martes, febrero 24, 2015

INDIA´S ECONOMY : A CHANCE TO FLY / THE ECONOMIST

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India’s economy

A chance to fly

India has a rare opportunity to become the world’s most dynamic big economy




EMERGING markets used to be a beacon of hope in the world economy, but now they are more often a source of gloom. China’s economy is slowing. Brazil is mired in stagflation. Russia is in recession, battered by Western sanctions and the slump in the oil price; South Africa is plagued by inefficiency and corruption. Amid the disappointment one big emerging market stands out: India.

If India could only take wing it would become the global economy’s high-flyer—but to do so it must shed the legacy of counter-productive policy. That task falls to Arun Jaitley, the finance minister, who on February 28th will present the first full budget of a government elected with a mandate to slash red tape and boost growth. In July 1991 a landmark budget opened the economy to trade, foreign capital and competition. India today needs something equally momentous.

Strap on the engines
 
India possesses untold promise. Its people are entrepreneurial and roughly half of the 1.25 billion population is under 25 years old. It is poor, so has lots of scope for catch-up growth: GDP per person (at purchasing-power parity) was $5,500 in 2013, compared with $11,900 in China and $15,000 in Brazil. The economy has been balkanised by local taxes levied at state borders, but cross-party support for a national goods-and-services tax could create a true common market. The potential is there; the question has always been whether it can be unleashed.

Optimists point out that GDP grew by 7.5% year on year in the fourth quarter of 2014, outpacing even China. But a single number that plenty think fishy is the least of the reasons to get excited. Far more important is that the economy seems to be on an increasingly stable footing. Inflation has fallen by half after floating above 10% for years. The current-account deficit has shrunk; the rupee is firm; the stockmarket has boomed; and the slump in commodity prices is a blessing for a country that imports four-fifths of its oil. When the IMF cut its forecasts for the world economy, it largely spared India.

The real reason for hope is the prospect of more reforms. Last May Narendra Modi’s Bharatiya Janata Party won a huge election victory on a promise of a better-run economy. His government spent its early months putting a rocket up a sluggish civil service and on other useful groundwork. But the true test of its reformist credentials will be Mr Jaitley’s budget.

The easy part will be to lock in India’s good fortune, with fiscal and monetary discipline. In addition India’s public-sector banks need capital and, since the state cannot put up the money, the minister must persuade potential shareholders that they will be run at arm’s length from politicians.

If India is to thrive, it needs bold reforms and political courage to match. The tried-and-tested development strategy is to move people from penurious farm jobs to more productive work with better pay. China’s rise was built on export-led manufacturing. The scope to follow that model is limited. Supply-chain trade growth has slowed, and manufacturing is becoming less labour-intensive as a result of technology. Yet India could manage better than it does now. It has a world-class IT-services industry, which remains too skill-intensive and too small to absorb the 90m-115m often ill-educated youngsters entering the job market in the next decade.

The country’s best hope is a mixed approach, expanding its participation in global markets in both industry and services. To achieve this Mr Jaitley must focus on three inputs: land, power and labour.

Jumbo on the runway
 
All are politically sensitive and none more so than land purchases. In China the state would just requisition the land, and let farmers go hang. But India has veered too far the other way. A long-standing plan to build a second international airport in Mumbai is on ice. An act passed in the dying months of the previous government made things worse by calling for rich compensation to landowners, a social-impact study for biggish projects and the approval of at least 70% of landholders before a purchase can go ahead. Mr Modi has used his executive powers to do away with the consent clause for vital investments. It is a temporary fix; Mr Modi needs to make it permanent and to win that political battle he needs to show that prime locations do not go to cronies, but to projects that create jobs.

Power, or rather the shortage of it, also stops India soaring. According to one survey half of all manufacturers suffered power cuts lasting five hours each week. Inefficiency is rampant throughout the power network, stretching from Coal India, a state monopoly, to electricity distributors. The first auctions of coal-mining licences to power, steel and cement companies, which began this week, are a step forward. More effort will be needed to open distribution to competition. Regulators are cowed by politicians into capping electricity prices below the cost of supply—though people will pay up and leave the politicians alone if they know that the supply is reliable.

The third big area ripe for reform is India’s baffling array of state and national labour laws.

Compliance is a nightmare. Many of the laws date to the 1940s: one provides for the type and number of spittoons in a factory. Another says an enterprise with more than 100 workers needs government permission to scale back or close. Many Indian businesses stay small in order to remain beyond the reach of the laws. Big firms use temporary workers to avoid them. Less than 15% of Indian workers have legal job security. Mr Jaitley can sidestep the difficult politics of curbing privileges by establishing a new, simpler labour contract that gives basic protection to workers but makes lay-offs less costly to firms. It would apply only to new hires; the small proportion of existing workers with gold-star protections would keep them.

Adversity has in the past been the spur to radical change in India. The 1991 budget was in response to a balance-of-payments crisis. The danger is that, with inflation falling and India enjoying a boost from cheaper energy, the country’s leaders duck the tough reforms needed for lasting success. That would be a huge mistake. Mr Modi and Mr Jaitley have a rare chance to turbocharge an Indian take-off. They must not waste it.


February 22, 2015 3:06 pm

The skirmish is over — let the Greek debt battle begin

Wolfgang Münchau

There are creative solutions to the fiscal fight that now matters the most, writes Wolfgang Münchau

 
 If this was meant to be the challenge to German economic orthodoxy, it failed. The compromise reached in Brussels on the extension of the Greek bailout was not the deal the new Syriza government sought. Its negotiating position was weak for two reasons. On Friday, Greek depositors transferred more than €1bn of bank deposits abroad. The bank system would have collapsed within days without an extension. And Athens had no plan for a euro exit. It had no choice but to cut a deal in which the Germans prevailed on all the substantive issues.
 
Then again, the deal runs for only four months — time to prepare for the battle that matters most: determining the long-term trajectory of the Greek fiscal position. Under its old agreement with creditors, Athens was meant to run a primary budget surplus — before payment of interest on its debts — of 3 per cent this year, and 4.5 per cent in 2016. The EU wants Greece to pay down its debt, currently 175 per cent of gross domestic product, to 110 per cent by 2022.

Economic history tells us adjustments of such scale do not work because electorates do not stand for it. One of Syriza’s main pre-election demands was a debt conference, in which Greece and its creditors would agree a formal “haircut” — a reduction in the nominal value of the outstanding debt — to allow the country to remain in the eurozone. The lower the level of the debt, the lower the required primary surplus needed to achieve any given debt target.
 
For the creditors this demand was an absolute taboo. Their preferred strategy is to extend the loans, cut interest rates on the Greek loans a little and pretend the country is still solvent. The question then becomes: how far would you have to go in this direction to make the re­quired primary surplus more tolerable?

The Greeks want a primary surplus of 1.5 per cent of GDP from now — which seems reasonable, given the state of their economy. Let us say they accept 2 per cent. And now think of the primary surplus as the money a country has for debt servicing and repayment. At present, Greece is not paying any interest at all on its loans from European creditors; this is not supposed to start until 2023. The reason the creditors are asking Greece to run a large primary surplus is to make room for the interest payments that start then.

The level of debt is thus closely related to the surpluses Greece needs to run. They are not independent variables you can adjust at will. A German official told me that, to justify a cut in the primary surplus as big as Athens wants, you would also need a haircut on the debt. Since the Germans oppose a haircut, they will oppose a cut in the primary surplus too. So there is a huge battle ahead over this — much bigger than anything we saw last week.

