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Economy

German Companies and China’s Marketplace Nightmare

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American values versus German

Americans have faith in that people have the right to individual freedom, which asserts people are free to think, speak and act as long as they do not affront the freedom and rights of others. This is what John Locke said in 16 century, one’s freedom ends when the other’s freedom begins. He moved on and said the government is responsible to protect freedom and property of the individuals if not the government should be ousted.

Self-government, which addresses the right of individuals to evaluate the conduct of the government and how it treats the citizens. As Abraham Lincoln said “Government“ of the people, by the people and for the people, which definitely refers to a democratically elected body to reflect the wish of the people and their wellbeing.

Equality brings up equity, fairness and dignity to all people, although this value is a little bit controversial in the eyes of John Locke. He believed that equal people are not free and free people are not equal. He opposed the notion that all people earn and spend equally, which is not possible in a liberal society. His belief is if we claim the urgency that all people earn equally then freedom is disregarded. If we let the people grasp the essence of freedom, at that point they are no longer equal. Socio-economic philosophers say if we take the dogma of Karl Marx for granted that all people receive equally in order to uphold social justice. Nevertheless, we cannot make people spend equally, because the wishes, needs, requirements and prerequisites of the people are different.

In modern day, equality should state the equal opportunities for education, economic achievement, political contribution and a satisfying life. Last but least, individualism a commitment to advocate and sustain independence, private initiative, and personal economic growth. It proclaims that each individual must be on the driving seat of his/her own life and be in a position to make decision of his/her own irrespective to the guidance of the government or other individual or group of individuals. Come hell or high water in the aftermath of dictatorial and Kleptocratic regime led by Adolf Hitler, Americans in Germany also promoted American values. Germany adopted a new constitution; beginning with Human dignity is inviolable. It is the duty of all state authorities to respect it. The German people are therefore, committed to inviolable and inalienable rights as the basis of every human community, of peace and justice in the world. Admittedly, it in turn let German citizens prosper, be creative and joyful, and attain the crux of free and fair life. Nonetheless, these values require sustainable self-assurance, a readiness to strive and hard work.

American economic classification as opposed to German

Unlike Germany, America have been ignoring the American values both in economic and political arenas, since American economic system is based on free enterprises, which refers to an economic system, where private individuals, who own the factors of production, make the economic decisions. Therefore, such decisions could be sometimes harmful to interests of other fellow individuals living in the country. Reminding John Locke theory, he clearly stated the boundaries of others freedom must not snubbed.

Contrasting John Locke philosophy the American economic system is centered on Adam Smith theory, Smith wrote in his book titled An inquiry into the cause of the wealth of Nations. He explains in it how vast fortunes were being made by entrepreneurs, how the market economy operated, and what the benefits of economies of scale in production were. He also stressed the importance of factors of production. Moreover, he formulated theories about how the state should behave. Like the physiocrats, he believed in laissez-faire. Smith saw the market system acting as invisible hand, which leads people to pursue their own self-interests, and which also unintentionally produces the greatest benefit for the society as a whole in contrast to state intervention as best regulator.

On the contrary, German economic system is grounded on the theory of John Stuart Mill, Mill wrote Principle of Political Economy. He believed in a moderate amount of state intervention to redistribute wealth and a mild version of socialism but he was opposed to Karl Marx’s ideal of a communist state because of the danger to rights and freedom of individuals. To be frank German economic system is derived from Mill’s theory, which is called social market economy. A state ownership coupled with free enterprises, or a mixed economic system including a variety of private freedom combined with centralized economic planning and government regulation, which evolves a tendency towards a free enterprise economy.

In the political arena, the American values are largely disregarded by American themselves                   (politicians, policy drivers and the deep state) their values narrate America First and purely describe the interest of wealthy individuals, who like no limits and only beget money by hock or crock. Hence, the principle of liberty, self-government, equality and individualism are put on hold for decades.

Thus, an Occupy movement came in to being in 2012 with a political slogan we are the 99%.  They spoke of 1% wealthiest American, who hijacked the wealth of the rest 99%, getting richer, and paying zero taxes, which largely reflects the income and wealth inequality in America.

The so-called 1% promote waging war strategies, produce deadliest weaponries, and sell those to the most brutal and barbaric regimes across the world, so that the 99% are paying the price for the blunder of a diminutive minority within the upper class of the American society.

In contrast to America luckily, there is no 1%, who could take over the 99% in Germany, however, many corporates disdain social responsibility and moral accountability.  As far as German economic system converges, free market economy with the notion of social responsibility. According to the German constitution, the underlying principle of German economic policy refers to social market economy, which lays the basis for economic, social security, and a good quality of life in Germany.

Daimler-Benz moves its partial business to China

The changing demands of global market place and the migration of economic center of power and future growth to the Asia-pacific region require involvement of German companies and investment, to be competitive, tangible and viable and meet the demands of buyers’ market.

