foreignpolicy--2020-01-17--The Left and Right Are Wrong About Inequality

The Left and Right Are Wrong About Inequality Over the last decade , right-wing and left-wing populism have gained traction in the United States—and , arguably , in many other rich democracies as well .
The right ’ s version of populism has taken a variety of forms : the pro-tariff and anti-immigration agendas of U.S. President Donald Trump , anti-corporatism as expressed by the former Trump advisor and Breitbart co-founder Steve Bannon , and greater skepticism toward markets more generally among many conservative intellectuals .
Meanwhile , on the left , an anti-corporate agenda has gone mainstream .
Two @ @ @ @ @ @ @ ’ s presidential election—Sens .
Bernie Sanders and Elizabeth Warren—routinely discuss their plans to reduce the power of U.S. corporations .
For example , Sanders would compel publicly traded companies to redistribute ownership , while Warren would force them to appoint board members based on worker preferences .
For several years , Democrats have expressed more favorable views toward socialism than capitalism .
It ’ s likely the 2007-2008 financial crisis , recession , and federal government bailouts of big banks and automakers elevated the popularity of these views , but even setting @ @ @ @ @ @ @ have been characterized by slow economic growth ; low personal savings rates ; soaring costs for health care , education , and housing ; and falling labor force participation rates of prime-aged men—and later women .
The last four decades have also been characterized by rising income inequality .
This is true using pretax market data from the Congressional Budget Office , IRS data , or household survey data from the Census Bureau .
To take the Congressional Budget Office numbers , the top 1 percent of earners saw their share of market @ @ @ @ @ @ @ to 18 percent in 2016 .
Estimates based of the IRS data , including by the economists Thomas Piketty , Emmanuel Saez , and Gabriel Zucman , put the share at around 20 percent .
Whatever the method of calculation , the United States is one of the most unequal democracies in the world .
The share of income going to the top in the United States is roughly three times higher than rates found in several Northern European countries .
Income inequality , as I argue in my new book from Princeton @ @ @ @ @ @ @ : A Manifesto for a Just Society , is not inherently bad .
But it is a political problem when it is unfair .
Unfair inequality occurs when rich people earn well beyond what they contribute .
Excessive inequality , in that sense , is bound to be unfair .
Citizens , of course , pick up on that unfairness and look to leaders for explanations and remedies .
During the 2016 Republican Party presidential primary , for example , Trump emerged as the leading candidate not among high-income earners—who supported more moderate @ @ @ @ @ @ @ Rubio , but rather among middle- and lower-income-earning Republicans , even though their exposure to trade competition and immigration was no higher than among those who do not support Trump .
Yet the diagnoses offered by populists on the right and left are based on fundamental misunderstandings of the reasons for inequality , and their remedies would fail to reduce it in any meaningful way .
That theory doesn ’ t align with the facts .
Research published in the Quarterly Journal of Economics last year examined U.S. tax data to see how @ @ @ @ @ @ @ the years .
The authors of the article find that almost all of the overall increase in U.S. income inequality since 1980 has come from growing gaps between firms—not between workers within the same firm .
Though there are certainly exceptions , the highest-paid workers in firms are not generally pulling away from the typical worker , rather , as the authors state , “ workers ’ earnings in almost all percentiles have evolved in line with those of their coworkers.
” Still , even if rising inequality between executives and workers at @ @ @ @ @ @ @ overall rise , it could be the case that corporations are driving inequality because of growing corporate control over the economy .
That also is not case .
Corporations are not nearly as important economically as they used to be .
From 1979 to 2018 , the share of U.S. national income going to revenue from C corporations—which are taxed separately from their owners and can be publicly traded on stock exchanges—fell from 62 percent to 42 percent .
Their profits as a share of national income fell by half over the period @ @ @ @ @ @ @ corporations , which are usually very small , with one or two owners , and not publicly traded .
In fact , scholars who study tax records have found that today ’ s rich are much more likely to own S corporations than be executives of traditional C corporations .
Going beyond the United States , it becomes clear that corporate economic influence can be compatible with an egalitarian society .
Compared with the United States , corporate compensation is higher as a share of GDP in many countries that are seen as @ @ @ @ @ @ @ anti-corporate narrative is that inequality has increased as trade barriers have fallen , leading to offshoring that enriches executives in trade-oriented industries at the expense of workers .
If this is true , then countries with the lowest trade barriers should have the highest levels of inequality .
This too is not the case , nor is it true that manufacturing executives and workers more generally are increasingly top income earners .
Their presence among top income earners has fallen in the United States and is generally low in most countries in the @ @ @ @ @ @ @ OECD ) .
Certainly , some workers have suffered income losses as a result of displacement from trade competition , but layoffs are even more common in sectors that are sheltered from overseas competition .
As recent academic work has shown , moreover , only a small fraction of workers experience long-term earnings losses as a result of import competition .
One fundamental error they make is failing to distinguish among different causes of inequality .
Certainly , highly successful entrepreneurship plays a role in inequality and also leads to economic growth .
@ @ @ @ @ @ @ perhaps a more important cause of both inequality in skill-generation and inequality in pay .
One indication that rising inequality in the United States and most other advanced countries has not purely resulted from entrepreneurship is that entrepreneurship has ground down over the last 40 years .
Start-ups and young companies more generally are increasingly rare in the United States .
Further , looking across countries , innovation and inequality are negatively correlated .
The number of patent applications per capita is highest in egalitarian Japan and Northern and Western European countries , @ @ @ @ @ @ @ , other than the United States , the most unequal OECD countries , such as Chile and Mexico , tend to generate very few patents .
Along these lines , innovative productivity growth has slowed across OECD countries .
As the economist Robert Gordon has argued , 1870 to 1970 was a far more innovative era in the United States than 1970 to 2016—and that era was characterized by falling income inequality toward the end of the period .
Rising inequality has coincided with an unmistakable slowdown in productivity growth .
Across rich @ @ @ @ @ @ @ from goods production to service production .
That is not an inherent problem , but service production brings challenges : The services provided by highly educated professionals ( including financial services , legal , medical , education , and others ) are expensive and , most importantly , subject to stringent regulations that are typically created by the insiders themselves .
These regulations allow certain types of professionals to monopolize the provision of high-profit services .
Thus , in 2017 , 43 percent of the top 1 percent of income earners working in @ @ @ @ @ @ @ legal , or financial services , up from 30 percent in 1980 .
Another significant portion of top earners come from various other professional service industries as well , putting the 2017 total around 50 percent .
In other words , essentially half of elite income earners in the United States either directly provide highly regulated services that require a license—such as doctors or lawyers—or work in a regulated skilled-service industry , such as finance , real estate , or health care .
These industries are all largely domestic—and they are politically powerful @ @ @ @ @ @ @ example , has prompted the massively inefficient insurance company model of health care , as the historian Christy Ford Chapin has shown , and has carved out special privileges for doctors , helping them maintain their independence from potential cost-cutting bureaucracies , while allowing them to charge on a fee-for-service basis .
Through the American Medical Association and its control over state licensing laws , doctors in the United States also hold a monopoly on valuable services .
Hospitals enjoy the same , which gives them the power to charge absurd and arbitrary @ @ @ @ @ @ @ model has made U.S. doctors , hospital owners , and insurance company executives abnormally rich at great expense to U.S. citizens .
Likewise , the American Bar Association has blocked efforts to allow alternative licensed professionals—like quasi-paralegals—from selling legal advice of any kind .
Hedge funds , for their part , have managed to charge extraordinary fees by exploiting rules that forbid mutual funds from providing hedge fund-like investment strategies to their retail investors .
The anti-populists fail to acknowledge how these political advantages consistently translate into gratuitous economic power , acting like @ @ @ @ @ @ @ , racial diversity is highly correlated with inequality .
Through a series of historical developments in the early 20th century , Northern and Western Europeans and their descendants in former British colonies found themselves in a position of economic and political power relative to the rest of the world .
With an ideology of white supremacy already firmly in place , the Great Migration of African Americans out of the U.S. South and the large-scale immigration of Eastern and Southern Europeans motivated white Americans to set up formal institutions to segregate themselves from @ @ @ @ @ @ @ of black people to participate in markets .
As a consequence of these institutions , racial and economic segregation remain extraordinarily high in the United States , and the upward mobility of African American children remains much lower than that of whites .
Meanwhile , professional whites continue to benefit from limited competition from African Americans , who were explicitly denied membership in the most prestigious professional associations into the 1960s .
Even today , U.S.-born white Americans under the age of 65 are three times more likely to be working as doctors @ @ @ @ @ @ @ Enduring patterns of racial inequality in social status , combined with racist ideology , have convinced a subset of populists—particularly whites who are not professional elites and not among the top 1 percent of earners—that new nonwhite migrants with low levels of formal education would be a permanent multigenerational drag on society , even as intergenerational data says otherwise .
