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The Misguided Forces Driving Conflict Escalation Between the US and China

Yale Law School Fellow Stephen Roach, discusses his just-released book, Accidental Conflict. Roach explores how much of the adversarial nationalist rhetoric in both China and the USA is dangerously misguided and more a reflection of each nation’s fears and vulnerabilities than a credible assessment of the risks they face.

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Transcript

Rob Johnson:

Welcome to economics and beyond. I'm Rob Johnson, president of the Institute for New Economic Thinking.

I'm here today with Stephen Roach. He's a senior fellow at the Paul Tsai China Center of Yale Law School and he's the former chairman of Morgan Stanley in Asia. I must add, he is someone whose insights and works I followed very closely when I was in the investment world, particularly working in the realm of non Japan Asia. He's written many things. Most recently I read something from Project Syndicate and Fortune Magazine. He's been in the Financial Times and is respected throughout the media. We're here today because on November 29th, his new book, Accidental Conflict: America, China in the Clash of False Narratives, will be released by Yale University Press. I had a chance to look at the book and I'm very excited to have this conversation with you. Steve, thanks for joining me.

Stephen Roach:

Thank you, Rob.

Rob Johnson:

Let's start with the inspiration. You're watching the world. Obviously there are a lot of ominous things related to US, China, Ukraine, et cetera. What got under your skin? What inspired the book that you've created that I've had the good fortune to look at?

Stephen Roach:

Well, it's a long story, but I'll try to be as short as I can. I actually make note of that in the acknowledgements that are buried at the end of the book, which very few people ever read. The book is basically an outgrowth of a 13 year journey I've had since I joined the faculty of Yale in 2010. When I came to Yale after a long career on Wall Street, tried to figure out what I was really most passionate about. Half my Wall Street career, I'd been the head economist for Morgan Stanley focused on the US, and the second half I was the chief global economist and I got hooked on China in the late 1990s in the depths of the Asian financial crisis. I thought about what I wanted to do when I became a professor and I said, these two pieces of my career have something really important in common, and that is they tell a story of the relationship between the US and China.

There are plenty of people who know more about China than I do. There are plenty of people, well I hesitate to say this, who know more about the US economy than I do, but let's just say that's true. I thought my strength was really in the overlap, the interplay between them. I started working on that and teaching about it. I set up a popular course at Yale called The Next China, which was a large lecture class for a number of years until COVID. I found that resonated a lot with the students and with my own research interests.

I wrote my first book on the relationship in 2014 when I took a stab at characterizing the relationship as a codependent relationship, where the US depends on China, China depends on the US. I ended that book in late 2014 with a warning saying, look, codependent relationships don't work out well unless both partners pay a lot of attention to themselves, and there's a real risk that this is going to end in conflict. As the conflict broke out in the open almost immediately after that book was published in 2014, then I just focused a lot on the dynamics of the conflict, why it was intensifying, where it might go in the end and how could we get out of it without a catastrophic ending for the US, China and the rest of the world? That's sort of the not so short but the intro to why I wrote the book.

Rob Johnson:

Well, I'm grinning as I listen to you because I'm reminded of my good friend Orville Schell, wrote a book with John Delury called Wealth and Power. When I looked at your work preparing for this, there were many echoes in that. He turned me onto something, which was a website called China Heritage. There was a man named Jeremy Barney that set up something in 2021 and it was like a special episode called Spectres and Souls. It resonated with a famous quote about a German man, Romain Rolland, who had dealt with the tensions and the disintegration of allegiance within Europe during the 1920s and '30s.

His biographer, Stefan Zweig, coined a term called the Invisible Republic of the Spirit. He said, "The invisible republic of the spirit, the universal of fatherhood has been established among races among nations. Its frontiers are open to all who wish to dwell therein. Its only law is that a brotherhood." Today we could also put sisterhood in there. "Its only enemies are hatred and arrogance between nations. Whoever makes his home within the invisible realm becomes a citizen of the world. He is the heir not of one people, but of all peoples. Henceforth, he is an in dweller in all tongues in all countries in the universal past and the universal future."

As I was going through your book, I wanted to nominate you for a cast in the invisible republic of the spirit. I think you're onto some very powerful themes. You talk about false narratives. Let's go to both sides. You pick who goes first, but what's the false narrative that China is resonating with? What's the false narrative the United States has resonated with at this juncture?

Stephen Roach:

Well, before I answer that, which I definitely will answer because the bulk of the book, some eight chapters, is all about the details of these false narratives. You might wonder, what is it about the false narrative that attracts both the US and China? The answer to that, in my opinion, is that both nations, as strong as they are, the number one and number two economies in the world and probably the same now in terms of military capabilities, are surprisingly vulnerable because of issues that I'll get into when I describe the false narratives. Rather than face up that vulnerability and take care of their own economies or sort of deal with the insecurities that they face, it is politically expedient for both nations to blame somebody else for their shortcomings and for their vulnerabilities.

We have focused on China, just as we focused on, I might add, Japan some 30 years ago, and China has focused on us for a whole series of reasons that I will get into. When you're a vulnerable nation, a vulnerable economy, and you don't have the strength of character, strength of leadership, whatever you want to call it, to face up to your own shortcomings, it's much easier to blame the other guy than get on with the heavy lifting of addressing your own problems.

If you want an example of that, think about Jimmy Carter in the depths of an energy crisis in the late seventies when he said in his gray cardigan sweater on public national television, "We have a problem in America." He was trounced in the polls by Ronald Reagan because he had the audacity to say that we had a problem. anyway, I just wanted to get that out of the way.

Rob Johnson:

I have a friend who's a scholar of Europe and he calls that the Bismark model. When you can't align everybody internally, you'll find an outward enemy or counterpart and focus all realignments on meeting the challenge of that external enemy.

Stephen Roach:

Well let me start with the US, Rob, because case in point, you look at the polling of sentiment toward China, and I use the Pew research centers as the longest and most accurate of those polls. The negative sentiment on China with respect to the American public is at an all time high in the history of this survey and it's bipartisan. It's literally the only thing, one of the few things, I should say, that Republicans and Democrats actually agree on. It's true of all age cohorts, young and old, college educated, uneducated, male, female, you name it. China is the enemy and the intensity of that feeling is higher than it's ever been.

What are some of the false narratives that the US has with respect to China? My favorite one, and I spend a lot of time on this in the book, is blaming China for our trade deficit. We have a big trade deficit in the United States. We've had a big trade deficit really now for 40 years. The economics that I practice says that trade deficits do not come out of a vacuum. They reflect the lack of domestic savings that an economy has or doesn't have, as in the case of China.

Countries that are short of savings and want to grow, and we certainly want to grow in the US, we are forced to borrow savings from overseas and we run these big balance of payments deficits to attract the capital. The balance of payments deficit gives rise to a massive trade deficit not with one country, as the China bashers would lead you to believe, but with many countries. Last year, 2021, we ran trade deficits with 106 countries. China was the largest, although the share has come down due to the tariffs that we've imposed on China, but by no means is the only large one. If we don't address our savings problem, and we have not done that with our massive budget deficits, then we can fix the Chinese piece of the trade problem but it simply would go to other trading partners. In many cases those with higher cost structures, and that ends up penalizing American companies and American consumers.

The false narrative is that there is a China fix, a bilateral fix to a multilateral problem. It makes no sense theoretically and it's not what's actually happened. As we've squeezed China through these tariffs, large tariffs that the Trump administration imposed on China and that the Biden administration has unfortunately perpetuated, the Chinese piece goes down, but other pieces go up. Trade deficits with Vietnam, Mexico, Canada, Malaysia, and across the board and the multilateral trade deficit, which is really the thing that should concern American companies and American families, has gotten worse, not better. This is an example of a false narrative that has completely backfired because we've chosen to prosecute it in our zeal to blame China for our domestic savings problem. That's one example on the US side. There are many more that I go into in the book, but I've probably droned on a little bit too much about that.

Rob Johnson:

Well, I think there's a very important element of this too, it's the notion that trade theorists have of comparative advantage. We were bringing China into a system with what we might call a division of labor, a lot of foreign direct investment in labor intensive activity and so forth. As they became interested in the realm of technology, and when I recall a report they put out called the China 2025 plan, Americans became very anxious.

In one case, the sector where you and I have each worked, they didn't feel they were going to make the exchange rate convertible and open the markets for foreign entities to handle financial management for people within China. Number two, the interaction with Silicon Valley as underscored by the Huawei polarities and the idea which you might call the Chinese were inspiring foreign direct investment in order to steal the technology from the original plant and then expand and block the success of the foreign investors.

The China 2025 plan I remember inspired some reports by the authors like Blackwill and Campbell at the Council on Foreign Relations, even before Donald Trump. This was something that was spiraling out of control. It wasn't caused by a Trumpian, it was maybe exacerbated there, but there seems to have been a sense in which America expected China to just fall into place in the division of labor that we chose for them. I'm sensing that they had a different medium or long term ambition that we hadn't realized.

Stephen Roach:

Well, I would completely agree with that, Rob. I think it's not just the technology piece of the implicit agreement that we had with China. When President Clinton pushed for China to be admitted to the World Trade Organization, he did that with the presumption that if China plays by our rules, they would become more like us in, not just in the technology area but in the political and social evolution of their system. A lot of big thinkers in Washington, and I would single out the Democrat, Kurt Campbell, as a leading proponent of this view, have really taken great affront to the fact that China has not conformed to the Western value proposition as we believe it should be adhered to if they want to be a member of our system, trade with us and get our dollars in exchange for the goods they provide us.

