16 November 2019   Leave a comment

For the first time in the 5 months of protests in Hong Kong, the People’s Liberation Army (PLA) has been dispersed in the streets, purportedly to “clean up” the streets. The move undoubtedly signals the growing unease of the Beijing government over the protests, and we shall have to see whether the PLA will take more active steps to quell the demonstrations. The student protesters have erected barricades on their campuses and are allegedly making Molotov cocktails. But the central government still faces a serious decision. Sending in the troops would likely inflame tensions even more and would be perceived by many as a confession of failure on the part of the Beijing government. But the protests have taken a real toll on the Hong Kong economy. China relies heavily on Hong Kong to be a conduit for capital from the outside world which trusts the Hong Kong legal system more than the legal system in Beijing. Already, many international universities have pulled their study abroad students out of Hong Kong for fears of the safety of the students. The US government has yet to formulate a clear response to the challenges posed by the protests.

The International Institute for Strategic Studies has published a very informative article on Iran’s strategic intent. The article points out how Iran has been pursuing a very robust foreign policy in the Middle East since the overthrow of Saddam Hussein in Iraq in 2003:

“By 2019, Iran’s influence in Iraq, Lebanon, Syria and Yemen had become a new normal in a region where such a concept would have once been unthinkable by the region’s leaders, including those in Tehran. Iran had achieved much of this change using a transnational Shia militancy, capable of fighting with varying degrees of skill and discipline, which confronted different Iranian adversaries on disconnected battlefields simultaneously.

“No state has been so active, and perhaps as effective, as Iran in regional conflicts in modern times. The list of Iran’s actions against regional targets is long: Iranian personnel and equipment have conducted offensive cyber attacks, enabled naval attacks in the Red Sea, and missile and UAV attacks on Saudi Arabia and its population. The Islamic Revolutionary Guard Corps’ (IRGC’s) Quds Force operations have sparked hundreds of Israeli airstrikes against Iranian and Iranian-backed-group sites in Syria. Iran has also maintained small ground forces in Syria, Yemen and sometimes Iraq.”

The article is incredibly detailed and will be useful for anyone who wishes to understand Iran’s intentions and capabilities in the Middle East.

Posted November 16, 2019 by vferraro1971 in World Politics

15 November 2019   Leave a comment

CNN is reporting that US President Trump is asking South Korea to pay 400% more than it currently does to have US troops stationed on the Korean peninsula. The request comes as the US and South Korea are reviewing the plans for scheduled military exercises which have been a constant feature of the military alliance between the two states since 1953. The US demand comes as North Korea is ratcheting up its demands for greater progress in the denuclearization process:

“‘We explicitly defined the joint military drill being planned by the U.S. and South Korea as a main factor of screwing up tensions of the Korean peninsula and the region out of control,’ the statement reads. 

“‘Despite our repeated warnings, the US and the South Korean side decided to push ahead with the military drill hostile to the DPRK at the most sensitive time,’ the statement reads. North Korea has imposed a year-end deadline for the US to come up with a strategy for reopening dialogue between the two countries; US Secretary of Defense Mark Esper said ‘talks about talks’ are in the works as he headed to South Korea on Wednesday, according to The Washington Post. 

“But while the statement is clear that North Korea is dissatisfied, it’s not clear what the consequences of that dissatisfaction are.”

It is unclear what North Korea is threatening. NDTV quotes a South Korean analyst about the statement’s implications: “Cheong Seong-chang, a senior fellow at South Korea’s Sejong Institute think-tank, said the North Korean statement appeared to be aimed at justifying future military actions.”

It is also unseemly for the US to make its monetary demands public. The US declaration makes it appear as if the US forces are mercenaries. It is far better for such negotiations to be handled discreetly. It seems highly implausible that the US would pull its troops out of the Korean peninsula if South Korea refuses to pay.

President Trump hosted Turkish President Erdogan at the White House at a time when US-Turkish relations are quite tense. The US disapproves of the Turkish decision to buy Russian anti-missile systems that could compromise the effectiveness of the American top-of-the-line fighter plane, the F-35. Additionally, the Turkish decision to invade Syria placed the Kurds, an important US ally in the region, in a very dangerous situation. These disputes need to be resolved, but it is not clear that a White House visit, with all the legitimacy it confers, was the right venue to discuss those matters. Indeed, President Erdogan took the occasion to return a letter send to him by President Trump that Erdogan considered highly insulting. Despite all these controversies, it is clear that the Turkish press regards the Erdogan visit as a victory for President Erdogan.