In this way , the ideology of racial differences provides soil for right-wing populism to grow , drawing fertilizer from excessive income inequality .
If this doesn ’ t happen , the unfairness @ @ @ @ @ @ @ the financial and political health of the country .
The fruitless back-and-forth between populists and anti-populists will continue , with both groups arguing past one another with the wrong solutions .

Over the last decade, right-wing and left-wing populism have gained traction in the United States—and, arguably, in many other rich democracies as well.
Over the last decade, right-wing and left-wing populism have gained traction in the United States—and, arguably, in many other rich democracies as well.
The right’s version of populism has taken a variety of forms: the pro-tariff and anti-immigration agendas of U.S. President Donald Trump, anti-corporatism as expressed by the former Trump advisor and Breitbart co-founder Steve Bannon, and greater skepticism toward markets more generally among many conservative intellectuals.
Meanwhile, on the left, an anti-corporate agenda has gone mainstream. Two of the leading Democratic candidates for 2020’s presidential election—Sens. Bernie Sanders and Elizabeth Warren—routinely discuss their plans to reduce the power of U.S. corporations. For example, Sanders would compel publicly traded companies to redistribute ownership, while Warren would force them to appoint board members based on worker preferences. For several years, Democrats have expressed more favorable views toward socialism than capitalism.
It’s likely the 2007-2008 financial crisis, recession, and federal government bailouts of big banks and automakers elevated the popularity of these views, but even setting that aside, the last 40 years have been characterized by slow economic growth; low personal savings rates; soaring costs for health care, education, and housing; and falling labor force participation rates of prime-aged men—and later women.
The last four decades have also been characterized by rising income inequality. This is true using pretax market data from the Congressional Budget Office, IRS data, or household survey data from the Census Bureau. To take the Congressional Budget Office numbers, the top 1 percent of earners saw their share of market income increase from 10 percent in 1980 to 18 percent in 2016. Estimates based of the IRS data, including by the economists Thomas Piketty, Emmanuel Saez, and Gabriel Zucman, put the share at around 20 percent. Whatever the method of calculation, the United States is one of the most unequal democracies in the world. The share of income going to the top in the United States is roughly three times higher than rates found in several Northern European countries.
Income inequality, as I argue in my new book from Princeton University Press, A Republic of Equals: A Manifesto for a Just Society, is not inherently bad. But it is a political problem when it is unfair. Unfair inequality occurs when rich people earn well beyond what they contribute. Excessive inequality, in that sense, is bound to be unfair.
Citizens, of course, pick up on that unfairness and look to leaders for explanations and remedies. During the 2016 Republican Party presidential primary, for example, Trump emerged as the leading candidate not among high-income earners—who supported more moderate Republicans like Jeb Bush and Sen. Marco Rubio, but rather among middle- and lower-income-earning Republicans, even though their exposure to trade competition and immigration was no higher than among those who do not support Trump.
Yet the diagnoses offered by populists on the right and left are based on fundamental misunderstandings of the reasons for inequality, and their remedies would fail to reduce it in any meaningful way.
The idea that corporations are the driving force behind income inequality is perhaps best understood in the theory that executives, board members, and shareholders successfully conspire to reward each other at the expense of rank-and-file employees, who are powerless to prevent it from happening. In this view, inequality is growing because the balance of power within firms has shifted toward executives, who are paid increasingly well compared to workers.
That theory doesn’t align with the facts. Research published in the Quarterly Journal of Economics last year examined U.S. tax data to see how pay inequality in firms has changed over the years. The authors of the article find that almost all of the overall increase in U.S. income inequality since 1980 has come from growing gaps between firms—not between workers within the same firm. Though there are certainly exceptions, the highest-paid workers in firms are not generally pulling away from the typical worker, rather, as the authors state, “workers’ earnings in almost all percentiles have evolved in line with those of their coworkers.”
Still, even if rising inequality between executives and workers at large corporations can’t explain the overall rise, it could be the case that corporations are driving inequality because of growing corporate control over the economy.
That also is not case. Corporations are not nearly as important economically as they used to be. From 1979 to 2018, the share of U.S. national income going to revenue from C corporations—which are taxed separately from their owners and can be publicly traded on stock exchanges—fell from 62 percent to 42 percent. Their profits as a share of national income fell by half over the period. Businesses are increasingly organizing as S corporations, which are usually very small, with one or two owners, and not publicly traded. In fact, scholars who study tax records have found that today’s rich are much more likely to own S corporations than be executives of traditional C corporations.
Going beyond the United States, it becomes clear that corporate economic influence can be compatible with an egalitarian society. Compared with the United States, corporate compensation is higher as a share of GDP in many countries that are seen as more egalitarian.
Corporate Share of Compensation and Income Inequality
Another variant of the anti-corporate narrative is that inequality has increased as trade barriers have fallen, leading to offshoring that enriches executives in trade-oriented industries at the expense of workers. If this is true, then countries with the lowest trade barriers should have the highest levels of inequality. This too is not the case, nor is it true that manufacturing executives and workers more generally are increasingly top income earners. Their presence among top income earners has fallen in the United States and is generally low in most countries in the Organization for Economic Cooperation and Development (OECD). Certainly, some workers have suffered income losses as a result of displacement from trade competition, but layoffs are even more common in sectors that are sheltered from overseas competition. As recent academic work has shown, moreover, only a small fraction of workers experience long-term earnings losses as a result of import competition.
The populists are wrong about inequality, but another group—call them the anti-populists—are just as wrong. They claim that inequality is simply the price of prosperity. The basic argument is that markets create inequality because some people are simply better at making money. The upshot is that any policy agenda meant to curb inequality will harm efficiency and economic growth by preventing star entrepreneurs from realizing their potential.
One fundamental error they make is failing to distinguish among different causes of inequality. Certainly, highly successful entrepreneurship plays a role in inequality and also leads to economic growth. But unequal access to political power is perhaps a more important cause of both inequality in skill-generation and inequality in pay.
One indication that rising inequality in the United States and most other advanced countries has not purely resulted from entrepreneurship is that entrepreneurship has ground down over the last 40 years. Start-ups and young companies more generally are increasingly rare in the United States. Further, looking across countries, innovation and inequality are negatively correlated. The number of patent applications per capita is highest in egalitarian Japan and Northern and Western European countries, such as Switzerland and Sweden. Meanwhile, other than the United States, the most unequal OECD countries, such as Chile and Mexico, tend to generate very few patents.
Patents Per Capita and Income Inequality
Along these lines, innovative productivity growth has slowed across OECD countries. As the economist Robert Gordon has argued, 1870 to 1970 was a far more innovative era in the United States than 1970 to 2016—and that era was characterized by falling income inequality toward the end of the period. Rising inequality has coincided with an unmistakable slowdown in productivity growth.
Across rich democracies, the economy has shifted massively from goods production to service production. That is not an inherent problem, but service production brings challenges: The services provided by highly educated professionals (including financial services, legal, medical, education, and others) are expensive and, most importantly, subject to stringent regulations that are typically created by the insiders themselves. These regulations allow certain types of professionals to monopolize the provision of high-profit services.
Thus, in 2017, 43 percent of the top 1 percent of income earners working in the United States worked in medical, legal, or financial services, up from 30 percent in 1980. Another significant portion of top earners come from various other professional service industries as well, putting the 2017 total around 50 percent. In other words, essentially half of elite income earners in the United States either directly provide highly regulated services that require a license—such as doctors or lawyers—or work in a regulated skilled-service industry, such as finance, real estate, or health care. These industries are all largely domestic—and they are politically powerful.
Top 1 Percent of Income Earners by Industry-Occupation Categories UNITED STATES, 1980-2017
The American Medical Association, for example, has prompted the massively inefficient insurance company model of health care, as the historian Christy Ford Chapin has shown, and has carved out special privileges for doctors, helping them maintain their independence from potential cost-cutting bureaucracies, while allowing them to charge on a fee-for-service basis. Through the American Medical Association and its control over state licensing laws, doctors in the United States also hold a monopoly on valuable services. Hospitals enjoy the same, which gives them the power to charge absurd and arbitrary prices for basic services. The resulting model has made U.S. doctors, hospital owners, and insurance company executives abnormally rich at great expense to U.S. citizens.
Likewise, the American Bar Association has blocked efforts to allow alternative licensed professionals—like quasi-paralegals—from selling legal advice of any kind. Hedge funds, for their part, have managed to charge extraordinary fees by exploiting rules that forbid mutual funds from providing hedge fund-like investment strategies to their retail investors. The anti-populists fail to acknowledge how these political advantages consistently translate into gratuitous economic power, acting like a regressive tax on Americans.
As markets for professional services have been rigged to favor elite insiders, neither right-wing populism nor inequality can be fully explained without understanding the role of race and the way racial differences in political power have limited access to markets and stymied competition for elite professional jobs.
