Wednesday, June 26, 2024


The Rise of Protectionism among American politicians

Wednesday, June 26, 2024

Dr. Rodrigue Tremblay, Emeritus professor of economics and international finance, Université de Montréal

"Under a system of perfectly free commerce, each country naturally devotes its capital and labour to such employments as are most beneficial to each... By increasing the general mass of productions, it diffuses general benefit, and binds together... the universal society of nations throughout the civilized world."  David Ricardo (1772-1823). British political economist, (in 'On the Principles of Political Economy and Taxation', 1817).

"Trade wars are good and easy to win." Donald Trump (1946- ), 45th American president (2017-2021), (comment on Twitter (X), March 2, 2024).

[Donald] "Trump doesn't get the basics. He thinks his tariffs are being paid by China. Any freshman Econ student could tell you that the American people are paying his tariffs." Joe Biden (1942- ), American politician and 46th president of the United States (2021- ), (statement made by then candidate Joe Biden, on Twitter, June 11, 2019).

"When every country turned to protect its own private interest, the world public interest went down the drain, and with it the private interests of all.Charles Kindleberger (1910-2003). American economic historian, (in his book 'The World Depression 1929-1939', 1973).

Unpopular politicians in power are currently floating old economic ideas, which have proven in the past to be disastrous to their own economies and to the world economy.

Indeed, a leading cause of the Great Depression of 1929-1939 was the implementation of severe protectionist trade policies by industrial economies, which turned the financial crises and subsequent economic recession of the early 1930's into a full-fledged economic depression. For example, protectionist members of the U.S. Congress enacted the Smoot-Hawley Act of 1930 in June of that year.

That measure raised American import taxes by some 20 percent. The goal initially was to help American agricultural producers, but other industries requested the same protection from competition for their own products and asked that goods imported from other countries be heavily taxed.

That induced other industrial countries to retaliate by raising their own barriers to trade to protect their industries. They ended up adopting similar—what was called "beggar-thy-neighbor"protectionist trade policies, thus contributing to unravelling the entire international network of world trade. For example, U.S. imports from and exports to Europe fell by some two-thirds between 1929 and 1932. World trade contracted and so also did the entire world economy.

In other words, governments of the time threw gazoline on the fire. They made the early financial and economic situation much worse by raising import barriers that led to sever contraction of worldwide economic activity. Could history repeat itself today?

Trade wars are likely to lead to net economic losses for every country

Trade wars amount to imposing heavy taxes on imports of goods and services from other countries, which in the end are paid by domestic consumers and local companies. The latter need cheaper imported parts and raw materials to remain efficient and competitive in domestic and world markets. Such an economic process is profitable on a net basis for a national economy, because it leads to higher standards of living. It is the result of a profitable but complex process of international division of labor.

Domestic and highly efficient exporting industries also suffer from such artificially increased costs of their imports and from retaliations by other countries to their exportations, and they see a decline in their productions, their employment and their earnings.

The issue of employment in the economy is important. High tariffs and other protectionist measures may artificially increase employment in a few particularly less competitive industries, but this is not the end of the story. Ripple effects can be expected in other industries, especially in the export sector of the economy.

For the United States, for example, the rising costs of imports through high import taxes, and from reprisals from other countries against American exports of goods and services, hurt production and employment in the most efficient domestic exporting industries. This is likely, for instance, to damage the comparative advantage that the U.S. has in producing and exporting technological products and other services.

Therefore, when world trade contracts and even collapses, the net effect of such trade wars has a good chance of being net negative for all economies and for workers in general, as labor productivity and the productivity of capital decline in the whole economy. A trade war is likely to end up hurting all economies on a net economic basis.

Benefits and adjustments to international trade

In everyday reality, job losses are inevitable in certain economic sectors and in certain regions, due either to competition from imports and technological developments.

It is then important that governments actively help workers and affected regional economies to share in the overall national economic benefits arising from international trade and technological progress, preferably within an overall national industrial strategy.

This means adopting special public programs, such as a targeted increase in unemployment insurance benefits, special training programs for displaced workers and special employment and investment subsidies at the regional level.

The special place of the U.S. dollar in the international monetary system

A major preoccupation nowadays comes from the fact that just as the 1930's saw the U.S. dollar replace the British pound, the place of the U.S. dollar in international affairs is contested. In July 1944, the Bretton Woods conference officially established the U.S. dollar along with gold as the foundation of the postwar international monetary system. From then on, the currencies of many countries were fixed to the U.S. dollar, the latter being the only currency convertible into gold at $35 an ounce.

However, the international role of the dollar was substantially reinforced on August 15, 1971, when the Nixon administration unilaterally ended the official international convertibility between U.S. dollars and gold, thus making the American currency a completely fiat means of payment.

Today, for different reasons, attempts are being made by some important countries, the BRICS countries, to replace the American dollar as the principal means of payments for international transactions. If such a process of dedollarization were to expand and succeed,  important geopolitical, financial and economic tensions between countries could ensue.

The United States reaps important economic and financial benefits when other countries hold dollars in their central banks' reserves or use it as the main trading currency in their international trading and financial transactions. This amounts to zero or low-interest rate loans being made to the U.S. economy by other countries, thus generating an important so-called seigniorage gain for the USA.

Therefore, such an inflow of foreign capital into the U.S. economy, firstly, helps the American central bank, the Fed, to support the U.S. dollar in foreign exchange markets. Second, it helps finance the U.S. government fiscal deficits and American trade deficits. And, thirdly, it increases the liquidity and profitability of American money and financial markets. That is why some consider such advantages to be an immense privilege granted to the United States by countries that use the American dollar.

An increasingly protectionist Biden administration

As a sign of the times, when candidate Joe Biden was running for office in 2020, he was a sharp critic of the Trump administration's imposed barriers on trade with China. However, once elected, he maintained the tariffs previously decided by Trump.

On Friday, May 14 of this year, President Biden went a step further. In the middle of his current presidential campaign, and having to prepare for a public debate on CNN, on Thursday, June 27, with his main opponent, Donald Trump, he announced the imposition of a series of new tariffs on several American imports from China.

The new customs tariffs range from 100 percent on imports of electric vehicles (EVs) to 25 percent for imports of electric vehicle parts. Tariffs of 50 percent will also be imposed on the import from China of solar modules or cells, as well as on imports of semiconductors. Tariffs of 25 percent will also be levied on steel and aluminum imports from the Asian country.

Such import taxes are likely to raise domestic prices of the targeted products and parts, generating more domestic inflation. These new taxes are also likely to hurt American consumers and American-based industries, when the latter use imports as inputs in their own production.

In fact, the Biden administration is increasing jobs in some industries among the weakest, and situated in some key states important for his reelection, but in so doing, he risks destroying jobs in other industries among the most efficient, in other states.

