Abramovich may owe UK £1bn in unpaid tax

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Original article by Simon Lock Eleanor Rose William Dahlgreen Harriet Agerholm Rob Davies James Oliver republished from The Bureau of Investigative Journalism under Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.

Leaked documents suggest oligarch’s billions were managed from UK, undermining offshore tax avoidance plan

Roman Abramovich may owe as much as a billion pounds in UK tax and potential penalties on profits made through a vast offshore hedge fund operation, the Bureau of Investigative Journalism can reveal after an analysis of leaked documents.

If HMRC found wrongdoing and levied the maximum penalties available, this would surpass former F1 boss Bernie Ecclestone’s £653m record tax settlement last year.

Between the late 1990s and early 2022, the billionaire – who is now sanctioned in the UK and EU – held as much as $6bn in a global network of hundreds of hedge funds. The sums totalled nearly half his estimated fortune.

These generated huge returns, which were then used to bankroll other parts of his business empire – including his financing of Chelsea Football Club.

Now a joint investigation with the BBC and the Guardian based on documents from Cyprus Confidential, the project led by the International Consortium of Investigative Journalists and Paper Trail Media, reveals evidence that Abramovich may have avoided huge amounts of UK tax on the profits by skirting “corporate residency” rules.

The investments were structured through a series of British Virgin Island companies, which ultimately belonged to a Cypriot trust of which Abramovich was sole beneficiary. A so-called tax haven, the BVI does not levy taxes on profits generated by businesses registered there.

Cyprus Confidential

Cyprus Confidential is a joint reporting project digging through a massive leak of financial information from Cyprus.

However, leaked documents and filings from the US financial regulator suggest that investment decisions were not really taking place in the BVI. Instead, one of Abramovich’s closest associates appears to have been controlling the companies from the UK.

UK tax laws state that a company’s residence – and therefore its tax jurisdiction – is based on where it is centrally managed and controlled. In other words, it’s about where the business decisions take place.

In simple terms, Abramovich’s companies were registered offshore but were apparently being run from the UK. That would mean they should have been paying UK taxes. The data is not always complete – and it’s possible some key elements were missing from the files reviewed by reporters. But, according to experts, the evidence is enough to raise serious questions.

While an exact figure is impossible to calculate, the total sums potentially owed are enormous. The Cyprus Confidential cache contains thousands of corporate documents laying out how Abramovich managed his enormous wealth. There is a window of time between 2013 and 2018 for which reporters were able to review a full set of financial accounts. Abramovich’s hedge fund investment companies recorded profits of $1.4bn in this period. Had a flat rate of UK corporation tax been levied, this alone would amount to over £200m.

Since the hedge fund operation lasted for over two decades, the real figure is likely to be much higher. Between 1999 and 2018, it’s possible to see the relevant companies made – at the very minimum – $3.8bn in profits.

Calculations based on UK corporation tax rates during that period give a minimum figure of £536m in unpaid tax.

On top of that, if HMRC were to deem the tax avoided or evaded, there could be penalties as well as interest. These could amount to about £1bn.

Representatives for Abramovich said he obtained independent professional tax and legal advice and acted in accordance with it. He denied knowledge of any unlawful tax avoidance or evasion scheme and said he was not liable for any scheme.

Offshore Network

Documents show Abramovich’s huge hedge fund investments date back to the late 90s, when he owned and managed the Russian oil giant Sibneft. The company’s 2005 sale to Russian state-backed oil company, Gazprom, netted Abramovich over $13bn, making him one of the world’s wealthiest men.

It was around the time of this sale that he began channelling billions of dollars into a BVI company he owned called Keygrove Holdings Ltd.

Keygrove lay at the centre of a complex web of investment holding companies. It owned more than a dozen other BVI companies, all set up to invest in hedge funds and other financial products. Sibneft money flowed into Keygrove, which injected the funds into these subsidiaries.

Huge profits accumulated in Keygrove, which then loaned the money out to other entities within Abramovich’s corporate network. Over $2bn went to a BVI company called Sonora Capital Holdings Ltd, which in turn lent money onwards to another offshore entity, Camberley International Investments Ltd.

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Camberley itself was set up for one purpose: bankrolling Chelsea Football Club, which it did through loans to Chelsea’s parent company, Fordstam Ltd.

By 2021 – the same year Chelsea won the Champions League, Club World Cup and UEFA Super Cup – Camberley had loaned a massive $1.9bn to Chelsea via Fordstam. Of that, over a quarter (nearly $500m) came from Sonora, backed by its loans from Keygrove.

The leaked documents mean we can follow the meandering route of the money, showing that at least some of the untaxed profits from Abramovich’s hedge fund investments ended up on the balance sheet of Chelsea.

‘Sweeping’ Powers of Attorney

The key to how Abramovich managed his vast hedge fund investments came through a series of leaked documents from the early 2000s.

Labelled “general powers of attorney”, these agreements handed huge effective decision-making powers over Keygrove’s subsidiaries – the companies investing in hedge funds – to one of Abramovich’s oldest and closest associates, Eugene Shvidler.

Under the terms of the agreement, Shvidler had the power to buy assets with the companies’ money, manage their bank accounts and enter deals on their behalf. It effectively gave him carte blanche to run the companies as he saw fit.

The documents are hugely significant because there is a longstanding precedent in UK tax law that a company is deemed tax resident based on where its centre of operations is located, regardless of where in the world it might be registered. In corporate terms, this is known as the management and control of a company.

The on-paper directors of these BVI companies were based across the world in Austria, Germany, Russia and the UK. That alone could have presented its own tax implications. But documents seen by TBIJ suggest these people were simply nominees who signed the documentation on the company’s behalf.

The general power of attorney documents seem to indicate the real control lay with Shvidler – who was a UK resident.

Like Abramovich, he was placed under UK sanctions following Russia’s invasion of Ukraine in 2022. In 2023, he brought a legal case against the UK government over his sanctions designation.

In his sworn testimony, Shvidler stated that he was a dual US-UK citizen who had been a UK resident since 2004 and a naturalised citizen from 2010, having been granted a visa under the Highly Skilled Migrant Programme – known as the “golden visa” because wealth was the determining factor in a successful application.

The general powers of attorney were in place for the hedge fund companies until at least 2009. Alongside them, the same companies entered into “investment advisory” agreements with a BVI company called Millennium Capital Ventures Ltd (owned by Shvidler’s then-wife and controlled by him), which again delegated huge powers to make investment decisions.

After 2009, there are no further records for powers of attorney, but it appears that a new “investment management” arrangement between Millennium and Keygrove had been set up.

Once again, Millennium was granted similar powers to the general powers of attorney, as well as compensation of $12m a year. Experts spoken to by TBIJ said this means Keygrove would likely have also been tax-resident in the UK.

However, the new arrangement appears to have left Shvidler’s central role unchanged: he made all the key decisions.

Lawyers for Shvidler said he denied knowingly or negligently being involved in an unlawful scheme to avoid paying tax. They said that the investments uncovered by TBIJ were the subject of very careful and detailed tax planning, undertaken and advised on by leading tax advisors.

But Professor Rita De La Feria, chair of tax law at Leeds University, said: “Nothing is happening in the BVI. I think this is a pretty big smoking gun. That would be … strong evidence that the effective management of the company was not taking place in the BVI.”

