The march of isolationism

Revenge of the rich

Author: Sunita Narain

Trump's election reflects the anger of the rich who did not get richer. This inequity is also at the core of the climate change challenge

What does the ascension of Donald Trump to US presidency mean for climate change? Also, what does Trump mean for our inter-connected and by now highly globalised world?

Let’s discuss climate change first. As my colleague Chandra Bhushan argues so forcefully in this issue (see ‘Why the US should quit the Paris Agreement’,), firstly, Trump is not the only climate denier in the US. All Republican nominees and even Democratic candidate Hillary Clinton avoided using the “C” word during the election campaign. But there is no doubt that President-elect Trump is of another shade of this grey. He denies climate change is happening, though recently he said to CNN that “humans have some connectivity” on climate change. He is certain that the US needs to dig more coal, build more power plants and do everything to ramp up production, which will increase greenhouse gas emissions. So, he is bad news for climate change.

But this is not new. As Chandra Bhushan says, the US has invariably made the multilateral world change rules; reconfigure agreements, mostly to reduce it to the lowest common denominator, all to get its participation. Then when the world has a weak, worthless and meaningless deal, it will walk out of it. All this while, its powerful civil society and media will hammer in the point that the world needs to be accommodating and pragmatic. “Our Congress will not accept” is the refrain, essentially arguing that theirs is the only democracy in the world or certainly the only one that matters.

This happened in 1992, when in Rio, after much “accommodation” the agreement to combat climate change was whittled down, targets were removed and there was no agreed action. All this was done to bring the US on board. But it walked out. Then came the Kyoto Protocol, the first and only framework for action to reduce emissions. Here again, in December 1997, when climate change proponents Bill Clinton and Al Gore were in office, the agreement was reduced to nothingness—the compliance clause was removed, cheap emission reduction and loopholes were included. All to bring the US on board. Once again, they rejected it.

Then came Barack Obama and his welcome commitment to climate change actions. But what did the US do? It has made the world completely rewrite the climate agreement so that the targets, instead of being based on science and contribution of each country, are now based on voluntary action. Each country is allowed to set targets, based on what they can do and by when.

It has led to weak action, which will not keep the Planet’s temperature rise below 2^oC, forget the guardrail of 1.5^oC. This was done to please the Americans who said they would never sign a global agreement that binds them to actions or targets. Paris fatally and fundamentally erased historical responsibility of countries and reduced equity to insignificance. This was done because the US said this was the redline—nothing on equitable rights to the common atmospheric space could be acceptable.

Also, the Centre of Science and Environment’s analysis of US climate change action plan in the report, Capitan America, showed that even under Obama the proposals were business as usual.

This is when the world tiptoed around equitable rights, was bent out of shape and scraped the bottom of the barrel. Now the US will even walk out of this. Chandra Bhushan, then, rightly asks: is it time we thought of a world agreement without the US?

Let’s now turn to what the Trump era means for globalisation. It was in the 1990s that the world stitched the global trade agreement and made rules for free, unfettered movement of goods. It wanted an interconnected world, where cheap labour could be used to enhance corporate profits. It got this. The two decades that followed saw the amazing rise of China as a provider of these goods; it also saw consumption increasing manifold. It was also in the 1990s that this same world agreed that there was a need to moderate economic globalisation so that climate change could be mitigated. This was ecological globalisation, its counter to economic globalisation. But it failed.

Trade won over climate; consumption won over emission control. The success of economic globalisation showed up in the balance sheet of emissions: the carbon dioxide (CO₂) emissions of the rich who gobbled up these goods did not decrease and the CO₂ emissions of the countries who manufactured these increased. The Planet was fried.

This is where we are today. We have Trump, who openly denies climate change and has won elections. A large majority stands with him. Calls for protectionism are growing in this already rich world. The UK’s Brexit vote is also a testimony to this anger. It is the revenge of the rich, who did not get richer. It is the revenge of the educated; the well-off who believe they are entitled to more and that this is being taken away from them by “others”. This is also a time when the already developed world, which has long exhausted its quota of the global atmospheric space, wants to burn more fossil fuel for its growth. It believes it is growth-deprived.

