Six Abenomics lessons for a world struggling with ‘Japanification’

Shinzo Abe’s three arrows programme has valuable insights into what to do and not do

Robin Harding

© James Ferguson/FT

“Buy my Abenomics!” urged Japanese prime minister Shinzo Abe in 2013. And we did. In an all-time triumph of Something-nomics branding, Mr Abe convinced the world that his so-called three arrows of “bold monetary policy, flexible fiscal policy and a growth strategy” would transform Japan’s economy.

Now Mr Abe is stepping down after more than eight years in power, it is time to judge: did Abenomics succeed?

The simple answer is: no. The central goal of Abenomics was an inflation target of 2 per cent.

Yet even before Covid-19, Japan never got closer than about 1 per cent. This is failure.

But like a football team that fails to win the league, defeat does not necessarily mean you were bad, just not good enough. Abenomics had its moments. For a world struggling with “Japanification” — a slide towards stagnation, deflation and ultra-low interest rates — it holds powerful lessons.

Lesson one is that monetary policy works. The initial “bazooka” of massive asset purchases by the Bank of Japan in 2013 was highly effective. Bond yields fell; stock markets boomed; and most important, the yen fell below ¥100 to the dollar, a boon to Japanese industry. Lending grew and the country enjoyed record employment during the Abe years. It is almost impossible to argue that Japan would have been better off with higher interest rates and a stronger yen.

Lesson two is that weak economies cannot handle tax hikes. The day Abenomics failed was the day Japan’s consumption tax rose from 5 to 8 per cent in the spring of 2014. The tax rise was planned by a previous administration, but both Mr Abe and BoJ governor Haruhiko Kuroda are culpable for the decision to go ahead, plunging the country into recession.

A further tax increase to 10 per cent last year had the same results. If you promise stimulus, and deliver restraint, you get failure. That is the story of Abenomics in brief.

Lesson three, following closely on the above, is that credibility is everything. In the early days of Abenomics, Mr Kuroda promised 2 per cent inflation within two years.

Inevitably, that pledge was not kept. After the consumption tax led to recession, Mr Kuroda’s second bazooka in 2014 — upping the pace of asset purchases to ¥80tn a year — had less effect. By now, the spell was broken.

Nor was this the only way Abenomics undermined its own credibility. For example, the government never raised public sector wages in line with the 2 per cent inflation target. Why, then, should the private sector have heeded Mr Abe’s demand for wage increases?

Lesson four is that you cannot rely on expectations alone. Mr Kuroda repeatedly explained how his policy would work by raising public expectations of future inflation. In fact, there are signs this did initially happen, before the 2014 recession killed hopes that inflation actually would rise. A tool reliant on expectations will never match one that changes interest rates directly.

This is particularly relevant given the US Federal Reserve’s decision last week to adopt an average inflation target, which will compensate for low inflation today by allowing higher future inflation. Fed officials should note the BoJ has had an “inflation-overshooting commitment” since 2016. It has not done much good.

Abenomics lesson five is that stimulus does not cause problems with public debt, it solves them. Since 1990, Japan’s public debt as a percentage of gross domestic product has risen relentlessly, except for two periods: 2005-07, when the economy was strong enough for the BoJ unwisely to raise interest rates, and 2013-19, when Abenomics provided enough of a boost to allow the consumption tax rises. The public sector can only save more if the private sector saves less. Economic strength is a precondition for fiscal tightening.

Lesson six is the limits of a growth strategy. Perhaps the most common criticism of Mr Abe in Japan is that he never delivered on promises of structural reform. It is true he never did the most radical things, such as tearing up protections for salaried staff. But he did liberalise Japan’s electricity market, open the country to Chinese tourists, cripple the agriculture lobby and sign two huge trade deals.

But most economic growth ultimately comes from more people, better education, accumulating capital, and most crucially of all, new technology. With Japan’s declining population, the only “reform” sure to expand the economy is large-scale immigration, and Mr Abe rightly felt that choice goes beyond economics. Perhaps he is at fault just for claiming to have had a strategy to revive growth. But since no such strategy exists, delivery was not the issue.

Where does that leave Japan today? Its challenges are greater than ever. After the failure of a supposedly all-out stimulus programme, the public may not buy another. But the status quo, with inflation well below target, is symptomatic of a chronic demand gap, imperfectly filled by ever-rising public debt.

One option is to wait, continue central bank asset purchases and hope for the best — the basic BoJ stance since 2016. The alternative is to co-ordinate those asset purchases even more closely with government spending.

That would be another step towards the uncharted and potentially perilous policy of helicopter money. But to sustain the hope that Mr Abe once sold so well, Japan may have little alternative.

Fed urged to back up new dovish policy with action

Investors look for guidance from US central bank as hopes of fiscal stimulus to prop up economy fade

James Politi in Washington and Colby Smith in New York

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The FOMC has set the stage for years of rock-bottom interest rates in the US as the world’s largest economy faces a slow and uncertain rebound from the shock of the pandemic © Rick Bowmer/AP
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The Federal Reserve is facing calls to translate its new more dovish monetary framework quickly into policies to support the US economy, amid waning expectations of additional fiscal stimulus to keep the recovery going.

The Federal Open Market Committee — the US central bank’s rate-setting body — is set to meet this week for the first time since last month’s approval of a long-term strategy shift. The Fed said it would allow periods of higher inflation as it strengthened its commitment to reach full employment.

