Category: Geopolitics & Geo-economics

  • “And Now to some serious Governance”

    “And Now to some serious Governance”

    A time comes for each leader and government to rise above pettiness, discarding ill will and hatred towards all. For the BJP, now uniquely in its third term, this is the time to show the nation that it is a party with a difference. For the opposition equally, this is the time to cooperate with the government on critical issues impacting the country.  

     

    Since my retirement from active service, I have avoided politics and political writings like the plague, but the avoidable happenings of the past few months have caused me, like am sanguine would have to millions of our countrymen, pain and a sense of despair.

    India has conducted over 18   general elections to its Parliament since 1952 with a lot of fury and vibrancy, but the Lok Sabha 2024 general elections were indeed an example of abysmally low-level politics transcending our better senses.

            How the world’s largest democracy indulged in its Lok Sabha 2024 elections was hardly complimenting to it considering the unquestionable fact that among the emerging nations in the world, call it from the Global South, the conduct of our elections showed some among those participating in poor light. Between competing political parties, enlightened debates and mutual civility were sadly lacking.   India has conducted over 18   general elections to its Parliament since 1952 with a lot of fury and vibrancy, but the Lok Sabha 2024 general elections were indeed an example of abysmally low-level politics transcending our better senses. India, which carries a fair amount of moral authority and is considered an example of a true and vibrant democracy, cannot let its hallowed image be sullied attributable to the selfish electoral games of some of its political leaders. The party in power at the Centre, the principal Opposition party and all those regional parties at the helm in the states have to display adequate maturity and a modicum of propriety and civility towards each other and not politicize each and every aspect of governance or national issues impacting India. The opposition, as it shows the mirror to the government on critical issues of governance, must not criticise each and every act of the government as a matter of routine.

             With the outcome of the general elections now done and dusted and the previous BJP government back in power, albeit with a clear reduction in its seats tally from 303 down to 240, it must get down to the exacting business of good governance from the Centre. That the same government, with its experience of the last ten continuous years in power, fielding more or less the same faces in the Cabinet in critical ministries and importantly serviced by the same bureaucrats should have, relatively speaking, not such an arduous task in governance. However, the thrust for fair, equitable, and sensitive handling of all critical matters across the nation has to come from the top political leadership. All our states must never feel discrimination by the Centre, especially in financial allocations urgently required for developmental works and disaster management. Additionally, the new government must take stern measures to keep rising inflation and unnecessary governmental expenditure under check before the economy takes a severe nose-dive.

             The Modi government, with the continuous experience of the last ten years, will have more than a good idea of the systemic improvements required and about areas needing additional financial resources and effort. It is unnecessary to worry too much about criticisms from the opposition but to carry on regardless in developmental works, without fear or favour, and with impartiality towards all the states in the true spirit of federalism. A time comes for each leader and government to rise above pettiness, discarding ill will and hatred towards all. For the BJP, now uniquely in its third term, this is the time to show the nation that it is a party with a difference. For the opposition equally, this is the time to cooperate with the government on critical issues impacting the country.

             New Delhi’s hands will be full of the nation’s diverse and formidable challenges, requiring attention and effectiveness. On the foreign policy front, India will have to walk the tightrope of maintaining strategic autonomy and sustaining its good relations with both the US and Russia. However, as it determinedly confronts an overly assertive China, India needs to use its economic clout and sophisticated diplomacy to get its South Asian neighbourhood closer to it and each other, avoiding the debt trap diplomacy and financial machinations of China.

    The number of terror-related incidents in J&K has gone up substantially in the last three months, and Pakistan will have to be kinetically chastened.

          India must, at the appropriate level, convey to China that their confrontationist attitude towards us will be harmful to the Chinese, too and may propel India to rethink its existing Tibet policy. Nevertheless, India must maintain the utmost vigil along the 3485 km Line of Actual Control/ IB, which it shares with  China. Meanwhile, Pakistan once again needs to be cautioned against stepping up terror activities in J&K  or elsewhere in the Indian hinterland. India is in full knowledge of Pakistan’s many fault lines. Still, it has refrained from exploiting these, and Pakistan must also cooperate in ensuring a peaceful and prosperous South Asian neighbourhood independent of China’s wily stratagems. The number of terror-related incidents in J&K has gone up substantially in the last three months, and Pakistan will have to be kinetically chastened.

    Meanwhile, India’s preparations to successfully improve its security capabilities to confront a two-front war must go ahead with realism and an unfailing determination. Measures to augment capital expenditure for major defence acquisitions must be identified. Transformative defence reforms like the introduction of integrated theatre commands will need the attention of the Centre. In addition, India must take all steps to restore peace in our restive NE states.

             The Modi government has come in for some criticism abroad on its human rights record and dealings with its Muslim population. This unjust criticism must be dealt with judiciously and with maturity. India’s overall inclusiveness and celebration of its diversity are unique examples for the entire world, especially the nations of the Global South. We must never deviate or be even seen to shift from this noble orientation.

    Reduction of the yawning gap between the countless ultra-rich and those millions in abject poverty is essential as we boast of becoming the 5th largest economy in the world. The many human indices where we are faltering also need to be addressed.

             As economic strength is the pillar that propels and sustains progress, the Modi government must take measures to improve our economic health. Reduction of the yawning gap between the countless ultra-rich and those millions in abject poverty is essential as we boast of becoming the 5th largest economy in the world. The many human indices where we are faltering also need to be addressed.

             By all yardsticks, India is deservingly on the cusp of acquiring a seat on the global high table. Let us not squander away this golden opportunity by internal squabbling but instead work together in addressing crucial issues that affect our nation; we must seize this opportunity.

    Feature Image Credit:  vskbharat.com    

    Cartoon Credit: Times of India

  • The catastrophe of modern capitalism: Inequality as an aim in Neo-Liberal-Ideology

    The catastrophe of modern capitalism: Inequality as an aim in Neo-Liberal-Ideology

    Neoliberalism is the dominant form of capitalism that began in the 1980s as a way to promote global trade and grow all economies. That was a false promise, whereas in essence it supported individuals amassing massive wealth in the name of market forces, at the expense of common man by ensuring states minimise their role and eliminate welfare economics. It ensured least-developed and developing economies remained resource providers to developed economies, exemplifying extraction and exploitation. Neoliberalism is a top down economic policy that does not benefit those who are impoverished. The inequality we see on a global scale is mind-numbing. In 2006, the world’s richest 497 people were worth 3.5 trillion US dollars representing 7% of the world’s GDP. That same year, the world’s lowest income countries that housed 2.4 billion people were worth just 1.4 trillion US dollars, which only represents 3.3% of the world’s GDP. The situation today is far worse as Andreas Herberg-Rothe explains in his critical analysis below. The world is in urgent need of freeing itself from the clutches of neoliberal capitalism. 

     

    ..neoliberalism contains a general tendency towards an extensive economisation of society. Thus, inequality transcends the economy and becomes the dominant trend in society, as in racism, radical extremism, and hate ideologies in general: Us against the rest, whoever the rest may be.

     

    Following on from the initial question about Hannah Arendt’s thesis that equality must be confined to the political sphere, we must ask how democracy and human rights can be preserved in the face of social inequality on an extraordinary scale. By the end of this century, 1% of the world’s population will own as much as the “rest” of the other 99%. And already today, only 6 people own more property than 3.6 billion. Let us take a closer look at some of the ideas of the currently dominant neo-liberalism, which sheds some light on the acceptance of these current obscene inequalities. For this ideology, social inequality is a means to greater wealth. However, since it sets no limits on social inequality, it can be used to legitimize even obscene inequalities. We argue that neoliberalism as an ideology is the result of the spread of a specific approach to economic thought that has its roots in the first half of the twentieth century, when Walter Lippmann’s seminal book “An Inquiry into the Principles of the Good Society” (1937), followed by Friedrich August von Hayek’s “The Road to Serfdom” (1944), gave rise to neoliberalism. During the Cold War period, neoliberals gained more and more ground in establishing a global system. With the support of Milton Friedman and his “Chicago Boys,” the first attempt to establish a pure neoliberal economic system took place in Chile under the military dictatorship of General Pinochet in the 1970s. In the last decade of the Cold War, neoliberal architects such as Margaret Thatcher and Ronald Reagan began to impose the new economic model. Since the end of the Cold War, the final development was that neoliberalism became THE hegemonic economic system, as capitalism was de jure allowed to spread unhindered worldwide, and neoliberalism continued on its way to becoming the dominant belief system.

    The critical message in this sense is the following: This process is not limited to an economic dimension – neoliberalism contains a general tendency towards an extensive economisation of society. Thus, inequality transcends the economy and becomes the dominant trend in society, as in racism, radical extremism, and hate ideologies in general: Us against the rest, whoever the rest may be.

    When we talk about global inequality in the era of neoliberalism, we are referring to two other major developments: To this day, inequality between the global North and South persists. While the total amount of poverty has decreased, as seen in the World Bank’s report (2016), there is still a considerable gap between those countries that benefit from the global economy and those that serve as cheap production or commodity areas. The second development takes place in countries that are more exposed to the neoliberal project. In this sense, societies are turning into fragmented communities where the “losers of neoliberalism” are threatened by long-term unemployment, a life of poverty, social and economic degeneration.

    After three decades of intense global neo-liberalism, the result has been a significant increase in social inequalities, polarization and fragmentation of societies (if not the entire world society), not to mention a global financial crisis in 2008 caused by escalating casino capitalism and the policies of a powerful global financial elite.

    We are witnessing a global and drastic discontent of peoples, fears and anger, feelings of marginalization, helplessness, insecurity and injustice. After three decades of intense global neo-liberalism, the result has been a significant increase in social inequalities, polarization and fragmentation of societies (if not the entire world society), not to mention a global financial crisis in 2008 caused by escalating casino capitalism and the policies of a powerful global financial elite. We witness a global and drastic dissatisfaction of the peoples, fears, and anger, the feelings of marginalization, helplessness, insecurity, and injustice. After three decades of intense worldwide Neo-Liberalism, the result significantly intensified social inequalities, polarization, and fragmentation of societies (if not the entire world society), not to mention a global financial crisis in 2008 caused by escalating casino capitalism and the policy of a powerful global finance elite.

    The central critique is that neoliberalism includes social inequality as part of its basic theory. Such capitalism emphasizes the strongest/fittest (parts of society) and uses inequality as a means to achieve more wealth.

    Remarkably and frighteningly, the situation outlined does not provoke the oppressed, marginalised, and disadvantaged populations to turn against their oppressors and their exploitation. These people tend to sympathize with ideological alternatives, either with more triumphant (right-wing) populist movements and parties or are attracted by radical/fundamentalist religious groups such as the Islamic State. The result is an increase in polarization and violence, and even more protracted wars and religious-ideological disputes. Europe is not exempt from the trend toward obscene social inequality. We also find a polarization between rich and poor, between those who have good starting conditions and those who have little chance of prosperity, between those who are included and those who feel excluded. The fact that Europe has so far largely avoided populist parties gaining administrative power (although we have already witnessed this process in France, Hungary and Poland) may be due to the remnants of the welfare state. In this respect, at least a minimum of financial security remains and limits the neoliberal trend. In the United States, on the other hand, a flawless populist could reach the highest office. The people, stuck in their misery, fear and insecurity, voted for a supposed alternative to the neoliberal establishment, but above all against other social outcasts whom they blamed for their misery. This brings us to the central critique of neoliberalism, a system that has caused fundamental social oddities, the impact of which as an ideology has been highlighted above. The central critique is that neo-liberalism includes social inequality as part of its basic theory. Such capitalism emphasizes the strongest/fittest (parts of society) and uses inequality as a means to achieve more wealth.

    In an interview with the German magazine Wirtschaftswoche, Hayek spoke bluntly about the neoliberal value system: He emphasizes that social inequality, in his view, is not at all unfortunate, but rather pleasant. He describes inequality as something simply necessary (Hayek, 1981). In addition, he defines the foundations of neo-liberalism as the “dethronement of politics” (1981). First, he points out the importance of protecting freedom at all costs (against state control and the political pressure that comes with it). The neoliberals see even a serious increase in inequality as a fundamental prerequisite for more economic growth and the progress of their project. One of the most renowned critics of neoliberalism in Germany, Christoph Butterwegge (2007), sees in this logic a perfidious reversal of the original intentions of Smith’s (reproduced in 2013) inquiry into the wealth of nations in the current precarious global situation. The real capitalism of our time – neoliberalism – sees inequality as a necessity for the functioning of the system. It emphasizes this statement: The more inequality, the better the system works. The hardworking, successful, and productive parts of society (or rather the economy) deserve their wealth, status, and visible advantage over the rest (the part of society that is seen as less strong or less ambitious). The deliberate production of inequality sets in motion a fatal cycle that leads to the current tense global situation and contributes to several intra-societal conflicts.

