20 November 2017   Leave a comment

After weeks of negotiations, the German parties–Christian Democrats CDU, the Bavarian Christian Social Union (CSU), the pro-business Free Democrats (FDP) and the Greens–failed to come to agreement on a coalition government led by Chancellor Angela Merkel.  It does not appear as if the Free Democrats and the Greens will change their minds and a resurrection of a coalition with the Social Democrats (SDP) seems unlikely since the previous coalition did not seem to help the SPD at all.  A minority government is a possibility with decisions made on an ad hoc basis but that solution is inherently unstable.  If no coalition is possible, then the only alternative is another election, an outcome that will rock Europe’s last predictable politics.  After Macron in France, Brexit in Great Britain, and the growing illiberal governments in Eastern Europe (Poland, Hungary, and the Czech Republic), politics in Europe has become highly uncertain.

 

The World Trade Organization is predicting slower growth in international trade in the next quarter of 2017.  For most of the 20th century and the beginning of the 21st, international trade has always grown faster than global economic growth.  Trade has been the engine of economic growth in the process of globalization as productive activities have sought out the cheapest places to produce goods.  It may be the case, however, that the link between trade and economic growth is about to change.  According to Hellenic Shipping News Worldwide:

“… the volume of world merchandise trade has tended to grow between 1.5 times to twice as fast as world GDP. But since 2012, trade has only been growing at a rate equal to or below that of GDP. In 2016, 20 of the world’s largest shipping companies sold $120 billion, compared to $200 billion in 2012. The downturn of the Chinese economy and other emerging economies, as well as the contraction of investment in the US during recent years, may explain part of this deceleration – but not all of it. Other technological and political factors could indicate a long-term anti-globalization trend. This would create a world very different to the one we know.”

One of the key factors in this change is the radical transformation occurring in the manufacturing process itself as robotization changes the dynamic of labor costs.  Firms no longer have to go abroad to produce cheaply.  With automated processes, labor costs shrivel and firms can stay closer to the markets for their products.  The Financial Times has an informative article on the process which forecasts a dramatic growth in the number of industrial robots globally.

 

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Posted November 20, 2017 by vferraro1971 in World Politics

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