Monday, August 22, 2016

Monday, August 22, Morning Global Market Roundup: Asian Shares Drop, Dollar Gains As Investors Await Fed Hike Signal

By Lisa Twaronite and Nichola Saminather
Reuters
August 22, 2016

Asian shares slipped on Monday, while the dollar lifted off last week's lows on expectations a signal might emerge from a Federal Reserve gathering this week in Jackson Hole, Wyoming, that the U.S. central bank is gearing up to hike interest rates.

Global central bankers will join the annual mountain retreat that opens on Thursday, with Fed Chair Janet Yellen due to speak on Friday.

European markets also looked set for a lower open on Monday, with financial spreadbetter CMC Markets expecting Britain's FTSE 100 .FTSE to be off 0.2 percent, and Germany's DAX .GDAXI and France's CAC 40 .FCHI to start the day down 0.1 percent.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was down 0.7 percent, after losing 0.3 percent last week. Wall Street logged modest losses on Friday, ending nearly flat for the week.

"The market could move either way, but most people want some kind of signal at this point," said Masashi Oda, general manager of the strategic investment department at Sumitomo Mitsui Trust Asset Management.

The dollar index, which tracks the greenback against a basket of six major rivals, added 0.4 percent to 94.879 .DXY, pulling away from last week's trough of 94.077, which was its lowest mark since June 24.

The dollar was up 0.6 percent against its Japanese counterpart at 100.79 yen JPY=, while the euro EUR= was down 0.3 percent at $1.12830, slipping from last week's eight-week high of $1.1366.

The weaker yen proved a boon for Japan's Nikkei .N225 which closed up 0.3 percent. It skidded 2.2 percent last week, as the dollar dipped below 100 yen.

China's CSI 300 index .CSI300 retreated 0.6 percent and the Shanghai Composite.SSEC lost 0.5 percent as investors took profits. Hong Kong's Hang Seng slipped 0.4 percent.

On Sunday, Fed Vice Chairman Stanley Fischer gave a generally upbeat assessment of the U.S. economy's current strength, saying the job market was close to full strength and still improving.

"Fischer's comments have raised some expectations in the market, particularly after (New York Fed President William) Dudley's recent comments," said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank.

Last week, Dudley said a rate hike would be possible in September. Fischer's remarks fueled that sense of anticipation, though interest rate futures contracts indicate that the market is pricing in about 50/50 odds of an increase in December.

"While no one seriously expects the Federal Reserve to act on rates next month, some Fed officials seem extremely keen to try and keep the option on the table," Michael Hewson, chief market strategist at CMC Markets in London, said in a note.

"Attention will be on Ms. Yellen's speech on Friday, however it doesn't seem likely that we'll get any significant clues despite the markets desire to be hand held by the Fed," he wrote.

Crude oil futures dropped, giving back some of their recent gains that propelled oil into bull market territory, after technicals had it in a bear market earlier this month. [O/R]

Crude futures have risen almost $10 a barrel since early August on speculation that Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries will agree next month to a production freeze deal with non-OPEC producers led by Russia.

But doubts about whether the talks will rein in oversupply are again weighing on prices.

U.S. crude CLc1 slumped 1.7 percent to $47.68 after gaining 9 percent last week, rising for a second straight week. Brent crude LCOc1 was 1.9 percent lower at $49.95 a barrel, after gaining 8 percent last week, rising for a third week in a row.

Gold fell on Monday to its lowest in almost two weeks as the dollar strengthened. Spot gold XAU= was down 0.6 percent at $1,333.41 an ounce.


Article Link To Reuters:

Oil Falls As August Price Rally Seen Overblown, China Fuel Exports Jump

By Henning Gloystein
Reuters
August 22, 2016

Oil prices fell on Monday as analysts doubted upcoming producer talks would rein in oversupply, saying that Brent would likely fall back below $50 a barrel as August's more than 20-percent crude rally looks overblown.

Soaring exports of refined products from China also pressured prices, as this was seen as the latest indicator of an ongoing global fuel glut, traders said.

China's July exports of diesel and gasoline soared by 181.8 and 145.2 percent respectively compared with the same month last year, to 1.53 million tonnes and 970,000 tonnes each, putting pressure on refined product margins.

Brent crude futures LCOc1 were trading at $49.93 per barrel at 0641 GMT (0241 ET), down 95 cents, or 1.87 percent.

U.S. West Texas Intermediate (WTI) crude Clc1 was down 84 cents, or 1.73 percent, at $47.68 a barrel.

Analysts cast doubt on an August price rally, saying much of it was a result of short-covering and anticipation of upcoming producer talks to discuss means to curb oversupply.

"Positioning data seems to confirm our view that the latest oil bounce is more technical and positioning-oriented than fundamental. In fact, new buyers have been mostly absent the past few months," Morgan Stanley said.

Regarding the upcoming producer talks, the bank said a agreement was "highly unlikely" and that there were "too many headwinds and logistical challenges to a meaningful deal".

Members of the Organization of the Petroleum Exporting Countries (OPEC) and other producers like Russia are set to meet in September to discuss a freeze in output levels in order to rein in oversupply, but analysts said animosity between OPEC-members Saudi Arabia and Iran made a deal unlikely.

"Though Iran now sits roughly 200,000 barrels per day away from its monthly pre-sanctions peak in May 2011, we do not see it accepting restraints on its output, and without Iran's inclusion, Saudi Arabia will not take part," Barclays said.

As a result, the bank said that "the stars remain misaligned for an OPEC/non-OPEC freeze agreement".

Because of the ongoing production and storage overhang in fuel markets, Barclays said the 20-percent price rally in August was unwarranted, and that oil prices of $50 or higher were unsustainable.

"Oil prices will likely experience another short-term dip in the coming weeks, in our view, before more sustainably moving to average $50 in Q4," it added.

Adding to the outlook of plentiful supplies, the U.S. oil rig count increased by 10 last week.

"Since its recent trough in May 2016, the U.S. oil rig count is up 28 percent at 406; this rebound has been driven by the increase in horizontal rigs," said Goldman Sachs.


Article Link To Reuters:

U.S. Banks Want To Cut Branches, But Customers Keep Coming

By Dan Freed
Reuters
August 22, 2016

Despite banks' nudging toward online tools, many U.S. customers are not ready to give up regular visits to their nearest branch, complicating the industry's efforts to slim down.

U.S. banks have trimmed the number of branches by 6 percent since it peaked in 2009, according to Federal Deposit Insurance Corp data. The 93,283 branches open at the end of last year was the lowest level in a decade. (tmsnrt.rs/2b66WKY)

Yet analysts who have examined the data say banks should have done more to offset the pressure on revenue from low interest rates and regulatory demands.

The number of FDIC-insured banks has fallen by more than 25 percent over that time even as industry assets have grown, indicating room for greater branch consolidation.

Bank executives argue, however, that branches remain crucial for acquiring new customers and doing more business with existing ones. Closures, they say, would hurt revenue more than help reduce costs.

"Our customers still want to visit us," Jonathan Velline, Wells Fargo's head of ATM and store strategy, told Reuters in an interview. "They're still coming to our stores and our ATMs at pretty consistent rates."

Bankers across the industry share that view. They say online banking complements traditional services for U.S. customers, but few have gone fully digital.

The United States falls somewhere in the middle among developed nations in terms of how aggressively its banks have been slimming down, according to the International Monetary Fund's population-adjusted data. They have cut relatively more branches than banks in Germany, France or Canada, but not nearly as many as those in Greece, Ireland, Spain or Italy.

While other factors are at play, one difference is that U.S. customers still routinely use checks and need branches to process them, said Rick Spitler, managing director at consulting firm Novantas.

FDIC Chief Economist Richard Brown said he often fields questions why the industry still has so many branches.

"This thesis…that we have mobile banking and high-tech banking, therefore the branch offices are dinosaurs and going away appears to be substantially overstated," he said.

On Every Corner

The case for reining in sprawling branch networks as a way to cut costs looks compelling.

The traditional branch costs roughly $2-4 million to set up and $200,000-400,000 per year to operate, according to Ed O'Brien, an analyst at Mercator Advisory Group. For big banks with thousands of branches – many of them clustered in pricey urban centers – it can get expensive.

For instance, an eight block stretch near Manhattan's Penn Station houses 14 bank branches - Astoria Bank, Apple Bank, Capital One, Citibank, HSBC, PNC, TD Bank, Sterling National Bank, Wells Fargo, two Bank of America branches, and three Chase branches.

Yet bank executives argue that, in a competitive market, they need to be footsteps away from the best customers.

Executives at JPMorgan Chase & Co, the country's largest bank, say each branch earns about $1 million in annual profit, but takes a decade to reach its full potential.

Chase bankers regularly scrutinize data on branch foot traffic and what customers do while inside to determine whether a location should remain open, shut down or shrink.

The bank has shut 265 locations since 2013, roughly 5 percent of its network, but executives insist that branches remain essential for JPMorgan's relationships with customers. They are the best way to sell clients many products and services ranging from mortgages to investment advice, according to Gordon Smith, JPMorgan's head of consumer and community banking.

"Often I will be asked why don't we just accelerate closings. Why don't we close 400 or 500 branches?" Smith said at the 2016 investor day. "The answer is that customers won't go there."

John Elmore, vice chairman of community banking and branch delivery at U.S. Bancorp, says branches are especially important for small businesses that need to deposit cash frequently, prefer to negotiate loans in person, or want strategic advice.

"Proximity to their business is a very, very important factor to their bank selection and their continuing relationship with a bank," Elmore told Reuters.

Cost Questions


Banks do keep trying to steer customers to digital tools.

They have reduced the number of tellers and moved them to the back. Their ATMs can perform more sophisticated tasks and banks have developed nifty mobile apps for routine banking needs. They are even experimenting with digital loan underwriting.

Yet customers still expect contact with bank staff and JPMorgan recently had to hire more tellers after customer complaints.

JPMorgan and Wells Fargo data show most customers visit branches several times every quarter, though younger clients tend to visit less often.

It may be too early to tell what happens in the long run when a big bank shutters many branches.

Bank of America Corp, which has closed a quarter of its branches since 2009, could eventually serve as a test case. The bank says it is done with cuts, but Keefe Bruyette & Woods analyst Fred Cannon calls for more. He also points to Citizens Financial Group Inc, KeyCorp, Comerica Inc and Zions Bancorp as banks that have not slimmed down enough.

