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A Yemeni worker carries a bag of flour outside a wholesale store in the capital Sanaa, on March 27, 2022. With the country almost completely dependent on imports, aid groups say the situation will only worsen following Russia's invasion of Ukraine, which produces nearly a third of Yemen's wheat supplies. (Photo: Mohammed Huwais/AFP via Getty Images)
Russia's catastrophic attempt to gain re-entry into the league of great powers, after its re-entry into capitalism reduced the country to a raw materials supplier to stronger economies, calls to mind Kalecki's remark about the fascist promise to humiliated nations after the First World War, that 'roads to glory lead to war.' In the violence into which this latest 'road to glory' has descended, it is sometimes forgotten that Russia may possess the largest army in Europe (and possibly in the world, depending on how much weight is given to reserve soldiers). But economically it has not recovered from the loss of the peripheral republics of the old Soviet Union, and the 'shock therapy' of economic liberalization after the Russian government abandoned socialism. The World Bank estimates that Russia now is merely the 11th largest economy in the world, not only after the United States, China, and Japan, the European behemoths of Italy, France, the United Kingdom, and Germany, but also the 'emerging markets' of India and South Korea.
Economic sanctions against Russia are adding to a major redistribution of income from workers and middle-class consumers to profits in international trade.
Russia's claim to great power status is therefore based on its stock of nuclear weapons, its economic function as a petrol pump for Europe, and an army that is far from sweeping all before it in Ukraine. It is to prevent the use of these weapons (and save on military casualties among their own citizens) that the powers in Europe and North America have preferred to use economic sanctions, in the hope that further impoverishment degrades the national dignity that is being restored with such violence and might evoke mutiny in the Russian elite. The possibility of such a mutiny cannot be accurately assessed by anyone outside the Kremlin. And further impoverishment will be significant but will affect largely the consumption of the wealthier middle classes, who have the most to lose from payment restrictions on imported goods and the joys of foreign travel. Although there are reports of Chinese banks refusing letters of credit to Russian customers out of fears that they may be declined facilities by US banks or face fines of their subsidiaries in the US, Russia retains access to the international payments system of China. And the Indian government is helping to set up a system for the exchange of rouble-rupee payments, although Indian banks will also be wary of possible retaliation by the US. Russian foreign exchange controls require traders to surrender 80% of their foreign earnings for conversion into roubles, and the Russian government has demanded payment for Russian oil in roubles. This is helping to stabilize the rouble exchange rate, after it fell to nearly half of its pre-war value against the US dollar, while international prices of oil and natural gas are benefitting from additional supplies.
However, much of these restrictions on foreign exchange transactions are journalistic hyperbole: The demand for payment in roubles is actually a requirement to deposit dollars in Sberbank or Gazprombank to buy the roubles required to pay for oil. And the obligation placed on traders to surrender dollars means that the Russian foreign exchange market has in effect been brought onto the balance sheet of the Russian central bank, where the central bank decides the rate at which it buys those compulsorily exchanged dollars.
The talk in the commodity markets is of the emergence of a two-tier system in which a fairly high official price is paid for energy and raw materials, but half the price is charged for such products from Russian sources. Similarly, Russian consumers may expect to pay well above the market price outside Russia for their imported goods. In the food-deficient Middle East, food prices are already rising and will rise further, as war affects Ukrainian agriculture. This coincides is the breakdown of cheap off-shore manufacturing, as global supply chains are disrupted: At the beginning of March, Volkswagen temporarily stopped production of electric cars in its factory in Zwickau due to the failure of supplies from Ukraine.
These unprecedented shifts in international markets have moved our business and financial leaders, on whose wisdom and foresight our prosperity is supposed to depend, to declare a new (inflationary) era in world economic affairs. Towards the end of March, as the war entered its fifth week, Larry Fink the Chief Executive of BlackRock, the world's largest asset manager, wrote to his shareholders at the end of March that 'The Russian invasion of Ukraine has put an end to the globalization we have experienced over the last three decades... A large-scale reorientation of supply chains will inherently be inflationary.' (Financial Times 26 March 2022). Fink had in mind the disruption to cross-border supplies due to the war and revulsion against doing business with Russia.
But globalization is more than this, and less. It is more than just 'global supply chains' assuring cheap raw materials and components to assembly plants on the fringes of industrial centers. Behind this is a system of worldwide payments, necessary for settling trade and debt obligations in different countries. The Society for Worldwide Interbank Financial Telecommunications, or SWIFT, is a network of 11,000 banks around the world through which most cross-border payments are routed. Although ostensibly a co-operative of member banks, it has agreed to remove select Russian banks from its messaging system, through which cross-border payments are made. However, Sberbank and Gazprombank have so far been spared expulsion from the payments system because German oil and natural gas importers pay for their imports through those banks. Pressure is now building up in Germany and Austria to eliminate such imports. But as long as imports continue, the banks through which they are paid have to be allowed to transfer such payments.
