Adam Tooze's Blog, page 25
February 9, 2022
Chartbook #80: The Economic Weapon – the real history of sanctions.
“(W)e tried, just as the Germans tried, to make our enemies unwilling that their children should be born; we tried to bring about such a state of destitution that those children, if born at all, should be born dead.” – William Arnold-Forster, a British blockade administrator and ardent internationalist, reflecting on the World War I blockade of Germany.
Sanctions are all over the news right now. Afghanistan, Iran, Syria and Russia come to mind.
Against this backdrop, Nicholas Mulder’s new book, The Economic Weapon: The Rise of Sanctions as a Tool of Modern War (Yale), is essential reading, not just for historians.
Btw, Nick (@njtmulder) is also a great follow on twitter and, full disclosure, a close friend. What follows isn’t so much a critique as an appreciation. I’ve seen this project in many stages and I am really delighted to see what Nick has pulled off.
If you don’t trust me 
check out the write ups by Lawrence Freedman in Foreign Affairs and Paul Kennedy in WSJ or Henry Farrell on twitter. As Henry says:“This is going to be a debate changing book.”
If you have any interest in political economy, international relations, interwar history, if you liked Deluge or Wages of Destruction, you should check Mulder’s book out. It’s highly original, powerfully argued, wonderfully well-written and elegantly produced by Yale UP, with lots of excellent illustrations.
As I want to emphasize in this newsletter, it ought to appeal to those interested in the history of neoliberalism and liberal economic ideas too.
One way of reading Mulder is to see his book as offering a history of another “new liberalism” to set alongside Quinn Slobodian’s rightly-celeberated history of neoliberalism, Globalists. If Slobodian showed how neoliberalism was born in central Europe out of the desire to defend capitalism against the collapse of Empire and the emergence of economic nationalism, Mulder shows us the other side of the dialectic – how aggressive nationalist drives for autarky were fueled by another new liberalism’s exorbitant schemes for weaponizing the world economy.
The crucial point to emphasize is that following World War I, the economic blockade was seen as a truly devastating weapon. Until the advent of giant fleets of heavy bombers, and atomic weapons, the blockade was a far more plausible means for striking against the enemy’s home front than airpower. All told, in World War I, aerial bombardment (by Zeppelin for example) killed perhaps two thousand civilians, the majority of them in Britain. By contrast, the Allied economic blockade, unarguably, killed hundred of thousands of civilians on the side of the Central Powers. Mulder gives 300-400,000 as a plausible figure. In the Middle East, 500,000 civilians died in blockade-induced famines.
As Mulder remarks:
Before World War II these hundreds of thousands of deaths by economic isolation were the chief man-made cause of civilian death in twentieth-century conflict
Economic warfare was a mighty weapon and the victor powers in World War I saw as it as the obvious tool through which the League of Nations would deter war and enforce peace. It was liberalism’s ultimate weapon.
This should lead to a fundamental revision of our view of the entire League project. As Mulder puts it:
The collapse of the global political and economic order in the 1930s and the outbreak of a second world war have made it easy to dismiss the League as a utopian enterprise. Many at the time and since concluded that the peace treaties were fatally flawed and that the new international institution was too weak to preserve stability. Their view, still widespread today, is that the League lacked the means to bring disturbers of peace to heel. But this was not the view of its founders, who believed they had equipped the organization with a new and powerful kind of coercive instrument for the modern world. That instrument was sanctions, described in 1919 by U.S. president Woodrow Wilson as “something more tremendous than war”: the threat was “an absolute isolation . . . that brings a nation to its senses just as suffocation removes from the individual all inclinations to fight. . . . Apply this 2 Introduction economic, peaceful, silent, deadly remedy and there will be no need for force. It is a terrible remedy. It does not cost a life outside of the nation boycotted, but it brings a pressure upon that nation which, in my judgment, no modern nation could resist.”1 In the first decade of the League’s existence, the instrument described by Wilson was often referred to in English as “the economic weapon.”
In retrospect the economic weapon reveals itself as one of liberal internationalism’s most enduring innovations of the twentieth century and a key to understanding its paradoxical approach to war and peace.
The German legal theorist and later advisor to the Nazis, Carl Schmitt, is famous for arguing that the League and its economic weapon blurred the boundary between war and peace. The League veiled the iron first of Anglo-American hegemony in a velvet glove of commerce and morality. On the general point, Schmitt was not wrong. But, as Mulder makes clear, Schmitt was neither particularly original, nor particularly precise in making his case.
The late 1920s were marked not by a sinister liberal plot orchestrated through the League, but by a hybrid condition of transition from one political-legal order to another. The new “public” system of collective security and League sanctions was chafing against an older “private” system of limited war, neutrality, and humanitarian law. It was precisely the uneasy coexistence of these two paradigms between 1927 and 1931 that made the period’s politics so disorienting. But this was not, as Schmitt suggested, a struggle between liberalism and some anti- or non-liberal alternative; in his preference for the older separationist system, Schmitt was in fact aligned with many classical liberals and future neoliberals.98 The divide between sanctionism and neutrality expressed not a conflict between liberalism and its enemies but a clash between opposing paradigms within liberalism itself.
Certainly the deployment of economic sanctions was tied up with a more general mutation of liberalism. In the interwar period a new strain of liberalism emerged. Its preeeminent domain were the fields of technical governance, the administrative apparatus of international law, expert diplomacy, logistics and applied economics.
Long-standing traditions, such as the protection of neutrality, civilian noncombatants, private property, and food supplies, were eroded or circumscribed. Meanwhile, new practices, such as police action against aggressor states and logistical assistance to the victims of aggression, arose. All of this amounted to a major and complex transformation of the international system. Today, economic sanctions are generally regarded as an alternative to war. But for most people in the interwar period, the economic weapon was the very essence of total war.
If populist, democratic economic nationalism was one of neoliberalism’s enemies, this other new liberalism, was another. Economic sanctions were the weapons of experts.
As Mulder remarks, sanctions and blockade were a new kind of war, an expert, bureaucratic war.
Sanctions were attractive not just because of their potential power, but also because they were easy to use for their handlers. Their coercive power was administered not out of the cockpit of a bomber or through the breech of a cannon but from behind a mahogany desk. Sanctions, an American commentator argued, were special because their “field of operations is not a visible terrain; but a force is exerted just the same.”
If, as Keynes remarked in the famous cameo at the beginning of the Economic Consequences of the Peace, in the halcyon days before 1914 an English gentleman could, from the comfort of his bed, order up the produce of the world. That same English gentleman, wielding the heft of the City of London and the global reach of the Royal Navy, could, later that same day, deny those same products to the civilian population of any enemy power.
Nor were interwar liberals hy about describing the awesome effects of this new means of coercion. As Mulder astutely points out, talking up the devastating effects of economic warfare was part of the deterrence strategy.
A nation put under comprehensive blockade was on the road to social collapse. The experience of material isolation left its mark on society for decades afterward, as the effects of poor health, hunger, and malnutrition were transmitted to unborn generations. Weakened mothers gave birth to underdeveloped and stunted children.4 The economic weapon thereby cast a long-lasting socio-economic and biological shadow over targeted societies, not unlike radioactive fallout.
None of this was a shameful secret. Nor was it, for the advocates of League sanctions, an argument against their favorite new weapon. Comprehensive devastation of the home front was the point. Crimes against peace were the ultimate crime in international law. Economic sanctions were the appropriate answer.
The inescapable question is, did the threat of sanctions work?
Against smaller states, Mulder argues, sanctions could claim a degree of effectiveness. They helped to deter aggression and make arbitration seem more attractive. Against the backdrop of the 1920s, when the threats of the world economy were tightly woven and the future looked bright, the elites of Germany, Italy and Japan also saw their interests aligned with the West. But, as Mulder argues in a brilliant concluding section, once the Great Depression struck, the League regime unfolded a perverse logic. The threat of economic sanctions justified moves towards radical economic nationalism, programs of autarky and ultimately warlike aggression in pursuit of the kind of Lebensraum that could withstand the global economic might of the United States and the French and British Empires.
It was not by accident that Hitler’s Germany launched its Four Year Plan in 1936, in the wake of the application of League sanctions to Mussolini.
To both Berlin and Tokyo, territorial expansion became a way to enhance self-reliance, mobilize popular support, and retain strategic independence. Conquest appeared as an avenue of escape from the anxiety of living under the Damoclean sword of international blockade. Over time, the seeming inevitability of economic war prompted both Adolf Hitler and the Japanese leadership to secure resources by any means available. The internationalist search for more effective sanctions and the ultra-nationalist search for autarky thereby became locked in an escalatory spiral
The result was paradoxical, in one particularly brilliant passage Mulder quotes Luigi Einaudi, the famous Italian liberal economist from an article of 1937, in which Einaudi pointed out that contemporary usage conflated two different notions, “autarchy” and “autarky.”
