Archive for the ‘Global Affairs’ Category

What Miracle at Dunkirk?

September 14, 2017

The movie Dunkirk, released in the summer of 2017, gives an account of the rescue of British and allied soldiers in June 1940 as a result of the German invasion of France, Belgium and Holland. Surrounded in a narrow stretch of land with their backs to the English Channel, some of these troops managed to escape by boat across the approximate 30 miles separating France from England. The film tells only a part of the story; there is another aspect to the miracle.

The events, as recounted from the British side, describe the rescue by boat and retreat across the channel. One aspect of the miracle is the rescue, a second is what might have happened if the German army had been allowed to advance to the Dunkirk beaches and prevent the escape.

About 340,000 men of the British Expeditionary Force were rescued by sea together with about 100,000 French and Dutch troops. They left behind all their trucks, guns and other heavy equipment. Around 65,000 allied personnel were killed or captured by the Germans. Those rescued became the core of the British army which was to go on with its allies to defeat the German, Italian and in the east the Japanese forces by 1945.

Missing from the film is a sense of what might easily have happened. In the period that the evacuation took place, the last days of May and first few of June 1940, the allied troops were surrounded by German tanks and soldiers who were less than 15 miles from the Dunkirk beaches, where the allied troops were being bombed and shot at by the Luftwaffe (the film does show German planes).

Some of the German high command advised Hitler to order the tanks to advance and force the allied troops to surrender before they could escape. Others cautioned against such action and their view prevailed with Hitler. Goering, as head of the Luftwaffe, assured Hitler that his planes would provide the knock-out blow, wrongfully as it turned out.

Hitler was persuaded by some, but not all of his generals, by two other factors, first that his tanks had outrun their supply lines for gasoline and might become victims of the allied forces, and second that the land separating the tanks from the beaches was marshy and difficult for tanks to traverse. The tanks would be vital later for Hitler’s campaign on the eastern front.

A second aspect to the miracle of Dunkirk is that if the allied troops had been defeated and forced to surrender, the British would have had to sign an armistice based largely on German terms. The postwar years would have been notably different, including my own.

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Turbulent Times – A Path to Dictatorship?

August 27, 2017

A rough path to dictatorship is to be elected by a recognized democratic process and then to use the powers to create a dictatorship. Hitler did this in the 1930’s in Germany, while Mussolini and Franco performed a version of this in Italy and Spain. Conditions prevailing in each country determined the particular means to the takeover. Could this happen again?

 

After less than a year in office, 35 percent of the US electorate continue to support the president. Many are people with lower incomes who have not enjoyed the benefits of economic growth enjoyed by the rest of the population. To-date, President Trump has the support of those disadvantaged who are willing to ignore or to forgive him for the erratic way in which he has chosen to govern – the failure to make appointments to key positions, scripted speeches outlining policies (increasing troop deployment to Afghanistan) together with incendiary remarks about the failure of Congress to enact his platform, and possibly a willingness to create turmoil by refusing to fund the government. Another sign of unrest is the number of appointees who have either been fired or resigned their positions in the first eight months of the administration.

 

Presidential power has so far been held in check to-date by a combination of media reporting, the courts and acts of Congress. Should these fail to receive public attention and support then the democratic process flowing from the US Constitution will be in jeopardy. Currently two areas of particular concern are what happens if North Korea (or any other nuclear state) initiates an attack, and what happens if funding to the federal government is terminated.

 

The circumstances today in the US are in many ways unlike those experienced by Germany, Italy and Spain in the 1930’s, but the seeds of dictatorship exist and could still take root. The growth of political and economic uncertainty, both domestically in the US and internationally, is bound to create instability – in what precise ways is difficult to predict.

Personal versus Government Debt

April 12, 2017

Personal debt is relatively easy to understand. A person borrows, often for a specific purpose – house, car, education, vacation etc. –  knowing what the interest cost and terms of repayment will be. Once in receipt of the funds the money becomes fungible and can be used for any purpose including a specified item. The loan may make it possible to purchase the item, but the actual dollars used may come from any source available to the buyer.

 

Repayment is a condition of the loan and can only be avoided by renegotiating the terms, or defaulting on the loan with various consequences. For personal loans, the interest rate will be known at the outset, although there may be conditions for revising it if say the government alters interest rates through changes in monetary policy.

 

Consumers are generally aware of their personal debt situation, and can anticipate what will happen when various circumstances change which affect their ability to repay or service the loan. Use of a loan enhances their ability to acquire goods and services which can differ in terms of what is purchased. A loan spent on a vacation, a meal or attending a concert will have different consequences than if the expenditure is made on a house, car, medical procedure or attending an educational establishment. The latter represent a capital investment that can lead to an enhanced flow of income in the future; the former may give immediate satisfaction but have less lasting benefits.

