Policy uncertainty threatens trade growth, says World Bank


February 22, 2017

Policy uncertainty threatens trade growth, says World Bank

Warning on protectionism and threats to trade agreements in Trump era

https://www.ft.com/content/9d49b092-f859-11e6-9516-2d969e0d3b65

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Political uncertainty is slowing trade growth, a World Bank report has concluded, indicating that the rise of Donald Trump may already be casting a shadow over the global economy.

Major international institutions such as the IMF, the OECD and World Bank have recently upgraded their forecasts of global economic growth largely due to expectations that tax cuts, rising infrastructure spending and a wave of deregulation will boost the US economy under the new president. But the report by World Bank economists, released on Tuesday, highlights the fragile state of one historically important engine of global growth — trade.

To the extent that the policy uncertainty will remain high we should continue to expect [global] trade growth to be subdued. Michele Ruta, World Bank report co-author

The study avoids naming Mr Trump, but highlights rising protectionism and threats to unwind trade agreements — such as those made by the president. It also raises the prospect that attempts by the Trump administration to force companies to repatriate global supply chains to the US could undermine efforts to boost lagging productivity growth. To the extent that the policy uncertainty will remain high we should continue to expect [global] trade growth to be subdued Michele Ruta, World Bank report co-author International trade has been growing below historic trends for the past five years. The 1.9 per cent growth recorded in 2016, according to the team at the bank, was the slowest since the 2009 collapse in commerce that followed the global financial crisis.

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Prime Minister Justin Trudeau meets with U.S. President Donald Trump in the Oval Office at the White House–The Future of NAFTA

The team found that some of the reasons for the anaemic trade growth, which affected both developed and developing economies, were broader trends such as slow economic growth around the world and a collapse in commodity prices. But in 2016 the principal change was a surge in uncertainty about economic policy. According to the World Bank’s calculations, such uncertainty was responsible for 0.6 percentage points of the 0.8 percentage-point fall in trade growth between 2015 and 2016. The team at the bank based their figure on a study of the relationship between trade and economic policy uncertainty in 18 countries over three decades. They added they expected the impact to continue in 2017. “To the extent that the policy uncertainty will remain high we should continue to expect [global] trade growth to be subdued,” said Michele Ruta, one of the authors. The World Bank team also sought to quantify the impact of trade agreements on global trade growth. World trade grew at an annual rate of 6.53 per cent between 1995 and 2014, they calculated. Had no new members — including China — joined the World Trade Organisation or no new trade agreements been signed, international trade would have grown at just 4.76 per cent annually, they found.

One of the big consequences of the explosion in trade deals in recent decades has been the emergence of global supply chains. Such chains are widely seen by economists to have made businesses more efficient and boosted productivity. But Mr Trump and his administration have said they want to unwind those international supply chains and bring them home. “It does the American economy no long-term good to only keep the big box factories where we are now assembling ‘American’ products that are composed primarily of foreign components,” Peter Navarro, one of the president’s top trade advisers, told the Financial Times last month.

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According to the World Bank team such a move, coupled with unwinding existing trade agreements that have encouraged the establishment of international supply chains, would hurt productivity growth. “Preserving and expanding the reach of trade agreements, rather than backtracking on existing commitments, would help to sustain the growth of productivity,” the bank’s economists wrote.

Malays are a complacent and self-aggrandising People


February 22, 2017

Malays are a complacent and self-aggrandising People

by Farouk A. Peru

http://www.themalaymailonline.com/opinion/farouk-a.-peru/article/americans-show-us-true-meaning-of-freedom-and-democracy

I believe in natural laws which determine the fates of individuals and nations. If we adhere to these laws, our destinies will shine and conversely, we are bound for a Dark Age if we refuse to do so.

One of these laws is that societies will rise if they constantly replenish themselves with fresh blood. This is the natural process of human movement.

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The Malay Leader –Najib Razak

Sedentary societies will not enjoy this social rejuvenation and the societies to which they emigrate will not enjoy a cultural replenishment.

The Malays are overwhelming a society of this latter description. After living 20 years in the UK, I do not meet as many Malays who have made a life here for themselves as I have people of other ethnic groups. There is no Malaysian town in London whereas there is a China town and even a Bangladeshi town!

The United States of America was born out of such an emigration. I am not forgetting the cost of human lives involved in that process nor forgiving the lack of moral rectitude which led to millions of native Americans perishing.

Rather, I am focusing on the hardiness of character of those immigrants. They had to endure long voyages and for those who were pushing the boundaries of the frontier, they had to endure austere and often tragic lives.

