Author: John Hulsman Enterprises

No amount of wishful thinking will displace the mighty dollar

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More mistakes are made in political risk analysis due to the curse of wishful thinking than any other intellectual malady that afflicts the human mind.

I was recently watching a documentary about the fall of Richard Nixon, in which one of his lawyers expressed shock that the US Supreme Court had ruled unanimously that he had to turn over the presidential tapes to the Congressional investigation into the Watergate scandal. When asked why he was so surprised — the White House had already lost court rulings every other time the issue had been raised with the lower district and appellate courts — he ruefully commented that, when you live in a bubble, you give up reason and instead all too often indulge in wish fulfillment.

This intellectual fallacy has recently reared its ugly head in terms of a lot of fashionable nonsense that the dollar is about to be displaced as the world’s reserve currency. Typical are the recent comments of President Luiz Inacio Lula da Silva of Brazil, who boldly stated that every night he asks himself why every country must use US dollars to trade.

Looked at in isolation, such a view makes sense. No one is arguing, or could possibly argue, that over the past generation — at least since the days of budget-balancing Bill Clinton — successive White Houses and Congresses have covered themselves in fiscal glory. The utterly irresponsible Democrats, in particular, never met a spending initiative they did not like.

But the Republicans have not been any better. While the Democrats are reflexively for spending, the GOP has never met a tax cut it was not for. Less often discussed are the corresponding spending cuts that are necessary to keep the federal budget in balance. Both roads lead directly to the fiscal hell of trillion-dollar deficits as far as the eye can see. This, coupled with bank failures, declining productivity and a cost-of-living crisis surely must mean the dollar’s primacy — and that of America as the dominant economic force in the world — is coming to an end.

Well, no. For wish fulfillment is driving an awful lot of this dollar doom-mongering. Lula, as a traditional, card-carrying leftist populist, is (to put it mildly) no great friend of the US. More than anything, he is — like so many pushing the dollar’s demise — trying to wish the dollar away, rather than letting facts, unpalatable as they may be, serve as his guide.

First, the dollar’s present dominance remains indisputable. As the International Monetary Fund notes, the world’s central banks still hold about 60 percent of their international reserves in dollars, far more than any other currency. Even more impressively, fully 90 percent of international trade is conducted using dollars. There simply is no other peer competitor to the greenback, even on the far horizon.

Second, and crucially, is the realist admonition that, in political risk analysis, you have to replace something concretely with something else. Currently, for all of America’s genuine and concerning fiscal follies, no other currency or country is rising to challenge either the dollar or the US’s central position in the global economy. The Japanese yen, the first challenger to the dollar put forward by the doomsday cultists cheering on its demise, is too small to be a credible contender, while its rapidly aging population is too old to reinvent itself as a dynamic economic alternative to the US.

The Chinese renminbi is not even fully convertible, which stops it in its tracks right there as being a putative challenger to the greenback’s supremacy. Given its looming property and credit card bubble, the country, which is also just recovering from the economic lunacy of its zero-COVID policy, last year endured its second-slowest year of growth in the past half century. Finally, China has yet to put forward any answer at all to its looming demographic crisis; it is far more likely to get old before it gets rich. No, this peaking power is not about to overturn the dollar’s long-time dominance.

Finally, the European David is nowhere near to toppling the American Goliath. With growth at its usual sclerotic levels and suffering through its highest inflation rate since the currency was established in 1999, the euro is far from representing a dynamic economy. Rather, this power in obvious decline serves as a salutary reminder to the rest of the world as to what decadence (the French are still protesting at having to work toward the end of middle age) and too much state regulation can do over time to even the most vibrant of societies.

So, the dollar’s demise is greatly exaggerated, based as it is on wishful thinking above all else. Like all apocalyptic prophets, being analytically wrong is unlikely to stop the doom-mongers from decrying the dollar’s end again soon. The simple reply to them should be this: “Yes, American policymakers have been shamefully, and irresponsibly, profligate. Yes, the dollar’s domination of the world, as history shows, will not go on for ever. But you can only replace something with something else. And currently no currency or country in the rest of the world, given their own ingrained weaknesses, is remotely near to overturning American economic dominance.” Like it or not.

This piece was originally published in Arab News.

China will get old before it gets rich and a waning Beijing is a more direct threat

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China faces an ageing population and a western world increasingly alive to the threat it poses; Beijing isn’t dangerous because it will outpace the US, it’s as China falls behind, Xi Jinping is more likely to lash out, writes John Hulsman.

For the past generation, China-watchers in the West have not covered themselves with glory in terms of political risk analysis. Rather, a series of depressing intellectual fads have taken the place of actual thinking.

First, up was the Barrington Moore hypothesis. Named after a notable Harvard sociologist, this view held that, in the words of the American philosopher, Ralph Waldo Emerson, every man is a conservative after dinner. The policy goal must be to integrate China into the global economy as much as possible, and then watch it flourish.

Such a booming country, so the thinking went, would never dare challenge the American-established order in the Indo-Pacific, as that system had made it rich. Even better, a nascent middle-class was bound to form, which would push China’s heretofore authoritarian rulers toward a more humane pluralism internally.

Obviously, this hypothesis—beloved by the global business community—has come to nothing in the real world with the rise of the increasingly dictatorial Xi Jinping, who has made a mockery of its assumptions.

A second far gloomier intellectual fad, a direct reaction to the obvious failure of the first, was propagated by the able Graham Allison. It held that China and the US were likely to go to war, following the historical examples set for them – since the days of Athens and Sparta – of an established superpower coming to blows with a rising one. Though Allison wrote this as a policy warning, rather quickly his mischaracterized views morphed into a sort of bleak historical determinism, which held that not only that war was inevitable in the Indo-Pacific, but that China was more than likely to win.

Finally, recently, there has been a new intellectual synthesis which actually matches the real political risk world we are living in: a China that is a peaking power and all the more dangerous for it.

Rather than effortlessly ascending to superpower dominance, instead Beijing finds itself beset by intractable problems which mean it will never quite catch up to the established ordering power – the United States.

