Elizabeth Warren: the worse, the better for Donald Trump’s female foe

 The Massachusetts senator could win in 2020 if she surges and the economy stutters

Is it conceivable that, in just over a year’s time, the Massachusetts senator Elizabeth Warren could defeat Donald Trump to become America’s first female president? Yes. Here’s why.

Since the summer, Warren has surged. The former vice-president Joe Biden was far ahead of her in the polls in May: 41% to 8%. Today they are almost neck and neck — 28% to 26%, according to the RealClearPolitics polling average. Biden is floundering, his age showing, his reputation tainted by the tar baby that is Ukraine (not to mention China, where son Hunter has been equally imprudent). Bernie Sanders just had a heart attack. The California senator Kamala Harris is fading. No one else is close.

Significantly, Warren is also popular among Democrats who don’t — yet — name her as a first choice. A recent poll found that 75% of Democratic voters have a favourable impression of her, up from 53% in January. Among Democrats, she also has lowest disapproval rate of the main candidates — 11% to Biden’s 22%. Warren’s fundraising is also on fire. She passed a million donors in July, lending credibility to her pledge to run without corporate money.

This looks different from Sanders’s surge in 2016. Prediction markets never gave Sanders above a 20% chance of winning the nomination. In contrast, the online betting market PredictIt has Warren as the clear favourite, with a 46% chance of victory to Biden’s 22%. PredictIt also gives Warren a 33% chance of winning the presidency itself. Trump is on 40%.

What’s going on? The answer is that Warren has emerged as a very effective candidate. She exudes not just an energy that belies her age — 70 — but wit. Suppose, she was asked by a suspiciously well-groomed man in Los Angeles last week, a supporter approached her and said: “Senator, I’m old-fashioned and my faith teaches me that marriage is between one man and one woman.” How would she respond?

“Well, I’m going to assume it’s a guy who said that,” Warren replied. “And I’m going to say: ‘Well, then just marry one woman. I’m cool with that.’ [Waits for the laughter to subside] Assuming you can find one.” Hillary Clinton could never work a crowd like that.

True, Trump’s campaign team sees Warren as more beatable than Biden. That is precisely why it has gone after Biden so aggressively. “Sleepy Joe” is just the kind of candidate Trump has to worry about when it comes to the key swing voters in the key swing states (hint: not well-groomed Californians). The people who did not show up for Clinton in 2016 — white working-class “deplorables” who had voted for Barack Obama, as well as African-Americans — could easily opt for Biden over Trump.

By comparison, Warren is a perfect target for a populist campaign. Not only is she a former Harvard professor — a toxic affiliation in most of middle America. She also clearly exaggerated her Native American ancestry in order to advance her academic career. (She listed herself as belonging to a minority in the Association of American Law Schools legal directory from 1986 to 1995; changed her ethnicity from white to Native American at Pennsylvania University in 1989; and agreed to be listed as Native American when she taught at Harvard.) But a DNA test published last year revealed, embarrassingly, that Warren is no more than one-64th Native American.

What’s more, Warren is a candidate far to the left of Biden on a range of key policy issues. She supports a “Medicare for all” system that would replace private health insurance. She has proposed a 2% wealth tax on the very rich (those with fortunes above $50m, or £40m). And she wants to crack down on anticompetitive behaviour by the big banks, returning retail banking to community banks and credit unions.

Warren also has her own version of the green new deal. “On my first day as president,” she recently declared, “I will sign an executive order that puts a total moratorium on all new fossil fuel leases for drilling offshore and on public lands. And I will ban fracking — everywhere.” Oh, and let’s not forget big tech: she plans to break up Facebook.

So it will not be hard for Trump to run against Pocahontas the socialist. With the usual incumbent’s advantage and a favourable electoral college map, he ought to win. But I agree with PredictIt. This is going to be close.

The key variable will be the state of the economy — and this is where things get interesting. At some point, Wall Street is going to wake up to the implications of Warren’s rise. True, most of her programme could be enacted only if the Democrats won the Senate as well as the White House and proceeded to kill the filibuster. Is that impossible? No.

