The World According to Xi Jinping
What China’s Ideologue in Chief Really Believes
By Kevin Rudd
November/December 2022
In the post–Cold War era, the Western world has suffered no shortage of grand theories of history and international relations. The settings and actors may change, but the global geopolitical drama goes on: variants of realism and liberalism compete to explain and predict state behavior, scholars debate whether the world is witnessing the end of history, a clash of civilizations, or something else entirely. And it is no surprise that the question that now attracts more analytical attention than any other is the rise of China under President Xi Jinping and the challenge it presents to American power. In the run-up to the 20th National Congress of the Chinese Communist Party (CCP), as Xi has maneuvered to consolidate his power and secure an unprecedented third term, Western analysts have sought to decode the worldview that drives him and his ambitions for China.
One important body of thought has been largely absent from this search for understanding, however: Marxism-Leninism. This is odd because Marxism-Leninism has been China’s official ideology since 1949. But the omission is also understandable, since most Western thinkers long ago came to see communist ideology as effectively dead—even in China, where, in the late 1970s, the CCP leader Deng Xiaoping set aside the Marxist-Leninist orthodoxy of his predecessor, Mao Zedong, in favor of something more akin to state capitalism. Deng summed up his thoughts on the matter with characteristic bluntness: Bu zhenglun, “Let’s dispense with theory,” he told attendees at a major CCP conference in 1981. His successors Jiang Zemin and Hu Jintao followed his lead, rapidly expanding the role of the market in the Chinese domestic economy and embracing a foreign policy that maximized China’s participation in a global economic order led by the United States.
Xi has brought that era of pragmatic, nonideological governance to a crashing halt. In its place, he has developed a new form of Marxist nationalism that now shapes the presentation and substance of China’s politics, economy, and foreign policy. In doing so, Xi is not constructing theoretical castles in the air to rationalize decisions that the CCP has made for other, more practical reasons. Under Xi, ideology drives policy more often than the other way around. Xi has pushed politics to the Leninist left, economics to the Marxist left, and foreign policy to the nationalist right. He has reasserted the influence and control the CCP exerts over all domains of public policy and private life, reinvigorated state-owned enterprises, and placed new restrictions on the private sector. Meanwhile, he has stoked nationalism by pursuing an increasingly assertive foreign policy, turbocharged by a Marxist-inspired belief that history is irreversibly on China’s side and that a world anchored in Chinese power would produce a more just international order. In short, Xi’s rise has meant nothing less than the return of Ideological Man.
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These ideological trends are not simply a throwback to the Mao era. Xi’s worldview is more complex than Mao’s, blending ideological purity with technocratic pragmatism. Xi’s pronouncements about history, power, and justice might strike Western audiences as impenetrable or irrelevant. But the West ignores Xi’s ideological messaging at its own peril. No matter how abstract and unfamiliar his ideas might be, they are having profound effects on the real-world content of Chinese politics and foreign policy—and thus, as China’s rise continues, on the rest of the world.
PARTY MAN
Like all Marxist-Leninists, Xi bases his thinking on historical materialism (an approach to history focused on the inevitability of progress through ongoing class struggle) and dialectical materialism (an approach to politics that focuses on how change occurs when contradictory forces collide and are resolved). In his published writings, Xi deploys historical materialism to position the Chinese revolution in world history in a context in which China’s move to a more advanced stage of socialism necessarily accompanies the decline of capitalist systems. Through the lens of dialectical materialism, he portrays his agenda as a step forward in an ever-intensifying contest between the CCP and reactionary forces at home (an arrogant private sector, Western-influenced nongovernmental organizations, religious movements) and abroad (the United States and its allies).
These concepts may seem abstruse and arcane to those outside China. But they are taken seriously by elites in the CCP, senior Chinese officials, and many of the international relations scholars who advise the government. And Xi’s published writings on theory are vastly more extensive than those of any other Chinese leader since Mao. The CCP also draws on the kinds of economic and strategic advice that typically guide Western political systems. But within the Chinese system, Marxism-Leninism still serves as the ideological headwaters of a world view that places China on the right side of history and portrays the United States as struggling in the throes of inevitable capitalist decline, consumed by its own internal political contradictions and destined to fall by the wayside. That, in Xi’s view, will be the real end of history.Under Xi, ideology drives policy more often than the other way around.In 2013, barely five months after his appointment as party general secretary, Xi gave an address to the Central Conference on Ideology and Propaganda, a gathering of top party leaders in Beijing. The contents of the speech were not reported at the time but were leaked three months later and published by China Digital Times. The speech offers an unfiltered portrait of Xi’s deepest political convictions. In it, he dwells on the risks of the ideological decay that led to the collapse of Soviet communism, the West’s role in fomenting ideological division within China, and the need to crack down on all forms of dissent. “The disintegration of a regime often starts from the ideological area,” Xi said. “Political unrest and regime change may occur overnight, but ideological evolution is a long-term process,” he continued, warning that once “ideological defenses are breached, other defenses become very difficult to hold.” But the CCP “has justice on our side,” he assured his audience, encouraging them not to be “evasive, bashful, or mince our words” in dealing with Western countries, whose goal is “to vie with us for the battlefields of people’s hearts and for the masses, and in the end to overthrow the leadership of the CCP and China’s socialist system.”
