Watch out! Biden wants to save the planet

Technology choices will decisively impact whether climate-pivoted economic policy brings benefit or disaster

By JONATHAN TENNENBAUM

President Joe Biden’s climate plan is a grandiose vision. Combining deliberate echoes of Franklin Roosevelt’s New Deal with the crash-program approach to development of technology. Exemplified by the Apollo program of the 1960s. If it works, planet Earth and the US economy will be saved at the same time.

Biden has vowed to establish US leadership in saving the planet from an impending climate apocalypse. His appointments of establishment climate activists to high positions in his administration, along with his opening salvos of executive orders, confirm his intention to make climate the central topic in all spheres of US government activity.

He calls it the “Whole of Government Approach to the Climate Crisis.”

Among other things Biden ordered a National Intelligence Estimate (NIE) of the threat that climate change poses for US national security. He made climate officially the priority focus of US foreign policy. 

One has the distinct impression that the Biden Administration intends to use the climate crisis as an occasion for reasserting the primacy of US power in international affairs. Far beyond rejoining the Paris Agreement on his first day in office, Biden has made clear that the United States will act as global enforcer of CO2 reduction measures. And, needless to say, he intends to focus especially on China. 

Biden has committed himself to making climate the center of US domestic economic policy. The recent executive orders already contain elements of his campaign promise to channel $2 trillion into building a “clean” national infrastructure. And thereby creating millions of new jobs and driving innovation and economic growth.

If all goes according to plan, by 2035 the US should have 100% CO2-free electricity generation. By 2050 total net emissions should reach zero.

“Social Cost System”

Among the first concrete steps is to initiate planning for replacing the entire fleet of over 600,000 vehicles used by federal government and the US Postal Service to zero-emission vehicles.

A key move, which has so far attracted little attention in the news media, is to implement the so-called “social cost system” as a guiding criterion for daily government decision-making. The social cost system is based on attaching a numerical value to the “global damage” attributed to emission of a given amount of carbon dioxide – in the production of a given commodity, for example.

This will have a big economic impact through the choice of products and vendors for government purchases, on which Washington spends about $600 billion a year.

The $2 trillion climate plan – whose funding must, of course, be approved by Congress – would follow on the heels of a $1.9 trillion American Rescue Plan to help the US economy and population recover from the effects of Covid-19.  

All in all, the degree of concentration of a US government on a single theme is practically unprecedented in peacetime. Were it not for the Covid-19 pandemic there would doubtless be much more discussion about this radical course.  People who believe that global warming is the greatest crisis of our time might easily overlook problematic, even ominous implications of declared policies.   

I wish to emphasize that I am not motivated by political opposition to the Biden Administration. Nor, of course, do I oppose rational measures to reduce and eventually eliminate the world’s one-sided dependence on fossil fuels.

One should also keep an open mind in respect to any new administration, which carries contradictory interests and impulses with it into office. It may adjust its course as it confronts reality.

Taking Biden’s declarations very seriously

But there are reasons to take Biden’s declarations very seriously.

Firstly, to all appearances Biden and his close advisors truly believe that the world is headed toward an unprecedented catastrophe through global warming. And that the clock is ticking and that urgent action is necessary to reduce CO2 emissions world wide. Not only the US but other nations as well must do so. Especially the largest COemitters, with China in first place.

Countries that refuse to reduce their emissions by the necessary amounts voluntarily must be forced to do so. The logic is inescapable. 

Secondly, as Biden has emphasized for the United States, replacing the world’s entire fossil fuel infrastructure with “clean technology” over the next 30-40 years creates a new market of colossal dimensions. Assuming that the nations and populations are able to pay for it. 

Thirdly, immense amounts of financial capital have already been committed to the expectation of radical climate policies. CO2 emissions are being monetized and a vast financial machinery created, tying asset valuations to parameters such as “carbon intensity” and “sustainability indices.”

Climate projections are being built into long-term risk strategies and the premium structures of insurance companies. The volume of carbon trade is growing exponentially. With it, the market for climate-linked financial instruments such as green bonds (already at $500 billion) and other so-called green assets.

Shaping global investment patterns and financial flows

Thereby, climate policy becomes a powerful instrument for shaping global investment patterns and financial flows. In his 2020 “Open Letter to CEOs” Larry Fink, the Chairman of the world’s largest asset management company, BlackRock, declared: “I believe we are on the edge of a fundamental reshaping of finance.”

In the meantime BlackRock, several of whose executives have been named to high positions in the Biden Administration. And announced that it is making climate change central to its investment strategy for 2021.

Thus, in all probability the Biden Administration will indeed pursue the radical course announced during his campaign and signaled by initial executive orders.

What will that mean?

From the positive side, I have reason to expect that areas of science and technology that are critically important for the future – nuclear fission and fusion, new materials, hydrogen technologies, high-density energy storage, applications of high temperature superconductivity and much more – will receive greater support under the new administration, than has been the case under preceding ones.

