Dear Mr Browning,
I suppose that writers should, in a way, feel flattered by the censorship laws. They show a primitive fear and dread at the fearful magic of print.
Yours as ever,
Monthly Archives: October 2013
The shifting tide of global power…
CHINA VERSUS AMERICA
A week of global economic peril, concluded late last week with a sigh of relief that reverberated around the world. America’s Republican Party zealots finally backed down following President Obama’s steadfast refusal to compromise on his signature healthcare bill. Life in Washington has returned to what passes for normal, but for the risk and uncertainty of a U.S. default deferred until January.
Late last week, too, came the news that China’s economy – the world’s most important locomotive – has recovered from two lacklustre quarters to report annual growth figures of 7.8 per cent. The good sense of the UK Chancellor, George Osborne, to engage as keenly as possible with China should be self-explanatory.
Yet, these two different events portray in the simplest terms the widening gulf and relative performance of the world’s two most powerful states. That in turn is reflecting the rather expeditious way in which global power is shifting. The Obama administration made a pivot to Asia a central tenet of its term in office, a policy that was made in response both to the economic opportunities on that side of the world and the brisk growth in China’s economic muscle. China’s geopolitical ambitions are a direct threat and challenge to the United States.
Mr Obama’s tactical approach was a sound one. The fact that Washington’s bitter political stalemate has led the president to cancel two planned Asian summits this month speaks loudly for the limits on the actual power of the man – often described, erringly, as the most powerful in the world.
China, meanwhile, continues to surge ahead, its peculiar and atypical political architecture proving to be more than adequate in hauling the rest of the world out of recession.
The economic data released from Beijing has received a muted greeting from many economists: the wild and extraordinary years in which China’s economy grew at double figures are undoubtedly over, and China’s new leadership certainly does not want them back. The Chinese challenge is to keep the economy growing fast enough to maintain a strong employment market and to avoid any prospect of incomes stagnating. Protecting domestic consumption on which future growth will inevitably depend is an important factor. Dramatic growth figures, however, will make it much harder for the Chinese government to push through their plans to curb inefficient and highly polluting industries. They need just enough growth to allow the economy to become leaner and more contemporary, but not much more to allow the unreformed parts to inflate more than they already have.
In achieving this, China has the advantage, and one that is shared by all authoritarian regimes, that all the political controls and levers are in their own hands – at least notionally. And it has to be said they are managing them with impressive competence: Xi Jinping’s self-congratulatory tune that China’s economy is basically doing very well, and that the slowdown was the result of its own adjustment initiative, is largely correct.
China is still growing, and the geopolitical power is increasingly pivoting to the East. The U.S. has tied itself in knots which it will struggle to untangle if a clear budget blueprint is not now delivered.
The implications may be stark enough, but this does not necessarily mean that we should resign ourselves to a new kind of dominion in our dealings with the Far East. For centuries, foreigners who have lived in awe of China’s size and revered age performed a pandering act. We should be careful in repudiating the idea that anyone should not be nervous about doing business with say the Chinese firm Huawei, a company that is frequently accused of industrial espionage, or by embracing Chinese management of our nuclear power stations, and saying nothing of a controversial nature. Dictatorial regimes have brutal histories, and in the case of China persecuting religious minorities and suppressing Tibetan autonomy are well documented.
US budget and debt ceiling: a continuing danger to the world…
U.S. BUDGET & MARKET CORRECTION
The confrontation over the U.S. debt ceiling might have been resolved meantime, but there is nothing to prevent a repeat of the U.S. economic debacle when the government’s budget comes up for review again in January. Last week, after a wrangling spectacle that lasted several weeks, politicians in Washington slammed on the brakes at the last minute. For a long time, though, the differences between Democrats and Republicans appeared irreconcilable and seemed intent on driving the global economy off a cliff, by triggering a catastrophic default.
President Obama was quick to highlight that nothing has done more damage to America’s credibility in the world, or standing with other countries, than what we’ve seen over the past few weeks. Yet, any sense of relief is likely to be distinctly short-lived. For what will prevent this whole exercise being repeated in a few months? What was agreed on Capitol Hill was a stay of execution, rather than a reprieve. Congressmen still have utterly different views of the role and extent of government, and far less reason now than ever to trust each other.
Outside of America, the most important thing is to ensure that the risk of another global recession is eliminated because of the disaster that would follow a U.S. default. The world will expect that America’s politicians are mature enough to forge a long-term budget deal. In the likely absence of such bipartisan spirit, a partial fix would be to eliminate the need for Congress to approve each increase in the debt ceiling, and rely on the market to provide the necessary fiscal rectitude and discipline.
Market correction does not imply a recipe for unrestricted spending. The House of Representatives would still retain control of the purse strings, and could refuse to fund certain aspects of the government’s operations it was unhappy with. Otherwise, the U.S. will continue to bump up against the ceiling time and again, with the possibility and threat of a catastrophe unfolding. Given that the debt’s numerical value is bound to increase – even if it shrinks as a proportion of GDP – the market should be used as a rectifying tool, rather than politicians in Washington who have proved they are unfit to compromise on their conflicting (and perhaps even reticent) agendas.
AN IMPASSE THAT COULD BE BROKEN WITH MID-TERM 2014 ELECTIONS LOOMING
Following the deal to reopen the U.S. government, John Boehner, Speaker of the House of Representatives, said: ‘We fought the good fight. We just didn’t win.’ These words expressed by Mr Boehner, in theory the most powerful politician in Congress, disguises the fact that Republicans fought an ignoble and pointless fight that has inflicted deep damage on the United States. True, the U.S. government has averted the calamity of a debt default, but to suggest his Republican party did not win is putting it mildly. The Republicans achieved nothing of what it was seeking, most notably a postponement of President Obama’s signature health care reform. Instead, many will suggest it suffered a crushing defeat that might just bring the party to its senses.
That outcome, however, is far from guaranteed. Judging by reactions following last Wednesday’s Senate and House votes that ended the crisis, the ultra-conservative minority that has been holding America to ransom shows little sign of changing its ways.
America must now count the cost of this completely unnecessary exercise in futility. The $20 billion direct loss to the U.S. economy is just the start of it. The ‘good fight’ Mr Boehner refers to has further poisoned the atmosphere on Capitol Hill, and distracted America’s legislature from far more important issues – such as immigration policy reform and climate change. Then there is the damage to the country’s reputation and financial standing. The budget deal that has allowed the U.S. government to resume business has settled exactly nothing.
The government is being funded again, but only until mid-January; the U.S. Treasury is authorised to borrow, but only until early February. There is no guarantee whatsoever that the zealots, unchecked by Mr Boehner, will use these deadlines once again to provoke a repeat shutdown and a new round of brinkmanship on the debt ceiling.
Under the agreement, a bipartisan joint House and Senate panel is being set up, with instructions to work out by mid-December a blueprint to balance the budget, and thus resolve the arguments underlying all of the issues between Mr Obama and Congress. This may offer a glimmer of hope but few will give it much chance of succeeding where numerous attempts in the past have failed. To reconcile the vast differences between the parties on taxes and spending will require compromise on both sides not yet seen.
The best hope of averting a new crisis could lie in the approach of the 2014 midterm elections, because Republicans may fear a brutal backlash from voters. Ultimately, the impasse is not economic but political, and could be settled at the ballot box.
Pollsters clearly show that the majority of Americans blame Congressional Republicans for the folly that has ensued on Capitol Hill. If Republicans do bring about a repeat of the budget debacle early next year, then they will surely be heading for a fully deserved electoral disaster.
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