Internationally, racial diversity is highly correlated with inequality. Through a series of historical developments in the early 20th century, Northern and Western Europeans and their descendants in former British colonies found themselves in a position of economic and political power relative to the rest of the world. With an ideology of white supremacy already firmly in place, the Great Migration of African Americans out of the U.S. South and the large-scale immigration of Eastern and Southern Europeans motivated white Americans to set up formal institutions to segregate themselves from other groups and sharply curtail the ability of black people to participate in markets.
As a consequence of these institutions, racial and economic segregation remain extraordinarily high in the United States, and the upward mobility of African American children remains much lower than that of whites. Meanwhile, professional whites continue to benefit from limited competition from African Americans, who were explicitly denied membership in the most prestigious professional associations into the 1960s. Even today, U.S.-born white Americans under the age of 65 are three times more likely to be working as doctors or lawyers than U.S.-born black Americans.
Enduring patterns of racial inequality in social status, combined with racist ideology, have convinced a subset of populists—particularly whites who are not professional elites and not among the top 1 percent of earners—that new nonwhite migrants with low levels of formal education would be a permanent multigenerational drag on society, even as intergenerational data says otherwise.
In this way, the ideology of racial differences provides soil for right-wing populism to grow, drawing fertilizer from excessive income inequality.
A just society would likely still have moderate levels of income disparity, but nothing like what is found in the United States. But to get to that future, politicians will need to move on from their flawed emphasis on corporations and globalization. Cutting down extreme inequality in incomes will require equalizing political power. That means providing not just equal voting rights and access to public services, but also access to markets for housing, financial, and professional services. Granting that access would work as a powerful decentralized force for curbing inequality.
If this doesn’t happen, the unfairness of the economy will continue to damage the financial and political health of the country. The fruitless back-and-forth between populists and anti-populists will continue, with both groups arguing past one another with the wrong solutions.


foreignpolicy--2020-01-17--Sudan’s New Prime Minister Grapples With His Country’s Past

Sudan ’ s New Prime Minister Grapples With His Country ’ s Past From the moment that Abdalla Hamdok became Sudan ’ s prime minister in August 2019 , he has at times appeared like a novice politician with the odds stacked against him .
As the country ’ s first transitional leader following the overthrow of longtime ruler Omar al-Bashir , Hamdok was left without a map to navigate the uncharted path to democracy .
The former technocrat and economist has struggled to stem the constellation of tribal conflicts that have dotted Sudan .
Some of his agenda and @ @ @ @ @ @ @ ’ s squabbling revolutionary leaders .
For his first weeks as prime minister , he did not even have an official residence , working and living out of a glittering temporary home because the military said he could not stay in Bashir ’ s old residence .
And a group of intelligence officials attempted mutiny on Tuesday , with gunfire and early reports of a coup attempt temporarily causing chaos in the capital before being quashed .
But despite the fumbling and violence—and a brief tenure already packed with historic highs and bleak @ @ @ @ @ @ @ Mandela ’ s political brilliance to unite the country around change amid a tortured past .
Some policymakers in Washington and other Western capitals are for the first time in decades cautiously optimistic about Sudan ’ s future , suggesting that if Hamdok manages to continue his reforms , he could alter Sudan ’ s image as a global problem child—and perhaps even transform it into a democratic success story .
A onetime senior economist for the United Nations in Africa , steeped in the wonky and technical world of economics and trade @ @ @ @ @ @ @ United Nations and Washington during a flurry of diplomatic meetings in which he sought international support for a nation in the midst of reform .
He has taken bold steps to liberalize Sudan ’ s byzantine economic policies , even as they strain under the weight of U.S. and international sanctions .
And most significantly , Hamdok made a historic visit to the rebel-held area of Kauda , promising peace to a conflict that has waged for nearly a decade .
Nonetheless , many observers still fear that the remnants of Bashir ’ @ @ @ @ @ @ @ upend the country ’ s fragile transition to democracy .
The violence that erupted in Khartoum on Tuesday offered an ominous preview of what could come .
Former elite troops loyal to Bashir attempted to mutiny over the issue of severance pay , leading to gunfire and clashes in Khartoum before the army quelled the rebellion .
The episode served as a reminder of how much power the country ’ s feared intelligence services and military still have , even with Bashir in prison .
A top Sudanese military commander on the country @ @ @ @ @ @ @ Hamdan “ Hemeti ” Dagalo , accused the country ’ s former spy chief , Salah Gosh , of plotting the mutiny .
Speaking to Foreign Policy from Cairo , Gosh denied the accusation .
“ I am not involved of course .
It is clear what is the problem—it is just a lack of management , ” Gosh said .
When asked about Hemeti ’ s comments , the former spymaster dismissed Hemeti .
“ I think he is playing political games.
” The accusations exchanged between the two men—each of whom @ @ @ @ @ @ @ violations—is an indication of the unstable security situation Hamdok himself must balance .
Hamdok ’ s term will officially end when elections take place in 2022 , but even those closest to the prime minister wonder if he will last the whole transition period .
This account of the first half-year of Hamdok ’ s tenure and its lead-up is based on more than two dozen interviews with Hamdok , senior officials around him , protest leaders , Western diplomats , and experts .
Over the course of two interviews with Foreign Policy—one @ @ @ @ @ @ @ office and one in December during his visit to Washington—Hamdok discussed the country ’ s revolution , prospects of normalization with the United States , and the lessons he learned from other transitions across the world .
“ I remember all the time Mandela saying … ‘ It is always impossible until it is done , ’ ” Hamdok said , referring to the former South African president who led the country peacefully out of its apartheid system in the 1990s .
As Sudan ’ s military junta and civilian protesters were in @ @ @ @ @ @ @ power-sharing deal following the overthrow of Bashir , he became the favorite to lead the country ’ s transitional government .
At first glance , he lacked the charisma and verve of some other world leaders , such as Ethiopian Prime Minister Abiy Ahmed .
But because Hamdok was living outside of Sudan and refused to work under Bashir , he was untouched by the widespread disaffection toward opposition leaders and had a respected international profile .
Hamdok was initially skeptical of taking the job as Sudan ’ s transitional prime minister , @ @ @ @ @ @ @ with , because of the mountainous challenges he would face .
But he was swayed by the once-in-a-generation moment that Sudan found itself in , these people said .
Some experts say such a leader—a wonk who was initially reluctant to take power—might be just what the country needs to extricate itself from decades of dictatorial rule .
“ Hamdok is a technocratic leader , ” said Susan Stigant , the director of Africa programs at the United States Institute of Peace .
“ He is in this position because he cared , @ @ @ @ @ @ @ right reasons .
He is the conductor of an orchestra , and his job is to get everyone to play in tune.
” “ He is the conductor of an orchestra , and his job is to get everyone to play in tune ” Hamdok still faces daunting challenges : a stagnant economy that is some $ 60 billion in debt , a “ deep state ” of Bashir loyalists who up to this point have been subdued but not fully removed from Sudan ’ s power structures , a dense thicket of @ @ @ @ @ @ @ removed overnight , and an eager but impatient population hungry to see quick political and economic wins after the revolution .
Hamdok has also gone out of his way not to directly antagonize Hemeti , a former janjaweed militia commander and the head of Sudan ’ s Rapid Support Forces .
Hemeti ’ s men killed more than a hundred pro-democratic protesters during Sudan ’ s transitional period .
Asked in December if he trusted Hemeti , Hamdok did not directly answer .
“ We are together in this partnership with the military @ @ @ @ @ @ @ it work , ” he said .
Instead , some believe that Hamdok is trying to quietly outmaneuver Hemeti , for example by liberalizing the gold sector and choking off the revenue the commander receives through mines he has stakes in .
“ He knows that you will likely lose a fight with Hemeti and the military head-on .
Instead , you bite away at the edges , ” said Cameron Hudson , a former U.S. diplomat and senior fellow at the Atlantic Council .
But Hamdok ’ s early days in government @ @ @ @ @ @ @ broke out in meetings between Hamdok ’ s staff and the Forces of Freedom and Change ( FFC ) , the umbrella group of organizations that led the country ’ s revolution , particularly over personnel issues .
Senior government officials and diplomats described to Foreign Policy how the frantic pace meant meetings were long but results were few .
In late 2019 , Hamdok faced his first international test with a high-profile visit to the United States , a key test for the new leader in a country that could hold the @ @ @ @ @ @ @ malaise .
During his visit to Washington in December , Hamdok sought to bring a message of hope .
“ A peaceful revolution that lasted for over five , six months .
Very resilient .
Every time we thought it ’ s dying , it surprises , it ’ s taking more momentum .
So that gives us not only hope but also certainty that Sudan will never be the same again , ” he told Foreign Policy during his visit .
