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Conventional wisdom has it that globalisation and the spread of deregulation have been an economic boon for the English-speaking countries. Having run down their manufacturing as a percentage of gross domestic product in the 1980s and 1990s, the US and the UK have been less vulnerable to Chinese competition in this cycle than the big economies of continental Europe. And with disproportionately large financial sectors, these two countries have also enjoyed a financial windfall from the rise of China and other emerging markets.
A more fundamental point is that China and other emerging market countries are unilaterally rolling back the high tide of liberalisation. Thanks to their rise, more of the world economy operates under mercantilist pegged exchange rate regimes. By investing their official reserves in developed world government debt, they reduce the cost of public sector borrowing, making a return of big government easier. As co-conspirators with the US Federal Reserve in creating the credit bubble, the same countries have contributed to a boom and bust cycle in housing and finance which will lead to a political backlash, soon to be followed by cumbersome regulation. Meanwhile, sovereign wealth funds are indirectly reversing the privatisation trend that began in the 1980s through a re-expansion of state ownership, but on a cross-border basis. That in turn will spawn an illiberal political reaction that will inhibit global capital flows. On the face of it, continental Europe ought now to be better placed to cope. Yet this is no time for schadenfreude . Two German banks that dabbled in subprime structured products have had to be rescued. The dabbling arose from an urgent need to raise returns in an over-politicised, over-regulated, but under-profitable German banking system.
There is no question that smart, global finance has been a good thing. Without the recycling of capital, excess savings in Asia would have been profoundly deflationary. Yet from today's global vantage point, we have undoubtedly all had too much of this good thing. Whether it is ever possible to have just the right amount is another question.
The whole self-serving article warrants a deconstruction.
We have met the enemy, and he is us — Pogo
The struggle of man against tyranny is the struggle of memory against forgetting.(Kundera)
FT.com / Companies / Financial services - The pitfalls of financial globalisation grow clearer
Two German banks that dabbled in subprime structured products have had to be rescued. The dabbling arose from an urgent need to raise returns in an over-politicised, over-regulated, but under-profitable German banking system.
The unpoliticised, not over-regulated, and uber-profitable Anglo banking system was under no urgent pressure to raise returns and therefore did no dabbling in subprime, right?
There's a real negative swing in that, where "un-profitable" is the determinant, the heavy factor that decides. I agree with over-politicised, I think "over-regulated" is the wrong angle--the angle is "wrongly regulated", so I see the base tone as "you're too political, and you're telling us what to do, and we're still not making money...with money as some strange talisman, not what it can buy but what....protection money....protection from "less", so the huge meme: "less is more"--
Less tax is more investment!
Less profits are more investment!
Less money is more time!
Less energy is more symbiosis!
Less pain is less pain!
Don't fight forces, use them R. Buckminster Fuller.
John Plender is an FT columnist and chairman of Quintain
And Quintain is... you guessed it, a property firm...
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