Keith Rankin Analysis – Liberal Mercantilism and Economic Capitalism: an Introduction

Keith Rankin Analysis – Liberal Mercantilism and Economic Capitalism: an Introduction

Keith Rankin.

Most of us realise that there is something wrong with capitalism as we know it. We also accept that capitalism is here to stay; the only practicable alternatives are evolutions of capitalism, not from capitalism.

For most of its history we have experienced capitalism as processes of inequality and contradiction. Capitalism as we know it exhibits the growth dynamics of a runaway train for which both stopping and not-stopping spell present or future disaster. We opt for future disaster. Economic growth is understood as the process of making money at an accelerated rate.

This is primitive capitalism. And it is the manifestation of a ubiquitous mode of modern thought that I refer to as liberal mercantilism. The principal metaphor of liberal mercantilism is gold, which in turn is the principal metaphor for money. Liberal mercantilism is the belief that the economic purpose of life is to make money, that the amount of money each of us makes is a measure of our success in life, and that the amount of money a country makes is the measure of its success.

There are two main strands of liberal mercantilism; conservative liberal mercantilism (which, in the past few decades, has embraced both neoliberalism and neoconservatism) and progressive liberal mercantilism (which embraces both social democracy and socialism). Progressive liberal mercantilism is about making money, taxing it, and governmental spending of it; conservative liberal mercantilism is just about making money. Progressive liberal mercantilists argue that you have to make money before you can spend it. Conservative liberal mercantilists argue that you have to spend (invest) money in order to make money. Both emphasise making money, and economic growth..

Liberal mercantilism is underpinned by a primitive capitalism that only acknowledges private property rights, or public property rights (as in state capitalism; government ownership) that are equivalent to private property rights. Primitive capitalism has no public hemisphere. It’s analogous to a single-hemisphere brain.

Liberal mercantilism represents a wrong path; indeed a false path, much as Ptolemaic astronomy and alchemy have represented false paths in the history of science. In another sense, however, it is a real path, in that liberal mercantilism is truly the existential path that modern humanity is on, and uncritically so.

The alternative to liberal mercantilism is economic capitalism. Economics began as a project to rid capitalism of mercantilism, the crude belief that the economic purpose of countries was to operate ongoing trade surpluses. (Donald Trump is an unreconstructed mercantilist; in his way of thinking, countries wage trade wars, seeking victory through ongoing trade surpluses.)

Economics both succeeded and failed; in economics, wealth is utility (and the sources of utility), not money. Economics, though liberal in its origins, is not a part of liberal mercantilism. But most economists are, to a greater or lesser extent, infused with the liberal mercantilist belief system; especially those economists who, through specialising in finance, clearly equate wealth with money and monetary derivatives.

Capitalism – proper capitalism, full capitalism, economic capitalism – represents a balanced economic order that draws on both private and public property rights; that has private and public hemispheres that complement each other. Private income sources are both private equity (property) and labour; what individuals (and groups of individuals) own, and what they make and sell. Public income is sourced from public equity (the essence of capitalism’s inchoate public hemisphere); it may be retained by public organisations (governments) to be spent on collective goods and services, or distributed, principally as benefits (using the proper capitalistic meaning of that word), to individuals (as economic citizens).

Most ‘capitalists’ are not proper capitalists; they are liberal mercantilists. Most people who advocate for capitalism as we know it are primitive capitalists. And many people who run businesses are mercantilists, drawn in the main by wanting money as an accumulating store of wealth, and not simply by wanting the means to acquire the consumer services that represent the actual purpose of market economic activity.

In economic capitalism, money is a means, not an end. It is not wealth; rather it is a social technology; arguably our most important social technology. Money is important as a technology, not as wealth. Wealth is the services that give us utility; wealth is whatever has value because of the happiness that such wealth enables us to enjoy. The economic purpose of life is to survive and prosper, where ‘prosper’ means to attain the higher forms of happiness.

Capitalism must evolve. Embrace that evolution.

MIL OSI – Source: Evening Report Arts and Media

Timor-Leste president to make first official visit to Indonesia

President Francisco “Lu Olo” Guterres …closer relations with Indonesia. Image: Presidential Power

Pacific Media Centre Newsdesk

Timor-Leste President Francisco Guterres will make his first official overseas visit to Indonesia this week, reports Antara news agency.

President Guterres will be welcomed by President Joko Widodo at Bogor Presidential Palace, West Java, on Thursday, where the two of them will hold talks on strengthening bilateral relations.

“We see Timor-Leste as one of the closest neighbouring countries, so we have a close relation in the aspects of history, economic cooperation, as well as people to people contact,” Foreign Ministry spokesman Arrmanatha Nasir told journalists during a press briefing in Jakarta.

