Tuesday, 11 May 2021

 

Britain’s Labour Party just collapsed in blue-collar England. Democrats should consider themselves warned.

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Britain's Labour Party leader Keir Starmer is seen in the window of his offices in London on May 7. (Toby Melville/Reuters)
May 11, 2021 at 3:56 a.m. GMT+8

Political trends in the United States and Britain have mirrored one another for decades, so the Labour Party’s stunning collapse across blue-collar England in last Thursday’s local elections is a clear warning sign for President Biden and Democrats. A full analysis gives Democrats signs of hope but also shows how difficult it will be to build a durable Democratic coalition.

The headline results were a disaster for Labour leader Keir Starmer. The party lost the parliamentary constituency of Hartlepool by a whopping 23 points. The seat resides in a working-class area that Britain’s Conservative Party had never won previously and that had once been occupied by Peter Mandelson, the Labour politician who served as former prime minister Tony Blair’s spin doctor. Labour also lost 327 local councillors in England, mainly in blue-collar areas that were once Labour’s heartland. It was the British equivalent of the massive losses that Democrats suffered in blue-collar areas in the Midwest and Northeast during the Trump era.

Other results were more positive. Labour gained support in some wealthier areas of the country that opposed Brexit, an analogue to Democratic gains in wealthier U.S. suburbs. Most telling here was Labour’s defeat of incumbent Conservative mayors in Cambridgeshire and Peterborough and West England, two regions that had voted to remain in the European Union or were divided on the question in the 2016 referendum. Combined with Tory losses to minor parties in other wealthy areas that voted “Remain,” these results suggest that Democrats may hold onto their suburban gains even after Donald Trump’s departure from the White House.

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Democrats should pay particular attention to the results from Scotland and Wales. In Scotland, the left-wing Scottish National Party (SNP) won another resounding victory in that nation’s Parliament while Labour equalled its best-ever results in the Welsh parliamentary elections. Crucially for Labour, the Welsh party largely held on to the blue-collar, Brexit-voting regions in the north that had deserted Labour in the 2019 general election. Democrats who want to regain working-class support should look to these regions for best strategies.

Nationalism and culture are the keys to understanding why Scotland and Wales diverged so sharply from England. Political scientist Matthew Goodwin is Europe’s premier scholar of blue-collar voting shifts and what he calls “national populism.” He notes that the sweet spot in politics today is to be center-left on economics but center-right on culture. Being center-right in “culture” here doesn’t mean taking the religious right’s views on abortion and same-sex marriage; it means being firm on immigration and backing the idea that one’s national history is basically good even while acknowledging missteps or injustices.

Scotland’s SNP and Welsh Labour fit this model perfectly. The SNP is social democratic in its economics and loudly backs Scottish independence. Welsh Labour also expresses support for the distinct Welsh nationality even as it rejects independence. By contrast, Paul Embery, a Labourite and author of the recent book “Despised: Why the Modern Left Loathes the Working Class,” told me that “Labour in England is hostile to any expression of English nationalism.” This bleeds over, according to Embery, into indulging the cultural proclivities of the metropolitan educated classes — which he lists as “LGBT rights, climate change, gender identity,” among others — at the expense of the cultural values of the working class.

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This is the problem Biden and Democrats refuse to address. Biden’s economic agenda has elements with real working-class appeal, such as child benefit payments, higher minimum wages and paid family leave. His “Buy American” plan also reinforces working-class patriotism. If these were all that were on offer, he’d look pretty good.

But it’s not all that’s on offer. Biden backs the woke left’s cultural priorities too, and working-class voters don’t share those enthusiasms. It’s hard to appeal to wealthy White voters on culture while also appealing to working-class voters on economics. Gains with one demographic are balanced out or exceeded by losses in others. That’s why Democrats were able to narrowly win Arizona and Georgia but have lost any hope of winning once-marginal Ohio and Iowa.

