Locking China Out of the Dollar System [feedly]

Locking China Out of the Dollar System
https://www.project-syndicate.org/commentary/trump-china-trade-war-financial-flows-dollar-by-paola-subacchi-2019-10

By broadening the nexus between economic interest and national security, Trump is encouraging the decoupling of the world's two largest economies and the emergence of a bipolar world order led by rival hegemons. Beyond fragmenting the trade and financial system that has underpinned the global economy for decades, the stage would be set for a devastating conflict.

LONDON – The recently announced "phase one" agreement between the United States and China has been touted as an important step toward a comprehensive deal that ends the trade war that has raged for over a year. But if you think that US President Donald Trump is ready to abandon his antagonistic China policy, think again. In fact, the Trump administration is already moving to launch another, closely related war with China, this time over financial flows.


20Add to Bookmarks

PreviousNext

In a highly integrated world economy, trade and finance are two sides of the same coin. Cross-border trade transactions depend on a well-functioning international payments system and a robust network of financial institutions that are willing and able to issue credit. This financial infrastructure has been built around the US dollar – the most liquid and exchangeable international currency.

The dollar's position as the leading global reserve currency has long afforded the US what Valéry Giscard d'Estaing, then France's finance minister, dubbed an "exorbitant privilege": America can print money at negligible cost and use it to purchase goods and services globally. But, with the opening up of global capital markets, the US has also gained exorbitant leverage over the rest of the world.

Today, some 80% of global trade is invoiced and settled in dollars, and most international transactions are ultimately cleared through the US financial system. About 16 million payment orders transit daily through the Euro-American Society for Worldwide Interbank Financial Telecommunication (SWIFT) network. Thus, US restrictions on capital flows have more far-reaching effects than any trade tariff. And yet imposing them requires only invoking the 1977 International Emergency Economic Powers Act (IEEPA), which allows the US president to declare a national emergency and deploy a range of economic tools to respond to unusual or extraordinary threats.

The IEEPA has formed the legal basis for many US sanctions programs, with presidents using it largely to block transactions and freeze assets. For example, in the 1980s, President Ronald Reagan issued an executive order under the IEEPA blocking all payments to Panama after a coup brought Manuel Noriega to power. (Funds intended for Panama were diverted to an escrow account established at the Federal Reserve Bank of New York.)

Trump – who has proved more than willing to cry "emergency" when it suits him – has cited the IEEPA many times, including to justify tariffs on imports from Mexico and to assert his authority to demand that US companies "immediately start looking for an alternative to China." Hoping to drive Venezuelan President Nicolás Maduro from office, he used the IEEPA to freeze the assets of state-owned oil company PDVSA.

Trump has also forbidden US investors from purchasing any debt owned by Venezuela's government or trading in shares of any entity in which it holds a controlling stake. Meanwhile, Trump has given Juan Guaidó, the US-backed interim president, access to Venezuelan government assets held at the Fed since his predecessor, Barack Obama, froze them in 2015.

Contrary to popular belief, Trump has not imposed more sanctions than his forebears. But he has devised particularly creative ways – often taking advantage of America's disproportionate financial leverage – to ensure that his administration's measures impose maximum damage, regardless of the effects on third parties. Likewise, Russia faces not only standard asset freezes and transaction blocks, but also limits on access to the US banking system and exclusion from procurement contracts.

China, which is already struggling with declining exports, sluggish investment, weak consumption, and a growth slowdown, apparently is next. The Trump administration is reportedly considering restrictions on US portfolio flows into China, including a ban on US pension funds from investing in Chinese capital markets, delisting Chinese firms from US stock exchanges, and limiting their access to stock indexes managed by US firms. How such policies would be implemented remains unclear; it would be no easy feat. But lacking a well-defined strategy has never stopped Trump before, especially when it comes to using economic levers to advance geopolitical objectives.

This approach may work in the short term, but it is sure to catch up to the US. Trump's repeated weaponization of the dollar undermines trust among holders of dollar-backed and US-verified assets. How many foreign companies will be willing to list on a US stock exchange knowing that they may be delisted at will? And how many non-US residents will keep their assets in US banks if any geopolitical skirmish can result in a freeze?

As mistrust of the US mounts, the drive for international monetary reform, which China has been advocating for the last decade, will gain momentum. This could mean expanding the international role of other currencies, such as the euro or, if China has its way, the renminbi. It could also lead to the creation of an alternate monetary system, centered on the needs of developing countries, especially oil and commodities exporters.

By broadening the nexus between economic interest and national security, Trump is encouraging the decoupling of the world's two largest economies and the emergence of a bipolar world order led by rival hegemons. Beyond fragmenting the trade and financial system that has underpinned the global economy for decades, the stage would be set for a devastating conflict.

