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      Can an Inflatable Economy Survive?

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      US President Joe Biden’s approval ratings have remained consistently positive since his inauguration in January, inspiring hope among his supporters and the liberal media that he can fulfill at least some of his campaign promises. With extremely thin majorities in both houses of Congress, Biden has to be sure that the “moderates” in his party follow his lead. The term “moderate Democrat” designates the type of elected official who wins office in a Democratic district but possesses a mindset in line with conservative Republican ideology. In particular, such people tend to reject anything that reeks of excessive spending or may create pressure to increase taxes.

      But that is not all. One of Biden’s most intimate advisers during last year’s election campaign, economist and former director of the National Economic Council under President Barack Obama, Larry Summers, has been leading a vociferous campaign opposing Biden’s policies on the grounds of a lurking danger of inflation. He fears that the combined effect of COVID-19 relief and an ambitious infrastructure project accompanied by diverse social reforms will stretch the economy to the point of triggering uncontrollable inflation, the bugbear of traditional politicians. Biden may want to be remembered as the new Franklin Delano Roosevelt. Summers appears to be inspired by the thinking of FDR’s predecessor, Herbert Hoover.

      Hoover was the president on whose watch the 1929 stock market crash occurred. Historians have identified excessive leveraging and the inflation of asset prices as the main contributing factor to the 1929 crash that marked the end of the Roaring ‘20s. That sobriquet for a decade that followed World War I and left in its wake the Great Depression reflects the wild optimism that reigned at the time. The US had survived a “war to end all wars” and now embraced what President Warren G. Harding called “the return to normalcy.”

      Embed from Getty Images

      Proud of their role in ending Europe’s war, Americans — though deprived of alcohol that had been banned in 1919 by a constitutional amendment — interpreted normalcy as an open invitation to self-indulgence. Throughout that roaring decade, the stock market reached for the ceiling before crumbling to the floor in 1929.

      To avoid the mistakes that led to depression, politicians have since crafted their preferred ways of fending off imminent disaster. They called the latest trick, perfected after 2008, quantitative easing (QE), a fancy name for the printing of money gifted to banks and corporations skilled at keeping it out of the reach of ordinary people. Quantitative easing magically inflated asset prices with little effect on the consumer index, a phenomenon all politicians gloried in for two reasons. First, it avoided consumer blowback against price-tag inflation. That always puts voters in a bad mood, threatening prospects of reelection. Second, QE meant that there would be unlimited cash available to corporate donors to finance their political campaigns.

      The COVID-19 crisis arrived at a point where interest rates had fallen to close to 0% and in some cases had gone negative. The encouraging news concerning effective vaccines at the end of 2020 gave hope of a rapid return to Hardingesque normalcy. But today, things have become more complicated. The new Delta variant of the coronavirus threatens the optimists’ vision of a prosperous post-pandemic world. Add to that the raging debate about spending trillions to implement the long-delayed response to a crumbling infrastructure in the US and it becomes clear that many now doubt the likelihood of a smooth transition to a new normalcy, in which the market’s productive forces, guided by an invisible hand, will solve problems on their own while government spending is reined in.

      The question arises: Is it reasonable to print money to solve otherwise unsolvable problems? Larry Summers says it will provoke inflation. Janet Yellen, Biden’s treasury secretary, disagrees: “Is there a risk of inflation? I think there’s a small risk. And I think it’s manageable.”

      Today’s Daily Devil’s Dictionary definition:

      Inflation:

      1. The characteristic expansion of all types of bubbles during their formation and preceding the moment at which they burst
      2. A general characteristic of any system that seeks to build an elaborate superstructure of hyperreality to replace traditional human activities, institutions, economic relations and social behavior, whose elements range from methods of governing and ideological frameworks to acceptable forms of public rhetoric

      Contextual Note

      Nobel Prize-winning economist, New York Times columnist and loyal Democrat Paul Krugman confessed this week that “while I’m in the camp that sees the current inflation as a transitory problem, we could be wrong.” He thus acknowledges that the threat of inflation is real while reiterating an optimism similar to Yellen’s. Consistent with The Times’ editorial line, he aligns with the president’s political agenda of Biden in his quest to be remembered as a second FDR.

      Some have asserted that Summers’ bitterness about not having been handed the job of treasury secretary explains his loud complaining about the danger of inflation. But Summers may have missed the real threat facing the economy, just as he misjudged not only the situation in 2007 but even the Asian crisis in the 1990s. “In terms of judgment, in forecasting his record has been atrocious,” according to Joseph Stiglitz. But does that mean Yellen and Krugman are correct?

      Who’s to Blame for a Tanking Economy?

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      Theron Mohamed, writing for Business Insider, cites a number of experts who beg to differ, including Michael Burry, who famously predicted the 2008 crash and became the hero of the book and film, “The Big Short.” These market analysts see something far worse than inflation in the offing. According to Mohamed, “Michael Burry and Jeremy Grantham are bracing for a devastating crash across financial markets. They’re far from the only experts to warn that rampant speculation fueled by government stimulus programs can’t shore up asset prices forever.”

      Whereas Summers and Krugman are debating possible effects on the consumer index, Burry and Grantham are talking about a market meltdown, possibly a new depression. And they dare to designate the true villain: the obsession with shoring up asset prices.

      Historical Note

      A recent study documented by Yale Insights points to a historical constant that exists despite radically changing market and regulatory conditions. “Downward leverage spirals are believed to be one of the main triggers of the 1929 U.S. stock market crash,” professor Kelly Shue points out. “Leverage-induced fire sales were also a contributing factor to the 2007-2008 financial crisis in the U.S.” She adds that the same phenomenon underlay the Chinese stock market crash in 2015.

      Measures taken with the intent of avoiding a depression have paradoxically aggravated the conditions that may result in a monumentally devastating depression. The intention of the Treasury and the Fed to employ quantitative easing to “shore up asset prices forever” contains one significant error: the belief in “forever.” It parallels the belief of every administration since George W. Bush — now for the first time called into question by Biden — that American wars can also be carried on forever.

      The link between the two may be more direct than most people recognize. Military investment and activity have become the core of the US economy. Bloated defense budgets are today’s “pump priming.” Wars keep a cycle of investment alive that nourishes not only industries that directly benefit from defense procurement but more broadly the entire technology sector, which has become the locomotive of the civil economy.

      The problem may even sink deeper into the structure of the US economy. Robert Kuttner recently unveiled a “dirty little secret of the recent era of very low inflation.” He believes that “the prime source of well-behaved prices has been shabby wages.” Citing “outsourced manufacturing, gig work, weakened unions, and a low-wage service sector,” he notes that the economy’s very real gains from productivity growth have all “gone to the top.”

