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Converging Crises

Maybe we can get through the climate crisis without a global catastrophe, although that door is closing fast. And maybe we can cope with the huge loss of jobs caused by the revolution in robotics and artificial intelligence (AI) without a social and political calamity.

But can we do both at the same time?

We should know how to deal with the AI revolution, because we have been down this road before. It’s a bit different this time, of course, in the sense that the original industrial revolution in 1780-1850 created as many new jobs (in manufacturing) as it destroyed (in cottage industries and skilled trades).

The AI revolution, by contrast, is not producing nearly enough replacement jobs, but it is making us much wealthier. The value of manufactured goods doubled in the United States in the past thirty years even as the number of good industrial jobs fell by a third (8 million jobs gone). Maybe we could use that extra wealth to ease the transition to a job-scarce future.

The climate emergency is unlike any challenge we have faced before. Surmounting it would require an unprecedented level of global cooperation and very big changes in how people consume and behave, neither of which human beings have historically been good at.

These two crises are already interacting. The erosion of middle-class jobs and the stagnation (or worse) of real wage levels generates resentment and anger among the victims that is already creating populist, authoritarian regimes throughout the world. These regimes despise international cooperation and often deny climate change as well (Trump in the US, Bolsonaro in Brazil).

And there is a recession coming. Maybe not this year, although almost all the storm signals are flying: stock markets spooked, a rush into gold, nine major economies already in recession or on the verge of one, an ‘inverted yield curve’ on bonds, and trade wars spreading. Even Donald Trump is worried, which is why he postponed the harsher US trade tariffs against China that were due next month.

Economists have predicted nine of the past five recessions, as they say in the trade, so I’m not calling the turn on this one. But a recession is overdue, and a lot of the damage done by the Great Recession of 2008 has still not been repaired. Interest rates are still very low, so the banks have little room to cut rates and soften the next one. When it arrives, it could be a doozy.

So what can we do about all this? The first thing is to recognise that we cannot plot a course that takes us from here and now through all the changes and past all the unpleasant surprises to ultimate safety, maybe fifty years from now.

We can plan how to get through the next five years, and we should be thinking hard about what will be needed later on. But we can’t steer a safe and steady course to the year 2070, any more than intelligent decision-makers in 1790 could have planned how to get through to 1840 without too much upheaval. They might have seen steam engines, but they would have had no idea what a railroad was.

We are in the same position as those people with regard to both AI and the global environmental emergency (which extends far beyond ‘climate change’, although that is at its heart). We know a good deal about both issues, but not enough to be confident about our choices – and besides, they may well mutate and head off in unforeseen directions as the crises deepen.

But there are two big things we can do right now. We need to stop the slide into populist and increasingly authoritarian governments (because we are not going to stop the spread of AI). And we have to win ourselves more time to get our greenhouse gas emissions under control (because we are certainly going to go through 450 parts per million of carbon dioxide equivalent, which would give us +2̊ C higher average global temperature).

The best bet for getting our politics back on track is a guaranteed minimum income high enough to keep everybody comfortable whether they are working or not. That is well within the reach of any developed country’s economy, and has the added benefit of putting enough money into people’s pockets to save everybody’s business model.

And the best way to win more time on the climate front is to start geo-engineering (direct intervention in the atmosphere to hold the global temperature down) as soon as we get anywhere near +2̊ C. To be ready then, we need to be doing open-air testing on a small scale now.

There will be howls of protest from the right about a guaranteed minimum income, and from the greener parts of the left about geo-engineering. However, both will probably be indispensable if we want to get through these huge changes without mass casualties or even civilisational collapse.
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To shorten to 700 words, omit paragraphs 7 and 8. (“And there…doozy”)

Middle East: Treachery and Betrayal

Things have got so complicated in the Middle East that the players are no longer just stabbing each other in the back. They are stabbing each other in the chest, in the groin, behind the left ear – anywhere that comes to hand. Friends and allies one day are targets and enemies the next.

Item One: Israel is not just bombing Iranian troops and allies in Syria, which it has been doing on an almost weekly basis for years. It is now also bombing pro-Iranian groups in Iraq, a country that is a reluctant ally of the United States (US).

There are still US forces in Iraq, but the US ignores the Israeli attacks, and the Iraqi government has to ignore them, too. Prime Minister Adil Abdul-Mahdi has to please both the Americans and his Iranian neighbours, who, as fellow Shias, benefit from strong popular sympathy in Iraq. His task is impossible, but he tries.

Item Two: Turkey, a NATO member and close American ally, is getting ready to invade northern Syria. As Turkey’s strongman President Recep Tayyip Erdoğan gets desperate at home (electoral humiliation, runaway inflation, popular anger), he looks for triumphs abroad.

Erdoğan is obsessed with the Kurds, a minority population in both Turkey and Syria, and he has long vowed to crush the self-governing Kurdish-ruled region that has emerged south of the border in northern Syria thanks to the civil war there. Now he’s actually going to do it.

