Sex, violence and the rise of populism

The Kavanaugh hearing in the US has shown that men fear a loss of power and status

Gideon Rachman

Where the male backlash finds its expression: Jair Bolsonaro of Brazil, Rodrigo Duterte of the Philippines and Matteo Salvini of Italy © AFP / EPA

The most popular explanations for the rise of populism have focused on inequality and race.

But the storm surrounding the nomination of Brett Kavanaugh to the US Supreme Court points to a third factor: male rage.

Traditional gender roles are under challenge, leading many men to fear a loss of power and status. That fear is visible in the misogynistic tone of populist movements in the US, Brazil, the Philippines, Italy and elsewhere.

The male backlash finds expression not just in relatively civilised debates about women in the workplace or gender roles at home. As the Kavanaugh hearings highlighted, it quickly moves on to the rawest and most emotive topic of all — sexual violence.

Rodrigo Duterte, the president of the Philippines, and Jair Bolsonaro, the frontrunner in this month’s Brazilian presidential election, have incorporated gibes about rape into their political rhetoric. Matteo Salvini, the dominant figure in the Italian government, has used sexual slurs to demean female politicians.

Mr Bolsonaro once claimed that Maria do Rosário, a Brazilian politician, was “not worth raping; she is very ugly”. More than 3m women have joined an online group to oppose his surging candidacy, with the hashtag #nothim. With the first round of voting taking place on October 7, hundreds of thousands of women have just demonstrated against Mr Bolsonaro on the streets of Rio de Janeiro and São Paulo.

Mr Duterte once joked about the gang rape and murder of an Australian missionary, suggesting that, because he was mayor of the town it took place in, he should have been allowed to go first. (US president Donald Trump has since said that he has a “great relationship” with the Filipino leader.)

Mr Salvini, Italy’s deputy prime minister and a Trump admirer, has also taunted female politicians. In 2016, at a political rally, he pointed to a sex doll on the stage and claimed that it was a “double” of Laura Boldrini, who was then president of Italy’s Chamber of Deputies. In a recent interview with Politico, Ms Boldrini said that she has received numerous rape and death threats in recent years, adding that Italy’s populists had targeted her because “I was a woman and I was advocating for refugees, for human rights, for women’s rights”.

As Ms Boldrini suggests, the use of demeaning misogynistic rhetoric looks like a direct response to the rise of powerful female politicians. It is suggestive that Mr Bolsonaro has come to prominence in the immediate aftermath of the presidency of Dilma Rousseff, the first woman to lead Brazil. And Mr Trump, of course, was running against Hillary Clinton, who would have been the first female US president.

By the debased standards of Messrs Duterte, Salvini and Bolsonaro, Mr Trump’s misogynistic language was relatively restrained. But it may have served a similar political purpose — sending a message to angry male voters that he was on their side.

Mainstream commentators, including prominent Republicans, assumed that Mr Trump’s remark about grabbing women “by the pussy” would hurt him in the presidential race. But some men probably quietly relished his taboo-busting macho talk. In the event 53 per cent of American men (and 62 per cent of white men) voted for Mr Trump.

Mr Trump’s period in office has coincided with the #MeToo movement against sexual harassment — which has ended the careers of some prominent men in Hollywood, the media, business and politics.

But the rise of #MeToo may also have stoked the male reaction that feeds populism. Senator Lindsey Graham, one of Mr Kavanaugh’s most vociferous supporters, certainly embraced the language of victimhood when he said during the judge’s confirmation hearing: “I’m a single white man from South Carolina and I’m told I should shut up. But I will not shut up, if that’s OK.”

Many Democrats are now taking some comfort from the thought that even if Mr Kavanaugh is confirmed, the controversy will backfire on the Republicans in the midterm elections. A recent poll suggested that white women now tilt towards the Democrats by a margin of 12 points.

But some Republicans believe that the Kavanaugh hearings could work for them, by mobilising male voters. James Robbins, a former official in the George W Bush administration, warned men that if the “Democrats win on Kavanaugh . . . any man could find himself facing unprovable accusations automatically taken as fact.”

Disquiet about the implications of #MeToo has also surfaced in bastions of liberal America. In recent weeks, both Harper’s and the New York Review of Books have published anguished articles by men who lost their careers after multiple accusations of maltreatment of women. Ian Buruma, the editor of the New York Review, lost his job in the subsequent furore.

These controversies inside literary America are insignificant compared with the drama of the Kavanaugh hearings — or the macho brutality of politics in Italy or the Philippines. But they demonstrate the polarising power of gender debates in politics and society. And if there is anything that populism thrives on, it is anger and polarisation.