 Therefore, Daimler-Benz has recently decided to move part of its industry to China, which nevertheless has had backlashes both at home and abroad. The company sacked thousands of its employees, stating their occupations no longer exist, while Daimler wants to invest heavily in E-mobility in order to encounter the requirements of global market place.

The former workforces criticize Daimler for such course of actions, who claim the readiness to be re-trained (umshculung), with the aim of becoming competitive. The experts blame the company for handing over share of its business to China to produce batteries for E-vehicles. The experts compare Daimler with Tesla, who produces batteries themselves. They call it a historic failure committed by Daimler to create jobs oversee (China)and neglect home labor market.

China’s market and work place could be lucrative in term of low labor costs, less bureaucracy and paperwork but it has some implications, while China does not bound to any western values respected in western world. Beijing extensively suppresses the Uygur minorities, massively imprisoning and ghettoing, and stationing them at the arbitrary camps and even sterilize them.

Chinese leadership also tyrannizes the Tibetans, their spiritual leader lives in exile since decades, furthermore, the country’s leadership enormously bottled-up pro-democracy movement in Hong Cong and sentencing a five years imprisonment for the journalist unmasking covid-19 outbreak in China. In accordance with western intelligence, China is getting prepared to invade Taiwan some time in upcoming future. Additionally, at mega events like the 2008 Olympics or the 70th anniversary of People’s Republic last year, Beijing took the clouds from the sky. Now the leadership is announcing a massive expansion of the artificial weather modification program, which will definitely affect the regional countries and will cause drought, famine, displacement of the people due to lack of source of life and even it will cause mass migration to storm Europe. 

Besides, Beijing has been conducting human testing on members of the PLA to develop soldiers with biologically enhanced capabilities reported top US intelligence officials. China has culminated all ethical boundaries, to multiply its political, economic and military power in the world. 

The question raised just before the German companies why China and why now? Since Germans and German corporates are constitutionally required to obey human dignity, peace and freedom worldwide and they are socially responsible and morally accountable and politically adhered to the western values, which have no place in China.

Ajmal Sohail is Co-founder and Co-president of Counter Narco-terrorism Alliance Germany and he is National Security and counter terrorism analyst. He is active member of Christian Democratic Union (CDU)as well.

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Economy

Economy Contradicts Democracy: Russian Markets Boom Amid Political Sabotage

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The political game plan laid by the Russian premier Vladimir Putin has proven effective for the past two decades. Apart from the systemic opposition, the core critics of the Kremlin are absent from the ballot. And while a competitive pretense is skilfully maintained, frontrunners like Alexei Navalny have either been incarcerated, exiled, or pushed against the metaphorical wall. All in all, United Russia is ahead in the parliamentary polls and almost certain to gain a veto-proof majority in State Duma – the Russian parliament. Surprisingly, however, the Russian economy seems unperturbed by the active political manipulation of the Kremlin. On the contrary, the Russian markets have already established their dominance in the developing world as Putin is all set to hold his reign indefinitely.

The Russian economy is forecasted to grow by 3.9% in 2021. The pandemic seems like a pained tale of history as the markets have strongly rebounded from the slump of 2020. The rising commodity prices – despite worrisome – have edged the productivity of the Russian raw material giants. The gains in ruble have gradually inched higher since January, while the current account surplus has grown by 3.9%. Clearly, the manufacturing mechanism of Moscow has turned more robust. Primarily because the industrial sector has felt little to no jitters of both domestic and international defiance. The aftermath of the arrest of Alexei Navalny wrapped up dramatically while the international community couldn’t muster any resistance beyond a handful of sanctions. The Putin regime managed to harness criticism and allegations while deftly sketching a blueprint to extend its dominance.

The ideal ‘No Uncertainty’ situation has worked wonders for the Russian Bourse and the bond market. The benchmark MOEX index (Moscow Exchange) has rallied by 23% in 2021 – the strongest performance in the emerging markets. Moreover, the fixed income premiums have dropped to record lows; Russian treasury bonds offering the best price-to-earning ratio in the emerging markets. The main reason behind such a bustling market response could be narrowed down to one factor: growing investor confidence.

According to Bloomberg’s data, the Russian Foreign Exchange reserves are at their record high of $621 billion. And while the government bonds’ returns hover at a mere 1.48%, the foreign ownership of treasury bonds has inflated above 20% for the second time this year. The investors are confident that a significant political shuffle is not on cards as Putin maintains a tight hold over Kremlin. Furthermore, investors do not perceive the United States as an active deterrent to Russia – at least in the near term. The notion was further exacerbated when the Biden administration unilaterally dropped sanctions from the Nord Stream 2 pipeline project. And while Europe and the US remain sympathetic with the Kremlin critics, large economies like Germany have clarified their economic position by striking lucrative deals amid political pressure. It is apparent that while Europe is conflicted after Brexit, even the US faces much more pressing issues in the guise of China and Afghanistan. Thus, no active international defiance has all but bolstered the Kremlin in its drive to gain foreign investments.

