Following the referendum on UK membership of the European Union (EU), upholding Brexit, world politics is expected to herald a period of immense instability and turmoil. There is likelihood of economic crisis in Europe and UK, even globally.
Unexpected or unintended?
Britain’s exit from EU is now almost final, pending only some formalities and the EU is pushing for early conclusion of the Brexit deal. It is quite clear that British Prime Minister David Cameron had not expected the referendum to lose, thereby forcing him to quit, having found no other credible alternative. The result is primarily the outcome of a political miscalculation by Cameron and allies that caused geopolitical and financial issues. The British capitalist lords are staggering about as they try to pick up the pieces while the situation spirals out of control.
Geopolitical relations in Europe have been destabilized as a direct consequence of the Brexit. Without Britain anchored in Europe, relations between France and a far more powerful Germany will deteriorate. Equally, relations between the EU and the United States—for which Britain provided a bridge—will be thrown into flux.
Martin Schulz, president of the European Parliament, insist there must be no delay in Britain invoking Article 50 of the Lisbon Treaty to formally initiate exit proceedings, so as to limit financial damage and impose a harsh settlement on Britain that will serve as an example to others. Far-right forces in Europe are now demanding referenda in their own countries, including the National Front in France and similar parties in Slovakia, Poland, Italy, the Netherlands, Denmark and elsewhere.
Amid dire warnings of economic catastrophe and the boost the referendum gave to right-wing, anti-immigrant nationalists, millions fear for the future. A petition is circulating that has gained some three million votes for another referendum to be held.
There is widespread shock and anger at the Brexit outcome in the UK, even among some who voted for leaving the EU. The result indicates anger on the art of the Britons in the very project of EU- an integration of basically different entities with varying degree of geopolitics and economic variations.
Meanwhile, the UK itself is in danger of breaking apart. Conservative Party and Labour Party could split, amid speculation of a snap general election. The Scottish National Party is pressing for a second independence referendum and also seeking early talks with Brussels and EU member states. In Northern Ireland, where the referendum vote was polarized along Republican and Unionist lines, the most severe crisis since the formal end of the civil war in 1998 is looming.
The historic Brexit that democratically became a reality create Brutish soverign nation once again after decades of being a part of EU, is feared to kickstart another “Great Financial Crisis” of 2008, and threatens to blow up even further, if more European countries exit for EU. The Bank for International Settlements (BIS), has warned of deep-rooted problems in the global economy.
The economic cost of the successful referendum by Britain to cede from EU is aid to be very high globally. The ongoing market sell-off wiped $2.5 trillion from the values of world equities markets on June 24 itself is the most visible manifestation of a much deeper crisis of the global economy. both the International Monetary Fund has warned in effect that the USA and world economy face conditions of stagnation characterized by a long-term reduction in growth rates.
The BIS report said the world economy was threatened by a ‘risky trinity’: debt levels that are too high, productivity growth that is too low, and room for policy manoeuvre that is too narrow.” It cast doubt on the ability to continue to combat crises with monetary policy. However, the BIS had no solution to the ongoing crisis besides further austerity measures. It called for slashing government debt while improving the “quality of public spending… notably by shifting the balance away from… transfers.”
Virtually every global central bank issued a statement saying it would either begin or was ready to implement a further expansion of liquidity measures in response to the share selloff. Markets are increasingly betting that the Federal Reserve will halt, or even reverse, its announced plans to begin raising interest rates. These conditions have weakened productive investment, fueled a global expansion of debt, making it near impossible for central banks to respond in an effective manner to the eruption of new crises.
In the latest such measure, the Japanese government of Prime Minister Shinzo Abe and the Bank of Japan announced the provision of additional funds to the financial system.
The growth of negative interest rates, promoted by central banks seeking to reassure the markets, is a risk with “a long fuse, with the damage less immediately apparent and growing gradually over time. Such rates tend to depress risk premiums and stretch asset valuations, making them more vulnerable to a reversal by encouraging financial risk-taking. All the actions taken by global central banks since the 2008 crisis have only exacerbated the cancerous growth of financial parasitism. At the end of May, close to $8 trillion in sovereign debt, including at long maturities, was trading at negative yields—a new record.” Due to the continuous infusions of cash into world markets, monetary policymakers have found it harder to push inflation back in line with objectives, leading to economic slump.
