Tension Ball Politics.

            With the international climate conference now underway, it is easy to see the problems arising from Nationalism.  There are no national boundaries in the environment, but everyone wants what is best for their own country and devil-take-the-hindmost.  What if that truth nevertheless misses the very real forces encouraging transnationalism in important areas? 

            Inflation offers one way of approaching this issue.  For example, there seems to have been a broad intellectual consensus in the West on the appropriate response to Covid.  While the world awaited the fast-track development of vaccines, most governments responded in a roughly uniform manner.  First, they locked-down to various degrees.  The lock-downs disrupted the normal pattern of economic activity, both on the supply side and on the demand side.  The lock-downs reflected an international consensus among medical and scientific experts, rather than just imitative behavior by public officials.[1] 

Second, they generally spent a lot of money on stimulus payments to states and localities, private business, and individuals.  Governments all seem to have over-shot the mark because private savings boomed during the pandemic.[2]  Stimulus programs reflected an international expert consensus, rather than accidentally similar national responses.  Now the “mea culpas, but not really” of the heads of central banks closely resemble each other. 

Third, the need for action on climate change and global warming represents another area of consensus among government officials, scientists, and many publics.  There is certainly disagreement over what action, how fast, and at whose cost.  Nevertheless, the need to transition away from dead dinosaurs and toward some alternative energy source is widely accepted.  The trouble is that countries have started to shrink carbon sources of energy before alternative sources are up and running.  “Underinvestment in both fossil fuels and renewable energy infrastructure exposed everyone to crippling supply interruptions.”[3]  They also pushed up prices. 

Fourth, Demography presents a complex problem for the world, but one aspect of it is common in the Developed economies.  The populations of these countries are aging.  People are moving out of working age without an adequate number of younger people to fill up the gaps.[4]  Covid led to early retirements and medical disabilities.  The resulting tight labor markets are part of what is fueling inflation.  However, Covid merely highlighted a much larger problem.  In the absence of immigration from Developing countries, the Developed world could face long-term tight labor markets.  That, in turn, might lead to many more robots of one sort or another. 

            As the Developed world becomes more aligned on policy, populist revolts against experts and the administrative state have surged.[5]  There is a tension here, but no clear solution. 

[1] O the role of the World Health Organization (WHO) see: World Health Organization’s response to the COVID-19 pandemic – Wikipedia 

[2] For the American case, see: The Fed – Excess Savings during the COVID-19 Pandemic (federalreserve.gov)  The pent-up demand represented by these “excess savings” are being spent, in part, because inflation will erode their value.  “Use it or lose it.”  Governments could “claw-back” what’s left of this money to reduce inflationary forces.  That isn’t likely to happen in any democracy. 

[3] Greg Ip, “Inflation a Headache for Leaders Everywhere,” WSJ, 10 November 2022. 

[4] See the remnants of the educational web-site created to support a PBS “Nova” series: NOVA | World in the Balance | PBS 

[5] See: Yellow vests protests – Wikipedia