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The Role Model for Malay Women–Malaysia’s First Lady Rosmah Mansor

This is part of the natural law I mentioned above. I believe this is the reason the “civilisational momentum” was built and the proceeding chapters of American history were great. Shows like Little House on the Prairie were based on true narratives of such experiences.

However, “civilizational momentums”, like any physical body, does not last forever. Whilst in physics, momentum is lost when there is resistance, “civilisational momentums” are lost when societies become complacent and self-aggrandising.

In the case of the USA, the Baby Boomer generation was probably the time when they sustained the greatest measure of growth. However, by the time the 80s rolled around, that momentum was long gone.

Like our very own Bumiputera self-entitled generation, they had come to expect the world to lie down for them. When that did not last, naturally there were feelings of resentment and thus overcompensation.

America was a land which came to existence due to the desire for freedom, democracy and a better life. People have been doing that for centuries and the refugees are no different. To see Americans opposing their own President and acknowledging that shows me that all is not yet lost.

By the time 9/11 happened, the confluence of that tragedy with the sluggishness of the American economy resulted in the frustrations of the working class being directed at the Muslim world. I am not playing the victim card here. I do not believe the Muslim world is free from complicity in this matter.

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Rights, but what about responsibility, commitment and hard work?

Rather I am pointing to the sheer convenience of otherisation. Muslims generally don’t “look” American nor much follow certain American rites of passage. It was easy to alienate them and so the Islamophobia industry was born.

By the time the Donald emerged on the scene, the conservative American working class were ready to back him up all the way to the White House. He knew just what to say, after all, so why not?

The proposed Muslim ban back in 2015 was vehemently opposed by many sections of the American public be they government officials or civil rights groups. It was so profoundly unAmerican and unconstitutional, they said.

Trump never really backed down from that position but it did not affect his campaign. When you think about it, even the “grab’em by their …” statement, which should in theory, make half of the American population vote against him was not enough!

Americans were ready to return to the hard politics of conservatism. Overt conservatism, not the surreptitious kind peddled by Rodham-Clinton masked as a liberal.

Trump’s first days in office already showed the coming changes or perhaps, some testing of the waters to see what he could get away with. The ban on citizens from the seven “Muslim nations” could be either one, only time will tell.

What astounds me though, is the backlash from the American public themselves. They responded by protesting at the airports where the victims of the ban were held. Lawyers worked pro bono to get the detainees freed. Social media buzzed with support for the detainees.

Perhaps the biggest sign that America would not go down without a fight was the acting Attorney General, Sally Yates, losing her job for refusing to back down. This shows that the original American spirit is still alive.

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America was a land which came to existence due to the desire for freedom, democracy and a better life. People have been doing that for centuries and the refugees are no different. To see Americans opposing their own President and acknowledging that shows me that all is not yet lost.

Noam Chomsky’s ‘Responsibility of Intellectuals’ Revisited


February 14, 2017

Noam Chomsky’s ‘Responsibility of Intellectuals’ After 50 Years: It’s an Even Heavier Responsibility Now

Written amid rising opposition to the Vietnam War, Chomsky’s greatest essay has added resonance in the age of Trump.
By Jay Parini

http://www.alternet.org/visions/noam-chomskys-responsibility-intellectuals-after-50-years-its-even-heavier-responsibility

Nothing was quite the same for me after reading that piece, which I’ve reread periodically throughout my life, finding things to challenge me each time. I always finish the essay feeling reawakened, aware that I’ve not done enough to make the world a better place by using whatever gifts I may have. Chomsky spurs me to more intense reading and thinking, driving me into action, which might take the form of writing an op-ed piece, joining a march or protest, sending money to a special cause, or just committing myself to further study a political issue.

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The main point of Chomsky’s essay is beautifully framed after a personal introduction in which he alludes to his early admiration for Dwight Macdonald, an influential writer and editor from the generation before him:

Intellectuals are in a position to expose the lies of governments, to analyze actions according to their causes and motives and often hidden intentions. In the Western world at least, they have the power that comes from political liberty, from access to information and freedom of expression. For a privileged minority, Western democracy provides the leisure, the facilities, and the training to seek the truth lying hidden behind the veil of distortion and misrepresentation, ideology, and class interest through which the events of current history are presented to us.

For those who think of Chomsky as tediously anti-American, I would note that here and countless times in the course of his voluminous writing he says that it is only within a relatively free society that intellectuals have the elbow room to work. In a kind of totalizing line shortly after the above quotation, he writes: “It is the responsibility of intellectuals to speak the truth and to expose lies.”

