China's Opportunity to Defuse Trump

China - the political masters of that country, to be precise - well understands that the North Koreans' unexpectedly rapid development of nuclear weapons capability is largely their fault; or, at the very least, their default.

The 'received wisdom' in foreign ministries around the world is that China is now locked in to a crisis that it has allowed to happen. China has limited [and 'interpreted'] UN sanctions in a way that has allowed the Kim regime to survive; most notably by allowing petroleum products to enter the country. This is said to be due to China's terror at what would happen if the regime collapsed. Starvation and anarchy would be very quick results of the collapse. There is said to be a fear that in such circumstances South Korea would step in to supply the people of the north, and thus be on the way to 'reunifying' the country on a capitalist basis: which would be anathema to China, and a great shame for the president who has begun to permit the media to liken him to the [still-sacrosanct] Chairman Mao.

More likely is the scenario that the regime would be able to tighten its grip even as the cessation of food and energy supplies [in a savage winter] picked off millions of already undernourished people. In such circumstances the rhetoric against the USA, as the perceived authors of the country's misfortunes [due to sanctions], would increase: and with it the prospect of nuclear adventurism from the Kim regime. The naive narcissist in the White House has recently had his image toned down by the largely-military cohort who now surround him. With the strong assistance of the Secretary of State, he can often appear reasonable; and this makes it unlikely that in the near future he could be declared unfit to continue in office. Thus the risk of a first strike by the US increases. The recent threat by the North Koreans to detonate a hydrogen bomb 'over the Pacific' has increased the probability of disaster greatly.

Were the US to deploy nuclear weapons against North Korea [and so far they are the only power to have done this in a real war] the fallout would certainly reach China, Russia and South Korea. This prospect is imminent.

There is an obvious solution. China has facilitated the North Korean weapons programme, and done nothing effective to tame the regime: or even its rhetoric. President Xi can stand tall as a statesman comparable with [and morally much superior to] Mao, by taking drastic, swift action. China should first seal the frontier with North Korea: then send in overwhelming forces to occupy the country. As it does so, it should call on the United Nations to send in a control team to supervise the neutralisation of the nuclear weapons and ballistic missiles.

As soon as those conditions are met, a joint command formed by - and led by - China, comprising the permanent members of the Security Council with the other 'brics' [India, Brazil and - perhaps - South Korea] should establish the preconditions for a reformation of the North Korean state. A safe haven could be offered to the dictator, perhaps in Switzerland which he knows from his schooldays: there is no reason to believe that he is mad, and assurances of personal security might be acceptable. Of course, for as long as lives, wherever he lives, victims of his regime and their children will [understandably] wish him harm: so he will never live in secure comfort.

Such a resolution would completely overcome Trump's posturing and rhetoric. It is arguably President Xi's duty to resolve the drastic dilemma that his country's hesitancy has fostered: and it can be the basis for real greatness.

Jim O'Neill Tilts at Productivity

Lord O'Neill, formerly the bank Economist who coined the term BRICS to characterise the main emergent markets of the millennium period, and then went to the Lords as one of Osborne's Treasury Team to be minister for the chimerical 'Northern Powerhouse' and then had the sense to resign, is now participating [as a judge] in a competition to find somebody - presumably an 'Economist' - who can re-work the data on input-output ratios in the services sector of the British economy with a view to making the data on productivity look a bit better than they do.

Almost 80% of the economy falls into the broad category of services, from financial services to waste disposal. While it is broadly possible to work out the costs of running a factory: maintaining it, depreciating the buildings and machinery, employing the staff, buying materials, warehousing incoming and outgoing commodities etc, and to set that figure against the prices received for the output, it is much harder to do this for a bank or even a hairdressing salon with the many ancillary 'treatments' that many such establishments offer. Thus the 'productivity' of manufacturing activities can superficially be assessed with more apparent assurance that applies to services.

