Tuesday, August 28, 2018

Bernstein: ISDS and the US [feedly]

For those seeking general background on Investor State Dispute Settlement, check wikipedia's intro. This is an important, critical issue in developing progressive trade theory and practice. Bottom line: US corps sought immense bilateral and NAFTA (also TPP)  trade advantages by agreements endorsing the rights of US companies to  sue trading partner governments not just for Bolshevik style nationalizations, but also for any reforms that might affect their bottom line, or tax obligations to the partner. Trade agreements founded on mutual benefits were corrupted significantly by fees and other sanctions used to punish less powerful partners, who might not, for example, be able to afford the millions in legal fees to prosecute their cases in US Courts (also preferred in agreements). 

Its interesting that protests from progressives on this matter were negated by the commercial forces dominating most negotiations, but now gain ground among right wingers worried that OTHER existing and emerging "investor states" (competitors, not allies to Trump) may reciprocate.


Jared drills into the details.....


ISDS and the US
http://jaredbernsteinblog.com/isds-and-the-us/

I've been touting the fact, i.e., as I understand it, that this new US/Mex NAFTA agreement just struck yesterday largely gets rid of investor dispute rules (investor state dispute settlement, or ISDS) that many progressive have long complained about. (To be clear, whether this deal is going anywhere is a whole other story; I'm skeptical.)

I'm working on a piece about how the new deal looks a lot better for workers on both sides of the border than prior agreements, but re ISDS, the very knowledgeable Lori Wallach tell me it "ends the possibility of any future U.S.-Canada ISDS cases. This is huge given major US-Canada cross investment." For Mexico, where domestic courts are less reliable, investors who want to bring a case must first exhaust domestic court and administrative remedies, before turning to new procedures that significantly raise the bar to investor compensation (the fact that the Business Roundtable is already complaining about this part of the deal is revealing in this regard). There is apparently a carve out for investments in Mexican energy production that would allow a small group of U.S. investors the same protections as in earlier agreements, but this looks to have been the negotiating price for the larger advances just noted.

My friend Jay Shambaugh, presumably implying that ISDS ain't so bad, asks the reasonable, though rhetorical (if not snarky: surely Jay, a former Obama-admin economists who's one of my go-to peeps on international trade, knows the answer). Has a company used ISDS under NAFTA to overturn a US law or regulation?

No, meaning fears about the process overriding US sovereign laws have not been realized. If that's Jay's point, it's a relevant one with which I agree.

But their are still at least two big, existing problems. First, ISDS has been used by corporate bullies of rich countries to extract millions in fines and fees from poorer countries, and not for investor takings (which would be legit) but for protections prohibited by trade deals (examples here and here). What I want to see much more in U.S. trade agreements–and Jay might agree–is less protectionism of the advanced countries' investor class and its IP and drug patents, and more lifting of standards in poor countries.

The second problem with ISDS is broader:

Through the backdoor of trade agreements, the ISDS process imposes extreme property rights' concepts rejected repeatedly by Congress and U.S. courts, such as the notion that governments should pay "regulatory takings" compensation to property owners for the right to enforce environmental, health and other safeguards that could undermine the value of their property or investment. We must not solve the problem of weak rule of law among our trading partners by having the broad public bear investment risk or by changing fundamental principles of U.S. law. Instead, investment risk must be borne by the investors themselves; it is their skin, not ours, that should be in the game.

Final point. While the US hasn't lost a case, a country is only really exposed to ISDS risk when partner countries have substantial investments in the other countries in the deal. That's why, according to Lori, "54 of the 56 NAFTA ISDS cases to date attacking U.S. or Canadian laws were brought by investors from the Canada or the U.S., not from Mexico."

Surely, this makes no sense. ISDS isn't in place–or at least it shouldn't be–to be invoked in advanced countries with mature legal systems. Let the nationally-sanctioned, highly functional court systems work it out! (Jay: agree or disagree?.)

In fact, recent journalistic research reveals speculation by financial investors in ISDS cases, wherein investors either purchase companies with the express purpose of filing an ISDS claim or directly bankrolling the cases in order to claim a share of the fine. (Investors refer to this practice as "third-party funding of international arbitration against foreign sovereigns".) Gus van Harten, a law professor who has studied these activities, finds that investors "…can get an award for billions of dollars when that award would never come out in domestic law. It's just a jackpot for speculators."

End of the day, the fact that ISDS hasn't overridden any U.S. laws is comforting and Jay's right to "ask" about it. But that doesn't mean it's non-evil!


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Sunday, August 26, 2018

The Technology Tel [feedly]

The economics of agglomeration are fascinating, and giving rise to lots of academic and government study. The tech infrastructures that both reflect, and enable, agglomeration history are like a map of changes in city and regional architectures

The Technology Tel
https://digitopoly.org/2018/08/25/the-technology-tel/

Most technology nerds know "tel" as a prefix meaning "transmission over a distance," as in telecommunications, television, or telemarketing. Most are unfamiliar with an altogether different meaning as found in the phrase "technology tel," which is the modern and digital equivalent to an archaeologist's tel.

