(The Conversation) – To justify invading Ukraine, Vladimir Putin has painted Russia as a hegemonic power re-asserting its rightful claim to imperial greatness. Yet even before the invasion, Russia’s economic capabilities were hardly capable of sustaining an empire.

Now, with foreign sanctions presiding over a plummeting Russian ruble, Russia’s economic standing has fallen further still. If measured at today’s exchange rates, Russia’s economy would be the 22nd largest in the world, with a gross domestic product (GDP) not much larger than the state of Ohio’s.

That’s a far cry from the past, when Russia was a true world power. According to data assembled by the late economic historian Angus Maddison, it was the fifth largest economy in the world in 1913, behind the United States, China, Germany and Britain. By 1957, when the U.S.S.R. outpaced the United States to launch the first satellite into space, the Soviet economy was the world’s second largest after America’s.

Putin’s quest for greatness

Putin was elected president following the chaotic disintegration of the Soviet Union and the 1998 financial crisis in which Russia defaulted on its debt and abandoned its fixed exchange rate.

At the time, Russia’s market-value GDP had bottomed out at US$210 billion, making it the world’s 24th largest economy, behind Austria. (All contemporary GDP figures are from the October 2021 World Economic Outlook published by the International Monetary Fund.)

Putin established an informal social contract with the Russian people based on his ability to deliver strong economic growth. Under Putin’s rule, and buoyed by a commodity price supercycle that would stretch well into the 21st century, Russia’s GDP in market exchange rates rose tenfold, returning Russia to global relevance and providing purchasing power to its middle class.

However, Russia researchers argued that as Russia’s economy began to flag, from a peak in 2013, Putin sought new legitimacy to govern through foreign policy actions to re-establish Russia’s status as a “great power.” These efforts were epitomized by the Crimean annexation of 2014.

Russia’s invasion of Ukraine, against the backdrop of Russia’s market-rate GDP losing a third of its value between 2013 and 2020, represents a doubling down of Putin’s strategy to seek legitimacy from “great power status,” rather than economic performance.

Yet the West’s unrelenting financial and economic sanctions have only accelerated Russia’s economic downfall.

Russian stocks traded on the U.K. market have fallen by 98 per cent, wiping out US$572 billion of wealth, while stocks on Russian exchanges remain suspended.

The Russian currency has fallen to 155 rubles per dollar — a drop of more than 50 per cent from 75 rubles per U.S. dollar before the invasion. If not for recent captial controls and the rising prices of commodities — brought about by the sanctions themselves — that make up the majority of Russia’s exports, it would fall even further.

Domino effect

A country’s market-rate GDP is its GDP converted to a global currency like the U.S. dollar. While there are other ways to measure GDP, when it comes to global trade and investment — and economic power — the market rate is what matters.

Russia’s market-rate GDP in 2021 was US$1.65 trillion, enough to make it the world’s 11th largest economy, behind South Korea. If we crudely convert Russia’s 2021 estimated GDP by March 7, 2022, currency rates, rather than the average exchange rate used last year, and place it against the 2021 market-rate GDP table, the rankings change and Russia slides to 22nd place, falling between Taiwan and Poland.

This drop is likely an underestimate. While a falling ruble lowers Russia’s exchange rate of its GDP to U.S. dollars, its weakening economy lowers its ruble GDP directly. And Russia’s isolation will erode its economic competitiveness, widening the economic gap further in the medium term.

Ukrainians confronted with the oncoming Russian army were wise to Putin’s chimeric strategy. “Don’t you have problems in your country to solve? Are you all rich there, as in the Emirates?” one elderly man heckled Russian soldiers.

Putin’s next move

Robert F. Kennedy famously observed that GDP failed to account for many things that we care about — like health and education. The fall in Russia’s market-rate GDP cannot begin to describe the human tragedy playing out in both Ukraine and Russia.

But what these figures do make clear is that Putin’s claim to legitimacy through economic performance is all but destroyed. With “great power status” tied closely to economic power, Putin’s back-door source of legitimacy from stirring up nationalist pride now seems closed as well.

Putin may have led Russia from one “Times of Troubles,” but he has delivered it to another one. That’s cold comfort to the Ukrainians, and indeed to the rest of the world, who are wondering Putin’s next move.

Eric Werker, William Saywell Professor of International Business, Simon Fraser University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Featured image: Pixabay.

As the devastation of climate change makes the need to decarbonise clearer by the day, countries face the question of what to do with their old fossil fuel infrastructure. While some environmental activists have taken to sabotaging the carbon economy on the back of its emissions in the Global North, the picture is different in oil-producing countries of the Global South, where energy infrastructure has fed communities for decades. There, the emphasis is placed on memory and institutionalisation.

Oil’s conquest of Iran and Malaysia

The cases of Malaysia and Iran, where oil has significantly contributed to economic growth, give us a glimpse into how authorities are currently reckoning with their fossil fuel heritage. In the 20th century, the arrival of international oil companies in the major port cities on the Persian Gulf in Iran and the South China Sea in Malaysia transformed the built environment, accelerated urbanisation and impacted peoples’ everyday lives. Even today, the dynamics and actors of oil in Iran and Malaysia continue to reshape industry, society, culture, and politics while leaving their mark on the built environment and urban spaces.