    The market alone is the regulating mechanism of development and decision-making processes within a society dominated by neo-liberalism, and as such is not politics at all. This brings us closer to the relationship between neoliberalism and democracy. The understanding of democracy in neoliberal theory is, so to speak, different. Principles such as equality or self-determination, which are prominent in the classical understanding of democracy, are rejected. Neo-liberalism strives for a capitalist system without any limits set by the welfare state and even the state as such, in order to shape, enforce and legitimize a society dominated only by the market economy. Meanwhile there are precarious tendencies recognizable, where others than the politically legitimized decision-makers dictate the actual political and social direction (e.g. the extraordinarily strong automobile lobby with VW, BMW and Mercedes in Germany or big global players in the financial sector like the investment company BlackRock). Neoliberalism only seemingly embraces democracy. The elementary democratic goals (protection of fundamental and civil rights and respect for human rights) can no longer be fully realized. Democracy cannot defend itself against neo-liberalism if political decision-makers do not resolutely oppose the neo-liberal zeal for expansion into all areas of society. The dramatic increase in inequality coincides with the failure of the state as an authority of social compensation and adjustment, as neoliberalism eliminates the state as an institution that mediates conflicts in society. To put it in a nutshell: Whereas in classical economic liberalism the state’s role is to protect and guarantee the functioning of the market economy, in neoliberalism the state must submit to the market system.

    Our discussion of neoliberalism here is not about this conceptualization and its history, which would require a separate article. Nevertheless, we want to emphasize that in neo-liberalism, social inequality is a means to achieve more wealth for the few. Therefore, we argue that there must be a flexible but specific limit to social inequality in order to achieve this goal, while excessive inequality is counterproductive.

    As noted above, moderate levels of inequality are not necessarily wrong per se. In a modern understanding, it also contributes to a just society in which merit, better qualifications, greater responsibility, etc. are rewarded. The principle of allowing differences, as used in the theory of the social market economy, is a remarkably positive one when such differentiation leads to the well-being of the majority of people in need. However, neo-liberalism adopts a differentiation that intensifies inequality to a very critical dimension. The current level of social inequality attacks our system of values, endangers essential democracy, and destroys the social fabric of societies. Even if we consider a “healthy” level of inequality to be a valuable instrument for a functioning market society, what has become the neoliberal reality has nothing to do with such an ideal. Neoliberalism implies an antisocial state of a system in which inequality is embedded in society as its driving mechanism. Consequently, we witness a division between rich and poor in times of feudalism. A certain degree of social equalization through the welfare state and a minimum of social security is no longer guaranteed. The typical prerequisites today are flexibility, performance, competitiveness, etc. – In general, we see the total domination of individualism within neo-liberalism, leading to the disintegration of society. In one part of the world, mainly in the Global South, we observe the decline of entire population groups. In contrast, in other parts of the world we see fragmented societies in hybrid globalization and increasing tendencies towards radical (religious) ideologies, violence and war.

    It must be acknowledged that neoliberalism was one of the causes of the rise of the newly industrialized nations, but the overemphasis on individual property also contributes to obscene inequality and thus to the decline of civilized norms.

    The Polish-British sociologist Zygmunt Bauman summed up this problem by comparing it to the slogan of the French Revolution: “Liberté, Egalité, Fraternité”. According to the proponents of the time, each element could only be realized if all three remained firmly together and became like a body with different organs. The logic was as follows: “Liberté could produce Fraternité only in company with Egalité; cut off this medium/mediating postulate from the triad – and Liberté will most likely lead to inequality, and in fact to division and mutual enmity and strife, instead of unity and solidarity. Only the triad in its entirety is capable of ensuring a peaceful and prosperous society, well integrated and imbued with the spirit of cooperation. Equality is therefore necessary as a mediating element of this triad in Bauman’s approach. What he embraces is nothing less than a floating balance between freedom and equality. It must be acknowledged that neoliberalism was one of the causes of the rise of the newly industrialized nations, but the overemphasis on individual property also contributes to obscene inequality and thus to the decline of civilized norms. When real socialism passed into history in 1989 (and rightly so), the obscene global level of social inequality could be the beginning of the end (Bee Gees) of neo-liberalism, centered on the primacy of individual property, which is destroying the social fabric of societies as well as the prospects for democratic development. Individual property is a human right, but it must be balanced with the needs of communities, otherwise it would destroy them in the end.

     

    Feature Image Credit: cultursmag.com

    Cartoon Image Credit: ‘Your greed is hurting the economy’ economicsocialogy.org

  • Globalisation’s Sunset

    Globalisation’s Sunset

    Are we witnessing the end of globalisation and the rise of economic nationalism? Who is responsible for this state of affairs? For many, the villain is clearly the US and its allies in the West. The reason is the rise of China as the world’s manufacturing and technology superpower. China is beating the West at its own game, and the US is shaken by the visible signs of the end of its hegemony and the dominance of the West.  Globalisation is being throttled by the West in a futile attempt to end China’s rise. The result will be catastrophic for the Global South in its aspirations for accelerated development. Former Venezuelan ambassador and Princeton scholar Alfredo Toro Hardy analyses what he sees as the sunset of globalisation.

    Team TPF

     

    Economic globalisation was the offspring of the neoliberal ideology that prevailed after the collapse of the Soviet Union. The globalisation process took off in the mid-nineties, as was identified by the firm support given to it by leaders such as Bill Clinton and Tony Blair, particularly the former, who commanded the world’s largest economy.

                Its most emblematic expressions would be the Washington Consensus, the creation of the World Trade Organization in 1995, and China’s entry into these organisations in 2001. The first resulted from the convergence of positions between the U.S. Treasury Department and International Financial Organizations based in Washington. It would translate into a ten-point recipe called to set in motion the economic liberalisation of distressed and closed economies, chiefly the previous communist ones. The second involved the global homogenisation of rules in matters as diverse as manufacturing, agriculture, services, labour standards or intellectual property, as well as the abandonment by its members of industrial policies and protectionism. The third represented the insertion into the global labour market of more than a billion human beings whose working costs were but a fraction of those in developed countries. This would be accepted and even promoted by the United States under the assumption that a China open to the world’s economy would eventually open itself to the values of liberal democracy as well.

                The importance of neoliberal ideology, as a determining factor of this process, would be key. As a matter of fact, for a long time the leading force in the world economy, America’s economy, was characterised by its industrial policies, protectionism, and vertical integration of its corporations. The federal government’s industrial policies became a catalyst for economic development, either through direct investments and engagement or through incentives for the private sector to follow a particular course of action. The countless products and services incorporated into the American technological repository resulting from NASA’s R&D efforts exemplify these policies. They still represent the broad shoulders on which the country’s private technological sector stands. Protectionism expressed itself through tariffs and non-tariff barriers to protect domestic production from foreign competition. Vertical integration, on its part, involved direct control by U.S. corporations in their production and distribution channels. Hence, outsourcing did not figure in their strategies. It is worth adding that even President Reagan, despite his deregulatory crusade, supported his country’s industrial policies and imposed protective barriers against Japanese competition (Foroohar, 2022).

    Globalization in question

                For decades, globalisation has represented an unchallenged paradigm. Under its course, China reached the anteroom of world economic supremacy, numerous cheap labour economies, particularly in Asia, emerged strongly, and large corporations relying on the revolutions in information technology, communications and transports outsourced and dispersed their production and services (again mainly in Asia). Actually, it was in the emerging Asian countries where, in nine of every 10 cases, the great beneficiaries of globalisation were concentrated. Moreover, it was estimated that between 2020 and 2030, the global middle class would jump from 3,300 million to 4,900 million people, with 80% of that jump taking place in Asia (Milanovic, 2018, p. 19; OCDE, 2010). However, for some time now, globalisation has been under serious questioning. Among the reasons behind this, the following should be outlined: the emergence of powerful populist movements in the Western World; climate change distortions upon trade and the impact on climate itself, resulting from maritime trade over long distances; and economic and political nationalism in China.

                Populism is, to a large extent, directly related to the immense social upheavals caused by the massive outsourcing of jobs to the cheapest labour economies. In 2000, Clinton predicted that globalisation would allow the export of products without exporting jobs. Exactly the opposite happened, though, seriously affecting the social fabric of the United States and its European counterparts. This significantly eroded their democratic systems. Climate change, with hurricanes, floods, and other incidents, has increased the risk of global supply chains, resulting in annual revenue losses of up to 35% for companies. (McKinsey and Company, 2020).

    Conversely, the massive mobilisation of supertankers worldwide generates up to 14% of the total greenhouse gas emissions affecting the planet. (Prestowitz, 2022). Indeed, “the ultimate buyer [of final products] remained an ocean or a continent away” (O’Neil, 2022, p. 113). In addition, contrary to what American promoters of China’s emergence had suggested, the country’s economic prosperity has led to an increasingly nationalistic and authoritarian model. Far from getting closer to U.S. values, China has emphasised its economic nationalism and geopolitical aggressiveness within the context of a growing rivalry with the United States.

    The triggering elements

                However, even if disappointment with globalisation continued to grow, the triggering elements that would end up clearly tilting the balance against it were still missing. COVID and Russia’s invasion of Ukraine took care of it. Twenty trillion U.S. dollars in goods rely on global supply chains. Especially so as the disaggregation of production translates into millions of components, parts and final manufacturers moving in every direction. (McKinsey and Company, 2020). This vertiginous dissemination of productive processes led to unexpected, sudden, and massive disruptions during the pandemic. As a result, global economic interdependence choked. The endless Zero COVID policy implemented in China, the geographic nerve centre for global trade, exponentially aggravated this situation. The result was none other than inflation that brought to mind the seventies and has not yet been controlled.

                This was joined shortly afterwards by the impact of the invasion of Ukraine by Russia. One that not only disrupted vital energy and food supply chains but fundamentally brought geopolitics back to the global scenario through the main door. As if the emerging Cold War between China and the U.S. had not already been enough to undermine faith in globalisation, events in Ukraine made security the central component of the international order. It was a sort of fall of the Berlin Wall in reverse. One that brought down the relevance of economics and propelled that of politics. Olaf Scholz’s “global zeitenwende” clarified that a new strategic culture and national strategy would become his country’s new priority (Scholtz, 2023). Under such circumstances, placing economic security in distant and potentially hostile hands was no longer a rational option.

    Back to the past

                Not surprisingly, the United States began reverting to policies that preceded globalisation. That is, to industrial policies, to protectionism, and the vertical integration of its corporations. Indeed, before losing the House of Representatives to Republicans in November 2022, Biden’s Democrats passed several laws that embody industrial policies. A perfect example is the so-called energy revolution, with 490 billion dollars being involved in incentives to guide private investment towards generating clean energy sources. It also allowed the federal government to intervene in medicine prices through direct negotiations with the pharmaceutical industry. In the same direction went the laws that stimulated competitiveness and innovation, the superconductors industry, and infrastructural development. In parallel, the “Buy American” policy, subsidies to the domestic industry, and the maintenance of the tariffs imposed by Trump represented an evident protectionist impulse. Meanwhile, American corporations, in tune with these policies and in reaction to the risks of dismembering their production and services on a global scale, are opting for vertical integration and direct control of their activities. This implies, by its very nature, a production centred on the local or the regional.

    Getting back home

                All of the above factors contribute to industries’ onshoring and supply chains. In 2021, of the 709 large U.S. manufacturing corporations consulted, 83% responded that they would very likely or probably return their production operations to the United States. (Ma, 2021). Numerous leading American and foreign corporations are opting to produce in the U.S. to benefit from the new incentives put in motion by the Biden administration. This list includes, among many others, Intel, GM, US Steel, Taiwan Semiconductor Manufacturing (TSMC), Toyota, Samsung and Micron Technology. The amount of their investments, in tens of billions of dollars in many cases, speaks for itself. The motivation behind this impressive move was well reflected in the words of the larger-than-life founder of TSMC, Morris Chang: “Globalization and free trade are almost dead and unlikely to return”. (Cheng, 2022; Doherty and Yardeni, 2022). However, together with this on-shoring move, there are also parallel movements of near-shoring or friendly shoring nature, where manufacturing and supply chains are being circumscribed to neighbours or traditional allies that do not represent a security risk. With the world’s largest economy becoming protectionist, it will be difficult for globalisation to retain its influence, especially as Europe rapidly evolves in the same direction.

    Globalization last hope

                Until recently, an area of globalisation seemed to be relatively protected from these kinds of upheavals: the digital ecosystem. According to a 2016 report, the rapid flows of international trade and finance that characterised the 20th century appear to have flattened (…), yet globalisation has not reversed. Indeed, digital flows are growing very quickly.” (McKinsey Global Institute 2016). However, a few months ago, Brookings published a highly pessimistic report regarding the future of this sector. According to it: “Historically, the arrival of the global web created an opportunity for the interconnection of the world under a global digital ecosystem. However, mistrust between nations has led to the emergence of digital barriers, which imply their focus on controlling their digital sovereignty (…). These developments threaten current forms of interconnectivity, causing high-tech markets to fragment and retract, to varying degrees, upon national states”. (Brookings, 2022). Thus, the last sector of globalisation, which still showed significant dynamism, is also reversing under the impact of geopolitics. Globalisation, no doubt about it, seems to be experiencing sunset.