Archaeologists define tel as a mound created by many generations rebuilding on the same location, where past efforts become foundations for new generations. This meaning of tel arises in locations that humans have inhabited for many centuries, such as the ancient cities of the Near East and Mediterranean.

Similarly, a technology tel accumulates generations of digital infrastructure built in one location, where it serves interdependent or independent functions. Technology tels exist in every major city, and though city dwellers interact with them regularly, they tend to blend into the background.

Unlike its archaeological counterpart, a technology tel accumulates material in a matter of decades or faster, which makes it possible to observe and illustrate its economic determinants. Those economics occasionally gain attention from developers and city planners, and they are worth some attention from anyone interested in the modern digital experience.

FINANCIAL DISTRICTS

Technology tels grow due to three economic factors:

• infrastructure is built in locations where the most users create the most demand,

• the presence of a prior generation lowers the cost of installing the next, and

• technical factors raise the productivity of collocating two distinct pieces of equipment.

These factors reinforce one another, keeping equipment in the same location.

Southern Manhattan contains the mother of all technology tels. Long before the era of modern technology, anyone affiliated with financial markets already crowded into the district. Then, electronics worked their way into the location to serve the industry. It is obvious why. Financial users have long been lead users of information technology, so every financial office needed equipment from the frontier. Accordingly, after the early 1980s, the district became home to LANs, laptops, servers, screens, printers, and WiFi routers. Plenty of advanced infrastructure also found its way there, both to serve the same set of users and to increase effectiveness through collocation. Many workers use the same ISPs, Internet cables, 4G antennae, LAN maintenance staff, and hosting facilities.

Although sharing is efficient, organic growth is uncoordinated and does not stress efficiency. Instead, competition induces duplicate supply. Multiple upgrades of buildings attract the best tenants, so competitive incentives induce earlier upgrades, and the cycle continues—keeping the technology tel near the frontier.

Users and equipment compete for space, driving up its price. And so arises one of the most telling symptoms of a crowded technology tel: Despite expensive real estate, some buildings house data-centers filled with servers for nearby users who demand low latency. Those datacenters also hap-pen to be in place where there is easy access to the fiber. That is as it should be. The functional value of the datacenter is highest there, which contributes to the willingness to pay for the space.

Today, crowding is visible everywhere. Data equipment, servers, and switches inhabit every closet and basement, and antennae and dishes crown the top of every building. Data lines snake through every tunnel and available duct, including Manhattan's bridges. Wires traipse every elevated path-way, especially telephone poles, if available. Aesthetics are optional. Equipment goes wherever it can fit and, in some places, where it should not have gone.

Most crowded technology tels generate spawning, that is, the movement of activity to other locations away from the technology tel, either to escape the price of space or the lack of available space. For example, today, the equipment for the electronic New York Stock Exchange and related ex-changes for high-frequency traders sits in northern New Jersey. These are organized around some datacenters, which, if you think about it, are just miniature technology tels coordinated by a manager.

Crowding and spawning are not unique to southern Manhattan. The same economics created other technology tels in many other locations. Consider the second-largest financial center in North America: Chicago. Yet again, that city contains a large network of preexisting tunnels and conduits to support an enormous knot of wires and connections. All the electronics inside the down-town loop today take advantage of it. In another parallel, part of the electronic infrastructure to support the electronic exchanges also left the financial district. Part resides at a datacenter in Arora, a western suburb, and part resides at a datacenter at 350 E. Cermak, two miles south of downtown.

The latter is a retrofitted printing building (which used to print the Sears Roebuck catalogue, among other things). It is a massive building containing nearly infinite conduits and pipes. With more than a million square feet, I see little reason to doubt its claim as one of the largest datacenters anywhere.

POLICY

The accumulated investments of a technology tel create a number of opportunities and headaches. Catalogue them as growth, neglect, and security.

Growth looks like the attractive part of a technology tel. Once started, an existing location acts as a magnet for more investment and people. For example, in the last few decades, the technology tel built around San Francisco's financial district spawned a nearby technology tel in the area south of Market Street—albeit, with some help from city planners. That area was among the seediest parts of the city during my childhood, but now it's a showcase for technology-led urban growth.

As in the case of San Francisco, organic growth often does not just happen on its own. That motivates a question: Can growth be jumpstarted in a new location by a city planner? Some cities in low-density locations have tried to do so through abatements for property and/or sales taxes, as well as expedited permitting. In recent times, this has worked with a propitious situation, namely, a location next to (transcontinental) access lines and inexpensive (overbuilt) electrical supply.

Critics of such programs note that these programs mostly attract datacenters, which create limited employment for construction work and modest employment thereafter. A moderately sized datacenter employs a few dozen people—maintenance and security staff, and a few technicians—and has limited local consequences. It mostly acts as a footloose secondary facility for backup storage for distant users. Giant warehouses and low-rise buildings (with little architectural beauty) typically do not result in a particularly attractive business district.

The addition of a few steady jobs hardly seems worth the effort and expense. So why do so? For one, if enough such buildings can be located in the same area, it can motivate investment in shared infrastructure, such as cellular towers, which spurs further investment. For two, these mini technology tels generate little traffic, meaning there will be few burdens for public administrators. Many planners in low-density locations would prefer that over nothing.

