The Sovereignty that Really Matters

October 23, 2017

by Javier Solana

http://www.project-syndicate.org

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

From Merkel to Macron–The Future of Europe

October 1, 2017

THE ECONOMIST

Running Europe

The spotlight shifts from Germany to France

A dynamic Emmanuel Macron and a diminished Angela Merkel point to a new order in Europe

Print edition | Leaders

Sep 30th 2017

WHO leads Europe? At the start of this year, the answer was obvious. Angela Merkel was trundling unstoppably towards a fourth election win, while Britain was out, Italy down and stagnating France gripped by the fear that Marine Le Pen might become the Gallic Donald Trump.

 

39 year old President Emmanuel Macron–The new Mr. Europe. Can he revitalise an anaemic Europe?

This week, it all looks very different. Mrs Merkel won her election on September 24th, but with such a reduced tally of votes and seats that she is a diminished figure. Germany faces months of tricky three-way coalition talks. Some 6m voters backed a xenophobic right-wing party, many of them in protest at Mrs Merkel’s refugee policies. Having had no seats, Alternative for Germany, a disruptive and polarising force, is now the Bundestag’s third largest party.

Yet west of the Rhine, with a parliament dominated by his own new-minted and devoted party, France’s President Emmanuel Macron is bursting with ambition . This week he used a speech about the European Union to stake his claim to the limelight. Whether Mr Macron can restore France to centre-stage in the EU after a decade in the chorus depends not just on his plans for Europe, but also on his success at home, reforming a country long seen as unreformable.

Angela’s leading man

Start with Europe. This week’s speech was brimming over with ideas, including a shared military budget and an agency for “radical innovation”, as well as the desire to strengthen the euro zone. At one level, Mr Macron’s bid for the role of intellectual innovator in Europe fits a long French tradition. Moreover, elements of his speech—a new carbon-tax on the EU’s frontiers, a proposal to tax foreign tech firms where they make money rather than where they are registered, a crusade against “social dumping” with harmonised corporate tax rates—were in keeping with long-standing French attempts to stop member states competing “disloyally” against each other.

Yet Mr Macron has a more subtle and radical goal than old-style dirigisme; as if to prove it, he agreed this week that Alstom, which makes high-speed trains, could drift from state influence by merging with its private-sector German rival. His aim is to see off populism by striking a balance between providing job security for citizens, on the one hand, and encouraging them to embrace innovation, which many fear will cost them their jobs, on the other (see Charlemagne). In his speech Mr Macron also made the case for digital disruption and the completion of the digital single market. Euro-zone reform would make Europe less vulnerable to the next financial crisis.

The merit of these ideas depends on whether they lead to a more enterprising, open and confident Europe or to a protectionist fortress. But they may not be tried out at all unless Mr Macron can make a success of his policies at home. For, if France remains a threat to the EU’s economic stability rather than a source of its strength, its president can never be more than a bit player next to Germany’s chancellor.

Mr Macron’s domestic policy might seem to have made a poor start. He has grabbed headlines thanks to the size of his make-up bill, the collapse of his popularity and the whiff of arrogance about his “Jupiterian” approach to power. Predictably, the grouchy French are already contesting the legitimacy of the plans they elected Mr Macron to carry out. Reform in France, it seems, follows a pattern. The street objects; the government backs down; immobilisme sets in.

Yet take a closer look, and Mr Macron may be about to break the pattern. Something extraordinary, if little-noticed, took place this summer. While most of the French were on the beach, Mr Macron negotiated and agreed with unions a far-reaching, liberalising labour reform which he signed into law on September 22nd—all with minimal fuss. Neither France’s militant unions, nor its fiery far left, have so far drawn the mass support they had hoped for onto the streets. Fully 59% of the French say that they back labour reform. More protests will follow. Harder battles, over pensions, taxation, public spending and education, lie ahead. Mr Macron needs to keep his nerve, but, astonishingly, he has already passed his first big test.

In many ways, the 39-year-old Mr Macron is not yet well understood. Behind the haughty exterior, a leader is emerging who seems to be at once brave, disciplined and thoughtful. Brave, because labour reforms, as Germany and Spain know, take time to translate into job creation, and usually hand political rewards to the successors of those who do the thankless work of getting them through. Disciplined, because he laid out clearly before his election what he planned to do, and has stuck to his word. The unions were fully consulted, and two of the three biggest accepted the reform. Compare that with his predecessor, François Hollande, who tried reform by stealth and encountered only accusations of bad faith. Last, thoughtful: Mr Macron does not approach policy as an à la carte menu. He has grasped how digital technology is dislocating the world of work. His governing philosophy is to adapt France’s outdated system of rules and protections accordingly.

