What to think of the Corona Pass?

Written by Sjoerd Bakker
October 18, 2021

Several European countries have introduced a health pass with which people can prove they are vaccinated, tested negative or have recovered from Covid. While the majority of people regard this as a necessary and temporary means to re-open society, others believe this is an example of wicked biopolitics and a clear violation of our basic rights.

What is really going here? Checks on age, criminal record or creditworthiness are commonplace in specific contexts to gain access to places, services, or goods. The corona pass is much more controversial, because it stretches the boundaries of governmental intervention towards our bodies; our body has to meet certain conditions (i.e. tested, cured or vaccinated) to gain access to (semi-)public spaces.

In light of the coronavirus crisis and our longing for ‘freedom’, this (temporary) biopolitical tool may be understandable and acceptable. Yet, the crucial question, from our perspective, is whether we are on a slippery slope towards more, and more casual, uses of such tools. Digital technology would certainly allow for these (automated) checks and the question really seems to be whether a next crisis, health- or otherwise, would warrant such ‘solutions’. Indeed, as a society we could very well conclude that these kinds of tools are once again a necessary evil to fight those crises as well.

Burning questions:

  • What constitutes a slippery slope when it comes to uses of technology and how could we make sure this remains a singular event rather than the start of a pattern?
  • If we were to limit individual freedom in a similar fashion in the future, is it primarily because of technological change and the possibilities this offers, or rather because of broader societal and cultural changes?

AUKUS and the return of geopolitics

Written by Alexander van Wijnen
October 18, 2021

In his seminal 1990 paper From Geopolitics to Geo-Economics, Edward Luttwak described a global shift triggered by the end of the Cold War: international relations would no longer be dictated by instruments of military power, but by instruments of economic power. We have written before about several of such geo-economic phenomena, such as technical standards, German power and the G7 tax deal.

However, in recent years, geopolitics seems to be making a comeback. Examples include Russia’s annexation of Crimea in 2014 as well as territorial disputes in East Asia. Most recently, AUKUS, the military agreement between the U.S., UK and Australia, has shown that the U.S., still the undisputed global hegemon, is returning to geopolitical instruments of power. Indeed, a shift back from geo-economics to geopolitics fits the return of hegemonic conflict, a process that will take decades. In the coming years, the return of geopolitics will be felt increasingly in sensitive areas like East Asia, the Middle East and the Indian Ocean.

Burning questions:

  • How will geopolitics and geo-economics co-exist in the coming years?
  • What are some extreme scenarios in the intensifying conflicts of geo-economics, in particular in the conflict between the U.S. and China?

How a decline in trust can be a driver for new political leadership

Written by Vivian Elion
October 18, 2021

The latest Edelman Trust barometer shows that global trust in governments has declined, from 61% in May 2020 to 56% in January 2021. These findings suggest that the trust bubble that was built up during the coronavirus crisis has burst. A similar dynamic is visible in the Netherlands: research institute Ipsos found that six out of ten respondents have no trust in the government, up from four out of ten last year. The reasons for this decline in trust include health policy, the housing market and the struggle to form a new government.

Especially the last issue weighs heavily. Six out of ten respondents have lost faith in the demissionary cabinet, even though it looks like this exact cabinet will continue as Rutte IV in the coming four years. An NRC article rightfully points out: how can we expect the same people who caused the problem in the first place, to fix issues like the social benefits scandal in the future? Results of the Ipsos report hint at a possible answer to this question. Pieter Omtzigt, the former CDA politician who fought for justice for and transparency towards the victims, received the highest appreciation score from the respondents. It might be time for Rutte IV to step away from its pragmatic, utilitarian style of leadership and develop more of an ideals-based government with an explicit mission to take on challenges such as the lack of governmental transparency and societal inequality.

Burning questions:

  • Why did voters re-elect the same parties if trust in exactly these parties has decreased?
  • Who are the main agents of change in an ecosystem of declining trust: politics, civil society, business or citizens?
  • Will polarization and a decline in trust drive further radicalization of both the far left and right? If so, how?

The traffic light turns green for German digitalization

Written by Sjoerd Bakker
September 30, 2021

Following Sunday’s elections, the greens and liberals are seen as kingmakers for the coming German government. Together they can decide whether to support a traffic light coalition with the Social Democrats, or a ‘Jamaica’ coalition with the Christian Democrats. While these two parties have many differences between them, e.g. on public spending, tax cuts and climate change, they do seem to agree on the need for Germany to catch up in terms of digitalization.

Germany is lagging behind the rest of Europe in terms of broadband connections, the use of digital services and digitalization of its industry and government. Fixing this situation, through public investments and more favorable regulations, should a be top priority for the new government. The greens and liberals could use such a plan to divert some attention away from issues that are politically more sensitive.

