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Showing posts with label USA. Show all posts
Showing posts with label USA. Show all posts

Thursday 13 April 2023

How China changed the game for countries in default

Robin Wigglesworth and Sun Yu  in The FT

Zambia, struggling from an economic and financial crisis compounded by the Covid-19 pandemic, first missed an interest payment on its international bonds. Two and a half years later it remains in limbo, unable to resolve the default on most of its $31.6bn debts. 

That an impoverished and vulnerable country has for so long unsuccessfully laboured to reach a deal with creditors and move on from the crisis is an illustration of the messy process to deal with government bankruptcies, which some experts fear has now broken down completely. 

The consequences could be severe for the spate of countries that have recently defaulted on their debts, and the topic has been high on the agenda of this week’s spring meetings of the IMF and World Bank in Washington. 

In her opening remarks at those meetings, the IMF’s managing director Kristalina Georgieva noted that about 15 per cent of low-income countries were already in “debt distress” and almost half were in danger of falling into it. 

“This has raised concerns over a potential wave of debt restructuring requests—and how to handle them at a time when current restructuring cases are facing costly delays, Zambia being the most recent example,” she told attendees.  

While domestic laws and judges govern the bankruptcies of companies and individuals, there is no international law for insolvent countries — only a chaotic, ad hoc process that involves working through a hodgepodge of contractual clauses and tacit conventions, enduring tortuous negotiations and navigating geopolitical expediency. 

A decade ago, US-based hedge fund Elliott Management exploited that landscape to notch up several lucrative victories by suing defaulters for full repayment of their debts. But this fragile patchwork is now under threat of unravelling completely due to the emergence of a new, disruptive, opaque and powerful force in sovereign debt: China. 

Some experts say Beijing’s lending spree to developing countries and refusal to play by western-established rules represents the single greatest impediment to government debt workouts and threatens to leave some countries in debt limbo for years. 

But Yu Jie, a senior research fellow on China at think-tank Chatham House, believes Beijing’s stance “is less about economic rationalities and more about geopolitical competition”. 

“The multilateral financial institutions are run largely by Americans and Europeans. China had hoped to be able to shape the agenda of debt relief, not to have it dictated by the west,” she says. 

Jay Newman, the former Elliott fund manager who successfully sued Argentina for $2.4bn after its 2001 debt restructuring, says the emergence of China as a significant player has left the entire system in uncharted waters. “You now have one big state creditor with the power to dictate terms and the patience not to make a deal if it doesn’t suit them. It has completely changed the game.” 

The new landscape 

In a grim sign of the times, Alvarez & Marsal — one of the world’s biggest corporate bankruptcy advisers — this year set up a sovereign practice for the first time. Underscoring its expectations for the business, it hired Reza Baqir, a former senior IMF official and governor of Pakistan’s central bank, to lead the new unit. 

The potential is clear. The latest IMF data from the end of February indicates that nine poorer countries — such as Mozambique, Zambia and Grenada — are already in what it terms “debt distress”, while another 27 countries are at “high risk” of falling into it. A further 26 more are on the watchlist. Baqir points out that there are also a lot of struggling state-controlled companies in these countries that will need help as a result. 

“The timing was right” for A&M to set up a sovereign advisory unit, he says. “Given that there are more than 50 countries in various stages of debt distress there is an opportunity for a more holistic approach.” 

Baqir is among those that say the debt restructuring process is broken, largely because it was primarily designed for a bygone era, when creditors were overwhelmingly western countries and western banks. 

Decades ago, the Paris Club was formed to co-ordinate between government creditors, while bankers formed the London Club to restructure their debts. Broadly speaking, western governments drove the process, and occasionally leaned on banks to accept painful settlements. It was largely improvised and often slow, but it mostly worked. 

But the decline of bank lending and the growth of the bond market shook things up in the spate of sovereign defaults that started in the early 1990s. Creditor co-ordination became trickier with myriad bondholders trading claims around the world, rather than just a handful of banks. 

Argentina’s default on $80bn of bonds in 2001 led to years of fights between Buenos Aires and investors such as Elliott, which refused to accept the terms agreed by other creditors. At one point the hedge fund famously seized an Argentine naval vessel when it docked in Ghana. Its reputation became such that bondholders would sometimes invoke the mere spectre of Elliott to scare countries contemplating a default, while policymakers used it as prima facie evidence of the sovereign debt restructuring system’s weaknesses. 