However, I have shown a few times in this blog that the higher 'productivity' that is reported in French and German firms, relative to British equivalents, is largely related to the incorporation of intellectual property within the prices that the firms can charge. In the many cases where firms in continental countries have the huge advantage of being recognised as the national leader in the field, they have the capability to charge premium prices and still get the demands of the public in preference to cheaper alien products. This applies to coffee grinders and to banks, as much as to car makers and washing machine suppliers.

Of course, the Germans have the advantage of the brilliant meister system of operation within companies, just as American forms benefit from massive intellectual property and a strong work ethic among the workforce [far exceeding UK norms], but many of the aspects that cause higher productivity in this country rather than that are intangible. I hope that Lord O'Neill will winkle out someone who can really provide the way to an answer; but I will not hold my breath.

BRICS Ascendant

Readers of most Newspapers in the postindustrial economies, and the wider spectrum of society that half-notice news headlines on television and radio, have been left unaware of the fact that the last days of March produced major news in the field of Political Economy, from Delhi. A meeting of the Heads of Government of China, India, Brazil, Russia and South Africa disappointed US and EU delusionists who hoped that major areas of disagreement - and different perceptions of their national interests - would cause this group of countries [commonly called the BRICS] to come to no practically-useful agreements. They instead issued their Delhi Declaration summarising a developing shared view of the state of the global economy, an increasing frustration with the unfairness of the nineteen-forties institutions that regulate world affairs [insofar as such matters are regulated], and a shared determination to gain appropriate recognition for their group - and for its members individually - in global institutions.

Their importance in the global economy has already gained recognition as a fact, as more of the goods in a typical European or American hardware store are marked as having been made in some of those countries; and oil, crops, minerals and other 'primary products' from those sources are increasingly important. China has gained control of the global market in 'rare earths' as well as a massive market share in simple manufacturing. Indian firms control globally renowned brands of high-quality cars and have exported their software building and managing skills into the highest technology laboratories and factories worldwide. Brazil is increasingly gaining respect for the balance between sectors that is being achieved as it grown rapidly. Despite the threat to economic stability that is posed by Zimbabwe-style pressure to dispossess 'white' firms and farms that comes from the 'left' of the ruling party, South Africa has managed to display economic data that currently justify their membership of the club. Enemies stress the weaknesses of Russia - declining population, oligarchy, corruption, the failure to establish 'real democracy' and the dubiety of the rule of law - but the combination of military strength and natural resources that always provided the basis for Tsarist power is still enough to ensure the global significance of the biggest country on the planet.

The Delhi group asserted that half of the world economic growth that is forecast for the next few years will take place in those countries. When 'the west' was in the lead, its Economists and politicians extolled their role as 'the locomotive' for the world economy: the concept has quietly been forgotten now that the BRICS can claim to be the motive forces for the present era. The most influential of the post-war institutions, the International Monetary Fund [IMF], was structured to serve the victorious wartime allies and even after many revisions to reflect changes in the world [and much weakening of the role of the US dollar] the EU together has 36% of the votes, the US still has 17%, and the BRICS together have just 11%: while their turnover is 28% of the global economy [and rising quickly as the west stagnates]. The Delhi assembly criticised this, demanded a reorganisation of the United Nations, and especially of the permanent seats on the Security Council, to reflect the shift in power. The rigidity of the World Bank - and the probability that yet another American would become its chairman - led to the BRICS examining the possibility of creating a South-South Development Bank through which they could lend money to each other and their emergent-country clients.

If the old-world institutions do not open themselves to recognition of the shift in the basic facts of Global Political Economy, they will compel the BRICS to set up their own parallel institutions: and the potential of global institutions to foster Peace among the Nations, which was promised to the whole world by the victors of 1945 - which included China and Russia and Imperial India - will be vitiated. The BRICS have the resources and the ability to go their own way: within the first half of the present century the Chinese and Indian economies will both be larger than the American. If these powers are not welcomed with due respect into the global institutions, the postindustrial countries will be much the loosers.