Economics

Economics International Trade Print Article Technology Women's Rights

Covid, Automation, and their long-term effects on Women’s Work

Joshua Potter’s article is additionally featured in The Generation’s Spring 2022 Digital Print Edition: Women. Coming June 1st 2022.

Automation has been ever since the Industrial Revolution , and due to recent events it will affect women more than ever. The COVID-19 pandemic accelerated many trends due to its destructive nature, and one such way is through massive automation effects around the globe due to lack of labor. Particularly throughout the United States, millions have quit their jobs in the phenomenon dubbed “The Great Resignation.” Due to the current labor shortage, the pandemic may be accelerating the trend of automation to tackle these issues and drastically change labor relations for years to come. . However, one of the issues with this increase will be the effect that it has on women, as they stand to lose the most in an ever increasingly automated world.

One of the keys to understanding automation’s effects on women labor is to exhibit how automation is starting to introduce itself to all occupations. In previous years, blue-collar workers were most at risk of losing their jobs to automation in factories or to self-checkout lines, but now this trend has spread to white-collar work as well. But recent research indicates that white-collar jobs are increasingly being taken over by machines — maybe not by robots directly, but certainly facing pressures from artificial intelligence (AI) and machine-learning solutions. Just as robots are now displacing blue-collar workers, advances in artificial intelligence are beginning to displace accountants, lawyers, and other service-based professions.¹ This is nothing new, and historically automation increases more during a recession since humans cost more to employ. Machines are designed to serve us in numerous ways, they don’t need paid time off, scheduling changes, or health insurance . It has been estimated that up to 45 million Americans will lose their jobs to automation by the year 2030.² Unfortunately, women will lose many of these jobs.

A big reason for this trend is because of the occupations where women work, and that’s why it is estimated that women are twice as likely to be replaced by automation than men. These figures are even higher when considering BIPOC (Black, Indigenous and People of Color) women. One of the reasons for this can be traced back to the demographic history of working women in the 20th century in the United States. During the second world war, millions of men went overseas for the war effort, and male dominated work such as working in the factories went to women.³ Due to the labor shortage, this allowed millions of women to leave the home and enter the workforce. However, the majority of these women were demobilized and these jobs went back to men once the war ended. Because of the baby boom that occured around the same time, women were needed for a variety of positions such as clerical work and frontline service jobs, and they continue to dominate these positions today. In 2017, the Bureau of Labor Statistics found that 22 million people are employed in office and administrative tasks, and the majority are women.⁴ Unfortunately, these are the same positions that can be replaced by automation, and in the near future we may see millions of women struggling for work.

This trend isn’t specific to the United States either. A study by the International Monetary Fund found that over 26 million women from over 30 countries could lose their jobs to automation within the next 20 years.⁵ This is likely due to the fact that women have been excluded from certain industries for years, and they have to look for clerical positions that can be replaced with advancements in technology. Even if white collar jobs are being eliminated, men in those positions will have more skills and connections that would give them a better chance to find work, while women are left behind. We must ensure that no one is abandoned in our ever-changing society, and other countries are already leading the way.

If we know that women are more susceptible to losing their clerical positions, then why don’t they join other industries? One reason is because many women are still the primary caretaker for children and handle most household tasks in the United States.⁶ Furthermore, childcare is expensive throughout the country and due to the cost many mothers have to stay home instead of being in the workforce.⁷ Increasing childcare benefits or subsidizing child care altogether could allow more women to further their education to obtain different types of jobs. However, this isn’t the only reason. This is because many professions are male-domainated. For example, construction is a massive industry with over seven million workers, but few women work in this industry.⁸ This is due to a lack of recruitment by employers, as well as stereotypes that it is “man’s work.” However, there are many other careers but are male dominated; such as Software Developers, Aerospace Engineers, Aircraft pilots, and many others. Even when women can break into blue-collar work, they are often looked down upon. When women worked at electrical plants in the 1960’s and 70’s, women were placed at the lowest level in the blue-collar hierarchy, with newly hired men placed above them. They also had worse pay and fewer highly skilled positions.⁹ Sexism in the working place is unfortunately nothing new, and because of societal pressure it is one of the major reasons why women risk losing to automation. We are seeing that more traditional trends of men being breadwinners is decreasing as is marriage rates and child born, but since this is a societal view only time can change these viewpoints. However, we can look to other countries to see how to manage the transition from human to automation work.

South Korea is one of the most heavily automated countries in the world, and its robot density has been increasing rapidly since 2015.¹⁰ In combination with the pandemic, some South Koreans have been struggling looking for work, and few groups have been hit harder than women working in the service industry. The labor rate for the country is not optimistic, as the rate for women stands at 53% in South Korea, compared with 73% for men.¹¹ However, the country is taking steps to mitigate some of the issues that rapid automation has created. For example, the government plans to expand it’s employment insurance policy to over 20 million people in the country, as well as provide stipends for younger people that are struggling to find work in these trying times.¹² Nonetheless, it is difficult to predict whether or not this will be enough to offset the loss of income as people look for work.

An important aspect of this discussion has to do with where the growth in automation is taking place.¹³ It’s no coincidence that eight out of the ten countries with the highest robot destiny also have some of the highest average per capita wealth on the planet.¹⁴ While countries such as South Korea have the means to offset changes in their labor demographics, developing countries and the women in them will be hardest hit. One of the big reasons for this is that many of these countries rely on manufacturing, and with advancements in technology these jobs can be automated easier, leaving people without work.¹⁵ This is not the only industry at risk, and in worst-case scenarios, whole economies will be left vulnerable. Developing countries’ risk of job loss from automation ranges from 55-85%, which is higher than the 57% risk in wealthier OECD countries.¹⁶ Without proper support, the effects of this could be devastating, leading to violence and political instability. Furthermore, the industries that are most vulnerable have a majority of working women. For example, a Mckinsey study found that over half of retail and food service positions can be automated.¹⁷ This would lead to millions of women losing their jobs in the coming decades, and would also mean the loss of financial security for many women. Not only that, but this would contribute to the ever widening growth gap that is happening around the globe. While developed countries will be in a better position to provide for women affected by these changes, they will be affected everywhere. However, changes can be made to alleviate some of the issues created by widespread automation.

Something that we can do to ensure that women can still find jobs is to make it easier for them to have the education and training needed to switch careers. Many educational programs are designed to prepare people for a certain type of job, but that is inefficient if that position will cease to exist down the line. One idea is to allow education to become more flexible, and allow women to only focus on what they need to do. One way for this to occur would be to have training programs primarily online, and due to the pandemic pushing all of us further online this change will not be as difficult. Also, nanodegrees or micro credentials provided by online education platforms such as Udacity and Coursera can be used for mid-career adjustments at low cost.¹⁸ There are numerous options available, but its critical reform is made as soon as possible. The longer we wait the more women will struggle if they are let go and can not find any work.

While this paper brought up possible consequences of automation for women, this does not have to be the case. With proper reform and policy, automation can be used to lessen the amount of labor needed for certain tasks, and ensure a safer working environment. For this to happen, meaningful change has to occur and women need more support to make sure that they are not further left behind. Automation can lead to a more equitable world, but only time will tell if this is accomplished.

Endnotes

1. Busch, Jason. “White-Collar Jobs Are Increasingly Being Automated.” In Business Madison, 18 Oct. 2021, https://www.ibmadison.com/white-collar-jobs-are-increasingly-automated/#:~:text=Research%20suggests%20artificial%20intelligence%20and,more%20easily%20automated%20than%20others.&text=Professionals%20with%20college%20degrees%20and,felt%20relatively%20safe%20from%20automation.

2. Carey, Kevin. “Do Not Be Alarmed by Wild Predictions of Robots Taking Everyone’s Jobs.” Slate Magazine, Slate, 31 Mar. 2021, https://slate.com/technology/2021/03/job-loss-automation-robots-predictions.html.

3. “Striking Women.” Post World War II: 1946-1970 | Striking Women, https://www.striking-women.org/module/women-and-work/post-world-war-ii-1946-1970.

4. Kinder, Molly. “The Future of Work for Women.” New America, 25 Feb. 2019, https://www.newamerica.org/work-workers-technology/shiftlabs/blog/future-work-women/.

5. Majumdar, Romita. “Working Women More Vulnerable to Automation than Men, Says IMF Report.” Business Standard, Business-Standard, 22 Dec. 2018, https://www.business-standard.com/article/economy-policy/working-women-more-vulnerable-to-automation-than-men-says-imf-report-118122200699_1.html.

6. Brenan, Megan. “Women Still Handle Main Household Tasks in U.S.” Gallup.com, Gallup, 20 Nov. 2021, https://news.gallup.com/poll/283979/women-handle-main-household-tasks.aspx.

7. Whitehurst, Grover J. “Russ”. “Why the Federal Government Should Subsidize Childcare and How to Pay for It.” Brookings, Brookings, 9 Mar. 2022, https://www.brookings.edu/research/why-the-federal-government-should-subsidize-childcare-and-how-to-pay-for-it/.

8. “U.S. Construction Employees 2000-2021.” Statista, Statista Research Department, 19 Jan. 2022, https://www.statista.com/statistics/187412/number-of-employees-in-us-construction/.

9. Blum, Linda M. “Constrained Choices: Women’s Interest in Women’s Work.” Between Feminism and Labor: The Significance of the Comparable Worth Movement, University of California Press, Berkeley, Ca, 1991, pp. 132–140.

10. Wessling, Brianna. “10 Most Automated Countries Worldwide.” The Robot Report, 15 Dec. 2021, https://www.therobotreport.com/10-most-automated-countries-wordlwide-in-2020/.

11. King, Sam, and Jeong-Ho Lee. “Korean Workers Need to Make Space for Robots, Minister Says.” Bloomberg.com, Bloomberg, 13 Apr. 2021, https://www.bloomberg.com/news/articles/2021-04-13/south-korea-workers-need-to-make-space-for-robots-minister-says.

12. King, Sam, and Jeong-Ho Lee. “Korean Workers Need to Make Space for Robots, Minister Says.” Bloomberg.com, Bloomberg, 13 Apr. 2021, https://www.bloomberg.com/news/articles/2021-04-13/south-korea-workers-need-to-make-space-for-robots-minister-says.

13. Wessling, Brianna. “10 Most Automated Countries Worldwide.” The Robot Report, 15 Dec. 2021, https://www.therobotreport.com/10-most-automated-countries-wordlwide-in-2020/.

14. Papadopoulos, Anna. “Richest Countries Globally with Average per Capita Wealth.” CEOWORLD Magazine, 26 July 2021, https://ceoworld.biz/2021/07/26/richest-countries-globally-with-average-per-capita-wealth/.

15. Khor , Martian. Automation, Robots and the Threat of Economic Disruption in Developing Countries, The Third Resurgence , 2017, https://www.twn.my/title2/resurgence/2017/319-320/cover01.htm#:~:text=Recent%20studies%20are%20showing%20that,the%20already%20great%20global%20inequalities.

16. Khor , Martian. Automation, Robots and the Threat of Economic Disruption in Developing Countries, The Third Resurgence , 2017, https://www.twn.my/title2/resurgence/2017/319-320/cover01.htm#:~:text=Recent%20studies%20are%20showing%20that,the%20already%20great%20global%20inequalities.

17. Manyika, James, et al. “A Future That Works: Automation, Employment, and Productivity.” McKinsey & Company, McKinsey & Company, 3 May 2018, https://www.mckinsey.com/featured-insights/digital-disruption/harnessing-automation-for-a-future-that-works/de-DE. 18. Cerf, Moran, et al. “3 Practical Solutions to Offset Automation’s Impact on Work.” Singularity Hub, 7 Apr. 2019, https://singularityhub.com/2019/03/11/3-practical-solutions-to-offset-automations-impact-on-work/.

May 25, 2022 0 comment

Asia Economics Featured Global Health Human Rights Print Article Women's Rights

Human Trafficking in Nepal: The Push Factors and Pushback

written by Samriddhi Sapkota

Samriddhi Sapkota’s article is additionally featured in The Generation’s Spring 2022 Digital Print Edition:Women. Coming June 1st 2022.

When Nepal signed the Indo-Nepal Treaty of Peace and Friendship with India in 1950, the nation certainly was not expecting to face one of the greatest human rights crises in the South Asian region. Intended to reflect their long-standing friendly diplomatic relations and act as a strategic security alliance, the treaty opened up the almost 1,100-mile border between Nepal and India and enabled citizens of each respective country to pass freely.¹ This agreement was fundamental to the socio-economic development of Nepal, providing the nation with vital resources from India to develop many of its economic and social sectors including basic infrastructure, healthcare, education, and human resource development.² Yet, even with the treaty’s efforts to establish the border between Nepal and India as a symbol of peace, the agreement ultimately opened the door to grave atrocities towards women and children. The vast area that the border covers, combined with limited border resources and security capabilities, has created the perfect formula to orchestrate the trafficking of women and girls from Nepal to India with greater ease.

The NGO ABC Nepal first raised awareness of the phenomenon occurring at the border in the 1980s, when they discovered that countless women and girls were being taken from Nepal and sold into sex trafficking, labor trafficking, and organ trafficking in India.³ Today, the Nepal-India border is considered to be one of the busiest human trafficking gateways in the world, with approximately 30,000 women and girls trafficked each year.⁴ Because traveling across the border between these two nations does not require any visa or documentation, border security tends to be extremely weak. A large portion of the border cuts through the Tarai region of Nepal, an area that has a large population of people of Indian origin due to the proximity to the border. Yet, the Tarai region only has 22 check posts that generally monitor international trade rather than surveillance of people, making it one of the easiest places to traffick innocent women who travel to the area for work.⁵ Moreover, Nepali girls are considered to be especially attractive in India due to their lighter skin tone, alongside the perception that Nepali virgins can ‘cure’ AIDS.⁶

Although the open border certainly contributes to the trafficking rates, the issue of human trafficking in Nepal is a result of many more complex factors besides border security. In recent years, trafficking has only been exacerbated by degrading circumstances in Nepal, including poverty, social discrimination, natural disasters, and political instability, which has tied the hands of the government to address human trafficking at its roots. Ultimately, with the government at a standstill, local organizations have begun to take matters into their own hands.

