The Western Rules-Based Order is Collapsing. Now What?

Allow me to make a prediction.

Five years from now, the United States will have left NATO, NORAD, NAFTA, the UN, the WTO, the IMF, the World Bank, and every other multilateral organization and trade agreement on the planet.

And there’s a simple reason for it; U.S. President Donald Trump feels that every organization to which his country belongs has ‘taken advantage of the United States’ for decades and the only way to ‘stop the hemorrhaging’ is to quit all those institutions — perhaps forever.

Even if the U.S. decides to retain its UN membership for a time, my point will have been made.

Perhaps the Trump administration will explain its position in an ongoing conversation at the United Nations as to why it’s leaving the other institutions first and then quit the United Nations body last as a final snub to the world community.

Although these undertakings haven’t yet come to fruition, signs are forming that President Trump and his supporters may go the entire distance in separating the United States from the Rest of the World — and that’s especially true if he receives a second ‘mandate’ via the 2018 U.S. midterm elections and a third mandate courtesy of American voters in 2020.


On the Way Out the Door, Grab Everything You Can!

Enroute to leaving every multilateral organization and trade agreement on the planet, Donald Trump the negotiator may tell his people to extract every possible concession, from every possible country, every step of the way.

If you think he won’t… sorry, you’re laughably naive.

Remember, Donald Trump thinks that every country in the world takes advantage of American largesse every day of the year! A team of Harvard lawyers couldn’t convince him otherwise. Therefore, why would he want to stay in any of those political or free trade agreements?

For Mr. Trump, interim negotiations seem nothing more than the necessary steps toward his goal of quitting those institutions completely.


The U.S. Midterm Elections Will Accelerate or Decelerate Trump’s Plans

The U.S. midterm election results will set the course for the next two years as all 435 seats in the United States House of Representatives and 35 of the 100 seats in the United States Senate will be contested and if the Republicans win big, expect Trump’s isolationist plans to accelerate accordingly.

If the Trump team does well, every country that trades with the United States better have a solid ‘Plan B’ ready to implement the day following the U.S. midterm election. A year later just won’t cut it. This President moves fast.

For G7 and G20 countries, this means ramping-up trade with each other in an attempt to replace the great American marketplace where billions of dollars of foreign goods are purchased every day.

For developing countries, not much will change as most of them have only tiny trade links with the United States.


What Can G7 and G20 Countries Do?

Having failed to grasp the full extent of the Trump determination to pull back from the rest of the world, some countries seem uncertain about what to do next, while others think it will simply ‘blow over’ and business will soon return to normal.

But in Donald’s world, if you’re willing to sign an actual trade deal with his country he then feels he’s left too much money on the table and we’re right back to where we started — the world is taking advantage of the United States and America must never sign such an agreement!

Countries that run large trade surpluses with the United States may start to notice curtailed trade with America, therefore every country must plan for changes in that trading relationship, because, like the song says, ‘The times, they are a changin’ and it’s no fun being stuck with tens of billions of dollars of stuff that you can’t export’ — because U.S. tariffs have made your goods too expensive or the U.S. border is closed to your exports.

For countries with a less than $10 billion trade surplus with the United States, you’re probably pretty safe (for now) unless you start waving a red flag at the Commander in Chief. But if you’re a country that runs double-digit or triple-digit trade surpluses with the Americans, it’s officially time to panic.

2018 G7 Summit Charlevoix, Quebec, Canada
Top ten countries that operated a large trade surplus with the U.S.A in 2017 | NOTE: Does not include services | Data courtesy of the U.S. Commerce Dept | Image courtesy of FORTUNE

Strengthen non-U.S. Trading Relationships Now

Perhaps using the recently-signed CETA deal between Canada and the EU as a template, G20 countries could begin to strengthen their trading relationships with each other to the extent that they could survive America severely curtailing their trade. (If it comes to that)

‘Surely that’s an unreachable goal’ some might say, but even if countries miss the ‘unreachable goal’ by 50%, they’re still better off compared to not making the attempt.

Even if it takes the Trump team five years to wrestle trade deficits down to a manageable level (think; $10 billion/yr per country) and even if it takes ten long years for countries to find replacement markets for much of the goods and services they presently sell to the U.S., they’ll still be glad they invested the time and effort.

