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Showing posts with label Jeffrey Sachs. Show all posts
Showing posts with label Jeffrey Sachs. Show all posts

Friday, October 4, 2024

Beyond Hegemony - We need a New International Order Under the UN Charter

 

To address these pivotal developments, UN Sec-Gen Antonio Guterres had called for a Summit of the Future to reform our international institutions so that they are fit for purpose in our fast-changing world. —AP

Jeffrey D. Sachs is University Professor and Director of the Center for Sustainable Development at Columbia University and President of the UN Sustainable Development Solutions Network. He has been advisor to three UN Secretaries-General, and currently serves as an SDG Advocate under Secretary-General António Guterres.

We are at a new phase of human history because of the confluence of three interrelated trends. First, and most pivotal, the Western-led world system, in which countries of the North Atlantic region dominate the world militarily, economically, and financially, has ended. Second, the global ecological crisis marked by human-induced climate change, the destruction of biodiversity, and the massive pollution of the environment, will lead to fundamental changes of the world economy and governance. Third, the rapid advance of technologies across several domains—artificial intelligence, computing, biotechnology, geoengineering—will profoundly disrupt the world economy and politics.

“We propose […] to establish a “UN Parliamentary Assembly” as a subsidiary body of the UN General Assembly according to Article XXII of the UN Charter”

These interconnecting developments—geopolitical, environmental, and technological—are stoking huge uncertainties, societal dislocations, political crises, and open wars. To address these pivotal developments, United Nations Secretary-General Antonio Guterres has called for a Summit of the Future (SOTF) (September 22-23rd, 2024 at the UN headquarters in New York) to reform our international institutions so that they are fit for purpose in our fast-changing world. Since global peace depends more than ever on the efficacy of the UN and international law, the SOTF should be a watershed in global governance, even if it does no more than point the way to further negotiation and deliberation in the years immediately ahead.

Our existing institutions, both national and international, are certainly not up to the task of governance in our fast-changing world. The late, great evolutionary biologist Edward O. Wilson, often described our predicament as follows: “We have stumbled into the twenty-first century with stone-age emotions, medieval institutions, and near godlike technologies.” By this he meant that we face our challenges today with the basic cognitive and emotional human nature that was formed by human evolution tens of thousands of years ago, with political institutions forged centuries ago (the U.S. Constitution was drafted in 1787), and with the lightning speed of technological advance (think of ChatGPT as just the latest wonder).

Perhaps the most basic fact of deep societal change is uncertainty, and the most basic reaction to uncertainty is fear. In fact, the technological advances—if used correctly—could solve innumerable problems in economic development, social justice (e.g., improved access to healthcare and education through digital connectivity), and environmental sustainability (e.g., a rapid transition to zero-carbon energy sources). Yet the mood today is anything but optimistic, especially in the West. Open wars rage between the United States and Russia in Ukraine, and between U.S.-backed Israel and Palestine. The possibility of war between the United States and China is widely, openly, and even casually discussed in Washington, though such a war could mean the end of civilization itself. At the root of these conflicts is fear, built on our stone-age emotions.

The biggest fear of all is that of many American and European political leaders that the West is losing its hegemony after centuries, and that somehow the loss of hegemony will have catastrophic consequences. Former UK Prime Minister Boris Johnson made this Western fear explicit in an April 2024 column for the UK’s Daily Mail, when he stated that if the West loses the war in Ukraine, “it will be the end of Western hegemony.”

Herein lies the essence of the Ukraine war, and many other global conflicts as well. The United States and its allies want to expand NATO to Ukraine. Russia has firmly said no. Both Washington and London were ready to fight a war with Russia over NATO enlargement to protect Western hegemony (specifically, the right to dictate security arrangements to Russia), while Russia was ready to fight a war in order to keep NATO away. In fact, Russia is prevailing on the battlefield over Ukraine’s army and NATO’s armaments. This is not surprising. What is perhaps surprising is how the West completely underestimated Russia’s capabilities.

In broad terms, with the changing global order, including the rise of China and the rest of East Asia, the military and technological strength of Russia, the rapid development of India, and the growing unity of Africa, the Western-dominated world has been brought to an end, not by a tumultuous collapse of the West, but by the growing economic, technological, and therefore military, power of the rest of the world. In principle, the West has no reason to fear the rise of the rest, as the United States and Europe still maintain an overwhelming deterrence, including nuclear deterrence, against any military threat from the outside. The West is bemoaning its loss of relative status—the ability to dictate to others—not any real military insecurity.

