China’s economic policy pendulum has swung towards stimulus – but keep expectations low Expert comment jon.wallace 14 October 2024

Beijing historically swings between stimulus and frugality. But Xi Jinping’s ambition for self-reliance will constrain any new efforts to boost the economy.

Policymakers in Beijing have spent the past three weeks trying to convince the world that they are determined to deliver meaningful support to China’s sagging economy. 

Since late September statements have come from the central bank, which promised to cut interest rates, release liquidity, and provide funding to securities firms; from the politburo, which said it wanted to stabilize the real estate market, boost the capital market and shift towards looser fiscal and monetary policy; from the government’s main planning body, which promised a package of policies to support domestic demand; and from the finance minister himself, who at the weekend committed to issue more debt to recapitalize banks, support local governments and aid unhappy consumers.

Though details have been scant, the Chinese stock market has responded enthusiastically to this flurry of rhetoric. But the bigger question for the global economy is whether a boost in Chinese demand can return the country to its former status as a reliable destination for global exports and capital.

With that measure of success in mind, it is worth keeping expectations low. For the past 15 years, Chinese authorities have been wrestling with two conflicting objectives: to grow the economy, and to minimize the risk of financial instability. Those goals sit uneasily with each other because the effort to boost growth has relied on borrowing; and yet a rise in debt can increase the risk of a debt crisis.  

Chinese policymaking has responded to this dilemma by taking on a pendulum-like quality. Sometimes the authorities boost the economy by funding more investment spending. At other times that stimulus gets reined back as policymakers worry about the economy’s indebtedness.

In the aftermath of the great financial crisis of 2008, for example, Beijing’s over-riding priority was to protect the Chinese economy from the risk of recession by implementing a huge credit-financed stimulus to spur investment in infrastructure and real estate. 

By 2012, though, concerns about over-indebtedness began to dominate, and a withdrawal of stimulus saw the Chinese economy sag. In late 2015,a new round of stimulus measures emerged, only to be withdrawn again around 2018.

With that pendulum in mind, the optimistic take on what policymakers have said in recent weeks is that we are now back in stimulus mode. That’s true in part, but three factors suggest that this time is a little different.

Different times

First, China’s rising debt burden increases authorities’ worries about financial stability. Data from the BIS show that China’s private sector debt almost doubled in the past 15 years to 200 per cent of GDP at the end of 2023. The comparable debt stock for the US and the Eurozone was much lower, at 150 per cent each.

Second, ideology is playing a growing role in shaping Chinese economic policy. The most visible effect has been to prioritize Chinese state-owned enterprises, at the expense of the private sector. This became especially visible in 2021 with a campaign against the ‘unrestrained expansion of capital’ – Beijing’s way of expressing its anxiety that China’s corporate sector was behaving in a manner inconsistent with Chinese Communist Party goals. 

Although that phrase is no longer current, entrepreneurs’ animal spirits remain in the doldrums. They are likely to stay there as long as President Xi Jinping’s preference is for ‘bigger, better, stronger’ state-owned enterprises, which use capital much less efficiently than private firms.

Third, today Chinese policy is shaped by Beijing’s perception of geopolitical risks that it faces. Those risks became starkly apparent in February 2022 after Russia’s invasion of Ukraine, when essentially every country that prints a reserve currency joined to freeze Russia’s access to its foreign exchange reserves. That enveloped the Russian economy in a network of sanctions that sharply constrained its access to a whole range of imports.

It is not difficult to consider a similar scenario confronting China. Beijing’s approach to economic policy is therefore heavily influenced by the need to insulate itself from that kind of risk (though Chinese policy had in any case been tilting in this direction for years).

‘Asymmetric decoupling’

This policy can be described as ‘asymmetric decoupling’: a simultaneous effort on the one hand to reduce China’s reliance on the rest of the world by substituting imports with domestic production; and, on the other hand, to increase the rest of the world’s reliance on China by establishing itself as a ‘zhizao qiangguo’, or manufacturing powerhouse.

This is the right context in which to understand a central economic goal of the authorities, which is to reduce the economy’s dependence on real estate investment. 

The intention is to allow capital and credit resources to migrate to new sectors of the economy that will help to build that manufacturing powerhouse: high-tech and green energy, in particular. What that means in practice is that any forthcoming support for the real estate sector will be rather limited.

What are the top economic priorities for the new US President? 19 November 2024 — 8:00AM TO 9:15AM Anonymous (not verified) 15 October 2024 Chatham House

A post-US election discussion on the outlook for US economic policy and implications for the global economy.

A fortnight on from the US Presidential and Congressional elections, this expert panel, organised by Chatham House’s Global Economy and Finance Programme in collaboration with the Society of Professional Economists, will consider the outlook for US economic policy and implications for the global economy.

Questions for discussion will include:

• What will the economic priorities of the new President be? What will be the role of industrial strategy/green transition, regulation, trade, migration and fiscal policy?
• How far will the President be constrained by other branches of the US government, including Congress, the courts and state governments?
• What will the implications be for the global economy broadly and through the specific channels of trade, investment, monetary policy and debt?
• How will the new President handle economic and financial relations with the US’s traditional G7 allies, China and the Global South?

The institute occupies a position of respect and trust, and is committed to fostering inclusive dialogue at all events. Event attendees are expected to uphold this by adhering to our code of conduct.

The US election could create the need for a G7 alternative – without American representation Expert comment jon.wallace 15 October 2024

Traditional allies of the US need to find a way to work together on some global policy issues even when the US itself is not engaged. A ‘G6 plus’ group could provide an answer.

When Jamaica pulled out of the nascent West Indies Federation in 1961, Trinidad and Tobago’s then prime minister, Dr Eric Williams, famously said ‘One from ten leaves nought’. In the run up to the US elections on 5 November, the US’s longstanding allies need to ask themselves if the same logic must apply to the G7. 

A Donald Trump victory will result in stark differences between the US and its closest partners on key global economic issues. US allies would no doubt try and persuade the new president to moderate his position, but experience suggests that this will have little, if any, effect.  

They may then want to work around the US, or on a parallel track. But doing so will be very hard unless they have a framework for discussing and developing ideas collectively. Could some form of ‘G6 plus’ forum help?

The role of the G7 today

The G7 no longer acts as a steering group for the global economy. However, it remains a critical forum for the US and its allies to coordinate their efforts to help solve global problems, to defend common Western interests, to resolve internal disputes and to underpin information exchange. 

