The times have changed: The fall of Eurocentric world

The times have changed: The fall of the Eurocentric world.

Since 2018, there have been signs of my showing some interest in the world of finance and geopolitics. I am not an expert, and I don't want to be an expert, because I often feel experts are too egoistic to learn. I want to be a learner and pass it on to my friends and family. Does that mean I might change my perspectives? Of course, yes, the ones who reject reality often lose in the end. As I was learning(and I still do), I kept changing my views about the world of finance and geopolitics. Earlier, I thought they were very different, but now I am convinced that they are very correlated. Why? For human civilisation, material prosperity has always been a driver. Now, when this "drive to thrive" enters a macroeconomic environment, we get the patterns of economic-geopolitical events. Think about it, after World War 2, we have seen an America dominating the world of finance, which resulted in its dominance in global politics. But now, it is getting challenged by newer players, who have more tail winds, so to speak. A growing middle-income population, military strength, and a large consumer base. This is what the Asian Century looks like. Because the customer base is here, nobody gives a damn what the old players say. Region-wise, the largest oil and gas producer is Asia, the largest manufacturing hub is Asia, the largest Innovation happens today in Asia, most of the global trade happens through the Indian Ocean, and the global financial capital is shifting towards Asian hubs. Obviously, China is the frontrunner, but overall, if we look at Asia, we are doing well. Most of us have come out of the world viewed through Eurocentric lenses. I had that lens too. Most of our parents have lived in a world where the global north would make policies, and the global south would follow, so it is very reasonable for them to have this bias for the global north. 

I can give you a couple of examples of how Western stupidity itself is leading to the West's downfall, but many are still not waking up to the reality that they should leave the table and give their seats to the new players. For Instance, countries like France and the UK, which are heavily indebted and often referred to as major countries closest to an economic disaster, should transfer their UNSC seat to countries like Bharat and Brazil or Germany, so to speak. We are already seeing that the UN has reduced itself to being a joke, where activism has more value than realism.

Western Civilisation (Global North) can be divided into three geographical regions: Europe, North America and Oceania. The discussion for today is the insanity around the Russian oil and gas and the Net Zero target.

We all know that Indians love Russian oil. It is good for our economy. Russia, I believe, is going to be Bharat's partner for at least the rest of the 21st Century and maybe even beyond. Of course, no one is your permanent friend in geopolitics, but unless some insane activist comes to power in either of them, this relationship is built on decades of trust, and neither PM Modi nor President Putin will do anything to break this. The current "Hohalla" around India is stopping oil purchases from Russia, and that India is going to decouple its ties with Russia is frothy. Once it was more of a military partnership, and now the economics are converging. The oil is just one parameter, and we might strike great deals with the Russians regarding Metals and Rare Earths, and defence manufacturing and tech transfer. The kind of stability, predictability and comfort this partnership has is simply unmatched. After the Ukraine conflict, Europe stopped purchasing Russian Piped Gas. They still import LNG, by the way, which is twice as expensive. Piped natural gas costs about $5/MMBtu, but LNG is more than $11/MMBtu. The European heavy industry has been struggling since then. But in my view, forcing Russia into a conflict by trying to get Ukraine into NATO was itself the greatest blunder. Apart from the US, no other NATO ally has that kind of military strength to push Russia back, if the war spills over. 

Also, looking at the history of Americans, forget the Russians, they have lost in Iraq, Syria, Afghanistan, Vietnam, made a deal in Korea, and also in World War two, the heavy lifting was done by the Red Army, so for Europe to think that Americans will help them is highly delusional. Now, a Europe that is energy-deficient, ideally, should be on good terms with its suppliers, but they are doing the exact opposite of that. They sanction Indian diesel manufacturers for the purchase of oil from Russia; they come up with a dumb climate policy called the carbon border tax, which will punish anyone for not having a net-zero goal, and doing business with them. All these egoistic moves were happening while India is one of the largest suppliers of refined crude to Europe, and the biggest suppliers of LNG to Europe are Qatar, the US and Russia. The intention of that Climate policy is to make sure all businesses go green, which is so dumb. So what happened was: Qatar said, "We won't supply LNG to Europe if they keep pushing net-zero goals on their suppliers". Now, some might say, Europe will go green then. Europe's solar manufacturing capacity is less than 1% of the world's. Most is in China, and in Bharat, it is growing rapidly (both friends of Russia). The result of such horrible policies will be the deindustrialisation of hubs like Germany. They will definitely need steel. Who are the largest producers? China and Bharat. 

