The crisis in China which is added to that of Russia and the BRICS, first of all Brazil, cast dark shadows on the recovery of Western economies, especially those of European countries. The risk is that without a coordinated effort on the part of the major economies, each will develop its own line of defense which inevitably passes through exchange rate devaluations, protectionist closures to world trade, to ultimately lead to a revival of political nationalism which already many trouble it has caused in the last century.
This topic, so important not only for the economic destinies of our world, was discussed yesterday in a seminar organized by the Tor Vergata Economics Foundation, chaired by prof. Luigi Paganetto, and in particular by the study group which has as its objective that of Revitalizing Anaemic Europe. Together with Carlo Calenda, deputy minister in charge of international trade, they discussed how best to govern the economic crises that are manifesting themselves in various parts of the planet and which, if left to their own devices, can cause political problems of no small importance.
There are already many worrying signs of a backtracking on free trade. In Europe, the powers of the international trade commission are weakening in favor of individual states and individual parliaments. Multilateral negotiations for trade liberalization are stalled and are being replaced by negotiations between large areas such as those between the US and Europe and the US and the Pacific. In the meantime, the outbreak of the Chinese crisis – as di Calenda said – could be profound and long-lasting since the change of the production model from export-oriented to the development of domestic demand will require overcoming formidable political resistance and great courage in set up a welfare system that allows individuals to have the security of the future and therefore be able to consume their income without fear.
Among other things, the Chinese crisis could have strong negative repercussions on Africa where in the past decade investments from China made a strong contribution to the growth of the entire continent. If these investments are reduced, what consequences could we have on the emigration of millions of Africans to European countries? To understand the extent of the problem, it is enough to think that remittances from emigrants help to support the economies of African countries for 54 billion dollars a year against just over 60 billion from international investments (especially from China).
Economic difficulties have already caused a currency war. The dollar started, then the Japanese yen arrived, then Europe replied by causing a devaluation of the Euro by more than 15% with QE. Now the Chinese are showing signs of not wanting to stay with the match in hand. Trade barriers, instead of being torn down, are restored here and there and therefore there is a risk of returning to a trade war, due to a "mercantilistic" conception that has been recovered from the old shelves of ancient history.
Finally, the advance of political nationalism is already there for all to see. Just look at Putin's Russia, but also at the great Chinese parade to celebrate the Victory against the Japanese, at the rearmament of Japan itself. And in Europe itself nationalist parties of both the right and the left (as in Greece) are gaining traction everywhere.
What tools exist to stop the progress of this negative sequence: currency wars, protectionism, political nationalism? There does not seem to be a clear awareness of the medium-term dangers we are running into in the world. The proposal that Deputy Minister Calenda is preparing, and which he hopes will be finalized in other European countries, is to transform the G20 from an occasional meeting of heads of state and government, without a precise agenda and without the ability to focus the discussion on the crucial issues of the moment, in a forum where the world's leaders are pushed to address the truly crucial geopolitical and economic issues. This would transform the G20 from a social occasion into a real decision-making forum, with tensions and clashes. But at least there would be a place to clarify that the path of each for himself can lead not to salvation, but to general disaster. As we have already seen in the last century it is a game in which everyone would lose.