In the past two years, the G7 has come to be seen by the US and other members as one of the most effective international mechanisms. It has played a critical role coordinating Western efforts to recover from the last pandemic and prepare for future ones.  

It has been pivotal in weakening Russia’s economy following the attack on Ukraine and has acted to strengthen Western economic security and resilience more broadly.  

The G7 has also responded to ‘Global South’ calls for help in dealing with the pandemic aftermath and the Ukraine war. 

Trump’s approach to the G7

The problem is that the G7’s effectiveness depends critically on full US engagement, sometimes as a leader of initiatives (such as the decision to impose an ‘oil price cap’ on Russia in autumn 2022) or as an essential partner. 

If elected, former President Trump is likely to abandon the G7 as an instrument of international economic policy. This is effectively what happened during his first presidency and there are reasons to expect this to be repeated. 

Many of Trump’s international economic policies are highly controversial with US allies, including his apparent determination to withdraw from the Paris Agreement, impose across the board 10-20 per cent tariffs and even punish countries for not using the dollar. His domestic policies, including mass deportation of undocumented immigrants and aggressive deregulation and fiscal easing could lead to further sharp disagreements.  

Furthermore, Trump demonstrates general antipathy towards multilateralism. Under his presidency, US representatives in the G7 and G20 sought to weaken core values and policies that have underpinned international economic cooperation for decades – including the importance of a rules based international system, the IMF’s global safety net role, and the responsibility of the advanced world to assist the poorest countries financially.  

Other G7 and G20 countries tried to preserve as much as possible of the previous consensus. But in the case of climate change, the only solution was to have a separate text for the US. Critically, such efforts diverted time and attention from the enormous challenges facing the world at the time. 

Trump went through four different G7/G20 Sherpas during his presidency and disowned the final declaration of the 2018 Canadian G7 summit after hundreds of hours of negotiation, and despite previously signing off on the text. The US failed to host a final leaders’ summit, even virtually, during his administration’s G7 presidency.  

Of course, how far Trump carries through his most radical policies will depend, among other things, on the outcome of the Congressional elections and the stance taken by US courts. 

He may also have second thoughts if elected. His first administration sometimes supported significant multilateral economic initiatives, notably the G20’s Debt Service Suspension Initiative and ‘Common Framework’ for debt rescheduling. 

But, in the event of a second Trump administration, the most likely scenario for the G7 is a repeat of the paralysis of 2017-20, which would be even more costly today.

Should Vice President Kamala Harris win on 5 November, the situation should in theory be very different. She will likely continue with President Joe Biden’s collaborative approach to the G7.

Nonetheless, major issues may still arise where America’s allies want to take a fundamentally different approach and need a mechanism to do so. These could include policy on the WTO, de-risking the economic relationship with China, restricting carbon leakage, and regulating US-dominated big tech.  

How should US allies respond?

No US ally will want to be seen to be leading development of a new ‘G6’ that excludes the US. The top priority will be securing the best possible relationship with the incoming president. Political weakness and/or new governments in France, Germany, the UK and Japan will add to this hesitancy.

Any new forum will therefore need to be as low profile as possible. The concept should initially be discussed in private by sherpas from each participating country. Once established, officials should as far as possible meet online. Leaders should only meet online, at least initially.  

Participants should be fully transparent about the forum’s existence and avoid any grand ‘framing’ along the lines of the EU’s ‘strategic autonomy’. Instead, it should be described as a practical, largely technocratic forum intended to coordinate activity among Western economic powers in those areas where the US chooses not to engage. A suitably innocuous name – such as the ‘the sustainable growth club’ could help.

Topics should be limited to those requiring urgent collective global action, such as climate, health, tech governance, development finance and trade – and where the US federal government is not an ‘essential’ partner. Such a forum should not therefore address defence.  

Will the next US president invest in Middle East stability or walk away? Expert comment LToremark 17 October 2024

Harris and Trump look set to continue US deprioritization of the region, but they would do better to enlist the support of their partners.

When stability in the Middle East feels so distant, it is much to the dismay of America’s partners that conflict management in the region has fallen down the list of US priorities. As Israel’s war in Gaza has reached its tragic one-year milestone, a new front has opened in Lebanon and further direct escalation between Israel and Iran seems imminent, it is hoped that the next US president will take a bolder role.

Namely, leaders in the UK, Europe and the Middle East are looking to whoever is in the White House to do more to restrain Israel, deliver self-determination – if not a peace process – for Palestine, and contain Iran’s interventionist regional role and nuclear programme.

While it is naive to expect either Kamala Harris or Donald Trump to prioritize conflict management in the Middle East above immigration, the economy, the war in Ukraine or competition with China, the past year has shown the danger of ignoring or sidestepping cascading and glaring regional challenges. 

For Harris or Trump to have a more sustainable impact in the region, they must enlist the support of European, British and Middle Eastern partners and work collectively to build multilateral processes that can set a stronger foundation for regional stability.

Repercussions of deprioritization

The Abraham Accords, which normalized relations between Israel, the UAE and Bahrain, led many to believe that a new era of integration was possible in the Middle East. To some, it also vindicated the US decision to deprioritize the region that had started with Barack Obama’s presidency and his drawing down from ‘forever wars’ in Iraq and Afghanistan. Presidents Trump and Biden continued that approach, encouraging America’s partners in the Middle East to assume greater responsibility for regional stability. Notably, neither renewed negotiations with Iran despite both committing to deliver a stronger deal with Tehran.

The shock of the 7 October attacks shattered that view, and the longer overhang of the US decision to deprioritize the region has visibly played out over the past twelve months. 

While the Biden administration marshalled full political and military support for Israel and there is not – yet – a direct regional war with Iran, the US has been unsuccessful in multiple areas: delivering a ceasefire agreement, securing the release of hostages, maintaining regular humanitarian relief and producing a so-called ‘day after’ plan of action.  

Moreover, the US temporary arrangement with Iran to prevent nuclear acceleration in exchange for marginal sanctions relief has also shown the limits of compartmentalization when managing a portfolio of issues with Tehran.  

No new approach

Trump and Harris’s policy approaches to conflict in the region further show their limited intent to change course on the Middle East. Both leaders are aware that Middle East politics, particularly on Israel–Palestine and Iran – the key issues requiring urgent attention – has become a US partisan minefield that could alienate voters. Despite their different plans, with Trump inclined to be more unilateral, they will both continue the trend of gradually deprioritizing conflict management in favour of greater burden sharing by those in the region.  