Nothing is going to restore Western hegemony in the coming years—no military victory, technological advance, or economic leverage. The rise of advanced military, technological, economic, and financial capacities to Asia and beyond, is unstoppable (and of course should not be stopped, since it signifies a world that is fairer and more prosperous than the preceding Western-dominated world). Yet, the end of Western hegemony does not mean a new Chinese, Indian, or Asian hegemony. There are simply too many power centers—the United States, the EU, China, Russia, India, the African Union, etc.—and too much capacity and diversity to enable any other hegemon to replace the Western-led world order. We have arrived, after centuries of Western dominance, to a world beyond hegemony.

This new world, beyond hegemony, should be the starting point for the Summit of the Future. The United States, UK, and the EU should come to the Summit not in a vain attempt to sustain their hegemony (as Boris Johnson fantasizes), or equivalently, to protect America’s self-declared “rules-based order”—a vacuous expression that envisions the rules as determined by the United States alone. They should come as part of a new multipolar world looking to find solutions to profound ecological, technological, economic, and other challenges. The new order should be based on multilateralism and international law under a suitably reformed UN Charter.

As President of the UN Sustainable Development Solutions Network (SDSN)—a worldwide network of more than 2,000 universities and think tanks dedicated to sustainable development generally and to the UN’s Sustainable Development Goals (SDGs) specifically—I have the opportunity to discuss humanity’s future with university leaders, scientists, technologists, policymakers, and politicians around the world, with the goal of envisioning a future that is prosperous, fair, sustainable, and peaceful for all of the world, not for a privileged West or any other small part of the world. Based on these extensive discussions, the SDSN issued a Statement on the Summit of the Future, responding to the five main “Chapters” for decisionmaking at the Summit: (1) achieving sustainable development; (2) ensuring global peace; (3) governing the cutting-edge technologies; (4) educating young people for our new world; and (5) reforming the UN institutions to make them fit for the post-hegemonic balance of the twenty-first century. 

Here is a summary of the core recommendations of the SDSN.

 

Achieving Sustainable Development

  1. The SDG Agenda should remain the core of global cooperation to 2050.

The SDGs were initially set for the fifteen-year period between 2016 and 2030, following the fifteen-year period of the Millennium Development Goals (MDGs). It is clear that the SDGs will not be achieved in the original time frame. We strongly urge that the SOTF recognize the pivotal role of the SDGs in aligning national, regional and global policies, and commit to the SDG framework until 2050, so as to reinforce the efforts already underway and recognize the time horizon needed to reorient the world economy to sustainable development. The new horizon of 2050 does not mean a slackening of effort. Rather, it means improved long-term planning to achieve highly ambitious 2050 goals and milestones on the way to 2050. 

  1. The Sustainable Development agenda should be properly financed.

All evidence developed by academia, the Bretton Woods system, and UN institutions is that there remains a massive shortfall in the pace of investments needed for the poorer nations to achieve the SDGs. In order to mobilize the needed investment flows for human and infrastructure capital, the global financial architecture must be reformed and made fit for sustainable development. The major objective is to ensure that the poorer countries have adequate financing, both from domestic and external sources, and at sufficient quality in terms of the cost of capital and the maturity of loans, to scale up the investments required to achieve the SDGs.

1.3 Countries and regions should produce medium-term sustainable development strategies

Sustainable Development in general and the SDGs specifically, require long-term public investment plans, transformation pathways, and a mission orientation to provide the public goods and services required to achieve the SDGs. For this purpose, all nations and regions need medium-term strategies to achieve the SDGs. These strategies, with a horizon to the year 2050, and in some cases beyond, should provide an integrated framework for local, national, and regional investments to achieve the SDGs, and for the technological transformations needed to achieve green, digital, and inclusive societies. 

 

Achieving International Peace and Security

2.1 The core principles of non-intervention should be reinforced and extended. 

The greatest threat to global peace is the interference by one nation in the internal affairs of another nation against the letter and spirit of the UN Charter. Such interference, in the form of wars, military coercion, covert regime-change operations, cyberwarfare, information warfare, political manipulation and financing, and unilateral coercive measures (financial, economic, trade, and technological), all violate the UN Charter and generate untold international tensions, violence, conflict, and war.