Francisco Guterres is chairman of the Fretilin Party, who won the presidential election in March 2017 with 57 percent of the votes from eight competing candidates. He succeeded the previous president, Taur Matan Ruak.

He had previously, and unsuccessfully, run for the presidency twice. Last year, with the backing of Timor-Leste’s founding father, Xanana Gusmao, he won decisively.

At his swearing in on 19 May 2017, Guterres pledged to assert Timor-Leste and its “principles and values” on the world stage, promoting peace, prosperity, environmental protection and the elimination of poverty, reports Antara.

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Further, the country would pursue bilateral relationships of mutual respect, regardless of the size of each nation, he told The Guardian.

Potential cooperation
Indonesia sees Guterres’ visit as an opportunity to discuss potential cooperation that can be developed between the two countries, especially in infrastructure, energy, finance, banking, pharmaceuticals and tourism.

Some issues that Indonesia seeks to accomplish include cooperation related to taxes, investment protection and connectivity, reports Antara.

“We want to improve flight connectivity from Indonesia to Timor-Leste,” Nasir noted.

Sharing the island of Timor, the economy of Indonesia and Timo- Leste are very connected to each other.

Currently, nine Indonesian state-owned enterprises and hundreds of Indonesian companies are operating in Timor-Leste, investing about US$600 million in 18 projects there.

Also, both countries share a border market which sells a wide range of necessities, with a considerable turnover value.

“Indonesia is currently exploring cooperation to build a toll road in Timor-Leste, but I do not have the details yet,” Nasir added.

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MIL OSI – Source: Evening Report Arts and Media

Activists fear Indian proposal for coal reserves in Indonesian-ruled Papua

By Febriana Firdaus in Jakarta

As it seeks to diversify its sources of fuel, India is looking to get in on the ground floor of coal mining in previously unexploited deposits in Indonesian-ruled Papua.

In exchange for technical support and financing for geological surveys, officials say India is pushing for special privileges, including no-bid contracts on any resulting concessions  a prospect that could run foul of Indonesia’s anti-corruption laws.

The details of an Indian mining project in Papua are still being negotiated, but Indonesia’s energy ministry welcomes the prospect as part of a greater drive to explore energy resources in the country’s easternmost provinces.

READ MORE: Strategic partnership between India and Indonesia

In future, the ministry hopes mining for coking coal will support the domestic steel industry, while also bringing economic benefits to locals.

Rights activists, however, fear the launch of a new mining industry could deepen tensions in a region where existing extractive projects have damaged the environment and inflamed a long-running armed conflict.

-Partners-

Indonesia’s new coal frontier
When Indian Prime Minister Narendra Modi visited Jakarta last month, joint efforts to extract and process Indonesia’s fossil fuels, including coal, were on the agenda.

India’s interest in investing in a new coking coal mining concession in Papua can be traced to 2017, when officials from the Central Mine Planning and Design Institute (CMPDI) and Central Institute of Mining and Fuel Research (CIMFR), both Indian government institutes, met with Indonesia’s Ministry of Energy and Mineral Resources in Jakarta.

The bilateral plan was announced by then-ministry spokesman Sujatmiko after the first India Indonesia Energy Forum held in Jakarta in April 2017. “The focus is on new territories in Papua,” he said.

To follow up, the Ministry of Energy and Mineral Resources sent a team to India in early May. The current energy ministry spokesman, Agung Pribadi, who was part of the delegation, told Mongabay that officials from state-owned energy giant Pertamina, major coal miner PT Adaro Energy, and state-owned electricity firm PLN also joined the meeting.

The Indonesian team presented research outlining the potential for mining high-caloric content coal in West Papua province, and lower-caloric coal in Papua province.

According to the team’s report, only 9.3 million tons of reserves have so far been identified. By contrast, Indonesia as a whole expects to export 371 million tons of coal this year. However, the true extent of coal deposits could be larger, said Rita Susilawati, who prepared the report presented during the meeting and is head of coal at the ministry’s Mineral, Coal and Geothermal Resources Centre. “Some areas in Papua are hard to reach due to the lack of infrastructure. We were unable to continue the research,” she explained.

During the visit, Indian and Indonesian officials discussed conducting a geological survey in Papua, Agung said. India would finance the survey using its national budget. With Indonesian President Joko Widodo prioritising infrastructure investment, the energy ministry has few resources to conduct such surveys.

Expected privileges
Indonesia also anticipates benefiting and learning from India’s experience in processing coking coal.

In exchange, India expected privileges from the Indonesian government, including the right to secure the project without a bidding process, Agung said.