Europe, due to its military weakness, is now promising massive investments and purchases of US products, just to stay in good books with President Trump. This over-reliance on the US is really going to hurt Europe dearly. Because if one observes, everyone apart from Europe has gained from this war. China got access to Russia's digital economy, India got cheap crude, and the most notorious Sam got military contracts and full control over Europe's energy security. Is it like, everything is doomed? No, Europe has to make drastic changes in its thinking, and as the Minister of External Affairs of India, Dr Jaishankar says, Europe has to grow out of its Eurocentric mindset. But I can't see that happening. 

Not to mention, many European Countries are highly indebted (France and Italy). The talk is that France might need an IMF bailout. The fact that Western citizens have become too complacent and want to work for 35 hours a week, while they expect governments to take care of their education and retirement, says a lot about what is happening. This is not happening in Europe alone, Australia, New Zealand, Canada, the UK, the United States; it is all over. Also, welfare can be a great leverage for an economy, but it only works if the population is young. Why? Well, welfare leads to governments borrowing money, and debt, in simple terms, means you borrow from the next generation and spend it right now, but if the population itself is old and the birthrates are below replacement levels, who is going to repay that debt is a question one should ask. This problem is also hitting some Asian countries like Japan and Korea, where the quality of life is deteriorating, because they simply cannot handle the inflation that came with so much debt. Europe has, for a very long time, relied on the American Military. Now the Uncle Sam itself is lacking funds to support such a large military, so Europe has to step up its military expenditure, which will further put strains on the pockets of the EU. 

I do have some belief that if this continues, the EU as a collective will have to bailout some countries like France, and in that case, I am doubtful if the European Union will even exist in the first place, because why would industrial European countries like Germany and the Netherlands want to share losses made by entitled French whoes GDP is 70% dependent on the government expenditure? There are already enough pushbacks in the European Parliament about the deal they cracked with the Americans, which, from a neutral perspective, is a humiliation for Europe. For Belgium, let's say, it doesn't really matter if a product is coming from another EU country or from the US, but it does hamper market access for EU manufacturers. I heard on a very good podcast related to finance(I follow so many, I don't remember which) that if the industrialised countries of Europe decide to leave the Union and become independent, the Euro as a currency would lose a lot of value. These five are highly responsible for draining the overall European Finances: Greece, France, Italy, Belgium and Spain, as their debt-to-GDP to gdp > 100% and Portugal is not that different. Greece, not too long ago, was in a big financial turmoil, where there was a sovereign debt crisis. 

The UK, which is not a part of the Union, has not yet recovered from the 2008 crisis. The millionaires are leaving, there is a visible rise in radicalism, fewer companies want to get listed on the London stock exchange, the metal exchanges of London are crying like a baby because countries like Bharat are bringing back their rightfully owned gold reserves (which was just stored in London), and they are losing their ability to price these metals at their will. The government is so much in debt that Liz Truss had to resign a couple of years ago, and now, the Current government is going to increase taxes on incomes and properties and is considering putting an exit tax on millionaires. What a downfall of a country about which people used to say: The Sun Never Sets on the British Empire. A few days ago, I said to a few people in my circle that in the next couple of years, this playbook of increasing taxes on income, property, and exit taxes on the wealthy will spill over to Europe, Canada, the US and Australia, simply because the western world is indebted, the population is asking for more freebies (wokeness is rising) and the indegeneous population is shrinking. There are enough studies to show that in the Western world, there are more pets than children. All is good, but is the pet-cat/dog going to repay the debt? No, so there is no option but to tax the hell out of residents. Again, freebies are bad, whether they are offered in Bharat or in the West; they cause inflation and lead to more inequality, but a young country at least has a population to pay it back, without growth getting hampered.

Officially, Bharat is still hoping for the European revival and has deep interests in trading with some European countries, and that's why we have projects like IMEC(India - Middle East - Europe Corridor) and INSTC (International North South Transport Corridor), which will not only strengthen trading relations between Bharat and Europe but will tie the West Asian and Central Asian economies with the rising superpower. But for Europe, to harness the full potential of these projects, they have to change their attitude not just towards Bharat but the entire global south, else the IMEC will become: India - Middle East Economic Corridor and INSTC will end on the Russian soil and will never extend to Eastern Europe.

This was my first blog from the 4-blog series: "The times have changed".
The next three are:
1. The times have changed: Australia and Canada have paid and will continue to pay a big price for being ignorant.
2. The times have changed: Mr Sam, just printing money won't work this time.
3. The times have changed: How did the West arrive at this critical point?

Thank you 

Rutvik.