Tag Archives: globalization

Down and Dirty in the Trade Game

JIM MCNIVEN: THOUGHTLINES
June, 2017

The new American administration is not only understaffed, but the organizational tendencies of the President consist of surrounding himself with a coterie of cronies and family, and then governing by Tweeted statements that disregard, and often contradict, what his departmental subordinates are saying at almost at the same time. Needless to say, the world has come to see this to-ing and fro-ing for what it is—the President has his reactions and lurches, but, for the most part, American policy has not changed much, yet.

This is particularly true of his approach to NAFTA, the North American Free Trade Agreement. The President has said that it was the worst deal ever. His officials say it is pretty good, but needs some updating after 25 years or so. Is Canada going to have an updated rules-based relationship with the US, or are we headed back into the 19th century and the law of the jungle?

NAFTA was created out of the sentiments of the Macdonald Commission on the Canadian economy, created in the early 1980s by the Pierre Trudeau government as it entered its last years. Its most notable recommendation was to propose a free-trade agreement with the United States, thus abandoning the National Policy approach that had been adopted almost at Canada’s Confederation, in reaction to American tariffs during and after the US Civil War.

The time was right. US President Ronald Reagan, acting on his and his advisors’ classic economic principles, had already envisioned a free-trade zone that was expansively seen as extending from Alaska to Patagonia, taking in all of the Americas. Canadian and American negotiators came up with CUSTA, the Canada-US Trade Agreement. The Conservative Mulroney government that succeeded Trudeau backed the negotiations, not so much for economic reasons, as for the political split it would cause in the Liberal Party, already wracked by disputes between free-traders and economic nationalists. The internal Liberal battle duly happened and contributed to the party’s defeat in 1988.

It did not take long for another country, Mexico, to decide it needed to be included. The resulting tripartite negotiations led to a split amongst Republican voters in the 1992 Presidential election. Democrat Bill Clinton was elected, and went on to approve the agreement.

All this was done in the global context of new regional free trade agreements, climaxed by the formation of the World Trade Organization in 1995, created to try to enforce a global rules-based trade context.

Fast-forward 20 years to 2015 and global sentiment seemingly has begun to change. Trade has expanded greatly in the time since CUSTA was signed and the rest of the world got onside with the trend. Millions, if not a billion, people were brought out of poverty.

Now the trend is going the other way, towards more inward-looking protectionism. The US Government is dominated by Republicans who are ostensibly led by a President who wants tariff and tax walls put up to ‘protect’ US jobs from going overseas. Given his predilections, he would probably not object to the global structure being dismantled. In particular, he has been very critical of NAFTA, especially the boost it has given to the Mexican economy.

Of course, behind all this lies the simplistic notion that the trade balance for any country is only the merchandise account. This is what the President focuses on when he talks about losses due to trade agreements. However, there are three elements in the trade equation for any country. The first is the aforementioned merchandise account; the second is the services account and the third is the capital account.

All of these taken together tend to even out in terms of surpluses and deficits. Canada, for instance, normally runs a merchandise surplus with the US, but it runs a services deficit. Remember the next time you ‘Google’ something that somehow you paid somebody in the US for that service.

The capital account fluctuates depending on the demand by foreigners, including Americans, for Canadian dollars, whether for trade or investment or better financial returns. It is also affected by Canadians’ demand for foreign currencies. Examples are money flowing into the country by house buyers from Asia, money flowing out with Canadians travelling to Florida for the winter, and in or out depending on the price for oil and earnings from exports and borrowings for oilsands investment. This last is so big that the Canadian dollar is often called a ‘petro’ currency: it fluctuates relative to other currencies with the world price for oil.

Now, let’s relate all this to the concerns of many Americans about the loss of manufacturing jobs. In truth, most of the lost jobs have come with changes in technology, but that is a hard idea to sell in a political debate. ‘Vote for me and I’ll force manufacturers to use only technology dating to 1960 and nothing newer!’ It just doesn’t have that zing that ‘foreigners stealing our jobs’ has.

The problem goes back to the notion that the trade balance has to settle around zero. If the existing mix among the three accounts is altered by public policy, different industries will be affected and there will be pressure to rebalance the accounts.

First, countries may retaliate to these changes. Mexico is a prime buyer of American corn. Closing out American plants in Mexico may lead to American farmers not being allowed to sell their corn to Mexico. Canadian airlines could be encouraged to buy Airbus planes from Europe rather than a Boeing product from the US. There are thousands of such potential retaliatory actions that the world’s countries (3/4 of the global economy) can take that would see other Americans than the beneficiaries of these changes suffer losses. That’s just on the merchandise side. Similar actions can be taken on the services and capital accounts.

Maybe this is too abstract. Let me tell a story where I was tangentially involved. Many years ago, in an attempt to prevent Washington fishermen from taking salmon near the BC Lower Mainland, the Government of Canada designated a certain area popular with US fishermen as a conservation zone and closed it. All around it, the fishery was open. The US protested and under international law won their case, but Canada remained righteously stubborn. By rights then, the US could retaliate, and they did—with a moratorium on Atlantic seafood exports to the US.

I was one of the only non-industry members of the Canadian fisheries industry committee, and I came into the next meeting to find the Atlantic representatives all but crawling over the table to get at those @!!xxx&** British Columbia %*##@’s, whose lobbying created this mess. Meanwhile, the western members were trying to say that all of Canada should stand up for conservation virtues, no matter what the cost.

The closed zone decision was soon reversed and life returned to normal. This is how the game is played.

This whole NAFTA review under way now could either end up in discussions over the usual topics; lumber and dairy products, or it could get ugly.

Yes, Canada is small next to the US and the President likes to push people around, but at some point, he will accept that simply focusing on the merchandise account is to risk having the other two accounts be negatively affected.

Nationalize Google.ca? Put a special tariff on US software purchases? These examples could affect the services account.

The international trading system is the way it is because the US, as the world’s policeman for decades, thought a rule-of-law system was in its best economic interest. Going back to the law of the jungle may not be in the works, but just in case, we Canadians had better dust off Sir John A’s National Policy.

 Copyright Jim McNiven 2017

Facts and Opinions, employee-owned, survives only on an honour system: please chip in (suggest at least .27 per piece) or make a sustaining donation. Details. 

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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.”

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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.

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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‘Soft’ Neoliberalism Preceded Brazil’s Far-right

Protest by workers in Sao Paulo, Brazil, on April 1, 2016. Photo Klaus Balzano/Flickr/Creative Commons

Protest by workers in Sao Paulo, Brazil, on April 1, 2016. Photo Klaus Balzano/Flickr/Creative Commons

By Roxana Pessoa Cavalcanti, University of Westminster 
January, 2017

Recent reports indicate that far-right groups from the Ukraine have come to Brazil to recruit neo-Nazis to fight against pro-Russian rebels. Western readers reacted with shock and fascination – but however strange the story might seem, conservatism and political extremism have been on the rise in Brazil for some time.

Many of the country’s hardline right-wingers come out of religious movements, such as neo-Pentecostalism, evangelical Christianity and US-style churches. There are over 600 Christian TV and radio channels, including the second-largest TV channel in the country, Rede Record, which is owned by billionaire bishop Edir Maçedo of the pentecostal Universal Church of the Kingdom of God.

