The Globalization of Our Discontent


December 8, 2017

The Globalization of Our Discontent

by
http://www.project-syndicate.org

Globalization, which was supposed to benefit developed and developing countries alike, is now reviled almost everywhere, as the political backlash in Europe and the US in recent years has shown. The challenge is to minimize the risk that the backlash will intensify, and that starts by understanding – and avoiding – past mistakes.

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NEW YORK – Fifteen years ago, I published Globalization and Its Discontents, a book that sought to explain why there was so much dissatisfaction with globalization within the developing countries. Quite simply, many believed that the system was “rigged” against them, and global trade agreements were singled out for being particularly unfair.what’s come apart in the past year, and anticipate what will define the year ahead.

Now discontent with globalization has fueled a wave of populism in the United States and other advanced economies, led by politicians who claim that the system is unfair to their countries. In the US, President Donald Trump insists that America’s trade negotiators were snookered by those from Mexico and China.

So how could something that was supposed to benefit all, in developed and developing countries alike, now be reviled almost everywhere? How can a trade agreement be unfair to all parties?

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Columbia University’s Dr. Joseph E. Stiglitz, Nobel Laureate in Economics

To those in developing countries, Trump’s claims – like Trump himself – are laughable. The US basically wrote the rules and created the institutions of globalization. In some of these institutions – for example, the International Monetary Fund – the US still has veto power, despite America’s diminished role in the global economy (a role which Trump seems determined to diminish still further).

To someone like me, who has watched trade negotiations closely for more than a quarter-century, it is clear that US trade negotiators got most of what they wanted. The problem was with what they wanted. Their agenda was set, behind closed doors, by corporations. It was an agenda written by and for large multinational companies, at the expense of workers and ordinary citizens everywhere.

Indeed, it often seems that workers, who have seen their wages fall and jobs disappear, are just collateral damage – innocent but unavoidable victims in the inexorable march of economic progress. But there is another interpretation of what has happened: one of the objectives of globalization was to weaken workers’ bargaining power. What corporations wanted was cheaper labor, however they could get it.

This interpretation helps explain some puzzling aspects of trade agreements. Why is it, for example, that advanced countries gave away one of their biggest advantages, the rule of law? Indeed, provisions embedded in most recent trade agreements give foreign investors more rights than are provided to investors in the US. They are compensated, for example, should the government adopt a regulation that hurts their bottom line, no matter how desirable the regulation or how great the harm caused by the corporation in its absence.

There are three responses to globalized discontent with globalization. The first – call it the Las Vegas strategy – is to double down on the bet on globalization as it has been managed for the past quarter-century. This bet, like all bets on proven policy failures (such as trickle-down economics) is based on the hope that somehow it will succeed in the future.

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The second response is Trumpism: cut oneself off from globalization, in the hope that doing so will somehow bring back a bygone world. But protectionism won’t work. Globally, manufacturing jobs are on the decline, simply because productivity growth has outpaced growth in demand.

Even if manufacturing were to come back, the jobs won’t. Advanced manufacturing technology, including robots, means that the few jobs created will require higher skills and will be placed at different locations than the jobs that were lost. Like doubling down, this approach is doomed to fail, further increasing the discontent felt by those left behind.

Trump will fail even in his proclaimed goal of reducing the trade deficit, which is determined by the disparity between domestic savings and investment. Now that the Republicans have gotten their way and enacted a tax cut for billionaires, national savings will fall and the trade deficit will rise, owing to an increase in the value of the dollar. (Fiscal deficits and trade deficits normally move so closely together that they are called “twin” deficits.) Trump may not like it, but as he is slowly finding out, there are some things that even a person in the most powerful position in the world cannot control.

There is a third approach: social protection without protectionism, the kind of approach that the small Nordic countries took. They knew that as small countries they had to remain open. But they also knew that remaining open would expose workers to risk. Thus, they had to have a social contract that helped workers move from old jobs to new and provide some help in the interim.

