"It's not that bad" --- "It will be all right after he's gone" -- "It's not gonna be like the Nazis" -- "The runway is not really icy"---"The gun's not really loaded" --- "I am not really responsible for all these charges!".
"I am addicted to placebos."
(Steven Wright)BEIJING – Change is taking place exponentially in today's world. One unmistakable trend is the rapid rise of China and decline of the U.S. as the dominant global power, a place it has held since World War II.
What does this portend for global economic and diplomatic relations? What new international order might prevail in a multi-polar world? Will it occur peacefully or will the coming years be marked by heightened tensions, turmoil and increased danger of war?
China takes its place on the global stage
Since China introduced socialist market economic reforms in 1978, it has experienced staggering growth rates, lifting 700 million people out of poverty. Last year, China's growth accounted for one-third of all new global wealth creation.
China is now the world's second largest economy, has surpassed the U.S. in domestic retail sales and has built a modern infrastructure. Chinese government officials insist, however, that they are still a developing country in the "primary stage of socialism."
The country is embarking on a new era of ambitious economic and social reforms based on raising productivity through innovation and advanced technology, prioritizing production for its domestic consumer market, modernizing education and governance systems; extending democracy and grassroots participation in decision-making; and shifting to sustainable development.
They see these reforms as essential to meeting the goal of a "prosperous, modern socialist society" by 2050 which in turn depends on "opening wider and wider" to the global economy, a stable global trade system, partnerships and peace.
By sparking a trade war with China, the Trump administration is signalling its intent to thwart China's ambitious plans while maintaining its own economic domination. By contrast, China believes the world is entering a fourth era of globalization that requires a new international order of multipolarity, shared development and cooperation.
Realignment of global relations underway
The U.S. emerged as the world's sole economic and military superpower with the introduction of capitalism into the former USSR and Eastern bloc socialist economies in 1989-91. The U.S. sought to ensure its long-term dominance and preempt future rivalries by integrating a prostrate Russia and underdeveloped China into the global capitalist system.
At the same time, it continued its Cold War-like foreign policy by expanding NATO eastward and militarily encircling Russia and China.
But things have changed dramatically for both countries. An oligarchic ruling class took power in Russia pursuing its national and global interests. And China emerged as a leading economy with global trade ties.
Mounting crises have shaken the global capitalist system, including the bursting of the tech bubble in 2000, the 2008 global financial crisis, deepening structural crises, deindustrialization, stagnation, the impact of severe austerity measures and a mounting refugee crisis.
The richest 1 percent owns half the world's wealth and the industrial and banking sectors are oligopolies leading to huge imbalances. The mass communications and technological revolutions are facilitating globalization.
U.S. imperialism experienced strategic setbacks when the neo-con policies of wielding U.S. military preeminence to impose economic pre-eminence began to fail, first in Afghanistan and then in Iraq and other places.
Economic nationalism in the U.S. and Europe is threatening to disrupt the global trading system and effect China's drive for what it counter poses as openness and reform. Ironically, however, the economic nationalism pushed by the Trump administration, for example, is actually diminishing U.S. influence and facilitating China's rising influence over the world economy.
In short, the global governance system dominated by advanced capitalist countries in place since WWII is now fraying.
Building a community for a shared future
The neoliberal globalization of the 1980s-90s was greatly spurred by China and Russia's entrance into the global capitalist dominated economy. Rapidly increased trade, deregulation, privatization, dropping of tariff barriers and a "race to the bottom" were its chief characteristics.
Meanwhile other factors are shaping the emergence of a new stage of globalization, one referred to as "inclusive globalization" whose goal is to improve people's lives. Trade takes place in an increasingly multi-polar world and alternative global financial institutions. The geographical center of globalization is shifting to Asia and the emerging economies.
This means global trade is less and less dependent on developed capitalist countries as the defining force.
Up until now, China had followed the late Communist Party of China chair Deng Xioaping's axiom to "keep a low profile and hide one's brightness," while tending to its domestic economy.
Things are different today. China is engaging the global community economically and diplomatically and increasing its influence. In the recent period China played a key role in brokering the Iran Nuclear Deal, the Paris Climate Agreement and in efforts to defuse tensions between the U.S. and North Korea.
China's "opening policy" is a recognition that globalization is a fact of life. No country can develop in isolation and must engage in the globalized economy even when the U.S. and other imperialist powers dominate for the time being. China realizes its state-owned companies and private corporations must play by the rules set by the global market.
But China is also projecting a new governing concept that fits the coming stage of globalization called "building a community for a shared future for humankind."
The concept was first introduced by Xi Jinping in 2013, then newly elected chair of the CPC. It involves "two guidelines": build a more just and reasonable new world order and jointly maintain international security.