American startups have less need to list on the stockmarket

Elon Musk revives a familiar critique of public markets

WHATEVER your view of the recent antics of Elon Musk, one thing seems clear. He rather regrets that Tesla, the electric-car maker of which he is boss, ever became a public company.
To recap: in August Mr Musk announced that he had secured the funding to take Tesla private. The gyrating stock price is a distraction to staff, he explained. The obligation to report earnings each quarter fosters short-term fixes that may hurt the firm’s long-term health. And being listed makes Tesla prey to short-sellers.

Tesla’s share price rallied. The shorts lost money. It then emerged that the money to buy out shareholders was not quite as secure as Mr Musk may have suggested. Before long, the board confirmed that the firm would not be taken private. Its shares sank back. The company is now under investigation for possible securities fraud.

Whatever these larger consequences, Mr Musk achieved a minor feat. He has drawn fresh attention to some familiar grumbles about public markets. The number of listed firms in America is in long-term decline (see chart). Mr Musk’s beefs seem specific, but they are part of a general explanation for this trend. The red tape, the endless disclosures, the ceaseless spotlight—all have made the cost of being a public company too high. Yet that is not the real cause. The main reason why startups do not become public firms is that many of them no longer need to.

In part, this reflects changes to the supply side of capital markets. In the 1990s specialist venture-capital firms were almost the only option for startups seeking money to finance their expansion. Nowadays there are large pools of private money that can be tapped. “There is a level of pre-IPO capital that did not exist before,” says Philip Drury, head of capital markets in Europe at Citigroup. Private-equity firms are sitting on piles of cash. Sovereign-wealth funds are willing to tie up capital in new, unlisted ventures. So are hedge funds, family offices and even pension funds.

This shift can be traced back to a piece of deregulation. The National Securities Markets Improvement Act of 1996 made it easier to set up large pools of private investors. A study by Michael Ewens and Joan Farre-Mensa, two academics, finds that the supply of “late-stage” capital (ie, to startups four or more years past their first funding round) accelerated soon after. In the 1990s most young firms seeking $150m or more had to raise it by an initial public offering. Now such sums are raised privately.

Capital-light capitalism

The demand side of capital markets has also changed. In the heyday of public markets, the typical listed firm would be capital-intensive—a railway, say, or a large manufacturer or a chain store. Such enterprises needed pots of capital to pay for land, buildings, plant and equipment. Even the very rich could not fund enterprises on this scale. The ventures were either too large or too risky.

These days the value of new firms is in ideas more than fixed assets. New ventures, notably technology firms, need far less capital to start and to grow than they once did. The building blocks for websites or smartphone apps are available free as open-source code. Computing power and digital storage can be leased. And a mini service industry has emerged to help startups refine and market their business ideas. It is also far cheaper to expand a business based on an idea than one that is based on physical capacity. Software can be copied at almost zero cost. That is not true of factories or warehouses.

Startups need less capital and have more options for raising it as they mature. Increasingly they choose private money. That is not only because it is more readily available. It is also because private capital is more suited to ideas-rich firms, say Craig Doidge, Kathleen Kahle, Andrew Karolyi and René Stulz in another recent paper. Listed firms are obliged to make public how they are using their capital. That is fine for a firm with lots of fixed assets. Spending on, say, a new plant may lift the firm’s value. But when an ideas-led firm reveals plans for its spending, it gives away details of its business plan to rivals. It would be better off seeking funds from a select group of private investors.

There is still a place for IPOs. Lots of asset-heavy firms still need pots of capital. More of those firms are found outside America, where the number of listed firms is still rising. But for most technology firms, an IPO is a way for founders to cash in their chips or to create shares to use as a currency for acquiring other firms. Bargaining-power is shifting. Suppliers of capital once had the whip hand. Now it is users of capital. Mr Musk, a finance whizz, looks on with envy.

The Restructuring of the World

Michael Spence

man checks phone

MILAN – The global economy is undergoing a far-reaching transformation. Change is being driven by shifts in countries’ populations, productivity, wealth, power, and ambitions, and accelerated by US President Donald Trump’s moves to reshape supply-chain structures, alter cross-border investment incentives, and limit the movement of people and technology across borders.

The tensions that these changes are producing are most apparent in escalating disputes over trade. Notwithstanding some dislocations in emerging economies, markets’ reaction to the tit-for-tat tariffs so far has been only muted. Investors probably assume that it is all just part of a renegotiation process that will ultimately produce new rules of engagement for global business – rules that are even more favorable to the powerful.

