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What happens to the world economy if Trump Wins!

7/26/2016

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What if Donald Trump wins and tries to impose the kind of anti-globalization tariffs and taxes on trade. Aside from the obvious problems of doing this legally, but given his ability to do things in an extra-legal fashion on the idea that he is some kind of elected tyrant with a "mandate" to rebuild America in the image of some mythical time when America was "Great", and assuming that he doesn't get impeached by the Congress and carried out of the White House in a straight jacket, then it is fair to analyze the impact of what he has proposed over and over again on the US and world economy.

As someone who has warned against the dangers of rising rate deficits and completely open markets on the US economy starting long ago when I was the Senior Economist in the Pentagon and continuing to this moment in time when the horse has long been gone from the stable making reversing thirty years of avoiding the issue for fear to inciting the specter of protectionism, I know better than others the dangers of this strategy and fear its consequence. Imports are damaging to smaller producers and there is no getting around this, but they are beneficial more often than not to the companies that import the products, and for workers who have incomes they offer cheaper products. I usually used the ceiling fan as the best example. Ceiling fans have been a ficture in drug stores since the 1930's, and were made in the United States by high end companies as fashion accessories with prices closer to $ 500 to 700 until probably around the mid-1970's. But they were very expensive. But as the electrical industry in Taiwan began to develop, entrepreneurs in the US said why not make then in Asia cheaper. And by the end of that decade they were everywhere selling for sometimes under $ 150 or less and the market exploded. So no doubt American consumers have benefited from everyday low prices. So that is exactly the point--add a 45% tariff on Chinese and now Mexican imports and you will find that retail has nothing to sell and shipping companies nothing to ship, and workers in companies buying intermediate inputs will be laid off.

That of course is a start of the snowball that comes from his ideas. Lets deport 11 million workers most of them doing jobs that they alone can do. All those old white factory workers I am sure voting for Mr. Trump (note he is always Mr. Trump like Kind Trump) will be willing to do roofing and yard work to replace the sudden loss of a good share of the work force concentrated in industries that no white or African American Americans might want to do. And who will do the brick work and grunt work on Mr Trump's buildings or golf courses. It would be a disaster for the economy and worse it would leave millions of dependents dependent on social services that will be starved by his tax cuts.

Trump wants to cancel NAFTA and renegotiate all trade agreements. I was in Geneva working at UNCTAD during the mid-1970's when the Tokyo Round was being negotiated. You don't renegotiate agreements that take years to negotiate. So if the US unilaterally repudiates the agreements we already have the world will retaliate. Perhaps once we were large enough share of the world economy to dictate terms, but that was just after the end of World War II. In today's globalized economy we can't dictate terms. Reneging on our obligations would open the door to global protection and the result will be a disruption in global supply chains and likely an increase in inflation everywhere. What is unlikely to happen is that factory jobs will suddenly and miraculously return to these shores. A more likely result will be economic and social collapse. Perhaps this is the reason for the plan -- an economic emergency allowing Trump to ask for a period of extra-legal powers to right the sinking ship.

There are ways that can help rebuild localized manufacturing that will not destroy the US or world economy. Companies have to be more sensitive to workers needs and share more of the gains form globalization on workers from the top to the bottom. But Trump's vision is not the way to solve the pressing issuesof wage inequality and underemployment. It is time for the Democrats to lay out the truth, to paints the scenario in the starkest terms to the misguiding and angry electorate who support this demagogic megalomaniac who has captured the Republican Party.

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Alternative Economic Archetype for the 21st Century—the Post-Competitive Model

7/9/2016

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What might a post-competitive economy reorganized around growth and fair wages look like. Let's imagine that Adam Smith way back in the 18th century had suggested that economies work best when they are cooperative rather than competitive.

