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The Moral Duty of the Elites

5 hours 41 min ago

By Dirk Helbing

It is the moral duty of the elite to avert global disaster.

Faced with climate change, financial, economic and spending crisis, mass migration, terrorism, wars and cyber threats, it appears we are very close to global emergency.

Given this state of affairs, we are running out of time to fix the problems of our planet. Here, we present what should be decided during the UN General Assembly on September 23, 2017 and a reflexive preamble.

We acknowledge your efforts to improve the quality of life. However, these efforts have also caused a further increase in the consumption of resources and energy.

It appears that this is now driving our planet to the edge: Climate change affects the global water system, agriculture and the basis of the lives of billions of people. It causes environmental disasters, mass migration and armed conflicts. Moreover, it is estimated to threaten about one-sixth of all species on our planet.

There is still time

Nevertheless, global disaster is not inevitable — if we re-organize the world in a suitable way, as discussed below.

The lives of billions of people are at risk. It is the moral duty of politicians, religious, cultural, scientific and business leaders – in short: the elite – to avert likely disasters, humanitarian crises and ethical dilemmas as much as possible.

This requires bringing about the necessary changes of society on the way in a timely manner.

With the aim to “save the planet,” many have urged the world community to reduce carbon emissions drastically by 2030 and almost completely by the end of the century.

However, given that the world population has grown roughly proportional to global oil and gas consumption, such a drop would largely reduce the carrying capacity of the Earth for people — unless the reduction in carbon-based energy can be replaced by renewable energy in a timely manner.

New solutions needed

New solutions are needed not only for heating and transportation, but also for the chemical industry, because the production of plastic and fertilizer currently depends on oil. Altogether, a radical re-organization of major parts of our economy appears to be urgently necessary.

Even though philanthropy and engagement in responsible innovation have increased, this urgent transformation has not taken place to the required extent. To a considerable degree, this is because those who have “vested interests” in the old system have often obstructed change.

However, “vested interests” are no excuse for inaction or delays. Property and power imply responsibility. If this responsibility is not adequately exercised, power lacks legitimacy.

If people have to pay with their lives for “vested interests”, these interests clearly undermine the very basis of societies.

Human dignity, which underpins many fundamental values and human rights, is the imperative that all individual, political and economic action should be oriented at. It is the key value and central pillar of many modern societies and, according to many constitutions, must be actively protected by all means.

A final call to action

If humanity wants to bring a positive future or even a “Golden Age of Prosperity and Peace” on the way, we need to dramatically reform our basic societal institutions, e.g. the present financial and monetary system, our economy and society.

Even though it seems that the current organizational principles of our world have served us well for a long time, they are now often failing to deliver the right solutions early enough.

Within the current framework, time and again we got trapped in suboptimal solutions to complex coordination games, “tragedies of the commons” and problems of collective inaction.

In our highly networked cyber-physical world, linear thinking (the assumption that effects are proportional to their causes) and the ethics of small-group, face-to-face interactions in relatively simple settings are often leading us astray.

Fundamental change is inevitable. It seems that what needs to take center stage now is not how much money or power someone can accumulate, but how much he or she is benefitting others and the world. Apparently, our societies have largely lost track of this basic guiding principle.

A lack of imagination

Claiming that our problem is overpopulation of the planet reveals lack of imagination.

By now it is obvious that all traditional problem-solving approaches have failed to work.

Also, the attempt to revive historical forms of societal organization, empowered by Big Data and Artificial Intelligence, does not seem to work, as the recent experiences in various countries with technocratic Smart Cities approaches have shown.

However, if innovation within the current system is not sufficient, the system itself has to be reinvented and changed.

It seems paradoxical that – in times of an abundance of data and the best technology ever – centralized control attempts failed to boost our most advanced economies and societies to a new level of satisfaction and prosperity, sustainability and resilience.

The reason for this lies in the complexity of hyper-connected systems, in which processing power cannot keep up with data volumes and those cannot keep up with the combinatorial increase in complexity.

Such networked systems often behave in unexpected and counter-intuitive ways: Rather than the intended effects, one will frequently find side effects, feedback effects and cascading effects.

Artificial intelligence is not enough

Given these circumstances, centralized control attempts perform often poorly. Even the most powerful artificial intelligence systems will not be able to manage the overly complex and often quickly changing systems of our globalized world well enough.

As a consequence, a new, decentralized control paradigm is needed, which implies the need for modular designs, diverse solutions, and participatory opportunities.

Therefore, we need new ways of participatory decision-making as well as new designs of the monetary, financial and economic system. In the new framework we propose, co-creation, co-ordination, co-evolution and collective intelligence are the main underlying success principles.

©2017 The Globalist

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The Summer of Love Turns 50

Sat, 2017-08-19 00:01

By Michael J. Brenner

San Francisco is celebrating the 50th anniversary of the most iconic cultural event in its history – the summer of 1967.

San Francisco is celebrating the Summer of Love’s 50th anniversary. Most of the celebrants are probably dead and buried by now, especially its high priests like Allen Ginsburg who passed into Eternity in the dingy East Village, Timothy Leary, Jerry Garcia, Emmet Grogan of the Diggers (remember them).

In truth, there hasn’t been much of a to-do about the historic occasion. Today’s “with it” residents of the Bay Area live in the moment. Vintage refers to their last but one smart phone; antique is their pre-updated software from Microsoft.

The “Summer Of Love” – if they can recognize the name at all – belongs to the Neolithic Age or whenever it was that the skies were filled with flying dinosaurs instead of Amazon delivery drones.

Only the De Young Museum has done its civic duty in bowing to the past. A mile away from the Haight-Ashby, they have organized a nostalgic exhibition that features the vivid psychedelic posters from Bill Graham’s Fillmore Ballroom concerts and the accoutrements of hippie culture.

Thin inheritance

This very muted celebration does make sense – of a sort. After all, the era’s inheritance is pretty thin – and much of it not a cause for outbursts of joy. On the positive side, the sexual revolution stands out.

Frankly, though, “the pill” did far more to liberate Americans from the emotional and mental trusses of the 1950s than did all the psychedelic stuff, strobe lights and pot highs.

Beyond that, not much. Our current national religion has nothing to do with community, much less love for humanity. Greed and selfishness is what we’re about – albeit women and gays are better off.

Even they are just as greedy and selfish as straight men. Politically, the hopes and imaginings of half a century ago have vaporized as the country spirals back to 1848 – at home and abroad.

Astoundingly, San Francisco has kept its allure. For two main reasons: topography, and earlier generations’ skill at creating a uniquely appealing cityscape suited to the cool, grey city by the bay.

It is still “cool” and laid-back and has a touch of class. Stay away from the techie hangouts, the tourists, the boosters and instead prowl the hills. Nob Hill, Russian Hill and Pacific Heights are physically unchanged.

That is due largely to municipal codes enacted in the early 1960s which placed a strict height limit on new construction in those residential neighborhoods. The few modern high risers that mar the skyline are to be thanked for arousing a sense of aesthetic preservation.

Eclectic architecture

The result is a unique mix of highly individual houses, multi-unit complexes of heteroclite architectural style, and some stately apartment buildings from the 1920s and 1930s. Many are distinctive; some of distinction. All are well preserved.

It is amusing to conjure visions of Humphrey Bogart in The Maltese Falcon slipping through the wisps of fog into the impressive lobby of one of those structures. The imagination runs riot pondering what mysteries lie within.

With a bit of conjuring, the elegant oriental lady dressed all in black stepping into her chauffeured limousine is a modern-day Madame Chiang off on a mission with instructions from President Xi to knit ties with West Coast power brokers at the monumental Pacific Union club.

The nearly empty streets create ample space for such theatrical free play.

The present has its own rewards

A return to the present has its own rewards. Outside an inter-war apartment block on Filbert, the Japanese doorman (uniformed) obligingly fills you in as to the current residents.

This 1929 building has thirty-odd units – with the identical floor plan: 2,500 square feet, roughly; 3 bedrooms, 2 full baths & 2 powder rooms; and blue water view. It’s a co-op.

If I were to pass muster, one might soon be available – for only $7 million. Wealthy people have always lived there – the 4 bathrooms tell you that. But it is by no means the top-of-the-line.

Take a look at the side of the building and you see fire escapes – just like a NYC tenement. That meets the strict city building code standard – in a primitive way.

More luxurious buildings of that era would have two interior escape routes instead of the fire escape.

A techie’s world

There is a lot of money in San Francisco – not all of it in the hands of techies. They, in fact, avoid these traditional districts. Too far from the Freeway that channels them down to Silicon Valley via exclusive vans, too few nightspots, too retro.

Think of it this way. You’re a high-living 20-something hotshot in the electronic cosmos whose awesome idea for a successor to Candy Crush is about to take off. It promises riches within nine figures.

When you walk your mixed Akita-Tosa designer hound at midnight do you really want to find yourself in the company of some 48 year old codger, working in a dreary law firm downtown for a measly 300K, who’s with his collie – a collie!

What is this: a remake of Lassie Finds a Home? The guy’s probably living off the inheritance of his wife from Cincinnati whose family made their money selling Proctor & Gamble soaps back in the last century.

In chic Pacific Heights, the stately houses go for $18 – 25 million. So too their varied Russian Hill companions.

As for the ultra exclusive private enclave on the edge of the Presidio, which Diane Feinstein, Nancy Pelosi and the late Mayor Joe Alioto called home, $30 million might get you a foot in the door.

They represent the party of the people; so where do their Republican counterparts live? Atherton is one place. Tiburon is another.

Iconic cable cars

Adding to the charm of highland San Francisco are the clanging cable cars. They’re a physical link between the old days and the electronic present.

Especially out of the tourist season. Even in the summer, the micro-culture developed around the antique cars persists – thanks to the cable operators and the brake-men who form a sort of guild.

They are the masters of their tiny domain — instructions issue forth as where to stand. To give up a seat to a greybeard, to keep a protective arm around a young child on the sharp curves, to pull a leg in before it gets tattooed with the logo of that parked Porsche at the corner of Hyde and Jackson.

This fun doesn’t come cheap; $7 a ride. But only tourists are routinely asked to pay up. For they get on and off at the terminal stops.

If you want to ride down to the Olympic Club to review your investments over lunch in the grill in anticipation of bidding on that $7 million apartment with the fire escape, you hop on the car on Russian Hill and hop off at Post.

Stopping for lunch

The brake-man is too busy on the steep hills to elbow his way through the clump of tourists to ask for fares. In fact, at an intersection on a particularly vertiginous street, the Chinese brake-man turned to me and, in a confiding manner, asked if I would let him know if any tourists jumped on while he dashed into the Italian pizza joint at the corner to pick up a pre-arranged eggplant sandwich.

That’s quite flattering – especially considering that I wasn’t wearing a trench coat or even a Giants cap.
On the same eventful ride, we make another impromptu stop at the Powell and California intersection where two cable lines cross.

Our black cable operator receives a fleeting visit from his buddy on the other line who flips him an Otis Redding CD. Civilization still lives. The spirit of 67 lives.

In truth, though, all the news about California public transportation is not good. Governor Jerry Brown’s grandiose plans for a high speed rail link between Los Angeles and San Francisco are on life support.

Short several tens of bilions

The $80 billion project was always destined to be a still-born White Elephant. Despite Brown’s remarkable achievement in convincing tax-payers to cough up a few billion as seed money notwithstanding, he’s short several tens of billions. Good luck!

So, his would-be legacy will be a few miles of track in the Central Valley around Madera far from the maddening crowd.

Centuries from now, archeologists will doubtless be digging up the old rails and wondering about the fate of the ancient civilization that once flourished in that remote region.

The corroded remnants of tram tracks will suggest a dense population – dispersed by drought, civil strife, or a sterile transgender population.

In the city itself, all the talk is about a heroic scheme to turn Market Street into the Champs Elysee of 21st Century, post-modern San Francisco. An elegant boulevard is envisioned with wide, café studded pedestrian promenades, much flora, remodelled facades – and no cars. (The light rail and BART subway already are underground).

Bicycles rule

There will be bicycles, though – lots of them. They will rule the streets. Cyclists are among the city’s most powerful lobbies – after feminists and gays.

What cyclists want, they usually get. Even if it costs $700 million, as are the estimates for the cyclist Shangri-La project.

Their strength derives not just from their numbers. Their discipline and organization is enough the make the last surviving Trotskyists green with envy.

They are passionate and they exude that sense of righteous superiority that we usually associate with apostles of the True Faith.

Their holier-than-thou attitude resonates with many citizens in a city where having a light carbon footprint is as close to godliness as one can get in this profane age.

The conduct of quite a few cyclists in Northern California conforms to this exalted self-image. Traffic rules are ignored, pedestrians mowed down (despite their even lighter carbon footprint), and drivers treated with a contempt peculiar to the weak and vulnerable who nonetheless hold the high moral ground.

They resemble the Holy Cows that occupy India’s towns with complete impunity. Could this possibly be the new fault line in San Francisco society and politics?

Which side will the techies take? Who knows? Some of us are still wondering over the mysterious fate of the Maltese Falcon.

©2017 The Globalist

ALL RIGHTS RESERVED
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The Two Faces of the Gulf Crisis: Inching Toward Social Change

Fri, 2017-08-18 00:01

By James M. Dorsey

The two-month old crisis pitting Qatar against an alliance led by the United Arab Emirates and Saudi Arabia is proving to be a double-edged sword.

In addition to stimulating an arms race it has actually revived momentum for unprecedented, albeit snail-paced social reforms, initially sparked by Qatar’s winning bid for the 2022 soccer World Cup.

Those reforms break with policies among the six members of the Gulf Cooperation Council (GCC) – Saudi Arabia, the UAE, Qatar, Kuwait, Oman and Bahrain. Until now, they where wholly designed to protect the region’s autocratic rulers rather than enhance rights.

The boycott backfired

Ironically, the revived reform momentum is an indication how the UAE-Saudi led diplomatic and economic boycott of Qatar has backfired.

It suggests that Qatar’s refusal to comply with the alliance’s demands that effectively would have put Qatar under Saudi and UAE custodianship is likely to impact long-standing social, economic and political relationships in the Gulf in ways that the Gulf states had not envisioned.

The boycott of Qatar also positions Saudi Arabia as well as the UAE as both bigger brothers of smaller Gulf states and potential threats.