Paul Monaghan, chief executive of the Fair Tax Foundation, said: “There appears to be an entire swarm of red flags surrounding the tax arrangements of Roman Abramovich.

“The combined use of Cyprus and the British Virgin Islands alone presents a massive cause for concern, given both are among the world’s worst enablers of tax avoidance. Cyprus has a long-standing reputation as a preferred tax haven for Russian oligarchs and as a sordid indulger of illicit financial flows more generally. The British Virgin Islands is a go-to destination for those wishing to ensure that their financial conduct is hidden away and that their activities are rendered anonymous.

“If it transpires that the central management and control of the investment decision making took place in the UK, with the board effectively rubber-stamping decisions up the chain, then there could be a sizeable tax liability in the UK [and] further investigation by HMRC would seem to be warranted.”

Across the Pond

Court records filed in the US shed further light on Shvidler’s continued central role in managing the hedge fund investments.

They detail that from the outset, Abramovich and his associates worked closely with a small financial advisory business in the suburbs of New York called Concord Management.

Run by Michael Matlin, another Russian emigre and former classmate of Shvidler, its role was to recommend hundreds of hedge funds for Abramovich to invest in.

Concord was rewarded handsomely for its work – $300,000 a month including expenses, plus a yearly bonus, according to a 2012 consulting agreement. Abramovich and his associates were Concord’s only clients.

After the Russian invasion of Ukraine, the Securities and Exchange Commission (SEC), a US regulatory body, brought legal action against Concord, claiming it had failed to register as an investment adviser and so avoided regulatory scrutiny.

The SEC’s filings spell out how it believed the operation worked. Throughout the filings, Abramovich is referred to as “UBO A” and Shvidler as “Person B”.

According to the SEC, Shvidler was “the point of contact for receiving investment advice from Matlin and Concord and for either deciding or communicating the decision whether to go forward with recommended transactions”.

The SEC complaint goes into granular detail about Shvidler’s work. According to the regulator, each month he would be sent a “short list” of hedge funds by Matlin, containing key details about the funds. Shvidler would then communicate which investments were approved – often in one-on-one telephone calls with Matlin. He also received regular updates on existing investments.

How did we decode the SEC filings?

UBO A is described as a “former Russian political official widely regarded as having political connections to the Russian Federation and vast wealth from the privatisation of state-run industries after the collapse of the former Soviet Union.”

The filing goes on to say that since March 2022, the United Kingdom and the European Union “designated UBO A as a sanctioned individual, and in April 2022, the Royal Court of Jersey issued an order freezing his assets.”

All this tallies perfectly with Abramovich, a former Russian state governor for the icy northern region of Chukotka. He was among the first of the prominent Russian oligarchs to be sanctioned following the outbreak of the war in 2022, while Jersey courts said they froze $7bn (£5.4bn) of assets linked to him not long after.

Person B meanwhile is described as “reportedly a citizen of both the United States and the United Kingdom” as well as a “longtime close associate of UBO A” who was placed on the UK sanctions list on 24 March 2022. Again, this matches perfectly with Shvidler.

Much of the description of the investing process accords with what we know from the leaked documents. A ‘Company 1’ is described as the parent company of over a dozen ‘Investing Entities’ which held the assets, while a ‘Company 2’ was a UK-registered company affiliated to UBO A providing “back-office administrative support”.

Company 1 is Keygrove, the central node in the hedge fund strategy, whose BVI subsidiaries invested in hedge funds, while Company 2 is Millhouse Capital, which operated out of offices at Stamford Bridge, Chelsea’s stadium, and whose administrative work appears frequently in the leaked cache.

Throughout this process, Shvidler, Matlin and another senior Concord employee would share confidential information about the recommendations, decisions and cash positions by phone, text messages, or messaging applications like WhatsApp and Telegram.

Through the Looking Glass

The scale of the investments were staggering. Each year between 2013 and 2018, on average, $6bn was invested across 140 hedge funds.

It was also very profitable. Over the same time period, the value of Abramovich’s investments increased by over $1.4bn – and this was just a five-year window within an operation that lasted over two decades.

But along with the total size of Abramovich’s investments and the scale of annual profits, another figure stands out: “Revenue Reserve”. This is an accounting term used to describe the portion of a company’s profits that are kept in the business instead of being paid out to shareholders.

In Abramovich’s hedge fund companies, these figures were colossal. By the end of 2016, over $3.2bn in profit had been kept on the company balance sheet. In the following two years, the dozen companies were merged into just three giant holding companies. Collectively they retained another $600m in profits by 2018.

How did we calculate the £1bn tax bill?

An HMRC tax bill consists of three elements: the unpaid tax bill; interest; and a penalty when rules have been breached.

The unpaid bill

To estimate the penalty, we needed to know how profitable the companies were. Fortunately we had complete accounts for all the companies involved in the scheme from 2013 to 2018.

These accounts were audited, and provide profit totals based on how much the underlying investments increased in value. So there’s the first caveat: the estimate is only as good as the source data.

The accounts show total profits of $1.4bn. To get an estimate for unpaid tax, we took the UK corporation tax rates for each of the years 2013-2018, and worked out the corresponding tax liability based on the profits.

We then converted the total from dollars into pounds using the exchange rates for the end of each year. This gave an estimated liability of £212m.

However, the scheme had been operating since the late 1990s, and we also wanted to estimate the profits before 2013. To do that, we looked at the “revenue reserve”, a figure that shows the total profit that has remained in a business since it was founded. It effectively describes profits that have been re-invested, rather than paid out to shareholders.

So, a second caveat. The revenue reserve figure represents the minimum possible profit the company made. It’s possible that money was taken out of these businesses prior to 2013 that we simply don’t know about. However, between 2013 and 2018, accounts show that didn’t happen: the company did not pay out dividends.

By the end of 2012, the companies had amassed – at the very least – $2.3bn in profit.

We don’t know when the profits were truly made, and if it were early on they would be subject to higher tax rates. In order to be completely fair, we applied the lowest level of corporation tax during the 1999-2012 period. We then converted this figure into pounds using the average dollar-to-pound exchange rate for the same period.

Our estimate for pre-2012 tax therefore was £325m, giving us a total bill of £537m.

The interest

All unpaid tax is subject to interest repayments. Late repayments use simple interest, not compound. Once again, we were conservative. Technically the interest would kick in from the moment the tax was due, but instead we took the total that could be owed from the end of 2018 and calculated the interest payments from then to the present day. Based on those rates, £537m owed at the end of 2018 would generate a further £145m in interest. This would keep rising until paid off.

Combined with the tax penalty, this gives a figure of just over £680m.

The penalty

Unpaid tax bills are based on estimations of past profits. Tax penalties, however, work on a sliding scale and balance lots of factors, including how companies and people respond when they are being investigated. At the lower end, HMRC could simply attempt to recoup the tax – this would be the £680m figure.

However, they could apply penalties under rules to punish taxpayers who should have declared tax. The “failure to notify” penalties range from 0% to 100% and factor in whether the avoidance was deliberate, whether the taxpayer declared it, and if they tried to hide it.

Based on TBIJ’s evidence, this case could fall under “deliberate” and “prompted” – meaning Abramovich or his agents should have known that HMRC would need to be told and chose not to. The upper range for this is 70% of the tax bill.