The US Federal Reserve also offers currency swap facilities to selected other central banks, in Europe, but also in Japan, Mexico, Brazil, and South Korea, allowing those central banks to draw dollars that are necessary as backing for many international transactions. The central banks outside the US, benefitting from these facilities, will of course be careful not to jeopardize their access to currency swap facilities by allowing commercial banks to make payments that bypass US sanctions. This is in addition to the freezing, shortly after the invasion of Ukraine, of up to 40% of Russian reserves held in markets outside Russia.
It is possible to argue that this international payments system is really at the heart of what is called globalization because it is the system that allows money and capital to flow between countries. In the heady years following the dissolution of the Soviet Union, when Francis Fukuyama celebrated the end of history, this international integration of finance underpinned the globalization announced by Anthony Giddens and Zygmunt Bauman. But the lived experience of globalization was always less than this. Russia and China did eventually join the World Trade Organisation and the International Monetary Fund. But the development of free trade and international payments systems was largely regional, most notably in Europe with the establishment of the European Union and its Single European Market, and in North America with its North Atlantic Free Trade Agreement (superseded in 2020 by the US Mexico Canada Agreement), with other regional agreements in the cone of South America, in West Africa, Southern Africa, and South-East Asia. Most of the world's population, in India, China, and the poorer countries of the world, make no use of international payments and live in countries where cross-border trade and its associated payments are strictly controlled. In those countries, only a wealthy minority with financial assets in off-shore territories, such as Mauritius and tax havens in the Caribbean, can move their deposits freely around the world. And even in countries where such payments are unrestricted, that freedom is only within the territories of associated countries. 'Globalization' always promised more than it delivered.
This system of regional trade and payments areas was already fragmenting before the War in Ukraine. The most spectacular case has been the departure of Great Britain from the European Union, 'going global' to set up barriers to international trade and payments. But perhaps the biggest push towards that fragmentation has been the use of economic sanctions by the United States as an alternative to military persuasion, which is perhaps Donald Trump's most significant innovation in statecraft. Sanctions require only an Executive Order signed by the President of the United States. But US banks also have a central position in the international financial system. US commercial banks provide dollar-based foreign exchange swaps (between commercial banks, backed also by central banks' currency swaps with the Federal Reserve) as security for credit transactions in other currencies. This means that banks in other countries cannot bypass US sanctions without losing the foreign exchange swap facilities with US banks that foreign banks need to conduct their business. This banking and financial power will now ensure that most banks around the world fall into line with US sanctions.
Over time, the economic sanctions imposed in support of Ukraine will have important economic consequences. The cost of living in virtually all countries of the world will rise, on top of the price inflation that was already taking off even before the war started. This will be blamed on the war, and declared by all right-thinking people to be part of the sacrifice that is necessary to defend democracy and peace against autocracy and war. But, short of rationing, natural catastrophe (such as Covid), and war, there is very little that makes people change their patterns of day-to-day expenditure, even if they may now season their expenditure with complaints about the prices now being paid for their customary shopping. This will allow the government of Russia and its friends to declare that the economic impact of sanctions has been contained and they are not really working.
However, there is something else that is happening that is no less real than inflation, even if it is less obvious than the rise in inflation. When international markets and payments systems fragment, it is the arbitrageur who makes money, at the cost of producers and consumers. Consider the market for luxury imported goods in Russia, such as German cars or French wines. These will not cease to be available in Russia. But they are already becoming much more expensive, both because of the depreciation of the Russian rouble against the Euro, and because of the more roundabout methods now necessary to secure shipments of these goods and pay German and French exporters for them. In the oil market, traders will seek out Russian oil that they can buy at a much lower price, in devalued roubles perhaps because of sanctions, but refined products like petrol will be supplied at a price above the much higher price for non-Russian oil.
In short, economic sanctions against Russia are adding to a major redistribution of income from workers and middle-class consumers to profits in international trade. It reinforces the boost to profits in the armaments industries as governments around the world expand their military capabilities and supplies to the combatants in Ukraine. This shift in distribution comes at a time when, in the recovery from Covid, business corporations are raising their prices to recover revenue lost due to measures taken by governments to suppress Covid, and to repay the debts run up by those corporations during the pandemic. Profiteering from military and economic warfare needs to be exposed and challenged. Given the existing institutions of international capitalism, it is difficult to suppress such profiteering. But it can be taxed, as such profits were in Britain and the United States during the Second World War, to pay the costs of aid to Ukraine, refugee relief and the reconstruction of health services, and to protect the living standards of the less well off. Our captains of business and generals of finance should welcome the opportunity to contribute to the defense of liberal values. The Ukrainians are paying for their democracy with their blood and their lives; working people and their families around the world should not also have to pay for the profits that are made out of that struggle.