“Aykan Erdemir, a senior fellow with the Foundation for Defense of Democracies and a former member of the Turkish parliament, said Erdoğan’s remarks are meant to send a message in Turkey.

“’Erdoğan really is a very cunning politician, so he is speaking in a way, when translated into English, let’s say harmless comments,’ he said. ‘But when his loyalists listen in Turkish, in Turkey, they can be interpreted as Erdoğan dominating Trump, or even insulting Trump.’”

The relationship between President Trump and President Erdogan is mystifying, as is President Trump’s relationship with Russian President Putin, Saudi Arabian Crown Prince Salman, and North Korean leader, Kim Jong-un.

Posted November 15, 2019 by vferraro1971 in World Politics

13 November 2019   Leave a comment

There are reports that the Trump Administration is considering additional tax cuts specifically targeted toward the middle class. The political aspect of this possibility lies in its attractiveness as a campaign promise in 2020. The ideological aspect is neoliberal: lower taxes are believed to stimulate investments that stimulate job creation (the “trickle-down” theory). These cuts follow those made in 2017 which changed rates in dramatic fashion. For the first time in US history, “labor income was taxed at a higher rate than capital income”. Perversely, the tax cuts of 2017 have not delivered on the promise of increasing business investments: “15 months after it took effect, business investment has actually been contracting, falling 1 percent and 3 percent in the past two quarters.” Finally, the current tax rates are profoundly regressive: “the 400 richest Americans now pay a total tax rate of about 23% — that’s lower than the bottom half of U.S. households, who pay a rate of about 24%.”  What is especially curious is how little outcry has developed as the less well-off begin to subsidize the life styles of the better-off.

Posted November 13, 2019 by vferraro1971 in World Politics

10 November 2019   Leave a comment

After weeks of protests, Bolivian President Evo Morales announced that he would resign from his position. Morales is the first indigenous President of Bolivia and he has won three elections in the past, the first time in 2006. He ran for a fourth term despite the fact that the Bolivian constitution prohibited a fourth term. The Organization of American States investigated the election and found that there were widespread irregularities in the election, and it recommended that Morales step down. But the protests led the Bolivian military to intervene and the military made it clear that it would not tolerate another term for Morales. Morales’s resignation leaves Bolivia in somewhat of a twilight zone as new elections have to be scheduled.

On 7 November there was a US Defense Department Press Briefing by Assistant to the Secretary of Defense for Public Affairs Jonathan Rath Hoffman and Navy Rear Admiral William D. Byrne Jr. It was a fascinating briefing and the press asked several very good questions about the decision of the US to place troops to secure the Syrian oil fields. Ostensibly, the mission is to prevent ISIS from gaining control of those oil fields and the oil revenues that they could gain from selling the oil. It is hard to imagine ISIS having the capability to take control of the oil fields since the organization is very fragmented now and has no weaponry such as tanks that could hold territory. The US holds that all the revenues from the oil fields will go to the Kurdish-led Syrian Democratic Force (SDF), perhaps as a way to help the Kurds after they were betrayed by the US decision to leave northeastern Syria last month. The Kurds, however, have no legal right to the oil revenues. But the most interesting question was how the US would handle an attempt by the Syrian government to take control of the oil fields–after all, the oil is on Syrian sovereign territory and US troops are not in Syria at the request of the Syrian government.

Q: If I may follow up? So if – do – do the – the U.S. troops have the – the authorization to shoot if a representative of the Syrian government comes to the oil fields – oil fields and says I am here to take property of these oil fields?

REAR ADM. BYRNE: On the other forces in the area, I think we’re all aware of who the players are in the field here. And to the rules of engagement in particular, I’m not going to get into specifics but – but I’ll make a couple of quick points on that.

First is deconfliction; and there are existing – existing deconfliction channels in place in theater amongst U.S. forces and all of the players – that’s airspace deconfliction, deconfliction on the ground. So we want to prevent incidents from happening by getting out in front of it.

The second is de-escalation; and when – when met with an unsure situation, an uncertain situation, the first thing we try and do – to do is de-escalate the situation. So we step through pre-planned responses to de-escalate. We identify who that potential threat might be, we make our presence known by sight and sound, and then we communicate with them to figure out who are you, why are you here, and what are your intentions, in order to de-escalate the situation.

