23/07/2022 thesaker.is  6 min 🇬🇧 #212572

Go East, My Son!

By Marwan Salamah for the Saker Blog

American nineteenth-century folklore tells of a young man asking his elders' advice on what calling he should take up. The answer was a firm "Go West my son and grow!", or to that effect. The gist of the advice was that the American West was at the time viewed as virgin, not yet settled and built up by the European immigrants. In fact, most of those who headed West did succeed, subject to exhibiting diligence, persistence, hard work, and some luck.

But today, in the twenty-first century, circumstances have changed. The West has matured, competition has increased, and returns have shrunk. Endless series of bubble booms and busts continue to occur and at ever shorter intervals. Classical economics concepts have gradually changed away from a real production economy to a paper economy which is considered by some to be fictitious, unreal, and unsustainable.

Today's Western economy is dominated by the FIRE sectors (Finance, Insurance, and Real Estate) plus the military industry, all of which have usurped the bulk of the economy's wealth and income, leaving far too little for the other sectors to survive let alone grow. The result is an alarming rise in extreme inequality with, it is claimed, the top 1% (or 10%) of the population owning the bulk of the wealth and income.

Other sectors have also grown, most prominent are those related to IT and services. But these are highly volatile and high-risk businesses and not all who enter them succeed or remain and prosper. Quite a few have turned into Zombie companies that absorb endless bouts of capital increases in the millions and even billions of Dollars but fail to show a profit.

The great western industry has all but disappeared. It has migrated to China, Asia, and elsewhere, as a result of an erroneous application of the famous economic edict of "maximizing profits". It was applied exclusively to the short-term with total disregard to its negative long-term implications on both the companies themselves as well as the economy as a whole. The result, among other things, was the stripping of the West's industrial capability, increasing its balance of trade deficit, creating endless supply chain bottlenecks, and increasing its vulnerability and reliance on the outside world.

Despite the negative description above, the US, so far, remains the biggest and strongest economy and the US Dollar remains the main trade currency, the main reserve currency held by the world's central banks, and the number one safe haven currency. Also, we should by no means ignore the huge American agriculture capacity that has fed and continues to feed a substantial number of the world's population.

But at the same, we cannot disregard the huge and important changes that are rapidly occurring elsewhere in the world, especially as most of these changes seem intent on competing directly, commercially and economically with the US and the West. Nor can we disregard the well-published data signaling a shrinkage in the West's global market share and the gradual erosion of the US Dollar hegemony.

And once we add the increasingly belligerent geopolitical tug-of-war between the US and its allies against Russia, China, and part of the Global South, it quickly becomes apparent that the world is on the verge of a major historic and permanent split into two or more camps.

Regardless of who fares better in the coming split, it is clear that the economic development that began a few years ago in Russia, China, Eurasia, the Far East, and the Global South has been positive and impressive, and is likely to be more so if it continues - and all indications point to its continuity.

On this basis, it is logical to assume and expect a huge growth of business and investment opportunities in those changing countries (East and South), both quantitative and qualitative. Bear in mind that those markets are still more or less virgin in that they have not reached their market or financial peaks and have ample room for additional growth. The crown jewel here is that most of the available business and investment opportunities are in the "real" economy and not fictitious paper or pencil-pushing based. Many comprise opportunities in the industrial and agricultural fields and are thirsty for smart capital. The services, trading, and real estate sectors are similarly poised for development by those with proven know-how and expertise.

It is therefore not surprising to see Turkiye begin, a few years ago, to turn its attention Eastwards, especially after a decades-long frustrating wait for the glorious EU membership approval that never arrived.

But the true attention head-spinner is Iran's resetting of its compass from West to East. After more than two millennia of looking West, Iran has at long last realized that its future lies in the East. Obviously, the US and West's animosity, accompanied by an endless series of harsh sanctions, and the unlikelihood of a return to the nuclear agreement has not only tipped the Iranian scale away from the West but pushed it firmly eastwards where it sees a much brighter and mutually beneficial future.

As such, Iran began a couple of years ago with a mega multi-year investment agreement with China worth approx. $400 Mill to develop and upgrade its oil and industry sectors. It then joined several segments of the Belt & Road Initiative (the new Chinese Silk Road) as well as signed a joint venture agreement with India to develop Iran's Arabian seaport of Chabahar as a main trade transit hub. In the process, it has significantly increased its trade with its northern, eastern, and southern neighbors and the trend appears continuing. On another front, it has recently jointly inaugurated the north-south route from Saint Petersburg through Azerbaijan and the Caspian Sea all the way to the Arabian sea and henceforth to India and Asia. This is claimed to be a very fast and economic route and is another potential competitor to the Suez Canal. And finally, only last week, it signed a batch of agreements with Russia, including one with giant Gazprom to develop its many gas fields.

On the international organizations' side, Iran joined last year the Shanghai Cooperation Council (SCO), which is an important Asian economic and security cooperation organization. Turkey is a Dialogue Member and new applications are expected from Saudi Arabia, Qatar, and Egypt. Similar developments are in progress in other Asian and Global South international organizations.

It is clear that the chess board layout is rapidly changing, and opportunities are aplenty. There is no logical reason not to head East and South... remember the early bird is usually well rewarded.



Marwan Salamah is a Kuwaiti economic consultant and publishes articles on his blog:  marsalpost.com

He is also an amateur Chef (Middle Eastern, Chinese, and European cuisines), home gardener (Hydroponics & Aquaponics), Herbal enthusiast (Moringa, Oregano oil, etc.), and dabbles in oil painting and sketching.