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Russia's catastrophic attempt to gain re-entry into the league of great powers, after its re-entry into capitalism reduced the country to a raw materials supplier to stronger economies, calls to mind Kalecki's remark about the fascist promise to humiliated nations after the First World War, that 'roads to glory lead to war.' In the violence into which this latest 'road to glory' has descended, it is sometimes forgotten that Russia may possess the largest army in Europe (and possibly in the world, depending on how much weight is given to reserve soldiers). But economically it has not recovered from the loss of the peripheral republics of the old Soviet Union, and the 'shock therapy' of economic liberalization after the Russian government abandoned socialism. The World Bank estimates that Russia now is merely the 11th largest economy in the world, not only after the United States, China, and Japan, the European behemoths of Italy, France, the United Kingdom, and Germany, but also the 'emerging markets' of India and South Korea.
Economic sanctions against Russia are adding to a major redistribution of income from workers and middle-class consumers to profits in international trade.
Russia's claim to great power status is therefore based on its stock of nuclear weapons, its economic function as a petrol pump for Europe, and an army that is far from sweeping all before it in Ukraine. It is to prevent the use of these weapons (and save on military casualties among their own citizens) that the powers in Europe and North America have preferred to use economic sanctions, in the hope that further impoverishment degrades the national dignity that is being restored with such violence and might evoke mutiny in the Russian elite. The possibility of such a mutiny cannot be accurately assessed by anyone outside the Kremlin. And further impoverishment will be significant but will affect largely the consumption of the wealthier middle classes, who have the most to lose from payment restrictions on imported goods and the joys of foreign travel. Although there are reports of Chinese banks refusing letters of credit to Russian customers out of fears that they may be declined facilities by US banks or face fines of their subsidiaries in the US, Russia retains access to the international payments system of China. And the Indian government is helping to set up a system for the exchange of rouble-rupee payments, although Indian banks will also be wary of possible retaliation by the US. Russian foreign exchange controls require traders to surrender 80% of their foreign earnings for conversion into roubles, and the Russian government has demanded payment for Russian oil in roubles. This is helping to stabilize the rouble exchange rate, after it fell to nearly half of its pre-war value against the US dollar, while international prices of oil and natural gas are benefitting from additional supplies.
However, much of these restrictions on foreign exchange transactions are journalistic hyperbole: The demand for payment in roubles is actually a requirement to deposit dollars in Sberbank or Gazprombank to buy the roubles required to pay for oil. And the obligation placed on traders to surrender dollars means that the Russian foreign exchange market has in effect been brought onto the balance sheet of the Russian central bank, where the central bank decides the rate at which it buys those compulsorily exchanged dollars.
The talk in the commodity markets is of the emergence of a two-tier system in which a fairly high official price is paid for energy and raw materials, but half the price is charged for such products from Russian sources. Similarly, Russian consumers may expect to pay well above the market price outside Russia for their imported goods. In the food-deficient Middle East, food prices are already rising and will rise further, as war affects Ukrainian agriculture. This coincides is the breakdown of cheap off-shore manufacturing, as global supply chains are disrupted: At the beginning of March, Volkswagen temporarily stopped production of electric cars in its factory in Zwickau due to the failure of supplies from Ukraine.
These unprecedented shifts in international markets have moved our business and financial leaders, on whose wisdom and foresight our prosperity is supposed to depend, to declare a new (inflationary) era in world economic affairs. Towards the end of March, as the war entered its fifth week, Larry Fink the Chief Executive of BlackRock, the world's largest asset manager, wrote to his shareholders at the end of March that 'The Russian invasion of Ukraine has put an end to the globalization we have experienced over the last three decades... A large-scale reorientation of supply chains will inherently be inflationary.' (Financial Times 26 March 2022). Fink had in mind the disruption to cross-border supplies due to the war and revulsion against doing business with Russia.
But globalization is more than this, and less. It is more than just 'global supply chains' assuring cheap raw materials and components to assembly plants on the fringes of industrial centers. Behind this is a system of worldwide payments, necessary for settling trade and debt obligations in different countries. The Society for Worldwide Interbank Financial Telecommunications, or SWIFT, is a network of 11,000 banks around the world through which most cross-border payments are routed. Although ostensibly a co-operative of member banks, it has agreed to remove select Russian banks from its messaging system, through which cross-border payments are made. However, Sberbank and Gazprombank have so far been spared expulsion from the payments system because German oil and natural gas importers pay for their imports through those banks. Pressure is now building up in Germany and Austria to eliminate such imports. But as long as imports continue, the banks through which they are paid have to be allowed to transfer such payments.