It's a very sort of self-serving proposition that did not really allow for consideration of what China's objectives were in terms of its economic growth and development. That's not to say that China's the good guy in all of this. China's done a lot of things that have really pushed the edge and gone over the edge in some areas that they need to be held accountable for. That's why we have dispute mechanisms set up to adjudicate those issues. This whole proposition of, we want China to come into our system and play by our rules and if we don't, we're going to close them down, seems patently one sided and laced with hypocrisy.

Rob Johnson:

Do you sense that as China was developing, which you might call the difference between wages there and the United States started to narrow, and there was pressure within China as around the world to start to address climate issues. I guess what I'm asking is, were the companies from the United States with foreign direct investments in China experiencing a profit compression not only from imitation, because I talked about that in my previous comment, but also from a rising wages and rising environmental protection, which might say their enthusiasm could have waned in that process. People like Nike and Walmart and others, did they continue to defend working out a collaboration with China, or did they become demoralized as well?

Stephen Roach:

Well, I don't think they became demoralized because China was the ultimate sort of offshore efficiency solution for high cost multinationals operating in more expensive markets like the United States. To the extent that China developed and went further up the pay scale, then those efficiency considerations were certainly worth questioning. In no way whatsoever did it change the mind of retailers like Walmart to continue to source heavily from low cost, increasingly high quality Chinese goods.

The environmental issues that you allude to. I mean, china quickly has become the world's leader in greenhouse emissions and there's been a growing awareness of that around the world and also inside of China. Did US companies stand up and say, "We don't want to source in China because of the emissions that they are spewing out into the atmosphere that are affecting all of us?" I don't know of too many companies that have defended the planet by rethinking their outsourcing to China, and maybe that's an issue that needs to be further explored.

Rob Johnson:

I was looking at it in a slightly different vantage point, which is they may have been, we might call less enthusiastic about being in China because China was reacting to climate and those new conditions might have compressed their profit, and therefore they'd spend less time resisting the people in America who were feeling displaced by, or how would I say, unable to compete with China or preserve their own technological property rights.

Stephen Roach:

Well, multinationals don't exist in a political vacuum. They can see the handwriting on the wall. They're aware of the escalation of conflict between the two nations. I mean, in five years we've gone from a trade war to a tech war to arguably the new stages of a Cold War, and that makes multinationals uncomfortable with their operating decisions. I mean, look at Apple for example. The quintessential multinational production platform that it produces or assembles, I should say, the bulk of their most powerful revenue generator, the iPhone, in Guangdong province. They've started shifting some of that production to India. A small portion of it, but they recognize the need to begin to hedge their exposure to China.

Now with the disruptions that are going on because of this patently impractical and absurd zero COVID policy that Xi Jinping insists on defending that has really taken a huge bite out of production in the Foxconn plant in Zhengzhou, Apple is certainly, I would imagine, thinking long and hard about its Chinese production and assembly exposure.

Rob Johnson:

We've been talking about this, not surprisingly, from the vantage point of the Americans. In your book, you talk also about the false storylines that the Chinese have about the United States. Could you share with us some of what you see as the misunderstanding or false constructions that emanate from their side?

Stephen Roach:

Well yeah, I think one of the most important ones, Rob, is that China recognized 15 years ago that it had to rebalance its economy, become more of a consumer, less of an export and investment economy. More services, less manufacturing. In part because of the environmental issues that you just alluded to, but also less of a surplus saver and more willing to invest its saving in expanding the social safety net that its families need to become secure and confident consumers. It made some progress, but basically the rebalancing is, charitably speaking, incomplete. Others might say it's failed. I would not go that far, but it remains incomplete in large part because I think there's been an unwillingness and inability to build out the social safety net that can address some of these long term consumer confidence issues.

China's been reluctant to admit this, but when they do admit it, they blame it on America in its efforts to contain the rise of China. This whole notion of American containment of China, while it's grounded in some of the concerns that we alluded to earlier in talking about our disappointment with China not playing by our rules, China has taken this containment complex to an extreme and blamed America for its own failure to rebalance the structure of its economy. If China did a better job in attending to its own economy, it wouldn't have the American containment excuse to rely on.

Rob Johnson:

When I was reading your book, I heard echoes of earlier readings. Michael Pillsbury's book on the idea that the period from the Opium War to the Japanese invasion, the century of humiliation. Was going to lead to almost like a nationalistic Chinese dream. I remember myself around 2014 going to the National Museum, which you've written about, and seeing the intensity of that presentation. My Chinese friends in Beijing at that time were quite anxious that I went to see it. There was also in your book a man named, I think it was James Truslow Adams who created an American dream.

How are the Chinese dream and the American dream different or incompatible at this point? I can see the Chinese dream had more like getting our seat back at the head table, the 100 year marathon going forward, as Pillsbury called it, was about China in his mind he was quite skeptical of collaboration, China taking over. Orville Schell and John Delury were a little softer. They wanted to be back at the head table as partners in their writing from around that time. How are you seeing that Chinese dream? Especially when you're talking about false narratives on both sides. We're talking about psychology, we're not talking about facts. We're talking about interpretation of things. I'm curious how you're seeing these two dreams catching fire at home and how we'll move on to how reconcile so that we can collaborate in the future.

Stephen Roach:

Well, I have a long take in the book, Rob, about the contrast between the two dreams. Because so much of my approach is to recognize, as you just put it very well, that there is a psychological aspect to the fantasies that go into the construction of dreams. How this interplay between two dreams plays out is I think it adds an interesting amount of local color to the themes I try to address in the book.

Xi Jinping grasped the concept of the dream within hours of his appointment as general secretary of the Chinese Communist Party in, well 10 years ago this month. He used the exhibit which you saw, which I saw, at the National Museum of China on Tiananmen Square as a staging ground for expressing his aspirational views for China's future. Saying that this century of humiliation is a lesson of for where we must go in the future. Never again should we as a nation be humiliated at the hands of foreigners. We have every right as a nation to reclaim our former stature as the world's leading nation, as he claimed China was arguably prior to the opium wars. It was a nationalistic vision that he offered. It became very popular. He marketed it heavily and used it very effectively to instill a growing sense of a nationalistic, patriotic feelings about the rise of China. Not where China had come, but where it was headed.

He went on to then articulate a clear goal such that by the year 2049, which would've been some I guess 37 years after he was first sworn in as the party secretary, that China would be at the table as a great power, a great socialist nation on a par with any other great power in the world today. That was the goal, the aspirational goal, which translated into a economic and military goal for the sustained rise in China. Then he went on to articulate this in strident and sometimes very belligerent terms, notably at the 100th anniversary of the founding of the party in July of 2021, to say basically anybody who messes with us in attempting to achieve the aspirational goals of the Chinese dream will have to face the consequences, to use Xi's own words, of a great wall of steel forged by 1.4 billion Chinese nations. It was an aspirational message with a very tough undertone.

You contrast this with the American dream, which was not articulated by a politician but by a historian and an author, James Truslow Adams, that was first written about in a book called I guess The Epic of America in the depths of the Great Depression in the early thirties when America was in the grips of a deep despair that coincided with the worst, most catastrophic economic failure in our history. With an unemployment rate of 25%, with breadlines, with no social safety net. Adams wrote of an American system that is the strongest value proposition the world has ever created that ultimately can produce growth and prosperity in accordance with the contribution that each of us make fairly and equitably to our own society and economy.

I would imagine, not being alive then, that dream rang hollow in the depths of the Great Depression, but over time many American politicians, notably Ronald Reagan going forward, have grasped onto this aspirational image of the American dream. It's become an important aspect of our societal values and some of our political sloganeering. I would certainly say that the American dream does not compare with the more strident and nationalistic and military aspirations of Xi Jinping.

Rob Johnson:

Let me ask you on that very theme. My sense is that China felt, and you talk about not taking responsibility at the time of the Industrial Revolution for staying at the head table, but my sense is that China felt at least in the two world wars as if there were foreign intrusions into their country that stopped them and that they want to refute that. I remember watching a film. Wherever I was an investor, I would read novels and poems and watch the films. I remember being alerted by a friend of mine who's very into the arts about a film called Wolf Warrior 2, about China. It was really about somebody going to go out there and go to a colonial country, I believe it was in Africa, and while there was an injury because the man's wife had been murdered, he was kind of starting out on revenge, but he wasn't really about revenge. He was about stopping oppressors from bothering those people.

Now why do I bring this up? Because the box office explosion and attraction to that movie, and I believe the closing credits came with an oration that comes out of the text of a Chinese passport that was talking about what you might call global brotherhood. It seemed to invigorate when all of my Chinese friends loved that film. There was something that I think relates to feeling like they're getting out from under foreign oppression, not just rebuilding themselves that's in this mix and may contribute to the false ideologies relative to what might be achievable.

Stephen Roach:

Well, I think you're onto something and I allude to it in the book. I mean, just like we use China as a scapegoat to mask our own inability to save, and blame China for the trade deficits that arise out of that, the Chinese need scapegoat too. Who was responsible for China's failure to maintain its absolutely dominant position as the world's leader in technology and innovation? China chose to stay closed and to look inward during this period where the Industrial Revolution created the greatest increase of national income in the West that any economic system had ever experienced. China chose not to participate in the Industrial Revolution and they want to blame the invasion of by their territory on Japan or on Europe, on the opium wars, the eventual occupation of Manchuria by the Soviet Union. They want to blame others for their own failure to stay on the edge as the world's leader in technology and innovation. That's a pretty convenient excuse and again, an example of many of the false narratives that I end up focusing on in this new book.

Rob Johnson:

You see the state of these two false narratives and then you see the introduction of the Ukraine and Xi Jinping not just staying out of the fray, not just wishing it would be reconciled, but actually joining one team as it's presented. First of all, is that accurate? Secondly, why would he do that? I know a lot of Chinese people that are criticizing the damage that it could to do to China in the world system in the medium term by siding with Vladimir Putin.