Even with such modest payoff, it is easier said than done. A thriving technology tel depends on each piece working well. Ask a city planner, and he or she will explain the challenges of lining up all the pieces. A local electrical, cable, or cellular company might fail to keep up with the frontier; a freeway exit might need repaving; or a state agency might drag its feet issuing permits.

Some difficult economic problems also can get in the way. For example, the deployment of 5G has many city planners vexed. The prior upgrade between 3G and 4G lowered the costs of deployment by using the existing rights-of-way and infrastructure, such as towers and pathways for backhaul of signals. As of this writing, however, 5G signals do not operate like 4G signals. That could drive up expenses in a local technology tel that wants to remain relevant.

Security risks raise different issues. Consider the technology tel in Ashburn, Virginia, next to Washington Dulles International Airport. That location became focal because it contained one of the original switches for the Internet, and then AOL and other dot-com wunderkinds moved in. For more than two decades, it has had a momentum all its own, with almost no spawning. Today, this location contains an enormous collection of datacenters, Internet switches, and private firms who take advantage of the connectivity, making it one of the largest technology tels in North America. Any firm trying to service the Eastern Seaboard or the federal government invests there.

Notice the historical irony. Building secure communication infrastructure in military applications provided one of several motives for DARPA to invent packet switching many decades ago. Yet, economic forces have created just about the opposite of what the military wanted: potential for a single point of technical failure due to a concentrated geographic target.

Interdependence links one failure to another in a technology tel, and this too creates potential head-aches. One of Chicago's experiences illustrates this well. In April 1992, some misplaced pile drivers in the Chicago River started a leak in a conduit tunnel, which was first discovered by a workman inspecting fiber lines running through the tunnel. The city ignored the warnings, and the unrepaired leak eventually became a flood. Many basements were served by interconnecting underground tunnels, so the flood spread. Swimming fish appeared in basements. It took a while to clean up. Settling the insurance claims was an even bigger mess.

CONCLUSION

A technology tel is propelled by the relentless urge to build and agglomerate. Crowding and spawning have become part of the landscape. Take a look around you. It is everywhere and notice-able, if you just look for it.

Copyright held by IEEE. To view the original essay click here. 


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Friday, August 24, 2018

Mid-terms- Defeat Trumpism [feedly]

Mid-terms- Defeat Trumpism
https://talkingunion.wordpress.com/2018/08/23/mid-terms-defeat-trumpism/

All Out for the Mid-terms: Democrats Must Retake the House to Put the Brakes on Trump!

Peter Olney and Rand Wilson

August 5, 2018

Stansbury Forum

Our most important political task: To flip the U.S. House of Representatives into the hands of the Democrats. Not everyone on the left agrees. Now is the time to elect Democrats – many of whom may not fit the progressive mold – in "swing districts."

Mitch McConnell, Paul Ryan, Donald Trump, Mike Pence, photo credit: Stansbury Forum
 

"L'estate sta finendo" (The summer is ending)

"E un anno se ne va" (And a year is going by)

"Sto diventando grande" (I am growing up)

"Lo sai che non mi va." (You know I don't like that)

The popular Italian hit captures all we need to say about the coming period. Before long the summer will be over and for many of us it's time to get down to business on our most important political task: To flip the U.S. House of Representatives into the hands of the Democrats.

Not everyone on the left agrees. For example, Chris Hedges recently wrote, "The Democratic Party elites…are creations of the corporate state. The Democratic Party is as much to blame for Trump as the Republicans. It is a full partner in the perpetuation of our political system of legalized bribery, along with the deindustrialization of the country, austerity programs, social inequality, mass incarceration and the assault on basic civil liberties. It deregulates Wall Street. It prosecutes the endless and futile wars that are draining the federal budget. We must mount independent political movements and form our own parties to sweep the Democratic and Republican elites aside or be complicit in cementing into place a corporate tyranny."(1)

We don't disagree with much that Hedges says about the Democratic Party — except his last sentence. With the right wing rising, quixotic talk of "forming our own parties" or being "complicit with corporate tyranny" by supporting Democrats is pure fantasy. It completely misses the necessity of a building a united front against a dangerous far right nationalist movement led by Trump and his backers.

 

As the song says, we are getting older and hopefully a little more mature and we can understand the critical importance of putting the reins on the erratic, racist, misogynist, anti-labor monster who sits in the White House. For one of the best discussions of Democratic Party "lesser of two evils" dilemmas, we strongly suggest reading longtime DSA activist and former legislator Tom Gallagher's "The Primary Route."

Now is the time to hold our noses and elect Democrats – many of whom may not fit the progressive mold – in "swing districts." That's why we support "Swing Left," an initiative coordinating this effort that helps people find — and commit to supporting — progressives in their closest Swing District to ensure that we take back the House in 2018.(2)

This is not to understate the importance of building a strong bench of progressive candidates at the municipal, county and state level. However, the importance of those contests, often in places where differences are minimal, pales in comparison to the job of putting the political brakes on Donald Trump. The country and the earth's future will feel the impact if we fail in November.