The US Federal Reserve also offers currency swap facilities to selected other central banks, in Europe, but also in Japan, Mexico, Brazil, and South Korea, allowing those central banks to draw dollars that are necessary as backing for many international transactions. The central banks outside the US, benefitting from these facilities, will of course be careful not to jeopardize their access to currency swap facilities by allowing commercial banks to make payments that bypass US sanctions. This is in addition to the freezing, shortly after the invasion of Ukraine, of up to 40% of Russian reserves held in markets outside Russia.
It is possible to argue that this international payments system is really at the heart of what is called globalization because it is the system that allows money and capital to flow between countries. In the heady years following the dissolution of the Soviet Union, when Francis Fukuyama celebrated the end of history, this international integration of finance underpinned the globalization announced by Anthony Giddens and Zygmunt Bauman. But the lived experience of globalization was always less than this. Russia and China did eventually join the World Trade Organisation and the International Monetary Fund. But the development of free trade and international payments systems was largely regional, most notably in Europe with the establishment of the European Union and its Single European Market, and in North America with its North Atlantic Free Trade Agreement (superseded in 2020 by the US Mexico Canada Agreement), with other regional agreements in the cone of South America, in West Africa, Southern Africa, and South-East Asia. Most of the world's population, in India, China, and the poorer countries of the world, make no use of international payments and live in countries where cross-border trade and its associated payments are strictly controlled. In those countries, only a wealthy minority with financial assets in off-shore territories, such as Mauritius and tax havens in the Caribbean, can move their deposits freely around the world. And even in countries where such payments are unrestricted, that freedom is only within the territories of associated countries. 'Globalization' always promised more than it delivered.
This system of regional trade and payments areas was already fragmenting before the War in Ukraine. The most spectacular case has been the departure of Great Britain from the European Union, 'going global' to set up barriers to international trade and payments. But perhaps the biggest push towards that fragmentation has been the use of economic sanctions by the United States as an alternative to military persuasion, which is perhaps Donald Trump's most significant innovation in statecraft. Sanctions require only an Executive Order signed by the President of the United States. But US banks also have a central position in the international financial system. US commercial banks provide dollar-based foreign exchange swaps (between commercial banks, backed also by central banks' currency swaps with the Federal Reserve) as security for credit transactions in other currencies. This means that banks in other countries cannot bypass US sanctions without losing the foreign exchange swap facilities with US banks that foreign banks need to conduct their business. This banking and financial power will now ensure that most banks around the world fall into line with US sanctions.
Over time, the economic sanctions imposed in support of Ukraine will have important economic consequences. The cost of living in virtually all countries of the world will rise, on top of the price inflation that was already taking off even before the war started. This will be blamed on the war, and declared by all right-thinking people to be part of the sacrifice that is necessary to defend democracy and peace against autocracy and war. But, short of rationing, natural catastrophe (such as Covid), and war, there is very little that makes people change their patterns of day-to-day expenditure, even if they may now season their expenditure with complaints about the prices now being paid for their customary shopping. This will allow the government of Russia and its friends to declare that the economic impact of sanctions has been contained and they are not really working.
However, there is something else that is happening that is no less real than inflation, even if it is less obvious than the rise in inflation. When international markets and payments systems fragment, it is the arbitrageur who makes money, at the cost of producers and consumers. Consider the market for luxury imported goods in Russia, such as German cars or French wines. These will not cease to be available in Russia. But they are already becoming much more expensive, both because of the depreciation of the Russian rouble against the Euro, and because of the more roundabout methods now necessary to secure shipments of these goods and pay German and French exporters for them. In the oil market, traders will seek out Russian oil that they can buy at a much lower price, in devalued roubles perhaps because of sanctions, but refined products like petrol will be supplied at a price above the much higher price for non-Russian oil.
In short, economic sanctions against Russia are adding to a major redistribution of income from workers and middle-class consumers to profits in international trade. It reinforces the boost to profits in the armaments industries as governments around the world expand their military capabilities and supplies to the combatants in Ukraine. This shift in distribution comes at a time when, in the recovery from Covid, business corporations are raising their prices to recover revenue lost due to measures taken by governments to suppress Covid, and to repay the debts run up by those corporations during the pandemic. Profiteering from military and economic warfare needs to be exposed and challenged. Given the existing institutions of international capitalism, it is difficult to suppress such profiteering. But it can be taxed, as such profits were in Britain and the United States during the Second World War, to pay the costs of aid to Ukraine, refugee relief and the reconstruction of health services, and to protect the living standards of the less well off. Our captains of business and generals of finance should welcome the opportunity to contribute to the defense of liberal values. The Ukrainians are paying for their democracy with their blood and their lives; working people and their families around the world should not also have to pay for the profits that are made out of that struggle.
