Currency Depreciation Can Save an Economy in Crisis

March 28, 2017

Amongst political and business leadership, there’s a popular bias that domestic currency depreciation and/or devaluation is negative for a nation’s economy. Instead, downward currency movements present a positive GDP benefit due to relatively favourable goods pricing offered to global consumers. Such a currency event will frequently act as a support to challenged economies during recessionary or transitionary periods.

One of my 2017 forecasts¹ – dollar depreciation – is already being realised. The US dollar (USD) has been falling in relative value to other major currencies from its recent highs, but not because of an overnight shift in any fundamental factor. Instead, it’s due to President Trump merely commenting on his hope for a softer, weakened USD. On the day of this brief mention, the dollar fell more than 1%.² Overall, the USD is down 3.3% from recent highs set late last year. However, a knee-jerk market reaction is unwarranted, as Trump’s comments are actually a fair desire. USD strength has had negative earnings implications to US corporations. Nonetheless, it’s simply amazing how a simple comment can elicit such swift market response on something that’s not even news.adjusted, trade weighted basis, compared to the Euro, Canadian dollar, Yen, Pound, and Swiss franc) is up more than 22% (see chart below). This has been a direct contributor to weakening US corporate foreign sales, as exported goods and services have had their prices skyrocket to importers over the past two years. A strong USD has been blamed as one of the more serious factors weighing down on US corporate earnings, as sales through foreign business units have suffered. For S&P 500 index companies, foreign sales are down to levels not seen since 2006.³ Though USD strength is a culprit, corporate tax reform addressing domestic and foreign earnings would be a far more valuable allocation of President Trump’s time, which would drive greater US corporate net earnings. That being said, all currency valuations are relative, and this is where the opportunity lies for all businesses anywhere to improve COGS and other expenditures. If USD strength has been harmful to US corporate earnings, then the inverse would be a welcome respite.

A strong USD has been blamed as one of the more serious factors weighing down on US corporate earnings, as sales through foreign business units have suffered.

For reasons not entirely clear, discussions of any nation’s currency devaluation and/or depreciation on the nightly news are delivered with an ominous tone. But in fact, these seemingly negative currency fluctuations will more often yield beneficial domestic economic results. Whether its currency depreciation (for those which follow free-market exchange rates) or currency devaluation (for others that have fixed exchange rates controlled by a central bank), both provide the necessary fuel to allow sovereign nations a pathway out of a challenging economic environment.

Recently, the British Pound (GBP) is an example of how currency depreciation can be beneficial. Not only has a depreciated GBP been enjoyed by global consumers who are searching for the most favourable pricing on goods and services, but more importantly it has provided a nice support to the British economy by forcing domestic goods consumption over imports. Brexit’s full economic impact is still uncertain, but for now such uncertainty – and the resulting manifested GBP depreciation – provides market opportunity to both domestic goods producers and foreign consumers equally.

The USD/GBP exchange rate plummeted nearly 20%, from a pre-Brexit value of 1.4874 to a post-Brexit low of 1.2046 (USD/GBP) six months later, and has recovered lately against a weakening USD. The magnitude of GBP’s current depreciation has not been seen since 1984, but neither has the accompanying opportunity to stimulate global demand for British exports. To make the situation even more advantageous, much has changed since the last GBP collapse three decades ago. The most significant difference is that today a global retail or business customer can easily take advantage of a cost differential due to currency movements, as matter of technology. As an example, the on-line shopping portals for high-end retailers, like Harrods and Harvey Nichols, offer global consumers luxury product discounts that are hard to match elsewhere. Recent news on tepid October 2016 UK retail sales also had highlighted how UK leisure and luxury stocks⁴ have seen a nice valuation uptick. Apparently, global consumers from around the world are converging on London to pick up great deals that their homeland cannot provide. The extent of the discounts is impressive. Since January 2016, the US Dollar and Euro are stronger against the Pound by 19% and 17% respectively, while the Japanese Yen (JPY) to GBP is stronger by more than 25%.⁵

President Trump’s main currency rhetoric has been reserved for China as a currency manipulator. Most economists, myself included, understand that China’s Renminbi (CNY) is actively managed to a persistently devalued position relative to the USD. A Trump administration could certainly introduce tax policies on imported Chinese goods that would leave many US consumers paying much, much more for similar household goods, but for only as long as less expensive import substitutes would need to be supplied. Such brief trade disruption would not upset most Americans who shop at large discount retailers, but it would place the Chinese government on red alert (pun intended). As monetary retribution (not to mention the potential military avenues), China – the second largest foreign holder of US treasury securities⁶ – may find it most pleasing to dump their more than $1 trillion in treasury holdings on the open market. Such action would send the value of US treasuries plummeting and bond yields spiking much higher. However, this monetary attack could be effectively managed by the US Federal Reserve’s FOMC. Moreover, US exports to China about 7% of total exports, compared to 19% of US exports to Canada and 16% to Mexico – a combined 35% of US exports.⁷ It would not surprise me to find a Trump trade policy that starts sounding very sweet on Mexico and more punitive on China.

Meanwhile, the Mexican Peso (MXN) has fallen dramatically post-Trump victory. From November 8, 2016 through January 6, 2017, the peso fell more than 15% relative to the USD. The drivers for this movement have been clear. Fears abound, as Trump remains tough on border security/wall building, tariff impositions, and a wholesale review of the so-called “worst deal ever” – NAFTA. These three talking points have weighed heavily on the peso’s current value and future outlook. To add to these US-centric political pressures, a recent move by the Mexican government to cut gasoline subsidies is sure to contribute to rising inflation, which would further hurt their waning domestic consumption and increasing the possibility of recession in Mexico this year. With all these headwinds, it’s no wonder that the Mexican peso has been treated like a piñata at a kid’s birthday party. But, there’s a bright side.

A more severely depreciated MXN would only serve to backfire on US interests, making US goods too expensive, and ultimately hurting US corporate revenues and earnings through falling exports.

The biggest positive for the peso’s future is that nearly 40% of the imported goods value from Mexico to the US is actually “Made in USA.”.⁸ This means that potential US tariffs imposed on imported Mexican goods would have the effect of directly impairing the earnings of the very US companies that Trump has vowed to protect. In addition, Mexico is a consumer nation, and it’s in the US’s best interest to keep our neighbour to the south in a healthy economic state. Mexico buys more from the US than Brazil, Russia, India, and China – combined. A more severely depreciated MXN would only serve to backfire on US interests, making US goods too expensive, and ultimately hurting US corporate revenues and earnings through falling exports.

Though the year ahead will undoubtedly be a volatile one for the MXN/USD exchange rate, it will most likely bottom out around 23, as Trump administration rhetoric heats up later this year. By year-end, it would be realistic to see the peso strengthen to levels seen prior to the November 2016 election, in the 18.25 to 19.75 range. Such a recovery would be seen as positive, by both domestic Mexican business consumers and the many US exporting companies who are so reliant on their orders. Such a symbiotic relationship may also yield another US benefit in that its southern neighbour would also become the market buyer in the event of China making good on its US treasuries liquidation threat. Mexico’s weakened peso also provides a nice substitute to the imported Chinese goods market.

Local currency depreciation is showcasing London as the international shopping mall for the best deals on today’s high-end merchandise. Conversely, China’s proactive CNY devaluation seems to be on a collision course with karma via Trump. Technology allows for consumers to access currency distortions in the form of buying discounts with a speed and simplicity never before experienced in our global economy. The economic support provided through a depreciated currency is due to the international consumer’s ability to focus their spending in those currencies, as with GBP for now. The “Big Brexit Sale” might just be the impetus to inspire other Eurozone nations to abandon their single monetary unit, the Euro. Though Britain never took on the Euro currency, its decision to leave the European Union has afforded it the depreciation benefits that will protect its economy from collapse. Countries like Italy, Spain, and Ireland would be very pleased to have the flexibility of their own currencies⁹ right now, instead of having to deal with out-of-touch, non-elected officials in Brussels. Global consumers and producers would certainly celebrate the chance to keep the good deals going from one nation to another.

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About the Author

Ivan Illán is an economist and author of How to Hire (or Fire) Your Financial Advisor. Mr. Illán is a Forbes contributor, a Financial Times Top Financial Adviser, and a CFA Society Los Angeles Wealth Management League Founding Member.

References

1.The full 2017 capital markets forecast, can be found at: https://www.equities.com/news/politics-central-bankers-are-2017-s-key-market-themes

2.Based on the WSJ Dollar Index on Tuesday, January 17, 2017

3.Reported in the 2015 S&P 500 Foreign Sales Report; Standard & Poor’s

4.McClean, Paul, “UK retailers enjoy average October sales”; October 28, 2016, Financial Times, © 2017 The Financial Times Ltd. Full article found at: https://www.ft.com/content/9e091d62-9d03-11e6-a6e4-8b8e77dd083a

5.All currency data sourced from Bloomberg.com and WSJ.com subscription-level quotes

6.Department of the Treasury/Federal Reserve Board, January 18, 2017; Major Foreign Holders of Treasury Securities Report can be found at: http://ticdata.treasury.gov/Publish/mfh.txt

7.Data found at: http://www.worldsrichestcountries.com

8.Gutiérrez, Geronimo, “Mexico’s Growth Has Helped the U.S.”, November 24, 2013, © 2017 The New York Times Company; Full article found at: http://www.nytimes.com/roomfordebate/2013/11/24/what-weve-learned-from-nafta/mexicos-growth-has-helped-the-us

9. Smith, Reiss, “What is Italexit? Will Italy be next to leave the EU?”; September 23, 2016, © 2017 Express Newpapers; Full article found at: http://www.express.co.uk/news/politics/713818/italexit-will-italy-leave-eu-european-union-referendum-brexit-exit

Changing Tides in International Trade

March 28, 2017

By Victor Andres Manhit

Although trade has played an important role in advancing economic growth, it has since lost its dynamism. Asian economies, however, have continued to liberalise its markets. Asia will now serve as the backbone of stability amidst the growing clamour for protectionism around the globe.

The past year has been marked by key events affirming the growing prevalence of populism. In June 2016, Britain voted to leave the European Union, providing the momentum for populist movements around the globe. A few months later, Donald Trump was catapulted to the Presidency on an “America First” campaign. Although trade has played an important role in advancing economic growth, it has since lost its dynamism. Asian economies, however, have sung a different tune. While the rising backlash against globalisation have spurred protectionist policies in the West, emerging powers in Asia have continued to liberalise its markets. This marks the end of a Western-led trade.

The Global Trade Disorder

Trade literature is dominated by studies showing how lower trade barriers have helped improve productivity and growth. Two decades after Bretton Woods, tariffs have fallen below 5% and world trade has outpaced economic growth by 3 percentage points. Proponents for freer trade argue that restricting the flow of goods limits the range of choices available, adversely affecting consumers and industries.

During global recessions, global trade typically stalls for a period of time. However, years after the 2008 financial crisis, growth in world trade has still remained flat, marking the longest period of postwar trade stagnation. The World Trade Organization (WTO) has forecasted trade to grow at 1.8% to 3.1% in 2017, down from its initial forecast of 3.6%. The downward revision was attributed to the slower recovery in merchandise trade volumes. Meanwhile, global GDP growth is expected to recover to 3.4% this year from 3.1% in 2016. On average, trade has grown 1.5 times faster than GDP, but this ratio has dipped below 1.0 in recent years.

In an atmosphere of skepticism towards trade liberalisation, reaching the pre-crisis average global trade growth of 6% is unlikely. A report by the Peterson Institute for International Economics (PIIE) noted that following the General Agreement on Tariffs and Trade (GATT) talks in 1947, reduction in trade barriers have lapsed over longer time periods, partly due to developing countries’ refusal to lower trade barriers even further to protect their local industries. The standstill in multilateral trade negotiations has encouraged countries to turn to plurilateral negotiations instead. However, these have not led to significant progress in goods and services liberalisation.

