Life, fate and the assault on liberalism

Both the right and the left are in thrall to identity politics

Gideon Rachman

The liberal tradition is weak in Russia. But I recently came across one of the most inspiring statements of the liberal ideal that I have ever read, in the work of a great Russian novelist, Vasily Grossman. At a time when both the right and left are increasingly obsessed by group rights, Grossman’s argument for the primacy of the individual still feels vital and urgent, 60 years after it was written.

If you have never read Grossman’s Life and Fate, you should. The book, set in Russia and eastern Europe at the time of the battle of Stalingrad during the second world war, was completed in 1960. But it was suppressed by Soviet functionaries, alarmed by its unsparing depiction of Stalinism. Grossman’s magnum opus only appeared in 1980, 16 years after his death, and its reputation has been growing ever since.

The frequent comparisons between Life and Fate and Tolstoy’s War and Peace are apt. The novels are similar in scale and subject matter; and in the way in which fictional characters mingle on the page with historical figures such as Stalin and Napoleon. Both Grossman and Tolstoy also combine their storytelling with broader philosophical thoughts.

At the end of a chapter describing a Russian army tank unit preparing for battle, Grossman reflects that, “Human groupings have one main purpose: to assert everyone’s right to be different, to be special, to think, feel and live in his or her own way. People join together in order to win or defend this right.” But this gives rise to a “terrible, fateful error”. “The belief that these groupings in the name of a race, a God, a party or a State are the very purpose of life and not simply a means to an end.” For Grossman, individual liberty was the only valid goal of war or politics.

Life and Fate depicts the terrible evils that Stalinism and Nazism inflicted on individuals in the name of a wider group — the proletariat or the “Aryan race”. But Grossman’s words struck me as still applicable to our own, much milder age. That is because political ideas that emphasise group identity, rather than individual rights, are back in fashion — as both the nationalist right and the progressive left slide towards identity politics.

In the US, President Donald Trump has roused his base by flirting with ethno-nationalism and denouncing Muslim and Mexican immigrants. The far right in Europe has travelled in the same direction. Influential thinkers like the French writer Renaud Camus have popularised conspiracy theories about “the great replacement”, which is said to place white Europeans at risk of cultural annihilation at the hands of millions of Muslim immigrants.

Paranoia about “white genocide” and “cultural Marxism” has also resurfaced in the garbled manifestos of far-right terrorists such as the Norwegian Anders Breivik, or Brenton Tarrant, who staged a murderous attack on a mosque in New Zealand, earlier this year.

The left’s version of identity politics has nothing to do with terrorism. Increasingly, however, progressive politics in America and Britain has moved away from the liberal insistence on equal rights for individuals to an illiberal emphasis on group rights. The motive for this shift is usually a laudable effort to achieve social justice. But the outcomes are, to use one of the left’s favourite terms, “problematic”.

An interesting example of the kinds of problems that are thrown up by group-based thinking is a current lawsuit brought against Harvard University for alleged discrimination against Asian-Americans. The complainants argue that Asian-Americans have to achieve better test scores, on average, to get into Harvard and are often marked down on vague measures of personality. This, it is argued, allows Harvard to boost student numbers from other more favoured groups, such as African-Americans, Hispanics and the children of Harvard graduates.

Harvard contests the charges. Even if discrimination is proved, it will have stemmed largely from a well-meaning motive — to increase diversity on campus. The trouble is that it seems logically impossible to discriminate in favour of one group without discriminating against another. The controversy is uncomfortably reminiscent of an earlier era, when Harvard deliberately restricted the number of Jews. That is now regarded as a disgraceful episode; but it is hard to see why it is much different from discriminating against Asian-Americans.

The whole miserable tangle is an example of the knots that organisations get tied in when they treat people as representatives of a group rather than as individuals with their own multi-faceted identities.

The questions of group rights, anti-Semitism and discrimination are important themes in Life and Fate. One of the main characters, Viktor Shtrum, is a prominent Jewish physicist who finds that his efforts to hire highly qualified Jewish colleagues are blocked because the authorities favour ethnic Russians. Throughout the book other characters run into problems because the Soviet system deems them to have the wrong class background.

It is the achievement of a great novel, such as Life and Fate, to show each character as an individual whose identity should never be reduced to that of a representative of a class, nation or ethnic group. As Grossman insisted: “The only true and lasting meaning of the struggle for life lies in the individual.”

World Bank boss warns global growth could disappoint

David Malpass blames Brexit, Europe’s recession and trade uncertainty

James Politi in Washington

David Malpass, the president of the World Bank, has warned that global growth could fall short of the 2.6 per cent rate it predicted in June, in the latest sign of concern in multilateral institutions about the direction of the world economy.