      When nearly all incremental wealth is tied up in assets that may come tumbling down at any moment, nobody is secure. After the crash, the rich will lament their losses and their inability to rebuild. Millions will lose their gig work and below-survival wages in real jobs with no hope for a rebound. And with COVID-19 still creating havoc and climate change more and more visibly aggravating its effects, the problem of inflation we should be most worried about is the verbal inflation of experts who believe their discourse is capable of shoring up a failing system.

      *[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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      in World Politics

      Has the Pandemic Boosted the Idea of Universal Basic Income?

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      The COVID-19 pandemic and the ensuing lockdowns have brought economic activity to a standstill. As a result, the livelihoods of people around the world have been threatened. To respond to the crisis, some governments have considered how to expand their social safety net. This is particularly because many people who work in the informal economy or those without jobs have been left with no financial support. In this context, the idea of a universal basic income (UBI) has resurfaced.

      Until recently, UBI was a utopian proposal relegated to academic discussions. But the pandemic has led to a debate about UBI as a potential tool of public policy. Now, several basic income programs are running around the world. Advocates see in UBI an instrument to build more resilient societies in the face of economic crises, income inequality and automation. Critics argue that governments should strengthen existing social programs instead.

      Can a Presidential Candidate Convince America on Universal Basic Income?

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      In June 2020, Spain offered monthly payments of up to €1,015 ($1,200) to the poorest families. Germany has implemented a small-scale pilot study to take place over three years. As part of the program, 120 Germans will receive monthly payments of €1,200. In the United Kingdom, a motion to introduce UBI was signed last year by more than 100 parliamentarians from across the political spectrum. At the start of the pandemic, the US government paid up to $1,200 to adults earning below $99,000 a year; a second stimulus package meant Americans received even more money. Thus, it seems that the crisis has shifted the UBI debate, at least in some European countries and in the US.

      However, in South and Central America, the debate on the desirability of UBI could “not take off, given the very severe fiscal constraints in most countries,” says Oscar Ugarteche, a Peruvian professor of economics. This is despite the Bolsa Familia (Family Allowance) experiment of Luiz Inacio Lula da Silva, the former Brazilian president. This indicates that the debate is partly country-specific and that the implementation of UBI may require “several national experiments, which are likely to influence corresponding variations in policy design,” according to counselor Andrew Cornford.

      Embed from Getty Images

      Indeed, UBI is not a one-size-fits-all program. Many questions need to be considered. For example, should payments be issued per household or adult? Should everyone be eligible for UBI or only those receiving low salaries? Should a universal basic income be temporary or permanent? How will it affect the willingness of people to find a job or to continue working? How would UBI be financed?

      The first step is to assess the feasibility and implications of UBI. To do so will require building on the experiences of small-scale studies, comparing their results and collecting further evidence. Thus, it could be a long time before governments and the wider population see such a program. That is unless the current health crisis can serve as a catalyst for socioeconomic change, contributing to make UBI part of the legacy of the pandemic. 

      By Virgile Perret and Paul Dembinski

      Author’s note: From Virus to Vitamin invites experts to comment on issues relevant to finance and the economy in relation to society, ethics and the environment. Below, you will find views from a variety of perspectives, practical experiences and academic disciplines. The topic of this discussion is: Where does the debate over a universal basic income stand in your region? Has the pandemic had an impact on discussions about UBI?

      “…ensure that everyone has a floor on which to build [their] life…”

      “World GDP in 2020 reached $90 trillion. To bring this number down to earth, it means that what we presently produce is equivalent to $3,800 a month per four-member family, amply sufficient for everyone on earth to live a dignified and comfortable life. A modest reduction in inequality and a flat redistribution to adults is sufficient to ensure that everyone has a floor on which to build [their] life. Huge financial resources lay idle in the world, growing not through productive investment, but financial rent. Taxing them might make these resources useful, stimulating demand and production at the bottom while drastically reducing poverty. Those who do not need the support might just be taxed back for the amount.”

      Ladislau Dowbor — economist, professor at the Catholic University of Sao Paulo, consultant many international agencies

      “…a certain confusion reigns here around the notion…”

      “In France, the debate concerning a universal basic income remains confined to academic spheres and to a few militant groups. The issue was, however, put in the political agenda by the socialist candidate in the last presidential elections (spring 2017), that is to say before the outbreak of COVID-19. This candidate achieved a very poor score. The crisis itself does not seem to have brought the problem to the fore. It is true that a certain confusion reigns here around the notion: Is it a real universal basic income, a negative tax, aid to citizens without resources or a subsidy to all residents? The imagination is lost, which does not help the political inscription of this notion, nor the serene economic discussion.”

      Etienne Perrot — Jesuit, economist and editorial board member of the Choisir magazine (Geneva) and adviser to the journal Etudes (Paris)

      “…with the COVID crisis, the idea is resurfacing…”

      “In June 2016, a proposal to introduce a universal basic income was rejected by three-quarters of Swiss voters and all Cantons. With the COVID crisis, the idea is resurfacing, but to gain traction, it will need to address two issues. The first is how to finance it, especially if UBI should be enough to live on, without having adverse incentives for work and the tax base. The second is why provide support to everyone instead of those in need? Even with the pandemic, the vast majority of the population have kept their income and thus do not need support.”

      Cedric Tille — professor of macroeconomics at the Graduate Institute of International and Development Studies in Geneva

      “…dissatisfaction with existing social-security systems…”

      “Dissatisfaction with existing social-security systems has recently led to greater attention to the universal basic income. Perhaps the best-known experiment is that carried out on a limited sample of recipients in Finland. In the recent municipal elections in the UK, almost 300 candidates of the Green Party were declared supporters of the UBI. Supporters stress the automaticity and universality of the UBI, which are believed to contribute to wellbeing and the ease with which beneficiaries are able to handle other problems of their lives. Critics stress the undesirability of the delinking of financial benefits from particular welfare services owing to its likely impact on popular support for these services. This is a debate that requires several national experiments, which are likely to influence corresponding variations in policy design, including other solutions such as negative income taxes or simply strengthened social security.”

      Andrew Cornford — counselor at Observatoire de la Finance, former staff member of the United Nations Conference on Trade and Development (UNCTAD), with special responsibility for financial regulation and international trade in financial services

      “…the proposal could draw away people from the labor force…”

      “During the pandemic, the Spanish left coalition government accelerated a plan called Ingreso Minimo Vital, expected to hand out between €462 and €1,015 per month according to the conditions of each household unit. This in part replaces or adds up to existing regional schemes. Until March 2021, 210,000 beneficiaries had their submission approved, of a total of 1.3 million requests. The unions and a few NGOs — some of them very efficient in relieving newly emergent poverty — denounced the slowness and administrative maze in the process. The Spanish unemployed still number 3.6 million (15.99%), plus about 750,000 in furlough schemes. The proposal, if successful, could draw away people from the labor force, whereas we need public-private policies aiming to the contrary.”

