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The Italian Strategic Fund -CDP Equity: Structure and Future

Giancarlo Elia Valori

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The “Italian Strategic Fund” (FSI) was established on July 28, 2011, with the then Economy Minister, Giulio Tremonti, and with the collaboration of the Treasury Director General, Vittorio Grilli, under the chairmanship of Cassa Depositi e Prestiti (CDP), led at the time by Franco Bassanini, as well as with the support of CDP’s CEO, Giovanni GornoTempini.

 From the outset, like many but not all the several Strategic Funds existing in the world, the FSI has been a holding company with the primary aim of supporting strategic Italian companies.

 Strategic companies in terms of products, important for processes, decisive for technologies, essential for Italy’s cutting-edge technologies, like the Defence companies.

In this case, what does it really mean to be a “strategic company”?

The various schools of thought diverge on this point, but we could find a good definition by recalling that strategic companies are those essential for the medium-long term planning of the major and most promising sector of Italy’s industrial system.

 The idea of the FSI was also to favour the maximum efficiency of some companies and, in particular, to stimulate the enhancement  of their ability to “compete” at international level.

Initially, the FSI share capital was ridiculously low, i.e. one billion Euros, which rose almost immediately to 4 billion Euros.

However, in the initial projects and still today, the company’s endowment could have reached 7 billion Euros. Probably still too little.

Like all the similar funds currently operating in the world today, the Italian Strategic Fund is targeted to sound companies which, however, need a new capital injection.

Certainly, unlike before the great technological revolution of the Web and of logistic telecommunications, it is currently hard to speak about “national champions” as we had at the time of Renault or Fiat or, possibly, Autostrade.

Nowadays, with the Global Value Chains (GVCs), it is even hard to identify the direct nationality of products that we all consider characteristic and typical of a given nation.

With a view to understanding GVCs, we need to think above all about the geographical distribution of companies. All small and medium-sized enterprises. The other less known side of Schumacher’s “small is beautiful”.

 In the classic model of “delayed development”, which was generally accepted until the 1970s, the shift of the global production centre from the EU and the USA to Asia was interpreted only as the creation of a structural dependence of the non-Western peripheries on the Eurasian production centre.

The Marxist derivation of this model was Arghiri Emmanuel’s brilliant theory of unequal exchange, also developed in the early 1960s.

That was the origin of the theory of the world division between “rich” and “poor” countries. Currently, however, with the evident presence of world overproduction (and of financial securities to cover it) at the origin of the present economic crisis, since 2016there has been a tendency to think, instead, that there is an even more heuristic model, called “compressed development”.

Compressed development would be a criterion that puts at the centre of its interest the heterogeneity of the individual countries participating in the Global Value Chains, thus also taking into account the extraordinary difference in power of the large multinational companies compared to the infinite “peripheral” and often non-Western SMEs.

Hence the SMEs as essential factors of the new international division of labour, but depending on a higher system of GVC managers that is a cartel in individual sectors and a political and industrial agreement between different sectors.

Hence, while it is true that the highest value-added segments tend to still remain in the old Euro-American centre – although China is currently showing us a different strategy – it is equally true that a model explaining Global Value Chains with the old criterion of “comparative advantages” and asymmetry between centre and periphery no longer stands the test of time.

Hence what is the national economic interest? It is currently hard to answer this question.

 We are partially helped by Hecksler-Ohlin’s theory stating that a “nation mainly exports goods requiring factors of production it has in abundance (labour, specialized technology, capital) and that it can most efficiently and plentifully produce”.

Therefore, the share of comparative advantages stems from the composition of its primary production formula, which is selected by the global competition of SMEs compared to those who monopolistically control global chains. It also stems from the  national governments’ ability to create temporary advantages in GVCs, resulting from the definition of specific strategies and the “joint” approach of private companies.

This is currently Italy’s productive point.

 To bring some of Italy’s big national champions into the  geopolitical rather than economic oligopoly of the global companies leading the main Global Value Chains, so as to later organize the “voluntary” mechanisms that permit the hegemony of Italian SMEs in the various sectoral markets.

