The risk of man-made earthquakes due to fracking is greatly reduced if high-pressure fluid injection used to crack underground rocks is 895m away from faults in the Earth’s crust, according to new research.

The recommendation, from the ReFINE (Researching Fracking) consortium, is based on published microseismic data from 109 fracking operations carried out predominantly in the USA.

Jointly led by Durham and Newcastle Universities, UK, the research looked at reducing the risk of reactivating geological faults by fluid injection in boreholes.

Researchers used microseismic data to estimate how far fracking-induced fractures in rock extended horizontally from borehole injection points.

The results indicated there was a one per cent chance that fractures from fracking activity could extend horizontally beyond 895m in shale rocks.

There was also a 32 per cent chance of fractures extending horizontally beyond 433m, which had been previously suggested as a horizontal separation distance between fluid injection points and faults in an earlier study.

The research is published in the journal Geomechanics and Geophysics for Geo-Energy and Geo-Resources.

Fracking – or hydraulic fracturing – is a process in which rocks are deliberately fractured to release oil or gas by injecting highly pressurised fluid into a borehole. This fluid is usually a mixture of water, chemicals and sand.

In 2011 tremors in Blackpool, UK, were caused when injected fluid used in the fracking process reached a previously unknown geological fault at the Preese Hall fracking site.

Fracking is now recommencing onshore in the UK after it was halted because of fracking-induced earthquakes.

Research lead author Miles Wilson, a PhD student in Durham University’s Department of Earth Sciences, said: “Induced earthquakes can sometimes occur if fracking fluids reach geological faults. Induced earthquakes can be a problem and, if they are large enough, could damage buildings and put the public’s safety at risk.

“Furthermore, because some faults allow fluids to flow along them, there are also concerns that if injected fluids reach a geological fault there is an increased risk they could travel upwards and potentially contaminate shallow groundwater resources such as drinking water.

“Our research shows that this risk is greatly reduced if injection points in fracking boreholes are situated at least 895m away from geological faults.”

The latest findings go further than a 2017 ReFINE study which recommended a maximum distance of 433m between horizontal boreholes and geological faults. That research was based upon numerical modelling in which a number of factors, including fluid injection volume and rate, and fracture orientation and depth, were kept constant.

Researchers behind the latest study said that changing these parameters might lead to different horizontal extents of fractures from fluid injection points.

The researchers added that this did not mean the modelling results of the previous study were wrong. Instead they said the previous study was approaching the same problem using a different method and the new study provided further context.

In the latest research the researchers used data from previous fracking operations to measure the distance between the furthest detected microseismic event – a small earthquake caused by hydraulic fracturing of the rock or fault reactivation – and the injection point in the fracking borehole.

From the 109 fracking operations analysed, the researchers found that the horizontal extent reached by hydraulic fractures ranged from 59m to 720m.

There were 12 examples of fracking operations where hydraulic fractures extended beyond the 433m proposed in the 2017 study.

According to the new study, the chance of a hydraulic fracture extending beyond 433m in shale was 32 per cent and beyond 895m was one per cent.

The research also found that fracking operations in shale rock generally had their furthest detected microseismic events at greater distances than those in coal and sandstone rocks.

Microseismic data was used in previous Durham University research from 2012. This suggested a minimum vertical distance of 600m between the depth of fracking and aquifers used for drinking water, which now forms the basis of hydraulic fracturing regulation in the UK’s Infrastructure Act 2015.

Professor Richard Davies, Newcastle University, who leads the ReFINE project, said: “We strongly recommend that for the time being, fracking is not carried out where faults are within 895m of the fracked borehole to avoid the risk of fracking causing earthquakes and that this guideline is adopted world-wide.”

Women’s representation on the boards of Spain’s listed companies climbed by 15 percent during the year 2017. That increase brought the total to 258 female directors, who now occupy just over 19 percent of 1,347 board seats.

While significant ground was gained, the current situation still falls short of the 30 percent representation recommended by the Good Governance Code of Spain’s National Securities Market Commission (CNMV) for the year 2020.

This is made clear in a new report on women on the boards of Spanish listed companies, created under the academic direction of professor Nuria Chinchilla, holder of the Carmina Roca and Rafael-Pich Aguilera Women and Leadership Chair at IESE.

The report, produced by communications consultancy Atrevia and IESE, includes the first annual analysis of Spain’s continuous market and the sixth annual report on women on the IBEX 35 boards of directors.

Much Remains to Be Done

According to the study, there are 15 listed companies without any female directors and another 47 have only one woman on the board. This means that almost half Spain’s publicly traded companies still have minimal or no female presence in positions of corporate oversight.

What’s more, the advance of women in absolute numbers and their relative weight on corporate boards does not translate into a significant increase in executive positions. In fact, less than 5 percent are executive directors.

Companies in the financial sector have the most female presence on their boards — an average of three female directors per company. The fewest are found in real estate services — with only one woman, on average, occupying a board seat.

IBEX-35 Companies: Ahead of the Curve

Homing in the 35 companies tracked by Spain’s benchmark IBEX-35 index, and setting aside the remaining 98 listed companies, more progress is seen. In the elite group of 35, there are 106 female directors out of 448 total — that’s almost 24 percent. In the other listed companies, female representation comes to just about 17 percent.

And, as for the number of female directors per company, the IBEX 35 has, on average, almost double the number seen for the rest of Spain’s stock market participants. That said, the only two companies with more female than male directors — Realia and Ezentis — are not IBEX-35 components.

For the first time, all 35 IBEX-tracked companies have some female representation and there’s upward trajectory apparent: as of the beginning of February, there were 106 female directors, 14 more than counted by the fifth annual report on IBEX 35 companies.

With regard to the relative weight of women in the IBEX boards, the current 24 percent is nearly double the 12 percent tallied just seven years ago, in 2011.

The signs of improvement in the IBEX 35 are evident: last year, 12 companies appointed more women and now eight of them (four more than last year) are in line with the European Commission’s recommendation that at least 40 percent of non-executive directors should be women.

According to the report, four women CEOs also chair their boards — one more than the previous year. They are Ana Botín of Santander, María Dolores Dancausa of Bankinter, Vanisha Mittal of ArcelorMittal, and now Cristina Ruiz of Indra.

Closer To Europe

The listed companies of Spain are coming closer to European averages — although, at 19 percent, they are still 6 percentage points below the European Union’s large listed companies, where one out of every four board members is female. The gap between the IBEX 35 and EU average is much smaller, at just 2 percentage points (see graphic below).

In terms of the situation in other countries, the European Commission’s 2017 Report on Equality between Women and Men in the EU shows that female representation on boards of large listed companies is led by France (41 percent), Sweden (37 percent) and Italy (32 percent).

Methodology, Very Briefly

The report analyzes female representation on the boards of 133 listed companies on Spain’s continuous market (i.e., its stock exchanges traded simultaneously in Madrid, Bilbao, Barcelona and Valencia). The principal data for the IBEX-35 companies were updated on February 8, 2018, while the rest of the data were collected on January 22, 2018. The data comes from Spain’s National Securities Market Commission (CNMV) and the websites of the listed companies.

Europe’s new framework for resolving banks includes a ‘bail-in’ mechanism that aims to ensure that banks’ shareholders and creditors pay their share of costs, and which was first used to resolve the 2013 banking crisis in Cyprus. This column, written by the economist who was the country’s central bank governor at the time, examines the unintended consequences of the bail-in, which have proved more toxic than could ever have been imagined, and not just in Cyprus. Several euro area central banks and their governors have found themselves in the eye of political and legal storms when taking actions to resolve failing banks and/or restore stability in their banking systems.

By Panicos Demetriades*

More than ten years on from the onset of the Global Crisis, public finances in many developed countries remain stretched. Higher levels of public debt to some extent reflect large bank bailout bills that were necessary to rescue banks deemed ‘too big to fail’. While such direct costs have varied from country to country – in some cases, like the US, direct costs have been largely recovered – the crisis has also had undisputed indirect effects on public finances everywhere, as a result of balance sheet recessions, economic slowdowns, and increased unemployment.

Understandably, therefore, one of the key lessons from the crisis for governments has been the need to introduce new bank resolution regimes that shift the burden of failing banks from the taxpayer to investors. In Europe, the Bank Recovery and Resolution Directive (BRRD), introduced in 2014 across the EU28, includes a ‘bail-in’ mechanism which aims to ensure that banks’ shareholders and creditors – including uninsured depositors – pay their share of costs.

In addition, the BRRD provides authorities with a comprehensive framework for dealing with failing banks at both the national and cross-border levels. The BRRD also aims to maintain financial stability by ensuring continuity of critical banking functions during resolution, and provides a range of restructuring and resolution tools intended to restore the viability of parts (or all) of a failing bank. Similar resolution arrangements have been, or are being, introduced in many other countries, including India, Turkey, and the US.

Are the new bank resolution frameworks all they have been hyped up to be?

While the BRRD has only recently been applied officially for the first time – in the case of Banco Popular, a Spanish medium-sized bank that was about to fail in 2017 – many of its provisions, including the bail-in mechanism, were first used to resolve the banking crisis in Cyprus during the first half of 2013.¹

The crisis was triggered by losses from the Greek PSI in late 2011 in the island’s two biggest banks. But its roots were in the doubling of the banking system in the previous six years due to large capital inflows, primarily from Russia and Ukraine. During the period 2005-10, bank credit expanded at 24% per year, fuelling a property bubble and resulting in the ratio of private credit to GDP rising to 287% (the third highest in Europe).

Bank rescue costs, estimated by an independent diagnostic exercise, amounted to 57% of GDP. As such, the Cypriot crisis was equivalent to that in Indonesia in 1997, the biggest banking crisis ever recorded (Laeven and Valencia 2013). The Debt Sustainability Analysis conducted by the IMF revealed that Cyprus could ill-afford to rescue its two largest commercial banks – the bill to save them was nearly 50% of GDP.² Not surprisingly, therefore, international creditors led by the IMF insisted on the bail-in solution as the only way to resolve the crisis.

The study of the Cypriot crisis can offer important insights into the new framework for resolving banks. For example, it has been used to address questions relating to the effects of bail-ins on financial stability – one of the inherent conflicts in the new resolution framework (Philippon and Salord 2017). Specifically, a significant new study by Brown et al. (2018) reveals that the bail-in of retail investors (bondholders and uninsured depositors) in Cyprus undermined short- and medium-term confidence among retail investors.

The findings of Brown et al. are drawn from a survey of 800 Cypriot households in 2013-14. The respondents were clients of the two banks that were resolved – Bank of Cyprus and Laiki – and/or clients of other financial institutions. Importantly, households with deposits above the insurance threshold (€100,000) were over-sampled: 49% had at least one bank deposit over this threshold. Within their sample, 55% of households incurred a direct financial loss, 28% experienced a bail-in of uninsured deposits, 16% experienced a bail-in of bonds, and 44% suffered a loss of bank equity. Of the sampled households, 30% incurred a loss from two sources and 10% from all three.

While the results in Brown et al. are novel, they are likely to be an over-estimation of the impact of the bail-in on depositor confidence. This is not just because of over-sampling of affected households – as only 4% of depositors were bailed-in – but also because of other shocks to depositors’ confidence that occurred at more or less the same time (Demetriades 2017a, 2017b).

Specifically, Brown et al. do not refer to the first Eurogroup agreement on Cyprus, announced on 16 March 2013, which involved imposing a deposit levy on all deposits in the entire banking system, consisting of insured and uninsured deposits at six domestic banks, 35 foreign banks and over 80 credit cooperatives. The ‘haircut’ that was agreed (but never implemented because it was turned down by Parliament on 19 March 2013) was 6.75% for deposits under €100,000 and 9.9% for deposits over €100,000.