“Smaller Gulf rulers now have increasing reason…to fear the Kingdom’s growing assertiveness under its new young Saudi king-to-be,” said former CIA official and Middle East expert Graham E. Fuller, referring to Saudi Crown Prince Mohammed bin Salman.

The boycott of Qatar, Mr. Fuller added, constitutes a “new display of Saudi aggressiveness and vengefulness against Qatar (from which) we gain flashes of insight into what the shape of things to come in Peninsula geopolitics might be.”

Modest reforms

Critics dismiss Qatar’s recent social policy changes as too little and primarily intended to garner international support in its dispute with the UAE-Saudi-led alliance. Indeed, reforms such as the recent introduction of permanent residency for a top layer of expatriates don’t benefit unskilled or semi-skilled workers.

Similarly, the lifting of visa requirements for nationals of 80 countries — which interestingly did not include Iran — fails to address the issue of exit visas. That is a major bone of contention in efforts by human rights groups and trade unions to get Qatar to radically reform, if not abolish, its contentious kafala or labor sponsorship system.

To be sure, Qatar has been slow to respond to both international calls for a change of its labor system and domestic complaints about issues about economic and educational benefits.

This also includes social issues such as the refusal to grant citizenship to children born in marriages of Qatari women to foreign men and restrictions on marrying a partner of one’s choice. Children of Qatari women were included among those eligible, but were not given the right to citizenship.

Shattering taboos

Nonetheless, they make Qatar the first Gulf state to accord to foreigners any sort of rights granted until now only to citizens beyond those associated with residency permits linked to a period of employment.

The changes also fit a pattern of carefully shattering taboos about public discussion of issues like gay rights, norms for women’s dress in public, and the right to marry a person of one’s choice, that emerged as a result of Qatar’s heavy investment in sports as a soft policy tool and the leveraging of Qatar’s successful World Cup by human rights groups and trade union to pressure Qatar.

A litmus test of how far Qatar is willing to push change is a crucial hearing in November by the International Labour Organization (ILO) that will evaluate whether the Gulf state has complied with promises to improve the living and working conditions of migrant workers.

The ILO warned that it would establish a Commission of Inquiry if Qatar had failed to act by November. Such commissions are among the ILO’s most powerful tools to ensure compliance with international treaties.

The UN body has only established 13 such commissions in its century-long history. The last such commission was created in 2010 to force Zimbabwe to live up to its obligations.

“The eyes of the world are on Qatar. The opportunity for the government is obvious, if it wants to prove its critics wrong… If the government takes the other path, of continuing to promote hollow reforms, then migrant labor abuse will be the gift that keeps on giving for Qatar’s political opponents,” said James Lynch of Amnesty International.

©2017 The Globalist

ALL RIGHTS RESERVED
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The Two Faces of the Gulf Crisis: Arms Race

Thu, 2017-08-17 00:01

By James M. Dorsey

The two-month old crisis pitting Qatar against an alliance led by the United Arab Emirates and Saudi Arabia is proving to be a double-edged sword.

One crucial dimension in which the conflict lays out is that it threatens to escalate a Middle Eastern arms race. So far, that arms race has tiptoed around developing nuclear capabilities.

At a time of global focus on the shenanigans of North Korea, the Gulf crisis has also laid bare military ties between North Korea and a key Qatar detractor, the UAE. Ironically, the social change aspect permeates even the military dimension of the crisis.

The crisis and the wave of nationalism and support it has sparked for Qatar’s emir, Sheikh Tamim bin Hamad Al Thani, has convinced the Gulf state that its past strategy of emphasizing soft as opposed to hard power is insufficient to guarantee security.

Arms splurge

As a result, Qatar has radically increased its arms purchases with a recent $12 billion deal to buy US F-15 fighter jets and a $7 billion naval vessel acquisition from Italy.

Britain’s Department for International Trade reported that Qatar since 2015 had moved from the world’s sixth largest to the third-largest buyer of military equipment. The Stockholm International Peace Research Institute (SIPRI) said Qatari arms purchases had increased a whopping 282% since 2012.

Qatar signaled changes in its defense and security policy in 2014, the year the UAE and Saudi Arabia first unsuccessfully tried to subject Qatar to their will by withdrawing their ambassadors from Doha, with $24 billion worth of arms purchases.

The flurry of deals contrasts starkly with Qatar’s earlier reputation as a state that eyed major defense acquisitions, but to the frustration of the U.S. defense industry, often did not follow through.

They put a spotlight on an arms race that potentially could have far-reaching consequences as well as the willingness of Gulf states to keep a door open to the development of missile and nuclear options.

Nuclear dimension

A leaked U.S. State Department memo attached to an email from the hacked email account of the UAE ambassador to Washington, Yousef al-Otaiba, expressed concern about a $100 million Emirati purchase of North Korean small and light arms in 2015, facilitated by an Emirati company allegedly owned by a close associate of UAE Crown Prince Mohammed bin Zayed.

The memo warned that North Korea “relies on overseas arms sales like this to sustain and advance its nuclear and ballistic missiles programs.”

Given that the UAE would have had no problem acquiring the weapons elsewhere, the purchase appears to have been a bid to ensure access to missile and nuclear technology and persuade North Korea to restrict any dealings with Iran as well as Iranian-backed Houthi rebels in Yemen.

Moreover, the Washington-based Institute for Science and International Security (ISIS) warned earlier this year that:

There is little reason to doubt that Saudi Arabia will more actively seek nuclear weapons capabilities, motivated by its concerns about the ending of (Iran’s) major nuclear limitations starting after year 10 of the (nuclear) deal or sooner if the deal fails… The current situation suggests that Saudi Arabia now has both a high disincentive to pursue nuclear weapons in the short term and a high motivation to pursue them over the long term.

Changing attitudes

Signaling changing attitudes and policies in the Gulf, Qatar, one of the first Gulf states to introduce compulsory military service, is focusing its national service program on strengthening its security forces in a bid to not only to enhance homeland defense but also national cohesion.

The program is partnering with Qatar Foundation’s Education City to include research that would support the military effort.

©2017 The Globalist

ALL RIGHTS RESERVED
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The Rise of Digital Workers

Wed, 2017-08-16 00:01

By Steven Hill

As more digital freelancers find work through online labor platforms, taxing their income will become increasingly difficult.

Digital freelancers are difficult to track. The “nano-ization” of their work, with short daily and weekly working hours, much of it part-time, is hard to capture statistically.

Therefore, official numbers may be undercounting. A study by McKinsey Global Institute found that the percentage of Germans working “independent” of the traditional employer-employee relationship is nearly twice that of the government estimate.

For example, the number of German clickworkers seeking gigs on the US-based platform Upwork grew by over 300% to over 59,000 in only the nine months before July 2017. Over 22,400 of those had earned income during July.

That’s just one online labor platform, there are dozens of them. Various studies have found that anywhere from 1-2 million Germans (2.3%-4.6% of all workers) are earning income on them.

Preliminary results from a recent survey commissioned by the Federal Ministry of Labour found 3.1% of workers earned income on these platforms over the previous year. Still another survey found that 22% of German respondents tried to find work via online platforms during the past year, with 4% managing to find work at least once a week.

Other studies have come up with different estimates, unleashing a confusing numbers game that makes policy design a challenge.

Tax evasion of digital platforms

Even more alarming, when these workers are hired by companies or individual clients located in other parts of the world, those clients often do not report to the German authorities how much income was paid to each worker. And the individual worker also likely is not reporting a lot of this “under the radar” income.

In a report written for the European Commission, Professor Gerhard Bäcker from the Universität Duisburg-Essen asked, “How can the incomes of clickworkers be recorded?”

That’s a tough question to answer. One Germany company, called Clickworker, claims to have 900,000 digital workers all over the world. How many of them are Germans, and how many of those pay taxes on their income? How many of the non-Germans pay taxes to their own governments? Nobody really knows.

Undermining the future

By my calculation, approximately €4 billion in annual income from these workers is conceivably going untaxed in Germany alone, and €600 million is not being paid into the German health care fund.

As more digital freelancers find work through these online platforms, that will further erode public funding for education, transportation, healthcare, the environment and more.

This is serious money. I have used Germany as an example, but the same challenges apply across Europe and in the United States. A lot is at stake.

If the drift toward a more “part-time, freelance economy” is not managed carefully, it will undermine the future. It will not only drain taxes from the welfare state, it also will unravel the employer-employee relationship, and the delicate balance of solidarity and co-determination between the different economic sectors.

And as more of the global economy moves into the online world, where Internet-based corporations can hide their transactions and control the massive amounts of big data that increasingly is becoming the “new currency” of the digital age, governments will be hard-pressed to enforce their laws regarding privacy, commerce, labor, taxes and worker surveillance against these global players.

A portable safety net

Germany, Europe, the United States and other developed economies must become better at collecting the data needed to track the activities of the companies, as well as the many different ways people are working today.

In addition, I have proposed creating a portable welfare net for all excluded freelancers. This could be enacted by expanding Germany’s “Hausgewerbetreibende” and “Künstlersozialkasse” programs.

These were created to provide healthcare and social security for self-employed workers who perform certain types of jobs from home, or who are artists, musicians and journalists.

As with regular workers, each business would pay its pro-rated share of social security costs, as would the worker. That money would be used to purchase the worker‘s safety net.

A number of European member states have a version of these programs that could be expanded to make sure no types of workers fall through the cracks.

By doing this, the developed economies would eliminate the “bogus self-employment” loophole, because if a business hires a freelancer it will no longer be able to evade paying its social security contribution.

And people who like flexible work wouldn’t have to sacrifice their social security to have it, and vice versa. That would greatly help prepare the labor force and the developed economies for the Digital Age.

©2017 The Globalist

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Future of Work and the Survival of the Welfare State

Tue, 2017-08-15 00:01

By Steven Hill

More and more people are finding work in the digital economy, but more flexibility also means increased insecurity.

Europe, like the United States, has seen dramatic changes in how people work. Compared to 15 years ago, many more people have part-time, temp or mini-jobs, or are self-employed.

While the number of full-time jobs has increased recently as the unemployment rate has slowly declined, far more of Europe‘s employment growth has come from part-time and temp jobs.

Even Germany, whose economy has fared better than most in recent years, has seen employment growth driven by part-time jobs, which have doubled since 2000 and now comprise about 27% of all jobs.

These shifts provide a hint about the “future of work,” and have enormous consequences for people’s well-being, as well as for the survival of the social welfare system.

In the latest phase of this trend, more people are finding work in the “digital economy,” via online Web- and app-based platforms.

As self-employed freelancers, some work from home, others out of the dozens of co-working spaces that populate London, Berlin, Paris, Amsterdam, Copenhagen, Hamburg, Munich and Stockholm. They don’t report to a regular workplace or employer, and have flexible work schedules, which is an attractive feature for many.

Gigging in Berlin

An acquaintance, Lutz, gave me a tour of his co-working space in his Neukölln neighborhood in Berlin, where he and a dozen other digital entrepreneurs rent out little cubicles, share office expenses and network.

Lutz and his colleagues are called “clickworkers” because they work over the internet for anybody who hires them for their particular specialty – software development, computer programming, data management, web and graphic design, translation, copy editing and more.

Many work for several different businesses at a time, constantly juggling their various “gigs.” Some do it full-time, others part-time, and a gig can last hours, days or weeks.

Bikes and smartphones

Other occupations are being “disrupted” too, including food delivery, house cleaning, apartment rentals and more. These industries use “platform workers,” which receive customers’ orders via their smart phones or over the Web.

One day as I was hurrying toward the U-Bahn station in Berlin, I was nearly run over by a Foodora deliverer on her bicycle. This “startup platform” offers bicycle delivery of food from restaurants, with the deliverers arranging their working lives around the “ding” of their smart phones when a job arrives.

These jobs are not a bike tour in the park, they are actually physically demanding and even dangerous. If the deliverer gets knocked off their bike and injured they are not entitled to any paid sick leave or lost wage compensation.

Many deliverers complain about low pay, particularly since these self-employed workers are not covered by Germany’s minimum wage law.

Job-seeking CEOs

Silicon Valley likes to call these workers the “CEOs of their own freelancing business,” but that’s just techno happy talk. In reality, many of them spend more time (unpaid) constantly looking for work than actually finding it.

They also don’t have any job security or much coverage from the social welfare system. Wages for these freelancers vary a lot by occupation – those in the tech industry are high, but other occupations barely earn minimum wage.

A closer look at Germany, one of the strongest economies in Europe, is revealing. Overall, the work force has become increasingly complex and “fissured,” with many workers moving between different types of work — from self-employed to temp, from full-time to part-time, to mini-job to “werkvertrag” subcontractor, and back again.

More workers now supplement their income with second, third and fourth jobs. Indeed, Eurostat says the number of Germans holding two jobs at once has nearly doubled in 10 years from 1.2 million to 2.2 million.

Businesses especially like hiring self-employed workers because they save 25-30% on their labor costs. Employers don’t have to pay for these workers‘ health care, retirement pension, sick leave, vacations or injured worker and unemployment compensation.

Self-employed women are not entitled to maternity leave. The self-employed in Germany, like in most European member states, are legally required to pay both the employers‘ half and their own half of the health care contribution.

In Germany, that amounts to a minimum of 14.6% out of their wages. And the self-employed are responsible for saving for their own retirement as well, with no contributions from employers like regularly-employed workers receive.

Downsides of flexibility

Nevertheless, many self-employed workers are attracted to the flexible scheduling, at least at first. But after a while many grow weary of this new kind of grind. A European Commission report found that the self-employed in Germany are 2.5 times more at-risk of poverty than salaried workers.

A study by the “Wissenschaftliches Institut der AOK” found that among low income workers, solo self-employed Germans spend an astounding 46.5% of their income for health insurance.

Not surprisingly, one study found that about half of self-employed workers would accept regular employment if decent jobs were available.

Roman, a digital media whiz and videographer, eked out a living as a self-employed freelancer for nearly 10 years.

“It was really hard to do,” he says. “It’s OK to try when you are in your 20s. But then you hit your 30s and you want more security, more income.”

Now Roman is 35 and thankful that he was able to find a stable job at an engineering university near Dortmund. He says the virtues of “flexibility” are way overrated. He has many friends who are still struggling freelancers, making €100 here, €100 there, and getting older and worn out.

“Hartz” refugees

This reality raises a fundamental question that has long plagued Germany, going back to the Hartz reforms of the Schröder years. Those reforms, which were enacted when Germany was suffering from unemployment rates as high as 11% — the highest since the Nazis were in power – greatly expanded the number of “Ich-AG” solo self-employed mini-businesses.