     

     

    References

    Brookings (2022). “The geopolitics of AI and the rise of digital sovereignty”, December 8.

    Cheng, Ting Fang (2022). “TSMC founder Morris Chang says globalization is ‘almost dead’, Nikkei, December 7.

    Doherty, J. and Yardeni, E. (2022). “Onshoring: Back to the USA”, Predicting the Markets, February 5.

    Foroohar, Rana (2022). Homecoming. New York: Crown.

    Ma, Cathy (2021). “83% of North American Manufacturers are Likely to Reshore Their Supply Chains”, Thomas, June 30.

    McKinsey & Company (2020). “Could climate change become the weak link in your supply chain”, August 6.

    McKinsey Global Institute (2016). “Digital Globalization: The New Era of Global Flows”, March.

    Milanovic, Branko (2018). Global Inequality. Cambridge, Mass.: The Belknap Press of Harvard University Press.

    OCDE (2010). “The Emerging Middle Class in Developing Countries”, Working Paper Number 285.

    O’Neil, Shannon K. (2022). The Globalization Myth. New Haven: Yale University Press.

    Prestowitz, Clyde (2022). “Is the U.S. Moving Out from Free Trade? Industrial Policy Comes Full Circle”, Clyde’s Newsletter, December 12.

    Scholz, Olaf (2023). “The Global Zeitenwende”. Foreign Affairs, January/February.

     

    Feature Image Credit: worldcrunch.com (Globalization as Ideology is Dead and Buried).

    Image Credit: Gulliver’s Travails (Paresh Nath, The Khaleej Times, UAE) www.uncommonthoughts.com

  • China’s economy is still far out growing the U.S. – contrary to Western media “fake news”

    China’s economy is still far out growing the U.S. – contrary to Western media “fake news”

    GDP data for China, the U.S., and the other G7 countries for the year 2023 has now been published. This makes possible an accurate assessment of China’s, the U.S., and major economies performance—both in terms of China’s domestic goals and international comparisons. There are two key reasons this is important.

    • First for China’s domestic reasons: to achieve a balanced estimate of China’s socialist economic situation and therefore the tasks it faces.
    • Second, because the U.S. has launched a quite extraordinary propaganda campaign, including numerous straightforward factual falsifications, to attempt to conceal the real international economic facts.

    The factual situation is that China’s economy, as it heads into 2024, has far outgrown all other major comparable economies. This reality is in total contradiction to claims in the U.S. media. This in turn, therefore, demonstrates the extraordinary distortions and falsifications in the U.S. media about this situation. It confirms that, with a few honourable exceptions, Western economic journalism is primarily dominated by, in some cases quite extraordinary, “fake news” rather than any objective analysis. Both for understanding the economic situation, and the degree of distortion in the U.S. media, it is therefore necessary to establish the facts of current international developments

    China’s growth targets

    Starting with China’s strategic domestic criteria, it has set clear goals for its economic development over the next period which will complete its transition from a “developing” to a “high-income” economy by World Bank international standards. In precise numbers, in 2020’s discussion around the 14th Five Year plan, it was concluded that for China by 2035: “It is entirely possible to double the total or per capita income”. Such a result would mean China decisively overcoming the alleged “middle income trap” and, as the 20th Party Congress stated, China reaching the level of a “medium-developed country by 2035”.

    In contrast, a recent series of Western reports, widely used in anti-China propaganda, claim that China’s economy will experience sharp slowdown and will fail to reach its targets.

    Self-evidently which of these outcomes is achieved is of fundamental importance for China’s entire national rejuvenation and construction of socialism—as Xi Jinping stated, China’s: “path takes economic development as the central task, and brings along economic, political, cultural, social, ecological and other forms of progress.” But the outcome also affects the entire global economy—for example, a recent article by the chair of Rockefeller International, published in the Financial Times, made the claim that what was occurring was China’s “economy… losing share to its peers”. The Wall Street journal asserted: “China’s economy limps into 2024” whereas in contrast the U.S. was marked by a “resilient domestic economy.” The British Daily Telegraph proclaimed China has a “stagnant economy”. The Washington Postheadlined that: “Falling inflation, rising growth give U.S. the world’s best recovery” with the article claiming: “in the United States… the surprisingly strong economy is outperforming all of its major trading partners.” This is allegedly because: “Through the end of September, it was more than 7 percent larger than before the pandemic. That was more than twice Japan’s gain and far better than Germany’s anaemic 0.3 percent increase.” Numerous similar claims could be quoted from the U.S. media.

    U.S. use of “fake news”

    Reading U.S. media claims on these issues, and comparing them to the facts. it is impossible to avoid the conclusion that what is involved is deliberate “fake news” for propaganda purposes—as will be seen, the only alternative explanation is that it is disgracefully sloppy journalism that should not appear in supposedly “quality” media. For example, it is simply absurdly untrue, genuinely “fake news”, that the U.S. is “outperforming all of its major trading partners”, or that China has a “stagnant economy”. Anyone who bothers to consult the facts, an elementary requirement for a journalist, can easily find out that such claims are entirely false—as will be shown in detail below.

    To first give an example regarding U.S. domestic reports, before dealing with international aspects, a distortion of U.S. economic growth in 2023 was so widely reported in the U.S. media that it is again hard to avoid the conclusion that this was a deliberate misrepresentation to present an exaggerated view of U.S. economic performance. Factually, the U.S. Bureau of Economic Analysis, the U.S. official statistics agency for economic growth, reported that U.S. GDP in 2023 rose by 2.5%—for comparison China’s GDP increased by 5.2%. But a series of U.S. media outlets, starting with the Wall Street Journal, instead proclaimedthat the “U.S. economy grew 3.1% over the last year”.

    This “fake news” on U.S. growth was created by statistical “cherry picking”. In this case comparing only the last quarter of 2023 with the last quarter of 2022, which was an increase of 3.1%, but not by taking GDP growth in the year as a whole “last year”. But U.S. growth in the earlier part of 2023 was far weaker than in the 4th quarter—year on year growth in the 1stquarter was only 1.7% and in the 2nd quarter only 2.4%. Taking into account this weak growth in the first part of the year, and stronger growth in the second, U.S. growth for the year as a whole was only 2.5%—not 3.1%. As it is perfectly easy to look up the actual annual figure, which was precisely published by the U.S. statistical authorities, it is hard to avoid the conclusion that this was a deliberate distortion in the U.S. media to falsely present a higher U.S. growth rate in 2023 than the reality.

    It may be noted that even if U.S. GDP growth had been 3.1% then China’s was much higher at 5.2%. But the real data makes it transparently clear that China’s economy grew more than twice as fast as the U.S. in 2023—showing at a glance that claims that the U.S. is “outperforming all of its major trading partners”, or that China has a “stagnant economy” were entirely “fake news”.

    Many more examples of U.S. media false claims could be given, but the best way to see the overall situation is to systematically present the overall facts of growth in the major economies.

    What China has to do to achieve its 2035 goals

    Turning first to assessing China’s economic performance, compared to its own strategic goals of doubling GDP and per capita GDP between 2020 and 2035, it should be noted that in 2022 China’s population declined by 0.1% and this fall is expected to continue—the UN projects China’s population will decline by an average 0.1% a year between 2020 and 2035. Therefore, in economic growth terms, the goal of doubling GDP growth to 2035 is slightly more challenging than the per capita target and will be concentrated on here—if China’stotal GDP goal is achieved then the per capita GDP one will necessarily be exceeded.

    To make an international comparison of China’s growth projections compared with the U.S., the U.S. Congressional Budget Office (CBO), responsible for the official growth projections for the U.S. economy on which its government’s policies rely, estimates there will be 1.8% annual average U.S. GDP growth between 2023 and 2023—with this falling to 1.6% from 2034 onwards. This figure is slightly below the current U.S. 12-year long term annual average GDP growth of 2.3%—12 being the number of years from 2023 to 2035. To avoid any suggestion of bias against the U.S., and in favour of China, in international comparisons here the higher U.S. number of 2.3% will be used.

    The results of such figures are that if China hits its growth target for 2035, and the U.S. continues to grow at 2.3%, then between 2020 and 2035 China’s economy will grow by 100% and the U.S. by 41%—see Figure 1. Therefore, from 2020 to 2035, China’s economy would grow slightly more than two and a half times as fast as the U.S.

    The strategic consequences of China’s economic growth rate

    The international implications of any such growth outcomes were succinctly summarised by Martin Wolf, chief economics commentator of the Financial Times. If China’s economy continues to grow substantially faster than Western ones, and it achieves the status of a “medium-developed country by 2035”, then, in addition to achieving high domestic living standards, China’s will become by far the world’s largest economy. As Wolf put it: “The implications can be seen in quite a simple way. According to the IMF, China’s gross domestic product per head (measured at purchasing power) was 28 per cent of U.S. levels in 2022. This is almost exactly half of Poland’s relative GDP per head… Now, suppose its [China’s] relative GDP per head doubled, to match Poland’s. Then its GDP would be more than double that of the U.S. and bigger than that of the U.S. and EU together.” By 2035 such a process would not be completed on the growth rates already given, and measuring by Wolf’s chosen measure of purchasing power parities (PPPs) China’s economy by 2035 would be 60% bigger than that of the U.S. But even that would make China by far the world’s largest economy.

    Wolf equally accurately notes that the only way that such an outcome would be prevented from occurring is if China’s economy slows down to the growth rate of a Western economy such as the U.S. Clearly, if China’s economic growth slows to that of a Western economy, then, naturally, China will never catch up with the West—it will necessarily simply stay the same distance behind. Therefore. as Wolf accurately puts it the outcomes are:

    What is the economic future of China? Will it become a high-income economy and so, inevitably, the largest in the world for an extended period, or will it be stuck in the ‘middle income’ trap, with growth comparable to that of the U.S.?

    The progress in achieving China’s strategic economic goals

    Turning to the precise figure required to achieve China’s 2035 target, China’s goal of doubling GDP required average annual growth of at least 4.7% a year between 2020 and 2035. So far China, as Figure 1 shows, is ahead of this goal—annual average growth in 2020-2022 was 5.7%, meaning that from 2023-2035 annual average 4.6% growth is now required.

    China’ 5.2% GDP increase in 2023 therefore once again exceeded the required 4.6% growth rate to achieve its 2035 goal—as shown in Figure 1. From 2020 to 2023 the required total increase in China’s GDP to hit its 2035 target was 14.9%, whereas in fact its growth was 17.5%. This is in line with the 45-year record since 1978’s Reform and Opening Up, during which entire period the medium/long term targets set by China have always been exceeded.

    Therefore. to summarise, there is no sign whatever in 2023, or indeed in the period since 2020, that China will fail to meet its target of doubling GDP between 2020 and 2035—China is ahead of this target. Such a 4.6% growth rate would easily ensure China becomes a high-income economy by World Bank criteria well before 2035—the present criteria for this being per capita income of $13,846.

    It should be noted, as discussed in in detail below, that a clear international conclusion flows from this necessary 4.6% annual average growth rate for China to achieve its strategic goals. It means that China must continue to grow much faster than the Western economies throughout this period to 2035—that is in line with China’s current trend. However, if China were to slow down to the growth rate of a Western economy, then it will fail to achieve its strategic goals to 2035, may not succeed in becoming a high income economy, and will necessarily remain the same distance behind the West as now. The implications of this will be considered below.

    Systematic comparisons not “cherry picking”

    Having considered China’s performance in 2023 terms of achieving its own domestic strategic goals we will now turn to actual results and a comparison of China with other international economies. This immediately shows the factual absurdity, the pure “fake news” of claims such as that the U.S. has “the world’s best recovery“ and “the United States… is outperforming all of its major trading partners.” On the contrary China has continued to far outgrow the U.S. economy not only in 2023 but in the entire last period. China’s outperformance of the other major Western economies, the G7, is even greater that of the U.S.

    Entirely misleading claims regarding such international comparisons, used for propaganda as opposed to serious analysis, are sometimes made because data is taken from extremely short periods of time which are taken out of context—unrepresentative statistical “cherry picking” or, as Lenin put it, a statistical “dirty business”. Such a method is always erroneous, but it is particularly so during periods which were affected by the impact of the Covid pandemic as these caused extremely violent short-term economic fluctuations related to lock downs and similar measures. China’s assertion of superior growth is based on its overall performance, not an absurd claim that it outperforms every other economy, on every single measure, in every single period! Therefore, in making international comparisons, the most suitable period to take is that for since the beginning of the pandemic up to the latest available GDP data. As comparison of China with the U.S. is the most commonly made one, and particularly concentrated on by the U.S. media campaign, this will be considered first.