But the right’s most visible political advocates are gathered in Congress, where they form the Bullets, Bible and Beef (BBB) caucus. An increasingly dominant political bloc, the BBB began to form in 2012 during legislative discussions about Brazil’s forest code. Right-wing pro-deforestation rural lobbyists forged an alliance with the evangelicals, and later with armaments and ammunitions lobbyists.

That alliance successfully put forward a number of pro-deforestation proposals, and in 2015, a special commission approved the BBB’s proposal to amend the constitution to give the national congress sole authority over the demarcation of indigenous lands. Many NGOs and advocates consider the proposal disastrous for Brazilian indigenous tribes that rely on land for survival, and a severe environmental danger. And as the BBB has grown more powerful, its far-right conservative agenda has expanded beyond deforestation and agribusiness to include hardline stances against abortion, women’s rights, homosexuality and gun control.

Coming 30 years after Brazil embraced liberal democracy, the sight of ultra-conservative politics returning to the mainstream is rather shocking. And it might never have been possible had the country’s progressive governments done a better job addressing their people’s concerns.

Jumping ship

As did their counterparts in many other countries, Brazil’s social democratic and centre-left parties long ago signed up to “soft” versions of the so-called neoliberal agenda, embracing globalisation and free trade. In doing so, they gave up their identity as organs of popular protest – and thereby left an opening for far-right parties and movements to exploit anything resembling a national crisis.

This is what happened to the Workers’ Party (PT), which governed Brazil for a full 14 years. The PT advanced progressive policies, most famously the social security cash transfer programme Bolsa Familia, but also a higher minimum wage and wider access to credit and university education. This policy programme wasn’t popular with the mainstream media, the middle classes and business leaders, but it won the PT loyal support among poor voters. Under its tenure, Brazil saw mild reductions in inequality for the first time in its history.

But these policies weren’t enough. They could not close a gap between high taxes and the low quality of basic public goods, the PT having failed to rework a historically regressive tax system that disproportionately punishes Brazil’s poorest. Services simply did not improve quickly enough to keep up with the country’s growth, pushing many Brazilians’ patience to breaking point. In 2013, massive urban protests erupted against a rise in bus fares and poor service provision.

This all left the PT highly vulnerable.

Ousted

The PT never held more than 20% of seats in Congress; to govern a country with over 25 political parties, it had made coalitions with the right and adopted some of its economic policies. This proved to be a big mistake, especially when it introduced public spending cuts that ate into its support base. Right after the party’s Dilma Rousseff was re-elected president in 2014, the opposition started calling for her impeachment, citing corruption allegations that many observers considered dubious.

As the economic downturn intensified during 2015 and unemployment rose, media publicity about corruption scandals brought Rousseff’s already low levels of popularity to rock bottom. Michel Temer, Rousseff’s vice-president and coalition partner, was quick to take the opportunity to remove and usurp her.

This was the BBB’s best chance yet to flex its muscles. Among the 367 members who voted to impeach Rousseff, 313 are associated with the BBB. At the time of writing, 373 out of 513 (73%) elected federal deputies in Brazil’s congress are part of at least one of the three congressional fronts that form the BBB.

The right has plenty more fodder at its disposal. Fear of violence is a central issue: according to one study, nearly 60,000 Brazilians lost their lives to violence in 2014 alone. It’s widely understood that the authorities are unable or unwilling to control high crime rates, and this insecurity fosters extremely punitive attitudes towards stereotyped groups, especially the poor and criminals.

In this febrile atmosphere, armed far-right and neo-Nazi groups have been able to present themselves as the defenders of poor communities. Nothing better illustrates that than a recent lynch mob epidemic, which showed just how explosive the combination of violent insecurity and rampant individualism can be. With the BBB as powerful as ever in Congress and disgust at ineffective, corrupt government still widespread, small wonder that the far right is on the march – and that it’s finally getting global attention.

The ConversationCreative Commons

Roxana Pessoa Cavalcanti is a Lecturer in Criminology at the University of Westminster. This article was originally published on The Conversation. Read the original article.

Related on F&O:

FORTALEZA, Brazil — Leaders announce a BRICS development bank at Brazil summit. Left to right: President of Russia Vladmir Putin, Prime Minister of India Narendra Modi, President of Brazil Dilma Rousseff, President of China Xi Jinping, President of South Africa Jacob Zuma. Photo: Russian government, public domainBRICS turning to rubble, by Jonathan Manthorpe  Column

The leadership chaos in Brazil and South Africa is a timely reminder for emerging economies that unless they also press ahead with political, administrative, judicial and social reform they are doomed. The prospects for the BRICS —  Brazil, Russia, India, China and South Africa — don’t look rosy, and in every case it is because the governing regimes failed to use their growing economic wealth as a tool to fuel political, administrative, judicial and social reform.

Illegal Gold Mining in the Amazon, by Bruno Kelly Photo essay

An area the size of Switzerland belongs to the Yamomani people. But in their lust for gold illegal miners — who in the 1980s used guns and disease to kill 20 per cent of the population — continue felling trees and poisoning rivers with mercury. Authorities stage raids and destroy the miner’s equipment. But who are the illicit business interests behind the miners?

 

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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 our readers. It is ad-free and spam-free, and does not solicit donations from partisan organizations. To continue we require a minimum payment of .27 for one story, or a sustaining donation. Details here; donate below. Thanks for your interest and support.

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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A Tale of Two Crashes, and Their Aftermaths

A woman walks past a laughing Buddha sculpture near the venue where the G20 Finance Ministers and Central Bank Governors Meeting will be held over the weekend in Chengdu in Southwestern China's Sichuan province, July 22, 2016. REUTERS/Ng Han Guan/Pool

A woman walks past a laughing Buddha sculpture near the venue where the G20 Finance Ministers and Central Bank Governors Meeting will be held over the weekend in Chengdu in Southwestern China’s Sichuan province, July 22, 2016. REUTERS/Ng Han Guan/Pool

JIM MCNIVEN: THOUGHTLINES
December, 2016

There are a lot of rough parallels between events in history that suggest that what one generation learns is forgotten over time. One of these is between the political/financial events in the United States between 1830-1850 and 2000-2020.

In the first, a President was elected in 1828 pledged to let the charter of the Bank of the United States lapse in 1836. The Bank was the closest thing we have today to the Federal Reserve system, and Andrew Jackson, representing the ‘soft’ money frontier, was determined to eliminate the ‘hard’ money Bank. This institution kept the frontier banks from printing all kinds of banknotes and contributing to the instability of American finances. Proper banking practice required, then as now, that loans outstanding should not exceed 10-12 times deposits and the Bank was rigorous in discounting the value of notes from institutions that were not acting responsibly.

James K. Polk, by Mathew B., 1823

James K. Polk, by Mathew B., 1823

Jackson’s fight with the Bank was successful and the frontier State banks, some of which were carting trunks of gold ‘deposits’ from one bank to another ahead of State inspectors, began issuing all kinds of paper money that could theoretically be cashed in for gold or coin, which of course, didn’t exist. By 1836, the speculative credit bubble began to lose air and the economy crashed in 1837.

