GE-14 :Time to shift Political Discourse to Policy Issues

February 25, 2018

GE-14 :Time to shift Political Discourse to Policy Issues

by Wan Saiful Wan Jan

THE date of GE14 has been on our minds for quite some time. Most analysts I know are suggesting that polling will likely take place in April or early May.

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Political parties are clearly ramping up their efforts to woo voters. Ceramah are organised every night in various places across the country. These talks are quite exciting to watch.

In the absence of good stand-up comedy shows, the hypocrisy of some of our politicians is the next best thing, especially when they claim that their side monopolises everything that is good, while those who are not on their sides are the root of all evil. Isn’t it amusing that, in their eyes, everything is either black or white, with no shades of grey at all?

I suspect that as we get closer to GE14, race and religion will once again dominate the political discourse.

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UMNO Leaders–Najib Razak and Zahid Hamidi–can be expected to play the Islam and Malay Survival card in order to retain power. Najib Razak’s shift towards policy issues is an attempt to appear liberal and moderate to non-Malay voters–Din Merican


This is necessary because politicians from ethnic-based parties need to achieve immediate-term victories, while the long-term fate of this country is not the top priority.

Ensuring society is divided and sowing distrust between groups are the only way for ethnic- and religion-based parties to remain relevant in the modern world. If society rejects division, starts to trust each other unconditionally and opts for unity, these parties will become irrelevant.

I can be more specific. I have been studying Malay politics and Malay political parties in depth since March last year. In the many interviews and focus group discussions I’ve conducted, the most common issue brought up by the Malay voters is their fear of a Chinese “takeover”.

In the eyes of many Malays, the Chinese cannot be trusted because they want to remove Malay political control from the rubric of this country. Supposedly, the Chinese can only be trusted if they are subservient.

The impact of this sentiment is many-pronged. UMNO and PAS will remain influential in constituencies with certain demographics without much contest. As a coalition, Pakatan Harapan must accept the Malay leadership provided by Parti Pribumi Bersatu Malaysia (Pribumi), just like Barisan Nasional accepted the leadership of UMNO.


Image result for Malaysia --Battle for the Malays

Tun Dr. Mahathir Mohamad– The Revivalist and Reformer

Non-Malay parties in both BN and Pakatan must know what they can talk about and what they must avoid. The dividing lines may be invisible, but they exist. And, for the politicians who feel that they cannot win when debating policy and governance, their best strategy is to further embed the dividing lines.

Sadly for Malaysia, the divide-and-rule strategy is still the more successful one when it comes to political competition. In fact, ethno-religious division is so rooted in the country today to the extent anyone who does not play the same game will find it very difficult to win.

My biggest fear is the damage created by this divisive strategy will be entrenched even further in our society as a consequence of what the politicians do to win in GE14.  But desperate politicians usually have no qualms about destroying relations between our multicultural groups so long as they can win in the immediate term.

Having said the above, I am glad that there is an increasing number of political leaders calling for debates that are more policy-oriented. If you listen to the formal speeches by Prime Minister Datuk Seri Najib Tun Razak over the last few weeks, you can sense the push towards policy. And many other politicians, from both sides, are following suit.

I also noticed that among the ideas gaining traction is the proposal to separate the roles of the Attorney-General from that of the Public Prosecutor.

Currently, there is a clear conflict of interest because the A-G is also the Public Prosecutor. The A-G holds absolute discretion in deciding whether to prosecute someone.

The A-G is also the chief legal adviser to the Government, which means the Government is his “client”. It is incredible that the defence lawyer also holds the power to decide if his own client should be taken to court.

I think this is among the most urgent changes that we need to make. The Institute for Democracy and Economic Affairs (IDEAS) has been advocating this reform for more than three years now, and I am glad that more people have warmed up to the proposal. I hope political parties from both sides will now take it one step further and include this reform in their respective manifestos.

It is not difficult to make this change. The A-G should be a politician who is a member of the Cabinet.

He will continue to be chief legal adviser to the Government. The Prime Minister should appoint a trusted MP to this post. But the Public Prosecutor should be a different person, appointed from the legal or judicial system, or perhaps even a suitable senior civil servant.

The main point is, the Public Prosecutor should not be a political appointment, whereas the Attorney-General can be. That way, the Public Prosecutor has no master other than the rule of law.

Wan Saiful Wan Jan is chief executive of the Institute for Democracy and Economic Affairs ( The views expressed here are entirely the writer’s own.

Wan Saiful Wan Jan

Wan Saiful Wan Jan is chief executive of the Institute for Democracy and Economic Affairs.

School system needs to match transformation society has undergone

January 20, 2018

School system needs to match transformation society has undergone

Despite emergence of small families and well-educated but working parents, education structure has changed little in past five decades, Michael Heng points out


Schools in Hong Kong and many cities elsewhere in Asia have not undergone significant changes since the 1960s while family structure, the economy and other elements of society have experienced great transformations. Just to name four changes that have direct bearing on education. First, families have become smaller; many children have either one or no sibling. Second, most parents today are pretty well-educated — at the very least they are literate. Third, jobs for university or polytechnic graduates are more difficult to come by. Fourth, there is an ample supply of teachers’ college graduates.

In the 1960s, schools focused mainly on transmitting knowledge to students. In line with this exam results were the key criteria to measure school performance. Not many schools had well-trained teachers. Where students felt their teachers failed their expectations, they had to turn to some kind hearted and brainy fellow classmates for help. In many cases, their parents were too poorly educated to help, and they could not afford private tuition. In such conditions, other important matters related to full development of an individual were pushed into the background. One hardly heard of schools being responsible for helping students develop social and communication skills and guide them in coping with personal problems, failures in life, etc.

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Fast-forward to the 2010s, schools have changed. Though there has been open recognition of the roles of schools in the full development of an individual, the main emphasis is still on exam results. Even with a growing army of well-trained teachers and better-educated parents, we see a booming private-tuition industry. Our mindset and practices on educating our young are stuck in the 1960s, despite conditions having changed so much.

