The Four Horsemen of the Apocalypse

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In recent years, the stock market has conquered the economy. Despite mounting debts and ever-increasing income disparities around the world, the financial system seems completely disconnected from the real economy. This makes the economic system inherently unstable, after a long period of stable growth since the end of the Second World War. This instability in the economic system affects the political system, resulting in far-reaching polarisation within parties. Instead of the dichotomy between left and right, there is now a dichotomy between the elite (both left and right) and populism (also both left and right).

It is that the democratic institutions still work, otherwise things could easily degenerate into revolution or civil war. The uninterrupted growth of the economy has also had a major impact on the environment and the climate. With oceans full of plastic and biodiversity in rapid decline, it is a miracle that there is still enough food in the world. To top it all off, a global pandemic has occurred, while we had assumed that we had conquered nature in this respect. Plagues and diseases are part of the Middle Ages, but they are no longer part of the 21st century. Is this the end of times, the Apocalypse from the book of Ezekiel, in which four horsemen seated on white, red, black, and white horses in succession are the bringers of calamities such as war, famine, and plagues after the economic conquest?

Economics, politics, sustainability, and health are interrelated. One flows from the other. Our economic system has been weakened by debt and greenhouse gases, further aggravated by political developments and the corona crisis. The measures taken to combat the virus are devastating for the economy, including high social and health costs. The world has been better.

Systems are stable until they are not. Stability cannot be extrapolated into the future as a matter of course. It is not a straight line. First, it bends, but after the tipping point comes the crack. Then there seems to be no way back. Because these systems are interrelated and in combination are even seen as an existential risk, they must also be approached integrally. With complex and adaptive systems, this is not easy. For example, monetary and macroeconomic support during the pandemic provide relief now but may exacerbate problems in the future.

The solution is not to continue along the same path, not to do more of the same. Problems must be confronted and addressed. There are different ways to solve a debt crisis. Central bankers are on the track of reflation and financial repression, but investors prefer a quick fix. Zombie companies are standing in the way of progress. In a free financial world, they would be cut off from credit and promptly collapse. Fast debt restructuring has also proven in the past to be a good basis for future growth. Then it will also be possible to normalize monetary policy. This will probably mean that budget deficits will increase, but that is better than continuing on the current path. Political instability itself can only be tackled by finding a solution to the skewed distribution of wealth in the world. This will require, among other things, a complete overhaul of the tax system. But the most existential problem is the climate and the living environment. This requires high investments, but these will eventually yield a positive return.

It is not easy to tackle the problem of the four horsemen. It is a complex problem with many analytical challenges, full of paradigm shifts. Only with international cooperation and new strong institutions can this problem be tackled. In this respect, the world could take a leaf out of Europe’s book. To make the European Union a success, the power of the national member states must be transferred to Brussels. Without them, Europe would be a fantastic example to the world, with strong autonomous regions that excel in diversity. Unfortunately, the relinquishment of power by national governments appears to be very sensitive in Europe, precisely because of its historical awareness. Only when there is an existential problem in Europe is it possible to reach a compromise. This requires first that we understand the need to change. The collective of investors, the ‘wisdom of crowds’, is capable of recognising change at an early stage. Unfortunately, politicians and those in authority are prevented from investing, because a financial stake in the future is particularly disciplining.

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