The 2016 World Economic Outlook diagnoses that trade growth has slowed primarily because of weaker economic activity. The report adds that the slower pace of trade liberalisation and a surge in protectionist policies have also dampened trade growth. The slowdown of global trade amidst growing protectionist sentiments is particularly alarming. Despite the supposed merits of trade, its benefits have not been inclusive.

In the aftermath of the Great Depression in the 1930s, the US raised its import tariffs, only to face retaliation from other countries. This only worsened the recession and slashed more than half of global trade. Although nowhere near the protectionist measures imposed decades ago, today’s Western leaders are treading on a dangerous route by introducing restrictive trade measures. In Asia, increasing protectionism poses a huge threat to its trade growth. The number of antidumping cases filed against the region’s exporters has risen by over 50% in the last 5 years. Protectionism can harm smaller countries – particularly those with export-oriented economies – who have limited resources to cushion against external shocks.

A Rethink in the Rules of Global Trade?

The rise of populism is perhaps a testament that the current system is no longer working. There are growing calls for a more moderate form of globalisation, arguing that today’s volatile politics is partly rooted in excessive globalisation. Dani Rodrik, a Harvard economist, asserts that democracy, national determination, and economic globalisation cannot be pursued simultaneously.

Countries who have experienced the greatest growth never fully embraced the free-market ideology imposed by the US and other multilateral institutions. Citing China, South Korea and Japan as examples, Rodrik noted how these countries have engaged with the global market, while protecting its domestic industries. By enforcing import barriers, nascent industries were given enough room to develop its own capacities. By controlling capital flows and manipulating currencies, local firms gained an edge over their foreign competitors.

There are growing calls for a more moderate form of globalisation, arguing that today’s volatile politics is partly rooted in excessive globalisation. Dani Rodrik, a Harvard economist, asserts that democracy, national determination, and economic globalisation cannot be pursued simultaneously.

However, this vision might be better suited for smaller countries trying to gain economic traction. It would be catastrophic for advanced economies to impose the same measures. Instead of reverting back to protectionist policies, larger countries should implement strategies to ensure that trade’s benefit is more inclusive, such as strengthening social safety nets to help out those who have lost out on trade.

Shift in Trade Patterns

The political climate in Western countries have made it impossible to push for more trade liberalisation. In contrast, Asian economies tell a different narrative. In the Philippines, President Duterte, who amassed widespread support for his anti-elite stance, has so far maintained his predecessor’s liberal macroeconomic policies. The Asian Development Bank (ADB) reports that although trade growth in the region has decelerated due to slower global growth, intraregional trade continued to strengthen.

Xi Jinping, the first Chinese leader participating in the World Economic Forum, delivered a speech in defence of globalisation. He echoed a vision typically espoused by Western leaders, remarking that, “We should adapt to and guide economic globalisation, cushion its negative impacts and deliver its benefits for all countries.” He cautioned that no one will emerge victorious in a trade war. This is a stark contrast to the anti-trade rhetoric embraced by the new US government. Historically, America has championed trade liberalisation, encouraging developing countries to open their economies and reduce trade barriers. It has since reversed its tone under the Trump administration.

In his first week in office, Trump has issued two trade-focussed Executive Orders in fulfilment of his campaign promise. He has withdrawn his country’s involvement in the Trans-Pacific Partnership (TPP), ending an era of multilateral trade deals that have been a hallmark of globalisation, and has also sought a renegotiation of the North American Free Trade Agreement (NAFTA). To add salt to the wound, he threatened to impose tariffs on goods produced in Mexico and China. Should Trump pursue border taxes, global supply chains will be disrupted and trade wars will ensue as affected countries will most likely retaliate. These policies are unsound and would undermine trade reforms implemented over the past decades.

With the US retreating from the global stage, China looks poised to fill in the leadership vacuum. The TPP’s demise will allow China to expand its economic clout in Asia through the Regional Comprehensive Economic Partnership (RCEP). Traditional American allies in the region have already hedged towards Beijing. The Philippines, for instance, has reoriented its foreign policy, setting aside its tussle with China over the West Philippine Sea in favour of stronger economic ties.

With the US retreating from the global stage, China looks poised to fill in the leadership vacuum.

However, for China to become a credible leader in global trade, it should be willing to open its markets further and abide by international trade standards. As it stands, it has stalled from implementing significant reforms after its accession to the WTO in 2001. Its regulatory environment is unpredictable, transparency challenges unresolved, and barriers to its services markets remain in place. China itself is also one of the main targets of protectionist policies. Although China has shown geopolitical assertiveness, it faces numerous constraints in assuming global leadership. For now, it seems unlikely that a dependable leader will take the helm in shaping the rules of the global economy. What is clear, however, is that Asia will now serve as the backbone of stability amidst the growing clamor for protectionism.

Featured image: President Rodrigo Roa Duterte listens to Trade and Industry Secretary Ramon Lopez as he discusses matters during the courtesy call of People’s Republic of China Minister of Commerce Zhong Shan to the President in Malacañang Palace on March 7, 2017.

Photo Courtesy: Rolando Mailo/Presidential Photo

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About the Author

Professor Victor Andres “Dindo” C. Manhit is the Founder and Managing Director of the Stratbase Group and President of its policy think-tank, the Albert del Rosario Institute for Strategic and International Studies (ADRi). He also serves as Managing Director for BowerGroupAsia (BGA) in the Philippines.

Time for African Economic Miracle

March 27, 2017

By Dan Steinbock

In the 20^th century, Africa gained political independence but fell behind the economic boom. In the 21^st century, it is Africa’s turn – but not without a stronger state and a new external push.

After struggling against corruption, lawlessness and terror, President Buhari’s administration has outlined an economic recovery plan targeting 7 percent GDP growth rate from 2017 to 2020. While many African economies are hoping for takeoff in the coming years, Nigeria represents the region’s greatest economic potential.

For longer than a century, Africa’s economic miracle has been a pipedream. But things are changing.

Stronger state, different external actors

In the mid-2000s, after decades in the slow lane, African economies hit the accelerator. But what lies ahead for the continent is not an open highway, says Justin Yifu Lin, World Bank’s former chief economist, with co-author Andrea Goldstein. “If Africa is to achieve its potential as the next emerging-market engine of global economic growth,” the two write, “it will have to industrialise.”

But the devil is in the details.

Ever since Britain’s first Industrial Revolution, the rise of labor-intensive light manufacturing (textiles, garments, shoes, and associated tools and machinery) has played a major role in pushing up national incomes. However, as Africa has not managed to participate fully in industrialisation since the 1970s, it has lagged behind the rest of the developing world.

Lin and Goldstein advocate a new catalyst role for government. They emphasise that an effective industrial policy must cover not just manufacturing but the kind of economic activities that support it. This means vital role for external actors, particularly for large emerging economies, such as China, that are able and willing to participate in African growth.

After three decades of economic stagnation and income polarisation in the name of freedom and democracy, Lin and Goldstein are right to stress a different, more inclusive view of economic development.

And yet, despite Africa’s great long-term potential, the future may prove more challenging than anticipated. The fact that Africa fell behind globalisation and associated catch-up growth after the 1970s should not be associated with domestic economic choices only.

Historically, external geopolitical constraints have weighed heavily on Africa’s economic promise.

Legacies of Colonialism and Decolonisation

During colonialism, the largest colonisers – the British Empire and its European counterparts – did contribute to the building of infrastructure in some African nations. Yet, the latter was geared to serve the coloniser’s economic and strategic needs, not those of the colonised. In Africa, the colonial efforts focussed on raw materials and commodities that were most needed for the colonisers’ industrialisation during and after the “scramble for Africa” in the late 19^th century.

The great irony should not be discarded. Historically, Western Europe’s Belle Époque (1870-1914) – an era of great optimism, regional peace and stability, rapid industrialisation and technology innovation – went hand in hand with the “Scramble for Africa”; that is the devastating invasion, occupation, division, colonisation and annexation of African territory by European powers during the period of “new imperialism”.

Moreover, the end of colonialism did not translate to rapid growth either. In the postwar Africa, political independence came often with great destabilisation, which virtually ensured that nascent efforts at industrialisation would fail, remain partial, or stall.

Africa’s political independence was followed with strife and fragmentation, civil wars, and sectarian divisions, which were further exploited by major powers and multinational giants during the Cold War. And yet, industrialisation requires stability, not destabilisation.

As the Nigerian story attests, political independence was followed with strife and fragmentation, civil wars, and sectarian divisions, which were further exploited by major powers and multinational giants during the Cold War. And yet, industrialisation requires stability, not destabilisation.

Illicit Financial Outflows, Lawlessness and Corruption

After the Cold War, interventionism by external powers has shifted toward economic exploits. Between 2004 and 2013 alone, developing and emerging economies lost $7.8 trillion in illicit financial flows (Global Financial Integrity), which averaged at 6.5 percent per year; that is, nearly twice as fast as global GDP.

Typically, Sub-Saharan African economies, despite very low prosperity levels, have a key role among those that have suffered the most outflows, including South Africa ($20.9 billion in average illicit financial flows 2004-13), Nigeria ($17.8 billion), Zambia ($2.9 billion), Ethiopia ($2.6 billion), Cote d’Ivoire ($2.3 billion), and so on.

Economic stability also requires appropriate institutions. Yet, according to the Rule of Law Index (World Justice Project), many African economies have low scores, including Cameroon, Zimbabwe, Ethiopia, Uganda, Kenya, Nigeria, Sierra Leone, Liberia and so on. Even the best – South Africa, Ghana, Botswana and Senegal – do not make it to the top-40 list.

The same goes for corruption. According to Transparency International, corruption perceptions are greatest among African nations, including Somalia, South Sudan, Sudan, Guinea-Bissau, Chad, Central African Republic and Burundi. Even the best performer – Botswana – is not in the top-30 league. Nigeria’s rank is 136, along with those of Myanmar, Guinea and Mauritania.

The lesson is that if illicit financial flows are allowed to prevail, if the rule of law cannot be sustained and if corruption grows pervasive, even rapid industrialisation or modest success at sustained economic growth will not contribute to economic modernisation and rising living standards.

What African economies need is a series of industrial takeoffs across the entire region. That is a viable project, but not without stronger state catalyst and external actors’ participation, particularly large emerging economies such as China which have more in common with African nations than the slow-growing, rich Western economies.

Toward the Big Push

While nascent takeoffs have been evolving for a long while, they need a “Big Push”. Developing economies require large amounts of investments to embark on the path of economic development.

As in other developing regions, structural change in sub-Saharan Africa has been characterised by a significant decline in the share of the labor force engaged in agriculture. In a sense, this is progress; agriculture has been the least productive sector in African economies. But the bad news is that, unlike other developing regions, structural change in Africa has not yet been accompanied by a significant expansion in the share of the labor force employed in manufacturing.

Yet, the potential between the two regions is not that different. Between 2000 and 2010, overall labor productivity growth in Africa was second only to Asia, where structural change continued to play a vital positive role. The real difference is that, in emerging Asia, the share of employment in manufacturing is more than double the share of employment in manufacturing in low-income African countries.

Asian economies have been able and willing to industrialise; African countries have been willing, but not able to industrialise.

In the postwar era, development economist Gunnar Myrdal showed that the strong state and associated public institutions ensured sustained economic growth in advanced economies. In contrast, the “soft state” virtually ensured stagnation in Asia and other developing regions. Until recently, neoliberal policies have further contributed to arrested modernisation in Africa, while keeping soft states in power.

In the early 21^st century, the global landscape is finally shifting, but not because of initiatives in the advanced West. Rather, it is the rise of the large emerging economies in the past two decades that can finally offer a new and more realistic view of a strong state and the required push for industrialisation.

