The Week of March 5th, 2018

Care

1. The Italian job

Populists exceed expectations in Italy

In a general election on March 4, Italian populist parties scored a major victory, sidelining establishment factions and positioning themselves to take a leading role in a new Italian government. The populist Five-Star Movement (M5S), founded by comedian Beppe Grillo, received the highest vote share with over 30%. The far-right, Eurosceptic Northern League party also had an impressive showing, particularly in the north of the country. The election was a disastrous defeat for the governing center-left Democratic Party.

The anti-establishment successes bode poorly for those hoping for a renewed period of stability in Italian politics. M5S’ choice of coalition partner remains uncertain. If the party chooses to enter into a governing agreement with the mainstream Democratic Party, Italians and the European Union can expect to see relative stability. However, if M5S makes a deal with the hard-right League, financial markets and pro-European Union leaders throughout the block will have cause for consternation: both M5S and League are Eurosceptic parties, which work against the integration of the Eurozone and oppose the austerity policies of the bloc. They are likely to resist any proposals by pro-European leaders like Emmanuel Macron and Angela Merkel for a European fiscal union or common defense force. The League is also virulently anti-migrant, a position that could have serious ramifications for the millions of refugees who have crossed into Italy from the North African coast in recent years. The triumphant populists also have a rosy view of Russian leader Vladimir Putin. Opponents of Russian election meddling and expansionism will be hard-pressed to find allies in the ranks of Italy’s new government.

Although the exact shape of the governing coalition remains uncertain, the Italian people have clearly rejected the political status quo in favor of a more radical course.  

2. Tricks of the trade

America signs off on major trade tariffs

On March 1, the Trump administration announced hefty tariffs on aluminum and steel. This announcement represents the White House’s attempt to fulfill a campaign promise and part of Mr Trump’s nationalist “Made in America” agenda, which includes his hard-line stances on national security and immigration. One week after the announcement, Mr Trump signed the tariffs: 10% and 25% on aluminum and steel imports, respectively. though exemptions were made for Canada and Mexico, as well as other countries that plead for exceptions.

Republicans, including Paul Ryan, the House speaker, were unanimous in their opposition to the tariffs. Most presidential advisors, including James Mattis, defense secretary, vehemently opposed the tariffs on a variety of grounds. Opposition from Gary Cohn, a top economic advisor, was so great that he resigned from his position in protest. International reception to the tariffs has also been overwhelmingly negative, inviting threats from European countries to enact retaliatory tariffs.

This action from the president is a nod to one of the regions most responsible for his upset victory in 2016: the Rust Belt. Mr Trump overwhelmingly won this area, composed of states like Michigan, Pennsylvania, and Wisconsin, which had been manufacturing strongholds in the past and were hit hard when manufacturers moved overseas. Mr Trump’s protectionist rhetoric was vital in winning this region during the 2016 campaign, and will again be crucial as he seeks reelection.

The tariffs also demonstrate his delight at horrifying the Republican Party establishment, his cabinet, and perceived globalist leaders. Upsetting these parties may continue to endear him to anti-establishment voters.The tariffs have not, however, endeared him to policy analysts at the Trade Partnership, who predict that the tariffs will lose the US 146,000 jobs.

3. All the tea in China

China’s president is set for life

On March 5, the Communist Party of China announced its plan to eliminate presidential term limits. While the presidency is a weak office and Xi Jinping, the current president, could have remained as party general secretary and military chief for life, the change has enormous symbolic value as it shows that Mr Xi plans to shirk all prior convention regarding power succession since the death of Mao.

The abolition of term limits is yet a further continuation of the consolidation of power Mr Xi has been working on over the last five years. Last summer, “Xi Jinping Thought” became apotheosized in the Chinese Constitution, making him the only leader mentioned in the document besides Mao. Most outside policy makers and academics see little good in the recent decision as it increases the possibility of later succession struggles and reflects a concern within the Communist Party about China’s political and economic stability.   

In 2017, China’s GDP growth slowed to 6.8%, a number that most emerging markets would be more than satisfied with, but below the country’s target of 7%. Many investors continue to worry about the large amount of debt being accumulated by China’s massive state-owned banks, and see the recent move for the government to takeover Anbang Insurance, a financial colossus, as anti-business and a portent of possible future takeovers.

While the move to abolish term limits was likely made in response to domestic concerns, there are massive foreign policy implications as a result of the decision, especially as the Trump administration decides to combat Chinese malpractice in trade.