But such assumptions may underestimate the complexity of the issues at play, beginning with the politically salient matter of where investment and employment are created. On their own, tariff and trade barriers, if viewed as transitory negotiating tactics, will not significantly change global investment patterns or the structure of global supply chains and employment.

Protectionists like Trump argue that the power of tariffs and other trade barriers lies in their ability to curb cheating and free-riding. The implication is that such measures can help to eliminate the tensions, imbalances, and polarization associated with globalization.

“Cheating,” of course, is in the eye of the beholder. State subsidies for specific sectors, including preferential treatment of state-owned enterprises, may be regarded as cheating. So may requiring technology transfer in exchange for market access, public procurement favoring domestic entities, acceptance of unsafe work environments and exploitative labor practices, and exchange-rate manipulation.

The test of free-riding is whether a country contributes too little, relative to its capacity, to the provision of global public goods, such as defense and security, scientific and technical knowledge, mitigation of climate change, and absorption of refugees. The culprits depend on the topic in question.

But whatever the downsides to cheating or free-riding, tackling these behaviors is unlikely to eliminate the conditions that have contributed to economic, social, and political polarization.

After all, labor arbitrage has been the core driver of the organization of global supply chains for at least three decades – accelerating, of course, with China’s rise – with significant distributional and employment effects. It seems unlikely that, had China and other emerging economies adhered to the letter of World Trade Organization rules, the distributional effects of their integration into the global economy would have disappeared.

What, then, is the real purpose of the tariffs? Trump could be interested only in leveling the playing field, at which point he will accept global market outcomes. But it is more plausible that this is all part of his strategy – echoed by leaders in a growing number of countries worldwide – to win support by asserting national priorities and sovereignty.

Such efforts are pushing the world toward a more balkanized system. Moreover, the challenges and fears raised by advances in technology, especially digital technology, with regard to both national security and economic performance are also propelling the world toward greater fragmentation.

Fifteen years ago, few would have predicted that mega-platforms like Google or Facebook would become key players in areas like image recognition, artificial intelligence, and the development of autonomous vehicles (including military vehicles). Yet that is exactly what has happened. In fact, Google is now a defense contractor (though it may not renew its contract).

Given the security implications of these developments, as well as a host of issues like data privacy and security, social fragmentation, and foreign interventions in elections, countries are unwilling to leave the Internet unregulated. But they are also unwilling to delegate regulation to a supra-national body. As a result, many are taking matters into their own hands, leading to a growing divergence among countries regarding Internet regulation.

Reflecting the national-security tilt of these initiatives, the scope and authority of the Committee on Foreign Investment in the United States – responsible for reviewing the national-security implications of foreign ownership of US companies or operations – has recently been expanded.

Despite these efforts, however, the fact remains that innovation cannot easily be blocked by national borders. On the contrary, the diffusion of ideas may well become the most consequential dimension of globalization in the future.

While this may complicate national-security planning, it represents powerful new opportunities for business, even as trade faces headwinds. Already, there has been an explosion of innovative, digitally-based business models, many of which could become powerful engines of inclusive growth, especially in emerging economies. Digitally-enabled ecosystems, with open architecture and low barriers to entry, are one example of an emerging model with considerable economic potential.

There is one more crucial dynamic that will shape how the global economy will develop in the coming decades: the strategic rivalry between China and the US. At this point, it is impossible to say precisely what form this rivalry will take. What is clear is that every part of the global economy will be affected by the mix of cooperation and competition that emerges.

In the face of a powerful rival, one might expect the US to pursue a strategy focused on building, expanding, and consolidating alliances with natural allies – that is, countries with similar governance structures and shared views about the benefits of international cooperation and open markets. Instead, Trump has alienated longtime allies and attacked multilateral structures and institutions, all while antagonizing China in what is quickly becoming a two-player game.

This is a bizarre strategy. Whatever advantage Trump thinks he will gain by positioning the US in opposition to its natural allies will be dwarfed by the losses. A split between the US and its traditional allies, if it becomes a permanent feature of the new global order, would lead to deeper fragmentation among the world’s market-oriented democracies. That will surely shift the long-term balance of power in China’s favor, as it moves steadily toward becoming the world’s largest economy.

