December 11, 2023

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The ugly new stagflation era- POLITICO

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Summit of the Americas off to a rocky start: Cuba, Venezuela and Nicaragua are banned, while Mexico is boycotting. President Joe Biden makes his first appearance today. More below.

Euro-coordination: French President Emmanuel Macron hosts Italian Prime Minister Mario Draghi for dinner at the Élysée Palace tonight. Officially, they’re opening the OECD ministerial meeting taking place Thursday and Friday, which is chaired by Italy. What’s really happening is coordination ahead of the three major international meetings in June: the G-7, NATO and EU leaders summits.

COPENHAGEN DEMOCRACY SUMMIT: Follow the world’s leading democracy summit via livestream Thursday and Friday. This year’s top speaker is former President Barack Obama.


The global economy may grow only 2.9 percent in 2022, half the 2021 growth rate, and well down from a predicted 4.1 percent in January, according to the World Bank. You can expect “subdued growth” to continue “throughout the decade because of weak investment in most of the world,” the bank said in a new report.

Worst case scenario: World Bank President David Malpass told reporters Tuesday that global growth could fall as low as 2.1 percent this year, and 1.5 percent in 2023.

Big takeaway is the risk of stagflation: The bank describes the risk as “considerable” — meaning we should not be surprised to see prolonged high inflation combined with economic recession (and perhaps rising unemployment).

No decoupling in the growth slump: U.S., EU and Chinese growth rates are all getting slammed. The U.S. and EU are each now on track for 2.5 percent growth, and China is down to 4.3 percent. That’s roughly a halving of the 2021 growth rates of the world’s three biggest economies.

In China’s case, its growth path is well below the 5 to 6 percent growth rate long believed to be the foundation level for avoiding social unrest. We know from recent history that high commodity prices alone tend to correlate with protests and other political instability (hello, Arab Spring). Throw in Covid lockdowns, and it’s a combustible mix in the world’s most populous nation.

Orthodox solutions: International Monetary Fund economists argue that anti-stagflation programs need to focus on the most vulnerable. The takeaway is that the global economic rescue organizations, the World Bank and IMF, have softened their tone when it comes to dealing with economic crises but are still sticking to traditional prescriptions.

BY THE NUMBERS — GDP IMPACT OF RUSSIAN FOSSIL FUEL BAN: The next blow to the global economy could come from the end of Russian oil and gas trade with Europe. Depending on how it is managed, the EU’s GDP could be slashed by 2.5 to 4.2 percentage points, according to an analysis by Spain’s central bank.


Denying and defying reality has worked for Boris Johnson in the past — his special brand of magical thinking is what got him to Downing Street in the first place, after a career built out of scandals and lies.

But the British prime minister is taking his reality distortion field to whole new levels this week, after 41 percent of his Conservative MPs, including a majority not directly on his government’s payroll, refused to back him in an internal party vote Monday night.

Yet his Cabinet still backs him and the prime minister quits nothing: “He never left any of his wives — they always ended up divorcing him,” one Tory MP said of the three-times married prime minister. “It’s the same with No.10. He’ll never leave of his own accord. The party will have to kick him out,” the MP told POLITICO.

While Johnson can point to leading one of the greenest conservative governments in the world, and delivering Brexit for his party base, he also delivered among the world’s worst health and economic outcomes from Covid. His explanations around the “Partygate” scandal defy belief. In the minds of many, they actually put into question the basic tenets of democratic political decency (read this scorching editorial from the Sydney Morning Herald, of all places).

The real question: who can take the British prime minister seriously?

Global Insider asks that question because when your approval rating is tanking (to 29 percent), your base is booing you in public, and your own MPs are out to get you, being taken seriously by partners is all you have to stop all power draining away.

If you’re not on Boris’ payroll and not a paid-up Conservative Party member, and you do indeed take him seriously, I’d love to hear your perspective: [email protected]

What to look for next: 

— Two special elections June 23, a test of public reaction to Johnson’s efforts to save himself.

— How ministers who’ve refused to back Johnson are treated: does he fire them, or is he afraid doing that would unleash further backlash?

— Will Conservative Party rebels try to make governing all but impossible. In the Guardian, Bree Allegretti writes that some rebels are mulling “vote strikes” to block government business. “One likened the situation the prime minister faced to a scene from The Simpsons, in which the character Sideshow Bob is encircled by rakes and continually hit by them as he steps in different directions,” Allegretti noted.

