European integration has been transformed into neo-liberal project when the economic crisis and global competition were strengthened starting from 1970s. There were other important occurrences which caused a shift in economic model, like 1973 oil price hike, 1975 U.S. defeat in Vietnam, halt in Bretton Woods System in 1971. After Keynesianism, rising social responsibilities of states and caring the class which consumes without producing also accelerated unavoidable economic shift.
Particularly, after economic crisis in 1973, it was identified that traditional approaches to economy is insufficient. Structural weakness of the economy was also revealed in the comparison with the U.S. and Japan’s economic development. In this situation, three main debates appeared over restructuring socio-economic order of Europe. The fundamental axis of ideological struggles within the European capitalist class in the beginning of 1980s constituted the contrast between neo-mercantilism and neo-liberalism. Neo-mercantilists had the view of “Europeanism”. They were the main industries which were producing for only Europe. Therefore, they wanted to create a strong European market which is resilient to outside competition. Thus, how and to what extent the European capitalist class has shaped the transformation of the European order largely depended on the outcome of the struggle between Europeanists and globalists.
The third adversary capitalist model – social democratic model appeared in the second half of 1980s. The main concern of this model was that social dimension should be added to the completion of internal market. Social democracy model was suggested by Jacques Delors in 1985 (president of European Commission) with promising high level of social protection against the possible disruptive forces of neoliberalism and globalization.Thus, European Social Model appeared in Delors’ vision that European capitalism should combine both the needs for welfare and sustainable growth, social solidarity and competitive market. To reach these goals, it was aimed to create strong European institutions and support state-building programs together with market-building. To make European market stronger against the global competition converged social model defenders to neo-mercantilists.
Indeed, all three models supported the accomplishment of internal market. However, the significant friction occurred on the question how the single market should be completed. The answer of neoliberalism was that trade liberalization should be increased and large external openness should be added there. On the other hand, social model supported regulation of market by a single supra-national power, namely Commission.The third project – neo-mercantilism supported interventionist industrial policy by increasing external tariffs in order to protect the internal market form outside competition.
The debate on the completion of market was resulted with the victory of neo-liberalist model of capitalism. The steady support and lobbying of corporate sector, while the weakness of labor unions were the main reasons for the victory of neo-liberalism. In Europethe shift towards state ownership or privatization, labor markets’ flexibilisation and pressure on wage demands started to be strengthened form 1980s which significantly decreased the power of labor unions. While support for further liberalization has been increased with the 200 TNCs and 500 corporate lobby groups based in Brussels, it wasn’t thought that the ignorance of labors’ social demands will cause resurgence of social model. Neo-Gramscian theorist van Apeldoorn particularly mentions the promotion activities of European Round Table Industrialists for global liberalism.
The turn of neo-liberalism has certainly been started in European integration after the creation of Single Market in 1987. Neo-liberalist approach was promoted with the claim of treating the deficiencies of the social welfare state, like increase in welfare, formation of rational and responsible individuality and productivity. In the beginning, it was accepted to provide a middle path (social democratic) and state intervention along with the free market. However, the further development of the approach was far from meeting the expectations of social policy and social welfare. In particular, the increasing welfare gap among social classes, income inequalities, increase in poverty and interest rates, erosion of job security and rise in the levels of unregistered employment increased the discontent substantially in the social sectors.
After completion of Single Market, further steps in integration, like European Monetary Union, Lisbon Strategy have been totally based on economic liberalization and preference for competition. Considering anti-globalization movements, EU became active in social policy improvement, whereas these movements were constrained by the claims for competitiveness, economic efficiency and stabilization. For example, Phipip Whyman, Mark Baimbridge and Andrew Mullen exemplify 1989 Social Charter and 1999 Luxembourg and Cologne process for the creation of European Employment Pact. They argue that the former process aimed to respect for national differences in social systems and the latter planned to deliver job-creating growth and decrease the burden on workers by reforming taxation and social security systems. However, the authors criticize that Employment policy guidelines have been left for the decision and control of member states. According to Cologne process, member states had to develop and implement their national action plans for employment improvement on their own and then they could publish the consequences in the joint employment report after Commission’s approval. They further claim that in this situation, there can’t be formed a unified EU level welfare state.