Recently my friend Paolo Savona has spoken about the “return of the  State as master”, but the future will enable us to have only two real forms of control of global value chains: either with a top-down approach, by producing universal enterprises that lead the chains, or with a bottom-up approach, by organizing the groups of SMEs that prevail – with public and private support – over their competitors in the division created by GVCs.

 However, all the latest statistical analyses show us that in the Euro area countries there have been massive and now excessive share transfers of State entities, as well as liberalisations, often of goods and services which are – even in the free-trade and liberal economic tradition – “natural monopolies”, but with a significant slowdown in share transfers and divestments, which in Italy, France and Germany started as early as the early 2000s.

Furthermore, Ronald Reagan – the politician epitomizing the free-trade and liberal revival – had not at all cut public spending in general, but had cut the traditional spending for civilian Welfare, with a view to favouring his specific military Welfare.

  A deficit military spending, which had no immediate inflationary repercussions, but rather acted as a technological stimulus for innovation, also in civilian enterprises.

Without “inclusive institutions”, however, i.e. without stable public organizations enabling sufficient segments of the population to have access to some wealth, all modern States tend to be relegated to be failed States, thus becoming easy prey for their structural and global geoeconomic opponents – and even at the lowest possible cost.

 This is what – inter alia – Sovereign Funds are for.

 In fact, they ensure the public or semi-public ownership of the enterprises that a State and a society choose – moment by moment – to guide their economic and social future in the medium-long term.

Hence the Sovereign Funds must be protected from the raids of possible and real competitors. Raids are continuous, while growth projects are temporary.

It should be recalled that in Gilpin’s opinion, the “aim of economic activities is to provide benefits to consumers, not to strengthen the State security”.

 But the State security is also a primary asset, which allows to quickly eliminate adverse geoeconomic actions and hence avoid  the immediate colonization of the development potential of a State and of a society.

Edward Luttwakhas also rigthly said that any economic globalization is always strategically dangerous, since it inevitably leads to what he calls “paroxysmal competition”, which is an inevitable feature of turbo-capitalism: a very rapid increase in the size and speed of trade, always combined with post-Cold War globalization, which does not accept any geographical limit to its expansion.

 If turbo-capitalism stops, it immediately melts away under the sun of value realization.

The excessive trade speed mimics its actual productivity and the size of trade sometimes masks its very low value which, however, is maintained thanks to excessive speed, which does not allow the rational and technical assessment of risks.

Hence, against the Hobbesian state of bellum omnium contra omnes typical of turbo-capitalism, which usually does not sufficiently invest in product or process innovation, we need to  think of two solutions, called the State of Economic Intelligence or the Geoeconomic State.

 Paolo Savona and Carlo Jean have spoken of the ever-increasing role of economic intelligence, which should become the axis of every modern State’s economic, financial and productive choices.

 Without Sovereign Funds, however, there is no economic intelligence.

Hence we need to firmly keep a sector, at least one, which is comparatively very advanced,  but above all export-led, and which is also protected with all the non-tariff mechanisms that are now commonly used in everyday economic warfare.

This is the reason why, for at least five years all the major Western countries have been rethinking their old deindustrialization and delocalization policies, which often deprive societies and States of the necessary systems for controlling global, financial and productive flows. Not to mention the fiscal deprivation and over-costs for maintaining structural unemployment.

In the evolution of the most recent international trade theory, we have even gone so far as to develop a Strategic Trade Theory, a model underlining the companies’ and State’s ability to improve the trade balance by working strategically -i.e. in the medium-long term – in imperfect global markets.

The oligopolistic markets are always those where leading products or services are developed, usually with public investment in Research and Development.

 This is the true nature of the Keynesian model: the State funds  what is not yet profitable, but the private sector deals mainly with “mature” or growing companies, which have already found their market.

 Hence we also need the theory of the Innovating State, i.e. the Entrepreneurial State, recently developed by Mariana Mazzuccato.

 The State imagined by Mazzuccato explores the whole scenario of business risk, thus creating above all new markets. In particular, the State creates the markets in which we need to have strong investment in situations of maximum uncertainty, thus acting as a risk taker and hence later as a market shaper.

 The “Administrative State” is a public administration “serving” private individuals, but the Entrepreneurial-Innovating State is the one that does not make the unemployed people dig the classic Keynesian holes, in the inevitable periods of production contraction, which is above all – Marxistically – tendential over-production.

