America’s political theatre

S P SETH

America’s political theatre is on the road these days, with presidential contenders from both the Democratic and Republican sides making their respective sales pitch. The Republican side started with a crowded field. On the Democratic side, the contest for nomination is between Senator Bernie Sanders and Hillary Clinton. Clinton missed out in 2008 when Obama won the nomination and went on to win the presidential race. Clinton has always considered herself presidential material and felt cheated when a young ‘upstart’ like Obama beat her to the Democratic Party nomination to become the country’s president. Obama made her Secretary of State, partly because of her considerable experience, as a politically active First Lady during her husband Bill Clinton’s presidency and partly, it would seem, to neutralize her from making political mischief during his term. It was an astute move on his part and now might help Hillary by further reinforcing her credentials and experience, as well as in getting her a large chunk of the African American vote. But that is if she wins the Democratic nomination, which is still an open contest.

Bernie Sanders, a 74-year old virtual unknown until he decided to throw his hat into the ring, represents interesting and arresting phenomena reflecting some important emerging shift in political thinking in the US. And this shift is best captured in Senator Bernie’s speech after the Iowa primary, which ended up in a virtual tie, with Clinton winning by just a whisker.  To quote him: “Nine months ago, we came to [Iowa]. We had no political organization, no money, no name recognition and we were taking on the most powerful political organization in the United States [the Democratic Party establishment and the Clinton dynasty]… Tonight [in Iowa] it looks like we are in a virtual tie…” And in New Hampshire primary, he trounced Clinton.

By the standards of American political lexicon, Bernie Sanders, with his avowed socialist views, is trying to fuel an insurrection/revolution when he said, “We do not represent the interests of the billionaire class, Wall Street or Corporate America. We don’t want their money…” Elsewhere, he has said, more or less, that Clinton is captive to that class and their interests, accepting their money and promoting their special interests.

Summoning up the courage, as if, to speak on behalf of the people, he said, “The American people no longer want to see an economy in which the average American works long hours for low wages while all income and wealth is going to the top one per cent…”

Answering his critics who ask how will Sanders pay for all his policies to create a just and equal society? And he is ready with an answer that should send shudders through America’s capitalist class. His answer is that, “We are going to impose a tax on Wall Street speculation. [Because] The greed, the recklessness and the illegal behavior of Wall Street drove this economy to its knees. The American people bailed out Wall Street. Now it’s Wall Street’s time to help the [the country’s hollowed out] middle class.”

In other words, by being not beholden to corporate America’s money and patronage, he would be able to put people right, left and centre of his policies, if he wins. On the other hand, while Hillary Clinton is receiving millions of dollars from corporate interests for her election, she can only do the talk about fairness and equality but not the walk. Bernie Sanders’ young activist volunteers are raising money for his election by way of small contributions from people at the grass roots. In drawing the distinction with Clinton, he projects himself as the peoples’ representative.

Whether or not Sanders gets the Democratic Party nomination, he certainly has shaken its establishment raising some serious concern that he might trump (no pun intended) Clinton, say, like Obama did, in 2008. Though it was a different political environment then but the general wisdom at the time was that Hillary Clinton would be the Democratic Party nominee (and the country’s president) because, among other things, it was her turn as a Clinton dynasty nominee and because the Democratic Party establishment was behind her. With or without Sanders’ eventual nomination, he has brought about a qualitative change in America’s political debate, at least on the Democratic side. And its proof is that Hillary Clinton is having difficulty defining herself, shifting from a ‘moderate’, a ‘centrist’ and even a ‘progressive’.

Which begs the question: who precisely is Hillary Clinton? And there is no clear answer to this. She is anything and everything, which simply reinforces her lack of trustworthiness that is often pointed out as a serious negative in her case compared with Sanders’ life long consistent socialist principles. This is another important contribution from Sanders that, by entering the presidential nomination race he has somehow softened, if not expunged, the negative connotations of being a socialist. Sanders’s main problem, though, is that he doesn’t carry much weight with the country’s minorities like Afro Americans and Latinos. He represents Vermont, which is almost exclusively white, and he has very little record of any advocacy of their concerns and rights. On the positive side, he is very popular with youth groups, like Obama was, and they are doing voluntary work for him. And he has done quite well with women, regarded by Clinton as predominantly her constituency.

On the Democratic side, there is a choice between an old (in the political sense) and familiar, and hence not too exciting, Hillary Clinton, and an untried but with a transformative vision, Bernie Sanders, who is promising to positively transform the United States.

As against this, on the Republican side, at times it looks like a race to the bottom with Donald Trump virtually declaring war on Muslims, Mexican immigrants, ‘uppity’ women who would like to ask some uncomfortable questions and, in one instance, even dumping on a disabled reporter. Whether or not some one from the Republican side will eventually trump him to the nomination is an open question? But the fact remains he has tapped into the insecurities of many Americans by saying things openly that they feel. In some ways, for many, he has become their voice.  Which is not to say that he will end up becoming the Republican nominee, but to dismiss him mockingly is dangerous.

