(Roughly) Daily

Posts Tagged ‘geopolitics

“A great sound is given forth from the empty vessel”*…

Pakistan’s economy appears to be in pretty bad shape. Riffing on a provocative thread from Atif Mian, the redoubtable Noah Smith compares the economic condition of Indian’s nuclear-armed antagonist with its island neighbor (and current basket case) Sri Lanka…

Many of the particular root causes of Pakistan’s situation are different than in Sri Lanka — they didn’t ban synthetic fertilizer or engage in sweeping tax cuts. The political situations of the two countries, though both dysfunctional, are also different (here is a primer on Pakistan’s troubles). But there are enough similarities at the macroeconomic level that I think it’s worth comparing and contrasting the two.

In my post about Sri Lanka, I made a checklist of eight features that made that country’s crisis so “textbook”:

• An import-dependent country

• A persistent trade deficit

• A pegged exchange rate

• Lots of foreign-currency borrowing

• Capital flight

• An exchange rate crash (balance-of-payments crisis)

• A sovereign default

• Accelerating inflation

[He then examines each as it pertains to Pakistan]

… Pakistan shares a lot in common with Sri Lanka. It doesn’t have a pegged exchange rate, it’s not as dependent on imported food, and it doesn’t have quite as much foreign-currency debt. But the basic ingredients for a slightly more drawn-out version of the classic emerging-markets crisis are there, and there are some indications that the crisis has already begun.

Because Pakistan didn’t peg its exchange rate and didn’t borrow quite as much in foreign currencies as Sri Lanka, it made fewer macroeconomic mistakes than its island counterpart. But in terms of long-term economic mismanagement, it has done much worse than Sri Lanka. No, it didn’t ban synthetic fertilizers — that was an especially bizarre and boneheaded move. But one glance at the income levels of Sri Lanka and Pakistan clearly shows how much the development of the latter has lagged:

Pakistan went from 3/4 as rich as Sri Lanka in 1990 to only about 1/3 as rich today. That’s an incredibly bad performance on Pakistan’s part…

Another emerging-market crisis looms: “Pakistan is in big trouble,” from @Noahpinion.

Oh, and the weather’s not helping either.

For a consideration of the interesting (that’s to say, challenging) questions that Pakistan’s predicament (and the travails of other debtor nations) pose for China, which is an increasingly large lender across the developing world, see the first set of items here.

* Pakistani proverb

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As we batten the hatches, we might spare a thought for Fazlur Rahman Malik; he died on this date in 1988. A scholar and philosopher, he was a prominent reformer in Pakistan, who devoted himself to educational reform and the revival of independent reasoning (ijtihad). While his work was widely-respected by other reformers, it drew strong criticism from conservative forces– who eventually forced him into exile. He left Pakistan in 1968 for the United States where he taught at the University of California, Los Angeles and the University of Chicago.

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Written by (Roughly) Daily

July 26, 2022 at 1:00 am

“The crisis consists precisely in the fact that the old is dying and the new cannot be born; in this interregnum a great variety of morbid symptoms appear”*…

Three considerations of Gary Gerstle‘s important new book, The Rise and Fall of the Neoliberal Order: America and the World in the Free Market Era: First Robert Kuttner ponders why Democratic presidents embraced an economic credo that annihilated their own public philosophy and its appeal to the electorate…

Beginning with the presidency of Jimmy Carter, a succession of Democratic presidents joined Republicans in turning away from the New Deal model of regulated capitalism toward what has come to be known as neoliberalism. The neoliberal credo claims that markets work efficiently and that government attempts to constrain them via regulation and public spending invariably fail, backfire, or are corrupted by politics. As public policy, neoliberalism has relied on deregulation, privatization, weakened trade unions, less progressive taxation, and new trade rules to reduce the capacity of national governments to manage capitalism. These shifts have resulted in widening inequality, diminished economic security, and reduced confidence in the ability of government to aid its citizens.

