Saturday, November 9, 2019

Europe should see China as an ally

China's COSCO co-owns two terminals at Port of Genoa.

Europe should no longer see China as a threat and instead see it as an ally.

There are economic reasons for considering China as an ally. Europe must work closely with China on sustainable, inclusive, social and green economic policies and on addressing international economic issues such as global warming, extinction of the species and the need for reform of the global financial system*). This benefits Europe, China and the rest of the world.

There are environmental reasons for considering China as an ally. In the fight against climate change, China is at the forefront of some clean air policies, investigating opportunities to improve green technologies and make them cheaper, while striving for international cooperation rather than competition. China is the world’s largest investor in renewable energy. China has signed the Paris Climate Agreement, while the United States has not done so and has now even officially declared it will not sign it.

There are political-military reasons for considering China as an ally. Europe should stop China bashing and presenting the country as a threat to global security, as is popular with Western media and politicians today. Europe needs to develop a fresh, unbiased view of China's role in international security. China’s main concern on international relations is its own national security, similar to Europe’s.

Instead of saving NATO from its "brain death" (words of President Macron), Europe should look at China without prejudice, fear and arrogance. It should distance itself from American arrogance and hegemonic pretension. Seeing China as a potential ally will provide a sensible European perspective on world security. At the same time, such thinking can help improve relations with Russia, another major player in global security.

There are also mass psychological reasons for considering China as an ally. It will help enormously in overcoming the racial and political rejection of China. The framing of China as a threat in recent years has been successful in brainwashing the minds of many intellectuals and politicians. 

What about the authoritarian, repressive and dictatorial characteristics and tendencies in China? Should we in Europe not clearly reject the way in which China deals with its minority of Uyghurs? Should we not reject China's assumed or real secret espionage through Huawei? Should we not reject Chinese exploitation of minerals and other resources in poor countries? Should we not reject China's hidden or not so hidden intervention in Hong Kong's policies?

Yes, I am concerned about such dictatorial, repressive or authoritarian issues. But then I expect equal concern about authoritarian, repressive and dictatorial issues in Europe, even though they may be less visible, less dramatic and can be criticised publicly. European democracies are more repressive and authoritarian than they claim to be. An example of this is how European technocrats in economic and central bank ministries dictate economic policies to the detriment of large sections of the population, thus undermining democracy - see the case of Greece.

I think or hope that China is interested in good relations with Europe. A lot is being written about China's expansion in Europe, buying ports and making other foreign investments in European countries like Greece, Italy and Spain. It is presented as if the Chinese are taking over key infrastructure in Europe, thus silently preparing invasion -- the Huns of the east invading civilised Europe. But history has it differently: it were the civilised or not so civilised Portuguese, Dutch and British who invaded South and East Asia and occupied or subjugated (parts of) big countries like India and China. Holland even stuck to its colony Indonesia after the Second World War until the United States convinced the Dutch to give it up. China's interest in Europe is not to invade or occupy it. Its interest is to develop economic ties with Europe.

China and Europe play an important role in the cooperation of the multipolar world, particularly when the US is becoming an insecure superpower behaving irrational or irresponsibly in many areas due to bad domestic politics and lingering Cold War mentality.

Together China and Europe could balance the US so as to avoid the collapse of an already fragile world system under threat by global warming, extinction of the species**), and war. If history has taught one dire lesson to the Europeans it is that every effort should be made to maintain peace and a just social order. The issue of how European countries could be better governed by involving its inhabitants in policy making rather than leaving it to technocrats and powerful business (see my post Is Europe run jointly by its technocrats and CEOs?), and the faltering criticism of European democracies and institutions, are pressing issues that Europeans have to solve to become real democracies.

*) In March 2009, there was a plea by China's central banker Zhou Xiaochuan to create a new global reserve currency replacing the dollar. Jan Joost Teunissen reminded in his 2009 speech "Why should we have listened better to Robert Triffin?" in Louvain-la-Neuve that three years earlier Fan Gang, member of the Monetary Policy Committee of China's central bank and member of the Fondad Network, made a similar plea in his contribution to the Fondad conference and book Global Imbalances and the US Debt Problem: Should Developing Countries Support the US Dollar? 

**) A recent UN panel report on biodiversity says that humanity faces a biodiversity crisis just as profound as the climate crisis."Biodiversity," the panel declared, "is declining faster than at any time in human history." "What is needed, is a change to the definition of what a good quality of life entails—decoupling the idea of a good and meaningful life from ever-increasing material consumption."

Friday, November 8, 2019

Johannes Witteveen: "Music goes much deeper"

I still regret the death of Johannes Witteveen in the spring of this year. He was an advisor and friend of FONDAD and helped me enormously (I am the director of FONDAD). Below I reproduce part of an interview I had with him. 