In the wake of the Argentine debacle the IMF responded by attempting to set up a kind of bankruptcy court for countries with itself as judge. But the sovereign debt restructuring mechanism foundered after attracting little support from the IMF’s biggest shareholders. Instead, the US championed the insertion of “collective action clauses” into bonds, which compel recalcitrant creditors to accept a restructuring agreement made by a majority. After Greece’s debt restructuring in 2012 these CACs were beefed up further. 

However, many bonds still lack these clauses. Moreover, they can only help ease a restructuring agreement once it is struck. Many experts point out that they do nothing to solve the biggest fundamental problem: countries are far too slow to seek a debt restructuring as they are wary of a messy process with the potential of worsening an economic crisis and the inevitable political humiliation of defaulting. 

“If I was a finance minister, I’d find it hard to tell my prime minister that we have a clean framework to work with,” says Baqir. 

When they are finally forced into a debt restructuring, the financial relief that countries secure is often too little to ensure a durable upswing. In the few cases where it does clean up their balance sheet, it sometimes only leads to another debt binge. 

This flawed process has now been further complicated — some say wrecked — by China’s vast lending programme across the developing world over the past decade. Many of these loans are opaque in size, terms, nature and sometimes even existence. 

The overall size of the lending programmes is hard to judge, given that China does not report most of it to the likes of the IMF, OECD or Bank for International Settlements. But AidData, a development think-tank based at William & Mary’s Global Research Institute, estimates that the loans amount to about $843bn. China is not a member of the Paris Club, and in most cases the loans are made by its myriad state-owned or merely state-controlled banks, muddling things further. 

It’s like the international financial policy community spent the past decade trying to clean up around the street light, oblivious to the mounds of rubbish piling up unseen around the rest of the darkened street, says Anna Gelpern, a professor of law and international finance at Georgetown University. 

“We spent 20 years focusing on contractual tweaks, assuming that bonds were the problem,” she says. “The problem is the state of global politics, and the fate of low-income countries just isn’t a big priority anywhere.” 

Life in default 

Zambia is a prime example. Of the roughly $20bn of external debt that the IMF tallied when forming its programme in 2022, $2.7bn was lent by international development banks, $1.3bn comes from various western governments, bank loans come to $1.6bn, local kwacha-denominated bonds held by non-residents are $3.3bn and international dollar-denominated bonds account for $3.3bn. But the biggest chunk is nearly $6bn owed to China. 

The IMF has reached a support agreement with Zambia that is conditional on its debt burden becoming sustainable. But other bondholders do not want any relief they offer to simply go towards paying off China. Beijing has in principle agreed to accept a “haircut” on its debts, but experts say it appears to not want anything it offers to go towards improving the recovery of private creditors, leading to the impasse. 

In the meantime, Zambia says it has accumulated about $1.2bn in arrears since its default. Including missed payments to various government contractors, the IMF has estimated that the arrears are actually nearly $3bn. 

Highlighting how China also appears to be leveraging these situations to undermine the western-designed global financial architecture, in January it called for international organisations such as the IMF and World Bank to participate in the debt restructuring. This would overturn half a century of convention that these organisations are “super-senior” creditors exempt from debt restructurings, as participating would imperil their ability to lend to other countries. 

One senior adviser to the Chinese government says that “there is no law that requires World Bank loans to be prioritised” and that the country was “not happy” with a practice that originated in an era when western countries were generally the only creditors. “If we allow the World Bank to take precedence over us, we need to have bigger voting rights and take larger stakes at the bank. China’s duty doesn’t match its rights in development finance.” 

Another increasingly common wrinkle in debt restructuring is what to do with domestic bonds, which local banks and financial companies have often gorged upon. Here too, Zambia is a good example. 

The $3.3bn of local currency bonds held by non-residents have also been cordoned off from the debt restructuring. Lusaka fears that reducing the value of kwacha bonds could wreck its banking industry and do more damage than they are worth. But some holders of other international bonds argue that they should also be included in the restructuring. 

“In the sovereign debt restructuring business we didn’t really think much about local debts,” says Lee Buchheit, a leading lawyer in the field. “There often wasn’t much of it, and we always assumed that the sovereign has a much broader palate of mechanisms it can use to deal with domestic debt.” 