The Nordic countries are deeply democratic societies, so they knew that unless most workers regarded globalization as benefiting them, it wouldn’t be sustained. And the wealthy in these countries recognized that if globalization worked as it should, there would be enough benefits to go around.

American capitalism in recent years has been marked by unbridled greed – the 2008 financial crisis provides ample confirmation of that. But, as some countries have shown, a market economy can take forms that temper the excesses of both capitalism and globalization, and deliver more sustainable growth and higher standards of living for most citizens.

We can learn from such successes what to do, just as we can learn from past mistakes what not to do. As has become evident, if we do not manage globalization so that it benefits all, the backlash – from the New Discontents in the North and the Old Discontents in the South – is at risk of intensifying.

Maybe Trump knows his base better than we do


December 3, 2017

Maybe Trump knows his base better than we do

by Dr. Fareed Zakaria

https://www.washingtonpost.com/opinions/maybe-trump-knows-his-base-better-than-we-do/2017/11/30/b4ca2164-d60e-11e7-b62d-d9345ced896d_story.html?utm_term=.227592e3afbc

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The most important revolution in economics in the past generation has been the rise of the behavioral scientists, trained in psychology, who are finding that people systematically make decisions that are against their own “interests.” This might be the tip of the iceberg in understanding human motivation. The real story might be that people see their own interests in much more emotional and tribal ways than scholars understand. What if, in the eyes of a large group of Americans, these other issues are the ones for which they will stand up, protest, support politicians and even pay an economic price? What if, for many people, in America and around the world, these are their true interests?—Dr. Fareed Zakaria

 

 

Watching the Republican tax plan race through Congress, one is reminded of a big apparent difference between President Trump’s program and other populist movements in the Western world. In the United States, Trump is leading something that is best described as plutocratic populism, a mixture of traditional populist causes with extreme libertarian ones.

Congress’s own think tanks — the Joint Committee on Taxation and the Congressional Budget Office — calculate that in 10 years, people making between $50,000 and $75,000 (around the median income in the United States) would effectively pay a whopping $4 billion more in taxes, while people making $1 million or more would pay $5.8 billion less under the Senate bill. And that doesn’t take into account the massive cuts in services, health care and other benefits that would likely result. Martin Wolf, the sober and fact-based chief economics commentator for the Financial Times, concludes, “This is a determined effort to shift resources from the bottom, middle and even upper middle of the U.S. income distribution toward the very top, combined with big increases in economic insecurity for the great majority.”

The puzzle, Wolf says, is why this is a politically successful strategy. The Republican Party is pursuing an economic agenda for the 0.1 percent, but it needs to win the votes of the majority. This is the issue that University of California at Berkeley political scientist Paul Pierson discusses in a recently published essay. Writing in the British Journal of Sociology, Pierson notes that Trump’s program does have strong populist aspects, especially on trade and immigration. But, he points out, “On the big economic issues of taxes, spending and regulation — ones that have animated conservative elites for a generation — he has pursued, or supported, an agenda that is extremely friendly to large corporations, wealthy families, and well-positioned rent-seekers. His budgetary policies (and those pursued by his Republican allies in Congress) will, if enacted, be devastating to the same rural and moderate-income communities that helped him win office.”

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Republican Party is cleverly and successfully hoodwinking its supporters, promising them populism and enacting plutocratic capitalism?  –Thomas Frank’s book “What’s the Matter with Kansas?

Pierson argues that Trump entered the White House with a set of inchoate ideas and no real organization. Thus, his administration was ripe for takeover by the most ardent, organized and well-funded elements of the Republican Party — its libertarian wing. Nurtured and built up over the years, this group of conservatives decided to ally with the Trump administration to enact its long-standing agenda. Pierson quotes Grover Norquist, the fiercely anti-statist GOP operative, explaining in 2012 his views on the selection of a Republican presidential nominee. “We are not auditioning for fearless leader. We don’t need a president to tell us in what direction to go. We know what direction to go. . . . We just need a president to sign this stuff.”

Image result for “The plutocrats are riding on a hungry tiger,” writes Wolf.