PAOLA SUBACCHI

Writing for PS since 2012
29 Commentaries

Paola Subacchi, Professor of International Economics at the University of London's Queen Mary Global Policy Institute, is the author of The People's Money: How China is Building a Global Currency.
 -- via my feedly newsfeed

Wayne E. Lee (2016): Waging War: Conflict, Culture, and Innovation in World History https://books.google.com/?id=hbyYCg... [feedly]

via Brad Delong: fascinating excerpts form Wayne Lee's study of warfare in human evolution, and early pre-state economies and social organizational diversity 

Wayne E. Lee (2016): Waging War: Conflict, Culture, and Innovation in World History https://books.google.com/?id=hbyYCg...
https://www.bradford-delong.com/2019/10/wayne-e-lee-2016-_waging-war-conflict-culture-and-innovation-in-world-history_-excerpts-when-in-1996-lawrence.html

Wayne E. Lee (2016): Waging War: Conflict, Culture, and Innovation in World History https://books.google.com/?id=hbyYCgAAQBAJ, excerpts: "When in 1996 Lawrence Keeley published War Before Civilization. Keeley made an impassioned plea for reimagining the role of violence in human experience, and he made the striking claim that prestate societies experienced extreme male fatality rates. Keeley's work and additional studies have settled on the somewhat shocking estimates... [that] between 15 and 25% of males and about 5% of females" in human forager societies died from warfare. This per capita rate far exceeds those of later state-based societies. Since Keeley's work, archaeologists and anthropologists have renewed the debate begun by Hobbes and Rousseau. To use the simplest terms, as suggested in a recent review, there are the 'deep rooters', who believe in the long evolutionary history of intergroup violence, and the "inventors", who argue that human conflict emerged more recently because of changes in human social organization...

Some key traits in chimpanzee group conflicts seem to recur in prestate human conflict. First, conflict is not endemic but episodic. Being a neighbor does not guarantee conflict, but territories are clearly marked, patrolled, and defended, and usually a dangerous buffer zone develops between those territories. Chimpanzees in one community avoided the border area of their territory, spending 75 percent of their time in the central 35 percent of their range, suggesting an awareness of the threat of conflict even when conflict was not constant. Second, casualty rates can be very high (in Goodall's Gombe community, 30 percent of the original male population was killed by other chimps after the group fissioned) but are accrued over time, not in single attacks. Third, conflict begins not through simple "aggression" but rather in response to ecological pressures and perceptions of advantage. Specifically, conflicts begin when one group enjoys an overall numerical advantage. Attacks are launched only when a local numerical edge exists....

From about 125,000 to 70,000 yearsago, modern humans in Africa began to display more creative behaviors, including some indicating conscious ness, complex problem solving, early language formation, and ritual. Almost simultaneously, and almost certainly related, about 125,000 years ago H. sapiens began to migrate out of Africa, into the Middle East, and, as recently discovered at Jebel Faya, across the Arabian Peninsula to the Persian Gulf. A recent find in Israel confirms the simultaneous existence there of both Neandertals and modern humans at least 55,000 years ago, but H. sapiens' migrations further north stalled, perhaps due to competition with resident Homo populations there, as well as continued glacial conditions. Genetic studies, however, suggest that modern humans continued to move east into South Asia and beyond. The recent discovery of the oldest examples of human art in Indonesia (roughly forty thousand years old) probably reflects this migration.

Second, around 70,000 to 40,000 years ago, human cognitive development accelerated further, marked by a diversification of tool types and of materials used, distant sourcing for materials, art and ornamentation, and likely a new stage in language development. There is certainly no doubt that one conse quence was a rapid population expansion that saw H. sapiens spread across

H. sapiens's enhanced social capability and new technologies (notably the atlatl spear thrower developed at least 30,000 to 40,000 years ago) gave them a competitive advantage as they expanded into territories inhabited by other archaic humans. In some theories, the larger group size may itself have promoted technological experimentation and knowledge retention. It has long been theorized or suggested that the in-migration of modern humans pres sured, isolated, and eventually eliminated the Neandertal population, if not through actual genocide, then by pushing them into more and more marginal zones where their reproduction rates suffered. There is little physical evidence that suggests that this competition was violent, but some evidence does exist both of intra-Neandertal violence and violence between Neandertals and modern humans. And given what we know about the role of women as victims in much of human warfare, the recent discovery of Neandertal DNA surviving in present day non-African humans does not necessarily suggest a peaceful process of interbreeding....

As in later periods, the evidence for violence is artistic, skeletal, and technological. There are several examples of early cave art (ca. 20,000-12,000 BP) depict ing human figures pierced by spears or arrows. And there is skeletal evidence from the Neandertal period in Europe of violent death and cannibalism, argu ably for dietary (rather than ritual) purposes. One of the most dramatic examples has emerged relatively recently from the El Sidrón site in Asturias, Spain, dated to approximately 50,000 years ago. At least twelve Neandertal individuals were found in the deposit (six adults, three adolescents, two juveniles, and one infant three of the adults can be identified as female and three adults and the three adolescents as male). Many (if not all) of the remains possessed cut marks and other signs of butchering, and recent genetic analysis has revealed that all three adult men had the same mitochondrial DNA, suggesting that they were brothers, cousins, or uncles, as did four other individuals, while all three adult females came from different lineages. In short, this was a family group, probably massacred in one incident, by a neighboring separate group of Neandertals, and then butchered by them for food....

The best evidence for warfare prior to the development of settled agricultural communities comes from the skeletal evidence of massacres. Sedentism based on intensive local foraging emerged in the Near East approximately 13,000 BCE, with agriculture following at around 9000 BCE. In Central Europe sedentism emerged around 10,500 BCE, with agriculture arriving from the Near East by around 5500 BCE. Right on the cusp of the emergence of agriculture in Europe, and thus undermining the contention that early farmers enjoyed a period of peace as a result of their relative prosperity, is the massacre site at Talheim, near Heilbronn in Germany, dating from 5000 BCE. The site is a mass burial of thirty-four individuals (eighteen adults and sixteen children). The bodies were piled indiscriminately on top of each other, apparently simply dumped, all the victims having died violently. Careful study of the injuries has determined that:

the majority of the victims were attacked from behind as they were standing, presumably as they tried to protect themselves or flee. Having already been struck, many individuals were then hit again as they knelt or even lay on the ground.... In addition to the majority of the skulls being smashed, serious injuries were also inflicted upon other parts of the body—the arms, legs, and pelvis.