What Africa needs is industrialisation and inclusive growth for the many, not exploitation and exclusive growth for the few.

The original commentary was released by BusinessDay, Nigeria’s leading business daily, on March 2, 2017

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About the Author

Dan Steinbock is the Founder of Difference Group and has served as Research Director of International Business at the India China and America Institute (US) and a Visiting Fellow at the Shanghai Institutes for International Studies (China) and the EU Centre (Singapore). For more, see http://www.differencegroup.net

Pentagon Wars and US Hegemony at the Root of Instability and Dislocation

March 25, 2017

By Abayomi Azikiwe

Pentagon wars and capitalist exploitation at the root of instability and dislocation. Members of the United States government spoke in Germany at the Munich Security Conference (MSC) held from February 17-19 in an effort to assuage growing fears in Europe over the apparent escalating official and public disaffection from the administration of President Donald Trump.

Vice President Mike Pence told the MSC that the US commitment to the North Atlantic Treaty Organization (NATO) was “unwavering”. Pence later said that the Russian Federation would be held accountable for actions internationally dispelling the myth that a Trump White House will lessen tensions with Moscow.

Republican Senator John McCain, however, raised questions about the stability of the current regime in Washington assessing that the Trump presidency was in “disarray and had a lot of work to do”. He cited the recent scandal and departure of National Security Advisor Gen. Michael Flynn as firm evidence for his viewpoint on the White House.

Everyday across the US there are demonstrations being held against Trump’s policies which are being enacted through executive orders and presidential memorandums.

From the concerns over escalating military tensions with Iran and China to the domestic protests against the targeting of Muslims, immigrants, women, African Americans, etc., people have come out in the millions to register their opposition. At the same time, high-ranking Democratic Party spokespersons have sought to blame unverified claims of interference from the Russian Federation into the 2016 national presidential elections for the contradictions in the present administration.

Excessive propaganda against Moscow has reached levels not seen since the years prior to the collapse of the Soviet Union and the Socialist states of Eastern Europe. Trump is falsely portrayed by the corporate media as being too close to Russia while at the same time his appointees within the administration are continually voicing hostilities towards the Kremlin.

Sanctions enacted against Russia by former President Barack Obama remain in effect. The Pentagon military buildup within the NATO states in the closing days of the previous administration has not been withdrawn.

These are some of the factors that are fuelling speculation over the stability and internal consistency of the Trump White House. During the period leading up to his inauguration, Trump held a conversation with the Taiwanese leader indicating a possible shift in the “one China” policy which has been in operation since 1979. Nevertheless, in recent days it has now been reported that Trump engaged in a conversation with the People’s Republic of China government saying that the “One China” policy is still enforce.

Background to the Munich Security Conference

The annual gathering of the MSC brings together officials and analysts to discuss the major questions surrounding the continuing hegemony of imperialism. Amid economic difficulties and massive population shifts throughout Africa, the Middle East, Asia-Pacific and Europe, the capitalist ruling class of Europe and North America are concerned over the impact of these developments.

This meeting was not only addressed by officials of the leading western imperialist states in Europe and North America. Contrastingly, Russian Foreign Minister Sergei Lavrov spoke as well calling for the creation of a “Post-West World Order”. He described NATO as a relic of the cold war which is not serving the interests of peace and stability.

People’s Republic of China Foreign Minister Wang Yi utilised the summit to express the Asian nation’s opposition to the US defence missile system known as Terminal High Altitude Area Defense (THAAD). The Republic of Korea government is scheduled to deploy the system by the end of 2017 ostensibly in response to missile developments taking place in the neighbouring Democratic People’s Republic of Korea (DPRK).

People’s Republic of China Foreign Minister Wang Yi utilised the summit to express the Asian nation’s opposition to the US defence missile system known as Terminal High Altitude Area Defense.

In a post on its website, the MSC says: “Over the past five decades, the Munich Security Conference (MSC) has become the major global forum for the discussion of security policy. Each February, it brings together more than 450 senior decision-makers from around the world, including heads-of-state, ministers, leading personalities of international and non-governmental organisations, as well as high ranking representatives of industry, media, academia, and civil society, to engage in an intensive debate on current and future security challenges.”

This same entry goes on noting that: “In addition to its annual flagship conference, the MSC regularly convenes high-profile events on particular topics and regions and publishes the Munich Security Report. All its activities aim at offering the best possible platforms for a frank and open exchange of ideas and opinions.”

Nonetheless, there is a seemingly unease between the White House and the government of Chancellor Angela Merkel of Germany combined with the Brussels-based and US-directed NATO military alliance.

Moreover, Merkel has clashed with other European states of the former socialist bloc such as Hungary in a dispute over the influx of migrants from Africa, the Middle East and Asian-Pacific countries. Pressure is emerging strongly from right-wing political parties not only in Germany but many other states including the Netherlands, Britain and France who are saying that the existing governments are not going far enough in curtailing immigration from these above-mentioned nations along with Eastern Europe.

In this MSC context what is often not discussed in detail are the reasons behind the current instability and dislocation around the world. The wars of occupation and genocide waged against the peoples of Afghanistan, Iraq, Haiti, Libya, Syria and Yemen are to blame in part for the current crisis.

At the same time the role of international finance capital is also responsible for the mass poverty and economic underdevelopment. Over the last two years the impact of the over production of oil and natural gas has triggered problems of declining growth rates, growing unemployment and poverty. People are fleeing their home countries due to the horrendous social conditions that are in existence.

Several years prior, reports abounded of the phenomenal economic growth that was taking place in Africa, the Middle East, Asia and Latin America. However, the dependence upon oil revenues in countries such as Venezuela, Brazil, Ecuador, Russia, Nigeria, Angola, etc., has plunged millions back into poverty and uncertainty.

Domestic War Against People in the US

Simultaneously huge sections of the US population are being targeted for political and economic reasons by the administration.

A travel ban on people from seven African and Middle Eastern states was temporarily halted as a result of mass demonstrations and court actions. The Federal Court of Appeals in the Ninth Circuity unanimously upheld a temporary restraining order on the implementation of the ban placed by a lower Federal Court in Washington State.

These efforts by the Trump administration represent the continuation of US military policy against Africa and the Middle East. The populations of these states have been displaced by the war and economic policies of the imperialist governments led by the US The United Nations Refugee Agency (UNRA) has declared that the degree of displacement internationally is the worst on record so far in history. Approximately 75 million people have been driven from their homes both internally and outside of their geographic borders.

Compounding the domestic attacks against people from Sudan, Libya, Somalia, Yemen, Syria, Iran and Iraq, the administration has intensified its targeting, detention and deportations of people from Mexico and other Central and South American countries. Many of these migrants have been displaced as well due to the economic policies of Washington which has made agricultural production and energy extraction largely non-viable industries within their national economies.

Trump administration Secretary of Homeland Security Gen. John Kelly stated in a draft memorandum that the Immigration and Customs Enforcement (ICE) along with Customs and Border Protection (CBP) will hire 10,000 new agents to pursue, detain and deport so-called “criminal aliens” from the US Other reports which have been denied by the White House advance proposals which will federalise 100,000 National Guard troops to assist in the search and remove policy towards people considered as undesirables.

Any reasonable observers within the European Union (EU) member-states as well as the Russian Federation realise that the situation inside the US is quite politically fluid.

These policy initiatives are related to the promise made by Trump during the national presidential elections of 2016 to construct a wall along with border between the US and the Republic of Mexico. Trump insists that the funding taken from the tax dollars of working families to build the wall will be authorised by Congress. Nonetheless, he says that a tariff on imported goods to Mexico will serve as a reimbursement for the expenses related to the building of the wall.

Any reasonable observers within the European Union (EU) member-states as well as the Russian Federation realise that the situation inside the US is quite politically fluid. The burgeoning hostility towards the administration from various sectors of the population is bound to influence the attitudes of governments and civilian organisations in Europe.

This article was first published on Global Research on 21 February 2017 (http://www.globalresearch.ca/pentagon-wars-and-us-hegemony-at-the-root-of-instability-and-dislocation/5575981).

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About the Author

Abayomi Azikiwe is the Editor of the Pan-African News Wire, an electronic press agency that was founded in 1998. He has worked for decades in solidarity with the liberation movements and progressive governments on the African continent and the Caribbean. Azikiwe is a graduate of Wayne State University in Detroit where he earned undergraduate and graduate degrees in Political Science/Public Administration and Educational and Administrative Studies.

SADC Region Seeks to Accelerate Industrialisation amid Challenges in Mining and Energy

March 20, 2017

By Abayomi Azikiwe

Swaziland summit discusses economic crises in the sub-continent

The Republic of South Africa, the most industrialised state in the region, is still undergoing an economic recession. King Mswati III emphasised the necessity for regional member-states to engage in a strategic approach aimed at realising economic development for people in Southern Africa.

A one day Extraordinary Summit of Heads of State and Government within the Southern African Development Community (SADC) was held on March 18 at the Mandvulo Grand Hall in the Kingdom of Swaziland. Three days prior to the summit a gathering of the Council of Ministers of the region convened.

The summit adopted the Report of the Ministerial Task Force on Regional Economic Integration drafted two years earlier. This program would foster coordinated efforts in this regard through 2063.

A communique issued at the conclusion of the meeting said: “Summit approved the resolutions of the Strategic Ministerial Retreat on the Regional Integration, which was held on 12^th – 14^th March 2017 under the theme: ‘The SADC we want.’ The Retreat was to take stock of what SADC has achieved since its establishment in 1980, the challenges it was facing and what needed to be done to accelerate the pace and level of the SADC integration agenda. In this regard, the Summit noted the recommendations of the Ministerial Retreat and directed the Secretariat to develop an implementation plan and roadmap of the Conclusions of the Strategic Ministerial Retreat for its consideration in August 2017.” (sadc.int/files, March 18)

In the opening address King Mswati III emphasised the necessity for regional member-states to engage in a strategic approach aimed at realising economic development for people in Southern Africa. The Monarch said “If we join hands as member states in the implementation of various development projects, I am sure unemployment and poverty will go down in our countries.”

In the opening address King Mswati III emphasised the necessity for regional member-states to engage in a strategic approach aimed at realising economic development for people in Southern Africa.

The SADC was formed 37 years ago as the Southern African Development Coordinating Conference (SADCC) during the escalating struggle against white-minority rule in Namibia and South Africa. The apartheid regime through its military and economic dominance of the sub-continent sought to strangle genuine economic development by regional states in an effort to halt the-then forward trajectory of the national liberation struggles and their supporters throughout the region. In 1992, during a meeting in the newly-independent Republic of Namibia, the regional body changed its name to the Southern African Development Community (SADC).

Recent challenges emanate from the decline in commodity prices, the shortage of foreign exchange, slowing international investment and the profound impact of El Niño, rendering agricultural production and economic growth at a standstill. The continued reliance on revenue garnered through the export of agricultural products and strategic minerals seriously hampers the capacity for regional integration and industrialisation.

Zimbabwe, the Diamond Sector and Lingering Sanctions

President Robert Mugabe of the Republic of Zimbabwe was in attendance at the summit in Swaziland. The former SADC chair endorsed the regional integration program which was initiated under his leadership two years ago.

Zimbabwe Minister of Industry and Commerce Mike Bimha was quoted in The Sunday Mail (March 19) saying the plan would prove to be a positive step in the march towards industrialisation throughout the nations of the 14-member organisation. Bimha recalled: “Just to take you back to 2015 when there was a special summit here in Harare when the Heads of State and Government approved the industrialisation strategy and roadmap for SADC. And at last year’s SADC summit in Swaziland, Secretariat was tasked to look into implementation of that strategy and roadmap and also look into the costed action plan; in simple words, it means coming up with a budget. For the first 15 years the action plan looks at a budget of about US$112 million; now that is more on the focus on activities that have to be done at regional levels.”

