foreignpolicy--2020-11-27--The World’s First Affluence Recession

The World’s First Affluence Recession

The modern economy has been immune to infectious disease—until now .
Epidemics in the modern world have ruined hopes , debilitated bodies , and claimed tens of millions of lives .
This the first epidemic in American history that has also caused an economic crisis .
Between April and June , about $ 2 trillion of economic activity in the United States came to a halt .
Adjusting for changes in prices , that was nearly one tenth of gross domestic product .
Even though public-health authorities and ordinary people took similar steps to stop past epidemics from spreading , @ @ @ @ @ @ @ economy—not cholera , which struck repeatedly in the 19th century ; not the fearsome bubonic plague , which visited San Francisco in 1900 ; not even the so-called “ Spanish ” influenza that arrived in the United States in 1918 and killed tens of millions internationally .
What has made this pandemic unique is that for the first time , consumers worldwide can afford to spend a significant share of their incomes on non-essential goods and services .
Much of their consumption has become optional , and rather than risking death to buy @ @ @ @ @ @ @ to stay home .
Others would like to go out , but public-health authorities have ordered non-essential businesses to close .
Because the discretionary share of consumption has expanded , the choices about non-essential business that governments and individual consumers make in response to pandemic disease have become an economic problem .
The shift in the makeup of economic activity is due to decades of transformative economic growth .
Previous epidemics did not cause economic crises because most consumers were poor by today ’ s standards , and their discretionary spending was minimal @ @ @ @ @ @ @ as food and clothing , which neither households nor governments could restrict in the interest of public health , kept the economy going .
Today ’ s economy depends on a thousand luxuries large and small , from overpriced coffee to air travel , and these luxuries are what many consumers are now giving up .
Willingly or not , they are saving instead of spending .
Extreme savings rates are a defining feature of the available data on the coronavirus economy .
The public-health crisis is the result of a novel pathogenic @ @ @ @ @ @ @ a result of our affluence .
Growth has created both extraordinary prosperity , and previously unknown risks .
The economy ’ s historically atypical response to the coronavirus is just one more piece of evidence that growth has altered the mechanics of the economy in ways that experts do not yet completely understand .
After all , the pandemic has only accelerated the 21st century ’ s puzzling economic trends : excess savings ; low interest rates ; falling prices ; and mass unemployment— all despite rising incomes .
Having satisfied all their @ @ @ @ @ @ @ , consumers worldwide were saving more of total income even before the outbreak .
And long after the pandemic has abated , the coronavirus economy will in important respects resemble the economy of the future—if policymakers allow these trends to continue .
For now , we can still hope that the current recession is just a weird and awful experience that none of us will have to go through again , rather than a harbinger of capitalism ’ s fate .
But before hazarding any predictions , it ’ s worth taking a @ @ @ @ @ @ @ .
Many experts predicted what is technically called a supply-side recession .
The phrase means that the supply of goods and services throughout the economy is interrupted or restricted .
( Think of the increase in oil prices in the 1970s . )
Supply-side recessions tend to increase prices , as well as wages and salaries , and they are rarely as severe as demand-side recessions .
In a demand-side crisis , goods and services are readily available , but households and businesses do not make new purchases .
The resulting glut of @ @ @ @ @ @ @ and wages .
In their regular report issued in March , economists at the OECD discussed how the virus could affect supply chains in China , and lowered their forecast for global GDP growth by just half a percentage point .
Although these initial forecasts seem too conservative in hindsight , they were reasonable extrapolations from the historical record .
The effects of past epidemics have been concentrated on the supply side of the economy .
The most important example was the bubonic plague that first visited Europe in 1348 .
The Black @ @ @ @ @ @ @ labor caused famines and , eventually , substantial increases in wages .
At the beginning of April , a group of economists at the University of California , Davis , concluded that similar supply-side effects had followed other major epidemics .
Analyzing data from as far back as the 16th century , they found that shortages of labor increased wages and reduced returns on wealth .
In other words , epidemics have empowered surviving workers and peasants against their overlords in every era .
Likewise , previous studies had found that elevated wages @ @ @ @ @ @ @ .
Sickness made labor scarce in major industries , causing shortages of basic commodities , especially coal .
Pig iron and steel production were off several percent , due to the lack of coking coal .
There was a dearth of copper as well .
White-collar workers were affected , too .
So few healthy telephone operators had reported for work at the exchanges in New York that only non-emergency calls were permitted north of 59th Street , The Wall Street Journal reported .
Good luck getting a call through to Brooklyn .
@ @ @ @ @ @ @ against their overlords in every era .
Like previous epidemics , the economic effects of the 1918 flu were mostly on the supply side .
But there were also disruptions on the demand side , which prefigured this year ’ s recession .
In 1918 , as today , weddings , funerals , and other public gatherings were banned .
Schools , churches and theaters were closed almost everywhere .
So were bars , cinemas , dance halls , poolrooms , bowling alleys , soda fountains , and slot-machine parlors in many cities @ @ @ @ @ @ @ in 1918 is that , by modern standards , they were overwhelmingly poor .
What money they had , they had to go out and spend to feed and clothe themselves , despite the danger of influenza .
A study conducted by the Bureau of Labor Statistics from 1917 to 1919 found that a typical family in Washington , D.C. spent just $ 44 a year on entertainment and travel , including $ 20 for tickets to shows and movies , out of an annual income of about $ 1,500 .
The family @ @ @ @ @ @ @ .
Men probably spent most of that at the barbershop , although the total included items like soap and cologne .
Two-thirds of workers brought lunches to work .
The relative scarcity of non-essential businesses could be one reason that many businessmen supported quarantines .
The Kansas City Star reported on the efforts of the city ’ s Chamber of Commerce , controlled by Republicans , to force the mayor to impose more stringent rules .
The only opposition came from owners of theaters and cinemas .
All these factors limited the economic @ @ @ @ @ @ @ according to the Wall Street Journal , consumer spending was “ remarkably well-sustained in all sections , ” but especially staples , dry goods , and groceries .
François Velde , an economist at the Federal Reserve Bank of Chicago , produced a thorough retrospective on the 1918 epidemic earlier this year , quoting the economists Wesley C. Mitchell and Arthur F. Burns , the future Federal Reserve chairman , who lived through the pandemic .
They later described the recession that year as having “ exceptional brevity and moderate amplitude.
” There @ @ @ @ @ @ @ , of runs on banks , of panic , or of crisis .
Business went on as usual .
It is true that there have been shortages of some strategic commodities , like Wendy ’ s burgers and kettlebells .
Meanwhile , tankers were lined up in the Pacific off San Francisco in late April , laden with oil that no one wanted to buy .
About 160 million barrels were stored at sea worldwide , a record .
Gasoline fell from $ 2.58 a gallon in January to $ 1.88 in April @ @ @ @ @ @ @ percent in the second quarter , according to the Federal Reserve ’ s preferred measure of inflation .
That was the sharpest decline since the 1940s .
While prior epidemics have increased wages , this one has caused mass unemployment .
About 15 percent of Americans workers were out of a job in April .
Many of the remainder had to choose between joblessness and going to work in potentially infectious air .
The unemployment rate has declined since then , to 6.9 percent according to the latest numbers released on Friday .
@ @ @ @ @ @ @ the fact that many workers have quit the labor force entirely .
Total employment remains about 5.6 percent below February ’ s level , and G.D.P.
, according to last month ’ s figures , is still off over 2 percent after adjusting for changes in prices .
Meanwhile , the number of new infections is increasing again around the country , and governors are imposing renewed restrictions on retailers and restaurants .
Yet given shifting , overlapping , and inconsistently enforced regulations , with mayors and county commissioners squabbling over the rules @ @ @ @ @ @ @ for the economy than those of individual consumers and business owners about what risks they will accept .
After all , most Americans today have significant discretionary expenditures .
Because the economy ’ s non-essential sector has expanded , the choices of public-health authorities as well as individual consumers during a pandemic have become more consequential .
Spending on the necessities of food , clothing , and shelter accounted for 73 percent of the typical household budget at the time of the 1918 flu .
In 2019 , the same categories made up @ @ @ @ @ @ @ .
Spending on the necessities of food , clothing , and shelter accounted for 73 percent of the typical household budget at the time of the 1918 flu .
In 2019 , the same categories made up just 35 percent of the household budget .
And that total includes big bills at restaurants and bars .
Spending on food away from home , which was almost nonexistent in the early 20th century , now nearly equals spending on groceries for the average household .
