POLICY PRIMER THE END OF ‘GLOBALIZATION’? ECONOMIC POLICY IN THE POST-NEOCON AGE 88 ACTUALITÉ AUTEUR M. NICOLAS FIRZLI M. NICOLAS J. FIRZLI IS THE The End of ‘Globalization’? COFOUNDER AND MANAGING DIRECTOR OF THE WORLD PENSIONS COUNCIL (WPC), a Paris-based think-tank focused on pension research and financial Economic Policy in the Post-Neocon Age law. Mr. Firzli is also Advisory Board Member to the World Bank Global Infrastructure Facility (GIF), a collaborative co-investment framework The stunning defeat of the ‘Remain camp’ in the Brexit referendum in the UK and the surprise dedicated to emerging and frontier markets. A statistician by training, Mr. ‘discursive dominance’ of Bernie Sanders and Donald J. Trump throughout the presidential Firzli has more than 18 years of capital primaries cycle on the other side of the Atlantic have shaken the neoconservative-consumerist market research and institutional asset management experience, focusing policy consensus in Berlin and Brussels. A new consensus seems to be emerging amongst on Canadian, Asian and MENA area pension funds, as well as sovereign British, American and French experts, one that favors ambitious developmentalism, modern wealth funds, central banks and infrastructure investment and the defense of native workers’ rights including pensions over supranational organizations. A graduate of McGill University lawless ‘free trade’ and regulatory overreach. (Statistics & Economics) and alumnus of the HEC School of Management and the University of Paris Law School (LL.M.), Mr. Firzli conducted research at i n many ways, with its long and the free movement of goods, named Margaret Thatcher: ironically the University of Louvain (UCL) Doctoral litany of discomforting capital, people and ideas across Thatcher and Delors who went on School of Economics and Management. news, the year 2016 has borders – a bold notion when 60% to be respectively UK Prime Minister a fin de siècle feel – ‘fin de of humanity lived under a Soviet- and President of the European demi-siècle’ would be a Communist yoke. The brain trust Commission, quarrelling theatrically more fitting appellation, for many of behind Reaganomics was composed for years from Brussels to Bruges the themes and ideas that came to of disciples of William J. Baroody, Sr., regarding the ‘future of Europe’, define the way the global economy president of the American Enterprise shared precisely the same neoliberal is run actually emerged in 1966 Institute (AEI). They wanted to economic agenda… during the California gubernatorial transform America and the world into The European version of that all- race: a maverick candidate named a unified ‘global economy’, a huge, encompassing laissez-faire market Ronald Reagan challenged the deregulated open market run by ideology is perfectly summarized state’s Republican establishment coldly efficient, rational CEOs selling by Klaus Kinski who plays Tomski (then led by George Christopher, consumer products to appreciative in ‘Mort d’un pourri’ (1977), a the Greek-American mayor of San masses: beyond California, they cynical West German CEO based in Francisco), won the primaries and eventually “masterminded the La Défense, the modern business went on to defeat Pat Brown, a transformation of the nation’s public district of the Paris Metropolitan popular Democratic centrist backed philosophy 1.” Area that Thatcher would later use by the President of the United Soon, by the late 1960s and early as a model for Canary Wharf2. Herr State, Hollywood and Wall Street 1970s, these ideas would cross Tomski informs a naively patriotic (any similarity with recent events or the Atlantic, informing the ‘new French army veteran (played by characters is purely coincidental!). policies’ proposed by anti-conformist Alain Delon) “to us, America, Russia, European politicians: Jacques Eastern Europe, it’s all the same… IT ALL STARTED IN Delors in France (then a center-right The economy is global now: we have CALIFORNIA . . . neoliberal ideologue for ‘La Nouvelle no enemies, no borders, just trading Reagan was merely a messenger Société’ who would become briefly partners the world over...”