Is it that the Republican Party is cleverly and successfully hoodwinking its supporters, promising them populism and enacting plutocratic capitalism instead? This view has been a staple of liberal analysis for years, most prominently in Thomas Frank’s book “What’s the Matter with Kansas?” Frank argued that Republicans have been able to work this magic trick by dangling social issues in front of working-class voters, who fall for the bait and lose sight of the fact that they are voting against their own interests. Both Wolf and Pierson believe that this trickery will prove dangerous for Republicans. “The plutocrats are riding on a hungry tiger,” writes Wolf.

But what if people are not being fooled at all? What if people are actually motivated far more deeply by issues surrounding religion, race and culture than they are by economics? There is increasing evidence that Trump’s base supports him because they feel a deep emotional, cultural and class affinity for him. And while the tax bill is analyzed by economists, Trump picks fights with black athletes, retweets misleading anti-Muslim videos and promises not to yield on immigration. Perhaps he knows his base better than we do. In fact, Trump’s populism might not be as unique as it’s made out to be. Polling from Europe suggests that the core issues motivating people to support Brexit or the far-right parties in France and Germany, and even the populist parties of Eastern Europe, are cultural and social.

The most important revolution in economics in the past generation has been the rise of the behavioral scientists, trained in psychology, who are finding that people systematically make decisions that are against their own “interests.” This might be the tip of the iceberg in understanding human motivation. The real story might be that people see their own interests in much more emotional and tribal ways than scholars understand. What if, in the eyes of a large group of Americans, these other issues are the ones for which they will stand up, protest, support politicians and even pay an economic price? What if, for many people, in America and around the world, these are their true interests?

 

Trump’s Federal Reserve Nominee Chairman–Jerome Powell


November 3, 2017

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Trump’s Federal Reserve Nominee Chairman–Jerome Powell

by Kenneth Rogoff*

https://www.project-syndicate.org/commentary/jerome-powell-fed-chair-pick-by-kenneth-rogoff

Jerome Powell, US President Donald Trump’s pick to succeed Janet Yellen as Fed Chair, will face some extraordinary challenges at the outset of his five-year term. But the greatest challenge of all will be to stay out of Trump’s shadow and uphold the Fed’s independence.

Image result for Jerome PowellFederal Reserve Chairman Designate Jerome Powell with President Donald J. Trump.

Jerome Powell “is a sane and sober choice that heralds short-term continuity in Fed interest-rate policy, and perhaps a simpler and cleaner approach to regulatory policy.”–Kenneth Rogoff

 

CAMBRIDGE – With the appointment of Jerome Powell as the next Chair of the United States Federal Reserve Board, Donald Trump has made perhaps the most important single decision of his presidency. It is a sane and sober choice that heralds short-term continuity in Fed interest-rate policy, and perhaps a simpler and cleaner approach to regulatory policy.

Although Powell is not a PhD economist like current Fed Chair Janet Yellen and her predecessor, Ben Bernanke, he has used his years as an “ordinary” governor at the Fed to gain a deep knowledge of the key issues he will face. But make no mistake: the institution Powell will now head rules the global financial system. All other central bankers, finance ministers, and even presidents run a distant second.

If that seems hyperbolic, it is only because most of us don’t really pay attention to the Fed on a day-to-day basis. When the Fed gets it right, price stability reigns, unemployment remains low, and output hums along. But “getting it right” is not always easy, and when the Fed gets it wrong, the results can be pretty ugly.

Famously, the Fed’s efforts to tame a stock-market bubble in the late 1920s sparked the Great Depression of the 1930s. (Fortunately, of the candidates Trump was considering for the Fed post, Powell is the one least likely to repeat this mistake.) And when the Fed printed mountains of money in the 1970s to try to dull the pain of that decade’s oil shocks, it triggered an inflationary surge that took more than a decade to tame.