But what to do about Zambia’s Chinese loans remains the thorniest issue and has risen to the highest levels in Washington and Beijing. US Treasury secretary Janet Yellen this year raised the stand-off with Chinese president Xi Jinping’s economic adviser Liu He, and said that it had “taken far too long already to resolve this matter” when she visited Lusaka in January. 

China’s exceptionalism? 

For the most part, experts say China seems mostly content with rolling its debts rather than restructuring them, handing out new loans to ensure that its domestic banks can be repaid in full. But it prefers to act alone, at its own pace, and feels no need for transparency. 

A recent paper by several economists, including Harvard University’s Carmen Reinhart, estimated that China has made 128 bailout loans worth $240bn to 20 distressed countries between 2000 and 2021. About $185bn was extended over the last five years of the study, and more than $100bn in 2019-21. 

Reinhart says that China’s lending stands out for its “extreme” opacity but stresses that its overall behaviour is not as unusual as some people say. “China is really playing hardball because it is a major creditor. US commercial banks also played hardball back in the 1980s,” she says. Baqir agrees, saying: “Whatever the colour or creed of a creditor, creditors think like creditors.” 

The Chinese government adviser also points to factors such as the country’s relative inexperience with debt workouts. “China is still at an early stage in coming up with its debt relief programme,” he says. 

Incomplete domestic financial reforms have also made it harder to offer debt relief to overseas creditors, while some Chinese banks are also struggling with big hits from the country’s wilting real estate sector. 

“We need co-ordination from the top level, which now has other priorities,” the adviser says. He also points out that the pressure on developing countries has intensified following a series of US interest rate rises, and that as a result Washington “should be responsible for the debt trap”. 

But whatever the root cause, most agree on the end result. “All of this [creditor] fragmentation is leading to paralysis,” says Sean Hagan, a former general counsel at the IMF who now teaches international law at Georgetown. 

 There are few solutions being floated around. The IMF in February announced a new Global Sovereign Debt Roundtable to bring together the full gamut of creditors and debtors, and hopefully thrash out ways to “facilitate the debt resolution process”. It is an initiative that few experts harbour much hope for. 

Buchheit likens the impact of an assertive new player on an already fault-riddled debt restructuring system to someone having a bad cold that a doctor struggles to treat, who is then impaled by a spear. “The cold hasn’t gone away, but the doctor is likely to focus more on the spear,” he says. 

Ironically, both Buchheit and Newman — who clashed many times over the years as the leading lawyer for and suer of bankrupt countries — advocate for the same basic approach: countries should restructure the debts they can, remain in default to China, and the IMF should drop its “kumbaya” approach and accept semi-permanent arrears to its biggest shareholders. 

But most expect Zambia-like debt limbo to be the likeliest outcome for a lot of countries. “I suspect this is going to be a recurring problem,” says Reinhart. “And the longer these countries are in the [debt] netherworld . . . the [more the] fabric of the country is affected.”  

Monday 13 June 2022

The WTO’s lonely struggle to defend global trade

What role does the organisation have in an era of fracturing multinational alliances and fears of deglobalisation?  Andy Bounds in The FT 

For almost three decades, the World Trade Organization has been lowering barriers to trade and smoothing the path of globalisation. Yet its ministerial meeting in Geneva this week could result in something that would do the opposite: new tariffs. 

As the summit begins, trade ministers from the WTO’s 164 members have yet to agree whether to continue a 25-year-old moratorium on customs duties for ecommerce. 

If India, South Africa and Indonesia continue their opposition it will expire at the end of the meeting on Wednesday, permitting countries to impose charges on messaging apps, video calls and data flows. 

If an organisation whose purpose is to make global trade easier allows a new protectionist measure, says Jane Drake-Brockman of representative group the Australian Services Roundtable, “the WTO will have lost the plot”. 

 It might also reinforce fears that the WTO is unfit for purpose in an era of fracturing multinational alliances, isolationist politics and possible deglobalisation. 

The history of the WTO traces the evolution of globalised trade. Since it was created in 1995, global trade volumes have more than doubled and average global tariffs have fallen to 9 per cent, with billions lifted out of poverty by participating in the global economy. 

Companies established global supply chains, taking advantage of cheap labour or abundant raw materials in developing countries such as China. 

But in about 2015, this period of so-called hyperglobalisation began to come to an end. The election of US president Donald Trump in 2016, who inflamed a trade war against China and put tariffs on allies in Europe in the name of national security, threatened to unwind years of integration. 