This imposes a heavy burden on those of us who think of ourselves as “intellectuals,” a term rarely used now, as it sounds like something Lenin or Trotsky would have used and does, indeed, smack of self-satisfaction, even smugness; but (at least in my own head) it remains useful, embracing anyone who has access to good information, who can read this material critically, analyze data logically, and respond frankly in clear and persuasive language to what is discovered.

Chomsky’s essay appeared at the height of the Vietnam War, and was written mainly in response to that conflict, which ultimately left a poor and rural country in a state of complete disarray, with more than 2 million dead, millions more wounded, and the population’s basic infrastructure decimated. I recall flying over the northern parts of Vietnam some years after the war had ended, and seeing unimaginably vast stretches of denuded forest, the result of herbicidal dumps – 20 million tons of the stuff, including Agent Orange, which has had ongoing health consequences for the Vietnamese.

The complete picture of this devastation was unavailable to Chomsky, or anyone, at the time; but he saw clearly that the so-called experts who defended this ill-conceived and immoral war before congressional committees had evaded their responsibility to speak the truth.

In his usual systematic way, Chomsky seems to delight in citing any number of obsequious authorities, who repeatedly imply that the spread of American-style democracy abroad by force is justified, even if it means destroying this or that particular country in the effort to make them appreciate the benefits of our system. He quotes one expert from the Institute of Far Eastern Studies who tells Congress blithely that the North Vietnamese “would be perfectly happy to be bombed to be free.”

“In no small measure,” Chomsky writes in the penultimate paragraph of his essay, “it is attitudes like this that lie behind the butchery in Vietnam, and we had better face up to them with candor, or we will find our government leading us towards a ‘final solution’ in Vietnam, and in the many Vietnams that inevitably lie ahead.”

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Chomsky, of course, was right to say this, anticipating American military interventions in such places as Lebanon (1982-1984), Grenada (1983), Libya (1986), Panama (1989), the Persian Gulf (1990-1991) and, most disastrously, Iraq (2003-2011), the folly of which led to the creation of ISIS and the catastrophe of Syria.

Needless to say, he has remained a striking commentator on these and countless other American interventions over the past half century, a writer with an astonishing command of modern history. For me, his writing has been consistently cogent, if marred by occasional exaggeration and an ironic tone (fueled by anger or frustration) that occasionally gets out of hand, making him an easy target for opponents who wish to dismiss him as a crackpot or somebody so blinded by anti-American sentiment that he can’t ever give the U.S. government a break.

I like “The Responsibility of Intellectuals,” and other essays from this period by Chomsky, because one feels him discovering his voice and forging a method: that relentlessly logical drive, the use of memorable and shocking quotations by authorities, the effortless placing of the argument within historical boundaries and the furious moral edge, which — even in this early essay — sometimes tips over from irony into sarcasm (a swerve that will not serve him well in later years).

Here, however, even the sarcasm seems well-positioned. He begins one paragraph, for instance, by saying: “It is the responsibility of the intellectuals to insist upon the truth, it is also his duty to see events in their historical perspective.” He then refers to the 1938 Munich Agreement, wherein Britain and other European nations allowed the Nazis to annex the Sudetenland — one of the great errors of appeasement in modern times. He goes on to quote Adlai Stevenson on this error, where the former presidential candidate notes how “expansive powers push at more and more doors” until they break open, one by one, and finally resistance becomes necessary, whereupon “major war breaks out.” Chomsky comments: “Of course, the aggressiveness of liberal imperialism is not that of Nazi Germany, though the distinction may seem rather academic to a Vietnamese peasant who is being gassed or incinerated.”

What he says about the gassed, incinerated victims of American military violence plucks our attention. It’s good polemical writing that forces us to confront the realities at hand.

What really got to me when I first read this essay was the astonishing idea that Americans didn’t always act out of purity of motives, wishing the best for everyone. That was what I had been taught by a generation of teachers who had served in World War II, but the Vietnam War forced many in my generation to begin the painful quest to understand American motives in a more complex way. Chomsky writes that it’s “an article of faith that American motives are pure and not subject to analysis.” He goes on to say with almost mock reticence: “We are hardly the first power in history to combine material interests, great technological capacity, and an utter disregard for the suffering and misery of the lower orders.”