 

The nature and consequences of personal debt are fairly easy to describe and appreciate. Public or government debt is a different kettle of fish in terms of measuring its size and understanding its ramifications which include these and other factors:

 

  1. Government expenditures are financed by a combination of tax revenues and, if needed, borrowing, the latter becoming part of the national as opposed to personal debt. But that debt becomes personal as it is shared by all Canadians and includes the debt of all three levels of government. If governments make poor economic decisions causing increased deficits, then their, and our, levels of liability increase, and Canadians would be likely to face higher levels of taxation.

 

  1. Public debt does not have to be paid off. A ten-year government bond does have to be redeemed at the end of the decade but usually it can be replaced with another bond. A government’s borrowing capacity is thus greater than that of most individuals. It has a much longer lifespan and a continuous and often growing source of revenue to service its debt and repay past loans.

 

  1. Trying to figure out the size of a country’s national debt and its consequences is extremely difficult, at least for me. An internet search results in different concepts of debt being used. Gross versus net debt is fairly obvious, but different sources will quote different figures for net debt for a country in a given year. News reporting is not helpful with reports merely printing what some source, that is thought to be official and thus reliable, publishes.

 

  1. It is often stated correctly that government debt incurred today will have to be repaid by future generations. Whether this is a bad thing or not depends on what the increased debt is used to finance. If it builds and/or repairs highways, hospitals, airports, ports and educational facilities, this represents an investment for future generations. Failure to make such public expenditures would be a detriment to future generations. Of course, there are limits as to how much borrowing can be done at any time, but these type of investments are different from other items of expenditure.

 

  1. National debts are sometimes reported gross and sometimes net with the net figure deducting assets which the government owns such as land, buildings, equipment including military equipment. Some physical assets may be easy to value but how do you value land in Canada’s national parks. These have significant value but since the government would not consider selling them then their only value comes from the revenue generated by visitors less the cost of administering the parks. (A similar private sector situation arises with churches which often find it difficult to borrow money using the building as collateral).

 

I don’t think economists or journalists do a good job of explaining the nature and consequences of deficits and debt except to repeat what each other say. It is not an easy topic to untangle, but if the absurdly low current interest rates on short, medium and long-term government debt persist there are likely to be severe repercussions. Bondholders holding bonds with negative real returns on their investments may turn away from government lending, causing interest rates to rise with consequences throughout the economy.

 

John Cochrane has an interesting article on debt and inflation at

http://www.nationalaffairs.com/publications/detail/inflation-and-debt

Forty days into the new US administration – some thoughts

March 3, 2017

1. Michael Moore called the election correctly, unlike almost all the news media pundits. He did so by observing the enthusiastic crowds at Trump meetings, and Clinton’s lukewarm crowd support, plus the fact that Sanders supporters said they would not back Clinton if Sanders was not the candidate. Most of the media forecast the outcome they wanted, not what voters were signaling, which the democrats did not want to hear.

2. The Democrats nationally are now in the weakest position they have been in for decades with no obvious leadership candidates. They have lost Senate and House seats, governorships and control in a growing number of states. They did however get about three million more of the popular vote in the presidential contest. While this does not count in the way presidents are elected, it reinforces the message that the country is divided.

3. The newly elected president does not read mainstream media, although his staff does. He Tweets and watches cable news networks, especially Fox News. His behaviour suggests a cocktail of narcissism and mental instability. This seemed to change with a measured and lengthy speech to the joint Congressional Houses on Feb. 28th. The speech contained spending proposals which would vastly inflate the budget deficit and weaken the US dollar and raise interest rates. However the stock market has boomed since the election…..go figure.

4. The involvement of Russia in the election is still unknown, but after a brief honeymoon period between the US and Russia there are signs of future instability due to contacts between Republican cabinet appointees and Russian officials before the election. This could be linked to Trump’s tax returns which may show that he had funding from and commercial ties with Russian businesses.

5. Elected Congressional Republicans are having a hard time knowing how to respond to the President’s proposals. Some they like, but some they strongly oppose, and so does Ivanka.

6. A personal prediction (few turn out to be accurate) – the President’s close advisers, Bannon, Priebus, Conway, Spicer and Miller are unlikely to hold these positions a year from now. They helped to shape the campaign rhetoric but may not be the most adept advisors for governing.

7. Leading firms in the mainstream media are labelled as providing ‘fake news” when they criticize the new administration. These firms seem to be hanging in and retaining their influence and may become the most effective critics of the government.

