Global arms trade reaches highest point since cold war era

Middle East almost doubles weapons imports, as US and Europe remain the main suppliers and China joins top-tier exporters

Read more:

My new year forecast: Trumpian uncertainty, and lots of it

Joseph Stiglitz: Which policies Trump will pursue remains unknown, to say nothing of which will succeed or what the consequences will be

Every January, I try to craft a forecast for the coming year. Economic forecasting is notoriously difficult but, notwithstanding the truth expressed in Harry Trumans request for a one-armed economist (who wouldnt be able to say on the other hand), my record has been credible.

In recent years, I correctly foresaw that, in the absence of stronger fiscal stimulus (which was not forthcoming in Europe or the US), recovery from the great recession of 2008 would be slow. In making these forecasts, I have relied more on analysis of underlying economic forces than on complex econometric models.

For example, at the beginning of 2016, it seemed clear that the deficiencies of global aggregate demand which have been manifest for the last several years were unlikely to change dramatically. Thus, I thought that forecasters of a stronger recovery were looking at the world through rose-tinted glasses. Economic developments unfolded much as I anticipated.

Not so the political events of 2016. I had been writing for years that unless growing inequality especially in the US, but also in many countries throughout the world was addressed, there would be political consequences. But inequality continued to worsen with striking data showing that average life expectancy in the US was on the decline.

These results were foreshadowed by a study last year, by Anne Case and Angus Deaton, which showed that life expectancy was on the decline for large segments of the population including Americas so-called angry men of the rust belt.

But, with the incomes of the bottom 90% having stagnated for close to a third of a century (and declining for a significant proportion), the health data simply confirmed that things were not going well for swaths of the country. And while America might be at the extreme of this trend, things were little better elsewhere.

But, if it seemed clear that there would be political consequences, their form and timing were far less obvious. Why did the backlash in the US come just when the economy seemed to be on the mend, rather than earlier? And why did it manifest itself in a lurch to the right?

After all, it was the Republicans who had blocked assistance to those losing their jobs as a result of the globalisation they pushed assiduously. It was the Republicans who, in 26 states, refused to allow the expansion of Medicaid, thereby denying health insurance to those at the bottom. And why was the victor somebody who made his living from taking advantage of others, openly admitted not paying his fair share of taxes, and made tax avoidance a point of pride?

Donald Trump grasped the spirit of the time: things werent going well, and many voters wanted change. Now they will get it: there will be no business as usual. But seldom has there been more uncertainty. Which policies Trump will pursue remains unknown, to say nothing of which will succeed or what the consequences will be.

Trump seems hell-bent on having a trade war. But how will China and Mexico respond? Trump may well understand that what he proposes will violate World Trade Organisation rules, but he may also know that it will take a long time for the WTO to rule against him. And by then, Americas trade account may have been rebalanced.

But two can play that game: China can take similar actions, though its response is likely to be more subtle. If a trade war were to break out, what would happen?

Trump may have reason to think he could win; after all, China is more dependent on exports to the US than the US is on exports to China, which gives the US an advantage. But a trade war is not a zero-sum game.

The US stands to lose as well. China may be more effective in targeting its retaliation to cause acute political pain. And the Chinese may be in a better position to respond to US attempts to inflict pain on them than the US is to respond to the pain that China might inflict on Americans. Its anybodys guess who can stand the pain better. Will it be the US, where ordinary citizens have already suffered for so long, or China, which, despite troubled times, has managed to generate growth in excess of 6%?

More broadly, the Republican/Trump agenda, with its tax cuts even more weighted towards the rich than the standard GOP recipe would imply, is based on the idea of trickle-down prosperity a continuation of the Reagan eras supply-side economics, which never actually worked. Fire-breathing rhetoric, or raving 3am tweets, may assuage the anger of those left behind by the Reagan revolution, at least for a while. But for how long? And what happens then?

Trump might like to repeal the ordinary laws of economics, as he goes about his version of voodoo economics. But he cant. Still, as the worlds largest economy leads the way into uncharted political waters in 2017 and beyond, it would be foolhardy for a mere mortal to attempt a forecast, other than to state the obvious: the waters will almost certainly be choppy, and many if not most pundit ships will sink along the way.

Joseph Stiglitz is a nobel prizewinner in economics, university professor at Columbia University, a former senior vice-president and chief economist of the World Bank and chair of the US presidents council of economic advisers under Bill Clinton.

Project Syndicate

Read more:

Will Donald Trump’s election put America first and global conflict next?

The historical record is clear: protectionism, isolationism, and America first policies are a recipe for economic and military disaster

Donald Trumps election as President of the United States does not just represent a mounting populist backlash against globalisation. It may also portend the end of Pax Americana the international order of free exchange and shared security that the US and its allies built after the second world war.