FRANCE — PARLIAMENT ELECTION PREVIEW: French voters go to the polls Sunday for a first round of parliamentary elections. Even after efforts to broaden his movement into a coalition of three parties, Macron is set to lose his commanding parliament majority.

In 2017, Macron alone commanded 350 of 577 seats. In 2022, it could be slashed to just 195 seats, and his best case scenario is a majority of exactly one seat (impossible to sustain given the multi-party dynamics) according to the latest IFOP poll.

Instead, expect a three-way split in Parliament between Macron-aligned liberal globalists, Éric Zemmour and Marine Le Pen-aligned far-right nationalists and the far-left followers of Jean-Luc Mélenchon.

IRAN — WEST MOVES TO CONDEMN LACK OF COOPERATION: The International Atomic Energy Agency says that “as of May 15, 2022, Iran’s total enriched [uranium] stockpile was 3,809.3 kilograms.” Iran has, since at least 2021, been enriching uranium at 60 percent purity in some cases: around 18 times the 3.67 percent purity level allowed under the 2015 deal.

The takeaway is that the problem has gotten much worse since the U.S. withdrew from the deal in 2018, but there appears to be no viable path for reviving the deal.

Next steps: The U.S., U.K., France and Germany have submitted a resolution to the IAEA board of governments condemning Iran’s nuclear advances and “insufficient cooperation” with the agency. A vote on the resolution “will likely be taken on Wednesday,” Al Jazeera reported.

The Western allies have avoided the move so far, in order to protect stalled talks in Vienna aimed at restoring the 2015 deal.


The Biden administration’s biggest own goal of the year appears to be unfolding in Los Angeles.

The summit is happening without the region’s most popular leader — Mexico’s Andrés Manuel López Obrador, known as AMLO. With the approval of two-thirds of Mexican adults, AMLO is behind only Indian Prime Minister Narendra Modi among all world leaders tracked by Morning Consult.

In the absence of AMLO, who could have signed a joint statement on controlling illegal migration with Biden, the summit big reveal may now be yet another regional “economic framework” — which is code for presenting the illusion of a trade deal.

So far the main announcement has been a 1330-word statement about what it says is an “Action Plan on Health and Resilience in the Americas,” but the statement does not appear to contain any new money or initiatives, and instead talks up a Global Health Worker Initiative announced May 11.

The other controversial element of the summit is a scheduled bilateral between Biden and Brazilian President Jair Bolsonaro.

Protests in front of Los Angeles City Hall are planned for 1 p.m. ET / 10 a.m. PT today, connected to 66 Brazilian NGOs that wrote to Biden about their fears that the meeting will legitimize Bolsonaro’s attacks on Brazil’s environmental assets and democracy. For nearly a year now, ahead of October national elections, the Brazilian president has spread lies asserting that the elections are rigged.

CLIMATE — BONN TALKS SIGNAL FIGHT FOR CASH: Two weeks of climate talks are underway in Bonn with a squabble over how much time should be devoted to debating emissions reductions, instead of arranging the financing needed for poorer countries to make those cuts. The public dispute, which saw China intervene on behalf of vulnerable countries, heralds that money will dominate this year’s COP27 climate process. Egypt, the host of the end-of-year COP27 conference, also wants financing to be the central issue.

Espinosa warning: In a valedictory speech before she steps down next month, U.N. climate chief Patricia Espinosa said the agenda set at COP26 was under threat from multiple global crises. More from Karl Matheisen.

Espinosa told POLITICO she expected a gap between her departure on July 15, and the announcement of her successor. Applications for the post close June 23.

Data delay: The Intergovernmental Panel on Climate Change (IPCC) said it would not publish a synthesis section of a report due in October because of unspecified “operational reasons.” This means the report will not be ready for the COP27 talks in November.

TECH — REGULATING AND CRIMINALIZING THE BORDER BETWEEN THOUGHT AND ACTION: At this week’s RightsCon, a conference focused on human rights and technology hosted by the nonprofit group AccessNow, one of the hot topics was the intersection of “neurotechnology, extended reality (XR), and the metaverse of surveillance,” an out-there idea that already has serious real-world implications, writes POLITICO’s Derek Robertson.

The panelists warned about the need to plan now for the potential dangers of ceding access to one’s thoughts and neural patterns to a third party, either in a virtual world or this one. Risks include companies not just collecting neural data but using it to make users dependent on their technology.

