Philippa Kaur

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    Joe Biden’s Team of Consummate Insiders

    Joe Biden is a cautious man of the center. He has anchored the moderate camp of the Democratic Party for several decades. For many, he is a welcome antidote to the last four years of fire and fury, like a bite of white bread to alleviate the pain of a mouthful of habanero pepper. The reassurance Biden provides is that of the status quo ante. Donald Trump promised a return to an illusory golden age. Joe Biden offers a reset to the Obama years — a bronze age at best, but one that at least existed.

    As he assembles his foreign policy team, Biden is predictably drawing from past Obama administration figures. By embracing these middle-of-the-road figures, the new president is mindful perhaps of confirmation battles to come in a Senate that is either in Republican hands or so precariously in Democratic control that a single defection could prove ruinous.

    Joe Biden’s Revolving-Door Cabinet

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    Progressives are understandably upset at Biden’s reliance on establishment types among his first picks. And it’s true that the team so far has not been a transformative bunch. But progressives should not pay too much attention to personalities. Three other factors are more important: the overall policies of the administration, the shifting geopolitical context and the popular pressure that progressives can bring to bear on Biden’s emerging priorities.

    Reconstituting the Foreign Policy Elite?

    President Barack Obama was notoriously frustrated with the foreign policy elite in Washington that resisted some of his more ambitious initiatives, particularly around reducing the US military footprint in the Middle East. Obama encountered perhaps even stronger pushback from hawks in both parties who distrusted his nuclear deal with Iran, détente with Cuba and efforts to reduce the nuclear arsenal. Even though he wasn’t able to shift the focus of US foreign policy away from the Middle East, Obama did manage to win enough support from the foreign policy elite on Iran, Cuba and climate change.

    Biden so far is relying on that same foreign policy elite. His choice for secretary of state, Antony Blinken, has long been in Biden’s foreign policy orbit, first in the Senate and then as the vice president’s national security adviser. With his knowledge of European affairs and his fluent French, he’ll quickly repair relations across the Atlantic. He’s a firm believer in international partnerships, but he also has more interventionist leanings than Biden, having supported the military action in Libya and a more aggressive position on Syria.

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    Biden’s other picks have been likewise familiar. Jake Sullivan, his choice for national security adviser, was an Obama administration mainstay, as was CIA pick Avril Haines, who’d been a deputy CIA director. John Kerry, the climate czar, was Obama’s secretary of state. Linda Thomas-Greenfield, the nominee for the UN representative, was in charge of the Bureau of African Affairs under Obama. The proposed head of Homeland Security, Alejandro Mayorkas, was the deputy secretary of DHS during the Obama years.

    When it comes to foreign policy, there aren’t many leading candidates outside the establishment consensus who cast a critical eye on the Obama administration’s track record. Appointees of a more realist persuasion — Harvard professor Stephen Walt, for instance, or former CIA analyst Paul Pillar — might have nudged Biden to shrink the US military footprint overseas. But that presupposes an institutional commitment to reexamining American exceptionalism. Such realism is occasionally found among academics or former government officials, but seldom among those who still aspire to top positions in the foreign policy elite.

    Much has been made of the links many of these nominees have to the consulting firm WestExec that Blinken created with Michelle Flournoy, who’s in the running for Pentagon chief. Avril Haines is also a WestExecutive. The name itself tells you all you need to know about the connections of the principals: West Executive Avenue links the West Wing of the White House and the Eisenhower Executive Office Building. Technically not a lobbying firm, WestExec doesn’t have to disclose its client list, which only adds to its mystique.

    Let’s face it: This is the swamp.

    It’s not Trump’s version of an old boy’s network, which featured outright corruption, cronyism and nepotism. Rather, Biden is bringing back the more familiar inside game of influence-peddling, which is technically legal but morally suspect. WestExec is firmly part of that world. But then, what did you expect, that Biden would nominate people who’d spent the last four years volunteering for Habitat for Humanity rather than profiting from their elite connections? That’s not how Washington works.

    Biden is surrounding himself with people like himself: consummate insiders. They know how to interact with their foreign counterparts and will hit the ground running on day one of the administration. They will be competent, which generally is a good thing, except if they’re prosecuting a bad policy. Trump’s people could have done a great deal more damage if they’d actually been good at their jobs.

    Focus on the Policies

    Even skeptics of the Great Man approach to history — that those in power determine the course of events — often put inordinate emphasis on individuals in contemporary politics like presidents, cabinet officials and congressional leaders. Of course, these people have power and influence. But they all must operate within institutional constraints, in larger geopolitical contexts and according to the vagaries of popular pressure.

    Consider the examples of China and climate change. On relations with Beijing, I’d love to see a secretary of state who favors the kind of engagement necessary to avoid military conflict and wrecking the global economy. But the foreign policy consensus on China has shifted in the last five years — an evolution I describe here — so there’s no real engagement camp from which to recruit a secretary of state. Biden himself has leaned toward a more cooperative relationship. But during the presidential campaign, The Economist reports, “Biden had to be reprogrammed on China, says an adviser. It seems to have worked. Mr. Biden has since called Xi a thug.”

    Even if a China expert like Lyle Goldstein were to be appointed to a top administration position, he would be a lone voice. The best to hope for in this situation is Blinken’s preferred mix of containment, and engagement. “China poses a growing challenge, arguably the biggest challenge, we face from another nation state: economically, technologically, militarily, even diplomatically,” he told CBS. “And, you know, the relationship has adversarial aspects, competitive aspects, but also cooperative ones.” At least the secretary of state is open to win-win scenarios. A change of personnel absent a change in consensus will not go very far.