The Republican embrace of this doctrine is hardly surprising. Given the lessons learned about the necessity of government interventions following the 1929 stock market collapse and the success of the Roosevelt administration as a model for the Democratic Party, the allure of neoliberalism to many Democrats is a puzzle worth exploring.

The term “neoliberalism” itself is confusing, because for at least a century “liberalism” in the United States has meant moderate left, not free-market right. Neoliberalism in its current economic sense draws on the older meaning of liberalism, which is still common in Europe and which holds that free markets are the counterpart of a free and democratic society. That was the claim of classical liberals like Adam Smith and Thomas Jefferson.

Only in the twentieth century, after the excesses of robber-baron capitalism, did modern liberals begin supporting extensive government intervention—the use of “Hamiltonian means” to carry out “Jeffersonian ends,” in the 1909 formulation of Herbert Croly, one of the founders of The New Republic. This view defined the ideology of both presidents Roosevelt and was reinforced by the economics of John Maynard Keynes. In Britain, the counterpart in the same era was the “radical liberalism” of social reform put forth by the Liberal prime minister David Lloyd George.

The term neoliberalism also gets muddled because some on the left use it as an all-purpose put-down of conservatism—to the point where one might wonder whether it is just an annoying buzzword. But neoliberalism does have a precise and useful meaning, as a reversion to the verities of classical economics, with government as guardian of unregulated markets…

Free Markets, Besieged Citizens

Brian Kettenring worries (with Gramsci, as quoted in this post’s title above) that the transition to what’s next could be treacherous…

In a contest among global models, one option is the state-authoritarian capitalist model represented by China. A second one would be a neoliberalism retooled for the 21st century. But because neoliberalism has failed on its most central promise (growth) and other important tests (climate, inequality, and race), it is increasingly marginalized, if still persistent in the public imagination and the structures of important national and international institutions. A third option—which seems ascendant—is the ethno-nationalism of Trump, Viktor Orbán, Jair Bolsonaro, and company. The economic track record of ethno-nationalism in power has often proved anti-neo-liberal—especially on trade, but often on public investment, the social safety net, and even industrial policy—but that hasn’t foreclosed tax cutting or deregulation. And while the racialist and exclusionary politics of ethno-nationalism are disqualifying, its record of governance is, with some exceptions, poor.

None of these geopolitical arrangements will serve America or the world well in the third decade of the 21st century. For those who share Gerstle’s critique of neoliberalism, the task is to chart a fourth way that is inclusive, sustainable, and consonant with strong democratic governance and pluralistic societies. At present, this fourth way appears to be the harder road. That said, Rise and Fall offers guidance for how it might still win the day. 

Gerstle reminds us that geopolitics can have unpredictable economic side effects. The war in Ukraine has accelerated inflationary dynamics in the global economy, increasing the price of everything from energy to wheat. It’s too soon to assess the long-term consequences of the Russian invasion. Still, one optimistic reading of the potential by-products of the war might be accelerated investments—at least in Europe—in the green energy sector…

Neoliberalism Is Dying. What Comes Next?

And L. Benjamin Rolsky considers the moral– and spiritual– baggage that it carries…

… A moral code accompanied the neoliberal order to protect itself against its worst excesses and moral failures. Many Americans were perfect matches for neoliberalism’s entrepreneurial politics, its promises of unbridled freedom once remade in the image of homo economicus; many were not. For Gerstle, the neoliberal order produced two interrelated modes of citizenship within the body politic: conservative neo-Victorianism and liberal cosmopolitanism. The former encouraged self-discipline in the name of market austerity and the proverbial Christian family. The latter privileged diversity, self-expression, and socioeconomic mobility. As Gerstle describes, “It celebrated the cultural exchanges and dynamism that increasingly characterized the global cities — London, Paris, New York, Hong Kong, San Francisco, Toronto, and Miami among them — developing under the aegis of the neoliberal order.” This much is most certainly true circa 1975: the beginnings of neoliberalism’s deregulatory ascent.