      Domingo Sugranyes — director of a seminar on ethics and technology at Pablo VI Foundation, former executive vice-chairman of MAPFRE international insurance group

      “…these measures would provide tangible help that women need right now…”

      “For myriad women in economies of every size, along with trailing income, unpaid care and internal work burden have exploded. While all are facing unprecedented challenges, women continue bearing the brunt of the economic and social fallout of COVID-19. Pandemic-induced poverty flow will also widen the gender poverty gap, which means more women will be pushed into extreme poverty than men, thereby revealing women’s precarious economic security. Introducing direct income support to women would mean giving cash directly to women who are poor or lack income that can be a lifeline for those struggling to afford day-to-day necessities during the pandemic. Further, these measures would provide tangible help that women need right now.”

      Archana Sinha — head of the Department of Women’s Studies at the Indian Social Institute in New Delhi, India

      “In Central America, it has not even been considered…”

      “In Mexico, the discussion went to Congress as a proposal in June 2020 and is unapproved with a cost of 1% of GDP. In Central America, it has not even been considered as it is too onerous for the limited public finances of those countries. In Brazil, Chile, Colombia and Argentina, among other countries in the region, there is public discussion on the desirability of UBI promoted by ECLAC and UNDP and has not taken off, given the very severe fiscal constraints in most countries. UBI would not reduce inequalities as people who do not need it would get it and families with many adults in one household would get a bigger share than those with children.”

      Oscar Ugarteche — visiting professor of economics in various universities

      “…at the center of the most dynamic debates…”

      “The pandemic triggered a socioeconomic downturn — already sharpened by the 2008 debt crisis — that raised economic uncertainty and widened inequalities. Fundamental rights and basic life parameters are at risk, especially for the poorest of the poor. Scholars, experts and citizens feel that it’s surely the time to voice their support for a series of socioeconomic initiatives — the universal basic income being at the center of the most dynamic debates. The southern Mediterranean countries and Greece prioritized the pandemic effects and kept aside for a short period of time the austerity measures. However, Greece is expected to turn back to the economic stability narrative, as described during the debt crisis, a fact that disempowers a possible engagement to the UBI debate. If this becomes — as it should — an international matter, weaker economies will follow.”

      Christos Tsironis — associate professor of social theory at the Aristotle University of Thessaloniki in Greece

      “…popularizing the idea of universal basic income in the US…”

      “Thanks, Andrew Yang, for popularizing the idea of universal basic income in the US. Yang ran in the 2020 Democratic presidential primaries, offering the “Freedom Dividend,” a UBI of $1,000 a month to every American adult, as a solution to the eventual replacement of (nearly all) humans with automation. He scarcely answered how his UBI was to be funded, a significant, but not insurmountable, problem for UBI’s proponents. UBI skeptics were somewhat silenced when the former and current administrations sent out modest checks to those who lost jobs in the pandemic, in a series of massive economic rescue packages. Maybe the rescue plans are a nascent solution to UBI funding: higher taxes, deficit spending and pump priming.”

      Kara Tan Bhala — president and founder of the Seven Pillars Institute for Global Finance and Ethics

      “Italy introduced two years ago the Reddito di cittadinanza…”

      “Italy introduced two years ago the Reddito di cittadinanza, with 1.2 million Italians receiving this first attempt of universal basic income (€560 on average), at the condition of refusing no more than two job offers. In two years, only a small number of citizens actually signed a contract, as most offers were short-term. On the other hand, Italy just presented its Piano Nazionale di Ripresa e Resilienza )PNRR), consisting in €235.1 billion. Roughly 27% of the resources of the plan will be devoted to the digital agenda, 40% to investments to counteract climate change and 10% to social cohesion. Particular attention was paid to the historically disadvantaged Mezzogiorno of southern Italy (€82 billion, of which 36 in infrastructures), with projects involving young people and women, groups hit hard by the socioeconomic impact of the pandemic.

      Valerio Bruno — researcher in politics and senior research fellow at the Centre for Analysis of the Radical Right (CARR).

      *[A version of this article was originally published by From Virus to Vitamin and Agefi.]

      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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      in US Politics

      ‘The Great Resignation’: June’s US jobs report hides unusual trend

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      US unemployment and employment data‘The Great Resignation’: June’s US jobs report hides unusual trendJune’s numbers suggest economy is continuing to recover at steady pace – but another pattern shows people are quitting their jobs Rashida Kamal in New YorkSat 3 Jul 2021 06.00 EDTThe Bureau of Labor Statistics reported on Friday that the US economy added 850,000 jobs last month. Hidden by this encouraging figure is the hint of an unusual trend: people are beginning to quit their jobs in extraordinary numbers.June’s numbers, in combination with last month’s figures, suggest that the economy is continuing to recover at a steady pace. The rate of unemployment was 5.9% and 9.5 million people remain unemployed.This latest update, along with projections of positive economic growth, was met with notable optimism from the White House and record highs on Wall Street.Joe Biden, in response to the report, was eager to point out the changing power dynamic of the labor market.“The strength of our economy is helping us flip the script. Instead of workers competing with each other for jobs that are scarce, employers are competing with each other to attract workers,” he said.In midst of this uneven recovery, and perhaps somewhat counterintuitively, others have noticed another pattern that may further elevate unemployment rates in the months to come: people are leaving their jobs.In a move that organizational psychologist Dr Anthony Klotz calls “the Great Resignation”, workers are beginning to quit jobs in the highest rates seen since the Bureau of Labor Statistics (BLS) began to collect this data in 2000.Number of people quitting their jobsThis trend, according to Klotz, is not only due to pent-up “resignation demand” – fewer people quit their jobs during the early, uncertain months of the pandemic – but also because people are simply feeling burnt out.According to a recent report from Microsoft, 41% of the global workforce is considering leaving their jobs. Though the intention to quit is not quite the same as the act of quitting, the most recently available BLS data shows that while there were 9.3m job openings in April, almost 4 million people had also quit their jobs that month.“The economy is seemingly doing very well. There are lots of job openings out there. So, if you’re an employee, that’s empowering for you because you have options,” Klotz said.Like many other factors of American life, the Great Resignation will not be immune to the racial and economic disparities that exist elsewhere. Socioeconomic differences will shape who is quitting and why.Sandra Sucher, Harvard Business School professor and author of the forthcoming The Power of Trust, noted that low-wage workers will be particularly motivated to change jobs with even marginally better offers.“There’s definitely a sense of if I can make more money doing this job, I’ll go for it,” she said.While there are concrete factors such as better wage and improved savings rates driving these choices, experts like Sucher and Klotz also believe that the pandemic, by bringing us face-to-face with our own mortality, has prompted a reckoning with how we balance work and life.“There was overall sense of malaise that came from the experience of working, almost regardless of who you were working for during the pandemic,” Sucher said.“You want a place that takes care of you and recognizes you as a human being.”With labor market conditions seemingly turning in favor of workers, it is possible that there will better opportunities available, at least for some. Klotz has been careful to note that quitting a job is ultimately a deeply personal decision.“What I don’t want is for people to see all this coverage of the Great Resignation and think, oh, this is a good time to put my job.”Whether or not it is the right decision will still depend on a myriad of personal and particular considerations.Dr Valerie Wilson, the director of Economic Policy Institute’s Program on Race, Ethnicity and the Economy (Pree), warned against treating any one month’s report with too much importance, “The caveat is that subsequent revisions or updates to the numbers could always change what that story is. We always know more in retrospect than we do in any at any single point.”Despite the White House’s positivity, what has remained consistently evident is the disparate impact of the pandemic on different groups of people. There continues to be marked differences how long it is taking for everyone but white men to return to their pre-pandemic rates of unemployment.Race and gender groups that are recovering quicklyRace and gender groups that are recovering slowlyThese differences, of course, have been entrenched throughout US history. In particular, Wilson is concerned with “occupational segregation”, which has historically meant that Black and brown workers are disproportionately represented in some industries and not others.“For example, we know that women – women of color in particular – are more likely to be in low-wage service and those industries are hit extremely hard during a recession,” she said.Industries, such as leisure and hospitality, continue to falter in regaining their pre-pandemic rates of unemployment.Industries that are still recovering slowlyTopicsUS unemployment and employment dataEconomicsUS economyUS politicsJoe BidenfeaturesReuse this content More