The key reason for all this is the fact that globalisation increased inequity. This is at the core of the problem today. This is also the core of climate change—ultimately, if emissions are linked to economic growth, then the question is how this growth will be shared between people and between nations. Economic and ecological globalisation are about making rules that benefit people and the Planet, not in ways that some get richer or that we blow up the Planet. This is what we need to work on in the present world. But this demands a change in the narrative. For too long, the two discussions on growth and climate change have been separated. For too long, we have been told that we cannot discuss the issues of equitable growth and equitable allocation of the carbon budget. This is what needs to change.

But for this, for once, let’s move beyond shadow-boxing. The election of Trump should teach us that the divisions are deep; the crisis is real. It is time to wake up. Otherwise, we will be in denial. And the climate deniers will have the last laugh.

Is the free market losing its buyers?

Trump's victory shows growing discomfort with globalisation

Author(s): Richard Mahapatra and Subhojit Goswami

The developed world’s poorest country—the United States of America (USA)—has voted for its new president. The victory of Donald Trump was unexpected. But the anger that fuelled his victory was very much expected, and sends out a clear message. It questions the free market model of economy that has been the only model in existence for more than half of the world’s population.

Championed by the developed world, the free market economy has been under scrutiny since 1990. But developments in the aftermath of the recession of 2008 show that countries are increasingly losing interest in this model of economy. The recession wiped out 13 per cent of the global production and 20 per cent of the global trade. In fact, its impacts are still being felt across developed countries. Britain’s surprise vote to leave the European Union (Brexit) was the biggest reality check on the efficacy of globalisation, while high unemployment in Spain and severe economic crisis in Greece that led to adoption of austerity measures across the countries were wake-up calls. Opinion poll after opinion poll, including the one from the Pew Research Center, a Washington-based fact tank, suggests that many European countries want to follow in Britain’s footsteps and exit the European Union to pursue their sovereignty over decision-making and economy.

This sentiment was reflected during the US presidential election campaigns when unusual reports filled the newspapers. “Nobody is talking about the 43 million poor of US”. “Voters can’t buy bus tickets to go to the poll station”. “USA just closes its eyes to the inequality”. Then there were the kind of slogans Trump made: Stop outsourcing American job to India and China; Deport illegal migrants from the country. The campaign slogans had an uncanny similarity with those made in developing countries: free the market economy; create jobs for the locals; eradicate poverty. This is the reason Trump won, even though he has accumulated his fortune by reaping the benefits of free trade.

For the world yet to overcome the Brexit shock, Trump is just a rude reminder that there is some fundamental problem with the free market model. “Donald Trump’s victory should serve as a lesson for Europe’s mainstream forces ahead of their own ballots next year. Politics as usual just does not work on both sides of the Atlantic. Clearly, people are not feeling they profit from the benefits of globalisation and free trade,” says Anthony L Gardner, the US ambassador to the EU.

The victory of Trump also indicates that the developed world now struggles with the third world problems. Its economies are in tatters; inequality is further widened, with a handful of people amassing the major chunk of profits generated out of a free market; and human development indices have declined sharply.

For example, in the US the per capita GDP grew by 14 per cent between 2001 and 2015, but the average wage grew by only 2 per cent. An analysis by the McKinsey Global Institute shows that the real incomes of about two-thirds of households in 25 advanced economies were flat or fell between 2005 and 2014. The situation was the worst in Italy, where 97 per cent of the middle-class saw stagnant or declining take-home pay. In USA, the figure was 81 per cent. About 193 million people, or one-third of those whose income has not been advancing, express negative opinions about free trade and immigration.

