Leadership Failure Perpetuates Stagnation

Jomo Kwame Sundaram

What kind of leadership does the world need now? US President Franklin Delano Roosevelt’s leadership was undoubtedly extraordinary. His New Deal flew in the face of the contemporary economic orthodoxy, begun even before Keynes’ General Theory was published in 1936.

Roosevelt’s legacy also includes creating the United Nations in 1945, after acknowledging the failure of the League of Nations to prevent the Second World War. He also insisted on ‘inclusive multilateralism’ – which Churchill opposed, preferring a bilateral US-UK deal instead – by convening the 1944 United Nations Conference on Monetary and Financial Affairs at Bretton Woods with many developing countries and the Soviet Union.

The international financial institutions created at Bretton Woods were set up to ensure, not only international monetary and financial stability, but also the conditions for sustained growth, employment generation, post-war reconstruction and post-colonial development.

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Transnational Capital and Transnational Labor

William K. Tabb

In this interview, economist William K. Tabb addresses questions on the causes and fallout of the global crisis, the emergence of a “transnational capitalist class,” and the possibilities of a new anti-capitalist politics on a world scale. Tabb is the author of The Restructuring of Capitalism in Our Time (Columbia University Press, 2012) and other books.

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An Empire Upside Down, Part 3

Christy Thornton

This is the final part of a three-part article on the United States and Latin America in the Trump era, originally published in the July/August issue of Dollars & Sense magazine. Part 1 focused on Argentina, part 2 focused on Peru, and this part focuses on Colombia. Christy Thornton is an assistant professor of history and international studies at Rowan University.

Ramping up the Drug War

Beyond issues of trade, the White House visit this May from President Juan Manuel Santos of Colombia reveals how the United States under Trump is poised to stymie important progressive changes led by Latin American governments—particularly when it comes to the drug war. Colombia has long been the United States’ staunchest ally in the region, as the Colombian ambassador reinforced before Santos’ trip, telling reporters, “There are very few countries that will come and tell that we love the United States, and we want to partner with the United States.” Colombia, he insisted, loves the United States. And Santos himself, who holds degrees from Harvard and the London School of Economics, has long had a relationship with his counterparts in Washington: before becoming president in 2010, he was the country’s defense minister, working very closely with the U.S. on drug and security issues. The visit, then, appeared cordial, and both presidents issued statements reaffirming the close ties between their countries.

During their joint press conference, however, Trump implicitly reprimanded his Colombian counterpart, drawing attention to the issue of coca growing in Colombia. The Drug Enforcement Administration (DEA) recently reported that coca production had reached record-high levels in the country in 2016. The increases came after the termination of a controversial aerial eradication program in which U.S. pilots sprayed suspected coca crops—and frequently the people, animals, and plants in their proximity—with glyphosate, a chemical that the World Health Organization (WHO) has linked to cancer. Ending the aerial spraying of the chemical put Colombia at odds with a crucial part of the United States’ counter-narcotics strategy in the country, though the Colombian government allowed on-the-ground eradication efforts to begin again this year. For many observers, this change marked a new willingness of Colombia to defy the United States.

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An Empire Upside Down, Part 2

Christy Thornton

This is the second part of a three-part article on the United States and Latin America in the Trump era, forthcoming in the July/August issue of Dollars & Sense magazine. Part 1 focused on Argentina, this part focuses on Peru, and Part 3 will focus on Colombia. Christy Thornton is an assistant professor of history and international studies at Rowan University.

Trade and Multipolarity

When Peru’s newly elected President, Pedro Pablo Kuczynski, arrived at the White House for a meeting with Trump, the narrative seemed to be one of continuity rather than change. During Kuczynski’s visit, Trump took the time to highlight to reporters his approval of the sale of military vehicles to Peru. The deal was for $668 million in reconditioned Stryker armored infantry carriers—mid-sized, rapidly deployable, armed people-movers, used by the U.S. Army in Iraq and Afghanistan, particularly in urban areas. (Notably, they are manufactured and reconditioned by a General Dynamics subsidiary in Canada, not the United States.) During his White House press briefing with Kuczynski, Trump told reporters, “I understand they’re going to be buying quite a bit of our military—some of our military vehicles. And they are great vehicles. I just looked at it and we’re approving it.”

