ESADEgeo Daily Digest, 05/04/2018

The Ratification of the Treaty of Münster, 15 May 1648 (1648) by Gerard ter Borch

The Guardian – Rana Dasgupta / The demise of the nation state

  • The most momentous development of our era is not the so-called “resurgence of the nation state”, but its waning: the nation-state is increasingly unable to withstand countervailing 21st-century forces, and is losing its influence over human circumstance.
  • Nostalgia for the golden age of the nation state continues to distort western political debate to this day, but the nation state was built on an improbable coincidence of conditions that will never recur.
  • The three elements of the current global crisis will only worsen. First, the existential breakdown of rich countries during the assault on national political power by global forces. Second, the volatility of the poorest countries and regions, now that the departure of cold war-era strongmen has revealed their true fragility. And third, the illegitimacy of an “international order” that has never aspired to any kind of “society of nations” governed by the rule of law.
  • From the standpoint of our present, the needed measures seem impossible to put into practice, but they needn’t be: first, global financial regulation; second, global flexible democracy; and third, new conceptions of citizenship, which should be de-linked from territory, so that its advantages can be more fairly distributed.

Project Syndicate – J. Bradford DeLong / Crisis, rinse, repeat

  • The immediate response of the US to the 2008 financial crisis was better than that given after the 1929 crash. But on the longer term, the opposite is true. When historians look back at the 2 periods, they will conclude that the relative performance after the Great Recession was nothing short of appalling.
  • Within 11 years of the peak of the pre-Depression business cycle in 1929, output per worker in the US was up 11% and still growing rapidly. By contrast, the US’ output per worker this year is only 8% higher than its pre-Great Recession peak.
  • Democrats point to the fact that Republicans turned off fiscal stimulus in 2010, whereas Republicans blame President Obama’s signature policies, such as the 2010 Dodd-Frank Wall Street Reform.
  • There is much more truth to the argument offered by the Democrats, even if Obama and his team also deserve a fair share of the blame for pursuing inappropriate fiscal austerity in the early stages of the recovery.
  • When the next crisis arrives, will we have the monetary- and fiscal-policy space to address it in such a way as to prevent long-term output shortfalls? The current political environment does not inspire much hope.

Brookings – David Dollar & Zhi Wang / Why a trade war with China would hurt the U.S. and its allies, too

  • Two-thirds of world trade now occurs through global value chains that cross at least one border during the production process. Hence, in any trade war between the United States and China, there will be collateral damage on third countries.
  • 37% of U.S. imports from China are intermediate products used by American firms to make themselves more competitive. Putting tariffs on intermediate products is shooting oneself in the foot – and the list of targeted products posted by the US does include some intermediates.
  • In choosing which imports to punish, Washington faces a dilemma. On the face of it, it would make sense to target high-tech industries that benefit from technology transfer. However, these tend to be the industries in which Chinese value-added has the lowest share.
  • What all this means is that tariffs are a very poor instrument for punishing China for any unfair trading practices. The same analysis can be applied to Chinese retaliatory tariffs.

Financial Times – Joe Leahy & Andres Schipani / Supreme court rules Brazil’s Lula must serve jail sentence

  • Brazil’s supreme court has ruled that former president Luiz Inácio Lula da Silva should face jail.
  • Lula was found guilty and sentenced to more than 12 years jail for accepting a beachside apartment and other favours from construction companies in exchange for helping them win contracts at Petrobras.
  • The historic ruling comes just a few months ahead of the national elections that will take place in October. The former president is leading early polling with 36 per cent support, double his nearest contender.
  • The next court of appeal, the superior court of justice, would only review technical arguments, not the facts of the case.

The selected pieces do not necessarily reflect the views of Javier Solana and ESADEgeo. The summaries above may include word-for-word excerpts from their respective pieces. 

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