Countries with double-digit or triple-digit trade surpluses with America that get ahead of the curve are more likely to survive it better, while countries that don’t diversify may find themselves neck-deep in their own exports.

Final thought? As the United States pulls back from the world, countries that double-down on building their Commonwealth/EU/BRICS trade links will rejoice.

Written by John Brian Shannon | Reposted from JohnBrianShannon.com

G20 Hamburg: Opportunity to Share Success, or End of the Established Order?

by John Brian ShannonReposted from JohnBrianShannon.com

There are many things in the economic and political world that are going ‘right’ at the present time and there are many things going ‘wrong’ and depending upon where you are in the world, you see the glass as half-full or half-empty.

Where you are financially… likely determines your views on economics and politics.

In the colonial and postwar eras, if you were happy and supportive of democracy it’s because you lived in a thriving economy in the West or Japan  — and if you were unhappy, you lived in a colonial or post-colonial nation with a ‘frontier’ economy, which is to say, you were dirt poor and local warlords were more powerful than your own government.

However, that’s changing.


Globalization Changed the World

Since the advent of globalization 2.0 (which began with the creation of the Petro-dollar) wealth has shifted from industrialized nations to developing nations as have millions of jobs that were offshored by Western corporations in the pursuit of higher profits — profits which are then distributed among relatively small numbers of rich shareholders.

Over many years this has caused wealth to ‘trickle upwards’ and is responsible for creating the 1 percent economic class.

In America (which always has reliable stats) the 1 percent in that country enjoy more wealth than the bottom 80 percent.

Here’s a nice, short video that demonstrates this; Keep in mind, this video was made in 2009. Things are much worse now… and people wonder why there is political change in the country?

The total wealth of the United States was 54 Trillion dollars in 2009. Let’s see how it was distributed…

As long as we keep in mind that things are getting more dire each year, that will about cover inequality in America and explain the recent and major political changes there — with surely more change to come.


Growing Inequality Isn’t Being Addressed

Inequality is even worse globally. Although different in absolute numbers than America’s situation, the disparity between rich and poor is even greater.

Even today, 71 percent of the world’s population exist on less than $10 per day and 9 million per year die of starvation/lack of clean water.

That’s Failure by Any Standard!


All the good work by NGO’s over decades of time aside, it is a catastrophic indictment of our entire civilization. It seems to be a case of; ‘We can do better, we just can’t be bothered’.

To illustrate the disparity that remains in the world, lets look at the present trend lest you think that world leaders are actually doing anything to solve the problem.

G20 Hamburg
G20 Hamburg: Since globalization 2.0 began, people like President Nixon and Bill Gates have said to Tax the Robots to make a GBI affordable.

Share of the world’s total wealth for the Top 1 percent and the Bottom 99 percent. Image courtesy of OXFAM.

It’s pretty clear this is the Number One problem in our decade and that it isn’t going to be solved at the G20 Hamburg summit. And if the 20 most powerful nations on Earth can’t solve it year-after-year (look again at the trendline) then it isn’t going to be solved.

I think it’s a pretty safe bet that it isn’t ever going to be solved.


Therefore, Let’s Be Realistic and Deal With the Symptoms

Now that we’ve gone ‘realistic’ we can settle ourselves down and figure out a way to compensate the ‘losers’ of globalization — which for now, are the bottom three economic quintiles in each developed nation. Yes, the middle class is being hollowed-out and sooner than you may realize there won’t be a middle class.

(You know, the middle class — the group that was mainly responsible for paying for most of the infrastructure built in the postwar era and for paying many of the entitlements enjoyed by developed nation citizens)

Fortunately, it’s an easy fix.

In the next 10 years, one-in-every-eight jobs will be lost in developed nations to technology, whether robotics on assembly lines, or to computers or other technologies, and it’s happening now.

In some ways those jobs are already gone.

If corporations wanted to they could accelerate their Automation / Mechanization / Computerization (AMC) programs and do it over the next 40 months, not over the next 10 years. That’s a very sobering thought.

Of course, GDP would leap forward, corporations would make astonishing profits, relatively small numbers of Western shareholders would reap even more dividends further enriching the 1 percent, and developed nation corporations would have the ability to better compete with developing economies.