This ill-conceived deposit tax turned out to be a massive shock to depositor confidence not only in Cyprus but also in other parts of the euro area. Its rejection by parliament was, by itself, a further blow to confidence since without a financial assistance programme, Cyprus faced the prospect of a sovereign default, financial meltdown and exit from the euro. The traumatic events of those days, which also included a prolonged imposed bank holiday and new limits on ATM withdrawals, culminated with banks reopening on 28 March under severe capital controls that included restrictions on flows of funds between banks within Cyprus.

As a result, it is extremely difficult to disentangle the effects of the bail-in on investors’ confidence from the independent shocks of the deposit tax, capital controls, and the near exit from the euro area. All of these shocks compounded the effects of the bail-in and could in principle have been avoided. It is therefore hard to accept that the bail-in alone was responsible for the shocks to depositor confidence reported by Brown et al.

Indeed, the effects of all combined shocks were not long-lived. By June 2014, the IMF had commended the Cypriot authorities for the stabilisation of the banking sector, which it described as a “major achievement”.³ Capital controls were fully lifted by early 2015. By then, the country was already out of recession and bank deposits had started to grow. By January 2017, Bank of Cyprus, described by the Financial Times as the bank that came “back from the dead”,⁴ was listed on the London Stock Exchange.

Unintended (and under-researched) consequences of the bail-in

There were two unintended, albeit related, consequences of the bail-in which proved more toxic than could ever have been imagined.⁵

The bail-in of uninsured depositors can result in unpredictable switches in ownership in the resolved institution. The new owners may not want to own a bank and may also not be fit and proper to do so. This is the first unintended consequence of the new bank resolution framework.

In the case of Cyprus, the ten largest new shareholders turned out to be politically exposed Russian and Ukrainian oligarchs (one of them, who eventually became the bank’s vice president, was described by Reuters news agency⁶ as a close ally of the Russian president). In addition, the ten largest shareholders were represented by the top five Cypriot law firms, all of which were politically connected (one belonged to the family of the then newly elected Cypriot president).

Not surprisingly, the fitness and probity checks that are normally conducted quietly behind the scenes by the supervisor turned out to be beyond surreal. Suffice to say that they became headline news in the local media and generated a toxic political climate against the central bank and its governor.⁷ This was in addition to the political pressures on the central bank aimed at reducing the bail-in percentage. If heeded, these pressures would have resulted in an under-capitalised bank, with unimaginable consequences.

The erosion of the independence of the central bank that followed these political attacks was the second unintended consequence of the bail-in. It included legislative amendments to the central bank’s governance structure that undermined its decision-making powers and changes to the resolution legislation that shifted powers from the central bank to the government. These amendments were voted in by Parliament in the summer of 2013, notwithstanding an ECB legal opinion⁸ warning against their enactment.

These developments, which I analysed in Demetriades (2017b), have brought to the surface some less well-known legal limitations in the scope of central bank independence, if not the ECB’s reluctance to take more drastic action.

Mersch (2017), for example, explains that tasks and functions conferred on the ECB by secondary legislation after the crisis (for example, micro- and macroprudential supervision, and financial crisis management) are not covered by the very high level of independence provided to the ECB under the Treaty for the pursuit of its primary objective of price stability. While there may be sound legal and historical reasons why this is the case, the economic case for delegating banking supervision or financial crisis management to independent central bankers is not dissimilar to that of monetary policy. If anything, the experience from the management of the crisis in Cyprus confirmed that an independent central bank was better placed than politicians to take time-consistent actions that were politically costly in the short term but beneficial in the longer term.

The toxic fallout on central bank independence in Europe

The little-known toxic fallout on central bank independence from the Cyprus bail-in, like other forms of financial contagion, has not remained confined within national borders. In the last three years, the Greek,⁹ Portuguese,¹⁰ and Slovenian¹¹ central banks and their governors have found themselves in the eye of political and legal storms when taking actions to resolve failing banks and/or restore stability in their banking systems.

By contrast, during the recent banking crisis in the Veneto region, Italy’s central bank sided with the Italian government to prevent the application of BRRD. The two banks that failed, which had been systemic in terms of their supervisory arrangements (they were supervised by the Single Supervisory Mechanism), were deemed non-systemic by the Single Resolution Board and are therefore being dealt with by Italian insolvency legislation. This effectively allows the Italian government to inject around €10 billion of taxpayers’ money to bail out retail investors in the banks.

Yet, Italy is perhaps the euro area country that can least afford to bail out its banking system. The Bank of Italy’s decision to back a decision that smells of short-term political expediency indicates that central bankers’ behaviour in the euro area may already be changing in light of the new, narrower, definition of their independence. This inevitably raises the legitimate question of whether central bankers in the euro area will continue to do “whatever it takes” to save the euro.

About the author:
* Panicos Demetriades, Professor of Financial Economics, University of Leicester. Former Governor of the Central Bank of Cyprus and Former member of the Governing Council of the ECB. Author and Speaker.

References:
Brown, M, I Evangelou and H Sixt (2018), “Banking crisis, bail-ins and money holdings”, VoxEU.org, 1 February.

Demetriades, P (2017a) “Political economy of a euro area banking crisis”, Cambridge Journal of Economics 41(4): 1249-64.

Demetriades, P (2017b), A diary of the euro crisis in Cyprus: lessons for bank recovery and resolution, Palgrave Macmillan.

Laeven, L and F Valencia (2013) “Systemic banking crises database”, IMF Economic Review 61: 225-70.

Mersch, Y (2017) “Central bank independence revisited”, Keynote address at the Symposium on Building the Financial System of the 21st century: An Agenda for Europe and the United States”, Frankfurt am Main, 30 March.

Philippon, T and A Salord (2017), “New ICBM/CEPR Report: Bail-ins and Bank Resolution in Europe”, VoxEU.org, 22 March.

Endnotes:
[1] The Cypriot resolution law, which was passed during the crisis, was in fact modelled on early drafts of the BRRD, with contributions by the ECB, the European Commission and the IMF. As such, at the time it was the most modern bank resolution legislation in Europe. The BRRD in its final form had some additional refinements that were informed by the Cyprus crisis.

[2] In terms of relative size, Bank of Cyprus and Laiki had become the biggest in Europe, with a combined balance sheet size that had reached 400% of GDP.

[3] https://www.imf.org/en/News/Articles/2015/09/28/04/52/mcs073014

[4] https://www.ft.com/content/47ec92b8-de55-11e6-86ac-f253db7791c6

[5] For more details, see Demetriades (2017b).

[6] https://www.reuters.com/article/bankofcyprus/russians-including-putin-ally-join-bailed-in-bank-of-cyprus-board-idUSL5N0H63FF20130910

[7] https://www.bloomberg.com/news/articles/2013-05-29/how-trading-blame-led-to-death-threats-for-ecb-s-cypriot-banker

[8] https://www.ecb.europa.eu/ecb/legal/pdf/en_con_2013_41_f_sign.pdf

[9] https://www.ft.com/content/a2ae6c86-cd3c-11e7-b781-794ce08b24dc

[10] https://www.ft.com/content/320cb516-d700-11e5-8887-98e7feb46f27

[11] http://www.dailymail.co.uk/wires/reuters/article-3679256/Slovenia-investigates-central-bank-chief-rebuffs-ECB.html

We would usually expect that a 12-year-old kid would be taller than a 6-year-old kid. However, if a 12-year-old had only grown one inch over their last six years, we would probably be somewhat worried.

David Brooks devotes his most recent column, “the virtue of radical honesty” to presenting data from Steven Pinker’s new book, Enlightenment Now, which purports to show that things are better than ever. Most of the data has the character of boasting over our 12-year-old’s one inch of growth over the last six years.

Brooks tells us:

For example, we’re all aware of the gloomy statistics around wage stagnation and income inequality, but Pinker contends that we should not be nostalgic for the economy of the 1950s, when jobs were plentiful and unions strong. A third of American children lived in poverty. Sixty percent of seniors had incomes below $1,000 a year. Only half the population had any savings in the bank at all.

Between 1979 and 2014, meanwhile, the percentage of poor Americans dropped to 20 percent from 24 percent. The percentage of lower-middle-class Americans dropped to 17 from 24. The percentage of Americans who were upper middle class (earning $100,000 to $350,000) shot upward to 30 percent from 13 percent.

The problem with the Brooks–Pinker story is that we expect the economy/people to get richer through time. After all, technology and education improve. In the fifties, we didn’t have the Internet, cell phones, and all sorts of other goodies. In fact, at the start of the fifties, we didn’t even have the polio vaccine.

The question is not whether we are better off today than we were sixty years ago. It would be incredible if we were not better off. The question is by how much. In the fifties, wages and incomes for ordinary families were rising at a rate of close to two percent annually. In the last forty-five years, they have barely risen at all.

This fact can be seen even looking at the numbers that Brooks is bragging over. While it’s not clear where they got their poverty data, the child poverty rate comes closest to the numbers in the article. This was at 22.3 percent in 1983. It was down to 21.1 percent in 2014 and fell further to 18.0 percent in 2016.

Should we celebrate this reduction in poverty rates over the last 33 years? Well, the poverty rate had fallen from 27.3 percent in 1959 (the first year for this data series) to 14.0 percent in 1969. That’s a drop of 13.3 percentage points in just ten years. The net direction in the last 47 years has been upward.

It’s true that a larger share of the population is earning over $100,000 a year. This is due to some growth in hourly wages, but also due to more work per family. A much larger share of women are working today than fifty years ago and a larger share of the women working are working full-time. If family income had continued growing at its pace from 1967 to 1973 (the last years of the Golden Age), median family income would be almost $150,000 today.

There are a whole a range of other measures which leave real enlightenment-types appalled by the state of the country today. While Brooks–Pinker tell us “only half the population had any savings at all” in the 1950s, a recent survey found that 63 percent of the country could not afford an unexpected bill of $500. The homeownership rate is roughly the same as it was sixty years ago. Life expectancy for those in the bottom 40 percent of the income distribution has barely budged in the last forty years.

In short, a serious analysis of data shows that most people have good grounds for complaints about their situation today since they have not shared to any significant extent in the economic growth of the last four decades. But apparently, there is a big market for the sort of dog and pony show that Brooks and Pinker present trying to argue the opposite.

This article originally appeared on Beat the Press and republished with permission.

State Department Spokeswoman Heather Nauert said on February 20 that Washington supported united Syria with current borders. “We’re not changing it, we’re not supporting the changing or the addition of any kind of autonomous region”, she added.

The statement, however, runs counter to the DoD actions for its officials must have their own plans for Northern Syria. As early as late last year Pentagon spokesman Eric Pahon confirmed the U.S. Air Force was going to stay in Syria as long as it would have to support the local Kurds and Syrian opposition partners as well as to prevent an ISIS recovery.

The U.S. Secretary of Defense James Mattis even believes the U.S. soldiers have every reason to be in Syria which is justified by a Security Council resolution. However, James Mattis seems the only one to have ever seen the resolution since the Syrian government declared the U.S. military presence in the country as illegal and continually called Washington to withdraw its forces.

Official reports say there are as many as 2,000 U.S. soldiers in Syria now. They have repeatedly launched airstrikes on the Syrian army positions, allegedly by mistake. Besides, the U.S. personnel train as instructors both Syrian opposition fighters and Kurdish militia at its military bases.