This country still reeling from the compounded effects of nearly two decades of economic sanctions and an unprecedented drought, also was forced during February 2016 to close down its diamond mining facilities. Unsatisfied with the operations of the mines which were co-managed with foreign firms, the government announced the establishment of a Zimbabwe Diamond Consolidated Company to reorganise the sector.

Another article in the March 19 Sunday Mail notes: “Zimbabwe’s diamond sector has received the much needed boost after Government struck a resumption of operations agreement with some companies in Chiadzwa that had earlier blocked Zimbabwe Diamond Consolidated Company (ZCDC) mining activities through court action. Diamond production at Chiadzwa had plummeted to an all-time low as production at the three mines owned by Anjin, Jinan and Mbada stopped after the firms contested Government’s consolidation plan.”

Zambia Copper Mines Lose Energy Stifling Investment

The profitability of the mining industry in Zambia is being severely curtailed by the decline in the power generating resources inside the country. Zambia over the last few years has experienced serious shortfalls in the energy generating sector. ZESCO, the state-owned national energy agency, has been forced to ration power to consumers within the mining sector and across the board.

Nathan Chishimba, the President of the Chamber of Mines, emphasised that despite several appeals to corporate firms to invest in the energy sector, they have refused due to their inability to reap substantial profits. Consequently, ZESCO imposed tariffs on the mine owners which they have contested in the courts.

ZESCO claims that the mine owners owe the state utilities agency $US276 million in arrears. The firms are questioning whether the assessments are lawful. A decision could determine the short term direction of the mining sector. Zambia is a leading producer of strategic minerals in Africa and the world.

In a recent article by Jeff Kapembwa, he reports: “The mining companies in Zambia consume over 50 percent of the 2,317 megawatts of power generated in the country. The country is second only to the Democratic Republic of Congo in red metal production in Africa, and among the top 10 copper producers in the world. Last year, Zambia rose to seventh position from an initial ninth top global producer, having mined 708,000 tones as at August, with DR Congo having mined 850,000 tones, according to Invest News.” (March 20)

The drought is also a key factor in the lack of power generation. Rolling black outs have extended for as long as 12 hours in one day.

These difficulties would place limitation on the ability to increase industrial capacity nationally as well as on a regional level.

South African Recession Impedes Regional Growth and Integration

The Republic of South Africa, the most industrialised state in the region, is still undergoing an economic recession. The decline in the price of minerals and the employment contractions within the extractive sector has prompted the loss of value in the national currency, the rand.

The Republic of South Africa, the most industrialised state in the region, is still undergoing an economic recession.

Negative economic growth rates are prompting the African National Congress (ANC) government to threaten radical reforms including the increase in taxes for the wealthy and the seizure of white-owned agricultural lands without compensation.

Opposition political parties are attempting to discredit the ANC government which is also dealing with divisions over the direction of governmental and economic policy. As long as South Africa remains in recession the entire SADC region will not be able to effectively launch its comprehensive industrialisation and integration plans.

Tackle Economic Crises

Therefore there is a need to consolidate the approaches to the economic impediments to regional growth and integration. These efforts cannot be viewed independently of the broader international divisions of economic power and labor production.

Dependency upon the demands for primary and secondary industrial products by the western capitalist states can no longer be relied upon as an engine for development. Demand must be generated throughout the region and the continent as a whole.

Agricultural production and equitable economic distribution must be a cornerstone of this regional program. A common currency and joint regional economic planning should be implemented in order to address the shortfalls in energy generation and job creation.

Featured Image: Zimbabwe Diamond © Global Witness

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About The Author

Abayomi Azikiwe is the Editor of the Pan-African News Wire, an electronic press agency that was founded in 1998. He has worked for decades in solidarity with the liberation movements and progressive governments on the African continent and the Caribbean. Azikiwe is a graduate of Wayne State University in Detroit where he earned undergraduate and graduate degrees in Political Science/Public Administration and Educational and Administrative Studies.

The Trump-Ryan Healthcare Act: Some Economic Consequences

March 16, 2017

By Jack Rasmus

While Republicans on the Right and the Far Right wrangle over whether to repeal the Obamacare Affordable Care Act (ACA), or just revise it, the Ryan proposal does both. How can that be? Revise and yet repeal?

The repeal is every dollar and cent that the Obamacare Act taxed the rich and their corporations. The rest, the non-funding features is what’s being revised.

Only in the past 24 hours is the corporate press even discussing the tax increases under the ACA now being totally repealed by the Ryan-Trump bill. That’s because they can no longer ignore it, since it was reported today by the Congressional Budget Office (CBO). But they knew the details weeks ago. So did the Democrats in Congress. Yet they said nothing. How much in tax cuts for the wealthiest individuals and their corporations are we talking about? Over $590 billion over the decade.

About a fourth of the total cost of the ACA, was paid by tax cuts on wealthy households. That included a repeal of the 3.8% tax on earned income of the wealthy. Another repeal of the tax on net investment income by the same. Both are gone by the end of this year. Add to that the following business tax cuts also now totally repealed: the tax on prescription drug makers that provided $25 billion in annual revenue. The $145 billion repeal of the annual fee on Insurance companies. And the $20 billion on medical device makers. That’s another $190 billion tax cuts for businesses. But there’s still more ‘tax’ repeal. The employer mandate is also repealed. If companies didn’t provide their own employer health insurance, they too had to pay into the system. The CBO report estimates the mandates – employer and individual (also repealed) amounted to $156 million in 2017 alone. That’s inflation adjusted. So the market price is at least 5% higher, for a total of around $165 million. The mix in the employer-individual contribution from the mandates, let’s assume, is 50-50. So the corporate tax cut is at least $82.5 million from the repeal of the employer mandate. Added all up, the total reductions for businesses and the wealthy, according to the CBO’s own estimate, is $592 billion, “mostly by reducing tax revenues”.

What we have in exchange for the $592 billion tax cuts on the rich is a de facto tax hike on the 10 million plus consumers who bought plans on the exchanges, in the form of the elimination of the subsidies that had been provided to help them purchase plans. Subsidy repeal is just a tax hike by another name. How much ‘savings’ per the CBO from the repeal of all premium subsidies and assistance under the ACA? CBO estimates $673 billion.

By the way, here’s another business-health care trivia item: companies that provide employer health insurance get to write off their contribution costs. Their workers don’t get to write off their share deducted from their wages, but the companies do. Their tax cut savings amounts to $260 billion a year.

So the Ryan-Trump Taxman taketh $673 billion from the 10 million consumers who bought plans and he giveth $592 billion to the wealthy and their corporations who, heavens knows, need it more than the rest of us. After all, their corporate profits only tripled since 2010 and the wealthy captured only 95% of all the national income gains since 2010, according to studies by the University of California, Berkeley economists (based on IRS data). And the rest of us have done so much better! (By the way, here’s another business-health care trivia item: companies that provide employer health insurance get to write off their contribution costs. Their workers don’t get to write off their share deducted from their wages, but the companies do. Their tax cut savings amounts to $260 billion a year). Employers already providing health plans were supposed to pay an excise tax on their plans, but even the Obama administration put that one off, so the Ryan-Trumpcare delay of that excise tax hike until 2026 is not really a new tax cut or part of the $592 billion.

As the slick marketers on the online sales channels say, ‘But wait, there’s more. There’s a two for one offer!’ The double whammy offer in the Ryan-Trumpcare plan is an additional whopping $880 billion cut in Medicaid spending by the government. Another 10 million of those citizens most in need of health care services – composed mostly of the elderly, the disabled, and single mothers heads of households – will be now thrown under the Trumpcare bus as virtually the entire change in Medicaid will be, yes, repealed.

The ‘Multiplier Effect’ Is Bad News for Ryan-Trumpcare

So how does the $673 billion in subsidy assistance spending cuts and $880 billion in Medicaid spending cuts, plus $592 billion in wealthy-corporate tax cuts, and the new spending of $303 billion, impact the US economy in net terms? It will be a big negative hit on economic growth as measured in Gross Domestic Product terms. Here’s why.

There’s this thing called the ‘multiplier effect’ in calculating GDP. It’s not a theory. It’s an empirical observation. A fact. A dollar in spending gets spent several times over and the total at the end of the year adds up to more than a dollar added to GDP. Spending on lower and middle income groups results in a bigger ‘multiplier’. Spending on the wealthier a smaller. They save more than the net change in income they receive than do lower income households. Furthermore, empirical observation shows that tax cuts of any kind (business, investor, or consumer) have less a ‘multiplier’ effect than do spending, and tax cuts for the wealthy and for corporations even less an effect than consumer tax cuts. Ok. That’s all ‘economics 101’ but it’s true.

The Ryan-Trumpcare plan gives the wealthy and their corporations $592 billion in tax cuts. Will they spend all that? No. Their ‘multiplier’ is about 0.4 according to best estimates. Give the rich a tax cut, in other words, and they’ll spend 40% of it. That 40% means they will spend in the US economy about $230 billion over the course of the decade, or $23 billion a year on average due to their tax cuts. (They may spend more offshore, of course, especially the corporations, but offshore spending adds nothing to US economy and GDP growth).

Unlike the wealthy and corporations, the average consumer has a multiplier of at least 2.0, and the poor on Medicaid higher than that. But let’s conservatively estimate the government spending multiplier for consumers on the $673 billion spending for insurance subsidies and the $880 billion in Medicaid spending is only 2.0. That means a contribution to GDP of $1.55 trillion ($673 billion plus $880 billion) is times two, or $3 trillion total over the decade. That’s $300 billion a year contribution to GDP. But that subsidies and Medicaid spending is now repealed so it’s a reduction of $3 trillion, or $300 billion a year.

In net terms, we therefore get $23 billion a year in wealthy-corporate added contribution to GDP due to their tax cuts and $300 billion a year reduction in GDP due to the repeal of the subsidies and Medicaid. That’s a net reduction of about $275 billion a year from GDP, which occurs in 2018 and every year thereafter (on average) until 2026.

Based on the US current $20 trillion annual GDP, $275 billion annual net reduction is a little over 1% of the total GDP growth, which according to official government estimates is about 2% annually. The annual reduction in GDP from the multiplied and secondary effects is likely around .2% per year. That reduces annual US GDP to 1.8%.

That GDP reduction includes further ‘knock on’ effects to consider as well.

Premium and Price Inflation

The Ryan-Trumpcare proposal will almost certainly result in higher premiums and higher out of pocket costs for healthcare services. The higher inflation will reduce consumer household disposable income. That will leave households less income to spend on other items. Since the inflation in health care spending adds nothing to ‘real’ GDP, there’s no gain in GDP from that. But the reductions in household other items, in order to afford paying for the higher cost health insurance, will reduce ‘real’ GDP. So the net inflationary effect is significantly negative, depending on how much health insurance premiums (and deductibles, copays, etc.) actually rise.

The Ryan-Trumpcare proposal will almost certainly result in higher premiums and higher out of pocket costs for healthcare services. The higher inflation will reduce consumer household disposable income.

Ryan and Republicans claim that premiums are already rising rapidly under Obamacare, which is true, especially the past year. But that is likely to continue. The Health Insurance companies have been ‘gaming’ the system and the Obama administration did little to stop them. They will continue to do so in the transition to Ryan-Trumpcare and under it going forward as well.