If private greed (self-interest) is out, then what could be its replacement as the organizing principle for the global economy? Cooperative self-interest is one possible solution to this problem. Declining incomes lead to slower growth and economic weakness and if this analysis is correct then it becomes in every stakeholder’s interest to maintain incomes and subsequently expand the market—in rich and poor countries alike. Wealth disparities between advanced countries and poor are so great that slow growth in Western Europe may be worth more than double digit growth in incomes in sub-Saharan Africa. Destroying high paying jobs in the United States without replacing incomes there weakens all companies even if it appears to be beneficial in the short-run to the country shifting production to save a few dollars to pass through to the bottom line.

Since the end of the era of the great business trusts, governments have been in the business of breaking up or reducing business combinations that distort competition. It is illegal almost to talk to competitors in quasi-social settings. With each firm acting alone, as if its business decisions have no impact on the economy as a whole, the result is to amplify the unusual event that begins the downturn, turning what could be a short-lived retrenchment into a long-lasting recession or as in the early 1930’s a Great Depression.

The question then is there a better way to coordinate strategies.

The Presidential bully-pulpit no longer works with companies seeing themselves as citizens of the wider world. Obama tried it tapping GE CEO Jeff Immelt to head a business panel back in 2011 to boost jobs as the economy began to falter as the stimulus wound down. Little came of this initiative because it ignored the problem that CEO’s answer not to the nation state where they sell their products, but to their shareholders alone. But failure to see the woods from the trees can lead to the kind of bombastic statements of someone like Donald Trump who views the Presidency as a Kingship offering to impose by his own fiat massive tariffs directed a companies that move production overseas.

And finally the popularity of Bernie Sanders on the left and Donald Trump on the right should be sufficient warning to companies long used to doing as they please with workers and economies in their quest to maximize private worth to see the bigger picture that without individual worth there is no change of recovery. It is not surprising then to me that there is a renewed interest in adopting universal basic incomes as a strategy to insure stability. The unequal sharing of knowledge and the ability of firms to produce value without paying workers full value for their work, thus concentrating wealth in fewer and fewer people’s hands will ultimately reduce the ability of economies to maintain growth, but will also lead to social revolutions. Of course blow back from mechanization is not new. Luddites destroyed machines to stop the rapid industrialization of British industry that destroyed jobs and livelihoods. Productivity is a double edged sword that can lead to periods of slow or even negative growth despite record levels of output per worker if the benefits are passed to the owners of the machine capital rather than human capital.
As the Economist in its June 4th, 2016 issue discusses in its special section on the history of “Universal basic incomes” report suggests that in light of the ability of outsourcing and automation of work to destroy useful activities the only way to sustain demand and maintain a healthy circular flow of funds is through some form of income redistribution. While living off the dole may be attractive to some, it is morally offensive and psychologically damaging to the majority of the population still able to find gainful employment and pay taxes to support the dispossessed of an economy.   The problem isn’t automation of manufacturing, but rather how to split the benefits of that mechanization in ways that encourage useful activities in the service sector and the government sector.

At the turn of the 19th to the 20th century the larger share of the value-added from food went to the farmers. Food products were sold closer to their bulk forms, but as agricultural productivity increased, employment declined and labor shifted towards manufacturing. Farmers sold raw wheat grains to millers who sold to industrial size bakeries and break became a commodity. As productivity increased in manufacturing labor shifted to services and more sub sectors stole the value-added as productivity increased again shifting labor towards other activities and the average hours worked declined from six days a week to five.   Today we are seeing more workers under employed leaving a financial hole in the circular flow.

Thus to keep the world economy growing and more workers gaining from the global integration, then private business must take the lead to maximize growth and employment, not profits and shareholders interests. Without private sector buy-in, then the entire edifice of globalization will collapse as protectionist walls are built without proper analysis of the consequences. Unlike Donald Trump's mythical wall with Mexico keeping out Mexicans, protectionist walls have real consequences for the buyers and the sellers. The last time they were raised was in the Great Depression and we all know what that turned out to be, the first stage of a World War that was the most destructive in human history in terms of lives lost and property destroyed.

