India Emerges the Biggest Winner of the Ukraine War and Growing US-China Tensions

"It may be dangerous to be America's enemy, but to be America's friend is fatal" Henry Kissinger

India is emerging as the biggest beneficiary of the Ukraine War and the US efforts to check China's rise. Indian businesses are busting US sanctions to take advantage of the vacuum left in Russia by the exit of western businesses since the start of the Ukraine War.  At the same time, the US is rewarding India by promoting it as an alternative to China in the global supply chain.  Meanwhile, Beijing is warning New Delhi that India "will be the biggest victim" of America's "proxy war" against China. 

L to R: Modi, Putin, Xi and Biden

Soaring Russia-India Trade: 

Since the start of Russia's invasion of Ukraine, India has ramped up its imports of Russian oil by a whopping 33 times, according to the Christian Science Monitor.  Dr. Nivedita Kapoor, an Indian expert at the Higher School of Economics in Moscow, told the Monitor: “Right now the focus is on pharmaceuticals, electronics, machinery, chemical products, medical instruments, and agricultural products,” says Dr. Kapoor. “We have already been exporting these goods to Russia, and there is potential for major increases. ... It may be harder to expand the list due to the threat of secondary sanctions. In this environment, the Indian private sector looks at Russia as a risky market. But the immediate potential is very big.”   

“The best solution would be for Russia to make an early end to this war,” Kapoor said. “We can envisage a situation where Western companies have already exited the Russian market, and burned their bridges, while the Indian private sector no longer regards business with Russia as a risky proposition, carrying the threat of secondary sanctions. All that would go away for us, but we need to see an end to this war”, she added. 

India in Global Supply Chain: 

With growing Washington-Beijing tensions,  the United States is trying to decouple its economy from China's. The Wall Street Journal has reported that the Biden administration is turning to India for help as the U.S. works to shift critical technology supply chains away from China and other countries that it says use that technology to destabilize global security.

The US Commerce Department is actively promoting India Inc to become an alternative to China in the West's global supply chain.  US Commerce Secretary Gina Raimondo recently told Jim Cramer on CNBC’s “Mad Money” that she will visit India in March with a handful of U.S. CEOs to discuss an alliance between the two nations on manufacturing semiconductor chips. “It’s a large population. (A) lot of workers, skilled workers, English speakers, a democratic country, rule of law,” she said.

China-India Border Conflict: 

India's unsettled land border with China will most likely continue to be a source of growing tension that could easily escalate into a broader, more intense war, as New Delhi is seen by Beijing as aligning itself with Washington

In a recent Op Ed in Global Times, considered a mouthpiece of the Beijing government, Professor Guo Bingyun  has warned New Delhi that India "will be the biggest victim" of the US proxy war against China. Below is a quote from it: 

"Inducing some countries to become US' proxies has been Washington's tactic to maintain its world hegemony since the end of WWII. It does not care about the gains and losses of these proxies. The Russia-Ukraine conflict is a proxy war instigated by the US. The US ignores Ukraine's ultimate fate, but by doing so, the US can realize the expansion of NATO, further control the EU, erode the strategic advantages of Western European countries in climate politics and safeguard the interests of US energy groups. It is killing four birds with one stone......If another armed conflict between China and India over the border issue breaks out, the US and its allies will be the biggest beneficiaries, while India will be the biggest victim. Since the Cold War, proxies have always been the biggest victims in the end". 

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Comment by Riaz Haq on June 29, 2023 at 8:55pm

India in a world of asymmetrical multipolarity

Author: Jagannath Panda, Institute for Security and Development Policy

https://www.eastasiaforum.org/2023/03/20/india-in-a-world-of-asymme...