Founded in 1978, the International Committee for the Conservation of the Industrial Heritage (TICCIH) is an international organisation established to explore, protect, conserve and explain the remains of industrialisation. In 2020, it published the first global assessment of the heritage of petroleum production, the oil industry and the places, structures, sites, and landscapes that might be chosen to conserve for their historical, technical, social, or architectural attributes. In a 2020 report, the organisation defined the heritage of the petroleum industry as

“the most significant fixed, tangible evidence for the discovery, exploitation, production, and consumption of petroleum products and their impact on human and natural landscapes”.

Iran’s petroleum museums

Less than a decade ago, Iran’s Ministry of Petroleum began to consider establishing museums with a view to preserving the country’s industrial heritage. Those in the port city of Adaban in the country’s southwest, include an old refinery, gas station, and the oldest oil-related technical training school. In sections of the old ports, passersby can appreciate cranes and heavy machinery, such as the Akwan and Sulfur cranes, as well as an exhibition about the reconstruction of the refineries following the Iran-Iraq war (1980-1988).

The country is projecting to open other oil museums in major oil port cities. One of them is Masjed Suleiman, a city in the southwestern province of Khuzestan widely recognised as the birthplace of the oil industry in the Middle East. Its museum hosts the oldest oil recovery site in the region. In Tehran, the Museum of Oil Industry Technology will detail the nature and importance of oil, gas, and petrochemicals since 1901. It was in that year that the British speculator William D’Arcy received a concession to explore and develop southern Iran’s oil resources.

When the oil industry refuses to die

In Malaysia, the oil industry is omnipresent in everyday life, which raises challenges to global decarbonisation efforts. The national oil company Petronas is visible everywhere, from the dissemination of scholarships, the establishment of a university, and the iconic Petronas Twin Towers to the transformation of sleepy towns into sprawling industrial complexes. The industry goes back to the early 1900s, when oil was struck in the jungles of Miri, Sarawak, under British rule.

The conservation of Malaysia’s oil legacy has proven somewhat challenging, as most rigs are located offshore and sites still very much in use. Efforts have also been limited and lack a centralised plan. In a federal nation, each state dictates its own policies, which extends to museums. Under the Sarawak Tourism Board, the oil rig in Miri has been transformed into a museum and tourist site but remains the only one of its kind.

Conservation efforts have mainly focused on education with an emphasis on science and technology. Most attractions, such as the Petrosains Discovery Centre and the Petronas University of Technology, prioritise public awareness and learning. Malaysia’s national narrative is consistently upbeat – that the oil industry has improved society, transformed of remote villages, advanced educational opportunities, and led to dramatic changes in landscapes and cityscapes.

Toward post-pandemic and post-oil futures

Malaysia and Iran have taken different approaches when preserving the oil industry as part of their tangible and intangible cultural heritage. Nonetheless, a common element of is to separate the oil industry from its imperial pasts by preserving historical sites and narrating them as part of the national narrative.

For Malaysia, Petronas and the oil industry is promoted as a success story, intertwining petrol and nationalism. The preservation of the Miri oil rig as a tourist site serves the dual purpose of an attempt to safeguard the historical value of the location and to integrate it as a part of Sarawak’s story.

However, rising concerns about climate change, the environment, and corporate responsibility are increasing pressure on oil companies to reduce their carbon footprint by supporting clean and renewable energy, but these efforts appear to lag behind companies such as British Petroleum, which has moved into electric charging and renewable energy. Furthermore, the Covid-19 pandemic caused consumer demand for oil to plummet, which will likely continue to depress Iranian and Malaysian exports for the months to come.

The impact of the Covid-19 and climate crises

In the case of Iran, the Covid-19 crisis and the fluctuations in oil prices coincide with intensified sanctions by the United States against Iran, also known as the “maximum pressure campaign”. Despite its rich oil and gas resources, the country needs new technology investments and development plans to prepare for the post-fossil-fuel future. However, that will be hard to achieve without resolving US-Iran tensions and easing sanctions. To balance future economic growth with social development and environmental protection, Iran needs to invest more in plans for sustainable development and transition to less environmentally harmful energy sources.

Malaysia’s response acknowledges of the twin effects of Covid-19 and global warming: change in weather patterns and a decrease in demand for oil. Since the 2010s, there has been some movement in the energy sector to prepare for the post oil future. Over nearly a decade, Petronas has focused on solar power, wind energy and clean hydrogen, pledging to achieve net zero carbon emissions by 2050.

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But it took until 2020 amid the Covid-19 crisis and growing international awareness over the climate emergency for momentum to pick up. In 2021, the Ministry of Energy and Natural Resources set targets to decarbonise the country by 45% by 2030. While these efforts have been applauded, some hindrances remain, such as financial constraints and a lack of engagement with nongovernmental organisations.

Lessons from Malaysia’s palm oil heritage

Given changing global attitudes toward the oil industry, the question arises how the industrial heritage of Malaysia and Iran can be envisioned. Will oil rigs become relics of human greed instead of human advancement? And how will the national narrative reconcile this new reality with the importance of oil in the countries’ decolonisation process?

For Malaysia, it’s a question that has already been asked regarding palm oil and deforestation. Environmental activists in the country and abroad have highlighted their negative impact, which resulted in poor publicity for the country. However, through government engagement with youth and activists, there has been some improvement with how palm oil is viewed especially with regards to sustainability efforts.