The change, which ditched the Fed’s decades-old mantra of pre-emptive rate cuts to stymie spikes in consumer prices, has set the stage for years of rock-bottom interest rates in the US as the world’s largest economy faces a slow and uncertain rebound from the shock of the pandemic.

Although the Fed’s dovishness has never been in question throughout this year’s crisis, many investors and economists said the US central bank needs to apply the new philosophy speedily to its policy statement and guidance, possibly as early as this week, to show its commitment to the plan.

“The Fed announced its new strategic objectives two weeks ago, and now it is time to back them up with concrete actions,” Aneta Markowska and Thomas Simons, economists at Jefferies, said in a note on Friday. “Not doing so would undermine the credibility of the new framework. And, when it comes to central banking, credibility is everything,” they said.

The Fed’s economic projections for this year are expected to show an improvement compared with the 6.5 per cent contraction in output and year-end 9.3 per cent unemployment rate in the median forecast of officials in June, but the outlook remains extremely hazy.

Most economists and Fed policymakers hoped that the White House and Congress would have delivered at least $1tn in additional fiscal stimulus to the US economy by now. However, negotiations on a new relief package have stalled and hopes of a deal have dwindled, raising fears of a looming hit to consumption and a wave of business failures and job cuts.

This week’s FOMC meeting will be the last before the US presidential election in early November, adding to the political uncertainty.

Meanwhile, the coronavirus crisis is far from resolved in the US, despite the decline in cases since the spike in infections over the summer, with many schools starting classes remotely and businesses operating well below capacity.

In its last policy statement in July, the Fed said it would not raise interest rates until it was “confident that the economy has weathered recent events” and was on track to reach its goals.

But economists said it can now be more explicit and firm in light of the new policy framework.

“The stage is set very nicely for them to adopt outcome-based forward guidance which would be driven by the overshoot of the inflation target . . . that they will remain at the zero lower bound until they are confident that they will be able to run at 2 per cent for some time,” said Michelle Meyer, a senior economist at Bank of America.

“And in the press conference [Fed chair Jay] Powell will do his best to further explain why the Fed made the changes they made, why they think it’s appropriate to reinforce the inflation objective right now,” she added.

Concrete policy changes at this week’s Fed meeting are far from certain, however. Some Fed officials have in recent weeks argued that the central bank’s current language has been sufficient to satisfy markets of its determination to keep rates on hold for a very long time.

They assert that it is not necessary for the central bank to bind itself to more specific targets that could limit its flexibility in the future.

But investors are clamouring to know how exactly the Fed’s new framework will work in practice, and warned that otherwise it may end up being dismissed as a purely theoretical exercise.

“Increasing your desire doesn’t increase your credibility,” said Gene Tannuzzo, deputy global head of fixed income at Columbia Threadneedle. “They need to demonstrate not just a willingness for inflation to go higher, but also what [they are] going to do differently to get there.”

They need to demonstrate not just a willingness for inflation to go higher, but also what [they are] going to do differently to get there

Gene Tannuzzo, deputy global head of fixed income at Columbia Threadneedle
Former Fed chairs Janet Yellen and Ben Bernanke have also nudged Mr Powell to be more specific. At a joint event at the Brookings Institution this month, they both endorsed the US central bank’s big strategy shift but both said they would give it an “incomplete” grade because of the unanswered questions surrounding its implementation.

“I think they have come to an excellent conclusion. They ran a very good process. They still need to translate this into something more operational. They need some forward guidance about the path of rates and asset purchases,” Ms Yellen said.

Beyond the tools under consideration to achieve the average inflation goal, investors also want to know the parameters the Fed will use to determine when it is appropriate to eventually tighten monetary policy. 

“Let’s assume we get the unemployment rate dropping substantially to the extent where we start to see inflationary pressure. Over what period of time will the Fed be staying put? That is a point the market does not have too much clarity on,” said Diana Amoa, a fixed income portfolio manager at JPMorgan Asset Management. 

Fed officials appear to have distanced themselves from another tool — yield curve control — which involves the central bank setting targets for certain Treasury yields and then buying or selling as many securities as necessary to maintain those levels.

In remarks delivered at the end of August, vice-chair Richard Clarida said the potential benefits from such a policy were only “modest” and noted the potential for “complications in terms of implementation and communications”. 

Climate Crunch Time

In the 50 years since the first Earth Day, the environmental movement has matured and developed highly sophisticated methods for driving change. But, given the unprecedented scale of the climate crisis, the question is not whether activism is effective, but whether we still have time to save ourselves.

Elmira Bayrasli, Bill McKibben

Since 1880, the average global surface temperature has risen by about 1°C, or 1.8°F. 

Much of that increase has happened in the last 50 years, and the consequences are already becoming apparent. Forest fires have become larger and more severe, the polar ice caps are melting six times faster than they were in the 1990s, and extreme weather events like hurricanes and droughts are occurring with greater frequency and intensity.

As the evidence of the looming climate crisis has mounted, it has reinvigorated the environmental movement that started in the 1970s, with young people increasingly leading the way. In August 2018, a then-15-year-old Greta Thunberg staged her first climate strike in front of the Swedish parliament. 

Just over a year later, millions of young people in 150 countries joined her for a worldwide climate strike. The activists’ demands are straightforward but potent: eliminate greenhouse-gas (GHG) emissions, shift to renewable energy, and ensure a sustainable future. Will our leaders listen?

