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Pakistan’s appeal for national-debt write-off

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In an interview with Associated Press, our prime minister called upon world community to write off debt burden of poor countries so as to help them cope with COVID19 epidemic (Dawn March 17, 2010).

The total debt liabilities of the country amount to Rs19, 299.2 billion (as of March 2015). Every Pakistani now owes a debt of about Rs101, 338 as compared with Rs.90, 772 in 2013, Rs80, 894 in 2012 and Rs37, 170 in early 2008.The debt-to-gross domestic product ratio stands at 66.4 percent, in which foreign debt is Rs. 6.4 trillion and domestic debt is Rs.12 trillion.

In dollar terms, Pakistan’s external debt soared to 95097 USD Million in the second quarter of 2018 from  91761 USD Million in the first quarter of 2018.That’s an all-time high, and well above the average of 54065.23 USD Million for the period 2002-2018. Pakistan recorded a Current Account deficit of 8.20% of its Gross Domestic Product in 2018. That’s an all-time high and well above the -2.60% average for the period  1980-2018.

Pakistan’s debt burden has a political tinge. For joining anti-Soviet-Union alliances (South-East Asian Treaty Organisation and Central Treaty Organisation), the USA rewarded Pakistan by showering grants on Pakistan. The grants evaporated into streams of low-interest loan which ballooned as Pakistan complied with forced devaluations or adopted floating exchange rate.

Soon, the donors forgot Pakistan’s contribution to break-up of the `Soviet Union’. They used coalition support funds and our debt-servicing liability as `do more’ mantra levers.

Successive Pakistan governments treated loans as freebies. They never abided by revised Fiscal Responsibility and Debt Limitation Act. Nor did our State Bank warn them about the dangerous situation.

No formal application for write-off: What a pity! Whenever International Monetary Fund’s  delegations visit, Pakistan’s representatives keep mum about politically-motivated odious nature of our debt burden. They lack nerve to tell them point-blank Pakistan’s non-liability to service politically-stringed debts. They government’s dilemma in Pakistan is that defence and anti-terrorism outlays plus debt-service charges leave little in national kitty for welfare. Solution lies in debt forgiveness by donors (James K. Boyce and Madakene O’Donnell (eds.), Peace and the Public Purse.2008. New Delhi. Viva Books, p. 251).

Benefits of Write-Off: Debt forgiveness (or relief) helps stabilise weak democracies, though corrupt, despotic and incompetent.  Research shows that debt relief promotes economic growth and boosts foreign investment. Sachs (1989) inferred that debt service costs discourage domestic and foreign investment.  Kanbur (2000), also, concluded that debt is a drag on private investment.

In fact, economists have questioned justification of paying debts given to prop up a client regime congenial to a `master’ country.  They hold that a nation is not obliged to pay such `odious debts’ (a personal liability) showered upon a praetorian individual (p. 252 ibid.). Legally also, any liability financial or quasi-nonfinancial, contracted under duress, is null and void.

Apparently, all Pakistani debts are odious as they were thrust upon praetorian regimes to bring them within anti-Communist (SEATO, SEATO) or anti-`terrorist’ fold.  To avoid embarrassing unilateral refusal of a country to repay odious debts, UN should declare which portion of debts is `odious’ (Jayachandaran and Kremer, 2004). Alternatively, the USA should itself write off our `bad’ debts.

Sovereignty compromised: People barter away some of their naturally-derived freedom with sovereign ruler to get security and welfare (Thomas Hobbes, John Locke et. al.).  When a despot fails to deliver the goods, the contract stands broken, and the people have a right to overthrow him. Thomas Jefferson (North American colonies) enshrined this social contract in the 1776 Declaration of Independence: ` when a long train of Abuses and usurpations pursuing invariably the same Object evinces a Design  to reduce them under absolute Despotism it is their Right, it is their Duty to throw off such Government and to provide new Guards for their Security’.

But, Pakistani people are too passive to overthrow their despotic unpopular governments.

The successive governments did nothing by way of welfare for the people. They could not even evolve a universal healthcare system akin to Thailand’s (2002).

The government’s dilemma in Pakistan is that defence and anti-terrorism outlays (26 per cent) plus debt-service charges leave little in national kitty for welfare.

