Costs — hospital bills, physician services, pharmaceutical spending — are relatively easy to observe. Benefits, by contrast, are diffuse, multidimensional and often realized over long time horizons. Improvements in longevity, functional ability and quality of life (QOL) are not easily quantified. Even more complicating is attribution: When health outcomes improve, how much is due to medical care versus broader societal changes such as nutrition, environment, or behavior?

As a result, conventional productivity metrics systematically understate the true value created by healthcare. They focus on measurable transactions rather than meaningful outcomes. This mismeasurement is not merely a technical issue — it shapes policy decisions, investment flows and ultimately the direction of innovation itself.

The measurement problem

Traditional healthcare rely heavily on service volume — how many procedures were performed, how many patients were treated, how much revenue was generated. This approach implicitly assumes that more services equate to more output. But healthcare is not a manufacturing process. Performing more procedures does not necessarily mean better health outcomes. In some cases, it may even indicate inefficiency.

The deeper problem lies in the definition of output. If the goal of healthcare is to improve human well-being, then output should reflect improvements in health, not simply the number of services delivered. Yet most official statistics fail to incorporate this dimension. They do not adequately account for improvements in survival rates, reductions in disability or enhancements in quality of life.

This disconnect creates a paradox. Healthcare appears to be a low-productivity sector, even as medical innovation continues to generate profound improvements in human health. The paradox is not real — it is a consequence of flawed measurement.

Healthcare as welfare creation

by Calvin Ackley, Abe Dunn, and John A. Romley provides a compelling alternative framework. Their approach redefines healthcare productivity by aligning it with fundamental economic principles: Productivity should measure how effectively inputs are transformed into welfare-enhancing outputs.

Instead of counting treatments, they measure output in terms of utility — specifically, gains in longevity and quality-adjusted life years (QALYs). Inputs, meanwhile, are measured using underlying treatment costs rather than regulated prices, which often distort the true resource use in healthcare systems. 

The results are striking. Applying this framework to nine major medical conditions over two decades, they estimate annual productivity growth of approximately 7.5%. This is dramatically higher than conventional estimates, which often suggest stagnation or decline. The implication is profound: Healthcare has been far more productive than we thought — not because it delivers more services, but because it delivers better outcomes.

This framework also highlights an important insight: Improvements in health outcomes often outweigh increases in costs. Rising healthcare spending, therefore, should not automatically be interpreted as inefficiency. In many cases, it reflects investment in technologies and treatments that generate substantial welfare gains.

Regenerative medicine

Within this conceptual shift, emerges as a defining frontier. If traditional healthcare is akin to maintaining aging machinery — repairing parts, managing wear and tear — regenerative medicine represents a transition toward rebuilding the system itself.

Regenerative therapies aim not merely to manage symptoms, but to restore biological function. Stem cell therapies, gene editing and tissue engineering seek to reverse disease processes at their root. Instead of lifelong treatment, the goal is durable recovery — sometimes even a functional cure.

This distinction is critical from a productivity perspective. Conventional treatments often generate continuous costs with incremental benefits. Regenerative therapies, by contrast, may involve high upfront costs but produce long-term, sustained improvements in health outcomes.

In economic terms, regenerative medicine transforms healthcare from a flow-based model (ongoing treatment) into a stock-based model (building health capital). The value lies not in the number of interventions but in the lasting change to the patient’s health trajectory.

Despite its transformative potential, regenerative medicine faces a structural challenge: Its value unfolds over time, while markets and evaluation frameworks are often short-term oriented.

Most reimbursement systems, clinical trials and valuation models focus on near-term endpoints — 12-month survival rates, short-term efficacy or immediate cost-effectiveness. These metrics fail to capture the durability of regenerative therapies, which may deliver benefits over decades.

This creates a mismatch between intrinsic value and perceived value. A therapy that eliminates the need for chronic treatment may appear expensive in the short run, even if it generates substantial long-term savings and welfare gains.

The result is systematic undervaluation.

Lessons from recent biotech market failures

This misalignment is vividly illustrated by recent developments in the biotechnology sector. Over the past few years, several regenerative medicine and advanced therapy companies have experienced sharp declines in market valuation, despite promising scientific progress.

Companies in gene therapy, cell therapy and Clustered Regularly Interspaced Short Palindromic Repeats () -based platforms saw significant capital inflows during the early 2020s, driven by optimism about transformative cures. However, as macroeconomic conditions tightened and interest rates rose, investor sentiment shifted dramatically. Many firms faced declining stock prices, funding constraints and delayed commercialization timelines.

This is not merely a cyclical phenomenon — it reflects a deeper structural issue.

Capital markets often struggle to price long-duration assets. Regenerative medicine is, by nature, a long-duration investment. Its returns are uncertain, delayed, and dependent on complex clinical and regulatory pathways. Traditional valuation models, which heavily discount future cash flows, tend to undervalue such opportunities.

Moreover, the lack of standardized outcome-based metrics exacerbates the problem. Without clear frameworks to quantify long-term benefits, investors rely on short-term indicators, such as trial milestones or quarterly earnings, that may not reflect the technology’s true potential. In this sense, the recent “failures” in biotech markets are not failures of science — they are failures of measurement and expectation alignment.

To unlock the full value of regenerative medicine, a fundamental reframing is required. These therapies should not be viewed as high-cost interventions, but as investments in long-term health capital.

This perspective shifts the focus from cost minimization to value maximization. The relevant question is not “How expensive is this therapy?” but “How much long-term health does it create?”

Embedding this logic into strategy requires several key changes:

1. ��Outcome-Based Metrics: Clinical development should prioritize metrics that capture long-term outcomes, such as quality-adjusted life years, functional independence and durability of treatment effects. These metrics align more closely with the true value proposition of regenerative therapies.
2. Longitudinal Data and Evidence: Demonstrating sustained benefits over time is critical. Real-world evidence, long-term follow-up studies and patient-reported outcomes can provide a more comprehensive picture of value creation.
3. Value Communication: Companies must articulate their value proposition in terms that resonate with both payers and investors. This involves translating clinical outcomes into economic and societal benefits, such as reduced lifetime healthcare costs and increased productivity.
4. Innovative Payment Models: Traditional reimbursement models are ill-suited for regenerative therapies. Alternative approaches, such as outcome-based payments or annuity models, can better align costs with realized benefits over time.

Capital markets and the repricing of healthcare innovation

As measurement frameworks evolve, capital markets will also need to adapt. Investors increasingly recognize the limitations of short-term metrics in evaluating long-term innovation. The shift toward outcome-based valuation is already underway in some areas, but it remains incomplete.

Regenerative medicine represents a test case for this transition. If markets can develop tools to accurately assess long-term value, capital allocation will become more efficient, directing resources toward technologies with the greatest societal impact. Conversely, failure to adapt may result in persistent underinvestment in high-impact innovations, slowing progress in areas where breakthroughs are most needed.

The implications of this paradigm shift extend beyond healthcare. It challenges the very definition of productivity.

In a traditional sense, productivity is about producing more with less. In healthcare, however, the goal is not efficiency alone, but effectiveness — improving human well-being. This requires a broader conception of output, one that incorporates qualitative dimensions of life. Regenerative medicine embodies this shift. It does not simply improve efficiency within the existing system; it redefines what the system produces.

Aligning measurement, innovation, and value

Healthcare stands at a crossroads. On one path lies the continuation of existing measurement frameworks, with their inherent biases and limitations. On the other lies a new paradigm, grounded in welfare-based metrics and long-term value creation. The framework provides a crucial foundation for this transition, demonstrating that healthcare productivity may be far higher than previously believed. 

Regenerative medicine, in turn, represents the frontier of this new paradigm. Its true value cannot be captured by traditional metrics. It requires a rethinking of how we measure, evaluate and invest in healthcare innovation.

The recent volatility in biotech markets should not be interpreted as a rejection of regenerative medicine, but as a signal of misalignment between value creation and value recognition. Bridging this gap is both a strategic and systemic challenge.

Ultimately, the future of healthcare productivity depends not only on scientific breakthroughs but on our ability to measure what truly matters. When we shift from counting treatments to valuing health, from short-term costs to long-term outcomes, we unlock a more accurate — and more optimistic — understanding of progress.

In that sense, regenerative medicine is more than a technological advance. It is a lens through which we can rethink the economics of health itself.

[ edited this piece.]

The views expressed in this article are the author’s own and do not necessarily reflect 51�Թ�’s editorial policy.

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The result is a war in which the heaviest economic consequences are being absorbed by those with the least influence over how it ends. That is not an unintended side effect. It reflects how modern conflict now interacts with an interconnected global system.

A war that moves through systems

The violence of the war may be concentrated in the Gulf, but the disruption is not. Pressure around the , which carries a substantial share of global oil and liquefied natural gas, is already translating into broader instability. Insurance premiums for shipping have . have been adjusted or delayed. Even limited disruptions have forced rerouting through longer and more expensive corridors. Energy markets have responded with volatility that reflects not only current supply risks, but uncertainty about how far escalation could extend.

These effects are not linear. They move through the same channels that sustain the global economy. Energy flows, maritime logistics, financial markets and supply chains react simultaneously, but unevenly. A disruption at one point in the system propagates outward, reshaping conditions elsewhere.

The Gulf states are encountering the first layer of this pressure. Infrastructure, once treated as secure, is now exposed. Oil facilities, ports and shipping terminals are at increasing risk. More critically, , which provide the majority of potable water in several Gulf countries, have emerged as potential vulnerabilities. Any sustained disruption to these systems would not only affect economic output but also the basic functioning of daily life.

These states are not directing the war, but they cannot distance themselves from it. Their exposure is structural, rooted in geography and infrastructure. Beyond the Gulf, the effects become less visible but more complex.

South and Southeast Asia are absorbing the next layer of impact. Countries such as , which rely heavily on imported energy, are particularly sensitive to even modest price increases. Currency pressure intensifies as import costs rise; inflation begins to move; governments face difficult trade-offs between stabilizing prices and maintaining fiscal discipline. These pressures do not appear all at once; they build gradually, often unnoticed at first.

Recent movements in global have already begun to translate into higher domestic costs across several Asian economies. Airlines face rising fuel expenses, manufacturing sectors dependent on energy inputs adjust output and households encounter rising costs that are not immediately traceable to the conflict, but are directly linked to it.

There is also a human dimension that remains largely overlooked. Millions of from South Asia are employed across the Gulf. Their income supports families and local economies back home. As uncertainty increases, their position becomes more precarious. Flight routes are disrupted; insurance premiums increase; mobility becomes more constrained at the very moment when flexibility is most needed. They are not participants in the conflict. Yet they are embedded within its consequences.

Further east, the constraints tighten. Japan and South Korea sit at the far end of the same energy chain, but with far less flexibility. Their dependence on Middle Eastern energy imports is not marginal; it is structural. A significant portion of their oil imports passes through the same contested maritime routes. When supply tightens, they are forced into competition for alternative sources, often at higher cost.

This has immediate effects: Industrial output begins to slow, petrochemical production adjusts, and financial markets react to uncertainty in input costs and output expectations. What begins as an energy shock extends into industrial and financial systems. The war is not expanding geographically in the traditional sense; it is expanding through systems.

The economies that carry the burden

The most consequential aspect of this dynamic is not simply the scale of disruption, but its distribution. The countries bearing the greatest economic pressure are not those setting the conflict’s trajectory. They are not determining strategy or shaping escalation. Yet their economies, infrastructure and populations are directly exposed to the consequences. What emerges from this is a structural imbalance that is difficult to correct.

The US, despite its central role, is relatively insulated from the immediate energy shock. As a major energy producer, it experiences price fluctuations differently. Domestic pressure exists, but it does not threaten systemic stability in the same way. Iran, for its part, is already operating under long-term economic constraints. Additional pressure intensifies existing challenges, but does not fundamentally alter the conditions under which it operates. Israel’s exposure is primarily security-driven, rather than rooted in systemic economic vulnerability of the same kind.

The most severe pressures are concentrated elsewhere. They are felt most acutely in economies that are deeply integrated into global systems, but lack the capacity to shape them. This is where the situation becomes more complex than it initially appears.

If energy prices continue to rise, governments across affected regions will be forced to respond. Subsidies may be expanded; strategic reserves may be drawn down; emergency fiscal measures may be introduced to stabilize domestic conditions. These responses are not cost-free; they shift pressure into financial systems.

Several large Asian economies hold substantial foreign-currency reserves, including . In periods of sustained stress, the liquidation of such assets can serve as a tool for maintaining domestic stability. If undertaken at scale, these actions would transmit pressure into global financial markets, affecting borrowing costs, liquidity and investment conditions.

A regional conflict begins to generate global financial consequences. At that point, the distinction between participant and observer begins to weaken.

A system that redistributes risk

What is unfolding is not simply economic disruption. It is a redistribution of risk across an interconnected system. Energy markets are beginning to fragment, as different regions experience different price pressures and supply constraints. are adjusting, but not uniformly. Some states are able to absorb shocks through reserves and diversification. Others face more immediate constraints. The longer the conflict persists, the more these differences widen.

Recent developments suggest that even limited escalation can have disproportionate effects. Temporary disruptions to shipping routes have already extended delivery times and increased costs. Insurance markets have adjusted faster than physical supply, amplifying the economic impact. Financial markets are reacting not only to current conditions, but to the possibility of further escalation.

Over time, this begins to resemble a feedback loop. Uncertainty drives cost. Cost drives policy response. Policy response introduces new distortions. The system does not stabilize quickly. It adjusts, but unevenly and often with delay. This is not a temporary disturbance that will dissipate once the conflict slows. It reflects a deeper shift in how war interacts with global systems. Conflict is no longer contained by geography. It is transmitted through connectivity.

The wrong economies

The countries most exposed to the economic consequences are not the ones making strategic decisions or defining objectives. Yet they are the ones managing inflation, stabilizing currencies, protecting supply chains and absorbing social pressure. They carry the cost without controlling the cause. This is increasingly how modern conflict operates. Power is exercised in one place. Consequences are distributed across many. The further a country is from the center of decision-making, the more likely it is to experience the conflict as an external shock rather than a controllable process. And the longer the war continues, the more entrenched this pattern becomes.

Wars are still fought between states, but their effects are no longer confined to them. They move through the systems that connect economies, societies and markets. And in that movement, the burden does not fall where power is concentrated; it falls where exposure is greatest. That is why this war is not just reshaping the balance of power; it is reshaping the distribution of vulnerability. And in doing so, it is placing the heaviest burden on the economies least able to shape the outcome.

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In the classical global political economy, multinational enterprises are not merely recipients of geoeconomic risks. Recent research suggests that the shift from globalization to weaponized interdependence has placed profit-seeking corporations at the of geoeconomic rivalries and national security interests. Worldwide networks of interdependence (financial, legal, physical) have grown asymmetrically hierarchical, generating distinct configurations of power and vulnerability. The result is what scholars call the of interdependence, a defining feature of international trade and investment that affects cross-border transactions and taxation.��

What corporate tax governance means for corporation-state relations

At its core, conventional corporate governance prioritizes shareholder value maximization, often aligning managerial decisions with profit-oriented goals. In contrast, corporate tax governance brings a balancing mechanism that reconciles corporate responsibilities toward shareholders with obligations to governments and broader societal interests. In the international tax , shaped by jurisdictions, political mandates, markets and normative environments, corporations function as gatekeepers of market activity.

Moreover, corporate tax governance is often understood as the integration of tax risk management into the broader enterprise risk framework and the alignment of the tax function with the company’s core values and strategy. In practice, tax compliance is a central component of this process, including decision-making on tax planning and transparency in tax reporting. In short, it concerns how a company manages tax risks, compliance, planning and reporting. 

Corporation–state dynamics in tax affairs

The global business and finance sector has been transformed by digitization and innovative regulatory approaches, enabling multinational corporations to increase cross-border capital mobility and to develop financial structures and infrastructure in offshore financial centers, commonly known as tax havens. Consequently, governments now face two major challenges from corporations: the emergence of corporate governance behavior aligned with economic security and the incremental adaptation of tax havens to the era of weaponized interdependence. 

Profit concealment through tax havens emerged as a structurally dominant strategy during the era of globalization, driven by high capital mobility, opportunities for regulatory arbitrage and the decentralized treatment of multinational entities. However, this strategy is increasingly challenged by the rise of geoeconomic fragmentation and weaponized interdependence, highlighting how past “blind spots” in the global political economy often stemmed from deliberate corporate strategies lacking sufficient geoeconomic oversight.

Conceptually, tax havens lie at the of the globalized neoliberal economic order and have evolved into instrumental tools for sustaining US hegemony. They function as an institutionalized form of “club good,” provided by US power to benefit the global elite. Tax havens and offshore financial centers are increasingly evolving into strategic “connector” countries, acting as neutral intermediaries that facilitate trade and capital flows between competing geopolitical blocs, particularly as global trade becomes more fragmented.

How governments combat corporate tax avoidance��

The era of weaponized interdependence has also created opportunities for states to curb multinational corporations’ tax avoidance. The networked infrastructure of multinational companies, long used to undermine national tax bases globally, is now being mobilized to advance economic security objectives. The EU’s implementation of the global minimum tax demonstrates how states can harness to transform corporate subsidiaries into “chokepoints” for enforcement. By exploiting these networked liabilities, the EU has effectively reasserted its authority over multinational actors to ensure regional economic resilience.��

Traditionally, multinational corporations used the implicit threat of capital flight to pressure states into favorable tax policies. However, governments can now neutralize this threat by treating the multinational corporation as a single economic actor and targeting its networked liabilities. This approach enables states to enforce tax agendas regardless of where a company claims to be headquartered, effectively transforming the networked infrastructure of globalization from a device for tax avoidance into a mechanism for compliance enforcement. 

However, this strategy is contingent upon two conditions: The state or region must have physical or legal jurisdiction over key hub nodes and it must possess well-established legal and regulatory institutions. The EU, for example, benefits from its supranational authority, single market integration and binding directives, allowing it to exercise considerable power in regional .

Consequently, tax havens have become a leverage point in the structural power struggle between states and corporations. These jurisdictions act as a permanent friction point in state-corporate relations, where firms leverage offshore mobility to bypass national legal mandates, while state and regional bodies attempt to weaponize these same networks for fiscal enforcement. Companies that wish to operate successfully in this complex regulatory environment must closely monitor the rapidly evolving domain of tax governance.

[ edited this piece.]

The views expressed in this article are the author’s own and do not necessarily reflect 51�Թ�’s editorial policy.

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Unlike traditional lending, private credit operates in a realm defined by negotiation rather than standardization. Loans are structured privately, often tailored to the needs of mid-sized or leveraged companies that fall outside the rigid frameworks of banks or public bond markets. This flexibility has made private credit both attractive and dangerous — attractive because it fills gaps left by banks, and dangerous because those gaps often exist for a reason. In this sense, private credit is like water flowing into cracks in a dam: It provides necessary pressure relief, but over time, it may also widen the cracks themselves.

The scale of this transformation is striking. Industry survey-based estimates indicate that the global private credit market has reached approximately $3.5 trillion in assets under management, according to data by the Alternative Credit Council in 2025, although the figure depends on broad definitions and survey-based estimates. It rivals major segments of public credit markets and continues to , fueled by institutional investors seeking yield in a low-return world and, increasingly, by private wealth channels. What was once an institutional domain dominated by pension funds and endowments is now opening to retail investors through semi-liquid and evergreen structures, fundamentally altering the composition of capital.

Yet this rapid expansion has occurred largely outside traditional regulatory oversight. Unlike banks, private credit funds are not subject to the same capital requirements or supervision. Unlike public bonds, their pricing is not continuously tested by the market. As a result, private credit has developed in a space that is both innovative and opaque — a shadow system that is becoming too large to ignore.

II. Cracks beneath the surface

Despite its outward strength, the private credit market in 2026 shows increasing signs of strain. The surface may appear calm, but beneath it, pressure is building. Borrowers are facing higher interest rates after years of cheap money, and many are struggling to service their debt. The widespread use of payment-in-kind () interest — a noncash payment method in which borrowers pay interest by issuing additional debt or equity rather than cash, thereby preserving liquidity while increasing the principal through compounding — is a clear signal that cash flows are under stress.

At the same time, the true default rate appears to be higher than headline figures suggest. While commonly cited default rates in private credit often remain around 2–3%, more comprehensive measures indicate significantly higher levels of distress. According to , the US private credit default rate reached 5.8% for the trailing 12 months through January 2026, reflecting the highest level since the metric’s inception. Importantly, a large share of these default events is associated with payment deferrals, PIK interest and distressed restructurings rather than outright payment failures. This discrepancy highlights a key issue: Conventional default metrics may understate underlying fragility by excluding softer forms of financial distress.

The situation is further complicated by borrowers’ financial health. Around of private credit borrowers now have negative free cash flow, a sharp increase from previous years. This means that many companies are not generating enough income to cover their expenses, let alone their debt obligations. In a low-interest-rate environment, such companies could survive by refinancing or restructuring. In today’s higher-rate environment, those options are becoming increasingly limited.

These developments suggest that private credit is entering a late-cycle phase, where the risks accumulated during years of easy money begin to surface. It is like a forest that has grown dense and lush after years of favorable weather — beautiful on the surface, but increasingly vulnerable to fire.

III. Liquidity, valuation and the illusion of stability

One of the most significant vulnerabilities in private credit arises from the structural mismatch between the liquidity offered to investors and the underlying illiquidity of the assets. While many funds provide periodic redemption opportunities, these are typically subject to strict caps — often of assets per period — designed to prevent forced asset sales. In normal conditions, such mechanisms appear sufficient. However, when investor demand for liquidity rises sharply, these constraints become binding, forcing funds to ration withdrawals rather than meet them in full.

Recent developments illustrate how quickly this mismatch can become destabilizing. In several high-profile cases, including funds managed by and , redemption requests exceeded allowable limits, resulting in investors receiving only a fraction of their requested capital. In some instances, payouts were reduced to well below one-quarter of requested amounts. Such dynamics resemble a “slow-motion bank run”: Rather than triggering an immediate collapse, liquidity constraints gradually erode investor confidence as expectations of access to capital are revised downward.

This tension is compounded by the valuation framework underpinning private credit. Unlike publicly traded securities, these assets are typically marked using net asset value (), based on internal models or manager estimates rather than observable market prices. While this approach dampens reported volatility and creates the appearance of stability, it also introduces a disconnect between stated valuations and realizable prices under stressed conditions. In effect, valuations become smoother not because risks are lower, but because they are tested less frequently.

The reliance on NAV becomes particularly problematic in structures where funds hold positions in other private credit vehicles. In such cases, valuation can become circular: One fund’s reported NAV is derived from another’s, creating a chain of interdependent assumptions. This recursive valuation process weakens the informational content of prices, as asset values are increasingly anchored in model-based estimates rather than market-clearing transactions.

The combined effect of these features is the emergence of an “illusion of stability.” Reported prices remain steady, volatility appears subdued and performance seems consistent. Yet this apparent resilience is, to a significant extent, an artifact of valuation conventions and liquidity management practices rather than a reflection of underlying economic fundamentals. As long as redemption pressures remain contained and assets are not forced into the market, the system appears robust. However, once these constraints are tested, the gap between reported and realizable values may become evident, revealing vulnerabilities that had previously been obscured.

IV. Structural evolution and the new financial ecosystem

While risks are rising, the private credit market is simultaneously undergoing profound structural transformations that are reshaping its role within the global financial system. One of the most significant developments is geographic diversification. As the US direct lending market becomes increasingly competitive and compressed, institutional investors are reallocating toward Europe, where fragmented market structures and informational inefficiencies create opportunities for higher risk-adjusted returns.

At the same time, new strategies are emerging and scaling rapidly, reflecting a broadening of the private credit ecosystem. Asset-based finance — lending against specific collateral such as receivables, infrastructure or real assets — is gaining prominence and may eventually rival traditional direct lending. Similarly, the expansion of credit secondaries is enhancing market dynamism by providing liquidity solutions for existing portfolios and facilitating balance sheet management among investors.

Another important structural shift is the rise of evergreen funds and other forms of perpetual capital. Unlike traditional closed-end vehicles, these structures allow investors to remain invested indefinitely, offering periodic liquidity rather than fixed exit horizons. While this evolution provides funding stability for managers and supports long-term capital deployment, it also introduces new challenges related to liquidity management, valuation and governance.

Perhaps the most transformative development is the growing role of private wealth. Individual investors, attracted by higher yields in a low-return environment, are increasingly allocating to private credit through semi-liquid vehicles. This influx of capital is altering the composition of the investor base and shifting the balance of power within the market, as asset managers adapt product design, liquidity features and reporting practices to meet the preferences of a more heterogeneous set of investors.

Taken together, these developments suggest that private credit is not a static asset class but a rapidly evolving system of financial intermediation. As I , the expansion of private credit is increasingly driven by supply-side dynamics — particularly institutional portfolio reallocation and funding structures — rather than by borrower fundamentals. In this context, systemic risk is not eliminated but reconfigured, shifting from traditional borrower leverage toward vulnerabilities associated with liquidity transformation, interconnectedness and nonbank financial intermediation.

This reconfiguration of risk can be further understood by comparing the structural characteristics of private credit with those of the subprime mortgage market prior to the 2008 financial crisis.

While private credit differs from subprime in important respects — particularly in its lower reliance on short-term funding and reduced run dynamics — its opacity, constrained liquidity and growing interconnectedness suggest that vulnerabilities may emerge in more gradual but less visible ways. Rather than triggering an abrupt systemic collapse, risks in private credit are more likely to accumulate beneath the surface, becoming evident only when liquidity constraints bind or valuations are tested under stress.

In this sense, the private credit market resembles an expanding financial network: It is becoming more complex, more interconnected and more central to the functioning of global finance. This evolution creates new opportunities for capital allocation and diversification, but it also introduces new forms of fragility that are diffuse, less transparent and potentially more difficult for regulators and market participants to detect in real time.

V. Crisis, adjustment or transformation?

The central question facing private credit in 2026 is whether it is heading toward a crisis or simply going through a period of adjustment. Comparisons to the subprime mortgage market are hard to avoid. Both expanded rapidly, operated with limited transparency and became increasingly interconnected. But the differences are just as important.

Private credit today is generally less leveraged and less complex than the structured products that fueled the . Its investor base is more stable, relying heavily on long-term capital rather than short-term funding. Banks, meanwhile, have relatively limited direct exposure and have shifted much of the risk off their balance sheets through tools such as synthetic risk transfers. Even the parts of the market that offer liquidity to retail investors remain relatively small, despite recent redemption pressures on funds run by firms like BlackRock, Morgan Stanley, Apollo Global Management and Cliffwater.

All of this makes a sudden, system-wide collapse less likely. Private credit has not fueled a single, concentrated bubble in the way that subprime lending did in housing, and most companies still have access to alternative sources of financing. But that doesn’t mean the risks are small — it just means they are different.

The real shift lies in how risk is transmitted. In traditional credit cycles, stress builds through excessive borrowing by companies. In private credit, pressure is more likely to emerge through the financial system itself — through lenders’ balance sheets, funding structures and investor expectations.

That dynamic is becoming increasingly visible in the financing of artificial intelligence. The rapid build-out of data centers, chips and cloud infrastructure has attracted large flows of private capital, often supported by private credit and structured financing arrangements. In some cases, the same firms act as borrowers, investors and counterparties within closely linked networks, raising the risk that capital circulates within the system without being fully anchored in external demand. This creates conditions that resemble earlier episodes of technology-driven exuberance, where expectations run ahead of realized economic returns.

Signs of strain are already visible. Default rates have risen into the mid-single digits, according to Fitch Ratings, and much of that stress is showing up not as outright failures, but as restructurings and delayed payments. At the same time, the features that make the system appear stable — limited liquidity, redemption caps and model-based valuations — can also delay the recognition of problems and stretch them out over time.

This is where external shocks begin to matter. The ongoing tensions involving Iran and the resulting surge in oil prices are already pushing up inflation and weighing on global growth. Even a sustained increase in energy prices can slow economic activity and tighten financial conditions worldwide. In that environment, weaker borrowers — many of whom rely on continued access to credit — become more vulnerable.

Private credit may act as an amplifier of broader economic stress. A slowdown driven by higher energy costs, geopolitical uncertainty or a reassessment of overly optimistic expectations in sectors like artificial intelligence can feed through the system, tightening financing conditions and exposing weaknesses that had been hidden during more benign times.

In many ways, private credit is now being tested for the first time under real strain. It grew rapidly in an era of low interest rates and abundant liquidity, but its resilience in a more challenging environment remains uncertain. 

The most likely outcome is not a clean divide between crisis and stability, but a period of adjustment. Some firms will exit, others will adapt and the system will evolve. In the process, private credit will move further into the mainstream of global finance — no longer operating in the shadows, but increasingly shaping how capital flows through the economy.

The question, then, is not whether private credit matters. It already does. The real question is how resilient it will be as its role continues to expand — and whether the financial system around it is prepared for what that expansion brings.

[ edited this piece.]

The views expressed in this article are the author’s own and do not necessarily reflect 51�Թ�’s editorial policy.

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Cybersecurity, particularly in jurisdictions such as the US, has traditionally been framed as a defensive discipline, preventing intrusion, restoring systems and limiting disruption. That framing no longer captures new forms of exposure. The most consequential cyber risks facing private banks emerge when nothing visibly fails.

This exposure becomes critical in areas where private banks within regulatory frameworks that increasingly emphasize the traceability, justification and suitability of financial decisions. In such contexts, the integrity of decision-making is not only an operational concern but a matter of regulatory and fiduciary accountability.

As long as platforms remain online and business continuity plans operate as designed, no immediate financial loss is typically recorded. Yet the informational in which regulated decisions were formed may have shifted in subtle but material ways. In that scenario, the institution remains operational. The question is whether it remains .

Modern private banks extensively on automated and semiautomated processes to generate regulated such as risk classification, sanctions screening, transaction monitoring, suitability , credit and surveillance controls. These systems are engineered for continuity. They are designed to avoid abrupt breakdown. When upstream data quality , when dependencies introduce distortion or when external conditions change in ways not fully anticipated, the machinery rarely collapses. It continues to produce outputs that appear coherent and compliant.

The governance gap: fiduciary accountability in the age of automated logic��

From a governance , this is precisely the danger. An institution may remain procedurally compliant and technically resilient while becoming substantively exposed. With being delivered on time and documentation in a timely way, the assumptions underpinning those decisions may nevertheless no longer hold with the same strength. If the informational premises were compromised, the reasoning based on the observation that “the was running” does not answer the fiduciary question of whether the decision truly served the client’s best interest.

In such cases, fiduciary accountability is tested . Across major financial jurisdictions, expectations are converging toward greater scrutiny of how decisions are formed. Institutions are required to demonstrate not only that processes functioned, but that the underlying reasoning remained reliable, explainable and aligned with client interests. It arises when regulators reconstruct the file, when clients question outcomes or when litigation forces explanation. At that moment, system is irrelevant. What matters is whether the institution can that its judgment was formed on reliable foundations. Whenever decision-making becomes embedded in data pipelines, model calibrations and third-party integrations, cyber risk ceases to be a peripheral operational concern. It becomes a structural condition of governance.

Moreover, automation a familiar asymmetry. Responsibility remains anchored to the institution and its leadership. Causality, however, is dispersed across complex technical , data configurations, integration logic, vendor , model behavior and design assumptions made long before any specific decision is rendered. When are challenged, explanations often fragment across technical, contractual and procedural boundaries. Each may be accurate. None alone resolves whether fiduciary standards were met.

The architecture of trust: securing the soul of the decision

Private banking adds a further dimension. Its value rests on continuity, discretion and reasoning across decades. A visible breach can be repaired and . A silent erosion of decision integrity is more corrosive. It undermines the bank’s capacity to explain itself convincingly. Credibility, once weakened, is difficult to restore.��

Given this context, we need to acknowledge that judgment in a digital private bank is no longer solely a human . It is embedded within infrastructure. When that infrastructure is , failure does not always translate as downtime. It resembles doubt.

In conclusion, cybersecurity in private banking is only about operational resilience; it is about fiduciary credibility. And fiduciary credibility is harder to rebuild than any system. The institutions that will distinguish themselves are not only those that demonstrate strong perimeter defense or rapid recovery, but those capable of clearly and demonstrating that the integrity of their decision-making remains intact even when the informational environment is under strain. This shift is visible across both the US and European regulatory environments, where the ability to defend decisions is becoming as critical as the ability to execute them.��

[Ainesh Dey edited this piece]

The views expressed in this article are the author’s own and do not necessarily reflect 51�Թ�’s editorial policy.

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Tariffs in a crowded Indo-Pacific market

The 18% tariff rate is only marginally lower than those applied to other Indo-Pacific exporters. Vietnam faces tariffs of approximately 20%, Bangladesh around 19%, while Japan and South Korea are subject to rates closer to 15%. China, despite being framed as Washington’s principal geopolitical competitor, currently faces a nominal reciprocal tariff rate of about 10%. Additional sanctions and trade restrictions, however, are likely to raise China’s effective tariff burden to around 30%. In practical terms, India’s advantage over many competitors may amount to only two to three percentage points in several sectors. This margin is frequently absorbed by structural cost differences rather than translating into sustained competitiveness.

In the apparel sector, at roughly $120 billion annually in US imports, India exports about $9 billion, accounting for approximately 7% of the market. Vietnam exports over $22 billion, Bangladesh around $11 billion and China, despite tariff pressures, continues to ship more than $25 billion. Operating margins in apparel typically range between 3% and 6%, meaning that a modest tariff differential is often outweighed by Bangladesh’s labor cost advantages and Vietnam’s scale efficiencies and faster production cycles.

Electronics and electrical machinery an even starker contrast. US imports in this category exceed $500 billion annually, yet India’s exports remain relatively small, at an estimated $11–13 billion. Vietnam exports more than $43 billion in electronics to the US market, while China’s shipments remain above $120 billion despite diversification efforts. These disparities reflect deeper structural factors, including component ecosystems, logistics integration and supply-chain reliability — areas where tariff relief alone offers limited leverage.

Pharmaceuticals are frequently cited as a comparative strength for India. The US more than $230 billion worth of pharmaceutical products annually, and Indian firms supply roughly $13 billion in finished formulations and active pharmaceutical ingredients, accounting for nearly 40% of US generic prescriptions by volume.

Historically, tariffs in this sector were minimal, but since October 2025, the US a 100% tariff on branded and patented drugs to incentivize domestic manufacturing. The trade deal leaves these measures unchanged, limiting its relevance for Indian pharmaceutical exporters. In this sector, competitiveness is shaped more by regulatory approvals, intellectual property regimes and compliance costs than by customs duties.

Indian goods exports to the US total approximately $86 billion annually. Even an optimistic export expansion of 6–8% under improved tariff certainty would generate only $5–7 billion in additional exports. After accounting for imported inputs, exchange-rate effects and trade elasticity, the net impact on India’s GDP is estimated at around 0.15–0.3%. For an economy approaching $4 trillion, the gain is measurable but far from transformative.

Oil diplomacy and the cost of alignment

Parallel to trade discussions, political attention has focused on of Russian crude oil. India imports roughly 5.2 million barrels of oil per day, amounting to nearly 1.9 billion barrels annually. In recent years, approximately 35% of these imports have come from Russia.

Russian Urals crude has typically at a discount of about $8–10 per barrel relative to Brent benchmarks. At an average discount of $8, India’s annual savings on roughly 550–600 million barrels could approach $5 billion, rising toward $6 billion when discounts widen. Replacing these volumes entirely with North American crude oil, relative to the West Texas Intermediate (WTI) benchmark, would eliminate this discount. This could potentially increase India’s import bill by $4–6 billion each year. Additional freight and insurance costs associated with Atlantic routes could increase expenses by a further $0.5–1.5 billion annually. Moreover, refineries optimized for medium-sour Urals blends may require technical adjustments, entailing capital expenditure and temporarily reduced refining margins. These costs are comparable to the projected export gains from tariff relief.