    On climate change, meanwhile, the policy consensus has shifted the right way within the Democratic Party toward greater recognition of the urgency of the crisis. Although Biden hasn’t adopted the language of the Green New Deal, his “clean energy revolution” comes pretty close. Appointing John Kerry to the new position of special presidential envoy for climate is a strong indication of Biden’s seriousness. Bringing Kerry into the Cabinet and giving him a seat on the National Security Council are even stronger signs.

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    This policy shift is far more important than the person who occupies the position. It is, of course, extremely useful that Kerry has the international contacts as well as the specific experience of helping to negotiate the Paris Climate Agreement. But he will have to answer not only to Biden, but to an energized environmental movement that has young activists at the forefront.

    He’ll also be operating in a different international context than the one in which he participated in the Paris negotiations. Although some countries continue to drag their feet on limiting carbon emissions — Brazil, Russia — the rest of the world is beginning to realize the enormity of the challenge. The Paris accords set an informal goal of net zero carbon emissions by 2050. A number of countries have made legally binding pledges to achieve that goal: the United Kingdom, France, Denmark, Hungary, New Zealand, Japan and South Korea.

    Sweden was the first country, in 2017, to set a legally binding goal ahead of 2050. It has pledged to be carbon neutral by 2045. Austria and Iceland have more informally set 2040 as their goal, Finland is looking at 2035, and both Norway and Uruguay expect to achieve the mark by 2030. Bhutan and Suriname are the only two countries that currently absorb more greenhouse gasses than they emit.

    Biden has pledged to make the United States carbon neutral by 2050. The domestic pressure will be on the administration to carry through on this pledge even as Kerry will face pressure on the international stage for the United States to do even better.

    Shifting Geopolitical Context

    As long as the Biden administration doesn’t need to push a treaty through the Senate, it will have a relatively free hand on foreign policy. It can rejoin the World Health Organization and the Paris Climate Agreement. It can lift restrictions on travel and remittances to Cuba. It can negotiate its way back into the Iran nuclear deal. It can extend the New START treaty with Russia. Republicans can squawk all they want. It will be their turn once again to feel helpless in the face of executive power.

    But the world has moved on from 2016. The Trump team has left messes pretty much everywhere it camped around the world. A two-state solution to the Israeli-Palestinian standoff has become ever more remote. The Iranians are understandably wary of US promises of reengagement, and the reformists might only be in power for another half year in any case, pending an early summer election. Europeans are increasingly skeptical of relying on the United States for anything. China is hedging its bets after several years of more hostile US policy.

    Biden’s foreign policy team will have to navigate this new world. Their intentions — good, bad, indifferent — may end up mattering very little as they come up against the new geopolitical realities. Moreover, other countries are making a whole new set of calculations based on the domestic discord that Trump sharpened over the course of four years. Dmitry Suslov is a professor of international relations at the National Research University Higher School of Economics in Moscow. He recently gave this prognosis of US-Russian relations in the Biden era:

    “Moscow expects Biden to spend the better part of the next four years mired in all-consuming domestic political battles, making any significant breakthroughs in the U.S.-Russian relationship impossible.

    Under these circumstances, Russia will try to avoid a new arms race or direct military confrontation with the U.S., but will hope for little else … Instead, it will prioritize strengthening ties with China and other rising powers like India.“

    One can easily imagine other countries — China, North Korea, Iran — making a similar calculation. Even putative allies like Japan or Australia are likely to loosen their grip on the American bandwagon over the longer term.

    From the naïve perspective of many Americans, the right cabinet nominees will push the Biden administration to do the right thing on a number of foreign policy issues. In reality, the world will often go about its business with scant regard to what anyone in the Biden administration says or does. Thanks in no small part to Donald Trump, the United States just doesn’t matter as much anymore.

    Progressive Pressure

    The Obama administration was pragmatic to a fault. When Obama endorsed nuclear disarmament, he was careful to say that neither his children nor perhaps even his grandchildren would see that goal realized. And when it came to passing the New START deal with Russia, Obama committed to a massive modernization of the US nuclear arsenal in order to secure Republican support for the treaty. If there had been a powerful, influential peace movement in the United States, Obama wouldn’t have had to curry favor with Republican hawks.

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    The Biden administration will have only so much bandwidth for foreign policy. The Democrats want to win a clear congressional majority in 2022 as well as a second presidential term in 2024. They have to deliver, first and foremost, on the economy. If progressives want to score wins on foreign policy, we need to frame key items on our wish list in domestic economic terms and turn up the popular pressure accordingly.

    First of all, our efforts to reduce carbon emissions have to be framed as a massive jobs bill connected to the creation of clean energy infrastructure. Our desire to avoid a Cold War with China begins with the removal of tariffs that ultimately hurt US farmers and manufacturers and continues with cooperation in clean energy that grows that sector in both countries. Finally, a détente with Cuba and a nuclear deal with Iran both give US businesses a leg up in both countries and thus also can have job-creation potential domestically.

