Category Archives: GIS Statements

Americans vote for change and for stability

GIS statement by Prince Michael of Liechtenstein

Pence Trump Liechtenstein

The citizens of the United States have cast their votes and given their verdict after an extremely ugly campaign that took a strange turn as early as the primaries. The Democrats started almost immediately with two main candidates, which led to a less-than-impressive campaign for the nomination. The Republicans had many potential standard-bearers, but no favorite. This allowed outsider Donald Trump to win the nomination, even against the party establishment’s fierce opposition.

The electorate found little to like in either candidate – each had just two main points of attraction. For Hillary Clinton, the first was that she represented continuity of the existing political class, appealing to voters afraid of the unknown. For Mr. Trump, it was his status as the outsider, appealing to those who feel left out by system or dissatisfied with the state of politics. The second point, however, was rather negative: each was billed as the lesser of two evils. Most voters said they would cast their ballot for a candidate not because they agreed with his or her policies, but simply because the other candidate would be much worse.

The result was a campaign full of mudslinging. Ms. Clinton was portrayed as corrupt and Mr. Trump as an uncontrollable rogue. From a distance, it looked as if the U.S. was choosing between an unscrupulous insider and a riverboat gambler.

Both took populist positions, a phenomenon that democracies throughout the whole Western world are struggling with – including in the more established parties. So far, fortunately, institutions have been robust enough to hold back the worst consequences of this rise in populism.

Exaggerated reactions

In the end, the winner was Donald Trump. The Republicans retained control of the House of Representatives and the Senate. All of the pre-election prognoses proved drastically wrong.

The harsh anti-Trump reactions both within and without the U.S. are unfair, exaggerated and – especially when it comes to the financial markets – ridiculous. The prophesies of doom and gloom ignore quite a lot of fact.

Taking a dispassionate look at the situation, one sees that the difference between Mr. Trump and Ms. Clinton is mainly one of style. Ms. Clinton holds to the center-leftist line of the Democratic Party establishment, while Mr. Trump represents the voters who oppose that line. But when it came to trade, for example, both offered protectionist policies.

The strategies to prevent Mr. Trump from winning backfired. The arrogant conclusion that mainly uneducated white males would vote for him was plain wrong. Stirring up fear before a vote is usually counterproductive, as was also the case with Brexit. Allegations that Russia supported the Trump campaign by hacking into the Clinton campaign’s e-mail accounts were never proven. Obviously, these accusations did not significantly affect the vote.

Responsibility and cooperation

The result boils down to one fact: voters were turned off by the mudslinging and wanted change. They sent a strong message. However, the vote to keep Republicans majorities in both houses of Congress is a call for a certain degree of stability.

The U.S. government’s executive branch is important, but not all-powerful. It is ensconced in a robust system of governance with sophisticated checks and balances. The Republican majority in the House and Senate will follow a responsible line and are not dependent on the president.

For Donald Trump, the world will also change once he enters the Oval Office in January. The real danger is that the media and political establishments around the world, frustrated by this result, might try to marginalise the democratically elected president of the United States. The American people have made their choice, and the only way to avoid negative results is to accept their decision and find constructive ways to work with Mr. Trump. An outsider needs support to perform his duties successfully, not antagonism.

Read the original GIS statement here ->
Americans vote for change and for stability


*GIS is a global intelligence service providing independent, analytical, fact-based reports from a team of experts around the world. We also provide bespoke geopolitical consultancy services to businesses to support their international investment decisions. Our clients have access to expert insights in the fields of geopolitics, economics, defence, security and energy. Our experts provide scenarios on significant geopolitical events and trends. They use their knowledge to analyse the big picture and provide valuable recommendations of what is likely to happen next, in a way which informs long-term decision-making. Our experts play active roles in top universities, think-tanks, intelligence services, business and as government advisors. They have a unique blend of backgrounds and experience to deliver the narrative and understanding of global developments. They will help you develop a complete understanding of international affairs because they identify the key players, their motivations and what really matters in a changing world. Our experts examine the challenges and opportunities in economies old and new, identify emerging politicians and analyse and appraise new threats in a fast-changing world. They offer new ideas, fresh perspectives and rigorous study.

In defense of referenda

GIS statement by Prince Michael of Liechtenstein

Many well-meaning people around the world – especially those in the media and politics – have been shocked by three referenda that have not brought the results they had hoped for. The series started with Brexit. A slight majority in the United Kingdom voted, against the recommendation of their government and advice of European and world leaders, to exit the European Union.