Nepal is one of the poorest countries in the world, with a GDP per capita of $1155.14.⁷ As such, the most common push factors for human trafficking are poverty and unemployment. Though rich in natural resources, particularly in its water resources, Nepal has still not been able to utilize these assets and establish any large industry on which to base its economy. And while the nation has the land and capability to mass-produce agricultural products, outdated farming practices make it difficult to establish a widescale agricultural industry. Without a representative industry, Nepal has a difficult time attracting foreign direct investment, the key to kickstarting economic growth. Consequently, Nepal relies on other countries, particularly India, to acquire the majority of its goods. With a stagnant economy and an overreliance on imported goods, poverty and unemployment rates remain high. It is estimated that in 2019, 17.4% of Nepali people, around 5 million individuals, were considered to be multidimensionally poor, which includes lacking access to housing, clean cooking fuel, nutrition, and years of schooling.⁸ Additionally, according to the World Bank, the unemployment rate in 2020 was 4.7%, a sharp increase from the previous year’s rate of 3.09%.⁹

Given these dire economic prospects, it is not unusual for many Nepali women and girls to either look for work outside of the country or be sent by their families to make extra income. Common tactics used by traffickers include promises of work, opportunities, marriage, and other good fortunes available abroad, which is usually enough to convince the women or their families that opportunities outside of the country are better than prospects at home.¹⁰ Women and girls who face domestic violence at home, lack familial support, or live in rural areas are at even greater risk of falling victim to these tactics, as their desperation to escape their circumstances at home and their general lack of resources make them even more likely to believe the promises made by traffickers.¹¹

Poverty and unemployment are worsened by ongoing natural disasters at home. In 2015, Nepal experienced one of the most devastating earthquakes in its history, which killed almost 9,000 people and severely disrupted the nation’s social and economic structures.¹² The earthquake left many women and children without homes or a livelihood. Numerous children who were orphaned or left without work were forced to move further away from home in search of employment. This made them even more vulnerable to tactics used by traffickers to lure them into lucrative practices abroad. It is estimated that around 12,000 children are trafficked into India every year, mainly for sexual exploitation but are also often sent to work in fisheries, construction sites, circuses, sweatshops, and sometimes even sent into the illegal organ trade.¹³ The market for organ trafficking, in fact, was found to have expanded as a result of the 2015 earthquake and the subsequent worsening of poverty.¹⁴

Social discrimination against women is another consequential push factor that forces women and girls out of their homes and into dangerous work abroad. More specifically, caste-based and gender-based discrimination continues to be a major problem in Nepal today, despite strides made by the government to eradicate such practices in public and private settings. This is because instances of discrimination are generally not enforced to the highest degree.¹⁵ As a result, women and those from the Dalit class, formerly referred to as the “untouchable” caste, remain considerably behind the majority groups in Nepal both in terms of their economic prospects and representation in politics.¹⁶ The intersectionality of these identities also has a large impact on the vulnerability of women and girls to trafficking. NGOs in Nepal report that low-caste girls living in the Terai region of Nepal and in early and forced marriages were significantly more vulnerable to sex traffickers.¹⁷

Finally, political instability and corruption within the government make it difficult to punish traffickers even if they are caught. For one, even though the Nepali government has passed anti-trafficking laws, they generally have not been strictly enforced. Most notably, Nepal became the 176th country to ratify the Protocol to Prevent, Suppress and Punish Trafficking Persons, especially Women and Children, also referred to as the Palermo Protocol, in June 2020.¹⁸ Nevertheless, the government has yet to make serious changes to its existing laws to implement the conditions of the protocol, which most importantly includes promoting cooperation with other states that have also ratified the protocol to combat trafficking.¹⁹ Because most of the trafficking that occurs out of Nepal entails foreign employment, implementation of the Palermo Protocol into the existing anti-trafficking laws in Nepal is a vital first step that the government must take to protect the women and girls who are sent to work across the border.

Moreover, many individuals who are in charge of trafficking women and girls have deep political connections within the government. Several NGOs in Nepal have claimed that there are many police officers and political party leaders that are complicit in sex trafficking and the adult entertainment sector establishments where women and girls are forced to work.²⁰ Hence, even when traffickers are arrested for their crimes against women and children, they can call upon their political connections and prevent any prosecution. The government has not made any significant efforts to investigate or prosecute any individuals for bonded labor and instead continues to misidentify the bulk of transnational labor trafficking cases simply as labor violations, which are generally resolved without a criminal investigation and result in short and insufficient sentences.²¹

Furthermore, some actions that have been taken by the government have actually created more problems for female migrant workers. In reaction to the rising cases of trafficking and sexual abuse, the Nepali government has continually passed measures to ban women under the age of 40 from traveling abroad to work without the consent of their families and local ward offices.²² This proposal has been met with intense public backlash, as it targets the already vulnerable women instead of attempting to dismantle the systems and trafficking networks in place that perpetuate the issue.²³ The mandate fuels existing systems of oppression against women, who are already disadvantaged in social and economic circles and thus have difficulties finding work. Moreover, women who are unable to legally migrate out of the country for work might resort to illegal pathways to support themselves or their families, providing an even easier gateway for traffickers to take advantage of their dire circumstances.

As evident from the push factors that increase the risk of falling victim to trafficking tactics to the lack of closure they receive even if their perpetrators are caught, Nepali women and girls are being underserved in every possible avenue. However, unlike the government, local communities are not simply sitting back and watching these atrocities unfold. Even though the government has been unable to make any notable progress to address human trafficking, countless numbers of NGOs in Nepal have stepped up to the job and been quite successful in their work to combat trafficking. These NGOs do a wide array of work including monitoring the Nepal-India border, collaborating with police officials to intercept women at the border or working in lucrative businesses in India, operating safe homes, and providing the necessary tools for rehabilitation.²⁴ The majority of NGOs provide education and access to vocational skills for rescued women and children, such as sewing, cooking, housekeeping, and beauty, that they can utilize to find and establish a stable income.²⁵ There are also a number of rescued women that have themselves assumed roles in anti-trafficking NGOs to address the problem. Survivors are often seen stationed at monitoring booths set up by NGOs at the Nepal-India border questioning suspicious individuals and cross-checking information to determine whether women and girls who are traveling to India are indeed safe.²⁶ There is also an NGO established in 1996 called Shakti Samuha which became the world’s first organization that was established and run by women who were survivors of human trafficking.²⁷

In addition to the work done on the ground, many NGOs have also taken the initiative to research and document trafficking. Nepal does not yet have a centralized database system for trafficking on a governmental level and the illegal nature of the act makes it that much more difficult to track. Thus, the majority of information regarding trafficking in Nepal comes directly from NGO publications, hence why there is a lack of concrete figures and numbers on the issue. NGO publications are also limited in their scope, as they tend to include anecdotal cases, newspaper reports, and commentaries from the agencies that are conducting the research.²⁸Despite the shortcomings of the research that NGOs have done, the extent to which trafficking has been documented through these organizations has played an essential role in bringing light to the issue of trafficking. NGO publications are a pivotal reason why the government has begun to act on trafficking in Nepal, even if these actions have not been quite effective.

For many Nepali women and girls who have been victims of trafficking, the work that is being done by NGOs to raise awareness for and combat the problem provides a small glimmer of hope for their futures. Even so, the process of reintegrating back into society following their rescue still presents its own difficulties. Women who had been able to earn money before returning to their homes are more readily accepted and more likely to be able to marry than those who return still carrying their debt or have become sick.²⁹ Social stigma surrounding trafficked girls has also been an incredible hurdle in the lives of women and girls who try to start a new life in their communities. Specifically, women who had previously been involved in sex work are often perceived as being ‘tainted,’ suggesting that their communities have already labeled them to be a lost cause.³⁰

Evidently, Nepal is still quite far from combating all of the factors that produce the conditions in which trafficking thrives. Nevertheless, the actions being taken by local organizations proves that Nepali people truly seek to address human trafficking, even if this means that they must take on the responsibility alone. NGO work has been pivotal to bringing the issue of human trafficking to the forefront of general discourse, shedding a light on the dangerous repercussions of Nepal’s current economic and political environment on women and girls. That being said, there is still much more work to be done. Because the issue finds roots in larger and much more complex problems that the country faces, it will require major changes in the government to dismantle the social, political, and economic inequities for women and girls. Anti-trafficking initiatives need to not only be more heavily enforced, but they should also be targeted towards supporting women when they look for work outside of the country instead of finding ways to prevent them from doing so. Domestically, security and economic opportunities for impoverished women and girls must improve so that they are not forced into situations where they can be taken advantage of by traffickers. Lastly, further education is necessary in vulnerable communities on the tactics commonly used by traffickers to lure women, alongside the impacts that gender-based discrimination has on increasing the risk of trafficking to occur.

Endnotes

Maxine Betteridge-Moes. “Human trafficking persists during Covid at Indo-Nepal border.” University of London, November 26, 2020. Accessed February 20, 2022, https://study.soas.ac.uk/indo-nepal-border-human-trafficking-persists-amid-pandemic/.
Embassy of Nepal – New Delhi, India. “Economic Relation.” Accessed February 20, 2022, https://in.nepalembassy.gov.np/economic-relation/.
Maxine Betteridge-Moes. “Human trafficking persists during Covid at Indo-Nepal border.” University of London, November 26, 2020. Accessed February 20, 2022, https://study.soas.ac.uk/indo-nepal-border-human-trafficking-persists-amid-pandemic/.
Friends of WPC Nepal. “Trafficking in Nepal.” Accessed February 20, 2022, https://www.friendsofwpcnepal.org/nepal/.
Geetanjali Sharma. Indo-Nepal Cross-Border Human Trafficking: A Rising Concern: International Journal of Creative Research Thoughts 6, no. 1 (2018): 1345-1354. https://ijcrt.org/papers/IJCRT1802174.pdf.
Human Rights Watch. “Rape For Profit: Trafficking of Nepali Girls and Women to India’s Brothels.” 1995. Accessed February 20, 2022. https://www.hrw.org/reports/1995/India.htm.
The World Bank. “GDP per capita (current US$ – Nepal).” 2020. Accessed February 20, 2022, https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?end=2020&locations=NP&start=2020&view=bar.
OPHI, UNDP, UNICEF. “Nepal Multidimensional Poverty Index 2021: Report.” September 2021. Accessed February 20, 2022, https://www.unicef.org/nepal/reports/nepal-multidimensional-poverty-index-2021-report#:~:text=In%202019%2C%2017.4%20percent%20of,schooling%2C%20assets%2C%20and%20nutrition.
The World Bank. “Unemployment, total (% of total labor force) (modeled ILO estimate) – Nepal.” February 2022. Accessed February 20, 2022, https://data.worldbank.org/indicator/SL.UEM.TOTL.ZS?locations=NP.
Maxine Betteridge-Moes. “Human trafficking persists during Covid at Indo-Nepal border.” University of London, November 26, 2020. Accessed February 20, 2022, https://study.soas.ac.uk/indo-nepal-border-human-trafficking-persists-amid-pandemic/.
ibid.
Violeta Santos Moura. “Spirit Me Away: The women and girls lost to trafficking in Nepal.” Al Jazeera, March 8, 2021. Accessed February 20, 2022, https://www.aljazeera.com/gallery/2020/3/8/spirit-me-away-the-women-and-girls-lost-to-trafficking-in-nepal.
ibid.
Dom Gallogly, Layla Hart, and Georgina Kassim. “Human Trafficking in Nepal.” Office of the United Nations High Commissioner for Human Rights, 2020. Accessed February 20, 2022, https://uprdoc.ohchr.org/uprweb/downloadfile.aspx?filename=8088&file=EnglishTranslation.
The World Bank. “Unequal Citizens: Gender, Caste, and Ethnic Exclusion in Nepal.” 2006. Accessed February 20, 2022, https://documents1.worldbank.org/curated/en/745031468324021366/pdf/379660v20WP0Un00Box0361508B0PUBLIC0.pdf.
ibid.
U.S. Department of State. “2020 Trafficking in Persons Report: Nepal.” 2020. Accessed February 20, 2022, https://www.state.gov/reports/2020-trafficking-in-persons-report/nepal/
Chandan Kumar Mandal. “Nepal needs to amend human trafficking laws to fully enforce Palermo Protocol, experts say.” The Kathmandu Post, February 21, 2021. Accessed February 20, 2022, https://kathmandupost.com/national/2021/02/21/nepal-needs-to-amend-human-trafficking-laws-to-fully-enforce-palermo-protocol-experts-say.
ibid.
U.S. Department of State. “2021 Trafficking in Persons Report: Nepal.” 2021. Accessed February 20, 2022, https://www.state.gov/reports/2021-trafficking-in-persons-report/nepal/.
ibid.
Lekhanath Pandey. “Nepal’s bid to deter women’s job migration draws fury.” DW, February 25, 2021. Accessed February 20, 2022, https://www.dw.com/en/nepal-women-migration-exploitation/a-56696325.
ibid.
Violeta Santos Moura. “Spirit Me Away: The women and girls lost to trafficking in Nepal.” Al Jazeera, March 8, 2021. Accessed February 20, 2022, https://www.aljazeera.com/gallery/2020/3/8/spirit-me-away-the-women-and-girls-lost-to-trafficking-in-nepal.
Maxine Betteridge-Moes. “Human trafficking persists during Covid at Indo-Nepal border.” University of London, November 26, 2020. Accessed February 20, 2022, https://study.soas.ac.uk/indo-nepal-border-human-trafficking-persists-amid-pandemic/.
Violeta Santos Moura. “Spirit Me Away: The women and girls lost to trafficking in Nepal.” Al Jazeera, March 8, 2021. Accessed February 20, 2022, https://www.aljazeera.com/gallery/2020/3/8/spirit-me-away-the-women-and-girls-lost-to-trafficking-in-nepal.
Shakti Samuha. “Introduction.” Accessed February 20, 2022, http://shaktisamuha.org.np/about-us/introduction/.
Padam Simkhada. Life Histories and Survival StrategiesAmongst Sexually Trafﬁcked Girls in Nepal: Children & Society 22, no. 3 (2008): 235-248. https://doi.org/10.1111/j.1099-0860.2008.00154.x.
ibid.
ibid.

May 3, 2022 1 comment

Authoritarianism Economics Europe Featured Geopolitics Human Rights International Trade Print Article The International Economy Uncategorized

Why Liberal Internationalism Can Survive a Global Rise in Autocracy

written by Annabelle Werner

“Will we apply and strengthen the core tenets of the international system, including the U.N. Charter and the Universal Declaration of Human Rights, as we seek to shape the emergence of new technologies and deter new threats? Or will we allow those universal principles to be trampled and twisted in the pursuit of naked political power?”

In his first speech before the UN General Assembly, President Biden acknowledged his administration’s sustained commitment to a rules-based order. He affirmed that the fundamental international legal doctrines created in the post-World War II era are not rendered obsolete by the passage of time, “new technologies” or recent grabs for power. Yet Biden’s declaration of support for the international system is far from accepted in the international relations community. In fact, the liberal international order (LIO) is coming under more fire than ever. Because while theorists agree that the world is collectively experiencing democratic decline, scholars and practitioners want to know: can liberal internationalism survive this global rise in autocracy?