. (and a very good one) for a small ‘Socialist’ minister of finance under The ‘Neocon Era’ (1966-2016) was group of ‘ultra-capitalist’ ideologues President Mitterand…and then predicated upon the fundamental preaching the laissez-faire gospel of ‘father of the European Union’) and a assumption that borderless laissez- free trade, globalization, lower taxes young Conservative MP for Finchley faire and ‘totally free trade’ (Jacques JUILLET AOÛT SEPTEMBRE 2016 ANALYSE FINANCIÈRE N° 60  POLICY PRIMER THE END OF ‘GLOBALIZATION’? ECONOMIC POLICY IN THE POST-NEOCON AGE ACTUALITÉ 9 AUTEUR M. NICOLAS FIRZLI Delors’s Maastricht Treaty in 1993, investment in the Interstate Highway fueled by massive public subsidies, water and Legionnaires' disease Bill Clinton’s NAFTA in 1994, then System, America’s national road generous tax holidays for corporate while the equally incompetent CAFTA in 2005, the EU Lisbon Treaty grid.” 3 The main architect of raiders (the vulture capitalism of Democrat mayor and Republican in 2007 and now the Transatlantic Eisenhower’s infrastructure-based Lakshmi Mittal who destroyed the governor blamed each other for that Trade and Investment Partnership or economic policy was General Lucius steel mills of France and England seemingly ‘tragic event’. TTIP) went hand-in-hand with mass Dubignon Clay, a Saint-Simonian with Brussels’s blessings) and As predicted by World Pensions migrations and the ‘free movement French-American civil engineer and toxic credit-derivatives passing for Council researchers5 at the start of of persons’. military planner. ‘financial innovation’. the decade, financial short-termism But Reagan, Thatcher, Delors and This systematic, deliberate diversion and the deliberate under-investment AMERICA’S their many admirers amongst of public resources in favor of in public infrastructure by Ronald INFRASTRUCTURE Clintonian, ‘New Labour’ and EU unproductive sectors of the economy Reagan and those who followed CRISIS AND THE RISE OF Social-Democrat decision makers has turned Michigan, Upstate New him in the White House in the past SANDERS AND TRUMP in Brussels sought to dismantle York, Pennsylvania, Ohio, Northern thirty-five years has finally caught We have to remember that in the the generous state subsidies for England (where workers voted up with the US economy: even pre-Reagan era, “infrastructure was social infrastructure and public massively in favor of Brexit last neoconservative thought-leaders an apolitical, positively connoted, transportation across the United week), Northern France and many and Wall Street Journal editorialists technocratic term shared by States, Britain and the European regions of Belgium, Spain, Portugal had to admit recently that neglected mainstream economists and policy Union, focusing instead on the faux and Greece into pauperized urban roads and bridges could potentially makers […] including President modernity of ‘information highways’, wastelands: in Flint, Michigan, more “fuel a political rebellion against the Eisenhower, a praetorian Republican social media4 and video-games than 10,000 children were recently establishment.”6 leader who had championed start-ups, real estate speculation exposed to cancerous lead-laced In the past 9 months, the US presidential primary campaign was ECONOMIC DYNAMISM AND NATIONAL PENSION WEALTH: ‘EU CORE’ VS. OTHER OECD COUNTRIES shaken by the rise of two highly 2.5 contrarian contenders: Bernie DECORREL. FROM EU-CORE Sanders a (truly) Socialist senator from Vermont and Donald J. Trump, a real estate tycoon turned center- 2 right nationalist leader. Initially, most experts within the Republican and Democratic establishments predicted 1.5 that Sanders and Trump would fail miserably…But US voters proved them wrong: beyond the traditional 1.0 left/right divide, these ‘iconoclast candidates’ share two key economic themes that resonate strongly across the American heartland and beyond. 0.5 These common, common sense ideas are fairly simply: the need to curtail extreme forms of ‘free ECONOMIC GROWTH trade’ and mass migration (neocon -2 % -1 % 0 1% 2% 3% 4% 5% ideologues call it the ‘free trade n Economic Growth (x-axis): average annual growth rate of GDP (2012-2014). Source: World Bank national accounts. of the labor force’!) and, more n Decorrel. from EU Core (y-axis): composite economic, monetary and legal/regulatory indicator (see further description in Section 2). Source: World Pensions Council (WPC) proprietary estimates and the author’s recent contributions to Euromoney Country Risk ratings (June 30th 2016) importantly, the need to restart n National Pension Assets (flag size): OECD Pension Markets in Focus, 2015 (2014 data); the relative size of US and UK pensions being actually bigger than massive, sustained federally-funded represented here; Norway data not counting the country’s sovereign wealth fund investment in public infrastructure: E JUILLET AOÛT SEPTEMBRE 2016 ANALYSE FINANCIÈRE N° 60  POLICY PRIMER THE END OF ‘GLOBALIZATION’? ECONOMIC POLICY IN THE POST-NEOCON AGE 10 ACTUALITÉ AUTEUR M. NICOLAS FIRZLI (1) Stoesz, David. "Responding to the Crisis: high unemployment trap of their Conservative Prescriptions." Reconstruc- own making (misallocation of public ting the American Welfare State 43 (1992): 50, pg. 44 capital, ‘free circulation of persons’ (2) Today, Canary Wharf is owned jointly pauperizing