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      in World Politics

      How China’s Growing Dominance Will Impact Sino-Gulf Relations

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      The COVID-19 pandemic has sent shockwaves through energy markets. Since March 2020, lockdowns around the world have led adults to work remotely and children to learn virtually. Last year, according to estimates, global energy demand and investment fell by 5% and 18%, respectively.

      Yet as restrictions ease and economies pick up pace, the sense of normality that many hope for is one of the few luxuries energy producers cannot afford. In the race to comply with mounting political pressure to reduce carbon emissions while simultaneously securing their energy futures, the Sino-Gulf alliance may become the new center of gravity for global energy markets.

      Young People Are the Key to Reconciling China and Hong Kong

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      The pandemic has undoubtedly cast a dark shadow on energy. The International Energy Agency (IEA) recently revealed that energy demand will not return to pre-pandemic levels until 2023 in its most optimistic outlook or 2025 in the case of a delayed economic recovery. However, a return to pre-COVID demand does not necessitate a return to pre-crisis growth. Predicted growth in demand between 2019 and 2030 is estimated at 4% in the delayed recovery case, compared to 12% in a COVID-free world.

      Nevertheless, the pandemic has also highlighted the importance of a reliable and accessible electricity supply. The IEA predicts that the electricity sector, whose demand outpaces other fuels, will support economic recovery and account for 21% of global final energy consumption by 2030. This push for electricity is widely driven by the various global emission reduction targets, increased use of electric vehicles and heat sources in advanced economies, and greater consumption from emerging markets.

      Leader of the Pack

      Of the countries driving this growth, China is leading the pack and is predicted to be the main driver of energy demand over the next decade. Following his call for an “energy revolution,” President Xi Jinping has sought to reposition China as a key player in global energy markets. While the Chinese are currently the world’s biggest consumers and producers of coal-fired electricity, Xi’s pledge to make China carbon neutral by 2060 means that energy demands are increasingly being met via renewables.

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      China is predicted to account for 40% of global renewable expansion, leading in the realm of nuclear power, biofuel production and will account for almost half of globally distributed photovoltaic power. In addition to this, Chinese demand is also predicted to account for 40% of global electricity sector growth by 2030, up from 28%. It was as a consequence of East Asia’s growing appetite for clean energy that, in 2016, global electricity investment outpaced that of oil and gas for the first time in history.

      However, as with everything, there will be winners and losers. While electricity is on the up, sluggish global oil demand has led to falling oil prices. With demand predicted to plummet in the 2030s, there is a growing urgency for Gulf Arab states to diversify as oil becomes more of a burden than a blessing. Yet, in their hurry to claim their stake in the new energy world order, Gulf countries may begin to look east rather than west for a friend to rely on.

      China and the Gulf

      Sino-Gulf relations are not a new occurrence. As the world’s largest importer of oil and natural gas, these two commodities dominate Chinese trade relations and have been the basis of the Saudi-led Gulf alliance. The Gulf Cooperation Council supplies over 30% of China’s oil imports, with Saudi Arabia topping the list, accounting for over 16% of the oil import total. Nevertheless, in a world that is increasingly turning its back on oil, GCC states and China may increasingly look to each other to secure their respective energy futures.

      From the establishment of the China–Arab States Cooperation Forum (CASCF) in 2004 to the China–GCC Strategic Dialogue in 2010, Sino-Gulf relations have grown from strength to strength. As such, it was hardly supplying when China gave the GCC a starring role in its Belt and Road Initiative. Announced in 2013, this global infrastructure project that seeks to boost physical connectivity, financial integration, trade and economic growth has become the core pillar of China’s increasingly active foreign policy approach under Xi.

      During the Sixth Ministerial Conference of the CASCF in 2014, Xi spoke about the Gulf Arab states as “natural cooperative partners in jointly building” the BRI. This set the stage for a flood of multi-billion-dollar investments and agreements between China and the Gulf states, advancing the Belt and Road Initiative in the Arabian Peninsula and deepening economic ties.

      Chinese investment activity in the Gulf has followed the “1+2+3” Sino-Arab cooperation framework. This features energy cooperation as its central axis, investment and infrastructure, and accelerating breakthroughs in three high-tech sectors, namely aviation satellite, nuclear energy and new energy. However, there is no doubt that the BRI aims primarily to strengthen this central pillar of energy cooperation. Aptly described as “oil roads,” the initiative will enable China to establish the necessary infrastructure, transport and refinery facilities needed to secure its energy future and keep GCC coffers full.

      These ambitious plans will be of greater significance in the years to come. Despite the economic and energy market turmoil triggered by the pandemic, Sino-Gulf relations show no signs of slowing. Rather, the pandemic may have made way for a greater mutual dependence between China and the Gulf states. This is particularly true for the GCC, whose economic wellbeing depends heavily on the revival of global oil markets. China may prove to be the answer to Gulf ministers’ prayers, stimulating growth by providing a guaranteed revenue stream for the region’s main export, no doubt stabilizing GCC economies.

      Embed from Getty Images

      Beyond the energy sector, however, the two regions offer a wealth of investment opportunities that will likely deepen relations, particularly as the GCC economies realize their various diversification plans. The synergies between the GCC’s various “vision” agendas and China’s BRI are extensive, thus acting as a major point of collaboration. The two are already in the final stages of concluding the long-awaited China–GCC free trade agreement, a move that would no doubt propel economic cooperation and open the doors to a vast array of trading opportunities. Saudi Arabia has already taken active steps to consolidate this BRI-vision cooperation by signing various agreements and memorandums of understanding with China. Riyadh has since considered the BRI to be “one of the main pillars of the Saudi Vision 2030,” consequently making China “among the Kingdom’s biggest economic partners.” 