President Trump has promised a tougher approach aimed at curtailing conflict and advancing US interests. On Iran, Trump has made clear that he would return to a policy of maximum pressure on the Islamic Republic, perhaps to come to new agreement with Tehran or alternatively to constrain Iran even further.  He has championed his administration’s withdrawal from the 2015 Joint Comprehensive Plan of Action (JCPOA), also known as the Iran nuclear deal. Trump has argued that this approach put economic strain on Iran and reduced its ability to fund proxy groups. 

His advisers have also indicated that they would extend this pressure campaign and provide maximum support to the Iranian opposition and activists. Yet without clear goals or a willingness to negotiate with Tehran to contain further nuclear advancements, the result may well be another round of instability.  

Should he return to office, Trump has indicated that he would immediately put an end to the war in Gaza, though how remains unclear. More broadly, he would likely double down on the agreements to promote Israeli–Saudi normalization and attempt to bypass the Palestinian leadership, focusing on broader regional normalization. But sidestepping Palestinian self-determination, which since 7 October has been the condition for broader Arab normalization, will be difficult for Saudi Arabia to sell to its broader, now politicized, public.  

Many Middle East leaders, including those from the Arabian peninsula, might welcome the return of a Trump presidency, but Trump’s ‘America First’ policy did not provide Arab Gulf leaders, especially Riyadh, with protection from Iran’s attack on Saudi oil facilities seen in September 2019.  

Trump also promised without success to deliver a bigger, better Iran deal that would extend the JCPOA and include compromises on Tehran’s support for proxy groups and constraints on its missile programme. Rather than imposing his previous strategy, a second Trump presidency would be more effective if it worked collaboratively with transatlantic and regional partners on regional security issues pertaining to Israel–Palestine and Iran.  

Continuation and reinforcement?

Despite her recent tough talk on Iran, it is expected that Harris will reinforce the current wave of diplomatic efforts to deescalate and manage tensions with Tehran, rather than advocate for ‘maximum pressure’.  

Harris would likely build on efforts to revive a new paradigm that could contain Iran’s nuclear programme. She is expected to emphasize a strategy of engagement combined with pressure to prevent Iran from obtaining a nuclear weapon, while addressing its regional activities.   

Now that Iran has provided missiles and drones to Russia, it is clear that Tehran’s transfer of lethal aid needs an urgent response beyond continued reliance on sanctions. Harris’s team would be wise to pursue a multilateral negotiation process bringing together Europe and the UK, who are already discussing these issues, to collectively engage Tehran on a broader deal.

Moreover, winning support from Israel and the Gulf is a necessary condition to build a more sustainable Iranian agreement. 

Addressing Russia’s use of forced displacement in Ukraine 7 November 2024 — 12:30PM TO 2:00PM Anonymous (not verified) 17 October 2024 Chatham House and Online

Experts consider the role international law could play in responding to Russia’s forcible movement of people during its war against Ukraine.

In the two and a half years since its full-scale invasion of Ukraine, evidence has emerged of Russia’s use of forced deportation and forcible transfer. Russia has also employed arbitrary detention as a tool of war and occupation.

Much attention has been on the International Criminal Court’s arrest warrants against Russian President Vladimir Putin and his children’s commissioner Maria Alekseyevna Lvova-Belova. These warrants were issued in relation to the alleged war crimes concerning the unlawful deportation of children from Ukraine to Russia and the unlawful transfer of thousands of children from occupied areas of Ukraine.

Meanwhile, Ukrainian citizens are being arrested and sent to Russia to serve prison sentences. They are often detained without charge and conviction.

This panel discussion explores:

• What evidence is emerging of Russia using unlawful deportation and transfer of children, and the arbitrary detention of civilians?
• What is the role and significance of international law on these issues?
• What challenges might these practices create for later peace negotiations, as well as the securing of justice?
• What is the process of releasing illegally detained Ukrainians, and Ukrainian children in particular, and reuniting them with their families? How do Russian volunteers inside Russia cooperate with Ukrainian NGOs to facilitate family reunification?

The event includes a screening of part of the documentary After the Rain: Putin’s Stolen Children. 

The institute occupies a position of respect and trust, and is committed to fostering inclusive dialogue at all events. Event attendees are expected to uphold this by adhering to our code of conduct.

Independent Thinking: How can France survive its budget crisis? Audio john.pollock 17 October 2024

Sophie Pedder and Shahin Vallée join the podcast to discuss France’s contentious budget and political drama, and the potential impact on Europe and beyond.

On this episode

France is facing political turmoil. The survival of Michel Barnier’s new government rests on whether he can pass a controversial budget intended to rescue the country from its huge fiscal deficit. Bronwen Maddox is joined by Sophie Pedder, the Paris bureau chief of The Economist, Shahin Vallée, a former adviser to Emmanuel Macron and Armida van Rij, the head of our Europe Programme.

About Independent Thinking

Independent Thinking is a weekly international affairs podcast hosted by our director Bronwen Maddox, in conversation with leading policymakers, journalists, and Chatham House experts providing insight on the latest international issues.

More ways to listen: Apple Podcasts, Spotify.

How to revive Europe’s economy and unlock its potential 7 November 2024 — 6:00PM TO 7:00PM Anonymous (not verified) 22 October 2024 Chatham House and Online

Enrico Letta, former prime minister of Italy, and other experts discuss how the European Union’s economy must adapt to a challenging world.

Amid a fractured geopolitical environment, global trade volatility and hardening protectionist policies in many countries, the European economy must adapt fast. The single market is a key driver of European integration, but it was designed in a very different global economic context.

Launched in April, Enrico Letta’s Much more than a market report set out how the European Union should adapt the arrangements of the single market to ensure it delivers prosperity and economic security for EU citizens in the 21st century. The report resonates with ongoing debates over the future of European competitiveness, industrial strategy and how to respond to an apparently deglobalizing world. In this event, Letta and other experts on the European economy and integration will discuss the prospect of meaningful reform of the single market, and what the incoming Commission can do to ensure the EU unlocks the potential of its economy for all its citizens.