As was the case with both the Kaiser’s Germany of 1914 and the Imperial Japan of the 1930s, this leaves the peaking power highly dangerous in the immediate term, precisely because its drive to dominance has been thwarted.

As if to prove our point, this week, Beijing has laid out plans for China’s military spending to grow at its fastest pace in the last four years as it pours money into defence. Expenditure will rise by 7.2 per cent, compared to 5.7 general spending, according to a draft budget. Simply the latest example of President Xi’s aggressive jostling for influence.

Historically, in the case of pre-1914 Germany, the Kaiser ruled a country that had not caught up to Imperial Britain, both in terms of naval power or geostrategic position in the world. At the same time, Tsarist Russia was economically gaining on it from a low base. Stuck somewhere short of dominance, the Kaiser chose to risk it all in 1914, precisely because political risk conditions for Germany were looking increasingly bleak.

In the 1930s, Japan was in a similar fix. A decade earlier, Tokyo had grown at over 6 percent. This economic boom subsequently evaporated, with growth slowing to an unacceptable 1.6 percent. Given the US oil embargo, the militarists running the Japanese government were confronted with a stark choice by 1941: either lunge for their American tormentors, taking over Asia to make good on their economic deficiencies, or meekly wind up their dreams of colonising China. For a warrior honor culture, the choice was as clear as it proved to be disastrous.

This peaking power malady is what confronts us in China today. China’s relative economic slowdown is not about to abate. Geostrategically, Beijing’s recent bullying has scared the horses, throwing India, Australia, the Philippines, South Korea, and Japan into America’s arms. Perhaps worst of all, due to its ruinous one child policy implemented over generations, Beijing stands to get old before it gets rich.

In each case—economically, geostrategically, and demographically—it is almost impossible to see how Xi turns things around in policy terms. No, China is heading headlong toward peaking power status.

This is what should worry us all. The Indo-Pacific region is the most important in our new era, where most of the world’s future economic growth and much of its future political risk are located. A peaking China must either escalate its claim against Taiwan in the next few years, or it will lose the ability to do so. While the West is fixated on Ukraine, policymakers should be looking to increasing deterrence in the Indo-Pacific, so yet another peaking power does not plunge us into the carnage of a new war and make a sideshow out of Russia’s aggression.

This piece was originally published in City A.M.

Republican patience with supporting Ukraine is running out

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Robert Bolt’s masterpiece, A Man For All Seasons, tells the story of the doomed, heroic, and very human Sir Thomas More. The moral is that it easy to believe in things when they are popular; far harder, and far more important to do so, when they mean that you will risk something.

I’m not going to be beheaded, as was More. But I do bear an unfashionable message.

Almost the whole of the British elite supports the trendy, hawkish view regarding the war in Ukraine: that Volodymyr Zelensky must be entirely supported and given whatever he wishes. After over a dozen meetings with every sector of the British elite recently, this uniformity of belief was by far my firm’s most striking takeaway. There is literally no debate as to whether this is the wise course.

One common assumption was that Ukraine was self-evidently winning the war, and that American support for Kiev would be endless. The only time I saw any of my British friends squirm was when I suggested that both these lazy suppositions are deeply questionable.

First, the war is devolving into a stalemate that is likely to go on for the next year. Second, as Boris Johnson’s visit to Washington, Republican patience with endless, extensive support for what amounts to (at best) a second-order prioritym is wearing very thin.

These views are not popular. That doesn’t mean they are wrong.

Winter has predictably seen the war grind into stalemate; now two questions may well determine the outcome of the contest.

Will Russian domestic alarm at a lack of victory, now that Vladimir Putin has had to call up reservists in a draft, doom his adventurism? Or will the US, which is overwhelmingly keeping the lights on in Ukraine, experience war weariness of its own?

The realist danger ought to be obvious: Russia, seeing Ukraine as a first-order interest (as America would Mexico), will always care more about the war in Ukraine than the US.

Come the spring, it is clear the Russians will throw new masses of men, numbering between 180,000-300,000 new conscripts, onto the offensive. Although little more than cannon fodder, the new troops are likely by simple numbers to make some gains, if not decisively overrun the country.

Then it will be the Ukrainians turn. Bolstered by more advanced weaponry from its NATO allies, including a number of Leopard 2 tanks from Germany and Europe and Abrams tanks from the US, Kyiv will likely blunt the Russian drive and undertake an offensive of their own, which in turn will grind to a halt given Russian numerical superiority.

If all this holds, we will be back where we are now at the end of the year, in an increasingly attritional war with masses of casualties with little to show for the horrendous sacrifices. It is then, a year on from now, that war fatigue on both sides will become the overriding question.

Little-covered in the British press is that American support, is already fraying. The Republicans, never fashionable at the best of times, has come to the deeply unpopular view that support for Zelensky must be limited, conditional, and even come to an end over time. While almost no-one in the GOP is cheerleading for Putin, they is not mindlessly in the tank for Kiev either.

January polling in the Washington Post makes this clear: a comfortable majority of Democrats supports Joe Biden’s Wilsonian line, but for the first time a bare majority of Republicans (with the trend line decisively heading downwards) is against giving further aid. This bombshell has received far too little exposure in London.

There are three broad factors that together explain this steady erosion in political support.

First, years of frustration at allied free-riding in terms of defence spending are finally bearing fruit.

While for Washington Ukraine is demonstrably a second- or even third-order priority, it is accepted that this is not true in Europe, much closer to the fighting and more affected by the outcome.

Yet, once again, the US seems to care more about European security than do the Europeans. In terms of total aid, America has committed an eye-watering $120 billion to Ukraine, more than the rest of the world put together.

Europe’s collective GDP is roughly the same as America’s, yet 70-plus years after the founding of NATO we find that the US is still cross-subsidizing Europe’s safety net by paying a disproportionate share of the common defence.

Enough, an increasing number of Republicans think, is enough. If the war matters as much as European hawks think, it is time for them to put their money where their mouth is – or simply stop having bold, expensive postures that American taxpayers must pay for.