For this reason, the UN member states should resolve to end illegal measures of intervention by any nation (or group of nations) in the internal affairs of another nation or group of nations. The principles of non-intervention, enshrined in the UN Charter, UN General Assembly Resolutions, and international law, should be reinforced along the following lines. 

First, no nation should interfere in the politics of any other country through the funding or other support of political parties, movements, or candidates. 

Second, no nation or group of nations should deploy unilateral coercive measures, as recognized repeatedly by the UN General Assembly.

Third, in a world operating under the UN Charter, there is no need for nations to permanently station military forces in foreign countries other than according to UN Security Council decisions. Existing overseas military bases should be reduced dramatically in number with the aim of phasing out and eliminating overseas military bases over the course of the next 20 years. 

2.2 The UN Security Council and other UN agencies should be strengthened to keep the peace and sustain the security of UN member states.

The UN Security Council should be reformed, expanded, and empowered to keep the peace under the UN Charter. Reform of the structure of the UN Security Council is described in Section 5 below. Here we emphasize the enhanced power and tools of the UN Security Council, including super-majority voting within the Security Council to overcome the veto by one member; the power to ban the international flow of weapons to conflict zones; strengthened mediation and arbitration services; and enhanced funding of peacebuilding operations, especially in low-income settings. 

In addition to the Security Council, other key instrumentalities of global peacekeeping, human rights, and international law should be strengthened. These include the authority and independence of the International Court of Justice and the International Criminal Court, the functionality and support for UN-based humanitarian assistance especially in war zones, and the role of the UN Human Rights Council in defending and promoting the Universal Declaration of Human Rights. 

2.3 The nuclear powers should return to the process of nuclear disarmament.

The greatest danger to global survival remains thermonuclear war. In this regard, the 10 nations with nuclear weapons have an urgent responsibility to abide by the non-proliferation treaty (NPT) mandate under Article VI “to pursue negotiations in good faith on effective measures relating to cessation of the nuclear arms race at an early date and to nuclear disarmament, and on a treaty on general and complete disarmament under strict and effective international control.” All nations, and especially the nuclear powers, should ratify and comply with the 2017 Treaty on the Prohibition of Nuclear Weapons

 

Governing Cutting-Edge Technologies 

3.1 Enhancing the multilateral governance of technological risks.

The world is experiencing unprecedented advances in the power, sophistication, and risks of advanced technologies across a range of sciences, technologies, and applications. These include biotechnology, including the ability to enhance pathogens and create new forms of life; artificial intelligence, including the potential for pervasive surveillance, spying, addiction, autonomous weapons, deep fakes, and cyberwarfare; nuclear weapons, notably the emergence of yet more powerful and destructive weapons and their deployment outside of international controls; and geoengineering, for example proposals to alter the chemical composition of the atmosphere and oceans, or to deflect solar radiation, in response to anthropogenic climate change.

We call on the UN General Assembly to establish urgent processes of global oversight of each class of cutting-edge technologies, including mandates to relevant UN agencies to report annually to the UN General Assembly on these technological developments, including their potential threats and requirements of regulatory oversight. 

3.2 Universal access to vital technologies.

In the spirit of Section 3.1, we also call upon the UN General Assembly to establish and support global and regional centers of excellence, training, and production to ensure that all parts of the world are empowered to participate in the research and development, production, and regulatory oversight of advanced technologies that actually support sustainable development (rather than hyper-militarization). Universities in all regions of the world should train and nurture the next generation of outstanding engineers and scientists needed to drive sustainable development, with expertise in structural transformations in energy, industry, agriculture, and the built environment. Africa in particular should be supported to build world-class universities in the coming years. 

3.3 Universal access to R&D capacities and platforms. 

More than ever, we need open science for scientists in poorer countries and regions, including universal free access to scientific and technical publications, to ensure the fair and inclusive access to the advanced technological knowledge and expertise that will shape global economy and global society in the twenty-first century. 

 

Educating Youth for Sustainable Development 

We call on the Summit of the Future to prioritize the access of every child on the planet to the core investments in their human capital, and to create new modalities of global long-term financing to ensure that the human right of every child to quality primary and secondary education, nutrition, and healthcare is fulfilled no later than 2030. 