While Trump took credit for approving the agreement, the deal was actually worked out in December, under the Obama administration. That Trump’s administration decided to continue a policy of selling security-related materiel to a Latin American country was no surprise. Security aid and arms sales have long been a backbone of the relationship between the United States and Peru, which, according to the Stockholm Institute, has received more than $1 billion in arms sales since 1950.

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Imperialism in the 21st Century, Part 3

An Interview with Jayati Ghosh

This is the final part of a three-part interview with economist Jayati Ghosh, conducted by Lynn Fries of the Real News Network. (Parts 1 and 2 are available here and here, respectively.) Ghosh discusses the shape of imperialism in the 21st century, touching on themes also developed in her article “Globalization and the End of the Labor Aristocracy” (previously published by Triple Crisis: Part 1Part 2Part 3Part 4). —Eds.

Originally published by the Real News Network.

Full text below the jump.

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Early Death in Russia

The Russian mortality crisis underscores the impact of stress on life expectancy.

Vladimir Popov and Jomo Kwame Sundaram

The transition to market economy and democracy in the Russian Federation in the early 1990s dramatically increased mortality and shortened life expectancy. The steep upsurge in mortality and the decline in life expectancy in Russia are the largest ever recorded anywhere in peacetime in the absence of catastrophes such as war, plague or famine.

During 1987-1994, the Russian mortality rate increased by 60%, from 1.0% to 1.6%, while life expectancy went down from 70 to 64 years. Although life expectancy declined from 1987, when Mikhail Gorbachev was still in charge, its fall was sharpest during 1991-1994, i.e., during Boris Yeltsin’s early years.

In fact, mortality increased to levels never observed during the 1950s to the 1980s, i.e., for at least four decades. Even in the last years of Stalin’s rule (1950-1953), mortality rates were nearly half what they were in the first half of the 1990s.

Economic output fell by 45% during 1989-1998, while negative social indicators, such as the crime rate, murder rate, suicide rate and income inequalities, rose sharply as well, but even these alone cannot adequately explain the unprecedented mortality spike.

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An Empire Upside Down, Part 1

Christy Thornton

This is the first part of a three-part article on the United States and Latin America in the Trump era, forthcoming in the July/August issue of Dollars & Sense magazine. This part focuses on Argentina, with the subsequent parts (which will be posted to Triple Crisis blog in the next two weeks) to focus on Peru and Colombia, respectively. Christy Thornton is an assistant professor of history and international studies at Rowan University.

In the early months of the Trump administration, high-profile White House visits from foreign leaders from Europe, Asia, and the Middle East garnered headlines about the changing role of the United States in the world. In the context of political and economic upheaval around the globe, observers worry that, under Trump, the United States is abandoning the global leadership role it has played for decades. But the Trump administration’s response to various crises—Brexit, North Korea, Syria—paints a chaotic and often incoherent picture. Looking instead to a region long assumed to be firmly in the grasp of U.S. hegemony—Latin America—can help us understand the contours of the changes underway. It’s true that Latin America has generally been a low priority for the new president: he did recently move to roll back Obama-era changes in the relationship with Cuba, but while he made Mexico a central focus of his campaign, promising to build a border wall and tear up NAFTA, there has been little action on either front. Despite the relative disinterest in the region, however, White House visits by three Latin American heads of state—Argentina’s Mauricio Macri, Peru’s Pedro Pablo Kuczynski, and Colombia’s Juan Manuel Santos—reveal three broad ways in which U.S empire is being reconfigured under Trump.

First, where Trump has a personal financial interest—such as in Argentina—his transactional deal-making instincts have marked a return to the “dollar diplomacy” of the early 20th century. Trump, however, has given the traditional exercise of U.S. political and military might in service of U.S. capital a particularly venal, personalist twist, looking to line his own pockets, even at the expense of other U.S. business interests.