The possibility of creating the world’s biggest free trade market now looks bleak due to this rising discontent against economic liberalisation in developed countries. The proposed Transatlantic Trade and Investment Partnership (TTIP) between the EU and the US, dubbed one of the most ambitious free trade accords ever attempted, has attracted opposition in Europe as voters have grown doubtful of the benefits of globalisation. The victory of Trump, who has pandered to the anti-globalisation sentiment, is likely to result in the demise of the deal. He has already vowed to withdraw the US from another free trade agreement, the Trans Pacific Partnership that covers 12 countries, on his first day in office. “Instead, we will negotiate fair, bilateral trade deals that bring jobs and industry back onto American shores,” Trump said while unveiling plans for his first 100 days in office.

Small wonder that immediately after the US presidential elections, multilateral financial organisations like the World Bank Group and the International Monetary Fund (IMF), who champion the free market economy, defended the model. Addressing a press conference at the World Bank-IMF Annual Meetings, World Bank Group President Jim Young Kim cited the example of China that has lifted 700 million people out of poverty using the same model of economy. Christine Lagarde, managing director of IMF, was more vocal. On Trump’s idea of getting American jobs by adopting protectionism, she said, “The rhetoric against [free] trade would do harm to the country. I call it economic malpractice.” Just a few months ago, the research department of the IMF had alleged that the proponents of neoliberalism have been over selling the benefits of free market.

Trump had campaigned on a promise to scrap international trade deals that transferred US jobs overseas and flooded domestic markets with foreign goods. His call for “Americanism, not globalism” struck a chord with the white working-class voters at a time when the US was still licking the wounds of the North American Free Trade Agreement (NAFTA), an agreement signed between the US, Mexico and Canada in 1994. NAFTA had resulted in the loss of manufacturing and shipping jobs for the Americans.

Verdict against rising inequality

There is another reason Trump’s brand of protectionism has found takers in USA. Free trade, which served the country for two decades following Europe’s and Japan’s wartime collapse, ensured enrichment of an already rich part of the society. The protectionism, as demanded and upheld by Abraham Lincoln, is now looked upon as a more fitting answer to “exclusionary capitalism” that helped the economic elite reap all the fruits of unrestrained international trade.

Factory work, which was once the backbone of the middle class, is now all but gone. It has been replaced by low-paying service jobs. In 1980, one in five Americans worked in manufacturing units. Now it is one in 12. Ohio now has one-third fewer manufacturing jobs than it had in 2000. Estimates by Massachusetts Institute of Technology economist David Autor show USA lost a million manufacturing jobs to China between 2000 and 2007—this is a quarter of the jobs lost across the US during the period.

Political scientist Francis Fukuyama, who had previously supported the American model of capitalism and free trade, also highlights this fallout of globalisation. “We thought to make the best of globalisation by producing nothing ourselves and offering services instead. This was a mistake. We forgot that socialism never was a big issue in the US, because enough people always managed to move into the burgeoning middle class. Nowadays, this is no longer the case, because they have worked in industries that we have outsourced to countries like China,” he says.

Other than soya beans and corn, which in a highly mechanised agriculture are practically produced without human labour, the US sells services like patents and licences, and technologically sophisticated products like industrial machines, semiconductors, electric apparatus and medical equipment. Unfortunately, high-tech industries and research do not create jobs for the majority of American people. This explains why the Rust Belt (Pennsylvania, Ohio, Michigan and Iowa) has been decisive in Trump’s victory. These are the states where working class people and union workers have seen deindustrialisation and manufacturing decline.

A study by the Pew Research Center finds that 65 per cent of Americans agree that the gap between the rich and the rest has widened in the last 10 years. In 2013, the median wealth of the nation’s upper-income families ($639,400) was nearly seven times that of middle-income families ($96,500), the widest wealth gap seen in 30 years when the Federal Reserve began collecting these data.

Obviously, the US is no stranger to the trend of rich dictating the political agenda, financing the candidates who protect their interests and ensure that the laws are in the interest of the corporate. The six-month-old Dakota Pipeline Access protest is the most recent specimen. Despite hundreds of indigenous people upping their protests against this proposed pipeline, Kelcy Warren, the chief executive officer of Energy Transfer—the promoter of the project—says, “I am 100 per cent sure that the pipeline will be approved by a Trump administration.” In June, Warren donated US $100,000 to the Trump Victory Fund and another $3,000 to the Trump campaign.