Another factor at work is the overly hawkish Russian Central Bank (RCB). To tame inflation – currency raging at an annual rate of 6.7% – the RCB hiked its policy rate to 6.75% from the all-time low of 4.25%. The RCB has raised its policy rate by a cumulative 250 basis points in four consecutive hikes since January which has all but attracted the investors to jump on the bandwagon. However, inflation is proving to be sturdy in the face of intermittent rate hikes. And while Russian productivity is enjoying a smooth run, failure of monetary policy tools could just as easily backfire.

While political dissent or international sanctions remain futile, inflation is the prime enemy which could detract the Russian economy. For years Russia has faced a sharp decline in living standards, and despite commendable fiscal management of the Kremlin, such a steep rise in prices is an omen of a financial crisis. Moreover, the unemployment rates have dropped to record low levels. However, the labor shortage is emerging as another facet that could plausibly ignite the wage-price spiral. Further exacerbating the threat of inflation are the $9.6 billion pre-election giveaways orchestrated by President Putin to garner more support for his United Russia party. Such a tremendous demand pressure could presumably neutralize the aggressive tightening of the monetary policy by the RCB. Thus, while President Putin sure is on a definitive path of immortality on the throne of the Kremlin, surging inflation could mark a return of uncertainty, chip away investors’ confidence: eventually putting a brake on the economic streak.

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Economy

Synchronicity in Economic Policy amid the Pandemic

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business-economy

Synchronicity is an ever present reality for those who have eyes to see.Carl Jung

The Covid pandemic has elicited a number of deficiencies in the current global governance framework, most notably its weaknesses in mustering a coordinated response to the global economic downturn. A global economy is not fully “global” if it is devoid of the capability to conduct coordinated and effective responses to a global economic crisis. What may be needed is a more flexible governance structure in the world economy that is capable of exhibiting greater synchronicity in economic policies across countries and regions. Such a governance structure should accord greater weight to regional integration arrangements and their development institutions at the level of key G20 decisions concerning international economic policy coordination.

The need for greater synchronicity in the global economy arises across several trajectories:

· Greater synchronicity in the anti-crisis response across countries and regions – according to the IMF it is a coordinated response that renders economic stimulus more efficacious in countering the global downturn

· Synchronicity in the withdrawal of stimulus across the largest economies – absent such coordination the timing of policy normalization could be postponed with negative implications for macroeconomic stability

· Greater synchronicity in opening borders, lifting lockdowns and other policy measures related to responding to the pandemic: such synchronicity provides more scope for cross-country and cross-regional value-added chains to boost production

· Greater synchronicity in ensuring a recovery in migration and the movement of people across borders.

Of course such greater synchronicity in economic policy should not undermine the autonomy of national economic policy – it is rather about the capability of national and regional economies to exhibit greater coordination during downturns rather than a progression towards a uniform pattern of economic policy across countries. Synchronicity is not only about policy coordination per se, but also about creating the infrastructure that facilitates such joint actions. This includes the conclusion of digital accords/agreements that raise significantly the potential for economic policy coordination. Another area is the development of physical infrastructure, most notably in the transportation sphere. Such measures serve to improve regional and inter-regional connectivity and provide a firmer foundation for regional economic integration.

The paradox in which the world economy finds itself is that even as the current crisis is leading to fragmentation and isolationism there is a greater need for more policy coordination and synchronicity to overcome the economic downturn. This need for synchronicity may well increase in the future given the widening array of global risks such as risks to cyber-security as well as energy security and climate change. There is also the risk of the depletion of reserves to counter the Covid crisis that has been accompanied by a rise in debt levels across developed and developing economies. Also, the speed of the propagation of crisis impulses (that effectively increases with technological advances and globalization) is not matched by the capability of economic policy coordination and efficiency of anti-crisis policies.

There may be several modes of advancing greater synchronicity across borders in international relations. One possible option is a major superpower using its clout in a largely unipolar setting to facilitate greater policy coordination. Another possibility is for such coordination to be supported by global international institutions such as the UN, the WTO, Bretton Woods institutions, etc. Other options include coordination across the multiplicity of all countries of the global economy as well as across regional integration arrangements and institutions.

Attaining greater synchronicity across countries will necessitate changes in the global governance framework, which currently is characterized by weak multilateral institutions at the top level and a fragmented framework of governance at the level of countries. What may be needed is a greater scope accorded to regional integration arrangements that may facilitate greater coordination of synchronicity at the regional level as well as across regions. The advantage of providing greater weight to the regional institutions in dealing with global economic downturns emanates from their greater efficiency in coordinating an anti-crisis response at the regional level via investment/infrastructure projects as well as macroeconomic policy coordination. Regional development institutions also have a comparative advantage in leveraging regional interdependencies to promote economic recovery.