Within the same moment, however, neoliberalism would also help give birth to additional forms of religiosity including the “Prosperity Gospel,” replete with global communication networks, acts of spiritual exuberance, and larger-than-life television personalities. While this tradition of health and wealth dates back to the late 19th century, it found its domestic stride in the United States within the postindustrial conditions of the neoliberal order in the 1980s and 1990s. The fact that prosperity gospel healer Paula White-Cain has rekindled her relationship with former president Donald Trump’s communications team speaks to the intimate relationship between neoliberal success, political freedom, and spiritual prosperity in American political life — especially in 2022.

The rise and fall of the neoliberal order has curtailed some religious ideals and formulations in the name of neo-Victorian morality, but it also cultivated equally powerful forces that promised to liberate true believers from their respective experiences of spiritual captivity. Until such forces of neoliberal freedom are understood and diagnosed as complex forms of economic captivity themselves, there is no telling how much longer the neoliberal order can remain fractured yet deeply informative of our collective political imaginations…

Religion of the Market: On Gary Gerstle’s “The Rise and Fall of the Neoliberal Order

How neoliberalism rose, fell, and what might replace it: @rkuttnerwrites, @bkettenring, and @LBRolsky on a powerful new book by @glgerstle.

* Antonio Gramsci, Prison Notebooks

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As we compose our selves for change, we might recall that it was on this date in 1965 that Bob Dylan was booed off stage at the Newport Folk Festival during his first public performance with electric instruments (and a band that included Michael Bloomfield and Al Kooper)… The cat-calling began with his opening number, “Maggie’s Farm,” and continued through three more songs, after which Dylan left the stage. As a peace offering to Pete Seeger and other aggrieved organizers, Dylan returned later to do two acoustic numbers… but the die was cast; thereafter, his career was electrically-powered… and both folk and rock music were forever changed.

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“A nation that destroys its soils destroys itself”*…

The world’s largest permafrost crater, Batagay, Russia, 2017

The cliché, avidly promoted by Moscow, is that Russia, one of the world’s largest petro-states, will be a relative winner in climate change; but a new book argues that the country will find itself in deep trouble. Sophie Pinkham unpacks the lesson’s in Thane Gustafson’s Klimat: Russia in the Age of Climate Change

Thane Gustafson, a longtime specialist on Russian energy, wrote Klimat: Russia in the Age of Climate Change before the [Ukraine] invasion, when the Covid pandemic seemed the great unexpected event complicating every prediction. Yet with its focus on the future of Russia’s energy, grain, and metals markets, all of which have been reconfigured by the war and the new sanctions, Klimat could hardly be more timely. Gustafson argues that Russia’s days of hydrocarbon-funded might are numbered. Unfortunately, the end of this era will not come soon enough for Ukrainians, or for the planet.

Russia is warming 2.5 times as fast as the world on average, and the Arctic is warming even faster. The cliché, avidly promoted by Moscow, is that the country will be a relative winner in climate change, benefiting from a melting and accessible Arctic shipping route, longer growing seasons, and the expansion of farmland into newly thawed areas. Gustafson counters, with a dry but persuasive marshaling of facts, that in the redistribution of wealth and power that will result from climate change, Russia is doomed. After reading Klimat, Russia’s attack on Ukraine begins to look like the convulsion of a dying state.

About two thirds of Russia is covered in permafrost, a mixture of sand and ice that, until recently, remained frozen year-round. As permafrost melts, walls built on it fracture, buildings sink, railways warp, roads buckle, and pipelines break. Anthrax from long-frozen reindeer corpses has thawed and infected modern herds. Sinkholes have opened in the melting ground, swallowing up whole buildings. Ice roads over frozen water, once the only way to travel in some remote regions, are available for ever-shorter periods. The Arctic coast is eroding rapidly, imperiling structures built close to the water…

