Indian Rupee Hits Record Low Amid Escalating Trade Tensions

Source: AP

Context of global economy

State of Indian economy

Survey’s recommendations

Change in Survey mood

Source: indianexpress.com

While the financial situation of the federal government is often scrutinised, not often do one take a look at the Malaysian state’s fiscal health. After all, most of what is deemed as “public service” in this country is provided by the federal government, not the states.

However, looking at the financial statements of all 13 states that make up Malaysia, one could see that the strength of a state’s economy does not necessarily translate into a rich government.

As state government revenues are often associated, or tied to, their control of land and natural resources, such as water, sand, timber, tin, gold, rare earth minerals, crude oil and natural gas, small states are often “penalised” compared to larger, more naturally well-endowed states.

This is even if the state’s economy measured by its gross domestic product and trade performance could be among the biggest in Malaysia.

This raises the question of whether state governments should be allowed to collect more revenues from their own people, rather than just depending on revenues that are tied to land matters and property assessments.

As can be seen with the case of Sarawak, whose revenues shot up in 2020 when it received the green light to collect sales tax on petroleum products, the other states should perhaps be allowed to collect some form of indirect tax that better reflects their economic wealth.

However, the capability of the states to collect indirect taxes, as well as what they will do with the additional funds, would also be in question.

Read the second cover story above and more in The Edge Malaysia this week.

Source: Theedgemarkets

US President Donald Trump said he would prefer not to have to impose tariffs on China, while at the same time highlighting the influence he sees his threats having over the Asian nation’s actions.

“We have one very big power over China, and that’s tariffs, and they don’t want them,” the US leader told Fox News host Sean Hannity in an interview that aired in the US. “And I would rather not have to use it. But it’s a tremendous power over China.”

Trump has wielded tariffs as a frequent threat against friends and adversaries, and for the US promised additional revenue from them would help fund his domestic priorities. Trump threatened on his second day in office to put 10% tariffs on China as soon as Feb 1 for allowing fentanyl to “pour” into America.

Trump’s latest comments came in a wide-ranging conversation that also touched on other immediate global challenges he faces in his first week in office. The US president threatened to impose “massive” additional financial penalties on Russia if it doesn’t get to the negotiating table to end its war in Ukraine, called Iran’s leadership “religious zealots”, and said he also plans to reach out to North Korean leader Kim Jong Un.

Markets have taken it as a positive sign that Trump stopped short of imposing the tariffs on China in his first days in office, and his recent threats were softer than those issued last year. On the campaign trail, the Republican floated additional levies on China around the 60% mark, which economists have said could decimate US trade with a Chinese economy heavily reliant on exports.

Trump also reiterated his admiration for China and its leader Xi Jinping during the interview, saying he is “like my friend”, and that a recent call with him “went fine”. “It was a good, friendly conversation,” Trump said.

“I had a great relationship with him prior to Covid,” he added. “They are a very ambitious country. He’s a very ambitious man.”

‘Smart guy’

Trump also had praise for Kim, saying the North Korean leader “happens to be a smart guy” and isn’t a “religious zealot” like the leaders of Iran. Trump said he plans to reach out to Kim again.

While Kim hasn’t directly name-checked Trump since his election victory, state media earlier carried comments from the North Korean leader saying past talks with the US during Trump’s first term had only served to confirm Washington’s “unchangeable” hostility towards North Korea.

Trump had harsher words for Russia’s Vladimir Putin, threatening “massive” tariffs and big new sanctions if he doesn’t settle the war. “I don’t want to do that, but we have got to get this war ended,” Trump said.

Trump also criticised Ukraine President Volodymyr Zelenskiy’s handling of the initial stages of the conflict, saying he’s “no angel”.

Source: Theedgemarkets

Today’s world is increasingly grappling with a mentality reminiscent of the Cold War and even that predating the two World Wars. The recent attempt to impose martial law in South Korea, one of the most advanced democracies and economies in Northeast Asia, exemplifies this mentality.

Is it class or geopolitics?

Commentators often point to economic and social factors to shed light on this phenomenon. For example, many believe that the increase in radical sentiments in eastern Germany is largely due to limited job opportunities, lower wages and a decline in the quality of social services compared to western Germany. Furthermore, residents in western Germany have had more exposure to multicultural environments. In contrast, this socioeconomic divide has caused many in the east of the country to gravitate toward the anti-immigration rhetoric espoused by extremist groups.

