Saturday 31 December 2016

From Alpha to Omega

A couple of days ago I was interviewed by Tom O'Brien for his From Alpha to Omega website. The hour long recording is available on his site. The discussion covers a wide range of topics, including the development of imperialism post-1945, the role of the City of London, government economic policy, why I do not use the terms 'neoliberal' and 'financialisation', Brexit and Syria.

The link to the episode (#076)  is here.

A YouTube version is here.

Tony Norfield, 31 December 2016

Thursday 29 December 2016

Some Books

Based on my non-economic readings over the past year or so, here are some books to follow up if you want to find out about …

The British Labour Party
Edmund Dell, A Strange, Eventful History: Democratic Socialism in Britain, Harper Collins, 1999
Written by a Labour right-winger, this book contains a telling critique of the reformism and hypocrisy of the Labour left, plus rarely noted information on how the colonies (and the US) provided the funds with which to set up the welfare state in 1945. Its main message is that the British electorate will not warm to ‘socialism’, so Labour has always had to retreat from radical programmes, even ones that were far from socialistic and which at best could be called national welfarism.
The Partition of India
Narendra Singh Sarila, In the Shadow of the Great Game: the Untold Story of India’s Partition, Harper Collins 2005 and 2009
This is the only book I have found that explains what was in it for the British when India was partitioned. It shows how the British backed Muhammad Ali Jinnah in his opposition to the Indian National Congress, and how they encouraged the formation of Pakistan as a dependent state that they could better rely upon to be anti-Russian than an independent India. Historians usually avoid this and explain partition by claiming that there were deep-rooted ethnic/religious differences that demanded a Moslem Pakistan separate from a Hindu India.
Middle East historical background
James Barr, A Line in the Sand: Britain, France and the Struggle that Shaped the Middle East, Simon and Schuster, 2011
A very interesting account of the carve up of the region between the British and the French, from Iraq to Syria, Lebanon, Palestine and Israel, mainly covering the 1915-49 period. This brings out the hypocrisy and double dealing of the major powers very clearly. For example, it shows how France armed and supported the Zionist opposition to Britain in Palestine as a means of getting back at the Brits for edging them out of Syria.
David Fromkin, A Peace to End All Peace: the Fall of the Ottoman Empire and the Creation of the Modern Middle East, Phoenix Press, 2000
Fromkin has some very good coverage of the machinations of the big powers in the region, from the late 1800s to the 1920s. Although he is pro-Zionist, he provides a lot of useful material on who did what, when and why.
However, neither of these books (nor many others) asks the question of why the Palestinians had to pay the price for the European murder of millions of Jews – in terms of expulsions and seized land in the UN 1948 deal to set up Israel (quite apart from the new state’s later annexations).
Immigration/racism in Britain
Robert Winder, Bloody Foreigners: the Story of Immigration to Britain, Abacus Books, 2004 and 2005
This covers a long history from the 1200s (!), but very well, and with interesting insights into popular prejudice and political responses, giving many striking examples. The 20th century takes up most of the book, and is most relevant for contemporary politics.
Africa and nationalism
Basil Davidson, The Black Man’s Burden: Africa and the Curse of the Nation State, James Currey, 1992
This is the best thing I have read on the problem of nationalism, and why Africa is such a mess. Davidson shows how the efforts of post-colonial governments in Africa to adopt a national perspective, largely adopted from Europe, could not work. This perspective did not suit the realities on the ground, where there were all kinds of cross-border relationships and also divergences within supposedly unified nations. Davidson puts this in a materialist perspective, showing how the up and coming African bourgeoisie was still very weak, and in the 20th century could not replicate what the Europeans did in the 19th in terms of building nation states. This was a clear sign of the limits on development created by the imperialist world economy, both in colonial times and today.

