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US-China trade war? Not likely

Payman Yazdani

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Commenting on recent the US and China tit-for-tat tariff disputes, Prof. Larry Backer says that the deep structures of economic integration cannot be undone by a series of shocks with offers of renegotiation.

As the US and China ratchet up a tit-for-tat tariff dispute, it has been said often in the last few weeks that no one wins a trade war.

The issue was discussed with Larry Backer, Professor of Law and International Affairs in Penn State University.

How will President Trump’s decision to boost tariffs impact US domestic steel and aluminum producers?

My apologies, the answer to this question will be the longest of this interview precisely because the simplest questions may pose the subtlest problems. In contrast to many experts, and others, who might be eager to provide a simple and direct answer to this simple and direct question, I can only offer complexity and contingency. At the greatest level of generalization, it is not clear, even to experts and policymakers, whether the tariff boost will have a positive or negative effect. Steel and aluminum production are now part of integrated production chains only a portion of which concerns steel and aluminum production. The idea appears to be that the tariffs will protect US based steel and aluminum production by making the import of like products more expensive—and thus US producers will substitute domestic production over foreign. That may well work for domestic production and consumption but may not work for domestic production for export—especially where other states match the tariff to equalize pricing (and reduce the foreign subsidy) that the tariff represents. And yet domestic production and consumption is an important element of US macro-economic policy and may produce positive short-term effects in terms of domestic investment and employment.

Yet the tariff discussion must also be understood within a more complex context produced by the deep embedding within global production and ownership chains. The key here is that there is no identity between the location of production (in this case steel and aluminum production) and the nationality of ownership (that is, the “citizenship” of the apex enterprise that owns or controls the steel or aluminum production chain with respect to which production might be located in any number of states). It has been reported, for example, that some US companies may be negatively affected because they are subsidiaries of foreign enterprises from which, for example they receive steel for finishing and then export. And the effect will have little to do with the nationality of the owners of steel production. Consider the irony of these tariffs if, as a result, foreign owned enterprises establish factories in the US for steel production, boosting US production while repatriating the profits of that enterprise back to the home states of parent company. That insight, in turn, produces some variations in the answer to the question you posed.

Larry Backer

First, even if the tariffs have an effect (positive or negative), it is not clear that the extent of that effect will be large. Again, the issue of tariffs can only be viewed in a vacuum within the cloistered towers of those who find such detached analysis useful for purposes of advancing policy without relation to real world effects. Thus, the amplitude of the effect may be difficult to distill apart from the ecology within which tariffs may have both direct and indirect effects.  This provides an opportunity to seek to distill effects using a variety of techniques all of which will be dependent of a set of assumptions and approaches that might well skew the results in ways that serve objectives. These effects, of course, are further complicated by the distinction between the effects on domestic production (an objective of the tariffs, of course) and the effects of the nationality of the benefits of this production. It is not clear how one deals with the situation where domestic production increases (and increases local economies) while the profits of that production are repatriated elsewhere.

Second, even if there is significant effect, it is not clear whether the effect will be generally felt or will affect different parts of the country, and different industrial sectors differently. To speak of the effects of the tariff boost generally produces an answer that aggregates effect. But aggregated effects only serve political interests, it does not reflect the reality within a large country like ours.  It is much more likely that the effects will be felt differently, positively and negatively in different parts of the country and with respect to different industries and companies. Yet that might well have been the point—to ensure a targeted boost to economic activity within specific portions of the US with the hope that this boost in activity will then have indirect effect over a broader area.

Third, the answer to the question must take into account the time horizons for change and the sectors with respect to which differing time horizons might matter. Thus, for example, to the extent that the tariff is meant to foster greater steel and aluminum production, that effect will take years to be felt in terms of actual significant increases in production. Also important here is the question whether that production can be sustained. Tariffs as subsidies may have an immediate effect on decisions to invest in production (and hire labor to aid in its production), but eventually the sector and the heightened production will have to be economically viable—especially since over the middle and long term global consumers and producers may adjust their activities to take the tariffs into account.