Key questions will include:

• What dynamics are shaping the Europe’s economic landscape?
• What opportunities are there to enhance the strength and competitiveness of the single market
• How can the EU’s leaders ensure the single market is aligned with other strategic objectives such as security and enlargement?
• What political hurdles may prevent progress on single market reform? And how can these be overcome?

The institute occupies a position of respect and trust, and is committed to fostering inclusive dialogue at all events. Event attendees are expected to uphold this by adhering to our code of conduct.

The MENA uprisings: Five years on, what role is civil society playing? 31 October 2024 — 2:00PM TO 3:00PM Anonymous (not verified) 23 October 2024 Online

Panellists examine the protest movements’ legacies in different context and how civil society continues to work towards positive change.

Five years after nation-wide protests in Algeria, Iraq, Lebanon, and Sudan demanded systemic changes and political reforms, the situation remains largely unchanged. In some cases, it has deteriorated. Sudan is facing a humanitarian catastrophe amidst an ongoing civil war. Lebanon is dealing with Israeli aggression amidst a severe economic crisis with little response from the caretaker government. In Iraq and Algeria, relative stability masks the reality of increased suppression of dissent. This preservation of the status quo supports the entrenched political structures that strive to uphold it.

The current absence of large-scale street protests in these countries should not be taken as an indication that populations are content with the status quo. The issues that ignited the initial uprisings remain and in many cases have worsened. Despite enormous challenges, activists continue to navigate their systems to survive and instigate change. In the face of increasing difficulties, they are raising awareness of their countries’ predicaments and are finding alternative economic solutions. Additionally they are mobilizing community support, and pushing to voice their disillusionment. All these efforts aim at actively participating in shaping decisions that determines their future.

This webinar explores:

• What has been the impact of the uprisings in Algeria, Iraq, Lebanon, and Sudan?
• How are civil society and activists contributing to change within their communities?
• What is the current landscape for civic engagement within the politics, society and economy in these countries?
• What prospects are there for solidarity and cooperation among civil society actors across these regions and beyond?

Independent Thinking: Will debt constrain Western foreign policy? Audio john.pollock 24 October 2024

Patrick Wintour and Ranil Dissanayake join the podcast ahead of the UK Budget to discuss the high debt facing G7 economies and its impact on foreign, defence and development policies.

On this episode

Ahead of a crucial Budget by Chancellor Rachel Reeves, UK national debt is at almost 100 per cent of GDP – and it’s not alone. Many G7 economies face massive debt levels, restricting ambitions when it comes to foreign policy and global engagement. 

Bronwen Maddox is joined by Patrick Wintour, the Guardian’s diplomatic editor and Ranil Dissanayake, a senior research fellow at the Centre for Global Development. With them are Olivia O’Sullivan and David Lubin from Chatham House.

About Independent Thinking

Independent Thinking is a weekly international affairs podcast hosted by our director Bronwen Maddox, in conversation with leading policymakers, journalists, and Chatham House experts providing insight on the latest international issues.

More ways to listen: Apple Podcasts, Spotify.

In conversation with James Manyika, Senior Vice President of Research, Technology and Society at Google 12 December 2024 — 11:15AM TO 12:45PM Anonymous (not verified) 29 October 2024 Chatham House and Online

A conversation on AI’s global, societal and economic impacts.

2024 has been a landmark year for Artificial Intelligence (AI) development, deployment and use, with significant progress in AI-driven science, governance and cooperation. Looking ahead, AI continues to demonstrate economic promise and potential to expand on scientific breakthroughs in areas such as climate and health. This wave of innovation is occurring against a backdrop of geopolitical uncertainty and not all countries are fully able to participate. Heading into 2025, there are urgent questions about how best to maximise shared opportunities when it comes to AI and to advance global cooperation.

James Manyika, Senior Vice President of Research, Technology & Society at Google, will unpack what 2025 will bring for AI in science, economics, global governance and international cooperation. 

Key questions include:

• What will be AI’s global societal and economic impact in 2025 and beyond? 
• What are the ways AI could help increase economic growth and economy-wide productivity? What factors must be in place for this to happen?
• How best can we maximise shared opportunities and advance global cooperation when it comes to AI? Where can public-private partnerships unlock scientific breakthroughs for societal progress, combatting shared global challenges such as climate change and global health issues?  
• What are the principles of safe, responsible AI, and how should companies remain responsive to their evolution and integrate them into technology design and implementation? 
• What is the current – and ideal – role of technology companies in emerging mechanisms for global cooperation and national governance on AI?

This event is being held in partnership with Google.

You will receive notice by 13:00 on Wednesday 11 December if you have been successful in securing an in-person place.

The institute occupies a position of respect and trust, and is committed to fostering inclusive dialogue at all events. Event attendees are expected to uphold this by adhering to our code of conduct.

As the ruling party claims victory in Georgia’s disputed election, Western condemnation is no longer enough Expert comment LToremark 29 October 2024

As tens of thousands take to the streets to protest the election results, Georgia faces a familiar crisis – with a few key differences.

As the people of Georgia went to the polls on 26 October, many were hoping not only for a democratic change of government but also for an end to one-party dominance and a return to the path of European integration. The previously weak and divided opposition had grouped itself into four major electoral centres, promising a coalition government and framing these elections as a choice between Europe and Russia. 

Ahead of the election, President Salome Zourabishvili had put forward the Georgian Charter, a blueprint for a stable and democratic transition to a new style of governance and for initiating reforms to fulfil conditions for EU accession. It was signed by all pro-European and pro-Western opposition parties. 

The official election results gave the ruling Georgian Dream party a 54 per cent majority in contrast with exit polls that gave the opposition a 10 per cent lead. President Zourabishvili and the opposition parties refuse to recognize the results, beginning a long process of contestation with allegations of fraud and street protests. As the disappointment sets in and the streets once again replace the ballot box as a conduit for democratic change, there is a sense of déja vu.

Georgia has seen this before. A party sweeps to power on the tide of popular protest, initiates reforms to meet public expectations but, by the end of its second term, it takes an authoritarian turn. As it overstays its welcome, it starts manipulating elections to cling to power. People once again take to the streets and a new party wins by a landslide only to repeat the same cycle. But with each turn, the grip the ruling elites have on power gets stronger and the methods they use become more sophisticated. State security becomes equated with regime stability, leaving no space for normal democratic contestation or expressions of dissent. 

Although what is happening in Georgia fits this familiar pattern, there are some consequential differences. 

