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      Why Are the Indian and Chinese Economies Decoupling?

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      Many experts argue India is the weaker power unable to take on China. In an article in Foreign Policy, James Crabtree argues that a trade war with China would be a bad idea for India. In his view, India’s “military is inefficient, underequipped, and dogged by procurement corruption scandals.” To develop its military strength, India needs a dynamic economy, and an “inward economic direction” would only benefit China in the long run. Therefore, an India–China decoupling is a terrible idea.

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      These analysts are wrong. Their argument against decoupling is based on three implicit assumptions. First, India is a deeply-divided country unable to act or respond decisively. Second, India is dependent on the Chinese economy for its growth. Third, China’s rise is inexorable and India has no option but to come to terms with it. These assumptions are true, but it is an error of judgment to treat them as unqualified truths.

      A Trip Down Memory Lane

      For Indians with longer historical memories than many of these experts, these arguments sound familiar. Anglo-Saxon publications have long hectored, advised and moralized on Indian issues. On July 5, 2014, the editorial board of The New York Times made a case against India’s membership of the Nuclear Suppliers Group. To be admitted, India needed “to sign the treaty that prohibits nuclear testing, stop producing fissile material, and begin talks with its rivals on nuclear weapons containment.”

      In response, Gurmeet Kanwal, a retired Indian brigadier-turned-defense analyst, called the editorial “partisan and condescending.” Some even saw it as neocolonial. He pointed to “the existential threat posed by two nuclear-armed states on India’s borders” that led India to develop its nuclear weapons capability. Kanwal argued that India had been a “responsible nuclear power” with a “positive record on non-proliferation” and had “consistently supported total nuclear disarmament.” In typical Sikh humor, he advised nuclear ayatollahs to focus on real proliferators and let go of the cap, roll-back and eliminate (CRE) stance they had adopted against India since the 1990s.

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      Just as India stood up to the US on the nuclear issue in the 1990s, it is capable of standing up to China in 2020. An India–China conflict is highly undesirable. Ideally, New Delhi and Beijing should be able to work something out over endless cups of tea. However, sanctimonious advice from foreign experts about dire consequences of an India–China decoupling has to be taken with a bucket, not a pinch, of salt.

      In 1998, India went nuclear despite dire predictions for its economy. Many in Washington assumed that India depended on the West for its economy. Barely seven years prior, India had experienced a serious financial crisis. The Gulf War and slowing exports to the US crippled an economy by rising deficits and increasing debt. The precipitous decline of the Soviet Union meant India no longer had a godfather to bail it out. So severe was India’s 1991 currency crisis that it had to pledge its gold reserves and liberalize its economy to get a bailout from the International Monetary Fund. In 1998, India was better off than in 1991 but certainly not in a strong position. Nuclear tests put it under immense pressure.

      At the UN, the Conference on Disarmament condemned Indian nuclear tests. In the preceding years, India had watched the West ignore the 1989 Tiananmen Square crackdown and fete China for its economic reforms. Condemnation for nuclear tests strengthened, not weakened, India’s response. It stood up to the West, ignored experts and upended nuclear apartheid. Today, India is again in a mood to defy experts and stand up to China.

      Like Love, Trade Is Complicated

      As troops amass on the India–China border, a full-scale economic war has broken out. It is leading to a structural break in the Indian economy. Both public opinion and political leadership is now committed to decoupling from China. In India, there is a ban on 59 Chinese apps by government authorities. Major trade bodies have formally announced boycotts of Chinese products. For instance, the Confederation of All India Traders (CAIT) has listed 3,000 such products. CAIT is a national umbrella organization with 40,000 smaller trade bodies and 70 million traders as members. The government has tightened country of origin rules for e-retailers and other sellers.

      Demand for Chinese products is declining. Xiaomi is no longer India’s top-selling phone. Samsung has replaced it. Increasingly, selling Chinese goods using Southeast Asian free trade agreements is becoming difficult. The existing business model of buying in China and selling in India is under pressure.

      In an additional twist, Indian tax authorities have conducted raids on Chinese companies and individuals for money laundering. It led to the arrest of a Chinese national. Apparently, he was married to a woman from India’s northeast border state of Mizoram, had spuriously obtained an Indian passport and been arrested earlier for espionage. It seems trade is not as simple as experts imagine it to be. Intelligence, influence and geopolitics are inextricably intertwined with trade, business and investment. In the India–China economic relationship, three largely forgotten factors are noteworthy.

      First, India enhanced trade ties with China not only for economic reasons but also geopolitical ones. Becoming a key market and investment destination for China was supposed to reduce the risk of conflict and wean Beijing off Islamabad. Aggressive Chinese actions have made India reconsider this strategy and change tack.

      Second, India’s manufacturing sector is reasonably well developed but has suffered from Chinese competition since China joined the World Trade Organization (WTO) in 2001. A 2018 parliamentary report concluded that Chinese imports were playing “a negative role for [India’s] domestic industry.” The report warned about the loss of jobs, an increase in bad debts for banks, a decline in tax revenues and a worrying dependence on China for critical products. It concluded that China does not play by WTO rules and “the problem of Chinese dumping is a matter of concern across the globe.”

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      India is not alone in having concerns about China’s abuse of WTO rules. A 2018 report to the US Congress expressed concern at “China’s continued embrace of a state-led, mercantilist approach to the economy and trade.” It detailed “substantial costs borne by WTO members as a result of China’s problematic trade regime” and  the challenges presented by its “non-market economic system.” Given China’s track record, there is a case to be made for India taking a more protectionist path.