Social Policy Agenda (2000) under Lisbon strategy aimed to modernize social protection and to create more and better jobs. However, there was a critic about EU’s social initiatives that all social policies were limited to voluntary coordination and social dialogue which shows the absence of willing for formulating a common and regulated mechanism.
Starting from 1990s, there appeared important deficiencies in neoliberalism which gave a way for resurgence of ESM discourse. One of the main flaws was related to the rising power of Trans National Corporations. Corporations’ unwillingness for organized labor market, stabilizing welfare benefits by ensuring work pays and increase in payment for social expenditure resulted with rise in poverty and social inequalities. They have played a crucial role in transforming of World Order by penetrating not only to economy, but also to policy-making process through lobbying endeavors and media by using propaganda. Phipip Whyman, Mark Baimbridge and Andrew Mullen argue in their book that TNCs started to govern the economics and became more wealthy and powerful after neo-liberal revolution and spreading the dominance of globalization. For example, worldwide sales of TNCs were smaller than world exports in 1960, however they got 247 per cent of world exports in 2000. Following this, Chomsky also declared neo-liberal world order as “new imperial age” by claiming that World Bank, GATT, IMF were programmed to serve the interests of TNCs and investment firms.
Global trade in services and goods started to be dependent on TNCs and this process of corporate concentration has been speed up by trade deals, like Single Market (in 1987) or NAFTA (in 1994). Moreover, as the two-third of TNCs were based in North (Japan, Europe, North America), FDIs in the form of acquisitions and cross-border mergers were substantially centered in core countries. This concentration of FDIs deepen core-periphery divergence and make periphery stay outside by increasing interpenetration of core countries.
Neo-liberal policies and its social consequences
Neoliberalism has been unsuccessful to reach its aims in terms of social well-being and economic efficiency. If we compare the period 1980-2000 with the previous twenty years (1960-1980), then we can easily identify that the latter period has been more successful in terms of well-being indicators and quality of life, than the former. Furthermore, annual rate of economic growth per capita has been lower in the EU when neo-liberalism peaked in 2000. The author also elaborates that class inequalities have increased substantially in Europe’s capitalist countries. To prove the hypothesis of increasing income inequality, Branco Milanovic came a conclusion that world population’s top 1 per cent obtained 57 per cent of the world income between 1995 and 2000.
Income and other social inequalities have appeared due to the class-determined policies. In other words, as neo-Gramscian theorists argue, hegemon classes in the form of lobby groups (European Round Table of Industrialists, World Economic Forum, Trilateral Commission and so on) directly influence to the decisions of governments. These decision and policies constitute the core of neo-liberalism which undermined the implementation of social policies.
One of the main public policy in neoliberalism was the deregulation of labor markets. John Peters argues in his article that the most significant consequence of labor markets’ deregulation was the decline in salaries and job security, while rise in temporary employment. This policy also eliminated the power of trade unions to change the nature of jobs through collective negotiations. The initiative of deregulation and allowing businesses to define wages have been started by Ronald Reagan and Margaret Thatcher with claim of supporting businesses. Table 1 shows the percentage of trade union membership in the EU after the launch of neoliberalism until its peak – 2003. Between this period of time we can observe a slight decline in the membership for Trade Unions in developed countries.
Table 1: Trade Union density
Then deregulation of financial markets and commerce in goods and services were followed. Deregulation for consumers was beneficial in terms of having more choices and superior customer service, however it was more detrimental for consumers who have worse socio-economic conditions. These types of customers can’t pay more for products and have been left for the mercy of businesses who mainly care their profits than social responsibility.
Another crucial neo-liberal policy was the reduction of social public expenditures which was harmful for working class. Government spending on social programmes has been cut through austerity measures which aimed to reduce budget deficits. Member countries started to reduce public debts and budget deficits within austerity measures after Maastricht Convergence Criteria which sharpened the already high unemployment rates. The trouble due to rising unemployment rates persuaded European Council to formulate European Stability Pact in 1997 which has played a crucial role in the process of cutting social expenditures. The main objective of Stability and Growth Pact was to ensure the commitment of member states to the Maastricht Convergence Criteria. However, the commitment about keeping deficit below 3 per cent of GNP has been strengthened which resulted with large reductions of social public expenditures.
