Petro-Dollar Exit
China Builds Georgia's Black Sea Container Port, Saudi Arabia's Petro-dollar Exit, and Enemy of Freedom.
China Builds Georgia's Black Sea Container Port
By Maritime Executive
The government of Georgia has awarded a 49 percent stake in the future Black Sea port of Anaklia to a Chinese consortium led by state-owned China Communications Construction Company (CCCC). The project will have a container throughput of 600,000 TEU per year, which will support a long-planned “Middle Corridor" of multimodal transport connecting China to Europe”.
A Swiss consortium also entered the bidding, but never submitted its final proposal, according to Georgian economy minister Levan Davitashvili.
"This is not the first important investment project from China to Georgia, but I believe it’ll be a milestone for our cooperation within the framework of the Belt and Road initiative," said Chinese Ambassador to Georgia Zhou Qian in a statement.
CCCC's partners include China Harbour Investment Pte., China Road and Bridge Corporation and Qingdao Port International Co. The full details of the agreement with CCCC will be disclosed soon, the Georgian government said.
"The application is complete, the relevant bank guarantees have been presented," Davitashvili said. "In a few days, we will have clarifications, after which the Chinese consortium will be announced as the winner."
The Georgian government claims that CCCC is not sanctioned by the U.S. government, and a top official told local media that reports to the contrary were "a lie."
In 2020, CCCC was sanctioned by the U.S. Commerce Department for its role in building artificial islands in Philippine waters, and in the following year it was designated by the U.S. Treasury as an element of the Chinese military-industrial complex. Taken together, these sanctions imposed limited restrictions on investing in CCCC, or sending exports or technology transfers to CCCC. These measures are still in place, but they only cover certain types of transactions, and Georgia noted that the restrictions "do not prevent others from purchasing services or goods from CCCC."
Ambassador Zhou noted that U.S.-backed civil society groups in Georgia have raised concerns about Chinese involvement in the project. "I think that if you look back at some disinformation about the CCCC, made by some so-called think tanks, which is financed by Taiwan and the United States, you can see why such disinformation was spread," he said.
A previous plan to build a port at Anaklia was launched in 2017, with participation from TBC Holding, SSA Marine, British Wondernet Express, and G-Star Ltd. The contract ran into controversy related to the finances of its local backers, and it was ultimately canceled by the government.
Saudi Arabia's Petro-dollar Exit
By Katja Hamilton (Biz Community)
The financial world is bracing for a significant upheaval following Saudi Arabia's decision not to renew its 50-year petro-dollar deal with the United States, which expired on Sunday, 9 June, 2024.
The lapsed security agreement - signed by the United States and Saudi Arabia on 8 June 1974 - establishes two joint commissions, one on economic co-operation and the other on Saudi Arabia's military needs, and was said to have heralded an era of increasingly close co-operation between the two countries.
American officials at the time expressed optimism that the deal would motivate Saudi Arabia to ramp up its oil production. They also envisioned it as a blueprint for fostering economic collaboration between Washington and other Arab countries.
The crucial decision to not renew the contract enables Saudi Arabia to sell oil and other goods in multiple currencies, including the Chinese RMB, Euros, Yen, and Yuan, instead of exclusively in US dollars. Additionally, the potential use of digital currencies like Bitcoin may also be considered.
This latest development signifies a major shift away from the petrodollar system established in 1972, when the US decoupled its currency from gold, and is anticipated to hasten the global shift away from the US dollar.
Cross-border CBDC transactions
In a more recent move, Saudi Arabia has announced its involvement in Project mBridge, a project which explores a multi-central bank digital currency (CBDC) platform shared among participating central banks and commercial banks. It is built on distributed ledger technology (DLT) to enable instant cross-border payments settlements, and foreign-exchange transactions.
The project has more than 26 observing members including the South African Reserve Bank, which was greenlighted as a member this month.
The better known observing members of mBridge are those of the Bank of Israel, Bank of Namibia, Bank of France, Central Bank of Bahrain, Central Bank of Egypt, Central Bank of Jordan, European Central Bank, the International Monetary Fund, the Federal Reserve Bank of New York, the Reserve Bank of Australia, and the World Bank.
In tandem, the project steering committee has created a bespoke governance and legal framework, including a rulebook, tailored to match the platform's unique decentralised nature.
Evolution of Project mBridge
Project mBridge is the result of extensive collaboration starting in 2021 between the BIS Innovation Hub, the Bank of Thailand, the Central Bank of the United Arab Emirates, the Digital Currency Institute of the People's Bank of China and the Hong Kong Monetary Authority.