    Yes, of course there are quite a few items on the progressive wish list that are not so easily connected to the US economy. Free global access to a COVID-19 vaccine doesn’t translate into more American jobs. But the Biden administration has to prove that it’s working on behalf of struggling Americans, even with its foreign policy. If it can’t make that case, the Biden administration won’t have a chance to undo all the damage of the last four years much less push the United States in a more progressive direction, regardless of how progressive members of the foreign policy team happen to be.

    *[This article was originally published by Foreign Policy in Focus.]

    The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

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    Agriculture Is India’s Ray of Hope in Time of Crisis

    As India completes 73 years of independence, agriculture has emerged as a mainstay of the economy. Despite the COVID-19 crisis, Indian agriculture is poised to grow by an estimated 3% in 2020-21. Shaktikanta Das, the governor of the Reserve Bank of India (RBI), has acknowledged that agriculture remains a “beacon of hope” at a time the economy is shrinking.

    The government has announced a new agricultural policy that has drawn both supporters and detractors. Farmer protests have broken out in parts of the country. About 50,000 have marched to New Delhi from the agrarian state of Punjab, objecting to the loosening of price, storage and sales regulations that have traditionally shielded India’s farmers from the free market forces.

    Land Reform Can Transform India’s Economy

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    As of August 25, the International Monetary Fund projected India’s real GDP growth to be 4.5% in 2020. This shrinking of the economy in a country with a growing population could lead to a major crisis. Already, jobs are scarce, industrial production has declined, services have suffered and demand has plummeted. Even after decades of independence, agriculture remains “the largest source of livelihoods in India.” As India gears up to celebrate Mahatma Gandhi’s 151st birthday, there is no better time than now to achieve the Gandhian vision of rural self-reliance.

    Blessing in Disguise

    COVID-19 has made rural areas more important than ever. On March 25, Indian Prime Minister Narendra Modi announced a nationwide lockdown. It took the country by surprise. Millions of urban migrant workers were left with little choice but to walk home to their villages. Carrying their meager household possessions and with their small children in tow, many walked hundreds of kilometers, suffering thirst, hunger and pain. Some died en route.

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    India’s Economic Survey 2016-17 estimated the “annual inter-state migration [to be] about 5-6.5 million between 2001 and 2011.” In 2020, this migration has been reversed. People who fled rural areas for urban jobs have returned home. Chinmay Tumbe, a professor of economics at the Indian Institute of Management Ahmedabad and an expert on migration, estimates that 30 million migrants might have returned to their villages since the lockdown began. The number could be as high as 70-80 million if reverse intrastate migration is accounted for.

    The reverse migration from urban to rural areas might be a blessing in disguise. Over the last few decades, urban migration has led to overcrowding of cities, the proliferation of slums and much misery for poor migrants. In cities, they have lacked community, cultural moorings and social safety nets. The massive migration to India’s cities was a result of failed economic policies that focused on megacities while neglecting villages. Several studies have found that at least 60% to 70% of the migrant workers who returned to their native places are unlikely to return back to the cities, at least not in the near future. The millions of migrant workers, whom I refer to as agricultural refugees, flocked to cities because the government’s economic policies kept them impoverished.

    A recent study by the Organisation for Economic Co-operation and Development in collaboration with ICRIER, a New Delhi-based think tank, concluded that Indian farmers suffered a cumulative loss of Rs. 45 lakh crore (over $600 billion) between 2000 and 2016-17 because of such policies. Subsequently, the NITI Aayog, a policy think tank of the government of India, admitted that, between 2011-12 and 2015-16, the growth in real farm incomes was less than 0.5% every year. It was 0.44% to be exact.

    Since then, the growth in real farm incomes has been near zero. With farm incomes growing painfully slowly and then stagnating, what else could be expected from the rural workforce but migration to cities where menial jobs as daily wage workers give many the only shot at survival?

    Despite the Hardships

    Despite these hardships, Indian farmers have toiled hard to produce a bumper harvest year after year. This has led to overflowing food stocks. Reports show that this abundance of food grains has come in handy. The government has been able to provide subsidized rations to over 720 million people during the four months of the post-COVID-19 lockdown. In addition, the government has been able to provide free rations to the needy.

    A buoyant agricultural output has hidden a severe agrarian crisis. Farmers get little money for their produce. With less money available in their hands, rural demand has dipped. This had led to a slowdown in the Indian economy even prior to the lockdown. In a country where the agricultural workforce accounts for nearly 50% of the population, the surest way to bolster the economy is to create more rural demand. This involves providing farmers with decent incomes.   

    The lockdown has increased downward pressure on farm incomes. It coincided with the rabi (winter crop) harvest season and resulted in a crash in demand for winter produce. Farmers suffered huge losses in the case of perishables such as vegetables, fruits, flowers, poultry, dairy and fish. Not all news is grim though. On May 15, the United States Department of Agriculture estimated that India is on course to produce “a record 295.7 million metric tons, with estimated record rice, wheat and corn production.”

    For the next kharif (monsoon crop) season, the sowing area coverage of summer crops has increased by 13.92% as compared to last year. With rains expected to be normal, and with a much higher area under cultivation, the kharif harvest will be bountiful just like the rabi one. It seems that in these times of crisis, agriculture alone provides a ray of hope in India.

    Aim for an Economic New Normal

    The coronavirus pandemic has come as a timely reminder of the limitations of dominant economic thinking. Its inherent bias and blind spots stand exposed. For the last two centuries and more, economics has sacrificed agriculture on the altar of industry. The dominant assumption is that industry drives productivity and growth.