4.2 Universal education for sustainable development and global citizenship (Paideia). 

In adopting the SDGs, the UN member states wisely recognized the need to educate the world’s children in the challenges of sustainable development. They did this in adopting Target 4.7 of the SDGs:

“4.7 By 2030 ensure all learners acquire knowledge and skills needed to promote sustainable development, including among others through education for sustainable development and sustainable lifestyles, human rights, gender equality, promotion of a culture of peace and non-violence, global citizenship, and appreciation of cultural diversity and of culture’s contribution to sustainable development”

Target 4.7 is, in effect, the call for a twenty-first-century paideia, the ancient Greek concept of the core knowledge, virtues, and skills that should be attained by all citizens of the Polis. Today, we have a global polis—a global citizenry—that must be equipped to foster and promote the values of sustainable development and the respect of human rights throughout the world. We call on the Summit of the Future to reinforce Target 4.7 and bring it to life in education for sustainable development around the world. This includes not only an updated and upgraded curriculum at all levels of education, but training at all stages of the life-cycle in the technical and ethical skills needed for a green, digital, and sustainable economy in an interconnected world. 

4.3 Council of Youth and Future Generations 

The empowerment of youth, by training, education, mentorship, and participation in public deliberations, can foster a new generation that is committed to sustainable development, peace, and global cooperation. A new UN Council of Youth and Future Generations can strengthen the UN’s activities in training and empowering young people and can provide a vital global voice of youth to today’s complex challenges. 

 

Transforming Global Governance Under the UN Charter

5.1 There should be the establishment of a UN Parliamentary Assembly.

Around the world, civil society, scholars, and citizens have called for strengthening global institutions by establishing representation of “We the Peoples” in the UN. We propose as a first instance to establish a “UN Parliamentary Assembly” as a subsidiary body of the UN General Assembly according to Article XXII of the UN Charter (“The General Assembly may establish such subsidiary organs as it deems necessary for the performance of its functions.”). The new UN Parliamentary Assembly would be constituted by representative members of national parliaments, upon principles of representation established by the UN General Assembly. 

5.2 Other UN subsidiary bodies should be established.

Invoking the powers under Article XXII, the UN General Assembly should establish new subsidiary chambers as needed to support the processes of sustainable development, and the representativeness of UN institutions. The new chambers might include, inter alia:

  • A Council of the Regions to enable representation of regional bodies such as ASEAN, the EU, African Union, Eurasian Economic Union, and others;

  • A Council of Cities to enable representation of cities and other sub-national jurisdictions;

  • A Council of Indigenous Peoples to represent the estimated 400 million indigenous peoples of the world;

  • A Council of Culture, Religion, and Civilization’ to promote a culture of peace and non-violence, global citizenship, and appreciation for cultural diversity, religion, and civilizations;

  • A Council of Youth and Future Generations to represent the needs and aspirations of today’s youth and of generations to come (see Section 4.3 above);

  • A Council on the Anthropocene to support and enhance the work of the UN agencies in fulfilling the aims of the Multilateral Environmental Agreements (including the Paris Climate Agreement and the Kunming-Montreal Global Biodiversity Framework) and the environmental objectives of the Sustainable Development Goals.

5.3 The UN Security Council Should Be Reformed in Membership and Powers 

We call on the UN Security Council and the UN General Assembly to adopt urgently needed reforms of the Security Council structure and processes. These should include: (1) the addition of India as a permanent member, considering that India represents no less than 18 percent of humanity, the third largest economy in the world at purchasing-power parity, and other attributes signifying India’s global reach in economy, technology, and geopolitical affairs; (2) the adoption of procedures to override a veto by a super-majority (perhaps of three-quarters of the votes); (3) an expansion and rebalancing of total seats to ensure that all regions of the world are better represented relative to their population shares; and (4) the adoption of new tools for addressing threats to the peace, as outlined in Section 2.2.

 

Reflection & Reconsideration

The most fundamental principle for our new world system must be mutual respect among nations. The world faces profound and unprecedented challenges—environmental destruction, widespread political instability, the weaponization of cutting-edge technologies, and the dramatic widening of inequalities of wealth and power—that can only be addressed through peaceful cooperation among nations. Yet, despite the urgency of cooperation, we are drifting towards wider war.

The UN is very much a work in progress. It is the creation of a very different world, one that was dominated by the United States in the intermediate aftermath of World War II. At 79 years old, the UN is still an infant in the age-old challenge of good governance and international statecraft. In a world filled to the brim with ever more powerful weaponry, especially nuclear weaponry, solving the challenge of peaceful cooperation is the most vital challenge of all.

The Summit of the Future is therefore a key moment for reflection and reconsideration on how to govern our new multipolar world, at a time of unprecedented challenges facing humanity. The world’s challenges will certainly not be solved at the September conference, but the Summit of the Future can nevertheless mark a vital starting point for a new global governance in which all regions of the world contribute cooperatively to the global common good.

