Adam Tooze's Blog, page 32

Has Covid ended the neoliberal era?

The year 2020 exposed the risks and weaknesses of the market-driven global system like never before. It’s hard to avoid the sense that a turning point has been reached

If one word could sum up the experience of 2020, it would be disbelief. Between Xi Jinping’s public acknowledgment of the coronavirus outbreak on 20 January 2020, and Joe Biden’s inauguration as the 46th president of the United States precisely a year later, the world was shaken by a disease that in the space of 12 months killed more than 2.2 million people and rendered tens of millions severely ill. Today the official death tolls stands at 4.51 million. The likely figure for excess deaths is more than twice that number. The virus disrupted the daily routine of virtually everyone on the planet, stopped much of public life, closed schools, separated families, interrupted travel and upended the world economy.

To contain the fallout, government support for households, businesses and markets took on dimensions not seen outside wartime. It was not just by far the sharpest economic recession experienced since the second world war, it was qualitatively unique. Never before had there been a collective decision, however haphazard and uneven, to shut large parts of the world’s economy down. It was, as the International Monetary Fund (IMF) put it, “a crisis like no other”.

Even before we knew what would hit us, there was every reason to think that 2020 might be tumultuous. The conflict between China and the US was boiling up. A “new cold war” was in the air. Global growth had slowed seriously in 2019. The IMF worried about the destabilising effect that geopolitical tension might have on a world economy that was already piled high with debt. Economists cooked up new statistical indicators to track the uncertainty that was dogging investment. The data strongly suggested that the source of the trouble was in the White House. The US’s 45th president, Donald Trump, had succeeded in turning himself into an unhealthy global obsession. He was up for reelection in November and seemed bent on discrediting the electoral process even if it yielded a win. Not for nothing, the slogan of the 2020 edition of the Munich Security Conference – the Davos for national security types – was “Westlessness”.

Read the full article at The Guardian

What if the Coronavirus Crisis Is Just a Trial Run?

Almost two years since the novel coronavirus began to circulate through the human population, what lessons have we learned? And what do those lessons portend for future crises?

The most obvious is the hardest to digest: The world’s decision makers have given us a staggering demonstration of their collective inability to grasp what it would actually mean to govern the deeply globalized and interconnected world they have created. There is only one limited realm in which something like a concerted response has been managed: money and finance. But governments’ and central banks’ success in holding the world’s financial system together is contributing in the long run to inequality and social polarization. If 2020 was a trial run, we should be worried.

How did we get here? In a way, the failure was predictable. As instruments of coordination and cooperation, global institutions like the United Nations, the International Monetary Fund and the World Health Organization had proved fragile and toothless long before the pandemic. The explanation for this failure used to be geopolitical antagonism: Power blocs couldn’t come together when they had competing priorities and agendas. It was thus tempting to imagine that some common threat — perhaps an alien invasion — might make a reality of the United Nations.

The coronavirus, one might think, was precisely such an invasion. And yet faced with this common threat, cooperation failed. Rather than a concerted shutdown of global aviation, frontiers were closed on the fly; supplies of personal protective equipment were grabbed at airports; haphazard travel bans continue to this day.

Read the full article at The New York Times.

Don’t Abandon Afghanistan’s Economy Too

As the chances of evacuation dwindle, the West owes Afghans a chance at surviving in their own country.

As Western powers pull out of Afghanistan, they have begun to ask themselves what their remaining sources of leverage over the Taliban are. In forums like the G-7 meeting chaired by the United Kingdom, conversations rapidly turn to the possibility of using funding as a means of pressure. This is a dangerous approach.

Afghanistan is critically dependent on foreign aid. In recent years, it was not unusual for it to have received aid amounting to 43 percent of its GDP. That flow of funds has now been suspended, giving the West leverage. But if the West exercises pressure indiscriminately, it will pull Afghanistan’s last remaining support at the same time it’s abandoning the country. The Taliban may threaten Afghan freedom and rights, but it is the abrupt end to funding from the West that jeopardizes their material survival.