Recent studies have gone further and suggest that the massacre was committed by outside aggressors seeking to completely destroy the settlement and take over their territory and resources....

Sedentism and agriculture represented an increase in subsistence carrying capacity, initially reducing the impulse for conflict between similar peoples, But sedentism, and especially agriculture and the domestication of animals, increased the reward for foragers of raiding sedentary villages. There was now "stuff" to be taken, and mobile domesticated animals, present in the Middle East after about 8500 BCE, were the easiest thing to steal. Such raids by small foraging bands against larger nucleated towns would have been risky, however....

The archaeological evidence for prestate warfare in the agricultural Neolithic (fortification, settlement destruction, paintings, and weapons development) seems at least as undeniable as that for the era of states. Indeed, we can jump backwards right to the very beginning of the Neolithic to two of the earliest agricultural communities, one at Jericho, founded about 9000 BCE near the Jordan River in the modern West Bank, and the other at Çatalhöyük, occupied roughly from 7500 BCE to 5700 BCE in what is now southern Turkey. Both sites are critical to our understanding of human development since both were among the first "towns" in human history, and both were associated with the earliest phases in the invention of agriculture.

Jericho seems to have been a nucleated town first, fortified later, with agriculture arriving somewhat before the wall, but this sequence is still unclear. What is undeniable, however, is that by around 8000 BCE Jericho's inhabitants had surrounded themselves with an extensive elliptical wall, nearly four meters tall, two meters thick at the base, and incorporating a massive circular tower eight and half meters tall, with an interior circular stair case.... Çatalhöyük is not precisely "walled," but was built much like the cliff dwellings of the American southwest, in which many individual dwellings are conjoined, lack ground-level exterior....

Evolution of cooperative altruism within human groups, suggesting that "for many groups and for substantial periods of human prehistory, lethal group conflict may have been frequent enough to support the proliferation of quite costly forms of altruism." In this way, as much of the rest of this chapter will show, cooperation and conflict proved to be two sides of the same coin, each reinforcing the other, as one group enhanced cooperation to succeed at conflict, and the persistence of conflict necessitated ever more complex forms of cooperation. Therefore, competition and its most dramatic form, violent conflict, acted as a selection pressure on human biological evolution, favoring the selection of group behaviors like male solidarity, a "shoot on sight" attitude toward intrusive strangers, the ability to incorporate the defeated remnants of other groups, risk calculation in assessing the threat of other groups, and, most importantly, greater social complexity to sustain larger group sizes which provided an important advantage in violent conflict.

It is this last characteristic that points us to the other side of the conflict coin: cooperation. For humans, being "good" at conflict depends on more than physical size, keen eyesight, or other physical attributes. It also means being good at cooperating. Recent studies of infants suggest that the ability and desire to reward cooperators exists at the genetic level, and ethnographic work among bands of foragers frequently shows that not only do they depend on cooperation within the group, but the group actively controls aggressive, dominance-seeking individuals—although they never fully eliminate dominant males nor their quest for dominance.31 Summarized another way by anthropologist Bruce Knauft, "Collective socialization in gregarious groups ... pro vided a distinctive evolutionary niche for the genus Homo"....

Flipping the coin back to conflict, however, humans have tended to fill up the landscape quickly. From at least the rapid human migrations around Eurasia from about 40,000 to 60,000 years ago they have spread rapidly across the entire globe, moving as foragers and presumably impelled by more than simple curiosity. The most reasonable model for most of human biological history is one of small kin groups existing in a universe of similarly equipped and similarly subsisting kin groups, bouncing off each other, fissioning as they grew too large, probably mostly in a watchful kind of "peace," since rarely would any single group possess a sustained advantage over an other. But compete they did, and that competition would continuously refine the intragroup dynamics discussed above. Furthermore, given the small size of the group during the evolutionary period of human prehistory, accident or chance encounters that killed one or more males would render that group vulnerable to a nearby group that had not been reduced in that way. The size of the group was critical, and it is in this context that we must understand the huge selective advantage conveyed by the ability, perhaps first biological, and then cultural, to enlarge the group size. It is also important to emphasize that the advantage of a larger group was not just about winning a "battle." Group size enhanced group survival because it represented their ability to retaliate against any other group that attacked it....

Some caveats are necessary to all this. To claim a role for biological evolution in producing potentially violent ethnocentrism is not to claim that we are trapped in these behaviors. Culture can overrule biology, especially in group behaviors, but this argument does suggest the power behind such behavior. And asserting that this process of cultural evolution has occurred does not entail that there was only one track of human experience, or that one track was "better" than another, or more progressive, or even inevitable. Nevertheless, I argue, as anthropologist Bruce Trigger has written, that there has been "a strong tendency" for sociocultural evolution to move in the general direction of greater complexity." Put simply, as described above, more complex societies compete more successfully with less complex ones for control of territory and other resources. "As a result of such competition, in all but the poorest and most marginal environments and increasingly even in these) smaller-scale societies must either acquire the key attributes of more complex societies or be displaced or absorbed by them." Human cooperation and social complexity evolved both biologically and culturally in the face of human conflict. They were and remain two sides of the same coin....