"India’s multipolar focus is its second pillar of diplomacy. India envisages itself as a major pole in global politics, after the United States, Russia and China. For a long time, India has been dubbed a state with enormous potential — but has remained a middle power, unable to tap into this promise"

---------------

Russia and China proclaimed the emergence of a ‘new multipolar order’ in a February 2022 joint statement at the Brazil, Russia, India, China and South Africa (BRICS) and Shanghai Cooperation Organisation (SCO) summits. Major and middle powers are also considering their own distinct outlooks in a multipolar world. In 2022, German Chancellor Olaf Scholz noted that Russian President Vladimir Putin’s invasion of Ukraine marks a turning point in global politics.

Among all the powers, India seems the most committed to a multipolar world, and has portrayed itself as a strong leader of the developing world. More importantly, India strives to shape a multipolar world that rejects great power politics and reflects today’s diversity and hinges on inclusive cooperation.

The evolution of Indian foreign policy is often seen through the prism of non-alignment to multi-alignment to pointed alignment, based on realpolitik. This is evidenced by India’s recent handling of the Russia–Ukraine war and the West versus Russia conundrum. New Delhi has adroitly projected itself as a neutral centrepiece within the China—West divide.

India’s so-far successful hedging between Russia and the United States is reminiscent of the US–China dilemma faced by most Asian states. But silent and invisible Russia–China competition presents a distinct challenge to India — Russia is India’s historical partner while China has been a constant adversary.

China’s contentious rise has propelled India’s inclusion into US-led Indo-Pacific institutional architecture. This takes shape primarily through forums such as the Quadrilateral Security Dialogue (Quad), Quad Plus and Indo-Pacific Economic Framework for Prosperity.

Fears and antagonism consolidated in 2022. China’s ‘no limits’ partnership between Moscow and Beijing — as opposed to India’s ‘principled’ Russian stance based on pure national interests — is one. Border clashes have also accelerated mistrust.

China is India’s foremost security challenge and is gradually being recognised as a permanent threat. China–India rivalry is not limited to land border disputes. It also encompasses geopolitical issues within the maritime domain. India is pursuing across-the-spectrum bilateral engagements with states that have significant stakes in Indo-Pacific stability, and is also working with trilateral, minilateral and multilateral forums.

Preserving strategic autonomy is an essential objective for New Delhi. Foreign Secretary Harsh Shringla has interpreted strategic autonomy as self-reliant thinking drawn from Indian philosophical practices and adopted this ‘Indian nature of strategic thinking’ as the first pillar of Indian diplomacy.

India’s multipolar focus is its second pillar of diplomacy. India envisages itself as a major pole in global politics, after the United States, Russia and China. For a long time, India has been dubbed a state with enormous potential — but has remained a middle power, unable to tap into this promise.

Still, India will be able to move beyond the middle power construct and close this gap with major powers. India has been gaining confidence by unapologetically forging relations to maximise its position without alienating partners and rivals alike.

Asian unity has always been central to India’s future worldview. India is working towards bringing Indo-Pacific middle powers together to achieve common developmental goals.

Comment by Riaz Haq on July 4, 2023 at 10:01am

Modi uses speech to Russia-China-led group to swipe at Pakistan, avoids mentioning Ukraine

https://www.independent.co.uk/news/world/americas/us-politics/vladi...

India’s prime minister on Tuesday took a veiled swipe at rival neighbor Pakistan and avoided mentioning the war in Ukraine while addressing a group of Asian countries led by China and Russia

India’s prime minister on Tuesday took a veiled swipe at rival neighbor Pakistan and avoided mentioning the war in Ukraine while addressing a group of Asian countries led by China and Russia.

In his opening speech to the Shanghai Cooperation Organization, Prime Minister Narendra Modi said the group should not hesitate to criticize countries that are "using terrorism as an instrument of its state policy."

"Terrorism poses a threat to regional peace and we need to take up a joint fight,” Modi said without naming Pakistan. India regularly accuses Pakistan of training and arming insurgent groups, a charge Islamabad denies.

Russian President Vladimir Putin, Chinese President Xi Jinping and Pakistan Prime Minister Shebaz Sharif are scheduled to address the day-long virtual summit.