First, these were the first fully proportional elections. Previously, a mixed system of representation meant that the incumbency always had an advantage by dominating majoritarian districts. A new electoral system had created a not unreasonable expectation that these elections, if held freely, would result in a coalition government. The hope was this could help break the vicious cycle of Georgian politics, sustained by an extreme form of majoritarianism and a winner-takes-all political culture.

The Georgian Dream party was contesting its fourth consecutive term against a backdrop of falling popularity and growing societal mobilization in opposition to its authoritarian inclinations. Despite all this, it secured – some would insist manufactured – an absolute majority in elections that international observers say were marred by serious irregularities and fell short of democratic standards. 

The second important difference is that these elections were not only about saving Georgia’s democracy but also about rescuing its European perspective. Since Georgia was granted EU candidate status in December 2023, its parliament has adopted Russian-style laws on foreign agents and combating LGBTIQ+ ‘propaganda’. 

It has also adopted a strongly Eurosceptic political discourse, pushing back on international criticism and accusing EU and US officials of interference in domestic affairs and disregard for Georgia’s sovereignty. In response, the EU has suspended accession talks with Georgia indefinitely while the US has imposed targeted sanctions on high-ranking Georgian officials and judges. 

Georgia’s democratic backsliding at home and its pivot away from the West are both simultaneous and interrelated. It was widely hoped these elections would be a course correction and return Georgia to the path of European and Euro-Atlantic integration. The election results, if they stick, will prevent this from happening. A Georgian Dream government will not work to fulfil conditions for EU accession, viewed as a challenge to its hold on power. 

The third and final difference is that these elections took place in the context of heightened geopolitical confrontation. The Georgian Dream ‘victory’ is a win for anti-liberal, conservative forces around the world championed, among others, by Hungary’s Viktor Orbán. He was the first to congratulate Georgian Dream for its declared success and even visited Tbilisi in a show of solidarity and ideological alignment. 

The election result is also a win for Russia. It strengthens Moscow’s influence in the South Caucasus, which has waned as a result of the war in Ukraine and the fall of Nagorny-Karabakh. Russian officials and propagandist were quick to congratulate Georgian Dream, wishing them success in standing up to Western pressures and offering help in case things got tough. 

From Moscow’s perspective, Georgia’s elections are part of a global hybrid war. They represent a local battle in the ongoing geopolitical contest between Russia and the West, between the rules-based global order and competitive multipolarity. 

As Georgia repeats a familiar pattern, what do the election results mean for its future? While clear predictions are difficult at this stage, it is worth bearing in mind that as the democratic resilience of the Georgian society has strengthened over time, so too has the state capacity to supress and control. 

Independent Thinking: Why is North Korea sending troops to Russia? Audio john.pollock 31 October 2024

Orysia Lutsevych, Edward Howell and Yossi Mekelberg discuss North Korean troops fighting with Russian forces against Ukraine, as well as the issue of military conscription.

On this episode

North Korea is sending troops to Russia, but what is Kim Jong-Un hoping to get from Vladmir Putin for this military assistance against Ukraine? The panel also discuss the role military conscription plays in Israel, South Korea and Ukraine’s defence.

Bronwen Maddox is joined by Edward Howell, the Korea Foundation fellow at Chatham House, Orysia Lutsevych, the head of our Ukraine Forum and Yossi Mekelberg, a senior consulting fellow with our Middle East and North Africa Programme.

About Independent Thinking

Independent Thinking is a weekly international affairs podcast hosted by our director Bronwen Maddox, in conversation with leading policymakers, journalists, and Chatham House experts providing insight on the latest international issues.

More ways to listen: Apple Podcasts, Spotify.

Harris and Trump's shared goal masks a fundamental AI policy divide Expert comment rgold.drupal 3 November 2024

Both presidential candidates will pursue US tech dominance but differ on the means to achieve it.

There remain some differences between the US presidential candidates’ positions on the governance of artificial intelligence and other emerging technology, notably around competition. 

But under either future administration, US decision-making looks set to be heavily influenced by growing securitization, the aims of the US technology industry and broader competition with China. 

‘Safe’ AI development 

Vice President Kamala Harris attended the inaugural Global AI Safety summit in the UK in 2023, where she announced President Joe Biden’s Executive Order on AI. This significant move by the federal government sought to define national and cyber security guidelines for AI developers and outline privacy and transparency guarantees. It also committed the federal government to a review of the National Security implications of this emerging technology, which was published last week.

In her remarks at the summit, Harris was clear that her definitions of safety extended beyond catastrophic risk mitigation to societal and personal harm. She noted the corrosive effects of some algorithmic decision-making and disinformation on democracy, appealing for AI that is developed ‘in the service of the public interest’.

A number of initiatives developed during the Biden administration have attempted to steer emerging technology as it takes root in society. This includes the establishment of the US AI Safety Institute, various schemes on global AI governance and investment in Public AI projects like the National AI Research Resource (NAIRR).

The US public is largely supportive: polling by the AI Policy Institute (AIPI) points to a majority preference for safety standards governing the US effort to lead in AI, rather than pedal-to-the-metal development. Investment in public options on AI and the infrastructure required to develop and sustain it is a bold direction that the incoming administration should consider expanding.

Biden’s Executive Order on AI has come under fire by the Trump campaign. At a rally in Iowa, Trump explained that he would cancel the order ‘on day one’, echoing a Republican platform that described it as imposing ‘Radical Leftwing ideas’ . 

Trump does, however, have his own track record in technology policy. During his first presidency, his administration passed an Executive Order on AI, stressing that ‘continued American leadership in Artificial Intelligence is of paramount importance to maintaining the economic and national security of the United States’. The tools and institutions announced as part of the order – including AI research investment, national AI research institutes and AI regulatory guidance including on federal use of AI – echo those of the current administration. 

Four years is a long time in AI, however. As the power of this technology is revealed, talk of safety may give way to talk of security. While the candidates may disagree on the role of the federal government in setting standards, there will be close alignment on the central need for US supremacy in national security. Neither administration seems likely to erect barriers to securitization of AI should it emerge as a critical strategic asset.

AI regulation at home 

American industry will remain the pivotal force shaping the US AI ecosystem, particularly as America jostles for position as the maker of the global rules governing AI. A notable aspect of Biden’s AI Executive Order was where it staked responsibility. Reports by AI and Cloud companies on the safety of their tools and infrastructure are sent to the Department of Commerce.