Biden’s immigration stance is especially problematic. Mass, low-skilled immigration drives working-class voters to the right virtually everywhere in the world, and the 2020 vote signaled that it also drives Latino working-class voters to the GOP. Biden did especially poorly compared with past Democrats in heavily Hispanic regions on the Mexican border. The huge pro-Trump shift in Texas’s Rio Grande Valley was not isolated; Biden’s margin in two other heavily Latino border counties — Arizona’s Santa Cruz County and California’s Imperial County — were 12 and 17 percentage points lower than Hillary Clinton’s. Hispanic blue-collar workers apparently like tight labor markets as much as Black and White workers.

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Biden and Democrats desperately want to use the Trump era to regain national political dominance. Britain’s local elections show just how hard that’s going to be.

 

India's Covid crisis: The newsroom counting the uncounted deaths

On 1 April, the wife and daughter of an editor of a leading newspaper in India's western state of Gujarat went to a state-run hospital to get the daughter a Covid-19 test.

Waiting in the queue, they noticed two body bags on gurneys. Workers at the hospital in the capital, Gandhinagar, said the patients had died of Covid-19.

The mother and daughter returned home and told Rajesh Pathak, who edits a local edition of Sandesh, what they that had seen.

Mr Pathak called his reporters that evening and decided to investigate further. "After all, the government press statements were showing no Covid-19 deaths for Gandhinagar yet," he said. Only nine deaths from Covid-19 were officially recorded in Gujarat that day.

The next day a team of reporters began calling up hospitals treating Covid-19 patients in seven cities - Ahmedabad, Surat, Rajkot, Vadodara, Gandhinagar, Jamnagar and Bhavnagar - and kept a tab on deaths. Since then, Sandesh, a 98-year-old Gujarati language newspaper, has published a daily count of the dead, which is usually several times more than the official figure. "We have our sources in hospitals, and the government has not denied any of our reports. But we still needed first-hand confirmation," Mr Pathak says.

Sandesh headline
image caption Sandesh reporters checked 21 cremation grounds and found more than 200 Covid-19 funerals in one night

So the newspaper decided to do some old-fashioned shoe-leather journalism. On the evening of 11 April, two reporters and a photographer staked out the mortuary of the 1,200-bed state-run Covid-19 hospital in Ahmedabad. Over 17 hours, they counted 69 body bags coming out of a single exit before they were loaded into waiting ambulances. Next day, Gujarat officially counted 55 deaths, including 20 from Ahmedabad.

On the night of 16 April, the journalists drove 150km (93 miles) around Ahmedabad and visited 21 cremation grounds. There they counted body bags and pyres, examined registers, spoke to cremation workers, looked at "slips" which assigned the cause of death, and took photographs and recorded videos. They found that most of the deaths were attributed to "illness", although the bodies were being handled under rigorous protocols. At the end of the night the team had counted more than 200 bodies. But the next day, Ahmedabad counted only 25 deaths.

All of April, Sandesh's intrepid reporters have diligently counted the dead in seven cities. On 21 April, they counted 753 deaths, the highest single-day tally since the deadly second wave washed over the western state. On a number of other days, they counted in excess of 500 deaths. On 5 May, the paper counted 83 deaths in Vadodara. The official figure was 13.

Ahmedabad hospital
image caption Photographer Hitesh Rathod took this picture of ambulances queued up outside the government hospital

The Gujarat government denies under-counting and says it is following federal protocols.

But reportage by other newspapers has stood up the alleged under-counting. The English language Hindu newspaper, for example, reported it had information that 689 bodies were cremated or buried in the seven cities following Covid-19 protocols on 16 April, when the official death toll for the entire state was 94. Some experts reckoned that last month alone Gujarat might have under-counted Covid-19 deaths by a staggering factor of 10.

With the pandemic forcing people to stay away from the rituals of grief, newspapers were overflowing with obituaries.