The Ryan-Trumpcare proposal allows insurance companies to hike premiums for older customers up to five times more than premiums charged to younger customers. That’s up from three times under Obama. Trumpcare also now allows insurers to offer ‘barebones’ plans, with lower premiums but with hardly any coverage whatsoever. This trend was a growing problem under Obamacare, as consumers were signing up for super-high deductible plans ($3 to $5,000 per year) just to be able to afford the lower premiums. They were essentially ‘disaster-only’, called “leaners”, super-stripped down health care plans. The new ‘barebones’ policies will cover even less. This less and less coverage for the same (and sometimes higher) premium is in effect a price hike. Less for the same price is a de facto price hike in premiums. The Trumpcare plan also now permits insurers to charge a 30% surcharge for consumers who drop and then re-enroll. It assumes that premiums will decline, according to the CBO, after 2020. Sure, after 30 years of constant health insurance premium hikes, sometimes double digit, now the insurance companies four years from now will start reducing premiums! If anyone believes that, there’s a bridge on sale in Brooklyn they might look into.

Trumpcare also now allows insurers to offer ‘barebones’ plans, with lower premiums but with hardly any coverage whatsoever.

What About the US Budget and Deficits?

The Ryan-Trumpcare proposal takes $673 billion and $880 billion out of spending by government and households (not counting “knock on” negative effects on household consumption) and another $592 billion out in tax cuts for the wealthy and their corporations. That’s a $2.145 trillion hit to the US budget over the next decade. The Trumpcare advocates claim the wealthy-investor-corporate tax cuts will stimulate the economy and therefore tax revenues. But the 0.4 multiplier effect suggests only a fraction of that will positively affect the economy and tax revenue growth.

The Trumpcare advocates also claim their plan proposes to give tax credits costing $361 billion to consumers to buy insurance. But that starts only in 2020, so it’s really only $180 billion averaged over the decade. They further point out that another $80 billion in spending will occur in a grant for New Patient State Stability Fund to the States to spend, plus another $43 billion in government spending to hospitals to cover Medicare costs. So that’s about a total of $303 billion new spending to offset the $1.553 trillion spending cuts. Even if the spending additions of $303 billion have a multiplier of 2.0, the net deficit and national debt increase of Ryan-Trumpcare is still more than $900 billion.

So there’s hundreds of billions in net loss from the tax cuts and the net spending. That means massive increases in the US Budget deficit, and consequent rise in US debt, now more than $20 trillion. The CBO summarises the net deficit growth of only $336 billion. That is ridiculously low.

It should be noted that this net deficit, driven by tax cuts for the wealthy and their corporations, will be quickly followed by another, more massive general corporate tax cut now working its way through Congress as well. That one is estimated to cost more than $6 trillion over the coming decade. It and the Trumpcare tax cuts are in addition.

No wonder the wealthiest 1% households captured 95% of all income gains since 2009? And if Ryan-Trump have their way, they’ll get to keep at least that much for another decade.

And both Trumpcare and the daddy of all tax cuts coming follows on more than $10 trillion in business-investor-wealthy tax cuts that have already occurred under George W. Bush and Barack Obama.

No wonder the wealthiest 1% households captured 95% of all income gains since 2009? And if Ryan-Trump have their way, they’ll get to keep at least that much for another decade. America is addicted to tax cuts for the rich, perpetual wars around the world, and the destruction of decent employment and what’s left of any social safety net for the rest. The current political circus in Washington is just the latest iteration of the policy shift to the wealthy and their corporations at the expense of the rest. There’s more yet to come. And it will be even worse.

Feature image: House Speaker Paul Ryan, center, speaks at a news conference regarding the American Health Care Act, on Capitol Hill in Washington, March 7, 2017. (© GABRIELLA DEMCZUK / NYT)
https://www.thestar.com/opinion/commentary/2017/03/14/is-health-care-really-just-a-shopping-opportunity-salutin.html

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About the Author

Dr. Jack Rasmus is author of the forthcoming book, “Central Bankers on the Ropes”, by Clarity Press, June 2017, and the recent 2016 publications, also by Clarity, “Looting Greece: A New Financial Imperialism Emerges ”, and “Systemic Fragility in the Global Economy ”. He blogs at jackrasmus.com, where reviews are available. (For a further analysis of the Ryan-Trumpcare proposal in comparison to the Obamacare ACA it will replace, listen to the Alternative Visions radio show of March 10, at: http://alternativevisions.podbean.com

Le Pen-ization of France Europe’s Changing Landscape

March 9, 2017

By Dan Steinbock

In France, President Hollande’s utter failure to foster broad consensus for structural reforms has paved the way for the most contested election in decades. While public debate focuses on the 2nd round winner, the real story is that Marine Le Pen’s agenda has already shifted the French political landscape.

In recent polls, the French presidential rivalry involves 3-4 viable candidates, which together account for 85-90 percent of the total vote. Until recently, the leader of the Front National, Marine Le Pen, and the centrist Emmanuel Macron, have each garnered about 25 percent in the polls. The two are followed by the centre-right François Fillon, who has about 20 percent, and the socialist Benoît Hamon, with 15 percent.

While Le Pen may win the first round, she is not likely to win the second round, in which her popular triumph would be likely contained by a coalition of her adversaries. Yet, the future belongs to Le Pen’s agenda which the next president must coopt to win – and coopt to sustain victory.

Who’s Afraid of Marine Le Pen

The French presidential election will take place in late April, but the real winner will be chosen in the second round in early May. Even if Le Pen won the first round, the consensus is that a centrist or a centre-right candidate will win the second round.

Marine Le Pen (49) is the youngest daughter of the veteran FN leader Jean-Marie Le Pen, a French far-right politician who supported euro-skepticism, opposed immigration and pushed for law and order, traditional culture and values. As long as he led the FN, it was a marginal far-right, anti-Semitic party with politically incorrect neo-Nazi associations. In the past decade, Marine Le Pen has successfully “mainstreamed” FN away from the margins and extremism. Nevertheless, she has had difficulties funding her campaign because of the opposition of every French bank to her political platform.

In her campaign, Le Pen continues to support traditional values, law and order, while opposing immigration and the EU. As her campaign kicked off, Le Pen pledged a fight against “two totalitarianisms, globalisation and Islamism” that seek to “subjugate France”. Running in the name of the French people, she reaffirmed the FN’s anti-immigration, protectionist and anti-EU stance. “The divide is not between the left and right anymore, but between patriots and globalists,” she said. “Financial globalisation and Islamist globalisation are supporting each other. Those two ideologies want to bring France to its knees.”

Her France needs greater independence, believes in a multipolar world and neo-gaullist geopolitics.

Le Pen wants to pull out of the Euro and a return to French franc, a referendum on EU membership within 6 months, and taxes on imports and the employment of foreigners in France. Building on Gaullist legacies, she is a critic of and wants to pull France out of the NATO. She would like to revise French relations with the US and has denounced French bandwagoning toward Washington. Her France needs greater independence, believes in a multipolar world and neo-gaullist geopolitics.

The Three Anti-Pen Musketeers

Emmanuel Macron (40) is a self-proclaimed proponent of a “third way” and the product of the elitist École nationale d’administration (ENA). After a stint as an investment banker at Rotschild & Cie Banque, he served in Hollande’s socialist governments, where he advocated business-friendly reforms that were a poor fit with Hollande’s socialist constituencies. Like Blair and the Clintons, Macron tends to support whatever is expedient at the time, whether it has been Rotschild’s neoliberal profits or Hollande’s bureaucratic socialism.

Married with his 24 year older high school teacher he first met at 15, Macron’s personal life and policy stances remain ambiguous. Last November, he declared that he would launch a social liberal bid under the banner of En Marche!. In public, this was legitimised as a new Clintonesque-Blairian ideology; in practice, it was necessary because Macron had alienated socialists while failing to gain enough support among conservatives; he lacked a party platform.

Of the key candidates, Macron is the ultimate Europhile and federalist, although he sees himself as EU-agnostic. He supports integration and structural reforms. In controversies about immigration, secularism, security and terrorism, Macron has favoured a balancing act, which accounts for the perception that he avoids taking any stances. Ironically, that makes him valuable to neoliberal business, Brussels and Washington.

Born into privilege, François Fillon (63) became nationally known as President Sarkozy’s Prime Minister. Already years ago, he undertook controversial reforms of the labor code and the retirement system. He represents conservative Republicans (previously Sarkozy’s Union for a Popular Movement, UPM), France’s largest center-right party. Last fall, Fillon still seemed to appeal to the conservative “silent majority” in France, but that was before a widening embezzlement investigation following charges that he had paid his wife and children almost 1 million euros from the public payroll for little or no work. Rather than resign, Fillon attributed all blame to a “smear campaign” and has stayed in the game.

Just as Fillon thought he could get on with his presidential campaign, he was recently hit by more claims of financial irregularities as Canard Enchaine disclosed that he has also received an interest-free, undeclared loan of 50,000 euros from a French billionaire tycoon in 2013. If Fillon can remain afloat, he could prove a minority kingmaker in the second round – unless centrist forces can agree on a unifying candidate.

Known as an “Anglophile”, Fillon is a French Thatcherite. He would like to balance the budget and abolish the wealth tax. He would raise retirement age to 65 and reduce the public sector by cutting half a million civil-service jobs. He holds tough views about immigration, Islamic radicalism and terrorism. As a believer in realpolitik, he has called for dialogue with al-Assad’s Syria and Putin. “In a Trump era,” he says, “Europe must spend more on military.” While he stands for the West, he sees the expansion of NATO to Russia’s borders in the 1990s as a provocation that was bound to alienate Moscow and foster redundant friction.

The last viable candidate is Benoît Hamon (49), a French socialist (PS) who defeated the centrist and business-friendly Manuel Valls in the party primaries. While he is portrayed as a new figure, he is a veteran party bureaucrat and has served in the European Parliament (2004-9), Hollande’s Junior Minister for the Social Economy (2012-4) and Minister of National Education (2014).

Hamon supports a basic income to all French citizens, a 35-hour workweek, legalisation of cannabis and euthanasia, and huge investments in renewable energy. Unlike recent socialist leaders who have managed to widen the gap between business-friendly and pro-NATO social democratic leadership and the socialist and NATO-skeptical grassroots constituencies, Hamon represents the left wing of the PS and is an admirer of US Democrat Bernie Sanders. He is critical of neoliberal myths and the NATO.

In contrast, the more leftist Jean-Luc Mélenchon, who heads the new “Unsubmissive France”, would like France to leave both the euro and NATO. While Mélenchon has barely 10%+ support in France, the two might align to achieve a unified left position in May. Nevertheless, after years of Hollande’s failed policies and plunging ratings, all socialist candidates face a steep uphill.

Coming Shifts in French Policy Stance

Whether Le Pen wins the elections or not may not be the question. The real story is that the winning agenda that the next French president has been re-defined by the rise of Marine Le Pen. Domestically, the new president will push for (subdued) structural economic reforms with or without the consent of the unions, while taking a stricter view of immigration and a tougher stance against Islamic fundamentalism.

The real story is that the winning agenda that the next French president has been re-defined by the rise of Marine Le Pen.

France will have a more critical stance toward further EU integration, and the euro. As even Hollande recently acknowledged, “for a long time, the idea of a differentiated Europe, with different speeds and distinct paces to progress, has provoked a lot of resistance. But today this idea is necessary. Otherwise, Europe will explode.” If Le Pen wins, Paris will also start a process that could ultimately result in a “Frexit”.

In foreign policy, the new president will be more cooperative with Russia and President Putin, from the Middle East to Ukraine and energy issues. While France may actually invest more in defence spending, the return of Gaullisme is predicated on greater skepticism toward the NATO and harder push for French national priorities. While Macron’s team has already suggested that Russia may be intervening in the French election, France is not as vulnerable to Russo phobia as the United States.

Furthermore, recent Wikileaks disclosures prove that it is not so much Moscow that Paris should be concerned about. In the 2012 French presidential election – as classified CIA “tasking orders” indicate – the agency engaged in a spying campaign ahead of the election. The documents reveal that all major French political parties were targeted for infiltration by the CIA’s human and electronic spies in the seven months leading up to France’s 2012 presidential election. According to the most recent WikiLeaks documents, televisions, smartphones and even anti-virus software are all vulnerable to CIA hacking, which makes any effort to shape the outcome of the impending elections and referendums in Europe relatively easy. Washington and Pentagon favour pro-NATO candidates and will walk the talk.