This narrative of expansion from the origin point of agriculture in the Middle East northwestward into Europe has been supported by genetic studies of early farmers in Europe as well as by other forms of archaeological analysis. Farming peoples, not just the idea of farming, migrated into Europe from the Near East-although some hunter-gatherer populations in Europe successfully retreated and survived and/or adopted farming and greater social complexity. Furthermore, the archaeological evidence regard ing the expansion of these farmers, some of it reviewed above with respect to Talheim and Ofnet, clearly indicates that not only was the expansion not always peaceful, but, after pushing back the Mesolithic hunter-gatherers, the new farming arrivals turned on each other in increasingly lethal competition....

A Lord among Lords and the Rise of the State: This process of socially stratified societies expanding and competing for territory in turn created more complex societies, as each sought competitive advantage. These evolved through subtly differentiated stages including petty chiefdoms, chiefdoms, inchoate states, petty states, and eventually states. This process was not unilinear. Imagine, for example, a regional cluster of linguistically related agricultural villages, politically autonomous, each partially socially stratified, and each more or less controlled by a single kin network, with a "head-of-kin" figure. A talented (or lucky) kin leader, seeking to cement his local control, perhaps especially in the face of declining local resources relative to population growth, might successfully mobilize his village to attack a neighboring village, subordinating the defeated population, further stratifying this now expanded and more complex society, with himself more firmly ensconced at the top-now someone we might call a "petty chief". Further luck and further success in using his now-expanded manpower against the other remaining single villages might elevate him (and his original village) further, the village becoming the capital of a chiefdom and he a "paramount chief." Bad luck, or an alliance by individual villages against him, however, might destroy or devastate his original village after his first successful attack, and that incipient chiefdom would "cycle" back down to a simple village....

Once the enemy's village, town, or city had been taken and held, since the enemy sedentary population was already stratified, "subordination" actually meant the replacement or co-option of the local elite, who would then con tinue to exercise their control over the local laboring (or enslaved) population, now at the behest of a more distant center, In this way the successful ruler of the emergent state was actually a lord among lords. Every regional center had its own "lord" and its own regional elite. The regions were nominally obedient to the state center, but, as any historian can tell you, the relationship actually was riddled by power games and strategies ranging from self-interested cooperation (perhaps the norm), to truculence, to tax skimming, to collusion with other state rulers, to outright rebellion. Such competition among elites is the usual stuff of history...

---

 -- via my feedly newsfeed

The Emerging Competition for Space Solar Power [feedly]

The Emerging Competition for Space Solar Power
https://www.globalpolicyjournal.com/blog/21/10/2019/emerging-competition-space-solar-power

Morgan Bazilian, Ian Lange, Peter Aaen and Alex Gilbert  argue that space solar power has the potential to provide energy whilst helping to address climate change.

Due to aerospace innovations like usable rocketry and growing international space participation, the global space sector is on the verge of a renaissance. Proposed NewSpace activities, like space tourism, space mining, or orbital manufacturing, seem to come straight from science fiction but could now arrive within a decade. However, the space technology with the biggest potential may be one that benefits all of humanity: production of solar power in outer space for use on Earth.

Space solar power (SSP), involves generating electricity with space-based solar panels and wirelessly beaming the electricity from space to the Earth. In space, there are no issues with the sun being a variable resource like it is on Earth­ (think clouds, rainy days, and nightfall)—in space, it is always shining. For this reason, SSP is an attractive concept for security and defense agencies­—but also for reasons of resilience.  Today, with climate change driving a global need for game-changing, historically inconceivable technologies, like the large-scale direct air capture of CO2, SSP may have finally reached its time in the spotlight.

SSP can help balance renewable-dominated, decarbonized grids while enabling energy access anywhere in the world. The technology could provide round-the-clock clean energy to the world's largest urban centers, as well as those far away from the electricity grid. It is not surprising that, to date, most economic studies have concluded that the cost of power delivered from space is not ready to compete with power generated on Earth. That remains the case but, as with terrestrial panels, costs can fall.

The history of solar power really began in space. Even before the invention of the first solar cell at the storied Bell Labs, a solar powered satellite, Vanguard 1, was launched in 1958. Since then solar panels have been the energy choice of default on almost all satellites. Only recently, with cost declines driven by favorable energy policy and Chinese solar market dominance, has solar power become an economic terrestrial energy source.

First popularized by Isaac Asimov in the 1940s and proposed as an solution to the energy crises of the 1970's by Gerard O'Neill, space solar power has seen interest come and go over the years.  About ten years ago, there was considerable hype, even including a contract issued from Pacific Gas and Electric to a company called Solaren. While the company still appears to be in business, delivering power from space under that contract does not appear to have been achieved.

Today, however, the race for space solar power is heating up as NewSpace activities lower the cost of space access and orbital manufacturing could reduce production costs. The costs in the core elements of SSP are falling dramatically­—consider the rapid advances in photovoltaics (PVs), and in launching satellites in orbit. Crystalline PV (the most common type) prices have fallen by about 80% since 2010, while technological development in other solar types offers efficiencies that can be best taken advantage of in space. The cost of launching a payload into space has come down by a factor of ten in the last 20 years, and is continuing to fall.

With falling costs, China is again eyeing the dominance of global solar markets but this time it is targeting space solar power markets. China is planning on launching a demonstration SSP project within a decade and a commercial plant by 2050 as part of their strategy for global space dominance. Many other countries are also researching SSP, including Japan, Australia, and the US, but more urgency is needed if SSP is to play a serious role in decarbonization during the second half of the 21st century. A concerted strategy for research, development, and commercialization is needed to fully investigate whether SSP can be economic in an era of cheap space access.

Niche Markets

In the short-term, niche markets like islands, rural communities in developing economies, and remote mining operations may be the best place for SSP to be trialed. Military operations, with their highly distributed nature and the high cost of convoys, could also find SSP a resilient solution.