But that just delayed the hard task of figuring out how to create not only an adequate number of jobs but also good quality jobs. Germany has been kicking that can down the road ever since.

Many of these solo self-employed workers are the so-called “Hartz refugees,” that now nobody knows what to do with.

With so much blurring between different job types and categories, enforcement of labor laws has become more difficult.

Various investigations have found widespread abuse, with businesses treating many types of workers as self-employed in order to avoid paying social security contributions.

This loophole is called “bogus self-employment,” and it allows these employers to wiggle out of legal obligations and robs many workers of their rights. So while about 10% of German workers are classified as “self-employed,” the impact on the economy extends well beyond that.

Further complicating matters, the digital economy makes it much easier to locate and temporarily hire self-employed freelancers instead of permanent workers. That further reduces economic stability, yet many German leaders I have spoken to downplay this threat.

They say that click- and platform workers do not make up enough of the overall German labor force to worry about it.

©2017 The Globalist

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Gulf Media Wars: No Winners, Only Losers

Mon, 2017-08-14 00:01

By James M. Dorsey

Feuding Gulf States have poured millions of dollars into media campaigns which twist the truth to serve rival narratives.

Feuding Gulf States that have pumped millions of dollars into public diplomacy appear to have done better in damaging the reputations of their detractors than in polishing their own tarnished images.

Qatar, the United Arab Emirates and Saudi Arabia all appear to fare poorly in how they are perceived, judged by a recent survey of American public opinion.

The international community’s response to the two-month-old Gulf crisis suggests, however, that Qatar so far has been more successful in garnering muted support for its call for direct talks to solve the crisis – a position rejected by its detractors.

Public perception

In the only survey to date of public perceptions in the United States of the Gulf crisis by Britain’s YouGov on behalf of Saudi Arabia’s foremost English-language daily, Arab News, Qatar faired poorest in its approval rating.

However, Saudi Arabia and the United Arab Emirates, the instigators of a diplomatic and economic boycott of the idiosyncratic Gulf state did not do much better.

Poll results showed that a mere 27% of the 2,263 people queried considered Qatar a friend or ally of the United States compared to Saudi Arabia with 37% and the UAE with 39%. Thirty-one percent identified Qatar as unfriendly or an enemy of the United States.

Only 16% of those polled associated Qatar with its hosting rights for the 2022 World Cup, while 34% linked Qatar to being accused of supporting terrorism. Forty-four percent believed that Qatar’s state-owned Al Jazeera TV network provided a platform for militant and jihadist groups.

Arab News reported extensively on the poll, but appeared to refrain from providing a link to the original survey report. The report was also not immediately accessible on YouGov’s website.

As a result, it was difficult to independently evaluate the survey beyond the results published by Arab News as well as based on the questions asked. It was also not clear to what degree the poll further surveyed perceptions of Qatar’s detractors and how they compared to those of the Gulf state.

Public relations war

The Arab News reporting was the latest salvo in a public relations war waged by state-owned or privately-owned media on both sides of the Gulf divide that operate in an environment of highly restricted freedom of the press and often have close ties to government and/or ruling families.

The Financial Times quoted Saudi journalists as saying they had been pressured by government to criticize Qatar.

One Saudi editor described to the FT how officials have been using a mobile phone messaging group to instruct journalists on how to shape coverage and what stories to focus on. “These are orders, not suggestions,” the editor said.

Focusing exclusively on the poll’s Qatar-related results, Arab News editor-in-chief Faisal J. Abbas expressed “surprise” at “how quickly the diplomatic row has negatively affected ‘Brand Qatar,’ at least in the US… It was interesting to see that despite the billions spent by Qatar on various soft power initiatives — from education to charity to international sport — the study found that more Americans associate it with supporting terror than anything else,” Mr. Abbas wrote.

Mr. Abbas made no reference to the fact that like Qatar, Saudi Arabia and the UAE have deployed huge sums to hire a battery of U.S. public relations and lobbying firms in a bid to garner support for their positions. Nor did he discuss what return on investment they have had.

Reputation matters

Striking a slightly more cautionary note in one of several commentaries on the YouGov poll published by Arab News, Sir John Jenkins, a former British ambassador to the kingdom, noted that “Saudi Arabia has ground to make up here, which is an important policy point for decision-makers in Riyadh: Reputation matters in the modern world and you do not improve that without a smart, targeted and sustained communications strategy.”

Last month, a random online YouGov poll suggested that of those asked whose side they were on in the Gulf crisis, 23% opted for Qatar and only 9% for Saudi Arabia. Two thirds of the respondents said they did not know enough to choose sides.

The results of the survey of U.S. public opinion notwithstanding, Qatar appeared to be faring better than the poll results suggested. A majority of Arab and Muslim states have refrained from joining the UAE-Saudi-led campaign, which is backed by less than a score of African and Asian nations, who are dependent on the oil-rich Gulf States in financial and/or political terms.

The international community almost unanimously has refused to endorse the UAE-Saudi-led alliance’s conditions for resolving the Gulf crisis. The United States, the European Union, China and Russia have effectively backed Qatar’s call for direct talks between the Gulf States and its detractors — a proposal rejected by the alliance.

Nobody buying it

The prominent journalist and pundit Rami G. Khouri noted that:

[The alliance’s] problem with [its] display of political bravado is that nobody else buys it, and they are awkwardly isolated in their tent woven of threads of bravado. This is mainly because their accusations are wildly exaggerated, and also hypocritical on core complaints like funding Islamist movements, having relations with Iran, or interfering in other states’ affairs. The Saudi-Emirati media propaganda pushing such accusations has been embarrassing in its ultra-thin doses of truth, and wildly counter-productive, serving only to further damage the credibility that some GCC media did enjoy in recent years.

Mr. Khouri argued further that “in the court of global public opinion, the Qataris appear to be much more sensible, consistent, focused, and precise, while the Saudi-Emirati-led states seem to express genuine anger and fear accompanied by unrealistic and unreasonable demands, but without convincing evidence for their accusations.”

The UAE-Saudi-led alliance has demanded that Qatar shutter Al Jazeera and other media outlets, reduce its relations with Iran, expel Turkish troops and cut ties to militant and Islamist groups irrespective of whether they have been proscribed by the United Nations or the United States.

Qatar has rejected the demands as an infringement on its sovereignty.

Twisting the truth

To many, the dispute in the Gulf amounts to the pot blaming the kettle and twisting the truth to serve rival narratives that fuel their public relations and media wars.

Literally all parties to the dispute are suspected of having had, at least at some points in time, links to militant groups. All, apart from Saudi Arabia, maintain often flourishing economic relations with Iran and many have foreign military bases on their soil.

In an article detailing the Gulf rivals’ investment in Washington public relations and lobby firms some four years prior to the current Gulf crisis, investigative journalist Glenn Greenwald stated:

The point here is not that Qatar is innocent of supporting extremists… The point is that this coordinated media attack on Qatar – using highly paid former U.S. officials and their media allies – is simply a weapon used by the Emirates, Israel, the Saudis and others to advance their agendas… What’s misleading isn’t the claim that Qatar funds extremists but that they do so more than other U.S. allies in the region… Indeed, some of Qatar’s accusers here do the same to at least the same extent, and in the case of the Saudis, far more so.

©2017 The Globalist

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President John Kelly? Trump’s Yeltsin Moment

Sun, 2017-08-13 00:01

By Greg Austin

The dynamic between White House Chief of Staff John Kelly and President Trump harkens back to the Yeltsin-Putin dynamic of the late 1990s.

Could the new White House Chief of Staff, John Kelly, just promoted from Homeland Security Secretary and previously a general in the U.S. Marines eventually succeed Donald Trump as president?

It’s not as unlikely as it might seem at first glance, and it has a striking precedent – overseas.

It is a vaguely familiar story today: A laughingstock president, whose citizens (and observers around the world) were not quite sure whether he had become demented or was permanently affected by alcohol, governed aimlessly through his family members.

Later reports would suggest he may have been affected by overly strong prescribed medication or that he had a neurological disorder.

Whatever the cause of the President’s public stumbles, he had to be removed from power. I am speaking, of course, of the decline and fall – via constitutional process – of Boris Yeltsin, the first post-Soviet president of Russia.

Enter Putin

Vladimir Putin, the man who replaced Yeltsin had started his career in national politics – after earlier serving as a Lieutenant Colonel in the intelligence services – as a Deputy Head of the Presidential Administration (the Kremlin staff) only in March 1997. He quickly rose up through the chaos.

The first Russian President, Boris Yeltsin, broke the back of Soviet power in 1991 and gave his country a democratic constitution in 1993.

But within several years after getting the Constitution approved and facing down an armed revolt in the Russian parliament, Yeltsin had become a laughingstock, especially as his public deterioration became more visible.

Putin had effectively served previously one year in a mid-level role in the Administration in Moscow and before that worked in St. Petersburg politics. Yes, Vladimir Putin, became President of Russia in 1999 starting from a lower level post than Chief of Staff of the White House is in the United States.

On current indications, the U.S. President looks set to finish his career more ignominiously than his Russian forerunner, Boris Yeltsin. If Trump is impeached and forced from office, Chief of Staff and former General John Kelly has a similar constitutional path to power as Putin.

Kelly for Pence

It would only require two things to happen first. Trump forces Vice President Pence to resign (or Pence is forced out by a scandal) and then Trump nominates Kelly as the new Vice President and he wins support by majority votes in the Congress.

If Trump were then forced from office, or were declared incompetent to serve – a maneuver that would be constitutionally initiated by the Vice President with the support of a cabinet majority – Kelly as Vice President would automatically become President.

The 25th Amendment to the U.S. Constitution, adopted only in 1967, would require a new Vice President to be approved by majority vote of both houses of Congress. Any vote for a successor Vice President to Pence would be politically overcharged because of the implications for succession to Trump.

The resignation of the Vice President would itself be seen by many as a harbinger of Trump’s inevitable and necessary downfall, as it was during the collapse of the Nixon-Agnew administration in the 1970s. Trump is already very close to where Yeltsin ended up for the last few years of his Presidency—an alarming joke at home and globally.

Putin’s ascent

Between being appointed as Deputy Head of Yeltsin’s office and deputy prime minister, Putin was appointed in May 1998 as the head of national security intelligence, the Federal Security Service (FSB for its Russian name).

This is a rough equivalent of the FBI, but was the direct successor in domestic security to the notorious KGB. Putin stayed in this job until August 1999, when he was appointed as one of several First Deputy Prime Ministers and simultaneously appointed Acting Prime Minister.

By December 1999, Putin was Acting President, and won the election in March 2000.

Russia during the 1990s was not politically stable. There was open warfare between cliques in the Presidential Administration and among the oligarchs surrounding Yeltsin. Threats of violence and actual physical attacks were not uncommon.

Putin achieved his meteoric and completely unexpected rise from mid-level bureaucrat (albeit former KGB Lieutenant Colonel) to president in this unstable environment in just two years and six months.

While the circumstances remain murky, we could probably conclude that the final nomination of Putin as the successor was forced on the Yeltsin family. By that stage, it was the family that ran the Presidency to a large degree and Putin granted them immunity as part of his ascension to power.

Putin could not have become President without his post at the FSB where he had access to the “dirt files” on politicians and where he commanded meaningful coercive powers of the state in KGB style.

Key questions remain on Kelly

Kelly rising through the 25th Amendment to the U.S. Vice Presidency and then Presidency would differ in that it would not be murky at all nor would it be tainted by anything approaching the KGB legacy.

Still, the question that Americans need to ask now, before it is too late, whether Kelly as an internal security Trump loyalist, as Putin was to Yeltsin, is who they would actually want for President.

It would be wise to reject the assessment of the New York Times editorial of July 28 that Kelly “most likely does not see the White House job as a springboard” to higher office.

He may not, but given the quickening decline of Trump, Kelly may yet find himself higher up than he and most Americans currently imagine. It is time to find out more about this rising figure.

There are many politically popular aspects to Trump’s policy ideas of deporting illegal immigrants and banning travel by people from troubled regions of the world.

The Trump Administration has gone about that in the most inhuman and hate-inspiring way that it could have, short of actually putting illegals in concentration camps or declaring Islam to be an un-American activity.

From what little we know, John Kelly, as a Marine officer, built a track record that does not suggest a strong deviation – except in tone and execution – from Trump’s racist populism.

Under President Obama, Kelly led the U.S. Southern Command, which conducts the United States’ aggressive military policy in Latin America. As Homeland Security Secretary under Trump, he led the increasingly aggressive actions of Border Patrol or Customs Enforcement.

No possibility off the table

But who knows where Kelly stands. The reality is that we simply don’t know as much about Kelly’s political views now as we did about Putin on 31 December 1999 when he became Acting President.

By that time, Grozny’s civilian population had been bombarded by Russian forces and Russian security agencies had been implicated in attacks on Russian apartment buildings.

As in 1990s Russia, the United States is in a great period of shifting ground, where old norms are evaporating overnight and no political possibilities are off limits anymore. We would be wise to prepare for Kelly rising further.

©2017 The Globalist

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China’s Strategic Caution

Sat, 2017-08-12 00:01

By Chas W. Freeman

China has established a seven-decade-long record of strategic caution and a preference for diplomatic and paramilitary rather than military solutions to national security problems.

China clearly prefers to use measures short of war to protect itself but has shown that it is fully prepared to go to war to defend its borders and strategic interests.

Chinese uses of force have been notably purposive, determined, disciplined and focused on limited objectives, with no moving of the goalposts.

Chinese campaigns

In Korea, where ragtag Chinese forces fought the United States to a standstill from 1950 to 1953, China settled for the de facto restoration of the status quo ante bellum — strategic denial of the northern half of the Korean Peninsula to hostile forces. In 1958, it ended its military presence in Korea.

When border skirmishes escalated into war between China and India in 1962, China first showed India that, if provoked, the PLA could overrun it. Then, having made that point, China withdrew its troops to their original positions.

In the 1979 Sino-Vietnamese war, China accepted huge losses on the battlefield to teach Vietnam that the costs of continued empire building in association with the Soviet Union would be unacceptably high. Once Vietnam seemed convinced of this, China disengaged its forces.

China waited a decade to respond to multiple seizures of disputed islands and reefs in the South China Sea by other claimants. The Philippines began the process of creating facts in the sea in 1978, Vietnam followed in 1982, and Malaysia did the same in 1983. In 1988, China intervened to halt the further expansion of Vietnamese holdings.