Bill McKibben is a long-time climate activist; a regular contributor to the New Yorker, the New York Review of Books, and other publications; and a co-founder of On July 8, he spoke with Elmira Bayrasli about climate activism during the COVID-19 pandemic.


Elmira Bayrasli: This past April, the world celebrated its 50th Earth Day. What were environmental activists fighting for back in 1970, and how have their goals changed since then?

Bill McKibben: Early environmentalism was largely a response to problems that were incredibly visible. The air was brown, and you could chew it. The rivers and streams were yellow and orange, and you could light them on fire. There had just been a massive oil spill in Santa Barbara, off the California coast, and on and on. So, it wasn’t completely surprising that people were ready to rally.

The first Earth Day in the US had about 20 million people – one-tenth of the population at the time – out in the street. It may well have been the largest single day of political activity in the country’s history, and that was really important. Earth Day didn’t just get people out in the streets; they won. America soon passed the Clean Air Act, the Clean Water Act, and other measures that made the air far more breathable and the water far more swimmable and drinkable.

The movement’s initial goals have, to a very large degree, been met, and all of us are the beneficiaries. Now, we’ve moved on to a deeper, more difficult set of environmental problems that can’t be seen quite as plainly.

EB: Yet today’s protests, which have spread even farther around the world, have yet to deliver in terms of reducing GHG emissions.

BM: Today’s targets are much more difficult, and the reason has a lot to do with the science. Take, as an example, one of the pollutants that people were most concerned about on that first Earth Day: carbon monoxide – carbon with an oxygen atom. It comes out of a tailpipe. It kills you if you breathe it. But you can take care of it pretty easily. Stick a catalytic converter on the back of the car and that small amount of carbon monoxide that was in the exhaust stream just disappears.

Today, we’re dealing with a different kind of pollutant: carbon dioxide – carbon with two oxygen atoms. Instead of being a trace gas that you can eliminate with an exhaust filter, CO2 is what happens when you burn something.

There’s no filter that can catch it. You must either stop driving a car and take a bus or a bike instead, or drive an electric car that you can run with renewable energy. 

So, it’s no wonder that this is far more difficult terrain. The fossil-fuel industry’s life is on the line, and they have fought with extraordinary amounts of money to keep change from happening.

EB: Many commentators have pointed out that environmental issues intersect with inequality. Hurricane Katrina comes to mind, because it showed there to be a strong connection between climate risk and social justice. The poorest in New Orleans are overwhelmingly black, and they have long lived in the city’s most vulnerable areas. As climate change increases the frequency of Hurricane Katrina-type events, how has the growing awareness of its disproportionate impact on the world’s poorest shaped the environmental agenda?

BM: The first, most basic thing to realize about climate change is its incredible unfairness. Those who contributed the least to it suffer first and are the hardest hit by it. That’s now widely understood – enough so that the climate movement is really morphing into the climate justice movement. The people who are most at risk are also the people doing most of the leading on these questions.

EB: In the US and elsewhere around the world, there has been a reckoning this summer over police violence and other forms of racial injustice. Like the environmental movement, today’s demonstrations emanated from the grassroots. How complimentary are the two movements, and what kind of collaboration can we expect to see between them?

BM: You’re seeing a lot of collaboration, which is terrific, because in the end, all of these questions are about justice. We can’t just take an unjust world that runs on coal and replace it with an unjust world that runs on solar. We should take this opportunity to make the world a better place – and racial and economic equality are a huge part of that.

The phrase of the summer – owing, sadly, to the death of George Floyd at the hands of a Minneapolis police officer – is “I can’t breathe.” People can’t breathe for all kinds of reasons: because a policeman is kneeling on their neck; because there’s a coal-fired power plant in their neighborhood; because the temperature has just become too hot; because wildfires are burning nearby.

The people paying the price for racial, economic, and climate injustices are predominantly the same people who have borne the worst of the coronavirus pandemic. The poorest and most vulnerable people – disproportionately people of color – are at the forefront of all these fights.


EB: The environmental movement has passed many milestones over the last 50 years, but only in the last few years has public opinion really shifted in favor of climate action. The science hasn’t really changed, so why did it take so long to get here?

BM: We know the answer to that question now, and we know it from really great investigative reporting. I wrote the first book about climate change – The End of Nature, which came out in 1989. It turns out that while I was working on it, the fossil-fuel companies were doing their own work and coming to understand exactly how dangerous global warming was.

The record is very, very clear. Companies like Exxon put good scientists on this, those scientists gave highly accurate forecasts of what was coming, and those forecasts were believed. Exxon started building all its drilling rigs to compensate for the rise in sea levels, because they knew what was coming. What they did not do was tell the rest of us.

Instead, Exxon and its peers invested billions of dollars in a massive disinformation campaign that kept us locked in a completely phony debate about whether or not climate change was real. Both sides in this debate knew the answers from the beginning. But one of them was willing to lie in order to protect its business model. It may turn out to be the most consequential lie in human history, because it cost us 30 years that we could have been at work on this existential problem.

Now, finally, thanks to enormous efforts by activists to stand up to the fossil-fuel industry in a thousand ways – through divestment campaigns, stopping pipelines, going after their financing – the oil companies’ position has been weakened enough that they can no longer completely block rational action on climate change. Their ability to dominate public sentiment has evaporated. People see forest fire after forest fire, heat wave after heat wave. In the end, who are you going to believe: Exxon advertisements or your own lying eyes?