What is at stake for Greece now is its very ability to survive economically. That would re­quire an exit from the vicious cycle between debt and deflation in which it has been caught for the past five years.

One extreme solution to the debt-deflation problem would be Grexit. It would be very costly at the start but would allow Greece to default on its official creditors, devalue its currency, and run much lower primary surpluses than those required now.

A less risky, and less costly, solution would be a debt restructuring inside the eurozone; not an outright haircut but something similar. A sovereign equivalent to a debt-for-equity swap would be one option. While you cannot own shares in a country you could, for in­stance, tie the interest rate on a sovereign bond directly to GDP. A GDP-linked bond is not a silver bullet, however, not least because it would give countries an incentive to underreport GDP figures.

Another option could be a debt obligation that has some characteristics of money — a parallel currency. It could be used as a medium of exchange, though not necessarily as a unit of account. Its value would still be expressed in euros.
 
There is room for creative solutions. The choices are not binary: German-imposed austerity versus Grexit. There are intermediate options superior to both. The smartest choice would probably be to combine a number of instruments — a haircut, GDP-linked bonds, maturity extensions, interest rate reductions — and hope that the overall effect is sufficient to allow Greece to run permanently lower primary surpluses.

This is what the upcoming negotiations will be about. For Greece to prosper in the eurozone will require a shift of thinking among its creditors that goes beyond the marginal degree of flexibility they were ready to agree last week.

It was Plato who remarked in his Laws that a statesman is likely to fail if he legislates only for peace.
 
Prime Minister Alexis Tsipras and his finance minister should follow this advice. They will need a fully worked-out plan B to signal to their partners that Greece is determined to achieve sustainability — inside or outside the eurozone — whatever it takes.


Wednesday, February 18, 2015

Global Politics – a war of meanings

by Nikolai Starikov 

Source: http://nstarikov.ru/blog/49012
Translated by DzhMM, Mikhael, Gideon (thanks guys!!!!)



In the course of life today, we’ve grown accustomed to using terms whose meaning we might not fully understand. We throw them around casually, not realizing that they lose their meaning and sometimes even come around to stand for their exact opposite. This is precisely why the sense has arisen today in society that there is a need to determine in a clear and understandable manner exactly what is happening on the global chessboard in front of all of our eyes – the Big Story, written online.

Even those people the very furthest from politics are feeling the need for understanding and explaining to themselves the reasons for the things they encounter even just moving through their own lives. Why have prices in stores started to go up? What’s the reason for the fact that, quietly and nearly unnoticed, belief in a brighter tomorrow is slipping? When and why did talk about a possible war stop being speculative and distant? These and dozens of other questions have driven millions of yesterday-apolitical citizens to seek answers. They feel the need to find those answers and to construct a new worldview in which what-comes-tomorrow is not simply a lottery ticket, but a predictable and logical continuation of today. Predictable and, hopefully, not frightening.

This atmosphere, unfortunately, is a breeding grounds for attempts to brainwash our citizens and to stuff their heads with ideas which will be devastating to them personally. But this devastation will come hidden within banal attempts stubbornly do good. So let’s try to dissect the methods and means of manipulating the people’s conscience which we have already started to encounter. And, which will grow in direct proportion to the problems being encountered by our geopolitical opponents.


1. THE ROOTS AND SOURCE OF TODAY’S ECONOMIC AND GEOPOLITICAL CRISIS.



Today, the world is in a situation that can be characterized as a dead end that the liberal financial-oriented world economy drove itself into after remaining the dominant economic system following the collapse of the USSR. Not going into much more detail on that theme, since doing so would require a whole other in-depth discussion, I will simply point out that, as historical experience and logical consideration confirm, this economic system cannot work without theft. On its own, without infusions from outside, it is not able to sustain itself, therefore a long period in which no one goes to war and no one is robbed, for countries sitting at the top of the liberal “food chain”, will always mean a crisis of the economic system itself. The need for war or theft is a matter of life and death for many (if not for all) countries of the West. The danger for the West today is that “potential victims” are nowhere to be found. In the world of today, the approximate parity of strength is like it was before two world wars, which itself increases many times over the risk of a new world conflict. A classical conflict, as during the previous two world wars, or as a hybrid, hidden beneath a large number of local conflicts (the main goal of which will be not to allow the nuclear weapons deterrent to be used!) together with informational and economic aggression.

What goals are the wars’ organizers aiming for?

First and foremost is a breaking of established economic ties, a deepening everywhere of the economic slide, except for in agreed-upon “economic growth spots”. In the First and Second World Wars this zone was the USA and once again they are trying to repeat this scenario. In addition, a goal of starting wars is the nullification or depreciation of “pre-war” debts and a restart of the world economy. An analysis of the upcoming conflict’s probable zones of destruction and (or) thievery which will permit the world economy to be restarted while preserving the existing economic model and the currently-constituted “economic food chain” for the existing financial elites shows that the level of accumulated contradictions can only be resolved at the expense of Russia and her demolition. The situation in the disparate and ailing enclaves of Europe and Asia, surrounded by the raging chaos that will come from the destruction of our country, will allow the United States to retain for itself the role of regulator of the world’s economy, island of stability, and the source point for new growth. Growth for itself, for Europe, and for Asia under the USAs security guarantees, paid for by the robbery of our country and our people.

How do the interests balance in the quadrilateral: USA, Europe, Russia, and China?

The USA and Russia in this are antagonists. Why? Because retaining the privileged role of the USA is only possible at the expense of Russia, and under the circumstances of a weakened China and Europe. That being the case, such aspirations make it very unlikely that there will be an “amicable” consensus between Russia and the USA without a change (or a solidifying via Russia’s defeat) in the established order of things. That means that in the absence of a “Neo-Gorbachevism” we will inevitably be forced to stand against the States -- just to be able to survive and retain ourselves. This is unavoidable. Europe in this case is the sole ally of the United States. Today’s “European submissiveness” to the will of the USA is the result of deeper causes, and unlikely solely due to “bought and blackmailed” leadership. Europe, lacking its own combat-capable armed forces and its own independent financial system capable of providing a sufficient level of financial sovereignty, is forced to follow in America’s wake. Which, for better or worse, is providing her both the first and the second.

Is this situation final and irrevocable? It seems to me that it isn’t. Europe will cry, but will eat the cactuses like the mice in the joke, for just as long as the USA is able to guarantee her safety and economic stability (though maybe in lesser amounts). The threat of losing all of this can flip Europe from the USA’s side in search of new guarantors of its separate and privileged position. In the event of a “fall of Russia”, Europe will become “frontline” territory at whose borders there will be aggressive instability. Europe will be most satisfied with Russia in a “USSR variant”, where the state, in “Gorbachev’s manner”, withdraws and enthusiastically permits itself to be robbed like a masochist.
 
But the variant where Russia resists, and from this the country springs up as, not a “zone of robbery”, but a “zone exporting aggressive instability” (like today in the former Ukraine) will not please Europe. In sum, we will have a situation where Europe supported the USA in its attempted “blitzkrieg” against Russia as the better of its available courses. However, continuing Russian resistance changes the situation and in the future will inevitably lead to Europe, though with numerous reservations and attempts to negotiate preferential treatment, having to distance itself from the American policies directed towards the destruction of Russia. China in this quadrilateral (USA-Europe-Russia-China) is our natural and situational ally in its own opposition to the collective West. After all, today it is becoming a competitor to China in the economic as well as the political sphere. Any kind of strengthening of Russia will automatically result in a weakening of the West as a competitor to China.
 