The types of fiscal austerity measures and labor market restructuring called for by the BIS have been brought forward in every major economy in response to the 2008 crisis. These range from the USA, where state education spending has been slashed by 25 percent, to Greece, Spain, Portugal and, most recently, France, with the implementation of the El Komri labor reforms by the Hollande government, where sweeping social cuts have been combined with attacks on protections for jobs and conditions.
Austerity policies have transferred ever more wealth to the financial elite, who have proceeded to use their cash hoards for speculation and financial parasitism, fueling a vicious cycle of economic stagnation, rising inequality and financial crisis, in turn inflaming international antagonisms and the growth of protectionism.
The global economy cannot afford to rely any longer on the debt-fueled growth model that has brought it to the current juncture, the “persistent and otherwise puzzling” global slowdown in productivity growth. It tellingly attributed the slowdown to the effect of a massive series of booms and busts that have characterized the global economy in recent years as it has become increasingly dominated by financialization and speculative mania, fueled by virtually unlimited cash from global central banks.
A full scale disintegration of the EU is now a real possibility – yes, only a possibility and not necessarily the reality, mainly because Germany would not let EU disintegrate.
EU Integration was an attempt by the ruling classes of the continent, with the support of the United States, to prevent a new eruption of national conflicts that had twice plunged the world into all-out war. However, “unity” within the framework of capitalism could never mean anything other than the domination of the most powerful nations and corporations over the continent and its peoples.
The fracturing of the EU along national lines that is now taking place is once again driving inexorably towards world war. But the EU cannot be put back together again. The Brexit result has made manifest a broader crisis that is insoluble within capitalism because it is rooted in the fundamental contradiction between the integrated character of the global economy and the division of the world into antagonistic nation states based on private ownership of the means of production.
Europe must be united. However, this cannot be done on a progressive basis through efforts to preserve the moribund institutions of the EU or other bureaucratic mechanisms. The progressive and democratic unification of Europe can be achieved only from below, through a revolutionary struggle for socialism across the continent led by the working class.
The likely economic fallout from the Brexit vote on the rest of the world over could be huge. In addition to the direct trade effect, business investment around the globe is likely to be dampened somewhat due to the heightened uncertainty about the global implications of Brexit and the tightening of financial conditions. Companies now delay investment projects to assess how Brexit could affect them.
One impact on the government is the effect on the value of its holdings in banks. The value of the government’s holding in RBS and Lloyds Banking Group dropped by about £8bn, although it has recovered somewhat since.
The pound has dropped considerably against the US dollar; less so against the euro. That has not had a great deal of impact on the economy so far, although it is likely to stoke inflation in due course. National income is reported in pounds so will not be hit automatically by a weaker pound, although it will suffer in comparison with other countries – the status as the world’s fifth biggest economy may be threatened.
There may already have been an impact on the economy or the public finances but there are no data as yet showing that. Throughout the campaign pro Brexit leaders argued that UK would save money from not contributing to the EU Budget.
However, the impact on global growth and inflation is likely to be relatively small – and almost certainly not large enough to push the global economy into recession. UK import demand would be minimal as the UK accounts for only 3.6% of global imports of merchandize goods.
This could lower potential growth even further and would likely lead to higher wage and inflation pressures.
Chancellor of the Exchequer George Osborne says that companies have already started cutting back on investments following the vote to leave the European Union.
The Brexit shock is likely to intensify the pressure on current and future mainstream governments to address inequality and limit migration.
Of course, Europe, USA and the rest of nations would undertake urgent measures to minimize the impact of Brexit and according to reports the European Union has already begun action in the respect. Investors will have to factor in a higher chance of a stagflationary outcome over the next three to five years: even lower growth or near-stagnation coupled with a significant rise in inflation. This could lower potential growth even further and would likely lead to higher wage and inflation pressures.
From Davos to Munich
An overview of the views and attitudes of European officials during the Davos and Munich Conference and their comparison with each other suggests that the security, economic, and political concerns of European countries have not only not diminished but are increasing.
During the World Economic Summit in Davos, the Chancellor of Germany and the President of France both gave a significant warning about the return of nationalism and populism to Europe. This warning has been sent in a time when Far-Right movements in Europe have been able to gain unbelievable power and even seek to conquer a majority of parliaments and form governments.
