The world is facing an unprecedented and complex economic crisis, and the only way out is to hold “pessimistic activism”
The famous Japanese researcher of economic nationalism and author of “TPP Subjugation Theory” Nakano Takeshi, in the world including Japan, trapped in wars, epidemics and climate warming, and more deeply in the current situation of severe price rises, exhausted What I have learned all my life, recently (2022.12.15) urgently published the book ” Worldwide Inflation and War-Towards a Permanent Wartime Economy ” (World Infleto War-Constant Wartime 経済への道).
It has studied in detail the fundamental reasons why the world’s prices have risen sharply and remained high in recent years, and as a responsible bureaucrat, he has put forward policy suggestions to the Japanese government.
After reading this book, the author lamented that Japan, which has produced a large number of talents, is not affected by the aging and declining birthrate in the slightest, and still has such a high level of political commentary. This book covers rigorous economic theoretical analysis, chart structure, and wonderful theoretical debates. However, due to the length of the article, I can only reluctantly give up. This article only describes the core arguments of the book. Referring to the current situation in Taiwan, I will talk about some thoughts after reading.
Two Types of Inflation
At the beginning of this book, Nakano Tsuyoshi introduced the two types of inflation in New Keynesianism in a simple way: Cost-Push Inflation and Demand-Pull Inflation. , to put it simply, the former is caused by a shortage of supply and cannot catch up with demand; the latter is caused by an increase in demand that is greater than supply.
To give a simple example, the cost-push type is like an oil-producing country embargoing oil, or oil fields are depleted, or crop failures, or even labor shortages caused by aging and declining birthrates are all considered as this type of inflation. The demand-pull type is like the inflation caused by the large demand for materials in wartime.
Whether it is the former or the latter, it will lead to an increase in prices. The only difference is that in the case of demand-pull type, due to the need to step up production to make up for the shortage of supply, there will be a shortage of labor force. Ask for a raise. And the government can reduce excess demand by raising taxes and raising interest rates (increasing interest rates), so that the economy will not overheat, prices will be stable, and the gap between the rich and the poor will not widen. Even in a certain sense, demand-pull inflation can even have the effect of increasing the economy, but if it is overheated, there is a risk of a bubble.
Cost-push inflation, however, is not so easily addressed. Because the depletion of crude oil and the shortage of agricultural and food cannot be solved overnight. The government needs to develop new oil fields or alternative energy sources, expand food production, and import from abroad. , long-term, planned public investment. Moreover, improper response will also lead to stagflation, also known as “stagflation”. While rising prices, it will also lead to a rise in unemployment and a reduction in production, falling into the trap of an overall economic recession.
So here comes the question. After World War II, the world has experienced six inflations of different causes and degrees. Today after 2022, which one will we experience?
In fact, the above two so-called inflations appear more or less in a mixed form, but which one has a greater proportion. Unfortunately, the inflation we are facing today, according to Nakano Tsuyoshi’s assertion, is mostly cost-push, and has even reached the point of stagflation. Not only that, compared with the stagflation that occurred in the 1970s, the current stagflation situation has reached the point where it is difficult to solve.
Economic Dilemma with No Way Out
Why? Nakano Tsuyoshi proposed several factors. One is the stagflation we are facing in this era, which stems from the shortage of energy supply caused by the Russia-Ukraine war, the industrial restructuring of the US-China trade war, the epidemic caused by Wuhan pneumonia, climate change and carbon reduction. policy. These causes are not only intertwined, but many of them are beyond the scope of economics, and more interdisciplinary cooperation of experts is needed to understand these structural problems.
The second is that compared with the crude oil caused by the Fourth Middle East War in the 1970s, the shortage of materials this time is not only crude oil and natural gas, but even grains such as wheat, scarce metals, and semiconductors. The only lucky thing is that Taiwan is the leader in the semiconductor industry and is not affected by the shortage for the time being.
The third is also related to the shortage, but what is missing is the shortage of labor force caused by the declining birth rate and aging population.
Fourth, compared with the economic growth in the 1970s, the world now has fallen into a long-term stagnation. In other words, even if there were no wars and epidemics, the world economy would already be in crisis. The wars and epidemics only detonated the crisis.
The fifth is the decline in the bargaining power of labor. In the 1970s, when trade unions were still powerful, rising prices could be smoothed out through coordination between labor and capital and wage increases. However, the organization and bargaining power of trade unions in developed countries have declined, wages have stagnated, and they are even less able to cope with inflation.
The sixth is crucial, the end of globalization. According to Nakano Tsuyoshi, this conclusion is not the conjecture of a few scholars, but the opinion of global elites such as Lawrence Fink, CEO of the US investment management company BlackRock, and Paul Krugman, the Nobel Prize winner in economics. consensus.