According to Freedom House, 2021 was the 15th straight year of an overall rise in global autocracy and the worst single year of democratic deterioration.¹ The “overall rise” occurs when more states experience a decrease in democracy than an improvement. This translates to nearly 75% of the world’s population living in a state that experienced democratic backsliding in 2020.²

It is widely accepted that 2020’s drastic deterioration occurred because of state leaders using emergency measures regarding COVID – 19 to postpone elections, indefinitely expand executive power, and erode democratic institutions. Few states were spared in the rise of populism as both struggling democracies like Hungary and secure governments like the United States both felt their democratic safeguards tested. The upcoming Freedom House reports will most likely measure whether political officials relinquish some of this emergency power. But while COVID – 19 may explain the rise in autocracy in 2020, there have still been years of democratic decline before it. Many theorists are claiming that the liberal international order is failing to prevent such decline, and it will not survive further changes in international hierarchy, such as the rise of China.

In order to tackle this argument, let’s first define what the liberal international order is, and what it is not. The LIO is a rules-based system defined by the essential, universal principles of human rights as well as political and economic liberalization that was established following World War II. Many international organizations and treaties were founded on these principles in the post-1945 era. Yet it is key to mention a fundamental idea developed by Professors Mette Eilstrup-Sangiovanni and Stephanie C. Hofmann: not anyone international organization defines the entirety of the rules-based order – organizations can come and go as long as the fundamental principles of the LIO remain the same.³ It is also important to understand that the organizations created in the name of these principles were created by and for a handful of western states left after the end of WW2, thus they were designed to facilitate diplomacy between only a few state actors. Thus, it seems only natural for the organizations themselves to change over time in reaction to new events, phenomena, and actors. As long as newly amended or created organizations are upholding the LIO’s key principles, these are to be considered changes within the LIO, not challenges to them.⁴

Since the post-1945 world, one can see how the LIO has survived developments in world politics. For instance, the post-World War II hierarchy shortly gave way to the bipolar world and international stalemates of the Cold War. And while the LIO and its various international organizations were able to survive the great power competition, many of its functions were blocked throughout this period. After the fall of the Berlin Wall, the LIO was essentially run by the U.S. until 2001. This unipolar, U.S.-led system arguably provided stability as the LIO’s agencies and mechanisms functioned unencumbered by the interests of other powers.

But the U.S.’s unipolar moment ended in 2001 after the attacks on the Twin Towers and President Bush’s declaration of the “War on Terror”. The ensuing failures of unilateral intervention in the Middle East soon became synonymous with the failures of the LIO. Other troubles arose, like the deadlock of the WTO, which has resulted in the stalling of the Doha Round for 20 years, and the deadlock of the UN Security Council (UNSC), which has resulted in the perpetuation of humanitarian disasters in Syria and Yemen. Furthermore, the nature of war has shifted: internal/civil conflicts are more common than state versus state conflicts, and now non-state actors as powerful players in international relations. These changes have brought into question whether the LIO and its structure operating with states as primary actors, can adapt to such new challenges. Some theorists are even questioning if the LIO ever truly existed in the first place.

Despite this laundry list of problems regarding the efficacy of liberal internationalism, the general disillusionment with its ability to quell the rise of autocracy, and the doubt that our rules-based system can live through a change in the international hierarchy like the rise of China, the LIO is not obsolete and can survive in the 21st century. Rather than abandon our core principles, lower our standards for the quality of life, and abandon the pursuit of sustainable development, I argue that the LIO can stave off this rise in autocracy. Although in order to do so, the international community needs to apply new, innovative mechanisms to actualize the LIO’s core principles of multilateralism, and its international organizations need to adapt to a broader view of global governance and the reality of a multipolar world. The good news? In some ways, these adaptions have already started.

Although the Doha Round has been stalled since 2001 due to conflicts between the US and China, trade liberalization and the average global lowering of tariffs have continued exceptionally well; the average world import tariff remains below 5% (as of 2019).⁵ Economist Richard Baldwin argues that this is due to the increase in bilateral investment treaties and regional trade agreements (RTAs), which are innovative adaptions to a world that is far more globalized and complex than the one that existed at the conception of the WTO in 1995; he argues that such complex and nuanced solutions will be a part of the future multilateralism in the global economy.⁶ And while we still need to work with and reform the WTO in order to actualize its benefits, such as its dispute settlement body, we can pair this necessary reform with utilizing other innovative, solutions to promote key principles of the LIO: multilateralism and economic liberalization. And while we will still have yet to see the outcome of the current trade war between the US and China, I mention these localized adaptions to argue that despite the trade war, tariffs globally have been kept low. Thus, these aforementioned adaptations and suggested reforms can occur within the rules-based order despite periods of great power contention and stalemates between powerful actors.⁷

Another application of Sangiovanni and Hofmann’s theory to the WTO can be explored through the transition from the GATT (the former tariff lowering practice) to the very creation of the WTO in 1995. The WTO was created in order to adapt to the end of the Cold War as well as better incorporate so many of the newly decolonized states at the end of the 20th century. This development occurred without the claims that the end of the LIO was upon us, thus showing how there have been historical changes in our international economic systems within the liberal international order in order to adapt to new events. And while it is important to mention that agreements like RTAs could be used to facilitate protectionist policies, they also have the potential to “pave the way for deeper multilateral integration”.⁸ OCED describes RTA’s as having the ability to establish “deep and comprehensive market integration” while covering pressing issues such as intellectual property and environmental regulation.⁹ In summation, as long as the LIO’s key principles like economic liberalization and multilateralism are being actualized (which can be measured by analyzing tariff rates), the prominence of regional agreements should not be used as evidence that the end of LIO is here.

While innovative adaptations are already happening, our international organizations themselves still need to adjust to a multipolar international hierarchy. The reality is that we are no longer in a world that operates at the will of U.S. hegemony, and our current IO’s are struggling to operate because they were designed around an essentially unipolar world. They also face significant bureaucratic red tape in the pursuit of any reform. If some of the LIO’s structures can be amended to reflect an expanded system of global governance, and its mechanisms are better equipped to learn from their own shortcomings, the LIO can propel a recession of autocracy without reconceptualization or a retreat from our principles.

One area that needs such reform is the UN Security Council. The P5 shaped the Security Council to reflect the victors of WW2, and it doesn’t even include a single state from South America, Africa, or Southeast Asia. The UNSC has been deadlocked, even during genocides, leading to a failure to halt such atrocious crimes. But an expanded and reformed Council could include more world powers and reforms such as where “permanent members shall not exercise the right to veto in the event of mass atrocities”, which is an idea proposed by a P5 member themselves, France.¹⁰ The stakes regarding the UNSC reform are particularly high as this is the only international mechanism that can legally sanction the use of force, which is one of the most powerful functions of the international community.

Yet the stakes are also high for many issues we face in the 21st century, and success cannot be achieved by regression to unwavering reverence to state sovereignty: we cannot simply give up on the principles or current mechanisms of liberal internationalism. Global pandemics and climate change do not occur in vacuums that individual states can solve on their own. Large swaths of our planet will become uninhabitable due to rising temperatures and sea levels, and massive levels of migration are inevitable. Resorting to isolationism and dismissing the fundamental principles of the LIO will only lead to more suffering. Accepting the inevitability of conquest and war will only lead to self-fulfilling prophecies. The only sustainable solutions to collective action problems will involve the just principles of equality and collaboration defined in a rules-based order.

So, if there’s broad consensus that the world is inevitably moving towards a multipolar world, shouldn’t we also ask ourselves what the benefit could be to 1) having our international organizations match the current international hierarchy and 2) having a multipolar world that also falls along the with LIO? Because couldn’t “a multifaceted world order based on complex and polycentric governance arrangements among a wider community of national governments, international organizations and non-state actors” better lead to more accountability and efficacy in our diplomatic practices?

Overall, instead of rejecting the LIO on the grounds that it has failed to quell a rise in autocracy, we should focus on adapting these institutions to a world that is no longer unipolar while ensuring that our principles remain the same. Because it is not our guiding principles of equality, peace, and multilateralism that have allowed for autocracy to develop, but rather a lack of reform that has hindered our global governance and accountability mechanisms from being used, or for being used as vehicles to serve other interests. Ultimately, the LIO can outlast this rise in autocracy. But in order to tackle these modern dilemmas, we need to apply nuanced solutions and update our structures to fit the modern international arena while upholding the principles of the rules-based order.

Endnotes:

1. “Freedom in the World 2021: Democracy Under Siege.” Freedom House, 2021, https://freedomhouse.org/report/freedom-world/2021/democracy-under-siege.

2. ibid.

3. M. Eilstrup-Sangiovanni and S.C. Hofmann. “Is the Liberal International Order in a state of terminal decline?” London School of Economics, January 7, 2020, https://blogs.lse.ac.uk/europpblog/2020/01/07/is-the-liberal-international-order-in-a-state-of-terminal-decline/.

4. ibid.

5. “International Trade in Goods – tariffs. International trade in goods – tariffs – Statistics Explained.” Eurostat, July 21, 2021, https://ec.europa.eu/eurostat/statistics-explained/index.php?title=International_trade_in_goods_-_tariffs.

6. R. Baldwin. “The World Trade Organization and the future of multilateralism.” Journal of Economic Perspectives, 2016, 30(1), 95-116.

7. Mette Eilstrup-Sangiovanni & Stephanie C. Hofmann. “Of the contemporary global order, crisis, and change,” Journal of European Public Policy, 2020, 27:7, 1077-1089, DOI: 10.1080/13501763.2019.1678665.

8. “Regional Trade agreements,” OECD, https://www.oecd.org/trade/topics/regional-trade-agreements/.

9. ibid.

10. “Ministère de l’Europe et des Affaires étrangères,” France and the United Nations, France Diplomacy – Ministry for Europe and Foreign Affairs, https://www.diplomatie.gouv.fr/en/french-foreign-policy/united-nations/france-and-the-united-nations/.

11. M. Eilstrup-Sangiovanni and S.C. Hofmann. “Is the Liberal International Order in a state of terminal decline?” London School of Economics, January 7, 2020, https://blogs.lse.ac.uk/europpblog/2020/01/07/is-the-liberal-international-order-in-a-state-of-terminal-decline/.

February 16, 2022 0 comment

Authoritarianism Economics Europe Featured National Security Print Article Russia Uncategorized Vladimir Putin

Why Angela Merkel’s Tenure has Emboldened Authoritarians

written by Andreas Papoutsis

Angela Merkel has often been likened to the replacement leader of the free world in the absence of active American leadership, particularly during the isolationist years of the Trump administration. Logically, her departure from the international stage is considered an imminent loss for the prosperity and security of the free world, though her legacy on the international stage should not be remembered fondly by those who truly support global democracies. Despite the occasional victory notched for neighboring democracies or domestic German society, Merkel’s legacy as a diplomat should be defined by the several inconsistencies in the values she chose to defend and the failures she has notched when standing up to autocrats.

Despite a whopping 16 years spent in office as the German Chancellor, Merkel has failed to raise German defense spending to the 2% of GDP threshold as required by NATO doctrine, instead of shrugging off the disregard for defense expenditures as a matter that should not be the worry of NATO allies. She will have left public office with a military budget that amounts to a meager 1.36% of the country’s GDP in 2019 before the pandemic-induced recession led to a sharp downtick in GDP that raised the figure to 1.57% in 2020.¹ Indifference to defense expenditures has forced the issue of foreign NATO missions to be disproportionately shouldered by other allies such as the United States. The issue of German defense spending has also left Europe in a strategically vulnerable position in the face of a revanchist Russian adversary in Vladimir Putin, whom she has seemingly cozied up to. What meaningful military response can be taken by Berlin in the event that the Kremlin’s juggernaut military invades Finland or Ukraine? At this point, the answer is clear: hardly anything of consequence. If Putin’s 2014 invasion of Crimea or repeated scares of Russian military buildup along Europe’s borders isn’t convincing enough of the very real possibility of an attack orchestrated by Moscow, we could simply turn to the leaders of Russia’s neighboring democracies, who constantly warn of the threat posed by Vladimir Putin’s dictatorship.²

Perhaps one of the most disruptive and troublemaking authoritarian governments in the world, Russia has relied largely on its oil economy to project power and support the financial needs of its military proliferation. Amid a decline in European demand for fossil fuels, the Kremlin has been handicapped by a changing energy environment. Where would the Kremlin possibly find a lifeline? Perhaps from like-minded authoritarian governments such as the one seen in Beijing? Contrary to what logic would dictate, the helping hand was instead extended by Germany under the leadership of Angela Merkel, against the wishes of close allies such as the United States and the frantic warning of Eastern European countries like Ukraine.³ No amount of diplomacy, sanctions, or common sense could convince Germany otherwise of completing the Nord-Stream 2 pipeline despite its blatantly conspicuous strategic repercussions.

Trying to rationalize such a decision by pointing out political technicalities or lauding economic conveniences simply implies an apathetic attitude towards NATO security and laziness when configuring Germany’s energy structure. Even when Alexei Navalny was intentionally poisoned by the Kremlin for being an anti-corruption advocate, Berlin responded with inconsequential statements and sanctions that ignored the crown jewel of Putin’s objective in Europe: the Nord-Stream 2 pipeline.⁴ Norbert Roettgen, the conservative party’s leader on the German foreign affairs committee, correctly assessed the seriousness of the situation by suggesting Germany, “must pursue hard politics, we must respond with the only language Putin understands – that is gas sales.”⁵ Despite calls from several Western countries and numerous politicians within her own country, Merkel decided against implicating the pipeline in any response levied by Germany.

German Foreign Minister Heiko Maas merely questioned and offered hollow consternation surrounding the future of the project in the aftermath of the Navalny poisoning, essentially demonstrating to one of the world’s most notorious authoritarians that his efforts to snuff out and assassinate pro-democracy advocates was entirely acceptable by Berlin’s standards.⁶ Germany seemed more enraged by American sanctions against the project than the assassination attempt undertaken by the Kremlin. Merkel instead figured that the wishes of her democratic allies were secondary to the desires of Vladimir Putin and the misconceived economic expediency he offered.

The decision to finalize the pipeline despite the Navalny poisoning now puts Ukraine and several other European partners at risk, as Kiev fears that Moscow could once again cut off oil supply to the region in an attempt to punish or coerce neighboring democracies. There does not even appear to be a surefire guarantee that implementation of the pipeline would be able to increase the volume of oil transported to Europe; we only know for certain that it would change the source of said oil. Likewise, neighboring Poland finds itself incredibly vulnerable and downright shocked in this situation, since repairs to the Ukrainian-Polish pipeline would have been significantly cheaper than the construction of the Nord-Stream 2.⁷ Since the pipeline will run through the Baltic Sea, NATO allies in the area should expect additional Russian naval assets in the region, an opportunity that Moscow will surely take advantage of to intimidate its neighbors.