At times, the rest of the world seems to care more about Fed policy than Americans do. Little wonder: perhaps more than ever, the US dollar lies at the heart of the global financial system. This is partly because much of world trade and finance is indexed to the dollar, leading many countries to try to mimic Fed policies to stabilize their exchange rates.

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Thank You, Dr. Janet Yellen for Your Service to the International Financial Community

Powell will face some extraordinary challenges at the outset of his five-year term. By some measures, stock markets look even frothier today than they did in the 1920s. With today’s extraordinarily low interest rates, investors seem ever more willing to assume greater risk in search of return.

At the same time, despite a strongly growing US and global economy, inflation remains mystifyingly low. This has made it extremely difficult for the Fed to normalize policy interest rates (still only 1%) so that it has room to cut them when the next recession hits, which it inevitably will. (The odds of a recession hitting in any given year are around 17%, and that seems like a good guess now.)

If Powell and the Fed cannot normalize interest rates before the next recession, what will they do? Yellen insists that there is nothing to worry about; the Fed has everything under control, because it can turn to alternative instruments. But many economists have come to believe that much of this is smoke and mirrors.

For example, so-called quantitative easing involves having the Fed issue short-term debt to buy up long-term government debt. But the US Treasury owns the Fed, and can carry out such debt purchases perfectly well by itself.

Some argue for “helicopter money,” whereby the Fed prints money and hands it out. But this, too, is smoke and mirrors. The Fed has neither the legal authority nor the political mandate to run fiscal policy; if it tries to do so, it runs the risk of forever losing its independence.

Given that monetary policy is the first and best line of defense against a recession, an urgent task for the new chair is to develop a better approach. Fortunately, good ideas exist, and one can only hope that Powell will quickly move to create a committee to study long-term fixes.

One idea is to raise the Fed’s inflation target. But this would be problematic, not least because it would breach a decades-long promise to keep inflation around 2%. Moreover, higher inflation would induce greater indexation, ultimately undermining the effectiveness of monetary policy. Paving the way for effective negative-interest-rate policy is a more radical – but by far the more elegant – solution.

Bank regulation is also part of the Fed’s mandate. The 2010 Dodd-Frank financial-reform legislation, which has spawned 30,000 pages of rules, has been a boon for lawyers. But the massive compliance costs ultimately fall on small and medium-size businesses. It would be far better simply to require banks to raise much more of their resources in equity markets instead of through bonds. That way, shareholders, not taxpayers, would take the big hit in a crisis.

I have not mentioned the elephant in the room: the threat to the Fed’s independence posed by a president seemingly intent on challenging all institutional norms. When President Richard Nixon was intent on being re-elected in 1972, he put heavy pressure on then-Fed Chair Arthur Burns to “juice” the economy. Nixon was re-elected, but inflation soared and growth collapsed. No one should be wishing for a replay – even if Nixon eventually was impeached.

*Dr. Kenneth Rogoff, Professor of Economics and Public Policy at Harvard University and recipient of the 2011 Deutsche Bank Prize in Financial Economics, was the chief economist of the International Monetary Fund from 2001 to 2003. The co-author of This Time is Different: Eight Centuries of Financial Folly, his new book, The Curse of Cash, was released in August 2016.

 

The Sovereignty that Really Matters


October 23, 2017

The Sovereignty that Really Matters

by Javier Solana

The preference of some countries to isolate themselves within their borders is anachronistic and self-defeating, but it would be a serious mistake for others, fearing contagion, to respond by imposing strict isolation. Even in states that have succumbed to reductionist discourses, much of the population has not.

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MADRID – In his famous “political trilemma of the world economy,” Harvard economist Dani Rodrik boldly claims that global economic integration, the nation-state, and democracy cannot coexist. At best, we can combine two of the three, but always at the expense of one.

Until recently, the so-called Washington Consensus, with its emphasis on liberalization, deregulation, and privatization, shaped economic policy worldwide. While the 2008 global financial crisis eroded its credibility, the G20 countries quickly agreed to avoid the protectionist policies against which the consensus stood.