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With only one sibling or no sibling, a child has lost the family environment and does not acquire the habits and skills to cope with older and younger siblings. This inadequacy is often not addressed by schools, which put children of the same age in the same class. As an alternative, primary schools can have just two kinds of classes. One kind comprises classes with children aged 6, 7 and 8, and the higher for children aged 9, 10 and 11. They not only learn from the teachers, but from each other. The younger ones do content-learning from the older ones, while the older ones learn how to teach the younger ones. There is a “risk” the older ones will fail to teach the content correctly to younger ones. But there are textbooks, well-trained teachers, and well-educated parents to correct errors. Moreover, children are exposed from a young age to develop independent thinking and to absorb materials through questioning and critical thinking. Such mental habits are immensely useful for independent pursuit of knowledge. For those familiar with Montessori educational philosophy, the approach sounds familiar.

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Schools should also be reorganized in terms of time and space. Since both parents of most young families work, schools can be organized to keep students at school while parents are working. All kinds of interesting activities can be organized to fill in the hours. Homework in the traditional sense should be done during these hours. “Weaker” students should be assisted by “stronger” students, making tuition redundant. Off-school hours are free from homework and can be fruitfully spent on such activities as community work or learning extra languages.

As a very rich city, Hong Kong can afford to have small classes. Unlike a class of 40 students, where teachers sometimes have to struggle just to maintain discipline and order, what about a class of 20 to 25 students? Any person with teaching experience can testify to the benefits of small classes in schools. To offset the negative aspects of living in a concrete jungle, schools should have bushes, flowers, vegetables, plants and trees to cultivate an early respect for the natural environment.

Besides transmitting book knowledge, there are other dimensions of education — cultivating good character, attitude toward work, social-justice awareness, proper human interaction and ability to cope with failures and setbacks in life.

Good character is more than integrity and being upright. It includes the ability to help others, especially the weak and disadvantaged. Here schools should design incentives to encourage such behavior. For example, classes can be assessed on cooperation and mutual assistance among students, as a balance to competitive exams.

The major spiritual traditions attach great value to productive work, whether well-paid or otherwise. Such attitude is important especially in the current labor market where well-paid professionals may lose their jobs through no fault of their own. Those who perceive all productive work as respectable will be more flexible in facing the situation. Of course, social attitudes must also change to make it easier for redundant staff.

The author is a retired professor who had academic appointments in Australia, the Netherlands, and at six universities in Asia. He has been trained as a school teacher and has also taught in secondary schools. 


Wealth Concentration Continues to Increase

January 23, 2018

Wealth Concentration Continues to Increase

SYDNEY and KUALA LUMPUR, January 23, 2018 (IPS) – As the ‘masters of the universe’ gather for their annual retreat at Davos, the World Economic Forum (WEF) has just published its Inclusive Development Index (IDI) for the second time.

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After moderating from the 1920s until the 1970s, inequality has grown with a vengeance from the 1980s as neoliberal ascendance unleashing regressive reforms on various fronts.

Sensing the growing outrage at earlier neo-liberal reforms and their consequences, as well as the financial sector bail-outs and fiscal austerity after the 2008-2009 global financial crisis, politicians and business leaders have expressed concerns about inequality’s resurgence.

The record is more nuanced. While national level inequalities have grown in most economies over the last four decades, international income disparities between North and South have actually narrowed, largely due to growth accelerations in much of the latter.

But while income inequality trends have been mixed, wealth concentration has picked up steam, recently enabled by the low cost of credit, thanks to ‘unconventional monetary policies’ in the North.

According to the World Inequality Report 2018, the top 1% in the world had twice as much income growth as the bottom half since 1980. Meanwhile, income growth has been sluggish or even flat for those with incomes between the bottom half and the top 1%. Oxfam’s new Reward Work, Not Wealth report reveals that the world’s wealthiest 1% got 82% of the wealth generated in 2017, while the bottom 50% saw no increase at all!

The world’s 500 richest, according to Bloomberg Billionaires Index, became US$1 trillion richer during 2017, “more than four times” the gain in 2016, as their wealth increased by 23%, taking their combined fortunes to US$5.3 trillion. According to the UBS/PwC Billionaires Report 2017, there are now 1,542 US dollar billionaires in the world, after 145 more joined their ranks in 2016.

Worsening wealth inequality

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Meanwhile, the latest Credit Suisse Report found that the world’s richest 1% increased their share of total wealth from 42.5% at the height of the 2008-2009 global financial crisis to 50.1% in 2017, or US$140 trillion.

It shows that the bottom half together owned less than 1% of global wealth, while the richest 10% owned 88% of all wealth, and the top 1% alone accounted for half of all assets. Thus, global household debt rose by nearly 5% in 2017 despite total wealth increasing by US$16.7 trillion, or 6.4%.

The Report attributes this to uneven asset price inflation with financial asset prices growing much faster than non-financial asset values. Recent unconventional monetary policies of the world’s major central banks contributed to such asset price inflation.

The European Central Bank has acknowledged that quantitative easing (QE) has fuelled asset price inflation. Kevin Warsh, a former US Federal Reserve Board member, has argued that QE has only worked through the ‘asset price channel’, enriching those who own financial assets, not the 96% who mainly rely on income from labour.

An IMF study found that ‘fiscal consolidation’, typically involving austerity, has significantly worsened inequality, depressed labour income shares and increased long-term unemployment.

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MOZAMBIQUE, Beira, Grande Hotel, opened 1955 during portuguese colonial time, today some thousand homeless people living here.

Another IMF research report shows that capital account liberalization — typically recommended to attract foreign capital inflows without due attention to the consequences of sudden outflows — has generally significantly and persistently increased national-level inequalities.

The World Inequality Report 2018 also observed that rising income inequality has largely been driven by unequal wealth ownership. Privatization in most countries since the 1980s has resulted in negative ‘public wealth’ — public assets minus public debt — in rich countries, even as national wealth has grown substantially. Over recent decades, countries have become richer as governments have become poorer, constraining governments’ ability to address inequality by increasing public provisioning of essential services.