In the early 2000s, the Republican administration of George Bush, likewise, was promoting a less-relaxed financial regulatory regime in order to stimulate growth. Easier credit was seen as a means to this end. Financial regulators, including federal bodies like Fannie Mae and Freddy Mac encouraged the private sector to make credit easier for potential homebuyers (read: frontier settlers) to access housing.

As well, the Wall Street financial houses began to invent new debt instruments that effectively pyramided loans upon loans, based on housing and new business creation. It was not uncommon for their leverage to exceed 33:1.* By 2006, the speculative credit bubble began to lose air and the economy began to totter in 2007 and crashed in 2008, during that year’s election campaign. Barack Obama inherited the mess, but it was hard to blame it on him — not that this wasn’t tried.

In March, 1837, President Martin Van Buren had just taken office when the wheels began to come off the financial wagon. Since Jackson was a war hero and strong leader, Van Buren got the blame for the mess and was defeated by Harrison in 1840, who promptly died a month into office. Vice President John Tyler, Harrison’s successor, managed to anger both Congressional parties and spent the term in one political fight after another. Meanwhile, the economy healed slowly.

Beginning in 2009, President Obama had a two-year ‘honeymoon’, where his party managed to put in place stronger financial regulation, though the reverberations of the American crisis were felt world-wide, inhibiting the American recovery. By 2012, the Republicans, deeply hostile to the President, had gained power in Congress and much of the rest of Obama’s eight years in office were consumed in political wrangles. Meanwhile, the economy healed slowly.

Tyler was followed by a ‘dark horse’, James K. Polk, in 1844. Polk came in as the Congress acted to admit Texas to the Union, prompting a war with Mexico. He was also an advocate of the extreme American position on the Oregon Territory, which claimed the whole northern Pacific coast to the border of the then Russian colony of Alaska. This conflicted with British claims to much of this coast and the American rallying cry went forth of ’54:40 or fight!’.

There was some doubt about whether the American Army could defeat the Mexicans, since the US had not had a serious conflict in 30 years, but no one was under the illusion that another ‘War of 1812’ would go well with a colonial power that was subjugating India and southern China as well as parts of Africa, and whose Navy was supreme. Polk cut a deal on Oregon, splitting the Territory at the 49th parallel and then went after Mexico. Needless to say, the economy was generally healed by then.

Now we have a ‘dark horse’ President-elect who appeals to American nationalism, much like Polk once did. I doubt that he has 1840s-style territorial ambitions, but some sabre-rattling in various directions can be expected. The economy has been generally healed by now, but he intends to super-heal it.

I don’t want to follow my parallels between the mid-1800s and today into the future. Polk was the last of the strong Presidents before Lincoln and the Civil War. He also just predated the huge immigration of Catholic Irish into America during the Famine, as well as the equally huge German migration (both Protestants and Catholics, but all not English speakers) that came after the failed revolutions of 1848.These sparked some serious nativist reactions in 1850 and beyond.

I suppose that drawing parallels with history is both attractive and yet misleading. We do not live in the post-Crash world of the 1840s, when American influence in the world was negligible, nor is Manifest Destiny the big thing it was then.

We do live in a world where North America makes up but 5% of the global population and 25% of the global economy. We are almost all interconnected in an immediacy that those in the 1840s hardly knew, even on different floors of a New York slum. James Polk and his contemporaries have little to teach us about this reality, except that human beings do tend to replay the general themes of the past, when faced with similar problems. There are some of these themes that we need to avoid.

 Copyright Jim McNiven 2016

* What this implies is that if a mere 3% of a bank’s loans were to default, the bank was bankrupt. At 10:1, it would take over 10%, a reasonable risk. The whole system depends on depositors’ confidence that they can withdraw their deposits whenever they like. Lose confidence, and there is a ‘run’ on the bank.

Facts and Opinions is employee-owned and survives on the honour system: please chip in (suggest at least .27 per piece) or make a sustaining donation. Details here. 

 

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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.

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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Foreign banks in Britain pay fraction of tax rate

Pedestrian pass the offices of Goldman Sachs in London April 20, 2010. REUTERS/Toby Melville

Pedestrian pass the offices of Goldman Sachs in London April 20, 2010. REUTERS/Toby Melville

By Tom Bergin
December, 2016

LONDON (Reuters) – Some of the biggest foreign investment and commercial banks operating in Britain paid an average tax rate of just 6 percent on the billions of dollars of profits they made in the country last year, a Reuters analysis of regulatory filings shows.

That is less than a third of Britain’s corporate rate of 20 percent. There is however nothing illegal about how they managed to reduce their taxes, and includes using losses built up during the financial crisis to offset current bills.

Seven of the biggest international banks operating in London – Europe’s main investment banking centre – have published profit and tax data ahead of a year-end deadline stipulated by EU law.

Five of them, all U.S. banks, reported a profit – a combined $7.5 billion – and paid corporation tax, or corporate income tax, of $452 million.

Bank of America’s two main UK investment banking subsidiaries paid no corporation tax on combined profits of $875 million. JPMorgan paid $160 million in tax on $3.3 billion in UK profits.

Goldman Sachs paid $256 million tax on $2.8 billion profit, while Morgan Stanley’s main UK unit paid $33 million tax and earned $530 million.

All the banks declined to comment on the data except San Francisco-based Wells Fargo, which reported $2.7 million tax on $34 million profit. It said its objective was to comply with all of its tax compliance requirements.

The British Bankers’ Association (BBA) said the data did not reflect the sector’s full contribution and that, including other taxes and payments, foreign banks contributed about $20 billion to the UK treasury last year.

The British tax authority, Her Majesty’s Revenue and Customs, said the Government had taken steps to ensure banks paid the correct amount of tax.

“Many complex factors contribute to the effective rate of tax paid by corporate businesses,” a spokesman added in a emailed statement.

The finance ministry was not available to comment.

The 6 percent rate is still higher than the average rate of 1 percent paid for 2014 by the 10 biggest foreign investment and commercial banks that reported UK profits and taxes.

British banks also disclose profit and tax amounts but these are largely related to domestic retail activities, so it is not possible to calculate the effective UK tax rate on their commercial and investment banking activities.

Analysts say many other companies pay tax at below the headline rate but only banks are required to disclose tax and profit figures by country, so it is not possible to calculate the rates paid by manufacturers, builders or services companies.

‘ALL-TIME HIGH’

A Citigroup office is seen at Canary Wharf  in London, Britain May 19, 2015.  REUTERS/Suzanne Plunkett

A Citigroup office is seen at Canary Wharf in London, Britain May 19, 2015. REUTERS/Suzanne Plunkett

The opposition Labour Party said the figures showed that the government was still going soft on the banks, years after saving the sector from collapse with taxpayer funds.

“These again look like alarmingly low tax rates for banks which are making eye-watering amounts of money,” said shadow finance minister John McDonnell. “This shows that this government wants to create an environment in which big firms get tax giveaways while everyone else gets spending cuts.”

The data comes as banks in Britain push back against a government decision last year to increase their corporate tax rate to 28 percent this year – a move that was offset by a cut in the levy on their assets.

The BBA criticised the change saying, the government risked making Britain a “less attractive place for banks”.