It won’t solve the problem of the 1 percent sucking up all the wealth, because as U.S. and European corporations make larger profits the 1 percent will receive higher dividends.

But the ‘losers’ of globalization — ‘the shrinking middle class’ that are rapidly becoming members of the fourth and fifth economic quintiles — can be compensated.


Compensating the Hollowed-out Middle Class

Why should they be compensated? Because developed nation governments allowed millions of jobs to be given to developing nations (via legislative inaction) when corporations began to offshore jobs in significant numbers in the 1970’s.

But we can solve it now, exactly as President Nixon predicted (and tried to do while in office) by instituting a 5 percent tax on every robot and job-stealing mechanized device based on the value of the work performed (just like an income tax on individuals) to fund a Guaranteed Basic Income (GBI) for unemployed adult individuals.


What do Smart People like Bill Gates say?

Smart people like Bill Gates are also calling for this plan, and one of the best reasons for it is to maintain social cohesion so that we don’t lose our country (via revolution) in the mad dash by small numbers of corporate shareholders for larger dividends.

The GBI would replace all social welfare programs, many of which are duplicated at the federal and state levels, some cities have additional income schemes that exist concomitant with other levels of government. In many cases there is duplication and even benefit fraud — sometimes with the knowledge of people running those programs.

Every adult citizen in America (to use the U.S. for an example) that isn’t employed (as America is a nation of workers, it’s safe to assume *they would still be working if millions of jobs weren’t already offshored* by greedy U.S. corporations and their shareholders) would receive $1088 per month once they have exhausted their unemployment insurance benefits.

Also, every retired person who is trying to live on less than $1088 per month, would have their monthly income topped-up to $1088 per month, via the GBI program.

It isn’t enough to get rich on. But it is enough to live on at a very basic level, and would allow them to stay ready for any job opportunity that may appear.

And local shopkeepers would love it, as every cent would be spent on groceries, medicines, clothing and haircuts for job interviews, and phone/rent/internet access. A real boon to local economies!

In the UK, this amount could be set at £1088 per month, while EU countries could set their GBI at €1088 per month.


Tax the Robots!

It’s so simple to fix the vast inequalities that are getting worse with each passing year. TAX THE ROBOTS!

And cancel the many overlapping, inefficient, and abuse-prone welfare programs by turning them into one automated program that pays every non-working adult $1088 per month (after they have exhausted their unemployment insurance benefits) and to top-up the monthly income of pensioners to $1088 per month.

It’s so simple, even a politician could do it! 😉


Keep Workers Viable Until Needed for the U.S. $1 Trillion National Infrastructure Program

And I’d suggest that other G20 countries do similar. Keep your former workers alive and viable (who after all, are only ‘former’ workers since millions of their jobs were offshored by corporations with their government’s approval) by using a GBI and they will be ready and willing to return to work — a different kind of work than manufacturing, but still, paid work — where they can be part of a great national infrastructure renewal program lasting one decade, or longer.

Most developed nations are at the stage where Generation I and Generation II infrastructure needs replacement and upgrade. It isn’t glamorous, but it is ultra-important.

So, what could the world leaders actually accomplish at G20 Hamburg?

They could decide to Tax the Robots, pay a GBI to unemployed adults after their unemployment insurance runs out until they get a new job and begin to earn more income than the national poverty line, and rebuild and upgrade the national infrastructure on a massive scale.

Now that’s a plan that benefits everyone!


Related Articles:

Fossil Fuel Subsidies Must End – Investor Group tells G20

by John Brian Shannon

In advance of the G20 Hamburg Summit in July 2017 investor groups that control $2.8 trillion in assets report that fossil fuel subsidies are counterproductive to G20 economies.

This latest call to remove fossil fuel subsidies came two years after the G20 Brisbane Summit where leaders announced their intention to, “reaffirm our commitment to rationalise and phase out inefficient fossil fuel subsidies that encourage wasteful consumption.”G20 Brisbane Leaders’ Communiqué (November 2014, Item #18)

The 16-member mega-investor group says G20 nations should set a clear timeline “for the full and equitable phase-out by all G20 members of all fossil fuel subsidies by 2020,” and mobilize “to accelerate green investment and reduce climate risk” in a report submitted to G20 foreign ministers preparing for the upcoming G20 Summit in Hamburg, Germany.

