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2017 — A Thunderous Clash of Politics, Economies and Policies

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Yet another new year has dawned.   But 2017 will be a year like no other.

There will be a thunderous clash of policies, economies and politics worldwide.   We will therefore be on a roller-coaster ride, and we should prepare for it and not only be spectators on the side-lines in danger of being swept away by the waves.

With his extreme views and bulldozing style, Donald Trump is set to create an upheaval if not revolution in the United States and the world.

He is installing an oil company chief as the Secretary of State, investment bankers in key finance positions, climate sceptics and anti-environmentalists in environmental and energy agencies and an extreme rightwing internet media mogul as his chief strategist

US-China relations, the most important for global stability, could change from big-power co-existence with a careful combination of competition and cooperation, to outright crisis.

Trump, through a phone call with Taiwan’s leader and subsequent remarks, signalled he could withdraw the longstanding US adherence to the One China policy and instead use Taiwan as a bargaining card when negotiating economic policies with China.  The Chinese perceive this as an extreme provocation.

He has appointed as head of the new National Trade Council an economist known for his books demonising China, including “Death by China: Confronting the Dragon”.

Trump seems intent on doing an about-turn on US trade and investment policies, starting with ditching the Trans Pacific Partnership Agreement and re-negotiating the North American Free Trade Agreement.

Other measures being considered include a 45% duty on Chinese products, extra duties and taxes on American companies located abroad, and even a 10% tariff on all imports.

Martin Khor

Martin Khor

Thus 2017 will see a rise in protectionism in the US, the extent still unknown.  That is bad news for those developing countries whose economies have grown on the back of exports and international investments.

Europe in 2017 will also be preoccupied with its own regional problems.  The Brexit shock of 2016 will continue to reverberate and several European countries facing elections will see challenges to their traditional values and established order from xenophobic and narrow nationalist parties.

As Western societies become less open to the world and more inward looking, developing countries should revise their development strategies and rely more on domestic and regional demand and investments.

As North-South economic relations decline, this should also be the moment for expanding South-South cooperation, spurred as much by necessity as by principles.

2017 may be the year when resource-rich China, with its huge Road and Belt initiative and its immense financing capacity, fills in the economic void created by western trade and investment protectionism.

But this may not be sufficient to prevent a finance shock in many developing countries now beginning to suffer a reversal of capital flowing back to the US, attracted by the prospect of higher interest rates and economic growth.

Several emerging economies which together received many hundreds of billions of dollars of hot money in recent years are now vulnerable to the latest downturn phase of the boom-bust cycle of capital flows.

Some of these countries opened up their capital markets to foreign funds which now own large portions of government bonds denominated in the domestic currency, as well as shares in the equity market.

As the tide turns, foreign investors are expected to sell off and transfer back a significant part of the bonds and shares they bought, and this new vulnerability is in addition to the traditional external debt contracted by the developing countries in foreign currencies.

Some countries will be hit by a terrible combination of capital outflow, reduced export earnings, currency depreciation and an increased debt servicing burden caused by higher US interest rates.

As the local currency depreciates further, the affected countries’ companies will have to pay more for servicing loans contracted in foreign currencies and imported machinery and parts, while consumers suffer from a rapid rise in the prices of imports.

On the positive side, the currency depreciation will make exporters more competitive and make tourism more attractive, but for many countries this will not be enough to offset the negative effects.

Thus 2017 will not be kind to the economy, business and the pockets of the common man and woman.  It might even spark a new global financial crisis.

The old year ended with mixed blessings for Palestinians. On one hand they won a significant victory when the outgoing President Obama allowed the adoption of a UN Security Council resolution condemning Israeli settlements in occupied Palestinian territories by not exercising a veto.

The resolution will spur international actions against the expansion of settlements which have become a big obstacle to peace talks.

On the other hand the Israeli leadership, which responded defiantly with plans for more settlements, will find in Trump a much more sympathetic President.  He is appointing a pro-Israel hawk who has cheered the expansion of settlements as the new US ambassador to Israel.

With Trump also indicating he will tear up the nuclear power deal with Iran, the Middle East will have an even more tumultuous time in 2017.

Some countries will be hit by a terrible combination of capital outflow, reduced export earnings, currency depreciation and an increased debt servicing burden caused by higher US interest rates.

In the area of health care, the battle for affordable access to medicines will continue, as public frustration grows over the high and often astronomical prices of patented medicines including for the treatment of HIV AIDS, hepatitis C, tuberculosis and cancers.