The tricky bit is that these same Syrian Kurds provided the ground troops for the US campaign to eliminate Islamic State forces in Syria. That job is now done, but several thousand American troops remain in northeastern Syria, partly to deter Turkey from invading. Betraying the Kurds is a Middle Eastern tradition, however, and the US does not want war with Turkey.

Item Three: The United Arab Emirates, Saudi Arabia’s closest ally, is pulling its troops out of Yemen. ‘Little Sparta’, as former US Defence Secretary Jim Mattis calls the UAE, has been the mainstay of the Saudi-led military intervention in Yemen since 2015. It seems to have realised, at last, that the intervention has failed and was a bad idea from the start.

It certainly was. When a northern Yemeni tribe called the Houthi seized control of most of Yemen in 2015, driving the Saudi-imposed puppet president into exile, the Saudi concluded that it was an Iranian plot. (The Houthis are Shia.) But that’s nonsense. It was just Round 189 in a power struggle between the Yemeni tribes that has been going on for centuries.
Parting gift

So the UAE is leaving, and its parting gift to the Yemenis last week was to back rebel militias in Aden who want to revive the old separate country of South Yemen. The Saudi Air Force bombed the rebels, of course, but they still hold most of the city.

This level of dysfunction would not even have caused comment in medieval Europe, but it is unique in the modern world. There are bits of Africa and Asia where individual countries are seeing this level of violence and chaos, but not many, and no whole regions. How can we account for it?

Maybe it’s the fact that dictators and absolute monarchs are thicker on the ground in the Middle East than anywhere else in the world, but that just moves the argument back one step. Why are they the norm in this region and not elsewhere? Could it be because the Middle East has seen more foreign military interventions than anywhere else on the planet?

Maybe – and it’s still going on. Overshadowing all the local follies is the possibility that the US will attack Iran on the false pretext that it is working on nuclear weapons. You know, like it invaded Iraq on the false pretext that it was working on nuclear weapons.

War in the Gulf?

Donald Trump is well known for his desire to cut American military commitments overseas. Indeed, it is one of his most attractive characteristics. But his attention span is short, he plays a lot of golf, and he does not have the knack of choosing good advisers.

His main domestic advisers on the Middle East are Vice-President Mike Pence, Secretary of State Mike Pompeo, and National Security Adviser John Bolton, all hawks on Iran. His closest allies in the region itself are Israeli Prime Minister Binyamin Netanyahu and Saudi Crown Prince Muhammad bin Salman, both of whom can wrap him around their little fingers. And they both want the United States to attack Iran for them.

Donald Trump doesn’t want a war with Iran. He has an extra-strength version of the usual Washington obsession with Iran, as irrational and ineradicable as the parallel obsession with Cuba – the United States will forgive and forget anything except humiliation – but he imagines Iran can be bullied and bluffed into submission. His ‘advisers’ are not that naive.

This is not to say that Pence, Pompeo or even Bolton prefers war to any other outcome of the current confrontation. They would rather see the sanctions they have imposed on Iran, which are strangling the economy and causing great hardship, lead to a popular uprising and regime change. Fat chance.

It’s the ever-popular moral mistake. WE would never yield to such blackmail, because our cause is just and our will is strong. THEY will crumble before the same threats because they are weak and they must secretly know they are in the wrong.

But if the Iranians perversely refuse to overthrow their government, then PP&B would accept war as the next-best outcome. Bolton might actually welcome it, and may already be involved in manipulating the intelligence to justify such a war in the same way he did in the run-up to the invasion of Iraq in 2003. (He called a rather peculiar early-morning meeting at CIA headquarters last week.)

Unfortunately, but unsurprisingly, some players in Iran now appear to be pushing back against the American pressure. They are probably hard-liners associated with the not-so-loyal opposition to President Hassan Rouhani’s ‘moderate’ government (moderate in the sense that he doesn’t want nukes and does want trade with the West), and they may just have given the American warhawks something to work with.

If push came to shove, Iran’s one available counter-weight to overwhelming US military strength would be to threaten the tanker traffic that carries 20 percent of the world’s crude oil and LNG out of the Gulf. The ‘choke point’ is the Strait of Hormuz, between Iran’s south coast and the United Arab Emirates, where the navigation channels narrow to three nautical miles wide in each direction.

On Sunday, there was a ‘sabotage attack’ on four merchant ships at anchor off the UAE port of Fujairah, just outside the Strait of Hormuz, where tankers often wait to be refuelled. Two at least were Saudi tankers.

Something holed all four ships at the waterline, and the instant suspicion was that some Iranian group is reminding everybody that Iran can close down the Strait if it is attacked. Or at least that it could do enough damage to drive insurance rates on cargoes transiting the Strait into the stratosphere.

But it might not be an Iranian group at all. It could be an American or Israeli or Saudi intelligence operation seeking to create a pretext for a US attack on Iran (like the ‘Gulf of Tonkin incident’ created a pretext for the US to start bombing North Vietnam in 1964). You have to keep an open mind on these things, unless you believe that intelligence agencies never lie.