In her speech, Angela Merkel emphasized that the twentieth century’s mistake shouldn’t be repeated. By this, the German Chancellor meant the tendency of European countries to nationalism. Although the German Chancellor warning was serious and necessary, the warning seems to be a little late. Perhaps it would have been better if the warning was forwarded after the European Parliamentary elections in 2014, and subsequently, more practical and deterrent measures were designed. However, Merkel and other European leaders ignored the representation of over a hundred right-wing extremist in the European Parliament in 2014 and merely saw it as a kind of social excitement.
This social excitement has now become a “political demand” in the West. The dissatisfaction of European citizens with their governments has caused them to explicitly demand the return to the twentieth century and the time before the formation of the United Europe. The recent victories of right wing extremists in Austria, Germany and…, isn’t merely the result of the nationalist movement success in introducing its principles and manifestos. But it is also a result of the failure of the “European moderation” policy to resolve social, security and economic problems in the Eurozone and the European Union. In such a situation, European citizens find that the solutions offered by the moderate left parties didn’t work in removing the existing crises in Europe. Obviously, in this situation “crossing the traditional parties” would become a general demand in the West. Under such circumstances, Merkel’s and other European leaders’ warnings about the return to the twentieth century and the time before the formation of the United Europe simply means the inability of the Eurozone authorities in preventing the Right-extremism in the West.
These concerns remain at the Munich Security Conference. As Reuters reported, The defense ministers of Germany and France pledged to redouble their military and foreign policy cooperation efforts on Friday, inviting other European countries to participate if they felt ready to do so.
In a speech to the Munich Security Conference, German defense minister Ursula von der Leyen said Europe’s countries would not be able to respond nimbly enough to global challenges if they were stymied by the need to decide joint foreign policy approaches unanimously.
“Europe has to up its pace in the face of global challenges from terrorism, poverty and climate change,” she said. “Those who want to must be able to advance without being blocked by individual countries.”
Her French counterpart Florence Parly said any such deepened cooperation would be complementary to the NATO alliance, which itself was based on the principle that members contributed differently depending on their capacities.
“The reality has always been that some countries are by choice more integrated and more able to act than others,” she said.
The push comes as Germany’s political class reluctantly concedes it must play a larger security role to match its economic pre-eminence in Europe, amid concerns that the European Union is unable to respond effectively to security concerns beyond its eastern and southern borders.
But in their deal for another four years of a “grand coalition” government, Chancellor Angela Merkel’s conservatives and the Social Democrats have agreed to boost spending on the armed forces after years of post-Cold War decline.
The deal, which must still be ratified by the Social Democrat membership, comes as Germany reluctantly takes on the role of the continent’s pre-eminent political power-broker, a role generations of post-war politicians have shied away from.
Days after U.S. Secretary of Defense James Mattis reiterated President Donald Trump’s demand that European countries spend more on their militaries, Von der Leyen pledged to spend more on its military and the United Nations, but called in return for other countries not to turn away from mulitlateralism.
The pledges come as the EU seeks a new basis on which to cooperate with Britain, traditionally one of the continent’s leading security players, after its vote to leave the EU.
Earlier on Friday, the leaders of the three countries’ security services said close security cooperation in areas like terrorism, illegal migration, proliferation and cyber attacks, must continue after Britain’s departure.
“Cooperation between European intelligence agencies combined with the values of liberal democracy is indispensable, especially against a background of diverse foreign and security challenges,” they said.
First published in our partner Tehran Times
Election Monitoring in 2018: What Not to Expect
This year’s election calendar released by OSCE showcases a broad display of future presidential, parliamentary and general elections with hefty political subjecthoods which have the potential of transforming in their entirety particularly the European Union, the African Union and the Latin American sub-continent. A wide sample of these countries welcoming elections are currently facing a breadth of challenges in terms of the level of transparency in their election processes. To this end, election observation campaigns conducted by the OSCE Office for Democratic Institutions and Human Rights (ODIHR), the Council of Europe, the Organisation for American States (OAS), the United Nations Electoral Assistance Division, the National Democratic Institute, Carter Center and even youth organisations such as AEGEE and Silba are of paramount importance in safeguarding the incorruptibility of election proceedings in fraudulent and what cannot be seen with the naked eye type of fraudulent political systems, making sure elections unfold abiding national legislation and international standards.