There will be more powerful calls for governments to curb the excesses of drug companies, as well as more extensive use of the flexibilities in the patent laws to counter the high cost of medicines.

Momentum will also increase to deal with antibiotic resistance which in 2016 was recognised by political leaders meeting at the United Nations to be perhaps the gravest threat to global health.

All countries pledged to come up with national action plans to counter antibiotic and anti-microbial resistance by May 2017 and the challenge will then be to review the adequacy of these plans and to finance and implement them.

The new year will also see its fair share of natural disasters and a continued decline in the state of the environment.  Both will continue to be major issues in 2017, just as the worsening of air pollution and the many earthquakes, big storms and heat-waves marked the previous few years.

Unfortunately low priority is given to the environment.  Hundreds of billions of dollars are allocated for highways, railways and urban buildings but only a trickle for conservation and rehabilitation of hills, watersheds, forests, mangroves, coastal areas, biodiversity or for serious climate change actions.

2017 should be the year when priorities change, that when people talk about infrastructure or development, they put actions to protect and promote the environment as the first items for allocation of funds.

This new year will also be make or break for climate change.  The momentum for action painfully built up in recent years will find a roadblock in the US as the new President dismantles Obama-initiated policies and measures.

The Paris agreement, which was adopted in December 2015 and which came into force in record time in October 2016 as a demonstration of international concern over climate change, may face a major test and even an existential challenge in 2017, if Trump fulfils his election promise to pull the US out.

But Trump and his team will face resistance domestically including from state governments and municipalities which have their own climate plans, and from other countries determined to carry on without the US on board.

Indeed if 2017 will bring big changes initiated by the new US administration, it will also generate many counter actions to fill in the void left in the world by a withdrawing US or to counter its new unsettling actions.

Many people around the world, from politicians and policy makers to citizen groups and community organisers are already bracing themselves to come up with responses and actions.

Indeed 2017 will be characterised by the Trump effect but also the consequent counter-effects.

There are opportunities to think through, alternatives to chart and reforms to carry out that are anyway needed on the global and national economies, on the environment, and on geo-politics.

Most of the main levers of power and decision-making are still in the hands of a few countries and a few people, but there has also been the emergence of many new centres of economic, environmental and intellectual capabilities and community-based organising.

2017 will be a year in which ideas, policies, economies and politics will all clash, thunderously, and we should be prepared to meet the challenges ahead and not only be spectators.

IPS



21 Comments on "2017 — A Thunderous Clash of Politics, Economies and Policies"

  1. onlooker on Tue, 3rd Jan 2017 12:47 pm 

    Yes the election of Trump has certainly shaken things up. But make no mistake about it this is about a clash of Civilizations as the West and the East vie for supremacy in the context of a world becoming increasingly unstable because of the consequences of our environmental, population and economic overshoot.

  2. Sage on Tue, 3rd Jan 2017 12:58 pm 

    Trump will be an unmitigated disaster. But then again, so was Obummer. We have no leadership just greed.

  3. eugene on Tue, 3rd Jan 2017 1:02 pm 

    In the mid 1990s, I read a couple of economists who stated American lifestyles were totally out of touch with reality ie wages far beyond the world standards and a poor work ethic meaning we’d have to become a whole helluva lot more productive or our lifestyle would decline. Well, we did neither. When we could no longer afford our lifestyle, we charged everything in child like glee. So, couple of decades later, here we are. I thought the Carrier deal said it all ie $3 an hour in Mexico or $30+ here. As we scream more jobs here, we joyfully, ignore what that means for the cost of living. Personally, I can’t afford to pay American wages for what I buy and I sure as hell can’t afford to pay for half assed repairs by the average worker. Electing Trump just showed me we’re not ready act like adults yet but one can hope.

  4. Sissyfuss on Tue, 3rd Jan 2017 10:31 pm 

    Trump is going to use a 20th century mindset to revitalize the 21st century. Mak, pass that damn popcorn!

  5. DerHundistlos on Tue, 3rd Jan 2017 11:54 pm 

    The Republican assault on the natural world moves forward as the new congress and Trump administration have slated for fast track approval the sell-off of America’s “surplus” lands to the highest bidder (i,e, surplus = parks and wildlife refuge areas), and full repeal of the Endangered Species Act.

  6. makati1 on Wed, 4th Jan 2017 12:28 am 

    In America, the mindset is “If it doesn’t work, do it again and again and again and …”

    Sissy, I have a well stocked supply of popcorn. The events unfolding in the West (1st world) especially, are going to make any horror movie or book ever thought of seem like a fairy tale for children. All I can do is sit back and watch the show.