Apply that the unpaid bill of £537m, combined with interest, and the total tax liability would be £1.06bn.

This means that from the point they were registered up to December 2018, the companies had made, at the very minimum, $3.8bn in profits. But it could be higher still if any of that profit had previously been extracted.

If Abramovich’s associate played this central role in managing these investments on his behalf, this should all have been subject to UK corporation tax, according to experts consulted during this investigation.

Between 1999 and 2015, UK corporation tax averaged about 25%. Abramovich’s $3.8bn would therefore leave a potential approximate unpaid tax figure of £536m based on historic exchange rates. With interest, the figure rises to almost £700m.

On top of that, if HMRC were to deem the tax avoided or evaded, there could be penalties as well as interest. These could amount to as much as double the unpaid tax bill – about £1bn.

The figure alone is bigger than the UK’s entire budget for rebuilding the 500 schools in England “in the greatest need”.

It also accounts for well over half the funds sitting in a frozen Barclays bank account following Abramovich’s sale of Chelsea to a consortium led by Tood Boehly in May 2022, and which had been earmarked “for the benefit of all victims of the war in Ukraine”.

HMRC told TBIJ it couldn’t comment on individual taxpayers, nor confirm or deny an investigation. A spokesperson said: “We’re continuing to lead international efforts to improve global transparency and are committed to ensuring everyone pays the right tax under the law, regardless of wealth or status.”

Concord Management, Michael Matlin, Keygrove Holdings and representatives for Millhouse Capital didn’t respond to requests for comment. Chelsea Football Club declined to comment.

Original article by Simon Lock Eleanor Rose William Dahlgreen Harriet Agerholm Rob Davies James Oliver republished from The Bureau of Investigative Journalism under Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.

Continue ReadingAbramovich may owe UK £1bn in unpaid tax

Taxing the “super rich” pays off for Brazil’s gov’t

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https://en.mercopress.com/2025/01/29/taxing-the-super-rich-pays-off-for-brazil-s-gov-t

“We’re just bringing the super-rich into the same tax bracket as the middle class,” said Barreirinhas

Brazilian Finance Minister Fernando Haddad’s policy of taxing the “super rich” yielded unprecedented returns of R$ 20.6 billion (US$ 3.32 billion) to the South American country’s coffers in 2024, Federal Revenue Secretary Robinson Barreirinhas confirmed Tuesday. The strategy focuses on exclusive investment funds and offshore assets, it was explained.

Under the new scheme, previously untaxed exclusive funds now contributed R$ 13 billion (US$ 2.10 billion), while offshore investments added R$ 7.67 billion (US$ 1.24 billion), thus closing legal loopholes allowing the wealthy to dodge substantial contributions. “This is about justice,” Barreirinhas argued. According to Brazilian Government figures, the economy grew by around 3.5% last year.

https://en.mercopress.com/2025/01/29/taxing-the-super-rich-pays-off-for-brazil-s-gov-t

Continue ReadingTaxing the “super rich” pays off for Brazil’s gov’t

Trump 2.0: the rise of an ‘anti-elite’ elite in US politics

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Elon Musk urges you to be a Fascist like him, says that you can ignore facts and reality then.
Elon Musk urges you to be a Fascist like him, says that you can ignore facts and reality then.

William Genieys, Sciences Po and Mohammad-Saïd Darviche, Université de Montpellier

US president Donald Trump is surrounded by a new cohort of politicians and officials. While one of his campaign promises was to overthrow the “corrupt elites” he accuses of flooding the American political arena, his second term in office has elevated elites chosen, above all, for their political loyalty to him.

The media’s focus on Trump’s comments on making Canada the 51st US state and annexing Greenland and billionaire Elon Musk’s support for some far-right parties in Europe has obscured the ambitious programme to transform the federal government that the new political elite intends to implement.

In the wake of Trump’s inauguration on January 20, the Republican elites most loyal to the MAGA (“Make America Great Again”) leader, who staunchly oppose Democratic elites and their policies, are operating amid their party’s control over the executive and legislative branches (at least until the midterm elections in 2026), a conservative-dominated Supreme Court that includes three Trump-appointed justices, and a federal judiciary that shifted right during his first term.

However, the political project of the Trumpist camp consists less of challenging elitism in general than attacking a specific elite: one particular to liberal democracies.

Castigating democratic elitism

Typical anti-elite political propaganda, along the lines of “I speak for you, the people, against the elites who betray and deceive you,” claims that a populist leader would be able to exercise power for and on behalf of the people without the mediation of an elite disconnected from their needs.

Political theorist John Higley sees behind this form of anti-elite discourse an association between so-called “forceful leaders” and “leonine elites” (who take advantage of the former and their political success): a phenomenon that threatens the future of Western democracies.

Since the Second World War, there has been a consensus in US politics on the idea of democratic elitism. According to this principle, elitist mediation is inevitable in mass democracies and must be based on two criteria: respect for the results of elections (which must be free and competitive); and the relative autonomy of political institutions.

The challenge to this consensus has been growing since the 1990s with the increased polarization of American politics. It gained new momentum during and after the 2016 presidential campaign, which was marked by anti-elite rhetoric from both Republicans and Democrats (such as senators Bernie Sanders and Elizabeth Warren). At the heart of some of their diatribes was an aversion to “the Establishment” on the east and west coasts of the United States, where many prestigious financial, political and academic institutions are based, and the conspiracy notion of the “deep state”.

The re-election of Trump, who has never admitted defeat in the 2020 presidential vote, growing political hostility and the direct involvement of tech tycoons in political communication –especially on the Republican side– further reinforce the denial of democratic elitism.

Trump’s populism from above: a revolt of the elites

The idea that democracy could be betrayed by “the revolt of the elites”, put forward by the US historian Christopher Lasch (1932-1994), is not new. For the anthropologist Arjun Appadurai, it is a particular feature of contemporary populism, which comes “from above.” Indeed, if the 20th century was the era of the “revolt of the masses”, the 21st century, according to Appadurai, “is characterized by the ‘revolt of the elites’.” This would explain the rise of populist autocracies (such as those currently led by Viktor Orban in Hungary, Recep Tayyip Erdogan in Turkey and Narendra Modi in India, and formerly led by Jair Bolsonaro in Brazil), but also the election successes of populist leaders in consolidated democracies (including those of Trump in the US, Giorgia Meloni in Italy, and Geert Wilders in the Netherlands, for example).

As Appadurai explains, the success of Trumpian populism, which represents a revolt by ordinary Americans against the elites, casts a veil over the fact that, following Trump’s victory in November, “it is a new elite that has ousted from power the despised Democratic elite that had occupied the White House for nearly four years.”

The aim of this “alter elite” is to replace the “regular” Democrat elites, but also the moderate Republicans, by deeply discrediting their values (such as liberalism and so-called “wokeism”) and their supposedly corrupt political practices. As a result, this populism “from above” carried out by the President’s supporters constitutes an alternative elite configuration, the effects of which on American democratic life could be more significant than those observed during Trump’s first term.