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In my novel, The Phoenix Year it ends with a global collapse to mirror the 1929 Depression induced by a group of very wealthy and very concerned men acting to game the global financial system by taking advantage of the rich or near rich’s obsession with “self-interest.” In The Phoenix Year, the wealthy men see the problems of the global economy as being individual and collective greed. Workers are less important than shareholders and Boards of Directors are captives of senior managers. The men in this group, the Ancient and Honorable Order of the Phoenix, own and manage the companies they or their fathers or grandfathers founded. Their time horizons are longer than the managers of most of the world’s private companies who worry about making next quarters targets more than insuring that their companies grow, and their employee prosper. As Heinrich Von Kleise, Swiss billionaire at the heart of the conspiracy, explains to Michael Ross, the American economic advisor to the President:

“We have created great wealth, but also great inequality. We are choking on our own excesses from income inequality that robs economies of demand for ordinary things, to the pollution that overconsumption and limited regulations has unleashed on our planet. Billions of people will be without water or food in the future, as floods and droughts afflict rich and poor alike. Free enterprise has created a paradox, greater abundance, and even greater poverty. Markets are not self-correcting, nor fair. Rarely do they produce results that are even approximately optimal. We are at a point, Michael, that without some higher authority stepping in, our world will self-destruct, choke on its on excesses, and billions will die. It is the economist’s delusion that free markets work best.”

Just as British votes took the leap into the unknown with Brexit or Trump-istas wishing for the simple solution that comes with the words “trust me” with your future without any substance, these men decide to game the world system of finance and investment, destroying in one final period of uncertainty fortunes and creating the collateral damage to small and large investors in the wake of this destruction.

Dr. David L. Blond works as a private economic consultant specializing in quantitative analysis of economic data. He began his career working for the United Nations in Geneva, Switzerland. During the period of 1978 – 1985, he was a Senior Economist in the Office of the Secretary of Defense in Washington, and after leaving that position worked for various major global economic forecasting and consulting firms in senior positions developing some of the largest and most complex global economic models ever developed for use by private sector clients. He lives between Washington and Santa Fe, New Mexico. www.davidlblond.com @davidblond2000

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From Ashes to Rebirth – A Post-Competitive Economy

7/8/2016

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In my opinion, the problem comes from letting company decisions be taken in the interests of shareholders by hired gun managers with short time horizons. By destroying the tyranny of captive Boards and Group - managers measure their success in profits, not growth and innovation, their goal is to build a new system of cooperative, non-competitive behavior driven by growth metric; employment, wage equality, new investments in solutions for global problems. By eliminating the metric of profits alone from the equation and reorganizing these companies into global keritsu-like companies linked in common purpose they see the private sector sharing fully with government responsibilities for managing economies.

Of course what I wrote in The Phoenix Year and how it turns out may not square with the world we have post-Brexit, but the themes of the failure of private companies to see the larger picture and to work together to make the whole larger than the sum of the parts are the same themes that British voters explored with their Brexit votes for radical change in the old order. The fact that any simple solution – get out of Europe, British jobs for British workers only, make Britain Great or Trumps themes of xenophobia, American supremacy and America First (damn the rest of the world) — will always have unintended consequences, and make the cost of leaping into the unknown so great and so worrisome. No one knows the economic fall-out from Brexit for the United Kingdom or the world, but what we do know is that keeping with the status quo will no longer work either – even if the UK stays in Europe, Europe itself must see this as a wake-up call for elites everywhere that the forgotten little people need more than, as Thomas Malthus once said, “his crust of bread.”

Globalization by itself is not the problem, it may well be the only viable solution today, but globalization that works for everyone – rich and poor alike – is the real goal and the one that the wealthy men in my novel were trying to attain. It is time to search for real solutions rather than simple palliatives like tax cuts or more regulations. The solution likes in a new economic paradigm; one less wedded to pure market based solutions and the assumption that individual or corporate self-interest alone is the best solution. A cooperative, post-competitive economy is what we will ultimately have to achieve if we are to meet the needs of the billions of poor and middle class without destroying the planet in the process.