That means that four large sectors of the economy are in the firing line: the pharmaceutical industry, the banks, oil and gas and big tech. That is a pretty big chunk of the main stock market indices.

As investors digest the rising probability of a Warren presidency, I predict a Wall Street sell-off. Businesses in the targeted sectors are going to cut investment. And that, in turn, is going to lower growth. Three years ago, Trump ran on a promise to double the growth rate. But already the economy is projected by the International Monetary Fund to grow by just 1.9% next year. If it tips over into a recession, Trump is done.

Professor Ray Fair of Yale has a simple model for US elections that has a pretty good track record. If there is a recession in 2020, the model predicts a 49% vote share for the Democratic candidate. It’s hard to see how the electoral college could save Trump in that scenario. (Remember, the winner got less than 50% in four out of the past seven elections.)

In other words, if Warren establishes herself as the Democratic frontrunner, there is a real chance that Trump’s presidency could enter a doom loop. The better her chances become, the worse the stock market and the economy do, the better her chances become.

Meanwhile, make no mistake: Trump is in deeper trouble today than he ever was during Robert Mueller’s investigation into Russian interference in the 2016 election. Not only is the Ukraine scandal metastasising. It is also clearly typical of the way the president deals with his foreign counterparts — brazenly seeking personal commercial and political advantage from his conduct of foreign policy, even at the cost of undermining his own administration’s strategy.

His base will not desert him, and so the Republican-controlled Senate dare not turn against him. But independent voters are looking askance at Trump. And they are looking afresh at Warren. Can she beat him? Yes, she can.

Niall Ferguson is the Milbank Family senior fellow at the Hoover Institution, Stanford

Donald Trump’s Chernobyl will nuke him — or his foes

 Impeachment is a political disaster that could blow up either side

I rarely watch television. By the age of 55 you’ve seen all the plots that drama writers will come up with. But I made an exception for Chernobyl, the riveting five-part HBO and Sky miniseries written by Craig Mazin. Anyone who never went to the Soviet Union should be required to watch it. The key point Chernobyl makes is that the chronic inefficiency, corruption and untruthfulness of Soviet life guaranteed that one day a catastrophe such as the explosion of the Chernobyl reactor would happen — and the first impulse of the country’s communist rulers would be to try to cover it up.

The other takeaway of the drama is the rock-hard fortitude and even heroism of so many ordinary Soviet citizens. This was the paradox at the heart of the system: despite its utter wastefulness, it could always summon self-sacrifice.

I was in Kiev a couple of weeks ago for the annual Yalta European Strategy (YES) conference that used to take place in the Black Sea resort until Vladimir Putin annexed it along with the rest of Crimea.

I have a soft spot for Ukraine. Surely no country witnessed more suffering in the 20th century. A battlefield in two world wars, it also bore the brunt of Joseph Stalin’s manmade famine — the mass murder of the peasantry in the name of “collectivisation” that Ukrainians remember as the Holodomor. Chernobyl contaminated with radiation land that was already suffused with blood.

Since the dissolution of the Soviet Union, Ukraine has struggled to cleanse itself of history’s many taints. In successive revolutions in 2004 and 2014 Ukrainians took to the streets to protest against the two main threats to their nation’s independence: Russia to the east and corruption within. Today, Russia occupies not only Crimea but also Donbass. And oligarchs still dominate both economics and politics.

Ukrainians look like Europeans but — as a survey for this year’s YES revealed — they are closer to Brazilians in their attitudes. They are sick of the status quo. And they are willing to gamble on a complete political outsider in the hope of radical change.

Enter Volodymyr Zelensky. Other populist politicians have begun as entertainers. Zelensky is unique in having been elected president after playing the role of president in a political sitcom, Servant of the People.