    India has never quite managed to industrialize like, for example, the US or China. Still, it has kept farm incomes low and neglected public investment in agriculture for many decades. As per the RBI, this investment hovered around 0.4% of the GDP between 2011-12 and 2017-18. It is little surprise that agriculture has floundered in India.

    The time has come to change outdated economic thinking. Agriculture matters to India because it employs a majority of the country’s population. It provides food security to 1.3 billion people whose ancestors suffered repeated famines until a few decades ago. COVID-19 gives the country the opportunity to return not to normal, but to a new normal.

    The return of migrant labor to villages gives India the opportunity to reinvigorate its rural economy. The country must tap the socioeconomic wealth of rural enterprise, its diversity, and the traditional knowledge base. Prime Minister Narendra Modi’s vision of Atmanirbhar Bharat — a self-reliant India — can only be achieved through a focus on agriculture. A sharp focus, sensible policies and public investment can unleash growth not only in the sector but also in the country.

    The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

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    The Road Leading to the India-China Standoff

    The reason for the China-India standoff in the Galwan Valley may not be the oft-mentioned construction of the Darbuk-Shyok-Daulat Beg Oldie (DSDBO) road. The new thoroughfare improved Indian logistics in the Ladakh area, meaning that supplies and troops can be deployed with far greater speed. While the DSDBO might have irked China, Beijing has deeper …
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    Why Do Latinos Vote for Trump?

    Debates about the role of the Latino vote have become somewhat of a tradition in the United States. As campaigns begin to trace their strategies for the upcoming elections, the topic is brought up by political strategists, scholars and pundits who attempt to project the electoral behavior of these communities. Their concern is not unfounded. …
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    Why Is Foreign Investment Flooding Into India?

    For years, India suffered from what came to be called the “Hindu rate of growth” — a result of Jawaharlal Nehru’s policy choices. India’s first prime minister had a fascination for the Soviet Union and championed socialism. In India, this socialist economic model was incongruously implemented by a colonial bureaucracy with a penchant for red tape.

    Consequently, the license, quota and permit raj, a system in which bureaucrats commanded and controlled the Indian economy through byzantine regulations, throttled growth for decades. Once the Soviet model started collapsing in 1989, the Indian economy came under increasing pressure. A balance-of-payments crisis led to the 1991 economic reforms. Thereafter, India consistently grew at a rate of more than 5% per year until 2019.

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    During the COVID-19 pandemic, that growth has stalled. In the first quarter of India’s financial year that begins on April 1, the economy shrunk by a record 24%. Forecasts estimate that it will shrink further, although the rate of the contraction will decelerate considerably over the next two quarters. This contraction has left little elbow room for a government fixated on redistributive policies and fiscal restraint. This fixation is a hangover from the past.

    Historically, the Bharatiya Janata Party (BJP) has been more market-friendly than other political parties. In fact, the BJP broke new ground in the early 2000s by targeting and achieving a growth rate in excess of 8% when Atal Bihari Vajpayee was prime minister. Despite such high growth, the BJP lost the 2004 election. 

    Foreign Investment Hits Record Figures

    The BJP has not forgotten Vajpayee’s defeat. In particular, Prime Minister Narendra Modi has drawn a key lesson and focused on providing services to the masses. As a result, the government has focused on redistribution and taxation. It has put growth on a backburner. In 2018, the Modi government embarked upon what these authors termed Sanatan socialism, a policy that courts the poor with financial transfers and private provision of services. This strategy was vindicated by a resounding electoral victory in 2019.

    Today, COVID-19 is posing fresh challenges to the economy and to the Sanatan socialism policy. The growth slowdown in India is greater than in other emerging economies. The opposition has upped the ante and is blaming the government. Some business leaders are questioning the government’s lockdown strategy. This puts the BJP on the defensive regarding the economy.

    Yet even during such a growth shock, foreign direct investment (FDI) and foreign portfolio investment (FPI) have been pouring into India. Surprisingly, the FDI has hit record figures. In the first five months of this financial year, $35.7 billion has come into India. The FPI figures are also at an all-time high. In November, foreign investors plowed $6 billion into Indian capital markets, beating figures for Taiwan and South Korea. What is going on?

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    Three key facts explain this inflow. First, corporations from the US and the Gulf have bought big stakes in Reliance Industries, India’s biggest conglomerate. They are also buying shares in Indian companies. In effect, they are betting on future growth.

    Second, the Performance Linked Incentive (PLI) scheme has gained some traction. The purpose of the PLI is to boost electronic manufacturing in the country. So far, India has been too dependent on China. Current tensions along the border have led India to change tack and give financial incentives to companies who manufacture in-house. Players like Samsung, Pegatron, Foxconn, Wistron and AT&S have responded well to the PLI.

    Third, global corporations might be diversifying their supply chains to mitigate the risk of manufacturing exclusively or mainly in China. This strategy to tap alternative supply chains to China is widely known as China Plus One, and India might be benefiting from it.

    Modi has doubled down on an advantageous situation. Sovereign wealth funds, pension funds and organizations with over $6 trillion of assets under management attended a summit organized by the prime minister in the first week of November. In addition to Modi, India’s business leaders such as Mukesh Ambani of Reliance Industries Limited, Ratan Tata of the Tata Group and Deepak Parekh of Housing Development Finance Corporation pitched to these investors. More foreign investment might follow soon.