Stephen Roach:

Yeah, I have to confess that the book was complete and had been through multiple rounds of editing. We were a few months away from sending it off to the proverbial printing press when Putin invades Ukraine. He invaded Ukraine three weeks after he had signed this unlimited partnership agreement with Vladimir Putin and the Russian Federation. I had to go back and rework a significant amount of the book to bring this into the development of my themes. Why was this important is what you're asking.

It goes again back to the false narratives of the Chinese dream. I think that Xi Jinping had figured out that China needed a partner to become a great power. It really could not do it on its own. The original sort of model that he proposed for partnership was a special relationship with the United States that he rolled out at the Sunnylands Summit to Barack Obama in, I want to say 2000. I'm sort of blanking on that. Maybe somewhere in the 2008, 2010 period when they met at Sunnylands. It was called the new model of great power or major power relationships. Xi Jinping had the audacity to say at that point to Barack Obama that China should be already at the table with the US with this new model of major country relations, and that would allow him to of jumpstart his aspirational goals to be at the table with the US.

Obama unfortunately did not just tell him, "Hey, this is a really dumb idea." He played along with it and so it got a lot of traction in sort of the global power community. Then ultimately, as we went into conflict with China, China dropped the idea but not the notion that it needed a partner to be great again. Russia is Xi Jinping's second attempt to find the partner that would allow him to sit at the table as a great partner compatible with his aspirational goals for 2049, when China is sort of deserving of that title.

It was, I think quite honestly, Rob, it could end up being Xi Jinping's most serious strategic blunder. Because number one, he has to have underestimated where this war was going and what it meant for the West to unify encountering this horrific and tragic conflict. Secondly, it raised a distinct possibility that if China were to support its new unlimited partner in any way whatsoever, whether it was through direct military assistance or financial assistance or technical advice, then it too would be judged guilty of the same types of war crimes that the West is accusing the Russian Federation of committing. China would be judged guilty by association with the world's pariah state, the Russian Federation.

I've urged in things that I've written that Xi Jinping just say, "Wait a second. This is the wrong deal. It's over." I think this would actually play over the long run to his advantage in an extraordinary way. Vladimir Putin would obviously be irritated to say the least, but Xi Jinping would be admired as a global statesman, which is precisely what he's seeking to do as part of his aspirational objectives of the leader of an ascending great power. Who knows? If he were to force Putin to end this war in Ukraine, there's good reason to think that he might even be nominated for a Nobel Peace Prize. I'm putting the cart before the horse there, but this is a devastating war and China has no moral grounds for standing together with its new partner who is prosecuting this war in such a horrific manner.

Rob Johnson:

It's interesting because the echoes in what you're saying, say for instance Xi Jinping gave speeches a couple of times at the World Economic Forum, the Davos meeting, and he did speak in a very what you might call aspirational, global partnership way. It wasn't nationalistic bellicosity or what have you. I noticed at time some people, particularly European friends, said to me they thought that he was more on track, particularly as it related to climate, technological platforms, global governance than was Donald Trump. The wind has gone out of those sails in light of this recent episode for sure.

Stephen Roach:

Well, in a couple of weeks, in January of 2017, Xi Jinping addressed the Global Economic Forum in Davos truly with a stirring defense of leading and committing to globalization. Literally in that same month Donald Trump was sworn in as our 45th president with a strident support of protectionism that was very much aligned with his anti-China view in damaging American companies and workers. The contrast couldn't have been sharper, but the question you're raising is that Xi Jinping squandered that capital, that commitment to globalization by his new partnership with Russia. I think there's a big risk of that if he stays wedded to the Russian Federation and the war that it is continuing to conduct to this very day.

Rob Johnson:

In 2019, I ran a conference with Justin Lin at Beijing University about China and the development of Africa. What I'm saying is relative to the hopefulness at that time, the polarity between the US and China, the Ukraine, energy prices, the slow down in growth, the despondency about global leadership in the global South now, as though all of these things are happening and we're suffering and we don't think anybody's paying attention. It's very demoralizing in all of the conversations I have in those regions of the world. I don't know it means, it doesn't mean they pick a side. They're saying, "When are you guys going to get over this arm wrestle and get back to work on what really needs to be done?"

Stephen Roach:

Yeah, I couldn't agree more. I mean, we talk about deficits, whether they're trade deficits or technology deficits, but suffice it to say we have a real global leadership deficit and we're all suffering from that at this point in time. Again, I trace it back to the psychology of the false narratives. We'd rather blame others for our problems than work together and address our common issues.

Rob Johnson:

I think what I found, I guess as we're turning the corner here, the diagnosis of the false consciousness in both places, which you might call the impetus for demonization, the critical failure perhaps in siding with Putin. I feel compelled to ask you, having read your book, how do we turn the corner? What do we build from here? What do we build in technology? What do we build in climate? What do we build in global governance that reinvigorates confidence in the world system and its potential for the future?

Stephen Roach:

Well, I end the book with a few chapters that lays out a plan for resolving this conflict. One of the first things I learned back in the old Wall Street days is that I was always good at identifying problems, but my clients who were smarter than me always said, "If you're so smart, what's your solution to the problem?" That stuck with me for basically all of my career on Wall Street and my efforts at spending all these years subsequent to that in academia. I start out with the idea that this is a dysfunctional relationship, it's a relationship problem that requires a relationship solution to bring both nations together in solving this common problem. The book really stresses three legs to the stool in addressing this conflict. I'll just tick them off for you as briefly as I can.

The first one is moving from distrust to trust. We're not going to get anywhere if we continue to blame the other and question the commitment that the other has to a resolution of this conflict. There's a lot of low hanging fruit that we can pick immediately. Reopening of consulates, relaxing visa restrictions, relaxing restrictions on the operation of NGOs. A number of small things that can be done with the stroke of the pen.

Then there are three tough issues that are all of them mutually beneficial for us to address that you were hinting at. Climate change, global health, especially in an era of pandemics, and cyber security. These are enormously important from a standpoint of the mutual interest of both nations, and we certainly need to address them for the future of our own systems as well as for the future of the planet.

I tick them off, I go through them in the book. We've made a little bit of progress on climate, but a lot more needs to be done. We've made no progress in global health because we're fixated on the COVID-19 blame game, who's responsible for it. We've made virtually no progress in addressing cyber security. We've got plenty of work to do to move from distrust to trust. I'd say again, the place to start is with picking some of the low hanging fruit.

The second leg to the stool is changing the perspective away from the zero sum bilateral trade conflict, which gets us nowhere because of the points we described earlier and the savings disparities between the world's most serious deficit saver, America, and the world's largest surplus saver, China. We need to move away from this zero sum bilateral framework to a positive sum, market opening growth framework. My favorite device to achieve that is to resurrect negotiations on a bilateral investment treaty, which were 95% of the way done before the election of Donald Trump in 2016. Bilateral investment treaties, or BITs, open markets, expand growth opportunities and can be written in a way that addresses many of the tough structural issues that divide the US and China, like innovation policy, forced technology transfer, subsidy sustainable enterprises, even some of the cyber issues. It gives us a pro-growth growth positive sum framework rather than a zero sum anti-growth framework that we are hooked on.

Then the final piece of the plan is what I call a new organization that brings together the US and China in dealing with our relationship on a full-time basis, rather than doing it episodically or serendipitously through summits like we had a few weeks ago in Bali between Xi Jinping and Biden, or earlier efforts that we used to call strategic and economic dialogues. I want a full-time organization that works 24/7 on all aspects of the US China relationship. I call it a US China secretariat. Staffed equally by large complements of professionals on both sides of the relationship with a broad remit focusing on economics and trade, human rights and health, cyber and innovation policy.

I detail it in the final chapter of the book that has a number of robust functions that focus on developing a new collaborative model for working together rather than on a scapegoating model that drives us apart. I think these three legs to the stool, some might have difficulty with them, but I welcome the chance to hear anyone's alternative. The point is, Rob, the current approach has not worked, it will not work in the future. We've gone from one stage of conflict to another and we need to address this conflict before it is too late.

Rob Johnson:

Yes. Well, I guess in coming down the stretch here, I want to express some appreciation. I walk around a lot and I often hear songs in my mind. I often recently have been hearing Barry McGuire's song, The Eve of Destruction. As I started to read your book, I heard Diana Ross theme from Mahogany, do you know where you're going to? As I finished the book, I heard U2's song called One. We have to carry each other, we have to carry each other.

You are in a country as a very well known and successful individual at an elite university taking a stand. I spoke at the outset about the invisible republic of the spirit, and this man, Stefan Zweig, came up with that name in relation to Romain Rolland in his work in Europe during the inner war period. I thought, to quote something about him that reminds me of the journey that you're on, he said, "This man of letters has preserved us from what would've been an imperishable shame had there been no one in our days to testify against the lunacy and the hatred. To him we owe it that even during the fiercest storm in history, the sacred fire brotherhood was never extinguished. The world of the spirit has no concern with the deceptive force of numbers. In that realm, one individual can outweigh a multitude. For an idea never glows so brightly as in the mind of the solitary thinker. And in the darkest hour we were able to draw consolation from the signal example of this poet. One great man who remains human can forever and for all men rescue our faith in humanity."

I know that not only are you that poet, but you lead a tribe at an extraordinary university of young people. As we all know, those of us like you and I have taught later in life, sometimes the best way to learn is by teaching. I feel a sense of possibility and promise from what you've had the courage to build and say and from the tribe of brilliant young students that can join your secretariat and help us make our way to the future.