James Abbott, investor relations chief for Zions, said the group had eliminated roughly 20 percent of its branches since 2009 and continued to evaluate further cuts. The other banks did not provide a comment for this story.

Cannon argues their costs are too high, and that they could eliminate locations without giving up much revenue.

"I think there's going to be a real question about the cost of that branch infrastructure," he said.


Article Link To Reuters:

U.S. Watchdog Clears ChemChina's Takeover Of Syngenta

By Greg Roumeliotis and Michael Shields
Reuters
August 22, 2016

A U.S. regulator has cleared ChemChina's $43 billion takeover of Swiss pesticides and seeds group Syngenta (SYNN.S), the companies said on Monday, boosting chances that the largest foreign acquisition ever by a Chinese company will go through.

The decision should remove significant uncertainty over whether the acquisition of the world's largest pesticides maker will be completed.

Syngenta shares ended trading on Friday at 380.80 Swiss Francs ($396), some 100 Swiss francs less than what ChemChina's offer valued the company.

Reuters had reported earlier that the acquisition was in the final stages of being cleared by the Committee on Foreign Investment in the United States (CFIUS), which scrutinizes deals for national security implications.

"China National Chemical Corporation (ChemChina) and Syngenta today announced that the companies have received clearance on their proposed transaction from the Committee on Foreign Investment in the United States (CFIUS)," a joint statement released by Syngenta said.

"In addition to CFIUS clearance, the closing of the transaction is subject to anti-trust review by numerous regulators around the world and other customary closing conditions. Both companies are working closely with the regulatory agencies involved and discussions remain constructive.

"The proposed transaction is expected to close by the end of the year."

Syngenta had said in July it expected the deal to close this year despite concerns that U.S. regulators could throw a spanner in the works.

Syngenta's share price has significantly lagged ChemChina's offer of $465 per share plus a 5 franc special dividend amid concerns that the deal would get through CFIUS. Syngenta derives about a quarter of its sales from North America.

Several U.S. lawmakers wrote to Treasury Secretary Jacob Lew this year asking for CFIUS to subject the deal to additional scrutiny over its impact on domestic food security. The U.S. Department of Agriculture also joined the CFIUS review, Reuters previously reported.

Syngenta had said this year it would make a voluntary filing with CFIUS "even though no obvious national security concerns were identified during due diligence".

Unveiled in February, the deal comes as China looks to secure food supplies for its population.

Syngenta is a key player in the market for pesticides and seeds. It has facilities in North Carolina, as well a presence in California, Delaware, Iowa and Minnesota among other states.

The CFIUS review is being watched closely by Monsanto Co (MON.N), the world's largest seed company, which is deliberating whether it should sell itself to Germany's Bayer AG (BAYGn.DE). Syngenta last year turned down offers to be acquired by Monsanto.

With a growing number of Chinese companies looking to acquire U.S. peers, CFIUS had emerged as a significant risk for such deals, particularly those with potential cyber security implications.

For example, in February, state-backed Chinese firm Unisplendor Corp (000938.SZ) scrapped a $3.78 billion investment in Western Digital Corp (WDC.O) after CFIUS said it would investigate the transaction.


Article Link to Reuters:

The Heinous Olympification Of Seoul

The 1988 Summer Games set the template for the “neurotic” model of economic development that has plagued Rio and other Olympic cities.

The New Republic
August 22, 2016

Rio’s manic preparations for this year’s Summer Olympics have now become a familiar subplot to the sports themselves. More than 77,000 people have been displaced from their homes between 2009 and 2015 in Olympics-related redevelopment. Many found themselves not just out of a home, but pushed to remote peripheries of the city without access to social networks, public transportation, or employment opportunities. Entire communities, like the fishing village of Vila Autodromo, have been cleared, a faithful execution of the renderings presented in Brazil’s original bid to the International Olympic Committee, in which the settlement was conveniently airbrushed out. In favelas that are not cleared but subject to intense patrols, hundreds of residents have fallen victim to Brazil’s military police—or what Amnesty International called a “trigger-happy” force that seems to be conducting a “shoot first, ask questions later” strategy in its pacification campaign.

Some reporters have left the Olympic venues long enough to show us glimpses of the still-simmering unrest, from the Olympic torch relay, during which protesters lobbed stones and the riot cops retaliated with tear gas and rubber bullets, to the viral photos of children watching the Opening Ceremony’s glittering spectacle from their distant perch in the mountainside favelas. The popular anger against Olympic excess, which comes on top of the outrage displayed just two years ago during the World Cup, is compounded by a rolling national political crisis in which the presidency and the country’s future hang in the balance.

The IOC has stated that one of its criteria for site selection is to give the opportunity to countries that have never hosted before. In turn, nations selected as first-time Olympic hosts become consumed in the grand project of demonstrating their modernity and progress to visitors, whatever the cost. For many recent hosts, like Beijing, Sochi, and now, Rio, that cost has raised serious domestic controversy.

However familiar the story of Olympics-related displacement may be, what often goes unremarked is the displacement yet to come. For many, the Olympics serve as a pretext for accelerated real estate speculation in areas settled by the poorest and most vulnerable. The speed and scale of the required construction often sets in motion a number of mechanisms that enable wholesale gentrification: massive land purchases, the state’s use of eminent domain to seize the private land of mostly poor residents, the relinquishment of public land to private entities, and the creation of non-elected private bodies to manage the process. The special procedures, bypassed laws, and closed-door decision-making all give the overwhelming impression that the Olympics is where the democratic process goes to die.

In Rio, for example, 75 percent of the Olympic Park will be turned over to private developers after the Games are done. The committee in charge of redevelopment was led by real estate scions, and unsurprisingly, the most apparent beneficiaries of the Games so far are the same industry players.

All these elements—and worse—were evident in the Seoul Olympic Games in 1988, which helped set the template for the modern “Olympification” of cities in the developing world. As we start to look toward the next Olympics—the 2018 Winter Games in Pyeongchang, South Korea—it’s worth looking back at the 1988 Summer Games to see what’s in store for other cities tempted to use the Olympics as a fast track to development.

In the lead-up to the 1988 Games, the residents of Sanggyedong, a poor Seoul neighborhood, fought against the riot police and the thugs hired to kick them off the land for Olympic redevelopment. A documentary about their protracted struggle, Sanggye-dong Olympics, was shot by a young filmmaker who had intended to document a single day but instead spent three years living in the neighborhood, fully absorbed into its daily routines and skirmishes. The footage is unforgettable and harrowing—women lying prone beneath the construction cranes to stop them, and grandmothers staying up all night with bats to guard against night evictions.

Inevitably the confrontations turned violent, as hired muscle beat anyone who resisted with steel pipes and sledgehammered through houses still filled with residents’ possessions, while the police hauled off screaming residents. But even after being evicted, the residents refused to leave the land, living in makeshift shelters, cooking together outdoors, covering their children with layers of blankets through the freezing winter. “Protect the human rights of poor people” was one of the slogans strung on banners around the area.

Eventually the residents were resettled to another area on the outskirts of Seoul, but faced eviction for the second time when it turned out their shantytown was located along the Olympic torch route. The film ended with an epigraph: “Olympic guests will rest assured they will not suffer the discomfort of seeing a single poor person in Seoul.”

Only recently did I learn that some of my relatives had lived in Sanggyedong in those days. My aunt on my father’s side offered this fact as an off-hand comment, but she never talked about the evictions. I could hardly imagine her criticizing the government. She had lived through several military dictatorships, and didn’t trust that criticism wasn’t punishable with jail or worse.

The 1988 Olympics did not just spur a construction boom of stadiums and apartment towers. They also catalyzed a larger turning point in national culture and politics. Korea in 1988 was a fledgling democracy, emerging only the year before from four decades of U.S.-backed military dictatorships. Nearly a decade earlier, in 1979, dictator Park Chung-hee (the father of the current South Korean president, Park Geun-hye) had decided to bid for the Olympics. But he was assassinated only a few months later. After a brief period of hope for civilian rule, military general Chun Doo-hwan staged a coup in 1979 to gain the presidential seat. He decided to proceed with the Olympic bid, which was approved in 1981 despite his subsequent declaration of martial rule, a bloody crackdown on pro-democracy protesters, and his dissolution of the national parliament in 1980. For Chun, bidding for the Olympics was part of a larger strategy to distract citizens from the political and economic struggles taking place, otherwise called the 3S policy of promoting “sports, sex, and screen.”

Chun’s rule mirrored Park’s, even as he vowed to build a different kind of regime. He continued the torture and imprisonment of dissidents and blocked all avenues to independent and fair elections. This led to unprecedented mass protests in 1987, in which tens of thousands of people marched in the streets. These protests, along with the specter of the whole world observing South Korea on the eve of its Olympic debut, led to Chun’s hand-picked successor agreeing in 1987 to the first free elections in the country’s modern history.

Thus 1988 represented an opening in more ways than one. In a country that still had strict limitations on international travel, where sports and leisure activities were relatively new cultural phenomena, and books and movies still heavily censored, the Olympics signified a break from an authoritarian past, instead of lending legitimacy to it.

But before Chun stepped down, he had already used strong-arm tactics to ready the country for its global debut. In the five years leading up to the Games, an estimated 48,000 buildings were destroyed, displacing 720,000 people. The U.N. fact-finding delegation that came to document what happened said the Olympics had set Korea’s “neurotic development” on warp speed. Visitors streamed in from around the globe, astonished that Korea looked so, well, modern. But the gleaming capital unveiled for the Summer Games was, in fact, the product of two back-to-back military dictatorships and their unchecked power to transform the urban landscape.

More recently, it has come to light that during the years leading up to the Olympics, beginning under Park’s presidency, policemen and local officials had waged a “purification” campaign, sweeping the streets of more than 16,000 unattended children, disabled people, panhandlers, homeless people, and dissidents, and locked them up in dozens of institutions without giving notice to their families. Thousands were raped, beaten, and killed during their imprisonment, while those who survived the violence toiled in factories or on construction sites all day for no pay. At the most notorious of the institutions, Brothers Home, four to five inmates died every day from violence committed by the guards.