In the second referendum, Hungarians voted to amend their constitution to block EU immigration settlement plans, against some rather strong requests from other European governments. The pressure included threats: Luxembourg Foreign Minister Jean Asselborn said Hungary should be “excluded” from the bloc. The government-sponsored proposal was overwhelmingly accepted by those who voted. However, the turnout of just 40 percent made the result void under Hungary’s constitution.

The third plebiscite resulted in the people of Colombia rejecting – by a tiny majority – a peace agreement that the government negotiated with FARC rebels.

referendum_colombia_farq

All three referenda were initiated by governments. The UK government wanted confirmation that the country should remain in the EU, while the Colombian government wanted its peace agreement sanctioned. Both failed.
Hungary’s case was different. The widely desired outcomes were for the proposals from the UK and Colombian governments to be approved, but for the Hungarian government’s proposal to be rejected. Just the contrary took place, although the Hungarian government failed to mobilize enough voters.
This has led many to question both the legitimacy of referenda in democracies and the system of direct democracy as such. Also, doubt has been cast on the people’s judgment when it comes to major issues.
It is true, as critics suggest, that in these three cases the governments’ main motive may have been to transfer responsibility for such decisions onto the people. However, the critics of referenda miss that the idea of direct democracy is not for governments to initiate such votes. Plebiscites usually bring excellent results if they are brought about by groups of concerned citizens. The problem in most Western democracies is that citizens are frustrated – and they are using these votes to voice their dissatisfaction.
A system of strong local autonomy and direct democracy using referenda initiated by citizens brings superior outcomes and normally shows the people’s sound judgment. Obviously, there must be a certain hurdle for such initiatives, such as a petition with a large number of authenticated signatures.
Switzerland has such a system, and it produces plenty of sensible decisions. For example, the Swiss voted by a big majority not to reduce time spent at work. They also rejected an initiative to increase the Swiss National Bank’s mandatory gold reserves.
In the United States, referenda do not play a role at the federal level. This reflects the fear of populism held by some of the framers of the constitution. They are also less necessary, because the main purpose of the constitution was to create a system of checks and balances and to provide for the protection of the freedom of the individual against the state.

Read the original GIS statement here ->
In defense of referenda


*GIS is a global intelligence service providing independent, analytical, fact-based reports from a team of experts around the world. We also provide bespoke geopolitical consultancy services to businesses to support their international investment decisions. Our clients have access to expert insights in the fields of geopolitics, economics, defense, security and energy. Our experts provide scenarios on significant geopolitical events and trends. They use their knowledge to analyze the big picture and provide valuable recommendations of what is likely to happen next, in a way which informs long-term decision-making. Our experts play active roles in top universities, think-tanks, intelligence services, business and as government advisors. They have a unique blend of backgrounds and experience to deliver the narrative and understanding of global developments. They will help you develop a complete understanding of international affairs because they identify the key players, their motivations and what really matters in a changing world. Our experts examine the challenges and opportunities in economies old and new, identify emerging politicians and analyze and appraise new threats in a fast-changing world. They offer new ideas, fresh perspectives and rigorous study.

Cheap money policy does not fool citizens

GIS Statement by Prince Michael von Liechtenstein

The socialist idea of a planned economy is gradually being made a reality by the monetary policies of central banks, such as the United States Federal Reserve and the European Central Bank. The idea is also promoted by a considerable number of western economists and politicians. The conventional wisdom within that group is that economies are driven mainly by consumption. They blissfully ignore the importance of investment and savings – even of the kinds that help people set money aside for retirement.
The purported logic behind the banks’ current monetary policy is that extremely low to negative interest rates will discourage savings and boost consumption, fanning economic growth. This is superficial, short-term thinking from ideologically misguided people.
The policy, if successfully applied, would lead to an increase of the indebtedness of households in the affected countries. Indebted peoples tend to be less free than societies with savings, which give individuals freedom and independence. One is tempted to start suspecting that a hidden agenda might play a role here – a politically motivated desire to push private households deeper into debt in order to gain better control of consumption and to be able to centralize investments by institutions. This would amount to a triumph of economic planners over markets.