Second, where the broader issue of free-trade agreements dominates the agenda—as in Peru—Trump’s disavowal is affecting those countries’ international economic strategies. Trump’s vigorous campaigning against such agreements is leading those countries to seek closer economic ties with other partners, such as China.

And, third, in those places—like Colombia—where leaders are seeking new solutions to the failed drug war, the Trump administration has pushed back, determined to re-escalate and remilitarize U.S. strategy. Meanwhile, U.S. non-military foreign aid to such countries is on the chopping block.

These changes come even with a resurgent pro-business right wing coming to power in various countries across the region—which might have portended even closer ties to the United States. Instead, Trump may be pushing Latin America further out of the United States’ shadow—with consequences good and bad.

Trump’s Personal Dollar Diplomacy

In the context of Donald Trump’s foreign-policy belligerence—trying to point aircraft carriers toward North Korea, dropping massive bombs on Afghanistan, announcing $100 billion in arms sales to Saudi Arabia—it’s easy to overlook a few Argentine lemons. But the recent deal to allow citrus imports from Argentina for the first time since 2001, made after the visit of Argentine president Maurcio Macri to Washington, reveals much about the nature of Trump’s intentions in Latin America, where the Washington Consensus is giving way to the “art of the deal.” Macri is the wealthy businessman who won Argentina’s presidency in late 2015, ending the rule of the Justicialist (Peronist) party of Nestor Kirchner and Cristina Fernández de Kirchner. The Kirchners’ party had been in power for 12 years, and was an important part of Latin America’s “pink tide” of center-left leaders. Macri’s election, therefore, signaled a broader regional shift toward the right, and he made clear his intention to bring Argentina back into the good graces of the United States.

But Macri was already a known quantity to Trump—and the two had a tense personal relationship. The massive Trump Place development on Manhattan’s Upper West Side—where residents notably rallied to remove Trump’s name from their buildings after the U.S. election—stands on land Trump bought in 1985 from an Argentine real estate magnate: Francisco Macri, the current president’s father. The deal was acrimonious, and Trump developed a strained relationship with the elder Macri, one of Argentina’s richest men. Francisco Macri told journalist Wayne Barrett that, on a golf trip in Argentina during the early 1980s, Trump spoke to him condescendingly, as if he were “a South American banana farmer” (leaving one to wonder how Macri himself might speak to such a farmer). And the rancor extended to his son Mauricio: when the younger Macri beat Trump during a later round of golf, Trump reportedly snapped his clubs in frustration. Perhaps this personal history was part of the reason that the Argentine president openly supported Hillary Clinton, a strong proponent of the neoliberal consensus to which Macri hoped to return, during the U.S. presidential campaign.

But when Mauricio Macri arrived at the White House, Trump was already eager to turn over a new leaf with his fellow real-estate scion. In fact, the path had already been cleared for a reconciliation: the Argentine newpaper La Nación reported that Felipe Yaryura, the main Argentine investor in a Trump office building in downtown Buenos Aires, was at Trump’s victory party in Manhattan on election night, posting celebratory selfies with Trump’s son Eric and having breakfast with the Trump children the next day. Then, just days later, after Macri made a congratulatory phone call to the president-elect, long-stalled permits for the Buenos Aires project were suddenly granted. Trump and Macri denied that the permits had been a subject of their conversation, but with Yayura in constant contact with the Trump children, the content of the short phone call between the two presidents was largely irrelevant. Trump’s business interests in Argentina would proceed as he had planned.