      There is another tiny little matter. Protectionism has played a key role in industrialization for any latecomer. Furthermore, industrialization has been the key driver of economic growth. In a 2019 article, one of these authors observed that the first major act passed by Congress was the Tariff Act of July 4, 1789. Without protecting its infant industry, the US would not have emerged as an industrial power.

      Since 1978, China has followed the American playbook on steroids. It has powered through the largest and fastest industrialization in history. Its companies enjoy the advantages of infrastructure, cheap financing and political support. Therefore, they have been able to achieve economies of scale. As a result, Indian companies have been blown away. An India-China decoupling might give sectors from aerospace components to advanced pharmaceuticals a second chance.

      Third, Chinese imports into India are nice-to-have, not must-have, goods. Demand for them is elastic unlike the inelastic demand for energy from the Middle East and the US. An India-China trade war that leads to a decoupling of the two economies could lead to short-term pain but has a strong rationale for the longer term.

      The Shape of Things to Come

      In any case, experts forget that India is unlikely to turn entirely inward as it did after independence in 1947. Recently, billions of dollars have poured into India from the US. Reliance Jio, an Indian mobile internet company, raked in $15 billion in 10 weeks. This is indicative of a deeper trend. Given new geopolitical imperatives, India is now looking to boost economic ties with friendly powers. It wants Korean, Japanese, European and American firms to set up shop in the country. Foreign market players who can act nimbly would be in a good position to grab some of the approximately $60 billion China’s trade surplus with India. There are new investment, manufacturing and trading opportunities emerging as the status quo changes and a new order emerges.

      Many economists predict a short-term price shock as Chinese goods stop coming into the country. They forget that India has struggled with jobless growth even during the best of times. Decoupling with China could boost domestic manufacturing not only for large but also for medium and small industries. This would increase employment, tax revenues and even demand thanks to a multiplier effect. Improved job figures further increase political support for decoupling and decrease India’s need to subsidize agriculture so heavily. For decades, agricultural subsidies have put pressure on public finances. If a lower amount is spent on subsidies, pressure on the fiscal deficit would abate.

      To sum up, India has strong reasons to decouple and no longer consider WTO rules sacrosanct. A tectonic shift is underway. After World War II, a new rules-based order emerged. The end of the Cold War strengthened this order and led to visions that Western democracy was the final destination for all societies. With polarization and partisanship at home, Western democracies themselves are in peril. The order that emerged in 1991 is crumbling and a new one is about to emerge. History offers us lessons as to what to expect.

      In the past, India and China focused on their spheres of influence with the Himalayas keeping them apart. Both prospered. In this age of trade, peace and prosperity, a Chola empire based in the modern-day southeastern state of Tamil Nadu ruled Malaysia (Putrajaya), Indonesia (Srivijaya), Sri Lanka and the Maldives. The Middle Kingdom held sway over Mongolia, Korea and Japan. Both India and China could go back to sticking to their historic spheres and to trading with each other.

      At the moment, China has followed salami tactics and encroached on territory India claims as its own. China has also been meddling in Nepal, Myanmar and Sri Lanka, India’s key neighbors. Since  1963, China has been in a close alliance with Pakistan. Yet China has never played a role in the Indian subcontinent and cannot suddenly turn into an overlord here. Therefore, close India-China economic ties no longer make strategic sense.

      Additionally, China disingenuously claims to meet India halfway while insisting that the onus to improve the border situation lies entirely with its neighbor. This is a one-way, not halfway, diplomacy that suggests aggressive intent. The Chinese also seem determined to win the war of narratives and are enlisting the support of free market ayatollahs to do so. It is only natural that the Indian narrative is bound to be different. It is in sync with the new realities of the day, which drive India’s decision to decouple its economy from China. Trade, investment and deep economic ties are a jolly good thing with allies and friends, not with rivals and foes.

      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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      Negotiating the End of Brexit

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      It is increasingly likely that, unless things change, on January 1, 2021, we will have a no-deal Brexit. That would mean the only deal between the European Union and the United Kingdom would be the already ratified EU withdrawal agreement of 2019.

      There are only around 50 working days left in which to make a broader agreement for a post-Brexit trade deal between the UK and the EU. The consequences of failing to do so for Ireland will be as profound — and perhaps even as long-lasting — as those caused by the COVID-19 pandemic.

      A failure to reach a UK-EU agreement would mean a deep rift between the UK and Ireland. It would also mean heightened tensions within Northern Ireland, disruptions to century-old business relations and a succession of high-profile court cases between the EU and the UK dragging on for years.

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      Issues on which a deal could have easily been reached in amicable give-and-take negotiations will be used as hostages or leverage on other matters. The economic and political damage would be incalculable. And we must do everything we can to avoid this.

      Changing the EU trade commissioner, Phil Hogan, under such circumstances would be dangerous. Trying to change horses in midstream is always difficult. But attempting to do so at the height of a flood — in high winds — would be even more so.

      The EU would lose an exceptionally competent trade commissioner when he was never more needed. An Irishman would no longer hold the trade portfolio. The independence of the European Commission, a vital ingredient in the EU’s success, would have been compromised — a huge loss for all smaller EU states.

      According to the EU’s chief negotiator, Michel Barnier, talks between the European Union and the UK, which ended last week, seemed at times to be going “backwards rather than forwards.” The impasse has been reached for three reasons.

