ADAM TOOZE

Dear friends, Thank you for reading the Chartbook Newsletter. Over the last 8 months I’ve managed to put together 26 issues of Chartbook and I

One of the remarkable things about China under the rule of the Communist Party is its aversion to inflation. Since 2020 the regime has been making a point of emphasizing its resistance to Western-style monetary experimentation. Fascinating background is provided by Isabella Weber’s timely book about China’s price reform discussion of the 1980s.
Weber argues that the stability of the CCP regime today owes much to the rejection of shock therapy a la Russe, urged on it by Western and East European advisors in the 1980s. Instead China opted for a gradualist program of price liberalization combined with the crackdown of 1989. This more cautious and ultimately far more successful approach was justified in the eyes of CCP experts by concerns about inflation. And that in turn owed much to the lessons learned by the Communists during the period of World War II and the civil war. One of the main forces enabling the CCP’s overthrow of Chiang Kai-shek in 1949 was the economic disaster suffered by the Nationalist regime. The Communists were swept to power on a tidal wave of dissatisfaction over a ruinous hyperinflation.

Who makes history and on what terms? Three times in World War II – in 1940, in 1941 and in 1942 – the armies of the Third Reich made advances so spectacular that they unsettled the global balance of power and threatened to reorder the world.

Germany’s conquests triggered FDR’s armaments drive, the first step towards the United States becoming the military hyperpower that it is today. Down to the present, this serves as a benchmark – including for advocates of the Green New Deal – of what America is capable of, if it when puts its mind to it. In Asia the defeat of France and the Netherlands unleashed a chain reaction that led to the fall of Europe’s empires. Had Nazi Germany found a new form of geopolitical leverage? Was Blitzkrieg a kind of revolution? Had Hitler’s Germany found a way to undo the iron lock, apparently established by World War I, that tied global power to economic predominance, the iron lock that secured Anglo-American hegemony?

The climate crisis is a political economy problem. This is all too obvious on the “production side”. Entrenched fossil fuel interests have long been the nemesis of the climate movement. But it is also true on the “consumption” side. Social hierarchy, inequality and class structure shape the way that we use fossil fuels. They will also shape the energy transition.

This aspect of the climate crisis was somewhat obscured by the way in which the problem of climate justice was framed in the first phase of global climate politics in the 1990s. For all-too obvious reasons attention was initially focused on the huge gulf in emissions between the rich countries and the developing world. The key variables were national CO2 emissions per capita and the accumulated emissions of the global North, which at that point were overwhelmingly the main drivers of global heating.

Timelines are a handy tool in grasping the complexity of historical processes. Over the last six months I’ve been trying to keep abreast of the evolution of the Biden administration’s stance towards China. This newsletter started life as a chronological listing of news items. No such listing is innocent. Principles of selection are involved. I compiled this list out of a sense of anxiety about the widening Sino-US antagonism. Putting it together has reinforced my sense that we are witnessing a historic shift. But the limitations of such an approach are obvious. PLEASE NOTE, in this compilation I am looking only at the US side. It is just one facet of a complex process in which Beijing is an active player, as are America’s allies. Nor is this a comprehensive treatment of the American side. The attitude of American business and society are more multifaceted than presented here. But with these provisos in mind, I hope this may serve as a useful compilation for those interested in the Biden administration’s early history. More to come …

“We are inside.” – Mark Hulliung, Sartre and Clio. Encounters with History (2013), p. 10.

The threat of inflation makes daily headlines right now. In most advanced economies, only people over the age of 40 have any personal experience of serious inflation. But scary historical episodes are easily to hand. The 1970s ghost through policy-talk.

Whether or not such historical clichés are at all relevant to our current moment, is one line of debate. I am on the skeptical side of the fence. Fifty years on from the last great inflation in the West, the political economy, has radically changed. The bargaining power of labour is far weaker. Today, the risk of a wage-price spiral seems slim. The global headwinds that dampen inflationary risks continue to be strong. Indeed, so stark are these differences that it seems surprising that simple historical analogies are taken seriously at all. What is truly intriguing, however, is a deeper and more basic question. If there are underlying changes in the regime of price-setting, is our current system of inflation measurement set up to give us a good handle on 21st-century price dynamics? How do you deal with a shock like 2020? In its aftermath, how do you recognize inflation when it does arrive?

This newsletter is strong stuff, more Wages of Destruction than regular Chartbook fare. Some of the material is disturbing.

The battle of Stalingrad raged between 23 August 1942 and 2 February 1943 when the last of the German 6th Army surrendered. It cost the Red Army, the Wehrmacht and its allies, the Italian, Romanian and Hungarian forces, a combined total of c 2.5 million casualties, over 1 million of them KIA. It was the end of the last major German offensive on the Eastern Front, a turning point in the war and, thus, in world history.