EB: I want to focus on the financial angle. In a column for the New Yorker last year, you suggested that a powerful way to dramatically alter the landscape for companies like Exxon is take away their credit card by divesting from fossil fuels, especially in the domains of banking, asset management, and insurance. What progress is being made on this front?

BM: Yes, we’ve mounted this huge divestment campaign to get institutions to sell their shares in the fossil-fuel industry. Over the last decade, that’s become by far the biggest financial campaign of its kind in history. I think, as of today, we’re at $14 trillion divested – universities and pension funds and churches have sold their fossil-fuel stock. Within the last few months, both the Pope and the Queen have joined in this effort. I don’t even know who’s left. I guess we still need Beyoncé – but beyond that, it’s gone well.

This has had a real effect. It’s weakened the fossil-fuel industry in big ways, which they’ve admitted. Shell, in its annual report last year, said divestment is becoming a material risk to its business. Thank heavens, because Shell’s business poses material risks to the planet.

But the next step is, as you say, an attack on the people who supply the money to the fossil-fuel industry – the cash pipeline that keeps them going. A broad coalition of groups have formed an effort called, which has been in operation for about eight months and has had much success. 

JPMorgan Chase got rid of its lead director because of his ties to the oil industry. BlackRock, the world’s biggest asset manager, announced that it will make climate change a central part of every investment decision.

This is happening because it’s clear that the fossil-fuel industry’s finances are not good. They’re being challenged every day by sun and wind, which are now the cheapest ways to supply the same product – energy – that oil and gas companies produce.

The same institutions are also under incredible pressure from activists. If you’re a bank, you can make some money lending to oil companies. But it’s not the core of your business. It’s maybe 5-6% of your business, and if it becomes more trouble than it’s worth, you might back away.

EB: In getting more organizations to divest from fossil fuels, how important are new greener accounting standards, financial disclosures, and other elements of sustainable finance?

BM: Those things are really important, because what we measure is what we do. 

However, there’s a tendency for green accounting standards and this sort of thing to turn into a “greenwash,” or to slow everything down. We don’t have time for that. At this point, it’s really important for institutions just to break ties with the fossil-fuel industry: to say, “You are an industry of the past that is trying to wreck the future, and we want nothing to do with you.”

As for other industries, it makes sense to be looking hard at how we make these activities – all of the things we need to do every day to keep the world moving, to grow food, and so forth – as green as possible. Standards are a huge part of that. As I say, what we measure tends to be what we do.

EB: Climate activists also have been using Bloomberg Terminals to monitor the activities of specific firms and industries. Where did that idea come from?

BM: That was the wonderful people at the Rainforest Action Network. About a decade ago, they bought a Bloomberg box so they could keep track of the financial world. Everybody else uses these to watch what banks are doing, who’s lending the most to whom, and so forth. 

Of course, RAN was interested for the opposite reason. They were tracking the worst banks in the world, the ones who were financing our destruction. That led to a series of annual “fossil fuel finance reports,” Banking on Climate Change, which revealed that JPMorgan Chase has provided a quarter-trillion dollars of financing to the fossil-fuel industry just in the years since the 2015 Paris climate accords.

We’re talking about climate denial on the largest and most expensive possible scale. But the people at RAN and at groups like Carbon Tracker are doing a good job of keeping people well apprised of who’s spending what. The intelligence capabilities of the environmental movement are much better than they used to be.


EB: Of course, government also has a big role to play in climate solutions. So, what about politicians’ often-cozy relationships with the fossil-fuel industry? How do we change that?

BM: That’s the key question. If you look at the US, the fossil-fuel industry basically purchased one of our two main political parties about 15 years ago, and left the other one terrified. That’s why there’s been no real climate action from Congress. 

The only solution is to try making it more painful for politicians to take money from the industry. None of these politicians are in bed with the oil industry because they love the oil industry. They’re there because the oil industry is powerful and can deliver goodies to them. If we make the industry less powerful and more politically toxic, that will shift the dynamic.

EB: That means the climate movement needs to focus not only on the science, but also on the lobbying and the corporate influence that these companies have in Washington, DC.

BM: Absolutely. People are working on all of those things. There’s an inside game and an outside game in everything, and there are a lot of good lobbyists. The environmental movement has volunteers trying to counter the power of the corporate lobbies, but to succeed, they need a big movement behind them. You can’t dispense with people in the streets.

EB: This November, the US will have one of the most consequential elections, arguably, in modern history. If Joe Biden defeats Donald Trump, what should his first 100 days of climate policymaking look like?

BM: I think he’s got a lot of good people beginning to work on this. What it should look like is something like the Green New Deal. There are things he can do on day one without congressional authorization, and he’s already said he’ll do some of them – for example, ending new permits for drilling and mining on public lands in the US. 

That’s important, because US public lands are the fourth- or fifth-biggest source of the country’s carbon emissions. He can do that by himself.

But then he’ll need to work with Congress to achieve the long list of things we should have been doing for the last three decades. That means figuring out how to carry out massive retrofitting of buildings, how to overhaul transportation systems, and how to work with farmers to reduce the carbon impact from agriculture. 

There’s a pretty good programmatic agenda now emerging. The House Select Committee on the Climate Crisis – which was set up after the Sunrise Movement and Rep. Alexandria Ocasio-Cortez camped out in House Speaker Nancy Pelosi’s office to demand action – has just produced a powerful 500-page document that contains a lot of these ideas.