Second, conveniently forgotten in all the ringing Times editorials, is that fact that America has a debilitating set of domestic problems itself that simply aren’t being addressed. The pandemic made plain that America’s schools are a mess; doing away with testing (as the teacher’s unions advocatine) won’t this glaringly issue any less real.

America’s kids don’t know nearly enough; its infrastructure is falling apart. The opioid crisis (with fentanyl killing more than 70,000 in 2021) is as grossly underreported at home and abroad as it is dangerous to the nation. Border policy is non-existent.

American elites don’t discuss these vital issues enough; practically no foreign commentary dwells on them at all. Were they the centre of media attention the idea that the US ought, or at least might, choose to re-focus on its domestic problems would not seem so outlandish.

Third, and the reason for my personal flagging support, is the geopolitical argument against over-committing to Ukraine. The strategic future of the world is undoubtedly in the Indo-Pacific, location of much of both the world’s future economic growth and its future political risk as China and the US vie for dominance.

For that reason, my firm spends roughly 70 percent of our time on the region. It is safe to say that the Biden administration, in terms of both money and focus, spends far less than they should, and the obvious reason is the war.

The idea that America can do everything is false. With US debt standing at an unfathomable 31 trillion dollars, doubling defence spending to avoid difficult foreign policy decisions is just magical thinking.

It should be obvious that the US should be focusing like a laser-beam on assembling the broadest possible alliance in the Indo-Pacific, training with them and arming them to the teeth, in order to make the Chinese hesitate in making a lunge at Taiwan.

Only by so doing, and (hopefully) peacefully halting China’s adventurous designs can global peace and prosperity be guaranteed for the next generation.

It should go without saying, but it does not, that the strategic outcome in the Indo-Pacific is overwhelmingly more important than the fate of Ukraine. Yet, nonsensically, the Biden administration is diverting weapons caches promised to Taipei to Kyiv.

For Wilsonian utopians, strategic choices never have to be made; every problem is equal, and all can be solved. But even the US economy has limits, as does the patience of the American people. The public support necessary for a vast new defence spending programme isn’t there.

A year from now, it is a certainty that for all these sound realist reasons, Republican support for the war will be lower than it is today. With the election will be on the horizon, whoever is the GOP nominee (likely Ron DeSantis or Donald Trump) will likely share the party’s view.

Such a shift in the US position will come as a nasty surprise to many. But they will have nobody to blame but themselves for not seeing it coming.

This piece was originally published in Conservative Home

Macron’s pathetic pension reform shows why Europe cannot be fixed

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Pity poor Emmanuel Macron. It is the French president’s tragedy to be a supremely rational man in a supremely irrational world. This able leader, surely one of the best and the brightest of his generation, is ineffectually stuck yet again in the mire of his stalled domestic program. But this is not a specific French hiccup. Rather, it says far more about Europe’s signal inability to reform itself. And without reform, internal decay is an inevitability.

Macron’s controversial French pension reform proposal highlights nothing less than why the continent is in decided decline. Policy efforts are invariably too slow, too little, and too unpopular for a decadent society that simply doesn’t want to change, whatever the math or the consequences.

The math is simple enough. According to the World Bank, in 1967 (the year I was born) the average life expectancy in France was 71. In 2020 it had climbed to 82. While it is certainly fantastic that people live a full decade longer in such a short period of time, the extra burden on the state must be paid for, or the pension system will quickly collapse. The obvious way to do so is for everyone to work a bit longer in order to keep the pension system solvent. But, in terms of economics, the rational way has never been the French way.

Let’s start with the unpopularity the French public reserves for any reform that involves either math or reality. An early January poll found a decisive 68 percent opposed to Macron’s plan to nudge the retirement age from a laughable 62 to a still not-fit-for-purpose 64. Even more Kafkaesque, another poll found about 55percent desiring the pension age to stay as it is, or even be disastrously lowered to 60, in defiance of all understandings of economics.

True to form, French populists of the left and right cynically feed their constitiencies’ flight from reality. Both Jean-Luc Melenchon and Marine Le Pen, eager to further politically wound the unpopular French president, are rallying against his frankly timid reform. At least Macron has the courage to forthrightly say: “The truth is that we have to work more and produce more in our country … if we are to keep the French social model.”His problem is that his people are allergic to the truth, as it would involve them working harder and longer. This bedrock problem of decadence explains both the slowness of European reform efforts, and their timidity.

Like the Greek tragic hero Sisyphus — who was punished by Hades, the god of the Underworld, by being forced to roll a giant boulder up a hill, only for it to eternally roll back to the bottom —Macron has tried to enact pension reforms before, during his first term. As ever, the hysterical and economically illiterate French street, far more than the relatively weak parliament of the Fifth Republic, shrieked with alarm. Saving face, Macron blamed the pandemic, and shelved the reform.

This time his heroic effort is even more fraught with peril. In addition to the restive street, for the first time since 1988 France finds itself with a hung parliament. Macron’s party has only 245 seats, 44 short of a majority in the National Assembly, the country’s lower house. With the next biggest groupings being Melenchon’s far-left and Le Pen’s far-right, the French president will be dependent on the much-diminished center-right Gaullists to get his reform program over the line.

Even assuming this happens, which is surely only a 50-50 chance, Macron’s reforms will not change much. Public debt stands at an astronomical 112 percent of GDP; as is true for most Western corporatist states, France is effectively broke. Raising the retirement age by a few paltry years will not alter this basic and damning fact.

The luxurious European pension model flowered in the 1960s, when the continent’s productivity was the envy of the world. A state that is rich and booming has the largesse to set up and maintain a generous safety net. But what happens when this same continent is economically sclerotic, with growth rates regularly below a meager 2 percent of GDP, productivity rates flatlining, and no new major world-beating companies being created on the horizon? It is not an accident that Big Tech (Apple, Microsoft, Google, Meta et al) originated in the more economically free US. Rather, it is the logical outcome of a freer market system triumphing over a statist one.

