Inflation, Ukraine and China

How the super-rich, fossil fuel corporations and war continue to fuel inflation
by David Goessmann
[This article posted on 3/10/2023 is translated from the German on the Internet, Wie Superreiche, fossile Konzerne und Krieg Inflation weiter anheizen.]

High wages and cheap money are drivers of price increases, he said. So wage restraint and interest rate hikes are called for. A new study in the U.S. dispels these myths and unearths some surprising facts.

In Germany, but also in other countries, white- and blue-collar workers are demanding more money. In Germany, employees at Deutsche Post and in local public transport are demanding significant pay rises of up to 15 percent in the face of sharp price increases.

In France and the UK, there are also strikes in response to the rising cost of living, against pension cuts and for better wages.

However, this is met with skepticism and rejection by the broader political public. The conservative business press and mainstream economists warn of a wage-price spiral. The pattern is that higher wage settlements make companies' products and services more expensive, which in turn raises prices.

In the U.S., as in this country, economists and the major media such as the Washington Post and the Frankfurter Allgemeine Zeitung also speak of a "demand shock" driving inflation.

Aid packages such as the U.S. government's American Resue Plan Act in the wake of the Corona pandemic of March 2021 would simply give normal citizen:s too much money, which they then spend with both hands - which in turn has driven inflation. The Handelsblatt states:

In addition [to supply shortages], there is high demand, driven primarily in the U.S. by government spending and everywhere else also by pent-up consumption.

For this reason, wage restraint and monetary taxation are being recommended from all sides as a remedy. Central banks everywhere have raised the key interest rate to counter inflation. The European Central Bank alone has raised its key interest rate to three percent since last year.

However, in a new study, economists Thomas Ferguson and Servaas Storm of the Institute for New Economic Thinking in the U.S. contradict the view that too high wages and cheap money are responsible for extreme inflation.

They point out that 90 percent of the Corona bailout money had already been spent by June 2021. Then, in the second half of 2021, the various tax and spending policies in the U.S. would have actually reduced economic demand. Inflation, however, did not take off until late 2021 and then increased to record levels during 2022.

Ferguson and Storm therefore do not see a demand boom among the average working population driving inflation. But in their opinion, there has certainly been a demand shock. However, it was triggered by the upper classes.

Between the first quarter of 2020 and the first quarter of 2022, total private wealth in the U.S. increased by $26.1 trillion, largely due to the exploding stock market. Forty percent of that went to the top one percent, and another 33.4 percent to the next nine percent - meaning about three-quarters of the increase went to the top tenth of Americans.

By the end of 2021, Ferguson and Storm write, "wealthy U.S. Americans entered the stage in droves and started a spending rally." Indeed, the economy could not generate enough supply for what the rich wanted to buy. The best solution to this kind of lopsided demand would have been progressive consumption taxes, rather than a broad-based slowdown of the economy via the Federal Reserve, the U.S. central bank.

Elites, not ordinary citizen:s, are to blame

In Germany, during the Corona pandemic and after, the wealth and incomes of the rich also continued to rise. According to a study, the "millionaires' club" in Germany continued to grow last year.

This was due to booming stock markets and rising real estate prices. In this country, 1.63 million people are now among those with investable assets of at least one million dollars. About 100,000 people rose into that range in 2021.

Of course, Ferguson and Storm also point to the supply side, or "supply shocks." These include, first, fossil fuel shortages in the wake of the Ukraine war and sanctions against Russia.

Second, higher corporate profit margins drove prices. Third, the labor force shrank during the pandemic: people died, fell ill, retired in greater numbers, or had to care for their children.

Finally, higher prices were charged for imports, triggered in part by increased climate disasters and extreme weather. The study draws on calculations by Swiss Re, one of the world's largest reinsurers, which provides insurance for insurance companies. Such reinsurers are the last financial backstop in the event of disasters and are therefore very concerned about the increasing costs of global warming.

Swiss Re estimates that total economic losses from natural catastrophes in 2021 and 2022 will be $292 billion and $260 billion, respectively - far more than the $207 billion average over the past decade.

Insured losses have "increased by an average of five to seven percent per year over the past decade," the report said. In a report, Swiss Re sees global warming as one of the "key factors." It poses "the greatest long-term risk to the global economy," it said.

Ferguson and Storm warn that the world faces an "indefinite future with a variety of supply shocks." As a result, they say, attention must be paid not only to the financial and monetary aspects in the short term, but to the underlying causes.