“ That gives us not only hope but also certainty that @ @ @ @ @ @ @ ” U.S. policymakers and lawmakers who met him were eager to give assurances that the United States would support Sudan in its democratic transition .
During his visit , the Trump administration agreed to upgrade diplomatic relations with Sudan and exchange ambassadors for the first time in more than two decades .
In a flurry of meetings with administration officials and on Capitol Hill , Hamdok stayed on message and convinced his U.S. counterparts he was genuine in his push for democratic reforms , according to a senior U.S. official familiar with the @ @ @ @ @ @ @ he ’ s trying to do the right thing , ” said Jon Temin , the director of Africa programs at Freedom House , a U.S.-based nonprofit advocacy organization .
“ I think he has a lot of support here.
” “ It ’ s a multistep process , and Sudan will have to meet the statutory and policy criteria for the lifting of SST , ” U.S. envoy to Sudan Donald Booth said in a speech at the Atlantic Council in October 2019 .
He also pointed to other congressional restrictions on @ @ @ @ @ @ @ , trafficking in persons , and child soldiers from the Bashir era that are still in place .
“ There are many areas where we have restrictions on what we can do .
But I want to assure everyone that the U.S. government is doing what we can based on the restrictions we have and are currently engaging the U.S. Congress to look at how those restrictions may be interpreted or modified going forward , ” he said .
Hamdok said lifting the designation was key to helping Sudan turn around its economy @ @ @ @ @ @ @ financial institutions to help address its crippling debt .
“ Any progress in this would require good cooperation with the international financial institutions , the World Bank , [ the ] IMF .
There ’ s no way we could reach any understanding on this under the shadow of the SST , ” he said during his visit in December .
If Hamdok inherited Sudan ’ s SST designation and staggering debt , then he also inherited the crimes of the past regime .
Bashir ’ s government in the early 1990s loaned @ @ @ @ @ @ @ .
Sudan was implicated in the 1998 U.S. embassy bombings in Kenya and Tanzania that killed more than 200 people and the 2000 bombing of the USS Cole that killed 17 .
Families of the victims of those attacks have lawsuits pending in U.S. courts .
If Hamdok inherited Sudan ’ s SST designation and staggering debt , then he also inherited the crimes of the past regime Even before Bashir was ousted , analysts said , Sudan in recent years reversed its support for extremist groups and began to cooperate with the @ @ @ @ @ @ @ the House Foreign Affairs Committee who met with Hamdok said , despite progress , Sudan needs to reach a settlement with the families before they would agree to back the lifting of the SST designation .
Hamdok indicated a willingness to reach a settlement , but the cash-strapped country may have trouble finding the money to do so .
Hamdok has trumped up the lifting of the SST designation as a major political win at home .
That ’ s become a problem according to Temin .
For starters , it backs Hamdok @ @ @ @ @ @ @ constituents if the United States can ’ t deliver lifting the label soon .
It also boils down U.S. commitments to Sudan to one issue in the eyes of the Sudanese , even though Sudan ’ s challenges go way beyond whether the designation is lifted or not .
“ I ’ m worried about the way that ’ s been elevated and the way that it ’ s become this test of the overall U.S. commitment to democratic reform in Sudan , ” he said .
Returning to Khartoum without a commitment @ @ @ @ @ @ @ list , Hamdok faced another blockade from the FFC .
A draft budget that lowered food and energy subsidies was rejected by leaders of the protest groups , and Hamdok had to submit a new draft with the funds .
The loss stung even more because of the unquestioned economic drain of the subsidies on Hamdok ’ s first budget .
“ If he removed the measures , the streets would turn against him , ” said Muhammad Yousif , a civil activist .
Hamdok has “ wide support ” among Sudanese , @ @ @ @ @ @ @ by the military , ” Yousif said .
Officials in both Khartoum and Washington said they did not expect Sudan to be removed from the SST list anytime soon .
And on Monday , the U.S. Supreme Court denied a petition by the Sudanese government to review the nearly $ 4 billion in damages the country owes to family members of those killed in the 1998 al Qaeda bombings in Kenya and Tanzania .
That payment is a condition for full normalization with Washington .
But Hamdok shows no signs of letting up @ @ @ @ @ @ @ and his economic agenda stifled , Hamdok became a peacemaker .
After weeks of behind-the-scenes negotiations , Hamdok on Jan. 9 traveled to Kauda , a rebel stronghold in the Southern Kordofan region that has seen conflict for nearly a decade .
The risky trip paid off .
Hamdok graced a stage to thousands of cheering people and raised the hand of the rebel leader Abdel-Aziz al-Hilu .
“ Hamdok ’ s visit to the rebel stronghold was successful , ” said Jérôme Tubiana , a researcher in Sudan .
“ Hamdok had @ @ @ @ @ @ @ officers in the military council for support in the peripheries.
” But Hamdok , balancing on a precarious political tightrope , is careful to portray the military as a partner .
“ It is in the interest of both parties , the military and the civilian government , to work together to move Sudan to the next stage , ” he told Foreign Policy .

From the moment that Abdalla Hamdok became Sudan’s prime minister in August 2019, he has at times appeared like a novice politician with the odds stacked against him. As the country’s first transitional leader following the overthrow of longtime ruler Omar al-Bashir, Hamdok was left without a map to navigate the uncharted path to democracy.
From the moment that Abdalla Hamdok became Sudan’s prime minister in August 2019, he has at times appeared like a novice politician with the odds stacked against him. As the country’s first transitional leader following the overthrow of longtime ruler Omar al-Bashir, Hamdok was left without a map to navigate the uncharted path to democracy.
The former technocrat and economist has struggled to stem the constellation of tribal conflicts that have dotted Sudan. Some of his agenda and personnel decisions have been torpedoed by Sudan’s squabbling revolutionary leaders. For his first weeks as prime minister, he did not even have an official residence, working and living out of a glittering temporary home because the military said he could not stay in Bashir’s old residence. And a group of intelligence officials attempted mutiny on Tuesday, with gunfire and early reports of a coup attempt temporarily causing chaos in the capital before being quashed.
But despite the fumbling and violence—and a brief tenure already packed with historic highs and bleak lows—Hamdok has displayed a touch of Nelson Mandela’s political brilliance to unite the country around change amid a tortured past. Some policymakers in Washington and other Western capitals are for the first time in decades cautiously optimistic about Sudan’s future, suggesting that if Hamdok manages to continue his reforms, he could alter Sudan’s image as a global problem child—and perhaps even transform it into a democratic success story.
A onetime senior economist for the United Nations in Africa, steeped in the wonky and technical world of economics and trade, Hamdok has charmed officials at the United Nations and Washington during a flurry of diplomatic meetings in which he sought international support for a nation in the midst of reform. He has taken bold steps to liberalize Sudan’s byzantine economic policies, even as they strain under the weight of U.S. and international sanctions. And most significantly, Hamdok made a historic visit to the rebel-held area of Kauda, promising peace to a conflict that has waged for nearly a decade.
Nonetheless, many observers still fear that the remnants of Bashir’s brutal security state could alter or upend the country’s fragile transition to democracy. The violence that erupted in Khartoum on Tuesday offered an ominous preview of what could come. Former elite troops loyal to Bashir attempted to mutiny over the issue of severance pay, leading to gunfire and clashes in Khartoum before the army quelled the rebellion. The episode served as a reminder of how much power the country’s feared intelligence services and military still have, even with Bashir in prison.
A top Sudanese military commander on the country’s ruling Sovereign Council, Mohamed Hamdan “Hemeti” Dagalo, accused the country’s former spy chief, Salah Gosh, of plotting the mutiny. Speaking to Foreign Policy from Cairo, Gosh denied the accusation. “I am not involved of course. It is clear what is the problem—it is just a lack of management,” Gosh said. When asked about Hemeti’s comments, the former spymaster dismissed Hemeti. “I think he is playing political games.”
The accusations exchanged between the two men—each of whom faces a rap sheet of human rights violations—is an indication of the unstable security situation Hamdok himself must balance.
Hamdok’s term will officially end when elections take place in 2022, but even those closest to the prime minister wonder if he will last the whole transition period. This account of the first half-year of Hamdok’s tenure and its lead-up is based on more than two dozen interviews with Hamdok, senior officials around him, protest leaders, Western diplomats, and experts.
Over the course of two interviews with Foreign Policy—one in August just days after he assumed office and one in December during his visit to Washington—Hamdok discussed the country’s revolution, prospects of normalization with the United States, and the lessons he learned from other transitions across the world.
“I remember all the time Mandela saying … ‘It is always impossible until it is done,’” Hamdok said, referring to the former South African president who led the country peacefully out of its apartheid system in the 1990s.
Hamdok’s was the most unlikely of political ascents.