A discussion was held at a seminar jointly organised by the Institute for Social and Economic Justice (ISEJ) and the Islamic Relief Pakistan under the campaign ‘Breaking the Chains of Debt’, at Forman Christian College. The crux of discussion was 47 per cent of whatever the government generates in revenue goes to pay off debt against 44 per cent in the previous year. Ideally, this ratio should be less than 30% to allocate more resources to social and poverty-related expenditures.

Speaking on the occasion, ISEJ Executive Director Abdul Khaliq said the debt situation was alarming and the government must review its reckless borrowing behaviour. We must demand an audit of the public debt,” he said. “All new loan contracts should be subjected to a debate in parliament and its approval.”

The government must stop reckless international borrowing and minimise reliance on foreign debt in the future and take measures to get the illegitimate loans cancelled, he said.

Khaliq emphasised the need for synergising efforts for a debt-free Pakistan and making the people of Pakistan the real drivers of the economy.

Three time prime minister Nawaz Sharif during his election campaign made tall claims that on assuming power he will get rid of the ‘cancer of debts’ and promised to break the ‘begging bowl’, however, there is little evidence of measures towards freedom from debt, said political economist Dr Qais Aslam.

The present Pakistan Tehrik-e-Insaf government proved no different from its predecessors and started knocking on the doors of international lenders even more vigorously, he added.

In a country where 60% of the population lives below the poverty line and 58% faces food insecurity, this additional burden means more miseries for the generations to come.

Speakers further said the impact of mounting debt burden on the people is horrific. Fiscal space for social spending has drastically squeezed. Pakistan spends just 2 to 2.6% of its Gross Domestic Product on education and health respectively, making it the lowest in South Asia.

International Monetary Fund’s assessment (Express TribuneMarch 16, 2018):

In its post-programme monitoring report, the IMF assessed risks to Pakistan’s economic outlook had increased. Despite changing goalposts twice, Pakistan’s public debt remained higher than the limit prescribed in the revised Fiscal Responsibility and Debt Limitation Act.

The policy of building foreign currency reserves through expensive loans and ignoring the export performance haunted the policymakers.

The IMF said the elevated current account deficit and rising external debt servicing, in part driven by China-Pakistan Economic Corridor (CPEC)-related outflows, were expected to lead to higher external financing needs.

External financing would surge to around $27 billion by the end of fiscal year 2018-19 (FY19) and would go up to $45 billion by FY23.

At that time, Pakistan’s external financing needs will be equal to 10% of the national output, which is a dangerous level. “Risks to public debt sustainability have increased since the completion of the EFF (Extended Fund Facility) programme. Public and publicly-guaranteed debt is expected to remain elevated at 68% of GDP by FY23.” Gross fiscal financing needs will likely exceed 30% of GDP from 2018-19 onwards, in part reflecting increased debt service obligations.

However, the more alarming part is the growing challenges to arranging foreign loans. It said Pakistan had so far remained successful in contracting external borrowing that softened the impact of rising external imbalances on foreign exchange reserves.

The IMF’s projections showed a bleak path for the next five years. Public and publicly-guaranteed debt is projected to remain close to 70% of GDP by 2023 under the baseline scenario.

In the absence of strong consolidation measures, the fiscal deficit is expected to remain close to 6% of GDP in the medium term, resulting in elevated debt levels.

Adverse shocks, notably to economic growth and the primary balance, could lead to public debt ratios rising well above 70%, said the IMF.

Contingent liabilities from restructuring of loss-making public sector enterprises represent additional fiscal risks. High gross financing needs may also pose potential rollover risks.

The IMF said high levels of public debt and gross financing needs presented significant fiscal risks and needed to be addressed in a timely fashion through fiscal tightening to improve debt sustainability.

Financial sovereignty threatened:  Some people question is Pakistan really a sovereign state? The question is based on premise that government has ceded control of the economy to foreign entities. Both the finance minister and the governor of the State Bank of Pakistan are career officers of respectively the World Bank and the International Monetary Fund. Is the primary loyalty of these officers to their Washington-based institutions or to their country of origin? And, should we be outsourcing existential financial decisions to people with possibly divided loyalty?