Drumroll

Over the past few years, an enfeebled France has been a chronically weak partner for Germany, pushing Mrs Merkel into a solo role that she neither sought nor relished. If he is to change that dynamic, Mr Macron needs to move swiftly to match his labour law with an overhaul of France’s inefficient training budget, increase the number of apprenticeships and renovate the state’s sleepy employment services. He also needs to explain with a less contemptuous tone why his plans for tax cuts, including to France’s wealth tax and corporate tax, are not designed simply to benefit business and the better-off. In Europe he needs to reassure the northern, more open economies that he is not trying to put up walls.

Of course, Mr Macron’s first steps in the spotlight may falter. The odds on any leader reforming France are never high. He will struggle to convince Germany to embrace his vision of euro-zone reform. But, if this year has shown anything, it is that it is a mistake to bet against the formidable Mr Macron.

This article appeared in the Leaders section of the print edition under the headline “Europe’s new order”

Myanmar: The Rohingya, Saudi Backed ISIS Militants, Aung San Suu Kyi is a US Proxy

September 10, 2017

The unfolding crisis in Southeast Asia’s state of Myanmar has confounded many geopolitical analysts due to its complex history and the intentionally deceptive and now contradictory coverage provided by the Western media.

Aung San Suu Kyi is a Creation and Proxy of US and European Interests

The current government of Myanmar is headed by Aung San Suu Kyi and her National League for Democracy (NLD). It has ascended into power after a decades-long struggle against the nation’s military who ruled the nation for decades.

Aung San Suu Kyi is a Creation and Proxy of US and European Interests

Suu Kyi and her NLD are the recipients of tens of millions of dollars in US, British, and European aid. Entire networks of fronts posing as nongovernmental organizations (NGOs) have been created to undermine and overwrite Myanmar’s sovereign institutions.

The extent of this support and funding is covered by many of the Western organizations themselves, including the Burma Campaign UK, who in its 36 page 2006 report, “Failing the People of Burma?” (.pdf) details extensively how it and its American counterparts have built up Suu Kyi’s now impressive political domination of Myanmar.

The report states explicitly:

The National Endowment for Democracy (NED – see Appendix 1, page 27) has been at the forefront of our program efforts to promote democracy and improved human rights in Burma since 1996. We are providing $2,500,000 in FY 2003 funding from the Burma earmark in the Foreign Operations legislation. The NED will use these funds to support Burmese and ethnic minority democracy-promoting organizations through a sub-grant program. The projects funded are designed to disseminate information inside Burma supportive of Burma’s democratic development, to create democratic infrastructures and institutions, to improve the collection of information on human rights abuses by the Burmese military and to build capacity to support the restoration of democracy when the appropriate political openings occur and the exiles/refugees return.

It also reports:

Both Voice of America (VOA) and Radio Free Asia (RFA) have Burmese services. VOA broadcasts a 30-minute mix of international news and information three times a day. RFA broadcasts news and information about Burma two hours a day. VOA and RFA websites also contain audio and text material in Burmese and English. For example, VOA’s October 10, 2003 editorial, “Release Aung San Suu Kyi” is prominently featured in the Burmese section of VOAnews.com. RFA’s website makes available audio versions of 16 Aung San Suu Kyi’s speeches from May 27 and 29, 2003. U.S. international broadcasting provides crucial information to a population denied the benefits of freedom of information by its government.

Regarding the indoctrination and education of future leaders of this Western proxy political bloc, it states:

The State Department provided $150,000 in FY 2001/02 funds to provide scholarships to young Burmese through Prospect Burma, a partner organization with close ties to Aung San Suu Kyi. With FY 2003/04 funds, we plan to support Prospect Burma’s work given the organization’s proven competence in managing scholarships for individuals denied educational opportunities by the continued repression of the military junta, but committed to a return to democracy in Burma.

In regards to the Open Society and its role in interfering with Myanmar’s internal politics, the report states:

Our assistance to the Open Society Institute (OSI) (until 2004) provides partial support for a program to grant scholarships to Burmese refugee students who have fled Burma and wish to continue their studies at the undergraduate, or post-graduate level. Students typically pursue degrees in social sciences, public health, medicine, anthropology, and political science. Priority is given to students who express a willingness to return to Burma or work in their refugee communities for the democratic and economic reform of the country. 