This is a crucial point. Leaving many other factors aside, the choice of technologies employed in the promised rebuilding of US infrastructure. Assuming it actually occurs. It will have a decisive impact on whether Biden’s climate-pivoted economic policy will benefit the nation or lead to disaster.

Following this introductory article no. 1, further installments in the series will take up the following concerns:

  • Green imperialism: Is the Biden Administration turning the climate issue into a vehicle for great-power geopolitics? 
  • Will Biden’s climate policy serve, defacto, as a vehicle for financial interests that are positioning themselves to profit from the tectonic shifts in global financial flows, arising from a forced move away from fossil fuels? Is this a “BlackRock Administration”?
  • Will overheated climate measures set the stage for a financial crisis? Major bets are being placed on the future of the world energy system, and market stability faces the dual menaces of a “green bubble” of climate-linked financial assets and a “carbon bubble” of potentially worthless fossil fuel assets.
  • Consider the risk of a California-like horror scenario: economically ruinous over-expansion of so-called renewable energy sources and ideologically-driven environmentalist measures, leading to exploding energy prices, blackouts, economic austerity, productivity losses and growing poverty. Will ill-conceived climate measures generate a political backlash and a resurgence of the Republicans, at latest by the 2024 Presidential elections?
  • Will the United States descend into economic and social crisis when the temporary, government money injections-induced “high” begins to wear off?
  • What’s the danger that ill-conceived measures by the Biden Administration, in the name of saving the planet, will undermine the capability of the United States and other nations to cope with climate changes in the future?
  • At the end I shall make some remarks concerning what a rational approach to the climate issue would look like.

Jonathan Tennenbaum received his PhD in mathematics from the University of California in 1973 at age 22. Also a physicist, linguist and pianist, he is a former editor of FUSION magazine. He lives in Berlin and travels frequently to Asia and elsewhere, consulting on economics, science and technology.

John Pilger on The New Cold War With China..

John Pilger on The New Cold War With China, American Exceptionalism, Biden’s Victory, Coronavirus


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In this episode of Going Underground, we speak to legendary journalist and filmmaker John Pilger. He discusses the devastating impact of Coronavirus in the U.K., rising poverty and militarism, the Western logic for the new Cold War with China, the victory of Joe Biden over Donald Trump and why not much will change with Trump leaving the Presidency, the Yemen War, the survival of Venezuela despite crippling international sanctions, mainstream journalism vs real journalism and much more!

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We contacted HM Treasury and they directed us to Chancellor Rishi Sunak’s words following the Spending Review.

Well, you know, yesterday was a spending review we were setting the budgets. And I was very clear when I set out the fiscal situation that what is happening this year is obviously not sustainable. You know that, your viewers know that. It is right to act in the way that we have this year to protect the economy in the medium term. I’m glad that the Office for Budget Responsibility who or independent fiscal watchdog acknowledged that what we’ve done has made a difference and it made a difference to keeping people in work primarily, which is what we’re trying to do.

But yes, you’re right, that can’t go on. Now is not the time to make those decisions because we’re dealing with so much uncertainty with the economy. The OBR yesterday presented three different scenarios. But once we get through this and we have greater certainty about the outlook, we can’t obviously have a situation where we’re borrowing this much and that is going up forever and a day.  When we get to an appropriate point, where we have certainty over the economy, we’ll look at how best to make sure that we have strong public finances. And the reason for that is simple.

I have been able to respond in a comprehensive and generous way during this crisis. It is in part because of the decisions of my predecessors. Which meant that we came into this with a strong set of public finances. I want to make sure whenever the next difficult thing comes along, the Chancellor can do the same response that I’ve done. That will require us to make sure we get back to that strong position.


Iran wants to join Eurasian Economic Union

Will Russia allow it?

There are some good reasons for Moscow’s lukewarm response to the possibility of Tehran’s admission to the EAEU. What are factors for and against Iran joining Eurasian Economic Union from Russian point of view?

By NIKOLA MIKOVIC

The Russia-dominated Eurasian Economic Union might soon be acquiring a new member: Iran. Boxed in because of its rivalry with other states in the Middle East, and laboring under US-imposed sanctions, Tehran believes it needs to strengthen ties with such neighbors as might be willing to accept it.

Iran appears to think that membership in the EAEU is a done deal. That is despite officials of the bloc denying they had received any formal request. When Mohammad Baqer Qalibaf, Speaker of the Iranian parliament, visited Moscow on February 10, he declared Iran would “permanently join the EAEU in two weeks.” Apart from the fact that the date has passed, such optimism is extremely premature.

The response from Mikhail Myasnikovich, chairman of the board of the Eurasian Economic Commission, was telling. The Eurasian union wants Iran to have “a special view on cooperation with Eurasia,” he said. It hardly sounds like a warm welcome. Other EAEU officials have stressed that Iran must formally apply for membership. A veiled warning, perhaps, that Iran cannot expect to bypass procedures.

On the face of it, there are reasons for Tehran and Moscow to support Iran’s inclusion into the bloc. The economic area is an integrated market of 180 million people with a combined GDP of more than US$5 trillion. It encourages the free movement of goods and services and can formulate common policy in key areas such as energy, agriculture, transport, customs, and foreign trade and investment.