Apart from this, Washington was ready to set up a professional 30,000-strong Kurdish army in Northern Syria, as if Pentagon intended to gain a foothold and establish there an autonomous Kurdish quasi-state. But it has not fulfilled its promise i.e. Kurdish independence yet despite the fact ISIS is said to be defeated.

Many Syrian experts think, Washington has different reasons to settle down in Syria, e.g. the U.S. is believed to keep on confronting the official government in Damascus and its allies Iran and Russia as well as protecting its own geopolitical interests in the region, in particular, overall control over oil and gas fields won by the Kurds back from ISIS.

Obviously, the U.S. appears to stay in the sovereign state of Syria for a quite long time under any pretext. For its part, the Kurdish militia should consider any further cooperation with Washington, which has exploited them many times, giving nothing in return. Maybe it’s high time to start negotiations with the Syrian government and kick out the U.S. troops occupying the Kurdish regions and Eastern Syria?

The howling in government and the corporate media and among many liberals about an alleged Russian information war, with bots, trolls and fake news being placed in social media to mislead and incite Americans against each other, might lead one think, like Sen John McCain, that we are practically at war with Russia. Yet it’s all actually pretty silly. After all, our own government has been playing this game for decades, both abroad, and also right here inside the “Land of the Free and Home of the Brave” and against us American citizens.

I know. I was a victim of such an attack, though initially, I didn’t realize what was happening.

Back on August 25, 2005, I published a piece in In These Times titled Radioactive Wounds of War about the devastating damage caused by the US military’s use of depleted uranium weapons in its brutal assault leveling Fallujah, the Iraqi city of 300,000 people that was destroyed by US marines in 2004 as retribution for the killing of four US contractors by the Iraqi insurgents who at the time controlled the city, and for their humiliating defeat of a smaller Marine assault on the city earlier in the year.

At the time I was and had been a contributing editor at ITT, a publication for which I had written regularly since it was founded back in 1978, and was listed on its masthead as such.

It’s amazing what a difference a little water can make.

The Moon formed between about 4.4 and 4.5 billion years ago when an object collided with the still-forming proto-Earth. This impact created a hot and partially vaporized disk of material that rotated around the baby planet, eventually cooling and accreting into the Moon.

For years, scientists thought that in the aftermath of the collision hydrogen dissociated from water molecules and it and other elements that have low boiling temperatures, so-called “volatile elements,” escaped from the disk and were lost to space. This would lead to a dry and volatile element-depleted Moon, which seemed to be consistent with previous analyses of lunar samples.

But ongoing research about the Moon’s chemistry is revealing that it may be wetter than initially thought, which raises questions about some aspects of this origin story.

“This is still very much an area of active research, so there is much that scientists, including our Department of Terrestrial Magnetism staff scientist Erik Hauri, as well as many other Carnegie colleagues and alumni, are figuring out about how much water exists in the Moon. This is a highly important and challenging question to answer given that we have limited knowledge on the history and distribution of lunar water,” explained Carnegie’s Miki Nakajima who, together with Caltech’s Dave Stevenson, set out to determine whether prevailing Moon-formation theories needed to be adjusted to account for the more recent higher estimates of lunar water content.

The work is published by Earth and Planetary Science Letters.

They created detailed models to determine whether existing theories about the Moon-forming collision could explain a wet Moon that’s still depleted in other volatile elements like potassium and sodium.

They modeled different temperature conditions and water abundances of the Moon-forming disk. At higher temperatures, their disk was dominated by silicate vapor, which came from evaporation of the mantles of both the proto-Earth and the impactor, with a relatively small abundance of hydrogen dissociated from water. At lower temperatures, their disk was dominated by water, from which hydrogen did not disassociate under this temperature range, making its escape mechanism very inefficient.

“The good news is that our models show that observations of a wet Moon are not incompatible with a giant impact origin,” Nakajima explained.

However, it also means that scientists need to come up with other explanations for why the Moon is depleted of potassium, sodium, and other volatile elements. Other possibilities exist, such as the volatile elements in the disk falling onto Earth rather than escaping or being part of the Moon’s formation. Or potentially they were part of the Moon when it first accreted from the post-collision disk but were later lost.

By Maria Gioia Zurzolo

Every year, the Munich Security Conference brings together delegates from different part of the world to discuss major international security challenges.

Transatlantic partnership has always been the strategic framework within which any effort is announced in Munich. However, this year the context was different compared with the past, reflecting the difference in the Trump administration’s approach toward its European allies.

As a matter of fact, over a year into the Trump administration, it is now possible to say that US support for European security does not appear to be guaranteed anymore, and neither is the US role in maintaining the liberal international order.

It is still challenging to define the key points of Trump’s foreign policy approach, and this uncertainty is expected to push the European Union to strengthen defense cooperation among its member countries, aiming at taking the lead on various international challenges without having to rely on Washington’s assistance.

While the international community reflects on whether or not the EU can fill the gap left by US leadership, President Trump has apparently not completely set aside the traditional themes of US strategy and its role in leading the free world. According to the Trump administration, ‘America first’ does not necessarily translate into ‘American Isolationism.’ Instead, as codified in the National Security Strategy, putting America first is a prerogative for the US leadership because: “a strong America is in the vital interests of not only the American people, but also those around the world who want to partner with the United States in pursuit of shared interests, values, and aspirations.”

This concept was also affirmed by President Trump during the World Economic Forum in January in Switzerland. After praising the health of the US economy and markets, Trump gave a keynote on his approach to the international community. He said that his administration is taking action to restore US confidence and independence, insisting that ‘America first’ is not ‘America alone.’

Trump portrays a US government that’s committed overseas but focused on putting national interests at the top of its agenda. What exactly this approach would bring in the future is questionable.

In the US National Security Strategy, the EU is singled out as the United States’ most important and prosperous ally. The document is insistent on the US commitment to its European partners; yet there are still reasons for doubt. Owing to a lack of both credibility and reliability, the US leadership might find itself in a compromised position if ever called on to fulfil its traditional duty.

The US team sent to Munich included Secretary of Defense James Mattis, National Security Advisor H.R. McMaster, Deputy Secretary of State John Sullivan, and Director of National Intelligence Dan Coats. They did not deliver any impressive speeches or new assurances, and by failing to do so they showed that the only answer the US leading power has to European efforts to improve its own defense is to simply maintain the status quo.

The US delegation did list the administration’s foreign-policy priorities, such as countering the proliferation of weapons of mass destruction, defeating jihadi organizations, and strengthening the international foundations for peace and prosperity, but this was nothing more than rhetoric and general statements. Secretary of Defense James Mattis started his journey around Europe a couple of days before the Munich Security Conference began. His trip brought him first to Rome, where he met Italian Minister of Defense Roberta Pinotti; then he attended the first NATO Defense Ministerial of 2018; and finally he travelled to Stuttgart to meet with the troops of the United States European and African Commands. This journey was planned to reaffirm key partnerships and prepare for the dialogue which would have followed in Munich about current and future security challenges.

Unfortunately, US delegates left Munich with no plan, no strategy, and no long-term vision – just disappointment and criticism from those who do not approve of Trump’s approach toward the United States’ European allies. German Defense Minister Ursula von der Leyen declared in her speech a general disapproval of Trump’s military-heavy approach to global affairs, and this seems to be a common opinion around Europe. Pushing to increase military and defense spending while cutting funds to the United Nations, diplomacy, and development aid could threaten international security instead of improving it.

It is debatable whether European countries will be capable of coming to a consensus that finally addresses the Continent’s security needs. It is equally unclear whether their doing so would benefit the United States of not. What is clear, however, is that the transatlantic partnership is not going to be based on its traditional pillars any longer.

The opinions, beliefs, and viewpoints expressed by the authors are theirs alone and don’t reflect any official position of Geopoliticalmonitor.com.

By Giancarlo Elia Valori*

Based on the long and careful speech delivered by Chinese President Xi Jinping on New Year’s Eve, it is currently useful to identify his policy line and of the conceptual framework of his activity as statesman.

From what we can currently read on the most widespread Western media, Xi Jinping’s policy line comes down to a simple and mechanistic “concentration of power” in the President’s hands or, worse, to the discovery of a “new Chinese authoritarianism”, characterized by the usual and banal request for some “opening” by the Chinese Party and State structures.

The banality of good, we could say, by ironically paraphrasing the title of a very famous book by Hannah Arendt, namely The Banality of Evil.

It is really strange that the Western theory of political representation can never go beyond a naive, rough and phenomenological pluralism or the childish fear of power in the hands of a Leader.

Yet another example of a conceptual and philosophical crisis of the modern State in the West foreshadowing more severe and material destabilization.

Certainly, the best political theory of liberal pluralism – from Dahl to Lipset until Giovanni Sartori – has never been so sloppy and superficial.

Therefore it is good to understand the context in which Xi Jinping’s philosophy and his new approach to the issue of China’s renewal and economic, political and cultural development must be placed.

In fact, on April 2, 2017, in the West we received news that the Constitution of the People’s Republic of China had incorporated the “Xi Jinping’s Thought”.

A line adding to President Xi Jinping’ specific “foreign affairs thought”- concepts mentioned in an article of the Party’s bi-monthly political theory magazine Seeking Truth on July 16, 2017.

Therefore the President’s Thought will be officially associated with the Party’s “guiding ideology”, without forgetting that the current Chinese leader is the first, after Mao Zedong, to mark the history, texts and official policy line of the Communist Party of China with his own explicit ideological and political dictates.

This applies both to the phase of his rising to power and to the height of his and his closest aides’ hegemony.

However, the previous revisions of the Chinese Constitution have always taken place before a Congress of the Party since its foundation in Shanghai in 1922.

In fact, in the 7thCongress held in 1945, mention was made of a fact which is still very important to understand the current situation: “the Communist Party of China takes the Thought that supplements Marxism-Leninism with the practice of the Chinese Revolution-Mao Zedong’s Thought – as the principle guiding all its activities” (emphasis added).

This reflected Mao’s victory over his internal opponents obtained in 1943.

At the 8thCPC Congress in 1956 – the key year in the history of Communist regimes – “Marxism-Leninism” became “a guide to action” with no reference to Mao Zedong’s Thought.

That was either an uncritical acceptance of the de-Stalinization proclaimed by the 20th CPSU Congress of 1956 or it was more probably the sign of a hidden break in the Party’s leadership.

As is well-known, the failed “Great Leap Forward” was the breaking point between Mao and his Party, the moment when the Great Helmsman decided to “shoot on the Headquarters”.

In fact, only the most incompetent people (and there are still many) believe that the Communist regimes were or are still totally monolithic.

Those who think so – also with regard to contemporary China – should read the small masterpiece entitled “The pressure groups in the Soviet Union”, published by Laterza in 1977 – a book written in the USSR by the extraordinary Italian Ambassador, Silvio Fagiolo.

Moreover, in the CPC Congress held in April 1969, the Constitution read as follows: “the Party takes Marxism, Leninism and Mao Zedong’s Thought as the (only) theoretical foundation of its guiding ideology” (in that version Marxism-Leninism was disaggregated into separate elements).

Hence Mao was elevated to a stature of Father of the Communist theory comparable to the two traditional German founders’.

The specificity of the construction of Socialism in China is no longer a case on the margins of Karl Marx’ sacred texts, but their autonomous evolution and with equal dignity compared to the Third International and its tenets.

Conversely, in the 12th Congress held in 1982, it was stated: “the Communist Party of China takes Marxism-Leninism and Mao Zedong’s Thought as its guide to action” (emphasis added).