yellen-draghi-2016

Fortunately, people have not been responding as expected. Citizens understand mathematics and they know that they need a financial cushion in hard times, and for retirement. They are aware that low to negative interest rates are eroding their financial reserves and the value of their nest eggs and retirement entitlements. Those negative effects are exacerbated by planned inflation. Inflation is biting already, but that is obscured by statistics that do not reflect the purchasing structure of a typical middle class household. Rightfully, people worry of being impoverished in their old age.
And they are acting on their concerns. Demonstrably, people in the countries with extremely low to negative interest rates have been saving more. They are bucking the trend that many politicians and central banks are irresponsibly trying to spawn.
The savings rate (the ratio of the disposable income that private households put aside as reserves) increased in Sweden from some 5 percent in 2006 to more than 16 percent in 2016. In Denmark during the same period, it shot up from a negative rate to more than 8 percent, and it has remained stable in Germany at around 10 percent. Even the U.S., normally not a savings champion, has seen a stable savings rate of some 5 percent. Switzerland, on the other hand, long a nation of big savers, increased its savings rate during that decade from about 15 percent to some 20 percent.
A danger exists that once the misguided monetary policy fails, as it must, some of the money-hungry governments will then try to confiscate large chunks of these savings. They also may be wiped out by inflation as soon as the huge money supplies created by central banks hit the economies.

Read the original GIS statement here ->
Cheap money policy does not fool citizens


*GIS is a global intelligence service providing independent, analytical, fact-based reports from a team of experts around the world. We also provide bespoke geopolitical consultancy services to businesses to support their international investment decisions. Our clients have access to expert insights in the fields of geopolitics, economics, defense, security and energy. Our experts provide scenarios on significant geopolitical events and trends. They use their knowledge to analyze the big picture and provide valuable recommendations of what is likely to happen next, in a way which informs long-term decision-making. Our experts play active roles in top universities, think-tanks, intelligence services, business and as government advisors. They have a unique blend of backgrounds and experience to deliver the narrative and understanding of global developments. They will help you develop a complete understanding of international affairs because they identify the key players, their motivations and what really matters in a changing world. Our experts examine the challenges and opportunities in economies old and new, identify emerging politicians and analyze and appraise new threats in a fast-changing world. They offer new ideas, fresh perspectives and rigorous study.

Market economies, regulation and crony capitalism

GIS statement by Prince Michael of Liechtenstein

It has been the intellectual fashion among commentators, politicians and some economists to claim that the financial crisis of 2008 and the ensuing economic downturn were caused by excessively free markets, or “turbo-capitalism.” From this they deduce that free markets foster inequality, and that inequality is the main source of today’s social and economic problems.
The result is a cry for more regulation and government intervention whose aim, in the words of one German finance minister, is to put the markets on a leash. We certainly need sensible regulations. But in this context, we should not forget the best and most efficient regulator. That would be competition, which keeps markets clean, honest and working for the best interests of all stakeholders and society in general. It must also be admitted that the biggest problems arose in the most highly regulated sector: the global financial industry. The tangled thicket of regulations favored large players (“too big to fail”) and led to concentration. This encouraged cartels and unethical price-fixing, as shown in the Libor scandal. Such malpractice by a handful of big players appears to have been silently tolerated by the regulatory authorities.

Market distortions

Meanwhile, irresponsible and populist overspending by governments over the past 30 years led to large budget deficits and sovereign debt. One of the main reasons why central banks adopted a policy of easy money was to alleviate this fiscal burden. Money is the raw material of the financial system. As in any industry, government intervention to keep raw materials cheap will distort markets, exaggerate profits and encourage waste and abuses. The problems in the financial sector were created by a regulatory concentration of the industry combined with cheap money. Capitalism, based on competition and free markets, was replaced by regulations and government intervention. In order to camouflage the crony system between governments and big banks, the term “turbo-capitalism” was coined. True markets and capitalism took the blame.
It did not stop there, however. Capitalism and free markets were also blamed for inequality, which was identified as the fundamental problem. This diagnosis is totally false. It is true that inequality is rising. But one has to analyze the reasons carefully before jumping to populist, ideological conclusions. Liberalization of markets for labor, goods and services has helped approximately 1 billion people escape from poverty over the past 25 years. In both magnitude and speed, this is an unprecedented step.
But an era of cheap money has brought huge problems. Zero to negative interest rates have destroyed the personal savings of vast numbers of people, encouraged a culture of debt and threaten to wipe out pension savings. Poverty may again become the norm among elderly people in the developed world.
A side effect of cheap money is asset bubbles, which drastically increase inequality on paper even if they fail to make the rich richer on a lasting basis (because bubbles burst). With so much money sloshing around, the equity and real estate markets are too expensive, reducing investment in the economy and hindering growth.
The real reason for today’s economic malaise and rising inequality is overregulation. This creates inefficiencies and encourages politicians to intervene in the economy for short-term, populist aims. Unfortunately, they will find cronies in the private sector, because market inefficiencies can be very profitable to a privileged few – to the detriment of business and the broader public.
Politicians and regulators should not be putting markets on a leash. They should be devising lean and efficient rules to allow free markets to do their work. Competition and innovation lead to prosperity, from which everyone benefits.