Therefore, so long as China can trust that it will no longer have to run up against Khrushchev-Gorbachev-Yeltsin-type “wiggly” unpredictable policies from Moscow, we can count on the economic and political support of China. Let’s sum it up. We are dealing with opposition between the USA and Russia, in which Europe and China play the part of tactical (within certain bounds) allies of the battling sides as they pursue their own goals in the confrontation. Therefore, neither Europe nor China is interested – unlike the USA – in the total destruction of Russia. After all, in that event both Europe and China would be weakened and would stand alone against a strengthened USA, as well as surrounded territorially by Eurasian chaos.

The USA needs Russia to die quickly. Europe was ready for a blitzkrieg under the management of the USA, but Europe is not ready for a drawn-out, long, and “expensive” conflict. China is prepared for a “game of debts” and is prepared to weaken both the USA and Europe in economical and political support of Russia, but is not prepared in this conflict to “take the bit between their teeth”, since it is still not ready to throw its entire weight into opposition, burdened as it is with its own problems and a worries due to the “Gorbachev effect”.

Given the shortage of time, the only path to survival for the USA is to demolish Russia from within and have her collapse. Either that, or a radical change of power in Russia which would abruptly turn the country’s ship of state around and permit the subsequent chaos and war. This would, in turn, give the States the necessary conditions for breaking the financial and economic channels of interaction in Eurasia and the weakening of both Europe and China, but at the “fault” of the new Russian government. We have a situation where the organization of an internal explosion in Russia displacing the legal government is for the USA a question of its own survival.



2. INFORMATION WARFARE IN RUSSIA – A QUESTION OF SURVIVAL FOR THE USA.



In the beginning of the article I mentioned that the current situation is forcing Russian citizens to actively seek answers to many questions. This pursuit of information, this struggle between various points of view, opinions and ideas opens a “window of opportunity” for those attempting to influence foreign policies of the country by influencing internal political situation. Chaos and war are once again becoming the one and only weapon of choice for the dollar. Russia, despite being subject to Western economic and information aggression, still:
  • continues to strengthen its economy;
  • continues its shift towards East;
  • retains the role of an economic and political bridge between Europe and Asia;
  • preserves its leading military and political position on the continent;
  • possesses decisive energy, scientific and manufacturing potential;
  • continues to adapt to hostile economic and political relations with a certain part of the world;
Such Russia is not in the interests of the USA. Stronger Russia will play a stronger stabilizing role in the world. Not only it is not going to become the source of chaos and war in Eurasia, it also has a high potential to distance Europe from the “leading and directing” role of the USA, which is totally unacceptable for America. Hence the question – what can US do in this situation?

First, US needs to instill chaos and war in the minds of Russian citizens, to have this chaos reach the “critical mass” needed to enable them to either influence the actions of the government on international stage or, which would be even “better”, tear down the government altogether, similar to how it was done in February of 1917 or August of 1991. Today, citizens of Russia have many questions, which is a great opportunity to provide answers which will lead them to actions that would ultimately be in US interests.

And such “answers” have already been prepared by the all-knowing well-wishers…



3. CAUTION: MANIPULATION!



Let’s reiterate that this is very important. In order to survive and preserve its leading role on international stage, US desperately needs to plunge Eurasia into chaos, to cut economic ties between Europe and APR (Asia-Pacific Region). The States need to turn the territory that lies between them (Russia, Central Asia, Middle East) into a zone with local armed conflicts, falling economies, deficient governments and general instability. Middle East is already very close to a state of total chaos, US-created ISIL is working to further complicate the situation in that region. Central Asia is a potentially very unstable region and it has been “farmed out” to the revived Taliban, but so far it has kept the appearance of stability. Russia is the only territory within this potential zone of instability that is capable of resistance. It is the only state that is ready to confront the Americans. Undermining Russia’s political will for resistance, shifting its foreign policy – is a vitally important task for America.

How can this be achieved given that the will of the President of Russia can be clearly defined as anti-American and the ability to realize this will is as strong as ever, thanks to the stability of the ruling establishment? The only way to achieve this is to drag the leadership of the country into a long and debilitating stand-off with its own people.

Liberal scenario (ineffective)

In the long term, the unity of Russian people and their leadership can be broken by providing liberal answers to questions that are important for the apolitical majority. To achieve this, long forgotten “weathered soldiers” of ideological battles, who were not part of the events of 2011-12, have been brought out of nonexistence (Stankevich, Nadezhin and others). They are working to convince the Russian society that today’s Russia is “in over its head”. In other words, Russia, by protecting its geopolitical interests and by breaking every imaginable international rule, is behaving in a way that is unacceptable for a “gas station” country. Therefore, not having the required economic potential and sufficient international weight, Russia is bound to end up in international economic and political isolation. This will impact the lives of average citizens by significantly lowering their standard of living, the government will lose control over the state affairs and, ultimately, the state itself will be torn apart.
 
Of course the proposed remedy for all these ailments is this: “fold” to US, recognize the leading role of US in the world and generally follow in the footsteps of American policies. This means that Russia must give up its national geopolitical interests, return Crimea, take on the burden of supporting Ukraine and then, just like in the 90’s, follow directions of Western advisors who will determine the path of political and economic development of the country.

Today, the level of “immunity” of Russian society against this liberal scenario is quite high. The nineties and the “liberal shift” attempt in 2011-12 served well to create a stable “anti-liberal” sentiment within Russian society. That’s why realization of this scenario is not possible in the short term, but our Anglo-Saxon enemies always plan well ahead. This liberal point of view will be kept alive and will be cultivated among a certain type of urban intellectuals who are traditionally aligned with Western values. And, in case society becomes fed up with patriotism, these intellectuals will be the ones to present Russian society with a point of view that will be in line with Western interests.


Patriotic scenario (main)

The States don’t really care what particular scenario will sink the territory of Eurasia (Russia – Customs Union) into chaos or what will cut the strong economic ties along the EU-Russia-Customs Union-China line. Whether Russia follows the liberal scenario described above, dissolves the way USSR did or willingly plunges into chaos and localized armed conflicts – makes no difference to US. If Russia starts throwing its weight around and using force to assert its own views and interpretations of international rules of co-existence, the US will just as well reach its intended goals. The important expression here is “using force”. That will result in chaos and war in Eurasia, which is all US needs.