Although there are those who compare Mr Xi’s rise in unchecked power to that of Mao, it is important to remember that Mr Xi’s track record has been much more pragmatic and predictable; Mr Xi has various outward-looking officials in his cabinet such as Wang Qishan and Liu He. Nonetheless, Mr Xi’s power grab will undoubtedly have significant ramifications as China continues its economic and political expansion in years to come.

4. Labor of love

South Korea passes new labor laws

One of the world’s most industrious countries will soon find itself having to take some time for relaxation. Moon Jae-in, the President of South Korea, signed into law a measure cutting maximum weekly work hours from 62 to 58. Since the South Korean economy began its rapid expansion in the 1980s, the country has always had what some term a “workaholic” culture. Among developed countries, South Korean consistently ranks at the top when it comes to working hours. Under the new scheme, the work week will include 40 normal hours and an additional 12 hours of overtime. Although the law applies to most businesses, some sectors, including healthcare and transport, will receive an exemption.

Proponents of the bill argue that it marks the first step in combating stress and exhaustion. Some have gone far enough to say that the reduction in working hours will address the problem of plummeting birth rates. Business groups, for their part, have lambasted the change, warning of impending productivity losses. Although it is too early to tell what the impact of this law will be, it certainly represents a new vision for labor regulations in South Korea.

5. Bargaining chip

The US government gets involved in a hostile chip takeover

On Sunday, the US government intervened in the tech sector’s largest potential takeover. The Committee on Foreign Investment in the United States (CFIUS), a group chaired by the Treasury Department with the power to block acquisitions of US companies by foreign ones, ordered Qualcomm, a US-based telecom and chipmaking behemoth, to delay its annual shareholder meeting by 30 days. The delay will give CFIUS time to review a $117 billion hostile takeover proposed by Broadcom, a Singapore-based rival of Qualcomm’s.

CFIUS’s decision to interpose itself in the deal is rooted in its fear that Broadcom taking over Qualcomm could expose the US to national security threats. People close to the matter have indicated that Qualcomm does sensitive work for the US government. Perhaps even more importantly, Qualcomm is the world’s leading developer of 5G, the next generation of wireless technology, which will constitute the necessary infrastructure of self-driving cars, wireless virtual reality and other innovations. Broadcom has a reputation for increasing profits at its acquisitions by slashing investment in R&D; opponents of the deal say that disinvestment in Qualcomm’s 5G research would be inexorable under Broadcom management, which could leave the door open for Chinese firms to eclipse those from the US in the race for 5G.

The specter looming over the Broadcom-Qualcomm deal is one such Chinese firm, Huawei. The firm has been pursuing 5G advances with vigor equalling Qualcomm's -- it has also been effectively barred from the US market since a 2012 report averred that the Chinese government might use Huawei’s equipment to spy or disable telecom networks.

Don’t Care

0. Straight from the horse’s mouth

A former campaign aide debases himself on live television

The American media, like Congress, perennially ranks among the nation’s most-loathed institutions. On (a day like) Monday, it was easy to see why. The story started innocently enough: an early Trump aide, Sam Nunberg, who left the campaign shortly after it began, provided the New York Times his subpoena from Robert Mueller’s office. While somewhat unusual, it certainly qualifies as news—providing a look at key targets Mr Mueller, investigating Russian interference in the 2016 election, is probing. However, Mr Nunberg soon began to debase himself, repeatedly, on live television, bouncing from network to network spewing outlandish claims. He said he would refuse to turn over the requested documents; he dared Mr Mueller to arrest him; he hurled insults at the White House and its press secretary. In extended interviews on television and with print outlets, he tried to top himself by trumpeting increasingly ludicrous claims.

Perhaps in an era where headlines are dominated either by the president’s affair with a porn star or questions of whether a foreign power helped Mr Trump secure the Oval Office, this sort of brouhaha is to be expected. But responsible journalism demands more than indulging the depraved instinct of the frenzied 24-hour news cycle. Furthermore, it is unlikely Mr Nunberg, who left the campaign more than a year before the election, has anything to offer Mr Mueller or the American public. At one point, Erin Burnett, a CNN host, asked him if he was drunk. No, Mr Nunberg responded, the only substance he had consumed was his antidepressant medicine. In the end, it was all for naught, as Mr Nunberg eventually complied with the request later Monday evening. A brouhaha, indeed.

Edmund Bannister, Sachin Shukla, Jason Frankel, Avi Dravid, Max Rowe, and David Gernon contributed to this report.