Edge of Change (Issue 003)

Analytics | | 15-03-2018, 08:30

France’s secular ayatollahs (by Paul Taylor)

5 March 2018

Edge of Change (Issue 003)In our previous edition, we have touched upon the French problem of integrating Muslims in the French society and President Macron’s attempts to handle this problem. At Politico, Paul Taylor contemplates about the different aspect of the problem: the phenomenon of French militant secularists allergic to any hint of religious presence in the public life, and especially if this religion is Islam. Anti-religious tradition has deep roots in France ever since the Jacobin rule, and in case of many anti-Islamic activists (the leader of ultranationalistic FN Marine Le Pen is a vivid example) it is blended with underlying xenophobic and racist feelings and thus takes strongly anti-Islamic forms. It is emphasized that even such 100 per cent secular persons as broadcaster Nora Hamadi, get appalled at such acts as a prohibition of headscarves at school in 2004. Naturally, this radicalizes the Muslim minority and makes any integration policies much harder to implement. Then-candidate Macron in 2016 spoke about the danger of “revanchist secularism” and even of “the specter of civil war”. Such issues as wearing burkini or providing halal food at schools that would not raise much concern in most Western European countries, are still a matter of a fierce debate in the Fifth Republic.

However, the author mentions positive signs, too; the share of people of the non-French, including Muslim, origin, is higher now within the educated groups of the society than ever before and is only growing. He argues it is a considerable time lag typical for the French public life that makes this trend still unexpressed on the higher political level and gives false hopes to radical Republican conservatives. 


Populist gains in Italy show the scale of Europe’s anger epidemic (Raphael Behr)

5 March 2018

Edge of Change (Issue 003)Rafael Behr at The Guardian draws interesting parallels between the astounding victory of the   Eurosceptic forces at the recent Parliamentary elections in Italy, and Brexit. In his opinion, the opinions and reactions both within Eurosceptic and pro-European circles on the continent and in Britain alike, are one-sided and biased, resulting in myopic approach to the European affairs. For example, Brexit enthusiasts were driven by a calculation that the Kingdom decision’s to leave would trigger the disintegration of the EU as many countries with strong Eurosceptic moods would decide to hold similar referenda. This conclusion proved to be spectacularly wrong, as the EU finds ways to come to terms even with such obstinate members as Poland or Austria- it seems that there is a strong mutual consensus that requires resolving even the very fundamental European controversies without resorting to leaving EU or expelling from it. Moreover, Macron’s victory in France as well as the modest result of the hardly Eurosceptic and xenophobic Freedom Party in Netherlands, proved the populist wave to be not as catastrophic as it was deemed to be. On the other hand, many Europeans now prefer to bring the Brexit mess as evidence for a robust state of the European Union which is definitely not true. The EU has to make tough compromises time and again, now in Italy, where it has come to endorse Mr. Berlusconi, an ardent supporter of renouncing Russian sanctions and a person with dubious commitment to norms of law, as the least evil, since it cannot downplay Rome’s position on European issues- and since the Lega Nord’s leader Matteo Salvini believes that all the immigrants, from the first to the last one, are to be “sent home”. Hence, the space for policy-making is set to be uncomfortably narrow in Brussels, at least in the near future. 


China’s ‘bad emperor’ returns (by Francis Fukuyama)

6 March 2018

Edge of Change (Issue 003)On the pages of Washington Post, Francis Fukuyama discusses what the latest news from China about the elimination of term limits for the Head of State, would mean. He compares President Xi, with his incessant self-aggrandizing and increasingly authoritarian style, to Chairman Mao whose voluntaristic experiments of the 1960s cost China millions of lives and a huge step back in terms of economic development. It was this trauma, Fukuyama argues, that taught moderation and made them agree on the 10-year limit for Presidential reign. However, the younger generation that did not live through Mao’s excesses, is less inclined to be wary of the perils of an unconstrained one-man rule. Fukuyama claims the Chinese experience is the best possible argument in favour of democracy; in such Latin American countries as Colombia and Ecuador, the presence of constitutional checks and balances, non-existent in China, thwarted their leaders’ attempts to remain in power for additional cycles. He makes a pessimistic forecast that the world may witness new, “unimagined forms” of totalitarianism, such as the system of total digital control over citizens already being developed, in Mr. Xi’s China. 


Steeling for a fight (by Philippe Legrain)

8 March 2018

Edge of Change (Issue 003)Philippe Legrain in his argumentative piece analyzes import tariffs intended to be put on steel and other products by Donald Trump. The main gist of the whole arguments is depicting the causalities of possible tariffs and its consequence as trade war being destructive for all parties. Since protectionists won the debate in White House and Trump announced his intention to impose a 25% import tariff on steel and a 10% one- on aluminum, questions arise regarding the possible global trade war. The author argues that despite the fact that Trump’s steel import tariffs target China, it will damage other countries more, since China exports only 0.2% of its steel output. This step also will hit the U.S. as well: compared to 140,000 people work in steel-producing industries, 17 million works in steel-using industries which will suffer from increased costs. Furthermore, the author states that the countries tariffs levied will retaliate against this step and will do tit-for-tat for U.S.-imported products which will cause further damage to European consumers and industries relying on American products. Legrain argues that a possible trade war will be destructive for both sides causing loss of jobs, inflation, while on a bigger scale harming economic growth and damaging alliances such as informal alliance against Chinese unfair trade practices. In following parts, the author also mentions that a possible trade war between U.S. and EU would be especially hard for the UK since it should face the threats bilaterally rather than responding through the alliance. Legrain   claims that EU will do safeguard measures against Trump’s tariffs and will raise this issue on WTO which is a lose-lose scenario for the organisation. If WTO favors the U.S., other countries would lead to misuse by other countries who favor import tariffs. Meanwhile, in case WTO favors other countries, U.S. would ignore the ruling and even would pull out from it, which can create a hole in general in the international institution. As a concluding remark, Legrain finalizes that in a possible trade war there will be no winning side and it would certainly not make America great again. 