      The Meaning of Sovereignty

      First, the two sides have set themselves incompatible objectives. The European Union wants a wide-ranging “economic partnership” between the UK and the EU, with a “level playing field” for “open and fair” competition. The UK agreed to this objective in the joint political declaration made with the EU at the time of the withdrawal agreement, which was reached in October 2019.

      Since then, the UK has held a general election with the ruling Conservative Party winning an overall majority in Parliament, and it has changed its mind. It is now insisting, in the uncompromising words of it chief negotiator, David Frost, on “sovereign control of our own laws, borders, and waters.”

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      This formula fails to take account of the fact that any agreement the UK might make with the EU (or with anyone else) on standards for goods, services or food items necessarily involves a diminution of sovereign control. Even being in the World Trade Organization (WTO) involves accepting its rulings, which are a diminution of “sovereign control.” This is why US President Donald Trump does not like the WTO and is trying to undermine it.

      The 2019 withdrawal agreement from the EU also involves a diminution of sovereign control by Westminster over the laws that will apply in Northern Ireland and thus within the UK. That agreement obliges the UK to apply EU laws on tariffs and standards to goods entering Northern Ireland from Britain — i.e., going from one part of the UK to another.

      This obligation is one of the reasons given by a group of UK parliamentarians — including Iain Duncan Smith, David Trimble, Bill Cash, Owen Paterson and Sammy Wilson — for wanting the UK to pull out from the withdrawal agreement, even though most of them voted for it last year.

      Sovereignty is a metaphysical concept, not a practical policy. Attempting to apply it literally would make structured and predictable international cooperation between states impossible. That is not understood by many in the Conservative Party.

      The Method of Negotiation

      Second, the negotiating method has proved challenging. The legal and political timetables do not gel. The UK wants to discuss the legal texts of a possible free trade agreement first and leave the controversial issues — like competition and fisheries — until the endgame in October. But the EU wants serious engagement to start on these sticking points straight away.

      Any resolution of these matters will require complex legal drafting, which cannot be left to the last minute. After all, these texts will have to be approved by the European and British Parliaments before the end of 2020. There can be no ambiguities or late-night sloppy drafting.

      The problem is that the UK negotiator cannot yet get instructions on the compromises he can make from Boris Johnson, the British prime minister. Johnson is instead preoccupied with combating the spread of the COVID-19 disease, as well as keeping the likes of Duncan Smith and Co. onside. The prime minister is a last-minute type of guy.

      Trade Relations With Other Blocs

      Third, there is the matter of making provisions for the trade agreements the UK wants to make in the future with other countries, such as the US, Japan and New Zealand. Freedom to make such deals was presented to UK voters as one of the benefits of Brexit.

      The underlying problem here is that the UK government has yet to make up its mind on whether it will continue with the European Union’s strict precautionary policy on food safety or adopt the more permissive approach favored by the US. Similar policy choices will have to be made by the UK on chemicals, energy efficiency displays and geographical indicators.

      The more the UK diverges from existing EU standards on these issues, the more intrusive the controls on goods coming into Northern Ireland from Britain will have to be, and the more acute the distress will be for Unionist circles in Northern Ireland. Issues that are uncontroversial in themselves will assume vast symbolic significance and threaten peace on the island of Ireland

      The UK is likely to be forced to make side deals with the US on issues like hormone-treated beef, genetically modified organisms and chlorinated chicken. The US questions the scientific basis for the existing EU restrictions and has won a WTO case on beef over this. It would probably win on chlorinated chicken, too.

      If Britain conceded to the US on hormones and chlorination, this would create control problems at the border between the UK and the EU, wherever that border is in Ireland. Either UK officials would enforce EU rules on hormones and chlorination on the entry of beef or chicken to this island, or there would be a huge international court case.

      All this shows that, in the absence of some sort of partnership agreement between the EU and the UK, relations could spiral out of control. Ireland, as well as the European Union, needs its best team on the pitch to ensure that this does not happen.

      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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      How Global Britain Confronts the Asian Century

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      On February 3, Prime Minister Boris Johnson laid bare his long-awaited vision of a “global Britain” in a world after Brexit. Speaking amidst the imperial grandeur of Old Royal Naval College in Greenwich, Johnson’s message was that the United Kingdom, liberated from the straitjacket of EU membership, would be free to carve out a confident, dynamic and outward-looking role on the world stage in a post-Brexit era — even as the first handful of COVID-19 infections took root on British soil.

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      Six months and a global pandemic later, Britain faces the unique and unprecedented challenge of redefining its place in a world that is in the midst of a historic watershed moment. The COVID-19 pandemic has served as a catalyst for deep-rooted trends that have long been evident to politicians, policymakers and analysts alike — none more so than the tectonic shift in the globe’s geopolitical center of gravity from West to East.

      Whether it be China’s much-publicized “wolf-warrior” diplomacy against states criticizing its initial response to the outbreak, or the initial success of East Asian states in confronting the pandemic using artificial intelligence and digital surveillance, COVID-19 has shown that the much-hyped “Asian century” is not merely a future prognosis but a present-day reality.

      Brexit Britain on the World Stage

      If the pandemic has served to boost Asia’s image on the world stage, the opposite is true for Brexit Britain. The UK’s bumbling response to the COVID-19 crisis has confirmed many of the suspicions of ill-placed grandeur held in foreign capitals since the referendum to leave the European Union in 2016.