And – and finally, our commanders always retain the right and the obligation of self-defense when faced with a hostile act or demonstrated hostile intent.

(CROSSTALK)

Q: The legal basis of controlling the oil fields, the government of Syria is still, based on international law in the U.N., is still recognized legitimate government. Are government forces allowed to go back and retake national resources that belong to … 

MR. HOFFMAN: I will – I will – I will make it – I’ll … 

(CROSSTALK)

MR. HOFFMAN: … I’ll put it very simply. Everyone in the region knows where American forces are. We’re very clear with anyone in the region in working to deconflict where our forces are. If anyone – we work to ensure that – that no one approaches or has – shows hostile intent to our forces, and if they do, our commanders maintain the right of self-defense. 

The position of the US in Syria is untenable. US troops are an occupation force and have no legal right to hold Syrian territory. If Syria decides to regain control of the oil fields, and they may have the support of Russian troops in the country, then the US will be placed in a very uncomfortable position. The right of “self-defense” in such a situation is essentially the right to withdraw troops if they are threatened.

Posted November 10, 2019 by vferraro1971 in World Politics

9 November 2019   1 comment

The torrid growth of the stock market this year (18% growth) has aggravated the problem of inequality in the US. That growth last week added another $1 trillion of value in the stock market. That increase in value gives the top 1% of American society almost as much wealth as the middle and upper middle classes. According to Bloomberg:

“It may not be long before one-percenters actually surpass the middle and upper-middle classes. Household wealth in the upper-most bracket grew by $650 billion in the second quarter of 2019, while Americans in the 50th to 90th percentiles saw a $210 billion gain.

“For now, those Americans in 90th to 99th percentiles — well-to-do, but not the super rich — still control the biggest share of wealth, with $42.6 trillion in assets.

“The lone group left out of the fun: the bottom 50% of Americans. Those households have 35.7% of liabilities in the U.S. and just 6.1% of assets.”

The increase in wealth is hardly the result of robust economic growth–the US economy is growing but only at a rate of about 2% a year, much lower than the 18% increase in the value of the stock market. The stock market continues to grow rapidly because the cost of money is very low due to the low interest rates maintained by the US Federal Reserve.

The political question is how much tension these disparities will create. In the US, the Baby Boomer generation has 11 times the wealth of the Millennial generation. Right now, it does not appear as if the Millennials will take to the streets. But it is clear, that inequality is a prime mover of the protests that have occurred throughout the world this year.

Today marks two anniversaries. One is the anniversary of Kristallnacht, the night in 1938 when mobs of people in Germany, Austria, and the Sudetenland attacked the homes and shops of Jewish owners. The word Kristallnacht refers to the sound of shattered glass as windows were broken by the mobs, acts that were tolerated by the authorities. The violence presaged the Holocaust catastrophe. The violence was followed by the following changes in the treatment of Jews in Nazi-controlled areas:

  1. Jews were required to turn over all precious metals to the government.
  2. Pensions for Jews dismissed from civil service jobs were arbitrarily reduced.
  3. Jewish-owned bonds, stocks, jewelry and art works can be alienated only to the German state.
  4. Jews were physically segregated within German towns.
  5. A ban on the Jewish ownership of carrier pigeons.
  6. The suspension of Jewish driver’s licenses.
  7. The confiscation of Jewish-owned radios.
  8. A curfew to keep Jews of the streets between 9:00 p.m. and 5:00 a.m. in the summer and 8:00 p.m. and 6:00 a.m. in the winter.
  9. Laws protecting tenants were made non-applicable to Jewish tenants.
  10. [Perhaps to help insure the Jews could not fight back in the future, the Minister of the Interior issued regulations against Jews’ possession of weapons on November 11. This prohibited Jews from “acquiring, possessing, and carrying firearms and ammunition, as well as truncheons or stabbing weapons. Those now possessing weapons and ammunition are at once to turn them over to the local police authority.”]

Unfortunately, the world turned its back on the Jews who were disenfranchised by these actions. The inaction of the global community gave the Nazis the sense that their treatment of Jews would not result in any penalties.

