It's been nearly 15 years since John Ralston Saul proclaimed the death of neoliberalism in "The Collapse of Globalism, and the Reinvention of the World." Back then he envisioned a new economic model, a new ideology, that would spread through the world and sweep aside the deeply flawed and failing globalism model. Only that didn't happen.
Globalism is still with us. We don't know what else to do. Canada is not a leader in this sort of thing and no one is showing us a new path.
Does this mean that JRS' criticisms of globalism are wrong? Hardly. It's just that no one has found a way out of our deepening rut. So, what's next?
One way or the other, the wheels are coming off the wagon and we don't have a Plan B.
Paul Mason, writing in New Statesman, America argues that the future may no longer be able or willing to bail out modern capitalism.
In his own dumb way, Matt Hancock just summed up the survival strategy for global capitalism. Blinking into the camera lights, Britain’s hapless Health Secretary assured viewers that he could promise to build 40 new hospitals with just £100m because “the rest of the money will come in the future”.
He was instantly ridiculed but he was right. Eleven years after the financial crash, the only dynamism still left in the system is being driven by the twin engines of rising debt and money creation by central banks. Each of these represents a claim on the future: the problem is, it’s a future that may not exist.
With Germany sliding towards recession, and some $17trn worth of debt now yielding negative interest rates, policymakers are coming face to face with an existential question: what happens when even borrowing and printing money on an unprecedented scale no longer drives sufficient growth? And for the banking industry it poses an even sharper question: what happens when the time value of money evaporates?
First, since the financial crisis of 2008, the world’s companies, households and states have borrowed an extra $57trn, taking the global debt pile to an estimated 325 per cent of GDP.
Second, in order to keep the world economy from depression, the central banks have been forced to print money to the tune of $20trn. When, according to their established doctrines, the US Federal Reserve and the European Central Bank simultaneously tried to unwind quantitative easing over the past 18 months, global growth began to slow.
Exhibit Three is the impact of quantitative easing on interest rates. As an influential paper by Larry Summers and the Bank of England’s Lukasz Rachel shows, real interest rates in the world’s most advanced economies are now negative and likely to fall further. In layman’s terms, for more and more savers, there is no income to be generated from putting money into the bank, or lending it to a government by buying bonds.
Fourth and finally, in August this year, the so-called yield curve on government debt “inverted”. Normally it should cost more for a government to borrow money over ten years than over two, but the cost of borrowing short term has surged, while the cost of borrowing long-term continues to fall.His conclusion? The party's over.
If I and the other post-capitalist theorists are right, there is no future income or measurable economic growth from which to pay down the debts, or manage down the central bank balance sheets. The ultimate structural reform needed is a managed transition beyond capitalism itself.
It is slowly dawning on the clearest thinkers in the official system that the entire era of financial globalisation has been based on borrowing from and speculating against a future income stream that may not exist. While in the short term, aggressive and radical social-democratic programmes will need to be adopted across the developed world, the strategic task is to design an economy that replaces one based on markets, scarcity, debt, speculation and (of course) carbon.