And some of the obituaries appeared to point to the under-counting that was taking place:

Obit
IMAGE COPYRIGHT TWITTER
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The number of funerals at a cremation ground in Bharuch district on Saturday also did not tally with the official death statistic, according to this report in Gujarat Samachar, another leading local newspaper:

Sandesh
IMAGE COPYRIGHT TWITTER
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Gujarat has so far officially registered more than 680,000 Covid-19 infections and over 8,500 deaths. Under-counting of deaths have been reported from several Indian cities badly hit by the pandemic. But the scale of Gujarat's under-counting appears to be massive, and has even provoked the state's high court to admonish the state government, run by Prime Minister Narendra Modi's ruling BJP. "The state had nothing to gain by hiding the real picture and hence suppression and concealment of accurate data would generate more serious problems including fear, loss of trust, panic among the public at large," the judges said in April.

Many believe that most Covid-19 deaths are being attributed to the patient's underlying conditions or co-morbidities. A senior bureaucrat, who preferred to remain unnamed, told me only patients testing positive for the virus and dying of "viral pneumonia" were being counted as Covid-19 deaths. Chief minister Vijay Rupani says "every death is being investigated and recorded by a death audit committee".

To be sure, counting bodies at mortuaries or cremation grounds and tallying them with official figures for the day can be imprecise as official statistics come with a time lag, according to Prabhat Jha of the University of Toronto, who led India's ambitious Million Death Study. Countries such as UK have reduced the official death toll from coronavirus after a review of how deaths are counted. Covid-19 deaths have been under-reported by as much as 30 to 40% worldwide, studies have shown.

A patient with breathing problems lies inside a car while waiting to enter a COVID-19 hospital for treatment, amidst the spread of the coronavirus disease (COVID-19), in Ahmedabad, India, April 22,
image caption Gujarat has officially reported more than 600,000 cases

"Reporting and recording systems are swamped during a pandemic, so officials often take time to update [numbers]. But update they must, and record all the deaths. Counting body bags at hospitals and cremation grounds is a good way to put pressure on authorities to come clean," Dr Jha says.

For the journalists, it has been a harrowing experience.

Hitesh Rathod, a photographer at Sandesh, recounted the harrowing experience of counting the dead. "People were getting admitted and coming out as body bags," he said. He found six-hour-long queues of bodies at crematoria, which he says reminded him of the "long queues of people outside banks after demonetisation," Mr Modi's controversial 2016 ban on high denomination currency.

"Five years later, I found similar queues outside hospitals, mortuaries and cremation grounds. This time there were queues of the people struggling to stay alive and queues of the dead," he said.

Ronak Shah, one of Sandesh's reporters, says he was shaken up by the wails of three young children piercing the still night when the hospital's PA system announced the death of their father. "The children were saying they had come to the hospital to pick up their father and go home. They returned with his corpse seven hours later," Mr Shah says.

Dipak Mashla, who led the team to the cremation grounds, says he returned home "scared and shaken". "I saw parents come with body bags of their dead children, pay money to the funeral worker and tell them, 'Please take my child and burn him'. They were too scared to even touch the corpse."

Imtiyaz Ujjainwala, another reporter on the team, believes the scale of under-counting has been considerably more, considering he and his colleagues only counted bodies from one hospital. There were more than 171 private hospitals treating Covid-19 patients in Ahmedabad, he said. "And nobody is counting there."

 

BE SURE NOT TO BUY FROM THESE JAPANESE PIGS!

Japan’s Muji Appeals to China by Advertising Use of Xinjiang Cotton

Clothing and homewares brand has publicly sided with Beijing in a way that many Western and other Japanese companies won’t

A Tokyo location of Muji. The retailer expects to have more than 300 stores in China by August.  PHOTO: AKIO KON/BLOOMBERG NEWS
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TOKYO—While Swedish clothing retailer H&M has been virtually wiped off e-commerce sites in China, rival Muji is winning applause there.

The Japanese chain has publicly sided with the Chinese government in a way that many Western and Japanese companies won’t. Muji says it uses cotton from the Xinjiang region—where mostly Muslim Uyghurs are allegedly held in forced-labor camps—and doesn’t see a problem with advertising that fact. 

