A tale of two narratives

Economic Regions

There are two narratives, two Grand Strategies in the geopolitical sphere. These strategies have their own backers who fight to impose their agenda. Both have their own ideology; one depicts the liberal values of the West, and the other, the planned-economy tendencies of the East.

The Western narrative shows that the Nation State as we have known it is in full decadence. The State as such is inefficient in a socioeconomic level. It inhibits human creativity, and prevents certain regions from reaching their full potential. But how will the pre-eminence of the State come to an end? The main culprit will be the treasury, or the lack thereof. European states are heavily indebted: Greece has debt of 175% in relation to the GDP, 134% for Italy, 132% for Portugal, 106% for Belgium, 99% for Spain, and a 99% for France – both France and Spain closing in on 100%. Two of the “big four” European States are almost 100% indebted, whereas the third, the UK is leaving the EU. This leaves the Eurozone with 83% of debt. The EU is in bad shape at the moment, like a Frankenstein of old states kept alive with the bloodstream of QE, and in some places with the spirit of populism. The EU as such still is a worthy project, but it needs reform.

The states have, for too long, regulated the economy to secure its own existence, sometimes at the expense of the economic vigour of certain areas. The solution lies in a revival of the regions. Instead of Nation States, we need Nation Regions. This is, the full implementation of Geoeconomics as a method of governance. The main archetype is the Blue Banana, but also the revitalisation of the Sun Belt, among others.

Specifically, areas prone to innovation, with the potential of bringing more economic growth, and allowing “creative cities”[1] to reach their full potential. Cities like London, Berlin, Frankfurt, Milano, Paris, or Barcelona. According to Gert-Jan Hospers, [2] these aforementioned areas are contrasted by other, more agrarian, innovation-adverse regions. Above all, these are Mediterranean regions such as the Mezzogiorno, Andalusia or the Greek Islands [3].

The pre-eminence of Geoeconomics as a method, and as a reality, will surface as interregional competition, instead of State vs State competition. In this new paradigm, the more prepared, informed citizens, will thrive. Thus, the winners of the race will be those who understand the new paradigm, and adapt quickly, not those who romantically resist the accession of the new order.

These changes also have a financial side. A monetary revolution is underway, and the dollar will be reformulated. And the SDR will acquire a more relevant role which we will
discuss in more detail in upcoming columns.

On the other hand, there is the Chinese narrative. Pursuing an interventionist agenda over the economy, its strategy is called One Belt One Road (OBOR). In essence, it is a mega-project of infrastructures. Its main aim is to connect, via rail and road, the Eurasian landmass. This would be putting the cart before the horse, because there needs to be trade, a demand of some sort, to build a road towards any place. Moreover, if once the infrastructure project is done, there is a conflict of any sort (terrorism, wars, etc), or simply, no demand to use it, this rails and roads will be unused, and abandoned like an Olympic venue. On the other hand, it is not clear whether or not the OBOR project will help the Eurasian nations to get out of poverty, because in this mega-project, all Roads lead to… Beijing.

There are a couple of examples to help illustrate the point. First, the Yiwu–Madrid railway line. Covering 13.000Km, is the longest in the world. The Spanish, though, are not happy, since the train arrives full of cheap, Chinese goods, but leaves Madrid with a few cans of olive oil. On the other hand, there is the recently openned China – Myanmar energy link. The pipeline crosses all of Myanmar, and gives a great geopolitical advantage to China. The pipeline allows China to import oil from Africa and the Middle East, bypassing the pirate-infested Strait of Malacca. Notwithstanding the geopolitical gain for the Chinese, the refinery is based in China, which gives added-value jobs to the Chinese, not the Burmese.

The proponents of OBOR, should not forget that the first company created in the world was made out of desperation, not greed. The Dutch East India Company, was chartered in the Netherlands by the time it was at war with Spain. Its founder Johan von Oldenbarnevelt was a prominent leader in the independence wars against Spain. The company was used, among other things, to fund the war against spanish occupation.

There is an old Wall Street proverb, and though it comes from the land of speculators, it is a cry for modesty: “bulls make money, bears make money, but pigs? They get slaughtered.” The proponents of both narratives should take the saying into account.

[1] Beyond the Blue Banana? Structural Change in Europe’s Geo-Economy Gert-Jan Hospers

[2] Ibid

[3] Ibid