All of this happened with the full knowledge and approval of the country’s leadership, while the owners of these institutions were rewarded with medals for social welfare. To this day, they have not been punished. Even when the owners were pursued on legal charges in 1988, presidential officials continually blocked the investigation on the grounds that the resulting scandal would only embarrass the country on the eve of its Olympic debut. When asked by the AP about the deaths, a former official from Brothers only offered, “These were people who would have died in the streets anyway.”

This past New Year’s Eve, I was in Gangneung, a city on the east coast of South Korea, to celebrate the holiday with my relatives. I asked my uncle, as I always do, to take me to my mother’s childhood home, located on a rural road where I would not trust GPS to guide me. This was where my mother spent her childhood after surviving the Korean War, living with her grandparents in a traditional house with a thatched roof and papered sliding doors, a house where the family had lived for generations. Nowadays, only one of my relatives still makes a living as a farmer in the area. Whenever I visit, his elderly neighbors, wizened and bent over from their farm work, peer into my face and exclaim my mother’s name.

As we drove to the house, I noticed a series of monumental concrete arches dotting the landscape. They were the tallest structures around, five to six stories high, in an otherwise flat vista of rice fields and one-story homes. Curiously, they didn’t follow the road. Instead they seemed to exhibit their own logic, often landing squarely within meadows and fields.

My uncle parked the car on a narrow road and announced, “Here we are!” I was shocked to see the arches continue straight through the field that held my mother’s old house. Several loomed just ten yards from us.

“But what’s all that?” I asked, pointing upward.

My uncle peered up. “That’s for the high-speed rail. They’re building it for the Pyeongchang Olympics.”

“They’re also building ice rinks along the coast,” my aunt added. “The Olympics are coming here too! We’re thinking of volunteering. But we’ll see.”

There was a quiet pride in her voice. I could understand it—there was obviously some prestige in Korea being selected to host the 2018 Winter Olympics. For her, there was the added pride that Gangwon province, an agricultural region known mostly for its potatoes and beaches and its proximity to North Korea, would be hosting the most iconic sporting event in the world. There was a general excitement in the air about the prospect of hosting the Games—another chance to prove South Korea’s status as a global contender.

Looking up at the arches, I envisioned the train whooshing past, filled with dignitaries and tourists oblivious to the ancient, crumbling house below. The high-speed rail was one of the cornerstones of South Korea’s winning bid to the IOC. Korea had promised that visitors would be able to travel directly from the international airport to Pyeongchang in 68 minutes—a projection that was later pushed back to 93 minutes. The city of Gangneung, only thirty minutes from Pyeongchang, will boast a total of four ice stadiums and host all the indoor sporting events.

Pyeongchang’s winning bid was the legacy of former President Lee Myung Bak, who built his career as the CEO of Hyundai Construction and spent much of his presidency bestowing generous federal contracts to the construction industry, earning him the nickname “Bulldozer.” In his presentation to the IOC, Lee pointed out that 19 of the last 21 Winter Games had been held in Europe or North America. Didn’t Asia deserve a chance?

Standing in the shadow of the giant arches, I felt a sharp sense of loss. I had always assumed that breakneck urban development was a central feature of life in Seoul, the nation’s capital. But in this part of the country, known mostly for its natural vistas, where the elderly tended to stay and the young people disembarked for new lives in Seoul, a high-speed rail seemed excessively optimistic and all too permanent. I tried to imagine a future where, after the world’s top athletes had packed their bags, Seoulites would visit Pyeongchang in droves to luge and curl and bobsled. This had been the IOC’s main draw for selecting Korea—it represented a new market for winter sports. But beyond cheering for Olympic figure skater Kim Yuna, Koreans are not winter sports enthusiasts. It seemed more likely that, after the Games ended, the high-speed rail would become a long, snaking ruin, looming silently over the countryside like a hollow promise.

When the 2018 Winter Olympics kick off in Pyeongchang, 30 years will have passed since the 1988 Seoul Olympics. Traveling back to Seoul after the New Year’s holiday, I noticed that at City Hall and the National Assembly, at the plazas, the subway stations, and even on billboards, tent occupations and rallies and other signs of dissent were on display, flourishing everywhere even in the freezing temperatures. It was a hopeful sign that the political climate in Korea had changed since the ‘80s—and yet it was disheartening, too, a reminder that some things haven’t changed. As the Olympics leave Rio, and as we look ahead to Pyeongchang and beyond, the question remains troublingly unresolved: Does Olympification always have to mean mass displacement? What does it mean to host the world if you cannot house your own citizens?


Article Link To The New Republic:

Hillary Clinton's October Surprise: WikiLeaks Looms

When a fundraising scandal threatened his reelection in 1996, Bill Clinton stonewalled. Can Hillary do the same with the Clinton Foundation?


By John Fund
The National Review
August 22, 2016

Much of the media are already declaring the election an all-but-certain win for Hillary Clinton. Today, the political forecasting site FiveThirtyEight, using polls plus historical and economic data, gives Hillary a 74.7 percent chance of being elected. But smart Democrats are resisting overconfidence; they know a lot can happen before the election. “American politics is freaky and can turn on a dime and in the other direction in one news cycle,” Democratic strategist Brad Bannon admitted last week,

Forecasts like the one from FiveThirtyEight are often based on a combination of polls, economic conditions, and factors such as the popularity of the incumbent president. They clearly don’t include the inevitable “x factors” in a campaign, such as the performances in presidential debates, possible terrorist attacks, and mega gaffes by one or more of the candidates. They also ignore the impact a late-breaking scandal can have on a race. Donald Trump has to worry about a potential leak from his IRS tax returns (it happened to Mitt Romney in 2012). Hillary Clinton has known since the Democratic convention in Philadelphia just how disruptive a WikiLeaks revelations can be — the leaks of e-mails from the Democratic National Committee cost chairwoman Debbie Wasserman Schultz her job.

Clinton must also remember what happened exactly 20 years ago during her husband’s campaign for reelection. That campaign has so far been recalled this year mostly for the skillful decision by Haley Barbour’s Republican National Committee to put some distance between GOP congressional incumbents and presidential nominee Bob Dole. The RNC urged voters not to “hand Clinton a blank check,” in the event he won reelection, by turning control of Congress over to the Democrats. It worked: Democrats actually lost two seats in the Senate and gained only two seats in the House.

But another story emerged from the 1996 election, centering around how Bill Clinton had to run out the clock on a growing campaign-finance scandal that in the last month of the campaign changed the dynamics of what had been a complete cakewalk of a race. Clinton ended up winning by eight points over Bob Dole (49 percent to 41 percent, with Ross Perot taking 9 percent of the vote). But that loss was not nearly as bad as Republicans had feared. Six final pre-election polls had Clinton winning by anywhere from eleven to 16 points. The New York Times/CBS poll was the most off-base, showing Clinton beating Dole 53 to 35 percent. CNN’s final tracking poll had Clinton ahead by 16 points. The respected Pew Research Center issued a final poll showing Clinton ahead 52 percent to 38 percent, a 14-point lead almost double the actual results on Election Day.

Those bad numbers prompted political experts Michael Barone and Everett Ladd to call for an investigation into how the polling industry had bungled the numbers so badly. Bill Clinton had his own answer. He told journalist Elizabeth Drew after the election that negative coverage of the fundraising scandal involving DNC finance vice chairman John Huang allowed Republicans to keep Congress and tighten the 1996 election.

A former Commerce Department official, Huang was a top fundraiser who scooped up suspect foreign cash for Team Clinton. Throughout October 1996, Huang dodged subpoenas and reporters. The dimensions of the scandal became clear only after the election, when reporters uncovered ties between Huang associates and the Communist regime in Beijing.

A 1998 Senate Government Affairs Committee report on the scandal found “strong circumstantial evidence” that a great deal of foreign money had illegally entered the country in an attempt to influence the 1996 election. Johnny Chung, a bagman for the Asian billionaire Riady family, confessed that at least $35,000 of his donations to the Clinton campaign and the DNC had come from a Chinese aerospace executive — a lieutenant colonel in the Chinese military; Chung said the executive had helped him meet three times with General Ji Shengde, the head of Chinese military intelligence. Mr. Chung testified that General Shengde had told him: “We really like your president. We hope he will be reelected. I will give you $300,000 U.S. dollars. You can give it to...your president and the Democratic party.”

The sprawling fundraising scandal ultimately led to 22 guilty pleas on various violations of election laws. Among the Clinton fundraisers and friends who pleaded guilty were John Huang, Charlie Trie, James Riady, and Michael Brown, son of the late Clinton commerce secretary Ron Brown. But a lot was never learned, even after the revelations that Clinton had personally authorized offering donors Oval Office meetings and use of the Lincoln bedroom. A total of 120 participants in the fundraising scandal either fled the country, asserted their Fifth Amendment privilege against self-incrimination, or otherwise avoided questioning. The stonewalling worked, just as Hillary Clinton hopes it will with the Clinton Foundation, her private e-mail server, and Benghazi.

But there is one change that might undermine the stone wall: The Internet is ubiquitous, as it was not in 1996. WikiLeaks founder Julian Assange told CNN on August 1, “We have quite a lot of material (from the DNC, the Clinton campaign, and the Clinton Foundation), so I think we will stagger it in different batches when we are ready to publish each batch.” Assange has told reporters he plans to detonate his e-mail bombs at key points during the campaign, such as just prior to each of the three presidential debates.

We already have extensive evidence that special-interest donors to the Clinton Foundation sought favors from a responsive State Department when Hillary Clinton was U.S. secretary of state. We know from Peter Schweitzer’s movie (and the book of the same name), Clinton Cash, that the State Department helped move along an infamous deal that granted the Russians control of more than 20 percent of the uranium production here in the United States. (Clinton Cash is available for free viewing online.) The company involved in acquiring the American uranium was a very large donor to — you guessed it — the Clinton Foundation.

What more could we learn from WikiLeaks in the weeks leading up to the November election? Just having the tip of the John Huang fundraising scandal surface before the 1996 election changed the dynamics of that race, reducing the size of Dole’s loss and altering the congressional outcome.

Harold Macmillan, the British prime minister in the early 1960s, was once asked what he most feared in politics. “Events, dear boy, events,” he replied.