All of the details and nuances of the Nord-Stream 2 pipeline, however, can be boiled down to a simple rhetorical question: why would Merkel want a sizable share of Germany’s energy supply to be in the hands of one of the world’s most notorious enemies of democracy? Considering that disdain for the project emanated not just from allies, but from domestic German lawmakers and a wide array of members of Merkel’s own party, there is no valid justification.

In recent weeks, the possibility of a Russian attack on Ukraine has grown. Despite a drawdown of troops along the Ukrainian border in April this year, Russian military assets have once again accumulated in the region, alarming officials in Kiev and causing many security officials from NATO countries to warn of an invasion. With over 100,000 troops in position, defense officials in Kiev project an attack before the end of the winter. Many American officials consider it a “high probability,” including Fiona Hill, who described Putin as “deadly serious” about commencing an incursion into Ukraine.⁸ In response to what could devolve into a major European war, Merkel has merely suggested imposing sanctions against the Kremlin. Levying sanctions against Moscow after allowing the Nord-Stream 2 pipeline to be constructed, however, seems like a rather hollow threat.

Lt. Col. Robert Maginnis expects the Kremlin to divert NATO’s attention away from Ukraine by fomenting unrest along the Polish border.⁹ Over the last few months, asylum seekers and migrants primarily originating from the Middle East have flooded the Polish border after being escorted by Belarusian security forces. Moscow has employed the strategy of attempting to create a refugee crisis within a NATO country by using the Belarusian government as a smuggler of vulnerable migrants. The predicament at the Polish border has been met with condemnation from Merkel, who rightly demonstrated solidarity with her counterparts in Warsaw. This solidarity, however, has not been consistently extended to other European democracies that have experienced similar hybrid attacks by authoritarian governments.

When standing up for European Union allies, Merkel has picked and chosen when to exhibit a commitment to democratic values. Merkel has often been perceived as the de facto leader (or co-leader alongside France’s Macron) of the European Union, especially with the departure of the United Kingdom. The Union’s mission statement includes promises of promoting peace, freedom, and security, yet it has been rendered virtually useless in acting on such promises in instances where Merkel’s leadership has deemed it as inexpedient, particularly as it relates to Turkey. For 47 years now, Ankara has militarily occupied the northeastern portion of Cyprus. Seventeen years ago, the Republic of Cyprus joined the European Union, which means that, for 17 years, a foreign nation has militarily occupied European territory with little to no backlash whatsoever from Berlin. Last summer, when Turkish warships were escorting oil surveying vessels in Greek and Cypriot waters, leading to a tense situation that nearly devolved into armed conflict between two NATO allies, Merkel framed the situation as if it were an incidental and natural dispute between two neighbors rather than an aggressive incursion of EU territorial waters. Instead of explicitly siding with a European partner and a country committee to good neighborly relations, Merkel chose neutrality, further emboldening the strongman residing in Ankara.

The aforementioned “hybrid attacks” that entail the intentional funneling of asylum seekers into a neighboring country to overwhelm their immigration infrastructure is a tactic that has been regularly utilized by Turkey when confronting neighboring democracies like Greece. In fact, many of the migrants attempting to cross the Polish border made their way to Belarus through Turkish flights to Minsk, which were eventually stopped once the European Union and the United States agreed to sanction third-country airlines involved in flying asylum seekers to Belarus.¹⁰

In March 2020, several thousands of migrants attempted to cross into Greece’s Evros region after President Erdogan announced he would allow their passage into the European Union despite no mutual agreement from the Greeks. The Turkish president’s intentions were clear: to threaten Greece with an unsustainable influx of migrants while unethically generating leverage to exact a more financially lucrative immigration agreement with the European Union. His efforts were successful in generating more financial assistance from the European Union, and although Merkel condemned Turkey’s actions as unacceptable, her government did little to enact any consequences.

While Turkey has grown increasingly authoritarian, both in how it operates domestically through Erdogan’s consolidation of power and in his militaristic foreign policy that threatens regional democracies, Merkel and her government have rewarded such behavior with new arms sales that include the transaction of new German submarines. The decision lends a strategic advantage for an authoritarian government in its aggression directed towards neighboring democracies. Her indifference on such matters also strengthens Ankara’s disdain for the democratic aspirations of its people, knowing that corruption and authoritarianism will result in little backlash from its longtime German partner.

No leader is perfect, not even some of history’s most respected figures, but Merkel’s vaunted reputation is largely based on the intentional ignorance of her shortcomings in defending global democracy. Her work as a domestic politician has received praise from vast ranges of German society, evidenced by her incredibly long tenure as German Prime Minister, but her work in the international community is not particularly impressive considering the urgency of challenging authoritarianism.

Merkel’s true legacy as a diplomat should instead reflect the inconsistencies in her values and the appeasement she demonstrated to some of the world’s most notorious dictators, the likes of which have utilized Merkel’s support to advance their objectives of consolidating power and tearing down democratic institutions within their own countries while simultaneously lashing out against neighboring democracies that are struggling to ensure the free world’s future. So, when it comes to defending democracy and confronting authoritarianism, Merkel’s record will forever be far from perfect.

Endnotes:

1. Leah Carter. “Germany reports record €53 billion in NATO defense spending.” Deutsche Welle News, February 2, 2021, https://www.dw.com/en/germany-reports-record-53-billion-in-nato-defense-spending/a-56491017.

2. Micheal Phillips and James Marson. “Russian Aggression Spurs Neighbors to Rebuild Defenses.” Wall Street Journal, January 5, 2021, https://www.wsj.com/articles/russian-aggression-spurs-neighbors-to-rebuild-defenses-11609859853.

3. “Ukrainian ambassador calls Nord Stream 2 ‘a stab in Ukraine’s back’.” Ukrinform, March 11, 2021, https://www.ukrinform.net/rubric-economy/3344084-ukrainian-ambassador-calls-nord-stream-2-a-stab-in-ukraines-back.html.

4. “Russia responsible for Navalny poisoning, rights experts say.” United Nations News, March 1, 2021, https://news.un.org/en/story/2021/03/1086012.

5. Madeline Chambers. “Germany pressed to rethink Nord Stream 2 pipeline after Navalny poisoning.” Reuters, September 2, 2020, https://www.reuters.com/article/us-russia-politics-navalny-germany-nord/germany-pressed-to-rethink-nord-stream-2-pipeline-after-navalny-poisoning-idUSKBN25U0UF.

6. “Germany has alternatives if it abandons Nord Stream 2 over Russia tensions: Experts.” Alarabiya News, September 7, 2020, https://english.alarabiya.net/business/energy/2020/09/07/Germany-has-alternatives-if-it-abandons-Nord-Stream-2-over-Russia-tensions-experts.

7. Mark Temnycky. “The Security Implications of Nord Stream 2 for Ukraine, Poland, and Germany.” Wilson Center, March 17, 2021, https://www.wilsoncenter.org/blog-post/security-implications-nord-stream-2-ukraine-poland-and-germany.

8. John Haltiwanger. “Putin is ‘deadly serious’ about neutralizing Ukraine, and has the upper hand over the West, former US diplomats and officials warn.” Business Insider, November 26, 2021, https://www.businessinsider.com/puti-deadly-serious-about-ukraine-has-upper-hand-over-west-2021-11.

9. Lt. Col. Robert Maginnis. “Why it’s better than a 50-50 chance that Russia will attack Ukraine this winter.” Fox News, November 27, 2021, https://www.foxnews.com/opinion/russia-attack-ukraine-winter-biden-putin-robert-maginnis.

10. Aykan Erdimir. “Swift trans-Atlantic action kept Turkey from fueling Belarus’ hybrid attacks,” DefenseNews, November 16, 2021, https://www.defensenews.com/opinion/commentary/2021/11/16/swift-trans-atlantic-action-kept-turkey-from-fueling-belarus-hybrid-attacks/.

February 7, 2022 0 comment

Authoritarianism Economics Featured Globalization International Trade Populism Print Article The International Economy

The Free-Market Democracy Scam

written by Katherine Jones

“The Free-Market Democracy Scam” was originally published in our Fall 2021 Print Edition: Authoritarianism.

Our story starts in 2000, at the close of Bill Clinton’s second term in office. Clinton, a man who has been known to “see the world through rose-colored glasses,” saw a brighter, more democratic future for China.¹ At the eleventh hour of his presidency, Clinton advocated the admission of China into the World Trade Organization (WTO), with the sincere belief that an open and free economy would lead to prosperity, and that prosperity would gradually force an increase in civil liberties.² History has unfolded quite differently, yet Clinton was not wrong to see a connection between free markets and democracy.

Where he may have miscalculated is the way in which these phenomena relate- perhaps free markets destroy democracy rather than create it. Perhaps Clinton should have expected that the rise of China, the first genuine competitor to U.S. economic supremacy since WWII, would slowly diminish the relative economic power of the United States. The ensuing “race to the bottom” would force the U.S. to introduce economic reforms that would reduce standards of living in order for our economy to remain internationally competitive. Such reforms would have sociopolitical consequences including increasing Americans’ appetites for authoritarianism. When all was said and done, China’s free-market may have reduced Americans’ civil liberties rather than building up their own.

Free markets, Free Men?

Free markets and democracy exist not as compliments, but largely in opposition to each other. At their core, the motives that govern markets and democracy almost always directly contradict one another. Democracy seeks to find the best outcome for the majority, capitalism seeks to satisfy individual self-interest.³ Democracy relies on the principle that we are all equal, capitalism inherently produces inequality.⁴ Democracy can break down free markets through punitive redistribution and regulation. Free markets break down democratic systems through poverty and inequality.

Every “free market democracy” relies on the fragile balance between the interests of citizens and corporations, with the pendulum swinging back and forth depending on the era’s prevailing economic theory. In 1950s America, the more “democratic” Keynesian system of regulation and social welfare was popular. This was an era of strong unions and a robust middle class. By the 1970s, economists such a Milton Friedman interpreted the success of the 1950s and 60s to be due to democracy and capitalism reinforcing one another.⁵ A more “free market” focused ideology came into vogue. This period was characterized by deregulation, financialization, and an increasing frequency and severity of financial crises. Since the 1970s, this trend has only continued to intensify.

In modern-day America, we have levels of inequality that rival the pre-WWI era, stagnating wages, a breakdown in labor unions, and large-scale political discontent.⁶ However, our domestic economy tells only a fraction of the story. All other Western liberal democracies have, to some extent, suffered a similar fate. Globalization would have deteriorated regulatory and social welfare frameworks even if strong national policies had been maintained.

Globalization’s Caused Much More Than Discontent

Free-market globalization has contributed to a breakdown in democratic accountability and produced instead governments accountable to, and run by, corporations, banks, and international organizations.

International trade has insidiously contributed to the breakdown of democratic accountability, by forcing countries to undercut the needs and best interest of their own citizens, in favor of more competitive economic policies. Take for example the corporate tax rate: large corporations pay almost zero tax, however countries are often hesitant to raise their tax rate, as businesses may then choose to base themselves in another country with a lower corporate tax rate. This phenomenon is further applicable to labor rights, environmental protections, and many other components of the “ease of doing business.” Within this framework, there are more extensive rights granted to corporations than to people with respect to free movement and migration, the movement of capital, law enforcement, and more.

Countries grant these special rights and privileges to not only corporations but often to international organizations and banks as well. Such was demonstrated during the Euro crisis when all of the countries within the Eurozone were accountable to the European Union over their individual sovereign governments. This policy required the Germans to pay the debts of the Greeks, and the Greeks to undergo harsh austerity, despite that neither of these policies would have been democratically feasible in their respective countries.⁷ In addition, the very premise that the Northern European countries were bailing out “The Greeks” or “The Irish,” veils that everyday citizens were required to bail out international financial institutions, demonstrating nation’s loyalties to banks over citizens.⁸

In tandem with this, banks, corporations, and International Organizations have all contributed to the direct deterioration of democratic systems, particularly in the global south. Countries within the global south have less developed economies than countries in the global north. For the last several centuries “free markets” in the global north have been subsidized by the imposition of exploitative and extractive policies in their “colonies,” then former “colonies.” These policies have resulted in structures of economic and political dependence that encumber many countries in the global south from maintaining free and open democracies. As an illustration, let’s say there’s an election in Latin America, and Western banks may favor one candidate over the other. Voters essentially must choose to pick the banks’ candidate or choose to undergo a painful recession.⁹ Any “choice” is an illusion.

The Allure of Authoritarianism

As the global economy continues to erode democracy, many countries shift towards the authoritarian model. Authoritarianism’s growth in popularity in recent years could be due to its perceived superior ability to ensure economic growth. Authoritarian governments can execute the most favorable economic policies without winning elections, compromising with opposition parties, or contending with unfortunate voter decisions (such as Brexit.) In many ways, these authoritarian regimes have experienced unprecedented success. A 2009 IMF study shows that economic growth in capitalist authoritarian nations averaged 6.28% over the previous 15 years, whereas growth only averaged 2.62% in liberal democracies.¹⁰ In addition, there are individual case studies, such the China, boasting growth rates as high as 19.3%, which make authoritarianism appear as a guarantor of success.¹¹

The growth of authoritarianism speaks to countries, and perhaps people, valuing economic prosperity over freedom. For those that have never known either this deal with the devil may be worth the price, yet what about those that already have both?

To the Republic, for which it stands…

People like authoritarianism; even in Western Democracies. Political theorist Robert Kuttner warns that support for right-wing extremists in Western Europe is even higher today than it was in the nineteen-thirties.¹² According to a 2021 study from the Morning Consult, 26% of Americans are in favor of right-wing authoritarianism.¹³ The increase in authoritarian sentiment seems to be linked to the failures of free-market globalization, particularly the decline in voter power and the growth of inequality. According to economist Dani Rodrik, the issues that draw supporters to populism (authoritarianism more palatable precursor) are the same on both sides of the aisle: voters are “anti-globalization, anti-free trade, anti-immigration, and anti-Wall Street,” though it usually manifests in opposing ways.¹⁴ Rodrik explains that “When mainstream politicians are unable to generate meaningful responses to inequality, social exclusion and insecurity, populists of various ilk gain ground.”¹⁵ However, what’s interesting, and sad, is that this feeling of powerlessness leads people to cede even more power to strongmen. And there is a precedent for democracies developing in authoritarian regimes. Take for example ancient Rome, Hitler in Weimar Germany, Chavez in Venezuela, Papa Doc in Haiti, Mugabe in Zimbabwe, Erdogan in Turkey, and many more. As Socrates stated, “tyranny is probably established out of no other regime than democracy.”¹⁶

Potential Solutions

What can we do to save the world’s democratic capitalist system? There are more ways in which we can reimagine the relationship between our economic and political systems to produce more favorable outcomes.