IMF’s changed role: The IMF and the World Bank are products of the Bretton Woods conference of 1944. Both organizations made good sense in the tattered world economy of the post-War period. The World Bank set about financing the rebuilding of Europe; while the primary purpose of the IMF was to promote international trade, which had collapsed during the war. The IMF’s role was to assist member nations to maintain stable exchange rates by providing short-term credit to support their currencies.

However, the `dinosaurs’ changed their roles. Over time fixed exchange rates gave way to floating rates, multiplying debt burden of recipients manifold.  Markets replaced governments as the primary arbiters of the value of national currencies.

The arrangement works as follows: A poor country, due generally to mismanagement and corruption, finds itself in dire need of hard currency. Commercial lenders are unwilling to commit their funds without adequate safeguards. Enter the IMF. It offers to lend some of its own money, provided that the host government agrees to a set of economic ‘reforms’. These understandably seek to enhance the borrower’s ability to repay the money loaned. When a deal is struck, the IMF disburses its own funds. At the same time commercial lenders, now reassured that the borrower can repay, step in with additional funds.

Typically, the IMF’s own funds constitute only a small proportion of the borrower’s total debt. Commercial lenders provide the rest. Yet the IMF’s participation is crucial. If it does not ‘certify’ a country by its participation then that country effectively gets cut off from all other sources of credit.

The question which recipients need to brood over is: Does the IMF serve their national interests? The IMF has a single overriding objective. This is to enhance the borrower’s ability to service its debts. It does not care a fig for recipients’ policies about poverty alleviation, price stability, employment, universal access to health care and education, and affordable rates for basic services.

Hypothetical example of debt black hole: Our external debt is $100 billion. Let’s assume that the average applicable yearly interest rate is five percent and that we decide to pay it back in equal annual installments over a period of 20 years. We would need to pay annual installments of $8 billion per year for a total payback over the 20 year period of $160 billion. Of which $60 billion would be interest and the balance repayment of principal.

We run a trade deficit of $20 billion a year. If we had a trade surplus we could theoretically have had the ability to pay back some of our debt. But, with shattered industry, teetered infrastructure, and COVID19 hangover, we can’t. So the only way to find the $8 billion per year to pay back our existing loans is to take new loans. We thus fall in the financial equivalent of a black hole.

Light at end of the `Hole’: While light cannot escape a black hole, we can extricate ourselves from this crisis. Pakistan needs to make the most of its strategic advantages. If we did not get out loans written off as quid pro quo for Soviet collapse in Afghanistan, we should better negotiate US exit now. We should have an answer if the US asks, by way of quid pro quo, for putting permissive action links on our nuclear bombs. If Pakistanis to be denuclearized than its binary India too should be.

Pakistan government should take prime minister lead further. It should hold negotiations with lenders that are commercial banks and the international finance agencies. We should aim at repudiation of about 50 percent of debt. This should be in addition to interest rate waivers, revisions and extended terms.

Simultaneously, Pakistan should dust off burden of debt models in textbooks. Debts should be so utilised as to be able to pay off interest and principal over agreed time span.

Bad debts: Pakistani debts qualify for write-off as bad debts. Why should poor Pakistanis, lacking basic needs, pay them?

World Bank President David Malpass (Express Tribune February 12, 2020) portrayed a bleak situation of loaning policies worldwide. Like a pot calling kettle black, he chided other development banks for lending too quickly to heavily indebted countries, saying some were helping worsen already-challenging debt situations. Addressing a World Bank-International Monetary Fund (IMF) debt forum, he said Asian Development Bank, the African Development Bank and the European Bank for Reconstruction and Development were contributing to debt problems.

He said the ADB was “pushing billions of dollars” into a fiscally challenging situation in Pakistan.   African Development Bank was doing the same in Nigeria and South

Africa. Pakistan was unlikely to meet debt reduction targets. The Manila-based development lender in December approved $1.3 billion in loans for Pakistan, including $1 billion for immediate budget support to shore up the countries

Public finances and $300 million to help reform the country’s energy sector.

The loans came as the country is struggling with billions of dollars in debt to China

from the Belt and Road infrastructure projects, which pushed Pakistan to turn to the IMF for a $6-billion loan programme in 2019.

Malpass said there needed to be more coordination among international financial institutions to coordinate lending and maintain high standards of transparency. “And so we have a very real problem of the IFIs themselves adding to the debt burden and there’s pressure then I think on the IMF to sort through it and look at the best interest for the country,” he stated.