So, American political scientist Larry Bartels was not off the mark when he recently said the US senators are five to six times more likely to listen to the interests of the rich than to the interests of the middle class. “There is no discernible evidence that the views of low-income constituents had any effect on their senators’ voting behaviour,” Bartels said. Economist Joseph Stiglitz says from the 1980s until 2007, deregulated capitalism in the US brought greater material wellbeing only to the very richest in the richest country of the world (see ‘How Trump happened’). “Over the course of this ideology’s 30-year ascendance, most Americans saw their incomes decline or stagnate year after year,” says Stiglitz.

“There are many Americans who work two jobs to make ends meet,” says Hershey Friedman, professor of Business at Koppelman School of Business, Brooklyn College. “One of my friends, a college professor, is having trouble paying his rent and is heavily in debt.

He is considering working at night driving a cab. There is a large number of people like that in the US. They are opposed to an economy slanted to benefit the rich,” Friedman says.

Increasing inequality and stalled growth in the wake of global financial crisis are also the reasons most nations in Europe seem to denounce the ideology of free trade. This becomes evident from the rise of anti-globalisation movements and nationalist parties in several countries.

Brexit exposed the anti-EU feelings and anger against the power structures that are alienated from the society and ineffective in tackling global downturn and the Eurozone crisis. The referendum is the result of a realisation that the beneficiaries of globalisation have been powerful corporations, affluent families and skilled and educated workers; the working-class continues to struggle with stagnant wages, job losses and staggering debt. “A UK departure is going to make the entire EU inward-looking and more defensive on globalisation,” says Fredrik Erixon, director of the European Centre for International Political Economy, a policy research think-tank based in Brussels.

In both Europe and the US, the grouse has been evident among older and less-educated citizens whose livelihoods were affected by automation and cheaper foreign labour—two main features of globalisation. Branko Milanovic, a leading economist of inequality, explains in one of his books that the recent surge of inequality in the West has been driven by the revolution in technology, just as the Industrial Revolution drove inequality about 200 years ago.

Rise of restrictive trade measures

Way back in 2011 when the Occupy Wall Street took roots, highlighting inequality and the failure of the economy to meet people’s expectation, the International Labour Organization (ILO) hinted that the growing unrest had an uncanny protagonist: the youth. Currently, the population in the age group of 15-24 is at a historic high. This group has not seen any economic model other than the free market. Comparing the current crisis of unemployment among the youth to the Great Depression, ILO said, “There have been serious financial crises, none have been as deep, as prolonged, and as globally contagious as the current crisis.” It also indicated that a generation is growing up without access to the labour market, further precipitating the crisis. It is no surprise that a majority of Trump’s voters are less educated unemployed youths.

Growing unemployment is one of the reasons most developed countries are resorting to economic protectionist measures. The WTO report, which analysed restrictive trade measures between mid-October 2015 and mid-May 2016, says the G20 economies have introduced new protectionist trade measures at the fastest pace since 2008 economic recession. “G20 economies applied 145 new trade-restrictive measures—an average of almost 21 new measures per month, compared to 17 in the previous report,” it states.

Going by the European Commission report, between July 1, 2014, and December 31, 2015, Russia issued the largest number of measures restricting government procurement. Countries, such as Algeria and China, used discriminatory tax measures favouring local businesses. In the field of services and investment, China adopted the highest number of restrictive measures, followed by Indonesia.

China is the EU’s second largest trade partner. But the EU says Chinese exports are flooding European market. Recently, it has taken temporary anti-dumping measures against the imports of Chinese seamless steel pipes. “Europe cannot be naive and must protect its interests, especially when it comes to dumping,” says Peter Ziga, trade minister of Slovakia that holds EU’s presidency.