In the last couple of months I’ve immersed myself in Vasily Grossman’s two-volume epic about Stalingrad – For a Just Cause (1952) published in English in 2019 as Stalingrad and the sequel Life and Fate (1960), which has long been famous in the West as an account of the war that the Soviet censors tried to suppress. Reading the books back to back was engrossing. It became a habit. A daily need. These aren’t books that it is easy to be “finished” with.

Last week the US government took the decision to extended temporary protected status to c. 150,000 people of Haitian citizenship living in the US. This status, first granted by Obama in 2010, had been put in question by the Trump administration. Deportations had gathered pace at the beginning of 2021. In recognition of the situation of crisis in Haiti, they have now been, once again, halted

Haiti’s conditions are extreme, but large parts of the Caribbean and Central America region are currently under huge stress. This flickers on the US radar in the form of the refugee crisis on the US-Mexican border. The most desperate migrants come not from Mexico, but from the Northern Triangle of Central America. UNCTAD warns of the risk of debt crises afflicting small island developing states in the Caribbean. Even in the Caribbean territories of France and the Netherlands, tensions are rising.

Biden’s Families Plan is the third of his economic packages. Billed at $1.8 trillion over ten years, the Families Plan complements the immediate support provides by the Rescue Plan and the long-term Jobs/infrastructure Plan.
The Families Plan concludes the sequence, but the family has been a key preoccupation of all three of Biden’s programs.

The Rescue Plan offered hundreds of billions in support for child care providers and families in the form of family tax credits. It established what amounts to a temporary child benefit system. The Jobs/infrastructure plan provided $400 billion for elder care. As David Dayan summarizes in the American Prospect, the Families Plan adds to that a long-term continuation of child tax benefits, hundreds of billions for child care and Federal backing for paid family and medical leave.

On February 13 2021 Mario Draghi was sworn in as Italy’s Prime Minister.

In early 2021 Draghi is not the only veteran being called back to the colors. In Foreign Policy I did a long read on the intertwined trajectories of Mario Draghi and Janet Yellen as emblematic technocrats of the neoliberal era. In this newsletter I want to focus on Draghi and in particular on his early career in Italy as a way of better understanding the stakes involved in his late-life premiership.

Draghi’s appointment as Prime Minster was both a surprising choice and an obvious one.

How should progressive politics relate to realism?

The question has long haunted me. It was most pressing when I was writing Deluge and struggling with the problems of interwar war international relations and the Treaty of Versailles. It was out of that era that conventional notions of “realism” in international relations theory were born.

Back in 2017, Stefan Eich and I had a crack at dismantling “Politics as a Vocation”, a key lecture by Max Weber that is often cited as canonical for realism in political theory.

Right now there is no more important arena in which to debate this issue than the climate crisis.

The US is engaged in a fiscal policy push of historic dimensions. This has unleashed a debate about inflation, overheating and the output gap. Those concerns have been overridden with the passage of the $1.9 trillion Relief Act.

Don’t expect the inflation hawks to give up easily. Inflation- angst will not go away and now there is an even more pressing fear to worry about. If some increase in inflation is now baked in, are we heading into a bond market storm? If so, what is to be done?

I was forced to talk about bitcoin this week. On a podcast (in German).

The discussion was triggered by the remarkable surge in bitcoin’s value – the second great surge in the Ur-crypto’s turbulent history since it’s launch on 3 January 2009.
Lisa Splanemann, the journalist with whom I do the podcast, has been pushing the topic for a while. I was reluctant.

Money talk is political talk. We should be selective in the political talk we engage in. I don’t like the politics of crypto/bitcoin.

In the last couple of weeks, as financial markets have digested the implications of Democrat control of Congress and a giant second stimulus, US government Treasuries have sold off and yields have moved sharply upwards.
This has unleashed a wave of discussion about the return of bond vigilantes. See for instance Robin Wigglesworth’s excellent piece in the FT.

The phrase “bond vigilante” is normally attributed to Ed Yardeni a Wall Street economist who coined it in the 1980s to describe the role of bond markets in disciplining governments.

Before signing off to finish Shutdown (out in September!) I was worried about Europe. I still think we should be.

In 2020, the corona crisis delivered a devastating hit to both Italy and Spain . This comes on top of two previous shocks – 2008 and the eurozone crisis 2010-2013. The result is an alarming divergence in economic performance between the most troubled parts of the Eurozone, the rest of Europe and the United States.

Wishing you a very belated Happy New Year.