In the United States, it is often explained that Donald Trump and his supporters have taken control of the Republican Party due to the frustrations of disenfranchised and disaffected white males, as well as those without a college education. These groups have experienced diminishing social mobility and falling incomes. Similarly, rising inequality and the declining fortunes of the working class fuel the growing influence of Bernie Sanders-style leftism within the Democratic Party. The November elections further intensified awareness of the educational gap, which is increasingly perceived as a social and class divide marked by cultural, gender and even culinary differences.

Similarly, recent election outcomes in the United Kingdom, France and other democracies are rationalized by a shifting political landscape driven by economic discontent.

Another significant factor in the current climate is the increasingly hostile global geopolitical landscape, which resembles the pre-war situation of the 1930s. As the world becomes increasingly polarized into conflicting camps, domestic politics mirrors these global tensions. Radical far-right and far-left movements are gaining traction in countries that are major powers, putting centrists on the defensive.

In France today, much like in the 1930s, the left and the center have united to prevent the far right from coming to power. Similarly, in several federal lands of Germany, the left and center are coalescing to build a wall against the rise of the far-right parties. The upcoming federal elections are likely to reflect this trend. Reports of connections between radical parties and geopolitical rivals, such as Russia, echo past ideological battles, and the ongoing war in Ukraine underscores historical parallels in our geopolitically divided world.

Or is it irrationality?

Scientific evidence indicates that the world is on the brink of environmental collapse, with global warming evidenced by severe floods, scorching heat and extreme weather patterns. Global action is urgently needed but is sorely lacking. Even as environmental crises escalate, the green parties remain on the fringes of political influence in most countries.

Green policies are inherently neither right nor left. They often clash with center-right perspectives because they prioritize environmental outcomes over economic efficiency. Due to its nature, the green ideology is in perennial conflict with major industries like oil and mining. Green policies should not align with center-left ideologies either, as they may threaten jobs and worker welfare in existing industries. Retraining programs for displaced workers often fall short, compelling many who face structural changes to seek employment in lower-paying, less “respectable” jobs.

Given the magnitude of the global environmental crisis, it is only rational that green parties should have the potential to rally voters around collective action to save our planet. However, national agendas prioritizing identity – be it class, national, religious or gender-based – continue to overshadow environmental concerns at the political forefront. To put it mildly, irrationality empowered by the radicalizing bullhorns of social platforms dominates the political agenda over the rationality of environmental action, which, some will argue, is simply too complex for a TikTok reel or a tweet.

The final resurgence of a bygone era

Class, geopolitical and religious discourses powerfully dominate domestic and global politics today. This realm of geopolitical competition and identity division has its roots in the rationality of an era predating the World Wars. It has resurfaced with renewed vigor and serves as a backdrop for contemporary politics. Today’s ruling class primarily consists of the generation molded by the conflicts of the past, who shape the world in their image.

The worldview of these political elites was formed during the Cold War when the world was divided into “us” and “them.” Conflict was commonplace, there were two genders, religion or ideology served as the source of truth, class was the main form of identification and patriotism was seen as a call to duty.

For this reason, current world leaders have strongholds among this generation and their younger followers. The ruling class comprises leaders and the entire generation that has amassed the greatest wealth and power during the peaceful era since World War II. The electorates of these leaders increasingly reflect these established worldviews, seeking comfort in a nostalgic return to the societal norms of their youth. It is paradoxical yet somewhat rational that the younger followers, who have never experienced that past society, view it as a reference for a better future.

The past three decades have marked significant changes that this older generation has not fully internalized or accepted. Skepticism toward the U.S. remains a common sentiment among older generations in the former communist bloc, who attribute many life challenges to what they perceive as decaying U.S. capitalist culture. While explicit critiques of capitalism may have diminished over time, grievances associated with “decaying U.S. culture” resonate strongly with them and are experiencing a resurgence in popularity.

Conversely, attributing the blame to “liberals in big cities and leftists on university campuses” who allegedly conspire with “communists” and various radicals abroad for most problems, both real and imagined, may resonate well with older voters across much of the West. The rationalization for the attempted martial law in South Korea is a surprising yet telling example.

Similarly, colonialism, which is allegedly still perpetrated by wealthier nations, serves as an easy explanation for many social ills in the developing world in the eyes of the older generation.

Echoes of past wars and ideological conflicts quickly revive latent distrust. Old habits run deeper than new realities, and trigger words such as “the U.S. imperialists,” “communists” and “colonizers” still have a potent impact on this generation.

Source: GIS