Lambert here: How about that DeGaulle! And “exorbitant privilege” has a nice ring, doesn’t it? By Yanis Varoufakis, a professor of economics at the University of Athens. Originally published at his website. As 2015 is approaching, seemingly pregnant with crucial challenges for Europe, the euro and all those who have to live with it, I […]
Read more...A new leak shows that the even-more-secret-than-the-TTP-and-TTIP Trade in Services Agreement is worse than you imagined.
Read more...Yves here. This important post by Michael Pettis addresses whether the efforts of the Chinese to diversify their foreign investments away from the dollar will be a negative for the US. Pettis is skeptical of that thesis, and some of his reasons are intriguing. Like quite a few experts, he doubts that China’s role in sponsoring an infrastructure bank will be a game changer, and he also points out, as we have regularly, that the Chinese cannot deploy their foreign exchange reserves domestically without driving the renminbi to the moon (via selling foreign currencies to buy RMB), which is the last thing they want to have happen. A more surprising, but well argued thesis is that reduced Chinese purchases of US bonds would be a net plus for the US.
Get a cup of coffee. This is a meaty, important article.
Read more...Yves here. We’ve commented occasionally on Obama’s failed pivot to Asia, which is clearly an effort to contain China. The centerpiece, the TransPacific Partnership, appears to be going nowhere. A meeting between Communist party chief Xi and Japan’s Abe trumped America’s presence at the ASEAN conference; our Japanese press-watcher Clive says that Putin garnered as much media coverage as did the US president. But you’d get perilous little sense of how China is outmaneuvering the US in Asia, despite considerable worries among its neighbors about its aggressive territorial claims.
This article by Pepe Escobar gives a fine overview of the measures China is taking to create greater economic integration with its Eurasian and European trade partners, to the detriment of US influence. And Washington appears to have been caught flat-footed.
Read more...By Yanis Varoufakis, a professor of economics at the University of Athens. Originally published at his website. In this article, aptly subtitled It’s lonely being the global policeman, Slavoj evokes a parallelism between the age of extremes that began as the British Empire was losing its grip with the present moment in history. Now that the […]
Read more...Yves here. Some of this Real News Network interview with Richard Wolff, who is currently a visiting professor at the New School, on a new ILO report on workers’ wages covers familiar ground. Wage growth in advanced economies has been much slower than that in emerging economies, in large measure due to multinational moving jobs overseas to exploit lower labor costs. But the interesting part of the conversation is Wolff’s argument on why this is in fact not defensible conduct and what countries like the US ought to do about it.
Read more...Yves here. Ebola is serving as a reminder that the fate of members of advanced economies isn’t necessarily divorced from those of citizens of poor, developing nations. And it isn’t as if those countries are completely neglected. They are simultaneously the recipients of foreign aid, while at the same time being de facto capital exporters. So while this study below is informative, it ignores the elephant in the room, which is the degree to which looting simply overwhelms the amount of funding provided by foreign aid.
As Nicholas Shaxson wrote in Treasure Islands (p. 157):
Read more...Global Financial Integrity (GFI) in Washington authored a study on illicit financial flows out of Africa (March 2010). Between 1970 and 2008, it concluded:
Total illicit financial outflows from Africa, conservatively estimated, were approximately $854 billion. total illicit outflows may be as high as $1.8 trillion… The GFI estimate – equivalent to just over 9 per cent of its $51 billion in oil and diamond exports during that time – simply has to be a gross underestimate of the looting. Many billions have disappeared offshore through opaque oil-backed loans channeled outside normal state budgets, many of them routed through two special trusts operating out of London.
Yves here. This is an intriguing exchange among Michael Hudson, John Weeks, professor emeritus of development economics at the University of Long and Colin Bradford of Brookings. The points of difference between Hudson and Bradford are sharp, with Bradford admitting to giving a Washington point of view that Obama scored important gains at the APEC summit, with Hudson contending that both confabs exposed America’s declining role and lack of foreign buy-in for its neoliberal economic policies.