Fourth, on the other hand, the immediate effects of the tariffs have already been felt—not in the changes to the location of steel and aluminum production (inside or outside the US), but in the reactions of financial markets, lenders, political leaders and the like. And perhaps that is the most telling part of tariff policy in the contemporary age—tariffs appear to have greater effects on global finance than on global production, on the allocation or distribution of the placement of portions of the production of commodities (in the long term), and on its value in mobilizing mass opinion to some political end or other. In that respect, tariffs may not pose the same problems that they produced a century ago in the European inter-War period. Globalization has substantially reduced the power of tariffs precisely because the borders necessary to make them effective have been substantially eroded—and it is unlikely that they will be reconstructed in the manner of 1920s thinking.

Fifth, the impact will vary from the short to the long term. Most people may be tempted to consider the question in light of immediate or short-term impact. Indeed, global analytics have tended to increasingly favor short term thinking and reaction rather than long term or strategic responses or adjustment. And the short-term impact—politically—will be significant. One sees that already as the “usual suspects” have already aligned themselves and their media outlets to amplify their support or opposition to the tariffs, and to begin to seek to mobilize mass opinion to some end or other. Yet it is the long term strategic adjustments that are far more important and most likely to be missed by a media and analytic culture with a short attention span.

How will it actually impact the aluminum and steel industries globally then?

There are two answers here. The direct answer is that impact will be a function of the way industry and states respond. Industry might be able to avoid the effects of the tariff by strategic shifting of the operations of their global production chains to minimize the effects of the tariffs—but such adjustments might take time. States, on the other hand, are less flexible. They will either support their own industries or risk losing them. If they do not reciprocate tariffs, they might be induced to apply enough support to their industries to wash out the price effects of tariffs. The indirect answer, however, may be more important. The impact to states and enterprises will depend on the ability of both to mitigate the effects of tariffs through changes in the ownership of the producers of tariffed goods. Thus, for example, if Chinese enterprises own or can acquire (direct or indirectly) steel and aluminum production facilities in the US, the net effect of the tariff will be small. Over the long term, and in the absence of waivers from tariff, there may be a gradual shift of production—but not necessarily to the US Instead the shift may move production to other states which have successfully negotiated tariff waivers.

You’ve mentioned some of the beneficiaries behind his decision are their other internal or external beneficiaries in addition to the companies in America, or is it just wholly these American companies who are going to benefit from this decision?

What is an American company today? The notion of national companies is now essentially obsolete in a context in which most economic activity is connected to global flows of production. Companies of a variety of nationalities are organized to manage and participate in global production (in steel and aluminum and other products). The economic enterprise that tends to manage or control the process of production and the role of other enterprises within that production process tends to be characterized as the representative or incarnation of a multinational enterprise, and to lend its nationality to that system of global production. But realistically, that represents an oversimplification of the realities of production. Thus, American apex companies may benefit from the tariffs.

On the other hand, US apex companies who have invested heavily in steel and aluminum production enterprises outside the US may suffer. Conversely, a Russian or Chinese enterprise that owned steel or aluminum production facilities in the US might profit significantly from the tariffs.  Because of this quite large divide between the nationality of the place of production and the nationality of the ownership of production (up the production chain) it is difficult in many cases to point to a generalizable nationality for winners and losers.  And that is the great insight of this effort—states can control generally the production of things within their territory and use their borders to exact a cost of entry (or exit).  But that control of the consequences of production within or outside a state has absolutely nothing to say about the nationality for the beneficiaries of these policies.  If all steel production abroad is owned by US companies, then steel import tariffs would affect US companies negatively because it adds costs to their global allocation of the elements of their production chains.

How much will this decision to increase tariffs affect countries like China, Japan and South Korea then?

There are two questions here.  The first deals with reciprocal tariffs. This is a simple one—if the US raises tariffs on aluminum and steel, then other countries would seek to do the same on US steel and aluminum. Yet the impact on the US may be negligible if it is a net importer of these products. And thus, more effective may be what I might call retaliatory tariffs. Thus, if the US imposes tariffs on steel and aluminum that affects national industries elsewhere, those states might impose duties on US agricultural products or some other product in a sector where US exports are large. But in a global economy that might only produce short term pain, as those in control of production chains can, at some cost, realign their trade routes in ways that might soften the blows of tariffs. And again, where one thinks only of short term effect, one misses the essential element of a more benign long-term effect within a global context in which capital and investment still moves fairly freely. And, indeed, rather than approach the imposition of tariffs with retaliatory tariffs, China, Japan and Korea would be better off buying US: steel manufacturers, increasing production of un-tariffed steel and then exporting that commodity for finishing in their own home states.