The second anniversary is the collapse of the Berlin Wall in 1989. The wall was built in 1961 by East German authorities who wanted to prevent the outflow of people from East Berlin to West Berlin because the outflow suggested the failure of Communist rule in East Germany. For people in the West, the Wall symbolized the totalitarian rule enforced by the Soviet Union on its client states in East and Central Europe.

In 1989, there was increased pressure by the people of East Berlin to have access to the West and the ability of the East Germans to control the population of their part of the city declined precipitously. Ultimately, people began to move across the border and people in West Berlin began to tear down the wall. The collapse of the Berlin Wall signaled the beginning of the end of the Cold War which finally resulted in the dissolution of the Union of the Soviet Socialist Republics (USSR) in 1991.

The Collapse of the Berlin Wall

Posted November 9, 2019 by vferraro1971 in World Politics

7 November 2019   6 comments

Scientific American has published a fascinating article entitled “Is Inequality Inevitable?” Wealth Inequality is increasing in almost every country on the planet:

“Wealth inequality is escalating at an alarming rate not only within the U.S. but also in countries as diverse as Russia, India and Brazil. According to investment bank Credit Suisse, the fraction of global household wealth held by the richest 1 percent of the world’s population increased from 42.5 to 47.2 percent between the financial crisis of 2008 and 2018. To put it another way, as of 2010, 388 individuals possessed as much household wealth as the lower half of the world’s population combined— about 3.5 billion people; today Oxfam estimates that number as 26. Statistics from almost all nations that measure wealth in their household surveys indicate that it is becoming increasingly concentrated.”

It is difficult to explain the process of concentrating wealth in a market economy if one accepts the traditional defense of market capitalism. The market is supposed to be a completely neutral mechanism, rewarding only those who produce goods and services with high efficiency for which there is a high demand. The implicit assumption is that all persons have equal freedom to make good choices, and that assumption leads to a conclusion that there should be no bias in the allocation of rewards for good choices. That assumption does not square with the actual distribution of rewards in a market economy.

There are many ways to account for the seemingly systematic bias in market economies. Race and gender biases undermine the assumption that all persons have equal freedom. There are also political biases in the creation of laws and regulations that favor some individuals over others (this explanation is the one I prefer). But the article in Scientific American makes the interesting argument that the bias in market economies is a feature of the market itself: in other words, inequality is inherent in any economy in which transactions between individuals occur. Even more interesting is the possibility that the inherent bias argument resonates with some theories in physics.

The explanation is actually simple but requires an extended quote from the article.

” To understand how this happens, suppose you are in a casino and are invited to play a game. You must place some ante—say, $100—on a table, and a fair coin will be flipped. If the coin comes up heads, the house will pay you 20  percent of what you have on the table, resulting in $120 on the table. If the coin comes up tails, the house will take 17  percent of what you have on the table, resulting in $83 left on the table. You can keep your money on the table for as many flips of the coin as you would like (without ever adding to or subtracting from it). Each time you play, you will win 20 percent of what is on the table if the coin comes up heads, and you will lose 17 percent of it if the coin comes up tails. Should you agree to play this game?….

“If our goal is to model a fair and stable market economy, we ought to begin by assuming that nobody has an advantage of any kind, so let us decide the direction in which ∆w is moved by the flip of a fair coin. If the coin comes up heads, Shauna gets 20  percent of her wealth from Eric; if the coin comes up tails, she must give 17  percent of it to Eric. Now randomly choose another pair of agents from the total of 1,000 and do it again. In fact, go ahead and do this a million times or a billion times. What happens?

“If you simulate this economy, a variant of the yard sale model, you will get a remarkable result: after a large number of transactions, one agent ends up as an “oligarch” holding practically all the wealth of the economy, and the other 999 end up with virtually nothing. It does not matter how much wealth people started with.It does not matter that all the coin flips were absolutely fair. It does not matter that the poorer agent’s expected outcome was positive in each transaction, whereas that of the richer agent was negative. Any single agent in this economy could have become the oligarch—in fact, all had equal odds if they began with equal wealth. In that sense, there was equality of opportunity. But only one of them did become the oligarch, and all the others saw their average wealth decrease toward zero as they conducted more and more transactions. To add insult to injury, the lower someone’s wealth ranking, the faster the decrease.”

