Tag Archives: economy

These three firms own corporate America

By Jan FichtnerEelke Heemskerk, & Javier Garcia-Bernardo 
May, 2017

A fundamental change is underway in stock market investing, and the spin-off effects are poised to dramatically impact corporate America.

In the past, individuals and large institutions mostly invested in actively managed mutual funds, such as Fidelity, in which fund managers pick stocks with the aim of beating the market. But since the financial crisis of 2008, investors have shifted to index funds, which replicate established stock indices, such as the S&P 500.

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The magnitude of the change is astounding: from 2007 to 2016, actively managed funds have recorded outflows of roughly US$1,200 billion, while index funds had inflows of over US$1,400 billion.

In the first quarter of 2017, index funds brought in more than US$200 billion – the highest quarterly value on record.

Democratising the market?

This shift, arguably the biggest investment swing in history, is due in large part to index funds’ much lower costs.

Actively managed funds analyse the market, and their managers are well paid for their labour. But the vast majority are not able to consistently beat the index.

So why pay 1% to 2% in fees every year for active funds when index funds cost a tenth of that and deliver the same performance?

Some observers have lauded this development as the “democratisation of investing”, because it has significantly lowered investor expenses.

But other impacts of this seismic shift are far from democratising. One crucial difference between the active fund and the index fund industries is that the former is fragmented, consisting of hundreds of different asset managers both small and large.

The fast-growing index sector, on the other hand, is highly concentrated. It is dominated by just three giant American asset managers: BlackRock, Vanguard and State Street – what we call the Big Three.

Lower fees aside, the rise of index funds has entailed a massive concentration of corporate ownership. Together, BlackRock, Vanguard and State Street have nearly US$11 trillion in assets under management. That’s more than all sovereign wealth funds combined and over three times the global hedge fund industry.

In a recently published paper, our CORPNET research project comprehensively mapped the ownership of the Big Three. We found that the Big Three, taken together, have become the largest shareholder in 40% of all publicly listed firms in the United States.

Figure 1: Network of ownership by the Big Three in listed US firms. (See our paper for explanation of colours).
Fichtner, Heemskerk & Garcia-Bernardo (2017)

In 2015, these 1,600 American firms had combined revenues of about US$9.1 trillion, a market capitalisation of more than US$17 trillion, and employed more than 23.5 million people.

In the S&P 500 – the benchmark index of America’s largest corporations – the situation is even more extreme. Together, the Big Three are the largest single shareholder in almost 90% of S&P 500 firms, including Apple, Microsoft, ExxonMobil, General Electric and Coca-Cola. This is the index in which most people invest.

Figure 2: Statistics about the ownership of the Big Three in listed US firms.
Fichtner, Heemskerk & Garcia-Bernardo (2017)

The power of passive investors

With corporate ownership comes shareholder power. BlackRock recently argued that legally it was not the “owner” of the shares it holds but rather acts as a kind of custodian for their investors.

That’s a technicality for lawyers to sort. What is undeniable is that the Big Three do exert the voting rights attached to these shares. Therefore, they have to be perceived as de facto owners by corporate executives.

These companies have, in fact, publicly declared that they seek to exert influence. William McNabb, chairman and CEO of Vanguard, said in 2015 that, “In the past, some have mistakenly assumed that our predominantly passive management style suggests a passive attitude with respect to corporate governance. Nothing could be further from the truth.”

When we analysed the voting behaviour of the Big Three, we found that they coordinate it through centralised corporate governance departments. This requires significant efforts because technically the shares are held by many different individual funds.

Hence, just three companies wield an enormous potential power over corporate America. Interestingly, though, we found that the Big Three vote for management in about 90% of all votes at annual general meetings, while mostly voting against proposals sponsored by shareholders (such as calls for independent board chairmen).

One interpretation is that BlackRock, Vanguard and State Street are reluctant to exert their power over corporate America. Others question whether the Big Three really want this voting power, as they primarily seek to minimise costs.

Corporate American monopoly

What are the future consequences of the Big Three’s unprecedented common ownership position?

Research is still nascent, but some economists are already arguing that this concentration of shareholder power could have negative effects on competition.

Over the past decade, numerous US industries have become dominated by only a handful of companies, from aviation to banking. The Big Three – seen together – are virtually always the largest shareholder in the few competitors that remain in these sectors.

This is the case for American Airlines, Delta, and United Continental, as it is for the banks JPMorgan Chase, Wells Fargo, Bank of America, and Citigroup. All of these corporations are part of the S&P 500, the index in which most people invest.

Their CEOs are likely well aware that the Big Three are their firm’s dominant shareholder and would take that into account when making decisions. So, arguably, airlines have less incentive to lower prices because doing so would reduce overall returns for the Big Three, their common owner.

In this way, the Big Three may be exerting a kind of emergent “structural power” over much of corporate America.

Whether or not they sought to, the Big Three have accumulated extraordinary shareholder power, and they continue to do so. Index funds are a business of scale, which means that at this point competitors will find it very difficult to gain market shares.

In many respects, the index fund boom is turning BlackRock, Vanguard and State Street into something resembling low-cost public utilities with a quasi-monopolistic position. Facing such a concentration of ownership and thus potential power, we can expect demands for increased regulatory scrutiny of corporate America’s new “de facto permanent governing board” to increase in coming years.

 

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Jan Fichtner is a Postdoctoral Researcher in Political Science at the University of Amsterdam; Eelke Heemskerk is Associate Professor Political Science, University of Amsterdam, and Javier Garcia-Bernardo is a PhD Candidate, University of Amsterdam

 

This article was originally published on The Conversation. Read the original article.

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Trump and Yellen may not be such an Odd Couple

FILE PHOTO: Federal Reserve Chair Janet Yellen speaks during a news conference after a two day Federal Open Market Committee (FOMC) meeting in Washington, U.S., March 15, 2017. REUTERS/Yuri Gripas/File Photo

By Howard Schneider and Ann Saphir
April, 2017

WASHINGTON (Reuters) – At first glance, U.S. President Donald Trump and Federal Reserve chair Janet Yellen may have little in common.

Yellen is an academic economist and veteran of Democratic administrations who is committed to an open global economy, while Trump is a real estate mogul with an electoral base suspicious of the economic order Yellen helped to create.

Yet the two may have interests in common now that Trump is president and both want to get as many Americans working as possible.

Since her appointment as Fed chair in February 2014, Yellen has kept interest rates low and she currently pledges to raise them only slowly even though unemployment, at 4.5 percent, is at its lowest in nearly ten years.

Meanwhile, Trump’s election campaign promises to cut taxes, spend money on infrastructure and deregulate banking, have helped propel a surge in the U.S. Conference Board’s consumer confidence index to its highest level since the internet stocks crash 16 years ago.

Former Fed staff and colleagues who know Yellen said Trump’s surprising remarks this week in a Wall Street Journal interview, in which he did not rule out Yellen’s reappointment to a new four year term next year, are not as outlandish as they may appear now that the president has a vested interest in keeping markets and the economy on an even keel.

And the same staff and colleagues say Yellen may well accept reappointment, despite Trump’s criticism of her during last year’s election campaign.

Many in Trump’s Republican party have called for tighter monetary policy and a less activist Fed, but “the president would not really find that useful,” said former Fed vice chair Donald Kohn.

If Trump fills three existing Federal Reserve board vacancies with people Yellen thinks she could work with, “it would be really difficult to turn down” a reappointment when her term as chair expires in February 2018.

“If she continues to do well, he’d be nuts to ditch her for an unknown quantity,” said University of California, Berkeley, economics professor Andrew Rose, a long-time colleague and co-author with Yellen of an oft-cited study of labour markets.

Yellen took over from Ben Bernanke as Fed chair in February 2014 with the U.S. economic recovery from the 2008 financial crisis still on shaky ground, and she has made no secret she puts a priority on growth in jobs and wages and a broad recovery in U.S. household wealth.

In a slow return to more normal monetary policy, Yellen has stopped the purchase of additional financial securities by the Fed and in December 2015 began raising short term interest rates for the first time in 10 years.

So far those policy shifts have been engineered with little apparent impact on job growth, and so mesh with Trump’s core election campaign promises to restore employment and earnings.

The slow rise in interest rates in the past year has also happened while U.S. stock prices have risen to record highs, though Trump has claimed the credit for himself.

U.S. President Donald Trump waves as he boards Air Force One at Joint Base Andrews outside Washington, U.S., before traveling to Palm Beach, Florida for the Good Friday holiday/Easter weekend, April 13, 2017. REUTERS/Yuri Gripas

PRECEDENT FOR FED CHAIR TO STAY ON

There is precedent for Trump to stick with a former president’s Fed chair appointment. Paul Volcker, Alan Greenspan and Ben Bernanke, the three previous Fed chairs, served at least two four year terms and were nominated by both Democratic and Republican presidents.

However it may be a more difficult step for Trump.

During last year’s election campaign, Trump accused Yellen of accepting orders from then President Obama to keep interest rates low for political reasons, and he said he would replace her as Fed chair because she is not a Republican party member.

In a particularly biting moment last year, in a campaign video advertisement, he labelled her as among the “global special interests” who had ruined life for middle America.

The Fed on Thursday said it had no response to Trump’s comments published on Wednesday on Yellen and or on whether Yellen would consider a second term.

MUCH COULD STILL GO WRONG

Some of Trump’s advisers and some Republican lawmakers want a more conservative Fed in which the chair has less power and would see a Yellen reappointment as yet another step away from his promise to “drain the swamp” of the Washington establishment.

There are also three current vacancies on the Fed’s seven member Board of Governors, and unorthodox new members could make it difficult for Yellen to manage policy or accept another four year term.

But if the choice is her consensus style or someone unproven in their ability to manage public and market expectations, “he’d be wise to reappoint her,” said Joseph Gagnon, a former Fed staffer and Berkeley colleague of Yellen’s currently at the Peterson Institute for International Economics.

“I don’t see what is in his interests to appoint someone who is going to jack up interest rates.”

Copyright Reuters 2017

(Reporting by Howard Schneider in Washington DC and Ann Saphir in San Fransisco; editing by Clive McKeef)

Related on F&O:

Federal Reserve Chairman Janet Yellen speaks at an event hosted by the Economic Club of Washington in Washington December 2, 2015. REUTERS/Joshua Roberts

REUTERS/Joshua Roberts

JANET YELLEN: an unorthodox economist. By Jason Lange

Former colleagues paint a picture of U.S. Federal Reserve chair Janet Yellen as a pragmatic economist who is ready to adjust course when necessary, but one who relies on data and economic theory rather than guesswork or hunches.

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Why Does America’s President Bother with Russia?

List of countries by GDP, Wikipedia (Screen shot)

JIM MCNIVEN: THOUGHTLINES
Spring, 2017

Like a lot of people in North America and Europe, I lived through years and years of paying attention to the Soviet Union, and later, Russia. It always seemed to me that this huge country, with the largest land area in the world, and possessor of nuclear weapons, was and is engaged in a more or less evenly-matched competition with the US and with Europe. I took for granted that Russia had a big economy to (sort of) go along with their big land mass. But then, a month or so ago, I ran across a visual diagram of the world’s economies on The Visual Capitalist. (1)

The founder and editor of this website, Jeff Fairbanks, took some data from one of the international agencies and turned it into a visual that compared the relative size of the world’s economies. Startling stuff, when shown this way.

Now, there are a lot of countries that have nukes, such as North Korea, Pakistan, India, France and China, yet these seem benign or very far away, so we pay little attention to them, except perhaps for the publicity-seeking North Koreans. Russia has always seemed close and antagonistic. Yet, other than the fact they are in the ‘nuclear club’, do the Russians deserve the attention they get? Yes, they have meddled in some of their much weaker neighbors and bit off small pieces of land, but the Chinese are eating their lunch in the former eastern Soviet Asian Republics, the ‘Stans’ as they are called. The Russians also sent their only aircraft carrier around to the eastern Mediterranean to launch planes at Syrian rebels who had no anti-aircraft capability. Do these compare with the Soviet threat that launched the Marshall Plan and NATO? I don’t think so.

What the Visual Capitalist diagram showed is that almost a quarter of the world’s GDP is generated by the US. Canada is good for 2.09% and Mexico 1.54%. Russia comes in at 1.8%, right up there with Australia. Australia!! Mexico?? Where’s the Canadian aircraft carrier? Why hasn’t Mexico invaded Belize or Guatemala recently?

Also, how can Russia have all these billionaire ‘oligarchs’ with an economy so small? Mexico has Carlos Slim and maybe one or two drug lords, but that seems small potatoes by comparison. Anyway, how does having these oligarchs buying up properties in Florida or London help the Russian economy? Who’s paying to run that aircraft carrier?