How likely is the European Union to retaliate by imposing tariffs on US products?

This is an excellent question.  While the initial emotional response, one fanned by the global media, might have tilted toward retaliatory tariffs on vulnerable US products, that course may not be followed once tempers are calmed.  The principle reason for this is that the Trump Administration has made it clear that it would entertain bilateral negotiations on waivers of tariffs.  This is not a small matter.  Indeed, one can see in this Tariff imposition-negotiated waiver approach an essential feature of the Trump Administration’s movement away from its old approach of globalized system building multilateralism to the new America First Initiative. Thus, consider the dynamics of the tariff imposition in context.  The United States has commenced building its own trade network in a manner that links up with the US enterprise’s management or control of certain production chains.

That requires a reorienting of trade relations from a multilateral form without a center to an aggregated bilateral form with the US at the center.  To effect this reorientation of the foundations of trade the US must first re-center its position in global trade networks (not all of them but those of vital interest or with respect to which there is an ambition). To that end, certain shocks are necessary. These include withdrawal form multilateral agreements (including Paris and TPP) and the disruption of old free trade alignments. But mere withdrawal does not produce re-centering—the offer to renegotiate the terms of bilateral relations (and in the process restore relations or waive action) is the driving element of realignment. At the end of the process, if carried out systematically and with a clear long term vision, the US might well produce a trading system that looks substantially the same as the Chinese One Belt One Road Initiative. If that is the case, then the future of global trade is not manifested in tariffs, but through these tariff and other shocks, a new global trade system, built around control of production chains, will emerge in which most roads lead either to Washington, or to Beijing.

Will Mr. Trump’s acts result in a trade war between the US and world’s other economic powers? What can be the consequences of such possible war for world?

No trade war is likely. The deep structures of economic integration cannot be undone by a series of shocks with offers of renegotiation. And trade war does not seem to be the intent (though one must disregard certain of the President’s tweets to acquire assurance on that point). And America First Initiative is not the same as the isolationist policies adopted from near the end of the 1920s—it is rather the reverse, the effort to encourage muscular expansion but now oriented from key home states, rather than by building a community of similarly situated actors all competing in the global markets for engagement with portions of emerging production chains. And indeed, while the ineptitude of national leaders might, through comedies of errors and personal vanity, move key states toward trade wars, the result would not further state power. Trade wars are particularly dangerous in contemporary politics precisely because they would produce two types of instability. First, trade wars would produce instability among the lower reaches of production chains. Those states would suffer substantial impacts in employment that would lead to political unrest, and more likely substantial migration that would then destabilize neighbors and eventually the apex states to which migration will flow, particularly in the West. Second, trade wars would destabilize apex nations as well. The stability of the political orders in the United States and China depend in large part on the fulfillment of a promise of a baseline economic prosperity. Where that disappears then both states might well be subject to the vagaries of populism which, though it might not overthrow either’s system in a formal sense, would substantially corrupt them.

The US and the Europeans cooperation after world war was based on trade, security and military regimes like NATO. Don’t you think possible trade war between the US and Europe can spill over other security and military fields, too?

I agree, of course, that a trade war would spill over to other vectors of state to state relations. But only suicidal states and mad leaders without substantial popular or institutional checks, could possibly move the US-EU relationship dangerously in that direction. The US and its European allies have had tiffs and have made grand gestures of disapproval against each other with some regularity since the 1960s. One need only remember the antics of Charles De Gaulle (quite effective both within Europe and in the effect on NATO relations). And in any case, the bad behavior of states on the periphery of the US-EU “entente” may ensure the strength of the core alliance militarily and work against economic policy foolishness.

Rising of rightist in Europe is a threat to the future of the EU and from the other side this can result in more independent trade relation without the EU considerations. Considering this fact how do you see the future of EU?

Many people fear the ghosts of the past, and even more people believe that it is important to fight past battles over and over.  But like the analogy with the trade wars of the 1920s, analogies with the rise of fascist movements in Europe in the 1930s may be misapplied in this case. Yes, indeed, the ultra-right movements have risen again after several generations of muscular suppression in Europe, and ridicule (effective) in the US But that suppression, in part, might well have contributed to the re-emergence of the virus of right wing extremism in the face of a largely unchecked left wing extremism that has tended to be the darling of the political and intellectual sets in the US and Europe since the great social rebellions of 1968.