Russia's catastrophic attempt to gain re-entry into the league of great powers, after its re-entry into capitalism reduced the country to a raw materials supplier to stronger economies, calls to mind Kalecki's remark about the fascist promise to humiliated nations after the First World War, that 'roads to glory lead to war.' In the violence into which this latest 'road to glory' has descended, it is sometimes forgotten that Russia may possess the largest army in Europe (and possibly in the world, depending on how much weight is given to reserve soldiers). But economically it has not recovered from the loss of the peripheral republics of the old Soviet Union, and the 'shock therapy' of economic liberalization after the Russian government abandoned socialism. The World Bank estimates that Russia now is merely the 11th largest economy in the world, not only after the United States, China, and Japan, the European behemoths of Italy, France, the United Kingdom, and Germany, but also the 'emerging markets' of India and South Korea.
Economic sanctions against Russia are adding to a major redistribution of income from workers and middle-class consumers to profits in international trade.
Russia's claim to great power status is therefore based on its stock of nuclear weapons, its economic function as a petrol pump for Europe, and an army that is far from sweeping all before it in Ukraine. It is to prevent the use of these weapons (and save on military casualties among their own citizens) that the powers in Europe and North America have preferred to use economic sanctions, in the hope that further impoverishment degrades the national dignity that is being restored with such violence and might evoke mutiny in the Russian elite. The possibility of such a mutiny cannot be accurately assessed by anyone outside the Kremlin. And further impoverishment will be significant but will affect largely the consumption of the wealthier middle classes, who have the most to lose from payment restrictions on imported goods and the joys of foreign travel. Although there are reports of Chinese banks refusing letters of credit to Russian customers out of fears that they may be declined facilities by US banks or face fines of their subsidiaries in the US, Russia retains access to the international payments system of China. And the Indian government is helping to set up a system for the exchange of rouble-rupee payments, although Indian banks will also be wary of possible retaliation by the US. Russian foreign exchange controls require traders to surrender 80% of their foreign earnings for conversion into roubles, and the Russian government has demanded payment for Russian oil in roubles. This is helping to stabilize the rouble exchange rate, after it fell to nearly half of its pre-war value against the US dollar, while international prices of oil and natural gas are benefitting from additional supplies.
However, much of these restrictions on foreign exchange transactions are journalistic hyperbole: The demand for payment in roubles is actually a requirement to deposit dollars in Sberbank or Gazprombank to buy the roubles required to pay for oil. And the obligation placed on traders to surrender dollars means that the Russian foreign exchange market has in effect been brought onto the balance sheet of the Russian central bank, where the central bank decides the rate at which it buys those compulsorily exchanged dollars.
The talk in the commodity markets is of the emergence of a two-tier system in which a fairly high official price is paid for energy and raw materials, but half the price is charged for such products from Russian sources. Similarly, Russian consumers may expect to pay well above the market price outside Russia for their imported goods. In the food-deficient Middle East, food prices are already rising and will rise further, as war affects Ukrainian agriculture. This coincides is the breakdown of cheap off-shore manufacturing, as global supply chains are disrupted: At the beginning of March, Volkswagen temporarily stopped production of electric cars in its factory in Zwickau due to the failure of supplies from Ukraine.
These unprecedented shifts in international markets have moved our business and financial leaders, on whose wisdom and foresight our prosperity is supposed to depend, to declare a new (inflationary) era in world economic affairs. Towards the end of March, as the war entered its fifth week, Larry Fink the Chief Executive of BlackRock, the world's largest asset manager, wrote to his shareholders at the end of March that 'The Russian invasion of Ukraine has put an end to the globalization we have experienced over the last three decades... A large-scale reorientation of supply chains will inherently be inflationary.' (Financial Times 26 March 2022). Fink had in mind the disruption to cross-border supplies due to the war and revulsion against doing business with Russia.
But globalization is more than this, and less. It is more than just 'global supply chains' assuring cheap raw materials and components to assembly plants on the fringes of industrial centers. Behind this is a system of worldwide payments, necessary for settling trade and debt obligations in different countries. The Society for Worldwide Interbank Financial Telecommunications, or SWIFT, is a network of 11,000 banks around the world through which most cross-border payments are routed. Although ostensibly a co-operative of member banks, it has agreed to remove select Russian banks from its messaging system, through which cross-border payments are made. However, Sberbank and Gazprombank have so far been spared expulsion from the payments system because German oil and natural gas importers pay for their imports through those banks. Pressure is now building up in Germany and Austria to eliminate such imports. But as long as imports continue, the banks through which they are paid have to be allowed to transfer such payments.