Iran already has had a free-trade agreement with the Eurasian union since 2018. In 2020, trade turnover between Iran and the EAEU increased by 2%, exceeding $2 billion.

Mutual benefits

Food products and agricultural raw materials accounted for most of that trade in both directions. 80% of the goods that the EAEU supplied to Iran and 68% of what Iran sent to the EAEU.

Joining the EAEU would improve Iran’s economic and political position globally and help to offset, at least partly, the cost of US sanctions.

On the Russian side, Moscow wants another pathway to the markets of the Middle East. That is why the Kremlin strongly supports the construction of the Nakhchivan corridor. It is a land route connecting not only Azerbaijan to its Nakhchivan exclave between Turkey and Armenia, but also Russia and Turkey and – crucially – Russia and Iran.

A future rail link between Russia and Iran, passing though Azerbaijan and Armenia, will undoubtedly enhance economic ties between the two countries as well as Iran’s trading relations with other Eurasian union member states.

However, how receptive Arab Middle East states would be to Russian goods transiting through Iran is another question altogether. This might be a reason for Moscow’s distinctly lukewarm response to the possibility of Tehran’s admission to the bloc.

In fact, there are several large questions hanging over inducting a new member into the bloc. Bloc consists of Armenia, Belarus, Kazakhstan and Kyrgyzstan, in addition to Russia. Uzbekistan, Moldova and Cuba have observer status.

Impact on Russian relationship with Israel and Arab States

It is not improbable that closer economic ties would lead to stronger military ones. The UN Security Council embargo on conventional arms shipments to Iran expired in October. It is no secret that Iran is interested in purchasing Russia’s S-400 anti-aircraft system. As well as Su-30 fighter jets. But such a deal would almost certainly ramp up tensions between Moscow and Washington and raise alarm bells in Gulf Arab states.

Then there is Russia’s relationship with Iran’s arch-enemy, Israel. The Russians have not prevented Israel from striking at Iranian targets in Syria, despite operating S-400 units in the area. Russia was the mediator in a prisoner exchange between its ally, Syria, and Israel that took place this month and there are rumors of further ongoing negotiations on humanitarian issues and even on wider geopolitical matters.

Speculation aside, what is known is that Israeli Prime Minister Benjamin Netanyahu and Russian President Vladimir Putin discussed continued coordination between their two countries in light of developments in regional security. Was Iran also on the agenda?

Moscow, after all, must maintain its own delicate balancing act and guard its geopolitical interests. The normalization of ties between Israel and the United Arab Emirates and other Arab states has changed interest-dynamics in the region, tilting the balance further toward the Arab Gulf region’s anti-Iran alliance. How does Russia profit from the new Middle East?

Some other countries are already in the queue to join

Finally, there is the fact that there are others ahead of Iran in the queue to join the Eurasian union. Syria is one of them; 40 other countries also have stated their wish to develop trade and economic cooperation with the bloc.

As well as declaring that Iran would soon join the EAEU, Qalibaf said he had brought “a very important message” from Supreme Leader Ali Khamenei. It may well be that Moscow is composing its own, equally important message to send back to Tehran.

NIKOLA MIKOVIC

Nikola Mikovic is a political analyst in Serbia. His work focuses mostly on the foreign policies of Russia, Belarus and Ukraine, with special attention on energy and “pipeline politics.” 

More by Nikola Mikovic

The moral case for China to fight a war

Ancient Chinese philosophy draws a clear and moral distinction between an ‘attack’ and ‘punishment’

By FRANCESCO SISCI

War sounds nearer for China while its contours remain rather foggy. But Hu Xijin, the editor of the Global Times, a popular newspaper associated with the Communist Party organ the People’s Daily, recently broached the possibility of a real war.

“Chinese people don’t want war, but we have territorial disputes with several neighboring countries encouraged by the US to confront China. Some of these countries believe that the US support provides them with a strategic opportunity and try to treat China outrageously.

“They believe that China, under the US’s strategic pressure, is afraid, unwilling or unable to engage in military conflict with them. Thus, they want to pull the chestnuts out of the fire. Considering that there is also the Taiwan question, the risk of the Chinese mainland being forced into a war has risen sharply in recent times,” he wrote.

In this context, Hu makes some interesting and important points. War must have a solid moral justification; thus, China would not fire the first shot and it should be clear that it is the victim and not the aggressor.

The point harks back to ancient times: Mozi, an ancient philosopher who deals with the reasons for war, condemns the aggressive war of big states against small ones (gong 攻) but supports the actions sanctioned by the supreme Son of Heaven who punishes (zhu 誅) unruly rulers.

今遝夫好攻伐之君,又飾其說以非子墨子曰:「以攻伐之為不義,非利物與?昔者禹征有苗,湯伐桀,武王伐紂,此皆立為聖王,是何故也?」墨子曰:「以攻伐之為不義,非利物與?昔者禹征有苗,湯伐桀,武王伐紂,此皆立為聖王,是何故也?」子墨子曰:「子未察吾言之類,未明其故者也。彼非所謂攻,謂誅也.