Subscribe now

With just three weeks to go before submission of the manuscript for Shutdown – out in September – things are getting pretty intense.
But, life goes on. Term has started. I have a regular column to do for Social Europe and I’m looking forward to giving one of my monthly talks for Conley & Silvers on Monday night.

So, I thought I would take a break from the grind on the book, to do a newsletter on the outlook for the Euro Area.

Dear Subscribers

Just a quick note to wish you happy holidays and a great end to the year.

The first ten in this series of Chartbook Newsletters were fun to put together.

The feedback has been great.

Thank you very much for signing up.

I look forward to continuing in 2021. Shortly, I will be returning to the story of the March 2020 US Treasury market crisis.

However, please forgive me if the pace in the next few weeks is not as regular as hitherto.

Between now and mid-February I have to concentrate on finishing the manuscript for Shutdown – out in September in UK, US and Europe.

As of mid-February, I look forward to returning to a regular pattern.

If you have suggestions or ideas for themes to cover, please let me know.

All the very best

A

The demography of sub-Saharan Africa is one of the megatrends of the 21st century. Africa is the only world region projected to have strong population growth for the rest of the century. According to Pew Research, between 2020 and 2100, Africa’s population is expected to increase from 1.3 billion to 4.3 billion. These gains will come mostly in sub-Saharan Africa, which, even allowing for demographic transition, is expected to more than triple in population by 2100.

There is no more important issue right now than how to read China’s state capitalism and its likely trajectory.

In Chartbook Newsletter # 8 I collected some material on China’s recent economic development. In # 9 I want to dig a little deeper, on the lines along which China’s political economy is interpreted. I offer these thoughts as a general reader of political economy rather than a China specialist.

The basic question seems to be:

Are we seeing a power grab by Xi that will lead to an overgrowth of state-owned businesses and the strangulation of China’s private sector? Or, are we seeing the emergence of a new streamlined form of state capitalism?

It is a crucial question for China. It is a crucial question for the world economy. By one estimate, China’s State-Owned Enterprises account for a larger share of global GDP than Japan.

As far as the economy is concerned there are three types of story about China right now.

The baseline are the stories of dramatic and relentless economic growth. Not by accident, they lend themselves to statistical enumeration. They describe an ongoing, unprecedented, world-transforming growth surge.

Then there are the stories about a precarious structure of debt and credit built on that growth. It is as at risk of toppling or suddenly contracting.

Finally, there are the stories about regime interventions: managerial, regulatory, expansive and repressive, actions that range from concentration camps in Xinjiang, to giant commitments on decarbonization, to the abrupt cancelation of the largest IPO in the world.

Together, the three form a loosely articulated, vaguely dialectical whole.

Revisiting The Role of Hedge Funds In The March 2020 Treasury Market Turmoil Subscribe now Last week’s newsletter #5 on the turmoil in the all-important

On the brink of Brexit (no deal or not), I’m still struggling to make sense of what has happened since 2016.

The best historically informed take, is this brilliant piece for the Guardian by my good friend David Edgerton.

March 2020 will forever be remembered as the month of the global lockdown. By April 2020 80 percent of the global workforce would be under one or other type of restriction. It was like nothing else in economic history.

In anticipation of that shock the financial markets began to quake already in February.

The immediate reaction, unsurprisingly was a flight to safety that put pressure on equities and corporate debt. That began in earnest in the last week of February. The effect of the flight to safety was to increase demand for safe assets like Treasuries. So far so good.

How stable is the financial system?

At least twice a year, the world’s central banks and international financial institutions like the IMF and the Financial Stability Board set themselves to answering this question. A typical rhythm is to publish two reports a year, one in the spring and one in the autumn. National central banks cover their respective territories. The IMF and the Financial Stability Report take a global view. In the last few weeks, we have had the reports from the IMF, the Fed and the ECB. The Bank of England does a very interesting report. So too does the Bank of Japan.

In the US this week an argument flared about the continuation of Fed emergency programs and their cancelation by outgoing Trump Treasury Secretary, Steve Mnuchin. In Europe the much-hailed July recovery package was stalled by Europe’s own nationalist-populist troublemakers aka Hungary and Poland. In both cases this leaves the central banks exposed and increasingly politicized.

Meanwhile, the G20 is holding a virtual meeting under Saudi chairmanship (sic) to discuss a framework for addressing international debts of lower income countries.

Second in the series of chartbooks with charts, links and news of vaccines, an accelerating pandemic and dramatic news on the trade front from Asia.

Introducing Adam Tooze Chartbook # 1. Vaccine refrigeration, Biden’s economics team, IMF fiscal reports, Turkey under financial pressure, Nagorno-Karabakh, Indian potato inflation and the market