Concerns are further amplified by indications that India may reduce or eliminate tariffs on a wide range of US industrial and agricultural goods. The US currently around $40 billion worth of goods to India each year, including aircraft, advanced machinery, medical devices, chemicals, energy products and agricultural commodities. Significant tariff reductions would likely benefit US capital goods manufacturers, which operate at larger scales and with higher automation intensity.

In agriculture, US producers of corn, soybeans, dairy and processed foods combine high productivity with extensive federal support mechanisms. Increased access to the Indian market could exert downward pressure on domestic prices in sensitive categories, affecting millions of smallholder farmers whose margins are already thin. With agriculture more than 46% of India’s workforce, the distributional consequences could be substantial, even if consumers see modest price declines.

Benefit first, pressure last

The broader policy environment also warrants consideration. US trade policy in recent years has been marked by volatility, with tariffs imposed, suspended and recalibrated in rapid succession. Any tariff advantage secured today could be eroded if Washington extends similar concessions to competing Asian exporters or introduces new measures in response to domestic political cycles. As a result, projected export gains remain inherently uncertain.

Taken together, the agreement offers India limited but tangible economic benefits while exposing it to potentially higher energy costs and intensified domestic competition. At the Munich Security Conference in February 2026, External Affairs Minister S. Jaishankar that India’s decisions would be guided by calculations of economic interest and national priorities rather than external pressure. The durability of that principle may ultimately determine whether the trade deal proves advantageous beyond its headline figures.

[ edited this piece.]

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Markets, Trump and the limits of geopolitics

Mehra identifies Trump as the common thread running through much of the recent turbulence. In her words, he is “dismantling the old order without your knowing what comes next.” Yet she draws a clear distinction between macro-level disruption and market behavior.

Looking at 50 years of data, from the Gulf Wars to September 11 and the US invasion of Afghanistan, she argues that stock markets tend to recover from geopolitical shocks within six to 12 months. Unless a country is directly involved in conflict, markets historically “shrug it off.” The notable exception is when major commodity producers are involved, as in the Russia–Ukraine war, where energy and commodity prices experience sustained impact.

In 2025, another dynamic was at play: extreme market concentration. The so-called Magnificent Seven US tech stocks once again drove the bulk of S&P 500 gains. In 2025, roughly 43% of the index’s performance came from this narrow group, down from more than 60% in 2023 and 2024 — but still highly concentrated. Even within that group, only three or four stocks accounted for most of the gains. The average stock, Mehra cautions, has underperformed.

The AI boom and the profitability question

Much of the recent market enthusiasm centers on artificial intelligence. Mehra remains cautious. History, she argues, shows that transformative technologies do not automatically translate into investor profits.

Automobiles and aviation reshaped the 20th century but were “a graveyard of companies” from an investor’s standpoint. The early Internet era followed a similar pattern. Infrastructure firms such as Global Crossing laid undersea cables that still carry global data traffic today — yet the company itself went bankrupt.

Mehra’s concern with AI is less about its transformative potential and more about capital intensity and monetization. Massive data centers, rapidly depreciating hardware and soaring talent costs create enormous upfront investment. Meanwhile, she points to data suggesting that usage of some AI platforms fell 60–70% during school holidays. This implies that student adoption, not high-margin enterprise demand, drives a significant portion of current traffic.

Even more worrying, she notes, is financial engineering. Some large technology firms avoid placing AI-related debt directly on their balance sheets by routing it through smaller entities that build and finance infrastructure separately. The result is systemic leverage that may be underappreciated.

India’s growth versus market reality

Turning to India, Khattar Singh challenges the dominant narrative that India is rising while the West stagnates. Mehra acknowledges that India’s headline GDP growth remains among the highest globally. Yet the composition of that growth raises questions.

Manufacturing as a share of GDP has fallen to roughly 12–13.5%, near its lowest level since the 1960s. Tourism has not yet surpassed pre-pandemic levels. Foreign direct investment and foreign institutional flows have slowed, and India recently recorded a capital account deficit for the first time in two decades.

Most importantly, Mehra stresses that macroeconomic growth does not guarantee market performance. China offers a stark example: Between 2007 and 2023, Chinese GDP expanded more than sixfold, yet its equity market only recently surpassed its 2007 peak. High growth does not automatically translate into shareholder returns or sufficient job creation.

Dedollarization, crypto and the myth of safe havens

On dedollarization, Mehra has revised her earlier skepticism. While reserve currencies rarely change quickly, she believes the pace of diversification has accelerated as confidence in US institutions comes “under question.” Even so, she doubts that China’s renminbi will replace the dollar outright. Instead, she anticipates gradual diversification toward a basket of currencies — euro, Swiss franc, Japanese yen — alongside gold.

Cryptocurrencies, in her view, are legitimate assets but not true currencies. Extreme volatility makes them impractical for pricing goods or serving as stable stores of value. With drawdowns of 70–85% occurring multiple times, she recommends limited exposure — 2% to 5% of a portfolio at most.

Gold fares no better under scrutiny. Over a 50-year period, gold has been more volatile than equities. After peaking in 1980, it took 27 years to reclaim that high. Its steady rise in Indian rupee terms, she explains, reflects currency depreciation rather than intrinsic stability.

Machines, bias and the discipline of data

At First Global, Mehra has adapted to what she sees as a structural shift in markets. In the 1990s, the edge lay in privileged information. Today, regulation ensures simultaneous disclosure. The advantage now lies in analysis.

Her firm uses machine learning systems to screen more than 20,000 securities globally, examining numerous factors without human emotional bias. Machines reduce randomness and cognitive error — insights drawn in part from behavioral economist Daniel Kahneman’s work on decision-making. Yet she insists on a “human overlay” to design models and interpret outputs. Technology is a tool, not an oracle.

Mehra will not speculate on what single trend could make or break markets in 2026. “Risk is always something you didn’t see coming,” she says, recalling how The Economist failed to flag Russia–Ukraine as a major geopolitical risk just weeks before war erupted in 2022. For her, disciplined data checks matter more than bold predictions. In an age of narrative excess, humility may be the most valuable asset of all.

[ edited this piece.]

The views expressed in this article/video are the author’s own and do not necessarily reflect 51�Թ�’s editorial policy.

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Today’s situation, with the loss of Venezuelan energy support, is somewhat reminiscent of Cuba’s experience with the devastating economic impact of the Soviet Union’s in the 1990s, and it may be tempting to draw comparisons between the two periods. At that time, the Castro regime was forced to confront similar challenges: material shortages, isolation and civil unrest. However, today’s reality is characterized by new factors: the physical absence of Fidel Castro and Raúl Castro; the widespread use of social media; resumed flights to and from the US since 2016; and increased liberalization and warmer diplomatic relations.

No matter how valuable ending the longest-running communist government in the Americas may seem, US President Donald Trump seems to be trying out a new for foreign intervention: decapitating regimes while keeping the establishment intact. This model clearly prioritizes business opportunities over democratic values. However, it’s not only uncertain whether it could be applied to Cuba, but also whether this is actually the plan. All of which makes it particularly difficult to imagine what could happen next.

Historically, international observers have oscillated between fascination and outrage towards Communist Cuba. In the early years of the revolution, this fascination was understandable. Cuba was a potent for activists in the 1960s and for the global civil rights movement. However, as the revolution shifted toward military autocracy rather than democratic ideals, the initial romanticism faded. This group of observers, largely comprising European baby boomers who rebelled against post-World War II imperialism, has seen its initial fervor tempered by time. Reflecting a broader evolution in leftist thought, they continue struggling to reconcile Cuba’s social achievements with its authoritarian political regime and the continuous, increasing and deepening impact of the US trade on these revolutionary ideals since 1962.

The Cuban Revolution officially began with the 1953 of the Moncada Barracks by a group of revolutionaries led by Fidel Castro, who was relatively unknown at the time. The uprising aimed to overthrow ’s illegitimate military dictatorship and the systemic corruption and poverty it fostered. Specifically, the movement demanded economic independence from US imperialist interests and the restoration of political liberty through an armed uprising of the working class.

After the attempted coup, Castro, a trained lawyer, was tried and imprisoned by Batista’s regime. During this trial, he delivered an iconic defense speech that ended with the famous words, “History will absolve me.” Indeed, he was pardoned after 22 months due to a general amnesty and went on to lead Cuba for life. However, total absolution by history is doubtful and yet to come.

After his release from prison, Castro adopted July 26 — the date of the attack on the Moncada Barracks — as the name of his revolutionary movement: the Movimiento 26 de Julio. By January 1, 1959, the rebels, including the iconic Comandante Ernesto “Che” Guevara, had successfully overthrown the dictatorship. In response to Batista’s pro-US regime, the revolutionaries had campaigned with slogans such as: “Cuba sí, yanquis no!” (“Cuba yes! Yankees no!”) and “Yanquis, vayanse!” (“Yankees, go away!”).

Shortly after Castro and his group took control, the US intervened militarily in 1961, but was defeated at the Bay of Pigs. This defeat solidified the first self-proclaimed communist revolution in the region, which would become the longest-standing regime of its kind in the Western world. It is now approaching its seventh decade.

The revolution as an unfinished process

After years of rumors that he was dead and that his government was keeping him alive to prevent a political collapse, Castro died on November 25, 2016, at the age of 90. Following Castro’s illness in 2006, his younger brother Raúl assumed provisional power. By 2011, Raúl had solidified his position as leader of both the presidency and the Communist Party. This appointment communicated a strong stance on hierarchy and kinship. Yet, Raúl ultimately delegated governance in 2019, eight years later.

Miguel Mario Díaz-Canel Bermúdez, Cuba’s current president, is a direct descendant of the Castro regime, having been personally appointed by Raúl Castro. Born in Villa Clara Province on April 20, 1960, Díaz-Canel was born one year after the Cuban Revolution of 1959. Although Díaz-Canel holds onto the revolutionary ideals of his predecessors, he is facing unprecedented times. Amid escalating instability and unrest, he called for dialogue on Monday, March 23, while not capitulating on the Revolution, stating:

We don’t want war; we want dialogue. But if that space isn’t provided, we are ready. I tell you this with the deep conviction that I hold, which I have shared with my family, that we would give our lives for the Revolution.

Díaz-Canel said this in a conversation with Pablo Iglesias, the Spanish founder of the left-wing political party Podemos, and former vice president of Spain. Iglesias arrived in Cuba on March 24, 2026, as part of the humanitarian convoy. There, he Díaz-Canel on behalf of his media organization, Canal Red. With the support of figures like Iglesias and British politician Jeremy Corbyn, the Nuestra América mission delivered 20 tons of aid, including solar panels, to help alleviate the island’s severe energy crisis.

The convoy’s name invokes the legacy of (1853–1895), the “Apostle of Cuban Independence” and a foundational figure in the development of the nation’s identity. In his influential 1891 essay, Nuestra América, or “,” Martí contended that Latin American nations should develop governance systems grounded in their unique social realities instead of imitating foreign models. By warning against “the giant of the north” and calling for cultural sovereignty, Martí’s manifesto remains a powerful symbol that the modern mission seeks to reclaim. In fact, both Díaz-Canel and Iglesias reiterated Martí’s accusations that the US is responsible for Cuba’s structural problems of the past several decades, that the 1959 Revolution eliminated “all miseries and evils.”

The blockade of all trade and diplomatic relations with the US, coupled with the nationalization or expulsion of the private sector, did not stop the steady stream of tourists, primarily from Europe, from arriving on the island. Despite the gradual disenchantment of many, a sense of mysticism about Cuba as an oasis outside of capitalism began to emerge.

For as long as I can remember, I have heard the same tropes in stories by foreigners who visited the island in the ‘90s and ‘00s. One recurring theme was the idea that Cuba was “suspended in time.” People often mentioned the old cars, which were rare in other urban landscapes. In a dimmer note, Fidel, who had once that Cuba would no longer be the “brothel of the Western Hemisphere,” later used that same imagery in a 1999 speech, infamously , “Cuba has the cleanest and most educated prostitutes in the world.”

In his 1965 work, , Virgilio Piñera famously referred to “the curse of being completely surrounded by water.” Writing from a first-person perspective while sitting in a café in Havana, Piñera captured an insular reality that visitors, often distracted by the island’s tropical allure, could never truly grasp. This metaphorical curse reveals a less paradisical side of the nation, grounding its international isolation in a bittersweet reality.

Piñera’s sentiment mirrors the devastating truth in Fidel’s later remarks about the island’s “cultured” prostitutes. Both the poet’s verses and the leader’s words acknowledge a reality that, despite its high ideals, remains trapped by its circumstances. Piñera’s image remains profoundly expressive today, as Cuba faces renewed media attention and political turmoil, making this sense of cursed isolation feel as relevant as ever.

Following a period of diplomatic warming that began in 2015, US–Cuba relations shifted from a hopeful path toward greater understanding to extreme hostility under the Trump administration. By 2025, Marco Rubio, a former senator from Florida and Cuban American, had become one of the loudest advocates for this shift. A Gen Xer, Rubio belongs to the first generation of diaspora children who have historically migrated to Miami. This group has traditionally been fiercely opposed to the regime they fled.

Today, many of them see the current moment as the opportunity they’ve been awaiting for decades. Hispanic outlets Univision and Telemundo Miami have the various demonstrations, many of which were led by Cuban activist Ramón Saúl Sánchez, who on the exile community at the iconic Cuban restaurant to support the protests occurring on the island. The Free Cuba Rally, which through Washington, DC, featured slogans such as “Trump” and “Cuba Next!” calling for US action.

Founded by Cuban exiles in Valencia, Spain, in 2014, the news outlet Cibercuba has been a relevant source that divulges information from inside the island. It has extensively covered the protests of the last few weeks against constant outages and the growing precarious situation. According to Cibercuba, there have been pot-banging , fires started in the middle of roads, and people taking to the streets regardless of the significant military and police presence.

Though their demands are diverse and sometimes conflicting, protesters in Cuba and the diaspora are united in their response to the same lack of coherence embodied by an unfinished revolution and an authoritarian regime. Unlike the diaspora, protesters on the island largely US intervention. They call for freedom and anti-authoritarianism, yet they never question their own autonomy. They correctly believe that their future is in their hands, more on immediate needs than on challenging the entire economic system. Despite its flaws, the revolution’s accomplishments should be recognized, such as ensuring that and remain for all. 

Taking all of this into account, it’s reasonable to conclude that Cuba is experiencing its most severe economic and social crisis in decades. Nevertheless, Díaz-Canel has taken a defiant position against Washington, considering the one-party political system and the decades of cultural and structural revolution that sustain him. Even as it prepares for potential American aggression, the Cuban government refuses to negotiate its political system and its national sovereignty.

Perspectives from the Island: the case of Beto

I traveled to Cuba for the first and only time in January 2018, spending the first eight days of the year in Havana. I flew from Miami, a route that had only direct service in December 2016. I remember the other passengers, most of whom were not tourists, rushing to stand up as soon as the plane landed. Their urgency seemed to reflect the extraordinary experience of taking a direct flight after decades of needing to take indirect routes, such as via Cancún, or of being unable to travel at all due to visa or the risk of state retaliation for those in exile.

Coming from a place where unlimited internet access was the norm, the intermittent service during that short trip felt unusual. Access was a luxury; you had to go to a hotel or somewhere with Wi-Fi, or buy a $5 data card that lasted 30 minutes. For the majority of Cubans, this was a significant expense, as average monthly salaries among the lowest in the world. According to a 2025 , this digital divide persists as Etecsa, the national telecommunications enterprise, continues to restrict and raise the price of monthly data top-ups.

This atmosphere of restricted access and slow change makes the current shift in US foreign policy feel like a long-awaited opportunity. However, the notion of a tipping point once again reveals its tantalizing and procrastinatory nature. To understand how this pivotal turning point was perceived beyond the official headlines, I reached out to my Cuban friends living abroad.

One of them is Beto, a chef and owner who has lived in Madrid for over 20 years. When he responded on Monday, March 16, he was visiting family in Cuba, 30 minutes outside Havana. He stayed in touch throughout his week-long trip, and I am fortunate to be able to share some of his insights here.

Beto began his testimony by recounting how difficult it was to move around the island. His brother had to buy fuel on the black market just to pick him up from the airport, paying between eight and ten dollars per liter. Beto could only afford this expense because of his life in Spain. This corroborates reports of a severe decline in fuel supply, despite Beto’s testimony that money was circulating. 

On the drive from the airport to his hometown, which usually takes place on a busy highway toward Havana, there were no other cars. In a video he , the empty horizon could be seen in both directions, interrupted only by a car that eventually passed them. According to Beto, the airport itself also felt empty. His Iberia flight, designed to carry over 200 passengers, landed with only 60 people on board. The rental lots were empty, yet filled with cars no one was renting. “Havana doesn’t even have fuel for the planes,” Beto explained. He noted that his flight had to detour to the Dominican Republic just to refuel for the return trip to Madrid. He added that due to limited resources, tourism and travel for non-urgent matters have become extremely difficult these days.

This perception of a shortage is indicative of a broader energy crisis in which access to electricity depends on having the right technology. This takes us back to Diaz-Canel’s recent with Pablo Iglesias. Overall, the Cuban President’s tone was optimistic. Diaz-Canel mentioned that even amid an intensified blockade, Cuba is on the path to energy sovereignty. He highlighted the importance of solar panels, electricity generated from sugarcane fields and the increased use of electric motorcycles for various services, describing all of it as a form of “creative resistance.”

Overall, listening to Beto confirmed both Diaz-Canel’s description of advancements in renewable energy and the fact that it is insufficient. During the most recent national blackout, Beto said that only people near power plants or with solar panels were able to power their electronics. This was the case in his father’s village. To cope with the heat, he said he used a battery-powered fan for up to five hours at a time in his father’s house. A tropical storm on Monday night also helped cool the air.

Based on what he saw and experienced on this trip, the state-run food supply system, which used to equitably distribute food despite its imperfections, has nearly vanished. A new reality has emerged in which private enterprises import food and sell it at higher prices than in Madrid. Beto also shared photos of solar energy kits and kerosene stoves being sold on social media. The flyers provide contact information and state that payments must be made in cash in US dollars, and that delivery is available for an additional cost.

In addition to the photos of electronics, Beto shared a video with me depicting the unique blend of eras and economic systems found on Cuban streets. In the video, bicycle-powered taxis rattle past an old Polish Fiat, an iconic Soviet-era car, that has been modified to include a solar panel on its roof. The car was parked outside a bar called Tómatela Fría, where reggaeton music played from a speaker. During my short visit in 2018, I noticed that music, mostly reggaeton, was always playing on the streets. Seeing that it’s still the norm gave me a sense of reassurance that other reports didn’t.

Throughout the week, Beto and I were able to communicate with each other more than twice a day, albeit intermittently. He relied on airport Wi-Fi or Etecsa offices for internet access. There, you can pay 40 cents an hour for a connection to their Wi-Fi, which is powered by generators. When he described this situation to me, he paused and said it was all a “strange, high-speed transformation caught between socialism and capitalism.” As citizens increasingly take to the streets, Beto’s ambiguity sums up the reality of existing in the long-term middle ground between the two systems that polarized the second half of the 20th century.

As proof of the exceptional circumstances due to intensified protests and government dissent in the days prior, Beto sent a picture showing military helicopters circling overhead and armored vehicles moving through his father’s neighborhood. While the townspeople attempt to maintain a facade of normalcy by selling everyday goods in private stalls, intermittent electricity and the shadow of helicopters serve as constant reminders that the country is transforming into something entirely unknown.

Against this backdrop, Beto told me that when people in Cuba talk about the importance of money from family members abroad, they often ask each other, “¿Tú tienes fe?” While “fe” means “faith” in English, it actually stands for Familiar en el Extranjero, or “family member abroad.” This refers to receiving remittances from places such as Miami or Madrid. The double meaning of faith speaks to the concept of the hybridity of the two systems that Beto mentioned earlier. The anecdote also conveys a sense of truth when considering that faith may be the only unifying factor among the different positions, regardless of the indeterminate results.

The curse of being completely surrounded by water

The curse of being completely surrounded by water condemns me to this café table. If I didn’t think that water encircled me like a cancer, I’d sleep in peace. In the time that it takes the boys to strip for swimming, twelve people have died of the bends … The eternal misery of memory. If a few things were different and the country came back to me waterless, I’d gulp down that misery to spit back at the sky … The uniform of the drowned sailor still floats on the reef. It makes you want to jump out of bed and find the main vein of the sea and bleed it dry.

— The Whole Island, Virgilio Piñera

In closing, I would like to return to Virgilio Piñera’s poem and his words: “The curse of being completely surrounded by water.” In the poem, he also speaks of finding “the main vein of the sea and bleeding it dry,” building to a crescendo of intensity. Following the success of the Revolution, Piñera was one of many intellectuals who initially supported the movement. However, the revolutionary promise soon turned into systematic censorship. Piñera was arrested at the beginning of a period of state repression that intensified throughout the ‘60s and ‘70s.

In his posthumous memoir, (1993), Reinaldo Arenas, a writer of a later generation, explains how he, like Piñera, was imprisoned because of his homosexuality and his stance as a dissident public writer. The title, Before Night Falls, refers to how he had to write by the last rays of sunlight while hiding in parks as a fugitive. It wasn’t until 1980 that the Cuban state stopped homosexuals criminal figures, and the Ley de Ostentación Homosexual was repealed.

However, prosecutions due to sexual orientation didn’t stop overnight (it was not until 2019 that a new constitution was approved in Cuba that included regarding gender rights, and it wasn’t until 2022 that same-sex marriage was legalized). Arenas was able to flee during the 1980 Mariel Boatlift , which began when a bus crashed into the Peruvian embassy, causing a massive refugee crisis. To be granted permission to leave through Mariel, Arenas had to “” his homosexuality. He eventually settled in Miami and then New York, where he died by suicide while awaiting death from AIDS in 1990. In his suicide note, he explicitly blamed Fidel Castro for his death.

It’s hard to reconcile heartbreaking stories like Arenas’s with the continued loyalty of other prominent figures. As I have striven to convey in this piece, we find ourselves in limbo, torn between disillusionment and faith. Silvio Rodríguez, a renowned musician, exemplifies the latter. The government recently him a Kalashnikov rifle in recognition of his loyalty. Interestingly, in his popular 1993 song “,” or “the fool,” Rodriguez sang that deciding what the world deems foolishness may also be a stance: “Could it be that foolishness was born with me?/The foolishness of what now seems foolish/The foolishness of embracing the enemy/The foolishness of living without a price.”

On March 16, the day I spoke with Beto, Trump escalated his rhetoric, he could “take Cuba in some form” and do as he pleased there, adding that such a thing would be “an honor.” Once again, when we bring together the rhetoric of Rodríguez and Trump, we feel as though we are traveling in time. As the “giant of the North,” in Martí’s words, confronts Cuba, the island remains caught between the remnants of communism and an emerging informal capitalism. Cubans are resisting creatively, as they always have, even when struggling in the context of an accentuated decades-long blockade. Currently, their system of governance is holding strong, albeit while being cornered in their search for a path forward.

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Capitalism now faces an analogous moment. For more than two centuries, it justified itself through performance. It worked. It produced unprecedented wealth, technological progress and expanded opportunity. Even critics conceded its generative capacity. Growth became capitalism’s moral argument.

But a system that once needed only to deliver output must now deliver meaning and fulfillment of the promise to which it agreed in 1776.

This shift is not ideological. It is structural. The relationship between prosperity and legitimacy has weakened. Economies continue to expand, yet societies grow more anxious. Financial markets reach new heights even as institutional trust declines. Capitalism’s first certainty — that growth secures consent — no longer holds.

This article advances a central claim: Capitalism is transitioning from a performance-based system, in which legitimacy was historically secured through sustained economic growth, to a legitimacy-based system, in which long-term stability increasingly depends on institutional design, credible governance, and the alignment of economic outcomes with social and ecological constraints.

This transformation is driven by three structural shifts: the decoupling of income and well-being, the erosion of institutional trust and rights, and the emergence of environmental constraints as binding economic conditions.

When wealth stops explaining itself

Modern capitalism has reached a paradoxical threshold. By its own metrics, it has succeeded. Global poverty has over the long term. Technological innovation has reshaped human possibilities. Yet this success has not translated into universal confidence.

In advanced economies, citizens increasingly perceive that the system is both efficient and unfair. They recognize its productivity but question its legitimacy. Economic abundance coexists with social fragmentation, as reflected in declining intergenerational mobility, rising inequality in the Organisation for Economic Cooperation and Development () countries, and record levels of in the US and Europe. This tension reflects a deeper transformation: Economic growth alone has been necessary, but it has proved insufficient.

The historical logic of capitalism rested on delayed justice. Inequality was tolerated because prosperity was expected to spread. That expectation is fading. Wealth now appears to concentrate faster than opportunity expands. Intergenerational mobility slows. The narrative of upward progress and mobility loses credibility.

This is not simply a distributional issue. It is a narrative crisis. Capitalism still produces wealth, but it struggles to produce widespread and trusting belief.

Belief matters because markets are not merely transactional mechanisms; they are psychological systems. They function only when participants trust that the future is predictable enough to justify risk. When belief erodes, investment becomes defensive, innovation cautious and politics volatile.

Capitalism’s second act has begun at this moment when wealth alone can no longer secure legitimacy.

Why this moment is different

Capitalism has faced crises before — depressions, wars, financial collapses. In each case, the narrow solution was more growth, deeper markets or better technology. What makes this current moment different is that the pressure is no longer cyclical. It is structural.

by John F. Halbleib and Masaaki Yoshimori are converging.

First, human satisfaction has decoupled from income. Beyond a certain point, higher GDP no longer delivers greater happiness or social cohesion. Anxiety, loneliness and political alienation rise even in affluent societies. Economic systems that excel at production, but fail at meaning, lose consent.

Second, rights and trust are weakening inside advanced economies, not only in developing ones. Democratic backsliding, institutional capture and legal uncertainty erode the predictability on which markets depend. Capitalism without credible rules becomes transactional, short-term and extractive.

Third, the planet is no longer a passive backdrop. Climate instability, resource scarcity and ecological degradation now shape inflation, investment, migration and financial risk. Markets that treat nature as free collateral are discovering that the bill arrives — with interest.

What unites these forces is that none can be solved by growth alone. They demand improved institutional design.

Happiness as an economic variable

For much of the 20th century, economists treated well-being as an outcome rather than an input. Happiness was presumed to follow growth. Today, evidence suggests the relationship is more complex. Beyond a certain threshold, increases in income yield diminishing returns in satisfaction. What rises instead are expectations, comparisons and anxieties.

This phenomenon has profound economic implications. Societies characterized by psychological insecurity struggle to sustain the cooperation required for long-term development. Innovation depends on trust. Entrepreneurship depends on optimism. Social cohesion depends on perceived fairness.

The political consequences of declining well-being are visible across democracies. Polarization intensifies. Institutional credibility weakens. Policy horizons shorten. Economic systems that fail to sustain meaning encounter resistance not because they are inefficient, but because they are experienced as indifferent.

Happiness, therefore, is not a soft variable. It is a stabilizing condition. It reflects whether citizens view participation in the system as worthwhile. Capitalism’s durability increasingly depends on this perception.

In this sense, well-being becomes a form of functional consent. Without it, markets face continuous disruption — not from external enemies, but from internal dissatisfaction.

Rights as market infrastructure

Capitalism’s legitimacy also depends on institutional predictability. Markets require more than prices; they require rules that participants trust. Property rights, legal equality, freedom of expression and accountable governance form the invisible architecture of economic life.

When this architecture weakens, markets do not collapse immediately. They mutate. Competition tilts toward political access rather than productive capacity. Investment horizons shrink. Corruption substitutes for coordination. Over time, the system’s efficiency erodes.

This dynamic challenges a common assumption: that economic development automatically strengthens democratic norms. In reality, rights are not a byproduct of growth. They are design choices. Affluent societies can experience institutional decay as readily as developing ones.

The economic consequences of such decay are cumulative. As predictability declines, risk premiums rise. As trust weakens, transaction costs increase. Capitalism without credible rights becomes extractive — generating wealth for some while undermining the foundations of prosperity for all.

In this sense, rights function as capitalism’s operating system. They enable markets to process information, allocate resources and sustain innovation. Without them, economic dynamism becomes fragile.

The planet as a structural constraint

Perhaps the most consequential transformation facing capitalism is environmental. For centuries, markets treated ecological systems as externalities. Nature was assumed to be abundant, resilient and costless. That assumption is no longer viable.

, and are not distant concerns; they are immediate economic variables. They shape inflation, energy security, migration patterns and financial stability. Environmental shocks are transmitted through supply chains, asset valuations and geopolitical tensions.

This shift alters capitalism’s temporal logic. Traditional markets discount the future; ecological systems impose it. The costs of environmental degradation accumulate slowly but materialize abruptly. As a result, sustainability becomes a matter of systemic risk management rather than ethical preference.

The emerging question is not whether environmental policies constrain growth. It is whether growth can persist in their absence. A capitalism that fails to internalize ecological limits undermines its own viability.

Environmental governance thus begins to resemble financial regulation. Both seek to prevent systemic crises. Both require long-term coordination. Both depend on institutional credibility.

The planet is no longer a backdrop to economic activity. It is a codeterminant of market stability.

From efficiency to legitimacy

Capitalism’s first act prioritized efficiency. Its second must prioritize legitimacy. This does not imply abandoning growth or innovation. It implies redefining success.

Economic systems will increasingly be evaluated not only by output but by resilience — their capacity to absorb shocks without social rupture. They will be judged by fairness — not perfect equality, but credible opportunity. And they will be measured by sustainability — the ability to preserve the conditions of future prosperity.

These criteria are not ideological concessions. They are functional necessities. Markets that fail to sustain legitimacy encounter political backlash. Policies become erratic. Long-term investment declines. Social trust erodes. The challenge, therefore, is institutional design. States must move beyond minimalist regulation toward strategic coordination. They must create frameworks in which social and ecological objectives align with economic incentives.

This requires a shift from reactive governance to anticipatory governance. Instead of correcting market failures after crises occur, institutions must shape expectations before instability emerges.

This reorientation does not imply a transition toward socialism or a repudiation of market principles. Rather, it reflects an effort to preserve the institutional conditions under which market economies can function effectively while sustaining both efficiency and freedom. Institutional coordination, environmental regulation and investments in social resilience are not substitutes for markets but complements to them. Historically, capitalism has evolved through the interaction between economic freedom and adaptive governance rather than through ideological replacement. The objective is therefore not to diminish competition, private initiative or individual liberty, but to ensure that the system remains capable of generating both prosperity and legitimacy in an increasingly complex structural environment.

Cooperation as the new competitive advantage

The defining challenges of the 21st century — climate change, demographic transitions, technological displacement — are coordination problems. They transcend national borders and individual firms. Markets excel at competition but struggle with collective action.

Capitalism’s second act will thus depend on new forms of cooperation. Public and private sectors must collaborate to manage systemic risks. International institutions must facilitate alignment rather than rivalry. Corporations must integrate long-term societal considerations into strategic planning.

This transformation does not diminish competition; it reframes it. The most successful economies will be those that balance rivalry with coordination. The capacity to solve collective problems will become a source of competitive advantage.

In this environment, legitimacy becomes an economic asset. Societies characterized by trust and institutional coherence attract investment, talent and innovation. Those marked by fragmentation face volatility and decline.

Relegitimizing the market system

The future of capitalism is not predetermined. It is contingent on choices made by governments, businesses and citizens. Markets will remain central to prosperity, but their legitimacy will increasingly depend on whether they expand the realm of human freedom — enabling individuals to pursue lives they value, exercise rights they trust and inhabit a planet that remains viable for future generations.

The approaching American semiquincentennial offers a symbolic reminder of this principle. The founding generation did not view freedom as self-executing. They understood that legitimacy must be continually renewed through institutions capable of aligning economic dynamism with political liberty. Economic systems face the same imperative today.

Capitalism’s second act will not replicate its first. It will be less certain, more complex and more constrained by structural realities. Yet it may also prove more durable. By integrating human well-being, institutional integrity, ecological sustainability and the protection of economic freedom into its design, capitalism can sustain both prosperity and trust.

The alternative is not immediate collapse but gradual erosion — of belief, cooperation, stability and ultimately freedom itself. When economic systems lose legitimacy, societies respond not only with discontent but with demands for protection that may curtail openness and opportunity.

In the end, the central question is not whether capitalism can continue to generate wealth. It is whether it can sustain a framework of freedom that citizens regard as both fair and secure. Systems endure not because they are inevitable, but because they are trusted — and trusted systems expand rather than constrain human agency.

That trust is no longer guaranteed. It must be built deliberately, collectively and continuously.

Capitalism’s future, like democracy’s, remains an invitation to freedom. Whether that invitation is renewed or rejected will shape the trajectory of the century ahead.

In an increasingly complex world, the task ahead is not to replace markets; rather, it is to enhance them so that they remain both economically productive and legitimately supported by all those whom they serve and upon whom their continued sustainability is dependent.

[ edited this piece.]

The views expressed in this article are the author’s own and do not necessarily reflect 51�Թ�’s editorial policy.

The post Capitalism at 250: Freedom, Legitimacy and the Renewal of the Market Order appeared first on 51�Թ�.

The answer is not straightforward, but one that entails a complex interplay of the development of labor, structural inequality, environmental necessity and unique alterations in human cognition and agency. The world population has risen steadily over the last ten years, from approximately billion in 2020 to nearly 8.3 billion today. Although a higher population ideally means a greater labor and bigger markets, it also simultaneously stresses employment systems. The AI burst adds to the problem by increasingly automating repetitive manual and even tasks. While nations grapple with accommodating increasing populations, they also have to contend with the structural displacement that comes with the speed of AI penetration.��

Work creation has lagged behind such population pressures. The International Labour Organization () originally projected the development of million new jobs by 2025, but reduced the number to million when the growth of the economy slowed down, as quoted by . Therefore, a vast majority of these new roles involve high-level technical and AI ability, leaving the conventional increasingly at risk. Consequently, this intensified disconnection adds more to the urgency of getting by on the basis of reskilling and forward-looking workforce planning. Without progressive policies, AI can further exacerbate the global between high-skill and low-skill labor markets.

Beyond the bottom line: the collateral impact of automation

On a different note, AI business deployment levels have sped up. Over of large firms had already implemented AI in their operations by 2019, as indicated by the (), given that AI is more operationally efficient, cheaper and more often makes choices. Yet this speed comes at significant human expenses. Analytics, decision-making and creative work are under threat. Overemphasizing efficiency at the expense of greater social costs can lead to incremental erosion of human in decision-making and innovation.

Furthermore, job dismissals have already been hit by trade barriers, geopolitics, sanctions and intellectual property conflicts, which are compounded by restructuring due to AI. Over employees were discharged by 221 American technology companies in 2025 alone, as estimated by . These are structural, not cyclical, , as the labor could be lost for good or require skills that the existing labor pool lacks. Subsequently, this creates destabilizing forces for traditional social safety nets and labor institutions that policymakers will find difficult to deal with.

Furthermore, the environmental of AI is typically underestimated. In addition to energy usage, AI needs custom hardware composed of scarce minerals like neodymium, dysprosium and tantalum. The extraction of the has environmental impacts and geopolitical dependencies. The data centers used to house AI systems account for vast amounts of water usage for cooling and plenty of power to process, according to the (). by fossil fuels, these operations have high levels of carbon emissions. Places with this sort of infrastructure are subject to local water deprivation and resource shortage, proof that the social benefits of AI have undetected ecological and social effects.

The cognitive erosion: reclaiming human autonomy

Aside from economic and environmental , AI insidiously menaces human thought and culture. With AI interfaces and alert systems overwhelming human , attention is splintered, diminishing creativity, civic engagement and the capacity for long-term strategic contemplation. AI excels at capturing explicit knowledge but cannot fully grasp context-dependent know-how, risking the erosion of institutional memory and local problem-solving capabilities. interpersonal decision-making and AI-mediated communication can diminish empathy, negotiation skills and emotional resilience — qualities essential for healthy workplaces and social cohesion. 

