Global Economic Warfare Intensifies as Military Conflict Recedes

Date: 09‑09‑2021

Source: The Wall Street Journal By Greg Ip

Biden, like Trump, embraces sanctions, though they may be losing effectiveness and increasing the risk of conflict

President Biden has pledged to use economic tools to pressure the Taliban in Afghanistan.

The last American soldier had barely left Afghanistan when President Biden pledged that pressure on the Taliban would continue through other means, in particular what he described as economic tools. He has since maintained sanctions on the Taliban, though the action imperils Afghanistan’s aid‑dependent economy.

It is the latest step in the U.S.’s and the world’s shifting preference from military to economic warfare. Under former President Donald Trump, the U.S. on average sanctioned more than 1,000 people or entities a year, often by barring their access to the U.S. financial system. That was more than double the average of the prior 16 years, according to the law firm Gibson, Dunn & Crutcher.

LET’S RETHINK WHAT COUNTS AS PAID WORK

Date: 11‑01‑2020

Source: The Wall Street Journal by Greg Ip

The ‘robot apocalypse’ is generating support for a once‑in‑a‑generation rewriting of the basic contract of the labor market, writes chief economics commentator

As artificial intelligence and automation multiply, so do dystopian predictions that millions of employees will become redundant, their tasks performed more reliably and cheaply by a machine.

But must the “robot apocalypse” be quite so apocalyptic? It may provide a once‑in‑a‑generation opportunity to rewrite the basic contract of the labor market: Your paycheck reflects your contribution. In this alternative future, robots will take over much of the routine drudgery, freeing millions of us to do what we truly love or society truly needs, from raising children to writing poetry to befriending the lonely.

The Trouble With Taxing Wealth

Date: 07-03-2019
Source: The Wall Street Journal By Greg Ip

Elizabeth Warren’s proposed tax on net worth seems like a nearly surgical strike at inequality, but it may not be efficient

Massachusetts Sen. Elizabeth Warren has proposed a tax of 2% on net worth above $50 million and 3% above $1 billion.

Around the world, governments in recent decades have sought to lighten the burden on capital by reducing taxes on dividends, capital gains, corporate profits and wealth. The motivation is straightforward: more capital means more investment, higher productivity and faster growing wages. Capital is also highly mobile: Tax it too much, and it will go elsewhere, undermining growth.

Massachusetts senator and Democratic presidential contender Elizabeth Warren has broken with that consensus by proposing a tax of 2% on net worth above $50 million and 3% above $1 billion. It may never be enacted; yet in spirit it marks a historic pivot in the focus of capital taxation, from growth to inequality.

While there is no “right” level of inequality, it stands near historic highs and Democrats are unified in wanting to reduce it. Taxing wealth is an immensely appealing, nearly surgical strike at its most glaring manifestation. Yet it may not be an efficient response.

The Shrinking of the Political Middle—and What It Means

Date: 21-01-2019
Source: The Wall Street Journal By Greg Ip

As the far right and far left gain strength, countries find it increasingly difficult to get things done—both domestically and globally

In the past two years, the world has been rocked first by the rise of right-wing populists and now by a re-energized left. Both are products of a deeper-seated, destabilizing trend: the hollowing out of the political middle.

The shrinking center has hamstrung governments’ ability to act, as Britain’s Brexit chaos and the U.S.-government shutdown have demonstrated. It also erodes the international cooperation needed to confront common challenges such as on immigration, trade and the climate.

It’s a threat in particular to the global business leaders meeting in Davos this week. They’re the biggest beneficiaries of the market-friendly policies and global openness that centrist parties champion. They increasingly must deal with insurgents on the left and right with little in common except a mistrust of globalization,big banks and big tech.

Brexit Provides Early Proof of Deglobalization’s Costs

Date: 17-10-2018
Source: The Wall Street Journal By Greg Ip

A study comparing Britain to peer economies finds its output is 2.1% below what it would be without Brexit

For outsiders, Brexit has the feel of a long-running soap opera: a mash-up of plot twists and tragic characters loaded with entertainment value but not much significance if you’re not British.

That complacency is a mistake. Never in the last 70 years has a major advanced economy left a free-trade area. Brexit is providing the first real-world evidence of the costs that come from undoing the intricate bonds of globalization.

It is of course an extreme case of deglobalization: The European Union’s single market for goods, services, capital and labor is much more integrated than other free trade zones. Yet many of the barriers that are bound to rise between Britain and its partners, such as on regulations, trade penalties and immigration, are similar to those cropping up in the wider world, such as between the U.S. and its partners.

Measuring the effect of Brexit is complicated by the fact it hasn’t happened yet. British and European leaders are meeting Wednesday in an effort to bridge differences on a post-Brexit deal. Without a deal, Britain could see tariff and nontariff barriers snap back to the maximum the World Trade Organization permits.

No, the Financial Crisis Didn’t Spawn Populism

Date: 19-09-2018
Source: The Wall Street Journal By Greg Ip

Election results and economic data suggest the two aren’t as closely connected as some commentators believe

The unifying factor in the rise of right-wing populism is a disenchantment with globalization in all its manifestations: international trade, international institutions (like the EU) and, most of all, immigration.

Two defining events of the last decade were the financial crisis and the rise of right-wing populists like Donald Trump. Many believe that the first caused the second.