Modi also warned of global challenges to food, fuel and fertilizer supplies. Trade in all three has been disrupted by Russia's 14-month-long war in Ukraine, but SCO members have largely avoided direct mention of the war.

Putin is participating in his first multilateral summit since an armed rebellion rattled Russia, at one of the few international grouping in which he enjoys warm relations with most members.

For Putin, the summit presents an opportunity to show he is in control after a short-lived insurrection by Wagner mercenary chief Yevgeny Prigozhin.

The Shanghai Cooperation Organization is a security grouping founded by Russia and China to counter Western alliances from East Asia to the Indian Ocean. The group includes the four Central Asian nations of Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan, all former Soviet republics in which Russian influence runs deep. Pakistan became a member in 2017, and Iran, which is set to join on Tuesday. Belarus is also in line for membership.

The United Nations Secretary-General Antonio Guterres in a message to the summit that it was taking place amid growing global challenges and risks. "But at a time when the world needs to work together, divisions are growing, and geopolitical tensions are rising.”

"These differences have been aggravated by several factors: diverging approaches to global crises; contrasting views on nontraditional security threats; and, of course, the consequences of COVID-19 and Russia’s invasion of Ukraine,” he said.


This year’s event is hosted by India, which became a member in 2017. It’s the latest venue for Prime Minister Narendra Modi to showcase the country’s growing global clout.

Days after his return from a high-profile visit to the United States, India’s Prime Minister Narendra Modi on Friday had a telephone conversation with Putin about the recent developments in Russia, India’s External Affairs Ministry said.

Modi reiterated calls for dialogue and diplomacy between Russia and Ukraine, ministry spokesman Arindam Bagchi said.

India has avoided condemning Russia for its war on Ukraine and abstained from voting on U.N. resolutions against Russia.

Comment by Riaz Haq on July 6, 2023 at 7:43am

The West needs to get real about India | The Strategist

https://www.aspistrategist.org.au/the-west-needs-to-get-real-about-...

Excellent piece by John McCarthy, a former Australian High Commissioner to #India. Unfortunately, western leaders, academics and analysts, including in #Australia, simply don’t want to hear that India is a wobbly democracy and an uncertain potential military ally down the road.

----------

Lately, the West—particularly the United States—has been wooing India’s Prime Minister Narendra Modi with the bling of a monied Indian wedding.

Last month, Modi was US President Joe Biden’s guest for a full state visit—of which there are usually only a couple year. Modi also addressed Congress for a second time. In so doing, he was among a chosen few—of whom Winston Churchill and Nelson Mandela have been the most notable.

Earlier, when in New Delhi in April, Biden’s commerce secretary, Gina Raimondo, included in a paean to Modi words such as ‘unbelievable’, ‘indescribable’ and ‘visionary’.

Kurt Campbell—the US National Security Council’s most senior figure on Asia—reportedly routinely describes the US–India relationship, without caveats, as America’s most important. This will be news to Japan, the UK and others.

Modi was a guest at the G7 meeting in Hiroshima in May. He then visited Australia. He has been invited by President Emmanuel Macron to be France’s guest for Bastille Day. The leaders of Italy, Germany and Australia—among others—have all visited India this year.

Since India became independent, Western dealings with India have had their fits and starts. However, the courtship gathered pace with the so-called nuclear deal concluded between the US and India in 2008, under which the Americans agreed to assist India’s civil nuclear development and to sell the deal internationally—despite the impediment that India was not a signatory to the Nuclear Non-Proliferation Treaty.

The deal was a turning point in the US–India security relationship and boosted India’s growing status as a major power. A stimulus for the deal was concern in both countries about the rise of China.

In the past few years, India’s attraction for the West has increased because of its size and wealth. It is now the most populous nation globally, and in purchasing power parity terms has the world’s third highest GDP. Its attraction has grown as concerns about China have multiplied.