      Despite Johnson’s boastful confidence in Britain’s “world-beating” response to the novel coronavirus (which causes the COVID-19 disease), fatal early errors by the government — notably the initial refusal to enforce a lockdown in a forlorn effort to preserve the economy — have resulted in Britain suffering the worst of both worlds. Not only is the UK facing one of the highest per-capita death rates and the worst economic fallout as a result of COVID-19 in the developed world, but the situation has been exacerbated by the looming threat of no post-Brexit trade deal being agreed with the EU by the end of 2020.

      In this context, a global Britain’s success in navigating the increasingly volatile “new normal” of the post-pandemic geopolitical order will hinge more than ever on the government’s ability to leverage ties with partners old and new across the Asian continent.

      Embed from Getty Images

      Johnson’s vision of a buccaneering global Britain on the world stage is fundamentally predicated upon two core pillars: trade and security. Whitehall is acutely aware that Britain’s ability to harness the ascendance of Asia’s emerging powerhouses hinges upon striking a fragile balance between these two, often inconsistent, objectives.

      On one hand, Britain’s strategic planners look hungrily toward contemporary geopolitical hotspots like the South China Sea as testing grounds for a new forceful security footprint in the Indo-Pacific region. Britain’s armed forces already possess a string of strategic outposts, from the Brunei-based Gurkha garrison to Royal Naval logistical hubs in Singapore and Diego Garcia. The recently formed UK Defence Staff (Asia Pacific) has outlined plans for a further base in Southeast Asia in a bid to affirm Britain’s commitment to upholding the regional security architecture.

      In a symbolic gesture, the scheduled deployment of the Royal Navy’s brand new state-of-the-art aircraft carrier, HMS Queen Elizabeth, to conduct “freedom of navigation” patrols in the disputed South China Sea during 2021 is indicative of a wholesale rejection of the strategic retrenchment from east of Suez that has typified British security policy in the Indo-Pacific since the 1960s.

      Beijing’s Sphere of Influence

      Nevertheless, such grandiose ambitions of a more assertive military and diplomatic footprint in Asia do not come without their costs. Given China’s increasingly assertive posture on the international stage since the outbreak of COVID-19, it is not unreasonable to expect the diplomatic blowback from Britain’s perceived meddling within Beijing’s sphere of influence to grow stronger in the post-COVID era.

      In July, after the UK offered citizenship to almost 3 million Hong Kong residents following Beijing’s implementation of a controversial new security law in Britain’s ex-colony, China issued a strongly-worded yet ambiguous threat of “retaliation.” China’s response is illustrative of the fact that Brexit Britain’s ability to fully harness the Asian century is dependent upon London playing second fiddle to the preferences of Tokyo, Beijing and New Delhi.  

      Despite Johnson’s lofty rhetoric hailing Britain’s post-Brexit transformation into a “great, global trading nation,” such a vision is not exactly conducive to geopolitical maneuvers that can all too readily be perceived as antagonistic by prospective partners. For instance, Whitehall’s backpedaling over the contracting of Huawei, a Chinese technology company, to construct large tracts of Britain’s 5G infrastructure over national security concerns does not bode well for a future UK–China free trade deal. Similarly, efforts to introduce restrictions on immigration via the adoption of an Australia-style points-based system have proved to be a sticking point in post-Brexit trade negotiations with India, the former “jewel of the empire” with whom Britain shares extensive historical, cultural and linguistic ties.

      As a global Britain seeks to navigate a post-pandemic order characterized by increased great power antagonism, retreating globalization and resurgent authoritarianism, Whitehall’s strategic planners must be prepared to make hard-headed compromises between geopolitical and economic objectives in Asia in a manner that has been sorely lacking from Brexit negotiations with Britain’s European partners. Cut adrift from Europe at a time when the global order is becoming increasingly fragmented into competing regional blocs, a rudderless Britain lacking a coherent, sustainable vision of how it seeks to engage with Asia’s emerging superpowers risks becoming caught in the middle of an escalating cold war between the US and China.

      Reason for Optimism

      Despite the gloomy prognosis for a global Britain standing at the dawn of the Asian century, there remains reason for optimism once the short-term shockwaves of the pandemic have receded. Britain’s elite universities retain a mystical allure for ambitious young Asians seeking a world-class education. China, India, Hong Kong and Malaysia account for four of the top five countries of origin for international students in the UK. In addition, with two leading vaccine candidates in development at Oxford and Imperial, a British breakthrough in the fight against COVID-19 would further bolster Britain’s reputation as a global hub of research and innovation.

      Such cutting-edge academic expertise — combined with London’s enduring status as a global financial center, post-2021 visa and immigration reforms targeting highly-skilled professionals, and the cultural imprint of large Indian, Pakistani, Bangladeshi and Chinese diasporas — ensures that even post-Brexit Britain possesses the latent potential not only to attract top-class Asian talent, but also to emerge as one of the Asian century’s biggest winners outside of the Indo-Pacific. Whilst Brexit has undercut the Blairite vision of Britain as a “pivotal power” bridging the gap between the US and Europe, the United Kingdom’s deep-rooted historical, cultural, linguistic and economic ties with Asia’s rising powers provide ample scope for recasting Britain as a pivot on a grander scale: as a global hub bridging East and West.