EB: Then there is the rest of the world. China and many European countries are taking advantage of large-scale stimulus spending in response to the COVID-19 crisis by investing in clean-energy technologies. And many governments are attaching climate-related conditions to industry bailouts. What are your hopes for a green recovery at the global level?

BM: It will depend on the degree to which we do those things you mention. This is the last great opportunity we’re going to get, I think. The world will have to spend a ton of money to pull itself out of the current economic hole, and that money might as well be spent in ways that would also prevent the worst of the even bigger crisis that’s coming at us.

Countries that have realized this are beginning to take smart steps. You can see it at the national level in budgets, and you can even see it at the city level, where municipal leaders are saying, “You know what, we’re going to put a lot of bike lanes out there because we want our city to be different coming out of this.” Maybe we’ll see that in the US after November.

EB: One notable consequence of the pandemic is falling energy prices. And a number of major pipeline projects have been stymied both by protests and by deteriorating economic conditions. To what extent will the pandemic and its economic fallout force oil and gas companies to set aside new projects as well?

BM: The pandemic is putting pressure on the oil industry, and I think the trend is speeding up to the point where we will go past “peak oil.” In fact, it’s possible we already have. The financial future for the oil industry is bad.

Of course, we need to move quickly now. We can’t have a 40-year process of oil and gas companies dragging out their demise. It’s got to be much swifter than that to catch up with the physics of climate change. The pandemic did reduce emissions for a while when we locked down the economy, and that was a good reminder that individual habits play a role in all of this. We should be mindful of the fact that we were able to make big changes pretty quickly.

But the drop may not have been as sharp as some people expected. It was maybe a 15% reduction at its peak, which is a reminder of how much our emissions are hardwired into the system. We’ll have to go into the guts of that system, pull out the oil and gas, and replace it with sun and wind and a lot of insulation. Between that and some changes in habits, we can make the math work if we really, really go after it.

EB: That’s the big question, then. How likely is it that the world will pass the “timed test” that is climate change?

BM: Well, we’re not going to prevent climate change, because it’s already too late for that. 

The question now is whether we can stop it short of the point at which it cuts civilizations off at their knees. That really is, as you say, a timed test, and that’s the thing that makes it hard.

We have only about ten years of real leverage left. The Intergovernmental Panel on Climate Change said in October of 2018 that if we haven’t fundamentally transformed our energy system by 2030 – by which they meant cutting emissions in half – the chances of meeting the Paris climate targets would be nil.

And the Paris targets aren’t even that great. Even short of those targets, the temperature increases we’ve seen already are wreaking havoc around the planet.

We won’t escape undamaged and untraumatized. The question at this point is how bad it will be; the answer depends mostly on how fast we work. In the last ten years, engineers have done a spectacular job at bringing down the cost of solar and wind power. Renewables are now the cheapest form of power on Earth, which means that if we wanted to move fast, we could.

EB: That makes me wonder whether we should be so dependent on national governments in the first place. When the Trump administration announced that it would withdraw from the Paris agreement, many US cities said they would still adhere to it. Should we be approaching climate activism on a much more local level?

BM: I’m afraid we need to do it on every possible level – they don’t call it global warming for nothing. It would be easiest to do it at the international level, but the Paris accords were the closest we ever came to that. The task is so large that you have to have national governments involved.

But, yes, cities and towns and suburbs are where the actual changes are going to play out. Those are places to apply pressure, because the oil industry is less likely to have control over your local city council than over your member of Congress.

EB: Let’s conclude by reflecting on your 30 years fighting the fossil-fuel industry, the politicians who defend it, and the bankers who fund it. What lessons do you think the environmental movement’s future leaders should take to heart?

BM: Oh, I don’t know if they need any advice from me. The young people who are coming up in this work are doing an amazing job. It took us too long to realize that it wasn’t an argument about data and reason. It’s about money and power. And that’s what we’ve been engaged in this last decade or so.

It’s starting to bear fruit, but we’re going to have to keep it up. The fossil-fuel industry is enormously powerful, and now it’s cornered and desperate. In some ways, it’s probably more dangerous than ever.

Elmira Bayrasli is the co-founder and CEO of Foreign Policy Interrupted and the author of From The Other Side of The World: Extraordinary Entrepreneurs, Unlikely Places.

Bill McKibben, a scholar in environmental sciences at Middlebury College and a member of the American Academy of Arts and Sciences, is a co-founder of

The Communist Party of Every Last Inch of China

Crackdowns in places like Inner Mongolia are easier to understand when you understand the difference between threats to the state and threats to the regime.

By: Phillip Orchard

In July, Chinese authorities announced a three-year plan to phase out Mongolian-language instruction for grade schoolers in the nominally autonomous northern region of Inner Mongolia. Beijing had imposed similar changes on ethnic Uighurs and Tibetans in 2017 and 2018 as part of its draconian forced assimilation campaigns.

As a result, many of the 6 million or so ethnic Mongolians living in the province were understandably unnerved, seeing the move not as a well-intentioned policy aimed at promoting national unity and development, but rather as a form of cultural genocide – and a precursor of worse to come.

When the fall school term began on Monday, and students cracked open their new state-compiled textbooks to find them written in Mandarin, the result was what qualifies as all hell breaking loose in stability-obsessed modern China. Tens of thousands of people reportedly took to the streets throughout the province. Students and teachers walked out of schools – or, more accurately in some cases, climbed and pushed their way out after authorities tried to lock them in.