On the international scale, The most desirable, and perhaps most unrealistic solution would be to establish democratically accountable global regulatory bodies to effectively create a fair and even playing field. We currently have organizations such as the World Trade Organization (WTO) and the International Court of Justice (ICJ) constructed to fulfill this role, that have in some respects fallen short and may be improved by democratic accountability and enhanced enforcement power. We additionally have national organizations such as the Securities and Exchanges Commission that are relatively effective and would be valuable to be expanded on a global scale.

However, in reality, compliance on a global scale would be near impossible to achieve. Worldwide solutions, in general, will be difficult to implement; it is possibly more productive to put forward domestic solutions.

If our problem is globalization, the natural reaction may be to tend towards isolation. Yet, complete isolation is not feasible in the modern world due to global issues including cyberattacks, pandemics, terrorism, and climate change. The closest examples we see to isolation are pariah states such as Iran and North Korea. However, the world, and the United States, may be ready for a period of American withdrawal. A 2019 poll shows that “a plurality of Americans want the country’s role in the world to shrink or end altogether.”¹⁷ An American retreat could allow for more resources to be directed to education, cybersecurity, and social welfare, all of which would likely aid our ailing democracy. On the other hand, a retraction is risky as it could damage alliances, leave a power vacuum, and allow us to fall behind other countries.

Perhaps we should instead abandon democracy altogether to save global capitalism. There are relatively more attractive forms of authoritarianism such as technocracy that may allow for a smooth transition. We have already experienced a huge growth in independent agencies unaccountable to the voter, such as the Environmental Protection Agency (EPA), the Federal Reserve, and the FDIC.¹⁸ This is potentially an interesting proposal in light of the many modern Americans who believe in ceding individual rights and freedoms for the collective good, for example removing the individual right to choose in terms of guns, abortions, or vaccines, for the sake of public health and safety. Should people give up the right to vote for the collective good? Should we all?

Endnotes:

1. Joel Roberts. “Bill Clinton: The Optimist.” CBS News, June 25, 2004, https://www.cbsnews.com/news/bill-clinton-the-optimist/.

2. Brian Stauffer. “When the World Opened the Gates of China.” Wall Street Journal, July 27, 2018, https://www.wsj.com/articles/when-the-world-opened-the-gates-of-china-1532701482.

3. Wolfgang Merkel. “Is capitalism compatible with democracy?” Harvard University, July 26, 2014, https://projects.iq.harvard.edu/files/mobilized_contention/files/merkel_-_is_capitalism_compatible_with_democracy.pdf.

4. ibid.

5. John Weeks. “Free Markets and the Decline of Democracy.” Open Democracy, July 18, 2018, https://www.opendemocracy.net/en/can-europe-make-it/free-markets-and-decline-of-democracy/.

6. Michael Hirsh. “Why Trump and Sanders Were Inevitable.” Politico, February 28, 2016, https://www.politico.com/magazine/story/2016/02/why-donald-trump-and-bernie-sanders-were-inevitable-213685/.

7. Joseph Stiglitz. The euro: how a common currency threatens the future of Europe. WW Norton & Company, Inc. 2016.

8. Wolfgang Streek. “The Crises of Democratic Capitalism.” New Left Review, September 2011, http://piketty.pse.ens.fr/files/StreeckNLR2011.pdf.

9. Joesph Stiglitz. “Decades of free market orthodoxy have taken a toll on democracy.” The Guardian, November 5, 2019, https://www.theguardian.com/business/2019/nov/05/decades-of-free-market-orthodoxy-have-taken-a-toll-on-democracy.

10. John Lee. “Western v. Authoritarian Capitalism.” The Diplomat, June 18, 2009, https://thediplomat.com/2009/06/western-vs-authoritarian-capitalism/.

11. “GDP growth (annual %)- China.” The World Bank, 2020, https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?locations=CN.

12. Caleb Crain. “Is Capitalism a Threat to Democracy?” The New Yorker, May 7, 2018, https://www.newyorker.com/magazine/2018/05/14/is-capitalism-a-threat-to-democracy.

13. Cameron Easley. “U.S. Conservatives Are Uniquely Inclined Toward Right-Wing Authoritarianism Compared to Western Peers.” Morning Consult, June 28, 2021, https://morningconsult.com/2021/06/28/global-right-wing-authoritarian-test/.

14. Michael Hirsh. “Why Trump and Sanders Were Inevitable.” Politico, February 28, 2016, https://www.politico.com/magazine/story/2016/02/why-donald-trump-and-bernie-sanders-were-inevitable-213685/.

15. ibid.

16. Andrew Sullivan. “Democracies end when they are too democratic.” New York Magazine, May 1, 2016, https://nymag.com/intelligencer/2016/04/america-tyranny-donald-trump.html.

17. Charles Kupchan. “Isolationism Is Not a Dirty Word.” The Atlantic, September 27, 2020, https://www.theatlantic.com/ideas/archive/2020/09/virtue-isolationism/616499/.

18. Yascha Mounk. “America is Not a Democracy.” The Atlantic, March 2018, https://www.theatlantic.com/magazine/archive/2018/03/america-is-not-a-democracy/550931/.

January 31, 2022 0 comment

Economics National Security Security

The Honduras Challenge for U.S. Foreign Policy

written by Christopher López

When Joseph Biden served as Vice-President, he traveled to over 45 countries, often leading diplomatic efforts on behalf of the Obama administration. In Central America, he was often tasked with the challenge of working with Guatemalan, Salvadoran and Honduran governments to stem irregular migration. The resulting regional initiative became known as the “Plan of the Alliance for Prosperity in the Northern Triangle” and was drafted in response to the over 70,000 unaccompanied minors that were apprehended at the southern border in 2014. This five-year joint regional plan was financed by the U.S. Congress’ commitment to allocate over $700 million towards development and security assistance to this specific Central American region. One of the presidents that committed to this initiative, sadly, went on to extend his rule and whose undemocratic conduct became a predicament for U.S. foreign policy in Central America.

There are many challenges Honduras poses for the U.S. and many are related to the outgoing administration of Juan Orlando Hernández. Initially, Hernández’s ascent to power was well received by Washington. His iron-fist approach towards gang networks and regional drug trafficking delighted many of his North American counterparts given that these were two factors accused in spurring unprecedented migration from the region. In 2013, shortly before coming into office, San Pedro Sula was recognized as the most dangerous city in the world not actively at war with a homicide rate of 85.5 per 100,000 inhabitants. In 2019, that rate had significantly dropped by half.

If President Hernández successfully reduced the country’s homicide rate, why has his government proven to be a predicament for the current and past two presidencies of the United States? The reasons have to do with an escalation of institutional corruption, narco-trafficking accusations and most notably, the continuous surge in irregular immigration from Honduras to North America. Two years before he was inaugurated, 513 family units were apprehended at the U.S. southern border. In 2019, the documented number rose to an alarming 188,368 apprehensions. A brief insight into how this has complicated the relation between these two countries could better convey the challenges that lie ahead for the newly-elected, first-female democratically elected president, Xiomara Castro Sarmiento.

Historically, Honduras has maintained great diplomatic relations with the United States. At the turn of the 20th century, businessmen from the United States invested heavily into the country’s mining sector, banana production, and transportation infrastructure. President John F. Kennedy nominated Honduras to become a recipient of funding from the Alliance for Progress initiative, a 10-year, multi-billion dollar aid program designed to improve U.S. relations with Latin America. During the 1980’s, Honduran President Roberto Suazo Cordova allowed President Ronald Reagan to utilize Honduras as a base for U.S. sponsored counterinsurgency operations. In 2019, Honduras’ gross domestic product was just over $24 billion with U.S. goods and services trades totaling an estimate of over $12 billion. Tensions momentarily flared in June 2009 when the Honduran military overthrew the democratically-elected administration of President Manuel Zelaya Rosales. Though President Obama initially condemned this to be “illegal,” then Secretary of State Hillary Clinton did not call for a restoration of the overthrown government but rather validated – through her display of apathy – the farce elections that would eventually cement the National Party for twelve years.

The relationship between these two governments over this period of time has established some very concerning precedents. In 2015, a wave of protests denouncing government corruption swept through Guatemala and Honduras, eventually leading to the resignation of a Guatemalan president and vice-president. While not directly implicated in a scandal regarding the siphoning of hundreds of millions of dollars from the country’s social security institute, Hernández would go on to admit, during an interview with Reuters, that his electoral campaign received money that originated from this scandal without initially recognizing this. The pressure from civil society did not achieve their desired change in government, only the establishment of an international anti-corruption commission, the Mission to Support the Fight Against Crime and Impunity in Honduras (MACCIH), with the help of the U.S. and the United Nations.

Juan Orlando Hernández was first elected into office in 2013 for a single four-year presidential term. Though he went on to strengthen his country’s armed forces by creating two new security forces, he weakened democracy as these efforts would prove to be smokescreens that would ultimately fail to conceal his true authoritarian lust for power. President Hernández presided as President of the Honduan National Congress that unjustly sacked four-fifths of the Supreme Court in two years before becoming president. In 2015, the new appointees approved a modification to the amendment in the Honduran Constitution that explicitly outlawed re-election and thus enabled President Hernández the ability to run once more. The 2017 presidential election was marked by a series of irregularities and violence. Social unrest was prompted by the electoral commission’s voting system shutting down for ten hours after displaying Hernández trailing his opponent by more than five percent. It took three weeks for the electoral results to become finalized and it took the Trump administration only five more days to recognize this controversial electoral victory as legitimate. The White House’s actions signified that immigration deterrence, rather than democratic values, constitutes the true concern of this diplomatic relation.

Perhaps the most condemnable event related directly to the Honduran head of state was the arrest and criminal trial of his younger brother in the United States. In March 2021, Honduran Congressman Juan Antonio “Tony” Hernández was sentenced to life in prison. The Southern District of New York’s Attorney General’s office stated that “over a 15-year period, Hernández manufactured and distributed at least 185,000 kilograms of cocaine that was imported into the United States.” The media release statement went on to detail how the president’s younger brother utilized members of the Honduran military and national police while President Hernández received electoral campaign funds from Amilcar Ardon Soriano, the second former Honduran Mayor charged with conspiring to import cocaine into the United States. President Hernández has adamantly defended his administration, highlighting his cooperation with U.S. Southern Command counter-narcotic related operations and his authorization of extraditing Honduran officials to the U.S. In the case of his younger brother, he was not extradited but rather detained by the Drug Enforcement Agency at Miami’s international airport.

President Biden is no stranger to Honduras. As one of the leading authors of Alliance for Prosperity, he had to work with Central American leaders and design economic aid programs that would discourage migration to the U.S. It clearly had many shortcomings, considering the slew of international media headlines that continue to document the grim realities of Honduran unaccompanied children and families migrating in the present day. One thing for certain is that back-to-back hurricanes Eta and Iota in November 2020 were not foreseen and in conjunction with the ongoing pandemic, forced more Hondurans to consider leaving their country. In January 2021, the Anti-National Corruption Council published a report on how corruption is a determining factor in Honduran migration, demonstrating how corruption represses access to public services and how the lack of financial transparency promotes the degradation of security, education, health and municipal services. Even during this difficult time for the nation, certain government officials misappropriated millions of dollars in public funds, promising mobile hospitals that did nothing to alleviate the country’s national health crisis. It is possible that this persistent corruption is the reason why President Biden has not yet met with his Honduran counterpart.

Xiomara Castro’s inauguration will take place towards the end of January and U.S. foreign officials have begun engaging with her transition team. The most recent development is the confirmation of U.S. Vice President Kamala Harris’ attendance at incoming President Castro’s inauguration. Juan Orlando Hernández and Xiomara Castro come from two completely different political parties and maintain a very different vision for the future of Honduras. President Hernández rejoiced in the diplomatic approval he received from the United States even as he devalued democracy and the anti-corruption struggle in Honduras. Because of this, Castro not only became the first female Honduran president, but also received the most votes in her country’s history because constituents recognize her willingness to dismantle the bureaucracy that facilitates such impunity. The restoration of trust between these two governments will be critical as their bilateral relationship enters a new era.

January 28, 2022 0 comment

Asia Economics Featured Geopolitics Globalization Print Article The International Economy

Bangladesh: The Cost of Democracy

written by Samriddhi Sapkota

“Bangladesh: The Cost of Democracy” was originally published in our Fall 2021 Print Edition: Authoritarianism.

When Bangladesh gained independence from Pakistan in 1971, most did not expect the nation to become one of the fastest-growing economies in the world. Then-U.S. National Security Advisor Henry Kissinger went so far as to name Bangladesh a “basket case,” as rampant poverty and deprivation made it seem as though the country could never catch up to its neighbors in South Asia. However, notably in the last few years, Bangladesh’s economic growth has given the country an image of unexpected and exceptional success. Before the COVID-19 pandemic contracted economies worldwide, Bangladesh’s GDP growth rates surpassed 7% for four consecutive years, outpacing Pakistan, India, and even China.¹ Even after the onset of the pandemic in 2020, Bangladesh was still able to achieve a 5.24% growth.²

Yet, behind this veil of economic growth, Bangladesh has simultaneously been facing serious challenges to its democracy. Since coming into power, Prime Minister Sheikh Hasina and her party Awami League have been accused of presiding over a slew of human rights violations, including forced disappearances, extrajudicial killings, torture, and arbitrary arrests, including those of political opponents. The government is also considerably intolerant of any criticism or dissent, from both the media and the general public. As democratic institutions deteriorate and the nation slowly slips towards authoritarianism under Hasina, it is becoming clear that Bangladesh’s economic success has occurred despite political developments in the country, not owing to it.

An Economic ‘Miracle’

As Kissinger initially predicted, Bangladesh’s economy heavily struggled in the first few decades of independence. Such was the case that when Bangladesh’s GDP growth rate surpassed that of Pakistan’s in 2006, it was dismissed as a fluke.³ Despite the dire expectations, Bangladesh’s GDP growth rate has continued to exceed Pakistan’s, and since 2020, also exceeds India’s. Bangladesh is now classified as a lower-middle-income economy and is set to graduate from the UN’s Least Developed Countries list by 2026, according to the World Bank.⁴

Bangladesh’s sustained economic growth can be attributed to several factors. One of the most important contributing factors has been the exemplary success of the garment industry, which employs about 4 million people and accounts for 84% of the country’s total exports.⁵ The garment industry has been a vital source of income and employment, particularly for Bangladeshi women. Unlike India and Pakistan, where cultural conservatism has stood as a long-time barrier to female participation, Bangladesh has made incredible efforts to encourage women to participate in the workforce. Since Bangladesh’s independence, the share of women in the workforce has risen from 3% to 36%.⁶ Female participation is especially high within garment manufacturing, as 80% of all workers are women.⁷

A key force for bringing about this effort is Grameen Bank, a renowned NGO that notably decided to give microfinance credits to the senior female member of each household. Investing in the country’s women has proven to be beneficial in many ways. The strides made in educating women and amplifying their voices have helped to redirect household expenditures to child welfare. As such, development factors such as average life expectancy and literacy rates have significantly improved, while malnutrition has decreased.⁸

Remittances have also served as a critical agent in Bangladesh’s growth. Bangladeshi migrant workers, most of whom work as low-skilled laborers in the Persian Gulf, send an average of $15 billion per year in remittances,⁹ accounting for over 6% of the nation’s total GDP.¹⁰ Remittances have proven to be a crucial source of income to ease both poverty and unemployment rates at home. While Bangladesh’s economic growth has seen abundant benefits as a result of these factors, there is also an imminent danger that progress may be reversed due to deteriorating political conditions in the nation’s government.