It was a matter of clearly writing in the Constitution that “Mao Zedong’s Thought was the only possible adaptation of the Communist revolution principles to the specific situation of China”, as applied by the whole Party leadership and not only by Mao.

Mao Zedong who rescued China from the dangerous embrace of the Soviets and implemented his own autonomous foreign policy, in which there was no room for the “paper tiger” that the Cold War was.

In the 15th CPC Congress held in 1997, an observation was added that quoted the Thought of the late Leader Deng Xiaoping in applying the Marxist-Leninist tenets to the Chinese reality defined as “undergoing a process of change”.

Therefore, at the time, the CPC line was determined by “Marxism-Leninism, Mao Zedong’s Though and also Deng Xiaoping’s Theory” (in that version Marxism-Leninism was no longer disaggregated into separate elements).

It is worth noting that, according to Chinese formulas, Deng Xiaoping’s Theory was “the product resulting from the integration of the basic laws of Marxism-Leninism with China’s current practice and with the underlying features and forms of our Times, i.e. the heritage and development of Mao Zedong’s Thought under the new historical conditions – a new stage in the development of Marxism in China, namely the Marxism of contemporary China and a crystallization of the CPC collective wisdom” (yet another concession to the pluralism hidden within the Party).

Therefore Deng was elevated to the same stature as Mao and, indeed, he became the only interpreter of the Marxist-Leninist-Maoist Tradition within the new China which was firmly emerging after the “Four Modernizations”.

Hence defining the Modernizations as irreversible and making them fit into Mao’s Marxism, as well as placing them as a basis for future developments was the goal of these apparently sibylline wordings, but very clear if only we read them as concrete projects of Chinese autonomy in economy and in foreign policy.

Therefore in 2002, at the beginning of the 16thCPC Congress, the new Chinese central formula was outlined, incorporating the changes occurred after Deng’s death and the crystallization of the Four Modernizations.

The Party’s ideological principles were “Marxism-Leninism, Mao Zedong’s Thought, Deng Xiaoping’s Theory and the important thinking of the Three Represents”.

Jiang Zemin was not mentioned directly, but reference was made to his Thinking, by emphasizing its importance for the Three Represents.

The Party fully represented the development of Productive Forces, as well as the orientations of an advanced culture, and finally the fundamental interests of the overwhelming majority of China’s people.

Jiang Zemin’s Thought, expressed in 2000, basically meant three things: a) the productive forces – or, Marxistically, the people’s working ability – the knowledge used in production, as well as the machines and tools used in production, and finally infrastructure did not diminish during the construction of Chinese Socialism; b) the Party had always a mass role it had to preserve also at the cost of losing abstract ideological purity; 9) finally, Marxism-Leninism had to be always integrated with “contemporary culture”.

In other words, Jiang Zemin’s official speech on the “Three Represents” delivered on July 1, 2001, meant something very simple: important representatives of the various social strata emerged during the Modernizations, and even private entrepreneurs, could be admitted into the CPC.

It should also be noted that the Chinese Communists wanted to integrate the most dynamic forces of society into their power apparatus. The aim was exactly to avoid suffering the same sad fate as the CPSU and the Eastern European Communist Parties, which China studied with great care.

Nevertheless, the CPC’s official circular letter interpreting the Three Represents, specified that Jiang Zemin was the only most authoritative representative of the Party, while the text published by the Chinese press mainly focused on Hu Jintao’s theoretical approach by stating, in particular, that – as he said – “a Party must be established which is devoted to the public interest and governs for the people”, making “the health and safety of the common people a top priority”(a theme we can currently find in Xi Jinping’s policy) by “achieving and maintaining the development of people’s fundamental interests” (a typical Deng’s topic, as already seen).

Hu Jintao repeated that last part ten times in his speech.

Hu Jintao wanted to use those abstract criteria which, however, have a precise meaning in the CPC semantics, particularly to stem corruption, improve control over its officials, enhance the Party’s prestige and good reputation among the masses.

Three themes we will find explicitly developed in the current context of Xi Jinping’s Thought.

In 2012, after the end of Hu Jintao’s leadership, the 18th CPC Congress officially referred “to Mao Zedong’s Marxism-Leninism-Thought (and it was the first time those elements were put together), to Deng Xiaoping’s Theory, to the important thinking of the Three Represents and to the scientific outlook on development”.

It was the first time that said terminology appeared in the CPC official texts – and it was certainly not by mere coincidence.

For the new CPC the “scientific outlook on development” was “a scientific theory having the same origin as Marxism-Leninism and the other theories already mentioned, but it also fully embodies the Marxist worldview on and methodology for development” – hence it was the last result of the sinicisation of Marxism (emphasis added) and “the crystallization of the collective wisdom of the Communist Party of China”.

Therefore, for the first time, the CPC thought went explicitly beyond the tradition of the Third International, by reaffirming – as was the case with the other Communist Parties derived from the Soviet one – the practice of autonomous sinicisation, having the same origins as Karl Marx’s theory.

Hence, the Party’s unity was reaffirmed once again, as well as its collective wisdom – a unitary wisdom seen as a factor counterbalancing the Soviet tendency to the cult of personality.

It should also be noted that the scientific outlook on development had already been incorporated into the Constitution in 2007, even though it was not part of the Party’s guiding ideology at the time.

For the first time the typical criterion of the 17th Congress appeared, according to which it was necessary “to put together all the CPC wisdom to develop a scientific outlook on development”.

Again a non-Marxist formula that – outside the classic Marxism-Leninism and the tradition of the Chinese State and Party leaders -reminded of an autonomous theory allowing precisely to develop Socialism with Chinese characteristics and, even, a Chinese way to something going even beyond Socialism itself- a road to the power, strategic autonomy and well-being of the Chinese people.

Many years later, in 2012, the 18thCPC Congress merged Hu Jintao’ scientific outlook on development with the Party’s “ideological guide”.

Hence, with reference to Xi Jinping, over the last five years the Chinese media have reported the emergence of “Xi Jinping’s thought” and of “Xi Jinping’s Party construction thought”, in addition to “Xi Jinping’s foreign affairs thought”.

There are also some quotations on “Xi Jinping’s military thought”, now published regularly in many Chinese newspapers.

Moreover, since 2013 the expression “the spirit of the important speeches of Comrade Xi Jinping” has emerged. These speeches are collected in the text entitled “The Governance of China”, which was published for the first time in September 2014.

Hence what are the theoretically and practically significant speeches delivered by President Xi Jinping?

In February 2017, for example, the Chinese leader proposed “new lines, new concepts, new strategies regarding domestic policy but, above all, foreign policy, military issues and the armed forces”.

While his predecessors spoke about economy and the development of productive forces in relation to the masses’ needs, Xi Jinping mainly thinks about the economic expansion of his country in relation to foreign policy and military issues.

This is an extremely important change.

As already noted, while the tradition of his predecessors’ Thoughts – apart from some Mao’s considerations – regarded essentially economic development and the masses’ wellbeing, with Xi Jinping the “Party line” is often focused on foreign policy and global strategy.

Hence this becomes a way to fully achieve and develop the internal economic power of current China.

Moreover, the President’s line increasingly regards “the comprehensive deepening of reforms”, that is the union between domestic and foreign policy and the legacy of reforms from Deng to Xi Jinping – reforms currently brandished by the President against the interests of the Party and State bureaucracy.

Therefore the aspect currently linking Xi Jinping’s line to Mao Zedong’s is precisely the will to fight against some very strong interests of the Party hierarchy – in the past with the legacy of the Soviet model and the clash between the CPC and Mao after the failure of the “great leap forward” and currently with the struggle between Xi Jinping’s group and the vast network of corruption.

Again in President Xi Jinping’s mind, a new era is currently opening up for China, as well as a new “strategic opportunity”. After the 19thCPC Congress, China has become the leading nation of the countries already called “developing countries” and, at the same time, of the developed ones.

While Marxism-Leninism has always been a political theory needed to skip steps and forge ahead at economic and military levels, today Xi Jinping’s China is reaffirming its hegemonic role and hence needs new theoretical models, well beyond the Marxism of the Third International and the inevitable closure of its strategic, military and geopolitical prospects.

Again in President Xi Jinping’s mind, China’s future transformation is hinged around some key sectors.

The first one is the CPC deep reform.

With a view to achieving it, first and foremost the Party’s internal discipline must be strengthened, not only with regard to the fight against corruption, but also in proposing Xi Jinping’s austere and simple lifestyle as a universal model.

Hence the Party’s reconstruction is essential to understand the President’s Thought, which is based precisely on the CPC’s internal reform.

Another factor not to be neglected is what Xi Jinping often defines as “the new contradiction”.

In fact, according to the President, the traditional contradiction characterizing the Chinese society has currently evolved and changed.

It is the new contradiction between “unbalanced and inadequate development and the people’s ever-growing needs for a better life”.

Hence not productive forces and production conditions, in an old Marxist model which always implies a capitalist overproduction crisis, as in the West, but a typically Chinese contradiction between the development of productive forces and production conditions with respect to the People’s current needs.

This is at the core of Xi Jinping struggle – always very explicit in his essays, speeches and actions – for eradicating poverty in China and building much infrastructure, especially in rural areas, to definitively uproot poverty and allow the “Chinese” solution to an old contradiction which has always existed in the Marxist theory, namely the contradiction between urban and rural areas.

It is from this viewpoint that Xi Jinping assesses the environmental issue, with an environmental cleaning campaign following the models adopted in his campaigns against corruption.

With reference to the issue of President’s control over the Party, Xi Jinping wants to keep on controlling the State economy, which backs the single-party political structure, with structural investment in large transport networks and heavy industries.

This is not the return of the Stalinist myths of basic industry, but Xi Jinping’s problem is that the State economy is essentially more efficient than the private one, chaotically developed in a short lapse of time.

Hence Xi Jinping will largely enter the best business generated by individuals and private entities over the last ten years. It will be on these modern sectors, typical of the new economy, that the Party reformed by Xi Jinping will justify its new social and political hegemony.

It will absorb them and it will make them tools for political and social cohesion.

From this viewpoint, Xi Jinping’s China will be increasingly assertive, aggressive and sometimes cynical on world markets and in its relations with the other Powers.

Currently Xi Jinping wants above all the Chinese supremacy in Asia and later in the Eurasian Heartland, up to being on an equal footing with the United States in the old strategic regions and playing an asymmetric role again with the United States in the new strategic regions of the future, namely the Arctic, Southeast Asia, South Pacific, Antarctica.

As Xi Jinping said at the 19th Congress, China is “ready to donate to the world its ancient wisdom and its recipes for the salvation of mankind”. It will be once again the Middle Kingdom with its explicit “civilizing mission” at cultural, political and strategic levels.

Xi Jinping currently thinks about China as the world, while his predecessors pondered on how to reach the development of the First World countries as early as possible.

Hence, according to President Xi Jinping, at the end of the current phase of development there will be the “revitalization and rejuvenation of the Chinese race” – at least until the centenary of the Party’s foundation in 2022.

From this viewpoint, we need to clarify the apparently simple concept of “Socialism with Chinese characteristics”.

As is well-known, according to Marx and Engels, Socialism could be achieved only with the maximum maturation of capitalism.

From the “Long March” onwards, China has inevitably developed the project of a Socialism created starting from a semi-feudal and backward society both in terms of productive forces and in terms of production conditions.

Forget about structural overproduction crises! For centuries China had been experiencing only massive famines.

In this sense, in the Chinese case, the traditional CPC theorists spoke of a transition from the unqualified to the qualified, from the indistinct to the distinct – and Xi Jinping certainly does not deny this theory.

