Has the Quad failed to rally behind India and is Europe wiser now?

Gideon Rachman writes that India has picked a side and that it is going to drop the high-wire balancing act between the United States and China. In my view, India has been hedging its China risks rather slowly (too slowly in some view) and imperceptibly (again, there are harsher ways of putting this) over the years. The recent stand-off and loss of lives might push India over the edge.

Gideon Rachman thinks that a Biden administration might be willing to extend a security alliance to India more than a re-elected Trump. Interesting. I hope he is right although I am not sure he will be.

Some think that the rest of the Quad had been somewhat reticent in condemning China for its aggression. Well, Mike Pompeo issued a statement. US media (esp. WSJ) has featured an Edit and at least two articles on this issue. USA Today has a good piece on how China’s Western Command actually planned the attack.

A former Under-Secretary of Defence in the US Government wrote this piece for FT. His piece is a call for the Quad countries to get closer.

If the rest of the Quad countries did not react officially to the border clashes, it can also be said that India had not reacted to recent China aggression (non-military, of course) against Australia. Of course, there is a difference. There is loss of lives for India. Not so for Australia. So, as a former diplomat put it, more noise from the three remaining Quad countries would be welcome.

Trump had offered to mediate. I wonder why. His government is suing China’s mask manufacturer and has named four more Chinese news organisations as foreign missions because they are not disseminating new but peddling propaganda. Quite. So, not sure what is the underlying message of his offer to mediate.

[Parenthetically, it has to be mentioned that the Wall Street Journal broke a story on how some 1300 medical suppliers to the United States used a bogus address]

In the meantime, this note from the Observer Research Foundation on why India voted with America against the issuance of new SDR by the International Monetary Fund is interesting. If true, it reflects strategic thinking on India’s part.

I do not go along with much hand-wringing over India’s handling of the diplomatic fallout and over India’s official communication on the bloody border clash. It is not as though India has handed over the narrative to China. By now, even Germany (if not the officialdom) seems to have wisened up to China.

Fabian Zuleeg, chief executive of the European Policy Centre, notes a significant shift in the mood among EU businesses, including in Germany, where exporters remain particularly reliant on the Chinese economy. Previously, there was an expectation that misbehaviour in China would be corrected over time, he explains. Not any more.

“There is a recognition that is not going to happen, and if the EU wants to insist on a level playing field in its variety of forms it will have to take strong action,” he notes. [Link]

It may be too soon to conclude thus. Interested readers should check out the tweets of Christopher Balding on a regular basis (@Baldingsworld).

In sum, I am not sure I would characterise India’s handling of the matter as disastrous. Far from it, in my view. But, then I am no diplomat nor foreign service man nor a security analyst.

Trump and Biden on China

A journalist by name Dake Kang put up the following tweet by Peter Martin of Bloomberg who had tweeted his article. I have not read that article.

“If Biden is elected, I think this could be more dangerous for China, because he will work with allies to target China, whereas Trump is destroying U.S. alliances,” said Zhou Xiaoming, a former Chinese trade negotiator and former deputy representative in Geneva.” [Link]

These four tweets in response by Chris Balding are worth reflecting on:

This cliched talking point makes two assumption and why it is used by China and DC Engagers. 1. There is scant evidence that the Biden administration would continue to confront and challenge China. Many take money from China, including Biden, and spearheaded the … 1/n [Link]

… The infamous Open Letter. Major mistake to believe Biden would continue the general direction. 2. Working with allies is only a viable strategy if they are won to our point if view. Most of Europe with regards to China is a waste of time diplomatically as they will not 2/n … [Link]

… put their plants in Xinjiang at risk. An ally confronting China is only valuable if they are willing to incur costs to stand up for values. No evidence of that in China. 3. While Trump is not building alliances, absolutely winning policy battles that bring Europe into 3/n … [Link]

… Closet policy alignment with the US. Europe may not like the methods but US winning the battle on Huawei and more to come. Almost no alliance building taking place but the battles is being won with more taking place. Finally, you should be smart enough to know CCP disinformation [Link]

While you are at it, you must follow his tweets on the feckless Europe (mainly Germany) when it comes to dealing with China.

This tweet by Jojje Olsson is sharp:

As a European, I feel there is something sad with this article, that in between the lines reads: “You can run concentration camps, swallow Hong Kong, attack Taiwan and occupy the South China Sea, as long as German companies are granted good market access”. [Link]

 

Surreal global debt issuance data

Some of the eight U.S. investment-grade companies that brought bond sales Thursday helped tip year-to-date supply past $1 trillion at the fastest rate ever. European borrowers passed 900 billion euros ($991 billion) on Wednesday, two months earlier than in 2019, and got up to 921.5 billion euros with Thursday’s haul.

Issuance has been rampant since the Federal Reserve and European Central Bank each announced programs to buy corporate bonds in March, enticing borrowers to tap the market at a frantic pace. Credit risk has eased with additional fiscal stimulus, especially from the European Union Wednesday.That’s helped encourage riskier debt sales, including those from hotel chain Marriott International Inc., borrowing in the U.S. market for the second time Thursday in as many months.