  7. Cloggie on Wed, 4th Jan 2017 3:11 am 

    Trump is going to use a 20th century mindset to revitalize the 21st century. Mak, pass that damn popcorn!

    “Make America Great Again” is indeed pure nostalgia. Not going to happen with all these me-too “New Americans” around.

    But the Trump presidency should nevertheless be applauded because Trump at least has (probably) no hegemonic One World intentions (although he could kill-off the bromance in a heart beat if he is serious about attacking Iran; Russia and China won’t stand idly by in that case).

    Kunstler is probably right when he suspects that Trump will be left holding the bag at the moment the global financial system will implode. What Kunstler doesn’t say in his latest piece is that such a crash that will come with great wealth evaporation will almost inevitably initiate enormous social upheaval in the US and all this diversity will say “poof”. Expect in that case for Trump to morph into the US variety of Yugoslav commie Milosevic turning into the Serb nationalist leader.

    Paraphrasing the SPLC: “diversity is our demise”.

    In that case, after the breakup of the US, Trump will be remembered by the slogan “he made America smaller again”.

  8. Davy on Wed, 4th Jan 2017 5:58 am 

    The biggest potential I see coming in 2017 is a rearrangement of Sino-American economic realities and Russo American military realities. Both represent profound changes that will impact every nation. It is clear if Russia and America find a minimum of détente it will be an improvement. If Trump and Putin talk to each other on occasion and their people are in contact this represents a stand down in a situation that could end civilization. I see this happening because Trump is a go-getter. This is typical of a businessman and not a politician. A Politician would have endless cabinet meetings on the subject with protocol and intrigue and a businessman would go after his goals first and deal with the consequences with his management team. Trump knows better relations with Russia is his starting point for going after China.

    Putin knows the US more than any other nation can make Russia’s life difficult. He knows he can improve Russia by better US relations. He can realize a new world order based on Putin’s vision but he needs the US in his sphere of influence. Putin will go down as the greatest leader of the 21st century. I say this because we will likely not have many more to be great. Putin sees in Trump some of the very ideas he is championing with ethno-nationalism but multipolar internationalism. Putin is also into a globalism lite with significant bilateralism. Both are nationalist that can make each other great. Trump appears to be interested in bilateral relations for purposes of trade instead of nation building and influence in the American mold. He apparently sees the failure of the last 20 years and the opportunities from these failures. Sometimes such situations open up significant opportunities. The US has hit rock bottom politically at home and abroad and now he can build something new on the ashes of failure.

    The important point is Trump is just one man in a form of government with numerous checks and balances that prevent one man too much power. He will never be a Putin in political abilities because the American government prevents it. He has minefield after minefield of challenges for every one of his political and economic initiatives. He does have momentum and he does have a majority in both houses. Will he win over the Republican leadership with such extreme policies per the status quo? Will special interest bend and fold to his will? I think he has the potential to radically disrupt the status quo. He is already doing it and he is not even in office. I think he has a limited time frame before economic and political realities bog him down into trench warfare.

    The Sino American relationship is too important and too dangerous for much change. This is mutual for both sides. Both the US and China have a lot at stake. I read lazy thinkers talk about how great China is and her potential when the reality is China is unraveling after two decades of tremendous growth and the consequences. Both the US and China have an economic arrangement that is a bubble. Both nations are economic and social Ponzi arrangements. Both nations are tied to each other profoundly such that any change by either will dramatically alter the other. This could be an opportunity for both to force needed change. This will not make either better as in more affluent. Both nations have extreme imbalances and these dangerous imbalances can be reduced but only painfully. This will have a cost but if it happens right it will be a “positive” negative. There is nothing positive in either nation’s future. The US consumers will be impacted adversely and the Chinese working class will be hit hard but this needs to happen before it is too late for any change in the right direction.

    The rest of the world will get its tail wagged by these processes. This is true of Europe and Japan with their military alliances. It is true of the developing world with their economic relationships. This kind of destructive change at a time of imbalances and extremes will likely cause some kind of break in the status quo. It is difficult to see how any of this can be good except as a way to let off steam to keep the global engine from exploding. If anything about Trump turns out good it will be about letting off steam to prevent a worse event later. That is the good side of Trump. The bad side could be a dangerous and destructive war on the economic and military front with China and maybe North Korea. That will be a step in the direction of collapse for all of us. This is something to be watched closely. Maybe Putin will sense this coming and use his influence to mediate these two great powers.

