Category Archives: Emerging Markets

Corbyn’s beloved Venezuela is sinking further into the socialist abyss

The definition of a fanatic is someone who doesn’t let the facts get in the way of their theories. By this standard, hapless, gormless Jeremy Corbyn is truly (if serenely) living in another galaxy.

 Heroes are important and Corbyn is crystal clear that Hugo Chavez and his charismatic, populist, socialist Bolivarian movement—long in charge of resource rich Venezuela–is a model he is just itching to emulate. Let us take him at his word and look at the prototype of the socialist paradise Corbyn dreams of.

 With any sort of remotely competent leadership, Venezuela ought to be one of the wealthiest countries in the world, as it possesses the planet’s largest known oil reserves. So economic illiterates Chavez and his even more clueless successor as President Nicolas Maduro have form, as wrecking such a paradise has taken real talent. When Chavez and his Bolivarian revolution took power in 1998, Venezuela was one of the richest countries in Latin America; now it is one of the poorest.

 What does this mean practically? Presently there are shortages of medicine and food staples, a direct result of government policies. The inflation rate in 2016 has been estimated a stratospheric 800%, with output falling by a precipitous 18.6% last year, after a mere 180% rate of inflation and 5.7 percent contraction in 2015. Simply put, due to economic negligence, the place is falling apart at the seams.

 Under its socialist champions and despite the incredible bounty of its oil reserves, Venezuela is desperately, irredeemably poor, and there is no sight whatever of even the smallest effort on the part of the gormless Maduro government to even attempt to right the ship, as to do so would be to abandon the socialist snake oil that they and Corbyn so enjoy peddling.

 Venezuela’s problem is structural, and simply isn’t going away. With the global price of energy halving (and with the American shale revolution now functioning as a permanent ceiling on global oil prices), the latest socialist fantasy is fast approaching its sell-by date.

 It is the easiest political risk call in the world to note (as almost everyone has) that the Bolivarian revolution is on its last legs. But tragically, it is unlikely the fetid, discredited regime will go without a fight.

 Maduro is Chavez without the charisma, meaning he is nothing. With his popularity rating plummeting to near Hollande-like levels of 24% in February 2017, the thuggish President has done about everything he can to change the subject from his obvious and glaring incompetence.

 Maduro has blamed the US (somehow its Washington’s fault as it would surely be for Corbyn) for his self-inflicted wounds. He charges the opposition are fascists and in the pocket of Donald Trump, rather than being a disparate, desperate group of Venezuelans trying to stave off economic disaster, and save what’s left of their country. Having lost December 2015 parliamentary elections to his foes, Maduro, rather than change course and tack towards sanity, has set about organising a takeover of the Venezuelan political system.

 He cajoled the pro-government Supreme Court to recently announce its assumption of legislative powers, in lieu of the opposition-controlled congress. Having extra-legally quashed the opposition’s effort to recall him (which given Maduro’s great unpopularity was sure to have succeeded), the Venezuelan President is not intent on re-writing the Constitution presumably to see that his political opponents, are never, ever in a position to threaten him again.

 Predictably, the opposition are in the streets this spring, leading ever larger demonstrations that have already resulted in the deaths of at least 36 people. Venezuela is a hair’s breath from revolution.

 Maduro will talk about anything, anything other than the undeniable economic mess he and his mentor Chavez have driven his country into. But in the end, the laws of political risk analysis—as is true for the laws of physics—cannot be indefinitely ignored. The disastrous socialist Bolivarian revolution that the Labour leader so admires is not long for the earth. Thank God, as the poverty-stricken people of Maduro’s country deserve far better.

 It is my strong bet that the people of Britain do not need this political risk lesson as to why a vote for Corbyn is a vote for economic suicide (beyond the Shadow Home Secretary’s disastrous inability to do simple maths).

 However, alternate realties and alternate paths not taken are an important comparison metric voters can use to gauge what taking a chance on a radical candidate would look like.