      However, such aspirations remain little more than wishful thinking unless British policymakers can formulate a coherent approach toward the Asian century, which has so far been absent. Nevertheless, tentative steps have been taken in such a direction over recent months. Whitehall’s merging of the Department for International Development with the Foreign Office is likely to deal a blow to British influence in less-developed corners of Asia, at least in the short term. Yet Johnson’s renewed commitment to spend 0.7% of GDP on foreign aid enables a more cohesive, long-term approach with developmental issues, allowing funding to be streamlined toward teams of world-class specialists, such as the UK Climate Change Unit in Indonesia or the Stabilisation Unit supporting post-conflict reconstruction in fragile states like Pakistan and Myanmar.

      Similarly, the Foreign Office’s recent adoption of an “All of Asia” strategy is indicative of a more comprehensive approach to forging partnerships across the continent, balancing conflicting security, diplomatic, trade, developmental priorities, as illustrated through the establishment of the UK’s first permanent mission to Association of Southeast Asian Nations (ASEAN) bloc in January 2020.

      Before It Sets Sail

      As the nature of post-pandemic global order emerges over the coming months and years, a global Britain will find itself navigating a turbulent geopolitical environment made infinitely more challenging by the aftershocks of the coronavirus. This includes a worldwide economic crisis, decreased globalization, declining faith in multilateral institutions and rising great power tension, all of which threaten to derail Johnson’s post-Brexit voyage into the unknown before it has even set sail.

      Whilst Britain and its Western allies have bungled their response to the public health crisis, Asia’s dynamic rising powers are already bouncing back from the pandemic and laying the building blocks to ensure that the 21st century truly is Asian. From Beijing’s “Belt and Road Initiative” to New Delhi’s “Make in India” to ambitious future vision projects such as Saudi Arabia’s Vision 2030, Vision of Indonesia 2045 or Kazakhstan 2050, Asia’s emerging powerhouses all champion integrated strategic frameworks to harness the unprecedented shift in global wealth and power eastward, which the COVID-19 pandemic has catalyzed.

      A global Britain’s greatest mistake would be to supplement such a long-term calculated strategy with the half-baked geopolitical gambits that have so far typified Brexit Britain’s approach to the world’s largest continent. Indeed, for the UK to truly unleash its full potential in the dawning Asian century, it must look to Asia itself for inspiration.

      *[Will Marshall is an intern at Gulf State Analytics, which is a media partner of 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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      Will Millennials and Zoomers Save the Future?

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      “All of you young people who served in the war. You are all a lost generation.” This famous phrase is credited to Gertrude Stein by Ernest Hemingway, who popularized it in the epigraph to his 1926 novel “The Sun also Rises.” The phrase encapsulates the feelings of a generation, disillusioned by the civilizational breakdown witnessed during the Great War, the loss of faith in the ideals and values that had marked their pre-war youth, which left them empty and cynical. In Europe, many of them would ultimately find a new purpose in the ranks of Mussolini’s squadristi, Hitler’s Sturmabteilung and the various fascist movements that sprang up in their wake — with disastrous results.

      It might appear preposterous to compare today’s younger generations, millennials and zoomers (aka Generation Z), to Hemingway’s cohort of young women and men on both sides of the Atlantic. And yet there are good reasons to presume that today’s younger generations are going to be as deeply, if not more, scarred — socially, economically and psychologically — by COVID-19 as the Lost Generation was by World War I.  

      Foretaste of Things to Come

      The travails of COVID-19, as has been frequently noted, are just a foretaste of things to come. The combination of climate change and the destruction of natural habitats has made the outbreak of infectious diseases spreading from animals, such as bats and birds, to humans increasingly likely. As a landmark study published in Nature put it a decade ago, “mounting evidence indicates that biodiversity loss frequently increases disease transmission.” Or, to put it differently, “current evidence indicates that preserving intact ecosystems and their endemic biodiversity should generally reduce the prevalence of infectious diseases.”

      Unfortunately, the opposite has been the case. The current rate of extinction is “tens to hundreds of times higher than the average over the past 10 million years — and it is accelerating.” By now, humanity, which accounts for not more than a small sliver of life on this planet, is responsible for the loss of more than 80% of all wild mammals and half of all plants. The consequences are potentially catastrophic.

      For the moment, concerns about global warming and the rapid loss of biodiversity has been overshadowed by the all-consuming issue of COVID-19. And for good reasons. The novel coronavirus has severely disrupted life as we have come to know and expect it. And there is no end in sight. Its social, economic and psychological consequences, in addition to its impact on public health, has been profound and far reaching, particularly for the younger generations. Millennials, already pummeled by the fallout from the Great Recession of 2008, have been hit hard once again. For zoomers, the generation born between the mid-1990s and the early 2010s, COVID-19 is likely to be the formative experience shaping the rest of their lives.

      For both generations, the economic impact of the pandemic has been disastrous. Already last year, months before the pandemic hit the United States full force, Annie Lowrey wrote in The Atlantic that millennials were “likely to be the first generation in modern economic history to end up worse off than their parents. The next downturn might make sure of it, stalling their careers and sucking away their wages right as the Millennials enter their prime earning years.” The pandemic confirmed her worst fears. Early this year, Lowrey characterized the pandemic as a “financial tsunami for younger workers.”

      According to preliminary data, after the onset of the pandemic, “a staggering 52 percent of people under the age of 45 have lost a job, been put on leave, or had their hours reduced due to the pandemic, compared with 26 percent of people over the age of 45.” Federal aid was likely to do little to nothing to alleviate their financial woes.