The concept shares aspects of the USSR foreign policy of peaceful co-existence between different social systems but differs in some important respects.
It calls for increased multi-lateralism, relations based on mutual respect regardless of size, social system, fairness and justice in the global economy, and win-win economic cooperation. The new approach to globalization should take into account protection of both the environment and workers' rights.
It calls for working out disputes through dialog and sees deeper economic interdependence as an important factor contributing to peace relations.
It is based on non-involvement in the internal affairs of other countries, and eschews Cold War type economic and military alliances and blocs in favor of collective security.
It is a recognition that no country can solve problems of development, climate change, peace, poverty, disease, resource allocation, or security on their own in this era of globalization.
It doesn't see international relations through the lens of a global competition between socialist and capitalist systems, but rather state-to-state relations and partnerships.
It is a recognition that development must be inclusive and sustainable. Diversity is celebrated and cultural exchange elevated.
It involves restructuring the international order, and reforming global governance and financial systems established after WWII such as the United Nations, IMF and World Bank.
China has built alternative international networks and relationships since the fall of the USSR including the Shanghai Cooperative Organization (SCO), BRICS (the association of five major emerging economies: Brazil, Russia, India, China and South Africa) and alternative financial institutions to facilitate trade and development including the Asian Infrastructure Investment Bank.
China's foreign policy will increasingly impact economic development and global governance. A case in point is the Belt-Road Initiative (BRI) – $1 trillion investment in road, rail, and maritime ports, energy pipelines, power grids, refineries, connecting 65 countries (in particular Asia and Africa) with trade and cultural exchange. Once complete, the BRI, called the largest infrastructure project in modern history, could boost global trade by an estimated 12 percent.
The BRI will facilitate trade and infrastructure development of countries involved while securing raw materials and resources China needs for its own development, theoretically a win-win.
The BRI is also meant to create alternative shipping and transport routes from China's east coast and through the Strait of Malacca, made urgent with the Trump containment policies.
The U.S. and other capitalist countries charge the BRI is fostering "debt traps" for developing countries and projects don't employ workers from their own countries. This is disputed by China.
India also fears encroachment into its sphere of influence with implementation of the China-Pakistan Economic Corridor that will bring economic development throughout the region. India is disputing the BRI because it passes through Kashmir.
Trump's declaration of a trade war is one aspect of a larger strategic approach toward China. Trump's protectionist foreign policy is designed to appeal to his base, grow his financial empire and build a white nationalist Christian alliance stretching from the U.S. to Russia. The aim is to preserve the domination of white-ethno states and build a global alliance against China, a racist strategic concept pushed by Steve Bannon.
The Trump administration declared China a strategic rival and largely junked the Obama administration's "pivot" to Asia which emphasized engagement and cooperation. Trump is also abandoning the "One China" policy with respect to relations with Taiwan.
The new Trump administration policy favors what it calls the "Free and Open Indo-Pacific strategy" first enunciated by Japan. While the new approach hasn't fully taken shape, it includes scrapping the Trans Pacific Partnership trade pact, downgrading diplomacy in the region and reviving cooperation with some traditional allies.
U.S. imperialism has long attempted to shape China's development path and restrict its maritime access to the Pacific with a string of military bases. China is now challenging this containment by increasing trade and building its military presence in the South China Sea. This has led to territorial and maritime disputes with its neighbors including Vietnam. While tensions remain, Vietnam and China are seeking a diplomatic resolution to their differences.
In the past year the Quadrilateral Security Dialogue involving the U.S., India, Australia and Japan, but better described as a "diplomatic carcass," has been revived with the express purpose of a Cold War containment of China.
The Trump administration is also promoting India as a regional power alternative and partnering with Japan, India and other countries to actively thwart and counter the BRI with competing infrastructure projects across the Indo-Pacific region. But this has little meaning without massive funding to back it up.
Trump's approach is full of contradictions that make it unsustainable. The EU including Germany and the UK, Russia, India, Australia and other countries are fostering economic trade ties with China. The EU is China's largest trading partner and China is the EU's second largest trading partner after the U.S. China is Russia's largest trading partner.
The world can ill afford a conflagration between China, the U.S. and other powers that could turn into a nuclear catastrophe. Delaying cooperation to address the climate crisis or continuing to allow vast economic inequalities between nations and people leads to nothing good for the human race. "Building a community for a shared future for humankind" seems to make a lot more sense.
n a long-anticipated yet troubling decision, the U.S. Supreme Court overturned its own precedent and decreed that public workers who benefit from their unions' collective-bargaining efforts owe no obligation to financially support those efforts. Justice Elena Kagan's blistering dissent makes a powerful argument that this decision is wrong on legal and policy grounds, but it is obvious that nothing will deter Justice Samuel Alito from his zealous crusade to weaken, if not abolish, labor unions in America. The decision is a setback not just for public service workers, but for all workers and perhaps for democracy itself. The decision will take its place alongside other misguided and overtly political Roberts Court decisions to diminish workers' rights and elevate corporate interests.