So, we urge people to get ready to head to the "red" and "purple" districts where vulnerable House Republicans can be beat. These races are crying out for volunteers, donations and brio!

There are plenty of places to go for September and October to help organize on the ground. Make your travel plans now, because some of these districts may be crowded with folks who are setting out to do this important work.

If you can't travel, there are many other ways to take action. You can donate or host a fundraiser for District Funds to give Swing District Democrats a boost the day they become the official nominee. You can host or attend a Voter Contact Event. Or start using new phone banking technology to talk to voters in a Swing District.(3)

The authors have already made their own plans: 

Peter Olney plans to spend September and October in Southern California working on the 39th Congressional campaign of Democrat Gil Cisneros. He is running to flip this Eastern LA County/Orange County seat, which Hilary carried by 8.5% points in the 2016 election. The incumbent Republican Ed Royce has resigned, but his former aid, Young Kim is running to replace him. Peter has a strong personal interest in this project – his return to Italy is contingent on winning a Democratic majority.(4)

Rand Wilson is deciding between devoting his time to the contest for an open seat in New Hampshire's First Congressional District that could easily go Republican or campaigning for Jared Golden, the Democrats' nominee challenging Republican Rep. Bruce Poliquin in Maine's 2nd Congressional District race.(5)

Regardless of the outcome of the U.S. elections in November, there is so much important grassroots organizing to do in the U.S. — and Italy. Avanti Popolo!

Notes:

1: Et Tu, Bernie? "Et ", Chris Hedges

 

 

2: Learn more at swingleft.org. According to Swing Left, there are 78 Swing Districts. These are places where the last election was won by 15% of the vote or less, where Hillary Clinton beat Donald Trump, where a high concentration of volunteers could make certain districts winnable, or where other, specific circumstances make it a competitive district. Democrats need to flip at least 23 seats to take back the House in 2018. If they hold on to the vulnerable Democratic-held districts, they only need to flip 23 Republican-held House seats to take back the house in 2018.

 

3: Interested in learning more or questions about how to get involved? Contact Swing Left at host@swingleft.org.

 

4: Peter promised his Italian friends that he won't return to Italy unless we flip the House, although a return to Italy is beset with such a similar government, the product of some of the same right-wing populist forces that elected Trump.

 

5: The 2nd district backed Barack Obama in the 2012 presidential election by a margin of 9 points, before flipping red in 2016 for Donald Trump (R), who won by 10 points.

[Peter Olney is retired Organizing Director of the ILWU. He has been a labor organizer for 40 years in Massachusetts and California. He has worked for multiple unions before landing at the ILWU in 1997. For three years he was the Associate Director of the Institute for Labor and Employment at the University of California. View all posts by Peter Olney

Rand Wilson has worked as a union organizer and labor communicator for more than twenty five years and is  currently an organizer with SEIU Local 888 in Boston. Wilson was the founding director of Massachusetts Jobs with Justice.  Active in electoral politics, he ran for state Auditor in a campaign to win cross-endorsement (or fusion) voting reform and establish a Massachusetts Working Families Party.  He is President of the Center for Labor Education and Research, and is on the board of directors of the ICA Group, the Local Enterprise Assistance Fund and the Center for the Study of Public Policy. View all posts by Rand Wilson.]


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Krugman: The Tax-Cut Con Goes On [feedly]

The Tax-Cut Con Goes On
https://www.nytimes.com/2018/08/23/opinion/obamacare-medicare-social-security-midterms-republicans.html


What will happen if the blue wave in the midterm elections falls short? Clearly, at this point it still might: Democrats will surely receive more votes than Republicans, but thanks to gerrymandering and population geography, the U.S. electoral system gives excess weight to rural, white voters who still have faith in President Trump. What if, thanks to that excess weight, the minority prevails?

One answer, obviously, is that the unindicted co-conspirator in chief will continue to be protected from the law. And for those concerned with the survival of American democracy, that has to be the most important issue at stake in November. But if the G.O.P. hangs on, there will also be other, bread-and-butter consequences for ordinary Americans.

First of all, there is every reason to believe that a Republican Congress, freed from the immediate threat of elections, would do what it narrowly failed to do last year, and repeal the Affordable Care Act. This would cause tens of millions of Americans to lose health insurance and would in particular hit those with pre-existing conditions. There's a reason health care, not Trump, is the central theme of Democratic campaigns this year.

But the attack on the social safety net probably wouldn't stop with a rollback of Obama-era expansion: Longstanding programs, very much including Social Security and Medicare, would also be on the chopping block. Who says so? Republicans themselves.


In a recent interview with CNBC's John Harwood, Representative Steve Stivers, the chairman of the National Republican Congressional Committee — in effect, the man charged with containing the blue wave — declared that, given the size of the budget deficit, the federal government needs to save money by cutting spending on social programs. When pressed about whether that included Social Security and Medicare, he admitted that it did.