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Meanwhile, the European Union remained (and remains) the only democratic experiment on a supranational level, taking pride in its promising advances, despite being burdened by multiple defects. In other words, economic integration, anchored in the nation-state, remained in favor globally, while democracy was made secondary to international market dynamics.

But 2016 marked a turning point, though we still do not know toward what. A “Beijing Consensus” has emerged, which some view as an alternative model of development based on greater government intervention. But it was the Brexit vote and the election of Donald Trump as US president that really reflected the move to upend the long-established balance among globalization, the nation-state, and democracy.

“Let’s take back control” was the Brexiteers’ winning slogan, expressing a sentiment that clearly resonated with the slim majority of British voters who supported withdrawal from the EU. Likewise, many Trump voters were convinced that the accumulated powers of Wall Street, transnational players, and even other countries had to be reined in to “make America great again.”

It would not be wise to scorn this diagnosis, to which Rodrik himself subscribes (at least in part), just because one dislikes the proposals put forward by Trump and some of the Conservative proponents of Brexit. Their approach consists in hindering globalization – while maintaining or even enhancing other aspects of the Washington Consensus, such as financial deregulation – and strengthening democracy through the nation-state.

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In his first appearance before the United Nations General Assembly, Trump delivered a 42-minute speech in which he used the words “sovereignty” or “sovereign” 21 times –an average of once every two minutes. And in Europe, the United Kingdom is not the only country to be carried away by a neo-Westphalian current: Poland and Hungary are in its grip as well. Even the Catalan pro-independence movement, headed by various parties, most of which would not feel comfortable being labeled “anti-globalization,” follows a similar logic of retreat into nationalism.

All of these forces overestimate their capacity to dilute or circumvent existing economic integration, which has been strengthened in recent decades by the rapid development of cross-border value chains. Unless these forces reverse course, they are more likely to dilute the influence that their nation-states (or the states they seek to create) might be able to wield over globalization. In short, an increase in formal sovereignty could paradoxically result in a loss of effective sovereignty, which is the kind that really matters.

Consider Britain: by exiting the EU, the British will have no say over what is, far and away, their most important export market. As for Catalonia, a supposedly pro-independence and pro-sovereignty movement could end up creating a polity that is less sovereign and more at the mercy of international events.

Just a week after Trump’s UN speech, French President Emmanuel Macron presented his vision of Europe’s future in an address at the Sorbonne. Macron also mentioned the word “sovereign” repeatedly, making it clear that it forms the basis of his vision for Europe. But, unlike populists, he favors an effective and inclusive sovereignty, European in scope and supported by two more key pillars: unity and democracy.

Relations between states are driven by cooperation, competition, and confrontation. There is little doubt that a certain degree of confrontation will always be present internationally. But the EU has clearly demonstrated that its incidence can be reduced by exponentially increasing the opportunity cost of conflictive dynamics. Unfortunately, the movements that understand sovereignty in isolationist terms usually revert to extreme nationalism, which is not given to promoting the common spaces that allow international society to prosper.

The preference of some countries to isolate themselves within their borders is anachronistic and self-defeating, but it would be a serious mistake for others, fearing contagion, to respond by avoiding engagement with these states. The spirit of cooperation, along with constructive competition, should structure relations between all players that possess international legitimacy. Even in states that have succumbed to reductionist discourses, much of the population has not. Such is the case of the 48% of British voters who opposed Brexit, or the 49% of Turks who voted “no” to expanding the Turkish presidency’s powers, implicitly rejecting a narrative that used the EU as a scapegoat. Many of these voters would surely be disappointed if the EU turned its back on them.

The vitality of international society depends on dialogue. And, to avoid perpetuating the deficiencies of the Washington Consensus, which were revealed with such clarity in 2016, this dialogue must occur within the framework of a common and democratic public sphere. If we cultivate this common public sphere, reducing the pre-eminence of the nation-state, we could advance step by step toward the least explored side of the triad described by Rodrik: global democracy.