Moreover, U.S. tariffs as high as 100% are bound to intensify the US-China trade war, since the expected Chinese reprisals will most likely lower American exports to China. One might wonder whether these new import taxes by the Biden administration are not more the result of a short-term partisan political calculation rather than the product of a well-thought-out industrial policy.

It remains also to be seen whether such a shift toward protectionism by the United States is compatible with the trading rules of the World Trade Organization and its 166 members.

A likely even more protectionist Trump Administration

If former president Donald Trump is elected next November 5, it can be expected that his administration would pursue a very protectionist foreign trade policy.

Indeed, on Thursday, June 13, candidate Trump already told a group of Congressional Republicans that he was juggling with the idea of replacing U.S. federal income taxes [$2,176 billion in fiscal year 2023] with high import taxes [U.S. imports in 2023: $3,112 billion]. Since such a policy would drastically contract imports, it would necessitate very high import taxes.

During his first term (2017-2021), Republican president Donald Trump slapped steep tariffs on billions of dollars' worth of goods from neighboring countries Canada and Mexico, and also from the European Union (EU) and China. All countries have retaliated by imposing their own tariffs on imports of U.S. goods and services.

Likewise, during his first term, the Trump administration significantly amended the North American Free Trade Agreement (NAFTA), which came into force on January 1, 1994, between the United States, Mexico and Canada.

That historic treaty was replaced, at the insistence of Donald Trump and his protectionist advisers, by the United States-Mexico-Canada Agreement (USMCA), as revised in its ratified 2020 version, largely to the advantage of the United States. Additionally, it is important to point out that the 2020 USMCA treaty is subject to renegotiations every six years, and that it could expire after just 16 years, if  not renewed (depending on the so-called clause extinction of 16 years).


If unilateral barriers to international trade were to keep increasing in the coming years, this could undermine the influence of the World Trade Organization (WTO), as the only organization designed to regulate and facilitate international trade.

Possibly the WTO, as an inter-state organization, could follow in the footsteps of the United Nations (UN) and become less able to prevent trade disruptions and trade wars. This could have disastrous economic and political consequences on the standards of living of people in many parts of the world. Taken to the extreme, unbridled protectionism could push the global economy into an economic depression.

Indeed, repeated destructive wars, whether they are military or commercial, make the world economy less stable and less peaceful, and, ultimately, less prosperous for the large majority of people.


International economist Dr. Rodrigue Tremblay is the author of the book about morals "The code for Global Ethics, Ten Humanist Principles" of the book about geopolitics "The New American Empire", and the recent book, in French, "La régression tranquille du Québec, 1980-2018". He holds a Ph.D. in international finance from Stanford University.

Please visit Dr. Tremblay's site or email to a friend here.

Posted Wednesday, June 26, 2024/ modified on Thursday, June 27, 2024

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Friday, May 17, 2024


Two Economic and Financial Periods with Similarities, but with Different International Monetary Systems: 1920-1929 and 2008-2024

Friday, May 17, 2004, 2024

By Dr. Rodrigue Tremblay, 

Emeritus professor of economics and international finance, Université de Montréal

"There is no subtler, no surer means  of  overturning the existing basis of society than to debauch the currency... The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner, which not one man in a million is able to diagnose."  John Maynard Keynes (1883-1946). British economist, (in 'The Economic Consequences of the Peace', 1919, Ch. VI, pp. 235-236).

"The survivors of a generation that has been of military age during a bout of war will be shy, for the rest of their lives, of bringing a repetition of this tragic experience either upon themselves or upon their children, and... therefore the psychological resistance of any move towards the breaking of a peace... is likely to be prohibitively strong until a new generation ... has had time to grow up and to come into power.Arnold J. Toynbee (1889-1975), British historian, (in 'A Study of History', vol. 9, 1954).

"When every country turned to protect its own private interest, the world public interest went down the drain, and with it the private interests of all.Charles Kindleberger (1910-2003). American economic historian, (in his book 'The World Depression 129-1939', 1973).

Next year will be the 80th anniversary of the end of the Second World War (1939-1945). It is therefore likely that the world is approaching the end of the long post-war period, which has spanned three generations.

Likewise, in just a few years, it will be the 100th anniversary of the massive stock market crash in the autumn of 1929, which preceded the advent of the Great Depression (1929-1939).

Even though economic history does not necessarily repeat itself in every detail, there are long economic cycles in capitalist economies, which tend to repeat themselves at various intervals, provided that the economic imbalances and financial excesses which activate them are strong enough. Indeed, there are presently economic, financial and geopolitical circumstances that have some similarities with those that prevailed in the past, especially during the decade of the Roaring Twenties in the 1920's, and even later during the 1930's.

I- The economic and financial situations in the United States during the 1920's

The end of WWI in 1918 was followed by the influenza pandemic of 1918-1919, (it was called the Spanish flu pandemic because the press in Spain was the first to report it). It was a severely contagious viral disease that created numerous social and economic problems worldwide. Schools were closed, public gatherings prohibited and mortality rates rose.

However, after the pandemic and the brief but deep economic recession that followed, in 1920-1921, the American economy embarked upon a period of strong economic growth and widespread prosperity. It strongly benefited from the postwar reconstruction boom and from the emergence of many industrial innovations in the automobile, airline, telephone, radio, cinema and electric appliances industries, etc.

Manufactured consumer goods became more widely available to households through mass production. The US economy grew by 42 percent during the rest of the decade, from 1922 to 1929, as the building of roads, airports, gas stations, etc. progressed to meet the new needs in infrastructures. Unemployment was falling sharply and there was great optimism. However, this led to an overheated economy and to asset bubbles, especially in the stock market.

Indeed, the main reason the decade of 1920-1929 is so well remembered is because it led to the Great Depression of 1929-1939. The economy collapsed, deflation prevailed and unemployment reached a record high of 24.7 percent, in 1933.

During the 1920's, behind the façade of prosperity, there were major economic imbalances and financial excesses that developed, not only in the United States, but worldwide. The first consequences of these drawbacks were the Wall Street stock market crash of 1929 and the economic recession, which rapidly morphed into an economic depression that lasted a decade. Also, an important international bank, the Austrian Creditanstalt bank, failed in May 1931. This led to other bank failures and created banking panics in the U.K., in the USA and in other countries.

And when later on, countries began to adopt inward-looking protectionist trade policies, international trade contracted and the global economy as a whole collapsed.

• Declining interest rates and stock market speculation in the 1920's

To counteract a mild economic recession in 1927, the Fed lowered its discount rate in September of that year, from 4% to 3.5%.