The sardonic tone, as in “the lower orders,” disfigures the writing; but at the time this sentence hit me hard. I hadn’t thought about American imperialism until then, and I assumed that Americans worked with benign intent, using our spectacular power to further democratic ends. In fact, American power is utilized almost exclusively to protect American economic interests abroad and to parry blows that come when our behavior creates a huge kickback, as with radical Islamic terrorism.

One of the features of this early essay that will play out expansively in Chomsky’s voluminous later writing is the manner in which he sets up “experts,” quickly to deride them. Famously the Kennedy and Johnson administrations surrounded themselves with the “best and the brightest,” and this continued through the Nixon years, with Henry Kissinger, a Harvard professor, becoming secretary of state. Chomsky skewers a range of these technocrats in this essay, people who in theory are “intellectuals,” from Walter Robinson through Walt Rostow and Henry Kissinger, among many others, each of whom accepts a “fundamental axiom,” which is that “the United States has the right to extend its power and control without limit, insofar as is feasible.” The “responsible” critics, he says, don’t challenge this assumption but suggest that Americans probably can’t “get away with it,” whatever “it” is, at this or that particular time or place.

Chomsky cites a recent article on Vietnam by Irving Kristol in Encounter (which was soon to be exposed as a recipient of CIA funding) where the “teach-in movement” is criticized: Professors and students would sit together and talk about the war outside of class times and classrooms. (I had myself attended several of these events, so I sat to attention while reading.) Kristol was an early neocon, a proponent of realpolitik contrasted college professor-intellectuals against the war as “unreasonable, ideological types” motived by “simple, virtuous ‘anti-imperialism’” with sober experts like himself.

Chomsky dives in: “I am not interested here in whether Kristol’s characterization of protest and dissent is accurate, but rather in the assumptions that it expresses with respect to such questions as these: Is the purity of American motives a matter that is beyond discussion, or that is irrelevant to discussion? Should decisions be left to ‘experts’ with Washington contacts?” He questions the whole notion of “expertise” here, the assumption that these men (there were almost no women “experts” in the mid-’60s) possessed relevant information that was “not in the public domain,” and that they would make the “best” decisions on matters of policy.

Chomsky was, and remains, a lay analyst of foreign affairs, with no academic degrees in the field. He was not an “expert” on Southeast Asia at the time, just a highly informed and very smart person who could access the relevant data and make judgments. He would go on, over the next five decades, to apply his relentless form of criticism to a dizzying array of domestic and foreign policy issues — at times making sweeping statements and severe judgments that would challenge and inspire many but also create a minor cottage industry devoted to debunking Chomsky.

This is not the place to defend Chomsky against his critics, as this ground has been endlessly rehashed. It’s enough to say that many intelligent critics over the years would find Chomsky self-righteous and splenetic, quick to accuse American power brokers of evil motives, too easy to grant a pass to mass murderers like Pol Pot or, during the period before the Gulf War, Saddam Hussein.

I take it for granted, as I suspect Chomsky does, that in foreign affairs there are so many moving parts that it’s difficult to pin blame anywhere. One may see George W. Bush, for instance, as the propelling force behind the catastrophe of the Iraq War, but surely even that blunder was a complex matter, with a mix of oil interests (represented by Dick Cheney) and perhaps naive political motives as well. One recalls “experts” like Paul Wolfowitz, who told a congressional committee on February. 27, 2003, that he was “reasonably certain” that the Iraqi people would “greet us as liberators.”

Fifty years after writing “The Responsibility of Intellectuals,” Chomsky remains vigorous and shockingly productive, and — in the dawning age of President Donald Trump — one can only hope he has a few more years left. In a recent interview, he said (with an intentional hyperbole that has always been a key weapon in his arsenal of rhetorical moves) that the election of Trump “placed total control of the government — executive, Congress, the Supreme Court — in the hands of the Republican Party, which has become the most dangerous organization in world history.”

Chomsky acknowledged that the “last phrase may seem outlandish, even outrageous,” but went on to explain that he believes that the denial of global warming means “racing as rapidly as possible to destruction of organized human life.” As he would, he laid out in some detail the threat of climate change, pointing to the tens of millions in Bangladesh who will soon have to flee from “low-lying plains … because of sea level rise and more severe weather, creating a migrant crisis that will make today’s pale in significance.”

I don’t know that, in fact, the Republican Party of today is really more dangerous than, say, the Nazi or Stalinist or Maoist dictatorships that left tens of millions dead. But, as ever, Chomsky makes his point memorably, and forces us to confront an uncomfortable situation.