Inference: If Pakistan wants to get its loans written off, it should do more than indulge in rhetoric. `Negotiation’ is a subject taught in all universities as a business course. Pakistan should learn to argue its case and decipher donors’ BATNA (best alternative to negotiated agreement    

Mr. Amjed Jaaved has been contributing free-lance for over five decades. His contributions stand published in the leading dailies at home and abroad (Nepal. Bangladesh, et. al.). He is author of seven e-books including Terrorism, Jihad, Nukes and other Issues in Focus (ISBN: 9781301505944). He holds degrees in economics, business administration, and law.

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The Upcoming Recession and its Ramifications on the World Economies

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The recent decision of the new head of Twitter, Elon Musk, to sack approximately 50 percent of the workforce is only indicative of the recession that is glooming over the world. The story of Twitter is just one example among many visible ones. Almost all the major firms around the globe have or are planning to lay off employees, including Microsoft, Meta, Tencent, Xiaomi, Unacademy, etc. 

According to a comprehensive study titled ‘Risk of Global Recession in 2023 Rises Amid Simultaneous Rate Hikes’ by the World Bank, all the nation-states are tilting towards a cascade of economic crises in global financial markets and emerging economies, leading to long-term damages. The report blames central banks around the globe for raising interest rates to tackle inflation caused due to the Coronavirus pandemic and Russia’s aggression on Ukraine in the European arena. The report states that even raising the interest rates to an unprecedented high not seen over the past five decades will be insufficient to pull global inflation down to the pre-pandemic levels. It further instils the need to focus on supply disruptions and subside labour-market pressures. The President of the World Bank Group, David Malpass urged policymakers to focus on boosting production instead of cutting consumption and make policies that generate auxiliary investments, improving productivity and capital allocation, which are crucial for growth.  

Economics 101: Recession

Amidst the pandemic, many states released relief and stimulus packages that heavily leaned on measures to expand liquidity, such as loosening lending restrictions or reducing repo rates (the rate at which commercial banks borrow money from the central bank) as well as reverse repo rates (the rate at which commercial banks lend money to the central bank). China was the first state to act upon these stimulus measures to counteract the disruptions caused by the covid, followed by Japan, the EU, Germany, India and so on. Though the measures helped economies absorb the pandemic’s impact, one major drawback was increased demand due to induced money flow in the market, leading to inflation.

Inflation, defined as the rate of increase in prices of general goods and commodities in a given period of time, can be caused by multiple factors. A shortfall in aggregate supply, one of the most common factors, can lead to excessive demand pressures in the market. To curb inflation, central banks often tweak or change the fiscal and monetary policies of the nation. Increasing the interest rates is one such measure, as it tightens the economy’s banking system and thus contracts the flow of money, reducing already high demands. However, suppose only the rates are increased without substantial reforms in line with resetting the supply chains, increasing production and overall growth to meet the demand; in that case, a country may move towards a recessionary period. Therefore, alongside rising rates, a nation must diversify its suppliers, invest in technology (without increasing the debt burden), and focus on self-reliance while sustaining employment.

The International Monetary Fund (IMF) defines recession practically as the fall in a country’s Gross Domestic Product (GDP), i.e. a decline in the value of all the produced goods and services in a country for two consecutive quarters. Simply, a recession is a period of massive economic slowdown. Pointing at a specific moment when a recession occurs is almost impossible and futile. However, a few indicators, like the downfall of GDP and public spending, increased unemployment, and a decline in sales and a country’s output, generally point towards an upcoming recession. To sum up, there are various ways for a recession to start, from sudden shocks to the economy and excessive debt to uncontrolled inflation (or deflation) and non-performing asset bubbles.

The Stumbling Economies

According to IMF Managing Director Kristalina Georgieva, “First, Covid, then Russia’s invasion of Ukraine and climate disasters on all continents have inflicted immeasurable harm on people’s lives.” One-third of the world economies, including the United States, Europe and China, are expected to contract in the subsequent quarters. 