    China’s and the U.S.’s growth in 2023

    It was already noted that in 2023 China’s GDP grew by 5.2% and the U.S. by 2.5%—China’s economy growing more than twice as fast as the U.S. But it should also be observed that 2023 was an above trend growth year for the U.S.—U.S. annual average growth over a 12-year period is only 2.3% and over a 20-year period it is only 2.1%. Therefore, although in 2023 China’s economy grew more than twice as fast as the U.S., that figure is actually somewhat flattering for the U.S. Figure 2shows that in the overall period since the beginning of the pandemic China’s economy has grown by 20.1% and the U.S. by 8.1%—that is China’s total GDP growth since the beginning of the pandemic was two and half times greater than the U.S. China’s annual average growth rate was 4.7% compared to the US’s 2.0%.

    Economic performance of China and the three major global economic centres

    Turning to wider international comparisons than the U.S. such data immediately shows the extremely negative situation in most “Global North” economies and China’s great outperformance of them. To start by analysing this in the broadest terms, Figure 3 shows the developments in the world’s three largest economic centres—China, the U.S., and the Eurozone. These three together account for 57% of world GDP at current exchange rates and 46% in purchasing power parities (PPPs). No other economic centre comes close to matching their weight in the world economy.

    Regarding the relative performance of these three major economic centres, at the time of writing data has not been published for the Euro Area for the whole year of 2023 —which would be the ideal comparison. However, it has been published for the the Euro area for the four quarters of 2023 individually and trends can be calculated on that basis. These show that In the four years to the 4th quarter of 2023, covering the period since the beginning of the pandemic, China’s economy has grown by 20.1%, the U.S. by 8.2%, and the Eurozone by 3.0%. China’s economy therefore grew by two and a half times as fast as the U.S. while the situation of the Eurozone could accurately be described as extremely negative with annual average GDP growth in the last four years of only 0.7%.

    Such data again makes it immediately obvious that claims in the Western media that China faces economic crisis, and the Western economies are doing well is entirely absurd—pure fantasy propaganda disconnected from reality.

    Relative performance of China and the G7

    Turning to analysing individual countries, then comparing China to all G7 states, i.e. the major advanced economies, shows the situation equally clearly—see Figure 4. Data for China and all G7 economies has now been published for the whole of 2023. The huge outperformance by China of all the major advanced economies is again evident.

    Over the four years since the beginning of the pandemic China’s economy grew by 20.1%, the U.S. by 8.1%, Canada by 5.4%, Italy by 3.1%, the UK by 1.8%, France by 1.7%, Japan by 1.1% and Germany by 0.7%.

    In the same period China’s economy therefore grew two and a half times as fast as the U.S., almost four times as fast as Canada, almost seven times as fast as Italy, 11 times as fast as the UK, 12 times as fast as France, 18 times as fast as Japan and almost 29 times as fast as Germany.

    In terms of annual average GDP growth during this period China’s was 4.7%, the U.S. 2.0%, Canada 1.3%, Italy 0.8%, the UK 0.4%, France 0.4%, Japan 0.3% and Germany 0.2%.

    It may therefore be seen that China’s economy far outperformed the U.S., while the performance of all other major G7 economies may be quite reasonably described as extremely negative—all having annual average economic growth rates of around or even under 1%.

    Comparison of China to developing economies

    A comparison using the IMF’s January 2024 projections can also be made to the major developing economies—the BRICS. Figure 5 shows this, using the factual result for China and the IMF projections for the other countries. Over the period since the start of the pandemic, from 2019-2023, China’s GDP grew by 20.1%, India by 17.5%, Brazil by 7.7%, Russia by 3.7% and South Africa by 0.9%.

    This data confirms that the major Global South economies are growing faster than most of the major Global North economies, which is part of the rise of the Global South and draws attention to the good performance of India. But China grew more than two and half times more than all the BRICS economies except India—China’s growth was 15% greater than India’s. It should be noted that India is at a far lower stage of development than the other BRICS economies—all the others fall in the World Bank classification of upper middle-income economies whereas India falls into the lower middle income group.

    Comparison of China’s growth to Western economies

    Finally, this outperformance by China casts light on what is necessary to achieve its own 2035 strategic targets. China’s 4.6% growth rate necessary to meet these goals means that it must continue to maintain a growth rate far higher than Western economies—Figure 6 shows this in overall terms in addition to individual comparisons given to major economies above. Whereas China must achieve an annual average 4.6% growth rate the median growth rate of high income “Western” economies is only 1.9%, the U.S. is 2.3%, and the median for developing economies is 3.0%.That is, to achieve its 2035 goals China must grow twice as fast as the long term trend of the U.S., almost two and a half times as fast as the median for high income economies, and more than 50% faster than the median for developing economies. As already seen, China is more than achieving this.

    But such facts immediately show why it is an extremely misleading when proposals are made that China should move towards the macro-economic structure of a Western economy. If China adopts the structure of a Western economy then, of course, China will slow down to the same growth rate as Western economies—and therefore fail to achieve its 2035 economic goals. China will be precisely stuck in the negative outcome of the situation accurately diagnosed by Martin Wolf.

    What is the economic future of China? Will it become a high-income economy and so, inevitably, the largest in the world for an extended period, or will it be stuck in the ‘middle income’ trap, with growth comparable to that of the U.S.?

    Conclusion

    In conclusion, it addition to objectively analysing 2023’s economic results, it is also necessary in the light of this factual situation to make a remark regarding Western, in particular U.S. “journalism”.

    None of the data given above is secret, all is available from public readily accessible sources. In many cases it does not even require any calculations and simply published data can be used. But the U.S. media and journalists report information that is systematically misleading and in many cases simply untrue. While it lagged China in creating economic growth the U.S. was certainly the world leader in creating “fake economic news”! What was the reason, what attitude should be taken to it?

    First, to avoid accusations of distortion, it should be stated that there were a small handful of Western journalists who refused to go along with this type of distortion and fake news. For example Chris Giles, the Financial Times economics commentator, in December, sharply attacked “an absurd way to compare economies… among people who should know better.” Giles did not do this because of support for China but because, quite rightly, he warned that spreading false or distorted information led to serious errors by countries doing so: “Coming from the UK, which lost its top economic dog status in the late 19th century but still has some delusions of grandeur, I can understand American denialism… But ultimately, bad comparisons foster bad decisions.” But the overwhelming majority of U.S. and Western journalists continued to spread fake news. Why?

    First, the fact that identical distortions and false information appeared absolutely simultaneously across a very wide range of media makes it clear that undoubtedly U.S. intelligence services were involved in creating it—i.e. part of the misrepresentation and distortions were entirely deliberate and conscious, aimed at disguising the real situation.

    Second, another part was merely sloppy journalism—that is journalists who could not be bothered to check facts.

    Third, supporting both of these factors was “white Western arrogance”—an arrogant assumption, rooted in centuries of European and European descended countries dominating the world, that the West must be right. Therefore, such arrogance made it impossible to acknowledge or report the clear facts that China’s economy is far outperforming the West.

    But whether it was conscious distortion, sloppy journalism, or conscious or unconscious arrogance, in all these cases no respect should be given to the Western “quality” media. It is not trying to find out the truth, which is the job of journalism, it is simply spreading false propaganda.

    It remains a truth that if a theory and the real world don’t coincide there are only two courses that can be taken. The first, that of a sane person, is to abandon the theory. The second, that of a dangerous one, is to abandon the real world—precisely the danger that Chris Giles pointed to. What has been appearing in the Western media about international economic comparisons regarding China is precisely abandonment of the real world in favour of systematic fake news.

     

    This article was published earlier in mronline.org and is republished under Creative Commons Attribution-Non Commercial-No Derivatives 4.0 International License

    Feature Image Credit: China will continue to lead global growth in 2024 – globaltimes.cn

  • What the Global Economy and Security Require

    What the Global Economy and Security Require

    With the new year 2024 well underway, the world is afflicted with wars, economic challenges, and the larger issues of climate change impact that threaten the very survival of the planet. It is paradoxical to see that great powers are still focused on competition and conflict. The year ahead portends continued conflicts, wars, and the weaponisation of economic infrastructures, demonstrated by Israel’s genocidal war against the Palestinians. Carla Norrlof highlights the increase in geopolitical conflicts and the complex relationship between economics and security. The article, like most Western academics, looks from the American perspective. and may miss the larger worldview.

    – Team TPF

    This article was published earlier in Project Syndicate.

     

    If America and its allies are to maximize both security and prosperity in the coming years, policymakers and strategists will have to understand the complex interplay of forces that is making the world more adversarial and fraught with risk. The global environment demands a comprehensive new economic-security agenda. The global order is undergoing significant changes that demand a new economic-security agenda.

    From hot wars and localized insurgencies to great-power standoffs, geopolitical conflict has made the complex relationship between economics and security a daily concern for ordinary people everywhere. Complicating matters even more is the fact that emerging markets are gaining economic clout and directly challenging traditional powers’ longstanding dominance through new networks and strategic alliances.

    These developments alone would have made this a tumultuous period marked by economic instability, inflation, and supply-chain disruptions. But one also must account for rapid technological advances – which have introduced new security risks (such as arms races and cyber threats) – as well as natural risks such as pandemics and climate change.

    To navigate this dangerous new world, we must reckon with three interrelated dimensions: the effects of geopolitics on the global economy; the influence of global economic relations on national security; and the relationship between global economic competition and overall prosperity.

    Each pathway sheds light on the multifaceted interplay between economics and security. We will need to understand all of them if we are to tackle the varied and complex challenges presented by our highly interconnected global system.

    As recent years have shown, geopolitics can profoundly affect the global economy, reshaping trade, investment flows, and policies sometimes almost overnight. Aside from their devastating human toll, wars like the Russian invasion of Ukraine and Israel’s campaign in Gaza often reverberate far beyond the immediate theater of conflict.

    For example, Western-led sanctions on Russia, and the disruption of Ukrainian grain exports through the Black Sea, caused energy and food prices to soar, resulting in supply insecurity and inflation on a global scale. Moreover, China has deepened its economic relationship with Russia following the mass exodus of Western firms in 2022 and 2023.

    Similarly, Israel’s bombing of Gaza has destabilized the entire Middle East, especially tourism-dependent neighbouring countries such as Egypt, Jordan, and Lebanon. Meanwhile, Yemeni Houthi rebels, long supplied by Iran, have been attacking cargo ships in the Red Sea, leading international shipping firms to suspend or adjust their routes and directly impeding trade through the Suez Canal – a major artery of global commerce.

    We are witnessing the destabilizing effects of natural threats as well. The COVID-19 pandemic drove a massive shift away from cost-effective “just-in-time” supply chains to a “just-in-case” model aimed at strengthening resilience during disruptions. And, more recently, an El Niño-induced drought has diminished the capacity of the Panama Canal – another major artery of global commerce. Whether for geopolitical or ecological reasons, rerouting around these new bottlenecks inevitably increases shipping costs, causes delivery delays, disrupts global supply chains, and creates inflationary pressure.

    Turning to the second dimension – the implications of global economic relations for national security – it is clear that countries will be more likely to adopt bold or aggressive security policies if they already have a web of economic ties that can either attract support or dampen opposition. China, for example, is counting on economically dependent countries within its Belt and Road Initiative to accept its political influence and longer-term bid for hegemony. Many countries also now rely on China for critical defence-related supply-chain components, which leaves them vulnerable diplomatically and militarily.

    More broadly, global connectivity, in the form of economic networks and infrastructure, is increasingly being weaponized for geopolitical ends. As Russia’s war on Ukraine shows, economic ties can create dependencies that raise the cost of opposing assertive security policies (or even outright aggression). The implicit threat of supply disruptions has a coercive – sometimes quite subtle and insidious – effect on a country’s national security objectives. Owing to the network effects of the dollar system, the United States retains significant leverage to enforce international order through coercive sanctions against states that violate international norms.

    Trading with the enemy can be lucrative, or simply practical, but it also alters the distribution of power. As Western governments learned over the past two decades, the advantages conferred by technological superiority can be substantially offset by forced technology transfers, intellectual property theft, and reverse engineering.

    The third dimension – the relationship between global economic competition and prosperity – has been complicated by these first two dynamics, because the pursuit of material well-being now must be weighed against security considerations. Discussions in this area thus centre around the concept of economic security, meaning stable incomes and a reliable supply of the resources needed to support a given standard of living. Both Donald Trump’s “Make America Great Again” slogan and President Joe Biden’s “Build Back Better” plan reflect concerns that economic relations with China harm US prosperity.

    The challenge for the US and its allies is to manage the tensions between these varying economic and security objectives. There is a potential conflict between adapting to market- and geopolitically-driven shifts in economic power and sustaining the economic strength to finance a military force capable of protecting the global economy. The US, as the dominant power, must remain both willing and capable of preserving an open, rules-based global economy and a peaceful international order. That will require additional investments in military capabilities and alliances to counteract territorial aggression and safeguard sea lanes, as well as stronger environmental policies and frameworks to distribute global economic gains according to market principles.

    By attempting to mitigate security risks through deglobalization (reshoring, onshoring, and “friend-shoring”), we risk adding to the economic and security threats presented by a more fragmented world. Though economic ties with rivals can create dangerous dependencies, they also can act as a safeguard against hostility.