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Intellectuals need to  take on this “dangerously ill-informed bully in the White House”and Malaysia’s most corrupt and intellectually challenged Prime Minister Najib Razak and other kleptocrats. Speak the Truth to Power–Din Merican

As I reread Chomsky’s essay on the responsibility of intellectuals, it strikes me forcefully that not one of us who has been trained to think critically and to write lucidly has the option to remain silent now. Too much is at stake, including the survival of some form of American democracy and decency itself, if not an entire ecosystem. With a dangerously ill-informed bully in the White House, a man almost immune to facts and rational thought, we who have training in critical thought and exposition must tirelessly call a spade a spade, a demagogue a demagogue. And the lies that emanate from the Trump administration must be patiently, insistently and thoroughly deconstructed. This is the responsibility of the intellectual, now more than ever.

Jay Parini, a poet and novelist, teaches at Middlebury College. His most recent book is New and Collected Poems, 1975-2015.”

Recommended Read:

https://www.pdx.edu/challenge-program/sites/www.pdx.edu.challenge-program/files/KRANE-TheResponsibilityofIntellectuals.pdf

The Paris Approach to Global Governance–Looking Back


January 28, 2017

The Paris Approach to Global Governance–Looking Back

by Anne-Marie Slaughter*

*Anne-Marie Slaughter, a former director of policy planning in the US State Department (2009-2011), is President and CEO of the think tank New America, Professor Emerita of Politics and International Affairs at Princeton University, and the author of Unfinished Business: Women Men Work Family

… In the United States, as a matter of domestic law, it is an executive agreement (The Paris Agreement on Climate Change), binding only on President Barack Obama’s administration. An executive-legislative agreement would have the same status as a treaty, except that a treaty must be ratified by two-thirds of the Senate, whereas an executive-legislative agreement must be adopted by the Senate and the House under the same rules that apply to all domestic legislation. An executive agreement made by one administration is not necessarily binding on its successor, but it would have to be explicitly repudiated.

…The Paris agreement is a sprawling, rolling, overlapping set of national commitments brought about by a broad conglomeration of parties and stakeholders. It is not law. It is a bold move toward public problem solving on a global scale. And it is the only approach that could work.–Anne-Marie Slaughter

As a former president of the American Society of International Law, I should bemoan the recent Paris agreement on climate change as a failure. By the standards of a traditional treaty, it falls woefully short. Yet its deficits in this regard are its greatest strengths as a model for effective global governance in the twenty-first century.

Image result for Anne-Marie SlaughterMost Inspiring–Key to Personal and Professional Growth

The international legal gold standard is a treaty, a binding document that can be enforced by courts and arbitration tribunals. Such agreements comprise more than expressions of intent; they contain codified, enforceable rules, along with sanctions for non-compliance. Indeed, they must be ratified by national parliaments, so that they become a part of domestic law.

The Paris agreement is none of these things. In the United States, as a matter of domestic law, it is an executive agreement, binding only on President Barack Obama’s administration. An executive-legislative agreement would have the same status as a treaty, except that a treaty must be ratified by two-thirds of the Senate, whereas an executive-legislative agreement must be adopted by the Senate and the House under the same rules that apply to all domestic legislation. An executive agreement made by one administration is not necessarily binding on its successor, but it would have to be explicitly repudiated.

Moreover, unlike in a traditional international treaty, the obligations of the Paris agreement are not fixed. The point of carefully negotiating international agreements is that once they become law, they cannot be changed, except through formally agreed amendment processes. That permanence gives them authority. Yet the 195 signatories to the Paris agreement created a non-binding system for raising their individual obligations every five years. In other words, the parties are encouraged – but not required – to submit increasingly stringent revisions of their so-called Intended Nationally Determined Contributions (INDCs), based on their own judgment.

The Paris agreement also abandons the idea of “compliance” as a stamp of legality or illegality. The historic job of international lawyers and tribunals has been to determine whether a signatory to an international agreement is complying with its obligations. The Paris agreement essentially substitutes transparency for compliance, creating an “enhanced transparency framework” designed “to build mutual trust and confidence and to promote effective implementation.”

A subsequent article of the agreement does create a compliance mechanism, but specifies that it will be “expert-based” – meaning that assessment teams will include climate scientists and policy experts, as well as lawyers. Furthermore, it will be “facilitative,” functioning in a manner that is “transparent, non-adversarial, and non-punitive.” That sounds more like a support group than a disciplinary committee.

In short, by traditional international legal standards, the Paris agreement is essentially a statement of good intentions, setting forth aspirational goals to limit global temperature rise to 2° Celsius – or, ideally, 1.5°C – above pre-industrial levels. It is as far as could be from the Treaty of Vienna, the Treaty of Versailles, or even the treaties banning landmines and establishing the International Criminal Court. And that is precisely why it has a good chance of working.