These include the threat of pandemics, lack of international cooperation, and fossil fuel combustion for energy production. Therefore, the scientists recommend taking action against war escalation like in Ukraine, preparing for further pandemics, and taking decisive action against global warming.

In the end, it means turning to the interests and needs of ordinary people and neglecting those of the elites. Something, however, that is hardly the focus of debates in the media commentary.

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Ukraine war: China promotes negotiations
by Wolfgang Pomrehn
[This article posted on 3/27/2023 is translated from the German on the Internet, Ukraine-Krieg: China wirbt für Verhandlungen.]

People's Republic wants EU to contribute to ceasefire and peace negotiations.

The Chinese government apparently wants to win the EU for a peace initiative in Ukraine war. This is according to a report in the Hong Kong-based South China Morning Post on a telephone conversation between China's top diplomat Wang Yi and French presidential adviser Emmanuel Bonne.

According to the report, Wang stressed China's position that the conflict must be resolved through talks and negotiations, and called on European countries to play their role in the process. The phone call came last Thursday at France's request, after Chinese President Xi Jinping met with his Russian counterpart in Moscow earlier in the day.

Hope for strategic consensus between EU and China

China hopes that ceasefire, peace talks and a political solution can be the strategic consensus between the EU and the People's Republic, the Hong Kong paper quoted Wang as saying.

In the next few days, Spain's head of government Pedro Sánchez will travel to the Far East to meet with Xi Jinping. After that, France's President Emmanuel Macron plans to join EU Commission President Ursula von der Leyen in Beijing in early April to seek talks.

In recent months, China has repeatedly underscored its neutrality in the Ukraine war and, like many other countries, refused to participate in the sanctions against Russia. While the People's Republic is one of the most important trading partners and investors for Ukraine, Beijing has not been dissuaded from maintaining its good relations with Moscow.

In late February, the Chinese government had made its position clear in a 12-point paper in which, without directly criticizing Russia, it condemned the threat of nuclear weapons, emphasized the right to sovereignty, independence and territorial integrity of all countries, and promoted negotiations.

Meanwhile, against the backdrop of growing efforts to restrict economic relations with China, UN Secretary-General António Guterres has warned EU states against isolating the People's Republic. He said China has an interest in good relations with the EU and its members, which should cooperate with Beijing not least on climate protection. (Wolfgang Pomrehn)

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China's rise as a superpower and the crumbling U.S. empire
by Andrew Bacevich
[This interview posted on 3/25/2023 is translated from the German on the Internet, Chinas Aufstieg zur Supermacht und das bröckelnde US-Imperium.]

U.S. President Joe Biden attends a virtual meeting with Chinese President Xi Jinping at the White House on Nov. 15, 2021.

From the Ukraine war to Saudi Arabia, China is overtaking the U.S. as a global mediator. The decline of US power goes back to the Iraq war crime. Why the U.S. hegemon can't get back on its feet.

Chinese President Xi Jinping and Russian President Vladimir Putin proclaimed a "new era" in Sino-Russian relations after their meeting in Moscow earlier this week.

Andrew Bacevich is president of the Quincy Institute for Responsible Statecraft.

The two leaders reportedly discussed China's twelve-point proposal to end the war in Ukraine, with Putin stating that China's plan could be the basis for a peace agreement.

Ukrainian President Volodymyr Selenskyj also recently expressed willingness to consider China's peace plan, although he has not yet met with Xi himself.

Amy Goodman and Juan González of the U.S. news program Democracy Now spoke with Andrew Bacevich, co-founder of the Quincy Institute for Responsible Statecraft, about the rise of China and the 20th anniversary of the U.S. invasion of Iraq.

Bacevich is professor emeritus of international relations and history at Boston University and author of "On Shedding an Obsolete Past: Bidding Farewell to the American Century."

I want to talk to you about developments that go back to the events of twenty years ago, the U.S. invasion of Iraq, and continued all the way to the war in Ukraine. Let's start in the present, with the news from the Xi-Putin summit, the Chinese peace plan that was offered, and Selenskyj's reaction to it. Do you see a path for diplomacy at the moment? Talk first about the significance of the summit.

Andrew Bacevich: First of all, we shouldn't take anything that the individual actors involved say at face value, whether it's Russia, China, Ukraine, or the United States.

I think what impresses me is China's diplomatic engagement. And I say that also in terms of their role in restoring diplomatic relations between Iran and Saudi Arabia. Our diplomacy, American diplomacy, seems to me reactive, unimaginative, and ineffective.

