The ill-feeling among leaders of the G-7 nations - essentially, the West plus Japan - was mirrored early this morning in the puking financial market futures, so odious, apparently, is the presence of America’s Golden Golem of Greatness at the Quebec meet-up of First World poobahs. It’s hard to blame them. The GGG refuses to play nice in the sandbox of the old order.
Like many observers here in the USA, I can’t tell exactly whether Donald Trump is out of his mind or justifiably blowing up out-of-date relationships and conventions in a world that is desperately seeking a new disposition of things. The West had a mighty good run in the decades since the fiascos of the mid-20th century. My guess is that we’re witnessing a slow-burning panic over the impossibility of maintaining the enviable standard of living we’ve all enjoyed.
All the jabber is about trade and obstacles to trade, but the real action probably emanates from the energy sector, especially oil. The G-7 nations are nothing without it, and the supply is getting sketchy at the margins in a way that probably and rightfully scares them. I’d suppose, for instance, that the recent run-up in oil prices from $40-a barrel to nearly $80 has had the usual effect of dampening economic activity worldwide. For some odd reason, the media doesn’t pay attention to any of that. But it’s become virtually an axiom that oil over $75-a-barrel smashes economies while oil under $75-a-barrel crushes oil companies.
Mr. Trump probably believes that the USA is in the catbird seat with oil because of the so-called “shale oil miracle.” If so, he is no more deluded than the rest of his fellow citizens, including government officials and journalists, who have failed to notice that the economics of shale oil don’t pencil out — or are afraid to say. The oil companies are not making a red cent at it, despite the record-breaking production numbers that recently exceeded the previous all-time-peak set in 1970. The public believes that we’re “energy independent” now, which is simply not true because we still import way more oil than we export: 10.7 million barrels incoming versus 7.1 million barrels a week outgoing (US EIA).
Shale oil is not a miracle so much as a spectacular stunt: how to leverage cheap debt for a short-term bump in resource extraction at the expense of a future that will surely be starved for oil. Now that the world is having major problems with excessive debt, it is also going to have major problems with oil. The quarrels over trade arise from this unacknowledged predicament: there will be less of everything that the economically hyper-developed nations want and need, including capital. So, what’s shaping up is a fight over the table-scraps of the banquet that is shutting down.
That quandary is surely enough to make powerful nations very nervous. It may also prompt them to actions and outcomes that were previously unthinkable. At the moment the excessive debt threatens to blow up the European Union, which is liable to be a much bigger problem for the EU than anything Trump is up to. It has been an admirably stable era for Europe and Japan, and I suppose the Boomers and X gens don’t really remember a time not so long ago when Europe was a cauldron of tribal hatreds and stupendous violence, with Japan marching all over East Asia, wrecking things.
There is also surprisingly little critical commentary on the notion that Mr. Trump is seeking to “re-industrialize” America. It’s perhaps an understandable wish to return to the magical prosperity of yesteryear. But things have changed. And if wishes were fishes, the state of the earth’s oceans is chastening to enough to give you the heebie-jeebies. Anyway, we’re not going back to the Detroit of 1957. We’ll be fortunate if we can turn out brooms and scythes twenty years from now, let alone flying Teslas.
This will be the summer of discontent for the West especially. The fact that populism is still a rising force among these nations is a clue of broad public skepticism about maintaining the current order. No wonder the massive bureaucracies vested in that order are freaking out. I’m not sure Mr. Trump even knows or appreciates just how he represents these dangerous dynamics.