Muji, a Tokyo-based clothing and homewares brand owned by Ryohin Keikaku Co. 7453 -2.53% , gets about half its revenue outside its home market from China. A fraction comes from the U.S.

Muji’s public statements represent one approach to the dilemma of doing business in China for apparel companies. Companies sometimes have to choose whether to please China’s government—and the many consumers in the country who follow the official lead—or heed the warnings of human-rights activists. Those activists say it is impossible for outsiders to ascertain whether the cotton used in T-shirts and other garments is being harvested humanely in Xinjiang.

Last month, Muji’s parent said it conducted an on-site audit at more than 12,000 acres of farms and other facilities in the Xinjiang region in 2020 and found no material human-rights violations. Earlier, the company had said the audit didn’t identify significant issues other than some that could be fixed.

The April statement said Muji’s use of cotton from organic farms was helping to improve the lives of people working there.

A demonstration outside Muji headquarters in Tokyo early last month. PHOTO: NORIYOSHI SHIBATA

On its online store in China, Muji includes the words “Xinjiang cotton” next to several items. The move was well-received by Chinese social-network users, some of whom said on the Twitter-like Weibo platform that they recognized the company’s eagerness to stay on the country’s good side.

Muji executives have said they see China as a growth driver after the company’s U.S. unit was forced last year to seek protection under U.S. bankruptcy laws. Muji expects to have more than 300 stores in China by August. 

Western retail companies such as Nike Inc. and H&M, owned by Sweden’s Hennes & Mauritz AB, have taken a different tack. Since last year, they have said they aren’t using Xinjiang cotton, and in recent months they have come under fire in China with social-media users calling for boycotts.

Activists say it is hard to be sure that inspections such as those cited by Muji are uncovering the real situation in Xinjiang. Given the allegations of forced labor and Chinese assaults on Uyghur culture, they say, apparel companies shouldn’t buy from the region unless they can be certain that their suppliers have no connection to human-rights abuses. 

A small group of activists demonstrated in early April in front of Muji’s headquarters in Tokyo, calling on the company to stop buying cotton from the Xinjiang region. 

“I want the company to prioritize human rights before Chinese money,” said Uryu Hirano, 27 years old. She called on Japanese consumers to boycott Muji, saying it was the best way to get the attention of the company’s executives. A Muji representative declined to comment.

Muji executives have shown caution about saying anything that might offend either side. On the day Muji parent Ryohin Keikaku confirmed the use of Xinjiang cotton, President Satoru Matsuzaki held an earnings news conference and repeatedly declined to comment on any aspect of the Xinjiang issue.

China, where Muji has stores including this one in Shanghai, is the nearest big market for Japanese companies. PHOTO: QILAI SHEN/BLOOMBERG NEWS

Tadashi Yanai, chief executive of Uniqlo clothing-store operator Fast Retailing Co. , went one step further at an April 8 news conference, declining to confirm or deny whether Uniqlo uses Xinjiang cotton. He called the question political and said the company needed to be neutral on political issues.

Others have flipped back and forth. China business is a particularly tough conundrum for Japanese companies. Their government is allied with the U.S., but China is the nearest big market and a source of growth when the Japanese population is shrinking. 

A recent message on Chinese social media from Kobe-based sportswear maker Asics Corp. said the company was continuing to use Xinjiang cotton, but the message was quickly removed. A spokesman at Asics headquarters said the company’s China branch posted the message without authorization and it didn’t reflect the company’s position.  He declined to say whether Asics products use Xinjiang cotton. 

Kota Hirayama, an economist at SMBC Nikko Securities, said that for many Japanese companies, cutting ties with China not only would deprive them of a big consumer market but also disrupt their global supply chain.

“In addition to losing sales there, Japanese companies could suffer from damage to the value of their brand due to lower quality of their products,” he said, because Chinese companies are skilled in clothing production. At the same time, he said, Japanese companies that side with China could suffer reputational damage and lose business in the U.S. and Europe. 