Stephen Roach:

Well, thank you Rob. Those are very kind and meaningful words. I resonate also with your reference to music, it's something that's always been important to me as well. I would be neglecting one thing if I just didn't come back to the title of the book, Accidental Conflict. The point of writing a book about an accidental conflict was that the tensions have gotten so bad right now, driven by the high octane fuel of these politically convenient false narratives, that it doesn't take much of a spark to ignite the fuel and take us into a realm that would be far more destructive than any aspect of the road we've traveled. Look no further than what happened in August of this year after Nancy Pelosi's visit to Taiwan. You may say, "Well, she had every right to go there." The Chinese marshaled a military response, the likes of which had never been seen in the modern history of Taiwan, and the possibility of a military accident with that type of power assembled is not something that we can or should take lightly.

That's only one example, but in a realm of conflict escalation, the chances of an accident are growing, they are not receding. That was the warning that really told me that the crafting of this book was increasingly urgent. I pushed the publisher as hard as I could to get this book out as quickly as possible because I think our time is growing short. This relationship is not in a healthy place and that's China's fault, it's our fault, but it's the fault of the two of us in our unwillingness to work in a collaborative, cooperative way. I've laid out a model to restore cooperation and collaboration that may not be perfect, but it sure as heck beats the approach that we're both on right now.

Rob Johnson:

Yes, and I've done a lot of reading as an undergraduate at MIT. I spent a lot of time studying arms control and disarmament issues. The notion of the cost of that kind of mistake, like you mentioned in Taiwan or could happen around the Ukraine, and the implications not just for those regions but for the upper atmosphere and life on earth. By the way, I would also offer, if somebody drops a nuclear bomb, the heightened fear from that episode is going to make it much harder for us to reestablish the collaboration. The armor that comes with fear is what we have to work to disassemble now. I think the urgency of what you've created is very important. Thank you for me, for my four children, for my three grandchildren. You've done a great service.

Stephen Roach:

Thank you, Rob. We can only do what we can do and then we have to throw these ideas out there and hope that they get some traction.

Rob Johnson:

Well, I want to help you with the traction, but thank you for the ideas. We'll have to meet again and I want to urge everybody to take this book. It doesn't feel like a Christmas parable, but it might be the best gift you could get or give in this holiday season. Thank you again, Steve.

Stephen Roach:

Thank you, Rob. Pleasure speaking with you.

Rob Johnson:

Pleasure speaking with you too.

Check out more from the Institute for New Economic thinking at ineteconomics.org.

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Food Security in Africa: “This Crisis Has Shown the Limits to Africa’s Resilience”

"We risk a global decoupling in which East and West face off in a cold war, and Africans are caught in the middle," says Professor Carlos Lopes in an interview with Folashadé Soulé and Camilla Toulmin

Professor Carlos Lopes is Honorary Professor at Nelson Mandela School of Public Governance, University of Cape Town, Associate Professor at Sciences Po, Paris, Associate Fellow at Chatham House, London, and 2022 Fellow at Oxford Martin School, University of Oxford. His new book on Africa-Europe relations will be coming out in mid-2023.

Thank you for talking to us. It’s been nearly two years since our last discussion. Welcome back from COP27. You were there particularly for the African Climate Foundation?

Thank you. Sharm el Sheikh was a real jamboree! I was there for several reasons. I led the delegation for the Africa Climate Foundation as Board Chair. I am also a member of the UN Secretary General’s High-Level Expert Group on Net Zero Certification. We presented our report on how non-state entities should adhere to standards that need to become universal to avoid “greenwashing”. Then with the World Resources Institute, where I am a board member, we presented a report on sustainable cities, my interest being the African angle of the discussion. I was also involved with the dissemination of the recent report of the Nature Markets Taskforce, looking into how we can use market-driven policy measures to protect nature. We ask whether it’s feasible to use market-based solutions for sustainability, rather than being just another opportunity for business. I was quite involved with side events on global economic governance, to discuss reforms to the Bretton Woods institutions, to make them fit for purpose in a climate emergency. So COP27 was busy for me, with many calls to be involved in a number of events, like the launch of the African Renewable Energy Forum, AU joint positions on how to address land and agriculture in a sustainable manner, and so on.

Let’s talk now about the consequences of the Ukraine invasion, most particularly on Africa, given big price increases for food, fuel, and fertilizers. How have governments responded to this new crisis? Two years ago, when we spoke, we discussed how the COVID crisis had been a big shock to the system. Sometimes this kind of disruption can have positive consequences, by forcing people to do things differently. How far has this latest food crisis and inflation been an opportunity to rethink policy options and agricultural development models across Africa?

We are really in a watershed moment. The crisis of 2008-09 showed up the difficulties of global economic governance in dealing with capital investment innovations, due to the weakness of the regulatory bodies. The response from the Bank of International Settlements, through the so-called Basel III regulations, was aimed at central banks to identify unacceptable financial innovations and address the risks faced by the international banking system. Basel III had large unintended negative impacts for Africa since it established safeguards that were very difficult for international banks to fulfill in relation to their African operations. The burdens associated with the new due diligence requirements were so demanding, that many international banks were unable to sustain such complex structures for the levels of business they had on the continent. Many started to withdraw, given the costly stress tests they needed to complete in the case of African operations. Thus, levels of access to capital fell further and costs of capital rose, creating immense difficulties.

African countries are always presented as having access to special concessional lending but, when you look into the detail of such claims, the scale of disbursements from international financial institutions do not correspond to the growth in Africa’s GDP and current needs. With the 2008-09 financial crisis, Africa ended up being the last to be affected by the crisis and the first to recover, which showed the continent’s resilience at that point. However, by 2010-11, the subsequent repercussions of the 2008-09 crisis led to falling demand for Africa’s commodity exports and began to expose real weaknesses in Africa’s economic outlook. Many African countries were forced to borrow capital on tougher conditions, with sovereign borrowing at high rates of interest, at 7% or more, which risked erasing the precarious macroeconomic gains of the previous decade.

When the pandemic arrived, their margin for maneuver and fiscal space was stretched to the limit. There is a common narrative that proclaims that African countries received a lot of help during the COVID crisis, in a spirit of solidarity. But in reality, Africans have got less than anybody else. When the IMF approved COVID support of about $1tr, only about $23bn was programmed for Africa, and even this was not actually disbursed. During the pandemic, African countries did well in terms of introducing new forms of social protection, but they had to cut other items out of the budget. Investment suffered significantly, and there was a slowdown in the economy. Africa did not suffer as much as other regions from a medical point of view and, while economic growth went into reverse, most escaped a recession which is remarkable. With this second major crisis, they showed proof of resilience, without help from outside.

But then came the Russian invasion of Ukraine. It was one crisis too many! You can’t be resilient all the time. The war has been particularly difficult - not so much the inflationary dimensions but difficulties in accessing food. During the pandemic there had been large-scale supply chain disruptions, which have been further accentuated by this conflict. Africa being at the tail-end of logistical supply chains means the cost of commodities for Africans are as much to do with supply chain logistics as the cost of the goods themselves. The cost of shipping containers has boomed, multiplying by 8, 10, and sometimes 15 times. For food, when everybody wants it, we see the same problem as during the pandemic. Then, Africa was at the end of the queue for vaccinations, and now Africa must pay much more to access food. So this particular crisis has affected Africa more than the previous two.

This crisis has also shown the limits to Africa’s resilience. Before, we could navigate more or less, but now we can see the vulnerability of Africa within the global trade system. There are also big tensions between energy security and energy access in Africa, since we do not have enough and need more energy. However, other parts of the world have energy security as their main concern. If you give priority to energy security, you look around your neighborhood for extra supplies. Europe has been the most affected by the Ukraine conflict, so they have been seeking gas from Africa. This demand then displaces the energy priorities in Africa from access to security, from focusing on domestic needs to privileging exports. Yet again, we are pursuing another wave of commodity dependence, with Africa exporting gas, green hydrogen, and strategic minerals to allow others to prosper, instead of using these resources to transform the continent’s economy. We risk digging ourselves even deeper into the colonial trap of commodity dependence as a result of this last crisis.

Several African governments have taken measures to respond to the food crisis. What is your opinion of the effectiveness of such measures, and how do you assess their responses?

In Africa, we have the least productive agricultural sector in the world, in terms of yields per hectare. It is true that high yields based on the intensive use of inputs can also bring major environmental consequences, but here in Africa our problem is low productivity. We have been treating farming as a social sector and using development assistance to support livelihoods for smallholders, rather than thinking about agriculture as a business, needing value chain development and agro-processing to make it profitable. We have been keeping the sector afloat with microcredit and drought resilience, without any of the needed transformations. It is now clear that six decades of development policy for the agricultural sector has not worked.

The crisis in Ukraine has shown this very starkly, by exposing the high dependence of Africa on food imports. This is especially true for food products that do not form part of traditional diets, such as wheat, which has been introduced thanks to food aid and has now become part of the daily diet. Food aid, the great majority of which comes from surplus production in countries that provide heavy agricultural subsidies, is also not good for nature.

How have African governments reacted to the Ukraine conflict? Some have reoriented domestic consumption towards crops they can produce. This process is now underway, with countries reorienting food habits in favor of indigenous products, but it will take time before it has a significant impact. Second, governments have tried to guarantee the flow of global food stocks, which requires a lot of international negotiations. From a geostrategic point of view, this is why African countries did not want to take sides in the conflict. The position of AU President, Macky Sall of Senegal, has been to guarantee the Black Sea grain export corridor from Ukraine and Russia, so African countries can benefit from the large grain stocks which had been blocked. Even after an agreement was achieved, with the mediation of Turkey, Africa has not in fact been the main beneficiary. A lot of the food coming out through this corridor has gone elsewhere, and only a minimal part has gone to Africa. So we are still going to suffer from inflation and a lack of proper stocks. The third measure has been to negotiate replacement supplies from other geographies and suppliers, namely Latin America.