Even more important will be the net effect of the new economic policies. In Brussels, the greatest fear involves Le Pen’s quest to unilaterally take France out of the Euro in just 6 months, which would be followed by the effective redenomination of €1.7 trillion of French public debt into francs (80% of this debt is not under international law and thus FN would have the right to change the currency). Unsurprisingly, the ratings agencies have already warned that the net effect would be the largest sovereign default on record, nearly 10 times larger than the €200 billion Greek debt restructuring in 2012. Like biblical prophets, Le Pen’s adversaries have warned that her victory would mean a French Armageddon, the plunge of euro, and chaos to the world financial system.

Like biblical prophets, Le Pen’s adversaries have warned that her victory would mean a French Armageddon, the plunge of euro, and chaos to the world financial system.

In contrast, the FN argues that reintroducing a national currency that would fall in value against the euro would lower France’s total debt burden and thus allow Paris to begin competitive devaluation.

Domestic Dead-End, International Spillovers

The struggle for France is the direct result of half a decade of policy failures, which climaxed last summer in a failed effort to reform the French labour code. It was not the first time. Years ago, huge strikes forced President Chirac to back down from proposed changes in the pension system, just as they led to fierce union opposition when President Sarkozy raised the retirement age. However, under Hollande, a Socialist government has been pitted against unions and the ultra-left, which has fostered apprehension, disappointment and fragmentation on the left.

When the socialist Hollande replaced the conservative Sarkozy as the French president in May 2012, the latter’s ratings had plunged but Hollande’s popularity hovered at around 58 percent. By late 2016, his ratings had plunged to less than 5 percent. So his decision not to seek a second term was hardly a surprise. While France cannot avoid the overhaul of its labor legislation in the future, a socialist president cannot drive a neoliberal labor agenda; and that’s what Hollande tried to do.

After half a decade of near-stagnation, French economy has been benefiting from a cyclical rebound, thanks to a more accommodative external environment, especially lower oil prices, a depreciated euro, record low interest rates and the European Central Bank’s quantitative easing. Nevertheless, these shifts cannot compensate for France’s longstanding internal rigidities, which overshadow the economy’s medium-term potential. In the 1980s and 90s, French growth still exceeded 2.2 percent; in the 2000s, it hovered around 1.8 percent; now it is around 1.1 percent and likely to decelerate to less than 1% by early 2020s. In the past decade, French competitiveness, as reflected by the country’s share in world export markets, has declined significantly as well.

What’s worse, French real wage growth has been solid, despite declining productivity growth. The equation is unsustainable; it means that French economy is penalising future generations for its current distortions. If the external environment grows still more adverse, while reform progress is hardly evident, French banks, given their size and interconnectedness, could generate adverse effects not just domestically but through spillovers, especially in Italy and emerging Europe.

France remains the world’s sixth largest economy. If it begins to shake, Italy cannot avoid a quake and ailing Eastern European economies could take multiple hits. That, in turn, would have adverse implications across the Eurozone and globally.

Feature image: © Jeff Pachoud, AFP | French far-right presidential candidate Marine Le Pen gives a campaign speech in Lyon on February 5, 2017
http://www.france24.com/en/20170205-france-marine-le-pen-far-right-speech-brexit-trump-immigration-lyon

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Dr. Dan Steinbock is an internationally recognised expert of the nascent multipolar world. In 2010, he predicted that Brussels opted for misguided policies to overcome the European sovereign debt crisis, which would prolong rather than resolve the challenges. In spring 2016, he forecast the UK Brexit and the outcome of the Italian referendum.

Dr Steinbock is the founder of DifferenceGroup. He has served as Research Director of International Business at India China and America Institute (USA) and Visiting Fellow at Shanghai Institutes for International Studies (China) and the EU Center (Singapore). For more, see www.differencegroup.net

Trump – The Enigma

March 9, 2017

By Peter Koenig

In this article, Peter Koenig discusses a few of the bountiful contradictions and controversies of the new Trump Administration. The Donald, less than 50 days in office, deserves the benefit of the doubt, as anybody would who dares oppose and attack the “fake news” lie culture of western media.

President Trump may be wondering himself about the miracles and mysteries and confusions he creates. As a megalomaniac, he is the only one who knows everything. His ideas range and flash from right to left, crisscrossing the political spectrum to favour the globalised world – and yet he is largely acting against globalisation – and in the “interest of people”. That would be great.

He also seeks truth by telling truth; that Obama and Hillary created ISIS and the CIA created Al Qaeda, that 9/11 was not the way the Nine-Eleven Commission says it was, and that the Government lies about statistics. Poverty, unemployment and inflation figures are much higher than those published by the various US statistical offices. He loves BREXIT, congratulating Theresa May for it, and joyfully predicts the end of the European Union and of the Euro. It would be a good thing for the world. But does he mean what he says? – As a megalo he loves to be an Enigma.

The non-intervention policy – as candidate Trump he said he would not intervene in other countries’ affairs. Fair enough. That’s what most of the world wants; that’s what most of the Americans who voted for him want. Yet, Donald Trump, the almighty, along with his chief vassals of Europe, France, Germany and the UK, has just tried imposing new sanctions on Syria, among other deceitful allegations, because of some military commanders’ use of toxic gas attacks. By now, most of the informed world knows that this is a lie and nothing but a UN proven lie – a lie that has been repeated since the beginning of the CIA imposed war on Syria in 2011 to justify “regime change”.

Both China and Russia opposed the motion. Mr. Putin went on a news conference saying that sanctions would not be helpful for the new peace negotiations in Geneva. – Of course, not. But that’s precisely what they are supposed to do – undermine the peace process. There are enough “outside” negotiators in Geneva with brainwashed, preconceived ideas that Bashar Al Assad is a mass murderer, having killed “hundreds of thousands of his own people”. Literally.

That’s the concept of some of the western negotiators. It is an outright shame that such people are allowed to help negotiate peace – even worse, they claim the right to rewrite Syria’s Constitution for a country without President Assad, who still has 80% of Syrians’ backing. Seriously? – Yes, very seriously. If it wouldn’t be a grave breach on a country’s sovereignty, it would be laughable. Who is sponsoring such nonsense anyway? The western world once again proves without impunity that they have no respect for human and civil rights, for those they consider below their boots. What would those foreigners say who are “negotiating” a new Constitution for Syria, if foreigners were to decide on their own country’s Constitution? – Trump should know better. Is this the same Trump, who pledged non-intervention in foreign lands?

Trump, Netanyahu’s puppet – Or is it the “new” Trump? The even more submissive Trump – submissive to Netanyahu’s Israel? Outranking by far his predecessor. – The little boy Trump we saw during the joint Press Conference with Bibi in Washington last month? – So sad and almost insulting to the American people, witnessing the President of the United States in total adulation of the Zionist-in-Chief. Surely, he may have swayed Trump’s good intentions away from staying out of other peoples’ and countries’ business. – The exceptional nation of the US of A is a sheer vassal of Israel, the Zionist-run 8-million people country in the Middle East, adamant to turn the entire zone into a huge chaos, a zone which they eventually hope to take over from shiny Euphrates to Shiny Nile, much like the Brits did, by killing all the indigenous people in North America to eventually create an empire from Shiny Sea to Shiny Sea? – Not bad. But why would The Donald not know about it? And go along with such atrocities? Who twists his arm? How does one twist the arms of the President of the United States?

Peace with Russia – candidate, as well as President Donald Trump was pledging for a future peaceful relationship with Russia. However, when pressed, he is not a friend of Putin’s and doesn’t know whether he will get along with him. In any case, to deserve a friendly relation with the exceptional nation, Mr. Putin must return Crimea – return to whom? – to Kiev’s Nazi regime? Anybody who hears this must be thinking it’s a joke, or sheer lunacy.

And withdrawing Russian troops from Ukraine? Anybody who says this and propagates it around the world is mad. People who by now haven’t gotten to the truth are insane. Because the truth is everywhere, except in the presstitute. Get away from the presstitute. Crimean people decided by a 97% majority to rejoin Russia, where they were during the past 300 years; and Ukraine – it is by now a little secret that the US Embassy in Kiev, helped by CIA, MI6, NATO and the EU vassal states, instigated the coup in February 2014 against the democratically elected – pro-Russian President Yanukovych. Rather than intervene in Kiev’s Washington and Brussels driven Nazi war against her own people in the Donbass, Putin has explicitly refused the democratically voted demand by the Donbass people also to be reintegrated into Russia. Ukraine for hundreds of years was part of Russia.

Instead, President Putin has initiated the Minsk II Agreement of February 2015. Minsk II was a Russian initiative after Minsk I of September 2014 collapsed, mainly because the warrying parties Kiev and NATO didn’t adhere to the accord. At Minsk II the leaders of Germany and France, Russia and Ukraine’s oligarch President, Poroshenko, shook hands for peace. For the west, this was mere propaganda, as they can say now, that Russia didn’t adhere to the deal. Lie after lie after miserable lie. Mr. Trump, despite his pledges to the contrary – and he said once as much as Obama was responsible for Maidan, the Kiev coup in February 2014 – is back-tracking on his own common sense. Did here too, Netanyahu’s evil wisdom prevail?

Sanctions – Trump was clear during his campaign and in the first days of his Presidency that he didn’t think sanctions were a good idea, especially not applied to Russia. Has he had a change of mind or a twist of arms? – The war industry, of course, does not like the notion of peace with Russia. The President of the United States has nothing to say. Is he a mere marionette of the war and security faction of the Deep State? Naturally, well accompanied by a bunch of stooges from Brussels. Never mind that these sanctions hurt Europe more than they hurt Russia. As Mr. Putin said repeatedly – thanks god for the sanctions. They have helped Russia to become independent again, building her own agriculture and manufacturing capacity – let alone research and development which is already producing cutting edge technology, by far superior to the US-outsourced kind, coming from such low-wage countries like India.

Appointing Nikki Haley Ambassador to the UN – the new mandate for the former Governor of South Carolina, is another ruse that should please Israel. Judging from her first moves in the UN body, Nikki Haley looks not much different from her predecessor, Samantha Power, especially when she flies such lies in the face of the world, like, “It is a sad day on the Security Council when members start making excuses for other member states killing their own people. The world is definitely a more dangerous place,” in response to Russia’s and China’s veto to the new western attempt to impose more sanctions on Syria.

She knows – or should know better. Trump definitely knows better. If he let her get away with this slander propaganda, it’s because he has been told to do so, or wants to bend over backwards to please his friend Bibi, and/or because he himself thinks the UN has become a useless body of bla-bla nations, devoid of any backbone; it should melt away, as it is unreformable in its current structure, like the EU. Both have been hijacked by the world’s Deep State of neocons. It’s time to wake up to this new reality.

The no-nonsense strategist Flynn, who was about to seek harmonious relations with Russia, and would defend Trump’s non-intervention policy, is gone. The masters of the Pentagon, the military industrial complex have won.

Firing Michael Flynn, Mr. Trump’s first choice as National Security Advisor – was a horrible betrayal of a friend and possibly a peacemaker. Did Trump simply follow orders from non-peace-loving Pentagon masters – Deep state warriors? With that unsavvy move the President lost all his respect from people, whose ethics weigh infinitely more than those of the Washington swamp. The no-nonsense strategist Flynn, who was about to seek harmonious relations with Russia, and would defend Trump’s non-intervention policy, is gone. The masters of the Pentagon, the military industrial complex have won. – By firing Flynn, did Trump hand over de facto his Presidency to neocon Vice-president, Mike Pence? Thanks to Pence who created a storm in a water glass about a private citizen talking to the Russian Ambassador, Flynn is out – and Trump has lost his worldwide standing.