This week, it said the low corporation tax payments would likely increase in coming years. In any case, it said combining the bank levy, value added tax, payroll taxes and income taxes paid by staff foreign banks contributed 16.8 billion pounds to the UK Exchequer in 2015. “Tax contributions by the banking sector are at an all-time high,” a BBA spokeswoman said.

The levy – introduced in 2011 to help discourage risky borrowing and pay for the crisis-era banking bailouts – raised 3.4 billion pounds in 2015-16, compared with corporation tax payments by the sector of 3.2 billion pounds, the BBA said.

Only one of the foreign banks published data on their bank levy payments. Merrill Lynch International said it paid a levy of $19.2 million last year, down from $47.5 million in 2014.

LAGS AND LOSSES

A man walks into the JP Morgan headquarters at Canary Wharf in London May 11, 2012.  REUTERS/Dylan Martinez/File Photo

A man walks into the JP Morgan headquarters at Canary Wharf in London May 11, 2012. REUTERS/Dylan Martinez/File Photo

Bank of America said in a filing that its Merrill Lynch International unit paid no corporation because of “relief obtained via the utilisation of historical losses brought forward”, largely from during the global financial crisis.

Accounts for other banks’ UK subsidiaries also show that they benefited from using losses built up during the crisis to offset current tax bills.

Last year the government changed tax rules so that such losses may only offset half a bank’s income in any one year, partly explaining the increase in the banks’ effective tax rate compared with 2014.

Other banks including JPMorgan said in the filings that since tax payments often partly cover the previous year’s earnings, the rate paid in a given year may not reflect the amount eventually paid in respect of that year’s profits.

Across the UK banking sector, corporation tax payments are half what they were before the financial crisis, according to the BBA’s own tax survey, published last month.

The drop is not confined to banks, and is echoed across other businesses. The ‘100 Group’ which represents around 100 of the UK’s largest companies said corporation tax payments by its members had fallen over the past decade.

Tax campaigners say some companies also use complex inter-company transactions to ensure profits are actually reported in lower tax jurisdictions to minimise bills.

Banks filings do sometimes show disproportionate profitability in such jurisdictions.

London-based Goldman Sachs Group UK Ltd reported a $194 million profit in the Cayman Islands, which has no corporate income tax, despite employing no staff there.

Citigroup reported twice as much profit at Citigroup Europe Plc, its main subsidiary in Ireland, than at its main UK subsidiary. That’s despite the UK arm employing more people than Ireland, and more senior staff – average wages at London-based Citigroup Global Markets Ltd were $288,000 per head last year compared with $48,000 at Dublin–based Citigroup Europe Plc.

Ireland’s tax rate is 12.5 percent.

Goldman and Citigroup declined to comment.

Copyright Reuters 2016

($1 = 0.8035 pounds)

(Editing by Pravin Char)

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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 our readers. It is ad-free and spam-free, and does not solicit donations from partisan organizations. To continue we require a minimum payment of .27 for one story, or a sustaining donation. Details here; donate below. Thanks for your interest and support.

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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Public Health Crucial for Urbanized World

Concentrated populations are often seen as a boon for the environment because resources can be easily shared. But so can pathogens. How can cities discourage infectious disease?

By Nate Berg
July 30, 2016

CC BY-SA 2.0, https://commons.wikimedia.org/w/index.php?curid=357998

Memorial to John Snow’s public health breakthrough in London. Wikipedia/Creative Commons

Near the corner of Broadwick and Lexington in London’s Soho neighborhood, a single spot on the ground has influenced more than 150 years of urban development. It’s the location of a water pump that in 1854 physician John Snow pinpointed as the source of contamination leading to a widespread outbreak of cholera in the neighborhood that killed more than 600 people.

Snow connected the dots between incidents of illness in the neighborhood and the use of water from the pump in a feat of early data science that is heralded as a milestone in public health. It’s literally a textbook example of the link between disease and population density — a link that’s becoming even more important today as the world undergoes a dramatic process of urbanization.

And it’s no longer just contaminated wells we need to worry about, but wall-to-wall housing; poorly built, densely packed homes; unchecked informal development; insufficient infrastructure; and readily accessible international travel that can quickly carry life-threatening illnesses across continents and oceans.

Crammed and Connected

About 4 billion people — 55 percent of the global population — now live in what are considered urban areas; the United Nations expects that number to grow to more than 6 billion by 2050. Much of this growth is happening in countries such as India, China and Nigeria, where rural residents are flocking to cities at the same time cities are seeing their populations multiply from within.

Such urbanization is hailed by many as a positive development: Planners and social scientists have argued for decades that denser concentrations of people lead to more efficient use of resources, reduced impact on the environment and a generally more sustainable form of development.

But the concentration of people can also mean a greater risk of exposure to pathogens and a higher likelihood that infectious diseases will spread.

In Brazil, for example, an outbreak of the Zika virus is causing major concerns about public health as Rio de Janeiro prepares to host the Olympics in August. Spread to humans by mosquitoes and between humans through bodily fluids, the virus has proven to be a pernicious urban problem, with dense populations providing a ready conduit for its spread.

And it’s not just major cities that are vulnerable. As the Ebola virus outbreak in West Africa in 2014 showed, what matters for infectious diseases is the availability of pathways for travel, even if it’s from village to village.

The risks of urbanization are closely interrelated with globalization.“Before, when Ebola would pop up in an isolated village, it wouldn’t spread so much. But now the areas are so large, they’re so interconnected,” says Emily Blodget, a specialist in infectious disease at the University of Southern California. “Because of the urbanization of those areas we’ve had outbreaks. and the amount of people that have been affected is just so much more.”

Blodget says the risks of urbanization are closely interrelated with globalization, which has made it relatively easy for someone who’s unknowingly carrying Zika, Ebola or countless other diseases to get on a plane and land in a densely packed city. The SARS outbreak in Hong Kong in the early 2000s was blamed not only on density but also on the high rate of people traveling into and out of the city, according to Blodget.

Controlling the spread of disease through global travel should be a top priority, according to an article in Places Journal by Thomas Fisher, dean of the College of Design at the University of Minnesota. Fisher argues that airport operations should be augmented to include disease detection and prevention — something like the firewalls a computer uses to prevent viruses. Some airports have instituted fever checks at the gates of arriving planes, hoping to catch people with symptoms before they can enter the city so they can be tested for infectious diseases and treated as needed. But these interventions are limited.

Basic Infrastructure

By Hilnik - Own work, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=41659953

Affordable household toilets near Jaipur, Rajasthan. Photo by Hilnik via Wikipedia, Creative Commons

A much more widespread problem in cities than spread of disease through travel is related to the lack of sanitation. Informal developments and slums in cities like Mumbai, Sao Paulo and Lagos often lack formal sanitation or sewage systems, and the contamination of drinking water causes the spread of gastrointestinal illness from salmonella, shigella and even the bacteria that cause cholera — the public health danger John Snow identified back in 19th century London. Between 1990 and 2012, urban dwellers without access to sanitation facilities such as sewage systems and clean water grew from 541 million to 756 million, according to a 2014 report from the World Health Organization and UNICEF. This increase was linked primarily to population growth outpacing the provision of basic infrastructure.