Today, the Russian economy is not exactly a powerhouse. The population has been declining to stagnant and is aging. The main Russian export has been oil and gas, but the drop in world oil prices from $100 per bbl. to $40-$50 was a real body blow. They do have a lot of computer engineers, but they seem to be misplaced, hacking US Democratic Party emails and data rather than producing neat stuff to sell to the world economy instead of all that cheap oil. My guess is that the US has more, and more sophisticated, techies than Russia and that the Russian activity around the US election is no more than another one-off surprise attack like Pearl Harbor or 9/11. Very effective — once, but it is not a wise idea in the long run to get those trusting Yankees seriously aggravated. American hackers invented this game of messing around with somebody else’s software in Iran over a decade ago. It may take a couple of years, but I anticipate nothing good for Russian software infrastructure happening after then.

Of course, the US has an Administration now with a lot of Russian ties, and it remains to be seen whether the nature of their ties is strong enough to cause its downfall. Given the latent American anti-Soviet fears and the unpopular strident anti-globalization of the President, his desire for some kind of rapprochement with Russia seems to be endangered. Many people are puzzled by it and wonder if the President sees himself as a kind of an American Putin.

Parts of the ill-coordinated Administration are overtly hostile to Russia, while the Senate, especially, is engaged in an investigation of Americans with business or political ties to Russia and the FBI has been on the trail of the Russian hackers for most of the past year. The whole thing is taking on the cast of the Watergate mess of 40 years ago. Like then, the scandal is starting to overshadow the policy initiatives of the Administration. Congress has problems in getting anything of substance passed and the simple slogans of the campaign are running into the complicated details in their realization. Maybe a rethink is in order.

If the Russian economy is barely larger than Mexico’s and smaller than Canada’s, then why not pivot back to North America? The Russians can’t offer an import market like Mexico can. Check the stats…. Canada has as much oil as Russia and it does not have a history of beating up its smaller neighbors, like Danish Greenland. Spanish is easier to learn than Russian. There is also the benefit that Canadian and Mexican ties are more palatable to Americans, since nearly half of them live within a couple of hundred miles of these countries.

Someone who can habitually deny tomorrow what he said yesterday, ought to be able to just deny a couple of more promises and assurances. This is the President who promoted a health-care bill that would hurt the very people he promised would be given better care than they have with Obamacare. He promised he would build an Israeli-style wall across the desert southwest, when it has become apparent it will be both costly and ineffective (Drones can fly over it, etc.) and is located just where most illegals do not come (They fly in to US airports and disappear.). He ought to find it easy to pivot away from Moscow, unless there are some personal entanglements we still know nothing about..

Turning his back on Russia sure would go a long way toward easing a lot of tensions inside the country. Getting friendlier with Canada and Mexico could help remake him from the pro-Russian Grinch into a pleasant grandfather figure, no matter how improbable that may seem right now.

 

 Copyright Jim McNiven 2017

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Links:

Visual Capitalist: http://www.visualcapitalist.com/74-trillion-global-economy-one-chart/

Wikipedia, List of countries by GDP: https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)

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Jim McNiven’s latest book is The Yankee Road: Tracing the Journey of the New England Tribe that Created Modern America

Who is a Yankee and where did the term come from? Though shrouded in myth and routinely used as a substitute for American, the achievements of the Yankees have influenced nearly every facet of our modern way of life.