The warring lords would gloss over their conduct with arguments to confute Mozi, saying: “Do you condemn attack and assault as unrighteous and not beneficial? But anciently Yu made war on the Prince of Miao, Tang on Jie and King Wu on Zhou. Yet these men are all regarded as sages. What is your explanation for this?”

Mozi replied: “You have not examined the terminology of my teaching and you do not understand its motive. What they did is not to be called ‘attack’ but ‘punishment.’”

The issue is crucial for Mozi, and we are in a situation totally different compared with that of Sunzi, who has no moral qualms but wants to win the military engagement. He utters:

攻其無備,出其不意,此兵家之勝,不可先傳也。

“Attack him with superior forces where he is unprepared, appear where you are not expected. These military devices, leading to victory, must not be divulged beforehand.”

Hu Xijin, like Mozi and unlike Sunzi, is not concerned here with actual military success, but with a very important and delicate point that helps to lead to military success: how to build a moral case justifying a military intervention.

If the moral case is well built, it will help to reinforce domestic consensus and undermine enemy consensus, both crucial elements for a victory.

Chinese philosopher Mozi differentiated between attacks and punishments. Image: Wikimedia

International consensus-building

The point from this is how to build a domestic consensus in an authoritarian society and take it abroad successfully. In theory, the first part is simple. The government has a monopoly on information and what it says is true. It should be enough not to be too rough and naive with the use of its tools.

The problem is how to export the authoritarian truth to an open world. In theory, this was already done. Communist governments effectively engaged free capitalist societies for decades. In the Vietnam War, for example, they positively helped to undermine the enemy’s will to fight. This was no simple effort.

Communism was a complex ideology with a body of articulated and fascinating literature promising to improve the lives of people and the structure of state and society. It built a church and a theology in which all elements of the socialist life were encoded. The coding was fine-looking and so attractive that it cut a lot of ice in Western capitalist societies.

The ideological “capitalist” answer to the communist philosophical-propaganda offensive was also extremely complex, mixing theoretical elements with practical results, ie, tangible improvement of livelihoods in the capitalist West versus dwindling economic performance in the communist East.

Most importantly, both “capitalist” and “socialist” ideologies had no spatial border. Both were concerned with the well-being of everybody in the world and both wanted to change the whole world.

China now doesn’t want to export its socialist system; it wants to defend what it deems are its sovereign rights against a perceived aggression on many fronts of its frontiers: India, Vietnam, Japan, a “splittist” Taiwan, the US, and possibly other countries. But its size and its different system by themselves undermine the global US-dominated system.

This scares many countries at its borders, which may feel that if China’s ambitions are not territorially restrained, they will fall under Beijing’s economic and political clout.

Beijing may believe these concerns are totally unwarranted, it may want to assuage them and win over public opinion in these countries, just as these countries may try to do with Chinese public opinion.

Yet China doesn’t have a global philosophical outlook developed through decades of international debate. Russian communism, battling international physical and philosophical assaults in the 1920s, inherited communist literature dating back at least to the 1848 Marx-Engels Communist Manifesto. China has nothing similar.

Moreover, its stress on patriotism, borders and protection give a sense that China’s interests and those of its neighbors are at odds over specific nationalistic issues. In a nationalistic brawl, everybody sticks to their own nation.

Lastly, in a world adhering mostly to free exchange of opinions, ideas coming from an authoritarian, possibly nationalist, society cut little or no ice and conversely can be proof of Chinese bad and deceptive intentions.

To change this situation – that is, to have an effective philosophical-propaganda machine –China should develop an internationalist reach, like communism or “capitalism,” or stop being an authoritarian regime. For a better result, it should do both.

Short of that, Beijing finds itself painted in a corner. It doesn’t matter if India, Taiwan, Japan or anybody else is right or wrong with its grievances against China; Beijing’s reasons have little or no appeal outside of China. That is, its reasons for war will work only domestically and only as long as its monopoly on information holds.

Internal morale can be easily undermined in a public information onslaught by its enemies. They, in theory, can basically construct whatever reason to attack China and will get away with it because Beijing will have no credible voice.

Fake news is nothing new, but battling it is a very sophisticated game that a monopoly on information can sort out only if imposed on a global and absolute scale. On top of that, Beijing may actually be wrong.

Why Beijing is not totally wrong

But this is beside the point. Even if Beijing is right, without an open debate platform, without an appealing internationalist ideology, it will only have brute force and money to fend for itself and its morale.

If force and money were enough to hold power, Mao would have died in a ditch and Chiang Kai-shek’s grandson would rule China now.

Then this leaves the final, practical point: what did Hu Xijin want to say in the article?

Possibly by arguing about the moral issues in going to war he is building an argument that tries to cool down the animus of domestic hardliners. They are growing annoyed and nervous about what some in China perceive as a state of siege led by the US.