      Closer Partners

      It is thus clear that, willingly or unwillingly, recent global events have further pushed China and GCC into each other’s arms. Sino-Gulf relations can be expected to gain serious traction in the next few years, especially in the realm of energy cooperation, which is likely to continue to spearhead this strategic alliance as a sector of great mutual importance. Meanwhile, as China seeks to entrench itself in the Gulf, it may find itself caught in the middle of the regional power struggles that threaten stability, namely the Iran-Saudi rivalry. President Xi, however, shows no intent of mixing business with politics, as seen in his recent regional tour, which saw him visit both Saudi Arabia and Iran among others.

      Nevertheless, if China wishes to grow its presence in the Gulf, ensuring regional peace will undoubtedly become a priority for Beijing. Chinese neutrality may be exactly what is needed to defuse regional tensions and maintain a level of accord that keeps the feud below boiling point. Yet despite Sino-Gulf relations taking center stage in the near future, China will not be replacing the United States as the dominant foreign power in the Middle East any time soon. Beijing’s focus on economic rather than political matters makes China, to use the words of Prince Turki bin Faisal Al Saud, “not necessarily a better friend, but a less complicated friend.”

      *[Fair Observer is a media partner of Gulf State Analytics.]

      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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      in US Politics

      ‘When is this going to end?’: US factory town devastated by jobs moving overseas

      by

      “Disbelief. Distraught and traumatized.”Just some of the words United Steelworkers Local 8-957 president Joe Gouzd used to describe how he and hundreds of other workers felt after their 56-year-old pharmaceutical plant in West Virginia was shut down, sending between 1,500 to 2,000 jobs to India and Australia.The Viatris plant at Chestnut Ridge, just outside Morgantown, has been in operation since 1965, providing well paid jobs in one of America’s poorer states. And the timing of the closure has workers furious.“This is the last generic pharmaceutical manufacturing giant in the US, and executives are offshoring our jobs to India for more profits. What is this going to do to us if we have another pandemic?” said Gouzd.It is also causing a political row, with Congress accused of inaction and workers denouncing profits before people.“When is this going to end, losing American jobs? Every politician you hear, part of their political platform is: jobs, domestic jobs, domestic manufacturing, bringing jobs and manufacturing back to America,” said Gouzd.The offshoring of jobs has taken on new political weight since Donald Trump was elected. But his record in office was just as poor as his predecessors’.While the US does not track all jobs lost to offshoring, the labor department does count the number of workers who petition for help under a federal law designed to aid those harmed by trade.According to Reuters, during the four years of Trump, those petitions covered 202,151 workers whose jobs moved overseas, only slightly less than the 209,735 workers covered under Obama.Biden has proposed taxing companies that offshore jobs, but it remains to be seen whether he will be successful. Viatris may prove his first big test.The union is fighting to prevent the plant closure, asking elected officials to repurpose the plant via the Defense Production Act of 1950. It also criticized elected officials in Congress from ignoring their pleas for assistance “for no other reason than stakeholder return on investment dollars,” said Gouzd, who has also worked at the plant for 22 years.The local union branch represents about 900 workers. “Families are going to be forced to relocate, probably sell their homes, and relocate from West Virginia. Here we’re going to rid ourselves of 2,000 high-paying jobs in north central West Virginia, taking out $150m to $200m out of the local economy from lost income.”Less than a month after Mylan merged with Pfizer’s Upjohn to form Viatris, the company informed the union of its plans to shut down the plant and send the work abroad, as part of a $1bn cost-cutting restructuring plan. Mylan reported $3.9bn in profits in 2019, and over $1bn in quarterly profits before the merger. The plant is scheduled to end manufacturing on 31 July when the majority of the workforce will be laid off, with closure operations planned to end by 31 March next year.Carla Shultz, 60, worked at the plant for 13 years and is worried about not being ready to retire, but too old to return to college or be able to find another job with comparable wages and benefits.Through her job, Shultz was able to receive chemotherapy tablets for her mother; the same medicine would have cost her family $7,000 a month without benefits for her job. During the pandemic, her mother caught coronavirus and is currently hospitalized, on oxygen, and requiring round-the-clock care.“It added a lot more stress to our already stressful situation caring for family. I also take care of my three grandchildren, two of whom are school-age. But they’ve been home a lot while schools were closed because of Covid,” said Shultz.“My sister and I take turns caring for my mom. I help in the daytime after I get off work catching a nap when I can and then keeping my midnight shift schedule. It’s not easy keeping up, but we do what we have to do for our families.”Chad McCormick, recording secretary of USW Local 8-957, has worked at the plant since 2001, but now expects to be forced to find a much lower paying job to remain in the area, where his family has lived for decades.“I’ve been here for over 20 years. I’ve since gotten married, had three children, and built a house,” said McCormick. “It’s just devastating, and a lot more people than I expected are now looking into relocating.”The West Virginia legislature passed a bill calling on governor Jim Justice and Joe Biden to save the jobs. Senators Elizabeth Warren and Marco Rubio introduced the Pharmaceutical Supply Chain Review Act to conduct a study on the American over-reliance on foreign countries in pharmaceutical industry, but neither West Virginia senator has sponsored the bill.According to Gouzd, Republican senator Shelley Moore Capito has ignored pleas to work with Biden officials to save the plant, and Democrat Joe Manchin, whose daughter served as Mylan’s chief executive until she retired in 2020, has also ignored their requests to get involved and help.Viatris cited the plant closure as part of a global restructuring initiative, and said it is exploring alternatives outside the company network.“The phasing out of manufacturing operations in Morgantown was a decision the company did not take lightly and in no way reflects upon our genuine appreciation for the commitment and work ethic of the employees at Chestnut Ridge,” it said. More

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      in World Politics

      How the G7 Intends to Build the World Back Better

      by

      The US Senate recently demonstrated that the only adhesive capable of uniting the two parties is a good, old-fashioned enemy. Although the Democrats and Republicans continue to bicker over the Biden administration’s infrastructure legislation, they achieved rare accord in passing a major technology bill that directs investment into key sectors of the economy.

      Why the sudden bipartisanship? China. The $250 billion investment into semiconductor production, scientific research, space exploration and the like is intended to decrease dependency on inputs from China and maintain a US lead in critical technologies.

      Does the World Need to Contain China?

      READ MORE

      The Biden administration is now eager to replicate that experience on the global level. At last week’s G7 summit in the UK, the United States again used China as a threat to forge transnational solidarity around a global infrastructure deal. Despite some misgivings from Germany and Italy, President Joe Biden managed to steer the group toward something called the Build Back Better World (B3W) initiative, which incidentally sounds a lot like Biden’s 2020 campaign slogan. But that slogan itself echoed a catchphrase adopted by the UN in 2015 to characterize its response to humanitarian disasters. So, B3W can sound both authentically multilateral and distinctively Bidenesque at the same time.