the national labor force by QIA, the Qatar sovereign wealth fund, and bureaucratic regulations stifling and a real estate and infrastructure asset management company investing on behalf the private sector). of Canadian pension funds – see Julia Kol- Apart from Holland and Denmark, lewe, “Canary Wharf to be bought by Qatar Investment Authority,” The Guardian, Ja- EU-Core countries all have poor nuary 28, 2015 retirement systems with dangerously https://www.theguardian.com/busi- low pension assets (see chart). On ness/2015/jan/28/canary-wharf-qatar- brookfield-sale-london the other hand, assets owned by (3) Firzli, MN., and Vincent Bazi. "Transpor- UK pension funds are actually more tation Infrastructure and Country Attractive- ness." Revue Analyse Financière 48 (2013): than 11 times bigger than those of 67-68 all German and French retirement (4) A handful of contrarian American acade- institutions put together, a sign of mics predicted that the rise of mass enter- President Eisenhower with his chief adviser General Lucius Dubignon Clay, the French- tainment fueled by ‘consumer electronics’ Britain’s economic strength. would eventually represent a mortal threat American civil engineer and military planner who championed the formation of the Who kno ws? By defending to Western culture itself – see notably Interstate Highway System (IHS), the marquee public infrastructure asset that foste- Hannah Arendt in Jacobs, Norman. "Intro- red socially-beneficial, sustainable economic growth across the nation for decades: ‘egoistically’ its own national duction to the Issue of Mass Culture and “Together, the uniting forces of our communication and transportation systems are interests, the new UK government Mass Media". Daedalus 89, no. 2 (1960): dynamic elements in the very name we bear--United States. Without them, we would 273-277 be a mere alliance of many separate parts” (Dwight D. Eisenhower, Special Message to may well change the course of (5) Firzli, MN., and Vincent Bazi. "Infrastruc- the Congress of the United States, Feb. 22, 1955) European history and finally force ture Investments in an Age of Austerity: The Germany and the entrenched EU Pension and Sovereign Funds Perspective." Revue Analyse Financière 41 (2011): 34-37 E “When I see the crumbling roads and and single most important issue for establishment to reform the rigid (6) Gerald F. Seib, “As Infrastructure Creaks, bridges, or the dilapidated airports most voters. The brutal migratory Maastricht/Lisbon constitutional Congress Dithers,” Wall Street Journal, Oct. or the factories moving overseas pressures imposed by Brussels are framework, thus giving more 5 2015 (7) https://berniesanders.com/issues/crea- to Mexico, or to other countries for putting an untenable burden on leeway to Britain, France and other ting-jobs-rebuilding-america/ that matter, I know these problems the nation’s public transportation, Northern European nations and can all be fixed” (Trump) and “Our schools and hospitals (not to mention allowing a more democratic union nation’s infrastructure is collapsing, the pension system), while forcing to focus on economic cooperation and the American people know native workers to compete for their internally with much stronger it […] For too many years, we sustenance with unskilled migrants external borders, leaving the rest have dramatically underfunded and ‘refugees’ lured to our shores to member-states: the far more the physical infrastructure that our by the irresponsible promises of the effective, more nimble ‘European economy depends on (Sanders).”7 German Chancellor. Community’ model designed by Beyond mass migration and national French investment bankers and ‘BREXIT’ AND THE BROKEN security, Angela Merkel’s swollen development economists (treaties of EU CORE European Union is characterized by Paris and Brussels built on the ideas Last week it was the UK voters’ turn lackluster economic performance: of Winston Churchill and his protégé to reject the destructive neoliberal ‘EU-Core’ states (see chart), defined the Anglophile Jean Monnet). M agenda: The ‘Leave’ camp won with as Germany, France, Italy, Belgium a wide margin in spite of challenging and Luxembourg (the original The data charts, conclusions and odds. The European Union in its members of the 1958 European opinions expressed here are the current condition has become a Coal and Steel Community, with author's and do not necessarily potential threat to national security the possible exception of the reflect the views of the World itself – the most fundamental country- Netherlands) plus Spain and Portugal Pensions Forum or the World risk factor for long-term investors are stuck in a low economic growth/ Pensions Council. JUILLET AOÛT SEPTEMBRE 2016 ANALYSE FINANCIÈRE N° 60