The contribution of globalization to the economy lies in its ability to provide a means of curbing inflation. For example, when there is a shortage of labor force, China’s reform and opening up has provided cheap labor force for the world economy, and when the supply is in short supply, the materials and raw materials in circulation can also be quickly replenished.
However, after the financial crisis in 2008, globalization gradually weakened until the Russo-Ukrainian war brought globalization to a halt. The global supply chain is “broken”, raw materials cannot be dispatched for their own use because of the economic security considerations of various countries, and enterprises seeking cheap labor in developing countries will encounter obstacles of xenophobic nationalism. To put it simply, the end of globalization has cut off the way for countries around the world to escape inflation or even “stagflation”.
Seven of them are closely related to Taiwan. Nakano Tsuyoshi believes that geopolitical factors also affect inflation, and even have a mutual causal effect. The rise in food and energy prices caused by the Russia-Ukraine war will make the international situation more unstable and increase geopolitical risks. The decline of US national power and the expansion of China’s military power are the root causes of all future conflicts in Northeast Asia.
To sum up, the geopolitical crisis, inflation and even stagflation we are facing today are more complicated than in the past. Even more desperate is the fact that the end of globalization has cut off everyone’s escape from this economic catastrophe, and has worsened the geopolitical crisis. It is no exaggeration to say that the great historical changes that people will face in the future may not be able to be achieved by the sum of the previous generations.
At the end of this book, Nakano Tsuyoshi believes that the future Japanese government and politicians may have to uphold “pessimistic activism” to act. That is to say, in the face of the tragedy that has already happened (the decline of the US national strength has led to China’s military threat far beyond Japan’s ability to cope, and long-term inflation) to catch up without knowing and impossible to know the result.
Taiwan’s Future Issues
Takeshi Nakano calls it “pessimistic activism.” The policies that have to be pursued mainly have two directions. One is to strengthen security guarantees, abandon the illusion of peace under globalization, and strengthen The ability to defend oneself. Because China, which has already reached the point of declining birth rate and economic stagnation, will definitely unify Taiwan by force as a shift of domestic focus, and this will be a life-and-death threat to Japan, which relies on import and export trade.
Second, expand domestic demand and invest in industrial policies. In addition, huge investments need to be made in units of decades, because large-scale, long-term planned investments can protect important industries and technologies, and develop new technologies to alleviate long-term shortages at the supply level.
In other words, it is the return of “big government”. In addition to leading the country out of economic difficulties, the gap between rich and poor and social disorder caused by inflation in the short term still needs the state to rescue and maintain it.
Judging from the various policies of the Kishida government recently, the Ministry of Economy, Trade and Industry has provided huge subsidies for TSMC to set up factories in Kumamoto, increased taxes to expand the defense budget, and issued relief funds during the epidemic and inflation (the author, who is an international student, has also received it), and so on. In fact, Nakano Takeshi’s idea has vaguely become a consensus in the bureaucratic and political circles in Japan. And all kinds of measures, just as Nakano Tsuyoshi said, are a permanent wartime economic system, and the political and economic actions of the government are similar to those of the governments of belligerent countries.
But what about Taiwan? Taiwan after the local elections and the recent domestic political trends are deeply worrying. The local elections were won by the Kuomintang, which gave up national defense and security, and it is extremely pro-China economically. It ignores the loss of industrial technology and has no economy at all. The concept of sovereignty, more deliberately downplays China’s threat to Taiwan. This result is entirely due to the general lack of security awareness, lack of long-term plans, and emotional voting behavior among Taiwanese voters.
Otherwise, if you know the world factors behind inflation, why would you be at the mercy of malicious winds such as egg prices? However, the Democratic Progressive Party, which was defeated in the local general elections, wants to return the excess tax to the people, and not use it for long-term investment in industrial technology, national defense and security, etc. It is a pity that it is true, and there is also the risk of intensifying further price rises. However, considering the undecided situation after the election and the situation of advancing and retreating, it may be understandable to be sad.
After reading this book, I deeply feel how the so-called “pessimistic activism” by Nakano Tsuyoshi is difficult to achieve in Taiwan. The common political thinking of the people is “We have no tomorrow”; No matter what, it is doomed to be narrow-minded and short-sighted, which is not conducive to Taiwan’s long-term development and survival. What’s more, the winter of the global economy has come, and at the end of the cold winter night, will we be greeted by the warmth of spring, or will the world be impoverished and completely lose freedom under the long-term recession? It depends on man’s effort, and depends on the awareness and actions of those with knowledge.