Under Secretary Gina Raimondo, whose star continues to rise, the department has become significantly more engaged with technology companies. In the absence of any other legal authority, AI governance has therefore sat under the purview of a secretary who herself has noted that they are ‘not a regulator’. 

The trend of industry leaders driving the government agenda on AI is replicated in other departments. There was an outcry over the composition of the new Department of Homeland Security advisory panel, the Artificial Intelligence and Security Board, with civil society groups concerned about the preponderance of industry voices: the 22-member panel includes the CEOs of OpenAI, Anthropic, NVIDIA, IBM, AWS, Adobe, Microsoft and Alphabet.

Under a Harris presidency, these trends seem likely to continue. Plus with deadlock in Congress probable, establishing new legal authorities for emerging technology will be difficult. That will likely mean emerging tech governance remains heavily influenced by the Department for Commerce. 

Like Harris, Trump has his allies in industry. While the Biden administration has courted the CEOs of AI companies who have historically spoken out in favour of regulation, Trump’s allies tend towards a more deregulatory agenda. 

Silicon Valley billionaires Elon Musk and Marc Andreessen have backed Trump’s plans to minimize AI regulation, lauding his support for ‘little tech’. They have also backed reported plans for so-called ‘Manhattan Projects’ to develop military technology, stewarded by ‘industry-led’ agencies. Trump’s aversion to strong regulatory institutions may mean an end to Biden’s anti-trust efforts, benefitting the biggest voices in the room, though his VP pick may disagree. JD Vance has somewhat surprisingly come out strongly in defence of the current chair of the Federal Trade Commission, Lina Khan, and her anti-trust efforts targeting US big tech.

Regardless, business interests will likely shape either a Harris or Trump administration’s approach as the US grapples with balancing the ambitions of its industry with an increasingly protectionist stance towards its biggest import market, China.

Competition abroad

China looms large in the imaginations of both campaigns. 

The US has signalled to its allies that American AI standards should replace Chinese standards. Export controls on semiconductors were expanded in September this year, with key voices in the industry – notably the Netherlands, Japan and South Korea – describing the restrictions as ‘economically motivated’ despite nominally being tied to national security by the US. 

Following its snap election, Japanese politics has entered uncharted waters Expert comment LToremark 5 November 2024

Prime Minister Ishiba’s election gamble has failed. Japan now faces another period of political uncertainty, which could affect its international standing.

In Japan’s snap election on 27 October, the ruling coalition of the Liberal Democratic Party (LDP) and New Komeito lost the overwhelming majority it had held since the 2012 general election. The ruling coalition now has 215 seats, leaving it 18 seats short of a majority. 

The largest opposition party is the Constitutional Democratic Party of Japan (CDP), which gained 50 seats to 148. The second largest opposition party is the Japan Innovation Party (Ishin), which lost six seats to 38, and the third largest opposition party is the National Democratic Party (NDP), which gained 21 seats to 28.

But the opposition is divided and there is no real appetite to form a coalition government. This will likely result in a hung parliament, which will further destabilize Japan’s government.

The election results reveal three key things  about the state of Japanese politics and what comes next.

First, that Prime Minister Ishiba’s snap election gamble has failed. The aim was for Ishiba, a non-mainstream member of the LDP, to strengthen the party base and stabilize his administration. But with the ruling coalition losing its majority, the party base has been further weakened and the Ishiba administration is now more likely to be short-lived. LDP voters as well as the public in general  had hoped that Ishiba, as the ‘opposition within the party’, would change the LDP’s structure and government policies, eliminate the uncertainty surrounding party funding and increase transparency on how MPs use public funds to finance political activities.

However, when Ishiba became LDP leader and prime minister, he abandoned his previously more critical stance and prioritized carrying on the policies of the mainstream LDP, leaving his supporters feeling betrayed.

Second, while the ruling coalition has been punished, the people of Japan still did not vote for a change of government. The opposition is divided and, despite its gains in this election, the CDP is not fully committed to take the lead and consolidate the opposition to form a coalition. The CDP also suffers from internal division. The left wing of the party would prefer a coalition with the Communist Party, while the right wing of the party does not want to form a coalition with the LDP or the Communist Party, preferring a partner such as the NDP.

Third, the NDP has become the key to future Japanese politics. By becoming the minority ruling party, the NDP is in a position to control the fate of Ishiba administration. While the CDP has no intention of cooperating with the LDP, the NDP is more willing to do so in order to implement its own policies. As the budget cannot be passed without the NDP’s cooperation, the ruling coalition will have no choice but to accept the NDP’s policy of substantial tax cuts through the expansion of tax credits. It will also likely have to accept an option for married couples to decide their family names, which requires a change of civil codes and is something it has been reluctant to do so far. 

If the NDP’s demands are rejected, a no-confidence motion will likely be submitted and passed, leaving the Ishiba cabinet with no choice but to resign or dissolve the House of Representatives (the lower house of Japan’s parliament).

But the NDP has chosen to not form a coalition with the ruling party and enter government. Why? From the NDP’s point of view, forming a coalition with the LDP, would mean getting involved in the LDP’s internal turmoil – something it wishes to avoid. In addition, elections to the House of Councillors (upper house of parliament) will be held in the summer of 2025. The NDP may have judged that it will have a better chance of implementing its policies by cooperating with the government on a case-by-case basis, rather than forming a coalition with a party that is losing public support and risk following suit.

The minority ruling system that has emerged after the election is extremely rare in Japan’s political history and is likely to make its politics even more unstable in the years ahead. The Ishiba administration will probably be able to survive until the budget is passed in March next year by cooperating with the NDP, but beyond that its prospects are unclear.

As the House of Councillors elections get closer, some in the LDP may say that they cannot fight the election with Ishiba as prime minister. If so, they may choose the option of a same-day election for the lower and the upper house. The cost of an election campaign is significant, and the LDP’s financial strength gives it an advantage in the case of a same-day election. There is also a strong possibility that the public will choose the LDP to regain stability in government. However, this election has shown that public distrust of the LDP is high, and if Ishiba continues to be pushed around by the NDP, his party’s chances of winning would be reduced.