Jeffrey D. Sachs is a world-renowned economics professor, bestselling author, innovative educator, and global leader in sustainable development. Originally published on the Center for International Relations and Sustainable Development. 

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Saturday, March 16, 2024

The more thoroughly exposed the CIA's true face, the better

Mother of all disorder Illustration: Liu Rui/GT

Reuters exclusively reported on Thursday that, according to a former US official with direct knowledge of highly confidential operations, then-US president Donald Trump authorized the Central Intelligence Agency (CIA) to launch secret operations on Chinese social media aimed at "turning public opinion in China against its government." Many people don't find this information surprising or even consider it "news." The US is a habitual offender, using various covert means to foment "peaceful evolution" and "color revolutions" in other countries, with the CIA being the main force employed to this end. For other countries, the US' pervasive influence is everywhere, visible and tangible, so there is no need for exposés.

We are still unclear  what the specific purpose of the "former US official" was in leaking the information to Reuters. A CIA spokesperson declined to comment on the existence of the program, its goals or impact. A spokesperson for the Biden administration's National Security Council also declined to comment, which means it was neither confirmed nor denied. The US intelligence community often uses a mixture of false and true information to create confusion, a tactic that was used on Edward Snowden. The Reuters report is valuable, but needs to be further processed to filter out the true and useful parts.

Firstly, this report carries a strong defense of US penetration into China. It portrays the proactive offensive of the US' cognitive warfare against China as a passive counterattack against "cyber attacks" on the US from China and Russia. In reality, portraying themselves as the weak or victimized party and labeling their hegemonic actions as "justice" is a part of the US' cognitive warfare against foreign countries.

One US official interviewed by Reuters even said it felt like China was attacking the US with "steel baseball bats," while the US could only fight back with "wooden ones," showing his exaggerated and clumsy acting skills. The US has never used a "wooden stick." Over the past few decades, the CIA has overthrown or attempted to overthrow at least 50 legitimate international governments. There are also statistics showing that from 1946 to 2000, the US attempted to influence elections in 45 countries 81 times to achieve regime change. As a habitual offender of manipulating public opinions, the US has long established a series of tactics in its targeted propaganda, information dissemination, event creation, rumor fabrication, incitement of public opinion, and media manipulation. It constantly creates new tactics and uses new technologies according to changing circumstances. This is an open secret. The US dressing itself up as a "little lamb" only has a comedic effect, not a propaganda effect.

Next, as the US' intervention and infiltration in other countries are covert operations, this disclosure provides an opportunity for the outside world to glimpse into the specific methods used by the US. For example, the whistleblower admitted that the CIA had formed a small team of operatives, using bogus online identities to spread damaging stories about the Chinese government while simultaneously disseminating defamatory content to overseas news agencies. This corroborates with previous statements by CIA Director William Burns, indicating increased resources being allocated for intelligence activities against China, once again confirming the existence of the US "1450" (internet water army) team targeting China.

The whistleblower admitted that the CIA has targeted public opinion in Southeast Asia, Africa, and the South Pacific region, spreading negative narratives about the Belt and Road Initiative. This indicates that in the US-instigated propaganda war against China, the global public opinion arena, especially in "Global South" countries, is their main strategic target. Various "China threat" theories circulating in third-party countries, as consistently pointed out by China, are all being operated by the US intelligence agencies behind the scenes.

The US has never concealed its hegemonic aims, nor does it regard encroachment on other countries' sovereignty as something to be ashamed of, which is even more infuriating than the hegemonic behavior itself. American economist Jeffrey Sachs criticized the CIA's blatant violation of international law in his commentary last month, stating that it is "devastating to global stability and the US rule of law," leading to "an escalating regional war, hundreds of thousands of deaths, and millions of displaced people." He also criticized the mainstream American media for failing to question or investigate the CIA. In fact, far from acting as watchdogs, mainstream American media has served as an accomplice. How many rumors manufactured by the CIA have been spread through the mouths of mainstream American media? When did they reflect and correct themselves?