Beyond the idea of a ‘Muskoligarchy’

The idea that we are witnessing the formation of a “Muskoligarchy” –in other words, an economic elite (including tech barons such as Jeff Bezos, Mark Zuckerberg and Marc Andreessen) rallying around the figurehead of Elon Musk, whom Trump asked to lead what the president has called a “Department of Government Efficiency” (DOGE) –is seductive. It perfectly combines the vision of an alliance between a “conspiratorial, coherent, conscious” ruling class and an oligarchy made up of the “ultra-rich”. For the Financial Times columnist Martin Wolf, it is even a sign of the development of “pluto-populism”. (It is also worth noting that former president Joe Biden, in his farewell speech, referred to “an oligarchy… of extreme wealth” and “the potential rise of a tech-industrial complex.”)

However, some observers are cautious about the advent of a “Muskoligarchy.” They point to the sociological eclecticism of the new Trumpian elite, whose facade of unity is held together above all by a political loyalty, for the time being unfailing, to the MAGA leader. The fact remains, however, that the various factions of this new “anti-elite” elite are converging around a common agenda: to rid the federal government of the supposed stranglehold of Democratic “insiders.”

An ‘anti-elite’ elite against the ‘deep state’

In his presidential inauguration speech in 1981, Ronald Reagan said: “Government is not the solution to our problem; government is the problem.” The anti-elitism of the Trump elite is inspired by this diagnosis, and defends a simple political programme: rid democracy of the “deep state.”

Although the idea that the US is “beleaguered” by an “unelected and unaccountable elite” and “insiders” who subvert the general interest has been shown to be unfounded, it is nonetheless predominant in the new Trump Administration.

This conspiracy theory has been taken to the extreme by Kash Patel, the candidate being considered to head the FBI. In his book, Government Gangsters, a veritable manifesto against the federal administration, the former lawyer writes about the need to resort to “purges” in order to bring elite Democrats to justice. He lists around 60 people, including Biden, ex-secretary of state Hillary Clinton and ex-vice president Kamala Harris.

Government Gangsters, Kash Patel’s controversial book. Google Books

The appointment of Russell Vought as head of the Office of Management and Budget at the White House, a person who is known for having sought to obstruct the transition to the Biden Administration in 2021, also highlights the hard turn that the Trump administration is likely to take.

Reshaping the state around political loyalty

To “deconstruct the administrative state”, the “anti-elite” elites are relying on Project 2025, a 900-plus page programme report that the conservative think-tank The Heritage Foundation, which published it, says was produced by “more than 400 scholars and policy experts.” According to former Project 2025 director Paul Dans, “never before has the entire movement… banded together to construct a comprehensive plan” for this purpose. On this basis, the “anti-elite” elite want to impose loyalty to Project 2025 on federal civil servants.

But this idea is not new. At the end of his first term, Trump issued an executive order facilitating the dismissal of statutory federal civil servants occupying “policy-related positions” and considered to be “disloyal”. The decree was rescinded by president Biden, but Trump on his first day back in office signed an executive order that seeks to void Biden’s rescindment. As President, Trump is also able to allocate senior positions within the federal administration to his supporters.

The “anti-elite” elite not only want to reduce the size of the state, as was the case under Reagan’s “neoliberalism”, but to deconstruct and rebuild it in their own image. Their real aim is a more lasting victory: the transformation of democratic elitism into populist elitism.

William Genieys, Directeur de recherche CNRS au CEE, Sciences Po and Mohammad-Saïd Darviche, Maître de conférences, Université de Montpellier

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Continue ReadingTrump 2.0: the rise of an ‘anti-elite’ elite in US politics

‘Sustainable’ aviation fuel and other myths about green airport expansion debunked

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Taking off: emissions from the aviation sector. WildSnap/Shutterstock

Jack Marley, The Conversation

Environmentalists and locals have resisted a third runway at London’s Heathrow, Europe’s busiest airport, for more than two decades. Today, their efforts took a major setback.

The UK government has announced it will give the green light to airport expansion. This is not guaranteed to increase growth in the national economy as Chancellor Rachel Reeves hopes. More flights and more emissions are certain, however, at a time when experts are practically screaming at governments to rein them in.


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“No airport expansions should proceed” without a UK-wide plan to annually assess and control the sector’s climate impact said the government’s watchdog, the Climate Change Committee, in 2023. Aeroplanes are 8% of UK emissions and 2% of the world’s, but they also release gases that seed heat-trapping clouds in the upper atmosphere, which triples air travel’s greenhouse effect.

While the government’s own advisers have effectively ruled out new runways for the sake of net zero, airport and airline bosses play a different tune. So what does the sector propose to manage its own pollution?

Not enough cooking oil to save us

Aviation is a notoriously difficult sector to decarbonise says Richard Sulley, a senior research fellow in sustainability policy at the University of Sheffield: “If electric or hydrogen-powered planes are possible, it won’t be for many years yet.”

To justify air travel emissions ballooning in the meantime, the aviation sector has promised a mix of “supply-side” measures, like replacing kerosene with so-called “sustainable aviation fuel” (SAF), which Reeves described as “a game changer”, and making planes lighter and more fuel-efficient.

Efficiency, in this context, is a slippery path to decarbonisation. When a high-emitting activity is reformed so that it consumes less energy, the efficiency savings are generally eclipsed by the increasing demand it drives.

“Indeed, the sector’s own plans for growth will outstrip efforts to decarbonise through synthetic fuel, delivering a neutral effect at best,” Sulley says.

Technicians refuel an aeroplane on the runway.
Fuel consumption is the biggest emissions source in aviation. Sergey Ginak/Shutterstock

“Demand-side” measures like fewer flights, taxes on frequent flying and domestic flight bans (see France) could cut emissions, he notes, but are seldom mentioned.

The UK has set a target for airline fuel to be 10% SAF by 2030. So far we’re at 1.2% – and Sulley reports that the industry has not said how it will scale up in time.

Even if airlines start taking their commitment to SAF seriously very soon, it’s a dubious solution to aviation’s climate impact according to political economists Gareth Dale (Brunel University) and Josh Moos (Leeds Beckett University).

Earlier SAF test flights burned coconut oil – 3 million coconuts to power a journey from London to Amsterdam, as Dale and Moos calculate it. At that rate, they argue Heathrow would exhaust the world’s entire crop in a few weeks (there are 18,000 commercial airports worldwide).

Modern SAF is blended with waste products from farms and kitchens. But the pair argue that the market for used cooking oil is “notoriously unregulated”. SAF may in fact be relabelled palm oil from plantations that are erasing orangutan habitat in the tropics. Again, Dale and Moos argue there is not enough used cooking oil to meet existing, let alone future, demand.

Transport for the rich, by the rich

At least the hype around SAF addresses the main problem, albeit misleadingly. Policy experts David Howarth (University of Essex) and Steven Griggs (De Montfort University) marvel at how often “carbon-neutral airports” in aviation sustainability strategies simply mean terminals powered by renewable energy.

“A terminal’s heating or lighting is, of course, largely irrelevant when its core business is as emissions-intensive as flying,” says Sulley.

Unfortunately for Rachel Reeves, a 2023 report by the New Economics Foundation found that any economic benefits of airport expansion will be largely confined to the airports themselves. Meanwhile, a wealthy subset of UK society can be expected to capture the biggest share of any new flight capacity. Each year, around half of British residents do not fly at all, Sulley points out.

At the stratospheric heights of that subset are the private jet passengers who are served by “more or less dedicated airports” that are more obscure to the general public, says Raymond Woessner, a geographer at Sorbonne Université. A study published in November found that emissions from these flights rose by 46% between 2019 and 2023. The lead author described wealthy passengers using jets “like taxis”.