Nevertheless, even though short-term interest rates were still low, they were higher than longer-term rates, and this was the case in 1927, 1928, and 1929. That translated into an inverted yield curve, as opposed to a normal situation when longer rates are higher than shorter rates, since longer loans are riskier than shorter ones. Usually, this indicates a situation of tight banking credit lending conditions.

An inverted yield curve is one of a the most accurate predictors of a future economic slowdown or a recession, since nearly all economic recessions since the 1920's, including the onset of the Great Depression in 1929, have taken place after such a warning that an economic slowdown was unfolding.

During the years of 1927-1929, the financial warning sign of the inverted yield curve was ignored and speculation in the stock market only got worse. At the time, speculators big or small could buy shares in companies by investing on margin, with as little down as 10 percent of the value, while borrowing the rest from banks or brokers. This led, from 1923 to 1929, to a six-year stock market bull run, when stock prices kept rising on average by 20 percent, each year. This was clearly an unsustainable pace.  

After having vainly admonished banks and brokers to restrict their loans to speculators, the Fed finally decided to raise its discount rate three times, (the rate the Fed charges member banks for loans), between January and July 1928, from 3.5% to 5%. However, this turned out to be insufficient, because stock market speculation didn't slow down. The Fed again raised its discount rate in August 1929, from 5 percent to 6 percent. That's what broke the camel's back!

The rest is history. The economic recession began in the United States in August 1929, as the economy started to shrink. However, the stock market only peaked on Tuesday, September 3, 1929, one day after Labor Day, but it began crashing for good on Black Thursday, Oct. 24, 1929.

II- The Subprime Mortgage Crisis of 2007-2008 and the Great Recession of 2008-2009

Let's see how things stack up nowadays, financially and economically.

In the aftermath of the Subprime Mortgage Crisis of 2007-2008, and during the Great Recession of 2008-2009, governments and central banks of a number of countries changed profoundly their fiscal and monetary policies, especially in the United States.

Indeed, there was a real fear among government officials, during the fateful years of 2007-2008, that the entire American financial system could collapse and bring down the economy. The American banking system was already severely weakened by the collapse of the large investment bank Lehman Brothers, and by the rescue in panic of the investment banks Bears Stearns and Merrill Lynch. It was then judged necessary to adopt extreme measures to bail out the system.

That is when the Fed adopted a novel form of monetary policy of extraordinary accommodation called "Quantitative Easing" (QE). The idea was that in such a time of financial trouble, it was not sufficient to lower interest rates and to advance loans to banks in trouble.

What was required was to flood financial markets with huge amounts of newly created liquidity, which is accomplished when a central bank purchases for its own account large quantities of Treasury bonds or private securities on the secondary market. If necessary, such a practice can push nominal interest rates to zero or to close to zero. This was the case in the United States when the federal funds rate (rate at which private banks borrow from each other for very short periods) was kept by the Fed close to zero, from 2008 to 2016, and again, from 2020 to 2022.

• The economic consequences of Quantitative Easing on debtors

A Quantitative Easing monetary policy risks creating two problems. First, it tends to create important price bubbles in the stock and bond markets. Secondly, artificially low interest rates run the risk of encouraging consumers, businesses and governments alike to go deeper into debt. This raises the question of moral hazard when public policies encourage people to alter their normal prudent behavior and take bigger risks.

This is an important consideration nowadays, since the sum of all consumer, business and government debts in the world, the global debt, reached the record high level of $307 trillion in 2023, according to the Institute of International Finance. This has pushed the global debt-to GDP ratio to 336 percent.

In the event of a rise in inflation, accompanied by an increase in interest rates and mortgage rates, debtors in general who have become heavily indebted while interest rates were ultra low, may find themselves caught in a dangerous debt trap. Households and consumers, for example, who are saddled with high mortgage debts and credit debts, may have to renew their loans at much higher interest rates, thereby facing the unattractive prospect of making monthly payments that are inflated relative to their incomes.

III- The major differences between the 1920-1929 period and the 2008-2024 period

The main difference between the 1920-1929 economic decade and the current economic and financial period since 2008 is the fact that the international monetary systems were different during these two periods.

The gold standard (1879-1933) had been suspended at the start of WWI, in 1914, but it had been reinstated in most major economies, including the United States, by 1925. It was an international monetary system in which the value of a standard unit of a currency was based on a fixed quantity of gold. For instance, if the official price of one ounce of gold was set at $20, that meant the one US dollar was worth 1/20 ounce of gold and could be exchanged at that price.

The Gold Standard had the advantage of imposing a strict discipline on governments regarding spending and borrowing and thus to prevent inflation. Indeed, with such a system, a government was less able to run large fiscal deficits, because the central bank could not print money at will to accommodate its need of funds. The government had to sell Treasury bonds to the  public to cover its excess spending over its tax revenues.

For example, countries running an external deficit in their balance of payments ran the risk of losing gold, while those countries with an external surplus stood to gain gold. The consequence was that central banks could not increase their country's money supply at will, for fear of creating an external deficit and of losing gold. In the latter case, the domestic money supply would contract and this would place a deflationary burden on the economy. That is why the Gold Standard had, in general, a deflationary bias.

• The Bretton Woods monetary system of 1944

After WWII, the Gold Standard monetary system, which had been suspended in 1933, was replaced by the Bretton Woods monetary system. It was called a Gold Exchange Standard system, which meant that only the American dollar remained freely convertible into gold, at an official price of $35 an ounce, while other countries' currencies had an exchange rate pegged to the US dollar.

However, the US dollar became officially a genuine fiat currency on August 15, 1971, when the Nixon administration cancelled the official convertibility of the dollar into gold. This meant the end of the fixed exchange rate system. Shortly after, in fact, most other countries adopted a floating exchange-rate system for their fiat currencies. This is the international payment and exchange system that exists today. Contrary to the Gold Standard, the system of floating exchange rates for fiat currencies tends to be inflationary.

• Digital cryptocurrencies and geopolitical risks

To add to the overall speculative nature of our era, one must also mention the rise of the internet-based digital cryptocurrencies phenomenon, which began in 2009. with the creation of the Bitcoin. This is a system of digital assets with widely fluctuating prices. It is somewhat reminiscent of the exotic Tulip bubble, which took place in the Netherlands in the early part of the 17th century.

Also, it is important to note that geopolitical tensions between great powers are much more prevalent today than they were in the 1920's. This is reflected in the current turmoil in international relations. It is a state of affairs somewhat similar to the one prevailing during the later part of the 1930 decade.

At the time, the League of Nations was incapable of preventing or of ending regional military conflicts, just as the United Nations nowadays is unable to maintain world peace. Therefore, in the coming years, serious military confrontations between great powers cannot be excluded, and this could be an additional cause of financial and economic dislocations, as it could mean higher oil prices and higher inflation.