Join author Jim McNiven as he explores the emergence and influence of Yankee culture while traversing an old transcontinental highway reaching from the Atlantic to the Pacific — US 20, which he nicknames “The Yankee Road.”

~~~

Jim McNiven

James McNiven has a PhD from the University of Michigan. He has written widely on public policy and economic development issues and is the co-author of three books. His most recent research has been about the relationship of demographic changes to Canadian regional economic development. He also has an interest in American business history and continues to teach at Dalhousie on a part-time basis.

 

 

 

 

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Facts and Opinions is a boutique journal of reporting and analysis in words and images, without borders. Independent, non-partisan and employee-owned, F&O is funded by you, our readers. We are ad-free and spam-free, and do not solicit donations from partisan organizations. Real journalism has value. Thank you for your support. Please tell others about us, and follow us on Facebook and Twitter.

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Where have all the jobs gone?

PENNEY KOME: OVER EASY
March, 2017

Photo by Marco Verch/Flickr/Creative Commons

Photo by Marco Verch/Flickr/Creative Commons

“Every would-be populist in American politics purports to defend the ‘middle class,'” wrote Barbara Ehrenreich and John Ehrenreich recently, “although there is no agreement on what it is.

Back in 1977 the pair (then married) proposed that the American economy had created a new “professional and managerial class” (PMC) that expanded the upper-middle class from its base of successful bourgeois merchants to include doctors, lawyers, accountants, journalists, professors, social workers and other professionals, as well as middle and executive managers at major corporations.  PMC members’ success showed that anybody could achieve wealth through education.

The PMC grew rapidly, from an estimated one per cent of workers in 1930 to 35 per cent of workers in 2006, just before the great crash of 2008. By the 1970s, professionals had education, confidence and enough wealth to start questioning some social effects of the capitalist economic structure.

That’s when the “capitalist class” started pushing back, cutting business workforces and pouring resources into union busting. As capitalists cut the workforce, they also cut the management class, the PMC.

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 What’s more, capitalists reached across borders and moved their businesses to cheaper labour pools in other countries, which also had weaker labour and environmental protections. That, along with the Internet,  brought near-total collapse of the PMC as well as the blue-collar job markets.

Ah, but in the 1980s and 90s, economists forecast a coming “Information Economy,” where knowledge itself would generate revenue. Just as industrialization’s much more efficient tools supplanted the cottage industries, they promised, so too would digitization produce useful goods.

Maybe all that will happen in a generation or two. To date, mostly what we’re doing is eating our own young.

Industry after industry has fallen to technical disruption. On February 7 in Canada, Dominic Blanc, who chairs Justin Trudeau’s economic advisory council, told a university conference that automation will take 40 percent of existing jobs within the next decade. 

An Investopedia article names 20 industries “threatened” by technical changes, (I’ve added a few too)  such as:

  • travel agencies found their customers making their own bookings online;
  • tax accountants lost business to tax software programs;
  • newspapers lost their subscribers and their lucrative classified advertising market to free online services;
  • Secretaries, switchboard operators and executive assistants have lost their jobs to answering systems, online calendars and tailored software;
  • bookstores have closed everywhere as people order their books online;
  • employment agencies have had to compete with online listings and networks like Linked-in;
  • postal workers have much less mail to sort or deliver;
  • the whole film manufacturing and developing industry has folded with the advent of digital cameras;
  • ATMs and online banking are replacing bank counter clerks;
  • most corporations have flattened their structures, trimming middle management;
  • self-serve check-outs are replacing cashiers;
  • pre-recorded playlists (like Clear Channel in the US) have replaced most radio DJs;
  • hotels and motels are challenged by AirBnB and HomeAway;
  • taxis and couriers are challenged by Uber and Lyft;
  • driverless cars may do away with driving jobs altogether, although right now truck driving is the second-largest occupation in North America;
  • Napster crashed the U.S. music and movie industry business model; and of course,
  • as U.S. student debts top $1.3 trillion, universities have to compete with MOOCs (Massive Open Online Courses) like Udemy, Coursera and the Khan Academy, which make higher education available even to students who can’t afford university tuition.

Hold on, because that’s just the beginning of the list. The Paris Agreement calls on fossil fuel industries to restrict current activities, let alone explore for more resources.  Banks and financial industries already compete with online services. On the horizon is “blockchain” software that promises security for anonymous financial dealings, such as Bitcoin. Meanwhile, a whole generation of computer experts is becoming obsolete as smartphones and tablets replace desktops and laptops.

Consumer spending drives 70 per cent of the economy, yet retail stores are folding in the face of Walmarts and online catalogues. Supermarkets may be next, as more people can order online from local warehouses that send out vans for local delivery. Amazon has said it will add groceries to its online products, with drone delivery within 30 minutes in urban areas.

So where are the new industries, the new jobs? Gigs like Uber and AirBnB seem almost regressive, stepping back from health and safety standards, and paying the worker even less than the industry does. Amazon’s monitored warehouse workers might well envy the bored department store clerk.

Sometimes it seems like there isn’t enough work to go around. Scratch that: the world is full of essential tasks that need to be done. What we lack are ways to pay people to do them. There certainly aren’t enough paid jobs.

On the other hand, maybe capitalism has just reached the earthly limits of constant growth. Maybe this is the tipping point forteold by 1950s futurists, when robots take over dirty and dangerous jobs, computers handle personal and corporate transactions, and people like you and me receive Basic Annual Incomes (plus housing if we need it) to keep the retail economy going.

We live in a time of paradoxes. Sixty-three million refugees are on the move globally, fleeing war and famine — famine in four countries simultaneously. At the same time, U.S. corporations are sitting on $1.9 trillion in their bank accounts, not invested in any active enterprises at all — despite the tax breaks they get as “job creators.” Everybody is waiting for the next innovation.

Here’s an innovative idea: let’s share! Let’s suppose two ideas about the futurel 1) Whatever you think of capitalism, the global economy is in flux, and will be volatile for quite a while.  2) Humans are much less inclined to ignite conflicts when they have their basic needs met.

We have a choice. We can step in and share necessities. Or we can throw up our hands in horror and let shortages cause tensions that develop into war, which is capitalism’s usual method for re-booting the economy.

Now is the time to kickstart a true sharing economy. The government could start by funding start-up groups dedicated to establishing national and local sustainable housing (and co-housing) programs, universal connectivity, and geothermal greenhouse farming everywhere across Canada.

Maybe an unemployed coal miner can’t become a computer programmer, but almost anybody can learn how to retrofit homes, from insulation to solar panels. Maybe we can use sustainable technology in a way that means that Indigenous people don’t have to pay $12 for a fresh tomato or travel far from home to get a high school education.

The Ehrenreichs say the Professional Managerial Class rose in the 1930s and started to fade early in the 21st century, lasting barely 100 years.  Instead, in recent decades, the educated middle class spiralled down into service jobs as wealth was sucked upwards.

Last January, Oxfam announced that eight individuals controlled as much wealth ($426 billion US) as all of the poorest 3.6 billion people on earth. Such are the wages of unfettered free markets. No wonder Bernie Sanders found that Americans are finally receptive to the phrase, “democratic socialism.”

Copyright Penney Kome 2017

Contact:  komeca AT yahoo.com

Read more F&O columns by Penney Kome here

Related works on F&O:

Technology, not trade, real job-killer, by Tom Regan   Column

I hate to be the bearer of bad news but those jobs U.S. President Donald Trump promised aren’t coming back. And for others, there’s a very good chance that soon more people will be out of work. It won’t happen because of production going to China or Mexico, or and an immigrant or refugee taking jobs. It will be because of technology.

From F&O’s archives, a Focus on Artificial Intelligence:

Figure-1The chilling significance of AlphaGo. By Sheldon Fernandez  Magazine

In March, a computer named AlphaGo played the human world champion in a five-game match of Go, the ancient board game often described as the ‘Far East cousin’ of chess. That AlphaGo triumphed provoked curiosity and bemusement in the public — but is seen as hugely significant in the artificial intelligence and computer science communities. Computer engineer Sheldon Fernandez explains why.

The Sunflower Robot is a prototype that can carry objects and provide reminders and notifications to assist people in their daily lives. It uses biologically inspired visual signals and a touch screen, located in front of its chest, to communicate and interact with users. Photo by Thomas Farnetti for Wellcome/Mosaic, Creative CommonsA one-armed robot will look after me until I die. By Geoff Watts Magazine

I am persuaded by the rational argument for why machine care in my old age should be acceptable, but find the prospect distasteful – for reasons I cannot, rationally, account for. But that’s humanity in a nutshell: irrational. And who will care for the irrational human when they’re old? Care-O-bot, for one; it probably doesn’t discriminate.

Product and graphic designer Ricky Ma, 42, gives a command to his life-size robot ''Mark 1'', modelled after a Hollywood star, in his balcony which serves as his workshop in Hong Kong, China March 31, 2016. Ma, a robot enthusiast, spent a year-and-a half and more than HK$400,000 ($51,000) to create the humanoid robot to fulfil his childhood dream. REUTERS/Bobby Yip SEARCH "ROBOT STAR" FOR THIS STORY. SEARCH "THE WIDER IMAGE" FOR ALL STORIESBuilding a humanoid Hollywood Star. By Bobby Yip  Report

The rise of robots and artificial intelligence are among disruptive labor market changes that the World Economic Forum projects will lead to a net loss of 5.1 million jobs over the next five years. Where will they come from? Why, we can make them ourselves. Or at least some of us can, and do.

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Penney KomePenney Kome is co-editor of Peace: A Dream Unfolding (Sierra Club Books 1986), with a foreward by the Nobel-winning presidents of International Physicians for Prevention of Nuclear War.

Read her bio on Facts and Opinions.

Contact:  komeca AT yahoo.com

 

 

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Facts and Opinions is a boutique journal, of reporting and analysis in words and images, without borders. Independent, non-partisan and employee-owned, F&O is funded by you, our readers. We are ad-free and spam-free, and we do not solicit donations from partisan organizations. Please visit our Subscribe page or use the PayPal button below to chip in at least .27 for one story or $1 for a day site pass. Tell others about us, and follow us on Facebook and Twitter.

 

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Europe’s ‘multi-morbidity:’ John Keane in conversation with Claus Offe

JOHN KEANE, University of Sydney 
February 2017

The writer-political thinker Albert Camus once commented that the true source of strength of modern Europe has been its ability to live on its contradictions, flourish amid its differences and, under pressure, to reinvent itself as “a civilisation on which the whole world depends even when rejecting it”.

Claus Offe, courtesy of John Keane

Claus Offe, courtesy of John Keane

The remark was anti-fascist, a sharp knife designed to cut through fantasies of European unification, by ideology or military force. It expressed equal contempt for the violence of European colonialism, which Camus knew well from his native Algeria, and for all forms of nationalism. “I love my country too much to be a nationalist” was his shorthand formula for casting doubt on the nationalist fetish of borders, nation state jurisdictions and pompous talk of the “essence” and “purity” of nations and national identity.

A generation later, this whole democratic way of thinking about a post-nationalist and diverse Europe is besieged by an assortment of menacing trends, Claus Offe explains over lunch during my recent visit to Berlin. A sage septuagenarian with a gift for no-nonsense political analysis, Offe is among Europe’s best-known public intellectuals. He specialises in straight talk. So I begin by asking him to summarise what’s going on in Europe.

“Our times resemble the 1920s”, he replies. “We’re witnessing the accumulation of various crises that are rapidly putting the whole European project under tremendous pressure. Illiberal forces are on the rise. Middle classes are shrinking. There’s populist hatred of ‘the establishment’ and fascination with strong leaders. Europe is suffering multi-morbidity. Our problems, and the promises that are being broken, are now far greater than anything money could possibly buy, even if large sums of EU transfer funds were suddenly made available, and spent wisely, in a spirit of solidarity.”

Economic stagnation

An obvious source of the present European malaise is economic stagnation, which has now lasted nearly a decade. Offe recalls the work of the American economist Robert Gordon, who’s shown that in the history of modern capitalism, the median economic growth is less than 1% per annum, and who calculates that in the face of “headwinds”, such as a rapidly ageing population, soaring inequality and festering social ills, a new round of innovation-driven growth is highly improbable.

“Europe’s economic problems aren’t over”, Offe tells me. “Stagnation is combined with rising household, investor and public sector debt. Italy has an unstable banking system. Income and wealth inequality gaps are still widening. Product and process innovations that favour both labour and capital are in short supply. Unemployment stops millions of people from servicing their debts. And there’s a worrying new statistical category: young Europeans who are classified as NEET because they are ‘not in education, employment or training’.”

It’s said that bad luck comes in big bundles. Europeans are feeling the pinch of the proverb in this unfolding set of crises, he says. The social injustices and destabilising effects of a stagnant economy are one thing.

There’s also the Putin factor. The military assertiveness of the Russian regime is spreading fear and division among the people of Poland and the Baltic states. It’s also undermined the EU’s Eastern Neighbourhood Policy.

“The Russian occupation of Crimea and parts of eastern Ukraine is destabilising the Ukraine state and producing military and international law conflicts that we’ve not seen, apart from the post-Yugoslav wars, since the end of World War Two.”

Russian aggression compounds the swelling uncertainty and failure in other policy areas, Offe continues. It’s as if there’s a conspiracy of trends determined to bring ill fortune to Europe. He gives another example: the unhappy coincidence of sluggish growth and high unemployment with the escalating refugee crisis. The combination is proving to be “a real godsend for the populist right in Europe”.

Refugee crisis and populist trouble

Populist movements and parties, he says, are trying to stir up public trouble by stringing together the problems of stagnation, refugees and threats of terrorism into a single story. He’s adamant that their simple-minded story-telling must be resisted. In this worsening European crisis, in matters of intellect and politics, recognising the complexities of the multiple dynamics really matters.

Offe underscores the point by noting that Europe’s entanglement in the ongoing wars in Libya, Iraq and Syria, in its neighbouring regions, is among these multiple dynamics. Europe is at war. It’s been drawn into the devilish “confrontation between the two regional powers of Iran and Saudi Arabia” and the military rivalries of Russia, Turkey, and the USA, “each with its own and openly conflicting military agenda”.

The spread of IS-inspired jihadist “suicide missions and random killings of civilians” is another matter. He tells me that some acts of violence, including the December attack on the Christmas market in Berlin, are products of “administrative and police failure”. Contrary to the populists, most acts of violence are “home-grown”, he insists. “This violence has little or nothing directly to do with refugees. The discomforting truth is that the big majority of known attackers are citizens, and often natives, of EU member states, often with family roots in the Middle East and North African region.”

The trouble for Europe is that the in-flow of refugees “is not going to end any time soon”, he emphasises. It’s not just that “human beings are a migratory species” or that “building fences on salt water is for technical reasons impossible”. The policies of the European Union are in disarray. Its governing capacity is weak.

The Dublin agreement, which placed the responsibility of settling refugees on the states where they first arrived in Europe, was defeated by wall builders in Hungary, Slovenia, Macedonia and other states. The European Home Affairs Ministers agreement (in September 2015) to allocate at least 120,000 stateless peoples throughout the EU was stillborn; more than a year later, figures from the European commission show that only 8,162 people have found a permanent home. The Schengen Agreement, an open-border arrangement that enables passport-free movement of citizens across most of the EU bloc, an arrangement that was among the “most effective and popular accomplishments of European integration”, is crumbling.

The EU-Turkey deal, signed in March 2016, is not working either, and probably can’t be made to work. Refugees continue to arrive in large numbers in Greece and Italy, where they face appalling living conditions; the promised funding of several billion euros hasn’t yet been provided to the satisfaction of Turkey, which is hardly a “safe third country”. Yet more refugees from the war zones are surely on their way, Offe says, driven from their homes by uncivil wars, food shortages and climate change. “People aren’t frivolously leaving their home country. They leave because their situations are intolerable, and because Europe is an attractive safe haven. Syria’s just the tip of the iceberg. Waves of Kurdish refugees may be next.”

With more than 1.3 million Syrians now believed to be trapped by the al-Assad government’s “surrender or die” tactics in Idlib and at least 40 other besieged communities across the country, Offe’s assessment hardly seems exaggerated. With an additional 1.1 million Syrians facing the threat of siege, Frauke Petry of Germany’s Alternative für Deutschland (AfD), Marine Le Pen, Geert Wilders, Nigel Farage and other populist xenophobes are rubbing their hands together in glee.

Offe detests their tactics, and their thinking. It’s not just that “Europe’s political elites still haven’t understood that the gates of ‘fortress Europe’ can’t be fully closed”, or that most European governments are callously flouting humanitarian norms. The framing of refugees as foreigners who don’t belong in a Europe that is supposedly “full” simply doesn’t make sense, Offe says. “If all the refugees who’ve so far arrived had been settled fairly in the member states, then the share of refugees in each country would be less than 1% of their total population.” That’s hardly “an unbearable economic burden”.

Offe is quick to point out as well that populists are normally silent about the mounting costs of wall building, border protection and potentially lost trade. He cites a recent European Commission report that notes that lost business, steeper freight and commuter costs, interruptions to supply chains, and government outlays for tighter border policing will probably cost the whole European economy at least 18 billion euros each year.

Populists, he notes, are equally silent about the long-term economic benefits of migration. When refugees are seen in terms of labour markets, a subject he’s studied and written about for nearly half a century, the new arrivals are on balance long-term assets. “I don’t underestimate the challenges of integration. It will take a generation. Many refugees are burdened by bad memories of terrible atrocities. More than half come equipped with only elementary school qualifications. But Syrian medical doctors and many other refugees are unpaid-for human capital. Through time, they’re going to fill the demographic and labour-market gaps of rapidly ageing European societies”.

The German burden

The galling fact is that Germany, home to more than a million refugees, has been forced disproportionately to bear the costs of the catastrophes suffered by people from war-ravaged countries. Data collected and analysed by the Pew Research Centre and Eurostat, the European Union’s statistical agency, show that Germany gave refuge to more than 1.1 million people in 2015, the highest annual number received by a European country during the past 30 years. The year 2016 saw another 300,000 people arrive in Germany.

So our conversation shifts to Angela Merkel, and her impending political fate. For someone whose leftist sympathies run deep, Offe’s empathy with her migration policies is surprising. On this issue, he’s clearly on her side. He’s scathing about Dutch Freedom Party leader Geert Wilders (who in response to the Berlin attack tweeted a provocative photo of Angela Merkel, with blood on her hands) and Hungarian Prime Minister Viktor Orbán and his dismissal of the refugee issue as a “German problem” and Chancellor Merkel’s policy as “moral imperialism”.

Offe makes a prediction that doubles as a warning: the refusal of the majority of European member states to bear their fair share of the burden is going to affect them, too. His warning has a sting in its tail. This time around, he says, pausing, Angela Merkel miscalculated the degree of member state support for burden sharing. But Germany’s leadership in the refugee crisis “unwittingly shows that when Brussels fails to deliver effective policies Berlin and Germany’s leadership can’t substitute for the European Union”.

But what about those loud voices, within Germany’s AfD and elsewhere, who are saying that heavy intakes of mainly Muslim refugees are threatening European civilisation? Offe grows visibly irritated. “That’s the battle cry of the populists: all these ‘foreigners’ make ‘us’ feel like ‘foreigners in our own country’”.

The odd thing, he notes, is that “ethno-nationalist and xenophobic passions” are weakest in the very countries (Italy and Greece) that for geographic reasons are being forced to bear the costs of wave after wave of refugees. The pattern throughout Europe, he says, is that Islamophobia and other forms of bigotry are strongest where there are fewest refugees. He gives the point a sharp twist: “It’s the demagogue populists and their supporters who are most urgently in need of being ‘integrated’ into societies that are ever more diverse.”

Brexit and European disintegration

Our short time together is ending, so I press Claus Offe to say a few words about Brexit, and the dangers posed to the EU by potentially ruinous state rivalries.

Offe admits he’s worried about new fractious fissures that are developing, for instance between Portugal, Spain, Italy and Greece, “the loser countries of the Euro and debt crisis”, and the rest of the EU. The disagreements over refugee policy between Brussels and the Visegrad (“V4”) countries (Poland, Czech Republic, Slovakia and Hungary) are similarly ominous, he agrees. But he reserves his full exasperation for the Brexit drama: the events triggered by the decision of UK voters (actually only 37.5% of them to leave the EU.

The wise public intellectual suddenly reveals his upset about the political damage that’s being done to Europe by the Brexit decision. “Let’s imagine we’re living in a house with others”, he begins, “and a resident proposed a vote on whether or not we should continue staying in the house. We’d naturally expect a discussion of alternative housing arrangements before the vote was taken. We’d need to know where we’re moving. Incredibly, that didn’t happen prior to the UK referendum.”

Offe rounds on the “fear-driven, truth-doesn’t-matter propaganda” of the Brexit campaign. His harshest words are reserved for the motives and miscalculations of David Cameron. The UK referendum “was the political equivalent of what’s known in penal law as ‘criminal negligence’” led by a Prime Minister “trying to stem the tide of nationalist populism”, says Offe. “How could he so recklessly force a whole country to play Russian roulette against itself?”

I remind Offe that Cameron’s been punished politically for his foolishness; after all, he was forced to resign, in disgrace. “Yes,” says Offe, invoking Winston Churchill’s biting quip, “but the trouble with committing political suicide is that you live to regret it.” Then follows a remark about suicide: “Suicide requires courage, but in this case the decision to hold a referendum was driven by cowardice.” Cowardice, I ask? “The cowardice of a governing elite that shirked its political responsibilities as representatives of the public good”, he replies. “And the cowardice of voters not held accountable for such a momentous and complex decision that will surely inflict massive economic burdens and long-lasting political disadvantages upon the whole British population”.

The whole saga “stinks on ice”, Offe says. Not only does it raise such practical questions as what will be the fate of the two million European citizens currently working in the UK, or who will pay the pensions of British citizens currently employed at the European Commission, Brexit is compounding public anxieties about the future. Flights of capital from the country have begun. And Brexit exposes the deadly dangers of using a referendum to handle complex and consequential matters. “Parliaments use safety procedures, such as several readings of bills, confidence votes and super-majority requirements,” he says. “In this Brexit business, such procedures were entirely absent at Westminster.”

Now that the UK Supreme Court has ruled (by an 8-3 majority) that Theresa May’s government must win the support of both houses of parliament before triggering Article 50, new battles are bound to happen.

The Scottish National Party will undoubtedly seek substantial amendments to the proposed legislation; the Liberal Democrats will likely vote against Article 50 unless there’s a guarantee of another referendum on the final deal reached between the UK and the EU. How the Lords will react is unclear. Populists are of course wetting themselves with excitement. “Now Parliament must deliver will of the people – we will trigger A50 by end of March. Forward we go!”, tweeted Foreign Secretary Boris Johnson.

A viable alternative

But in which direction? And with what results? Whatever transpires, we agree that the whole messy Brexit process is spreading anxiety throughout the whole of the EU, so I put my farewell question to Offe.

When measured in terms of media coverage and public commentary, paradoxically, European integration is deepening, I say. Not since World War II has the subject of Europe gripped the hearts and minds of so many millions of people. Yet most things otherwise look rather bleak, as in the 1920s; the menace of European disintegration is getting the upper hand, isn’t it? How long will it be before Europe becomes a burden to the rest of the world, I ask? Can Europe, as Camus had hoped, once again prove it’s capable of finding energy in its contradictions and differences and, under pressure, reinvent itself as a place the whole world respects?

Claus Offe surprises me with his ebullience, or what he calls his “cautious realism”. Europe may be on its knees, he says, but it’s not down and out. “Those who draw analogies between the 1930s and our times are mistaken,” he says. “Yes, our present troubles bear some resemblance to the economic disruption and political disaffection of the 1920s. But there are no Führers waiting in the wings. There’s widespread public commitment to democracy. Even fringe neo-fascist parties like Germany’s NPD (National demokratische Partei Deutschlands] are forced to camouflage their doubts about democracy.”

“And the setbacks of the moment are but the flipside of eclipsed hopes”, he says. “Neo-liberal globalisation has momentarily triumphed over a robust welfare state. It’s fashionable to ignore the economic benefits of integration and to think that tightened national borders are a bulwark of security. But I’m convinced none of this can replace the hope for an integrated Europe that provides for the security and prosperity of its citizens in ways that disjointed nation states can’t any longer do.”

I ask him what he has in mind. “There’s only one viable general alternative”, he replies. “The banks and states have been bailed out. Now it’s time to rescue workers, the unemployed, young people, pensioners and other citizens who’ve been most severely hurt by financial crisis and stagnation. Money’s cheaper than ever, austerity has failed.”

He pauses, for effect. “So imagine the founding of a new Ministry for Social Affairs and Social Security in Brussels that pays each member state 50% of the unemployment insurance and retraining costs they currently bear. Then imagine a multi-billion euro infrastructure investment programme in such fields as communications, transportation and energy, backed by a strengthened European Parliament and a Commission-led government of a federal Europe. Such initiatives would undoubtedly increase public support for European integration. They would encourage citizens to feel that Europe mustn’t be lost, that it’s possible to move forwards, towards a system of transnational social security and representative democracy never before tried anywhere else on our planet.”

Creative Commons


Born in Berlin in 1940, Claus Offe has published widely and researched and taught at many institutions throughout the world. He was most recently Professor of Political Sociology at the Hertie School of Governance in Berlin (2006 – 2012). Among his best-known recent books are Reflections on America: Tocqueville, Weber and Adorno in the United States (2005), Europe Entrapped (2015) and (with Ulrich Preuss) Citizens in Europe (2016).

This article is part of the Democracy Futures series, a joint global initiative with the Sydney Democracy Network. The project aims to stimulate fresh thinking about the many challenges facing democracies in the 21st century.The Conversation

John Keane is a Professor of Politics, at the University of Sydney. This article was originally published on The Conversation. Read the original article.

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German economist challenges orthodoxy, inequality

“There is a feeling that we are superstars, that we are doing everything right and that no one should criticise us. I see this as a problem.”

 

By Noah Barkin 
March, 2016

Marcel Fratzscher, chairman of the German Institute for Economic Research, speaks during an interview with Reuters in his office in Berlin, Germany REUTERS/Fabrizio Bensch

Marcel Fratzscher, chairman of the German Institute for Economic Research, speaks during an interview with Reuters in his office in Berlin, Germany REUTERS/Fabrizio Bensch

BERLIN (Reuters) – Marcel Fratzscher is not your typical German economist.

Educated at Oxford and Harvard, he often writes the first drafts of his papers in English. When asked whose work inspired him, he names Amartya Sen, a Nobel Prize-winning Indian economist and philosopher.

And in contrast to many of his domestic counterparts, Fratzscher does not believe the German economy and the special brand of rules-based governance – Ordnungspolitik – that has shaped it since World War Two is a model that others should emulate.

In fact, the 45-year-old president of the German Institute for Economic Research (DIW) in Berlin, has made a name for himself in recent years by exposing flaws in the German economy and daring policymakers to fix them.

In his 2014 book “Die Deutschland Illusion”, he argued that what was being hailed by politicians and the media as a second German economic miracle was little more than a mirage that masked deep-seated problems, including a massive investment shortage that had left German roads and bridges crumbling.

The ensuing debate prompted reluctant Finance Minister Wolfgang Schaeuble to earmark funds for infrastructure.

On Monday March 14, Fratzscher releases a new book, called “Verteilungskampf” (The Distribution Battle), which tackles what he says is another fantasy: the notion that Germany is a nirvana of economic and social equality – more caring Scandinavia than callous United States.

In the book he calls Germany a country of “enormous inequality” in which income, wealth and opportunities are distributed “more unequally than in almost any other industrialised country”.

“We live in denial in Germany,” Fratzscher said in an interview in his Berlin office near the Gendarmenmarkt square.

Some economists may challenge his argument. Germans earn more per capita than virtually all of their European counterparts, have one of the highest savings rates in the bloc and are enjoying record-high employment levels.

A report by the Paris-based Organisation for Economic Cooperation and Development (OECD) last year showed Germany scored better than average on most measures of inequality.

But Fratzscher clearly hopes the book will encourage politicians to tackle reforms of the German education and tax systems, which he says have fuelled inequality.

It seems sure to make waves at a time when many Germans are worried that an influx of refugees could erode their living standards. On Saturday, Der Spiegel magazine did a cover story linked to the book with the title: “Divided Nation”.

“Germany in 2016: the rich are getting richer and the poor remain poor,” Spiegel said.

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Marcel Fratzscher, president of the German Institute for Economic Research (DIW), introduces his new book "The Distribution Battle - Why Inequality in Germany is Rising" as he speaks during an interview with Reuters in his office in Berlin, Germany, March 7, 2016. REUTERS/Fabrizio Bensch

Marcel Fratzscher, president of the German Institute for Economic Research (DIW), introduces his new book “The Distribution Battle – Why Inequality in Germany is Rising” as he speaks during an interview with Reuters in his office in Berlin, Germany, March 7, 2016. REUTERS/Fabrizio Bensch

ANTI-SINN

“Verteilungskampf” also establishes Fratzscher, who ran the international policy analysis division at the European Central Bank (ECB) before joining the DIW in 2013, as one of the most influential economists in Germany – a successor of sorts to Hans-Werner Sinn, the president of the Munich-based Ifo institute, who is due to retire at the end of March.

Sinn, with his signature chin strap beard, has been a staunch defender of German orthodoxy. He opposed bailouts for Greece and other struggling euro members during the bloc’s financial crisis and condemned steps by the ECB to stem the turmoil, sometimes finding support from politicians like Schaeuble.

Fratzscher is the anti-Sinn. He broke with the mainstream in lauding the economic benefits of the euro at the height of the crisis and now talks about how an influx of hundreds of thousands of refugees will be good for German growth.

His stances have drawn criticism from conservative voices such as the Frankfurter Allgemeine Zeitung newspaper. In the world of German economists, some view him as an apostate.

“He’s one of the few economists in Germany who is challenging the traditional conservative view represented by people like Sinn,” said Henrik Enderlein, a professor of political economy at the Hertie School of Governance.

Fratzscher jokingly refers to himself as a “bad German” because he studied abroad.

“If there is a common thread to my books it’s the message that Germany has been somewhat arrogant, that it has been deluding itself,” Fratzscher said.

“There is a feeling that we are superstars, that we are doing everything right and that no one should criticise us. I see this as a problem.”

Copyright Reuters 2016

(Editing by Louise Ireland)

You might be interested in:

Class war returns, this time as a global issue — JONATHAN MANTHORPE: International Affairs, January 8, 2016

Now for Another Debt Crisis —  JIM MCNIVEN, April, 2015