The situation deteriorated for working class who use public services, with the next policy of privatization of services. U.K.’s large privatization experience has been a model for other countries, in particular after Maastricht Convergence Criteria. Privatization aimed to reduce public debt level and budget deficit. Privatization of assets and public sector services was continued after euro crisis in 2008 under Troika.
From the beginnings of 1990s the discourse of promotion of ant-interventionism has been reinforced under neo-liberal model. Despite the acceptance of state interventionism in neo-liberalism, the new discourse of ant-interventionism appeared to support the interests of TNCs and dominant classes.
Matthew Eagleton-Pierce explains the promotion of individualism and consumerism in neo-liberalism and relates the term of individualism with the term of choice. He further claims that the relationship between neo-liberalism and consumer choice is in contrast with the culture of collectivism. Starting from the 1970s, collective forms of socio-economic organization has been challenged by business lobbies and conservative governments. To show the correlation, he exemplifies that the decline in trade union participation in Western Europe started to weaken socialist-inspired goals and to erode bargaining positions.
Iceland’s Historic(al) Elections
The morning of September, 26 was a good one for Lenya Run Karim of the Pirate Party. Once the preliminary results were announced, things were clear: the 21-year-old law student of the University of Iceland, originating from a Kurdish immigrant family, had become the youngest MP in the country’s history.
In historical significance, however, this event was second to another. Iceland, the world champion in terms of gender equality, became the first country in Europe to have more women MPs than men, 33 versus 30. The news immediately made world headlines: only five countries in the world have achieved such impressive results. Remarkably, all are non-European: Rwanda, Nicaragua and Cuba have a majority of women in parliament, while Mexico and the UAE have an equal number of male and female MPs.
Nine hours later, news agencies around the world had to edit their headlines. The recount in the Northwest constituency affected the outcome across the country to delay the ‘triumph for women’ for another four years.
Small numbers, big changes
The Icelandic electoral system is designed so that 54 out of the 63 seats in the Althingi, the national parliament, are primary or constituency seats, while another nine are equalization seats. Only parties passing the 5 per cent threshold are allowed to distribute equalisation seats that go to the candidates who failed to win constituency mandates and received the most votes in their constituency. However, the number of equalisation mandates in each of the 6 constituencies is legislated. In theory, this could lead to a situation in which the leading party candidate in one constituency may simply lack an equalisation mandate, so the leading candidate of the same party—but in another constituency—receives it.
This is what happened this year. Because of a difference of only ten votes between the Reform Party and the Pirate Party, both vying for the only equalisation mandate in the Northwest, the constituency’s electoral commission announced a recount on its own initiative. There were also questions concerning the counting procedure as such: the ballots were not sealed but simply locked in a Borgarnes hotel room. The updated results hardly affected the distribution of seats between the parties, bringing in five new MPs, none of whom were women, with the 21-year-old Lenya Run Karim replaced by her 52-year-old party colleague.
In the afternoon of September, 27, at the request of the Left-Green Movement, supported by the Independence Party, the Pirates and the Reform Party, the commission in the South announced a recount of their own—the difference between the Left-Greens and the Centrists was only seven votes. There was no ‘domino effect’, as in the case of the Northwest, as the five-hour recount showed the same result. Recounts in other districts are unlikely, nor is it likely that Althingi—vested with the power to declare the elections valid—would invalidate the results in the Northwest. Nevertheless, the ‘replaced’ candidates have already announced their intention to appeal against the results, citing violations of ballot storage procedures. Under the Icelandic law, this is quite enough to invalidate the results and call a re-election in the Northwest, as the Supreme Court of Iceland invalidated the Constitutional Council elections due to a breach of procedure 10 years ago. Be that as it may, the current score remains 33:30, in favor of men.
Progressives’ progress and threshold for socialists
On the whole, there were no surprises: the provisional allocation of mandates resembles, if with minor changes, the opinion polls on the eve of the election.
The ruling three-party coalition has rejuvenated its position, winning 37 out of the 63 Althingi seats. The centrist Progressive Party saw a real electoral triumph, improving its 2017 result by five seats. Prime-minister Katrín Jakobsdóttir’s Left-Green Movement, albeit with a slight loss, won eight seats, surpassing all pre-election expectations. Although the centre-right Independence Party outperformed everyone again to win almost a quarter of all votes, 16 seats are one of the worst results of the Icelandic ‘Grand Old Party’ ever.