Then came the Covid-19 pandemic and its lockdowns, which caused a dramatic fall in global trade. Countries closed borders and imposed export restrictions on face masks, drugs and food to protect supplies when the pandemic shut down factories. 

Finally, Russia’s invasion of Ukraine, which cut food supplies to countries reliant on its vast grain harvest, exacerbated protectionist trends. Today, many nations are deeply worried about dependency on others and anxious to shorten supply routes. 

The picture has rarely looked bleaker for advocates of free global trade. Pierre-Olivier Gourinchas, the IMF’s chief economist, this month warned of a world fragmenting into “distinct economic blocs with different ideologies, political systems, technology standards, cross-border payment and trade systems, and reserve currencies”. 

The question is what the WTO can do in its “MC12” meeting, the 12th ministerial conference in its history, to keep these disparate blocs together — or at least find consensus on some of the key issues under discussion: fishing subsidies, food security, Covid-19 vaccine equity and WTO governance. 

Ngozi Okonjo-Iweala, the former Nigerian finance minister who took over as WTO director-general in Geneva in March 2021, has staked her reputation on finding an answer. She insisted the meeting should go ahead, despite strained relations and stalled talks. In recent weeks, she has been a whirlwind of activity, popping between negotiating groups to urge progress. 

In May, she told members to consider what is at stake. “Let us all remember that the WTO is about people — about using trade as a tool to raise living standards, create jobs and promote sustainable development. So, let’s redouble our efforts, let’s deliver results and let’s reinvigorate the WTO,” she told ambassadors from developing countries. WTO economists have estimated that if the world split into two trading blocs it would lower the long-run level of real global gross domestic product by about 5 per cent.  

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1. Fishing stocks 
What is the issue? Reducing fishing subsidies. 
What’s at stake? Fishing subsidies are estimated to be $35bn worldwide, of which $20bn directly contributes to overfishing. The UN says the number of stocks fished at biologically unsustainable levels increased from 10 per cent in 1974 to 34.2 per cent in 2017. Support for large vessels means small coastal boats cannot compete. 
Who is blocking it? India and China, who want to be classed as small states and as such would face fewer restrictions.
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Business has issued a similar plea. On the eve of MC12, Business Europe and the US Chamber of Commerce said in a joint statement that the “primary objective” of the meeting must be to “reaffirm multilateralism and rules-based trade as the preferred path to boost global economic growth . . . The WTO also needs to demonstrate that it can respond to the most pressing challenges of our time, particularly health, climate change and food security.” 

That might sound like a tall order when the WTO is in danger of failing to agree even on averting ecommerce tariffs. But the stakes are too high for businesses and consumers for the organisation to fail, Drake-Brockman says. “This is a dangerous time for trade. We really need ministers to get a quality outcome that signals the WTO is still a pro-trade organisation.” 

Seeking consensus 

The WTO was established by 123 countries on January 1 1995. It has been in crisis almost ever since. 

In November 1999, huge protests at a ministerial meeting in the US spilled into rioting and fighting with the police, dubbed the Battle of Seattle. Protesters focused on issues including workers’ rights, sustainable economies, and environmental and social issues. 

No longer could technocrats simply cut tariffs and preach about the economic benefits of comparative advantage. The Uruguay round that created the WTO was the last multilateral trade deal. The Doha round, launched in 2001, collapsed in 2015. 

A subsequent ministerial meeting, MC11 in Buenos Aires in 2017, also ended without agreement. Its shadow hangs long over MC12 in Geneva, originally scheduled for 2020 but postponed by the pandemic. 

The geopolitical winds do not look favourable. The invasion of Ukraine looms large; the US, EU and Canada stripped Russia of its most-favoured-nation status, the WTO rule that means you must offer every member the same minimum trade terms. Ambassadors from several countries walk out of the room whenever the Russian ambassador speaks — and ministers have said they will do the same in Geneva. 

The discord does not end there. Even the EU, historically an enthusiastic cheerleader of open, globalised trade, is pursuing what it calls a policy of “strategic autonomy” in response to aggressive actions by the US and China. 

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2. Farming subsidies 
The issue Reducing agricultural subsidies. 
What’s at stake Governments globally provide farmers with $540bn per year, making up 15 per cent of total agricultural production value. This distorts trade and pushes up prices. 
Who is blocking it? India and others, who want to block cheap imports and pay farmers to stockpile foodstuffs in case of emergency. 
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The bloc has introduced unilateral trade defence tools, including an anti-coercion instrument, which would allow it to respond unilaterally to new trade barriers without seeking WTO approval, and a carbon border tax, which will put tariffs on imports of steel and other goods where the producer is not paying a cost for emissions. 