Tony Norfield, 29 December 2016

Friday 16 December 2016

Trump and the US-Russia-China Triangle

Although it is the world’s major power, the US has found it difficult to impose its will in the past decade or so. From President Bush’s ‘mission accomplished’ speech about Iraq in 2003, to the continuing disasters in Afghanistan, Libya and Syria, from US policy in Ukraine also being upset by Russian intervention in Crimea, to how the Saudis and other Gulf states have destabilised the Middle East, the US has not been getting its own way and has been unable to impose settlements that would otherwise be expected of a hegemonic power. This puts the incoming US administration under The Donald in an interesting position.
Early signs suggest that POTUS-elect Trump is taking a softer line on Russia, one different from the still Cold War-inspired position of the Obama regime. Trump has stated that he expects the Europeans to pay more for their own NATO-related defence, which might make them less willing to finance an increased build up of military operations close to Russia’s borders. Trump has also rejected Obama’s rhetoric on Putin’s supposed involvement in Russia’s alleged cyber attack on Clinton’s emails. Perhaps most striking of all, Trump plans to appoint Rex Tillerson as US Secretary of State, that is to be the main person in charge of foreign policy. Tillerson is Chief Executive Officer of ExxonMobil, and is well known to have friendly relationships with the Russian government.
ExxonMobil opposed sanctions on Russia from its own business perspective, but one would have to agree that the aggression shown to Russia by the current US administration makes little economic or political sense. Russia is far from being a threat to US interests. Instead, Russia may have prevented the unravelling of Syria that was the direction of previous US policy, and which would have had a deleterious impact on the stability of the Middle East, with knock on impacts into Europe. For this reason, Trump’s likely Russian rapprochement makes sense, even if it will embarrass the Europeans.
All this, and more, is still to be determined, since the billionaire has yet to establish himself in the White House. However, it seems that while there is very likely to be a US-Russia rapprochement, the US political antagonism to China will continue under the Trump administration.
Under Obama and previous US presidents, Taiwan had remained in the limbo of being diplomatically isolated (it has not been a member of the UN since 1971, under the ‘one China’ policy) although politically and militarily supported by the US. But Trump took a call from Taiwan’s president, much to China’s displeasure, which saw the incident as an implicit recognition of Taiwan. This also makes sense from a US perspective. China is both a political and an economic threat to US interests, one that has been recognised in numerous US Congressional reports. China’s economic power has seen it gain influence in Africa, Latin America and Asia, often giving governments in these regions an alternative to the US-dominated world financial and economic system.
More pointedly for the current political climate, it is China, rather than Russia or anywhere else, which is being singled out as the country that is being ‘unfair’ in trade and taking American jobs. An anti-Chinese political stance makes far more sense for the US on many more levels than the anti-EU stance does for the UK, since it not only appeals to the latest domestic populism but also coincides with longer-term US strategic interests.
Trump’s election is one more sign of a shift in the tectonic plates of the imperial world economy. It will impact not only US relationships with Russia and China, but also the position of Europe, and even the acceptability of Russia outside Europe. Interestingly, in the past day or so, Russian President Putin had a meeting in Japan with Japan’s Prime Minister Abe on the Northern Territories/Kurile Islands, an area of dispute between the two countries since the end of World War Two. No resolution was made, and no peace treaty agreed on this, but there were 80 documents signed, including 68 on planned commercial deals between the two countries.