The results of the Social-Democrats, almost 10% versus 12.1% in 2017, and of the Pirates, 8.6% versus 9.2%, have deteriorated. Support for the Centre Party of Sigmundur Gunnlaugsson, former prime-minister and victim of the Panama Papers, has halved from 10.9% to 5.4%. The centrists have seen a steady decline in recent years, largely due to a sexist scandal involving party MPs. The populist People’s Party and the pro-European Reform Party have seen gains of 8.8% and 8.3%, as compared to 6.9% and 6.7% in the previous elections.
Of the leading Icelandic parties, only the Socialist Party failed to pass the 5 per cent threshold: despite a rating above 7% in August, the Socialists received only 4.1% of the vote.
Coronavirus, climate & economy
Healthcare and the fight against COVID-19 was, expectedly, on top of the agenda of the elections: 72% of voters ranked it as the defining issue, according to a Fréttablaðið poll. Thanks to swift and stringent measures, the Icelandic government brought the coronavirus under control from day one, and the country has enjoyed one of the lowest infection rates in the world for most of the time. At the same time, the pandemic exposed a number of problems in the national healthcare system: staff shortages, low salaries and long waiting lists for emergency surgery.
Climate change, which Icelanders are already experiencing, was an equally important topic. This summer, the temperature has not dropped below 20°C for 59 days, an anomaly for a North-Atlantic island. However, Icelanders’ concerns never converted into increased support for the four left-leaning parties advocating greater reductions in CO2 emission than the country has committed to under the Paris Agreement: their combined result fell by 0.5%.
The economy and employment were also among the main issues in this election. The pandemic has severely damaged the island nation’s economy, which is heavily tourism-reliant—perhaps, unsurprisingly, many Icelanders are in favor of reviving the tourism sector as well as diversifying the economy further.
The EU membership, by far a ‘traditional’ issue in Icelandic politics, is unlikely to be featured on the agenda of the newly-elected parliament as the combined result of the Eurosceptics, despite a loss of 4%, still exceeds half of the overall votes. The new Althingi will probably face the issue of constitutional reform once again, which is only becoming more topical in the light of the pandemic and the equalization mandates story.
New (old) government?
The parties are to negotiate coalition formation. The most likely scenario now is that the ruling coalition of the Independence Party, the Left-Greens and the Progressives continues. It has been the most ideologically diverse and the first three-party coalition in Iceland’s history to last a full term. A successful fight against the pandemic has only strengthened its positions and helped it secure additional votes. Independence Party leader and finance minister Bjarni Benediktsson has earlier said he would be prepared to keep the ruling coalition if it holds the majority. President Guðni Jóhannesson announced immediately after the elections that he would confirm the mandate of the ruling coalition to form a new government if the three parties could strike a deal.
Other developments are possible but unlikely. Should the Left-Greens decide to leave the coalition, they could be replaced by the Reform Party or the People’s Party, while any coalition without the Independence Party can only be a four-party or larger coalition.
Who will become the new prime-minister still remains to be seen—but if the ruling coalition remains in place, the current prime-minister and leader of the Left-Greens, Katrín Jakobsdóttir, stands a good chance of keeping her post: she is still the most popular politician in Iceland with a 40 per cent approval rate.
The 2021 Althingi election, with one of the lowest turnouts in history at 80.1%, has not produced a clear winner. The election results reflect a Europe-wide trend in which traditional “major” parties are losing support. The electorate is fragmenting and their votes are pulled by smaller new parties. The coronavirus pandemic has only reinforced this trend.
The 2021 campaign did not foreshadow a sensation. Although Iceland has not become the first European country with a women’s majority in parliament, these elections will certainly go down in history as a test of Icelanders’ trust to their own democracy.
From our partner RIAC
EU-Balkan Summit: No Set Timeframe for Western Balkans Accession
On October 6, Slovenia hosted a summit between the EU and the Western Balkans states. The EU-27 met with their counterparts (Albania, Bosnia-Herzegovina, Serbia, Montenegro, North Macedonia and Kosovo) in the sumptuous Renaissance setting of Brdo Castle, 30 kilometers north of the capital, Ljubljana. Despite calls from a minority of heads of state and government, there were no sign of a breakthrough on the sensitive issue of enlargement. The accession of these countries to the European Union is still not unanimous among the 27 EU member states.