That said, there are three reasons why the West might want to reflect on the ardour of its courtship of India.

The first is that India’s economic promise—particularly as an eventual rival to China—is overblown.

Doubts about the extent of India’s promise have been around for a couple of decades—in fact, ever since some commentators started suggesting that India would one day outstrip China.

These doubts were cogently expressed by Harvard academic Graham Allison in a recent essay in Foreign Policy. Allison, inter alia, suggested that we need to reflect on several ‘inconvenient truths’:

Comment by Riaz Haq on July 6, 2023 at 7:44am

The West needs to get real about India | The Strategist

https://www.aspistrategist.org.au/the-west-needs-to-get-real-about-...

These doubts were cogently expressed by Harvard academic Graham Allison in a recent essay in Foreign Policy. Allison, inter alia, suggested that we need to reflect on several ‘inconvenient truths’:

We have been wrong in the past about the pace of the rise of India—namely in the early 1990s and the middle of the first decade of this century.
India’s economy is much smaller than China’s—and the gap has increased, not decreased. In the early 2000s, China’s GDP was two to three times as large as India’s. It is now roughly five times as large.
India has been falling behind in the development of science and technology to power economic growth. China spends 2% of GDP on research and development, compared with India’s 0.7%. On artificial intelligence, the figures are startling. For example, China holds 65% of AI patents, while India holds just 3%.
China’s workforce is more productive than India’s. The quality of their respective workforces is affected by poverty and nutrition levels. As one example, according to the 2022 UN State of Food Security and Nutrition in the World report, 16.3% of India’s population was undernourished in 2019–2021 compared with less than 2.5% of China’s population.
The second argument is that India’s worldview is quite different to that of most Western countries.

India rightly sees itself as a force in international affairs. It aspires to be a powerful pole in a multipolar world. It adheres to a doctrine of strategic autonomy. It is guided by what it thinks is best for India, not by alliances or what others want of it.

India’s China-driven strategic congruence with the US is not the same as a quasi-alliance relationship. India doesn’t operate within a framework of mutual obligation. It doesn’t expect others to come to its aid and it won’t join someone else’s war.

In a recent Foreign Affairs article entitled ‘America’s bad bet on India’, an American academic of Indian origin, Ashley Tellis, argues that New Delhi would never involve itself in any US confrontation with China that did not threaten its own security.

The Tellis piece has weight because he was a main intellectual force behind the ‘nuclear deal’ concluded in 2008.

Moreover, India will differ radically from the West on some questions. True, as the Ukraine war has progressed, India has put some daylight between itself and Russia. But it declines to impose sanctions on Moscow. Both countries benefit from Russia’s sales of oil to India.

And never a proponent of the Western-inspired liberal international order, India is also a leader of the disparate—but re-energised—global south, effectively the developing world.

The third argument is that the west’s line that its relationship with India is based on shared democratic values does not hold up.

In a recent interview with the Financial Times, Biden’s national security adviser, Jake Sullivan, said he saw the long-term trajectory of the US-India relationship as being ‘built on the notion that democracies with shared value systems should be able to work together both to nurture their own democracies internally and to fight for shared values globally’. Come off it, Mr Sullivan!

Comment by Riaz Haq on July 6, 2023 at 7:45am

The West needs to get real about India | The Strategist

https://www.aspistrategist.org.au/the-west-needs-to-get-real-about-...


The problem is that Modi’s government can only lend itself to highly qualified identification with democratic principles.

Elections in India are generally fair, and Modi’s sway is vigorously contested by the main opposition party, by Congress and by regional parties. That’s good.

However, Modi remains an unabashed Hindu supremacist whose political machine largely disregards the aspirations of Muslims and other minorities. It reacts vengefully to criticism and scores badly on most of the international indexes that measure democratic freedoms. To some, India is an illiberal democracy; to others, it’s an electoral autocracy. But, for sure, it is not a liberal democracy.