    What Lies Ahead?

    If investment is flowing in, what are its implications for the Indian economy? First, India will experience a growth spurt within three to four quarters from now. In recent years, private investment has been weak because of a banking crisis. Indian banks lent large sums to big borrowers who had no intention or ability to pay back their debts. This meant that they had no money or appetite to lend to bona fide businesses. A credit crunch ensued, investment suffered and so did growth. Increased FDI will reverse this trend and fuel growth by restoring investment.

    Second, India will experience job growth thanks to higher FDI. The entrance of new players and the revitalization of older ones will increase employment. The government has already instituted major labor market reforms to encourage manufacturing and other labor-intensive activities. 

    Third, increased employment could boost domestic demand, raising growth rates. These might materialize by the 2022-23 financial year, just in time for the next general election. The FDI flowing in right now might be boosting the BJP’s 2024 reelection chances.

    Finally, the record FDI is giving the Modi administration a leeway to achieve geopolitical goals. With cash coming in from friendly economies, the government is limiting economic engagement with nations hostile to India, especially in core sectors such as power, telecommunications and roads. Aimed largely at Chinese and probably Turkish entities, the move could benefit European, American and East Asian companies from Japan, South Korea and Taiwan.

    India’s new economic direction reflects the seismic shift in the global economy. The post-1991 era is over. As during the Cold War, countries are now mixing politics and business again.

    The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

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    Joe Biden’s Revolving-Door Cabinet

    After a weird hiatus in modern history lasting four years — more like the “Twilight Zone” than “West Wing” — the US under Joe Biden will presumably return to its stable center, which is proudly claimed to be “center-right.” The Biden camp thinks that defining the nation as center-right is an objective, lucid, realistic evaluation of the mood of the population. They base it on their interpretation of the results of the 2020 election that sent Joe Biden to the White House, reduced the representation of Democrats in the House and left Republicans in control of the Senate.

    The true Democrats — a group that excludes a small minority of fanatical progressives — consider themselves the center but also claim to be progressive. The true Republicans — moderates like John Kasich and Meg Whitman, who endorsed Biden — are just right of center. And they claim that the millions of Trump voters define the right. This means that to accomplish the goal of unifying the country and offering something to everyone across the spectrum, President-elect Joe Biden’s policy should logically be situated somewhere to the right of the moderate Republicans.

    The Low Expectations of Biden’s High-Mindedness

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    Though the media seems uninterested, it can easily be demonstrated that this official reading of the “mood” of the US is based on totally erroneous assumptions. The US population is clearly tired of a foreign policy based on endless overseas wars, even traumatized by it. A clear majority of Americans, irrespective of party allegiance, favor the principle themes proposed by the progressive left of the Democratic Party: Medicare for All, a wealth tax, an end to bailouts for the rich, a $15 minimum wage, free college education, the decriminalization of marijuana, to mention only those. The Democratic center that Biden represents has branded most of those positions extreme. And the Republicans will systematically oppose them.

    If a majority of the people clamor for progressive policies but the officials they elect oppose them, shouldn’t the leaders recognize a state of cognitive dissidence rather than assume that their own values represent the truth? When citing the “mood of the nation,” whose mood are they talking about, the people’s or the that of Washington insiders? Whose mood will guide the new administration’s policies?

    If the choices Biden has been making for his cabinet are any indication, the only mood worth taking seriously is that of Beltway insiders. An article in The New York Times by Eric Lipton and Kenneth P. Vogel, “Biden Aides’ Ties to Consulting and Investment Firms Pose Ethics Test,” looks at the recent activity of Biden’s cabinet choices reveals how the system is built. All of the identified candidates for significant posts are linked to the kinds of corporate interests that oppose the positions the US public supports.

    Worse, the authors analyze the structural corruption of the DC system of revolving doors. They focus on two companies: the consulting firm WestExec Advisors and an investment fund, Pine Island Capital Partners. The two firms feature “an overlapping roster of politically connected officials,” that include “the most prominent names on President-elect Joseph R. Biden Jr.’s team and others under consideration for high-ranking posts.” WestExec was founded by the future secretary of state, Tony Blinken, and a top candidate for secretary of defense, Michèle Flournoy.

    The authors bring up the fact that Biden’s nominees have refused to release a list of their firm’s clients. This would be the key to following up any suspicion of corruption. WestExec generously offered this explanation of their refusal: “As a general matter, many of our clients require us to sign nondisclosure agreements, which are a standard business practice to protect confidential information. We are legally and ethically bound by those agreements.”

    Today’s Daily Devil’s Dictionary definition:

    Legally and ethically bound:

    Required by a supreme law, doubly enforced (by a moral code among people of honor and commercial law) to place one’s loyalty to corporate masters ahead of public service.

    Contextual Note

    Welcome to the iron-clad logic of what may be called the rulebook of the elite. Slaves in the old South and elsewhere were physically bound to prevent their escape. Slaves to an all-powerful corrupt system are voluntarily bound by shackles of self-interested solidarity. The average person assumes that the wealthy and powerful have absolute freedom. They too are slaves.

    Some may wonder if any difference exists between the idea of being “ethically bound” by devious commercial agreements and the Mafia’s law of omertà. Both function as a law of silence designed to hide shameful activities. The difference is that the Mafia never claims their business is either ethical or legal. Saagar Enjeti addressed The Times article on his program for The Hill, describing how the influence-peddling system Blinken and Flournoy created works, how the consulting company and the hedge fund work together to disguise their corruption. He added that “the best part is it’s totally legal. It’s also corruption 101 … a more sophisticated way of handing somebody a briefcase full of cash.”