The ancient Greek term autarchy, he pointed out, derived from the words αὐτός (self) and ἀρχή (rule). It had been used by Stoic philosophers to denote independence, a political state of self-rule, or a psychological condition of self-command. This concept was distinct from autarky, which combined αὐτός with the verb ἀρκέω (to suffice) and entailed material self-sufficiency
The insurgent states of the 1930s were able to attain neither.
Since none of these three countries—united after 1936–1937 through the Anti-Comintern Pact—was self-sufficient in crucial raw materials, their search for immunity against blockade strengthened their inclination toward territorial conquest. As their strategic ambitions grew, the threat and application of new sanctions only increased the urgency of securing resources at all costs. Economic pressure, meant to restrain aggressive expansion, now began to accelerate it.
And material shortage, all too easily, could be reinterpreted through the lens of racial ideology. For Göring it was a small step from remarking that 1914–1918 Germany had possessed “insufficient counter-measures”, to warning industrialists: “Imagine only that we would no longer obtain any Swedish iron ore, if it should fall into Jewish hands!” As I argued in Wages of Destruction, the culmination of this politico-ideological-economic-grand-strategic maelstrom was Hitler’s infamous address to the Reichstag on 30 January 1939, where he linked Germany’s economic difficulties, shortages of hard currency, the prospect of world war (with the United States) to a lethal threat to European Jewry.
As Mulder remarks:
In this pattern of “temporal claustrophobia,” desperate decisions for conquest brought into being the economic pressure that the Nazis were trying to escape, causing greater problems of supply that propelled the regime forward to its inevitable defeat and destruction.138
But the chain of action and reaction did not stop there. The drive to war on the part of the insurgents, in turn, triggered a further twist in the dialectic.
On top of the punitive deployment of the economic weapon, the Allied bloc turned back in 1939 to the idea of the “positive economic weapon” – concerted economic cooperation and mutual aid, as a crucial factor in organizing world power. This, for Mulder, is the road not taken in the interwar period. Not the threat of devastation, but the promise of large-scale economic and financial support for those under threat of aggression. The giant Lend Lease program of 1941 was the logical result of that belated realization.
Whether it worked or not in deterring war, Mulder leaves us in no doubt that the emergence of the economic in World War I shaped the modern world down to the present day. The continuities to the present, however, are not straight forward.
Mulder’s brilliant book ends with an appropriately ironic historical reflection.
By 1945, the material conditions existed in which the idea of ending aggression could acquire real teeth. For the first time, a sizable group of states was able and willing not just to chastise transgressors, but also to organize resources for solidarity. At its head stood the United States, the workshop of the world, its main aid provider, and the rising sanctions wielding state. In light of its interwar opposition to sanctionism, the U.S. emergence in this role was a remarkable historical reversal.168
On its face, the new world order meant a complete defeat for any notion of neutrality.
As the British interwar liberal, Kenworthy remarked in 1944:
“in these days, first of all of totalitarian war, and then of war against robber States such as Germany and Japan, the conception of neutrality has largely disappeared. You cannot have neutrals any longer in the old sense in the future, and we shall not have won this war in the political sense if we do not succeed in establishing a system after the war by which in the case of a new aggression or new outburst of lawlessness no neutrals remain.”164 The classical era of neutrality had indeed ended, and with it, the way that war and peace had functioned in the international order.165 In the coming era of superpower conflict, the end of neutrality put the independence of small countries back into question. Economic warfare created, in the words of the blockade’s main historian, “a world fit, or fit only, for belligerents to live in.”166
But in the wake of the horrors of strategic bombing, Hiroshima and Nagasaki, in the new regime of the United Nations, the original cognitive shock of the 1920s was largely forgotten. The debates of the interwar period were dismissed or denied. The UN embargoes and Cold War–era sanctions came to be seen as a
benign alternative to atomic war, an enlightened overcoming of the past. Yet the economic weapon was an interwar creation that was carried over into the postwar world by power politics. What had changed after 1945 was that a novel group of nations had come to agree on a new institutional framework for its use. The history of sanctions also changed in character. Between the wars it had been a predominantly Euro-American affair in which the non-Western world was peripherally involved. For the rest of the century, it would be a global practice in which American power was dominant, while the socialist Eastern bloc and newly independent states in the Third World both resisted and appropriated the tools of economic pressure.
What overall lessons should we draw? I will leave you to buy and read the book to find out!
You will not be disappointed. It is a fascinating work. Mulder has written more than a technical monograph. By way of the economic weapon he offers us a new vision of the first half of the twentieth century.
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February 6, 2022
Chartbook #79: From Hayek to left populism – how price changes deliver an information bomb
Did a piece for the New Statesman that started out as a reflection on the fact that when prices change on a large scale, in a short space of time, what this delivers is not a neat and tidy “price signal”, as Friedrich Hayek famously imagined, but an information bomb.
I’ve been worrying away at this for a while, starting with my various musings about the politics of the energy price shock.
The latest New Statesman piece looks more generally at how price movements can be read (1) as relative price signals, (2) as part of a broader inflationary process, (3) as explicable in terms of sectoral political economy, (4) as a policy tool, (5) as drivers of a social crisis, (6) as indicators of the value of life, (7) as markers of class struggle and finally (8) as the harbinger of a new era of “idiosyncratic”, but systemic environmental shocks.
Hayek was certainly not wrong. They compress a lot of information!
Inexplicably, the New Statesman on publication removed all the links from the edit I sent them. Crazy! I’ll note here that I particularly liked James Meadway’s piece on inflation and environmental shocks.
We have learned a lot from the price shock. The current series of price surges has reminded of us key connections e.g. between fossil fuels, artificial fertilizer and food prices.
Quick
— Scott Lincicome (@scottlincicome) January 25, 2022
Amidst all of the concern abt high US food prices, a new factor has recently emerged: sky-high US fertilizer prices (a key input for agriculture). See, e.g.,https://t.co/7fn7iDX8xT and https://t.co/jlFIGigjsy /1 pic.twitter.com/WNCKfhICwI
We have learned a LOT about supply chains and their impact on pricing. On this score, these paragraphs by Dean Baker are excellent.
The Bureau of Labor Statistics reports that the price index for final demand for transportation and warehousing services rose 16.6 percent last year. This is a cost that gets factored into the price of just about everything.
One example that shows the impact clearly is apparel. The index for apparel prices in the CPI rose 5.8 percent last year. The overwhelming majority of our apparel is imported, most of it from developing countries like China and Bangladesh. The index for the price of imports of apparel rose by 1.5 percent over the last year.
Presumably, most of the 4.3 percentage gap between the CPI index and the import price index is explained by higher transportation costs. If we can expect that at some point in 2022 that these supply chain problems will be overcome, then not only will apparel prices stop rising, but much of their increase in the last year will be reversed.
But, in the course of editing the New Statesman piece, what really blew up was left populist discourse in the UK about price hiking and gouging, especially in the discount food section. This campaign by Jack Monroe has had a huge impact.
Woke up this morning to the radio talking about the cost of living rising a further 5%. It infuriates me the index that they use for this calculation, which grossly underestimates the real cost of inflation as it happens to people with the least. Allow me to briefly explain.
— Jack Monroe (@BootstrapCook) January 19, 2022
It has sent economic journalists and the statisticians at the ONS scrambling to figure out how best measure the cost of living for the poor. See this piece by Tim Hartford, for instance.
And most remarkably it triggered a mea culpa by Claire Jones of the FT’s Alphaville, disowning the slogan “transitory inflation”.
We’re no longer “team transitory” because, regardless of your views on the labour market and semiconductor chips, we’ve come to realise how callous the phrase sounds. …. We’re ashamed that it took the thread for us to realise how insulting framing inflation as only “transitory” must’ve felt for people who are struggling to make ends meet. Transitory sounds blasé, like it’s only a blip. It implies it’s something that officials and journalists ought to “look through”, focusing more on the “medium term” and less on how higher prices in the here-and-now are impacting society’s most vulnerable.
Personally, I am unpersuaded by both the logic and the politics of this about face. But you have to take note. When an excellent financial journalist like Claire Jones writing in the pages of the FT fells compelled to make a move like this, it marks a moment in the development of the UK’s “moral economy”.
I’m unpersuaded because if we are talking about poverty, which Jack Monroe is – poverty as defined by the urgent search for the cheapest can of baked beans – then we should talk about poverty. And, no, that is not a transitory problem. But price controls on basics are not generally a good way of addressing poverty, except in emergencies where the apparatus of regulation is already in place (e.g. in current energy market shambles).
In the UK case, as the FT’s own analysis exposes, the Tory government’s response to the energy price shock is handing out largesse across the income distribution.