That cultural moment plays differently in Eastern Europe, of course, and produces a return to the comforts of authoritarian nationalism that can easily be characterized as either left or right to suit the agenda of the commentator. At some point balance must be restored, of course, or the EU will flounder. And that may be likely in the medium term. For the moment, however, the rise of rightists as against an unchecked culture of leftism may produce the sort of instability that marked the early Weimar Republic. But at its base, the EU is suffering a version of 2nd generation malaise. The rising elite never experienced the trauma that produced European solidarity in the face of a half century during which Europe virtually committed suicide. They do not know hunger, and fear, nor do they worry about the penetration of larger powers to undermine their own autonomy and independence (those are worries left for the detritus of empire). And thus, they can indulge the privilege of dismissing the institutional structures on which their own prosperity and security are based. To that end, indeed, it is not the rise of the right, but the effects of ennui, that may have a substantial deleterious effect on the solidity of the EU.

The US also recently imposed tariffs and other measures against the People’s Republic of China.  Do you see the possibility of a trade war or more adversarial relations between the US and China with respect to trade issues?

I would suggest that the recent and very quick tariff exchange between the United States and the People’s Republic of China illustrates the character of these tariff moves by the Trump Administration and the way that they have been received once governments finish producing the appropriate responses required for public consumption by their internal and external audiences. Consider what happened when in mid-March 2018 President Trump moved to levy tariffs on up to $60 billion of Chinese imports, in addition to those imposed on solar panels, steel and aluminum. Initially, the Chinese reacted aggressively and publicly in the expected way, utilizing all of their networks to aid in that effort. The Chinese indicated an intention to levy tariffs on about $3 billion of US imports, including soybeans or aircraft, major trade goods.

The effect was immediate—global financial markets fell dramatically over the course of a week. Yet, after the necessary public drama, one discovered that the tariffs imposed on both sides appeared to serve as an invitation for both the US and China to begin to renegotiate their trade relations. The Americans sent a letter indicating the changes that they sought in the wake of the tariff impositions, with an emphasis on trade and intellectual property issues, including what for the US amounted to coercive technology and know-how transfer rules. Premier Li Keqiang spoke publicly about the need for China and the United States to continue negotiations and reiterated pledges to better open their internal markets and perhaps to target purchases of specified US goods. Negotiations continue.

When news leaked of those steps, global markets responded appropriately. And thus one can begin to see the contours of the way in which tariffs have become an instrument rather than the objective of trade policy. The US may now use tariffs as a critically important tool in the reframing of US trade policy in the form of the “America First” Initiative. The object is not to destroy trade—the US President and his advisors have been very clear about that (it is only that people have chosen not to listen)—but to reframe the basis of the global trading system from the forms that emerged after the 2nd World War to a new form whose characteristics will be shaped both by the Chinese One Belt One Road Initiative and its American counterpart, the “America First” Initiative.

It was the Iranian leadership itself which almost a decade ago pointed to the end of the post-World War II era and its structures.  Few paid attention at the time.  That was a pity. For it seems that in retrospect they were correct and that the global community will continue to see manifestations of the new system emerge as the first order powers realign their visions, reach accommodations with each other and reorder the hierarchies of power and production for the first part of this century.

First published in our partner Mehr News Agency

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COVID-19, major shifts and the relevance of Kondratief 6th Wave

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Covid-19 has changed the global strategic equations, it has impacted each part of human life so has it let us to ponder upon the Kondratieff cycles, as with Covid-19 there has started a new debate about sixth wave, which is about the importance of health sector, especially the biotechnology which is crucial for progress of society in future.

Henceforth, the countries that are working on these sectors know that the most important engine for our economic and social development will be health in the 21st century. For example we have USA that focused on these and now has created around 2/3rd of its jobs in health sectors along with that has invested about $3,500 billion on health sector back in 2017. Also a 2008 report said about 4,700 companies all across worked in  field of biotechnology whereby 42% were in North America, and 35% in Europe, which depicts these states long-term understanding of the emerging scenario as seen from the emergence of Coronavirus. But then the on the other side if we look into the health structure of underdeveloped states, we can easily conclude that these states will suffer the most if a global health issue emerges, and in the contemporary world it has emerged in the form of COVID-19.