Chinese diplomacy, on the other hand, seems to me to be more imaginative and potentially more effective. That means that the world is changing in important and dramatic ways in terms of the distribution of power and influence around the world.

In a way, this confirms something that we've always been able to see, or have known for a long time, that China is actually emerging as a global superpower on a par with the United States of America.

Can you talk about the peace plan that China has offered? Selenskyj does reject it because it would mean that Russia would remain in the occupied territories in Ukraine, both in Crimea and in eastern Ukraine, and could allow them to invade at a later date. But it is quite striking when Selenskyj says, "I want to talk to the Chinese President," and then puts forward his own peace plan. What do you make of that?

Andrew Bacevich: I haven't analyzed it in detail, but I think you hit the key point that Selenskyj's willingness to listen to China indicates an openness to Beijing as a mediator, which would make an agreement possible.

It is highly unlikely that there will be one side that wins and one that loses in this conflict, even though that seems to be the expectation of the Biden administration, which is that Ukraine wins and Russia loses. That is not going to happen. So there has to be a compromise.

My impression is that Selenskyj is signaling a willingness to compromise, while the United States is insisting on a very tough position.

The U.S. says it can't trust China. Why do you think China and other countries could play an important role in brokering a peace agreement?

Andrew Bacevich: The larger context is the one that other commentators are putting forward, which is that the war between Ukraine and Russia is a proxy conflict. It is a proxy conflict that is part of a larger contest between the West, led by the United States (although the U.S. government is not entirely sure), and the People's Republic of China. It shows an assertiveness, an imagination on the part of the People's Republic that has not been responded to in a comparable way by the United States.

Andrew Bacevich, we have now witnessed the twentieth anniversary of the U.S. invasion of Iraq as the Ukraine war continues. The Iraq invasion is barely remembered by the media. And even when the mainstream media does go into it, the same people who drummed up publicity for the war, for the invasion, twenty years ago are allowed to talk about it - and I'm not just talking about the Fox News network. They copied the way political leaders - from Joe Biden to Hillary Clinton, who were in the Senate at the time - voted for the U.S. invasion that then-U.S. President George W. Bush was pushing. What has been the impact of this disastrous war, which - unlike Afghanistan - still has 2,500 U.S. troops stationed there?

Andrew Bacevich: One question is: Why did the United States invade Iraq in the first place? And there are several answers to that question. I think in many ways the most important answer is that the Iraq war was seen, both by the Bush administration and by proponents of the war - for example, in the media - as a way to demonstrate that the attacks of September 11, 2001, were in fact meaningless. The U.S., it was to be shown, is still the only global superpower

The message was that if we send U.S. troops into Iraq, if we beat up and overthrow Saddam Hussein, then we can use that to forget the obvious consequences of the Sept. 11 attacks. Because the attacks had shown that the U.S. was much more vulnerable, much weaker, than was claimed after the end of the Cold War with reference to the "indispensable nation."

So it was an attempt to show that 9/11 really didn't matter. The assumption was that the U.S. would win a major, decisive military victory without major cost in Iraq. And that, of course, did not happen.

Here we are twenty years later. You're right: the establishment is really not prepared to deal honestly with the consequences of the war. And in some ways, ironically, the war in Ukraine provides the establishment with a convenient opportunity to change the subject.

We still have U.S. troops in the Middle East. We maintain the basic structure of national security policy, spend more money on the military than the next ten largest military powers in the world, maintain more than 800 bases around the world, operate regional command centers, like Central Command, NATO, and so on. We have learned nothing.

That is sad, to say the least, and I think we are going to repeat the mistakes. We are in this showdown, a proxy showdown, with Russia and Ukraine. We seem to assume that Putin's war effort is going to be all conventional weapons, when of course Russia has a massive nuclear arsenal.

People also have illusory assumptions about how the war will unfold. In the end, we are then completely surprised when the war does not follow the desired script.

After Iraq: China's stock prices flourish, those in the U.S. plummet

You recently wrote an article for The American Conservative, titled "And the winner is ... Twenty years after the Iraq invasion: America's humiliation was China's gain." ("And the winner is ... Twenty years after the Iraq invasion: America's humiliation is China's gain") What do you mean by that?

Andrew Bacevich: China's stock price has risen and flourished, our stock price has crashed. We've given away our power. We've given away our influence. And I wouldn't say that the Iraq war is the only explanation for America's relative decline. But it was an essential contributing factor.