These different measures have had mixed results. The situation remains dire, with famine increasing in many parts of the continent. Now we also see much more contestation of power, because people are hungry, leading to the resurgence of jihadism, coups d’état, and revisions to the constitution. These are all forms of political contestation, and we will see much more of them as hunger creates fertile ground. I expect many more African countries are going to enter a period of increased political instability because of what has happened to food prices.

Can we talk about capital markets, and where the investment will come from for the energy transition and industrialization? What combination of both domestic and international capital might unlock investment in energy and industrialization, and also radically improve levels of yield and productivity in agriculture?

Let’s start with issues of terminology because they influence how we see these problems. I already mentioned concessional lending, meaning loans at very low rates, such as 1%. If we look at which countries benefit most from this, it is not the poorest and most vulnerable in Africa, but rather Germany, the UK, and other developed countries with very low-interest rates. They are subsidized because their Central Banks have room for maneuver to stimulate the economy by using monetary policy. But in Africa, we don’t have that luxury. If we ask who is getting concessional lending, actually it’s the richer countries.

Let’s talk now about risk. If we want to increase investments needed by the planet to deal with climate change, we are told we must de-risk what is good for the planet. But what about the large amounts of investment going into fossil fuels, which we know are bad for the planet? Another issue of terminology concerns “stranded assets”, with African countries being told they should not invest in oil and gas because this will result in stranded assets. But, at the same time, we are pushed to invest in these in the short term, because there is an energy security need in richer countries that justifies short-term pragmatism. But the real stranded assets are not the physical infrastructure. Some of these assets can be repurposed, with gas pipelines able to carry green hydrogen, for example. It’s the financial stranded assets I worry about. We’ll be continuing to repay the debt long after the urgent demand for these resources has passed.

Over the last two centuries, the growth model has produced two problems - the accumulation of wealth, and problems for the planet in the form of greenhouse gas emissions. We can’t address these two major global problems – inequality and climate – without changing the pattern of growth. We also need a parallel change in global economic governance. The Bretton Woods institutions – the World Bank and IMF – were established nearly 80 years ago and are not responding to today’s needs. The Bridgetown Initiative, led by the PM of Barbados, talks about how to liberate more money from existing institutions, rather than challenging the foundations of such structures. How we use the issue of Special Drawing Rights (SDRs) is a good case in point, which could leverage private capital 15 or 16 times over. I believe these are all short-term solutions rather than addressing the model of growth which has generated the problems in the first place.

We need a completely different approach. For example, we should discipline the use of intellectual property to reduce wealth accumulation, and put part to use for global public goods, since protecting the planet is public good number one. But there seems no appetite from rich countries to change course. For example, a relatively small request from African countries to have patent waivers for the COVID vaccine ended with a two-year waiver being granted. This is the time needed for African countries to get their vaccination plants up and running, so by the time they are ready to go, the waivers will have expired. It feels like a gimmick. The only one that can benefit right now is South Africa, which already has plants ready to produce. But even here, they are struggling to find buyers for the vaccines they produce. World trade rules say they cannot export without respecting patent owners' rights, even to other African countries. The donor-supported COVAX mechanism has been used to flood the markets that could have imported from South Africa, restricting their chances of expanding vaccine production. In normal trade jargon, we might call it “dumping”, a technique to prevent new entrants from coming into a market.

So, African countries remain seriously disadvantaged. They are dealing with short-term supply shocks in the food system and political contestation. They are too distracted by short-term problems to enter into the debate around global governance, which is led by middle-income countries. Most African countries will not benefit because they are not in a position to enter this debate. I am trying to provoke them into engaging in this debate, by offering a different set of perspectives so they understand what’s at stake.

What highlights do you take away from COP27? Are there some positive outcomes emerging, despite the rather downbeat assessment you read in the press?

The biggest gain from COP27 is the recognition of Loss and Damage (L&D). This means that Mitigation, Adaptation, and Loss and Damage have become the three big-ticket items. Discussions about funding will be tough, but Loss and Damage has really important historical dimensions. Taking past patterns of growth, you have some countries and regions whose production and consumption levels have benefitted greatly from fossil fuels. Over time, their emissions have accumulated into a substantial carbon debt. Countries that have not benefitted from this kind of growth have not emitted much, and they have a carbon credit. African countries together have a very large, accumulated carbon credit.

Why is there so much focus on sovereign debt in Africa? There are 79 countries around the world with debt-to-GDP ratios of more than 60%. But only 23 of these are considered by the IMF as having a debt sustainability problem, and all of these are African. Obviously, debt sustainability is judged by financial criteria relating to limited fiscal space, not being able to service the debt, etc., but surely we should introduce carbon credits into this discussion! Where is climate in this checklist of criteria? It’s completely absent. For me, accepting loss and damage means you compensate for the historic dimensions of the climate crisis by ensuring that those countries with a carbon credit get something in return. This discussion is just beginning, so I am not sure we’ll get anything substantial out of COP27 but sometimes you need to be patient. I still remember the Addis Ababa Action Plan for the post-2015 UN agenda, which started us talking about overhauling taxation, and introducing a digital tax. While nothing came out of the Addis Ababa meeting, apart from a couple of statements, look at the position today and the presence of significant digital revenues. You have to begin somewhere, so I think L&D will be tagged to the Sharm el-Sheikh COP.

At the same time, I see more and more African countries becoming extremely cynical about the promises made at events like COP. There has been a long-term pattern, especially since the Paris COP, of over-promising and under-delivering, which demonstrates the hypocritical nature of current governments in Europe and elsewhere.

My final question is about multilateralism in the current crisis. You mention that global economic governance is not adapted to address the overlapping crises we face, especially for African countries. There has been a resurgence of non-alignment amongst African countries, and a lack of trust in global institutions as a whole. In spite of this, how do you see the future of multilateralism? Is there any hope for reform?

I mentioned the vaccine issue, which ended with nothing more than a gimmick. Let me give you two more recent examples. This week, Chad was the first country in Africa to qualify to be eligible for debt restructuring, as announced three years ago by the IMF and Paris Club within what’s known as the “Common Framework”. Would you believe it? It has taken three years of negotiation in the middle of a pandemic and war to get one single country eligible for debt restructuring! And what has actually been achieved? Instead of reducing Chad’s debt, it just involves kicking the can down the road. Chad needs quite a bit more fiscal space right now, to address social and political upheavals. There have been big demonstrations in the capital, N’Djamena with more than 100 people killed. What is the reason given for the lack of speed and ambition? That the oil price has increased, so Chad as an oil exporter has less need for debt restructuring. The so-called Common Framework is just not working if it takes three years to negotiate for one country.

The second example concerns Special Drawing Rights (SDRs). In June last year, President Macron and the IMF proposed to mobilize an extra 100bn SDRs for Africa, but where are we today? Only three countries have announced they would contribute – France, Portugal, and China. But the mechanisms are complex and challenging because they introduce multiple conditionalities for recipient countries to access these funds. Called the Resilience and Stabilisation mechanism, the process mimics previous instruments drawn up by the IMF and World Bank and has been made so complex, not a penny has been disbursed so far. Zero! It's going to take many years for just one or two countries to benefit from this mechanism, and the resources are small in relation to need.

The impacts of climate change have been estimated to cost Africa $277bn per year, but we’re getting just $20bn in adaptation finance. Given that we are facing large planetary crises, we need a different scale of response. Only if we take the Congo Basin, Africa has a carbon sink capable of trapping more emissions than we send into the atmosphere - so we are a net provider of solutions. Look at the International Energy Agency projections for renewable energy around the world. Again, Africa has by far the largest potential for renewable energy in the future. It will be much cheaper to invest in producing green hydrogen in Africa than in Europe. But where is the investment actually going? Not to Africa, despite this being where you get much better returns for the environment.

We do not yet have solutions for dealing with the global systems which we all depend on. The multilateral system, constructed more than 70 years ago, is creaking and will become evermore marginalized unless it demonstrates clearly it can tackle the most important problems we face. We risk a global decoupling in which East and West face off in a cold war, and Africans are caught in the middle. Many value chains are being restructured and re-shored to friendly countries, which introduces many new forms of protection, with colossal impacts on the environment. So there is a huge debate underway to reshape our global institutions and address the big challenges we face. Africa needs to be a central part of it.

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Top Antitrust Expert: We Need a New Approach to Giant Tech Firms Like Google

Economist Cristina Caffarra, a leader in competition and antitrust, warns that ever-expanding tech giants like Google, Meta, and Apple raise concerns about the exercise of power and democratic discourse. So why is it so hard to get anything done?

Since the 1970s, economists buying into the Chicago School of Antitrust have waved off the dangers of lax antitrust policies, professing that “the market” would sort out issues of competition and punish companies that abuse size and power. The Chicagoans’ narrow focus on direct consumer costs as the sole measure of harm didn't consider the impact of consolidation on small businesses, start-ups, workers, or, for that matter, democratic norms. Nor did it raise red flags for tech platforms that were touted as “free” for users (while monetizing our attention and personal data).

A growing number of critics argue that these basic assumptions are both wrong and outdated, as evidenced by the fact that in many industries, particularly technology, companies have been growing to gargantuan proportions and, as anybody who owns a smartphone is painfully aware, they seem free to gobble competitors, hinder innovation, and serve up crappy, overpriced products.

These conglomerations of money and power not only end up widening the inequality gap, but they also threaten democracy itself, as University of Utah antitrust expert Mark Glick and other experts have attested. That’s why tech-focused antitrust voices are sounding the alarm as companies like Google, Amazon, Apple, and Meta expand at a breakneck pace, encroaching into every possible area of our lives, from our cars to our refrigerators to our dreams.

