In the past few years I have been disappointed multiple times for not reading adequate and missing on most relevant pieces of information. Being an ordinary mortal, I have not taken the blame for this on myself’. I have rather chosen to blame the deluge of data and information that has been persistently inundating my mindscape.
The flow of data is so overwhelming that discerning the important from the redundant has been a real challenge; especially because important is usually very marginal and underwhelming. The redundant, manipulated and superfluous is forcefully pushed and pursued relentlessly. The lines between the truth and untruth, conscientious and manipulative, data and information, relevant and redundant have been obviously obliterated or should I say brutally violated.
Most of the financial and economic literature I have come across in the past couple of years has focused on analysing the topics like digitalization of economy, modern monetary theory (unsustainability of it and disastrous likely consequences), spectre of hyperinflation, pandemic and its long term economic consequences, geopolitical reset (deglobulisation, ultra nationalism etc.).
The financial and economic literature does not appear to have adequately emphasized on some megatrends that may have far reaching implications for the global economy. I, of course, write this fully acknowledging the limitations of my small knowledge base.
Three of these could be listed as follows:
Rise of new class of feudal czars
The world is now being increasingly dominated by corporate czars. Though, the role of large corporate in policy making was always material; but in earlier days it was mostly limited to the areas of taxation and banking. In recent years these large corporates, especially the digital businesses, have become all pervasive. They blatantly influenced geopolitics, domestic & international politics, fiscal policies, and markets (including household consumption patterns), etc.
The communist China has taken decisive action and curtailed their area of influence. But democratic USA, UK and Europe etc. are meekly surrendering to this new class of feudal lords. The politicians and administrations are happy being subservient to the corporations that have grown much bigger than the entire economy of a large number of countries.
Most of the global population is not only within the sphere of their influence but addicted to their products and services. For example, a one week shutdown of google services could be catastrophic to the world. When was the last time one corporate so important to the world?
This demise of democracy at the altar of corporate feudalism will of course have far reaching implications for the global economy.
Abandoning the basic principles of economics
The principles of classical and neo-classical economics are being violated with impunity; and while doing so no new economic theory is being propounded. It appears that global markets are abandoning the theory of economics per se. Of course, we shall witness chaos in the global markets, till a new framework is put in place, or we decide to revert to the old system.
Some examples of abandoning the basic principles of economics in favour of chaos are as follows:
(i) The factors of production (man, money, land, machine & technology) are finite and should be used in an optimum manner. The resources should be allocated to the most efficient producer to achieve the economies of scale, optimization of cost and maximization of productivity.
However, diminishing cooperation and growing mistrust between countries is violating this principle. Geopolitics rather than economics is guiding the allocation of scarce resources.
(ii) Goods or services of economic value must have a price at which it could be exchanged.
But some of the most used services (e.g., Google search) in the world are now free. In some cases, people are even paid to use some of these services (e.g., digital payments). Online trading platforms are selling goods at much lower rates that the cost of procurement. Interest rates have been negative on trillions of worth of bonds for years now.
(iii) Competition is good for the economy.
Markets for many large products and services are becoming monopolies and oligopolies. Competition is not being allowed to develop.
Distancing of human beings
The trend for the past few decades was shortening of distances. Technology was bringing people closer. However, the past few years have seen the trend reversing suddenly. Technology is increasingly facilitating people to isolate themselves from the outside world. The dictum “Man is a social animal” appears to be becoming completely redundant.
This trend, if it gathers more momentum, shall catalyse reorientation of many things. The businesses, services and administration may now begin to focus more on secluded individuals, rather than families and communities. The concept of cities and villages might need rethinking. The political system which are based on people acting in groups (electoral democracies, participative communism, etc.) may become redundant for lack of participation.
Of course, there is no investment theme in these thoughts. But I feel these are not entirely random or utopian thoughts.
I shall be happy to receive views from the readers.
