The Economist has issued its global wealth forecast for 2016. It predicts modest global growth of around 2.7%, a rate that is below that necessary to create enough jobs for new workers entering the job market. But the most interesting part of the forecast is the reversal of fortunes between the developed economies and the emerging economies. The emerging economies (Brazil, Russia, India, China, South Africa) have been the growth centers since 2011, but their slowdown in 2015 has been dramatic and shows little sign of reversing course. The US and Europe are slated to do a little better in 2016, but growth rates are hardly robust. Slow growth is always politically dangerous.
Richard Yeselson has written a fascinating essay on the rise of Donald Trump and how the forces that seem to be ignited by his rhetoric mimic the sordid ethno-nationalism that afflicted the US in the 1920s. The rigid ideologies of that period, the romantic illusion of a “white” America, and the irrational fear of immigrants all seem to be replaying in the current political scene in the US. Those passions actually seem to be taking hold all over the world. Economic hard times often lead to such conditions.
In a live-fire exercise, Iran shot off unguided rockets about 1,500 yards away from the US aircraft carrier, USS Harry Truman which was operating in the Strait of Hormuz. Iran had announced its intention to fire the rockets so it was not an attack on the US vessel. But the Strait of Hormuz is only about 20 navigable miles across and the area is bristling with naval vessels from a large number of countries. Such activities simply raise the level of tension in an already dangerous situation.
The US tax system is impossible to understand. The tax code takes about 2000 pages to articulate and many of those pages are incomprehensible. There is probably no good public policy interest to justify such complexity, but the code reflects a systematic effort to create opportunities for individuals and corporations to reduce their tax obligations. The New York Times has an article in today’s paper that every American should be required to read. The essential argument of the essay? The US has the most biased tax code that money can buy: owners of capital pay a much lower percentage in taxes than do owners of labor.
Do lower taxes lead to higher rates of economic growth?
The evidence doesn’t support that proposition.
After retaking the city of Ramadi, Iraqi forces will turn their attention to the much larger and much more important city of Mosul. That city, however, is contested by both Iraqi Arabs and Iraqi Kurds. The Iraqi army will have to cooperate with Kurdish forces to retake the city, but the Kurds will likely expect greater autonomy in the city and in their parts of Iraq as the price for their support. The Kurds are emerging as the pivotal element in the fight against Daesh (the Islamic State), but they hold weaker cards in the longer game for their own aspirations.
Some are predicting that the North Pole will have temperatures above freezing tomorrow. If that does happen, it will only be the second time in recorded history that above freezing temperatures have occurred in the winter. There is little question that the weather in South Hadley has been very strange this winter. Something weird is definitely going on.
During World War II, as many as 200,000 women and girls were kidnapped from Korea, China, the Philippines and other Southeast Asian nations and were forced by the Japanese Imperial Army to work as sex slaves. That atrocity has bedeviled Japanese relations with its neighbors throughout the postwar period. Finally, the Japanese government has acknowledged its guilt and promised to pay $8.3 million into a South Korean account to support the surviving 46 South Korean women who were kidnapped. While some of those women have rejected the agreement, South Korea has indicated that it will consider the dispute successfully “resolved” if Japan keeps its word. We will see how others regard the settlement.
The rules governing the treatment of refugees are outlined in the UN’s 1951 Convention Relating to the Status of Refugees. Denmark is questioning two parts of that convention. The first governs the movement of refugees from states that are not at war, and the second questions the right of families to follow refugees granted asylum. Reopening the convention to changes would likely allow other changes to be entertained and would also likely take an extended period of time. But the simple fact that the convention is being questioned is an index of how troubling the refugee issue has become to some of the European states.
Last May, US Special Operations Forces conducted a raid in Syria that killed Daesh (Islamic State) financial official, Abu Sayyaf. In that raid, thousands of documents were taken. These documents allegedly outline a very sophisticated bureaucracy governing everything from the handling of oil revenues to the treatment of slaves. Taken altogether, the documents belie the idea of a ragtag, ideologically driven jihadist group. Rather, they suggest officials with long careers in government bureaucracy such as the careers of former Baathist officials in the former Saddam Hussein regime. One should be aware that Daesh is comprised of many people that wish to restore a Hussein-like, Sunni-rule over Iraq and Syria.