As citizens are still weary of information technology in general and e-government especially, cultural change should also be part of the ambition. From that perspective, it would be promising for the digital future of Germany if the deeply conservative CDU is left out of the coalition.

Burning questions:

  • How would a traffic light coalition go about public investments in the digital infrastructure, given the FDP’s fiscal conservatism?
  • Can and will sustainability be part of Germany’s digital agenda in terms of energy use of data centers, or the use of data and intelligence for sustainable solutions?
  • How can the government overcome Germany’s distrust in information technology?

The ‘Wechselstimmung’ after Merkel

Written by Sebastiaan Crul
September 30, 2021

Merkel’s main task was to hold things together and safeguard the nation’s prosperity. Looking back, she passed with flying colors. Merkel provided guidance and steered Germany through the financial crisis, the Eurozone crisis, the European migrant crisis and the COVID-19 crisis. The mother of the nation brought stability in turbulent times with her conservative moderate-right politics. Internationally, her calmness and rationality were the perfect antidote to the hysteria of emotional and short-tempered leaders such as Orbán and Bolsonaro.

Opponents point to the fact that Europe bouncing from crisis to crisis was also the perfect cover for Merkel’s lack of vision. When Trump entered the office, she somewhat shook off this image and naturally became the leader and face of liberal values. And with her stance in the refugee crisis, she won the hearts and minds of many worldwide. While outsiders mostly applauded this new face of Merkel, some Germans responded with disappointment or even felt abandoned. According to psychologist Stephan Grünewald, who is well-known for measuring the “Stimmung” of the country, confidence in Merkel has been showing cracks in the past years. After sixteen years of Merkel, the zeitgeist of the nation is now more ambivalent than it was at the beginning of the century. While the big challenges ahead have made many realize more structural change and progressive politics are needed (‘Wechselstimmung’), the perceived rising insecurity of a broad part of the population and the aftermath of a pandemic aren’t contributing. For many, change is exactly what is feared the most. Thus, even without Merkel, ‘Merkelism’ is likely to survive in German politics for some time.

Burning questions:

  • Will Merkel’s successor build on her image of “defender of the free world” or focus more on domestic policy?
  • With Scholz being a relatively conservative and technocratic politician, can we interpret his win as a sign that Germans are indeed afraid of change?

The future of the anti-establishment, conservative right

Written by Pim Korsten
September 20, 2021

Last week, many high-profile supporters of Trump voiced their support for incumbent president Jair Bolsonaro at the world’s biggest conservative, anti-establishment right political event. Bolsonaro is preparing for re-election next year, but his ratings and support have been falling to all-time lows. In other countries, the far right seems to have been losing ground as well recently, such as in France and the UK, or stalling, as in Germany. With many important elections in major economies next year, like Germany, France, U.S. (mid-term elections), Brazil, India, Sweden, Australia, next year could become a crucial year for the far right.

Reasons for this might be the mishandling of far-right governments of the coronavirus crisis, as in Brazil, Russia and the U.S. A second reason could be the resurgence of the Big Left and Big Government in the wake of the pandemic, fueled by calls of the general public for more government intervention (e.g. on inequality) and government spending. Lastly, there could be a general shift in consensus on what the core issue is; from identity politics and culture wars to fighting climate change and creating more resilient societies in a sustainable sense.

Burning questions:

  • Unlike in Western European countries, support for the far right is rising in Mediterranean countries such as Italy, Spain, Greece, and Portugal. Could we see a resurgence of the far right in these countries that were unaffected by the recent far-right wave that started in 2015?
  • Can far-right parties build momentum in the run-up to next year’s elections, as they have often done by proving polls wrong (e.g. remember Trump’s election odds?)
  • In what sense has the far-right agenda been taken over by “mainstream parties”, e.g. has the center become more right-wing and has identity politics become more for the middle parties?

China’s CBDC-as-a-standard?

Written by Alexander van Wijnen
September 20, 2021

An August 2021 report by the Carnegie Endowment for International Peace (CEIP) shows that China is far ahead of other countries in the development of a “central bank digital currency” (CBDC). Whereas most countries are still researching the possibility of a CBDC, China has been running different types of pilots since 2019. In effect, a CBDC, by eliminating the role of intermediary entities in the financial system, allows for more efficient financial transactions. Based on such efficiency, it is expected that China’s CBDC will boost the share of the yuan in the global financial system. Yet, turning the yuan into the global reserve currency is not China’s primary goal here.