This means that Socialism in China must experience the transition from an indistinct backward and semi-feudal society to undeveloped capitalism.

This implies the future transition to Socialism in the ways and conditions of the ancient Chinese society.

Therefore China had to develop industrialization, marketing, socialization and modernization, all together at the same time, by repeating the capitalist contradictions along with those typical of a backward society.

Hence the need for the Chinese Communists to use a full market economy, but always distinguishing between the State and the market, by combining the superiority of Socialism and public ownership with free market – hence a State competing with the private sector, which optimizes the costs of the State sector almost automatically.

But only if the Party rules the whole society.

In fact, while the Soviets calculated the costs of production and prices figuratively by using Lange’s public accounting, for Communist China the market parallel to the State and to its planned economy optimally calculates exact and minimum prices.

Another trait of “Socialism with Chinese characteristics” is the link between strong strategic autonomy (i.e. an economy not dependent on foreign countries) and the maximum openness to the world market.

Without peace in the world there is no economic autonomy and optimal combination of State and Market in China.

Therefore for Socialism with Chinese characteristics it is necessary: 1) to speed up modernization through the use of foreign investment; 2) to attract advanced technologies from abroad for current China’s dual economy system (State and private sector); 3 ) to promote the creation of special autonomous free zones for the industrial economy and international trade; 4) to make the best use of capitalism through the formula of “one country, two systems”; 5) to combine Socialism with the market in order to overcome the gap between China and the rest of the world.

Moreover, Xi Jinping’s Thought initially incurred some unexpected difficulties in becoming – as theoretical model – the focus of the Chinese debate inside and outside the CPC.

Again in Xi Jinping’s mind, the contradiction between the State and the market – brilliantly managed from Deng Xiaoping onwards in Communist China – in which both are essential for the single hegemony of the CPC and its leader, regards the simultaneous following of the “mass policy line”(which implied, with Mao, the slogan “to serve the people”) and the “strengthening of the State’s transformation”.

Here Xi Jinping proposes again his theory of the “Four Greats”, already clear as early as 2007.

According to the President, the Four Greats are the following: “great struggle, great project, great cause and great dream”.

This clearly reminds us of Mao Zedong’s old statement, “it is a great pleasure to fight against Heaven, to make war with the Earth, to clash with human beings”.

Furthermore, Xi Jinping recalls that it is necessary to “fight against subversive mistakes” in economics and politics.

President Xi Jinping will never accept the Party’s weakness or its transformation into a secondary factor for the creation of the Chinese State.

It is not easy, however, to imagine how all this will materialize in the concrete Chinese political and economic practice. Nevertheless, it is clear that Xi Jinping’s Thought is the formula with which, today, China thinks to overcome its traditional appearance, be it Marxist-Leninist or born of a whirling and often corrupt market economy.

The new synthesis between these two functions, which Xi Jinping no longer interprets as weaknesses or simple internal contradictions, will be the one shaping the shift from a China rising to the level of the other world powers to a China achieving a new global hegemony on its own.

About the author:
*Advisory Board Co-chair Honoris Causa Professor Giancarlo Elia Valori is an eminent Italian economist and businessman. He holds prestigious academic distinctions and national orders. Mr Valori has lectured on international affairs and economics at the world’s leading universities such as Peking University, the Hebrew University of Jerusalem and the Yeshiva University in New York. He currently chairs “La Centrale Finanziaria Generale Spa”, he is also the honorary president of Huawei Italy, economic adviser to the Chinese giant HNA Group and member of the Ayan-Holding Board. In 1992 he was appointed Officier de la Légion d’Honneur de la République Francaise, with this motivation: “A man who can see across borders to understand the world” and in 2002 he received the title of “Honorable” of the Académie des Sciences de l’Institut de France.

Source:
This article was published by Modern Diplomacy.

By Pieter-Jan Dockx*

Since the rise of Saudi Arabia’s new de-facto ruler, Mohammed bin Salman (MbS), there have been subtle yet important changes in the Kingdom’s foreign policy. The traditional Salafist discourse has partly made space for increased references to ‘Arabness’. Although support for Syrian opposition groups during the Syrian war was legitimised based on religion, MbS has framed the current Saudi intervention in Yemen as an Arab matter. When Ali Abdullah Saleh, the assassinated Iran-aligned Yemeni president had called for talks with Saudi Arabia, Riyadh welcomed him “back to the Arab fold.”

Based on this Arab discourse, the Kingdom has also begun engaging Shia Arabs rather than only Sunnis. This is most visible in Riyadh’s Iraq policy. In 2017, former Shia hardliner Moqtada al-Sadr visited the Kingdom; Riyadh invited Ammar al-Hakim, another former hardliner; And Saudi Arabia’s King Salman received Iraq’s Prime Minister Haider al-Abadi, who is part of the Iran-aligned Shia Islamist Da’wa party.

This use of the Arab identity discourse is a noticeable break with Saudi Arabia’s recent past. Since the 1979 Islamic Revolution in Iran, Saudi Arabia has attempted to isolate Iran by embarking on a Sunni Islamist foreign policy, thus intensifying the latent Shia-Sunni divide in the region. Based on this discourse, the Kingdom has supported various Sunni, and especially Salafist, allies in places like Yemen, Syria and Iraq. However, an Arab component is not entirely new to Riyadh’s foreign policy.

In the 1950s and 1960s, Egypt’s former president Gamal Abdel Nasser (then seen as the leader of the Arab world), supported by the erstwhile USSR, engulfed the region with his Pan-Arabism to roll back Western influence embodied by the Shah of Iran. Despite its fear of the anti-monarchist current that intended to unify the Arab world, the Kingdom partially appropriated the ideology. Especially after Egypt’s defeat in the Yom-Kippur War and the subsequent peace treaty with Israel, Saudi Arabia took up the mantle of Arab leadership. Even in the 1970s, Riyadh’s Arab leadership did not exactly mirror Nasser’s popular thinking. While Pan-Arabism had a distinct secular character, Islam always remained a secondary yet significant component of Saudi Arabia’s appropriation. To highlight this contrast, this article uses the notion of ‘Arabness’ rather than the loaded term, ‘Pan-Arabism.’

The current reintegration of the Arab identity in the Kingdom’s discourse will lead to a fusion of Arabness and Islam as opposed to the secularism Nasser espoused. This policy shift is borne foremost out of pragmatic considerations in the region. Saudi Arabia’s policy of supporting Sunni proxies has largely failed to contain Iran, which made engaging with actors outside of the Sunni world inevitable. The new discourse would also resonate with allies like Egypt. The country is the birthplace of Arab identity politics and is ruled by a secular establishment that is faced with a Salafist insurgency in the Sinai Peninsula. Surveys have also indicated that in many countries in the region, the most salient identity amongst the youth is not sectarian or national, but the Arab identity. This means the reintegration of Arabness in the Kingdom’s foreign policy has a lot more soft-power potential in the region than its conventional Islamist ideology.

Furthermore, the new identity narrative backed by non-sectarian engagement has the potential to replace the current Sunni-Shia schism in the region by an Arab-Persian division. This could redefine West Asian politics and swing the balance in favour of the Kingdom. As the pool of Arab allies in the region is broader than possible Sunni partners, a shift to an Arab-Persian paradigm would allow the Kingdom to isolate Iran further, limit potential proxies for Tehran and simultaneously increase its influence in the Arab world.

For this new narrative to be effective against Iran’s—who sees no merit in an Arab-Persian schism—sectarian status quo in the region, it needs reciprocation from local actors. Iraqi Shia figures like Sadr, Hakim and Abadi have, for various reasons, embarked on a nationalist discourse based on a sense of Arab unity and antagonism towards Iranian meddling. Thus, they have every incentive to cooperate with a Saudi Arabia that legitimises their discourse and can act as a counterweight against Iranian influence in the country. Before he was killed, Yemen’s former president Saleh, a Zaidi Shiite, too called for an alliance with Saudi Arabia, which too could have led to a cross-sectarian Arab alliance. While the new Saudi approach is taking root in Iraq and possibly in Yemen, a lot will depend on future local political conditions in the Arab world.

To sum up, Saudi Arabia is increasingly framing its regional policy with a discourse hinged on ‘Arabness’ as opposed to one hinged on Islam. This shift, combined with Riyadh’s recent engagement with Shia actors in the region, could redefine the fault lines of conflict in West Asia. However, the success of this envisioned paradigm shift will depend on the capacity of Iranian resistance and local political conditions.

* Pieter-Jan Dockx
Research Intern, IPCS

By Vijay Sakhuja*

During his speech at the Munich Security Conference in February 2018, Israeli Prime Minister Benjamin Netanyahu “brandished” a piece of debris from an Iranian unmanned aerial vehicle (UAV) brought down by the Israeli military after it entered Israel’s airspace. Apparently, the Iranian UAV was a copy of the US’ ‘Sentinel’ that had been captured by Iran while on a reconnaissance mission in December 2011. By 2014, Iran had successfully reverse engineered the UAV and put it to operational use.

Earlier, ten fixed-wing drones strapped with small rockets were either destroyed or crash-landed by Russian forces while these were attempting to descend over air and naval bases in Syria. In the past, Russia has successfully destroyed Bayraktar drone from Turkey, the Israeli Heron, and US’ RQ-21A Blackjack.

Drones appear to be the platform of choice among the warring parties in Syria, Iraq and Yemen. These machines possess significant operational and stealth attributes and can carry a variety of payloads such as explosives and air-dispersed IEDs; and the non-lethal devices include high-definition cameras and miniaturised electronic sensor suites. They fly less than 400 feet above the ground at speeds of up to 90 knots, resulting in operational flexibility. Significantly, they can be launched and recovered from different terrains, thus offering enormous stealth and surprise. It is not unexpected then that drones are the platforms of choice among a large number of militaries; some have chosen to develop these at home, and in the absence of technological capability, others have preferred import substitution option.

Although drones have recorded several successes in various crisis situations, at least three counter-droning techniques are being developed: (a) hard-kill shooting by anti-aircraft guns, missiles, air-burst ammunition and lasers; (b) non-kinetic ways involving cyber-attacks or electronic jamming; and (c) physical barriers that act as traps against drones.

Counter-drone technologies are gaining prominence among militaries due to increased ‘security breach incidences’ and the fear of small and weaponised drone swarms being put to use as tools of warfare. This is best understood by the fact that the anti-drone market is expected to grow from US$ 342.6 million in 2016 to US$ 1,571.3 million by 2023, at a compound annual growth rate (CAGR) of 25.9 per cent between 2017 and 2023.

A number of players are engaged in the development of counter-UAVs (c-UAV). For instance, a c-UAV system developed by the French Airbus Defence and Space Inc. uses a variety of early warning devices and systems such as radars, infrared cameras, and direction finders including ultramodern data fusion and signals analysis. It can detect an incoming drone between 5-10 km and determine the potential threat. The embedded systems also help prescribe to the operator the type of electronic counter-measures that can be put to use, thus lowering collateral damage.

Drone Defence in the UK is developing Drone Defenders that employ “acoustic, optical, and infrared sensors for real-time detection and identification.” This is a composite system that can detect, classify, and prosecute unknown UAVs. It uses the man-portable Dynopis E1000MP to jam the UAV’s controls or Net Gun X1 c-UAV system to capture the aircraft. Perhaps the most important feature is its flexibility of deployment from both a fixed location and mobile unit.