Education and health care have partially replaced food , @ @ @ @ @ @ @ .
Spending on education has increased from 0.5 percent at the time of the 1918 flu to 2.3 percent today , and spending on health care has increased from about 5 percent to about 8 percent .
In normal times , education and health care are unavoidable headaches for every family .
But the coronavirus has thrown even these sectors into turmoil .
With students staying home , colleges and universities have been unable to collect tuition and housing fees .
Hospitals have been forced to postpone all but the most urgent procedures @ @ @ @ @ @ @ had increased through every recent recession , declined 9.6 percent between February and April .
Instead of spending their money on restaurants or college courses , Americans saved 33.5 percent of their income in April , 24.2 percent in May , and 19 percent in June—by a wide margin , the three highest figures since the Second World War .
The average for the past decade was 7.3 percent .
In the short term , to be sure , all that saving could be good for the economy .
During the Second World @ @ @ @ @ @ @ at this level , rationing forced consumers to save up the high wages they were earning in military service or in armaments factories .
After the war , they used their savings to purchase homes , appliances , and automobiles , and to have children and raise them .
The resulting boom lasted throughout the 1950s and 1960s .
Then , as now , federal outlays have resulted in increased incomes for many households , while a national emergency has prevented consumers from spending the extra cash .
There has been real hardship @ @ @ @ @ @ @ not to qualify for unemployment benefits , but most families did all right financially through the spring and summer , thanks to generous federal aid .
Disposable personal income actually increased 9.7 percent in the second quarter .
The rate of credit-card defaults , a good measure of middle-class finances , declined .
Americans were so flush during the pandemic that many opened their first retirement accounts .
Americans were so flush during the pandemic that many opened their first retirement accounts .
Fidelity reported in August that its customers had opened a @ @ @ @ @ @ @ ) year over year .
Contributions increased 22 percent in volume .
The money wasn ’ t just coming from older , affluent clients with comfortable jobs .
The increases were still greater among millennials , who are evidently eating less avocado toast .
Investments in retirement accounts likely accelerated the stock market ’ s recovery .
The S & P 500 fell by a third in February and March , but had made up those losses by early August , setting new record highs .
For the economy today , the best @ @ @ @ @ @ @ will again find some way of spending their savings , say on a brand-new pick up , a designer handbag , or a family vacation .
But there are differences between the wartime economy and the coronavirus economy .
Then , consumers were postponing spending on big-ticket , durable goods , such as cars and dishwashers .
Today ’ s affluent consumers have largely met their needs for durable goods .
And services , which have been so important in this recession , can only be consumed in the moment .
For instance @ @ @ @ @ @ @ after the pandemic , a family that stopped paying for weekly visits from a house cleaner would have to have the house cleaned twice a week .
Another difference is that in the postwar period , U.S. manufacturers could rely on foreign as well as domestic consumption .
The United States benefited from a modest trade surplus for most of 1940s , 1950s , and 1960s , supplying goods and equipment to other nations who would not only emulate American standards of living , but build up manufacturing sectors to rival this country @ @ @ @ @ @ @ the United States are spending less and saving more .
Since at least the turn of the millennium , the world economy has burdened by an excess of saving—what Ben Bernanke , the former chairman of the Federal Reserve , termed a savings glut .
The increase in savings due to the pandemic is compounding this existing glut .
The trade deficit , which represents dollar-denominated assets saved by foreigners , exceeded $ 63 billion in July .
That was the highest total since the financial crisis of 2008 .
Since at least @ @ @ @ @ @ @ world economy has been burdened by an excess of saving—what Ben Bernanke , the former chairman of the Federal Reserve , termed a savings glut .
As more and more people worldwide find they have enough to meet their immediate needs , they have put away more for themselves in old age and for their children .
Pension funds and life insurance companies have become macroeconomic heavyweights .
These institutions , like foreign central banks , consistently turn to the American banking system to provide financial security for their clients .
The colossal @ @ @ @ @ @ @ Investment Fund ( GPIF ) , the world ’ s largest pension fund , invested more than $ 500 billion in cash-equivalent U.S. Treasury bonds at the beginning of the pandemic , Bloomberg reported .
Bernanke predicted that the savings glut would be temporary .
He blamed foreign governments for interfering with currency markets , encouraging their citizens to accumulate U.S. dollars , and argued that as foreign economies recovered from the financial crisis of 2008 , global buyers would rediscover their taste for American goods and services .
The past few months @ @ @ @ @ @ @ .
Not only has the trade deficit increased again , but foreign governments have resumed their interventions in the markets to protect their economies from the expanding crisis .
( That ’ s according to research by Brad Setser , a former Obama administration official now at the Council on Foreign Relations . )
Interest rates tell the story of everything that has changed since the postwar years .
High rates reflected the demand for capital to fight the war and to rebuild all that it destroyed .
In that context , savings @ @ @ @ @ @ @ check , making it easier for households and businesses worldwide to borrow money for new purchases .
Today , savings can no longer provide that same stimulus .
Interest rates are near zero throughout much of the developed world , a result of the limited need for capital in a richer society that can already satisfy most of its wants .
Keynes also predicted that the improving standard of living would not cause unemployment .
He wrote that although there would no longer be any need for many traditional occupations in a more @ @ @ @ @ @ @ would develop new needs , providing new opportunities for displaced workers .
The 20th century seemed to bear out this prediction , too .
Technological progress produced not mass unemployment but an astounding variety of inexpensive goods and services .
But if the historical data seems to vindicate Keynes ’ s optimism , that might only be because his own ideas were so influential .
High tax rates on the wealthy and expanded public benefits redistributed incomes to those who were more likely to spend , not to save .
Policymakers protected organized @ @ @ @ @ @ @ of solidarity with the workers of the world , but also because they believed that empowering unions to demand high wages would avoid the perils of overproduction and underconsumption that had bedeviled the early 20th century .
If consumers choose to save instead of spend , then the economy of the future will share important features with the present crisis , including deflation , zero interest rates , mass unemployment , and , paradoxically , rising incomes .
Those protections and benefits have been progressively weakened or eliminated over the past 50 years @ @ @ @ @ @ @ no empirical basis for the assumption that workers displaced by economic progress and technological growth will always find work in new industries .
There is no hard evidence that the economy will always create not only new kinds of goods and services , but also the demand for them .
In the coming years , consumers might instead choose to save .
They would spend less not out of fear of infection or in compliance with public-health orders , as they have done during the pandemic .
Instead , they might have enough @ @ @ @ @ @ @ , preferring the security that comes with accumulated savings .
If so , then the economy of the future will share important features with the present crisis , including deflation , zero interest rates , mass unemployment , and , paradoxically , rising incomes .
For the new global middle class , saving for retirement or a rainy day promises freedom from the demands of work and the ups and downs of the market .
The desire for that peace of mind seems insatiable , in contrast to the desire for most consumer @ @ @ @ @ @ @ system has opened up all kinds of possibilities for ordinary people around the world .
Yet for them , the most remarkable possibility of all might be the promise of escape from that system ’ s many uncertainties and anxieties .
It would be premature to predict what the consumers of the future will want .
If the pandemic can be contained , there is ( as yet ) no reason to think that the same policies that worked before to create demand for the capitalist system ’ s products would fail to @ @ @ @ @ @ @ coordinated effort on the part of policymakers worldwide to alleviate excess savings through redistribution and public spending , this recession is just a preview of the economy ’ s normal state in years to come .
Affluence has changed the rules of the economy .
Its unusual reaction to the coronavirus has made that especially clear .
Keynes has been cited frequently in the years since the recession of 2008 , which resembled the panics of the era before the Second World War in its nature and severity .
But if that crisis @ @ @ @ @ @ @ might be the first crisis of the future .

The modern economy has been immune to infectious disease—until now. Epidemics in the modern world have ruined hopes, debilitated bodies, and claimed tens of millions of lives. This the first epidemic in American history that has also caused an economic crisis. Between April and June, about $2 trillion of economic activity in the United States came to a halt. Adjusting for changes in prices, that was nearly one tenth of gross domestic product. Even though public-health authorities and ordinary people took similar steps to stop past epidemics from spreading, none had remotely comparable effects on the economy—not cholera, which struck repeatedly in the 19th century; not the fearsome bubonic plague, which visited San Francisco in 1900; not even the so-called “Spanish” influenza that arrived in the United States in 1918 and killed tens of millions internationally.