What exactly does an election observation mission supposed to accomplish?
An election monitoring mission consists of operational experts and analysts who are all part of a core team and are conducting their assignments for a period of time varying between 8 and 12 weeks. Aside from the core team experts and analysts, there can be short-term or long-term observers and seconded observers or funded observers. Joining them, there is usually a massive local support staff acting as interpreters and intermediaries. Generally, an election observer does not interfere with the process, but merely takes informative notes. With this in mind, it is imperative of the observer to make sure there isn’t any meddling with votes at polling stations by parties and individual candidates; that the people facilitating the election process are picked according to fair and rigorous benchmarks; that these same people can be held accountable for the final results and that, at the end of the day, the election system put in place by the national and local authorities is solid from both a physical and logical standpoint. Oftentimes, particularly in emerging democracies, the election monitoring process goes beyond the actual process of voting by extending to campaign monitoring.
In practical terms, the average election observer needs to abide by certain guidelines for a smooth and standardised monitoring process. Of course, these rules can vary slightly, depending on the sending institution. Typically, once the election observer has landed in the country awaiting elections, their first two days are normally filled with seminars on the electoral system of the country and on the electoral law. Meetings with candidates from the opposition are sometimes organised by the electoral commission. Talking to ordinary voters from builders to cleaners, from artists to businesspeople is another way through which an election observer can get a sense of what social classes pledged their allegiances to what candidates. After two days in training and the one day testing political preferences on the ground, election day begins. Since the early bird gets the worm, polling stations open at least two hours earlier than the work day starts, at around 7am. Throughout the day, observers ask voters whether they feel they need to complain about anything and whether they were asked to identify themselves when voting. Other details such as the polling stations opening on time are very much within the scope of investigation for election monitors. Observers visit both urban voting centres and rural ones. In the afternoon, counting begins with observers carefully watching the volunteers from at least 3 metres away. At the end of the day, observers go back to their hotels and begin filling in their initial questionnaires with their immediate reactions on the whole voting process. In a few weeks time, a detailed report would be issued in cooperation with all the other election observers deployed in various regions of the country and under the supervision of the mission coordinators.
Why are these upcoming elections particularly challenging to monitor?
Talks of potential Russian interference into the U.S. elections have led to full-on FBI investigations. Moreover, the idea of Russian interference in the Brexit vote is slowly creeping into the British political discourse. Therefore, it does not take a quantum physicist to see a pattern here. Hacking the voting mechanism is yet another not-so-classic conundrum election observers are facing. We’re in the midst of election hacking at the cognitive level in the form of influence operations, doxing and propaganda. But, even more disturbingly, we’re helpless witnesses to interference at the technical level as well. Removing opposition’s website from the Internet through DDOS attacks to downright political web-hacking in Ukraine’s Central Election Commission to show as winner a far-right candidate are only some of the ways which present an unprecedented political savviness and sophistication directed at the tampering of the election machinery. Even in a country such as the U.S. (or Sweden – their elections being held September of this year) where there is a great deal of control over the physical vote, there is not much election monitoring can do to enhance the transparency of it all when interference occurs by way of the cyber domain affecting palpable election-related infrastructure.
Sketching ideational terrains seems like a fruitful exercise in imagining worst-case scenarios which call for the design of a comprehensive pre-emptive approach for election fraud. But how do you prevent election fraud? Sometimes, the election observer needs to come to terms with the fact that they are merely a reporter, a pawn which notwithstanding the action of finding oneself in the middle of it all, can generally use only its hindsight perspective. Sometimes, that perspective is good enough when employed to draft comprehensive electoral reports, making a difference between the blurry lines of legitimate and illegitimate political and electoral systems.
Can Europe successfully rein in Big Tobacco?
In what looks set to become the ‘dieselgate’ of the tobacco industry, a French anti-smoking organization has filed a lawsuit against four major tobacco brands for knowingly selling cigarettes with tar and nicotine levels that were between 2 and 10 times higher than what was indicated on the packs. Because the firms had manipulated the testing process, smokers who thought they were smoking a pack a day were in fact lighting up the equivalent of up to 10, significantly raising their risk for lung cancer and other diseases.
