Trump’s Unrealpolitik


January 7, 2017

Trump’s Unrealpolitik

by Shlomo Ben-Ami, a former Israeli foreign minister, is Vice President of the Toledo International Center for Peace. He is the author of Scars of War, Wounds of Peace: The Israeli-Arab Tragedy.–http://www.project-syndicate.org

Some in the United States have praised President-elect Donald Trump for his supposed realism. He will do what is right for America, they argue, without getting caught up in thorny moral dilemmas, or letting himself be carried away by some grand sense of responsibility for the rest of the world. By acting with the shrewd pragmatism of a businessman, he will make America stronger and more prosperous.

This view is, to be frank, delusional.

Image result for Greek historian Thucydides

It is certainly true that Trump will not be caught up in questions of morality. He is precisely what the Greek historian Thucydides defined as an immoral leader: one of “violent character” who “wins over the people by deceiving them” and by exploiting “their angry feelings and emotions.”

But immorality is neither desirable nor a necessary feature of realism. (Thucydides himself was an ethical realist.) And there is little to suggest that Trump has any of the other realist qualities that his supporters see. How could anyone expect the proudly unpredictable and deeply uninformed Trump to execute grand strategic designs, such as the Realpolitik recommended by Harvard’s Niall Ferguson, Henry Kissinger’s biographer, following the election?

Image result for Harvard’s Niall Ferguson on Realpolitik Quote

Ferguson, like Kissinger, believes that true Realpolitik under Trump should begin with an alliance among the US, China, and Russia, based on a mutual fear of Islamic extremism and a shared desire to exploit lesser powers to boost their own economies. These countries would agree to prevent Europe from attaining great-power status (by destroying the European Union), and to ensure that populist or authoritarian governments control the United Nations Security Council’s five permanent members.

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To this end, Trump could work with Russian President Vladimir Putin to help Marine Le Pen, the leader of France’s anti-EU nationalist right, win April’s presidential election. Moreover, in order to consolidate a post-EU Anglo-Atlantic sphere, Trump could transform the North American Free-Trade Agreement into a North Atlantic arrangement, replacing Mexico with the United Kingdom. Finally, he could put pressure on NATO members to pay more for defense – a move that would surely undermine the security of the Baltic states and Ukraine.

Achieving these goals would require more than an ability to avoid moral impediments. Like all statecraft, it would require an aptitude for careful diplomatic engineering, respect for facts and truth, historical knowledge, and a capacity for cautious examination of complex situations when formulating (or revising) policies.

Yet Trump is the most anarchic, capricious, and inconsistent individual ever to occupy the White House, and all he has to help guide him is a cabinet full of billionaire deal-makers like him, preoccupied with calculable immediate interests. For them, casting off allies might seem like an easy way to streamline decision-making (and boost share prices).

But repudiating America’s role as a global beacon – and thus the idea of American exceptionalism – is a bad bet for the future. Scrapping free-trade deals with Asia and Latin America, for example, could provide a short-term gain for the US economy; but doing so would ultimately undercut the projection of American power there, paving the way for penetration by China.

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The US should be aiming to curtail China’s influence without incurring its wrath. Another lesson from Thucydides – reinforced by historical experience – is that rising, not established, powers tend to upset the international order.

Protecting that order requires the main global power to uphold the institutions that underpin it, in order to prevent revolutionary behavior by lesser powers. Yet Trump has criticized and disregarded international institutions to such an extent that it is now China that is defending global governance – including the Paris agreement on climate change and the nuclear deal with Iran – from a revolutionary US.

Worse, Trump has seemingly abandoned all caution with regard to China. On the diplomatic front, by speaking directly with the president of Taiwan after the election, he violated a protocol maintained for four decades, by Democratic and Republican presidents alike. On the economic front, he has leveled reckless (and plainly wrong) accusations that China is manipulating its currency to gain an unfair trade advantage.

Provoking China, doubting NATO, and threatening trade wars is nihilism, not strategy. At this point, Trump seems set to do on a global scale what former President George W. Bush did to the Middle East – intentionally destabilize the old order, and then fail to create a new one. The first step would be a deal with Putin on Syria – a move that, like Bush’s defeat of Saddam Hussein in Iraq, would amount to handing a victory to Iran.

This is not to say that none of the Realpolitik envisioned by Ferguson will come to fruition. But what elements of it do emerge will likely be driven more by Putin than by Trump – with dangerous outcomes. Already, Putin has begun work on dismantling the EU. After Le Pen was refused credit from French banks, Russian banks saved her campaign. And Russian state-sponsored propaganda is helping to drive former Soviet republics away from the EU.

Trump, a vocal Putin fan, is unlikely to redress the tilting balance of power as part of, let alone as a condition for, a diplomatic “reset” with Russia. What kind of a realist would not use a united Western alliance to limit a Russia that is trying to engineer a return to Cold War spheres of influence?

And, for that matter, what kind of a realist sends to Israel an Ambassador whose pro-settlement rhetoric threatens to inflame the entire Muslim world against the US? What is so realistic about a war of annihilation against the Islamic State that is not backed by a plan for engagement with the broader Middle East?

Trump might have some realistic instincts. But they will not be enough to ensure measured responses to even the slightest provocation, much less to underpin a sweeping and consistent strategy.

Farewell to the West


December 7, 2016

Farewell to the West

by Joschka Fisher@Project Syndicate

Image result for joschka fischer

Now that Donald Trump has been elected President of the United States, the end of what was heretofore termed the “West” has become all but certain. That term described a transatlantic world that emerged from the twentieth century’s two world wars, redefined the international order during the four-decade Cold War, and dominated the globe – until now.

The West shouldn’t be confused with the “Occident.” While the West’s culture, norms, and predominant religion are broadly Occidental in origin, it evolved into something different over time. The Occident’s basic character was shaped over centuries by the Mediterranean region (though parts of Europe north of the Alps made many important contributions to its development). The West, by contrast, is transatlantic, and it is a child of the twentieth century.

When World War I began, it was a European conflict between the Central Powers and the Entente of Britain, France, and Russia. It became a true world war only in 1917, when the US entered the fray. This is the moment when what we now call the West began to take form.