“Discretion and anonymity” is what one airport nestled in the Oxfordshire countryside promises for “routine celebrity, head of state and royal visits”. Without state direction or regulation, it is these people who are setting the agenda for air travel.

Woessner notes that the world’s richest man, Elon Musk, successfully lobbied to derail a high-speed rail project in California in 2013. Instead of an option that has shown its ability to cut flight demand, the US will be offered intercontinental rocket travel.

Musk’s company SpaceX says that rockets could ferry passengers between New York and Shanghai in under an hour. Rockets would burn “vastly more fuel per trip than conventional aircraft”, says aerospace engineer Angadh Nanjangud of Queen Mary University of London, but this might “drive critical research into carbon-neutral” methane-based rocket fuel.

It would not be the first time an industry seeking to grow has used an as yet fantastical fuel to justify more carbon in Earth’s atmosphere.

“There is the potential to create a good life for all within planetary boundaries,” say Dale and Moos.

“But getting there requires clipping the wings of the aviation industry.”

Jack Marley, Environment + Energy Editor, The Conversation

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Continue Reading‘Sustainable’ aviation fuel and other myths about green airport expansion debunked

How Trump 2.0 could herald a new age of authoritarian capitalism

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Original article by Laurie Macfarlane republished from OpenDemocracy under a Creative Commons Attribution-NonCommercial 4.0 International licence.

This is not the same Trumpism that won the election in 2016. It’s a far more dangerous project | Chip Somodevilla/Getty Images

Trump’s weaponisation of US power poses a threat to peace, prosperity and the planet. It must be strongly resisted

After four years of narrowly avoiding prison, Donald Trump is back in the White House. For many observers outside the US, the re-election of a convicted felon who tried to illegally overturn an election is baffling.

But Trump’s second victory was no fluke – and nor was it merely the result of Russian interference or ‘deplorable’ voters. Although Trump left formal politics in 2021, the forces that brought him to power did not. This time, he is entering office far better organised, far stronger, and with a more diverse political base.

Trump is also not alone: across the West, right-wing populism is on the march, while progressive parties continue to find themselves on the back foot. In an increasingly unstable world, the rising tide of the authoritarian right poses huge challenges for the global economy. Left unchecked, it has the potential to imperil peace, prosperity and the planet.

To fully assess the threat this right-wing populism poses, and how to counter it, we must carefully assess the conditions under which Trump is assuming power – as well as the plans he has for wielding it. Like all political developments, Trump’s dramatic return has not happened in a vacuum. Instead, it must be viewed in the context of a series of profound political and economic shifts that are reshaping the face of Western capitalism.

The first shift – and by far most significant – is the rise of a rival economic superpower that could potentially threaten the technological supremacy that has long underpinned US hegemony.

Red Dragon Rising

Following China’s entry into the global trading system in 2001, many economists in the West assumed that China’s state-capitalist model would deliver some catch-up growth, then quickly run out of steam. The theory was that while state-led systems can be effective at rapidly mobilising existing resources, they struggle to drive productivity growth and innovation. This, it was thought, would eventually force China to open up its economy and embrace liberal democracy.

However, China’s achievements to date have made such pronouncements look remarkably naive. Not only has liberal democracy not arrived in the People’s Republic, but the Chinese Communist Party (CCP) has developed a distinct economic model that has lifted nearly a billion people out of poverty and transformed the country into one of the world’s largest and most dynamic economies. Somewhat ironically, it is Western governments that have had to adapt to China’s model – not the other way around. In recent years, China’s successes have forced Western governments to pivot away from free market orthodoxy and resuscitate muscular industrial policy, which had long been banished from Western policy toolkits.

The importance of China’s spectacular rise to Trump’s victory in 2016 cannot be overstated. At a time when most Americans felt the economy simply wasn’t working, Trump offered a clear albeit false diagnosis of the problems – China and immigration – and an aggressive strategy for dealing with them, when the Democrats were doing neither. His aim was to stand up to China, bring back jobs and put ‘America first’. His weapon of choice, tariffs, marked a major break with the neoliberal consensus of recent decades. Protectionism was back, spearheaded by the world’s largest economic and military power.

But in reality, Trump’s ‘trade war’ was never about trade or jobs. As I wrote back in 2020, it was primarily a response to US fears of losing technological supremacy in the face of successful Chinese industrial policy. From the very beginning, the ‘trade war’ was less about trade, and more about constraining Chinese development and preventing China’s rise as a rival technological power.

Since Trump’s exit from the White House in 2021, this ‘return of the state’ in Western economies has accelerated, fuelled by two other forces. The first has been a global ramping up of action to tackle the climate crisis. As a growing number of countries have embraced net zero targets, many have enacted new industrial policies to try and bolster capabilities to compete in emerging green supply chains. The second factor was the Covid-19 pandemic, which saw governments intervene in economies on an unprecedented scale. In order to contain the economic fallout, Western countries ripped up the neoliberal playbook in favour of widespread state planning and cash transfers. While the promises to ‘build back better’ inevitably rang hollow, many governments and businesses did act to bolster domestic supply chains in an attempt to address the chronic lack of resilience the pandemic exposed.

Acutely aware of these challenges, in 2021 the incoming Joe Biden administration sought to break with the economic consensus of his Democrat predecessors. Not only did Biden keep most of Trump’s tariffs on China, he increased them. His administration then embarked on the US’s most significant experiment with industrial policy for decades.

The key pillar of so-called ‘Bidenomics’ was the Inflation Reduction Act (IRA). Despite its name, the IRA was not primarily about reducing inflation. Instead, it launched the biggest investment programme in modern American history to revitalise the economy, enhance energy security, and tackle the climate crisis. The package included large tax breaks and subsidies to bolster US manufacturing capacity, and wean the US away from Chinese imports. In practice, the IRA was a significantly watered-down version of Biden’s initial ‘Build Back Better’ agenda, which, in addition to ambitious climate spending, also proposed trillions of additional dollars on social spending in areas such as housing, childcare and healthcare, as well as more progressive tax hikes. This agenda was blocked by Republicans and conservative Democratic senators, who also secured big giveaways to the fossil fuel industry.

Nonetheless, the IRA represented a significant step change in the ideological outlook of the world’s largest economy. It also posed new challenges for China, particularly as some policies were explicitly designed to discourage companies from using Chinese components. In a remarkable role-reversal, in May 2024 China lodged a complaint against the US at the World Trade Organisation (WTO), arguing that IRA subsidies “distort fair competition”.

GettyImages-453444611
US President Joe Biden shakes hands with Chinese President Xi Jinping at the Asia-Pacific Economic Cooperation summit in Lima, Peru, on 16 November 2024 | Lintao Zhang/Getty Images

On the basis of conventional economic metrics, Bidenomics appeared to be working. Following the pandemic, US economic growth outperformed peer nations, business investment soared, and unemployment remained low. The problem was that Americans simply weren’t feeling it. A big reason for this was inflation, which surged across the world as economies reopened after the pandemic, and Russia invaded Ukraine. Although in the US, inflation had fallen to less than 3% by the time of last year’s election, the damage had been done. Under Biden’s leadership, real earnings had fallen and satisfaction with the economy tumbled. Months before the presidential election, more than half of Americans wrongly believed the US was experiencing a recession, according to a poll for The Guardian. The consequences of this disconnect between buoyant economic statistics and peoples’ lived experiences were fatal. As economist Isabella Weber put it in the New York Times: “Unemployment weakens governments. Inflation kills them.”