Without economics on one’s side, who is to tell the people the truth? Given the torpid state of Europe’s economy, its overly generous safety net can no longer be afforded. That is surely not a reality decadent Europeans are remotely ready to accept. The consequences of this holiday from economic reality are as clear as they are damning. Europe’s debt will skyrocket, as it falls ever further behind both great powers such as the US and rising ones such as India. Macron’s frustrated efforts at pension reform are just the canary in the coal mine of this larger, and fundamental, process of European decline.

This piece was originally published in Arab News.

Will Europe be mastered by history in 2023?

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One of the standard aphorisms in my political risk business — used to describe whether a country is rising or falling — is as brutal as it is profound. Either a country is mastering history, so the shorthand goes, or history is mastering it. There is little doubt that Europe, over the last sleepy generation, has been mastered by larger global political forces it was barely even aware of, as it lay basking in the sunny false dawn following the end of the Cold War.

One of the standard aphorisms in my political risk business — used to describe whether a country is rising or falling — is as brutal as it is profound. Either a country is mastering history, so the shorthand goes, or history is mastering it. There is little doubt that Europe, over the last sleepy generation, has been mastered by larger global political forces it was barely even aware of, as it lay basking in the sunny false dawn following the end of the Cold War.

But, with the coming of the Ukraine war and the stirrings of the Sino-American strategic competition for dominance in the Indo-Pacific, we have reached the end of the end of history. Suddenly, global geopolitics and great power competition are all the intellectual rage again, though in truth they never really departed from the scene. Instead, and nowhere more so than in Europe, their enduring importance was merely conveniently forgotten as the continent ruinously chose to take an intellectual holiday from history. But time waits for no man — nor for any decadent continent, either. The damage done by this willful ignorance of how the world really works is only now becoming apparent.

By every great power measure, Europe is a mess. The three basic pillars of power have remained the same since the time of the ancient Greeks. What is the state of a country’s army? What is the state of a country’s economy? How politically unified is a country to act both within and beyond its borders? By these exacting and unchanging political risk standards, Europe remains a busted flush as a great power, a political entity promising much and perpetually underdelivering.

First, the continent punches way below its weight in terms of its military. Germany, both Europe’s greatest power and the source of many of its ills, is a case in point. Berlin long has outsourced its military policy to America, its energy policy to Russia (ruinously), and its trade policy to China. Rather than serving as the engine of the European Union as a rising power, instead Germany has been an intellectual black hole over the past generation, where every good idea for Europe’s revival goes to die.

Defense spending estimates for 2022 make the case clearly for Europe being overrun by lotus-eaters. Whereas the U.S. will spend 3.5 percent of its GDP on defense, only France comes close to NATO’s required 2 percent of spending at 1.9 percent. In contrast, Italy will spend only 1.5 percent, Germany a laughable 1.4 percent, and Spain a risible 1 percent. This isn’t remotely intellectually serious even as the problem has festered for a generation. I remember telling the former head of the German armed forces that my high school football team could take the German army — and I wasn’t far off the mark.

The problem with having only carrots (economic tools) without any sticks (military tools) is that such a strategy works only in a world populated entirely by rabbits. And, say what you will of them, neither President Vladimir Putin of Russia nor President Xi Jinping of China are rabbits. Europe is simply not fit for purpose in a world where military force still matters, as it has every day since the dawn of time.

Economically, Europe is also so much less than meets the eye. While possessing a huge internal market roughly equal to that of the U.S., its sclerotic economic model means the continent falls ever further relatively behind rising great powers such as China and India, as well as the emerging developing world. Again, Germany — the continent’s undoubted economic powerhouse — best explains the problem. Here the Ukraine war has done more than point out Germany’s military follies; it also underlines the fact that its vaunted economic model is now irretrievably broken.

The German model was based on buying cheap Russian energy to make high-end products (machine tools, petrochemicals, luxury cars) that were, in turn, swallowed up by an economically ravenous China. Now, in our dawning age of insecurity, the Russian cheap energy inputs that the German model requires are definitively at an end, even as the outputs — assured access over time to China’s market, assuming it to continue booming and assuming geopolitical tensions with Beijing can be contained — is more up in the air than ever. The German model is definitively broken, and nothing has yet emerged to take its place.

At the same time, Europe has become a daycare center, chock full of a decadent population used to taking more out of the continent than they put in. For example, at the end of September, opinion polls in France showed that around 55 percent of its populace want the pension age to stay the same (62), or to drop back to 60, the demand of both the far left around Jean-Luc Melenchon, and the far right around Marine Le Pen, who between them can block the reformist urges of President Emmanuel Macron in the French parliament.

It is not that Macron has not identified the obvious, glaring problem. He has said, “The truth is that we have to work more and produce more in our country … if we are to keep the French social model.” But a continent in advanced-stage decadence finds this almost impossible to countenance emotionally and intellectually. The notion that people are living dramatically longer than when the safety net was first constructed, and that this requires all of us to work longer, is seen as almost a war crime even to mention. But economic reality exists, whether you choose to ignore it or not.

Finally, Europe is a Tower of Babel. How could it be otherwise? There are 27 countries in the European Union; I could not cajole 27 of my friends to agree on a common ice cream flavor, let alone something as complicated as reaching a genuine consensus over setting out a common foreign policy. As such, the EU’s policy outputs, even when generally on the money, will always amount to half-measures, compromises that do not genuinely “solve” any of its problems.

The common position on Ukraine is a case in point. Beneath a surface agreement about the war, deep fissures exist on the continent, with the Poles and the British downright hawkish, while the Germans, French and Italians (in terms of public opinion) are far more eager to end the war on almost any terms. As the war drags on into 2023, look for these hairline cracks to become canyons.

Militarily anemic, economically sclerotic, and politically divided — this is the reality of a Europe that has been mastered by history over the past generation. It must face up to these festering problems or be definitively swept into the second tier of powers. And there is simply no more time to waste.

This piece was originally published in The Hill.