      The outlook is equally bleak for zoomers. According to the consulting firm Delloite, in April and May 2020, 30% of Zoomers reported having lost their job or having been put on temporary, unpaid leave. This is particularly ironic. As Mathew Goodwin has recently noted, zoomers “find themselves in a strange position — on the one hand, they are on track to be the most well-educated generation in history but, on the other, they are entering the labour market amid one of the most challenging periods in history.” Given their educational background and levels of skills, their prospects in the labor market should be bright; instead, they are nothing short of bleak.

      At least for the moment, opportunities for internships have largely dried up, entry positions are rare and, for those who manage to get one, the pay is low. And things are unlikely to get better any time soon, given the depth of the coronavirus-induced recession. As an essay in The Economist recently put it, “Economic misery has a tendency to compound. Low wages now beget low wages later, and meagre pensions after that. The prospect of middle-aged drudgery beckons.”

      After Us, the Deluge?

      The Lost Generation’s soul-shattering experience of senseless death during the Great War turned many of them cynical while leading them into aimless and reckless pursuit of vacuous, decadent hedonism, reflected in the writings of F. Scott Fitzgerald and the paintings of George Grosz. Given the circumstances, one might expect history to repeat itself, not as a “grand tragedy” but as a “rotten farce,” as per Karl Marx’s “The Eighteenth Brumaire of Louis Napoleon,” reflected in the infamous “COVID parties” on the beaches of Florida, with their flair of Russian roulette, scripted according to the adage “after me, the deluge,” or, more prosaically, “who gives a shit about the future.”

      As it turns out, zoomers do — or so a growing number of recent studies suggest, whether produced by think tanks or by business consulting firms seeking to exploit Gen Z’s consumer potential. The results are nothing short of stunning, the implications potentially revolutionary. Take global warming. In 2019, an Amnesty International-sponsored survey found more than 40% of young people considering global warming the most important global issue. At the same time, however, almost half of zoomers and more than 40% of millennials thought that it was already too late to repair the damage caused by climate change.

      This, however, does not seem to have turned them cynical, self-centered, apathetic or escapist. On the contrary. An article in Forbes, written at the height of last year’s global mass demonstrations calling for action to confront climate change, put it best, claiming that Gen Z was “a force to be reckoned with. They’re not trying to change the world; they’re already doing it and, in many cases, they’re leading the way.”

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      Recent studies support this contention. They find that the younger generation holds deeply engrained values that more often than not are in complete opposition to the values that dominated advanced capitalist societies pre-coronavirus. In the face of a resurgence of ethnocentrism and tribalism, they cherish diversity while rejecting the knee-jerk nationalism that has been the hallmark of right-wing populism currently en vogue from Britain to Denmark, from Italy to the United States.

      Unlike their elders, who for decades allowed themselves to be subjected to incessant neoliberal indoctrination claiming that the state is part of the problem, that only markets get things right, that society does not exist, and that everybody fends for themselves, zoomers are pro-government and supportive of a strong state. COVID-19 has not only validated and reaffirmed their belief in government action and the extension of social welfare policies but also in the necessity of fundamental, radical change.

      With Gen Z, the old slogan from the student movement of the 1960s that “the personal is political” has come back with a vengeance — and a new meaning. We have seen it with the controversies over the wearing of masks that have shown how quickly and to what degree personal choice turns into political statement these days. Today, as a number of top-notch business consulting firms have affirmed, this is particularly true with respect to consumption patterns and consumer choices. Veganism, for instance, is not only a lifestyle choice — it is also, and in some instances even predominantly, a political statement. As Deborah Kalte has recently noted, the “vast majority of vegans is politically motivated and aims to induce change in society at large.”

      In the past, as Thorstein Veblen and Pierre Bourdieu have argued and shown, consumption served as a marker, a sign of distinction, and this in a very material sense. Today, or so a number of studies suggest, at least with the younger generation, consumption is tied in with ideals and values, which makes it highly political.

      The Personal Is Political

      Even before the onset of the pandemic, business reports noted the central importance of sustainability for the younger generation. In 2015, a Nielsen report found more than 70% of global millennials were willing to pay more for sustainable goods. Five years later, a First Insight report found that “the vast majority of Generation Z shoppers prefer to buy sustainable brands, and they are most willing to spend 10 percent or more on sustainable products.” At the same time, the report noted that Gen Zers and millennials “are the most likely to make purchase decisions based on values and principles (personal, social, and environmental).”

      And the revolution does not stop here. Business consultants have already set their eyes on Generation Alpha — the offspring of the millennial generation and younger siblings of Gen Z — who populate today’s cradles and kindergartens. As an article in Wired puts it, the “latest age group to emerge are barely out of diapers, and the internet is already serving them ads.”

      Raised and influenced by their millennial parents and Gen Z siblings, they are expected to be just as progressive and radical — even more so — as their immediate elders, or so a recent report from the e-commerce consulting firm Wunderman Thompson Commerce wants us to believe. Confronted with myriads of global crises — humanitarian, ecological, economic, social — they are characterized as “uniquely ethically inclined and value-led.” This is based on the finding that more than two-thirds “of 6 to 9 year olds say that saving the planet will be the central mission of their careers in the future, joining the fight that current Gen Zs are leading.” An equally large proportion indicated they would like to buy from companies that “are trying to do good in the world.”