The modern economy has been immune to infectious disease—until now. Epidemics in the modern world have ruined hopes, debilitated bodies, and claimed tens of millions of lives. This the first epidemic in American history that has also caused an economic crisis. Between April and June, about $2 trillion of economic activity in the United States came to a halt. Adjusting for changes in prices, that was nearly one tenth of gross domestic product. Even though public-health authorities and ordinary people took similar steps to stop past epidemics from spreading, none had remotely comparable effects on the economy—not cholera, which struck repeatedly in the 19th century; not the fearsome bubonic plague, which visited San Francisco in 1900; not even the so-called “Spanish” influenza that arrived in the United States in 1918 and killed tens of millions internationally.
What has made this pandemic unique is that for the first time, consumers worldwide can afford to spend a significant share of their incomes on non-essential goods and services. Much of their consumption has become optional, and rather than risking death to buy a Frappuccino, they’ve chosen to stay home. Others would like to go out, but public-health authorities have ordered non-essential businesses to close. Because the discretionary share of consumption has expanded, the choices about non-essential business that governments and individual consumers make in response to pandemic disease have become an economic problem.
The shift in the makeup of economic activity is due to decades of transformative economic growth. Previous epidemics did not cause economic crises because most consumers were poor by today’s standards, and their discretionary spending was minimal. The overwhelming demand for necessities such as food and clothing, which neither households nor governments could restrict in the interest of public health, kept the economy going. Today’s economy depends on a thousand luxuries large and small, from overpriced coffee to air travel, and these luxuries are what many consumers are now giving up. Willingly or not, they are saving instead of spending. Extreme savings rates are a defining feature of the available data on the coronavirus economy.
The public-health crisis is the result of a novel pathogenic coronavirus. But the economic crisis is a result of our affluence. Growth has created both extraordinary prosperity, and previously unknown risks.
The economy’s historically atypical response to the coronavirus is just one more piece of evidence that growth has altered the mechanics of the economy in ways that experts do not yet completely understand. After all, the pandemic has only accelerated the 21st century’s puzzling economic trends: excess savings; low interest rates; falling prices; and mass unemployment— all despite rising incomes. Having satisfied all their essential and most of their non-essential needs, consumers worldwide were saving more of total income even before the outbreak. And long after the pandemic has abated, the coronavirus economy will in important respects resemble the economy of the future—if policymakers allow these trends to continue.
For now, we can still hope that the current recession is just a weird and awful experience that none of us will have to go through again, rather than a harbinger of capitalism’s fate. But before hazarding any predictions, it’s worth taking a careful look at how we got here.
A person walks out of Starbucks in SoHo as New York City continues reopening efforts following restrictions imposed to slow the spread of coronavirus on Nov. 2.
This winter, when economists and journalists were first coming to terms with the pandemic, most were forecasting relatively modest, short-term costs. And there was reason to expect those costs to be balanced out in the long term by faster increases in wages and incomes.
Many experts predicted what is technically called a supply-side recession. The phrase means that the supply of goods and services throughout the economy is interrupted or restricted. (Think of the increase in oil prices in the 1970s.) Supply-side recessions tend to increase prices, as well as wages and salaries, and they are rarely as severe as demand-side recessions. In a demand-side crisis, goods and services are readily available, but households and businesses do not make new purchases. The resulting glut of unsold goods and unemployed workers reduces prices and wages.
In their regular report issued in March, economists at the OECD discussed how the virus could affect supply chains in China, and lowered their forecast for global GDP growth by just half a percentage point. Although these initial forecasts seem too conservative in hindsight, they were reasonable extrapolations from the historical record. The effects of past epidemics have been concentrated on the supply side of the economy. The most important example was the bubonic plague that first visited Europe in 1348. The Black Death claimed the lives of between 40 percent and 60 percent of the continent’s population. The shortage of labor caused famines and, eventually, substantial increases in wages.
At the beginning of April, a group of economists at the University of California, Davis, concluded that similar supply-side effects had followed other major epidemics. Analyzing data from as far back as the 16th century, they found that shortages of labor increased wages and reduced returns on wealth. In other words, epidemics have empowered surviving workers and peasants against their overlords in every era. Likewise, previous studies had found that elevated wages and incomes followed the influenza of 1918. Sickness made labor scarce in major industries, causing shortages of basic commodities, especially coal. Pig iron and steel production were off several percent, due to the lack of coking coal. There was a dearth of copper as well. White-collar workers were affected, too. So few healthy telephone operators had reported for work at the exchanges in New York that only emergency calls were permitted north of 59th Street, The Wall Street Journal reported. Good luck getting a call through to Brooklyn.
Epidemics have empowered surviving workers and peasants against their overlords in every era.
Like previous epidemics, the economic effects of the 1918 flu were mostly on the supply side. But there were also disruptions on the demand side, which prefigured this year’s recession. In 1918, as today, weddings, funerals, and other public gatherings were banned. Schools, churches and theaters were closed almost everywhere. So were bars, cinemas, dance halls, poolrooms, bowling alleys, soda fountains, and slot-machine parlors in many cities. But the chief fact about Americans in 1918 is that, by modern standards, they were overwhelmingly poor. What money they had, they had to go out and spend to feed and clothe themselves, despite the danger of influenza.
A study conducted by the Bureau of Labor Statistics from 1917 to 1919 found that a typical family in Washington, D.C. spent just $44 a year on entertainment and travel, including $20 for tickets to shows and movies, out of an annual income of about $1,500. The family paid only $14 for personal care. Men probably spent most of that at the barbershop, although the total included items like soap and cologne. Two-thirds of workers brought lunches to work.
The relative scarcity of non-essential businesses could be one reason that many businessmen supported quarantines. The Kansas City Star reported on the efforts of the city’s Chamber of Commerce, controlled by Republicans, to force the mayor to impose more stringent rules. The only opposition came from owners of theaters and cinemas.
All these factors limited the economic effects of influenza. In Chicago, according to the Wall Street Journal, consumer spending was “remarkably well-sustained in all sections,” but especially staples, dry goods, and groceries. François Velde, an economist at the Federal Reserve Bank of Chicago, produced a thorough retrospective on the 1918 epidemic earlier this year, quoting the economists Wesley C. Mitchell and Arthur F. Burns, the future Federal Reserve chairman, who lived through the pandemic. They later described the recession that year as having “exceptional brevity and moderate amplitude.” There was no talk of firms going under, of runs on banks, of panic, or of crisis. Business went on as usual.
Some of the three dozen oil tankers anchored off the California coast stay offshore as the spread of the coronavirus pandemic impacts global demand for crude oil on April 28.
Although the 1918 flu was much more lethal than the coronavirus, the economic effects were hardly noticeable. That is because today, the global economy has lurched in the opposite direction—not toward shortages, but toward surpluses.
It is true that there have been shortages of some strategic commodities, like Wendy’s burgers and kettlebells. Meanwhile, tankers were lined up in the Pacific off San Francisco in late April, laden with oil that no one wanted to buy. About 160 million barrels were stored at sea worldwide, a record.
Gasoline fell from $2.58 a gallon in January to $1.88 in April and May. Overall prices decreased 5 percent in the second quarter, according to the Federal Reserve’s preferred measure of inflation. That was the sharpest decline since the 1940s.
While prior epidemics have increased wages, this one has caused mass unemployment. About 15 percent of Americans workers were out of a job in April. Many of the remainder had to choose between joblessness and going to work in potentially infectious air.
The unemployment rate has declined since then, to 6.9 percent according to the latest numbers released on Friday. But that improvement is largely due to the fact that many workers have quit the labor force entirely. Total employment remains about 5.6 percent below February’s level, and G.D.P., according to last month’s figures, is still off over 2 percent after adjusting for changes in prices.
Meanwhile, the number of new infections is increasing again around the country, and governors are imposing renewed restrictions on retailers and restaurants. Yet given shifting, overlapping, and inconsistently enforced regulations, with mayors and county commissioners squabbling over the rules, governmental decisions might be less consequential for the economy than those of individual consumers and business owners about what risks they will accept.
After all, most Americans today have significant discretionary expenditures. Because the economy’s non-essential sector has expanded, the choices of public-health authorities as well as individual consumers during a pandemic have become more consequential.
Spending on the necessities of food, clothing, and shelter accounted for 73 percent of the typical household budget at the time of the 1918 flu. In 2019, the same categories made up just 35 percent of the household budget.
Spending on the necessities of food, clothing, and shelter accounted for 73 percent of the typical household budget at the time of the 1918 flu. In 2019, the same categories made up just 35 percent of the household budget.