    Embed from Getty Images

    Lipton and Vogel describe the system in these terms: “WestExec’s business plan accommodates the revolving door between the influence industry and government by offering services that draw on government expertise without triggering lobbying laws that would require its officials to disclose their clients’ identities or specific issues before the government.”

    Democrats will undoubtedly point out that none of this compares with the obscenity of Donald Trump’s flagrant violation of the emoluments clause of the Constitution from day one of his presidency, to say nothing of the aggravated nepotism of his administration over the past four years. But the Democrats’ precious revolving door has been there for decades. Trump’s outrageous performance offered a singular advantage to any Democrat or Republican succeeding him. If they return to the more traditional, discrete methods of corruption, no one will blink an eye. Biden has been around DC lobbyists and their ilk long enough to understand the rules of that game.

    Historical Note

    The Times article is astonishing if only because it breaks with the newspaper’s perceived editorial stance of systematically developing Democratic talking points and avoiding any criticism of the party’s establishment. This time, the authors pull no punches as they describe what can only be called a flagrant sell-out to the corporate plutocracy by a president who didn’t even wait to assume his functions before putting the graft machine to work.

    Democrats will protest that, to quote Marc Antony on Brutus and his fellow assassins, “these are all honorable men” (even if today many of them are women). Lipton and Vogel mention the fact that the DC lobbyists they have spoken to “say WestExec has already come to be seen as a go-to firm for insight on how Mr. Biden’s team will approach issues of significance to deep-pocketed corporate interests.” Given the direct connections his appointees have with major defense contractors, the military-industrial complex will find itself in a more comfortable position than under Trump.

    The article nevertheless carefully avoids adventuring into the real and most troubling consequences of this revolving door. Biden’s group of political professionals has a shared professional and financial interest in keeping the massive arms industry ticking over. That doesn’t mean that war is imminent. It means that the risk of war and the threat of military intervention will continue to be a dominant tool not just of diplomacy, but also of the management of the economy.

    Trump had his own personal way of being what he claimed he would be during his first presidential campaign: “the most militaristic” president ever. Nevertheless, he thought military action abroad was a waste of money and sought to bring home the troops, but he also insisted that military build-up was vital. He relentlessly and needlessly bloated the defense budget. In comparison, Democratic presidents, at least since Lyndon Johnson, have tended to support both the build-up and the intervention.

    Biden’s future cabinet certainly appears to conform to that model. This cabinet will undoubtedly find itself “ethically and legally bound” to reinforce the US military presence across the globe. That’s what Democrats have been doing for decades. And that’s what the masters of the revolving door have been trained to do.

    *[In the age of Oscar Wilde and Mark Twain, another American wit, the journalist Ambrose Bierce, produced a series of satirical definitions of commonly used terms, throwing light on their hidden meanings in real discourse. Bierce eventually collected and published them as a book, The Devil’s Dictionary, in 1911. We have shamelessly appropriated his title in the interest of continuing his wholesome pedagogical effort to enlighten generations of readers of the news. Read more of The Daily Devil’s Dictionary on Fair Observer.]

    The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

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    What Ails Corporate Governance in India?

    Most businesses perish not because of strong competition or adverse macroeconomic conditions but because of cracks within. One such failing is weak corporate governance. For publicly listed companies, this often translates to controlling shareholders or “promoters” pursuing policies and practices in their own interests at the expense of minority shareholders. It turns out that companies with such promoters are at greater risk of crises and near-death moments in bad economic cycles. Those companies with better governance, where promoters act responsibly in the interests of shareholders, tend to do better during adversity. In fact, savvy investors now treat good corporate governance as an intangible asset.

    This can be best seen in India’s banking sector. In general, private sector banks have practiced better governance than state-owned ones. Consequently, their financial and operating metrics also tell a story of profitable growth with less asset quality issues than their public sector peers. No wonder that private sector banks trade at a higher valuation than public sector ones.

    360˚ Context: The State of the Indian Republic

    READ MORE

    Higher valuation puts these banks into a virtuous growth cycle. They are able to raise capital cheaply with less dilution. This reinforces their already high return ratios, which in turn continue to support a higher valuation. This self-perpetuating cycle has led to long-term compounding of shareholder returns. State-owned peers have fared much worse.

    Despite a large number of state-owned banks, the majority of credit growth in India is led by private sector banks. In fact, state-owned banks are struggling and the government is forced to merge them to ensure their survival. The success of well-run private banks demonstrates how good governance can lower a company’s cost of capital. That is not all. The resulting higher valuation also gives such companies immense pricing power in corporate transactions and talent management, widening their economic moat. 

    Multiple Issues

    India boasts of the oldest stock exchange in Asia, which is also the region’s largest. However, corporate governance in India still lags behind many other places like Singapore or Taiwan. India must understand that good corporate governance is the foundation of a lasting business. It builds investor confidence and has other benefits. India is short of capital and needs to earn investors’ trust. Without an infusion of capital, the Indian economy will fail to thrive. 