In a speech in Montreal, ahead of the World Bank and IMF’s annual meetings next week, Mr Malpass warned that global growth was “slowing” and said he expected it to be even lower than the forecast from four months ago due to “Brexit, Europe’s recession, and trade uncertainty”.

“Moreover, in much of the developing world, investment growth is too sluggish for future incomes to rise in a meaningful way,” Mr Malpass said.

Mr Malpass, a former senior Trump administration official, sounded the alarm as he laid out the main goals of his tenure at the World Bank, which began in April this year after he replaced Jim Yong Kim, the previous president appointed by Barack Obama, who resigned to take a job in private equity.

Mr Malpass said he was encouraged by the potential of digital cash transfers as an important boost to development policy. “We’re almost at the point of having secure systems that would allow poor people to electronically receive remittances, foreign aid, and social safety-net payments as well as their earnings, and then be allowed to save and transact freely. That would be revolutionary because it allows people the freedom and opportunity they need to improve their living conditions,” he said.

In an environment of slowing growth, Mr Malpass said it was essential for countries to have “well-designed structural reforms”, including beefing up the rule of law so private companies can compete with state-owned enterprises.

“For many countries, this means opening up their closed and protected markets, allowing prices to be determined by market forces, and liberalising capital flows. The pay-off is that countries that make this step attract more investment, both foreign and domestic, and can generate growth that benefits a broader part of the population,” he said.

Mr Malpass’s preoccupation with the European economy echoes broad fears about stagnant and even shrinking growth in Germany and Italy. However, the IMF, in its latest forecast in July, predicted growth of 1.3 per cent for the eurozone in 2019, rebounding to 1.6 per cent in 2020.

China’s central bank continues to load up on gold

Reserves managers around the world are trying to trim exposure to the US dollar

Harry Dempsey in London

China has added more than 100 tonnes of gold to its reserves over the last ten months, underlining its position as one of the leading central bank buyers of the precious metal.

The People’s Bank of China announced over the weekend that its holdings of the yellow metal rose to 62.64m ounces in September, an increase of 190,000 ounces from August.

The increase of nearly 5.4 tonnes of gold to China’s holdings — bringing the total additions since December to more than 105 tonnes — comes at a time when central banks across the world have been trying to diversify their reserve assets away from the US dollar as trade tensions continue to simmer.

Gold is considered a haven asset and a store of value in times of uncertainty.

Last year central banks, led by Russia, bought more gold last year than at any time since America decided to move off the gold standard in 1971, with around $27bn worth of purchases.

So far this year a total of 14 central banks, primarily from emerging markets, have bolstered their gold reserves, according to data from the World Gold Council. That has helped support the gold price, which touched a six-year high last month. On Monday it was trading a fraction below $1,500 a troy ounce, up about 17 per cent for the year.

“China hasn’t said what its gold policy is but it would need to buy two years worth of global production to achieve diversification,” said Suki Cooper, precious metals analyst at Standard Chartered Bank. “It looks like it is on track to add 150 tonnes for the whole year. The desire to add gold is there.”

China’s central bank has continued to stock up on bullion as the trade war with the US shows little sign of easing and its domestic economy is slowing. Negotiators from the US and China are due to meet at the end of the week.

China’s foreign-exchange reserves have held fairly steady over the past couple of years, averaging $3.1tn. Beijing does not provide a full breakdown of its holdings, but officials have previously said that the currency mix is broadly in line with the composition of global reserves as indicated by IMF data collected from member countries. US dollar assets comprised 64 per cent of allocated reserves at the end of 2016, according to the latest data.

The Future of Europe: The Spanish Case

How would a collapse of the European Union affect its member states?

By Ryan Bridges

What happens to supranational organizations like the European Union that promise their members prosperity in exchange for surrendering some sovereignty once those bodies can no longer deliver on their promise?

We got glimpses at the answer in the previous decade, as crisis-wracked Greece, Italy, Spain, Portugal and Ireland. Anti-EU forces gained prominence across the bloc, and one country even voted to leave it altogether (though the U.K.’s reasons for doing so are complex and go far beyond the crisis of recent years). And for almost a year, Germany, the growth engine of Europe, has been straining to outrun recession. Whether this race ends in a Great Depression-like catastrophe or just a period of prolonged stagnation, Germany looks likely to lose, and it will inevitably drag the rest of Europe down with it. What does this portend for the EU as a whole? This is a question we’re going to investigate going forward.