The report, written in 2006 when another US proxy – Thaksin Shinawatra – presided over Thailand as Prime Minister until his ouster later that year, would detail the role Thailand was then playing to undermine and overthrow Myanmar’s political order:

Last year the U.S. government began funding a new program of the International Organization for Migration (IOM) to provide basic health services to Burmese migrants outside the official refugee camps in cooperation with the Thai Ministry of Public Health. This project has been supported by the Thai government and has received favorable coverage in the local press. Efforts such as this that endeavor to find positive ways to work with the Thai government in areas of common interest help build support for U.S.-funded programs that support Burmese pro-democracy groups.

Myanmar’s current minister of information, Pe Myint – for example – underwent training at the NED and Open Society-funded Indochina Media Memorial Foundation in Bangkok.

A US diplomatic cable made available via Wikileaks would reveal just how integral such training was in building up the US client state that now rules Myanmar.

Titled, “An Overview of Northern Thailand-Based Burmese Media Organizations,” the 2007 cable states (emphasis added):

Other organizations, some with a scope beyond Burma, also add to the educational opportunities for Burmese journalists. The Chiang Mai-based Indochina Media Memorial Foundation, for instance, last year completed training courses for Southeast Asian reporters that included Burmese participants. Major funders for journalism training programs in the region include the NED, Open Society Institute (OSI), and several European governments and charities….

…A number of active media training programs attract exiles and those from inside Burma to Chiang Mai for journalism courses ranging from one week to one year. These training programs identify would-be journalists who are active in communities inside Burma, as well as NGOs in Thailand, and help them secure reporting positions with Burmese media outfits in the region. The training programs help ensure that future generations will be able to succeed the founders of the current organizations.

The cable also links US funding to the very predictable “pro-American” attitude adopted by those receiving the benefits of such funding:

In a refreshing take for U.S. diplomats interacting with foreign media, the exile journalist community here remains steadfastly pro-American. Groups such as DVB and The Irrawaddy continually seek more input from U.S. officials and make frequent use of interviews, press releases and audio clips posted on USG websites. A live interview with a U.S. diplomat is a prized commodity, one even capable of stoking a healthy competition among rival news organizations to land a scoop. A 2006 Irrawaddy interview with EAP DAS Eric John multiplied into several articles and circulated widely throughout the exile community and mainstream media. 

USG funding plays some role in this goodwill…

Without doubt, Suu Kyi and those occupying top positions within her government, are the product of decades of US-UK and European backing, training, and indoctrination.

Saudi-backed “Rohingya Militants” No More Represent All Rohingya than ISIS Represents All Sunnis 

An unfortunate narrative is taking shape across the alternative media, portraying Myanmar’s Rohingya minority as “Islamists” taking up “jihad.”

In reality, Myanmar’s Rohingya minority have lived in Myanmar for generations. Until recently, they have lived in harmony with their Buddhist-majority neighbors across the country, including in Rakhine state.

Many of the talking points now being adopted against the Rohingya are quite literally copied and pasted from US-backed extremist groups in Myanmar. Claims that the term “Rohingya” is simply made-up, that the Rohingya are actually illegal Bengalis, and that they should be expelled by force from Myanmar have been the key points of Suu Kyi’s violent “Saffron monk” supporters for years.

The increasingly empowered supporters of Aung San Suu Kyi – many of whom were present during the 2007 “Saffron Revolution” – are the primary agitators of the Rohingya crisis. While the Western media has attempted to portray the military as being behind the violence, it is often the military that intervenes to separate attacking extremists from the Rohingya villages and refugee camps they seek to slash and burn.

It was the military-led government that attempted to move forward the process of granting the Rohingya citizenship, opposed vehemently by Suu Kyi’s political party and her supporters, and ended entirely once Suu Kyi came to power.

More recently, the Western media has noted the emergence of Rohingya-aligned militants who have reportedly carried out several large-scale attacks on police and military units across Rakhine state.

Of course, no militant group exists without substantial political, financial, and material support. And just as other politically-convenient conflicts have erupted in Libya, Syria, Yemen, and the Philippines, US-Saudi funding is evident among the latest outbreak of violence in Myanmar as well.

It is a combination of gasoline and fire – the tools of a single arsonist intentionally put into place to create a geopolitically convenient conflagration. 

The Wall Street Journal in a recent article titled, “Asia’s New Insurgency Burma’s abuse of the Rohingya Muslims creates violent backlash.” claims:

Now this immoral policy has created a violent backlash. The world’s newest Muslim insurgency pits Saudi-backed Rohingya militants against Burmese security forces. As government troops take revenge on civilians, they risk inspiring more Rohingya to join the fight.