Whether it’s leaks from Donald Trump’s tax returns or Hillary Clinton’s e-mail, there are a lot of possible “events” between now and when we will finally learn the results of the November election.


Article Link To The National Review:

‘Sleepless Nights’ For Gülen’s Supporters In Europe

Gülenist schools and cultural centers say they’ve suffered intimidation since the putsch Ankara blames on the exiled Turkish cleric.


Politico EU
August 22, 2016 

Turkey’s crackdown on supporters of Fethullah Gülen, the Muslim cleric accused by Ankara of masterminding July’s coup attempt, is being felt by the Turkish diaspora across Europe.

Turks living in Germany, Belgium, the Netherlands, France and Switzerland who have links to the influential Gülenist movement say they are being threatened and intimidated.

“Many of us received death threats,” said Ercan Karakoyun, head of the Berlin-based Stiftung Dialog und Bildung, one of the main Gülen think tanks in Europe. “I have reported six death threats to the police, and I know many people who have done the same. I am in constant touch with the police.”

One example cited by Gülen supporters in Europe came from Ozan Ceyhun, a Turkish-born former German MEP, who wrote on Twitter after the putsch: “Gülenists in Germany will have many sleepless nights. We owe that to our martyrs.”

Contacted by POLITICO, Ceyhun declined to comment on the tweet but said he had long believed “that the Gülen movement is a dangerous and misanthropic terrorist organization.” That’s also the view of President Recep Tayyip Erdoğan: Once allies, they drifted apart and in 2013 Erdoğan accused Gülen of fabricating a corruption scandal that targeted officials with links to the president’s Justice and Development Party (AKP).

The 75-year-old Islamic cleric has lived in self-imposed exile in the U.S. since the 1990s. That did not stop Erdoğan from accusing Gülen of trying to topple his government last month: In the ensuing crackdown, thousands of people including many Gülen supporters have been arrested and Ankara has asked the United States to extradite the cleric.

"‘The Gülen movement is a dangerous and misanthropic terrorist organization’ — Ozan Ceyhun, former MEP"


Erdoğan’s spokesman Ibrahim Kalin, in an op-ed for POLITICO published last week, wrote that some army officers involved in the coup have “confessed to being members of the Gülenist cult, and admitted to taking orders from superiors in the Gülenist hierarchy.”

Cultural centers, schools, associations and shops linked to Gülen’s Hizmet movement have reported insults on social networks, death threats, arson attacks on their cars and stones thrown at their premises. There have also been calls to boycott shops owned by Gülenist Turks, and some parents have withdrawn their children from schools run by the Gülen network.

“Parents have pulled their kids out of our schools,” Karakoyun said. “One reason is that if they have a business in Turkey, they are afraid that something might happen to their business, and another reason is that they want to show loyalty to Erdoğan and so they do not want to support the school anymore.”

Days after the coup attempt, Karakoyun said a school near the German city of Stuttgart asked for police protection after reportedly receiving threats.

“Violence expanded in a phenomenal way after the coup,” said Hüseyin Çakmak, the spokesperson of Fedactio, a federation of Belgian Turkish associations, many of which are inspired by the Gülen school of thought. “We have been forced to file a complaint to the police as it was getting more and more virulent.”
‘How Dare You?’

The weekend after the coup, Çakmak said two men threw cobblestones at the windows of his association in the Brussels neighborhood of Schaerbeek. Others daubed insults on the building of another office of the association in Ghent. He also said the word “FETÖ” — an abbreviation for “Pro-Fethullah Terror Organization” — was sprayed on a car.

Çakmak said people affiliated with Hizmet in Belgium have set up a blog compiling the threats, while Fedactio has complained to the cabinet of Belgian Prime Minister Charles Michel.

“We showed them screenshots of insults,” said Çakmak, who called the post-coup tensions a “Turco-Turkish conflict which shouldn’t be exported to Europe.”

The group advised some of its most prominent figures to avoid traveling to Turkey during the summer holiday, and urged its members to make sure their local police forces were familiar with the Gülenist movement.

In Germany, Karakoyun said the threats came from Turkish government supporters, especially the German branch of the Union of European Turkish Democrats (UETD), a branch of Erdoğan’s AKP. Karakoyun said Dursun Bas, head of the UETD in the Hesse region of Germany, had addressed two members of Stiftung Dialog und Bildung via Twitter, saying, “How do you dare to go out on the streets? For you there will be no easy death.”

The UETD failed to respond to POLITICO’s request for comment for this article.

Karakoyun says he feared the threats against Gülen supporters could get worse once Turks living in Europe return from their holidays in Turkey. Back in the homeland, he said, “they have been listening and reading Turkish news for weeks and they’ll bring this Turkish propaganda back to Germany. This will lead to further escalation.”

Turk Against Turk

With millions of followers and schools in 140 countries, including across Europe and Africa, Gülen heads one of the world’s most prominent and influential Islamic movements. The group describes itself as an umbrella nonprofit organization —Hizmet means “service” — which promotes altruism and religious and cultural dialog. Many supporters donate a small percentage of their income to groups linked to the movement.

Hizmet expanded to Europe about 30 years ago, particularly Germany, which has the largest Turkish community on the Continent.

There are no official statistics on the size of the Gülen movement in Europe. Karakoyun said Germany is home to approximately 100,000 supporters of Gülen, with about 150 affiliated tutoring centers, 30 schools and 12 dialogue centers, many of them financed via donations.

In Belgium, experts and social workers say there are fewer than 10 Gülenist schools, including in Brussels, Charleroi and Liège. France has at least two Gülen affiliated schools in Villeneuve-Saint-Georges near Paris and Strasbourg, according to news reports.

"The Gülenist community in Belgium is now the target of ‘very serious’ threats, says professor Ekran Toguslu. ‘People here are scared.’"

The movement’s stated purpose is to focus on Muslim communities’ difficulties with integration in Europe, and to “take initiatives to be useful to society through education and dialogue, and develop socio-cultural programs which promote mutual understanding and togetherness,” said Ekran Toguslu, the coordinator of the Fethullah Gülen chair for intercultural studies at the University of Leuven in Belgium.

“The young generation, including Muslims and children of immigrants, need bearings,” he said, adding that the Gülen chair focused on responses to radicalization and other problems facing Muslims living in Europe. Its fields of research include Muslim entrepreneurship, religious identity for young people, the role of Muslim women, and inter-religious dialogue. One recent conference was on the subject of “Sport and Islam.”

But the Gülenist community in Belgium is now the target of “very serious” threats, said the professor, adding: “People here are scared.”


Article Link To Politico EU:

The Syria "What If" That May Haunt Obama

By W. Robert Pearson
Real Clear World
August 21, 2016

On Aug. 21, 2013, the Syrian government murdered more than 1,400 innocent Syrians in the Damascus suburb of Ghouta -- including several hundred children -- in a nerve gas attack. What if the United States had decisively dealt with the Assad government after its chemical weapons attack? It certainly would have been a defining moment for every major participant -- Syria, Russia, Turkey, and the United States. That deadly attack and its aftermath may have profoundly affected U.S.-Turkey relations and the fate of the besieged Syrian city of Aleppo.

Rewind one year, to August 2012, and recall that it was President Barack Obama who said "We have been very clear to the Assad regime, but also to other players on the ground, that a red line for us is we start seeing a whole bunch of chemical weapons moving around or being utilized. That would change my calculus. That would change my equation.”

Syrian warplanes were nonetheless back in the air three weeks after the nerve gas attack. Facing opposition in Congress over an airstrike and some hesitation among its allies, the United States had welcomed a Russian proposal to negotiate the destruction of Syria’s chemical arsenal. Syria’s regime had escaped unscathed, and Russia had seized the diplomatic momentum on the Syrian issue.

It is difficult to gainsay President Obama’s decision. He had inherited two wars in Afghanistan and Iraq that he was trying to end. A third military campaign in Libya had seemingly ended in October 2011 with the capture and killing of former leader Moammar Gadhafi, only to be marred by postwar instability and the 2012 murder in Benghazi of Ambassador Chris Stevens. Since 2006, Washington and its P5+1 partners had been negotiating on a nuclear weapons agreement with Iran, and the president wanted that process to continue. Even so, Israel and some members of Congress seemed to prefer a new war with the Islamic Republic of Iran. That would be three wars fought and two more contemplated for the United States in the Middle East within a single decade.The first two alone had cost Americans up to an estimated $6 trillion, approximately one-third of the country’s annual GNP. The United States was in the midst of its worst economic downturn in 80 years and was facing a long, slow recovery. Finally, and importantly, most Americans were in no mood for another war. By a strict calculation of the pros and cons, the answer looked clear -- stay out of it.

However, Obama could have grounded the Syrian air force through pinpoint targeting, including by cratering runways, without large loss of life or collateral damage. The president could have shown that he understood very well the unique and moral role of the United States in international affairs. Against such American leadership, Syria could not have carried on its relentless air campaign, and Russia when deciding on its options would have been faced with a pre-emptive American move. U.S. policymakers could have then invited Russia to join Washington in seeking an end to the war, thereby maintaining a position of strength sufficient to convert the Syrian strike into an international effort to reach a settlement.

What actually followed is well-documented history. Seeing Washington’s strategic pause, within seven months of August 2013 Russia moved in March 2014 to occupy Crimea and then eastern Ukraine. Russia then entered the Syrian civil war militarily in September 2015, reversing the course of the conflict. Two months later, the downing of a Russian fighter jet by Turkey precipitated a war of words between Moscow and Ankara and significant economic loss for Turkey. Russia has now begun the process of resetting its relationship with Turkey, with the possible strategy of doling out economic favors to Ankara in exchange for more closely aligned views on Syria and on NATO’s role in the eastern reach of the alliance.

Turkey was deeply disappointed and frustrated by the American decision of August 2013. Turkish President Recep Tayyip Erdogan had even called for a full intervention -- a Kosovo-style operation -- to rid Syria of Assad. For Turkey, August 2013 marked the beginning of the end for its stated goals in Syria:

-- By the end of 2013, the refugee flow from Syria to Turkey was nearing 1 million, and some already were fleeing to Europe. Today there are 2.7 million refugees in Turkey, the equivalent of 8 to 10 million refugees in the United States.

-- Ankara’s determined push for a no-fly zone to be enforced by the U.S. came to naught.