And then came the lemons. “I know all about the lemons,” Trump told reporters during his meeting with Macri in April. “One of the reasons he’s here is about lemons.” And indeed, the lemon issue was an important piece of Macri’s broader agenda. One of the touchstones of the Macri administration—besides rolling back the advances won by activists and human rights groups to confront the horrifying legacy of the country’s military dictatorship—has been what he calls the “normalization” of the Argentine economy. To him, that includes lifting currency controls, cutting public subsidies, dismantling trade barriers like the 35% tariff on electronic goods, and negotiating a deal with the intransigent “vulture funds” that scooped up Argentine public debt after the financial crisis of 2001. All of this is intended to open the Argentine economy back up to world markets. So reversing the United States’ 15-year ban on the import of lemons from Argentina was a part of this strategy. The Kirchner adminstrations had been unsuccessfully battling the restriction through the World Trade Organization (WTO) for years, but after Macri was elected, the Obama administration indicated a willingness to reconsider the ban. Trump, however, announced immediately upon taking office that he would block any further consideration of the Obama plans for 60 days—thereby convincing U.S. citrus growers that their lobbying for the continued ban would pay off. After he extended the ban again, it seemed that Trump intended to heed domestic producers’ concerns not only about any diseases the fruit might carry, but, more importantly, about competition, and that “America First” would win the day.

While citrus makes up only about half a percent of of Argentina’s foreign sales, which are dominated by $18 billion a year in soy exports, “normalizing” access to U.S. markets is especially important to the Macri administration. What’s more, Argentina produces nearly three times the volume of lemons that the United States does, making it one of the world’s leading suppliers.  In fact, a USDA analysis showed that even a small influx of Argentine lemons—20,000 metric tons, a tiny proportion of their overall production—would result in a 4% drop in prices in the United States, something domestic growers feared. Allowing Argentine lemons back in the country would hurt U.S. industry, growers argued. So when the Department of Agriculture suddenly lifted it the lemon ban in May, after Macri’s visit, citrus growers were shocked: the “America first” promise had been broken, and U.S. producers were left in the lurch.

This seemingly small deal reveals the first important Trump-era change to the way that U.S.-Latin American economic relations have worked in recent decades. In some ways, the agreement itself is fairly typical: a neoliberal Latin American leader argues for lifting regulations in accord with a free-trade ideology, accruing benefits to agricultural producers who have consolidated landholdings and concentrated capital in fewer, larger, and more vertically integrated industrial agribusiness firms. This is consistent with the longer trajectory of trade integration that has marked the process of globalization. But it’s how this deal was arrived at, the quid pro quo on which Trump’s deal-making instinct depends, that makes Trump’s strategy toward Latin America look a bit less like the neoliberal consensus of the last thirty years, and more like the gangster capitalism of the early 20th century—only now the gangster sits in the Oval Office. That the reversal of Trump’s nationalist posturing on the Argentine lemon ban came after meeting with the leader of a country that had recently approved his business dealings demonstrates that when Trump himself stands to gain financially, he’s willing to make a deal that might contradict his America-first promises. The story of Argentine lemons, then, seems to portend a new and deeply venal kind of dollar diplomacy, where aid and trade will be dispensed as rewards for help lining Trump’s personal coffers.

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Imperialism in the 21st Century, Part 2

An Interview with Jayati Ghosh

This is Part 2 of a three-part interview with economist Jayati Ghosh, conducted by Lynn Fries of the Real News Network. (Part 1 is available here.) Ghosh discusses the shape of imperialism in the 21st century, touching on themes also developed in her article “Globalization and the End of the Labor Aristocracy” (previously published by Triple Crisis: Part 1Part 2Part 3Part 4). —Eds.

Originally published by the Real News Network.

Full text below the jump.

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Hamburg Summit

The end of the G20’s days as a premier forum for international economic cooperation”?

Jesse Griffiths

Jesse Griffiths is Director of the European Network on Debt and Development (Eurodad).

The strangest aspect of the G20 communiqué, and the part that has dominated media coverage, is the section on the Paris climate agreement.  The strangeness arises not because of the topic—the G20 has always played second fiddle to the UN on climate issues—but because, for the first time, a whole paragraph is devoted solely to one member, the USA, explaining why it doesn’t agree with the others, followed by a paragraph by the others explaining why they will go ahead without the USA anyway, including through agreeing a “G19” action plan on energy and climate for growth.