And he's not alone in seeing major cuts in core programs for older Americans as the next step if Republicans win in November. Many major figures in the G.O.P., including the departing speaker of the House, Paul Ryan, and multiple senators, have said the same thing. (Meanwhile, groups tied to Ryan have been running attack ads accusing Democrats of planning to cut Medicare funding — but hey, consistency is the hobgoblin of little minds. So, apparently, is honesty.)

Now, Republicans who call for cuts in social spending to balance the budget are showing extraordinary chutzpah, which is traditionally defined as what you exhibit when you kill your parents, then plead for mercy because you're an orphan. After all, the same Republicans now wringing their hands over budget deficits just blew up that same deficit by enacting a huge tax cut for corporations and the wealthy.

So it might seem shocking that only a few months later they're once again posing as deficit hawks and calling for spending cuts. That is, it might seem shocking if it weren't for the fact that this has been the G.O.P.'s budget strategy for decades. First, cut taxes. Then, bemoan the deficit created by those tax cuts and demand cuts in social spending. Lather, rinse, repeat.

This strategy, known as "starve the beast," has been around since the 1970s, when Republican economists like Alan Greenspan and Milton Friedman began declaring that the role of tax cuts in worsening budget deficits was a feature, not a bug. As Greenspan openly put it in 1978, the goal was to rein in spending with tax cuts that reduce revenue, then "trust that there is a political limit to deficit spending."    

It's true that when tax cuts are on the table their proponents tend to deny that they'll increase the deficit, claiming that they'll provide a miraculous boost to the economy and that tax receipts will actually rise. But there's not a shred of evidence to support this claim, and it has never been clear whether anyone with real political power has ever believed it. For the most part it's just a smoke screen to help conceal the G.O.P.'s true intentions. The puzzle is why Republicans keep getting away with this bait-and-switch.


Fifteen years ago I wrote a long piece titled "The Tax-Cut Con," describing what was even then a time-honored scam; it reads almost word for word as a description of Republican strategy in 2017-18. Yet I keep reading news analyses expressing puzzlement that men who were strident deficit hawks in the Obama years so cheerfully signed on to a budget-busting tax cut under Trump. To say the obvious: These men were never deficit hawks; it was always a pose.   And the gullibility both of the news media and self-proclaimed centrists remains a remarkable story. Remember, Ryan, who was utterly orthodox in his determination to cut taxes on the rich while savaging programs for the poor and the middle class, even received an award for fiscal responsibility.

Which brings us back to the midterm elections. Rule of law is definitely on the ballot. So is health care. But voters should realize that the threat to programs they count on is much broader: If the G.O.P. holds its majority, Social Security and Medicare as we know them will be very much in danger.


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Hysteresis: Some Fairly-Recent Must- and Should-Reads [feedly]

From Brad Delong's Blog: There is a lot in the economic press now about the lagging effects of structural changes in labor force patterns during and following the Great Recession (2007).  Economists apply the term "hysteresis" --  the dependence of the state of a system on its history -- to this phenomenon.  

The literature reveals rapid redefinitions of important terms like "unemployment", "natural rate of interest" (it went negative!), the manufacturing -- services distinctions and classifications, "human capital", "public goods", "intangibles", and more take. The debates and discussions reflect the mounting data detailing the multifaceted pressures of Globalization and automation at work in nearly every economic sphere.

Hysteresis: Some Fairly-Recent Must- and Should-Reads
http://www.bradford-delong.com/2018/08/hysteresis-some-fairly-recent-must-and-should-reads.html


  • The empirical studies are finding more and more hysteresis—more hysteresis in the sense of a persistent downward shadow cast by a recession than I would have believed likely. I keep hunting for something wrong with these studies. But there are too many of them. And they all—at least all those published that cross my desk—point in the same direction: Karl Walentin and Andreas WestermarkStabilising the real economy increases average output: "DeLong and Summers (1989)... argue that (demand) stabilisation policies can affect the mean level of output and unemployment...

  • As Chief Acolyte of the "hysteresis view", I must protest! The "hysteresis view" has proved correct: Benoît CœuréScars that never were?: Potential output and slack after the crisis: "To be clear... I do believe that deep recessions can have effects on the supply capacity of the economy that may take some time to unwind...

  • We are not yet at maximum feasible employment: Jared BernsteinEmployment Breakeven Levels: They're higher than most of us thought: "We know neither the natural rate of unemployment nor the potential level of GDP...


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China-India rapprochement makes sense [feedly]

China-India rapprochement makes sense
http://www.atimes.com/china-india-rapprochement-makes-sense/

ndia made a U-turn on its relations with China in April when Prime Minister Narendra Modi met with Chinese President Xi Jinping to reset ties. He met with Xi again on the matter of rapprochement on the sidelines of the SCO (Shanghai Cooperation Organization) Summit in May.

China-India rapprochement has taken the world, the US in particular, by surprise. Less than a year ago, the two countries were on the verge of a military conflict over a host of issues: the Doklam border dispute, China helping Pakistan (India's nemesis) build the China-Pakistan Economic Corridor (CPEC) in a section of the Kashmir region claimed by India, China moving into the Indian Ocean, which India considered its "back yard" or sphere of influence, and others.

