One more time. Bad economic policies lead to political upheaval, which then becomes economic chaos. It is a cycle that has repeated itself for at least two millennium. The more things change, the more they stay the same.
In last Sunday’s scripture reading in the Roman Catholic Church, it spoke of a man that if he knew his house was going to be robbed, he would have been prepared. “If the owner of the house had known at what time of night the thief was coming, he would have kept watch and would not have let his house be broken into.”
What I found interesting is that we think of this sort of event as a modern phenomenon, as if the old days were filled with peace and harmony. And yet, here is a story from some 2,000 years ago that addresses exactly the same situation that we face today. The more things change, the more they stay the same.
The Beijing government used Hong Kong like an abused carabao for two decades, both politically, and more importantly economically. The Hong Kong dollar is pegged to the US dollar and with HK being a major tourist and shopping attraction, it helped the mainland acquire seed money 20 years ago to help build all those factories that flooded the world with goods.
Foreign companies were able to do business with “real China” through HK without visibly getting their fingers dirty paying off Chinese public and private corruption. When it was to Beijing’s advantage to have ‘secret’ money flow out of the mainland, HK was a good place to launder funds for overseas investment that western countries might have frowned upon if it came from real Chinese corporations. On the way out, HK made a “commission.”
In those good old days when HK’s economy was growing by 8 percent, oddly enough there were no protests about “freedom.”
And then when it became necessary to curtail that money flow, Beijing put the financial screws to HK. HK economic growth dropped to 4 percent. Perhaps realizing the freewheeling good old days had come to an end, political chaos ensued. HK will be in recession by the end of the month and it will take several quarters at least to recover. Bad economic policies lead to political upheaval, which then becomes economic chaos.
These countries are experiencing mass protests. A year ago Bolivia’s growth was 5.23 percent, now down to 2.84 percent. Chile went from 5.3 percent to the latest 3.3 percent after two quarters of less than two percent. Lebanon’s GDP growth is down 60 percent from 2017. Iran’s GDP growth rate was 12.9 percent in 2017 to the current 1.8 percent. In 2017, Iraq’s economy grew at 13.8 percent versus negative -1 percent in 2018. The European Central Bank has decided, “The bank would incorporate the climate threat into both its capacity as watchdog of the financial system” since it has failed on economic policy. European Union economic growth is 1.1 percent while inflation is 1.2 percent. That is negative real growth.
Next year will see the major central banks and most governments give up on fixing their economies. Then the economic chaos will begin with a vengeance. The political chaos will continue to spread to nations considered safe from that problem as the economic chaos also spreads.
That will not be a pretty sight. Of course, watching from a country with low inflation and 6- percent growth, laughing might be considered rude even if appropriate.
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