The US Federal Reserve also offers currency swap facilities to selected other central banks, in Europe, but also in Japan, Mexico, Brazil, and South Korea, allowing those central banks to draw dollars that are necessary as backing for many international transactions. The central banks outside the US, benefitting from these facilities, will of course be careful not to jeopardize their access to currency swap facilities by allowing commercial banks to make payments that bypass US sanctions. This is in addition to the freezing, shortly after the invasion of Ukraine, of up to 40% of Russian reserves held in markets outside Russia.
It is possible to argue that this international payments system is really at the heart of what is called globalization because it is the system that allows money and capital to flow between countries. In the heady years following the dissolution of the Soviet Union, when Francis Fukuyama celebrated the end of history, this international integration of finance underpinned the globalization announced by Anthony Giddens and Zygmunt Bauman. But the lived experience of globalization was always less than this. Russia and China did eventually join the World Trade Organisation and the International Monetary Fund. But the development of free trade and international payments systems was largely regional, most notably in Europe with the establishment of the European Union and its Single European Market, and in North America with its North Atlantic Free Trade Agreement (superseded in 2020 by the US Mexico Canada Agreement), with other regional agreements in the cone of South America, in West Africa, Southern Africa, and South-East Asia. Most of the world's population, in India, China, and the poorer countries of the world, make no use of international payments and live in countries where cross-border trade and its associated payments are strictly controlled. In those countries, only a wealthy minority with financial assets in off-shore territories, such as Mauritius and tax havens in the Caribbean, can move their deposits freely around the world. And even in countries where such payments are unrestricted, that freedom is only within the territories of associated countries. 'Globalization' always promised more than it delivered.
This system of regional trade and payments areas was already fragmenting before the War in Ukraine. The most spectacular case has been the departure of Great Britain from the European Union, 'going global' to set up barriers to international trade and payments. But perhaps the biggest push towards that fragmentation has been the use of economic sanctions by the United States as an alternative to military persuasion, which is perhaps Donald Trump's most significant innovation in statecraft. Sanctions require only an Executive Order signed by the President of the United States. But US banks also have a central position in the international financial system. US commercial banks provide dollar-based foreign exchange swaps (between commercial banks, backed also by central banks' currency swaps with the Federal Reserve) as security for credit transactions in other currencies. This means that banks in other countries cannot bypass US sanctions without losing the foreign exchange swap facilities with US banks that foreign banks need to conduct their business. This banking and financial power will now ensure that most banks around the world fall into line with US sanctions.
Over time, the economic sanctions imposed in support of Ukraine will have important economic consequences. The cost of living in virtually all countries of the world will rise, on top of the price inflation that was already taking off even before the war started. This will be blamed on the war, and declared by all right-thinking people to be part of the sacrifice that is necessary to defend democracy and peace against autocracy and war. But, short of rationing, natural catastrophe (such as Covid), and war, there is very little that makes people change their patterns of day-to-day expenditure, even if they may now season their expenditure with complaints about the prices now being paid for their customary shopping. This will allow the government of Russia and its friends to declare that the economic impact of sanctions has been contained and they are not really working.
However, there is something else that is happening that is no less real than inflation, even if it is less obvious than the rise in inflation. When international markets and payments systems fragment, it is the arbitrageur who makes money, at the cost of producers and consumers. Consider the market for luxury imported goods in Russia, such as German cars or French wines. These will not cease to be available in Russia. But they are already becoming much more expensive, both because of the depreciation of the Russian rouble against the Euro, and because of the more roundabout methods now necessary to secure shipments of these goods and pay German and French exporters for them. In the oil market, traders will seek out Russian oil that they can buy at a much lower price, in devalued roubles perhaps because of sanctions, but refined products like petrol will be supplied at a price above the much higher price for non-Russian oil.
In short, economic sanctions against Russia are adding to a major redistribution of income from workers and middle-class consumers to profits in international trade. It reinforces the boost to profits in the armaments industries as governments around the world expand their military capabilities and supplies to the combatants in Ukraine. This shift in distribution comes at a time when, in the recovery from Covid, business corporations are raising their prices to recover revenue lost due to measures taken by governments to suppress Covid, and to repay the debts run up by those corporations during the pandemic. Profiteering from military and economic warfare needs to be exposed and challenged. Given the existing institutions of international capitalism, it is difficult to suppress such profiteering. But it can be taxed, as such profits were in Britain and the United States during the Second World War, to pay the costs of aid to Ukraine, refugee relief and the reconstruction of health services, and to protect the living standards of the less well off. Our captains of business and generals of finance should welcome the opportunity to contribute to the defense of liberal values. The Ukrainians are paying for their democracy with their blood and their lives; working people and their families around the world should not also have to pay for the profits that are made out of that struggle.
"They're now using the failed War on Drugs to justify their egregious violation of international law," the Minnesota progressive said of the Trump administration.