There is a great deal of new information (in the last ten years) that suggests that inequality is an inherent feature of any market economy. For example, Thomas Piketty in his book, Capital in the 21st Century, looked at income and wealth distribution over an extended period of time and found that the return to capital was about 5% a year whereas the return to labor was about 3% a year. That empirical approach confirms an inherent bias, but only among two basic groups: sellers of labor and holders of capital. That conclusion is not inconsistent with the argument in Scientific American, but it is more limited. In both cases, however, the effective conclusion is that if society decides that growing inequality is a serious problem, then the solutions must necessarily involve non-market approaches:

“Moreover, only a carefully designed mechanism for redistribution can compensate for the natural tendency of wealth to flow from the poor to the rich in a market economy. Redistribution is often confused with taxes, but the two concepts ought to be kept quite separate. Taxes flow from people to their governments to finance those governments’ activities. Redistribution, in contrast, may be implemented by governments, but it is best thought of as a flow of wealth from people to people to compensate for the unfairness inherent in market economics. In a flat redistribution scheme, all those possessing wealth below the mean would receive net funds, whereas those above the mean would pay. And precisely because current levels of inequality are so extreme, far more people would receive than would pay.”

That inequality is not “random” is nicely captured by a map of income inequality produced by the International Monetary Fund (IMF). It is a map of inequality in the US and just a quick glance confirms that there are clear departures from a random distribution of income in the US.

Posted November 7, 2019 by vferraro1971 in World Politics

5 November 2019   Leave a comment

11,000 scientists representing 153 countries issued a statement expressing deep concern over the process of climate change. The statement was issued in the science journal Bioscience on the same day that US President Trump announced the US intention to leave the Paris Climate Agreement. It reads in part:

“Despite 40 years of global climate negotiations, with few exceptions, we have generally conducted business as usual and have largely failed to address this predicament (figure 1). The climate crisis has arrived and is accelerating faster than most scientists expected (figure 2, IPCC 2018). It is more severe than anticipated, threatening natural ecosystems and the fate of humanity (IPCC 2019). Especially worrisome are potential irreversible climate tipping points and nature’s reinforcing feedbacks (atmospheric, marine, and terrestrial) that could lead to a catastrophic “hothouse Earth,” well beyond the control of humans (Steffen et al. 2018). These climate chain reactions could cause significant disruptions to ecosystems, society, and economies, potentially making large areas of Earth uninhabitable.”

The statement notes that the political will do address climate change does not exist in many governments, and that the crisis is already upon us and will only get worse. Naomi Oreskes and Nicholas Stern wrote an op-ed for The New York Times which assesses the economic impacts of a warmer planet. They conclude that the economic costs have been seriously underestimated:

“The urgency and potential irreversibility of climate effects mean we cannot wait for the results of research to deepen our understanding and reduce the uncertainty about these risks. This is particularly so because the study suggests that if we are missing something in our assessments, it is likely something that makes the problem worse.”

We shall see if this manifesto changes the political dynamic of the discussion about climate change. Unfortunately, most evidence suggests that nothing will change.

Iran has announced that it will take a fourth step away from the terms of the Joint Comprehensive Plan of Action (JCPOA), more commonly referred to as the Iranian nuclear deal. It was an agreement forged between Iran and the US, France, Great Britain, Russia, China, and Germany signed in 2015 which limited Iranian nuclear activities in return for the end of economic sanctions designed to punish Iran for its nuclear program. President Trump violated the Agreement in 2017 by unilaterally ending US participation in the Agreement despite clear evidence that all the other signatories had honored their commitments. Al Jazeera provides a good background to the significance of the Iranian moves since the US departure.

The Iranian news agency, MEHR, indicated that this move gives Iran the ability to enrich Uranium to a much higher level of purity in a much faster time. If true, Iran is now very close to having the capability to build a nuclear bomb, even though it still insists that that is not its current objective. Virtually all countries expressed dismay at the Iranian decision, but unless the world is willing to lift more sanctions, Iran will probably continue to use the nuclear program as a lever to force economic relief. President Trump now must face an Iran which is significantly closer to building a nuclear bomb than it was when Mr. Trump took office. One must count the US policy toward Iran as a profound failure.

Kavita Khory is one of the world’s pre-eminent analysts of South Asian security matters. One of her most recent lectures was at the Springfield, MA World Affairs Council. It was comprehensive and sophisticated, covering a variety of security matters. An extraordinary lecture. The video of her talk is below.

Posted November 5, 2019 by vferraro1971 in World Politics

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