In 2022, a pilot with real-value transactions was conducted. Since then, the mBridge project team has been exploring whether the prototype platform could evolve to become a Minimum Viable Product (MVP) – a stage now reached.
As it enters the MVP stage, Project mBridge is now inviting private-sector firms to propose new solutions and use cases that could help develop the platform and showcase all its potential.
Enemy of Freedom
By Ingar Solty (Jacobin)
Today marks 125 years since the birth of Austrian-British economist Friedrich August von Hayek. He theorized the need to keep the masses away from the levers of state power — and did it in the name of defending freedom.
for all the enemies of democracy and freedom, Friedrich August von Hayek was probably the smartest. At least, he was the most influential: the structures of today’s global economy — the European Economic and Monetary Union, central banks, “balanced budget amendments” to national constitutions, and “free” trade agreements guaranteeing capital’s future profits — are essentially based on his ideas and those of his students.
Margaret Thatcher is said to have once pulled Hayek’s The Constitution of Liberty out of her bag during a Conservative policy meeting and proclaimed: “This is what we believe in!” Even after fifty years of neoliberal devastation, there are still true believers. One is Javier Milei. When the son of an upwardly mobile capital entrepreneur was elected Argentina’s president in December, the Berlin-based Hayek Society awarded him its greatest prize: the Hayek Medal. The society, which has come under fire for its closeness to the far-right Alternative für Deutschland, hailed Milei’s “clear view of the power of a market economy” able to “once again lay the foundations for freedom, prosperity and social peace,” in the tradition of “Ludwig Erhard, Ronald Reagan and Margret Thatcher.”
“Hayek’s first goal was to systematically keep the people at a distance from all the social and economic decisions affecting their own lives.”
Gerd Habermann, member of the Hayek Society’s executive board and honorary professor in economics at Potsdam University, wrote upon Milei’s hundredth day in office that he sought the abolition of “the egalitarian welfare state (not just its reform) and socio-political destructionism (genderism and all that).” Milei had indeed fired up the “chain saw” just ten days into his term, as he pushed through an emergency decree: in the name of total freedom for capital, he abolished or amended workers’ rights to unionize; laws to protect against layoffs and in the workplace; price controls on electricity, health and mobility; protection of tenants against real estate corporations; and consumer protection against practices of pharmaceutical, banking, and credit card companies. All government spending has been frozen, with the exception of the military. Moreover, Milei seeks the total privatization of all state-owned companies. To implement these policies without opposition, the decree included an “enabling law” intended to give Milei quasi-dictatorial powers in key policy areas. Hayek would surely have liked all this a great deal. Writing in business daily Handelsblatt, Hayek Society chairman Stefan Kooths described Milei as a “stroke of luck for liberalism” — and hoped that he foreshadows a new wave of market fundamentalism.
Hayek’s first goal was to systematically keep the people, “the big lout” (in Heinrich Heine’s words), at a distance from all the social and economic decisions affecting their own lives. His second major goal was to hand the working class over to capital utterly defenseless.
He and his followers have always done this in the name of “liberty.” This word runs throughout Hayek’s work, which his student Milton Friedman called the “battle for freedom.” What is always meant, however, is the unrestricted freedom of capital, the flip side of which is wage slavery. Hayek wanted exploitation without limits. For this, he was awarded the Nobel Prize for Economics in 1974 — at a time when the profits of capital were squeezed — which, according to the conservative magazine the National Interest, made him a “cult figure of the radical right.” At that time, Hayek still had to share the prize with the left-wing Keynesian economist Gunnar Myrdal — a sign that Fordism’s crisis was an open process, with multiple ways out. Friedman’s award in 1976 later signaled the neoliberal turning point, long before Thatcher and Reagan were elected and radicalized policies already were set in place by their predecessors.
Hayek hated equality. He only accepted equality before the law — a mockery when ordinary Joe is forced to sue an oligopolistic auto industry, pharmaceutical, or hospital corporation. Hayek justified the dramatic economic inequalities inherent in capitalist development — i.e. the fact described by Thomas Piketty, Emmanuel Saez, and Gabriel Zucman that without massive redistribution, income from capital eats up income from labor — with reference to “hereditary” differences. This resonates with the assumption that the fortunes of Elon Musk, Jeff Bezos, Mark Zuckerberg, and the Quandts and Klattens are the result of personal achievement and merit.
