Xi Jinping, Davos and the world in 2017

There is a tidiness that disappears when rules are replaced by competing powers

by: Philip Stephens

Xi Jinping is heading to the World Economic Forum in Davos. Perhaps his trip tells us only than that the Chinese president has succumbed to the vanity that compels global elites to parade their wisdom over champagne and canapés in a small Swiss ski resort. And yet Mr Xi’s top billing at next month’s gathering also says something about the world. President-elect Donald Trump wants the US to shrug off its global responsibilities. China may grab the opening to move centre stage.

The populism that has unnerved the west during 2016 has scarcely been a match for the revolutionary tumult that gripped Europe in 1848. Though it ended in bitter disappointment for the revolutionaries, that year’s “spring of nations” struck at the foundations of the ancien regime. Today’s insurgents have grabbed power through the ballot box.

That said, a post-cold war generation lulled into believing that order and predictability are part of the state of nature has been badly shaken. Power is no longer where we thought it was. Even before the dust settles on the spreading populism that gave Mr Trump his victory and Britain, well, Brexit, we can see a different landscape taking shape.
The US president-elect still has everyone guessing. Each tilt towards a more temperate stance on domestic or international affairs is matched by angry late night tweets from the top of Trump Tower.

No one ever accused Mr Trump of campaigning in poetry. As time passes, it seems even less likely that he intends to govern in prose.

Amid the swerves and the Twitter fusillades there are one or two constants. Billionaires will pay less tax and foreign policy will be unashamedly nationalist. Mr Trump belongs to a club of Americans that sees global rules and fixed alliances as a subtraction from, rather than an addition to, US power. Multilateralism is for wimps. Geopolitics is no different from business.

Mr Trump wants to make deals.

He is right, of course, to think that the US can more than stand its ground in a world in which might replaces rules as the currency of international relations. The US is still the sole superpower — the reference point for everyone else’s foreign policy. On the other hand, discarding allies and making deals with the likes of Russian president Vladimir Putin is unlikely to advance US strategic interests.

Here lies the opportunity for Mr Xi in Davos. China’s distrust of the post-cold war order long predates Mr Trump. But it is a US president who is now bringing down the curtain on the Pax Americana. Set against Mr Trump’s embrace of “America First” trade and security policies, Beijing’s call for a “new model of international relations” no longer looks like an attempt to overturn the western liberal order.

To the contrary, China can cast itself as a guardian of global governance and the torchbearer for the open trading system. Mr Xi champions the Paris climate change accord, defends the international community’s nuclear deal with Iran and expands trade liberalisation in Asia and, hey presto, the bad guy is suddenly the good guy. As for China’s military manoeuvres in the South China Sea, it is the president-elect who now threatens to upend a decades-long Sino-US understanding that has kept the peace in the Taiwan Strait.

The first step to understanding the unravelling of the global order is that the new geopolitical landscape will not be drawn in straight lines. There is a tidiness about multilaterism that disappears when shared rules are replaced by the interplay of competing powers. Perhaps Mr Trump imagines a great power condominium of the US, China and Russia. The snag is their interests collide more often than coincide. Striking a bargain with Mr Putin about Syria would see the US handing a victory to Iran. Abandoning the Trans-Pacific Partnership trade deal will encourage America’s regional allies to integrate economically with China.
No, the new order will be replete with jagged edges, regional pacts and overlapping, sometimes contradictory, alliances. India will claim its place at the table. So too will Europe.

Mr Trump has not had much time for his Nato allies. And the lazy thing to say is that Europe will continue to be consumed in 2017 by domestic troubles. Growth is not fast enough to quell the anger of those left behind by globalisation; migration supplies ammunition to the populists; Brexit will suck up political energy. Marine Le Pen, the leader of France’s xenophobic National Front, hopes to harness the momentum of Mr Trump and the Brexiters in her bid for the Elysée Palace.

Were Ms Le Pen to win the presidency, the game might well be up. There is, though, another plausible if not yet probable scenario that sees the start of a European revival, in which economic recovery picks up speed and migration stabilises. Most importantly, a victory for the Republican candidate François Fillon in France and a fourth term for Germany’s Angela Merkel restores the Franco-German motor of European co-operation.