Videos posted on social media appeared to show several scuffles with police. Beijing responded Thursday by doubling down on its new policies and launching a fresh campaign to arrest troublemakers.

Dominating buffer zones such as Inner Mongolia is a core Chinese geopolitical imperative. It’s why the Communist Party of China is reportedly expanding its mass internment of ethnic Uighurs in Xinjiang, tightening the screws in Tibet, dismantling “one country, two systems” in Hong Kong, sparking royal rumbles in the Himalayas and putting the squeeze on Taiwan.

These moves, however, are only intensifying international pressure on Beijing at a time when it’s still grappling with the epochal political and economic crises created by the pandemic. So it would seem self-defeating to open up yet another front of unrest in the comparably stable Inner Mongolia. But Beijing doesn’t think it can manage these crises in any other way.

Around the Core

Five subordinate regions surround the ethnic Han core in China: Tibet, Xinjiang, Inner Mongolia, Manchuria and Yunnan. The regions are defined by impassable mountains, unforgiving jungle, vast desert grasslands and high tundra.

When the core has been united under central rule, these features have served as shields against outsiders, their inhospitable geography giving China as a whole the defensible borders and security the Han core alone lacks.

Between the Himalayas and the jungle uplands bordering Indochina, for example, southern China is protected and isolated by a true Great Wall. The west is a vast and dry expanse that would stretch thin any invading force. The North is the Gobi Desert and Siberia, bereft of major population centers.

The core is exposed to overland invasion only through a pair of narrow corridors closer to the coasts, through parts of Manchuria and across the Vietnam border, allowing China to concentrate its defenses. Otherwise, China can’t easily invade anyone over land, but nor can it be invaded.

Historically, however, when central authority over China’s buffer regions weakens, bad things tend to happen to China. Their geographies made them ethnically, culturally and economically distinct from the Han core, to varying degrees, and thus often outright hostile to the Han encroachment.

And whenever the core has succumbed to its internal pressures, devolving into regionalism, warlordism and disarray, the outlying buffer regions have been quick to go their own way. If occupied by or aligned with an outside power – e.g. the Genghis and Kublai Khan’s Mongol invasion from north of the Gobi, the Manchu in the 1600s, the Europeans in the 19th century, the Japanese and Russians a century ago – the Han core fractures, and dynasties fall.

So even before the CPC had put the finishing touches on its victory in the Chinese civil war in 1949, it began turning its attention to the buffers, waging a decadelong campaign to subjugate Tibet, Yunnan and Xinjiang (to say nothing of expelling foreign forces from Manchuria). And the modern CPC, particularly under Xi Jinping, routinely cites China's historical pattern as justification for its crackdowns on the outlying ethnic regions.

The party works diligently to keep the “century of humiliation” – the period between the 1830s and 1949 when the collapse of central authority in China led to it being carved up by foreign powers – in the collective Chinese consciousness. It must be neither forgotten nor repeated, or so the propaganda narrative goes, and the party will not cede to international interference in its efforts to fulfill its mandate of national rejuvenation.

It’s easy to dismiss Beijing’s historical justification for dominating the buffers as anachronistic. In theory, there are ways an outside power could use the buffers to threaten the Han core. India, for example, could try to dominate the Tibetan plateau and take control over China’s water supplies.

But in reality, the days of overland invasion in China are gone, to say nothing of foreign occupation. No outside power is strong enough to overcome both the geographic barriers and the firepower China is now able to position along its borders, even if one wanted to.

And there is no threat emanating from within the buffers themselves on par with the Mongols or the Manchu of past dynasties capable of supplanting the central government. The CPC has proved capable of enforcing its writ in the most remote, geographically fractured parts of the country with brute force and a willingness to adopt draconian practices like the “re-education” centers in Xinjiang.

It’s also relied heavily on more subtle and insidious measures, such as encouraging mass Han migration into the buffer regions, coopting ethnic institutions and civil society organizations like Tibetan monasteries, more tightly controlling school curricula, implementing a vast surveillance apparatus, and, of course, steadily narrowing the space for use of things like native tongues that can form the basis of a distinct identity.

Winning hearts and minds has been a comparably lesser priority, but Beijing’s massive infrastructure buildouts have helped integrate the outlying regions into the economy of the heartland and create at least some incentives to buy into the CPC’s plans for national prosperity

As a result, China’s buffers today are largely subjugated. The only real threat to the core from the periphery is Islamic terrorism. But beyond a pair of high-profile attacks – one at the gates of Tiananmen in 2013 and one in 2014 – even that has remained relatively contained to Xinjiang. A wave of self-immolations by Tibetan monks from 2009 to 2017 appears to have petered out.

Inner Mongolia, in particular, has been a relative success story in ethnic integration. Occasional clashes between ethnic groups and the state mostly died out decades ago. There is lingering discontent over the forced resettlement of hundreds of thousands of nomads, and occasional protests over environmental damage done by the state’s development initiatives, particularly mining, in the resource-rich region (where ethnic Han, which now make up more than 80 percent of the population, have enjoyed the lion’s share of the extraction spoils). But there’s no substantive secessionist movement, and signs that unrest is boiling beneath the surface are rare.

Beware the Buffers

China understands that its biggest potential threats today come not from the buffers but from outside powers uniting against it. And while there’s been more bark than bite from other countries in response to Chinese oppression, the party’s human rights record makes it easier for foreign leaders to rally public support for the painful measures required to truly challenge China.