This meant cracking down on anyone “harboring dissent and discord” and demanding that CCP members demonstrate loyalty not only to the party but also to Xi personally. What followed was an internal “cleansing” of the CCP, accomplished by purging any perceived political or institutional opposition, in large part through a decadelong anticorruption campaign that had begun even before the speech. A “rectification campaign” brought another round of purges to the party’s political and legal affairs apparatus. Xi also reasserted party control over the People’s Liberation Army and the People’s Armed Police and centralized China’s cybersecurity and surveillance systems. Finally, in 2019, Xi introduced a party-wide education campaign titled “Don’t Forget the Party’s Original Purpose, Keep the Mission in Mind.” According to an official document announcing the initiative, its goal was for party members “to gain theoretical learning and to be baptized in ideology and politics.” By around the end of his first term, it had become clear that Xi sought nothing less than to transform the CCP into the high church of a revitalized, secular faith.
HIGH MARX
In contrast to those immediate moves toward a more Leninist discipline in domestic politics, the shift to Marxist orthodoxy in economic policy under Xi has been more gradual. Economic management had long been the domain of the technocrats who serve on the State Council, China’s administrative cabinet. Xi’s personal interests also lay more in party history, political ideology, and grand strategy than in the details of financial and economic management. But as the party apparatus increasingly asserted control of the economic departments of the state, China’s policy debates on the relative roles of the state and the market became increasingly ideological. Xi also progressively lost confidence in market economics following the global financial crisis of 2008 and China’s homegrown financial crisis of 2015, which was sparked by the bursting of a stock market bubble and led to a nearly 50 percent collapse in the value of Chinese stocks before the markets finally settled in 2016.
China’s economic policy trajectory under Xi—from a consensus in support of market reforms to an embrace of increased party and state intervention—has therefore been uneven, contested, and at times contradictory. Indeed, in late 2013, less than six months after Xi’s revivalist sermon on ideology and propaganda, the Central Committee of the CCP (the top several hundred leaders of the party) adopted a remarkably reformist document on the economy, starkly titled “The Decision.” It outlined a series of policy measures that would allow the market to play “the decisive role” in the allocation of resources in the economy. But the rollout of these policies slowed to a standstill in 2015, while state-owned enterprises received trillions of dollars in investment from “industry guidance funds” between 2015 and 2021—a massive infusion of government support that brought the Chinese state roaring back to the center of economic policy.
Posters of Mao, Xi, and other senior Chinese leaders, Juancheng, China, February 2015
ReutersAt the 19th CCP Party Congress, in 2017, Xi announced that going forward, the party’s central ideological challenge would be to rectify the “unbalanced and inadequate development” that had emerged during the “reform and opening” period of market-based policy changes that Deng had inaugurated in the late 1970s. In a little-noticed speech published in the party’s ideological journal in 2021, Xi in effect challenged Deng’s definition of “the primary stage of socialism” and Deng’s belief that China would need to endure inequality for hundreds of years before achieving prosperity for all. Instead, Xi hailed a faster transition to a higher phase of socialism, declaring that “thanks to many decades of hard work, [this] is a period that marks a new starting point for us.” Xi rejected Deng’s gradualism and the notion that China was doomed to an indefinite future of developmental imperfection and class inequality. Through more rigorous adherence to Marxist principles, he promised, China could achieve both national greatness and greater economic equality in the not-too-distant future.
Such an outcome would rely on party committees increasing their influence on private firms by playing a larger role in selecting senior management and making critical board decisions. And as the Chinese state began securing equity in private firms, the state would also encourage successful entrepreneurs to invest in state-owned enterprises, mixing the market and the state to an ever-greater degree.
Meanwhile, CCP economic planners would be tasked with designing a “dual circulation economy,” which in effect meant that China would become increasingly self-reliant across all sectors of the economy while the world’s economies would become increasingly dependent on China. And in late 2020, Xi laid out an approach to income redistribution known as the “common prosperity agenda,” through which the rich were to be expected to “voluntarily” redistribute funds to state-favored programs to reduce income inequality. By the end of 2021, it was clear that Deng’s era of “reform and opening” was coming to a close. In its place stood a new statist economic orthodoxy.
“HISTORY IS THE BEST TEXTBOOK”
Xi’s push toward Leninist politics and Marxist economics has been accompanied by his adoption of an increasingly bracing form of nationalism, fueling an assertiveness abroad that has replaced the traditional caution and risk aversion that were the hallmarks of China’s foreign policy during the Deng era. Xi’s recognition of the importance of nationalism was evident early in his tenure. “In the West, there are people who say that China should change the angle of its historical propaganda, it should no longer make propaganda about its history of humiliation,” he noted in his 2013 speech. “But as I see it, we cannot heed this; forgetting history means betrayal. History objectively exists. History is the best textbook. A nation without historical memory does not have a future.” Immediately after Xi was installed as CCP general secretary in 2012, he led the newly appointed Politburo Standing Committee on a tour of an exhibition at the National Museum of China in Beijing titled “The Road to Rejuvenation,” which chronicled the perfidy of the Western imperial powers and Japan and the party’s heroic response during China’s “100 years of national humiliation.”