For US economists and forecasters, the recession is no longer about ‘if’ but ‘when’. The decision of the Fed (US Central Bank) to increase rates to cool inflation without inducing higher unemployment and an economic downturn has only shrunk the possibility of a ‘soft landing,’ which occurs when the tightened monetary policies of the Fed reduce inflation without causing a recession. Nouriel Roubini, one of the few economists who rightly predicted the financial crisis of 2008, also claims a prolonged and inevitable recession in 2022 that will last till 2023. Economists expect a growth rate of 0.4 percent in the fourth quarter of 2023 as opposed to the fourth quarter of the previous year, and in 2024, they expect the economy to grow at 1.8 percent. The rate of unemployment is expected to rise to 3.7 percent in December this year and to 4.3 percent in June 2023, compared to 3.5 percent in September.

Like the US, Europe was also under the impression that the economic situation would improve without a recession. Assumptions of subsiding or transitory inflation due to solid businesses, enough public savings and adequate fiscal adjustments turned out wrong for the European economies. The Euro area (5.1 percent), and the UK (6.8 percent), are among the countries with the most expected output loss. Europe has mainly been affected by the Russian war on Ukraine and the resulting oil and gas disruptions leading to an ‘Energy War’ against the former. Similarly, China doesn’t lie far from them, with an expected output loss of 5.7 percent in 2023. Zero Covid Policy, coupled with the mortgage crisis and exodus in the manufacturing sector, has led to the economic slowdown of the Asian giant.

Impact on the Indian Economy

India reported a growth of 13.5 percent in the April to June quarter and became the world’s fifth-biggest economy, taking the spot of Great Britain. However, this growth results from the nation’s shutdown amid Delta-driven covid lockdowns during previous quarters and not because of the significant improvements in the economic activities. India needs to focus on skill-based human development projects to unleash its economic potential and effectively utilise its demographic dividend. However, India is not immune to the global slowdown. It is expected to face an output loss of 7.8 percent in 2023. 

Indian CEOs are also expecting a decline in the growth of companies, but the economy is expected to bounce back in the short term, according to KPMG 2022 report. Moreover, 86 percent of CEOs in India expect an impact of up to 10 percent on earnings in the next 12 months. Reducing profit margins, boosting productivity, diversifying supply chains, and implementing a hiring freeze (worst case, layoff policies) are a few steps firms can take to weather such challenges.

India, thus, needs to tap the potential of start-ups and small enterprises, as opposed to just established firms, by expanding and enhancing the private sector’s access to capital investments and curbing environment-related risks. Reforms in dispute resolution mechanisms are also long overdue, evident through the Ease of Doing Business report, where India ranked 63rd out of 190 countries worldwide. India needs to prove its worth by showing investors that not only can their money achieve decent returns, but it is safe in Indian soil as well. 

The stand on India’s future remains split. The global rating agency S&P claims that India will not face the true and horrifying brunt of the global recession thanks to its decoupled economy with huge domestic demand, healthy balance sheets and enough foreign exchange reserves. On the contrary, according to the Japanese brokerage firm- Nomura, policymakers are misplaced in their optimism about India’s growth trajectory. Its economists assert India’s estimated growth at 7 percent in FY23, which is at par with the RBI’s revised forecasts, but it also predicts a sharp decline to 5.2 percent in FY24. This estimated growth doesn’t align with India’s commitment to becoming a 5 Trillion USD economy.

Way Forward

UNCLAD’s Trade and Development Report 2022 projects global economic growth will plunge down to 2.5 percent in 2022, followed by a drop to 2.2 percent in 2023, costing the world a loss of more than 17 trillion USD in productivity. It further warns that the developing nations will be most vulnerable to the slowdown resulting in a cascade of health, debt and climate crises. Regarding the proportion of revenue to public debt, Somalia, Sri Lanka, Angola, Gabon, and Laos are the worst-hit countries, evident through the excessive inflation these states face.

Similarly, Indian fuel and food commodities prices have increased, but India’s sturdy performance when other countries are struggling can be attributed to its efficient policies. India does not have a perpetual external debt burden to hamper its growth. In addition, the government has focussed on developing the industrial and service sector to promote jobs and increase savings, especially after the Pandemic, to revitalise the Indian economy. Domestically, the government has provided effective social safety nets to ensure healthy livelihood for the population. 