An earlier IMF study also noted that the neoliberal reforms — promoting privatization, cutting government spending, and strictly limiting fiscal deficits and government debt — have also increased economic inequality.

On average, net private wealth in most rich countries rose from 200–350% of national income in 1970 to 400-700% recently as marginal tax rates for the rich and super-rich have fallen. The Oxfam report identifies tax evasion, corporate capture of public policy, erosion of workers’ rights and cost cutting as major contributors to widening inequalities.

The IMF’s recent Fiscal Monitor acknowledges that regressive tax reforms have caused tax incidence to be far less progressive, if not regressive, while failure to tax the rich more has increased inequality. Besides new tax evasion opportunities and much lower marginal income tax rates, capital gains are hardly taxed, encouraging top executives to pay themselves with stock options.


It is quite remarkable how increasing wealth concentration has been described and presented to the public. For example, the Allianz Global Wealth Report 2016 has described the trends as ‘inclusive inequality’, claiming a growing global middle class even as inequality has been rising.

Similarly, the Credit Suisse Report argues that wealth distribution is shifting as the world becomes wealthier, thus lowering barriers to wealth acquisition. Increasing wealth and income inequality are thus merely reflecting faster asset accumulation, including the pace at which new millionaires are being created.

Josef Stadler, UBS head of global ultra-high net worth and lead author of the UBS/PwC Billionaires Report 2017, decries “the perception that billionaires make money for themselves at the expense of the wider population” as incorrect, attributing billionaires’ fortunes to the strong performance of their companies and investments.

Besides their philanthropic contributions and patronage of the arts, culture and sports, 98% of billionaires’ wealth are said by him to contribute to society as the world’s super-rich employed 27.7 million people. Rather than making money from their employees’ efforts, billionaires apparently make private welfare payments to them out of the goodness of their hearts!



Trump’s Abominable Snow Job

January 12, 2018

Trump’s Abominable Snow Job

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“America first” means workers come last– The Abominable Snowman.

In the 2016 US Presidential Election, Donald Trump presented himself as a populist who would protect America’s “forgotten” workers from the disruptions of trade and immigration and the nefarious designs of unnamed elites. But, a year after assuming office, it has become abundantly clear that “America first” means workers come last.

Almost one year ago, beneath a gray sky and before a middling crowd, Donald Trump was sworn in as US President. In his inaugural address, he vowed that, “Every decision on trade, on taxes, on immigration, on foreign affairs, will be made to benefit American workers and American families.” And to the “forgotten men and women of our country,” he vowed, “I will never, ever let you down.”

Trump had campaigned on a promise to tear up “unfair” trade agreements and crack down on immigration. And in his first weeks and months in office, he abandoned the Trans-Pacific Partnership (TPP). He announced America’s withdrawal from the Paris climate agreement. He banned entry to the United States for Muslims from seven countries. And he has cleared the way for the deportation of hundreds of thousands of Latin Americans who have been living in the US legally for a generation or more.

But, as Trump prepares to deliver his second “State of the Union” address, it is clear that many other major promises have fallen by the wayside. The wall he promised to erect on the border with Mexico is no closer to being built than it was a year ago. The 2010 Affordable Care Act (Obamacare) remains un-repealed. American infrastructure remains neglected and underfunded. And, rather than “drain the swamp” of entrenched insiders and vested interests that shape so much US policy, he’s stocked it with bigger alligators.

To be sure, Trump’s predecessors had similar failures. Barack Obama never did manage to shut down the US military prison at Guantánamo Bay. George W. Bush failed to enact comprehensive immigration reform. And Bill Clinton could not deliver on health care. But they at least upheld the spirit of their commitments.

As Project Syndicate commentators have documented, the same cannot be said for Trump. During his first year in office, US domestic and foreign policies have amounted to a full-scale betrayal of American workers and families, including those in Michigan, Pennsylvania, and Wisconsin to whom he owes his presidency. And, with his approval ratings pinned at historic lows, many others who voted for him in 2016 presumably feel the same way.

Soaking the 99%

The Trump policies that will most obviously affect American workers and families relate to health care and taxes. After joining with congressional Republicans last spring and summer in a failed attempt to repeal Obamacare, the Trump administration introduced regulations to bypass key provisions of the law, such as a new rule allowing companies and organizations to band together to purchase skimpier coverage. Trump says his executive orders are intended to shore up wobbly insurance markets, but many observers expect the measures to drive up premiums for millions of Americans and introduce new inequities in coverage over time.

 Image result for joseph stiglitzColumbia’s Nobel Laureate Joseph Stiglitz

The Tax Cuts and Jobs Act of 2017, signed in December, similarly backloads the pain. In the near term, American workers will see modest bumps in their paychecks. But within the next decade, Nobel laureate economist Joseph E. Stiglitz notes, the law “will increase taxes on a majority of Americans in the middle (the second, third, and fourth quintiles),” and add at least $1-1.5 trillion to the deficit by 2027, all so that tax cuts for corporations can remain permanent.

That timing, says Nouriel Roubini of New York University, is no coincidence. The tax plan was designed with the 2018 midterm congressional election firmly in mind. Until then, Roubini explains, Trump and the Republicans “can brag about cutting taxes on most households.” And after that, “they can expect to see the economic-stimulus effects of tax cuts peak in 2019, just before the next presidential election – and long before the bill comes due.”

But both Stiglitz and Roubini are skeptical that the GOP’s ruse will work. After all, Stiglitz writes, “voters are not so easily manipulated,” and there is much in the Trump tax package that workers, in particular, should regard skeptically.

For example, despite Trump’s promise to “bring back” jobs to the US, Roubini shows that provisions in the tax law “will give US multinationals an even greater incentive to invest, hire, and produce abroad.” And, contrary to Trump’s campaign promise that “no one will lose [health-insurance] coverage,” the tax law repeals Obamacare’s individual mandate, which “will cause 13 million people to lose health insurance, and insurance premiums to rise by 10%, over the next decade.”