Instead, China primarily seeks to protect its companies against American sanctions by building a financial infrastructure that parallels the US dollar system. The report highlights several reasons as to why China’s CBDC is likely to become a standard. China’s pilots are far ahead of other countries and its government is willing to boost adoption aggressively (e.g. discounts for consumers, incentives for trade). Also, China has already set standards for a new global financial infrastructure through “m-CBDC” (a cross-border payment project between China, Hong Kong, Thailand and the UAE), the Blockchain Service Network, and the inter-bank payment system of CIPS. Finally, China already has large international payment platforms which are accessible through government intervention (UnionPay, Alipay, WeChat Pay).

Burning questions:

  • What are the consequences of a Chinese parallel (to the U.S. dollar) financial system for trade and capital flows?
  • To what extent will the CBDC be able to boost the dominance of Chinese firms in other regions (e.g. Southeast Asia)?

On the Chinese variety of capitalism

Written by Alexander van Wijnen
August 9, 2021

From a Western perspective, the Chinese crackdown on tech companies is a sign of an authoritarian state imposing its will on the market economy. To a certain extent, such an assessment is correct, but it prevents us from gaining an understanding of how Chinese capitalism continues to be a successful system. In his book Capitalism, Alone the economist Branko Milanovic explains that although capitalism has emerged victorious from the post-Cold War period, it has split into two models: “liberal meritocratic capitalism” (e.g. the U.S.) and “political capitalism” (e.g. China). In political capitalism, the state is autonomous, which means the absence of the rule of law is a necessary condition for capitalism to be successful.

It follows that the interest of the state will prevail over the interest of the market. Simply put, the law may not protect private companies against the state. This does not suggest an absence of capitalism, but rather a different ‘variety’ of capitalism. It is likely that the current crackdown will intensify before it abates, but beyond that, it is important to see that China has a different model for successful capitalism: the state will redirect the private sector to produce innovation that is more relevant to the good life, create sustainable growth and foster social stability.

Burning questions:

  • To what extent will Chinese companies align with the state?
  • How will the Chinese state’s policies and regulations affect the global perception of China’s financial markets?
  • Will non-Chinese societies be inspired by the way in which China regulates its tech companies and forces them to build a better life?

Judges break the unwritten rule of environmental agreements

Written by Sjoerd Bakker
July 9, 2021

Even though it concerns the first-ever climate case against a company, the court ruling against Royal Dutch Shell is part of a wider trend of a demand for more action against climate change. Yet, while the intentions behind them are clear, these rulings may actually be counterproductive. They break the unwritten rule that international agreements on climate action are taken with a grain of salt. Such agreements tend to be either abstract or focused on the long term and leave a lot of room for interpretation with respect to short-term action.

The resulting wiggle room allows politicians to sign these agreements and adopt a wait-and-see strategy afterwards. By now it is clear that the courts will no longer accept this and intend to force governments to take action today in order to meet the long-term goals they agreed upon. Looking ahead, the question is whether these rulings will indeed lead to much-needed action, or rather prevent politicians from signing any new agreements that could lead to similar court cases in the future.

Burning questions:

  • Will companies anticipate future court rulings and speed up their own plans of action?
  • Will companies flee to countries where judges are less likely to make similar rulings?

We need more downward mobility

Written by Sebastiaan Crul
June 16, 2021

We often gauge inequality by looking at income distributions and complain about the lack of equal opportunity in society. To fight inequality, governments are in search of social measures to ease the path upwards and close the income gap. For example, better education is widely held to be the great equalizer and the best way to move up on the social ladder. Although this is presumably true, it is only half the story. Income distributions only offer a static snapshot of equality.

To fully comprehend inequality, one should also look at the dynamics of the population. Equally important is the capacity of the population to constantly change positions, keep moving from time to time, including the rich and arrived (i.e. downward mobility). Mathematically, this is called the ergodicity of the system and, more intuitively, this tells us whether the rich stay rich and lock in their privileges and wealth or if one has a good chance to become rich(er), but still end up poor(er). From this point of view, Europe may be more unequal than the U.S., because, according to Nassim Taleb, Europe excels in non-ergodic systems. So, often neglected, the path to equal societies is not only to empower the lower classes, but just as much to add some skin in the game for the richest decile of the income distribution, to increase the chances some of them actually slide down the social ladder.

Burning questions:

  • Is the current surge in “public executions” based on someone’s private behavior a symptom of our non-ergodic system and lack of downward mobility by other means?
  • How do we make our central and bureaucratic organizations, companies and governments have more skin in the game?
  • Can the decentralized architecture of Web3 increase the ergodicity of the system in the future, or will it establish new, unforeseen mechanisms and patterns of absorbing wealth and sticky wealth in a decentralized economy?