    All governments will need to grapple with these tensions as they develop a new economic-security agenda. The world is quickly becoming more adversarial and fraught with risk. To maximize both security and prosperity, we will have to understand the complex interplay of forces that are creating it.

    Feature Image Credit: India Today

  • Trump followed four years later by Trump: Would America’s trustiness and system of alliances survive?

    Trump followed four years later by Trump: Would America’s trustiness and system of alliances survive?

    Ambassador Alfredo Toro Hardy examines, in this excellently analysed paper, the self-created problems that have contributed to America’s declining influence in the world. As he rightly points out, America helped construct the post-1945 world order by facilitating global recovery through alliances, and mutual support and interweaving the exercise of its power with international institutions and legal instruments. The rise of neoconservatism following the end of the Cold War, particularly during the Bush years from 2000 to 2008, led to American exceptionalism, unipolar ambitions, and the failure of American foreign policy.  Obama’s Presidency was, as Zbigniew Brezinski said, a second chance for restoring American leadership but those gains were nullified in Donald Trump’s 2016-20 presidency leading to the loss of trust in American Leadership. In a final analysis that may be questionable for some, Ambassador Alfredo sees Biden’s administration returning to the path of liberal internationalism and recovering much of the lost trust of the world.  His fear is that it may all be lost if Trump returns in 2024.                               – Team TPF

     

    TPF Occasional Paper   9/2023    

    Trump followed four years later by Trump: Would America’s trustiness and system of alliances survive?

     

     

    According to Daniel W. Drezner: “Despite four criminal indictments, Donald Trump is the runaway frontrunner to win the GOP nomination for president. Assuming he does, current polling shows a neck-and-neck race between Trump and Biden in the general election. It would be reckless for other leaders to dismiss the possibility of a second Trump term beginning on January 20, 2025. Indeed, the person who knows this best is Biden himself. In his first joint address to Congress, Biden said that in a conversation with world leaders, he has ‘made it known that America is back’, and their responses have tended to be a variation of “but for how long?”. [1]

    A bit of historical context

    In order to duly understand the implications of a Trump return to the White House, a historical perspective is needed. Without context, it is difficult to comprehend the meaning of the “but for how long?” that worries so many around the world. Let’s, thus, go back in time.

    Under its liberal internationalist grand vision, Washington positioned itself at the top of a potent hegemonic system. One, allowing that its leadership could be sustained by the consensual acquiescence of others. Indeed, through a network of institutions, treaties, mechanisms and initiatives, whose creation it promoted after World War II, the United States was able to interweave the exercise of its power with international institutions and legal instruments. Its alliances were a fundamental part of that system. On the other side of the Iron Curtain, though, the Soviet Union established its own system of alliances and common institutions.

                In the 1970s, however, America’s leadership came into question. Two reasons were responsible for it. Firstly, the Vietnam War. The excesses committed therein and America’s impotence to prevail militarily generated great discomfort among several of its allies. Secondly, the crisis of the Bretton Woods system. As a global reserve currency issuer, the stability of the U.S. currency was fundamental. In a persistent way, though, Washington had to run current account deficits to fulfil the supply of dollars at a fixed parity with gold. This impacted the desirability of the dollar, which in turn threatened its position as a reserve currency issuer. When a run for America’s gold reserves showed a lack of trust in the dollar, President Nixon decided in 1971 to unhook the value of the dollar from gold altogether.

                Notwithstanding these two events, America’s leadership upon its alliance system would remain intact, as there was no one else to face the Soviet threat. However, when around two decades later the Soviet Union imploded, America’s standing at the top would become global for the same reason: There was no one else there. Significantly, the United States’ supremacy was to be accepted as legitimate by the whole international community because, again, it was able to interweave the exercise of its power with international institutions and legal instruments.

    Inexplicable under the light of common sense

                In 2001, however, George W. Bush’s team came into government bringing with them an awkward notion about the United States’ might. Instead of understanding that the hegemonic system in place served their country’s interests perfectly well, the Bush team believed that such a system had to be rearranged in tandem with America’s new position as the sole superpower. As a consequence, they began to turn upside down a complex structure that had taken decades to build.

    The Bush administration’s world frame became, indeed, a curious one. It believed in unconditional followers and not in allies’ worthy of respect; it believed in ad hoc coalitions and “with us or against us” propositions where multilateral institutions and norms had little value; it believed in the punishment of dissidence and not in the encouragement of cooperation; it believed in preventive action prevailing over international law.

    In proclaiming the futility of cooperative multilateralism, which in their perspective just constrained the freedom of action of America’s might, they asserted the prerogatives of a sole superpower. The Bush administration’s world frame became, indeed, a curious one. It believed in unconditional followers and not in allies’ worthy of respect; it believed in ad hoc coalitions and “with us or against us” propositions where multilateral institutions and norms had little value; it believed in the punishment of dissidence and not in the encouragement of cooperation; it believed in preventive action prevailing over international law. Well-known “neoconservatives” such as Charles Krauthammer, Robert Kagan, and John Bolton, proclaimed America’s supremacy and derided countries not willing to follow its unilateralism.

                But who were these neoconservatives? They were the intellectual architects of Bush’s foreign policy, who saw themselves as the natural inheritors of the foreign policy establishment of Truman’s time. The one that had forged the fundamental guidelines of America’s foreign policy during the Cold War, in what was labelled as the “creation”. In their view, with the United States having won the Cold War, a new creation was needed. Their beliefs could be summed up as diplomacy if possible, force if necessary; U.N. if possible, ad hoc coalitions, unilateral action, and preemptive strikes if necessary. America, indeed, should not be constrained by accepted rules, multilateral institutions, or international law. At the same time, the U.S.’ postulates of freedom and democracy, expressions of its exceptionalism, entailed the right to propitiate regime change whenever necessary, in order to preserve America’s security and the world order.

    Bogged down in Iraq and Afghanistan, while deriding and humiliating so many around the world, America’s neoconservatives undressed the emperor. By taking off his clothes, they made his frailties visible for everyone to watch.

    Inexplicable, under the light of common sense, the Bush team disassociated power from the international structures and norms that facilitated and legitimized its exercise. As a consequence, America moved from being the most successful hegemonic power ever to becoming a second-rate imperial power that proved incapable of prevailing in two peripheral wars. Bogged down in Iraq and Afghanistan, while deriding and humiliating so many around the world, America’s neoconservatives undressed the emperor. By taking off his clothes, they made his frailties visible for everyone to watch.

                At the beginning of 2005, while reporting a Pew Research Center poll, The Economist stated that the prevailing anti-American sentiment around the world was greater and deeper than at any other moment in history. The BBC World Service and Global Poll Research Partners, meanwhile, conducted another global poll in which they asked, “How do you perceive the influence of the U.S. in the world?”. The populations of some of America’s traditional allies gave an adverse answer in the following percentages: Canada 60%; Mexico 57%; Germany 54%; Australia 52%; Brazil 51%; United Kingdom 50%. With such a negative perception among Washington’s closest allies, America’s credibility was in tatters.[2]

             Is the liberal international order ending? what is next? dailysabah.com

     While Bush’s presidency was reaching its end, Zbigniew Brzezinski wrote a pivotal book that asserted that the United States had lost much of its international standing. This felt, according to the book, particularly disturbing. Indeed, as a result of the combined impact of modern technology and global political awakening, that speeded up political history, what in the past took centuries to materialize now just took decades, whereas what before had taken decades, now could materialize in a single year. The primacy of any world power was thus faced with immense pressures of change, adaptation and fall. Brzezinski believed, however, that although America had deeply eroded its international standing, a second chance was still possible. This is because no other power could rival Washington’s role. However, recuperating the lost trust and legitimacy would be an arduous job, requiring years of sustained effort and true ability. The opportunity of this second chance should not be missed, he insisted, as there wouldn’t be a third one. [3]

    A second chance

                Barak Obama did certainly his best to recover the space that had been lost during the preceding eight years. That is, the U.S.’s leading role within a liberal internationalist structure. However, times had changed since his predecessor’s inauguration. In the first place, a massive financial crisis that had begun in America welcomed Obama, when he arrived at the White House. This had increased the international doubts about the trustiness of the country. In the second place, China’s economy and international position had taken a huge leap ahead during the previous eight years. Brzezinski’s notion that no other power could rival the United States was rapidly evolving. As a result, Obama was left facing a truly daunting challenge.

                To rebuild Washington’s standing in the international scene, Obama’s administration embarked on a dual course of action. He followed, on the one hand, cooperative multilateralism and collective action. On the other hand, he prioritized the U.S.’ presence where it was most in need, avoiding unnecessary distractions as much as possible. Within the first of these aims, Obama seemed to have adhered to Richard Hass’ notion that power alone was simple potentiality, with the role of a successful foreign policy being that of transforming potentiality into real influence. Good evidence of this approach was provided through Washington’s role in the Paris Agreement on Climate Change, in the Joint Comprehensive Plan of Action in relation to Iran, in the NATO summits, in the newly created G20, and in the summits of the Americas, among many other instances. By not becoming too overbearing, and by respecting other countries’ points of view, the Obama Administration played a leading influence within the context of collective action. Although theoretically being one among many, the United States always played the leading role.[4]

    Within this context, Obama’s administration followed a coalition-building strategy. The Trans-Pacific Partnership represented the economic approach to the pivot and aimed at building an association covering forty per cent of the global economy. There, the United States would be the first among equals. As for the security approach to the pivot, the U.S. Navy repositioned its forces within the Pacific and the Atlantic oceans.

                To prioritize America’s presence where it was most needed, Obama turned the attention to China and the Asia-Pacific. While America was focusing on the Middle East, China enjoyed a period of strategic opportunity. His administration’s “pivot to Asia” emerged as a result. This policy had the dual objective of building economic prosperity and security, within that region. Its intention was countering, through facts, the notion that America was losing its staying power in the Pacific. Within this context, Obama’s administration followed a coalition-building strategy. The Trans-Pacific Partnership represented the economic approach to the pivot and aimed at building an association covering forty per cent of the global economy. There, the United States would be the first among equals. As for the security approach to the pivot, the U.S. Navy repositioned its forces within the Pacific and the Atlantic oceans. From a roughly fifty-fifty correlation between the two oceans, sixty per cent of its fleet was moved to the Pacific. Meanwhile, the U.S. increased joint exercises and training with several countries of the region, while stationing 2,500 marines in Darwin, Australia. As a result of the pivot, many of China’s neighbours began to feel that there was a real alternative to this country’s overbearing assertiveness.[5]

                Barak Obama was on a good track to consolidating the second chance that Brzezinski had alluded to. His foreign policy helped much in regaining international credibility and standing for his country, and the Bush years began to be seen as just a bump on the road of America’s foreign policy. Unfortunately, Donald Trump was the next President. And Trump coming just eight years after Bush, was more than what America’s allies could swallow.

    Dog-eat-dog foreign policy

                The Bush and Trump foreign policies could not be put on an equal footing, though. The abrasive arrogance of Bush’s neoconservatives, however distasteful, embodied a school of thought in matters of foreign policy. One, characterized by a merger between exalted visions of America’s exceptionalism and Wilsonianism. Francis Fukuyama defined it as Wilsionanism minus international institutions, whereas John Mearsheimer labelled it as Wilsionanism with teeth. Although overplaying conventional notions to the extreme, Bush’s foreign policy remained on track with a longstanding tradition. Much to the contrary, Trump’s foreign policy, according to Fareed Zakaria, was based on a more basic premise– The world was largely an uninteresting place, except for the fact that most countries just wanted to screw the United States. Trump believed that by stripping the global system of its ordering arrangements, a “dog eat dog” environment would emerge. One, in which his country would come up as the top dog. His foreign policy, thus, was but a reflection of gut feelings, sheer ignorance and prejudices.[6]

                Trump derided multilateral cooperation and preferred a bilateral approach to foreign relations. One, in which America could exert its full power in a direct way, instead of letting it dilute by including others in the decision-making process. Within this context, the U.S.’ market leverage had to be used to its full extent, to corner others into complying with Washington’s positions. At the same time, he equated economy and national security and, as a consequence, was prone to “weaponize” economic policies. Moreover, he premised on the use of the American dollar as a bullying tool to be used to his country’s political advantage. Not only China but some of America’s main allies as well, were targeted within this approach. Dusting off Section 323 of the 1962 Trade Expansion Act, which allowed tariffs on national security grounds, Trump imposed penalizations in every direction. Some of the USA’s closest allies were badly affected as a result.

                Given Trump’s contempt for cooperative multilateralism, but also aiming at erasing Obama’s legacy, an obsessive issue with him, he withdrew the U.S. from the Trans-Pacific Partnership, from the Paris Agreement on Climate Change, and from the Joint Comprehensive Plan of Action in relation to Iran. He also withdrew his country from other multilateral institutions, such as the United Nations’ Human Rights Commission and, in the middle of the Covid 19 pandemic, from the World Health Organization. Trump threatened to cut funding to the U.N., waged a largely victorious campaign to sideline the International Criminal Court, and brought the World Trade Organization to a virtual standstill. Even more, he did not just walk away from the Joint Comprehensive Plan of Action, in relation to Iran, but threatened its other signatories to impose sanctions on them if, on the basis of the agreement, they continued to trade with Iran.