Image result for the challenge of climate changeThe Challenge of Climate Change

For starters, tackling a problem as complex and fast-moving as climate change would be impossible with permanent, binding commitments. By the time an agreement could be hammered out – if it could be hammered out – the scale and features of the problem, not to mention the technologies that could be used to address it, would have changed. The new kind of global governance that the Paris agreement exemplifies, which substitutes rolling processes for fixed rules, is far better suited to the kinds of global problems we face today.

Likewise, in a world of 195 diverse countries – from the desperately poor or conflict-ridden to the highly developed – top-down obligations can never be uniform enough to work. Relying on bottom-up INDCs, which require the citizens and governments of each individual country to come together to determine what they can reasonably achieve, is far more promising.

But perhaps the most important shift made in the Paris agreement is from selective coercion to collectively supported competition. Instead of suing one another for failure to comply with a legal obligation, countries will try to outdo one another in their efforts to help address a shared problem. The transparency mechanism supports this shift, by allowing journalists, activists, scientists, concerned citizens, and climate-friendly businesses to engage in debates, publicize successes and failures, solicit help and advice, and offer support to lagging countries.

This highlights the final crucial feature of the new global governance model exemplified by the Paris agreement: The deal reached earlier this month (December, 2015), like the Conference of the Parties itself, is not only for governments. Although the agreement calls on governments to continue providing public finance through the official Green Climate Fund, individuals and entities are also playing a major role.

For example, Bill Gates made global headlines during the negotiations when he announced a $2 billion fund to invest in clean energy, financed by the Breakthrough Energy Coalition, a group of 26 global philanthropists and the University of California. The BEC heralds a new level of public-private partnership, with the investors working with the governments of some 20 countries – including the China, India, and the US – that already account for roughly 80% of global investment in clean energy and have now pledged to double their investments.

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It is no longer one of choice  but it is time for bold and decisive action

Negotiators in Paris recognized that business, philanthropy, civil society, academia, and ordinary people all have a role to play in addressing a major global challenge. Change is happening even on the government side, with municipal authorities often significantly outpacing their national counterparts, operating through vehicles like the C-40, a “network of the world’s megacities committed to addressing climate change.”

The Paris agreement is a sprawling, rolling, overlapping set of national commitments brought about by a broad conglomeration of parties and stakeholders. It is not law. It is a bold move toward public problem solving on a global scale. And it is the only approach that could work.

https://www.project-syndicate.org/commentary/paris-agreement-model-for-global-governance-by-anne-marie-slaughter-2015-12

 

John Kerry–We got it right


January 20, 2017

We got it right–John Kerry

“Diplomacy requires creativity, patience and commitment to a steady grind, often away from the spotlight. Results are rarely immediate or reducible to 140-character bites. But it has helped build a world our ancestors would envy — a world in which children in most places are more likely than ever before to be born healthy, to receive an education and to live free from extreme poverty”–Secretary of State John Kerry.

With a new administration taking office this week, it is natural to assess the inheritance it will receive from the old.

There are some who see nightmares wherever they look and insist that the entire global system is unraveling and that America’s position as world leader is in precipitous decline.

As the departing Secretary of State, I cannot claim objectivity. But I will leave office convinced that most global trends remain in our favor and that America’s leadership and engagement are as essential and effective today as ever.

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A major reason is that President Obama has restored assertive diplomacy as our foreign policy tool of first resort and deployed it time and again to advance our security and prosperity.

This is evident, first of all, in our campaign to defeat the Islamic State, also known by its Arabic acronym, Daesh. Two and a half years ago, these murderers were on the march across Iraq and Syria. Instead of rushing into a unilateral war, we responded by quietly helping Iraq form a new and more inclusive government, and then assembling a 68-member coalition to support a rehabilitated Iraqi military, the Kurdish Peshmerga and other local partners to liberate territory once occupied by Daesh.

We are engaged in a climactic effort to free the largest remaining strongholds in Iraq (Mosul) and Syria (Raqqa). These military steps depended on the diplomatic cooperation we brokered to cut off Daesh’s finances, slow its recruiting and rebut its poisonous propaganda on social media and within the region.

