by Gary Alexander

June 6, 2023

David Malpass was appointed to a five-year term as head of the World Bank, but he will leave that office this month, early in his fifth year. I find it interesting that he resigned early not over criticisms of slow global growth – which would be his mandate – but over critiques about his climate knowledge.

All he did was claim that he was not a scientist. Sorry, David, that’s not good enough. In today’s world, even central bankers can’t keep their jobs if they hold nuanced views, like “some fossil fuels are cleaner than others.” (See: David Malpass: World Bank leader who was called climate denier quits – BBC News)

At any rate, Malpass wrote a valedictory address of sorts in The Wall Street Journal (“The World Needs to Get its Growth Back,” May 24, 2023), which opens: “The global economy is facing dangerously slow growth of 2% or lower. As I near the end of my term as World Bank president, I’m discouraged by the lack of resolve and action. I worry that slow growth may persist for years. The world is digesting the huge buildup of government debt relative to gross domestic product, normalization of artificially low interest rates, and a system allocating capital away from small businesses and toward bond issuers, especially governments and the largest businesses. The result is reduced dynamism at home and fragility abroad.”

He’s right. The top three economies – The U.S., China, and Germany (tied with Japan at #3) – are being intentionally held back from their peak performance level by ideologues putting a series of weights on the backs of their premier performers – more so than usual, that is. According to an editorial in last Friday’s Wall Street Journal (“The Global Economic Growth Deficit”), #2 China is slumping, and #3 Germany is slipping into recession, while the U.S. is locked in a terminal slow-growth rut, while avoiding a recession.

In a nutshell, all three nations (and my home state) have succumbed to belief systems over economics:

  • China’s “chairman for life,” Xi Jinping, seems to be a more devoted Communist than each of his four more pragmatic predecessors. While Deng Xiaoping famously said of communism vs. capitalism, “It doesn’t matter whether it is a yellow cat or a black cat, as long as it catches mice,” The Wall Street Journal reminded us that “Chinese President Xi Jinping is waging a campaign against the country’s private economy to maintain Communist Party political control. This includes regulatory crackdowns on tech companies that should be leading a rapid economic expansion.”

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

  • Germany’s ideology is centered around green purity, after making a foolish “all in” bet on wind and solar power while ignoring the more secure non-fossil alternative of nuclear power. The Journal says, “Reality is also catching up with the German economy, which contracted 0.3% in the first three months of the year after shrinking 0.5% in the previous quarter, with consumer spending especially weak and inflation high. The surprise is that this didn’t happen sooner, given the burden of Berlin’s green-energy malinvestment and rising fossil-fuel prices after Russia invaded Ukraine.”
  • The U.S. is the healthiest of the three, but not by much. We suffer from the Biden administration’s “hostility to affordable fossil fuels,” although not yet to Germany’s extreme, while adding a focus on “equity over growth” in “nearly all economic decisions.” The Journal further says that Mr. Biden is “using regulation to allocate private capital across the economy, often in unproductive ways.”
  • In my home state, Washington, cement truck drivers willingly destroyed their company’s product, but the State Supreme Court upheld the Union’s right to sabotage their company. The U.S. Supreme Court reversed our state court’s ruling, but this is an example of the “unproductive ways” economic growth is sabotaged (see “Union Sabotage at the Supreme Court,” Wall Street Journal, June 2, 2023).

Where the Big 3 Economies Went Wrong

All three nations have been big growth engines for decades. Germany has been Europe’s top performer since the 1950s, overcoming the slower work habits in Mediterranean economies and work slowdowns in France and other socialist-leaning nations. China has been the miracle-working growth engine of Asia, since Japan went into slow-growth limbo in 1990, and the U.S. has been the world leader for a century.

China will continue to underperform for several reasons. One reason is their demographic destiny of fewer babies, meaning fewer workers supporting a growing army of older and retired parents needing aid. But in the immediate future, Chairman Xi (who must be obeyed) has declared that the traditionally corrupt and cossetted State-Owned Enterprises (SOEs), which were gradually being phased out by the previous three more practical CCP Chairmen, will be rewarded and encouraged from now on. Last November, Xi approved a new plan to make these SOEs “stronger, better and bigger,” to “optimize and restructure the state economy layout” – a euphemism for forced mergers – after Xi’s enforcers found that the SOEs were more obedient during Beijing’s forced COVID lockdowns and other strong-arm measures from the State.

Everyone expected China to come bursting out of the chute once their Covid lockdown ended, but it didn’t happen – and now we know why: The somnolent SOEs are in control. China sputtered and never took off this year. China just reported that its official purchasing managers’ index (PMI) for manufacturers contracted for the second straight month, and its services PMI declined almost two points to 54.5 in May.

So – 45 years after Deng Xiaoping began his first capitalist experiments in 1978, Xi is turning back the clock to Mao’s doctrinaire communism. Ideology has blinded him, and it will choke off China’s growth.

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Germany suffers from a mass “green” mania, dreaming they could abandon all forms of fossil fuel and go “all in” on wind and solar for a growing economy. First, former Chancellor Angela Merkel shut down eight nuclear reactors in response to the 2011 Fukushima nuclear disaster – which was due to a tsunami, which poses no threat in Germany. Then she vowed to shut down all other nuclear facilities by 2022, although nuclear is a clean source of power. Then she vowed to build 25,000 megawatts of sea-based wind turbine power by 2030 and chew up almost 2% of Germany’s land for bird-killing wind turbines.

The German magazine Der Spiegel (The Mirror, pictured above) wrote back in May 2019, “Over the past five years alone, the ‘energy transition’ (Energiewende) cost Germany €32 billion ($36 billion) annually.” Der Spiegel cited an estimate that it would cost Germany “€3.4 trillion ($3.8 trillion),” or seven times more than it spent from 2000 to 2025, to increase solar and wind three to five-fold by 2050.

Michael Schellenberger responded, in Forbes: “If renewables can’t cheaply power Germany, one of the richest and most technologically advanced countries in the world, how could a developing nation like Kenya ever expect them to allow it to ‘leapfrog’ fossil fuels?” He cited the new wind farm in Kenya, inspired and financed by Germany and other well-meaning Western nations, which “is located on a major flight path of migratory birds. Scientists say it will kill hundreds of endangered eagles,” an added cost.

The U.S. isn’t as fanatic as many green zealots in Germany, but we’re close, as the Biden Administration seems determined to fulfill their fearless leader’s numerous campaign promises of “no more fossil fuels.”  In one Presidential debate, Mr. Biden said, “No more drilling, including offshore. No ability for the oil industry to continue to drill, period,” making no exception for a relatively clean fossil fuel, natural gas.

In addition, the Biden Administration has added a major emphasis on “institutional diversity, equity and inclusion,” which is rife with opportunity for corruption and diversion from goals of growth into settling scores. After America resoundingly elected a black President, and then re-elected him, race relations were better than ever, but The New York Times decided in 2019 to focus on the fact that America is a racist nation, and the 1619 Project was their first manifesto to emphasize race; so major organizations must now focus on filling meaningless positions and balancing color codes instead of promoting economic growth.

It’s time for China to return to “capitalism with a Chinese face,” Germany to return to a balanced energy policy, and the United States to promote fairness with freedom once again, so we can all grow with vigor.

All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.

Please see important disclosures below.

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About The Author

Gary Alexander

Gary Alexander has been Senior Writer at Navellier since 2009.  He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks.  For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.

Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s.  He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division.  Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander

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