On top of these conflicts, India has never forgiven China for defeating it in a 1962 border war, culminating in calls for revenge by some nationalists to this day. India has spent large sums of money on importing weapons, seeking "like-minded allies" and joining the "diamond of democracies" or "quad" – the US, Australia, Japan and India – to counter China.

This raises the question: Why has Modi decided to mend fences with China, since none of these issues have been addressed or gone away?

Speculations on the question abound. Some attribute it to the coming election in India, with Modi wanting tangible actions that could boost his "Make in India" industrial policy. But whatever the motive(s) behind his decision, it serves both countries' economic and geopolitical interests.

Economic benefits of rapprochement

Some Indian nationalists might disagree, but China is perhaps best equipped to boost the "Make in India" policy's chances of making the country an economic and geopolitical powerhouse by 2025. The Chinese government has the authority and resources to invest in India's infrastructures and establishing an industrial foundation. Perhaps more important, having India on side would enhance the success of China's Belt and Road Initiative (BRI).

Western and Japanese investors are largely interested in short-term rates of return, explaining why they are shying away from the Indian market. Business media have reported that Western and Japanese firms are not only reneging on commitments but also pulling back investments they made when Modi launched his "Make in India" policy.

Modi launched "Make in India" in New Delhi with much fanfare on September 25, 2014, vowing to create 100 million new jobs by 2022 and making manufacturing worth 25% of gross domestic product by 2025. The World Bank and other international organizations, however, have reported that the Modi government produced fewer than 650,000 new jobs and manufacturing barely accounted for 16% of the economy in the 2017-18 financial year.

Year-on-year economic growth slowe  in the first quarter of 2018, from 7.1% recorded a year earlier to 5.7%, according to World Bank statistics.

Media such as Business Standard, Reuters and Bloomberg as well as the World Bank have offered many reasons that the "Make in India" policy failed to take off, including inadequate infrastructure, harsh labor laws, and demonetization of large banknotes.

According to a January 9, 2017, Business Standard report, demonetization alone might have been responsible for a 50% drop in agricultural prices and 35% of job losses in the "informal sectors," industries consisting of small businesses, which account for 80% of the Indian economy. The main reason was said to be the elimination of large banknotes, which hit the sector hard because transactions are largely if not solely based on cash.

However, most Western and Japanese businesses and governments were not to be seen in India's "moment of need." Thus forging a cooperative relationship with China is economically desirable and necessary for both countries. India would gain from Chinese infrastructure investment, enhancing the country's economic growth. China would benefit from an expansion of its BRI.

Rapprochement makes geopolitical sense

Since the 1962 China-India border war, the relationship between the two countries has been "complicated," if not hostile. Neither side is willing to compromise on its territorial claims. What's more, India is wary of China's rise, viewing its as a national-security threat, thereby prompting it to spend huge sums of money on weapons acquisition.

According to the Stockholm International Peace Research Institute (SIPRI), India is the world's largest weapons importer, accounting for 13% of arms purchases each year. Much of that expenditure is meant to deter "Chinese aggression." Rapprochement would ease that threat, enabling the government to channel more funds for economic development and poverty reduction.

Would rapprochement be sustainable?

Rapprochement should and would likely work if both nations took a deep breath and thought through the consequences of continuous conflict. According to the International Monetary Fund, India and China are the world's biggest, fastest-growing, and most populous developing countries, accounting for more than a third of the global population and more than 20% of its gross domestic product.

They are also nuclear powers capable of wiping each other off the map, or at least incurring irreparable damage and loss of human lives.

India's recent reaching out to China suggests that Prime Minister Modi, many in the Indian business and political establishments and the majority of the population are probably well aware of the dire consequences of confrontation.

However, a workable and sustainable rapprochement requires that both nations bury the past of mistrust and suspicion fueled by territorial disputes, culminating in the border war in 1962.

Territorial dispute

India inherited the McMahon Line (ML) as the border between it and China when gained independence from Britain in 1947. According to Western scholars such as Alastair Lamb, British territory was west of the ML, along the the plains of Assam, which the colonial power conquered in 1826, known as the Inner Line.

But in a May 20, 2015,  article for The Wire, Imphal Free Press editor Pradip Phanjoubam wrote that British India's foreign secretary, Henry McMahon, arbitrarily drew a line inside Tibet as the border between India and Tibet at the Simla Conference  in 1914.

Since gaining independence, India has considered the ML the Line of Actual Control (LAC). However, China never ceded the territory and considered Tibet as part of China, but was too weak to defend it. India reinforced its claim in light of the Chinese absence, arguing that Tibet was never a part of China.

The 1962 border war

Which country was responsible for the brief 1962 border war depends on which version of history one believes. India claimed that Chinese troops unexpectedly occupied Aksai Chin, located on the Indian side of the LAC or ML, forcing it to fight back. But Indian scholar Arun Kumar stated at the Indian Defense Forum held in Washington on January 28, 2007, that declassified US Central Intelligence Agency reports blamed India for the war.