G20 fossil fuel subsidies total $452 billion a year according to the Overseas Development Institute and Oil Change International.

A Must Read: Empty promises:
G20 subsidies to oil, gas and coal production

Fossil Fuel Subsidies chart from Empty Promises - G20 subsidies to oil, gas and coal production. Image courtesy of ODI and Oil Change International
Annual G20 Fossil Fuel Subsidies (2015)

Meanwhile, annual subsidies for renewable energy in the G20 nations amounts to only 1/4 of the annual subsidy awarded to fossil fuels, which have received mega-billions of subsidy dollars every single year since 1918.

G20 Fossil Fuel Subsidies total 452 billion globally 2015, while Renewable Energy Subsidies total 121 billion globally 2015
Annual G20 Fossil Fuel Subsidies = $452 billion. Renewable Energy Subsidies = $121 billion (2015)

For the next few paragraphs, let’s look at the United States exclusively…

Fossil Fuel Subsidies - Energy subsidies from 1918-2009. Image courtesy of Nancy Pfund
1918-2009 Fossil Fuel Subsidies vs. Renewable Energy Subsidies in the U.S. The Historical Role of Federal Subsidies in Shaping America’s Energy Future: What Would Jefferson Do?

The average annual subsidy for Oil and Gas alone in the U.S. from 1918-2009 totals $4.86 billion.

Adding all those (oil and gas only) subsidy years together gets you the astonishing figure of $442,260,000,000. in total from 1918-2009 — that’s half a trillion dollars right there, folks.

Which doesn’t include wars to protect foreign oil exporters to the United States.

Nor does it include so-called ‘externalities’ which are the negative costs associated with the burning of oil and gas — such as the 200,000 annual premature deaths in the U.S. caused by airborne pollution, along with the other healthcare costs associated with air pollution, the environmental costs to farmers and to the aquatic life in our rivers and marine zones, and higher infrastructure (maintenance) costs.

Fossil Fuel Subsidies chart from DBL Investors What Would Jefferson Do. Total Capital Gains tax allowance coal subsidy 1.3 trillion 2000-2009
Fossil Fuel Subsidies chart from DBL Investors What Would Jefferson Do? which shows the capital gains allowance (a type of subsidy) enjoyed by the U.S. coal industry that totals $1.3 billion over the 2000-2009 timeframe.

This chart shows only the U.S. capital gains allowance! There are other coal subsidies, direct and indirect, at play in America — in addition to the externality costs of coal.

On the Externality Cost of Coal
Harvard Medicine

Each stage in the life cycle of coal—extraction, transport, processing, and combustion—generates a waste stream and carries multiple hazards for health and the environment. These costs are external to the coal industry and are thus often considered “externalities.”

We estimate that the life cycle effects of coal and the waste stream generated are costing the U.S. public… over half a trillion dollars annually.

Many of these so-called externalities are, moreover, cumulative.

Accounting for the damages conservatively doubles to triples the price of electricity from coal per kWh generated, making wind, solar, and other forms of non-fossil fuel power generation, along with investments in efficiency and electricity conservation methods, economically competitive. — Full Cost Accounting for the Life Cycle of Coal (Harvard Medicine)

Fossil Fuels = High Subsidy Costs, High Externality Costs and Lower Employment: When Compared to Renewable Energy

In addition to the direct and indirect subsidy costs of fossil fuels, there are the externality costs associated with carbon fuels, but almost more important, is the ‘lost opportunity cost’ of the carbon economy.

Over many decades in the U.S., conventional energy producers have tapered their labour costs to only a few persons per barrel of oil equivalent (BOE) while renewable energy hires more workers per BOE, which will result in a significant net gain for the U.S. economy.

Infographic: More Workers In Solar Than Fossil Fuel Power Generation | Statista You will find more statistics at Statista

Even with the paltry subsidy regimes presently in place for U.S. renewable energy in the year 2017 — once fossil fuel subsidy costs, the externality costs of fossil fuels, and the ‘missed opportunity’ costs (fewer jobs per BOE) are factored-in to the equation, renewable energy really begins to shine.