Moreover, AI’s reliance on historical data for optimization may unintentionally constrain innovation, favoring safe and predictable trajectories over bold, unconventional ideas. The psychological reliance on AI for professional, personal and ethical decision-making also risks destabilizing autonomous human thought. Business investment in AI keeps expanding. As per a McKinsey and Company Report, of business executives are planning to increase AI spending, with over half expecting a hike from existing levels. The force of transformation that AI represents is gigantic, but not necessarily for all. Whether AI will raise human potential or speed up inequality will be determined by governance, regulation, upskilling and inclusive deployment strategies. 

As we begin this new era, caution needs to catch up to optimism. Societies may unwittingly dependent on AI networks owned and controlled by a few large firms, generating systemically produced . AI-rich environments everywhere can distract attention in the crowd, undermining imagination, long-term thinking and civic participation. Human of context-dependent and experiential knowledge can be contemplated as being pushed aside, and optimization by algorithms can pressure innovation along predetermined lines, deterring out-of-the-box solutions.

The final experiment: shaping our machine-driven destiny

On the whole, dependence on AI for making , individual and moral decisions may quietly erode independent thought. Unobtrusive external costs — such as mining of rare metals, water-cooled operation and energy-intensive usage — add to the multifaceted, interdependent nature of AI deployment footprint. A sense of these problems ensures that AI is benefiting human beings and not becoming stuck in inequality, environmental pressure or psychological reliance.

Moreover, AI is no longer a ; it’s a force remaking the destiny of economies, societies and even the brain. The question now is no longer whether we can control AI, but whether human beings will be the masters of their own destiny and not just passive actors in a machine-dominated world. Optimism about AI needs to be paired with , ethical sensitivity and robust governance.

Therefore, in order to realize its full potential, human societies will have to develop not only technological know-how but also public wisdom, cultivating a human-AI partnership that is attuned to local conditions and capable of responding to diverse social and environmental . Not only are we developing AI, but AI is also developing us. It is a different kind of experiment, and one whose outcome is less predictable and more fateful than ever.

[Ainesh Dey edited this piece]

The views expressed in this article are the author’s own and do not necessarily reflect 51�Թ�’s editorial policy.

The post ​Beyond the Code: Reclaiming Human Agency in an AI-First World appeared first on 51�Թ�.

In the high-stakes world of short selling, fortunes can be made by betting against companies, but they can just as easily be lost when predictions fail to materialize. Recent events in India’s stock market offer a stark reminder of this reality, where traders who of fintech platform Groww during its initial public offering suffered devastating losses as the stock surged contrary to their expectations. High risk, high gain, but a risk worth taking? Hindsight is a wonderful thing.

Gambles, mishaps and undeserved reputations��

The Groww initial public offering (IPO) case exemplifies how even seemingly sophisticated market participants can misread the room. When the Indian fintech company went public, numerous traders bet heavily that its shares would decline. Instead, the stock soared, leaving short sellers scrambling to cover their positions at significantly higher prices. The losses were substantial, serving as a cautionary tale about the risks inherent in contrarian investing. 

Such failures aren’t confined to emerging markets or retail traders. The landscape of short selling includes figures who have built reputations (although sometimes undeserved) as market prognosticators, despite track records that suggest otherwise. Consider, for example, Keith Dalrymple, a Bulgaria-based American investor who operates under the banner of Dalrymple Finance. With a Master of Business Administration from Babson College and early career experience at firms including Tucker Anthony/RBC Dain and Halpern Capital, Dalrymple’s credentials might suggest credibility. He publishes research through his — DF Research — is active on X and has occasionally attracted media attention for his analyses.��

Yet a closer examination of Dalrymple’s track record reveals a pattern more notable for missed predictions than vindicated calls. His highest-profile moment came in 2011 when Dalrymple Finance published an alleging fraud at Gerova Financial Group, a Bermuda-based reinsurer. While Gerova’s principals were eventually sanctioned and the company liquidated, the episode was marked by acrimonious litigation.

Noble Investment Fund Dalrymple, his wife, Victoria and Dalrymple Finance, alleging they orchestrated a coordinated media campaign to manipulate the stock price. The suit was filed by Gross Law and alleged a “short and distort,” or “reverse pump and dump,” scheme that artificially depressed Gerova’s share price, “ultimately destroying the company as an operating entity.”

Though the cases were ultimately dismissed on jurisdictional grounds, the controversy highlighted the contentious nature of activist short selling. Since then, Dalrymple’s public track record has been less impressive. He has maintained a years-long campaign against Brookfield Asset Management and its various entities, publishing numerous reports on his alleging accounting irregularities, overvaluation, and questionable governance, in a long campaign that ultimately failed.��

Short sellers or content creators?��

Dalrymple, who is, in reality, not operating in the same league as globally renowned short sellers like Jim Chanos or Bill Ackman, represents a growing phenomenon in financial markets: analysts who leverage self-publishing platforms to build audiences despite limited demonstrable success. His shows professionally produced videos companies like RXO, complete with dramatic music and graphics designed to create urgency and concern.

The accessibility of platforms like Substack, X and YouTube has democratized financial commentary, allowing anyone to position themselves as a market expert through dynamic content production and an ostensibly trustworthy tone of voice. While this has occasionally surfaced legitimate concerns, it has also created an environment where presentation can therefore substitute for track record.

When the shorts “misfire”

Dalrymple is far from alone in the category of short sellers whose predictions have failed to materialize. Famous like Jim Chanos built their reputations on successful calls, most notably the fraud at Enron. The practice has a long history and, when done well, serves an important market function.��

However, even established figures have experienced spectacular failures. Bill Ackman’s on Herbalife, maintained from 2012 to 2018, cost his fund hundreds of millions as the stock appreciated. David Einhorn’s shorts on Tesla and other companies generated substantial losses as the electric vehicle revolution exceeded his expectations. Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners, this as “by far the longest unprofitable short I’ve ever seen.”��

Who pays when short sellers are wrong?

The crucial difference is accountability. Major hedge fund managers face immediate consequences when their predictions fail. Investors withdraw capital, performance fees disappear and reputations suffer quantifiable damage. They manage billions in assets and are subject to regulatory oversight. Smaller operators publishing research through self-hosted platforms face fewer checks on accuracy and often operate with unclear funding sources and limited transparency about their actual positions, but the consequences for businesses remain the same. 

Indeed, for investors too. For those who follow questionable short-selling recommendations, the consequences can be severe. Short selling carries theoretically unlimited risk: If a stock rises instead of falling, losses can multiply quickly. The in India demonstrates how rapidly these losses accumulate when predictions prove wrong.

But the cost extends beyond direct financial losses. Investors who spend years waiting for predicted collapses that never occur miss opportunities elsewhere. Those who short companies based on fragile predictions supported by online campaigns ultimately suffer.  One man’s loss is another man’s gain. For short sellers, their losses translate into gains for others, so following their predictions is not without risk. 

[ edited this piece.]

The views expressed in this article are the author’s own and do not necessarily reflect 51�Թ�’s editorial policy.

The post Short Selling: When Prophecy Collides With Reality appeared first on 51�Թ�.

On the screen of a seized cellphone, the country barely fits. It fits in names, invitations, contacts, suggested favors, denied payments, hurried official statements and a succession of messages. Even when they do not prove the crimes the social media mobs crave, they reveal plenty about the environment in which a mid-sized bank was able to grow, seduce, promise, escape and, ultimately, crumble. Banco Master has become a matter for the police, the regulators, the deposit insurance fund, Brasília and the Supreme Court. It is too much of a bank to be mere gossip. There is too much gossip to be just a bank.

The question arose early and bears repeating: What is the true scale of the Banco Master case? Not the — the one that obsesses over helicopters, parties, Coldplay performing at a Sicilian engagement and penthouses for sale on the day of an arrest. The real dimension. The size of the hole. The design of the mechanism. The proximity to power. What has been proven. What remains mere noise. And, above all, what this case tells us about Brazil when the subject is money, oversight and people who learned to circulate where the door should have been bolted.

At first glance, the plot is familiar. A mid-sized bank grows too fast, pays a premium to attract liquidity and bets that the market will continue to believe what is written on its balance sheet. Master was exactly that. But that is not enough. The bank’s collapse turned into a financial, criminal and institutional scandal because it bundled together suspected banking fraud, a multibillion-real bill for the Credit Guarantee Fund (FGC), an investigation into former high-ranking Central Bank officials and a trail of connections that pushed the crisis into the Supreme Court’s (STF) orbit.

The scale and impact of Banco Master

For the international reader, it is best to translate without an excessive accent. Banco Master was not large enough to topple the Brazilian financial system. It was not a “tropical .” But it was large enough to expose significant cracks in how Brazil supervises mid-sized banks, in the almost anesthetic comfort the deposit insurance fund offers investors and in the ancient intimacy between markets, politics and institutions. Had it been liquidated, Master held less than of the country’s banking assets. Still, its failure would trigger an estimated 40.6 billion Brazilian reais from the FGC and affect roughly 800,000 creditors. Less than 1% in size. 40.6 billion Brazilian reals in trouble. The number does the talking.

At the center of the story is , the bank’s controller. Master grew by offering high-yield securities, particularly certificates of deposit (CDs), to retail investors through investment platforms. This model, in itself, is neither a crime nor original. Mid-sized banks do this. They pay more to compete with giants that have the brand, the reach and the comfortable lethargy of loyal clients. The flaw appears when trust begins to fray. When the market believes, a high rate looks like an opportunity. When it stops believing, that same rate smells of desperation.

Here enters one of the Brazilian peculiarities that best explains the speed of expansion. The FGC, though private and funded by the banks themselves, functions in the mind of the average investor as a quasi-public safety net. It generally covers up to 250,000 Brazilian reais per Tax ID per institution. In practice, this produced a dangerous habit: many bought mid-sized bank CDs looking first at the yield and only much later, or never, at the quality of the issuer. The guarantee became a sedative. When Master collapsed, the sedative turned into a debt.

This detail matters because the case is not just about one banker, one bank and eventual fraud. It is also about incentives. When the market learns it can take more risk because an institutional cushion exists, caution evaporates. The investor thinks they are being clever. The platform loves the high-converting product. The bank gains momentum. The entire system kicks the can down the road. Until the day it comes back.

In 2025, the unease surrounding Master ceased to be market gossip and became a visible crisis. Doubts about liquidity and asset quality began to circle the bank. The proposed exit was an with Banco de Brasília (BRB), a state-owned bank controlled by the Federal District government. The plan envisioned BRB purchasing a relevant portion of Master’s assets, specifically the “prime” ones. Suddenly, the banking crisis acquired a political face.

The moment a state-owned bank enters the stage to absorb choice pieces of a troubled private institution, the nature of the debate shifts. It is no longer just about balance sheets. It is about who gets the meat and who is left with the bone. Critics viewed the operation as a transfer of attractive assets to a public institution, with the remaining risk remaining distributed among creditors, investors and the FGC. The operation was eventually stalled by the Courts and later by the Central Bank.

The formal rupture would come on November 18, 2025. On that day, the Central Bank the extrajudicial liquidation of Banco Master, Banco Master de Investimento, Letsbank, and a brokerage firm within the group. The allegation was blunt: “severe liquidity crisis, sharp financial deterioration, and grave infractions of systemic rules.” In the same context, the Federal Police moved forward with investigations into fraud linked to credit securities, and Vorcaro ended up arrested. The Central Bank maintained that there was no systemic risk. Perhaps there wasn’t. But there was already, by any measure, an institutional disaster.

Extrajudicial liquidation is a technical term for something quite simple: The regulator steps in because the house can no longer explain itself. From there, the dismantling begins — counting assets, attempting recoveries, defining creditors, triggering the guarantee. It is not a movie-style bankruptcy with a judge and slamming drawers. It is an administrative surgery. And every surgery, when it finally arrives, is already too late for those who only wanted a remedy.

Until that point, one could still argue the case was large but sectoral: a supposedly broken bank. A bitter bill; investors scrambling to understand their coverage limits; a regulator trying to convince the country that the fire was contained. Then, the story moved to a different floor.

Regulatory capture and institutional failures

In March 2026, that the investigation had begun targeting two former high-ranking Central Bank officials: Paulo Sergio Neves de Souza, former Director of Supervision, and Belline Santana, former Head of the Department of Bank Supervision. The suspicion is that both may have provided informal counseling to Vorcaro while still occupying or orbiting sensitive roles linked to system oversight. Messages described in the investigation reportedly indicate prior review of regulatory documents, strategic guidance, and signs of attempted influence through gifts and sham consulting contracts. The defense teams deny any wrongdoing. They deny it because they must. But the point has been made.

This is the nerve of the case. If it is proven that a troubled banker received privileged advice from the very person meant to watch him, the problem stops being a banking issue and becomes one of regulatory capture. The technical jargon describes a banal scene of Brazilian life: The inspector begins to behave like a consultant for the inspected. The gate remains in place, but the padlock is already in someone’s pocket.

This is what gives the episode a stature beyond the financial hole. Master may not be the largest bank to fall. It may not yet be the largest scandal in absolute volume. But it touches a more corrosive point: the hypothesis that the control environment itself was contaminated. It is not just the thief lurking around the safe; it is the suspicion of a conversation in the hallway between those who hold the key and those who shouldn’t even know where it is kept.

The Supreme Court’s role and public perception

The crisis reached the Supreme Court. Here, it is wise to take a deep breath, lower the social media adrenaline and separate what exists from the hunger for scandal. In the case of Justice Dias Toffoli, in February that a Federal Police report cited references to him in data extracted from Vorcaro’s phone and mentioned allegations of payments to a company linked to the Justice, along with invitations to social events. Toffoli’s response was objective: He never received payments and never had a relationship with Vorcaro. Later, he reportedly decided to recuse himself and step down as the case’s rapporteur. The STF, in a note signed by its Justices, reportedly expressed personal support for Toffoli, stating there was no legal impediment to his staying, though he preferred to step aside.

Thus far, there is no consolidated public proof of Toffoli’s illicit involvement. There is a reference in investigative material. There is a mention of alleged payments. There is the Justice’s denial. There is a declared recusal. There is reputational damage. But reputational damage is not evidence. In high-profile cases, the difference between the two is usually the first casualty.

With Alexandre de Moraes, the temperature rose through the channel Brazil currently masters best: the partial capture of a message, the accelerated circulation of screenshots and the outsourcing of conclusions to the nearest shouting match. The STF’s was direct. According to a note from the Communication Secretariat, after analyzing the disclosed material, the messages attributed to the context were reportedly not sent to the Justice’s contact, but to others in the banker’s contact list. In plain English: The Supreme Court asserts that the screenshots do not demonstrate communication between Vorcaro and Moraes.

Here, too, the distinction matters. Is there, to date, proven compromising communication involving Moraes? No. Is there enough noise to amplify public suspicion of proximity between the case and the top of the Judiciary? Yes. And this “yes” is enough to contaminate the environment. In institutional matters, the wear and tear does not always come from a proven crime. Sometimes it comes from the combination of suggested contact, a toxic context and a succession of episodes that give the public the feeling that the same old names are, once again, standing too close to the smoke.

This caution is not pedantry. It is method. The case already produces enough noise on its own. There is political, social and institutional proximity suggested by reports, meetings and references in seized material. That exists. It is one of the reasons the case grew so large. But is there, today, airtight public proof of criminal participation by STF Justices? No. What exists in a robust and verifiable way is something else: Toffoli denied payments and links to Vorcaro and recused himself; Moraes denied the messages were directed to him; and the Supreme Court attempted to contain, via official note, the reading of direct contamination of the Court.

This point is decisive because Brazil suffers from a recurring narrative disease: Either everything is mundane, or everything is the greatest conspiracy in history. The Banco Master case needs neither of these crutches. The question of whether it is “the greatest heist and corruption case in Brazilian history” requires a journalistic handbrake. Not yet. What benchmark reporting points to is something more precise and more serious: The episode may become the largest banking fraud in the country’s history and is already treated as a multibillion-real scandal that has shaken the Central Bank’s reputation. This is massive. And it remains different from decreeing, without a verdict or conclusive evidence, that we are facing the largest corruption case in Brazilian history in a broad sense.

However, there is a visual element that helps explain why the case boiled over so quickly outside technical circles: Vorcaro’s lifestyle. Not because luxury proves fraud — it doesn’t. But because excess, when paired with fragile liquidity, suspect assets and asset-tracking, organizes the public imagination with unparalleled efficiency.

Opulence and public outrage

The eventual lifting of the banker’s bank secrecy reportedly revealed arrangements for an event in Sicily featuring performances by Coldplay, David Guetta, and Andrea Bocelli, with an estimated cost of over (roughly 198 million Brazilian reals). The number has the delicacy of a punch. It doesn’t prove the crime. But it offers the exact image of the kind of disconnect that transforms a financial case into an elite soap opera: While the bank sinks into doubt, the controller’s private life seems to operate on the scale of a landlocked principality.

Other episodes bolstered this portrait. Reports surfaced that Vorcaro’s daughter’s 15th birthday party allegedly cost around Brazilian reais. Messages reportedly pointed to a hurried attempt to sell a penthouse in São Paulo for 60 million Brazilian reais on the day of the banker’s first arrest. Brazilian authorities have been tracking luxury real estate, artwork and other assets in Florida linked to Vorcaro and his family in search of asset recovery. Bloomberg Law reported that the bank’s liquidator accuses the controller’s family of participating in a scheme that allegedly diverted over $1 billion from Master, including through luxury assets abroad. An accusation is not a conviction. But an accusation with this profile repositions the case on a different level of gravity.

Money, here, functions less as a moral judgment and more as a dramatic contrast. The point is not to attack champagne, expensive singers or Miami real estate as if the problem were merely bad taste. The point is different. When a bank grows by distributing high-yield securities to small and medium investors under the tranquilizing shadow of the FGC, and later enters liquidation with a 40.6 billion Brazilian real bill for that fund, every display of opulence by the controller begins to function as an involuntary allegory of the system. The party is not the proof. The party is the caption. What is solidly established, even without exaggeration, would already suffice for a major crisis.

The anatomy of a systemic mirror

Banco Master reportedly grew too much and too fast with expensive funding. Its model reportedly depended on the persistent belief that assets and guarantees would withstand the run. An exit via a state-owned bank was attempted. The Central Bank intervened late, according to critics, and technically, according to its own defense. The FGC inherited a multibillion-real bill. And investigations began to describe a network of influence that includes former regulators, political connections and the fringes of the Supreme Court.

The case, therefore, is not just the story of how a mid-sized bank broke. It is the story of how it managed to grow so much, circulate so close to power and produce a hole of this scale without being contained sooner. It is a question about chronology. About complacency. About the selective slowness of institutions. About the old Brazilian habit of treating warning signs as market noise until the truck is already in the living room.

There is also a deeper, perhaps more Brazilian, irony in the anatomy of the case. Master did not topple the system. There was no national banking panic. There was no apocalypse that the jargon-heavy headlines love to anticipate. The system remained standing. And yet, precisely because it was not a systemic collapse, the episode became more revealing. It shows that a bank does not need to be massive to expose a country. It only needs to be ambitious enough, well-connected enough and tolerated for long enough.

In the end, the true dimension of the Banco Master case perhaps lies less in the isolated size of the hole than in the kind of intimacy it revealed. Intimacy between private risk and collective coverage. Between supervision and undue proximity. Between the market and the State. Between the promise sold to the investor and the bill passed to the system. Between regulators’ technical routine and the Brazilian fascination with people who confuse access with immunity.

Institutions look solid from a distance. Up close, they depend on small things: distance, procedure, timing, shame, closed doors, unanswered phone calls. The Master case is the chronicle of an environment in which some of these small things reportedly failed at once. And when they fail together, a mid-sized bank ceases to be just a mid-sized bank. It becomes a mirror. And the country, once again, does not like what it sees.

[ edited this piece.]

The views expressed in this article are the author’s own and do not necessarily reflect 51�Թ�’s editorial policy.

The post The Master Paradox: How a Mid-Sized Bank Exposed the Cracks In Brazil’s Power appeared first on 51�Թ�.

A distinct identity, not a proxy pawn

The (Anṣār Allāh) are frequently labeled as Iranian proxies, but this characterization oversimplifies their nature. While Tehran has supplied weapons and technical know-how over the years, the Houthis are not a direct military arm of Iran and retain significant autonomy in their decision-making. Researchers that Iran lacks direct control over Houthi behavior, which is shaped by Yemen’s local dynamics as much as by transregional alliances.

Historically, the group emerged in the early 2000s from local grievances in northern Yemen long before any meaningful Iranian support, and its ideology — rooted in Zaydi Shi‘a traditions — differs from the Lebanese or Iraqi militias often described as Tehran’s “proxies.” 

1. Preserving diplomatic gains with Gulf powers

One central reason for the Houthis’ calibrated posture is their quiet diplomatic engagement with Gulf states, especially Saudi Arabia. After years of brutal conflict in Yemen, mediated talks — often facilitated by Oman — have created openings for a potential political settlement that could legitimize the Houthis’ control in the north and expand their role in national governance. 

Escalating militarily in a broader regional war could jeopardize these fragile diplomatic advances by provoking Riyadh and its partners, putting at risk the limited détente that has allowed a relative lull in Yemen’s .��

2. Lessons from past military reprisals

Another powerful deterrent has been the memory of punitive strikes on Houthi positions by the US and Israel. During the Gaza conflict and its aftermath, heavy bombardments Houthi infrastructure and leadership, including air strikes that significantly degraded their military capabilities.��

Analysts argue that the Houthis are acutely aware of their limitations against the superior air power of the US and Israeli militaries. They may well fear that renewed escalation on behalf of Iran could invite another round of devastating strikes, further eroding their ability to hold territory and govern effectively. 

3. Economic fragility and domestic priorities

Yemen remains one of the world’s , and Houthi-controlled areas have been economically devastated by years of conflict. The group faces severe budgetary constraints, disrupted port revenues and widespread socioeconomic hardship among its population.��

With many public sector workers unpaid and basic services collapsing, escalating into a full-fledged regional war could inflict catastrophic economic damage on areas under Houthi control, eroding the regime’s legitimacy among its own people.

4. Strategic patience and timing

A recurring theme across expert analyses is that the Houthis may simply be waiting for the right moment to act. Their leadership has suggested readiness, their “fingers are on the trigger,” but stops short of committing to open conflict.

This “strategic patience” could be aimed at preserving military capability for when it matters most — not necessarily in defence of Iran, but to strengthen their bargaining power in any future regional settlement or negotiations over Yemen’s political future. Such a move, analysts suggest, could enhance their leverage at a critical juncture rather than diminish it prematurely.

A broader regional balance

Finally, the Houthis’ caution reflects a broader recalibration of alliances across the Middle East. Even other Iranian-aligned groups in Lebanon and Iraq have shown restraint, balancing ideological solidarity with considerations of domestic stability and geopolitical risk. 

The Houthis’ restraint should not be interpreted simply as indecision or weakness. Instead, it underscores the complex interplay of local interests, diplomatic maneuvering and strategic self-preservation that defines Yemen’s role in a wider regional conflict. As the war evolves, so too might the Houthis’ calculations — but whatever course they take, it will likely be driven first by Yemeni considerations, rather than solely by allegiance to Iran.

[ edited this piece.]

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Ability does not grow in isolation. It is more like a seed responding to soil, climate and season than a fixed label attached at birth. Social norms, technological change and economic demand act as shifting weather patterns, altering which traits flourish and which remain dormant. When certain abilities appear to “bloom late,” it is often not because they were absent, but because the ecosystem had not yet provided the light in which they could be seen. A serious economic understanding of gifted education (specialized teaching for students who are intellectually talented) must therefore hold two ideas at once: Some forms of talent require early cultivation to reach their full height, while others reveal their value only when the landscape evolves.

The true challenge is not choosing between planting early or waiting for later growth. It is designing an educational ecosystem rich enough to sustain both the fast-sprouting and the slow-maturing, ensuring that no season of development is mistaken for the whole story of potential.

Karnes and institutional flexibility

The life and work of Professor Emeritus offer a practical illustration of what it means to design institutions that recognize both early potential and evolving talent. Through the establishment of the Frances A. Karnes for Gifted Studies at the University of Southern Mississippi, Karnes did not merely advocate for gifted children — she helped build a statewide infrastructure that treated talent development as a public responsibility rather than a private accident.

Her role in shaping Mississippi’s Gifted Education Act is especially instructive. By mandating identification in grades two–six, requiring service hours, ensuring teacher licensure and funding instructional positions, the legislation institutionalized early investment in mathematically and intellectually precocious students. In economic terms, this reduced the probability of underinvestment in highly cumulative domains. It recognized that in fields such as mathematics and physics, delay can permanently narrow opportunity.

Yet Karnes’s philosophy was never confined to early selection alone. She rejected the myth that gifted students “get it on their own,” but she also rejected rigid notions of ability tied to age, seat time or arbitrary promotion standards. Her emphasis on appropriate instructional level rather than chronological age reflects precisely the flexibility required in a portfolio model of talent development. Institutional structure, in her view, should adapt to the learner, not the reverse.

Moreover, her commitment to teacher training reveals another dimension often missing in theoretical debates: Talent development depends on intermediary human capital. Identification without educator expertise yields little return. By building educator development programs and research-based practices, Karnes strengthened the complementary investments necessary for sustained growth — precisely the dynamic complementarities emphasized in .

In this sense, Karnes’s legacy exemplifies the integration of the two principles outlined above. Early identification was not an end in itself, but part of a broader institutional ecosystem designed to keep opportunity open, raise the returns to later development and prevent systemic misallocation of ability. Her work demonstrates that the question is not whether societies should invest early, but whether they are willing to build adaptive systems capable of recognizing that ability — like the economy itself — evolves over time.

Karnes’s institutional philosophy illustrates a broader economic insight: Ability is not a fixed signal revealed once, but a trajectory shaped by investment, timing and opportunity. Theoretical work in human capital economics helps formalize this intuition.

The role of changing societal demand

One reason ability may appear to “bloom late” is that society’s demand for particular skills changes.

Economic history provides many examples. Entire categories of talent — software engineering, data science, digital design, AI research — were either nonexistent or peripheral only a few decades ago. Individuals whose comparative advantage lay in these areas could not demonstrate their potential early because the relevant domains did not yet exist at scale.

Endogenous growth theory helps explain this phenomenon. In former Chief Economist of the World Bank Paul Romer’s , the value of ideas depends on their applicability within the production structure of the economy.

As technology evolves, so too does the shadow price of different abilities. Talent that once appeared marginal can become central. From this perspective, late-blooming ability is not an anomaly; it is a predictable outcome of structural change.

In mathematics, physics and certain areas of engineering, early exposure and sustained challenge are often critical. These domains are highly cumulative; later learning depends heavily on mastery of earlier concepts. Lubinski and Benbow’s longitudinal on mathematically precocious youth demonstrates that early mathematical ability predicts later contributions to science, technology, engineering and mathematics (STEM) fields, including patents and publications

In such fields, failure to challenge early can permanently foreclose later opportunities. Here, early gifted education plays a uniquely powerful role.

By contrast, fields such as entrepreneurship, leadership, policy design and even some scientific domains rely heavily on integrative thinking, judgment and contextual reasoning — capacities that often mature later. American psychologist and distinguished Professor Emeritus Dean Simonton’s on creativity shows that peak creative output varies widely across disciplines and individuals, with many innovators producing their most influential work well into midlife. Similarly, research on entrepreneurship that successful founders are often older, benefiting from accumulated experience, networks and domain knowledge rather than early technical brilliance alone

These findings underscore a central point: Early gifted education is essential in some domains.

��AI, late bloomers and the expansion — and stratification — of opportunity

In the age of AI, where algorithms increasingly generate optimal solutions at remarkable speed, the meaning of “Gifted Talent” is quietly shifting. In the past, exceptional memory, calculation skills or technical precision were seen as rare forms of intelligence. Today, however, these capabilities can often be replicated — or even surpassed — by machines. What remains uniquely human is not merely the ability to solve problems, but the ability to ask original questions, sense hidden patterns and imagine possibilities beyond existing data. Gifted individuals may therefore matter not because they outperform AI in efficiency, but because they introduce perspectives that algorithms cannot easily anticipate.

Technological progress has always reshaped how society values human abilities. The typewriter, for example, allowed anyone to produce neat and legible text regardless of handwriting skill. In a similar way, AI now “standardizes” analytical tasks, making high-level outputs accessible to a broader population. As technical barriers fall, the traits that stand out most are intuition, creativity and the courage to challenge established assumptions. Gifted Talent, in this sense, is less about superior processing power and more about cognitive flexibility — the capacity to connect distant ideas and redefine the problem itself.

Rather than competing with AI, gifted individuals may play a complementary role. As machines handle optimization and pattern recognition, human value shifts toward ethical judgment, interdisciplinary thinking and visionary insight. The question is not whether gifted students are necessary, but how their abilities evolve in a world shaped by intelligent tools.

In an era of algorithmic precision, Gifted Talent may represent the expanding frontier of human originality — the space where imagination, ambiguity and intuition continue to guide innovation beyond what optimization alone can achieve.

Premature closure or portfolio development

Educational systems are most effective when they function not as sorting machines, but as environments for sustained cultivation. Different forms of talent grow at different speeds. Some abilities develop rapidly and benefit from immediate acceleration. Others deepen gradually, gaining clarity and strength as experience, maturity and context evolve. The objective is not to identify once and finalize, but to design conditions under which talent can continue to expand.

Early identification can be valuable, particularly in cumulative fields where foundational skills compound over time. But the true strength of a gifted system lies in its capacity to support growth beyond initial signals. Talent is not a single moment of recognition; it is a trajectory. Systems that allow individuals to re-engage, redirect and accelerate at multiple stages create more opportunities for high-level development.

In periods of rapid technological and economic change, flexibility becomes an asset. The domains that will define the next generation of innovation may not yet be fully visible. Educational structures that remain open to evolving strengths increase the likelihood that emerging forms of excellence will be recognized and cultivated. Rather than narrowing pathways early, forward-looking institutions build layered opportunities that enable talent to compound over time.

A developmental portfolio approach, therefore, strengthens gifted education. Intensive early challenge in highly cumulative disciplines remains essential. At the same time, broad intellectual enrichment expands exposure, adaptive pathways enable renewed acceleration and lifelong learning systems allow new expertise to crystallize. Such an approach does not merely avoid lost potential — it actively maximizes the probability that exceptional ability, whenever it becomes visible, can grow into sustained contribution.

Structural constraints��

An example of the ways that current educational systems limit opportunities for gifted students comes in the format of the assignment of for credits toward high school graduation. Because this system is primarily based on spending a specified amount of time in a particular course, most high school experiences are detrimental to advanced students, who must either languish in a course for much longer than they need to.

On the other hand, if they are allowed to move more quickly, the accelerated courses they take receive fewer Carnegie units, meaning that the students must complete twice as many courses to obtain the same number of hours toward their graduation. Without proper training in working with gifted students and recognizing their needs, educators cannot appreciate the extent of the devaluation gifted students experience at the hands of educators.

Case illustration

One example of these concepts that comes from the Karnes Center focuses on a young man who attended the Summer Program for Academically Talented Youth (AT Program) in the early 2000s. The AT Program, as it was then known, was a forerunner of dual-credit programs currently prevalent in most high schools today and provided an intensive academic immersion experience over the course of three weeks. One of the most popular courses was advanced mathematics. On the first day of the course, students were tested to see which mathematics skills had already been mastered and which skills they were ready to learn.  

At that time, the young man in question tested in a way that indicated his readiness to begin Algebra I. Most students who took the course finished one high school math credit during the three-week period. This young man, however, when given the opportunity to explore mathematical concepts at his own pace, flew through not only Algebra I, but also Algebra II and Geometry in the three-week time frame. When his transcripts were presented to his high school, they were reluctant to acknowledge the credits he had earned. The path toward graduation at his school required that students take one math course in each of the four years of high school, and because they did not have an appropriate number of even more advanced courses for him to take during his junior and senior years in high school, they wanted to force him to stay in the lower-level courses that he had already mastered. 

Misalignment across educational levels

This is not uncommon and is not limited to high schools. Even students who attend accelerated high schools must advocate for their placement in higher-level college courses as freshmen, rather than, say, taking an introductory course in biology for nonmajors when they have already taken courses such as Human Infectious Diseases or Microbiology at their advanced high school. It is extremely important to advocate for appropriate alignment agreements between secondary and tertiary schooling entities if gifted students are to be appropriately recognized without penalty for transferring more than the appropriate number of credits into the university program.

[ edited this piece.]

The views expressed in this article are the author’s own and do not necessarily reflect 51�Թ�’s editorial policy.

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— US President

Agriculture has long been, and remains, central to Chinese civilization; it is as crucial to China’s future as any other single factor.

China 9% of the world’s arable land while supporting 20% of the world’s population, 50% less arable land per capita than the US. Between 2010 and 2020, China lost 15 million hectares of agricultural land to urbanization, an area larger than England. Urbanization, infrastructure and industry claim a further one million hectares each year. China has only 7% of the world’s freshwater, 65% of which is used for agriculture:

We used to question China for storing so much grain until Trump’s trade war in 2018. It accelerated the West’s retreat from globalised trade, and we saw how vulnerable China was, and its obsession with food security began to make sense. Now the situation is even worse. China has trading partners, but no real allies, and the US is pressuring its many allies to help it keep a lid on China. Not many people know of China’s history of natural disasters and famines. It has no choice but to increase its productivity and find reliable global suppliers.

— US agricultural official in Shenzhen

Between 1959 and 1961, an estimated 30 to 45 million Chinese people in a famine resulting from Leader Mao Zedong’s Great Leap Forward. Hundreds of millions of farmers were diverted from growing food to working in makeshift, mostly inefficient village furnaces, striving to increase steel output. Spoons and pots were melted down to meet quotas. At the same time, the state tried to expand agricultural production by breaking in unsuitable land.

Chinese agricultural officials experimented with schemes such as “,” which involved planting seeds a meter below ground in the irrational belief they would produce hardier, higher-yielding crops. This was combined with “close planting,” a pseudoagronomic Soviet theory of clumping crops close together to increase yields. Widespread crop failures resulted. The Chinese Government also confiscated grain for storage, in part to demonstrate to the US and USSR that its mass rural collectivization was effective. Millions starved to death, many at the gates of full granaries.

Westerners with no experience of hunger, let alone famine, are unlikely to understand why the Chinese Government stores such large reserves and why people focus so much on food in their daily lives. Most Chinese families have a relative who suffered from poor nutrition at some point in their lives or know of someone who starved to death.

The government understands that a core foundation of its power and legitimacy lies in, at a minimum, being able to feed the people.

Private risk, public good

Extreme straightness is as bad as crookedness. Extreme cleverness is as bad as folly. Extreme fluency is as bad as stammering.

— Chinese philosopher Lao Zi, 5th century BCE

In the late , a handful of Anhui farmers, risking imprisonment or even death, triggered China’s economic reforms by growing crops to meet market demand rather than just fulfilling state-mandated quotas. In doing so, they challenged what had become a core principle of communist agricultural theory: strictly planned, collectivized farming. Leader Deng Xiaoping subsequently endorsed the Anhui farmers’ initiative, dubbing it the . To this day, the state’s agricultural development strategies, aimed at securing China’s future sustenance and security, are based on the Anhui farmers’ principles of assessing supply and demand and ensuring investment returns. Today’s private sector relies on the fact that local officials — on whom farmers depend for credit and the application of market regulations and commercial law — will ultimately respect the free market.