    Trump followed a transactional approach to foreign policy in which principles and allies mattered little, and where trade and money were prioritized over security considerations.

                Trump followed a transactional approach to foreign policy in which principles and allies mattered little, and where trade and money were prioritized over security considerations. In 2019, he asked Japan to increase fourfold its annual contribution for the privilege of hosting 50,000 American troops in its territory, while requesting South Korea to pay 400 percent more for hosting American soldiers. This, amid China’s increasing assertiveness and North Korea’s continuous threats. In his relations with New Delhi, a fundamental U.S. ally within any containment strategy to China, he subordinated geostrategic considerations to trade. On the premise that India was limiting American manufacturers from access to its market, Trump threatened this proud nation with a trade war.[7]

                Irritated because certain NATO member countries were not spending enough on their defence, Trump labelled some of Washington’s closest partners within the organization as “delinquents”. He also threatened to reduce the U.S.’ participation in NATO, calling it “obsolete”, while referring to Germany as a “captive of Russia”. At the same time, Trump abruptly cancelled a meeting with the Danish Prime Minister, because she was unwilling to discuss the sale of Greenland to the United States. This, notwithstanding the fact that this was something expressively forbidden by the 1975 Helsinki Final Act, represents the cornerstone of European stability. The European Union, in his view, was not a fundamental ally, but a competitor and an economic foe. Deliberately, Trump antagonized European governments, including that of London at the time, by cheering Brexit. Meanwhile, he imposed tariffs on steel and aluminium on many of its closest partners and humiliated Canada and Mexico by imposing upon them a tough renegotiation of NAFTA. One, whose ensuing accord did not bring significant changes. Moreover, he fractured the G7, a group integrated by Washington’s closest allies, leaving the United States standing alone on one side with the rest standing on the other.

    In June 2018, Donald Tusk, President of the European Council, expressed his bewilderment at seeing that the rules-based international order was being challenged precisely by its main architect and guarantor– the United States. Financial Times columnist Martin Wolf summoned up all of this, by expressing that under Trump the U.S. had become a rogue superpower.

                Unsurprisingly, thus, America’s closest allies reached the conclusion that they could no longer trust it. Several examples attested to this. In November 2017, Canberra’s White Paper on the security of Asia expressed uncertainty about America’s commitment to that continent. In April 2018, the United Kingdom, Germany and France issued an official statement expressing that they would forcefully defend their interests against the U.S.’ protectionism. On May 10, 2018, Angela Merkel stated in Aquisgran that the time in which Europe could trust America was over. On May 31, 2018, Justin Trudeau aired Canada’s affront at being considered a threat to the United States. In June 2018, Donald Tusk, President of the European Council, expressed his bewilderment at seeing that the rules-based international order was being challenged precisely by its main architect and guarantor– the United States. In November 2019, in an interview given to The Economist, Emmanuel Macron stated that the European countries could no longer rely on the United States, which had turned its back on them. Financial Times columnist Martin Wolf summoned up all of this, by expressing that under Trump the U.S. had become a rogue superpower.[8]

    The return of liberal internationalism

    Politically and geopolitically Biden rapidly went back to the old premises of liberal internationalism. Cooperative multilateralism and collective action were put back in place, and alliances became, once again, a fundamental part of America’s foreign policy. 

               As mentioned, George W. Bush followed a few years later by Donald Trump was more than what America’s allies could handle. Fortunately for that country, and for its allies, Trump failed to be re-elected in 2020, and Joe Biden came to power. True, the latter’s so-called foreign policy for the middle classes kept in place some of Trump’s international trade policies. However, politically and geopolitically he rapidly went back to the old premises of liberal internationalism. Cooperative multilateralism and collective action were put back in place, and alliances became, once again, a fundamental part of America’s foreign policy.  Moreover, Biden forcefully addressed some of his country’s main economic deficiencies, which had become an important source of vulnerability in its rivalry with China. In sum, Biden strengthened the United States’ economy, its alliances, and its international standing.

                Notwithstanding the fact that Biden had to fight inch by inch with a seemingly unconquerable opposition, while continuously negotiating with two reluctant senators from his own party, he was able to pass a group of transformational laws. Among them, are the Infrastructure Investment and Job Act, the CHIPS and Science Act and the Inflation Reduction Act. Together, these legislations allow for a government investment of a trillion dollars in the modernization of the country’s economy and its re-industrialization, including the consolidation of its technological leadership, the updating of its infrastructures and the reconversion of its energy matrix towards clean energy. Private investments derived from such laws would be gigantic, with the sole CHIPS Act having produced investment pledges of more than 100 billion dollars. This projects, vis-à-vis China’s competition, an image of strength and strategic purpose. Moreover, before foes and friends, these accomplishments prove that the U.S. can overcome its legislative gridlocks, in order to modernize its economy and its competitive standing.

                Meanwhile, Washington’s alliances have significantly strengthened. In Europe, Russia’s invasion of Ukraine and Washington’s firm reaction to it had important consequences. While the former showed to its European allies that America’s leadership was still indispensable, the latter made clear that the U.S. had the determination and the capacity to exercise such leadership. Washington has indeed led in response to the invasion, in the articulation of the alliances and the revitalization of NATO, in sanctions on Russia, and in the organization of the help provided to Ukraine. It has also been Kyiv’s main source of support in military equipment and intelligence, deciding at each step of the road what kind of armament should be supplied to the Ukrainian forces. In short, before European allies that had doubted Washington’s commitments to its continent, and of the viability of NATO itself, America proved to be the indispensable superpower.

                Meanwhile, American alliances in the Indo-Pacific have also been strengthened and expanded, with multiple initiatives emerging as a result. As the invasion of Ukraine made evident the return of geopolitics by the big door, increasing the fears of China’s threat to regional order, Washington has become for many the essential partner. America’s security umbrella has proved to be for them a fundamental tool in containing China’s increasing arrogance and disregard for international law and jurisprudence. Among the security mechanisms or initiatives created or reinforced under its stewardship are an energized Quad; the emergence of AUKUS; NATO’s approach to the Indo-Pacific region; the tripartite Camp David’s security agreement between Japan, South Korea and the U.S.; a revamped defence treaty with The Philippines; an increased military cooperation with Australia; and Hanoi’s growing strategic alignment with Washington. On the economic side, we find the Indo-Pacific Economic Framework for Prosperity and the freshly emerged Partnership for Global Infrastructure and Investment & India-Middle East-Europe Economic Corridor.

    Enough would be enough

                Although the Global South has proved to be particularly reluctant to fall back under the security leadership of the superpowers, Washington has undoubtedly become the indispensable partner for many in Europe and the Indo-Pacific. Thanks to Biden, the United States has repositioned itself on the cusp of a potent alliance system, regaining credibility and vitality. What would happen, thus, if he is defeated in the 2024 elections and Trump regains the White House? In 2007, Brzezinski believed, as mentioned, that although America had deeply eroded its international standing, a second chance was still possible. Actually, with Biden (and thanks in no small part to the Russian invasion and China’s pugnacity), the U.S. got an unexpected third chance. But definitively, enough would be enough. Moreover, during Trump’s first term in office, a professional civil service and an institutional contention wall (boosted by the so-called “adults in the room”), may have been able to keep at bay Trump’s worst excesses. According to The Economist, though, that wouldn’t be the case during a second term, where thousands of career public servants would be fired and substituted by MAGA followers. The deconstruction of the so-called “deep State” would be the aim to be attained, which would translate into getting rid of anyone who knows how to get the job done within the Federal Government. Hence, for America’s allies, Trump’s nightmarish first period would pale in relation to a second one. Trump followed four years later by Trump, no doubt about it, would shatter America’s trustiness, credibility, international standing, and its system of alliances. [9]

    Notes:

    [1] “Bracing for Trump 2.0”, Foreign Affairs, September 5, 2023

    [2] The Economist, 19th February, 2005; Walt, Stephen M, Taming American Power, New York: W.W. Norton and Company, 2005, p.72.

    [3] Second Chance, New York: Basic Books, 2007, p. 191, 192, 206.

    [4] Hass, Richard, “America and the Great Abdication”, The Atlantic, December 28, 2017.

    [5] Campbell, Kurt, The Pivot, New York: Twelve, 2016, pp. 11-28.

    [6] Steltzer, Irwin, Neoconservatism, London: Atlantic Books, 2004, pp. 3-28; Fukuyama, Francis, “After the Neoconservatives”, London: Profile Books, 2006, p. 41; Zakaria, Farid, “The Self-Destruction of American Power”, Foreign Affairs, July-August 2019.

    [7] World Politics Review, “Trump works overtime to shake down alliances in Asia and appease North Korea”, October 14, 2019.

    [8] White, Hugh, “Canberra voices fears”, The Strait Time, 25 November, 2017; Breuninger, Kevin, “Canada announces retaliatory tariffs”, CNBC, May 31, 2018; The Economist, “Emmanuel Macron warns Europe”, November 7th, 2019; Kishore Mahbubani, Has China Won? New York: Public Affairs, 2020, p. 56; Cooley, Alexander and Nexon, Daniel, Exit from Hegemony , Oxford: Oxford University Press, 2020, p. 70.

    [9]  The Economist, “Preparing the way: The alarming plans for Trump’s second term”, July 15th, 2023.

     

    Feature Image Credit: livemint.com

    Cartoon Credit: seltzercreativegroup.com

  • The US economic war on China

    The US economic war on China

    The anti-China policies come out of a familiar playbook of US policy-making. The aim is to prevent economic and technological competition from a major rival.

    China’s economy is slowing down. Current forecasts put China’s GDP growth in 2023 at less than 5%, below the forecasts made last year and far below the high growth rates that China enjoyed until the late 2010s. The Western press is filled with China’s supposed misdeeds: a financial crisis in the real estate market, a general overhang of debt, and other ills. Yet much of the slowdown is the result of US measures that aim to slow China’s growth. Such US policies violate World Trade Organization rules and are a danger to global prosperity. They should be stopped.
    The anti-China policies come out of a familiar playbook of US policy-making. The aim is to prevent economic and technological competition from a major rival. The first and most obvious application of this playbook was the technology blockade that the US imposed on the Soviet Union during the Cold War. The Soviet Union was America’s declared enemy and US policy aimed to block Soviet access to advanced technologies.

    At the end of the 1980s and early 1990s, the US deliberately sought to slow Japan’s economic growth. This may seem surprising, as Japan was and is a US ally. Yet Japan was becoming “too successful,” as Japanese firms outcompeted US firms in key sectors, including semiconductors, consumer electronics, and automobiles.

    The second application of the playbook is less obvious, and in fact, is generally overlooked even by knowledgeable observers. At the end of the 1980s and early 1990s, the US deliberately sought to slow Japan’s economic growth. This may seem surprising, as Japan was and is a US ally. Yet Japan was becoming “too successful,” as Japanese firms outcompeted US firms in key sectors, including semiconductors, consumer electronics, and automobiles. Japan’s success was widely hailed in bestsellers such as Japan as Number One by my late, great colleague, Harvard Professor Ezra Vogel.
    In the mid-to-late 1980s, US politicians limited US markets to Japan’s exports (via so-called “voluntary” limits agreed with Japan) and pushed Japan to overvalue its currency. The Japanese Yen appreciated from around 240 Yen per dollar in 1985 to 128 Yen per dollar in 1988 and 94 Yen to the dollar in 1995, pricing Japanese goods out of the US market. Japan went into a slump as export growth collapsed. Between 1980 and 1985, Japan’s exports rose annually by 7.9 percent; between 1985 and 1990, export growth fell to 3.5 percent annually; and between 1990 and 1995, to 3.3 percent annually. As growth slowed markedly, many Japanese companies fell into financial distress, leading to a financial bust in the early 1990s.

    In the mid-1990s, I asked one of Japan’s most powerful government officials why Japan didn’t devalue the currency to re-establish growth. His answer was that the US wouldn’t allow it.

    Now the US is taking aim at China. Starting around 2015, US policymakers came to view China as a threat rather than a trade partner. This change of view was due to China’s economic success. China’s economic rise really began to alarm US strategists when China announced in 2015 a “Made in China 2025” policy to promote China’s advancement to the cutting edge of robotics, information technology, renewable energy, and other advanced technologies. Around the same time, China announced its Belt and Road Initiative to help build modern infrastructure throughout Asia, Africa and other regions, largely using Chinese finance, companies, and technologies.

    After winning the 2016 election on an anti-China platform, Trump imposed unilateral tariffs on China that clearly violated WTO rules. To ensure that WTO would not rule against the US measures, the US disabled the WTO appellate court by blocking new appointments.