Of course, a universal democracy would be a very difficult objective to achieve (Rodrik himself rules it out). But, with technological development and the multiplication of economic and cultural synapses, it is not a chimera. In this sense, the EU has already forged a new path, one that aims to expand democracy beyond the realm of the nation-state. For Europe, as well as for other regions, it is a path worth following.

*Javier Solana was EU High Representative for Foreign and Security Policy, Secretary-General of NATO, and Foreign Minister of Spain. He is currently President of the ESADE Center for Global Economy and Geopolitics, Distinguished Fellow at the Brookings Institution, and a member of the World Economic Forum’s Global Agenda Council on Europe.

 

Jomo Kwame Sundaram–Need to Speak Truth to Power


October 16, 2017

Jomo Kwame Sundaram–Need to Speak Truth to Power

by Malaysiakini Team

http://www.malaysiakini.com

Tomorrow: Jomo on why Malaysians are worse off today

INTERVIEW | Jomo Kwame Sundaram, former Assistant Secretary-General for Economic Development at the United Nations, talks about the need to “speak truth to power,” among others.

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Question: In a recent speech, Prime Minister Najib Razak accused you of taking “every opportunity to attack me and my policies, from our participation in the TPPA, to the administration of welfare payments, to foreign investment in Malaysia.” What do you have to say?

Jomo: What can I say? One should not read him out of context. He said this as proof of freedom of speech and democracy in the country. Obviously, I appreciate his commitment to freedom of speech, and presumably, freedom after speech [laughs]. In fact, some people now tease me as the PM’s “poster boy” for free speech in Malaysia.

But unfortunately, his fact-checkers did not do their homework, or perhaps facts don’t matter in this age of fake news. As many know, I have also been criticised by the PM’s critics for supporting several of his policy initiatives, most notably BR1M (Bantuan Rakyat 1Malaysia) and the minimum wage policy.

BR1M goes directly to beneficiaries and is hence much appreciated by recipients. Understandably, as with the mid-year deal for Felda settlers, opposition politicians see BR1M as bribing the electorate, but one should not condemn BR1M itself.

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However, labour market interventions, such as the minimum wage policy, have been far more significant for improving a lot of low-income earners although the public may not realise it.

I recently lauded the Health Ministry initiative to get an affordable Hepatitis C treatment, for a small fraction of the US price, for the almost half million Malaysians who suffer from it.

So factually, his speechwriters were wrong. But he was right to say that I do not blindly support everything his government has done, and have been critical of specific policies, which I have done for decades, long before he became PM.

Najib said you have been critical of the Trans-Pacific Partnership Agreement (TPPA).

Jomo: He is correct that I have long been critical of the TPPA. Before I came back to Malaysia last year, I joined some UN colleagues to critically assess the TPPA. The report was launched in Washington DC in early 2016, soon after I left the UN.

That work was not focused on Malaysia, and simply pointed out that the methodology used simply assumed away the problems the TPPA would generate, including for the US. In the US, both Democrats and Republicans cited our work to oppose the TPPA.

After returning to Malaysia, I felt obliged to point out that the gains promised by the TPPA, even by its most fervent US advocates, were actually very modest and exaggerated by its Malaysian proponents.

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I also pointed out that most of the gains to the US were at our expense. Strengthened intellectual property rights (IPRs) would raise the costs of medicines, for example.

The TPPA’s investor-state dispute settlement (ISDS) provisions would allow private tribunals to make rulings in favour of powerful foreign corporations at potentially great expense to the Malaysian government.

Even now, although the TPPA is dead in law because President (Donald) Trump rejected it, there are those trying to push TPP 11 through while the government and public are distracted by other matters.

This would be worse as it would sell out the national and public interest for next to no gain. My concern throughout has been the Malaysian public interest, including the government interest.

What about foreign investments?

Jomo: As for foreign investment, again he is correct that I am concerned about how the government is encouraging foreign portfolio investment, as in the period before the 1997-98 crisis.

Unlike Thailand and Indonesia then, the government and Malaysian corporations had not borrowed very heavily from abroad. But we were vulnerable because of the sudden exit of mainly foreign holdings from the Malaysian stock market.