Congresswomen Ilhan Omar and Delia Ramirez on Thursday strongly condemned the Trump administration's deadly attack on a boat allegedly trafficking cocaine off the coast of Venezuela as "lawless and reckless," while urging the White House to respect lawmakers' "clear constitutional authority on matters of war and peace."
"Congress has not declared war on Venezuela, or Tren de Aragua, and the mere designation of a group as a terrorist organization does not give any president carte blanche," said Omar (D-Minn.), referring to President Donald Trump's day one executive order designating drug cartels including the Venezuela-based group as foreign terrorist organizations.
Trump—who reportedly signed a secret order directing the Pentagon to use military force to combat cartels abroad—said that Tuesday's US strike in international waters killed 11 people. The attack sparked fears of renewed US aggression in a region that has endured well over 100 US interventions over the past 200 years, and against a country that has suffered US meddling since the late 19th century.
"It appears that US forces that were recently sent to the region in an escalatory and provocative manner were under no threat from the boat they attacked," Omar cotended. "There is no conceivable legal justification for this use of force. Unless compelling evidence emerges that they were acting in self-defense, that makes the strike a clear violation of international law."
Omar continued:
They're now using the failed War on Drugs to justify their egregious violation of international law. The US posture towards the eradication of drugs has caused immeasurable damage across our hemisphere. It has led to massive forced displacement, environmental devastation, violence, and human rights violations. What it has not done is any damage whatsoever to narcotrafficking or to the cartels. It has been a dramatic, profound failure at every level. In Latin America, even right-wing presidents acknowledge this is true.
The congresswoman's remarks came on the same day that US Secretary of State Marco Rubio designated a pair of Ecuadorean drug gangs as terrorist organizations while visiting the South American nation. This, after Rubio said that US attacks on suspected drug traffickers "will happen again."
"Trump and Rubio's apparent solution" to the failed drug war, said Omar, is "to make it even more militarized," an effort that "is doomed to fail."
"Worse, it risks spiraling into the exact type of endless, pointless conflict that Trump supposedly opposes," she added.
Echoing critics including former Human Rights Watch director Kenneth Roth, who called Tuesday's strike a "summary execution," Ramirez (D-Ill.) said Thursday on social media that "Trump and the Pentagon executed 11 people in the Caribbean, 1,500 miles away from the United States, without a legal rationale."
"From Iran to Venezuela, to DC, LA, and Chicago, Trump continues to abuse our military power, undermine the rule of law, and erode our constitutional boundaries in political spectacles," Ramirez added, referring to the president's ordering of strikes on Iran and National Guard deployments to Los Angeles, the nation's capital, and likely beyond.
"Presidents don't bomb first and ask questions later," Ramirez added. "Wannabe dictators do that."
"The fact that a facility embedded in so much pain is allowed to reopen is absolutely disheartening!" said Florida Immigrant Coalition's deputy director.
Two judges appointed to the US Court of Appeals for the 11th Circuit by President Donald Trump issued a Thursday decision that allows a newly established but already notorious immigrant detention center in Florida, dubbed Alligator Alcatraz, to stay open.
Friends of the Everglades, the Center for Biological Diversity, and the Miccosukee Tribe of Indians of Florida sought "to halt the unlawful construction" of the site. Last month, Judge Kathleen Williams—appointed by former President Barack Obama to the U.S. District Court for the Southern District of Florida—ordered the closure of the facility within 60 days.
However, on Thursday, Circuit Judges Elizabeth Branch and Barbara Lagoa blocked Williams' decision, concluding that "the balance of the harms and our consideration of the public interest favor a stay of the preliminary injunction."
Judge Adalberto Jordan, an Obama appointee, issued a brief but scathing dissent. He wrote that the majority "essentially ignores the burden borne by the defendants, pays only lip service to the abuse of discretion standard, engages in its own factfinding, declines to consider the district court's determination on irreparable harm, and performs its own balancing of the equities."
The 11th Circuit's ruling was cheered by the US Department of Homeland Security, Republican Florida Attorney General James Uthmeier, and Gov. Ron DeSantis, who declared in a video that "Alligator Alcatraz is, in fact, like we've always said, open for business."
Uthmeier's communications director, Jeremy Redfern, collected responses to the initial ruling by state and federal Democrats, and urged them to weigh in on social media. Florida state Sen. Shevrin "Shev" Jones (D-34) did, stressing that "cruelty is still cruelty."
In a Thursday statement, Florida Immigrant Coalition deputy director Renata Bozzetto said that "the 11th Circuit is allowing atrocities to happen by reversing the injunction that helped to paralyze something that has been functioning as an extrajudicial site in our own state! The Everglades Detention Camp isn't just an environmental threat; it is also a huge human rights crisis."