Read more...Yves here. This post focuses on the considerable gap between rhetoric and action as far as sanctions against Russia are concerned. John Helmer describes who is exempted from sanctions against Russia and why.
Read more...Yves here. We’ve been giving regular updates, with the considerable help of our man in Japan Clive, on how the the prospects for Japan signing up for the TransPacific Partnership look extremely slim. Mind you, “extremely slim” is not impossible, but the reason we deem the probability to be that low is that the Administration appears unwilling to bargain at all, let alone offer Japan some critical and large concessions that it requires to sign up. And since Japan is a linchpin to the entire deal, if Japan is a no-go, you can kiss the TransPacific Partnership goodbye.
These TransPacific Partnership discussions have also given yours truly, and even more so our real expert Clive, the opportunity to do some cross-cultural translating, which I personally enjoy. The Japanese are a sufficiently alien culture that you are forced to suspend or retrain your assumptions about how things work. So to watch the US Trade Representative, which along with the State Department, ought to be a US agency particularly attuned to how Japan needs special handling, instead do the equivalent of repeatedly step on a rake and get smacked in the face, is entertaining in a perverse way. How can they NOT know that what they are doing is counterproductive? And how can they NOT course correct when it should be obvious that what they are doing isn’t working?
However, even though, as we have discussed, the USTR has acted in a way almost guaranteed to offend the Japanese, the government has reasons for being cool on the TransPacific Partnership yet having to feign otherwise. And they aren’t terribly mysterious either, even though they do vary with US baseline assumptions.
Read more...Yves here. Understandably, US reporting on the just-finished APEC summit focused on Obama’s objectives and supposed achievements. Russia has historically not been a major force in the region and thus received less coverage here. It was therefore surprising to see our man in Japan Clive tell us that Japanese media coverage of Putin at APEC was on a par with the column-inches given to Obama.
On Real News Network, Michael Hudson describes how Putin is shifting Russia’s export focus and economic alliances towards Asia, particularly China. Putin did better at the APEC summit than most Western sources acknowledge, and that could have longer-term ramifications for the US.
Read more...Yves here. In a bit of synchronicity, Lambert and I were discussing how bad America is at running an empire. Iraq by any standards was not doing all that well under Saddam Hussein. Growth was lousy due to Western sanctions, and he was thuggish in his methods of maintaining control. Yet he ran a secular government and hostilities between Shia and Sunni were a non-issue. After our invasion, hospitals were basically looted. Electricity barely worked in Baghdad, and wasn’t working all that well long after the US occupied Iraq. Any member of the professional classes that could leave the country did (this was well reported in Australia in 2003 and 2004). So we broke a country…as a demonstration project? For what end? The US also made a botch of the fall of the USSR, with our neoliberal reforms facilitating a plutocratic land-grab in Russia by well-placed insiders, with key Western aides participating in the plunder. OIFVet points out that, contrary to Western ideology, the lives of ordinary Bulgarians was better under the old USSR (Russia is now showing net gains; I’m told Moscow now looks to be on a par with Berlin).
The British took their imperial project far more seriously than we have ours. A big reason that they were more successful is that they built infrastructure, in the form of putting in place a British bureaucracy run by civil servants. And producing those civil servants was the top priority of the education system. C. Northcote Parkinson reports that the top Cambridge and Oxford graduates went to India. The next rank were civil servants in the UK. The ones at the bottom of the heap went into business.
Now there is a lot not to like about a British-style bureaucracy; they are stereotypically rigid and procedure-driven. The Australian Taxation Office is hugely taxpayer-unfriendly if you are a business, compared to the IRS (for instance, when I was there, you needed a receipt for every expense, and not just a credit card receipt. If you had a charge from a newsstand, they wanted to see that it really was a business periodical and not, say porn).
