“I can’t wait to see how the incoming administration deals with AI (artificial intelligence),” said US Secretary of State John Kerry, in a less-than-gracious reference to the fact that the Trump team hasn’t got a clue about the real driving force in the changing world economy.
What was striking was that Kerry didn’t have to clarify his remark for the 2,000 “global leaders” – politicians, bureaucrats, business representatives and public intellectuals – who are in the Swiss alpine town of Davos for the annual World Economic Forum (WEF). They all know what he’s talking about.
This year’s Davos gathering is actually focused on the rise of populism and simple-minded attacks on globalisation (Donald Trump, Brexit et al.). That’s only to be expected, since the world’s ultra-rich are potentially threatened by that sort of thing. But they didn’t get rich by being stupid, and they have a fairly sophisticated analysis of what’s causing it.
The headline event on the first day of Davos was an hour-long speech by China’s President Xi Jinping in which he laid claim to the leadership role on free trade, globalisation and the struggle to contain climate change that is being abandoned by the United States under Trump. His main concern was to fight the rise of protectionism: “No one will emerge as a winner in a trade war,” he said.
But Xi didn’t go into the sources of the anger that fuels the populist revolt (for China is not a democratic country, and it hasn’t happened there yet). John Kerry did get into it, and he went well beyond the usual platitudes about rising unemployment and under-employment, stagnating wages, and the widening gulf between the rich and the rest. “Trade is not to blame for job losses,” he said. Automation is.
Quite a few American manufacturing jobs did go abroad in the early stages of globalisation, in the 1980s and 1990s, but that’s old news. Eighty-five percent of the almost 6 million American manufacturing jobs that disappeared between 2000 and 2010 did not go anywhere; they just evaporated. The workers were replaced by tireless, uncomplaining machines that could do their jobs more cheaply.
Although Kerry did not mention it, the same thing is now happening in China: relatively cheap Chinese labour is still more expensive than the automation that replaces it. Even in India, where wages are lower still, there is now talk of “premature deindustrialisation”.
It’s a misleading phrase, because it suggests that India will never become fully industrialised. It probably will – but perhaps without ever creating a huge industrial working class with reasonably good and steady wages. Further industrial growth is likely to come mainly through automation, and employment in manufacturing may be peaking right now.
So Donald Trump is barking up the wrong tree, as are the other populists emerging all across Europe, and their emulators who are beginning to appear in the developing world. Why do they all persist in blaming free trade and globalisation instead of automation? Because you can’t do anything about automation.
It’s like the old story about the man looking for his car-keys under the street-light. “Where did you lose them?” “Over there.” “Then why are you looking for them here?” “The light’s better here.”
If you are a politician, then it’s better to blame globalisation because you can do something about that. You can build walls, impose tariffs, make all sorts of impressive gestures to stop the free trade that is allegedly destroying the good jobs. Or more precisely, you can win political power by claiming that you will do those things and thereby solve the problem.
Whereas nobody will believe you if you say that automation is what is really changing the economy, and so you are going to stop the automation. That’s Luddism, and everybody (or at least, everybody at Davos) knows that that doesn’t work. So the rich and the powerful are way out ahead of the pack in accepting that growing automation really is going to destroy large numbers of jobs.
A recent Citibank research note forecasts that automation will eliminate 57 percent of all existing jobs in the developed countries within the next 20 years. In China, 77 percent of manufacturing jobs are at risk over the same period. And the notion that the economy will create other, better jobs to replace them is just a comforting myth. Most of the new jobs that are being created are MacJobs.
If more than half the workforce ends up unemployed – and therefore humiliated and broke – then their anger will be so great that it could sweep away the comfortable world of the ultra-rich. Which is why there are sessions at Davos this year considering radical ideas like a “Universal Basic Income”.
To stop the populism, first you have to deal with the anger.