And that total includes big bills at restaurants and bars. Spending on food away from home, which was almost nonexistent in the early 20th century, now nearly equals spending on groceries for the average household.
Education and health care have partially replaced food, shelter, and clothing as household necessities. Spending on education has increased from 0.5 percent at the time of the 1918 flu to 2.3 percent today, and spending on health care has increased from about 5 percent to about 8 percent.
In normal times, education and health care are unavoidable headaches for every family. But the coronavirus has thrown even these sectors into turmoil.
With students staying home, colleges and universities have been unable to collect tuition and housing fees. Hospitals have been forced to postpone all but the most urgent procedures. Employment in health care, which had increased through every recent recession, declined 9.6 percent between February and April.
Instead of spending their money on restaurants or college courses, Americans saved 33.5 percent of their income in April, 24.2 percent in May, and 19 percent in June—by a wide margin, the three highest figures since the Second World War. The average for the past decade was 7.3 percent.
A restaurant sits closed and empty in Manhattan in New York City on March 19.
The astonishingly high savings rate is the most important statistic for understanding the coronavirus economy. After paying the bills for food, clothing, and shelter, the typical consumer in 1918 simply did not have that much left to put away. Today, affluence affords consumers the discretion to spend or to save. What they do with those savings will determine how quickly the economy recovers after the pandemic.
In the short term, to be sure, all that saving could be good for the economy. During the Second World War, the last time savings were at this level, rationing forced consumers to save up the high wages they were earning in military service or in armaments factories. After the war, they used their savings to purchase homes, appliances, and automobiles, and to have children and raise them. The resulting boom lasted throughout the 1950s and 1960s.
Then, as now, federal outlays have resulted in increased incomes for many households, while a national emergency has prevented consumers from spending the extra cash. There has been real hardship during the pandemic among those unlucky enough not to qualify for unemployment benefits, but most families did all right financially through the spring and summer, thanks to generous federal aid. Disposable personal income actually increased 9.7 percent in the second quarter. The rate of credit-card defaults, a good measure of middle-class finances, declined.
Americans were so flush during the pandemic that many opened their first retirement accounts.
Americans were so flush during the pandemic that many opened their first retirement accounts. Fidelity reported in August that its customers had opened a third more Individual Retirement Accounts (IRAs) year over year. Contributions increased 22 percent in volume. The money wasn’t just coming from older, affluent clients with comfortable jobs. The increases were still greater among millennials, who are evidently eating less avocado toast.
Investments in retirement accounts likely accelerated the stock market’s recovery. The S&P 500 fell by a third in February and March, but had made up those losses by early August, setting new record highs.
For the economy today, the best we can hope for is that consumers will again find some way of spending their savings, say on a brand-new pick up, a designer handbag, or a family vacation. But there are differences between the wartime economy and the coronavirus economy.
Then, consumers were postponing spending on big-ticket, durable goods, such as cars and dishwashers. Today’s affluent consumers have largely met their needs for durable goods. And services, which have been so important in this recession, can only be consumed in the moment. For instance, to make up for lost time after the pandemic, a family that stopped paying for weekly visits from a house cleaner would have to have the house cleaned twice a week.
Another difference is that in the postwar period, U.S. manufacturers could rely on foreign as well as domestic consumption. The United States benefited from a modest trade surplus for most of 1940s, 1950s, and 1960s, supplying goods and equipment to other nations who would not only emulate American standards of living, but build up manufacturing sectors to rival this country’s.
Today, consumers outside the United States are spending less and saving more. Since at least the turn of the millennium, the world economy has been burdened by an excess of saving—what Ben Bernanke, the former chairman of the Federal Reserve, termed a savings glut. The increase in savings due to the pandemic is compounding this existing glut. The trade deficit, which represents dollar-denominated assets saved by foreigners, exceeded $63 billion in July. That was the highest total since the financial crisis of 2008.
Since at least the turn of the millennium, the world economy has been burdened by an excess of saving—what Ben Bernanke, the former chairman of the Federal Reserve, termed a savings glut.
As more and more people worldwide find they have enough to meet their immediate needs, they have put away more for themselves in old age and for their children. Pension funds and life insurance companies have become macroeconomic heavyweights.
These institutions, like foreign central banks, consistently turn to the American banking system to provide financial security for their clients. The colossal Japanese entity known as the Government Pension Investment Fund (GPIF), the world’s largest pension fund, invested more than $500 billion in cash-equivalent U.S. Treasury bonds at the beginning of the pandemic, Bloomberg reported.
Bernanke predicted that the savings glut would be temporary. He blamed foreign governments for interfering with currency markets, encouraging their citizens to accumulate U.S. dollars, and argued that as foreign economies recovered from the financial crisis of 2008, global buyers would rediscover their taste for American goods and services. The past few months have put these hopeful predictions in doubt. Not only has the trade deficit increased again, but foreign governments have resumed their interventions in the markets to protect their economies from the expanding crisis. (That’s according to research by Brad Setser, a former Obama administration official now at the Council on Foreign Relations.)
Interest rates tell the story of everything that has changed since the postwar years. High rates reflected the demand for capital to fight the war and to rebuild all that it destroyed. In that context, savings stimulated the economy by holding rates in check, making it easier for households and businesses worldwide to borrow money for new purchases. Today, savings can no longer provide that same stimulus. Interest rates are near zero throughout much of the developed world, a result of the limited need for capital in a richer society that can already satisfy most of its wants.
In a well-known essay titled “Economic Possibilities for our Grandchildren,” the British economist J. Maynard Keynes looked forward to a world in which economic progress had satisfied basic human needs. The coronavirus has proved most of his predictions correct. The economy’s productive power easily meets our most essential demands.
Keynes also predicted that the improving standard of living would not cause unemployment. He wrote that although there would no longer be any need for many traditional occupations in a more productive and technologically sophisticated economy, society would develop new needs, providing new opportunities for displaced workers.
The 20th century seemed to bear out this prediction, too. Technological progress produced not mass unemployment but an astounding variety of inexpensive goods and services. But if the historical data seems to vindicate Keynes’s optimism, that might only be because his own ideas were so influential. High tax rates on the wealthy and expanded public benefits redistributed incomes to those who were more likely to spend, not to save. Policymakers protected organized labor, in part out of feelings of solidarity with the workers of the world, but also because they believed that empowering unions to demand high wages would avoid the perils of overproduction and underconsumption that had bedeviled the early 20th century.
If consumers choose to save instead of spend, then the economy of the future will share important features with the present crisis, including deflation, zero interest rates, mass unemployment, and, paradoxically, rising incomes.
Those protections and benefits have been progressively weakened or eliminated over the past 50 years. In their absence, there is no empirical basis for the assumption that workers displaced by economic progress and technological growth will always find work in new industries. There is no hard evidence that the economy will always create not only new kinds of goods and services, but also the demand for them.
In the coming years, consumers might instead choose to save. They would spend less not out of fear of infection or in compliance with public-health orders, as they have done during the pandemic. Instead, they might have enough of the things that money can buy, preferring the security that comes with accumulated savings. If so, then the economy of the future will share important features with the present crisis, including deflation, zero interest rates, mass unemployment, and, paradoxically, rising incomes.
For the new global middle class, saving for retirement or a rainy day promises freedom from the demands of work and the ups and downs of the market. The desire for that peace of mind seems insatiable, in contrast to the desire for most consumer goods.
Economic growth in the capitalist system has opened up all kinds of possibilities for ordinary people around the world. Yet for them, the most remarkable possibility of all might be the promise of escape from that system’s many uncertainties and anxieties.
It would be premature to predict what the consumers of the future will want. If the pandemic can be contained, there is (as yet) no reason to think that the same policies that worked before to create demand for the capitalist system’s products would fail to do so today. But without a coordinated effort on the part of policymakers worldwide to alleviate excess savings through redistribution and public spending, this recession is just a preview of the economy’s normal state in years to come.
Affluence has changed the rules of the economy. Its unusual reaction to the coronavirus has made that especially clear. Keynes has been cited frequently in the years since the recession of 2008, which resembled the panics of the era before the Second World War in its nature and severity. But if that crisis recalled the past, the coronavirus recession might be the first crisis of the future.


foreignpolicy--2020-11-27--Europe May Cheer Biden’s Win—But It Threatens Macron’s Grand Project

This article is part of The Biden Transition , Foreign Policy ’ s ongoing coverage of how U.S. President-elect Joe Biden builds a new White House administration—and what the new team ’ s policies might be .