The public policy of virtually every state affected by the decision has long declared collective bargaining to be in the public interest. Yet Alito's decision makes little effort to hide the court majority's hostility to the idea that workers should have the freedom to bargain with their employers. The challenge now is to construct policies consistent with the Court's decision while still fostering state policies promoting collective bargaining and labor organization.
The focus must be on workers and their unions. No one, not even the Supreme Court, can deprive free people of the opportunity to work together to create a better life for themselves and their communities. Workers must educate one another to build and maintain their strength and grow their unions. Anticipating the court's decision, public service unions have embarked on massive internal educational and organizing campaigns, building the organizational strength necessary for success in a hostile political and legal climate.
Elected officials can assist this effort by making policy consistent with the original intentions of our nation's labor laws. Because the people of these affected states have established collective bargaining as a fundamental right, public workers should be given opportunities to meet with their union representatives to learn about collective bargaining and their unions' programs, functions, and operations. New employees should have these opportunities right away, and all employees should be provided with such opportunities on a periodic and ongoing basis. Since the decision to join the union is personal to each employee, and state laws that provide for collective bargaining favor the process of labor organization itself, supervisors and managers should be prohibited from interfering in any employee's decision to join with their co-workers. In short, policymakers should create opportunities for workers to educate one another on the decision to join the union, free from any outside influence.
Although the Janus decision is ostensibly focused on fees paid to the union, treating the attack on unions and collective bargaining as simply a resource problem will be ineffective and lead to unintended consequences. Some academics have suggested that government employers fund the union directly rather than have employees make dues payments. They reason that the original source of union dues is the government employer anyhow, so why not cut out the middleman if everything comes out equal for all parties?
This reasoning is simple, but wildly off the mark.
Direct payments from the employer to the union are prohibited in the private sector because they compromise the independence of the union. No experienced union negotiator would want his or her management counterpart to literally control union revenue. The union must belong to the workers, and they must pay for their union so they can own it. A direct payment from the government employer will also undermine the union's credibility with its own members. If the union makes difficult choices to settle a contract in tough fiscal times, will workers suspect it was to preserve the union's "payoff" from the boss? Finally, there's the political problem. Anti-tax groups and anti-worker politicians will never acknowledge the payment is "workers' money" and will insist the funding is an inappropriate, and perhaps illegal, expenditure of taxpayers' funds.
Here's another idea that has been floated: require nonmembers to pay a fee when the union represents them on an individual complaint. Still another related idea would give the union the option of refusing to represent a non-member on an individual complaint. While seemingly equitable on their face, such practices will undermine the unions' strength by dividing the workforce. A union is its members, and a union's strength is derived from the entire workforce speaking out, member and non-member alike. By segregating workers into "us" and "them," unions erode their status and their power. Members-only representation is a short walk away from members-only contracts, which diminish the collective power of the workforce and are inherently divisive and weak.
The only way to preserve a vibrant union is for workers themselves to want it, work for it, and pay for it. A preoccupation with resources and maneuvers to create short-term financial viability will lead to further erosion of the American labor movement, with continued negative effects on our society and our economy. When given the opportunity to get the facts free from coercion, workers willingly join and participate in their unions in overwhelming numbers. They need policymakers to help provide them with those opportunities.
Earlier this month, the President's Council of Economic Advisers (CEA) declared that the War on Poverty launched by President Lyndon Johnson in 1964 is "largely over and a success." Although it is premature to declare an outright and absolute victory, it's great that policymakers at the highest level of government recognize that our social safety net programs are working.
But if we are to continue to reduce hardship and promote mobility from poverty through access to good jobs, work and other means, we have to understand the nature of poverty today. It's important that we draw the right lessons from the past so we don't underestimate our current challenges and cede our hard-won progress in the War on Poverty.
Let's start with the good news in the CEA report: material well-being in the United States has improved considerably. The poverty rate has also declined over the last few decades, although you wouldn't know it if you looked just at the official poverty rate, which has not fluctuated greatly since the 1960s, ranging from 10 to 15 percent.
The official poverty rate draws a threshold based on food consumption patterns from the 1950s and considers only pretax cash income as available resources. Consequently, the official poverty rate understates both the needs of today's families and the resources available to them. In fact, two of our largest sources of support to low-income families—the earned income tax credit (EITC) and the Supplemental Nutrition Assistance Program (SNAP)—don't count in our official poverty measure.
Recognizing the limitations of the official poverty measure, the Census Bureau developed a supplemental poverty measure (SPM) in 2009 that better captures needs and resources.