The article also claims:

Called Harakah al-Yaqin, Arabic for “the Faith Movement,” the group answers to a committee of Rohingya emigres in Mecca and a cadre of local commanders with experience fighting as guerrillas overseas. Its recent campaign—which continued into November with IED attacks and raids that killed several more security agents—has been endorsed by fatwas from clerics in Saudi Arabia, Pakistan, the Emirates and elsewhere. 

Rohingyas have “never been a radicalized population,” ICG notes, “and the majority of the community, its elders and religious leaders have previously eschewed violence as counterproductive.” But that is changing fast. Harakah al-Yaqin was established in 2012 after ethnic riots in Rakhine killed some 200 Rohingyas and is now estimated to have hundreds of trained fighters.

While many causal observers note that the violence the Rohingya have been subjected to was bound to provoke a violent reaction, armed insurgencies do not spontaneously emerge. Isolated acts of violence, organized gangs with very limited capacity are possible, but the violence the Wall Street Journal is describing is not “backlash,” it is foreign-funded politically-motivated militancy operating under the cover of “backlash.”

Aung San Suu Kyi and “Rohingya” Militants: Gasoline and Fire, Not Good vs. Evil  

The current client regime presiding over Myanmar – created and perpetuated by American cash and support – is being intentionally pitted against a militancy funded and organized by America’s closest ally in the Middle East – Saudi Arabia.

It is a combination of gasoline and fire – the tools of a single arsonist intentionally put into place to create a geopolitically convenient conflagration.

It should be noted that Rakhine state is the starting point of one of several of China’s One Belt One Road projects – connecting Sittwe Port located there to infrastructure that leads across Myanmar to China’s southern city of Kunming.

 

This map provided by VOA accompanies stories by the US State Department-funded media platform eagerly reporting how violence is disrupting China’s OBOR projects.

Not only does the violence in Rakhine state threaten Chinese interests, it also helps set a pretext for direct US military involvement – either in the form of “counter-terror assistance” as is being offered to the Philippines to fight US-Saudi-backed militants from the Islamic State, or in the form of a “humanitarian intervention.”

In either case, the result will be US military assets placed in a nation directly on China’s border – in Southeast Asia, just as US policymakers have sought to do for decades.

For example, The Project for a New American Century (PNAC) in a 2000 paper titled “Rebuilding America’s Defenses” (PDF) would unabashedly declare its intentions to establish a wider, permanent military presence in Southeast Asia.

The report would state explicitly that: 

…it is time to increase the presence of American forces in Southeast Asia.

It would elaborate in detail, stating:

In Southeast Asia, American forces are too sparse to adequately address rising security requirements. Since its withdrawal from the Philippines in 1992, the United States has not had a significant permanent military presence in Southeast Asia. Nor can U.S. forces in Northeast Asia easily operate in or rapidly deploy to Southeast Asia – and certainly not without placing their commitments in Korea at risk. Except for routine patrols by naval and Marine forces, the security of this strategically significant and increasingly tumultuous region has suffered from American neglect. 

Noting the difficultly of placing US troops where they are not wanted, the PNAC paper notes:

This will be a difficult task requiring sensitivity to diverse national sentiments, but it is made all the more compelling by the emergence of new democratic governments in the region. By guaranteeing the security of our current allies and newly democratic nations in East Asia, the United States can help ensure that the rise of China is a peaceful one. Indeed, in time, American and allied power in the region may provide a spur to the process of democratization inside China itself.

It should be noted that the paper’s reference to “the emergence of new democratic governments in the region” is a reference to client states created by the United States on behalf of its own interests and in no way constituted actual “democratic governments” which would otherwise infer they represented the interests of the very people possessing the “national sentiments” that opposed US military presence in the region in the first place.

In 2000, the US had several prospective client regimes emerging – including Suu Kyi in Myanmar, Thaksin Shinawatra in Thailand, and Anwar Ibrahim in Malaysia. Since then, only Suu Kyi remains – while Shinawatra and his sister have fled abroad and Anwar Ibrahim resides in prison.

Conclusions

It is important that readers and analysts alike understand several key points regarding the crisis in Myanmar:

1. Aung San Suu Kyi and her political party are whole-cloth creations of US and European interests;
2. The Rohingya have lived in Myanmar for generations; 
3. Saudi-backed “Rohingya militants” no more represent the Rohingya people than the Islamic State represents the Sunnis of Syria and Iraq; 
4. These “militants” are admittedly supported and directed from Saudi Arabia and do not represent a legitimate “backlash” against anti-Rohingya violence and; 
5. The US does not seek “regime change” in Myanmar, it seeks to disrupt Chinese interests, undo Chinese-Myanmar ties, and if possible, place US military assets on China’s border. 