Russian society has overcome the virus of liberalism and is not ready to become infected with it again, and that is exactly why instead of the “liberal scenario of voluntary dissolution” they are being offered the “patriotic scenario” that instills in their minds an arrogant faith in success. In practice, this translates into certain public figures, who are consistently viewed as being patriotic, persistently offering… scenarios which require use of force in future developments in Eurasia. They are also interpreting past events using assumptions that every event was dealt with from the position of force, position of power. These interpretations are exactly what US needs. As a matter of fact, these interpretations, and the part of Russian society that is behind them, are so closely aligned with US interests that Western political and public figures have been focusing solely on this particular part of Russian society, using them in propaganda and diplomatic efforts directed against the current leadership of the President in the Russian Federation. It is possible to assert that a certain part of those who consider themselves to be patriots of Russia willingly or unwillingly are working in the interests of Western aggressors. Interpreting the events of 2014 as “Russia using force to apply pressure on Ukraine”, calling for a wider and more profound use of force in Ukraine in the future and accusing Russian leadership of not providing sufficient military and technical support for Donbass militia, they are allowing Western diplomats to interpret all their statements as “proof of Russian aggression”. And a very valuable proof at that, because, according to Western views and practice of legal precedents, a witness account of Russian use of force in Ukraine, coming from those who took part in the events (Strelkov-Girkin), is an indisputable and necessary proof that the USA and the collective West are acting appropriately against “aggressor Russia”. This is a case of remedy being more dangerous than the ailment. This “proof of Russian aggression” is allowing Washington to justify sanctions and cutting relations with Moscow. The logic of confrontation with Russia includes mechanisms designed to rupture Eurasian economic ties, which will inevitably lead to chaos across the entire Eurasian continent. And that is exactly what the US is trying to achieve.

Russian “patriots”, who are, in reality, defending US interests (regardless of what they themselves think), in fact… are probing the Russian society to figure out just how possible it is to organize mass protests in the country. With today’s strong leadership that is stirring Russia towards absolute sovereignty, this task seems nearly impossible. But if their point of view starts affecting the mindset of the majority of Russian citizens, an attempt to use “street democracy” to push Russia towards “use of force” scenario in Ukraine can be made. And that will be a 100% American victory over Europe and China. Therefore, we can safely conclude that “street democracy” using popular “patriotic” slogans instead of the unpopular liberal ones is the most desired development within Russia for the USA. So desirable that the States will nurture and support (financially, using media and PR) those “patriotic” Russian figures who, willingly or unwillingly, are acting in line with American interests. Impartial analysis of information and media shows that this is exactly how events are unfolding in Russia.

How can this be fought and how can the ill-fated path of 1914-style “destructive patriotism” be averted? The victory over the minds and hearts of Russian citizens can only be achieved by spreading the truth and disclosing the methods of manipulation used by Russian “patriots” who are currently helping our eternal enemies in their information war against Russia.
Some Examples of Manipulation.

The mass manipulation of consciousness, in the first-order is the implicit substitution of desires from genuine goals to manufactured goals. Any conscious ‘exposure’ of this process, even though it identifies these first-order manufactured goals, is itself manufactured (‘second order’) on the very basis of this ‘exposure’. The methodolical manufacture of this second order phenomenon logically enables a pure inversion of genuine desires and thus by direct implication, reality.

For example, those ‘ultra-patriotic’ chaps working, doubtlessly part-time, for the U.S. State Department will state that ‘We should militarily intervene in the Ukraine. Working on an emotional level (the most commonly applied method of ‘softening up’ for manipulation) they will tell us of the unspeakable ordeals endured by the people of the Donbass. It is surely the healthy reaction of any human being to wish to give assistance and support. An example would be the incursion of Russian troops into the Ukraine with the aim of averting a humanitarian catastrophe and putting a halt to the genocide of the Russian population. Moreover, we can confirm that this incursion cannot be dangerous for Russia insofar as Russia is already under the most onerous sanction regime imaginable which the Russian people bear unjustly. Simultaneously the public is ‘calmed’ by the belief that NATO will under no circumstances allow itself to be drawn into armed conflict with Russia, in possession of nuclear weapons which can be used as a ‘trump card’ in any negotiations. Strelkov-Girkin has developed the knack of projecting a statesmanly wisdom. He endlessly affirms that those speaking of peace are in denial about the ongoing war scares Russians with the spectre of NATO forces. These self-same NATO forces, in turn, simply swallow any half-baked statements and perceive any movement of Russian forces as having the goal of overthrowing the regime in Kiev. Why? Because it allegedly can’t directly oppose Russia because of her well supplied army and her nuclear forces.

So how do we apply, to the current situation, the concept of the implicit substitution of desires to manufactured goals? Well the point is that instead of the actual escalating Hybrid war, being fought with the aim of exhausting the enemy, using the full spectrum of potential threats with the exception of Nuclear weapons, we see that the public is presented with the traditional threat of a second world war confrontation (replete with Nazis and Swastikas).

Such wars can be characterized by opponents openly trying to destroy each other mainly by military confrontation. In such conflicts, the aim is simply to destroy or take control of the opposition center of political decision making by military means. This was sufficient as it destroyed the ‘brain’ of the enemy. In modern hybrid war the political decisions will be taken in the Western Centers remote from the military conflict (Brussels, Washington). The military conflicts will be delegated to peripheral centers (the Kievan ‘Junta’; the Donbass ‘Novorossiya’; ISIS (Islamic State) active in the North Caucasus, Uzbekistan, Kazakhstan, perpetrating terrorist activities in the Volga region; the Taliban active in Central Asia, the Urals and the far east of Russia). Correspondingly, economic aggression will be applied from the financial bloc controlled by the West. Engaging militarily in the Donbass, Russia in the short term will be on the receiving end of a series of strikes in the above regions and in its urban centers. Countering these blows (dependent on the scale of the territory destabilized) will demand the dramatic strengthening of the Russian military including the special services and the transformation of the economy as well as everyday life onto a war footing, which of course is neglected in the patriotic narrative projected by the ‘manipulators’. Such ‘surprises’ for the Russian society, who are simply geared up for a "small victorious war in the Donbas" under the current patriotic narrative will incline public opinion towards direction the liberal activists, those supporters of the "peaceful dissolution" of Russia. Such appeals will sound repeatedly to “rest under the wing” under the American world order and the popularity of such ideas will dramatically grow. In summary, we witness the re-emergence of the provocateurs of the sort we had in 1914, these ‘Hurray Patriots’ who paved the way for the provocateurs of February 1917.

These same liberal capitalists are ready for the widest possible cooperation with the West on its terms in the ordering of Russian life. However, even if against the odds, Russia will pull off another "Russian miracle" and be able resolve, through military means, the numerous military conflicts both along its borders and within its territory, even this great victory will not destroy the Western center of decision-making. Washington and Brussels will remain out of reach of the Russian army, as they are not directly participating in any of these conflicts.

While Russia will face outside the military and terrorist aggression forming an existential threat to the state, Europe without an efficient army, dogged by controversy and lack of a single center of decision-making will be in no better straites. Europe will be forced, against the background of a Russia "which is on fire," to simply forget about their own geopolitical interests and stand in line with the Americans. At the same time, Europeans will be forced to acquiesce to a significant decline in their living standards, and be subordinated to all the other American adventures. As a direct consequence, economic cooperation through Europe - Russia – Trans-Siberian will decline to an absolute minimum, if it survives at all.

China, similarly faced with instability in its own underbelly in Central Asia and facing growing aggression from NATO allies in Taiwan and Japan, will be forced to limit its military, political and economic support to Russia, awaiting the outcome of the confrontation and eventually breaking its ties with the United States. As a result, we see the realization of the US plan: economic cooperation between Europe - Russia - TC - China, minimized or neutralized, and the existence between China and Europe of zone of global instability and local wars. Russia will have to exert all its strength to survive, which will eliminate its opportunities for political maneuver and peace-building and economic development.