At any rate, an actual war against Iran now seems much closer than it did last week. The long-planned transfer of another American aircraft carrier into the Gulf is now being re-framed as an emergency response to a new (but unspecified) Iranian threat. B-52 bombers that could easily reach Iran from their current bases are being ostentatiously flown into the Gulf. Mike Pompeo makes an unscheduled four-hour visit to Iraq.

If the United States does attack, nobody will help Iran, even though every other signatory to the no-nukes treaty that Trump trashed knows (and says) that Iran has complied with its terms. And the US would only bomb Iran, not invade it on the ground, so the only people who got hurt in the initial round would be Iranians.

But then it would spread: mines in the Strait of Hormuz, missile attacks on Israel by Hezbollah, maybe an uprising by the Shia minority in Saudi Arabia. Lots of death and destruction, and no possibility of a happy outcome.

I really don’t think this is what Donald Trump wants. Maybe somebody should tell him.
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To shorten to 725 words, omit paragraphs 5 and 11. (“It’s…wrong”; and “But…lie”)

Trade War and More

Donald Trump is playing hard-ball with China over trade, and the worry-warts are fretting that he’s going to start a real trade war by accident. The bigger threat, however, is that he will push first China, and then the whole world, into a deep recession.

It’s been ten years since the last recession (2008-09), and that one was a doozy. Recessions tend to come around once a decade, so one is due about now anyway – and the Chinese economy is so shaky that almost any serious shock could topple it into the pit. The rest of the world would follow.

A week ago, according to both sides, the US-China trade deal was almost done, but then (according to Washington) China started to “renege” on parts of the deal they had earlier agreed to. Washington is probably telling the truth about that: it’s practically standard in the closing stages of any negotiation with the Chinese government.

So Trump responded by imposing heavy new tariffs on Chinese exports, to come into effect in less than a week’s time unless they back off. On Friday, according to his twitter-storm last Sunday, the existing tariff of 10 percent on $200 billion of Chinese exports to the United States will more than double to 25 percent. Another $325 billion of currently untaxed Chinese exports to the US will face 25% customs duties “shortly”.

Decades of experience in the Manhattan real estate market have taught Donald Trump to recognise the smell of fear, and he is right: the Chinese are terrified. But he knows nothing about trade or the Chinese economy, so he doesn’t understand the implications of that. (This is a guy who boasts that the Chinese are having to pay these new tariffs. It is, of course, the American importers who pay.)

The Chinese leaders are terrified because their economy is already trembling on the brink of a major recession. They dodged the last one in 2008 by flooding the economy with cheap credit and setting off an investment boom that kept employment high, especially in construction. But that trick only works once.

All four corners of almost every major intersection in the hundred biggest Chinese cities is now occupied by ‘dark towers’: 40- or 50-storey apartment buildings with few or no occupants. It would take an estimated four years with no new construction whatever to sell off the currently unsold housing stock.

And the building is still going on, albeit at a somewhat slower pace. The vaunted 6% annual growth in the Chinese economy is just creative accounting. At least half of that is actually spending on white elephant projects like the dark towers that create employment, but will never produce an adequate return on investment.

Meanwhile the real Chinese economy (annual growth rate between 2% and 3%) is slowing to a near-stall. Last year, for the first time in a quarter-century, new car sales in China actually fell, by almost 6 percent. A big hit to its exports to the US, its biggest single customer, could tip it over the edge.

China is now such a big player that the rest of the world economy would probably follow it into a recession – and it would be much worse than the usual couple of years of slow or no growth, because none of major players has really recovered from the last recession yet.

The main way governments fight recessions is by cutting the interest rate, but that is still near zero in most big economies from the drastic cuts in interest last time round. Moreover, government debt is much higher than it was a decade ago, and there would be no public support for bailing out the banks with taxpayers’ money again.

“We’re in much worse shape to deal with whatever shocks come along than we were ten years ago,” said Nobel Prize-winning economist Paul Krugman in a recent Bloomberg interview. China is in particularly bad shape. Its total debt, even according to the untrustworthy official figures, is nearing three times its GDP, which is when the alarm bells usually start ringing.

So what happens if Trump’s huge tariff hikes do not force an immediate Chinese surrender on whatever issues remain in contention in the trade talks? What if Xi Jinping and his people decide to tough it out rather than lose a lot of face?

What is quite likely to happen is that China slides into a huge recession, dragging the rest of the world behind it. Maybe not as bad as 2008, but very bad, and probably very long.

And something else might happen too. The Chinese version of the ‘social contract’ is that the power and privileges of the post-Communist autocracy that runs the country will be tolerated as long as people’s living standards rise rapidly. But they are already stagnating. How would the Chinese public react if living standards actually begin to fall?

Really badly, in all likelihood. We live in interesting times.

To shorten to 700 words, omit paragraphs 11 and 12. (“The main…ringing”)