The West can be said to have received its birth certificate during World War II. In August 1941, after Nazi Germany had invaded the Soviet Union, British Prime Minister Winston Churchill and US President Franklin D. Roosevelt met on a warship off the coast of Newfoundland and signed the Atlantic Charter. That agreement would later develop into NATO, which, for four decades, enabled an alliance of independent democracies with shared values and market economies to withstand the Soviet threat – and which has safeguarded Europe to this day.

More fundamentally, the West was founded on an American commitment to come to its allies’ defense. The Western order cannot exist without the US playing this crucial role, which it may now abnegate under Trump. As a result, the future of the West itself is now at stake.

No one can be certain what Trump’s election will mean for American democracy, or what he will do when he takes office. But we can already make two reasonable assumptions. First, his presidency will be highly disruptive to American domestic and foreign policy. Trump won the presidency by flouting virtually every unwritten rule of American politics. He beat not only Hillary Clinton, but also the Republican Party establishment. There is little reason to think that he will suddenly abandon this winning strategy come January 20.

We can also safely assume that Trump will stick firmly to his pledge to “Make America great again”; this will be the foundation for his presidency, come what may. Former President Ronald Reagan also promised this, but he did so while the US, still engaged in the Cold War, could take an imperial approach. Thus, Reagan pursued rearmament on such a large scale that it ultimately led to the Soviet Union’s collapse; and he paved the way for an American economic boom with a massive increase in the national debt.

Trump does not have the luxury of an imperial approach. On the contrary, during the campaign, he heaped criticism on America’s senseless wars in the Middle East; and his supporters want nothing more than for the US to abandon its global leadership role and retreat from the world. A US that moves toward isolationist nationalism will remain the world’s most powerful country by a wide margin; but it will no longer guarantee Western countries’ security or defend an international order based on free trade and globalization.

The only remaining questions now concern how quickly US policy will change, and how radical those changes will be. Trump has already pledged to scrap the 12-country Trans-Pacific Partnership – a decision that amounts to a gift to China, whether he realizes it or not. He could also bestow upon China another gift: reducing US engagement in the South China Sea. China might soon find itself the new guarantor of global free trade – and probably the new global leader in combating climate change, too.

With respect to the war in Syria, Trump might simply hand that devastated country over to Russian President Vladimir Putin and Iran. Practically speaking, this would overturn the balance of power in the Middle East, with grave consequences well beyond the region; morally, it would be a cruel betrayal of the Syrian opposition and a boon to Syrian President Bashar al-Assad.

And if Trump defers to Putin in the Middle East, one wonders what he will do with respect to Ukraine, Eastern Europe, and the Caucasus. Should we expect a Yalta Conference 2.0 to recognize Putin’s new de facto sphere of influence?

The new course Trump will chart for the US is already discernible; we just don’t know how quickly the ship will sail. Much will depend on the opposition (Democrats and Republicans alike) that Trump encounters in the US Congress, and on pushback from the majority of Americans who did not vote for him.

But we should not harbor any illusions: Europe is far too weak and divided to stand in for the US strategically; and, without US leadership, the West cannot survive. Thus, the Western world as virtually everyone alive today has known it will almost certainly perish before our eyes.

So what comes next? China, we can be certain, is preparing to fill America’s shoes. And in Europe, the crypts of nationalism have been opened; in time, they will once again release their demons upon the continent – and the world.

https://www.project-syndicate.org/commentary/goodbye-to-american-global-leadership-by-joschka-fischer-2016-12

Joseph Stiglitz: ‘The EU’s monetary union was the mistake’


September 17, 2016

Joseph Stiglitz: ‘The EU’s monetary union was the mistake’

by Jeremy Warner

I’m on my way to interview Joseph Stiglitz, economic guru of the political left, about his latest book, The Euro and its Threat to The Future of Europe.

Waiting in the reception of Penguin Books, I notice on display an early, Penguin “classic” edition of George Orwell’s 1984. Orwell is one of those authors who is claimed as their own by both right and left – the left because of his writings on social deprivation, but the right too because of his deep aversion, depicted in Animal Farm and 1984, to totalitarian communism.

I’m not sure Stiglitz, a Nobel prize winning economist who has advised the Scottish government on independence, the Far Left Syriza government in Greece, and very briefly sat on Jeremy Corbyn’s now disbanded economic advisory panel, crosses the boundaries in quite the same way, but there is no doubt that as a critique of the euro, his new book will appeal as much to a right as to the left.

I put this point to Stiglitz at the start of our interview.

It is the absence of any proper economic adjustment mechanism which is the over-riding failure in Europe–Joseph Stiglitz.

“Yes, it’s a fair summary”, he says, “except for one thing. One of the arguments I make for the failure of the euro is that at the time it was being constructed there was a “neo-liberal” ideology which said that all we need to do to make this thing work is to get deficits low, keep inflation low and take down barriers and then everything would be fine.

“That was a very conservative ideology,  that if you did those things the markets would on their own adjust and everything else would come right. Not all right wing conservatives thought that, but a lot of what I call ‘market fundamentalism’ did go into the thinking on the euro.”

 

But most of those in Britain who thought the euro a mad idea were on the political right, I point out.

Stiglitz says that he is not really talking about the issues of national sovereignty raised by the euro. “I was thinking more in terms of the macro-economic adjustment. It is the absence of any proper economic adjustment mechanism which is the over-riding failure in Europe. Where the left and right would agree – and this speaks to the whole Brexit debate – is that Europe needs economic arrangement that work well for a very diverse group of countries.

“This requires a balance between flexibility and harmonisation, and in opting for monetary union they didn’t get that balance right. We see the lack of it particularly in the rigidity that Germany imposes on the eurozone’s crisis hit countries”.

The theme of Stiglitz’s book is that monetary union was basically where it all went wrong for the European Union. A project that was meant to bring countries together has succeeded only in tearing them apart in a manner which now threatens wider European economic and social stability.

“There have been other things that Europe got wrong, but monetary union was the overarching macro economic mistake. We can see this most clearly in the fact that some countries not in the euro but with the same regulatory framework, such as the UK and Sweden, did much better.”

EU flag

So what, fundamentally, is the problem with the euro?

“For the first nine years up until 2008 there were no symptoms, or no obvious ones, of how dysfunctional things really were. But actually the euro was already creating its own problems.

“When the financial crisis hit, it was roundly blamed on the US, but in fact a very large part of Europe’s crisis was created by the euro.