Reducing global poverty is crucial, according to Fisher. He cites a report from the U.S. Centers for Disease Control and Prevention that estimates the economic harm of a pandemic ranging from US$71 billion to US$166 billion. Those potential costs far outweigh the estimated US$16 billion the World Bank has lent over the past three decades for shelter improvement. Fisher argues that more aid should be directed to impoverished places to improve conditions now and avoid the huge costs that could arise if a pandemic breaks out.

Improving access to sanitation and upgrading infrastructure is a straightforward way of reducing health risks. However, there are clear challenges to building such systems in parts of cities that grew informally and outside of any plan or government control. Groups like the Society for the Promotion of Area Resource Centers have made progress in the slums of Indian cities by building community-run toilet facilities. But public works like this are expensive, and they’re not going to prevent all diseases from spreading.

The sheer variety of diseases and methods of transmission mean that even the best prepared city with the cleanest infrastructure can still be vulnerable to outbreaks.“Not all diseases are as related to not having access to sanitation,” says Adriana Pacheco-Coral, an infectious disease specialist with the University College London. With something like Zika, she says, “you may find these types of diseases in very well-developed cities affecting certain areas with vulnerable people and then spreading out.” From one side of the city to the other, the risk of disease can vary widely.

Develop and Design

The sheer variety of diseases and methods of transmission mean that even the best prepared city with the cleanest infrastructure can still be vulnerable to outbreaks. Blodget says cities need to develop robust public health surveillance and response systems if they’re going to be able to recover if an outbreak does occur. This can mean anything from relying on teams of epidemiologists to track disease flare-ups to a simple communication campaigns to warn about unsafe water sources.

“It won’t take the place of hygienic practices and having a proper sewage system, but it does help and it’s relatively simple,” Blodget says.

Others are thinking about these problems from an even more basic level. The nonprofit ARCHIVE Global is using architectural design to prevent the spread of infectious diseases. Recognizing that many diseases are spread because of cramped conditions and poor ventilation, ARCHIVE Global has worked with immigrant neighborhoods in London that suffer from high rates of aerially transmitted tuberculosis to identify design flaws in their homes and schools that are likely contributing to its spread. Another project in Dhaka, Bangladesh, focuses on the mud floors of huts, which have been found to play a significant role in spreading bacteria and pathogens, particularly among small children. By replacing mud with concrete flooring that’s easier to clean, the organization is reducing the likelihood that these easily avoidable illnesses will be contracted.

There is no one solution to preventing infectious disease, which takes many forms in cities. But experts agree that while the risk of outbreaks can rise in urban settings, cities don’t have to be breeding grounds for pathogens. By encouraging the development of proper infrastructure, enabling alternative infrastructures and disease prevention mechanisms in informal and vulnerable places, and building up a public health system to monitor and respond to outbreaks, cities will be better prepared to prevent diseases from afflicting their residents, and to fight them when they do.

Creative Commons

This story is published under a Creative Commons licence. It appeared first on Ensia. View Ensia homepage

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Calls for G20 to act as fiscal, monetary policies falter

A woman walks past a laughing Buddha sculpture near the venue where the G20 Finance Ministers and Central Bank Governors Meeting will be held over the weekend in Chengdu in Southwestern China's Sichuan province, July 22, 2016. REUTERS/Ng Han Guan/Pool

A woman walks past a laughing Buddha sculpture near the venue where the G20 Finance Ministers and Central Bank Governors Meeting will be held over the weekend in Chengdu in Southwestern China’s Sichuan province, July 22, 2016. REUTERS/Ng Han Guan/Pool

By Kevin Yao and David Lawder 
July 23, 2016

Christine Lagarde, Managing Director of the International Monetary Fund reacts to photographers before attending the G20 High-level Tax Symposium held in Chengdu, China, July 23, 2016. REUTERS/Ng Han Guan/Pool

Christine Lagarde, Managing Director of the International Monetary Fund reacts to photographers before attending the G20 High-level Tax Symposium held in Chengdu, China, July 23, 2016. REUTERS/Ng Han Guan/Pool

CHENGDU, China (Reuters) – Fiscal and monetary policies are becoming less effective at spurring economic activity so the world’s leading economies need to increase coordination to promote sustainable growth, China’s Finance Minister Lou Jiwei said on Saturday.

Lou was speaking at the start of a meeting of Group of 20 finance ministers and central bankers in the southwestern city of Chengdu, where they will confront challenges to global growth exacerbated by Britain’s decision to leave the European Union and consider deeper structural reforms.

“To promote strong, sustainable and balanced economic growth is still the core issue of G20,” Lou told a forum.

Various countries have taken steps to support economic growth in recent years, but Lou said the effectiveness of fiscal policy and monetary policy was “diminishing, and the side-effects are showing up.”

Chinese women gather near panda dolls  at the venue ahead of the G20 Finance Ministers and Central Bank Governors Meeting to be held over the weekend in Chengdu in Southwestern China's Sichuan province, July 22, 2016. REUTERS/Ng Han Guan/Pool

Chinese women gather near panda dolls at the venue ahead of the G20 Finance Ministers and Central Bank Governors Meeting to be held over the weekend in Chengdu in Southwestern China’s Sichuan province, July 22, 2016. REUTERS/Ng Han Guan/Pool

“G20 countries should increase policy communication and coordination, form policy consensus and guide market expectations, making monetary policy more forward-looking and transparent and increase the effectiveness of fiscal policy,” Lou said.

Lou Jiwei, China's Minister of Finance speaks at the High-level Tax Symposium held in Chengdu in Southwestern China's Sichuan province, Saturday, July 23, 2016. REUTERS/Ng Han Guan/Pool

Lou Jiwei, China’s Minister of Finance speaks at the High-level Tax Symposium held in Chengdu in Southwestern China’s Sichuan province, Saturday, July 23, 2016. REUTERS/Ng Han Guan/Pool

In a bilateral meeting with Japanese Finance Minister Taro Aso, U.S. Treasury Secretary Jack Lew underscored the need for G20 members to refrain from competitive devaluations.

Markets are simmering with speculation that the Bank of Japan will cut its inflation forecasts and expand its already massive stimulus programme at a July 28-29 rate review, as a hit to exports from a strong yen <JPY=> and weak consumption has added to downward pressure on the economy and prices.

Regarded as a safe haven at times of market turmoil such as that caused by Britain’s vote to leave the European Union, the yen has strengthened to around 106 to the dollar. Aso has previously warned that the yen was rising too quickly.

A U.S. official indicated earlier that the depreciation of China’s yuan <CNY=CFXS> to five-and-a-half year lows, and the Chinese central bank’s reaction, were understandable and “consistent to a transition to a market-oriented exchange rate”.

“It wouldn’t be fair to say that over the last few months the downward movement of the RMB was something that was fundamentally driven by policy decisions,” he said.

The G20 meeting will be a debut of sorts for Britain’s newly-appointed finance minister Philip Hammond, who is likely to be grilled about the UK’s plans for keeping up economic growth in the wake of Brexit.

“There will be a lot of attention to this meeting as we gather for the first time since the Brexit vote shook markets,” said one Asian finance official.

“I expect G20 debate to focus more on potential effects from Brexit on the real economy in the longer term, which should be a matter of concern for emerging economies.”

The International Monetary Fund this week cut its global growth forecasts because of the Brexit vote, saying that uncertainty over Britain’s future trade relationship with Europe will stall investment and sap consumer confidence.