The further from these facts analysts start out with, the further from the truth they will find themselves as the conflict in Myanmar continues to unfold. Readers and analysts should hold in suspicion narratives based on ideological rhetoric or built upon geopolitical analogy rather than actual evidence regarding finances, logistics, and socioeconomic motivations.

In Myanmar, Suu Kyi’s movement, anti-Rohingya violence, and alleged “backlash” all come accompanied with very obvious and significant foreign-footprints. It is a testament to the scale and complexity of manipulation the West is still capable of undertaking and places in jeopardy not only the majority of the people in Myanmar – Buddhist and Rohingya alike – who wish to live in peace, but the entire region as the US attempts to continue its pursuit of regional hegemony.

This article was originally published by Land Destroyer Report.

All images in this article are from the author.

The original source of this article is Global Research

Copyright © Tony Cartalucci, Global Research, 2017

http://www.globalresearch.ca/myanmar-the-rohingya-saudi-backed-isis-militants-aung-san-suu-kyi-is-a-us-proxy/5607571

Unfinished business in Berlin: Why Angela Merkel deserves to win Germany’s election

September 10, 2017

Unfinished business in Berlin

And why she must become bolder in her (almost inevitable) fourth term

https://www.economist.com/news/leaders/21728618-and-why-she-must-become-bolder-her-almost-inevitable-fourth-term-why-angela-merkel-deserves

Angela Merkel; Germany’s Great Liberator and Towering European–She deserves to win a Fourth Term

Success will partly depend on Mrs Merkel picking the right partners in government. A continuation of the present grand coalition with the SPD threatens yet more sleepy stasis. Instead she should team up with the free-market Free Democratic Party and the Greens—who are wise on Europe and tougher on Russia. Such a coalition would stand a chance of shaking the country up. As its leader, the hesitant Mrs Merkel might even become the chancellor who surprised everybody.–The Economist’s editorial

TO HER many fans, Angela Merkel is the hero who stands up to Donald Trump and Vladimir Putin, and who generously opened her country to refugees. To others, she is the villain whose ill-thought-out gamble on immigration is “ruining Germany”, as Mr Trump once put it, and whose austerity policies laid waste to southern Europe.

The fans are closer to the truth. Her country has indeed done well under her leadership and the world been better for her steady hand. But during three terms in office, Mrs Merkel has not done enough to prepare Germany for the future. If her many years at the top are to be viewed as more than merely sufficient, she must use her fourth term to bring about change.

A steady hand in a turbulent world

Germany’s Chancellor with Canada’s Favorite Son, Canadian Prime Minister Justin Trudeau

There is little doubt that Mrs Merkel and her Christian Democratic Union are coasting towards victory when Germany votes on September 24th. That is partly owing to the lacklustre Martin Schulz, her Social Democratic Party (SPD) rival. His party’s domestic policy is undistinctive and his foreign policy barely credible. He has also failed to put the chancellor on the spot. Their debate on September 3rd was more like the negotiation of a new “grand coalition” than a clash of ideas.

But her imminent victory also reflects how Germany has prospered since 2005, when Mrs Merkel took office (see Briefing). Unemployment has fallen from 11.2% to 3.8%; wages are rising; consumer confidence is at a high. The chancellor has stood by the labour-market reforms introduced by Gerhard Schröder, her SPD predecessor—though she has not extended them. She has provided stable and unideological political leadership. German society has become more open and relaxed on her watch; she allowed, for instance, a vote on gay marriage even though she personally opposed it.

And in trying to cope with the euro crisis and the influx of refugees from the Middle East and north Africa, Mrs Merkel has proved to be the indispensable European. Beyond that, she persuaded Germans that their country should take on more of the responsibilities its size demands but its history makes difficult. At summits she is a calm, well-informed presence, helping to broker European sanctions against Russia over its invasion of Ukraine, and the Paris climate accord. Germany is also taking on international burdens, with troops in Afghanistan, Mali and Lithuania, a scale of deployment unthinkable a decade ago. Her commitment to NATO’s target for defence spending of 2% of GDP speaks of a country growing up in the world.