European antitrust and competition expert Cristina Caffarra has been a top advisor and expert before the European Commission and in courts and agencies across Europe, as well as a guide in antitrust efforts in the United States. Her experience includes landmark cases on the economics of platforms and the digital economy for and against Microsoft, Amazon, Apple, Google, Meta, and more. She spoke to the Institute for New Economic Thinking about what she sees as the most pressing areas of antitrust, why regulation and legal actions have largely failed so far, and why, from her perspective, too many economists have been part of the problem rather than the solution.

Lynn Parramore: Let’s start with the overall antitrust landscape in Europe in comparison with what’s happening in the U.S. It has long been said that Americans have lagged behind in taking on Big Tech in competition matters. What’s your view?

Cristina Caffarra: For a good decade, Europe felt itself to be a pioneer in enforcement, particularly against tech. The case against Google Shopping [Google’s shopping comparison service] started in 2010 and the case against Android started in 2015. There was a time when I was visiting the U.S. that we looked at U.S. colleagues and practitioners with some element of smugness, saying, look, we’re enforcing in Europe but you haven’t done anything since Microsoft 2001.

What has happened since is an increasing realization in Europe that the antitrust cases we initiated and pursued, however well-intentioned, have not delivered yet and are not going to.

Take the Google cases. We have led them to a conclusion and there has been a finding of infringement against Google, but it has taken far too long and the remedies have been ineffectual. This is inherent in antitrust assessment. It’s the nature of the beast that you often intervene as a result of complaints. The reason the European Commission pursued the Google Shopping case is that they were inundated with complaints -- the case selection in prioritization often follows the complaints you have. What happens is that enforcement bandwidths get tied up. While the Commission spent five years focused on Shopping, Google was moving the monopoly from the desktop to mobile devices. The search monopoly was effectively translated to mobile, and by the time the Commission opened the investigation in 2015, it was far too late.

The same is true in other cases. The Commission is pursuing cases against Amazon, against Apple -- all framed in ways that are to my mind not going to deliver anything.

So Europe, having started off as a pioneer, has ultimately not been able to show that you could deliver. To us Europeans, the U.S. was really frozen under the permafrost since Microsoft. But things began to change when you started to see the progressive New Brandeisian discourse [an antitrust movement focused on competition] getting a bit more into the mainstream.

I vividly recall a meeting that I attended back in late 2015 at the Metropolitan Club in Washington, put on by the Jevons Institute, a small group of people who talk about antitrust. Jason Furman and Peter Orszag (at Citibank at the time) came to present what they considered to be an interesting result that was beginning to seep into the conversation. They had been in President Obama’s Council of Economic Advisers, and they had uncovered that over time, concentration was increasing and margins were increasing. This was the start of an antitrust discussion at the time. The gathered antitrust community was totally in disbelief that this was telling us anything important or interesting. Why would concentration be going up? People argued, wait, you’re not measuring market concentration at the right level. You’re not doing market definition properly. Margins are not particularly going up. Why would they be going up?

So the antitrust establishment, such as it was then, was skeptical that there was any degree of under-enforcement or that they were watching anything interesting. At the same time, we started to hear rumblings from other voices like Barry Lynn [journalist and director of the Open Markets Institute] and others who were noticing the phenomena, but it hadn’t percolated through the antitrust establishment. To me, that meeting was the very first time that the antitrust establishment was confronted with the potential for a claim that we have underenforced widely in this country, and you can tell because concentration is on the up, margins are on the up, and the share of GDP that goes to labor is down. We have less creation of companies and less vitality. But most importantly, workers are disadvantaged in this new order.

That was in 2015. Then you had the development of these Brandeisian voices and so on. In the spring of 2019, I went to the Zingales conference in Chicago, as the only European, I think. I was approached by Doug Peterson, who was and still is the attorney general of Nebraska. He heard I had experience working against Google in Europe and asked if I would be interested in assisting a coalition of bipartisan attorneys general bringing cases against Google. I say, whoa, yes! Where do I sign? So I became an advisor to this coalition, initially a single coalition, that later split (I advised both for a period).

I was on the steps of the Supreme Court on the 9^th of September 2019 when [Texas Attorney General] Ken Paxton launched, with all the other AGs, that antitrust investigation of Google. Then the initiative split, and it was Texas, on the one hand, that is pursuing Google adtech [accusing Google of monopolizing technology underlying online advertising] and then you had Nebraska and Colorado leading the way in pursuing [Google’s] search [accusing Google of monopolizing the online search market].

Simultaneously, you started to see cases brought by federal agencies. The Federal Trade Commission (FTC) began to look into Facebook and Amazon, and suddenly the Department of Justice (DOJ) began looking into Google and Apple. In December 2019, I had an event in Brussels with a thousand people coming from all over. I had Doug Peterson speaking at that event together with Max Miller [assistant attorney general] from Iowa. The title of the panel was, “Drums Beating From the Hill. Are We Beginning to See Enforcement Revived in the United States?” At that time, the U.S. was way behind, but that impetus made a huge difference and it was at the level of the state AGs. It was the states and it was a bipartisan initiative to pursue Google in particular. Of course, when you are the United States and you start to veer, it carries a lot of force.

The Europeans started thinking, oh, look at them, they woke up and they’re doing stuff! Then you had the election of Biden, and you got Jon Kanter [assistant attorney general for the DOJ], Lina Khan [FTC Chair], and Tim Wu [White House antitrust adviser] and suddenly there was government policy reflecting their views. The current perception in Europe is that in terms of posture, the regulators in the U.S. have overtaken us because Kanter and Khan are very much progressives. They are certainly very much ahead of European regulators. The only exception was the U.K., though now, with the current government and a new CEO to be nominated, it’s not clear what’s happening and they may take us back to where we were.

So the U.S. posture is something we watch with great interest. But will it deliver? In Europe, we are in a world in which antitrust has failed. But we woke up in 2019, too, and said, oh, we’ve got a lot to do, but unlike the U.S., we are a regulatory power -- we do regulate a lot. In 2019 there were these political designs to essentially pair up antitrust and regulation, and so we are now in a world where we have digital regulation, the DMA [the EU Digital Markets Act, which addresses perceived unfair business practices by large online platforms designated as important gatekeepers between European businesses and consumers]. This is now law. Of course, what we’ll actually do is a very big question.

LP: You’ve noted a need to scrutinize tech business models and to fundamentally change them. Why are the business models themselves important to address?

CC: This is very much my baby. I came up with this discussion of business models in a 2019 article. It was the first time discussions of business models and their antitrust implications appeared in the antitrust community. The point I made is that when you think about categories of concern in antitrust, which are premised in all cases, like, for example, self-preference, you see that yes, there is a thing called self-preferencing. This is when firms favor their own business. I’m an economist, though, and I also know that not every form of self-preferencing is anti-competitive.

LP: What would be a case in which self-preferencing is benign?

CC: Suppose Amazon is throwing up a particular recommendation in the buy box [the white box beside the product detail page used for customers to purchase items in their cart]. Now (and for clarity, I have advised Amazon), Amazon will say that the algorithm that is selecting that particular product is designed to provide the product that is the lowest price, highest quality, and matches the requirement of the consumer the best. Why? Because, they will say, we care about the consumer coming back to the platform over and over again. They will do so only if they get the sense that they were given a fair recommendation and value. If they get a biased recommendation, the consumer will suss it out and eventually be unhappy. That’s the story.

But is it a form of self-preferencing every time Amazon recommends its own product? It's not clear, because Amazon makes money either way. If I’m buying a battery, Amazon makes money whether I buy an Amazon battery or a Duracell because they get a commission. Financially – and here’s the monetization point – it’s not clear that Amazon makes more selling Amazon batteries v. Duracell batteries. It depends on the margin. The incentive is not necessarily to sell an overpriced Duracell battery or to sell one of their own if it is crap, because the consumer will say, well, it’s a bit cheaper but it’s crap. I’m not going to go back and buy Amazon again.

On the other hand, I’m saying that there are some business models in which self-preferencing is inherent and most likely bad, and that is typically ad-funded businesses. Why? Because ad-funded businesses monetize in no other way than through directing traffic to themselves, to their own sites. They want to work as the turnstile that directs traffic to themselves. That is inherent when there is no other form of monetization.

If you want to monetize a commission for being the platform – think of Uber or Airbnb, or think of Apple – you monetize mostly on the device. In these cases, the unit economics of their business is fundamentally different from the Amazon example I mentioned, so if you have a general rule that says “thou shall not self-preference,” you get these companies saying, well, "I don’t! My algorithm is completely fair." It just is designed to optimize what a consumer wants. But then the regulator says: how do I know that what the company says is true? Do I believe you just because you’re Amazon and you tell me you have the right incentives? Maybe. But that is why I would favor some form of algorithmic transparency: a regulator can say, Amazon, come and show me your algorithm and tell me how you constructed it. Obviously, no one really wants to do it, but that would be the way to check.

The point is that to presume that every time you are recommending your own product is a form of self-preferencing and illegal is wrong. We need to think about how companies monetize because companies are driven by incentives. In economics, we talk about incentives, and they are, in turn, designed as a result of the monetization structure. Can I make more money this way or that way? That’s why I was very much a fan of the approach that the U.K. did, which was not a generic “thou shalt not self-preference” kind of thing.

The U.K. approach was intended to be bespoke– that is, tailored to an individual company. The U.K. invented this approach: Amazon, Apple, you will have to do this, and Google, Facebook, you have to do this. Each and every one of them had a different set of problems and a particular bespoke regulation tailored to their business model.

That is the only way we can hope to achieve anything with regulation, because the other model, which is generic and simply says something like “don’t self-preference” is going to be met with such endless resistance that it won’t lead anywhere. I think what we’re going to see in Brussels and with the DMA is absolute and total resistance. Companies are resisting not just the designation but the obligation that is placed on them because they’re going to say this is not relevant to me.