The state has a mixed track record in its attempts to mitigate risks, ensure commercial and social stability, and drive economic growth. Some decisions have appeared to make sense in the long term, but resulted in catastrophic commercial losses in the short term. In the quest for greater independence and food security, many agricultural subsectors are oversupply and deflation, including the berry, beef and dairy sectors. While these sectors are in the process of recovering, the damage inflicted on producers and farmers has been severe. Local officials must find a way to balance their longer-term mission of improving sustainable supply and resilience with the need to deliver short-term growth key performance indicators (KPIs) to their superiors, or risk failing at both.

Both Chinese and foreign analysts often attribute radical changes in the Chinese economy to single choices by powerful individuals like Deng, or today, President Xi Jinping. While these leaders have had the vision, and at times courage, to own often radical trends, the initiatives have invariably come from the grassroots of the economy.

Sufficiency

China has learned much from the past, and is ten years into an agricultural revolution that is reshaping international markets. China cannot become totally independent in many food categories; it currently buys of globally traded soya beans (100 million tonnes) and 25% of globally traded wheat (250 million tonnes) annually, more than the combined harvests of Britain, Germany and France. But China is working hard to reduce the degree of its dependence.

The positive impact of Chinese demand on food-exporting nations is already profound. Yet no food supplier to China can take its place in the market for granted. The Chinese government has been assessing the agricultural sectors most dependent on foreign imports, while expanding domestic production where possible to reduce that dependence, particularly in dairy and beef, as well as in animal feed such as alfalfa and soya beans. This effort to diversify away from the coercive, tariff-prone West has been ongoing since US President Donald Trump’s first term and what China understood to be a clear and worrying trend of deglobalization.

Some of China’s trading partners that enjoy preferential market access through free trade agreements — such as Australia and New Zealand — and others hoping to gain better access, like the UK, continue to align themselves with Washington and support American attempts to contain China. Small nations like New Zealand and even middle powers like Australia would be better off avoiding military alignment altogether, or risk alienating both great powers.

Global exporters dominant in domestic Chinese food sectors should be prepared to see their primacy challenged as Beijing deploys the same private-public sector partnerships it applied in its technology sectors to stimulate growth and forge greater autonomy. Beijing is trying to boost not only local production, but also support local companies establishing premium brands to serve the needs of the rapidly growing middle class. It is partly a matter of face for the government and the Chinese people that their best products and brands are world-class.

With the exception of staples such as bananas and citrus fruit, global fruit demand was sluggish in 2025, which drove all major producing regions to increase exports to China. This exacerbated existing Chinese domestic oversupply of high-end fruits such as blueberries and cherries, yet amid that disruption, established brands such as Driscoll’s held their position as market leaders. Few fruit exporters to China have put in the time and investment needed to establish their brands, and many have underestimated the burgeoning power of local competitors.

Consumer rule

The pandemic accelerated the shift in food distribution from traditional retail to online sales. Online distributors’ share of retail sales grew 30% in first-tier cities from 2021 to 2023. Most food exporters to China without teams in the market lost share and brand equity to competitors, both domestic and foreign. Companies need sufficient resources not only to manage distributors but also to make independent assessments of market demand and pricing, observe retailers and engage selectively with consumers.

The Chinese market no longer delivers quick profits and sales surges to new entrants as it once did, and has become more sophisticated and competitive than many foreign companies understand. The opportunities, particularly in the food and beverage sectors, are still good but take patience, resources and deep consumer insights to realize.

Our board wants a measure of predictability so they can plan more effectively, but China is so dynamic and tough to forecast. The key is to be flexible and quick to adapt. Our management come to China frequently, and even then it is hard for them to put themselves in the minds of our consumers or competitors. Local teams need to have the resources to know their consumers, adapt to changes and have confidence that their parent companies will respect the need for swift decision-making.

— Sales manager, foreign produce company in Shanghai

African growers have begun taking counterseasonal advantage to sell fruit to China since Beijing all tariffs on African produce from the continent’s less-developed countries. Driscoll’s Zimbabwean-sourced blueberries commanded premium prices this year and helped the brand towards a more certain position to offer a 12-month supply — a necessary strategy to endure heavy local competition in the Chinese season.

Beijing identified apples, grapes, citrus (particularly navel oranges) and kiwifruit as categories for local government assistance in the next Five-Year Plan. The choice of kiwifruit was a surprise as the category is so much smaller than the other fruit mentioned, but it is indigenous to China and recognized as a nutrient-dense “superfood.”

Imported kiwifruit will come under increased pressure as local supply expands and local competitors challenge foreign plant variety rights while asserting China’s indigenous claims to a number of original cultivars. The need is deepening for all suppliers of scale to be able to offer fruit over their off-season and maintain their brands. Companies must either procure or grow their varieties in China to protect existing sales and compete with those who will have fruit on shelves.

Farmer robots

Whoever controls food controls the people.

— Mao Zedong, 1963

Driven not only by a need for food security but also by a dwindling rural labor force, China is applying some of the world’s most advanced farming techniques. Many are not of its own invention, but most are being commercialized at a scale that few markets have been able to meet to date. Chinese farmers deploy ten times the number of drones in agriculture than their US counterparts.

Privately-owned Shouguang Vegetable and Food Industry Group in Shandong produces nine million tonnes of vegetables per annum from 600,000 greenhouses, covering 60,000 hectares, dominating supply to Beijing, Shanghai and a significant portion of northern China. Between 2015 and 2025, China spent on agrotechnology the equivalent cost of building 53 Three Gorges Dams: $1 trillion. In Fujian, one hydroponic and aeroponic factory farm uses 95% less water than traditional farms and yields 10,000 tonnes of vegetables, 400 times that of traditional farming per hectare per annum. It employs 15 people. Vertical farming of this kind grew 40% in 2025 and is forecast to expand by over 12% for each of the next five years, and will come to characterize produce supply to China’s wealthier cities in the future.

Global producers need not only to consider the impact of China’s increasing agricultural prowess in respect of Chinese companies competing in domestic markets, but also these companies’ impact on markets around the world. Toughened by unremitting local and interprovincial competition, Chinese entrepreneurs in the food industry will soon make themselves felt in global markets.

Collaboration rather than protectionism is key for foreign companies wishing to maintain their domestic and global markets and expand within China. Where collaboration is not possible, foreign firms need to become sufficiently local to compete. US and German companies were early leaders in foreign investment in China in the first three decades following China’s reopening because they invested and formed strong partnerships. In the middle of the last decade, they began to fall behind Chinese competitors, due to domestic political and strategic impediments in their home markets, combined with an inability to grasp the impact of Chinese long-term industrial planning.

China’s need, foreign investors’ gain: knowledge and technology

China’s lack of arable land and freshwater sets hard limitations, and Chinese businesspeople are constantly seeking to acquire new technology and know-how. It is a mistake for foreign investors to resign themselves to the idea that they cannot participate and compete in China now. Some harbor outdated views that intellectual property is widely stolen with little legal recourse. On the contrary, Chinese entrepreneurs and scientists have created a great deal of intellectual property in recent decades, spawning a commensurate legal and, by global standards, thorough arbitration system.

This evolution has finally established a credible basis for engaging China not only as a market for products, but also as a venue for structured collaboration around technology and know-how. Such business is unlikely to encounter the stiffening domestic competition felt in product sales, aligns with Chinese policy objectives and presents stable, long-term opportunities for profit generation.

Despite the unprecedented pace of China’s agricultural revolution, much of Chinese agriculture and horticulture remains technologically backward, with horticulture in particular often taking place in remote, hilly and even mountainous regions that are ill-suited to the application of the unmanned vehicles and robotic systems in which China has specialized. Foreign companies may find excellent opportunities in places that lie outside of China’s wealthiest cities, but still in the hearts of markets where demand is strong, and partnerships are welcomed.

The West is rich in agricultural technology and biotechnology, and, equipped with AI tools, will develop further each year. In many fields, the West is still more advanced than China. Coupled with building fresh food brands in China, Western companies need to consider how best to invest their technology and know-how in order to participate in and profit from China’s ongoing agricultural and consumer revolution.

[ first published this piece as a business report.]

[ edited this piece.]

The views expressed in this article are the author’s own and do not necessarily reflect 51�Թ�’s editorial policy.

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According to the Geneva Centre for Security Policy (GCSP), the international system is undergoing “intensified fragmentation and geopolitical polarisation” as competition among China, Russia and the US reshapes the global order. In this context, the behavior of states that are neither great powers nor small, dependent states is crucial to systemic stability.

Why the middle matters

Middle powers matter because they offer more than geographic or economic weight; they constitute a relational space that sustains cooperation even when the largest actors retreat into rivalry. 

Middle powers are not solely defined by material capacity but by their strategic behavior, which explains that these states “leverage their resources through selective leadership, niche diplomacy and active engagement in specific issue areas.” Their influence arises not from overwhelming force but from credible, flexible diplomacy embedded in international networks.

Yet middle power behavior cannot be purely transactional. Unlike great powers, which can absorb reputational costs through sheer weight, middle powers depend on a consistent record of principled engagement — the moment their positions appear for sale, their value as mediators and bridge-builders evaporates. Strategic flexibility is only credible when it rests on stable principles.

Notably, some of the most effective middle power actors — Norway, Qatar, Singapore and Switzerland — formally present themselves as small states, yet their diplomatic footprint tells a different story. 

This capacity to function between poles gives middle powers a unique stake in stability — they thrive not by domination but by preserving openness and predictability in a world where rivalry threatens to narrow options for all.

The pressure to choose — and the value of autonomy

Great power rivalry today extends beyond security to trade, technology and supply chains. The pressure on other states to align is real. Yet for most, alignment is neither simple nor costless.

Kazakhstan, for example, openly maintains relations with Russia, China, the EU and the US — not out of indecision, but as deliberate diversification that enhances its strategic autonomy and flexibility. As Thomas Greminger, the author of the GCSP brief, explains, this diversification gives such states greater agency while preserving room to maneuver amid competing pressures. And, Türkiye offers an even sharper illustration: a NATO member that nonetheless purchased Russia’s S-400 missile system, demonstrating that strategic autonomy is exercised not only outside alliances, but sometimes in deliberate tension with them. 

Scholars describe this as “flexilateralism” — shifting coalitions across different issues and configurations — or simply “multialignment,” where a state maintains simultaneous partnerships across rival blocs without fully committing to any.

Autonomy in this sense is not neutrality in a moral vacuum but a careful exercise of agency — preserving space for diplomacy, cooperation and engagement across rival blocs.

When geography constrains

Geography shapes middle power behavior, but does not determine it. A strategic location between major powers can amplify diplomatic options — Kazakhstan’s position at the crossroads of Russia, China and Central Asia sharpens rather than limits its multivector diplomacy, while Qatar’s contested neighborhood has pushed it toward mediation and strategic connectivity as survival tools. But geography can also become a trap.

Countries wedged between Russia and the West — Armenia, Azerbaijan, Belarus, Georgia, Moldova, Ukraine — cannot exercise middle power agency in the same way; their contested position pushes them toward bandwagoning rather than bridge-building. The difference between a middle power and an “in-between country” is ultimately less about location than about the political space available to make independent choices.

Communication when giants drift apart

As great powers communicate less directly, middle powers often keep vital conversations alive.

The GCSP Policy Brief highlights that middle powers deploy a range of diplomatic strategies — including bridge-building, coalition formation and mediation — to bring parties into dialogue and cooperation. It points specifically to cases like Oman and Qatar playing roles in regional mediation, facilitating negotiations between actors that might otherwise lack direct channels.

This kind of facilitation rarely makes headlines. But preventing escalation matters. When crises do not escalate into conflict, when lines of communication hold even loosely, fragmentation is contained.

Coalitions without camps

Global institutions are under strain. Consensus is harder to achieve. Formal mechanisms stagnate.

In response, middle powers are forging issue-based coalitions that sidestep rigid bloc politics. Rather than insisting on universal agreements that exclude major disagreements, these coalitions generate functional cooperation on shared risks — climate, health, food security and technology governance.

The GCSP brief notes that by forming ad hoc alliances and working collectively, middle powers can help “repair, adapt and stabilise the international order” precisely through these narrower but productive agendas.

This cooperation does not require full alignment on all strategic questions; it is rooted in practical outcomes and shared interests in avoiding collapse into zero-sum rivalry.

Greminger’s most concrete proposal points in exactly this direction. During the Cold War, a group of neutral and nonaligned states — the so-called “N+N” — played a quiet but decisive role in facilitating dialogue between NATO and the Warsaw Pact, contributing to the stable European security order that emerged from the Helsinki Process. He asks whether a similar coalition might be needed today: Should the current Ukraine conflict move toward settlement, reconstructing a European security order will require more than deterrence — it will need committed, credible states willing to facilitate risk reduction, confidence-building and arms control. Could that coalition include middle powers like Kazakhstan, Norway and Türkiye alongside traditional neutrals like Austria, Ireland, Malta and Switzerland, with Germany and Italy as cooperative security anchors? The question is deliberately open, but the precedent is real.

Economic connectivity as a stabilizing force

In a fragmented world, economic interdependence is not just a driver of prosperity. It is a buffer against division.

Middle powers often act as connectors, integrating regional trade networks and hosting platforms for economic cooperation. Financial and logistical corridors, middle powers help build complicated efforts to draw hard bloc lines in the global economy, reducing incentives for complete decoupling.

Even outside the GCSP brief, analysts note that middle powers can exercise influence by mobilizing coalitions and exploiting opportunities where great powers are indifferent or immobilized, essentially shaping cooperative spaces where larger players otherwise struggle to do so.

The risks of erosion

Stabilizing the middle is no guarantee. Strategic autonomy can be squeezed by coercive tactics. Economic levers can become tools of political pressure. Domestic politics may harden into pro-alignment rhetoric.

Here, the GCSP brief highlights that middle powers’ agency depends not just on capacity but on political commitment and diplomatic skill, observing that countries like Norway, Qatar and Switzerland combine principled engagement with reputational credibility to act as effective bridge-builders.

These dual attributes — conviction and craft — are what allow middle powers to operate as stabilizers in fractured environments.

Holding the system together

The international system need not collapse, and rivalry among great powers will surely continue. Yet the degree of fragmentation the world ultimately experiences will depend not only on the behavior of the largest states, but on whether enough mid-level states sustain cooperation, connectivity and dialogue.

In this sense, middle powers do not just fill gaps left by great power abstention. They actively shape the contours of the emerging order — not by opposing or neutralizing superpowers, but by keeping diplomatic and institutional space open.

As the GCSP brief illustrates, middle powers are uniquely positioned to contribute to stability precisely because they do not seek domination but manageable, predictable cooperation in an unpredictable world.

Their success is not a function of overwhelming force, but of relational influence — a blend of credibility, commitment and strategic autonomy. Yet realizing this potential is not automatic. It requires coordinated action, long-term vision and the willingness to lead on principled yet pragmatic agendas. In this sense, the resurgence of middle powers may be the most viable path to sustaining a rules-based international order in an increasingly fragmented and multipolar world, if they choose to act collectively and in time.

[This is an op-ed, summarized version of the publication for the GCSP, where you can find all the sources.]

Roberta Campani had some follow-up questions for the author, which he answered. You can find their exchange below:

1. On Escalation and Structural Change

Roberta Campani: Your policy brief describes a fragmented but still manageable international order. Do the recent US-Israeli strikes on Iran represent a qualitative shift from fragmentation to open confrontation? Has the structural environment for middle powers fundamentally changed?

Thomas Greminger: The recent US-Israeli strikes on Iran have only further strengthened our perception of a polarized and fragmented world order where great powers choose to follow what they perceive to be their interests without any consideration of international law. This is not to say that I wouldn’t condemn the way the Iranian regime has been treating its population. So, I see a further erosion of international law with unpredictable repercussions on regional stability and the global economy, but no fundamental changes of the structural environment for middle powers.

2. On Credibility and Negotiation

Roberta Campani: When major powers signal openness to negotiations and then rapidly escalate militarily, how does that affect the credibility of diplomacy itself? Does such behavior narrow the space in which middle powers can operate as mediators?

Thomas Greminger: It undermines the credibility of diplomacy and, more specifically, conflict mediation. Just imagine that the Omani Minister of Foreign Affairs, tasked to mediate between the US and Iran, was still reporting in Washington on what he perceived to be fairly successful negotiations in Geneva, when the decision to attack militarily was taken. Compare my comments to the :

3. On Strategic Autonomy Under Pressure

Roberta Campani: You argue that middle powers rely on strategic autonomy and diversified partnerships. In moments of acute crisis, does the pressure to align intensify to a point where autonomy becomes unsustainable? How resilient is the “middle” under coercive conditions?

Thomas Greminger: Yes, this may well happen. We have, for instance, witnessed several cases where middle powers came under US tariff pressure and felt obliged to offer major concessions. I believe that resilience can be strengthened through regional alliances that offer stronger bargaining power.

4. On International Law and Norms

Roberta Campani: Many middle powers anchor their diplomacy in multilateral norms and international law. If great powers appear willing to bypass or reinterpret these frameworks, does that weaken the normative foundations on which the middle power agency rests?

Thomas Greminger: It does. At the same time, middle powers have an intrinsic interest to preserve and rebuild a predictable, rules-based international order because they don’t dispose of the might necessary to impose right. The good news is that they can still rely on a large majority of states that continue to believe in international law. There is also still a large majority of states that continue to believe in addressing global challenges through international cooperation.

5. On the Risk of Systemic Fragmentation

Roberta Campani: Is the greater danger today the rivalry itself — or the erosion of trust in diplomatic signaling and institutional commitments? In other words, what threatens the middle more: power politics or unpredictability?

Thomas Greminger: I believe it is easier for middle powers to adapt to power politics that remain stable and thereby predictable over a certain time, as we have seen in the 19th century, than having to deal with the high degree of unpredictability that marks current times.

6. On Collective Action Among Middle Powers

Roberta Campani: Your brief hints at coordination among middle powers. Do you see realistic prospects for collective middle-power initiatives in de-escalation or crisis mediation in the current environment?

Thomas Greminger: We are seeing some initial signs of such alliances. An example is regional powers aligning in response to the war in Gaza. It is true that many mini-lateral structures have popped up in recent years that address specific challenges in a pragmatic, ad-hoc way, but most of them actually serve great power interests. Clearly, middle powers would have to aim for such alliances much more systematically. This would often also imply readiness to overcome regional differences.

7. On Switzerland’s Role

Roberta Campani: Given Switzerland’s diplomatic tradition and your own background, do you see particular responsibilities or opportunities for neutral or non-aligned states in preventing further fragmentation?

Thomas Greminger: Yes, absolutely! At the same time, Swiss foreign policy is very busy regulating its long-term relationship with the EU, dealing with the repercussions caused by the wars in Europe and in the Middle East, and responding to the challenges of the neomercantilist trade policies of one of its most important trade partners. There is therefore a need for a lot of political leadership and commitment for exploiting the opportunities offered to middle powers like Switzerland. It would like other middle powers also to look for creating new cross-regional alliances, perhaps similar to the Human Security Network operating successfully some 25 years ago.

The views expressed in this article are the author’s own and do not necessarily reflect 51�Թ�’s editorial policy.

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Asset managers are closing their doors on investors

The news from that it will be limiting withdrawals from one of its private credit funds is a watershed moment. The world’s largest asset manager has done something once unthinkable: it has effectively locked the doors. Faced with in redemption requests this quarter — nearly 10% of its $26 billion flagship private credit fund — BlackRock paid out only half. The rest of the investors were told, quite simply, that they cannot have their money back.

To understand why this matters, you have to look at the mechanics of the private credit boom. Private credits are funds that make loans to mid-sized companies — businesses that are too small for the bond market but too large for a local bank. These loans are illiquid, meaning they cannot be sold quickly. This works perfectly fine as long as everyone stays in their seats. But when a crowd rushes for the exit at the same time, the fund doesn’t have the cash. It has to gate the fund, trapping investors inside.

We are seeing a systemic shudder. In finance, refers to the repayment of mutual fund shares or bonds before those funds mature, that is, reach the date they’re supposed to be paid back. , the other titan of the industry, faced a record 7.9% redemption request. To avoid a similar freeze, it had to break its own rules, raising withdrawal limits and pumping of its own capital into the fund just to keep the peace. Blue Owl went further, entirely and issuing IOUs. Across the board, shares in these firms — KKR, Apollo, Carlyle — have plummeted.

Threat of stagflation looms large

This panic is not happening in a vacuum. It is being fueled by a broader, more ominous economic shift. For the past week, the US economy has been flashing red. We are witnessing the return of a ghost from the 1970s: , or the combination of a reduction in spending and an increase in prices. On one side, we have a sudden, violent spike in inflation. Following the joint US–Israeli strikes on Iran last week, oil prices have gone vertical. crude surged over 12% in a single day, settling above $90, while Brent crude has breached the $100 mark this morning. The Strait of Hormuz, the world’s most vital energy artery, is effectively a war zone. This isn’t just a market fluctuation; it is a massive supply-side shock that acts as a regressive tax on every consumer and business in the world.

On the other side, the stagnation half of the equation is arriving faster than expected. Last Friday’s was a disaster. Instead of the modest growth the markets expected, the US economy actually lost jobs in February. Revisions to previous months were equally grim, showing that the robust labor market we were promised was largely a mirage. This puts the Federal Reserve in an impossible position. Usually, when the job market weakens, the Fed cuts rates to stimulate growth. But with oil prices skyrocketing and fueling inflation, cutting rates risks pouring gasoline on a fire. If they hold rates high to fight inflation, they crush an already fragile economy.

What we are seeing is what market analysts call a Davis Double Kill. It’s a rare and painful event where both corporate earnings and market valuations collapse simultaneously. Earnings are eroding because outside of the AI-fueled tech sector, the real economy is contracting. Manufacturing and construction are struggling under the weight of high interest rates and now, rising energy costs. Mary Daly of the San Francisco Fed recently that the market faces “two-sided risks” that complicate the path forward.

Guarantees no longer exist

The Trump administration’s decision to initiate a conflict with Iran appears, in hindsight, to have been made without a clear calculation of the economic fallout. The assumption was likely a swift, Venezuela-style collapse. Instead, we have a protracted war, a closed Strait and a global community — including many of our NATO allies — expressing deep dissent. The geopolitical premium is finally being collected, and the US dollar is feeling the weight of it. Jan Hatzius of Goldman Sachs had previously that a fragile job market could spark recession fears; that moment has arrived.

When the world’s largest fund manager tells you that you can’t have your money, it is a signal that the era of easy assumptions is over. For years, we treated private credit as a risk-free alternative to the public markets. We treated the US consumer as an infinite engine of growth. And we treated geopolitical stability as a given. Today, all three of those assumptions are being tested at once. This is more than a market correction; it is a fundamental reassessment of the American economic narrative. If the Fed cannot find a way to balance the dual threats of rising oil and falling jobs, the soft landing we were promised will remain a dream, and the closed gates at BlackRock may be just the beginning.

[Cheyenne Torres edited this piece.]

The views expressed in this article are the author’s own and do not necessarily reflect 51�Թ�’s editorial policy.

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That is why it spreads. A teenager watches a video on “beating inflation” with a few crypto tokens. A parent forwards a clip insisting a recession is guaranteed. A grandparent hears a “safe” strategy that can double retirement savings in months. By the time a family argues about whether any of it is true, the belief has already done its work.

Trust is now a market variable

In markets, trust is more than a feeling; it is a vital input. When trust falls, participation falls, liquidity dries up and good information gets discounted along with the bad. That spillover is one reason online financial misinformation is more than a consumer-protection issue; it is a market-structure issue.

Researchers who fake news on crowdsourced investing platforms found that a small share of posts could still have outsized effects. Their conservative detection approach estimated that roughly 3% of articles in a large sample were likely fake. That figure is easy to dismiss until you consider that the fake articles generated more than 50% higher trading volume over the next three days, compared with the real ones.

The costs show up in households. In a 2025 on financial misinformation, the CFP Board reported that 57% of Americans say they’ve made regrettable financial decisions based on misleading online information.��

The damage does not stop at the individual click. Once readers learn that a platform contains manipulation, they start treating every claim as suspect. The result is a broad tax on information quality. Legitimate analysis loses influence because bad actors cheapen the signal.  

Influencers are not paid to be right

The influencer economy turns attention into revenue, but it rarely prices in accuracy. Some creators disclose sponsorships. Many do not. Either way, the upside is immediate: views, followers, affiliate fees and, in crypto, the ability to sell into a spike.

That incentive shows up in the data. In a study of 180 prominent , researchers examined roughly 36,000 tweets and found a clear pattern: prices tended to rise shortly after a mention and then drift down. A reports that by day 30, investors who bought after an influencer tweet were down about 6.5% on average.����

In other words, the audience can become the exit liquidity. The platform delivers the crowd. The crowd delivers the price move. The person with the megaphone keeps the engagement, whether the trade works or not.

Scams scale, and institutions can be spoofed

Even if you never buy a meme coin, you still live in the same information environment. The Federal Trade Commission more than $1 billion in consumer losses to cryptocurrency-related scams from January 2021 through March 2022, including $575 million tied to bogus investment opportunities.����

Artificial intelligence makes this worse because it can generate credibility on demand. Arup, the global engineering firm, has said fraudsters used AI-generated video on a conference call to steal about $25 million. The World Economic Forum how the attackers convinced an employee via a real-looking multiperson video call.����

It is not only private firms. On January 9, 2024, the Securities and Exchange Commission that its official X account was compromised after a false post claimed spot Bitcoin exchange-traded funds had been approved. Markets reacted immediately. The episode should be a warning: If a hacked regulator account can move prices, so can a convincing deepfake of one.����

Verification must live in the feed

Most of us learned media literacy as a separate unit. We learned to evaluate sources in theory, not while the content was playing. That gap matters more than ever now, as the video age evolves into the AI age. People do not constantly pause to fact-check when the platform algorithms and content are designed to keep them scrolling.

So we should move verification to where persuasion happens. In schools, that means treating “how to invest” videos like primary sources to be interrogated in real time. At home, it means normalizing two questions before acting: Who benefits if I believe this, and where is the evidence?

Tools can help. My team built to overlay a live verification layer on top of social video, like subtitles, starting with desktop YouTube. The goal is not to replace judgment or give financial advice. It is to reduce the friction of checking claims when they are made, when the viewer is most vulnerable to confidence and urgency.����

The broader shift is cultural. We should treat verification as a daily habit, not a special project for crises. Financial misinformation will not be solved by scolding people for being gullible. It will be solved when checking becomes easier than sharing.

[ edited this piece.]

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In 2025, the US goods trade deficit reached��, the largest on record. This occurred even after the average tariff rate climbed sharply from��2.6% to 13%. At first glance, this appears contradictory. If tariffs raise the cost of imports, shouldn’t imports fall and the trade deficit shrink?

The persistence of the deficit suggests something deeper. Trade balances are not simply the outcome of border policy. They are the visible expression of macroeconomic forces — capital flows, savings behavior, fiscal policy and global industrial strategy. Tariffs can reshape the shoreline of global commerce. But they do not change the gravitational pull beneath the surface.

The arithmetic beneath the politics

The trade deficit is often framed as a competitiveness problem. In reality, it is fundamentally a savings–investment identity. When a country invests more than it saves domestically, it must borrow the difference from abroad. That capital inflow necessarily corresponds to a current-account deficit.

The US runs large fiscal deficits while simultaneously attracting global investment into technology, infrastructure, artificial intelligence and capital markets. Foreign capital flows into Treasury securities, equities and real estate because of the depth, safety and liquidity of US markets. This inflow strengthens the dollar. A strong dollar makes imports cheaper and exports more expensive, widening the trade deficit.

In that sense, the deficit is not purely a symptom of weakness. It is partly the byproduct of strength — of being the world’s primary financial hub and reserve currency issuer.

If the US eliminated its trade deficit tomorrow without raising national savings, something else would adjust. Either domestic investment would fall — reducing future productivity and growth — or the dollar would depreciate sharply, altering global financial conditions. The deficit finances real economic activity. The critical question is qualitative: Is the borrowing funding productive investment or unsustainable consumption?

Tariffs focus attention on the symptom — imports — rather than on the balance sheet dynamics underneath.

Attempting to erase the deficit with tariffs alone is like trying to shorten your shadow by scraping the pavement. Unless the position of the sun changes, the shadow remains.

The wall and the detour

The 2025 tariff increases significantly reduced China’s share of US imports, pushing it below��. But total US imports did not collapse. Instead, sourcing shifted toward Mexico, Vietnam and other emerging manufacturing hubs. Supply chains reorganized.

This illustrates a second structural truth: Modern trade flows are adaptive. Close one channel, and another opens. Tariffs altered geography more than magnitude.

Empirical research that roughly��90% of the tariff burden in 2025 fell on US firms and consumers, not foreign exporters. Import prices rose substantially, while exporters reduced prices only modestly. In practice, tariffs functioned largely as a domestic price increase.

This has important consequences. US manufacturers reliant on imported inputs faced higher costs. Consumers encountered higher prices. Rather than eliminating global linkages, firms rerouted production networks. A semiconductor might be fabricated in one country, assembled in another and integrated into final goods elsewhere. Global supply chains resemble a web, not a line. Tugging one strand redistributes tension across the network.

Tariffs act like a dam across a river. For a moment, water pools behind it. But unless the river’s source dries up, pressure builds, and the water eventually finds a path around or through the barrier. Trade volumes shift and reorganize, but the underlying demand remains.

The export engine abroad

While the US escalated tariffs, surplus economies such as Germany, Japan and South Korea reinforced export competitiveness through industrial subsidies, energy support and financial assistance.

Germany’s current-account surplus remains around�� of GDP, while China’s is projected ��%. These figures reflect deliberate economic strategies. For many surplus nations, manufacturing underpins employment, technological capability and political stability. Shrinking trade surpluses would require boosting domestic consumption — often through wage growth, structural reform or reduced precautionary savings. Such transitions are politically sensitive and slow-moving.

From Washington’s perspective, surplus persistence appears unfair. From Berlin or Tokyo’s perspective, export strength represents economic resilience. Each country operates within its own political economy constraints.

This creates a coordination dilemma. If multiple countries pursue export-led growth simultaneously, someone must run a deficit. For decades, the US has filled that role, supported by its reserve currency and financial depth.

The global economy resembles a circulatory system. Surplus countries pump goods outward and accumulate savings. The US absorbs those savings and provides demand. Tariffs introduce friction into this bloodstream, but they do not change the heart’s rhythm.

Growth, investment and the productive deficit

Not all trade deficits are created equal. A deficit driven by consumption of imported consumer goods differs from one associated with high levels of capital investment.

In recent years, much US import demand has been tied to capital goods and intermediate inputs supporting technology and infrastructure expansion. Data centers, semiconductor equipment and advanced manufacturing facilities often rely on globally sourced components. In the short run, such imports widen the trade deficit. In the long run, they may raise productivity and income.

This distinction complicates the narrative. If the deficit finances future growth, its existence may not be inherently destabilizing. The problem arises if borrowing fuels asset bubbles or unsustainable fiscal trajectories.

Tariffs, however, do not discriminate between productive and unproductive imports. They increase costs across categories.

What would true rebalancing require?

Reducing the trade deficit structurally would require adjustments beyond border measures. On the US side, higher national savings — through fiscal consolidation or policy reforms encouraging household saving — would narrow the savings-investment gap. On the surplus side, stronger domestic demand and consumption would reduce reliance on exports.

Such changes are politically complex. Fiscal tightening is rarely popular. Structural reforms abroad challenge entrenched industrial and social arrangements. Tariffs, by contrast, are visible and unilateral. They signal resolve even if they do not transform fundamentals.

The persistence of the US trade deficit demonstrates that trade balances are anchored in deeper macroeconomic realities. Tariffs can redirect shipments, alter sourcing patterns and raise prices. They can reshape the coastline of trade. But they cannot change the gravitational forces of savings, investment and global capital flows.

Until the underlying incentives that drive capital and production shift, the deficit will likely endure — changing form, perhaps changing partners, but reflecting the same structural logic. The question is not whether tariffs can block the waves. It is whether policymakers are willing to alter the forces that move the sea itself.

[ edited this piece.]

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It is within this unequal monetary landscape that Ankur Bhatnagar and C. Saratchand’s 2025 , Foundations of Money and Banking in India, must be read. On the surface, the book is a comprehensive guide to India’s money and banking institutions. But beneath its careful exposition lies a deeper and more unsettling question: How much monetary sovereignty can a developing economy truly exercise in a dollar-centered world?

Money is not just technical, it is political

One of the book’s strengths is its refusal to treat money as a neutral instrument. From the opening chapters, the authors situate currency within social trust and state authority. Their discussion of India’s 2016 demonetization captures this vividly. Rather than analyzing it as a narrow policy error, they frame it as a rupture in the social contract of money itself. Currency works because people believe in its stability. But when that belief is shaken, the costs are not evenly shared. Poor workers and small enterprises in the poorer countries absorb the shock first.

This framing sets the tone for the rest of the book. Monetary policy is not presented as a mechanical adjustment of levers, but as a practice embedded in power relations between the state and citizens, between regulators and markets, and increasingly between national economies and the global financial system.

The chapters on interest rate determination are particularly revealing. Bhatnagar and Saratchand note that developing economies often adjust their policy stance in response to movements in external “anchor rates,” especially those set by the US Federal Reserve. This is not a minor observation. It is an admission that domestic monetary policy frequently operates in reaction to global benchmarks.

When the Federal Reserve tightens, emerging economies must often follow or risk capital outflows and currency depreciation. In such circumstances, interest rate decisions become defensive measures rather than purely domestic judgements about growth or employment. Monetary sovereignty exists, but within boundaries drawn elsewhere.

The book recognizes this asymmetry, though it does so in measured language. Inflation targeting, presented as a framework of transparency and credibility, also functions as a signal to international markets. Stability becomes not only a macroeconomic objective but a reassurance to global investors that policy will remain predictable.

The contrast with advanced economies is striking. Central banks at the core of the international system can expand balance sheets dramatically, as seen after 2008, without fearing immediate external constraint. Emerging economies rarely enjoy that latitude. The rules are formally similar, but the power embedded within them is not.

Banking reform in a world of global liquidity

The institutional account of India’s banking reforms from asset quality — the identification of an institution’s asset value and risk on a financial balance sheet — to insolvency — assessing an institution’s ability to prevent the failure of paying off debts — is thorough and accessible. The narratives of reform are laid out clearly, allowing readers to see how domestic institutions attempted to repair balance sheets and restore confidence. This includes examinations of nonperforming assets (), which are loans or debts with missed payments; , or changing a company’s capital structure; and mechanisms, the management of financial institution failure.��

Yet banking stress does not arise in isolation. It is deeply shaped by global liquidity cycles. Periods of abundant capital encourage borrowing and risk-taking; tightening cycles expose fragility. The book documents the domestic response to stress effectively, but the broader international transmission mechanism could have been foregrounded more strongly. Asset crises in emerging markets often mirror shifts in global risk appetite and funding conditions.

The comparative discussion of India and China is instructive here. China’s state-owned banks retain sector-specific mandates aligned with industrial strategy, reflecting a distinct approach to finance and development. India’s post-liberalization trajectory, by contrast, emphasized regulatory convergence and market discipline. The book presents this divergence analytically, but in a geopolitical context, the pressures of integration into a dollar-dominated system sit somewhat in the background.

Fintech, crypto and the new monetary frontier

To its credit, the book engages with contemporary developments such as fintech platforms and cryptocurrency. These are not peripheral topics; they are reshaping payment systems, cross-border transactions and even debates about monetary sovereignty. Digital currencies and alternative settlement systems have entered geopolitical discourse, especially amid discussions of de-dollarization.

However, while the book acknowledges these developments, it could integrate them more deeply into its broader analysis of international monetary power. Fintech and crypto are not merely technological innovations; they challenge or reinforce existing hierarchies. Digital payment infrastructures can reduce transaction costs, but they can also deepen financial surveillance and concentration. Central bank digital currencies raise questions about whether emerging economies might gain greater autonomy or become further embedded within global standards. By touching on these themes without fully developing their geopolitical implications, the book leaves readers with an important but unfinished conversation.