During her final tour of the Balkans three weeks ago, German Chancellor Angela Merkel stated that the peninsula’s integration was of “geostrategic” importance. On the eve of the summit, Austrian Chancellor Sebastian Kurz backed Slovenia’s goal of integrating this zone’s countries into the EU by 2030.
However, the unanimity required to begin the hard negotiations is still a long way off, even for the most advanced countries in the accession process, Albania and North Macedonia. Bulgaria, which is already a member of the EU, is opposing North Macedonia’s admission due to linguistic and cultural differences. Since Yugoslavia’s demise, Sofia has rejected the concept of Macedonian language, insisting that it is a Bulgarian dialect, and has condemned the artificial construction of a distinct national identity.
Other countries’ reluctance to join quickly is of a different nature. France and the Netherlands believe that previous enlargements (Bulgaria and Romania in 2007) have resulted in changes that must first be digested before the next round of enlargement. The EU-27 also demand that all necessary prior guarantees be provided regarding the independence of the judiciary and the fight against corruption in these countries. Despite the fact that press freedom is a requirement for membership, the NGO Reporters Without Borders (RSF) urged the EU to make “support for investigative and professional journalism” a key issue at the summit.”
While the EU-27 have not met since June, the topic of Western Balkans integration is competing with other top priorities in the run-up to France’s presidency of the EU in the first half of 2022. On the eve of the summit, a working dinner will be held, the President of the European Council, Charles Michel, called for “a strategic discussion on the role of the Union on the international scene” in his letter of invitation to the EU-Balkans Summit, citing “recent developments in Afghanistan,” the announcement of the AUKUS pact between the United States, Australia, and the United Kingdom, which has enraged Paris.
The Western Balkans remain the focal point of an international game of influence in which the Europeans seek to maintain their dominance. As a result, the importance of reaffirming a “European perspective” at the summit was not an overstatement. Faced with the more frequent incursion of China, Russia, and Turkey in that European region, the EU has pledged a 30 billion euro Economic and Investment Plan for 2021-2027, as well as increased cooperation, particularly to deal with the aftermath of the Covid-19 pandemic.
Opening the borders, however, is out of the question. In the absence of progress on this issue, Albania, North Macedonia, and Serbia have decided to establish their own zone of free movement (The Balkans are Open”) beginning January 1, 2023. “We are starting today to do in the region what we will do tomorrow in the EU,” said Albanian Prime Minister Edi Rama when the agreement was signed last July.
This initiative, launched in 2019 under the name “Mini-Schengen” and based on a 1990s idea, does not have the support of the entire peninsular region, which remains deeply divided over this project. While Bosnia and Herzegovina and Montenegro are not refusing to be a part of it and are open to discussions, the Prime Minister of Kosovo, Albin Kurti, who took office in 2020, for his part accuses Serbia of relying on this project to recreate “a fourth Yugoslavia”
Tensions between Balkan countries continue to be an impediment to European integration. The issue of movement between Kosovo and Serbia has been a source of concern since the end of September. Two weeks of escalation followed Kosovo’s decision to prohibit cars with Serbian license plates from entering its territory, in response to Serbia’s long-standing prohibition on allowing vehicles to pass in the opposite direction.
In response to the mobilization of Kosovar police to block the road, Serbs in Kosovo blocked roads to their towns and villages, and Serbia deployed tanks and the air force near the border. On Sunday, October 3, the conflict seemed to be over, and the roads were reopened. However, the tone had been set three days before the EU-Balkans summit.
German Election: Ramifications for the US Foreign Policy
In the recent German election, foreign policy was scarcely an issue. But Germany is an important element in the US foreign policy. There is a number of cases where Germany and the US can cooperate, but all of these dynamics are going to change very soon.