If one were interested in stopping that decline, it seems to me the right way to do it would be to start with an honest reappraisal of the Iraq war, its origins, its conduct, and its consequences. But there's not a lot of evidence that that honest reappraisal is going to happen.

And what do you think of the right when it comes to questioning the Iraq war? It leads many to believe that sides have been switched. There are those in the peace movement who deeply question the war in Ukraine and say that negotiations are the only solution here. They fear that the conflict could lead to nuclear war. Right-wingers now say - even Florida Governor DeSantis, who could challenge Trump - it's just a territorial dispute. A number of Republicans don't want to continue funding the war in Ukraine.

Andrew Bacevich: Do politicians, when they speak in public, express a principled view? Or are they more likely to actually say things that reflect domestic political strategies? I have to say - and I don't want to seem cynical - I tend to be in the latter camp.

Now that Biden is in charge of the Ukraine war, many Republicans are expressing restraint and caution about the use of force. I am not convinced that the positions taken today by Democrats and Republicans reflect principled positions, but rather what is politically convenient at the moment.

Back to Iraq. A well-known Iraqi-American who left Minneapolis when the U.S. invaded Iraq said, "I don't care if I have to sweep the streets of my city of Najaf, I will be there with my people." He has now returned. President Putin has recently been indicted by the International Criminal Court for war crimes. But there is also the question of what should have happened in the United States twenty years ago, or even ten years ago. President Obama is known to have said to always look forward. But when it comes to responsibility for the destruction of the Iraqi nation, what about George W. Bush? Just one day after Sept. 11 - when it had long been known that 15 of the 19 hijackers were from Saudi Arabia - Bush pressed Richard Clarke, who had been in charge of counterterrorism in his administration, on the Iraq question: "How can we make that connection?" Richard Clarke answered him, "There is no connection." Shouldn't Bush also be charged with war crimes? And should others be in the dock with him?

Andrew Bacevich: First of all, there's no question in my mind that the Iraq war, which was instigated by the United States, is a crime, a really horrible crime. I am probably more lenient with President Bush than many other people. You know, I think he is a person of limited talent, to put it bluntly.

He became President because his last name was ''Bush.'' He was an unimaginative figure and totally unprepared for what happened on September 11. His reaction, which I am not defending, I think is primarily due to the staff that he surrounded himself with.

In other words: When I look for bad guys, I don't start with Bush. I start with Cheney, Rumsfeld, Wolfowitz, and Condoleezza Rice, people who imagined they were thinking strategically. They pretended to understand world politics and believed that American military power was so great that Saddam Hussein's forces could be swept aside and great benefits derived.

They miscalculated. They were completely wrong. So when I look for somebody I would blame, I tend to blame those people more than Bush-without letting Bush get away with it, of course. He was the commander in chief. But again, I think in a sense his hands were not on the controls.

If Bush was so untalented, why couldn't the biggest anti-war movement the world has ever seen stop him? This movement went far beyond the United States. On February 15, 2003, millions of people around the world protested to stop the U.S. invasion of Iraq.

Andrew Bacevich: I don't think Bush or anyone in the Bush administration cared about world opinion. They were interested in getting certain allies, like Britain, to support the war. And they succeeded in doing that. Tony Blair should be ashamed of himself. I don't think world opinion played much of a role in Washington, D.C.'s inner political circles.

I happened to be in New York City, in Manhattan, on February 15. It was moving, powerful, and amazing, but it had no political impact from my perspective.

And why? I think that says something about our democracy, that elites tend to gravitate toward the will of the people. But when they sit around the table and make decisions, decisions that have to do with war and peace, I don't think they think very seriously about, "What do the people of the state of Indiana actually think about this?"

Their calculus is driven by power considerations. The Bush administration had an extremely misguided understanding of war, of the U.S. population, and of the potential of U.S. military power in 2003 when the war began. Our political leadership, elected and appointed, was just plain stupid. I think people have a better understanding of the dangers we took when we went to war against Iraq.

The interview appears in cooperation with the U.S. media Democracy Now.

Andrew Bacevich is president of the Quincy Institute for Responsible Statecraft and writes regularly for TomDispatch. His new book, co-edited with Danny Sjursen, is called Paths of Dissent: Soldiers Speak Out Against America's Misguided Wars. His new book is called "On Shedding an Obsolete Past: Bidding Farewell to the American Century."