The climate change issue is a jarring symbol of the G20’s difficulty in reaching agreement. However, the Trump administration’s “America first” stance and resulting lack of movement on economic issues—the raison d’etre of the G20—is evident throughout the document.

Two things stand out.

Firstly, many key economic issues receive very little attention. The opening paragraphs on the global economy, trade and investment are masterpieces of bureaucratic obfuscation, offering something for everyone, while saying very little, and presenting no new initiatives. Financial sector reform—an issue at the centre of G20 work since the global financial crash of 2007/8—merits one short paragraph, with no new promises. The Action Plan which accompanies the communique has a more detailed summary of work in this area, highlighting that the G20 has essentially outsourced this work to the Financial Stability Board (FSB)—a worrying development given the major governance problems with that institution. In addition to being one of the least transparent and accountable international financial institutions, the FSB replicates the flawed G20 governance model, but makes it worse by adding the financial centres of Switzerland, Hong Kong, and Singapore to the G20 membership list (as well as Spain and the Netherlands).

Secondly, the continued expansion of G20 interest into a whole host of issues outside its traditional mandate is striking, with the G20 concerning itself with, for example, health, women’s empowerment, food security, rural youth employment, and marine pollution.

Debt problems, what debt problems?

Shockingly, despite developing country debts reaching record levels, and a significant number of countries being in debt distress, not a single mention was made of the need to tackle current and future debt crises in the communiqué. This came after the Finance Ministers earlier this year ignored the strong work being done at the UN on the need for a fair and transparent debt workout mechanism to rapidly resolve and help prevent debt crises, preferring instead to endorse a two page Operational Guidelines for Sustainable Financing that simply emphasises better information sharing informal methods of creditor coordination. They are a step backwards when compared to existing guidelines such as the UNCTAD Principles on Promoting Responsible Lending and Borrowing, which have already been endorsed by the UN General Assembly.

The G20’s Action Plan also fails to mention the UN’s work on multilateral sovereign debt restructuring frameworks, and offers only one new initiative—a Compass for GDP-linked Bonds. While it makes sense to focus on linking debt repayments in bond contracts to the ability of the borrower to pay, the vast majority of low-income country debt does not involve bonds: countries suffering from debt crises need a comprehensive approach which deals rapidly and fairly with all kinds of debt. The way the G20 deals—or fails to deal—with debt issues faced intensive critique by Eurodad members and partners at a major event that took place alongside the Hamburg Summit.

The German government had hoped to make management of international capital flows a central issue at this G20, but, as Eurodad predicted, the issue merits barely a mention in the communiqué, due probably to long-standing differences between some developed countries that are keen to further liberalise international finance, and emerging markets, who are rightly wary of this agenda.

As noted previously by Eurodad, promises to conclude governance reform of the IMF by 2019 shows how glacial progress is, given that the last of these “every five year” reforms was concluded in 2010 (though only implemented in 2016).

Tax—a blacklist of one

G20 efforts to tackle tax dodging by multinationals continue to centre on the flawed OECD Base Erosion and Profit Shifting (BEPS) initiative. Eurodad has already noted the major flaws of BEPS—it lacks transparency, contains significant loopholes, and has failed to incorporate the needs and interests of developing countries, the vast majority of which have had little meaningful participation in decision-making.

In March, Finance Ministers called on the OECD to prepare a blacklist of countries not meeting “agreed international standards of tax transparency.” The result was that the OECD—a body that boasts well known tax offenders such as Luxembourg, Switzerland, the Netherlands and the UK amongst its members—produced a blacklist naming only tiny Trinidad and Tobago as “non-compliant” with international standards. Almost comically, the G20 chose to see this as a sign that all was well, and asked the OECD to repeat the flawed exercise for the next summit. Finally, the G20 leaders noted the work they are doing on “enhancing tax certainty” which previous Eurodad analysis suggests is an effort to shift attention away from ensuring that multinationals pay taxes in the country where they do business, to a focus on ensuring they don’t receive any surprises—in other words, protecting the status quo.