Such investments have grown so much in the last decade that some estimates suggest that they exceed foreign share ownership in the mid-1970s, more than four decades ago. It is also misleading to think that because Malaysians have been encouraged to invest abroad, we should encourage foreign portfolio investments here.

 

Greenfield foreign direct investments are a different story as they may bring in new productive capacities and capabilities, including technology, management and market access. But my concern remains that Malaysian industrial capacities and capabilities remain modest, and we still have relatively few internationally competitive industrial firms.

My concerns have been expressed with the country’s interests and future progress foremost. I pray that the space for such discussion and debate will be expanded, not diminished. The PM’s affirmation of freedom of speech should, therefore, be welcomed, not feared.

So, what inspires you to do what you do?

Jomo: Many people have inspired me. Those who fought to free us from imperialism, oppression and exploitation. While in school, especially at the Royal Military College, I was inspired by Malcolm X, Martin Luther King, Yasser Arafat, Kwame Nkrumah, Ho Chi Minh and Nelson Mandela.

And yes, I do not identify with the other man I was named after – Jomo Kenyatta, father of Kenya’s current president, who was unfairly jailed by the British from 1952 until 1959, but became increasingly corrupt and tribalistic after becoming president in 1963.

Chinua Achebe’s writings turned from the disruptive colonial impact to the gangrene of corruption. Then, in 1983, I was shaken by the brutal torture and murder of my senior in school, the late Jalil Ibrahim, in Hong Kong.

We are all enjoined to “speak truth to power.” Initially, when I was at UKM (Universiti Kebangsaan Malaysia) with the late Ishak Shari, Osman Rani and Ismail Muhd Salleh, and later with others after I moved to Universiti Malaya.

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During Dr Mahathir (Mohamad)’s long tenure, I was also known as a critic, even though I appreciated many aspects of particular policy initiatives. Although I was quite outspoken in those days, BN politicians did not harass me.

 

Rather, petty university administrators who had ambitions or agendas of their own were the vindictive ones. But most left me alone as I had no ambitions in terms of university positions.

Also, there is no personal animus on my part towards the Prime Minister. As is well-known, I greatly admire his late father (Tun Abdul Razak )for many reasons. In fact, I wrote an article early last year, just after leaving the UN, on the occasion of the 40th anniversary of his untimely passing.

As a student then, in the cold winter of early 1976, we organised a memorial meeting at MIT (Massachusetts Institute of Technology) to honour his contributions soon after he passed.

Tomorrow: Jomo on why Malaysians are worse off today

Sustainable Development Goals Achievable?


September 28, 2017

Sustainable Development Goals Achievable?

by Andrew Sheng and Xiao Geng*

https://www.project-syndicate.org/commentary/sdgs-global-cooperation-trump-un-speech-by-andrew-sheng-and-xiao-geng-2017-09

The SDGs were always bound to meet strong headwinds, owing to technological disruption, geopolitical rivalry, and widening social inequality. But populist calls for nationalist policies, including trade protectionism, have intensified those headwinds considerably.

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US President Donald Trump’s recent speech at the United Nations has gotten a lot of attention for its bizarre and bellicose rhetoric, including threats to dismantle the Iran nuclear deal and “totally destroy” North Korea. Underlying his declarations was a clear message: the sovereign state still reigns supreme, with national interests overshadowing shared objectives. This does not bode well for the Sustainable Development Goals.

Adopted by the UN just a year before Trump’s election, the SDGs will require that countries cooperate on crucial global targets related to climate change, poverty, public health, and much else. In an age of contempt for international cooperation, not to mention entrenched climate-change denial in the Trump administration, is achieving the SDGs wishful thinking?

The SDGs were always bound to meet strong headwinds, owing to technological disruption, geopolitical rivalry, and widening social inequality. But populist calls for nationalist policies, including trade protectionism, have intensified those headwinds considerably. Simply put, populations are losing faith that the global development orthodoxy of good governance (including monetary and fiscal discipline) and free markets can benefit them.