First, it’s important to set some boundaries for this exercise. We know that European unity is in trouble, but we don’t know what form the crisis will take. The outcome hinges on questions like whether there is a complete, sudden breakup; a gradual, partial breakup that leaves a rump EU intact; or just a creeping irrelevance and loss of influence from Brussels. If there’s a breakup, it matters whether it is peaceful or violent.

Also critical is the settlement of debt obligations and questions like what happens to a state’s euro-denominated debt if it leaves. What if the euro is eliminated? These latter questions will be especially important for highly indebted states, but for brevity’s sake, we’ll have to leave them aside. We’re also going to assume for simplicity’s sake the most extreme scenario for the EU: total collapse.
The Case of Spain
We’ll focus here on Spain – an oft-overlooked but significant member state with a unique set of circumstances. Spain’s population and economy are both fifth-largest in the EU, with 47 million people and a gross domestic product of $1.4 trillion. Somewhat miraculously, it survived the past decade’s crash, bailouts and austerity, and in 2019 is one of the few Western European economies still experiencing moderate growth.

Setting aside the financial and economic questions, a post-EU Spain’s first challenge would be restoring domestic control. Domestic stability has never been Spain’s strong suit, even in the glory days of the Spanish Empire. Mountain ranges carve up the country, and none of its main rivers, save the Guadalquivir, are navigable (and they don’t link up anyway). This is a recipe for fractiousness, and Spain has its fair share, led by Catalonia and the Basque Country on the northeastern periphery.
When in the 1970s Madrid began the process of applying to join the European Communities, the EU’s forerunner, it hoped the move would dissipate tensions with the country’s periphery. The implication was that centralized authority would be spread simultaneously down to the Spanish regions and up to Brussels. Of course, as we now know, EC and later EU membership did not put Basque or Catalan nationalism to rest. So, an early challenge for the Spanish central government post-EU would be preventing separatists from capitalizing on the chaos and breaking away – which those regions might be more inclined to do if some sort of Western European bloc were to survive sans Spain. It’s especially important for Spain to hold on to Catalonia because it is the second-most populated Spanish autonomous community, it has the fourth-highest GDP per capita, it hosts Spain’s third-most important seaport at Barcelona, and like the Basque region, it borders a major military power in France.

The second priority for Spain would have to be restoring deep economic ties with Western Europe. Forty-two percent of Spanish trade is with France, Germany, Italy, Portugal and the United Kingdom. Spanish workers in France, Germany and the U.K. account for about 40 percent of remittances to Spain, which are an important source of funds for the country, and tourists from those three countries are the leading travelers to Spain. German and French car companies have poured investment into Spain, helping to make it Europe’s second-largest auto manufacturer. The agri-food sector is also a key source of exports, especially to the rest of Europe. Increasing trade with the U.S. would help, but even if Spain tripled its exports to the U.S., the numbers would pale in comparison to its trade with Western Europe. No matter how disruptive the EU’s breakup was, Europe would remain the primary focus of Spanish trade policy.

A close third priority, and the most important challenge for external security and defense, is in the Mediterranean and Maghreb. At the moment, all the challenges to Spain emanating from this region are unconventional – terrorism, militancy, migration and smuggling – and economic disruption would complicate Madrid’s ability to deal with them. EU missions in which Spain participates, like military training missions in parts of the Sahel and anti-piracy operations like Operation Atalanta off the Horn of Africa, would collapse. If France would have to scale back its anti-terrorism Operation Barkhane in the Sahel, it would have significant implications for the counterterrorism effort in the region. In other words, a region that is not a major threat to Spanish security at the moment could become more volatile and therefore pose more of a threat as European powers necessarily pull back.

In that case, Spanish defense cooperation with the United States (as well as France and the U.K.) would take on newfound urgency. With the collapse of the EU’s incipient military cooperation and integration, NATO would be an even greater priority. Located so far from Washington’s main concerns (namely, Russia) in Eurasia, Spain wouldn’t be a top priority for the United States, particularly at a time when there could be conflict elsewhere on the European continent, though it is important to note that southern Spain hosts an American naval station at Rota and air base at Moron. The U.S. and Spain do, however, have overlapping interests in keeping a lid on transnational terrorism in places like the Sahel and Maghreb. And economically, the U.S. is Spain’s sixth-largest trade partner and a major source of remittances to Spain.