Japanese politics has entered uncharted waters, where the patterns and customs of the past do not apply. There are now doubts both at home and abroad as to whether Ishiba, who has a weak party base, will be able to stay on and steer the government. Over the past decade, the Abe and Kishida administrations have provided Japan with political stability, which has in turn enhanced its international presence. An unstable political system, with frequent changes of government, will likely lead to a decline in Japan’s international influence.

There is also a risk that US–Japan relations  could become unstable. Although the NDP does not have a strong agenda to change the course of this relationship, Ishiba may struggle to keep the promise made by his predecessors to increase defence spending. Ishiba’s nationalist posture could also create a confrontational relationship with the United States, while his weak leadership means he may not seek to invest in strengthening the US–Japan alliance. 

Donald Trump’s win in the US presidential election could pose a further risk. Although Trump might be open to Ishiba’s demand for parity with the US, he could become irritated with Ishiba’s weak domestic position. Ishiba may not be able to make decisions – or a deal with Trump – unless the NDP agrees to it.

Is there an end to the Central Bank of Libya crisis? 14 November 2024 — 3:00PM TO 4:00PM Anonymous (not verified) 6 November 2024 Online

Experts discuss implications for Libya’s economic governance.

In August this year, the Libyan Presidency Council moved to replace Libya’s longtime central bank governor, Sadiq al-Kabir. Kabir had been in position since September 2011, and in the period following the administrative division of Libya, he rose to prominence as one of the most influential figures on the Libyan political scene.

In the absence of a functioning relationship between executive and legislature, the Central Bank of Libya (CBL) took on many of the competencies of the ministry of finance and became an arbiter of which payments were made and when. In October, following UN-led and parallel back-channel negotiations, a new governor was selected and the CBL board of directors reconstituted.

In this webinar, experts will examine:

• What challenges will the new CBL leadership face?
• Can we expect significant changes for Libya’s economic governance?
• What are the implications for the balance of power between Libya’s rival power centres?

This webinar is organized in partnership with the North Africa Initiative (NAI) at the Foreign Policy Institute (FPI) of the Johns Hopkins Paul H. Nitze School of Advanced International Studies.

Independent Thinking: What does Donald Trump’s re-election mean for the world? Audio john.pollock 8 November 2024

Edward Luce, Leslie Vinjamuri and Gerald Seib join the podcast this week to discuss Donald Trump’s victory over Kamala Harris in the US presidential election.

On this episode

Donald Trump has decisively defeated Kamala Harris in the US presidential election. What does his return to the White House mean for America and the world? 

Bronwen Maddox is joined by Edward Luce, the FT’s North America editor, Gerald Seib, the former Washington bureau chief of The Wall Street Journal and Leslie Vinjamuri, the head of our US and Americas programme.

About Independent Thinking

Independent Thinking is a weekly international affairs podcast hosted by our director Bronwen Maddox, in conversation with leading policymakers, journalists, and Chatham House experts providing insight on the latest international issues.

More ways to listen: Apple Podcasts, Spotify.

Trump and his growing number of European allies threaten the European project Expert comment LToremark 8 November 2024

With Trump in the White House, a key challenge for Europe will be the growing transatlantic illiberal ties which risk undermining European unity.

As the US presidential election result became clear, European leaders followed a similar formula when congratulating President-elect Trump. They offered their congratulations, mentioned previous good working relations with the US (special points for a nod to long-standing relations), and – most importantly – emphasized the need for this to continue for the benefit of the citizens of both their country and the US.

The formula was a telling sign of the political bartering most European heads of state expect with Trump back in the White House. The exception, of course, were Trump’s European allies who were simply ecstatic.

Transatlantic illiberalism

Trump’s growing number of European allies and the increase of illiberalism and populism is perhaps the most worrying development for Europe. In 2016, some of Trump’s counterparts in Europe were Angela Merkel in Germany, Emmanuel Macron in France, Mark Rutte in the Netherlands, and Giuseppe Conte in Italy. Regardless of their record, they were moderates.

The picture looks very different today. Anti-war extremist parties Alternative for Germany and the Sahra Wagenknecht Alliance are on the rise in Germany. In France, pro-Russia Marine le Pen has been able to reduce support for Ukraine from €3 billion to €2 billion in the draft French budget. In the Netherlands, the far-right Freedom Party is the biggest coalition partner. In Italy, Prime Minister Georgia Meloni hails from a neo-fascist party. Hungarian Prime Minister Viktor Orbán’s populist and illiberal playbook is being replicated across Europe. 

Meanwhile in Poland, moderate prime minister, Donald Tusk, is experiencing the difficulties of reversing damage done by the previous populist government.

What European populist leaders have in common is a deep-seated scepticism of the EU and a desire to erode it from within. And many of these leaders also welcome the return of Trump.

It is no coincidence that Orbán scheduled the European Political Community Summit, hosted by Hungary, to take place just days after the US election. The Trump win was an added bonus. This meant European heads of state travelled to Budapest for the summit still reeling from – or rejoicing at – the election result. 

Orbán would like to position himself as Trump’s man in Europe. He has spent the past four years building ties with the president-elect and the MAGA wing of the Republican party. Trump even namechecked Orbán – a Eurosceptic Putin-supporter – during the presidential debate.

Italy’s Meloni, meanwhile, has so far worked with EU institutions and NATO rather than against them: she has supported EU and NATO resolutions for Ukraine and demonstrated opposition to Russia. But this may have been a strategic calculation. She likely looked at her country’s balance sheet and realized she needed the European Commission’s COVID-19 recovery funds. 

But with the fund coming to an end and given her history of Euroscepticism and pro-Russian views, the transatlantic illiberal ties mean she may now feel emboldened to revise her positions. She is already deploying the illiberal playbook domestically.

Policy implications for Europe of a second Trump term 

Despite some ideological similarities, Trump’s policies will not be good for his European allies. He has threatened to impose 10 to 20 per cent tariffs on all EU imports. For Italy and the Netherlands, the second and fifth largest EU exporters to the US, this would have direct negative impacts on their economies.

Increased tariffs on Chinese goods – Trump has threatened up to 60 per cent – would also have an impact on Europe’s economies. Rerouting of Chinese goods could see China dump overproduction in Europe, one of the few remaining relatively open markets, and make European products compete with cheaper Chinese goods in Europe and on the global market. 

Neither of these developments are positive for export-led European countries. In France, the EU’s fourth largest exporter to the US, Marine le Pen – previously a strong supporter of Trump – had a notably muted response to his victory due to concerns over a trade war.