The European Commission says emerging economies were responsible for 50 per cent of all trade-restrictive measures introduced between June 2014 and December 2015. However, developed countries, including G20 members, also take protectionist measures despite repeated pledges against them. According to European Commissioner for Trade Cecilia Malmström, “Trade protectionism continues to be on the rise worldwide. Open markets are proven to bring more innovation, increased productivity, economic growth and prosperity. Despite this, few barriers to trade have been removed, while new ones have been introduced.”

Though USA is officially committed to free trade, it has limited openness since the 2008 recession. In fact, it has implemented the maximum protectionist measures since 2008. USA had pursued protectionism between the Civil War and the Word War II, before it radically changed its mind in the middle of the 20th Century, when Europe’s industries were largely destroyed, and turned into the follower of free trade to prevent others from protecting their industrial production. The optimism of the first two decades after the World War II is now sagging. Under the Trump regime, it is most likely to tailor its rules to shut out foreign companies from public tenders.

Like Japan, which practised protectionism much to its benefit, the upcoming Republican government in the US is going to be conservative in foreign trade deals and pay heed to Abraham Lincoln’s warning to his countrymen: “I proceed to try to show that the abandonment of the protective policy by the American Government must result in the increase of both useless labour and idleness; and so, in proportion, must produce want and ruin among our people.”

How Trump happened

Widespread anger stemming from the loss of trust in government decided the new presidency of the US

Author : Joseph E Stiglitz

As I have traveled around the world in recent weeks, I am repeatedly asked two questions: Is it conceivable that Donald Trump could win the US presidency? And how did his candidacy get this far in the first place?

As for the first question, though political forecasting is even more difficult than economic forecasting, the odds are strongly in favour of Hillary Clinton. Still, the closeness of the race (at least until very recently) has been a mystery: Clinton is one of the most qualified and well prepared presidential candidates that the United States has had, while Trump is one of the least qualified and worst prepared. Moreover, Trump’s campaign has survived the behaviour by him that would have ended a candidate’s chances in the past.

So why would Americans be playing Russian roulette (for that is what even a one-in-six chance of a Trump victory means)? Those outside the US want to know the answer, because the outcome affects them, too, though they have no influence over it. And that brings us to the second question: why did the US Republican Party nominate a candidate that even its leaders rejected?

Obviously, many factors helped Trump beat 16 Republican primary challengers to get this far. Personalities matter, and some people do seem to warm to Trump’s reality-TV persona.

But several underlying factors also appear to have contributed to the closeness of the race. For starters, many Americans are economically worse off than they were a quarter-century ago. The median income of full-time male employees is lower than it was 42 years ago, and it is increasingly difficult for those with limited education to get a full-time job that pays decent wages.

Indeed, real (inflation-adjusted) wages at the bottom of the income distribution are roughly where they were 60 years ago. So it is no surprise that Trump finds a large, receptive audience when he says the state of the economy is rotten. But Trump is wrong both about the diagnosis and the prescription. The US economy as a whole has done well for the last six decades: GDP has increased nearly six-fold. But the fruits of that growth have gone to a relatively few at the top­—people like Trump, owing partly to massive tax cuts that he would extend and deepen.

At the same time, reforms that political leaders promised would ensure prosperity for all—such as trade and financial liberalization—have not delivered. Far from it. And those whose standard of living has stagnated or declined have reached a simple conclusion: America’s political leaders either didn’t know what they were talking about or were lying (or both). Trump wants to blame all of America’s problems on trade and immigration. He’s wrong. The US would have faced deindustrialization even without freer trade: glo bal employment in manufacturing has been declining, with productivity gains exceeding demand growth.

Where the trade agreements failed, it was not because the US was outsmarted by its trading partners; it was because the US trade agenda was shaped by corporate interests. America’s companies have done well, and it is the Republicans who have blocked efforts to ensure that Americans made worse off by trade agreements would share the benefits.