More generally the embrace of the discourse of the “cost of living crisis”, rather than alternative formulations like “the crisis of low pay”, or the “crisis of inadequate state benefits”, seems dangerous. It plays into the hands of inflation hawks. Tender concern for the cost of living of the struggling pensioner has long been a staple of conservative anti-inflation rhetoric. It is a close kin of the “householder fallacy” i.e. the idea that macroeconomic accounts are like household budgets and tightening belts is the way to meet a crisis.
The anti-inflation push right now is taking on the quality of a more broadly based conservative campaign. Andrew Bailey’s remarks about wage restraint let the cat out of the bag on that score.
As the Governor of the Bank of England told BBC radio, he
wants British workers to think again when they ask for an inflation-busting wage rise. “I’m not saying nobody gets a pay rise, don’t get me wrong, but I think, what I am saying, is we do need to see restraint in pay bargaining otherwise it will get out of control,”
This exposes one of the most profound hypocrisies in conventional talk about inflation, the asymmetrical treatment of the price of labour i.e. wages. If a central bank is truly committed to stabilizing the general price level, then it has no business lecturing any one particular actor on the need for restraint. Asking for wage restraint is literally asking for an allocative effect, one-sidedly, in favor of employers.
As Martin Sandbu puts it:
Genuine question: why does the governor of the Bank of England encourage restraint in wage demands but not call for restraint in businesses’ attempts to protect their profit margins? Intellectual bias, ideology, greater resignation wrt price- than wage-setting, or something else?
— Martin Sandbu (@MESandbu) February 4, 2022
In the US, Jay Powell is getting in on the act too. This commentary by Josh Mason is predictably excellent.
Your periodic reminder that "real wage growth in excess of productivity" is identically equal to a rise in the labor share. pic.twitter.com/78O5yc523u
— JW Mason (@JWMason1) January 28, 2022
In 2020 a lot of folks were asking, “where has austerity gone?” The smart answer was wait and see. After the GFC it took until 2010 for the real fight to begin. Well, here we are, right on time. 2022 may turn out to be the year that the hydra returns in earnest.
***
I love putting out Chartbook. I am particularly pleased that it goes out for free to thousands of subscribers around the world. Voluntary subscriptions from paying supporters sustain the effort. If you are enjoying the newsletter and would like to join the group of supporters, pick one of the options here.
February 5, 2022
Chartbook #78: The “Frozen Hell” of Afghanistan
Afghanistan is in the grip of an escalating humanitarian disaster of epic proportions.
More than half of the population is facing “extreme levels” of hunger. As António Guterres, United Nations secretary-general, has put it: “For Afghans, daily life has become a frozen hell.”
The World Food Program distributed food to eight million people in December. According to the WFP 23 million people have sunk to crisis or emergency levels of food shortage.
A million children are at risk of starving to death. Food prices are soaring. Since the summer, the price of wheat flour jumped 53%, cooking oil is up by 39% and sugar by 36%, according to the U.N.’s World Food Program.
Heavy snow is blanketing the country making fuel for cooking and warmth a vital necessity.
Also from the 25th of January, a nice clear image of the recent snow coverage in Afghanistan. pic.twitter.com/25zswdpeQ8
— Alastair Thompson (@althecat) January 27, 2022
The Taliban regime has no answers. The regime’s Prime Minister, Mullah Hassan Akhund recently declared in a speech that the Taliban movement had promised to expel foreign forces, establish an Islamic Emirate and bring security. It had not promised to feed the population. Famine was, literally, an act of god.
“Remember, the Emirate had not promised you the provision of food. The Emirate has kept its promises. It is God who has promised his creatures the provision of food,” Mr. Akhund said.
Fatalism aside, this is a disaster that was widely predicted. As I discussed in Chartbook #35, Afghanistan’s economy was critically dependent on foreign aid. Comprehensive sanctions were a death sentence.
Despite its poverty, Afghanistan has sufficient foreign exchange reserves – $9.4 billion – to easily cover necessary imports. But following the Taliban takeover, the reserves were impounded by the US Treasury.
Multilateral banks have pulled back too. At the end of last year, the World Bank released $280 million from the Afghanistan Reconstruction Trust Fund (ARTF) to prop up NGO-run health care services and allow the UN to deliver food is critical but insufficient. But this is a pittance. Afghanistan needs billions.
The World Bank board is not even due to consider the situation until mid-February, at the earliest.
Time is critical. Afghanistan’s situation now is nowhere near as bad as it is going to get. Famines typically reach their most intense stage in the spring and early summer, in the agonizing wait for the next harvest.
By March the UN predicts that over half of the population of Afghanistan will in IPC phase 3 or above of food crisis/famine, the highest ever recorded.
Source: FT
Not only is Afghanistan hobbled by sanctions, but its currency is depreciating severely, raising the cost of imported food.
Source: FT
Rumor has it that the depreciation is driven in part by the dollar purchases of big Pakistani’s businessmen who smuggle US currency into Pakistan, whose economy is also under serious financial pressure.
The depreciation of the Afghan currency would be even worse, but for the fact that the Afghan central banks depends on foreign companies to print its bills and thus cannot actually inflate the currency as it might wish.
The paralysis at the central bank is indicative of the wider disintegration of the Afghan state. Hundreds of thousands of civil servants, including virtually all teachers, have not been paid in months. This leaves their families desperate and, at the same time, erodes the capacity to uphold public order, except by brute force.
The United States can stand back from this apocalyptic scene. President Biden has made good on his promise to get the troops out. It is Afghanistan’s neighbors that are in harms way.
Pakistan has as much responsibility as anyone for bringing to the Taliban to power. Now it is experiencing the blowback in mounting tension in the border regions.
From October through the end of January, more than a million Afghans in southwestern Afghanistan have begun to migrate towards the border with Iran. Aid organizations estimate that around 4,000 to 5,000 people are crossing into Iran each day.
For many Afghan refugees, neither Pakistan or Iran is the final destination. Desperate to contain the refugee flow, the European Union has pledged over $1 billion in humanitarian aid for Afghanistan. “We need new agreements and commitments in place to be able to assist and help an extremely vulnerable civil population,” Jonas Gahr Store, the Norwegian prime minister, said in a statement at the U.N. Security Council’s meeting on Afghanistan last month. “We must do what we can to avoid another migration crisis and another source of instability in the region and beyond.” Gahr Store has opened framework discussions with the Taliban in the hope of managing the crisis.
What should be done?
David Miliband, president and CEO of the International Rescue Committee, has proposed a sensible, 5-step plan.
Release all private funds of Afghan citizens and corporations frozen in overseas banks in Europe and the USAs the largest shareholder, the US should support the World Bank to urgently release the remaining more than $1.2 billion sitting in the Afghanistan Reconstruction Trust Fund. As Miliband says, this should now be directed to a wider set of programs to resume essential services, including paying civil servants such as teachers, nurses and other essential workers.The US and other donor governments should support a joint World Bank/IMFmission to Afghanistan and pathways for technical assistance for the Afghan central bank. As Miliband puts it: “Afghans need a functioning economy, and it begins with a functioning central bank.” This would enable channels of communication between the international financial community and Taliban authorities to be reopened.Clarify the sanctions regime to be imposed by the US and other Western powers, so that private business can engage with some degree of confidence.Finally, donor states must urgently meet the short-term UN humanitarian aid appeal of $5 billion — the largest single country appeal of its kind ever. America’s announcement of over $300 million in aid is in Miliband’s words “both meaningful for aid operations and a symbolic effort that should be leveraged to galvanize other donors.” If the crisis is allowed simply to escalate, the UN warns that it could soon be asking not for $ 5 billion, but for $10 billion.Miliband’s action points are modest, but they far exceed the current effort.As of early February 2022, according to UN data, less than 10 percent of the $5 billion appeal is funded.
The US Department of Treasury has recently clarified that international banks can transfer money to Afghanistan for humanitarian purposes, and aid groups are allowed to pay teachers and healthcare workers at state-run institutions without fear of breaching sanctions on the Taliban.
This may provide some relief.
But Miliband steered well clear of raising the truly sensitive issue: the fate of Afghanistan’s $9.4 billion foreign exchange reserves, currently frozen by the US.
Last week, Congressional Progressive Caucus Chair Pramila Jayapal, D-Wash., secured a vote in the House on this crucial question. As the Intercept reported, she did so by tying her amendment to the anti-China omnibus bill which
will subsidize the U.S. semiconductor and other industries with hundreds of billions of dollars and ratchet up military activities in the Indo-Pacific region. The House of Representatives passed the legislation — called the America Creating Opportunities for Manufacturing, Pre-Eminence in Technology and Economic Strength, or COMPETES, Act — on Friday. But the House rejected Jayapal’s amendment with 175 yes and 255 no votes, as 44 Democrats joined Republicans against the measure. (Two Democrats and one Republican did not vote on the amendment.)