With all of the advanced countries confronting serious fiscal constraints, and emerging markets weakened by lower commodity prices, paying for global public goods has become all the more unappealing. Budget cuts – together with accountability issues and new technological challenges – are also hurting those tasked with delivering good governance. And markets increasingly seem to be captured by vested interests.

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Economic outcomes often have their origins in politics. Harvard Law School’s Roberto Unger has argued that overcoming the challenges of knowledge-based development will demand “inclusive vanguardism.” The democratization of the market economy, he says, is possible only with “a corresponding deepening of democratic politics,” which implies “the institutional reconstruction of the market itself.”

Yet, in the US, the political system seems unlikely to produce such a reconstruction. Harvard Business School Professors Katherine Gehl and Michael Porter argue that America’s two-party system “has become the major barrier to solving nearly every important challenge” facing the country.

Political leaders, Gehl and Porter continue, “compete on ideology and unrealistic promises, not on action and results,” and “divide voters and serve special interests” – all while facing little accountability. A forthcoming book by University of San Francisco Professor Shalendra Sharma corroborates this view. Comparing economic inequality in China, India, and the US, Sharma argues that both democratic and authoritarian governance have failed to promote equitable development.

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There are four potential combinations of outcomes for countries: (1) good governance and good economic policies; (2) good politics and bad economics; (3) bad politics and good economics; and (4) bad politics and bad economics. Other things being equal, there is only a one-in-four chance of arriving at a win-win situation of good governance and strong economic performance. That chance is diminished further by other disruptions, from natural disasters to external interference.

There are those who believe that technology will help to overcome such disruptions, by spurring enough growth to generate the resources needed to mitigate their impact. But while technology is consumer-friendly, it produces its own considerable costs.

Technology kills jobs in the short term and demands re-skilling of the labor force. Moreover, knowledge-intensive technology has a winner-take-all network effect, whereby hubs seize access to knowledge and power, leaving less-privileged groups, classes, sectors, and regions struggling to compete.

Thanks to social media, the resulting discontent now spreads faster than ever, leading to destructive politics. This can invite geopolitical interference, which quickly deteriorates into a lose-lose scenario, like that already apparent in water-stressed and conflict-affected countries, where governments are fragile or failing.

The combination of bad politics and economics in one country can easily produce contagion, as rising migration spreads political stress and instability to other countries. According to the UN High Commission for Refugees, there were 65 million refugees last year, compared to just 1.6 million in 1960. Given the endurance of geopolitical conflict, not to mention the rapidly growing impact of climate change, migration levels are not expected to decline anytime soon.

The SDGs aim to relieve these pressures, by protecting the environment and improving the lives of people within their home countries. But achieving them will require far more responsible politics and a much stronger social consensus. And that will require a fundamental shift in mindset, from one of competition to one that emphasizes cooperation.

Just as we have no global tax mechanism to ensure the provision of global public goods, we have no global monetary or welfare policies to maintain price stability and social peace. That is why multilateral institutions need to be upgraded and restructured, with effective decision-making and implementation mechanisms for managing global development challenges such as infrastructure gaps, migration, climate change, and financial instability. Such a system would go a long way toward supporting progress toward the SDGs.

Unger argues that all of today’s democracies “are flawed, low-energy democracies,” in which “no trauma” – in the form of economic ruin or military conflict – means “no transformation.” He is right. In this environment, reflected in Trump’s embrace of the antiquated Westphalian model of nation-states, achieving the SDGs will probably be impossible.

*Andrew Sheng, Distinguished Fellow of the Asia Global Institute at the University of Hong Kong and a member of the UNEP Advisory Council on Sustainable Finance, is a former chairman of the Hong Kong Securities and Futures Commission, and is currently an adjunct professor at Tsinghua University in Beijing. His latest book is From Asian to Global Financial Crisis.

*Xiao Geng, President of the Hong Kong Institution for International Finance, is a professor at the University of Hong Kong.