Hu is basically saying, it is impossible to go to war if we don’t have a clear-cut case and to have that we cannot be the ones who move first. It appears as an internal message against Chinese war-mongers to wait longer. It is a command not to rush things and ponder them.

Chinese People’s Liberation Army soldiers marching with their bayonets during a military parade. Photo: AFP/Stephen Shaver

But, actually, as soon as China speaks of war, many countries are impatient about the details of its arguments; they simply shrug, taking it as naive braggadocio. Conversely, some in Beijing may believe that this grand talk could actually intimidate certain foreign parties.

Now, given the international mood around China and the long shadow of events in Hong Kong, Xinjiang and on other fronts, it is possible that outside of China the message will be simply received as “Beijing is talking of going to war.”

China may be seen as trying to build a case to start a war and be provocative. Then, the foreign parties may think: this must be taken seriously and countermeasures must be arranged.

In this way, we are all one step closer to a slippery slope of massive misunderstandings leading to a war.


Used with permission of Settimana News. Read the original here.

Working with China is more beneficial than fighting it



By Ken Moak

It appears the political and security elites in the United States are preparing for an OK Corral-type showdown with China. On December 1, the US Justice Department asked (some would argue pressured) Canada to arrest Meng Wanzhou, the chief financial officer of Chinese telecommunications giant Huawei, on a provisional warrant. It went on to charge two Chinese government employees with stealing information from firms and governments in 12 countries.

The big question is: Why now and what does the US hope to gain from these provocations?

China’s economic, technological and military rise

A brief look at China’s accomplishments in the economic, technological and military realms might shed light on the question.

The size of China’s economy is estimated at US$13.7 trillion in nominal exchange rate measurement and it met the targeted growth rate of 6.5%  in 2018, according to China’s National Bureau of Statistics (CNBS). China’s growth rate is far greater than that of the US, estimated at around 3% by the US National of Statistics. If the trend continues, the Chinese economy could well topple that of the US, becoming the biggest economy in both measures.

The remarkable annual average growth rate of nearly 9% has allowed the country to spend lavishly on research and development and higher education, estimated at over US$260 billion and US$175 billion, respectively, in 2017 by the CNBS. A big chunk of higher education spending was on science, technology, engineering and mathematics (STEM).

As a result, China produces over 6 million STEM graduates each year and a similar number worked in research. These millions of STEMs are the country’s best and brightest scientific and engineering minds.

This might be a more compelling explanation of why the country is fast closing the innovation gap with and even surpassing the US in some areas – 5G, AI, driverless cars, high-speed railway, etc – than China stealing American secrets.

Huawei is at the forefront of 5G technology and the biggest (and some would suggest the best) telecommunications equipment manufacturer in the world. According to the company’s press release, almost 170 countries are using its equipment. Huawei is also the world’s second-largest smartphone producer, surpassing Apple but behind South Korea’s Samsung.

Other than the US, Australia and New Zealand, no country has accused Huawei of being a “spy” for the Chinese government. Indeed, France and Germany welcome the company’s investment.

It is probably the fear that Huawei might displace Apple that the US barred the company’s products from entering its market and asked Canada to arrest its chief financial officer. According to Jeffery Sachs, a Columbia University  professor and Washington Post columnist, Meng Wanzhou’s arrest might have been politically motivated, contrary to what both the US and Canada have claimed. This allegation was supported by Trump himself when said he would intervene if China would not give him the “deal” he wants.

While China is not interested in getting into an arms race with America, it is spending heavily on developing new weapons systems to ensure it has a credible deterrent. The latest is the JL3, a submarine missile that can carry 10 nuclear bombs with a range of over 7,500 kilometers. Together with its DF21, DF26, DF31 and DF41, China has achieved that credible deterrent capability.

America’s ruling elite upset and frustrated

The US political, security and intelligence communities are upset with China because it is able to challenge American supremacy but cannot do anything about it short of a nuclear attack.

It was not supposed to be that way. The US did not expect China to transform itself from an impoverished and backward country into a superpower within four decades. Based on Soviet economic performance, the West and Japan, in fact, laughed at Deng Xiaoping’s “Socialism with Chinese Characteristics,” dubbed “state-capitalism.” Indeed, they cheered for India.

However, the West, the US in particular, and Japan are shocked because China has done so well. According to the World Bank, China’s economy was just a little over US$250 billion in 1978, the year Deng opened the country up and established economic reforms, turning away from dogmatic central planning to a market economy with Chinese characteristics.

Since then, China’s economy has grown enormously, reaching nearly US$13.7 trillion in 2018. Along the way, the government managed to lift between 750 and 800 million people out of poverty, build the largest and most sophisticated high-speed train system in the world, and establish a formidable space program, just to name a few accomplishments.

In a span of 40 years, China has managed to become a near-peer power of the US, economically, technologically and militarily, and therein lies the frustration: having China as an equal is unthinkable but stopping her is unimaginably costly.

Is Beijing as “evil” as the US says?