    A part of me is not optimistic now. I am trading dread from a Russian war to a Chinese one. Decline is in full force and nothing will change that. Depletion is like sands through an hour glass. Climate change is beginning its abrupt phase. Overpopulation and ecological failure is entering a new stage of extinction and failure of the last vestiges of the pre-Anthropocene. This is a time of destructive and dangerous change no leader or country can prevent. Sit back and hold on because no one will leave this thriller the same..

  9. Davy on Wed, 4th Jan 2017 7:41 am 

    Economic nationalism 21st century style.

    “Trump Tariff on GM Would Violate Nafta. That May Not Stop Him”
    http://tinyurl.com/glx565z

    “A lot of this is about setting the agenda and getting people to talk about what he wants to talk about,” Holtz-Eakin said. “It’s not something that in the end generates great policy.”

    “Trump and House Republicans are aligned on much of their tax policy, but they differ starkly on how imports should be treated. Both want to lower the current top corporate income tax rate — Trump to 15 percent and House Republicans to 20 percent. But the Republicans also propose a system known as “border adjustments” that would levy the 20 percent rate only on U.S. companies’ domestic sales. Their exports would be untaxed, and their imported goods would be taxed at 20 percent, much lower than Trump’s 35 percent tariff.”

  10. penury on Wed, 4th Jan 2017 8:24 pm 

    I am over 80 years old and I think I have heard all the proclamations for the last fifty years. Dems think Rs will destroy the world, Rs can show that Ds have destroyed the economy and will do so again. Eighty years later and here we are. Still talking about the end of the world as we know it, and still talking about a thousand things which will never happen and not a word about the real problems of the world. Every politician talks what they want their base to think they believe but vote the way their party tells them to. So everyone making predictions about a Trump presidency should keep a list of everything the predicted and re-read it after the year. Amazing how wrong you will be. PS you can tell people that you aced it because no one cares.

  11. makati1 on Wed, 4th Jan 2017 8:29 pm 

    To the techies out there…

    “When I read economists and financial presstitutes glorifying the cost savings of robotics, I wonder where their mind is or if they have one. Robots don’t purchase housing, home furnishings and appliances, cars, food, clothing, vacations, entertainment. When robots have the jobs, where do humans get the incomes with which to purchase the products produced by robots?”

    http://www.globalresearch.ca/can-trump-fix-the-economy-in-2017/5566363

    Robot factories need customers with cash to spend. Not going to happen. China can be considered a low pay ‘robot’. What has China done to the U$ consumer? Answer: Taken away their good paying jobs so they now have less and less ability to buy Chinese junk. America is sliding into the 3rd world faster with every swipe of the credit card.

  12. penury on Wed, 4th Jan 2017 10:11 pm 

    Mak every country can adopt the Swiss and Finnish model and just guarantee all residents a living wage. Period no expectations. Sounds great to me if only I was twenty again.

  13. Boat on Wed, 4th Jan 2017 10:16 pm 

    mak,

    Thats the miracle of robots. We won’t need as many humans. Those without skills are welcome to step off the planet in increasing numbers. No need for growth anymore. Less humans, less cows needed, less oil needed, less water needed, less food needed needed. Military robots will save health care costs for the winners. It’s a win win. Robots will do great building weather hardened buildings to counter climate change. Welcome to a whole new world. Lol

  14. makati1 on Wed, 4th Jan 2017 10:32 pm 

    penury, the Swiss.Finnish dreams will not last long. Those numbers will not extend to billions. Printing money is not going to last much longer. The whole idea is a fairy tale. I am glad I am 72 and not 22. The kind of world I would want to live in will not last another 50 years. Maybe not another 10.

  15. makati1 on Wed, 4th Jan 2017 10:35 pm 

    Boat, please take the first step and lead the way. You obviously have no skill that will be useful to anyone. You prove it with every comment.

    Your techie dreams are just that. Fantasy Koolaid. Live in your make-believe world but don’t be shocked when it evaporates.

  16. GregT on Wed, 4th Jan 2017 11:14 pm 

    “Thats the miracle of robots.”

    Walking on water, turning holy water into wine, and parting the Dead Sea are miracles Boat. Robots are human technology gone too far.

  17. makati1 on Thu, 5th Jan 2017 2:00 am 

    For Boat: “Almost everything you read about AI is fake news. The AI coverage comes from a media willing itself into the mind of a three year old child, in order to be impressed.