 ~~~

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F&O’s CONTENTS page is updated each Saturday. Sign up for emailed announcements of new work on our free FRONTLINES blog; find evidence-based reporting in Reports; commentary, analysis and creative non-fiction in OPINION-FEATURES; and image galleries in PHOTO-ESSAYS. If you value journalism please support F&O, and tell others about us.

——-

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Snow, science, solitude: Ny-Alesund, Norway

By Anna Filipova and Alister Doyle
January, 2016

Ny-Alesund, Norway (Reuters) — A Norwegian chain of Arctic islands is seeking to turn numbing cold and total winter darkness into a draw for visitors who usually only venture north for the midnight sun during fleeting summers.

A scupted bust of Norwegian explorer Roald Amundsen is seen at the scientific base of Ny Alesund, in Norway, October 18, 2015. A Norwegian chain of islands just 1,200 km (750 miles) from the North Pole is trying to promote new technologies, tourism and scientific research in a shift from high-polluting coal mining that has been a backbone of the remote economy for decades. Norway suspended most coal mining on the Svalbard archipelago last year because of the high costs, and is looking for alternative jobs for about 2,200 inhabitants on islands where polar bears roam. Part of the answer may be to boost science: in Ny-Alesund, the world's most northerly permanent non-military settlement, scientists from 11 nations including Norway, Germany, France, Britain, India and South Korea study issues such as climate change. The presence of Norway, a NATO member, also gives the alliance a strategic foothold in the far north, of increasing importance after neighbouring Russia annexed Ukraine's Crimea region in 2014. REUTERS/Anna FilipovaPICTURE 09 OF 19 - SEARCH "SVALBARD FILIPOVA" FOR ALL IMAGES


A scupted bust of Norwegian explorer Roald Amundsen is seen at the scientific base of Ny Alesund, in Norway, October 18, 2015. A Norwegian chain of islands just 1,200 km (750 miles) from the North Pole is trying to promote new technologies, tourism and scientific research in a shift from high-polluting coal mining that has been a backbone of the remote economy for decades. Norway suspended most coal mining on the Svalbard archipelago last year because of the high costs, and is looking for alternative jobs for about 2,200 inhabitants on islands where polar bears roam. Part of the answer may be to boost science: in Ny-Alesund, the world’s most northerly permanent non-military settlement, scientists from 11 nations including Norway, Germany, France, Britain, India and South Korea study issues such as climate change. The presence of Norway, a NATO member, also gives the alliance a strategic foothold in the far north, of increasing importance after neighbouring Russia annexed Ukraine’s Crimea region in 2014. REUTERS/Anna Filipova

The new focus on winter in the Svalbard archipelago, 1,200 kms from the North Pole, is part of a drive to attract tourism and environmental research to diversify the economy after a century of dependence on now-failing coal mines.

Winter tourism can include night-time dogsled rides, visits to ice caves or cross-country skiing, with guns to protect against polar bears. And the northern lights – flickering colours in the sky generated by charged particles from the sun – are only visible in the dark.

“We’re advertising the exotic side of being in the dark,” said Arild Olsen, mayor of Longyearbyen, the main settlement with 2,200 inhabitants. Its winter temperatures are around minus 10 degrees Celsius.

Science is another part of the islands’ efforts to reinvent themselves.

Ice has been receding fast in the Arctic because of climate change. In Ny-Alesund, the world’s most northerly permanent non-military settlement, scientists from 11 nations including China, India, South Korea, Norway, Germany, France, Britain and Norway have research stations.

Norway mothballed the main coal mine on Svalbard last year, which had been due to produce 1.9 million tonnes a year until 2019, after mounting losses.

The right-wing government will issue a plan to parliament this spring about the long-term future of the islands.

Ny-Alesund was originally built around a coal mine which shut after 21 people died in an accident in 1962. Old wooden buildings still stand, and a train that used to transport coal stands marooned in the snow.

“I think we’ll manage quite okay after coal,” Olsen said, adding that fishing, for crabs and cod, could also help. Tourist numbers reached 60,000 last year, compared with 41,000 in 2008.

Unni Steinsmo, head of the board of Kings Bay AS, which runs Ny-Alesund, said scientists were carrying out more winter research, such as into how plants and fish adapt to the polar darkness. The fjord by Ny-Alesund has been ice-free in recent winters, making marine research easier, she said.

