Edge of Change (Issue 005)

Analytics | | 28-03-2018, 07:05

Bring politics back to monetary policy (by Jacqueline Best)

6 December 2017

Edge of Change (Issue 005)A long-read by Jacqueline Best provides an incredibly deep overview of the drawbacks of the contemporary monetary order. Though de-politicization of monetary policy with the purpose of shield economy from populist inflationary pressures has become a common truth as one of the pillars of neoliberalism, it is now time to consider the negative sides of this approach. Forces of illiberal populism that have recently swayed over most of the Western world, often vehemently critique the opaque technocratic policies pursued by the “elites”. Their opinions cannot be merely dismissed as “unsound”, since the global crisis and subsequent events revealed the failure of technocratic monetary policy to achieve genuine de-politicization. While inflation-focused policy has been hailed as the only viable option by neoliberals, it turns out that it itself became a deliberately political choice; moreover, inflation targeting skewed economic policies in many countries in favour of the financial sector and savers at the cost of producing sectors and working borrowers. Being one of the factors in the decline of middle class in the West, these policies in fact brought about the very populism it was implied to prevent. At the same time, post-crisis economies demonstrated a prolonged period of extra-low interest rates combined with expansionary monetary policy, that was quite unimaginable 40 years ago, when the technocratic consensus was forming. Hence, the author argues, it is high time to review the fundamental policy approach and make monetary authorities more democratically accountable. 


Europe’s AI delusion (by Bruno Maçaes)

19 March 2018

Edge of Change (Issue 005)On April 24, 2018, the European commission is set to publish a new AI (Artificial Intelligence) strategy. However, the author notes, its initial draft seems to be very out-of-date and may render the EU unable to compete with the global rivals. He states that it is China which is the fastest-growing AI power, thanks to the enormous pools of data and weak privacy protection. As the core AI sector output in 2020 is estimated to equal $150.8 bn. and the AI-related output- to $1.5 trillion, Beijing is clearly planning to fully capitalize on this opportunity to outrun the West. At the same time, Russian President Putin has recently announced that frontrunners in this field will win the 21th century race and Russia will also put a lot of effort into it. And it is not only economic dominance that the AI may bring- new technologies are likely to render their owners unmatched capabilities in terms of planning and waging war, which should specifically challenge the Western powers.

However, even a quick glance at the draft strategy is enough to understand Brussels does not take the AI realities in all their complexity. The most part of the document is dedicated not to developing but to reflecting on artificial intelligence and its ethical dimension. Whether it is commitment to humanistic values on the part of the EU or mere lenience, but the fact is that with $50 million worth of announced AI spending, Europe cannot be a serious contender in this area, and it raises a lot of questions about the global role it will play in the future.


Is Trump’s get-tough approach with China working? (by Keith Johnson)

21 March 2018

Edge of Change (Issue 005)Keith Johnson analyzes Trump’s tough approach towards China highlighting Chinese mixed messages. After Washington eager for raising tariffs on China, Beijing made clear that they did not want trade war and aimed more balanced trade relations with U.S. Furthermore, China made promise to open up its economy, to stop forcing foreign companies to share their technologies with the Chinese firms, according to the statement made by the Chinese Premier Li Keqiang. While Washington believes that stick-over-carrot approach is the only way to “tame” China, there are many who are skeptical towards implementation of Chinese promises and consider Li’s statement as empty words. Johnson states that even before President Trump, Chinese officials were supporting global trade but there was no progress in terms of actions. Furthermore, since 2013 as China promises to open up its economy, the situation got worse according to the author as regards the business environment, technology transfer, and intellectual theft. In this regard, Mr. Johnson also states that Chinese officials replace promises with threats considering Li’s speech was overshadowed by Xi’s call to defend Chinese every inch to warn Taiwan, Vice Commerce Minister Wang Shouwen’s signal for safeguard measures against U.S. protectionist measures, as well as the statement by the Chinese Foreign Ministry spokeswoman Ms. Hua Chunying, that tariffs on Chinese export would hurt U.S. firms and China will take safeguard measures to fight against the U.S. As a concluding remark, Johnson states that U.S. is determined to continue its tough actions on U.S. trade affairs against China now focusing on theft of technology and intellectual property. Considering recent U.S. tariffs on steel and aluminum, it makes harder for the U.S. to fight against China by creating a coalition alongside the European Union and Japan.


Europeans fret that Chinese investment is a security risk

22 March 2018

Edge of Change (Issue 005)The EU is concerned about growing number of acquisitions by China since they are seen as Chinese government’s strategy aiming to overtake Western innovation. This fear motivated some  EU countries like Germany and Italy not only to tighten up the rules screening foreign investments but also to extend investment-screening rules beyond energy and transport sectors to cover technology sector. Despite the fact that the Chinese companies keep successfully acquiring the know-how, Western companies, particularly German ones are facing discrimination in China. Such unfavourable circumstances made Germany, France and Italy to push for an EU-wide regime blocking acquisitions in sectors where EU firmswere undermined and did not have access in China. While one group of countries advocate further steps restricting Chinese investment, another group, including the Netherlands and Nordic countries, argue that such strict measures may inflame trade tensions as it could scare off investors and damage economic growth. 