Indonesia denied the request, and the talks were put on hold. Approving it would have been too risky, Agung said, since the bidding process is regulated in Indonesia. “We recommend they follow the bidding process or cooperate with a state-owned enterprise,” Agung said.

India’s ministry of coal did not respond to an emailed request for comment.

Energy and mining law expert Bisman Bakhtiar said there was still a chance India could get the rights to develop any resulting coal concessions without having to go through an open bidding process. “It can proceed under the G-to-G (government-to-government) scheme by signing a bilateral agreement,” he said.

This form of agreement would supersede the ministerial regulations requiring competitive bidding, Bisman explained, although he said any such agreements should emphasise that any projects must be carried out according to local laws.

There is precedent in Indonesia for G-to-G schemes bypassing the open bidding process, Bisman said. For example, multiple projects have been carried out on the basis of cooperation agreements with the World Bank and Australia. In another instance, Indonesian media mogul Surya Paloh imported crude oil from Angola via a bilateral cooperation agreement with Angola’s state-owned oil company Sonangol.

Draft law
A draft law currently being discussed in the House of Representatives could also smooth the path for India. It says that if there is agreement between Indonesia and a foreign government to conduct geological studies, the country involved will get priority for the contract.

However, this would still require the country to meet market prices. “We called it ‘right to match.’ If there are other parties who offer lower prices, then they should follow that price,” Bisman said.

Another option would be for India to appoint one of its local companies to work with Indonesian private sector giant Adaro or state-owned coal miner PT Bukit Asam. Such a deal could be conducted as a business-to-business (B-to-B) agreement, and would be legal according to Indonesia’s Energy Law.

Or, Indonesia could assign a state-owned firm like Bukit Asam to work with India based on a memorandum of understanding (MOU) signed by both countries.

“But all these options have a potential risk,” Agung said. “They can be categorised as collusion by the Corruption Eradication Commission (KPK).” He said a conventional bidding process should be prioritised.

Bisman said India needed to consider other risks, such as the social and political situation in Papua. The region is home to an armed pro-independence movement and has faced decades of conflict around the world’s largest and most profitable gold and copper mine, Grasberg, owned by US-based Freeport McMoRan.

‘Land grab’
Despite the presence of the mine, Papua remains Indonesia’s poorest province, with some of the worst literacy and infant mortality rates in Asia. Indonesia’s National Commission on Human Rights (Komnas HAM), a state-funded body, has characterised Freeport’s concession as a “land grab,” for which the original stewards of the land, the Amungme and Kamoro indigenous people, were never properly consulted or compensated.

The Indonesian energy ministry’s own research says that any project must take into account the impact on Papua’s indigenous peoples, and must factor in specific local concepts of land ownership, leadership and livelihood.

Franky Samperante, executive director of rights advocacy group Yayasan Pusaka, said he was worried about the plan. “It is way too risky,” he said, pointing to the social and environmental fallout of the Grasberg mine.

“There should be communication between the mining company and indigenous Papuans,” he said, warning Jakarta to carefully calculate the social, environmental and national security impacts.

Local indigenous people need to be meaningfully involved in the decision-making process, he said, especially since the mining would occur in and near forests where indigenous people live and gather and hunt their food.

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MIL OSI – Source: Evening Report Arts and Media

Timor-Leste finally has a government. But what happens now?

By Guteriano Neves in Dili

After nearly a year of political deadlock resulting from a minority government, and a divisive political campaign, Timor-Leste is set to have a stable government after an early election, held last Saturday.

The forthcoming government will face an uneasy task in delivering on the promises made during the campaign.

The result of the election brought four parties to be represented in the Parliament. The Aliança de Mudança para o Progresso (AMP), led by resistance leader Xanana Gusmão, won an absolute majority in the latest polls, securing 34 seats out of 65 seats in the Parliament.

This will be sufficient to pass the programme and budget in the Parliament, both of which the previous minority government failed to do. Frente Revolucionáriu de Timor-Leste Independente (Fretilin) came in second, maintaining its 23 seats despite a significant increase in the number of votes.

The Democratic Party and Frenti Dezenvolvimentu Demokrátiku (FDD) – a new political force – secured five and three seats, respectively.

The result sets Timor-Leste up to end nearly a year of political impasse resulting from the previous minority government. The country can now expect have a stable government for five years to come.

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Having a stable government is one thing, but delivering on political promises is another. The latter is not easy, given the context in Timor-Leste.

Strong opposition
At the macro political level, the government is expected to face strong opposition from the opposition bench in the National Parliament.

Outside of parliament, the government will face enormous pressure from the public to deliver the promises made during the campaign. This includes delivering good quality infrastructure, high quality public services — mainly education and health — and building an economy that can employ a significant number of the young population.