Western interests dictate that we put grunt into our relationship with India with energy and determination. It is unquestionably an increasingly important country. But we must have realistic expectations of India and deal with as it is, not as we might like it to be. Otherwise, we risk disappointment.

Comment by Riaz Haq on July 13, 2023 at 7:00am

The Illusion of a U.S.-India Partnership

https://www.nytimes.com/2023/07/13/opinion/india-us-diplomacy-china...

by Arundhati Roy

The state visit by Prime Minister Narendra Modi of India to Washington last month was billed as a meeting of two of the world’s greatest democracies, and the countries duly declared themselves “among the closest partners in the world.” But what sort of partners will they be? What sort of partners can they be?

President Biden claims that the “defense of democracy” is the central tenet of his administration. That’s commendable, but what happened in Washington was the exact opposite. The man Americans openly fawned over has systematically undermined India’s democracy.

We needn’t be shocked by America’s choice of friends. The enchanting folks that the U.S. government has cultivated as partners include the shah of Iran, Gen. Mohammad Zia ul-Haq of Pakistan, the Afghan mujahedeen, Saddam Hussein of Iraq, a series of tin-pot dictators in South Vietnam and Gen. Augusto Pinochet of Chile. A central tenet of U.S. foreign policy has, too often, been democracy for the United States, dictatorship for its (nonwhite) friends.

Mr. Modi certainly does not belong in that rogues’ gallery. India is bigger than him. It will see him off. The question is: When? And at what cost?

India is not a dictatorship, but neither is it still a democracy. Mr. Modi heads a majoritarian, Hindu-supremacist, electoral autocracy that is tightening its grip on one of the most diverse countries in the world. This makes election season, which is just around the corner, our most dangerous time. It’s murder season, lynching season, dog whistle season. The partner that the U.S. government is cultivating and empowering is one of the most dangerous people in the world — dangerous not as a person but as someone turning the world’s most populous country into a tinderbox.

What kind of democrat is a prime minister who almost never holds a news conference? It took all of the U.S. government’s powers of persuasion (such as they are) to coax Mr. Modi into addressing one while in Washington. He agreed to take two questions, only one of them from a U.S. journalist. Sabrina Siddiqui, The Wall Street Journal’s White House reporter, stood up to ask him what his government was doing to prevent discrimination against minorities, particularly Muslims. Given the worsening abuses against Muslims and Christians in his country, it’s a question that really ought to have been raised by the White House. But the Biden administration outsourced it to a journalist. In India, we held our breath.

Mr. Modi expressed surprise that such a question should be asked at all. Then he laid out all the bromide that he had brought along in his baggage. “Democracy is our spirit. Democracy runs in our veins. We live democracy.” He added, “There’s absolutely no discrimination.” And so on.

Comment by Riaz Haq on July 13, 2023 at 7:00am

The Illusion of a U.S.-India Partnership

https://www.nytimes.com/2023/07/13/opinion/india-us-diplomacy-china...

by Arundhati Roy

In India the mainstream media and Mr. Modi’s vast fan base reacted as though he had hit the ball clean out of the park. Those who oppose him were left sorting through the debris for shreds of reassurance. (“Did you notice Biden’s body language? Totally hostile.” And so on.) I was grateful for the hypocrisy. Imagine if Mr. Modi had felt confident enough to tell the truth. Hypocrisy gives us a sort of ragged, shabby shelter. For now, it’s all we have.

Mercilessly attacked by the ruling Bharatiya Janata Party’s cheerleaders and other Hindu nationalists on Twitter, Ms. Siddiqui was accused of being a biased Pakistani Islamist hatemonger with an anti-India agenda. Those were the more polite comments.

Eventually the White House had to step up and condemn the harassment as “antithetical to the very principles of democracy.” It felt as if everything that the White House had sought to gloss over had become embarrassingly manifest.