Note: This article was first published in the Daily Times.

Oil shock and global economy

S P SETH

There was a time, not long ago, when many people worried about oil, the black gold that was making its producers very rich and important players on the global economic and political stage. And the worry was centred on two factors. First was the rising price of oil---remember the seventies and eighties--- that was creating a lot of uncertainties about economic growth and causing inflation. And the second was constant speculation about finite oil production and reserves and that, sooner or later, the fuel that kept economic wheels turning might run out.

Well, that was then. Today, the oil price has fallen sharply and some expect it to fall further. The question is: what has caused the oil price to plummet so low as it has serious economic and geopolitical consequences? There are several reasons for this. As concerns grew about the likely imbalance between global supply of oil and its growing demand, two things happened. First, major global economies introduced practices to increase oil efficiency in its use, thus putting some restraint on their ever-growing demand for oil. Second, the hike in oil price made it cost-effective to bring into production some old oil wells but, more importantly, to extract oil and gas from shale and tar sands thus creating a glut in the market, with supply overtaking demand for oil in international market.

At the same time, the global economies have still not quite recovered from the 2007-08 recession; thus their growth rate, where positive, is still patchy. And on top of it, the relatively slower economic growth in China has seriously dampened the demand for oil and other resources. Normally, the geopolitical turmoil in some regions of the world, particularly in the Middle East, should work to spike oil price but it is not doing its job when there is already glut in the oil market, estimated at anywhere between one and two million barrels a day. Besides, the demand from building up inventories against any future crisis seems to have dried up for the time being. And with the lifting of sanctions on Iran for fulfilling its part of the nuclear deal, it will soon be entering the international oil market, which is likely to further depress oil prices. It is likely to add another half a million barrel a day into the market.

In the past, the oil cartel of the Organization of Petroleum Exporting Countries (OPEC) used to exercise its leverage by limiting oil supply and hiking the price. But Saudi Arabia, the biggest oil producer, hasn’t seen it fit to do that. Even though the fall in oil price is hurting its revenues, it has enough staying power with large foreign currency reserves, and investments. But the falling price will hit Iran when it is hoping to ease its economic situation. At the same time, Saudi Arabia doesn’t want to lose its share of the global market by limiting supply. And by keeping the price low it wants to drive out producers and investors drawn into new oil production by the higher price of oil not long ago. The low price will make oil production from new wells, and from shale and tar sands, uneconomic. There are already reports that these investments are under debt stress.

The precipitous fall in oil price is causing havoc with economies of some the countries that are heavily dependent on oil exports. These countries include Russia, already subject to economic sanctions from EU and the US, oil producing Middle Eastern countries, including Saudi Arabia with its revenues from oil falling that will make it difficult to bribe its population with all sorts of subsidies, Venezuela with its economy already teetering on the edge, and oil producing countries in Africa like Nigeria and Angola. Here in Australia, emerging as a large producer of LNG, the fall in oil prices, compounded by shrinking demand from China for its iron ore, coal and other resources, the economic situation is creating great uncertainty. Already, the stock market tumbles have reportedly wiped off $ 110 billion from its markets. Canada, another resource rich country, is affected, as well as Brazil and South Africa. Some of China’s African ventures, where it has invested in oil extraction and other mining projects, might already look dubious.

The combination of all these factors is creating conditions that might bring about another global recession, even before the one in 2007-08 has worked its way through. Indeed, the Royal Bank of Scotland has advised its clients to: “Sell everything except high quality bonds.” Because: “In a crowded hall, exit doors are small.” As one commentator has said, pointing to all round confusion, “It is not just economics, but game theory” that is driving the market. “The Saudis”, for instance, “are quite happy to see US shale oil prices not make money, and also some other high-cost producers.”

In the old conventional sense, such big falls in oil price should perk up economies, as oil is a significant component of cost in manufacturing and transport operations. With the expected follow on savings to consumers, they should ordinarily feel encouraged to spend more, but this is not working.  The International Monetary Fund (IMF) has downgraded its predictions for global growth for 2016 and 2017. In any case, it appears that the substantial fall in oil prices is not being passed on to the consumers. At the same time, the character of the global economy has changed since the seventies and eighties. At the time, because of the dominance of manufacturing and its overwhelming dependence on oil and coal, these energy sources were the linchpin of economic growth. The oil price shocks of the seventies and eighties forced a drastic reorganization of the heavy industry to foster energy efficiency. And now with digital revolution and growth of services sector, there is no more talk of running out of oil and its reserves.

Besides, in the light of global warming and emphasis on renewable energy, oil is less prized, though it is still an important component of driving growth in developing countries. It is, therefore, not surprising that the price of oil is in a bit of strife. And unless it works its way through, the global economy is in for a bumpy ride. 

Note: This article was first published in the Daily Times.