“Research is definitely part of the solution” for Svalbard, said Steinsmo.

In this remote location, world events also have their part to play.

Norway, a member of NATO, wants to maintain settlements on the islands partly as a strategic foothold in the Arctic, all the more so since its neighbour Russia annexed Ukraine’s Crimea region in 2014.

(Text editing by Brian McGee)

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An old locomotive train that was used for transporting coal is preserved as a monument at Ny-Alesund, in Svalbard, Norway, October 13, 2015. A Norwegian chain of islands just 1,200 km (750 miles) from the North Pole is trying to promote new technologies, tourism and scientific research in a shift from high-polluting coal mining that has been a backbone of the remote economy for decades. Norway suspended most coal mining on the Svalbard archipelago last year because of the high costs, and is looking for alternative jobs for about 2,200 inhabitants on islands where polar bears roam. Part of the answer may be to boost science: in Ny-Alesund, the world's most northerly permanent non-military settlement, scientists from 11 nations including Norway, Germany, France, Britain, India and South Korea study issues such as climate change. The presence of Norway, a NATO member, also gives the alliance a strategic foothold in the far north, of increasing importance after neighbouring Russia annexed Ukraine's Crimea region in 2014.    REUTERS/Anna Filipova
PICTURE 12 OF 19 - SEARCH "SVALBARD FILIPOVA" FOR ALL IMAGES

An old locomotive train that was used for transporting coal is preserved as a monument at Ny-Alesund, in Svalbard, Norway, October 13, 2015. A Norwegian chain of islands just 1,200 km (750 miles) from the North Pole is trying to promote new technologies, tourism and scientific research in a shift from high-polluting coal mining that has been a backbone of the remote economy for decades. Norway suspended most coal mining on the Svalbard archipelago last year because of the high costs, and is looking for alternative jobs for about 2,200 inhabitants on islands where polar bears roam. Part of the answer may be to boost science: in Ny-Alesund, the world’s most northerly permanent non-military settlement, scientists from 11 nations including Norway, Germany, France, Britain, India and South Korea study issues such as climate change. The presence of Norway, a NATO member, also gives the alliance a strategic foothold in the far north, of increasing importance after neighbouring Russia annexed Ukraine’s Crimea region in 2014. REUTERS/Anna Filipova

Dogs, some that are family pets and others that are used for dog sledges, are seen waiting in their yard outside the settlement in Longyerbyean, Svalbard, Norway, October 22, 2015. A Norwegian chain of islands just 1,200 km (750 miles) from the North Pole is trying to promote new technologies, tourism and scientific research in a shift from high-polluting coal mining that has been a backbone of the remote economy for decades. Norway suspended most coal mining on the Svalbard archipelago last year because of the high costs, and is looking for alternative jobs for about 2,200 inhabitants on islands where polar bears roam. Part of the answer may be to boost science: in Ny-Alesund, the world's most northerly permanent non-military settlement, scientists from 11 nations including Norway, Germany, France, Britain, India and South Korea study issues such as climate change. The presence of Norway, a NATO member, also gives the alliance a strategic foothold in the far north, of increasing importance after neighbouring Russia annexed Ukraine's Crimea region in 2014.    REUTERS/Anna FilipovaPICTURE 11 OF 19 - SEARCH "SVALBARD FILIPOVA" FOR ALL IMAGES


Dogs, some that are family pets and others that are used for dog sledges, are seen waiting in their yard outside the settlement in Longyerbyean, Svalbard, Norway, October 22, 2015. A Norwegian chain of islands just 1,200 km (750 miles) from the North Pole is trying to promote new technologies, tourism and scientific research in a shift from high-polluting coal mining that has been a backbone of the remote economy for decades. Norway suspended most coal mining on the Svalbard archipelago last year because of the high costs, and is looking for alternative jobs for about 2,200 inhabitants on islands where polar bears roam. Part of the answer may be to boost science: in Ny-Alesund, the world’s most northerly permanent non-military settlement, scientists from 11 nations including Norway, Germany, France, Britain, India and South Korea study issues such as climate change. The presence of Norway, a NATO member, also gives the alliance a strategic foothold in the far north, of increasing importance after neighbouring Russia annexed Ukraine’s Crimea region in 2014. REUTERS/Anna Filipova

Radar dish and antennas systems are seen at the European Incoherent Scatter Scientific Association facility on Breinosa, Svalbard, in Norway, October 24, 2015. A Norwegian chain of islands just 1,200 km (750 miles) from the North Pole is trying to promote new technologies, tourism and scientific research in a shift from high-polluting coal mining that has been a backbone of the remote economy for decades. Norway suspended most coal mining on the Svalbard archipelago last year because of the high costs, and is looking for alternative jobs for about 2,200 inhabitants on islands where polar bears roam. Part of the answer may be to boost science: in Ny-Alesund, the world's most northerly permanent non-military settlement, scientists from 11 nations including Norway, Germany, France, Britain, India and South Korea study issues such as climate change. The presence of Norway, a NATO member, also gives the alliance a strategic foothold in the far north, of increasing importance after neighbouring Russia annexed Ukraine's Crimea region in 2014.    REUTERS/Anna Filipova  TPX IMAGES OF THE DAYPICTURE 13 OF 19 - SEARCH "SVALBARD FILIPOVA" FOR ALL IMAGES

Radar dish and antennas systems are seen at the European Incoherent Scatter Scientific Association facility on Breinosa, Svalbard, in Norway, October 24, 2015. A Norwegian chain of islands just 1,200 km (750 miles) from the North Pole is trying to promote new technologies, tourism and scientific research in a shift from high-polluting coal mining that has been a backbone of the remote economy for decades. Norway suspended most coal mining on the Svalbard archipelago last year because of the high costs, and is looking for alternative jobs for about 2,200 inhabitants on islands where polar bears roam. Part of the answer may be to boost science: in Ny-Alesund, the world’s most northerly permanent non-military settlement, scientists from 11 nations including Norway, Germany, France, Britain, India and South Korea study issues such as climate change. The presence of Norway, a NATO member, also gives the alliance a strategic foothold in the far north, of increasing importance after neighbouring Russia annexed Ukraine’s Crimea region in 2014. REUTERS/Anna Filipova 

An old locomotive train that was used for transporting coal is preserved as a monument at Ny-Alesund, in Svalbard, Norway, October 11, 2015. A Norwegian chain of islands just 1,200 km (750 miles) from the North Pole is trying to promote new technologies, tourism and scientific research in a shift from high-polluting coal mining that has been a backbone of the remote economy for decades. Norway suspended most coal mining on the Svalbard archipelago last year because of the high costs, and is looking for alternative jobs for about 2,200 inhabitants on islands where polar bears roam. Part of the answer may be to boost science: in Ny-Alesund, the world's most northerly permanent non-military settlement, scientists from 11 nations including Norway, Germany, France, Britain, India and South Korea study issues such as climate change. The presence of Norway, a NATO member, also gives the alliance a strategic foothold in the far north, of increasing importance after neighbouring Russia annexed Ukraine's Crimea region in 2014.    REUTERS/Anna Filipova
PICTURE 14 OF 19 - SEARCH "SVALBARD FILIPOVA" FOR ALL IMAGES

An old locomotive train that was used for transporting coal is preserved as a monument at Ny-Alesund, in Svalbard, Norway, October 11, 2015. A Norwegian chain of islands just 1,200 km (750 miles) from the North Pole is trying to promote new technologies, tourism and scientific research in a shift from high-polluting coal mining that has been a backbone of the remote economy for decades. Norway suspended most coal mining on the Svalbard archipelago last year because of the high costs, and is looking for alternative jobs for about 2,200 inhabitants on islands where polar bears roam. Part of the answer may be to boost science: in Ny-Alesund, the world’s most northerly permanent non-military settlement, scientists from 11 nations including Norway, Germany, France, Britain, India and South Korea study issues such as climate change. The presence of Norway, a NATO member, also gives the alliance a strategic foothold in the far north, of increasing importance after neighbouring Russia annexed Ukraine’s Crimea region in 2014. REUTERS/Anna Filipova

Breinosa is seen from the research Zeppelin Observatory that is operated by operated by the Norwegian Polar Institute and Norwegian Institute for Air Research in Svalbard in Norway October 17, 2015. A Norwegian chain of islands just 1,200 km (750 miles) from the North Pole is trying to promote new technologies, tourism and scientific research in a shift from high-polluting coal mining that has been a backbone of the remote economy for decades. Norway suspended most coal mining on the Svalbard archipelago last year because of the high costs, and is looking for alternative jobs for about 2,200 inhabitants on islands where polar bears roam. Part of the answer may be to boost science: in Ny-Alesund, the world's most northerly permanent non-military settlement, scientists from 11 nations including Norway, Germany, France, Britain, India and South Korea study issues such as climate change. The presence of Norway, a NATO member, also gives the alliance a strategic foothold in the far north, of increasing importance after neighbouring Russia annexed Ukraine's Crimea region in 2014.    REUTERS/Anna Filipova  TPX IMAGES OF THE DAYPICTURE 01 OF 19 - SEARCH "SVALBARD FILIPOVA" FOR ALL IMAGES

Breinosa is seen from the research Zeppelin Observatory that is operated by operated by the Norwegian Polar Institute and Norwegian Institute for Air Research in Svalbard in Norway October 17, 2015. A Norwegian chain of islands just 1,200 km (750 miles) from the North Pole is trying to promote new technologies, tourism and scientific research in a shift from high-polluting coal mining that has been a backbone of the remote economy for decades. Norway suspended most coal mining on the Svalbard archipelago last year because of the high costs, and is looking for alternative jobs for about 2,200 inhabitants on islands where polar bears roam. Part of the answer may be to boost science: in Ny-Alesund, the world’s most northerly permanent non-military settlement, scientists from 11 nations including Norway, Germany, France, Britain, India and South Korea study issues such as climate change. The presence of Norway, a NATO member, also gives the alliance a strategic foothold in the far north, of increasing importance after neighbouring Russia annexed Ukraine’s Crimea region in 2014. REUTERS/Anna Filipova

Workers housing of Longyerbyean, Svalbard are seen covered in snow October 23, 2015. A Norwegian chain of islands just 1,200 km (750 miles) from the North Pole is trying to promote new technologies, tourism and scientific research in a shift from high-polluting coal mining that has been a backbone of the remote economy for decades. Norway suspended most coal mining on the Svalbard archipelago last year because of the high costs, and is looking for alternative jobs for about 2,200 inhabitants on islands where polar bears roam. Part of the answer may be to boost science: in Ny-Alesund, the world's most northerly permanent non-military settlement, scientists from 11 nations including Norway, Germany, France, Britain, India and South Korea study issues such as climate change. The presence of Norway, a NATO member, also gives the alliance a strategic foothold in the far north, of increasing importance after neighbouring Russia annexed Ukraine's Crimea region in 2014.    REUTERS/Anna Filipova  TPX IMAGES OF THE DAYPICTURE 05 OF 19 - SEARCH "SVALBARD FILIPOVA" FOR ALL IMAGES

Workers housing of Longyerbyean, Svalbard are seen covered in snow October 23, 2015. A Norwegian chain of islands just 1,200 km (750 miles) from the North Pole is trying to promote new technologies, tourism and scientific research in a shift from high-polluting coal mining that has been a backbone of the remote economy for decades. Norway suspended most coal mining on the Svalbard archipelago last year because of the high costs, and is looking for alternative jobs for about 2,200 inhabitants on islands where polar bears roam. Part of the answer may be to boost science: in Ny-Alesund, the world’s most northerly permanent non-military settlement, scientists from 11 nations including Norway, Germany, France, Britain, India and South Korea study issues such as climate change. The presence of Norway, a NATO member, also gives the alliance a strategic foothold in the far north, of increasing importance after neighbouring Russia annexed Ukraine’s Crimea region in 2014. REUTERS/Anna Filipova

Dawn at the scientific base of Ny-Alesund, Svalbard, Norway October 14, 2015. A Norwegian chain of islands just 1,200 km (750 miles) from the North Pole is trying to promote new technologies, tourism and scientific research in a shift from high-polluting coal mining that has been a backbone of the remote economy for decades. Norway suspended most coal mining on the Svalbard archipelago last year because of the high costs, and is looking for alternative jobs for about 2,200 inhabitants on islands where polar bears roam. Part of the answer may be to boost science: in Ny-Alesund, the world's most northerly permanent non-military settlement, scientists from 11 nations including Norway, Germany, France, Britain, India and South Korea study issues such as climate change. The presence of Norway, a NATO member, also gives the alliance a strategic foothold in the far north, of increasing importance after neighbouring Russia annexed Ukraine's Crimea region in 2014.    REUTERS/Anna FilipovaPICTURE 03 OF 19 - SEARCH "SVALBARD FILIPOVA" FOR ALL IMAGES


