From: slider@anashram.com   
      
   The ties that bind the global economy together, and delivered goods in   
   abundance across the world, are unravelling at a frightening pace.   
      
   Russia’s invasion of Ukraine and China’s Covid Zero lockdowns are   
   disrupting supply chains, hammering growth and pushing inflation to   
   forty-year highs. They’re the chief reasons why Bloomberg Economics has   
   lopped $1.6 trillion off its forecast for global GDP in 2022.   
      
   But what if that’s just an initial hit? War and plague won’t last forever.   
   But the underlying problem – a world increasingly divided along   
   geopolitical fault lines — only looks set to get worse.   
      
   Bloomberg Economics has run a simulation of what an accelerated reversal   
   of globalisation might look like in the longer term. It points to a   
   significantly poorer and less productive planet, with trade back at levels   
   before China joined the World Trade Organisation. An additional blow:   
   inflation would likely be higher and more volatile.   
      
   ‘Going to Stay’   
      
   For investors, a world of nasty surprises on growth and inflation has   
   little to cheer equity or bond markets. So far in 2022, commodities –   
   where scarcity drives prices higher – have been among the big winners,   
   along with companies that produce or trade them. Shares in defense firms   
   have outperformed too, as global tensions soar.   
      
   “Fragmentation is going to stay,” says Robert Koopman, the WTO’s chief   
   economist. He expects a “reorganised globalisation” that will come with a   
   cost: “We won’t be able to use low-cost, marginal-cost production as   
   extensively as we did.”   
      
   For three decades, a defining feature of the world economy has been its   
   ability to churn out ever more goods at ever lower prices. The entry of   
   more than a billion workers from China and the former Soviet bloc into the   
   global labor market, coupled with falling trade barriers and   
   hyper-efficient logistics, produced an age of abundance for many.   
      
   But the last four years have brought an escalating series of disruptions.   
   Tariffs multiplied during the US-China trade war. The pandemic brought   
   lockdowns. And now, sanctions and export controls are upending the supply   
   of commodities and goods.   
      
   All of this risks leaving advanced economies facing a problem they thought   
   they’d vanquished long ago: that of scarcity. Emerging nations could see   
   more acute threats to energy and food security, like the ones already   
   causing turmoil in countries from Sri Lanka to Peru. And everyone will   
   have to grapple with higher prices.   
      
   A few numbers illustrate the scale of the new barriers.   
      
   Tariffs: The trade war saw US charges on Chinese goods rocket up from 3%   
   to about 15% over the course of Donald Trump’s presidency.   
      
   Lockdowns: This year’s Covid crackdown in China has put hundreds of   
   billions of dollars in exports at risk, and disrupted supply chains for   
   companies from Apple Inc. to Tesla Inc.   
      
   Sanctions: In 1983, the flows of trade subject to export or import bans   
   was only worth about 0.3% of global gross domestic product. By 2019, that   
   share had risen more than fivefold.   
      
   Sweeping embargoes triggered by Russia’s invasion of Ukraine, and efforts   
   by countries to secure their own supplies by barring sales abroad — like   
   India’s recent ban on wheat exports — have pushed the figure higher still.   
      
   Viewed from one angle, all of this is part of a global rupture that pits   
   Western democracy and free markets against Chinese and Russian   
   authoritarianism. But it’s not necessary to believe in a Manichean   
   struggle between good and evil — or expect the rival camps to separate   
   behind a new iron curtain — to see the prospective costs.   
      
   About $6 trillion of goods — equivalent to 7% of global GDP — are traded   
   between democratic and autocratic countries. To illustrate the risks of   
   the great unraveling, Bloomberg Economics introduced a 25% tariff on all   
   that traffic into a model of the global economy. That’s equal to the   
   highest rates that the US and China have leveled against each other, and   
   it can stand in for other kinds of friction too, like sanctions and export   
   bans.   
      
   The result: global trade plunges by some 20% relative to a scenario   
   without the decoupling — falling back to its levels at the end of the   
   1990s, before China joined the WTO, as a share of GDP. That’s a huge and   
   wrenching change.   
      
   All countries would have to shift resources toward activities they’re less   
   good at. A chunk of the productivity that’s associated with trade would be   
   lost. In the long term, a rollback of globalisation to late-1990s levels   
   would leave the world 3.5% poorer than if trade stabilizes at its current   
   share of output, and 15% poorer relative to a scenario of global ties   
   strengthening.   
      
   The model shows that another 7% of existing trade relationships would   
   shift between blocks. In concrete terms, that might mean factories making   
   goods for US markets moving from China to, say, India or Mexico.   
      
   As that example suggests, there would be winners. But the transition would   
   take time and cause severe bottlenecks along the way, ushering in a period   
   of high and volatile inflation. As Kenneth Rogoff, then a top economist at   
   the International Monetary Fund, warned back in 2003: “The global economy   
   now appears immersed in a long wave of low inflation, but experience   
   suggests that many factors, notably heightened conflict that reverses   
   globalisation, can bring it to an end.”   
      
   Rival camps   
      
   To be sure, the reality of global fracture is unlikely to play out along   
   quite such clear-cut ideological lines. Still, those numbers provide a   
   sense of what’s at risk.   
      
   Democracies can be forgiven for feeling under threat. In 1983, when Ronald   
   Reagan called the Soviet Union an “evil empire,” authoritarian countries   
   accounted for about 20% of global GDP. Fast forward to 2022, and that   
   share has risen to 34%. In the years ahead, with China expected to outgrow   
   the US and Europe, it will edge higher still.   
      
   The Ukraine war shows rival political systems lining up on opposite sides.   
   Chinese President Xi Jinping remains supportive of his Russian ally   
   Vladimir Putin, while Europe and the US are aligned on sanctions for   
   Moscow and military support for Kyiv. It also shows the limits of that   
   framing. India, the world’s most populous democracy, continues to buy   
   Russian oil and weapons. Many other democracies — in Asia, Latin America   
   and elsewhere — show little desire to join the US-led campaign of economic   
   and financial pressure on Russia.   
      
   Whether they’re defined by an ideological divide, or simply diverging   
   interests in a multi-polar world, the deepening fault-lines are real.   
   China’s latest Covid lockdowns are a good example of some of their   
   harder-to-predict consequences.   
      
      
   [continued in next message]   
      
   --- SoupGate-Win32 v1.05   
    * Origin: you cannot sedate... all the things you hate (1:229/2)