As for Biden’s programme of green reindustrialisation, it didn’t quite live up to its promise. Although the IRA successfully catalysed billions of investments in clean energy, the immediate impact on jobs and living standards was modest. Since 2020, the number of manufacturing and construction jobs in the US economy has increased by around 800,000. While this might sound impressive, it amounts to less than 0.5% of the total workforce.

This does not mean the IRA should be seen as a failure – far from it. Investment takes time to deliver returns, and ironically it will be Trump who reaps the political rewards when they start to materialise. But these statistics also reveal a significant flaw in Biden’s approach to industrial policy. In the 21st century, most Americans do not work in manufacturing and construction, and likely never will. They don’t care much for semiconductors, nor do they pay much attention to GDP growth and business investment. What they care about is whether their life is getting better or worse. The initial Build Back Better agenda recognised this, while the watered-down IRA did not.

Trumpism 2.0

While Bidenomics failed to get its namesake re-elected, it played a crucial role in putting industrial policy back on the global agenda. Though this is long overdue, it is a mistake to think that a more interventionist state always pushes politics in a progressive direction. What really matters is who wins and who loses from these interventions. In other words: who are these interventions really designed to serve?

Seen through this lens, Trump’s vision for the role of the state looks rather different. He has already vowed to kill the IRA’s climate measures, referring to the act as “the greatest scam in the history of any country”. In its place, Trump has a new plan for industrial policy: “drill, baby, drill”. He has also pledged to deliver “the largest deportation operation in American history”, targeting millions of undocumented migrants whom he says are “poisoning the blood” of the US – and using the military to do so if necessary. The long-term economic impact of such a move would be severe, with some analyses estimating it could reduce annual US GDP by up to 7%, or nearly $1.7trn.

As a means of flexing American economic muscle globally, Trump has also promised to double down on tariffs, pledging to impose blanket 10-20% duties on all US imports and 60% on goods from China. In a sign of creeping paranoia that some countries may act to reduce their reliance on US trade, he recently threatened to impose 100% tariffs on the ten nations that form the BRICS bloc – Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Indonesia, Iran and the United Arab Emirates – if they create a currency aiming to challenge the US dollar’s dominance in global trade.

‘America first’ is the aim, while economic warfare is the game

In order to collect the billions in expected tariff revenues, the incoming president also recently announced the creation of a new ‘External Revenue Service’, stating: “Through soft and pathetically weak trade agreements, the American economy has delivered growth and prosperity to the world, while taxing ourselves. It is time for that to change.”

Whether these sharply higher tariffs represent a hard commitment or merely a negotiating tactic remains to be seen. However, it is clear that Trump intends to weaponise the US’s economic clout to strong-arm allies and adversaries alike. ‘America first’ is the aim, while economic warfare is the game, it would appear.

This again would not come without an economic cost – both to the US and its trading partners. Despite being Trump’s flagship policy, it remains unclear whether he knows how tariffs actually work. He has repeatedly insisted that they are paid by “other countries”, when in reality they are a tax on American companies paid when foreign-made goods arrive at the US border.

Perhaps most alarmingly, Trump has taken state interventionism to a whole new level by threatening to seize territories belonging to other sovereign nations. One prime target is Greenland, where the aim is to control its trove of natural resources to guarantee the US’s “economic security”, with a particular focus on rare earth metals. Another is the Panama Canal, which the US ceded control over to Panama in 1977 under President Jimmy Carter. Perhaps most ambitiously, Trump has floated the idea of annexing Canada, describing the two countries’ shared border as an “artificially drawn line” and vowing to use “economic force” to make Canada the 51st US state. The US projecting its power overseas to secure its economic interests is far from new. But rarely has a president been this direct and explicit about it.

The focus on Greenland’s rare earth metals is no accident. China currently dominates global rare earth metal production and has recently restricted the export of critical minerals and associated technologies ahead of Trump’s second term. These elements, which play a critical role in the manufacturing of batteries and countless high-tech products, are quickly becoming one of the most important geopolitical battlegrounds.

With China and the US each taking increasingly aggressive measures to limit the trading of key resources and components, the drift towards a new ‘technological cold war’ – as well as a military hot war – between East and West looks set to accelerate under Trump’s second reign. A partial decoupling of US and Chinese technology ecosystems is already well underway – with the extreme pressure the US applied to the UK government in 2020 to ban Huawei from the UK’s 5G network providing one example. Not unrelatedly, today the UK has among the worst-performing 5G signal in Europe. The recent US clamp down on the Chinese social media app TikTok provides another such example, with US lawmakers moving to ban the app on national security grounds. However, just before taking office Trump – who had previously backed a ban – pledged to delay implementation of the law to allow more time to “make a deal to protect our national security”.

If these trends continue to accelerate, it is possible to imagine a world that is bifurcated into distinct technological ‘zones’. In this scenario, countries would be able to use US technology or Chinese technology – but not both. Each country must pick a side.

A technological arms race

Any further slide towards technological bifurcation between East and West would pose huge challenges for the US and its allies. Whether it is clean energy, electric vehicles or radio communications such as 5G, Chinese companies are rapidly coming to dominate many critical 21st-century markets, in some cases to an extraordinary degree. As such, any further attempt to restrain Chinese technology or exclude Chinese goods from Western markets would have serious economic consequences, while also heightening military tensions. It would also pose existential challenges for China’s economic model, which has long relied on exporting to the US and other Western economies to drive economic growth.

Evidence indicates that China is also rapidly racing ahead to dominate many advanced technologies of the future. It is winning the technological race against the US in 37 of 44 advanced technology fields assessed in the report spanning defence, space, robotics, energy, biotechnology and artificial intelligence, according to a recent study by the Australian Strategic Policy Institute. The study also found there was a high risk of China establishing an effective monopoly in eight technologies – including supercapacitors, 5G and 6G communications, electric batteries, and synthetic biology – while the US enjoyed no such monopoly opportunities. For some technologies, all of the world’s top ten leading research institutions are based in China, which are collectively generating nine times more high-impact research papers than the US.

Perhaps unsurprisingly, China’s rapid advancements also extend to deadly weapons technology. While recent Chinese advances in nuclear-capable hypersonic missiles allegedly took US intelligence agencies ‘by surprise’, China has generated over 60% of the world’s high-impact research papers into advanced aircraft engines and hypersonics over the past five years, and currently hosts seven of the world’s top ten research institutions.

Chart - advanced aircraft research FINAL
China has produced over 60% of the world’s high-impact research papers into advanced aircraft engines and hypersonics over the past five years | Chart by openDemocracy using data from the Australian Strategic Policy Institute

While China’s rapid advancements have confounded its critics, its economy is far from invincible. Despite the best efforts of the CCP’s latest five-year plan, Chinese economic growth is slowing considerably and is widely expected to fall short of its target this year. Among the reasons for this has been China’s fragile real estate sector, which after decades of debt-fuelled speculation has finally started to unravel. In 2021 China’s largest property developer, Evergrande, defaulted on its debt, with multiple other major developers following closely behind. These defaults forced Beijing to announce an emergency package of support measures to stabilise the sector, which accounts for about a fifth of the country’s economic activity. In many ways, the sector’s woes – soaring debt and slowing growth – have become emblematic of the challenges facing the wider Chinese economy. Sustaining growth in the face of an escalating trade war would require a radical reorientation of China’s economic model, lessening dependence on exports and real estate speculation towards substantially boosting domestic demand.