The US’ Multi-Azimuth Defense Fast Intercept Round Engagement System (MAD-FIRES) developed by the Defense Advanced Research Projects Agency (DARPA) is for military use and is a counter to attacks by unmanned platforms such as small planes, fast attack craft, and other platforms that pose “perennial, evolving, and potentially lethal threat to ships and other maritime vessels.” It also serves as a close-in weapon system (CIWS) and can augment onboard ship defence to target with precision and engage a “swarm of diverse targets comes from a range of directions.”

The US has fielded at least 11 counter-drone technologies; one of these is the ‘Ghostbuster looking gun’ which uses radio frequencies to disrupt enemy drones instead of kinetic ammunition. Likewise, the Liteye’s AUDS non-lethal electronic attack radio-frequency jammer system is paired with an Orbital gun that can fire precision-guided or air-burst ammunition to provide a hard-kill option was deployed in the US Central Command’s area of operation. The system has proved effective and has successfully downed “more than 500 drones with electronic attack.”

Israel is also known to have excelled in counter-drone technologies and at least two companies have entered the market. Elbit System has produced ReDrone, a counter-drone product that specialises in hacking and diverting drones; and the Israel Aerospace Industries manufactures Drone Guard, a drone detection and disruption system that has been available since 2016.

It is true that drones are a military nightmare, and as more drones enter the market and deluge the skies, counter-droning will gain currency and emerge as an important tool of tactical warfare. The possibility of drones themselves serving as weapons in the form of anti-drone platforms is not a stretch of the imagination. This could be by hijacking and taking control of unidentified drones and marshalling them to collide with other drones or even crashing them by using non-kinetic ways.

*Vijay Sakhuja
Former Director, National Maritime Foundation (NMF), New Delhi

By Relja Dusek

Croatian finance expert Fabris Perusko was appointed as the state’s new ‘extraordinary manager’ for debt-ridden food giant Agrokor after the previous crisis chief quit over alleged conflict of interest.

The Croatian government announced on Tuesday that it has appointed Perusko to head Agrokor with Irena Weber as his deputy, after the huge company’s previous extraordianary manager, Ante Ramljak, stepped down.

Ramljak quit on February 21 over claims about conflicts of interest. He resigned after media revealed a lucrative deal business between Agrokor and Ramljak’s former company Texto Management.

“Unfortunately, the uncertainty that was created in connection with my stay in the position of an extraordinary commissioner is strongly against this process,” Ramljak said when he quit.

Texto had been hired as consultants for the restructuring of Agrokor and rewarded with fees of around 130,000 euros a month.

The state-appointed crisis manager must stabilise the company to prevent its bankruptcy from undermining the financial stability of the country.

Agrokor’s severe debt problems were revealed in 2017. With revenues of 6.5 billion euros in 2015, equal to almost 16 per cent of Croatia’s total GDP, it is the biggest private company in Croatia with a huge role in the country’s economy.

The state reacted to the crisis by passing a special new law which sllowed the government to appoint an extraordinary manager for the company.

The new ‘extraordinary manager’ Perusko, as well as his deputy Weber, are closely connected to Agrokor.

In May 2017, Perusko was appointed as the chief financial officer at Tisak, an Agrokor Group member and Croatia’s leading distributor of print and tobacco products.

Weber was already involved in Agrokor’s restructuring. From June 2017, she was worked for Ramljak as an executive director for non-core asset management at the company.

(RFE/RL) — Several thousand Macedonians have taken to the streets in the capital, Skopje, to protest against a possible change of their country’s name, as required by Greece to end a long-running dispute.

Defying freezing temperatures and snow on February 27, the protesters, organized by a network of several civic associations, held umbrellas in the colors of the Macedonian flag and chanted “Long live Macedonia!” and “Macedonians!”

The protesters demanded an end to ongoing talks between the Macedonian and Greek governments aimed at resolving the decades-long dispute.

The former Yugoslav republic has been holding extensive talks with neighboring Greece in recent months in an effort to resolve the dispute over the name Macedonia, which Greeks say implies territorial claims to a northern region of Greece.

The protest was organized by the World Macedonian Congress and several other Macedonian associations.

They accused the government of Prime Minister Zoran Zaev and the main opposition nationalist VMRO-DPMNE party of betraying Macedonia’s national interests.

Political parties, including the VMRO-DPMNE, said they had nothing to do with the protest.

Zaev earlier said he had offered four options to Greece in an effort to resolve the dispute.

Zaev said in an interview with Reuters in London on February 27 that he had suggested to Greek officials that Macedonia officially be called one of the following: the Republic of North Macedonia, Republic of Upper Macedonia, Republic of Vardar Macedonia, or the Republic of Macedonia (Skopje).

The name issue has greatly hindered Skopje’s efforts to gain entry to the European Union and NATO, the latter of which has been blocked by Greece.

Zaev said that Greece had some “more preferred options and some not so preferred options [in terms of the name],” but was satisfied with the options he has proposed.

He said one remaining question was whether there is “a real need” to change the Macedonian Constitution, as Greece also objects to a few articles of it that it says could also imply a claim to Greek territory.

Zaev said Macedonians were “prepared to do a change [of the constitution]” but added that it would be “very difficult.”

The Greek and Macedonian foreign ministers are to hold talks on the issue in March, and Zaev also plans to meet with Greek Prime Minister Alexis Tsipras that month.

By Rev. Ben Johnson*

In a tragic irony, Oxfam has demonstrated the injustice of a certain kind of inequality.

The international charity, which is known for its annual report on income inequality, is mired in scandal involving sexual coercion by its employees, possible pedophilia, witness intimidation, nepotism, and lying to a government agency in order to maintain taxpayer funding.

While responding to the 2010 Haitian earthquake, relief workers engaged prostitutes in living quarters furnished by Oxfam, paid for with charitable donations (and tax dollars).

Some have alleged that Oxfam workers did not spare minors. Behind all this is the fear that charitable aid may have been leveraged as a bargaining chip, leaving women fearing that if they did not comply, they would be denied food and medical supplies.

The reports are familiar to Roland van Hauwermeiren, who oversaw Oxfam operations in Haiti. While denying some media reports, van Hauwermeiren admits he had relations with a Haitian aid recipient. “I supported her young sister and very young mother with diapers and powdered milk,” he revealed.

He reportedly engaged in identical behavior while working for Oxfam in Chad and in Liberia for the aid group Merlin (which subsequently merged with Save the Children). In the latter, NGO workers reportedly abused boys as young as 14 – and girls as young as eight. While allegations of pedophilia in Haiti thus far remain unproven, they would fit a discomforting pattern.

When Oxfam officials discovered the Haitian sex scandal, they potentially violated the law by hiding it from the British government. Oxfam revealed sexual harassment in an August 2011 report, but withheld the most significant details. The UK’s Charity Commission said:

The report to us stated there had been no allegations, or evidence, of any abuse of beneficiaries. It also made no mention of any potential sexual crimes involving minors.

Doing so allowed Oxfam to retain its access to a lucrative revenue stream. “In its last financial year Oxfam received 32 million pounds ($44 million) from Britain’s aid ministry, about 8 percent of its overall income,” Reuters reported. It receives another £29.3 million annually from the EU.

Sexual harassment and exploitation of vulnerable women flows from what the Financial Times describes as “the inevitably yawning imbalance of power between the givers and recipients of aid.” MEP Daniel Hannan wrote that villagers view Oxfam employees as “little gods,” handing out life or death one box at a time. Some aid workers come to share this view.

Despite the broad, deep, and variegated nature of its wrongdoing, Oxfam CEO Mark Goldring admitted over the weekend “I struggle to understand” the backlash. “What did we do? We murdered babies in their cots?”

Such self-aggrandizement inverts the advice of St. Gregory Nazianzus, who said, “Be like gods to the poor, imitating God’s mercy. Humanity has nothing so much in common with God as the ability to do good.”

Whatever the solution to this crisis, it is not identity politics. Oxfam’s initial response boasted of its commitment to “ensure more gender balance in leadership roles,” adding that 15 of its 22 executive directors are women. (Sixty-eight percent is not, in fact, gender balance.) However, the one official who took responsibility and resigned is Oxfam GB deputy CEO Penny Lawrence.

Nor could the situation be improved if government awarded this aid directly, rather than delivering it through private charity. UN workers in peacekeeping zones sexually abused 311 victims in 2016 alone. After the UN refused to stamp out such victimization in the Central African Republic in 2013 and 2014, it was whistleblower Anders Kompass, rather than the abusers, who found himself suspended. After an independent investigation vindicated him, his resignation letter denounced the UN’s culture of “complete impunity.”

The greater the power differential, the greater the immunity predators enjoy.

Where could one begin to clean up such a mess? How can we assure that Western aid workers are seen as gods of mercy, not gods of plunder?

Oxfam’s inequality report offers a helpful starting point. It outlines a course of action for corporations guilty of a much lesser “offense”: not paying its workers Oxfam’s definition of a living wage. The relevant passage reads:

No dividends if no living wage: Multinational companies can choose to prioritize the well-being of lower paid workers by refraining from rewarding shareholders through dividends or buybacks or paying bonuses to executives and the highly paid until all their employees have received a living wage (calculated using an independent standard), and steps have been taken to ensure they are paying prices that can provide a living income for workers or producers in their key supply chains.

If Oxfam believes entities are responsible for the deeds of other segments of its supply chain, then the charity can exercise responsibility for the actions of its own employees. Herewith, a modest counterproposal:

Oxfam can choose to prioritize the well-being of its recipients by refraining from rewarding its directors with salaries or benefits – or, at a minimum, decline all government funding – until such time as 1) all its beneficiaries are free from sexual coercion by its employees and 2) it stops misleading the governments which funded that exploitation.

If Oxfam finds this policy impracticable, it may wish to rethink the advice is dispenses.

Failing that, the government should take compulsory measures to defund bad actors, who mislead supervisors to retain taxpayer funding. The Charity Commission has pressured Oxfam to temporarily refrain from applying for government funds, and the EU has required partnering agencies to adopt a “zero tolerance policy” for sexual abuse going forward. Both should both assure that Oxfam fires everyone guilty of deception and exact a proportionate financial penalty from the agency. Furthermore, they should privatize a greater share of its long-term relief budget. This would offer more immediate oversight, less waste and red tape, and allow a more nimble and nuanced response to unique local circumstances.

Any illegal actions committed by Oxfam personnel should be subject to vigorous enforcement of all applicable laws and statutes. Haitian officials have initiated this process, and Oxfam announced on Monday that it has cooperated with their investigation … seven years after concealing the relevant offenses.

On Tuesday, Goldring also revealed that Oxfam has received 26 new allegations of sexual misconduct since the Haiti scandal broke, assuring fresh rounds of new and unseemly revelations.

Ultimately, the only way to end the cycle of abuse is for charitable agencies to value the human dignity and well-being of the powerless – the least of these – over money. Human beings become gods of mercy only when they see the image of God in every human face, however discarded or disfigured. This renewed vision is so vital that our salvation depends on it (St. Matthew 25:31-46). Most aid workers – like most priests – fulfill their vocation with the highest of ethical standards. But no institution should sweep malfeasance under the rug, especially to preserve a steady stream of taxpayer funds.

In its current fundraising pitch to combat “extreme inequality,” the charity writes: “Oxfam is fighting for a future … where people are put before profits.”

It is time for Oxfam to practice what it preaches.

About the author:
*Rev. Ben Johnson is a senior editor at the Acton Institute. His work focuses on the principles necessary to create a free and virtuous society in the transatlantic sphere (the U.S., Canada, and Europe). He earned his Bachelor of Arts in History summa cum laude from Ohio University and was inducted into Phi Beta Kappa.

Source:
This article was published by the Acton Institute.