Either way, there is no room for neatness in the world’s new design. There is, though, an opportunity for China. Classical geopolitical theory has it that, in a collision between established and rising powers, the upstart is the destabilising force. When the elites of Davos gather for their annual fest of self-congratulatory backslapping, it would be something of an irony were Mr Xi to appear as the voice for stability.

Donald Trump’s Military Government


Gen. Michael T. Flynn in Afghanistan in 2009. Credit Carolyn Cole/Los Angeles Times, via Getty Images  

Washington — A new president, swept into office on a tide of fake news and media manipulation, surrounds himself with generals: his adviser on foreign policy, the defense minister, his minister of the interior and the further possible appointments of foreign minister and intelligence director.
If this happened in a third world country, the United States, as a global promoter of democracy, would warn against it. America has frequently urged the militaries of other countries to stand down and stay in barracks. The United States supports civilian control; the military’s job should be to provide military advice, not make policy and govern.
Yet these admonitions do not now seem to apply at home. Having roundly criticized generals during the campaign, President-elect Donald J. Trump is now surrounding himself with them.
The issue is not about getting good military advice to the president. The 1986 Goldwater-Nichols Act made the chairman of the Joint Chiefs of Staff the principal military adviser to the president for that purpose. The president regularly listens to uniformed officers in the Situation Room and the Pentagon.
Marine Gen. James N. Mattis aboard the U.S.S. Peleliu in 2001. Credit Jim Hollander/European Pressphoto Agency                   
As much as Americans like and respect their generals, civilian control of the military has nothing to do with the personal merits or otherwise of particular flag officers. They may be smart (David H. Petraeus), bold (James N. Mattis), temperamental (Michael T. Flynn) or quietly competent (John F. Kelly). There is not just one kind of general.
The larger principle goes back to the founding of the republic: Civilians should oversee the military, and the president is the commander in chief. The founders worried about the influence that a military with excessive power could have on America’s young democracy.
Military officers do view the world differently. Their experience has necessarily produced in them what psychologists sometimes call a “professional deformation,” a necessary conditioned way of looking at the world that is structured, hierarchical, strategic and operational. It focuses on the uses of military force.
Military officers are “can do.” Operational problems require operational solutions — fix the problem, and done. Fundamentally, military deterrence and combat are what they do, generally well.

Gen. John Kelly at the Pentagon in 2016. Credit Manuel Balce Ceneta/Associated Press                    

Civilian analysts, strategists and diplomats focus on statecraft: how to wield the foreign policy tool kit to achieve national goals and protect American interests. They focus on broader strategy, diplomatic nuance, setting one sticky problem aside to make progress on another.
Both skill sets, military and civilian, are important. The president and his staff coordinate between the two. But filtering all policy decisions through a military lens will compromise the balance in decision making that good statecraft requires.
More fundamentally, our older democracy is in trouble. Over the past 70 years, the military has become the dominant institution in how the United States engages with the world, especially since Sept. 11, the so-called global war on terror and the invasions of Iraq and Afghanistan.
Special Operations forces are now deployed to more than 80 countries, the counterterrorism apparatus has expanded across the country, and the military conducts cyberwarfare abroad.
Like water to a fish, our militarized medium has become invisible to us. To have generals in charge of the foreign and national security policy agencies looks normal. While it is true that the strategic failure behind the two biggest operational failures of the past 15 years, Iraq and Afghanistan, was a civilian responsibility, it seems ironic that the careers of the three officers so far appointed by Mr. Trump — Generals Mattis, Flynn and Kelly — were bound up with those debacles. If General Petraeus were nominated as secretary of state, that would make four.
It is important for the president to surround himself with senior cabinet-level advisers who are not military men. The president will need that balance, as well as the capabilities of all America’s foreign policy institutions. The challenges he will encounter are broader than the military view can encompass. And most solutions are not military.
Putting military officers in charge of the entire architecture of national security reinforces the trend toward militarizing policy and risks cementing in place “the military-industrial complex” that President Dwight D. Eisenhower warned of. To borrow the psychologist Abraham H. Maslow’s words, if all the men around President Trump are hammers, the temptation will be “to treat everything as if it were a nail.”