China’s looming demographic crisis poses another major threat to its economic future. The CCP’s ‘one-child policy’, which was enforced between 1980 and 2015, means its population is currently ageing faster than any other country in modern history. Over the next decade, about 300 million people currently aged between 50 and 60 are set to leave the Chinese workforce. In 2020, there were five workers for every retiree, by 2050 this is expected to fall to 1.6 workers per retiree. The compounding effect of a rapidly contracting labour market, and the associated shrinking tax base, poses huge challenges for future growth and fiscal policy, as well as the provision of pensions and care in old age.

The challenge facing Beijing is therefore stark: can China continue to drive growth and technological advancement in the age of Trumpism 2.0, while staving off financial contagion and a demographic time bomb? China has confounded its critics before – but never before has its outlook looked so uncertain.

Europe’s predicament

Caught in the crossfire between China and the US, Europe stands at a critical juncture. Lacking the technological dynamism to compete with the world’s two economic superpowers, and with many key industries in decline, European leaders have struggled to respond effectively. To date, its strategy has amounted to a tepid foray into industrial policy through the Green Industrial Plan, which aims to counter the EU’s import dependency for key commodities and technologies.

In a grudging admission that the free-market dogma underpinning the single market might be a barrier to an industrial revival, the European Commission has also relaxed state aid rules, enabling states to provide more generous subsidies for green industries. While these necessary reforms to the single market are long overdue, the ongoing failure to reform the eurozone’s fiscal architecture makes it difficult to see the EU posing a serious threat to US and Chinese technological dominance anytime soon.

For EU leaders, the most pressing issue is the prospect of new tariffs and threats to sovereign European territory. While Europe cannot compete with the US technologically or militarily, as the world’s largest trading bloc it can compete on trade. Reports suggest the European Commission is exploring a ‘carrot and stick’ approach: implementing its own retaliatory tariffs while also pledging to buy more US goods. A trade war between the US and Europe is unlikely to end well for either party, but would be particularly painful for Europe.

The prospect of escalating transatlantic coordination between the authoritarian right and billionaire egomaniacs is one of the biggest threats to Europe’s future

Even if transatlantic tariffs are avoided, there is still the question of what to do in relation to China. If Trump follows through with imposing 60% tariffs on Chinese goods, should the EU do the same? If it doesn’t, Europe may face a flood of cheap Chinese goods dumped on its doorstep, further harming domestic producers. Then there is the question of how Europe should respond to the accelerating technological decoupling between East and West. While the EU has taken various steps to try and turbocharge research and innovation in recent years, it still lags significantly behind the US and China. In theory, there is a strong case to be made for Europe to forge its own path, neither bowing to US or Chinese authoritarianism. However, this ambition may be thwarted by challenges closer to home.

In recent years, far-right parties have seen a dramatic surge in support across the continent. Last year France came inches away from electing Marine Le Pen’s Rassemblement National, while in 2023 the Netherlands elected an Islamophobic populist. Far-right parties continue to make considerable inroads in Germany, Spain, Italy and elsewhere. Many of these parties are in direct contact with Trump’s wider networks and have also received glowing endorsements from billionaire and Trump fanboy Elon Musk, the owner of X (formerly Twitter). As well as being Trump’s largest donor, Musk has quickly positioned himself as one of the president’s most influential aides. The prospect of escalating transatlantic coordination between the authoritarian right and billionaire egomaniacs represents one of the biggest threats to Europe’s future.

Britain’s alignment problem

The challenges faced by the EU are perhaps even more acute in the UK. Brexit was supposed to unleash Britain as a great, swashbuckling trading nation once again. But this fantasy was always rooted in a failure to come to terms with the UK’s rapidly diminishing power in the world. While the EU lacks technological leadership but has considerable trade power, the UK has neither. At a time of growing geopolitical tensions over technology and trade, the UK is a sitting duck.

In the event that Trump does escalate a global trade war, Keir Starmer’s government will likely have to pick a major bloc to align with – or absorb considerable economic pain. This was always the deep irony of Brexit; while it was supposed to be about “taking back control”, the UK was always going to be forced to align with decisions taken by one of the world’s major power blocs, albeit having no control over the rules.

This reality was recently bluntly spelt out by Stephen Moore, one of Trump’s closest economic advisers. “The UK really has to choose between the European economic model of more socialism and the US model, which is more based on a free enterprise system,” Moore told the BBC last year. Moving towards the US model of “economic freedom” would significantly increase the likelihood of securing a US trade deal, he added. However, this would also likely involve bowing to US demands to open up key British markets – such as agriculture and pharmaceuticals – to American competitors. Given the gulf in bargaining power and Trump’s notoriously aggressive deal-making, this would almost certainly not end well for the UK.

Starmer’s government therefore faces an unenviable lose-lose dilemma. Align with the US to avoid tariffs and secure a trade deal, and suffer the deeply unpopular consequences of Trump’s trade conditions, from chlorinated chicken to significantly higher NHS drug prices. Or align more closely with the EU once again, and risk plunging the country into civil war over Brexit all over again. Given the present political dynamics in Britain, this could be disastrous for the Labour Party.

While, on paper, the landslide victory Labour secured at last year’s election victory appeared decisive, looks can be deceiving. In reality, the party’s majority was built on incredibly fragile foundations – and the UK is far from immune to the threat of right-wing populism. Since then, election support for the party has plummeted, while support for Nigel Farage’s pro-Brexit Reform party has surged. With the two parties neck and neck in the polls, any attempt to align more closely with the EU would be capitalised on by Reform, likely to devastating effect. Even without this, Reform could be on track to upend British politics in the next election, subverting the traditional two-party system, perhaps with help from an increasingly unhinged Musk.

Nigel Farage speaks at a press conference
Any attempt by the Labour government in the UK to align more closely with the EU would be capitalised on by Nigel Farage’s Reform Party | Carl Court/Getty Images

Global fractures

China’s global ascendency, combined with the US’s political fracturing, has led some to speculate that we may be witnessing the ‘end of the American century’. Back in 2020, I argued that such premonitions were premature. The two pillars of the US’s global power – military and financial – remained rooted in place.

However, it was clear that the election of Trump in 2016 was eroding the US’s soft power, and its ability to act as the paragon for liberal democracy. Trump’s subsequent attempt to overturn the result of the 2020 election only put this on steroids. Far from being viewed as a successful model to emulate, the US began to resemble a cautionary tale to avoid.

Biden made a conscious effort to repair US prestige on the world stage. “America is back,” he vowed at his first address to world leaders from the State Department in February 2021. “We are a country that does big things. American diplomacy makes it happen. And our Administration is ready to take up the mantle and lead once again.”

However, polling undertaken in 2021 found that while most people in Europe were happy to see Biden elected, they believed that the US political system was “broken”. Perhaps most alarmingly for US strategists, a majority also believed that China would be more powerful than the US within a decade – and said they would want their country to stay neutral in a conflict between the two superpowers. In the years since, Biden’s international standing has been further stained by his resolute support for Israel’s brutal assault on Gaza, which has generated intense animosity towards the US in many parts of the world.