“The single currency gave markets this excessive confidence. They began to confuse the absence of exchange rate risk with the absence of risk per se. Monetary union had taken away the ability of individual governments to curb domestic inflationary pressures, which led to an increase in price levels relative to Germany. Real exchange rates became out of line.

“One of the key points of the book is that it is easy to create these imbalances, made possible by the easy flow of money between countries under  the euro, but with a rigid exchange rate it is very hard to undo them.

“There are only two ways of doing it. Have Germany inflate, or have the others deflate. Germany was unwilling to inflate. But deflation doesn’t work easily either because your debts are still owed, and that means that in forcing countries to deflate you make them even more fragile”.

We move onto the issue that most puzzles Anglo-Saxon commentators such as myself; if the euro is so bad, how come it has lasted so long?

“Well, you have to take account of the eight or nine years before the problem became apparent. Then there was ‘oh it has worked for nine years’ – even though it hadn’t – ‘so the crisis will be over quickly and we can make it work again’. When you have already invested heavily in something, it is very difficult to cut your losses. There is always a tendency to think that with just a little more investment, it can be made to work.

“So the politicians said, just accept a little bit of temporary pain and everything will be OK again. After two years that wasn’t true. And time and again it turns out not to be true. Good money is constantly thrown after bad.

“Imagine yourself in the position of a Greek politician, with 25pc unemployment and an escalating financial commitment as a result of the fight to stay in the euro. As things go more and more wrong, you become ever more committed to the policy that got you there because to admit you are wrong is to say we have suffered all this pain for nothing”.

Joseph Stiglitz

Does this mean Europe is essentially damned, I ask?

“The most likely scenario is a continued muddling through, which is what they have been doing to date. But neither Frankfurt nor Brussels controls events, as the Brexit referendum vote shows, so what you see – and this is not for sure but almost predictable – is growing alienation.

“This is already apparent in electoral outcomes. More than 60pc of people in Spain, Greece and Portugal voted against austerity parties. The same thing with Brexit, which was also a rebellion against the political centre.

“The only thing that saves the centre ground is that the anti-establishment movement is divided between left and right. So you get a stalemate which is also not at all good for anyone, and out of that who knows what happens.

“Getting a political coalition in any country large enough to leave the euro is therefore difficult. What’s so troubling is that it is also proving impossible for Europe to agree on policies to fix the euro, so you have neither one thing or the other. Despite his apparent pessimism, Stiglitz is not short on suggested solutions.

“If you had a group of people sitting around a table rationally discussing the future of Europe, these are the sort of things they might come up with.

“One is to say let’s finish the job. The US shares a common currency among 50 diverse states, so what are the institutions and rules needed to make the single currency work.

“As a bare minimum, you need common deposit insurance, a banking union, Eurobonds, maybe industrial policies to allow those at the bottom to catch up, you need to move away from just inflation targeting, and you need some way of adjusting real exchange rate that doesn’t involve internal devaluation.

“Germany has to perform its role of allowing its economy to inflate relative to others. So those are the minimum to make a euro that works.

“But Germany takes the view that we are not a transfer union and we won’t even take the risk of a banking union or of common deposit insurance. This is like New York saying we don’t want to have federal deposit insurance because there is a bank in Alabama which might go bankrupt.”

If completing the job proves impossible, says Stiglitz, that leaves the alternative of an “amicable divorce”.

“In the book I use the example of marriage councillors. In the past, the job of the marriage councillor was to keep the marriage together, but modern ones sometimes say you should never have got married in the first place.

“Once you have accepted the marriage can’t be made to work, then the only issue is how to make splitting up go as smoothly as possible.

“In the book, I describe some novel ways of doing this. The core of the idea is that you are going to have to allow redenomination of debt, and allow some form of bankruptcy.

“A third way is the flexible euro where you say lets try and consolidate the institutional advances we have made but recognise that we are not anywhere near a single currency yet. And then I describe some mechanisms that would allow the exchange rate to be operated flexibly and allow economic adjustment”.

So what are the chances of any of these “solutions” being adopted, I ask.“I’m hopeful”, Stiglitz says with a grin, which somewhat suggests he’s not.

The death of neoliberalism and the crisis in western politics


August 25, 2016

The death of neoliberalism and the crisis in western politics

By Marton Jacques

In the early 1980s the author was one of the first to herald the emerging dominance of neoliberalism in the west. Here he argues that this doctrine is now faltering. But what happens next?

 

Donald Trump seeks a return to 1950s America, well before the age of neoliberalism. Photograph: H. Armstrong Roberts/Retrofile/Getty Images

The western financial crisis of 2007-8 was the worst since 1931, yet its immediate repercussions were surprisingly modest. The crisis challenged the foundation stones of the long-dominant neoliberal ideology but it seemed to emerge largely unscathed. The banks were bailed out; hardly any bankers on either side of the Atlantic were prosecuted for their crimes; and the price of their behaviour was duly paid by the taxpayer. Subsequent economic policy, especially in the Anglo-Saxon world, has relied overwhelmingly on monetary policy, especially quantitative easing. It has failed. The western economy has stagnated and is now approaching its lost decade, with no end in sight.

After almost nine years, we are finally beginning to reap the political whirlwind of the financial crisis. But how did neoliberalism manage to survive virtually unscathed for so long? Although it failed the test of the real world, bequeathing the worst economic disaster for seven decades, politically and intellectually it remained the only show in town. Parties of the right, centre and left had all bought into its philosophy, New Labour a classic in point. They knew no other way of thinking or doing: it had become the common sense. It was, as Antonio Gramsci put it, hegemonic. But that hegemony cannot and will not survive the test of the real world.

But the causes of this political crisis, glaringly evident on both sides of the Atlantic, are much deeper than simply the financial crisis and the virtually stillborn recovery of the last decade. They go to the heart of the neoliberal project that dates from the late 70s and the political rise of Reagan and Thatcher, and embraced at its core the idea of a global free market in goods, services and capital. The depression-era system of bank regulation was dismantled, in the US in the 1990s and in Britain in 1986, thereby creating the conditions for the 2008 crisis. Equality was scorned, the idea of trickle-down economics lauded, government condemned as a fetter on the market and duly downsized, immigration encouraged, regulation cut to a minimum, taxes reduced and a blind eye turned to corporate evasion.