As Sudan’s military junta and civilian protesters were in the final stages of agreeing to a power-sharing deal following the overthrow of Bashir, he became the favorite to lead the country’s transitional government. At first glance, he lacked the charisma and verve of some other world leaders, such as Ethiopian Prime Minister Abiy Ahmed. But because Hamdok was living outside of Sudan and refused to work under Bashir, he was untouched by the widespread disaffection toward opposition leaders and had a respected international profile. Hamdok was initially skeptical of taking the job as Sudan’s transitional prime minister, according to two people whom he consulted with, because of the mountainous challenges he would face. But he was swayed by the once-in-a-generation moment that Sudan found itself in, these people said.
Some experts say such a leader—a wonk who was initially reluctant to take power—might be just what the country needs to extricate itself from decades of dictatorial rule. “Hamdok is a technocratic leader,” said Susan Stigant, the director of Africa programs at the United States Institute of Peace. “He is in this position because he cared, and it’s for all the right reasons. He is the conductor of an orchestra, and his job is to get everyone to play in tune.”
“He is the conductor of an orchestra, and his job is to get everyone to play in tune”
Hamdok still faces daunting challenges: a stagnant economy that is some $60 billion in debt, a “deep state” of Bashir loyalists who up to this point have been subdued but not fully removed from Sudan’s power structures, a dense thicket of international sanctions that can’t be removed overnight, and an eager but impatient population hungry to see quick political and economic wins after the revolution.
Hamdok has also gone out of his way not to directly antagonize Hemeti, a former janjaweed militia commander and the head of Sudan’s Rapid Support Forces. Hemeti’s men killed more than a hundred pro-democratic protesters during Sudan’s transitional period. Asked in December if he trusted Hemeti, Hamdok did not directly answer. “We are together in this partnership with the military. … We will have to make it work,” he said.
Instead, some believe that Hamdok is trying to quietly outmaneuver Hemeti, for example by liberalizing the gold sector and choking off the revenue the commander receives through mines he has stakes in. “He knows that you will likely lose a fight with Hemeti and the military head-on. Instead, you bite away at the edges,” said Cameron Hudson, a former U.S. diplomat and senior fellow at the Atlantic Council.
But Hamdok’s early days in government were defined by growing pains. Disagreements broke out in meetings between Hamdok’s staff and the Forces of Freedom and Change (FFC), the umbrella group of organizations that led the country’s revolution, particularly over personnel issues. Senior government officials and diplomats described to Foreign Policy how the frantic pace meant meetings were long but results were few.
In late 2019, Hamdok faced his first international test with a high-profile visit to the United States, a key test for the new leader in a country that could hold the key to reversing Sudan’s economic malaise.
During his visit to Washington in December, Hamdok sought to bring a message of hope. “A peaceful revolution that lasted for over five, six months. Very resilient. Every time we thought it’s dying, it surprises, it’s taking more momentum. So that gives us not only hope but also certainty that Sudan will never be the same again,” he told Foreign Policy during his visit.
“That gives us not only hope but also certainty that Sudan will never be the same again”
U.S. policymakers and lawmakers who met him were eager to give assurances that the United States would support Sudan in its democratic transition. During his visit, the Trump administration agreed to upgrade diplomatic relations with Sudan and exchange ambassadors for the first time in more than two decades. In a flurry of meetings with administration officials and on Capitol Hill, Hamdok stayed on message and convinced his U.S. counterparts he was genuine in his push for democratic reforms, according to a senior U.S. official familiar with the matter.
“By all accounts, he’s trying to do the right thing,” said Jon Temin, the director of Africa programs at Freedom House, a U.S.-based nonprofit advocacy organization. “I think he has a lot of support here.”
Hamdok’s biggest request to the United States, however, is still in limbo. Since 1993, Sudan has been designated a “state sponsor of terrorism” (SST) by the U.S. State Department, a label that imposes strict unilateral sanctions and wards off serious financial investment from much of the world. Hamdok inherited the designation from his predecessor, but getting it lifted involves a monthslong technocratic process and U.S. congressional approval.
“It’s a multistep process, and Sudan will have to meet the statutory and policy criteria for the lifting of SST,” U.S. envoy to Sudan Donald Booth said in a speech at the Atlantic Council in October 2019. He also pointed to other congressional restrictions on assistance to Sudan related to religious freedom, trafficking in persons, and child soldiers from the Bashir era that are still in place. “There are many areas where we have restrictions on what we can do. But I want to assure everyone that the U.S. government is doing what we can based on the restrictions we have and are currently engaging the U.S. Congress to look at how those restrictions may be interpreted or modified going forward,” he said.
Hamdok said lifting the designation was key to helping Sudan turn around its economy and open access to support from international financial institutions to help address its crippling debt. “Any progress in this would require good cooperation with the international financial institutions, the World Bank, [the] IMF. There’s no way we could reach any understanding on this under the shadow of the SST,” he said during his visit in December.
If Hamdok inherited Sudan’s SST designation and staggering debt, then he also inherited the crimes of the past regime. Bashir’s government in the early 1990s loaned support to terrorists including Osama bin Laden. Sudan was implicated in the 1998 U.S. embassy bombings in Kenya and Tanzania that killed more than 200 people and the 2000 bombing of the USS Cole that killed 17. Families of the victims of those attacks have lawsuits pending in U.S. courts.
If Hamdok inherited Sudan’s SST designation and staggering debt, then he also inherited the crimes of the past regime
Even before Bashir was ousted, analysts said, Sudan in recent years reversed its support for extremist groups and began to cooperate with the United States on counterterrorism.
Members of the House Foreign Affairs Committee who met with Hamdok said, despite progress, Sudan needs to reach a settlement with the families before they would agree to back the lifting of the SST designation. Hamdok indicated a willingness to reach a settlement, but the cash-strapped country may have trouble finding the money to do so.
Hamdok has trumped up the lifting of the SST designation as a major political win at home. That’s become a problem according to Temin. For starters, it backs Hamdok into a political corner with his impatient constituents if the United States can’t deliver lifting the label soon. It also boils down U.S. commitments to Sudan to one issue in the eyes of the Sudanese, even though Sudan’s challenges go way beyond whether the designation is lifted or not.
“I’m worried about the way that’s been elevated and the way that it’s become this test of the overall U.S. commitment to democratic reform in Sudan,” he said.
Returning to Khartoum without a commitment to remove Sudan from the U.S. sanctions list, Hamdok faced another blockade from the FFC. A draft budget that lowered food and energy subsidies was rejected by leaders of the protest groups, and Hamdok had to submit a new draft with the funds. The loss stung even more because of the unquestioned economic drain of the subsidies on Hamdok’s first budget. “If he removed the measures, the streets would turn against him,” said Muhammad Yousif, a civil activist. Hamdok has “wide support” among Sudanese, but his job has been “hampered by the military,” Yousif said.
Officials in both Khartoum and Washington said they did not expect Sudan to be removed from the SST list anytime soon. And on Monday, the U.S. Supreme Court denied a petition by the Sudanese government to review the nearly $4 billion in damages the country owes to family members of those killed in the 1998 al Qaeda bombings in Kenya and Tanzania. Addressing the claims is a condition for full normalization with Washington.
But Hamdok shows no signs of letting up. Feeling shut out of international support and his economic agenda stifled, Hamdok became a peacemaker. After weeks of behind-the-scenes negotiations, Hamdok on Jan. 9 traveled to Kauda, a rebel stronghold in the Southern Kordofan region that has seen conflict for nearly a decade. The risky trip paid off. Hamdok graced a stage to thousands of cheering people and raised the hand of the rebel leader Abdel-Aziz al-Hilu. “Hamdok’s visit to the rebel stronghold was successful,” said Jérôme Tubiana, a researcher in Sudan. “Hamdok had started to compete with Hemeti and some officers in the military council for support in the peripheries.”
But Hamdok, balancing on a precarious political tightrope, is careful to portray the military as a partner. “It is in the interest of both parties, the military and the civilian government, to work together to move Sudan to the next stage,” he told Foreign Policy.
Update, Jan. 19, 2020: This article was updated to clarify how the United States would like Sudan to address claims for damages to family members of the victims of the 1998 al Qaeda terrorist attacks.


Avoiding Autarky

With the international economic order apparently crumbling , it may seem increasingly sensible for individual countries to adopt protectionist policies .
But the effects of climate change , the erosion of national corporate tax bases , and the splintering of global supply chains mean that the world really needs more economic cooperation—not less .
The question then , is how .
There are three areas ripe for coordination .
First , governments could strengthen their collaboration on international taxation .
For example , they could agree to tax consumption rather than production , which would allow citizens to benefit from @ @ @ @ @ @ @ country , instead of the current system , which allows companies to pay minimal taxes only where they manufacture goods—an increasingly unsatisfactory method in a digital world .
Second , companies could strengthen their efforts to create a circular , or “ regenerative , ” economy that better recycles the resources it uses .