    Embed from Getty Images

    There are multiple issues that plague corporate governance in India. First is the lack of accountability among controlling shareholders. For example, promoters get away with appointing their friends, ex-employees and business-school classmates as independent directors with no one raising an eyebrow. Often, statutory auditors are given only one-year extensions to pressurize them to “comply” with management demands. Compliant auditors tend to persist for too long, developing far-too-cozy relationships with the very people they are supposed to keep an eye on. With no strong checks and balances, promoters are in effect incentivized to take advantage of minority shareholders. 

    Second is the slow and selective enforcement by the Securities and Exchange Board of India (SEBI), the country’s market regulator. Cases against the management’s missteps take years to resolve. SEBI generally hands out warnings or mild punishments. This could be because SEBI does not have enough resources to deal with a large number of cases, or it could be a lack of authority or competence. In certain cases, promoters are extremely powerful and politically connected. Given that regulators are political appointees, it is far from easy for them to ignore pressure from politicians, remain impartial, punish the powerful and deliver justice.

    Third is the fact that markets do not punish poorly managed companies for their misdeeds. India needs deeper markets with broader participation for true price discovery. Stock markets must be treated as marketplaces, not as forums for votes of confidence on the government’s economic policies. Because governments place too much importance on market performance, they have an incentive to keep them inflated. Indian corporate bond markets are even worse than stock markets in terms of participation. They are really accessible to only a handful of companies. 

    Fourth is the lack of transparency and weak disclosure requirements. This further perpetuates weak governance. The most detailed yearly disclosures by Indian companies are annual reports, which are often colorful marketing decks instead of detailed, factful and insightful documents, like the 10-Ks in the US. The quarterly earnings report for many companies is just a one-pager. This discloses summary items only without any breakdown of details.

    Earlier, manufacturing companies were mandated to disclose operational details pertaining to capacity, production and inventory. A few years ago, this disclosure requirement was done away with. Now, the only time companies make adequate disclosures only during their initial public offerings, which is a mere one-time event instead of an annual exercise.

    Bringing Sense to the Madness

    The only way to bring some sense to the madness in India’s public markets is to give more independence, power and resources to SEBI. At the same time, India must seriously penalize auditors and boards of companies for overlooking management follies. In addition, the authorities must incentivize and protect whistleblowers in a similar manner to developed economies.

    Some argue that complying with higher disclosure requirements might be too costly for smaller companies. That is not true. Furthermore, even the top 100 Indian companies default frequently on mandatory disclosures. Instead of reducing requirements for disclosures, India should lower costs of disclosures and compliance by using more technology.

    Another way to improve the health of India’s public markets is to increase market participation and trading volumes. Then good corporate governance would be rewarded while poor corporate governance would be penalized. Making short-selling a smoother affair might make the market deeper and more liquid. To increase depth in corporate bond markets, India must make lasting banking reforms. This involves privatization and granting more powers to the banking regulator.

    An unintended consequence of banking reform might be the improvement of India’s infrastructure. Currently, many state-owned enterprises in infrastructure sectors such as power are mismanaged because their bosses are able to buy time by restructuring their bank loans. Banking reforms will make that impossible and will transform this sector too.

    A combination of disclosure, regulation and enforcement can improve corporate governance. Reforms can also reduce conflicts of interests as well as create the right incentives and disincentives for Indian companies. These would inevitably lead to some short-term backlash, but the substantial long-term benefits are too significant to be ignored.

    The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

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    Is Michel Zecler France’s George Floyd?

    In recent weeks, France’s President Emmanuel Macron has accelerated his recent campaign to bolster his credentials as Europe’s most determined authoritarian leader. Citing France’s secular philosophical tradition, he appears to believe in the 18th-century cultural meme of the enlightened despot.

    Macron came to power in 2017 after painting himself as the inclusive centrist standing midway between the left and the right, whose parties were in total disarray. Like Joe Biden today, he promised to unite a nation that had suffered from a system of “alternance” (alternate rule). For decades, it had allowed the powerful political organizations on the right and left to repeatedly replace the other as France’s ruling elite, perpetuating a political class that had lost touch with reality.

    After three years of Macron, and because of the events last week, the president may be suddenly realizing the truth behind William Butler Yeats’ observation a century ago that “the center cannot hold.” Yeats was of course referring to Western civilization as a whole, not French politics. Macron wants people to believe he represents Western civilization. After claiming Jupiterian authority at the beginning of his reign, he has increasingly projected himself as the all-seeing arbiter of modern political truth. He claims to embody what he calls “the principles and values” of la république. His version of the Enlightenment has become the French version of Puritan America’s shining city on a hill.

    The Rapid Growth of Emmanuel Macron’s Authoritarianism

    READ MORE

    Macron may have noticed that the American politicians — notably Ronald Reagan and George W. Bush — who successfully marketed the shining-city meme to justify their militaristic authoritarianism, represented the right rather than the center. The right traditionally applauds xenophobic nationalism. But Macron still sees his brand as centrist. This obliges him to thread the needle by emphasizing secular universalism, traditionally approved by the left, as opposed to the right’s typically faith-based nationalism.

    In recent months, Macron has pushed two distinctly authoritarian themes: declaring cultural war on Islamists (meaning he has a beef with Islam itself) and reinforcing France’s already well-structured police forces to help the nation evolve into an enlightened police state. At the same time, he poses as the promoter of European unity, encouraging the EU to rally around his “liberal” values that notably include “freedom of expression,” redefined as the right — if not the duty — to blaspheme, so long as the target is Muslims, who clearly take their religion too seriously.