Monday, 10 May 2021

 US business calls on China to end domestic favouritism


Michael SmithChina correspondent

May 11, 2021 – 3.57pm

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US companies in China are are being denied market access and investment approval in favour of domestic firms, and fear more consumer boycotts as tension between the two countries continues to escalate.

The American Chamber of Commerce (AmCham) in China, which represents 900 companies, on Tuesday called on the world’s second -biggest economy to commit to equal treatment for foreign companies and drop implicit guidelines to replace imported products with domestic alternatives.


H&M items disappeared from major Chinese e-commerce platforms last months. US firms want equal treatment in China. Getty Images

Its latest assessment on the state of play for American and other foreign firms in China also highlighted jitters about a repeat of last month’s consumer backlash against global fashion brand H&M.

In a press briefing, Chamber executives were careful to highlight the importance of China’s huge economy and commended its efforts to contain the coronavirus. However, it also acknowledged rising politic risks for foreign companies operating in China.

“We feel that local officials are reacting to the levels of tension in the relationship and taking the safer path to offer preference to the domestic industry,” said AmCham China chairman Greg Gilligan, pointing to areas such as market access and the speed of investment approvals.

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The latest AmCham report is likely to resonate with Australian companies in China, which have been at the frontline of the country’s pushback against Western criticism. Australian companies are even more vulnerable because their country does not have the economic or military clout of the US.

A consumer boycott against H&M, Nike, Adidas and Puma last month has also alarmed foreign companies operating in China. The brands were banned on some ecommerce sites because they had supported initiatives banning cotton sourced from Xinjiang province, where ethnic Ugihur Muslims are reportedly forced to work in factories.

Australian products have not yet been targeted by the same sort of consumer campaigns, although borders are currently closed to tourists and students so the future impact on those industries is not yet known. China has slapped restrictions or tariffs on billions of dollars worth of Australian exports.


H&M goods have disappeared from major Chinese e-commerce platforms last months. US firms want equal treatment in China. Getty Images

The US chamber said on Tuesday that its members ranked US-China bilateral tensions, which had accelerated during the pandemic, as the top challenge to doing business there. Beijing has long been criticised for supporting unprofitable state-owned firms (SOEs).

China enacted a new foreign investment law in January 2020 which promised equal treatment for foreign firms. In a white paper released on Tuesday, the chamber said its implementation had been uneven in practice.

“Many long-standing economic and commercial issues that plague the foreign business community remain unaddressed, including China’s long-standing support for its SOEs, preferential treatment for domestically-invested enterprises, preferences for domestic technologies and products over foreign technologies and products in the procurement process, strict cybersecurity and data localisation requirements, and cyber intrusions,” the AmCham said.

The white paper called on China to drop “implicit” guidance to replace foreign products with locally-made alternatives. “The government should abandon the use of implicit, unpublished, or internal guidance to replace US or other foreign-made products/services with domestically made equivalent,” it said.

Australian executives operating in China also privately said conditions were becoming more challenging, but that the opportunities for growth and profits in the remained too promising to pack up and leave. Foreign companies were also concerned about new tax provisions which meant expatriate workers in China will pay more tax.

Two-way China-US trade in goods totalled US$560 billion ($715 billion) in 2020.

Chamber executives said they were confident that China wanted to resume talks about a phase-two trade deal with the US, although it was unclear if tariffs imposed by former president Donald Trump would be lifted. US Trade Representative Katherine Tai said last week she hoped to engage with China in the near term.

 

 

The Fed Is Playing With Fire

Clinging to an emergency policy after the emergency has passed, Chairman Powell courts asset bubbles.

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Federal Reserve Chairman Jerome Powell speaks to the Senate Banking Committee, Dec. 1, 2020.

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With Covid uncertainty receding fast, and several quarters deep into the strongest recovery from any postwar recession, the Federal Reserve’s guidance continues to be the most accommodative on record, by a mile. Keeping emergency settings after the emergency has passed carries bigger risks for the Fed than missing its inflation target by a few decimal points. It’s time for a change.