Mineral deposits are spread throughout the world with numerous potential mining sites located far from an electric grid. As an example, a case study for remote mine operations was undertaken to determine its economic feasibility. Such mines use lots of electricity, tend to rely on expensive sources for fuel, and sign long-term agreements to buy their electricity. While the analysis showed the need for prices to come down considerably to be a viable alternative to things like diesel generators, SSP may find a market in feeding multiple mines at the same time.

Much attention has been given to the resilience challenges facing remote island nations in light of devastating weather events. SSP might allow for an island economy, such as Puerto Rico or the Bahamas, who rely heavily on imported petroleum products for electricity, to reduce their emissions and keep costs reasonable. Importantly, as much of the infrastructure is in space, it also could help minimize damages from storms, and help with quicker responses to getting the lights back on.

There are at least two other, very different, areas that have potential for SSP to contribute, namely: rural energy access and shipping. Rural communities in developing countries are urgently looking for ways to effectively power homes, community services, and businesses. Over a billion people currently live without access to electricity. SSP could be well-suited to serving such remote demand.  Maritime emissions of air pollutants are prevalent enough to see from space, and the emissions that occur as the ship gets close to port are a big public health hazard.  Most ships use an oil boiler to generate electricity for propulsion, thus there is potential for SSP with wireless power beaming to help.

Policy Challenges and Next Steps

While there is considerable potential for SSP to provide energy services, there remain regulatory hurdles. As an example, the International Telecommunications Union (ITU) treaty regarding the electromagnetic spectrum does not currently have specific provisions for power beaming. This is a severe impediment to the development of microwave or laser power beaming technology. Policies that would add to the list of acceptable uses might make a big difference.

As the costs of a proposed SSP system are rapidly falling, the regulatory hurdles come into focus. Those hurdles may not be difficult to overcome, but they require priority consideration at places like the ITU, and require international collaboration. It appears that the USA is on the verge of a new space renaissance. The recent Congressional proposal for a Space Research Institute might usefully include the topic of space solar power within its focus areas.

As the urgency of climate change becomes more apparent each day, adding considering and funding new radical solutions makes sense. SSP needs to move from science fiction to focused R&D. Including SSP as a longer-term tool to mitigate climate change allow it federal energy R&D funds, like those from ARPA-E, eventually allowing the private sector to finance it if it proves viable.

 

 

Morgan D. Bazilian is the Director of the Payne Institute and a Professor of public policy at the Colorado School of Mines. Previously, he was lead energy specialist at the World Bank. He has over two decades of experience in the energy sector and is regarded as a leading expert in international affairs, policy and investment. He is a Member of the Council on Foreign Relations.

Image: NASA Goddard Space Flight Center via Flickr (CC BY 2.0)

 -- via my feedly newsfeed

CEPR: House Democrats Are Failing to Protect Farmers from Trump [feedly]

While I am not a big fan of dumping on House Dems at the moment, these folks make some important points about farmers and rural communities, the could be opportunities for Dems to improve their fortunes in rural areas.

House Democrats Are Failing to Protect Farmers from Trump
http://cepr.net/publications/op-eds-columns/house-democrats-are-failing-to-protect-farmers-from-trump

House Democrats Are Failing to Protect Farmers from Trump

0 Comments

Jeff Hauser and Eleanor Eagan
Washington Monthly, October 19, 2019

See article on original site

Times are tough for American farmers. Everything from corporate consolidation to falling commodity prices is making it harder to get by. Strange, then, that the person most responsible for safeguarding their wellbeing, Secretary of Agriculture Sonny Perdue, brought the following message to a gathering of Wisconsin dairy farmers: "In America, the big get bigger and the small go out. I don't think in America we, for any small business, we have a guaranteed income or guaranteed profitability." In other words, he was telling the farmers: you're probably screwed and there's nothing you can do about it.

Contrary to Perdue's claims, the deaths of small farms are not a result of natural forces. They are a consequence of explicit policy choices that have allowed for the rampant consolidation and disinvestment that are crushing rural communities. Only two decades ago, there were 600 companies that sold seed. Today, there are only four. It's no wonder that the cost of seeds and plant corn has risen 329 percent in that time period, with similar increases for other crops.

Perdue hasn't just failed to recognize the root causes of farmers' pain; he has actively aided the forces responsible for it. From his first days in office, he has turned the full power of the USDA against farmers and rural communities on behalf of Big Agriculture, betraying one of the constituencies most vital to Trump's 2016 win.

None of this should surprise anyone. What should be genuinely shocking, however, is that Congressman Collin Peterson, a Democrat from Minnesota and the chair of the House Agriculture Committee, has been practically silent about these attacks. Over the past nine months, he has only convened one full committee hearing. And while his panel heard testimony from Perdue in February, Peterson has yet to call him back despite his committing numerous transgressions since, including his continued efforts to impose work requirements on access to food stamps and pressing ahead to relocate the department's research wing out of D.C.

Peterson, who declined our request for comment, has failed to fulfill his obligation to protect farmers and rural communities. That is not only bad on the substance, but it is a missed opportunity for Democrats to win back support among American farmers, who overwhelmingly pulled the lever for Trump in 2016.

In recent years, consolidated agribusinesses have translated their rising profits into formidable political power. They have successfully weakened or killed many measures that would have limited their control over farmers' lives and livelihoods, including fighting laws that would give farmers the right to repair their own equipment, something that overzealous copyright protections have prevented them from doing. When these and other nasty practices get too much attention, Big Ag wields its considerable weight to silence critics, whether that means getting a newspaper cartoonist fired or suing the Minnesota Pollution Control Agency to close a public comment period on a proposed merger.

