So my friend @sociotalker finally made a kultwit about neoliberalism, something most indonesians don’t understand. Well, not their fault, because the anti-neoliberalism propaganda that they see is mostly about demonizing the said economic model for the bad condition of Indonesian microeconomics. People need a demon, something to loathe, something to put the blame upon. Ironically, that’s what happens to God as well, but sometimes God can enjoy the attribution of good stuff too.
Anyway, we know that there’s something wrong with indonesian economics, but good news (or bad news, if you happen to have no economical advantages whatsoever) is, it happens all around the globe for the last several decades. The way I see it, there’s no end to the infamous Great Depression, just series of alleviations and meanderings to dampen its effects.
While my perspective, basically, is just a big non-academical, all-intuitive, and is basically just a general bullshit, I will still write it down because I won’t be able to sleep before this is posted. So read on if you want.
From where I see it, macrodynamics of international economy and politics is a continuous story of who gets the most power to be left alone, to be envied at, or to lead the rest. No story starts without a prologue and ends without a finale. There’s always a specific, underlying, recurrent, leitmotif to every actions taken by countries all over the world.
While there are lots of stories from the times of the ancients to the modern world, this story actually started during the industrial revolution, where natural resources were extracted in great numbers, production factories boomed, and the demand for energy and labors were sky high.
Back then, England was the center of the perceptual universe, America was the runner up. England with the inventions and the marvel of sea armada has the most acess to natural resources and energy. During the previous age, the naval expeditions of the royal navy had secured multiple ports in various lands across the globe for resources. We’re Indonesians, of course we know what happened during the colonial age.
The problem starts when England started to expand in terms of production capacity and broke free from the Malthusian Trap. This started an europe-wide race to get more income per person that requires more extraction of resources and energy from the rest of the world. Not surprisingly, the most aggressive competitor was Germany.
With the increased income, came increased consumption and the start of what economists called as the Great Divergence. Some countries experience the exponential growth while some other countries (namely, the exploited lands such as sub-saharan africa) are still in the Malthusian Trap.
David Landes (1998) argued that European culture is more conducive to economic growth, and in the rise of economy means the rise of both production and consumption. The market needs to move faster and faster, and energy consumption increases. Colonization efforts grew and the international game of chess was played with more vigor. This process continues and gave birth to World War I. (for a very beautiful story about the turn of the ages up to this point in time, I would recommend Ernst Hans Gombrich’s “A Little History of the World” for more avid readers)
War is a very expensive investment, and the losing party tends to lose everything. This happens to Germany who had to pay for reparations in the affected countries. Among other things happening globally, this gave rise to the dream of a Third Reich which will lead into the advent of World War II.
But the most interesting things happen with the involvement of the Americans. Basically, they gain the most during the aftermath of the World War I. Long before Marshall Plan, there was Dawes Plan whose main point is about financing Germany in the efforts of post-war reparations. A debt that haunts Germany until it’s finally settled in 2010.
The side effect of Dawes Plan is the dependency it created to Germany. I’m pretty sure this is what modern colonization means, creating dependency from another sovereign nation and make them dependent for their livelihood. My stupid analysis would suggest this is the seed for a global domination plan.
However, the Great Depression somehow happened. I don’t know how, or why, it happens. But we all can agree that it happened, and one of its effects was the inability for Germany to pay for its war debts. (for a good quick read on the Great Depression, I recommend this page here on american economy during 1920-1930)
America, in dire need for cash and in a show of generosity, decided to make another plan to replace Dawes Plan, since Germany wouldn’t be able to pay its debts anyway. Young Plan was about postponing the payment dues, lowering the debts, and generally making Germany continued to pay its debts under a softer terms and conditions.
But opposition came and gave room for the rise of a brilliant overlord named Adolf Hitler. As you can see up to this point, there seems to be a downhill race in humanity since the freedom from Malthusian Trap. One evil leads to another, maybe.
The structure of the world changes rapidly in the chaos following World War II. In the aftermath, came what is known as Marshall Plan. America’s revamped version of Dawes Plan, but this time, the financing goes to the allies in developing their post-war economy, and in effect, dividing the rest of the world into new colonial territories based on economic dependency. Yes, we’re a part of the colonial territory.
As a sidenote, during the 1910s, America was a military pygmy who accelerated and mobilized its economy to war-funding efforts just to participate in the first great war. This resulted in an investment called Germany, and failed gloriously along with the Great Depression. A re-enactment of this opportunistic war-investment happened in the second great war, and this time it results in a plan that put the allies and not the war loser on the debitor side.
Market growth was accelerated during this era because world commerce was believed to be a precondition for peace. America gained success in leading the development of world economy during this era. The logic here is that if all nations are related in an interdependent relation, they would refrain from making wars with each other. Most of the world powers during this age agreed to the logic. Except the Soviet Union who believed that each nation should be mutually independent and self sufficient. Cold War between Soviet bloc and the rest of the world happened afterwards.
During this age of post-war aftermath, World Bank and International Monetary Fund was established to prevent the economic collapse as what had happened after the first great war. The concept was to build two intergovernmental agencies to oversee market stability and regulating international investments in the emerging markets of the third world countries. Basically, these regulatory agencies, plus the cost of war, successfully prevent the advent of another great war.
While the idea is simple, the regulatory details and the following economic consequence is not. The financial crisis during 2007 – 2010 proved that, among other things, risk assessment models that had dominated the mainstream economy since the rise of World Bank and IMF was not infallible. Bubbles burst, eventually.
Even so, it doesn’t mean that the economic models developed by Keynes along with his American counterpart White wasn’t effective. It has prevented the post-war problems for so long, though it couldn’t answer to the Great Divide between world powers and leftover countries.
So yeah. After such a long bullshit, I think the problem lies not in the economic models, but the economic strategies taken by the world powers. America, as we see, participates in war as a form of investment. England participate in war as a form of resource pooling expansion. And in this age of economical interdependence, the war happens in the economy perspectives and actions taken by governments.
Presently, Indonesia is facing two options: either it will go China, or it continues to go America. For both world powers, Indonesia is a very important market. Lots of consumers, lots of cheap labors, and lots of natural resources. And it’s not easy to navigate between the two world powers. (add to that, the general problems indonesia has from the very beginning and its independence minus absolute sovereignity).
During the last economic crisis, however, Europe and America faced potential bankruptcy, so I’m thinking that there would be world wars going on. So far, the unrests happening in Africa and Middle East is well contained, but who knows if it will go into an all out war once the investment money runs thin and the return is nowhere in sight.
So yeah, libertarianism my ass.