In many European capitals , Joe Biden ’ s election victory has been welcomed with a sigh of relief after four years of trouble with President Donald Trump .
But alongside the rejoicing over America ’ s promised return to multilateralism , Biden ’ s win is laying bare old and new rifts regarding Europe ’ s role on the world stage .
@ @ @ @ @ @ @ to what extent Biden ’ s presidency will hamper their already difficult push for a more geopolitically independent EU , a pet project of President Emmanuel Macron in recent years , but one which seemed to draw power from Trump ’ s Europe-bashing and unilateral approach .
“ Is the change in the American administration going to see Europeans letting up ” on the effort to build greater strategic autonomy ?
, wondered Macron in a lengthy recent interview .
Macron fleshed out his vision of a Europe that can hold its own @ @ @ @ @ @ @ the United States and China .
While Macron called the United States “ our historical allies , ” he also stressed the cultural and geopolitical differences between the two sides of the Atlantic , and made clear that Europe should pursue strategic relevance “ for itself ” and “ to prevent the Chinese-American duopoly.
” Concretely , he argued , this means further efforts to beef up European defense , while tackling technological dependence on the two superpowers when it comes to 5G networks and cloud data storage .
He also urged action @ @ @ @ @ @ @ which became apparent when U.S. financial sanctions threatened EU firms doing business with Iran after the United States withdrew from the Iran nuclear deal in 2018 .
A stronger France via a stronger Europe has been a mantra of Macron ’ s for years.Coming from Paris , none of this is particularly new .
A stronger France via a stronger Europe has been a mantra of Macron ’ s for years—and has been part of France ’ s political DNA for decades .
The Elysée ’ s attitude towards NATO , for instance @ @ @ @ @ @ @ de Gaulle , who in 1966 withdrew French forces from the alliance ’ s command—a decision that would be fully reversed only 40 years later .
“ If you look at how France has positioned itself in the West from de Gaulle onwards , it ’ s precisely this : ‘ We are an ally of the United States , with which we have common values , but we are no vassals and we must be respected , ’ ” said Christian Lequesne , a geopolitics and international relations professor at Sciences Po @ @ @ @ @ @ @ is whether , absent Trump as a foil , its European partners will still embrace the same attitude .
In recent years , thanks to Trump ’ s trade wars , NATO-bashing , and political and economic fights over everything from Iran to climate change , Europe seemed ready to carve out a bigger independent role for itself .
French and German officials , incensed by U.S. economic pressure , spoke openly of restoring “ economic sovereignty.
” In 2018 , then-European Commission President Jean-Claude Juncker entitled his State of the Union speech @ @ @ @ @ @ @ Last spring , German Chancellor Angela Merkel demanded “ greater strategic sovereignty for the EU.
” Talk was cheap , though , and that ’ s clearest when it comes to defense .
A European Defense Fund was set up to develop military technology and improve cooperation , but the resources allocated by the latest seven-year EU budget are 40 percent lower than the figure originally proposed by the Commission .
The European Defense Agency says that aggregate spending in this area only got back to pre-financial crisis levels last year , with @ @ @ @ @ @ @ defense budgets still substantially lower than it was in 2007 .
And despite a military cooperation agreement signed in 2018 , an integrated European army remains little more than a fantasy at this stage .
Those fault lines have become evident in recent weeks due to an unusually public argument between Macron and German Defense Minister Annegret Kramp-Karrenbauer .
In a POLITICO op-ed , she argued that “ illusions of European strategic autonomy should come to an end : Europeans will not be able to replace America ’ s crucial role as a @ @ @ @ @ @ @ “ profoundly ” disagreed with that view .
In recent years , Europe seemed ready to carve out a bigger independent role for itself.In some ways , the divisions look deeper than they really are .
Last week , the French and German Foreign Ministers penned a joint column acknowledging that the transatlantic partnership must become “ more balanced.
” Especially in the wake of Trump ’ s decision to pull thousands of U.S. troops out of Germany , Berlin knows that Europe will have to accept more burden-sharing , as American resources @ @ @ @ @ @ @ China .
The bigger difference is one of emphasis .
Kramp-Karrenbauer insists that Europe needs to boost its military spending and take on some of the United States ’ security tasks in its own neighborhood—but as a way to be taken more seriously by Washington and reinforce NATO and trans-Atlantic ties , not to supplant them .
Macron ’ s problem is that , even if he settled for the German approach , it ’ s not clear it would materialize .
One minister ’ s point of view is not necessarily the @ @ @ @ @ @ @ a cobbled-together coalition like the one that governs Germany , noted Hanns Maull of the German Institute for International and Security Affairs .
Any continuity in Germany ’ s current approach is further clouded by Merkel ’ s planned departure from the Chancellery next year .
In that sense , this month ’ s Franco-German spat could be an attempt by Macron to keep up the pressure , noted Maull , given a general lack of trust in Berlin meeting its commitments on defense spending .
While Germany ’ s defense budget has @ @ @ @ @ @ @ remains below the nominal 2 percent of GDP threshold that NATO states are supposed to spend on defense .
Germany is now estimated to be spending about 1.6 percent of its GDP on defense , compared with France ’ s 2.1 percent .
And when it comes to expenditure in major equipment and related research and development as a share of the total , Germany ’ s is one of the lowest among NATO members .
The German armed forces ’ top brass has long been sounding the alarm about the poor state @ @ @ @ @ @ @ Maull described as a “ mess.
” That , as much as Biden ’ s victory , is what makes it seem unlikely Macron will see any big breakthrough in his vision for a more muscular Europe .
Further , other EU and NATO members , like Poland and ( to a lesser extent ) Hungary and the Baltic countries , are even less willing than Germany to pursue strategic independence from the United States .
“ The French President is quite isolated , ” said Lequesne , of Sciences Po .
“ @ @ @ @ @ @ @ to accept American hegemony , and that ’ s where Macron ’ s project is faltering .
”

In many European capitals, Joe Biden's election victory has been welcomed with a sigh of relief after four years of trouble with President Donald Trump. But alongside the rejoicing over America’s promised return to multilateralism, Biden’s win is laying bare old and new rifts regarding Europe’s role on the world stage.
In many European capitals, Joe Biden’s election victory has been welcomed with a sigh of relief after four years of trouble with President Donald Trump. But alongside the rejoicing over America’s promised return to multilateralism, Biden’s win is laying bare old and new rifts regarding Europe’s role on the world stage.
French officials in particular find themselves wondering to what extent Biden’s presidency will hamper their already difficult push for a more geopolitically independent EU, a pet project of President Emmanuel Macron in recent years, but one which seemed to draw power from Trump’s Europe-bashing and unilateral approach.
“Is the change in the American administration going to see Europeans letting up” on the effort to build greater strategic autonomy?, wondered Macron in a lengthy recent interview. Macron fleshed out his vision of a Europe that can hold its own in a world dominated by giants like the United States and China. While Macron called the United States “our historical allies,” he also stressed the cultural and geopolitical differences between the two sides of the Atlantic, and made clear that Europe should pursue strategic relevance “for itself” and “to prevent the Chinese-American duopoly.”
Concretely, he argued, this means further efforts to beef up European defense, while tackling technological dependence on the two superpowers when it comes to 5G networks and cloud data storage. He also urged action against Washington’s financial clout, which became apparent when U.S. financial sanctions threatened EU firms doing business with Iran after the United States withdrew from the Iran nuclear deal in 2018.
A stronger France via a stronger Europe has been a mantra of Macron’s for years.Coming from Paris, none of this is particularly new. A stronger France via a stronger Europe has been a mantra of Macron’s for years—and has been part of France’s political DNA for decades. The Elysée’s attitude towards NATO, for instance, has been ambivalent since President Charles de Gaulle, who in 1966 withdrew French forces from the alliance’s command—a decision that would be fully reversed only 40 years later.
“If you look at how France has positioned itself in the West from de Gaulle onwards, it’s precisely this: ‘We are an ally of the United States, with which we have common values, but we are no vassals and we must be respected,’” said Christian Lequesne, a geopolitics and international relations professor at Sciences Po university.
The key question for Paris is whether, absent Trump as a foil, its European partners will still embrace the same attitude. In recent years, thanks to Trump’s trade wars, NATO-bashing, and political and economic fights over everything from Iran to climate change, Europe seemed ready to carve out a bigger independent role for itself. French and German officials, incensed by U.S. economic pressure, spoke openly of restoring “economic sovereignty.” In 2018, then-European Commission President Jean-Claude Juncker entitled his State of the Union speech “The hour of European sovereignty.” Last spring, German Chancellor Angela Merkel demanded “greater strategic sovereignty for the EU.”