We also see that the intentions of the US intelligence agencies are even more sinister. As admitted in the revelations, they aim to force China to spend valuable resources in defending against "cognitive warfare," keeping us busy with "chasing ghosts," and disrupting our development pace. First of all, we appreciate their reminder. At the same time, we will not allow external factors to interfere with our strategic determination to manage our own affairs well. For China and the world, the more fully, clearly, and thoroughly the CIA exposes itself, the deeper people will understand its true nature, and the stronger their ability to discern the truth will become. Keeping the CIA busy to no end or failing in their attempts is the best preventive effect.

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How the CIA Destabilizes the World


 

Monday, May 7, 2012

Demise of US dollar as world currency

Experts see demise of dollar as world currency

 By DORIS C DUMLAO and MICHELLE V. REMO

IT may only be a matter of time before the US dollar gets replaced as the main currency in international trade, according to economists attending the meeting of the board of governors of the Asian Development Bank (ADB) in Manila.
Asian Development Bank, ADB Loan Disbursement ...
Asian Development Bank, ADB

For many years, the dollar “has been almost the sole ‘reserve’ currency,” banked on by the world economy, American economist Jeffrey Sachs said on Thursday in one of the forums held during the ADB annual event. “Going forward, (the dollar) can’t play that role anymore.”

Sachs added that he could not see how the US dollar could remain as the world’s reserve currency when “the role of the United States in the global economy is diminishing.”

Several finance experts echoed Sachs’ sentiment, explaining that, with the greenback expected to weaken further, the world should turn to another currency to facilitate international trade and other commercial transactions.

“Having another reserve currency other than the US dollar is only a matter of time. We don’t know exactly when it will happen, but it will,” Neeraj Swaroop of Standard Chartered Bank said in an interview at the sidelines of the ADB meeting.

In the area of merchandise trading, Swaroop said, countries have actually started to use currencies other than the US dollar.

Sachs also said that some countries could turn to more than one currency in maintaining their foreign exchange reserves.

One currency being considered is the Chinese renminbi (RMB) which, according to HSBC, will inevitably become an international reserve currency.

The renminbi, or yuan, has the potential to become an international reserve currency because China is continuing to post strong growth, becoming an important player in the global economy, Iwan Azis, ADB head for regional integration, said in the same forum.

Also, China is pushing to make the yuan the world’s reserve currency – a move that is seen to hasten the replacement of the US dollar, Azis added.

Already, British banking giant HSBC has mapped out a strategy to be a leading global player in the “renminbi banking” space.

This global strategy has filtered into the Philippine market with the bank’s introduction of RMB-denominated deposit and trade financing facilities, top HSBC officials said in a press briefing on Thursday.

Spencer Lake of HSBC said the renminbi was increasingly becoming an important currency from a trade perspective.

Lake was in Manila as head of the HSBC delegation to the ADB event.

“If it were freely convertible today, it will be the second-largest currency in the world,” Lake said, noting that China has started to liberalise currency systems.

“It’s part of our core strategy to adopt and put in place all of the infrastructure and products to embrace (the renminbi) as a future reserve currency,” Lake said.

Lake said the bank’s strategy appeared to be gaining ground as indicated by a “significant” buildup of the RMB business in Hong Kong, Singapore and other South-East Asian countries.

“The world is getting ready to adopt it as a world currency,” he said. “You’ll see it as a more common language.”

“Reserve” currency, which is currently used to describe the US dollar, is the denomination that accounts for bulk of the foreign exchange reserves of most countries.

A country taps its foreign exchange reserves whenever it needs to pay off the costs of imported products and debts to foreign creditors.

After the United States fell into a recession in 2009, the US dollar began to weaken against emerging market currencies.

The trouble with hanging on to the dollar as the main reserve currency is that it is prone to depreciation given the prevailing economic troubles of the United States.

Depreciation of the US dollar, in turn, may lead to a reduction in the value of a country’s foreign reserves, experts said.

Apart from the yuan, Sachs said other viable currencies that could replace the US dollar were the euro and the Japanese yen. — Philippine Daily Inquirer / Asia News Network   

Saturday, October 22, 2011

‘Occupy Wall Street’ goes global !

The corner of Wall Street and Broadway, showin...


What Are We To Do By TAN SRI LIN SEE-YAN

Movements against bailouts, cutbacks and inequality picking up stream

SINCE its obscure beginnings, the “Occupy Wall Street” (OWS) movement has spread its wings, joining the “Indignant” of Spain (a movement born on May 15 when a Madrid rally sparked a worldwide campaign focussed on outrage over high unemployment and opposition to the financial elite).