NATO is outdated – superfluous – those were the wise words of candidate Trump. He repeated them, somewhat weakened after his inauguration – but not for long. The puppets in Europe were crying big Crocodile Tears; the newly appointed James “Mad Dog” Mattis, true to his name went to Brussels, telling his subjects that there was nothing to worry about; the US would continue protecting Europe with NATO against the evil Russians – but they had to pay up, sharing more of the cost of this expensive, but highly profitable enterprise, the weapons industry. He didn’t tell them the latter part. That was implicit, though. – We can assume that Mattis didn’t go to Brussels on his own initiative, but as the emissary of his boss, the President and Commander-in-Chief of the United States.

Increasing the Defense budget by US$ 54 billion – Trump’s recent announcement, wasn’t exactly a move towards peace. Earlier, within his first couple of weeks in the White House, Trump went to the Pentagon and told the generals to come up within a month with a plan on how to renew the war equipment, including the nuclear arsenal – sort of confirming Obama’s plan to put a trillion dollars into “nuclear renewal” within the next ten years.

None of this smells of peace, or even of promoting harmonious relations with the rest of the world. It has nothing to do with wanting to become a nation of equals. And it goes way beyond simply “Making America Great Again”. It rather smacks of perpetuating Washington’s status of the exceptional nation – pure insanity.

Iran Bashing – calling her “The World’s Biggest State Sponsor of Terrorism”, – another outrageous lie destined to spread negative propaganda about Iran, to intimidate other countries from renewing their commercial dealings with Iran. After all, the “Nuclear Deal” promised to abandon sanctions. Yet, Trump just started a new regime of sanctions. Trump also wants to “scrap” or rip apart the 5+1 and Iran (Permanent Security Council Members, plus Germany and Iran) “Nuclear Accord” of January 2016. This may not be easy, as there are more players involved than just the exceptional nation.

Any intervention by Russia would be considered an aggression on the US.

Trump and his aids, have been demonizing Iran already during his campaign and reiterated the groundless accusations after his inauguration. – Why? – He knows that there is no substance to back up his claims and that Iran is backed by Russia and China and that a direct confrontation with Iran would mean a clash – nuclear? – with Russia and possibly also with China. Is this a way of getting at Russia (and China) through the back-door? Or is it just one more goody for his Pal, Bibi? – We don’t know yet. But it is not excluded that Israel launches an attack against Iran – supported by Washington, of course. Any intervention by Russia would be considered an aggression on the US.

Truth be told, this appears to be sheer sabre rattling. Nobody dares attacking Iran, which would mean attacking the entire axis of Middle East stability, China-Russia-Iran – and more, attacking the Shanghai Cooperation Organization (SCO), of which Iran is now a member. Confronting SCO would be aggressing one half of the world’s population that commands one third of the world’s GDP. That’s heavy stuff. More than a conventional WWIII. From there, nuclear is just an emotional breath away, or a tiny misunderstanding – who wants to risk that? – Least the war industry. Because once the planet is eviscerated, there is no more need for arms. Those few elitists who may survive, have killed their milk cow. Trump should know that. He is a businessman.

Better is eternal chaos – leaving the arms and bankster business booming – reducing at the margin the world population by continuous merciless killing; by armed conflicts; by artificial food shortages; by clandestine sterilizations through GMOs (plus a myriad of deadly diseases potentially implanted in genetically engineered food seeds); by an out-of-bounds pharma-industry, today already responsible for one third of annual deaths, right after cancer and heart failure – all with the goal of leaving more resources for the few. That’s ideal for the empire and those who are in command of the empire. In the meantime, sabre rattling with nuclear warheads is an excellent tool for intimidation. Scared people are much more submissive.

And on the domestic front….

The wall on the Mexican border – a promise, Trump seems adamant to keep. Has he been told how many particularly southwestern US businesses he would kill? Agriculture, hospitality and tourism, small businesses depend on illegal workers. They all do work Americans don’t want to do. So, there is no immediate alternative. Did Trump think this over?

Forced evictions of illegal immigrants from their often longtime homes in the US, fall in the same inhuman category. The trained brutes of US police enjoy this “new freedom” to use force tremendously. A more generous, more civil and more human – and for both sides more beneficiary move would be granting all illegals with no criminal records – at least 97% – amnesty, with work visas or immigration status, depending on their situations.

But The Wall has become so abjectly popular among the non-thinking US rednecks that there seems to be no crawling back. Or is there, Mr. Trump? – Like coming to reason?

Renegotiating NAFTA – or abolish this nefarious trade deal altogether – yes, but done professionally. That should in the long run please both Mexico and Canada, as both of these countries have lost enormously for signing on the 1992 Clinton- imposed dotted line. Mexico alone lost 1.3 million farm jobs, as the US 2002 Farm Bill subsidised US agribusiness by as much as 40% of net farm income, thereby driving countless Mexican farmers into ruin. – So, renegotiating NAFTA would be welcome by Mexico and Canada, but surely that’s not the way Trump sees it. – Or has he or some of his economic advisors told him what is really at stake?

Bringing back jobs and Making America Great Again – the Trump slogan of the year. Probably coined by some members of the Deep State, to emulate Obama’s “Yes we Can” – just coming through other lips, is nothing but the same trick – but with the naked emperor wearing differently shaded clothes. If Trump can pull this through – it would be truly amazing, a true feather in his hat. Of course, it doesn’t happen overnight, and it requires thorough planning. Just giving homecoming corporations tax breaks is not the solution. Analysts say it would take at least 20 years to build up a job base, mainly in the rust belt, that could rival what was there before the big exodus to cheap labor countries in the late 80s and 90s.

Globalisation has had nothing but devastating effects for the large majority of the world population. This would clearly be an unparalleled trump in Trump’s basket.

Not only would it help bring back job sovereignty to the US, it would be a tremendous blow to globalisation; this evil structure created by the neocons and their institutions, FED, IMF, World Bank at the Washington Consensus Conference at the end of the 1980s. Globalisation has had nothing but devastating effects for the large majority of the world population. This would clearly be an unparalleled trump in Trump’s basket. He seems to be serious, as he congratulated the British PM to BREXIT and doesn’t believe in the long-term survival of the European Union and the single currency, the Euro. And he is right.

Canceling the Trans-Pacific Partnership (TPP) agreement – and possibly also the highly controversial TTIP (Trans-Atlantic Trade and Investment Partnership) deal – would be a tremendous achievement for Trump. The people of Europe and of the 11 Pacific Countries might be forever thankful to Trump for his genius move. Never mind that he believes they would have been bad for the US of A. Let him. A good deed to the world, so anathema to his other business- oriented discourse. Here’s to the enigma Trump!

Trade war with China – may it be Trump’s soft version of Obama’s South China Sea aggression? He already announced a 45% import tax for anything coming from China that could be made in the US of A. Of course, this is first meant as an incentive for all the US corporations who outsourced their manufacturing to bring them back home. But, he thinks, by the way it would hurt China as a rising star on the world economic horizon. It hardly would. Especially not in the long-run. More hurt would be the United States if China were to retaliate.

As of the end of 2016 Chinese foreign direct investments (FDI) since 2005 in the US cumulatively amounted to 109 billion dollars, a mere10% of all of China’s FDI, worldwide. But, they are accelerating. China’s FDIs in the US in 2016 with 45.6 billion were about triple those of 2015. This compares with about 644 billion dollars of US FDI in China over the past 15 years. Punishing China with steep import taxes is about as effective as “sanctioning” Russia – namely almost nil. China has huge investments in Asia, in her principal export market. This is one area where Obama wanted to interfere with his pivot to Asia. The other one, of course is militarily, by stationing about two thirds of the US Naval Fleet in the South China Sea. They won’t be twiddling thumbs for long.

Let’s see what the twittering Trump does. Will he get the license to play business with China? Or will the Deep State of the Pentagon-Security clan get the best of him – through an arm-twisting provocation in the South China Sea?
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Trump, the enigma. These are just a few of the bountiful contradictions and controversies of the new Trump Administration. If he manages to stop Globalization, the nefarious trade deals set up under Obama, bringing back the work force to the US, rehabilitating his country’s decaying infrastructure and bringing back security to the common citizen, plus decent health care and education – and foremost, keeping wars at bay, then he has achieved more for the US and the rest of the world than any of his predecessors for the last 100-plus years. – To be fair, The Donald, less than 50 days in office, deserves the benefit of the doubt, as anybody would who dares oppose and attack the “fake news” lie culture of western media.

Featured photo courtesy: AP/Carolyn Kaster

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About the Author

Peter Koenig is an economist and geopolitical analyst. He is also a former World Bank staff and worked extensively around the world in the fields of environment and water resources. He lectures at universities in the US, Europe and South America. He writes regularly for Global Research, ICH, RT, Sputnik, PressTV, The 4th Media, TeleSUR, TruePublica, The Vineyard of The Saker Blog, and other internet sites. He is the author of Implosion – An Economic Thriller about War, Environmental Destruction and Corporate Greed – fiction based on facts and on 30 years of World Bank experience around the globe. He is also a co-author of The World Order and Revolution! – Essays from the Resistance.

United You Don’t Stand

February 20, 2017

From the Editors

The latest news about Israel is again about some on-going land grab. This is not new news. This has been going on for over 70 years. And in and of itself historically Israel is not unique in conducting this type of land grab for those it regards as its own people, and from those it regards as the other.

That is how the United States came into existence.

The United States was created on the back of a huge and systemic land grab. The land taken from the indigenous peoples, the American Indians, was initially classified by us as terra nullius. The indigenous peoples disagreed of course. Similar land grabs also took place in Australia, New Zealand, Canada and South Africa.

No, the real news, and once again not new news, is the enduring hypocrisy of a large number of Arab states, who perpetually give lip service to support for the Palestinian cause. This is usually to keep their own masses drunk with platitudes of solidarity.

The fact is that the Middle East is at war with itself.

It is easy to blame the United States and or NATO for regularly intervening either in terms of colour revolutions or hybrid wars or outright war as in Iraq and Libya, or war by proxy agents as in Syria.

The fact is that the Middle Eastern states are at ideological war against each other. Why? Only God knows!

Europe moved towards harmonious relations (apart from the Napoleonic Wars and World Wars I & II) after the signing of the Treaty of Westphalia in 1648, which marked the end of an era of ideological rift and recognised the supremacy of the nation state as a political construct. Incidentally, this 30 Years’ War started when the Holy Roman Emperor, Ferdinand II decided to impose Roman Catholicism upon the people within his domains.

Saudi Arabia and the Gulf monarchies, allied closely to the United States and NATO regard Iran as a disruptive influence within the Middle East.

One might note here that Saudi Arabia and the Gulf monarchies are not democracies. They are fairly antiquated, repressive regimes that might see the Iranian republic as a disruptive influence only because their own positions are at present guaranteed by the patronage of the US and NATO. Iran regards the United States as a meddler in the region often purely for the benefit of Western multinational oil companies who don’t want to pay Iran or any of the other states in the region a fair price for the exploitation of their oil and gas reserves.

Furthermore, Iran is seen globally as representing symbolically and tangibly the essence of resistance to what many call American Imperialism.

An imperialism made that much more fluid by the collaboration of nation state actors, for example, who align themselves against Iran and Syria for reward from the United States and NATO countries in the form of weapon sales and the bolstering of their regimes.

We should really forget about Israel for now. Though any suffering caused to any peoples within the parametres of that state is inexcusable.

The real issue, the real news, is that there can be no peace within the Middle East until there is unification of the mind set of the leaders of the various states in the Middle East and a determination to be united and harmonious.

After all, though this may sound stilted, the European Union as a fairly harmonious economic, cultural and social entity was not created by warring states or those bleeding from ideological wounds.