    For example, how many human jobs did AI replace in 2016? If you gave professional pundits a multiple choice question listing these three answers: 3 million, 300,000 and none, I suspect very few would choose the correct answer, which is of course “none”.

    Similarly, if you asked tech experts which recent theoretical or technical breakthrough could account for the rise in coverage of AI, even fewer would be able to answer correctly that “there hasn’t been one”.”

    http://www.zerohedge.com/news/2017-01-04/artificial-intelligence-putting-ai-fail

    Finally: “Out in the real world, people want better service, not worse service; more human and less robotic exchanges with services, not more robotic “post-human” exchanges. But nobody inside the AI cult seems to worry about this. They think we’re as amazed as they are. We’re not.”

  18. Cloggie on Thu, 5th Jan 2017 3:35 am 

    For example, how many human jobs did AI replace in 2016?

    https://www.youtube.com/watch?v=3H1c_6_AxrQ

    Volkswagen plant, Wolfsburg, Germany.

    This didn’t happen in 2016 alone of course, but it is absolutely true that machines do most of the work these days.

    Production: 1 million cars/year
    Workforce: 70,000

    That’s an obscene productivity, certainly if you realize that the actual number of people doing the actual assembly is merely a fraction of this 70k, I vaguely remember it is ca 5000, the rest is in sales, marketing, design, research, administration, finance, etc. This would mean a production of 200 cars per worker per year, with 95% of the work done by machines. The trend is absolutely towards robotics on a global scale. Last week the Chinese for instance bought a prominent German robotics company.

    You of course will claim that we will be running out of energy before the total robotics nirvana will have materialized. I’m not so sure about that.

  19. Cloggie on Thu, 5th Jan 2017 3:46 am 

    where do humans get the incomes with which to purchase the products produced by robots?

    In western societies production work constitutes only a small fraction of the total work force. But what to do with the permanent lower educated unemployed?

    https://www.theguardian.com/world/2017/jan/03/finland-trials-basic-income-for-unemployed

    Some form of basic income is probably inevitable in the long run. It doesn’t make sense to produce stuff that people won’t be able to buy. That basic income should be too high to die and too low to live. Once a basic income for everybody of say $600/month is in place you can do away with all kinds of social security money and drop minimum wage and make labor for simple tasks affordable for households (gardening, baby sitting, cleaning in private homes, courier services, etc., etc).

  20. joe on Thu, 5th Jan 2017 4:13 am 

    Sadly, Cloggie I fear you are right. Things already look more or less like that in Nordic countries in Europe, I think this is absolutely driving the division of Europe. Communities dont need to cooperate. In this modern age a man without any local language can immigrate, start life on social welfare, drive cabs or sell items for spare cash, can live his life on social media and never havevto interact with the wider white society around him. In Syria all the minorities ganged up on the US backed Sunni majority who tried to take over everything when they mass migrated to the cities. Imho, civil war is coming to France, probobly Germany too. Seems crazy but eventually somthing will crack, as governments cant supress muslims forever in Europe, and thats how they feel. Isis, al qaeda, will keep stinging the elephants butt and make him do stupid things, they want war and are determined to get it. Europe invited Turks and North Africans in a generation ago, when there was still factories and work, now thats all gone. These people are the jobless trash of Europe. At least in the UK they live in some kind of dignity with the NHS and small business they gave a stake and a purpose but in socialist Europe, they just exist.

  21. Cloggie on Thu, 5th Jan 2017 4:42 am 

    The internet is a great help in making this low level labor market work:

    https://www.werkspot.nl/

    Over the last two years I used the services of:

    1. tree cutter; young guy who climbed into 10 meter trees and top them off, piece by piece with a hand saw for 250 euro until they were small enough to be cut in one piece by #2 without running the risk of the trees crushing into my home.

    2. tree cutter; a 50-year old guy who had worked all his life for and had been dumped by a major bank. He has a van, a professional heavy duty chain saw and a small website and now “sexes-up” his income by cutting trees for private persons. For 400 euro he cut down and chopped to pieces 11 mid-sized trees and make my garden ready for vegetable gardening and energy harvesting via solar collectors, my next prepping project:

    https://deepresource.wordpress.com/2017/01/03/solar-air-heater/

    3. curtain maker; probably single mom. Bought nice but cheap curtains for 300 euro from IKEA and had them tailor-made by a woman in my town, whom I had found with Google and verified references not posted on her site. For 300 euro I now have uniform curtains for every window in my house. I also had new lace made for 1200 euro from a professional company. No difference in quality.

    Now I am looking for a person who can assemble my greenhouse construction kit.

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