And third , the United Nations , International Labor Organization ( ILO ) , and their partners could create a supply chain human rights charter to guarantee the basic rights of workers around the world .
For almost 75 @ @ @ @ @ @ @ strategy in the global economy was to collaborate , and it seemed likely that economic forces would surpass domestic political ones .
The Cold War , in this framework , was an economic war , won on the well-stocked supermarket shelves of West Berlin .
Wherever goods , jobs , and aspirations went , politics followed .
Economic cooperation eclipsed geopolitical competition , and for a long time , it seemed as if the system would forever lead to greater integration .
But politics no longer lag behind global economic forces .
As @ @ @ @ @ @ @ drop and their jobs disappear , many turned their backs on collaborative trade and clamored for change .
The United Kingdom ’ s vote to leave the European Union was perhaps the greatest setback for economic integration in the bloc ’ s six-and-a-half-decade history .
And the United States , meanwhile , pulled out of the Trans-Pacific Partnership , started a trade war with China , levied tariffs on European goods , and blocked World Trade Organization arbitration .
If trade and cooperation are becoming less attractive , and leading countries are moving @ @ @ @ @ @ @ ?
As the West ’ s appetite for integration changed , other countries had to question their own strategies .
The trend is clear in the statistics : From 1945 until 2008 , trade grew faster than GDP almost without exception , with exports as a percentage of GDP reaching a record high of 26 percent in 2008 .
But that figure has been on a downward curve ever since , meaning trade is losing in relative importance .
The trend raises a question : If trade and cooperation are becoming less attractive @ @ @ @ @ @ @ autarky , should others follow suit ?
No .
There are some even bigger , countervailing trends on the horizon .
And they will increase the incentive for globalization and more cooperation .
First , climate change will continue to accelerate .
To avoid its worst effects , everyone is better off working together .
Second , digital trade is exploding , increasing the need for a new international tax paradigm that can cover digital services—something that existing frameworks leave out .
And third , global supply chains may be changing , but @ @ @ @ @ @ @ world wants to guarantee a fair economic system for workers , protecting the rights of those working in global supply chains could go a long way .
National governments can not make this happen by themselves .
Much of what the average Westerner consumes travels halfway around the world before it arrives in stores .
And in free market economies , consumers continue to have the last word , even when governments offer carrots and sticks to guide them toward greener choices .
A better solution would be for those companies that are @ @ @ @ @ @ @ the largest producers of global emissions to enforce circular and regenerative best practices across their entire supply chains .
One example is the Loop initiative by the U.S.-based recycling company TerraCycle .
The company works with major multinationals to promote responsible consumption and eliminate waste .
It allows any consumer to obtain refillable steel containers for their favorite products .
It works much as how milk sellers used to go door to door to pick up and refill customers ’ glass bottles .
The approach would eliminate single-use plastic , still prevalent in @ @ @ @ @ @ @ make the consumption economy more circular .
Second , there ’ s taxation .
Currently , the international tax system creates competition among countries to attract and retain companies ’ legal global headquarters .
But in a world where the production of goods and services is increasingly digital , having a headquarters is becoming less relevant .
In some cases , only a few dozen executives are located in the actual headquarters , with all back offices , production , and sales based elsewhere .
The result is a tax race to the @ @ @ @ @ @ @ countries .
A better outcome is possible .
If governments agreed to change the tax paradigm so that it focuses on consumption , almost all countries could gain .
Especially for digital services , such a system could lead to a major boost in tax revenues , since those aren ’ t currently taxed consistently , without taking away incentives for companies to operate globally .
New treaties could ensure that one country doesn ’ t tax consumption while the other imposes a levy on production .
An example comes from France .
@ @ @ @ @ @ @ introduced a digital services tax on the advertising revenues of companies generating at least 750 million euros ( $ 827 million ) in digital services worldwide , of which a minimum of 25 million euros ( $ 28 million ) were earned in France .
So far , coordination efforts on the European level have failed , but the Organization for Economic Cooperation and Development is building a potential worldwide framework that could lead to net gains for all involved .
The economic system already has the answers it needs .
Finally , @ @ @ @ @ @ @ decrease in relative importance , global trade continues to play a very significant role in almost every economy .
The benefits that come from importing goods—namely access to more affordable products—could outweigh the costs in terms of job losses .
But to make the system work better for all , and to create a level playing field , the world needs to make more of an effort to secure the rights of those working in supply chains around the world .
In a previous era , workers in Western economies united and used @ @ @ @ @ @ @ labor reforms .
Today , that same struggle continues in many emerging markets , where workers lag far behind on rights and pay .
At the same time , some of the progress that workers in Western economies made has been lost as jobs disappeared overseas and as their collective bargaining power decreased .
The economic system already has the answers it needs .
Organizations like the ILO ( after World War I ) and the United Nations ( after World War II ) long ago established codes for humane working conditions , @ @ @ @ @ @ @ the U.N. Universal Declaration of Human Rights .
If countries engaged in the world ’ s deadliest wars could agree to these commitments , why couldn ’ t countries living in relative peace work together to fully realize them ?
Collaborating on these three priority areas—taxation , climate change , and workers ’ rights—would go a long way in improving the lives of everyone across the world .
Working together would rescue us from the negative Nash equilibrium that the world is now heading toward , in which each party has incentives not @ @ @ @ @ @ @ a course for a much more positive outcome .
Cooperation could again become the norm .
It won ’ t be easy .
But if a few important stakeholders again show the way , they may well inspire others to follow suit .
The payoff would be significant : the achievement , for the first time in history , of an inclusive and sustainable equilibrium in the global economic system .
This article appears in the Winter 2020 print issue .

With the international economic order apparently crumbling, it may seem increasingly sensible for individual countries to adopt protectionist policies. But the effects of climate change, the erosion of national corporate tax bases, and the splintering of global supply chains mean that the world really needs more economic cooperation—not less. The question then, is how.
With the international economic order apparently crumbling, it may seem increasingly sensible for individual countries to adopt protectionist policies. But the effects of climate change, the erosion of national corporate tax bases, and the splintering of global supply chains mean that the world really needs more economic cooperation—not less. The question then, is how.
There are three areas ripe for coordination. First, governments could strengthen their collaboration on international taxation. For example, they could agree to tax consumption rather than production, which would allow citizens to benefit from taxes emanating from economic activity in their country, instead of the current system, which allows companies to pay minimal taxes only where they manufacture goods—an increasingly unsatisfactory method in a digital world. Second, companies could strengthen their efforts to create a circular, or “regenerative,” economy that better recycles the resources it uses. And third, the United Nations, International Labor Organization (ILO), and their partners could create a supply chain human rights charter to guarantee the basic rights of workers around the world.
For almost 75 years, a nation’s optimal strategy in the global economy was to collaborate, and it seemed likely that economic forces would surpass domestic political ones. The Cold War, in this framework, was an economic war, won on the well-stocked supermarket shelves of West Berlin. Wherever goods, jobs, and aspirations went, politics followed. Economic cooperation eclipsed geopolitical competition, and for a long time, it seemed as if the system would forever lead to greater integration.
But politics no longer lag behind global economic forces. As workers in the West saw their wages drop and their jobs disappear, many turned their backs on collaborative trade and clamored for change. The United Kingdom’s vote to leave the European Union was perhaps the greatest setback for economic integration in the bloc’s six-and-a-half-decade history. And the United States, meanwhile, pulled out of the Trans-Pacific Partnership, started a trade war with China, levied tariffs on European goods, and blocked World Trade Organization arbitration.
If trade and cooperation are becoming less attractive, and leading countries are moving toward autarky, should others follow suit?
As the West’s appetite for integration changed, other countries had to question their own strategies. The trend is clear in the statistics: From 1945 until 2008, trade grew faster than GDP almost without exception, with exports as a percentage of GDP reaching a record high of 26 percent in 2008. But that figure has been on a downward curve ever since, meaning trade is losing in relative importance.
The trend raises a question: If trade and cooperation are becoming less attractive, and leading countries are moving toward autarky, should others follow suit? No. There are some even bigger, countervailing trends on the horizon. And they will increase the incentive for globalization and more cooperation.
First, climate change will continue to accelerate. To avoid its worst effects, everyone is better off working together. Second, digital trade is exploding, increasing the need for a new international tax paradigm that can cover digital services—something that existing frameworks leave out. And third, global supply chains may be changing, but they are not disappearing. If the world wants to guarantee a fair economic system for workers, protecting the rights of those working in global supply chains could go a long way.
Workers weld parts on an auto assembly line at a factory in Qingdao, China, on April 29, 2019.
First, take the issue of climate change. To halt its progress and restore nature’s ability to provide humanity with resources, we need an overhaul of the entire economic system. Both production and consumption must become more sustainable, and the way to do that is to make them circular and regenerative. “Circular” means closing the loop between production and consumption, that is, reusing the waste of one economic cycle as input for the next. “Regenerative” means ensuring that the natural capital the global economy relies on—the Earth and its atmosphere—isn’t depleted but rather can restore itself.