And best of all — by 2020 and without any subsidies (yes, really!) renewable energy will regularly beat highly subsidized conventional energy generators at their own game — by lowering electricity costs, by lowering healthcare and infrastructure costs, and by creating thousands of new, good-paying jobs.

Who was saying that renewable energy was a pipe-dream?

G20 Brisbane 2014 Hints at Eliminating Fossil Fuel Subsidies

by

As the G20 Brisbane 2014 wraps up, leaders discussed the eventual elimination of the massive global subsidies paid to the fossil fuel industry which topped some $600 billion dollars last year, slightly more than last year’s $550 billion and 2012′s $500 billion.

Meanwhile, non-polluting renewable energy continues to receive peanuts — well under $100 billion dollars worldwide in 2014.

At the G20 Brisbane 2014 Summit leaders discussed elimination of the massive $600 billion dollars subsidy paid to the fossil fuel industry in 2014.
At the G20 Brisbane 2014 Summit leaders discussed elimination of the massive $600 billion dollars subsidy paid to the fossil fuel industry in 2014.

Clean energy does have it’s detractors, similar to the criticisms by the detractors of aircraft travel 100 years ago when people traveled by ship or by train. But, “The times, they are a changin’,” rings true in this century too!

“We do it this way, because we’ve always done it this way,” is no longer good enough. The fossil fuel industry provides the fuel for the world’s transportation industry and it is the most heavily subsidized industry on the planet and has been given carte blanche to operate in any way it sees fit.

Fine. We needed the oil. Whatever has taken place was done with our tacit approval. But with the very real effects of climate change now becoming clearer to us with each passing year, not to mention the more poignant effects on human health by breathing polluted air and drinking fracked water, fossil now requires a relook.

It’s not just climate and individual health concerns that are driving the discussion, health care systems around the world are now realizing that a good portion of disease and mortality are directly relatable to the environment. In major industrialized nations, billions of dollars in health care dollars are spent to repair the damage to people’s health from fossil fuel emissions. It’s not a few billion ‘here and there’ it may be as high as 1/3rd of all health care spending in the world’s most industrialized nations.

The cost of fossil is becoming a very large number for even the richest countries

  • Climate: For each 1 degree of climate increase the world will spend 1 trillion dollars to counter drought, sea level rise, abnormal storm activity and land remediation.
  • Health: Our sophisticated health care systems can now argue with statistical proof that fossil fuel burning contributes to human mortality and disease in a much more precise manner than in decades past.
  • Costs: $600 billion dollars in subsides is a lot for the world’s nations to bear. And that number continues to grow each year as all of the ‘easy oil’ and ‘easy gas’ is already tapped and locations with special extraction methods must be employed.

From the G20 Energy Sustainability Working Group 2014, Co-chair’s Report

Inefficient fossil fuel subsidies

G20 members reported to G20 finance ministers in September on their progress towards meeting the G20 commitment, initially made at the 2009 Pittsburgh summit and reaffirmed at subsequent summits, to “ rationalize and phase out inefficient fossil fuel subsidies that encourage wasteful consumption over the medium term ”. The ESWG benefitted from updates on the preparations for the first round of voluntary peer reviews involving the United States and China. A second round of voluntary peer reviews involving other G20 countries is expected to commence in mid – 2015. Germany has announced it will participate in the second round.

In response to a request from leaders at the 2013 Saint Petersburg summit, the ESWG tasked the World Bank Group, in consultation with other relevant international organisations, to prepare a report on transitional policies to assist the poor while phasing out inefficient fossil fuel subsidies that encourage wasteful consumption. The World Bank Group provided regular updates to the ESWG through the year and the final report was delivered to finance ministers in September. — Read the full report here.

It looks like ‘business as usual’ is headed for change in the energy industry

Only fossil fuel superpowers Australia (coal), Canada (coal, oil, tar-sands petroleum, fracked gas and conventional gas, deepsea oil extraction), and Saudi Arabia (oil), alone out of the G20 did not see fit to endorse the Energy Sustainability Working Group 2014 report.

No surprise there. However, the day is coming when the costs of not switching to clean energy will far exceed the costs of switching. If all energy subsidies were magically and instantly removed — that day would be today.