Why a measured critique of monetary orthodoxy matters now

Perhaps the book’s most important contribution lies in its restraint. It does not present itself as a manifesto. Instead, it carefully maps institutions, policies and debates. Its tone is cautious, sometimes deliberately so. For readers seeking sharper normative conclusions, this measured approach may feel unsatisfying.

Yet there is value in this moderation. By presenting the architecture of India’s monetary and banking system without polemic, the authors allow readers to see the contours of constraint for themselves. The limits of policy space, the discipline of capital mobility and the asymmetry of currency hierarchy become visible precisely because they are not overstated.

The international monetary system is entering a period of uncertainty. Persistent geopolitical tensions, debates over reserve currency status and tightening global liquidity have revived questions that many assumed were settled. Who controls money? Who absorbs risk? And who decides the boundaries of economic choice?

Foundations of Money and Banking in India does not answer these questions definitively. What it does is remind us that they exist and that they shape everyday policy decisions in emerging economies.

For a global readership, the book offers more than a national case study. It is a window into how a large developing economy navigates an unequal financial order, balancing credibility with growth, stability with development and autonomy with vulnerability. Money, the authors suggest, is never just a technical instrument. It is a site of power and in an unequal world, understanding that power is the first step toward questioning it.

[ edited this piece.]

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While collaboration tools and hiring systems have adapted quickly, international payment infrastructure still relies heavily on slow, fragmented and outdated mechanisms. The gap between global work and local financial systems is now one of the most visible sources of friction for digital workers everywhere. This growing disconnect is shaping how remote professionals move money, manage income and participate in the global economy.

The globalization of individual work

The rise of remote work did more than expand hiring options. It has redefined citizenship in economic terms. A worker in Nairobi can contribute to a startup in Denmark. A designer in Slovakia can service clients in Australia and the United States simultaneously. Digital workers have become economically borderless, but the financial systems supporting them remain strongly territorial.

Most remote professionals actively navigate various platforms, clients and countries while depending on financial pathways that lack the design for fast, flexible cross-border earnings. This has created a structural mismatch that affects both productivity and income stability. As the global workforce expands, so does the urgency to rethink the financial foundation that supports it.

Why traditional banking systems struggle

Corporations and large institutions built the international payments system, not individual remote workers. These older frameworks operate with layers of intermediaries, risk checks and national connectivity rules. The result is a predictable pattern of delays, high fees and inconsistent performance for workers trying to move money from point A to point B.

Most cross-border transfers pass through multiple banks before arriving at the destination. Each step introduces verification, risk assessment and processing time. For workers relying on invoices, contract payments or short-term project compensation, these delays by intermediaries create uncertainty that affects budgeting, planning and day-to-day stability.

Fees accumulate at every stage. Workers face wire transfer fees, conversion charges, receiving fees and unexpected deductions. These high transaction costs disproportionately impact digital workers in developing regions where every percentage point matters. According to the , the average global cost of sending international remittances remains close to 8%. The lack of transparency across institutions also makes it difficult for workers to understand why earnings fluctuate.

Compliance checks may cause payments to fail, bounce or be delayed without notice, prompting workers to contact banks or clients to track progress. Fragmented national banking systems create inconsistent reliability and force individuals to navigate complex financial pipelines that were never designed for modern global work.

The rise of digital payment infrastructure

To overcome legacy barriers, remote workers have increasingly turned to modern digital payment tools. These systems focus on speed, transparency and cross-border usability. They operate with reduced intermediaries and clearer settlement pathways. Many design this specifically to support global earnings and currency movement.

What makes these systems particularly relevant is not the technology itself but the way they align with how digital workers operate. They offer faster settlements, real-time tracking and reduced dependency on traditional banking hours. For remote workers paid across borders, these features directly address the bottlenecks that make income unpredictable.

Workers increasingly rely on platforms that support to avoid delays and maintain consistency when moving income between regions, particularly as modern digital payment tools allow users to send and manage funds directly through protected online payment systems. Global have also highlighted the need for safer and more efficient cross-border payment infrastructure as digital work expands worldwide.

Economic impact on developing regions

One of the most important effects of digital work is its role in leveling economic access. Remote work enables individuals from lower-income regions to earn in higher-income markets, shifting global . Faster and more reliable payments are essential for this shift to function effectively.

In many regions, outdated financial rails restrict access to global work because payment delays undermine financial security. When income takes days or weeks to arrive, workers cannot plan, save or allocate money efficiently. This weakens the economic benefits that remote work can deliver. Modern digital tools that speed up transfers strengthen the connection between global employment opportunities and real economic mobility.

How faster payments influence productivity

Predictable income is not just a financial advantage. It directly affects productivity. Workers who receive funds on time are better able to manage their schedules, plan long-term commitments and sustain consistent output. Uncertainty weakens motivation and disrupts work cycles.

Faster payments reduce administrative burdens on both employers and workers. Instead of tracing lost transfers or waiting for banking hours, teams can spend their time on collaboration, delivery and planning. As remote work scales across industries, efficient payment systems become foundational infrastructure rather than optional support tools.

Emerging policy considerations

The growth of the global remote workforce raises several policy questions. How should countries regulate cross-border freelance payments? How should taxation frameworks evolve to reflect location-independent work? What standards should exist to protect global workers from excessive fees or transfer delays?

Governments and financial institutions are increasingly aware that old systems cannot support new labor patterns. Policy reform will likely focus on streamlining international payment corridors, improving transparency and encouraging financial innovation that supports mobility rather than restricting it.

The future of global earnings

Global work is no longer a niche trend. It is becoming a defining feature of the world economy. As remote workers continue to operate across borders, demand for fast, secure and accessible payment systems will continue to grow.

The evolution of cross-border payments will influence how millions of people participate in the global economy. It will shape income distribution, access to opportunity and the competitiveness of digital talent. The future of work and the future of global payments are now deeply connected. The systems that support them must evolve together.

[ edited this piece.]

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And when asked why he abandoned even the pretense of propriety, Trump offered a more damning than any indictment: “I found out that nobody cared.”

He is right. And this essay is addressed to the “nobody” who didn’t care.

Not to the Make America Great Again (MAGA) base. They were promised something: border security, cheaper groceries, no wars, restored greatness. They voted for it in good faith. That most of those promises have been broken is Trump’s betrayal of them, not theirs of the country. The base is not the subject of this letter.

This letter is addressed to the people who knew. The CEOs who sat in the front row at the inauguration and who possess the education, resources, institutional power and platforms to have said no. Mark Zuckerberg. Sundar Pichai. Tim Cook. Jeff Bezos. Satya Nadella. The billionaire donors who wrote checks after January 6, after the indictments, after the conviction, after the “very fine people on both sides.” Stephen Schwarzman. Ken Griffin. Nelson Peltz. Larry Ellison. The venture capitalists who built media empires to launder authoritarian governance as “disruption.” David Sacks. Chamath Palihapitiya. Marc Andreessen. The finance titans who called Trump’s tariffs “economic nuclear war” in private and applauded his “business-friendly agenda” in public. The senators who voted just a few weeks ago to let a president wage war without their consent because party loyalty outweighed their oath to the Constitution.

You are the “nobody” who didn’t care.

And as of three weeks ago, the consequences of your cowardice are measured in body bags.

The Iran test

On February 28, 2026, the US and Israel a joint military campaign against Iran, code-named “Operation Epic Fury,” that killed the country’s Supreme Leader, Ayatollah Ali Khamenei, and targeted Iranian military infrastructure across the country. The strikes were ordered by a president who campaigned on a promise of “no more forever wars.” They were executed by a Defense Secretary, Pete Hegseth, who was a Fox News host six months before his confirmation. They were launched without , without a UN mandate, without a clearly articulated strategic objective, without a plan for the day after and without basic contingency planning for the blindingly obvious consequences.

This is the part that should terrify every American: Nobody in this administration appears to have war-gamed what would happen next.

Iran closed the Strait of Hormuz. of the world’s oil supply was disrupted overnight. Brent crude surged past $80 a barrel within days, with Goldman Sachs it could reach triple digits if the closure persists. Gulf state airspace shut down. Emirates, Qatar Airways and thousands of commercial flights were grounded. Dubai International Airport, one of the world’s busiest hubs, went dark. European natural gas prices spiked 38% after attacks on Qatari facilities, threatening energy security across the continent and driving up fertilizer costs that will ripple through global food supply chains for months.

The contagion spread faster than the war itself. South Korea’s Composite Stock Price Index in a single day, the worst crash in its history, worse than September 11, triggering a circuit breaker that halted trading. The next day, it fell another 7%, cementing the worst two-day streak in decades. Samsung, SK Hynix, LG: the pillars of a major allied economy, gutted. Thailand imposed its own trading curb after an 8% decline. Bloomberg that emerging markets became “one of the worst places to be for global investors,” with Korean stocks down 18% in a single week. South Korea imports 98% of its fossil fuels. It did not start this war. It did not consent to it. It is paying for it.

The destabilization extends far beyond markets. The Armenia-Azerbaijan conflict now merging with the Iran-Israel proxy war. Central Asian nations, landlocked and dependent on Iranian ports for trade routes to the Indian Ocean, face severed commerce. India, which depends heavily on Gulf oil imports, is bracing for inflation shocks that will hit its poorest citizens hardest. Pakistan and Afghanistan have that the conflict could spill over their own borders. Djibouti’s president has denounced the risk of the war cascading into Northeast Africa’s existing conflicts in Somalia, Sudan and Chad. The Houthis have to attack any US or Saudi military facilities in Yemen. The very allies this administration claims to be protecting are now scrambling to contain the chaos it created.

Six American service members are dead. Hegseth told reporters the operation is “just getting started” and that the US could “sustain this fight easily for as long as we need to.” Trump the New York Times the strikes could last “four to five weeks.” Representative Hakeem Jeffries pointed out what should be obvious: “This notion of regime change has never been successful, as most recently indicated by its failure in Iraq, its failure in Libya and its failure in Afghanistan.”

The Senate on March 4, 2026, on a war powers resolution to require congressional authorization for further military action in Iran. It , 47-53, almost entirely along party lines. Rand Paul was the only Republican who voted yes. John Fetterman was the only Democrat who voted no. Speaker Mike Johnson called the resolution “siding with the enemy.” Senator Tim Kaine responded: “If you don’t have the guts to vote yes or no on a war vote, how dare you send our sons and daughters into war where they risk their lives?”

A CBS News found that most Americans disapprove of the war with Iran. About half believe the conflict could last months or years. The American people see what the enablers refuse to acknowledge: This war has no endgame, no authorization and no limiting principle.

This is the test. And every enabler in America is failing it.

The broken promises

Before I walk through the full ledger of what the enablers sanctioned with their silence, I want to address the people they claim to represent. The voters. The consumers. The workers. The families who were promised something tangible and received something very different.

Trump promised to “end inflation and make America affordable again, starting on day one.” Inflation the Federal Reserve’s 2% target throughout 2025, with the personal consumption expenditures deflator ending the year at 2.9%. The Fed’s own research attributed as much as half a percentage point of that inflation directly to tariff policy. Grocery prices rose in the year, the sharpest increase since March 2024. Beef prices are up over 16%. Coffee is up 20%. Electricity bills rose by 6.7% in 2025, more than double the overall inflation rate, costing the average American household an additional $116 per year. The promise to cut energy costs in half was, in ’s precise words, missed “by a lot.”

Trump promised that “jobs and factories will come roaring back.” The US labor market added roughly jobs in all of 2025, a fraction of the 1.5 million created in 2024. Manufacturing, the sector Trump vowed to resurrect, lost jobs between April and December after the trade war escalated. The Wall Street Journal (WSJ) reported that “fewer Americans work in manufacturing than at any point since the pandemic ended.” January 2026 brought the worst month of job cuts since the Great Recession: , three times the December figure.

Trump promised, “no more forever wars.” He has now bombed or conducted military operations against eight countries in a single year, including an unauthorized war against Iran that his own defense secretary says is “just getting started.” The man who mocked the “endless wars” of his predecessors has launched an open-ended conflict without congressional approval, without a strategic endgame and without the consent of the American people.

Trump promised free markets. He delivered Trump markets. Companies are told what to build, where to build it and whom to hire. Those who comply receive tariff exemptions and regulatory favor. Those who dissent receive investigations and public threats. The Supreme Court in February 2026 that Trump exceeded his authority by unilaterally imposing broad tariffs, a violation of congressional power over trade. The administration promised to replace them using other legal tools. American consumers are shouldering up to of the tariff costs, according to Goldman Sachs, a burden projected to rise to 70%.

Trump promised to restore global respect. American soft power is in freefall. Allied markets are crashing from a war they were never consulted about. The UN, NATO, the International Criminal Court, the International Court of Justice, the UN Refugee Agency (UNHCR), the World Bank and the US Agency for International Development (USAID) have been gutted or abandoned. The global order that — whatever its imperfections (and there are many) — maintained a predictable framework for security and commerce is being dismantled by the country that built it. Even Republican voters are souring: A found that “by 15 percentage points, more voters rate the economy as weak rather than strong,” the worst showing of Trump’s second term.

These are not partisan talking points. They are data. They are Bureau of Labor Statistics numbers, Federal Reserve reports, consumer price index measurements and trade deficit figures. The GoFundMe CEO that the economy is so challenged that people are raising money to buy food. Deloitte’s holiday spending survey the least optimistic consumer outlook since 1997.

The people who voted for Trump are not stupid. They are being robbed. And the enablers who financed, promoted and legitimized the administration that is robbing them will face no consequences. They never do.

The ledger: what you enabled

Let me walk through what the “reasonable” men — the CEOs, the donors, the senators and the editorial boards — enabled with their silence, their checks and their front-row seats.

You enabled the dismantling of constitutional governance. This president has governed almost exclusively through executive orders, in his first 100 days, because he has almost no legislative accomplishments. He imposed tariffs without congressional approval. He attempted to freeze funds that Congress had already appropriated. He tried to birthright citizenship by executive fiat, in direct violation of the 14th Amendment. He fired members of independent agencies to install loyalists. He attempted to a Federal Reserve board member. He reclassified tens of thousands of career civil servants as political appointees to enable mass firings. He did not govern the republic. He ruled it by decree. And you said nothing.

You enabled the construction of a domestic surveillance and deportation apparatus. Immigration and Customs Enforcement (ICE) agents are detaining and, in documented cases, American citizens. The Alien Enemies Act of 1798 has been to justify mass deportations. Asylum seekers are systematically jailed. Families are separated. Palantir’s databases track and target communities with algorithmic precision. The “remain in Mexico” forces asylum seekers into conditions the UN has described as inhumane. And you, the same people who profess to believe in “freedom” and “individual liberty,” have said nothing, donated millions and attended galas.

You enabled the demolition of global institutions. In one year, this administration has gutted or undermined the UN, NATO, the ICC, the ICJ, UNHCR, the World Bank and USAID. Decades of American soft power have been systematically destroyed. Allied nations are realigning away from the US. Adversaries are emboldened. The global institutions that constrain war, protect refugees and adjudicate disputes between nations have been weakened to the point of irrelevance. You calculated that deregulation and tax cuts were worth more than the international order that protects your supply chains, your markets and your employees’ children from conscription.

You enabled economic destruction in the name of “free markets.” The man you funded has replaced free markets with a command economy run by tweet. He rewards allies and punishes critics through tariffs, procurement and regulatory favor. His own supporter, Bill Ackman, the tariffs “economic nuclear war” before going quiet again. Small businesses are being crushed. Consumer prices are rising. The manufacturing boom he promised is a manufacturing contraction. And the billionaires who funded this, whose portfolios are buffered by diversification and offshore holdings, will be fine. The people who voted for cheaper groceries will not.

You enabled the weaponization of justice. Over January 6 participants have been pardoned or had their sentences commuted, including people who assaulted police officers, broke into the Capitol and called for the murder of elected officials. The president has directed investigations into former officials who criticized him. He has threatened the press credentials of outlets that publish unfavorable coverage. He has filed a lawsuit against JPMorgan Chase, a bank regulated by his administration, alleging “political bias” for closing his accounts after an insurrection he incited. The rule of law is not being bent. It is being broken.

You enabled complicity in genocide. This president has provided unconditional support to an Israeli government whose leadership is by the ICC. He has advanced fighter jets and approved AI chip exports to Saudi Arabia, the same week he welcomed its crown prince. He has deployed American military technology, including the platforms built by Google, Amazon and Palantir under contracts their own employees protested, in operations that have killed thousands of civilians.

And now you have enabled an unauthorized war. Not a “limited strike.” Not a “targeted operation.” A war. With American casualties. With a defense secretary who says it’s “just getting started.” With no congressional authorization, no strategic endgame, no exit plan and no contingency for the economic devastation already rippling across the planet. With South Korea’s market in its worst crash since 9/11. With the Strait of Hormuz closed. With oil heading toward triple digits. With the conditions for a wider regional conflagration already in motion.

This is what you enabled. This is what “nobody cared” produced.

The double standard

I need to say something that will make some readers uncomfortable. I say it not to score political points but because it is the structural diagnosis without which nothing else in this essay makes sense.

If Barack Obama had profiteered $4 billion from the presidency, the impeachment proceedings would have begun before the ink was dry. If Obama had a convicted money launderer whose platform subsequently enriched his family’s cryptocurrency business, Fox News would have run the chyron for a year. If Obama had launched an unauthorized war against a sovereign nation, killing its head of state without congressional approval, while his defense secretary, a former television commentator with no military command experience, told reporters he was “just getting started,” the same senators who voted today to let Trump continue would have drafted articles of impeachment by sundown. And let me be clear: I am no Obama fanboy. I voted for him with historical emotions in 2008; I not only abstained but also became a vocal critic thereafter.

If Obama had told the New York Times “nobody cared” about his profiteering, the word “corruption” would have been on every front page. When Trump says it, it lands on page six.

The silence is not neutral. It is the sound of every institutional constraint — congressional oversight, media independence, corporate accountability, civil society pressure, staff resignation — collapsing simultaneously. Previous presidents were not necessarily better men. They were more constrained men. And the people who provided those constraints have chosen, for the first time in modern American history, to abandon them entirely.

These men, and they are mostly men, mostly white, though not exclusively, did not suddenly discover that presidential profiteering is acceptable. They did not suddenly decide that unauthorized wars are constitutional. They did not suddenly conclude that dismantling independent agencies and firing civil servants is good governance. They decided that this president, who flatters their portfolios, guts their regulatory constraints, appoints their allies to the bench and provides the political cover for a vision of governance they always wanted but couldn’t say aloud, is worth the cost.

The cost is being paid by others. By the six dead service members in Iran. By the asylum seekers in detention. By the small business owners bankrupted by tariffs. By the 108,435 workers laid off in January alone. By the 77,000 manufacturing jobs that vanished after “Liberation Day.” By the farmers watching their markets collapse. By the federal workers fired for the crime of competence. By the journalists investigated for the crime of reporting. By the citizens of allied nations whose markets crashed this week because an American president chose war without a plan or authorization.

The enablers will be fine. They are always fine. That is the definition of the word.

The cowards’ gallery

I will not dwell on the true believers. Elon Musk, who contributed to elect this president and now operates a parallel executive branch, is not a coward. He is an ideologue pursuing a vision of governance by technological aristocracy. David Sacks and Chamath Palihapitiya, who use their podcast to gaslight millions into treating constitutional erosion as “liberal hysteria,” are not cowards. They are propagandists with conviction. Alex Karp, who mocked Google’s refusal to build military AI and now builds surveillance systems for governments, is not a coward. He is a man who found that power tastes better than principle.

The cowards are the converts. The people who knew better and chose anyway.

Mark Zuckerberg built a platform on “connecting the world” and “giving people the power to build community.” He spent years cultivating a reputation as a defender of democratic discourse. Then he Trump’s response to an assassination attempt “badass,” dismantled Meta’s fact-checking apparatus, adjusted his algorithms to amplify MAGA-aligned content and eliminated Diversity, Equity and Inclusion (DEI) programs, all before anyone asked him to. This was not capitulation under pressure. This was pre-emptive obedience. Zuckerberg calculated that the cost of Meta’s regulatory exposure exceeded the cost of his credibility. He was right about the calculation. He was wrong about what it made him.

Jeff Bezos spiked his own newspaper’s presidential endorsement. The Washington Post, the paper that published the Pentagon Papers, that broke Watergate, that employs the colleagues of Jamal Khashoggi, was from endorsing a candidate because its owner wanted to protect Blue Origin’s government contracts. Bezos did not need to say a word. The suppression was the statement. It told every journalist at the Post that their independence is conditional on their owner’s business interests. It told every reader that the paper’s editorial judgment is for sale. And it told every authoritarian on earth that the American free press can be silenced without a single law being changed. All you need is a billionaire with a portfolio.

Tim Cook attends inaugurations, maintains “friendships” and secures tariff exemptions while Apple’s supply chain depends on and its App Store extracts feudal rents from developers worldwide. Cook has perfected the art of apolitical complicity: the posture of the executive who “doesn’t do politics,” while every political calculation is embedded in every product decision, every market entry, every regulatory negotiation. His silence is not neutrality. It is the sound of a man who has decided that human rights are a marketing problem.

The Wall Street are perhaps the most revealing. Stephen Schwarzman distanced himself from Trump after January 6, then returned, citing “economic and immigration policy.” Nelson Peltz said he “regretted” voting for Trump in 2020, then endorsed him in 2024 for the tax cuts. Ken Griffin contributed $108 million to Republican causes. These are men who, in their private lives and professional environments, would never tolerate the behavior they fund in public life. They would not hire a CEO who had been convicted of fraud. They would not invest in a company whose founder pardoned criminals for personal financial benefit. They would not sit on the board of a firm that launched unauthorized operations costing lives without a strategic plan. But they fund a president who does all of these things because the after-tax return is sufficient. Their morality is a function of their marginal rate.

David Solomon, the CEO of Goldman Sachs, described the market’s reaction to the Iran war, a war that killed six Americans, crashed South Korea’s market by 12% in a single day and disrupted 20% of global oil supply, as “.” He said it on the same day his own research team warned oil could hit triple digits. This is what enablement sounds like at the institutional level: the language of normalcy applied to catastrophe. If the market is “benign,” the war must be manageable. If the war is manageable, the president’s judgment must be sound. If the president’s judgment is sound, the donations were justified. The logic is circular, self-sealing and, as of today, costing lives.

What they would have done to Obama

I want to hold this frame for one more moment, because it is the frame that explains everything.

Imagine that President Obama had: Made $4 billion from the presidency through cryptocurrency ventures he previously called “a scam”; Pardoned a convicted money launderer whose platform subsequently enriched his family; Announced Saudi real estate deals the same week he sold advanced weapons to the kingdom; Launched an unauthorized war that killed American soldiers, with a defense secretary who had no military command experience; Told the Times “nobody cared” about his profiteering; Governed almost entirely through executive orders, with virtually no legislation; Imposed tariffs so sweeping that allied stock markets had their worst crashes since 9/11; Fired 250,000 federal employees through an unelected advisor; Used the Alien Enemies Act to justify mass deportations; Pardoned 1,500 people who violently stormed the Capitol; Presided over the worst January for job cuts since the Great Recession; Lost 77,000 manufacturing jobs while promising a manufacturing boom; Allowed electricity bills to rise 6.7% while promising to cut energy costs in half

He would not have survived the first month. And every person named in this essay knows it. This knowledge is what makes them cowards rather than fools.

The agency we still have

I have spent this essay in anger. I want to end it in clarity.

The enablers have failed. The institutions they were supposed to steward — corporate boards, media organizations, financial markets and the US Congress — have been captured, hollowed out or bought. The Senate voted to let a president wage an unauthorized war. The CEOs attend galas. The billionaires write checks. The editorial boards issue measured calls for “dialogue.”

But here is what I know from 30 years of watching power operate: The countermovement never comes from the institutions that capitulated. It comes from below.

The civil rights movement did not wait for corporate America to develop a conscience. It forced conscience upon a nation through boycotts, marches, sit-ins and the willingness of ordinary people to absorb violence in the service of justice. The labor movement did not wait for Wall Street to discover fairness. It organized, it struck, it bled and it built the middle class that Wall Street now profits from. Solidarity did not wait for the Polish establishment. It began in a shipyard.

The 300 million Americans who are not in that room, who are not at the galas, who do not write the checks, who do not sit in the front row, are not powerless. They are, in fact, the last institution standing. When the Senate abdicates, when the courts defer, when the press is purchased, when the corporations kneel, the citizenry is the final check on power. Not as aspiration. As structural reality.

There are members of Congress who voted their conscience, some against their own party, knowing it would cost them. Thomas Massie, who called the strikes “acts of war unauthorized by Congress.” Rand Paul, who said his “oath of office is to the Constitution.” Tim Kaine, who demanded: “If you don’t have the guts to vote yes or no on a war vote, how dare you send our sons and daughters into war where they risk their lives.” Warren Davidson, a former Army Ranger, who said simply: “No. War requires congressional authorization.” Andy Kim, who told the administration that it “owns” the results of this conflict, including every American death. They exist. They spoke. They voted no.

There are Google employees who were fired for refusing to build technology that powers genocide. There are journalists who continue to report under threat. There are small business owners, teachers, nurses, veterans, organizers and citizens who refuse to accept that “nobody cared” is the final word.

The enablers have made their choice. The question now is whether the rest of us will make ours.

Trump said nobody cared. He was describing the people who surround him: the court jesters, the cowards, the converts, the profiteers. He was not describing America. Not the America I have spent my career serving, the America that has always, eventually, painfully, imperfectly, chosen the harder right over the easier wrong.

The enablers bent the knee. The republic does not have to follow them down.

The views expressed in this article are the author’s own and do not necessarily reflect 51�Թ�’s editorial policy.

The post Nobody Cared: A Letter to the Enablers of American Collapse appeared first on 51�Թ�.

According to their analysis, this development carries important geopolitical implications because the US has long relied on the threat of excluding banks from the SWIFT network as a key instrument of financial sanctions. If a growing share of global payments migrates to alternative infrastructures such as CIPS, the effectiveness of this sanctions tool could gradually weaken.

This observation aligns with broader evidence presented by economists at the International Monetary Fund (IMF). Recent IMF staff assessments of China’s economy several indicators suggesting that RMB internationalization is progressing gradually. These include rising shares of trade invoicing settled in RMB, increased offshore RMB lending and expanding issuance of “panda bonds” — RMB-denominated bonds issued in China by foreign institutions. Central banks have also modestly increased their holdings of RMB assets as part of broader reserve diversification strategies. Although the RMB still accounts for only a small portion of global financial transactions and foreign-exchange reserves compared with the US dollar, these developments suggest that international currency usage may be slowly diversifying at the margin.

Payment Infrastructure and the visibility of RMB transactions

Launched in 2015 by the People’s Bank of China, CIPS functions as a clearing and settlement system for cross-border RMB payments. It also provides messaging services that allow participating banks to transmit payment instructions across borders. In its early years, CIPS remained closely linked to the existing global payment infrastructure. Most CIPS transactions still relied on SWIFT messaging protocols to transmit payment instructions. As recently as 2022, estimates that roughly 80% of CIPS payments were accompanied by SWIFT messages.

Since 2024, however, the structure of the system has begun to evolve. The number of direct participants in CIPS — banks capable of sending payment messages directly through the system — has expanded significantly. Direct participants from 139 banks to nearly 193 institutions, representing a growth of roughly 40%. This expansion has gradually shifted the flow of payment messages away from SWIFT and toward CIPS’s internal messaging channels. As a result, a growing share of RMB transactions no longer appears in SWIFT statistics.

This shift helps explain why SWIFT data may underestimate the actual level of cross-border RMB activity. As more payments are processed through CIPS rather than SWIFT, the apparent decline in RMB usage within SWIFT statistics does not necessarily indicate a decline in global RMB transactions. Instead, it reflects a migration of financial messaging infrastructure.

The implications of this migration extend beyond technical changes in payment systems. For decades, the US has exercised significant influence over the international financial system through its central role in global payment infrastructure. SWIFT, though headquartered in Belgium, operates within a financial ecosystem closely tied to Western regulatory frameworks. As a result, access to SWIFT has become an important instrument of economic statecraft. Financial sanctions imposed on countries such as Iran and Russia illustrate the power of this mechanism. By threatening to exclude banks from SWIFT, the US and its allies have been able to restrict targeted countries’ access to global financial markets. In practice, this ability to control access to payment networks has reinforced the international influence of the US dollar.

At the same time, the emergence of alternative payment infrastructures such as CIPS may reduce the effectiveness of this specific strategy at the margin. If more international transactions can be processed through networks outside SWIFT, countries subject to sanctions may find limited ways to maintain financial connectivity despite restrictions imposed through Western-controlled channels. Even so, it would be misleading to interpret such developments as evidence of an imminent decline in dollar dominance. The dollar’s central role in global finance remains supported by much deeper structural factors than payment messaging alone.

US Treasury securities remain the most liquid and widely trusted safe assets in global financial markets. The size and depth of US financial markets continue to provide unparalleled infrastructure for global capital flows, liquidity management and collateral formation. Dollar-based markets also remain central to hedging, derivatives pricing, reserve accumulation and external financing. For these reasons, shifts in payment channels do not automatically translate into a generalized weakening of the dollar’s broader international role.

Structural foundations of dollar dominance

from ANZ Research reinforces this perspective. Analysts there argue that even developments such as the potential emergence of a “” — oil transactions denominated in RMB — are unlikely to trigger a rapid shift in the global monetary system. If major oil exporters such as Saudi Arabia were to accept RMB as payment for oil exports to China, this could increase the currency’s role in trade settlement and encourage central banks to hold more RMB-denominated assets. However, such changes would more likely represent incremental diversification than a wholesale transformation of the international currency hierarchy.

In this context, this article by your author should as denying the strength or persistence of the dollar. Nor does it attempt to analyze the political dynamics through which the US sustains the dollar as a uniform form of monetary hegemony. Questions concerning the political strategies, institutional coalitions and geopolitical forces that underpin the durability of US monetary power fall outside the scope of the author’s model. Instead, the article adopts a different analytical perspective: It interprets dollar dominance as a form of infrastructure power distributed unevenly across distinct monetary functions within the international monetary system.

From this perspective, the resilience of the dollar derives less from a single hegemonic mechanism than from the dense network of financial markets, legal institutions, safe assets, payment systems and hedging instruments that collectively support global dollar use. The author’s model, therefore, does not deny dollar dominance; rather, it specifies how that dominance operates unevenly across functions. It argues that changes such as the expansion of alternative payment infrastructures, bilateral settlement arrangements or the increased use of non-dollar currencies in trade may permit partial bypass of the dollar in specific domains — especially payments and invoicing — without displacing its central role in more demanding functions such as safe-asset provision, financial anchoring and global liquidity supply.

Evidence of such functional reconfiguration can also be in the structure of global energy trade. In 2024, Russia, Saudi Arabia, Malaysia and Iraq together accounted for 57.5% of China’s crude oil imports. Russia emerged as the largest supplier, exporting approximately 2.19 million barrels per day (Mb/d) of crude oil to China — about 41% more than Saudi Arabia’s 1.55 Mb/d. Malaysia and Iraq followed with exports of 1.39 Mb/d and 1.24 Mb/d, respectively. Together, these four countries supplied more than half of China’s crude oil imports. Notably, Malaysia overtook Iraq by roughly 12% in exports to China despite not being a major oil producer. This pattern has led analysts to suggest that part of these exports may include Iranian crude oil rebranded as Malaysian in order to circumvent international sanctions.

Such trade patterns are closely linked to sanctions evasion and the diversification of transaction routes. Countries subject to Western financial sanctions — most notably Russia and Iran — have increasingly sought to reduce their dependence on dollar-denominated settlement and Western financial infrastructure by utilizing alternative payment channels, including renminbi-based settlement arrangements and non-Western payment networks. As a result, a portion of energy transactions has begun to shift toward settlement in RMB or other non-dollar currencies.

However, these developments remain concentrated primarily in the transactional functions of international money — specifically the medium-of-exchange and unit-of-account roles associated with trade settlement and pricing. Even in global oil markets, more demanding financial functions such as hedging, liquidity provision, asset management and safe-asset holdings remain overwhelmingly anchored in the dollar-based financial system. The deep liquidity of US financial markets, the availability of dollar-denominated safe assets, and the extensive infrastructure for derivatives and risk management continue to reinforce the dollar’s central role.

Consequently, the expansion of RMB settlement in China’s energy trade should not be interpreted as evidence of the collapse of the dollar-based international monetary system. Rather, it reflects a limited redistribution of payment infrastructure and currency usage within specific transactional domains. The dollar continues to occupy the core of global financial architecture, even as alternative currencies and payment systems gradually expand their presence in selected areas of trade and settlement. The emerging international monetary system, therefore, appears increasingly layered, characterized by partial diversification in transactional functions while the deeper financial foundations of dollar dominance remain firmly intact.

Historical experience also suggests that major shifts in global currency regimes occur only under extraordinary institutional and geopolitical circumstances. The rise of the US dollar as the dominant international currency was closely tied to the creation of the in 1944 and the broader economic and political order that emerged after World War II. Similarly, the decline of the British pound as the leading reserve currency accelerated only after major geopolitical shocks such as the in 1956.

In contrast, the contemporary international financial system lacks a comparable institutional turning point that would facilitate the rapid replacement of the dollar. Moreover, China itself appears cautious about fully internationalizing the RMB. Rather than pursuing rapid financial liberalization, Chinese policymakers have generally favored a gradual approach centered on trade settlement, regional financial links and selective infrastructure development. The expansion of CIPS, along with initiatives such as the digital renminbi (e-RMB), reflects efforts to build alternative transactional channels without fully opening China’s capital account.

For this reason, the evolution of financial infrastructure may prove more significant than the immediate expansion of RMB-denominated transactions. Although CIPS currently processes only a small fraction of the daily transaction volume handled by SWIFT, its growth signals a broader trend toward diversification in global payment networks. Geopolitical fragmentation may reinforce this process, as countries increasingly seek to reduce vulnerability to sanctions and network exclusion.

Ultimately, the expansion of CIPS and the gradual growth of RMB usage point to a broader transformation in the architecture of global finance. Yet this transformation is better understood as functional diversification within a still dollar-centered system than as a generalized transition away from dollar dominance. The central question for policymakers, therefore, is not whether the RMB will soon replace the dollar. It is how the diversification of global financial infrastructure may reshape the distribution of power within an international monetary system whose deepest financial foundations remain anchored in the dollar.

The views expressed in this article are the author’s own and do not necessarily reflect 51�Թ�’s editorial policy.

The post China’s Use of Renminbi and CIPS Challenges US Dollar but Falls Short appeared first on 51�Թ�.

Today, however, rival powers are probing those gates. Rather than attempting to overthrow the system directly, China and Russia are expanding influence along their strategic corridors — regions where multiple interests and means intersect, e.g., energy, maritime routes, military positioning and financial networks. The emerging rivalry between the US and the China–Russia partnership is therefore less a single confrontation than a distributed competition unfolding across multiple regions simultaneously.

Understanding this competition requires looking beyond traditional geopolitical maps. The international system now operates through interconnected physical and financial infrastructures: shipping lanes, commodity supply chains, payment systems, energy corridors and technological networks. But these networks are inseparable from military strategy; naval deployments protect sea lanes while air and missile defenses secure regional balances. Strategic basing and force projection shape the security of trade routes and energy infrastructure.

Power increasingly flows through these interconnected channels. The states that influence them shape not only regional politics but the broader architecture of the .

One way to understand this evolving contest is through what might be called the Four Gateways Strategic Framework. This framework identifies four regions where geopolitical competition, economic infrastructure and military positioning converge: the Western Hemisphere, the Middle East, the Arctic and the Indo-Pacific. Each of these strategic gateways functions as a corridor through which rival powers can project influence across the international system.

For the US, these gateways represent critical pressure points. Securing them requires more than military power alone. It demands a coordinated strategy combining alliances, economic statecraft, energy diplomacy, financial leadership and credible military deterrence.

