Ambrose Evans-Pritchard wrote:
> Protectionist dominoes are beginning to tumble across the world
> The riots have begun. Civil protest is breaking out in cities
> across Russia, China, and beyond.
> Greece has been in turmoil for 11 days. The mood seems to have
> turned "pre-insurrectionary" in parts of Athens - to borrow from
> the Marxist handbook.
> This is a foretaste of what the world may face as the "crisis of
> capitalism" - another Marxist phase making a comeback - starts to
> turn two hundred million lives upside down.
> We are advancing to the political stage of this global train
> wreck. Regimes are being tested. Those relying on perma-boom to
> mask a lack of democratic or ancestral legitimacy may try to gain
> time by the usual methods: trade barriers, saber-rattling, and
> barbed wire. ...
> "If we are not able to [use worldwide fiscal stimulus], then
> social unrest may happen in many countries, including advanced
> economies. We are facing an unprecedented decline in output. All
> around the planet, the people have reacted with feelings going
> from surprise to anger, and from anger to fear," said IMF head.
> Russia has begun to shut down trade as it adjusts to the shock of
> Urals oil below $40 a barrel. It has imposed import tariffs of
> 30pc on cars, 15pc on farm kit, and 95pc on poultry (above quota
> levels). "It is possible during the financial crisis to support
> domestic producers by raising customs duties," said Premier
> Vladimir Putin. ...
> The Kremlin is alarmed by a 13pc fall in industrial output over
> the last five months. There have been street protests in Moscow,
> St Petersburg, Kaliningrad, Vladivostok and Barnaul. Police
> crushed "Dissent Marchers" holding copies of Russia's constitution
> above their heads in Moscow's Triumfalnaya Square.
> "Russia has not seen anything like these nationwide protests
> before," said Boris Kagarlitsky from Moscow's Globalization
> Institute.
> The Duma is widening the treason law to catch most forms of
> political dissent, and unwelcome forms of journalism. Jury trials
> for state crimes are to be abolished.
> Yevgeny Kiseloyov at the Moscow Times said it feels eerily like
> December 1 1934 when Stalin unveiled his "Enemies of the People"
> law, kicking off the Great Terror.
> The omens are not good in China either. Taxis are being bugged by
> state police. The great unknown is how Beijing will respond as
> its state-directed export strategy hits a brick wall, leaving
> exposed a vast eyesore of concrete and excess plant.
> Exports fell 2.2pc in November. Toy, textile, footwear, and
> furniture plants are being closed across Guangdong, now the riot
> hub of South China. Some 40m Chinese workers are expected to lose
> their jobs. Party officials have warned of "mass-scale social
> turmoil". ...
> So is the Communist Party mulling a 1930s "beggar-thy-neighbour"
> strategy of devaluation to export its way out of trouble? Such
> raw mercantilism can only draw a sharp retort from Washington and
> Brussels in this climate.
> "During a global slowdown, you can't have countries trying to
> take advantage of others by manipulating their currencies," said
> Frank Vargo from the US National Association of Manufacturers.
> ...
> There has been much talk lately of America's Smoot-Hawley Tariff
> Act, which set off the protectionist dominoes in 1930. It is
> usually invoked by free traders to make the wrong point. The
> relevant message of Smoot-Hawley is that America was then the big
> exporter, playing the China role. By resorting to tariffs, it set
> off retaliation, and was the biggest victim of its own folly.
> Britain and the Dominions retreated into Imperial Preference.
> Other countries joined. This became the "growth bloc" of the
> 1930s, free from the deflation constraints of the Gold Standard.
> High tariffs stopped the stimulus leaking out.
> It was a successful strategy - given the awful alternatives - and
> was the key reason why Britain's economy contracted by just 5pc
> during the Depression, against 15pc for France, and 30pc for the
> US.
> Could we see such a closed "growth bloc" emerging now, this time
> led by the US, entailing a massive rupture of world's trading
> system? Perhaps.
> This crisis has already brought us a monetary revolution as
> interest rates approach zero across the G10. It may overturn the
> "New World Order" as well, unless we move with great care in grim
> months ahead. This is where events turn dangerous.
> The last great era of globalisation peaked just before 1914. You
> know the rest of the story.
>
http://www.telegraph.co.uk/finance/comm ... world.html