Diminutive but dynamic, Zelensky radiates ingenuous bonhomie. At the end of the first day of the YES conference, he took to the stage with the cast of his old comedy show. The only shadow over the merriment was cast by his former business partner and probable financial backer, the oligarch Igor Kolomoisky.

Now into the Ukrainian tragicomedy wanders another transplant from entertainment to politics, Donald Trump. It was not news to me that Trump had been taking an interest in Ukrainian politics. In May it was reported that Rudy Giuliani — the president’s personal lawyer — had been seeking to meet Ukrainian officials.

The story then was that Giuliani was pushing the new Ukrainian government to investigate allegations involving Joe Biden, the former US vice-president, and his son Hunter’s well-paid job with a Ukrainian energy firm. At YES, Zelensky’s people muttered about a rather tricky phone call in July with Trump.

We now know just how tricky that call was because a memorandum of it was released on Wednesday, after a formal complaint by an as yet unidentified CIA whistleblower.

“I will say,” Trump tells Zelensky, “that we do a lot for Ukraine. We spend a lot of effort and a lot of time . . . I wouldn’t say that it’s reciprocal necessarily because things are happening that are not good but the United States has been very, very good to Ukraine.”

Now comes the first ask: “I would like you to do us a favour,” says Trump, “. . . because our country has been through a lot and Ukraine knows a lot about it. I would like you to find out what happened with this whole situation with Ukraine, they say CrowdStrike... I guess you have one of your wealthy people . . . The server, they say Ukraine has it... I would like to have the attorney-general call you or your people and I would like you to get to the bottom of it.”

Trump is alluding to a conspiracy theory that officials in the previous Ukrainian government sought to help Hillary Clinton during the 2016 election. (CrowdStrike was the firm the Democrats hired to investigate the hacking of their emails.) Zelensky responds that one of his assistants has spoken to Giuliani “just recently” and that he will see him if he comes to Ukraine.

Then comes the second ask: “I heard you had a prosecutor who was very good and he was shut down and that’s really unfair . . . The other thing, there’s a lot of talk about Biden’s son, that Biden stopped the prosecution and a lot of people want to find out about that so whatever you can do with the attorney-general would be great. Biden went around bragging that he stopped the prosecution so if you can look into it . . . It sounds horrible to me.”

The question is how far this exchange — combined with the revelation that $391m (£318m) of US military aid to Ukraine was withheld just before the call, and the whistleblower’s crucial allegation that records of other such presidential calls have been improperly classified — provides a new basis for the impeachment that the Democratic rank-and-file, the liberal media and conservative never-Trumpers have so long craved, and which the hotly anticipated report by Robert Mueller, the former FBI director, failed to deliver.

If they are right, then this will be Trump’s Chernobyl: the catastrophe that was bound to befall a chronically inefficient, corrupt and untruthful government. In this view, he and Giuliani already show signs of melting down and not even a brigade of heroic Fox News anchors can douse the fire. The House will vote for impeachment. Then it only needs 20 Republican senators to defect...

Wait, did you say 20? At a time when Republican voters are solidly opposed to impeachment and inclined to believe the president’s cries of “fake news” and “witch-hunt”? There’s another, equally plausible scenario in which impeachment guarantees that Trump dominates the US news for the next three to six months, marginalising all his Democratic rivals except for Biden, who’ll be fielding questions about his son’s business dealings until he concedes to Elizabeth Warren, whom Trump can beat.

“Every lie we tell incurs a debt to the truth,” says the morose scientist Valery Legasov in Chernobyl. “Sooner or later that debt is paid.” Websites such as PolitiFact and FactCheck keep a tally of presidential lies. Perhaps their efforts will one day be rewarded and a large debt paid. But the key to Trump’s power is not the untrue things he says. It is the outrageous things he openly does — and gets away with. Thus far.

