(Roughly) Daily

Posts Tagged ‘geopolitics

“Exorbitant privilege”*…

Economic history books will commemorate the era we currently live in as the second wave of financial globalization, following the first wave during the Classical Gold Standard period. Our era is characterized by an unprecedented expansion of global financial flows. Partly, these flows form the counterpart to global value chains and the globalization of trade in goods and services. In the last few decades, however, they have been increasingly decoupled from the real sector. The financial infrastructure that enables this expansion is the international monetary system…

In its current shape, [the international monetary system] has a hierarchical structure with the US-Dollar (USD) at the top and various other monetary areas forming a multilayered periphery to it. A key feature of the system is the creation of USD offshore – a feature that in the 1950s and 60s developed in co-evolution with the Bretton Woods System and in the 1970s replaced it. Since the 2007–9 Financial Crisis, this ‘Offshore US-Dollar System’ has been backstopped by the Federal Reserve’s network of swap lines which are extended to other key central banks. This systemic evolution may continue in the decades to come, but other systemic arrangements are possible as well and have historical precedents. This article discusses four trajectories that would lead to different setups of the international monetary system by 2040, taking into account how its hierarchical structure and the role of offshore credit money creation may evolve. In addition to a continuation of USD hegemony, we present the emergence of competing monetary blocs, the formation of an international monetary federation and the disintegration into an international monetary anarchy…

Americans tend to take the global primacy of the U.S. Dollar for granted (indeed, often complaining about the current account imbalances to which huge quantities of off-shore dollars lead). But there’s no mistaking that this system has been been hugely advantageous to the U.S. Yet, as Steffen Murau (@steffenmurau) explains, it may not last: “The evolution of the Offshore US-Dollar System: past, present and four possible futures.”

See also Mernau’s “International Monetary System” (from whence, the image above), and Ben Bernanke’s “The dollar’s international role: An ‘exorbitant privilege’?

* Valéry Giscard d’Estaing (then the French Minister of Finance; later French President), referring to the benefit that accrues to the U.S. as a result of the U.S. Dollar being the world’s reserve currency

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As we count our blessings, we might recall that it was on this date in 1890 that journalist Nellie Bly completed her 72-day trip around the world.

In 1888, Bly suggested to her editor at the New York World that she take a trip around the world, attempting to turn the fictional Around the World in Eighty Days into fact for the first time.  A year later, at 9:40 a.m. on November 14, 1889, with two days’ notice, she boarded the steamer Augusta Victoria, and began her 24,899-mile journey.

She brought with her the dress she was wearing, a sturdy overcoat, several changes of underwear, and a small travel bag carrying her toiletry essentials. She carried most of her money (£200 in English bank notes and gold in total as well as some American currency) in a bag tied around her neck.

Bly traveled through England, France (where she met Jules Verne in Amiens), Brindisi, the Suez Canal, Colombo (Ceylon), the Straits Settlements of Penang and Singapore, Hong Kong, and Japan.  Just over seventy-two days after her departure from Hoboken, having used steamships and existing railway lines, Bly was back in New York; she beat Phileas Fogg’s time by almost 8 days.

Nellie Bly, in a publicity photo for her around-the-world voyage. Caption on the original photo reads: “Nellie Bly, The New York World‘s correspondent who placed a girdle round the earth in 72 days, 6 hours, and 11 minutes.”

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“Note, to-day, an instructive, curious spectacle and conflict”*…

States within the global political economy today face a twin insurgency, one from below, another from above. From below comes a series of interconnected criminal insurgencies in which the global disenfranchised resist, coopt, and route around states as they seek ways to empower and enrich themselves in the shadows of the global economy. Drug cartels, human traffickers, computer hackers, counterfeiters, arms dealers, and others exploit the loopholes, exceptions, and failures of governance institutions to build global commercial empires. These empires then deploy their resources to corrupt, coopt, or challenge incumbent political actors.

From above comes the plutocratic insurgency, in which globalized elites seek to disengage from traditional national obligations and responsibilities. From libertarian activists to tax-haven lawyers to currency speculators to mineral-extraction magnates, the new global super-rich and their hired help are waging a broad-based campaign to limit the reach and capacity of government tax-collectors and regulators, or to manipulate these functions as a tool in their own cut-throat business competition.

Unlike classic 20th-century insurgents, who sought control over the state apparatus in order to implement social reforms, criminal and plutocratic insurgents do not seek to take over the state. Nor do they wish to destroy the state, since they rely parasitically on it to provide the legacy goods of social welfare: health, education, infrastructure, and so on. Rather, their aim is simpler: to carve out de facto zones of autonomy for themselves by crippling the state’s ability to constrain their freedom of (economic) action…

From Nils Gilman (@nils_gilman), a sadly prophetic 2014 piece– the postmodern state is under siege from plutocrats and criminals who compound each other’s insidiousness: “The Twin Insurgency.”