 But, if anything, the Entrepreneurial-Innovating State invests in new high-quality technologies, which create original markets where, in fact, the Entrepreneurial State controls the future oligopoly. Another role of Sovereign Funds.

Technically, however, the Funds are investment funds which manage financial asset portfolios denominated in foreign currencies, according to the global rules of what we currently call the grey economy.

In theory, the Funds are divided between those which invest resources coming from raw materials or oil and gas (SWF Commodity) and all the others which, instead, invest surpluses coming from the currency surpluses of the trade balances.

 This is clearly our case.

 According to the “Santiago Principles”, a code for Sovereign Funds developed based on the International Monetary Fund’s indications, the Sovereign Wealth Funds (SWFs) are “special purpose” investment funds owned by national governments.

 Therefore, SWFs have five primary characteristics: a) they are always held by a Sovereign State; b) they make investment in foreign currency; c) they carry out their activities over a long term, with low indebtedness and without withdrawals or distribution of profit to participants; d) their accounting is strictly separate from that of Central Banks and Finance Ministries; e) they carry out research for investment with returns above the risk-free rate.

 The first real Sovereign Funds were the Kuwait Investment Authority, created in 1953, to obviously invest the capital originating from the extraction and sale of local oil, as well as the old Revenue Equalization Reverse Fund, set up by the British administration of the then colony of the Gilbert Islands, the current Republic of Kiribati, to invest the surplus from the sale of phosphates.

 The secret agreement between Kissinger and King Fahd of Saudi Arabia, after the Yom Kippur war, later channelled the extraordinary surpluses stemming from the very significant increase in the OPEC oil barrel price into US government bonds. Hence petrodollars were created.

 In the phase following the booming prices of some fundamental raw materials when, in fact, oil prices plunged, namely in the 1980s, the Sovereign Funds became the primary instrument for diversifying investment and hence for the financial stability of the countries producing raw materials (or commercial surpluses) which had already adopted them.

From then until 2005, the Sovereign Funds became the main instrument, for Asian countries in particular, to accumulate and use the foreign currency reserves arriving in the Asian countries which were more export-led and more linked to the US dollar cycle.

 To avoid having to resort to the often dangerous therapies of the International Monetary Fund, especially when the global reference currency fell, the top Asian export-led countries combined their industrial expansion policies with specific exchange rate policies, which tended to accumulate very large foreign currency funds.

 Obviously that happened only to avoid the manipulation of  currency markets in a condition of objective weakness created by an exclusively export-oriented economy – with exports to countries having a very strong currency.

In 1978 the SWF Temasek, the “historic” Singapore investment fund, came up with the idea of using Sovereign Funds for that purpose.

Temasek invested its considerable surpluses in the acquisition of companies and financial holdings in the Asian area directly bordering on Singapore, thus making the city-State – which was also the first model for Deng Xiaping’s Four Modernizations –  overcome its structural limits, thus protecting it from enemy and adverse operations on its exchange rates and on its productive system.

 Finally, from the beginning of the great subprime crisis, the Funds have spread mainly in the so-called BRICs (Brazil, Russia, India, China and South Africa) and also in some “First World” countries, especially to acquire minority shareholdings or to carry out hostile takeover operations towards competitors or potential penetrators of their national markets, possibly even with dumping actions –  and it would not be the first time.

 In 2020 SWFs are supposed to reach, worldwide, an amount of managed assets of approximately 15 trillion US dollars.

 75% of the capital managed by the Funds is currently concentrated on the top 10 operators. Obviously the SWF market is highly oligopolistic and the top 10 operators are now all Middle East or Asian entities.

The history of modern European Sovereign Funds began with  Sarkozy’s Presidency in France.

As early as 2008, the French centre-right leader set up the Fond Strategiqued’ Investissement (Strategic Investment Fund), based on two already existing financial structures, namely the Caisse des Dépôts et Consignations(the State Bank handling official deposits, which is the equivalent of the prominent Italian investment bank known as Cassa Depositi e Prestiti) and the Fond de Réserve pour les Retraites(Pension Reserve Fund), with capitalisations – at the time – of 80 and 33.8 billion Euros respectively.