Oil heritage perhaps needs to walk a similar path, encouraging honest conversations between policymakers, NGOs, industry stakeholders and historical organisations. The Covid-19 pandemic has also provided vital lessons and introduced new practices emphasising corporate responsibility toward workers. Improved governmental cooperation has also shown that it is possible to work toward common goals, which can be expanded to issues such as heritage. If implemented appropriately, such approaches may spell a bright future for how we view oil as part of a national narrative.

50th anniversary of the World Heritage Convention (16 November 2022): World Heritage as a source of resilience, humanity and innovation.

Rowena Abdul Razak, Guest Teacher in International History, London School of Economics and Political Science and Asma Mehan, Assistant Professor in Architecture and Urban History, Texas Tech University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Central banks around the globe are currently staring at inflation rates unseen in more than 20 years. Supply chain problems and labour shortages arising from the pandemic, combined with sharply rising food and energy prices, have pushed prices up by as much as 6.2% in the US, 4.2% in the UK, 10.7% in Brazil and 4.5% in India. Every central bank has responded by either raising interest rates or committing to raising them in the immediate future.

It’s too early to say whether the new coronavirus variant B.1.1.529, first identified in Botswana, will take rate-rises off the agenda, but certainly they have not been part of Turkey’s plans. Since September, Turkey has cut interest rates by four percentage points from 19% to 15%, wreaking havoc in the financial markets in the process.

The Turkish lira, which was trading at TL8.28 = US$1.00 in early September, fell to TL13.40 a few days ago, its lowest level on record at the end of an eleven-day losing streak. It is now trading at around TL12.10, having recovered a little but then weakened again as investors move money out of weaker currencies in response to new fears about COVID.

So why has Turkey had such an “irrational” policy stance on interest rates while everyone else is doing the opposite?

Erdoğanonomics

It would have been of some academic interest to analyse the reasoning behind such a move, but there has been little forthcoming from the authorities – except to say that it would “boost exports, investment and jobs”. President Erdoğan believes that raising interest rates would raise inflation rather than reduce it, and has maintained this view throughout the near 20 years that he has been prime minister (2003-14) and president (2014 to present). Unlike the 2018 currency crisis, which followed a diplomatic crisis between Turkey and US, the latest debacle is very much homemade and self-inflicted.

Turkish lira vs US dollar

There have been two important changes in governance in recent years with important consequences. First, the move to the current executive presidential regime in 2018 officially crowned the president as the dominant authority in every sphere of policy.

Second, the independence of the country’s central bank, granted as part of a series of economic reforms in the early 2000s before Erdoğan’s AKP came to power, is now also gone. There have been four central bank governors in less than three years, with a clear pattern of dismissals closely following interest rate hikes. The most recent appointment was Şahap Kavcıoğlu in March, and interest rates have not risen since then.

Compounding factors

The lira has now lost nearly 40% of its value since the beginning of the year. This is a massive depreciation for any economy, and even worse for Turkey for various reasons. For one thing, the fall in the lira will soon show up in a rise in inflation, which is already hovering around 20% even by official accounts. The fact that so much of the economy runs on US dollars does not help.

Existing estimates suggest that a 10% depreciation in the lira against the US dollar results in around a two percentage point rise in inflation. Given that inflation has only risen by about one percentage point since the summer, that suggests it has a long way to go yet. About 70% of Turkey’s imports are made up of raw materials and goods used in manufacturing, so that’s where much of the effects will be felt. Among the difficulties is that Turkey has to import most of its energy.

Another issue is that a significant proportion of Turkey’s debts are in foreign currencies – mainly US dollars and euros. The weaker lira makes these debts much more difficult to service, and Turkey is due to pay US$168 billion (£126 billion) of its external debts in the next 12 months. The increased risk of default could inflict serious losses on foreign investors, with certain Spanish and Italian banks among those that are heavily exposed. This raises the prospect of Turkey’s problems spilling over into other countries, and the sell-off in the lira is likely to get worse if market panic becomes prolonged because of variant B.1.1.529.

What can policymakers do?

There are three policy tools available to policymakers in the face of currency turmoil: raising interest rates, selling foreign exchange reserves and imposing capital controls (meaning you prevent foreign currency from leaving the country).

All three aim to take the pressure off the domestic currency. Raising interest rates makes the domestic currency more attractive to investors, since it increases what they can earn from it. Selling foreign exchange reserves means buying more of the domestic currency, so its value is strengthened by the extra demand. And capital controls slow down the volume of trade between the domestic and foreign currency, which means fewer people are selling the domestic currency.

Apart from the fact that the regime in Turkey is not enthusiastic about raising interest rates, it can’t sell foreign reserves because it essentially doesn’t have any. That leaves capital controls, which would be an extreme measure in today’s world and would imply that Turkey was withdrawing from the international financial system. Capital controls are also difficult and costly to enforce, even in countries with robust institutions.

Perhaps instead the central bank will reverse policy and raise interest rates. This already happened during the 2018 currency crisis, when the authorities made a major U-turn and raised interest rates by 6.25 percentage points that September. At that time the lira had plummeted to close to TL6.50 = US$1.00 – still much more valuable than it is today – before strengthening to the low TL5.00s after the change of policy. Similarly, in 2020 a rate-cutting streak was followed by sharp rate-rises later in the year.

Yet, as necessary as it is for Turkey to increase interest rates, this will not do much to solve the significant imbalances in the economy that have accumulated over a long period.