Data out of Britain on Friday seemed to bear out fears. A business activity index posted its biggest drop in its 20-year history, a sign that Britain’s economy appears to be shrinking at the fastest rate since the financial crisis in the wake of last month’s Brexit vote.

On Friday, Hammond said the UK could reset fiscal policy if necessary, his strongest comments to date on how policy may change after Britain’s historic decision to leave the European Union.

The spectre of protectionism, highlighted by U.S. Republican presidential candidate Donald Trump’s “America First” rhetoric and talk of reworking or quitting trade agreements, will also hang over the meeting.

(Reporting by Elias Glenn, Kevin Yao, Gernot Heller, Jan Strupczewski and William Schomberg; Writing by John Ruwitch and Pete Sweeney; Editing by Jacqueline Wong)

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Turkey says it will uphold democracy and rule of law

CHENGDU, China (Reuters) – Turkey will strongly adhere to democratic principles and rule of law, Deputy Prime Minister Mehmet Simsek said on Saturday, referring to the government’s crackdown in the aftermath of a failed military coup.

“From the very beginning, I wanted to say that despite what has happened a week ago in Turkey, that we will continue to strongly adhere to democratic principles and apply rule of law and not much really has changed. I know there are question marks,” he told a meeting of G20 finance ministers and central bankers in the southwestern Chinese city of Chengdu.

The government’s widening crackdown in the aftermath of a failed military coup has spooked investors, who have dumped the lira currency and sold stocks.

(Reporting by David Lawder, Writing by Brenda Goh; Editing by Jacqueline Wong)

 ~~~

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‘It Don’t Come Easy’

JIM MCNIVEN: THOUGHTLINES
July, 2016

Dawn breaks behind the Houses of Parliament and the statue of Winston Churchill in Westminster, London, Britain June 24, 2016. REUTERS/Stefan Wermuth

Dawn breaks behind the Houses of Parliament and the statue of Winston Churchill in Westminster, London, Britain June 24, 2016. REUTERS/Stefan Wermuth

A long time ago, when I ran an organization whose role is analyzing and reporting on the economy of Atlantic Canada, one of my board members from the province of Newfoundland and Labrador made a comment that stuck with me. There are ‘big’ Newfoundlanders and ‘small’ Newfoundlanders, he said, referring to ones that wanted to take on the business world as a whole and win, and those who wanted to huddle behind a protectionist wall with their little piece of the economic pie. Ever since then, I have used his localism to look at all kinds of people, not just Newfoundlanders.

Since the 1960s, at least, the trends in the world have favored the ‘big’ types. They do include the likes of multinational companies, but they also include those in the tech sector who run little companies and who know that their success depends on how fast they can reach global scale. The whole panoply of trade barrier-lowering treaties, from tariff reductions to integrative economic agreements constituted the first steps toward a global economy. But there has been resistance from nationalist groups who see these moves as threats to personal, social and national integrity.

The arguments against globalization began to have resonance after the financial crash of 2007-8. The pain caused by widespread financial malfeasance, arrogance, greed and stupidity provided a platform for resistance.

Then the collapse of Middle Eastern and African States added a huge movement of peoples to Europe, whose countries have scant experience in accommodating immigration. The slowness or lack of economic recovery meant chronic distress for millions, which has been laid at the feet of international competition, even though there is ample proof that demographic stagnation and technological change have been more important causes.

The social aspect of the nationalist complaint is that immigrants, refugees or not, take jobs that might otherwise have gone to locals, and that the cultural differences between immigrants and locals are hard to deal with. These have a bit of truth in them. Immigrants come from the most adventuresome parts of their native cultures and could be more aggressive in job searches. Cultural differences may be seen negatively rather than as opportunities for local cultural expansion. Immigrant-based countries like Canada and the United States have more or less successfully grappled with these challenges and found it depends more on local willingness than anything else.

The economic arguments are more fantastical. The idea that carving whole countries out of the global trading system could lead to local prosperity makes little sense. Breaking up the globalized nature of manufacturing, communications and financial services companies is more a formula for ruin than prosperity.

Trying to do this by creating nationalist trade barriers would lead to a lot of job losses in all sorts of industries well before that country’s businesspeople could recreate downsized corporations and begin any rehiring. Restructuring an economy is not an automatic job-creator. Financial markets hate uncertainty and won’t lend until the uncertainty is resolved. Global corporations would not be able to repatriate jobs home without suffering from retaliation by potential losers. Not importing leads to non-exporting. In the end, stimulation could only be restored by wartime buildup, but this is not 1936. War means nuclear war.

So, we are coming to a crossroads. Either we continue with the globalization project that started with the Marshall Plan and the first GATT tariff reductions, or we don’t.

We still have to bring billions of people into some kind of economic parity with the rich parts of the world. It will mean profitably continuing and improving their situation, or we can pretend that parts of the world are a ‘gated community’ as far as the rest are concerned. This would lead to having to control these populations somehow or shutting down our internet communications so they don’t know what it is like on the other side of the ‘wall’.

What does continued globalization mean? The original goal of the General Agreement on Tariffs and Trade (GATT) on tariff reduction was largely met by the 1980s. A parallel step within Europe was toward more economic integration, first by the continental Europeans with the European Coal and Steel Community and then in the creation of Common Market. Then came the Canada-US Free Trade agreement in 1988, expanded into NAFTA about the same time as the creation of the European Union in 1993. A couple of years later, in 1995, the World Trade Organization was created to provide for a common set of rules for, basically, the whole globe to operate business and economic policy. Companies had similar rights and obligations within all of the national signatories’ economies. The agreement has not been perfect in its design nor execution, but it has made for the most level playing field the world has ever had.

So now, we are exhorted to break it up in the hopes that a few will be better off while others suffer. The double failure of nerve of the Cameron government in the UK, first in not acting as a properly elected government should by its permitting a referendum, and then campaigning against the ‘Brexit’ forces so ineffectively that it lost the vote, has led to the legitimizing of  nationalist attacks on the global rules that have benefitted everybody. Given the welter of trade rules that will not be affected by Brexit, it can be argued that the global economic system may not suffer, and that primarily, the UK will suffer the most. There are others, however, who would go further to fantasize extricating themselves from the WTO-globalized economy, promising to prospering from it while the rest of the ‘losers’ suffer.

Surprisingly, government does not operate like businesses. There is no global bankruptcy court out there to bail out national mistakes. There is no superior power making the rules to govern nations. To paraphrase Pogo, ‘they will meet the enemy, and it will be themselves’.

Maintaining and rebuilding confidence in the international economic system has to be Job One for policymakers today. We have something that works: there is no higher power to appeal to and no way to get off this big, blue marble we live on. Making it work after the idiocy of Brexit, to put it in the words of George Harrison and Ringo Starr, ‘It don’t come easy’.

 Copyright Jim McNiven 2016

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~~~

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.

 

 

 

 

 ~~~

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.

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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Déjà Vu All Over Again

JIM MCNIVEN: THOUGHTLINES
February, 2016

This 18th year of the Second Cold War is, simultaneously, the 40th year of the Muslim equivalent of the Christian Thirty Years’ War in the 1600s.