That US-led global order has enabled 70 years of prosperity. It rests on market-oriented regimes of trade liberalisation, increased capital mobility, and appropriate social-welfare policies; backed by American security guarantees in Europe, the Middle East, and Asia, through Nato and various other alliances.

Trump, however, may pursue populist, anti-globalisation, and protectionist policies that hinder trade and restrict the movement of labour and capital. And he has cast doubt on existing US security guarantees by suggesting he will force Americas allies to pay for more of their own defence. If Trump is serious about putting America first, his administration will shift US geopolitical strategy toward isolationism and unilateralism, pursuing only the national interests of the homeland.

When the US pursued similar policies in the 1920s and 1930s, it helped sow the seeds of the second world war. Protectionism starting with the Smoot-Hawley Tariff, which affected thousands of imported goods triggered retaliatory trade and currency wars that worsened the Great Depression. More important, American isolationism based on a false belief that the US was safely protected by two oceans allowed Nazi Germany and Imperial Japan to wage aggressive war and threaten the entire world. With the attack on Pearl Harbor in December 1941, the US was finally forced to take its head out of the sand.

Today, too, a US turn to isolationism and the pursuit of strictly US national interests may eventually lead to a global conflict. Even without the prospect of American disengagement from Europe, the European Union and the eurozone already appear to be disintegrating, particularly in the wake of the UKs June Brexit vote and Italys failed referendum on constitutional reforms in December. Moreover, in 2017, extreme anti-Europe left or rightwing populist parties could come to power in France and Italy, and possibly in other parts of Europe.

Without active US engagement in Europe, an aggressively revanchist Russia will step in. Russia is already challenging the US and the EU in Ukraine, Syria, the Baltics, and the Balkans, and it may capitalise on the EUs looming collapse by reasserting its influence in the former Soviet bloc countries, and supporting pro-Russia movements within Europe. If Europe gradually loses its US security umbrella, no one stands to benefit more than the Russian President, Vladimir Putin.

Trumps proposals also threaten to exacerbate the situation in the Middle East. He has said he will make America energy independent, which entails abandoning US interests in the region and becoming more reliant on domestically produced greenhouse-gas-emitting fossil fuels. And he has maintained his position that Islam itself, rather than just radical militant Islam, is dangerous. This view, shared by Trumps incoming National Security Adviser, General Michael Flynn, plays directly into Islamist militants own narrative of a clash of civilizations.

Meanwhile, an America first approach under Trump will likely worsen the longstanding Sunni-Shia proxy wars between Saudi Arabia and Iran. And if the US no longer guarantees its Sunni allies security, all regional powers including Iran, Saudi Arabia, Turkey, and Egypt might decide that they can defend themselves only by acquiring nuclear weapons, and even more deadly conflict will ensue.

In Asia, US economic and military primacy has provided decades of stability; but a rising China is now challenging the status quo. US President Barack Obamas strategic pivot to Asia depended primarily on enacting the 12-country Trans-Pacific Partnership, which Trump has promised to scrap on his first day in office. Meanwhile, China is quickly strengthening its own economic ties in Asia, the Pacific, and Latin America through its one belt, one road policy, the Asian Infrastructure Investment Bank, the New Development Bank (formerly known as the BRICS bank), and its own regional free-trade proposal to rival the TPP.

If the US gives up on its Asian allies such as the Philippines, South Korea, and Taiwan, those countries may have no choice but to prostrate themselves before China; and other US allies, such as Japan and India, may be forced to militarise and challenge China openly. Thus, an American withdrawal from the region could very well eventually precipitate a military conflict there.

As in the 1930s, when protectionist and isolationist US policies hampered global economic growth and trade, and created the conditions for rising revisionist powers to start a world war, similar policy impulses could set the stage for new powers to challenge and undermine the American-led international order. An isolationist Trump administration may see the wide oceans to its east and west, and think that increasingly ambitious powers such as Russia, China, and Iran pose no direct threat to the homeland.

But the US is still a global economic and financial power in a deeply interconnected world. If left unchecked, these countries will eventually be able to threaten core US economic and security interests at home and abroad especially if they expand their nuclear and cyberwarfare capacities. The historical record is clear: protectionism, isolationism, and America first policies are a recipe for economic and military disaster.

Nouriel Roubini is a professor at NYUs Stern School of Business. He was senior economist for international affairs in the Clinton White House and has worked for the IMF, the Federal Reserve, and the World Bank.