In the years since, the concept of “the great rejuvenation of the Chinese nation” has become the centerpiece of Xi’s nationalist vision. His goal is for China to become the preeminent Asian and global power by 2049. In 2017, Xi identified a number of quantitative benchmarks that the country must reach by 2035 on the road to that status, including becoming a “medium-level developed economy” and having “basically completed the modernization of China’s national defense and its armed forces.” To capture and codify his vision, Xi has introduced or highlighted a number of ideological concepts that collectively authorize China’s new, more assertive approach. First among these is “comprehensive national power” (zonghe guoli), which the CCP uses to quantify China’s combined military, economic, and technological power and foreign policy influence. Whereas this concept was used by Xi’s predecessors, only Xi was bold enough to claim that China’s power has grown so rapidly that the country has already “entered the leading ranks of the world.” Xi has also emphasized rapid changes in “the international balance of forces” (guoji liliang duibi), which refers to official comparisons the party uses to measure China’s progress in catching up with the United States and its allies. Official CCP rhetoric also features references to growing “multipolarity” (duojihua) in the international system and to irreversible increases in China’s power. Xi has also rehabilitated a Maoist aphorism hailing “the rise of the East and the decline of the West” (dongsheng xijiang) as a euphemism for China surpassing the United States.
Xi’s public praise for China’s growing national power has been much sharper and more expansive than that of his predecessors. In 2013, the CCP formally abandoned Deng’s traditional “diplomatic guidance,” dating from 1992, that China should “hide its strength, bide its time, and never take the lead.” Xi used the 2017 Party Congress Report to describe how China had promoted its “economic, scientific, technological, military, and comprehensive national power” to the extent that it had now “entered into the leading ranks of the world”—and that owing to an unprecedented increase in China’s international standing, “the Chinese nation, with an entirely new posture, now stands tall and firm in the East.”
THEORY AND PRACTICE
What matters most to those warily eyeing China’s rise is how these changing ideological formulations have been put into practice. Xi’s doctrinal statements are not only theoretical—they are also operational. They have laid the groundwork for a wide range of foreign policy steps that would have been unimaginable under earlier leaders. China has embarked on a series of island reclamations in the South China Sea and turned them into garrisons, ignoring earlier formal guarantees that it would not. Under Xi, the country has carried out large-scale, live-fire missile strikes around the Taiwanese coast, simulating a maritime and air blockade of the island—something that previous Chinese regimes refrained from doing despite having the ability to do so. Xi has intensified China’s border conflict with India through repeated border clashes and by building new roads, airfields, and other military-related infrastructure near the border. And China has embraced a new policy of economic and trade coercion against states whose policies offend Beijing and that are vulnerable to Chinese pressure.
China has also become far more aggressive in going after critics abroad. In July 2021, Beijing for the first time announced sanctions against individuals and institutions in the West that have had the temerity to criticize China. The sanctions are in harmony with the new ethos of “Wolf Warrior” diplomacy, which encourages Chinese diplomats to routinely and publicly attack their host governments—a radical departure from Chinese diplomatic practice over the last 35 years.
Xi’s ideological beliefs have committed China to the goal of building what Xi describes as a “fairer and more just” international system—one anchored in Chinese power rather than American power and one that reflects norms more consistent with Marxist-Leninist values. For that reason, China has pushed to strip UN resolutions of all references to universal human rights and has built a new set of China-centric international institutions, such as the Belt and Road Initiative, the Asian Infrastructure Investment Bank, and the Shanghai Cooperation Organization, to rival and eventually replace Western-dominated ones. A Marxist-Leninist quest for a “more just” world also shapes China’s promotion of its own national development model across the global South as an alternative to the “Washington consensus” of free markets and democratic governance. And Beijing has offered a ready supply of surveillance technologies, police training, and intelligence collaboration to countries around the world, such as Ecuador, Uzbekistan, and Zimbabwe, that have eschewed the classical Western liberal-democratic model.
These changes in Chinese foreign and security policy were signaled well in advance by earlier shifts in Xi’s ideological line. Using what Western audiences might see as obscure, theoretical mumbo jumbo, Xi has communicated to the party a crystal-clear message: China is much more powerful than it ever was, and he intends to use this power to change the course of history.
IN IT TO WIN IT
Xi is 69 years old and seems unlikely to retire; as a lifelong student and practitioner of Chinese politics, he knows full well that if he did leave office, he and his family would be vulnerable to retribution from his successors. So Xi is likely to lead the country for the rest of his life, although his formal designations may change over time. His mother is 96 and his father lived until he was 89. If their longevity is any indication of his, he is poised to remain China’s paramount leader until at least the late 2030s.