The US sold about $36.2 billion of military equipment to others in 2014. Russia was the second largest arms seller at $10.2 billion, followed by Sweden at $5.5 billion, France at $4.4 billion, and China at $2.2 billion. The American amount increased by $10 billion for 2013 and military manufacturers were likely the most dynamic sectors in the American economy. The primary buyers of American military equipment were South Korea, Iraq, and Brazil.
Samir Kuntar, a high-ranking official of Hezbollah, was assassinated in Damascus. From his headquarters in Lebanon, the leader of Hezbollah, Hassan Nasrallah, accused Israel of the assassination and vowed retaliation. It is unlikely that a major conflict between Israel and Hezbollah will break out soon, but Hezbollah has been very active in Syria supporting President Assad and has been increasingly well-armed by Iran.
The increased military action by Turkey against Kurds in Southeast Turkey has led to increased demands by the Kurds for greater autonomy. Kurdish successes against Daesh (the Islamic State) in Syria have heightened fears in Turkey of Kurdish independence. However, the iron fist strategy of President Erdogan against the Kurds is leading to inevitable demands for self-rule. A video of Kurdish actions against Turkish troops appears below the map.
Iraqi forces have taken back major parts of the city of Ramadi, a city held by Daesh (the Islamic State) for nearly a year after a humiliating defeat of the regular Iraqi army. The city is apparently laced with booby traps, so the Iraqis are moving quite slowly to recover the entire city. Defeating Daesh in the city would be a major psychological victory for the Iraqis, and could lead to the liberation of the city of Mosul, a significantly more strategically important city.
There has been major flooding in the US south, in the north of England, and in Paraguay, Argentina, Uruguay, and Brazil. These floods has been especially destructive and many believe that they are all related to the intense El Niño in the eastern Pacific. More than 100,000 people have been forced to evacuate in the South American countries.
Flooding in Asuncion, Paraguay
For the first time, China has sent an armed naval vessel into waters near the disputed islands called Diaoyu by the Chinese and Senkaku by the Japanese. Much attention has been given to the maritime disputes in the South China Sea, but this dispute in the East China Sea has been simmering for some time. As the chart below indicates, the pace of challenges over the disputed islands has been elevated for some time.
Number of Chinese vessels sighted near the Senkaku/Diaoyu Islands (Source: Japan Coast Guard)
Indian Prime Minister, Narendra Modi, paid a surprise visit to Prime Minister Nawaz Sharif of Pakistan today. The meeting was unexpected and it came in the midst of a diplomatic trip by Modi to Afghanistan, which Pakistan has always viewed as within its sphere of influence. The two countries have had a very tense relationship throughout their history since the partition in 1947 and current relations are quite bad. It is difficult to determine how significant this personal meeting might be in terms of the relationship between the two states.
Russian airstrikes killed Zahran Alloush, the head of Jaysh al Islam, one of the most important rebel groups opposing Syrian President Assad. The killing of Alloush is a serious blow to American and Saudi hopes of cultivating a “moderate” rebel opposition to Assad to offset the allure of Daesh (the Islamic State). It is difficult to see any viable alternative for the Americans other than to accept Assad’s continuation in office to preserve the integrity of Syria. The Russians closer to boxing the Americans into that position.
Manuel Funke, Moritz Schularick, and Christoph Trebesch are three German economists who have studied the political impact of financial crises. They constructed a dataset of more than 800 elections from 1870 to 2014 and included 100 financial crises and their aftermaths, including protests and strikes. Their conclusions are straightforward:
“The typical political reaction to financial crises is as follows: votes for far-right parties increase strongly, government majorities shrink, the fractionalisation of parliaments rises and the overall number of parties represented in parliament jumps. These developments likely hinder crisis resolution and contribute to political gridlock. The resulting policy uncertainty may contribute to the much-debated slow economic recoveries from financial crises.”
These conclusions resonate strongly with the experiences of the world since the financial crisis of 2008-09.