Politics is A Dirty Game

The decline in Bangladesh’s democracy began during a two-year political crisis from 2006 to 2008, in which a military-backed caretaker government assumed control to address rampant corruption and political tension occurring during the election cycle.¹¹ Under the 13th Amendment of the nation’s constitution, parliamentary elections are overseen by a non-partisan caretaker government that has power over state affairs for the 90 days in which the elections occur. The head of this caretaker government is the Chief Advisor, who is appointed by the President and is typically given to the last retired Chief Justice of the Supreme Court.¹²

During the 2007 election cycle, violence broke out after the Awami League, under Sheikh Hasina, set off a series of protests against the appointment of Justice K.M. Hasan as Chief Advisor. Hasan had a history of affiliation with the Bangladesh National Party (BNP), the Awami League’s main political opposition as well as the incumbent party at the time. The Awami League made claims that the BNP had been attempting to sway the election in their favor to maintain their control over the government.¹³

Because the two parties were not able to agree on a candidate for Chief Advisor, the position devolved to the president at the time, Iajuddin Ahmed.¹⁴ Yet, even President Ahmed was unsuccessful in abating the tension between the two parties to hold the elections. In fact, the Awami League eventually boycotted the elections altogether in early January 2007. The dire situation led military representatives to urge, and ultimately convince, President Ahmed to declare a state of emergency, step down from the Chief Advisor position, and relinquish power of the government.

Under the military-backed caretaker government, several fundamental rights guaranteed under the constitution were suspended and various politicians were arrested on suspicion of involvement in corruption.¹⁵ This included Prime Minister Sheikh Hasina, who was arrested on charges of extortion, as well as former Prime Minister Khaleda Zia, head of the BNP, who was arrested on charges of corruption. Hasina was eventually released on parole in 2008 and went on to run in the 2009 elections after the military had relinquished power over the caretaker government. Prime Minister Hasina and the Awami League went on to win a landslide victory, winning 288 of the 300 seats in parliament, though this came along with widespread accusations of voter intimidation, ballot stuffing, and restrictions on opposition polling agents.¹⁶

The Awami League in Power

Since the conclusion of the 2006-2008 political crisis, the rivalry between the Awami League and the BNP has only intensified. The tactics utilized during the crisis to undermine the elections have not only set a precedent for all succeeding elections but also have enabled the Awami League to maintain its power over Bangladesh.

Since assuming office, Prime Minister Sheikh Hasina has removed almost all checks to her power. Amongst the greatest changes that she has made is her abolishment of the impartial caretaker government in 2011.¹⁷ Hasina claimed that the system was no longer beneficial to the Bangladeshi democracy, for the preceding military-backed caretaker government remained past the three months it was originally mandated. However, many viewed her actions as a method for which she and her party could directly intervene in the outcome of the elections. The lack of a caretaker government intensified political tensions during the 2014 parliamentary elections when the Awami League and the BNP could not agree on the appropriate mechanism to hold the election. As a consequence, the BNP boycotted elections, leaving more than half of the nation’s parliamentary seats uncontested. Voter turnout hit a record low due to the boycott and resulting violence. In the end, the Awami League won 232 of the 300 seats in parliament.¹⁸

Following the 2014 elections, the Awami League has also cracked down on its political opposition. Law enforcement officers have illegally detained, tortured, and killed thousands of activists from the opposition party, many times in secret for weeks at a time before formally arresting them. The government has also jailed many of its political opponents; most notably, the former prime minister and leader of the BNP, Khaleda Zia, was arrested once again on charges of corruption in 2018.¹⁹ This action severely damaged the BNP during the 2018 elections, when the party could not find an alternative candidate to run against Hasina. Consequently, the Awami League was able to once again achieve a landslide victory, winning 288 of the 300 seats.²⁰

Alongside the crackdown of political opponents, the Awami League has also denied freedom of expression and association. In 2018, the government passed the Digital Security Act, granting law enforcement officials to arrest any individual that they believe has been or has the possibility of committing a crime or destroying evidence of a crime.²¹ The law also allows up to 10 years of imprisonment for digitally disseminating propaganda against Bangladesh’s Liberation War, the national anthem, or the national flag. Bangladeshi authorities have utilized the law to harass journalists, activists, and any other individual that criticizes the current government.²² In one case, a writer was arrested, denied bail six times, and finally died in prison when he criticized the Bangladeshi government for its response to the COVID-19 pandemic on his social media.²³

Developments made in women’s rights are also at risk. While Bangladesh’s constitution provides religious freedom, Islamic fundamentalist groups within the country have continuously pressured the government to make strides towards becoming a “theo-democracy.” Particularly, BNP has a deep history of alliance with the Islamist party Jamaat-e-Islami, notorious for encouraging sexual separation.²⁴ Although the ruling Awami League is founded upon the principles of secularism, Prime Minister Sheikh Hasina has, nonetheless, also been seen cozying up to other fundamentalist groups like Hefazat-e-Islam, which does not support the secularism that the Awami League supposedly advocates for.²⁵ Adding onto this is the fact that the increase in women’s participation in the workforce has slowed in recent years. Women’s participation in the workforce increased by an average of 1.7% per year between 2005 and 2010, but that number has decreased to a 0.7% increase since then.²⁶

Looking Ahead…

So what does this shift towards authoritarianism mean for Bangladesh’s economic growth? Given the fierceness of the rivalry between the Awami League and the BNP, and the overall disregard the government has in upholding democratic values, Bangladesh’s economy is at serious risk.

For one, the economic progress that the nation has made, while extraordinary, is not sustainable. Although the garment industry has been successful, extreme dependence on a single category of exports poses a dangerous risk to the economy. If any nation that imports garments were unable to continue purchasing from Bangladesh, the industry as a whole would suffer significant losses. Moreover, remittances are dependent on the availability of work for migrant workers. As the COVID-19 pandemic has demonstrated, work availability can decline rapidly according to the job environment. Finally, Bangladesh has faced difficulty in attracting foreign direct investment, which is key for sustainable growth. According to the World Bank, Bangladesh does not perform well in terms of compliance, quality, and reliability, which it considers to be essential for attracting foreign investment.²⁷

The solution to these issues lies in attracting foreign direct investment, which would expedite the process of diversification into more complex products and decrease Bangladesh’s reliance on remittances, but this might be difficult given the political circumstances of the nation. This is because the act of silencing dissent, as the current government has done, often gives way to corruption and cronyism. News outlets may fear to report on suspicious practices, providing those willing to cozy up to the government countless opportunities to find protection despite not necessarily following ethical standards. With such great inequities in the system, the country risks losing all reliability, warding off foreign direct investment, and threatening to stunt the momentum that Bangladesh has accomplished in its economy.

There is already evidence that demonstrates that such inequities exist in the current system. While the Awami League has been silencing its opposition, the party has simultaneously been providing its cronies with various benefits. Those with close ties to the party are easily able to secure bail, even for serious crimes, and are almost guaranteed to win if a case were to go to court. Moreover, the tax code is skewed in favor of rich and well-connected individuals, even though it is intended to depend on consumption rather than wealth. Corruption is so rampant in the nation that Transparency International gave Bangladesh a score of 26 out of 100 in its Corruption Perception Index in 2020, a measure that indicates the level of corruption within the public sector.²⁸

Economic data is beginning to reflect these inequities. The wealth gap has been exceptionally exacerbated by corruption under the Awami League, providing additional evidence that the economy is in jeopardy under the party. Between 2010 and 2016, the income of the richest households increased by a quarter, whereas the poorest household found theirs to decrease by a third.²⁹ Large wealth gaps not only inhibit social mobility and equal opportunity but are also indicative of health and social problems. Nations that have severe class disparities also experience inequalities in public health and education, as these resources are more readily available to the rich than the poor.

Wealth disparity is also associated with lower GDP growth rates in the long term. It is estimated that corruption knocks off an average of two percentage points from Bangladesh’s GDP growth every year.³⁰ Considering the Awami League’s tight grasp on the government and the unjust practices it has utilized to maintain this power, cronyism can only be expected to worsen, leading to greater inequality and larger losses to Bangladesh’s growth.

Democratic Backsliding in Asia

The phenomenon of declining democracy is not limited to Bangladesh, however. This event seems to be a part of a larger trend observable in democracies throughout Asia. While Asia experienced widespread democratization during the 1980s and 1990s, the region has experienced an apparent shift away from democracy and towards rising authoritarianism in recent years. Even while general support for democracy and democratic principles continues to be high, forces such as inequality and elite corruption, domestic polarization, and restrictions on civil liberties are affecting democratic institutions in many contemporary Asian democracies.³¹

As seen in Bangladesh, rising wealth in countries such as Malaysia and South Korea has been accompanied by inequality and corruption. Not only has this led to a decay in the perceived legitimacy of democratic institutions throughout the Indo-Pacific, but it has also encouraged a rise in populist leaders that undermine democratic principles to consolidate power. Domestic polarization is also not limited to Bangladesh. Throughout Asia, polarization is observable across religious, ethnic, and political lines, which has increasingly been used by national leaders for their own political advantages. Lastly, civil liberties, such as freedom of assembly, formation of civil society organizations, religious institutions, and freedom of the press, have been heavily restricted.³² A 2018 study of the civil society sustainability in nine Asian democracies, which included Bangladesh, found that all similarly had recently passed restriction laws on the formation of new NGOs, arrested local activists, and had placed tight restrictions on freedom of speech.³³

This trend is a serious cause for concern for democracy in Asia. Because democratic backsliding has been gradual rather than sudden, it often fails to ignite a call to action from the general public.³⁴ Furthermore, this phenomenon occurs where opposition forces are already weakened by the party in power, which makes it increasingly difficult to gather a majority and fight back against the controlling party. For Bangladesh, this puts at stake not only the rights of its citizenry but also its economic development. The lack of available options to oppose the Awami League means that the Bangladeshi people may completely lose a voice in their government. Simultaneously, if power continues to consolidate under the current government, this leaves the nation’s economic development in grave danger of reversal.

Conclusion

Once dubbed a ‘basket case,’ Bangladesh has dramatically improved its prospects and seen incredible economic achievements for several years. Though the economy has incredible potential, the government’s shift towards authoritarianism leaves the future of Bangladesh’s development extremely vulnerable. Intense political competition between the Awami League and the BNP has produced continuous violations of democratic ideals, a pattern that has now become standard in their fight for political power. This has opened the door for immense corruption, a direct indicator of long-term economic contraction. Furthermore, because Bangladesh’s growth is not yet sustainable, a slide towards authoritarianism means that their economic successes are likely to be reversed. If the government proceeds to undermine its democracy in favor of bolstering the political elite without allowing any space for opposition voices, this will almost certainly come at the expense of all of its economic achievements and future development.

Endnotes:

1. “As It Turns 50, Bangladesh Is Doing Well, Despite Its Politicians.” The Economist, March 27, 2021, https://www.economist.com/asia/2021/03/27/as-it-turns-50-bangladesh-is-doing-well-despite-its-politicians.

2. Vaishali Basu Sharma. “Bangladesh’s Economy: What Did It Do Differently To Ride Out the Pandemic?” The Wire, July 18, 2021, https://thewire.in/south-asia/bangladesh-economy-pandemic-gdp.

3. Kaushik Basu. “Why Is Bangladesh Booming?” The Brookings Institution, May 1, 2018, https://www.brookings.edu/opinions/why-is-bangladesh-booming/.

4. “The World Bank in Bangladesh: Overview.” The World Bank, October 3, 2021, https://www.worldbank.org/en/country/bangladesh/overview#1.

5. Sahid Yusuf. “Bangladesh: Growth Miracle or Mirage?” Center For Global Development, June 16, 2021, https://www.cgdev.org/blog/bangladesh-growth-miracle-or-mirage.

6. “Bangladesh’s Growth Has Been Remarkable, But Is Now At Risk.” The Economist, March 27, 2021, https://www.economist.com/leaders/2021/03/27/bangladeshs-growth-has-been-remarkable-but-is-now-at-risk.

7. “As It Turns 50, Bangladesh Is Doing Well, Despite Its Politicians.” The Economist, March 27, 2021, https://www.economist.com/asia/2021/03/27/as-it-turns-50-bangladesh-is-doing-well-despite-its-politicians.

8. Kaushik Basu. “Bangladesh at 50.” The Brookings Institution, March 26, 2021, https://www.brookings.edu/opinions/bangladesh-at-50/.

9. Jason Beaubien. “They Pump $15 Billion A Year Into Bangladesh’s Economy — But At What Cost?” NPR, June 3, 2019, https://www.npr.org/sections/goatsandsoda/2019/06/03/722085193/they-pump-15-billion-a-year-into-bangladeshs-economy-but-at-what-cost.

10. Sahid Yusuf. “Bangladesh: Growth Miracle or Mirage?” Center For Global Development, June 16, 2021, https://www.cgdev.org/blog/bangladesh-growth-miracle-or-mirage.

11. “Background Note: Bangladesh.” U.S. Department of State, August 2008, https://2001-2009.state.gov/r/pa/ei/bgn/3452.htm.

12. “Bangladesh.” U.S. Department of State, January 20, 2017, https://2009-2017.state.gov/outofdate/bgn/bangladesh/74099.htm.

13. “Background Note: Bangladesh.” U.S. Department of State, August 2008, https://2001-2009.state.gov/r/pa/ei/bgn/3452.htm.

14. ibid.

15. ibid.

16. “Bangladesh Election: PM Sheikh Hasina Wins Landslide in Disputed Vote.” BBC, December 31, 2018, https://www.bbc.com/news/world-asia-46718393.

17. “Bangladesh Ends Caretaker Government Arrangement.” BBC, June 30, 2011, https://www.bbc.com/news/world-south-asia-13973576/.

18. “Bangladesh Election Violence Throws Country Deeper Into Turmoil.” The Guardian, January 6, 2014, https://www.theguardian.com/world/2014/jan/06/bangladesh-election-violence-awami-league.