Despite these factors, India must realize and accept the harsh reality of the upcoming turbulent times. India may have a decoupled economy, but the world is one interlinked system. Global slowdowns will lead to a recession in India as well, whose effects are becoming more and more visible with each passing day. Major tech firms in India like Wipro, Tech Mahindra and Infosys have revoked their offer letters to young freshers, while others have started laying off employees amidst the fear of global recession. Irrespective of whether India becomes the “fastest growing economy” in the end, even a modest growth rate of about 5 percent will push millions into poverty in a country like India. It’s only imperative to realise that a depreciating currency and elevated inflation will hit the poorest the hardest, and India must be prepared to deal with this challenge.

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The Revival of China’s Supply and Marketing Co-op: A Countermove to Asia Pivot 2.0?

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The Indo-Pacific Economic Framework for Prosperity (IPEF) was launched in the wake of President Joe Biden’s Asia trip this May, signaling the commencement of “Pivot to Asia 2.0” on the economic dimension. In the following months, China has accelerated to revive, despite being dubbed as “re-emergence”, its decades-old supply and marketing cooperatives—a Mao-era institution that once served as the engine of Chinese planned economy in the 1950s. The rebooting of the co-op system was actually initiated as early as 2016, but its recent sudden expansion across the country has provoked suspicion that China is reversing its market-reform efforts, and more importantly, it could be used as a pre-mobilization training by China to counter the increasing pressure from America or even to prepare for military operations targeting Taiwan.

China’s Co-op System in the 1950s: An Outgrowth of Geopolitical Threats

The first few years after the 1949 Chinese revolution is often portrayed by Beijing as a period fraught with internal and external threats—internally, a dearth of qualified infrastructure and urban workforce for industrialization; externally, the Korean War and intermittent border conflicts with Cambodia, Vietnam, and India. Consequently, China was forced to prioritize the development of heavy industry with the help of Soviet Union. The result of the rapid industrialization led by state-owned enterprises was the food shortage in cities due to the huge influx of farmers into urban areas. In order to efficiently balance the circulation of food and industrial products between urban and rural areas, the supply and marketing co-op system was born.

A year after the termination of Soviet aids to China in 1957, Beijing transformed its supply and marketing co-op system to a more centralized Commune System in the name of improving the “self-reliance” of poor communities to solve the issues of impoverishment. Later that same year, China triggered the second Taiwan Strait Crisis by initiating an artillery bombardment of Taiwan’s front-line islands, Quemoy and Matsu. Even though there was no direct evidence showing that the nearly decade-long collectivization movement in the 1950s was designed in the first place to target Taiwan, it was still an outgrowth of a grim geopolitical circumstance China believed it was in. Therefore, it is not difficult to understand China’s motivation to revive the Co-op system today.

Co-op 2.0: Decoupling from the U.S. and Targeting Taiwan?

The recent Biden-Xi meeting during the G20 summit may have sent a positive signal to the world that a period of détentebetween the U.S. and China could be expected in the near future, but a real breakthrough in their systematic competition may take a much longer time. With the successful implementation of the Regional Comprehensive Economic Partnership (RCEP) this year, China’s economic influence could be further projected in the region, which would largely bolster China’s confidence that building a regional trade bloc to exclude U.S. influence is feasible. China’s plan of becoming economic autarky, as having been framed as “internal circulation” , may be a workable cause so that a self-reliant China would no longer needs external demand to be a major driver of its economic growth.

Following the recent revival of Quadrilateral Security Dialogue (Quad) and the establishment of AUKUS, the announcement of IPEF by the United States undoubtedly reaffirm China’s conviction that it is again caught between a rock and a hard place the way it was in the early 1950s—external challenges with intensifying geopolitical tensions and internal downward economy compounded by its unwavering “zero Covid” policy. Consequently, the rebooting of the supply and marketing cooperatives was initiated with the hope to pave the way for a grand duel strategy in the future: externally, further decoupling from global economic system dominated by the U.S. and its western democratic allies; internally, tightening the government’s grip on the economy to weather international sanctions that could be imposed by western countries.