Europe needs a collective defense strategy to counter Russia (by Guy Verhofstadt)

22 March 2018

Edge of Change (Issue 005)Taking into account Vladimir Putin’s re-election and the Salisbury incident, Verhofstadt calls for the European collective strategy towards Russia since he considers Putin as a threat to European liberal democracies. The author states that by demonstrating Mr. Putin consequences of his violations of international law, we can also open a door for further cooperation and engagement in the case of Russia’s delivery of obligations under international law and Minsk agreement. Verhofstadt states that Brexit should not be a burden for security and foreign policy issues across Europe so security and defense arrangements should be in place before the transition period’s termination. In this regard, investigations regarding Russian influence over the European democracies, including political systems and economies, should be carried out. Furthermore, Verhofstadt believes that there is a problem that despite frozen EU-Russia contacts, there are on-going bilateral channels so the channels of communications should be opened to reduce further risks. Regarding the supposed new strategy, the author claims that it should be built on the logic of Helsinki process of the 1970s and in return for full respect to Minsk agreement, compliance with international law and free and fair elections as well as respect for human rights, not only lifting sanctions but also deepen political and economic cooperations should come hand in hand. Verhofstadt also made clear that this strategy should be directed against the current Russian government rather than Russian citizens. As a final point, the author emphasizes the establishment of the Defence Union as a European analogue of NATO. As a final remark, Verhofstadt express his belief in the younger generation of European leaders who have the courage to initiate integrated European defense.


The middle is being squeezed – can it recover? (by Mohammed el-Erian)

26 March 2018

Edge of Change (Issue 005)At the pages of The Guardian, Mohamed el-Erian contemplates about the erosion of the middle- the phenomenon distinct for the last decades but especially pronounced in the recent years. He argues that the trigger for this process was the abrupt end to the constant enlargement of the middle class, when the median wages stopped to rise and the process of gradually improving living standards got stuck. The author explains it through the change in economic patterns that has not been duly addressed, especially when it comes to the impacts of technological progress. Socioeconomic polarization also entailed hollowing out of the centrist politics (which is now universally observed in the Western countries) and the subsequent rise of vehemently partisan, fringe parties and movements across the world. At the same time, these unnerving changes undermined faith in expert opinion and rational discussion, which can bear multiple dangerous consequences for the world. So, Mr. el-Erian argues that time is ripe for trying to tame this tide and introduce policy measures that would restore the optimism of the middle class and general understanding of its merits. As an example, he brings about contemporary economics which has been shifting from single to multiple equilibria models and behavioral approaches that are much better able to cope with uncertainty and predict the whole range of consequences of seemingly small changes. 


Why Central Asian states want peace with the Taliban? (by Masood Saifullah)

27 March 2018

Edge of Change (Issue 005)In February, 2018 a two-day Afghanistan peace conference was held in Uzbekistan. 

DW analyses the key reasons motivating Uzbekistan and Russia to establish peace between the Afghani government and Taliban. According to Michael Kugelman, a senior associate for South and Southeast Asia at the Washington-based Woodrow Wilson Center for Scholars, Uzbekistan’s desire to gain recognition from the international community as a credible and peace-loving country is one of the key factors contributing to Tashkent’s motivation to build peace with the Taliban. The presence of the Islamic Movement of Uzbekistan (IMU) in Afghanistan and IMU’s ambitions to establish an Islamic State in Uzbekistan is another source of concern for the Uzbek government driving it to look for peace with the Taliban. By reaching out to the Taliban, Uzbekistan may isolate the IMU and IS and thus ensure its own security. It is believed that   Russia as another key player is hiding behind the curtains. Although Russia remained neutral in the Afghan conflict for many years, it has recently increased its involvement in the region. According to the analysts, the Afghanistan peace conference is backed by Moscow since Russia does not want to be seen as a key player in that scene. 


The second most dangerous American. What to expect from Trump advisor John Bolton? (by Vladimir Frolov)

26 March 2018

Edge of Change (Issue 005)The appointment of an ultraconservative and hawkish John Bolton, “the second most dangerous American”, to the position of U.S. national security advisor has been a cause of concern for many across the world, as he is widely known for his absolutely uncompromising stance towards Iran and North Korea, whom he deems to be existential threats for the American hegemony, and commitment to a very bitter form of realist foreign policy. Mr. Bolton has repeatedly called to denounce the nuclear deal with Iran (most probably President Trump will now agree to do it), and he sees total abandonment of the nuclear programme as the only way for Pyongyang to achieve normalization with Washington. Moreover, the politician is distinguished for his dismissive attitude towards international organisations (first of all, UN and EU) and views force as the major tool of securing American global power.

However, while Mr. Bolton has also issued a range of harsh statements in the Russian address, paradoxically, his influence might play a positive role for Moscow. His cynical realism and refusal to recognize international norms and values, are quite in tune with the Kremlin’s worldview. Moreover, if the policies he preaches will be implemented more or less fully, they are bound to cause significant ruptures with the EU and deepen contradictions with China and other American rivals in different parts of the world. Moscow may feel it could “catch a fish in muddy waters” and benefit from a more conflict-prone and chaotic world that can emerge. It is then no coincidence that no negative comments have come from Kremlin, and Foreign Minister Lavrov even mentioned their “positive experience of cooperation”.