19. “As It Turns 50, Bangladesh Is Doing Well, Despite Its Politicians.” The Economist, March 27, 2021, https://www.economist.com/asia/2021/03/27/as-it-turns-50-bangladesh-is-doing-well-despite-its-politicians.

20. ibid.

21. “Bangladesh: New Digital Security Act Imposes Dangerous Restrictions on Freedom of Expression.” Amnesty International, September 20, 2018, https://www.amnesty.org/en/latest/news/2018/09/bangladesh-new-digital-security-act-imposes-dangerous-restrictions-on-freedom-of-expression/.

22. “Bangladesh: Repeal Abusive Law Used in Crackdown on Critics.” Human Rights Watch, July 1, 2020, https://www.hrw.org/news/2020/07/01/bangladesh-repeal-abusive-law-used-crackdown-critics#.

23. “As It Turns 50, Bangladesh Is Doing Well, Despite Its Politicians.” The Economist, March 27, 2021, https://www.economist.com/asia/2021/03/27/as-it-turns-50-bangladesh-is-doing-well-despite-its-politicians.

24. K. Anis Ahmed. “Bangladesh’s Choice: Authoritarianism or Extremism.” The New York Times, December 27, 2018, https://www.nytimes.com/2018/12/27/opinion/bangladesh-election-awami-bnp-authoritarian-extreme.html.

25. “As It Turns 50, Bangladesh Is Doing Well, Despite Its Politicians.” The Economist, March 27, 2021, https://www.economist.com/asia/2021/03/27/as-it-turns-50-bangladesh-is-doing-well-despite-its-politicians.

26. ibid.

27. Gladys Lopez-Acevedo and Raymond Robertson. “Stitches to Riches? Apparel Employment, Trade, and Economic Development in South Asia.” The World Bank., https://www.worldbank.org/en/region/sar/publication/stitches-to-riches-apparel-employment-trade-and-economic-development-in-south-asia.

28. “Bangladesh.” Transparency International, 2020, https://www.transparency.org/en/countries/bangladesh#.

29. “As It Turns 50, Bangladesh Is Doing Well, Despite Its Politicians.” The Economist, March 27, 2021, https://www.economist.com/asia/2021/03/27/as-it-turns-50-bangladesh-is-doing-well-despite-its-politicians.

30. ibid.

31. Lindsey W. Ford and Ryan Hass. “Democracy in Asia.” The Brookings Institution, January 22, 2021, https://www.brookings.edu/articles/democracy-in-asia/.

32. ibid.

33. ibid.

34. Nancy Bermeo. On Democratic Backsliding: Journal of Democracy 27, no. 1 (2016): 5-19. doi:10.1353/jod.2016.0012.

January 3, 2022 0 comment

Africa Asia China Economics Featured Globalization The International Economy

Jamaica and China: Finding The Balance

written by Elizabeth Onibokun

Introduction

China’s rising influence around the world has been a subject of concern, particularly for the United States, who continue to fear China’s spreading power over different regions around the world. China’s extensive presence on the continent of Africa is proof of this but in recent years their neocolonialism has slowly made its way to the Caribbean, specifically in Jamaica. Neocolonialism refers to the use of economic and cultural forces in order to exert control over an independent country that used to be a colony. The “neo” in neocolonialism is key due to the fact that it highlights that even in a post-colonial world there are still processes in place that perpetuate these older colonial systems. Unfortunately, in our world, older does not equate to defunct but rather, colonialism has managed to remodel itself into a different form which is extremely insidious and subtle. Instead of using methods like imposing direct military control, neocolonialism utilizes economics as its main source of power. In Jamaica, it is paramount that they try to find a secure balance while being in the midst of a great power struggle between the United States and China.

Belt and Road Initiative

In 2019, Jamaica joined China’s ambitious Belt and Road Initiative (BRI) which is a focal point of the Chinese Communist Party’s foreign policy. It’s a massive global undertaking which pledges investments aimed at developing infrastructure in countries around the world. The BRI has many Western opponents, with countries like the United States, Australia, and Japan forming a counter project which has a similar global infrastructure strategy called the Blue Dot Network. One of the main criticisms of the Belt and Road Initiative is its direct path to “debt-trap diplomacy”. It’s a recently coined term that has been fervently denied by the Chinese but refers to a powerful country purposefully seeking to entrap a borrowing country in debt so they can exert their will over them. It goes hand-in-hand with neocolonialism and unfortunately some critics have claimed that this phenomenon has been seen in major institutions such as the World Bank and the IMF.

Despite Western hesitance, Jamaica’s Minister of Foreign Affairs and Foreign Trade, Kamina Johnson Smith, was a strong proponent for the BRI and believed it to be the perfect step forward for Jamaica. “Such connectivity and the potential it holds can serve as a catalyst for bringing Jamaica closer to [the] attainment of our economic growth and sustainable development goals,” Johnson Smith observed. Jamaica was the tenth country in the Caribbean to join the Belt and Road Initiative following the likes of Trinidad, Suriname, Guyana, Antigua, Barbados, Dominica, Grenada, Cuba, and the Dominican Republic. The amount of Caribbean countries who are signing on to the BRI is a worrying trend for the United States, in large part due to the proximity of the Caribbean to the US. The strategic location of many Caribbean countries seems to be one of the major reasons why China has chosen to invest in the region. Frankly, it’s hard not to draw comparisons between the Cold War of the 20th century and the rivalry between the United States and the Soviet Union. In response to encroachment by the USSR in the Caribbean (which was extremely geopolitically important even then), President Ronald Reagan and his administration launched the Caribbean Basin Initiative in 1983 which opened up US markets to Caribbean markets and provided several trade benefits. It was deemed successful and stimulated the economy of many Caribbean countries. The Hill states that “with an average annual GDP growth of 4 percent per year, development in the Caribbean has significantly outpaced the rest of Latin America since 2002.” Now, nearly 40 years later, China aims to do what the United States managed to accomplish in the 1980’s.

Jamaica at the Center

Jamaica has received more loans from the Chinese government than any other Caribbean nation. Since 2005, the amount has amassed to about $2.1 billion dollars. Jamaica has also received direct investments from China which has accrued more than $3 million into bauxite mining projects and sugar production. Perhaps in a bid to avoid “debt-trap diplomacy” Jamaica has announced that it would stop negotiating new loans from China but that doesn’t mean they’ll end their relationship with them.

This decision to hold on borrowing from China is novel to many countries China has been funneling money into. According to Jevon Minto, a China-Latin American scholar from The Inter American Dialogue, many African countries should follow in their footsteps. The primary motivation for the Jamaican government to freeze on borrowing is so that they can reduce the level of debt the government owes China. It appears to be largely strategic and places Jamaica at the forefront. Unwilling to be threatened by warnings from Washington about Chinese influence, the Jamaican government has made it clear they know exactly what they are doing and the relationships they are intentionally cultivating. After all, the decision to hold on to any new loans was announced in conjunction with several bilateral agreements made between Jamaican Prime Minister Andrew Holness and his Chinese counterpart Li Keqiang. This signifies that this new Jamaican approach is not made because of any malice or repudiation towards the Chinese but rather an interest in changing the nature of the relationship into something more progressive. Minto states that, “Instead of borrowing new loans every year, the government is working with Chinese policy banks to fund multi-year infrastructure projects.” It’s remarkable how much of a consensus there is within the Jamaican government about developing relations with China and not succumbing to the wishes of the United States. High-ranking officials like PM Holness, the aforementioned Minister of Foreign Affairs and Trade, Kamina Johnson Smith and the Jamaican Labour Party as a whole are all in agreement about exercising the sovereignty they have. Even Jamaica’s former ambassador to the US, Richard Bernal, said he is cautiously optimistic about Jamaica’s involvement with the Belt and Road Initiative. Jevan Minto said it best, “When you’re a middle-income country like Jamaica, with so many domestic challenges yet you are not getting access to concessional finances, at 2-3% interest rates as provided by Chinese banks, you find that Washington warnings are scoffed at.”

China is also employing “mask diplomacy” which refers to personal protective equipment (PPE) that China has sent to many countries around the world, especially during the onset of the pandemic when obtaining PPE was extremely difficult. In July 2020, the Chinese foreign minister Wang Yi pledged to extend $1 billion in vaccines to both the Caribbean and Latin America. Whether this was an act of goodwill on the part of China or another attempt to extend their influence, there is no denying that many will be aided by this.

The current Jamaican Prime Minister Andrew Holness, leader of the Jamaica Labour party, managed to establish a strategic framework for an economic partnership with China during a nine day visit in Beijing and Shanghai in November 2019. Here, we can observe how Jamaica is working to reverse the trend of overexploited countries being taken advantage of. Through these meetings, PM Holness was able to lay the groundwork for educational support from China in technology training and building a school’s infrastructure. Also, climate action was another important item on the agenda. China sharing their technology on renewable energy, water security, and environmental management systems would largely help Jamaica advance in the technological realm and establish themselves as political actors within their own right. There have been some criticisms, primarily from local Jamaicans, on how this partnership is playing out. Even with the new construction of highways, most of them remain largely empty. The North South highway was constructed in 2016 and was one of the first major projects completed in Jamaica by a Chinese state-owned company. With the highway comes a pricey toll which makes it extremely inconvenient for daily use. Another problem that has been brought up is the loss of job opportunities for those in industries on the small island nation. Many of the construction projects that have been funded by the Chinese employ a limited number of residents which has been a significant hit against many Jamaican construction industries who have been suffering against the new competition. “The Chinese do not engage Jamaican engineers and Jamaican management on the construction job, they only engage labour,” said Carvel Stewart, a civil engineer and former president of the Incorporated Masterbuilders Association of Jamaica. One of the main selling points of aid from China was the supposed boost to the economy. And yet, many locals are complaining about their sharp decrease in profits and jobs which runs counter to what was supposed to be prosperity and more wealth.

Why Jamaica?

If China has a presence in the entire Caribbean, then why is there a focus on Jamaica? There are a couple of reasons. Part of the motivation behind the BRI is China’s need for natural resources. Bauxite is a sedimentary rock that is common in tropical regions. It is the world’s main source of aluminum and bauxite mining happens to be the second largest industry in Jamaica. The hunt for natural resources isn’t a new thing and is commonly associated with colonialism and exploitation. A previously closed mining facility for bauxite had been closed in Jamaica since 2009 but was purchased in 2016 by the Chinese state-owned Jiuquan Iron and Steel Company (JISCO). Along with it came environmental concerns from locals because dust from bauxite mining can poison drinking water and cause damage to internal organs. JISCO eventually chose to close the mines but they plan to only do so for two years which is quite concerning. Former ambassador to the US, Richard Bernal made sure to highlight that “the residue from bauxite plants have been here since they were established 50 years ago by Canadians and American firms.” Unfortunately, this is yet another harmful colonial legacy.

Location is another important factor in China’s close ties with Jamaica. Not only is Jamaica in close proximity to the United States but it is not too far off from the Panama Canal. The Canal’s shipping importance is extremely key for trade in both the Americas and Asia. Being able to have a base close to such a significant route is highly strategic and China has already attempted to establish a presence. There were originally plans to build a port off of Goat Island (which is off the coast of Jamaica and directly above Panama) where state-owned China Harbour Engineering Company would have led the project. However, building the port would have meant that the island would have to be both levelled and dredged, leaving residents more vulnerable to hurricanes which can be quite destructive in the area. The project was eventually cancelled after mobilization and research from the Conservation Strategy Fund was submitted to the Jamaican government. Let’s hope that the decision sticks.

Conclusion

The relationship between Jamaica and China is a delicate situation because on the one hand you have a country that wants to advance and cement themselves on equal footing with other nations in the world. This is hard to do without aid of some type, and most developed nations in this world would not have flourished without help. The Marshall Plan was a US effort to grant billions of dollars of aid to Western Europe in the disastrous aftermath of WWII and it was immensely successful in building up their economy. If the US is unwilling to do that for Caribbean nations, namely Jamaica, where else are they to turn if they require a boost but China? A country that is projected to become the largest economy in the world. On the other hand however, neocolonialism is just as serious a problem as its predecessor. Just because it evades harsher tactics used in centuries preceding it, does not mean it carries less harm. Trying to slyly entrap former colonies under rule by way of economic means is a harsh cycle that will continue to allow for the subjugation and quelling of their own national agendas. This is not to single out the Chinese and paint them as the villain, but rather meant to highlight that this is the same formula with different actors. How many times throughout history have we seen powerful states using any means necessary to quash the opposition in order to stay on top? My primary concern is the locals who reside on such a diverse and rich land and who are in danger of becoming game pieces on the chessboard of great power competition. My hope is that Jamaica and other countries in the Caribbean continue to make choices that are best for them and cultivate the right relationships that will bring them success and security.

June 8, 2021 0 comment

Africa Economics Globalization International Trade The International Economy

African Debt Sustainability: A Chinese Problem?

written by Katherine Jones

In the past two decades China has invested unmatched resources into the African continent, exploiting underutilized opportunities and markets. China, the world’s largest creditor, has granted 148 billion USD in commercial and concessional loans to African countries, now holding 60% of the world’s poor country debt. As of December 2020, eighteen African countries are at risk for high debt distress, a figure that has doubled since 2013. Evidently, Chinese investment has come at a cost, and it’s one African countries must now pay back with interest.

The Debt Trap

The inherent issue in debt sustainability for developing countries is an inability to pay debts without structural transformation, and the inability to transform economies without huge investments in infrastructure and human capital. This unfortunate predicament places nations in a vulnerable position in which they must accept unfavorable agreements that may leave them highly indebted. For example, the Mombasa-Nairobi railway in Kenya, funded by Chinese investment, loses 9.2 million USD every month. As a result, Kenya has not been able to effectively repay its loan.

The failure of the Mombasa-Nairobi railway, along with similar failed projects, has triggered accusations from the West that the Chinese are engaging in “debt trap” diplomacy, in which one country becomes deeply indebted and loses some degree of sovereignty to its’ creditor. Moody’s, one of the world’s top credit and bond rating agencies, has warned: “Countries rich in natural resources, like Angola, Zambia, and Republic of the Congo, or with strategically important infrastructure, like ports or railways such as Kenya, are most vulnerable to the risk of losing control over important assets in negotiations with Chinese creditors.”

Accusations of “debt trap” diplomacy are supported by the fact that Africa receives a disproportionate share of Chinese development assistance in loans, in comparison to other regions. China invested 18 billion USD in foreign direct investment (FDI) in Latin America in 2017, versus only 3 billion USD in FDI in Africa in 2017. The total amount of all investments in Latin America was 200 billion USD, double that of the 100 billion USD in Africa. Moreover, Africa has nearly double the population of Latin America, making the per capita rate of capital transfers, on average, one-fourth the rate awarded to Latin America. The implication here is that the Chinese are offering proportionally more loans to Africa, whereas more favorable FDI, and higher amounts of assistance in absolute terms, are being directed more heavily to other regions.