Prediction – Marie Le Pen will win the French election.

Déjà vu

November 15, 2016

Two events come to mind as providing some sort of precedent to the 2016 US election, the 1989 fall of the Berlin Wall and its impact on the Soviet Union and satellite countries, and events leading up to and following the French Revolution, 1789 to 1799. In both instances, pressures built up leading to a volcanic type explosion which became visible on the surface but where the causes lay underground.

The establishment media and almost all of the rest of us failed to appreciate what was happening in the US, because we were not looking at or listening to what half the population was saying. A few were, such as Bernie Sanders and Michael Moore. Sanders sits in the Senate as an independent and caucuses with the Democrats in the Senate. He raised a large amount of money in small donations with a crowd-sourcing type process. Moore is a documentary film maker who is skilled at covering topics ignored by the mainstream media.

 

The former Soviet Union

The 1989 demise of the Soviet Union has been followed by almost three decades of change for member countries which are now more or less independent. The transition has not always been smooth. Aside from foreign relations, what happened within each country was a change of the domestic political scene, generally towards democracy except in those places which are now part of Russia. It was a major upheaval as the countries of eastern Europe became more democratic.

America had a revolution in 1776, but this was a revolt against an external force, British control, and was not a result of dissatisfaction within the country as is the case today. Its success gave impetus to events in Europe.

 

The French Revolution

The French Revolution beginning in 1789 suggests parallels. It was an internal uprising by groups in French society which rebelled against their rulers and the prevailing economic and social conditions. It lasted for ten years and brought about change, but it also led to the rise and rule of Napoleon until his defeat in June 1815 at Waterloo.

The process was messy. On the positive side, it ushered in democracy to France – freedom of religion, legalization of divorce, decriminalization of same-sex relationships, civil rights for Jews and black people, plus the execution in 1793 of Louis XII.

A couple of short extracts on the French Revolution from Wikipedia suggest comparable circumstances to today’s US with of course different institutional factors in play.

Many other factors involved resentments and aspirations given focus by the rise of Enlightenment ideals. These included resentment of royal absolutism; resentment by peasants, labourers and the bourgeoisie towards the traditional seigneurial privileges possessed by the nobility; resentment of the Catholic Church’s influence over public policy and institutions; aspirations for freedom of religion; resentment of aristocratic bishops by the poorer rural clergy; aspirations for social, political and economic equality, and (especially as the Revolution progressed) republicanism.

Louis XVI ascended to the throne in the middle of a financial crisis in which the state was faced with a budget deficit and was nearing bankruptcy. This was due in part to France’s costly involvements in the Seven Year’s War and the American Revolution. 

…the country’s extremely regressive tax system subjected the lower classes to a heavy burden, while numerous exemptions existed for the nobility and clergy. He argued that the country could not be taxed higher; that tax exemptions for the nobility and clergy must be reduced; and proposed that borrowing more money would solve the country’s fiscal shortages. Necker (finance minister) published a report to support this claim that underestimated the deficit by roughly 36 million livres…

 

So, parts of the world have been here before. How it will all play out, and throw in Brexit and upcoming elections in Europe, is a mystery to me. But there are similar circumstances to suggest parallels.

 

 

Trump plus 4

November 12, 2016

It can be a mistake to focus on leaders and not on their supporters. Looking back, why did we and most pollsters get it wrong? A few did not, but they were ignored and often reviled by the mainstream media and few listened to them. Some thoughts on this, in no particular order.

 

  1. Clinton ended up with a majority of the overall vote but not enough electoral college votes. The so-called battleground states like Florida and North Carolina went Republican, and the Democrats picked up far fewer senate and house seats than had been forecast. The pollsters got it wrong at all three levels.
  2. If you add Trump supporters to those of Bernie Sanders, it constitutes about half the US electorate. When questioned at Sanders’ rallies, most said that if Sanders lost they would not vote for Clinton, a situation that received little coverage in the press.
  3. Trump supporters did not necessarily like his electioneering performance, but there was no way they were going to support the Washington establishment to which Clinton was seen to belong.
  4. The Democrats had held the White House for eight years and nothing had improved for a large chunk of the population, and so they felt that it was time for a change. The Democrats were past their best before date. In a sense Obama had failed them. During the past two years, he had done very little and was very popular. What does that tell us?
  5. Trump rallies witnessed enthusiastic supporters, while Clinton rallies, especially towards the end were smaller and generated little excitement. This was not reported in the press.
  6. The press became supporters of a Clinton win, and refused to take seriously anyone with a contrary opinion. The press and their pundits ended up looking biased and foolish.
  7. When he was on political message, Trump identified the concerns of a large segment of the electorate and did so without offering more than general solutions, such as to make America great again. They bought it and now await the how. Maybe they had little to lose.
  8. Michael Moore has, for me, one of the more persuasive explanations of what happened and why almost no one forecast the outcome (see Moore interviewed on MSNBC’s Morning Joe). J.D. Vance’s Hillbilly Elegy – A memoir of a family and culture in crisis (2016) is another book worth reading. Now we await similar developments in Europe.