The first inkling of the wider political consequences was evident in the turn in public opinion against the banks, bankers and business leaders. For decades, they could do no wrong: they were feted as the role models of our age, the default troubleshooters of choice in education, health and seemingly everything else. Now, though, their star was in steep descent, along with that of the political class. The effect of the financial crisis was to undermine faith and trust in the competence of the governing elites. It marked the beginnings of a wider political crisis.

It should be noted that, by historical standards, the neoliberal era has not had a particularly good track record. The most dynamic period of postwar western growth was that between the end of the war and the early 70s, the era of welfare capitalism and Keynesianism, when the growth rate was double that of the neoliberal period from 1980 to the present.

Ronald Reagan and Margaret Thatcher, pictured in 1984, ushered in the era of neoliberalism.
Ronald Reagan and Margaret Thatcher, pictured in 1984, ushered in the era of neoliberalism. Photograph: Bettmann Archive

But by far the most disastrous feature of the neoliberal period has been the huge growth in inequality. Until very recently, this had been virtually ignored. With extraordinary speed, however, it has emerged as one of, if not the most important political issue on both sides of the Atlantic, most dramatically in the US. It is, bar none, the issue that is driving the political discontent that is now engulfing the west. Given the statistical evidence, it is puzzling, shocking even, that it has been disregarded for so long; the explanation can only lie in the sheer extent of the hegemony of neoliberalism and its values.

But now reality has upset the doctrinal apple cart. In the period 1948-1972, every section of the American population experienced very similar and sizable increases in their standard of living; between 1972-2013, the bottom 10% experienced falling real income while the top 10% did far better than everyone else. In the US, the median real income for full-time male workers is now lower than it was four decades ago: the income of the bottom 90% of the population hasstagnated for over 30 years.

A not so dissimilar picture is true of the UK. And the problem has grown more serious since the financial crisis. On average, between 65-70% of households in 25 high-income economies experienced stagnant or falling real incomes between 2005 and 2014.

The reasons are not difficult to explain. The hyper-globalisation era has been systematically stacked in favour of capital against labour: international trading agreements, drawn up in great secrecy, with business on the inside and the unions and citizens excluded, the Trans-Pacific Partnership (TPP) and theTransatlantic Trade and Investment Partnership (TTIP) being but the latest examples; the politico-legal attack on the unions; the encouragement of large-scale immigration in both the US and Europe that helped to undermine the bargaining power of the domestic workforce; and the failure to retrain displaced workers in any meaningful way.

As Thomas Piketty has shown, in the absence of countervailing pressures, capitalism naturally gravitates towards increasing inequality. In the period between 1945 and the late 70s, Cold War competition was arguably the biggest such constraint. Since the collapse of the Soviet Union, there have been none. As the popular backlash grows increasingly irresistible, however, such a winner-takes-all regime becomes politically unsustainable.

Large sections of the population in both the US and the UK are now in revolt against their lot, as graphically illustrated by the support for Trump and Sanders in the US and the Brexit vote in the UK. This popular revolt is often described, in a somewhat denigratory and dismissive fashion, as populism. Or, as Francis Fukuyama writes in a recent excellent essay in Foreign Affairs: “‘Populism’ is the label that political elites attach to policies supported by ordinary citizens that they don’t like.” Populism is a movement against the status quo. It represents the beginnings of something new, though it is generally much clearer about what it is against than what it is for. It can be progressive or reactionary, but more usually both.

Brexit is a classic example of such populism. It has overturned a fundamental cornerstone of UK policy since the early 1970s. Though ostensibly about Europe, it was in fact about much more: a cri de coeur from those who feel they have lost out and been left behind, whose living standards have stagnated or worse since the 1980s, who feel dislocated by large-scale immigration over which they have no control and who face an increasingly insecure and casualised labour market. Their revolt has paralysed the governing elite, already claimed one prime minister (David Cameron), and left the latest one fumbling around in the dark looking for divine inspiration (Theresa May).

The wave of populism marks the return of class as a central agency in politics, both in the UK and the US. This is particularly remarkable in the US. For many decades, the idea of the “working class” was marginal to American political discourse. Most Americans described themselves as middle class, a reflection of the aspirational pulse at the heart of American society. According to a Gallup poll, in 2000 only 33% of Americans called themselves working class; by 2015 the figure was 48%, almost half the population.

Brexit, too, was primarily a working-class revolt. Hitherto, on both sides of the Atlantic, the agency of class has been in retreat in the face of the emergence of a new range of identities and issues from gender and race to sexual orientation and the environment. The return of class, because of its sheer reach, has the potential, like no other issue, to redefine the political landscape.

The re-emergence of class should not be confused with the labour movement. They are not synonymous: this is obvious in the US and increasingly the case in the UK. Indeed, over the last half-century, there has been a growing separation between the two in Britain. The re-emergence of the working class as a political voice in Britain, most notably in the Brexit vote, can best be described as an inchoate expression of resentment and protest, with only a very weak sense of belonging to the labour movement.

Indeed, Ukip has been as important – in the form of immigration and Europe – in shaping its current attitudes as the Labour party. In the United States, both Trump and Sanders have given expression to the working-class revolt, the latter almost as much as the former. The working class belongs to no one: its orientation, far from predetermined, as the left liked to think, is a function of politics.

The neoliberal era is being undermined from two directions. First, if its record of economic growth has never been particularly strong, it is now dismal. Europe is barely larger than it was on the eve of the financial crisis in 2007; the United States has done better but even its growth has been anaemic. Economists such as Larry Summers believe that the prospect for the future is most likely one of secular stagnation.

Worse, because the recovery has been so weak and fragile, there is a widespread belief that another financial crisis may well beckon. In other words, the neoliberal era has delivered the west back into the kind of crisis-ridden world that we last experienced in the 1930s. With this background, it is hardly surprising that a majority in the west now believe their children will be worse off than they were. Second, those who have lost out in the neoliberal era are no longer prepared to acquiesce in their fate – they are increasingly in open revolt. We are witnessing the end of the neoliberal era. It is not dead, but it is in its early death throes, just as the social-democratic era was during the 1970s.