Talk was cheap, though, and that’s clearest when it comes to defense. A European Defense Fund was set up to develop military technology and improve cooperation, but the resources allocated by the latest seven-year EU budget are 40 percent lower than the figure originally proposed by the Commission. The European Defense Agency says that aggregate spending in this area only got back to pre-financial crisis levels last year, with the share of research and technology in defense budgets still substantially lower than it was in 2007. And despite a military cooperation agreement signed in 2018, an integrated European army remains little more than a fantasy at this stage.
Those fault lines have become evident in recent weeks due to an unusually public argument between Macron and German Defense Minister Annegret Kramp-Karrenbauer. In a POLITICO op-ed, she argued that “illusions of European strategic autonomy should come to an end: Europeans will not be able to replace America’s crucial role as a security provider.” Macron said later he “profoundly” disagreed with that view.
In recent years, Europe seemed ready to carve out a bigger independent role for itself.In some ways, the divisions look deeper than they really are. Last week, the French and German Foreign Ministers penned a joint column acknowledging that the transatlantic partnership must become “more balanced.” Especially in the wake of Trump’s decision to pull thousands of U.S. troops out of Germany, Berlin knows that Europe will have to accept more burden-sharing, as American resources are increasingly devoted to the confrontation with China.
The bigger difference is one of emphasis. Kramp-Karrenbauer insists that Europe needs to boost its military spending and take on some of the United States’ security tasks in its own neighborhood—but as a way to be taken more seriously by Washington and reinforce NATO and trans-Atlantic ties, not to supplant them.
Macron’s problem is that, even if he settled for the German approach, it’s not clear it would materialize. One minister’s point of view is not necessarily the position of the entire government, especially a cobbled-together coalition like the one that governs Germany, noted Hanns Maull of the German Institute for International and Security Affairs. Any continuity in Germany’s current approach is further clouded by Merkel’s planned departure from the Chancellery next year.
In that sense, this month’s Franco-German spat could be an attempt by Macron to keep up the pressure, noted Maull, given a general lack of trust in Berlin meeting its commitments on defense spending. While Germany’s defense budget has gone up in recent years, it remains below the nominal 2 percent of GDP threshold that NATO states are supposed to spend on defense. Germany is now estimated to be spending about 1.6 percent of its GDP on defense, compared with France’s 2.1 percent. And when it comes to expenditure in major equipment and related research and development as a share of the total, Germany’s is one of the lowest among NATO members. The German armed forces’ top brass has long been sounding the alarm about the poor state of the Bundeswehr, a situation that Maull described as a “mess.”
That, as much as Biden’s victory, is what makes it seem unlikely Macron will see any big breakthrough in his vision for a more muscular Europe. Further, other EU and NATO members, like Poland and (to a lesser extent) Hungary and the Baltic countries, are even less willing than Germany to pursue strategic independence from the United States.
“The French President is quite isolated,” said Lequesne, of Sciences Po. “Many EU states are still relatively eager to accept American hegemony, and that’s where Macron’s project is faltering.”


foreignpolicy--2020-11-27--Why India Has Become a Different Country

Why India Has Become a Different Country On Thursday , Nov. 12 , the Indian Supreme Court intervened to release Arnab Goswami , a controversial media executive who is also the principal anchor of his network , Republic TV , from a Mumbai jail where he was arrested on charges of abetment to suicide .
In granting him bail , Justice Dhananjay Chandrachud rhetorically asked : “ If constitutional courts don ’ t protect liberty , who will ?
” The court ’ s enthusiasm for individual liberty would have sounded more sincere if it extended similar courtesy to the @ @ @ @ @ @ @ writers , and journalists who have been jailed for months : Their trials remain pending , and Indian courts have shown no sense of urgency to take on their cases .
Indeed , on Nov. 21 , while hearing the case of another journalist in jail—Siddique Kappan—the court complained of “ unfair reporting ” even as it finally gave lawyers permission to meet Kappan , who remains in jail .
Kappan was jailed on so-called sedition charges as he was travelling to India ’ s largest state , Uttar Pradesh , to report @ @ @ @ @ @ @ death of a young Dalit ( as those at the bottom of Hinduism ’ s caste hierarchy are known ) woman .
Many , including international press freedom organizations , have spoken out for both Kappan and Goswami .
But Goswami , who was arrested on charges that had nothing to do with journalism , is now free , whereas Kappan remains in custody .
The saga of Goswami ’ s arrest is complicated : Goswami ’ s network has run a sustained campaign against the opposition-ruled Maharashtra state ( India ’ s @ @ @ @ @ @ @ actor , alluding to the fact that that the death may have been due to a murder .
Goswami ’ s supporters—and there are millions—insist Goswami is being framed in another suicide case because of what they call his heroic journalism .
When he was arrested , leading Indian politicians , including ministers from Prime Minister Narendra Modi ’ s cabinet , expressed their horror over his arrest .
Other journalists doing heroic work , however , are arrested in states ruled by Modi ’ s Bharatiya Janata Party ( BJP ) and @ @ @ @ @ @ @ government .
Being a journalist in India and uncovering stories that the BJP and its supporters don ’ t like is dangerous business .
On Oct. 16 , Ahan Penkar , a 24-year-old journalist covering a protest in front of a police station in New Delhi , was dragged inside the station by men , only some of whom were wearing a uniform .
He was detained for four hours , his phone was taken away , and the police deleted the photographs and videos he had recorded from the phone and his @ @ @ @ @ @ @ uncovering stories that the BJP and its supporters don ’ t like is dangerous business .
Penkar was interviewing people protesting an alleged rape and murder of a teenager in the capital .
Later that day , the magazine where Penkar works , the Caravan ( where I also write ) published photographs showing Penkar with physical injuries which he said he had because Ajay Kumar , an assistant police commissioner , assaulted him , and other police officers abused him .
Penkar has filed a complaint with the city ’ s police @ @ @ @ @ @ @ into the matter .
Penkar said that when he was being roughed up and insulted at the police station , one of the officers shouted : “ Why do you all keep doing this ?
Tumhe nahi pata hai ki desh badal gaya hai ?
” ( Don ’ t you know the country has changed ? )
You can say that again .
India has changed .
The same week , India ’ s National Investigation Agency arrested Stan Swamy , an 83-year-old Jesuit priest who has spent decades working for the @ @ @ @ @ @ @ communities are known in India , accusing him of being a sympathizer of the banned Communist Party of India ( Maoist ) group .
Swamy ’ s arrest has shocked Christians and human rights activists in India .
He joins a growing list of intellectuals , academics , musicians , activists , and dissidents who have championed the cause of India ’ s underprivileged and marginalized communities and who are now in jail , denied bail , the cases against them pending .
Among those arrested in what is known as the Bhima @ @ @ @ @ @ @ poet Varavara Rao ( who was diagnosed with coronavirus while in jail and yet was denied bail ) , lawyer Surendra Gadling , poet Sudhir Dhawale , social activist Mahesh Raut , human rights activists Rona Wilson and Arun Ferreira , academics Shoma Sen and Vernon Gonsalves , lawyer Sudha Bharadwaj , academics Anand Teltumbde and Hany Babu , writer Gautam Navlakha , and performers of the Kabir Kala Manch .
The Bhima-Koregaon case goes back to New Year ’ s Eve in 2017 and early 2018 , when hundreds of thousands of @ @ @ @ @ @ @ of a 19th century battle in which the Dalits , as part of British troops , defeated upper caste Peshwas who had ruled parts of Western India at that time .
In the violence that followed the 2018 celebration , one person died , and a few were injured .
But the government has asserted that there was a conspiracy against the state , seized computers , books , and other personal effects from the homes of the arrested individuals , and attempted to implicate more than a dozen government critics .
Journalist @ @ @ @ @ @ @ vast , dubious enterprise of defamation and criminalization that began as a supposed plot to kill the prime minister—an accusation never mentioned since—and degenerated into a vast conspiracy with no credible proof and no sign of trial.
” If ticking boxes were sufficient to evaluate democracies , then India still gets the right ticks—it holds elections periodically , it has an independent judiciary , a constitution that safeguards minority rights and recognizes individual rights , where privately owned media operates , where opposition parties exist and are in parliament.If ticking boxes were sufficient @ @ @ @ @ @ @ gets the right ticks .
And yet , the essence of democracy is not the form , but its content ; the norms , not the laws ; it is not the presence of the structures , but whether those structures function the way they are meant to perform , and whether checks and balances set the system right when things go wrong , that determines democracy .