Thus, many Americans feel buffeted by forces outside their control, leading to outcomes that are distinctly unfair. Long-standing assumptions—that America is a land of opportunity and that each generation will be better off than the last—have been called into question. The global financial crisis may have represented a turning point for many voters: their government saved the rich bankers who had brought the US to the brink of ruin, while seemingly doing almost nothing for the millions of ordinary Americans who lost their jobs and homes. The system not only produced unfair results, but seemed rigged to do so.

Support for Trump is based, at least partly, on the widespread anger stemming from that loss of trust in government. But Trump’s proposed policies would make a bad situation much worse. Surely, another dose of trickle-down economics of the kind he promises, with tax cuts aimed almost entirely at rich Americans and corporations, would produce results no better than the last time they were tried.

In fact, launching a trade war with China, Mexico, and other US trading partners, as Trump promises, would make all Americans poorer and create new impediments to the global cooperation needed to address critical global problems like the Islamic State, global terrorism, and climate change. Using money that could be invested in technology, education, or infrastructure to build a wall between the US and Mexico is a twofer in terms of wasting resources.

There are two messages US political elites should be hearing. The simplistic neo-liberal market-fundamentalist theories that have shaped so much economic policy during the last four decades are badly misleading, with GDP growth coming at the price of soaring inequality. Trickle-down economics hasn’t and won’t work. Markets don’t exist in a vacuum. The Thatcher-Reagan “revolution,” which rewrote the rules and restructured markets for the benefit of those at the top, succeeded all too well in increasing inequality, but utterly failed in its mission to increase growth.

This leads to the second message: we need to rewrite the rules of the economy once again, this time to ensure that ordinary citizens benefit. Politicians in the US and elsewhere who ignore this lesson will be held accountable. Change entails risk. But the Trump phenomenon—and more than a few similar political developments in Europe—has revealed the far greater risks entailed by failing to heed this message: societies divided, democracies undermined, and economies weakened.

Joseph Stiglitz is former chief economist of the World Bank and recipient of the Nobel Memorial Prize in Economic Sciences. He teaches at the Columbia Business School

Get ready for post-globalisation era

Trade, climate change and the role of multilateral development banks are critical areas

Author : Montek Singh Ahluwalia

The election of Donald Trump as US President, coming after the Brexit vote, is widely seen as a thumbs down for globalisation. Herewith some comments on implications for trade policy, climate change and the role of multilateral development banks.

Trade policy

The most immediate worry relates to global trade. A slowdown is already under way and pessimists worry that if the threat to raise tariffs, which was mentioned in the campaign, is implemented, it may trigger a Smoot-Hawley-type process, precipitating a severe downturn as happened in the inter-war years of the last century. Things may not turn out as bad, but a fresh protectionist turn in the US will have a negative effect on the global economy which will affect us as well.

Industrialised countries have turned against globalisation because of the perception that it has hollowed out manufacturing and shifted jobs to developing countries. The perception is exaggerated: some jobs may have been offshored, but other jobs have been created, and more could be created if industrialised countries were to undertake the reforms to restart growth and re-skill their labour. From our perspective, the key issue is whether we should remain open or respond by turning inward.

There are good reasons for us not to turn inward. The US, Europe and Japan are likely to have a continuing comparative advantage in the development of new technology, but to sell the products embodying these technologies in world markets, each industrialised country has to be as competitive as possible and it helps them to exploit the lower manufacturing costs in developing countries. There is much talk of robotification and 3D printing reducing labour costs in industrialised countries and thereby shrinking global value chains (GVCs). The technology has indeed advanced impressively, but it is not clear that it would be sufficiently cost- effective to offset the lower costs of skilled labour in developing countries.

If GVCs are here to stay, even if they expand less aggressively, it follows that we need to position ourselves to derive full benefit from them. Sceptics will be quick to point out that we have not benefited as much as other developing countries from the growth of GVCs in the previous decade, but this is largely because we have not implemented policies that would make us competitive. The policy lesson for us is to focus on overcoming these disadvantages rather than turning our back to continued openness. This is strengthened by the fact that Asia is the part of the world most likely to experience rapid growth, and this region is likely to remain open and pursue trade integration. We should plan to be part of the Asian growth story and encourage deeper trade integration with the other fast-growing Asian countries, including China.