A story for the next US presidential election

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Back in the 2000s, during the month-long book tour for our best-selling “The Godfather Doctrine,” my co-author and great friend Wess Mitchell came upon a hypothesis as to why our book had done so unexpectedly well. Since time began, Wess hypothesized, human beings have primarily learned about life through the telling of stories.

For example, the first two great works of Western civilization were, respectively, about a war, “The Iliad,” and a guy just trying to make it home, “The Odyssey.” Our book, a parable about US foreign policy told through the story of the never-bettered American film “The Godfather,” was merely following in this well-established human way of thinking.

Following in this Homeric tradition, I would like to tell you a story about the 2024 US presidential election that goes a long way toward predicting what is likely to happen and — more importantly — why it is going to happen.

Let us start our tale with the crucial fact that the present front-runners for the two party nominations are Donald Trump and Joe Biden, the two least-popular leaders since Gallup polling began in 1935. A Nov. 14 Morning Consult poll made this very clear. A decisive 65 percent of those polled did not want Biden to run for reelection, while the exact same number said the same of Trump’s efforts.

So, both parties have a succession crisis. The first to solve theirs and pivot away from the deep unpopularity of their present standard-bearer is likely to win the next election. That is, if the Democrats can get rid of Biden, they are likely to beat Trump, just as a GOP without Trump is likely to best the aging president.

Paradoxically, the midterms have made it more likely that the Republicans and not the Democrats are on their way to sorting out their succession problem. This is because the Democrats did a good deal better than was expected, having the fourth-best midterm result for a new presidency in the past 100 years. Narrowly losing the House as was predicted, the Democrats surprisingly managed to retain the Senate, even picking up a seat to hold a narrow 51-49 advantage. Why did the Democrats, despite Biden’s dismal approval rating of 43 percent, manage to do so well?

Rather than the 2022 vote serving as a traditional referendum on the new presidency, as was expected to be the case, instead the Democrats adroitly pitched it as a choice between Trump and Biden, ground they could win on.

Trump also helped build their case in a number of ways. First, he hand-picked terrible, flawed Senate candidates like Mehmet Oz in Pennsylvania and the egregious Herschel Walker in Georgia. Second, Trump hoarded the money his political action committee had raised, selfishly saving it for himself rather than helping the GOP’s hard-pressed candidates. Third, Trump’s acolytes had to agree to push his pathetic conspiracy theory about the 2020 vote being stolen from him; these election deniers were punished across the board.

In many ways, the emergence of Gov. Ron DeSantis of Florida is the answer to the GOP’s basic succession crisis; he provides the party with Trumpism (which is popular nationally) without Trump (who is not). On a night of Republican disappointments, DeSantis won reelection by a whopping 19.5 percent. He achieved this political feat by governing effectively and taking on the leftist mainstream media over social issues (such as so-called wokeism and immigration) and economic matters (keeping Florida open during much of the pandemic). As a man with a successful record of putting the Trumpist agenda into actual effect, DeSantis is the bright new hope of the party.

The governor ticks a lot of boxes. Graduating from Yale and Harvard Law School, DeSantis is a serious thinker about the issues. Serving in Iraq, he won the Bronze Star Medal, while Trump skipped Vietnam because of bone spurs. The governor also has a telegenic wife and young family.

Along with all these pluses, he retains faith in the Trumpist agenda, being broadly for deregulation, America not fighting stupid wars, an anti-woke social stance and a patriotic, interest-based foreign policy, with the populist concerns of his working-class constituents at the center of his efforts. Indeed, this represents Trumpism without Trump, which must be the GOP formula for future success.

On the other side of the ledger, Biden, incredibly, feels the 2022 midterms vindicate his often-disastrous first years in office, despite the fact that 65 percent to 70 percent of the country blame him for the rampant inflation that has caused the present cost-of-living crisis. Encouraged, the president is more likely than ever to run for reelection and no modern president has lost his party’s nomination once he has entered the race. Doomed, the Democrats seem to be shackled to the fading Biden.

The moral of our story, then, is simple and profound, like the best of literature. Based on the midterm outcome, it is far more likely that Biden will run again and ruinously gain his party’s nomination, while Trump can be thwarted from attaining the GOP nod. As such, the Republicans are in a far better position to solve their succession crisis than are the Democrats. The White House in 2024 is theirs for the taking.

This piece was originally published in Arab News.

As winter sets in, both Russia and Ukraine still think they can win this war

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The fantastic new German cinematic version of Erich Maria Remarque’s seminal war novel, All Quiet on the Western Front, makes a telling, universal point about war itself right off the bat: how a conflict plays out is almost never as you imagine it to be.

The young German boys are regaled about the effortless victories they are about to win for Kaiser and fatherland by their paunchy, dead-eyed, middle-aged, history teacher, a man for whom war has always been a glorious theory. The next thing we know, the clueless lads he has swept up in his nationalistic fever are at the hellscape of the western front in World War I, about as far away from chivalric glory as it is possible to be.

Remarque’s microcosm of the folly of the Great War can be easily extrapolated: that if the great men of 1914 had known all that was to come in the deadly whirlwind of the next four years – which would sweep their more civilized world aside in favor of the barbarism of that was to characterize the twentieth century – none of them would have been as suicidally bellicose as they were in the fateful summer. To put it mildly, the Great War did not go according to anyone’s plan.

As the canny Otto von Bismarck put it, when you draw the sword, you roll the dice. Wars start out being about one thing, but their outcome is always a gamble. Rarely do they end as anyone imagined at their start. In the case of the present Russo-Ukrainian War this is surely true. What Vladmir Putin assumed would be a weeks-long mopping-up exercise, as Kiev was once again politically amalgamated into the wider Russian empire, has become something very different, indeed.

Worse, for analysts, the fog of war is a very real thing, as yesterday’s missile incident in Poland helped to demonstrate. Trapped in the myopia of day-to-day events, it is devilishly hard to take an intellectual, strategic step back, and make sense of what the pointillist painting actually looks like, rather than obsessing over-much about the dots.

