OPINION: Flying blind in the Cross-Atlantic crises

BANGKOK (ANN Desk) - Air travel has been the most safe form of transportation, with the risks even lower than travel by car. However, after the tragic Ethiopian Boeing 737 Max 8 jet crash, China, Singapore, Indonesia and UK have already banned the overflight of the jet in their airspace pending further investigations. 

Flying to Washington DC and London this week, news came of the tragic Ethiopian Boeing 737 Max 8 jet crash almost immediately after take-off, eerily similar to what happened just five months ago to the Lion Air Max 8 jet that also crashed after takeoff from Jakarta last year. China,
Singapore, Indonesia and UK have already banned the overflight of the jet in their airspace pending further investigations, but the US delayed suspension until over 61 countries had done so, prompting one commentator to suggest that the US is losing soft power as a country that used to
care about high standards of safety and concern for human life.

Air travel has been the most safe form of transportation, with the risks even lower than travel by car. But the blog videos showing the plane stalling with very experienced pilots on board seem to suggest to non-engineers that there is something wrong with the plane design.

The remarkable fact is that President Trump weighed in with a tweet that “airplanes are becoming too complex to fly. Pilots are no longer needed, but rather computer scientists from MIT.” He took the decision to suspend the flights. But one could argue that things are so complex these days, do we need auto-pilots in planes, trains, or even countries?

Was this a mechanical hardware, software or human-induced crash amidst excess complexity? Only further investigations will tell. Complexity theory suggests that you cannot apply simple, linear and mechanical models to understand reality, requiring much more sophisticated pattern recognition methods. Conventional economic models have failed to predict the future because they are too simplistic, assuming that humans have “rational expectations” with perfect information and completely ignoring contextual issues such as climate change, technology disruption and politics - namely, everything that even to a layman, has huge economic consequences.

And that is exactly how it felt after a week visiting the two capitals of the world that used to run the whole world - Washington DC and London. Both capitals are totally absorbed with present complexities that have no ideal future solutions. We have moved from a simple, predictable world of optimal, “first best” solutions to a condition of utter confusion, in which everything is possible.

We can trace the breakdown of the old order to the Great Financial Recession of 2007/8, which was more accurately a North Atlantic crisis, involving mainly the US and Europe. The US managed its subprime crisis better, but the Europeans bungled their excessive debt crisis. London
and New York, were both hubs and amplifiers of that financial crash, which was solved mainly by massive quantitative easing by the central banks and the reflation by the Chinese in 2009.

With hindsight, the best and brightest financial brains on both sides of the Atlantic were blind to the weaknesses of their complex financial systems, turbo-charged with financial derivatives that Warren Buffett famously called “weapons of mass destruction.”

All financial crises have political origins, and of course, political consequences. In hindsight, the greatest financial innovation of all time was the creation of financial derivatives on NINJA mortgages, namely no-income, no-job residential mortgages which were simply unsustainable.

The bangsters of Wall Street turned these financial derivatives into a NONJA outcome, namely “no fail, and no jail” situation whereby no one was accountable to anyone. Heads I win, tail you pay.

The monetary creation of more than $14 trillion by the top five global central banks brought interest rates down to zero and boosted global asset bubbles, making the rich richer, with the 90% of the population realising that they footed the bill, with the bankers getting off scot-free.

It was this anger plus distrust of the elite, especially the politicians, that drove the electorate to vote for change - Brexit in the case of the United Kingdom and President Trump in the United States.

Politics in the United States is deeply divided between the left-wing Democrats, which won control of the House of Representatives last year, and the right wing supporters in the Republican Party, who remain hard-core supporters of Mr. Trump.

This week in London, Prime Minister Theresa May had a double parliamentary defeat, despite her heroic efforts to strike a deal. In two weeks’ time, the United Kingdom may exit Europe with “no deal”, or more possible delays with totally unpredictable economic and political consequences.

The European Union does not see any advantage to change its present hardline stance. A wise friend from the City remarked that today, “there is no majority in support of anything”, other than everyone wishing that the whole Brexit issue would just be over and done with, whatever the
outcome.

All this goes to show is that today the epicentre of global fragility is not in Asia, but in Washington DC and London. Any single miscalculation in policy in both capitals could have serious consequences around the world. America First policy under President Trump has stirred up a
hornet’s nest with the trade dispute with China. Similarly, Brexit will have terrific consequences, not just for Britain, but also for Europe, which is also in a political pickle.

Which brings us back to the jet crashes. If modern airplanes are so complex that we are not sure whether human pilots or auto-pilot software are in charge, who is really piloting our future trajectory? Our political leaders across the world will do whatever they think is right, but it looks as
if they are flying in a fog of uncertainty. We, the silent passengers, watch and wait for key decisions by the pilots in front, pray that they know what they are doing.

And that is the true state in the world from messy geo-politics.

(Andrew Sheng writes on global issues from an Asian perspective.)

Photos

No photos has been attached.