Ms. Siddiqui may not have anticipated what she walked into. The same cannot be said of the State Department and the White House. They would have known plenty about the man for whom they were rolling out the red carpet.

They would have known about the role Mr. Modi is accused of having played in the 2002 anti-Muslim pogrom in the state of Gujarat, in which more than 1,000 Muslims were killed. They would have known about the sickening regularity with which Muslims are being publicly lynched, about the member of Mr. Modi’s cabinet who met some lynchers with garlands and about the precipitous process of Muslim segregation and ghettoization.

They would have known about the hounding of opposition politicians, students, human rights activists, lawyers and journalists, some of whom have received long prison sentences; the attacks on universities by the police and people suspected of being Hindu nationalists; the rewriting of history textbooks; the banning of films; the shutdown of Amnesty International India; the raid on the India offices of the BBC; the activists, journalists and government critics being placed on mysterious no-fly lists; and the pressure on academics, both Indian and foreign.

They would have known that India now ranks 161st out of 180 countries on the World Press Freedom Index, that many of the best Indian journalists have been hounded out of the mainstream media and that journalists could soon be subjected to a censorial regulatory regime in which a government-appointed body will have the power to decide whether media reports and commentary about the government are fake or misleading.

They would have known about the situation in Kashmir, which beginning in 2019 was subjected to a monthslong communication blackout — the longest internet shutdown in a democracy — and whose journalists suffer harassment, arrest and interrogation. Nobody in the 21st century should have to live as they do, with a boot on their throats.

They would have known about the Citizenship Amendment Act, passed in 2019, which barefacedly discriminates against Muslims; the massive protests that it touched off; and how those protests ended only after dozens of Muslims were killed the following year by Hindu mobs in Delhi (which, incidentally, took place while President Donald Trump was in town on a state visit and about which he uttered not a word).

They might also have known that at the same time they were feting Mr. Modi, Muslims were fleeing a small town in northern India after Hindu extremists affiliated with the ruling party reportedly marked Xs on their doors and told them to leave.

It’s time we retired that stupid adage about speaking truth to power. Power knows the truth far better than we do.

Comment by Riaz Haq on July 13, 2023 at 7:01am

The Illusion of a U.S.-India Partnership

https://www.nytimes.com/2023/07/13/opinion/india-us-diplomacy-china...

by Arundhati Roy

In addition to everything else, the Biden administration would have also known that every moment of the grand reception and every episode of bogus flattery will be spun into pure gold for Mr. Modi’s 2024 election campaign, in which he is seeking a third term. Ironically, Mr. Modi had openly campaigned for Mr. Trump in 2019 at a huge gathering of the Indian diaspora in a Texas stadium attended by Mr. Trump. Mr. Modi revved up the crowd, shouting, “Ab ki baar Trump sarkar!” (Once more for a Trump government!)

Still, Mr. Biden pulled out all the stops for this most polarizing figure in the history of modern Indian politics. Why?

In an interview with Christiane Amanpour that aired on CNN during the state visit — and it’s tempting to believe that this, too, was a piece of White House outsourcing — President Barack Obama told us why. He was asked how a U.S. president should deal with leaders like Mr. Modi who are widely considered autocratic and illiberal.

“It’s complicated,” he said, mentioning the financial, geopolitical and security concerns that any American president must consider. To those of us listening in India, what came through was simply, “It’s China, stupid!”

Mr. Obama added that if minorities are not protected, India could “at some point start pulling apart.” The trolls in India went to work on him, but these words were a balm to many in India who are paying a hard price for standing up to Hindu nationalism and have been shocked by how Mr. Biden has moved to strengthen Mr. Modi’s hand.

But if the president of the United States is allowed to consider national self-interest in his dealings with other countries, that courtesy must be extended to other countries too. So what kind of ally can India be to the United States?

Washington’s top envoy to East Asia has said the U.S. military expects India to help it patrol the South China Sea, where the atmosphere has thickened with tension over China’s territorial claims. So far, India is playing along, but will it really risk putting skin in this game?