What Turkey needs is a carefully designed and inclusive stabilisation programme with buy-in from large sections of society, with independence for the central bank at its core. This is highly unlikely to happen with the current all-powerful presidential regime, with or without a change in power.

Gulcin Ozkan, Professor of Finance, King’s College London

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Bonus Video added by Informed Comment:

VOA News: “Turkey’s Economic Turmoil Threatens to Stoke Refugee Tensions”

( Middle East Monitor ) – On what was called “Black Tuesday” in the media this week, the value of the Turkish lira against foreign currencies declined sharply, bringing the exchange rate to 13.5 Turkish liras to the US dollar. While experts on the matter in Turkey and elsewhere are unanimous in attributing this to the Turkish Central Bank’s decision to reduce interest rates, President Recep Tayyip Erdogan described what was happening as a “war of economic independence”.

The situation has reached the point where the media are drawing a parallel between the depreciation of the local currency and the expansion of Turkey’s role in foreign affairs. One individual defending the government’s monetary policy argued with some degree of sarcasm that the exchange rate of the lira against the dollar and other hard currencies could be lowered by following policies in line with what the West dictates: withdraw Turkish forces from Libya, Azerbaijan and Syria; give up Turkey’s rights in the eastern Mediterranean, pleasing Greece in the process; release activist Osman Kavala and Kurdish politician Selahattin Demirtas; and basically submit to Western domination.

Government supporters say that Turkey is growing as an international power, and this is the reason for the hostility being shown by global superpowers which want to bring the country to its knees. They add that they are willing to make all kinds of sacrifices for the sake of the country’s prosperity.

Erdogan has replaced the minister of finance and the head of the Central Bank three times within one year, and the bank made contrary decisions regarding interest rates with each of the changes, both decreasing and increasing them. However, they did not achieve the desired results of stopping the deterioration of the local currency and reducing inflation and price rises of basic essentials. Government critics consider that such fluctuations in monetary decisions are a sufficient reason for the loss of confidence by local and foreign investors, which has a negative effect on the gross national product, unemployment and poverty levels.

READ: When silence is the best diplomacy

Naturally, the opposition parties are making political capital out of the economic turmoil and blame the government’s decision-making, which means, in reality, the president, who has full executive power in his hands. The opposition parties have taken the opportunity provided by the Turkish Lira’s “Black Tuesday” to take action with renewed momentum. The People’s Alliance led by Kemal Kilicdaroglu and Meral Aksener held an “urgent meeting” and have demanded early elections.

Turkish President and Leader of Turkey’s ruling Justice and Development (AK) Party Recep Tayyip Erdogan in Ankara, Turkey on 23 November 2021 [TUR Presidency/Murat Cetinmuhurdar/Anadolu Agency]

” data-medium-file=”https://i0.wp.com/www.middleeastmonitor.com/wp-content/uploads/2021/11/20211123_2_50995674_70927615.jpg?fit=500%2C333&quality=85&strip=all&zoom=1&ssl=1″ data-large-file=”https://i0.wp.com/www.middleeastmonitor.com/wp-content/uploads/2021/11/20211123_2_50995674_70927615.jpg?fit=933%2C622&quality=85&strip=all&zoom=1&ssl=1″ src=”https://i0.wp.com/www.middleeastmonitor.com/wp-content/uploads/2021/11/20211123_2_50995674_70927615.jpg?resize=933%2C622&quality=85&strip=all&zoom=1&ssl=1″ alt=”Turkish President and Leader of Turkey’s ruling Justice and Development (AK) Party Recep Tayyip Erdogan in Ankara, Turkey on 23 November 2021 [TUR Presidency/Murat Cetinmuhurdar/Anadolu Agency]” data-recalc-dims=”1″ data-lazy-loaded=”1″ >

Turkish President and Leader of Turkey’s ruling Justice and Development (AK) Party Recep Tayyip Erdogan in Ankara, Turkey on 23 November 2021 [TUR Presidency/Murat Cetinmuhurdar/Anadolu Agency]

Generally speaking, the Republican People’s Party (CHP) chairman Kilicdaroglu has, for some time, behaved as if he is the head of state. He called on state bureaucrats to refuse to obey any orders from politicians that contradict the law, and threatened them with being held accountable, implying that a change of president is imminent. For the first time in the history of the CHP, its representatives in parliament voted against renewing the permission for the government to send military forces to Syria and Iraq. In a move that was seen as “historic”, Kilicdaroglu announced that he would ask for forgiveness from the social groups that have been subjected to injustices at the hands of the state at different times during Turkey’s modern history, whether or not the CHP was responsible for them.

In short, Kilicdaroglu is addressing the Turkish people directly as he tries to give them confidence in change and in the opposition’s ability to solve the problems that the government has failed to solve. The opposition parties agree that the key to change is to return to the parliamentary system and get rid of the presidential authority system where one person holds all the power in his hand.

To what extent will the people respond to these opposition campaigns? It is too early to say. It is true that periodic opinion polls generally suggest a large and steady decline in the popularity of Erdogan’s Justice and Development Party (AK Party), but this decline is not matched by an upturn in the popularity of the opposition parties, although the results of some of these polls indicate a boost in possible voter turnout for the opposition coalition. However, the most prominent factor is the increase in the percentage of undecided people who have confidence in neither the ruling AK Party nor the opposition.