Early conclusion of the Regional Comprehensive Economic Partnership (RCEP) agreement would send the right signal at this time. Unfortunately, the Indian industry has been lukewarm about our regional integration efforts, and some parts of it have even opposed the steps taken. Industry needs to reconsider its position in terms of what is in its longer term interest. They should work harder to persuade the government to remove impediments to our competitiveness, rather than argue for higher tariffs on the assumption that these impediments are here to stay.

We also need to rethink our strategy in the WTO. Trade negotiators have to fight hard to protect national interests, but successful negotiations are also a matter of give and take. Unless industrialised countries can present the outcomes to their domestic constituencies as providing a gain from their perspective, they will marginalise the WTO and push for plurilateral negotiations outside it. This is what led to the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership, but as these agreements appear to be stalled, there is a window for showing progress in the WTO. We should review our position on ongoing WTO matters, such as trade facilitation, government procurement, the Information Technology Agreement II and the Trade in Services Agreement. We often act in the WTO on the assumption that we should resist any narrowing in our “policy space” but there may be a good case to change domestic policy where it has become the source of compe titive disadvantage.

Uncertainty over climate cooperation

President-elect Trump had said in the campaign that he would scrap the Paris Agreement and this is causing much worry among those fighting against climate change. Unlike trade policy, where the Republican Party can be expected to exert a moderating influence on unnecessary reversals, there is no such restraining element on climate change. Many in the Republican Party are climate change deniers and the fossil fuel lobby is strong.

The Paris Agreement has many shortcomings. Nevertheless, it is important because it broke the earlier impasse in the UN Framework Convention on Climate Change and got all the countries on board. It was hoped that as momentum developed it would be possible to improve the agreement in subsequent reviews. A US withdrawal will undoubtedly interrupt the momentum of global cooperation on climate change. It will also create uncertainty about policy in industrialised countries, slowing down investment in the development of green energy technology. It would also put paid to hopes of mobilising financial resources to help developing countries make the transition.

There is not much India can do to counter this development other than urge our point of view in bilateral discussions and use the G20 forum, now chaired by Germany, to persuade the new US administration to stay the course.

World Bank for sustainable development

A major problem facing developing countries today is the need to invest massively in building sustainable infrastructure that will moderate the energy requirement and therefore the GHG consequences of future growth. The additional investment needed in developing countries on this count is estimated to be between US $1 trillion and $3 trillion per year between now and 2030. This covers investment in new green energy sources (solar, hydro and wind) plus the associated balancing investments. It includes investment in energy-saving urban infrastructure and transport systems.

Multilateral development banks (MDBs), such as the World Bank and the Regional Development Banks, and also the New Development Bank (BRICS Bank) and the China-sponsored AIIB, can all play a critical role in supporting investments in these areas. They can provide technical support in project design and also in devising the policy framework needed to incentivise the shift. They can contribute directly to financing a part of the project. Given the scale of the challenge, private investment in the form of public-private partnerships will be necessary. This calls for an assurance to the private investor that the policy framework is conducive to private investment and that policy will be stable over the life of the project. The involvement of MDBs in financing these projects even in a limited way will help reduce risk perception in the private sector and be an assurance against whimsical policy changes.

The G20 had, in the past, called upon the World Bank to prepare specific proposals on how MDBs can help in this area. No credible proposal has emerged thus far, but with the World Bank President having just been elected to a second term, it is opportune to push for concrete action.

A recent report by the Center for Global Development has recommended that of the $3 trillion additional investment that may be needed annually in developing countries, $200-250 billion should come from all MDBs taken together. The current flow from these institutions for infrastructure is about $50 billion per year. The biggest contributor is the World Bank and it must play its part in meeting the enhanced target for MDBs. Indeed, it must give a lead. An increase of the order required will only be possible if the major member countries agree to a large increase in the World Bank’s capital, along with a clear mandate to develop a work programme for action in this area.