4. WHAT NEEDS TO BE DONE?



Firstly, we need to look objectively, without emotions at the root cause of the issue. Collectively, the West enslaved by its ineffective liberal, finance oriented economic model, will inevitably be forced to engage in local or planetary plunder to fulfil its own dynamic requirements for existence. A suitable metaphor would be a car running out of fuel with the engine running. Any delay will dramatically increase the chances of the engine ‘seizing up’ which will render further motion impossible. The driver of the car facing such threats is prone to panic and make mistaken decisions when trying to refuel. Assuming that one is not inclined to help the driver the natural course of action would be to let the driver make all these mistakes and for the engine to be allowed to seize up.

Russia's actions in the contemporary situation should be based on several principles:

- First, we must understand that every day we delay the onset of full scale hybrid war strengthens us and weaken our enemies. Each day of delay – allows us to establish economic ties to the Eurasian space, making Russia less vulnerable. Each day of delay - it is an additional burden on the "western car" and its fuel consumption.

Today, the West and the United States are incurring significant costs maintaining its hybrid "War Infrastructure" (the junta in Kiev, Islamic State, the Taliban, 5th Columns inside China and Russia), but it is still investing without accruing dividends. Each day of delay signifies a new weapon for the Russian army, new production in Russia and an increase in readiness for difficult times.

- Secondly, using the tactics of "viscous defense" when every new step on the occupied territory carries obvious loss for the occupier, Russia increases the chance of a split in the "Euro-Atlantic Coalition" The weak point of the West is that it is not monolithic. I.e. the "slaves" are always ready to betray the "masters" if the cost / risk associated with coalition leads to an unjustified increase in the level of risk. Today, the West is stuck in Ukraine. "Blitzkrieg" failed. The original plan to separate the Ukraine from Russia, reorientation its markets to Europe, while maintaining the previous level of Russian economic support for Ukraine, is now firmly in the past. For the US the Ukraine forms and outstanding catalyst for Eurasian Chaos. However for Europe, Ukraine is a "White Elephant” with severe and infectious behavioral issues which has kindly donated by the Americans to them. For the sake of countering "Russian Aggression" Europe is ready to consolidate and bear hardships, but to preserver Poroshenko and Co., still less, for the sake of geopolitical dispute between Russia and the United States, the willingness to bear hardships becomes a lot less.

- Thirdly, we must remember that the advantage in war is to those who choose their time and terrain. This is critical. Start a war when we see the result will not be to win these peripheral conflicts i.e. the Kievan ‘Junta’, the Islamic state or the Taliban, but rather to achieve victory over the “center of real political decision making” in Washington. A war should be fought for this goal and none other.

On the basis of the above, we can see that every victory of Assad in Syria, and every victory of the militia of the Donbass and Lugansk Republics saves lives of Russian soldiers and Russian territory from ruin. We see a unique situation, the first time in Russian history, when the forces of aggression against Russia are based on the distant outskirts of our country. Russia is obliged, according to her own interests, to furnish every assistance and support, to weaken the Western Coalition, thus expanding the cracks of various interests in the allegedly monolithic Euro-American unity.

 
 
5. CONCERNING “PATRIOTIC” MANIPULATORS.
 

On January 28, 2015 in St. Petersburg, the Russian party “Great Society” organized a cultural gathering with the writer, essayist and translator Dmitry Y. Puchkov as keynote speaker. Dmitry Y. was predictably humble, consumed by his own thoughts and interests, which were genuinely, without excessive sophistication, quite profound. I was unfortunately unable to attend this meeting, as due to a business trip in Nizhny Novgorod.

However, when I watched recordings of the proceedings, I was immediately struck by the savage accuracy of the metaphor of the Russian intelligentsia, worshiping the West, with the liberal intelligencia playing the role of “Evil Shepherds”, leading their flock of sheep to the slaughter. The allegory is devastatingly accurate. The West have maintained their dominance by the means of murder and robbery on a planetary scale. They "manufacture their image" in the eyes of future victims, using these “evil shepherds” from the intelligentsia. Without these “Evil Shepherds”, any potential victim from the Soviet Union to Ukraine today, could be saved from plunder and mobilize their own self-preservation instinct. It is only the conscious and pro-active manipulation that these, "intellectuals" practice, performing the role of administrators of “spiritual chloroform”, which has allowed public opinion to be so manipulated.

Events of the last year and especially the last few months have unfortunately led me to be convinced that that the existence of the "Evil Shepherds" may not only be among those enthralled by the west, but also among those administrating "patriotic" rhetoric to the public.

However, I am deeply convinced that our Russian society, representatives of all the peoples of our country have a sufficient high level of consciousness to counter this pseudo-patriotic manipulation which works for the benefit of the United States. After all, our people were able to emerge from the liberal manipulation of a few years earlier. The memory "of Greeks bearing gifts" battered us in the 90s, battered us until our pores wept sweat and blood.  As for me, I will, to the best of my ability, resist these new attempts to deceive our society under the renewed and pseudo-patriotic slogans.

Why Public Investment?
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Michael Spence
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FEB 20, 2015

Dollars flower pot money economy


MILAN – The world is facing the prospect of an extended period of weak economic growth. But risk is not fate: The best way to avoid such an outcome is to figure out how to channel large pools of savings into productivity-enhancing public-sector investment.
 
Productivity gains are vital to long-term growth, because they typically translate into higher incomes, in turn boosting demand. That process takes time, of course – especially if, say, the initial recipients of increased income already have a high savings rate. But, with ample investment in the right areas, productivity growth can be sustained.
 
The danger lies in debt-fueled investment that shifts future demand to the present, without stimulating productivity growth. This approach inevitably leads to a growth slowdown, possibly even triggering a financial crisis like the one that recently shook the United States and Europe.
 
Such crises cause major negative demand shocks, as excess debt and falling asset prices damage balance sheets, which then require increased savings to heal – a combination that is lethal to growth. If the crisis occurs in a systemically important economy – such as the US or Europe (emerging economies' two largest external markets) – the result is a global shortage of aggregate demand.
 
And, indeed, severe demand constraints are a key feature of today's global economic environment.
 
Though the US is finally emerging from an extended period in which potential output exceeded demand, high unemployment continues to suppress demand in Europe. One of the main casualties is the tradable sector in China, where domestic demand remains inadequate to cover the shortfall and prevent a slowdown in GDP growth.
 
Another notable trend is that individual economies are recovering from the recent demand shocks at varying rates, with the more flexible and dynamic economies of the US and China performing better than their counterparts in the advanced and emerging worlds. Excessive regulation of Japan's non-tradable sector has constrained GDP growth for years, while structural rigidities in Europe's economies impede adaptation to technological advances and global market forces.
 
Reforms aimed at increasing an economy's flexibility are always hard – and even more so at a time of weak growth – because they require eliminating protections for vested interests in the short term for the sake of greater long-term prosperity. Given this, finding ways to boost demand is key to facilitating structural reform in the relevant economies.
 
That brings us to the third factor behind the global economy's anemic performance: underinvestment, particularly by the public sector. In the US, infrastructure investment remains suboptimal, and investment in the economy's knowledge and technology base is declining, partly because the pressure to remain ahead in these areas has waned since the Cold War ended. Europe, for its part, is constrained by excessive public debt and weak fiscal positions.
 
In the emerging world, India and Brazil are just two examples of economies where inadequate investment has kept growth below potential (though that may be changing in India). The notable exception is China, which has maintained high (and occasionally perhaps excessive) levels of public investment throughout the post-crisis period.
 