Yet, for all this, Mrs Merkel has often governed on the “easy” setting, especially in her policies at home. She has enjoyed a host of advantages. Mr Schröder’s reforms made German workers competitive. The euro, raw materials and borrowing have all been cheap for much of her chancellorship, too. Emerging economies such as China cannot yet make the things Germany does (like luxury cars), so they import them. Germany has the second-oldest population in the world, but its baby-boomer bulge is largely still of working age. The country has been living through a golden age.

She is a Giant among Men–with Guts and Strong Convictions

The trouble is that none of the factors that brought this about is permanent. Mrs Merkel had a chance to prepare the country for the future. She has squandered it. Her government’s obsession with balanced books has led it to invest too little. The net value of German infrastructure has fallen since 2012. Since 2010 the country’s broadband speed has fallen from 12th to 29th in the world. New industries like the internet of things and electric cars are underdeveloped. The mighty German automotive industry took a bad gamble on diesel engines, and is now mired in allegations of faked emissions tests.

Little has been done to prepare Germany for its demographic crunch. Mrs Merkel’s outgoing government not only reversed a raise in the retirement age, but cut it to 63 for some workers and introduced a “mothers’ pension” for women who took time off to care for children before 1992, benefiting a generation that was already well-catered for. At the same time she did little for those Germans left behind. Inequality and the use of food-banks have both risen on her watch.

When she does take big decisions, Mrs Merkel has a habit of ducking the consequences. The switch to renewable energy is proving so slow and expensive that Germany’s coal usage and carbon emissions are rising—her sudden decision to shut the country’s nuclear plants after a meltdown in Japan only made the transition harder. Having helped to hold the euro zone together through a series of weekend crises, Mrs Merkel (along with Wolfgang Schäuble, her finance minister) has stood in the way of reforms that would mitigate the next crisis. The task of integrating legions of refugees has been left primarily to cash-strapped state governments and citizens. The chancellor barely talks about them these days, having reduced arrival numbers using a murky repatriation deal with Turkey.

In the election campaign Mrs Merkel has said little to confront her compatriots with the need to reform governance of the euro, to raise investment and to prepare the economy for a revolution in the nature of work. Instead, her manifesto is vague, and her public appearances have been banal.

Action needed in Act IV

And yet Mrs Merkel could accomplish a lot in her next—and possibly last—term. She could use Germany’s budget surplus, of €26bn ($31bn) last year and rising, to invest more in human and physical capital. She could look to Emmanuel Macron of France for ideas to strengthen institutions that govern the euro and for a sense of urgency about high-tech. She could cement Germany’s foreign-policy credentials, by pressing on towards NATO’s 2% goal. Her legacy depends on it.

Success will partly depend on Mrs Merkel picking the right partners in government. A continuation of the present grand coalition with the SPD threatens yet more sleepy stasis. Instead she should team up with the free-market Free Democratic Party and the Greens—who are wise on Europe and tougher on Russia. Such a coalition would stand a chance of shaking the country up. As its leader, the hesitant Mrs Merkel might even become the chancellor who surprised everybody.

This article appeared in the Leaders section of the print edition under the headline “Angela’s unfinished business”

James Comey’s Remarkable Story

June 9, 2017

 by Jeffrey Toobin

http://www.newyorker.com/news/daily-comment/james-comeys-remarkable-story-about-donald-trump

President Trump appears to be guilty of obstruction of justice. That’s the only rational conclusion to be reached if James Comey’s opening statement for his planned testimony before the Senate Intelligence Committee, on Thursday, is to be believed. The lurch of the Trump Presidency from one crisis to the next scandal produces a kind of bombshell-induced numbness, but that should not prevent us from appreciating the magnitude of Comey’s statement.

The statement, alongside other established facts, doesn’t just lay out evidence; it tells a story. In this tale, the President knows how much power he possesses and dangles it before those who serve him. The F.B.I. director was in the middle of a ten-year term, which was designed to give him some insulation from political pressure, but there was a catch: Trump could still fire him. And Trump clearly knew it, as he repeatedly demanded Comey’s personal loyalty. An early conversation, on January 27th, over dinner in the Green Room of the White House, set the tone: Comey was to answer to Trump, or the F.B.I. director would be gone. As Comey put it, he saw that Trump was trying to set up a “patronage relationship.”

Soon enough, Trump called on Comey’s loyalty. The President was worried about the F.B.I.’s Russia investigation, and he wanted a premature exoneration from Comey. The director hedged, clearly uncomfortable with the demand, but finally told Trump, in rather convoluted ways, that he was not a subject of the investigation—at least not yet.