"Housing thousands of men in tents in the middle of a fragile ecosystem puts immense strain on Florida's source environment, but even more troublesome, it disregards human rights and our constitutional commitments," Bozzetto continued. "This is a place where hundreds of our neighbors were illegally held, were made invisible within government systems, and were subjected to inhumane heat and unbearable treatment. The fact that a facility embedded in so much pain is allowed to reopen is absolutely disheartening! The only just solution is to shut this facility down and ensure that no facility like this opens in our state!"
"Lastly, it is imperative that we as a nation uphold the balance of powers that this country was founded on," she added. "That is what makes this country special! Calling judges who rule against you 'activists' flies in the face of our democracy. It is a huge tell that AG Uthmeier expressed this as a 'win for President Trump's agenda,' as if the courts were to serve as political weapons. This demonstrates the clear partisan games they are playing with people's lives and with our democracy."
While Alligator Alcatraz has drawn widespread criticism for the conditions in which detainees are held, the suit is based on the government's failure to follow a law that requires an environmental review, given the facility's proximity to surrounding wetlands.
In response to the ruling, Elise Bennett, a senior attorney at the Center for Biological Diversity, told The Associated Press that "this is a heartbreaking blow to America's Everglades and every living creature there, but the case isn't even close to over."
The report found that seven of America's biggest healthcare companies have collectively dodged $34 billion in taxes as a result of Trump's 2017 tax law while making patient care worse.
President Donald Trump's tax policies have allowed the healthcare industry to rake in "sick profits" by avoiding tens of billions of dollars in taxes and lowering the quality of care for patients, according to a report out Wednesday.
The report, by the advocacy groups Americans for Tax Fairness and Community Catalyst, found that "seven of America's biggest healthcare corporations have dodged over $34 billion in collective taxes since the enactment of the 2017 Trump-GOP tax law that Republicans recently succeeded in extending."
The study examined four health insurance companies—Centene, Cigna, Elevance (formerly Anthem), and Humana; two for-profit hospital chains—HCA Holdings and Universal Health Services; and the CVS Healthcare pharmacy conglomerate.
It found that these companies' average profits increased by 75%, from around $21 billion before the tax bill to about $35 billion afterward, and yet their federal tax rate was about the same.
This was primarily due to the 2017 law's slashing of the corporate tax rate from 35% to 21%, a change that was cheered on by the healthcare industry and continued with this year's GOP tax legislation. The legislation also loosened many tax loopholes and made it easier to move profits to offshore tax shelters.
The report found that Cigna, for instance, saved an estimated $181 million in taxes on the $2.5 billion it held in offshore accounts before the law took effect.
The law's supporters, including those in the healthcare industry, argued that lowering corporate taxes would allow companies to increase wages and provide better services to patients. But the report found that "healthcare corporations failed to use their tax savings to lower costs for customers or meaningfully boost worker pay."
Instead, they used those windfalls primarily to increase shareholder payouts through stock buybacks and dividends and to give fat bonuses to their top executives.
Stock buybacks increased by 42% after the law passed, with Centene purchasing an astonishing average of 20 times more of its own shares in the years following its enactment than in the years before. During the first seven years of the law, dividends for shareholders increased by 133% to an average of $5.6 billion.
Pay for the seven companies' half-dozen top executives increased by a combined $100 million, 42%, on average. This is compared to the $14,000 pay increase that the average employee at these companies received over the same period, which is a much more modest increase of 24%.
And contrary to claims that lower taxes would allow companies to improve coverage or patient care, the opposite has occurred.
While data is scarce, the rate of denied insurance claims is believed to have risen since the law went into effect.
The four major insurers' Medicare Advantage plans were found to frequently deny claims improperly. In the case of Centene, 93% of its denials for prior authorizations were overturned once patients appealed them, which indicates that they may have been improper. The others were not much better: 86% of Cigna's denials were overturned, along with 71% for Elevance/Anthem, and 65% for Humana.
The report said that such high rates of denials being overturned raise "questions about whether Medicare Advantage plans are complying with their coverage obligations or just reflexively saying 'no' in the hopes there will be no appeal."
Salespeople for the Cigna-owned company EviCore, which insurers hire to review claims, have even boasted that they help companies reduce their costs by increasing denials by 15%, part of a model that ProPublica has called the "denials for dollars business." Their investigation in 2024 found that insurers have used EviCore to evaluate whether to pay for coverage for over 100 million people.
And while paying tens of millions to their executives, both HCA and Universal Health Services—which each saved around $5.5 billion from Trump's tax law—have been repeatedly accused of overbilling patients while treating them in horrendous conditions.
"Congress should demand both more in tax revenue and better patient care from these highly profitable corporations," Americans for Tax Fairness said in a statement. "Healthcare corporation profitability should not come before quality of patient care. In healthcare, more than almost any other industry, the search for ever higher earnings threatens the wellbeing and lives of the American people."