The OWS group which has camped out in lower Manhattan's Zuccotti Park (nearby Wall Street) now in its 5th week, has a valid complaint: its young social-media connected generation is losing faith in traditional structures of government and business, arguing it has been betrayed and denied opportunity. “We got sold out; banks got bailed out” was their chant as thousands marched from Wall Street to Times Square.

Inspired by these movements, rallies rippled across the globe last weekend targeting 951 cities in Europe, Africa, Asia, Australia, and North and South America to take part in the demonstration. It's unclear how long protestors plan to stay. Some fear this could only be the beginning, as the world faces a systemic rise in anger, protest and political volatility that could last for years. With Middle-east unrest stirring again, a winter of discontent looks likely. It's not easy to pinpoint the underlying cause of their woes. Checkout their websites: they seem to demonstrate against corporate greed (bank bailouts and bonuses) and income inequality (government cutbacks). Worldwide they demand for a more fair and equal society.



Since the 2008 financial crisis, US bank profits were up 136%, but bank lending, down 9%. Indeed, bank lending has fallen in 10 of the past 12 quarters. To the OWS demonstrators, banks haven't fulfilled their part of the social bargain: bailouts for Wall Street in exchange for lending on Main Street. While banks now have more capital, they still aren't lending. Lending will continue to shrink. Banks say the demand isn't there. But 73% of small businesses say they are still being affected by the credit crunch. As I see it, banks remain very much risk adverse. Unlike in medicine, banks don't have the ability to quarantine financial contagion. There is a dangerous world out there.

What also irks protestors are Wall Street bonuses which have returned while ordinary workers suffered retrenchment and job insecurity with little help from Washington. A recent New York State report predicted that the financial industry will likely lose another 10,000 jobs by end 2012. That's on top of the 4,100 jobs lost since April and 22,000 since early 2008. Overall, New York area employment in finance and insurance had declined by 8.9% since late 2006.



The OWS movement has gained widespread support and encouragement, including from economics Nobel Laureates Stiglitz: “We have too many regulations stopping democracy and not enough regulations stopping Wall Street from misbehaving. We are bearing the cost of their misdeeds. There's a system where we have socialised losses and privatised gains”; and Kurgman: “Wall Street pay has rebounded even as ordinary workers continue to suffer from high unemployment and falling real wagesAnd their outrage has found resonance with millions of Americans. No wonder Wall Street is whining.”

Harvard's historian Niall Ferguson regarded the movement “still worth taking seriously” even though he concluded: “So occupying Wall Street is not the answer to this generation's problems. The answer is to occupy the Tea Party Call it the Iced Tea Party. Way cool.” Even the in-coming president of the European Central Bank has expressed support. However, the Times of London labelled the protests “Passionate but Pointless.”



US inequality

By far, the cause of OWS's frustration and outrage is best articulated in my friend Jeffrey Sachs' (Columbia University) latest book: “The Price of Civilisation.” In the US, the top 1% of households accounted for almost 25% of all households' income. The last time this happened was in 1929. In the first 3 decades of the 20th century, rapid industrial development raised income and wealth at the top, while mass immigration set the low bar. Then came the 1929 Great Depression and the New Deal four years later which railed against “a small group (who) had concentrated into their own hands an almost complete control over other people's property, other people's money, other people's labour and other people's lives.”

But, prosperity wasn't always accompanied by large-scale inequality. The 1950s and 1960s brought about rapid economic growth and a narrowing of inequality as a result of a more robust social safety net, fresh New Deal measures, World War II (WWII), and the vigorous post-war recovery which reversed the 1920s inequalities.

Since the 1970s, the United States tasted the fury of globalised competition but failed to grapple effectively with it. The deterioration in Main Street's earning prospects was papered over for the next 20 years by debt mortgage debt and consumer credit. Bear in mind median earnings of male workers peaked way back in 1973. The United States collects less tax as a percentage of national income (25% in 2009) than most advanced European nations (40-50%).

This reflected partly the Republican's one-idea approach: cut taxes permanently and impose fiscal austerity, often at the expense of lost competitiveness (reflecting insufficient public investment in education, infrastructure and human capital). OWS young demonstrators have a valid argument to make: they are frustrated trying to find a place in an economy where there is one job for every five jobseekers, and where youth unemployment is 18%. So much for the clich of Wall Street vs Main Street; “the greedy 1% uses the hard-done-by 99%.” The wider middle-class fears its prosperity has evaporated, demanding for a way to deliver growth once more. It's about time Americans get wise to the source of their economic woes it's a few hundred miles south of Wall Street.

