Mon | May 20, 2019

Norris McDonald | Austerity, the penny dreadful Euro and May’s Humpty Dumpty Brexit

Published:Sunday | April 7, 2019 | 12:17 AM

Prime Minister Theresa May is not having a happy time. It will cost Great Britain US$57.29 billion for Brexit, the decision to exit the European Union (EU). But it is not clear how Britain will get this money. New trade deals are being sought, but things are not working out as planned.

Chinese Vice Premier Hu Chunhua was about to sign a US$17 billion trade deal with Britain. China cancelled the trade talks following British Defense Minister Gavin Williamson’s threats to send warships to the South China seas to stop China’s “aggressive behaviour”.

That is the topsy-turvy way the British government seems to be led since Mrs May became prime minister. Mrs May is certainly no ‘Iron Lady’ Margaret Thatcher, but her control of the Government – or lack of effective control – has led to charges of incompetence.

Everyone seems truly fed up with Prime Minister May. Several Cabinet ministers have resigned. She is being severely criticised by her European colleagues while in Britain, there are increasing calls for her to resign.

The Telegraph newspaper reports that Sir Rocco Forte, a prominent British investor, urged the government to leave the Eurozone, calling it an “uncompetitive” place to do business. He also accused Mrs May of being a “third-rate negotiator in any middle size company,” t he Telegraph said.

Brexit is a truly Humpty-Dumpty mess for Mrs. May.

Brexit will see Britain leaving the Eurozone. It was demanded by angry British voters. They voted in 2016 to exit the EU by March 29, 2019. Mrs. May asked for an extension. The end of May 2019 is the new deadline.

Meanwhile, Brexit is not Mrs May’s only problem. Scotland is threatening to break from the British Union while Ireland is demanding border and trade agreement after Brexit.

PENNY-DREADFUL EURO

The EU was established by the Maastricht Treaty in 1993 to promote shared prosperity. No one expected all this penny-dreadful mess. Then came the common currency in 1999, like a nightmare from hell, dragging the British pound down, like a River Thames beaver that can’t swim.

“Many of Europe’s problems come from the disastrous decision, a generation ago, to adopt a single currency,” says Professor Paul Krugman.

Dr. Krugman is right. In the face of a growing debt crisis and other instabilities, harsh austerity policies were imposed in Europe to help prop up the Euro. These policies have not worked.

Anger, debt crisis, economic mess, austerity, Brexit mess, and, of course, a major immigration and refugee crisis now haunt Europe.

Noam Chomsky, an American philosopher, believes that populist revolts within the European working class are driven by fear and anxiety about the future.

Chomsky says that the current austerity policies have not led to any improvements in people’s live. As a consequence, this rising anger has led to the increase in nationalist political parties.

Spain has a secessionist rebellion. France, Italy, Hungary, Poland, and many other countries are seeing a higher level of political turmoil.

Poor Europe. What else can go wrong?

AMERICAN NATIONALISM

Donald Trump was elected president of America.

Trump’s election brought his nationalistic “America First” policy, with trade wars, increased tariffs, sanctions, and political threats.

Trump placed a 25 per cent tariff on US$50 billion Chinese imports, 10 per cent on an addition US$200 billion, and threatens even more tariffs on Chinese goods.

China’s economic growth rate, in 2018, fell to “a three-decade low”. Even with that, the Chinese economy is still growing over six per cent, well above growth rate for the world economy.

Trump cancelled several free trade deals. He cancelled the nuclear arms control agreement with Iran. Then he imposed sanctions on Iran and ordered all European companies to comply.

The financial markets worldwide were roiled by these threats and tariffs.

The tariffs have caused consumer prices to rise, in America and Europe, as major retailers passed their price increases on to consumers.

We can’t blame President Trump for all of the world’s problems, but his policies have certainly created chaos worldwide.

They have also made life even harder for the already struggling poor people.

GERMAN CRISIS

Germany, once the darling of Europe, is in deep crisis. The German economy is now sputtering along like a rickety, broken-down Mercedes Benz.

German Chancellor Angela Merkel has had enough. At the recent Munich Conference on International Security, Mrs. Merkel “effectively challenged Trump’s world vision with a practical, point-by-point rebuttal of nationalist isolationism”, The Guardian newspaper reports.

At the end of the day, Jamaica and CARICOM can learn at least one thing from this penny dreadful mess: They ought to give up their ‘pipe-dream’ of having a common currency, like the Euro, for this region.

If a single currency can’t work in Europe, then no monetary policy guzzum or even Jamaica’s best obeahman, the late Brother Fitzie, can make it work here.

That is just the bitta truth!

- Norris McDonald is an economic journalist, social researcher, and political analyst. Email feedback to columns@gleanerjm.com and miaminorris@yahoo.com.