Xi faces few political vulnerabilities. Elements of China’s society may begin to chafe at the increasingly repressive apparatus he has built. But contemporary surveillance technologies allow him to control dissent in ways that Mao and Joseph Stalin could hardly imagine. Xi exhibits growing confidence in China’s rising “nationalist generation,” especially the elites who have been educated at home rather than abroad, who came of age under his leadership rather than during the more liberal regimes of his predecessors, and who see themselves as the vanguard of Xi’s political revolution. It would be foolish to assume that Xi’s Marxist-Leninist vision will implode under the weight of its own internal contradictions in the near to medium term. If political change does come, it will more likely arrive after Xi’s death than before it.
But Xi is not completely secure. His Achilles’ heel is the economy. Xi’s Marxist vision of greater party control over the private sector, an expanding role for state-owned enterprises and industrial policy, and the quest for “common prosperity” through redistribution is likely to shrink economic growth over time. That is because declining business confidence will reduce private fixed capital investment in response to growing perceptions of political and regulatory risk; after all, what the state gives, the state can also take away. This applies in particular to the technology, finance, and property sectors, which have been China’s principal domestic growth engines for the last two decades. China’s attractiveness to foreign investors has also declined because of supply chain uncertainty and the impact of the new doctrines of national economic self-sufficiency. At home, China’s business elites have been spooked by the anticorruption campaign, the arbitrary nature of the party-controlled judicial system, and a growing number of high-profile tech titans falling out of political favor. And China has yet to figure out how to leave behind its “zero covid” strategy, which has compounded the country’s economic slowdown.
Xi speaking at an event commemorating the 200th birthday of Karl Marx, Beijing, May 2018
Jason Lee / ReutersAdding to these weaknesses are a number of long-term structural trends: a rapidly aging population, a shrinking workforce, low productivity growth, and high levels of debt shared between state and private financial institutions. Whereas the CCP had once expected average annual growth to remain around six percent for the rest of the 2020s before slowing to around four percent for the 2030s, some analysts now worry that in the absence of a radical course correction, the economy will soon begin to stagnate, topping out at around three percent in the 2020s before falling to around two percent in the 2030s. As a result, China might enter the 2030s still locked in the so-called middle-income trap, with an economy smaller or only marginally larger than that of the United States. For China’s leadership, that outcome would have profound consequences. If employment and income growth falter, China’s budget would come under pressure, forcing the CCP to choose between providing health care, elder care, and pension entitlements on the one hand and pursuing national security goals, industrial policy, and the Belt and Road Initiative on the other. Meanwhile, China’s gravitational pull on the rest of the global economy would be called into question. The debate over whether the world has already witnessed “peak China” is only just beginning, and when it comes to China’s long-term growth, the jury is still out.
Therefore, the critical question for China in the 2020s is whether Xi can engineer a course correction to recover from the significant slowing of economic growth. That, however, would involve a considerable loss of face for him. More likely, he will try to muddle through, making as few ideological and rhetorical adjustments as possible and putting in place a new team of economic policymakers, hoping they can find a way to magically restore growth.
Xi’s Marxist nationalism is an ideological blueprint for the future; it is the truth about China that is hiding in plain sight. Under Xi, the CCP will evaluate changing international circumstances through the prism of dialectical analysis—and not necessarily in ways that will make sense to outsiders. For example, Xi will see new Western institutions intended to balance against China, such as the Quad (the Quadrilateral Security Dialogue, a strategic cooperation agreement between Australia, India, Japan, and the United States) and the AUKUS (a defense agreement linking Australia, the United Kingdom, and the United States), as both strategically hostile and ideologically predictable, requiring new forms of political, ideological, and military “struggle” to roll back. In his Marxist-Leninist view, China’s ultimate victory is guaranteed because the deep forces of historical determinism are on the CCP’s side, and the West is in structural decline.Xi now sees threats on every front.This view will affect the likelihood of conflict in Asia. Since 2002, the CCP’s code language for its belief that war was unlikely has been the official phrase “China continues to enjoy a period of strategic opportunity.” This statement is meant to convey that China will face a low risk of conflict for the foreseeable future and can therefore seek economic and foreign policy advantages while the United States is bogged down elsewhere, especially in the broader Middle East. But in the wake of Washington’s official labeling of China as a “strategic competitor” in 2017, the ongoing U.S.-Chinese trade war, mutual (if selective) forms of economic decoupling, and the hardening of U.S. alliances with Australia, Japan, South Korea, and NATO, the CCP is likely to change its formal analytical conclusion about the strategic environment.
The danger is that dialectical methodologies and the binary conclusions that they produce can lead to spectacularly incorrect conclusions when applied to the real world of international security. In the 1950s, Mao saw it as dialectically inevitable that the United States would attack China to snuff out the Chinese revolution on behalf of the forces of capitalism and imperialism. Despite the Korean War and two crises in the Taiwan Strait during that decade, no such attack materialized. Had Mao not taken such an ideological view, the thawing of China’s relationship with the United States could perhaps have been initiated a decade earlier than it was, particularly given the unfolding reality of the Sino-Soviet split that began after 1959. In similar fashion, Xi now sees threats on every front and has embarked on the securitization of virtually every aspect of Chinese public policy and private life. And once such threat perceptions become formal analytical conclusions and are translated into the CCP bureaucracies, the Chinese system might begin to function as if armed conflict were inevitable.