Image result for Jeffrey D. Sachs

The Earth Institute@Columbia University’s Jeffery Sachs

A sure sign of the declining influence of neoliberalism is the rising chorus of intellectual voices raised against it. From the mid-70s through the 80s, the economic debate was increasingly dominated by monetarists and free marketeers. But since the western financial crisis, the centre of gravity of the intellectual debate has shifted profoundly. This is most obvious in the United States, with economists such as Joseph Stiglitz, Paul Krugman, Dani Rodrik and Jeffrey Sachs becoming increasingly influential. Thomas Piketty’s Capital in the Twenty-First Century has been a massive seller. His work and that of Tony Atkinson and Angus Deaton have pushed the question of the inequality to the top of the political agenda. In the UK, Ha-Joon Chang, for long isolated within the economics profession, has gained a following far greater than those who think economics is a branch of mathematics.

 Meanwhile, some of those who were previously strong advocates of a neoliberal approach, such as Larry Summers and the Financial Times’s Martin Wolf, have become extremely critical. The wind is in the sails of the critics of neoliberalism; the neoliberals and monetarists are in retreat. In the UK, the media and political worlds are well behind the curve. Few recognise that we are at the end of an era. Old attitudes and assumptions still predominate, whether on the BBC’s Today programme, in the rightwing press or the parliamentary Labour party.

Following Ed Miliband’s resignation as Labour leader, virtually no one foresaw the triumph of Jeremy Corbyn in the subsequent leadership election. The assumption had been more of the same, a Blairite or a halfway house like Miliband, certainly not anyone like Corbyn. But the zeitgeist had changed. The membership, especially the young who had joined the party on an unprecedented scale, wanted a complete break with New Labour. One of the reasons why the left has failed to emerge as the leader of the new mood of working-class disillusionment is that most social democratic parties became, in varying degrees, disciples of neoliberalism and uber-globalisation. The most extreme forms of this phenomenon were New Labour and the Democrats, who in the late 90s and 00s became its advance guard, personified by Tony Blair and Bill Clinton, triangulation and the third way.

But as David Marquand observed in a review for the New Statesman, what is the point of a social democratic party if it doesn’t represent the less fortunate, the underprivileged and the losers? New Labour deserted those who needed them, who historically they were supposed to represent. Is it surprising that large sections have now deserted the party who deserted them? Blair, in his reincarnation as a money-obsessed consultant to a shady bunch of presidents and dictators, is a fitting testament to the demise of New Labour.

‘Virtually no one foresaw the triumph of Jeremy Corbyn’, pictured at a rally in north London last week.

‘Virtually no one foresaw the triumph of Jeremy Corbyn’, pictured at rally in north London last week. Photograph: Daniel Leal-Olivas/AFP/Getty Images

The rival contenders – Burnham, Cooper and Kendall – represented continuity. They were swept away by Corbyn (pic above), who won nearly 60% of the votes. New Labour was over, as dead as Monty Python’s parrot. Few grasped the meaning of what had happened. A Guardian leader welcomed the surge in membership and then, lo and behold, urged support for Yvette Cooper, the very antithesis of the reason for the enthusiasm. The PLP refused to accept the result and ever since has tried with might and main to remove Corbyn.

Just as the Labour party took far too long to come to terms with the rise of Thatcherism and the birth of a new era at the end of the 70s, now it could not grasp that the Thatcherite paradigm, which they eventually came to embrace in the form of New Labour, had finally run its course. Labour, like everyone else, is obliged to think anew. The membership in their antipathy to New Labour turned to someone who had never accepted the latter, who was the polar opposite in almost every respect of Blair, and embodying an authenticity and decency which Blair patently did not.

Labour may be in intensive care, but the condition of the Conservatives is not a great deal better.

Corbyn is not a product of the new times, he is a throwback to the late 70s and early 80s. That is both his strength and also his weakness. He is uncontaminated by the New Labour legacy because he has never accepted it. But nor, it would seem, does he understand the nature of the new era. The danger is that he is possessed of feet of clay in what is a highly fluid and unpredictable political environment, devoid of any certainties of almost any kind, in which Labour finds itself dangerously divided and weakened.

Labour may be in intensive care, but the condition of the Conservatives is not a great deal better. David Cameron was guilty of a huge and irresponsible miscalculation over Brexit. He was forced to resign in the most ignominious of circumstances. The party is hopelessly divided. It has no idea in which direction to move after Brexit. The Brexiters painted an optimistic picture of turning away from the declining European market and embracing the expanding markets of the world, albeit barely mentioning by name which countries it had in mind. It looks as if the new prime minister may have an anachronistic hostility towards China and a willingness to undo the good work of George Osborne. If the government turns its back on China, by far the fastest growing market in the world, where are they going to turn?

Brexit has left the country fragmented and deeply divided, with the very real prospect that Scotland might choose independence. Meanwhile, the Conservatives seem to have little understanding that the neoliberal era is in its death throes.

‘Put America first’: Donald Trump in Cleveland last month. Photograph: Joe Raedle/Getty Images

Dramatic as events have been in the UK, they cannot compare with those in the United States. Almost from nowhere, Donald Trump rose to capture the Republican nomination and confound virtually all the pundits and not least his own party. His message was straightforwardly anti-globalisation. He believes that the interests of the working class have been sacrificed in favour of the big corporations that have been encouraged to invest around the world and thereby deprive American workers of their jobs. Further, he argues that large-scale immigration has weakened the bargaining power of American workers and served to lower their wages.

He proposes that US corporations should be required to invest their cash reserves in the US. He believes that the North American Free Trade Agreement (Nafta) has had the effect of exporting American jobs to Mexico. On similar grounds, he is opposed to the TPP and the TTIP. And he also accuses China of stealing American jobs, threatening to impose a 45% tariff on Chinese imports.

To globalisation Trump counterposes economic nationalism: “Put America first”. His appeal, above all, is to the white working class who, until Trump’s (and Bernie Sander’s) arrival on the political scene, had been ignored and largely unrepresented since the 1980s. Given that their wages have been falling for most of the last 40 years, it is extraordinary how their interests have been neglected by the political class. Increasingly, they have voted Republican, but the Republicans have long been captured by the super-rich and Wall Street, whose interests, as hyper-globalisers, have run directly counter to those of the white working class. With the arrival of Trump they finally found a representative: they won Trump the Republican nomination.