In conclusion, the global economy has arguably become more fragmented as a result of the Covid pandemic. The multiplicity of country models of dealing with the pandemic, the “vaccine competition”, the breaking up of global value chains and their nationalization and regionalization all point in the direction of greater localization and self-sufficiency. At the same time there is a need from greater synchronicity across countries particularly in the context of the current pandemic crisis. Regional integration arrangements and institutions could serve to facilitate such coordination in economic policy within and across the major regions of the world economy.

From our partner RIAC

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Economy

A New Strategy for Ukraine

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Authors: Anna Bjerde and Novoye Vremia

Four years ago, the World Bank prepared a multi-year strategy to support Ukraine’s development goals. This was a period of recovery from the economic crisis of 2014-2015, when GDP declined by a cumulative 16 percentage points, the banking sector collapsed, and poverty and other measures of insecurity spiked. Indeed, we noted at the time that Ukraine was at a turning point.

Four years later, despite daunting internal and external challenges, including an ongoing pandemic, Ukraine is a stronger country. It has proved more resilient to unpredictable challenges and is better positioned to achieve its long-term development vision. This increased capacity is first and foremost the result of the determination of the Ukrainian people.

The World Bank is proud to have joined the international community in supporting Ukraine during this period. I am here in Kyiv this week to launch a new program of assistance. In doing this, we look back to what worked and how to apply those lessons going forward. In Ukraine—as in many countries—the chief lesson is that development assistance is most effective when it supports policies and projects which the government and citizens really want.

This doesn’t mean only easy or even non-controversial measures; rather, it means we engage closely with government authorities, business, local leaders, and civil society to understand where policy reforms may be most effective in removing obstacles to growth and human development and where specific projects can be most successful in delivering social services, particularly to the poorest.

Looking back over the past four years in Ukraine, a few examples stand out. First, agricultural land reform. For the past two decades, Ukraine was one of the few countries in the world where farmers were not free to sell their land.

The prohibition on allowing farmers to leverage their most valuable asset contributed to underinvestment in one of Ukraine’s most important sources of growth, hurt individual landowners, led to high levels of rural unemployment and poverty, and undermined the country’s long-term competitiveness.

The determination by the President and the actions by the government to open the market on July 1 required courage. This was not an easy decision. Powerful and well-connected interests benefited from the status quo; but it was the right one for Ukrainian citizens.

A second area where we have been closely involved is governance, both with respect to public institutions and the rule of law, as well as the corporate governance of state-owned banks and enterprises. Poll after poll in Ukraine going back more than a decade revealed that strengthening public institutions and creating a level playing field for business was a top priority.

World Bank technical assistance and policy financing have supported measures to restore liability for illicit enrichment of public officials, to strengthen existing anticorruption agencies such as NABU and NACP, and to create new institutions, including the independent High-Anticorruption Court.

We are also working with government to ensure the integrity of state-owned enterprises. Our support to the government’s unbundling of Naftogaz is a good example; assistance in establishing supervisory boards in state-owned banks is another. We hope our early dialogue on modernizing the operations of Ukrzaliznytsia will be equally beneficial.

As we begin preparation of a new strategy, the issues which have guided our ongoing work—strengthening markets, stabilizing Ukraine’s fiscal and financial accounts; and providing inclusive social services more efficiently—remain as pressing today as they were in 2017. Indeed, the progress which has been achieved needs to continue to be supported as they frequently come under assault from powerful interests.

At the same time, recent years have highlighted emerging challenges where we hope to deepen and expand our engagement. First, COVID-19 has underscored the importance of our long partnership in health reform and strengthening social protection programs.

The changes to the provision of health care in Ukraine over recent years has helped mitigate the effects of COVID-19 and will continue to make Ukrainians healthier. Government efforts to better target social spending to the poor has also made a difference. We look forward to continuing our support in both areas, including over the near term through further support to purchase COVID-19 vaccines.

Looking ahead, the challenge confronting us all is climate change. Here again, our dialogue with the government has positioned us to help, including to achieve Ukraine’s ambitious commitment to reduce carbon emissions. During President Zelenskyy’s visit to Washington in early September we discussed operations to strengthen the electricity sector; a program to transition from coal power to renewables; municipal energy efficiency investments; and how to tap into Ukraine’s unique capacity to produce and store hydrogen energy. This is a bold agenda, but one that can be realized.

I have been gratified by my visit to Kyiv to see first-hand what has been achieved in recent years. I look forward to our partnership with Ukraine to help realize this courageous vision of the future.

Originally published in Ukrainian language in Novoye Vremia, via World Bank

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