Xi’s ideological pronouncements shape how the CCP and its nearly 100 million members understand their country and its role in the world. They take such texts seriously; the rest of the world should, too. At the very least, Xi’s embrace of Marxist-Leninist orthodoxy should put to rest any wishful thinking that Xi’s China might peacefully liberalize its politics and economy. And it should make clear that China’s approach to foreign policy is driven not only by a rolling calculus of strategic risk and opportunity but also by an underlying belief that the forces of historical change are inexorably driving the country forward.China might begin to function as if armed conflict is inevitable.This should, therefore, cause Washington and its partners to carefully evaluate their existing China strategies. The United States should realize that China represents the most politically and ideologically disciplined challenger it has ever faced during its century of geopolitical dominance. U.S. strategists should avoid “mirror imaging” and should not assume that Beijing will act in ways that Washington would construe as rational or serving China’s self-interests.
The West won an ideological contest in the twentieth century. But China is not the Soviet Union, not least because China now has the second-largest economy in the world. And although Xi may not be Stalin, he is certainly not Mikhail Gorbachev, either. Xi’s adherence to Marxist-Leninist orthodoxy has helped him consolidate his personal power. But this same ideological stance has also created dilemmas that the CCP will find difficult to resolve, especially as slowing economic growth puts in doubt the party’s long-standing social contract with the people.
Whatever may unfold, Xi will not abandon his ideology. He is a true believer. And this presents one further test for the United States and its allies. To prevail in the unfolding ideological war that now stretches before them will require a radical reembrace of the principles that distinguish liberal-democratic political systems. Western leaders must defend those ideals in word and deed. They, too, must become true believers.
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Regno Unito, malato (cronico) d’Europa
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La forza lavoro britannica ha un problema serio. O meglio, il problema risiede fuori dalla forza lavoro, cioè negli inattivi. Le persone che non lavorano né cercano lavoro anche se si trovano in età lavorativa. È una tendenza che mette il Regno Unito in posizione deviante rispetto al resto dei paesi sviluppati. Un vero shock avverso dal lato dell’offerta che, assieme alle limitazioni all’immigrazione conseguenti alla Brexit, rappresenta un problema per la tendenza di fondo dell’inflazione salariale.
Ma forse è anche (o soprattutto) un problema di politiche sanitarie, che concorrono alla forza di una comunità o sono alla base delle sue fragilità. Come spiega un articolo di John Burn-Murdoch sul Financial Times, il Covid in Regno Unito ha interrotto e invertito una tendenza di lungo periodo alla riduzione dell’inattività.
INATTIVI IN CRESCITA, CAUSA PATOLOGIE CRONICHE
Una tendenza del passato: tra gennaio 2015 e gennaio 2020, l’incidenza dell’inattività economica ha segnato una riduzione pressoché lineare. Secondo l’autore, se tale tendenza fosse stata proiettata ai giorni nostri, oggi ci sarebbero 8,3 milioni di inattivi britannici. Il numero effettivo è invece di circa 8,9 milioni.
Di questi, poco meno di mezzo milione sono gli inattivi in età lavorativa, che danno al Regno Unito il non piacevole primato di essere l’unico paese sviluppato al mondo dove la quota di inattivi in età lavorativa (15-64 anni) non è rientrata nella tendenza calante di lungo periodo dopo l’iniziale shock pandemico.
Secondo uno studio preliminare di due economisti della Bank of England, il tasso di malattie croniche è aumentato di circa lo 0,5% annuo negli ultimi 25 anni, e all’inizio della pandemia 6,4 milioni di persone in età lavorativa si definivano malati cronici. Quel numero è cresciuto del 5% durante la pandemia, con un aumento di 450 mila unità. Di essi, 400 mila sono malati cronici.
All’interno di quest’ultima categoria, il numero di inattivi che non vogliono un lavoro è aumentato da 2,26 milioni del quarto trimestre 2019 a 2,7 milioni di persone nel primo trimestre di quest’anno, portando nel periodo l’incidenza sul totale degli inattivi che non vogliono un lavoro dal 34% al 38%.
FonteDOLORE FISICO E MENTALE
Perché? Analizzando la UK Labour Force Survey, l’autore scopre che il numero di britannici resi inattivi da dolore cronico è aumentato di duecentomila unità (metà del totale da patologie) negli ultimi due anni rispetto al trend precedente. La seconda causa di inattività è legata a condizioni di salute mentale, che spiegherebbe un ulteriore 40% dell’inattività per condizioni croniche.
Spesso, le patologie fisiche e quelle mentali sono associate o in qualche modo correlate. Anche in conseguenza di ciò, il numero di persone in età lavorativa che segnala di soffrire di condizioni patologiche multiple, che era declinante sino alla pandemia, è aumentato di 735 mila unità in soli due anni.