    The US dusted off the old playbook to slow China’s surging growth. President Barrack Obama first proposed to create a new trading group with Asian countries that would exclude China, but presidential candidate Donald Trump went further, promising outright protectionism against China. After winning the 2016 election on an anti-China platform, Trump imposed unilateral tariffs on China that clearly violated WTO rules. To ensure that WTO would not rule against the US measures, the US disabled the WTO appellate court by blocking new appointments. The Trump Administration also blocked products from leading Chinese technology companies such as ZTE and Huawei and urged US allies to do the same.

    When President Joe Biden came to office, many (including me) expected Biden to reverse or ease Trump’s anti-China policies. The opposite happened. Biden doubled down, not only maintaining Trump’s tariffs on China but also signing new executive orders to limit China’s access to advanced semiconductor technologies and US investments. American firms were advised informally to shift their supply chains from China to other countries, a process labelled “friend-shoring” as opposed to offshoring. In carrying out these measures, the US completely ignored WTO principles and procedures.

    The US strongly denies that it is in an economic war with China, but as the old adage goes, if it looks like a duck, swims like a duck, and quacks like a duck, it’s probably a duck. The US is using a familiar playbook, and the Washington politicians are invoking martial rhetoric, calling China an enemy that must be contained or defeated.

    The results are seen in a reversal of China’s exports to the US. In the month that Trump came into office, January 2017, China accounted for 22 per cent of US merchandise imports. By the time Biden came into office in January 2021, China’s share of US imports had dropped to 19 per cent. As of June 2023, China’s share of US imports had plummeted to 13 per cent. Between June 2022 and June 2023, US imports from China fell by a whopping 29 per cent.

    Of course, the dynamics of China’s economy are complex and hardly driven by China-US trade alone. Perhaps China’s exports to the US will partly rebound. Yet Biden seems unlikely to ease trade barriers with China in the lead-up to the 2024 election.

    Unlike Japan in the 1990s, which was dependent on the US for its security, and so followed US demands, China has more room for maneuver in the face of US protectionism. Most importantly, I believe, China can substantially increase its exports to the rest of Asia, Africa, and Latin America, through policies such as expanding the Belt and Road Initiative. My assessment is that the US attempt to contain China is not only wrongheaded in principle but destined to fail in practice. China will find partners throughout the world economy to support a continued expansion of trade and technological advances.

     

    Feature Image Credit: The limits of US-China Economic Rivalry www.setav.org

  • BRICS: On 1 January 2024, the World’s Centre of Gravity will Shift

    BRICS: On 1 January 2024, the World’s Centre of Gravity will Shift

    As is often the case in history, the actions of a dying empire create common ground for its victims to look for new alternatives, no matter how embryonic and contradictory they are. The diversity of support for the expansion of BRICS is an indication of the growing loss of the political hegemony of imperialism.

    On the last day of the BRICS summit in Johannesburg, South Africa, the five founding states (Brazil, Russia, India, China, and South Africa) welcomed six new members: Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates (UAE). The BRICS partnership now encompasses 47.3 per cent of the world’s population, with a combined global Gross Domestic Product (by purchasing power parity, or PPP,) of 36.4 per cent. In comparison, though the G7 states (Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States) account for merely 10 per cent of the world’s population, their share of the global GDP (by PPP) is 30.4 per cent. In 2021, the nations that today form the expanded BRICS group were responsible for 38.3 percent of global industrial output while their G7 counterparts accounted for 30.5 percent. All available indicators, including harvest production and the total volume of metal production, show the immense power of this new grouping. Celso Amorim, advisor to the Brazilian government and one of the architects of BRICS during his former tenure as foreign minister, said of the new development that ‘[t]he world can no longer be dictated by the G7’.

    Certainly, the BRICS nations, for all their internal hierarchies and challenges, now represent a larger share of the global GDP than the G7, which continues to behave as the world’s executive body. Over forty countries expressed an interest in joining BRICS, although only twenty-three applied for membership before the South Africa meeting (including seven of the thirteen countries in the Organisation of Petroleum Exporting Countries, or OPEC). Indonesia, the world’s seventh largest country in terms of GDP (by PPP), withdrew its application to BRICS at the last moment but said it would consider joining later. Indonesia’s President Joko Widodo’s comments reflect the mood of the summit: ‘We must reject trade discrimination. Industrial down streaming must not be hindered. We must all continue to voice equal and inclusive cooperation’.

    The facts are clear: the Global North’s percentage of world GDP fell from 57.3 per cent in 1993 to 40.6 per cent in 2022, with the US’s percentage shrinking from 19.7 per cent to only 15.6 per cent of global GDP (by PPP) in the same period – despite its monopoly privilege. In 2022, the Global South, without China, had a GDP (by PPP) greater than that of the Global North.

    BRICS does not operate independently of new regional formations that aim to build platforms outside the grip of the West, such as the Community of Latin America and Caribbean States (CELAC) and the Shanghai Cooperation Organisation (SCO). Instead, BRICS membership has the potential to enhance regionalism for those already within these regional fora. Both sets of interregional bodies are leaning into a historical tide supported by important data, analysed by Tricontinental: Institute for Social Research using a range of widely available and reliable global databases. The facts are clear: the Global North’s percentage of world GDP fell from 57.3 per cent in 1993 to 40.6 per cent in 2022, with the US’s percentage shrinking from 19.7 per cent to only 15.6 per cent of global GDP (by PPP) in the same period – despite its monopoly privilege. In 2022, the Global South, without China, had a GDP (by PPP) greater than that of the Global North.

    The West, perhaps because of its rapid relative economic decline, is struggling to maintain its hegemony by driving a New Cold War against emergent states such as China. Perhaps the single best evidence of the racial, political, military, and economic plans of the Western powers can be summed up by a recent declaration of the North Atlantic Treaty Organisation (NATO) and the European Union (EU): ‘NATO and the EU play complementary, coherent and mutually reinforcing roles in supporting international peace and security. We will further mobilise the combined set of instruments at our disposal, be they political, economic, or military, to pursue our common objectives to the benefit of our one billion citizens’.

    Why did BRICS welcome such a disparate group of countries, including two monarchies, into its fold? When asked to reflect on the character of the new full member states, Brazil’s President Luiz Inácio Lula da Silva said, ‘What matters is not the person who governs but the importance of the country. We can’t deny the geopolitical importance of Iran and other countries that will join BRICS’. This is the measure of how the founding countries made the decision to expand their alliance. At the heart of BRICS’s growth are at least three issues: control over energy supplies and pathways, control over global financial and development systems, and control over institutions for peace and security.

    A larger BRICS has now created a formidable energy group. Iran, Saudi Arabia, and the UAE are also members of OPEC, which, with Russia, a key member of OPEC+, now accounts for 26.3 million barrels of oil per day, just below thirty per cent of global daily oil production. Egypt, which is not an OPEC member, is nonetheless one of the largest African oil producers, with an output of 567,650 barrels per day. China’s role in brokering a deal between Iran and Saudi Arabia in April enabled the entry of both of these oil-producing countries into BRICS. The issue here is not just the production of oil, but the establishment of new global energy pathways.

    The Chinese-led Belt and Road Initiative has already created a web of oil and natural gas platforms around the Global South, integrated into the expansion of Khalifa Port and natural gas facilities at Fujairah and Ruwais in the UAE, alongside the development of Saudi Arabia’s Vision 2030. There is every expectation that the expanded BRICS will begin to coordinate its energy infrastructure outside of OPEC+, including the volumes of oil and natural gas that are drawn out of the earth. Tensions between Russia and Saudi Arabia over oil volumes have simmered this year as Russia exceeded its quota to compensate for Western sanctions placed on it due to the war in Ukraine. Now these two countries will have another forum, outside of OPEC+ and with China at the table, to build a common agenda on energy. Saudi Arabia plans to sell oil to China in renminbi (RMB), undermining the structure of the petrodollar system (China’s two other main oil providers, Iraq and Russia, already receive payment in RMB).

    Both the discussions at the BRICS summit and its final communiqué focused on the need to strengthen a financial and development architecture for the world that is not governed by the triumvirate of the International Monetary Fund (IMF), Wall Street, and the US dollar. However, BRICS does not seek to circumvent established global trade and development institutions such as the World Trade Organisation (WTO), the World Bank, and the IMF. For instance, BRICS reaffirmed the importance of the ‘rules-based multilateral trading system with the World Trade Organisation at its core’ and called for ‘a robust Global Financial Safety Net with a quota-based and adequately resourced [IMF] at its centre’. Its proposals do not fundamentally break with the IMF or WTO; rather, they offer a dual pathway forward: first, for BRICS to exert more control and direction over these organisations, of which they are members but have been suborned to a Western agenda, and second, for BRICS states to realise their aspirations to build their own parallel institutions (such as the New Development Bank, or NDB). Saudi Arabia’s massive investment fund is worth close to $1 trillion, which could partially resource the NDB.

    BRICS’s agenda to improve ‘the stability, reliability, and fairness of the global financial architecture’ is mostly being carried forward by the ‘use of local currencies, alternative financial arrangements, and alternative payment systems’. The concept of ‘local currencies’ refers to the growing practice of states using their own currencies for cross-border trade rather than relying upon the dollar. Though approximately 150 currencies in the world are considered to be legal tender, cross-border payments almost always rely on the dollar (which, as of 2021, accounts for 40 per cent of flows over the Society for Worldwide Interbank Financial Telecommunications, or SWIFT, network).

    Other currencies play a limited role, with the Chinese RMB comprising 2.5 per cent of cross-border payments. However, the emergence of new global messaging platforms – such as China’s Cross-Border Payment Interbank System, India’s Unified Payments Interface, and Russia’s Financial Messaging System (SPFS) – as well as regional digital currency systems promise to increase the use of alternative currencies. For instance, cryptocurrency assets briefly provided a potential avenue for new trading systems before their asset valuations declined, and the expanded BRICS recently approved the establishment of a working group to study a BRICS reference currency.

    Following the expansion of BRICS, the NDB said that it will also expand its members and that, as its General Strategy, 2022–2026 notes, thirty per cent of all of its financing will be in local currencies. As part of its framework for a new development system, its president, Dilma Rousseff, said that the NDB will not follow the IMF policy of imposing conditions on borrowing countries. ‘We repudiate any kind of conditionality’, Rousseff said. ‘Often a loan is given upon the condition that certain policies are carried out. We don’t do that. We respect the policies of each country’.

    In their communiqué, the BRICS nations write about the importance of ‘comprehensive reform of the UN, including its Security Council’

    In their communiqué, the BRICS nations write about the importance of ‘comprehensive reform of the UN, including its Security Council’. Currently, the UN Security Council has fifteen members, five of whom are permanent (China, France, Russia, the UK, and the US). There are no permanent members from Africa, Latin America, or the most populous country in the world, India. To repair these inequities, BRICS offers its support to ‘the legitimate aspirations of emerging and developing countries from Africa, Asia, and Latin America, including Brazil, India, and South Africa to play a greater role in international affairs’. The West’s refusal to allow these countries a permanent seat at the UN Security Council has only strengthened their commitment to the BRICS process and to enhance their role in the G20.

    The entry of Ethiopia and Iran into BRICS shows how these large Global South states are reacting to the West’s sanctions policy against dozens of countries, including two founding BRICS members (China and Russia). The Group of Friends in Defence of the UN Charter – Venezuela’s initiative from 2019 – brings together twenty UN member states that are facing the brunt of illegal US sanctions, from Algeria to Zimbabwe. Many of these states attended the BRICS summit as invitees and are eager to join the expanded BRICS as full members.

    We are not living in a period of revolutions. Socialists always seek to advance democratic and progressive trends. As is often the case in history, the actions of a dying empire create common ground for its victims to look for new alternatives, no matter how embryonic and contradictory they are. The diversity of support for the expansion of BRICS is an indication of the growing loss of the political hegemony of imperialism.

    This article was published earlier in tricontinental.org and is republished under the Creative Commons.

     

  • The Atomic Executioner’s Lament

    The Atomic Executioner’s Lament

    While the world focuses on the trials and travails of the scientists who invented the atomic bomb, little attention is paid to the hard positions taken by the nuclear executioners, the men called upon to drop these bombs in time of war.

     

    Crew of the Enola Gay, returning from their atomic bombing mission over Hiroshima, Japan. At center is navigator Capt. Theodore Van Kirk; to the right, in foreground, is flight commander Col. Paul Tibbetts. (Wikimedia Commons, Public domain)

     

    There is an interesting scene in Chris Nolan’s film Oppenheimer, one which could easily get lost in the complexity of telling the story of the man considered to be the father of the American atomic bomb, J. Robert Oppenheimer.

    The Trinity test of the first nuclear device has been successfully completed, and Oppenheimer is watching as two men in military uniform are packing up one of Oppenheimer’s “gadgets” for shipment out of Los Alamos to an undisclosed destination.

    Oppenheimer talks to them about the optimum height for the detonation of the weapon above ground, but is cut off by one of the soldiers, who, smiling, declares “We’ve got it from here.”