In addition to these opinion polls, interviews with people on the street have appeared in the media frequently. Their comments should worry Erdogan about losing the popular support that has kept the AK Party in power for the past twenty years.

A cause for additional concern is what the journalist and AK Party MP Samil Tayyar described as a “trap” set for the president by the condition that a presidential candidate must obtain 50 per cent plus one vote to win under the new presidential system.

On the political level, Erdogan declared his concern openly about this condition, and left it to parliament to deal with. Meanwhile, his partner in the People’s Alliance, Devlet Bahceli, the leader of the Nationalist Movement Party, declared his adherence to the 50 per cent plus one condition, considering it to be the basis for the legitimacy of the presidential system. An urgent meeting took place between the two partners immediately after Bahceli’s statement.

Bahceli is afraid of losing his party’s representation in parliament due to the ten per cent barrier in the election law, but is committed to his alliance with the AK Party. However, because of his insistence on defending the aforementioned condition regarding the presidential election, it seems as if he is abandoning his ally Erdogan at one of the most difficult times experienced by the AKP since it came to power in 2002.

Bakr Sidqi is a Syrian journalist.

This article first appeared in Arabic in Al-Quds Al-Arabi on 24 November 2021

The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor or Informed Comment.

Via Middle East Monitor

Unless otherwise stated in the article above, this work by Middle East Monitor is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.

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Turkish lira plunges, loses nearly 40% it’s value this year | DW News

Progressive leaders in the U.S. Congress are refusing to back down on the Democrats’ promises to American voters to reduce poverty, expand rights to healthcare, education and clean energy, and repair a shredded social safety net. After decades of tax cuts for the rich, they are also committed to raising taxes on wealthy Americans and corporations to pay for this popular agenda.

Photo: Tom Pennington.

Germany has elected a ruling coalition of Social Democrats, Greens and Free Democrats that excludes the conservative Christian Democrats for the first time since 2000. The new government promises a $14 minimum wage, solar panels on all suitable roof space, 2% of land for wind farms and the closure of Germany’s last coal-fired power plants by 2030.

Iraqis voted in an election that was called in response to a popular protest movement launched in October 2019 to challenge the endemic corruption of the post-2003 political class and its subservience to U.S. and Iranian interests. The protest movement was split between taking part in the election and boycotting it, but its candidates still won about 35 seats and will have a voice in parliament. The party of long-time Iraqi nationalist leader Muqtada al-Sadr won 73 seats, the largest of any single party, while Iranian-backed parties whose armed militias killed hundreds of protesters in 2019 lost popular support and many of their seats.

Chile’s billionaire president, Sebastian Piñera, is being impeached after the Pandora Papers revealed details of bribery and tax evasion in his sale of a mining company, and he could face up to 5 years in prison. Mass street protests in 2019 forced Piñera to agree to a new constitution to replace the one written under the Pinochet military dictatorship, and a convention that includes representatives of indigenous and other marginalized communities has been elected to draft the constitution. Progressive parties and candidates are expected to do well in the general election in November.

Maybe the greatest success of people power has come in Bolivia. In 2020, only a year after a U.S.-backed right-wing military coup, a mass mobilization of mostly indigenous working people forced a new election, and the socialist MAS Party of Evo Morales was returned to power. Since then it has already introduced a new wealth tax and welfare payments to four million people to help eliminate hunger in Bolivia.

The Ideological Context

Since the 1970s, Western political and corporate leaders have peddled a quasi-religious belief in the power of “free” markets and unbridled capitalism to solve all the world’s problems. This new “neoliberal” orthodoxy is a thinly disguised reversion to the systematic injustice of 19th century laissez-faire capitalism, which led to gross inequality and poverty even in wealthy countries, famines that killed tens of millions of people in India and China, and horrific exploitation of the poor and vulnerable worldwide.

For most of the 20th century, Western countries gradually responded to the excesses and injustices of capitalism by using the power of government to redistribute wealth through progressive taxation and a growing public sector, and ensure broad access to public goods like education and healthcare. This led to a gradual expansion of broadly shared prosperity in the United States and Western Europe through a strong public sector that balanced the power of private corporations and their owners.

The steadily growing shared prosperity of the post-WWII years in the West was derailed by a combination of factors, including the 1973 OPEC oil embargo, Nixon’s freeze on prices and wages, runaway inflation caused by dropping the gold standard, and then a second oil crisis after the 1979 Iranian Revolution.

Right-wing politicians led by Ronald Reagan in the United States and Margaret Thatcher in the U.K. blamed the power of organized labor and the public sector for the economic crisis. They launched a “neoliberal” counter-revolution to bust unions, shrink and privatize the public sector, cut taxes, deregulate industries and supposedly unleash “the magic of the market.” Then they took credit for a return to economic growth that really owed more to the end of the oil crises.

The United States and United Kingdom used their economic, military and media power to spread their neoliberal gospel across the world. Chile’s experiment in neoliberalism under Pinochet’s military dictatorship became a model for U.S. efforts to roll back the “pink tide” in Latin America. When the Soviet Union and Eastern Europe opened to the West at the end of the Cold War, it was the extreme, neoliberal brand of capitalism that Western economists imposed as “shock therapy” to privatize state-owned enterprises and open countries to Western corporations.