 

Clump minus 10 – Déjà vu all over again

October 28, 2016

Some Republican voters are threatening violence in the event that their candidate loses on Nov 8th. Similar responses have been heard before in recent years in different parts of the world leading to unpleasant outcomes.

How do nasty people come to power? Usually it is because they have either legitimate or some degree of public support. And that seems to be the situation in the US where the Republican candidate for the presidency has the undivided support of thirty to forty percent of the electorate. What he would do with that support, if elected, is of concern to Canadians, and if he is not elected they should still be concerned since that support remains. A review of the fairly recent past is instructive of what might happen.

Consider some of the leading nasties of my lifetime. Mussolini (1883-1945) and Hitler (1889-1945) were voted into office and then destroyed the institutions and procedures which had given them power. Franco (1892-1975) gained power through a military coup, and then exercised dictatorial powers with the help of the Catholic Church, and his Italian and German allies amongst others. Stalin (1878-1953) and Mao Zedong (1893-1976) seized power after civil wars and never let go. Italy, Germany and Spain over time evolved into functioning democracies, while Russia and China remain totalitarian states.

Where are the good guys? Churchill (1874-1965) affirmed that some form of parliamentary democracy was the least-worst of known political systems. It provided a political beacon to numerous countries, both within and outside the former British Empire, and is practiced there today. When the time came, he was voted out of office.

In the US in recent years, both Roosevelt (1882-1945) and Eisenhower (1890-1969) provided democratically sanctioned political leadership. Roosevelt died in office, while Eisenhower left after completing two terms as President.

Two other politicians of note (and there are many others) are Mahatma Gandhi (1869-1948) and Nelson Mandela (1918-2013). Both had unusual paths to power, but left behind functioning democracies, although with various blemishes.

Freedom House rates countries and populations on their freedom in several dimensions. The long run trend is for greater freedom globally, but in the last ten years 105 countries have experienced a net decline in freedom while 61 have seen a net increase (Freedom House website).

The political scene in the US after the election will not be a pretty one whoever wins. All countries will be affected in the aftermath.

Rule or Cruel Britannia

October 5, 2016

Tears of the Rajahs (Simon and Schuster, 2015) by Ferdinand Mount, describes how the British East India Company dealt with the local populations on the Indian subcontinent from around 1600. It was often not a pretty picture and provides more ammunition to British Empire bashers.

I am aware of the list of documented atrocities and Mount helps to confirm them. But there is another side to the story, at least regarding the state of India and the countries which were once part of the Empire. Like most major happenings, there is a good and bad news story to recount. This one links to what is discussed under the rubric of globalization and suggests a good news outcome.

There are several stages and meanings to the idea and process of globalization. A world map for 1905 (I have one on my wall) shows countries of the British Empire coloured red. They include the UK, Canada, Australia, New Zealand, parts of Africa, the Indian subcontinent (today’s India, Pakistan, Bangladesh and Myanmar), and numerous places like Malaysia, Singapore and a series of rocks and islands. Until 1776, the thirteen American colonies would also have had a reddish hue, and in many ways still do.

From around 1600, and from a geographic viewpoint, the process of globalization lead to Britain becoming the world’s main superpower. On the way it had to compete with Holland, Spain and France in North and South America, in Africa and in parts of Asia. Naval superiority aided by piracy helped to establish British footprints around the world.

Soon after 1905, the British Empire started to decline, and within fifty years of the end of WW1 it was over in a political, economic and military sense, but not, I would suggest, in a cultural and political sense. Its political institutions had become established in North America, Australia, New Zealand, the Indian subcontinent and elsewhere. No formal empire existed, but in its place the British Commonwealth, now the Commonwealth, was formed, reinforcing British views on many issues. English has become established as the common language for international interactions. Even the EU is reported to be considering retaining English as its working language after Brexit.

Another stage of globalization began after 1945, when the US became the main superpower challenged only by the Soviet Union and its satellites. By 1990, the Soviet Union had dissolved and Russian influence diminished globally and especially in central and eastern Europe. Meanwhile China was on the rise following the death of Mao and the reign of Li Peng. While China has become a global economic player, its neighbor Japan has receded somewhat from the global economic scene.