Jayapal’s provision, drafted with Rep. Jesús García, D-Ill., would require the secretary of the Treasury to provide Congress with an assessment of the humanitarian suffering caused by U.S. sanctions on Afghanistan and its confiscation of the country’s foreign-held money. It would also mandate a review of illicit financial activities with China amid a breakdown of Afghanistan’s banking system.
At least eight other amendments to the broader bill target Afghanistan, reflecting a range of approaches to sanctions and relief. One provision sanctions individuals for trading the country’s rare earth minerals; another provides visas for Afghan Fulbright scholars. But none call out the Biden administration for its asset seizure.
Meanwhile, the World Food Program waits for the food deliveries that could save millions from misery.
WFP’s has a well-oiled a fleet of 171 trucks that manage to transport food across all of Afghanistan’s 34 provinces. However, “the most important element is missing,” says Assemy – funds to make sure WFP can scale up as it must in 2022.
In these weeks and months, Afghanistan’s fate hangs in the balance. As Abdallah al-Dardari, the UNDP’s Afghanistan head, told the FT: “It can either implode with massive regional consequences, or something has to happen, but you cannot continue monitoring the collapse of each of these systems, with horrendous humanitarian consequences,” says al-Dardari. “People cannot just wait and see their children starving to death.”
February 4, 2022
Why inflation and the cost-of-living crisis won’t take us back to the 1970s
Prices are rising by 5, 6, 7 per cent per annum. In the US, President Joe Biden is under pressure over the increase in petrol prices. In the UK, there is talk of a cost-of-living crisis. The Bank of England is prescribing “tough love” in the form of steep interest rate rises. The Bild-Zeitung, Germany’s savage tabloid, pillories Europe’s central bankers for being careless about inflation. Bond markets are jittery.
It comes as a shock. Not so long ago, in large parts of the world, the main worry was not inflation but deflation. Now, even Japan – the poster child of “lowflation” since the 1990s – is experiencing price rises.
Whether prices go up or down, any change creates winners and losers. We worry about falling prices because they penalise those who have borrowed. Housing markets are spooked by even a hint of negative equity. Inflation, on the other hand, erodes savings and increases the cost of daily necessities.
In principle, economists tell us, we should welcome price changes. They are how market economies adjust to shocks, and Covid has certainly delivered a shock. It is one of the foundational ideas of neoliberal economics, classically formulated by Friedrich Hayek in his essay “The Use of Knowledge in Society” (1945), that prices are highly condensed vectors of information. Consumers and businesses don’t have to know much about what is going on, all they have to do is to respond to price signals. If prices go up, consumers demand less and producers supply more. That is the magic of market economies as super-efficient information-processing machines. Most recently, Philipp Hildebrand, vice-chair of the gargantuan asset manager BlackRock, has pleaded for central banks to tolerate inflation, because it “helps to smooth the adjustment to big shifts in patterns of demand”.
Read the full article at The New Statesman
Ones & Tooze: The Trouble With Cryptocurrency
The cryptocurrency market has lost some $1.1 trillion in value over recent months. On this episode of Ones and Tooze, Adam Tooze and Cameron Abadi discuss what accounts for the tumble and what function cryptocurrency serves beyond its appeal to financial speculators.
Also on the show, the last of our life cycle segments focuses on inheritance and, more specifically, on where the vast fortunes accumulated by the baby boomer generation will go when its members die off.
Find more episodes and subscribe at Foreign Policy
February 2, 2022
Chartbook #77: More than 7000 deaths per day … and we talk as though it is over.
The @jburnmurdoch FT graph of COVID deaths is set to become the Minard-“1812”-graph of the COVID pandemic.
Source: FT
This is our reality folks. In the week ending January 27 2022, there were on average 8610 officially recognized COVID deaths per day, of which 2267 were in the USA. A similar number died across Europe (EU and non-EU). Those are staggering numbers.
Anybody who says “the pandemic is over!” is literally talking out of their backside
— Prof. Gavin Yamey MD MPH (@GYamey) February 1, 2022
Yes, I know, there are daily OpEds saying “it’s over,” but these are always written by wealthy, boosted, healthy people at very low risk https://t.co/0yJfkoAH44
As we debate whether the pandemic will soon be reclassified as endemic it is important to realize that this does not mean we are sounding the all-clear. As this excellent piece in Nature points out, smallpox was endemic until it was eradicated.
Meanwhile, this piece in the FT by Donato Paolo Mancini offers a useful roundup of efforts to put in place new mechanisms for ensuring more adequate responses in future.
In December, the World Health Assembly began debating a new pandemic preparedness treaty. Health Ministers from 30 countries signed an appeal in the BMJ for more serious preparation. It may yield an agreement ready for adoption by 2024.
As for our current situation, the big story for 2021 was the staggering success of the vaccine production drive. 11 billion vaccine doses were delivered in 2021, 1.5 billion in December 2021 alone. Production may double again to 20 billion in 2022. Of course, it would have been even better to have had more, even faster. But this is a prodigious feat of science and industry. The European Center for Disease Control estimates the lives saved among people over 60 years of age to be 470,000. For the US, the figure is 1.1 million.
The vaccines are crucial even if they are not 100 percent effective against Omicron-style variants.
The primary purpose of vaccines is to prevent disease. The vaccines do this.
— Dr. Angela Rasmussen (@angie_rasmussen) January 25, 2022
The vaccines don’t prevent transmission entirely but they do significantly reduce it. With a booster, VE against infection is approaching 70%. So this is entirely wrong. https://t.co/a6v36e5OF3
But the tragedy is that costs, effectiveness and access vary hugely. The cost of the BioNTech/Pfizer gold standard is 20 euros per dose compared to 4 for AstraZeneca, which is the most widely used vaccine in the world, along with the Chinese Coronavac, with over 2 billion doses each.
And different costs are just part of the problem. The disaster, it is not too strong a word, is the gross maldistribution of vaccines.
This takes three forms. Within rich countries, there is a continuing issue of the failure to protect lowest income workers. A complex issue with many factors at play.
We need a US pandemic policy response that centers equity
— Julia Raifman (@JuliaRaifman) January 31, 2022
Low-income people most affected throughout the pandemic
We need to make vaccines, N95s, & tests *most* accessible to low-income communities most affected by the pandemic pic.twitter.com/mJwOXQ4b8I
There is a failure to deliver vaccines in a timely fashion to the most affected areas of the world. This includes the hot spots in Asia, Eastern Europe and Latin America.
Finally, there is the comprehensive failure to deliver very many vaccines at all to Africa. The continent is far from being the worst affected by the disease, but the failure to deliver vaccines is extraordinary.
Again and again the call has been made for comprehensive action. The most recent is this letter directed to the UK PM by a distinguished group of scientists. Reported on by the BBC.
COVAX was the designated vehicle for global vaccine delivery. Right now it is struggling to find funding for 2022. Gavi, its organizational backer, is hoping to raise an “ambitious” $5.2 billion to back its operations in the coming year. Right now it struggles to afford syringes.
As highly critical reports by the Bureau for Investigative Journalism and MSF have chronicled, COVAX was set up to fail. Failing to tie-in the main vaccine purchasing programs of the rich countries relegated it to the status of a second-class customer. And left it at the mercy of the rich-country producers.
It is a world away from the sort of amply funded urgent program envisioned by the IMF and experts advising the G20.
The disappointment of COVAX has meant that the world has relied more heavily on donations of vaccines than collective purchasing. Biden administration has made big promises. But those have, so far, resulted in an extremely patchy delivery. This gap is a feature of all donor commitments.
In the course of 2022 the absolute shortage of vaccines should end. It is estimated by March 2022 there should be a surplus of 1.4. billion doses in the US and Europe, enough to make real inroads on the African vaccination gap. But two questions must be put insistently. (1) Will the resources and organization be put in place to deliver the shots to the poorest billions of people worldwide? (2) Why, in a global medical emergency with gigantic economic costs, have the pace and terms of vaccine manufacture been set in such one-sided fashion by the manufacturers?
As investigative reports have established, Pfizer was unafraid to engage in brutal bargaining. Relations between Moderna and the Biden administration have been sticky too. Given Moderna’s heavy dependence on public funding, it is astonishing that the company should have any bargaining power whatsoever. It would not exist as a serious vaccine producer without public support of every kind.
With good reason profiteering from vaccine inequity has been denounced by Hassan, Yamey and Abbasi in the pages of the BMJ as a crime against humanity.
But, if individual companies that are beholden to public power and resources in so many ways are allowed to get away with this kind of behavior, this begs the question. Why are political figures not placing them under more serious pressure? Whatever technical and financial resources they may be able to muster, corporate power as we know it, does not exist independently of the state.