They also make it more difficult for foreign businesses – ones China needs for employment, technology and diplomatic leverage – to stay in China. (See: persistent calls to boycott Western retailers that source materials allegedly produced by forced Uighur labor.)
So why does Beijing still fear the buffers – particularly one as sparsely populated and relatively placid as Inner Mongolia – so much that it would risk the backlash? The answer lies in the distinction between the interests of China as a whole and those of the CPC.

The CPC is not the 19th century Qing dynasty. The center is strong both in the core and the periphery. But while China is realistically safe from foreign invasion, it cannot fully shield itself from foreign influences. Combined with China’s immense internal pressure, these make the CPC’s hold on power inherently fragile. The party therefore has a low tolerance for any threat to social stability, even relatively minor ones.

Even a pair of unsophisticated attacks by Uighur militants – which Beijing suspected were getting ideological and material support from militants in Central Asia and beyond – was enough to spook Beijing into effectively putting an entire region on lockdown. The fear of the public losing faith in its ability to provide security, and its fear of militants derailing Belt and Road Initiative projects (which are also essential to maintaining economic stability in the core) through Xinjiang to Central Asia, was evidently too overwhelming.

Similarly, its fear of civil society or religious institutions being used to mobilize the public against it partially explains its desire to control Tibetan Buddhism. One of Beijing’s core fears with Hong Kong protesters, meanwhile, is the ways they could – perhaps with Western assistance – stoke instability on the mainland by funneling money and media to dissidents, airing the party’s dirty laundry, or shielding enemies of the state.

Beijing is expecting foreign pressure to intensify over the coming decades regardless of how it chooses to govern its periphery. Put plainly, in the face of mounting pressures, the party’s foremost priority is control. Undermining ethnolinguistic diversity – eroding ethnic identity as something that can supersede loyalty to the CPC – has proved to be a ruthlessly effective way to deepen its control. So too has starting the nation’s citizens on a steady drip of ideology and propaganda from a very young age.

The CPC is also betting that, at the end of the day, outside powers won’t really care all that much about human rights – at least not more than they care about strong economic or diplomatic ties with Beijing – and that its policies will succeed in the buffer zones.

And it may be right. What it’s allegedly doing in Xinjiang is horrifying. And yet, there’s been barely a whiff of meaningful outrage from governments from Muslim-majority countries such as Turkey, Pakistan and Indonesia.

To the extent that there has been backlash over Xinjiang, it’s mostly come in the form of Western sanctions – mainly targeting Chinese sectors like AI and other emerging technologies, which the U.S. and friends are keen to check for geostrategic, not human rights, reasons.

Matters as esoteric and plausibly well-intentioned as national curriculum standards in Inner Mongolia are hardly going to cause much of a stir abroad.

Either way, the central government seems to have concluded that pressure will eventually fade if its control is absolute. Internal movements lose support and wither. Foreign governments get distracted and move on.

Shareholders in foreign firms return focus to the bottom line. The CPC, in its mind, just has to hold on tight until they inevitably do – and hope that it doesn’t suffocate the nation in the process.

miércoles, septiembre 16, 2020



How (Not) to Fight COVID-19

Public-health experts who adhere to rigid rules for containing the pandemic are standing in the way of new technologies that can help us develop a more flexible approach. By focusing on those with the highest risk of spreading the virus, we can inflict less harm and contain the pandemic more effectively.

Peter Singer

singer186_Robin UtrechtSOPA ImagesLightRocket via Getty Images_coronavirusappcontacttracing

MELBOURNE/TUCSON – When COVID-19 first appeared, strict quarantine requirements and short, tight lockdowns would have been a small price to pay to keep it at bay. Now that the pandemic has infected over 26 million people in 213 countries and territories, we need to find new ways to control it that are not just effective, but also efficient.

To avoid inflicting more pain than necessary, we should target stay-at-home orders as precisely as possible to those who are most likely to pose a risk to others. This requires not just tracing the contacts of those who are infected, but also distinguishing which of their contacts are most likely to have been infected.

Here, technology can help. We should combine new apps that notify people when they have been exposed to a risk of infection with new testing methods that are fast, easy, and as readily available as pregnancy tests. Contact tracing cannot work without fast test results, but it can work well even if more rapid tests are not as accurate as the ones we have now. Apps can improve not only the scalability of contact tracing, but also, importantly, its speed.

Contact tracing, whether conducted manually or by app, recommends quarantine to the close contacts of those who test positive. In the United States, rules issued by the Centers for Disease Control and Prevention (CDC) say that 15 minutes spent within six feet (1.8 meters) of a person during their infectious period warrants a 14-day quarantine. Under these rules, we can expect an average of 59 close contacts per infected person. It is plausible that 2% of US residents are infected today. Multiply that by 59 and most people in the US who aren’t staying home already will need to be quarantined.

But viruses don’t obey the CDC’s simplified rules. You are in much less danger spending 15 minutes five feet away from someone at the edge of their infectious period than you are spending eight hours seven feet away from them at the peak of their infectious period.

In Arizona, Covid Watch, a nonprofit open-source software developer, is piloting a new app that seeks to estimate infection risk accurately, rather than reproducing CDC rules. The app recommends quarantine only to those above a certain level of risk, and will tell them, in a completely private way, how long to stay home and when to get tested.