There are similarities but also important differences between the economic and financial situations prevailing in the 1920's and those unfolding int the current 2008-2024 period.

Both periods saw changing economic times, characterized by major economic imbalances and speculative excesses in financial markets.

The main financial similarity between the two periods is the prevalence of an inverted yield curve in both cases, which could hint at future financial and economic troubles. It remains to be seen whether financial and economic difficulties will unfold in the coming months or years, as it was the case in 1929.

On the other hand, the international monetary system in force during each period was completely different. In the first case, it was the Gold Standard system that prevailed. Currently, the world economy is under a system of floating exchange rates of fiat national currencies, with the US dollar serving as the main currency of exchange and for most of the official reserves of central banks.

However, such a system is presently in a flux, as many countries, especially those of the BRICS (Brazil, Russia, India, China, South Africa and others), are trying to escape the arbitrary financial sanctions that the US government imposes sometimes on some countries, for political reasons. This would explain the efforts of the latter countries to develop other means of payments to conduct their international trade and financial transactions.

If and when a financial crisis or a severe economic downturn were to unfold in the future, triggered by some unforeseen event, it is likely that governments and central banks would respond by adopting the same policies as they did at the onset of the Covid-related economic lockdowns in 2020.

First, the governments of major advanced economies would be expected to increase their fiscal deficits, already very high. Secondly, central banks would try to accommodate governments and financial markets alike, by injecting large amounts of liquidity into the economy, through a policy of 'Quantitative Easing'.

However, such extraordinary interventions are not without risk. Indeed, after the initial deflationary shock of a financial crisis, which would be followed by a recession, overly expansionary budgetary and monetary policies, possibly associated with protectionist trade policies similar to those adopted in the 1930's, could result in a period of widespread stagflation, that is a period of slow economic growth and of persistent inflation.


International economist Dr. Rodrigue Tremblay is the author of the book about morals "The code for Global Ethics, Ten Humanist Principles" of the book about geopolitics "The New American Empire", and the recent book, in French, "La régression tranquille du Québec, 1980-2018". He holds a Ph.D. in international finance from Stanford University.

Please visit Dr. Tremblay's site or email to a friend here.

Posted Friday, May 17, 2024.

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Wednesday, March 6, 2024

The Digital Revolution of Artificial Intelligence: Beneficial Economic Creative Destruction or Systemic Dehumanization

 Wednesday March 6, 2024

By Dr. Rodrigue Tremblay, 

Emeritus professor of economics and international finance, Université de Montréal, and of the book about morals "The Code for Global Ethics" and the book about geopolitics "The New American Empire")

"The opening up of new markets, foreign or domestic, and the organizational development... incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. That process of creative destruction is the essential fact about capitalism."  Joseph Schumpeter (1883-1950), American economist and political thinker of Austrian origin, in his book Capitalism, Socialism and Democracy, 1942.

"Every change is a menace to stability.  That's another reason why we're so chary of applying new inventions. Every discovery in pure science is potentially subversive; even science must sometimes be treated as a possible enemy. Yes, even science." Aldous Huxley (1894-1963), British author of the 1932 futuristic novel Brave New World, ch.16.

"Technological progress has merely provided us with more efficient means for going backwards.Aldous Huxley (1894-1963), British author, in his essay 'Adonis and the Alphabet', 1956.

"Our entire much-praised technological progress, and civilization generally, could be compared to an axe in the hand of a pathological criminal.Albert Einstein (1879-1955), German-born theoretical physicist, 1917.

"Artificial Intelligence (AI) is probably the most important thing humanity has ever worked on. I think of it as something more profound than electricity or fire.Sundar Picha (1972- ), chief executive officer (CEO) of Alphabet Inc. and of its subsidiary Google, in 2018.

• Introduction

The digital revolution of Artificial Intelligence (AI), currently evolving very rapidly, is a technological innovation that uses complex computer programs and sophisticated mathematical algorithms. These robotic systems and AI-based models, powered by AI chips and using super computers, can automate repetitive tasks, produce texts and quickly process vast quantities of data, in complementarity with humans.

However, beyond the economic benefits that would result, there is the threat of a gradual replacement of human beings by intelligent robots, in a number of functions and activities that lend themselves to such a substitution.

Such technological advances have great potential to profoundly upend national economies, businesses and societies in decades to come, when new capital investments replace older obsolete capital investments, and some categories of workers would be replaced by intelligent machines that require more specialized workers.

This could even possibly lead to a dystopian 'Brave New World', if autonomous brain-machines, in the next futuristic era, are capable of self-improvement and are able to think by themselves, and possibly, could even learn to program other brainy machines, with hardly any human input.

The global impact of industrial revolutions

All technological inventions produce positive advances but can also be accompanied by various disruptions and negative effects.

For example, the invention of the knife, which can be used to cut bread; but it also enables one to cut someone's throat. Likewise, the invention of dynamite and explosives helped the mining industry, but it also made wars deadlier and increased the destructive power of terrorists tenfold.

The same is true of the discovery of the fission of the atom, which led to the development of nuclear energy. This invention made it possible to produce electricity; it also made it possible to build atomic bombs and destroy entire cities and their inhabitants.

It is difficult to know precisely, in advance, what purpose a new technology will serve, for good or for evil, for economic progress or for human regression.

Questions raised by Artificial Intelligence (AI)

As with any new technology, the AI applications today and their generalization in the future will undoubtedly create winners and losers, and not only in the economic field, but also in politics, geopolitics, social affairs, biology, in arts and even in military conflicts. It is therefore important to assess whether the winners will be more numerous than the losers, or whether it will be rather the opposite, with a small number of successful operators and a large number of expendables.

For instance, what will be the consequences of so-called generative AI models, like Nvidia's AI systems or those of pre-programmed conversational robots, such as those of ChatGPT (Open AI), Copilot (Microsoft) or Gemini (Google), which can generate text, images or other creations? Will they improve the standard of living and the quality of life of the greatest number, or will they allow some to get rich, but render entire categories of workers obsolete and impoverished? In such case, they could end up increasing income and wealth disparities.

Indeed, each new industrial revolution in the past made some successful capitalist pioneers ultra rich. For instance, there was a period in the United States, in the late 19th century, called the era of the Robber Barons. It was a time characterized by rich monopolists (Carnegie, Rockefeller, Vanderbilt, Mellon, etc.), in the industries of steel, oil, railroads or finance, who crushed competitors, rigged markets, and corrupted governments.

At the political and geopolitical levels, is it possible nowadays that some malicious oligarchies could use such digital machines to better monitor and control people and to more easily launch wars in the future?