The Trump Boom?

Kenneth Rogoff
. Trump speaking at economic club

CAMBRIDGE – After years of hibernation, will the US economy rouse itself for a big comeback over the next couple of years? With an incoming Republican administration hell-bent on reflating an economy already near full employment, and with promised trade restrictions driving up the price of import-competing goods, and with central-bank independence likely to come under attack, higher inflation – likely exceeding 3% at times – is a near-certainty. And output growth could surprise as well, possibly reaching 4%, at least temporarily.
Impossible you say? Not at all.
The economy already seems to be growing at a 3% annual clip. And even steadfast opponents of President-elect Trump’s economic policies would have to admit they are staunchly pro-business (with the notable exception of trade).
Consider regulation. Under President Barack Obama, labor regulation expanded significantly, not to mention the dramatic increase in environmental legislation. And that is not even counting the huge shadow Obamacare casts on the health-care system, which alone accounts for 17% of the economy. I am certainly not saying that repealing Obama-era regulation will improve the average American’s wellbeing. Far from it. But businesses will be ecstatic, maybe enough to start really investing again.
The boost to confidence is already palpable.
Then there is the prospect of a massive stimulus, featuring a huge expansion of badly needed infrastructure spending. (Trump will presumably bulldoze Congressional opposition to higher deficits.) Ever since the 2008 financial crisis, economists across the political spectrum have argued for taking advantage of ultra-low interest rates to finance productive infrastructure investment, even at the cost of higher debt. High-return projects pay for themselves.
Far more controversial is Trump’s plan for a massive across-the-board income-tax cut that disproportionately benefits the rich. True, putting cash in the pockets of rich savers hardly seems as effective as giving cash to poor people who live hand to mouth. Trump’s opponent, Hillary Clinton, memorably spoke of “Trumped-up trickle-down economics.” But, Trumped-up or not, tax cuts can be very good for business confidence.
It is hard to know just how much extra debt Trump’s stimulus program will add, but estimates of $5 trillion over ten years – a 25% increase – seem sober. Many left-wing economics commentators, having insisted for eight years under Obama that there is never any risk to US borrowing, now warn that greater borrowing by the Trump administration will pave the road to financial Armageddon. Their hypocrisy is breathtaking, even if they are now closer to being right.
Exactly how much Trump’s policies will raise output and inflation is hard to know. The closer the US economy is to full capacity, the more inflation there will be. If US productivity really has collapsed as much as many scholars believe, additional stimulus is likely to raise prices a lot more than output; demand will not induce new supply.
On the other hand, if the US economy really does have massive quantities of underutilized and unemployed resources, the effect of Trump’s policies on growth could be considerable. In Keynesian jargon, there is still a large multiplier on fiscal policy. It is easy to forget the biggest missing piece of the global recovery is business investment, and if it starts kicking in finally, both output and productivity could begin to rise very sharply.
Those who are deeply wedded to the idea of “secular stagnation” would say high growth under Trump is well-nigh impossible. But if one believes, as I do, that the slow growth of the last eight years was mainly due to the overhang of debt and fear from the 2008 crisis, then it is not so hard to believe that normalization could be much closer than we realize. After all, so far virtually every financial crisis has eventually come to an end.
Of course, all of this is an optimistic spin on a Trump economy. If the new administration proves erratic and incompetent (a real possibility), dejection will quickly overwhelm confidence. But beware of pundits who are certain that Trump will bring economic catastrophe. On election eve, New York Times columnist Paul Krugman unequivocally insisted that a Trump victory would lead to a stock-market collapse, with no recovery in sight. Investors who relied on his insights lost a lot of money.
At the risk of hyperbole, it’s wise to remember that you don’t have to be a nice guy to get the economy going. In many ways, Germany was as successful as America at using stimulus to lift the economy out of the Great Depression.
Yes, it still could all end very badly. The world is a risky place. If global growth collapses, US growth could suffer severely. Still, it is far more likely that after years of slow recovery, the US economy might at last be ready to move significantly faster, at least for a while.