The economic nationalist argument has also been vigorously pursued by Bernie Sanders, who ran Hillary Clinton extremely close for the Democratic nomination and would probably have won but for more than 700 so-called super-delegates, who were effectively chosen by the Democratic machine and overwhelmingly supported Clinton. As in the case of the Republicans, the Democrats have long supported a neoliberal, pro-globalisation strategy, notwithstanding the concerns of its trade union base. Both the Republicans and the Democrats now find themselves deeply polarised between the pro- and anti-globalisers, an entirely new development not witnessed since the shift towards neoliberalism under Reagan almost 40 years ago.

Another plank of Trump’s nationalist appeal – “Make America great again” – is his position on foreign policy. He believes that America’s pursuit of great power status has squandered the nation’s resources. He argues that the country’s alliance system is unfair, with America bearing most of the cost and its allies contributing far too little. He points to Japan and South Korea, and Nato’s European members as prime examples.He seeks to rebalance these relationships and, failing that, to exit from them.

As a country in decline, he argues that America can no longer afford to carry this kind of financial burden. Rather than putting the world to rights, he believes the money should be invested at home, pointing to the dilapidated state of America’s infrastructure. Trump’s position represents a major critique of America as the world’s hegemon. His arguments mark a radical break with the neoliberal, hyper-globalisation ideology that has reigned since the early 1980s and with the foreign policy orthodoxy of most of the postwar period. These arguments must be taken seriously. They should not be lightly dismissed just because of their authorship. But Trump is no man of the left. He is a populist of the right. He has launched a racist and xenophobic attack on Muslims and on Mexicans. Trump’s appeal is to a white working class that feels it has been cheated by the big corporations, undermined by Hispanic immigration, and often resentful towards African-Americans who for long too many have viewed as their inferior.

A Trump America would mark a descent into authoritarianism characterised by abuse, scapegoating, discrimination, racism, arbitrariness and violence; America would become a deeply polarised and divided society. His threat to impose 45% tariffs on China, if implemented, would certainly provoke retaliation by the Chinese and herald the beginnings of a new era of protectionism.

Trump may well lose the presidential election just as Sanders failed in his bid for the Democrat nomination. But this does not mean that the forces opposed to hyper-globalisation – unrestricted immigration, TPP and TTIP, the free movement of capital and much else – will have lost the argument and are set to decline. In little more than 12 months, Trump and Sanders have transformed the nature and terms of the argument. Far from being on the wane, the arguments of the critics of hyper-globalisation are steadily gaining ground. Roughly two-thirds of Americans agree that “we should not think so much in international terms but concentrate more on our own national problems”. And, above all else, what will continue to drive opposition to the hyper-globalisers is inequality.

 https://www.theguardian.com/commentisfree/2016/aug/21/death-of-neoliberalism-crisis-in-western-politics

The Future of Europe


August 21, 2016

SLIPPERY SLOPE
Europe’s Troubled Future
By Giles Merritt
270 pp. Oxford University Press. $29.95.

WELCOME TO THE POISONED CHALICE
The Destruction of Greece and the Future of Europe
By James K. Galbraith
213 pp. Yale University Press. $26.

Americans tend to struggle to grasp the ways of the European Union, which admittedly are complex and often arcane. It’s unhelpful that much of the writing on the continent’s seminal postwar project lapses into the same euro-jargon that the union’s technocrats and think tanks employ. Many Europeans can’t make sense of it either, which is one explanation for the triumphant Brexit vote and the historically low trust in the E.U. that Europeans everywhere express today. The community is indisputably mired in its most acute crisis since its founding in the 1950s.

Yet contemporary Europe is incomprehensible without it, so thoroughly does the E.U.’s existence suffuse the everyday lives of its 508 million citizens, the governance of the 28 member states and a $15 trillion economy. This is why the short­ish, lucid books of the Brussels-based journal editor Giles Merritt and the American economist James K. Galbraith deserve particular attention. In accessible prose flush with strong argument, they diagnose the E.U.’s problems — and offer prescriptions on how to deal with them. Though the community is currently preoccupied with Britain’s vote to leave, the influx of migrants, an economy still reeling from the financial crisis, the ascent of far-right parties and a declining global market share, both authors believe deeply in the E.U.

In order to get at the community’s core deficiencies, Merritt first punctures some of the myths that unfairly damage its credibility. A favorite of euro-skeptics is that the E.U. is a gigantic, autonomous “superstate” that runs Europe from Brussels. In fact, the E.U.’s largest body and its executive arm, the European Commission, has a staff of just 23,000, smaller than many national government ministries.

Moreover, most E.U. legislation is not in the form of written law, but rather “directives” to the states, whose legislatures then turn them into law. The heavy lifting is done by the member states. As for autonomy, it is the states that drive the E.U., whether through their national ministers in the Council of Ministers, one of the E.U.’s legislative bodies, or the commission, where state appointees deal with everything from agriculture to consumer protection. The governments call the shots, and it is therefore at their feet that Merritt lays most of the blame for the E.U.’s malaise.

In the same vein, the E.U. has come under fire for its policies guaranteeing workers’ freedom of movement within the union. In the Brexit campaign, anti-E.U. voices charged that its provisions enabled Central Europeans to swamp Britain. In fact, demographic analyses show that northern Europe needs many kinds of workers now and will increasingly require more in decades to come. Although European politicians know this too, many can’t sell this argument to their electorates, just one example of the dichotomy that pits the interests of elected national officials against those of the greater good, embodied in the E.U.

Merritt, despite his substantial respect for the E.U., argues that bold, sweeping reforms are imperative to meet the challenges of the 21st century. Global warming, terrorism, globalized markets, mass migration, militarized geopolitics and the digital revolution all require supranational attention. On their own, he argues, the individual nation states of Europe, Britain included, are doomed to irrelevance.

Yet there’s much more consensus on the union’s shortcomings than on how to address them. The so-called democratic deficit, for instance, refers to the lack of transparency and accountability in the E.U.’s decision-making process. The council, the “true legislative body,” meets behind closed doors. The European Parliament’s elected M.P.s exercise some power, yet no one is held responsible for failure. And then there are the unelected civil servants. No democratic state worth its salt would permit such basic transgressions of democratic procedure. But the E.U., Merritt charges, gets away with it.

