Winners and Losers of the (dead) Globalization [i]

Journey into the Unknown

Editor’s note: Aleks began writing this article last night, and he planned to finish it today. However, a higher power intervened this morning and ordered him to spend some time with the family. He asked me to publish this half of the article as a standalone piece, and he will complete the task tomorrow. (Piquet)

Introduction

Recently, one reader wrote something remarkable in the comment section of one of my articles. He mocked my constant claims that the European economy is finished. When at the same time European stock markets rise and rise.

I need to admit he is right.

It was a mistake to make that claim without explaining the current situation. That’s why I decided to write this article.

I’d first throw in to understand the situation entirely that we need to distinguish between short-term and long-term considerations. I’m going to explain my thoughts about this.

Nevertheless, I’m going to use this opportunity to share several other thoughts with you as well.

Resources

I wrote a lot about what I’m going to expand upon now. To understand better where I’m coming from, I strongly suggest you read the following articles first:

• Economics and Empires 1: The Big Picture

• Economics and Empires 2: Germany

• Economics and Empires 4: Considerations about Asia

European Economics

Terminology

First, what is Europe?

Is it the European Union? Is it the European Continent?

I’m going to address both separately.

Nevertheless, Europe is the European Continent and not the wannabe dictatorship called the “Union of European Socialistic Republics” (UESR), which also contains elements of fascism. Oh, pardon… I meant “European Union,” I just mixed up the words.

The European Continent consists of all these (previously independent) beautiful single nation-states. And I love my (independent and free) Europe! Except that it is currently NOT independent and free.

Value of the EU

Now, I’m going to write a few things that some, especially my German readers, might disagree with at first glance. I think things will get clearer later when we delve deeper into the matter.

Initially, the EU was a good idea since it brought a lot of advantages:

• Free movement (Schengen) and right of residence

• No tariffs among the Union States

Was it really a good idea?

As I said, most likely, initially, it was a good idea. It was a Union among comparable industries and nations. So, essentially, these points were advantageous for everyone. And I think it went on to be beneficial, to some degree, even though not to the same degree for all, until the collapse of socialism in Eastern Europe.

After all the small Slavic countries opened their markets and started privatization in accordance with their Western “advisors,” things changed. The EU increasingly became a political block and evolved year by year to something resembling the central planning committee of some former socialist nations. Even though we are NOT there yet. It concentrates ever more political power and now seeks to even concentrate military competencies in Brussels.

That is the opposite of “free and independent” if we consider all our beautiful single nation-states such as France, Italy, Spain, etc.

Now, let’s revisit the abovementioned two advantages of the EU after the EU enlargement in East Europe and the introduction of a joint currency, the Euro.

• No tariffs

  This turned out to be a blessing for producing (domestically or abroad, it doesn’t matter) and exporting nations. Mainly Germany.

  It turned out to be a disaster for most, but not all, former socialist countries. They had a well-established supply and sales chain within the former socialist block. When socialism broke down in Europe, most of these formerly good working enterprises and supply chains collapsed and quickly became uncompetitive on international markets. Especially in the EU market, since there were no tariffs.

  Most of these countries transformed from producing and consuming countries into importing and consuming countries, which is a disaster.

  Most former workers became unemployed and, over time, found only lower paying service jobs, such as waiters or shop assistants.

  Don’t get me wrong. I didn’t say that it is a pity that they abandoned socialism. Or that socialism was better. It’s up to the individuals to decide what is/was better in their own situation. The affected people should decide, not outside observers.

  I want to say that how it played out was a disaster. They should have managed the transition to the free-market economy themselves instead of opening the doors and letting tens of thousands of Western “advisors” tell them how to convert to a market economy “within days.”

  They should have done it themselves over time and under their own conditions. Opening slowly with one step at a time and then adapting.

  What happened instead was an epic rape of us Slavs.

  And an economic boost for the big economies of the EU, mainly Germany, for the next two decades. The essence of these countries (not all) was literally eaten up.

  I also think this trend will be reversed slowly and things will improve. But for a certain period, this forceful conversion of East Europe into a market economy was essentially a time when West and Central Europe looted the essence of East Europe. Again, things are getting better and will become good, not because of the EU, but because of “other” factors.

• Free Movement and right of residence

  Free Movement is almost always a very good idea. Maybe not during war or when an enemy state tries to infiltrate you, but I think it is good in all other cases. It is enriching for people and countries if people can travel and learn about other cultures, try to understand them, and work with them. There are not many instances where one could label that as bad.