COVID-19 has brought changes in the political and economic arrangement. It has not limited itself to the China from where it has been started but has impacted the whole world. The virus that is itself unseen has shaken the structure, with severe consequences for all states. No matter if it’s the USA that is the super power or any small states, the pandemic has divulged the capability and integrity of all in their response to the Covid-19. With some having the capabilities to deal with it, but most lacking in these sectors which resulted in huge loss not only of human life but also of resources. Time has come when the world is criticizing globalization at one hand because globalization is the reason for the spread of COVID-19. This has marked the end of one era with the emergence of a new one.

Mention below are some of the major shifts which Covid-19 has resulted in economic sectors in both the developed and the underdeveloped states, along with the major political shift that has led many to debate about the new structure of world after the crisis would be over.

The Covid-19 that was first reported in China, in November has changed the world completely and resulted in a lot of economic and political changes all across. For example the global economy due to Covid-19 crisis have a setback of $590 trillion. Apart from this many people lost their jobs, the household incomes have reduce, moreover World Bank report say nearly 49 million people will move into extreme poverty because of pandemic. Then World largest real estates are having economic problems, the Tourism industry has declined. An estimate showed the loss of about $1.2 to $3.3 trillion in this area of tourism all over world. Also report of International Air Transport Association predicted a loss of $63-$113billion. Moreover the oil sector also faced problem as it was for the first time that its price has gone negative. Henceforth, it can be predicted that once the pandemic is over the world will have a lot to calculate.

The impact of this crisis is seen in both core and periphery states. In core states like the US and china COVID-19 has brought huge economic impact but along with this also a question of who will act as the world saviour. As Chinese economy is expected to decline by 13% in February also the Belt and toad initiative is at halt, but still apart from the economic problem this pandemic has helped a core state like china to use the situation and move towards the status of Global power. Thus this struggle of Global saviour resulted in US and China at odds with each other. Indeed, COVID-19 has brought political repercussions along with economic consequences. When it comes to Europe the industrial production decline by 17%. Likewise USA is also effected by COVID-19 as by this pandemic about 39 million American have lost their jobs, also US economy seen to decline by 20% so US health sector has been in the eye of analyst for its failure to curtail the coronavirus. Then covid-19 has more devastating impact on peripheral states as there health care facility is not well developed. For example the GDP of Bangladesh fell by 1.1%, then many African states that look for tourism as a source of economy faced a loss of about $50 billion. Also 29 million in Latin America fell into poverty. Though they have been exploited in past but the need of the hour is that the world must help them.

Global dynamics are showing transformation amid coronavirus. The pandemic has shown how China is using its trump cards to transform the contemporary situation in its favour while bolstering its image as the “global saviour”. China’s emergence from the sick man of Asian to the positing of global saviour has opened the prospect of a tilt in the global status of Hegemon from US towards China. The question is that will the Chinese strategy amid COVID-19 will hinder the prestige of US who instead of acting as the global leader has shown a deterioration in its role in global governance.

The future of China’s pre-eminence in the global spectrum has been widened by the pandemic. All of this has been further bolstered by the broad rejection of Trump to engage in Europe and elsewhere. COVID-19 not only emerged as an impetus to shift the global dynamic but has helped China to strengthen its position. In response to the confident play by China, US hasn’t come up with any convincing tactics to prevent the increasing role of China in achieving its interest. Recently, a move by Trump administration to withhold US funds of around $400million will surely leave a gap, moreover will be an opportunity for china to bolster its position in WHO. Taking backseat in its global role amid pandemic, then the withdrawal from global treaties, and withholding of funds from WHO shows a pattern which will further create a vacuum for China to take advantage of the prevailing situation. 

The current international order set by US will be subject to testation as the changing shifts in the geopolitics have to be catalyzed by the COVID-19. For it is now the right time for us all to ponder the relevance of Kondratieff 6th wave in current scenario of Covid-19. As now the focus has diverted towards the health care system and biotechnology since the world has in current situation saw a blame game between states with few called corona virus as naturally occurring but some regarded it as ‘Chinese virus’. This has led to the realization that that warfare scenario has entered into discussion over biotechnology. So after the Covid-19 pandemic, the policy makers of both periphery and core state will work on new technological area which has the Medical technologies, Nanotechnologies, Biotechnologies etc. for the improvement in health sector will be crucial for the progress in future.