All of this is far from being of purely theoretical concerns. The U.S. Pentagon is already planning to use intelligent robots and drones, controlled by Artificial Intelligence, to wage the wars of the future.

The short and medium term and longer term economic effects of AI and the four industrial revolutions since 1760

In economics, the notions of short-term (1-4 years), medium-term (4-9 years) and long-term (10 years or more) can vary, depending on the economic and financial sectors. For the economy as a whole, it is possible to refer to short, medium and longer term economic business cycles. For example, many years passed between the invention of the first giant computer, as large as a building, in 1946, and the innovation of the portable computer on the computer market, in 1977, and then the arrival of Apple's Macintosh computers, in 1998.

The first industrial revolution (1760-1870) began in the mid-18th century in Britain, in the textile industry. For the first time in history, overall production and consumption in a country could grow faster than population, thanks to the productivity gains that technological innovations and production techniques made possible.

The discoveries of new sources of energy, such as those coming from gas and oil, in addition to that of coal, as well as electricity, were at the center of the second industrial revolution (1870-1914). This led to innovations in means of transport (railway, steamboat, automobile and airplane). Increased industrialization then caused a demographic migration from the countryside to the cities, which accentuated the phenomenon of urbanization, resulting in the creation of large cities and mega-metropolises with high population density.

The third industrial revolution (1930-2010) is characterized by the innovation of nuclear energy and the advent of the information age, mainly during the second part of the 20th century. It was made possible by the invention of the microprocessor and by the creation of the first computers, followed by the innovation of the Internet, satellites and wireless communication.

As for the ongoing fourth industrial revolution (arising from applications of Artificial Intelligence, an expression first introduced in 2011, at a conference held in Germany to design a new industrial policy for that country based on high technology strategies), it would be wise to distinguish an initial period of shock and transition, and a longer period of gradual acceptance and maturity, which can extend over several decades, even a century or more.

• A difficult transition of layoffs, in the short and medium term, for workers in the tertiary sector most threatened by digitalization and automation

Already, institutions such as the International Monetary Fund (IMF) and the Goldman Sacks investment bank, among others, have attempted to quantify the net effect that applications of Artificial Intelligence will have on different categories of workers. For the IMF, 40% of jobs in the world could be affected, in one way or another, by the development of AI. These will mainly be jobs in the tertiary service sector, which risk being replaced, or affected to varying degrees, by intelligent robots. Indeed, we can classify jobs likely to be affected in one way or another by AI systems in three categories:

1- jobs potentially substituted or replaced, (such as support or secretarial jobs in banks, insurance companies, accounting offices, libraries, and in activities of translation, dubbing, etc.);

2- jobs not threatened by AI because they are performed either outdoors or because they require physical activity ( e.g. carpenter, plumber, electrician, painter, roofer, hairdresser, etc.);

3- the vast majority of jobs will be influenced to a certain degree by AI, particularly in finance, education, health, medicine, engineering, administration, cybernetics, video games, etc.

For example, in a study published in March 2023, Goldman Sacks estimated how much Artificial Intelligence could influence employment for the entire American economy. Their conclusion was that AI could replace 7% of current jobs, mainly jobs of office and white-collar workers, in years to come. However, the majority of jobs, 63% of the total, can be expected to be complementary to AI, would benefit from productivity gains and could even increase in importance. On the other hand, some 30% of jobs, mainly manual jobs, would hardly or not at all be affected by AI.

The role of politics, supervision and regulation of applications of Artificial Intelligence (AI)

The Artificial Intelligence revolution can undoubtedly both replace and create jobs, and, by increasing labor productivity, create wealth. However, this risks causing some upheaval in certain labor markets and resulting in significant layoffs of workers in some industries.

This is why governments, responsible for the general interest, must ensure that there are no major economic and social excesses and adapt educational programs to the qualifications required in the future. They must also ensure that workers potentially penalized by layoffs are compensated and that the new wealth thus generated can benefit society as a whole, and not just a handful of operators. This will not be an easy task because there is international competition between countries to monopolize the beneficial impacts of the new technologies.

Currently, the countries that are at the forefront of regulating Artificial Intelligence technologies and AI systems are the European Union, China, the United States and the United Kingdom. The EU has put forward a preliminary regulatory and digital strategy framework called the AI Act. The objective is to identify acceptable and unacceptable risks that will arise from the applications of new digital technologies. Likewise, in June 2022, the Canadian federal government introduced the Artificial Intelligence and Data Act (LIAD) as part of bill C-27, i.e. the Digital Charter Implementation Act of 2022. The purpose is to guide AI innovation in a positive direction and to encourage a responsible adoption of AI technologies by Canadians and Canadian businesses.


Does the advent of the Artificial Intelligence (AI) revolution herald an extraordinarily promising breakthrough for humanity, or does it rather carry a risk of great confusion and civilizational regression?

Indeed, many questions come to mind: will humans master the various Artificial Intelligence systems so that they serve not only the private economic and industrial interests behind their applications, but also that of displaced workers and the common interest? Is it possible that these systems will become so pervasive and so powerful that they could end up becoming forces of control, dehumanization and enslavement for large numbers of people?

A first conclusion is that no one can definitely answer these questions with precision and with full knowledge of the facts. And if we ever do get the answers, it may be too late. Consequently, everything will depend on the uses that we make of this new technology.

The digital revolution of Artificial Intelligence therefore raises more questions than it gives answers, as it is a technology that is expected to evolve and find new applications, good or bad, over time.

A second conclusion is that countries and economies that fall behind in adopting the AI technology could experience economic difficulties in the years and decades to come. Even those economies in the forefront of the new industrial revolution could expect an increase in incomes and wealth disparities.

A third conclusion is that the innovation of intelligent robots driven by Artificial Intelligence certainly opens up a new field for gains in labor productivity through creative destruction,  in a certain number of professions and industries. However, it is rightly a cause for concern, as it could also facilitate cheating, falsification, confusion and dehumanization of human beings in many areas.


International economist Dr. Rodrigue Tremblay is the author of the book about morals "The code for Global Ethics, Ten Humanist Principles" of the book about geopolitics "The New American Empire", and the recent book, in French, "La régression tranquille du Québec, 1980-2018". He holds a Ph.D. in international finance from Stanford University.

Please visit Dr. Tremblay's site or email to a friend here.

Posted Wednesday, March 6, 2024, edited Sun. March 10, 2024.