Moreover, as Stiglitz points out, contrary to Trump’s explicit promise to “eliminate the carried-interest deduction and other special interest loopholes that have been so good for Wall Street investors,” the dodges remain intact, and will continue to be exploited by “job-destroying private-equity firms.” The tax law also does little for workers whose jobs have been eliminated or displaced. As the University of California, Berkeley, economist Laura Tyson and Lenny Mendonca of New America observe, the law “prioritizes investment in physical and financial capital over what the US really needs: more investment in human capital and lifelong learning to help workers and communities cope with the disruptive effects of automation and artificial intelligence.”


Image result for laura tysonLaura Tyson@ University of California


But that is not all. Tyson and Mendonca remind us that the law will also heap costs on Americans living in Democratic-leaning states such as New York and California, by imposing an “across-the-board limit on mortgage deductions,” and “by capping the federal deduction for state and local income and property taxes.” The combined effect of these provisions, Tyson and Mendonca conclude, will be to increase “the marginal tax rate on millions of workers in the country’s most productive locales and industries.” Rather than encouraging innovation, Trump’s tax law will stifle it.

Economic Impossibilities for Our Grandchildren

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Jeffrey Frankel
Beyond the tax plan’s immediate, concrete effects, it could also have adverse long-term implications for US economic growth and prosperity. Harvard University’s Jeffrey Frankel points out that, whereas previous Republican tax cuts, such as in the early 1980s, came after economic downturns, the new law lands on an economy that is already near full employment. That means it could hasten the rate at which the US Federal Reserve will raise interest rates, which, Stiglitz notes, will lead to slower “investment, and thus growth,” regardless of whether “the consumption of the very rich increases.”

Frankel also laments that the law will reduce government revenue at a time when baby boomers are “retiring at a rate of about 10,000 people per day, meaning that Medicare and Social Security outlays – for health insurance and pensions, respectively – will increase rapidly.” Such cost increases, Roubini says, play directly into the “starve the beast” strategy long beloved of congressional Republicans, whereby party leaders will “use the higher deficits from tax cuts to argue for cuts” in social programs for “elderly, middle-class, and low-income Americans.” But, while Speaker of the House of Representatives Paul Ryan has already expressed his eagerness to pursue entitlement reform in 2018, Senate Majority Leader Mitch McConnell is much more reluctant.

In fact, the argument for entitlement reform – that US government debt is unsustainable and must be reined in – contradicts a central claim behind the Trump/Republican tax plan: that it will generate enough growth to cover most of its costs. As Stephen S. Roach of Yale University explains, this is the classic supply-side argument to which America now owes its swelling debt. After the Reagan-era tax cuts, Roach observes, “federal budget deficits ballooned to 3.8% of GDP during the 1980s, taking public debt from 25% of GDP in 1980 to 41% by 1990”; moreover, the US current account has “remained in deficit ever since (with the exception of a temporary reprieve in the first two quarters of 1991 due to external funding of the Gulf War).”

Higher deficits, former Greek Finance Minister Yanis Varoufakis reminds us, imply “higher long-term tax bills” for American workers down the road. Of course, taxpayers might be willing to accept that if the law’s corporate-tax provisions translate into higher wages across the board. But will they?

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Harvard’s Martin Feldstein


Harvard University’s Martin Feldstein, who believes the “economic benefits resulting from the corporate tax changes will outweigh the adverse effects of the increased debt,” is cautiously optimistic. Before the law passed, he predicted that reducing the corporate-tax rate from 35% to 20% (the final bill reduces it to 21%) would make the US far more competitive. And that, in turn, “will attract capital to the US corporate sector,” translating into higher “productivity and real wages,” possibly to the tune of “$4,000 per household in today’s dollars” by 2027.

But as Roach points out, US companies already “pay a surprisingly low effective corporate tax rate – just 22% – when judged against post-World War II experience.” The US is already third in the World Economic Forum’s yearly ranking of international competitiveness. And, at 9% of gross domestic income, “the current GDP share of after-tax [corporate] profits is well above the post-1980 average of 7.6%.”

Moreover, Tyson and Mendonca point to a “large body of economic research” showing that, “at most, 20-25% of the benefits of corporate tax cuts will accrue to labor; the rest will go to shareholders, about one-third of whom are foreign.” That suggests the long-run trend of wage gains trailing behind productivity growth could continue. While corporate profits have been rising, Roach observes, “the share of national income going to labor has been declining.” There is no reason to expect the Republicans’ tax legislation to change that.

The Great Growth Debate

Still, in the lead-up to the bill’s passage, Harvard’s Robert J. Barro pointed to three provisions in the tax plan that he believes will induce substantial business investment, and thus growth in output and employment. In addition to lowering the corporate-tax rate, the law also allows companies to write off the full cost of new equipment immediately, rather than over time; and it shortens from 39 to 25 years the period for writing off non-residential business structures. According to Barro’s calculation, the new tax regime will “raise long-run capital-labor ratios by 25% for non-residential corporate structures and 17% for corporate equipment,” implying “a large long-run increase in real per capita GDP – by around 7%.”


Image result for Harvard's Larry SummersHarvard’s Lawrence H. Summers


But Barro’s Harvard colleagues, Jason Furman and Lawrence H. Summers, who both served as senior economic advisers to Obama, criticized Barro’s analysis for making “the least favorable assumptions about current law and the most favorable assumptions about future policy” under the Trump/Republican plan. Using Barro’s own model, Furman and Summers calculate that the tax law will “yield an increase in the level of long-run GDP of about 1%.” That prediction is in line with assessments from most other economists and official budget scorers, including, they note, the “Republican-appointed Joint Committee on Taxation.”

In his own contribution to the tax debate, Stanford University’s Michael J. Boskin – who co-signed an open letter in November with Barro and seven other economists promoting the tax package’s growth potential – suggests that Furman and Summers have underestimated key effects of the bill. The impact of equipment investment on GDP growth, he contends, is “much larger than in the conventional models used in most studies, including those relied on by government revenue scorers,” owing to the “learning-by-doing effects” associated with new technologies.