Dawn at the scientific base of Ny-Alesund, Svalbard, Norway October 14, 2015. A Norwegian chain of islands just 1,200 km (750 miles) from the North Pole is trying to promote new technologies, tourism and scientific research in a shift from high-polluting coal mining that has been a backbone of the remote economy for decades. Norway suspended most coal mining on the Svalbard archipelago last year because of the high costs, and is looking for alternative jobs for about 2,200 inhabitants on islands where polar bears roam. Part of the answer may be to boost science: in Ny-Alesund, the world’s most northerly permanent non-military settlement, scientists from 11 nations including Norway, Germany, France, Britain, India and South Korea study issues such as climate change. The presence of Norway, a NATO member, also gives the alliance a strategic foothold in the far north, of increasing importance after neighbouring Russia annexed Ukraine’s Crimea region in 2014. REUTERS/Anna Filipova

Radar antennas at the European Incoherent Scatter Scientific Association (EISCAT) facility on Breinosa, Svalbard, Norway October 24, 2015. A Norwegian chain of islands just 1,200 km (750 miles) from the North Pole is trying to promote new technologies, tourism and scientific research in a shift from high-polluting coal mining that has been a backbone of the remote economy for decades. Norway suspended most coal mining on the Svalbard archipelago last year because of the high costs, and is looking for alternative jobs for about 2,200 inhabitants on islands where polar bears roam. Part of the answer may be to boost science: in Ny-Alesund, the world's most northerly permanent non-military settlement, scientists from 11 nations including Norway, Germany, France, Britain, India and South Korea study issues such as climate change. The presence of Norway, a NATO member, also gives the alliance a strategic foothold in the far north, of increasing importance after neighbouring Russia annexed Ukraine's Crimea region in 2014.    REUTERS/Anna FilipovaPICTURE 02 OF 19 - SEARCH "SVALBARD FILIPOVA" FOR ALL IMAGES


Radar antennas at the European Incoherent Scatter Scientific Association (EISCAT) facility on Breinosa, Svalbard, Norway October 24, 2015. A Norwegian chain of islands just 1,200 km (750 miles) from the North Pole is trying to promote new technologies, tourism and scientific research in a shift from high-polluting coal mining that has been a backbone of the remote economy for decades. Norway suspended most coal mining on the Svalbard archipelago last year because of the high costs, and is looking for alternative jobs for about 2,200 inhabitants on islands where polar bears roam. Part of the answer may be to boost science: in Ny-Alesund, the world’s most northerly permanent non-military settlement, scientists from 11 nations including Norway, Germany, France, Britain, India and South Korea study issues such as climate change. The presence of Norway, a NATO member, also gives the alliance a strategic foothold in the far north, of increasing importance after neighbouring Russia annexed Ukraine’s Crimea region in 2014. REUTERS/Anna Filipova

The old radio station for the mining town which is now a telegraph museum in Ny-Alesund Svalbard, Norway, October 13, 2015. A Norwegian chain of islands just 1,200 km (750 miles) from the North Pole is trying to promote new technologies, tourism and scientific research in a shift from high-polluting coal mining that has been a backbone of the remote economy for decades. Norway suspended most coal mining on the Svalbard archipelago last year because of the high costs, and is looking for alternative jobs for about 2,200 inhabitants on islands where polar bears roam. Part of the answer may be to boost science: in Ny-Alesund, the world's most northerly permanent non-military settlement, scientists from 11 nations including Norway, Germany, France, Britain, India and South Korea study issues such as climate change. The presence of Norway, a NATO member, also gives the alliance a strategic foothold in the far north, of increasing importance after neighbouring Russia annexed Ukraine's Crimea region in 2014.    REUTERS/Anna FilipovaPICTURE 06 OF 19 - SEARCH "SVALBARD FILIPOVA" FOR ALL IMAGES



The old radio station for the mining town which is now a telegraph museum in Ny-Alesund Svalbard, Norway, October 13, 2015. A Norwegian chain of islands just 1,200 km (750 miles) from the North Pole is trying to promote new technologies, tourism and scientific research in a shift from high-polluting coal mining that has been a backbone of the remote economy for decades. Norway suspended most coal mining on the Svalbard archipelago last year because of the high costs, and is looking for alternative jobs for about 2,200 inhabitants on islands where polar bears roam. Part of the answer may be to boost science: in Ny-Alesund, the world’s most northerly permanent non-military settlement, scientists from 11 nations including Norway, Germany, France, Britain, India and South Korea study issues such as climate change. The presence of Norway, a NATO member, also gives the alliance a strategic foothold in the far north, of increasing importance after neighbouring Russia annexed Ukraine’s Crimea region in 2014. REUTERS/Anna Filipova

A weather station is seen in Ny Alesund, one of the most northerly settlements in the world, a base for international scientists, Svalbard October 17, 2015. A Norwegian chain of islands just 1,200 km (750 miles) from the North Pole is trying to promote new technologies, tourism and scientific research in a shift from high-polluting coal mining that has been a backbone of the remote economy for decades. Norway suspended most coal mining on the Svalbard archipelago last year because of the high costs, and is looking for alternative jobs for about 2,200 inhabitants on islands where polar bears roam. Part of the answer may be to boost science: in Ny-Alesund, the world's most northerly permanent non-military settlement, scientists from 11 nations including Norway, Germany, France, Britain, India and South Korea study issues such as climate change. The presence of Norway, a NATO member, also gives the alliance a strategic foothold in the far north, of increasing importance after neighbouring Russia annexed Ukraine's Crimea region in 2014.    REUTERS/Anna FilipovaPICTURE 07 OF 19 - SEARCH "SVALBARD FILIPOVA" FOR ALL IMAGES


A weather station is seen in Ny Alesund, one of the most northerly settlements in the world, a base for international scientists, Svalbard October 17, 2015. A Norwegian chain of islands just 1,200 km (750 miles) from the North Pole is trying to promote new technologies, tourism and scientific research in a shift from high-polluting coal mining that has been a backbone of the remote economy for decades. Norway suspended most coal mining on the Svalbard archipelago last year because of the high costs, and is looking for alternative jobs for about 2,200 inhabitants on islands where polar bears roam. Part of the answer may be to boost science: in Ny-Alesund, the world’s most northerly permanent non-military settlement, scientists from 11 nations including Norway, Germany, France, Britain, India and South Korea study issues such as climate change. The presence of Norway, a NATO member, also gives the alliance a strategic foothold in the far north, of increasing importance after neighbouring Russia annexed Ukraine’s Crimea region in 2014. REUTERS/Anna Filipova

Snow is seen on the Ny-Alesund research centre, that was formerly a coal mining town October 19, 2015. A Norwegian chain of islands just 1,200 km (750 miles) from the North Pole is trying to promote new technologies, tourism and scientific research in a shift from high-polluting coal mining that has been a backbone of the remote economy for decades. Norway suspended most coal mining on the Svalbard archipelago last year because of the high costs, and is looking for alternative jobs for about 2,200 inhabitants on islands where polar bears roam. Part of the answer may be to boost science: in Ny-Alesund, the world's most northerly permanent non-military settlement, scientists from 11 nations including Norway, Germany, France, Britain, India and South Korea study issues such as climate change. The presence of Norway, a NATO member, also gives the alliance a strategic foothold in the far north, of increasing importance after neighbouring Russia annexed Ukraine's Crimea region in 2014.    REUTERS/Anna FilipovaPICTURE 08 OF 19 - SEARCH "SVALBARD FILIPOVA" FOR ALL IMAGES


Snow is seen on the Ny-Alesund research centre, that was formerly a coal mining town October 19, 2015. A Norwegian chain of islands just 1,200 km (750 miles) from the North Pole is trying to promote new technologies, tourism and scientific research in a shift from high-polluting coal mining that has been a backbone of the remote economy for decades. Norway suspended most coal mining on the Svalbard archipelago last year because of the high costs, and is looking for alternative jobs for about 2,200 inhabitants on islands where polar bears roam. Part of the answer may be to boost science: in Ny-Alesund, the world’s most northerly permanent non-military settlement, scientists from 11 nations including Norway, Germany, France, Britain, India and South Korea study issues such as climate change. The presence of Norway, a NATO member, also gives the alliance a strategic foothold in the far north, of increasing importance after neighbouring Russia annexed Ukraine’s Crimea region in 2014. REUTERS/Anna Filipova

The northernmost non-military post office in the world in the Kings Bay research station in Ny-Alesund, Svalbard, Norway, October 18, 2015.  A Norwegian chain of islands just 1,200 km (750 miles) from the North Pole is trying to promote new technologies, tourism and scientific research in a shift from high-polluting coal mining that has been a backbone of the remote economy for decades. Norway suspended most coal mining on the Svalbard archipelago last year because of the high costs, and is looking for alternative jobs for about 2,200 inhabitants on islands where polar bears roam. Part of the answer may be to boost science: in Ny-Alesund, the world's most northerly permanent non-military settlement, scientists from 11 nations including Norway, Germany, France, Britain, India and South Korea study issues such as climate change. The presence of Norway, a NATO member, also gives the alliance a strategic foothold in the far north, of increasing importance after neighbouring Russia annexed Ukraine's Crimea region in 2014.    REUTERS/Anna FilipovaPICTURE 10 OF 19 - SEARCH "SVALBARD FILIPOVA" FOR ALL IMAGES



The northernmost non-military post office in the world in the Kings Bay research station in Ny-Alesund, Svalbard, Norway, October 18, 2015. A Norwegian chain of islands just 1,200 km (750 miles) from the North Pole is trying to promote new technologies, tourism and scientific research in a shift from high-polluting coal mining that has been a backbone of the remote economy for decades. Norway suspended most coal mining on the Svalbard archipelago last year because of the high costs, and is looking for alternative jobs for about 2,200 inhabitants on islands where polar bears roam. Part of the answer may be to boost science: in Ny-Alesund, the world’s most northerly permanent non-military settlement, scientists from 11 nations including Norway, Germany, France, Britain, India and South Korea study issues such as climate change. The presence of Norway, a NATO member, also gives the alliance a strategic foothold in the far north, of increasing importance after neighbouring Russia annexed Ukraine’s Crimea region in 2014. REUTERS/Anna Filipova

Warehouses and the old part of the Ny-Alesund, Norway settlement from the coal mining period which closed in 1963, are seen October 11, 2015. A Norwegian chain of islands just 1,200 km (750 miles) from the North Pole is trying to promote new technologies, tourism and scientific research in a shift from high-polluting coal mining that has been a backbone of the remote economy for decades. Norway suspended most coal mining on the Svalbard archipelago last year because of the high costs, and is looking for alternative jobs for about 2,200 inhabitants on islands where polar bears roam. Part of the answer may be to boost science: in Ny-Alesund, the world's most northerly permanent non-military settlement, scientists from 11 nations including Norway, Germany, France, Britain, India and South Korea study issues such as climate change. The presence of Norway, a NATO member, also gives the alliance a strategic foothold in the far north, of increasing importance after neighbouring Russia annexed Ukraine's Crimea region in 2014.    REUTERS/Anna FilipovaPICTURE 15 OF 19 - SEARCH "SVALBARD FILIPOVA" FOR ALL IMAGES


Warehouses and the old part of the Ny-Alesund, Norway settlement from the coal mining period which closed in 1963, are seen October 11, 2015. A Norwegian chain of islands just 1,200 km (750 miles) from the North Pole is trying to promote new technologies, tourism and scientific research in a shift from high-polluting coal mining that has been a backbone of the remote economy for decades. Norway suspended most coal mining on the Svalbard archipelago last year because of the high costs, and is looking for alternative jobs for about 2,200 inhabitants on islands where polar bears roam. Part of the answer may be to boost science: in Ny-Alesund, the world’s most northerly permanent non-military settlement, scientists from 11 nations including Norway, Germany, France, Britain, India and South Korea study issues such as climate change. The presence of Norway, a NATO member, also gives the alliance a strategic foothold in the far north, of increasing importance after neighbouring Russia annexed Ukraine’s Crimea region in 2014. REUTERS/Anna Filipova

Dinghies and research vessels are pictured in the small harbour near Ny-Alesund on Spitsbergen, Norway October 15, 2015. A Norwegian chain of islands just 1,200 km (750 miles) from the North Pole is trying to promote new technologies, tourism and scientific research in a shift from high-polluting coal mining that has been a backbone of the remote economy for decades. Norway suspended most coal mining on the Svalbard archipelago last year because of the high costs, and is looking for alternative jobs for about 2,200 inhabitants on islands where polar bears roam. Part of the answer may be to boost science: in Ny-Alesund, the world's most northerly permanent non-military settlement, scientists from 11 nations including Norway, Germany, France, Britain, India and South Korea study issues such as climate change. The presence of Norway, a NATO member, also gives the alliance a strategic foothold in the far north, of increasing importance after neighbouring Russia annexed Ukraine's Crimea region in 2014.    REUTERS/Anna FilipovaPICTURE 16 OF 19 - SEARCH "SVALBARD FILIPOVA" FOR ALL IMAGES