Michael Spence, a Nobel laureate in economics, is Professor of Economics at NYU’s Stern School of Business, Distinguished Visiting Fellow at the Council on Foreign Relations, Senior Fellow at the Hoover Institution at Stanford University, Advisory Board Co-Chair of the Asia Global Institute in Hong Kong, and Chair of the World Economic Forum Global Agenda Council on New Growth Models. He was the chairman of the independent Commission on Growth and Development, an international body that from 2006-2010 analyzed opportunities for global economic growth, and is the author of The Next Convergence – The Future of Economic Growth in a Multispeed World.

Japan:A Trade War That's Easy to Avoid

Tokyo just wants to get this fight over with.

By Phillip Orchard        

Shinzo Abe is set to become Japan’s longest-serving prime minister following his re-election as Liberal Democratic Party chief earlier this month, but he’s entering his third term with a fresh headache gifted from Washington. For the past two years, Tokyo has refused to enter formal bilateral trade negotiations with the United States. On Wednesday, Abe and U.S. President Donald Trump announced an agreement to do just that. The apparent about-face follows a month of threats from Trump that Japan was next on his trade hit list, warning that his warm relationship with Tokyo would end “as soon as I tell them how much they have to pay.” It also comes as Japan remains stuck on the sidelines in the North Korea nuclear negotiations, with Tokyo increasingly concerned that the U.S. will strike a deal that keeps the U.S. mainland safe from North Korean attack while hanging Japan out to dry. With friends like these, who needs the Kim family?

But Tokyo’s conciliatory turn is not motivated by fears that Japan is following China toward a full-blown trade war with the U.S. Nor is Tokyo under any illusions that concessions on trade will make the U.S. any more inclined toward or capable of striking a deal with Pyongyangthat secures the home islands. In reality, there’s a lot less to Japan-U.S. trade tension than meets the eye – not enough to keep a deal out of reach, and certainly not enough to jeopardize the future of the alliance by itself. Still, Japan’s strategic imperatives have left it with little appetite for any protracted feud.
A Trade Spat, At Most
The U.S. trade deficit with Japan and its accompanying political considerations have bedeviled the alliance since about as soon as Japan found its postwar economic footing as a low-cost exporter beginning in the 1960s. This led to a major showdown in the 1980s, when the U.S. and other countries were able to force Japan to strengthen the yen and make a number of structural adjustments. Trump himself has been critical of supposed unfair Japanese trade practices since the 1980s, and he hasn’t spared Japan — in particular, the millions of Japanese cars on U.S. highways — from his trade criticisms since launching his run for the White House.

In 2017, according to official figures, the U.S. deficit with Japan in goods ran just short of $69 billion – the third-largest U.S. trade deficit behind that with China and Mexico – or around 0.35 percent of U.S. gross domestic product. The steel and aluminum tariffs the U.S. slapped on Japan (which was denied the temporary exemptions given to several other countries) in the spring haven’t made much of a dent in the deficit; through August this year, the goods deficit totaled around $40 billion. This is nothing to sneeze at, but the imbalance is not growing rapidly, and it’s a far cry from what it was in the mid-1980s, when it soared to nearly 1.2 percent of U.S. GDP. Since then, moreover, outbound foreign investment has gradually replaced low-cost exports as a primary driver of the Japanese economy. Japan is now the second-largest source of foreign direct investment to the U.S. ($129.1 billion in 2017), supporting an estimated 1.5 million jobs in the U.S. auto sector alone. Meanwhile, as Japan’s economy has matured, the U.S. has built a services surplus with the country ($13.4 billion in 2017).


In other words, by most metrics, the two countries have settled into a mutually beneficial economic partnership – albeit with occasional points of contention of the sort that would be expected in any trade relationship – that plays largely to each other’s strengths. And the deficit in goods, coming at a time of near full employment in the U.S., illustrates in many ways the power of the U.S. economy.

The White House’s frustration really boils down to just two issues. The first is auto imports, which account for around two-thirds of the deficit. But Tokyo doesn’t have much room to make concessions here, and it thinks the U.S. may not have the leverage to force the issue. Japan has zero duties on imported cars; the Clinton administration was able to nix these. (The U.S., by comparison, places a 2.5 percent duty on imported cars, and 25 percent on light trucks.) U.S. auto sales in Japan are negligible primarily because Japanese consumers don’t want them (German cars, by comparison, perform just fine in the Japanese market), and there’s not a lot the Japanese government can do about that. So Tokyo can’t put increased market access on the table to bring down the deficit.