It is without doubt that Taiwan Strait is the most probable battlefield should any hot wars initiated by China in the years to come. In spite of speculations that Russia’s setbacks in Ukraine may thwart China’s potential aggression against the self-governing island, Xi Jinping’s Taiwan ambition did not seem to take a hit. Instead, his historic third term as the top leader of China appeared to inject a shot of adrenaline to his “wolf-warrior” warmongering proclivity. Not only did the 20th Party Congress deliver a work report that manifested “the most authoritative” evaluation of China’s Taiwan policy, but Xi’ recent portrayal of China’s geopolitical situation as “unstable and uncertain” was a message sent to the United States and Taiwan that any provocative initiatives from them could be greeted with China’s forceful responses.

However, that type of forceful responses would come at a cost as having been seen in Russia’s case. Having learned from from Russia’ lack of economic preparation for international sanctions, Beijing realizes the importance of planning ahead. Thus, the supply and marketing cooperative system would function as a practical drill for China’s need to transform its socialist market economy to wartime economy for possible military confrontations with the U.S. and Taiwan.

Implications for Counterstrategies of the U.S. and Taiwan

The legislation of America’s new export controls of semiconductor chips may have landed a huge blow to the China’s hope to save its economy via high-tech industry, but it is not likely that the U.S. would directly respond to the intentions behind China’s Co-op 2.0 other than continuing to proceed the advancement of IPEF. Apropos to certain bilateral trade issues, the Biden administration may even favor a temporary ceasefire with Beijing, not only for the urgency to tackle the ongoing inflation, but also for the 2024 presidential election.

On the other hand, Taiwan can actually make the most of America’s “Pivot to Asia 2.0” to win itself more bargaining chips. First, despite being denied membership, Taiwan can still take advantage of the support from its allies inside of American congress to seek active participation in IPEF under the name of the “Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu”, the same title it uses as a member of the WTO. Second, it should put more efforts to promote the “Chip 4 Alliance” which is comprised of the United States, Taiwan, Japan, and South Korea, and strengthen technological ties with more European democracies. Last, it can seek more strategic dialogues with the new Republican-dominated congress. Compared to his predecessor, the would-be House Speaker, Kevin McCarthy, holds a tougher stance toward China and has already set to form a special committee to contain Beijing. Taiwan’s active interactions with the new American congress would be helpful to increase its strategic value to both U.S. China policy and U.S. partisan politics in the following two years.

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Who can live in England with less than £3 a week?

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A homeless woman begs for money in the centre of London, United Kingdom. Unsplash/Tom Parsons

A study from the Joseph Rowntree Foundation found that 7 million families in England have gone without things like heating, toiletries or showers this year. Gheorghe, for her part, sometimes eats just one meal a day. And this Elena Gheorghe had never eaten at a food bank until this year. But like millions of people in the UK, she has watched her daily expenses eat up more and more of her income, and she ran out of corners to cut. That’s a story from Bloomberg.

As they’ve watched double-digit inflation degrade their paychecks, millions of  people in the UK have for the first time found themselves in a similar position. Over the last nine months, the share of UK households with little or no discretionary income has doubled from 20% to 40%, according to Asda Income Tracker data.

Many have gone into debt paying for things other than food and housing. Others are cutting back on essentials. “It’s hard to feel anything but despair,” said Abigail Davis, a social policy researcher at Loughborough University who has studied poverty and inequality for 22 years.

This is but a slice of the cost-of-living crisis that the UK’s new Prime Minister, Rishi Sunak, will have to contend with as he takes office.

Britons across income levels face a foreboding combination of energy, mortgage, and pension crises. More than half of UK adults were finding keeping up with their bills a heavy burden this spring, according to the Financial Conduct Authority. Mortgage payments are already rising and the number of people either behind or struggling to pay rent has spiked by 45% since April, according to housing charity Shelter.

But the economic pain hasn’t hit all equally. Poorer people have disproportionately seen their spending power evaporate. That’s partly because those groups tend to lay out a bigger share of their income for essentials, such as food, whose prices have sky-rocketed.

The current political turmoil has only created more uncertainty over if and how the government will address skyrocketing prices.

Half of independent food banks in the UK say they either won’t be able to help everyone who reaches out to them, or they’ll have to cut the amount of food they’re giving out this winter, according to a survey by the Independent Food Aid Network.

…Britain lived ‘well and richly’ as long as the Crown plundered in India, Africa while  stolen funds came to London from everywhere. Nowadays the country gradually sinks into its normal state – an island without resources and wealth. They once  said –  an island of Royal Pirates. Salute to captain Morgan and captain Drake!

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