The Germans’ strategic culture makes it hard to be aligned perfectly with the US and disagreements can easily damage the relations. After the tension between the two countries over the Iraq war, in 2003, Henry Kissinger said that he could not imagine the relations between Germany and the US could be aggravated so quickly, so easily, which might end up being the “permanent temptation of German politics”. For a long time, the US used to provide security for Germany during the Cold War and beyond, so, several generations are used to take peace for granted. But recently, there is a growing demand on them to carry more burden, not just for their own security, but for international peace and stability. This demand was not well-received in Berlin.
Then, the environment around Germany changed and new threats loomed up in front of them. The great powers’ competition became the main theme in international relations. Still, Germany was not and is not ready for shouldering more responsibility. Politicians know this very well. Ursula von der Leyen, who was German defense minister, asked terms like “nuclear weapons” and “deterrence” be removed from her speeches.
Although on paper, all major parties appreciate the importance of Germany’s relations with the US, the Greens and SPD ask for a reset in the relations. The Greens insist on the European way in transatlantic relations and SPD seeks more multilateralism. Therefore, alignment may be harder to maintain in the future. However, If the tensions between the US and China heat up to melting degrees, then external pressure can overrule the internal pressure and Germany may accede to its transatlantic partners, just like when Helmut Schmid let NATO install medium-range nuclear missiles in Europe after the Soviet Union attacked Afghanistan and the Cold War heated up.
According to the election results, now three coalitions are possible: grand coalition with CDU/CSU and SPD, traffic lights coalition with SPD, FDP, and Greens, Jamaica coalition with CDU/CSU, FDP, and Greens. Jamaica coalition will more likely form the most favorable government for the US because it has both CDU and FDP, and traffic lights will be the least favorite as it has SPD. The grand coalition can maintain the status quo at best, because contrary to the current government, SPD will dominate CDU.
To understand nuances, we need to go over security issues to see how these coalitions will react to them. As far as Russia is concerned, none of them will recognize the annexation of Crimea and they all support related sanctions. However, if tensions heat up, any coalition government with SPD will be less likely assertive. On the other hand, as the Greens stress the importance of European values like democracy and human rights, they tend to be more assertive if the US formulates its foreign policy by these common values and describe US-China rivalry as a clash between democracy and authoritarianism. Moreover, the Greens disapprove of the Nordstream project, of course not for its geopolitics. FDP has also sided against it for a different reason. So, the US must follow closely the negotiations which have already started between anti-Russian smaller parties versus major parties.
For relations with China, pro-business FDP is less assertive. They are seeking for developing EU-China relations and deepening economic ties and civil society relations. While CDU/CSU and Greens see China as a competitor, partner, and systemic rival, SPD and FDP have still hopes that they can bring change through the exchange. Thus, the US might have bigger problems with the traffic lights coalition than the Jamaica coalition in this regard.
As for NATO and its 2 percent of GDP, the division is wider. CDU/CSU and FDP are the only parties who support it. So, in the next government, it might be harder to persuade them to pay more. Finally, for nuclear participation, the situation is the same. CDU/CSU is the only party that argues for it. This makes it an alarming situation because the next government has to decide on replacing Germany’s tornados until 2024, otherwise Germany will drop out of the NATO nuclear participation.
The below table gives a brief review of these three coalitions. 1 indicates the lowest level of favoritism and 3 indicates the highest level of favoritism. As it shows, the most anti-Russia coalition is Jamaica, while the most anti-China coalition is Trafic light. Meanwhile, Grand Coalition is the most pro-NATO coalition. If the US adopts a more normative foreign policy against China and Russia, then the Greens and FDP will be more assertive in their anti-Russian and anti-Chinese policies and Germany will align more firmly with the US if traffic light or Jamaica coalition rise to power.
|Issues Coalitions||Trafic Light||Grand Coalition||Jamaica|
1 indicates the lowest level of favoritism. 3 indicates the highest level of favoritism.
In conclusion, this election should not make Americans any happier. The US has already been frustrated with the current government led by Angela Merkel who gave Germany’s trade with China the first priority, and now that the left-wing will have more say in any imaginable coalition in the future, the Americans should become less pleased. But, still, there are hopes that Germany can be a partner for the US in great power competition if the US could articulate its foreign policy with common values, like democracy and human rights. More normative foreign policy can make a reliable partner out of Germany. Foreign policy rarely became a topic in this election, but observers should expect many ramifications for it.
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