Conclusively, the current COVID-19 as a bioweapon has resulted in a clear impetus and will definitely bring a shift in the states attitude towards medical research and the multiple fields of technology in future, this is so because COVID-19 has created a ground for relevance of Kondratieff 6th wave.

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How U.S.’s Response to Covid-19 Could Precipitate 2nd Great Depression

Eric Zuesse

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On March 10th of this year, there were 290 daily new U.S. cases of Covid-19 (coronavirus-19).

On March 13th, U.S. President Donald Trump declared a pandemic national emergency, because the number of daily new cases was now suddenly doubling within only three days. However, no lockdown was imposed. The policy-response was instead left to each individual. This is in accord with America’s libertarian idelogy. Trump even announced that “he was allowing his health secretary to bypass certain regulations to provide more flexibility to doctors and hospitals responding to the outbreak” — outright reducing, insead of increasing, federal regulations, this being his way to address the matter. That’s the libertarian response.

Covid-19 (coronavirus-19) cases started soaring in the U.S., from 600 daily new cases on March 13th, to 25,665 on March 31st. Americans were scared to death, and facemask-usage soared, and independent small businesses started laying people off en-masse. (Restaurants, hair salons, travel agencies, inns, dental offices, etc., were hard-hit.)

Immediately, the alarming rise in new cases halted on April 4th (at 34,480), and the daily new cases remained approximately flat, but slightly downward, from March 31 to June 9th (when it reached bottom at 19,166), but then soared yet again, to 78,615, on July 24th.

But, then, it again declined, so that, on September 8th, it was at only 28,561. This was already returning to around what the new-cases rate had been back on March 31st. So: despite peaking again on July 24th, the rate of daily new cases was little changed between March 31st and September 8th. And, all during that 5-month period, people were coming back to work.

The key immediate and direct economic variable affected by Covid-19 is the unemployment rate. Here, that economic effect is clearly shown:

U.S. unemployment: March 4.4%, April 14.7%, May 13.3%, June 11.1%, July 10.2%, August 8.4%

Though the daily-new-cases rate went down after March 31st and after July 24th, the unemployment rate progressed far more gradually downward after March 31st: the small businesses that had been panicked by the explosion of new cases during March were now gradually re-opening — but they remained very nervous; and, so, unemployment still was almost twice what it had been during March.

Here, that experience will be compared with two Scandinavian countries, starting with Denmark, which declared a pandemic national emergency on March 13th, just when Trump also did. “Starting on 13 March 2020, all people working in non-essential functions in the public sector were ordered to stay home for two weeks.” The daily new cases fell from the high of 252 on March 11th, down to the low of 28 on March 15th, but then soared to 390 on April 7th, and gradually declined to 16 (only 16 new cases) on July 9th. Then it peaked back up again, at 373, on August 10th, plunged down to 57 on August 26th, and then soared yet again back up to 243 on September 8th. The new-cases rates were thus irregular, but generally flat. By contrast against the experience in U.S., Denmark’s unemployment-rate remained remarkably stable, throughout this entire period:

Denmark: March 4.1, April 5.4, May 5.6, June 5.5, July 5.2

Sweden’s Government pursued a far more laissez-faire policy-response (“The government has tried to focus efforts on encouraging the right behaviour and creating social norms rather than mandatory restrictions.”), and had vastly worse Covid-19 infection-rates than did the far more socialistic Denmark, and also vastly worse death-rates, both producing results in Sweden more like that of the U.S. policy-response than like that of the Danish policy-response, but far less bad than occurred on the unemployment-rate; and, thus, Sweden showed unemployment-increases which were fairly minor, more like those shown in Denmark:

Sweden: March 7.1, April 8.2, May 9.0, June 9.8, July 8.9

That was nothing like the extreme gyration in:

U.S.: March 4.4%, April 14.7%, May 13.3%, June 11.1%, July 10.2%, August 8.4%

Why was this? 