In “Crashed,” historian Adam Tooze’s ambitious new history of the last decade, there is a direct line connecting them: “Overshadowed by memories of 2008, the 2016 election delivered a stark verdict.”

Surveys find little evidence for Mr. Bannon’s claim that the crisis drove voters into Mr. Trump’s arms.

Steve Bannon, the right-wing provocateur and architect of Mr. Trump’s campaign, agrees: “The legacy of the financial crisis is Donald J. Trump,” he told New York Magazine. “You know why the deplorables are angry? They’re rational human beings. We took away the risk for the wealthy.”

This seems intuitive. If, like Mr. Tooze, we treat the series of crises that include the failure of Lehman Brothers and cascaded through the eurozone as a single event, then this was the worst economic catastrophe since the Great Depression. And since the Depression led to political convulsions like nationalism and fascism, shouldn’t this one?

I used to think so, but upon closer read of elections, economic data, surveys and history, this connection looks exaggerated if not wrong.

This isn’t merely an academic point. By linking the financial crisis and populism too tightly, we might draw the wrong lessons about both.

To be sure, the crisis had political consequences. Practically every political party that governed during a crisis, from George W. Bush’s Republicans to Gordon Brown’s Labour Party, was shown the door. Several studies have found that politics becomes more fragmented and polarized in the wake of crises, and this one was no exception.

Open banking’s next wave: Perspectives from three fintech CEOs

By Laura Brodsky, Chris Ip, and Tobias Lundberg, McKinsey Quarterly

The CEOs of Ping Identity, Plaid, and Tink share their views on the prospects for open banking and the pressing need for players to develop a data and customer strategy.

The notion of open banking has been central to financial services dialogue for many months, fueled in part by the buildup to the EU’s revised Payment Services Directive (PSD2). We define “open banking” as a model in which banking data is shared between two or more unaffiliated parties to deliver enhanced capabilities to the marketplace. For more on recent movements related to PSD2, see sidebar, “PSD2 and open banking.”

Progress toward data sharing has differed by region depending on market structures, regulatory environments, and consumer attitudes toward privacy and security. Varied interpretations of the word open from both industry firms and consumers are also shaping approaches to this new model. Use cases range from new interfaces for financial data, alternative underwriting and lending, facilitating new payments streams, and the opening of ecosystems. (See “Remaking the bank for an ecosystem world,” October 2017.)

The Economy Needs Amazons, but It Mostly Has GEs

Date: 22-06-2017
Source: The Wall Street Journal By Greg Ip

GE wrote the rules of corporate finance, Amazon broke them. To end economic stagnation we need more Amazons.

When Amazon.com Inc. announced Friday it was buying Whole Foods, the stock market got a taste of something long missing: volatility.

The turmoil, however, was confined to retail. While the two companies’ stocks rose sharply and their competitors’ tanked, the rest of the market remained placid. Indeed, months of historically low market volatility has begun to look like dangerous complacency.

Yet there is another, potentially more troubling explanation: stagnation. Muted markets may be the inevitable product of steady, sluggish growth, low and predictable interest rates, declining business startups and failures, and decreased competition. In other words, the problem is, there aren’t enough Amazons disrupting the stock market and the economy.

Globalism’s Great French Hope

Date: 21-06-2017
Source: The Wall Street Journal by Greg Ip

French president Emmanuel Macron has exposed a hole in the nationalist agenda,

For global elites left dispirited by Britain’s vote to leave the European Union and Donald Trump’s presidency?, France has provided a shot of adrenaline. Emmanuel Macron won the presidency last month on a proudly pro-European platform, and Sunday, French voters gave him a solid legislative majority.

It is premature to say the nationalist wave has crested. But after establishment victories in the Netherlands and Austria and a setback to Brexit champion Theresa May, it appears globalism—whether the European Union specifically or open borders more generally—is not as politically poisonous as feared.

Still, the message of the last few months is not that voters are in love with globalism again: Turnout in the French elections was historically low. Rather, it’s that nationalists have been far better at spurring anger at the status quo than offering a coherent replacement, as Britain’s Brexit confusion and Mr. Trump’s stalled agenda demonstrate. The public unhappiness that fueled their rise remains, although it increasingly is being felt on the left, not just the right.

This Time, Trump Is Right About Trade

Date: 01-06-2017
Source: The Wall Street Journal By Greg Ip

German and Chinese current account surpluses are symptoms of damaging imbalances.

German Chancellor Angela Merkel and U.S. President Donald Trump at the G-7 summit in Italy last week.

President Donald Trump took his bellicose economic agenda abroad last week, blasting Germany for its “very bad” trade surplus—or “evil” as one German newspaper translated it.

Though German Chancellor Angela Merkel did not seem to care for the messenger, she should nonetheless hear the message. While Mr. Trump gets a lot wrong about trade, on this particular point he’s right. Germany’s current account surplus, which combines trade and investment income, is now the world’s largest. Along with China’s, it is a dangerous imbalance that leaves others, including the U.S. and the rest of Europe, worse off.

It’s not just Mr. Trump who thinks so. “The criticism is right. Germany’s trade surplus is excessive,” says Marcel Fratzscher, president of DIW Berlin, a prominent German think tank. Mervyn King, former governor of the Bank of England, went further, arguing, “President Trump is right when he identifies a problem with current international trading and monetary relationships.”