Yet if we are to make sense of the world, these are the intellectual precepts we must sternly follow to do so.

Two Present Truths

In the case of Ukraine there are presently at least two hidden truths that bear a lot more discussion, as they reveal the trajectory of the war, rather than merely what is happening on any given day.

First, despite wishful thinking on all sides, there is a lot more fighting to come; the end is not yet in sight.

It ought to be axiomatic (it isn’t) that wars continue as long as both sides think they have a realistic chance of attaining victory. In both the Russian and Ukrainian cases at present, both Kiev and Moscow think the spring can still lift them to dominance over the other.

In the case of Moscow, despite the recent humiliating defeat at Kherson, Putin still has reasons to believe ultimate victory will still be his.

First, Russia’s new position on the east bank of the Dnieper River (which neatly bisects Ukraine) is far more defensible that was the Russian army’s line awkwardly jutting across the river to Kherson. Putin’s troops had time to dig in before they executed this long-planned retreat. With winter setting in, and with Ukraine perennially short of arms, the Russian army hopes to regroup during the winter lull before the spring campaign of 2023.

Also, on the plus side, the Kremlin plans to put 300,000 new troops in the field. While the actual number will be smaller (experts estimate 180,000 is more realistic) and while they will be raw and often indifferently trained, as Joseph Stalin put it, at some point quantity becomes quality.

Putin had tried to avoid this draft as long as possible, as politically it puts his regime in danger as average Russians become more affected by the tragedy of the war itself. But in gaining use of this new mass of men there is an immediate military upside. He can hurl these new troops at the Ukrainians, at a minimum blunting their advance, and wait for western war weariness to further his cause.

For all these reasons, and despite the military calamities that have befallen him, the Russian elite still believe ultimate victory in the war is possible. It will fight on.

But given its recent surprising successes at Kherson and around Kharkiv, Kiev is greatly encouraged and of no mind to end a conflict where the military momentum presently lies with them. The Biden administration, which in sending more than half of all military and civilian aid to Kiev is in essence Volodymyr Zelensky’s patron, shows no signs of flagging in its support for the Ukrainian cause.

More advanced American weaponry has arrived in Ukrainian hands, most famously the HIMARS multiple rocket launcher, and with time and practice, Ukrainian troops are using the new, advanced weaponry to increasingly deadly effect. With the coming of the Spring, and with the strategic initiative still with them, Kiev is not remotely minded to throw in the towel.

Second, it is political forces away from the battlefield that will determine the outcome of the war.

The two key present political drivers of the war are as simple to explain as they are hard to gauge: will western war-weariness outpace Russia’s fabled ability to suffer, or will Putin’s calling up of his reservists and issuing a semi-draft be the beginning of the end of Russian tolerance for his botched invasion? The key political question is whether Russian or Western weariness comes to a head first.

For the West, the good news is that the European scramble to secure energy supplies for the coming winter has been tactically successful; most of the storage tanks are around 90 per cent full, in excess of normal EU directives. Europe will be able to get through the coming winter.

But what about the next one? For the EU’s scramble to throw policy plates in the air in terms of its energy policy must not obscure the devastating fact that Brussels has no plan to get through the next winter.

It will take time for the German engineers to construct the vast Liquified Natural Gas (LNG) terminals in the north of the country to offload American shale. Likewise, gas-rich Qatar would like to help, but its long-term contracts until recently have been with Asian countries.

There will be more gas from the Netherlands and Norway, but the black hole that emanates from Europe divesting itself from Russian natural gas (due to the moronic energy policies on the continent of the past two decades) will not go away. It is next winter that remains the problem.

Is Europe really prepared to theoretically support a Ukraine most of its citizens have never visited, given the practical economic and social costs that may ensue? Is a decadent Europe really prepared to genuinely make sacrifices for anything?

A fine European Council on Foreign Relations poll of June makes for bleak reading. When Europeans were asked whether the goal over the Ukraine war should be to for it to end immediately or to see Russia defeated, a plurality of 35 per cent wanted peace at all costs, while only 22 wanted justice for Ukraine. Further, pluralities favored peace at any price in Italy, Germany, and France.

If things get tougher, it is an open strategic question as to whether Europe is not the weak link in sustaining the Ukrainian cause.

For the hawkish Russian elite, the danger is that further defeats – and even the absence of a confidently expected victory – will lead to Putin’s demise or at least desire to save face in some way at the negotiating table. While the Russian President is undoubtedly hoping that time is on his side as the Europeans waver in their support for Ukraine as 2023 progresses, time can also be seen as moving against the Kremlin.

A war that was supposed to take days has taken years. Easy victory has given way to humiliating stalemate at best and defeat at worst, sullying the very Russian nationalism brand that has been the source of both Putin’s political legitimacy and surprising popularity for decades. John Kennedy put it well: while victory has a thousand fathers, defeat is an orphan.

Putin may find himself increasingly alone, isolated, and politically endangered if Russia’s masses of men cannot change the current trajectory of battle. Saving face at the negotiating table (with the Europeans and Americans restraining the Ukrainians on the basis that they are paying for everything) may be his last, best hope of survival in time.

So, these are the new truths of the Russo-Ukrainian War. What Remarque would entirely understand is that lying beneath these strategic questions there lies one horrible, human certainty; the suffering is bound to continue.

This piece was originally published in Conservative Home.

The midterm map says America will turn right

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The pioneering 20th-century Kenyan aviator Beryl Markham put it well in explaining the intellectual usefulness of maps: “A map says to you, ‘Read me carefully, follow me closely, doubt me not … I am the earth in the palm of your hand’.” And for all the fog obscuring the outcome of the 2022 US midterm elections, we have a clear map to guide us to the outcome if we simply decide to use it.

There is a lot we can already glean. First, historically, the party out of power two years after a new president is sworn in almost always does well, as “buyers’ remorse” sets in regarding the new administration. The simple fact is that there have been only four midterm elections out of 38 since 1870 in which the party holding the White House either gained seats in the House of Representatives or had a net loss of five seats or fewer — the very limited number that would cost the Democrats their current majority. This historical navigation point alone means the House is likely to shift to Republican control.