Thursday, April 30, 2015

Johannes Witteveen: "Music goes much deeper"

Johannes Witteveen, former managing director of the IMF
Johannes Witteveen and I had a long and interesting conversation about "the" global economy, the "crisis", and the need for a change in thinking and policies... And, then, towards the end of our meeting at his house in Wassenaar, we suddenly were speaking about the making of music. Here is a transcript of that part of our conversation:

- When I was ten years old I stretched rubber bands on an old shoebox. (Witteveen laughs) I liked the vibration. 

Yes, yes, that's nice. 

- And when I was a bit older, I made a guitar of cardboard on which I could play a Christmas song ("Silent night, holy night..."). And when I was 13,  I bought a guitar and since that time I play guitar. 


- The best part of playing guitar is to let emerge something from one tone. Often I feel myself more as a kind of medium than a creator... 

Yeah ... By improvising something happens to you. That is very nice, and plays a large role in Sufism. Meditative music. The tambura is used for that, that's an Indian instrument my wife has played many times, to come to meditation. Through the sound of one tone, over and over again, and then she softly sang a bit. 

- As a boy I climbed in tall trees, and then I felt the wind blowing around my ears ... 

(Laughing) Yeah. That is different from thinking. It goes much deeper.

Thursday, November 7, 2019

Debt Relief for Argentina?

From Transcript of IMF Press Briefing, November 7, 2019, by IMF Director Gerry Rice