Cecilia Malmström, the EU’s trade commissioner from 2014 to 2019 and now an adviser at law firm Covington & Burling, is worried by the combination. “The EU has always been a big friend of the WTO and has helped it with other allies to reform and change,” she says. But right now it is “focusing much more on trade defence than on opening up trade. And I think that is a real pity.” 

In the US, Trump may be gone but protectionism is not. Joe Biden’s Democratic party, which also controls Congress, says “the global trading system has failed to keep its promises to American workers”. 

The Democrats want more subsidies for domestic manufacturing, with goods stamped “Made in America”, and says they will “end policies that incentivise offshoring and instead accelerate onshoring of critical supply chains, including in medical supplies and pharmaceuticals”. 

Seeking re-election in 2024, Biden has maintained populist messages about protecting workers and bashing China. He has temporarily dropped tariffs on steel from the UK, Canada and the EU but only if they agree within two years to team up to keep out “dirty Chinese steel” with a new agreement to put tariffs on countries without a carbon price mechanism forcing polluters to pay for emissions. 

“President Biden’s trade agenda in all but rhetoric is exactly the same so far as president Trump’s. It’s still America first,” says Malmström. 

Don Graves, US deputy secretary of commerce, says Biden “has recommitted to the WTO, has stated his support for working with and through the WTO, working with [US] partners to provide necessary reforms”. 

Yet the US has undermined one of the fundamental pillars of the WTO system: dispute resolution. Any member can bring a case against another for breaching its obligations, for example by blocking imports or raising tariffs. A panel of experts rules on the complaint, after which the loser can appeal to the appellate body. 

The US refuses to allow new members to be appointed to the panel, rendering it useless. Washington was particularly irritated that the WTO partly backed the EU in a long-running dispute over aircraft subsidies to Airbus and Boeing. So countries are reduced to imposing unilateral measures that often provoke a response from the other side. “The US is the problem,” says Arancha González, a former senior WTO official and Spanish foreign minister. “It needs to accept that compliance is not weakness.” 

China and India’s influence 

The greater threats to rising global trade are in fact the powers that have grown richer on the back of it, according to Chad Bown, a fellow of the Peterson Institute for International Economics in Washington. 

 Exhibit A, he says, is China, whose entry 20 years ago was supposed to prove the relevance of the WTO, bringing the chief beneficiary of globalisation into the system. 

As it grew richer and more interconnected with the west, so its politics would become more western too, ran the arguments of proponents such as then president Bill Clinton. “It will open new doors of trade for America and new hope for change in China,” he said at the time. 

But in recent years President Xi Jinping has tightened the grip of the Communist party on all facets of life. The party grants many companies state subsidies and cheap loans. The services economy is largely closed. 

There are regular boycotts of companies who speak out on human rights issues, such as Nike and H&M. Indeed, since December China has boycotted an entire country’s produce: Lithuania, after it improved its relations with Taiwan, the independently governed island, which Beijing considers sovereign territory. The EU has filed a complaint at the WTO about China’s behaviour, one of two anti-China cases this year. 

“China’s economic system is not one that works within the WTO,” says Bown. “They have so many economic policies that nobody else would even think of using.” 

Then there is India. In trade, Delhi wants the special treatment of a small developing country, Geneva trade officials say. It is helping to hold up a deal on fishing rights by insisting it gets “special and differential treatment”, reserved for the poorest countries, despite having a big fleet. On agricultural subsidies, it insists on the right for the state to buy grain at inflated prices from farmers to stockpile in case of food shortages. 

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3. Vaccine equality 
The issue Waivers for vaccines. 
What’s at stake WTO intellectual property protections prevent poorer countries making cheap generic versions of Covid-19 vaccines. India and South Africa have been leading a push to allow governments to override IP. There is growing consensus to allow governments to issue compulsory licences to make drugs domestically, with some compensation for rights holders. 
Who is blocking it? The US. Many in Congress are opposed, since the pharmaceutical industry says it would deter investment in future vaccines. The US wants China excluded from using the IP waiver/compulsory licensing scheme as it already produces its own vaccines. 
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Large sectors of its economy are closed to international companies even as its homegrown IT and manufacturing businesses grow in the EU and US. 