Project Syndicate

Read more:

‘Brutal, amoral, ruthless, cheating’: how Trump’s new trade tsar sees China

Peter Navarro has been picked to lead US trade and industrial policy a move that may upset Beijing

The Chinese government is a despicable, parasitic, brutal, brass-knuckled, crass, callous, amoral, ruthless and totally totalitarian imperialist power that reigns over the worlds leading cancer factory, its most prolific propaganda mill and the biggest police state and prison on the face of the earth.

That is the view of Peter Navarro, the man chosen by Donald Trump to lead a new presidential office for US trade and industrial policy, a move likely to add to Beijings anxieties over the billionaires plans for US-China relations.

Chinas rulers initially appeared to embrace the possibility that improved ties with Washington could be negotiated with the deal-making US president-elect.

We must welcome him, said one prominent foreign policy expert.

But that enthusiasm has dimmed after Trump angered Beijing with a succession of controversial interventions on sensitive issues including Taiwan and the South China Sea.

The appointment of Navarro, a University of California, Irvine business professor, to run the White Houses newly created national trade council, represents a further blow to those hopes.

Trumps team described the 67-year-old academic, who is infamous in China watching circles for being a radical hawk, as a brilliant policy mind and a tireless worker.

Peter Navarro Photograph: Courtesy of Peter Navarro

But Beijing is unlikely to second such emotions.

Navarro has penned a number of vociferously anti-China tomes including Death by China and Crouching Tiger: What Chinas Militarism Means for the World.

In The Coming China Wars a 2006 book that Trump has called one of his favourite on China Navarro portrays the Asian country as a nightmarish realm where the raw stench of a gut-wrenching, sweat-stained fear hangs in the air and myopic, venal and incompetent Communist party officials rule the roost.

The Harvard-educated hardliner accuses cheating China of destroying both American factories and lives by flooding the US with illegally subsidised and contaminated, defective and cancerous exports.

American politicians must aggressively and comprehensively address the China problem before it leads to full-blown conflict, Navarro writes.

In a 2012 Netflix documentary based on Death by China, which Trump has described as right on, Navarro blames Beijing for the loss of 57,000 American factories and 25m jobs.

The repressive communist government [is] now victimising both American and Chinese citizens alike, the film claims.

Help defend America and protect your family: dont buy made in China, Navarro tells viewers in an introduction to the 80-minute polemic, which is narrated by Martin Sheen.

Navarro, who has also dubbed China a global pollution factory and disease incubator, made no secret of his distaste for its rulers during Trumps election campaign.

An image from Peter Navarros 2012 documentary Death by China Photograph: Netflix

Speaking to the Guardian in July at a resort near his home in Laguna Beach the academic railed against how Chinas brutal, authoritarian communist government had decimated the US economy.

He painted China as a ravenous bully and said he agreed with Trumps claim that Beijing was guilty of raping our country over trade.

Its an apt description of the damage and carnage that Chinas trade policies have wrought on the American economic heartland. Whats happening is rapacious, Navarro said.

Speaking shortly before Navarros appointment was confirmed, Andrew Nathan, a China expert at Columbia University, said Trumps plans for relations with Beijing remained an enigma despite the presence of several prominent China hawks in his camp.

Trump has shown two sides to his personality in dealing with everybody. One is: Lets make a deal, we are deal-makers. And the other one is: You hurt my feelings and Im going to bomb the shit out of you because I never lose I always win, said the political scientist.

I dont know whether he is setting up China for a deal. In fact, I dont know if he is that deliberate or whether his mood just changes from time-to-time depending on how the other side treats him.

Nathan, the author of a book on foreign policy called Chinas Search For Security, said he believed Beijing would still be banking on its ability to win over the tycoon.

I think predominantly they understand Trump as a businessman and that for them is a glimmer of hope, he said.

Christopher Balding, a Peking University finance professor, said that for all Navarros alarmist and inflammatory musings on China, he was unlikely to be able to follow through on his most radical beliefs once in government.

I think Navarro is going to quickly realise the constraints that he is under, he said.

They come as professors, they come as businessmen and they get into office as the secretary-of-whatever and they quickly realise … that they cannot just implement their pet idea or their classroom theory, Balding said, predicting there would be strong push-back from the US business community were hefty tariffs to be imposed on imports from China.

Li Yonghui, the head of the school of international relations at the Beijing Foreign Studies University, said Navarros rise was consistent with Trumps hawkish thoughts on China and would leave Beijing a little worried even if he still believed a radical shake-up of US-China relations was unlikely.

We should stay vigilant. We have to be prepared, the academic said. Trump will certainly place unprecedented pressure on China.

Asked for Beijings reaction to Trumps hire, a spokesperson for Chinas foreign ministry replied only that it was closely monitoring the transition and possible policy directions.

As two superpowers, China and the US have extensive common interests, Hua Chunying told reporters. Cooperation is the only correct choice.

Additional reporting by Christy Yao

Read more: