Category Archives: Emerging Markets

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

Unilever and the confused priorities of the Davos elite

If Angela Merkel epitomises the overrated in terms of international statesmanship, her equal in corporate terms must be Paul Polman of Unilever. As is true with the German Chancellor, it us unfathomable to me that the leader of a major corporation with a record this hapless should be lionised. For the larger point is that both are symbols of a world that has forgotten that, in healthy societies, recognition must coincide with a record of real accomplishment.

In Polman’s case, his peculiar talent is to perfectly talk the talk of Davos Man, the globe elite who–despite foreign policy disasters in Iraq and economically running the world into a ditch post-Lehman—somehow still thinks they are the repository of global governance wisdom. Since taking over Unilever in 2009, Polman specifically has talked sonorously about water conservation and the dangers of global warming, decreasing the Anglo-Dutch company’s carbon footprint, using more sustainable materials in making the Dove soap and Lipton tea that are two of Unilever’s core brands, and promoting global health.

All of these are worthy causes, and if I were looking for the new head of Oxfam I might well consider Polman for the job. The problem is that a fixation on these societal goods does not necessarily dovetail with a passionate commitment for maximising shareholder value that is the ultimate moral duty of any company chief.

In line with the general philosophical confusion of much of the Wilsonian centre-left, Polman ignores the fact that, in the real world, trade-offs amongst positive goals are merely a fact of life. When asked how much time he spends on specific Unilever business compared with cajoling politicians around the world to sign onto the Davos wish list, Polman tellingly has replied, ‘To me it is the same. I don’t separate that.’

But of course it is not the same. By refusing to prioritise between maximising shareholder value and saving the world, Polman is likely to do neither. For a man who loves everything loves nothing and helps nothing. Life is about priorities, about making choices, not ducking them.

Of course, setting the bar so morally high also leaves you open to endless charges of hypocrisy. In Unilever’s case its global reach has, under Polman’s watch, led it to reaching a settlement over allegations of mercury poisoning in India, while being accused of monopoly practices in South Africa, being slow to halt sexual harassment on its tea plantation in Kenya, and poor labour practices in Vietnam. While Unilever has moved to correct the abuses, in practical terms the company can never be as saintly as Polman’s rhetoric.

But it is Polman’s business record that is perhaps the greatest cause of concern, flowing as it does from his confused all-things-to-all-men Davos philosophy. Banishing reporting of quarterly returns (I would too if my record were as poor as his), Polman urges the world to take the long view. Let us take him at his word.

In the 12 months to 15 February 2017, just before Kraft Heinz announced a $143 billion takeover bid, Unilever’s share price rose some 10 percent. The wider FTSE 100, however, soared by some 28%. In the fourth quarter of 2016, Unilever’s sales missed expectations globally, while falling 2.3 percent in Europe, with many forecasters expecting even worse times ahead in 2017. Defending these poor recent results, Polman blamed both the ‘shock’ of Brexit, wherein the pound fell by 20% against both the euro and the dollar. He also pointed to Prime Minister Modi’s ‘surprise’ anti-corruption campaign, where the Indian government withdrew 500 and 1000 rupee notes, which undercut Unilever’s business there.

But, as regular readers of this column well know, neither of these events should have been surprising (as they have not been to me), and the possibility of both should at a minimum have been planned for. Instead of doing this, the lure of attending another development conference with the great and the good seems to have been to much of a temptation for Polman. For he has certainly taken his eye off the analytical ball.

There only so many hours in the day. And where you put your time in life, there also shall be your treasure. Polman–mindlessly lauded by the city elite—has made it unambiguously clear where his priorities lie. He has straightforwardly said, ‘I am really more interested in development.’ There is nothing at all wrong with this. But it is not overmuch to point out that a company as important as Unilever (with 168,000 employees in 2016) deserves a full time chief executive.

In the wake of the crash caused by many of his Davos colleagues, Polman has earnestly called for ‘a better form of capitalism.’ My gentle suggestion is that Unilever deserves a better form of capitalist.

Published in City AM, March 20, 2017