And by those criteria , India—for long described as the world ’ s largest democracy—has been failing persistently .
To be sure , India has @ @ @ @ @ @ @ .
It has laws that permit detention without trial ; it sends troops to quell dissent and has laws that human-rights groups say allow the army to act with impunity ; the freedoms it grants its citizens come with many restrictions ; between 1975 and 1977 then Prime Minister Indira Gandhi declared an internal emergency and jailed opposition leaders and suspended some laws that guaranteed fundamental rights ; and it has periodically erupted in brutal violence , as in the inter-religious riots of 1984 and 2002 .
And yet , its descent has @ @ @ @ @ @ @ when Modi became the prime minister of the first right-wing , Hindu nationalist government elected on its own strength , not requiring coalition partners ( although it does have parliamentary allies ) .
The world took notice of the deteriorating situation when in late September , the government ’ s conflict with Amnesty International , the world ’ s leading human rights organization , played out in the open .
That ’ s when Amnesty decided to shut its Indian operations because of what it called a witch-hunt , and several international human-rights @ @ @ @ @ @ @ Amnesty ’ s concerns , saying the organization was under investigation for possibly breaking Indian laws regulating foreign financial contributions to civil society groups .
Amnesty has denied those charges .
The Indian Government has been after Amnesty for some time now , upset over its many reports critical of the government ’ s human rights record in Kashmir , and curbs on peaceful protests , and it has charged Amnesty with sedition for organizing events that the government considers anti-national .
India always had complicated and onerous rules regulating foreign funds going @ @ @ @ @ @ @ administration has tightened those rules , making it harder for groups that advocate policy reforms or protection of rights to receive funds from abroad ; groups that do so-called humanitarian work such as poverty alleviation or delivering services ( but not questioning why poverty persists ) are preferred .
Globally , the space for civil society has been shrinking , and like Brazil , Hungary , and Russia , India has sharpened laws making it tougher to dissent .
The uproar that accompanied Amnesty ’ s exit was justified , but it is @ @ @ @ @ @ @ is a distraction to focus only on Amnesty ’ s plight ; the real battle for human rights is being fought in India , where activists , scholars , journalists , academics , and human rights defenders are at the frontline , facing graver dangers and harm .
Many are under surveillance , harassed , intimidated , have obstructions placed in their path , and are often detained without trial .
When they apply for bail , even the highest courts ignore the pleas or routinely postpone the cases , as has been @ @ @ @ @ @ @ incidents in Delhi .
In February , the Modi administration appeared to have set aside all other priorities ( including tackling coronavirus , then spreading through India ) because it was busy preparing the country to host President Donald Trump ’ s brief visit ( which yielded no breakthrough but gave Trump photo opportunities to woo Indian-American voters ) .
At that time , a public park in Delhi was the setting of a major protest against changes in India ’ s citizenship laws .
The new law would make it easier for @ @ @ @ @ @ @ neighborhood to get Indian citizenship .
Concurrently , a major exercise was underway to prepare a national registry of citizens , which human rights lawyers argued discriminated against the poor and the minorities , who may not have documentation and paperwork to prove they were Indian citizens ( many were being left out ) .
The protests at the park were peaceful , but government supporters attacked the protesters in a shrill tone and sometimes with violence .
During Trump ’ s visit more violence occurred , and in the riots more than @ @ @ @ @ @ @ the Delhi police have arrested dozens of government critics , including student leaders like Umar Khalid , Sharjeel Imam , and Safoora Zargar ( who was pregnant ) , and women ’ s rights activists like Devangana Kalita and Natasha Narwal , many of whom stressed their adherence to constitution and non-violence .
Even peaceful , Gandhian dissent is no longer tolerated in Modi ’ s India .
Dissenters are called anti-national , and the state looks the other way when electronic stormtroopers supporting the Modi administration hound government critics online ( including @ @ @ @ @ @ @ and it has been lethargic in pursuing cases to investigate the murders of four government critics in recent years .
Several widely watched television networks have run virulent campaigns against government critics .
Journalists in Kashmir are threatened , jailed , bullied , and beaten .
At 142nd out of 180 countries , India ranks behind Myanmar and Afghanistan today in a global press freedom index .
Reporters trying to visit the village of Hathras , where a young Dalit woman was raped and murdered , are stopped from doing so or arrested @ @ @ @ @ @ @ are not able to visit India , because as per U.N. protocol , they can only do so with an official invitation.Gandhian dissent is no longer tolerated in Modi ’ s India .
Electoral financing has become far more opaque , with political parties getting funds from unaccountable electoral bonds .
Court appeals against the law , seeking greater transparency , remain pending .
If opposition parties get elected to run state governments , inducements have been offered to legislators to topple those governments , and federally-appointed governors of the states , who @ @ @ @ @ @ @ openly partisan , even provocative statements critical of religious minorities and the constitution .
The judiciary has let some crucial cases remain in its in-tray , including habeas corpus petitions such as those involving the arrests of opposition politicians without due process in the disputed region of Jammu and Kashmir .
Last year , the Modi administration revoked constitutional guarantees Kashmir enjoyed and relegated it from a full-fledged state to a federally administered and bifurcated territory .
The relentless pace at which the attacks have occurred , the way institutions have been appropriated @ @ @ @ @ @ @ the government has been able to pass measures in parliament , and the passive manner in which some judicial pronouncements and orders have permitted the erosion of rights , have all collectively transformed India into what it was not meant to be .
Instead of the secular democracy it was envisioned as , it seems more and more like any other developing country with an autocratic leader who commands the passionate support of the vociferous .
The Delhi police are right : India has indeed become a different country .
But many Indians—brave @ @ @ @ @ @ @ , union leaders , grassroots workers , and human rights defenders—are fighting to preserve their republic .
Their voices must remain amplified—that is the far bigger story than Amnesty ’ s departure .

On Thursday, Nov. 12, the Indian Supreme Court intervened to release Arnab Goswami , a controversial media executive who is also the principal anchor of his network, Republic TV, from a Mumbai jail where he was arrested on charges of abetment to suicide . In granting him bail, Justice Dhananjay Chandrachud rhetorically asked: “If constitutional courts don’t protect liberty, who will?”
On Thursday, Nov. 12, the Indian Supreme Court intervened to release Arnab Goswami, a controversial media executive who is also the principal anchor of his network, Republic TV, from a Mumbai jail where he was arrested on charges of abetment to suicide. In granting him bail, Justice Dhananjay Chandrachud rhetorically asked: “If constitutional courts don’t protect liberty, who will?”
The court’s enthusiasm for individual liberty would have sounded more sincere if it extended similar courtesy to the dozens of human-rights defenders, academics, writers, and journalists who have been jailed for months: Their trials remain pending, and Indian courts have shown no sense of urgency to take on their cases. Indeed, on Nov. 21, while hearing the case of another journalist in jail—Siddique Kappan—the court complained of “unfair reporting” even as it finally gave lawyers permission to meet Kappan, who remains in jail. Kappan was jailed on so-called sedition charges as he was travelling to India’s largest state, Uttar Pradesh, to report on the story of the rape and death of a young Dalit (as those at the bottom of Hinduism’s caste hierarchy are known) woman.
Many, including international press freedom organizations, have spoken out for both Kappan and Goswami. But Goswami, who was arrested on charges that had nothing to do with journalism, is now free, whereas Kappan remains in custody. The saga of Goswami’s arrest is complicated: Goswami’s network has run a sustained campaign against the opposition-ruled Maharashtra state (India’s wealthiest) over the suicide of an actor, alluding to the fact that that the death may have been due to a murder. Goswami’s supporters—and there are millions—insist Goswami is being framed in another suicide case because of what they call his heroic journalism. When he was arrested, leading Indian politicians, including ministers from Prime Minister Narendra Modi’s cabinet, expressed their horror over his arrest. Other journalists doing heroic work, however, are arrested in states ruled by Modi’s Bharatiya Janata Party (BJP) and do not find such support from the government.
Being a journalist in India and uncovering stories that the BJP and its supporters don’t like is dangerous business. On Oct. 16, Ahan Penkar, a 24-year-old journalist covering a protest in front of a police station in New Delhi, was dragged inside the station by men, only some of whom were wearing a uniform. He was detained for four hours, his phone was taken away, and the police deleted the photographs and videos he had recorded from the phone and his cloud storage.Being a journalist in India and uncovering stories that the BJP and its supporters don’t like is dangerous business.