The architecture of power

For decades, the US has occupied a uniquely central position in the international system. Its influence rests not only on military strength but also on the institutional infrastructure of global finance. The US dollar serves as the for international trade, financial reserves,and cross-border settlement. American capital markets remain the deepest and most liquid in the world. Global banks rely heavily on dollar clearing and correspondent banking relationships tied to US financial institutions.

This architecture gives Washington powerful tools of economic statecraft. Financial sanctions, for example, derive their strength from the ability to restrict access to dollar transactions and the institutions that support them.

Yet the architecture of dollar power is layered rather than monolithic. It consists of multiple components: safe assets, liquid capital markets, correspondent banking networks, derivatives markets, reserve holdings and global payment systems. Because of this layered structure, rival powers do not need to overthrow the dollar system outright in order to weaken American leverage. Instead, they can attempt to bypass or erode specific operational layers — especially those linked to sanctions enforcement and cross-border payments.

China and Russia have increasingly explored such . These include local-currency energy trade, bilateral financial arrangements and alternative designed to reduce dependence on Western-controlled financial infrastructure. These efforts remain limited compared to the scale of the US dollar-based system, but they illustrate how geopolitical rivalry increasingly intersects with financial architecture.

But the same layered logic applies to military strategy. Just as the financial system operates through interconnected infrastructures, so too does military power rely on logistics networks, forward bases, naval chokepoints and alliance structures. The strategic gateways of the international system are therefore not merely economic corridors — they are also potential theaters of military competition.

The four strategic gateways illustrate where these dynamics are most visible:

What makes a strategic gateway?

Not every region of the world functions as a strategic gateway. A gateway emerges where multiple systems of power intersect, and typically includes four elements: geographic access, economic infrastructure, military positioning and financial connectivity. Regions that combine these characteristics become corridors through which global influence can be projected.

Geographically, strategic gateways sit along major transportation routes or chokepoints that shape the movement of goods and energy. Economically, they connect key resource flows, supply chains or financial networks that sustain the global economy. Militarily, they often host forward bases, naval routes or strategic terrain that enables states to project force across regions. Financially, they intersect with global trade settlement systems, energy markets and sanctions regimes that structure the operation of the international economic order.

The strategic logic of gateway control is not entirely new. One of the earliest examples appears in the�� of 1823, which asserted that external powers should not expand their political influence in the Western Hemisphere. Although framed as a defensive principle, the doctrine effectively defined the Western Hemisphere as a strategic gateway region whose political alignment and security were considered vital to the US. By discouraging European intervention in the Americas, the Monroe Doctrine sought to prevent rival powers from gaining footholds near US territory that could threaten the country’s long-term strategic position.

In the 21st century, elements of this logic have reappeared in contemporary US strategic thinking and actions. Based on policy discussions and reporting from late 2025 and early 2026, the administration of President Donald Trump — following his return to office — advanced what some observers described as the��“,” or the Trump Corollary to the Monroe Doctrine. This approach is widely interpreted as representing a modern reinterpretation of the original doctrine, aimed at reasserting American strategic primacy in the Western Hemisphere in the face of growing Chinese and Russian influence.

Unlike the 19th-century Monroe Doctrine, which focused primarily on preventing European colonization, this updated doctrine emphasizes preventing rival powers from establishing strategic footholds through infrastructure investment, energy partnerships, financial networks or military cooperation within the region. In practice, this approach reflects a broader recognition that great power competition increasingly unfolds not through direct territorial conquest but through control of critical corridors (or the strategic gateways) that shape global trade, energy flows and financial systems.

More broadly, what some analysts also describe as the Trump Doctrine emphasizes economic sovereignty, great-power rivalry and the use of sanctions, tariffs and military pressure to defend American strategic interests. This perspective recognizes that geopolitical competition increasingly occurs along the infrastructure networks that sustain globalization — shipping routes, energy pipelines, financial systems and technological supply chains.

The concept of strategic gateways builds on this logic. Certain regions become critical not merely because of their geographic location but because they sit at the intersection of military strategy, economic infrastructure and financial power. Control over these corridors enables states to influence the flow of global commerce, the security of energy supplies and the stability of financial systems.

The four regions examined in this article — the Western Hemisphere, the Middle East, the Arctic and the Indo-Pacific — represent areas where all of these dimensions converge. Each functions not only as a geographic space but as a strategic corridor linking military power, economic infrastructure and financial influence within the international system. Together, they form the principal gateways through which contemporary great-power competition is increasingly being conducted.

The Southern Gateway: Venezuela and strategic competition in the Western Hemisphere

The first gateway lies in the Western Hemisphere, where Venezuela has become an important node in the geopolitical relationship between China, Russia and the US.

Over the past two decades, China has Venezuela with substantial financial support through oil-backed loans and infrastructure investment. These arrangements allowed Beijing to secure long-term access to energy supplies while expanding its presence in Latin America. Russia this relationship through military cooperation, intelligence ties and investment in Venezuela’s energy sector.

For the Maduro government, these partnerships provided crucial support during periods of economic crisis and diplomatic isolation. For China and Russia, Venezuela offered a strategic foothold in a region historically dominated by the US.

The Venezuelan case also illustrates the limits of economic sanctions. Despite extensive restrictions imposed by Washington, Venezuelan oil exports continued through complex networks of intermediaries, shadow shipping fleets and indirect trading channels. These mechanisms demonstrated how sanctions can be partially circumvented when targeted states retain access to alternative markets and logistical support.

Yet Venezuela also illustrates the continuing role of military power in shaping geopolitical outcomes. On January 3, 2026, US forces executed��, a covert military operation in Caracas that resulted in the capture of Venezuelan President Nicolás Maduro and his wife, Cilia Flores, on charges related to narcotics trafficking and narcoterrorism. The raid, conducted by US special operations forces after months of planning, removed one of Washington’s most entrenched regional adversaries and underscored the�� US’s continued willingness to employ direct military force in the Western Hemisphere.

The episode demonstrates that the Southern Gateway remains both a geopolitical and military arena. Influence in the Western Hemisphere depends not only on economic engagement and political partnerships but also on the credibility of US security capabilities in the region.

The Western Gateway: Iran and the Middle Eastern strategic corridor

A second gateway lies in the Middle East, where Iran occupies a central position in the evolving geopolitical alignment between China and Russia.

Iran sits at the crossroads of multiple strategic systems: energy production, maritime trade routes, regional security dynamics and Eurasian connectivity. It also remains one of the most heavily sanctioned economies in the world.

China has as Iran’s largest trading partner and a major purchaser of its oil. Russia has military cooperation with Tehran, particularly following the war in Ukraine. These relationships illustrate how geopolitical alignment can reinforce economic resilience under sanctions pressure.

Recent developments have further intensified the region’s strategic volatility. As of March 2026, Iranian Supreme Leader Ayatollah Ali Khamenei was in a joint US-Israeli air strike targeting senior Iranian leadership during a period of escalating regional conflict. The operation triggered a succession process that elevated Mojtaba Khamenei as the new Supreme Leader, while retaliatory actions across the region produced more than a thousand casualties and heightened instability across the Middle East.

These events underscore the military dimension of the Western Gateway. The Middle East remains a region where energy markets, naval chokepoints such as the Strait of Hormuz, missile and drone warfare, and great-power competition intersect. Control over these corridors affects not only regional security but also global energy flows and financial stability.

The Northern Gateway: the Arctic and the future geography of trade

The third gateway lies in the Arctic, a region whose strategic importance is growing as climate change accelerates the retreat of polar sea ice. The opening of Arctic shipping routes could significantly shorten transit times between Asia, Europe and North America. At the same time, the Arctic contains substantial deposits of oil, natural gas and critical minerals increasingly important for advanced manufacturing and energy technologies.

Recent geopolitical developments have highlighted the region’s growing strategic value. In 2019, and again during his second presidency,�� Trump�� that the US acquire��Greenland, arguing that control of the island was vital for US national security and Arctic strategy. The proposal intensified in 2025–2026, with Washington pressing Denmark and Greenland while framing the acquisition as necessary to counter the expanding Russian and Chinese in the Arctic.��

Russia has already moved aggressively to expand its presence in the region, reopening Soviet-era military facilities and strengthening its control over the Northern Sea Route. These deployments include new Arctic brigades, expanded air defense systems and upgraded naval infrastructure.

China, while geographically distant from the Arctic, has pursued a strategy of economic engagement through research programs, investment projects and partnerships tied to resource development.

The Arctic, as the Northern Gateway, therefore represents an emerging frontier where logistics, resource extraction and military reach intersect. Control over Arctic infrastructure — including strategic territories such as Greenland — could gradually reshape global shipping patterns and supply chains while altering the strategic balance of naval power in the Northern Hemisphere.

The Eastern Gateway: Taiwan and the Indo-Pacific balance

The fourth gateway lies in the Indo-Pacific, where Taiwan remains one of the most consequential flashpoints in global politics. China views Taiwan as a breakaway province and has intensified through naval exercises, air incursions and gray-zone operations designed to test the island’s defenses and the credibility of American security commitments.

US policy debates have also reflected the possibility of direct military escalation. During private remarks reported in the media, President Trump claimed he warned Chinese leader Xi Jinping that the US would “” if China invaded Taiwan, framing the threat as a deterrent against a potential attack.

At the same time,��Taiwan��occupies a central position in the global technological economy. The island produces a of the world’s advanced semiconductors, which are essential for everything from consumer electronics to artificial intelligence and advanced weapons systems, largely through firms such as��Taiwan Semiconductor Manufacturing Company.

A crisis in the Taiwan Strait would therefore have global consequences. It would disrupt maritime trade routes, trigger economic sanctions and export controls, and potentially fragment financial and technological supply chains. Military escalation could also draw in regional allies and reshape the security architecture of the Indo-Pacific.

The Eastern (Taiwan) gateway thus represents the most advanced form of geopolitical convergence — where military operations, technological supply chains, financial sanctions and maritime security all interact simultaneously.

Distributed competition in a fragmenting world

Taken together, the four gateways reveal how contemporary great power competition differs fundamentally from earlier eras. During the Cold War, strategic confrontation was concentrated largely in Europe, where the geopolitical divide between NATO and the Warsaw Pact defined the central theater of global rivalry. Although conflicts occurred in other regions, the strategic balance of power was primarily determined by military deployments and political alignments on the European continent.

Today, however, competition among major powers is geographically dispersed and functionally interconnected. Rather than focusing on a single strategic theater, rivalry now unfolds simultaneously across multiple regions and domains. China and Russia increasingly pursue influence through coordinated diplomatic, economic, technological and military initiatives that span across the world. By expanding their presence across the Strategic Gateways, they create a pattern of distributed pressure against the US and its alliance network. These actions do not necessarily aim at immediate territorial conquest; instead, they seek to gradually reshape regional balances of influence, secure access to strategic resources and weaken the cohesion of US-led institutions.

The result is a form of competition more diffuse and multidimensional than the bipolar confrontation of the 20th century. Infrastructure investments, energy diplomacy, arms transfers, technological supply chains and military deployments now operate together as instruments of geopolitical influence. Developments in one region can quickly reverberate across others — for example, shifts in Arctic shipping routes can affect global trade patterns, while tensions in the Taiwan Strait could disrupt semiconductor supply chains and financial markets worldwide.

This evolving landscape significantly complicates American policymaking. Each gateway presents a distinct set of challenges requiring different policy tools and institutional responses. In Latin America, the US may emphasize economic engagement and protection of critical infrastructure such as maritime transit routes. In the Middle East, sanctions enforcement and energy security remain central. In the Arctic, military presence and infrastructure development intersect with environmental change and emerging shipping routes. In the Indo-Pacific, deterrence and alliance coordination play a central role in maintaining regional stability.

Managing these simultaneous pressures requires the US to coordinate across diplomatic, economic, technological and military domains while maintaining strong partnerships with its allies. The effectiveness of American strategy will therefore depend not only on military capabilities but also on the ability to sustain a resilient network of alliances and institutions capable of responding to a geographically dispersed and strategically interconnected form of great-power competition.

Securing the gates

The emerging geopolitical contest is therefore not only about territory or military balance; it is about control over the corridors through which the global system operates.

Energy shipments pass through maritime chokepoints. Financial transactions move through payment networks and banking systems. Commodity supply chains depend on shipping routes and logistical infrastructure that link regions across the world.

For the US, maintaining leadership in this system requires more than defending the center of the international order; it requires securing the Strategic Gateways themselves.

In the Western Hemisphere, that means strengthening partnerships and maintaining credible regional security capabilities. In the Middle East, it requires managing the intersection of energy markets, military deterrence and regional stability. In the Arctic, cooperation with allied states will shape the governance of emerging shipping routes and strategic resources. In the Indo-Pacific, maintaining credible deterrence around Taiwan remains essential to preserving regional balance.

At the same time, safeguarding the integrity of the US dollar-based financial system requires continued confidence in American institutions, transparent capital markets and resilient global payment networks.

The future of the international order will depend not only on who occupies the center of the fortress, but on who secures its gates. In an era when power flows through shipping lanes, financial networks, energy corridors and technological supply chains, the gateways of the global system may prove just as decisive as its walls.

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Deluge of drought

The elections initially appeared to be a breath of fresh air for Bangladesh’s politics, driven by the Gen Z revolution — also dubbed the “monsoon uprising”. However, the momentum this revolution brought quickly faltered.

A dehydrated mandate, with heavyweight student coordinators who had held key positions, has shattered; it seems the fresh polish and the shine have both come off. The student-led National Citizen Party performed dismally in the recent elections, securing victory in only 6 of the 30 contested seats (20%). The defeat was exacerbated by the NCP’s alliance with JIB, which proved suicidal due to the party’s checkered past — particularly its role during Bangladesh’s 1971 .

On top of this history, JIB has drawn a lot of for making derogatory and extremely vulgar comments against women. They have also faced grave of violence, intimidation, financial irregularities and a failure to provide safety, especially among minorities. These failures alienated many voters, shaped public perception and ultimately eroded the revolution’s initial promise.

Alongside the general election, voters also cast their ballots in a national referendum on the , which was proposed following the ousting of former Prime Minister Sheikh Hasina in July 2024. The charter was approved with 60.26% of the vote.

However, the modest turnout was a historic dwarf compared to the two previous referendums held in Bangladesh. In an interesting turn of events, the overwhelming majority of the freshly elected BNP Members of Parliament (MPs) boycotted the second parliamentary oath. This action followed their earlier of a note of dissent against the referendum’s ratification, signaling deep divisions within the political elite. While the JIB and the NCP vowed to implement the reforms, they lack the clout in parliament to pass them.

A major bone of contention remains the constitution amendment, as the council that will oversee this reform will have a significant vacuum from the ruling dispensation, who may overturn it, resulting in a predicament.

Balancing the banker’s book

The political turbulence intertwines with economic challenges. Nobel laureate Dr Muhammad Yunus, who was the epicenter of the previous 18-month interim government, faced from the sitting president, Mohammed Shahabuddin, for the grim state of affairs that prevailed during Dr Yunus’s tenure. The president accused Yunus of being uninformed and deliberately obstructing key decisions, such as the trade tariff negotiations with the US — decisions carrying deep and significant ramifications for Bangladesh.

Bangladesh’s ready-made garments industry, the backbone of its dollar cash crop, provides not only employment but empowerment, especially for women who play an active role in the vibrant Bengali social fabric. Any political formation aiming to alter and possibly marginalize this very significant section takes an enormous risk.

JIB also drew phenomenal criticism as they made about working women, which included comparing them to sex workers, proposing reduced working hours and hinting at the enactment of harsh Islamic laws if voted into power. JIB’s blunder in not embracing gender equality directly antagonized students’ aspirations.

With the (AL) suspended from political participation, an inclusive void prevailed, and JIP expected a monstrous verdict. However, the electorate did not play ball. Not only was the AL suspended from political participation, but the sitting Bangladeshi president also that, on the occasion of a royal invitation by the state of Qatar, his participation was blocked by design. Bangladesh had descended into a violent spiral of violence, arson, attacks targeting minorities, and an almost omnipresent law and order in the last 18 months following Sheikh Hasina’s departure.

The role of the interim caretaker, in association with student minister designates, must be examined impartially, and the whole timeline needs a holistic, overarching inspection. If these acquisitions hold, then the “banker of the poor” has much to disclose as to what transpired in the corridors of power in Dhaka. 

Collage of challenges

Prime Minister Tariq Rahman, returning after 17 years of self-imposed exile in London, faces a task if he wants to restore stability and usher in a new golden era for Bangladesh. He must also keep extremist elements at bay and avoid squandering the trust and faith his party has earned and paid for with blood.��

The BNP pledges to double the current decelerating economy to a trillion by 2030. Achieving this goal requires regional security, economic solidity and the restoration of peace in society. Tariq must leap onto an almost insolvent economic baton and propel it at lightning speed. International partnerships, with people-to-people contact as a core strategy, will be pivotal in this novel journey.��

Circumspection may prove a boon when expanding engagement with other neighbors and perceived friendly nations such as Pakistan and Turkey. It remains to be revealed which country Tariq will visit first after taking the oath, but for the moment, there seems to be a glimmer of optimism between the known ditch and the unknown deep blue bay.

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Managed interdependence and structural uncertainty

Contemporary global politics is not defined by the collapse of institutions. International organizations still convene, legal rules are invoked and procedural norms are performed with remarkable regularity. What has changed is the relationship between institutional form and the distribution of power, risk and strategic intent that once gave those institutions coherence. Rules remain, but they no longer align smoothly with the realities they are meant to govern.

What has emerged in place of postwar liberal universalism is not , nor a simple retreat from globalization, but a system of managed interdependence. Markets, finance and supply chains continue to bind states together, access to them is increasingly conditioned on political alignment rather than legal entitlement alone. Efficiency, once the dominant organizing principle of the global economy, now competes with resilience. Uncertainty is no longer episodic, arising from crises or shocks, but structural, embedded in the routine operation of the system.

This shift reflects a deeper transformation in how power is exercised. The postwar order rested on the assumption that economic exchange could be largely insulated from geopolitical rivalry and that legal and procedural constraints would discipline state behavior. That assumption has eroded. Economic relationships are now routinely through the lens of security, vulnerability and strategic dependence. Trade agreements, industrial policy and investment screening increasingly function as tools for managing exposure in a fragmented environment rather than as neutral mechanisms of liberalization.

Japan, Taiwan and the recalibration of ambiguity

Japan’s evolving approach to Taiwan how states adapt to this new landscape. Tokyo’s signaling has grown more explicit in recent years — not because Japan seeks confrontation, but because ambiguity alone no longer guarantees stability. As the strategic environment around Taiwan has hardened, silence and procedural neutrality have come to carry their own risks.

Japan’s response has been multifaceted. Trade frameworks such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (), to secure semiconductor and advanced technology supply chains, and selective forms of security coordination have become instruments for navigating uncertainty. These measures do not amount to a formal abandonment of long-standing policy constraints, but they do reflect a recalibration of priorities. Economic openness is no longer treated as an unconditional good; it is increasingly filtered through concerns about continuity, leverage and alignment.

In this context, recent remarks by Prime Minister Takaichi particular attention. Her suggestion that a naval blockade around Taiwan could constitute a “survival-threatening situation” for Japan implied the possible mobilization of the Self-Defense Forces under existing legal frameworks. The importance of such remarks lies less in their immediate operational implications than in what they signal about shifting thresholds for action. Statements once avoided in the name of ambiguity are now articulated openly, not to provoke escalation, but to clarify stakes in an environment where silence may be misread.

This shift reflects a broader change in how strategic ambiguity works. In the past, ambiguity was often seen as a stopgap — a way to postpone difficult decisions while shared rules and norms kept the peace. Today, it plays a difficult role. Clear red lines can rivals to test how serious those threats really are, and overly specific promises can trap governments in commitments they later regret. By contrast, leaving some things unsaid can create caution. When adversaries are unsure where the real limits lie — or how a country might respond —�� they are often less willing to take risks.

The emergence of a G1.5 world order

The broader international system in which these dynamics unfold does not fit neatly into familiar categories. It is neither a leaderless marked by pure disorder, nor a G2 condominium in which the US and China jointly manage global affairs. Instead, it resembles what can be described as a G1.5 world. In this configuration, the US retains primacy over critical margins of access and enforcement, while China possesses growing leverage without shared rule-making authority. Power remains concentrated, yet obligation has thinned. Rules persist, but their application is selective and increasingly shaped by political considerations.

The time, then, is out of joint not because order has vanished, but because its components no longer move together. Power, law and legitimacy have fallen out of alignment. The resulting system is neither chaotic nor stable in the traditional sense. Instead, it is marked by friction — by the continuous negotiation of access, obligation and risk. In a G1.5 world, the challenge is not to resolve every tension, but to manage misalignment with patience, restraint and a clearer understanding of evolving risks.

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That is the core message you can read between the lines of the International Monetary Fund’s (IMF) 2026 concluding statement: Japan has displayed impressive resilience, output is running above potential and inflation has been above the Bank of Japan’s (BoJ) 2% target for an extended stretch — but the next phase will be defined less by “escape velocity” than by��navigation. With the output gap positive and inflation expected to converge down to the target, the IMF argues that policy should be calibrated to sustain stability while rebuilding fiscal buffers and ensuring labor-market tightness translates into real wage gains. In other words: The liner is moving again; now it must pass through a narrow strait without scraping the rocks.

Goldman Sachs’ harmonizes with that baseline but adds a market practitioner’s edge: The fundamentals look steady — domestic demand, capex and a labor shortage-driven wage cycle — but the policy risks are rising, especially around the timing of BoJ normalization and the durability of expansionary fiscal choices. If the IMF writes like a harbor master, Goldman writes like a weather forecaster watching pressure systems gather. Same sea, different instruments.

A recovery with ballast

Start with what is working. Japan’s growth, in the IMF’s view, has been resilient: it exceeded potential in early 2025 and is projected to remain strong in 2026 even as external demand softens. Domestic demand has stayed firm despite elevated uncertainty and the of US tariffs. This matters because Japan’s post-bubble history is littered with recoveries that depended on foreign tides. A cycle led by domestic demand is like ballast in rough water: it stabilizes the ship.

Goldman’s narrative is similar, and more explicit: 0.8% real GDP growth in 2026, led by consumption and capex, with the economy structurally shifting toward persistent labor scarcity. In that frame, Japan is not merely enjoying a cyclical upswing; it is entering a new regime where labor shortages force wage-setting behavior to change — slowly, unevenly, but meaningfully.

Yet even here the metaphor has teeth. The engine is running, but the passengers are complaining. The IMF notes that nominal wages are rising at a historic pace, but persistent cost-of-living concerns remain because headline inflation has eroded purchasing power and real wages have continued to contract. That is the political economy of 2026: You can tell households the ship is moving again, but they will judge the voyage by how the cabin feels — warmth, food and the price of essentials.

Inflation: the fire in the hearth, not the fire in the walls

Japan’s inflation story is both a triumph and a trial. After three decades of near-zero inflation, prices have been rising faster than the BoJ’s target for three and a half years. For policymakers who spent years trying to light a fire under the economy, this is proof that the hearth is finally warm. But any homeowner knows: Warmth is welcome; smoke is not; and fire in the walls is a disaster.

The IMF’s baseline is that inflation should moderate in 2026 and converge toward the target in 2027, helped by easing global oil and food prices, stabilization in domestic rice prices, and fiscal measures that contain prices. Core inflation, however, may remain more persistent than anticipated, partly because the fiscal stance is projected to be more accommodative.

Goldman’s view is more pointed: Underlying inflation rises moderately amid continued wage growth in the low-3% range, while headline inflation decelerates mainly due to slower food prices. This is the key nuance. Japan may be shifting from a story dominated by imported inflation and commodity spikes to one where service prices — driven by wages — become the durable component. That is exactly the sort of inflation central banks treat as “real,” because it speaks to domestic momentum rather than global weather.

The risk is not simply that inflation stays above target; it is that expectations and wage-setting begin to embed a higher inflation norm before the BoJ has fully regained conventional policy footing. In the metaphor, it’s not the flames you see; it’s the ember you forget, the one that catches later when the wind changes.

Monetary policy: walking the tightrope while the rope is still being strung

Both the IMF and Goldman agree that the BoJ is at a crucial stage. The IMF supports a gradual, data-dependent withdrawal of accommodation, moving toward neutral by 2027, and emphasizes uncertainty around where “neutral” really sits after years at the effective lower bound. This is not cautious for its own sake. It is cautious because Japan’s financial system, wage dynamics and inflation psychology are all being reconditioned at once. The BoJ is trying to tune an instrument while the concert is already underway.

Goldman, by contrast, argues for a faster cadence: shifting from annual hikes to semi-annual, reaching 1% with a 25 basis point hike in July 2026, and aiming for a terminal rate of around 1.5% — its estimate of neutral. It warns that the cost of delaying hikes rises as underlying inflation approaches 2%. Delay too long, and the BoJ might ultimately need to hike into restrictive territory.

These positions are less contradictory than they appear. The IMF is optimizing for stability under uncertainty; Goldman is optimizing for avoiding a “behind-the-curve” catch-up. In metaphorical terms: The IMF says, “Keep both hands on the wheel and don’t oversteer in fog.” Goldman says, “If you wait too long to turn, you may hit the pier.”

What matters most is credibility. The IMF explicitly welcomes Japan’s flexible exchange-rate regime and stresses that BoJ independence and credibility help keep inflation expectations anchored. That independence is not a ceremonial banner; it is a structural beam. If it weakens, policy becomes more expensive: The market demands a premium, the currency becomes more volatile, and every rate move does less work.

Fiscal policy: the sugar rush versus the diet plan

If monetary policy is the tightrope, fiscal policy is the buffet table. The IMF credits Japan’s post-pandemic consolidation — strong revenues and spending restraint — with a primary deficit in 2025 that is estimated to be smaller than in 2019 and among the smallest in the G7. But it also warns that near-term policy should refrain from further loosening, preserving gains in consolidation and explicitly advises against reducing the consumption tax — an untargeted measure that erodes fiscal space and adds to fiscal risks.

Goldman’s analysis lands in the same neighborhood but uses a different street map. It argues that fiscal soundness has been maintained because Japan has enjoyed a “bonus stage” in which nominal growth exceeds the government’s effective interest cost. That makes the debt-to-GDP ratio easier to stabilize — even with deficits — because the denominator grows faster than the interest burden. But Goldman’s warning is sharp: Permanent tax cuts and permanent spending increases can reverse the debt trajectory, and rising market rates eventually raise debt-service costs, making market confidence and debt management more important.

The shared conclusion is straightforward: temporary relief can be affordable; permanent promises are the real danger. A one-off cash transfer is like giving passengers a blanket during a cold night. A permanent tax cut without a funding plan is like removing the ship’s watertight doors because they look bulky — fine until the storm hits.

The IMF’s preference for targeted, temporary, budget-neutral support — and its openness to refundable tax credits — fits this logic. It is easier to steer with a compass than with applause. Fiscal policy should protect the vulnerable without locking in structural deficits that reduce room to maneuver when the next shock arrives.

Financial stability: The tide is rising, and so is the price of duration

Japan’s financial system is broadly resilient, the IMF says, with strong capital and liquidity positions and improved profitability as rates rise. But the sources of risk have shifted. Higher yields can generate valuation losses, and structural vulnerabilities — mark-to-market securities positions, foreign exchange (FX) and cross-currency funding exposures, and pockets of weakness in commercial real estate — remain. Regional banks, in particular, appear more vulnerable due to weaker shock absorbers and demographic headwinds.

This is where normalization becomes real. For years, the BoJ’s outsized participation in the Japanese Government Bond (JGB) market acted like a breakwater, damping volatility. As it reduces its balance sheet and market functioning improves, Japan gets price discovery back — but price discovery is not always gentle. The IMF calls for close monitoring of JGB market liquidity and investor positioning and suggests that the BoJ should be ready for exceptional, targeted interventions if volatility undermines liquidity, while communicating clearly to avoid impairing market functioning.

In plain terms: Japan is learning to sail without training wheels. That is necessary. It is also risky if communication falters or fiscal headlines spook investors.

Structural reform: turning labor shortages into real wage gains

If you want one policy “north star” for 2026, it is real wages. The IMF highlights a stubborn reality: Despite labor shortages, real wage growth has been elusive, and the gap between productivity and wages has widened substantially since the mid-1990s. The diagnosis is institutional: Low mobility reduces competition for skills, weakens worker bargaining power and slows productivity-enhancing reallocation. The prescription is to raise mobility via job-based employment and merit-based pay, correct labor supply distortions, and expand active labor market policies and reskilling — especially to manage AI-driven displacement while capturing productivity gains temporally.

This is where Japan’s macro story becomes a social contract story. An economy with a labor shortage can produce higher wages, but only if the system allows workers to move to higher-productivity areas and firms to compete for talent. Otherwise, you end up with tightness without bargaining power: a paradox that breeds frustration and invites populist fiscal fixes.

The big picture: a strong hull, but watch the steering

Japan in 2026 has sturdier fundamentals than many observers expected: steady growth powered by domestic demand, inflation no longer stuck at zero, corporate investment adapting to labor scarcity and a central bank finally able to move policy rates without fearing immediate relapse into deflation.

But the next test is not whether Japan can grow. It is whether Japan can govern the transition from extraordinary policy to sustainable normalcy. The IMF’s baseline offers the roadmap: calibrate monetary tightening gradually toward neutral, keep fiscal policy from becoming permanently expansionary, rebuild buffers and undertake labor reforms so that real wages rise. Goldman’s overlay adds the caution flags: if the BoJ delays too long, it may have to hike more sharply later; if fiscal expansion turns permanent, the debt trajectory and market confidence can change quickly.

Back to the ocean liner: Japan has regained forward motion. The engines are humming. The sea is not calm, but the ship is seaworthy. Now comes the narrow strait — where small steering errors matter more than raw power. If Japan keeps the wheel steady, uses fiscal policy like a compass rather than confetti and turns labor tightness into durable real wage gains, 2026 can be remembered as the year Japan didn’t just sail again — it learned to steer in open water.

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Border tensions, “dehyphenation” and the logic of restraint

Singh opens with the core question: Can trade and economic ties be separated from the border dispute and wider strategic rivalry? Mahon says yes, pointing to periodic high-level pragmatism and long stretches of restraint along disputed lines. He argues that escalation offers little strategic gain for either side, noting, “To have any military conflict there at this point for either side is actually pointless.”

Singh counters with India’s security anxieties: Beijing’s ties with Pakistan, the China–Pakistan Economic Corridor and the broader “string of pearls” concern over Chinese influence in South Asia. Mahon acknowledges these fears but suggests Delhi often overestimates Beijing’s political control in neighboring states. He cites Nepal as an example, arguing that domestic grievances, not Chinese orchestration, better explain recent unrest. Reduced engagement breeds suspicion, while dialogue, even without trust, limits miscalculation.

The trade imbalance and India’s supply-chain dependence

Turning to economics, Singh highlights India’s roughly $100 billion trade deficit with China and its continued reliance on Chinese-manufactured inputs, despite post-2020 restrictions. Mahon frames the imbalance as a structural feature of China’s role as the world’s manufacturing hub rather than a uniquely Indian failure. He agrees that the dependency is real, however.

Singh lists the pressure points: industrial machinery, electronics, solar cells and active pharmaceutical ingredients that underpin India’s drug exports. Even where India’s exports are rising, such as Apple smartphone assembly for the US market, key components still originate in China. Diversification is occurring at the margins, but core industrial linkages remain Chinese.

China as a catalyst: Mahon’s Zhu Rongji argument

Mahon proposes that India treat China less as a threat to exclude and more as a competitor-investor to harness. He invokes former Chinese Premier Zhu Rongji, who used China’s entry into the World Trade Organization to force domestic reform. External competition compels regulators to simplify rules, courts to enforce contracts and firms to raise productivity.

Applied to India, this means selective openness. Mahon proposes allowing Chinese investment in sectors such as electric vehicles under clear conditions that require technology transfer and skill development. The aim is not speed but discipline: gradual engagement that strengthens India’s manufacturing base rather than overwhelming it.

Singh reinforces the institutional critique, arguing that India’s administrative and judicial systems impose severe friction on investment. Together, they suggest that without regulatory reform, India’s ambitions to rebuild manufacturing — from roughly 13% of GDP today — will remain constrained.

China’s slowdown, US pressure and a multipolar reality

Singh challenges the idea that China’s economic slowdown will turn India into a dumping ground for excess production. Mahon rejects the narrative of collapse, calling the idea that trade drives China’s growth “an IMF myth.” He stresses that “5% in an economy of the size and scale and complexity of China is absolutely huge.”

On investment, Mahon broadens the lens, arguing that India’s weak foreign direct investment reflects a global slowdown and uncertainty generated by US policy under US President Donald Trump. Singh maintains that domestic policy choices have amplified the damage.

Both agree that India cannot ignore the United States, given its trade surplus and deep cultural ties. Mahon’s answer is structured hedging: deepen selective economic engagement with China while attracting other investment so no single relationship dominates. He even suggests concentrating early reforms in one or two Indian states, echoing China’s early special economic zones.

Pragmatism, nationalism and execution risk

Mahon outlines three broad outcomes. The best case is a “beneficially transactional” relationship in which business proceeds despite political friction. The worst-case scenario is a nationalism-driven shock or a poorly managed opening that triggers scandal or industrial accidents and poisons public opinion. Singh adds leadership risk: Both Chinese President Xi Jinping and Indian Prime Minister Narendra Modi are aging leaders, and succession periods can encourage opportunistic nationalism.

India and China may distrust each other, but supply chains, investment needs and a weakening Western-led order make engagement more likely than separation. For Mahon, the strategic opportunity is to turn that engagement into a catalyst for Indian reform rather than a story of permanent dependence.

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Rethinking impact investing

Nicholas describes impact investing as a field that has grown significantly over the past decade. Rather than treating profit and purpose as opposing forces, it seeks to align them. As she puts it, “So often when we think about finance, we think about only maximizing financial returns, and that it is the opposite to social impact. But the thesis is that actually, each can reinforce the other.”

In practical terms, this means directing capital toward sectors such as climate, healthcare and education, where social and environmental considerations are embedded in a company’s mission. Nicholas points to investments such as Virta Health, which works to reverse type 2 diabetes, and Esusu, which uses rental payment data to help renters build credit profiles. These companies demonstrate that strong financial performance and social benefit are not mutually exclusive.

However, Nicholas recognizes the scale of the challenge. The global investment industry manages roughly $82 trillion in assets under management. Of that, less than 2% flows to companies or funds run by women and people of color. That disparity may signal a deeper structural imbalance in capital allocation.

Structural bias and capital allocation

Nicholas argues that the financial system does not simply reflect inequality; it often reinforces it. She points to the stark mismatch between who controls capital and the demographic composition of society.

To address this, she cofounded Impact Experience, an initiative that partners with investors and institutions to engage around bias directly. Through immersive programs in places such as Montgomery, Alabama, participants examine the historical roots of racial and gender inequities and how they shape present-day investment decisions. The goal is to bring about behavioral change that leads to different asset allocation choices.

Reform must operate on multiple levels: structural, organizational and individual. Greater transparency, intentional portfolio design and expanded networks for underrepresented founders all play a role. For Nicholas, recalibrating even a small fraction of that $82 trillion could have transformative effects.

Faith, work and the question of legacy

A distinctive dimension of Nicholas’s outlook comes from her identity as a member of the Bahá’í faith. She highlights core principles, such as the equality of men and women, the harmony of science and religion and the abolition of extremes of wealth and poverty. These ideas are not abstract doctrines but operational guideposts.

She references a line from the Bahá’í writings that a human being is “a spiritual being and only when they live in the life of their spirit are they truly happy.” For Nicholas, this reframes work as an expression of spiritual purpose rather than mere material accumulation. The concept that “work is worship” reinforces the idea that professional life can be a space of service.