Dinghies and research vessels are pictured in the small harbour near Ny-Alesund on Spitsbergen, Norway October 15, 2015. A Norwegian chain of islands just 1,200 km (750 miles) from the North Pole is trying to promote new technologies, tourism and scientific research in a shift from high-polluting coal mining that has been a backbone of the remote economy for decades. Norway suspended most coal mining on the Svalbard archipelago last year because of the high costs, and is looking for alternative jobs for about 2,200 inhabitants on islands where polar bears roam. Part of the answer may be to boost science: in Ny-Alesund, the world’s most northerly permanent non-military settlement, scientists from 11 nations including Norway, Germany, France, Britain, India and South Korea study issues such as climate change. The presence of Norway, a NATO member, also gives the alliance a strategic foothold in the far north, of increasing importance after neighbouring Russia annexed Ukraine’s Crimea region in 2014. REUTERS/Anna Filipova

An overview of the residential and research settlement areas for scientists at the Kings Bay in Ny-Alesund, Svalbard, Norway, October 15, 2015. A Norwegian chain of islands just 1,200 km (750 miles) from the North Pole is trying to promote new technologies, tourism and scientific research in a shift from high-polluting coal mining that has been a backbone of the remote economy for decades. Norway suspended most coal mining on the Svalbard archipelago last year because of the high costs, and is looking for alternative jobs for about 2,200 inhabitants on islands where polar bears roam. Part of the answer may be to boost science: in Ny-Alesund, the world's most northerly permanent non-military settlement, scientists from 11 nations including Norway, Germany, France, Britain, India and South Korea study issues such as climate change. The presence of Norway, a NATO member, also gives the alliance a strategic foothold in the far north, of increasing importance after neighbouring Russia annexed Ukraine's Crimea region in 2014.    REUTERS/Anna FilipovaPICTURE 17 OF 19 - SEARCH "SVALBARD FILIPOVA" FOR ALL IMAGES



An overview of the residential and research settlement areas for scientists at the Kings Bay in Ny-Alesund, Svalbard, Norway, October 15, 2015. A Norwegian chain of islands just 1,200 km (750 miles) from the North Pole is trying to promote new technologies, tourism and scientific research in a shift from high-polluting coal mining that has been a backbone of the remote economy for decades. Norway suspended most coal mining on the Svalbard archipelago last year because of the high costs, and is looking for alternative jobs for about 2,200 inhabitants on islands where polar bears roam. Part of the answer may be to boost science: in Ny-Alesund, the world’s most northerly permanent non-military settlement, scientists from 11 nations including Norway, Germany, France, Britain, India and South Korea study issues such as climate change. The presence of Norway, a NATO member, also gives the alliance a strategic foothold in the far north, of increasing importance after neighbouring Russia annexed Ukraine’s Crimea region in 2014. REUTERS/Anna Filipova

Snow covers Broggerdalen mountain near Ny-Alesund, Svalbard, Norway October 11, 2015. A Norwegian chain of islands just 1,200 km (750 miles) from the North Pole is trying to promote new technologies, tourism and scientific research in a shift from high-polluting coal mining that has been a backbone of the remote economy for decades. Norway suspended most coal mining on the Svalbard archipelago last year because of the high costs, and is looking for alternative jobs for about 2,200 inhabitants on islands where polar bears roam. Part of the answer may be to boost science: in Ny-Alesund, the world's most northerly permanent non-military settlement, scientists from 11 nations including Norway, Germany, France, Britain, India and South Korea study issues such as climate change. The presence of Norway, a NATO member, also gives the alliance a strategic foothold in the far north, of increasing importance after neighbouring Russia annexed Ukraine's Crimea region in 2014.    REUTERS/Anna FilipovaPICTURE 18 OF 19 - SEARCH "SVALBARD FILIPOVA" FOR ALL IMAGES


Snow covers Broggerdalen mountain near Ny-Alesund, Svalbard, Norway October 11, 2015. A Norwegian chain of islands just 1,200 km (750 miles) from the North Pole is trying to promote new technologies, tourism and scientific research in a shift from high-polluting coal mining that has been a backbone of the remote economy for decades. Norway suspended most coal mining on the Svalbard archipelago last year because of the high costs, and is looking for alternative jobs for about 2,200 inhabitants on islands where polar bears roam. Part of the answer may be to boost science: in Ny-Alesund, the world’s most northerly permanent non-military settlement, scientists from 11 nations including Norway, Germany, France, Britain, India and South Korea study issues such as climate change. The presence of Norway, a NATO member, also gives the alliance a strategic foothold in the far north, of increasing importance after neighbouring Russia annexed Ukraine’s Crimea region in 2014. REUTERS/Anna Filipova

Low clouds are seen in the Kings Bay of Ny-Alesund, Svalbard, Norway, October 12, 2015. A Norwegian chain of islands just 1,200 km (750 miles) from the North Pole is trying to promote new technologies, tourism and scientific research in a shift from high-polluting coal mining that has been a backbone of the remote economy for decades. Norway suspended most coal mining on the Svalbard archipelago last year because of the high costs, and is looking for alternative jobs for about 2,200 inhabitants on islands where polar bears roam. Part of the answer may be to boost science: in Ny-Alesund, the world's most northerly permanent non-military settlement, scientists from 11 nations including Norway, Germany, France, Britain, India and South Korea study issues such as climate change. The presence of Norway, a NATO member, also gives the alliance a strategic foothold in the far north, of increasing importance after neighbouring Russia annexed Ukraine's Crimea region in 2014.    REUTERS/Anna FilipovaPICTURE 19 OF 19 - SEARCH "SVALBARD FILIPOVA" FOR ALL IMAGES


Low clouds are seen in the Kings Bay of Ny-Alesund, Svalbard, Norway, October 12, 2015. A Norwegian chain of islands just 1,200 km (750 miles) from the North Pole is trying to promote new technologies, tourism and scientific research in a shift from high-polluting coal mining that has been a backbone of the remote economy for decades. Norway suspended most coal mining on the Svalbard archipelago last year because of the high costs, and is looking for alternative jobs for about 2,200 inhabitants on islands where polar bears roam. Part of the answer may be to boost science: in Ny-Alesund, the world’s most northerly permanent non-military settlement, scientists from 11 nations including Norway, Germany, France, Britain, India and South Korea study issues such as climate change. The presence of Norway, a NATO member, also gives the alliance a strategic foothold in the far north, of increasing importance after neighbouring Russia annexed Ukraine’s Crimea region in 2014. REUTERS/Anna Filipova

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Analysis: In crisis, interests trump European values

 

By Paul Taylor
January, 2016

BRUSSELS (Reuters) – Europe is torn between upholding its values and pursuing its interests in the multiple crises over refugees, challenges to the rule of law, relations with Russia and Turkey, and Britain’s membership that are shaking the European Union.

Political and economic interests are mostly prevailing over the EU’s declared values and governance standards, but it is not clear that the outcomes are any more effective.

Migrants queue to enter a tent that serves as a waiting room at the the Berlin Office of Health and Social Affairs (LAGESO), in Berlin, Germany, January 5, 2016. REUTERS/Hannibal Hanschke

Migrants queue to enter a tent that serves as a waiting room at the the Berlin Office of Health and Social Affairs (LAGESO), in Berlin, Germany, January 5, 2016. REUTERS/Hannibal Hanschke

 

To critics including human rights campaigners, Europe is too willing to betray its principles. To supporters, it is “growing up” and acting less naively.

“Politics is the art of the possible, but this is very different from the conception of Europe promoted for the last half century,” said Michael Leigh, senior adviser at the German Marshall Fund think-tank on transatlantic relations and a former senior European Commission official.

After more than a million migrants flooded into Europe last year, EU governments are divided on whether the bloc should give priority to its commitment to give asylum to refugees, or whether the main aim should be to toughen border controls and pay other countries to keep potential asylum-seekers at bay.

German Chancellor Angela Merkel is under fire at home and in Europe for having taken the moral high ground by welcoming hundreds of thousands of refugees.

The sullen reluctance of most of the EU – not just central European states but core partners like France – to take in quotas of refugees to which they agreed months ago is driven by fear of a domestic political backlash.

Brussels faced another of those values-versus-interests dilemmas last week when the executive European Commission had to decide whether to launch disciplinary action over Polish laws shackling the constitutional court and the state media.

The EU was widely criticised for failing to act to uphold its values of democracy and the rule of law when Hungarian Prime Minister Viktor Orban launched a similar crackdown in 2010 on the judiciary, the media and civil society organisations.

The Commission did take a first step on Poland but stressed it wanted to resolve the issue in dialogue with Warsaw and there was no likelihood of moving to sanctions such as suspending the country’s EU voting rights or access to funds.

Within the EU executive, officials are reluctant to appear to be lecturing a democratically elected Polish government as it goes about implementing campaign promises.

After big demonstrations in Warsaw in defence of liberal values, many in Brussels are pinning their hopes on the self-correcting strength of Polish democracy. Others are looking for someone else to take the lead such as the Council of Europe’s Venice Commission, a pan-European constitutional watchdog.

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REASONS FOR EXPEDIENCY

Major EU members Germany and Britain have mostly kept quiet about Poland on pragmatic grounds. Berlin wants to preserve as cooperative a relationship as possible with the more nationalist government of Jaroslaw Kaczynski’s Law and Justice party.

London needs Polish goodwill as it renegotiates sensitive aspects of its own EU membership. Eager to curb the access of EU migrants – mostly Poles – to in-work welfare benefits to deter further mass immigration to Britain, it is the last country likely to criticise Warsaw over civil rights.

Indeed, Europe’s willingness to seek a formula to permit Britain to deny fellow EU citizens who enter its labour market the same benefits as its own nationals highlights a willingness to compromise on core values for the sake of expediency – in this case to try to ensure Britons vote to remain in the EU in a forthcoming referendum.

While the European Parliament, which sees itself as Europe’s conscience on human rights, is likely to criticise Poland in a special debate this week which itself is a form of political punishment, other EU bodies are cautious.

“With the migration crisis and … with Europe’s current fragility, it would be a big mistake to lose Poland,” a senior European Commission official said.

Similar mixed feelings guided the EU’s schizophrenic response to Russia’s 2014 seizure and annexation of Crimea and moves to destabilise eastern Ukraine.

While the bloc did agree under German leadership to impose sectoral sanctions that have pushed the Russian economy into recession and restricted its access to capital, there are charges of double standards when it comes to energy.

EU regulatory pressure forced Russia to cancel a South Stream gas pipeline it had planned to build to supply southern European countries bypassing Ukraine. But Germany is resisting pressure to desist from building a second sub-Baltic Nord Stream pipeline directly from Russia, also bypassing Kiev.

Italy, Bulgaria and others that lost out on South Stream accuse Berlin of hypocrisy, while Poland and Baltic states say doubling Nord Stream would negate EU support for Ukraine.

Germany is trying to sidestep the arguments about values and pointing to Moscow’s historic role as a reliable supplier.

With Turkey, the EU is drawing a veil over its criticism of deteriorating civil liberties, media freedom and judicial independence in a candidate country for the sake of its vital interest in stemming the refugee flow to Europe.

The European Commission delayed a critical report on Turkish compliance with EU standards until after parliamentary elections in November to avoid upsetting President Tayyip Erdogan.

EU officials acknowledge they have muted criticism of Ankara because they are desperate for Turkish help on the refugees.

Across north Africa, the EU is downplaying the human rights and good governance elements of its policy towards neighbours such as Egypt, Morocco and Algeria – a stumbling block to dealing with authoritarian rulers – due to Europe’s need for security cooperation against Islamist militants.

“We are not abandoning our values but we are perhaps being more pragmatic,” said an EU official involved in managing those relationships, speaking on condition of anonymity.

Copyright Reuters 2016

(Editing by Mark Potter)

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Class war returns, this time as a global issue

JONATHAN MANTHORPE: International Affairs
January 8, 2016

By the time 2016 is two weeks old, each one of Canada’s 100 best paid corporate chief executives will have pocketed more than three times as much as the average Canadian can expect to take home in the entire year.

On average, Canada’s top 100 CEOs banked $8.96 million* each in 2014 while other Canadians earned on average $48,636. Thus in only four days the plutocrats were paid the equivalent of the average annual salary of the rest of us.