The First Cold War lasted 45 years, from 1945 to 1990. It was over once the Soviet system of States collapsed, due in great part to the inability of that system to manage a competitive, modern economy. The Chinese, Indians and others began to realize that a global economy was forming under the leadership of the United States and have adjusted accordingly. The Russians and others, including the Arab States, have had a more difficult time making that adjustment. The United States itself is now also having to adjust to its success in creating an increasingly interconnected world, largely of its own making, where it constitutes only about 4-5% of the global population. But, that is another story.

In 1618, the Holy Roman Emperor of the time decided to begin forcing all the subjects in lands under his nominal control to behave like Catholics. Since a large number of them had been practicing Protestants for nearly a century, this did not go down well. The resulting conflicts and revolts among the multitude of German States and principalities drew in other, foreign players such as France, Holland and Sweden. The War ended some 30 years later and left Germany exhausted and destroyed. There was no equivalent to the Marshall Plan to revive Germany at this time and the area remained a disunited ‘geographical expression’ for most of the next 2 ½ centuries.

The Muslim version of the Thirty Years War began with some inter-Arab States meddling in each others’ business, followed by a civil war in Lebanon, mostly along religious-ethnic lines. As the war dragged on, it dragged in the Cold War adversaries along with the neighboring Israelis. It took 14 years, from 1975 to 1989 for the parties to exhaust themselves and to encourage a political relationship that more equitably allocated legislative seats to Christians, Sunnis, Druze and Shia Muslims. By then, Shias elsewhere had become more aggressive following the Iranian Revolution of 1979 and, in reaction, the Iraqi leadership, with a Sunni dictator controlling a country that was majority Shia, began the Iraq-Iran War that lasted from 1980-88. As that petered out, the Iraqis invaded their smaller neighbor, Kuwait, bringing an American-led coalition that threw the Iraqis out.

Sunni extremism flowered as part of the distribution of Wahabi doctrine from Saudi Arabia, along with subsidies for mosques and imams worldwide. It was also helped along by active American support for the Afghan resistance to the Soviet occupation of their country. Once the Soviet Union collapsed in 1989, these occupiers had withdrawn and some of the veterans on the Afghan side, especially from other Muslim States, began to consider the possibilities of carrying the fight to other Muslim countries in Africa and Asia. The bombings of American embassies in Africa in 1998 began the Second Cold War.

But what about the core Muslim areas and the Thirty Years War there? The probability is that before it ends in exhaustion, the Arab States in Asia will have all been devastated. So far, only Jordan, Saudi Arabia and the Gulf States have been spared, but serious pressures and conflicts that could lead to war also affect them. Yemen, Iraq, Syria, Lebanon have been torn apart by violence and overlapping ethnic and religious communities have been set against each other, not unlike Germany in the 1600s.

All kinds of outside States are involved, sometimes allied and sometimes at odds. Communities of believers outside the area of direct conflict have been drawn in, especially in terms of ‘foreign fighters’ joining a new player, the Sunni extremist ISIL, which has taken territory from both Syria, whose Shia-supported leadership is entangled in a civil war with the majority Sunni population and Iraq, with its Shia government, which has succeeded in alienating the Sunni Arabs in the south. Both countries have also lost control of the areas inhabited by Sunni Kurds in the north.

It is commonplace to note that 75-80% of Muslims globally are Sunni, not Shia, but in the immediate zone of conflict, that is not relevant, as most Sunni States, with the exception of Turkey, are far distant. The major Arab player, Egypt, is blocked from direct intervention by the location of Israel, though it could still come to the aid of Saudi Arabia. The major player on the Shia side, Iran, is not Arab, though somewhat bigger than Egypt and, even under international sanctions, is probably more formidable. The Turkish interest is focused on the Sunni Kurds who have carved out a State for themselves in Iraq and northern Syria and have muted ambitions in eastern Turkey. Finally, the largest community of Muslim believers is a minority within the vast numbers of Indians.

Most likely, the endpoint will come with the sad removal of large and small pockets of Sunnis and Shia from their ancient communities, along with the uprooting of Christians and others who will become another wave of refugees from ethnically cleansed pockets. I take as a model the traumatic and bloody ‘exchange of populations’ between Greece and Turkey in 1922-3.

The Middle East will become more uniform, with two hostile camps watching each other. This will come at a price. The United States has learned that one of its most vital sources of creativity has come from the waves of people pushed out of places like Ireland, Germany, Eastern Europe, Mexico and China. The diversity is valuable, but difficult to manage. The uniformity so popular elsewhere leads to, well, dullness.

As to that Second Cold War, Year 18 corresponds to about 1963 in the First Cold War. That was the year the United States began to ‘get serious’ about supporting South Vietnam. No boots on the ground yet, but a lot of advisors and air support. Of course, there had been no real American combat since the Korean War had ended a decade before, but then we are now a decade since the beginning of the Iraq campaign.

So, is the United States likely to re-engage in terms of Islamic State or the resurgent Taliban? I doubt whether the Second Cold War will end any sooner than the first, which argues that the conflict will drag on until the 2040s. By then, like Germany after the 30 Years War, the Arab East will be a real mess and like Vietnam, it will make its peace with American business and (possibly) will develop a new relationship with some former enemy in the face of a new one. By then, the emerging global culture will be too strong to resist.

The lessons I would draw from these historical events is not to bet against whatever side the United States is on in a long-run Cold War situation. It is the acknowledged ‘champion’ of Cold Wars and will not give up its place in the face of Wahhabi/ Salafi/ Al Queda/ Taliban/ Islamic State, etc. pressure any time soon. As well, unlike the threat from the Soviets, this new opponent does not have the backing of a nuclear-armed, large-economy State. The United States will not abandon its globalization project no matter how much some elements in countries dreaming of alternatives, religious or socialist, would like to see this happen.

— With acknowledgements to Yogi Berra

 Copyright Jim McNiven 2016

Thanks for reading Facts and Opinions. Our journal is employee-owned and survives on the honour system: try a story at no charge;, if you value our work, please chip in at least .27 per piece or make a sustaining donation. Details here. 

Next, read Jim McNiven’s column The Cold War 2.0 from our 2014 archive:

For 40 years, one big contest played out in the world. It was a kind of arm-wrestling match between the Soviets and the Americans. I use the word ‘Soviets’ to distinguish one contestant from its successor of sorts: today’s Russians. Eventually, the Soviets could not keep their end of the game going and walked away from the table, into history. The last decade of the century was one where there was but one superpower — and it wanted to party. The attacks on America on September 11, 2001, brought that party to a halt. It signified a new game was beginning; not one of two superpowers engaged while the rest of the world largely stayed out of the way, but one where arm-wrestling was replaced by a kind of hide-and-seek. … continue reading The Cold War 2.0

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

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.