  It is entirely different from the right of residence in the EU. Between equals, it doesn’t matter. A few people will always move from country X to country Y and vice versa. But the right of residence between a large, powerful nation and a rather poor country with high unemployment problems (due to the collapse of the socialistic economic system) is an entirely different story.

  For the big nation, it is a blessing. They get an adult, educated, skilled, and cheap labor force for their industries. They don’t need to invest hundreds of thousands of Euros to raise and educate them.

  On the other hand, the small and poor countries invested all this money and raised and educated these people. And then they are “sucked out” of the country by a powerful and wealthy country. And this is especially easy with the right of residence.

  An argument would be, without a doubt, that these countries are simply not competitive enough. If they were, the people wouldn’t be incentivized to move away. Right. And here we come to the “Economy of Scale,” which I described in detail in Economics and Empires 6. It concludes that it is impossible for a little country with a small population and limited natural resources to compete with a wealthier country.

  When the socialist block was in place, these problems did not exist since the economy of scale also applied there. It was a very large, common, and coordinated market. And then all of this was gone, and all single countries became instantly uncompetitive.

  Does that mean that small countries that are naturally unable to compete with big, powerful countries should lose their statehood and simply join a bigger country? Does it mean that these countries don’t need their people since they are uncompetitive, and therefore, they can “donate” their able-bodied people to a bigger country that needs cheap labor?

  I don’t think so.

  I think that these countries should protect themselves and act accordingly based on their national interests. And thereby opening at a pace that allows it to adapt to new realities. And close its market, if necessary.

  We in Republika Srpska, Serbia, and Montenegro are not in the EU. But we are being slowly but steadily depopulated by this process discussed above.

  This is the difference between short-term considerations and long-term considerations.

  Considering the short-term period, some politicians might see the advantages of large numbers of people who are unemployed, and so leaving the country. Having fewer problems with them.

  In the long-term consideration, this is a demographic and social catastrophe that eventually, over decades or centuries, will ensure that these countries will simply vanish.

  Have problems with unemployment? Why import all the stuff that is needed from abroad? If you have a high unemployment rate, it is CRIMINAL to import commodities that you could also produce yourself with the available workforce and reasonable investments.

  How about putting the support of startups as the maximum priority? Supporting entrepreneurship? Developing plans for what commodities need to be produced domestically and providing tax breaks and subsidies for startups and other domestic companies that produce or innovate in this sector.

  Of course, Western “advisors” advise how to open markets, privatize everything, and sell out the country. However, none of these “advisors” advised how to promote entrepreneurship and the startup spirit in the country. In the universities. In the schools. Etc.

  In the Balkans, most teenagers attend school and study. And end up as waiters or shop assistants after graduation. Congratulations. Or leave to go abroad.

  But no, our Hegemon (???) doesn’t want us to be domestically successful. He wants us to buy his commodities and to take our people. The best current example is Ukraine. It is to be expected that millions of young and educated Ukrainians (Russians indeed) will be “stolen” forever.

• Euro

  The Euro was a bad idea from the beginning.

  If you want to be successful in international markets, you need the ability to adapt your currency to domestic and foreign demand fluctuations. Especially if you are highly dependent on foreign trade, be it imports, exports, or both.

  If you have a Union of countries, then this is impossible. Each country has individual demands and requirements. Some countries need a stronger Euro to be prosperous. Some need it to be weaker. In theory the value of the Euro will not match the requirements of ANY country.

  In theory.

  In reality, it absolutely matches the requirements of one country — Germany.

  Germany is a major exporter. And it benefits greatly, within its current business model, from the European Union. And in turn, many other EU countries are benefiting from a strong German economy.

  So, it is beneficial for the EU to align the value of its currency with the requirements of Germany. If Germany prospers with its export-based model, then most other “industrial” EU nations also prosper.

  Considering the needs and requirements of every EU state, one would conclude that to some of these states, the Euro is poison. They could prosper far better without sacrificing themselves for the “common good” of the EU if they had national currencies. They could place their products better on international markets, making it more difficult for domestic businesses to import commodities. And thereby creating domestic demand and promoting entrepreneurship and startups in the best-case scenario.

I wrote a very long introduction to finally come to one of my first (of many) conclusions.

Germany is led by a certain hierarchy. And within this hierarchy, democracy plays a very small role, like in the rest of the West.

Here is the pyramid of power in Germany. Note: Most power is on the top.