-- In 2014, rumors surfaced of large movements of ISIS fighters travelling to Syria via Turkey. ISIS began capturing towns in Syria in late 2013 and seized Raqqa in January 2014.

-- Two costly efforts by the United States to train moderate opposition fighters collapsed in complete embarrassment.

-- Washington turned to the Kurds in 2014, who rapidly became America’s best allies in the country, infuriating Turkey.

-- The United States, concluding that the Turks were entrenched in unattainable war aims, deepened their talks with Moscow, implying the likely survival of Assad for any postwar regime.

The seeming slowness of the United States in condemning the July 15 coup attempt in Turkey, coupled with rhetorical American missteps that implied to Ankara that Washington was more worried about Turkish generals than Turkish democracy may have helped confirm Turkish doubts about the overall U.S. concern about Ankara’s dilemmas. With the chance to simultaneously pressure America on Turkey’s extradition request for U.S.-based Muslim cleric Fethullah Gulen and on military cooperation in Syria, as well as recoup sharp economic losses, Mr. Erdogan leaped at the opportunity to show up in St. Petersburg on Aug. 9.

Needless to say, Moscow will be interested in what Turkey is willing to offer in return for its favors. Movement on Syria along the lines of Russia’s war aims will figure prominently in the discussions Turkey and Russia will have. Iran has now begun to press its own “friendship” diplomacy with Turkey.

Would the consequences have been different if the United States had taken military action in August 2013? Could the decision three years ago have actually magnified harm to American interests today? Might the United States and Turkey have found more common ground? Leadership is not only about deciding what is specifically best for you; it’s also about visualizing the result and using all the tools available to push in that direction with friends and opponents. Events over the last three years may offer us a cautionary tale on the consequences of what happens after nothing happens. “Ex nihilo nihil fit” does not hold true in international affairs.


Article Link To Real Clear World:

Can America Share Its Superpower Status?

The rest of the world is catching up.


By Michael Lind
The National Interest
August 22, 2016

The United States is in long-term relative decline. In absolute terms, the America of the future will be richer. But because other countries like China and India, and other regions like Africa, are growing more rapidly, America’s share of global wealth will decline. So will America’s share of global military power, which, in the industrial era, is loosely rather than perfectly correlated with relative economic weight.

Primacy, as a concept in international relations, can refer either to polarity (a country’s share of global economic and military resources) or to hegemony (a specialized function within an interdependent international community). Whether defined as polarity or hegemony, American global primacy is coming to an end.

Projections of national shares in GDP in 2050 by think tanks, investment banks and consulting firms tend to converge at the prediction that the world will have three economic poles or cores—China, the United States and Europe—or perhaps four, if India enjoys rapid and sustainable growth. “The World in 2050,” a report by PwC, assigns 20 percent of global GDP (in purchasing power parity) to China, 14 percent to the United States and India, and a mere 12 percent to Europe as a whole in 2050. A 2015 report by the Economist Intelligence Unit paints a similar picture, concluding: “By 2030 the top three economies of the world will be the US, China and India. Such will be the growth of the two latter countries, in particular, that by 2050 they will each be richer than the next five (Indonesia, Germany, Japan, Brazil, and the UK) put together. This will represent a scale of wealth relative to the rest of the top ten that is unique in recorded history.” Indeed, to use PwC’s numbers, China, the United States, India and Europe together would account for around 60 percent of global GDP. Sub-Saharan Africa’s population will explode in the next few generations, but its successful development, if it occurs, will take a long time.

The “Brexit” vote in the UK, together with the growth of nationalism and populism in Europe, has doomed the elite project of creating a federal Europe that can act as a superpower in world politics. Europe will be a rich but fragmented trading bloc surrounded by colossal continental powers, the United States, China and perhaps India.

Tomorrow’s world will be multipolar, not simply bipolar or tripolar. The rise of China and India to great-power status will allow regional powers, from Turkey to Vietnam and Brazil, to play the continent-states against one another and pursue their own independent interests.

The period between 1914 and 2014 can accurately be described as “the American century.” At some point during World War I, the gross domestic product of the United States passed that of the British Empire as a whole. Around a century later in 2014, according to the IMF, the GDP of China passed that of the United States.

After a hundred years in which it typically enjoyed a huge advantage in wealth and power over the next nearest competitors, with China the United States may finally have met a true “peer competitor.” Although per capita income in China is still much lower than in the United States, China is not only the world’s largest economy in terms of purchasing power parity (PPP), but also the world’s largest manufacturing nation—producing 52 percent of color televisions, 75 percent of mobile phones and 87 percent of the world’s personal computers. The Chinese automobile industry is the world’s largest, twice the size of America’s. China leads the world in foreign exchange reserves. The United States is the main trading partner for seventy-six countries. China is the main trading partner for 124. With growing wealth comes growing power. China is now second only to the United States in its defense spending.

For the first time since it surpassed the British Empire in the early 1900s, the United States faces a rival that, though poorer in per capita terms and still inferior in many ways, has an economy equal in scale to its own. This is a new development. America’s earlier challengers, Germany and the Soviet Union, were nowhere near the United States in their size and resources. Other nations, like Japan, were even less able to challenge U.S. economic and potential military primacy (which began with World War I), or U.S. international institutional hegemony (which began during and continued after World War II).

John Maynard Keynes observed: “The great events of history are often due to secular changes in the growth of population and other fundamental economic causes, which escaping by their gradual character the notice of contemporary observers, are attributed to the follies of statesmen.” The increasing frustrations in U.S. foreign policy have less to do with the failures of American leaders than with deep, long-term trends that are diffusing both wealth and power away from both the United States and Europe.

In particular, the rise of China is the indirect cause, or enabling factor, of many of America’s setbacks. China’s backing helped Russia oppose the United States and its European allies during the crisis over Ukraine. China’s assertion of its power in East Asia has inspired the United States to tighten its links with allies like Japan, while proposing a Trans-Pacific Partnership treaty that, by excluding China, looked very much like part of a frantic policy of anti-Chinese containment. To the distress of policymakers in Washington, Brazil, India, South Africa and other countries have joined China to lay the foundations for new international institutions that the United States would not be able to dominate. Adding insult to injury, America’s own allies, Britain, Germany and France, disobeyed Washington’s request and joined the Chinese-led Asian Infrastructure Investment Bank.

The standard of living in the United States will probably be higher than those in China and India for the rest of the century, if not beyond. But this is cold comfort. Even if only a fraction of the population of China or India enjoys American living standards, that elite minority could number in the hundreds of millions. And claims that America’s exceptionally innovative culture will ensure a continued technological lead is at odds with the insistence of Silicon Valley that the United States cannot continue to innovate without a constant stream of students and skilled workers who are the products of primary education in China and India, among other nations. At any rate, innovation as an element of geopolitical power is overrated. In many areas the United States was less innovative than Germany during the world wars, but prevailed nonetheless thanks to sheer demographic and industrial mass.

What about primacy as hegemony? During the Cold War, the United States acted as the hegemon of the American-led “Free World” alliance. To its allies and clients it acted as a military protector, a market for exports and provided the dollar as the world’s reserve currency. Following the Cold War, optimistic policymakers of both parties hoped that America’s alliance hegemony could be translated into enduring American global hegemony. In the emerging multipolar world dominated by continent-states like China, India and the United States, along with various medium-sized powers, no nation will be able to play the role of a military, financial or commercial hegemon.

It may take time for a new system to replace the dollar as the global reserve currency. But America’s two other hegemonic functions are already under severe strain.

The world’s second-largest economy, which the United States already is when measured by purchasing power parity and will soon be when measured by market exchange rates, simply cannot function as a market of first resort for export-oriented countries, in the way that an older United States enabled the development of Japan, South Korea and Taiwan. Most of the growth of the global middle class in the future will take place in China, India and other parts of the non-Western world.

At the moment, the United States is determined to remain the military hegemon in four regions: East Asia, Europe, the Middle East and North America. But as China grows in wealth and power, the U.S. attempt to thwart its regional hegemony in East Asia may prove to be as doomed as would have been a British attempt to contain the United States in North America after 1900. If China and India successfully assert their own spheres of influence, after the model of America’s Monroe Doctrine, the United States may have no choice but to retreat from globalism.

In theory, the United States could augment its strength by maintaining the transatlantic alliance. Europeans might welcome U.S. aid in protecting them from dangers from the Middle East and North Africa. But they would be unlikely to join the United States as allies in a Sino-American Cold War. A defensive, neutralist Europe, a sort of giant Switzerland, with a foreign policy toward the Chinese, Indian and American titans dominated by commercial considerations, is a possible, perhaps a likely, outcome.

Confronted with projections of global power shifts, American triumphalists tend to put their hopes either in Chinese stagnation or collapse, or else in a miraculous rejuvenation of American wealth and power. But projections like the ones I have cited assume slower Chinese growth going forward.

Nor is there much the United States can do to boost its share of global GDP. The U.S. fertility rate is below replacement, and yet even admitting enough immigrants to maintain population stability may be difficult, given the public backlash against mass immigration. Because of low labor-force growth, American GDP growth will be slower than in the past and determined largely by the pace of productivity growth. American hawks who propose cuts in entitlements for the elderly to fund higher defense spending are living in a dream world. In a budgetary showdown between American retirees and the Pentagon, the Pentagon will lose.

The overall picture is clear, even though details may turn out to be wrong. By the middle of this century, most of the world’s industry and military potential are likely to be concentrated in four places: China, India, Europe and the United States. In the emerging polycentric world, no single superpower like the late-twentieth-century United States will exist to provide global security and to promote a single set of economic rules. A multipolar world is likely to be a more fragmented world of regional spheres of influence and shifting security alliances reinforced by strategic trade and investment deals. Even if new cold wars are averted, the peace among major countries is likely to be not warm friendship, but a wary cold peace.

The United States will continue to be one of the Big Three or Four economic powers, and one of the Big Two or Three military powers, as far as the eye can see. But it will have to adjust to the loss of its status as the world’s largest economy and the world’s only superpower. Robert Kagan has written that superpowers can’t retire. But they can be forced to share the stage.


Article Link To The National Interest:

Clinton’s Punitive ‘Exit Tax’

Donald Trump’s plan would stop the corporate ‘inversions’ she deplores.