But the Russia probe continued to worry the President, and soon he had more demands. The climax of Comey’s statement is his cinematic recounting of a meeting with the President in the Oval Office on February 14, 2017. The drama begins after the meeting, when the President instructs the other officials present, including Vice-President Mike Pence, to leave the room. Trump even takes the extraordinary step of asking the Attorney General, Jeff Sessions, who was Comey’s boss, to go, in order to allow the President to speak with the director alone. Trump then shoos Jared Kushner, his son-in-law, out of the Oval Office, too. (When Reince Priebus, the chief of staff, looks in, a while later, Trump also asks him to stay out of the conversation.) This insistence on a one-on-one meeting suggests what prosecutors like to call “consciousness of guilt.” All these high-ranking officials had clearance to hear anything that Trump might want to say to the director, so the fact that the President wanted them out of earshot would seem to indicate that he knew that what he was telling Comey was wrong—that it was, indeed, an obstruction of justice.

When the two men were alone, Comey writes, Trump asked him to help out the just-fired national-security adviser, Michael Flynn. In Trump’s typical scattershot fashion, he started talking about Flynn, but segued to the subject of leaks, before getting back on topic. In the key passage of Comey’s statement, he writes:

The President then returned to the topic of Mike Flynn, saying, “He is a good guy and has been through a lot.” He repeated that Flynn hadn’t done anything wrong on his calls with the Russians, but had misled the Vice-President. He then said, “I hope you can see your way clear to letting this go, to letting Flynn go. He is a good guy. I hope you can let this go.” I replied only that “he is a good guy.”

This part of Comey’s testimony, if it’s accurate, is a smoking gun. The President is instructing his subordinate to stop an F.B.I. investigation of Trump’s close associate.

Comey told the F.B.I. leadership team about Trump’s outrageously improper request, but he did something more, too. When Comey went to see his direct boss, Sessions, he made an urgent request:

I took the opportunity to implore the Attorney General to prevent any future direct communication between the President and me. I told the AG that what had just happened—him being asked to leave while the FBI Director, who reports to the AG, remained behind—was inappropriate and should never happen. He did not reply.

The language is uncharacteristic for the lawyerly F.B.I. director: he implored his boss to put a stop to the President’s meddling. But Sessions, a more loyal soldier, said nothing.

The most important piece of evidence in the obstruction case against Trump is actually never mentioned in Comey’s opening statement. That evidence is what occurred on May 9th. Comey had not acceded to the President’s request that he cease the investigation of Flynn and the connection to Russia, and he paid the price with his job. Later, Trump all but confessed that he had rid himself of this meddlesome director because of Russia. He told NBC’s Lester Holt, “When I decided to just do it”—to fire Comey—“I said to myself, I said, ‘You know, this Russia thing with Trump and Russia is a made up story.’ “ The day after the firing, the President boasted to the visiting Russian foreign minister, Sergey Lavrov, saying, “I faced great pressure because of Russia. That’s taken off.

There is, of course, much more to know about this story. Did Trump use other government officials to try to stymie the Russia investigation? During an Intelligence Committee hearing on Wednesday, senators pressed Dan Coats, the director of national intelligence, and Admiral Mike Rogers, the head of the National Security Agency, about their contacts with Trump on the issue; they refused to answer. They may eventually tell what they know—as, surely, will others. But the story is now complete in its outline, if not its details, and Trump’s culpability is clear to anyone who cares to look.

 

Jeffrey Toobin has been a staff writer at The New Yorker since 1993 and the senior legal analyst for CNN since 2002. He is the author of “The Oath: The Obama White House and the Supreme Court.”

 

The Renminbi and the Rise of China in Global Trade and Finance

April 10, 2017

by Paola Subacchi, Chatham House

http://www.eastasiaforum.org

“…any suggestion that the renminbi may one day rival the dollar and seriously threaten the greenback’s dominance within the international monetary system remains wishful thinking. The renminbi is moving in the right direction, but much more needs to be done to make it into a pillar of this multi-currency system.”–Paola Subacchi

At times of big turmoil, currencies take the hit, but economic transformation can also create currency winners. Nowhere is this more apparent than when we compare the prospects of British sterling and China’s renminbi.

Between February 2016 — when the referendum on the UK’s membership of the European Union (EU) was announced — and the end of January 2017, the sterling fell by 14 per cent against the US dollar. Then, at the beginning of October, when the UK government appeared to signal a preference for a clear break with the EU — a ‘hard Brexit’ — the sterling dropped again by 6 per cent.