Kumar, citing the CIA reports, argued that Indian prime minister Jawaharlal Nehru did not want to negotiate with China and demanded that the ML be the border between the two countries. The CIA reports showed that Nehru sent external affairs secretary general R K Nehru to China demanding total Chinese withdrawal from Aksai Chin.

The CIA also reported that India established military outposts along the LAC, forcing China to take military action although it could ill afford it at the time.

China had just emerged from the hugely damaging Great Leap Forward at the time. Its economy was in ruins, with millions of people starving to death. There was also factional fighting between the "reformers" and "radicalists," the former wanting to abandon class struggle while the latter demanding that it continue.

It might have been because of China's hard times that India decided to insist on the ML as the boundary between the two countries and was unwilling to negotiate a settlement with China.

However, India has a very different version of history, insisting that China invaded India without any warning.

Readers can believe whatever version of history they want, but the fact of the matter is neither country is able or willing to go to war over the issue.

One cannot undo what has occurred. Indeed, the primary reason for studying history is to avoid repeating past mistakes. Or as the Chinese put it, "Develop the future with history as the mirror."

Image what China and India can accomplish and contribute to the world if they work together instead of against each other.


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Thursday, August 23, 2018

Greece after the bailout: Lessons for the left [feedly]

I post this piece from the UK CP magazine (Morning Star, reposted in Peoples World) as a fairly generic Left criticism of "the Greek Problem". The Greek Problem may be restated  thus: "Due to the profligacy of previous mostly right wing, 'conservative' Greek governments and their international lenders, Greece was unable to pay its debts. The lenders -- principally EU banks, especially Germany - refused to forgive the debt, despite the relative 'militancy' of the Syriza government toward the EU and against the austerity that would be the inevitable harsh and deeply unpopular consequence. Then, as now in this piece, many on the Left railed against 'neoliberal austerity'. But Greece submitted. They could find no partner to bail them out -- China or Russia, and an all out showdown with the EU, would have been the only options even in theory, and neither would have stopped a sharp decline in living standards regardless.  Some, like Yanos, the former Finance Minister, and the CP of Greece with its "Stalin  Operetta" political line, railed against the "sell-outs". "Smash the state." "Who needs the EU." Then, as now, in this article, the same advice is offered: "Be More Militant".

But guess what -- 70 years after the Bolsheviks cancelled their foreign debt, they still had to pay it back.

You be the judge whether that advice has any legs...

Greece after the bailout: Lessons for the left
http://www.peoplesworld.org/article/greece-after-the-bailout-lessons-for-the-left/

It had been planned to be a lavish celebration on the Pnyx hill next to the Acropolis in Athens, a place where the citizenry would hold popular assemblies in the ancient democratic period.

The angry aftermath of the forest fires last month put paid to Greek Prime Minister Alexis Tsipras hosting EU and other luminaries in such a way to mark the formal end of the country's subordination to the austerity memorandums.

Instead, he made a more low key broadcast to the nation from the island of Ithaka on Monday.

He proclaimed, in an overly extended image, that Greece had ended its painful Odyssey of eight years of crisis, against the backdrop of the harbor to which Odysseus is held to have returned after a decade of tortuous voyage. Few in Greece were taken in by the theatrics and self-identification of Tsipras as Homeric hero. Some recalled a previous Greek prime minister declaring a new dawn for the country from a remote island.

It was at the onset of the crushing austerity period in 2010 that the social democratic PASOK party's Prime Minister George Papandreou said pretty much that from the island of Kastelorizo off the Turkish coast. He informed the country that he was going to sign up to the first memorandum with the troika of the European Union, European Central Bank and International Monetary Fund.

"Despite the cheap communications tricks in sheltered harbors, the truth cannot be concealed," quipped a sharp-witted politician of the left. His name was Alexis Tsipras.

No hiding the truth

Eight years on and the truth cannot, indeed, be hidden. The imposition of neoliberal solutions on Greece has been a catastrophe. The economy has shrunk by about a quarter and average living standards by a third. The resulting social dislocation and suffering is enormous.

Greek Prime Minister Alexis Tsipras delivers a speech from the western Greek island of Ithaca, legendary home of the ancient mariner Odysseus, hero of Homer's Odyssey epic, on Tuesday, Aug. 21. Greece remains shackled to the austerity demands of its former creditors even though it officially entered its post-bailout era Tuesday. | Andrea Bonetti / Greek Prime Minister's Office via AP

Several business commentators have hailed a slight fall in overall unemployment figures to possibly under 20 percent (youth unemployment is double that). But few point out that one in 10 of the working age population of Greece has left the country in the crisis years.

That is the principal reason why the figures are not higher still. Those who have left show no indication of returning to the country. A basic measure of civilization, the capacity to provide for the wellbeing of a stable or expanding population, has not been met.

The enforced economic exile of a tenth of the population is not "free movement." It is the involuntary sacrifice of people to the dictates of corporate capitalism.

For the bailouts had nothing to do with alleviating the economic condition of the mass of Greek people. They were to save the zombie European banking system. The first was to rescue the mainly French and German banks exposed to defaulting Greek debt.