Even European leaders who might have hoped for a different election outcome may seek to hedge their bets. There are two things that are clear about Trump: he is unpredictable and transactional. 

It is quite possible that some European states, in particular frontline states with genuine fears over Russia’s imperialist ambitions, will seek to buy Trump’s support through bilateral arms deals – despite their distaste for Trump’s position vis-à-vis Russia. These countries already have some of the highest defence spending in NATO, with Poland, Estonia and Latvia leading the way, so this will not irk Trump – arms deals would simply be an additional insurance premium.

Countries rushing to make bilateral deals with the US risks a similar uncoordinated race for American arms deals as during Trump’s first term. This would in turn undermine much-needed European defence industrial cooperation efforts. As the need to reduce dependencies on third countries – even for defence equipment from historically close allies – has become increasingly clear, this would be a problematic development.

The silver lining may be that it could galvanize the UK and the EU just enough to take action on UK-EU security and defence cooperation, of which the defence industrial piece is the most essential.

Europe disunited

The transatlantic link between populist, illiberal leaders should be a concern. Trump is no longer isolated in Europe, he is rapidly accumulating allies among European heads of state. These leaders agree on the perceived existential threat posed by migration, the need for so-called ‘traditional family values’ and ‘anti-wokeism’. But beyond that, they share and want to advance an illiberal view of the world, with ramifications from security and global trade to human rights – and directly threatening the European project.

In conversation with Julien Harneis, UN Assistant Secretary-General 18 November 2024 — 2:30PM TO 3:30PM Anonymous (not verified) 11 November 2024 Chatham House and Online

In this discussion, Julien Harneis will give critical insights into the UN’s humanitarian response in Yemen and the importance of maintaining independent humanitarian assistance.

According to the United Nations, Yemen has faced the world’s worst humanitarian crisis in the last decade, with over 20 million people in need of assistance. Years of ongoing conflict have devastated infrastructure, displaced millions, and caused widespread food insecurity and health emergencies. Access to essential services remains a daily struggle, and the escalating economic collapse has left vulnerable communities facing critical shortages in food, water, and medical supplies.

However, humanitarian actors are continually facing challenges in delivering aid to Yemen due to security threats and supply chain barriers, highlighting the urgent need for coordinated and sustainable international assistance.

UN Assistant Secretary-General and Humanitarian Coordinator for Yemen, Julien Harneis, will provide an account of the humanitarian mission and evolving strategies in Yemen, the impact of regional conflicts in the delivery of aid and discuss other key questions including:

The break-up of Scholz’s coalition government signals the end of Germany’s old economic model Expert comment jon.wallace 12 November 2024

The coalition could not agree how to fund new support for Ukraine and failed to fully implement the ‘Zeitenwende’. A new government must push through reform.

As Europeans were still processing Donald Trump’s victory in the 2024 US presidential election, an acrimonious break up occurred 4000 miles east of Washington DC.

Reports had been circulating for weeks about the fragile state of Germany’s ‘traffic light’ coalition government led by German Chancellor Olaf Scholz, consisting of the centre-left Social Democratic Party (SPD), the Green Party, and liberal Free Democratic Party (FDP).

The expectation had been that the coalition would hold on for a few more weeks and might even be given a new lease of life by Trump’s re-election. Instead, it collapsed on the day Trump’s win was confirmed. An unusually angry Scholtz announced in a live address that he had fired FDP Finance Minister Christian Lindner, effectively breaking up the coalition.

At the heart of the dispute was the so-called ‘debt brake’ – a constitutional mechanism which restricts Germany’s annual public deficit to 0.35 per cent of GDP. Lindner proposed a set of reforms which were unpalatable to the SPD and the Greens. 

In response, Scholz suggested declaring an emergency, which would have suspended the debt brake. That in turn was unacceptable to Lindner, leading to his sacking by the Chancellor.

Practically, this means the SPD and the Greens are now in a minority coalition, without agreement on the 2025 budget or the votes in parliament to pass it. They also still face the challenge of the debt brake.

A vote of confidence will take place in December, with elections to be held before the end of February 2025 latest.

The end of Germany’s economic model

At the root of Germany’s political crisis is the country’s economic model. For decades, Germany relied on a system that depended on cheap Russian gas, cheap imports of consumer goods from China, high-value exports – particularly in the automotive sector – and the US security umbrella.

With Russian energy no longer viable, the global economic landscape shifting, and Donald Trump on his way back to the White House, that model is no longer workable. And Germany’s economy is expected to contract by 0.2 per cent in 2024 – a contraction for the second year running.

The ‘Zeitenwende’, announced by Scholz in the wake of Russia’s full-scale invasion of Ukraine, should have signalled a turnaround of both foreign and economic policy, given how much the two are interconnected. Yet on both fronts, too little changed.

Germany’s reliance on Russian gas did come to an abrupt end in 2022. And Germany is Ukraine’s second largest military aid donor after the US, while accepting the most Ukrainian refugees.

But the ‘Zeitenwende’ turnaround ended there. Scholz’s coalition government failed to prepare for long-term investment in defence at the levels required by creating an off-budget defence spending fund which would have run out in 2027. The draft budget for 2025 showed defence spending would have been cut, as would support for Ukraine.

Germany has also struggled to turn around its economic woes, with the car industry particularly affected. Cheap Chinese EVs and new energy technologies are competing with Germany’s most powerful companies. Volkswagen, the country’s largest car manufacturer, has announced plant closures and layoffs due to shrinking profit margins.  

To the west, Trump’s threat to impose 10 to 20 per cent tariffs on all EU imports meant share prices of Volkswagen, BMW, Mercedez-Benz and Porsche all dropped between 4 to 7 per cent following news of his re-election.

To the east, trade tensions between the EU and China are intensifying. Yet rather than choosing to diversify, German companies have doubled down on their bets in China, with German investment in the country rising from €6.5bn for the whole of 2023 to €7.3bn in the first half of 2024 alone – only exposing carmakers further.

Germany’s support for Ukraine

Like French President Emmanuel Macron, Scholz had already been weakened by the results of the European Parliamentary elections in June. With the collapse of his traffic light coalition, the EU’s Franco-German ‘engine’ is now well and truly stalled – until new leadership can be found. This weakness comes at a perilous moment when clear, united European leadership, and much increased funding, is needed to shore up support for Ukraine.