Niall Ferguson is the Milbank Family senior fellow at the Hoover Institution, Stanford

Science fiction has become dystopian fact

 Orwell and Huxley were not the first to fear an age of mass surveillance

So which dystopia are we living in? Most educated people have read George Orwell’s Nineteen Eighty-Four and Aldous Huxley’s Brave New World. So influential have these books been that we are inclined to view all disconcerting new phenomena as either “Orwellian” or “Huxleyan”. If you suspect we shall lose our freedom to a brutally repressive state, grinding its boot into our faces, you think of George. If you think we shall lose it to a hedonistic consumer culture, complete with test-tube designer babies, you quote Aldous.

However, a superior work of science fiction to both is the earlier masterpiece We, by the Russian satirist Yevgeny Zamyatin. Written in 1920-21, in the early, turbulent years of Bolshevik rule, We is astoundingly prescient. In the “One State”, individual humans are mere “ciphers” clad in standardised “unifs”, with numbers instead of names. All apartments are made entirely of glass and curtains can be drawn only when one is having state-licensed sex.

The secret police, the Bureau of Guardians, are ubiquitous. Unlike in Orwell’s Soviet Britain, where there are ways of dodging the telescreens, surveillance in the One State is incessant and inescapable. Unlike in Huxley’s eugenics-based utopia, pleasure is mandatory and joyless.

The central character of We, D-503, is a mathematician and engineer working on the construction of a spaceship, the Integral, but tortured by the suspicion that not all human life can be reduced to mathematical formulae. D-503’s life begins to unravel when he is seduced by a femme fatale, I-330, who introduces him to the forbidden pleasures of alcohol, tobacco and unscheduled sex.

Confronted by a rebellion led by I-330 — which threatens to break down the Green Wall between the One State and a hitherto hidden natural world — the all-powerful Benefactor orders mass lobotomisation of all ciphers. The only way to preserve universal happiness, he argues, is to abolish the imagination.

“What have people — from the very cradle — prayed for, dreamt about, and agonised over?” the Benefactor asks D-503. “They have wanted someone, anyone, to tell them once and for all what happiness is — and then to attach them to this happiness with a chain.”

Orwell frankly acknowledged his debt to Zamyatin; Huxley implausibly denied having read him. At the very least, Zamyatin deserves equal billing with them as one of the masters of dystopian science fiction, not least because he anticipated the nightmare panopticon Stalin would build in the ruins of the Russian empire. (By the time Orwell was writing, the nature of the totalitarian beast was all too apparent.) Jailed twice for his dissident views, Zamyatin was permitted to go into exile in 1931. He was lucky.

I have spent much of my career trying to imagine possible futures by applying history to the present. This year, however, I have been experimenting with an alternative approach, which is to apply science fiction. Sci-fi was a genre I loved as a boy but more or less gave up when I went to university, in the mistaken belief that it was insufficiently serious. In truth, there are few more illuminating literary forms.

From HG Wells to Margaret Atwood, hundreds of great minds have looked into their crystal balls, imagining the possible consequences of vast catastrophes and new technology. Studying the past helps us see ways the world may repeat itself, but we need science fiction to envision what will be novel about the future.

Zamyatin, Huxley and Orwell all essentially agreed that the power of the state would inexorably grow. The only question, as Huxley said to Orwell in a letter he wrote after reading Nineteen Eighty-Four in 1949, was how brutally coercive the state of the future would be.

“The philosophy of the ruling minority in Nineteen Eighty-Four is a sadism which has been carried to its logical conclusion,” wrote Huxley (who, by the way, had taught Orwell French at Eton many years earlier). “Whether in actual fact the policy of the boot-on-the-face can go on indefinitely seems doubtful. My own belief is that the ruling oligarchy will find less arduous and wasteful ways of governing and of satisfying its lust for power . . .

“Within the next generation I believe that the world’s rulers will discover that infant conditioning and narco-hypnosis are more efficient, as instruments of government, than clubs and prisons, and that the lust for power can be just as completely satisfied by suggesting people into loving their servitude as by flogging and kicking them into obedience.”