Industrialised countries have been reluctant to expand the capital of the World Bank. They say there is no shortage of funds from the capital market and the real constraint is the absence of well-prepared projects and a credible policy framework that would attract private funds. The case for greater involvement of the World Bank arises precisely because its involvement can help in both the areas. World Bank lending would not substitute for private flows—it would, in fact, leverage them. The need to push in this area is all the greater if climate change negotiations run into difficulties, especially in the area of mobilising finance. Once again, the G20, under the German presidency, is the logical forum to push these ideas.

Montek Singh Ahluwalia is former deputy chairperson of the Planning Commission of India

There was thirst for an outsider

People thought of Trump as an instrument to fix the establishment

Author : Ashis Nandy

Despite having an impressive resume and an illustrious political career, Hillary Clinton lost to Donald Trump, a rank outsider whose intemperate comments and other stunts were lambasted by the liberal camp. So, how could this billionaire Republican script one of the major upsets in the history of US elections? If you think Trump is a spoiler, then you have to know that there was thirst for an outsider in the system. People thought of him as an instrument to fix the establishment.

Post-electoral analyses suggest that Trump’s message was more resonant than Clinton’s as he focussed on trade and immigration. While the Democrats sneered at Trump’s socialist promises of nixing international trade deals and reclaiming manufacturing industry, the often-neglected Americans drove him to the White House.

Every establishment is run on the basis of rationality and organisation. You have to fight that rationality within the establishment. For some people, Hillary is rational and Trump is not. But not many realised the need to challenge this rationality. We have to be suspicious of the rationalist structure that drives a government and its economy.

Trump had chosen to speak about economic nationalism instead of globalisation; he preferred isolationism to interventionism and voiced in favour of job growth-oriented economy rather than jobs export-oriented economy. Many have started to think that his economic policies may see a collapse of the “bourgeois democracy”. While the victory of an authoritarian Republican leader has kindled hope of fighting neoliberalism and welcoming protectionism, does that also mean that a form of authoritarian capitalism will ensue?

We have examples of countries where authoritarian capitalism triggered development. If you look at East and Southeast Asia, stellar economic growth was achieved during the regime of Syngman Rhee (South Korea), Ferdinand Marcos (the Philippines), Mahathir Mohamad (Malaysia) and Lee Kuan Yew (Singapore). All of them endorsed an authoritarian form of capitalism. You cannot separate it from development. These Asian tigers, whom I also call man-eaters, thought that an authoritarian structure will help them actualise their development dreams.

But this form of tradition comes with a caveat. There is no place for human considerations. No one asks where will the indigenous and poor people go? How will they be affected?

The modern Western civilisation is blinded by the assumption that it is the vanguard of future. It does not realise that no human construction is perfect and all human constructions are open to criticism. There was a belief that the vision of enlightenment can be actualised through Western colonisation. No radical thinkers could identify this arrogance of Western civilisation. They say “man is the measure of all things”, but this homocentrism is ultimately self-destructive. If we think of the West, they are largely dependent on defence and other sophisticated technologies. This, itself, is anti-people, anti-life and anti-future. You have to realise that technology cannot solve all problems.

Trump has tapped into the anger of millions of people who are jobless, marginalised and displaced, and he has promised to return the sovereignty to America. But it is to be seen how his economic policies impact the society. He believes that environmental concerns are all hoax. This is where he has to distance himself from that arrogant assumption that the edifice of laws and the diplomatic processes that his government builds will lead to historical progress. You need a new way of looking at the world. It’s an age of compassion and humanity that requires a different form of consciousness and a different type of schooling.

(Based on a conversation with Subhojit Goswami) Ashis Nandy is an Indian political psychologist, social theorist and critic who has written extensively on European colonialism, development and modernity

We are a voice to you; you have been a support to us. Together we build journalism that is independent, credible and fearless. You can further help us by making a donation. This will mean a lot for our ability to bring you news, perspectives and analysis from the ground so that we can make change together.