Private finance

There is remarkably little in the communiqué on previous G20 pushes to increase the role of private finance, particularly for infrastructure. However, the leaders endorsed the Joint Principles and Ambitions on Crowding-In Private Finance, which Eurodad has previously raised concerns about, including its emphasis on mechanisms to “de-risk” private finance—a euphemism which can often mean the risks are not actually reduced, but simply transferred to the public sector.

As one centrepiece of its presidency, the German government had launched a new Compact with Africa initiative, aimed at encouraging foreign private investment in Africa, but this is not mentioned in the communiqué. Instead, the G20 groups a number of smaller initiatives under the umbrella of an Africa Partnership. Perhaps this downplaying of the Compact was due to the small number of African countries that signed up—only seven are listed in the communiqué—or it may be a response to the substantive criticism of the Compact and the real motives behind it. For example, Eurodad’s sister organisation, Afrodad, launched a comprehensive critique of the initiative, after consultation with groups from across the African continent. While noting that “the initiative could be beneficial,” Afrodad goes on to highlight major concerns, including noting that developed countries that support such initiatives are “in search of space for their expansionism” and that the end result may be “how to integrate Africa into the global division of labour … with Africa playing the same old role of raw materials provider.”

The “digital economy” was a particular focus of the German G20, which published a “G20 Roadmap for Digitalisation.” The G20 promise to “constructively engage in WTO discussions relating to E-commerce” is a warning flag for critics of the WTO’s work in this area. A recent analysis by the think tank the Center for Economic Policy Research (CEPR) found that current e-commerce proposals being considered by the WTO “are designed around a borderless, digitized global economy in which major technology, financial, logistics, and other corporations like Amazon, FedEx, Visa and Google can move labor, capital, inputs, and data seamlessly across time and space without restriction. They also want to force the opening of new markets, while limiting obligations on corporations to ensure that workers, communities, or countries benefit from their activities.”

Finally, green finance, a major topic of China’s presidency, seems to have been sidelined: it is not mentioned in the communiqué, though both the accompanying G20 Hamburg Action Plan and the Climate and Energy Action Plan take note of the work of the G20 study group on green finance, and the recommendations of the Task Force on Climate-related Financial Disclosures.

The lack of concrete outcomes in the G20’s core areas as the self-proclaimed “premier forum for international economic cooperation” underlines the governance shortcomings of the G20. As an informal club with no permanent secretariat and which operates by consensus, its ability to reach agreement can be held to ransom by powerful countries, such as the U.S., refusing to cooperate. This governance problem is inherent in the G20 design, which is one reason Eurodad and others have called for its replacement by an Economic Coordination Council elected by all UN member states, as proposed by the UN Commission of Experts on reforms of the international monetary and financial system.

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1997 Asian Crisis Lessons Lost

Jomo Kwame Sundaram

After months of withstanding speculative attacks on its national currency, the Thai central bank let it “float” on 2 July 1997, allowing its exchange rate to drop suddenly. Soon, currencies and stock markets throughout the region came under pressure as easily reversible short-term capital inflows took flight in herd-like fashion. By mid-July 1997, the currencies of Indonesia, Malaysia and the Philippines had also fallen precipitously after being floated, with stock market price indices following suit.

Most other economies in East Asia were also under considerable pressure. In November 1997, despite South Korea’s more industrialized economy, its currency also collapsed following withdrawal of official support. Devaluation pressures also mounted due to the desire to maintain a competitive cost advantage against the devalued currencies of Southeast Asian exporters.

Blind spot

Mainstream or orthodox economists first attempted to explain the unexpected events from mid-1997 in terms of orthodox theories of currency crisis. Many made much of current account or fiscal deficits, real as well as imagined.

When the conventional wisdom clearly proved to be unconvincing, the East Asian miracle was turned on its head. Instead, previously celebrated elements of the regional experience, e.g., government interventions and “social capital,” were blamed for the crises.

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