      In the face of the global tragedies of the COVID-19 pandemic and climate change — not to mention the sustained attacks by Donald Trump and other right-wing populists on the global order — it was entirely appropriate for the G7 to come up with a bold approach to addressing global economic inequities in a sustainable manner. Alas, B3W raises as many questions as it addresses.

      For instance, is B3W more than just a fancy name attached to already committed financing and existing institutions like the Blue Dot Network? Isn’t the World Bank supposed to be closing the infrastructure gap between the have-lots and the have-littles? And shouldn’t China be a collaborator in this effort rather than its chief antagonist?

      Improving Upon Belt and Road?

      China launched its Belt and Road Initiative (BRI) in 2013. Its aim has been thoroughly Keynesian: to pump money into the economies on China’s borders — as well as some further away — in order to sustain China’s own economic growth. The more these economies are dependent on Chinese financing, Chinese inputs and Chinese know-how, the more they will ultimately contribute to China’s global economic dominance.

      Is China creating some kind of global alternative to capitalism like the Soviet Union’s old Comecon? No, Beijing is thoroughly capitalist in its orientation, though it pushes a version that rubs many laissez-faire purists the wrong way.

      Embed from Getty Images

      Is China determined to use BRI to consolidate an anti-democratic bloc of nations? Although Beijing may well prefer to deal with more predictable partners — and democracies can elect some pretty outrageous wildcards — it is ultimately agnostic about the political governance of its BRI collaborators. There are 140 nations participating in the BRI, including 18 countries in the European Union. For every Belarus and Cuba, there’s an Estonia and a Chile.

      Well, then, isn’t China using BRI to build a kind of covert military bloc? Critics, for instance, have pointed to the deal China negotiated with Sri Lanka around the port it helped to finance in Hambantota. Struggling with loan repayments in 2017, Sri Lanka signed a 99-year lease arrangement with a Chinese firm. Couldn’t Beijing now turn this port into a military base?

      In fact, Sri Lanka continues to own the facility, though the Chinese commercial firm operates much of the port and thus gets much of the profit. Despite US government claims, China is not and doesn’t seem to have any intention of conducting military business at Hambantota. Two Chinese subs entered the port before the 2017 deal, and Sri Lanka has barred such visits ever since.

      The Sri Lankan example has often been used as exhibit A in the case of China’s use of the “debt trap” to advance its global objectives. According to this scenario, Beijing extends loans through BRI, the target country defaults, and China grabs the assets. It sounds plausible. Except that there’s no evidence that China actually operates that way, including in the Sri Lankan case.

      The Belt and Road Initiative has many flaws, to be sure. It has facilitated large-scale corruption, for instance, in Malaysia. It has promoted dirty energy, including 240 coal projects and billions of dollars in oil and gas investments.

      But it’s not as if China is the only country with dirty hands. Corruption is endemic in infrastructure projects, accounting for as much as 45% of construction costs. And when it comes to fossil fuels, the US was the largest oil exporter in the world last year as well as the fourth-largest exporter of coal.

      So, why did the G7 think it was so important to come up with an alternative to China’s Belt and Road rather than work with Beijing to build back better together?

      Beat ‘em Rather than Join ‘em?

      The United States likes being number one. The success of Trump’s political campaign and his various hyperbolic slogans testify to the endurance of American exceptionalism. The stridency of these exceptionalist claims, however, introduces a measure of doubt. Front-runners who are anxious about their status generally compensate by raising their voices and thumping their chests harder. In this way, we betray our simian origins.

      China has challenged the US status by growing what is now, measured by purchasing power parity, the world’s largest economy. Thanks to its performance in 2020 during the pandemic, China will likely become the world’s undisputed number one economy sometime around 2026.

      But China is also challenging the global economy by establishing its own institutions parallel to the World Bank and the International Monetary Fund (IMF), like the Asian Infrastructure Investment Bank. The BRI, by encompassing so much of the world, is just the kind of grand initiative that number-one economies set up to maintain their dominance.

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      The United States is not so enthusiastic about relinquishing its top status. Ditto all the countries that have hitched themselves to the US economic locomotive. With Trump out of the White House, Washington has eschewed machismo in favor of multilateral and moral arguments against the Belt and Road Initiative: China is throwing developing countries into debt dependency; China is bolstering the power of authoritarian leaders; China is fostering unacceptable work environments including forced labor.

      Those criticisms ring hollow. The developing world is already in debt dependency to the G7 and its financial institutions. The World Bank and IMF worked closely with dictators for decades. Western corporations long turned a blind eye to horrifying working conditions in the countries where they set up operations.

      And the $40 trillion infrastructure gap between have-lots and have-littles that B3W is supposed to bridge? It’s because of this gap that China was so successful in reaching out to the Global South in the first place. In charge of the global economy since 1945, the richest countries failed miserably to achieve a modicum of global economic equity — because that was never really their goal.

      But Can It Help?

      For the sake of argument, let’s put all this history aside. Regardless of the mixed intentions of its backers, can B3W actually help countries that want to catch up to the rest of the world in a way that doesn’t further accelerate the climate crisis?

      The experience of the Blue Dot Network is not encouraging. Established by Japan, Australia and the US in 2019 — after a series of failed infrastructure initiatives like the Asia-Africa Growth Corridor and the Trilateral Partnership — the Blue Dot Network essentially establishes a Good Housekeeping seal of approval for infrastructure deals that meet more stringent requirements around governance, finance, labor conditions and the like. But here’s the problem: The Blue Dot Network doesn’t actually provide credit-hungry countries with access to any new pots of money.

      B3W looks like it might be a similar example of grand rhetoric and few resources. It is articulating the same kind of criteria for investments as the Blue Dot Network. As for the financing, the G7 has promised to mobilize private sector funding — in other words, they aren’t ponying up any money of their own. This is no surprise. The Biden administration is hard-pressed to pass its own domestic infrastructure bill. Fat chance it can get Republicans on board to send similarly earmarked funds abroad, even under the rubric of challenging China.

      Nevertheless, the White House is talking big: “B3W will collectively catalyze hundreds of billions of dollars of infrastructure investment for low- and middle-income countries in the coming years.” The word “catalyze” sounds very dynamic, but frankly, it’s just a fancy way of saying: We will beg and wheedle and maybe twist an arm or two, but frankly we can’t promise much of anything. As Reuters wryly concluded in its article on the initiative, “It was not immediately clear how exactly the plan would work or how much capital it would ultimately allocate.”

      The bottom line is that the world desperately needs a green B3W. It needs to find a way to close the infrastructure gap by providing the funds and financing for the developing world to leapfrog into a clean energy future. At the moment, the Belt and Road Initiative does not do that. And neither does B3W.

      So, how about it, Washington and Beijing? Why not get together to see if you can turn two wrongs into a right and collaborate on a global Green New Deal?