A cosa si deve questa situazione? Mentre non ci sono ancora evidenze che la mettano in relazione diretta o indiretta col Covid, si può intuire che il problema sta anche e forse soprattutto nell’indebolimento delle strutture sanitarie, che dal Covid sono state travolte.
Il governo Truss, così focalizzato su politiche offertiste anche dal lato del lavoro, dovrebbe comprendere che il paese ha un problema molto grave in queste forme di cronicità che tagliano l’offerta di lavoro, e che di conseguenza serve investire sul sistema sanitario, per prevenzione e cura.
UN PROBLEMA DI SUPPLY SIDE
Se, per contro, prevarrà la pulsione distruttiva a tagliare la spesa sanitaria per concorrere a coprire i tagli d’imposta che hanno fatto tremare i mercati finanziari (non è affatto finita, a proposito), il problema è destinato ad aggravarsi. E con esso, detta in modo forse arido, la pressione inflazionistica, visto che stavamo parlando di strozzature dal lato dell’offerta. Avere un tasso di disoccupazione in calo in conseguenza di un aumento degli inattivi non è esattamente qualcosa di cui menar vanto.
Ma, dopo aver visto all’opera Truss e letto qualcosa del libercolo che ha scritto una decina di anni addietro assieme ad alcuni colleghi Tory tra cui lo stesso Kwasi Kwarteng (oltre a questa demolitoria recensione, lo ammetto), mi viene il sospetto che la risposta potrebbe essere centrata sul concetto di “pigrizia” e “simulazione” da parte degli inattivi. L’esperimento britannico continua. Soprattutto, a essere destinato a finire male.
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Il prezzo del gas ha cominciato a scendere quando si è chiarito che gli stoccaggi non avrebbero avuto problemi.
Momento critico sarà l'inizio dei primi freddi.
Questa volta una stagione mostruosamente sopra media in tutta Europa sarebbe di parecchio aiuto, soprattutto a noi.
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Bank of England'''s Bailey tells pension funds they have 3 days to rebalance | Reuters
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Andrew Bailey said the Bank of England had no intention of extending its emergency intervention in the bond market after Friday and that the £65bn programme would then come to a close.The central bank’s governor said that although there had been strains, market conditions in government bonds “seemed calmer” on Tuesday after it took action for a second time in two days.But he told an event organised by the Institute of International Finance in Washington that the BoE had to be clear that financial stability interventions were temporary and clashed with the bank’s ambition to tighten monetary policy.Bailey said for the BoE to be able to intervene rapidly on financial stability grounds and for that not to damage its monetary policy credibility, the moves had to be temporary.“We’ve announced we will be out by the end of this week. My message to the [pension] funds is you’ve got three days left,” he said.The Bank staged its second emergency intervention in as many days on Tuesday, with financial institutions stepping up calls for it to prolong its bond-buying programme to shore up the British pension system.The BoE widened its £65bn gilts purchasing programme to include inflation-linked bonds in its latest attempt to stem “fire sales” by pension funds that have created a “material risk to UK financial stability”.Tuesday’s move, the first time the BoE has purchased index-linked debt, initially helped steady gilt markets on a day when the IMF reiterated its doubts about UK economic prospects. It followed the BoE’s increase on Monday of the programme’s daily maximum purchase level to £10bn.But in a sign of persistent strains in the market, a late sell-off on Tuesday pushed the yield on the standard 30-year UK government bond as much as 0.14 percentage points higher to 4.83 per cent — its highest level since the BoE began emergency interventions in the gilt market last month. Bond yields rise as prices fall.From Monday, pension funds would only be able to access the short-term funding programme the BoE announced earlier this week, he said, but the central bank would not print money to buy more assets.That programme did not offer to buy government bonds — whether standard bonds or those linked to inflation — but would lend money to offer a pressure valve for companies that needed cash quickly if yields rose and they needed to post new collateral for their highly leveraged funds that were losing money.The BoE had to amend its original programme to act as a backstop to gilts markets twice in two days to avoid a vicious circle that was forcing pension funds to dump assets in moves it said were to avoid “dysfunction” in markets and posed “a material risk to UK financial stability”. The pension industry had been calling on the BoE to extend the bond-buying programme’s Friday deadline because of concerns funds do not have sufficient time to shore up portfolios against further shocks.The Pensions and Lifetime Savings Association, which represents schemes with about 30mn savers with £1.3tn in retirement money invested, said “many” funds would prefer the BoE’s programme to be extended at least until the government unveils debt-cutting plans on October 31.“It makes sense that the bank may not be able to fully wind up its support schemes until the markets’ fiscal concerns have eased,” said Paul Dales, chief UK economist at Capital Economics, the consultancy. “We would not be surprised if the Bank had to extend its pledge to buy gilts beyond Friday 14th October.”The central bank said on Tuesday it was prepared to buy up to £5bn a day in index-linked UK government bonds as it warned of “dysfunction” in the gilt market, where the cost of long-term borrowing this week hit its highest levels since the BoE began its emergency intervention. Later on Tuesday, the Bank said it had bought £1.95bn of index-linked bonds on the first day of its new intervention.The measures came just a day after it unveiled a new short-term funding programme it hoped would act as a pressure release valve for pension schemes that have been caught up in a vicious circle after chancellor Kwasi Kwarteng’s September 23 “mini” Budget set off a historic sell-off in gilts.