    Such men existed, although the scene in the movie — and the dialogue — was almost certainly the product of a scriptwriter’s imagination. The U.S. military went to great lengths to keep the method of delivery of the atomic bomb a secret, not to be shared with either Oppenheimer or his scientists.

    Formed on March 6, 1945, the 1st Ordnance Squadron, Special (Aviation) was part of the 509th Composite Group, commanded by then-Lieutenant Colonel Paul Tibbets. Prior to being organized into the 1st Ordnance Squadron, the men of the unit were assigned to a U.S. Army ordnance squadron stationed a Wendover, Utah, where Tibbets and the rest of the 509th Composite Group were based.

    Mission map for the bombings of Hiroshima and Nagasaki, Aug. 6 and Aug. 9, 1945. Scale is not consistent due to the curvature of the Earth. Angles and locations are approximate. Kokura was included as the original target for Aug. 9 but weather obscured visibility; Nagasaki was chosen instead. (Mr.98, Wikimedia Commons, Public domain)

    While Oppenheimer and his scientists designed the nuclear device, the mechanism of delivery — the bomb itself — was designed by specialists assigned to the 509th. It was the job of the men of the 1st Ordnance Squadron to build these bombs from scratch.

    The bomb dropped on Hiroshima by Paul Tibbets, flying a B-29 named the Enola Gay, was assembled on the Pacific Island of Tinian by the 1st Ordnance Squadron.

    Concerned about the possibility of the B-29 crashing on takeoff, thereby triggering the explosive charge that would send the uranium slug into the uranium core (the so-called gun device), the decision was made that the final assembly of the bomb would be done only after the Enola Gay took off.

    One of the 1st Ordnance Squadron technicians placed the uranium slug into the bomb at 7,000 feet over the Pacific Ocean.

    The bomb worked as designed, killing more than 80,000 Japanese in an instant; hundreds of thousands more died afterwards from the radiation released by the weapon.

    For the pilot and crew of the Enola Gay, there was no remorse over killing so many people. “I knew we did the right thing because when I knew we’d be doing that I thought, yes, we’re going to kill a lot of people, but by God we’re going to save a lot of lives,’ Tibbets recounted to Studs Terkel in 2002. He added:

    “We won’t have to invade [Japan]. You’re gonna kill innocent people at the same time, but we’ve never fought a damn war anywhere in the world where they didn’t kill innocent people,” Tibbets told Terkel. “If the newspapers would just cut out the shit: ‘You’ve killed so many civilians.’ That’s their tough luck for being there.

    An atomic bomb victim with burns, Ninoshima Quarantine Office, Aug. 7, 1945. (Onuka Masami, Wikimedia Commons, Public domain)

    Major Charles Sweeney, the pilot of Bockscar, the B-29 that dropped the second American atomic bomb on the city of Nagasaki on Aug. 9, 1945, held similar convictions about his role in killing 35,000 Japanese instantly.

    “I saw these beautiful young men who were being slaughtered by an evil, evil military force,” Sweeney recounted in 1995. “There’s no question in my mind that President Truman made the right decision.” However, Sweeney noted, “As the man who commanded the last atomic mission, I pray that I retain that singular distinction.”

    History records the remorse felt by Oppenheimer and his Soviet counterpart, Andrei Sakharov, and the punishment they both suffered at the hands of their respective governments. They suffered from designer’s remorse, a regret — stated after the fact — that what they had built should not be used, but somehow locked away from the world, as if the Pandora’s Box of nuclear weaponization had never been opened.

    Having designed their respective weapons, however, both Oppenheimer and Sakharov lost control of their creations, turning them over to military establishments which did not participate in the intellectual and moral machinations of bringing such a weapon into existence, but rather the cold, hard reality of using these weapons to achieve a purpose and goal which, as had been the case for Tibbets and Sweeney, seemed justified.

    Ignoring the Executioner

    Brigadier General Charles W. Sweeney, pilot of the aircraft that dropped the atomic bomb on Nagasaki. (Public domain, Wikimedia Commons)

    This is the executioners’ lament, a contradiction of emotions where the perceived need for justice outweighs the costs associated.

    While the world focuses on the trials and travails of Oppenheimer and Sakharov, they remain silent about the hard positions taken by the nuclear executioners, the men called upon to drop these bombs in time of war.  There have only been two such men, and they remained resolute in their judgement that it was the right thing to do.

    The executioner’s lament is overlooked by most people involved in supporting nuclear disarmament. This is a mistake, because the executioner, as was pointed out to Oppenheimer by the men of the 1stOrdnance Squadron, is in control.

    They possess the weapons, and they are the ones who will be called upon to deliver the weapons. Their loyalty and dedication to the task are constantly tested in order to ensure that, when the time comes to execute orders, they will do so without question.

    Image of a younger Petrov from a family album.
    (Stanislav Petrov’s Personal Library, Wikimedia Commons, CC0)

     

     

    Those opposed to nuclear weapons often point to the example of Stanislav Petrov, a former lieutenant colonel of the Soviet Air Defense Forces who, in 1983, twice made a decision to delay reporting the suspected launch of U.S. missiles towards the Soviet Union, believing (rightly) that the launch detection was a result of malfunctioning equipment.

    But the fact is that Petrov was an outlier who himself admitted that had another officer been on duty that fateful day, they would have reported the American missile launches per protocol.

    Those who will execute the orders to use nuclear weapons in any future nuclear conflict will, in fact, execute those orders. They are trained, like Tibbets and Sweeney, to believe in the righteousness of their cause.

    Dmitry Medvedev, the former Russian prime minister and president who currently serves as the deputy chairman of the Russian National Security Council, has publicly warned the Western supporters of Ukraine that Russia would “have to” use nuclear weapons if Ukrainian forces were to succeed in their goal of recapturing the former territories of Ukraine that have been claimed by Russia in the aftermath of referenda held in September 2022.

    “Imagine,” Medvedev said, “if the offensive, which is backed by NATO, was a success and they tore off a part of our land, then we would be forced to use a nuclear weapon according to the rules of a decree from the president of Russia. There would simply be no other option.”

    Some in the West view Medvedev’s statement to be an empty threat; U.S. President Joe Biden said last month that there is no real prospect of Russian President Vladimir Putin ordering the use of nuclear weapons against either Ukraine or the West.

    “Not only the West, but China and the rest of the world have said: ‘don’t go there,’ ” Biden said following the NATO Summit in Vilnius.

    Ignoring Russian Doctrine

    But Biden, like other doubters, emphasizes substance over process, denying the role played by the executioner in implementing justice defined on their terms, not that of those being subjected to execution.

    Russia has a nuclear doctrine that mandates that nuclear weapons are to be used “when the very existence of the state is put under threat.” According to Medvedev, “there would simply be no other option,” ironically noting that “our enemies should pray” for a Russian victory, as the only way to make sure “that a global nuclear fire is not ignited.”

    The Russians who would execute the orders to launch nuclear weapons against the West would be operating with the same moral clarity as had Paul Tibbets and Charles Sweeney some 88 years ago. The executioner’s lament holds that they will be saddened by their decision but convinced that they had no other choice.

    Proving them wrong will be impossible because, unlike the war with Japan, where the survivors were given the luxury of reflection and accountability, there will be no survivors in any future nuclear conflict.

    The onus, therefore, is on the average citizen to get involved in processes that separate the tools of our collective demise — nuclear weapons — from those who will be called upon to use them.

    Meaningful nuclear disarmament is the only hope humankind has for its continued survival.

    The time to begin pushing for this is now, and there is no better place to start than on Aug. 6, 2023 — the 78th anniversary of the bombing of Hiroshima, when like-minded persons will gather outside the United Nations to begin a dialogue about disarmament that will hopefully resonate enough to have an impact of the 2024 elections.

     

    This article was published earlier in consortiumnews.com

    The views expressed are the author’s own.

    Feature Image: The devastated city of Hiroshima after the atomic bomb blast – bbc.com

  • BRICS++: The West tries playing ‘catch-up’, but it’s too late

    BRICS++: The West tries playing ‘catch-up’, but it’s too late

    Until recently, the West has largely derided the BRICS project. But it finally is awaking to the fact that the BRICS initiative possesses the potential to turn both geo-politics, and the international monetary system, upside-down.

    The seismic Geo-Political event of this era is the explosion of BRICS membership and of even bigger potential BRICS membership. This movement has crossed a key threshold. It has transited from ‘vanilla’ multipolarity to being an anti-colonial expression — a shift that should not be underestimated. It is an ethos drawing energy from deep layers of passionate feeling that was stifled in the immediate post-war years, but which is re-surfacing to invest the multi-polar framework with evident dynamism.

    There are currently eight nations that have formally applied for membership and 17 others that have expressed interest in joining. If Saudi Arabia and Russia are both members, that is two of the three largest energy producers in the one camp.

    If Russia, China, Brazil and India are all members, there will be four of the seven largest countries in the world measured by landmass — possessing 30% of the Earth’s dry surface and related natural resources — as BRICS members.

    Almost 50% of the world’s wheat and rice production, as well as 15% of the world’s gold reserves, are in the BRICS.

    Meanwhile, China, India, Brazil, and Russia are four of the nine highest-population countries on the planet with a combined population of 3.2 billion people or 40% of the Earth’s population.

    “China, India, Brazil, Russia and Saudi Arabia have a combined GDP of $29 trillion or 28% of nominal global GDP. If one uses purchasing power parity to measure GDP, then the BRICS share is over 54%. Russia and China have two of the three largest nuclear arsenals in the world”.

    “By every measure then — population, landmass, energy output, GDP, food output and nuclear weapons — BRICS is not just another multilateral debating society. They are a substantial and credible alternative to Western hegemony”, Jim Rickards asserts.

    With a new trading currency framework likely to be fore-shadowed in August at the BRICS summit, the currency will descend upon a highly receptive audience. It will fall into an increasingly sophisticated network of capital and communications. This network will greatly enhance its chances of success.

    The key mistake is the failure to distinguish between the respective roles of a payment (trading) currency and a reserve currency. Payment currencies are used in trade for goods and services. Nations can trade in whatever payment currency they want; it doesn’t have to be dollars. However, in so doing – in a large way – the demand for the dollar incrementally is drained away. Ultimately this loss of foreign demand for dollars circumscribes the ability of the US to go on spending well above its income.

    What has defined a reserve currency has been a large, well-developed sovereign bond market. No country in the world comes close to the US Treasury bond market in terms of breadth and convertibility.

    And Western finance personnel, therefore, snort in derision at the prospects of the US dollar ever losing its hegemony. But they forget perhaps that there was no US bond market until WW1 when  Woodrow Wilson authorized Liberty Bonds to help finance the war. There were bond rallies and Liberty Bond parades in every major city. It became a patriotic duty to buy Liberty Bonds. The effort worked, and it birthed the US bond market.

    In short, the way to create an instant reserve currency is to create an instant bond market using your own citizens as willing buyers. As Jim Rickards earlier noted, were the BRICS to ‘use a patriotic model’ (by drawing on today’s anti-colonial spirit sweeping the BRICS countries) it would be possible to create international reserve assets denominated in the BRICS+ (trading) currency.

    Also, the recent Bank for International Settlements (BIS)-led experiments in real-time and digital Central Bank foreign exchange transactions promises to transform such a project – and to lessen substantially the need for a large reserve-asset reservoir.

    Until recently, the West has largely derided the BRICS project. But it finally is awaking to the fact that the BRICS initiative possesses the potential to turn both geo-politics and the international monetary system, upside-down.

    This month, the Chair of the Eurasia Group, Cliff Kupchan, wrote in Foreign Policy that “6 Swing States Will Decide the Future of Geopolitics

    “Middle powers today have more agency than at any time since World War II. These are countries with significant leverage in geopolitics. Much more interesting [however] are the six leading middle powers of the global south: Brazil, India, Indonesia, Saudi Arabia, South Africa, and Turkey. These swing states of the global south are not fully aligned with either superpower and are therefore free to create new power dynamics. These six also serve as a good barometer for broader geopolitical trends”.

     

    “… the question remains whether the BRICS states are going to become a more formal institution under China’s direction … that prospect is a clear challenge to the West…But the threat is unlikely to materialize. These countries may have tacked away from the United States — but that’s different from joining a Chinese-directed, Russian-assisted body actively opposing the United States. As of now, BRICS has not shown the ability to develop and implement a common agenda, so there is very little institutional strength for China to co-opt”

    The blinkers are on. The Western Establishment just doesn’t ‘get it’. Kupchan’s article’s conclusion: “the US has been playing catch-up – and not doing very well at even that”. It needs a well-crafted strategy toward each of the key Swing States (to halt their ‘tacking away’ from the US, towards the Russia-China axis), he warns. Arm-twisting, threats and coercion, presumably, as usual.

    ‘Catching-up’?  The horse already has bolted. The stable is empty.

     

    Feature Image: Indian Express

    This article was published earlier in Al Mayadeen English.