For a more current– but altogether resonant– take (one that arrives at a similar conclusion from a different point of origin), see Harvard Law School professor and Berkman Center co-director Yochai Benkler‘s “The Real Reason the GOP Suppresses the Vote.

(This is being written the day before the election; sadly, the issues raised here will be with us regardless of the outcome…)

* Walt Whitman

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As we watch our flanks, we might recall that it was on this date in 1970 that Salvador Allende took office after being elected President of Chile. He was deposed in a military coup, actively supported by the U.S. CIA, in 1973.

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Written by (Roughly) Daily

November 4, 2020 at 1:01 am

“The surface of American society is covered with a layer of democracy, from beneath which the old aristocratic colors sometimes peep”*…

Almost three decades ago, one of us, Jack Goldstone, published a simple model to determine a country’s vulnerability to political crisis. The model was based on how population changes shifted state, elite and popular behavior. Goldstone argued that, according to this Demographic-Structural Theory, in the 21st century, America was likely to get a populist, America-first leader who would sow a whirlwind of conflict.

Then ten years ago, the other of us, Peter Turchin, applied Goldstone’s model to U.S. history, using current data. What emerged was alarming: The U.S. was heading toward the highest level of vulnerability to political crisis seen in this country in over a hundred years. Even before Trump was elected, Turchin published his prediction that the U.S. was headed for the “Turbulent Twenties,” forecasting a period of growing instability in the United States and western Europe.

Given the Black Lives Matter protests and cascading clashes between competing armed factions in cities across the United States, from Portland, Oregon to Kenosha, Wisconsin, we are already well on our way there. But worse likely lies ahead.

Our model is based on the fact that across history, what creates the risk of political instability is the behavior of elites, who all too often react to long-term increases in population by committing three cardinal sins. First, faced with a surge of labor that dampens growth in wages and productivity, elites seek to take a larger portion of economic gains for themselves, driving up inequality. Second, facing greater competition for elite wealth and status, they tighten up the path to mobility to favor themselves and their progeny. For example, in an increasingly meritocratic society, elites could keep places at top universities limited and raise the entry requirements and costs in ways that favor the children of those who had already succeeded.

Third, anxious to hold on to their rising fortunes, they do all they can to resist taxation of their wealth and profits, even if that means starving the government of needed revenues, leading to decaying infrastructure, declining public services and fast-rising government debts.

Such selfish elites lead the way to revolutions. They create simmering conditions of greater inequality and declining effectiveness of, and respect for, government. But their actions alone are not sufficient. Urbanization and greater education are needed to create concentrations of aware and organized groups in the populace who can mobilize and act for change.

Top leadership matters. Leaders who aim to be inclusive and solve national problems can manage conflicts and defer a crisis. However, leaders who seek to benefit from and fan political divisions bring the final crisis closer. Typically, tensions build between elites who back a leader seeking to preserve their privileges and reforming elites who seek to rally popular support for major changes to bring a more open and inclusive social order. Each side works to paint the other as a fatal threat to society, creating such deep polarization that little of value can be accomplished, and problems grow worse until a crisis comes along that explodes the fragile social order.

These were the conditions that prevailed in the lead-up to the great upheavals in political history, from the French Revolution in the eighteenth century, to the revolutions of 1848 and the U.S. Civil War in the nineteenth century, the Russian and Chinese revolutions of the twentieth century and the many “color revolutions” that opened the twenty-first century. So, it is eye-opening that the data show very similar conditions now building up in the United States…

Two scholars long-ago predicted political upheaval in America in the 2020s. Why it’s here and what we can do to temper it: “Welcome To The ‘Turbulent Twenties’.” An important– and bracing– read.

As to how these challenges might unfold (JIC you’ve not yet seen this widely-circulated piece): “The Election That Could Break America.”

Of course, domestic issues are only one dimension of the challenges facing us. We have to deal with those same issues on a global level, as they play out in radically-changing geopolitics and geo-economics– all underlain by climate change: “Are we living at the ‘hinge of history’?

And finally, for those interested in the “plumbing” that enables the slide toward autocracy: “Money Laundering for 21st Century Authoritarianism: Western Enablement of Kleptocracy” (pdf).

* Alexis de Tocqueville, Democracy in America

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As we step up, we might recall that it was on thus date in 1962 that Rachel Carson’s Silent Spring was published. A pioneering study of the long-term dangers of pesticide use, it challenged the practices of agricultural scientists and the government, and called for a change in the way humankind relates to the natural world.