“Two interventions in 24 hours is pretty extraordinary,” said Sandra Holdsworth, UK head of rates at Aegon Asset Management, adding that the BoE’s steps showed how the problem in the pension industry was “much bigger than anyone thought a week ago”.Downing Street said on Tuesday that prime minister Liz Truss would not drop the tax cuts in the “mini” Budget despite the central bank’s repeated interventions.“The prime minister remains confident that the measures set out will deliver growth in the UK economy,” a spokesperson said, adding that the additional measures announced by the central bank on Tuesday “will support an orderly end to the BoE’s temporary purchase scheme”.But, signalling its concern at Kwarteng’s unfunded tax cuts, the IMF said the chancellor’s fiscal package was “complicating the fight against inflation”.The fund’s head of financial stability added that the only way yields on UK government bonds were likely to come down was if the government reversed course on its tax cuts. Tobias Adrian said the tax cuts led markets to expect the BoE would have to raise interest rates more than otherwise. “Certainly, a change in fiscal policy would change the trajectory of interest rates going forward,” he said.Indicating that the BoE’s intervention should remain targeted and temporary — rather than extended — he said longer-lasting action to bring down gilt yields would be inflationary if the UK did not change course. “The BoE has the price stability objective and that is going to stand in the way of having permanently lower interest rates,” he said.The BoE’s emergency bond-buying scheme, launched on September 28, initially helped soothe jittery markets. But selling picked up strongly on Monday as analysts and investors worried about the programme’s looming end date on Friday.“The beginning of this week has seen a further significant repricing of UK government debt, particularly index-linked gilts. Dysfunction in this market, and the prospect of self-reinforcing ‘fire sale’ dynamics, pose a material risk to UK financial stability,” the BoE said.Inflation-linked gilts, a market dominated by defined-benefit pension schemes, have come under particular strain this week. The 10-year real yield surged 0.64 percentage points on Monday to 1.24 per cent, the biggest rise since at least 1992, according to Bloomberg data.After the BoE’s Tuesday announcement, a £1.1bn 30-year inflation-linked gilt sale by the Debt Management Office attracted solid demand. But the DMO paid the highest inflation-adjusted borrowing cost for any debt since 2008, with the bond pricing at a real yield of 1.55 per cent.The BoE increased the limit on its daily bond purchases to £10bn on Monday, from £5bn previously. It kept that overall cap intact on Tuesday, but said it would buy as much as £5bn a day in conventional gilts and £5bn in index-linked gilts until the programme expires on Friday. So far the central bank has only used a small portion of the total £65bn that it has allotted to bond buying.
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Perhaps somewhat overlooked by this headline was his remarks that there are “serious risks to financial stability in the UK” and potentially this had more of an impact on GBP as it dropped close to two big figures on the news. So that’s them told then however a subsequent article in the FT this morning seems to have walked this back as its reported that there have been private discussions that the Bank’s buying programme may be extended and the Bank will show flexibility in the face of market volatility. So that’s them in for the duration then. Just to leave everyone feeling a lot warmer inside the UK’s business minister Rees-Mogg stated that he has full confidence in the BoE governor and claimed that “there doesn’t seem to be a systemic problem in pension funds” despite the government’s best efforts.
Vediamo se si riesce a capire qualcosa in questo marasma nei prossimi giorni
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Credo che la BOE stia cercando di percorrere un sentiero molto stretto tra evitare un collasso finanziario e raggiungere gli obiettivi di politica monetaria, quindi deve da un lato rassicurare su una ampia liquidità nel brevissimo termine ma dall'altro assicurarsi che questa liquidità venga utilizzata per rendere sostenibili le posizioni dei fondi di investimento ad ulteriori rialzi dei tassi e non ne approfittino invece per continuare a fare business as usual confidando nel fatto che la BOE non possa permettersi di farli fallire. Questo per i fondi significa registrare perdite non piccole sulle loro posizioni esistenti, quindi saranno molto reticenti a farlo.
È un buon esempio di quanto si diceva nei mesi scorsi riguardo la difficoltà di normalizzare la politica monetaria, con i notevoli rischi per la stabilità finanziaria che si sono accumulati in questi anni di tassi molto bassi. La politica monetaria quindi avrebbe bisogno di un supporto da parte della politica fiscale, anche perché in un contesto di tassi non più a zero il moltiplicatore keynesiano torna rapidamente verso lo zero quindi ogni tentativo di stimolare la crescita con politiche fiscali espansive produce solo più inflazione e tassi più alti.
Temo che la classe politica non abbia chiaro il fatto che una volta sfuggiti dalla trappola della liquidità e dai tassi a zero il contesto in cui si muovono non ha più niente a che vedere con quello degli ultimi 10 anni e quindi non possono più spendere soldi a debito senza limiti, se lo faranno il prezzo sarà salatissimo (ogni aumento di deficit produrrà un aumento più che proporzionale del debito).