The Trump administration has received qualified support in its quest to raise tariffs on aluminum and steel tariffs from abroad, part of its wider mission to wield protectionist policies in the name of safeguarding “national security.” In a memo to Secretary of Commerce Wilbur Ross on Friday, Defense Secretary Jim Mattis agreed that aluminum and steel imports based on “unfair trading practices” posed a threat to US security, but warned of the “negative impact” on key allies, calling for targeted rather than global tariffs.

While Chinese metals overproduction is a serious issue, Ross’ recommendations to carry out unilateral punitive action runs the risk of severely backfiring: for the sake of scoring political points with a minority of Americans, the proposed solutions would antagonize key trading partners, raise the risks of a trade war, and cause severe – and even irreparable – harm to the domestic economy. It’s a shame that Mattis – normally seen as among the more reasonable members of the administration – didn’t lay out the potential harm of these threats more clearly.

A solution looking for a problem

The government’s ‘Section 232’ investigation into steel and aluminum imports was ostensibly launched to discover whether imports were posing a threat to the domestic economy and defense-industrial base. Ross and his team concluded that this was indeed the case and recommended that the administration take immediate action by imposing quotas or tariffs with the objective of ‘increasing demand for American-made metals’.

Options including applying a global tariff of 24% on steel imports (7.7% on aluminum) or specifically targeting countries supplying steel and aluminum to the US via an elevated tariff level, with additional caps on import quantities. Another approach would be to introduce an import quota for both metals at a fixed percentage of current import levels. President Trump must respond to the reports by mid-April – but he is in no way bound by the recommendations of the DoC.

But a Trump move to levy tariffs will most likely ignite a global trade conflict. China – among others – has already begun to threaten retaliation. The backlash over the administration’s recent imposition of tariffs on solar panel and washing machine has already sparked a quid pro quo response, with the news that Beijing is investigating US sorghum exports (worth around $1.1 billion in 2017) being the latest to worry trade lawyers. Further provocation could easily escalate tensions and lead to sanctions on US soybean exports (worth $14 billion in 2016) or persuade the country to swap its Boeing planes for those produced by Airbus, for instance.

The impact of unilateral and global metal tariffs is also likely to be felt just as deeply by other countries. Canada is currently the top supplier of steel and aluminum to the US, while Brazil, South Korea and Russia also have plenty to lose from the introduction of a more punitive tariff system. The flow of low-carbon metals that are offered by non-Chinese exporters like Norsk Hydro and Rusal would also be severely restricted. Both of these firms rely on their considerable domestic hydropower capacity to produce aluminum with a lower carbon footprint than traditional smelters. If such suppliers are restricted, US firms will have no choice but to turn to higher-emissions suppliers.

Much ado about nothing

It’s key to note that US defense firms use only about 3% of all steel produced in the US, and most imported steel and aluminum comes from close allies with whom the US shares mutual-defense treaties. Citing national security as a way to carry out old-fashioned protectionism thus runs the risk of not only raising the possibility of a global trade conflict but also spoiling relations with some of our closest allies – not exactly a recipe for making America safer.

Raising the economic stakes

US economic experts and domestic interests set to be affected by new tariffs have also warned of the potentially negative impacts. Last week, six pro-free trade groups wrote an open letter to the president saying that the national security case for imposing tariffs is “thin” and that the economic price to be paid would be “considerable.” Many of the signatories include traditionally right-leaning groups such as R Street, the National Taxpayers Union, and FreedomWorks.

Spokespeople representing the domestic aluminum and steel industries have countered that the tariffs would help reduce overcapacity, reset the trade imbalance with China, and revive US aluminum smelters and steel mills. Yet experts are skeptical that domestic industry could increase production enough to make up for the expected drop in imports.

For instance, for certain products such as steel pipes and tubes, the proportion made up by imports is too large for domestic industry to compensate for. Additionally, it is difficult to convert steel mills that specialize in making certain kinds of finished products – such as sheet steel – into another, such as pipelines.

Missing the target

Then, there is the tiny detail that while US firms and non-Chinese suppliers would be slammed by the tariffs, China would suffer only a minor blow: according to the Commerce Department, the country did not even rank among the top 10 sources of American steel imports during the first 3 quarters of 2017.

It’s clear that even the more “targeted” approach recommended by the Defense Department would still miss the mark, resulting in short-lived political gain for long-term geopolitical and economic costs. Though the blowback might not result in a military conflict, the price to pay would still be a hefty one.

* Robert Held is a financial consultant specializing in international finance and transnational tax law, and lives in Geneva, Switzerland.

By Frank Shostak*

Most economists are of the view that by means of economic indicators it is possible to identify early warning signs regarding an upcoming recession or prosperity. What is the rationale behind this approach?

The National Bureau of Economic Research introduced the economic indicators approach in the 1930’s. A research team led by W.C. Mitchell and Arthur F. Burns studied about 487 economic data to ascertain the mystery of the business cycle. According to Mitchell and Burns,

Business cycles are a type of fluctuation found in the aggregate economic activity of nations….a cycle consists of expansion occurring at about the same time in many economic activities, followed by similarly general recessions, contractions, and revivals which merge into the expansion phase of the next cycle; this sequence of changes is recurrent but not periodic.1

Business cycles are seen as broad swings in many indicators, which upon their careful inspection permit the establishment of peaks and troughs in general economic activity. Furthermore, the research team had concluded that because the causes of business cycles are complex and not properly understood it is much better to focus on the outcome of these causes as manifested through economic data.

Through data inspection, the experts in the NBER establish the reference points to the beginning and the end of the business cycles. Covering the period between December 1854 and June 2009 the NBER has identified 34 cycles according to their peaks and troughs. (On the NBER the last trough took place in June 2009 and since that period we are in an economic prosperity phase).

The peaks and troughs identified by the NBER serve as a reference point to classify various individual data as leading, coinciding or lagging. Once the data is classified it is combined into leading, coincident, and lagging indices.

These indices are seen as economic signposts that are expected to alert analysts and policy makers regarding the state of a business cycle. When the leading indicators index starts to display the signs of weakening this is seen as a possible indication of weakness in economic activity in the months ahead.

The confirmation that the peak of the cycle might have reached is ascertained by means of the coincident index, while the lagging index provides the final OK that this might be the case. Hence by means of these three indicators, it is held, the phase of an economic business cycle can be ascertained.

The indicators approach that was inspired by the NBER methodology was designed to be as impartial as possible in order to be seen as purely scientific. This is what Murray Rothbard had to say about the NBER methodology,

Its numerous books and monographs are very long on statistics, short on text or interpretation. Its proclaimed methodology is Baconian: that is, it trumpets the claim that it has no theories, that it collects myriads of facts and statistics, and that its cautiously worded conclusions arise solely, Phoenix-like, out of the data themselves. Hence, its conclusions are accepted as unquestioned holy “scientific” writ.2

The Difficulty in Making Sense of Economic Indicators

By mere inspection of the leading indicator index, it is not always so straightforward in ascertaining the state of a business cycle.

Should we regard any fall in the leading index as a precursor for future economic decline? For how many months must the index decline before we can be certain of an upcoming economic recession?

Some economists are of the view that a fall in the index for three consecutive months is a signal of an upcoming recession. Why, however, is three consecutive months and not one or five required in verifying an upcoming recession?

Also, if one were to wait for the confirmation of the leading index signal from the signal of the coincident index then what is the point of having the leading index? After all, it is supposed to alert policy makers and businessmen before the boom, or a bust, has started.

Furthermore, on this way of thinking we still require the final “ok” from the lagging indicators index.

Therefore, it would appear that until the final verdict is verified the economy could already be in a deep economic slump or in a strong economic boom.

False Signals

Now, the US leading index fell by minus 0.2% in December 2015, minus 0.3% in January 2016 and by minus 0.1% by February 2016. In this case we had three consecutive declines in the leading index yet the NBER continued to classify the economy as being in an expansionary phase of the business cycle.

Observe that in terms of the yearly growth rate the leading index peaked at 6.5% by July 2014 and bottomed at 0.5% by June 2016.

The index of coincident indicators peaked at 3.2% by January 2015 and bottomed at 1.1% by October 2016.

Now in December 2017 the leading index increased by 0.6% after rising by 0.5% while the coincident index increased by 0.3% in December against 0.1% in the month before. Based on this one could conclude that everything is great as far as economic growth is concerned.

If the driving factors of boom-bust cycles are not known, as the NBER underlying methodology holds, how is it possible to make sense of movements in the leading index?

How could the government and the central bank introduce measures to counter something that is unknown?

The Need for Good Theory

Contrary to the NBER philosophy, data doesn’t talk by itself and never issues any “signals” as such. It is the interpretation of the data guided by a theory, which generates various “signals”.

By stating that business cycles are about swings in the data, one says nothing about what in fact business cycles are.

In order to ascertain what business cycles are, there is the need to identify the driving force that is responsible for the emergence of economic fluctuations.

Are the Sources of Business Cycles Really Unknown?

What typifies the emergence of an economic slump that businesses that were once thriving experience difficulties or go under. They do so not because of firm-specific entrepreneurial errors but rather in tandem with whole sectors of the economy.

People who were wealthy yesterday have become poor today. Factories that were busy yesterday are shut down today, and workers are out of jobs. Businessmen are confused and they cannot make sense of why certain business practices that were profitable yesterday are losing money today.

Bad business conditions emerge when least expected — just when all businesses are holding the view that a new age of steady and rapid progress has emerged. In short, an economic slump emerges without much warning and in the midst of “good news”.

Contrary to the indicators approach, boom-bust cycles are not about the strength of the data as such. It is about activities that sprang up on the back of the loose monetary policies of the central bank.

Thus whenever the central bank loosens its monetary stance it sets in motion an economic boom by means of the diversion of real wealth from wealth generators to various false activities that a free unhampered market would not facilitate.

Whenever the central bank reverses its monetary stance this slows down or puts to an end the diversion of wealth towards false activities, and that in turn undermines their existence. In short, the trigger to boom-bust cycles is central bank monetary policies and not some mysterious factors.

Consequently, whenever a looser stance is introduced this should be regarded as the beginning of an economic boom. Conversely, the introduction of a tighter stance sets in motion an economic bust or the liquidation phase.

The severity of the liquidation phase is dictated by the extent of distortions caused during the false economic boom. The greater the distortions the more severe the liquidation phase is going to be.

Any attempt by the central bank and the government to counter the liquidation phase through monetary and fiscal stimulus only undermines the pool of real wealth thereby weakening the real economy.

Since it is the central bank’s policies that set the boom-bust cycles in motion obviously then it is these policies that lead to economic fluctuations.

Whenever the central bank changes its interest rate stance the effect of the new stance doesn’t assert itself instantaneously — it takes time. The effect starts at a particular point and shifts gradually from one market to another market, from one individual to another individual. In short, the previous monetary stance may dominate the scene for many months to come before the new stance begins to assert itself.

Just by following the growth rate of money supply, one could get some idea regarding the boom and bust cycles in the months ahead. Given that the time lag from the money supply growth and the growth rate in economic activity is variable, the assessment as far as the future is concerned can be only qualitative.

Even if we don’t know the length of the lag we suggest that an analyst who has identified the primary causes of boom-bust cycles is likely to be on a firmer ground than an analyst who employs a “black box.” In short, he can make better sense of what various economic data implies once the major cause has been identified.

About the author:
* Frank Shostak’s consulting firm, Applied Austrian School Economics, provides in-depth assessments of financial markets and global economies.

Source:
This article was published by the MISES Institute.