By Review & Outlook
The Wall Street Journal
August 22, 2016

Hillary Clinton and Donald Trump are having a tax debate of sorts, with the Democrat wheeling out the familiar class-warfare artillery. Mr. Trump hasn’t replied on the specifics, but the irony is that his reform would solve the problem that Mrs. Clinton claims to be angry about—namely, the wave of American companies fleeing for foreign tax climes.

“Corporations should not abandon profitable operations here in the United States to move abroad, just to give shareholders a quicker return, CEOs a bigger bonus and unions a weaker hand to play,” Mrs. Clinton said in her Michigan economic speech on Aug. 11.

Mrs. Clinton is targeting so-called inversions, where U.S.-based companies move their headquarters by buying an overseas competitor, as well as foreign takeovers of U.S. firms for tax considerations. These migrations are the result of a U.S. corporate-tax code that supplies incentives to migrate—and Mrs. Clinton wants to enact even more restrictions and penalties than President Obama already has.

The Democrat would impose what she calls an “exit tax” on businesses that relocate outside the U.S., which is the sort of thing banana republics impose when their economies sour. She’d conduct a census and then categorize any multinational with more than 50% U.S. ownership as a domestic concern that would be subject to a tax on its deferred profits if it inverts. She isn’t specifying the punitive tax rate.

Unlike most countries, the U.S. taxes residents—businesses and individuals—on their world-wide income, not merely the income that they earned in the U.S. But tax law allows them to defer taxes on overseas profits until they bring the money back to invest at home.

U.S.-based companies have about $2 trillion parked in foreign subsidiaries. Mrs. Clinton wants to change the rules retroactively to take a government cut from this overseas cash pile. Mr. Trump may want to build a wall to prevent immigrants from coming to America, but Mrs. Clinton wants to build a tax wall to stop Americans from escaping. “If they want to go,” she threatened in Michigan, “they’re going to have to pay to go.”

By the way, Mrs. Clinton says she’ll use the proceeds of the exit tax to fund what she calls the greatest “investment” in roads, bridges and airports since World War II. But she also says the exit tax will deter inversions, which means it wouldn’t raise much money. Which is it?

Mr. Trump’s plan—when he bothers to mention it—recognizes the real problem, which is that the U.S. taxes companies headquartered in the U.S. far more than companies based in other countries. Thirty-one of the 34 OECD countries have cut corporate taxes since 2000, leaving the U.S. with the highest rate in the industrialized world.

The U.S. system of world-wide taxation means that a company that moves from Dublin, Ohio, to Dublin, Ireland, will pay a rate that is less than a third of America’s. A dollar of profit earned on the Emerald Isle by an Irish-based company becomes 87.5 cents after taxes, which it can then invest in Ireland or the U.S. or somewhere else. But if the company stays in Ohio and makes the same buck in Ireland, the after-tax return drops to 65 cents or less if the money is invested in America.

Mr. Trump proposes to cut the U.S. corporate rate to 15% from 35% (or 40% counting average state rates). Fifteen percent is low enough to deter inversions while making the country more attractive to capital investment and better primed for higher wages. He would also offer a preferential rate of 10% for the $2 trillion already earned overseas.

Mrs. Clinton calls this tax-cutting for billionaires and corporate-jet owners, which shows how unhappy her Presidency could be. Such Trumpian pragmatism—10% of $2 trillion is better than 35% of $0—is the only realistic way for Mrs. Clinton to fund her infrastructure plan, and Republicans in Congress have sounded out Democrats for such a deal for years. President Obama has rebuffed their entreaties, settling for nothing—and now Mrs. Clinton is setting herself up for the same.

As for Mr. Trump, he could be pointing out that his corporate-tax plan would raise worker incomes, as most economic research suggests. And why not challenge Mrs. Clinton for supporting a status quo that is driving jobs and investment overseas? And maybe even benefiting China, Mexico and Japan?

After nearly a decade of Obama-Clinton economics, the country needs a debate about how to revive growth and raise incomes. The corporate-tax proposals show that whatever Mr. Trump’s risks as President, the main risk from Mrs. Clinton is four more years of the same dismal economic performance.


Article Link To The Wall Street Journal:

The Brexit Question That Nobody Asked

By Clive Crook
The Bloomberg View
August 22, 2016

Mervyn King, former governor of the Bank of England, has written the best article I've read on Britain's exit from the European Union. In an essay for the New York Review of Books he makes many excellent points, but one is of surpassing importance. It's an obvious point, or ought to be, that nonetheless has been almost entirely ignored by other respectable commentators: Whether Britain should stay in the EU depends on where the EU is heading.

The EU is plainly in deep trouble with or without the U.K., and its condition as a political project is anything but stable. Judging whether Britain is better off as a member therefore requires a judgment not only about what Britain has gained or lost from membership up to now but also an assessment of the future character of the whole EU enterprise. Britain's Remain campaign, expressing the collective opinion of every expert on the subject, has had almost nothing to say about this.

As King points out, the EU is structurally unsound. (Joseph Stiglitz in the Financial Times makes the same point.) It has pressed political union both too far and not far enough. That is, it has created half a political union -- with a single currency but without a collective fiscal policy or the political apparatus that would be necessary to legitimize it. King:

"Putting the cart before the horse -- setting up a monetary union before a political union -- has led the European Central Bank to become more and more vocal about the need to “complete the architecture” of monetary union by proceeding quickly to create a Treasury and finance minister for the entire eurozone. The ability of such a new ministry to make transfers between member countries of the monetary union would reduce pressure on the European Central Bank to find new ways of holding the monetary union together. But there is no democratic mandate for a new ministry to create such transfers or to have political union -- voters do not want either."


And voters aren't the only ones who don't want it. German officialdom (backed by popular opinion) is viscerally opposed to a "transfer union," which is Germany's name for fiscal policy as it operates in any normal country. Germany's position is understandable, since Germans would give much more than they received in any such arrangement. But that doesn't alter the conclusion: Not only is the EU structurally unsound, but there's also little prospect that the structure either can be or will be repaired.

The most dangerous scenario of all in fact would be a political union that happened despite all this, forced by pressure of events onto electorates -- Germany's in particular -- that didn't want it. The hazards posed by discontented voters rebelling against deaf elites are already vividly apparent in Britain (the success of the Brexit campaign), in the rest of the EU (where far-right populist parties are gaining ground) and in the U.S. (Donald Trump). A European political union without strong popular backing might test Europe's democracies to destruction.

The closest Remain campaigners came to acknowledging this grim prospect was to say that Britain could help guide the EU in its efforts to address the union's problems, such as they may be. Given the scale of the task, that would be far from reassuring even if it were true. King explains why it's false.

Britain can't guide the EU in solving this existential problem because it has already detached itself from the EU core. It chose not to join the single currency and didn't participate in the Schengen plan for borderless travel. Britain isn't, and isn't seen as, a full member of the club. How then can it provide leadership? "For all our shared history, culture, and values," as King says, "it would be impertinent for a country that has chosen to join neither the euro nor the Schengen areas to tell our European partners what they should do."

The Remainers' take on Britain's semi-detachment was to say that Britain has the best of both worlds. It gets the benefits of membership, without the worry of living entirely inside a house whose roof might fall in -- or, as Remainers might prefer to think, whose paintwork needs touching up. I applaud the sentiment: It's good, whenever possible, to have the best of all worlds. But the question is whether Britain's less-than-full-hearted commitment to the European adventure is best pursued as an increasingly anomalous member of a broken EU or as a concerned and friendly neighbor.

Granted, the answer to that question isn't obvious. But what certainly ought to be obvious is that the question deserved to be asked -- and that's something the Remain campaign refused to acknowledge.


Article Link To The Bloomberg View:

Why No One Trusts China's Markets

By Christopher Balding
The Bloomberg View
August 22, 2016

When China's top securities regulator said recently that it plans to delist Dandong Xintai Electric Co. for falsifying initial public offering documents, it didn't grab many headlines. But it suggested some far-reaching changes may be afoot.

Xintai is the first company to be expelled from Shenzhen's ChiNext board for such an offense, and one of only a handful that have ever been delisted in China. Its expulsion suggests that regulators are facing up to some unfortunate truths about China's capital markets.

Those markets are, in important ways, only superficially market-like. In the stock market, the government has intervened on a huge scale to prop up prices. Investment in the bond market is overwhelmingly directed to state-owned enterprises. There's no derivatives market to speak of. Financial disclosures are often implausible, suspicions of insider trading are rife and doubts about corporate governance are widespread.

All these are symptoms of a common ailment: a regulatory system focused not on disclosure and market mechanics but on setting asset prices and allocating returns.

In most countries, when companies are considering an IPO, regulators require them to accurately disclose information, then let markets dictate prices. In China, the reverse holds true: Regulators assess a company's balance sheet and history, mandate an offering price, and then let the market figure out who might be lying or hiding things.

The result is that investors, both domestic and foreign, have lost confidence in China's markets. Foreign portfolio investment into China is down 60 percent, year over year, through July. MSCI Inc. has repeatedly declined to include China's domestic equities in its benchmark indexes. Even the much-celebrated Chinese retail investor is staying on the sidelines: Individual investment accounts holding less than 500,000 yuan declined to 46.8 million last month, from 47.4 million in July 2015.

This credibility deficit affects all areas of the markets. Major Chinese commercial banks have been trading at a price-to-equity ratio of about five -- compared to an average of about 12 for commercial banks elsewhere -- because investors think their loan portfolios are much worse off than they're letting on. A newly approved Shenzhen-Hong Kong stock-trading link could give foreign investors access to some of China's fastest growing tech firms, but they'll stay away if they don't trust the data.

The delisting of Xintai suggests that regulators are finally taking these pernicious effects seriously. But there are a few things they still need to address.

The first is to focus on creating high-quality markets rather than setting low-quality prices. That means, above all, forcing companies to come clean about their finances in public disclosures. Accurate disclosure, in turn, means that bad news will come out, whether it's recognizing higher levels of non-performing loans or admitting to declining profitability. For regulators, that's nothing to fear.

Finally, China needs market mechanisms that support price discovery, transparency and trading. Too often, Beijing equates high prices with a well-functioning market. China will never become a dominant financial center if traders don't trust that the playing field is level.