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Secondo il mio modestissimo parere, la situazione attuale non è troppo diversa da quella di fine anni '70, in cui ci fu l'unico altro grande shock energetico affrontato dall'Occidente nel dopoguerra (sebbene questo probabilmente lo supera come dimensioni complessive).Stretta dal lato dell'offerta, nessuna diminuzione spontanea dal lato della domanda (che anzi - dopo l'inevitabile tonfo durante il periodo pandemico - si è ripresa in modo molto spinto). La risultante è la c.d. stagflazione, con crescita economica stagnante per non dire anche in leggera contrazione assieme ad un'elevata inflazione.
Credo ci siano pochi dubbi su come debba essere orientata la politica monetaria in questo contesto (restrittiva).
La vera differenza rispetto a quel periodo, risiede però nei bilanci pubblici di diversi Stati. Il livello di indebitamento di allora era del tutto imparagonabile a quello odierno e consentiva molti più margini di manovra, anche in presenza di tassi di interesse elevati e crescenti.
Di conseguenza tramite una combinazione di politica monetaria restrittiva e politica fiscale espansiva, se ne uscì nei primi anni '80, anche se a prezzo di una temporanea recessione e di un pesante aumento del debito pubblico (vedi ad esempio Italia e USA, negli anni '80 hanno visto volare l'indebitamento in entrambi i casi)...ma appunto, essendoci buon margine di manovra perchè il debito pubblico in partenza era basso, il problema allora non appariva granchè pesante: si sarebbe sistemato tutto con una stretta fiscale successivamente.
Ora il contesto è completamente diverso: hai debiti pubblici molto alti, non solo in Italia ma in buona parte dei paesi occidentali, e in questo contesto lo Stato non può fare politiche fiscali espansive in scioltezza, pena ricevere bastonate sul mercato come quelle prese dalla Truss di recente. E il perchè è semplice da realizzare: se in Italia, un domani, i tassi di interesse aumentano anche solo dell'1%, tu, Stato, devi trovare 28 miliardi di Euro per pagare gli interessi. Hai voglia a metterti a fare altro debito? E come lo finanzi?
In sostanza credo che l'uscita passerà per una politica monetaria restrittiva assieme ad una politica fiscale più o meno "ferma", poichè di mettersi a stringere in questo contesto nessun politico se la sentirebbe, ma di fare altro deficit non se ne può parlare per i motivi suddetti. E non sarà certamente un'uscita indolore.
«L'Italia va avanti perché ci sono i fessi. I fessi lavorano, pagano, crepano. Chi fa la figura di mandare avanti l'Italia sono i furbi, che non fanno nulla, spendono e se la godono» (Giuseppe Prezzolini, 1921)
Neutrofilo, normofilo, fatalistofilo: il politically correct della meteo
27/11: fuori a calci i pregiudicati. Liberazione finalmente.
Rispetto agli anni 70 la differenza principale è il potere contrattuale del lavoro dipendente, che all'epoca aveva ottenuto adeguamenti stipendiali anche superiori all'inflazione (aiutati dalla presenza della scala mobile in Italia e altri sistemi di indicizzazione altrove) mentre adesso gli stipendi sono quasi fermi nonostante l'aumento fortissimo del costo della vita, specie per i redditi più bassi.
Di conseguenza l'inflazione importata (che è uno shock una tantum, un level shift e non un cambio di trend) fatica a tradursi in inflazione interna, la spirale prezzi-salari se i salari stanno fermi non può avvenire. Se l'inflazione importata non genera inflazione interna, al di là dell'inevitabile trasmissione dei costi dell'energia fino ai consumatori finali, basta un rallentamento dei costi dell'energia per far rallentare l'inflazione in tutti i settori, non è una situazione che si auto-alimenta. Finché la situazione resta questa la disinflazione sarà estremamente più semplice rispetto a quegli anni e non richiederà una grande stretta monetaria.
Negli anni 70 ci furono poi due shock distinti (guerra del Kippur nel 73 e rivoluzione iraniana nel 79) che portarono un doppio rialzo dei prezzi dell'energia nell'arco di pochi anni, un vero calo si raggiunse solo nel 1985 quando il cartello OPEC collassò anche a causa dell'arrivo sul mercato del petrolio del mare del Nord, adesso probabilmente abbiamo già superato la fase peggiore e la presenza di molte alternative a prezzi estremamente più bassi rispetto al prezzo spot attuale del gas in Europa dovrebbe permettere un calo dei prezzi dell'energia entro un orizzonte temporale ragionevole, le opportunità di arbitraggio non restano mai tali troppo a lungo e i vincoli infrastrutturali che le hanno generate possono essere colmati.
I rischi geopolitici poi sono sempre difficili da prevedere quindi tutto può succedere, ma questo vale in entrambe le direzioni, ad esempio un collasso del governo russo o del regime iraniano potrebbe far crollare i prezzi.
Segnalibri