EKIP– Expert Club for Economics and Politics A Different Opinion
Author: Yaroslav Romanchuk, original publication from 14.04.2020
The world economy is once again threatened by an unprecedented global recession, unemployment of 1.3 billion people worldwide, a debt crisis, budget holes, defaults and other scourges of a multi-layered systemic crisis. “A crisis like no other” – said IMF Managing Director Kristalina Georgieva on April 9, 2020.
The destruction of the foundations of the free market – the humiliation of the poor.
Since the beginning of the crisis, more than $100 billion has flowed out of developed countries, an amount more than three times higher than that spent during the same period of the global financial crisis of 2008-2009. Commodity prices have collapsed, dealing a painful blow to developing countries. A sharp decline in the volumes of international remittances to low- and middle-income countries is expected. The conditions of a currency war and the threat of devaluation and inflation are increasing the debt burden on state budgets. This means that budget and tax reform, cutting expenses, and adapting the behavior of traditional beneficiaries of the state budget, including the pension fund, are on the agenda.
Since the beginning of the coronavirus crisis, governments around the world have taken measures to support their countries in the amount of $8 trillion. And this is in addition to the large-scale monetary measures adopted by the G20 central banks, which amount to $3-5 trillion. The institution of “state monopoly money” is finally turning into paper. Through them, the rich/powerful get rid of their toxic assets, using taxpayers’ money for free and with impunity and taxing people and businesses with inflationary and devaluation taxes.
Governments, using the coronavirus as an excuse, have imposed strict trade restrictions. This is tantamount to declaring a currency war. This puts an end to fair and open competition. An international fiscal war is beginning: whoever helps the nomenclature favorites of their country more (at the expense of taxpayers' money) wins.
The most vulnerable are low- and middle-income countries. They do not have tens and hundreds of billions to support their national producers and consumers. They have higher foreign exchange debt, a strong dependence on foreign direct investment, on foreign technologies and on their place in the global value chain. In their case, the export of raw materials and technologies is highly dependent on the economic well-being of rich countries, and they are currently in recession. Minus tourism. Minus transport services. Minus remittances from other countries.
A fierce struggle has begun both within each of the countries and between them. The coronavirus is killing market competition between countries, it is killing this unique foundation of justice, morality and efficiency in rich countries. It is impossible to help everyone with money and resources. It is also impossible to save everyone from bankruptcy. This means that the managers of other people's wealth will save "their own" and those who have long since fallen into the category of the untouchable and unsinkable. This is a blow to small and medium-sized businesses. This is a sharp increase in the threat to morality, i.e. punishment for honest and responsible investors in the market and encouragement for those who have not been able to cope with the risks on their own and have come to the offices of politicians with an outstretched hand.
As in the late 2000s, international and national political elites have “ignored” another critically important foundation of the free market – bankruptcy. Because bankruptcy is now the fate of only micro, small and medium-sized businesses. This is the fate of economically weak countries that have piled up foreign debt on their own and have believed in the WTO, the technocratic recipes of the IMF/World Bank, and also in the lack of an alternative to the “great Keynes”.
The world is flooded with economic national socialism. The managers of foreign assets are ready to nationalize too-big/important-to-fail companies. Politicians and bureaucrats are ready to become businessmen. They promise to lend a shoulder, but they do not forget to provide their wide-open pockets. The managers of foreign assets turn on the powerful tools for manual regulation of production and trade at full speed: price control, rationing, licensing, certification, quotas, zoning, special tax/customs regimes, bans, targeted state programs, accreditations, permits and a special regime of inspections and audits. All this for the sake of the God of the mainstream of the 20th and early 21st centuries. The name of this god is “Public Good”. He should take care of people, their safety, well-being and protection from the big and rich. In reality, he takes care of the nomenclature business, monopolists and those who are “too big to fail”.
According to some of the most authoritative methodologists involved in assessing the impact of government regulations, Mark Crane and Nicole Crane, the burden of government regulations in the United States in the first half of the 2010s amounted to 12% of GDP. And this is in a country that is consistently in the Top 20 of the freest economic countries, which has solid institutions that protect property, including an independent court. This means that in low- and middle-income countries, where state participation in the economy is dominant, the burden of regulations is at least 15% of GDP. For Belarus, this is $9-10 billion per year, for Ukraine - $22-24 billion, for Russia - $245-250 billion. Scientists, analyzing the databases of OECD countries, have found that small businesses clearly bear a significantly larger share of the regulatory burden compared to large ones. Thus, in the conditions of monetary, fiscal, tax, credit and trade war, small businesses cannot withstand this incredible burden and go bankrupt.
Globalism and the international system of division of labor are buried under the dominant principle of the economic policy of the lion's share. "America/China/Russia/EU/Brazil/../../.. first". You take a side and get an answer to the question of whether the world is ready for compassion, solidarity and partnership. The world is preparing not for peace, but for war. Hatred is being incited against rich people and rich countries. We hear demands that the rich give up their wealth (assets, property) in the name of the "global public good". Nomenclature favorites among the rich channel the lion's share of state aid to themselves, while at the same time talking about supporting all business.
An even more radical proposal is to tax all rich people at a rate higher than 70% or simply “in the name of saving humanity” to confiscate most of their capital. Of course, a special tax regime is provided for systemically important too-big/important-to-fail companies. No one has canceled or banned dozens of offshore jurisdictions that are closely integrated into the optimization tax schemes of big business. International organizations offer some compensation to poor countries to fight the coronavirus and the economic consequences of the pandemic, but they do not speak out against the vicious and immoral practices of National Socialism, credit and tax discrimination.