There is nothing magic about 14 days of quarantine. If you don’t have symptoms five days after being exposed to the virus, your risk approximately halves. Your risk also falls (but not to zero) if you test negative, but countries where everyone in quarantine is tested are using the same fossilized 14-day rule as those that do not test. If, instead, we let people leave quarantine when their risk drops below the threshold we use to decide who should enter it, we can achieve greater safety at lower cost to individuals and the economy.

The threshold for quarantine can depend on where you are. Australia and New Zealand have relatively few cases and are aiming to get to zero as soon as possible. They can have stricter thresholds, quarantining people even for shorter exposures than 15 minutes, and requiring either multiple negative test results or longer quarantines after more dangerous exposures. In countries hit harder by the virus, too many quarantine recommendations could not only cause excessive economic and psychological harm, but also undermine the public support needed for the rules to be effective.

Whenever contact-tracing technology is mentioned, people raise concerns about privacy. The new apps that use the Google-Apple framework should put this worry to rest, because they have invented a way to warn you about a dangerous exposure without information about who you meet ever leaving your phone.

Our concern about companies like Apple is different. In the interest of making it difficult for users to guess who has put them at risk, successive versions of the application programming interface (API) controlled by Apple and Google have limited the maximum recorded duration of contact, and then restricted the amount of information available to quantify infectiousness. This reduces the app’s ability to distinguish between lower- and higher-risk contacts.

These misguided priorities place a possible and limited loss of privacy above the need to target quarantine recommendations to do the most good. There is a moral obligation to limit the harms from quarantine, as well as to stop the spread of a virus that will, unless effectively checked, cause hundreds of thousands more deaths and prolong lockdowns, with all the hardship that entails for billions of people. Such outcomes become more likely if quarantine is recommended indiscriminately and compliance drops as a result.

In a fast-moving pandemic, we must be ready to change rules quickly in accordance with local conditions, the latest epidemiological evidence, and the development of new technologies that help us reduce the spread of the virus. Public-health experts who rigidly adhere to outdated rules, or, as in Switzerland, even write them into law, are standing in the way of new technologies that can help us develop a more flexible approach.

By focusing on those with the highest risk of spreading the virus, we can inflict less harm and contain the pandemic more effectively.

Peter Singer is Professor of Bioethics at Princeton University and founder of the non-profit organization The Life You Can Save. His books include Animal Liberation, Practical Ethics, The Ethics of What We Eat (with Jim Mason), Rethinking Life and Death, The Point of View of the Universe, co-authored with Katarzyna de Lazari-Radek, The Most Good You Can Do, Famine, Affluence, and Morality, One World Now, Ethics in the Real World, and Utilitarianism: A Very Short Introduction, also with Katarzyna de Lazari-Radek. In 2013, he was named the world's third "most influential contemporary thinker" by the Gottlieb Duttweiler Institute.

The Delicate Task of Dealing With China’s Most Debt-Burdened Property Giants

Reducing leverage may be good for the companies, but cash-starved local governments are desperately dependent on their land purchases.

By Mike Bird

China’s central bank and housing ministry last month corralled developers to discuss lofty debt levels. / PHOTO: THOMAS PETER/REUTERS

Two of China’s most heavily leveraged developers are struggling in the stock market, and new attention from Beijing on their towering debt levels will put them under more pressure. But the central government’s efforts don’t address a key problem in the country’s economic model: Cash-starved local governments need indebted property developers to buy their land.

Shares in China Evergrande Group and Sunac China Holdings Ltd. are down 19% and 30% respectively this year. That partly reflects poor half-year results. In the first half of 2020, Evergrande’s net profits were cut nearly in half relative to the first six months of 2019, while Sunac’s grew by 6.5%, down from 57.1% year-over-year growth in 2019.

But the dismal stock performances also reflect new, unwelcome attention from Beijing: China’s central bank and housing ministry last month corralled developers to discuss lofty debt levels. According to state media, the meeting highlighted three “red lines” for developers to avoid: a liability to asset ratio of more than 70%, a net debt to equity ratio of over 100%, and cash to short-term debt ratio of less than 100%.

Evergrande and Sunac are the largest developers where debt metrics are worse than the reported redline level on every count.

What is perhaps most notable is that these poor debt metrics persisted this year even in the context of slowly growing or declining land banks. Evergrande’s land reserves declined by more than 50 million square meters in the first six months of the year, reaching a 3½ year low.

Sunac’s land bank is still growing, but at a far slower pace: The company’s land bank has increased by less than 6% since the end of 2019, to just shy of 250 million square meters. Between the end of 2015 and the end of 2019, the company bought land at a rapacious pace, its reserves of land growing by 750%.

On the one hand of course, that sounds like a positive thing. The companies are heavily indebted, so borrowing less to buy land seems like a good idea on the face of it.

But what’s good for the longer-term health of the companies may not be good for the system in general. Somebody needs to buy land from China’s local governments, with such sales making up around a third of their revenue. Since those municipalities shoulder most of China’s domestic government spending and remit taxes to Beijing, they cannot simply be starved of funds.

Sunac and Evergrande had been some of the largest purchasers of land in recent years. Without major changes to the Chinese fiscal framework, that burden will just be shuffled to other players.

Beijing’s focus on real estate makes it clear that the central government understands the threat that the sector’s leverage poses to China’s prosperity and stability. But it has yet to offer any meaningful incentives to improve the system: Merely telling Chinese developers they are too heavily indebted, when their voracious land purchases have been crucial to funding local governments, won’t work.