Here the brutal conclusion of one clear-eyed observer about the Biden administration:
So it's clear now, that @DavidAKesslerMD, @WHCOS and @JeffreyZients are the obstacles to scaling up #COVID19 vaccine production outside of what @moderna_tx, @Pfizer are willing to do. 1/
— Gregg Gonsalves (@gregggonsalves) October 15, 2021
At the global level , the commitment not to public command, but to lopsided public-private partnership runs deep in the lifeblood of Gavi, the parent organization of Covax. Even after the disappointments of 2021, Gavi boss Seth Berkley insisted to the FT that he remains committed to the partnership model and specifically the exclusive relationship between Oxford University, AstraZeneca and India’s Serum Institute. This was a relationship forged under the pressure of the Gates Foundation. And it is now widely seen as one of the main weaknesses of the COVAX construction. The higher-value deals with BioNTech/Pfizer and Moderna were left to the rich countries, whilst COVAX settled for contracts with India’s Serum Institute. It is a world-class facility but it is also the prime source of vaccines for the world’s second largest country that was itself suffering from a serious virus outbreak. Unsurprisingly, it turned out that the Serum Institute was not a reliable source of supply for the member countries of the COVAX initiative.
The failure by rich countries to adequately fund and supply a more generous and equitable global vaccination initiatives is commonly explained in terms of vaccine nationalism. But this is a superficial explanation that does not make sense in its own terms. Nature recently published a fascinating model that confirms the intuitive point that it is short-sighted and counterproductive for rich countries to hoard vaccines since the risk of virus mutation in unvaccinated populations leaves them vulnerable to new infectious strains.
A global vaccination campaign is NOT an act of charity on the part of rich countries. It is an act of enlightened self-interest. It is simply Realpolitik in the age of the anthropocene. As the IMF and every other competent agency have again and again pointed out, the benefits of ending the epidemic are, by any measure, orders of magnitudes larger than the costs of a global vaccination campaign.
The failure to devise more coherent and equitable vaccine production and distribution points not to a coherent national strategy so much as a vacuum of strategic vision and political panic, which lays governments open to strong-arm tactics by the likes of Pfizer. In 2018 Trump bullied Pfizer by tweet into retracting proposed price increases. In 2021 there was precious little bullying.
It is clearly true that purchasing the vaccine is just part of the cost of ultimate delivery. But there are carefully worked out models for the delivery of vaccines to even the most difficult territories. Take, for instance, this plan developed for the vaccination of South Sudan.
South Sudan aims to vaccinate 2,400,000 people by the end of 2021. Each vaccination team is 4 people and can vaccinate 80 people per day. That implies that each person on the team can vaccinate 20 people per day. • 20 people per day x 20 working days per month times 6 months = 2,400 doses of vaccine per worker. • To vaccinate 2,400,000 people within six months (or administer 4,800,000 doses of vaccine). That requires 2,000 members of vaccination teams working for 6 months. • An average salary for a health worker at this level is $300 per month. $300 x 2,000 people x 6 months = $3,600,000 Supervision and support for vaccinators: Additionally, each team and each county has a supervisor that supports the teams. There are also medical officers that provide support to teams. • Two team supervisor for every county = 158 team supervisors o Team supervisors get $450 per month o $450 x 158 supervisors x 6 months = $426,000 • One county supervisor for county = 79 county supervisors o County supervisors make $580 per month o $580 x 79 county supervisors x 6 months = $274,920 • One medical officer for every state = 10 medical officers o Medical officers make $580 per month o $580 x 10 medical officers x 6 months = $34,800 Total additional costs for supervisory and medical officer salaries = $736,320 Total costs. Total personnel costs = $4,336,320. $4,336,320 personnel costs divided by 4,800,000 doses = $0.90 per dose. Additional personnel costs are $0.90 per dose or $1.80 per person fully vaccinated.
The South Sudan model is based on online calculator for vaccination costs provided by the WHO.
Clearly, in the long-term, a far better model than charitably distributing vaccines would be for Africa, Latin America and poorer parts of Asia to produce and distribute their own vaccines. That would also allow local decision-makers to set their own priorities. As the FT reported:
during a recent meeting in Ghana, some of Africa’s public health leaders stated that “Covid vaccines are not our priority — we want malaria vaccines, we want vaccines which are for diseases that are causing high mortality in our countries.” Such concerns are underscored by data that show the collateral damage inflicted on wider public health goals by the pandemic — particularly in poorer nations. The WHO said last month that, of the 11 countries with the highest malaria burden, only India registered progress against the disease in 2020, as testing and the distribution of treatments were hampered by the Covid crisis. The 10 other countries, all in Africa, reported increases in malaria cases and deaths…
Malaria is one of the endemic killers with which African countries struggle. The news of the arrival of a Malaria vaccine is one of the highlights of 2021.
It has been decades in development. An overdue triumph of long-term commitment to public health research. Could it have come quicker? Surely yes, with the kind of funding and commitment received by the mRNA COVID vaccines in 2020. But for all their speed of development, they too profited from generations of scientific research. From the IMF came a particularly fascinating study of the successive layers of research that went into enabling the mRNA breakthroughs.
(mRNA) technology was built on waves of prior scientific discoveries. To track these discoveries, Figure 3.1.1 shows the publication dates of scientific articles cited by five of the seven Moderna COVID-19 vaccine patents (in blue).
… To measure the indirect influence of science, the yellow line shows the scientific citations of the vaccine’s “parent” patents—other patents referenced in the five original vaccine patents. These peak in the early 2000s, tracking discoveries in editing genetic codes. Earlier advances in reading genetic codes drove a similar wave of citations from “grandparent” patents in the early 1990s. These waves of scientific influence illustrate how policies that help incentivize advances in basic science today influence the building blocks of future technologies and yield long-lasting economic payoffs. Developing mRNA vaccines relied on a broad base of scientific knowledge. On average, the Moderna vaccine patents are in the same technological category as only 55 percent of their parent patents—a number that falls further as citation chains lengthen (Figure 3.1.2).
This shows how wide-ranging basic science contributed to mRNA vaccines, indicating that policies to develop a broad scientific base can pay off in many and unexpected ways. The development of COVID-19 vaccines was encouraged by unprecedented public support. This included regulatory forbearance (emergency use authorization of COVID-19 vaccines), at-risk up-front investment and subsidies for vaccine production (Operation Warp Speed), help in scaling up manufacturing (Indian government grants to vaccine producers), joint licensing agreements with local producers (India, South Africa), and advance public purchase commitments (Israel, United Kingdom, United States). A distinguishing feature of public support for a COVID-19 vaccine was its continuation throughout the development process. Typically, public funding is most generous for early trials, falling as products near market. For COVID-19 vaccines, public and academic funding for clinical trials stayed high, even at the latest stages of development (Figure 3.1.3). This highlights how support throughout the production process can incentivize research by forward-looking firms.
This, obviously, should have major implications for future R&D expenditure and licensing agreements with private manufacturers of publicly-funded vaccines and medications. But, in 2022, there ought to be one simple priority. We will, finally, have enough vaccines. Get them in people’s arms, worldwide! There may be a minority that refuse. But we have no excuse for not providing vaccines to everyone who wants and needs them.
As Mike Ryan puts it:
“What we need to do is get to low levels of disease incidence with maximum vaccination of our populations where no one has to die. That's the end of the emergency in my view, that's the end of the pandemic."
— Prof. Gavin Yamey MD MPH (@GYamey) January 19, 2022
-@DrMikeRyan
H/T @Boghuma https://t.co/JzADo0HfQl
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January 31, 2022
Chartbook #76: Strategy of Tension – updated on the economic fallout from Russian-Ukraine crisis
First off, a reminder. Ukraine is huge.
This map showing Ukraine superimposed on Western Europe gives a clear impression of quite how large the country actually is pic.twitter.com/rA8c8HyZqj
— Business Ukraine mag (@Biz_Ukraine_Mag) January 30, 2022
Over the last week, the most remarkable diplomatic development has been the emergence of a stark difference in stance between Ukrainian government and Washington.
On the one hand coming from both US and UK sources there is the escalation of warnings about impending war. That is increasingly unwelcome in Kyiv and has had the effect of raising tensions between Ukraine’s government and the Biden administration.
The problem is not that the Ukrainian language lacks a word for “imminent”, as was rumored on the politico website!
The deeper reasons for the difference are outlined stridently but effectively in this thread by E Hunter Christie.
1/ Interesting to see West. journalists and Pres Zelensky not understanding each other. Tension btw the Western mind that seeks a "single truth", e.g. mass invasion in X days (and if not, loss of interest, confusion). And Ukrainian experience of permanent war and threat of war.