      Embed from Getty Images

      If the findings of these studies are true, things are likely to heat up considerably in the near future, both socially and politically. What the younger generations represent is a reality that is fundamentally at odds with the one peddled by Donald Trump, Boris Johnson, Jair Bolsonaro and Scott Morrison (Australia’s champion of coal), to name but a few. There is a huge gap between the perceptions and values of the younger generations and those of the older generations, as most recently seen once again with COVID-19, whether with regard to wearing masks or accepting track-and-trace apps. Today, the fate of the planet is to a large extent in the hands of generations that are unlikely to experience the full force of the disasters their actions and inactions have caused. The reality is that governments, corporations and the older generation have largely failed the younger generations and continue to do so — with catastrophic consequences.  Over the past several decades, governments have piled up huge amounts of national debt.  With COVID-19, they have added further layers, bound to impose yet another enormous burden on today’s youth.     

      Under the circumstances, it might be tempting to dismiss them as another Lost Generation. It bears remembering, however, that it was the original Lost Generation that was instrumental not only in the rebuilding of much of Europe after the Great War, but also in the establishment of the postwar liberal order — “embedded liberalism” — and the entrenchment of the social-democratic welfare state. 

      Today, we confront another crucial moment. Once again hope rests on the younger generations to provide the vision and energy not only to meet the numerous social, economic, cultural and particularly ecological challenges that threaten to overwhelm humanity. All available data suggest that they are quite prepared to meet the challenge, if only because they don’t have much of a choice. Chances are that the young people will make a difference — provided their parents and grandparents will take them and their concerns and worries seriously, rather than dismissing them as alarmism or folly.

      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

      Boris Johnson Takes England, and COVID-19, Back to Square One

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      Not only has UK Prime Minister Boris Johnson failed to learn from other countries’ dealings with COVID-19, he has stubbornly refused to learn from his own experience. He is the true king of fools. It would be laughable were it not for the tens of thousands of deaths he and his government are responsible for.

      History Will Judge Britain’s COVID-19 Response

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      On March 23, Johnson led England into a lockdown. It was far too late. In May, he led the country out of lockdown in what was supposed to be an incremental fashion. It was far too early. It was also confusing, chaotic and only encouraged people to abandon all pretense long before the final restrictions were lifted in July and August. Johnson is now back where he started, declaring, as he did before March 23, that normality and the economy must be preserved at all costs. As before, infection rates are on the rise, especially in London and parts of the north. As before, these facts are being ignored. Under no circumstances will a second lockdown be contemplated, nor will schools close after September 1. Responses to any future outbreaks will be localized and short term.

      If Possible

      The guidance being handed to England’s hapless schools is remarkably similar to that issued back in January, February and March: wash your hands, clean surfaces and, if possible, keep your distance from each other. (The government adds “if possible” to its documents because it knows full well that such distancing is impossible in most schools and in most classrooms.) As before, teachers or children who are clinically vulnerable — or who are shielding a husband or wife, a mother or father, a daughter or son who is clinically vulnerable — can attend school and should do so when the new term starts in early September.

      If you are a parent who is determined to keep your child at home, you will be fined, as before, by the secretary of state for education. And, as before, there will be no testing unless someone displays symptoms. There is, however, one innovation being introduced this time around: children, parents and staff who do show any symptoms are asked to get themselves tested, to trace contacts and to report their findings to the school.

      Embed from Getty Images

      Johnson’s motivation for all this nonsense is the economy. He is seemingly and willfully unaware that it tanked by a whopping 20% of GDP in the first quarter, compared to just under 12% across the EU. This is not because Johnson locked down too early and for too long, but because he didn’t lock down early enough or for long enough and didn’t take that breathing space to organize an effective track-and-trace regime or institute a mask-wearing culture. He also failed to engage with local governments and instead treated them with contempt and withheld from them the information they needed to protect the vulnerable. He has, in other words, assiduously ignored the best strategies that are on public display in China, Taiwan, Hong Kong, Macao and South Korea. These include the restriction of movement and physical distancing, rapid identification of positive and suspected cases through mass testing, and the immediate isolation of positive and suspected cases with appropriate treatment rendered.

      The pillars of Seoul’s response, for example, are promptness and transparency, and a willingness to learn from the 2015 MERS outbreak. Government, local and national, did not hesitate: It tested aggressively, launched epidemiological investigations and imposed quarantines, shared information and began disinfection efforts.

      South Korea saw its first confirmed case of COVID-19 on January 23. Within a week, hand sanitizers and disposable masks were being distributed for free on public transport, and seats and handles were being disinfected. Within 16 days of the first case, museums, galleries and other cultural venues, along with taxis, subways and buses, were being sterilized with ever more frequency, and people who had been exposed were quarantined and given specialist medical care. Within four weeks, screening stations were up and running around the clock. Risky venues such as bars and cafes were closed, and treatment was being extended to citizens with suspected COVID-19 symptoms. Within five weeks, public facilities were shut.

      Unsurprising Results

      In the UK, within five weeks of the first confirmed case on January 29, Johnson, on the best scientific advice the country could muster, had done almost nothing. The government’s modeling group had advised that isolation and tracking wouldn’t do much other than delay the peak of the epidemic. Life might as well go on as normal. Masks were not needed. More proactive measures were not advised until six weeks after the first case. On March 3, Johnson’s government, having listened to the great and the good of Britain’s scientific community, declared that it would be better if people did not shake hands. That same day, Johnson proudly boasted that he had been shaking hands with everyone, including coronavirus patients.