Tony Norfield, 16 December 2016

Tuesday 13 December 2016

Norwegian Blues: Pining for 4%

It being the Christmas season in many countries, and this being a blog on the economics of imperialism, please spare a thought for the problems of Norway’s Government Pension Fund Global (GPFG). I would ask you to fear not, and not to let mighty dread seize your troubled minds, since I am not asking you for any money. However, the GPFG is asking for a 4% return on its investments outside Norway, ie from approximately 99.93% of the world’s population. In these difficult days, I am prepared to make some allowances. After all, Norway’s capital city of Oslo supplies Trafalgar Square in London with a Christmas tree each year, and this country is also one of the homes of reindeer, the intrepid beasts of burden for Santa’s present-laden sleigh. Yet, surely 4% is a bit much?
In fact, Norway’s demand is for even more than 4%, since that number is its planned ‘real return’, ie a nominal return after inflation. While inflation has been close to 1-2% in many major countries, in Norway it has been more than 3%. So the average asset in which the Norwegian fund invests is meant to produce a return far above the 4% level. This is a problem for Norway’s position as one of the world’s biggest rentier states now that financial returns are much lower.
The worst outcome is for GPFG’s bond investments, which make up 36% of its total holdings. In 2015, the return on fixed income investments was a mere 0.33%, measured in the fund’s currency basket. The recent months’ rise in yields will have hit the value of its bond holdings, although yield levels – and the related coupon income – still remain well below 3% in all major bond markets. For example, 10-year government bonds yield 2.4% in the US, 1.5% in the UK, 0.4% in Germany and 0.1% in Japan. The fund also holds corporate bonds, which generally have higher yields, but the yield premium there is not significant. This problem of falling yields in 2011 led the fund to cut its holdings of bonds and to allocate some cash to foreign property assets, but these still only account for 3% of the total. The GPFG owns a portfolio stake in real estate in around a dozen European countries – including in Regent Street, London, and in Paris – and also in New York, Washington and Boston in the US.
GPFG’s equity investments – 61% of its assets – have performed better in recent years, given the boost to stock markets from central bank monetary policy. These assets are invested mainly in European and North American stock markets, with the largest holdings in big corporations like Apple, Alphabet (formerly Google), Microsoft, Nestle, Novartis, Roche and Royal Dutch Shell. Dividends from these investments boost its returns, together with any rise in the prices of the equities held. The fund tries to avoid the political problems associated with being a major investor by limiting its holdings to 10% of the equity of any company.
An important component on all the investment returns (measured in Norwegian kroner) in 2014 and 2015 came from the depreciation of the krone versus the US dollar. In 2014, the NOK value of the fund rose by 24.2% and by 15.5% in 2015, given that 37% of Norway’s equity holdings are in the US and 43% of bond holdings are in US dollar securities. However, in 2016 the krone’s exchange rate has strengthened on FX markets and the NOK value of the total fund fell by nearly 4% in the year to end-September 2016.
What these percentage change numbers should not hide is that the GPFG is the largest ‘sovereign wealth fund’ in the world. As of mid-December 2016, its value was NOK 7395bn or, in US dollar terms, about $875 billion. This is serious money for a country of just five million people, ie roughly an investment fund of $175,000 for each man, woman and child, built up within the GPFG from the late 1990s. The oil and gas revenues accruing to the Norwegian government fund the investments of GPFG, and these have grown dramatically in the past twenty years, accentuated by the accumulated revenues from the investments themselves. In turn, the GPFG funds the government’s spending: in 2015 the budget took NOK 179.6bn from it.
Norway has the highest percentage of foreign investment income to GDP in the world. At 6% in 2015 it was even higher than Switzerland’s, and was some NOK 36,200 per person! This is the scale of Norway’s appropriation of surplus value from the rest of the world economy through its foreign investments. Norway’s net foreign investment income to GDP has been comparable to that seen at the height of British imperialism’s economic power in the late 19th century! This is the economic reality underlying Norway’s benign international image as a liberal, although somewhat insular and unexciting social democratic nation, home of the Nobel Peace Prize.
The following chart shows Norway's net foreign investment income from 1990 to 2015. The figures are for the country as a whole, not just the GPFG, but the latter accounts for the bulk of the income.

Norway got lucky with the discovery of energy resources in the Norwegian waters of the North Sea from the late 1960s, just ahead of the sharp rise of energy prices in the 1970s. With large energy supplies and a small population, Norway became the ‘Saudi Arabia of Scandinavia’. Despite being Christian, rather than Wahhabi, Norway’s governments have also frowned upon alcohol, keeping prices very high via taxation. To be a drunk in Norway, you need your own private distillery, or a large income, or a big credit limit, or a decent supply of return tickets to Denmark. Other sales and income taxes also remain high in Norway, despite the largesse received by the government from the oil and gas revenues. This is because the state’s spending policy funds very extensive welfare payments to consolidate the conservative (social democratic) national consensus, a policy that is now even more dependent upon the revenues derived from the country’s energy-revenue-funded financial investments.

Tony Norfield, 13 December 2016

Thursday 8 December 2016

Syria: White Helmet Whitewash

The conflict in Syria is a tragedy with many dimensions. One of the most scurrilous has been the western media's promotion of the so-called 'white helmet aid workers' in East Aleppo, when these are reactionary forces who would otherwise be labelled as terrorists, were it not for their opposition to Syria's government. A convincing characterisation of their real role is given in the interview here by Vanessa Beeley, a British investigative journalist. She notes that they have received some $100 million in aid from western powers, which is better explained as a cover for military equipment and support rather than for medical and aid supplies.

Listen to the full interview. Although made at end-September, it gives an interesting angle on the degree to which western media have no shame in persistently lying when this suits imperial strategy. Developments in Syria have not gone as they hoped, so the rhetoric is now being wound down, if only to cover up the embarrassment for the major powers delivered by Russia's actions.

If the Beeley interview does not enlighten you, then just consider the desperation of the British government in trying to disown the latest statements from its own Foreign Secretary, one Boris Johnson. He happened to be clumsy and truthful in noting some aspects of the role of Saudi Arabia in the many Middle East conflicts, when the demands of his position mean that he should have kept his mouth shut. At least he didn't make the mistake of referring to the 'Saudi regime', or suggest that regime change might be a good idea.

Tony Norfield, 8 December 2016

Friday 2 December 2016


On Tuesday 6 December, I will give a speech in Berlin, Germany, on ‘Brexit and other disasters’. This will examine the economic and political context for Brexit and also the broader question of political developments in the imperialist countries.

The public meeting starts at 7.30pm and the venue is: Wildenbruchstrasse 86, Neuk├Âlln, Berlin, 12045.

Tony Norfield, 2 December 2016