Dr. David L. Blond works as a private economic consultant specializing in quantitative analysis of economic data. He began his career working for the United Nations in Geneva, Switzerland. During the period of 1978 – 1985, he was a Senior Economist in the Office of the Secretary of Defense in Washington, and after leaving that position worked for various major global economic forecasting and consulting firms in senior positions developing some of the largest and most complex global economic models ever developed for use by private sector clients. He lives between Washington and Santa Fe, New Mexico. www.davidlblond.com @davidblond2000

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“The Problem is Capitalism – American-style, Shareholders Sovereign, Managerial Capitalism” by Dr. David L. Blond, QuERI-International

The problem is lodged mainly in the underlying premise of globalization’s advocates that in a complex world economy fewer barriers improve efficiency and profits rather than national wellbeing. It assumes that gains from trade outweigh costs and dislocations caused by global competition; or that self-interest alone of the private sector will insure a smooth functioning of the markets. In my opinion, Nazi Germany had a smoothly functioning economy built on slave labor and profit for Nazi Party members, but to survive it needed to gather more people to enslave.

Self-interest alone will not solve climate change or political dysfunction in global capitals or feed hungry and cure the sick or full employment. Self-interest is the second best solution because the world economy is just too complicated to be managed by some all-seeing central authority. The problem is that self-interest of one group, owners of capital (directly or indirectly through retirement accounts and investment funds) may not be in accord with the self-interest of workers or even nation states. It is this sentiment that sees NAFTA as a danger to American workers even if it insures the smooth functioning of a complex North American economy and lower prices in grocery stores and retail establishments.

In my novel, The Phoenix Year, set in 2016 with the backstory of the economy after the 2008 financial collapse, at least some of what has happened since its publication that form the plot details of the novel’s predicted economy – the collapse of oil prices from $110 to just over $30 is part of the novel predicted for 2015-16, along with a slowdown in China that leads to a drop in world trade during these years among other elements of the story. It included the surging nationalism throughout Europe and continued malaise and debt problems of the Southern tier of countries. It didn’t anticipate BREXIT, but it did include a rising nationalist politician in Germany calling for a renegotiation of Germany’s participation in the European Union. All these factors contribute to extreme volatility of stock markets helped by a fair amount of insider trading leading up to a series of events including the collapse of a overleveraged real estate empire, on a single weekend at the end of October of 2016. For good measure, the novel also included a real estate promoter from New York, who, at least, doesn’t run for President because he’s been framed for the murder of his wife and daughter. But the effect of multiple shocks to the system combined with the reliance on computerized trading algorithms by more so called money managers leads to a near total, 1928-32 collapse of equity prices. At the same time, the price of gold reaches new heights. At this point, the plan is to sell a huge stock pile of secretly accumulated Russian and African gold and buy control of more than 200 of the world’s largest, most influential companies with the proceeds.

Dr. David L. Blond works as a private economic consultant specializing in quantitative analysis of economic data. He began his career working for the United Nations in Geneva, Switzerland. During the period of 1978 – 1985, he was a Senior Economist in the Office of the Secretary of Defense in Washington, and after leaving that position worked for various major global economic forecasting and consulting firms in senior positions developing some of the largest and most complex global economic models ever developed for use by private sector clients. He lives between Washington and Santa Fe, New Mexico. www.davidlblond.com @davidblond2000

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Dr. David L Blond is a well known economists with experience in government and the private sector. Published in 2014, The Phoenix Year, an economic thriller about the events leading up to the global market collapse New novel available on Kindle --The Rings of Armageddon based on insights learned during his 7 years as the Senior and only economist in the Office of the Secretary of Defense at the Pentagon.

What happens to the world economy if Trump Wins!

Alternative Economic Archetype for the 21st Century—the Post-Competitive Model

Offering A New Way Forward

From Ashes to Rebirth – A Post-Competitive Economy

Is the Problem Capitalism?

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What happens to the world economy if Trump Wins!﻿

Alternative Economic Archetype for the 21st Century—the Post-Competitive Model

Offering A New Way Forward

F﻿rom Ashes to Rebirth – A Post-Competitive Economy

Is the Problem Capitalism?

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Archives

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What happens to the world economy if Trump Wins!

From Ashes to Rebirth – A Post-Competitive Economy