Carson documented her accusations that the chemical industry spread disinformation, and that public officials accepted those marketing claims unquestioningly. Unsurprisingly, the book was met with fierce opposition by chemical companies; but, thanks to public opinion, it sparked numerous changes: it led to a reversal in the United States’ national pesticide policy, and a nationwide ban on DDT for agricultural uses, and helped to inspire an environmental movement that led to the creation of the U.S. Environmental Protection Agency.

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Written by (Roughly) Daily

September 27, 2020 at 1:01 am

“No one leaves home unless/home is the mouth of a shark”*…

 

migrants

Migrants disembark from Royal Navy Ship HMS Enterprise in Catania, Italy, 23 October 2016

 

As the world’s ranks swell, population shifts have emerged as a major global challenge with potentially catastrophic implications. Endless debates over immigration rights have failed to produce the faintest hint of an acceptable solution. So perhaps an alternative approach would be to factor in an underlying basic law of chemistry. At the risk of gross oversimplification, what if we saw the flow of populations as the human equivalent of osmosis?

In high-school chemistry we learned that, in a container of water divided into two halves by a semipermeable membrane, uneven concentrations of salt resulted in movement of water from the more dilute side to the side of greater concentration. The greater the discrepancy in solute concentration, be it a salt molecule or a complex plasma protein, the greater the force to equalise the concentrations.

Now imagine the world as a giant vat subdivided into a number of smaller containers (nations) separated from each other by semipermeable membranes (borders). Instead of salt, provide each container with differing amounts of food, shelter and essential services. In this scenario, population flow from nation to nation will be a direct function of the degree of difference of goods, opportunities and hope.

This shift of populations isn’t just an ethical or metaphysical dilemma to be resolved at the level of ‘us’ versus ‘them’. It isn’t about the right to own land and enforce borders, or the relative worth of individuals versus groups. Instead, the pressures driving immigration should be seen as natural and unavoidable – like chemical reactions; from that perspective, a reduction in the gradients would be the only possible long-term solution…

Arguments for the rights of nations to control their borders are a huge step in the wrong direction. We need to take a hard look at the disruptive dynamics of inequality. If this simple fact of chemistry (that lesser flows to greater) can’t penetrate the predominantly impermeable minds of policymakers, welcome to a world of escalating chaos.

Robert A. Burton considers climate change, economic inequality, political imbalances and other “reasons to move,” as he suggests a more productive way to think about one of this era’s most pressing challenges, one that can be mitigated and made more humane, if not avoided: “Like the chemical process of osmosis, migration is unstoppable.”

* Warsan Shire

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As we focus on reducing the gradients, we might recall that it was on this date in 1925 that the Butler Act, prohibiting the teaching of evolution in Tennessee classrooms, became law… paving the way for the Scopes “Monkey” Trial.

anti-evolution

Anti-Evolution League at the Scopes Trial, 1925

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Written by (Roughly) Daily

March 21, 2019 at 1:01 am

“Whose maps are we trying to read? And what are we trying to draw?”*…

 

A map of the South China Sea, with competing territorial claims marked

Maps are complicated in the current geopolitical climate—especially emblazoned across your torso. What is perfectly acceptable in Vietnam can get you stopped at Chinese border control, and vice versa.

Recently, US clothing retailer Gap apologized for printing a t-shirt that didn’t include China’s claimed territories, including Taiwan, South Tibet, and islands in the South China Sea. In doing so, it joined Marriott and Delta, which had previously triggered Beijing’s ire for maps-related issues. At the same time, a group of Chinese tourists to Vietnam generated outrage by showing up at a Vietnamese airport wearing t-shirts with a Chinese map including parts of Vietnam…

Even the United Nations’s world map openly states that the represented borders aren’t necessarily officially recognized (the map specifically calls out Kashmir and the Falkland Islands as disputed territories.) It also notes that although Taiwan was a UN founding member, it left the organization in 1971, and the UN recognizes China’s sovereignty over it…

And so the image above: “Here’s a t-shirt you could wear everywhere in East Asia without upsetting anyone.”

* Rebecca Solnit

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As we ponder geopolitical presumption, we might send pioneering birthday greetings to Henry Bradford Washburn, Jr.; he was born on this date in 1910.  An explorer, mountaineer, photographer, and cartographer, he established the Boston Museum of Science, served as its director from 1939–1980, and from 1985 until his death served as its Honorary Director.

In 1940, he married fellow explorer Barbara Polk; on their honeymoon in Alaska, they made the first ascent of Mt. Bertha.  Seven years later, they climbed Denali (Mt. McKinley), an ascent that made her the first female to reach the peak.

Bradford and Barbara atop Mt. McKinley, Alaska, June 6, 1947

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Written by (Roughly) Daily

June 7, 2018 at 1:01 am

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