Russia’s forests are the largest in the world, accounting for a fifth of Earth’s trees, but they are being grievously damaged by fire, drought, and disease, all of which are caused or exacerbated by climate change. Smoke has choked Siberian cities. During the 2019 fires that burned about 10,000 square miles of forest in Siberia, the Internet lit up with protest, and Russian singers and actors took part in a flash mob called “Siberia Is Burning.” President Putin sent in military units to help extinguish the fire, but he was soon rescued by rain. The problem was forgotten. As burning, dying, clear-cut forests become carbon producers rather than carbon sinks, they make the problem of climate change even worse. The same is true of melting permafrost, which releases methane, another potent greenhouse gas…

Imperialism originates in a struggle for resources; the ideology justifying the brutality of conquest and control is secondary. Oil has been one of the most coveted resources of the modern era, but the oldest and most essential resource is food. Ukraine’s famously fertile “black earth,” desired by many invaders and colonizers over the course of the country’s history, may also be among the motivations for Russia’s new aggression. According to recent reports, Russia has been commandeering or destroying Ukrainian grain stores and making off with Ukrainian agricultural equipment, smuggling the stolen grain to Syria for sale in the Middle East. Gustafson points out that as shortages become more frequent, food will become an increasingly significant tool of geopolitical influence…

Eminently worth reading in full: climate change is coming for Russia: “A Hotter Russia,” from @sophiepinkhmmm on @ThaneGustafson in @nybooks.

Lest American readers feel complacent: “The challenging politics of climate change,” from @BrookingsInst.

* Franklin D. Roosevelt

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As we get serious, we might send imperial birthday greetings to the man Vladimir Putin seems to wish he was: Pyotr Alekséyevich, also known as Peter I, and best known as Peter the Great; he was born on this date in 1672. But even as Putin is trying to turn back the cultural clock, Peter was the Tsar who modernized Russia and grew it into an empire, capturing ports at Azov and the Baltic Sea, laying the groundwork for the Imperial Russian Navy, ending uncontested Swedish supremacy in the Baltic, and beginning the Tsardom’s expansion into a much larger empire that became a major European power.

Peter led a cultural revolution that replaced some of the traditionalist and medieval social and political systems with ones that were modern, scientific, Westernised, and based on the Enlightenment. His reforms had a lasting impact on Russia, and many institutions of the Russian government trace their origins to his reign. He adopted the title of Emperor in place of the old title of Tsar in 1721, and founded and developed the city of Saint Petersburg, which remained the capital of Russia until 1917.

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“How Africa’s population evolves, and how the continent’s economies develop, will affect everything people near and far assume about their lives today”*…

In these tumultuous times, there’s a lot of competition for one’s attention: Russia and its aggression? China and it’s ever-more-assertive rise? The tensions within Europe? The divisions within the U.S.? Indeed, as Adam Tooze argues, there’s so much going on that there’s a risk we’ll miss the most fundamentally important long-term dynamic of all…

Once you realize it’s scale, there is no global trend as dramatic today as the revolution in Africa’s demography.

Asia’s return to the center of the world economy dominates the headlines. But in the grand sweep of history that is a rebalancing or restoration not a revolution. Until the 18th century, the Pacific and Indian Oceans were the heart of sophisticated economic activity. That balance was grossly distorted in the “centuries of humiliation” by the rise of the West. Now, thanks to Asian economic growth, the centers of economic activity and population are realigning.

The same cannot be said for Africa. Despite optimism in recent years, the relative lack of economic growth in Africa is well-known. Less well-appreciated is the extraordinary historical novelty of its demographic development.

In 1914 according to the best estimates, Africa’s entire population was 124 million and that includes North Africa. Today it is 1.34 billion. Compared to Africa’s roughly elevenfold increase in population, Asia’s population increased by “only” between 3 and 4 times – China’s merely tripled and India’s increased by 4.5 times. Furthermore, whereas Asia’s population is beginning to stabilize – led by that of India and China – Africa’s population will, barring disasters, reach 2.4 billion by 2050 and will go on growing.