Market Radicalism Cornered
In the 1930s, as a result of the capitalist crisis, mass strikes, and the bourgeoisie’s fear of communism, there was an attempt in the United States to get to grips with the glaring inequality and make the distribution of wealth and income more egalitarian again by strengthening trade union rights, introducing and expanding wealth and progressive income taxation, and expanding the public sector of the economy. President Franklin Delano Roosevelt was confronted with the failure of his predecessor Herbert Hoover’s liberal austerity policy, which had caused mass unemployment to swell to 25 percent. He now radically skimmed off all annual income over $1 million at 75 percent taxation, later reaching 91 percent.
This was successfully invested in public employment programs (Works Progress Administration, Civilian Conservation Corps), the expansion of infrastructure (electrification, highways, bridges, subways, dams, and irrigation systems, etc.), nature conservation (establishment and expansion of national parks), the development of welfare state structures, and also the promotion of cultural life. If he had got his way, the tax rate would have been 100 percent. In 1936, the economist John Maynard Keynes, in his major work The General Theory of Employment, Interest and Money — on which the demand-oriented economic policy in Fordist capitalism (1933–75) was essentially based — anticipated the “euthanasia of the rentier” who lives exclusively from merit-less capital income.
“The Keynesian paradigm was replaced by Hayek’s neoliberal ideas during the crisis of Fordism in the 1970s.”
However, the Keynesian paradigm was replaced by Hayek’s neoliberal ideas during the crisis of Fordism in the 1970s. The fact that Keynes himself had helped Hayek to obtain a position at King’s College in London may be regarded as a staircase joke of history. Since then, the rentiers have been celebrating once again. According to the Federal Statistical Office, 1 percent of the German population now lives exclusively from capital income, i.e. from other people’s (surplus) labor, the value of which is appropriated through profits and dividends from shares in stock exchange–listed companies. Some sociologists once accused Occupy’s distinction between the bottom 99 percent and the top 1 percent of society of simplifying its concept of class. However, this distinction was actually quite close to real class relations.
Either way, this is how the gigantic billion-dollar fortunes of today were created, which contrast with the relative and increasingly also absolute poverty of the population and the collapse of public infrastructure like schools, bridges, and public transit. As Piketty has shown, inequality reached the highs of 1929 again in 2007, on the eve of the global financial crisis. This was no coincidence: financial market capitalism constantly leads to financial crises because the gigantic piles of capital in search of profitable investment opportunities constantly produce new speculative bubbles. And they also cause societal crises, where politics has created new investments by privatizing public housing, health care, pension systems, education, etc.
Hayek had already learned to hate politics like Roosevelt’s in social democratic “Red Vienna,” up through his early 1920s university years. In 1921, one of his professors connected him with the Austrian economist Ludwig von Mises, the author of a radical refutation of socialism called Die Gemeinwirtschaft (1922), who then became his mentor. In his 1944 work The Road to Serfdom, addressed to an Anglo-American audience in the midst of World War II, Hayek placed Roosevelt in close proximity to Hitler: one had to “state the unpalatable truth that it is Germany whose fate we are in some danger of repeating.” Certainly “the conditions in England and the United States” were different, he conceded. Perhaps he wanted to preempt skepticism as to whether the extension of the right to strike for US workers was really so similar to the annihilation of the German labor movement in the Nazi concentration camps, or if public employment programs for workers of all ethnicities were an American Auschwitz. But, according to Hayek, these differences should not obscure the realization “that we are moving in the same direction.”
Hayek rightly saw market radicalism on the defensive in the 1940s. Although US big business financed the mass distribution of The Road to Serfdom, there was a tendency toward greater regulation of capitalism and more economic planning. Liberal capitalism had led to the Great Depression, the Depression to fascism and fascism to world war. Only the Soviet Union had come through the crisis well thanks to economic planning and, although it had emerged from a dependent and backward developing country, was now in the process of liberating Europe from German fascism almost single-handedly.
In the United States, Roosevelt successfully pursued left-wing policies. After the war, Soviet-style socialism was extended to Eastern Europe, while a seriously left-wing Labour government came to power in Britain, and the Communists gained massive strength in France and Italy. In Germany, too, immediately after 1945, millions of people in all occupation zones flocked to the labor movement, and even backed the socialization of large-scale industry in a referendum in Hesse, which the US occupying forces blocked. Even the Christian Democratic Union (CDU) acknowledged in its Ahlen Program that the “capitalist economic system has not served the . . . interests of the German people,” which is why a “socialist economic order” beyond the “capitalist pursuit of profit and power” was needed.