Delhi has recently shown signs of engagement. It signed a partial trade deal with Australia this year and has reinitiated trade talks with the EU. It has also compromised on its demands at the WTO for drug companies to hand over their Covid-19 vaccine recipes for free. (See box.) 

But its attitude in multilateral talks remains intransigent, diplomats say, and it has a veto power. “As long as there is India you are never going to get anything agreed,” says Bown. 

‘The WTO will stagger on’ 

Yet despite all that trade is still thriving, González, who was chief of staff to ex-WTO director-general Pascal Lamy, said this month at a seminar at the European Policy Centre think-tank in Brussels. 

“When I look at the figures, I don’t see deglobalisation, I don’t see it in trade. I don’t see it in investment and I certainly don’t see it in digital exchanges,” she said. Cross-border trade and foreign direct investment are higher than they were before the pandemic. 

But she warned of “fragmentation”. The US is seeking to invest in strategic minerals and manufacturing in allied countries, a policy it calls “friendshoring”. China is building a network of African trading partners through its Belt and Road Initiative. Even the EU is looking to friendly states such as Norway and the US for alternatives to Russian oil and gas. 

This activity illustrates that there is still a role for the WTO to play, she said. “Europe thrives on an open economy and European businesses thrive on having one set of rules, which is what multilateral organisations and agreements bring to Europe and European businesses, as much as they bring it to Chinese businesses and to American businesses.” 

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4. WTO governance 
The issue WTO reform 
What’s at stake The WTO has not concluded a multilateral trade round since it was founded in 1995. It has struggled to deal with bilateral trade disputes and growing areas such as ecommerce, modern slavery, sustainable development and how to incentivise environmentally friendly production. 
Who is blocking it? Almost everyone has a different view of what the WTO should do. 
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There are still global issues that can only be solved by multilateral forums, Bown adds. “Look at climate change. We only have one planet.” He suggests countries might form “plurilateral” groups that agree things and have the WTO rubber stamp and perhaps police them. 

But for all the efforts of Okonjo-Iweala to pursue wider goals at this week’s summit, politics is still likely to get in the way of meaningful progress. In the current environment, democratic governments have a hard time convincing lawmakers and the public to endorse bilateral trade deals, let alone comprehensive multilateral deals. 

As a result, MC12 is likelier to see incremental deals than maximalist agreements. Ministers are likely to agree to roll over a deal to allow ecommerce to flow freely until the next meeting in two years, for example, but not even attempt a comprehensive framework to manage the fast-growing trade. “The WTO will stagger on,” Bown says. “We will have as much, or more, trade but just going to different places.” 

It’s possible too that the fragmentation of the multilateral world order is a problem only the members of that order can repair. The International Chamber of Commerce, with more than 45mn companies in more than 100 countries, says it is incumbent on national governments to compromise and bind the trading system back together. 

“Leaders and ministers have not realised how significant failure to reach outcomes would be for global business,” says ICC secretary-general John Denton. “If ministers can’t spend real political capital in making the WTO work, they risk sinking the organisation into further irrelevancy.”

Tuesday 12 April 2022

Capitalism and its Self-Delusions


 

A requiem for fine journalism

Jawed Naqvi in The Dawn

RONALD L. Haeberle was a combat photographer with the US army whose pictures exposed the horrors of the My Lai massacre in Vietnam in 1969. Military analyst Daniel Ellsberg, at peril to his life, leaked the papers revealing the cover-up of US perfidies in Vietnam. Mordechai Vanunu was an Israeli scientist who shared his country’s nuclear secrets with a British newspaper. Israel kidnapped him and put him in jail. US soldier Chelsea Manning handed over 750,000 secret military documents to WikiLeaks and was court martialled for it. She went to prison.

There’s no end to ill-informed media chatter about Vladimir Putin’s KGB past. But it took KGB master spy Vasili Mitrokhin to hand over a treasure trove of Kremlin’s secrets to the Western media. Likewise with Edward Snowden, living in exile in Moscow after exposing the US government’s illegal surveillance of its own citizens.

If there were no journalists, it seems, the truth would somehow still come out. That is one’s best bet for Ukraine. Somebody will blow the whistle, almost inevitably, after pattern, as it were, and the world would know a little more than what the media wants us not to know.