The Year Populism Went Mainstream

In regard to trade and immigration, words like ‘nationalism’ are no longer taboo.

By William A. Galston

     Trump adviser Anthony Scaramucci in New York, Dec. 2. Photo: Zuma Press

The axis of politics shifts when dissenting views enter the mainstream. On populist issues such as trade, immigration and national sovereignty, this process is visibly under way.

Speaking in Washington, D.C., on Monday at a convention of No Labels, a bipartisan organization that promotes cooperation between the political parties to achieve core national goals, Trump adviser Anthony Scaramucci argued that in the wake of World War II the U.S. built an international architecture designed to promote global economic recovery and market economies’ ability to resist pressure from the Soviet Union. In strictly economic terms, this structure was tilted against the U.S., but as the world’s dominant economy it was a price its creators were willing to pay in exchange for promoting key geopolitical objectives.

In the circumstances they faced, Mr. Scaramucci said, “they did the right thing for the world.”

But seven decades after the end of the war, the U.S. faces new economic challenges. Our manufacturing base has been “hollowed out,” he declared, and it is now time to “rebalance” our economic relations with the rest of the world.

No one in the incoming administration, he insisted, is looking for protectionism or tariffs. But it is reasonable for the next president to activate a mechanism in the North American Free Trade Agreement that has never been seriously used to review arrangements that are more than two decades old. The overall objective is to boost the incomes and purchasing power of middle- and working-class families. If we won’t, he concluded, “Nothing else is going to work.”

The day Mr. Scaramucci spoke, former Treasury Secretary Lawrence Summers, a pillar of the establishment, published an opinion piece in the New York Times titled “It’s Time for a Reset.”

He began by noting that this year has witnessed the breakdown of the international postwar consensus that “reducing trade barriers increases prosperity and promotes peace.”

I suspect that Mr. Summers and Mr. Scaramucci would disagree about the extent that responsible nationalism could rebuild a labor-intensive manufacturing economy in the U.S. But on the big picture, it is hard to see much daylight between them. Populism on trade has gone mainstream.

Later in the No Labels convention, former British Prime Minister Tony Blair reflected on the lessons he had learned in recent years. “Along with the economy,” he said, “we have to pay attention to culture and identity,” and we need to fashion policies that take these concerns into account. Mr. Blair cited Canada as a model of immigration policy that promotes cultural integration as well as economic growth. Venturing into a minefield, he said that the main problem of integration we face is with “part” of the Muslim community. The only way of dealing with this problem is to put it on the table honestly. If we are worried about extremism, he declared, we need a policy on extremism, and “political correctness can’t get in the way.”

To construct an effective response to this challenge, Mr. Blair said, we must return to the first principles of liberal democracy, which draws a line between the public and governmental, on the one hand, and the private and communal, on the other. On one side of the line is the “space of legitimate diversity,” and on the other side, the “common space.” In the common space are our core values—democracy, individual liberty, and the rights of women, among others. We have a right to expect that anyone coming to a liberal democracy will respect them, and we have a right to use government to enforce them. Diversity cannot mean that anything goes, even in the name of religious liberty.

His readers probably expected a staunch defense of the existing order. He did not offer one.

Instead, he said, “We need to redirect the global economic dialogue to the promotion of ‘responsible nationalism’ rather than on international integration for its own sake.” Economic diplomacy should now focus on measures that “increase the range of policies that governments can pursue to support middle-class workers domestically.”

To be sure, Mr. Blair is not a newcomer to the imperative of cultural integration. Nonetheless, during his decade at the helm, he was the principal architect of a welcoming immigration policy that rapidly changed the face of Britain. When nearly all the founding members of the European Union exercised their right to slow immigration from former communist bloc countries, the New Labour government did not—a decision that Mr. Blair’s principal EU adviser has defended on moral and geopolitical rather than economic grounds. The consequence: The “Polish plumber” became as iconic in British politics as the extremist imam, setting the stage for this year’s Brexit vote.

When Mr. Blair invoked the need to give culture and identity their due, he laid the foundation for a revised approach to immigration that takes into account a society’s ability to absorb demographic change—another example of populist sentiments entering the mainstream.