It could be argued that the “communist” government might be more responsible and caring than any in the West, including the US.  According to the World Bank and other supranational institutions, the Chinese government has lifted 800 million people out of poverty and elevated over 400 million to middle-class status within 40 years. In doing so, it has erased considerable human misery and lived up to its stated aim of “serving the people.”

Putting economic development at the forefront has not only benefited China, but also the world. Since the 2008 financial crisis caused by the US, China has contributed to a third of global economic growth by buying huge quantities of resources and other goods and services around the world. Indeed, the Australian China hawk Tony Abbott even admitted that it was China that made his country the “lucky continent.”

Because of huge industrial and infrastructural investment from China, many countries in Africa, Latin America and Asia are beginning to develop more rapidly.

What did the “holier than thou” US do to improve the lives of its poor and middle class?

A final comment

Demonizing China with “fake news” would only make the world a more dangerous and miserable place. US provocations in the South China Sea in the name of “freedom of navigation operations” could lead to a military clash, risking American, Chinese and other people’s lives.

As the UK’s last colonial governor of Hong Kong, Chris Patten, painfully discovered, China is too big to be bullied. The US and its allies should do the right thing for their countries: work with China to make this world a better place.

There is nothing to be gained from conflict. Spending more money on defense translates to less money for improving people’s lives.

Ken Moak Ken Moak taught economic theory, public policy and globalization at university level for 33 years. He co-authored a book titled China’s Economic Rise and Its Global Impact in 2015. HIs second book, Developed Nations and the Economic Impact of Globalization, was just published by Palgrave McMillan Springer.

Either the EU ditches neoliberalism or its people will ditch the EU

John Wight has written for a variety of newspapers and websites, including the Independent, Morning Star, Huffington Post, Counterpunch, London Progressive Journal, and Foreign Policy Journal.

We live in a world fashioned by Washington, and as 2019 approaches the dire consequences remain woefully evident.

In 1948 US State Department mandarin George Kennan – the man credited with devising the policy of containment vis-à-vis the Soviet Union at the end of WWII, – laid bare the focus of US foreign policy in the postwar period:

We have about 50 percent of the world’s wealth, but only 6.3 percent of its population…Our real task in the coming period is to devise a pattern or relationships which will permit us to maintain this position of disparity. To do so, we will have to dispense with all sentimentality and daydreamings…We are going to have to deal in straight power concepts.”

The “pattern of relationships” advocated by Kennan is embodied in the panoply of international institutions that have governed our world and dominated the planet’s economic, geopolitical, and military architecture in the seven decades since.

The World Bank and the IMF came out of the Bretton Woods Conference in 1944, along with the establishment of the dollar as the world’s primary international reserve currency.

The Truman administration’s 1947 National Security Act gave birth to a US military-industrial complex that married the nation’s economy to what was destined to become and remain a vast security and intelligence apparatus.

NATO, an instrument of US imperial power, was established in 1949, the year after the Marshall Plan (European Recovery Program) was rolled out with the objective of creating markets and demand in Europe for US exports; Washington having emerged from the war as a global economic hegemon and creditor nation without peer.  A similar plan was also rolled out to rebuild the Japanese economy on the same basis.

Pausing for a moment, it has to count as a remarkable feat of forward thinking on the part of US policymakers, embarking on a plan to not only affect the economic and industrial recovery of its two defeated enemies, Germany and Japan, immediately after the war, but turn them into regional economic powerhouses.

Subsidizing Europe’s postwar recovery was not only of immense economic importance to Washington, it was also of vital strategic importance in pushing back against Soviet influence in Europe. Immediately after the war, this influence was riding high on the back of the Red Army’s seminal role in liberating the continent from fascism, buttressed by resistance movements across occupied Europe in which Communist partisans had been most prominent.

A portion of Marshall aid money – in total some $12 billion (over $100 billion today) over four years between 1948 and 1952 – was diverted to fund various covert operations under the auspices of the CIA, designed to penetrate and subvert those governments and political parties that elicited a leaning towards socialist and communist ideas. 

In their titanic work ‘The Untold History of the United States’, co-authors Peter Kuznick and Oliver Stone reveal that one of those operations involved “supporting a guerrilla army in Ukraine called Nightingale, which had been established by the Wehrmacht in the spring of 1941 with the help of Stephan Bandera, head of the Ukrainian National Organization’s more radical wing OUN-B. The following year, Mikola Lebed founded the organization’s terrorist arm, the Ukrainian Insurgent Army…made up of ultranationalist Ukrainians, including Nazi collaborators.”

Given the nefarious role of Washington and its allies in aiding and abetting the rebirth of ultra-nationalism in Ukraine in our time, Marx’s dictum – History repeats itself, first as tragedy, second as farce – is hard to avoid.

Another institution that was established with US economic and strategic objectives in mind was the European Coal and Steel Community (ECSC) in 1951, the forerunner of today’s European Union. Yes, that’s right; the original incarnation of the EU was a triumph not of European diplomacy but US diplomacy.