The second bailed out the private Greek banks. The third, the one Tsipras signed up to, aimed ruthlessly at driving through the privatizations, welfare cuts, assaults on workers' rights, and "modernization" of the economy that the first two pledged but had not accomplished.

All of this was driven by the troika imposing—with willing cooperation from the Greek elites and their old political parties—an economic dogma whose predictions of a return to growth were refuted year after year.

Those congratulating themselves on the "success" of Greece need to be reminded that the neoliberal economists' forecast of a return to growth after two years turned out to be six.

It also meant a severe truncation of democracy and of national sovereignty. One EU official after another bluntly stated that to stay in the bloc and the single currency meant that democratic expressions of the mass of people—elections and referendums—had to be put aside.

Tsipras averred to this in his Homeric address on Monday as he took aim at his predecessors from 2009 to 2015 for sinking the country.

He criticized a system in which "bankers become politicians and politicians become bankers." It was a thinly veiled reference to the ECB banker Lucas Papademos, who became an unelected prime minister in 2011, and to the former finance minister Yannis Stournaras, who became governor of the Greek central bank—in reality a branch office of the ECB—in 2014.

The conservatives of the New Democracy opposition party and the business press squealed that a Greek prime minister was taking political pot shots—which otherwise has never happened, of course.

With elections due within the next year, they would like everyone to forget their responsibility both for the imposition of the memorandums and for the oligarchic model of capitalism that preceded it.

But Tsirpas's point begged the question. If that was the old capitalist cronyism linking Greece's political class, its 1 percent and the mafia dons of the European capitalist institutions, then why on Earth did he, in his first acts in government, pledge confidence in the governor of the central bank, assure the military of continued arms spending and an expansionist foreign policy, and commit to staying in the euro straitjacket come what may?

Here, light-minded explanations based upon personal failure or a narrative of betrayal will not do.

Questions for left strategy

For anyone serious about breaking from this failing phase of capitalism, the Greek experience raises some fundamental questions of strategy for the working class movements and the left.

The Syriza government was essentially a social democratic evolution out of Greek communism, which had been for most of the 20th century the main expression of working class and radical politics in the country.

Its strategy for escaping the murderous austerity memorandums was to rest on two things. First, obtaining a majority position in parliament. Second, to deploy rigorously developed economic arguments with the EU and creditors as to why the austerity had to be lifted.

The problem was twofold. As attested by various participants, including former Syriza Finance Minister Yanis Varoufakis in his memoir, a majority in parliament did not mean control of the levers of the state.

That was especially so, as for two years before coming to office Syriza had gone out of its way to reassure those permanent state mechanisms that it would not be disrupting their power and the continuity of capitalist interests it was exercised for.

The mantra was "we are a government in waiting." So from senior police officers to the central bank and the permanent bureaucracy of the finance ministry, the government was undermined from day one.

The second was a naïve faith in the power of a logical argument against those bound by a thousand golden threads to refusing to accept it.

Everyone could see that austerity and the economics behind it were not delivering the promised recovery in Greece. At the same time the European elites and their politicians could not admit the truth.

If Greek debt was unsustainable, then so was that of Spain, Italy, and elsewhere. If, seven years into the crisis, it had to be admitted that the emperor had no clothes in Greece, then it meant telling people from Indiana to Ireland, Britain to Bulgaria that their suffering in the crisis years had been for naught also.

A seemingly modest shift to a more rational organization of the economy entailed the most profound political risk. So they didn't do it.

Propping up a failed god

Unemployed Greeks wait in a long line at a state labor office to collect benefit checks, in Athens, Oct. 24, 2011. Greece has one of the highest unemployment rates in the eurozone and is also mired in a youth unemployment crisis. More than 10 percent of the workforce has left the country; if they were included, unemployment rates would be even higher. | Thanassis Stavrakis / AP

And that logic persists. Bridges are falling down in Italy and hundreds more are in a parlous state in Germany, despite it having the biggest trade surplus in the world.

The editorial writers of the international business paper The Financial Times make a persuasive case for a large boost to infrastructure spending. But no major government is listening.

Greece is out of the formal memorandum period but is still constrained by quarterly inspections to make sure the failed god of neoliberal capitalism is being propitiated.

The prospect of a return to borrowing from the global markets looks more and more remote as the Turkish currency crisis and the impact of rising interest rates on emerging economies such as Brazil and South Africa risks another credit crunch.

Throughout all of this, the working class movement in Greece has managed to sustain opposition, despite demoralization, ebbs, and flows.

That, and the intervention of that part of the left who took seriously this strategic dilemma, has meant that predictions of a massive fascist resurgence out of the failure of Syriza in office have not been realized.

That danger is far from over. It will not be met by pre-election orations from the island of Ithaka.

It's going to require more of the kinds of things that are being posed elsewhere in Europe and in Britain. Popular and militant opposition to austerity. A much more serious strategy for radical change than just positing a government in waiting.

And a popular anti-racist movement whose horizons go beyond some conventional politics of occupying a ministerial position.

The neoliberal nostrums failed in their purported aims in Greece. But failed too was a timid, commonsense strategy of the left.

The journey hasn't ended. The ship is still in treacherous seas.

Morning Star


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