When researchers extended the SPM back in time, they found that the poverty rate dropped from 26 percent in 1967 to 16 percent in 2012 and to about 14 percent in 2016, more accurately capturing poverty's downward trend than does the official poverty measure. In addition, without SNAP and refundable tax credits, the poverty rate would have been 3.7 percentage points higher than it was in 2016. Expansions of the EITC and SNAP have alleviated poverty in ways the SPM reflects and the official poverty measure misses.
The "too good to be true" news from the CEA is that the poverty rate declined from 30 percent in 1960 to just 3 percent in 2016 when applying a "consumption-based" poverty measure, which measures what a family consumes instead of how much income it earns. A consumption-based poverty measure has some merit. After all, a family with no income but substantial assets would be considered "income poor" but could be consuming at comfortable levels.
Because there is no official measure of consumption-based poverty, the CEA relies on the work of economists Bruce Meyer and James Sullivan. To develop a consumption-based poverty rate, Meyer and Sullivan need accurate data on consumption and a meaningful standard for how much a family needs to consume to have a minimally adequate standard of living. Some scholars have expressed concerns about the data Meyer and Sullivan use to construct their consumption-based poverty rate.
Those concerns aside, the consumption-based poverty rate from Meyer and Sullivan that the CEA cites is indexed to 1980, an arbitrary threshold that might understate the hardship and need families experience today. Using this measure allows the CEA to suggest that poverty isn't much a problem in the US today.
Drawing a meaningful threshold for consumption-based poverty is a challenge—for example, when the authors equate the consumption and official poverty rates in 2015 and then apply their techniques backward, they find that nearly 40 percent of Americans were poor in 1980, and nearly 60 percent were poor in 1960. Those levels are too high to be a meaningful indication of overall hardship in those years. Similarly, the 3 percent figure touted by the CEA for 2016 is too low.
Further, crossing a given consumption threshold does not mean you have the power and control over your resources and life to not be "poor." Exposing yourself or your children to a potentially abusive situation just to have a roof over your head or trading sex for food or income might keep you out of consumption poverty, but you are still poor.
Although it's too soon to declare the War on Poverty over, it is important to recognize the progress we have made and the important role our antipoverty programs such as SNAP and EITC have played in that success. Use of a consumption-based poverty measure should neither lead to a misguided belief that the War on Poverty has been won nor justify making major changes—however well intentioned—to safety net programs that risk cutting people off from the very programs that have kept them out of poverty.
Well-designed reforms that help recipients overcome their barriers to work, supplement and support their efforts to work, and recognize that some recipients will be limited in the amount and type of work they can do can help us make even more progress against poverty.
For the most part, reporting on 2nd quarter growth has been pretty decent. But I haven't seen clear explanations of why one quarter's growth tells us so little about longer-term growth prospects. I'm sure that reporters get it; maybe they assume that readers already know (a very bad assumption), or maybe they're afraid of sounding too technical. But anyway, it seems as if there's a gap worth filling; so here it comes.
The key point when you look at real GDP is that the economy's actual output depends both on its capacity – the amount it is capable of producing on a sustained basis – and the rate at which it is using that capacity. That is,
Output = capacity * capacity utilization
CBO actually produces an estimate of capacity – "potential GDP" – which you can argue with, but is a useful benchmark. And you can look at the ratio of actual GDP to potential, which is an indication of how hot the economy is running:
Why does capacity utilization fluctuate? Mainly because the economy sometimes suffers from periods of inadequate demand, as it did after the 2008 financial crisis. Sometimes, also, the economy overheats, reaching levels of capacity utilization that will lead to rising inflation. The Fed thinks we're in or near to that state now, although many economists disagree. Whoever's right, the point is that there's some limit to how hot the economy can run.
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Now, suppose that for whatever reason capacity utilization rises. This will generate a period of rapid growth. To take a not at all arbitrary example, suppose that capacity is growing at a 2 percent annual rate, and capacity utilization rises 0.5 percent over the course of a quarter. Then growth in that quarter will be at an annual rate of 4 percent (because half a point in a quarter is two points at an annual rate.)
This, however, says nothing at all about whether the economy can achieve 3 or 4 percent growth over a longer period, say a decade. That would require evidence of an acceleration in the growth of capacity.
So does 2nd quarter growth say anything at all about the Trump economic agenda? The tax cut probably helped give the economy a bit of a bump: massive deficit spending will do that. (Obama could have presided over a much more rapid recovery if Republicans hadn't insisted that deficits and debt are vast evils – but only when a Democrat is in the White House.) But deficit-based Keynesian stimulus wasn't how the tax cut was sold, and isn't a basis for sustained growth.
In short, one quarter's growth is a nothingburger. The real news is that we're still waiting for both the investment surge and the wage gains the tax cutters promised; as far as we can tell, they're never coming.
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