In his 2011 book ‘The Global Minotaur’, left-leaning economist Yanis Varoufakis writes:

Students of European integration are taught that the European Union started life in the form of the ECSC. What they are less likely to come across is the well-kept secret that it was the United States that cajoled, pushed, threatened and sweet-talked the Europeans into putting it together…Indeed, it is indisputable that without the United States’ guiding hand the ECSC would not have materialized.”

He goes on:

There was one politician who saw this clearly: General Charles de Gaulle, the future President of France…When the ECSC was formed, de Gaulle denounced it on the basis that it was creating a united Europe in the form of a restrictive cartel and, more importantly, that it was an American creation, under Washington’s influence.”

Washington’s influence over the European Union continues to this day. Most prominently the economic model that underpins this crisis-ridden economic and increasingly political bloc, neoliberalism, is one made in America.

From inception as the lodestar of Western economic thought in the mid 1970s, prior to its adoption as the economic base of the US and UK in the early 1980s, neoliberalism has functioned alongside Washington’s military might and overweening cultural values as part of an architecture of imperialism to which European elites have signed up as fully-fledged disciples, consciously or otherwise.

De Gaulle, as mentioned, was no slouch when it came to understanding that the major threat to European independence and security lay in Washington not Moscow. He championed a ‘Europe of Nations’ after WWII, not supranational institutions that were established with the primary purpose of servicing US economic and strategic interests. As he famously proclaimed: “From the Atlantic to the Urals it is Europe, all of Europe, that will decide the fate of the world.”  De Gaulle’s great fear was a “Europe of the Americans,” which alas is what transpired with the establishment of neoliberalism as the economic foundation of European integration three decades or so later.

De Gaulle took a dim view of the UK in the postwar period, considering London a proxy of Washington. It was a view that gained common currency within French political circles after the debacle known to history as the Suez Crisis, when in 1956 the French and British entered into an ill-fated military pact with Israel to seize control of the Suez Canal from Egypt and effect the overthrow of the country’s Arab nationalist president Gamal Abdul Nasser.

President Eisenhower forced the British into a humiliating retreat, threatening a series of punitive measures to leave London in no doubt of its place in the so-called special relationship. The French had been eager to continue with the Suez operation and were disgusted at London’s craven climb down in the face of Eisenhower’s intervention.

In 1958, two years after the Suez debacle, De Gaulle entered the Elysee Palace as French president. Thereafter, the humiliation of Suez still raw, he embarked on an assertion of the country’s independence from Washington that contrasted with Britain’s slavish and unedifying subservience. The French leader withdrew France from NATO’s integrated command and twice blocked Britain’s entry into the European Economic Community (EEC) – the previous incarnation of today’s EU – on the basis that London would be a US Trojan horse if admitted.

There is, given this history, delicious irony in the fact that the country responsible for injecting the poison of neoliberalism into the EU – the UK under its fanatical leader Margaret Thatcher – is currently embroiled in a messy divorce from the bloc.

The EU in its current form is a latter-day prison house of nations locked inside a neoliberal straitjacket and single currency. Not only can’t it survive on this basis, but it also does not deserve to. Ultimately, either Europe’s political establishment decouples from Washington and its works – the Trump administration notwithstanding – or its peoples will decouple from them and theirs.

As things stand, the latter proposition is far more likely.

Source: https://www.rt.com/op-ed/446788-eu-us-ditch-neoliberalism/

Starting from the bottom: a tale of the informal economy and inequality

By Namira Samir

Of the five administrative cities of the Special Capital Region (DKI Jakarta), East Jakarta has the second-highest number of people living below the poverty line, according to the Central Bureau of Statistics. My minibus trip to East Jakarta has taught me about poverty and inequality more than books and lectures have ever done.

The journey turned out to be an experience that is likely to endure through time. I was the first passenger to make my way inside the bus. I waited for about 15 minutes, and it was still only me, no one else.

Then a middle-age woman, possibly in her early 50s, joined me. She was carrying quite a lot of shopping bags. I presumed she came from Tanah Abang Market, the largest and possibly one of the cheapest textile markets in Asia.

From our brief chat, I learned that she was a frequent user of the minibus. I asked her when the bus would depart, because it was way behind schedule. She said, “It will not depart until the bus is at least half full, my dear.”

I was disappointed, because I had decided to take the bus to avoid traffic and it was the most efficient option available, or at least that was what I thought based on my Internet research.

Five minutes later, the driver stepped in and we finally left the station. Throughout the journey, I beheld people from different professions and backgrounds. But here’s the thing: They all were people who struggled to meet their basic needs.

There were fruit and vegetable sellers who I believed were on their way to another market where they would sell their products. There were beggars who despite seeming physically healthy, kept asking for easy money. There were elderly people who were hardly capable of walking on their own feet but had no other choice.

There were also food and goods vendors marketing their products during the journey until the bus reached its final destination. None of us paid even the slightest attention to the vendors. One man optimistically elaborated the perks of the product he was selling, pointing to the price, which was significantly lower than if we were to purchase such products in the retail shops or shopping malls.

