Politics of Economics

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Politics of Economics

Postby mukkan » 09 Jul 2020 23:23

We cannot have a practical discussion of economics without discussing the politics. Starting a new thread to discuss economic news and politics around the economic policies. There is another politics thread but aim of this thread to discuss only those related to economic impact and policies.


The Political Economy of Economic Policy
Over the past 50 years, political economy has become increasingly prominent in both economics and political science, in three ways:

It analyzes how political forces affect the economy. Voters and interest groups have a powerful impact on virtually every possible economic policy. Political economists strive to identify the relevant groups and their interests, and how political institutions affect their impact on policy.

It assesses how the economy affects politics. Macroeconomic trends can boost or ruin an incumbent’s chances. At the more microeconomic level, features of the economic organization or activities of particular firms or industries can have an impact on the nature and direction of their political activity.

It uses the tools of economics to study politics. Politicians can be thought of as analogous to firms, with voters as consumers, or governments as monopoly providers of goods and services to constituent customers. Scholars model political-economic interactions in order to develop a more theoretically rigorous understanding of the underlying features driving politics.


Special interests as well as voters on different sides of every issue fight their battles in the political arena. But the rules of politics vary a lot from country to country. The way a political economy is organized affects who wins the battle over policy.

A logical starting point is elections, at least in democracies. Governments that don’t satisfy their constituents don’t remain governments very long. So we might expect democracies to choose policies that benefit the economy as a whole. However, the economy as a whole doesn’t vote.

Politicians need votes from the people who decide elections. The decisive or pivotal voters vary with a country’s electoral institutions and social divisions. In most political systems, the best targets are swing voters, who might change their vote in response to the policies of an incumbent or the promises of a challenger. If the poor vote for the left and the rich vote for the right, for example, the middle class could be decisive. In recent American presidential elections, the most important swing voters have been in distressed industrial regions of the Midwest. Many voters in these areas believe that foreign competition contributed to manufacturing decline. This helps explain why presidential candidates have become increasingly protectionist, even though most Americans support openness to trade.

In addition, policymakers in democratic societies must always pay attention to the next election—otherwise they are likely to cease being policymakers. This helps explain why it can be difficult for governments to pay money now for policies whose benefits will be realized only in the long run—such as pandemic prevention and preparedness.

The mass of special and general interests in society is overwhelming.Institutions help make sense of them. First are social institutions—the way people organize themselves. Some businesses, farmers, and workers are well organized, giving them more political clout. Farmers in rich countries are relatively few, are well organized, and are almost universally subsidized and protected. Farmers in poor countries are many, rarely organized, and almost universally taxed. Where workers are grouped into centralized labor federations, as in some northern European countries, they play a major role in national policymaking. The ways in which societies organize themselves—by economic sector, region, ethnicity—affect how they structure their politics.

Political institutions mediate the pressures constituents bring to bear on leaders. Even in authoritarian countries, rulers have to pay attention to at least some part of public opinion. Political economists call this the “selectorate,” that portion of the population that matters to policymakers. In an authoritarian regime, this could be an economic elite or the armed forces. In an electoral democracy it would be voters and interest groups. No matter who matters, policymakers need their support to stay in office.


Political economy is the integration of political and economic factors in our analysis of modern society. Inasmuch as just about everyone would agree that politics and economics are intricately and irretrievably interwoven—politics affects the economy and the economy affects politics—this approach seems natural. It has proved itself powerful in understanding governments and societies; it can also be a powerful tool for those interested in changing governments and societies.


https://www.imf.org/external/pubs/ft/fa ... rieden.htm

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Re: Politics of Economics

Postby mukkan » 09 Jul 2020 23:31

Will there be another stimulus? Govt may be working on a plan?

https://economictimes.indiatimes.com/ne ... 871835.cms

India is considering a plan to raise as much as Rs 20,000 crores ($2.7 billion) by selling stake in the world’s largest coal producer, and a bank to fund a stimulus program aimed at boosting the virus-battered economy, officials with knowledge of the matter said.


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Re: Politics of Economics

Postby ramana » 09 Jul 2020 23:57

Politics, economics and history are all linked and in some cases intertwined.

So to discuss things in isolation leads to "six blind men of Hindoostan"

Of missing the forest for the trees.

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Re: Politics of Economics

Postby mukkan » 10 Jul 2020 00:18

Completely agree. I had to create this thread as political discussion was banned in the economy news thread.

ramana wrote:Politics, economics and history are all linked and in some cases intertwined.

So to discuss things in isolation leads to "six blind men of Hindoostan"

Of missing the forest for the trees.

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Re: Politics of Economics

Postby mukkan » 10 Jul 2020 04:49

India also needs to do something like US is planning for semiconductor industry. The CHIPS for America Act bill would secure $22 billion to promote more U.S.-based semiconductor manufacturing.

The CHIPS for America Act has lofty goals as are the commitments made to industry players. Here’s a brief breakdown:

An investment tax credit of 40% for semiconductor equipment or facility costs through 2024, dwindling each year until it disappears in 2027

$10 billion in federal matching to state and local funding in support of advanced manufacturing
New programs and funding to boost the nationwide STEM workforce, 5G leadership, and advanced assembly
Department of Defense funding for related projects, including the Defense Production Act tie-ins to support rapid production as needed
$750 in trust funding supporting transparency, policy negotiations with foreign powers, and consistency in the semiconductor industry
$12 billion towards numerous R&D pursuits in a variety of sub-industries, related fields, and training programs

https://www.allaboutcircuits.com/news/w ... -industry/


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Re: Politics of Economics

Postby mukkan » 10 Jul 2020 10:45

Like China, if GOI encourages homemade apps and discourages foreign apps by tax policies and other measures, this money spent by Indian entities will stay with Indians.

Indian Entities Spent $1.6 Billion On Facebook And Google Ads In 2018-19

Read more at: https://www.bloombergquint.com/business ... in-2018-19

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Re: Politics of Economics

Postby Adrija » 10 Jul 2020 12:45

Thanks for the thread Mukkanji

If I may, there is a wider implication and also policy of the politics of economics... India is I think the ONLY major country which does not practice economic nationalism.....of course CHina but also US, Korea, Japan, RU, FR and DE are all active in this space of promoting by hook or (more often) by crook home grown enterprises in every sphere (not just those deemed "critical/ strategic") e.g.,

1. FR refusal to allow Pepsi to take over Danone as dairy was a "strategic industry" (!!)
2. Korea spent a lot of state money blindly supporting LG and Samsung to become what they have become today.

However, that requires the Govt to consciously choose and play God to select players... not sure if we can aspire to that when we don't even enforce local buys in Government purchases... unlike US, where there is NO government car other than GM and Ford (CHrysler vehicles were dropped once it became FCA), here Govt doesn't even restrict its buys to Mahindra/ Tata/ JLR......... every govt department buys Honda/ Suzuki/ BMW/ Toyota...

We are very very very far off from realizing that markets are not open and all global platers represent the flag either implicitly or explicitly..

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Re: Politics of Economics

Postby csaurabh » 10 Jul 2020 18:48

Adrija wrote:Thanks for the thread Mukkanji

If I may, there is a wider implication and also policy of the politics of economics... India is I think the ONLY major country which does not practice economic nationalism.....of course CHina but also US, Korea, Japan, RU, FR and DE are all active in this space of promoting by hook or (more often) by crook home grown enterprises in every sphere (not just those deemed "critical/ strategic") e.g.,

1. FR refusal to allow Pepsi to take over Danone as dairy was a "strategic industry" (!!)
2. Korea spent a lot of state money blindly supporting LG and Samsung to become what they have become today.

However, that requires the Govt to consciously choose and play God to select players... not sure if we can aspire to that when we don't even enforce local buys in Government purchases... unlike US, where there is NO government car other than GM and Ford (CHrysler vehicles were dropped once it became FCA), here Govt doesn't even restrict its buys to Mahindra/ Tata/ JLR......... every govt department buys Honda/ Suzuki/ BMW/ Toyota...

We are very very very far off from realizing that markets are not open and all global platers represent the flag either implicitly or explicitly..


L1 tendering system and emphasis only on "procurement" rather than "research and development" has led to this sorry state of affairs.
Private sector thinks that govt is predatory with taxation and Govt sector thinks of private sector as greedy banias out to make a buck.
Trust factor between public and private that is so essential for economic nationalism has been deeply poisoned from the decades of Nehruvian socialism.

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Re: Politics of Economics

Postby mukkan » 12 Jul 2020 22:37

Tendering process of picking the lowest bidder also created emphasis on reducing cost, often cutting quality.

I agree India may be the only country not having economic nationalism. Samsung is an extension of Korean government, all the well known Japanese auto and electronic companies got huge assistance from Japanese government, China gives blanket support to all its home grown tech companies from wechat to Huawei. Huawei is able to make 4g/5g chips because of government support to protect it from huge IP royalties. In the other thread, somebody mentioned that it is feasible to do in India for $200M. Even if India made a cellular chip, it will end up paying more royalty.  GOI will have to negotiate like Chinese government for lower or no royalty. Intel invested billions of dollars to make cellular modems but had to shut down (ended up selling that division to Apple) as it was not feasible to make any money because of the huge licensing cost. 

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Re: Politics of Economics

Postby mukkan » 13 Jul 2020 18:56

Did India indirectly sell its data today to Google for $10B investment promise instead of trying to grow its own tech industry? Another selloff by short sighted government.

https://economictimes.indiatimes.com/te ... content=23

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Re: Politics of Economics

Postby mukkan » 17 Jul 2020 06:03

Xposted from economy news site as political discussion is banned in that thread.
same concern by Swarjyamag about sellout to Google that I raised earlier.




mukkan wrote:Did India indirectly sell its data today to Google for $10B investment promise instead of trying to grow its own tech industry? Another selloff by short sighted government.

https://economictimes.indiatimes.com/te ... content=23

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Re: Politics of Economics

Postby Mort Walker » 17 Jul 2020 07:09

We need to discuss creative accounting techniques to get that $514 billion Forex to work as capital investment for defence production. Notably India needs 200 LCA Tejas Mk1A by 2024 and 400 Mk2 by 2029 (before the election). On top of that the jet engine, LCH, Arjun, Dhanush, Akash air defence with Rajendra radar needs to go into big time production. There are other items that I've missed, but the strategic need to divert some of this Forex, about 10% toward domestic defence production will pay off big time. It will be a stimulus on the economy, create high skilled employment and boost morale of the entire nation.

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Re: Politics of Economics

Postby ramana » 17 Jul 2020 08:19

mukkan wrote:Xposted from economy news site as political discussion is banned in that thread.
same concern by Swarjyamag about sellout to Google that I raised earlier.




mukkan wrote:Did India indirectly sell its data today to Google for $10B investment promise instead of trying to grow its own tech industry? Another selloff by short sighted government.

https://economictimes.indiatimes.com/te ... content=23


No mukkan, India did not sell its data.
MukA sold Jio shares to foreign investors.
The Indian DL laws will apply.

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Re: Politics of Economics

Postby arshyam » 17 Jul 2020 08:44

mukkan wrote:Xposted from economy news site as political discussion is banned in that thread.
same concern by Swarjyamag about sellout to Google that I raised earlier.




mukkan wrote:Did India indirectly sell its data today to Google for $10B investment promise instead of trying to grow its own tech industry? Another selloff by short sighted government.

https://economictimes.indiatimes.com/te ... content=23

The author of that Swarajya makes no clear points and neither do you. Please tell me where has India sold its data? And since you used the words "another selloff", I assume you have a list of such activities. Kindly do share.

Suraj-san was right to keep the economics thread free of politics. If this is the kind of fact-free dhoti-shivering being passed as analysis, I don't see the point of this thread.

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Re: Politics of Economics

Postby mukkan » 19 Jul 2020 07:44

Instead of encouraging indigenous industry by giving incentives,time and opportunity to grow, GOI always take the easy path of allowing MNCs to grow in India. It doesn't matter if it is BJP or INC. Both does the same. Even if there is some data protection law (I am not sure how much it will be enforced), money generated from this data will not be ours. India's huge data may be making someone sitting in North Dakota richer.

In addition to making money, these MNCs will try to control the narrative/agenda. GOI won't have any control once it becomes too big and no other desi alternative.

Regarding examples on what needs to be done, look north and do something similar to China is doing to promote its technology industries from Huawei to wechat. GOI don't have any policy to address growing internal technology industry like China has.

If India doesn't act now, something like this will happen in future
https://asia.nikkei.com/Spotlight/Huawe ... n-2-months

GOI is finally starting
https://economictimes.indiatimes.com/ne ... 0444373081
Last edited by mukkan on 19 Jul 2020 11:43, edited 2 times in total.

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Re: Politics of Economics

Postby mukkan » 19 Jul 2020 08:34

India should have something like "Made in China 2025" policy that will favor local high technology industry.

China had heavily invested in last 5 years in semiconductor fab, infact majority of investment in new fabs happened in China. USITC paper on Made in China 2025 China's policies.

China’s goals and implementing guidelines are articulated in three policy documents released in 2014
and 2015: The Guidelines to Promote a National Integrated Circuit Industry (the National IC Plan), Made
in China 2025 (MIC 2025), and the Made in China 2025 Technical Area Roadmap. The National IC Plan,
released in June 2014, specified a strategy of support for “national champion” firms to catch up with
leading international competitors, leveraging investments by national and provincial entities under the
auspices of a National Integrated Circuit Investment Fund to acquire critical technologies and construct
advanced fabrication facilities.
Made in China 2025, which was released under one year after the National IC Plan, identified next
generation information technology (and integrated circuits specifically) as one of ten sectors that China
should endeavor to promote, with the goal being a commercially viable domestic manufacturing sector
capable of producing products at cost and quality comparable to leading international firms
https://www.usitc.gov/publications/332/ ... pliant.pdf

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Re: Politics of Economics

Postby chetak » 19 Jul 2020 13:47

The economic slowdown due to the pandemic will lead to political realignments in the gelf as larger bulk consumers of oil like India and a few others may start to exercise a larger than hitherto influence on the primary oil markets of these countries.

we will have to wait and see how things pan out for us and our Indian expats in the gelf

Headwinds in the gelf will also upset India's incoming remittances applecart and will lead to social unrest here in India in the short to medium term as Indian ex-pats in the Gulf region contribute a significant portion to the country's total inward remittances.

This year, judging by the early indicators, the flow of inward remittances are projected to go off a cliff. Remittances from the United Arab Emirates to India are expected to drop 35% in the second quarter alone. The UAE is the GCC’s largest source of remittances, and India is their top recipient.

This loss of income is likely just the start of a long cycle of despair as the pandemic starts throttling the flow of money from abroad, and economic slowdowns in the gelf triggering local layoffs resulting in the mass reverse migrations of mostly unskilled workers to a bleak future back home.

This could easily end up in a double whammy that some states will have to handle as they may not be geared/willing to increase social spending to levels commensurate with the expectations of millions of gelf returnees.





The end of the Arab world’s oil age is nigh


The end of the Arab world’s oil age is nigh

Pain will be felt across the region

The economist
Jul 18th 2020
BEIRUT



Their budgets don’t add up anymore. Algeria needs the price of Brent crude, an international benchmark for oil, to rise to $157 dollars a barrel. Oman needs it to hit $87. No Arab oil producer, save tiny Qatar, can balance its books at the current price, around $40 (see chart).

So some are taking drastic steps. In May the Algerian government said it would slice spending in half. The new prime minister of Iraq, one of the world’s largest oil producers, wants to take an axe to government salaries. Oman is struggling to borrow after credit-rating agencies listed its debt as junk. Kuwait’s deficit could hit 40% of gdp, the highest level in the world.

Covid-19 sent the price of oil plummeting to all-time lows as people stopped moving around in order to limit the spread of the virus. With commerce resuming, the price has ticked back up, though a peak in demand may be years away.

But don’t be fooled. The world’s economies are moving away from fossil fuels. Oversupply and the increasing competitiveness of cleaner energy sources mean that oil may stay cheap for the foreseeable future. The recent turmoil in oil markets is not an aberration; it is a glimpse of the future. The world has entered an era of low prices—and no region will be more affected than the Middle East and north Africa.

Image

Arab leaders knew that sky-high oil prices would not last forever. Four years ago Muhammad bin Salman, the de facto ruler of Saudi Arabia, produced a plan called “Vision 2030” that aimed to wean his economy off oil. Many of his neighbours have their own versions. But “2030 has become 2020,” says a consultant to Prince Muhammad. Oil revenues in the Middle East and north Africa, which produces more of the black stuff than any other region, fell from over $1trn in 2012 to $575bn in 2019, says the imf. This year Arab countries are expected to earn about $300bn selling oil, not nearly enough to cover their spending. Since March they have cut, taxed and borrowed. Many are burning through cash reserves meant to fund reform.

Pain will be felt in non-oil producers, too. They have long relied on their oily neighbours to put their citizens to work. Remittances are worth over 10% of gdp in some countries. Trade, tourism and investment have spread the riches around to some degree. Still, compared with other regions, the Middle East has one of the highest proportions of unemployed young people in the world. Oil has bankrolled unproductive economies, propped up unsavoury regimes and invited unwelcome foreign interference. So the end of this era need not be disastrous if it prompts reforms that create more dynamic economies and representative governments.

There is sure to be resistance along the way. Start with the region’s wealthiest oil producers, which can cope with low prices in the short run. Qatar and the United Arab Emirates (uae) have huge sovereign-wealth funds. Saudi Arabia, the region’s largest economy, has foreign reserves worth $444bn, enough to cover two years of spending at the current rate.

But they have all been hit hard by the pandemic, as well as low oil prices. And they have long overspent. In February, before the coronavirus broke out in the Gulf, the IMF predicted that the countries of the Gulf Co-operation Council (gcc)—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the uae—would exhaust their $2trn of reserves by 2034. Since then Saudi Arabia has spent at least $45bn of its cash. If it continues at that pace for another six months it would strain the Saudi rial’s peg to the dollar. Devaluation would hit real incomes hard in a country which imports almost everything. Officials are worried. “We are facing a crisis the world has never seen the likes of in modern history,” says Muhammad al-Jadaan, the finance minister.

In an attempt to balance the books, Saudi Arabia has suspended a cost-of-living allowance for state workers, raised petrol prices and tripled its sales tax. Even so, the budget deficit could exceed $110bn this year (16% of gdp). More taxes—perhaps on businesses, income and land—could follow. But raising taxes risks further depressing commerce, which has been hobbled in order to contain the coronavirus.

The kingdom had hoped an increase in religious and leisure tourism would at least partially compensate for the decline in oil revenue. That now seems a fantasy. The holy city of Mecca has been closed to foreigners since February. Last year the annual haj drew 2.6m pilgrims; this year it has been capped at around 1,000. “The kingdom is stuck in the oil dependency it needs to climb out of to survive,” says Farouk Soussa of Goldman Sachs, a bank.

Still, some see an upside to the upheaval in oil-producing states. The countries of the Gulf produce the world’s cheapest oil, so they stand to gain market share if prices remain low. As expats flee, locals could take their jobs. And the region’s struggles may convince some countries to speed up reforms. Credit-rating agencies praise Saudi Arabia’s tax rises as a step towards turning a rentier economy into a productive one. To drum up fresh revenue, Arab leaders speak of a wave of privatisations. The kingdom recently announced the sale of the world’s largest desalination plant at Ras al-Khair. But at the moment investors seem more inclined to pull their money out of the region altogether.

Meanwhile, public anger is growing. Saudis mutter about the new taxes, which fall most heavily on the poor. “Why is mbs not taxing the rich?” gripe the jobless on social media, referring to Prince Muhammad by his initials. “Why doesn’t he sell his yacht and live like us?” asks a mother of four from the north, where the prince is building more palaces. In Iraq officials enraged by pay cuts have thrown their support behind a protest movement that is seeking to topple the entire political system. In Algeria, where income per person has fallen from $5,600 in 2012 to under $4,000 today, protesters are drifting back to the streets. The region’s rulers can no longer afford to buy the public’s loyalty.

Where the oil doesn’t flow

Protests have already resumed in Lebanon, where the pandemic temporarily halted months of demonstrations over corruption and a collapsing economy. Lebanon is not an oil producer (though it hopes to become one). Its crisis, which could see gdp shrink more than 13% this year, comes from the unravelling of a post-civil-war economic order too reliant on services and a bloated financial sector. But the slump in the Gulf has made it worse. A long-term drop in oil prices will bring more pain even for Arab countries that do not pump the stuff.

Remittances from energy-rich states are a lifeline for the entire region. More than 2.5m Egyptians, equal to almost 3% of that country’s population, work in Arab countries that export a lot of oil. Numbers are larger still for other countries: 5% from Lebanon and Jordan, 9% from the Palestinian territories. The money they send back makes up a sizeable chunk of the economies of their homelands. As oil revenue falls, so too will remittances. There will be fewer jobs for foreigners and smaller pay packets for those who do find work.

This will upend the social contract in states that have relied on emigration to soak up jobless citizens. About 35,000 Lebanese graduate from university each year; the Lebanese economy only employs 5,000 of them. Most look abroad for work. The exodus has speeded up the brain drain. Egypt used to supply unskilled labour to the Gulf. In the 1980s more than one-fifth of its migrants toiling in Saudi Arabia were illiterate. Today most have a secondary education; the share of university graduates has doubled. Egypt is now struggling with covid-19 in part because it lacks enough doctors: more than 10,000 have emigrated since 2016, many to the Gulf.

With fewer opportunities in the oil-producing states, many graduates may no longer emigrate. But their home countries cannot provide a good life. Doctors in Egypt earn as little as 3,000 pounds ($185) a month, a fraction of what they make in Saudi Arabia or Kuwait. A glut of unemployed graduates is a recipe for social unrest. Add to that, perhaps, an influx of compatriots forced to come home when their contracts run out. Many do not wish to, since emirates like Dubai and Qatar offer not just well-paying jobs but first-class services and relatively honest governance. A Gallup poll published in January found that just 10% of Egyptian migrants in the rich parts of the Gulf want to return.

Businesses will be hurt as well. Oil producers are big markets for other Arab countries. In 2018 they took 21% of exports from Egypt, 32% from Jordan and 38% from Lebanon. Firms can pursue other trading partners, of course. Egypt already exports more to both Italy and Turkey than it does to any Arab country. But the stuff it sells there—petroleum products, metals and chemicals—tends to create few jobs for Egyptians. Countries in the region buy more labour-intensive goods, such as crops, textiles and consumer products. More than half of the televisions exported from Egypt wind up in the gcc. Jordan’s pharmaceutical industry, which generates more than 10% of its total exports and supports tens of thousands of jobs, sends almost three-quarters of its exports to Arab oil producers. Smaller, poorer Gulf states will make for more impecunious customers.

They will also send out fewer wealthy tourists. In Lebanon visitors from just three countries—Kuwait, Saudi Arabia and the uae—account for about one-third of total tourist spending. Most visitors to Egypt are from Europe, but Gulf tourists stay longer and spend more money at restaurants, cafés and malls. These countries can look elsewhere for revenue, but it will be hard to replace the wealthy tourists in their backyards. Saudis spend the summer in Cairo or Beirut because those cities are close, culturally familiar and speak the same language. Slovenians or Singaporeans are unlikely to do the same.

Image

It is something of a historical accident that the Gulf states rose to become hubs of power and influence in the Middle East. For centuries they were backwaters sustained by pilgrimage and the pearl trade. The rulers of the region were in the great old Arab capitals: Cairo and Damascus fought wars against Israel and led the cry for Arab nationalism. Beirut was the financial and cultural hub.

These old powers, now well into decline, have an uneasy relationship with the newcomers. In a recording leaked in 2015 Abdel-Fattah al-Sisi, the Egyptian president, mocked the Gulf’s wealth. He told an adviser to ask the Saudis for $10bn in financial aid, a request that was met with laughter. “So what? They have money like rice,” Mr Sisi quipped in response.

They have been generous with it, if selectively so. Kuwait, Saudi Arabia and the uae gave Egypt about $30bn in aid after 2013, when Mr Sisi overthrew an elected Islamist government. The Sunni leadership in Lebanon has long been a client of the Gulf states. Rafik Hariri, who led the country after its civil war, made his fortune as a contractor in Saudi Arabia. His son Saad, who also served as prime minister, holds Saudi citizenship. The gcc has bailed out Jordan twice in the past decade.

In recent years, though, funding has started to dry up. Partly this is due to political disputes. Seen from Riyadh or Abu Dhabi, many Arab states they once subsidised now look like bad investments. The Saudis are frustrated that Mr Sisi did not send troops to support their ill-fated invasion of Yemen, and that the younger Mr Hariri was too tolerant of Hizbullah, the Shia militia and political party backed by Iran. Their diminishing largesse also reflects their diminishing fortunes. Egypt has not received any money in years. No one from the Gulf looks willing to bail out Lebanon. Jordan had to plead to receive a five-year, $2.5bn aid package from the Gulf in 2018, half of what it got in 2011. None of this is necessarily bad: many Arabs would appreciate less foreign influence in their countries. But it will add to the financial pressure on their own indebted governments.

It may also presage a broader change in the region’s politics. For four decades America has followed the “Carter Doctrine”, which held that it would use military force to maintain the free flow of oil through the Persian Gulf. Under President Donald Trump, though, the doctrine has started to fray. When Iranian-made cruise missiles and drones slammed into Saudi oil facilities in September, America barely blinked. The Patriot missile-defence batteries it deployed to the kingdom weeks later have already been withdrawn. Outside the Gulf Mr Trump has been even less engaged, all but ignoring the chaos in Libya, where Russia, Turkey and the uae (to name but a few) are vying for control.

Image
President Xi has a bridge to sell you


A Middle East less central to the world’s energy supplies will be a Middle East less important to America. Russia may fill the void in places, but its regional interests are narrow, such as its determination to preserve its Mediterranean port at Tartus in Syria. It does not wish to—and probably cannot—extend a security umbrella across the Arabian peninsula.. China has tried to stay out of the region’s politics, pursuing only economic benefits: construction contracts in Algeria, port concessions in Egypt, a wide range of deals in the Gulf.

As Arab states become poorer, though, the nature of their relationship with China may change. This is already happening in Iran, where American sanctions have choked off oil revenue. Officials are discussing a long-term investment deal that could see Chinese firms develop everything from ports to telecoms. It is framed as a “strategic partnership”, but critics worry it could leave China in control of the infrastructure it builds, as it has in some indebted Asian and African countries. Falling oil revenue could force this model on Arab states—and perhaps complicate what remains of their relations with America.

No way out

Ask young Arabs where they would like to live, and there is a good chance they will choose Dubai. A survey in 2019 found that 44% viewed the uae as the ideal country to emigrate to. They often frame their admiration in contrast to their home countries. For all its faults, Dubai (and its neighbours) offers something unusual in the region: the police are honest, the roads well paved, the electricity uninterrupted.

As Lebanon’s economy crashes, everyone is talking of emigration. Yet there are few jobs in the Gulf. “Dubai was always the escape,” says one woman. “Now it’s like we’re trapped, with no backup plan.” Young people across the region have the same fears. Egypt can feel like a country crumbling under its own weight; Jordan is perennially in crisis. Almost ten years after a Tunisian fruit-seller lit the spark of the Arab spring, the frustrations that caused it persist. The end of the oil age could bring change. But it will bring pain first.

mukkan
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Joined: 01 May 2020 21:26

Re: Politics of Economics

Postby mukkan » 19 Jul 2020 23:00

India don't export much high value/margin products.
https://tradingeconomics.com/india/exports
http://www.worldstopexports.com/indias-top-10-exports/

IT service may be the only high value exports India have now, bringing about $137B in 2019. You can also see it is only $44B in domestic revenue. GOI needs to help this increase this by 10 fold.
https://www.statista.com/statistics/320 ... -industry/

Another source of forex is NRI remittance. It was $79B in 2018
https://economictimes.indiatimes.com/nr ... s?from=mdr

But as Chetak mentioned in previous post, with end of gulf dream it will fall sharply in current year.
https://economictimes.indiatimes.com/nr ... 826829.cms


This will look like a crazy idea. Like US/European countries, India may have to start exporting military hardware like LCAs to friendly nations to make money to build its own fleet. Defense experts in this forum will know better about the feasibility of exporting LCA.

Mort Walker wrote:We need to discuss creative accounting techniques to get that $514 billion Forex to work as capital investment for defence production. Notably India needs 200 LCA Tejas Mk1A by 2024 and 400 Mk2 by 2029 (before the election). On top of that the jet engine, LCH, Arjun, Dhanush, Akash air defence with Rajendra radar needs to go into big time production. There are other items that I've missed, but the strategic need to divert some of this Forex, about 10% toward domestic defence production will pay off big time. It will be a stimulus on the economy, create high skilled employment and boost morale of the entire nation.


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