As the British government is serving notice on the membership of the EU, it is not yet clear what the future relationship will look like. Will Britain remain a member of Europe’s single market? Or will it embrace a totally independent trade policy to maintain control at its borders?

Currencies not only reflect geopolitical dynamics, but also patterns of trade and debt. A weak currency is not much help for an economy that imports more than it exports. The UK has a significant deficit in its current account — roughly, it consumes more than it produces — at almost 6 per cent of GDP. Of course, a weak currency would lower the prices of exports, but only if these goods are produced with limited inputs from imports.

In a world of global supply chains this is questionable. Even assuming that a weak sterling would help shift the UK model of growth from domestic demand to exports, this adjustment will take time and is unlikely to cushion the adverse impact of Brexit on real GDP growth in the next few years.

The ‘hard Brexit’ option, by reducing market openness, will affect investors’ confidence, have an adverse impact on capital inflows and undermine growth. If the UK becomes less attractive as an investment destination, and stricter immigration policies cause the labour force to shrink, then Britain may find it difficult to attract the quantity of foreign capital and labour necessary to sustain a domestic demand-driven economy.

The sterling remains in the IMF’s Special Drawing Rights (SDR) basket of international reserve currencies. To some extent the sterling has been a proxy of British global influence: on the way down, but still ‘punching above its weight’. But the sterling’s protracted weakness coupled with the inclusion of the Chinese renminbi in the SDR basket — in effect from the beginning of October 2017 — may result in downgrading the pound when the composition of the basket is reassessed in 2020.

If currencies are an expression of national sovereignty, they also epitomise the limits of such sovereignty in an open economy. Exchange rate dynamics tend to reflect divergences between domestic politics and global markets. Thinking that domestic policy making can be insulated from the rest of the world, so that no coordination or cooperation is needed, is deeply fallacious. The sterling’s troubles are a reminder that foreign investors have an indirect say — and interest — in how a country is managed.

The inclusion of the renminbi among the currencies that compose the SDRs — the US dollar, the euro, the yen and the sterling — is a ‘milestone’ for China, as International Monetary Fund Managing Director Christine Lagarde said when she presented the IMF executive board’s decision on 30 November 2016.

The renminbi’s inclusion recognises the work that China’s monetary authorities have done in the last five years to push the renminbi’s transformation into an international currency — a currency that can be used to invoice and settle international trade and that is traded in international capital markets. The outcome of this process has been remarkable: approximately 25 per cent of China’s trade is now settled in renminbi — it was less than 1 per cent in 2009.

In addition, the inclusion somehow addresses the contradiction that China has faced for years: being the world’s second largest economy and the largest exporter without a currency that reflects that role. For years the dollar has been the currency used in China’s trade and investments, and this is still largely the case. This has suited China well throughout its transformation from a poor and isolated nation into an industrial powerhouse that is well integrated in regional and international supply chains.

But China’s dollar dependence no longer reflects Beijing’s ambitions for playing a more engaging and assertive role in international economic and financial affairs and governance. If ‘great nations have great currencies’, to paraphrase Nobel laureate Robert Mundell, then it is understandable that the Chinese leadership would push to turn the renminbi into a ‘great currency’.

Finally, and even more critically, being part of the SDR basket implicitly recognises the role that the renminbi, going forward, can play in the international monetary system. The hype that has surrounded the IMF decision — the SDR made headlines beyond the financial press, perhaps for the first time since its creation in 1969 — should not obscure the fact that the development of the renminbi is not a linear process, even if it is heavily policy-driven, and there is no guarantee that progress will continue at the same remarkable pace. The renminbi remains a currency with limited international circulation because of obstacles that are still in place to constrain capital flows into and from China’s domestic market.

This is not the case for trade transactions, where the renminbi has been fully convertible since 2001 when China joined the World Trade Organisation. But what is the incentive for foreign businesses to hold renminbi if liquidity is constrained and therefore so are investment opportunities?

To make the renminbi into an international currency that foreigners want to hold as a store of value the Chinese leadership needs to continue the pace of reforms. Top of the list is the exchange rate and the abandonment of the system where the central bank intervenes every time the value of the renminbi moves outside a pre-determined range. Until foreign investors believe that the renminbi is liquid and trustworthy, any suggestion that the renminbi may one day rival the dollar and seriously threaten the greenback’s dominance within the international monetary system remains wishful thinking. The renminbi is moving in the right direction, but much more needs to be done to make it into a pillar of this multi-currency system.

Paola Subacchi is Director of Economic Research at Chatham House, London, and the author of The People’s Money: How China Is Building a Global Currency (Columbia University Press, 2017).