US poverty 

According to the US Census Bureau, there are now more poor persons in America than at any other time in the 52 years records were kept. More than 15% of US families live below the poverty line in 2010. The line is set at US$22,000 a year for a family of four. This reflected the high unemployment of 9.1% 6.5 million jobs were lost in the recent recession. An additional 3 million Americans would fall below the poverty line if not for “doubling-up”, that is, adult children who can't afford life on their own return to live with their parents.



Today marks the first time in 20 years when US employment (as a percentage of population) has fallen below the rate in advanced European nations like UK, Germany and the Netherlands. The average weekly earnings (adjusted for inflation) of a typical US blue-collar worker is lower today than in 1964. Indeed, median inflation adjusted family income rose only about a fifth as much between 1980 and 2007 as it did in the generation following WWII. The US poverty profile is unlikely to change soon. That is why people are protesting. Many believe the current anger against autocrat politicians, bankers and elites is symptomatic of fundamental shifts in the structure of US (and indeed, global) population. Already, there are strains caused by aging populations driving up budget costs, reducing growth and blocking jobs from younger people.

Coincidentally, both the Boomerang generation and the Babyboomers generation are demonstrating together in OWS as they could very well end up in a political battle for dwindling government benefits. That is, the elderly fights to keep their entitlements (social security and medicare) to ward off poverty, and the younger population pushes for spending on education and training to avoid falling into it. Demographic issues are driving much of what we see today. A win-win is to continue pressuring the richest Americans to carry a larger share of the load. Despite congressional resistance, many of the wealthy in the United States do see it's in their interest to foster a less divisive society.

Smart government

While the benefits of globalisation are clear and I think, well appreciated (especially the rapid spread of technology embodied in the Internet and mobile telephony, and reduced poverty in emerging nations), the real problems associated with it are less well understood but nevertheless need to be urgently addressed.

Globalisation has (i) raised the scope for tax evasion; (ii) led to a loss of competitiveness among the less educated in advanced nations, particularly in the United States; and (iii) fuelled contagion, especially in finance.

In his latest book, Jeff Sachs pushed hard for a highly effective government to deal with these problems. Smart public policies are needed to (a) promote high quality education; (b) raise productivity by building modern infrastructure and inculcate science and technology; and (c) co-operate globally to regulate cross-border issues (e.g. finance and environment). His proposal is controversial at this time since it calls for more government not less, especially in the United States where economic inequality has reached a high not seen since the Great Depression.

Sachs also points to growing signs world-wide that people are fed-up with governments that cater for the rich and the powerful, and ignore everyone else. They call for greater social justice (not confined to the Arab Spring; also serious protests from Tel Aviv to London to Santiago to Sydney, and all over Europe, and now, in New York); and also more inclusive politics, rather than corrupt politics.

There are even calls for higher taxes on the very rich across nations (the United States has proposed the rich to pay more taxes; several European governments have talked of a new wealth tax; the European Commission has suggested a new financial transactions tax to raise US$75bil a year). Sachs refers to the most successful well-balanced economies today being in Scandinavia using high taxes to support smart public services, balancing economic prosperity with social justice and environmental sustainability. Sachs bemoaned that for 30 years, the United States has been going “in the wrong direction, cutting the role of government in the domestic economy rather than promoting the investments needed to modernise the economy and workforce.” It all started when President Reagan declared in 1980 that “government is not the solution to our problems it is the problem.”

Today, the solution lies in how the United States is going to fund its future competitiveness through building skills and raising productivity to fight for markets in the 21st century. This is also the way to go for the euro-zone.

Historically, Americans haven't been inclined to be aggressive enough to riot, as the Europeans, over inequality (contrast the protests in Rome, Athens, Madrid and London with those in New York). But the United States is in a new situation now where protestors are getting desperate in the face of intransigency, especially the uncompromising Tea Party. It is hard to rule that out when the American Dream is very much at stake.

At worst, I think the present situation can result in an economic malaise that lasts for decades. It makes politics most unpredictable. There is already political paralysis. But dramatic shifts in policy are possible. The rise of ideologues in a modern guise is also probable as we saw in the 1930s. I am afraid this is the new reality. We have to deal with it.

> Former banker, Dr Lin is a Harvard educated economist and a British Chartered Scientist who now spends time writing, teaching & promoting the public interest. Feedback is most welcome; email: starbizweek@thestar.com.my 

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