— Edward Hunter Christie (@EHunterChristie) January 28, 2022
The US and UK, for their own reasons, are staging this crisis as a classic war scare. By contrast, Ukraine’s President Zelensky has to foreground the reality of an agonizingly extended and ruinously costly confrontation with no clear beginning, middle or end. The former permits a relatively clean ending that caps the commitment of the Western powers, the latter would require the West to provide Kyiv with long-term and sustained support.
This piece in the Guardian by Dan Sabbagh and Luke Harding makes the case very clearly.
As Ukraine’s president, Volodymyr Zelenskiy, said on Friday, high tensions with Russia are not new “We have been in the situation for eight years,” he said. The analysis in Ukraine diverges from the west’s assessment of the crisis as primarily a military one. The belief in Kyiv is that Vladimir Putin’s goal is the long-term destabilisation of Ukraine, and that the Russian leader may have other objectives than invasion.
Alexander Clarkson, who is an essential follow, put the point with characteristic clarity.
I suspect the crisis timelines US and EU are focused on are out of whack with Russian elite timelines that could lead to a build up of Russian troops staying on or close to Ukraine's borders for months and years and Ukrainian societal timelines focused on survival over decades https://t.co/x3wkVPmjCv
— Alexander Clarkson (@APHClarkson) January 31, 2022
The piece by Barbashin that Clarkson is reacting too is excellent on the divergent perspectives on the conflict within Russia’s think tank elite.
As Barbashin puts it:
The more moderate wing Russian international affairs specialists — among which Andrei Kortunov and Dmitry Trenin stand out — are increasingly suggesting that the Russian leadership should promptly organize a glorious way out of the current situation, declaring victory with whatever they have in hand right now. … Another approach, however, is arguing for doubling down. Supporters of a more conservative views — most notably the voices of Sergei Karaganov, Dmitry Suslov and Fyodor Lukyanov — are de facto accusing their more moderate colleagues of insufficient ambition, urging to them look at the current confrontation as an opportunity for a final divorce from the Western-centric world. … It is obvious that neither one group, nor the other, knows what Putin really wants to get from the West and Ukraine, how many action plans he has, and which logic he leans more towards on Tuesday and which on Wednesday.
The longer-term (and more realistic) view of the conflict brings the question of the economy and the relative survivability of Ukraine and Russia into focus. On the Ukrainian side the damage is already being felt.
The talk of a
— Mattia Nelles (@mattia_n) January 31, 2022re-invasion is costly for
's economy. The currency fell to its lowest level against the US dollar in 7 years, the National Bank downgraded GDP growth for '22 by 0.4%, and borrowing on the int. markets got more expensive.https://t.co/aB4YLmvQz1
As Nelles remarks:
This is why, other than preventing the further invasion in the first place, economic assistance to Ukraine is now more important than ever. The EU stepped up announcing up to €6.5 bil. in ‘investments to support economy, recovery, growth.’
The EU’s promise came in a statement made by von der Leyen and were confirmed in meetings between EU Commissioner for Neighbourhood and Enlargement Olivér Várhelyi and the Ukrainian government.
“In Kyiv today [January 26]: with President [Volodymyr] Zelensky I confirmed EU’s continued commitment to Ukraine’s sovereignty and territorial integrity + socio-economic resilience. We will mobilise up to €6.5 billion in investments to support economy, recovery, growth, starting with five flagship projects,” Várhelyi wrote on Twitter.
The key word here may be “mobilise” or “leverage”. This usage often allows the EU to leave open precisely how much public EU money is actually involved. A lot of financial magic can be performed by leverage.
All the way back to 2013 this has been the question. Is the EU willing to put serious money behind its talk of supporting Ukraine’s sovereignty? What will be the balance for Ukraine’s population, vested interests and politicians between discipline/reform and economic and financial benefits? Those benefits can, of course, take many forms: investment, credit, trade, opportunities for migration, technology transfer etc.
If you make this kind of point, defenders of the EU are wont to point out, that since 2014 Ukraine has received 17 billion Euros in grants and loans which is a lot of money for a non-member. That is entirely fair. But the problem is that in this case what is “enough” is determined by unusual factors i.e. Ukraine’s deep economic malaise and the pressure that Russia can apply.
In the mean time, Ukraine’s debt is taking a battering. As Bloomberg reports.
Ukraine’s foreign bonds have lost 7.5% this year in dollar terms, the worst performance in emerging markets after Argentina, according to a Bloomberg index. Notes due in 2033 last traded at or above par in mid-November and the bonds fell in early trading Monday. The hryvnia also fell, weakening to the lowest levels against the dollar in more than a year.
Source: Bloomberg
As this excellent piece by Ben Hall and Roman Olearchyk in the FT makes clear:
Solid economic growth of 3.2 per cent last year, buoyed by high prices for Ukraine’s commodity exports, was a bright spot for Zelensky, who appears an increasingly isolated and unpopular figure. Since his election in 2019, he has made modest progress in tackling graft, is struggling to reform a corrupt judiciary and is locked in a power struggle with some of the country’s powerful oligarchs. However, the economy has now taken a sharp turn for the worse. Inflation has shot above 10 per cent. The hryvnia has lost 6 per cent of its value against the US dollar in a month. Companies are struggling with surging energy costs. Ukraine filled up its gas storage facilities last year before prices spiralled, but it will need billions of dollars to meet next winter’s needs. Investors have taken fright. Ukraine is, in effect, locked out of capital markets, although the biggest bond redemptions of the year are not due until September. “Even if nothing happens, it is a macroeconomic shock,” says Tymofiy Mylovanov, a former economy minister and adviser to the presidential administration. “It will have an impact on mood, morale and allocation of resources.”
Russia is in a far stronger position, but it is by no means immune.
Sergei Guriev who teaches economics at Science Po is an excellent person to follow on all things to do with Russia’s economy. As he remarks in the FT:
January 24 was also unprecedented for Russia’s Central Bank move to support the rouble. Russia’s budget breaks even when the oil price is at $44 per barrel. When it is higher, the Russian Finance Ministry uses excess export revenues to fill up the sovereign wealth fund by taxing the oil firms and handing these revenues to the Central Bank to buy dollars. Since today’s oil price is almost double the break-even level, the Central Bank should be investing heavily in dollars. On January 24, it stopped buying any.
Russia’s financial markets will continue to feel the burn for some time. How far this might affect global financial markets will be a matter for stress testing.
“Russian debt comprises more than 7 per cent of a widely followed JPMorgan index of emerging market local currency bonds, meaning many big investors are in effect forced to hold the bonds or risk underperforming their benchmark.”
A graph from Reuters shows how the share has fluctuated over time.
Major Western financial players like Unicredit are reevaluating their interests in Russia.
Meanwhile, analysts have been hard at work crunching the sanctions scenarios.
Gas remains the critical issue. As Bloomberg reports, Russia’s gas production is at all time, record highs. But exports are another matter. Flows to Europe will be watched anxiously. The deployment of a Russian LNG supply vessel to the Baltic waters around the Russian enclave of Kaliningrad it is not a reassuring sign.
That said, Europe’s situation is easing.
Europe is still short of gas… but it's *less* short than it was a month ago.
— David Sheppard (@OilSheppard) January 31, 2022
European politicians got the relatively mild winter they were praying for (and a big influx of LNG after Asian demand waned).
Maybe hope is a strategyhttps://t.co/bmtDvpBK3b
Beyond gas, the footprint of the Russian economy in global commodity markets is huge.
Source: Economist
Russia’s reemergence as a major exporter of grain is a dramatic development of recent years. It is all the more significant, because in the market for grain, alongside Russia, Ukraine is also a major exporter. And the breadbasket of Ukraine are precisely the eastern regions most vulnerable in case of Russian military action.
A war between the two would impact global markets from two sides. And this is all the more concerning, because of who buys Russian and Ukrainian grain.
As this fascinating article in Foreign Policy by Alex Smith of the Breakthrough Institute reports
about half of all wheat consumed in Lebanon in 2020 came from Ukraine, according to data from the Food and Agriculture Organization (FAO). Relying on bread and other grain products for 35 percent of the population’s caloric intake, Lebanon is critically dependent on Ukrainian wheat. Of the 14 countries that rely on Ukrainian imports for more than 10 percent of their wheat consumption, a significant number already face food insecurity from ongoing political instability or outright violence. For example, Yemen and Libya import 22 percent and 43 percent, respectively, of their total wheat consumption from Ukraine. Egypt, the largest consumer of Ukrainian wheat, imported more than 3 million metric tons in 2020—about 14 percent of its total wheat. Ukraine also supplied 28 percent of Malaysian, 28 percent of Indonesian, and 21 percent of Bangladeshi wheat consumption in 2020, according to FAO data.