Properly targeted public investment can do much to boost economic performance, generating aggregate demand quickly, fueling productivity growth by improving human capital, encouraging technological innovation, and spurring private-sector investment by increasing returns. Though public investment cannot fix a large demand shortfall overnight, it can accelerate the recovery and establish more sustainable growth patterns.
 
The problem is that unconventional monetary policies in some major economies have created a low-yield environment, leaving investors somewhat desperate for high-yield options. Many pension funds are underwater, because the returns required to meet their longer-term liabilities seem unattainable.
 
Meanwhile, capital is accumulating on high-net-worth balance sheets and in sovereign-wealth funds.

 
Though monetary stimulus is important to facilitate deleveraging, prevent financial-system dysfunction, and bolster investor confidence, it cannot place an economy on a sustainable growth path alone – a point that central bankers themselves have repeatedly emphasized. Structural reforms, together with increased investment, are also needed.
 
Given the extent to which insufficient demand is constraining growth, investment should come first.
 
Faced with tight fiscal (and political) constraints, policymakers should abandon the flawed notion that investments with broad – and, to some extent, non-appropriable – public benefits must be financed entirely with public funds. Instead, they should establish intermediation channels for long-term financing.
 
At the same time, this approach means that policymakers must find ways to ensure that public investments provide returns for private investors. Fortunately, there are existing models, such as those applied to ports, roads, and rail systems, as well as the royalties system for intellectual property.

Such efforts should not be constrained by national borders. Given that roughly one-third of output in advanced economies is tradable – a share that will only increase, as technological advances enable more services to be traded – the benefits of a program to channel savings into public investment would spill over to other economies.
 
That is why the G-20 should work to encourage public investment within member countries, while international financial institutions, development banks, and national governments should seek to channel private capital toward public investment, with appropriate returns. With such an approach, the global economy's “new normal" could shift from its current mediocre trajectory to one of strong and sustainable growth. 
 

Read more at http://www.project-syndicate.org/commentary/public-investment-economic-growth-by-michael-spence-2015-02#Wp4jwlw3Q4EI6fXr.99

Heard on the Street

Fed’s Journey Into the Wild Blue Yonder

Yellen has communication challenges as she heads to Capitol Hill

By David Reilly

Feb. 20, 2015 1:14 p.m. ET




Patience isn’t a virtue when it is too-rigidly defined by markets.

Federal Reserve Chairwoman Janet Yellen testifies next week before Congress in one of her semiannual trips to Capitol Hill, giving investors another chance to obsess over when the central bank is likely to begin raising short-term interest rates. In addressing questions about the so-called liftoff, Ms. Yellen must take on two communication challenges.

The first is to soften investors’ interpretation of what will happen when the Fed drops the word “patient” from its postmeeting statement. The general view in the markets is that once this occurs, a rate increase will follow two meetings later.

But as the Fed tries to regain a more normal monetary policy stance, it will surely want to get less specific in its guidance. The idea is that investors should be prepared for it to raise or lower rates at any meeting, as used to be the case before the current era of zero rates.

Re-establishing this mind-set is no easy task. As shown by minutes of the Fed’s January meeting, released this week, policy makers fretted that dropping the word “patient” would risk a shift in market expectations for tightening in an “unduly narrow range of dates.” That could cause sharp market moves.

Given the crosscurrents now facing the Fed—continued improvement in the U.S. economy even as the rest of the world slows—it needs more flexibility to act based on the data it receives. Without that, markets may indeed overreact, making the 10-year U.S. Treasury, for example, even more volatile than it has been of late.

The second, and possibly greater, challenge facing Ms. Yellen and the Fed will be to more clearly define what a tightening cycle is likely to look like in a post-zero-rate world. In the past, central-bank tightening was meant to cool exuberance, taking away the proverbial economic punch bowl.

Now, though, the Fed seeks to get back into the business of ordinary, versus extraordinary, monetary policy. That is a different proposition and one that makes a far more cautious approach likely. Rather than a series of rapid-fire rate increases, the Fed will probably pause between moves. And the final resting point for short-term rates may end up well below the 3% to 4% level that would typically be expected.

How the Fed manages expectations on this front is particularly important. The actual economic impact of a quarter-point increase in short-term rates is likely to be minimal given they are near zero today. But a shift in market sentiment could have noticeable, and unpredictable, effects.

Will, for example, investors begin to move out of equities back into fixed-income products, possibly causing market hiccups? On the flip side, will home buyers get more aggressive in hope of getting purchases done before rates spike, spurring housing?

Meanwhile, the Fed will have to contend with the fact longer-term yields are depressed due to the downward pull exerted by central banks elsewhere engaging in quantitative easing, or the buying of government bonds. That raises the prospect of a flattening of the yield curve, which could put U.S. banks’ margins under even greater pressure. It also argues for continued strengthening of the dollar, a possible headwind that again could cause the Fed to proceed slowly.

What’s more, the Fed is venturing into uncharted territory. While many academics, including former Fed Chairman Ben Bernanke, studied the Great Depression and how to address a recurrence of such dire conditions, far less work has been done on what comes after a rescue mission. There simply aren’t many playbooks for exiting an almost seven-year period of near-zero rates.

Getting to the point of liftoff is indeed a fraught process, one the Fed will have to manage gingerly.

The bigger issue for both stock and bond markets, though, may be how much turbulence they encounter once the Fed gets rates back into orbit.

Deflation

Feeling down

Deflation can be a good thing. But today’s version is pernicious

Feb 21st 2015
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FALLING prices sound like something to cheer. In 1950 talk was not cheap. It cost $3.70 to place a five-minute call between New York and San Francisco—or $36.35 in today’s money.

Now that same call costs you nothing. The emergence of the sharing economy is driving down the price of a taxi ride and a bed for the night. More recently tumbling prices for natural resources, especially oil, have boosted the spending power of consumers from Detroit to Delhi.

Mark Carney, the governor of the Bank of England, reckons that falling energy prices are “unambiguously good” for the British economy. Mr Carney is not wrong. Nonetheless, the world is grievously underestimating the danger of deflation.

The problem is that aggregate prices are dipping in so many places at once. Deflationary pressures are visible far beyond food and energy, and in countries that cannot claim to be leading the charge towards the new economy. In the euro zone, where deflation grips tightest, consumer prices fell by 0.6% in the year to January; Germany, Italy and Spain all saw falls.

Prices in Greece have been declining for 23 months. Ultra-low inflation is also widespread.

America, Britain and China each have inflation rates of less than 1%. This looks less like a welcome jolt to prices than a sign of entrenched weak demand.

Deflation poses several risks, some well-understood, one not. One familiar danger is that consumers will put off spending in the expectation that things will get even cheaper, further muting demand. Likewise, if prices fall across an economy but wages do not, then firms’ margins will be squeezed and employment will stagnate or decline. (Neither of these dangers is yet visible; indeed, America and Britain are seeing strong employment growth.) A third, well-known risk is debt deflation: debts become more onerous because the amount that is owed does not fall, even as earnings do. This is a big worry in the euro zone, where many banks are already stuffed with dud loans.

The least-understood danger is also the most serious, because it is already here. Deflation makes it harder to loosen monetary policy. When inflation is at 4%, the central bank can take real (ie, inflation-adjusted) rates well below zero, to -4%, by keeping headline rates at zero. But as inflation falls and turns negative, low real rates get harder and harder to achieve—just when you need them most. Most rich-world central banks have already cut their main policy rates near to zero in order to pep up demand. A growing number of European economies are using negative interest rates to encourage spending, although charging people to put money in the bank will eventually prompt them to use the mattress instead.