Donald Trump and Steve Bannon’s Russia Policy Explained: Bend or Break, Expect Change

February 16, 2017

By Jeffrey Sommers

For Russians, Mr. Trump presents at least the chance of a new course in US/Russian relations. Putin hopes to see the US stop its liberal interventionist policies – a position in accord with Mr. Bannon’s. A return to chilled relations will reward Russia and the United States’ respective military-industrial-intelligence complexes.

The central figure in President Donald Trump’s administration is Steve Bannon, but for how long, nobody knows. Mr. Bannon sees the fate of the US in apocalyptic terms. His world view centres on the supposition that the West, or as he sees it, Judeo-Christendom, is locked into a global fight with Islamic fundamentalist terrorism presenting an existential threat to the United States. Two, and related to point one, (but which goes beyond the scope of this essay), is that there exists a ‘real’ capitalism connected to that Judeo-Christendom. This version of capitalism produces broad-based prosperity. According to Bannon, the United States has departed from this model and must return to it or else collapse into the abyss.

Addressing point one, outreach to Russia becomes readily understandable given Mr. Bannon’s outlook. Under Vladimir Putin’s rule, Russia showed no mercy crushing Islamic separatists in Chechnya. The victory was total and spared no destructive power. Indeed, so much artillery fire was rained down on Chechnya that Russia dipped into still existing World War II surplus ordnance to complete the job. Additionally, Putin helped the United States in Afghanistan by providing rail transport corridors through Russia. Moreover, Russian intelligence picked up on the terror threat posed by the Dagestanis that bombed the Boston Marathon in 2013. The United States failed to act on Russia’s intelligence and consequently suffered. Moreover, Bannon sees Russia as a Christian state, while he thinks Europe has gone secular and soft. Mr. Putin indeed sees Russia as Christian, while also emphatically affirming it is a multi-ethnic federated state. This last point is lost on Mr. Banon’s Brietbart, Alt-Right, adherents, but then nuance is not their strength.

For Russians, Mr. Trump presents at least the chance of a new course in US/Russian relations. Putin hopes to see the US stop its liberal interventionist policies .

Then there is Syria. Again, Russia presents its role here as taking the fight to Islamic terrorists. A corridor has opened connecting terrorists in Syria to the Russian Caucasus, a distance of only several hundred kilometres. This makes Russia in Syria a decidedly serious as a player in the fight against terrorism from the perspective of Mr. Bannon. Meanwhile, the US under President Obama’s administration, referenced the need to support Syria’s “moderate Islamic opposition”. Yet, as Obama-era ambassador to Russia, Michael McFaul, noted in an interview last year, “I’m on TV all the time where I have to use the phrase “moderate opposition”, and I don’t know what it means. The President gave a speech yesterday—we’re supporting ‘Syrian forces’ he said, right? Who are they? What are they?” The US complains Russia has not, as promised, fought terrorism in Syria, but merely targeted the enemies of Bashar Al-Assad’s government. For Mr. Putin the realist, this is synonymous with fighting terrorism, as many of Mr. Assad’s enemies are in fact radical Islamists funded by Saudi Wahhabists (who previously funded the Afghani Mujahadeen that eventually morphed into Al-Qaeda). These same forces in Syria are also funded by the Qatari government. The Qataris (Sunni Muslim allies of the Saudis) wish to run a natural gas pipeline to Europe through Syria. Presently, this project is blocked by Assad’s Alawite Shia government that has given the gas pipeline transit contract to their allies, Shia Iran, even if the former is largely a secular government, while the latter is decidedly not so. Assad knows that if his government is toppled, he could meet a fate similar to that of Libya’s Muammar Gaddafi. Mr. Gaddafi’s video recorded end arrived with him being sodomised by a bayonet, while begging not to be shot, which in due course he was. This was immediately followed by an interview with the then US Secretary of State, Hillary Clinton (who advocated for US intervention in Libya) stating, “We came. We saw. He died”, followed by laughter. While one might make the case that Mr. Gaddafi deserved no better end, the manner of his execution was no doubt seen by Mr. Assad. Mr. Putin has reputedly viewed the tape of Gaddafi’s gruesome execution no less than three times. In short, neither of these leaders intends to exit this life in the same manner and suspect that some US policymakers intended to reprise Gaddafi’s fate with Mr. Assad, if not for Mr. Putin. When it comes to relations with Trump, Mr. Putin is looking for another reset, but likely has few illusions about its prospects given the depth of US hostility to him, from both policy makers and opinion makers in the US. Nonetheless, for Russians, Mr. Trump presents at least the chance of a new course in US/Russian relations. Putin hopes to see the US stop its liberal interventionist policies – a position in accord with Mr. Bannon’s – that destabilised North Africa and the Middle East, thus providing space for groups like ISIL to emerge and spreading their influence to Syria

Then there is NATO. Economic conservatives (along with Messieurs Trump and Bannon) often claim Europe gets a free-ride on security via the US. Few NATO countries spend the recommended 2% of GDP on defence. Among exceptions are Greece, a country viewing its fellow NATO oarsman, Turkey, as a future “Ottoman” occupier biding its time for a return. Of course, such heavy defence spending, largely borrowed from Germany to buy German weapons, contributed to Greece’s fiscal woes. This, plus democratic nature of tax evasion (near all Greeks do it, their public sector excepted) in the home of democracy, contributed further to Greece’s debt crisis. While Europe has been subsidised on defence, whenever Europeans have discussed forming an independent defence force, the US has shown displeasure and Europe drops it. Thus, Donald Trump’s statements regarding NATO while understandable, have been reckless in their timing and manner of communication.

President Trump’s NATO comments especially unnerved the Balts and Poles. Poland was partitioned by Russia, Prussia and the Astro-Hungarian Empire in the late 18^th century. By 1795, it no longer existed. After a brief return of independence in 1918, it again lost it to Germany’s invasion in 1939, followed by partial Soviet annexation of territory and the imposition of a Soviet proxy government of its remaining territory until 1989. Thus, it is suspicious of Russian intentions. Then there are the Balts. These small countries collectively possess population numbers well shy of New York City’s, yet often punch above their weight in international affairs. Caught in the cross-hairs of WW II, they were occupied by the USSR to provide ‘strategic depth’ in case of war with Germany. Stalin, fully expecting the future return of an aggressive Germany, as happened following WW I, decided to keep the Baltic states for strategic depth in expectation of a WW III. This had tragic consequences. Thousands of Balts in leadership positions were shot. Hundreds of thousands fled their countries as the Red Army returned in 1944. As the Cold War emerged in the late 1940s, hundreds of thousands from the Baltic middle classes were deported to Siberia. Many later returned. Many others died. For the Balts and Poles alike, NATO’s viability is seen in existential terms. Thus, President Trump’s statements regarding the need for NATO members to pay up and expression of doubts whether the organisation is even relevant, have been unwelcome in the extreme. Moreover, comment by Trump surrogates, such as Newt Gingrich, that proximity of Estonia’s capital of Tallinn to St. Petersburg makes it a veritable suburb of the latter, did little to instil confidence among the Balts that the Trump presidency is committed to their security. By mid-February, the Trump Administration’s messaging on this delicate matter improved and Balts came to feel a bit more confident that the US was not going sacrifice them to greater strategic imperatives with Russia.

While devising legitimate plans for self-defence, the US and Baltic countries should be careful not to overreact.

Yet, a possible détente with Russia under Trump has unnerved the Balts. They fear improved relations with Russia will signal that the Baltic states are not important enough to defend and at a point of US crisis or distraction, Russia will seize them. Yet, it would be a mistake for President Trump to structure US policy on the assumption Vladimir Putin has designs on the Baltic states. While devising legitimate plans for self-defence, the US and Baltic countries should be careful not to overreact. The historical circumstances that led to the 1940 Soviet occupation of the Baltics, chiefly an expansionist Germany seeking lebensraum (‘living space’), are absent today. Moreover, Russia no longer needs Baltic ports, since Putin spent vast sums developing northern ports in Russia like Primorsk to reduce their dependence on those in Estonia, Latvia, and Lithuania. Putin also wants to attract European investment in Russia, which would disappear if he annexed countries in the EU territory and potentially launched World War III by invading NATO territory. The US must keep its defence commitments to the Baltics while doing little to unnecessarily ratchet up tensions on Russia’s sensitive border from which invading powers have historically sacked Russia.

Ukraine is the chief flashpoint between the US and Russia. Putin and most Russians see Ukraine as ethnic siblings of sorts. Ukraine is complicated. Its borders are a Soviet legacy. West Ukraine is compromised, in part, of peoples from the old Austro-Hungarian empire that Stalin seized in 1939 and 1945 for oil and strategic depth. These are Ukraine’s most anti-Russian regions. A third of the country (roughly southeast/south) was part of Russia, but was tacked onto Ukraine by Vladimir Lenin in 1922 to add proletarian “balance” to a largely peasant Ukraine. Then, of course, Nikita Khrushchev pasted on Crimea (majority Russian) in 1954, which was under negotiation for return to Russia in 1991, but the Belavezha Accords where the dissolution of the USSR was planned proceeded too quickly to settle the matter. The red line for Putin on the score of defence, is inclusion of Ukraine and Caucasus in NATO. Russia could go to war over this. Thus, the concern going forward is what happens after Putin? If leadership falls to Russian ultra-nationalists, this could result in the creation of and enlarging of “Greater Russia” through annexations. Of course, Russia can’t simply unilaterally ‘correct history’ at its discretion, but at the same time all must act responsibly in Ukraine to avoid war and strengthening the hand of Russian chauvinists.

The pressures for Donald Trump to reprise the traditional hostility between Russia and the United States are immense. Expect Trump to eventually bend or break on this score.

Putin is more realist than ideologue, and while he rules as an autocrat at home, he can be engaged by the United States with interest-based realism. The United States and Russia both have military-industrial complexes (as President Dwight Eisenhower termed them) fuelling the current Cold War version 2.0, with media and intellectuals in both countries playing supporting roles. The situation, however, could quickly spiral out of control. Neither Russia nor the United States should be given a free pass, but neither should they be working to increase tensions. The United States need not support Putin, but they should be mindful that irredentists on his right flank, like Alexander Dugin and Igor Girkin, look to build an enlarged ‘Greater Russia.’ The United States must act cautiously. Putin’s fall might not bring democracy but instead the rise of the revanchists and a Cold War that turns hot.

Steve Bannon (Trump White House Chief Strategist) and General Mike Flynn (former Trump National Security Advisor) held central sway in Donald Trump’s administration and have shared outlooks on Russia. Others, however, such as Trump’s Secretary of Defense, General James (aka, “Mad Dog”) Mattis, perceive Russia in its traditional role from “central casting” as villain to America’s hero. President Trump’s Secretary of State, Rex Tillerson, seems to sit between these two camps. Presently, the only constant on messaging is chaos. The pressures for Donald Trump to reprise the traditional hostility between Russia and the United States are immense. Expect Trump to eventually bend or break on this score. Flynn has already been removed for seeking rapprochement with Russia. Bannon will be targeted next. A return to chilled relations will reward Russia and the United States’ respective military-industrial-intelligence complexes. They depend (both psychologically and for their livelihoods) on this conflict being maintained. The legion of media and policy consultants in both Russia and the US whose careers are linked to maintaining a Cold War environment will flourish in a return to ‘normalcy’ in a Cold War 2.0. Of course, the danger of this path is a Cold War that eventually turns hot.

Featured photo courtesy: AP / Evan Vucci

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About the Author

Jeffrey Sommers is Professor of Political Economy & Public and Senior Fellow, Institute of World Affairs of the University of Wisconsin-Milwaukee and Visiting Professor at the Stockholm School of Economics in Riga. His new book new book (with Charles Woolfson), is The Contradictions of Austerity: The Socio-economic Costs of the Neoliberal Baltic Model.

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