Then again, tax policies are not the only factor weighing on investment decisions. Roach, for his part, suspects that weak business investment in recent years may be “due less to onerous taxes and regulatory strangulation, and more to an unprecedented shortfall of aggregate demand,” the latter being a more salient driver of capital expenditures. The extent to which the tax package will stimulate demand remains to be seen, and much will depend on whether Republicans follow through on spending cuts this year. If they do, Barry Eichengreen of the University of California, Berkeley expects the ax to fall on programs that benefit “hand-to-mouth consumers, who will reduce their own spending dollar for dollar, denting aggregate demand.”

“America First,” Workers Last

Furnishing workers with more bargaining power could help to boost wages, and thus demand. And yet, as Roubini observes, Trump’s “deregulatory policies are blatantly biased against workers and unions.” The Trump administration has proposed deep cuts to the Occupational Safety and Health Administration, which polices workplace safety. And it has sided with corporations over workers in pending court cases, including one before the Supreme Court that could decide whether employees may be forced to sign arbitration agreements barring them from joining class-action lawsuits against their employers.

Likewise, Christopher Smart of the Carnegie Endowment for International Peace argues that Trump’s decision to abandon the TPP will actually make it harder for American workers to compete with cheaper labor abroad. Under the TPP, Smart explains, “Countries as diverse as Peru, Vietnam, and Mexico would have signed on to labor laws enshrining workers’ rights to form independent unions and engage in collective bargaining,” thus raising the cost of their labor vis-à-vis American workers. Of course, if a new Japanese-led effort to resuscitate the TPP succeeds, the 11 remaining Pacific-rim countries could still agree to higher uniform labor standards. But with the US remaining outside the proposed trade bloc, it will have less leverage to address other countries’ violations.


Image result for Bill Emmott,Bill Emmott

Elsewhere on the trade front, Bill Emmott, a former editor-in-chief of The Economist, notes that, “Trump has often huffed and puffed about other countries’ unfair trade practices, just as he did during the 2016 election campaign; but he has done little to turn words into deeds.” After promising to label China a currency manipulator, for example, Trump has (wisely) abstained from following through. Still, Emmott expects Trump to ramp up his protectionist policies this year, now that tax cuts are behind him.

In December, the White House gave a preview of what that agenda might look like with the release of its National Security Strategy, which places an unprecedented emphasis on economics. In Feldstein’s view, the Trump NSS includes some “valuable initiatives” for “dealing with foreign trade” – including stepped-up efforts to crackdown on intellectual-property theft. The problem, for Feldstein, is that the NSS singles out “unfair policies pursued by China and other countries, without distinguishing between those that hurt American interests and those that, though ‘unfair,’ actually help Americans.”

The fear now is that Trump will take a broad approach and either eliminate Chinese policies that are good for American consumers – such as exporting excess goods at fire-sale prices – or precipitate a full-scale trade war. If the latter happens, Kaushik Basu of Cornell University warns, no country “will suffer more than the US itself.”

Trump’s first-year record on immigration is a similarly mixed bag. After multiple tries, he managed to implement a Muslim-focused travel ban that passes judicial muster (it now also bars travelers from North Korea and Venezuela). And yet it is not clear what, if anything, his immigration policies have done for American workers, even those who believe that immigrants take American jobs and contribute less to the economy than they consume in public services. After all, notes Roubini, “the ‘Muslim ban’ doesn’t affect the supply of labor in the US”; nor does “the administration’s plan favor skilled over unskilled workers.” In fact, as Harvard’s Kenneth Rogoff warns, measures that “sharply reduce immigration” would “have significant adverse effects on growth,” and thus on jobs and wages.

Nationalism for Dunces

In his inaugural address, Trump also promised to “reinforce old alliances and form new ones,” and to “seek friendship and goodwill with the nations of the world,” while always putting “America first.” Foreign policy does not have as obvious an effect on US workers and households as tax cuts do. But if an incompetent or dangerous administration were to undermine the US dollar’s standing as the world’s main reserve currency, that loss of status would most likely prove to be more consequential than any domestic legislation.

Image result for Benjamin J. Cohen Benjamin J. Cohen, University of California@ Santa Barbara

The dollar’s exalted status in global financial markets, explains Benjamin J. Cohen of the University of California, Santa Barbara, is what allows America to “go on spending whatever it needs to sustain its many security commitments around the world, and to finance its trade and budget deficits.” If other countries suddenly soured on the dollar, the US could experience capital flight; at a minimum, the government would have to pay more to service its existing debt, implying a larger burden on taxpayers.

As it happens, the dollar performed poorly during Trump’s first year, losing almost 10% of its value when one might have expected it to appreciate with the strengthening of the US economy, a widening interest-rate differential with other advanced economies, and the promise of corporate-tax cuts. Last August, Cohen observed that, after Trump’s tweet threatening North Korean dictator Kim Jong-un with “fire and fury” – and even before his refusal to recertify the Iran nuclear deal – investors were “looking for alternative safe havens in other markets, from Switzerland to Japan.”

Similarly, Eichengreen cautioned in October that if the Trump administration continues to discredit America in the eyes of its allies, it could provoke a dollar crisis. Eichengreen imagines a scenario in which South Korea and Japan – both of which are “thought to hold about 80% of their international reserves in dollars” – are forced to find a new financial refuge. A failure on Trump’s part to manage the North Korean nuclear crisis, for example, could create an opening for China to step in. “And where China leads geopolitically,” Eichengreen writes, “its currency, the renminbi, is likely to follow.”


Image result for Christopher R. HillAmbassador Christopher R. Hill


If that sounds far-fetched, bear in mind that North Korea has now bypassed the US altogether to hold talks with South Korea, with China’s blessing. Meanwhile, notes Christopher R. Hill, the chief US negotiator with North Korea during George W. Bush’s presidency, Trump has made it increasingly clear “that he has no idea what to do next” when it comes to Kim’s regime. Indeed, a year ago this month, Trump responded to Kim’s threat to test a new ballistic missile by tweeting, “It won’t happen!” Since then, North Korea has conducted eight missile tests – demonstrating, among other things, that the regime now has the capability to strike the US mainland – and what appears to have been its first test of a hydrogen bomb.