Furthermore, the E.U.’s rigidity undermines its ability to promote innovation. Europe lags woefully behind the United States and China in turning digital technology into commercial success. Meager investment in R&D has hurt Europe’s productivity and thus global competitiveness, causing Europe’s share of the international market to stagnate while its rivals post gains. In more ways than one, Merritt argues convincingly, the E.U. is stuck in the 20th century.

Until the Brexit vote, the single greatest blow to the E.U. had been the post-2008 tribulations of the euro, called the euro crisis, which manifested itself as a devastating debt problem that upended the economies of southern Europe and Ireland. The threat of insolvency forced the wealthier northern Europeans, above all Germany, to bail out the troubled nations at high cost, both financially and in terms of good will.

James K. Galbraith, the son of the great Keynesian economist John Kenneth Galbraith, had, as an adviser to the left-wing Syriza government in Greece, a front-row seat at pivotal moments in the showdown between the E.U. (and the International Monetary Fund, too) and Greece, the hardest hit of the debtor nations. The E.U. erred egregiously, he writes, in making draconian austerity policies the price of Greece’s rescue while letting the continent’s banks off scot free. The wrongness of this prescription, he says, is borne out today, five years later, with Greece prostrate under the burden of the E.U.’s highest external debt (in relation to its economy’s size), the highest unemployment (29 percent) and grim social and psychological fallout. Deep budget cuts and higher taxes have cost Greece a quarter of its pre-crisis wealth, rendering a recovery impossible, according to Galbraith, perhaps forever. Greece’s withdrawal from the euro zone, he suggests, would have been preferable.

 Galbraith understands the eurocrisis largely as a byproduct of the global banking and financial disaster triggered in the United States in 2007, which the ­center-right governments in Germany and France exploited to crush the left-wing government in Greece and its allies elsewhere in southern Europe. Leftist governments, Galbraith says, won’t get relief from the punishment of austerity, slashed wages, reduced pensions and the fire sale of state assets until their politics return to the center. Until then, they will suffer and the wealth disparity between northern and southern Europe will widen.

Greece, Galbraith writes, could become something like “a Caribbean dependency of the United States. Its professional population will continue to leave, and its working classes will also either emigrate or sink into destitution. Or perhaps they will fight.”

Fighting, however, didn’t get Syriza or Galbraith’s friend, the controversial ­January-to-June-2015 Greek finance minister Yanis Varoufakis, very far. Even a national referendum rejecting the terms of a bailout didn’t manage to dilute the poison the Greeks had to swallow. The way out, argues Galbraith, ever the Keynesian, is a multi-pronged approach that includes a spending program like the postwar Marshall Plan.

For his part, Merritt presents the recipes of several research institutions, all of which call for rejuvenating the E.U.’s structures to make them more democratic, flexible and efficient. He, like Galbraith and other E.U. advocates, insists that deeper political and economic integration is the answer. Yet, he concedes, because Europe’s political spectrum is fractured as never before, with national interests regularly trumping common cause, the lesser evil at the moment may be smaller, tactical interventions to complete the single market, invest in research, modernize infrastructure and strengthen foreign policy mechanisms.

Doing nothing at all is the worst option, the authors agree, a conclusion dramatically reinforced by the Brexit vote. That would condemn the E.U. to muddle from crisis to crisis until finally one of those crises takes it down once and for all.

Paul Hockenos is a Berlin-based writer. His “Berlin Calling: Anarchy, Punk Rock, Techno, and the Birth of the New Berlin” will come out next year.

A version of this review appears in print on August 21, 2016, on page BR16 of the Sunday Book Review with the headline: Europe Is Falling . . . .

Presidential Elections 2016– Should Hillary Fear Optimism


August 1, 2016

Presidential Elections 2016– Should Hillary Fear Optimism

If the last two weeks of our political life have seemed extra long, it is because we have gone through not two but four political conventions.

Cleveland had two conventions. One featured Republicans who have decided to voice support for Donald Trump’s candidacy without echoing any of his distinctive themes. That’s the convention where Chris Christie made the standard Republican case that the Obama-Clinton foreign policy has been too timid and too unsettling to our allies, where Paul Ryan spoke once again about his party’s commitment to limited government and where the typical speaker praised Mr. Trump as though he were a normal Republican nominee.

The second convention in Cleveland featured Mr. Trump himself. Unlike the speakers at that first convention, he promised to spend money on infrastructure, shred trade agreements, cut back on immigration and get our allies to pay more for defense.

The Democrats put on two shows in Philadelphia as well. Half of the convention was devoted to keeping Bernie Sanders’s voters inside the tent. Some of these voters are hard to please. (“They’re both center-right candidates,” I overheard one protester saying outside the convention hall, and others held signs denouncing “Clintrump.”) Senator Elizabeth Warren, former President Bill Clinton and Senator Sanders himself were among the politicians deployed to protect Hillary Clinton’s left flank. Their message was neatly summarized by Senator Sherrod Brown of Ohio: “She’s a progressive who gets things done.”

When the convention focused on party unification, it dwelt on abortion, immigration and gun control — in each case without a great deal of nuance to appeal to those who are moderate or conservative on these questions. But the later in the night and the later in the week it got, the more the convention shifted toward the bigger task of courting a broader audience.

This was the convention of generals, of invocations of Ronald Reagan, of chants of “U.S.A.! U.S.A.!” The old liberal fear of lapsing into jingoism appeared to have disappeared. Substitute country musicians for pop stars, and you would have thought you were at a Republican convention of old. The parties had in several respects traded places. Mr. Trump, more than Mrs. Clinton, portrayed American workers as victims of a rigged system. The Democrats, more than the Republicans, talked about faith, American history and national unity. Mrs. Clinton warned that besides Trump and Clinton, e pluribus unum is on the ballot.

Vice President Joseph R. Biden Jr. (above), President Obama and the nominee herself all welcomed conservatives and moderates with misgivings about Mr. Trump to find a new home in the Democratic Party — or at least, as Michael Bloomberg, the former mayor of New York City, urged, to stay long enough to vote for Mrs. Clinton. Michelle Obama’s fine speech implicitly made the same argument.

That argument was, inevitably, characterological rather than ideological. “He loses his cool at the slightest provocation,” Mrs. Clinton said of Mr. Trump in what deserves to be the most quoted passage of her speech. “A man you can bait with a tweet is not a man we can trust with nuclear weapons.” Democrats characterized previous Republican nominees as too right-wing; not this time.