The American economy is back to prerecession levels of gross domestic product and the unemployment rate has recovered 70% of the initial pandemic hit in only six months, four times as fast as in a typical recession. Normally at this stage of a recovery, the Fed would be planning its first rate hike. This time the Fed is telling markets that the first hike will happen in 32 months, 2½ years later than normal. In addition, the Fed continues to buy $40 billion a month in mortgages even as housing is clearly running out of supply. And the central bank still isn’t even thinking about ending $120 billion a month of bond purchases. 

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Not only is the recovery happening at record speed, excesses of fiscal policy are already visible. Consumers are spending like never before, construction is booming, and labor shortages are ubiquitous, thanks to direct government transfers. Two-thirds of all relief checks were sent after the vaccines were proved effective and the recovery was accelerating. Opportunistic politicians didn’t let the pandemic go to waste. Especially after the Trump years, Congress has decided to satisfy its long list of unmet desires. 

Isn’t the Fed’s independence supposed to act as a counterbalance to these political whims? 

The emergency conditions are behind us. Inflation is already at historical averages. Serious economists soundly rejected price controls 40 years ago. Yet the Fed regularly distorts the most important price of all—long-term interest rates. This behavior is risky, for both the economy at large and the Fed itself. 

Future fiscal burdens will put the kind of political pressure on the central bank that hasn’t been seen in decades. The federal government has added 30% of GDP in extra fiscal deficits in only two years, right as the baby-boomer retirement wave is beginning to accelerate. The Congressional Budget Office projects that in 20 years almost 30% of all yearly fiscal revenues will have to be used solely to pay back interests on government debt, up from a current level of 8%. More taxes simply won’t be enough to bridge the gap, so pressures to monetize the deficit will inevitably rise over the years. The Fed should be adapting policy today to minimize these risks. 

Change in unemployment by months after the start of the recessionSource: Haver Analytics, Goldman Sachs
%1980198119902001200720202020 Forecast061218243036424854606672-2024681012

The risks are no longer hypothetical. For decades Treasurys have been the preferred asset for foreigners looking to hedge global portfolios. It was therefore shocking and unprecedented that in the midst of last year’s stock-market meltdown and while the Cares Act was being debated, foreigners aggressively sold Treasurys. This was dismissed by the Fed as a problem in the plumbing of financial markets. Even after trillions spent to prop up the bond market, foreigners have continued to be net sellers. The Fed chooses to interpret this troubling sign as the result of technicalities rather than doubts about the soundness of current and past policies.

America’s deep divisions also make the central bank’s independence crucial. Fighting inequality and climate change are very far from the Fed’s central mission. There’s a reason central bankers are supposed to be unpopular. Inflation is often the result of a fragmented society that feels unrepresented by weak political leadership. Eventually, the choice between fiscal discipline—lower taxes or higher spending—and forcing the central bank’s hand becomes an easy one for politicians to make.

With these risks in mind, and with unambiguous evidence of a strong recovery, the Fed should be doing more than just reanchoring inflation expectations to a slightly higher level. Fed policy has enabled financial-market excesses. Today’s high stock-market valuations, the crypto craze, and the frenzy over special-purpose acquisition companies, or SPACs, are just a few examples of the response to the Fed’s aggressive policies. The central bank should balance rather than fuel asset prices. The pernicious deflationary episodes of the past century started not because inflation was too close to zero but because of the popping of asset bubbles. 

With its narrow focus on inflation expectations, the Fed seems to be fighting the last battle. Just because the Fed hasn’t faced big trade-offs in recent decades doesn’t mean trade-offs aren’t coming or that they no longer exist. Chairman Jerome Powell needs to recognize the likelihood of future political pressures on the Fed and stop enabling fiscal and market excesses. The long-term risks from asset bubbles and fiscal dominance dwarf the short-term risk of putting the brakes on a booming economy in 2022.

Mr. Broda is a partner at Duquesne Family Office LLC, where Mr. Druckenmiller is chairman and CEO.