In wider collateral damage one also needs to consider Russia’s importance as a major destination for Central Asian migrant labour. As data from the World Bank makes clear, the most prominent sources of labour are Uzbekistan and Tajikistan
And remember all those stories a few years back about the rail routes from China to Germany? Well, given surging container shipping costs post-COVID, those once uneconomic overland routes have actually come into their own. As the World Bank reports: Rising container shipping costs have contributed to a growth in container traffic transiting Russia via rail, rising 40 percent, yoy, in September 2021 to 782,000 TEU. In this respect too there might be some nasty surprises from an all-out economic war.
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January 29, 2022
Chartbook #75: Being realistic … about the EU, history and climate policy
After Perry Anderson devoted 19,000 words to Luuk van Middelaar’s analysis of the EU in the LRB you might wonder why anyone should write anything else. To be honest, I was in two minds. But, in the end I did a review of Pandemonium – van Middelaar’s latests on the COVID crisis – for the New Statesman.
Why? Because, on closer reading I was struck by van Middelaar’s rather particular conception of history and historicity and the way they shape his narrative of the EU’s development – conceptions to which Anderson gives his nodding assent. Furthermore, in a truly striking omission neither van Middelaar nor Anderson addresses seriously what is, in fact, the EU’s central policy preoccupation of the current moment and the foreseeable future i.e. climate policy. And I have a hunch, as I argue in the New Statesman piece, that these two features of their reading of the EU’s development are related. Their agreement on how to conceive historicity, conditions their common blindspot on climate. And in the back of everything is a question I am preoccupied with, which is the question of realism.
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The thrust of all three of van Middelaar’s recent books is to reconstruct the emergence of Europe as a political and historical actor. The backdrop against which he does this is a notion of modern politics which he traces back to Machiavelli.
Van Middelaar, reads Machiavelli through Pocock’s influential work on the Machiavellian Moment. This is how van Middelaar puts it in Pandemonium:
In his brilliant study The Machiavellian Moment (1975), J. G. A. Pocock locates the creation of modern political thought – by Machiavelli and contemporaries such as Guicciardini – in the recognition of the finite nature of the polis. Pocock speaks of the moment “in which the republic was seen as confronting its own temporal finitude, as attempting to remain morally and politically stable in a stream of irrational events conceived as essentially destructive of all systems of secular stability”.13 Those who know themselves to be mortal must regard and arm themselves as chance entities in the river of time: an existential experience.
van Middelaar Luuk. Pandemonium: Saving Europe (p. 41). Agenda Publishing. Kindle Edition.
This nugget from Pocock founds the distinction that is crucial for van Middelaar between a conception of the EU as a rule-making machine fit to govern a predictable flow of events and a genuinely competent political agency capable of improvising in the face of history, understood as a stream of unpredictable and “irrational” events.
Van Middelaar’s history of the EU is a Bildungsroman through which Europe moves from seeking to subordinate conflicting national interests within a gigantic rule-making organization, under a geopolitical umbrella provided by the United States, to Europe emerging in its own right as a concerted body of states, capable of defining their common borders, identity and interests on the stage of history. Like the renaissance polities that Machiavelli was advising, Europe is finally coming to terms with a secularized world of power, violence and historical events.
It is worth lingering over this construction. To go forward to the future, the EU goes back to the early modern moment. In finally embracing the challenges of the 21st-century, van Middelaar sees Europe recapitulating the Machievellian enlightenment of the 1500s. Historicity, it turns out, has a frame that is, if not transhistoric, at least millennial in its range.
In his LRB review, Anderson discusses van Middelaar’s first book, the Passage to Europe precisely in these terms. Anderson applauds van Middelaar for pointing out that
discourses about Europe have revolved around offices, states and citizens, with corresponding theories about whether it is best conceived in terms of functionalism, inter-governmentalism or constitutionalism: the first oriented to a static present, the second to a familiar past, the third to a longed-for future. Yet none of these passes the critical test of genuine historicity, that flux of unpredictable events which makes of government, van Middelaar writes, citing Pocock, ‘a series of devices for dealing with contingent time’.
But this begs the question. What, for van Middelaar, are these contingent, irrational, unpredictable events that have delivered Europe’s Machiavellian moment? In the recent past the list includes the 2008 financial crisis and its European aftermath, the Ukraine crisis of 2013-4 and the “refugee crisis” of 2015-6.
As van Middelaar puts it:
we had arrived at world history’s end. Then suddenly the crises came: banks collapsed, the euro wobbled, Russia attacked Ukraine
van Middelaar, Luuk Alarums and Excursions
Europe was shaken out of its neo-medievalism into a new realism.
In light of our current situation, van Middelaar’s extensive treatment of the Ukraine crisis of 2013-4 in his book Alarums and Excursions is particularly interesting. The first Ukraine crisis was for van Middelaar a learning process through which the EU went from a naive and priggish insistence on the “attraction” of European norms and rules to being a pragmatic and realistic broker of the Minsk II accords of 2015, which sacrificed principles and strict adherence to international law, to the priority of stability and, if not peace, then at least a reduction in violence.
Russia serves van Middelaar as a foil against which to further elaborate his thoughts about politics and history. His characterization of Russian statecraft is worth quoting at length:
With Moscow the Union comes up against a different way of dealing with history. The Russians are masters at opportunistic events-politics and they have a system to match. Vladimir Putin did not invent it, but he does embody it. …Western commentators tend to write pedantically that Putin shows himself to be more an opportunistic “tactician” than a visionary “strategist”, or that he has “unclear intentions”. But the Russian president probably has no master plan for either Ukraine or Syria. Not because he is incapable of thinking of one, but because he regards it as a wasted effort: events always turn out differently. This Russian attitude existed long before Putin and will not disappear with him. … In the midst of the Cold War, when much was at stake for those trying to understand Russian intentions, America’s best ever diplomat in Moscow, George F. Kennan, observed the same phenomenon. In a memo written in 1952 he told his bosses in Washington that Russian agility is more than caprice. It arises from their own view of history and politics:
“I believe they [the Russians] are much more conscious than we are of the interplay of action and reaction in international affairs, of the way in which events mesh into each other and reflect each other, of the number of variables that can enter into the determination of a situation some years removed; and that they would be less inclined, for this reason, to feel themselves under the obligation to arrive at any firm or final judgement at the present time about the likelihood of war in a more distant future.”31
This way of engaging in politics demands strong central leadership without any lasting accountability, precisely the kind for which the Kremlin is so well equipped. In a democracy, improvisation is harder. Every move has to be elucidated, counterforces defeated – partly with words, partly through wrangling behind the scenes – and the public persuaded. All this costs time. Moreover, the arguments deployed go on to lead a life of their own. They take root. If you are forced to do something else three months later – new circumstances, new plan – you soon start arguing against your former self and are labelled a flip-flopper. A Kremlin leader is less troubled by that. In Russian dealings with chance, the leader has no need to feign sincerity and little to take account of, as long as the defence of national interests reaps results at the crucial moment and earns respect. We, by contrast, are troubled by the blind chance that reality serves up and demand, as a public, stories to tame it, preferably cast in moral categories that our own politicians must also believe in: the root melodies that are played. Yet good improvisation-politics need not be mere opportunism. European leaders acting in the moment can still remain true to their own convictions; they too can steer by compass. This requires a clear definition of strategic aims, which change and evolve over time and are continually the subject of debate, along with an honest acknowledgement of the plurality of our values, which may, indeed will, collide. They define our power and individuality. If the classic American history is at its heart a morality play of right against might and Russian history a cynical chronicle of might against might, then European history has given us a tragic awareness
van Middelaar, Luuk . Alarums and Excursions: Improvising Politics on the European Stage .
What is striking here, apart from the essentializing distinctions of three different political styles – American, Russian and European – is the slippage between van Middelaar’s text and Kennan’s.
What Kennan attributes to the Kremlin is an awareness of a complex pattern of action and reaction and long-range historical determination. In van Middelaar’s rendering, only a few sentences later, this becomes something quite different. Putin’s supposed awareness of complexity and a mesh of interrelationships and long-range determinations, becomes instead an improvisational capacity for dealing with “blind chance”. You might say that Middelaar has transmuted Tolstoy into Machiavelli, or, at least, Pocock’s reading of Machiavelli. We are back, whatever Kennan actually said, in the world of contingent, unpredictable and “irrational” events. History as “blind chance”.
Middelaar does admit the possibility of strategic statecraft beyond mere improvisation. But what moves us beyond opportunism and improvisation is not knowledge of ocean currents or prevailing winds (in other words knowledge of the logic of complex but nevertheless ordered historical processes), but the compass of Europe’s leaders. Order derives from the actions and insights of political leaders, it does not inhere in historical processes themselves.