National governments cannot make this happen by themselves. Much of what the average Westerner consumes travels halfway around the world before it arrives in stores. And in free market economies, consumers continue to have the last word, even when governments offer carrots and sticks to guide them toward greener choices. A better solution would be for those companies that are the heaviest users of natural resources and the largest producers of global emissions to enforce circular and regenerative best practices across their entire supply chains.
One example is the Loop initiative by the U.S.-based recycling company TerraCycle. The company works with major multinationals to promote responsible consumption and eliminate waste. It allows any consumer to obtain refillable steel containers for their favorite products. It works much as how milk sellers used to go door to door to pick up and refill customers’ glass bottles. The approach would eliminate single-use plastic, still prevalent in so many consumer goods, and help make the consumption economy more circular.
Second, there’s taxation. Currently, the international tax system creates competition among countries to attract and retain companies’ legal global headquarters. But in a world where the production of goods and services is increasingly digital, having a headquarters is becoming less relevant. In some cases, only a few dozen executives are located in the actual headquarters, with all back offices, production, and sales based elsewhere.
The result is a tax race to the bottom, with ever-decreasing revenue for most countries. A better outcome is possible. If governments agreed to change the tax paradigm so that it focuses on consumption, almost all countries could gain. Especially for digital services, such a system could lead to a major boost in tax revenues, since those aren’t currently taxed consistently, without taking away incentives for companies to operate globally. New treaties could ensure that one country doesn’t tax consumption while the other imposes a levy on production.
An example comes from France. In the summer of 2019, France introduced a digital services tax on the advertising revenues of companies generating at least 750 million euros ($827 million) in digital services worldwide, of which a minimum of 25 million euros ($28 million) were earned in France. So far, coordination efforts on the European level have failed, but the Organization for Economic Cooperation and Development is building a potential worldwide framework that could lead to net gains for all involved.
The economic system already has the answers it needs.
Finally, there are supply chains. Despite a decrease in relative importance, global trade continues to play a very significant role in almost every economy. The benefits that come from importing goods—namely access to more affordable products—could outweigh the costs in terms of job losses. But to make the system work better for all, and to create a level playing field, the world needs to make more of an effort to secure the rights of those working in supply chains around the world.
In a previous era, workers in Western economies united and used their power to push through social and labor reforms. Today, that same struggle continues in many emerging markets, where workers lag far behind on rights and pay. At the same time, some of the progress that workers in Western economies made has been lost as jobs disappeared overseas and as their collective bargaining power decreased.
The economic system already has the answers it needs. Organizations like the ILO (after World War I) and the United Nations (after World War II) long ago established codes for humane working conditions, namely the ILO core labor standards and the U.N. Universal Declaration of Human Rights. If countries engaged in the world’s deadliest wars could agree to these commitments, why couldn’t countries living in relative peace work together to fully realize them?
Collaborating on these three priority areas—taxation, climate change, and workers’ rights—would go a long way in improving the lives of everyone across the world. Working together would rescue us from the negative Nash equilibrium that the world is now heading toward, in which each party has incentives not to collaborate, and set us on a course for a much more positive outcome. Cooperation could again become the norm.
It won’t be easy. But if a few important stakeholders again show the way, they may well inspire others to follow suit. The payoff would be significant: the achievement, for the first time in history, of an inclusive and sustainable equilibrium in the global economic system.
This article appears in the Winter 2020 print issue.


foreignpolicy--2020-01-16--How to Reverse the World’s Trust Deficit Disorder

How to Reverse the World ’ s Trust Deficit Disorder In the summer of 1999 , a small and little-known think tank attached to the United Nations Development Programme published a book that transformed the global development discourse : Global Public Goods : International Cooperation in the 21st Century .
Runaway globalization had created a “ global public domain , ” the authors argued .
A shared pool of resources was being either undersupplied or overexploited .
In a globalized world , advancing sustainable development became more than a moral obligation ; it was in everybody ’ s enlightened self-interest @ @ @ @ @ @ @ of cheap palm oil but no forests , nobody thrives in the long term .
The idea of a global public domain caught the zeitgeist in an era of falling walls and regimes .
At the beginning of the 1990s , the collapse of communism stigmatized big government , but then breakneck liberalization , privatization , and deregulation ended in a series of financial crises , humbling market maximalists , too .
The experience of both government and market failure gave rise to a core pillar of the new narrative for international cooperation @ @ @ @ @ @ @ means to build a functioning global public domain on their own ; only a combined effort of all stakeholders would make a difference .
Public-private partnerships—already extensively used at the national level by governments in their quest for better public services at lower cost—became the new mantra for meeting the U.N. Millennium Development Goals .
Yet , two decades into the new millennium , public-private partnerships still have not broken through into the mainstream .
They are needed more than ever at a time where international cooperation is in crisis .
As U.N. @ @ @ @ @ @ @ opening address to the General Assembly in 2018 , the world is suffering from “ trust deficit disorder ” : Within countries , people are losing faith in political establishments , and polarization is on the rise ; among countries , cooperation is ever less certain and more difficult .
National interests are dictating foreign diplomacy , and at the grassroots level , young activists have little confidence in large corporations as a force for positive change .
In the early 2000s , public-private partnerships emerged as a potential win-win combination ; they @ @ @ @ @ @ @ advocacy organizations with business excellence .
They were the centrist architecture of choice for fixing the trust deficit disorder of the hyperglobalization era .
As Hillary Clinton explained in her farewell address as U.S. secretary of state , “ Where once a few strong columns could hold up the weight of the world , today we need a dynamic mix of materials and structures.
” Today , public-private partnerships have lost some of their luster .
The technocratic and top-down nature of many initiatives is seen by vocal critics as marginalizing their alleged @ @ @ @ @ @ @ intent .
The mixed track record of the mechanism raises doubts about its effectiveness .
According to the Sustainable Development Goals partnerships platform , only 290 of 3,900 initiatives currently registered—less than 8 percent—report being on track to reach their goals .
Poor intervention strategies , failure to include key actors , and a lack of mandates and clear goals that could be monitored and governed have all been cited as reasons why many of these first-wave partnerships tended to fail .
Emboldened by rapid technological progress and financed by the entrepreneurs behind @ @ @ @ @ @ @ century , first-wave partnerships deliberately pivoted from a systems paradigm that was seen by economists like Jeffrey Sachs as bureaucratic and ineffective toward more targeted interventions .
The first wave of partnerships was characterized by a move away from existing national and international institutions toward bespoke bodies with narrow issue-specific mandates .
The idea was to break a complex challenge ( such as public health ) into its component parts ; single out specific parts ( such as children dying of malaria ) ; define clear , measurable metrics of success ( such @ @ @ @ @ @ @ means to improve on these metrics ( by using insecticide-treated bed nets , for example ) ; and assemble the right experts and resources to tackle the problem .
Issue-centered approaches did deliver impressive results in confronting complicated problems such as the development of drugs or vaccines through organizations like the Global Alliance for Vaccines and Immunizations and the Global Fund to Fight AIDS , Tuberculosis and Malaria .
However , these kinds of partnerships have not been able to solve more complex challenges such as strengthening the effectiveness and inclusiveness of health @ @ @ @ @ @ @ of public-private partnerships to become more effective , the mechanism needs to rebalance from an approach that focuses on issues in isolation toward a more systemic approach that looks at the global public domain as a complex web of political , social , institutional , and technological factors and not just as a complicated engineering challenge .
First and foremost , this will require a paradigm shift from a rigid top-down project architecture toward platforms and protocols .
In a project paradigm , problem-solving is centralized .
In a platform paradigm , actors @ @ @ @ @ @ @ joint mission but operate independently .
In the corporate world , the platform approach is well established .
The online retailer Alibaba , for instance , does not own any warehouses , and the room-booking service Airbnb does not rent or own any real estate .
Both focus on enabling the interaction between the components of the system without owning them .
An illustrative platform partnership example is the Platform for Accelerating the Circular Economy ( PACE ) , co-chaired by the CEO of the Global Environment Facility , Naoko Ishii , and @ @ @ @ @ @ @ , Frans van Houten .
It brings together more than 50 partners and related initiatives under the common vision of creating a circular economy , in which waste and pollution are minimized and products and resources are recycled and regenerated .
Though still nascent , platforms and protocols like PACE could help overcome the ideological divide between technocratic supply-side approaches to sustainable development and bottom-up demand-side strategies .
In a protocol paradigm , decision-making is even more decentralized .
Protocols merely create a common means for otherwise unrelated efforts to interact , the @ @ @ @ @ @ @ bumping into one another .
The so-called Hypertext Transfer Protocol ( HTTP ) , for instance , is the foundation of data communication for the World Wide Web without any prescription on who should apply it or to what end .