Even though Sweden’s policy-effectiveness was more like America’s than like Denmark’s at keeping down the percentages of the population who became infected, and who died from Covid-19 (i.e., it was not effective), Sweden’s policy-effectiveness at keeping down the percentage of the population who became unemployed was more like Denmark’s (i.e., it was effective, at that). Unlike America, which has less of a social safety-net than any other industrialized nation does, Sweden had, until recently, one of the most extensive ones, and hasn’t yet reduced it down to American levels (which are exceptionally libertarian). Therefore, whereas Swedes know that the Government will be there for them if they become infected, Americans don’t; and, so, Americans know that, for them, it will instead be “sink or swim.” Make do, or drop dead if you can’t — that is the American way. This is why Swedish unemployment wasn’t much affected by Covid-19. When a Swede experienced what might be symptoms, that person would want to stay home and wouldn’t be so desperate as to continue working even if doing that might infect others. Thus, whereas Sweden’s unemployment-rate rose 27% from March to May, America’s rose 202% during that same period. Americans were desperate for income, because so many of them were poor, and so many of them had either bad health insurance or none at all. (All other industrialized countries have universal health insurance: 100% of the population insured. Only in America is healthcare a privilege that’s available only to people who have the ability to pay for it, instead of a right that is provided to everyone.)

On September 9th, Joe Neel headlined at NPR, “NPR Poll: Financial Pain From Coronavirus Pandemic ‘Much, Much Worse’ Than Expected”, and he reported comprehensively not only from a new NPR poll, but from a new Harvard study, all of which are consistent with what I have predicted (first, here, and then here, and, finally, here), and which seems to me to come down to the following ultimate outcomes, toward which the U.S. is now heading (so, I close my fourth article on this topic, with these likelihoods): 

America’s lack of the democratic socialism (social safety-net) that’s present in countries such as Denmark (and residual vestiges of which haven’t yet been dismantled in Sweden and some other countries) will have caused, in the United States, massive laying-off of the workers in small businesses, as a result of which, overwhelmingly more families will be destroyed that are at the bottom of the economic order, largely Black and/or Hispanic families, than that are White and not in poverty. Also as a consequence, overwhelmingly in the United States, poor people will be suffering far more of the infections, and of the deaths, and of the laying-off, and of the soon-to-be-soaring personal bankruptcies and homelessness; and, soon thereafter, soaring small-business bankruptcies, and ultimately then big-business bankruptcies, and then likely megabank direct federal bailouts such as in 2009, which will be followed, in the final phase, by a hyperinflation that might be comparable to what had occurred in Weimar Germany. The ceaselessly increasing suffering at the bottom will ultimately generate a collapse at the top. Presumably, therefore, today’s seemingly coronavirus-immune U.S. stock markets, such as the S&P 500, are now basically just mega-investors who are selling to small investors, so as to become enabled, after what will be the biggest economic crash in history, to buy “at pennies on the dollar,” the best of what’s left, so as to then go forward into the next stage of the capitalist economic cycle, as owning an even higher percentage of the nation’s wealth than now is the case. Of course, if that does happen, then America will be even more of a dictatorship than it now is. Post-crash 2021 America will be more like Hitler’s Germany, than like FDR’s America was.

The Democratic Party’s Presidential nominee, Joe Biden, is just as corrupt, and just as racist, as is the Republican nominee, Donald Trump. And just as neoconservative (but targeting Russia, instead of China). Therefore, the upcoming November 3rd elections in the U.S. are almost irrelevant, since both of the candidates are about equally disgusting. America’s problems are deeper than just the two stooges that America’s aristocracy hires to front for it at the ballot-boxes.