QUESTIONER: I have a question about Argentina. I was wondering if you're planning any mission there, or is there any meetings scheduled here in Washington, D.C. And could you give us a sense of where we are with the Argentina issue?
MR. RICE: Sure. Thank you. So where are we on Argentina? The Managing Director, Kristalina Georgieva, congratulated President Elect Fernández on his election, and reiterated the Fund's readiness to engage with Mr. Fernández and his administration to help Argentina address the important challenges facing the economy there, and to pave the way for inclusive and sustainable growth.
So, there was that message from the Managing Director, as the first thing I would say. The second thing is that we stand ready with President-Elect Fernández and his team at their convenience during the transition period. I don’t have any dates for missions planned at this stage. Again, it will depend on the discussions going forward. And again, we stand ready to engage, that's kind of where we are.
QUESTIONER: Thanks, Gerry. Just a quick follow up on that. Has Argentina given you any indication or have they made a formal request for modification of the program? Is that sort of what you're waiting for to begin this engagement?
MR. RICE: You know, we're just ready to engage. We're ready to discuss at any time, again, at the convenience at the new administration in Argentina. And, you know, that's not contingent on any, you know, prior conditions. We're just ready to engage whenever is convenient for them to do so.
QUESTIONER: Yes, thanks Gerry. To follow up on these questions, there's going to be an event in Miami where Alejandro Werner is going to be one of the speakers and also Mr. Nielsen which is a member of Alberto Fernández's team. Wanted to know if there was any meeting scheduled between the two of them in Miami.
MR. RICE: Well, I have the same understanding that you do that Alejandro Werner and Mr. Nielsen are both participating in this conference organized by the University of Miami tomorrow. I'm not aware of any planned meeting but they're both going to be there and often on these occasions, there are meetings on the sidelines of these events. So again, no planned meeting but we'll see what happens tomorrow.
QUESTIONER: There's a lot of debate about Argentina's upcoming negotiations with both the IMF and the bond holders. I wanted to ask if you have, the IMF's staff has any position regarding of which negotiations should come first. If Argentina's new government should negotiate first with the bond holders or with the IMF and do the bond holder negotiation under the IMF program.
MR. RICE: So, again we stand ready to engage straight away and regardless as I said earlier. On the issue of potential debt negotiations and discussions, I mean, a couple of things. Alejandro Werner talked about this during the recent Annual Meetings. But, you know, as is the case with all countries, so not just Argentina but all countries, the decision to restructure debt is entirely the purview of the member country and in consultation with their legal and financial advisors.
Our role, the IMF's role, is to assess whether debt is sustainable with a high probability in line with our exceptional access policy. So, in order to conduct our debt sustainability, we need the analysis, we need the information on the authority's policy plans as well as take a look at the macroeconomic outlook consistent with those plans. So, I mean, trying to answer your question, we are not in a position to make that assessment right now because the discussions with the new administration have not yet taken place. But again, you know, the role, the responsibility for the debt restructuring lies with the member country and our role is to assess the debt sustainability. Just very clear responsibilities there.
QUESTIONER: One more on Argentina. The new government, the elected government in Argentina said that in a conversation with President Trump, President Trump said that he has instructed the IMF to work with Argentina. Can you specify what does he mean by that and has there been any conversation between MD Georgieva and President Trump regarding this?
MR. RICE: So, just on your last part I'm not aware of any discussion between the President and Kristalina Georgieva. But, you know, what I would say is that we work with all our member countries and I would really just point to the statement that Kristalina Georgieva made which I referred to at the beginning of the press conference that we stand ready to work with President-Elect Fernández and his administration. And, you know, to help Argentina overcome the challenges and get back on the path of sustainable and inclusive growth. That commitment from the Fund to Argentina has been there and that commitment to Argentina continues to be there today.
QUESTIONER: Last night, Georgieva referred to Argentina, she said she was willing to discuss with Argentina (inaudible) commitment as soon as the IMF could foresee what kind of policies would the new government apply in Argentina. Do you have by now does the IMF have by now a certain idea about what kind of policies, economic policies would the new government display in order to start a conversation?
MR. RICE: Well, you know, I wouldn’t want to again, preempt any discussions that might take place with the new administration and, of course, first to hear their thoughts on the policy path. But perhaps, you know, just to note that during his election night speech and subsequent public pronouncements, President Elect Fernández stated that he is looking to lift Argentina's economy out of the current crisis and pave the way for more solid and inclusive growth. And we fully share those objectives is what I would say on that.
And again, our commitment to help Argentina get onto this better path of sustainable and inclusive growth and we are ready to engage on that as convenient with the new administration.
QUESTIONER: Mr. Fernandez has also talked about restructuring, reprofiling the debt without any removal of the debt, any (speaking Spanish) in Spanish terms. (Speaking Spanish).
And in Argentina, some people have said that the IMF would not recommend that kind of approach in restructuring of the debt. What is, is it true the IMF thinks that there should be a removal of debt in Argentinian negotiations with private creators?
MR. RICE: Yeah, you know, again I wouldn't want to preempt any discussions that might take place on that or other issues. I think those of you who follow the IMF know that from, you know, discussions in other countries, the capacity of the IMF itself to restructure its debt is constrained by its legal and policy frameworks. I'm talking about the IMF debt. So that’s clear and that's true, not again, not just in the case of Argentina, that’s just the case for all member countries.
And responding to the previous question, I tried to delineate the different responsibilities of, the government has the role, the -- in the decision to restructure debt and we have the role of assessing whether the debt is sustainable.
And again, I think all of this has to wait for the engagement to take place between the Fund and the new administration and we will be carrying forward the discussions after that.
QUESTIONER: The, there was an interview by Alberto Fernández --
MR. RICE: I'm sorry, say again, Jeff. Could you speak into the mic?
QUESTIONER: There was an interview on television last night with Alberto Fernández and he said that the IMF prohibits debt haircuts and hopes the IMF will help Argentina pay down its debt.
So the IMF -- does the IMF prohibit debt haircuts and would it help Argentina pay its debt and I'm just asking in a little bit of a different question. Thanks.
MR. RICE: Yeah. Again, Jeff, you know, I think that’s pretty much along the lines of the previous question. I wouldn't want to get ahead of any discussions that might take place and I have explained the IMF position on its debt, on our debt, and that’s just a long-standing policy for the IMF.
But the discussions on any potential haircut, debt restructuring, that’s really for the government to carry forward and more broadly we remain committed to helping Argentina in any way we can and we stand ready to engage as soon as it's convenient for the new administration.

Recommended reading:

The crisis that was not prevented: lessons for Argentina, the IMF, and globalisation

Open full report
What caused Argentina's financial crisis?
This book provides an overview of the current thinking about the Argentine crisis and reveals the limitations of the so-called "Washington Consensus". The book results from the international research project Global Financial Governance Initiative, which brings together Northern and Southern perspectives on key international financial issues. The book examines lessons to be learned, and present ideas on how future crises in emerging and developing economies might be prevented.
Chapters include:
  • introduction, by Jan Joost Teunissen and Age Akkerman
  • Argentina: a case of globalisation gone too far or not far enough?, by Dani Rodrik
  • the mistaken assumptions of the IMF, by José Antonio Ocampo
  • growth, instability and the crisis of convertibility in Argentina, by José María Fanelli
  • the regional fallout of Argentina's crisis, by Ricardo Ffrench-Davis and Rogério Studart
  • the puzzle of Argentina's debt problem: virtual dollar creation?, by Bernardo Lischinsky
  • the Argentine drama: a view from the IMF board, by J. Onno de Beaufort Wijnholds
  • some lessons from the Argentine crisis: a Fund staff view, by Mark Allen