In the United States, the mass media shy away from the word “neoliberalism” to describe the changes in society since the 1980s. They describe its effects in less systemic terms, as globalization, privatization, deregulation, consumerism and so on, without calling attention to their common ideological roots. This allows them to treat its impacts as separate, unconnected problems: poverty and inequality, mass incarceration, environmental degradation, ballooning debt, money in politics, disinvestment in public services, declines in public health, permanent war, and record military spending.

After a generation of systematic neoliberal control, it is now obvious to people all over the world that neoliberalism has utterly failed to solve the world’s problems. As many predicted all along, it has just enabled the rich to get much, much richer, while structural and even existential problems remain unsolved.

Even once people have grasped the self-serving, predatory nature of this system that has overtaken their political and economic life, many still fall victim to the demoralization and powerlessness that are among its most insidious products, as they are brainwashed to see themselves only as individuals and consumers, instead of as active and collectively powerful citizens.

In effect, confronting neoliberalism—whether as individuals, groups, communities or countries—requires a two-step process. First, we must understand the nature of the beast that has us and the world in its grip, whatever we choose to call it. Second, we must overcome our own demoralization and powerlessness, and rekindle our collective power as political and economic actors to build the better world we know is possible.

We will see that collective power in the streets and the suites at COP26 in Glasgow, when the world’s leaders will gather to confront the reality that neoliberalism has allowed corporate profits to trump a rational response to the devastating impact of fossil fuels on the Earth’s climate. Extinction Rebellion and other groups will be in the streets in Glasgow, demanding the long-delayed action that is required to solve the problem, including an end to net carbon emissions by 2025.

While scientists warned us for decades what the result would be, political and business leaders have peddled their neoliberal snake oil to keep filling their coffers at the expense of the future of life on Earth. If we fail to stop them now, living conditions will keep deteriorating for people everywhere, as the natural world our lives depend on is washed out from under our feet, goes up in smoke and, species by species, dies and disappears forever.

The Covid pandemic is another real world case study on the impact of neoliberalism. As the official death toll reaches 5 million and many more deaths go unreported, rich countries are still hoarding vaccines, drug companies are reaping a bonanza of profits from vaccines and new drugs, and the lethal, devastating injustice of the entire neoliberal “market” system is laid bare for the whole world to see. Calls for a “people’s vaccine” and “vaccine justice” have been challenging what has now been termed “vaccine apartheid.”

Conclusion

In the 1980s, U.K. Prime Minister Margaret Thatcher often told the world, “There is no alternative” to the neoliberal order she and President Reagan were unleashing. After only one or two generations, the self-serving insanity they prescribed and the crises it has caused have made it a question of survival for humanity to find alternatives.

Around the world, ordinary people are rising up to demand real change. The people of Iraq, Chile and Bolivia have overcome the incredible traumas inflicted on them to take to the streets in the thousands and demand better government. Americans should likewise demand that our government stop wasting trillions of dollars to militarize the world and destroy countries like Afghanistan and Iraq, and start solving our real problems, here and abroad.

People around the world understand the nature of the problems we face better than we did a generation or even a decade ago. Now we must overcome demoralization and powerlessness in order to act. It helps to understand that the demoralization and powerlessness we may feel are themselves products of this neoliberal system, and that simply overcoming them is a victory in itself.

As we reject the inevitability of neoliberalism and Thatcher’s lie that there is no alternative, we must also reject the lie that we are just passive, powerless consumers. As human beings, we have the same collective power that human beings have always had to build a better world for ourselves and our children – and now is the time to harness that power.

Via Code Pink

Things are about to get worse, as Afghanistan under the Taliban is cut off from the $4 billion a year in international aid that had kept it afloat.

A lot worse.

Here’s some of how that will work:

Mohammad Sajjad Sajjadi at Euronews Dari Persian interviews Afghan officials predicting the collapse of the Afghan monetary system now that the Taliban have taken over.

They point out that because several top Taliban leaders are under sanctions and accused of terrorism, member states of the World Trade Organization will not trade with Afghanistan now. The country will not be able to export or to import, its banks will be cut off from the international banking exchanges. There will be no way to receive Afghanis (the Afghanistan currency) from Kabul banks if you are an exporter abroad. There will be no way to send dollars to Kabul if you are an importer abroad. In turn, that means no exports and no imports.

Moreover, the banking system is in big trouble. A Central Bank official who asked to remain anonymous pointed out that the government only has two choices.

It can keep the banks open, in which case there will be a run on them. Banks work by lending money, so they don’t have all their assets on hand. If the full complement of account owners ask for their money at once, the bank can’t provide it and collapses.

The other possible policy is to put restrictions on withdrawals. But that way of proceeding would leave people without access to their money and reduce the money supply, causing deflation and economic stagnancy.

Either way, the Afghani currency is in big trouble

All this is why, Al Jazeera reports, United Nations Secretary-General Antonio Guterres said at a donor conference Monday, “The financial system at the moment is extremely limited, which means that a number of basic economic functions cannot be delivered.”

Kabul is a city of 3 million, the size of Chicago inside city boundaries, and Kandahar and other cities have hundreds of thousands of residents. They can’t live on subsistence agriculture.

The UN estimates that food stocks could run out by the end of September. As I reported in August, some 14 million Afghans are food insecure, up from 12 million last spring. Even under the American-sponsored Ashraf Ghani government, about a third of the population was in danger of missing meals if any little thing went wrong.