 

 

 

 

 ~~~

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.

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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Globalization: elite British golfers rue sale to Chinese investors

A practice green is seen next to the clubhouse of the Wentworth Club in Virginia Water, Britain, January 8, 2016. REUTERS/Peter Nicholls

A practice green is seen next to the clubhouse of the Wentworth Club in Virginia Water, Britain, January 8, 2016. REUTERS/Peter Nicholls

By Estelle Shirbon
January, 2016

Former club captain Michael Fleming poses by a portrait of Winston Churchill inside the clubhouse of the Wentworth Club in Virginia Water, Britain, January 8, 2016. REUTERS/Peter Nicholls

Former club captain Michael Fleming poses by a portrait of Winston Churchill inside the clubhouse of the Wentworth Club in Virginia Water, Britain, January 8, 2016. REUTERS/Peter Nicholls

LONDON (Reuters) – London has been cosying up to Beijing in recent years in the hope of attracting Chinese investment, but in one leafy corner of England the love-in has turned to acrimony.

Long-time members of Wentworth, a hallowed golf club in the affluent county of Surrey just west of London, accuse the new Chinese owners of using an eye-watering fee hike to get rid of them and turn the club into a preserve of the global ultra-rich.

The dispute has caused diplomatic ripples, with interventions from Britain’s Foreign Secretary Philip Hammond, who represents the local area in parliament, and from the Chinese embassy in London.

At issue is a plan by Beijing-based property and investment firm Reignwood Group, which bought Wentworth in 2014, that would require members to pay 100,000 pounds to remain part of the club and double maximum annual fees to 16,000 pounds.

“My own personal feeling is that they don’t want us,” said Michael Fleming, a local dental surgeon and Wentworth member for 28 years who has just ended a term as club captain. As for many members, the club has been central to his family’s social life.

The club says it plans to invest an initial 20 million pounds to improve facilities, with 10 million being spent in the next two years, as it pursues its vision to make Wentworth “the world’s premier private golf and country club”.

“We are absolutely clear on the important role the club plays within the community and we know that it has generated multiple friendships over the years. We very much want this to continue,” it told Reuters in an emailed response to questions.

Home to three 18-hole courses and to a striking crenellated clubhouse, Wentworth is famed throughout the golfing world for an old association with the Ryder Cup and as the venue for the annual BMW PGA Championship on the European Tour.

It has about 4,500 members, mostly wealthy locals with a smattering of British TV celebrities and professional sportspeople like former England cricketer Kevin Pietersen.

Men drink in the Burma Bar at the clubhouse of the Wentworth Club in Virginia Water, Britain, January 8, 2016. REUTERS/Peter Nicholls

Men drink in the Burma Bar at the clubhouse of the Wentworth Club in Virginia Water, Britain, January 8, 2016. REUTERS/Peter Nicholls

 

“LIKE A MORGUE”

Fleming said he expected about 90 percent of members to leave the club if Reignwood’s changes come into force as planned in April 2017, and a significant number had already left.

One member of 18 years, who did not wish to give his name because he did not want public attention, said Wentworth was already exclusive by most people’s standards and he could not fathom what Reignwood were trying to achieve.

“If they do have this exclusive membership, the club is going to be like a morgue. There will be nobody there. One of the essential elements of a decent club is it has a certain amount of buzz about it,” he said.

In December, Fleming delivered a petition signed by over 500 Wentworth members to the Chinese embassy in London.

In a response seen by Reuters, embassy official Jin Xu wrote that Reignwood had “established itself as a responsible investor in the UK”, concluding that “the group has assured me that their plans for Wentworth Club will serve the long-term interest of its members and local community”.

But Hammond, writing in his capacity as the area’s member of parliament, described Reignwood’s plans as “very disappointing” in a letter to a club member.

Hammond has met twice with disgruntled Wentworth members and once with representatives of Reignwood to discuss the dispute.

“It is clear to me that a solution needs to be found … which preserves the great history of the club, delivers important new investment and retains the club’s position as a great UK sporting institution,” Hammond has said in a statement.

A barman stands behind the bar of the Cocktail Bar in the clubhouse of the Wentworth Club in Virginia Water, Britain, January 8, 2016. REUTERS/Peter Nicholls

A barman stands behind the bar of the Cocktail Bar in the clubhouse of the Wentworth Club in Virginia Water, Britain, January 8, 2016. REUTERS/Peter Nicholls

THE GREAT BRITISH SELL-OFF

In China itself, golf is frowned upon as a symbol of Western values by the ruling Communist Party. In October, the party banned its 88 million members from golf club membership.

This has fuelled theories among the Wentworth community about what could lie behind Reignwood’s plans for their club, with some speculating that it would become a place for party cadres to enjoy a discreet round of golf during their travels.

Though confined to a small and well-heeled community, the conflict at Wentworth feeds into a wider debate in Britain over perceptions that prime assets are being sold off to foreigners who may not always have local interests at heart.

Concerns range from absentee Asian landlords snapping up London properties while residents face a housing shortage, to a perceived loss of national prestige and control as foreign firms take over storied British brands.

China is at the heart of the debate, with government critics voicing concerns over a plan to build a nuclear power station reliant on French technical expertise and Chinese money.

A Chinese firm owns the London Taxi Company, maker of the capital’s distinctive black cabs, and during a pomp-laden visit to London by President Xi Jinping in October it emerged that a Chinese retailer would take over world-famous toy store Hamleys.

At Wentworth, the dispute over what Reignwood euphemistically calls “the new membership structure” has fuelled strong anti-Chinese sentiment.

“Is this what the British people are to expect when the Chinese ‘invest’ in our country? We need to be more alert,” wrote a club member in one of dozens of similar comments handed over to the embassy at the same time as the petition.

The club said it was “extremely disappointed by any inference that members have been treated badly, which in turn is impacting on China’s image and image of Chinese investors in the UK”.

Copyright Reuters 2015

(Editing by Raissa Kasolowsy)

Related reading:

Class war returns, this time as a global issue, by Jonathan Manthorpe, International Affairs column

Many mature democracies, previously characterised by the broad social harmony that defines equitable societies, are being sucked into a new world order. 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. This is a shift in the structure of human society with very real and unappetizing implications … read more.

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Universities in Crisis: a series

Reed College, Portland, Oregon. Photo by Deborah Jones © 2010

Reed College, Portland, Oregon. Deborah Jones © 2010

Jim McNiven wraps up his three-part series The Future of the Global University System (public access) with thoughts on Globalizing Access to Higher Education. An excerpt:

Let’s take a tour d’horizon of what seem to be the relevant pieces of the situation outlined in the preceding two Parts of this essay. Governments, either quickly or slowly, are withdrawing from public funding for post-secondary education. As a general rule, governments everywhere are operating with deficits and growing debt loads, which are becoming unsustainable, either mathematically or politically. Something has to give. If there is a cheaper way to provide post-secondary education, then this has to become an issue, even where today’s governments are dedicated to providing the service for free. A French Premier once noted famously that, ‘to govern is to choose.’ By implication, something expensive will be hardly be chosen against its cheaper alternative.

Not all parts of the existing university system will be discomfited equally as the choice against traditional post-secondary education continues to become widespread. Technical colleges, where hands-on training is important, will continue to be supported. Small, residential teaching institutions, charging high tuitions but performing both socializing and education functions for those who can afford them, will continue to exist. Some of the most famous larger institutions, which have brand-names that are prestigious, will continue to be filled and paid for by the world’s top students and by the world’s elite families. Research institutions that train only graduate students (MA and PhDs) and which derive their funding from research sources may actually increase their small numbers.

The rest will find it difficult to survive…. read  Part 3: Globalizing Access to Higher Education (no charge*)

Here is Jim McNiven’s column page, including the series, The Future of the Global University System.

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