Trump could follow through with threats to impose 25 percent tariffs on all vehicle and auto parts imports, but there’d be no hiding the immense sticker shock for U.S. consumers at a politically sensitive time. According to the Center for Automotive Research, the price tag for the average vehicle sold in the U.S. would jump $4,400 nearly overnight, regardless of where it was built. Moreover, some 4 million Japanese vehicles are made primarily in the U.S., with parts from factories in dozens of states. Tariffs of this magnitude would kill off an estimated 750,000 U.S. jobs. Japan has used this footprint to curry considerable favor in the U.S. Congress, which is largely opposed to the proposed auto tariffs. The U.S. auto industry itself is uniformly and vocally opposed to the tariffs. Naturally, Tokyo thinks Trump may be bluffing here.

What Japan can (and probably will) do to satisfy the White House and eat into the deficit is pledge to buy more U.S. oil, liquefied natural gas and weapons. This is low-hanging fruit; Japan has negligible natural resources of its own, and securing steady supplies of oil and gas has been a geopolitical imperative for Japan since the Meiji Restoration. (See: World War II.) And Japan is likely to give in to U.S. demands that it end Iranian oil imports come November. Japan’s ongoing military modernization drive, meanwhile, is being done overwhelmingly with U.S. arms, and its efforts to build up a more robust domestic arms industry will center largely on joint production arrangements with U.S. firms. Notably, Abe in 2016 discarded Japan’s de facto 1 percent of GDP cap on military spending.

Somewhat trickier will be conceding on the second core area of focus for the White House: barriers to U.S. farm exports. Agriculture is Japan’s most tightly protected and politically powerful sector. Tokyo has reportedly offered to lower tariffs to levels agreed to as part of the negotiations over the Trans-Pacific Partnership, from which Trump withdrew on his first day in office. This makes sense for Tokyo, as it already spent the political capital needed to keep the sector at bay during TPP negotiations. And it appeals to the White House, which is looking for lifelines to throw to U.S. farmers, who have been targeted by Chinese counter-tariffs. But if the U.S. chooses to push for more, it’s not clear that Abe can deliver. Doing so would not only threaten his broader agenda at home, but it would also threaten the ratification prospects among signatories of the revived TPP, which may demand similar agricultural concessions from Tokyo.

In short, Tokyo has reason to believe the U.S. doesn’t have the economic, political or strategic rationale to escalate the dispute to a full-blown trade war. Japan is not China. And the recently revamped U.S. trade deal with another ally with a large bilateral trade surplus, South Korea, has furthered Tokyo’s belief that a largely symbolic deal may give the White House the political win it needs to move on. One of South Korea’s main concessions was a doubling of the number of vehicles each U.S. automaker can sell in South Korea without meeting Seoul’s safety standards, from 25,000 to 50,000. Last year, no U.S. automaker sold more than 10,000 vehicles in South Korea.
Japan’s Bigger Picture
Entering into formal negotiations is a concession on its own for Abe, who has pledged to refrain from pursuing a bilateral free trade agreement. (To get around this, Tokyo is labeling the talks as pursuing a “trade agreement on goods,” not a comprehensive free trade agreement that would also cover things like services and investment). Moreover, Tokyo’s push for multilateral, rather than bilateral, negotiations is not mere preference but a strategic goal as Japan attempts to build out a cohesive economic and security network of partners across the Indo-Pacific aimed primarily at containing Chinese assertiveness. So why, then, is Tokyo coming to the table?

For one, Trump’s willingness and ability to shrug off political risks and sectoral pressure in the U.S.-China trade war has made it so Tokyo can’t be sure that he’s bluffing on auto tariffs. If he follows through, the tariffs would dent Japan’s GDP by an estimated 0.5 percent in the first year at a time when Abe is still grappling for a way to shock the Japanese economy out of its decadeslong slump. And the U.S. has reportedly agreed to shelve auto tariffs so long as talks are ongoing. More important, Japan’s long-term goal is to entice Washington back to the TPP – or at least to present a united front against China on trade in some other form – and near-term bilateral concessions may help pave the way. Finally, Tokyo can’t be sure that trade will remain compartmentalized from bilateral security matters. In the past, Trump has indicated a willingness to link trade concessions to defense matters (such as basing costs, military aid, support for U.S. negotiating positions and so forth), as happened periodically during the bilateral trade spat in the 1980s.

None of these are major threats to the integrity of the alliance. If the alliance truly begins to crack, it will be because the two countries’ strategic orientations are diverging more widelyJapan is already preparing for the possibility that it will eventually need to better look out for itself. The North Korea detente has only underscored this reality. But Tokyo needs considerable U.S. support to get to the point where it can stand on its own, and it has an imperative to continue to prove itself indispensable to U.S. regional aims in the meantime. A protracted trade dispute is a complication that Tokyo is keen to avoid.