Over the past few decades, Democrats have too often either supported the policies that got us here, or fallen short in resisting them. In 2008, Barack Obama made fighting consolidation a feature of his agricultural policy platform. But once in power, he failed to act decisively on those promises. His administration hesitated to enact proposed regulations that would have made it easier for contract farmers to sue packing and processing companies for unfair practices. Then, it found itself unable to move forward once Republicans took the House in 2010.

As with most things, however, the Trump administration has taken a bad problem and made it worse. Earlier this year, the Department of Justice approved a merger between two agricultural industry giants, Monsanto and Bayer, allowing for the creation of a new behemoth. And those Obama-era contracting rules? They were eventually approved in 2016, but Perdue promptly scrapped them after taking power. Worse yet, Perdue's USDA has walked back enforcement of many of the remaining rules to protect contract farmers.

This is all without mentioning what's at the forefront of people's minds when they think about Trump's impact on farmers: trade policy. Yet as these examples should make clear, the harm this administration is inflicting on farmers goes well beyond trade.

Unfortunately, House Democrats have done little to draw attention to Trump's deleterious agricultural policies When they do respond by holding a hearing, like over the decision to move the USDA's Economic Research Service to Kansas City, they fail to confront those responsible for their actions, or take definitive actions to stop them.

Meanwhile, in the same time span that Peterson only convened one full committee hearing, Agriculture's six subcommittees have held a combined 19 hearings, seven of which involved testimony from USDA officials. The Committee has issued zero subpoenas to corporate or governmental actors.

Peterson should reverse course and start from the top. The USDA is a big department with a diverse set of important responsibilities, ranging from protecting farming and rural economies, to ensuring food safety and administering the Supplemental Nutrition Assistance Program (SNAP).

There have been other ways Perdue has materially hurt farmers and others working in the industry. In addition to cancelling the aforementioned Obama era contracting rules, Perdue announced, in 2018, that the USDA would begin to allow poultry processing plants to increase line speeds, putting already vulnerable workers at even greater risk of injury.

Trump has also failed to nominate an undersecretary of rural development almost three years after taking office, meaning there is no dedicated advocate for rural communities empowered to support rural businesses, utilities, housing, broadband, and more in the federal government.

But that's not all. The USDA is also making meat more dangerous for consumers by allowing pork processing plants to perform their own inspections. Indeed, the USDA's chief veterinarian from 2016 to 2018, Pat Basu, refused to sign off on the system and left the agency in protest. Basu recently said, "Look at the FAA. It took a year or so before the crashes happened. This could pass, and everything could be okay for a while, until some disease is missed, and we have an outbreak all over the country." It seems like Basu might make for an interesting witness at a Agriculture Committee hearing.

Democrats need to perform meaningful oversight of the Trump administration's assault on American farmers. Impeachment doesn't obviate the need for skeptical oversight. It underscores it. Oversight is, put simply, a basic fulfillment of Congress' governing obligations. It can uncover abuse, create pressure for change, and facilitate the development of much needed policy alternatives. And, as an added bonus, the political upside seems clear.

This strategy might seem somewhat unorthodox. It contravenes the gospel that Democrats can only win agricultural districts by espousing a quiet, inoffensive centrism. But that would cede control of the political debate to Trump. If Democrats only play on the president's terms, the conversation will always shift away from the real issue.

Democrats must therefore redefine the debate on agriculture policy through rigorous oversight. In rural America, they have to demonstrate their willingness to take on political corruption of all shades, and to challenge corporate America's chokehold over the political process.

Yet Democrats have been surprisingly unwilling to take on one of the most unifying issues across the electorate: how the system is rigged to hurt ordinary people and boost big corporations.

Trump has created an opportunity for Democrats to take up this message in virtually every area of policy, but now especially with farmers. House Democrats have a unique opening to prove to rural voters that they are serious about taking on structural inequities. All they have to do is highlight and push back against the administration's efforts to enrich corporations at the expense of small farmers. In other words, they have to simply do their jobs.

---

Jeff Hauser is the founder and executive director of the Revolving Door Project at the Center for Economic and Policy Research. Eleanor Eagan is a Research Assistant at the Revolving Door Project at the Center for Economic and Policy Research.

 -- via my feedly newsfeed

China’s Liu Confirms Phase One of U.S. Trade Deal is in Progress [feedly]

Looks like Trump has made some concessions.....we will see.

China's Liu Confirms Phase One of U.S. Trade Deal is in Progress
https://www.bloomberg.com/news/articles/2019-10-19/china-s-liu-confirms-phase-one-of-u-s-trade-deal-is-in-progress

China's top trade negotiator offered positive signals that talks with the U.S. are making progress and both sides are working toward a partial trade deal.

"China and the U.S. have made substantial progress in many aspects, and laid an important foundation for a phase one agreement," Vice Premier Liu He said at a technology conference in Nanchang, Jiangxi, on Saturday. He reiterated that China is "willing to work in concert with the U.S. to address each other's core concerns on the basis of equality and mutual respect."

The comments come as the U.S. and China work toward getting some sort of agreement ready for presidents Donald Trump and Xi Jinping to sign at the Asia-Pacific Economic Cooperation summit next month in Chile. The U.S. has said China will buy as much as $50 billion in U.S. agricultural goods in exchange for the suspension of additional tariffs, though Bloomberg has reported that the Chinese want more talks and would need existing tariffs rolled back in order to reach that amount of imports.