The Most Dangerous Man in Europe Is Jens Weidmann (by Simon Tilford)

8 March 2018

Edge of Change (Issue 003)Simon Tilford writes about the most probable candidate for the European Central Bank presidency, Jens Wiedmann, claiming that his accession to the job would not be in European interests. Mr. Weidmann is said to be a staunch economic conservative, being the only member of the ECB board to oppose Mario Draghi’s quantitative easing policy back in 2012 which ultimately helped to tame the worst phase of the crisis and paved the way for the recovery Europe is enjoying now. Representing the German tradition, Weidmann is skeptical of fiat money, inimical to the risk-sharing financial arrangements within Europe and believes in a very limited role to be played by the Central Bank. Moreover, his previous career background does not make him a good candidate for the extremely demanding job of the EU’s financier-in-chief. However, bearing in mind France’s and Italy’s hopes to gain Berlin’s support in conducting some structural reforms of the Union, their governments are likely to endorse the German candidate for this role. Though he will not be able to take most important decisions unilaterally, still, bearing in mind the fragility of the European economic boom and growing political tensions within Europe, especially the rise of populism almost everywhere, Mr. Weidmann as a ECB head may shift the Union’s fortunes to the worse, especially in case of a new crisis which would require unconventional decisions that don’t fit economic orthodoxy. 


Will China’s Belt and Road Initiative outdo the Marshall Plan?

8 March 2018

Edge of Change (Issue 003)This article at The Economist looks at the comparison between the U.S.-implemented Marshall Plan and Chinese Belt and Road Initiative (BRI). Firstly, it raises the issue of the financial capacity of both initiatives and argues that financial comparison of these two policies cannot be made since no one knows how much money will be allocated for BRI and current calculations are not accurate since it does not cover loans from banks. Furthermore, the article also argues that unlike the Marshall Plan which mainly (in fact, by over 90%) represented handouts rather than loans, Belt and Road Initiative cannot rely on pure generosity since there is money came from private entities focusing on earning a return. Moreover, many billions of dollars to be invested within the framework of the Chinese program, might be financed even without President Xi’s vision. Finally, there is analysis of the impact made by the Marshall Plan and BRI which comes to the conclusion that in comparison with market-friendly policies Marshall Plan encouraged in Europe, BRI is reluctant to influence internal economic affairs of interfered countries. As a concluding remark, the author argues that BRI will not even try to urge any reforms, especially since the sponsor country (China) has to initiate many of them at home first. 


Is the U.S. hypocritical to criticize Russian election meddling? (by Thomas Carothers)

12 March 2018

Edge of Change (Issue 003)Thomas Carothers analyze U.S. interventionism in foreign elections during and after the Cold War period, explaining what makes it different from Russia’s interfering policy. Although during the former period U.S. intervene in many foreign elections, mainly by supporting candidates that the United States preferred or in some cases overthrowing legitimately elected leaders that Washington accepted as belligerent to its security and economic interests, since the end of the Cold War such interventionism has declined considerably, due to the fact that U.S. policymakers became less interested in the outcomes of foreign elections. Moreover, author discusses the American pro-democracy diplomacy as an element of electoral meddling and its role in shaping political direction of other countries. For example, Russian President Vladimir Putin views democracy promotion as an intervention into domestic political life- a covert form of electoral meddling. Even though the author argues that U.S. democracy support abroad is not akin to political meddling done by Russia, he discusses some cases where the U.S. supports openly one side of a contested electoral campaign against the other. However, this is accepted not as an intervention into the free and fair elections, but rather as attempts to help the weaker side to struggle with an unfairly strong opponent. Further, the author points out that the U.S. efforts to promote democracy and democratic elections target its strategic enemies such as, Iran and Cuba, however, other nondemocratic countries such as Saudi Arabia and Ethiopia have never been on the agenda for promoting democracy, since they are the strategic partners of the United States. In conclusion, both U.S. and Russia do have past records of political meddling, however author argues that it is not clear what it will take for the U.S. to move forward in putting together an effective response to Russian electoral meddling. 


Global markets undergoing major change leaving investors at risk (by Joe Ciolli)

13 March 2018

Edge of Change (Issue 003)Goldman Sachs, the multinational finance company analyses the performance of safe-haven currencies since September, 2017 and comes to conclusion that there is clear divergence observed among them. Due to such a threatening trend, the reliability of “surefire hedges” is being challenged, which in turn has negative impacts on the safety of investments. Goldman’s argument is backed by 2 main factors explaining the current market shake-up. Higher rates and monetary tightening led to “rate shock environment”, while unexpected depreciation of dollar contributed to the worsening situation. A negative beta of conventional safe-haven assets to the Cboe Volatility Index known as VIX is another measure justifying Goldman’s conclusion. As no assets and equity sectors have had a positive beta to the VIX since 2017 “finding effective hedges in the cash space” will be a difficult and quite challenging task. 


You can also download a pdf file:Edge-of-Change-Issue-003.pdf [ b] (Downloads: 1)