Her book develops these themes through interviews with investors and entrepreneurs who have integrated values into their business models. She introduces the HEAL framework — Hope, Empathy, Abundance and Legacy — as a tool for aligning financial decision-making with long-term human flourishing. The animating question is not simply how much wealth one creates, but what trace one leaves behind.

Global perspective and expanded capital

Nicholas’s worldview has been shaped by time spent in India, China, the Congo and Silicon Valley. In India, she recalls meeting people with limited financial means but profound spiritual and social resources. These experiences inform her argument for expanding the definition of capital beyond money alone.

She proposes a broader framework that includes spiritual capital, social capital and human capital alongside financial capital. A purely material conception of capitalism, she suggests, misses the fullness of what it means to be human. By recognizing multiple forms of value, investors can make decisions that strengthen communities rather than merely extract returns.

This broader lens also informs her call to incorporate indigenous perspectives into finance. The idea of thinking seven generations ahead and considering the legacy of seven generations in the past, challenges the short-termism of quarterly earnings cycles and public market pressures.

From quarterly capitalism to seven-generation thinking

Khattar Singh presses Nicholas on whether long-term thinking is realistic in a volatile geopolitical environment. She responds that long horizons and daily discipline are not mutually exclusive. Multi-decade goals can be broken down into yearly, monthly and daily actions. The task is to ensure that short-term decisions do not undermine long-term societal well-being.

Nicholas says that finance and faith need not clash; they can coexist in productive tension. Investors and entrepreneurs alike must ask what motivates their work, what legacy they seek to build and how capital can serve broader human purposes.

The conversation ultimately circles back to a foundational question: Can modern capitalism evolve beyond quarterly metrics toward a system that values equity, sustainability and spiritual grounding? Nicholas believes it can, if those who steward capital are willing to align profit with purpose and think about the next generation.

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This scenario reads like a summary of the current US-China trade war, but it is actually a recounting of the 1980s US-Japan trade war. The uncanny similarities between the two trade wars reveal that little has changed in America’s strategy for addressing economic competition. With Japanese per capita GDP at an average rate of between 1945 and 1956, Japan’s rapid post-World War II (WWII) growth and recovery led many Westerners to assume that it would one day overtake America as the world’s largest economy.

In a 1989 of essays on international finance, economics professors John Charles Pool and Stephen C. Stamos, Jr. claim that “new economic power blocs seem certain to assume world economic leadership early in the next century. Of these, Japan provides the most dramatic example.”

Although such predictions never fully materialized, America took the Japanese threat seriously. During the Reagan administration, a number of were made with Japan to soften the impact of Japanese imports on the American economy; the most important being voluntary export restraints that placed quotas on imports of Japanese automobiles, steel, and machinery, the Accord — which strengthened the yen relative to the dollar to make Japanese imports artificially more expensive — and a semiconductor agreement that imposed a price floor on Japanese sold in America and partially opened up the Japanese domestic semiconductor market to foreign companies.

The high-stakes sequel: unilateralism and the break from the Japan model

Given China’s as an economic superpower in the early 2000s, it has supplanted Japan in observers’ minds as the most palpable threat to American world economic leadership, and predictions of when China might take America’s place as the largest economy in the world have become commonplace. The US’s to the Chinese economic threat is largely identical to its response to Japan in the 1980s — a rising trade deficit with a fast-growing power stokes protectionist sentiment at home and yields policies targeted at slowing that power’s growth both in the US and globally.

Unlike Japan though, China’s unwillingness to cooperate with American to curb exports has resulted in more unilateral efforts by the US to achieve a balanced trade relationship with China, namely through tariffs, initially on certain products (steel, electric vehicles, etc) and then on all Chinese exports (US President Donald Trump’s “Liberation Day tariffs”), as well as through outright export bans of certain products on national security grounds.

An additional of the US-China trade war absent from the Japan case is China’s reciprocal tariffs on American imports and other retaliatory trade actions, which have American soybean exports, for example, and China’s rare earth licensing regime that limits rare earth exports to America, demonstrating China’s rare earth supply chain dominance.

Although the policies may differ in form, they are the same in and intent. In the US-Japan case, it was not protectionist policies that kept the American economy ahead of Japan’s, and such policies are not likely to have a decisive impact in the US-China , either. Japan’s prolonged economic recession, driven by the unwinding of a real-estate bubble throughout the 1990s, is what prevented it from moving past America’s economy, and despite the recent of a similar real-estate bubble in China, persistent deflation and dragging investment and consumption down, the economy continues to grow due to strong exports to the rest of the world.��

The cost of contention: why fighting for number one may not be worth the price

American tariffs on Chinese products have simply Chinese manufacturing through third-party countries and integrated Chinese supply chains more deeply with other parts of the world. Notwithstanding a similar years-long recession that irreversibly stunts Chinese economic growth, American trade policy’s current stance on China will only provide a brief to Chinese competition for certain sectors of the American economy, which makes them and the broader economy ultimately less competitive in the long run.

On the contrary, if the US’s is to fend off the Chinese challenge for the title of the world’s largest economy, it must imitate what Japan and China did to become such formidable economic competitors in the first place — namely embrace supply-side economics and focus on the growth of production and exports not through tariffs or quotas on other countries, but through policy aimed at subsidizing and stimulating manufacturing output and exports.

Whether such a plan is in America’s best interests, though, is unclear given the trajectory of the American economy away from such activities, the advantage and inertia in such activities already accrued in China and other emerging markets over the last few , and the staggering amounts of debt that such a plan would likely require.

If the US could learn to live with being only the second largest economy in the world behind , the country would benefit from no longer needing to look over its shoulder and would instead be free to focus its efforts on ultimately more meaningful indicators of economic success, like striking an appropriate balance between the supply- and demand-side, resolving the growing debt crisis, reducing economic , and economic and supply chain resilience. After all, as a Japanese economic researcher during the height of the US-Japan trade war, “being number 2 is really quite pleasant.”

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As is often the case, corporations with aggressive tax avoidance practices often treat all stakeholders with the same disregard, shifting profits to executives and shareholders and externalizing costs onto society. Despite its claims, there appears to be nothing ethical about Starbucks.

The global coffee giant has been with massive labor violations in its supply chain and now faces multiple class-action for misleading consumers about human rights claims. It has paid record fines for violating the rights of its direct employees in US stores and has refused to bargain in good faith with the growing and currently striking Starbucks Workers United union. If that wasn’t enough, Starbucks’ CEO gets paid more than 6,666 times the median worker, a ratio higher than any other S&P500 company.

The role of Switzerland in profit shifting

The incredibly harmful role of Switzerland — as a commodity trading center, a tax haven and a secrecy jurisdiction — in aiding and abetting multinational corporations to shift profits away from producers in the Global South is too frequently overlooked. Starbucks provides a clear example of a much bigger global problem. However, while commodity trading and profit shifting are standard practice for many large multinationals, Starbucks appears to push this further than most others, with a stunning 18% mark-up on coffee beans in Switzerland, despite the beans never actually making their way up the Swiss Alps.

This 18% mark-up by Starbucks’s Coffee Trading Company (SCTC) in Switzerland on all global coffee purchases before reselling to other Starbucks subsidiaries for roasting and retailing has been in place since 2011. A previous Starbucks by us at the Centre for International Corporate Tax Accountability & Research (CICTAR) estimated that this scheme had shifted at least $1.3 billion in profits to the Swiss subsidiary over the last decade, or between $100–150 million per year. The profits booked in Switzerland are also one way Starbucks reduces its taxable income, where customers actually buy their Pumpkin Spice lattes or other coffee drinks.

The 18% mark-up would not have been known without a European Commission into Starbucks in 2015, following the 2012 of Starbucks’s UK tax dodging. Starbucks was compelled to provide financial information from the Swiss subsidiary to the European Commission, which would otherwise not be publicly available.

However, since Switzerland is not part of the EU, the investigation focused on the issue of illegal state aid in the Netherlands. The inflated coffee prices paid by the Dutch subsidiary created losses and a tax shelter for the European operations. The Commission ruled against the Netherlands, but that was later — as with several other cases — overturned by the European court.

CICTAR’s previous analysis found evidence — through the tracking of ongoing dividend payments from the Swiss subsidiary through Dutch and UK subsidiaries — that the 18% Swiss mark-up was ongoing. Starbucks changed the ownership of the Swiss subsidiary to one directly owned by a subsidiary in Washington state, where there is no state income tax and no requirement for financial reporting, as there is in the Netherlands and the UK. The dividend flows from Switzerland, derived from the 18% mark-up, are no longer traceable, but there’s no reason to believe that the practice isn’t ongoing. The basic allegation was not contested by Starbucks. The Swiss subsidiary, despite its central role in Starbucks’s global corporate structure, is never mentioned in its recent to shareholders.

The illusion of ethical sourcing

When Starbucks attempted to justify the introduction of the 18% mark-up (up from 3%) to the European Commission and in response to the CICTAR report, it argued that this was the cost of running Coffee and Farmer Equity () Practices — its “ethical sourcing program” via the Swiss subsidiary — including the use of its intellectual property.

A brand new by us, “The ‘Swiss Swindle’: Does Starbucks short-change coffee-producing countries?” set out to evaluate these claims. The report examines the only publicly available financial statements from Starbucks’ ten Farmer Support Centers, which it claims are at the heart of its “ethical” sourcing and are owned via the Swiss subsidiary.

Our analysis of the financial statements from Starbucks’s Farmer Support Centers in Colombia and Tanzania found negligible expenditures and limited benefits to farmers. The actual costs of the Farmer Support Centers are a tiny fraction of the 18% margin booked in Switzerland, where — on paper— the purchase of coffee beans occurs. The Farmer Support Centers appear more concerned about the quality and supply of coffee beans rather than anything to do with the welfare of coffee-producing communities. There was no evidence that Starbucks holds or values any intellectual property from its C.A.F.E. Practices program in Switzerland. If there is any intellectual property, it is created, held and used by the Farmer Support Centers in coffee-producing countries, not in Switzerland.

Our latest report concludes that the primary purpose of the Swiss set-up is not to support farmers but to book profits from the purchase and sale of green coffee beans in Switzerland, at very low tax rates and far from the reach of tax authorities in producer countries, where revenue for public services, including health, education and sanitation, is urgently needed. However, the existence of these Farmer Support Centers means that Starbucks has a legal physical presence in coffee-producing countries and that revenue from coffee sales currently shifted to Switzerland should be taxable where the beans are grown and value is genuinely created. This is the core principle, although not the practice, of the current global tax system.

The report recommends that governments from nations like Brazil, Vietnam, Colombia, Indonesia, Tanzania, Uganda, Ethiopia and others — which rely extensively on coffee production and export — fully explore all options under existing rules to tax the coffee-trading profits currently booked in Switzerland. Additionally, it calls for major global tax reforms through the current UN Tax Convention negotiations to end the profit shifting and extraction from commodity-exporting countries.

Starbucks as a case study

Starbucks provides an example — within one corporation’s global supply chain — of how the current global tax system is abused to shift profits from producer countries in the Global South to multinational corporations headquartered in the Global North. Switzerland, as a commodity trading center with low tax rates and high levels of secrecy, plays a major role in facilitating these practices.

If Starbucks wants to live up to its language on ethical sourcing, it could easily use the current 18% margin to pay farmers a significantly higher price and book those sales in the countries where they actually occur and where value is created. In the meantime, governments should immediately seek to tax profits artificially shifted by Starbucks to Switzerland, and everyone should push for reforms to the global tax system to end the ongoing exploitation of commodity-producing countries across the Global South.

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The idea of “” — the lingering seasonal bias that survives even after statistical adjustments — has become a powerful lens through which to interpret recent inflation data.��Research from Federal Reserve economists that residual seasonality may help explain why January inflation often appears elevated — though interpretations of what this means for policy remain open to debate.

Yet the most recent data introduce a subtle twist.�� came in at roughly 2.4% (2.39%), noticeably cooler than the elevated early-year averages seen during 2023–2025. Rather than contradicting the idea of residual seasonality, this softer reading complicates it. If previous January spikes reflected a mixture of pricing resets, tariff effects and statistical noise, the latest number suggests that the seasonal “heat” is not guaranteed to repeat. The illusion, it seems, fades when underlying inflation momentum weakens enough.

A seasonal curve and a shift in momentum

Consider the longer historical pattern. From 2006 to 2025, average monthly inflation has been remarkably stable, hovering around the mid-2% range: roughly 2.58% in January, 2.57% in March and 2.47% in October. The seasonal curve is gentle, almost flat — a quiet baseline that rarely attracts attention. Yet when we isolate the more recent period from 2023 to 2025, the curve shifts upward. January jumps to 4.13%, February to 3.97% and March to 3.59%. By late summer and autumn, the numbers cool toward the low-3% range, with October at 2.91% and November near 2.85%.

The image of a tide offers a useful way to think about monetary policy, because central banks rarely react to every passing wave. Policymakers do not chase each crest of incoming data; instead, they try to read the direction of the current beneath the surface. Between 2023 and 2025, the Federal Reserve’s actions appeared less tied to isolated monthly fluctuations and more aligned with the broader trajectory of disinflation. Rate hikes were concentrated earlier in the year in 2025 — with single increases in February, March, May and July — at a time when inflation remained elevated relative to its longer-term trend.

As the year progressed and price pressures gradually eased, the policy stance shifted. Cuts emerged later, with two reductions in September and December and additional moves in October and November, coinciding with inflation readings that had moved closer to historical norms.

Taken together, this sequence suggests that policymakers were responding to underlying momentum rather than short-term noise. If a strong January inflation print resembles a dramatic opening note in a symphony, the Federal Reserve appears more concerned with the evolving melody than with the volume of any single instrument.

The softer inflation reading in January 2026 reinforces this interpretation. Rather than reigniting fears of renewed tightening, the cooler data point implies that patience during the disinflation process may have allowed seasonal distortions to dissipate naturally, enabling policymakers to maintain a steadier course as the economic tide gradually turned.

Tariffs, corporate strategy and the fading distortion

The debate over tariffs another layer to the narrative. Some observers argue that higher import duties have encouraged companies to push up prices at the start of the year. But tariffs and seasonal pricing habits often move together, making it difficult to isolate cause and effect. Businesses frequently reset prices in January — adjusting service fees, subscription plans or post-holiday discounts — regardless of trade policy. In that sense, tariffs may act less like the engine of inflation and more like a that amplifies a seasonal pattern already in motion. The fact that January 2026 inflation cooled despite these dynamics suggests that structural demand conditions may now matter more than seasonal timing.

Corporate behavior hints at this complexity. As consumers became more cautious after years of rising prices, companies began experimenting with affordability strategies: smaller packaging, promotional discounts or diversified price tiers. These shifts suggest that demand conditions are evolving alongside cost pressures. When shoppers hesitate, businesses may find it harder to sustain aggressive price increases — a dynamic consistent with the recent return to lower inflation levels.

, then, is less a technical curiosity than a reminder of how economic data can mislead. Imagine looking at the economy through a window with faint vertical lines etched into the glass. You can still see the landscape beyond, but certain shapes appear distorted depending on the angle of light. January inflation may be one of those distortions — but the cooler 2026 reading shows that the distortion itself can fade when underlying conditions change.

The long horizon beyond the January illusion

What makes the recent period particularly revealing is how policy actions align with the seasonal curve. The early-year months that saw rate hikes also carried inflation averages well above the historical baseline, while the months with cuts coincided with cooling readings. This alignment suggests that policymakers were responding to persistent trends rather than reacting reflexively to single data releases. The softer start to 2026 further supports this interpretation: rather than chasing a seasonal spike, policy appears to be anchored to the broader inflation trajectory.

For readers following the story, the temptation is to treat each inflation report like a weather alert. A hotter-than-expected January feels like a thunderclap, a signal that the storm has returned. But the broader statistics tell a quieter story: a gradual shift from elevated inflation toward something closer to normal. And when January itself cools — as it did in 2026 — it reminds us that even familiar seasonal narratives can lose their grip when the economic climate changes.

In many ways, inflation behaves like a marathon runner at the start of a race. The opening pace may look fast, even frantic, but the real story emerges only over distance. Policymakers appear to recognize this dynamic, adjusting interest rates only when the runner’s rhythm changes consistently rather than when a single split time surprises observers.

And perhaps that is the most important lesson hidden inside the January illusion. Like a mirage on a desert road, a sudden burst of heat can capture attention and distort perception. But step back far enough — and include the cooler reading of January 2026 — and the landscape resolves into something steadier: a long horizon where seasons change slowly, tides rise and fall predictably, and the economy moves forward not in sudden jolts but in measured, deliberate rhythms.

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Using credible data that tells a compelling story, I will explain why the carrot has been and will continue to be much more effective than the stick in attracting manufacturing investment.

The data

The St. Louis Federal Reserve publishes US Census Bureau data on actual investments in new or expanded manufacturing facilities, titled “Total Construction Spending: Manufacturing in the United States.” It is seasonally adjusted and reported monthly on an annualized basis.

During the Biden administration, manufacturing tripled from $76.5 billion in January 2021 to $230.9 billion in January 2025. This represented one of the largest industrial construction booms in US history, driven primarily by large semiconductor, battery and advanced manufacturing projects.

Due to normal megaproject investment cycles, these projects are front-loaded with capital-intensive spending on site preparation, foundation work and structural construction, using massive volumes of concrete and steel. Consequently, manufacturing construction spending peaked in June 2024 at $240.1 billion and slowed in later phases due to less capital-intensive spending on machinery, equipment and installation, much of which is recorded outside of the St. Louis Fed’s manufacturing construction spending data.

The carrot

Using subsidies, grants, loans, tax credits and state incentives, the CHIPS and Science Act by President Joe Biden in August 2022 attracted large amounts of capital into semiconductor manufacturing, spurring new fabrication plants and related infrastructure. It also created an entire ecosystem of suppliers, workers and innovation improving American competitiveness, and is primarily responsible for the manufacturing construction boom reflected in the St. Louis Federal Reserve data.

Stated by the Semiconductor Industry Association, of the CHIPS and Science Act was a pivotal moment in recent American history, uniting government leaders from across the political spectrum to reinvigorate US semiconductor production and reinforce America’s economic strength, national security and technological competitiveness.

The carrot or positive incentives offered by the CHIPS and Science Act, combined with the Infrastructure Investment and Jobs Act, in November 2021, and the Inflation Reduction Act, in August 2022, boosted broader industrial and clean-energy facility investment. The message was clear: America is open for business, and we’re willing to invest in your success. This approach made investing in the US manufacturing sector very attractive.

The stick

Beginning with President Donald Trump’s second term through October 2025 (the latest available data), construction spending in manufacturing declined to $214.1 billion. Some of this is attributed to less capital-intensive spending in later phases, as explained above. However, the primary factor likely is trade uncertainty caused by President Trump’s on-again, off-again tariffs, delays, reversals and threats — the stick.

Anirban Basu, chief economist for the Associated Builders and Contractors, “With CHIPS Act-enabled megaprojects winding down and the stiff headwind of trade policy, manufacturing construction spending has fallen by nearly 10% over the past 12 months.”

There are many examples of stiff headwinds caused by erratic policies. Take South Korea, for example. On April 2, 2025, Liberation Day, President Trump tariffs of up to 25% on South Korea. Critics argued this was inconsistent with the United States–Korea Free Trade Agreement (), which has been in force since March 15, 2012. Three months later, on July 30, 2025, the two countries and later finalized the Korea Strategic Trade and Investment Deal, which reduced tariffs to 15% and included the understanding that South Korea would invest $350 billion in the United States.

Two months later, on September 4, 2025, US Immigration and Customs Enforcement (ICE) the construction site of the South Korean-owned Hyundai Motor Group/LG Energy Solution battery plant in Ellabell, Georgia. ICE detained several hundred South Korean nationals, many of whom were engineers and technicians training American workers and installing specialized machinery. According to immigration attorney Charles Kuck, his South Korean clients were legally in the US under B-1 visitor visas or the Visa Waiver Program (ESTA).

Even though the Trump administration offered to allow the South Korean workers to remain in the United States to complete their work, most decided to leave due to the unpleasant experience of being shackled, treated like criminals and unsure if they could trust the visa process. In response, South Korean President Lee Jae Myung , “Under the current circumstances, Korean companies will be very hesitant to make direct investments in the United States.”

The problems did not end here. In January 2026, President Trump that because the South Korean National Assembly had not yet passed implementing legislation for the 2025 deal, he would increase tariffs on Korean imports back up to 25%.

Uncertainty and the pause button

The chaotic tariffs and threats have caused economic uncertainty to skyrocket, costs to escalate and investors to be unable to predict what’s ahead. As a result of this and the Georgia immigration action, firms have become more cautious about committing to long-term capital projects in the United States and have hit the pause button.

Stated by , a senior fellow at the Brookings Institution, “Allies are receiving mixed signals. The South Korea case has made countries like Japan and even EU nations nervous.”

According to the American Institute of Architects’ January 2026 Consensus Construction , “Producers and investors typically have not had much clarity as to what countries, what products, or what tariff levels might be in place over the longer term. This makes decision-making difficult and often encourages inaction in supply chain sourcing and investment decisions.”

Not surprisingly, industry forecasts predict a continued decline in manufacturing construction spending.

A better approach

If the goal is to strengthen American manufacturing, US policy needs to focus more on carrots and less on sticks. The CHIPS Act demonstrates that positive incentives work. Expanding similar programs to attract capital to critical industries — advanced materials, batteries, clean energy and biotechnology — would help boost US competitiveness.

This approach is especially urgent given China’s relentless investment strategy and potential US-China hostility. The US cannot afford to cede its competitive advantages through policy uncertainty.

Importantly, strengthening relationships and working more closely with our allies to achieve our manufacturing goals would be an essential step in the right direction. America’s advanced semiconductor manufacturing depends on global supply chains. Alienating these partners through unpredictable tariffs and immigration raids undermines our own competitiveness.

The choice is clear: we can invest in our future through strategic incentives and stable partnerships or watch manufacturing investment go to more predictable shores. This may be a tall order today, but it will be necessary tomorrow.

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In addition to Walujo, Director of Public Affairs and Communications Ade Mulyana, and Commissioners Pablo Malay and Winanto Kartono, have tendered their resignations.  

The market may interpret the leadership change as a preparation for something significant that requires someone with a different view, yet seasoned and familiar enough to take the helm at a critical period focused on merger execution and continued profitability. 

Hans Patuwo, who is set to replace Walujo, has led various business lines within the company. As the chief operating officer and president of on-demand services, he oversaw all operations across the ecosystem. Patuwo was once credited by his team as the reason behind the growth, strength and transformation of GoTo’s fintech arm GoPay, thanks to his focus on problem-solving. 

As the merger between Southeast Asian giants GoTo and Grab is gaining steam, it’s time to look closer at the potential deal that would dramatically reshape the region’s ride-hailing and food delivery industry. It has direct effects on customers, online drivers, merchants and competitors. However, with Indonesia’s sovereign wealth fund Danantara in the mix, the proposed merger has become a lot more interesting to watch.

Begin (again)

The GoTo-Grab merger speculation began as comes-and-goes industry chatter in the past couple of years, captured initially only by niche business media. Earlier this year, DealStreetAsia the resurfacing of talks between the two tech majors, only to be called off in September.

Competition between GoTo and Grab has been costly for both parties due to intense price wars and investments in technology, marketing and expansion. For example, and have spent 34.5 trillion rupiah (about $2 billion) and 23.55 trillion rupiah (about $1.4 billion), respectively, on sales and marketing expenses to date. That is, on average, about 85% and 19% of their quarterly revenues, respectively.��

It indeed makes sense for both companies, as a merger can be seen as an effort to strengthen the balance sheet. The new entity can cut operating expenses, freeing up capital for innovation and expansion. That could mean wider geographical coverage, an unrivaled logistical and digital network. 

The merger may restore investor confidence. GoTo could benefit from access to Grab’s stronger international presence and broader capital resources, while Grab could tap into the scale and grasp GoTo has in Indonesia. It remains unclear whether Grab would absorb GoTo or vice versa. Still, data suggests that Grab has much bigger liquidity. By absorbing GoTo, Grab can remove its biggest rival, solidifying dominance in ride-hailing and delivery.

In an interesting turn of events, State Secretary Prasetyo Hadi that either a merger or an acquisition is afoot between GoTo, Gojek, Tokopedia and Grab Holdings — and that Daya Anagata Nusantara Investment Management Agency (BPI Danantara) is involved to realize such a plan.��

Hadi, as quoted by CNBC Indonesia, said the plan was the result of a three-way meeting between President Prabowo Subianto, GoTo and Grab representatives as part of the efforts to create better services for the public, to keep the company running and to create jobs.

Shares of GoTo and Grab had a slight uptick on the next trading day following Hadi’s comment on the potential merger on Friday, July 11th. The following Monday, GoTo’s shares went up to 67 rupiah apiece from 61 rupiah previously. Grab’s shares went up to $5.90 apiece, from $5.56 apiece previously. That being said, both shares are still far below their Initial Public Offering (IPO) prices.

Public concerns

Being the first and largest ride-hailing players in Southeast Asia, GoTo and Grab could control a significant share of the ride-hailing and online food-delivery markets in the region. In other words, a monopoly. In hindsight, it threatens consumer choice and gives the combined entity a potentially unchecked power over pricing and data.

The national commission overseeing business competition in Indonesia, also known as KPPU, can’t do much at this stage. According to , KPPU can only assess mergers and acquisitions that have already happened. In a to the media, KPPU Chairman M. Fanshurullah Asa said the commission is open for GoTo and Grab to hold a voluntary consultation with the agency.

KPPU has begun conducting independent research to identify potential impacts from the merger. If the transaction is finally notified to KPPU, the agency can immediately conduct a set of assessments. However, the question remains. If the state is involved and millions of dollars and precious time have been spent to make this merger come true, how far would KPPU maintain its ground?

On the other side, there is also a real possibility that the authority in Singapore will move to block or impose conditions on a merger between GoTo and Grab, especially if the deal risks unfairly reducing competition in the city-state. 

The Competition and Consumer Commission of Singapore (CCS) is of media reports about the potential merger, but it has not received merger notifications from either of the companies.��

Danantara’s involvement is another point of concern. Danantara, Indonesia’s new sovereign wealth fund with 1,000 trillion rupiah (about $59 million) in capital, needs nine months to set up a proper website that includes basic information such as its management and official statements.

As the public continues to question its transparency, the new Sovereign Wealth Fund (SWF) is reportedly exploring a potential minority stake in the combined entity. Danantara is poised to play a government-driven strategic role to ensure commercial return and market balance. 

It is still fresh in the memory how the state-owned mobile operator also intended to make a strategic investment in Indonesia’s digital economy by injecting billions of rupiah into GoTo through convertible bonds and equity purchases between 2020 and 2021. It, however, resulted in a major financial loss after GoTo’s shares plunged following its IPO.

The transaction received public criticism, not only due to the massive loss but also because of the potential . Prominent businessman Garibaldi Thohir, who was an independent commissioner of Gojek and later became GoTo’s president commissioner, is the sibling of State-Owned Minister Erick Thohir. Bono Daru Adji, Telkom commissioner, was a legal consultant for GoTo’s IPO.��

A name who’s involved in both Telkomsel’s investment in GoTo and potential Danantara’s investment in the GoTo-Grab entity is Pandu Sjahrir. Sjahrir was a commissioner for Indonesia’s Stock Exchange. He has been an early investor in Gojek and later became the president commissioner of GoTo’s financial services arm. These roles placed him, arguably, on the “GoTo side” of the relationship due to his close association with the company. 

Now, being the CIO of Danantara, Sjahrir the media that the transaction will be a business-to-business one. The optics are already murky. Danantara has to ensure nobody has financial or relational ties to GoTo and Grab. The SWF should ensure that no one uses this agency to secure positions or bail out existing positions in GoTo under the cover of “national interest.”

Securing local interests

For Danantara to take a stake in the merged GoTo-Grab entity, one would argue that it signals a major step in state involvement over the nation’s digital economy. It’s clear Danantara has the full support of the state. 

Knowing that the foreign entity has access to larger capital, Danantara’s involvement in this potential transaction may be the right way to secure Indonesia’s interest in the deal. It can address concerns over strategic assets and the direction of the digital market. Danantara’s stake could mean safeguarding data sovereignty, ensuring jobs and innovation stay onshore and securing regulatory compliance for the new entity.

However, having Danantara — along with its political influence and access to government data — invest in the new entity, the competition will be a bit tougher, if not impossible, for other ride-hailing companies. The merger itself would arguably create a near-monopoly, giving the platform far greater power to cut incentives, raise commissions and limit alternatives if conditions worsen for drivers, merchants and customers. Political backing will fuel this dominance even more. 

Fewer incentives, higher commissions and insensitivity to complaints are detrimental to both the drivers and their customers. The latter would pay more, yet the drivers could get less. In the grand scheme of things, the potential impact could be rising inflation, dropping purchasing power and worsening quality of life.

As the combined entity could control the majority of the ride-hailing market in the region, it will be harder for online drivers — and to some extent merchants and customers too — to voice and advocate their rights. The potential merger has received from the Indonesian Transport Workers Union (SPAI) and . They’ve sensed the potential decline of their take-home pay following this merger.��

There are looming questions on the deal structure itself: which one will become the surviving entity? What does it mean to have either of the entities as the surviving one? Where would it be based? What kind of taxes should it pay? How much share will Danantara have? Even if it’s not a majority stake, are there any government officials taking positions in the new entity? If so, what will their responsibility be? 

There are also questions regarding the customers, the merchants, and the online drivers. What does this merger mean to them? Do they need to pay more to use the ride-hailing service? Will it be more convenient for customers but less bargaining power for merchants? 

Just like KPPU and CCS, the public will have to wait for new developments and watch the results closely.

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and union campaigns for living wages also echo living wage concerns beyond statutory minima. This debate, however, is unfolding at a time when a large share of India’s micro, small and medium enterprises — employing the bulk of the workforce — continue to struggle with compliance even with existing minimum wage requirements.

Unlike minimum wages, which are explicitly linked to the nature of work, skill levels and hours performed, living wage frameworks are typically anchored in household consumption needs and do not explicitly account for the quantity or productivity of work.

As a result, they may generate wage benchmarks that appear arbitrary from the perspective of firms’ productivity and economic capacity, particularly for small enterprises operating with low productivity and thin margins. Yet in India’s labor market, an increasing focus on living wages risks diverting attention from a more immediate and consequential task of the wage laws India already has.

Living wages and developed vs developing economies

Living wage frameworks have largely emerged in developed economies, where per capita incomes are often more than ten to 20 times that of India, informality is limited and most employment is in high-productivity sectors. In such contexts, governments and employers have the fiscal and economic capacity to absorb consumption-based wage benchmarks.

India, however, remains a developing economy with low average productivity, widespread informality and nearly 90% of enterprises classified as micro or small units. Policy instruments suited to rich economies cannot be mechanically transplanted into a labor market with fundamentally different structural realities.

At its core, the living wage approach shifts wage determination away from work performed towards household consumption. Wages are benchmarked against food baskets, housing costs, education choices and lifestyle expectations.

This departs from a principle long embedded in Indian labor law and trade union practice — and more broadly in India’s civilizational ethos — where work itself is accorded dignity, the belief that labor, skill and effort (karma) deserve fair reward. By tying pay to household needs rather than work, the living wage framework disconnects remuneration from productivity, effort and skill acquisition.

This shift raises practical contradictions. Should two workers performing the same job earn different wages because one has a larger family? In a country as diverse as India, with sharp regional price differences and household structures ranging from single migrants to joint families, a consumption-based wage formula quickly becomes arbitrary, inequitable and administratively complex.

More importantly, such an approach weakens incentives for skill formation and productivity enhancement — the levers India must strengthen if it is to realize its ambition of becoming a by 2047. For an economy still climbing the income ladder, linking wages explicitly to the quantity and quality of work performed remains important for aligning remuneration with productivity.

Since productivity is shaped not only by effort but also by workers’ skills and working conditions, wage-setting mechanisms that recognize these factors can promote efficiency as well as fairness. When embedded within a framework of statutory minimum wages, skill-linked wage systems are therefore not merely pro-employer; they can also be pro-employee, as they encourage skill acquisition by linking wage rates directly to employees’ skill sets.

Laws on the book: a failure to enforce

India’s real wage crisis lies elsewhere. It is not the absence of a living wage benchmark, but the failure to enforce minimum wages already notified . Across agriculture, construction, domestic work and small manufacturing, many workers continue to be statutory minimum wages. Revisions are often delayed, inspection capacity is limited and compliance remains weak. For many workers, minimum wages remain a legal entitlement rather than a lived reality.

It was precisely to address these shortcomings that Parliament enacted the , 2019. By consolidating four earlier laws covering minimum wages, wage payments, bonuses and equal remuneration, the Code seeks to simplify compliance while strengthening worker protection. Its most significant reform is universal coverage.

Although its predecessor, the , 1948, existed for decades, its application was limited to “” notified by governments, leaving large segments of India’s informal and service sector workforce (like housemaids, cooks, caregivers, workers in small eateries like dhabas and roadside restaurants) outside its legal ambit.

The Code on Wages, 2019, removes this occupational filter, making minimum wages protected for the first time. Now, minimum wages have become a statutory right for all workers across organized and unorganized sectors.

The Code also introduces a statutory floor wage to be fixed by the central government, based on minimum living standards, with scope for regional variation. States cannot set minimum wages below this floor. This creates a national baseline of wage protection without abandoning the principle that wages remain linked to work and skill. Minimum wages are to be fixed using transparent criteria, including skill categories, geographic conditions and the nature of work, such as exposure to heat or hazardous environments.

Beyond wage levels, the Code strengthens core labor protections. It prohibits gender-based discrimination in recruitment and wages for similar work. It extends provisions on timely wage payment and restrictions on unauthorized deductions to all employees by removing earlier wage ceilings. Overtime wages at twice the normal rate are mandated, and responsibility for wage payment is clearly assigned to employers.

Equally important is the rethinking of enforcement. Inspectors are now designated as “”, combining oversight with guidance to improve compliance. First-time, nonserious offenses can be compounded through monetary penalties, while repeat violations attract stricter sanctions. This compliance-oriented framework recognizes India’s enforcement constraints while retaining legal accountability.

Searching for a just marketplace

Taken together, the Code on Wages, 2019 already incorporates many objectives advanced by living wage advocates: universality, adequacy, equity and enforceability. What it deliberately avoids is anchoring wages to individual household consumption patterns. Introducing a parallel living wage framework alongside the Code would blur legal clarity, complicate enforcement and weaken the incentive structure needed in a developing economy.

The economic risks of such a shift are significant. Most Indian enterprises operate on thin margins and have to capital. They can plan for and comply with clearly defined, work-linked minimum wages. But wages are tied to evolving consumption baskets, often devised without adequate sensitivity to the capacity to pay unpredictable labor costs. The likely outcomes are reduced hiring, greater informality and weaker compliance.

India’s labor market faces structural challenges: informality, low productivity and limited enforcement capacity. The Code on Wages, 2019, offers a pragmatic, Indian response aligned with the country’s development stage and long-term aspirations. The priority now is implementation through regular revision of minimum wages, stronger enforcement and universal compliance.

The debate, ultimately, is not between compassion and growth. It is between a wage system anchored in work, skills and productivity and one anchored in consumption. If India is serious about becoming a by 2047, the task is clear: make the Wage Code work, and ensure that the minimum wage promised by law is paid in practice.

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While such arguments may appear persuasive to those unfamiliar with the region’s history and economic realities, they collapse under scrutiny. The idea that Pakistan benefits financially from war ignores the devastating cost borne by the country, economically, socially and politically, and grossly misrepresents the motivations behind its security policy.

A popular narrative without economic grounding

The origin of the “war economy” myth is not academic. It is rooted in the rhetoric of anti-institutional and anarchist movements that seek to portray the Pakistani state, particularly its military, as profiteers of perpetual conflict. These claims often appear in activist discourse and certain international commentary, asserting that Pakistan’s engagement in post 9/11 operations was driven by financial incentives rather than national security imperatives.