These are the headlines in a new report by the Canadian Centre for Policy Alternatives. This is, of course, a “left-leaning” institution, and under normal circumstances that would be a useful caveat for readers to keep in mind. But the issue of income and wealth disparity between a minute elite and the rest of us is now a matter of global concern, well beyond tub-thumping by the political left or right.

Canada and many other mature democracies, previously characterised by the broad social harmony that defines equitable societies, are being sucked into a new world order. We are joining the rapidly rising developing countries into what looks increasingly like a system of global oligarchy. We are entering a world in which most wealth, and with it political power, is in the firm grasp of a tiny minority of people who have acquired their status either by luck, imagination, skill, or — in far too many cases — feral instincts.

And the minority is tiny. A report by Credit Suisse late last year said half the world’s entire human wealth is now owned by only one per cent of people. This followed a stream of equally disturbing analyses by other prestigious organizations that have started looking seriously at the implications of global disparity and inequality. One said that the world’s three wealthiest people possess assets worth more than those of the poorest 48 nations combined. Another said the world’s 85 richest individuals have a combined wealth equal to that of the bottom half of the world’s population: about 3.5 billion people.

This is a shift in the structure of human society with very real and unappetizing implications. The prospect that young Canadians will never be able to afford to buy or even rent a suitable home in Vancouver or Toronto because of the assault on the property market by foreign oligarchs, mostly Chinese, is one obvious fall-out. Russian oligarchs’ money is having a similar effect on the housing market in New York and London, where Middle Eastern petro-dollars are also a major influence.

But there are many deeper and darker long-term concerns. Oligarchy is a system that tends to entrench itself ever more firmly as the very wealthy bend the political and social system to their own interests. Just look at the campaign for this year’s presidential election in the United States. Paul Krugman, the Nobel prize winning economist, recently noted in a scathing attack on the influence of money on American politics that half the contributions to this year’s presidential campaigns have come from fewer than 200 families.

Even in the most well-established democracies, money buys influence.

The wealth gap between the rich and the rest has been growing since about 1990 and the end of the Cold War. In the last 25 years in the United States, for example, Census Bureau statistics show the real incomes of the vast majority of people, including the most highly skilled and educated, have hardly shifted.

Meanwhile, the pay for the CEOs of the 350 largest companies in the U.S., which was 20 times that of an average worker in 1989, was 273 times higher in 2012. The gap has continued widening since then.
The picture is similar in most developed industrial countries and even more exaggerated in developing countries or those emerging from Marxist economic management or extreme socialism such as China, Russia and India.

The post-Cold War globalization of the economy has had the remarkable success of halving from two billion to one billion the number of people in the world living in absolute poverty. But at the same time, disparity in rapidly developing countries such as China, India and Brazil has rocketed ahead even faster than the improvement in general livelihoods.

Inequity in China has for well over a decade been over the red line where disparity triggers social upheaval. This is usually measured by what is known as the GINI Coefficient. This system looks at several factors in the distribution of wealth in a society and then ranks them from zero to one. Zero is perfect equity where wealth is equally distributed among the population and one is where all assets are in the hands of one person.

Most analysts reckon that 0.4 is the red line, and that once a society becomes more unequal than that, social disruption will ensue. China’s GINI number has been fudged by the Beijing authorities for several years, like many of the country’s other embarrassing statistics. Beijing admits to a GINI number of 0.45, though various outside estimates put it much higher, some well over 0.7.

Canada’s GINI Coefficient number is about 0.32, which sounds impressive until one looks at it in context.
In the 1980s Canada was a much more equitable country than it is now, with the GINI rolling along between 0.28 and 0.29 for much of the decade. As in the rest of the world, the end of the Cold War triggered the era when the rich got much, much richer.

A recent report by the Conference Board of Canada divided the Canadian population into five income brackets – quintiles – and looked at how they had done over the past 25 years.

The richest group, the top quintile, now owns 39.1 per cent of Canada’s economic pie, up from 36.5 per cent in 1990. This top group is the only section of society to have benefited in the last 25 years. The wealth of every other economic group of Canadians has either remained stagnant or shrunk.

The picture is no prettier if we look beyond Canada’s borders. The same Conference Board report compares Canada’s GINI ranking with those of our 17 fellow industrialized nations. Canada comes in at 12th, between Switzerland and Japan. As might be expected, it is the northern European countries Denmark, Norway, Belgium, Finland and Sweden in that order who have the least wealth disparity, though they also have suffered attacks of plutocracy.

The main spark for the current stream of analysis of disparity was the 2008-2009 global recession, set off by the collapse of several of the main pillars of capitalism in the U.S. Questions about the sustainability, durability and suitability of American-style capitalism spurred the Occupy movement, which mounted demonstrations at several international economic summits. These sometimes violent protests gave an alarming glimpse into the future if the issues of social instability caused by wealth disparity are not addressed.

The collapse and the protests therefore launched much scholastic study, such as the 2013 tome Capital in the 21st Century, by French economist Thomas Piketty. Piketty’s 700-page manifesto boils down to the argument that when the rate of return on capital is greater than the rate of growth of an economy, widening economic disparity between the rich and the rest is inevitable.

It is a compelling argument that has set off much political and academic exploration of the socially acceptable limits of capitalism and free market economics.

There are many lists, some long, some short, setting out what has triggered the drive towards global oligarchy. But there are two associated events at the core. One was the collapse of the Soviet Union and the realization both in the old Soviet Bloc and in China that classic communist central economic planning doesn’t work. The opening of these countries to a form of managed free market economics had a profound effect, especially in China where it opened to the world a vast storehouse of cheap labour used to working under conditions of near slavery. Western investors jumped at this opportunity with little concern for the repercussions on their own societies. Manufacturing industries in the North Atlantic basin migrated east in droves.

This economic globalization is the second factor in growing disparity. In every case one looks at, the fruits of globalization have gone disproportionately to the oligarch classes.

An interesting example is Taiwan, once like Canada a highly equitable society with a GINI Coefficient ranking of around 0.3. That was until the current Taipei government of President Ma Ying-jeou, which came to power in 2008, embarked on a drive to improve relations with China by removing economic barriers to trade and investment. This resulted in an Economic Co-operation Framework Agreement, which came into force early in 2010.

The agreement did indeed boost the economic relationship across the Taiwan Strait. The bottom line numbers look good. But the profits went into the pockets of already rich industrialists in Taiwan while the jobs of many of the island’s 23 million people disappeared into China. Taiwan’s GINI Coefficient now stands at over 0.5 according to several analysts, well over the red line.

Still, unlike China, Taiwan is a democracy and next weekend the island’s voters will choose a new president and parliament. All the indications are they will back the opposition Democratic Progressive Party, which has serious doubts that cozying up to China under its current regime is a good idea for anyone.

Copyright Jonathan Manthorpe 2015

Contact: jonathan.manthorpe@gmail.com

*Funds in Canadian dollars

Please address queries about syndication/republishing this column to jonathan.manthorpe@gmail.com

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Manthorpe B&WJonathan Manthorpe is a founding columnist with Facts and Opinions and is the author of the journal’s International Affairs column. Manthorpe has been a foreign correspondent and international affairs columnist for nearly 40 years. Manthorpe’s  nomadic career began in the late 1970s as European Bureau Chief for The Toronto Star, the job that took Ernest Hemingway to Europe in the 1920s. In the mid-1980s Manthorpe became European Correspondent for Southam News. In the following years Manthorpe was sent by Southam News, the internal news agency for Canada’s largest group of metropolitan daily newspapers, to be the correspondent in Africa and then Asia. Between postings Manthorpe spent a few years based in Ottawa focusing on intelligence and military affairs, and the United Nations. Since 1998 Manthorpe has been based in Vancouver, but has travelled frequently on assignment to Asia, Europe and Latin America.

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JANET YELLEN: an unorthodox economist

Federal Reserve Chairman Janet Yellen speaks at an event hosted by the Economic Club of Washington in Washington December 2, 2015. REUTERS/Joshua Roberts

Federal Reserve Chairman Janet Yellen speaks at an event hosted by the Economic Club of Washington in Washington December 2, 2015. REUTERS/Joshua Roberts

By Jason Lange 
December, 2015

WASHINGTON (Reuters) – Janet Yellen is guiding the Federal Reserve towards its first rate rise in a decade armed with traditional economic models that some economists worry could fail her in a world of massive money printing and near zero rates.

The 69-year-old economist argues the time is coming for a rate-lift-off even though inflation has yet to accelerate, trusting decades of studies that suggest a tight labour market eventually creates inflationary pressures.

It is a risky wager considering that global inflation is at historic lows and many central banks remain in an easing mode as their economies struggle to get any traction.

If she is right, Yellen, who has already presided over the end of the Fed’s bond-buying stimulus programme, will cement her reputation and that of her “dashboard” that relies on long-established relationships between jobs, wages and prices.

If she is wrong, the Fed could join the European Central Bank and the central banks of Sweden, Israel and Canada, which have all tried, but failed, to escape the drag of zero rates in the wake of the 2007-09 financial crisis.

There are reasons to doubt conventional economic theory. Many economists predicted a spiral of falling prices when the U.S. jobless rate soared during the crisis and then thought inflation would rise when unemployment plunged. Neither happened, though Yellen has maintained this year that the Fed was on course for rate increases, which would be “data dependent,” likely gradual, and with no pre-set path.

This shows Yellen “is grounded in traditional modelling but she is well aware that there is uncertainty,” said Randall Kroszner, who served with Yellen as a Fed governor between 2006 and 2009.

“It is possible, though unlikely, the traditional models are just all wrong (and) we’re in a whole new world. But she’s not going to fly by the seat of her pants,” Kroszner said.

Yellen has made clear that models only serve as guideposts in a complicated decision-making process.

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MODELS AND HUNCHES

Interviews with the Fed chief’s former colleagues paint a picture of Yellen as a pragmatic economist who is ready to adjust course when necessary, but one who relies on data and economic theory rather than guesswork or hunches.

That could mean sometimes missing signals that are either too new or too hard to measure for traditional models and yet possibly relevant for policy.

Fed transcripts show that at a Fed policy meeting in September 1996, Yellen, then a Fed board member, said she was “quite willing” to support an increase in rates because her analysis suggested inflation was poised to rise.

However, Alan Greenspan, the Fed’s chairman at the time, convinced policymakers to hold fire at that meeting arguing that he saw changes in the economy that were holding back prices and it later turned out that inflation indeed stayed low.

“It was intuition more than anything else,” said Alice Rivlin, fellow board member at the time, referring to Greenspan’s hunch that U.S. productivity was rising.

A wrong call on inflation now could stunt job growth and possibly keep rates stuck near zero or even force the Fed to reverse course and cut rates.

“If they don’t see any pickup in costs or prices, that would cause them to be even more gradual than they think they are going to be,” said Donald Kohn, who served on the Fed’s board when Yellen headed the San Francisco Fed between 2004 and 2010.

Fed policymakers saw higher inflation around the corner in 2013 and 2014 that did not materialize. Yellen has argued this year that temporary factors such as low oil prices and a strong dollar will fade while a tight labour market sparks price pressures.

“It’s straightforward analysis but the issue is they have been saying this for years, so they are not hitting something right in their story,” said Timothy Duy, an economist at the University of Oregon. Hiking rates too early could make it more likely the U.S. economy tips into recession, he said.

The Fed’s preferred inflation measure stripped of food and energy prices is now at 1.3 percent and its policymakers on average see the gauge accelerating next year but not quite hitting their 2 percent target.

Jon Faust, a former special adviser to the Fed board whose inflation forecasting research has been cited by Yellen, says he doubts any policymakers have a firm view how to get inflation back to target and keep it there even if they agree that a tightening job market will help.

With the jobless rate at 5 percent, half its 2009 level, Yellen was confident enough to warn lawmakers on Dec. 3 that inflation could rise “significantly” above the Fed’s 2 percent target if rate-setters aren’t ahead of the curve.

However, some policymakers, including Fed Governor Lael Brainard, argue that the relationship between unemployment and inflation is not as straightforward as it used to be and that global economic weakness could knock the United States off course.

Many analysts expect Brainard, who has emerged as the leader of the Fed’s cautious faction, will accept a first hike without dissenting, but could need more convincing for subsequent rate rises.

Brainard said on Dec. 1 the U.S. dollar’s appreciation, driven in part by global economic weakness, could argue for a “delay in the date of lift-off and a shallower path for the federal funds rate over several years.”

On the other side of the policy debate is Charles Plosser, who led the Philadelphia Fed from 2006 until March 2015. Plosser would have preferred to raise rates “a year ago” but was glad that the Fed chief facilitated the debate over liftoff.

“The fact that she can articulate the rationale, that’s really important,” he said. “Because then you can debate.”

Copyright Reuters 2015

(Reporting by Jason Lange in Washington; Editing by David Chance and Tomasz Janowski)

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