The last area of importance would be Spanish relations with Latin America. The historical linkages are obvious, and in terms of trade, Latin America as a whole ranks as Spain’s fourth-largest trade partner, behind only France, Germany and Italy. Spain mostly exports machinery and vehicles to Latin America and imports mostly mineral ores and crude oil (Mexico is Spain’s fourth-largest source of petroleum, behind Nigeria, Algeria and Saudi Arabia). Moreover, Latin America is a launching pad for Spain to trade and build relations with East Asia.

The dissolution of the European Union would be devastating for all involved, but Spain is among that group of countries for which it would be especially traumatic. Spain’s economic and financial problems are well known, but we must also appreciate the political repercussions. More than 100 years ago, as Spain was still reeling from its 1898 defeat at the hands of the United States and from the loss of Cuba, the Philippine islands, Puerto Rico and Guam, the Spanish philosopher Jose Ortega y Gasset declared: “Spain is the problem, and Europe is the solution.”
After the Second World War, it spent decades seeking legitimation through membership in Western international organizations, but membership in the EC eluded Madrid until the death of longtime dictator Francisco Franco. For Spaniards, membership in the EC had a special symbolic significance, marking the end of authoritarianism and backwardness.
This attitude toward Europe goes a long way in explaining why Spanish support for membership and integration has remained so high even after the eurozone crisis. It’s hard to overstate the pain the EU’s breakup would inflict on Spaniards and the Spanish state.

What’s Freezing Europe-Russia Relations?

French President Emmanuel Macron is right to worry about the disintegration of the global arms-control regime and a Russia that is increasingly tied to China. But given that the divide between Russia and the European Union is over fundamental values, there is no reason to think that the relationship can be improved anytime soon.

Joschka Fischer

fischer161_Alexei DruzhininTASS via Getty Images_macron putin

BERLIN – Although the European Union and Russia are part of the same landmass, they don’t have all that much in common. In fact, Russians have yet even to decide where their country resides in the world. The bulk of its territory is in Asia, but over 70% of its people live west of the Ural Mountains. Russians have no interest in associating themselves with East Asia or the Islamic South, so their only choice is to go it alone or orient themselves toward Europe.

But going it alone is risky. Russia is a nuclear-armed colossus, yet it is declining demographically, economically, and technologically. The country still earns its living by exporting fossil fuels and other commodities, which is hardly sufficient for maintaining superpower status in the twenty-first century. It is increasingly at risk of becoming a junior partner to China.

The only alternative, then, is Europe. But both sides are prisoners of their respective histories. Memories of oppressive rule under the czars and the Soviets remain raw in Central and Eastern Europe, particularly in Poland and the Baltics, and Russian President Vladimir Putin’s annexation of Crimea and military campaign in Eastern Ukraine have reinforced distrust of Russia across the region.

Russia’s relationship with the rest of Europe is also determined by its history. Reeling from the Soviet collapse throughout the 1990s, Russia has adopted a nineteenth-century mentality since Putin came to power in 2000. The Russian elite, harking back to the Czarist period before the Bolshevik Revolution, regards their country as a European great power – even a hegemonic one, in the case of Eastern Europe – which pits it directly against the EU.

The EU’s raison d’être is to transcend zones of influence in Europe, because that is the only way to prevent a return of the power struggles and catastrophic wars that culminated in the first half of the twentieth century. And yet Russia is simply too large to be integrated into the EU (indeed, it is unclear who would be integrating with whom).

Even if that were not the case, Russia – or at least its leadership – does not share the EU’s values. In addition to championing democracy, judicial independence, and the rule of law, the EU has renounced any revision of borders by force. While geographic proximity demands that Russia and the EU manage their relationship in as mutually advantageous a manner as possible, the Kremlin’s ongoing war in Ukraine’s Donbas region makes this all but impossible.

Nonetheless, French President Emmanuel Macron has made renewed efforts to improve EU-Russian relations, not least by meeting with Putin in the run-up to the G7 summit in Biarritz last month. In Macron’s view, it is not in Europe’s interest to drive Russia further into China’s arms, or to stand by and watch the ongoing disintegration of US-Russian arms-control treaties. With respect to arms control, American and European interests are not the same, and today’s US administration cares little about Europe or its views on any given issue.

But Macron’s efforts raise many questions. For starters, it isn’t obvious what role Europe could play in renewing the global arms-control regime. Without the US, Europe has little to offer Russia on the issue of intermediate missiles. It would be stuck in the position of trying to convince two unwilling parties to reach a new agreement. And that doesn’t even account for China, which has also developed an intermediate-range-missile capacity.

Europe does have something to offer Russia economically. But improving economic relations is simply impossible without verifiable progress in the implementation of the Minsk Protocol to end the conflict in Donbas. It is unclear if Putin would be ready for that.