      *[This article was originally published by FPIF.]

      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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      in World Politics

      Should Billionaires Be Taxed Differently?

      by

      As a columnist for The Washington Post, Megan McArdle works for the Post’s owner, a man named Jeff Bezos. Over the past two decades, McArdle has had numerous other prestigious bosses. She boasts a solid career in high-level journalism, having worked for The Atlantic, Newsweek, The Economist and Bloomberg, among others. Bloomberg View’s executive editor, David Shipley, once called her “an extraordinary writer and thinker.”

      Early on, in 2001, McArdle broke onto the scene as the author of a blog, “Live from the WTC,” at a time when most people were not yet addicted to the internet and few even knew what the word blog meant. Making her mark as a blogger required one of two talents: the ability to come up regularly with remarkable scoops and cutting insights, or developing a shrill, brutally opiniated voice capable of irritating the right class of adversaries and resonating with a crowd of equally opinionated followers. McArdle long ago branded herself a libertarian. That quite naturally helped to define her as the second type of celebrated blogger. She has consistently lived up to that billing, even as an opinion writer for the revered Washington Post.

      ProPublica Reveals the US Is a Tax Haven

      READ MORE

      McArdle has now weighed in on ProPublica’s blockbuster scoop last week concerning the tax returns of the 25 richest Americans. New York Times editor Spencer Bokat-Lindell prudently commented: “Depending on your point of view, it was either one of the most important stories of the year or an invented scandal.” The Times author exposes the significant complications when wishing to address the issue of taxing the super-rich. He coyly conceals his own point of view. 

      In her column in The Washington Post bearing the title, “Think Twice Before Changing the Tax Rules to Soak Billionaires,” McArdle doesn’t hesitate to trumpet her point of view urbi et orbi. “Think twice” of course means: Read my article and stop complaining. She suggests that taxing the rich more would be undemocratic because it would mean treating them differently from other citizens. That would be an injustice. Her jibe, “soak billionaires,” suggests that taxing them would be torture similar to waterboarding.

      Then McArdle offers this: “We talk a lot about rich people ‘paying their fair share,’ but we’re rarely clear on what exactly we mean by that.”

      Today’s Daily Devil’s Dictionary definition:

      Fair share:

      An amount corresponding to the implicit rules of equitability that apply in any society that values solidarity, meaning that no such amount can be determined in a society with an ideological bias against solidarity

      Contextual Note

      McArdle may have been inspired by former UK Prime Minister Margaret Thatcher who, to the rhetorical question, “Who is society?” gave this response: “There is no such thing! There are individual men and women.” That means fairness is in the eye of the beholder. It also means all’s fair in love and war… and tax avoidance. In any case, the two ladies appear to share a similar train of thought. In the idea of “fair share,” it isn’t the concept of “fair” that upsets either of the ladies. It’s the idea of “share.” In McArdle’s mind, the noun “share” simply designates a unit of ownership in a corporation’s stock. Society, in this sense, is hardly different from a community of shareholders, some owning many more shares than others.

      The columnist speculates about what it would mean if the wealthy were taxed on the added value of the stocks they own. She imagines a melodramatic scenario in which “they might be forced to sell off stock of a business they spent decades building.” Shares cannot be shared, so they must be sold. That would be downright tragic because the builders might just stop building and then where would society be? But having made her melodramatic point, she doesn’t even try to imagine how such things would play out in the real world. Like Kurtz in Conrad’s “Heart of Darkness,” she simply invokes “The horror! The horror!”

      McArdle’s shock at the idea of entrepreneurs losing their life’s work makes no sense for two fairly obvious reasons. The first is theoretical, the second pragmatic. In theory, a wealthy person could be forced to sell stock to pay a percentage of capital gains. That person’s share of the company would be correspondingly diminished, but in almost all cases only slightly, since the tax would only represent a percentage of the gain in value. Owning 10% of a company valued at $1.5 billion is better than owning 12% of a company valued at $1 billion. In the long term, having to sell those more shares could end up reducing the person’s future wealth. It would not reduce their current wealth.

      Embed from Getty Images

      But because real billionaires tend to be well advised and own portfolios that allow them a wide range of options, they never make such sacrifices. Whether it is to buy a yacht or pay taxes, they rarely if ever liquefy any assets. They borrow against those assets, which has the added value of reducing their declared income on which they would normally pay taxes.

      For most people, income represents the money they must earn to survive or maintain a lifestyle. Because wealthy owners of businesses decide on their own remuneration, they avoid having a substantial taxable income by living lavishly off money they borrow from a bank and pay back with interest. The interest is the only “penalty” they pay for their prodigality. It is nowhere near what they would pay in taxes. It’s an ideal solution. Banks love lending money to the rich because there is zero risk. The wealthy avoid taxes. Their tax lawyers and accounts earn a decent fee. The society of ordinary taxpayers reaps no benefit other than whatever trickles down from the high profit margins of those who sell yachts and luxury goods.

      McArdle doesn’t want to know about such systemic truth. Instead, she returns to her imaginary vision of a system obsessed by its envy of the rich and intent on invoking the idea of fairness to constrain their freedom. She confesses that, “given a choice between letting billionaires spend fortunes reaching for the stars, or destroying those fortunes so that the rest of us don’t have to look at them, then personally, I’ll take the rockets.”

      Historical Note

      The rockets that Megan McArdle refers to are those that her boss, Jeff Bezos, is building thanks to his astronomic fortune, some of which he has invested in his space venture, Blue Origin. Is it a coincidence that she works for Bezos’ newspaper and that she uncritically assesses his personal indulgences?

      Her previous column, with the title “Why Aren’t We Talking More About UFOs?” clearly advances the interests of Blue Origin. The more concerned Americans are about alien invasions — whether from outer space, China or Russia — the more public money (provided by ordinary taxpayers) will be available to support Blue Origin, a company that is about to receive a gift offered by Congress of $10 billion to colonize the moon, even after losing out in a public bid to fellow billionaire Elon Musk’s venture, SpaceX. 

      McArdle probably thinks of Blue Origin as yet another example “of a business [Jeff Bezos] spent decades building.” His lobbyists have convinced the government to spend billions on it, while Bezos himself skirts his tax obligation. She complains that the argument demanding “‘taxes on untaxed capital gains’ is what you come up with if you just don’t think anyone should have enough money to be able to shoot themselves into space.” The “you” she refers to is ProPublica, which dared to make that case, and anyone else equally feeble-minded enough to begrudge billionaires their private pleasures. 

      Bezos’ ownership of the Post is paying off. When making the decision to buy the paper in 2013, he reasoned: “The Washington Post has an incredibly important role to play in this democracy. There’s no doubt in my mind about that.” Had he waited a year to consider the findings of a Princeton study published in 2014 with the title, “Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens,” he might have more accurately explained: The Washington Post has an incredibly important role to play in this plutocracy.

