Pandemic and Illusions of Democracy
FDR, thanks to his grandfather, made the connection between US economic development, geopolitics and global trade. So did Eleanor Roosevelt;
In sum, a vital engagement in global trade contributes massively to domestic economic growth.
Pandemic
The Covid-19 Pandemic has revealed both the weaknesses and strengths of what I call our Financial Logistics. Financial Logistics are about the distribution of wealth to everyone. The US and the world have a Financial Logistics problem. Our wealthiest and most influential families; the Astors, the Delanos, the Roosevelts, the Kennedys, were in the past, made wealthy by selling drugs, whether opium or booze, to both foreign (Chinese) and domestic consumers.
In the US, this occurred during our trade with China and Prohibition; in other words, outside of what was then the law.
Global Trade in Knowledge-Intensive Products and Services
The McKinsey Forecast
The McKinsey Global Institute (MGI) provides valuable data with regard to the growth and direction of global trade:
? The global flow of goods, services and finance in 2012, was equal to 36% of global GDP.
? Global flows could triple by 2025.
Up to $450 billion is added to global GDP growth each year by these flows and the benefits to the most connected countries compared to the least connected countries is 40% more.
? Between 2005 and 2012, there was an 18 fold increase in cross-border Internet traffic.
? The total cross-border flow of goods and services and finance from emerging economies grew from 14% in 1990 to 38% in 2012.
? By 2025, the value of the flow of goods, services and finance will reach $85 trillion, three times the value in 2012.
? Growth in knowledge-intensive goods (services) trade is growing 1.3 times as fast as trade in labor-intensive goods.
? 90% of commercial sellers on e-Bay export to other countries. In the U.S., less than 25% of traditional small businesses export.
Trade finance is estimated at $10 trillion per year globally. Of the 8.1 million short term trade finance transactions in 2011, fewer than 1800 defaulted.
The MGI provides an idea of the dimension and direction of the flows of global trade. What is remarkable is the degree to which the income, wealth and opportunity in this trade is concentrated in very few companies. The ICC has deemed trade finance to be a very secure business, "a business built on real transactions by companies that make real goods that are moved from one place to another, so real people can consume them in the real world."
It is a business in which financing is highly supportive of concentration. The degree to which the system of international trade finance fuels oligopoly is impressive:
? 100% of the large jet market is controlled by Boeing and Airbus
? 90% of PV operating systems are sold by Microsoft
? 55% of the PV market consisted of 5 firms
? 3 firms make up the mobile handset market
? 69% of agricultural equipment is sold by 3 firms
? 69% of global pharmaceuticals are controlled by 10 firms
? 95% of microprocessors are sold by 4 firms
? 50% of all cars sold globally are sold by Toyota/Daihatsu, GM, Ford and Daimler-Chrysler
? 3 firms comprise 60% of the tires sold: Michelin, Bridgestone, Goodyear
? 66% of glass is sold by Saint-Gobain and Owens-Illinois
This concentration of sales and markets also represents a concentration of wealth and opportunity. Concentration impacts employment and related income and opportunity depending on the market forces that act on the large firms within the oligopolies. It is now (then) rumored that IBM will lay off as much as 9,000 of its workforce of 431,000 because of the migration of its services to the cloud.
The oil exploration and exploitation services area is seeing large layoffs due to the precipitous drop in the price of oil.
My Comment
The pandemic has deeply affected our economic growth. At the same time the disproportionality in the distribution of wealth, medical and educational services has compromised US economic and socio-political advancement. The main impediments to our growth are oligopoly, privatization of wealth, demagoguery; the continual plague of financing the running for office in place of caring for the public good. The most corrosive and impactful causes of our mediocrity and superficiality are the distraction of “anti-social media,”corruption, cybersecurity-related warfare, discrimination and the idolatry of wealth, the self, technology and false prophets; the usual suspects.
As McKinsey reports, global trade has moved in the direction of knowledge-based services. We cannot expect a poorly-educated populace to excel in the area of knowledge-based global trade services, in humanism.
Optimism+Pragmatism = Exceptionalism
Despair is not the answer, nor are drugs and suicide.
Solutions
Mike Shields who will announce his retirement today, sums up my thoughts about global and American economic growth. Our economic growth is deeply linked to our spiritual existence. America will always play a leadership role in this Great Play. America, according to Shields, is a combination of Optimism and Pragmatism.
America is the HST, the Helicopter Support Team for the delivery of God’s Divine Grace which is constantly offered us and hovers above us.
Vienna Waits for You
Billy Joel recognized the influence of his father’s wisdom on his life with his song; “Vienna Waits for You.” (His father lives in Vienna).
Ageism is America’s "discrimination du jour."
America, “We wait for you" -with an idea whose time has come (Victor Hugo).
Next: The Solution and the HST