Longer term projections are hazardous, but a world with somewhere between 9 and 11 billion total population and close to 4 billion people living in Africa is what current trends would lead one to expect. That means that by 2100 the African share of global population will likely be between 35 and 40 percent. And in 2100 the population of several African countries – Chad, Mali, Niger, Nigeria, and South Sudan – is likely still to be growing.

That is something new under the sun. It means that in sheer quantitative terms Africa’s story increasingly drives world history…

Read on for a thoughtful unpacking: “Youth Quake. Why African demography should matter to the world,” from @adam_tooze in his newsletter Chartbook— in part a consideration of Youth Quake, by @EdPaiceARI.

See also: “We need to take a closer look at entrepreneurship in Africa,” from @sham_jaff in @whlwnews.

Howard French (@hofrench)

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As we pay attention, we might send dedicated birthday greetings to Joe Slovo; he was born on this date in 1926. A South African citizen from a Jewish-Lithuanian family, Slovo was a delegate to the multiracial Congress of the People of June 1955 which drew up the Freedom Charter. He was imprisoned for six months in 1960, and emerged as a leader of Umkhonto we Sizwe the following year. He lived in exile from 1963 to 1990, conducting operations against the apartheid régime from the United Kingdom, Angola, Mozambique, and Zambia. In 1990 he returned to South Africa, and took part in the negotiations that ended apartheid. He is probably best known for proposing the “sunset clauses” covering the 5 years following a democratic election, including guarantees and concessions to all sides, and for his fierce non-racialist stance. After the elections of 1994, he became Minister for Housing in Nelson Mandela’s government, a post he held until his death from cancer in 1995.

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“Their principal dependence is not upon their arms, I believe, so much as upon the failure of our revenue”*…

The ongoing Russia-Ukraine war and subsequent rounds of economic sanctions has underscored the important role of money in conflicts. As Jamie Catherwood explains, for hundreds of years nations have used money as a means of control and geopolitical influence. Financial instruments and economic sanctions have been wielded like any other weapon…

Over the course of centuries, nations have utilized money as a means of control and geopolitical influence. Financial instruments and economic sanctions have been wielded like any another weapon.

In fact, President William Taft’s foreign policy became known as one of ‘Dollar Diplomacy’. President Taft explicitly referenced the interchangeability of traditional weapons and debt in his State of the Union Address in 1912, explaining that his foreign policy was to “substitute dollars for bullets”

The methods and mediums through which countries wield this economic weapon changes over time, but the objectives of economic sanctions today are the same as those of centuries past: hurt the enemy by hurting their economy and restricting access to financial lifelines.

This article uses historical case studies across multiple centuries to demonstrate how money has been weaponized or used as a geopolitical tool in conflicts…

As the prevalence of “hot wars” continues to decline, the weaponization of money and finance stands to play an increasingly key role in how wars are waged…

A Brief History of Economic Warfare,” from @InvestorAmnesia.

* “Their principal dependence is not upon their arms, I believe, so much as upon the failure of our revenue. To think they have taken such measures, by circulating counterfeit bills, to depreciate the currency, that it cannot hold its credit longer than this campaign. But they are mistaken.” – John Adams, in 1777, on Britain’s attempts to undermine the U.S. economy

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As we brandish banknotes, we might recall that it was on this date in 1973 that Pink Floyd’s 8th studio album, The Dark Side of the Moon, reached the top of the Billboard 200 album chart. It had entered the chart on March 17 of that year, just over two weeks after its release, and held the #1 spot for only a week. But it was in the chart for for a record-setting 741 consecutive weeks. It has popped back into the charts over the years, and has currently been ranked for over 900 weeks (and counting). Overall sales of the album are estimated to be close to 50 million copies.

Money
It’s a crime
Share it fairly, but don’t take a slice of my pie
Money
So they say
Is the root of all evil today

Money,” Track 6 (Track 1, Side 2) of The Dark Side of the Moon

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