- Have we hit ‘peak trade’?
- The real buildout
Trump signals a trillion dollar infrastructure plan and suddenly the heft economy of diggers, builders and engineers is commanding investor attention again.
John Deere seems more future-filled and real than Facebook. The US business media is talking of John Maynard Trump. It’s an apt sobriquet.
What is often not grasped about Keynes is that he was an arch pragmatist — ”when the facts change I change my mind. What do you do Sir?”
A mathematician and world class probability theorist — his Treatise on Probability more revealing than his iconic General Theory– Keynes dubbed economics as ”applied social psychology dressed up with spurious statistics” and claimed that he only splattered the General Theory with algebra so that his professional colleagues would take it seriously.
Chimes with the Trump mentality.
Like Trump, Keynes was mischievous and promiscuous in more senses than one.
As Facebook wrestles with the ‘fake facts’ issue, and as Google and Amazon brace themselves for possible tax and antitrust investigations, it looks like the prevailing interest in markets will shift to taxing China, digging more coal in America, looking for more domestic oil and gas, re-opening steel mills, repairing highways, fixing leaking water pipes, bringing airports up to scratch and rebuilding bridges — all supposedly ‘shovel ready projects’, which a strapped Obama couldn’t get started.
And on that great Wall — looks like it may be a ‘virtual, surveillance wall’, involving fleets of drones rather than $10 billion worth of 20 foot high concrete blocks.
Have we hit ‘peak trade’?
The Indian rail disaster at Kanpur puts decision making over infrastructure priorities in sharp relief however.
It is now increasingly likely that India’s putative $300 billion national railway project will focus more on repairing and relaying tarnished track installed by the British than on prioritising glitzy high-speed trains in cahoots with the Japanese. It will be the same story of repair and upgrade in the US, despite Trump the builder’s love of glitz and gold taps. So to Britain, which is preparing to spend £1.3bn on road improvements.
So is this a return to a more primitive and protectionist economic policy? And at a time when the world is already slowing, should we be asking whether we are retrenching?
In short: have we reached ‘peak trade’?
According to the WTO, global trade flows averaged growth of around 10% between 1949 and 2008. That slumped to 1.3% from 2009-2015 and shows no signs of picking up. All a ball of wax that Keynes would have been happy to knead.
Keynes argued for a ‘compensatory’ fiscal and public works State. When an economy reaches equilibrium far short of employment and productive capacity, slash taxes and initiate public works, run deficits and vice-versa and the devil take the hindmost.
Trump will follow suit. It has the Austrian school and the economics team at the BIS wringing their seriously calloused hands, but in Trump’s post-fact, improv world of great simplification you just prime that pump like crazy otherwise the ‘armed’ core constituency in the rust belt and among white middle class JAMs will get distinctly restless, and soon.
The real buildout
It’s somewhat ironic that China is now saying it will lead the global anti-protectionist counter-charge to fill up any ‘US shaped hole’. As I’ve argued before, Trump should favour China in the long geoeconomic game.
And is there another side to this story of a slide in global trade.
With the Internet, not yet balkanised outside China, the cross-border flow of digital data and ideas — e-com, web searches, online video, M2M interactions — has grown 45X over the last ten years and is projected to grow even faster over the next few years, according to the McKinsey Global Institute.
This puts the angst about Brexit among London EC1 tech cadres in context.
The world is caught in a quicksand — it can’t afford the much needed infrastructure projects to make a dent in the global lack of secure jobs paying ‘living wages’ but the march, now like a cantering Roman army, of the algorithms and ubiquitous robots with their ‘heads in the Cloud’ leaves electricians and plumbers in work and hardly anyone else.
This is key story of our time: the tension between a land-based economic system and a wrenching global tech-driven system that thrives on the interface between human and machine intelligence, with vast streams of data and, in time, more useful information, being exchanged over mass platforms.
We have already seen a basic infrastructure put in place to support this new system. Over the last decade, tech titans have built server farms to support, planted sensors to draw data and trained algorithms to siphon off useful information.
With blockchain and the codification of all information — money, DNA, bureaucratic records, blueprints, ideas — there is scope for a distributed ledger that acts as a secure network for the storage and exchange of useful information on a mass scale.
There is huge work to be done supporting this new infrastructure: planting sensors, solving physical problems such as batteries storage, new chips, securing networks, developing VR/AR headsets. This buildout will continue long after Trump’s plans meet resistance in Congress.
Meanwhile, new trillion dollar industries — genomics, fabrication, robotics — are already emerging, even as platform companies such as Amazon, Google, Tencent, Alibaba threaten the viability of legacy industries that still rely on debt and human sweat, muscle power, heft and decision making. A wobbly, lurching world in which according to Stalin’s power law: ‘in politics the only sin is naivety.’
And that is before we consider exactly what kind of digital system is gestating — more on that in the coming week.
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