India’s ties with Russia and China are deep, wide and old. An estimated 90 percent of India’s army equipment and around 70 percent of its air force equipment, including fighter jets, are of Russian origin. With 2.2 million barrels a day in June and in open defiance of U.S.-led sanctions on Russia, India is among the biggest importers of Russian crude oil, some of which it refines and sells overseas, including to Europe and the United States. Not surprisingly, Mr. Modi has kept India neutral on Russia’s invasion of Ukraine.

Nor can he truly stand up to China, which is India’s biggest source of imports. India is no match for China — not economically, not militarily. For years, China has occupied thousands of square miles of land in Ladakh in the Himalayas, which India considers its sovereign territory. Chinese troops are camped on it. Bridges, roads and other infrastructure are being built to connect it with China. Other than banning TikTok, Mr. Modi’s government has responded with timidity and denial.

Comment by Riaz Haq on July 13, 2023 at 7:02am

The Illusion of a U.S.-India Partnership

https://www.nytimes.com/2023/07/13/opinion/india-us-diplomacy-china...

by Arundhati Roy

And what kind of an ally will the United States be to India in the event of a confrontation with China? The United States is far from the potential battlefield. The only price it might pay if things go badly is a bloody nose and a last helicopter ride out of the war zone as collaborators hang on to its landing skids. We need only look around our neighborhood at the fate of America’s old friends Afghanistan and Pakistan.

A bad moon is rising in the South China Sea. But for India, its friends and enemies are all wrapped up together in a tight ball of wax. We should be extremely, exceedingly, exceptionally, extraordinarily careful where we place our feet and float our boats. Everybody should.

Comment by Riaz Haq on August 19, 2023 at 4:52pm

Ritesh Kumar Singh
@RiteshEconomist
Replacing a supplier from China with one in a friendly country would seem to make a supply chain more resilient to a potential China-US conflict; but it may create a false sense of security, considering that many friendly suppliers still rely on China for key inputs
@Kanthan2030

https://twitter.com/RiteshEconomist/status/1692848048144335220?s=20

------------

https://www.project-syndicate.org/commentary/populist-economic-poli...

Aug 18, 2023
RAGHURAM G. RAJAN
Since the 2008 global financial crisis discredited the old liberal orthodoxy, the door has been open for simplistic policies, in part because most people tend to focus only on a policy’s first-order effects. Unfortunately, everyone will have to learn the hard way why such policies fell out of favor in the first place.

CHICAGO – Even in the best of times, policymakers find it difficult to explain complex issues to the public. But when they have the public’s trust, the ordinary citizen will say, “I know broadly what you are trying to do, so you don’t need to explain every last detail to me.” This was the case in many advanced economies before the global financial crisis, when there was a broad consensus on the direction of economic policy. While the United States placed greater emphasis on deregulation, openness, and expanding trade, the European Union was more concerned with market integration. In general, though, the liberal (in the classical British sense) orthodoxy prevailed.

So pervasive was this consensus that one of my younger colleagues at the International Monetary Fund found it hard to get a good job in academia, despite holding a PhD from MIT’s prestigious economics department, probably because her work showed that trade liberalization had slowed the rate of poverty reduction in rural India. While theoretical papers showing that freer trade could have such adverse effects were acceptable, studies that demonstrated the phenomenon empirically were met with skepticism.

The global financial crisis shattered both the prevailing consensus and the public’s trust. Clearly, the liberal orthodoxy had not worked for everyone in the US. Now-acceptable studies showed that middle-class manufacturing workers exposed to Chinese competition had been hit especially hard. “Obviously,” the accusation went, “the policymaking elites, whose friends and family were in protected service jobs, benefited from cheap imported goods and could not be trusted on trade.” In Europe, the free movement of goods, capital, services, and people within the single market were seen as serving the interests of the EU’s unelected bureaucrats in Brussels more than anyone else.

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