Second, the phrase most associated with the legendary former Democratic House Speaker Tip O’Neill — “All politics is local” — has been proved almost entirely wrong over the past generation; in fact, it’s national, not local. The single biggest determinant of House outcomes is the sitting president’s approval ratings. Again, as we have said before, a president with an overall approval rating above 60 percent can dictate to Congress his wishes; one with an approval rating below 40 percent is trying to squash rumors that he is dead.

According to RealClearPolitics’ most recent polling, the hapless Joe Biden is limping along at 43 percent, a number that does not augur well for Democratic hopes in the House. Adding these two navigation points together on our intellectual map, look for the Democrats to lose between 25 and 35 seats in the House, and for the Republicans to take control.

Third, while House races have become nationalized over the past generation, Senate races remain stubbornly idiosyncratic, with outcomes instead based on both the specific character of the candidates and the nature of the state itself. With a third of all Senate seats up for election in 2022, the Democrats also have the luck of the draw this time around. They are not defending any Senate seats in states carried by Donald Trump in 2020. Further, the Republicans must defend 20 seats, limiting their chances to make large gains, while this cycle the Democrats are defending only 14 seats. For these highly specific reasons, Democratic losses in the Senate will be fewer than in the House.

However, fourth, the primary issues the campaign has been fought on — the intellectual terrain of the political contest — have greatly favored the Republicans. November’s latest CNN poll finds the economy the overwhelming issue for most voters, with a majority 51 percent saying it is the most important policy area affecting them. Abortion — after the Supreme Court struck down Roe vs Wade and returned decision-making on this contentious social issue to the states — comes a distant second at just 15 percent.

A September NBC poll confirms our navigational data point, listing the top four issues as the Economy, the cost of living, abortion, and crime. Republicans have a decisive 23-point advantage over Democrats in terms of handling crime and 19 percent on the economy.

Voters overwhelmingly blame the Biden administration for the worst surge of inflation in over 40 years, after it ruinously spent trillions of dollars on social programs even as the economy quickly returned to pre-pandemic levels. Too much money chasing too few goods has been the largest factor leading to the price spike, in which adjustable mortgage rates topped 7 percent and the price of staples such as beef and gas skyrocketed. Grocery prices overall have increased by an uncomfortable 13 percent since Biden’s inauguration.

The economy, the cost-of-living crisis and the surge in inflation are voters’ greatest concerns, and the White House is who they blame. RealClearPolitics June polling shows a dominant 64 percent of those surveyed disapprove of how the president is handling the economy. This is simply killing Democratic chances to retain the 50-50 Senate.

Fifth, we know the states to watch on election night. Ohio, North Carolina, and Wisconsin are all narrowly trending Republican; buck that trend in any of these and the Democrats have a real chance to hold the upper chamber. However, New Hampshire, Arizona, and Pennsylvania have all been narrowly trending Democratic. A loss in any of these and it is going to be a long night for Joe Biden’s party. Control of the Senate may once again come down to Georgia, as it did in 2020. There, if any candidate fails to obtain 50 percent of the vote, there will be a run-off in a month’s time to determine the seat, and quite possibly the Senate majority.

Given our intellectual map, however, the midterm outcome is surprisingly clear. My firm’s final prediction is for the Republican Party to take the House by 25-35 seats, and the Senate more narrowly by a one to three-seat margin. The GOP is going to be back.

This piece was originally published in Arab news.

Rishi Sunak and the revenge of the grown-ups

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A famously frustrated Bill Clinton once explained the paradox of American politics like this: While the American people emotionally liked the Democratic Party — loving its nurturing focus on taking social care of the country — it still tended to vote for a colder, more distant, law-giving Republican Party. The Democrats were the “Mommy Party” and the GOP was the “Daddy Party.”

The American people might have yearned for a warm New Testament cuddle, but, when things went bump in the night and goblins came, instinctively they voted for Old Testament Republicans — the grown-ups of their day — to save them from the darkness. You might resent being told to eat your vegetables but you are secretly glad someone has the force of character to tell you to do the hard, necessary things in life.

Something very like this powerful dynamic is playing out in the high-drama surrounding the seemingly endless crisis swirling around Britain’s Conservative Party — historically perhaps the most successful political party in the modern world, though not recently.

Beset by an annoying, otherworldly self-regard for its own internal machinations, the Tories are on their fifth prime minister in six years — and this in the face of the pandemic, cost-of-living crisis, return of endemic inflation, and the war in Ukraine. In other words, international perils make this a time for grown-ups, even as the Conservatives have parochially behaved like children. It is little wonder that they find themselves fathoms behind the center-left Labour Party in the polls. The Tories have squandered their greatest asset and the secret to why they have been the natural governing party in the United Kingdom for much of the past two centuries: They are no longer seen as stern, yet capable, grown-ups.

Rishi Sunak on Tuesday became the 57th prime minister in British history, coming to power precisely to restore the Tories’ sullied grown-up reputation. A few years ago, I remember meeting him at a Tory Party function and he was everything he appears to be at a distance: steady, well-meaning, serious (if rather funny), talented and rather quiet. In other words, he seemed to me even then to be the polar opposite of the bombastic, carnivalesque, louche, strutting Boris Johnson. The Greek philosopher Heraclitus put it well: “Character is destiny.” Johnson as premier and Sunak as chancellor was never going to work well, and the record shows it did not.

Character invariably spills over into policymaking. Johnson was for what came to be known as “cakeism” — in that you can have your cake and eat it, too. In policy terms, this meant the magical thinking view that the UK could have a European-style safety net and pay only American-style taxes. While such an irresponsible view made Johnson popular with the Tory base for a time, a concerned Sunak fought a rear-guard action against this fiscal abomination. Johnson’s undoing for attending a series of Downing Street parties (and misleading the world about it) while draconian strictures were in place for the general public because of COVID was just another form of cakeism. The rules Johnson made were for the little people; they were never meant to apply to him.