Several European banks including Commerzbank AG and Credit Agricole SA sold so-called Tier 2 bonds, a kind of lower-grade debt issued by financial firms.

In Asia, dollar bond sales for the month are at $23.5 billion, putting the region on track for the busiest May ever, even amid mounting geopolitical tensions with China. [Link]

Lack of cohesion in Europe

Italy’s lurch towards full-blown Euroscepticism threatens the bloc’s stability [Link]

In my view, Wolfgang Muenchau has written a thoughtful article, as he more often does, than does not. The attitudes of many Italians and the German youth towards China is bewildering.

He is also pointing out that Merkels’ ‘Hamilton moment’ – the joint Franco-German proposal to issue EU debt of EUR500.0bn to provide grants to some Southern European nations may not quite make a dent in their situations.

That said, at the margin, it is a step forward. Interesting that Bloomberg and FT have a different ‘take’ on the response of the four frugal states – Austria, Denmark, Sweden and the Netherlands. See here for Bloomberg’s coverage and here for FT’s reporting on the paper that the ‘Frugal Four’ put out over the weekend.

Death by another name

By Daniel Henninger in the Wall Street Journal:

The most persuasive argument for the lockdowns, made by Anthony Fauci and Deborah Birx from day one, was flattening the curve to avoid collapsing the hospital system. Americans by the millions acceded to that suppression strategy and accomplished its goal: Hospital capacity is returning in most major cities. Capacity in other locked-down states never became an issue.

With Covid and the hospitals, we are near an inevitable moment: Covid will be managed like a chronic disease, not as the only disease. [Link]

He adds:

Some doctors argue that lockdowns are suppressing vaccination programs in Africa and elsewhere and will raise the incidence of childhood death and disfigurement from polio, yellow fever and meningitis. [Link]

In another column, James Freeman makes an excellent point:

This column has noted that while the response to the virus involves World War II levels of spending, the virus has fortunately come nowhere close to inflicting World War II levels of mortality. But the government response may be like warfare in one other respect. It requires disproportionate sacrifices from young people. [Link]

I watched the video recording (highly recommended) of the interview of the former Swedish Government’s Chief epidemiologist at unherd.com. It is worth watching. His point is not that one approach (lockdown) is inferior (no lockdown) to another. He simply says that one would likely arrive at the same number of infections and fatalities by a different route over time. His concerns with the lockdown are with respect to (a) difficulties in exiting it; (b) implications for freedom and democracy and (c) other illnesses and other forms of deaths.

He does not at all claim that the Swedish approach (limited restrictions) is superior to the total lockdown approach. Astonishingly, one of my friends, on watching the video, shot back that the veteran epidemiologist was trying to play God! I thought he was doing quite the opposite. He was essentially trying to say that one had to bow before such natural calamities and navigate our way around it rather than incurring huge costs in trying to conquer it.

Amazing to see in action, day in and day out, what fear does to reason.

French forward planning

While critics of the government lambast a lack of medical equipment, the hope is that France’s ability to use the whole country’s resources, strengthened by its highly centralised form of government, will help it to save lives as the epidemic heads towards its peak. “Two hundred and eighty eight seriously ill patients have been transferred to less stressed regions and this number is expected to increase in the days and weeks to come,” said Jérôme Salomon, director-general of the French health department, earlier this week…… [Link]

…. Importantly for SNCF, the idea of using trains to transport critical-care patients had already been considered and trialled. In 2015, after deadly terrorist attacks that killed 131 people and injured many more shook France, the rail group was asked by authorities to prepare a plan to evacuate victims from cities where hospitals might be overwhelmed to cities that could better care for them.

That plan was tested in Paris in May last year, in an exercise called Operation Chardon, or Operation Thistle. A train of doctors, nurses and 100 “victims” in full make-up to simulate a real disaster and make sure each was properly examined, was moved between Paris and Metz in the north-east of the country. [Link]

Lest we forget

We need to remember that China deserves a large share of the blame for hurting billions of people on the planet in terms of livelihoods and/or health. Attempts to whitewash it will continue – directly by the Chinese autorities and by certain commentators in the West.

My column in Mint on Tuesday was meant to put it on record what happened in the third and fourth weeks of January. It was based on an article in ‘Nikkei Asia Review’.

Few other links we should save:

(1) Why did Italy get affected the most? Read this. Italy walked into it – a case of economic and other forms of capture.

(2) Read the ‘timeline’ of lies from China, aided and abetted by the World Health Organisation, in this article in ‘The National Review’

(3) A nice summary of (2) is to be found in this tweet by Kanchan Gupta

(3) Taiwan said its doctors had heard from mainland colleagues that medical staff were getting ill — a sign of human-to-human transmission. Taipei officials said they reported this to both International Health Regulations (IHR), a WHO framework for exchange of epidemic prevention and response data between 196 countries, and Chinese health authorities on December 31.

Taiwanese government officials told the Financial Times the warning was not shared with other countries.