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Wednesday, February 7, 2024

Why Western Economies are at Risk of Entering a Period of Slower Growth and Impoverishment in the Coming Years

By Dr. Rodrigue Tremblay,

Emeritus professor of economics and international finance, Université de Montréal, and of the book about morals "The Code for Global Ethics" and the book about geopolitics "The New American Empire")

"Economic thinking about immigration is generally quite superficial. It is a fact that in different [rich] countries, reproducible national capital is on the order of four times yearly national income. As a result, when an additional immigrant worker arrives, in order to build the necessary infrastructure (housing, hospitals, schools, universities, infrastructure of all kinds, industrial facilities, etc.), additional savings equal to four times the annual salary of this worker will be needed. If this worker arrives with a wife and three children, the additional savings required will represent, depending on the case, ten to twenty times the annul salary of this worker, which obviously represents a very heavy burden for the economy to bear."  Maurice Allais (1911-2010), 1988 Nobel Prize in economics, 2002.

"What is the role of the Canadian government [in regards to immigration]? If it follows the recommendations of immigration advocates, it makes policies to maximize world welfare and its goal should be high, if not unlimited immigration. If its policies are to maximize the welfare of the native (Canadian) population, immigration policies should be designed to eliminate the fiscal burden (of between $20 and $26 billion a year) so that only positive economic benefits occur through  immigration." Hebert Grubel (1934- ), Emeritus professor of economics, Simon Fraser University, 2013.

"You cannot simultaneously have free immigration and a welfare state.Milton Friedman (1912-2006), Professor of Economics, University of Chicago, 1999.

There's no magic in economics.

To consume, you must produce, and to produce, you must save (income minus consumption expenses) and invest in productive capital, in infrastructure and in other means of supporting production. A stock of productive capital (businesses, factories, machinery, equipment, infrastructure) is required, plus innovations, technical progress, knowledge, management, reliable sources of energy and, above all, qualified workers, capable of contributing to increasing productivity and to raising the annual output of goods and services per capita.

That is how living standards and the average person's well-being rise in some economies and why living standards remain stagnant or increase slowly in other economies.

This is explained in some economies by the lack of savings and productive capital relative to the numbers and skills of workers as well as other factors. Indeed, other economic indicators of human development do take into account the quality of life (economic and political stability, public health, education, individual security, etc.) of a population, beyond just the average of domestic output of goods and services per capita, the latter possibly distributed in a very unequal manner.

Nowadays, the so-called 'advanced' Western economies are considered relatively productive and their populations enjoy a relatively high standard of living, as measured by the average gross domestic product per capita. This is essentially because their stock of productive capital is high and because they benefit from technical progress, cheap energy sources and have access to a qualified labor force.

However, such relative success is not necessarily permanent and a foreclosed conclusion, if the conditions for economic growth atrophy or are replaced by other less efficient factors. A decline in living standards is not inevitable, but it can become possible, or even likely, if public policies are poorly designed.

Indeed, there have been structural changes taken place in Western economies, over several decades now, in Europe and North America. These has been a slowdown in new productive investments, a relative expansion of the services sector, an influx of low-skilled workers resulting from illegal immigration, the adoption of energy transition policies to encourage an increased reliance on more costly and less reliable energy sources and a chaotic geopolitical environment that has enhanced the possibility of hegemonic wars.

1- A simple model to understand the sources of real economic growth in the long term

Let's start with a simple model of the real economic growth, i.e. the Solow model.

This model states that an economy's long-run economic output growth depends on its stock of productive capital, resulting from savings, technological progress and the supply of labor.

The higher the stock of capital available in an economy, the more abundant the yearly domestic output of goods and services will be, for a given population.

If we consider that the living standard of a population ultimately depends on the stock of accumulated capital and that the annual growth of gross domestic product (GDP) depends largely on this capital, it follows that the more workers are qualified and the more they have access to capital (businesses, factories, machinery, equipment), the more productive they are, and the higher the living standard of the entire population will be.

2- An industrialized economy relies on more capital than a less developed economy

It has been observed that for an industrialized economy, it takes an average value of about $4 of capital to generate an annual domestic output of $1, at a ratio of 4:1. In a subsistence or stagnant economy, conversely, where the living standard is low, the capital/annual production ratio is low, possibly not exceeding the ratio of 1:1.

This may explain, to a large extent, the tendency towards large-scale population migrations, originating from countries with low living standards and a high demographic growth, towards countries with high living standards and highly capitalized.

In the short- and medium-term, such a migratory phenomenon is not necessarily to the advantage of advanced economies, which may see their rate of economic growth decline and the living standard of their population fall, if enough new investments are not added to the existing stock of capital.

3- Economic growth vs. population growth

One thing to understand is the following. If the population increases in an industrialized economy, either through the natural process or through a high influx of immigrants, it is then necessary that the stock of productive capital and the infrastructures of such an economy increase also, in a ratio of 4:1, (in the absence of technological progress), so as to maintain the standard of living of the entire population.

In other words, if the level of capitalization of a country with an advanced economy does not increase in proportion, and at the same time, as a strong demographic expansion takes place, a decline in income per capita and a general lowering of the living standard can be expected.1

It has become trivial to say that Western economies have become consumer societies. They are economies in which the percentage of goods and services produced and consumed occupy more than sixty percent of total production.

It is a complex evolution which is linked to the phenomenon of deindustrialisation that has been observed for half a century in most Western economies. It is measured by the decline of the part of industrial added value and industrial jobs, in GDP and in total employment.2

Such a phenomenon is accompanied by a national relocation of certain high productivity industries towards emerging economies, under the influence of economic globalization. This has meant a relative expansion of the production and consumption of private services (commerce, finance, transport, catering, entertainment, etc.) and of public services (teaching, health care, administration, etc.), a sector generally less likely to record important productivity gains.

5- Structural dissavings of governments through debt

Relative deindustrialization and the shift to a service economy in Western economies has forced governments to increase their budgetary deficits, pushing some countries into a level of total public debt that currently exceeds the level of their gross domestic product.

Those advanced economies with the highest levels of national debt relative to their annual gross domestic product, in 2023, as measured by the percentage of public debt to annual GDP, are:

Japan =                255,24%

Greece =              241,55

Italy =                   143,73

United States       123,28

France =               110,03

Portugal =             108,35

Spain =                 107,28

Canada =              106,38

Belgium =             105,98

United Kingdom   104,14


P.S. : Japan is a special case because of its high household saving rate. Personal savings in Japan averaged 13.09% from 1963 until 2023, reaching an all time high of 62.10% in June of 2020. Moreover, Japan's public debt is nearly all domestic.


For a more complete picture, one must add to the current public dissavings of governments the increasing waste of resources devoted to the global arms industry and to recurring ruinous and polluting wars, some of which could eventually lead to a catastrophic nuclear war.

6- Global warming and the energy crisis

There is a great complementarity between productive capital and energy. Indeed, when energy sources were abundant and could be considered unlimited, they were considered a given. Since pollution resulting from the burning of fossil fuels is one of the causes of global warming, this cannot be the case in the future.