As I reflect on the world in 2019, I am struck by the wisdom of those words. In Xi Jinping’s China, we see Totalitarianism 2.0. The boot on the face remains a possibility, of course, but it is needed less and less as the system of social credit expands, aggregating and analysing all the digital data that Chinese citizens generate.

“The political and legal system of the future is inseparable from the internet, inseparable from big data,” Alibaba’s Jack Ma told a Communist Party commission overseeing law enforcement in 2017. In future, he said, “bad guys won’t even be able to walk into the square”. Example: some classrooms in China are now equipped with artificial-intelligence cameras and brain-wave trackers to monitor pupils’ concentration levels.

The sole consolation, if it’s human freedom you love, is that democratic states seem less capable of this kind of thing — though I suspect it’s more a result of incompetence than the separation of powers, the rule of law or the spirit of liberty. True, we need to be worried about the private-sector panopticons under construction at Google and Facebook. (If you doubt that the Silicon Valley giants have totalitarian tendencies, just take a look at Google’s leaked presentation The Good Censor.)

But technology in the service of making people money seems ultimately less dangerous than technology in the service of making citizens “happy”. The gaiety of the planet has been much enhanced in recent weeks by the travails of WeWork, a wildly overhyped tech company that rents out shared office space. Supposedly worth $47bn (£38bn) just a few weeks ago, WeWork has postponed its initial public offering. Last week, Larry Ellison, a founder of the tech giant Oracle, called it “almost worthless”.

The long-haired Israeli co-founder of the company, Adam Neumann, once declared that WeWork’s “mission” was “to elevate the world’s consciousness”. Another of his sayings is that “the energy of we [is] greater than any one of us, but inside each of us”.

Ah, yes, the energy of we. While I can just about imagine Zamyatin’s Benefactor saying this — or Huxley’s Mustapha Mond, for that matter — Neumann is ultimately more of a Douglas Adams character. We may well be destined for dystopia, but as long as we’re not all lobotomised, there’s a fighting chance that the future will be more Hitchhiker’s Guide to the Galaxy than hell on earth.

Niall Ferguson is the Milbank Family senior fellow at the Hoover Institution, Stanford

America’s power is on a financial knife edge

 China’s online payment platforms are the real threat to US hegemony

“How would you like to pay for that, sir?” For most of my lifetime, there have been three possible answers to that question: cash, a cheque or a plastic card. Go to Beijing, however, and you will see few transactions in those forms. People pay with their phones, using systems created by the two biggest Chinese tech companies, Alibaba and Tencent.

And not only in Beijing. For the Chinese way of paying is spreading around the world — from taxis in Tokyo to the Harvard giftshop in Cambridge, Massachusetts. I think this is a big deal. Indeed, it could be a much bigger deal than China’s dominance of 5G telecommunications networks.

Since 1971, when Richard Nixon severed the last link between the dollar and gold, the world has been on a fiat monetary system (meaning the money supply is unconnected to any scarce reserve asset such as gold). Because of the size of the American economy and its dominance of financial and commodity markets, the US dollar has been the No 1 currency since that time.

To varying extents, governments abused their ability to print money, leading to an era of high inflation. But gradually a variety of rules evolved (central bank independence, inflation targets) that brought down inflation in most places. Indeed, in the early 21st century, it began to seem as if the central banks had done too well. People began to worry about deflation. That worry intensified after the 2008-9 financial crisis.

The crisis led to monetary policy innovations, notably zero (and then negative) interest rates and quantitative easing. Despite all this, the dollar has remained the dominant currency in international transactions and central bank reserves. Confident in dollar dominance for the rest of history, American policymakers have grown used to exploiting it as a lever of foreign policy. That financial sanctions were a very powerful tool was only really appreciated after September 11, 2001, when US Treasury officials went after the financial supporters of al-Qaeda. People tend to focus on the seeming failure of the military interventions in Afghanistan and Iraq. But the assertion of US financial power after 9/11 was much more effective and less expensive.