So, to appease and subjugate the German Oligarchs (some very wealthy industrial families) and thereby secure control over Germany, Germany was allowed to become the hegemon of the EU. In other words, the EU has been built around Germany for a very long time to match its needs.

After the collapse of the socialist block, Germany was allowed to become a hegemon within the EU and a colonial/imperial master of the Balkans (more about that later).

This was established to be able to quickly assimilate the East European Countries into the Western economies (devouring them). And later to keep all EU countries under one point of influence. This ended recently. The EU concentrated so much power that Germany no longer is needed to fulfill this role.

Moreover, to be able to compete with China the US is forced to reindustrialize and develop markets for its goods. Germany has traditionally been a big supplier to worldwide markets for industrial goods. Hence, the USA needs to destroy German industry to eliminate one of its biggest competitors for industrial goods.

Downfall of Europe’s Economy

Why am I writing so much about Germany? It was chosen as the hegemon of the EU. So, what happens with Germany has a direct and major impact on the other European countries.

So, the claim is that Germany or Europe in general are still doing well and seeing high stock market values.

Check out the next figure:

Germany is deindustrializing already! Judging by these official figures, they are deindustrializing quickly.

The same with the stock of orders in the German industry:

The direction is clear.

In Germany, small and medium-sized enterprises were the backbone of the industry. And they can’t bear the burden of increased energy prices and all of the regulations around the transition to green energy. They are either dying or trying to relocate to the USA or elsewhere.

The big industrial companies, which are listed in the DAX (Germany Stock Index), are in a better position to cope with the difficulties, even though they are also struggling tremendously. Nevertheless, they are, to some degree, benefiting from the death or relocation of smaller or middle-sized competitors. Which is called centralization.

Moreover, most of the large enterprises are also producing abroad, but the accounting is based in Germany. So, they can still produce at competitive places (not Germany) and write positive figures in Germany.

I think the bottom line is the following: I will explain later what the death blow will look like, but most industrialists are aware of what is to come. So, hyping the stock indices to unrealistic heights will help them by withdrawing assets before the crash and reinvesting them in commodities such as real estate or gold. I’m sure these oligarchs, who mainly hold the shares of German industries, will have inside information before the crash and act accordingly. I have no evidence for it, but that’s the usual scheme.

Now, the question is, when will it be evident to everyone that things are catastrophic?

There are three events in the making to finish Germany off, and thereby the current European order:

1. When Russia finishes off Ukraine, which should be by the end of this year (if there is no major external escalation), Russia will have a land bridge to Hungary and Serbia. This will give these countries the opportunity to choose markets and suppliers freely by the mechanisms of a free-market economy and not by blackmail and pressure (EU).

   Since the neighboring EU countries will get step-by-step access to this new economic lifeline, it is expected that more European countries will choose to trade with BRICS instead of being forced to trade with countries where they pay twice the price. Moreover, they will be able to sell their products in other currencies and become competitive again.

2. Germany depends heavily on trade with China, both for imports and exports. Check out Economics and Empires 2 for detailed figures. If Germany loses access to China, then this would be a death blow to the German economy. It is very hard to imagine how Germany could survive this with its current business model.

   But hey, why should Germany lose access to China? 😊 It is not suicidal? 😊

   Correct. Germany will lose access to China exactly as it lost access to cheap Russian gas. The Americans blew up the Nord Stream pipeline, so they will blow up German relations and trade with China. Most likely through some crazy EU regulations that are already in the making (see the US tariffs on Chinese EV cars). And through internal saboteurs like the German Green Party.

3. Finally, Germany also has a big market in the USA. The US doesn’t want to have Germany in its market anymore since they want to reindustrialize. The US accepts German companies in its markets only if the German companies move their production to the US. Apart from that, they do everything to make German business uncompetitive, such as blowing up pipelines and forcing entirely unrealistic green transformation projects on Germany through their “The Green Party” saboteurs.

   So, Germans are not only going to lose the American market. They are also going to be transformed from a producer and exporter of goods to a consumer and importer of goods. Especially from China in the short term and the US in the long term (if these plans succeed, which remains to be seen).

And with a failing (maybe even a disintegration) Germany, the European political and military landscape will change dramatically.

And this is the difference between short-time thinking and strategic planning/thinking. Currently, things might be covered up to look “okay,” but the big blows have not arrived yet. They will unravel within the next three years.

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Editor’s note: Stay tuned for the rest of the story!

Hegemon of the Balkans

Serbia, Hungary, and China

American Trade with China

Taiwan

Scorched Earth

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[i] Edited by Piquet (EditPiquet@gmail.com)