Disruption in Trade and global concern for Toxicity of Asset Prices
By: Amit Bhushan Date: 29th Aug. 2018
With Trade Tariffs based protectionism on rise, the hawks of ‘global economic growth’ are busy selling ‘caution’. The reason is that Asset prices are behaving awkwardly in different regions. This is because on the back of ‘protectionism’, new production assets/industry is being created and this could be unsustainable if the tariffs are ‘gone’ or new Trade-deals are signed. Unfortunately none of these ‘hawks’ would cry foul when powerful governments take measures like public spending on Infra or other subsidies to alter ‘competitiveness’ dynamics in trade. When ‘public funds’ are drawn to distort ‘trade capabilities’ of a few organizations and business entities, that’s termed as sustainable growth in trade and consumers benefiting out of ‘low prices’, even if jobs and profits are pocketed by ‘a few’. And when Public/Government funded infrastructure offered cheaply is a key foundation for Trading Enterprises, is never seen as toxicity of such trading assets as trading entities are profitable and able to have capital to sustain loans on their books.
In short, massive investment on ‘Infrastructure’ to alter competitiveness dynamics is all about good governance. This has been in spite of that Capital Deepening has resulted in ever low Incremental Capital Output Ratio and same amount of investments elsewhere may have resulted in far more output. Large corporates have developed vested interests on two counts here- one who gets the contract to develop such ‘infra’ and second, what is the ‘infra’ that gets developed and where. Earlier, such ‘political wrangling’ was confined to local area or impact over a small locality. However now this seems to be taking not only national but also international dimensions. Large nations and within them large corporate, have taken over this ‘play’, much to the chagrin of smaller players like SMEs or self-employed people. The emerging nations with large swathes of people in poverty as often cited in Gini Index have been especially hit, and people seem to be becoming particularly restive. The governance processes are in need to be re-designed for making them more supportive for the smaller enterprises and the self-employed.
Often much of ‘global economic growth’ talks have really ignored these aspect and have tried to measure growth in terms of one or two major metrics for a nation, and political leaders/senior bureaucrats pushed to chasing such metric/s. The present political wave, which is being branded as ‘inducing toxicity to trade assets being created’ is a result of ‘political push’ from the bottom to actually replace the ‘measures’ and include job creation as a measure of success of economy though while at the same time having parameters for inflation, continued improvement for relative-competitiveness, food & energy prices (within common reach), ease for legitimate industrial and commercial activity, environment conservation and social stability etc. Instead of looking at these new parameters which can possibly gain some reliance, the ‘celebrity professionals’ are busy circulating the same old logical analyses seeped in ‘past’. The global political structures like WTO etc. were a response to public needs as understood at some point of time and these structures can undergo revisions based on revised understanding of public needs, a point that is steadfastly refused to be understood. Current tumult in the global trade is a pointer towards the ensuing change.
With the gradual evaporation of the socialist ideology and success of Capitalism, the political regimes in place had come to believe that they need to protect ‘Capitalists’ as they bring ‘success to economies. Unfortunately, that’s not the case as for success of Capitalism, one needs to grow the number of Capitalists and this can be helping more people into entrepreneurship or mostly done by encouragement for new entrepreneurs. The leaders are fast realizing that this at times is forcing upon them, the ‘odd choice’ of trade protectionism and also re-design of some government support institutions, laws, policies and procedures. Hence while the ‘celebrity professionals’ are working overtime to produce loads of analysis basis present structure, they should calibrate if they need to spend an ounce of time to define what possible new structure can be to better meet the ‘global demands’ that have emerged lately. Till that happens, most of the political leaders would perhaps go about allocating all powers to themselves to ‘make changes’ and continue to justify the same on grounds that people are asking/expecting ‘their version of change’. That’s currently the gist of most political tussles in many of the emerging as well as developed nations. And the ‘celebrated professional too have steadfastly refused to buzz, but for how long??? Till we start hearing more, about what’s possible to be done for a more ‘just’ global economic regime, it’s unlikely to know what shape of things would be like. However, for now it’s clear that monopolies are on its way out be it monopolies by enterprises or by nations or national enterprises. Let the ‘Game’ evolve…