The single clearest index of this dependence-based relationship is its balance of trade. Afghanistan is in deficit to the tune of 25 to 30 percent of its GDP. At $7 billion in 2020, Afghanistan’s imports exceeded its exports of $1.7 billion by a factor of four.

This is not by itself surprising. Afghanistan is very poor. Poor countries have a bottomless hunger for foreign goods. But the poor countries’ problem, by definition, is they have little to trade in return. Otherwise, they would not be poor. How much a poor county can satisfy its appetite for imports depends on the external funding it can find. It is not by accident that Afghanistan’s huge trade deficit first emerged after 2001, when the country was taken over by Western powers, or that the deficit reached its maximum toward the end of then-U.S. President Barack Obama’s military surge in 2012 and immediately thereafter in 2013. Imports are a direct function of foreign aid.

Read the full article at Foreign Policy.

Wages of Destruction with WW2TV

A look at Germany’s wartime economy as explored by Adam’s in his award winning book The Wages of Destruction. Our talking points will include the fact that after the Germans had failed to defeat Great Britain in 1940, the economic logic of the war drove them to an invasion of the Soviet Union. Hitler was constrained do so in 1941 to obtain the natural resources necessary to challenge two economic superpowers: the United States and the British Empire. That sealed the fate of the Third Reich because it was resource constraints that made victory against the Soviet Union impossible, especially when it received supplies from the Americans and the British to supplement the resources that remained under Soviet control. We will also talk about Strategic bombing, Albert Speer and also German’s pre-WWII rearmament.

Does the world need to learn to live with China? with World Review from the New Statesman

Historian and economist Adam Tooze joins Jeremy Cliffe in Berlin and Emily Tamkin in Washington, DC to talk about his New Statesman cover story on the West’s relationship with China. They talk about who China’s allies are and what impact climate change will have on geopolitics.

Opinion: the Fed can, and should, take big steps on climate

In the last two years the central banking community has embraced the issue of climate change.

That is not to say that central bankers have been converted to climate activists. That would imply a drop-everything approach to the climate issue, which is nowhere in sight. Nevertheless, to hear Christine Lagarde of the European Central Bank (ECB) telling the Green Swan conference recently that “(o)ur planet is burning” and demanding that central bankers think beyond narrow definitions of their mandate, is a sign of how far things have moved.

Central bankers are no longer strangers in the climate policy space. In light of far-reaching national commitments to achieving net zero by 2050, a wide-ranging re-examination of financial stability regulation and monetary policy tools is under way.

In the last six months, the Bank of England has had environmental sustainability and the transition to net-zero inserted into its core mandate. In its long-awaited strategic review, the ECB stressed the importance of climate. And the Bank of Japan has been authorized to make preferential loans to assist the energy transition.

Of course, the devil is in the detail, and the suspicion of greenwashing is never far away. The ECB may have opened the question of how far financial markets underprice climate risk, but it will be some time before it is clear how this will change its policy on corporate bond buying. The Bank of Japan may have a licence to promote green lending, but it is under no obligation to penalise dirty collateral.

Read the full article at Green Central Banking.

Why there is no solution to our age of crisis without China

For decades, the West has ignored the significance of China’s rise – but we must recognise that it will be instrumental in all our futures

In the summer of 2021 the Chinese Communist Party (CCP) is marking its centenary. It has much to celebrate. The most powerful communist party and by far the most powerful political organisation in the world, it has presided over the largest surge of economic growth ever witnessed. For both the West and China’s immediate neighbours, this unsettling and unexpected fact defines the early 21st century.

China’s rise has undone any assumption that social and economic progress naturally leads to liberalism. Hundreds of millions of people have been lifted out of poverty in 40 years by an authoritarian one-party regime, dedicated to what it calls “Marxism for the 21st century”.

Against the backdrop of this triumph, the CCP is planning its second century. In Europe, the US and Asia, the political classes are scrambling to keep up. American strategists have designated a newly minted world region, the Indo-Pacific, as the arena for a battle royal between democracy and authoritarianism.

Some influential voices on both sides of the Atlantic relish this confrontation. Others are suffering from a sense of shock. They hanker after the 1990s or early 2000s, when coexistence seemed assured – an era that contemporary hawks dismiss as a period of naivety when the China challenge was underestimated.