As 2017 came to an end, the Trump administration had further discredited itself with its approach to the Middle East. Trump’s unilateral decision in early December to recognize Jerusalem as Israel’s capital, notes Columbia University’s Jeffrey D. Sachs, was immediately and “overwhelmingly rejected” by most United Nations member states, including many US allies. According to the Palestinian journalist Daoud Kuttab, the decision also defies the wishes of most Americans, and seemed to be aimed at satisfying Trump’s “small base of US Christian Zionist evangelicals,” as well as leading Republican donors such as the casino magnate Sheldon Adelson.

As anyone familiar with the Middle East could have predicted, Trump’s Jerusalem policy has already proved self-defeating. According to Shlomo Ben-Ami, a former Israeli foreign minister, “anti-American powers” such as Hezbollah, Iran, Russia, and Turkey have wasted no time in taking “Trump’s divisive decision as an opportunity to enhance their own regional influence, at the expense of the US and its allies.”


Image result for Richard N. HaassCouncil on Foreign Relations’ Richard N. Haass


At the same time, Trump has invited still more international derision by insisting that his decision on Jerusalem – for which he received nothing in return from Israel – still leaves the door open for a two-state solution to the Israel-Palestine conflict. In fact, warns former German Foreign Minister Joschka Fischer, “America’s recognition of Jerusalem as Israel’s capital could mean the end of the two-state solution once and for all.” At a minimum, argues Richard N. Haass, the president of the Council on Foreign Relations, Trump has squandered the opportunity created by an ongoing rapprochement between Israel and Sunni Arab powers that share its interest in countering Iran.

Before Trump’s decision, Saudi Arabia might have been willing to back or even help lead an effort to end the Israel-Palestine conflict, which itself would have solidified the region’s anti-Iranian opposition. But now, Haass notes, the Saudis will be “reluctant to be associated with a plan that many will deem a sellout.” Ultimately, they “are likely to prove much less of a diplomatic partner than the White House had counted on.” In other words, Trump’s recklessness could leave the US sidelined and humiliated yet again.

As with Trump’s domestic record, it is hard to see how alienating allies, escalating nuclear tensions with North Korea, fomenting anti-American sentiment around the world, and threatening the international standing of the dollar will do anything to “benefit American workers and American families.” Far more likely, laments Ian Buruma of the New York Review of Books, is that the Trump presidency will “turn out very badly” for his supporters, to say nothing of the majority of Americans who never supported his agenda.

The United States of America Is Decadent and Depraved

December 23, 2017

The United States of America Is Decadent and Depraved

The problem isn’t Donald Trump – it’s the Donald Trump in all of us.

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In The History of the Decline and Fall of The Roman Empire, Edward Gibbon luridly evokes the Rome of 408 A.D., when the armies of the Goths prepared to descend upon the city. The marks of imperial decadence appeared not only in grotesque displays of public opulence and waste, but also in the collapse of faith in reason and science. The people of Rome, Gibbon writes, fell prey to “a puerile superstition” promoted by astrologers and to soothsayers who claimed “to read in the entrails of victims the signs of future greatness and prosperity.”

Would a latter-day Gibbon describe today’s America as “decadent”? I recently heard a prominent, and pro-American, French thinker (who was speaking off the record) say just that. He was moved to use the word after watching endless news accounts of U.S. President Donald Trump’s tweets alternate with endless revelations of sexual harassment. I flinched, perhaps because a Frenchman accusing Americans of decadence seems contrary to the order of nature. And the reaction to Harvey Weinstein et al. is scarcely a sign of hysterical puritanism, as I suppose he was implying.

And yet, the shoe fit. The sensation of creeping rot evoked by that word seems terribly apt.

Perhaps in a democracy the distinctive feature of decadence is not debauchery but terminal self-absorption

Perhaps in a democracy the distinctive feature of decadence is not debauchery but terminal self-absorption

— the loss of the capacity for collective action, the belief in common purpose, even the acceptance of a common form of reasoning. We listen to necromancers who prophesy great things while they lead us into disaster. We sneer at the idea of a “public” and hold our fellow citizens in contempt. We think anyone who doesn’t pursue self-interest is a fool.

We cannot blame everything on Donald Trump, much though we might want to. In the decadent stage of the Roman Empire, or of Louis XVI’s France, or the dying days of the Habsburg Empire so brilliantly captured in Robert Musil’s The Man Without Qualities, decadence seeped downward from the rulers to the ruled. But in a democracy, the process operates reciprocally. A decadent elite licenses degraded behavior, and a debased public chooses its worst leaders. Then our Nero panders to our worst attributes — and we reward him for doing so.

“Decadence,” in short, describes a cultural, moral, and spiritual disorder — the Donald Trump in us. It is the right, of course, that first introduced the language of civilizational decay to American political discourse. A quarter of a century ago, Patrick Buchanan bellowed at the Republican National Convention that the two parties were fighting “a religious war … for the soul of America.” Former Speaker Newt Gingrich (R-Ga.) accused the Democrats of practicing “multicultural nihilistic hedonism,” of despising the values of ordinary Americans, of corruption, and of illegitimacy. That all-accusing voice became the voice of the Republican Party. Today it is not the nihilistic hedonism of imperial Rome that threatens American civilization but the furies unleashed by Gingrich and his kin.

The 2016 Republican primary was a bidding war in which the relatively calm voices — Jeb Bush and Marco Rubio — dropped out in the early rounds, while the consummately nasty Ted Cruz duked it out with the consummately cynical Donald Trump. A year’s worth of Trump’s cynicism, selfishness, and rage has only stoked the appetite of his supporters. The nation dodged a bullet last week when a colossal effort pushed Democratic nominee Doug Jones over the top in Alabama’s Senate special election. Nevertheless, the church-going folk of Alabama were perfectly prepared to choose a racist and a pedophile over a Democrat. Republican nominee Roy Moore almost became a senator by orchestrating a hatred of the other that was practically dehumanizing.