Since then China has established an unejectable presence of its own on seven artificially enlarged land features in the South China Sea. It has not attempted to dislodge other claimants from any of the four dozen outposts they have planted in Chinese-claimed territories. China has been careful not to provoke military confrontations with them or with the U.S. Navy, despite the latter’s swaggering assertiveness.

Pattern of Restraint

A similar pattern of restraint has been evident in the Senkaku Islands, which China considers to be part of Taiwan and Japan asserts are part of Okinawa. There, China seeks to present an active challenge to Japanese efforts to foreclose discussion of the two sides’ dispute over sovereignty.

It has done so with lightly armed Coast Guard vessels rather than with the PLA’s naval warfare arm. Japan has been equally cautious.

China negotiated the reunification of both Hong Kong and Macau, although it could have used force, as India did in Goa, to achieve reintegration.

China has negotiated generous settlements and demarcations of its land borders with Afghanistan, Kazakhstan, Kyrgyzstan, Nepal, Pakistan, Russia, Tajikistan, and Vietnam. China’s borders with the former British Empire in Bhutan, India, and Myanmar remain formally unsettled but for the most part peaceful.

These interactions between China and its neighbors demonstrate a high degree of Chinese competence at managing differences without armed conflict. They provide grounds for optimism. War, including accidental war, between China and its neighbors – or China and the United States as the ally of some of those neighbors – is far from inevitable.

The Taiwan issue

China has been cautious even with respect to Taiwan – that most chauvinist of issues. There has been no exchange of fire between the civil-war rivals on opposite sides of the Taiwan Strait since 1979.

On Jan. 1 of that year, the United States accepted Beijing as China’s capital and ended its formal championship of Taipei in that role. Beijing responded by discontinuing its advocacy of the forceful “liberation” of Taiwan and announcing a policy aimed at peaceful reunification.

So far, despite occasional provocations from pro-independence forces in Taiwan, China has stuck with this policy, placing equal emphasis on enticement and intimidation. Beijing’s “united front” outreach to Taiwan complements the military pressure its growing capacity to devastate the island imparts to the imperative of cross-Strait accommodation.

The bottom line is that, while Chinese warnings must be taken seriously, Chinese aggressiveness should not be overestimated. China tends to act militarily with prudence, upon warning, not rashly. Its wealth and power are growing, giving it an incentive to defer confrontations to the future, when its relative strength will be greater and new opportunities to win without fighting may arise.

The record shows that China adheres to limited objectives, limited means, and limited time scales. On the other hand, it is characteristically determined, once the die is cast, to invest whatever level of effort is required to achieve its objectives.

China has been notably careful to avoid “mission creep” in the wake of success. There is no evidence that its ambitions are open-ended or unbridled. If given an inch, it is unlikely to seek to take a mile.

Risks of War

So, what’s the problem? Why are we concerned about how to avoid war with China? There are two reasons, one short-term and one long-term.

The first relates to Taiwan, which the United States has pledged to help defend. The island is now ruled by an anti-reunification, pro-independence government.

Trump administration statements have raised doubts about whether Washington might upgrade relations with Taipei, relitigate the U.S. commitment to a “one-China” policy, or otherwise change direction on this most neuralgic of all issues for Chinese nationalism.

China now has the military means to bring Taiwan to heel despite U.S. opposition. The uncertainties injected by Mr. Trump’s tweets seem to have moved Beijing to consider whether to act before the issue goes off track.

It is entirely possible that once this fall’s 19th Party Congress has passed, arguments for resolving the question of Taiwan’s relationship to the rest of China by the 100th anniversary of the founding of the Chinese Communist Party in 2021 will gain force.

If so, the long-deferred bloody rendezvous of the United States with Chinese nationalism could be upon us as Beijing makes Taipei “an offer it cannot refuse.” Americans will have to decide how invested we are in our Cold War commitment to keep China divided.

Declining American power

In the longer term, while Washington persists in proceeding on the assumption that the United States can forever dominate China’s periphery, this notion has steadily diminishing credibility in Asia.

America’s power is visibly declining, not just in relation to China but also to the increasingly self-reliant allies and friends of the United States in the region. These trends give every sign of accelerating. They reflect underlying realities that increased U.S. defense spending cannot alter or reverse.

Sino-American rivalry — political, economic, and military — seems destined to intensify. China can and will easily match defense budget plus-ups by the United States. Despite much shadowboxing by the U.S. armed forces, American military primacy in the Western Pacific will gradually waste away.

Rising cost and risk

Both the costs of U.S. trans-Pacific engagement and the risks of armed conflict will rise. The states of the region will hedge. They will either draw closer to Beijing, cleave to Washington, or — more likely — try to get out of the middle between Chinese and Americans.

For the most part, they will not repudiate their alliances with America. Why give up something for nothing? But they will rely less on the United States and act more independently of it.

So the central question in whether the United States can avoid war with China comes down to this: How much damage to our homeland are we prepared to risk to pursue specific foreign policy objectives that antagonize China?

In the Twenty-first Century, when Americans kill faraway foreigners, we must expect that they will retaliate and that, one way or another, we will pay a price in civilian deaths here at home.

It is time to get serious. We Americans are not omnipotent. Nor are we invulnerable. But we are a people who value honor. In the case of China and its neighbors, how do we balance our interests with our honor?

©2017 The Globalist

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German Political Update: Merkel’s Choice

Fri, 2017-08-11 00:01

By Holger Schmieding

Angela Merkel looks set for a comfortable win in next month's German elections. But which coalition partner will she choose?

Seven weeks ahead of the German election on 24 September, Chancellor Angela Merkel can take it easy. She looks set to comfortably win a fourth term in office. The real questions are which coalition partner she will choose and whether that choice will make any difference.

For some aspects of domestic policy, the choice may matter a little. But the German approach to the bigger questions of foreign and European policy including European reforms and Brexit will probably not change in any major way regardless of Merkel’s choice of coalition partner.

The message of the polls

In opinion polls, support for Merkel’s centre-right CDU/CSU has stabilised around 39%, 15 points ahead of the centre-left SPD led by Merkel’s challenger Martin Schulz.

Four other parties are on course to clear the 5% threshold and enter the federal parliament with roughly 8% each: the centre-left Greens (7.9% support on the average of the last seven polls), the ultra-left Left Party (8.7%), the liberal FDP (8.4%) and the right-wing AfD (8.1%).

As all other parties will shun the AfD, some combination of the other parties will form the next federal government. A coalition will need just above 47.5% of the popular vote for a majority of seats in parliament.

The two hypothetical alternatives to a Merkel-led government, a SPD-Green alliance with either the Left Party or the FDP, would command only 40.1% or 39.8% of the vote, respectively. They would thus fall at least seven points short of a majority.

In the absence of an unusual summer upset, such a shift in voting intentions looks unlikely. And even if it were to happen, chances are that Schulz may still not become chancellor as the FDP may refuse to join him while parts of the SPD may shy away from teaming up with the radical Left Party at the federal level.

Coalition options for Merkel

This leaves four realistic options:

1. Merkel could continue her current “grand” coalition with the centre-left SPD. This is quite possible, although it would probably not be her first choice. Parts of the SPD may also prefer to rejuvenate their party in opposition rather than supporting Merkel once again.

2. Merkel could lead a “Jamaica” coalition between her “black” CDU/CSU, the “yellow” liberal FDP and the Greens. As the liberal FDP and the statist Greens disagree on many issues of economic and social policy, forming such a government would be a challenge.

But with such a coalition now working in one of Germany’s 16 federal states, Schleswig-Holstein, it would be an option.

3. On current polls a CDU/CSU-Green coalition would be 1.8 points short of a majority. A small shift in the polls during the remainder of the campaign could turn it into an option. After the 2013 election, preparatory talks between Merkel’s party and the Greens ended within days as the Greens simply were not ready for it.

But the Greens have aged and become more mainstream since then. Also, for the current generation of Green leaders, it might be their last chance to become federal ministers in Berlin. According to some observers, an alliance with the Greens may be Merkel’s preferred option.

Of course, she is wise enough to not weaken her bargaining position by discussing such potential preferences ahead of time.

4. With 47.5%, a conservative-liberal coalition is currently only marginally behind the combined tally of all other parties likely to make it into the Bundestag (48.1%). With just a marginal shift of voting intentions over the next seven weeks, CDU/CSU and FDP may jointly win a majority.

Having governed together in the past, such a coalition may look like a natural choice. However, as the FDP believes that it was short-changed by Merkel and Wolfgang Schäuble in their joint government during Merkel’s second term, coalition talks might be rocky.

For example, the FDP (and perhaps the SPD) may insist that it controls the finance ministry this time (with Schäuble possibly moving on to be the speaker of parliament in such a case).

Would it matter? Not much

Egged on by her centre-left coalition partner SPD, Merkel has presided over a few reform reversals in her third term, introducing a minimum wage, restraining the scope for temporary work contracts slightly and making some pension entitlements more generous.

Over time, such steps will make the German economy slightly less dynamic. If Merkel forms a new coalition with either the SPD or the Greens, more of the same can be expected, namely a few small steps backwards that will place additional burdens on the German economy over the years without restraining the current upswing significantly.

If she teams up with the FDP instead, there may be some small-scale structural reforms including a modest income tax reform instead.

However, as parts of the FDP may be less comfortable with the European agenda of French president Emmanuel Macron, discussions about common funds for the Eurozone or other European reforms may initially be a little more rocky until the FDP has settled into the role as party of government rather than extra-parliamentary opposition.

The German consensus machine

German politics works largely by consensus. For two reasons, we should not look for major policy changes after the election:

1. The four mainstream parties (CDU/CSU, SPD, Greens, FDP) largely agree on the overall direction of German foreign and European policies. As things are going well enough at home, the desire to make major changes in domestic policies is not very pronounced either.

2. Because of the special role of Germany’s upper house of parliament, the mainstream parties usually need to find a consensus anyway. As the chamber of the 16 federal states, the Bundesrat will not be elected anew on 24 September, except perhaps for an early state election in Lower Saxony.

The Bundesrat needs to pass most major laws including most laws that affect spending and taxes and major European commitments. The CDU/CSU, SPD and Greens are represented in so many state governments at the moment (9, 11 and 10, respectively) that either of these three parties could veto any law in the Bundesrat.

This would not change even if the possible early state election in Lower Saxony were to bring down the current SPD-Green government in favour of a potential CDU-FDP coalition in that state. The power of the Bundesrat forces the mainstream parties to strive for a consensus on many issues.

Policy Outlook

Regardless of the precise shape of Merkel’s future coalition, a further gradual increase in federal spending for infrastructure, defence and the integration of the recent wave of migrants and refugees is likely.

The new German government will work constructively with Macron and its other European partners to strengthen the cohesion of the EU27 and the Eurozone.

A genuine Eurozone budget passed solely by a Eurozone parliament at the proposal of a Eurozone finance minister is beyond the scope of what Berlin can accept.

However, upgrading the European Stability Mechanism (ESM) to a European Monetary Fund and providing significantly more money for common funds (infrastructure, defence, possibly for aspects of social policy) would be possible as long as major decisions on the use of such funds remain subject to a veto by the German Bundestag and the representatives of other big member countries, as is currently the case for the ESM.

The attitude to Brexit will not change: the UK has filed for divorce and has to face the predictable fall-out from its decision.

While trying to preserve close relations with a post-Brexit UK, Berlin will fully support the EU27 consensus that the UK will have to honour the financial obligations it has incurred as an EU member and will not be allowed any cherry-picking upon agreeing its future relationship with the EU.

As before, the conditions of access for German industry to the UK market will play virtually no role in the German Brexit position. Put differently, don’t expect any breathtaking policy change from Berlin.

©2017 The Globalist

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Tillerson in Asia

Thu, 2017-08-10 00:01

By Philip Bowring

With its short-term focus on what currently occupies the American mind (North Korea), the U.S. is actually playing into China’s hands in Asia.

U.S. Secretary of State Rex Tillerson’s visit to Southeast Asia has exposed how the current obsession of the United States with North Korea is undermining more important long-term interests.

The only good thing one could say about the visit which took Tillerson to the Philippines – for ASEAN’s 50th anniversary – as well as Thailand and Malaysia was that his words were guarded and left plenty of room for re-interpretation.

Trump and narcissism

The fundamental problem is that under the Trump administration, American narcissism, never far from the surface, has come to the fore. Thus, the possibility that a nuclear North Korea has a missile capable of reaching the continental United States is deemed an imminent threat and cause of a crisis.

The fact that South Korea and Japan have for years been living with the reality of being within easy reach of Pyongyang’s weapons is somehow dismissed as irrelevant, even though those countries have no deterrent capability of their own but must rely on the United States.

All that has changed is that North Korea has more fully learned the 1950s doctrine of mutual deterrence.

An obedient China?

The Trump administration, instead of acting prudently, seems to have decided to go for the bait. It believes that a sanctions war against North Korea presents an easy and uncontroversial target.

It does not realize that going after “little” North Korea takes the national mind off more difficult issues such as Afghanistan and the South China Sea. But perhaps that is also an intended effect of zeroing in on North Korea.

The cost is likely to prove high. For a start, Washington threatening China with trade sanctions if it does not put sufficient pressure on Pyongyang undermines the United States’ case on very real trade issues it faces with China.

The Chinese are very skilled in playing the Americans. So they make all the right noises now, disapproving of North Korea’s path and joining new sanctions resolutions at the UN. In the short term, the Trump administration may proclaim that a diplomatic success.

But Beijing’s compliance is only superficial. It has no interest in squeezing a stubborn North Korea to the point of regime collapse, assuming that were even attainable.

Given the pain that the Kim regime over various generations has been able to inflict on its people in the name of nationalism and self-reliance, regime collapse at this stage is at least doubtful.

Pragmatic Tillerson? Or sidelined Tillerson?

Tillerson seemed pragmatic enough, implying in an August 2nd statement that eventually Washington must negotiate with Pyongyang.

Much to the chagrin of the armchair “regime change” advocates in the Republican Party, the Secretary of State claimed that the U.S. government was not pursuing regime change, just an end to North Korea’s pursuit of nuclear missile capabilities.

Hence, if Pyongyang does pause in its missile tests, there is scope for talks – and China will claim some credit for that.