Now, something very big has gone wrong.

Guterres made an emergency appeal for aid from international donors and garnered pledges of about $1 billion.

The United States pledged $63 million, which is not very much, but then Washington just lost a war. It contrasts with the billions it was willing to spend on bombs made by US arms manufacturers to drop on Afghanistan.

France pledged $118 million.

Guterres was pleased with the response, though it should be noted that very often these pledges are later reneged on by the donors and he’ll be lucky to get half that.

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Bonus Video:

CBS News: “U.N. sounds alarm on humanitarian crisis in Afghanistan

Ann Arbor (Informed Comment) – This Labor Day, American workers finally have something have to celebrate, by virtue of having voted for a Democratic president and Congress.

The pandemic-driven labor shortage has raised wages.

Direct payments from the government, including an expanded child tax credit and expanded unemployment benefits added $3,200 to the income of each worker, causing poverty to fall from 12.8 percent to 8.5 percent by last March. In 2021, Vox projects that poverty will fall to 7 percent, half the 2018 rate.

Economic growth could hit 7% this year, and 4.5% next year which will further reduce poverty.

Poor productivity growth since 2003 had reduced real wages for workers.

in contrast, general wealth inequality may have declined somewhat, despite the income rise for the .01 percent during the pandemic.

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Bonus video:

Live: Biden Delivers Remarks on July Jobs Report | NBC News

With markets again sending confusing and at times contradictory signals regarding such basics as inflation, unemployment, and quit rates, the job of economic forecasters seems especially difficult. Perhaps that obligation might become less burdensome if we entertain the possibility that US capitalism is undergoing basic changes and no glide path is certain. The important thing is to work with others to meet any future crisis with an order more concerned with human welfare than with that of corporations.

In an op-ed at Project Syndicate, Varoufakis maintains that the political choices made during the bailout of the 2008 World Financial crisis have created a dilemma for current legislators and Central Bankers. The world could be saved from a Depressions era crisis in one of two ways, Varoufakis writes,

“ One way … was a large enough fiscal stimulus. Direct injections of freshly minted money to consumers and firms – to pay off debts and to increase consumption and investment – would have re-floated Main Street and, indirectly, Wall Street. This was the road not taken by the Obama administration.

Instead, the Fed printed trillions of dollars, and the failing banks were re-floated directly. The banks lent the new money to corporations, but, because their customers were not re-floated, managers were unwilling to risk plowing the money into good jobs, buildings, or machines. Instead, they took it to the stock market, causing the largest-ever disconnect between share prices and the real economy.

Following Wall Street’s near-death experience in 2008, corporations became hooked on (almost) interest-free credit and rising stock valuations that flew in the face of low profits. Total savings dwarfed investment, aggregate wages were at an all-time low, and consumer spending remained subdued. And then, suddenly, COVID-19 arrived, with the ensuing lockdowns dealing major blows on both the supply and the demand side of the economy.”

An economy heavily leveraged and primarily dependent on stock buybacks and other financial manipulations is a luxury our society can no longer tolerate. The practice of stock buybacks was once defined as illegal market manipulation. With a decaying infrastructure and an intensifying global climate and pandemic crisis we need an economy that produces the food, energy, housing, and transportation needed for survival..

Yet the dilemma here is that any sustained period of full employment—or even expectation thereof– elicits fear of inflation, an increase in the long term interest rate, and spiraling bankruptcies among those corporations that had become addicted to cheap money. Varoufakis sees fiscal policy as an antidote to recession/depression but worries about how long it takes to become effective. The fear is well taken, especially in light of the scandalous delays in getting unemployment insurance to citizens in some states..

These concerns might be partially addressed by prioritizing and planning critical tasks now. In addition they constitute a further reason for permanent extension of the child care tax credit.

Varoufakis also regards unions, which can push worker incomes higher, as a part of the worker/consumer safety net. He advocates compulsory arbitration, but I would want to add an emphasis on union organization, which can boost both political and economic goals. Debt relief is also cited but needs more emphasis. Student debt along with mortgages are staggering and debt has a psychological impact beyond the number of dollars.

Finally, any economic collapse will double the present number of firms or industries deemed or claiming to be too big to fail. Rather than categorically rejecting or accepting these claims, o let’s decide these claims by applying environmental and social justice standards, as well as demanding movement toward a more democratic workplace as the price of any bailoout. It is time to model and experiment with different enterprise forms. Let’s have no more bailouts of the sort proffered after 2008 to The American International Group (AIG) or the strings-free $12 billion given to Jaime Dimon’s J.P. Morgan Chase.

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Bonus Video added by Informed Comment:

AJ+ “Biden Won’t Cancel Student Debt. Here’s What Other Countries Can Teach Him”

“Governing Lebanon is surely more daunting than governing France.”[1] That pearl of wisdom in an essay defending consociational democracy by University of Pennsylvania political scientist Brendan O’Leary has never been more accurate. A delicate balance of domestic interests with institutional vetoes at the best of times, Lebanese politics has been stalemated for months as the parties have failed to agree on a coalition government which would be responsible, among other pressing items, for negotiating with international creditors. More than a year ago, Lebanon failed to pay a $1.2 billion Eurobond, defaulting on a sovereign debt for the first time in its history.[2] Surprising in itself, Beirut has successfully dithered rather than accommodate the International Monetary Fund (IMF) with the sort of painful domestic policy package that sees foreign banks repaid at the expense of domestic living standards.