Read the full article at New Statesman.

Climate crisis offers way out of monetary orthodoxy

On July 8th the European Central Bank announced the results of the Monetary Policy Strategy Review initiated by its president, Christine Lagarde, in January 2020. Delayed by the pandemic, its deliberations had been kept tight. But, with striking haste, Lagarde shepherded the ECB’s General Council into unanimous agreement on a terse statement about the bank’s policy regime.

The review’s conclusions are technical but have wide implications. The ECB is Europe’s most powerful federal institution. At moments of financial stress it holds Europe’s fate in its hands. In normal times, interest rates are a key parameter for decision-making of all kinds.

The results of the review, modest though they may seem, are highly revealing not just about the ECB but the broader politics of eurozone. It is 18 years since the bank last conducted a strategic review and there has been plenty in the interim to digest. What is more telling than what appears in the final communiqué, however, are those aspects of the ECB’s experience which could not be assimilated into official doctrine.

Read the full article at Social Europe.

World War I and the Reconstruction of the Global Order with Huang Yanjie ‘The Paper’

亚当·图兹谈第一次世界大战与全球秩序的重建

一百年前，一个新的世界秩序在第一次世界大战的废墟上艰难地建立起来，然后很快就在纷至沓来的金融危机、法西斯运动和二次世界大战中分崩离析。多年来，我们对于一战后秩序重建的历史认识一直受制于二战的后见之明：冥顽不灵的克列孟梭、理想主义的威尔逊和料事如神的凯恩斯。亚当·图兹（Adam Tooze）正是要挑战这一常识。他认为，一战后的欧洲政治精英对时事的判断远超威尔逊和凯恩斯，但后者比前者更能代表历史的长期趋势。他告诫他的欧洲史同行，认识一战及其以后的秩序首先要注意美国的兴起，正如理解当代史必须留意中国崛起。从外部看，美国似乎已经是一个巨人。一战使美国成为全球政治和金融执牛耳者，而美国经济已然成为世界各国必须面对的挑战。从内部看，美国只是一个少年。美国内战的伤痕尚未愈合，而国家政权建设方兴未艾，无力进行全球扩张。面对一战前后才出现的全球治理挑战，美国在理想与现实中徘徊，直到二战彻底打破旧世界，才得以用凯恩斯主义重构内外秩序。亚当·图兹教授的《滔天洪水：第一次世界大战与全球秩序的重建》仿佛让我们回到一战后期与战后的历史现场，在结构性的力量与历史人物之间、在偶然事件和历史趋势之间，发现上世纪中期世界战争与革命的根源。

Read the full interview with Huang Yanjie at The Paper.

150th anniversary of German unification: Bismarck, Realpolitik, and Birth of a Nation With Columbia DC

Napoleon’s invasion smashed the Holy Roman Empire in 1806 and with it what was left of the early modern/medieval frame. Class strife in the wake of the Industrial Revolution unleashed competing forces of liberalism and conservative traditionalists across the European boundaries. And the tug of war among bigger powers including the French, the Russians, and the Habsburgs meant the German aspiration for nationhood was arrested at an ineffective and weak Confederation level, the Deutscher Bund. It may have sealed the inferior fate of Germans hadn’t it been for a radical and unabashed exponent of the politics of power, Otto Von Bismarck who knew that “Passive planlessness” was not an option: “We will be the anvil if we do not make ourselves into the hammer”. But how and when?

That moment came with Austria’s isolation from Russia during the Crimean war, and Bismarck’s keen instinct seized upon that opportunity to challenge for dominance in Germany. Exactly on the 3rd anniversary of the battle of Gettysburg, at an equally consequential civil war battle of Königgrätz, Bismarck masterfully channeled the political capital of a Prussian victory against the Austrians, into a movement that led to the unification of Germany in 1871. Europe was never the same again.

Please join us as Adam Tooze, Kathryn and Shelby Cullom Davis Professor of History and the Director of the European Institute at Columbia University revisits the socio-economical and geopolitical circumstances in 19th-century Europe that led to the drive for German unification. Tooze retraces the consequences of a unified and strong Germany as the center of Europe.