Read More: China Ties Agriculture Binge to Trump Reducing U.S. Tariffs

The "phase one" deal described by Washington may not address many of the larger issues that initiated the trade war which has dragged on for more than a year, such as forced technology transfers and industrial subsidies. The White House is also looking at rolling out a previously agreed currency pact with China, people familiar said earlier. The agreement would be similar to commitments China has already made in accordance with International Monetary Fund standards, they said.

Liu did not address any specifics in his speech, though he reiterated that China would boost intellectual property protection, especially for small and medium enterprises.

U.S. Treasury Secretary Steven Mnuchin said that lower-level talks would take place by phone this week. Chinese officials are working on the text of an agreement on trade in close contact with U.S. negotiators, and have begun discussions on the next stage, Ministry of Commerce spokesman Gao Feng said on Thursday.

China's economic growth slowed further to 6% in the third quarter, according to data released on Friday, increasing pressure on Beijing to put an end to the trade conflict. With a drop-off in exports to the U.S. expected to continue as long as tariffs remain, the economy is likely to keep struggling as deflationary pressures hit company profits.

China is targeting 6% to 6.5% gross domestic product growth this year. Liu said the fundamentals of China's economy remain unchanged, even as it goes through a significant re-balancing, and the nation is "confident" of reaching its economic targets.

 -- via my feedly newsfeed

Krugman: Democrats, Avoid the Robot Rabbit Hole [feedly]

Provocative post on automation from PK

Democrats, Avoid the Robot Rabbit Hole

Paul Krugman
https://www.nytimes.com/2019/10/17/opinion/democrats-automation.html

TEXT ONL

One of the less discussed parts of Tuesday's Democratic debate was the exchange that took place over automation and how to deal with it. But it's worth focusing on that exchange, because it was interesting — by which I mean depressing. CNN's Erin Burnett, one of the moderators, asked a bad question, and the debaters by and large — with the perhaps surprising exception of Bernie Sanders — gave pretty bad answers.

So let me make a plea to the Democrats: Please don't go down the robot rabbit hole.

Burnett declared that a recent study shows that "about a quarter of U.S. jobs could be lost to automation in just the next 10 years." What the study actually says is less alarming: It finds that a quarter of U.S. jobs will face "high exposure to automation over the next several decades."

But if you think even that sounds bad, ask yourself the following question: When, in modern history, has something like that statement not been true?

After all, in the late 1940s America had about seven million farmers and around 12 million production workers in manufacturing. Machinery could and did take over much of the work those Americans were doing — and people at the time wondered where the new jobs would come from. If you think that concerns about automation are somehow new, bear in mind that Kurt Vonnegut's novel "Player Piano," envisioning a dystopian future in which machines have taken away all the jobs, was published in … 1952.



Yet the generation that followed was a golden age for American workers, who saw dramatic increases in their income, with many entering a rapidly growing middle class.

You might say that this time is different, because the pace of technological change is so much faster. But that's not what the data say. On the contrary, worker productivity — which is how we measure the extent to which workers are being replaced by machines — has lately been growing much more slowly than in the past; it rose less than half as much from 2007 to 2018 as it did over the previous 11 years.

Which makes you wonder what Andrew Yang is talking about. Yang has based his whole campaign on the premise that automation is destroying jobs en masse and that the answer is to give everyone a stipend — one that would fall far short of what decent jobs pay. As far as I can tell, he's offering an inadequate solution to an imaginary problem, which is in a way kind of impressive.

Let me also give a shout-out to Joe Biden, who echoed Yang's talk about a "fourth industrial revolution." More on that in a minute.

[For an even deeper look at what's on Paul Krugman's mind, sign up for his weekly newsletter.]

Elizabeth Warren questioned Burnett's premise, saying that the principal reason we're losing jobs is trade policy that has encouraged jobs to move overseas. This claim was slammed by the fact-checkers at The Associated Press, who declared that automation was the "primary culprit" in manufacturing job loss between 2000 and 2010. As it happens, Warren was more right than the supposed fact-checkers; reasonable estimates say that trade was responsible for a large share of manufacturing job loss in the decade before the Great Recession.



Warren was surely wrong to suggest, however, that changing trade policy would do much to bring good jobs back. She got onto much sounder footing when she moved on to her wider agenda of tackling inequality and the power of the wealthy.

The best answer, as I said, came from Sanders. No, I don't support his proposed job guarantee, which probably isn't workable. But he was right to say that there's plenty of work to do in America, and right to call for large-scale public investment, which even mainstream economists have been advocating as a response to persistent economic weakness.

Why? Because the persistent weakness — yes, we have low unemployment at the moment, but thanks only to extremely low interest rates, and we're very poorly prepared for the next recession — isn't about automation; it's about inadequate private spending.

So what's with the fixation on automation? It may be inevitable that many tech guys like Yang believe that what they and their friends are doing is epochal, unprecedented and changes everything, even if history begs to differ. But more broadly, as I've argued in the past, for a significant part of the political and media establishment, robot-talk — i.e., technological determinism — is in effect a diversionary tactic.

That is, blaming robots for our problems is both an easy way to sound trendy and forward-looking (hence Biden talking about the fourth industrial revolution) and an excuse for not supporting policies that would address the real causes of weak growth and soaring inequality.

So harping on the dangers of automation, while it may sound tough-minded, is in practice a sort of escapist fantasy for centrists who don't want to confront truly hard questions. And progressives like Warren and Sanders who reject technological determinism and face up to the political roots of our problems are, on this issue at least, the actual hardheaded realists in the room.