It’s a strange war out there in which columns upon columns of enemy tanks were lined up for days without stirring from their highly visible location a short distance from the capital city, and no one took a pot shot at the sitting ducks. Is there something one is missing? It’s a strange war in which the besieged capital of the invaded country should be running low on critical daily resources but its citizens are able to keep their mobile phones charged and these work very efficiently.

An Israeli analyst says the Russians are allowing the phones to work to be able to listen in. It’s tempting to believe that. But then, why couldn’t the Israeli wizard advise his friends in New Delhi to keep the mobile phones running in besieged Kashmir. Not for days or weeks, but for months, till the courts intervened, did Kashmir have no internet. It’s nice to have an Israeli expert talk about phone tapping.

It’s a strange war also, in which leaders and politicians from friendly countries wade into the heart of supposedly besieged cities to cheer on the fighters they are arming to the teeth and return home unscathed. In football matches, the team managers shout out orders from outside the arena. Here you have them walking to the goalkeeper to plan which way to dive to stop the curving ball.

The Ukraine war looks set to reset the world order. It has in the bargain already exposed the overstated claim of objective journalism the West had credited itself with. The claim lay in tatters, of course, for the most part since the US invasion of Iraq. Many in the media covering Ukraine had purveyed brazen lies that provided the fig leaf for the destruction of a robustly secular country like Iraq.

The overwhelming impression being created is that the Russians are being chased out of Ukraine if they are not being drawn into a trap. Frustrated by their failure, the retreating troops are committing war crimes. It would be difficult to regard any army, Western or Eastern, as a saviour of human rights. It could be a great point to start a discussion. Who is going to try whom for the massacres? The US refuses to be a member of the International Criminal Court that is reported to have initiated its probe into the Bucha killings. And neither is Russia looking interested in blessing the court with acceptance. The worried world and the ICC can only persuade but not prosecute a non-member.

The basic question many are keen to ask is this: is the West on top of the situation in Ukraine, or is Russia winning the war, as non-Russian, non-journalist analysts are beginning to assert. Any journalist should be interested in both parts of the question, but asking the latter would be deemed tantamount to betrayal. Or are we heading towards a long-drawn stalemate dipped in even more innocent blood? The even-handed, old-fashioned school of journalism with cautionary words like ‘alleged’ and ‘claimed’ and ‘could not be independently verified’ etc is becoming sadly extinct.

As a South Asian journalist, one grew up admiring the probity and diligence of Western journalists. There was a time when the BBC in all the South Asian languages would be way ahead of domestic news services in credibility and speed. Z.A. Bhutto’s execution and Indira Gandhi’s assassination, for example, were first announced on BBC and only later reported by the national media outfits. Mark Tully and Satish Jacob were household names during the Punjab turmoil. Dalit leader Ram Vilas Paswan told me that he respected Western journalists more because they were honest in describing the injustices of the Hindu caste system. Indian journalists, he said, were mealy-mouthed about caste inequities.

Tully’s dispatches from New Delhi were broadcast in Hindi, Urdu, Bangla, Sinhalese etc. They found audiences in remote villages. One day, Mark Fineman of the Financial Times was travelling with me to a village near Mathura where a Jat girl and two Jatav boys were lynched by a kangaroo court in a typical love story that went tragically wrong. Fineman decided to flash his press card at the village octroi to get past the barrier speedily. The village boys took one look at him and said: “Oh! Mark Tully! You may go.” Incensed, Fineman promptly thrust a five-rupee note into the toll collector’s hand — more than twice the octroi fees and shouted: “No, I’m not Mark Tully. I can never be.”

Likewise, there cannot be another Robert Fisk who died in 2020. However, John Pilger and a few others of the old school are still around to give us a sliver of hope about an otherwise fatally stricken profession.

Thursday 17 March 2022

Western values? They enthroned the monster who is shelling Ukrainians today

 Aditya Chakrabortty in The Guardian
 
However repressive his regime, Vladimir Putin was tolerated by the US, Britain and the EU – until he became intolerable
 




Six days after Vladimir Putin ordered his soldiers into Ukraine, Joe Biden gave his first State of the Union address. His focus was inevitable. “While it shouldn’t have taken something so terrible for people around the world to see what’s at stake, now everyone sees it clearly,” the US president said. “We see the unity among leaders of nations and a more unified Europe, a more unified west.”