    Macron’s crowning achievement of the past week was the French parliament’s passing of the global security law, with its provisions to punish journalists and citizens who dare to film the police in the act of enforcing the always fair and just authority of the state. Those found guilty of filming the police face a €45,000 fine.

     Today’s Daily Devil’s Dictionary definition:

    Global security (Sécurité globale):

    The universally valid application of authoritarian methods of policing human activity in France and, why not, everywhere around the globe, since France is, as everyone should know, the source of universal moral values.   

    Contextual Note

    The vote in parliament took place the same day the surveillance video was released of the brutal beating by the police of Michel Zecler, a black music producer. The police booked Zecler for “violence against a public authority,” which, if successfully prosecuted, would have landed him in prison for many years. The three officers failed to notice the surveillance camera in Zecler’s professional premises, where the beating took place. The episode has proved severely embarrassing for Macron’s government. Although alive and safe, Michel Zecler could become the George Floyd of France. The law was already contested, but a massive protest on Saturday highlighted the symbolic importance of this incident. Others are likely to follow as the government hesitates on what tack to take.

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    Without the video, Zecler would have undergone the fate of so many other members of minorities harassed or brutalized by the authorities. The police officers claimed that he had assaulted them and attempted to seize their weapons. What judge or jury would believe Zecler’s word against theirs in a courtroom? Zecler has insisted on expressing his own respect for the police. He considers his attackers as three bad apples who do not represent the vast majority of law enforcement. What they do represent, however, is the workings of an arbitrary, racist and authoritarian system that Macron has chosen to reinforce and place beyond any criterion of accountability.

    The government finds itself in a quandary that in some way resembles the comedy of the Keystone Kops. The right-wing interior minister, Gérald Darmanin, a J. Edgar Hoover-type personality whom Macron appointed to demonstrate his commitment to authoritarian rule, immediately dismissed any reconsideration of the law. Within an hour, Prime Minister Jean Castex contradicted him, asserting, as France 24 reported, “that the government would review the wording of a controversial draft law that would place restrictions on citizens filming the police and publishing the images.” Castex immediately promised to set up “a commission to rewrite the text.”

    It didn’t take long for Macron’s own legislators who voted for the law to protest, calling the idea of appointing a commission to rewrite their law an insult. One complained of being treated like a “vulgar floorcloth” (serpillière), another like a doormat (paillasson). How embarrassing! The president had crafted the entire operation specifically for electoral purposes, following the results of private polling that showed a positive response to Macron’s promise to get tough on Muslims.

    Macron’s minister of justice, Eric Dupond-Moretti, speaking to BFM-TV, dared to undermine Macron’s and Darmanin’s logic: “It’s out of the question to forbid journalists from filming and informing the public.” He called for “amending a number of the law’s provisions.”

    Historical Note

    Macron has been heralding the 18th-century Enlightenment as an export rivaling champagne, Bordeaux or foie gras. This tells us a lot about the political philosophy of a man whose career oddly parallels Donald Trump’s. For both men, the presidency is the first political office they have been elected to. Theoretically, that should be good for democracy in two nations that have suffered from the corruption associated with government by political professionals whose idea of governing amounts to playing off vested interests against one another.

    Neither Macron’s center nor Trump’s solipsistic system have the capacity to mold reality to their purposes. But if both political mavericks managed to make it to the top, it is also because the traditional parties had themselves succumbed to a reality they could no longer control.

    Future historians will undoubtedly look back with curiosity at this strange period of history inaugurated by Osama Bin Laden in 2001, in which small terrorist groups and individuals managed to destabilize the immense power of the Western nations not through the damage they did do it directly, but through their ability to provoke self-destructive authoritarian responses from Western governments.

    Embed from Getty Images

    To be elected and respected, leaders had to show their electorate their determination to base policy on paranoia. In the meantime, the entire political class had lost its ability to analyze causes and effects, for the simple reason that they were focused on the task of balancing the interests of the powerful cliques — financial, industrial and military — that formed a club they aspired to belong to.

    Their governments’ growing authoritarianism had a two-fold effect: It punished its own citizens by restricting their liberty and reducing them to puppets in a system increasingly designed for a single purpose: to protect the status quo. Since terrorists were attacking the existing system, good citizens could accept the idea that it was the system that needed protecting, not the people themselves. 

    The second effect was more fundamental. The laws and political practices designed to protect the status quo augmented the power of private interests, increasing their wealth and control over the economy. This produced devastating social effects. The people — the supposed bedrock of democracy — were faced with an intolerable psychological dilemma. They were asked to adhere willingly to an increasingly arbitrary system that pushed them further and further into economic oblivion. Up to now, the system has worked because it seemed like the only system possible. But Yeats was right: There comes a moment when the center cannot hold. Sometimes it’s an obscure name that triggers it — a name like George Floyd or Michel Zecler.

    *[In the age of Oscar Wilde and Mark Twain, another American wit, the journalist Ambrose Bierce, produced a series of satirical definitions of commonly used terms, throwing light on their hidden meanings in real discourse. Bierce eventually collected and published them as a book, The Devil’s Dictionary, in 1911. We have shamelessly appropriated his title in the interest of continuing his wholesome pedagogical effort to enlighten generations of readers of the news. Read more of The Daily Devil’s Dictionary on Fair Observer.]

    The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More