But Tillerson followed those remarks with a Southeast Asian visit where he continued to focus on North Korea. This was an astonishing, wasted effort.

ASEAN countries are not interested in the North Korean issue. They will sign a statement of concern, but know perfectly well that even if they did care, their voice would be irrelevant.

What the ASEAN countries do care about is their sea issues and the balance of relations with China and the United States.

Easily distracted Trump

It is almost as if North Korea is doing China’s bidding – by tempting an easily distracted Trump administration to go after the supposed “easy” target (North Korea) – and forgetting about the real strategic challenge (an expansive China).

At a time when the Philippines’ President Duterte has trashed his country’s earlier victory over China at the Court of Arbitration and is now contemplating a deal with China in which he would sell those sea rights, the focus on Pyongyang seemed doubly irrelevant to U.S. interests in Southeast Asia (population 600 million).

Against the backdrop of modern history, it was ironically only because the Vietnamese — rightly contemptuous of the venal politicians in Manila — that a slightly more critical statement about China’s behavior in the South China sea was issued at the ASEAN meeting than had been expected, or that the Philippines, as host, had wanted.

Tillerson continued with his mission against North Korea during visits to Bangkok and Kuala Lumpur, where he urged the cutting of trade and other ties with Pyongyang.

Making up lost ground

But at least he did pay a visit. That made up at least a fraction of the ground lost by the United States in the region since the elections of Trump and Duterte.

The US may find it distasteful to give face to the military junta in Thailand, and is all too aware of how deeply involved the Malaysian prime minister is in a huge financial scandal. But those are now looking minor matters compared with the inroads China and its money have been making into southeast Asia.

Likewise, misgivings in Washington (and Singapore) about Chinese money influence over the kleptocracy running Malaysia could not stand in the way of being polite to Prime Minister Najib.

Nonetheless, by focusing on what currently concerns the U.S. government rather than how the United States can actually help in southeast Asia, Tillerson reminded his hosts how short-sighted and troubling the “America First” attitude is for traditional allies such as Thailand and Malaysia, and newer ones like Vietnam.

©2017 The Globalist

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A Visit to the Brexit World

Wed, 2017-08-09 00:01

By John Bruton

Mrs. May, tell us exactly what sort of deal you want with the EU customs union?

Brexit is a British idea, so Britain has primary responsibility for showing how it can be made to work.

It is unfortunate that the United Kingdom government decided to trigger Article 50, without first working out, around the Cabinet table, what sort of relationship the UK could reasonably expect to have with its neighbours after it had left the EU.

At last, in the next week or so, the UK will present a negotiating paper on customs controls, but it is unclear how helpful this can be until we know what sort of trading relationship these controls will apply to after the UK has left the EU.

May’s wish list

It is true that Mrs. May presented a wish list in her Lancaster House speech. But this list was, and is, impossible to achieve because it neither took account of WTO rules nor of the fact that commerce can only be free if the rules governing it remain reasonably uniform.

Mrs. May said at the occasion that, on the day the UK leaves the EU, it will retain all of the then-existing EU rules for goods and services, but would be free to change them, whether by order, by Act of Parliament or by legal reinterpretation from then on.

This implies a gradual, surreptitious, hardening of the border in Ireland, as UK standards begin to diverge from EU standards.

To the extent that the UK diverges from EU standards, UK businesses will forthwith have to apply two sets of standards: one for the UK market and another for the 45% of UK exports that go to the EU.

EU border controls

Meanwhile, the EU side will have to institute border controls to ensure that nothing enters the EU that does not comply with EU standards.

Irish officials will thus find themselves controlling a border they would prefer was not there at all. This will be politically difficult in domestic politics, but is a known outcome of the UK’s decision to leave the EU.

Once the UK has left the EU, goods coming from the UK into the EU (hence including those going into Ireland) will also be subject to checking under “Rules of Origin” requirements, in order to ensure that they do not contain impermissible non-UK content to which a higher tariff ought to have applied.

For example, there might have to be checks that UK beef burgers do not contain Brazilian beef.

Increased bureaucracy

These “Rules of Origin” checks will increase, not reduce bureaucracy. This will be especially onerous for small firms.

One study estimated that the need to apply “Rules of Origin” checks could reduce trade volumes by 9%. The EU/Canada trade Agreement has 100 pages on “Rules of Origin” alone.

It will not be done cheaply. A House of Lords Committee already said that “electronic systems are not available to accurately record cross-border movements of goods.”

If the UK government knows otherwise it will need to show convincing evidence of this in the paper it is about to present.

Businesses will pay the price

Even if a light or random system of checking at the border or in ports is imposed, the biggest costs will have to be met by businesses, before they get anywhere near the port or the border.

Inside the UK, the preparation of all the extra compliance documentation will deter many smaller firms from exporting at all.

For example, it has been estimated that the number of customs declarations that UK firms will have to prepare and present will jump from 90 million a year to 390 million once the UK leaves the EU.

That goes to show why EU membership was rightfully pursued in the first place – to advance, not to hinder commerce.

The “bespoke” trade deal fantasy

Theresa May was remarkably unclear, in her Lancaster House speech, about the sort of relationship she wanted with the EU Customs Union. The clearest thing that can be said about it is that she wants bits of it, but not all of it.

Her approach would run into immediate difficulties with the World Trade Organisation (WTO). The WTO works on the basis of non-discrimination, or the so called “Most Favoured Nation” principle.

This means that any concessions which the EU Customs Union might grant to the UK, as a non-EU member, would have to be extended by the EU to ALL the EU Customs Union’s trading partners. At the latest at that point, all the facile talk from London about a “bespoke” trade deal will probably be revealed to be fantasy.

The only conceivable way around this would be for the UK deal with the EU Customs Union to cover “substantially all” trade between them, but that would inhibit the UK doing trade deals with third countries.

But that puts the ball right back into the British Prime Minister’s court. Which way does Mrs. May want it? Intra-party politics may prevent her from giving a realistic answer.

Many suspect the UK wants to leave the Customs Union so the country can revert to the cheap food policy which it had before it joined the Common Market.

To prevent the undermining of the EU Common Agricultural Policy that would flow from that, Ireland would then be obliged to collect the EU Common External Tariff on perishable products like beef, milk, lamb, confectionary and other food products crossing 400 crossing points on our border, or arriving at our ports, from the UK.

It is a potential nightmare.

©2017 The Globalist

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Ending Iraq’s Humanitarian Crisis

Tue, 2017-08-08 00:01

By Alon Ben-Meir

The Iraqi people must rise above sectarianism and chart their own destiny.

Iraq, once the cradle of civilization, has and continues to experience one of the most horrific violent conflicts in modern history that defies any semblance of civilized humanity.

It is hard to imagine the mammoth death and destruction that has been inflicted on the Iraqi people by foreign powers and domestic terrorism.

Yet, the country can still overcome the horrors of the past 14 years, provided its leaders correctly reassess the changing regional and domestic dynamics and agree to allow all Iraqis, regardless of their sect and cultural orientation, to choose their own political and civil structure.

Appalling human cost

Since the invasion of Iraq by the United States and its allies in 2003, up to 500,000 civilians have been killed. From 2006, there have been 40,000 recorded terrorist attacks averaging more than 7,100 deaths per year.

Nearly 225,000 persons have become refugees, and 3.1 million are internally displaced. The destruction of infrastructure and socio-economic dislocation created widespread hunger and disease, especially among the tens of thousands of children who are vulnerable and suffering from malnutrition.

All this human and material devastation culminated with the rise of ISIS that has ravaged the country, while the internal indiscriminate terrorism between Sunnis and Shiites continues unabated.

This tragedy is unfolding as the Iraqi government and people are still languishing in the shadow of death and ruin, wandering about the political wilderness in search of ways to piece the country back together in the wake of ISIS’ eventual defeat. These efforts, however, may well prove to be an exercise in futility.

Deep divisions

The Abadi government ignores the fact that the Iraqi Kurds are on the verge of establishing their own independent state following the upcoming mid-September referendum, and that the Sunnis will reject the status quo ante and never again subjugate themselves to the whims of a Shiite government in Baghdad.

Having suffered intense discrimination, oppression, and wanton violence perpetrated against them, especially during the eight years of the Maliki government, the Sunni community has long since concluded that their future wellbeing depends on their will and ability to govern themselves.

They are determined to follow the footsteps of their Kurdish counterparts by establishing autonomous rule as a prerequisite to ending Sunni-Shiite bloodshed.

The carnage between the two sides that started immediately following the 2003 Iraq war continues to rage, claiming the lives of hundreds each week. It is unlikely to abate as long as:

1. The Iraqi government and outside powers, including the United States, are still absorbed by the illusion of maintaining Iraq’s geographical unity.

2. Shiite Iran and Sunni Saudi Arabia are waging a proxy war in Iraq to secure their geostrategic interests to become the region’s hegemon.

The legacy of ISIS

In many ways, the rise of ISIS and its control over much of the Sunnis’ three provinces further deepens the Sunnis’ resolve to fight for their independence from any internal or external power.

In addition to the egregious mistreatment they have suffered under the Maliki government, the Sunnis endured the brunt of ISIS’ brutality and horrific ruling methods.

Children were affected the most, as they were witnessing the unspeakable cruelty of ISIS in real time. Children were recruited to commit the most heinous crimes; hundreds of thousands have been traumatized as they were forced to watch beheadings and the gruesome treatment of innocent bystanders “suspected” of committing petty crimes.

The liberation of Mosul offers a new beginning to build a promising future for Iraq. In that regard, I maintain that Iraq’s strength rests on the three main sects becoming first politically independent from one another.

The central governments’ responsibility

The central government must support the establishment of an independent Sunni entity and amend the constitution to reflect the new political and territorial divisions.

Internally, the Iraqi government must address the endemic corruption which consumes nearly one third of the country’s revenue, establish a fair and impartial judiciary, engage in economic development, and refrain from infringing on the Kurds’ and Sunnis’ internal or external affairs as they put their own houses in order.

Given that the Sunnis’ three provinces have no oil, their economic development depends on securing their share of revenue by passing the long-anticipated oil law.

In addition to that, the new Sunni entity would need the financial support from the Gulf states, the United States and the European Union to become a viable entity.

The central Shiite-led government in Baghdad must not hold them hostage by denying them their legitimate share, thereby preventing them from establishing their own state. This would be the recipe for continuing bloodshed and destruction that will only deepen the gulf between them, to the detriment of the country’s future.

Wider implications

The benefits of this roadmap are enormous, as it will first impact directly on the future stability of Iraq, and bring an end to the proxy war between Saudi Arabia and Iran as they come to realize that neither can change the reality of Sunni-Shiite coexistence, both in Iraq itself and as neighbors.

This arrangement would also mitigate the Iranian threat, which the Gulf states and Israel view as the source of regional tension and violent conflict.

Moreover, it would significantly reduce militant activities, enhance regional security, and start a process of peace and reconciliation to end the revenge and retribution that would inevitably ensue, given the horrifying violence that they have inflicted on one another for the past fourteen years.

It is only when the Sunnis establish their own entity and build the infrastructure of an independent state will they feel empowered and confident to work closely with the Kurds and the Shiites as equals, which will pave the way for a functioning confederation between them at a later date.

The United States’ role

The role of the United States at this early stage is critically important. The United States must support the establishment of an independent Sunni entity, maintain residual forces throughout the transitional period, train and equip security personnel, rein in extremist groups, and guide the Sunnis in the development of a political structure consistent with their beliefs, culture and aspirations.

To be sure, the death and destruction from which the Iraqis have suffered during the past 14 years must come to an end.

Children have been affected the most; they have suffered from malnutrition, disease, and dislocation, with enduring psychological scars that will last a lifetime. Tens of thousands have been killed, and as many became orphaned, not knowing what happened to them and why.

It is time to end the Iraqi tragedy. Much of the healing and prospects for a better and more promising future is in the hands of the Iraqi people themselves—it is they who must rise above sectarianism, and it is they who must chart their own destiny.

©2017 The Globalist

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Brexit: The Tories‘ Battle Against the Economic Facts

Mon, 2017-08-07 00:01

By Denis MacShane

Why Germans and other nations should involve themselves more in the UK debate.

When he was an opposition MP, David Davis, now the minister in charge of Brexit, said: “A democracy that cannot change its mind ceases to be a democracy.”

And yet, very few of the facts and rational, economy-based arguments make it into the current British political discourse. Instead, there is an almost Trotskyist fervor among the partisans of Brexit in Parliament and in the conservative media.

The overriding goal is that anger against the European Union must be sustained and that the decision of the referendum can never be questioned. The fact that only 37% of registered voters supported Brexit is deliberately overlooked.

In an almost Erdoganesque manner, a crude majoritarianism reigns. The proud traditions of British democracy – including the primacy of parliament and a close observation of the principles of fairness – are turned into mincemeat.

Never mind that in many countries including Italy, Denmark, Ireland, Sweden, Hungary and Switzerland set a threshold of 40% or even 50% or a double majority of voters and cantons before a referendum result is valid.

Remember as well that the Brexit referendum was advisory, not legally binding. Margaret Thatcher called referendums “a device of demagogues and dictators.”

Making up rules as we go along

Of course, Britain has no written constitution. Thus, rules can be made up as we go along. But that cuts both ways, also with regard to unmaking what some now believe is binding.

As Sadiq Khan, the London Mayor and a force to be reckoned with inside the Labour Party, has suggested, there is a good case for a second referendum, perhaps early in 2019 (or whenever the EU departure agreement is agreed with Brussels).

As far as Tory MPs are concerned, they are not really thinking ahead at this stage. But while they don’t want to think of any general election before 2022, a second referendum is possible.

Ireland and Denmark voted more than once on EU Treaties. In any democracy, especially one as old and as proud as ours, it seems reasonable to hold a final test of the people’s will before any truly drastic move.

Surely, embarking on the amputation of Britain from Europe – a move that will overwhelm other political, economic and social decisions into the 2030s – qualifies for such reconsideration by the people.

Considerations about democracy aside, there are also those pesky economic facts of life. Once again, we Britons — and especially the Conservatives — generally pride ourselves that we put economic facts over political ideology. If only it were so.

A growing Europe

For the past decade, the British have looked with contempt at a Eurozone which seemed unable to grow and featured mass unemployment, especially in the southern Mediterranean countries.

The Brits patted themselves on the back at the decision to stay with the pound sterling, while those poor, ignorant Europeans found themselves nailed on the cross of their single currency.