Just as investors can no longer rely on double-digit economic growth to bail them out of bad decisions, China can no longer rely on ever-rising stock prices to attract new cash. If the crackdown on Xintai is any indication, China's regulators are coming to accept an annoying fact about markets: To work, they have to go down as well as up.


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Are Aging And The Economic Slowdown Linked?

By Robert Samuelson
The Washington Post
August 22, 2016

An aging United States reduces the economy's growth - big time. That's the startling conclusion of a new academic study, and if it withstands scholarly scrutiny, it could transform our national political and economic debate.

We've known for decades, of course, that the retirement of the huge baby-boom generation - coupled with low birthrates - would make the United States an older society. Similarly, we've known that this would squeeze the federal budget. Social Security and Medicare spending would grow rapidly, intensifying pressures to cut other programs, raise taxes or accept large budget deficits. All this has come to pass.

But the study goes a giant step further, claiming that the very fact that the United States is an aging society weakens economic growth. "The fraction of the United States population age 60 or over will increase by 21 percent between 2010 and 2020," says the study. This aging shaves 1.2 percentage points off the economy's present annual growth rate, the study estimates.

Although this seems small, it's enormous. Consider the numbers. From the 1950s to 2007, the economy (gross domestic product) grew about 3 percent a year, sometimes a little more, sometimes a little less. By contrast, annual growth since 2010 has averaged about 2 percent. But add in the 1.2 percent annual growth lost to aging, and we're roughly at 3 percent growth again.

To say the same thing differently: If other economists confirm the study, we'd probably resolve the ferocious debate about what caused the economic slowdown. The aging effect would dwarf other alleged causes: a lag in new technologies; increasing economic inequality; debt hangover from the housing bubble; government over-regulation; heightened risk aversion by shoppers and firms, reflecting the legacy of the Great Recession.

In effect, demographics rule. The theory's added appeal is that it might apply globally, because almost all advanced countries are experiencing both aging populations and slower economic growth. This implies - but does not automatically prove - a common cause.

Still, it won't be easy to convince other economists that aging explains most of the economic slowdown. Probably the theory will strike many as too simple. "I start with a strong skepticism that one factor explains where we are," says Brookings Institution economist Gary Burtless, who has also done research on the impact of aging.

Co-authored by economists Nicole Maestas of Harvard Medical School and Kathleen Mullen and David Powell of the Rand Corp., a think tank, the study on aging compared U.S. states with fast - and slow - growing elderly populations. States with the fastest increases in the elderly also had the weakest economic performance. These relationships then formed the foundations for the study's broader conclusions. (The study was recently released as a working paper of the National Bureau of Economic Research.)

Generally, aging poses two possible adverse economic effects. One is uncontroversial. As swarms of retirees leave the labor force, there are relatively fewer workers to support production. This hurts economic growth, but it represents only one-third of the slowdown, the study estimates. The other two-thirds reflect reduced productivity; workers become less efficient. Not just older workers - all workers. That's surprising, and there's no clear reason. This is the study's weak point. The conclusion rests on data points that can't be explained.

There are theories. It could be that as experienced workers retire, their positive effect on the work climate is lost. "If I'm working with someone who is relatively unproductive, I may become less productive [myself]," Powell says. Although this is plausible, it's also guesswork, as Powell admits. It's also partly undercut by Burtless's research, which found that the most skilled older workers stay in their jobs longer.

Or it may be that as societies age, they become more cautious. Their members value stability and security over ambition and adventure. They're more restrained and realistic and less experimental and optimistic. If these values strengthen as people age, they may impose a stand-pat and conservative bias on businesses and households.

On the whole, the study reveals bad news. One way that advanced societies can handle aging populations is through faster economic growth, which enables younger generations to pay the elderly's benefits without sacrificing too much of their own incomes. But if aging is a cause of slower economic growth - even if the impact is less than the study suggests - then this avenue is of limited help.

As a society, we need a better balance of obligation between the older and younger generations. Until now, policy has favored the elderly. The remedies to shift the balance are well-known: higher eligibility ages for government benefits; less generous benefits and tax breaks for wealthier retirees. None is politically easy. If slower economic growth is linked to aging, the competition for scarce funds will become even harder. It's a dismal connection.


Article Link To The Washington Post:

The Death Of Neoliberalism And The Crisis In Western Politics

In the early 1980s the author was one of the first to herald the emerging dominance of neoliberalism in the west. Here he argues that this doctrine is now faltering. But what happens next?


The Guardian
August 22, 2016

The western financial crisis of 2007-8 was the worst since 1931, yet its immediate repercussions were surprisingly modest. The crisis challenged the foundation stones of the long-dominant neoliberal ideology but it seemed to emerge largely unscathed. The banks were bailed out; hardly any bankers on either side of the Atlantic were prosecuted for their crimes; and the price of their behaviour was duly paid by the taxpayer. Subsequent economic policy, especially in the Anglo-Saxon world, has relied overwhelmingly on monetary policy, especially quantitative easing. It has failed. The western economy has stagnated and is now approaching its lost decade, with no end in sight.

After almost nine years, we are finally beginning to reap the political whirlwind of the financial crisis. But how did neoliberalism manage to survive virtually unscathed for so long? Although it failed the test of the real world, bequeathing the worst economic disaster for seven decades, politically and intellectually it remained the only show in town. Parties of the right, centre and left had all bought into its philosophy, New Labour a classic in point. They knew no other way of thinking or doing: it had become the common sense. It was, as Antonio Gramsci put it, hegemonic. But that hegemony cannot and will not survive the test of the real world.

"Third parties aren't 'spoilers'. They're at the cutting edge of democracy." -- Kevin Zeese

The first inkling of the wider political consequences was evident in the turn in public opinion against the banks, bankers and business leaders. For decades, they could do no wrong: they were feted as the role models of our age, the default troubleshooters of choice in education, health and seemingly everything else. Now, though, their star was in steep descent, along with that of the political class. The effect of the financial crisis was to undermine faith and trust in the competence of the governing elites. It marked the beginnings of a wider political crisis.

But the causes of this political crisis, glaringly evident on both sides of the Atlantic, are much deeper than simply the financial crisis and the virtually stillborn recovery of the last decade. They go to the heart of the neoliberal project that dates from the late 70s and the political rise of Reagan and Thatcher, and embraced at its core the idea of a global free market in goods, services and capital. The depression-era system of bank regulation was dismantled, in the US in the 1990s and in Britain in 1986, thereby creating the conditions for the 2008 crisis. Equality was scorned, the idea of trickle-down economics lauded, government condemned as a fetter on the market and duly downsized, immigration encouraged, regulation cut to a minimum, taxes reduced and a blind eye turned to corporate evasion.

It should be noted that, by historical standards, the neoliberal era has not had a particularly good track record. The most dynamic period of postwar western growth was that between the end of the war and the early 70s, the era of welfare capitalism and Keynesianism, when the growth rate was double that of the neoliberal period from 1980 to the present.

But by far the most disastrous feature of the neoliberal period has been the huge growth in inequality. Until very recently, this had been virtually ignored. With extraordinary speed, however, it has emerged as one of, if not the most important political issue on both sides of the Atlantic, most dramatically in the US. It is, bar none, the issue that is driving the political discontent that is now engulfing the west. Given the statistical evidence, it is puzzling, shocking even, that it has been disregarded for so long; the explanation can only lie in the sheer extent of the hegemony of neoliberalism and its values.

But now reality has upset the doctrinal apple cart. In the period 1948-1972, every section of the American population experienced very similar and sizable increases in their standard of living; between 1972-2013, the bottom 10% experienced falling real income while the top 10% did far better than everyone else. In the US, the median real income for full-time male workers is now lower than it was four decades ago: the income of the bottom 90% of the population has stagnated for over 30 years.

A not so dissimilar picture is true of the UK. And the problem has grown more serious since the financial crisis. On average, between 65-70% of households in 25 high-income economies experienced stagnant or falling real incomes between 2005 and 2014.

"Large sections of the population in both the US and the UK are now in revolt against their lot."


The reasons are not difficult to explain. The hyper-globalisation era has been systematically stacked in favour of capital against labour: international trading agreements, drawn up in great secrecy, with business on the inside and the unions and citizens excluded, the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership(TTIP) being but the latest examples; the politico-legal attack on the unions; the encouragement of large-scale immigration in both the US and Europe that helped to undermine the bargaining power of the domestic workforce; and the failure to retrain displaced workers in any meaningful way.

As Thomas Piketty has shown, in the absence of countervailing pressures, capitalism naturally gravitates towards increasing inequality. In the period between 1945 and the late 70s, Cold War competition was arguably the biggest such constraint. Since the collapse of the Soviet Union, there have been none. As the popular backlash grows increasingly irresistible, however, such a winner-takes-all regime becomes politically unsustainable.

Large sections of the population in both the US and the UK are now in revolt against their lot, as graphically illustrated by the support for Trump and Sanders in the US and the Brexit vote in the UK. This popular revolt is often described, in a somewhat denigratory and dismissive fashion, as populism. Or, as Francis Fukuyama writes in a recent excellent essay in Foreign Affairs: “‘Populism’ is the label that political elites attach to policies supported by ordinary citizens that they don’t like.” Populism is a movement against the status quo. It represents the beginnings of something new, though it is generally much clearer about what it is against than what it is for. It can be progressive or reactionary, but more usually both.

Brexit is a classic example of such populism. It has overturned a fundamental cornerstone of UK policy since the early 1970s. Though ostensibly about Europe, it was in fact about much more: a cri de coeur from those who feel they have lost out and been left behind, whose living standards have stagnated or worse since the 1980s, who feel dislocated by large-scale immigration over which they have no control and who face an increasingly insecure and casualised labour market. Their revolt has paralysed the governing elite, already claimed one prime minister, and left the latest one fumbling around in the dark looking for divine inspiration.

The wave of populism marks the return of class as a central agency in politics, both in the UK and the US. This is particularly remarkable in the US. For many decades, the idea of the “working class” was marginal to American political discourse. Most Americans described themselves as middle class, a reflection of the aspirational pulse at the heart of American society. According to a Gallup poll, in 2000 only 33% of Americans called themselves working class; by 2015 the figure was 48%, almost half the population.