“While the IHR’s internal website provides a platform for all countries to share information on the epidemic and their response, none of the information shared by our country’s [Centers for Disease Control] is being put up there,” said Chen Chien-jen, Taiwan’s vice-president. [Link]

(4) China’s Ambassador to the US takes exception to Chinese foreign ministry spokesperson’s claim that the virus originated from the U.S. army. [Link]

Law of unintended (good) consequences

When I write about the law of unintended consequences in many contexts, it is usually about adverse outcomes that are not anticipated even a when an action is performed or policy decision taken with good intentions.

Here is, for a change, a story that was taken with good intentions; it has delivered results and, happily, more than what were intended. I came across a FT podcast on the ‘car-less’ city centre in Pontevedra, a city in Galicia in Northwestern Spain. I listened to the podcast. It reminded me of the interview of the American professor Jameson Whetmore who said beautifully that we (America) have redesigned the world to be safer for cars than for children (I am paraphrasing him, I think).

Then I did a search and located this well-written aticle. It captures all the good things that have resulted. Most of them unexpected.

Conviction in the usefulness of the policy led the city government to persist with it. Now, political opposition has bought into it. Sceptics and naysayers have bought into it. Now, many want to be part of the success story. Lovely reading.

Great case study for urban policy planning and policymaking, in general, as to what make up the ingredients of a successful policy decision. Mind you, most would be necessary conditions but not sufficient conditions. That goes with the turf.

IMF advice on capital flows

Kristalina Georgieva, Managing Director of the International Monetary Fund, has written an article for FT on providing sound policy advice to emerging economies. It is conceptual in nature. Nothing wrong with the piece. To the extent it signals intellectual openness on the part of the Fund, it is welcome. 

The elephant in the room is the monetary policy pursued by the developed world. That has become a big and sizeable fetter on the policy options available to developing countries, with their spillover effects. IMF is unable to do much about them, if at all.

For the countries pursuing such policies, their efficacy – taking into consideration the impact on asset markets, real economy and the society at large – is in doubt. At the minimum, a honest evaluation is needed. But, central banks are resistant. Further, governments in those countries are not paying due regard to the long-term effects of such policies – a well-known ‘time inconsistency’ problem.

See this article on the housing bubble in Ireland and its impact on the Irish elections. The role played by QE pursued by the European Central Bank is highlighted.

Unless this is addressed, whatever advice IMF offers emerging economies will be band-aids. Well, band-aids have their uses too.

STCMA – 15th February 2020

German politics thrown into turmoil and debate over the embrace of the Far-Right and Far-Left parties. Should it be done or not? I can understand why it is not an easy decision for German politicians. In other words, I can understand the principled stand that some CDU politicians have taken on this matter, given the country’s history. [Link]

Sinn Fein, known for this earlier violent struggle to get Britain out of Northern Ireland now makes its mark in Ireland. Interesting development. [Link]

Did McKinsey destroy the American middle class? Tempting to say ‘yes’ but that sounds too absolutist. McKinsey might hvae symbolised the trends that took hold since the Sixties in America. Slowly at first and rapidly later. But, did it destroy the middle class single-handedly? Academics from U. Chicago (and similar schools) played a role. Wall Street played a role. To be sure, McKinsey might have recruited from these Universities and these academics would hve also worked for McKinsey. Also, politicians would have also hired McKinsey alumni as their campaign advisors/managers, etc. Their role is formidabe, no doubt. But, the only force? I still have my doubts much as it is tempting to make the firm the lightning rod. This article (ht: Rohit Rajendran) is more about dismissing Buttigieg’s claims to represent the country than anything else, in the end.

Interesting fact:

a mid-century study of General Motors published in the Harvard Business Review—completed, in a portent of what was to come, by McKinsey’s Arch Patton—found that from 1939 to 1950, hourly workers’ wages rose roughly three times faster than elite executives’ pay.  [Link]

‘Brazil’s credit revolution in six charts’ screams a header from FT. It sounds more like an unsustainable credit boom as one purveys the six charts. I doubt if it would last. Does not feel like it. I could be wrong. Lots of unsustainable trends in financial markets are still sustaining.

The header of this article in ‘The Economist’ tells the tale well – that analysts’ recommendations reflect their cultural biases. Who knew?! Well, not to be cynical. Once told, it appears self-evident and it is also good to document it systematically as the paper, on which the article is based, does. Useful to remember in case you are still a believer in ‘sell-side’ research.

This Morgan Housel blog post (ht: Rohit Rajendran) on 7th February 2020 is a very good read for the painstaking compilation of headlines from the decade of the Twenties from the United States. ‘Nothing is inevitable’, says he. Is that so?

Ross Douthat’s ‘The Age of Decadence’ in New York Times is extracted (ht: Rohit Rajendran) from his forthcoming  book, ‘The Decadent society’. The prose is good and the arguments appear compelling but it leaves one with a sense of incompleteness. He thinks that the current age of decadence in the West (the definition of ‘decadence’ is interesting) could be worse and that there is nothing inherently abhorrent or objectionable or negative about it. All comfortably prosperous societies eventually arrive there. Attempts to fix it through Leftist- revolutions (Sanders and Warren?) might make the situation more dangerous is a point that the author appears to be making. Apparently, the Roman Empire was in a state of decadence for nearly four centuries. So, at the end, not sure what the point of it is all.