      The results are as stark as they are unsurprising. While the UK has had more than 60,000 deaths and has taken the worst hit to its GDP year on year in the second quarter in 64 years, just over 300 people have died from the virus in South Korea, its economy grew through the first quarter and is expected to manage around -0.8% over the year. Even in the Philippines, where the government has been equally as irresponsible as Johnson’s, there are those who see the choice between keeping the economy going and tackling COVID-19 as an entirely fictitious one.

      Yet perhaps the most exasperating thing about this whole sorry debacle — surely the worst exhibition of foolhardiness and incompetence since the 1853 Crimea campaign, the First World War, Chamberlin’s policy of appeasement or Britain’s chaotic and bloody withdrawal from India (take your pick) — is the fact that Boris Johnson is still in Number 10. Not so long ago, a few weeks before the outbreak, I heard a young lecturer, a social psychologist from China, say that the English, so used to being smothered by their government and their aristocracy, are most at ease as placid and compliant followers. I’m beginning to see what she meant.

      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

      What the weakening dollar means for the global economy

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      A near 10% drop in the value of the US dollar since its March high has given rise to two distinct narratives. The first takes a short-term perspective, focusing on how a depreciation could benefit the US economy and markets; the second takes the long view, fretting over the dollar’s fragile status as the world’s reserve currency. Both narratives contain some truth, but not enough to justify the emerging consensus around them.Several factors have combined to put downward pressure on the greenback (as measured by the DXY index of trade-weighted currencies) in recent weeks, resulting in a depreciation that has reversed almost half of the appreciation of the last 10 years within the space of months.As the US Federal Reserve has loosened monetary policy (actually and prospectively) in response to a worsening economic outlook, the income accruing to dollar-denominated safe havens, such as US government bonds, has declined. And with US-based investments having lost some of their attractiveness, there has been a shift in holdings in favour of emerging markets and Europe (where the European Union last month agreed to pursue deeper fiscal integration).There also are indicators of lower capital inflows into the United States. House purchases by foreigners appear to have decreased again, owing in part to the US government’s embrace of inward-looking policies and the weaponisation of trade and sanction measures.With the exception of Lebanon, Turkey and a few other countries that have experienced even sharper exchange-rate depreciations than the US, most currencies have strengthened against the dollar. But among those with appreciating currencies, the reactions to this generalised phenomenon have been far from uniform.Some countries, particularly in the developing world, have welcomed the reversal, because their previous currency weakness had been contributing to higher import prices, including for foodstuffs. Moreover, a weaker dollar provides them with greater scope to support domestic economic activities through more stimulative fiscal and monetary measures.But the reaction has been less welcoming in the other advanced economies. Japan and eurozone member states, in particular, fear that currency appreciation could threaten their own economic recovery from the Covid-19 shock. Also, the Bank of Japan and the European Central Bank now have to worry that they are not only reaching the limits of their policy effectiveness, but could also be putting their economies at greater risk of collateral damage and unintended consequences.In the US, meanwhile, the dollar’s depreciation has been welcomed as an overwhelmingly positive development for the economy, at least in the short term. After all, economic textbooks tell us that a weakening dollar boosts US producers’ international and domestic competitiveness relative to foreign competitors, makes the country more attractive for foreign investors and tourism (in price terms), and increases the dollar value of revenue earned overseas by home-based companies. That is also all good for US stock and corporate bond markets, which benefit further from the greater attractiveness of dollar-denominated securities when they are priced in a foreign currency.The longer-term consensus view is less positive for the US. The worry is that dollar depreciation will further erode the currency’s global status, which has already been weakened by the US policies of the past three years – from protectionism and weaponised sanctions to bypassing global standards and the rule of law.The more the dollar’s credibility is eroded, the more the US risks losing the “exorbitant privilege” that comes with issuing the world’s main reserve currency. A country in this position can exchange bits of printed paper or digital entries – currency creation – for the goods and services that other countries produce. It enjoys disproportionate influence over important multilateral decisions and appointments. And it benefits from others’ willingness to outsource to its own institutions the management of their financial wealth.Both of these (partly true) consensus narratives imply further significant dollar depreciation. While the immediate effects are theoretically positive, the practical situation is likely to be different, because so much economic activity is currently impaired by government restrictions and the reluctance of individuals and companies to return to previous consumption and production patterns. Around half of US states have now reversed or halted the process of economic reopening.Moreover, today’s positive market effects demand further qualification beyond the health crisis. Owing to the reliable and ample provision of liquidity, particularly by central banks, most valuations have already decoupled from economic and corporate fundamentals. Under these financial conditions, it is hard to imagine that a dollar depreciation will have any more than a marginal effect on real economic performance.As for the dollar’s role as a reserve currency, I am reminded of a simple principle I learned at university: it is hard to replace something with nothing. At this time, there simply is no other currency that can or will fill the dollar’s shoes. Instead, we will continue to see small pipes being built around the dollar. And, because none of these will be large enough to replace it, the eventual result will be a more fragmented international monetary system.As has happened before, the current consensus views on the dollar will probably end up overstating the long-term implications of short-term movements. Today’s dollar weakness is neither a boon to markets and the US economy nor an augury of the currency’s global downfall. But it is part of a larger, gradual fragmentation of the international economic order. The main factor in that process is the shocking lack of international policy coordination at a time of rising global challenges.• Mohamed El-Erian is chief economic adviser at Allianz. He served as chair of President Barack Obama’s Global Development Council and is a former deputy director at the IMF© Project Syndicate More