LP: Many people are aware of the problem of “killer acquisitions,” a situation in which a big firm buys a startup in order to neutralize the competitive threat, like Facebook buying Instagram. But you’ve also been critical of the more common “reverse” killer acquisitions – scenarios in which an established company buys features or startups so they don’t have to build something themselves, sort of allowing themselves to throw in the towel on their own efforts. Can you talk about these and why we should be concerned?

CC: It’s quite pervasive, and I can mention half a dozen deals right now that are progressing that have got this feature. It’s much more widespread that a real killer acquisition. A real killer, like some we were looking at in pharma, is when you buy something to suppress it. You suppress it because you’ve got a product that competes with it and you don’t want the competition. That is a killer acquisition. What I see in my practice much more often, the reverse killer acquisition, is based on the idea that you buy something out there that you were actually doing yourself, or could have done if you really put your mind to it, or maybe you were even halfway there. But then you buy this slightly better or more advanced version and thereby you kill your own. You reverse kill. You kill not the target that you’re buying, but your own thing.

LP: Is this, then, a killer more of innovation than of competition?

CC: The two are incredibly close. If we care about dynamic competition, which is really, fundamentally, the creation of new products, and competition in the creation of new products, then we have to care about a situation in which if I didn’t do the deal I would have an incentive, as the buyer, to run as fast as I can to catch up with these other companies that are already in the market. The two become one.

Let me give you an example. Let’s take the FTC case against Meta concerning the [fitness startup] Within acquisition, which is being challenged (for transparency, I have had some involvement with this case). I would argue that the deal has got features of a reverse killer acquisition to the extent that Meta was trying internally to develop capabilities to do immersive reality fitness work. (There’s a further discussion about whether that particular user case is an important building block for them towards establishing themselves in this new form factor which is the metaverse. I would argue it definitely is because they hold a significant number of small BR apps [streaming apps]).

Anyway, fitness is an important user case, and there is evidence in the public domain that’s how Meta was thinking of it. You’ve got your headsets and you’re thinking about things that you can do that are social and fun in the immersive reality world. Exercising is one of them. There is a big focus on exercising in the metaverse. It is a very significant future application and a building block for other things, but this is something that they had their eyes on before. To me they didn’t buy Within to kill Within, but so that they wouldn’t need to make any effort of their own. Within is no longer independent. It’s now owned by Meta, so it can be used and manipulated to do all the other things that we know Meta does when they acquire a company. Meta owns the headset and the store, and they can do various things to make it more difficult for others to establish themselves. The point about the reverse killer is that to the extent that there was an incipient effort inside Meta to develop its own fitness app, that effort is killed.

The company can say, well, the effort was going nowhere, what’s wrong with buying a better version. Well, yes, but the point is that you’re Meta, right? You could get it right. You could make it work. You have the funds and the ability. In the U.K., the exact question was asked when Amazon bought a stake in Deliveroo [an online food delivery company]. The CMA was considering that they could, in principle, have done a delivery service themselves, and by buying Deliveroo they were forgoing their own effort in this space.

The result in reverse killer cases is that we see less innovation. I see this much more obviously as a phenomenon with these big digital companies because they have the cash, they’re so acquisitive, and they constantly acquire complements -- and not just those that are totally independent and what have you, but things that they are trying to do themselves. Then they turn and snuff out that internal effort. Think about a world in which Within was attracting other funding and went further into the future, working with all headsets, and then Meta developed their own version. There would be more competition, more choices for people looking for fitness apps. That is the point.

LP: You’ve noted that the best way to avoid many of these antitrust problems is to preempt them by avoiding mergers in the first place. Why is this critical to intervention that works?

CC: It is a very important piece of this conversation. We have established and exposed that antitrust intervention is ineffectual; that we get there far too late; that we are not able to effect change on the ground; and that it will not work because the regulation that is before us is going to attract a series of challenges in which these companies will sue in Luxembourg, every step of the way.

Personally, I do not predict that there will be any sort of movement. So I am in favor of looking at the merger policies and how these companies have grown to the grotesque levels that they have grown today. We know that the regulators, certainly in the U.S., like Jonathan Kanter and Lina Khan, are thinking about this. Will the courts follow? There is no telling. They have to try it out. There is a huge body of the conventional antitrust establishment that says that this is all madness, that it has to end. There are a lot of people waiting for it to fail. But there’s no question that the merger policies have been incredibly permissive.

I’ve been in this business for 25 years and we’ve stopped almost nothing. There’s this view that for companies to merge is a fundamental right. But sorry, where is the evidence that all of these mergers are benign? That efficiencies are being realized? I’ve not yet seen an efficiency study worth a damn and I’ve often advised the parties. The majority of these deals are intended to create market power. The hubris of people who say they are not is extraordinary. I’ve got 25 years in my career to look back on and to say, guys, we’ve left behind a shitshow. A lot of people think that I’ve gone completely mad to say the things that I say, but it’s true. When I came into this business as an advisor 25 to 30 years ago, there was an element of idealism because, certainly in Europe at the time, antitrust was thought to be such a soft science. We thought we needed to bring structure and form and mathematics -- and then you had this crazy shift in which the economists understood there was a ton of money to be made by giving lawyers useful narratives and we sold our soul. That’s what happened.

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Dollar Dominance is Financial Dominance

What Strategies can Break This Dependency?

The dollar system has proven resilient in the face of recent extreme and unexpected shocks, but it has also failed to foster sustainable growth and prosperity. Can it survive its contradictions? Evidence from the latest Trade and Development Report of UNCTAD suggests better South-South and commodity producers-consumers agreements are needed, on the way to a more inclusive international monetary system.

In a climate of fiscal austerity, unconventional monetary policy has been at the forefront of macroeconomic stabilization efforts since 2008, with the beginning of the Federal Reserve’s quantitative easing (QE) programs. At the time, when the fiscal channel dried up (after a short-lived stimulus) but growth and inflation remained low, developed countries relied on large purchases of bonds and other securities by their central monetary authorities to support long-term credit creation while maintaining the smooth functioning of the money markets.

Within a few years, all major central banks developed their own QE programs, sometimes exceeding the Fed’s both in value and as a share of GDP. Nonetheless, the role of the Fed has remained crucial since dollar-denominated liabilities held by entities outside the United States and the trades necessary to fund them have become even more prominent in the past decade: “US dollar funding remains below its peak of a decade ago relative to the size of the global economy, despite having grown in nominal terms. However, the share of international funding that is denominated in US dollars has risen compared with other major international currencies, reaching levels last seen in the early 2000s and making it the dominant international funding currency” (Committee on the Global Financial System, 2020, p. 1; see also Lysandrou and Nesvetailova 2022).

Figure 1 Monetary base (% of GDP), selected developed and developing countries.

Sources: UNCTAD 2022, data from IMF, International Financial Statistics, Monetary and Financial Accounts.

As a result, as explained in UNCTAD’s 2022 Trade and Development Report, the Fed’s decisions reverberate globally via at least three channels.

First, it is able to affect liquidity in key domestic and international markets. In particular, through swaps and repurchase agreements (repos) of various collateral from private domestic and public foreign entities, it has repeatedly been able to prevent money market freezes, at least in the core of the global financial system. However, it has been far less efficient in disciplining cyclical expansions of global finance in the context of international capital mobility.

Second, it affects the value of the dollar and, thus, the price of imports and exports domestically and abroad. It ensures that it provides a floor for interest rates in other regions which cannot allow their currencies to depreciate too much against the dollar to avoid over-exposure of their balance sheets to dollar-denominated debt (Moreno Brid et al. 2022). From the early 2000s until 2021, oil price movements provided a mitigating factor, thanks to their negative correlation with the US dollar.

Figure 2 Dollar-euro exchange rate and crude oil price, January 1999–September 2022

Sources: UNCTAD 2022, data from World Bank and Federal Reserve Bank St. Louis

Third, it affects US growth and private demand, including imports, thus affecting global growth. During the Covid-19 crisis, the Fed’s accommodative stance and its activity in the international repo markets prevented extreme stress in the global money markets and allowed central banks of developing countries to reduce interest rates quite significantly. Indeed, while in many cases they themselves engaged in asset purchases, it was mostly to control liquidity risk rather than to provide stimulus, which was predominantly supplied in the form of loans, including to public banks (Aguilar and Cantù, 2021).

Finance First

As soon as the US economy started emerging from the crisis and the Fed signaled its intention to raise interest rates in May 2021, the favorable conditions just mentioned reversed, forcing interest rate increases in many developing countries, especially those most exposed to dollar-denominated debt.

The announcement of May 2021 was followed by a crucial decision to make two standing repo facilities, which had been functioning in a temporary mode for some months, permanent: one dedicated to United States domestic primary dealers and soon to include additional depository institutions (Standing Repo Facility), and one for foreign and international monetary authorities (FIMA repo facility). The move showed that the Fed’s commitment to global financial stability remains unchanged (Mehrling, 2022). That, together with the preparations for such eventualities by the central banks of many emerging economies, has so far prevented a repeat of the 2013 taper tantrum.

But, as argued in the Report, the impact on the real economy cannot be stopped. With fiscal policy heading towards austerity, with crude oil and gas still at elevated prices, the increased cost of credit is going to affect the most fragile sectors and regions of the world economy through reduced investment, wages and employment growth, and liquidity stress, hitting hard the unemployed and low and medium wage earners everywhere, as well as firms and governments with elevated external debt in developing countries (UNCTAD 2022).