Now, the story is different. The EU looks like a growth center. Spain has posted 3% GDP growth each year for the past three years. President Macron has pushed back anti-European forces in France and seems determined to bring in labor market reform which could unleash French growth.

And our eternal favorite overlord, the United States, isn’t singing the right gospel any longer either. Donald Trump’s protectionism runs counter to two centuries of British free trade philosophy.

And the trend toward ever more inequality and low-paying jobs isn’t more pronounced in the United States than anywhere else.

Forget currencies

To be sure, the EU has problems – including dealing with masses of refugees from the destruction of the state in Iraq, Libya and Syria — after military interventions initiated by the United States, United Kingdom and France (under Sarkozy).

But British Conservatives – who see a strong U.S. dollar as validation of U.S. strength and a weak euro as a foregone conclusion for a continent on the ropes – now have to recalibrate their economic belief system.

The euro has strengthened considerably this year, in a direct reflection of the helter-skelter, completely inconsistent and unrealistic policy path pursued by Donald Trump.

With regard to our own currency, UK conservatives, in strange contrast to their traditional views on the euro, have always heralded a weak pound as a sign of our great “flexibility.”

They are silent on the prospects of the weakening British economy, which now heads south after the initial bump from a devaluing pound has worn off.

According to the UK Office of National Statistics, growth is slowing down to just 0.2% in the first three months of 2017 and an estimated 0.3% for the second quarter.

Bye-bye City

Meanwhile, private and public debt soars. And City firms, long the engine of accumulating wealth for the United Kingdom’s upper crust, have started re-locating to Frankfurt, Dublin and Paris.

Even Lloyds of London has moved 10% of its staff and operations to Luxembourg to stay within the EU.

Japan’s biggest bank, Mitsubishi UFG is moving to Amsterdam as Mrs May’s stubborn rejection of any compromise on Brexit means firms have to assume Britain will soon be amputated from the Single Market.

As regards our nation’s future path, it is perfectly possible to leave the EU Treaty and no longer elect MEPs or send a Commissioner to Brussels. And yet, as we drift to a path like Norway and Liechtenstein (via a future European Economic Area or EFTA relationship), this will be sad loss of influence.

Britain the rule-taker

Most poignantly, Britain becomes a rule-taker not a rule-maker. That is the net effect of a strategy that aims for a political but not an economic Brexit.

Even on that road, to avoid a full rupture and allow space for new political voices to emerge, the United Kingdom will need help from its German friends, especially important economic actors.

They should be much clearer about what the loss of the United Kingdom means for Europe.

German business naturally does not want to be seen as interfering in a British political process. But politeness at times can be unhelpful.

It is time for clear statements from all of Britain’s friends in Europe that the damage of Brexit is a self-inflicted wound. It need not be a death sentence.

Moreover, the political game is far from over. This we British could learn from another European country that fiercely defends its independence and has strong concerns about immigration.

The Swiss example

The Swiss voted in a referendum in February 2014 against “massive immigration” from the EU. Slowly over the next 30 months, the reality sank in what losing access to the EU would mean for Swiss business, health care, tourism and building industries.

That turned around Swiss public opinion and now the Swiss parliament has come up with a compromise on free movement that respects EU principles.

Voices from the continent should also be much clearer about the limitations of the Tories’ hosanna concept — that the World Trade Organization can provide a sufficient framework for commerce with the continent.

There are many problems with that. For example, since the WTO does not cover aviation, the boss of Ryanair, Mike O’Leary, told the European Parliament in July that planes from Britain could not fly to European destinations if Britain did not abide by EU aviation rules on the Single Sky and retain membership of the European Aviation Safety Agency.

Never mind that the WTO is not really helpful for most services where Britain runs a trade surplus in commerce with the EU27. 350,000 so-called “EU passports” are issued to financial service firms based in the City. Much of the business of trading and clearing Euros will go to the continent.

What do the Japanese say?

The Japanese can weigh in as well. It was Japanese car firms like Nissan which re-invented the United Kingdom’s car industry in the 1980s and 1990s.

Thankfully, they have made clear that, if they lose access to sell their cars to 450 million middle class consumers in Europe, then future investment in Britain will dry up.

All of that is the steep – and very predictable – price that we Britons must pay if our current government rejects every EU rule and the supervisory authority of the European Court of Justice. Britain is poised to enter the economic version of a Dignitas clinic.

Chaining ourselves to such a course, against all the economic evidence, at least borders on madness. At a minimum, it violates the sense of pragmatism for which British Conservatives always laud themselves.

©2017 The Globalist

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How To Make Democracy Work in the Digital Age

Sun, 2017-08-06 00:01

By Dirk Helbing and Stefan Klauser

Digital democracy has the ultimate benefit that it supports society’s historical achievements.

There are many complaints about how democracy works these days – or maybe rather why it doesn’t work. For example, we see a polarization of society in recent times.

Modern mass media and social media tend to create “filter bubbles” which reinforce one’s own opinion, while reducing the ability to handle different points of view. The public debate has to contend with increasingly personalized, attack-style, oversimplified, manipulative and deceptive messages or misinformation.

What makes this all the more deplorable and problematic is that societal and political complexity has increased dramatically, pretty much independent of where one lives.

Dealing with the compounded complexity and unpredictable outcomes is even difficult for experts. That leads some to suggest that – since neither voters nor experts can handle this complexity – the solution lies in relying on expert systems using big data and artificial intelligence.

Rise of the machines

So, should we leave it Google’s “omniscient algorithm” or IBM’s cognitive computer, called Watson, to decide about what is to be done?

Depending on the details of such digital operating systems for society, this experiment may very well end in fascism 2.0 (= a big brother and brave new world society), communism 2.0 (= distributing rights and resources based on a “benevolent dictator” approach), or feudalism 2.0 (= based on a few monopolies and a new kind of caste system).

Besides, we have already seen in the past that purely data-driven variants of governance models have failed. They will not suddenly become more acceptable. So far, we don’t even know how to measure human dignity – the most important “good” of modern democratic societies – by numbers. How then could we judge societal progress?

Therefore, the crucial question is how to use the digital opportunities of today and upgrade democracy, “the worst form of government, except for all the others,” as Churchill joked.

Democracy 2.0 – how to harness collective intelligence by digital means

The long-term consequences of centralized top-down control could be devastating. It would lead to an unprecedented loss of socio-economic diversity and resilience, a decline in the rate of innovation and serious slowdown of socio-economic progress, a rise in political instability and perhaps even war or revolution.

Centralized top-down optimization may be a proper paradigm for companies or supply chains, but complex societies need pluralism and combinatorial innovation to thrive.

The success principles of the past – globalization, optimization and administration – have more or less hit their limit. To reach the next level of society, an economy dominated by networks must build on the principles of co-creation, co-evolution and collective intelligence.

To achieve sustainable and legitimate results that leverage the benefits of complexity and diversity, it is crucial to move from a government paradigm based on power to a paradigm based on empowerment and coordination.

Massive Open Online Deliberation Platforms (MOODS)

Combining smart technologies with smart citizens is the recipe to create smarter societies. This can be reached by creating Massive Open Online Deliberation Platforms (MOODs). They allow all interest groups to put their arguments on a particular subject on a virtual table, where they can be structured into different points of view.

In a second step, it is important to work out innovative solutions that integrate several perspectives and, thereby, benefit several interest groups well – not just the interests of the incumbent or the 51% majority.

This is the essence of “digital democracy.” It is based on “collective intelligence” – on bringing the knowledge and ideas of many minds (and artificially intelligent systems) together. It is the combination of ideas and interaction of humans that have shown to deliver the best results when challenges are complex.

An updated democratic process should be able to reach equally distributed opportunities and satisfaction, as much as this can be done. While this cannot always be achieved in each single decision, we could certainly get much better in satisfying diverse interest groups than today.

Instead of trying to revive governance principles of the past, which have failed to embrace the complexity and diversity of modern societies, we should engage in digitally upgrading democracy.

After all, being the result of many wars and revolutions – democracy is a highly advanced governance system that has taken on board the wisdom of some of the smartest and most respected people in human history.

Rather than accepting data-driven technocracy to control and abate societal diversity and complexity, we propose a way to leverage complexity for our benefit, through a decentralized, participatory platform.

Overcome the dictatorship of the majority

With the means of MOODs, one can find solutions that consider various views on certain aspects of a topic. Today, one of the main problems is that people can only cast a “yes” or a “no” votes, i.e. to either agree on a proposed solution or disagree.

The topic is often extremely complex and has many facets. So, letting people decide about “yes” or “no” is simply not enough. We suggest that citizens should be able to continuously engage in a specific type of online deliberation processes, where they can feed in their ideas and voice their preferences on different aspects of a topic.

A refined, more inclusive process has several advantages. It enables people to learn about the different aspects of a complex political topic. At the same time, they can contribute to the solution from the beginning, which is believed to lead to a higher satisfaction.

This should also diminish the chances that protest movements and extreme solutions will find good breeding grounds.

Even if the results of the deliberation process would not be binding for policymakers, the MOODs would give them ample guidance when drafting new laws.

It would also be possible to take regional, ethnic and religious differences into account, which could lead to culturally fitting law-making and easily show whether it makes more sense for a specific law to be adopted on a federal or on a regional level.

There could still be a majority vote at the end of a deliberation process. But at this point, the solution would already include a substantial amount of the ideas and wishes of the citizens and it is likely that we would not see extremely polarized situations anymore.

Regardless of whether a proposed new law engendered a 50:50 polarization of society, deliberation processes after the vote could substantially lower the dissatisfaction of the minority, especially again, when mixed with a high level of regional autonomy in the way the vote/law is being implemented.

Counterbalance misinformation

For citizens it is increasingly hard to judge which information can be trusted and why. Governments, companies and rich individuals today can buy armies of bloggers and social media experts to run profiles and chat bots, which then flood social media channels.

Most of today’s largest social media platforms have currently no means to moderate these discussions. We thus need to create new platforms allowing for an informed, balanced, conscientious, substantive and comprehensive deliberation processes.

To define Digital Democracy merely as democratic processes in a media-dominated and digitalized world falls short of what a reasonably advanced idea of Digital Democracy encompasses.

It certainly takes a substantial amount of work to build the required deliberation platforms and to upgrade democratic processes to be fit for the digital age. The task we must accomplish has technical, legal and motivational aspects.

Especially the question of how to engage enough people in the deliberation process will be crucial. One has to secure easy access to the platform and experiment with incentives and gamification to reach sufficiently broad participation.

However, these are no obstacles that could not be overcome. The potential benefits of a suitably refined (direct) democratic process clearly outweigh the costs of turning history back and neglecting us, The People.

Digital democracy – as we envision it – has the ultimate benefit that it supports society’s historical achievements: self-determination and freedom, the division of power and fairness, social inclusion and participation as well as diversity and resilience.

©2017 The Globalist

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Colonialism Applied to Europe: Review of Mazower’s “Hitler’s Empire”

Sat, 2017-08-05 00:01

By Branko Milanovic

Mark Mazower’s “Hitler’s Empire: How the Nazis Ruled Europe” is a magisterial book.

I read it on vacation, and it is not a book I would suggest you take with you to the beach — unless you want to spoil your vacation. But once you have made such a choice, you cannot stop reading it, and the book will stay with you throughout your stay (and I believe much longer).

This Summer I read, almost back-to-back, Adam Tooze’s “The Deluge” and Mazower’s “Hitler’s Empire.” The first covers the period 1916-31, the second, the Nazi rule of Europe 1936-45.

They can be practically read as a continuum, but they are two very different books. Tooze’s is, despite all the carnage of World War I and the Russian civil war, an optimistic book in which sincere or feigned idealism is battling conservatism and militarism.

As I wrote in my review of Tooze’s book, the emphasis on the failed promise of liberal democracy (but a promise still it was) is a thread which runs through most of the book.

The dark continent

Mazower’s book, on the other hand, is unfailingly grim — and this is not only because the topic he writes about is much more sinister. The tone is bleaker. It is a book about unremitting evil.

It is the steady accumulation of murders, betrayals, massacres, retaliations, burned villages, conquests, and annihilation that makes for a despairing and yet compelling read. Europe was indeed, as another of Mazower’s books is titled, the dark continent.

Here I would like to discuss another aspect of Mazower’s book that is implicit throughout, but is mentioned rather discreetly only in the concluding chapter. It concerns the place of the Second World War in global history.

The conventional opinion is that the Second World War should be regarded as a continuation of the First.

While the First was produced by competing imperialisms, the Second was the outcome of the very imperfect settlement imposed at the end of the War, and the difference in interpretations as to how the war really ended (was it an armistice, or was it an unconditional surrender).

War of extermination

But that interpretation is (perhaps) faulty because it cannot account for the most distinctive character of the Second World War, namely that it was the war of extermination in the East (including the Shoah).

That is where Mazower’s placing of the war in a much longer European imperial context makes sense.

The key features of Nazi policies of “racial” superiority, colonization of land and conscious destruction of ethnic groups cannot be understood but as an extreme, or even extravagant, form of European colonialism, as it existed from the 15th century onward.

If one thinks of Soviet Russia as of Africa or indigenous American continent (as it seemed to the Nazis), then Nazi policy of mass extermination and (more liberally) enslavement of the Slavic population that would provide forced labor for the German aristocracy living in agro-towns dotted across the plains of Russia does not look much different from what happened for several centurieselsewhere.

In the mines of Potasi, in the Congo, in the ante-bellum South of the United States, in the Dutch Java or indeed in German-ruled Namibia.

The creation of two ethically and racially distinct social classes, with no interaction and with one openly exploiting another is exactly how European colonialism presented itself to the rest of the world. As Aimė Cėsaire, quoted at the end of the book, wrote (I paraphrase) “Nazism was the application of colonialism to Europe.”

Insufficient technological and military gap

There were, however, some differences that made the realization of this dream of conquest and domination unrealizable for the Nazis.

The technological and military gap between the “master” class and the Untermenschen was much smaller, and at the end it got even overturned in the military sphere.

By 1942, the Soviet Union was producing more airplanes and tanks than Germany with all her factories in conquered Europe. The technological gap was indeed much smaller than it seemed to the Germans, and than it objectively was between the European conquerors and the peoples of Africa or the Americas.

Tiny forces of Spaniards or English could conquer huge spaces and rule many people because of enormous superiority of their military power. But this was not the case in Europe. In other words, when the technological (military) gap between two groups is small, a complete annihilation of one by another is impossible.