However, 51% of the new French Sovereign Fund was owned by the Caisse des Dépôts and the remaining 49% by the Agence des Participations d’État (Government Shareholding Agency).

 The aim of the Fund created by Sarkozy was to invest mainly in French and foreign small and medium-sized enterprises, characterized by strong growth but having no longer access to standard market financing (although we do not know why).

The French Fund also set in when the company was overtly  threatened by a hostile takeover, or any acquisition, by foreign companies.

 The French Fund could also intervene directly in the capital of innovative industries.

 As early as 2008, however, the Italian intelligence Services have focused on the very strong need to protect the national know-how, considering that the operational plans of other Sovereign Funds interested in Italy could be useful for acquiring specific technologies.

 It has already happened: in the machine tools, agri-food,  specialized pharmaceutics and fine mechanics sectors, Italy’s top large SMEs have already been acquired by French, German and Chinese companies.

In their report to Parliament in 2010, the Italian intelligence Services already spoke of a “liquidity threat” to Italy’s companies.

The foreign private equity funds, in fact, are mainly targeted to banking, biotechnology, energy, entertainment and even online gaming companies.

Currently, however, the Cassa Depositi e Prestiti has two instruments to support companies, especially the technologically advanced ones: the Italian Strategic Fund – now CDP Private Equity – and the Italian Investment Fund.

The latter was launched in 2010, with the collaboration of some private banks, and – as usual – it is targeted primarily to small and medium-sized enterprises.

It has two operating structures: the Venture Capital Fund for innovative start-ups and the Minibond Fund, which supports the bond issues of small and medium-sized enterprises.

 The Italian Strategic Fund – 90% of which is held by Cassa Depositi e Prestiti(CDP) and the remaining 10% by FINTECNA, which is in any case fully owned by CDP – was launched in 2011 with a capital of 4.4 billion Euros and, as already mentioned, rose to 7 billion Euros.

However, why setting limits?

The Italian Strategic Fund was born with a negative experience to be made good, considering that those were the years of the takeovers for Parmalat, which had just been redressed financially, and for Bulgari, not to mention the future and possible “friendly” sales – well hyped by the Italian media- of Alitalia and Edison.

 The Italian Strategic Fund dealt mainly with medium-large companies having “significant national interest”, while, from the beginning, it created strong ties with Qatar Holding, the Russian Direct Investment Fund, the Kuwait Investment Authority and the Korea Investment Corporation.

 Moreover, in 2012 the Italian Strategic Fund signed an agreement with Qatar Holding LLC for the creation of a joint venture, called IQ Made in Italy Venture, to invest in the typical Made in Italy companies.

 The idea, which has not yet fully materialized, was to create a “luxury district”.

 The Maastricht restrictions on the so-called “State aid” always make it difficult for the Italian Strategic Fund to operate. It would possibly need an arm abroad, capable of operating on our companies without EU constraints. It would also be necessary to deem it legitimate for the Italian Strategic Fund to invest in companies of significant national interest, but regardless of the average return on the capital invested in the medium term.

 Therefore, unlike the old twentieth century economic statism, the Italian Strategic Fund invests in healthy companies and it plays -quietly and without nervousness – the role of minority shareholder. It also follows the private criteria of investment profitability and efficiency and does not follow the natural distortions, often originated by public entities, but also by powerful private entities, to manipulate production formulas and intermediate markets.

 Hence rethinking and expanding the Fund’s operations, or possibly creating specific areas of intervention for the Fund,  would be an excellent evolution of the fundamental policy lines on which the Italian Strategic Fund was conceived.

Advisory Board Co-chair Honoris Causa Professor Giancarlo Elia Valori is an eminent Italian economist and businessman. He holds prestigious academic distinctions and national orders. Mr. Valori has lectured on international affairs and economics at the world’s leading universities such as Peking University, the Hebrew University of Jerusalem and the Yeshiva University in New York. He currently chairs “International World Group”, he is also the honorary president of Huawei Italy, economic adviser to the Chinese giant HNA Group. In 1992 he was appointed Officier de la Légion d’Honneur de la République Francaise, with this motivation: “A man who can see across borders to understand the world” and in 2002 he received the title “Honorable” of the Académie des Sciences de l’Institut de France. “

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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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