The disastrous 45-day reign of Liz Truss followed, fueled (quite properly) by a basic critique of a British economy that is no longer fit for purpose in the 21st century. Decades of low productivity have left the UK with a low-growth, high-regulation undynamic economy, a Europe across the channel. Truss rightly wanted to take advantage of Brexit, using the regulatory freedom it allows to remake the UK as a Singapore-on-the-Thames: low-tax, low-regulation, high-trade and high-growth. All of this macroeconomic thinking was admirable and correct but, during the seemingly endless leadership campaign that followed Johnson’s defenestration, Truss fatally omitted to fill in the policy details lying behind her ambitious aspirations.

Unlike Margaret Thatcher, who skillfully used her spell as leader of the opposition to prepare the British public for radical changes she intended to make, Truss thrust them onto the British people with little warning. It proved to be her undoing. The markets, already spooked by the Bank of England’s derelict performance in taking its eye off the inflation ball, rebelled. Famously, Truss’s shelf-life as premier was shorter than that of a Tesco grocery store lettuce purchased by The Daily Star.

Because of all these self-inflicted wounds, Sunak comes to power with almost nothing left to lose. Upon winning the leadership, his Old Testament admonition to the death cult that has become the Tory Party could not have been more on point: “Unite or die.” In terms of foreign policy, look for the UK to continue its strong (almost worryingly neo-conservative) support of Ukraine in the face of Russian adventurism.

On the economic front, while entirely sharing Truss’s dream of the UK as a Singapore-on-the-Thames, Sunak disagrees with how to get there. First, Truss’s unfunded tax cuts will be shelved for the foreseeable future to steady markets worried about the profligacy of the British political elite. Second, cakeism is over; there will be significant spending cuts. Third, defense spending will hold steady, but probably will not be allowed to stratospherically rise from 2 percent to 3 percent as Truss had announced. Fourth, as a pro-Brexit leader, Sunak will look to make good on the promise of Britain’s hard-won freedom to cut trade deals with the portions of the world that are actually growing (India, the United States, the Anglosphere).

In other words, it’s time for Britain to eat its vegetables. It is a time for the revenge of the grown-ups. I have a sneaking suspicion that Bill Clinton will be proved right. Despite the very tall odds, look for Sunak to succeed in his new role.

This piece was originally published in The Hill

Sanctions on Russia are on a collision course with Europe’s green ambitions

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These days, Europe is seen as the weak link in the developed economic world. The European stock market is underperforming its US rival, down 22 percent year-to-date. Even risky emerging markets are doing better. Likewise, Europe’s surging inflation rates, in countries like Germany and Spain (not to mention what the UK is going through), are worse than it is in Mexico.

What is the primary policy culprit for all this economic woe? Most of all this is due to European sanctions on Russian energy as punishment for its aggression in Ukraine. That’s by far the most significant headwind. These sanctions have set off a massive commodity price spike that’s rebounded to damage the European economy.

Green zealots (and there are a lot of them in Europe) say that somehow all this economic misery is actually good for the continent because by abandoning Russian oil and gas, European Union leaders are signaling to its member states and its people that it is boldly moving into a post-fossil fuels world. Ursula von der Leyen, the out-of-her-depth EU Commission president, grandly describes the move beyond fossil fuels as Europe’s moon mission.

But all this utopian fervor hits the skids the moment reality intrudes, for facts are stubborn things. Punchy revolutionary rhetoric won’t turn Europe away from fossil fuels. Instead, ironically, the continent is being forced to return to coal to make up for the energy shortfall as a result of giving up Russian gas, merely to keep the lights on over the coming winter. Yes, coal is back in climate-purist Europe.

The Greens – the second in command in the ruling German coalition and occupying the pivotal Economic and Foreign Ministries– have been dragooned by reality into using more coal, a fatal sin in their climate change religion. This month’s ban on Russian coal just means Germany will simply get it from elsewhere. And the place to make up the difference is with their old American allies.

U.S. coal exports to Europe rose more than 140 percent in May compared to a year earlier — and they are continuing rising at that stratospheric level because Europe desperately needs coal for electricity generation to replace Russian gas. By October, U.S. coal shipments will need to grow far higher than they already are just so enough coal will be available in Europe to keep the heat on by winter, says the U.S. Coal Exports Coalition, part of the National Mining Association.

Despite all the endless nattering about climate change and the Paris Accord getting re-signed by the Biden Administration in his first year in office, the world’s biggest polluters are also not falling in line with Europe’s utopian green agenda, given the raging global energy crisis. For example, India, not wishing to commit economic suicide, said it would delay coal power plant closures recently to maintain low energy costs. This makes perfect policy sense. But to put it mildly, it is not music to the ears of Europe’s green elite.

At the big picture policy level, it is now painfully obvious that energy sanctions on Russia have boomeranged, proving to be a disaster for European commodity prices, fueling the continent’s cost of living crisis, through the law of unintended consequences. On the other side of the ledger, the increase in global energy prices that the sanctions have brought about have led to an unbelievable increase in Russia’s energy export earnings, up a whopping 22 percent in the year to date, as at the end of September. Surely, this is not what the West initially had in mind.

It is time to take a deep breath and actually think in realist terms. Some sanctions placed on Russia are good and serve western interests, but others, clearly, do not. But it has become something of a political nightmare – once the sanctions are in place, which leader could justify rolling them back? In a rush to appear at the front of the pack, many sanctions were slapped on private companies vital to the global economy without a second thought for the unintended consequences.  

Instead, the West has shot itself in the foot on energy, done great harm to climate change initiatives, and risks rising global food prices due to fertilizer production limits, and sky-high energy prices.

At the world market level, there is little doubt that the demand for coal will continue to grow, while the economic reality energy sanctions have unleashed mean that the green agenda in the European Union has been pushed into the background. The massive expansion of renewables is currently mainly on paper – while the increasing hunger for energy today is real.

This piece was originally published in City A.M.