Notes:
1. Quoted in Allan P. Layton and Anirvan Banerji “What is a Recession” www.businesscycle.com

2. Murray N. Rothbard Making Economic Sense p232 Ludwig von Mises Institute<

By Andrew Hammond*

Theresa May will on Friday give only her third set-piece speech on Brexit since becoming UK Prime Minister. In what may be her “last best chance” to set out a comprehensive vision and kick-start the second phase of talks, she badly needs to articulate a clear, coherent and comprehensive Brexit strategy.

The reason this is important is that, to date, May’s attempts at taking big steps forward with EU partners continue to be hamstrung by the lack of any UK government strategy. If strategy is a balanced combination of ends, ways and means, then Britain under her leadership has from the start been unclear about what it wants from Brexit. Ministers have been unsure of whether they have or can put in place the ways and means to get there. And, to compound the problem, they have struggled to understand how the EU is thinking and behaving.

It has left Britain badly divided and heading toward what could still be a potentially hard, disorderly Brexit that would see no trade deal agreed between the parties. This could see an unprecedented breakdown in relations with its close neighbors, trading partners and allies.

Yet May now has a limited window of opportunity to turn things around with relatively new French President Emmanuel Macron and Angela Merkel, who is hoping to form a new German government in the coming weeks. With the stakes so high, there are at least four fundamental issues that the UK premier needs to tackle in her speech.

Firstly, she needs to show more honesty about what Britain can and cannot achieve in the two-year time-frame of the Article 50 process. Hoping that Brexit could be completely settled between March 2017 and 2019 was always unrealistic, hence why a subsequent transition period is so important.

Secondly, May needs to dismiss any lingering hopes held by some Brexiteers of bringing about a reordering of European geopolitics. The prospect of the UK’s exit spreading to other EU countries drove the rest of the continent into defensive mode.

To many key allies like Germany and France, for instance, Brexit is an act of vandalism to Europe. The fear of EU disintegration might have receded for now, in part because Britain has shown no clear strategy for its EU exit, but it has also eased because the mood around Europe has become more optimistic with the failure of far-right populists to win power in France and the Netherlands, plus the stronger performances of the European economies.

Third, May needs to better recognize that the EU is changing and that Britain’s place in Europe will be shaped by this dynamic, not just its own plans for Brexit. The UK’s exit is only one of several challenges and opportunities confronting Brussels, including ongoing pressures facing the eurozone and Schengen Area, Russian relations, and the future of NATO and ties with the United States.

These are first order issues, and the EU needs to recognize it has some glaring weaknesses to remedy. Strategies for saving the euro single currency, for instance, have been nothing more than glorified exercises in muddling through. How the EU responds to these issues in the coming years will help determine its political economy, place in the world, and help frame its future relationship with the UK. A longer Brexit transition period would allow Britain and the EU time to better align and forge a new, successful relationship.

Finally, May should not lose sight of domestic politics beyond Brexit. The EU referendum and its aftermath have consumed UK politics, but most people’s lives are defined by other concerns. A longer transition would allow time to focus on the real drivers of positive change in UK society, such as education, infrastructure and productivity, and help deliver the most prosperous post-EU future for all UK citizens.

If May delivers on this on Friday, she will create the political capital and diplomatic space for a smoother pathway in Brexit talks, boosting the prospects of a good final deal. Brussels and the EU 27 will also be obliged to engage more constructively in Brexit negotiations.

To seize the opportunity, May must show statesmanship, putting country above party. This will not be easy given her post-election political weakness. Calling last June’s election, in which she lost her majority, was one of the most disastrous UK electoral decisions ever. The subsequent public infighting in the government shows that it has still not reconciled many key negotiating “trade-offs” by apparently wanting close, favorable post-Brexit ties without the costs. This also underlines how ministers have failed to educate the public about the challenges and potential opportunities on the Brexit horizon.

The United Kingdom remains a nation of immense power and potential, but that can only be fulfilled if governed by leaders with a clear strategy for what it is they want to achieve and an ability to direct toward it.

So this speech could be May’s chance to get Brexit talks moving at the faster pace that is needed. The challenges are real but, if she can surmount them, the prize could be a clearer course for positive future relations with European allies. Will she seize the opportunity or let it slip?

*Andrew Hammond is an Associate at LSE IDEAS at the London School of Economics

Islamic Revolution Guards Corps (IRGC) Commander Major General Mohammad Ali Jafari announced that the IRGC Ground Force plans to boost use of drones and helicopters in its operations.

Speaking to reporters on the sidelines of a ceremony to unveil IRGC’s new military gears in Tehran on Wednesday, Major General Jafari said, “Less than two years ago, we decided to equip the IRGC Ground Force with helicopters…”

He added that with the support of the IRGC Ground Force, three helicopter units have been constructed and prepared to be used for operations.

Given the decisive role of drones and helicopters in missions, the IRGC Ground Force is moving toward using the items in various operations, including heliborne and reconnaissance operations.

Iranian military experts and technicians have in recent years made great headways in manufacturing a broad range of indigenous equipment, making the armed forces self-sufficient in the arms sphere.

Tehran has always assured other nations that its military might poses no threat to the regional countries, saying that the Islamic Republic’s defense doctrine is entirely based on deterrence.

South Africa has called on the United Nations Human Rights Council to take a balanced approach to human rights.

“[The Council] needs to act in a manner that reflects the Vienna spirit of the indivisibility, interdependence and interrelatedness of all human rights.

“We need to prevent the misuse of human rights as an instrument for advancing political agendas of individual countries,” Deputy Minister of International Relations and Cooperation, Luwellyn Landers, said on Tuesday.

He was speaking at the high-level segment 37th session of the UNHRC underway in Geneva.

Marking the 70th anniversary of the Universal Declaration of Human Rights, which was adopted in 1948 by the UN General Assembly, Deputy Minister Landers said there are still areas that constitute an unfinished business for the international community.

These include the legacy of racism, racial discrimination, xenophobia and related intolerance, as well as poverty and inequality which are sometimes altered by some leaders who are not concerned about not effects of their utterances that border on incitement to hatred.

Landers said the world can only eliminate them through collective effort and cooperation.

“As a moral leader for the promotion and protection of human rights, the Council should not turn a blind eye to this major challenge of our time. It is important to work constructively with member states in combatting these scourges.”

he short-lived multilateral Quad of four democracies appears to be earning a new lease of life, partly due to a combined push by the US and Japan. Is this in response to China’s growing clout and assertiveness in the Asia Pacific?

By Tan Ming Hui and Nazia Hussain*

Reuters recently reported that the United States, Japan, India and Australia are discussing an alternative to China’s Belt and Road Initiative (BRI). Otherwise known as the ‘Quad’ or quadrilateral security dialogue, talks of deepening cooperation between the four democracies were only resurrected last November. Short of a joint statement, the separate statements issued after the meeting agreed that the four nations shared similar visions and interests to ensure a “free” and “open” Indo-Pacific region.

The quartet first came together in response to the devastating 2004 Indian Ocean tsunami, which saw their navies collaborating in relief operations. Initiated by Shinzo Abe during his first stint as Japan’s Prime Minister, the Quad held their first summit and also participated in a large naval exercise in the Bay of Bengal in September 2007. However, the Quad suffered an early demise when the Rudd government in Australia pulled out under Chinese pressure.

Not an ‘Asian NATO’

There are many speculations floating around of what the newly resurrected Quad is and what it is intended to accomplish. As before, Beijing believes that the quadrilateral grouping is part of a containment strategy against China and has immediately raised its concerns. Chinese scholars say Beijing should stay alert to such a security alliance which might reshape the regional geopolitical landscape.

Though China is cautiously not named in any of the statements, the revival of the group is undoubtedly motivated by increasing nervousness at China’s assertiveness and ambitions in the region. China has been building artificial islands in the contested South China Sea to back its claims, and ignored a judgement by an international tribunal in The Hague without any real consequences. Worryingly, it seems that China also does not shy away from using its economic leverage for political aims.

However, Quad 2.0 is not a first step to an ‘Asian NATO’. While both Japan and Australia are US allies, they have yet to show any willingness in following United States Freedom of Navigation Operations (FONOPs) into 12 nautical mile zone around contested territories.

Moreover, India has traditionally been non-aligned and is unlikely to enter any kind of formal alliance. In fact, the Indian statement revealed calculated caution in avoiding even the phrases “rules based order” and “freedom of navigation” – both of which are frequently used in Indian government documents.

Limitations

In addition, even though Abe successfully pushed through a bill in 2015 to reinterpret Japan’s pacifist Article 9 and allow collective self-defence, he still faces considerable legal limitations in terms of what Japanese troops are permitted to do in support of allies, on top of widespread public criticisms and protests.

It is thus difficult to imagine that Japan would or could help to defend India’s disputed borders with China, or that India would reciprocate in the East China Sea to support Japan. It is also unlikely that Australia would commit itself to an alliance that might drag it into geographically distant conflicts and risk its relations with China, its largest trading partner.

The quadrilateral grouping is likely to remain a loose and flexible partnership, involving closer naval cooperation such as joint exercise, information-sharing and consultations. Bureaucratically, it might be more efficient to consolidate the numerous existing trilateral agreements among the quartet, but this will never amount to an institutionalised military alliance like the NATO.

Rather than confronting China head-on, the Quad serves more as a diplomatic signal of solidarity and warning against any challenges to the status quo. Moreover, the idea of China’s Belt and Road Initiative (BRI) as an alternative suggests the members’ preference for soft hedging.

Substance and Sustainability

Quad 2.0 need not suffer the same fate as its predecessor if it can move beyond statements and reaffirmation of principles. While it need not be institutionalised, it should work towards a roadmap with actionable items and show tangible results, such as by stepping up coordination in counter-terrorism, cyber security, and disaster relief.

The four countries must define the scope of the Quad and what more can be done that is not already being achieved through bilateral and trilateral agreements. There are today much more evolved US-Japan-Australia, US-Japan-India, and India-Japan-Australia dialogues.

Also, the Quad failed the first time around when Australia caved in, which supposedly made India skeptical about participating in Quad 2.0. While Australia has shown interest in participating in the Malabar exercise along with the US and Japan, it remains to be seen if India would accept Australia’s request to join the exercise this year. Rectifying from past failures, the Quad will do good if Australia and India try to cement deeper ties to increase confidence.

Navigating Chinese Sensibilities

Thrashing out the agenda clearly and maintaining a degree of transparency may help to dispel some of China’s suspicions, if the Quad wants to avoid being branded as an anti-China clique.

Japan and Australia both depend on China for approximately 22 percent of their trade and will avoid placing their economies at risk. India will not want another Doklam-like crisis with China (73-day military standoff along the Himalayas in 2017), or intensify competition in the Indian Ocean which India regards as its sphere of influence. China is the largest holder of US debt, US$1.18 trillion as of 2017. Furthermore, the US is preoccupied with domestic concerns and may become more inward-looking.

At the same time, the quartet will bear in mind that accommodating China’s sensibilities in the past may have done little to soften China’s assertions in the region or increase China’s sensitivity to its neighbours’ security concerns. Hence, they are likely to pursue policies that will avoid over dependence on economic relations with China, especially if Beijing is willing to use economic leverage.

Overall, the continuity of Quad 2.0 will hinge on how well the four members stand their ground in the face of Chinese pressure, as well as possible economic or political pushbacks.

*Tan Ming Hui is an Associate Research Fellow and Nazia Hussain is a Research Analyst in the Office of the Executive Deputy Chairman at the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University, Singapore. An earlier version appeared in The Diplomat.