 In the case of Corbyn, one has only to look at the death throes of the economically-challenged Maduro regime to get a sense of what his government would deliver. To look, and then to shudder.

 Published in City AM London, May 9, 2017.

 

 

The America First insurgents couldn’t withstand contact with the real world

“If something cannot go on forever, it will stop.”

–Herbert Stein, Chairman of the US Council of Economic Advisers under Nixon and Ford

As has been true for most administrations over the past century, the new Trump regime came to Washington promising to change everything about the way the place worked and the policy outputs it produced. Over the past 100 years, only FDR and Reagan truly managed to do this. As such, it should come as little surprise that, with Trump’s slew of foreign policy about-turns on China, Nato, Russia, and Syria, the amateurish America Firsters’ reign at the top of US foreign policy lasted mere weeks, as its naïve view of the world could not withstand real world contact either with the Washington establishment or the verities of what is actually happening in the world.

Like many insurgencies, the America Firsters–epitomised by campaign svengali Steve Bannon and erstwhile National Security Adviser General Michael Flynn–have a good story to tell. Years of a gormless, utterly unaware American elite—the people I meet at swish conferences who are breathtakingly, wilfully unaware of the true damage they have done both in the sands of Iraq and to the global economy post-Lehman, and still think they are somehow entitled to run the world—running down the American lower middle class has given them a huge political opening. But if their narrative of elite incompetence is unerringly on the money, their practical policy alternatives have always amounted to little more than dangerous pixie dust.

For the American Firsters are, despite their conservative cloaking, genuine revolutionaries. They do not want to reform an establishment desperately in need of it, but rather throw the baby out with the bathwater and over-turn a global system which has safeguarded American dominance for the past 70 years and managed (just, thanks to JFK’s adroitness) to see off the cataclysm of another World War.

But here is where the real world kicks in. Gravity cannot be wished away, any more than the objective power realities of the present multipolar system. And, just as with gravity comes the affirmation of certain physical laws, so with the multipolarity of today comes political realities which just this past week reasserted themselves in terms of overall American foreign policy.

Not seeing that the perils of radical Islam—upsetting as they surely are—amount to a second order global problem that was under-studied before 9/11 and is over-studied now, the Bannonites have made its destruction the centrepiece of their foreign policy thinking, which inevitably leads to disastrous geostrategic results.

Much like the anarchist movement of the late nineteenth century—so wonderfully dissected in Joseph Conrad’s The Secret Agent—radical Islam can kill and maim and even (in the case of the anarchists) bump off the odd Russian Tsar (Alexander II), American President (William McKinley), or Austrian Empress (Sisi). But it has nowhere near the power either to change the overall nature of the global system, or to replace the United States as the dominant power on earth. It is a real, vexing, terrible problem but not what geostrategists should be concentrating on.

From this mistake about the true nature of the world, all other America First strategies amount to being fruit from this poisoned analytical tree. Russia is not worth cosying up to for a whole host of reasons (Assad, Ukraine, meddling in western elections) as the aid it gives the West in fighting a soon-to-be extinct ISIS isn’t remotely worth the price. Russia is a weak, declining power, an aging gas station with nuclear weapons, but it is a far cry from being America’s new joint partner in combatting radical Islam.

Likewise, China—which along with rising democratic powers such as India is where American strategic attention absolutely ought to be—is not the villain of the piece. Instead, with the help of the only power which in a generation might emerge as a peer competitor to America, the Trump White House can master the hornet’s nest of the nuclear ambitions of ‘the crazy fat kid’ in North Korea (as Senator McCain has so memorably dubbed him), keep the global economic system on the road, and sooth tensions in the South China and East China Seas, preserving stability in the undoubted global engine for future economic growth.

In other words, in the world we actually live in (as opposed to the alternative reality populated by Flynn and Bannon and their henchmen), China is worth engaging, Russia is worth opposing, and radical Islam (while important) is worth taking a deep breath over.