Image result for The Donald Trump in all of usAmerican voters disagreed with past Presidents. 2017 will be behind us soon. So the question is: Will  President Donald Trump be more presidential and can he behave like a global leader? He cannot be exclusively America First.–Din Merican


Trump functions as the impudent id of this culture of mass contempt.

Trump functions as the impudent id of this culture of mass contempt

Of course he has legitimized the language of xenophobia and racial hatred, but he has also legitimized the language of selfishness. During the campaign, Trump barely even made the effort that Mitt Romney did in 2012 to explain his money-making career in terms of public good. He boasted about the gimmicks he had deployed to avoid paying taxes. Yes, he had piled up debt and walked away from the wreckage he had made in Atlantic City. But it was a great deal for him! At the Democratic convention, then-Vice President Joe Biden recalled that the most terrifying words he heard growing up were, “You’re fired.” Biden may have thought he had struck a crushing blow. Then Americans elected the man who had uttered those words with demonic glee. Voters saw cruelty and naked self-aggrandizement as signs of steely determination.

Perhaps we can measure democratic decadence by the diminishing relevance of the word “we.” It is, after all, a premise of democratic politics that, while majorities choose, they do so in the name of collective good. Half a century ago, at the height of the civil rights era and Lyndon B. Johnson’s Great Society, democratic majorities even agreed to spend large sums not on themselves but on excluded minorities. The commitment sounds almost chivalric today. Do any of our leaders have the temerity even to suggest that a tax policy that might hurt one class — at least, one politically potent class — nevertheless benefits the nation?

There is, in fact, no purer example of the politics of decadence than the tax legislation that the President will soon sign. Of course the law favors the rich; Republican supply-side doctrine argues that tax cuts to the investor class promote economic growth. What distinguishes the current round of cuts from those of either Ronald Reagan or George W. Bush is, first, the way in which they blatantly benefit the president himself through the abolition of the alternative minimum tax and the special treatment of real estate income under new “pass-through” rules. We Americans are so numb by now that we hardly even take note of the mockery this implies of the public servant’s dedication to public good.

Second, and no less extraordinary, is the way the tax cuts have been targeted to help Republican voters and hurt Democrats, above all through the abolition or sharp reduction of the deductibility of state and local taxes. I certainly didn’t vote for Ronald Reagan, but I cannot imagine him using tax policy to reward supporters and punish opponents.

I certainly didn’t vote for Ronald Reagan, but I cannot imagine him using tax policy to reward supporters and punish opponents

He would have thought that grossly unpatriotic. The new tax cuts constitute the economic equivalent of gerrymandering. All parties play that game, it’s true; yet today’s Republicans have carried electoral gerrymandering to such an extreme as to jeopardize the constitutionally protected principle of “one man, one vote.” Inside much of the party, no stigma attaches to the conscious disenfranchisement of Democratic voters. Democrats are not “us.”

Finally, the tax cut is an exercise in willful blindness. The same no doubt could be said for the 1981 Reagan tax cuts, which predictably led to unprecedented deficits when Republicans as well as Democrats balked at making offsetting budget cuts. Yet at the time a whole band of officials in the White House and the Congress clamored, in some cases desperately, for such reductions. They accepted a realm of objective reality that existed separately from their own wishes. But in 2017, when the Congressional Budget Office and other neutral arbiters concluded that the tax cuts would not begin to pay for themselves, the White House and congressional leaders simply dismissed the forecasts as too gloomy.

Here is something genuinely new about our era: We lack not only a sense of shared citizenry or collective good, but even a shared body of fact or a collective mode of reasoning toward the truth.

We lack not only a sense of shared citizenry or collective good, but even a shared body of fact or a collective mode of reasoning toward the truth

 A thing that we wish to be true is true; if we wish it not to be true, it isn’t. Global warming is a hoax. Barack Obama was born in Africa. Neutral predictions of the effects of tax cuts on the budget must be wrong, because the effects they foresee are bad ones.

It is, of course, our president who finds in smoking entrails the proof of future greatness and prosperity. The reduction of all disagreeable facts and narratives to “fake news” will stand as one of Donald Trump’s most lasting contributions to American culture, far outliving his own tenure. He has, in effect, pressed gerrymandering into the cognitive realm. Your story fights my story; if I can enlist more people on the side of my story, I own the truth. And yet Trump is as much symptom as cause of our national disorder. The Washington Post recently reported that officials at the Center for Disease Control were ordered not to use words like “science-based,” apparently now regarded as disablingly left-leaning. But further reporting in the New York Times appears to show that the order came not from White House flunkies but from officials worried that Congress would reject funding proposals marred by the offensive terms. One of our two national political parties — and its supporters — now regards “science” as a fighting word. Where is our Robert Musil, our pitiless satirist and moralist, when we need him (or her)?

A democratic society becomes decadent when its politics, which is to say its fundamental means of adjudication, becomes morally and intellectually corrupt. But the loss of all regard for common ground is hardly limited to the political right, or for that matter to politics. We need only think of the ever-unfolding narrative of Harvey Weinstein, which has introduced us not only to one monstrous individual but also to a whole world of well-educated, well-paid, highly regarded professionals who made a very comfortable living protecting that monster. “When you quickly settle, there is no need to get into all the facts,” as one of his lawyers delicately advised.

This is, of course, what lawyers do, just as accountants are paid to help companies move their profits into tax-free havens. What is new and distinctive, however, is the lack of apology or embarrassment, the sheer blitheness of the contempt for the public good. When Teddy Roosevelt called the monopolists of his day “malefactors of great wealth,” the epithet stung — and stuck. Now the bankers and brokers and private equity barons who helped drive the nation’s economy into a ditch in 2008 react with outrage when they’re singled out for blame. Being a “wealth creator” means never having to say you’re sorry. Enough voters accept this proposition that Donald Trump paid no political price for unapologetic greed.

The worship of the marketplace, and thus the elevation of selfishness to a public virtue, is a doctrine that we associate with the libertarian right. But it has coursed through the culture as a self-justifying ideology for rich people of all political persuasions — perhaps also for people who merely dream of becoming rich.

