The ill-feeling among leaders of the G-7 nations — essentially,
the West plus Japan — was mirrored early this morning in the puking financial
market futures, so odious, apparently, is the presence of America’s Golden
Golem of Greatness at the Quebec meet-up of First World poobahs. It’s hard to
blame them. The GGG refuses to play nice in the sandbox of the old order.
Like many observers here in the USA, I can’t tell exactly
whether Donald Trump is out of his mind or justifiably blowing up out-of-date
relationships and conventions in a world that is desperately seeking a new
disposition of things. The West had a mighty good run in the decades since the
fiascos of the mid-20th century. My guess is that we’re witnessing a slow-burning
panic over the impossibility of maintaining the enviable standard of living
we’ve all enjoyed.
All the jabber is about trade and obstacles to trade, but the
real action probably emanates from the energy sector, especially oil. The G-7
nations are nothing without it, and the supply is getting sketchy at the
margins in a way that probably and rightfully scares them. I’d suppose, for
instance, that the recent run-up in oil prices from $40-a barrel to nearly $80
has had the usual effect of dampening economic activity worldwide. For some odd
reason, the media doesn’t pay attention to any of that. But it’s become
virtually an axiom that oil over $75-a-barrel smashes economies while oil under
$75-a-barrel crushes oil companies.
Mr. Trump probably believes that the USA is in the catbird seat
with oil because of the so-called “shale oil miracle.” If so, he is no more
deluded than the rest of his fellow citizens, including government officials and
journalists, who have failed to notice that the economics of shale oil don’t
pencil out — or are afraid to say. The oil companies are not making a red cent
at it, despite the record-breaking production numbers that recently exceeded
the previous all-time-peak set in 1970. The public believes that we’re “energy
independent” now, which is simply not true because we still import way more oil
than we export: 10.7 million barrels incoming versus 7.1 million barrels a day
outgoing (US EIA).
Shale oil is not a miracle so much as a spectacular stunt: how
to leverage cheap debt for a short-term bump in resource extraction at the
expense of a future that will surely be starved for oil. Now that the world is
having major problems with excessive debt, it is also going to have major
problems with oil. The quarrels over trade arise from this unacknowledged
predicament: there will be less of everything that the economically
hyper-developed nations want and need, including capital. So, what’s shaping up
is a fight over the table-scraps of the banquet that is shutting down.
That quandary is surely enough to make powerful nations very
nervous. It may also prompt them to actions and outcomes that were previously
unthinkable. At the moment the excessive debt threatens to blow up the European
Union, which is liable to be a much bigger problem for the EU than anything
Trump is up to. It has been an admirably stable era for Europe and Japan, and I
suppose the Boomers and X gens don’t really remember a time not so long ago
when Europe was a cauldron of tribal hatreds and stupendous violence, with
Japan marching all over East Asia, wrecking things.
There is also surprisingly little critical commentary on the
notion that Mr. Trump is seeking to “re-industrialize” America. It’s perhaps an
understandable wish to return to the magical prosperity of yesteryear. But
things have changed. And if wishes were fishes, the state of the earth’s oceans
is chastening to enough to give you the heebie-jeebies. Anyway, we’re not going
back to the Detroit of 1957. We’ll be fortunate if we can turn out brooms and
scythes twenty years from now, let alone flying Teslas.
This will be the summer of discontent for the West especially.
The fact that populism is still a rising force among these nations is a clue of
broad public skepticism about maintaining the current order. No wonder the
massive bureaucracies vested in that order are freaking out. I’m not sure Mr.
Trump even knows or appreciates just how he represents these dangerous
dynamics.