The Nazis were blinded to this, not only by their misjudgment of the technological development of Russia, but also by their belief in rigid racial hierarchy where the very fact that such hierarchy existed (as they believed) made it impossible to entertain the possibility that the lower classes might rise sufficiently to challenge the “masters.” The rigidity of self-created racial hierarchy blinded them to reality.

Economic need vs drive to exterminate

The second difference between the Nazis and classical European imperialism was that racial hierarchy, pushed to its extreme, and leading to the attempted annihilation of the entire ethnic groups (Holocaust) was not motivated by economic interests of the elite but took place, as it were, outside it.

Mazower makes very clear the tension that existed throughout the Nazi rule between economic needs for more forced labor, both in European factories and in the fields in the conquered territories in Poland, the Ukraine and Belorussia, and the ideologically-motivated drive to exterminate the “inferior races.”

The military and civilian administrations tended to prefer the former approach (exploitation to death through labor), the SS the latter (pure destruction). This single-minded pursuit of annihilation, regardless of, or even against, economic benefits, was not something that existed in European colonialism.

The rigidity of racial hierarchy was such that the same Nazi leaders were arguing for forced labor vs. annihilation for one group, and for the opposite for another group.

This was the case of Hans Frank, the head of the General Government of rump Poland, who tried to protect Poles from some random killings because he needed them to deliver grain but was eager to kill as many Jews as possible. (Although even he balked at thousands of “new” Jews being pushed to his territories as the “death camps” were already working at capacity).

It is this macabre and economically and politically irrational drive toward extermination that might have differentiated colonialism as applied to Europe from colonialism applied elsewhere.

But establishing racial hierarchy, believing in eugenics, being indifferent to the death of the “lower races,” creating a system of forced labor, shooting or maiming people who do not deliver their quotas of produce was not exactly new. Aimė Cėsaire might have been right.

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Avoiding War with China

Fri, 2017-08-04 00:01

By Chas W. Freeman

In recent years, many American leaders have grown cavalier about nuclear war, especially with Russia, but there is also risk of a devastating conflict with China.

Let’s not kid ourselves. The armed forces of the United States and China are now very far along in planning and practicing how to go to war with each other.

Neither has any idea when or why it might have to engage the other on the battlefield, but both agree on the list of contingencies that could spark conflict.These range from naval scuffles in the Spratly or Senkaku Islands to full-spectrum combat over Taiwan independence or reunification.

The context in which these contingencies might occur reflects an imbalance of power left over from history. U.S. forces are forward-deployed along China’s frontiers in a pattern that originated with the Cold War policy of “containment.”

Chinese forces are deployed to defend China’s borders as China defines them. China regards the United States as the country most able and likely to violate those borders and attack it.

The United States seeks to sustain the military dominance of the Western Pacific that it has enjoyed since its 1945 overthrow of Japanese imperial power. Washington is determined to preclude the contraction of the sphere of influence it established during the Cold War.

China is striving to establish defensible maritime borders, to prevent Japan, Malaysia, the Philippines, and Vietnam from prevailing in their counterclaims to islands and rocks in its near seas, and to reintegrate Taiwan, which the United States separated from the rest of China and placed in its sphere of influence 67 years ago, in 1950.

In China’s back yard

Elements of the U.S. military aggressively patrol the air and seas that abut China. Their purpose is to be ready to cripple the People’s Liberation Army (PLA) by striking bases in its homeland if conflict with U.S. forces or U.S. allies occurs.

Not surprisingly, China objects to these missions. It is steadily strengthening its capacity not just to fend off American attempts to scout or penetrate its defenses, but to recover Taiwan by coercive means.

The U.S. armed forces and the PLA have met on the battlefield before, but never on Chinese soil. Sino-American wars have taken place only in third countries like Korea or by proxy and covert action, as in Indochina. But any war between the United States and China under the contingencies both now contemplate would begin in places China considers part of its territory.

Risk of spiraling conflict

It might be possible to limit a conflict in the South China Sea to the islands and waters there. But a Sino-Japanese clash over the Senkaku (Diaoyu) Islands or a Sino-American war over Taiwan would almost certainly entail U.S. strikes on the Chinese mainland. Chinese doctrine calls for such attacks to be answered with reprisals against U.S. bases and the American homeland.

China’s no-first-use doctrine is a significant barrier to China’s use of nuclear weapons for such reprisal, but one that it is easy to imagine being breached under the pressures of wartime crisis conditions. Beijing is likely to see U.S. attacks on Chinese bases where nuclear and non-nuclear weapons are commingled as the equivalent of a strategic first strike designed to knock out China’s nuclear deterrent.

Any threat that China’s Communist Party leadership perceives as existential would stimulate some to argue for nuclear as well as cyber reprisal against comparable facilities in the United States.

Nuclear Amnesia

In the U.S. political elite and officer corps, alarm about the damage a nuclear strike can wreak on its targets and the retaliation it invites has succumbed to “nuclear amnesia.” The national “allergy” to the use of nuclear weapons has weakened concomitantly.

Washington is again exploring tactical uses for nuclear weapons and funding programs to develop them. Americans have ceased to consider what a nuclear exchange with Russia, China, or another foreign foe would do to the United States.

The current hysteria over North Korea may in time correct this. But, for now, Americans remain in denial, imagining that, despite all the evidence to the contrary, the U.S. missile defense program will work. No one is preparing for scenarios in which it does not.

Little to no trust

Meanwhile, communication between the American and Chinese national security establishments is far less robust than it was between the U.S. and USSR during the Cold War. There is very little, if any, mutual trust between Beijing and Washington.

Senior U.S. military officers understand Chinese politico-military doctrine poorly or not at all. There are no Sino-American understandings or mechanisms for escalation control. It is past time, but not too late to begin creating these.

This is not a reassuring situation. But there are many factors that inhibit rash Chinese actions in response to a crisis. And there are some on the U.S. side as well. Neither China nor America wants war with the other.

China’s strategic caution

Under the People’s Republic, China has established a seven-decade-long record of strategic caution and a preference for diplomatic and paramilitary rather than military solutions to national security problems.

China clearly prefers to use measures short of war to protect itself but has shown that it is fully prepared to go to war to defend its borders and strategic interests Chinese uses of force have been notably purposive, determined, disciplined, and focused on limited objectives, with no moving of the goalposts.

Chinese campaigns

In Korea, where ragtag Chinese forces fought the United States to a standstill from 1950 to 1953, China settled for the de facto restoration of the status quo ante bellum — strategic denial of the northern half of the Korean Peninsula to hostile forces. In 1958, it ended its military presence in Korea.

When border skirmishes escalated into war between China and India in 1962, China first showed India that, if provoked, the PLA could overrun it. Then, having made that point, China withdrew its troops to their original positions.

In the 1979 Sino-Vietnamese war, China accepted huge losses on the battlefield to teach Vietnam that the costs of continued empire building in association with the Soviet Union would be unacceptably high. Once Vietnam seemed convinced of this, China disengaged its forces.

China waited a decade to respond to multiple seizures of disputed islands and reefs in the South China Sea by other claimants. The Philippines began the process of creating facts in the sea in 1978, Vietnam followed in 1982, and Malaysia did the same in 1983. In 1988, China intervened to halt the further expansion of Vietnamese holdings.

Since then China has established an unejectable presence of its own on seven artificially enlarged land features in the South China Sea. It has not attempted to dislodge other claimants from any of the four dozen outposts they have planted in Chinese-claimed territories. China has been careful not to provoke military confrontations with them or with the U.S. Navy, despite the latter’s swaggering assertiveness.

Pattern of Restraint

A similar pattern of restraint has been evident in the Senkaku Islands, which China considers to be part of Taiwan and Japan asserts are part of Okinawa. There, China seeks to present an active challenge to Japanese efforts to foreclose discussion of the two sides’ dispute over sovereignty.

It has done so with lightly armed Coast Guard vessels rather than with the PLA’s naval warfare arm. Japan has been equally cautious.

China negotiated the reunification of both Hong Kong and Macau, although it could have used force, as India did in Goa, to achieve reintegration.

China has negotiated generous settlements and demarcations of its land borders with Afghanistan, Kazakhstan, Kyrgyzstan, Nepal, Pakistan, Russia, Tajikistan, and Vietnam. China’s borders with the former British Empire in Bhutan, India, and Myanmar remain formally unsettled but for the most part peaceful.

These interactions between China and its neighbors demonstrate a high degree of Chinese competence at managing differences without armed conflict. They provide grounds for optimism. War, including accidental war, between China and its neighbors – or China and the United States as the ally of some of those neighbors – is far from inevitable.

The Taiwan issue

China has been cautious even with respect to Taiwan – that most chauvinist of issues. There has been no exchange of fire between the civil-war rivals on opposite sides of the Taiwan Strait since 1979.

On Jan. 1 of that year, the United States accepted Beijing as China’s capital and ended its formal championship of Taipei in that role. Beijing responded by discontinuing its advocacy of the forceful “liberation” of Taiwan and announcing a policy aimed at peaceful reunification.

So far, despite occasional provocations from pro-independence forces in Taiwan, China has stuck with this policy, placing equal emphasis on enticement and intimidation. Beijing’s “united front” outreach to Taiwanese complements the military pressure its growing capacity to devastate the island imparts to the imperative of cross-Strait accommodation.

The bottom line is that, while Chinese warnings must be taken seriously, Chinese aggressiveness should not be overestimated. China tends to act militarily with prudence, upon warning, not rashly. Its wealth and power are growing, giving it an incentive to defer confrontations to the future, when its relative strength will be greater and new opportunities to win without fighting may arise.

The record shows that China adheres to limited objectives, limited means, and limited time scales. On the other hand, it is characteristically determined, once the die is cast, to invest whatever level of effort is required to achieve its objectives.

China has been notably careful to avoid “mission creep” in the wake of success. There is no evidence that its ambitions are open-ended or unbridled. If given an inch, it is unlikely to seek to take a mile.

Risks of War

So, what’s the problem? Why are we concerned about how to avoid war with China? There are two reasons, one short-term and one long-term.

The first relates to Taiwan, which the United States has pledged to help defend. The island is now ruled by an anti-reunification, pro-independence government.

Trump administration statements have raised doubts about whether Washington might upgrade relations with Taipei, relitigate the U.S. commitment to a “one-China” policy, or otherwise change direction on this most neuralgic of all issues for Chinese nationalism.

China now has the military means to bring Taiwan to heel despite U.S. opposition. The uncertainties injected by Mr. Trump’s tweets seem to have moved Beijing to consider whether to act before the issue goes off track.

It is entirely possible that once this fall’s 19th Party Congress has passed, arguments for resolving the question of Taiwan’s relationship to the rest of China by the 100th anniversary of the founding Chinese Communist Party in 2021 will gain force.

If so, the long-deferred bloody rendezvous of the United States with Chinese nationalism could be upon us as Beijing makes Taipei “an offer it cannot refuse.” Americans will have to decide how invested we are in our Cold War commitment to keep China divided.

Declining American power

In the longer term, while Washington persists in proceeding on the assumption that the United States can forever dominate China’s periphery, this notion has steadily diminishing credibility in Asia.

America’s power is visibly declining, not just in relation to China but also to the increasingly self-reliant allies and friends of the United States in the region. These trends give every sign of accelerating. They reflect underlying realities that increased U.S. defense spending cannot alter or reverse.

Sino-American rivalry — political, economic, and military — seems destined to intensify. China can and will easily match defense budget plus-ups by the United States. Despite much shadowboxing by the U.S. armed forces, American military primacy in the Western Pacific will gradually waste away.

Rising cost and risk

Both the costs of U.S. trans-Pacific engagement and the risks of armed conflict will rise. The states of the region will hedge. They will either draw closer to Beijing, cleave to Washington, or — more likely — try to get out of the middle between Chinese and Americans.

For the most part, they will not repudiate their alliances with America. Why give up something for nothing? But they will rely less on the United States and act more independently of it.

So the central question in whether the United States can avoid war with China comes down to this: How much damage to our homeland are we prepared to risk to pursue specific foreign policy objectives that antagonize China?

In the Twenty-first Century, when Americans kill faraway foreigners, we must expect that they will retaliate and that, one way or another, we will pay a price in civilian deaths here at home.

It is time to get serious. We Americans are not omnipotent. Nor are we invulnerable. But we are a people who value honor. In the case of China and its neighbors, how do we balance our interests with our honor?

©2017 The Globalist

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Germany: More Lenient on Brexit?

Thu, 2017-08-03 00:01

By Stephan Richter and Ambrose Evans-Pritchard

An email dialogue between London and Berlin.

Ambrose Evans-Pritchard, the International Business Editor of The Daily Telegraph, certainly believes strongly in the Brexit maneuver. Inside the Brexit camp, he also stands out as one of the smartest and truly internationally minded British journalists.

The transcript below is a verbatim record of a fascinating email exchange between Ambrose and Stephan Richter, our Editor-in-Chief who is now based in Berlin. If anything, the recent exchange underscores the depth of what is fast becoming a true continental divide.

4:40 PM, Ambrose Evans-Pritchard wrote:

I get the sense that Sigmar Gabriel and Schäuble both want to lower the temperature on Brexit and reach a solution. But maybe that is wishful thinking.

Best rgds,
Ambrose

4:56, Stephan Richter wrote:

It is wishful thinking.

The fact of the matter is that German elites, for good reason, have always had the highest admiration for strategic thinking and the pursuit of self-interest as displayed by UK elites.

That is why basically no one here can believe what’s going on. The UK’s Brexit strategy, which includes the joker Jeremy Corbyn, begs utter disbelief. It’s not because anyone here would want to punish the UK, as is often argued in London.

Rather, it is that nobody in the UK can expect reasonable, market-oriented people on the continent to fall over backwards to support a completely untenable position – literally along the famous “eat your cake and have it too” lines.

German politicians are just too nice to ever say such a thing out loud. And they are scared, because they realize that Britain having lost its sense of realism and/or wanting to exit the EU will put incredible leadership pressure on Germany.

Mark my forecast: Any rational German politician, without saying so, is just playing the negotiating game to make sure that the UK in the end does not depart from the EU.

That’s a legitimate position, not least because current UK polls also begin leaning in that direction.

Not because we are arrogant or imposing. Just because it does not make any sense, especially for the UK itself, as well as for the rest of Europe.

Cheers,
Stephan

5:32 PM, Ambrose Evans-Pritchard wrote:

This is where there could be an error on the Continental side.