The last point is critical for Timor-Leste’s long-term peace and stability.

The biggest task is economic: striking a balance between current domestic consumption and long-term investment, in a context where the current government reserve is depleting.

In general, public and private consumption in Timor-Leste have been growing during the last 10 years, becoming the engine for non-oil economic growth. One could view the growing domestic consumption level as an increase in purchasing power and wellbeing.

However, this growth is primarily fueled by public spending, using petroleum revenue.

Increased consumption also incentivises the emergence of small private sector activities, primarily the wholesale and retailer industry in Dili. This sector provides a large proportion of jobs in the private sector, particularly in Dili, according to the Business Activities Survey.

Poverty line
Growing domestic consumption has also contributed to the reduction of the poverty level. Nonetheless, 41 percent of Timorese still live below the national poverty line, and many households still depend on the government’s cash transfer programmes.

Therefore, maintaining the current consumption level is important for short-term growth and maintaining the well-being of individual households.

Meanwhile, the public sector is the biggest contributor of investment in Timor-Leste.

Currently private sector investment is still less than 10 percent of the total non-oil GDP. Therefore, the government’s investment has been critical for economic growth during the last 10 years, and job creation in the construction sector.

In the last decade, the government focused its attention on physical infrastructure, primarily electricity and roads. There are political as well as economic reasons for this.

The public demand for infrastructure resonates throughout the country, and the existing infrastructure is deteriorating rapidly due to poor maintenance. The economic rationale is that public investment in infrastructure is necessary to enable an environment for the private sector to grow.

But Timor-Leste needs to give more attention to long-term investment in its people. Education and health services, particularly, serve this purpose.

Health, education challenges
In the last decade, as the government prioritised physical infrastructure, public investment in health and education has been relatively low by regional standards.

While there have been significant improvements in many indicators, the issues of malnutrition and education quality are still big challenges.

In education in particular, there is an immediate need to improve the basic supporting infrastructure. Teacher training is widely regarded as a critical issue, but it requires long-term approach.

The country will pay a high economic and social cost in the future if there is no significant improvement in these sectors.

Finally, the country also needs to work on its institutional framework to support long-term development. Various organisations, laws and regulations, and policy frameworks, both formally and informally guide the way actors behave by creating economic incentives.

The roles of different institutions are critical, including the parliament, judiciary, ombudsman office, and anti-corruption commission. The government also needs to strengthen internal control mechanisms to strengthen accountability and efficient use of existing resources.

Extra-parliamentary oversight mechanisms, such as investigative journalism, critical voices from NGOs and academics, and space for public participation, will contribute here.

Striking a balance
In order to strike this balance between short-term and long-term goals, the government needs to be realistic, pragmatic, and strategic in choosing instruments and setting targets. A significant proportion of domestic consumption is public consumption.

The government’s intervention could focus on unnecessary public consumption, where spending cuts can be made in order to improve efficiency in public spending.

As for physical infrastructure, it is necessary for the government to focus much of its attention on basic infrastructure, such as roads, water and sanitation, and the infrastructure to support public service delivery.

There is a need to revisit all investment projects, particularly big projects that do not have clear investment returns, which could become “white elephant” projects for the country in the future if the economy does not have sufficient capacity to operate and to maintain such assets in the long run.

In the last 10 years, thanks to petroleum revenues, the government was able to adopt a “frontloading fiscal policy” to boost domestic consumption and finance largescale public investment. Nonetheless, having disproportionate public spending creates loopholes for misappropriation of public resources, particularly when coupled with less efficient public administration.

Consequently, certain groups of people profit disproportionately from the contracts. Unnecessary spending discourages productive activities and inflates the prices of goods and services, thus affecting resource distribution within the economy. This adversely impacts the government’s intention to develop Timor-Leste’s non-oil economy.

Since petroleum revenues have declined steeply, there is a need to impose certain fiscal disciplinary measures to constrain the temptation posed by available cash in the Petroleum Fund.

Not appropriate
Budget cuts do not sound appropriate in a context where poverty is still significantly high, and public spending is the engine to keep the economy moving.

But without fiscal discipline, Timor-Leste would be more likely to repeat the same policy that has been ineffective in responding to the country’s needs.

The new government needs to be more pragmatic and realistic in deciding how much to spend, setting the sectoral priorities, and acknowledging the tradeoffs involved.

These tasks are not easy, but they are not impossible. It requires decision makers to be realistic in spending and setting targets, strategic in choosing their policy instruments, and courageous enough to bear the tradeoffs resulted from policy options.

Guteriano Neves is a Dili-based policy analyst. This article was first published by The Diplomat and is republished with permission.

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MIL OSI – Source: Evening Report Arts and Media