All of this happened this past memorable week as gravity returned to international relations, and the Trump administration pivoted back to reality. Thank God.

Published in City AM London, April 18, 2107.

Donald Trump’s Syria strike killed America First and a Putin rapprochement

“Events are in the saddle and they ride mankind.” –Ralph Waldo Emerson

“I would love to have never been in the Middle East.” –Donald Trump

Foreign policy is rarely what it seems to be. It is the rare leader (a Nixon or a Putin) who comes to office as a chess player, with a fully formulated foreign policy strategy, allowing the tactical details of life to be filled in as they go, all the while never deviating from their overall plan.

Far more common is for a foreign policy to evolve from the bottom up, as the accumulation of responses to a series of unplanned crises that must be dealt with. While in hindsight patterns and themes emerge, they mostly do so after the fact, with the crises themselves leading to grand theory and not the other way around.

What we saw this past week confirms that Donald Trump’s foreign policy is evolving in this garden variety manner. Enraged that the blood-soaked Assad regime used chemical weapons on its own people in Idlib, killing 83 including women and children, Trump responded by unleashing Tomahawk missiles on the Shayrat air base near Homs where the hideous chemical attack was launched. Suddenly, American foreign policy didn’t seem so isolationist after all.

Ironically, the consequences of the shocking air strike—entirely out of character with Trump’s America First vow to avoid the cesspool of the Middle East—will be very limited regarding what is actually going on in Syria. The Pentagon confirmed the strike was a one off, meaning that it does nothing to actually alter the strategic reality on the ground in Syria. Assad, Russia and Iran will continue to win the war in a limited sense, even as the wretched country itself dissolves into a series of feuding fiefdoms.

But the airstrike does have huge strategic ramifications for Trump’s ever-more forlorn pivot to Russia. By directly striking Russia’s client Assad for the first time, the Trump White House has driven a stake through the heart of any chance at a real rapprochement with the Kremlin. With military activism back on the agenda as a foreign policy option, and with the proposed pivot to Russia stillborn after the Trump airstrikes, it is not too much to say that the first iteration of Trump’s America First foreign policy has ceased to exist. Real world events in Syria killed it.

So what is likely to take its place? Earlier in the week, a much less reported on event took place in Washington that in the long run will have an even greater impact on the overall direction of the Trump foreign policy than the dramatic Syrian missile strikes. Steve Bannon, the ideological guru behind Trump’s America First foreign policy, was ousted from the US National Security Council at the behest of the increasingly powerful NSC Adviser General H.R. McMaster.

Not only was Bannon shown the door, but McMaster and Defence Secretary James Mattis’s allies—Chairman of the Joint Chiefs of Staff Joseph Dunford and Director of National Intelligence Dan Coats–were added to the Council, in what amounts to the victory of the grown-ups.

This is hugely important for two reasons. With so few foreign policy appointees making it through the confirmation ordeal on Capitol Hill, the National Security Council is presently the only foreign policy game in town, being fully staffed, as confirmation is not necessary for its senior members. And in McMaster it has a forceful and able head.

If the NSC is dominant bureaucratically, with Bannon being ousted the thrust of Trump’s foreign policy is strikingly establishment and realist. Mattis, McMaster and even weak Secretary of State Rex Tillerson could have fitted comfortably in the administration of the first George Bush, or even that of Ronald Reagan.

They are realist, internationalist, national interest-driven establishment Republicans, and for at least the moment they are in the ascendancy in crafting the new administration’s foreign policy. This is shockingly good news for those of us who have for a while now woken up in a cold sweat, worrying Bannon might have a say in global matters of war and peace.

Of course, the problem with Donald Trump not being a chess player in foreign policy is that, as welcome as this shift is, he may prove to be a human weather vane, and dramatically alter course once again as the wind of events shifts. But for now amid the all the turmoil in the world, the thought of Republican realists actually running the most powerful country in the world is the best news we have had in quite a while.

Published in City AM London, April 10, 2017