I suppose the ending of the story is predictable. None of us passengers bought the product. He left the bus empty-handed.

That was and still is the reality of the Indonesian economy that most of us fail to recognize. Our attention and interest are only on how to create grand programs, tackling unemployment with projects that eventually fail to reach the right beneficiaries.

Pericles, a prominent and influential Greek statesman, once said, “There’s no shame in poverty, only in not doing something with it.” The vendor that I met, despite living in hardship, chose not to give up on his situation. Shouldn’t we be ashamed of doing nothing to help transform their situation into something better?

GDP per capita in Indonesia averaged US$3,877 in December 2017. The poverty rate fell to 9.82% of the total population in the first quarter of 2018. Yet Indonesia still has very high income inequality, and the unemployment rate rose from 5.13% in the first quarter of 2018 to 5.34% in the second quarter.

In addition to high unemployment, many of the existing jobs, especially those in the informal sector that absorb the largest proportion of the Indonesian workforce, are of low quality, which constitutes a major drag on workers’ well-being.

Looking at this issue, the scholars David Simon and Sarah Birch in their 1992 paper “Formalizing the Informal Sector in a Changing South Africa: Small-scale Manufacturing on the Witwatersrand” suggested the formalization of the informal sector in South Africa. The idea is often repeated in various research and reports such as in “Transitioning the Informal to the Formal Economy,” a 2014 report by the International Labor Organization.

There is no doubt that the informal sector in Indonesia is characterized by acute shortages of decent jobs. It is where the majority of the destitute make a living, although it hardly offers reasonable livelihoods and incomes. They are prone to inadequate and unsafe working conditions, and have high illiteracy levels. They are not able to benefit from social-security schemes or labor protection.

But proposing to formalize the informal economy is not the appropriate policy response. Doing so would require workers to obtain a license, register and pay taxes, which would add costs to the people whose livelihoods depend on this sector.

People who work in the informal sector lack the education and skills necessary for a more sustainable means of livelihood. Data from Statistics Indonesia (BPS, 2015) demonstrate that about 80% of employment in the informal sector is for those who are junior-high-school graduates or below.

The formal sector, such as office work, requires administrative or analytical skills. Therefore, without improving human-resources quality, those working in the informal economy will always be excluded from better job opportunities.

As such, policymakers must address this issue in order to improve the welfare of the workers in the informal economy as well as improving the overall national economy.

There are several things that government can do to solve this problem. First, local and national governments can design programs that can directly reach this layer of society, for example by providing training and providing easier access to education for workers who are still at compulsory school age.

Improving the quality of human resources needs to start from the bottom. Imagine the powerful impact it would create if the quality of human resources in the informal economy, which makes up 60% of the workforce of Indonesia, were escalated.

As documented in the ILO’s World Social Protection Report (2017), 61.1% of people in Asia and the Pacific remain without social protection. Such underinvestment in social protection or so-called exclusionary policy will jeopardize workers’ well-being and prevent Indonesia from achieving sustainable economic growth.

Therefore, in addition to enhancing the quality of human resources in the informal sector, macroeconomic policy needs to ensure that labor rights are protected. Referring to a report by the Organization for Economic Cooperation and Development (OECD, 2016), policymakers need to develop social protection system which can reduce labour market insecurity.

Second, the Indonesian government needs to provide workers in the informal economy access to financial services, since low financial inclusion may pose threats to both the societies affected and the country’s overall economy.

To illustrate this, the relationship among financial inclusion, real output and interest rates might be provided as an example. According to the neo-Keynesian macroeconomic model, an increase in policy interest rates contributes to lower private expenditures, which reduces real output, and vice versa.

However, the model is flawed in the way it assumes that all consumers as private agents have access to financial services. This would certainly ring false in a lower-middle-income country like Indonesia, where more than 60% of the total population are excluded from accessing financial services. Hence these financially excluded private agents would weaken the elasticity of private spending and reduce the monetary transmission mechanism through interest rates that might affect aggregate demand.

According to a 2015 analysis by Aaron Mehrotra and James Yetman, accessibility to saving or borrowing is the essential characteristic of financial inclusion. Since financial inclusion helps smooth consumption, increased financial inclusion will increase the incentive to buy of the workers, propel the demand for goods and services, hence causing gross domestic product to rise.

Seeing that the degree of financial inclusion is associated with the outcome of monetary and fiscal policies whose underlying motives include financial and economic stability, and seems to reduce inequality, the government needs to put more emphasis on improving financial inclusion in Indonesia.

The government can utilize technology to facilitate credit for workers in the informal sector who want to develop businesses or want to become entrepreneurs so that they can get more secure jobs while the government progressively reforms the human capital of the country.

Poverty and inequality are the biggest threats to the world’s sustainability, and only if we attempt to address the core issues we would all live happily and peacefully.

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Namira Samir Namira Samir is an economist and consultant specializing in Islamic finance, multidimensional poverty and women’s empowerment. She holds a master’s degree in Islamic finance and management from Durham University in the UK.