Paul Krugman has written a review of Robert Reich’s new book, Saving Capitalism, for the New York Review of Books. The review focuses on the current explanations for the growing income inequality in the US and why these explanations fail. Ultimately, Krugman argues that the failure rests on the inability of economic theory to address how economic power produces inequality:
“Economists struggling to make sense of economic polarization are, increasingly, talking not about technology but about power. This may sound like straying off the reservation—aren’t economists supposed to focus only on the invisible hand of the market?—but there is actually a long tradition of economic concern about “market power,” aka the effect of monopoly.”
The analysis Krugman offers is compelling. For many products and services in the US there is no such thing as a “free” market. And politics has been an active conspirator in creating this imbalance of power.
Happiness is only possible in the company of friends
Last September, the Pew Research Center did a poll in China of the top concerns of Chinese citizens. The top three concerns were corruption, pollution, and inequality. The three issues come as no great surprise, although some might have expected the slowing economy in China to rank higher. I was also surprised to see crime as a major issue, although it probably is difficult to separate that issue form the issue of corruption.
Rami Jarrah is a Syrian journalist who has been posting photos on Instagram of the devastation of the civil war around the city of Aleppo. The photos are significantly more powerful than words in conveying the both the horrors of the war as well as the deep, deep humanity of the Syrian people. The notes he keeps of his photos are sensitive and reveal the extent to which he is only an observer of a great crime.
Although it is hard to believe, Russian airstrikes in Syria have brought about even greater destruction than the country has endured before. Resports from the ground suggest that the Russian airstrikes are massive and less targeted than the anti-ISIS coalition forces. Humanitarian agencies have suspended their efforts because of the intensity of the strikes and the inability to move around the country to bring assistance to where it is needed.
Idlib city, Syria December 20, 2015
Seymour Hersh, one of the world’s premier investigative reporters, has published an incredible essay in the London Review of Books, that argues that the US Defense establishment has been quietly nudging the Obama Administration in the direction of support for Syrian President Assad and Russian support for Assad. In the process, those analysts have argued that Turkey and Saudi Arabia are actually working hard to support Daesh (the Islamic State) and that the US should move away from its erstwhile allies. The essay has provoked a storm of controversy by Max Fisher, Steven Rosenfeld, and others. My own reading of the tea leaves suggests that Hersh is essentially correct in his assessment.
The Somali militant group Al-Shabab has been conducting a campaign of violence against Christians in Kenya. A typical tactic in the terror campaign is to stop a bus and then separate the Muslims on the bus from the Christians and then execute the Christians. On Monday, the tactic backfired when the Muslims on the bus refused to leave the bus and told the terrorists to kill them as well as the Christians. It was an incredible act of bravery and solidarity that is testimony to the resilience of a country that has seen its share of violent acts.
Sales of personal safety items such as pepper sprays, mace, and even guns, have increased dramatically in Germany this year. According to Die Welt:
“The Frankfurter manufacturer DEF-TEC Defense Technology reported this fall, an increase of 600 per cent sales of pepper spray. ‘In early September was the lot. The dealers have since been overrun downright’ says Managing Director Kai Prase.
“Especially handy models MK 8 MK MK 6 and 3, all of which are also used in non-professional use would reordered in large quantities. ‘We have never experienced anything in 21 years of company history.’ And what triggered the Run? ‘Fear. This is not rational,’ says Prase who has puzzled with dealers about the possible reasons for the weapons hype. ‘There probably falls often the word refugee crisis.'” (translated by Google)
Interestingly, the use of pepper sprays in Germany is limited only to use against dangerous animals. Even German soldiers abroad are forbidden to use pepper spray as it is considered to be a violation of the Geneva Convention against Chemical Weapons.
The UN estimates that as many as one million children in Nigeria, Cameroon, Chad and Niger have been prevented from going to school by the violence perpetrated by Boko Haram. Schools have been special targets of the extremist groups and parents are reluctant to allow their children to be exposed to the violence. It is impossible to calculate how damaging this consequence of extremist violence has and will be to the future of these countries.
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