According to the National Committee Against Smoking (CNCT), cigarettes sold by the four companies have small holes in the filter that ventilate smoke inhaled under test conditions. But when smoked by a person, the holes compress due to pressure from the lips and fingers, causing the smoker to inhale higher levels of tar and nicotine. According to the lawsuit, the irregularity “tricks smokers because they are unaware of the degree of risk they are taking.”
It was only the most recent example of what appears to be a deeply entrenched propensity for malfeasance in the tobacco industry. And unfortunately, regulatory authorities across Europe still appear unprepared to just say no to big tobacco.
Earlier this month, for instance, Public Health England published a report which shines a positive light on “tobacco heating products” and indicates that electronic cigarettes pose minimal health risks. Unsurprisingly, the UK report has been welcomed by big tobacco, with British American Tobacco praising the clear-sightedness of Public Health England.
Meanwhile, on an EU-wide level, lawmakers are cooperating too closely for comfort with tobacco industry executives in their efforts to craft new cigarette tracking rules for the bloc.
The new rules are part of a campaign to clamp down on tobacco smuggling, a problem that is particularly insidious in Europe and is often attributed to the tobacco industry’s own efforts to stiff the taxman. According to the WHO, the illicit cigarette market makes up between 6-10% of the total market, and Europe ranks first worldwide in terms of the number of seized cigarettes. According to studies, tobacco smuggling is also estimated to cost national and EU budgets more than €10 billion each year in lost public revenue and is a significant source of cash for organized crime. Not surprisingly, cheap availability of illegally traded cigarettes is also a major cause of persistently high smoking rates in the bloc.
To help curtail cigarette smuggling and set best practices in the fight against the tobacco epidemic, the WHO established the Framework Convention on Tobacco Control (FCTC) in 2005. The first protocol to the FCTC, the Protocol to Eliminate Illicit Trade in Tobacco Products, was adopted in 2012 and later ratified by the EU. Among other criteria, the Protocol requires all cigarette packs to be marked with unique identifiers to ensure they can be tracked and traced, thereby making smuggling more difficult.
Unsurprisingly, the tobacco industry has come up with its own candidates to meet track and trace requirements, notably Codentify, a system developed by PMI. From 2005 through 2016, PMI used Codentify as part of an anti-smuggling agreement with the EU. But the agreement was subject to withering criticism from the WHO and other stakeholders for going against the Protocol, which requires the EU and other parties to exclude the tobacco industry from participating in anti-smuggling efforts.
The EU-PMI agreement expired in 2016 and any hopes of reviving it collapsed after the European Parliament, at loggerheads with the Commission, overwhelmingly voted against a new deal and decided to ratify the WHO’s Protocol instead. Codentify has since been sold to the French firm Impala and was rebranded as Inexto – which critics say is nothing but a front company for PMI since its leadership is made out of former PMI executives. Nonetheless, due to lack of stringency in the EU’s draft track and trace proposal, there is still a chance that Inexto may play a role in any new track and trace system, sidelining efforts to set up a system that is completely independent of the tobacco industry.
This could end up by seriously derailing the EU’s efforts to curb tobacco smuggling, given the industry’s history of active involvement in covertly propping up the black market for cigarettes. In 2004, PMI paid $1.25 billion to the EU to settle claims that it was complicit in tobacco smuggling. As part of the settlement, PMI agreed to issue an annual report about tobacco smuggling in the EU, a report that independent researchers found “served the interests of PMI over those of the EU and its member states.”
Given the industry’s sordid history of efforts to prop up the illicit tobacco trade, it’s little surprise that critics are still dissatisfied with the current version of the EU’s track and trace proposal.
Now, the CNCT’s lawsuit against four major tobacco firms gives all the more reason to take a harder line against the industry. After all, if big tobacco can’t even be honest with authorities about the real levels of chemicals in their own products, what makes lawmakers think that they can play a viable role in any effort to quell the illegal cigarette trade – one that directly benefits the industry?
Later this month, the European Parliament will have a new chance to show they’re ready to get tough on tobacco, when they vote on the pending proposal for an EU-wide track and trace system. French MEP Younous Omarjee has already filed a motion against the system due to its incompatibility with the letter of the WHO. Perhaps a ‘dieselgate’ for the tobacco industry might be just the catalyst they need to finally say no to PMI and its co-conspirators.
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