There are calls to eliminate the foundation of intellectual property, starting with low-income countries. That is, the rich exploit the poor through patents, copy rights, brands, etc. Therefore, in this world of global threats (warming, viruses, cybercrime, loss of biodiversity, etc.), the value of the intangible assets of companies from rich countries should be zeroed out for poor countries.
Thus, practically all over the world, the coronavirus has sharply increased calls for the strengthening and expansion of state interventionism, the nationalization of the economy, the nullification of fair market competition, and also the expansion of the practice of issuing indulgences that protect against bankruptcy. This is done supposedly in the name of saving capitalism. The World Economic Forum even invented a new term – stakeholder capitalism. Moreover, neither this nor any other international organization offers an accurate, scientifically based definition of the term “capitalism”. If we define capitalism as a system in which consumers, investors and entrepreneurs can make economic decisions decentralized, within the framework of their private property and in a system of free competition and international division of labor, we can conclude that the World Economic Forum proposes the decapitalization of the world, the erosion of private property rights, the restriction of competition and the increase in regulations in the division of labor system.
The new model of the SIF implies a significant expansion of the functions and obligations of companies. The nationalization and socialization of business is quietly taking place. The ideologists and stakeholders of the model of universal state interventionism impose on business not only social responsibility, but also the obligation to “contribute to the creation of a holistic and sustainable world”. Behind this amorphous formulation, absolutely anything can stand, including, for example, the deprivation of the right to work in the market. If the “Davos Manifesto 2020” is legalized and given the status of a Declaration of Human Rights with the corresponding enforcement mechanism, the administrators of foreign and, God forbid, supranational international bodies will receive the authority to interpret, regulate, encourage and punish the following aspects:
- the size and form of the contribution to the sustainable development of the world;
- the definition of the concepts of "sustainability" and "integrity";
- the definition of a fair regime for the payment of taxes and other fees;
- the forms of participation of “all stakeholders in the joint and sustainable process of value creation”;
- the regime of “negotiating the different interests of all stakeholders”;
- the form of serving the interests not only of shareholders, but also of “all stakeholders – employees, customers, suppliers, local communities and society as a whole”. This is where they can run wild, including introducing a points system: you serve well – 80 points – a kind of pass to subsidies, government procurement, tax, customs, loans, etc.;
- the compliance of current decisions of company managements with the "prosperity of companies in the long term";
- serving "society as a whole" so as not to "sacrifice the future for the present";
- providing "equal chances for new market entrants".
Such a document could be created in the name of saving humanity and could be called, for example, the “Universal Declaration of the Rights and Duties of Companies”. The coronavirus is an occasion to format the agenda of business and power. The recession is another chance for the supporters of Leviathan to centralize their control over resources and assets, money and debts, corporations and governments. And once again they want to blame “wild and unbridled capitalism”, “liberalism” and “greedy entrepreneurs” for everything that they themselves have created over the past few decades.
Theorists and ideologists of the theory of universal state interventionism blame globalization, neoliberalism, capitalism and greedy TNCs for the coming crisis. Among the culprits are also consumers with an uncontrollable desire to buy and consume services, factories/factories/ships/planes - for global warming, bohemians/regular users of social networks - for narcissism and selfishness. The sharp rise in unemployment, the crisis in state finances, inflation, the devaluation of "junk" currencies, the dangerous growth of poverty, the demographic crisis, competition from China, India and other developing countries, the debt gap, the danger of defaults - all this consolidates the theorists, ideologists and beneficiaries of the theory and practice of universal state interventionism.
To strengthen their position, theorists and beneficiaries of universal state interventionism need a new architecture for making economic decisions at the global and national levels (erosion of the “nation state” and transition to a regime of “global sovereignty”), large resources, supranational competencies, and the “science” stamp on the group of technocrats-managers. In practice, this means expanding the powers of the old ones, or creating new international structures that together can form a center for managing global challenges (world government). The structures that could serve as the basis for the new global architecture are the UN, the IMF/World Bank, and the WIF. Many theorists of global overcentralization propose the creation of a world central bank and a ministry of finance (a fund to counter global crises). As a source of financing, they propose creating a tax on greenhouse gas emissions, a tax on financial (currency) transactions, and an environmental tax (for example, on the production of plastic). To improve the quality of their policy, they crave a ban on cash and a transition to electronic receipts controlled by them. Under the banner of inclusive development, they insist on unconditional income. They also want to gain the right to forgive and restructure the debts of countries and “system-forming” companies. One of the main “scientific” theories that should give validity and legitimacy to global over-centralization is the “Modern Monetary Theory”, which is neither modern, nor monetary, nor a theory, but simply a practice of unbridled money printing and satisfying the whims of those who dispose of foreign wealth, packaged in scientific vocabulary. All this, of course, in the name of sustainable development of the planet and countering threats/risks.
Technocrats, graduates of American and European mainstream universities, who have long since expelled the living person from their models and econometric equations, are competing to offer their services for processing Big Data and securing a new level of equilibrium in the post-crisis world. Today, they dominate not only the circle of governments and central banks, but also all international organizations.
Today, the deepening of the crisis (an unprecedented, uniquely destructive threat to planet Earth/modern civilization) is led by the supporters of the global Leviathan and its national branches, with the aim of gaining public and political support for their agenda, even deeper erosion of Freedom, distracting attention from the real culprits/causes of the crises, and also legitimizing supranational bodies for the management of sustainable global development. In 2008 – 2009. it did not work. In 2020 – 2021. the global Leviathan makes a second attempt. Against the backdrop of the fight against the coronavirus and the real deep recession, their chances of success are significantly greater.
Translation: Marina Zaharieva