All of which means that policymakers risk having precious little room for manoeuvre when the next recession hits. And sooner or later it will—because of a sharp slowdown in China, say, or the effect of a rising greenback on dollar-denominated corporate debt, or from some shock that comes out of the blue. The Federal Reserve has cut its policy rate by an average of 3.9 percentage points in the six recessions since 1971. That would not be possible today. The break-glass-in-case-of-emergency option of depreciating the currency massively against a fast-growing trading partner is of limited use when so few big economies are growing rapidly and prices are falling, or close to it, in so many places.

Change the target
 
Policymakers should be more worried than they appear to be, and their actions to avert deflation should be bolder. Governments need to boost demand by spending more on infrastructure; central banks should err on the side of looseness. (Next month the ECB will start quantitative easing—and about time too.) Now is also the moment to consider revising the monetary rule book—in particular, to switch the central bankers’ target from the inflation rate that most now favour to a goal for the level of nominal GDP, the total value of spending in an economy before adjusting for inflation. With such a target there is no need to distinguish between good and bad price shocks. And the change in rules would itself send a signal that policymakers are serious about banishing the threat of deflation.

Central bankers change course slowly, and their allegiance to inflation targets runs deep.

Conservatism often serves them well. But in this case it could cost the world economy dearly.

China pivots everywhere

Pepe Escobar

February 20, 2015 11:01  

Reuters/Bobby Yip

Reuters/Bobby Yip      
 
The world’s leading economy is on a roll as it enters a new year in the Chinese zodiac. Welcome to the Year of the Sheep. Or Goat. Or Ram. Or, technically, the Green Wooden Sheep (or Goat).

Even the best Chinese linguists can’t agree on how to translate it into English. Who cares?

The hyper-connected average Chinese – juggling among his five smart devices (smartphones, tablets, e-readers) – is bravely advancing a real commercial revolution. In China (and the rest of Asia) online transactions are now worth twice the combined value of transactions in the US and Europe.

As for the Middle Kingdom as a whole, it has ventured much further than the initial proposition of producing cheap goods and selling them to the rest of the planet, virtually dictating the global supply chain.

Now Made in China is going global. No less than 87 Chinese enterprises are among the Fortune Global 500 – their global business booming as they take stakes in an array of overseas assets.

Transatlantic trade? That’s the past. The wave of the future is Trans-Pacific trade as Asia boasts 15 of the world’s top twenty container ports (with China in pride of place with Shanghai, Hong Kong, Shenzhen, Guangzhou).

Sorry, Britannia, but it’s Asia – and particularly China – who now rule the waves. What a graphic contrast with the past 500 years since the first European trading ships arrived in eastern shores in the early 16th century.

Then there’s the spectacular rise of inland China. These provinces have a huge population of at least 720 million people and a GDP worth at least $3.6 trillion. As Ben Simpferdorfer detailed in his delightful The Rise of the New East (Palgrave MacMillan), “over 200 major Chinese cities with populations greater than 750,000 lay some 150 miles inland from the coast. In effect, we are observing the rise of the world’s largest landlocked economy, and that will change the way China looks at the world. From Guangzhou’s factories to Shanghai’s bankers, all are starting to look inward, not outward.”

This new way China looks at the world – and at itself - certainly has not registered in the way the world, especially the West, looks at China. In the West, the spin is always about China’s economy slowing down and bubbles about the burst. The real story is how China will develop and modernize its mid-and-large sized cities with populations larger than 750,000. China concentrating on itself is now as important as China spreading its tentacles across the world.

This is what’s at the heart of Beijing’s breathless “urbanization drive.”

During the 1990s, the imperative was massive investment in manufacturing. During the 2000s, the buzzword was massive investments in infrastructure - and a property boom. Now China is tweaking its model – from large-scale economic restructuring to absolutely necessary improvement of political governance.

Meet our new best friends

Geopolitically, China has also tweaked its model, but the West, especially the US, has barely noticed it.

Essentially, the Beijing leadership finally got fed up with trying to manage a possible reset of the China-US strategic relationship, and be treated as an equal. Exceptionalists don’t do equality. So Beijing came up with its own response to the Obama administration’s political/military “pivot to Asia” – originally announced, and that’s quite significant, at the Pentagon.

Thus, in late November 2014, during the Central Foreign Affairs Work Conference in Beijing, President Xi Jinping made an earth-shattering announcement; from now on China would stop treating the US – and the EU – as its main strategic priority. The new focus is on the fellow BRICS group of emerging powers, especially Russia; Asian neighbors; and top nations of the Global South, referred to as “major developing powers” (kuoda fazhanzhong de guojia).
 
This is not as much a Chinese pivot to Asia as a Chinese pivot to selected nations in the Global South. And based on a “new type of international relations centered on ‘win-win’ cooperation” – not the bully-or-bomb exceptionalist approach.

Key advisors of this policy should include Professor Yan Xuetong, Dean of the Institute of Modern International Relations at Tsinghua University, and very close to the Chinese Communist Party (CCP) intelligentsia.

China’s new foreign policy and strategic configuration is all the more evident in the courting of Asian neighbors, invited to embark on China’s extremely ambitious twin strategy and the greatest trade/commerce story of the young 21st century: the Silk Road Economic Belt and the 21st Century Maritime Silk Road, in short “Belt and Road initiative,” as it’s known in China, now officially launched with the first $40 billion attributed to a Silk Road Fund.

The enormity of the challenge is on a par with Beijing’s ambition: a pan-Eurasia trade/commerce utopia weaved by high-speed rail, fiber optic networks, ports and pipelines, and connecting East Asia, Central Asia, Russia, the Middle East and Europe.

Of course there will be myriad problems. As in the Chinese commercial push clashing with foreign interests; China having to learn on the go how to manage different cultural sensibilities; and how to coordinate a sort of global trade campaign capable of creating myriad of political and economic effects. The Chinese are already worried about finding the right terminology - so the Chinese dream, internally and globally, won't be lost in translation.

Plenty to be excited about then as the Year of the Sheep (or Goat) starts. What’s certain is that the Chinese caravan, much in contrast with the dogs of war - and austerity – pivoting across the West, has already pivoted towards “win-win” pan-Eurasia integration.               

Opinion

The Global Flight From the Family

It’s not only in the West or prosperous nations—the decline in marriage and drop in birth rates is rampant, with potentially dire fallout.

By Nicholas Eberstadt

Updated Feb. 21, 2015 12:17 a.m. ET

Broken        Broken Photo: Getty Images


‘They’re getting divorced, and they’ll do anything NOT to get custody of the kids.” So reads the promotional poster, in French, for a new movie, “Papa ou Maman” (“Daddy or Mommy”), plastered all over Paris during my recent visit there. The movie sounds like quintessential French comedy, but its plot touches on a deep and serious reality—and one not particular to France.

All around the world today, pre-existing family patterns are being upended by a revolutionary new force: the seemingly unstoppable quest for convenience by adults demanding ever-greater autonomy.

We can think of this as another triumph of consumer sovereignty, which has at last brought rational choice and elective affinities into a bastion heretofore governed by traditions and duties—many of them onerous. Thanks to this revolution, it is perhaps easier than ever before to free oneself from the burdens that would otherwise be imposed by spouses, children, relatives or significant others with whom one shares a hearth.