Penkar was interviewing people protesting an alleged rape and murder of a teenager in the capital. Later that day, the magazine where Penkar works, the Caravan (where I also write) published photographs showing Penkar with physical injuries which he said he had because Ajay Kumar, an assistant police commissioner, assaulted him, and other police officers abused him. Penkar has filed a complaint with the city’s police commissioner; authorities say they are looking into the matter.
Penkar said that when he was being roughed up and insulted at the police station, one of the officers shouted: “Why do you all keep doing this? Tumhe nahi pata hai ki desh badal gaya hai?” (Don’t you know the country has changed?)
You can say that again. India has changed.
The same week, India’s National Investigation Agency arrested Stan Swamy, an 83-year-old Jesuit priest who has spent decades working for the land rights of adivasis, as indigenous communities are known in India, accusing him of being a sympathizer of the banned Communist Party of India (Maoist) group. Swamy’s arrest has shocked Christians and human rights activists in India. He joins a growing list of intellectuals, academics, musicians, activists, and dissidents who have championed the cause of India’s underprivileged and marginalized communities and who are now in jail, denied bail, the cases against them pending.
Among those arrested in what is known as the Bhima Koregaon case, are the 80-year-old revolutionary poet Varavara Rao (who was diagnosed with coronavirus while in jail and yet was denied bail), lawyer Surendra Gadling, poet Sudhir Dhawale, social activist Mahesh Raut, human rights activists Rona Wilson and Arun Ferreira, academics Shoma Sen and Vernon Gonsalves, lawyer Sudha Bharadwaj, academics Anand Teltumbde and Hany Babu, writer Gautam Navlakha, and performers of the Kabir Kala Manch.
The Bhima-Koregaon case goes back to New Year’s Eve in 2017 and early 2018, when hundreds of thousands of Dalits had gathered to commemorate the bicentenary of a 19th century battle in which the Dalits, as part of British troops, defeated upper caste Peshwas who had ruled parts of Western India at that time. In the violence that followed the 2018 celebration, one person died, and a few were injured. But the government has asserted that there was a conspiracy against the state, seized computers, books, and other personal effects from the homes of the arrested individuals, and attempted to implicate more than a dozen government critics. Journalist Samar Halarnkar describes it as “a vast, dubious enterprise of defamation and criminalization that began as a supposed plot to kill the prime minister—an accusation never mentioned since—and degenerated into a vast conspiracy with no credible proof and no sign of trial.”
If ticking boxes were sufficient to evaluate democracies, then India still gets the right ticks—it holds elections periodically, it has an independent judiciary, a constitution that safeguards minority rights and recognizes individual rights, where privately owned media operates, where opposition parties exist and are in parliament.If ticking boxes were sufficient to evaluate democracies, then India still gets the right ticks.
And yet, the essence of democracy is not the form, but its content; the norms, not the laws; it is not the presence of the structures, but whether those structures function the way they are meant to perform, and whether checks and balances set the system right when things go wrong, that determines democracy. And by those criteria, India—for long described as the world’s largest democracy—has been failing persistently.
To be sure, India has always had caveats placed around its democracy. It has laws that permit detention without trial; it sends troops to quell dissent and has laws that human-rights groups say allow the army to act with impunity; the freedoms it grants its citizens come with many restrictions; between 1975 and 1977 then Prime Minister Indira Gandhi declared an internal emergency and jailed opposition leaders and suspended some laws that guaranteed fundamental rights; and it has periodically erupted in brutal violence, as in the inter-religious riots of 1984 and 2002. And yet, its descent has been sharp and steep since 2014, when Modi became the prime minister of the first right-wing, Hindu nationalist government elected on its own strength, not requiring coalition partners (although it does have parliamentary allies).
The world took notice of the deteriorating situation when in late September, the government’s conflict with Amnesty International, the world’s leading human rights organization, played out in the open. That’s when Amnesty decided to shut its Indian operations because of what it called a witch-hunt, and several international human-rights organizations expressed alarm. India promptly dismissed Amnesty’s concerns, saying the organization was under investigation for possibly breaking Indian laws regulating foreign financial contributions to civil society groups. Amnesty has denied those charges. The Indian Government has been after Amnesty for some time now, upset over its many reports critical of the government’s human rights record in Kashmir, and curbs on peaceful protests, and it has charged Amnesty with sedition for organizing events that the government considers anti-national.
India always had complicated and onerous rules regulating foreign funds going to civil society groups. The Modi administration has tightened those rules, making it harder for groups that advocate policy reforms or protection of rights to receive funds from abroad; groups that do so-called humanitarian work such as poverty alleviation or delivering services (but not questioning why poverty persists) are preferred. Globally, the space for civil society has been shrinking, and like Brazil, Hungary, and Russia, India has sharpened laws making it tougher to dissent.
The uproar that accompanied Amnesty’s exit was justified, but it is not an isolated incident, and it is a distraction to focus only on Amnesty’s plight; the real battle for human rights is being fought in India, where activists, scholars, journalists, academics, and human rights defenders are at the frontline, facing graver dangers and harm. Many are under surveillance, harassed, intimidated, have obstructions placed in their path, and are often detained without trial. When they apply for bail, even the highest courts ignore the pleas or routinely postpone the cases, as has been the case with those detained over the incidents in Delhi.
In February, the Modi administration appeared to have set aside all other priorities (including tackling coronavirus, then spreading through India) because it was busy preparing the country to host President Donald Trump’s brief visit (which yielded no breakthrough but gave Trump photo opportunities to woo Indian-American voters). At that time, a public park in Delhi was the setting of a major protest against changes in India’s citizenship laws. The new law would make it easier for non-Muslim asylum seekers from India’s neighborhood to get Indian citizenship. Concurrently, a major exercise was underway to prepare a national registry of citizens, which human rights lawyers argued discriminated against the poor and the minorities, who may not have documentation and paperwork to prove they were Indian citizens (many were being left out).
The protests at the park were peaceful, but government supporters attacked the protesters in a shrill tone and sometimes with violence. During Trump’s visit more violence occurred, and in the riots more than 50 people died. Since then, the Delhi police have arrested dozens of government critics, including student leaders like Umar Khalid, Sharjeel Imam, and Safoora Zargar (who was pregnant), and women’s rights activists like Devangana Kalita and Natasha Narwal, many of whom stressed their adherence to constitution and non-violence.
Even peaceful, Gandhian dissent is no longer tolerated in Modi’s India. Dissenters are called anti-national, and the state looks the other way when electronic stormtroopers supporting the Modi administration hound government critics online (including using doctored images to embarrass women) and it has been lethargic in pursuing cases to investigate the murders of four government critics in recent years. Several widely watched television networks have run virulent campaigns against government critics. Journalists in Kashmir are threatened, jailed, bullied, and beaten. At 142nd out of 180 countries, India ranks behind Myanmar and Afghanistan today in a global press freedom index. Reporters trying to visit the village of Hathras, where a young Dalit woman was raped and murdered, are stopped from doing so or arrested. U.N. special rapporteurs for human rights are not able to visit India, because as per U.N. protocol, they can only do so with an official invitation.Gandhian dissent is no longer tolerated in Modi’s India.
Electoral financing has become far more opaque, with political parties getting funds from unaccountable electoral bonds. Court appeals against the law, seeking greater transparency, remain pending. If opposition parties get elected to run state governments, inducements have been offered to legislators to topple those governments, and federally-appointed governors of the states, who are supposed to be impartial, make openly partisan, even provocative statements critical of religious minorities and the constitution. The judiciary has let some crucial cases remain in its in-tray, including habeas corpus petitions such as those involving the arrests of opposition politicians without due process in the disputed region of Jammu and Kashmir. Last year, the Modi administration revoked constitutional guarantees Kashmir enjoyed and relegated it from a full-fledged state to a federally administered and bifurcated territory.
The relentless pace at which the attacks have occurred, the way institutions have been appropriated and weakened, the ease with which the government has been able to pass measures in parliament, and the passive manner in which some judicial pronouncements and orders have permitted the erosion of rights, have all collectively transformed India into what it was not meant to be. Instead of the secular democracy it was envisioned as, it seems more and more like any other developing country with an autocratic leader who commands the passionate support of the vociferous.
The Delhi police are right: India has indeed become a different country. But many Indians—brave activists, lawyers, academics, intellectuals, union leaders, grassroots workers, and human rights defenders—are fighting to preserve their republic. Their voices must remain amplified—that is the far bigger story than Amnesty’s departure.