As van Middelaar remarks at one point, riffing on Machiavelli’s discussion of fortuna and virtu:
Anyone who acts steps onto unknown territory. They cannot lean on custom and tradition but must set out on something new. …. Yet the fact of living in a world of ruptures and renewal offers an advantage too: “Men are attracted more by the present than by the past, and when they find the present good they enjoy it and seek
van Middelaar, Luuk . Alarums and Excursions
What van Middelaar’s description does not allow is the possibility that though not fully known, new territory may, in fact, be partially mapped and we may have point of orientation. We are not absolutely ignorant. There are no doubt ruptures in our world, but they are rarely if ever absolute. Existential drama, trumps an evaluation of modernities developmental logic.
Against the backdrop of the crisis of medieval theology – Pocock’s original Machiavellian moment – one can perhaps understand how contemporaries might have understood history as a stream of irrational events. Clearly modern history does not conform to any easily intelligible divine plan. But if we refuse the spell of Pocock’s dramatic scenario, in what world does it make sense to describe the Eurozone crisis, the Ukraine crises and the refugee crisis as essentially contingent, unpredictable and irrational? They are none of these things. All three were predictable and overdetermined. If they were irrational it was only in the sense that they were shot through with multiple conflicting logics. The outcome might be described as irrational, in the sense of a Keynesian “muddle”, but if you allow for conflict and contradiction and uneven and combined development, the historic process itself that led to them was not indecipherable.
Of course, if you believe that the original vision of the EU embodied a kind of neo-medieval theodicy – at one point in Alarums Middelaar describes the ideologues of the EU as “medieval prophets” – then you could imagine that Europe’s technocrats did indeed experience a secularizing Machiavellian shock when they came face to face with financial doom-loops and the Russian army. But if they were suffering moments of existential panic that is hardly a reason for us to make their trauma into the basis for our own diagnosis of their situation, or ours. If history seemed in such moments to be nothing more than a series of contingent, unpredictable and irrational events, if history bore a “Russian” visage, or as Donald Kagan insisted, it took the form of the war-god Mars, such imaginings are hardly the hallmark of a deep realism. Rather they are the sign of disorientation, disillusionment and despair.
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The “master thinker” who in modern European political thought most often encourages a conflation of realism with disorientation and despair is not Machiavelli, but Max Weber.
There are many different Max Webers. For a sympathetic and brilliant portrait of this complexity I cannot recommend highly enough Joachim Radkau’s adventurous psychobiography.
The Weber text that is most often cited as the warrant for political realism is his essay of 1919, “Politics as a Vocation”. Contemporaries at the time remarked on its Machiavellian flavor. But what kind of realism did it embody?
At the time, in the wake of Germany’s defeat and witnessing the disintegration of the Imperial German state, Max Weber was in a state of turmoil. The nation-state that had anchored his attempt to formulate a pluralist value system and define, like Machiavelli, a domain proper to political ethics, had just collapsed. In the lecture hall in 1919 his students recalled him ranting about the imminent Polish occupation of East Prussia and appealing for acts of heroic self-sacrifice. All the evidence suggests that Weber had, in fact, lost his grip on history. The only vista he could see ahead was one of polar night. As was noted by astute contemporaries and friends of Weber, notably the historian Friedrich Meinecke and the philosopher and theologian Ernst Troeltsch, this mood did not make for a particularly realistic reading of German politics or German raison d’état
By way of Frank Ankersmit, Meinecke’s history of European raison d’état – a far more realistic and historically saturated appraisal than Weber ever delivered – makes a cameo appearance in Anderson’s genealogy of van Middelaar’s work.
As Stefan Eich and I argue in our essay, “The allure of dark times: Max Weber, Politics and the Crisis of Historicism” (History and Theory 2017), what was centrally at issue in Weber’s crisis was his conception of history, or rather its evaporation. In phrases which anticipated Pocock’s vision of a stream of “irrational events”, Weber positioned the vocation of the politician against an essentially meaningless flow of history, on which human subjects did their best to impose whatever reason and order that they could. What is missing in this moment of Weber’s thought, is precisely a conception of history as process, history as Kennan actually described it. History as driven by “action and reaction” creating events, not as isolated contingencies or irrational incidents, but one event meshed with another, reflecting each other, shaping determinations that act over the long range.
***
What van Middelaar’s dichotomous distinction between history as predictable regular development and history as irrational event allows him to capture, is something akin to this Weberian shock. What it doesn’t allow you to do is to write history or understand historical process, to recognize 2008 or 2013 as something other than irrational event. It’s a symptomatic reading.
If on the other hand, we are actually to grasp the challenges for government posed by financial capitalism, or geopolitics we need to start not with the tragic, existential image of an embattled polity struggling to right itself amidst the stream of irrational events. We need to start with some conception of history as a process, a process in which actor like the EU and its member states and the social forces that cluster within that zone, have agency. They don’t simple react or strategize in relation to an external flow of events, they constitute that flow, they drive it more or less consciously. As Stefan Eich and I put it in our essay, “history is one of the names that generative social praxis fed by collective political action has given to itself.”
Politics formulated in relation to this kind of conception of history is neither merely rule-making, nor (strategic) improvisation. It is not simply about taking “the turbulent world for what it is” as van Middelaar insists any Realpolitik must. It is about articulating social change, initiating processes of transformation. And that preeminently is the domain in which the EU likes to position itself. Most notoriously, its favorite self-description is as the vehicle for a process of “ever closer union”.
That vision has its ups and downs, but it “ain’t dead yet”. Currently, the domain in which it is most clearly formulated is precisely climate policy and NextGen EU. To paraphrase the formulation that Stefan and I devised in wrestling with Weber, “the climate crisis is one of the names that generative social praxis fed by collective political action” gives to itself in Europe today.
Nor is this new. Before NextGen EU there was the Common Agricultural Policy, not just silly rules about bananas, but one of the most dramatic and problematic exercises in “just transition” ever conceived. Before CAP there was the Coal and Steel Community, and closer to the present both monetary union and, like it or lump it, “social Europe”. These are politics neither of rule-making, nor of improvisation. They are projects, projects conceived not in relation to a meaningless flow of events, simply taking reality as it is, but efforts to read, decipher and shape historical processes of social, economic and political change. Nor, frankly, was there any mystery about this at the time.
One can’t help wondering, in fact, whether the entire framing of the EU’s history in terms of an opposition between rule and event, in which van Middelaar is by no means alone, is not itself an effect of a particular phase, shall we call it the neoliberal phase or the phase of the “great moderation”, that might be dated to the period from 1992 (Maastricht) to 2008 (Georgia v. Financial crisis).
A phase of depoliticization, a purported end to history, has in turn given rise to a singularly convulsive and ahistorical account of the “return” of both history and politics. Whether as trauma or Schadenfreude it carries with it too much of its own moment of genesis. To arrive at a truly realistic account of this moment and of our present, stripped of the existential histrionics, there is still work to do.
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January 28, 2022
Ones & Tooze: Boris Johnson and the Sordid Arithmetic of Partygate
If British Prime Minister Boris Johnson loses his job over the the scandals now engulfing his government, his political obituary will focus on just three things: Brexit, COVID-19, and Partygate. On this week’s episode of Ones and Tooze, Adam Tooze and Cameron Abadi discuss the sordid legacy of a man who seemed almost invincible just two years ago, and they analyze the economic impact of Johnson’s policies.
Also on the show, part three of the lifecycle series: How much will that midlife crisis cost you?
Find more information and subscribe at Foreign Policy
January 25, 2022
Can Europe tame pandemonium?
As 2022 begins, Europe presents a Janus face. In the east, Russia’s military is massing on the border of Ukraine. The EU’s attempts at diplomacy have been swept aside. Moscow wants to deal with Washington. While the east European member states strike a hawkish pose, the German government is divided and Mario Draghi, Italy’s prime minister, says out loud what ought to be obvious. With limited military means and heavy dependence on Russia’s gas, Europe has no capacity for credible deterrence. Whatever position you take on the Ukraine crisis, the EU does not come off well.
On the other hand, Brussels is releasing volumes of NextGenerationEU funding to its member states. France and Italy have opened the debate about enabling greater public investment. Tens of billions in revenue are flowing into the EU’s Emissions Trading System. Nor is Brussels flinching from its confrontation with Britain over Brexit, and with Warsaw over the Polish government’s flouting of the supremacy of European law. While Russia’s aggression exposes Europe’s divisions, it appears that Covid has driven the EU more tightly together than ever.
There was little reason to think that the pandemic would be good for the EU. It was unprepared and a common healthcare policy was not part of the union’s remit. In March and April 2020 things were going disastrously. The European public was outraged. It was an urgent and fast-moving crisis – not the kind of situation you would expect the EU to cope with well.
But as the Dutch historian and political theorist Luuk van Middelaar has been arguing for some time, the EU is no longer the mechanical rule-making apparatus that it was. It is an increasingly capable political actor, forged by crises over more than a decade. That was already clear before 2020; Covid confirmed it.
Read the full article at The New Statesman
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