Yet in infancy and childhood and then again much later, in feebleness or senescence, people need more from others. Whatever else we may be, we are all manifestly inconvenient at the start and end of life. Thus the recasting of the family puts it on a collision course with the inescapable inconvenience of the human condition itself—portending outcomes and risks we have scarcely begun to consider.

To evaluate the world-wide flight from the family, we can start in the U.S. Remarkably enough, we do not actually know the probabilities of getting married and staying married in America today, because the government doesn’t collect the information needed to make an estimate. We do know that both marriage and in situ parenting are increasingly regarded as optional for child-rearing.

As of 2013, according to the Centers for Disease Control and Prevention, just over 40% of babies in the U.S. were born outside marriage, and for 2014 the Census Bureau estimated that 27% of all children (and 22% of “White” children) lived in a fatherless home. But the opt-out from the old family norm is even more advanced than these figures suggest. A 2011 study by two Census researchers reckoned that just 59% of all American children (and 65% of “Anglo” or non-Hispanic white children) lived with married and biological parents as of 2009. Unless there is a change in this “revealed preference” against married unions that include children, within the foreseeable future American children who reside with their married birthparents will be in the minority.

Now consider Europe, where the revolution in the family has gained still more ground.

European demographers even have an elegant name for the phenomenon: They call it the Second Demographic Transition (the First being the shift from high birth rates and death rates to low ones that began in Europe in the early industrial era and by now encompasses almost every society). In the schema of the Second Demographic Transition, long, stable marriages are out, and divorce or separation are in, along with serial cohabitation and increasingly contingent liaisons. Not surprisingly, this new environment of perennially conditional, no-fault unions was also seen as ushering in an era of more or less permanent sub-replacement fertility.

According to Eurostat, the European Union’s statistical agency, the probability of marriage before age 50 has been plummeting for European women and men, while the chance of divorce for those who do marry has been soaring. In Belgium—the birth-land of the scholars who initially detected this Second Transition—the likelihood of a first marriage for a woman of reproductive age is now down to 40%, and the likelihood of divorce is over 50%. This means that in Belgium the odds of getting married and staying married are under one in five. A number of other European countries have similar or even lower odds.

Europe has also seen a surge in “child-free” adults—voluntary childlessness. The proportion of childless 40-something women is one in five for Sweden and Switzerland, and one in four for Italy. In Berlin and in the German city-state of Hamburg, it’s nearly one in three, and rising swiftly. Europe’s most rapidly growing family type is the one-person household: the home not only child-free, but partner- and relative-free as well. In Western Europe, nearly one home in three (32%) is already a one-person unit, while in autonomy-prizing Denmark the number exceeds 45%. The rise of the one-person home coincides with population aging. But it is not primarily driven by the graying of European society, at least thus far: Over twice as many Danes under 65 are living alone as those over 65.

Lest one suspect that there is something about this phenomenon that is culturally specific to Western countries, we have Japan, whose fabled “Asian family values” are now largely a thing of the past.

Contemporary Japanese women have lifestyle options that were unthinkable for their grandmothers, including divorce, separation, cohabitation and remaining single. Japanese women are availing themselves of these new choices. Given recent trajectories, demographers Miho Iwasawa and Ryuichi Kaneko project that a Japanese woman born in 1990 stands less than even odds of getting married and staying married to age 50.

To be sure, unlike Europe and the U.S., Japan still severely stigmatizes childbearing outside marriage. Childlessness, on the other hand, is socially acceptable. Nowadays about one-sixth of Japanese women in their mid-40s are still single, and about 30% of all women that age are childless.

Twenty years hence, by Mr. Kaneko’s projections, 38% of all Japanese women in their mid-40s would be childless, and an even higher share—just over 50%—would never have grandchildren.

Much the same has been taking place around East and Southeast Asia for at least a generation. From South Korea to Singapore, China is rimmed by countries where marriage is being postponed or, increasingly, forgone; where networks of extended kin are withering due to extreme sub-replacement fertility; and where childlessness is on the rise.

Thus far the Chinese mainland has been conspicuously resistant to these trends. Yet according to the 2011 Hong Kong census, 22% of the Chinese territory’s women in their late 30s were unmarried—almost the same as for Japan. Further, over 30% of Hong Kong’s women in their early 40s are childless, more than doubling in 15 years. Similar, albeit somewhat less accentuated, tendencies are reported in Taiwan.

Formidable as the imperatives of Confucian familial tradition may be, they evidently can be overpowered by the more immediate attractions and pressures of modern life. Recognition of the fragility of the Confucian ethos in the face of a “me ethos” may help explain why Beijing saw the need in 2012 to amend its laws on the protection of the elderly. Those laws had already criminalized nonsupport of one’s elderly parents; now elderly parents are allowed to sue their children for spending insufficient time with them.

America, Europe and the highly modernized reaches of East and Southeast Asia are affluent and “globalized.” But the undoing of previously accepted family arrangements is also under way in seemingly traditional low-income societies—Muslim-majority societies in particular. Although it has attracted strangely little attention, a flight from marriage within the Arab world is in process, led by masses of women who wish to bend or break the rules of family life to which their mothers had submitted.

According to the U.N. Population Division’s “World Marriage Data 2012,” the proportion of never-married women in their late 30s was higher in Morocco in 2004 than in the U.S. in 2009 (18% vs. 16%). By the same token, the percentage of single women in their early 40s was higher in Lebanon in 2007 than in Italy in 2010 (22% vs. 18%). And nearly 32% of Libyan women in their late 30s were unmarried in 2006—20 times the percentage barely two decades earlier, even higher than for Denmark in 2011 (29%).

Every stage of the Arab world’s female flight from marriage is taking place on roughly a third of the GDP per capita, and just half the mean years of schooling, of the corresponding steps for societies from the affluent West or the affluent East. What this means: High levels of income and educational attainment are not preconditions for the new family revolution in those spots on the globe it hasn’t reached.

Our world-wide flight from family constitutes a significant international victory for self-actualization over self-sacrifice, and might even be said to mark a new chapter in humanity’s conscious pursuit of happiness. But these voluntary changes also have unintended consequences. The deleterious impact on the hardly inconsequential numbers of children disadvantaged by the flight from the family is already plain enough. So too the damaging role of divorce and out-of-wedlock childbearing in exacerbating income disparities and wealth gaps—for society as a whole, but especially for children.

Yes, children are resilient and all that. But the flight from family most assuredly comes at the expense of the vulnerable young.

That same flight also has unforgiving implications for the vulnerable old. With America’s baby boomers reaching retirement, and a world-wide “gray wave” around the corner, we are about to learn the meaning of those implications firsthand.

In the decades ahead, ever more care and support for seniors will be required, especially for the growing contingent among the elderly who will be victims of dementia, or are childless and socially isolated. Remember, a longevity revolution is also under way. Yet by some cruel cosmic irony, family structures and family members will be less capable, and perhaps also less willing, to provide that care and support than ever before.

That contradiction promises to frame an overarching social problem, not just in so-called developed countries but throughout the world. It is far from clear that humanity is prepared to cope with the consequences of its impending family deficit, with increasing independence for those traditionally most dependent on others—i.e., the young and old. Public policies are the obvious candidate for the task. But as the past century of social policy has demonstrated, government is a highly imperfect substitute for family—and a very expensive one.


Mr. Eberstadt is a political economist at the American Enterprise Institute in Washington, D.C.