Moreover, the global warming crisis has persuaded several governments to take drastic measures to reduce the combustion of fossil fuels, which are relatively abundant but non-renewable, easy to exploit and highly energy efficient (coal, oil, natural gas, etc.). The goal is to gradually replace them, over the coming decades, with less abundant renewable energy sources (solar, wind, hydraulic, etc.), some of which are intermittent and less reliable, in addition to being expensive to exploit. 

The nuclear sector falls between these two categories of energy sources. Nuclear power accounts for about 10% of electricity generation globally. Nuclear power has advantages and disadvantages, but it is very expensive to produce. However, certain countries lacking alternative energy sources, such as France, will not have much choice but to resort more to it in the future.

7- Energy has played a big role in the rapid rise in living standards

Since the first Industrial Revolution, from 1750 to 1900 in Europe, and its acceleration in the 20th century, the availability of abundant and inexpensive energy sources of fossil fuels has been an important factor that has propelled industrial and commercial civilization upwards. Indeed, this is what has transformed economies that, for millennia, had been agrarian and artisanal, into urbanized industrial and commercial economies, like those of today.

In the beginning of the Industrial Revolution, the advent of machines in the textile industry as well as in agriculture, followed by electrification and the subsequent multiplication of the means of transport, helped to multiply the physical and manual labor of workers and increase the production and distribution of products on a high scale. This resulted in considerable increases in labor productivity and in real GDP growth. GDP per capita followed, propelling upward the standard of living and the wealth of nations, as well as the quality of life of their populations.

For example, during the forty years between 1960 and 2000, a period of strong economic growth and relative international peace, French researcher Simon Yaspo estimated that GDP per capita in France, Germany and in the U.S. grew by more than 250 percent.

Such a rise has never been seen before in the history of the world. It is possible that humanity might never again experience such a long golden period of economic growth, with such a rapid rise in living standards.

8- Government policies and the energy transition

There is currently, in certain government circles, great optimism regarding the possibility of decarbonizing some national economies over the next quarter of a century, that is to say by the year 2050. This is based on the belief that substitution policies can be designed to promote a relatively rapid shift, from more polluting energies to cleaner ones. The objective is to limit the rise in global warming to 1.5℃ by the year 2050 and to keep it below 2.0℃ by the year 2100.

However, numerous economic and political obstacles could stand in the way of such an otherwise very laudable scenario.

The 2023 energy report, published by the International Energy Agency (IEA), is somewhat less hopeful that a quick reduction of fossil energies can occur before 2050. Indeed, according to the organizations's most recent energy forecasts, global consumption of oil and natural gas, which is expected to peak during the current decade, is seen to remain more of less around that level, until the year 2050. This is a consequence of the inertia and synergy that exist in energy systems. In other words, the development of new energy sources requires the use of fossil energies.

However, IEA is optimistic about a rapid reduction in the global consumption of coal, the most available and cheapest energy source. It predicts that such a consumption, after a peak reached also during the current decade, will quickly fall by 40% by the year 2050, which could bring it back to the level observed in the year 2000.

Nevertheless, coal and charcoal wood play a major role in heating, cooking and electricity production in several emerging and developing countries. The Chinese economy alone, for example, is responsible for 50% of global coal consumption. In Africa, coal represents 70% of the continent's total energy consumption. Some resistance to switching from coal to more costly sources of energy could be expected from these regions.

Moreover, even in Western nations, some political resistance could be expected about the negative economic effects that an imposed energy transition could have on living standards and on the quality of life of populations. Some governments, seen as being too hasty on the issue or ill-prepared to mitigate its consequences, could be overthrown and be replaced by political leaders more inclined to resort to adaptation measures rather than to simple suppression, concerning energy production and consumption of various sources of energy.


The Great Recession of 2007-2008 may have served as a warning sign that the sources of economic growth in Western economies were beginning to fade. That deep recession forced major central banks to push interest rates way down, even towards zero, in order to stimulate growth.

In the coming years, Western economies will have to face structural developments even riskier to their future prosperity.

Indeed, Western economies risk suffering, all at the same time, from: 1- a slowdown in productive investments and productivity gains, the results of deindustrialization and the transition to a service economy; 2- a pressure from largely under-qualified illegal immigration, which could lower the ratio of productive capital per capita and accentuate the push towards consumption of public and private services; 3- public dissaving, the result of high public budgetary deficits and a resulting public over-indebtedness; 4- a waste of resources due to the expansion of the unproductive arms sector, in a global context of geopolitical instability and wars; and, 5- an energy transition that will be difficult to achieve, with policies aimed at penalizing inexpensive fossil fuels, in favor of more costly and less reliable alternative energies.

With these economic headwinds interacting and reinforcing each other, western economies could face lower economic growth rates ahead. This could also translate into a relative drop in standards of living, and also possibly, in people's quality of life, over the coming years and coming decades.

In fact, in a not too far away future, the main limiting factor to economic growth in Western economies could likely come from more expensive sources of energy, which are less reliable than in the past. Likewise, demographic growth rates that are too rapid in relation to the stock of available productive capital, the result of uncontrolled immigration, could also become a cause of economic impoverishment.



1. The decline and fall of the Western Roman Empire, in the 5th century AD, is probably the most complex and most important historical phenomenon of an economic, political and military system that collapsed under the effect of several causes, but notably following a fall in income.

2. For example, the share of industrial jobs in total employment dropped by more than half in advanced economies, from 1970 to 2016.

The share of industrial jobs in total employment went from 46% to 17% in the U.K., from 31% to 17% in the U.S., from 39% to 18% in France, from 45% to 17% in Belgium. In Canada, the share of manufacturing jobs in total employment fell from 19.1% to 9.1%, from 1976 to 2019.

(For Quebec and Ontario, during the same period, the share of manufacturing employment, in total provincial employment, dropped from 23.2% to 11.5%, in the first case, and 23.2% to 10.2%, in the second case.


International economist Dr. Rodrigue Tremblay is the author of the book about morals "The code for Global Ethics, Ten Humanist Principles" of the book about geopolitics "The New American Empire", and the recent book, in French, "La régression tranquille du Québec, 1980-2018". He holds a Ph.D. in international finance from Stanford University.

Please visit Dr. Tremblay's site or email to a friend here.

Posted Wednesday, February 7, 2024.