The Referendum has been held. To try to reverse it risks a civil war here in the UK. The swing you describe is not really happening.

The debate is now about the shape of Brexit – i.e., hard or soft. On that point, there can be a lot of changes. The door could be reopened on an EEA application or something similar.

Liberal Brexiteers and Remainers together command a potential majority on softening the terms. But Liberal Brexiteers will not combine with Remainers to overturn the referendum.

It is the other way round. The Releavers (that is, Remainers who now agree that Brexit must go ahead) are about 20% of the vote.

Pushing too hard to get the Brits to change their mind will lead to a failed deal. Britain would of course be hurt very badly.

So would the EU in many complex ways (Would Ireland remain in the EU for long in those circumstances? who knows?). (What would happen to NATO, already losing Turkey?).

And as you say, Germany inherits an hegemony it does not want, and that is extremely damaging to German interests.

Better to avoid testing all of this.

Best rgds
Ambrose

6:37 pm, Stephan Richter wrote:

That’s all fine. It’s not a matter of misjudging in the German side. It’s a matter of hoping that the UK won’t base its future on a reed, as it seems hell-bound to do.

Nobody can help save a nation that wants to march down a specific road. If the UK wants to be harm itself – and in essence act like late imperial Germany – we know from history that there is nothing to keep them from it. With one significant difference: This is now the early 21st century, not the late 19th.

And with the deteriorating economy, the UK will tear at the seams. Nobody within will be happy.

Cheers,
Stephan

6:49 PM, Ambrose Evans-Pritchard wrote:

Stephan,

You keep using the term if. The decision was made a year ago. It is irreversible.

If there was a mistake, it was made long ago when Cameron called a referendum.

Rgds
A

7:43 pm, Stephan Richter wrote:

I used the term “if” with regard to “if the UK wants to harm itself.” For me, that’s still hard to swallow, for you that appears to be a given. Worse, to me, that answer is rooted in “Hier stehe ich, ich kann nicht anders” (here I stand, I can do no other) old-style German ideology, not British pragmatism.

Not to mention that the result was fraudulently obtained.

The role of friends is to warn one’s friends of necessary self-mutiliation. As with the launch of the self defeatist Iraq War, which I stood up against on U.S. TV very publicly in the early 2000s, I see this as a terrible parallel.

It’s as if the UK wants to celebrate a national self-flogging festival (I forgot what holy day in the Shiite calendar that is).

Cheers,
Stephan

8:19 PM, Ambrose Evans-Pritchard wrote:

A civil war would be much more harmful.

Those who wish to minimize the harm for all parties are pushing for something akin to the EEA.

I still don’t understand why you think that it is a bad way to conduct Brexit, or why that makes matters worse. It self-evidently reduces the potential damage.

The country is bitterly divided, but that is the nature of the issue. Reversing Brexit would merely deepen those divisions in a dangerous fashion.

The pragmatism being shown is the exact opposite of what you seek. It is Remainers coming to terms with the fact that they lost an historic vote.

The Brits are not celebrating anything. They are stoically dealing with the difficult fact that the EU has been evolving in such a way that it is not really compatible with our parliamentary democracy and the Common Law.

The fact that the country is so evenly split makes it more painful. Nobody is enjoying this. These sorts of ruptures are traumatic.

But you cannot pretend that the vote never happened. I am surprised that this is not obvious to you.

Once you get into allegations of fraud, you are going completely off the rails. Nobody of any influence here has even suggested such a thing. The government and the political establishment were desperately trying to engineer a Remain vote in any case.

Your warning about self-mutilation is well-taken but the horse bolted thirteen months ago.

Stephan, let us leave it at that. I think we are poles apart on this.

Best rgds
Ambrose

8:26 PM, Stephan Richter wrote:

Remember this though: An-EEA like deal effectively means taxation without representation. To me, that runs against the entire grain of British history.

Cheers,
Stephan.

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Western Balkans: The Young and Talented Leave

Wed, 2017-08-02 00:01

By Valbona Zeneli

Western Balkans policymakers often complain that their best minds are leaving. But they do so without offering any solution how to fix this issue.

Complaints, but no ideas. The issues to be resolved are clearly delineated. They clearly pertain to tackling the huge deficits in proper governance and the high levels of corruption. Which is exactly how the “insiders” – i.e., those in power – tend to prefer it.

After all, they often personally benefit from the current lay of the land. The thought that it is their own very insistence on preserving an anti-democratic, corrupt power structure that diminishes their countries’ future and propels outmigration by the talented (and unconnected) is irrefutable.

Yet, it seems to be too much of a leap of faith for them to fathom.

EU and the Western Balkans – Valbona Zeneli

The EU and the Balkans Parallel Lives Forever?

Europe Viewed From Just Outside But Looking In

Migration, Brain Drain and the Western Balkans

Western Balkans: The Young and Talented Leave Restricting the young?

Instead of cleaning up at their own doorstep, one option mooted about is to restrict the mobility of the most talented people.

However, outside the reestablishment of totalitarian structures, that is simply (and thankfully) not possible in today’s world.

The conclusive proof comes in the form of a thought experiment: Imagine their movement could be restricted. Even then, the Western Balkans would not become more skilled.

If they prevent people from leaving, these folks also cannot gain the additional skills they would need to advance their home country’s economy.

In addition, young people’s mental horizons have expanded and are eager to look for opportunities in order to realize their full potential.

Lack of opportunity at home is what makes them leave. Studies suggest that the poorer the country, the larger the proportion of inventors who are pushed abroad.

A recent study of the World Intellectual Property Organization suggest that the percentage of patents filed by emigrants is 98% in the case of Albania, 75% for Bosnia and Herzegovina and 71% for Serbia.

Brain drain as an opportunity

From this perspective, brain drain could be seen as an opportunity for the Western Balkans. In such a perspective, skilled migration is seen as an investment, to be re-exported in the long run to the country of origin with new skills and know-how.

However, rather than somberly complaining about brain drain, it is brain gain initiatives that are increasingly imperative.

Open avenues of circular skill migration could carry a real transformational significance for the future development of the Western Balkans. Unfortunately, it is this very debate which is woefully underdeveloped in the region.

That is why emigration shouldn’t be perceived as a problem for the governments in the Western Balkans. They should see it more as an opportunity – and an incentive (to reform their governments and political as well as economic structures, at long last).

Moreover, given the high unemployment rates and the lack of indigenous capacity to absorb the growing labor force, these political leaders really have no other choice anyway than to be grateful for out-migration.

Truth be told, the more cynical among those leaders are grandstanding on this issue. They know full well that why they really like outflows of educated people.

To them, this offers the benefit of reducing the risk of political opposition at home and – literally – exporting the demand for transparency and accountability.

Migration as political protection

In other words, such out-migration is key to keeping things precisely the way things are. worst of all, it slows meaningful competition in the public sector, the largest sector for employment in all countries.

Instead of jobs going to the most talented people – the ones that could actually advance the country – those precious jobs are doled out on a patronage basis. As a result, it isn’t the most qualified, but the best connected who get these jobs.

In the long term, the loss of skills is depriving the region of the most important factors for socio-economic and democratic transformation.

A two-step solution

In light of the above, in order to achieve meaningful progress, the Western Balkans governments should focus on:

  1. Strengthening institutions and economic policies to create the environment that encourages people to stay
  2. Promote return migration by attracting skilled workers back home.

This is the only way by which the clear and present danger of emigration and slower income convergence mutually reinforcing each other can be avoided.

Editor’s note: The views expressed here do not necessarily represent the views of the Valbona Zeneli’s institutional affiliations.

©2017 The Globalist

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The Germans Follow Keynes’ Advice!

Tue, 2017-08-01 00:01

By Holger Schmieding

If anything, the German Problem is complacency, not the current account surplus.

Is Germany not consuming enough? At 55%, the share of consumption in German GDP is lower than in most other developed countries.

Arguably, this could be seen as a problem for Germany. Its consumers could enjoy a better life today if they were to spend more.

However, record employment, political stability, ongoing gains in real wages and the current rise in GfK consumer confidence to a post-2001 high do not suggests that German consumers or workers believe that they are making the wrong choices.

Nor does it suggest that the government has made the wrong choices for them. The Agenda 2010 reforms of 2003/2004 turned Germany into a much better place to create jobs.

Wage moderation in return for job security

True, in the subsequent rebound in employment, German workers did not always ask for wage hikes fully in line with the improving outlook. That allowed companies to strengthen their balance sheets and create more jobs.

But the implicit deal between labor and corporates cuts both ways: When German GDP tanked by 5.6% in 2009, few workers were fired. Financial cushions and some well-targeted public spending helped companies to take the hit — without letting workers feel much pain.

As a result, workers do not tend to see their choice, namely enhanced job security in return for not fully exploiting any short-term leeway for higher wages, as being bad for them.

Their choice may also run counter to that being made by workers in some other European economies, but that does not mean the choice made in Germany is in any way inferior. It’s most likely the opposite.

On the corporate side, the German surplus could potentially be seen as a German problem. That would be the case if the penchant of German companies to spend some of their surplus abroad would be hurting Germany.

However, it is hard to find much evidence of macroeconomic relevance for that. On top of record employment, the rise in GDP per capita as the broadest measure of productivity has risen by 15.5% since 2005, far exceeding the 9.7% average gain in the OECD.

Ever since the Agenda 2010 reforms started to work, companies have invested enough in Germany to deliver above-average results for the German population. In this sense, the German economy does not suffer from an investment shortfall.

The Germans follow Keynes’ advice!

Observers urging the German government to embark on deficit spending today duck one major question: What’s wrong with a small fiscal surplus when the economy is expanding at an above-trend rate?

Isn’t that exactly what Keynes would have recommended? Berlin does not see the fact that the United States and the United kingdom are pursuing a less prudent fiscal policy as a problem that Germany has to address.

Of course, the contrast between deficit-funded demand abroad and a sustainable fiscal policy in Berlin is reflected in the current account. Incidentally, Germany’s fiscal gains since the early 2000s are not primarily the result of any harsh austerity.

Instead, they mostly reflect the major upturn in the labor market caused by the “Agenda 2010” reforms. As the number of people earning enough to pay into the welfare system has surged by 22% since early 2006, the fiscal accounts have swung into a small surplus.

(For all those who love these incomprehensibly long German words, check the statistics on “sozialversicherungspflichtige Beschäftigung”).

Infrastructure spending: Enough or not?

Whether or not the German government is spending enough on infrastructure is the subject of a heated debate between economists from the left, the right and the center.

Spending two-thirds of my working time travelling through Germany, Europe and the United States, I can add one observation: The public infrastructure in Germany does not seem to be in any worse shape than elsewhere.

To give an extreme example: The World Bank even ranks Germany as No. 1 out of 160 countries for the quality of trade and transport-related infrastructure in its 2016 Logistics Performance Index.

An alleged systematic underspending on public infrastructure cannot explain Germany’s fiscal balance and its current account surplus.

What’s wrong with creating jobs abroad?

So far, I have argued that the state of the German economy, including a current account surplus that seems to have peaked anyway, is not a problem for Germany.

But is it a drag on global growth, as The Economist argues? More precisely, is it such a global problem that the German government ought to override the apparent preferences of its citizens for fiscal prudence and job security and force a public deficit and higher labor costs upon them?

If the world suffered from an acute shortfall of global demand, a German reluctance to add to demand through counter-cyclical policies could be a genuine global concern.

In particular, if Germany hadn’t embarked on a well-targeted fiscal stimulus in 2009, the world would have had a genuine reason to complain.

However, given full employment in the United States, the United Kingdom, Germany, Japan etc., the world does not seem to be stuck in such a Keynesian situation today. To improve the global economic performance, we need to focus on supply more than on demand.

The domestic financial surplus of the German corporate sector means that, on top of creating a record number of jobs at home, German companies are also investing and creating jobs abroad.

German manufacturing jobs

Many of these jobs are well-paid manufacturing jobs. What’s wrong with that? German companies add to supply abroad.

Would the U.S., UK or Spanish economies really be better off if German companies were to invest their surplus at home? That would only add to the German employment boom.

If German car companies were to erode their surplus by paying their German workers much higher wages at home, some German tourists may indeed part with even more money in Disneyland or on Mallorca.

But would that really benefit U.S. workers, for whom German car companies may create fewer jobs if they have less savings to export? Also, if Germany saves less, borrowing cost for Spain and other countries might rise.

Moreover, Germany’s current account surplus looks set to shrink over time anyway, not least because the rising number of German retirees will likely draw down some of the savings they have stashed abroad over time.

As the overall economic adjustment seems well underway, the case for accelerating the process artificially looks weak.

Germany has to absorb roughly a million recent arrivals. Any advice that the government should intervene in the private sector wage-setting process to artificially raise labor costs (and hence barriers to labor market entry) for those often unskilled people seems unwise.

A case for more public spending?

Of course, the German government could usefully spend more on infrastructure, the digital economy, defense, child and nursing care.

However, it should not be overlooked that Berlin is already doing so. Every country has some problem areas. In Germany, the real infrastructure issues are typically on the regional and local level (bumpy local roads, leaking school roofs and the like). The federal government is not in control of such local spending.

Over recent years, the federal government has already diverted more tax receipts to state governments to enable them to spend more and pass on more money to the municipalities.

The real bottleneck in Germany is not lack of money. Instead, lengthy bureaucratic procedures needed before projects can be started to prevent a faster pace of infrastructure spending. Significant sums of money that have been designated to projects are not actually spent because of time-consuming procedures.

The real German problem

Thus, Germany’s real problem is not the current account. The real problem is that success breeds complacency.

Reaping the rewards of its “Agenda 2010” reforms, Germany has not introduced further pro-growth reforms since the 2010 decision to gradually increase the pension age to 67 years, a move master-minded by then SPD-minister Franz Müntefering.

Germany continues to enjoy a golden decade. But like a top athlete who is no longer training as diligently as she used to in the past, Germany will likely fall back slowly but surely over time.

In contrast, France — provided it follows through on Macron’s promise to deliver serious reforms similar to those that cured Germany’s erstwhile malaise from 2004 onwards — can overtake a complacent Germany and a Brexit-stricken United Kingdom as the most dynamic major economy in Europe in a few years.

It would then be France’s turn to enjoy a golden decade in the 2020s. If such a turnaround success materializes, should we then really start talking about “France’s problem?” I think not.

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