To shorten to 725 words, omit paragraphs 8 and 10. (“It’s…now”; and “It’s…here”)
Not many things are certain in the aftermath of Donald Trump’s narrow victory in the US presidential election, but FBI Director James Comey can rest assured that his job is safe. His prediction of a new investigation into Hillary Clinton’s emails eleven days before the election (followed by a retraction only 36 hours before the vote) gave Trump the edge he needed to win in the close-run contests in the “battleground states.”
Another sure bet is that Trump will not waste his time trying to send Hillary Clinton to jail, despite his many promises to “lock her up.” But this brings us rapidly to the nub of the matter: how many of his promises does he really intend to keep? If he keeps them all, we are in for a wild ride in the next four years.
President Barack Obama, addressing his last rally before the election, said: “All that progress (we made) goes down the drain if we don’t win tomorrow.” So down it goes: the promising climate change deal signed in Paris last December, the Affordable Care Act that gave 20 million poorer Americans access to health insurance, the deal that persuaded Iran to stop working on nuclear weapons, and maybe the whole 68-year-old NATO alliance.
Trump often accused of being sketchy on the details of his plans, but he has actually given us quite a lot of details on these issues. He’s not just going to tear up the Paris climate accord, for example. At home, he’s going to dismantle all but a few “little tidbits” of the Environmental Protection Agency and, he says, revive the coal industry.
He’s not just going to restart a confrontation with Iran. He has talked about closer cooperation with Russia in the fight against Islamic State – which, given Russia’s support for the Assad regime, might even give Assad a decisive victory in the Syrian civil war.
Will he really deport 11 million illegal immigrants from the United States? (He back-tracked a bit on that.) Will he build a wall on the Mexican border? (He can’t walk away from that promise.) Will he ban all Muslims from entering the US? (Not in so many words, maybe, but Muslims should not consider taking vacations there.)
Will Trump tear up the North American Free Trade Agreement with Canada and Mexico, and repudiate the Trans-Pacific Partnership (a free trade deal linking most Pacific Rim countries except China) and the proposed Trans-Atlantic Trade and Investment Partnership (a similar deal between the US and the European Union)? Yes, yes and yes. Destroying the current “globalised” trading arrangements was a key part of his platform.
Will he impose import duties on goods made in America’s trading partners in an attempt to “bring the jobs home”, including 35 percent tariffs on Mexican-made goods and 45 percent on Chinese exports. If he does, he’ll be starting a global trade war, and in the case of China a confrontation that could even turn military.
How could almost half of American voters support all this (47.5 percent)? Well, they didn’t, actually. They weren’t interested in the details.
They just hated the way the country was changing. Many of them had lost out economically because of the changes, and they were all very angry. As American film-maker and social commentator Michael Moore predicted, Donald Trump has ridden to power on the back of the biggest “Fuck You” vote in history.
It was driven by the same rage that fuelled the Brexit vote in Britain last June, and it was equally heedless of consequences. Pro-Brexit British voters were more obsessed by immigration and Trump voters were more upset about jobs going abroad, but white working-class males provided the core support in both cases and the basic message was the same: “Stop the world. I want to get off.”
Populists like Boris Johnson in England and Donald Trump in the United States are just exploiting those emotions, but they are barking up the wrong tree. The basic change that is leaving so many people feeling marginalised and unhappy is not immigration or globalisation. Those scapegoats are popular mainly because you can imagine doing something to solve the problem: close the doors to immigrants, rip up the free trade deals.
But the real change is automation: computers and robots are eating up most of the jobs. Seven million American factory jobs have disappeared since 1979, but American factory production has doubled in the same time. The United States is still the world’s second largest manufacturer, behind only China.
So the populists can go on baying at the moon for a while, but sooner or later we will have to recognise that this is unstoppable change and start figuring out how to live with it. In particular, we will have to figure out how a large proportion of the people in developed countries can still have self-respect and a decent living standard when there are no jobs for them.
To shorten to 725 words, omit paragraphs 5 and 6. (“He’s not…there”)
The chief source of new problems is solutions to old problems. The ammonia that we used in domestic fridges as a coolant in the early 20th century was poisonous if it leaked, so in the 1930s we replaced it with chlorofluorocarbons (CFCs), which you can breathe all day without harm. Problem solved.