Author’s note: first posted at Strategic Culture

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Democracy in the doldrums

Samudrala VK

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It is clear that during the COVID-19 pandemic  times, Democracy has gone pear shaped throughout the world. Power and Political activity are considered as alpha and omega of the modern day democracy.
The Modern state(political authority),which is based on legitimacy and a tool to deliver political, economical and social justice, has been rendering yeoman service to
corporates, both domestic and foreign. The ruling dispensations all around the globe have resorted to authoritarianism under the guise of health emergency. In addition, the topsy turvy of Democracy, through excessive centralisation and the iron curtain imposed on political activities during this pandemic, has left minimal space to raise the concerns of the urban poor. The pandemic, a bolt from the blue, has caught our health systems off guard. In India, the labour class has caught between the devil and the deep sea, thanks to the recent twin moves of the central government, privatization and the helter-skelter lockdown. The pernicious effects of the lockdown are yet to hit the masses. Seemingly, the rudderless policies of central government have created enough space to further pauperization of masses, mostly have-nots.
Now, the federal governments of third world countries have to walk on razor edge by meeting the fiscal deficit targets on one hand and by connecting the welfare dots on the other.It is not surprising to say that the big corporates are making good fortunes with the relaxation of tax rates and new labour codes. As unemployment is hanging like the sword of domacles over the working class, the corporate class would expect this surplus labour to be at their beck and call.The early warnings of intelligentsia on the consequences of disastrous lockdown  were remained as the voices crying in the wilderness. The ruling elite has been trying to enshroud the general despondency among the civic force by shifting the propaganda machinery to sensitive elements like religion, hyper nationalism and sloganeering-not to mention self aggrandizement.

Neo-liberalism and corporatisation

The diktats of the world bank and the IMF(International monetary fund) on the third world nations like pruning the subsidies, roll back of welfare measures and the abatement of labour laws as an essential sina qua non for any sort of relief package during the crisis of BOP(Balance of payments) have left labour class of the thrid world nations in quandary. The US with the support of the WTO( World Trade Organization)had exhorted all these countries to provide untrammeled access its products. Apparently, the aims and paths of federal governments of these nations ,the WTO and the IMF are congruent with regard to free trade and the globalization of capital. The lawful protections for the working class under the labour laws have proved disastrous for the interests of the capitalist class and being viewed as shackles for the exploitation. The decades-long struggle to retain these labour rights in independent nation states has been ending in smoke due to weakened trade unions and the decline of social capital. The time has come to fight tenaciously and move heaven and earth to restore their rights which are otherwise go to the dogs. When the market space is being dominated by Monopoly or Duopoly or Tripoly, the free and fair competition which the unhindered market guarantee is an absolute sham. Extolling the virtues of Neo-liberalism, the modern nation states have centred their development agenda in and around urban centres. Economically, in the post-liberal era of India, the upward mobility is largely confined to a few sections of the urban middle class.

Welfare economics

It is wrong to mention that welfare economics is based on “Rob Peter to pay paul principle” when Peter has direct access to resources(natural, political, economical and social) vis-a-vis Paul. It is not the Peter but the Paul who is running from the pillar to post in search of opportunities. The notion of political equality of liberal ideological stream revolves around freedom and liberty of an individual and overlooks the core elements of equality like social and economical justice. The central governments all over the world have successfully repudiated the pro-poor agenda and this volte face from welfare state to pro-capitalist state has pushed the labour class out of the frying pan into the fire.

Nexus between political class and biggies

The unholy nexus between the political class  and corporates has been riding roughshod over the interests of poor. This alliance behooves the political class to safeguard the vested interests of corporate bigwigs. It is apposite to mention that representative democracy has been metamorphosing into a turncoat democracy. Back in the day, Politicians were known for their erudition, statesmanship and uncompromising ideological commitment. On the contrary, present day representatives are turning into snollygosters for their personal gains. There are several voluminous reports from different corners on rising economical disparities in the post-liberal era on which no political party is keen to act upon. As Michael Jackson, king of pop, penned in one of his famous tracks “All I want to say is that they don’t really care about us”-the lyrics are still relevant in this pandemic times.

Globalization and dependency

The South Asian nations have started their LPG (Liberalisation, privatization and Globalization) path at the same time, with the exception of Sri Lanka which had opened its economy by fits and starts.They had adjusted their economical apparatus with a new global integration process at a time when the global economical architecture was dominated by unipolar power, the US.
The lopsided globalization process has been converting many third world countries as dependents and in some cases almost to a level of aid recipients upon the erstwhile colonial powers or the US. Under the banner of global integration, all these nations were dragged into this complex whole, in most of the cases through persuasion. In the name of free trade, the Western powers have been  bleeding these nations white of their resources. The asymmetrical globalization has also challenged the sovereignty of these nations while the same has remained intact in case of developed nations. The US has been playing a rigged game of globalization under the auspices of the WTO, the world bank and other agencies. The time has come for these players to bury their hatchet and rise as a one voice to have a just order at the international sphere.

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