President Obama took office with Iran’s nuclear program racing ahead and our nation under mounting pressure to take military action. While making clear we would do whatever it took to prevent Iran from obtaining a nuclear weapon, we started with diplomacy, building the strongest international sanctions regime the world has ever seen, and testing whether Iran would negotiate a deal that could ensure its nuclear program was exclusively peaceful. As a result, without firing a shot or putting troops in harm’s way, the United States and our partners reached the Joint Comprehensive Plan of Action, which blocked Iran’s pathways to a nuclear weapon and made our nation, our allies and the world safer.

When Russia invaded Ukraine in 2014, the United States could have responded as we had six years earlier, when Russian intervention in Georgia was largely met with rhetoric alone. But having repaired diplomatic ties badly damaged by the Iraq war, the Obama administration was able to defy skeptics by working with our European Union partners to impose sanctions that have isolated Russia and badly damaged its economy. We also bolstered NATO with a major expansion of our security assistance to allies in the Baltics and Central Europe.

Throughout, we continued to work with Russia when it was in our interest to do so. But because we have stood firm, Russia is now — despite the boasts of its leaders — plagued by dwindling financial reserves, a historically weak ruble and poor international relations.

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Love or Hate Him–Obama served America with distinction, making friends around the world through diplomacy with his charisma, charm and Harvard elegance.

President Obama has made clear to our allies and potential adversaries in Asia that the United States will remain a major force for stability and prosperity in their region. We have rallied the world behind unprecedented sanctions against a menacing North Korea, increased our naval presence in the Pacific, worked with regional actors to support the rule of law in the South China Sea and forged a strategic partnership with India. We also united key partners behind a landmark, high-standard trade agreement, the Trans-Pacific Partnership, that we still believe should be ratified by Congress — all while maintaining an often mutually beneficial relationship with Beijing.

When President Obama took office, efforts to protect our planet from the catastrophic impacts of climate change were going nowhere, stymied by decades of division between developed and developing countries. But our outreach to China led to a series of breakthroughs that made last year the most consequential in the history of climate diplomacy. Building on, rather than backing away from, that progress would allow a historic shift toward clean energy and a chance of saving the planet from the worst ravages of climate change.

The fruits of this administration’s diplomacy can also been seen in our own hemisphere, where we strengthened our position by normalizing relations with Cuba and helped end Colombia’s decades-long civil war. In Africa, we gained friends by training young leaders and led a successful global effort to contain Ebola.

Obviously, we haven’t solved every problem, particularly in the chronically combustible Middle East. But the United States was absolutely justified in stressing the need for a two-state solution between Israelis and Palestinians.

I also remain convinced that the formula we pursued to end the agonizing conflict in Syria was, and remains, the only one with a realistic chance to end the war — using diplomacy to align key countries behind establishing a nationwide cease-fire, providing humanitarian access, marginalizing terrorists and promoting Syrian-led talks on creating a constitution and democratic government.

The response of the international community to the tragedy in Syria will long be debated. For years, United States officials had those same debates in the Situation Room. Some options, such as an enormous deployment of ground troops, were rightly dismissed. Others, including deploying additional special forces in limited operations, were closer calls. Month after month, we weighed the deteriorating conditions and uncertain benefits of intervention against the very real risks, including deeper involvement in a widening war. While I did not win every argument — no policy maker does — I can testify that all viable ideas received a fair hearing.

I am not a pacifist. But I learned as a young man who fought in Vietnam that before resorting to war, those in positions of responsibility should do everything in their power to achieve their objectives by other means.

I just returned from Vietnam, where smart and sustained diplomacy has accomplished what a decade of war never could: developing a dynamic capitalist society, opening an American-style university with the promise of academic freedom and, perhaps most improbably, strengthening ties not just between our people, but also between militaries that once saw each other as enemies.

Looking ahead, my hope is that the turbulence still evident in the world does not obscure the extraordinary gains that diplomacy has made on President Obama’s watch or lead to the abandonment of approaches that have served our nation well.

Diplomacy requires creativity, patience and commitment to a steady grind, often away from the spotlight. Results are rarely immediate or reducible to 140-character bites. But it has helped build a world our ancestors would envy — a world in which children in most places are more likely than ever before to be born healthy, to receive an education and to live free from extreme poverty.

The new administration will face many challenges, like every administration before it. But it will take office this week armed with enormous advantages in addressing them. America’s economy and military are the strongest in the world, and diplomacy has helped put the wind at our back, our adversaries on notice about our resolve and our friends by our side.

Economic Crises and the Crisis of Economics


January 17, 2017

Economic Crises and the Crisis of Economics: Economists should learn to be humble and accept their own limitations

by Paola Subacchi@www.project-syndicate.org

Paola Subacchi is Research Director of International Economics at Chatham House and Professor of Economics at the University of Bologna. She is the author of The People’s Money: How China is Building an International Currency.