But the rigidity meant it was less easily corrupted, and that no one would question that the government was the paramount authority (a notion that most US regulators seem to have forgotten). Admittedly, with the rise of neoliberalism, no one seems to care about governing well any more, so there hasn’t been much thinking on how to run government in the 20th and 21st century that isn’t really about private sector profiteering.
This article looks at a symptom of the US’ misguided thinking about our imperial project: that of the role of our military bases. It isn’t much discussed in polite company, for instance, that the Saudis had repeatedly asked us to remove our base there because it was causing a lot of discord. We had ignored their request. It took 9/11 to get us to depart.
Read more...In the wake of the Republican trouncing of the feckless Democrats in the midterm elections, there’s been an upsurge of calls of alarm on both the right and the left that the Administration and its big business allies in both parties will try to push the toxic trade deal known as the TransPacific Partnership through. That is in part due to Administration messaging that the talks are gaining momentum, as Obama asserted a mere two days ago. But not only do the negotiations appear to be going nowhere, but the Administration appears to be losing clout in the region as China is playing a considerably shrewder trade and investment game.
Read more...Yves here. As Elizabeth Warren inches to the left on overall economic policy, one wonders if she’s actually shifting her views or responding to Hillary Clinton trying to rebrand herself as a populist. In fairness to Warren, it’s difficult not to be deeply inculcated in flawed economic thinking and thus hostage to false ideas like “We depend on China and Japan to finance our federal spending.” I look at my pre-crisis coverage and am embarrassed to see that sort of idea treated as obviously true. But if nothing else, the shift in Warren’s stance may be a sign that the Overton window is moving a smidge away from the right. After all, a big reason the Republicans so badly trounced the Dems in the midterms wasn’t just Democratic party fecklessness, but also that the Republicans kept their Tea Party extremists well out of the limelight and toned down the anti-women, anti-gay (and outside the border states) the anti-immigrant rhetoric. That actually amounts to a shift to the center, even if more for show than for real.
Read more...Yves here. With an active US effort to isolate Russia, which Russia is seeking to undermine (with only limited success so far) in strengthening ties with China and other emerging economies, most analysts have seen the geopolitical struggle in terms of short-term effects, such as on Russia’s and Europe’s growth rates over the next year. At the same time, the Chinese initiative to create a development bank, meant to rival the World Bank, is seen by many as an important step in breaking the dollar hegemony, along with moves by China and Japan to enter into oil contracts denominated in currencies other than the greenback.
As we’ve discussed in previous posts, we believe the frisson over the demise of the dollar as the world’s reserve currency is greatly overdone. As much as the US is abusing its role, particularly in its aggressive use of its influence over the dollar payments system as a weapon, there are simply no viable candidates for replacement on the horizon.
However, this post examines a consequence of US economic aggression against Russia that has not rceived the attention that it merits: that of reducing the amount of international trade, something economists see as a driver of growth. Note that per the Lipsey Lancaster theorem, there is ample reason to doubt the near-religious belief that more open trade is always a good thing. However, sudden restrictions in trade, which is what is taking place with US/European sanctions on Russia and Russia implementing counter-sanctions, is certain to cause short-term dislocations. And as we noted in a recent post, the cordon sanitaire being placed around Russia will led it to operate more as an autarky, which may not necessarily be a negative in the medium to long term.
This post seeks to identify the impact of reduced trade between Russia and Europe. This sort of analysis could become more germane going forward. While a currency rival to the dollar any time soon looks to be far-fetched, ever-more obvious US economic imperialism may lead other countries to strengthen trade ties among themselves to the detriment of the US, or like Russia, to move to greater self-sufficiency as a defensive measure. While economists assume that our current open trade system could never be rolled back, that was the tacit assumption during the last great era of open trade, the period right before World War I. The Great War put that all in rapid reverse gear. While no one expects a violent rupture, we may be in the early stages of seeing fractures developing in the trade system.
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