In gambling jargon, va bänk is a term that denotes a move where a player places all their chips on one decisive game. It’s a game of all or nothing. When on April 2 of this year, the President of the USA imposed tariffs on the ‘whole world and its surroundings’, it could be said that he went va bänk. In the seven days following that move, the public was flooded with thousands of news articles, analyses, reactions, and forecasts on how the game, in which, as Đorđe Balašević would say, ‘a pile of money’ is at stake, will end.
It is hard for anyone to accurately predict the outcome. It remains for each entrepreneur and manager to try to devise a framework within which they will sift through and arrange essential information for their business. Therefore, in today’s ‘Ekonomalije’, here is one such framework. Perhaps it will help someone.
The Trigger for Recession is in the USA
First, the broadest framework. It starts from the assertion that the current form of capitalism is in deep crisis. The yield that is being rejected (?) is disappointing for too large a part of humanity. Social inequalities are not decreasing. GDP growth is being pumped at an increasingly insane pace through money printing and budget deficits of countries. This version of capitalism has no answer on how to stop environmental pollution. And finally, as a result of all this, life expectancy has stopped increasing.
Within this framework, the largest economic power to date – the United States of America – is positioned. It is precisely the USA that is associated with money printing, the enormous growth of the state deficit, rising social tensions, and a series of defeats against its greatest rival – China. American leadership has had no answer for over a decade on how to prevent the collapse of its position as the world’s leading power. Sooner or later, the USA is a candidate to be the detonator of a global recession.
In the division of labor, world wars start in the Balkans, while world recessions begin in America. It was so in 1929. It repeated itself closer to us in 2008/2009. Everything was ripe for a new spontaneous recessionary detonation. Donald Trump, who was legitimately elected by a frustrated American electorate, merely replaced spontaneity with a conscious detonation by provoking a tariff, i.e., trade war with almost all countries in the world.
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A gambler as he has been in his business life, Trump made a move that in the long run has no chance of making America great again. World powers have an expiration date. The only question is how long the downward phase will last. And how much damage that collapse will inflict on the rest of the world. When cornered, leaders typically find scapegoats in external enemies. This is also the case with Trump.
The framework of fallen capitalism can be further filled with other countries. The basic question is how they react to the ‘neighborhood extortionist’. The reactions of individual countries can be categorized into three boxes. In the first are completely terrified state leaderships that, ignoring that the extortionist never stops with new extortions, kneel and beg for mercy and lower tariffs. There is no help for them.
The EU Must Act Wisely
In the second box, we can place countries that are short-term willing to make concessions to Trump, but simultaneously, in secret, begin the process of reducing dependence on such an unpredictable and disloyal key customer as the USA. When it comes to the EU and Croatia within it, such an approach should contain some new version of the National Recovery and Resilience Plan. Following the model of the fund from the pandemic period, a new one should be established to compensate for a larger part of the damage that commodity exporters will suffer in the US market.
Simplified, for the additional tariff, they will lower prices and receive compensation from Brussels for it. The percentage of compensation should then be reduced every six months, which would give exporters time to find alternative markets, undergo restructuring, and, if necessary, control the reduction of the number of employees.
The third group of countries are those that will choose open war with the USA. For now, in that box, apart from China, there isn’t really anyone else. But that box is only for the most powerful and determined opponents.
The framework should also include tens of millions of companies around the world. There are about 30 million in the EU alone. It is difficult for them to share concrete advice. Perhaps just a reminder that capitalism presupposes recessions, even depressions. It will be crazy. Raw material prices will fall, competitors with unsold stocks in the USA will flood domestic markets. There will be surpluses and shortages. Some will feel inflation, others deflation. The already nervous poorer layers will become more aggressive. The political scene will become even more filled with extremes, which will further complicate business operations. But all of this goes into the service term of those who have decided on entrepreneurship. They are neither the first nor the last. And everything passes, with more or even more victims. But those who prepared in good years for the ‘seven lean cows’ will survive.