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Thursday, January 11, 2024

Two Big Risks in 2024-2025: an Economic Slowdown and Expanding Hegemonic Conflicts

By Dr. Rodrigue Tremblay,

Emeritus professor of economics and international finance,

 Université de Montréal

"When every country turned to protect its own private interest, the world public interest went down the drain, and with it the private interests of all."  Charles Kindleberger (1910-2003). American economic historian, (in his book "The World Depression 1929-1939", 1973)

"The world is a dangerous place to livenot because of the people who are evil but because of the people who don't do anything about it." Albert Einstein (1879-1955). (As quoted in the book by Josep Maria Corredor "Conversations avec Pablo Casals", 1955)

"I think it is the beginning of a new Cold War... I think the Russians will gradually react quite adversely and it will affect their policies. I think it is a tragic mistake. There was no reason for this whatsoever. No one was threatening anybody else." George F. Kennan (1904-2005). American diplomat and historian, (in The New York Times, May 2, 1998, about the U.S. expansion of NATO toward Russia.)

While defending our own vital interests, nuclear powers must avert those confrontations which bring an adversary to a choice of either a humiliating retreat or a nuclear war. To adopt that kind of course in the nuclear age would be evidence only of the bankruptcy of our policy—or of a collective death-wish for the world.“ John F. Kennedy (1917-1963), 35th U.S. President, 1961-1963, (in an important speech on Monday, June 10, 1963)

In 2024, most economies are expected to face economic headwinds. Indeed, that is why in many countries, especially in Europe and in North America, polls indicate that people's main preoccupations are economic topics, such as the lingering inflation, high personal and public debts and the likelihood of a more or less severe economic recession.

An economic-social issue such as the influx of hordes of illegal immigrants will also be a source of concern, especially in Europe and in North America, above all if the rates of unemployment increase.

Similarly, the ongoing bombing wars in Ukraine and in Palestine, as well as the growing tensions between the United States and China and those between the U.S. and Iran, are foreign policy issues that could raise concerns.

Important economies according to their GDP vs. smaller rich economies per capita

According to World Bank data, the gross domestic product (GDP) of the United States, at mid-year 2023, was $25,463 billion. This places the U.S. economy number one with 24.3 percent of the world economy.

The economy of the European Union (EU), a bloc of 27 countries, represents 21.7 percent of global GDP and is the second largest in the world. China's economy follows in third place, with 15.0 percent of global GDP.

However, in terms of living standards (GDP per capita), small economies dominate the list, with Luxembourg ($127,580) in the lead, followed by Norway ($106,328), Ireland ($103,176) and Switzerland ($92,381).

An overview and expectations

The economic cycles of the major economies do not coincide perfectly, and vary somewhat depending on their economic structures and the economic policies followed by their governments.

The central question today is whether or not the coming economic year will be one in which major economies will be able to avoid a full-fledged economic recession.

The exuberance in the stock and bond markets seems to indicate that they are anticipating a gentle economic slowdown, driven by a marked decline in inflation and multiple cuts in interest rates to come.

The alternative situation to consider, contrary to the general optimism, could be that of a year characterized by a classic economic recession, more or less severe, a consequence of economic and financial imbalances accumulated in the past. It could be caused also by unexpected economic, financial and geopolitical shocks to come.

Currently, the general economic consensus is that the fight with higher interest rates that the main central banks are waging against inflation, (which was generated by large public deficits and by excessive monetary creation to counter the harmful economic effects of the 2020-2022 pandemic.), will succeed.

Thus, the central question boils down to whether the coming year will witness a very manageable mild economic slowdown or that many countries could rather have to go through a longer and more severe economic recession, with a minimum of two successive quarters of contracting GDP.

The American economy

Even if the U.S. economy is presently the most resilient of all, being at a virtual full employment level, with an official 3.7 percent unemployment rate, and with a rising consumer confidence, there are nevertheless some cracks appearing.

For example, the Conference Board's leading economic index is still declining and forecasting a mild economic recession in the United States, in 2024. Also, even though U.S. employment still holds steady, job openings are declining. This could be an indication that business investment and production plans in some sectors are being adjusted downwards.

The reason why the U.S. economy is performing better than other economies, besides the contribution of its vibrant technology sector, is partly due to its heavily subsidized arms industry, which is one sector that is prosperous and in constant growth. It comprises more that 200,000 companies, the most prominent being Lockheed Martin, Northrop Grumman, RTX (Raytheon), General Dynamics and Boeing.

Those companies are important contributors to the industrial growth and economic prosperity of states such as Alabama, Connecticut, Virginia, Texas and California.

The European and Canadian economies

It is even possible that future economic data, to be released next March, will confirm that several European countries and Canada are already into a recession, with two quarters in a row of decline in domestic production.

An energy crisis stemming from the Ukrainian-Russian conflict is adding to the rise in interest rates in slowing down European economies, notably those of the 20 countries of the Eurozone. Presently, the German and Italian economies would seem to be the best candidates for a recession.

In Canada, the unemployment rate is still respectable at 5.8 percent. But job growth is anemic, with only100 new jobs created last December.

Additionally, largely due to an open-door immigration policy, the Canadian population is growing at a record rate, by far the most of all industrialized countries, while employment growth stagnates. This is translating into a decline in living standards, as measured by real GDP per capita.

A period of stagflation can also be expected. Indeed, mass immigration, without major investments in infrastructure, increases effective demand but lowers productivity. The economy can find itself with both inflation and an economic slowdown.

The Organization for Economic Co-operation and Development (OECD) has even published a study, in March 2023, in which it highlighted that Canada is lagging behind developed economies in terms of the standard of living of its population, which continues to decline. The standard of living in Canada has been deteriorating since 2014, under the effect of unbridled immigration and poor general productivity growth.

Geopolitical risks

What could turn a mild economic recession into a more serious one would be an expansion of the ruinous and ongoing military conflicts in Ukraine and in the Middle East, or new and wider hegemonic wars to come.

In such a case, as most governments face high debt levels (i.e. total public debts greater than their yearly total domestic product), such developments would be likely to reignite inflation and cause a further surge in interest rates in years to come.

It is rare for economic conditions and geopolitical risks to be linked so closely, but unfortunately, this is the type of world we live in today.


The economic conundrum in 2024 is whether the expected economic slowdown will be mild and not very disruptive to labor and stock markets, or rather, whether unforeseen financial events, such as the failure of a large financial institution, could precipitate a more serious and severe global economic recession.

The geopolitical ball is murkier because the U.S. government of Joe Biden does not seem anxious to end military conflicts, even though the President had initially promised, at the start of his administration, to rely more heavily on diplomacy to resolve international disputes.

Nevertheless, the year 2024 could be an important turning point, both economically and geopolitically.


International economist Dr. Rodrigue Tremblay is the author of the book about morals "The code for Global Ethics, Ten Humanist Principles" of the book about geopolitics "The New American Empire", and the recent book, in French, "La régression tranquille du Québec, 1980-2018". He holds a Ph.D. in international finance from Stanford University.

Please visit Dr Tremblay's site or email to a friend here.

Posted Thursday, January 11, 2024; edited January 17, 2024.

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