Other Democrats should follow their lead. They should focus on the real issues, and not get sidetracked by the pseudo-issue of automation.

The Times is committed to publishing a diversity of letters to the editor. We'd like to hear what you think about this or any of our articles. Here are some tips. And here's our email: letters@nytimes.com.

Follow The New York Times Opinion section on Facebook, Twitter (@NYTopinion) and Instagram.

Paul Krugman has been an Opinion columnist since 2000 and is also a Distinguished Professor at the City University of New York Graduate Center. He won the 2008 Nobel Memorial Prize in Economic Sciences for his work on international trade and economic geography. @PaulKrugman
 -- via my feedly newsfeed

Piketty: Towards a circular economy [feedly]

A  compelling graphic picture of the real story behind growth and progressive taxation....and a discomforting correlation that confirm "long wavers" theories about tech financial cycles deeper than supply and demand in capitalism.

Thomas Piketty: Towards a circular economy
https://www.lemonde.fr/blog/piketty/2019/10/15/towards-a-circular-economy/

The idea of the circular economy frequently brings to mind issues of recycling waste and materials and making moderate use of natural resources. But if a new system is to emerge which is sustainable and equitable the whole economic model will have to be re-thought. With the differences in wealth which exist at the moment, no ecological ambition is possible.  Energy saving can only come from economic and social restraint and not from excessive fortunes and life-syles. We will have to construct new norms of social, educational, fiscal and climate justice through democratic discussion. These norms will have to say no to the present hyper concentration of economic power. On the contrary, the economy of the 21^st century must be based on the permanent circulation of power, wealth and knowledge.

It is the spread of property ownership and education which enabled social and human progress to become a reality in the 20^th century. A powerful movement of reduction in social inequality and increased mobility  (the first intellectual signs of which were already visible in the 18^th and 19^th centuries) gained momentum from 1900-1910 and into the years 1970-1980, thanks to an unprecedented level of investment in education. A new equilibrium was established with the rights of shareholders being matched by those of the wage-earners (particularly in Northern Europe) – the circulation of incomes and wealth was accompanied by progressive taxation (in particular in the USA), and so on.

This movement was interrupted in the decade 1980-1990 following the change in direction in the wake of the post-communist disillusion and lapse into the Reagan approach. Post-communism then became hyper-capitalism's best ally. Natural resources were over-exploited and privatised to the advantage of a minority, legal systems were systematically circumvented via fiscal paradises, any form of progressive taxation was completely eliminated. In Poutine's Russia, income tax is 13% whether your income is 1000 roubles or one billion roubles. The same excesses can be seen in China, where those close to those in power, have carved out empires for themselves which they transmit to their heirs with no inheritance tax. Hong Kong is thus an astonishing example of a country which has become even more unequal b submitting to the authority of a supposedly communist regime.

The Reagan approach in the 1980s was less radical: it lowered the rate of taxation applied to the wealthiest from 70% to 30%. Reagan intended to put an end to what he exposed as excessive redistribution and egalitarianism resulting from the New Deal and which, in his opinion, had weakened America's entrepreneurial spirit and anti-communist crusade. By liberating the energies of the entrepreneur, Reagan promised a new phase of unprecedented growth. Of course, the inequalities were going to increase, the number of millionaires would rise and they would be wealthier but all that would provide a degree of innovation which would benefit the masses meaning that everyone would gain thereby. In fact, the hold of billionaires over the American economy has grown considerably since the 1980s, with a concentration of property in the approaching the levels witnessed in Europe at the beginning of the 20^th century.

The problem is that the dynamic increase in growth has not taken place: the national per capita income has witnessed its progression divided by two (2.2% per annum between 1980 and 1990, 1.1% between 1990 and 2020). Salaries have stagnated and a growing percentage of the population are beginning to doubt the benefits of globalisation. The hardening of Trump's nationalism is directly linked to this failure in Reaganism: since economic liberalism is not enough, the Mexicans and the Chinese are now accused of stealing the hard labour of white America.

In reality, the failure of Reaganism mainly demonstrates that the hyper-concentration of property and power does not correspond to the requirements of a modern and circular economy. It is not because a person has made a fortune at the age of  30 that they should continue to concentrate power as a shareholder at the age of 50, 70 or 90 years. The decrease in growth is also explained by a worrying stagnation in educational investment since the 1990s as well as by the immense inequalities in access to education and training in both the United States and in Europe.

The challenge of global warming and the international awareness of the growing inequalities do act as leverage for change but we are still far from the goal. The OECD projects for the taxation of the profits of multinationals only concerns a small fraction of the latter and the scale of the contribution proposed is much more favourable to the rich countries than to the poor ones (as is demonstrated by the work of ICRICT. The Triumph of  Injustice, a book published this week in the United States by Emmanuel Saez and Gabriel Zucman, demonstrates that there are more ambitious solutions  with the key element being financial transparency and the return to fiscal progressivity in order to finance health and education for all, and the ecological transition.  The success of these ideas amongst the American democrats (in particular Warren and Sanders) does allow for optimism.

But Europe cannot simply stand by and wait for change to come from America. If we are to go beyond merely taking a stance, and finally give substance to the Green New Deal, it is urgent that strong measures for social and fiscal justice be taken in Europe. This may also be the price to pay for the hope of bringing the British Labour Party back into the European orbit and avoiding a disastrous Conservative victory in the forthcoming elections. Thirty years after the fall of the Berlin Wall, it is time for the march towards equality, the circular economy and participatory socialism to get back on track.

 -- via my feedly newsfeed