      *[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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      in World Politics

      ProPublica Reveals the US Is a Tax Haven

      by

      This week, ProPublica published a long, detailed article that blew the roof off two burning and intimately related questions currently in the news: wealth inequality and taxation. In the wake of the 2008 financial crisis, Thomas Piketty, Branko Milanovic and numerous pundits in the media have written reams on the topic. Politicians like Bernie Sanders and Elizabeth Warren have highlighted the issue and made proposals to address the problem. When Sanders suggested during the Democratic presidential primary that “billionaires shouldn’t exist,” the Democratic Party turned to one of the richest billionaires, Michael Bloomberg, counting on his financial clout to prevent the Vermont senator from winning the party’s nomination.

      In the US, people are more easily impressed by wealth itself than by the serious problem that wealth inequality has created. ProPublica’s article may help to change the public’s focus.

      They Are Coming for Us

      READ MORE

      ProPublica exposes the brutal fact that, contrary to the tenets of conservative Republican orthodoxy, the wealthy are the “takers” and people who work for a living, the “makers.” Worse, the taking they do no longer requires much effort. The tax system delivers everything they take away from others directly to their doorstep. Between 2014 and 2018, the 25 richest Americans “paid a total of $13.6 billion in federal income taxes.” The article calls it “a staggering sum, but it amounts to a true tax rate of only 3.4%.”

      Among the many details, ProPublica highlights the case of Warren Buffett, signaling “his public stance as an advocate of higher taxes for the rich.” Between 2014 and 2018, “Buffett reported paying $23.7 million in taxes.” But given the increase in his wealth over that period, that impressive sum “works out to a true tax rate of 0.1%, or less than 10 cents for every $100 he added to his wealth.” Who wouldn’t be happy paying taxes at that rate? And for Buffett, it isn’t even on earnings, which for most people permit survival, but on the absolute growth of his net worth.

      The article also cites the case of George Soros, the man who single-handedly broke the Bank of England. “Between 2016 and 2018,” according to a spokesman for the billionaire, “George Soros lost money on his investments, therefore he did not owe federal income taxes in those years.” The same spokesman, ProPublica reports, is quoted as affirming that “Mr. Soros has long supported higher taxes for wealthy Americans.”

      Today’s Daily Devil’s Dictionary definition:

      Support:

      To sit on the sidelines and verbally encourage other people to do things one is disinclined to do or incapable of doing on one’s own

      Contextual Note

      ProPublica has provided the world with a truly enlightening trove of information that sends a clear message. And this is only the beginning. The publication promises in the coming months to “explore how the nation’s wealthiest people — roughly the .001% — exploit the structure of our tax code to avoid the tax burdens borne by ordinary citizens.” Its reporting will certainly serve to clarify a debate that, for many, may have seemed too abstract and too polemical to try to take on board.

      Embed from Getty Images

      The numbers demonstrate the extreme, hyperreal nature of wealth distribution today. When the public learns that, in 2011, Jeff Bezos — who is, on and off, the richest man in the world — “claimed and received a $4,000 tax credit for his children” and that his true tax rate over time is less than 1%, they may begin to take the measure of how the tax system works and to whose benefit.

      The figures, nevertheless, show that between 2006 and 2018, Bezos paid out $1.4 billion, a staggering amount for any ordinary wage-earner to even try to comprehend. But his personal fortune over that time ballooned to reach close to $200 billion today. Has he earned it through his hard work? No, it earns itself. That’s what money does. And thanks to his ability to hire tax advisers and clever accountants, all but crumbs of his wealth stay in his hands, never to pollute (or contribute to improving) the public sphere.

      Historical Note

      ProPublica went to great lengths to gather, verify and publish these carefully guarded tax secrets. Its editors were not surprised when, as Forbes reports, IRS Commissioner Charles Rettig “told lawmakers that internal and external investigators are working to determine whether the data ProPublica used was illegally obtained.” In the land that enshrined free speech as a right (First Amendment) apparently even more fundamental than the right to own an AR-15 (Second Amendment), all speech is legitimate except when it is blown through a whistle.

      This simply means that the act of reporting certain types of scandalous abuse in the public interest is now deemed to violate the republic’s interest. We can expect the US government to spare no expense in its pursuit of the anonymous whistleblower who provided ProPublica with the tax returns it has put on display, whose secrecy is protected by the law.

      This is not a great time for whistleblowers. The cases of Edward Snowden, Julian Assange and Chelsea Manning have made headlines over the past decade. They all did something that could be interpreted as technically illegal, especially when laws such as the Espionage Act happen to be on the books. But they clearly exposed essential information about how a democracy functions that purports to be “of the people, by the people and for the people.” Thomas Drake, John Kiriakou and Jeffrey Sterling and Reality Winner are among others who were prosecuted by the Obama and Trump administrations for making significant contributions to our understanding of how government manages and sometimes mismanages people’s lives, fortunes and deaths.

      Last week, Natalie Mayflower Sours Edwards, who worked as a senior adviser at the US Treasury Department’s Financial Crimes Enforcement Network, was sentenced to six months in prison for revealing to BuzzFeed News what the International Consortium of Investigative Journalists qualifies as “financial corruption on a global scale.” She was arrested in 2018. Her crime consisted of sharing confidential bank documents with a journalist, an act that sparked “a global investigation into illicit money flows,” which, had she not acted, the public would never have known about.

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      BuzzFeed’s spokesman, Matt Mittenthal, helpfully explained that the resulting “investigation has helped to inspire major reform and legal action in the United States, the E.U., and countries around the world.” In other words, sometimes it is necessary to break the law to make it stronger and more equitable.

      Ben Smith, a New York Times columnist, summed up Edwards’ plight in a tweet: “This woman is going to prison for six months for her role in revealing systemic global financial corruption, and inspiring legal changes all over the world.” The law did not go after BuzzFeed in this case. Nor did it end up going after ProPublica in a 2012 case concerning tax filings for Karl Rove’s nonprofit, Crossroads GPS, in which the IRS initially told BuzzFeed “that it would consider [the] publication of them to be criminal.”

      In the eyes of the IRS, ProPublica has once again committed the crime of letting the truth out of the bag. It may well escape any punishment. The pattern is always to prosecute the whistleblower, but that requires identifying that person. If, as in the case of Edwards, the government does succeed in prosecuting and sentencing the whistleblower, that will not serve to put the truth back in the bag. That is why the government will be relentless in seeking the whistleblower and why the public should be grateful both to that person and to ProPublica.

      The government’s aim is not to repair the damage already done, but to instill fear in any other courageous individual in the position to reveal the inner workings of a system designed for the financial elite and managed by the political elite. In Edwards’ case, US District Judge Gregory H. Woods made this point clear when he “said that it was necessary to impose a ’substantial meaningful sentence’ in order to discourage others from committing similar crimes.”

      Publishing substantial meaningful truth will always provoke the call for a substantial meaningful sentence.

      *[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