The first generation of partnerships emerged in an era when global government was considered by many a feasible option and when big supranational organizations like the World Trade Organization ( WTO ) and the European Union were equipped with powers that limited and transcended the sovereignty of nation-states .
Today , the @ @ @ @ @ @ @ dominant narrative of the European Union has been one of fragmentation , with large portions of electorates backing anti-EU policies ; and since the fall of the Berlin Wall in 1989 , the number of physical barriers delineating international borders has grown from 15 to 77 .
As a result , partnerships today inevitably must grapple with a more disjointed political landscape and with global challenges that have grown in severity and complexity , making the turn-of-the-century brand of technocratic top-down transnationalism neither feasible nor practical .
In the transition toward a more @ @ @ @ @ @ @ will play an important role , too .
First-generation partnerships emerged at a time when the internet was slow , smartphones did not exist , and artificial intelligence was merely science fiction .
Their solutions were shaped by the possibilities of their time .
Today ’ s global public domain is more than a theoretical concept .
It is something citizens can increasingly see and measure in real time with smart sensors , big data , and AI , while technologies like blockchain allow people to establish trust in all this data without @ @ @ @ @ @ @ technologies are already playing a pivotal role in commercial settings , their massive potential for solving global challenges is yet to be realized .
Global problems have proliferated , but the spectrum of solutions has vastly expanded , too .
The world is facing overwhelming transnational challenges , and hence there is no choice but to find effective transnational solutions .
Public-private partnerships that are enabled by platforms and protocols can bend the disruptive power of technological innovations toward positive ends .
This article appears in the Winter 2020 print issue .

In the summer of 1999, a small and little-known think tank attached to the United Nations Development Programme published a book that transformed the global development discourse: Global Public Goods: International Cooperation in the 21st Century . Runaway globalization had created a “global public domain,” the authors argued. A shared pool of resources was being either undersupplied or overexploited. In a globalized world, advancing sustainable development became more than a moral obligation; it was in everybody’s enlightened self-interest. If the world has a glut of cheap palm oil but no forests, nobody thrives in the long term.
In the summer of 1999, a small and little-known think tank attached to the United Nations Development Programme published a book that transformed the global development discourse: Global Public Goods: International Cooperation in the 21st Century. Runaway globalization had created a “global public domain,” the authors argued. A shared pool of resources was being either undersupplied or overexploited. In a globalized world, advancing sustainable development became more than a moral obligation; it was in everybody’s enlightened self-interest. If the world has a glut of cheap palm oil but no forests, nobody thrives in the long term.
The idea of a global public domain caught the zeitgeist in an era of falling walls and regimes. At the beginning of the 1990s, the collapse of communism stigmatized big government, but then breakneck liberalization, privatization, and deregulation ended in a series of financial crises, humbling market maximalists, too. The experience of both government and market failure gave rise to a core pillar of the new narrative for international cooperation: Neither states nor markets had the means to build a functioning global public domain on their own; only a combined effort of all stakeholders would make a difference.
Public-private partnerships—already extensively used at the national level by governments in their quest for better public services at lower cost—became the new mantra for meeting the U.N. Millennium Development Goals. Yet, two decades into the new millennium, public-private partnerships still have not broken through into the mainstream. They are needed more than ever at a time where international cooperation is in crisis.
As U.N. Secretary-General António Guterres put it in his opening address to the General Assembly in 2018, the world is suffering from “trust deficit disorder”: Within countries, people are losing faith in political establishments, and polarization is on the rise; among countries, cooperation is ever less certain and more difficult. National interests are dictating foreign diplomacy, and at the grassroots level, young activists have little confidence in large corporations as a force for positive change.
In the early 2000s, public-private partnerships emerged as a potential win-win combination; they gave business a higher purpose and equipped advocacy organizations with business excellence. They were the centrist architecture of choice for fixing the trust deficit disorder of the hyperglobalization era. As Hillary Clinton explained in her farewell address as U.S. secretary of state, “Where once a few strong columns could hold up the weight of the world, today we need a dynamic mix of materials and structures.”
Today, public-private partnerships have lost some of their luster. The technocratic and top-down nature of many initiatives is seen by vocal critics as marginalizing their alleged benefactors, raising questions about their true intent. The mixed track record of the mechanism raises doubts about its effectiveness. According to the Sustainable Development Goals partnerships platform, only 290 of 3,900 initiatives currently registered—less than 8 percent—report being on track to reach their goals. Poor intervention strategies, failure to include key actors, and a lack of mandates and clear goals that could be monitored and governed have all been cited as reasons why many of these first-wave partnerships tended to fail.
Emboldened by rapid technological progress and financed by the entrepreneurs behind the digital revolution of the early 21st century, first-wave partnerships deliberately pivoted from a systems paradigm that was seen by economists like Jeffrey Sachs as bureaucratic and ineffective toward more targeted interventions.
The first wave of partnerships was characterized by a move away from existing national and international institutions toward bespoke bodies with narrow issue-specific mandates. The idea was to break a complex challenge (such as public health) into its component parts; single out specific parts (such as children dying of malaria); define clear, measurable metrics of success (such as reducing infection rates); identify means to improve on these metrics (by using insecticide-treated bed nets, for example); and assemble the right experts and resources to tackle the problem.
Microsoft co-founder Bill Gates speaks at the conference for the Global Fund to Fight AIDS, Tuberculosis and Malaria in Lyon, France, on Oct. 10, 2019.
Issue-centered approaches did deliver impressive results in confronting complicated problems such as the development of drugs or vaccines through organizations like the Global Alliance for Vaccines and Immunizations and the Global Fund to Fight AIDS, Tuberculosis and Malaria. However, these kinds of partnerships have not been able to solve more complex challenges such as strengthening the effectiveness and inclusiveness of health care systems.
For a new generation of public-private partnerships to become more effective, the mechanism needs to rebalance from an approach that focuses on issues in isolation toward a more systemic approach that looks at the global public domain as a complex web of political, social, institutional, and technological factors and not just as a complicated engineering challenge. First and foremost, this will require a paradigm shift from a rigid top-down project architecture toward platforms and protocols. In a project paradigm, problem-solving is centralized. In a platform paradigm, actors unite behind a shared purpose and a joint mission but operate independently.
In the corporate world, the platform approach is well established. The online retailer Alibaba, for instance, does not own any warehouses, and the room-booking service Airbnb does not rent or own any real estate. Both focus on enabling the interaction between the components of the system without owning them.
An illustrative platform partnership example is the Platform for Accelerating the Circular Economy (PACE), co-chaired by the CEO of the Global Environment Facility, Naoko Ishii, and the CEO of the electronics manufacturer Philips, Frans van Houten. It brings together more than 50 partners and related initiatives under the common vision of creating a circular economy, in which waste and pollution are minimized and products and resources are recycled and regenerated. Though still nascent, platforms and protocols like PACE could help overcome the ideological divide between technocratic supply-side approaches to sustainable development and bottom-up demand-side strategies.
In a protocol paradigm, decision-making is even more decentralized. Protocols merely create a common means for otherwise unrelated efforts to interact, the way traffic signs help drivers move without bumping into one another. The so-called Hypertext Transfer Protocol (HTTP), for instance, is the foundation of data communication for the World Wide Web without any prescription on who should apply it or to what end.
The first generation of partnerships emerged in an era when global government was considered by many a feasible option and when big supranational organizations like the World Trade Organization (WTO) and the European Union were equipped with powers that limited and transcended the sovereignty of nation-states. Today, the WTO is facing imminent crisis; the dominant narrative of the European Union has been one of fragmentation, with large portions of electorates backing anti-EU policies; and since the fall of the Berlin Wall in 1989, the number of physical barriers delineating international borders has grown from 15 to 77. As a result, partnerships today inevitably must grapple with a more disjointed political landscape and with global challenges that have grown in severity and complexity, making the turn-of-the-century brand of technocratic top-down transnationalism neither feasible nor practical.
In the transition toward a more decentralized model of public-private partnerships, technology will play an important role, too. First-generation partnerships emerged at a time when the internet was slow, smartphones did not exist, and artificial intelligence was merely science fiction. Their solutions were shaped by the possibilities of their time.
Today’s global public domain is more than a theoretical concept. It is something citizens can increasingly see and measure in real time with smart sensors, big data, and AI, while technologies like blockchain allow people to establish trust in all this data without creating large third-party organizations. While such technologies are already playing a pivotal role in commercial settings, their massive potential for solving global challenges is yet to be realized.
Global problems have proliferated, but the spectrum of solutions has vastly expanded, too. The world is facing overwhelming transnational challenges, and hence there is no choice but to find effective transnational solutions. Public-private partnerships that are enabled by platforms and protocols can bend the disruptive power of technological innovations toward positive ends.
This article appears in the Winter 2020 print issue.