The tension that has emerged between Saudi Arabia and Iran in the first week of 2016 foreshadows what might happen during the rest of the year. It is not a coincidence that the two most important countries in the world, in terms of oil and natural gas reserves, have come to the brink of war. Certainly, before executing Shiite leader Sheikh Nimr al-Nimr, Saudi Arabia must have known what Iran's reaction would be. Furthermore, it is no secret that Iran is increasingly intensifying its policies that escalate the sectarian strife in the region. Iran must see that the consequence of these policies will be war. The pace of armament in both countries and the fact that this armament is not limited to conventional weapons alone is another story.It is unlikely that countries such as Russia, Iran and Saudi Arabia will not turn into ticking bombs in a period where oil prices are heading toward $20 and energy lines, rather than the location of production, will determine the markets in natural gas sharing. Such a threat grows further considering that the significance of carbon-based energy resources will decline and that they will be replaced by other energy resources over the next two decades.
We can foresee that countries that base their economy and wealth on conventional types of energy, and those which form their political institutions based on this, will be vulnerable toward those who think that war will resolve the crisis. You can't teach an old dog new tricks. What do you think oil prices would be if Russia and Iran did not support the Syrian civil war? Or, would we be seeing lower oil prices were it not for the Syrian civil war?
Following the Saudi Arabia-Iran tension, gold and oil prices have entered an upward trend. As the tension persists, geopolitical risk will have implications on other commodity prices. So, 2016 will be a year where the war card will stand out particularly in this region. This is because the system cannot find a way out other than fighting the outdated institutions of the 20th century and their legal superstructure. In other words, the current system is designed in a way that it points to the war as a solution whenever it experiences a crisis. There is no way out other than war and it continuously produces crises in the absence of war.
International Monetary Fund (IMF) Managing Director Christine Lagarde said that 2016 will be disappointing and economic growth around the world will be lower than expected. She provided justification for this estimate by referring to rising risks in developing countries, high debts in developed countries, aging populations, financial problems and the lack of production that arises from all this. You do not need to have as giant a data set as the IMF and thousands of pages of country reports to come up with such arguments. Developments in the last quarter of 2015 alone will push you to put forward the same argument as Lagarde.
The economic implications of Lagarde's argument is that the world economy is far from an overall recovery as the global labor force and the existing production technology (instruments) components are producing far below their capacity and running badly. So, the world is experiencing a large output gap and the gap between production potential and production output is constantly growing. Indeed, this is a very old argument on which there are many theories and formulations. The last one of these is a formulation put forward by Thomas Piketty in his "Capital in the Twenty-First Century." He argues a "r>g" pattern, where r stands for the average annual rate of return on capital, including profits, dividends, interest, rents, and other income from capital, expressed as a percentage of its total value, and g stands for the rate of growth of the economy, that is, the annual increase in income or output. This means that the annual rate of return of the monopolized capital, including profits and interests, continuously surpasses the average annual income of production and producing segments. The more this income increases, the more the global output – growth – increases on the expenditure basis. If income falls, growth declines as well and if unearned income on capital increases simultaneously – which is possible due to the functioning of the system – we will enter a never-ending period of crisis. The financialization, which led the world to the 2008 financial crisis, is a process of this kind. The replacement of industrial profits by financial profits further subverts income distribution and turns the crisis into a deadlock.
Prior to the Cold War period, the overall solution to this problem was total war. The dual nuclear balance of the Cold War and multiple nuclear balance of the present time make such a solution impossible. However, conventional and regional wars and civil wars come into play with the crisis resolvers for the liquidation of old sectors and technology, as well as of old economic and political structures. This is the core of the logic and functioning of the system. So, all countries and economic and political unions, such as the EU, can respond to this deep crisis and overcome it without disintegrating, but only if they change their outdated systems that go back to the previous century. The year 2016 will be challenging for countries like Russia and Iran, which do not want to change their systems and which rely on their natural resources to maintain these systems.
The same challenge lies ahead of countries like Turkey, if they do not switch to a strong system that meets the requirements of the day. So, constitutional amendment in Turkey does not concern the constitution alone, but it also means the re-formation of all institutions with a new understanding and consensus. Turkey will discuss the constitutional amendment in an inclusive way based on this perspective. All non-governmental organizations, universities, trade unions and economic institutions should be mobilized for a new constitution that will be the most appropriate, comprehensive and permanent solution to ensure domestic peace and stability in Turkey. The same also goes for the EU, as it cannot continue on its path with an understanding of a union that goes back to the previous century. In this sense, Turkey's quest for a new and democratic constitution is the EU's quest for a new union.