Despite Biden’s efforts, it is likely that a second Trump term will fracture relations in the West further, as tensions relating to tariffs, Ukraine and NATO start to bite. How this plays out remains to be seen, any prolonged souring of relations among Western countries would likely benefit China, and hasten the transfer of global power from West to East.

Meanwhile, the much-vaunted ‘rules-based international order’ looks more fragile than ever before. Under Trump’s first reign, the US pulled funding from multiple UN agencies, withdrew from the Paris Agreement on climate change, and even pulled out of the World Health Organization (WHO) during the Covid-19 pandemic. Meanwhile, Trump and his allies severely criticised institutions such as the IMF and World Bank, long a critical tool for projecting US power. At the same time, the number of countries turning to Chinese-backed alternatives to fund development projects and joining China’s Belt and Road Initiative has continued to grow over the past decade.

In recent months, the ongoing war in the Middle East has exposed the feebleness of international law, with multiple signatory countries openly defying the International Criminal Court’s (ICC) arrest warrant for Israel’s prime minister and former defence minister. The US has never become a signatory to the ICC, but Trump previously sanctioned two ICC prosecutors after they began investigating whether US forces committed war crimes in Afghanistan – with secretary of state Mike Pompeo declaring it as a ‘kangaroo court’. At the start of this year, the US House of Representatives voted once again to sanction the ICC in retaliation for its arrest warrants against Israeli leaders.

What Trump’s stance towards such international institutions will be in his second term remains to be seen. But with his “America first” stance unlikely to soften anytime soon, the so-called ‘crisis of multilateralism’ looks set to deepen.

A global wake up call

Overall it is clear that Trump’s re-election represents a critical turning point for the West. While his first victory represented a high-risk gamble into the unknown, this time Americans fully knew what they were voting for. Far from softening the autocratic tendencies he was widely criticised for, he has doubled down on them.

Towards the end of Trump’s last reign, I argued that the West was being haunted by the spectre of ‘authoritarian capitalism’. The analysis identified three profound economic and political shifts that were reshaping Western economies: a China-induced pivot away from free-market orthodoxy, a clampdown on democratic freedoms, and a rise in state surveillance. Together, these shifts represented a distinct political economy that, if not contained, could usher in a new age of more authoritarian governance.

Thanks to the emerging transatlantic alliance between Trump, the European far-right and billionaire social media moguls, this is a reality we now face. Exactly what Trump will do in power, and whether his far-right allies in Europe will succeed in following his footsteps, is impossible to predict. But we should be under no illusions about the threat that this alliance poses. This is not the same Trumpism that won the election in 2016: it’s an altogether different – and more dangerous – project. How should progressives seek to counter the ascendance of a new authoritarianism?

One thing is clear: stoking anti-China sentiment will not cure the ills of Western capitalism. The roots of these problems, and therefore their solutions, can be found much closer to home. Simply trying to ban or censor voices on the authoritarian right won’t work either. When the voices in question include the US president and the second most popular party in the beating heart of Europe, silencing them isn’t an option (although that hasn’t stopped hundreds of German politicians from trying). Instead, the roots of these problems need to be dealt with at the source. In reality, it is not China or immigrants that are screwing over ordinary working people, but an extractive and unequal economic system.

Capitalism in the ‘developed world’ has primarily become an engine for redistributing wealth upward

The world’s richest 1% today owns more wealth than 95% of humanity. Last year total billionaire wealth increased by $2trn, growing three times faster than the year before. The wealth of the world’s five richest men has more than doubled since 2019, soaring from $506bn to over $1.1trn. That list includes Trump’s cheerleader-in-chief, Musk, who paid a true tax rate of just over 3% in the US between 2014 and 2018, according to an investigation by ProPublica. The average worker in advanced economies, meanwhile, has typically seen their real pay fall or stagnate.

The contrasting fortunes of the mega-rich and everyone else are not unconnected. Despite what our leaders claim, capitalism in the ‘developed world’ has primarily become an engine for redistributing wealth upwards – both from its own citizens and the rest of the world. Skyrocketing inequality is also inextricably linked to the climate and environmental crisis. As well as hoovering up much of the world’s wealth, the richest 1% emit as much carbon pollution as the poorest two-thirds of humanity. As such, tackling the climate crisis and reducing inequality must go hand in hand.

But by deflecting legitimate economic grievances towards external bogeymen and migrants, it is the authoritarian right – not the progressive left – that has most successfully capitalised on this broken system. If we are to address the central economic and environmental challenges we face, this urgently needs to change.

Progressive forces have transformed Western political economy before, and the task before us is to do so again. The goal must be to tackle inequalities, raise living standards and address the environmental crisis – while standing with migrants and other minoritised groups against persecution and oppression. This will inevitably involve a more proactive role for the state. The key question is: in whose interests will it act? The lesson from Bidenomics is that focusing primarily on industrial sectors such as renewable energy and manufacturing won’t work unless it is accompanied by policies to rein in corporate power and redistribute wealth. This means challenging the power of vested interests head-on, not cowering to them.

This project must also aim to strengthen democracy and protect civil liberties at a time when both are increasingly under threat. In recent years governments across the USEurope and the UK have cracked down on the right to protest with draconian legislation. Given Trump’s terrifying track record – including calling for the military to quash peaceful protests by “radical left lunatics” – we should expect the assault on the right to protest to intensify, alongside a curtailing of civil liberties more broadly. Peaceful protest will be absolutely critical for resisting the authoritarian right across the world, which is exactly why it is likely to be suppressed.

At the global level, lessons can be learned from Trump’s own playbook. In power, Trump has not shied away from breaking international norms or shaking up global institutions. Progressives must be willing to do the same – albeit for very different ends. While this may make some uncomfortable, it is a necessary prerequisite to delivering the kind of global transformation needed. The existing ‘rules-based international order’ is meaningless when some of the most powerful actors are not playing by these rules. Global cooperation is needed more than ever, but the existing multilateral order is fundamentally broken. It must undergo sweeping reforms to promote a more prosperous, peaceful and sustainable world.

Perhaps most importantly, however, there needs to be a clear focus on who the real enemy is – and the goals that need to be achieved to defeat them. For decades, the left has viewed its enemy as neoliberalism, and its main task as building an alternative to it. But if neoliberalism is not dead yet, it is slowly dying.

Instead of fighting the last war, progressives must start grappling with the distinct political economy of a new authoritarianism. In practice this requires developing a completely new set of strategies, tactics and policies. We are not only losing – we are losing badly. More of the same simply will not cut it.

The challenge now is therefore much greater than when Trump last took office. The spectre of authoritarian capitalism is not just haunting the West, it is already here, and it is actually quite popular. Now it must be resisted from the ground up.

The key question is: can we build the power needed to challenge it? Right now, it’s not looking promising. We can only hope that the arrival of Trump 2.0 provides the wake-up call the world so desperately needs.

Original article by Laurie Macfarlane republished from OpenDemocracy under a Creative Commons Attribution-NonCommercial 4.0 International licence.

Continue ReadingHow Trump 2.0 could herald a new age of authoritarian capitalism