Hence, while central bankers in the core of the international system focus pragmatically on avoiding short-term systemic instability, the real economy deteriorates, a fact that is increasingly overlooked by policymakers. What is particularly worrisome is that the commodity price rally initially followed expectations of a global growth rebound, but when the Fed’s moves, coupled with fiscal austerity and new international supply-chain disruptions, changed the economic scenario, many financial markets remained buoyant. The world was denied its economic recovery while speculators continued profiting.

A clarification is needed, here: The Fed claims policy normalization is aimed at reducing inflation. But, to be more precise, its policy levers operate indirectly, ideally affecting prices by subduing the bubble in commodity markets as well as GDP growth, thus preventing higher import and energy costs from spreading through to wages. However, the Fed does not have a monopoly on liquidity creation: private financial institutions matter too. Moreover, large dollar reserves held abroad can and have been mobilized. What matters, eventually, is that the Fed is stuck as a lender/dealer of last resort.

The Covid-19 economic crisis reinforced again the Fed’s position at the vertex of the global financial and monetary system. Within that context, its main concern is financial stability, and thus its activity focuses pragmatically on those markets that appear to be systemically relevant. As a result, liquidity is not guaranteed everywhere, and pockets of gluts and scarcity persist (Eren et al., 2020) and could widen. This is particularly true during a monetary tightening, but periods of financial expansion are not free from peril, especially for emerging markets that can attract disruptively large speculative inflows of capital. The various strategies implemented to protect themselves have included accumulating reserves and developing swap agreements between central banks that integrate, in an uncoordinated way, the Fed’s channels. The central bank of China and associated development banks have played an important role in this context, largely by increasing their lending capacity (UNCTAD 2022).

This dollarized financial system has recently proven resilient to extreme and unexpected shocks, but it has also failed to promote sustainable growth and prosperity. The pragmatism of the central bankers, who are forced to safeguard the financial stability of an unequal and stagnant economy, is not free from dangerous consequences. Its success can buy the world some time, but it also inevitably intensifies the unsound separation of the financial and real economy and of liquidity and solvency concerns. This inconsistency became especially evident in 2021 when speculative and oligopolistic increases in prices appeared even as economies remained below their pre-Covid levels, triggering the premature tightening. For all the pragmatism of its managers, the inadequacy of its underlying vision makes the global dollar system vulnerable to growing political stress.

For a Few Dollars Less: Towards a More Inclusive International Monetary System

The current crisis is signaling clearly an alternative direction, which requires some degree of de-linking from the global financial cycle while relying on more patient capital funding that reconnects credit with development (UNCTAD 2005; 2022). Similarly, economic models that assign complete control of price formation to speculative markets have proven particularly vulnerable and incapable of inducing sound investment strategies. As detailed in the Report, that is quite evidently the case for energy markets, which in many countries joins the worst of two models: the shadiness of price negotiations in concentrated markets, coupled with the risk of boom-bust dynamics, due to sudden shifts in the prevailing conventions and expectations. Indeed, this system, to which we should add the privatization and liberalization of national distribution networks in all developed countries, has produced alternating episodes of very low and very high prices (UNCTAD 2011, 2022). This instability is not favorable for most producers, especially smaller ones and those based in developing countries, or for consumers, and has damaging long-run consequences, the more so as the energy sector has to play a pivotal role in climate change mitigation planning (UNCTAD 2022, ch. III). It is, instead, highly profitable for speculative trading companies and vertically integrated giants.

The end of the commodity super-cycle in 2014, for instance, marked the beginning of a period of extremely low prices for oil. A game changer was the lifting of the ban on United States oil export in 2015 and the normalization of the relations between the United States and Saudi Arabia. The price recovered for a few years until 2020, when it dropped dramatically, partly because of a fall in demand and partly because of the failure of producers to agree on a cut in production. Production actually increased, and prices of some crudes even went below zero, with the market in deep contango (i.e. future prices were much higher than spot prices) with companies running out of storage space and resorting to floating storage (Fattouh, 2021). This period was financially debilitating for many producers – and this explains partly their reluctance to engage in further production as prices started their climb in 2021.

Figure 3 Global and US crude oil production (million barrels per day) and crude oil prices (dollars per barrel).

Source: UNCTAD 2022, data from OPEC, World Bank and U.S. Energy Information Administration.

Large state producers, such as Saudi Arabia, Qatar, and Russia, are often accused of strategically holding onto reserves or production. However, as UNCTAD’s Trade and Development Report clarifies, the de-centralized shale oil sector in the United States appears to be equally hesitant to increase production when prices increase, citing Wall Street investors’ pressure as the main reason (figure 3, McCormick, 2022, UNCTAD 2022).

Clearly, thus, it is urgent to establish a more sensible regulation of energy markets, including making explicit plans for the reduction of fossil fuel consumption. It is crucial that those plans be made together with producers to avoid taking advantage of periods of extremely low prices to leverage a power that disappears as soon as the price trend reverses. That should go hand in hand with an intensification of international cooperation to support global liquidity, public investments for development, adaptation, and mitigation of climate change (UNCTAD 2019, 2022, Gallagher and Kozul-Wright 2021).

As is often the case, the idea is not new. “Between the 1940s and the 1950s, some prominent economists were called upon by international institutions to contribute to [a very similar] debate including: John Galbraith, Nicholas Kaldor, Albert Hart, Mordecai Ezekiel, Gerda Blau, Jan Tinbergen, Richard Kahn, James Angell, and Colin Clark. Among the most active institutions, a major role was played by the United Nations through the Economic and Social Council (ECOSOC) and the Food and Agriculture Organization (FAO), which promoted some of the boldest plans in this field.” (Paesani and Rosselli 2014) From that period, particularly famous has remained Nicholas Kaldor’s plan, later elaborated by A.G. Hart and J. Tinbergen, for a commodity-based reserve currency to stabilize prices and the trade cycle. The plan was presented at the first UNCTAD conference in 1964 and involved an encompassing reform of the international monetary system through the establishment of an international reserve currency backed by a multi-commodity buffer-stock.

Back from Geneva, “Kaldor informed Hart that the first world countries were striving to keep all monetary matters out of UNCTAD, including [his own plan]. The developing countries, on the other hand, were trying to form an expert group on commodity and currency problems that was to report back to UNCTAD and ECOSOC” (Paesani and Rosselli 2014).

Indeed, already in 1954, Gerda Blau, the Chief of the Commodity branch at FAO, was quite lucid about the political challenge faced by those kinds of projects involving a multilateral reconsideration of the monetary and trade system, arguing that “any agreement between consumers and producers would be successful only if both parties perceived it as a sort of contract of mutual insurance against the same risk. This was the case of price volatility […] but not the case of long-term declining trend in the terms of trade between industrial and agricultural products” (Blau 1954, cited in Paesani and Rosselli 2014) and of the related international monetary reform needed to face it. Blau herself favored, for pragmatic reasons, a commodity-by-commodity approach, coupled with compensatory finance (Fantacci et al. 2012).

Some 70 years later, we might indeed be facing a window of opportunity for more regional, South-South, and sector-specific agreements to regulate commodity prices to see the light of day. Developed countries need to realize quickly that stability in these essential markets as well as monetary coordination are also to their advantage.

Note

The views expressed here are the author’s only.

References

Aguilar A and C Cantù (2021). Monetary policy response in emerging market economies: why was it different this time? BIS Bulletin, No. 32, p. 9.

Committee on the Global Financial System (2020). US Dollar Funding: An International Perspective. Report prepared by a Working Group chaired by Sally Davies and Christopher Kent. Committee on the Global Financial System (CGFS) Papers No. 65.

Eren E, A Schrimpf and V. Sushko (2020). US dollar funding markets during the Covid-19 crisis: the international dimension. BIS Bulletin No. 14. Bank for International Settlements. Available at https://www.bis.org/publ/bisbu... (accessed 16 August 2022).

Fantacci, L., Marcuzzo, M. C., Rosselli, A., & Sanfilippo, E. (2012). Speculation and buffer stocks: the legacy of Keynes and Kahn. The European journal of the history of economic thought, 19(3), 453-473.

Fattouh B (2021). Saudi oil policy: continuity and change in the era of the energy transition. Oxford Institute for Energy Studies Working Paper 81.

Gallagher, K. P., and R. Kozul-Wright. (2021) The Case for a New Bretton Woods. New York: John Wiley & Sons.

Lysandrou, P., and A. Nesvetailova (2022). Why the Ukraine crisis will make little difference to dollar supremacy. Institute for New Economic Thinking. Available at https://www.ineteconomics.org/perspectives/blog/why-the-ukraine-crisis-will-make-little-difference-to-dollar-supremacy (accessed 1 August 2022).

McCormick M (2022). US oil producers ignore Biden’s rallying call to drill. Financial Times, 11 June.

Mehrling P (2022). A money view of international lender of last resort. Jahrbuch fur Wirtschaftsgeschichte, vol. 63, No. 2, pp. 1–16.

Moreno-Brid JC, L Nalin and E Pérez-Medina (2022). External challenges to the economic expansion of emerging markets in the post-Covid-19 and post-COP26 era: a balance-of-payments constrained growth (BPCG) perspective. UNCTAD Background Paper.

Paesani, P., and Rosselli, A. (2014). The case for a supra-national control on commodities in the post-WWII world: novel perspectives from FAO and Kaldor archives. The case for a supra-national control on commodities in the post-WWII World: novel perspectives from FAO and Kaldor Archives, History of Economic Thought and Policy, vol. 2014, No. 1, pp. 5-30.

UNCTAD (2011). Trade and Development Report: Post-crisis policy challenges in the world economy. United Nations Publication.

UNCTAD (2019). Trade and Development Report 2019: Financing a Global Green New Deal. United Nations Publication.

UNCTAD (2022). Trade and Development Report 2022: Development prospects in a fractured world: Global disorder and regional responses. United Nations Publication

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