Brexit, too, was primarily a working-class revolt. Hitherto, on both sides of the Atlantic, the agency of class has been in retreat in the face of the emergence of a new range of identities and issues from gender and race to sexual orientation and the environment. The return of class, because of its sheer reach, has the potential, like no other issue, to redefine the political landscape.

"The working class belongs to no one: its orientation, far from predetermined, is a function of politics."


The re-emergence of class should not be confused with the labour movement. They are not synonymous: this is obvious in the US and increasingly the case in the UK. Indeed, over the last half-century, there has been a growing separation between the two in Britain. The re-emergence of the working class as a political voice in Britain, most notably in the Brexit vote, can best be described as an inchoate expression of resentment and protest, with only a very weak sense of belonging to the labour movement.

Indeed, Ukip has been as important – in the form of immigration and Europe – in shaping its current attitudes as the Labour party. In the United States, both Trump and Sanders have given expression to the working-class revolt, the latter almost as much as the former. The working class belongs to no one: its orientation, far from predetermined, as the left liked to think, is a function of politics.

The neoliberal era is being undermined from two directions. First, if its record of economic growth has never been particularly strong, it is now dismal. Europe is barely larger than it was on the eve of the financial crisis in 2007; the United States has done better but even its growth has been anaemic. Economists such as Larry Summers believe that the prospect for the future is most likely one of secular stagnation.

Worse, because the recovery has been so weak and fragile, there is a widespread belief that another financial crisis may well beckon. In other words, the neoliberal era has delivered the west back into the kind of crisis-ridden world that we last experienced in the 1930s. With this background, it is hardly surprising that a majority in the west now believe their children will be worse off than they were. Second, those who have lost out in the neoliberal era are no longer prepared to acquiesce in their fate – they are increasingly in open revolt. We are witnessing the end of the neoliberal era. It is not dead, but it is in its early death throes, just as the social-democratic era was during the 1970s.

A sure sign of the declining influence of neoliberalism is the rising chorus of intellectual voices raised against it. From the mid-70s through the 80s, the economic debate was increasingly dominated by monetarists and free marketeers. But since the western financial crisis, the centre of gravity of the intellectual debate has shifted profoundly. This is most obvious in the United States, with economists such as Joseph Stiglitz, Paul Krugman, Dani Rodrik and Jeffrey Sachs becoming increasingly influential. Thomas Piketty’s Capital in the Twenty-First Century has been a massive seller. His work and that of Tony Atkinson and Angus Deaton have pushed the question of the inequality to the top of the political agenda. In the UK, Ha-Joon Chang, for long isolated within the economics profession, has gained a following far greater than those who think economics is a branch of mathematics.

Meanwhile, some of those who were previously strong advocates of a neoliberal approach, such as Larry Summers and the Financial Times’s Martin Wolf, have become extremely critical. The wind is in the sails of the critics of neoliberalism; the neoliberals and monetarists are in retreat. In the UK, the media and political worlds are well behind the curve. Few recognise that we are at the end of an era. Old attitudes and assumptions still predominate, whether on the BBC’s Todayprogramme, in the rightwing press or the parliamentary Labour party.

Following Ed Miliband’s resignation as Labour leader, virtually no one foresaw the triumph of Jeremy Corbyn in the subsequent leadership election. The assumption had been more of the same, a Blairite or a halfway house like Miliband, certainly not anyone like Corbyn. But the zeitgeist had changed. The membership, especially the young who had joined the party on an unprecedented scale, wanted a complete break with New Labour. One of the reasons why the left has failed to emerge as the leader of the new mood of working-class disillusionment is that most social democratic parties became, in varying degrees, disciples of neoliberalism and uber-globalisation. The most extreme forms of this phenomenon were New Labour and the Democrats, who in the late 90s and 00s became its advance guard, personified by Tony Blair and Bill Clinton, triangulation and the third way.

But as David Marquand observed in a review for the New Statesman, what is the point of a social democratic party if it doesn’t represent the less fortunate, the underprivileged and the losers? New Labour deserted those who needed them, who historically they were supposed to represent. Is it surprising that large sections have now deserted the party who deserted them? Blair, in his reincarnation as a money-obsessed consultant to a shady bunch of presidents and dictators, is a fitting testament to the demise of New Labour.

The rival contenders – Burnham, Cooper and Kendall – represented continuity. They were swept away by Corbyn, who won nearly 60% of the votes. New Labour was over, as dead as Monty Python’s parrot. Few grasped the meaning of what had happened. A Guardian leader welcomed the surge in membership and then, lo and behold, urged support for Yvette Cooper, the very antithesis of the reason for the enthusiasm. The PLP refused to accept the result and ever since has tried with might and main to remove Corbyn.

Just as the Labour party took far too long to come to terms with the rise of Thatcherism and the birth of a new era at the end of the 70s, now it could not grasp that the Thatcherite paradigm, which they eventually came to embrace in the form of New Labour, had finally run its course. Labour, like everyone else, is obliged to think anew. The membership in their antipathy to New Labour turned to someone who had never accepted the latter, who was the polar opposite in almost every respect of Blair, and embodying an authenticity and decency which Blair patently did not.

"Labour may be in intensive care, but the condition of the Conservatives is not a great deal better."

Corbyn is not a product of the new times, he is a throwback to the late 70s and early 80s. That is both his strength and also his weakness. He is uncontaminated by the New Labour legacy because he has never accepted it. But nor, it would seem, does he understand the nature of the new era. The danger is that he is possessed of feet of clay in what is a highly fluid and unpredictable political environment, devoid of any certainties of almost any kind, in which Labour finds itself dangerously divided and weakened.

Labour may be in intensive care, but the condition of the Conservatives is not a great deal better. David Cameron was guilty of a huge and irresponsible miscalculation over Brexit. He was forced to resign in the most ignominious of circumstances. The party is hopelessly divided. It has no idea in which direction to move after Brexit. The Brexiters painted an optimistic picture of turning away from the declining European market and embracing the expanding markets of the world, albeit barely mentioning by name which countries it had in mind. It looks as if the new prime minister may have an anachronistic hostility towards China and a willingness to undo the good work of George Osborne. If the government turns its back on China, by far the fastest growing market in the world, where are they going to turn?

Brexit has left the country fragmented and deeply divided, with the very real prospect that Scotland might choose independence. Meanwhile, the Conservatives seem to have little understanding that the neoliberal era is in its death throes.

Dramatic as events have been in the UK, they cannot compare with those in the United States. Almost from nowhere, Donald Trump rose to capture the Republican nomination and confound virtually all the pundits and not least his own party. His message was straightforwardly anti-globalisation. He believes that the interests of the working class have been sacrificed in favour of the big corporations that have been encouraged to invest around the world and thereby deprive American workers of their jobs. Further, he argues that large-scale immigration has weakened the bargaining power of American workers and served to lower their wages.

He proposes that US corporations should be required to invest their cash reserves in the US. He believes that the North American Free Trade Agreement (Nafta) has had the effect of exporting American jobs to Mexico. On similar grounds, he is opposed to the TPP and the TTIP. And he also accuses China of stealing American jobs, threatening to impose a 45% tariff on Chinese imports.

To globalisation Trump counterposes economic nationalism: “Put America first”. His appeal, above all, is to the white working class who, until Trump’s (and Bernie Sander’s) arrival on the political scene, had been ignored and largely unrepresented since the 1980s. Given that their wages have been falling for most of the last 40 years, it is extraordinary how their interests have been neglected by the political class. Increasingly, they have voted Republican, but the Republicans have long been captured by the super-rich and Wall Street, whose interests, as hyper-globalizers, have run directly counter to those of the white working class. With the arrival of Trump they finally found a representative: they won Trump the Republican nomination.

"Trump believes that America’s pursuit of great power status has squandered the nation’s resources."

The economic nationalist argument has also been vigorously pursued by Bernie Sanders, who ran Hillary Clinton extremely close for the Democratic nomination and would probably have won but for more than 700 so-called super-delegates, who were effectively chosen by the Democratic machine and overwhelmingly supported Clinton. As in the case of the Republicans, the Democrats have long supported a neoliberal, pro-globalisation strategy, notwithstanding the concerns of its trade union base. Both the Republicans and the Democrats now find themselves deeply polarised between the pro- and anti-globalizers, an entirely new development not witnessed since the shift towards neoliberalism under Reagan almost 40 years ago.

Another plank of Trump’s nationalist appeal – “Make America great again” – is his position on foreign policy. He believes that America’s pursuit of great power status has squandered the nation’s resources. He argues that the country’s alliance system is unfair, with America bearing most of the cost and its allies contributing far too little. He points to Japan and South Korea, and Nato’s European members as prime examples.He seeks to rebalance these relationships and, failing that, to exit from them.

As a country in decline, he argues that America can no longer afford to carry this kind of financial burden. Rather than putting the world to rights, he believes the money should be invested at home, pointing to the dilapidated state of America’s infrastructure. Trump’s position represents a major critique of America as the world’s hegemon. His arguments mark a radical break with the neoliberal, hyper-globalisation ideology that has reigned since the early 1980s and with the foreign policy orthodoxy of most of the postwar period. These arguments must be taken seriously. They should not be lightly dismissed just because of their authorship. But Trump is no man of the left. He is a populist of the right. He has launched a racist and xenophobic attack on Muslims and on Mexicans. Trump’s appeal is to a white working class that feels it has been cheated by the big corporations, undermined by Hispanic immigration, and often resentful towards African-Americans who for long too many have viewed as their inferior.

A Trump America would mark a descent into authoritarianism characterised by abuse, scapegoating, discrimination, racism, arbitrariness and violence; America would become a deeply polarised and divided society. His threat to impose 45% tariffs on China, if implemented, would certainly provoke retaliation by the Chinese and herald the beginnings of a new era of protectionism.

Trump may well lose the presidential election just as Sanders failed in his bid for the Democrat nomination. But this does not mean that the forces opposed to hyper-globalisation – unrestricted immigration, TPP and TTIP, the free movement of capital and much else – will have lost the argument and are set to decline. In little more than 12 months, Trump and Sanders have transformed the nature and terms of the argument. Far from being on the wane, the arguments of the critics of hyper-globalisation are steadily gaining ground. Roughly two-thirds of Americans agree that “we should not think so much in international terms but concentrate more on our own national problems”. And, above all else, what will continue to drive opposition to the hyper-globalizers is inequality.


Article Link To The Guardian: