The bull in China’s shop

In this issue we are exploring the world of international organisations, values and globalisation. This is at a time when Trump is challenging all the norms, but maybe the norms are beginning to be shaped by China.

I have some form in this space as I worked on trade, investment and environment policy for the Australian government in the ‘90s. This was the age of Western triumphalism after the fall of the Berlin wall.

I learnt a few things: the trade policy community or “Tradies” saw themselves as righteous warriors against protectionism – the source of all evil including the Second World War (they believed it was caused by the breakdown of trade relations). So if environmentalists, such as myself, thought they were the only ones with a god on their side, we were much mistaken.

And the World Trade Organisation (WTO) Ruled OK. I managed to brief our Australian representative to propose at the General Council Meeting of the United Nations Environment Programme (UNEP) that WTO and UNEP should work together as equals on trade and environment policy – Tradies in the Australian government had been otherwise engaged and let this out as a government position.

The next day the secretariat of the WTO called in the Australian representative and carpeted him for making such an outrageous proposal. Seemingly, the WTO did not work with the likes of UNEP.

The end result was not a lot. The environmental cause was damned with the epithet of protectionism. For developing countries this was clearly another ruse to keep them down and the Tradies were happy to use this as an excuse for inaction.

“I learnt a few things: the trade policy community or “Tradies” saw themselves as righteous warriors against protectionism.”

Not much has changed since in the trade and environment arena, but clearly the days of Western triumphalism are over and there is a new kid on the block. Chinese power is nothing new but maybe it is now becoming clearer how significant it is.

This was most clearly illustrated for me by the story of the Democratic Republic of Congo, China and cobalt, told to me by a development economist in Atlanta at a great annual gathering of economists. I will call her Lucy to protect her identity as this is an area apparently fraught with sensitivities.

Lucy arrived in DR Congo capital, Kinshasa, in 2004 having accepted an assignment as an economist within an international organisation. This was seen as a pretty maverick move as DR Congo had had not one, but two civil wars in the previous ten years. The last had only ended in the previous year. A new government was in its infancy with uncertain prospects of keeping the peace.

Kinshasa is not exactly high-profile internationally. Its greatest claim to fame is arguably when, in 1974 – when DR Congo was called Zaire – it played host to the “Rumble in the Jungle” – a boxing match in which Mohammad Ali defeated the then, reigning world heavyweight champion, George Foreman, watched by a worldwide viewing audience of 1 billion people.

“Even the uranium used to power the bomb that destroyed Nagasaki came from DR Congo, thanks to Belgium.”

Kinshasa is not a total backwater either – Lucy noticed how you could get anything you wanted there. That is you could if you had the money. The source of money in DR Congo has been minerals since the years of Belgian colonial rule. They have also been the source of multiple conflicts.

As well as civil wars, there are claims that the 2nd UN Secretary-General, a Swede, who died in a plane crash on the way to DR Congo in 1961, was actually assassinated by mineral mining interests to prevent him bringing about the country’s independence. Even the uranium used to power the bomb that destroyed Nagasaki came from DR Congo, thanks to Belgium.

So despite its mining and oil wealth, investment in DR Congo has always been high-risk. However, from 2007 China started stepping in with loans and investment when the West was holding back. Of course the country’s president, Joseph Kabila, didn’t say no and neither has his successor Felix Tshisekedi. And now China is the dominant foreign power there.

So why does that matter? Well, according to the US Geological Surve, DR Congo is the world’s largest producer of cobalt, accounting for more than 58% of global production in 2017. Cobalt is an essential metal in the batteries needed to power electric vehicles. So this strategic investment has helped position Chinese mining companies, partnered with Chinese battery manufacturers, as key players in any move to a low-carbon economy.

The US now seems to be belatedly waking up to the situation, looking at other sources of production and recycling to reduce their Chinese dependence. US business magnates are also getting involved. First, founder of the American private security company, Blackwater and key Donald Trump ally, Eric Prince, led a non-official US strategy to secure critical minerals required for developing electric vehicles.

Most recently a coalition of billionaires led by Bill Gates has thrown its financial weight behind a startup hoping to build a “Google Maps for the earth’s crust” to hunt for new sources of cobalt. And with the team of Gates, Bezos, Bloomberg and Dalio, this may be the best chance so far of the US getting back in the game. But all this recent US activity may amount to shutting the stable after the horse has bolted.

This is only one illustration of Chinese power creating tensions with the US and the West. And this is clearly not the only one – Joe Zammit-Lucia explains this in his article on Western-Chinese trade relations. The Outsider also looks at the failing Western mojo while China rises.

“China may now be weakened as its growth has stalled, but a country at bay can also be even more dangerous as it begins to call in its favours and reveal its true power.”

China was a major factor in the rise of Bolsonara in Brazil, if indirectly, as James Cypher relates in this issue. What other countries have bet on continued Chinese expansion, who may now suffer with its contraction? China may now be weakened as its growth has stalled, but a country at bay can also be even more dangerous as it begins to call in its favours and reveal its true power.

As well as the Chinese factor, we talk to Grazia Letto-Gillies about the neglected economics of transnationals, Peter Manley looks at the “lies, damned lies and statistics” involved in claims of poverty reduction due to globalisation while Martin Parker looks at the incredible reach of business schools globally and what they are teaching. And we talk to Richard Baldwin about future turbulence from a new phase of globalisation and robotics. Is your job safe? What does this mean for the politics of the precariat?

And there is much else to feast on including talking to Sherry Kasper about her experience as an economist advising a democrats’ candidate, Liam Mullany on campaigning for affordable housing and Tom London on the life, ideology and influence of Ayn Rand. Do enjoy.

Last but not least, we have an article about winner of the economics Nobel Prize in 1974, Gunnar Myrdal. Myrdal has been the only practicing social democrat to win the prize to date. It is now 50 years since the Swedish Central Bank created the Nobel Memorial Prize in Economic Sciences as it is officially called. We intend to use this anniversary and the media interest in Nobel prizes to highlight the need for a more pluralist approach to economics.

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