“There is a strong parallel to other products we built in the past that have the ability to radically alter brain chemistry and brain function and behavior, like tobacco, things like alcohol, like opioids,” said privacy activist Albert Cahn. It’s easy to also add the links between youth mental health challenges and the rise of social media.

More on whether we’re already behind the curve on human rights in the Metaverse.

TECH — GLOBAL STRUGGLE OVER AI SURVEILLANCE: This report is the first in a series from the National Endowment for Democracy looking at how emerging technologies are affecting democracies and how societies can respond. The lead essay is by the Carnegie Endowment’s Steven Feldstein analyzing the global spread of AI surveillance. The top conclusions include that smart city technologies, predictive policing software, and social media monitoring tools are expanding government surveillance powers in ways that create new and serious risks to privacy and the rule of law.

While the most dystopian AI surveillance applications are found in closed autocracies, in particular China, risks extend across regime types.

SECURITY — THE RISE OF DUAL-USE FACILITIES: Call it plausible deniability with Chinese characteristics. We’ve seen the dangers of dual-use technology, but what about dual-use ports? China is funding a redevelopment of the Ream Naval Base and port in Cambodia, which Beijing and the Cambodians insist is a purely commercial facility. But the Australian government has joined the U.S. in demanding greater transparency about the port project, which could be converted quickly into a military facility, per satellite images of the work.

Reality check: The U.S. operates hundreds of military bases in around 85 overseas territories, from giant outposts to small radar facilities. Britain, France, Russia and India combined run around 50 bases. China has just three official facilities, in Djibouti, Myanmar and Tajikistan.

KLEPTOWATCH — GUPTA BROTHERS ARRESTED IN UAW: Rajesh and Atul Gupta, the subject of Interpol arrest notices, have been arrested in United Arab Emirates — where they have been exiled since 2018 — in cooperation with South African authorities who accuse the pair of obtaining lucrative contracts from the government by using misusing their relationship with former President Jacob Zuma.

The Guptas and their associates are also sanctioned by the U.S. Treasury Department. “The arrest of the Guptas is the second high-profile arrest related to alleged financial corruption within a week by the UAE, after the apprehension of 52-year-old hedge fund trader Sanjay Shah on Friday, who is wanted on fraud and money laundering charges in Denmark. Shah maintains his innocence,” CNN reported.

RISING: Keith Krach, the former CEO of Docusign, who served as a top economic official in the Trump-era State Department, is becoming a regular guest in Biden circles, with trade and business implications. More in West Wing Playbook.

APPOINTMENTS:Chris Sharrock is Microsoft’s new vice president for U.N. affairs and international organizations. The former U.K. ambassador to the OECD replaces John Frank at what amounts to Microsoft’s corporate embassy to the U.N. in New York.

Bono’s ONE Campaign has appointed Suzanne Granville as its executive director for North America. She has been with the organization since 2012.

LA GUARDIA JOINS THE 21ST CENTURY: Eight years after then Vice President Joe Biden said New York’s La Guardia airport reminded him of a “third world country,” Delta’s $4 billion revamp of its Terminal C is finally fully open, part of an $8 billion overhaul of the airport.

READ OF THE MONTH: The Institution. Rebecca Traister is magisterial in articulating how, over the course of more than five decades, Dianne Feinstein — now a senator but many other things before — came to represent most of what is great and wrong about American democracy.

CHALLENGE OF THE MONTH: The Democracy of the Future.Tomas Pueyo asks: What do these have in common: Elon’s Twitter, Venetian Bonds, General von Moltke’s strategy, AI, stock markets, prediction markets, and the Internet?

SHORT READ: The pitfalls of governments fighting misinformation. Michael Bröning argues against the global trend of state intervention. “Part of the problem is a simple truth — the truth is never simple.”

LONG READ: “American Rasputin,”Jennifer Senior profiles Steve Bannon. “A third-rate banker … He’s not an emperor and he has no clothes,” says John Podhoretz. “Your subject is a very sick megalomaniac,” says Anthony Scaramucci. “He was certainly a cancer in the Administration,” says yet another former White House colleague.

BOOK: Saving Us. Climate scientist Katherine Hayhoe flips the idea of “saving the planet” on its head — and argues that climate action is really about saving people.

Thanks to editor John Yearwood, Derek Robertson and producer Hannah Farrow.

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