The country once described as the ‘Switzerland of the Middle East’ for its own international banking is no longer a ‘stalwart debtor’ in the reputational schema of Stanford University political scientist Michael Tomz. But will it become a fairweather or perhaps even a lemon debtor? Stalwart debtors never default. Think Norway. Fairweather debtors sometimes default but repay when they can. Think Thailand. Lemon debtors almost invariably default. Think Argentina. Lebanon could afford to be a stalwart debtor back when it had no competition as the financial, entertainment and media capital of the Arab World, before the influx of Syrian refugees and before the Covid-19 Pandemic hammered its economy together with the rest of the world.

Today, Lebanon is economically prostrate and there is little elite interest in accepting the sorts of economic and social pain the IMF has in mind. Viewed from Paris, London or Washington, the protracted process of forming a new government might look like a collective action problem. Viewed from Beirut, however, it may appear a means of delaying the pain and saving Lebanese leaders from the onus of imposing it.

French bankers and thus the French foreign policy establishment are so unhappy with Lebanese recalcitrance that they have threatened to impose economic sanctions via the European Union on Lebanese officials they hold responsible.[3] Economic sanctions are what the Global North has heretofore imposed for horrific war crimes committed by African warlords and predatory organized crime by post-Soviet oligarchs. Using them to punish the failure to form a government is something new.

The unprecedented threat is attributable in part to the perennial unhappiness of the French political class with its Lebanese counterpart. France, as the League of Nations mandatory power, is responsible for establishing Lebanon and Syria as separate states despite their common history. Colonial fantasies about the Frankish Crusader states perhaps inspired the effort to create a Christian dominated Arab client state. Yet the Lebanese have always displayed an inclination to be themselves rather than French. Lebanese consociationalism, with the modus vivendi political cartel among elites in a society deeply divided by religion, in particular has irritated French republican elites since the Free French opposed the 1943 Lebanese pacte nationale.

The Constitution of the Fifth Republic describes France as indivisible, though obviously it is not, but Paris wants its former colonies and semi-colonies to embrace the adversarial democracy implicit in that sort of national identity. One of the ironies here is that the Quay d’Orsay threatens to use the economic might of the European Union, itself the planet’s most complex and extensive consociational entity whose state membership includes a host of successful consociational democracies, against the planet’s second oldest consociational democracy. (The Netherlands has an older consociational regime than Lebanon).

That Lebanon is today an economic mess is undeniable. Consumer banks have been unable to pay their depositors in hard currency, a shocking dysfunction given the country’s dependence on remittances. Sudden losses in the value of the Lebanese pound have led to rioting. The Lebanese public understandably blames both official corruption and international lenders for their economic distress. A 2019 public opinion poll found that 91% of Lebanese respondents considered government corrupt to medium or large extent and 59% of respondents anticipated that the economic situation would be worse or much worse over the next two to years.[4]

Economic distress is compounded by the extraordinary stresses of its regional environment, especially Syrian refugee flight and the violations of its sovereignty by Israel. Lebanese airspace sovereignty is regularly violated by Israeli military aircraft without apparent objection from Washington, London or Paris. Against this it is amazing that today’s Lebanon has not as yet succumbed to civil war or military dictatorship. European consociational democracies have confronted nothing comparable since the end of the Second World War.

What decision-makers in the Global North ought to recognize is that Lebanon functions, whether well or badly, only when its political class is permitted to negotiate shifts in domestic relative power without excessive foreign meddling. Rather than threatening economic sanctions, France should exercise patience until a vulnerable, exhausted Lebanon rises from the dust. Paris should act less as a harassing debt collector and instead like a responsible former mandatory power. The reality is that Lebanon is unlikely to repay any of its sovereign debt in the near future without significant help. Failing to provide it risks transforming a former stalwart debtor into a permanent lemon debtor rather than a temporary fair-weather debtor. More importantly, the only hope for Lebanese to develop the sense of secular Lebanese-ness the French political class ostensibly desires, is to allow it to emerge organically from public policy problems effectively managed. The Swiss are as Swiss as they can be because and not despite their consociational institutions. Nothing more than that should be asked of the Lebanese.

[1] Brendan O’Leary. “Debating Consociational Politics: Normative and Explanatory Arguments.” In From Power-Sharing to Democracy: Post-Conflict Institutions in Ethnically Divided Societies, (Ed.) S. J. R. Noel. (Toronto: McGill-Queens University Press, 2005), pp. 3-43.

[2] M. Amlôt (8 March 2020). “Lebanon’s Eurobond Default: Here’s What Happens Next.” Al Arabiya. https://english.alarabiya.net/en/features/2020/03/08/Lebanon-s-Eurobond-default-Here-s-what-happens-next

[3] Al-Jazeera. “France Sanctions Lebanese Figures ‘For Preventing Crisis Exit’.” 29 April 2021. https://www.aljazeera.com/news/2021/4/29/france-to-bar-entry-to-some-lebanese-officials-hindering-progress

[4] Arab Barometer (2019). Arab Barometer V, Lebanon Country Report. www.arabbarometer.org Accessed 30 November 2020.

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Bonus Video added by Informed Comment:

France 24 English: “French envoy visits crisis-hit Lebanon as pressure builds”