Both parties had split personalities at their conventions because neither party has been enthusiastic about its candidate, to an unusual degree. That lack of enthusiasm manifested in different ways in each city. Republicans gamely ignored a party division they fervently hope is temporary. Democrats tried to portray Mrs. Clinton simultaneously as a true progressive and a nonpartisan unifier.

Because each nominee has intraparty opponents, each nominee sees a chance to court the people who lost the other side’s primary. While accepting the Republican nomination, Mr. Trump said that he would attract Sanders voters because of their shared opposition to decades of American trade policy. Democrats, whose politicians are more unified than the Republicans, pursued a more systematic strategy of peeling off anti-Trump Republicans.

Part of what makes Mr. Trump’s conquest of the Republican Party so impressive is that it came at the expense of several of its factions. But that also means that voters in several parts of the usual Republican coalition might be tempted to defect this year, or at least to sit this election out.

Economic conservatives are unhappy about Mr. Trump’s indifference to shrinking the size of the government and alarmed by his offhand reference to withdrawing from the World Trade Organization. Jennifer Pierotti Lim, a founder of Republican Women for Hillary who spoke on the last night in Philadelphia, works for the United States Chamber of Commerce.

Many Republican foreign-policy intellectuals have come out against Mr. Trump, too, appalled by his stance on NATO, his friendliness to Vladimir V. Putin, his willingness to alienate Muslim allies and his ignorance of the world. Mr. Trump has worked hardest at cultivating his relationships with religious conservatives, and he has been fairly successful. Yet many of them still don’t trust him to expend political capital for their causes, which do not engage him. He said nothing about abortion in his acceptance speech, breaking decades of precedent.

As much as the Democrats of Philadelphia invited Republicans to join them, though, they did little to make themselves attractive to them. The Democrats insist on hurtling to the left on issue after issue.

Pro-lifers are less welcome than ever in the party, which is now more firmly committed not to the maintenance of the status quo on abortion but to the elimination of restrictions on taxpayer funding for abortion that have been in place for decades.

At the Democratic convention four years ago in Charlotte, N.C., Bill Clinton spoke about the federal government’s long-term debt problem. That candor was absent in Philadelphia, where speakers, including Hillary Clinton, talked about expanding Social Security instead of fixing the shortfall it is already projected to have.

The retreat from free trade, meanwhile, is a bipartisan one. Republicans who are concerned about their party’s drift toward protectionism will not be drawn toward Mrs. Clinton and her running mate, Tim Kaine, who have repudiated the Trans-Pacific Partnership. President Obama hasn’t, but at the convention he didn’t speak up for it or for trade generally — even though there is some evidence much of the public remains favorable to trade.

Some middle-of-the-road voters who find Mr. Trump alarming nonetheless share some of his stated concerns about crime, the Islamic State and immigration. Democrats did little to reassure them that they shared those concerns. They ignored the preliminary evidence that the violent crime rate, while still well below its peak rates, has started to increase again. Mrs. Clinton affirmed our existing strategy against the Islamic State, but her remarks stood out at the convention, where the topic was rarely mentioned, especially by progressive favorites. The Democrats also made it clear that they viewed illegal immigration almost exclusively through the eyes of illegal immigrants themselves: If it has costs, or enforcement of the laws against it has benefits, they weren’t mentioned. You don’t have to think it wise to “deport them all” to find this treatment of the issue cavalier.

Mrs. Clinton said that she loved talking about her plans for public policy. But she did less of it than Democrats usually do, perhaps because the convention’s dual political imperatives — reassuring both the left end of the party and the general public — made it impossible to make a coherent case for an agenda. One might have expected the Democrats to use center-left policies to attract white working-class voters who are unhappy with their lot and considering Mr. Trump. They didn’t make this pitch very prominently, except for when Bill Clinton promised vaguely to take coal miners on a ride to the economy of the future.

Making college free for the middle class was a repeated applause line in Philadelphia: “Bernie Sanders and I will work together to make college tuition-free for the middle class and debt-free for all!” said Mrs. Clinton. But not all people are going to get a college degree. They got two sentences from her, and less from her allies.

Instead of reasons for hope, the Democrats offered these voters bromides about optimism: America’s best days are always ahead of it, etc., etc. These bromides came with a liberal spin, the genius of America being defined as its closer and closer approximation of egalitarian ideals. The idea that American patriotism consists of loyalty to a future country clearly speaks to many of our citizens. Will it be enough in an anxious era, when Americans are deeply dissatisfied with their politicians? And when Mr. Trump is offering a more pointed explanation of that dissatisfaction than the Democrats are?

The Democrats’ optimism about the country is tightly related to their optimism about their own political fortunes, which is based on demography. They represent growing demographic groups — including nonwhites and the unchurched — rather than shrinking groups like the white working class. But that optimism is unlikely to prove contagious among that group.

And the Democrats’ rhetorical optimism is vulnerable to events in a way Mr. Trump’s is not. Terrorist attacks and high-profile crimes may not make Americans find new virtues in Mr. Trump, but they will validate his campaign message and make the Democrats’ look naïve or worse. Mrs. Clinton said in her speech: “There is no other Donald Trump. This is it.” That’s right: We know his campaign will focus on her alleged incompetence and crookedness. What we don’t know is how well she will be able to adapt to Mr. Trump’s unusual pursuit of the presidency.

The fall campaign will feature two candidates whose parties have little faith in them and who in turn are to varying degrees uncomfortable with their parties’ platforms. A more detailed discussion of the policy choices facing the country will have to wait for another presidential campaign, with more serious candidates than Mr. Trump and stronger candidates than either him or Mrs. Clinton.

“What the world needs now is love, sweet love,” Broadway stars sang at the convention. The Hillary Clinton Democrats showcased an impressively broad coalition, stretching from those who have won military honors to those who have won Tony awards. But what the world doesn’t need now — what won’t prove sufficient to stave off Donald Trump — is a forced optimism.

Ramesh Ponnuru is a senior editor at National Review, a columnist for Bloomberg View and a visiting fellow at the American Enterprise Institute.

A version of this op-ed appears in print on July 31, 2016, on page SR1 of the New York edition with the headline: Why Hillary Should Fear Optimism.

Additional READ: 

http://www.huffingtonpost.com/miles-mogulescu/hillarys-campaign-is-in-b_b_11114262.html