The foregoing is a ridiculously brief summary of how globalization has evolved geographically and politically over the past 120 years, but it does suggest quite a change over a reasonably short period of time. Few if any forecast these changes five years before they occurred. The same is true today and those who make even short term forecasts, say 2-3 years, are usually wrong.

Another dimension of globalization is more economic and technology related. Steam engines, railroads, cars and planes were technological changes stemming from the 19th century. The past several decades have seen the spread of computer-communications technology affecting different areas of economic, political and social activity. Enormous changes have taken place in numerous areas of our lives. These have been rapid and difficult to predict, but entrepreneurs are active around the world, as are criminals who have created a whole field of cyber-security.

In sum, the globalization initiated by the British Empire, although faded in some ways, is still very much present associated with the spread of democracy, certain human values, the English language and many types of sporting activity. How it got there was not always a pretty picture, but in the long run the results have not been too bad. Large parts of the world today still have a reddish hue. Rule rather than cruel Britannia is probably a better summary of many aspects of globalization today.

Clumping Closer

October 3, 2016

Forty days and counting to the US presidential election. It sometimes seems as though the Democrats may be backing a Republican candidate, who harms his chances of being elected and thus favours the Democrats. But Trump’s base support seems not to waiver despite the positions he takes and his manner of presenting them.

Political forecasting has become more than ever a mugs game, but one thing seems reasonably sure, and that is, whoever wins, the circumstances that surround the election will remain. They include a visceral dislike of both candidates by many voters, and the conditions that give rise to their contempt.

If Bernie Sanders supporters were added to Trump supporters, they might be a majority of voters. The problem is that they reside at different ends of the political spectrum so that such a coalition will probably not happen. But it may lead to people not voting, or voting for one of the two third party candidates, and how that plays out is a mystery to me.

Another unknown is whether those voting mechanisms, which are electronically controlled, have been hacked into such that some voters may have trouble exercising their vote. Edward Snowden and Julian Assange are masters at breaking into secure systems, and the Russians appear to have accessed Colin Powell’s emails and those of other politicians. Remember also that the Stuxnet virus was used to sabotage Iranian nuclear facilities. Cyber terrorism exists. How and where it will erupt is another mystery surrounding this election.

As suggested, once the election is over, the conditions remain which have given rise to both disaffected Democrat and Republican supporters. For low income white voters in states like Kentucky and Ohio where manufacturing jobs have been lost, the situation is forcefully described in Hill Billy Elegy by J.D.Vance, a thirty-one year old author who comes from a poor white background, a descendant of Scottish-Irish immigrants from several generations back. I strongly recommend it for both content, and the style with which the situation is explained. Of course there are other problems, such as race relations, immigration and the impact of globalization, but Vance sets out the plight of white working-class families in impressive detail.

 

Where are Snowden and Assange when you need them?

September 18, 2016

It seems that the emails of important people can be hacked but Trump’s income tax returns remain secret. There must be a bevy of officials, lawyers and accountants who have seen them and know what they contain. Perhaps they are waiting for an opportune time to release the details. These may be more informative than Dr Oz’s medical reports of Trump.

 

Only Gilbert and Sullivan or Monty Python could do justice to what takes place daily in the presidential election. Neither candidate is liked or respected by a big chunk of the US electorate. Who gets fewer dislikes may become the winner. The election appears not to be about the candidates and their policies, but about a widespread feeling that all is not well in American society.

 

Trump offers action leading to change, and although the action may be unrealistic, voters like the idea that someone argues the need for change. Clinton has been around Washington for a quarter century, and while she may recognize change is needed, as Bernie Sanders did, she is less believable. And trotting out Bill may not be helpful …….a consummate politician but often on a glide path that gets him into trouble.

 

Canadians reside smugly north of the border unaware of what might happen, and governed by Donnie and Marie. Canada could be sideswiped by whoever wins. If Trump, there will be a neophyte politician who will try to run the country like the businesses he may have owned. If Clinton, there will likely still be a Republican oriented House if not Senate, and governing will remain the challenge that it has been recently for Obama. Measures like the CETA and the TPP will be difficult to pass, which in my view will be a mistake as trade and investment are the ingredients for improved living standards. Ok, I am aware that the benefits have not always been equally shared, but protectionism guarantees lower living standards.

 

The final days of the campaign are likely to contain the determining factors, and what has gone on before will be forgotten, at least by the voters, if not by the reporters whose livelihood depends on reporting the news and are in intense competition with social media.