Read the original statement here -> GIS

Democracy and populists: a misconception

GIS* statement by Prince Michael of Liechtenstein

It is almost impossible to listen to politicians, intellectuals and media personalities lately without hearing the lament that liberal democracies are being threatened by populists, usually of an authoritarian bent.
At face value this assessment seems correct. But on closer examination, doubts grow about whether Western political systems can still be called democratic and liberal.
Representative democracy depends on legislators who represent the public interest (res publica), not that of a party or its ideology. In practice, however, this only works if most parliamentarians are independent people rather than professionals who view politics as a career. Unfortunately, in nearly all Western democracies, the latter predominate.
We commonly refer to parliamentarians as lawmakers. Today this is doubly true, as parliaments have evolved into factories belching forth new legislation, to the detriment of their true role of representing the nation’s long-term interests.
The political system has also evolved, as established parties do whatever it takes to uphold the status quo and maintain their grip on power. In so-called Western democracies, this has meant the established parties have become extremely populist themselves.
A myopic focus on the next election has led to strong uniformity within the political mainstream. Many people have stopped voting because they no longer see any differences. Without a real opposition, there is an absence of vigorous, fact-based debate – a vital ingredient of any democracy.
One way of stifling debate is the concept of “political correctness,” which excludes alternative thinking or raising ideas labeled as “radical.”

democracy-switzerland

Absurd system

Meanwhile, the tsunami of laws and regulations has led to a “nanny” state that little resembles its liberal roots. The powers of government have become increasingly centralized, to the detriment of individual responsibility and autonomy which would be better invested in regions and municipalities. As is well known, democracy functions best in smaller entities, where issues are closer to home and the individual voter can still be heard.
In Europe, countries like Switzerland and Liechtenstein – which uphold strong traditions of local autonomy, direct democracy by referendum, and a militia system requiring members of parliament to earn their own livings – are not threatened by authoritarian movements.
What we now call “liberal democracy” has in fact traveled a long way down the road toward centralized bureaucracy. It is a system that cannot be trusted. No longer liberal, it cannot really be called democratic, either.
The system’s absurdity became painfully obvious during the presidential campaign in the United States. Neither of the two major parties was able to select a convincing candidate after a lengthy series of primaries. Instead, we have been offered the political equivalent of mud-wrestling – an appalling spectacle on both sides.
According to a Reuters/Ipsos poll, 66 percent of American voters are convinced that the U.S. is on the wrong track, while 22 percent think things are headed in the right direction. The situation in Europe is not much different.
What ordinary people have grasped, consciously or subconsciously, is that the current political system is populist and ridden with self-interest. Its resistance to change and decentralization is palpable, as is its hostility to notions of personal responsibility and freedom of thought and expression. No wonder voters are looking for alternatives.

Read the original GIS statement here ->
Democracy and populists


*GIS is a global intelligence service providing independent, analytical, fact-based reports from a team of experts around the world. We also provide bespoke geopolitical consultancy services to businesses to support their international investment decisions. Our clients have access to expert insights in the fields of geopolitics, economics, defence, security and energy. Our experts provide scenarios on significant geopolitical events and trends. They use their knowledge to analyse the big picture and provide valuable recommendations of what is likely to happen next, in a way which informs long-term decision-making. Our experts play active roles in top universities, think-tanks, intelligence services, business and as government advisors. They have a unique blend of backgrounds and experience to deliver the narrative and understanding of global developments. They will help you develop a complete understanding of international affairs because they identify the key players, their motivations and what really matters in a changing world. Our experts examine the challenges and opportunities in economies old and new, identify emerging politicians and analyse and appraise new threats in a fast-changing world. They offer new ideas, fresh perspectives and rigorous study.