Unfortunately, it turned out that CFCs, when they leaked, eventually rose into the stratosphere where they began destroying ozone. The ozone layer is the only thing protecting us from the Sun’s harmful ultraviolet radiation, so countries responded quickly in the 1980s when scientists discovered a spreading “ozone hole” over the Antarctic.
In only a few years the world’s nations negotiated the Montreal Protocol of 1987, which mandated the elimination of CFCs from all industrial processes by 1996. The deadline was met, and the latest projection is that the ozone layer will recover to 1980 levels between 2050 and 2070. Problem solved.
Unfortunately, the CFCs were replaced in most fridges and air-conditioning units by hydrofluorocarbons (HFCs). They don’t hurt the ozone, but they are very powerful warming agents – 10,000 times more powerful than the same volume of carbon dioxide – when they escape into the atmosphere.
Global warming was not seen as an urgent threat in the 1980s, so the negotiators were not much concerned by that. If the warming turned out to be a major problem, it could be dealt with later. But it did turn out to be a major problem, and later is now.
The rapid industrialisation of the warmer parts of the world (India, China, Brazil, etc.) has led to an explosion of demand for air conditioning and other cooling technologies. According to the Lawrence Berkeley National Laboratory in California, about 1.6 billion new air-conditioning units will be switched on worldwide by 2050.
HFC leakage from air conditioners alone will raise the global average temperature by half a degree Celsius by mid-century. When all the world’s government are pledged to stop the warming before it reaches plus 2 degrees C, and we are already well past plus one degree C,
an extra half a degree is a lot.
So we needed another miracle like the Montreal Protocol – and now we have it. On 15 October, in Kigali in Rwanda, almost 200 countries signed an agreement to curb the use of HFCs being used. US Secretary of State John Kerry called it “the single most important step we could take at this moment to limit the warming of our planet.”
Well, yes it is, but you are probably noticing a pattern in all this. It’s not so much that we keep getting it wrong. It’s the time it takes to put it right: a century so far, and we’ll still be at it for at least another 30 years before all the HFCs are out of the system.
When you read the fine print of the Kigali Amendment, it turns out that the United States (the second-biggest HFC polluter), the European Union, and some other rich countries will have to achieve their first 10 percent cut in HFC production by 2019 – but the schedule for further cuts is not clearly defined, apart from the fact that they must be down by 85 percent by 2036. (That’s twenty years from now.)
The majority of the world’s countries – including China, the biggest polluter – will only have to freeze their production level in 2024. (At the moment, their production of HFCs is going up by an average of 16 percent a year, which means it could almost triple by 2024.)
The first 10 percent cut by these countries is only due in 2029, and it will be 10 percent of whatever they are producing five years from now – possibly double the current amount. They will then make further cuts in 2030-2045, getting production of HFCs down by 85 percent by the latter date (three decades from now).
India, Pakistan and most of the Middle Eastern countries don’t even have to freeze production until 2028, and their target date for getting to 85 percent cuts in production is 2047. At a rough guess, global HFC production will peak some time in the late 2020s, and will be back down to the current level by the mid-2030s.
Don’t get angry. Countries don’t know how to negotiate any other way: nobody gives anything away if they don’t absolutely have to. But if you want to despair, go right ahead. The pace of the political process does not remotely match the speed with which the threat is growing.
We have to do much better than this if we are to avoid crashing through the plus-two-degree limit and tumbling into runaway warming. We are not ready to make those deals yet, but when we finally are we will have one small consolation. This deal has been far easier to make because it is an amendment to the 1987 Montreal Protocol, not a whole new treaty.
The more treaties we have on climate matters now, however imperfect they may be, the faster we will be able to move when we finally do take fright.