Decadence is usually understood as an irreversible condition — the last stage before collapse. The court of Muhammad Shah, last of the Mughals to control the entirety of their empire, lost itself in music and dance while the Persian army rode toward the Red Fort. But as American decadence is distinctive, perhaps America’s fate may be, too. Even if it is written in the stars that China will supplant the United States as the world’s greatest power, other empires, Britain being the most obvious example and the one democracy among them, have surrendered the role of global hegemon without sliding into terminal decadence.

Can the United States emulate the stoic example of the country it once surpassed? I wonder.

Can the United States emulate the stoic example of the country it once surpassed? I wonder.

The British have the gift of ironic realism. When the time came to exit the stage, they shuffled off with a slightly embarrassed shrug. That, of course, is not the American way. When the stage manager beckons us into the wings we look for someone to hit — each other, or immigrants or Muslims or any other kind of not-us. Finding the reality of our situation inadmissible, like the deluded courtiers of the Shah of Iran, we slide into a malignant fantasy. 

But precisely because we are a democracy, because the values and the mental habits that define us move upward from the people as well as downward from their leaders, that process need not be inexorable. The prospect of sending Roy Moore to the Senate forced a good many conservative Republicans into what may have been painful acts of self-reflection. The revelations of widespread sexual abuse offer an opportunity for a cleansing moment of self-recognition — at least if we stop short of the hysterical overreaction that seems to govern almost everything in our lives.

Our political elite will continue to gratify our worst impulses so long as we continue to be governed by them. The only way back is to reclaim the common ground — political, moral, and even cognitive — that Donald Trump has lit on fire. Losing to China is hardly the worst thing that could happen to us. Losing ourselves is.

*James Traub is a contributing editor at Foreign Policy, a fellow at the Center on International Cooperation, and author of the book “John Quincy Adams: Militant Spirit.”

The United States of America Is Decadent and Depraved

Why 1997 Asian Crisis Lessons Lost

December 7, 2017

Why 1997 Asian Crisis Lessons Lost

by Jomo Kwame Sundaran

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Various different, and sometimes contradictory lessons have been drawn from the 1997-1998 East Asian crises. Rapid or V-shaped recoveries and renewed growth in most developing countries in the new century also served to postpone the urgency of far-reaching reforms. The crises’ complex ideological, political and policy implications have also made it difficult to draw lessons from the crises.

Conventional wisdom

The conventional wisdom was to blame the crisis on bad economic policies pursued by the governments concerned. Of course, the vested interests favouring the international financial status quo or further liberalization also impede implementing needed reforms. Such interests continue to be supported by the media.

Citing currency crisis theory, the initial response to the crises was to blame poor macroeconomic, especially fiscal policies, although most East Asian economies had been maintaining budgetary surpluses for some years. Nevertheless, the IMF and others, including the international business media, urged spending cuts and other pro-cyclical policies (e.g., raising interest rates) which worsened the downturns.

Such policies were adopted in much of the region from late 1997, precipitating sharper economic collapses. By the second quarter of 1998, however, it was increasingly recognized that these policies had worsened, rather than reversed the economic deterioration, transforming currency and financial crises into crises of the real economy.

By early 1998, however, as macroeconomic orthodoxy lost credibility, the blame shifted to political economy, condemning ‘cronyism’ as the cause. US Federal Reserve Bank chair Alan Greenspan, US Treasury Deputy Secretary Lawrence Summers and IMF Managing Director Michel Camdessus formed a chorus criticizing Asian corporate governance in quick sequence over a month from late January.

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Paul Krugman, Joseph Stiglitz and Jeffery Sachs supported Keynesian counter-cyclical policies.

The dubious conventional explanations of the Asian crises were not shared by more independently minded mainstream economists with less ideological prejudices. The World Bank’s chief economist Joseph Stiglitz and other prominent Western economists such as Paul Krugman and Jeffrey Sachs supported Keynesian counter-cyclical policies.

Regional contagion and response

The transformation of the region’s financial systems from the late 1980s had made their economies much more vulnerable and fragile. Rapid economic growth and financial liberalization attracted massive, but easily reversible, footloose capital inflows.

New regulations encouraged short-term lending, typically ‘rolled over’ in good times. Much of these came from Japanese and continental European banks as UK and US banks continued to recover from the 1980s’ sovereign debt crises. But these gradual inflows suddenly became massive outflows when the crisis began.

Significant inflows were also attracted by stock market and other asset price bubbles. The herd behaviour characteristic of capital markets exacerbated pro-cyclical market behaviour, heightening panic during downturns. Fickle market behaviour also exacerbated contagion, worsening regional neighbourhood effects.

Japan’s offer of US$100 billion to manage the crisis in the third quarter of 1997 was quickly stymied by the US and the IMF. Instead, a more modest amount was made available under the Miyazawa Plan to finance more modest facilities, institutions and instruments.

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Much later, in Chiang Mai, Thailand, the region’s Finance Ministers approved a series of bilateral credit lines or swap facilities, conditional on IMF approval. Many years later, the finance ministers of Japan, China and South Korea ensured that these arrangements were regionalized, and no longer simply the aggregation of bilateral commitments, while increasing the size of the credit facility.

New International Financial Architecture

A year after the crisis began in July 1997, US President Bill Clinton called for a new international financial architecture. The apparent spread of the Asian crisis to Brazil and Russia underscored that contagion could be more than regional.

The collapse of Long-Term Capital Management (LTCM) following the Russian crisis led the US Federal Reserve to intervene in the market to coordinate a private sector bailout. This legitimized government interventions to ensure functioning financial systems and sufficient liquidity to finance economic recovery.

After the US Fed lowered interest rates, capital flowed to East Asia once again. The Malaysian government’s establishment of bailout institutions and mechanisms in mid-1998 and its capital controls on outflows from September 1998 also warned that other countries might go their own way.

Ironically, the economic recoveries in the region from late 1998 weakened the resolve to reform the international financial system. Talk of a new international financial architecture began to fade as recovery was presented as proof of international financial system resilience.