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Is the economics profession “in crisis”? Many policymakers, such as Andy Haldane, the Bank of England’s chief economist, believe that it is. Indeed, a decade ago, economists failed to see a massive storm on the horizon, until it culminated in the most destructive global financial crisis in nearly 80 years. More recently, they misjudged the immediate impact that the United Kingdom’s Brexit vote would have on its economy.

Of course, the post-Brexit forecasts may not be entirely wrong, but only if we look at the long-term impact of the Brexit vote. True, some economists expected the UK economy to collapse during the post-referendum panic, whereas economic activity proved to be rather resilient, with GDP growth reaching some 2.1% in 2016. But now that British Prime Minister Theresa May has implied that she prefers a “hard” Brexit, a gloomy long-term prognosis is probably correct.

Unfortunately, economists’ responsibility for the 2008 global financial crisis and the subsequent recession extends beyond forecasting mistakes. Many lent intellectual support to the excesses that precipitated it, and to the policy mistakes – particularly insistence on fiscal austerity and disregard for widening inequalities – that followed it.

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Some economists have been led astray by intellectual arrogance: the belief that they can always explain real-world complexity. Others have become entangled in methodological issues – “mistaking beauty for truth,” as Paul Krugman once observed – or have placed too much faith in human rationality and market efficiency.

Despite its aspiration to the certainty of the natural sciences, economics is, and will remain, a social science. Economists systematically study objects that are embedded in wider social and political structures. Their method is based on observations, from which they discern patterns and infer other patterns and behaviors; but they can never attain the predictive success of, say, chemistry or physics.

Human beings respond to new information in different ways, and adjust their behavior accordingly. Thus, economics cannot provide – nor should it claim to provide – definite insights into future trends and patterns. Economists can glimpse the future only by looking backwards, so their predictive power is limited to deducing probabilities on the basis of past events, not timeless laws.

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And because economics is a social science, it can readily be used to serve political and business interests. In the years leading up to the financial crisis, global economic growth and profits were so strong that everyone – from small investors to the largest banks – was blinded by the prospect of bigger gains.

Economists employed by banks, hedge funds, and other businesses were expected to provide a short-term “view” for their employers and clients; and to dispense their “wisdom” to the general public through interviews and media appearances. Meanwhile, the economics profession was adopting more complex mathematical tools and specialized jargon, which effectively widened the gap between economists and other social scientists.

Before the financial crisis, when so many private interests and profitable opportunities were at stake, many economists defended a growth model that was based more on “irrational exuberance” than on sound fundamentals. Similarly, with respect to Brexit, many economists confused the referendum’s long-term impact with its short-term effects, because they were rushing their predictions to fit the political debate.

Owing to these and other mistakes, economists – and economics – have suffered a spectacular fall from grace. Once seen as modern witch doctors with access to exclusive knowledge, economists are now the most despised of all “experts.”

Where do we go from here? While we should appreciate Haldane’s candid admission, apologizing for past mistakes is not enough. Economists, especially those involved in policy debates, need to be held explicitly accountable for their professional behavior. Toward that end, they should bind themselves with a voluntary code of conduct.

Above all, this code should recognize that economics is too complex to be reduced to sound bites and rushed conclusions. Economists should pay closer attention to when and where they offer their views, and to the possible implications of doing so. And they should always disclose their interests, so that proprietary analysis is not mistaken for an independent perspective.

Moreover, economic debates would benefit from more voices. Economics is a vast discipline that comprises researchers and practitioners whose work spans macro and micro perspectives and theoretical and applied approaches. Like any other intellectual discipline, it produces excellent, good, and mediocre output.

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But the bulk of this research does not filter into policymaking and decision-making circles, such as finance ministries, central banks, or international institutions. At the commanding heights, economic-policy debates remain dominated by a relatively small group of white men from American universities and think tanks, nearly all of them well-versed devotees of mainstream economics.

The views held by this coterie are disproportionately represented in the mass media, through commentaries and interviews. But fishing for ideas in such a small and shallow pond leads to a circular and complacent debate, and it may encourage lesser-known economists to tailor their research to fit in.

The public deserves – and needs – a marketplace of ideas in which mainstream and heterodox views are afforded equal attention and balanced discussion. To be sure, this will take courage, imagination, and dynamism – particularly on the part of journalists. But a fairer, more pluralistic discussion of economic ideas may be just what economists need as well.