To shorten to 700 words, omit paragraphs 5, 6 and 13. (“Global…2050″; and “India…2030s”)
On Tuesday former Brazilian president Dilma Rousseff left the presidential palace in Brasilia and boarded a plane for her adopted home city of Porto Alegre. She leaves behind a successor who risks indictment for far worse offences than the ones that brought her down, and a country that has lost its right to a place among the BRICS
The BRICS began as a collection of large, fast-growing countries in the poorer parts of the world that Jim O’Neill of Goldman Sachs identified as emerging global powers in 2001: Brazil, Russia, India and China. (South Africa and the capital S were added in 2010.) The BRICS even started holding annual summits, although they were rarely more than orgies of self-congratulation.
Nobody enjoyed their new status more than the Brazilians, but it was always an illusion. China and India, with 1.3 billion people each, were indisputably great powers. Russia was a recovering great power, not a new one. But Brazil, like South Africa, was an imposter, lacking the critical combination of population, resources and industry that entitles a country to a place in the first rank.
Brazil was a fairly plausible imposter during the years of the great boom in commodity prices, but for the past two years it has been in deep economic trouble. It was Dilma Rousseff’s misfortune to win the 2014 presidential election just as the bottom dropped out of the country’s economic “miracle”.
Her predecessor as president, Luiz Inacio “Lula” da Silva, exploited the boom to build a modest welfare state that lifted 50 million Brazilians out of poverty. Rousseff struggled to maintain those gains in the midst of Brazil’s worst recession since the 1930s – the economy shrank by almost 4 percent last year – and became the least popular president in Brazilian history.
Her unpopularity, plus a huge corruption scandal that implicated some members of her Workers’ Party (though not herself personally), created the atmosphere in which it became possible for the Brazilian Congress to impeach her. She describes it as a “constitutional coup” designed to remove an elected left-wing government from power, and she is quite right.
Rousseff was not impeached for corruption. She was found guilty of window-dressing government accounts before the last election, in order to minimise the impact of the collapse in Brazil’s export earnings on her spending promises. It was a petty misdemeanour for which she received a grave punishment at the hands of a Congress full of people who have committed actual crimes.
It is universally acknowledged that the Brazilian Congress is one of the most corrupt legislatures on the planet. 58 percent of the members are currently under investigation for involvement in the “Lava Jato” (car wash) scandal, in which they allegedly got kickbacks on contracts with the huge, state-owned Petrobras oil monopoly.
Few of these people are associated with Rousseff, since the Workers Party holds less than one-tenth of the seats in Congress and depends on coalitions for a majority. A cynic
might say that that’s why Rousseff has supported federal prosecutors who are investigating Lava Jato – but the same cynic would also have to acknowledge that one of the motives for impeaching Rousseff is to shut the investigation down.
Indeed, the majority leader in the Senate, Romero Juca, was secretly recorded discussing precisely that goal – and he is a close political ally of Michel Temer, Rousseff’s former vice-president (from another party), one of the leaders of the campaign against her, and now her successor as president.
President Temer himself has been accused of skimming $300,000 off a nuclear-energy contract, so it shouldn’t be too long before some kind of amnesty is cobbled together for everybody who faces indictment in the Lava Jato case.
Under Temer, a centre-right politician, it also shouldn’t be long before austerity measures begin to cut into the increased spending on education and welfare that has transformed the lot of the Brazilian poor since the turn of the century. Money is scarcer now, of course, but there are other possible ways of coping with it than just imposing more sacrifices on the poor.
So what kind of Brazil emerges from this sorry story? It will be a much diminished country in wealth, in reputation, and in international influence, and the social and economic gulf between the rich and the rest will widen once again.
None of the BRICS apart from India is doing very well at the moment: Russia’s oil income has collapsed, China’s claims of continuing economic growth are deeply suspect, and South Africa’s economic growth last year was 0.5 percent. As Warren Buffet once said, it’s only when the tide goes out that you find out who’s been swimming naked. Everybody, it turns out.
What’s especially sad about Brazil is that it really did use its boom to rescue a generation of the very poor from misery, and was starting to address the extreme corruption of its political system as well. Now most of that will be rolled back. The crooks are back in charge.
To shorten to 725 words, omit paragraphs 7 and 14. (“Rousseff…crimes”; and “None…out”)