Chinese Opacity

However, to suggest Africa’s debt crisis is solely the result of Chinese lending is a gross oversimplification. The reality of the situation is much more complicated and the full picture remains unclear. Before discussing the other factors contributing to debt distress, it’s essential to acknowledge that complete information is not available due to the non-transparent nature of Chinese lending and the Chinese government. According to the Centre for Economic Policy Research, as of 2016, nearly half of Chinese loans may be unreported, a supposed 200 billion USD (Note: 200 billion USD represents hidden debt from all debtors, not just Africa). Further complicating the picture is that the Chinese distribute commercial and concessional (low interest, extended repayment period, often government to government) loans primarily from the same three state run banks: the Export-Import (Exim) Bank of China, the Chinese Development Bank (CDB) and the Agricultural Bank of China (AgBank). Having the same banks make both concessional and commercial loans (rather than development banks making concessional loans, and commercial banks making commercial loans, as in the West), again makes it difficult to determine the exact debt figures. Furthermore, knowing whether a loan is commercial or concessional is vital as it will determine the payment and refinancing options available to the debtor.

How China Does Debt…

The Chinese do not follow international norms for debt defaults and renegotiations, however they do provide debtors options, especially on concessional loans. They have up until this point only canceled interest free loans, for a total of about 3.4 billion USD (out of 148 billion USD total) in 94 separate cases, between 2000 and 2019. Unlike Western countries and international organizations, the Chinese do not cancel entire portfolios of loans, but instead renegotiate each loan on a case by case basis. It is common for Chinese creditors to enter into public private partnerships (PPP) or extend the timeframe of repayment, but uncommon for them to cut interest, principle, or engage in refinancing. Chinese creditors have not taken part in asset seizures or enforced payments through courts up to this point, despite clauses included in loan agreements mandating arbitration.

Yet, there exists a popular misconception that Chinese creditors have repossessed assets. This notion was highly popularized through the media coverage of Sri Lankan port, Hambanthota Harbor’s, transition to Chinese ownership. In reality, Sri Lanka’s predicament was instead exemplative of how debt distress represents a systemic problem within the financial system, rather than solely a Chinese problem.

The port’s sale was not a repossession but a competitive process in which a Chinese company bought a 70% share of the port at market value. Moreover, the Sri Lankan’s inability to repay their loan was not related to irresponsible lending by the Chinese. Chinese loans represented only 10% of Sri Lanka’s total loans and 60% of the Chinese loans were concessional loans. Sri Lanka’s debt crisis actually originated when the country entered “middle income” status and started borrowing high interest commercial loans. By 2017, Sri Lanka had 39% of GDP tied up in high interest debt, including Eurobonds (see Eurobonds section). A similar situation has taken place in Laos, where a Chinese company will now own the majority of what should’ve been the state electric grid. PPPs, such as these, are not particularly beneficial to debtor countries and do not represent poor inclusive growth. Many countries decide to restructure loans instead.

In Africa, the Chinese have historically been charitable in their rescheduling and renegotiation of loans. By the end of 1998, China had rescheduled 2.65 Billion USD worth of loans, sometimes up to 10 times, with only 14% being paid back. China has even restructured debts in healthy economies, restructuring Ethiopian debt when the economy was growing at 8% and Djiboutian debt when the economy was growing at 7.5%. Additionally, China has implemented integral changes to encourage sustainable debt repayment. In some cases, Chinese creditors have mandated that 25% of export revenue from China goes to refinancing Chinese loan payments. As well, the Chinese use a loan insurance agent, Sinosure, that requires existing loans are paid before new ones will be insured.

Both PPPs and debt restructuring are preferable to defaults, which downgrade debtors credit and make it more difficult to attain loans in the future. For this reason, only 22 of the 77 eligible countries have accepted G-20 assistance for debt relief (as of 2020). Many countries prefer to unilaterally negotiate, so they do not lose the market access that they have worked so hard to gain.

Eurobonds: The Real Problem

While Chinese loans are a significant contributor to African debt distress, the greatest contributor may be Eurobonds. Eurobonds are issuance of sovereign debt denominated in a foreign currency. In 2017, 31% of Africa’s debt was denominated in bonds, 17% in China, and only 5% in Paris Club countries (The Paris Club is an association of Western creditor countries). Years of low interest rates in Europe and North America have meant that many African countries can continue to take out greater amounts of debt on the bond market. Ghana, for example, has extracted 1 billion USD in bonds denominated in euros, despite having one of Africa’s worst performing currencies. Twelve countries in Sub-Saharan Africa alone, have taken out 12 billion USD in sovereign bonds. These bonds, unlike government to government loans, cannot be re-negotiated, making them a huge financial liability. In order to mitigate this problem and handle debt in a more sustainable fashion, countries should instead issue debt in their national currencies, which are inherently backed by state assets, and issue them with the greatest possible maturity.

Why Do We Care About Debt?

Yet all this begs the question, why are developing nations allowed to take on unsustainable levels of debt? Well, lenders are incentivized to issue non-viable loans in order to attempt to collect interest, repossess collateral, or exert future political or economic influence. For example, between 1980 and 2017 banks collected 4.2 trillion in interest alone from developing countries. To put this in perspective, this is a greater sum than all the aid given to developing countries in that same period. As well, creditors almost always have more intimate knowledge of the market and the associated risks than debtors. The asymmetrical information and power relationship between creditors and debtors is reminiscent of the gambling colloquialism: the house always wins. With this in mind, it’s curious that the narrative surrounding debt distress is that of shame and irresponsibility on the borrower, rather than on the creditor. Blame should be leveled against creditors, Western, Chinese, or otherwise, that make non-viable loans.

And still there is another underlying premise here to reconsider: What’s so wrong with high levels of debt anyways? High levels of indebtedness, along with lower levels of growth, are becoming the global norm, especially in developed countries. The debt to GDP ratio in France is 98%, in the U.S. it is 104%, and in Japan it reaches an astronomical 237%. These debt figures are greater than most African countries that are considered highly indebted. For example, Djibouti, which is considered at risk for high debt distress by the IMF, has debt at just 77% of GDP.

Developed and developing countries are treated differently with regards to debt for a number of reasons. In developed countries there is a greater sense of consumer confidence in the government’s abilities to pay back their debts. Developed countries often issue debt in their own currency, and most of the debt is held domestically rather than abroad. Regardless, allowing some countries to hold significant debts freely, while assigning stigma to others, reinforces existing inequalities within the global financial system. A double standard such as this may ultimately impede development and cooperation much more than arbitrarily selected benchmarks for “high debt distress.”

May 5, 2021 0 comment

Economics Europe Globalization Society and Culture The International Economy

So you want to be European? A challenge to the perceived success of the European model over the U.S. model in leftist discourse.

written by Katherine Jones

Imagine life in Switzerland: an idyllic alpine country in which gun ownership is legalized, immigration and multilateralism are frowned upon, healthcare is privatized and costly, and military service is compulsory. Staunchly independent and conservative, Switzerland is a right wing paradise. Yet, it is often liberal politicians and voters that yearn for a more European America, citing the success of “democratic socialism” in European societies. However, given the example of Switzerland, albeit extreme, the notion that Europe is necessarily “socialist,” and the success of existing “socialist” policies, should be challenged.

Bernie Sanders, former presidential candidate and arguably the most celebrated socialist in America, stated that the future of American democratic socialism “should look to countries like Denmark, like Sweden and Norway.” The Danish Prime Minister retorted that Denmark “is far from a planned a socialist economy,” and “it is a market economy.” The dissonance here relates to two different definitions of the word socialism. Socialism can connote a system of increased government administration of public goods, rather than private sector administration of public goods, as well as a robust social safety net. Infrequently, socialism can be used to refer to communism, a system of complete government control over the economy. This article will contend with the former, focusing on socialism as European government intervention in the market and social services.

When it comes to economic policy, the Nordic countries of Sweden, Norway, and Denmark, actually have greater economic freedom than the United States and are in this respect even more market driven or “capitalist” economies. A study by JP Morgan Chase, using data from the World Bank, found that on average these nations have a greater degree of business freedom. Greater business freedom means these economies protect property rights more aggressively, exercise less control over private enterprise, allow for greater concentration in the banking sector, and distribute a smaller share of total earnings to workers than the U.S.. As well, the Nordics have minimal corporate taxation and no wealth taxes. The U.S. in comparison boasted the highest corporate tax rate in the developed world, 40%, prior to the 2017 Trump tax cut, at which point the corporate tax rate was slashed to 21%, still above the European average. The reputation of high taxes in Nordic countries comes from the high value added taxes (VAT), similar to sales taxes, which are in their nature, regressive taxes. VATs disproportionately impact the lower and middle classes because these groups spend a higher proportion of their income than the upper class does. Thereby, it is the lower and middle classes which finance the generous social safety nets present in these countries. The essential takeaway here is that operation of the economy is extremely market friendly, and social benefits are being paid for not by the wealthy or corporations, but by their beneficiaries.

Yet these bountiful social safety nets, rather than actual economic policy, are generally what politicians and everyday people mean when they refer to European socialism. It is undeniable that in the Nordic countries, as well as Europe more generally, there are greater government transfers as a share of GDP. This takes the form of free or low-cost college, healthcare, child care and favorable unemployment benefits. However, these policies come at a cost. Not only are they financed primarily by the middle class as aforementioned, but these social programs are sometimes inefficient or even ineffective in comparison to alternatives.

For example, the European healthcare system, enviable for it’s widespread accessibility, is unfortunately often not the same quality or even necessarily always more cost effective than the U.S.. The healthcare policies in Europe range from country to country, from nationalized systems to health care mandates similar to the Affordable Care Act (ACA). However, the perception of healthcare as “free” is a fallacy across the board. In Sweden, where healthcare is significantly nationalized, average out-of -pocket cost is 15%, the U.S. average in contrast is 11%. In other European nations, such as the Netherlands, which have mandates similar to the ACA, they end up paying less than nationalized systems, 11% out of pocket as well. Moreover, the problem with single payer healthcare, especially in larger and more diverse economies, is that the health systems do not reach a satisfactory quality, so citizens end up bearing a double burden of paying for the nationalized system through taxation and private healthcare when they get sick. In France for instance, 95% of the population has private insurance to help pay the deductibles and copayments of the public system. In the UK, 11% of citizens have private insurance in addition to public insurance in order to gain faster access to specialists and elective procedures such as hip replacements. Commendably, nearly all European countries provide some form of universal basic coverage, yet to say a “medicare for all” system reflects the European model is inaccurate.

European universities present a similar story. While they are more authentically “free” than healthcare, they sometimes can not provide the same quality of education or versatility of degree as an American university. American universities’ high tuition (though arguably exorbitant), allows them the financial resources to attract the best faculty, research, technology, and top students from around the globe. Eight of the ten best universities in the world according to 2021 U.S. News’ edition of Best Global Universities, are in the United States. The London-based Times Higher Education, placed 16 of the World’s top 25 universities in America and the Shanghai-based Academic Ranking of World Universities placed 18 of the top 25 universities in America. The high costs of healthcare and education in the United States, while admittedly having distinct disadvantages, make U.S. institutions world class.

And can the United States afford these costs? Yes. The American middle class is comparatively richer than the European middle class. Even after the significant costs paid in the United States for healthcare, education, child care, etc. the average disposable income of Americans is much higher than Europeans. In fact, the United States has the highest average disposable income of any OECD country. The United States is also among the most highly ranked when it comes to housing and employment opportunities, not to mention more consistent and robust GDP growth, while Europe lags with stalling competitiveness.

Europe could possibly improve GDP growth and international competitiveness through decreasing state spending and encouraging the private sector; the direct antithesis to their “socialist” reputation. Sweden has successfully done this before. In the period the 1970s to the 1990s, Sweden had a much more “socialized” economy. During these years the country’s growth lagged far behind most other OECD countries. In 1990 and 1991, Sweden introduced tax cuts and business incentives to boast the economy, which was highly effective and allowed for the regionally impressive growth and economic strength that is present today. However in this period inequality in Sweden also rose significantly, the highest percentage growth in inequality in the world at the time, yet it was matched by a boast in the overall economy. This is not to say that cutting social programs and taxes will always increase productivity and growth, or that the increase in growth will be distributed fairly, but simply that there is a trade off with growth and productivity on one side and government social benefits on the other. Each country must decide where they feel comfortable within this trade off and what sacrifices they are willing to make. It seems that Americans want the lifestyle of southern Europe, the social benefits of northern Europe, at the level of prosperity of the United States, which is unrealistic.

However even if the U.S. wanted to accept the bargain of low growth for benefits, many European countries are able to maintain these systems based on historical and institutional reasons that would not apply to the United States. Europeans are capable of having expensive social programs in part because of their reliance on American defense spending. As of 2017, the United States contributes a greater proportion of GDP to NATO than any other country at 3.3%. 23 of the 28 countries in NATO fail to meet even the 2% of GDP goal. Many former presidents inducing George W. Bush and Barack Obama took issue with this, with Obama stating “Free riders aggravate me.” As well the comparatively smaller size of European countries allows for more centralized and efficient government distribution of benefits. Not to mention some countries, like Norway, have become very wealthy through natural resource extraction.

All of this is not to reflect a personal political agenda, in fact quite the opposite. I do not advocate for cutting social safety nets, but it must be acknowledged that these safety nets, aside from their many quality of life benefits, often fuel costly and inefficient bureaucracies and hurt international competitiveness. It is even more important to remember that the U.S. is not, and never will be, Europe. We shouldn’t strive to blindly emulate an imperfect system especially in a country facing such different conditions.

Additional Discussion….

A quick digression to social and political issues; it is often argued that Europe’s political spectrum is shifted further to the left than the U.S.. However, on social issues such as the legalization of gay marriage many European nations lagged behind the U.S.. Germany didn’t legalize gay marriage until 2017, and gay marriage is still illegal in large European countries such as Italy and Greece. Abortion similarly is not universally accessible in Europe, and some countries have only just recently legalized it. Ireland, a county with a strong religious tradition, most notably legalized abortion in 2018.

Politically, Europe has suffered from the same issues with right wing populism and xenophobia as the U.S.. From the infamous Brexit protest vote, to the rise of right wing governments in Austria, Italy, and other large countries, attitudes in Europe have been increasingly conservative. The illusion that the far left holds control in Europe may be attributable to many countries’ parliamentary systems giving fringe political parties a voice. Overall, Europe has a diverse array of political landscapes from country to country and region to region. Just like the U.S., Europe as a monolith cannot be characterized as necessarily liberal or conservative.

February 17, 2021 0 comment

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