In the countdown to the invasion, the Conservative chairman Oliver Dowden flew to Washington to address a thinktank with impeccable links to Donald Trump. “As Margaret Thatcher said to you almost 25 years ago, the task of conservatives is to remake the case for the west,” the cabinet minister told the Heritage Foundation. “She refused to see the decline of the west as our inevitable destiny. And neither should we.”

Western values. The free world. The liberal order. Over the three weeks since Putin declared war on ordinary Ukrainians, these phrases have been slung about more regularly, more loudly and more unthinkingly than at any time in almost two decades. Perhaps like me you thought such puffed-chest language and inane categorisation had been buried under the rubble of Iraq. Not any more. Now they slip out of the mouths of political leaders and slide into the columns of major newspapers and barely an eyebrow is raised. The Ukrainians are fighting for “our” freedom, it is declared, in that mode of grand solipsism that defines this era. History is back, chirrup intellectuals who otherwise happily stamp on attempts by black and brown people to factcheck the claims made for American and British history.

To hold these positions despite the facts of the very recent past requires vat loads of whitewash. Head of the European Commission, Ursula von der Leyen, claims Vladimir Putin has “brought war back to Europe”, as if Yugoslavia and Kosovo had been hallucinations. Condoleezza Rice pops up on Fox to be told by the anchor: “When you invade a sovereign nation, that is a war crime.” With a solemn nod, the former secretary of state to George Bush replies: “It is certainly against every principle of international law and international order.” She maintains a commendably straight face.

None of this is to defend Putin’s brutality. When 55 Ukrainian children are made refugees every minute and pregnant women in hospital are shelled mid-labour, there is nothing to defend. But to frame our condemnations as a binary clash of rival value systems is to absolve ourselves of our own alleged war crimes, committed as recently as this century in Iraq and Afghanistan. It is to pretend “our” wars are just and only theirs are evil, to make out that Afghan boys seeking asylum from the Taliban are inevitably liars and cheats while Ukrainian kids fleeing Russian bombs are genuine refugees. It is a giant and morally repugnant lie and yet elements of it already taint our front pages and rolling-news coverage. Those TV reporters marvelling at the devastation being visited on a European country, as if its coordinates on a map are what counts, are just one example. Another is the newspapers that spent the past 20 years cursing eastern Europeans for having the temerity to settle here legally and now congratulating the British on the warmth of their hearts.

And then there is the unblushing desire expressed by senior pundits and thinktankers that this might end with “regime change” – toppling Putin and installing in the Kremlin someone more congenial to the US and UK and certainly better house-trained. Spotting the flaw here doesn’t require history, it just needs a working memory. The west has already tried regime change in post-communist Russia: Putin was the end product, the man with whom Bill Clinton declared he could do business, rather than the vodka-soused Boris Yeltsin. 

Indeed more than that, London and New York are not just guilty of hosting oligarchs – giving them visas, selling on their most valuable real estate and famous businesses – they helped create the oligarchy in Russia. The US and the UK funded, staffed and applauded the programmes meant to “transform” the country’s economy, but which actually handed over the assets of an industrialised and commodity-rich country to a few dozen men with close connections to the Kremlin.

In 1993, the New York Times Magazine ran a profile of a Harvard economist it called “Dr Jeffrey Sachs, Shock Therapist”. It followed Sachs as he toured Moscow, orchestrating the privatisation of Russia’s economy and declaring how high unemployment was a price worth paying for a revitalised economy. His expertise didn’t come for free, but was bankrolled by the governments of the US, Sweden and other major multinational institutions. But its highest cost was borne by the Russian people. A study in the British Medical Journal concluded: “An extra 2.5-3 million Russian adults died in middle age in the period 1992-2001 than would have been expected based on 1991 mortality.” Meanwhile, the country’s wealth was handed over to a tiny gang of men, who took whatever they could out of the country to be laundered in the US and the UK. It was one of the grandest and most deadly larcenies of modern times, overseen by Yeltsin and Putin and applauded and financed by the west.

The western values that are being touted today helped enthrone the monster who is now shelling Ukrainian women and children. However corrupt and repressive his regime, Putin was tolerated by the west – until he became intolerable. In much the same way, until last month Roman Abramovich was perfectly fit and proper to own Chelsea football club. Now No 10 says he isn’t. There are no values here, not even a serious strategy. Today, Boris Johnson claims Mohammed bin Salman is a valued friend and partner to the UK, and sells him arms to kill Yemenis and pretends not to notice those he has executed. Goodness knows what tomorrow will bring.