But the real problem between Russia and the EU is the issue of democracy. Putin and the Russian oligarchy’s greatest fear is that Ukraine’s 2014 Maidan revolution could be replicated on Moscow’s Red Square. The Kremlin does not blame NATO for that possibility; it blames the EU. Anti-NATO rhetoric is a tried and true propaganda trope that exploits many Russians’ ingrained fear of a Cold War bogeyman. But the real threat in the eyes of the Russian oligarchy is the EU and its promotion of democracy and the rule of law.

The Russian and European systems are fundamentally incompatible, representing contradictory values and vastly different approaches to foreign and domestic policy. In the nineteenth century, czarist Russia was the leader of the “Holy Alliance,” a reactionary bulwark against the bourgeois revolutions sweeping in Europe. This dynamic was reversed under the Bolsheviks after 1917, when Russia became the cradle of revolution. But under Stalin, it returned to pursuing essentially the same aims as the czars, particularly when it came to crushing independence movements in Central and Eastern Europe.

Putin’s regime has followed a similar trajectory, retreating to the nineteenth century, allying with the Orthodox Church, and launching attacks on the “decadent West,” with tirades against homosexuality and liberalism. The Kremlin’s active support for illiberal, nationalist forces in Europe and the United States is just one part of this larger picture.

As desirable as an improvement in relations between the EU and Russia would be, it will come neither quickly nor easily. On the main questions of Ukraine and democracy, Europe can scarcely give an inch.

Joschka Fischer was German Foreign Minister and Vice Chancellor from 1998-2005, a term marked by Germany's strong support for NATO's intervention in Kosovo in 1999, followed by its opposition to the war in Iraq. Fischer entered electoral politics after participating in the anti-establishment protests of the 1960s and 1970s, and played a key role in founding Germany's Green Party, which he led for almost two decades.

Japan’s Shinzo Abe Aims an Arrow at His Own Foot

The imminent sales-tax increase is an unnecessary fiscal move that puts a fragile recovery at risk

By Mike Bird

With less than a week to implementation, any hope the Japanese government might abandon its sales-tax increase is now gone.

The increase marks a doleful milestone inShinzo Abe ’s seven-year tenure as prime minister, with two of the three “arrows” of Abenomics—bold monetary stimulus and flexible fiscal policy—clearly falling short of their targets.

On Oct. 1, the tax will rise to 10% from 8%. The last increase, in April 2014, sent spending tumbling: Consumption hasn’t even recovered to the levels recorded in March of that year.

Planned by the previous government, the increase reflects policy makers’ and bureaucrats’ long-running concern over the country’s debt level. Long-running but misguided: The risk of again slamming the brakes on economic growth is far larger—and would limit the fiscal benefit in any case.

There are a handful of reasons to hope the impact will be more modest than in 2014. It is smaller—2 percentage points rather than 3—and excludes fresh food. Some cashless purchases will be eligible for a 5% rebate.

But underlying conditions for an increase are even worse than in 2014. Consumer confidence has touched its lowest point since the aftermath of the Fukushima Daiichi nuclear accident in 2011, having declined slowly throughout 2018 and more rapidly this year.

Shop till the tax rises. Photo: Keith Bedford/Bloomberg News

The parlous financial health of the country’s regional banks, which can’t weather more interest-rate cuts easily, severely limits the Bank of Japan’s capacity to come to the rescue if the tax increase hits harder than expected. The BOJ has sat on its hands this year as other major central banks eased policy.
The global backdrop also is worse than in 2014. World trade growth is in the doldrums: Japanese exports in August, two months before the tax increase, were down 8.25% from a year earlier. In February 2014, two months before the last increase, they were up 11.75%.

There is no need to raise the sales tax. Japan’s main economic challenge is weak demand, not the need to finance government spending. The popular view of Japan as a country that has accumulated a worrying debt burden through relentless fiscal stimulus is almost the inverse of reality: Stimulus has been repeatedly stopped and started, and the country’s debt-servicing costs are some of the lowest in the world.

Optimists can hold out hope for the third arrow, Mr. Abe’s structural reforms of the Japanese economy. Japan led the way to a U.S.-free Trans-Pacific Partnership. Corporate governance has been revolutionized, and corporate profitability lifted. This is one reason that Japan’s equity markets have trailed only the U.S.’s among large, advanced economies during the past decade.

Mr. Abe’s tenure has included some of the boldest efforts to shake Japan from its low-growth morass since the country’s asset bubble burst nearly three decades ago, but the sales-tax increase represents another step backward.