Morally, it is wrong to suppose the source of evil is outside oneself, that one is a vessel of holiness running over with virtue. Such a disposition is the best soil for a hateful and cruel fanaticism. It is as wrong to impute every wickedness to Jews, Freemansons, "intellectuals," as it is to blame all crimes on the bourgeoisie, the nobility, and the powers that were. No; the root of evil is in me as well, and I must take my share of the responsibility and the blame. That was true before the revolution and it is true still.” - Nikolai Berdyaev

Throughout this year, all the forces that we had previously identified through our weekly readings have somehow connected to produce several crisis. Individualism, short termism, debt levels and growth, inequalities, terrorism, can be seen as the underlying reasons for Brexit and the election of Donald Trump. Previously marginal extreme points of views are now moving into mainstream media. Decades of failed economic policies and weak politicians have created a rich environment for populism.

We now believe that globalization is likely to revert in the mid to long term because of economic growth prospects muted due to high levels of private and public debt. This will be the direct cause and (thanks to feedback loops) main driver of increased populism and nationalism throughout the world. You will find below the articles that outline this working hypothesis.

Here, we will directly jump to the implications: if mainstream political parties in the Western world do not provide credible alternatives to the failed neo-liberal ideology, other parties will eventually succeed. In the Western world, these ‘other parties’ are increasingly shaping to be a mix of nationalism and xenophobia, along with a renewed interventionism of the state. ‘Elites’ are black sheep that must be destroyed and a renewal of politics is supposed to come out of this purge.

Yet the aftermath of Trump’s election is a warning sign: so far, he doesn’t appear to pursue any of the vague and populist program he proclaimed. Instead he is promoting ‘elites’ that were previously marginalized: this is a coup, not a revolution. But this doesn’t matter for now, because citizens are looking for ways to express their anger rather than to push forward a coherent program. In a few years, when the damages will be done, it won’t matter anyway.

Mainstream parties thus have very little room to manoeuvre: if they keep pressing on measures similar to those pushed during the last 30 years, they will keep losing their angry electorate. If they try to pick up ideas from populists parties, they will only manage into further bringing these ideas on centre stage. And if they focus on marginal issues, they will only reinforce the view that they are irrelevant. Given the lack of credible alternatives inside mainstream parties, this doesn’t bode well for the coming elections in France and Germany.

However, we believe that in Europe the crisis will probably reach its peak in the early 2020’s. Brexit and Trump may have emboldened populist parties but it also scared large parts of the populations. Yet 8 years after the start of the Great Financial Crisis (GFC) nothing has changed. Since no credible alternatives were pushed forward and the underlying framework that led to the GFC are still here, we cannot expect meaningful change in coming years. Instead, after another round of failed measures, botched bail outs and continuous inaction, the spectre of populism might eventually come back into life.

Science, General Knowledge & Environment

A Harvard psychologist says people judge you based on 2 criteria when they first meet you – “…people quickly answer two questions when they first meet you: Can I trust this person? Can I respect this person? Psychologists refer to these dimensions as warmth and competence, respectively, and ideally you want to be perceived as having both.

History & Geopolitics

Nationalism, Internationalism and New Politics – (Hat tip Tom) – “The world is experiencing a shift from the old liberal-conservative model to an internationalist-nationalist model. […] The rise of nationalism is the decisive character of the day. Internationalism is on the defensive. Whatever the ultimate outcome, this struggle will politically define at least the next decade.

Understanding the de-globalisation revolution – [Video] – Must see. Mark Blyth talks about debt, Brexit, Trump, the ‘new’ left/democrats, the EU and how this mega-mix led us to the current state of affairs: the rise of populism, the anger against ‘the elite’, and de-globalization.

In a highly indebted world, austerity is a permanent state of affairs – “The result, and the situation in which we find ourselves, is a classic bad equilibrium. Those who can’t pay, and don’t earn enough, are being asked to pay the most to service debt, from which they do not and will not benefit. Those who can pay, and earn almost all the income, both contribute the least and benefit the most from ‘all that debt’.

Trump’s Win is a Warning: Europe Urgently Needs a New Deal – “Instead, as the President he so convincingly conveyed his staccato of measures with a determination to put an end to the insanity of a slipped globalization and financial liberalization that this was enough to convince people not to turn to right-wing populists. And after a fatal crisis, the impression arose that politicians have control of destiny.

L’Europe face au défi de la régression démocratique – (Hat tip Lao Ho) – “La Hongrie de Viktor Orbán et la Pologne de Jaroslaw Kaczynski sont-elles l’avant-garde d’une contre-révolution culturelle qui est en train de gagner le monde ou une simple parenthèse malheureuse pour l’Europe centrale?

Finance & Economics

Nordic model myths beloved by left and right – (Hat tip Lao Ho) – “The Nordics offer mixed lessons. Their labour markets and educational systems have created a combination of egalitarian wages and high productivity. But access to wealth and the non-wage income it generates is often as unequal as elsewhere, and as impervious to social mobility.

China slams door shut on outbound capital – “Because while so far the global capital markets have been immune to the substantial tightening in financial conditions resulting from the sharp rise in the US Dollar and US interest rates, a similar tightening in China – which is now clearly taking place – will be far more difficult for global risk assets to ignore.

Picture of the day: Fidel Castro: polarizing icon


About Carlito Riego

"Great perfection may appear imperfect, but its usefulness is inexhaustible. Great abundance may appear empty, but its usefulness cannot be exhausted. Great correctness may appear twisted, great skills appear crude, great eloquence appear awkward. Activity conquers cold; inactivity conquers heat. Clear serenity governs the world." - Lao Zi