Before too long, America was using financial sanctions against other enemies too, notably Russia, Venezuela and Iran, and even against friends (Switzerland, for example) suspected of protecting tax dodgers or other kinds of criminal, not to mention allies that wished to trade with Iran.

Because international payments between banks have to go through a Belgium-based but US-controlled entity known as Swift (Society for Worldwide Interbank Financial Telecommunication), America has the power to kick an individual, company or country out of the cross-border payments system. This power has grown increasingly irksome to other large economies.

Until recently, there seemed to be no real alternative to the dollar. Indeed, the world’s appetite for dollars and dollar-denominated securities has tended to grow even faster than their supply, resulting in a strong dollar and historically very low interest rates (as US bond prices have risen). As Mark Carney, the governor of the Bank of England, said at this year’s Federal Reserve conference in Jackson Hole, Wyoming, this is not a satisfactory system. Donald Trump also finds it unsatisfactory, though for different reasons: he would simply like to see a weaker dollar, but finds that he cannot unilaterally will that.

The advent of various kinds of digital currency creates a new state of affairs. Since the launch of bitcoin, the world has seen a wave of monetary innovation. Cryptocurrencies have proliferated. Many of these, it is true, have been mere experiments. Some have been downright frauds. And maybe it will turn out that blockchain as a technology has more appropriate uses than money. But those who have written off digital money will soon look as silly as the people who said the internet would never replace the fax machine.

The proof is in China, where digital payment systems established by Alibaba (Alipay) and Tencent (WeChat Pay) have grown explosively. Partly because of timing, partly because of regulation designed to protect banks and credit card companies, Americans never switched as enthusiastically to digital payments.

Phase two of this story is the expansion of Chinese fintech. One emerging market at a time, China is building a global payments infrastructure. Right now, the various systems are distinct national versions of the Chinese original. But there is no technical reason why the systems should not be linked internationally. Indeed, Alipay is already being used for cross-border remittances.

If America is stupid, it will let this process continue until the day comes when the Chinese connect their digital platforms into one global system. That will be D-Day: the day the dollar dies as the world’s No 1 currency and the day America loses its financial sanctions superpower.

If America is smart, it will wake up and start competing for dominance in digital payments. The shortest cut to a system to rival Alibaba and Tencent is Libra, the digital currency proposed by Facebook, which, with its 2.4bn active users, is uniquely positioned to create something on a Chinese scale — and fast. This would not be a true blockchain cryptocurrency, but more like a digital currency in the Chinese style, with the difference that it would be backed by a reserve, held in Switzerland, of dollars and other main currencies.

There are many obvious arguments against letting Facebook do this, not least its questionable track record when it comes to harvesting and exploiting users’ data. However, as Carney said in Jackson Hole, something such as this needs to happen, with the sponsorship and regulatory oversight of government.

Right now, the US Treasury is opposed to Libra and the Federal Reserve seems sceptical. But these attitudes seem symptomatic of the risk-aversion that presages decline. From a national security perspective, there is an urgent need to compete with the Chinese before they dominate digital payments globally. And from Trump’s perspective, backing Libra could offer perhaps the only way out of the problem he currently cannot solve, which is the strength of the dollar.

Libra would be partly dollar-backed, not wholly. So it would be a kind of dollar substitute, reducing international demand for dollars. But it would not offer an alternative to Treasury bonds, so it would not reduce the global demand for those.

History teaches us power is inseparable from financial power. The country that leads in financial innovation leads in every way: from Renaissance Italy, through imperial Spain, the Dutch republic and the British Empire to post-1930s America. Only lose that financial leadership — just ask poor Mr Pound, once worth $4.86 — and you lose your place as global hegemon.

The US-China rivalry today (what I call the Second Cold War) is too focused on trade and telecoms. Washington needs to turn its attention, as a matter of urgency, to the race for monetary leadership, which America is in danger of losing.

Niall Ferguson is the Milbank Family senior fellow at the Hoover Institution, Stanford

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Trump exemplifies the Ugly American. Davos will accept him anyway.