Central to this argument is the notion that Pakistan received billions in aid, particularly through the US Coalition Support Fund (CSF), and used this as a revenue stream. The implication is that peace was undesirable for institutions that allegedly benefited from instability. However, the economic data and ground realities paint a far different picture.

Counting the cost, not the gains

According to Pakistan’s Ministry of Finance, the country suffered over in economic losses between 2001 and 2020 as a direct result of terrorism and conflict-related disruption, losses that dwarf the total foreign assistance received during the same period.

In contrast, the US disbursed approximately to Pakistan in Pentagon military payments, primarily through the CSF between 2002 and 2017. Crucially, this payment was not an open-ended financial reward. It was a reimbursement mechanism for logistical and security support rendered in connection with NATO operations in Afghanistan.

Independent research institutions echo these findings. A published in Small Wars & Insurgencies estimates that Pakistan has endured over due to terrorism, hardly the profile of a nation exploiting war for its benefit.

Strategic necessity, not opportunism

Accusations that Pakistan chose war for dollars neglect the regional security environment that followed after the US invasion of Afghanistan. With terrorist networks, including Tehrik-e-Taliban Pakistan and Al-Qaeda, establishing footholds along porous borders and violence spilling into Pakistani territory, neutrality was not an option. The state faced real and urgent threats to national cohesion and public safety.

To suggest that these decisions were made for mere economic gain is not only analytically unsound, but it also implies that Pakistan willingly invited terrorism onto its soil, destabilized its economy and lost thousands of lives for international financial aid, which it could neither fully control nor freely spend. While all institutions, including the military, must be subject to transparency and accountability, the idea that a nation enters war for reimbursement, much of which was withheld or conditional, is a distortion, not a diagnosis.

The power of the narrative and who it serves

So why does the myth persist? Because it serves a purpose. By casting national security decisions as economically motivated, anti-state narratives shift the focus from the complexity of militancy, cross-border terrorism and regional geopolitics to a simplified story of greed. It reframes a fight against extremism as a tool of oppression and reduces sacrifice to opportunism.

Such distorted framing appeals to international audiences unfamiliar with the region’s internal dynamics and is often repeated by anarchist factions seeking to erode public trust in state institutions.Ironically, this narrative not only misrepresents Pakistan but also undermines the very the country has made in reversing the tide of terrorism over the last decade.

No profit in pain

The war economy myth is a powerful speculation, but it is not an economic fact. Pakistan’s security decisions have often come at an extraordinary cost rather than as a benefit. The state has faced intense , and immense resource strain in its pursuit of stability, not profit.

As the world revisits the consequences of two decades of war in the region, it is critical to separate facts from speculative narratives. Reducing Pakistan’s complex national security challenges to a monetary transaction does a disservice not just to truth, but to the countless civilians, soldiers and institutions that continue to strive for peace in one of the world’s most difficult neighborhoods.

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Glenn responds with humor and irony:

Looked at from outside, as a non-Indian India hand, India follower, the picture that has been painted, that one thinks one sees at least in part, is that Modi and his party have said they wanted to decentralize the economy, deregulate the economy and energize the private sector, that there has been a sea change in Indian culture at least among the ruling elites recognizing that colonial centralization, top-down government and socialist economies are less able to provide growth, wealth, health and so on than a well-regulated market economy and that huge changes are underway.

Glenn goes on to ask:

What exactly is happening then? What is Modi doing to the economy? Does he know — and I am not being facetious here — does he know what he is doing? Does he believe what he is doing is the opposite of what is happening? Many socialists I have known, quite sincerely, told me that all was going as well as possible in the best of all possible worlds, even as their economies and societies were imploding. So, tell me what is happening?

Atul clarifies his metaphor by pointing out that Modi is no Joseph Stalin. Unlike the Soviet strongman, Modi is not killing millions and sending hundreds of thousands to the gulag. No Lavrentiy Beria is raping and killing young daughters of Indian citizens. However, Modi is certainly centralizing power in the same way as Indira Gandhi did during the heyday of socialism in the 1970s. 

The anatomy of Vegetarian Stalinism

Stalinism is a form of Marxist government in which all power is concentrated in the hands of a single ruler. In this deterministic political theology, capitalism is the final state of human development after which communism would emerge worldwide and the state itself would dissolve. Communism was the creation of an elite that saw the masses as needing help and itself as the vanguard of a political revolution. This elite seized power from the exploiters — the Tsarist elite — through a bloody revolution and placed all levers of production in the hands of the state. The new communist elite assumed all power, claimed the absolute right to the truth and the right to tell the people how to be free.

Joseph Stalin took over the reins of power of the Soviet state and was not just murderous but really genocidal. This Georgian (the country in the Caucasus) began by destroying his rivals and ended up killing millions. Stalin was training to be a priest. He walked out of his seminary. In came Karl Marx’s tomes and out went the Bible. 

In Stalinist theology, the ruler claims complete authority over truth, economic life and social behavior. An elaborate state apparatus enforces the ruler’s authority. Stalinism was not just authoritarian but totalizing, eliminating rivals and suppressing feedback. Stalin did not spare his rival Leon Trotsky, even when he fled to faraway Mexico despite his mythic leadership in the 1917 Russian Revolution and in creating the Red Army.

Post-independence India was greatly inspired by the Stalin-led Soviet Union and adopted a socialist economy. The colonial bureaucracy came to occupy the commanding heights of the economy in addition to the state. The Indian Civil Service (ICS) of the British Raj became the Indian Administrative Service (IAS) and gained even greater powers post-independence. In 1976, Prime Minister Indira Gandhi amended the constitution to declare India to be a socialist country and created a license-permit-quota raj where the babu (bureaucrat) was king.

While Pakistan became, in the words of the scholar Ishtiaq Ahmed, a garrison state, India became a babu state. Under Modi, this babu state is back. It secures compliance of citizens by tormenting them through administrative red tape and interminable judicial proceedings. As Atul points out, “You’re not sent off to the gulag but the Enforcement Directorate or the Income Tax [Department] or the Central Bureau of Investigation shows up at your door.” They start proceedings in court, which often last a decade or more. People end up traveling to dusty offices or decrepit courts, waiting interminably and wasting time, money and energy for years. They might end up innocent in court, but might be bankrupt by the end of their judicial ordeal. The Indian system is not Kafkaesque; it is Kafka.

Three features define the political system under Modi. First, Modi has centralized power to an excessive degree. Like Stalin, he wants all power for himself. The Prime Minister’s Office (PMO) is all-powerful now, and elected leaders in the ruling Bharatiya Janata Party (BJP) count for less than nothing. Modi exercises power not through the BJP but through a colonial-era bureaucracy led by the IAS. A coalition of big business, the bureaucracy and the BJP runs the country with an iron fist. This has led to a top-down babu state that lacks feedback loops of freer economies. Unlike a fascist system, this babu state does not corporatize or industrialize. Instead, India’s babu state has paralyzed the economy through bureaucratic oppression of the citizenry.

The perception and the reality

Glenn points out that the standard external perception of India is rather positive. From the outside, Modi appears to have deregulated, energized the private sector and presided over major infrastructure expansion. Glenn notes that when he visited India, the infrastructure was improving. Construction was underway on roads, airports and other logistics projects.

Atul says that we have to give credit where credit is due. Modi has an outstanding minister named Nitin Gadkari, who is efficient and dynamic. Improving infrastructure, a historic weakness, counts as a genuine achievement for the Modi government. It has also ameliorated the lives of hundreds of millions through better micro welfare measures. Thanks to direct bank transfers, the spread of digital payments and identification based on India’s Aadhaar ID system, leakages in welfare delivery have decreased greatly. So, less government money is stolen or wasted in welfare programs. Indians are better fed, taller and live longer than before. This is indeed an impressive achievement.

Economic growth rates have been volatile but remain relatively high. Note that achieving high growth rates is easier for developing countries than for advanced economies, though. Since India is operating from a low base, a higher growth rate is easily achievable. The World Bank tells us that India’s per capita income is only $2,694.7, which leaves a lot of headroom for growth.

Also, India’s economic numbers are no longer reliable. The International Monetary Fund (IMF) has given India a “C” grade (the second lowest) for its national accounts data. India failed to get the A (adequate) and B (broadly adequate) ratings. A C rating means economists, investors, and policymakers fail to get a completely accurate and timely picture of the Indian economy. Atul’s sources in the IMF, the World Bank and the Indian establishment reveal that the Modi government has cooked up its books, fiddled with the numbers and gamed World Bank indices. For example, the government has made it super easy for anyone to get electricity in Delhi and Jaipur, which are the two cities World Bank measures. They reveal that the improvement in ease of doing business in India is largely a myth and the World Bank’s indices for India are misleading.

India’s inflation figures are now highly misleading. Per government figures, inflation was 0.71% in November and 1.33% in December. Many fear that the government is the numbers. Atul’s mother Sudha believes that either Nirmalanomics is right or Sudhanomics is right. Finance Minister Nirmala Sitharaman must be either unaware of the cost of groceries or is lying about inflation figures.

Yet it is true that inflation under Modi on average has been 5.1% per year, lower than 8.1% under his predecessor Manmohan Singh. However, growth has been lower too: 6.8%per year under Modi in contrast to 7.7% under Singh. The rupee has fallen under Modi too. It was less than ₹60 per USD when Modi was elected and is now more than ₹90 per USD.

Atul makes the point that Modi is super sharp. He is cunning and charismatic. The prime minister is a decent orator who wins election after election. Yet Modi is not terribly well educated and began life as a teaseller. The prime minister has the instincts of a control freak who believes he will wave the wand and the elephant will dance. Fundamentally, Modi does not understand economics and policymaking.

The toxic legacy of the past

India became independent on August 15, 1947, two years after the end of World War II. Independent India chose socialism because it had been traumatized by British rule. The British had stripped India bare, engaged in an exploitative transfer of wealth and life expectancy was just 32. Remember the East India Company conquered India, not the British state.

At that time, the Soviets, communism and socialism seduced many Indian leaders. Vladimir Lenin’s Imperialism, the Highest Stage of Capitalism was deeply influential. Many subjects of imperial powers who were Western and capitalist were looking for alternatives. Other than nationalists around the world, the only party supporting independence movements was the Soviet Union. The US only paid lip service to these struggles. It was a capitalist power that was the inheritor of the British Raj.

Mahatma Gandhi chose Jawaharlal Nehru as his successor. Gandhi was from the trading caste, believed in small business and freer markets. Nehru was a Brahmin who had gone to Cambridge and was deeply influenced by socialism. He was very impressed by the Soviet Union where he went to fake factories where actors pretended to be workers and managers, and ate together. 

Nehru inherited an imperial state, a shadow empire with widely disparate parts that he tried to yoke together with the slogan “unity in diversity,” Gandhi’s center-right followers, including his relatives, were marginalized. Nehru was an idealist who brought in Soviet-inspired five-year plans, started the Indian Institutes of Technology, tried to create a public sector and built large dams to increase agricultural production. By the time Nehru died, India had become an elected monarchy.

Yet, at the end of the day, Nehru was using a colonial state to impose socialism. Harshan Kumarasingham, an outstanding scholar, has come up with the idea of the Eastminster model to describe former colonies. The British Viceroy in these colonies left for the UK and so did many of his officials. The brown sahibs moved into their bungalows and became even more power drunk because they acquired overweening powers under socialism. There was none of the Anglo-Saxon philosophy or parliamentary tradition of the UK to keep the brown babus in check.

Under Indira Gandhi, Nehru’s daughter, India lurched left and embraced hardcore socialism. She nationalized banks, promoted her sons and destroyed inner-party democracy in the Congress. Indira was charismatic, decisive and capable in many ways but also paranoid, a control freak and very dynastic. She destroyed all rivals in the party and ruled the country through the IAS who came to be more powerful than erstwhile feudal lords. Its predecessor, the British-era ICS, was the steel frame of the empire. British collectors ruled districts as representatives of the Viceroy. Their job was to collect revenue from these districts and send them on to London. Today, IAS officers, often in their early 30s, are district collectors who wield all power. Elected mayors or officials are toothless tigers with no power.

Today, the IAS has greater power than the ICS. During British days, the Surveyor General of India was a military man and an archeologist headed the Archeological Survey of India. Today, IAS officers head both these organizations. In the US, the UK, Japan and elsewhere, an economist heads the central bank. An IAS officer heads the Reserve Bank of India (RBI) despite never having studied any economics. In India, the IAS occupies the commanding heights of not only the state but also the economy.

Montesquieu’s philosophy of separation of powers that involves checks and balances does not exist in India. In addition to the sclerosis of the system, there is a moral aspect: Power corrupts and absolute power corrupts absolutely.

After independence, India came to have political freedom but not economic freedom. Today, it is a land of elected monarchies. The prime minister of the country and the chief minister of India’s 28 states rule like kings and queens with a handful of IAS officers. Members of the IAS have no domain specialization. One day, they run agriculture, another culture and a third day finance. They are the winners of the annual civil services examinations that tests for all services from diplomats to auditors. The reservation system means that 50% of the seats are for those of lower castes. So, anyone who misses the IAS lives a life of simmering regret.

The annual civil service examination does not test for aptitude. Most people coming into the elite bureaucracy come for a fat dowry and a fatter marriage. More people of humble backgrounds are getting into the IAS and other civil services but they are far more corrupt than their more affluent predecessors who served the Indian state in the past. Since the judicial process in India does not work, there is no accountability for the IAS officers. They do as they please and are answerable to no one. There are indeed heroic IAS officers who proverbially work 25 hours a day but India remains a flailing state because the colonial system no longer works.

The dangers of competitive populism

In 1991, India liberalized its economy. The IAS and other babus lost power. Indian growth rates went up but the state shrunk and politicians lost some of their power. When Modi came to power, the IAS sold him the story that they were the best and brightest of India because they had cleared the world’s toughest examination. As a control freak, Modi bought into the idea and the IAS came back.

Modi inaugurated the era of what noted analyst Manu Sharma and Atul have called Sanatan Socialism or what noted economist Arvind Subramanian has called “New Welfarism” has led to a number of populist welfare schemes that have indeed benefited millions. No less than 810 million  get five kilograms of free food every month. 

The BJP is not an exception. Every party is promising freebies. The Congress is the grand old party of India led by an energetic chap. Rahul Gandhi, the great grandson of Jawaharlal Nehru and the grandson of Indira Gandhi, has walked all the way from the south to the north of the country. This blue-blooded heir of the Nehru dynasty does not see a rollback of the state. The Samajwadi Party of Uttar Pradesh, Atul’s ancestral state with 240 million people, is socialist too. Samajwad literally means socialism and its name translates as the Socialist Party.

The new Aam Aadmi Party (AAP) is promising free water and electricity. In West Bengal, the Trinamool Congress (TMC) is run by a former Congress leader and was ruled by communists for decades. West Bengal is a basket case with hardly any business left in the state. Kolkata, the former imperial capital of India and the capital of West Bengal, is a shell of its former self. Tamil Nadu, a relatively better-run state with industry, is ruled by a politician called Muthuvel Karunanidhi Stalin known as M.K. Stalin or just Stalin of the Dravida Munnetra Kazhagam (DMK). You have guessed right — he was indeed named after Stalin.

The Swatantra (Freedom) Party and the Bharatiya Janata Party (BJP) were the more free market parties in the past. The former died decades ago and Modi has taken the BJP in a statist direction. Now the three Bs — the BJP, big business and babus — have created a nexus that promotes oligopolies and monopolies. India now has the Adani-Ambani problem. The two big business houses control almost everything. Modi’s compliance raj has replaced the license-permit-quota raj.

Modi’s catastrophic policies

Two catastrophic policies have done incalculable damage. Demonetization in 2016 destroyed small and  medium businesses. Modi arbitrarily withdrew high-denomination notes, causing massive economic dislocation in the country. In 2017, he rolled out the goods and sales tax (GST), a good idea in principle, in the middle of the financial year to disastrous results. The black economy, which was an estimated 60% of the Indian GDP, crashed.

There is a real argument to be made that India’s real GDP has actually shrunk under Modi. The cataclysmic demonetization and horrendous implementation of GST was a double whammy that killed off millions of small and medium sized businesses, many of which were a part of the black economy. Even assuming high growth, the real economy might have gone down from 160 to 100 by the end of 2017 and is yet to rebound to its pre-2016 level.

Today, the most important thing affecting taxpayers is tax terrorism. The tax babus under Modi have become increasingly arbitrary, extortionate and draconian. An American company was charged by the customs department for underinvoicing and by the income tax department for overinvoicing. Clearly, both of them could not simultaneously be right. Both departments were sending out inflated tax notices to meet top-down targets. People and businesses have to deposit 10% of the claimed amount and then fight it out in court. Millions of cases are stuck in Indian courts for an indeterminate period. The Indian system is not Kafkaesque but Kafka.

Given such catastrophic policies, businesses have collapsed. There are no jobs. Wage suppression and financial repression are destroying the middle class. Animal spirits are really low, a culture of fear prevails and demand has cratered. India is experiencing deindustrialization: Manufacturing has gone down from 17% to 13%, a similar level to 1965.

Protectionism through the back door means that tariffs and non-tariff barriers make goods expensive for the middle class. Thousands of quality control orders make it difficult for smaller American or European businesses to export to India. The same car costs more in India than in the US. Petrol costs much more in India than in the US thanks to taxes. Direct and indirect taxes are now extortionate. Atul’s business executive friend speaks about a rupeeization of incomes and dollarization of expenses. The middle class is feeling the squeeze. 

Foreign direct investment (FDI) has evaporated over the last two years: 2024 and 2025. Foreign institutional investors (FII) have been pulling significant money out of Indian equities since 2024, marking their biggest exit year in 2025. Capital and talent are fleeing India. Earlier 100,000 Indians left India every year. Since 2022, 200,000 Indians have been voting with their feet and leaving the country. 

Modi promised “minimum government, maximum governance” but has delivered “minimum governance, maximum government.” Doing business in India today is like pulling teeth, your own teeth, and is incredibly painful.

US President Donald Trump’s tariffs are hurt dollar earnings and India needs dollars for imports

If the US acts against Iran and oil prices hike, India faces a 1991-style balance of payments crisis. Two other crises that are hurting the economy: rising pollution and decreasing water. The air pollution in Delhi is hazardous. Ground water is falling, glaciers are melting and river flows are declining. 

The Modi government has some real achievements but has made one historic blunder. He has recentralized like Indira Gandhi and brought back a new form of Emergency. Modi has filled his cabinet with sycophants with no competence who focus on slogans, not substance. They are lightweights with no competence. The Modi government makes lots of announcements but with little implementation. An economist comments that the government has a half-assed everything must happen now approach which gets nothing done. 

The Modi government has an obsession with perception management. Cabinet members are fixated with Twitter (now X) and Instagram. Atul’s classmate Ashwini Vaishnaw is called Reel Mantri (Minister) because is always posting Instagram Reels. He holds three ministries. Vaishnaw is the 39th Minister of Railways, the 35th Minister of Information and Broadcasting and the second Minister of Electronics and Information Technology since 2024. Finance Minister Nirmala Sitharaman is ignorant and arrogant. Neither Vaishnaw nor Sitharaman have been elected or are electable.

An example of the orgy of incompetence is IAS Officer Shaktikanta Das. As head of RBI, India’s central bank, he blew $70–$100 billion of foreign reserves in a misguided effort to maintain the price of the rupee. He also launched a disastrous tax-free gold scheme that cost the government many tens of millions. Instead of being punished, Das has been rewarded for his catastrophic reign by being made No. 2 in the Prime Minister’s Office. An English partner when Atul was a lawyer once quipped, “Only two things float to the top: shit and cream.” Atul leaves the listener to conclude what is floating at the top of the Indian system.

Futures, not certainties

Glenn asks whether India is facing an existential crisis. Atul agrees and offers three future scenarios. First, India can return to the Hindu rate of growth without demand, manufacturing, technology or private investment. India can feed its huge population and may muddle along. Second, India might face a 1991-style balance-of-payments crisis because of a lack of foreign exchange reserves. This would force India to reform and a freer market would unleash higher growth. A culture of fear would go, animal spirits would rise and business activity would increase. Third, India could face institutional and environmental crises. South India might resent subsidizing North India or funding Kashmir and the Northeast. The words of William Butler Yeats — Things fall apart; the centre cannot hold — might come true. The age-old fears of Balkanization might actually transpire.

The best case scenario is reform and the worst case scenario is disintegration. The future is contingent on choices that Indians make. The outcome is not predetermined. India still has entrepreneurs, human capital and a global diaspora. Reform would require rolling back the compliance raj, restoring professional competence in economic institutions and rebuilding trust. If India can rationalize, there is a lot of potential. Glenn says there is hope for India yet. Atul concludes, “We are not doing a podcast for the opposition at all. We are saying, for heaven’s sake, get a grip. All political parties have inner party democracy — get rid of competitive populism and reform, reform, reform.”

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Transforming financial operations: the role of blockchain and AI in international development

At the World Bank, this shift is most visible in efforts to digitize and secure financial flows. In 2025, the Bank announced the rollout of , a blockchain-based platform designed to track project funds on distributed ledgers, enabling near-real-time visibility into how resources move from headquarters to implementing agencies and beneficiaries. By replacing fragmented reporting systems with a single tamper-resistant record, FundsChain aims to reduce reconciliation delays, limit opportunities for misuse, and simplify auditing across complex, multi-country projects. While still evolving, the initiative reflects a serious attempt to use blockchain to streamline core financial operations.

In tandem with blockchain, the World Bank has expanded its use of AI to support policy advice, project design and governance diagnostics. Through initiatives such as its , machine-learning tools analyze large datasets on procurement risks, public-sector performance and service-delivery outcomes. These tools allow staff to identify patterns and anomalies that traditional analysis might miss, improving project targeting and reducing costly design errors before funds are committed.

The Asian Infrastructure Investment Bank (AIIB) made a notable breakthrough in capital markets by its first digitally native note (a form of digital bond) in August 2024, raising $300 million on Euroclear’s Digital Financial Market Infrastructure platform using distributed ledger technology (DLT). This issuance — the first US-dollar-denominated digital bond on Euroclear’s DLT system and the first by an Asia-based issuer — was backed by a triple-A credit rating and listed on the Luxembourg Stock Exchange, with clearing available through the Hong Kong Monetary Authority’s Central Moneymarkets Unit and the SIX Swiss Exchange, demonstrating how established financial market infrastructure can broader adoption of blockchain-enabled securities.

The UN system has explored these technologies, though adoption varies widely across agencies. Blockchain pilots have been deployed in humanitarian contexts to support cash transfers, digital identity solutions and supply-chain tracking in fragile settings. To coordinate experimentation, the UN was created to promote knowledge sharing across agencies. AI is increasingly being to trade facilitation, climate-risk analysis and early warning systems, where rapid synthesis of large data streams is essential. In these areas, AI has shown promise in reducing manual workloads while improving the timeliness of analysis.

Challenges to AI and blockchain integration in multilateral organizations

Despite such progress, overall efficiency gains from AI and blockchain remain limited among the multilaterals. One persistent obstacle is data quality and interoperability. AI systems depend on clean, standardized and timely data, yet many multilateral organizations rely on legacy IT architectures that do not communicate effectively. Without interoperable data systems, AI tools remain confined to narrow use cases. Similar challenges have been observed in the private financial sector, where is a to effective AI adoption.

Governance concerns also slow progress. AI raises questions about transparency, bias and accountability — particularly when algorithmic tools influence funding decisions or policy advice. At the International Monetary Fund’s 2025 , policymakers emphasized the need for shared international standards to ensure AI adoption does not undermine trust or exacerbate inequality. Blockchain presents parallel challenges, including questions over control of permissioned networks, legal accountability, alignment with existing oversight frameworks and similar concerns. Scholars have that poorly designed blockchain systems could weaken institutional legitimacy rather than strengthen it.

Internal capacity constraints further limit adoption. Many multilateral organizations lack sufficient in-house expertise in data science and distributed systems, relying instead on consultants. Combined with risk-averse institutional cultures, this has kept many AI and blockchain initiatives at the pilot stage rather than embedding them into budgeting, procurement, financial and evaluation processes.

Harnessing AI and blockchain for enhanced efficiency in multilateral institutions

Yet the potential benefits of deeper adoption are clearly substantial. AI and blockchain could significantly improve funding efficiency by automating compliance checks, reducing leakages and enabling predictive analytics to identify underperforming projects earlier. Blockchain-based systems could support programmable disbursements, releasing funds automatically when verified milestones are met. AI could also improve institutional function by freeing staff from administrative tasks and enabling greater focus on strategy, supervision, streamlining and learning.

To realize these gains, multilateral organizations must move beyond experimentation toward structural reform. This requires interoperable digital infrastructure, credible governance frameworks for emerging technologies, and sustained investment in internal technical capacity. AI and blockchain are not panaceas, but when used strategically, they offer a pathway to leaner, more transparent, more effective, and more accountable multilateral institutions.

[Daniel Wagner is Managing Director of Multilateral Accountability Associates and co-author of the book The New Multilateralism.]

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Across major central banks, inflation targets remain formally symmetric, yet policy behavior increasingly suggests otherwise. In practice, 2% has come to function less as a midpoint than a ceiling. This interpretation is largely implicit and shaped by institutional constraints — most notably the effective lower bound — alongside credibility concerns and asymmetric risk perceptions. This is especially true in a post-pandemic environment marked by supply shocks and uneven disinflation.

Formally, the Federal Reserve (or Fed) continues to a 2% longer-run inflation goal and a strategy intended to deliver 2% inflation on average over time. Credibility is often earned through revealed behavior, and recent experience has made the costs of overshooting appear more salient than the costs of sustained undershooting.

When examined comparatively, the European Central Bank (ECB) provides a clearer historical case of institutionalized asymmetry. Until its 2021 strategy review, the ECB defined price stability as inflation “below, but close to, 2%,” a formulation that created a built-in ambiguity. While seemingly cautious, the phrasing placed greater emphasis on avoiding inflation above target than on correcting persistent undershoots.

The ECB later this with a symmetric 2% target in its 2021 strategy review, a change that implicitly acknowledged the credibility and communication costs of the earlier framing. This was not merely semantics: In the decade after the euro-area sovereign debt crisis, euro-area inflation outcomes repeatedly undershot the target despite substantial accommodation, contributing to concerns that expectations could settle below 2%.

Japan adds a distinct, highly current version of the same problem: Long periods of below-target inflation can change how the public and markets interpret a central bank’s reaction function. The Bank of Japan (BoJ) has maintained a clear, explicit price stability target since 2013. However, the macro backdrop has recently changed: By late 2025, Japanese inflation had remained above 2% for an extended period, and public inflation expectations appeared elevated in household surveys. A Reuters on the BoJ’s survey (based on December 2025 results) describes a large majority of households expecting prices to keep rising and notes that core inflation was still above the 2% target.

At the same time, recent describes the BoJ’s policy normalization path, including policy rate increases after ending its earlier stimulus regime. The key point for the asymmetry question is whether the BoJ’s revealed tolerance bands, and the thresholds that trigger decisive action, are symmetric around 2% or more discontinuous (for example, stronger urgency when inflation risks falling back toward 0% than when inflation runs modestly above 2%). In Japan’s case, the modern record makes the downside asymmetry argument particularly plausible, because the institutional memory of deflation has been so strong.

The United Kingdom adds another angle: strong formal symmetry paired with practical judgment under uncertainty. The Bank of England’s (BoE) remit explicitly declares that the inflation target is 2% and “symmetric,” applying “at all times,” in the Chancellor Rachel Reeves’s monetary policy remit letter. Yet the operational challenge is that the Monetary Policy must decide how much weight to place on inflation persistence versus emerging slack, and those judgments can generate time-varying asymmetry even under a symmetric mandate.

The BoE’s published Monetary Policy and Minutes provides contemporaneous evidence of this balancing act. For example, the December 2025 minutes note consumer price index inflation at 3.2% (above target) while emphasizing easing pay growth and services inflation and an expected return toward target, alongside restrictive policy settings. The November 2025 minutes also a closely split committee — 5–4 — with a minority voting for an immediate cut. This highlights that “revealed preferences” can differ across members even when the target is symmetric. In other words, the UK case shows how asymmetry can emerge from heterogeneous assessments of the inflation-output tradeoff and the risks around it.

Inflation targets derive their effectiveness not from mechanical enforcement, but from belief. When households, firms and markets trust that a central bank will actively steer inflation toward its stated objective, expectations align with that goal. When trust erodes, policy becomes less effective and more costly. This logic is well established in the academic literature, including former Fed Chair Richard Clarida and economists Jordi Galí and Mark Gertler’s foundational on credibility and the expectations channel. The euro area’s experience after the sovereign debt crisis remains an archetypal illustration: Prolonged below-target inflation coexisted with extensive accommodation and recurring debates about whether additional easing was warranted.

Across these central banks, the common thread is that stated targets are typically simple and symmetric, while revealed reaction functions are shaped by institutional constraints (such as effective ), political economy and differing beliefs about the costs of inflation deviations. The “quiet shift” is therefore not necessarily a formal abandonment of symmetry, but an increased practical importance of thresholds, regimes and credibility repair — especially after the post-pandemic inflation shock and the uneven, category-specific price pressures that continued to affect households even during disinflation.

Progress in the aggregate

Recent inflation dynamics in the United States provide a useful contrast. Inflation decelerated steadily through 2025, with headline inflation from about 2.9% at the end of 2024 to roughly 2.7% by late 2025. Core inflation declined more sharply. In several categories, including gasoline and some services, prices actually fell.

From a macroeconomic perspective, this represented substantial progress toward price stability. Yet consumer sentiment remained strained. As The Wall Street Journal in its analysis, households remained frustrated because a slower rate of price increases did not reverse the large cumulative rise in prices since the pandemic.

This disconnect underscores an important distinction. Inflation measures the rate of change of prices, not their level. Households care deeply about affordability, which depends on cumulative price increases relative to income growth. Even successful disinflation can leave lasting dissatisfaction if price levels remain high, a point reinforced by the University of Michigan’s consumer sentiment surveys ().

This outcome does not imply a failure of US monetary policy. Inflation had already fallen dramatically from its 2022 peak, and further disinflation without significant economic damage is inherently difficult. Rather, it highlights the limits of what monetary policy can achieve once large relative price shocks have occurred.

Why consumers still felt strained

Yet improved inflation statistics did not translate into improved public sentiment. This gap reflects a fundamental distinction between inflation and affordability. Inflation measures how fast prices are changing, not how high prices already are. For many households — especially those whose wages did not keep pace with earlier price increases — everyday expenses such as groceries, rent and utilities remained significantly higher than pre-pandemic norms. Disinflation slowed the pace of deterioration but did not restore lost purchasing power.

Survey evidence reinforces this interpretation. Data from the MICH show that sentiment remained weak even as inflation moderated, indicating that households continued to feel financially constrained with their psychology.

Notably, survey responses suggest that consumers place disproportionate weight on frequently purchased necessities, particularly food, rent and energy, rather than on aggregate inflation measures. Price declines in less salient categories, therefore, did little to improve overall perceptions. This pattern is consistent with broader reporting on consumer sentiment, including an Associated Press noting that US consumer confidence improved modestly but remained well below pre-pandemic levels.

This divergence between macroeconomic progress and household experience highlights a crucial communication challenge. While policymakers understandably emphasize declining inflation as evidence of success, households evaluate economic conditions through the lens of price levels and income adequacy. As a result, periods of successful disinflation can still be associated with widespread dissatisfaction, even in the absence of renewed inflationary pressure.

Frameworks, forward guidance and uncertainty

The Fed’s of its monetary policy framework was not a routine recalibration but a response to a prolonged empirical anomaly. For nearly a decade following the Global Financial Crisis, inflation persistently undershot target despite sustained economic expansion, historically low unemployment and extraordinary monetary accommodation. Standard Phillips curve relationships appeared attenuated, wage growth remained subdued and inflation expectations drifted downward even as labor markets tightened. Against this backdrop, the revised on Longer-Run Goals and Monetary Policy Strategy to address a credibility problem that had become structural rather than cyclical: a target that was symmetric in principle but asymmetric in outcomes.

The central innovation of the framework, often summarized as “average inflation targeting,” was less about tolerating inflation above 2% than about correcting the asymmetry embedded in prior policy practice. By conditioning future policy on realized inflation outcomes rather than on forecasts alone, the Fed aimed to counteract the persistent downside bias that had characterized inflation dynamics in the post-crisis period. In doing so, it implicitly acknowledged that credibility cannot be sustained when deviations below target are treated as benign while deviations above target provoke rapid response. The framework thus represented an attempt to restore symmetry not through mechanical rules, but through a reorientation of expectations.

This shift is especially evident in the Fed’s evolving approach to forward guidance. from the September 2020 Federal Open Market Committee meeting — released in 2025 under the Fed’s five-year disclosure rule — document a deep and explicit debate about the role of commitment under extreme uncertainty. Policymakers were operating in an environment where the conventional policy instrument had already been exhausted, the economic outlook was dominated by epidemiological rather than macroeconomic uncertainty, and the distribution of risks was sharply skewed toward catastrophic downside outcomes.

In this setting, forward guidance became the primary policy instrument, not as a signaling device about future rates per se, but as a tool for shaping expectations about the reaction function itself. Strong guidance was seen as necessary to prevent premature tightening in financial conditions and reassure households and firms that policy would remain accommodative until recovery was well advanced. The debate centered on how binding it should be — whether flexibility should be preserved at the cost of credibility, or credibility reinforced at the cost of discretion.

The eventual decision reflected a judgment that credibility losses are asymmetric and difficult to reverse. Weak or conditional guidance risked being interpreted as hedging, thereby reinforcing the perception that the inflation target functioned as a ceiling. Stronger guidance, by contrast, risked overshooting but offered a clearer focal point for expectations. In this sense, the Fed chose commitment over optionality, implicitly prioritizing expectation management over fine-tuned control.

The post-pandemic inflation surge fundamentally altered the policy environment in which this framework was implemented. Inflation rose faster and more broadly than anticipated, driven by a confluence of supply disruptions, unprecedented fiscal stimulus, shifts in consumption patterns and rapid reopening dynamics. Policymakers initially characterized these forces as transitory, a view grounded in historical experience with supply-side shocks but increasingly challenged as inflation diffused across sectors.

The subsequent tightening cycle was both rapid and forceful, marking one of the fastest increases in policy rates in modern US history. This episode is sometimes portrayed as evidence that the framework failed. A more careful interpretation is that the framework was forced to operate in a regime far removed from the one it was designed to address. The key issue was not the framework’s tolerance for above-target inflation, but the speed with which inflation exceeded any reasonable definition of “moderate.”

As Fed Chair Jerome Powell in public remarks — notably in his Jackson Hole 2025 framework review — monetary policy is not on a preset course, and Committee decisions are made based on evolving data and risk assessments rather than fixed rules. He underscored that frameworks are conditional constructs that support deliberation but do not substitute for judgment. This interpretation is reinforced by analysis of the Fed’s revised framework, which highlights how the institution adapted its strategy in response to changing economic conditions and lessons learned since the Covid-19 pandemic.

Asymmetry as an emerging norm

When the Fed’s experience is viewed alongside that of other major central banks, it becomes clear that asymmetry is a recurring feature of modern monetary regimes. The ECB’s of price stability — explicitly asymmetric in its “below, but close to, 2%” language — provides a clear historical example. Even after adopting a symmetric target, the ECB continues to operate in an environment shaped by a decade of entrenched undershooting and weakened inflation expectations.

More broadly, the post-pandemic inflation episode has revealed a striking regularity: Central banks respond more rapidly and decisively to inflation above target than they historically did to inflation below target. This pattern is partly explained by the effective lower bound, which constrains responses to downside risks more than to upside risks. But it also reflects genuine asymmetries in policymakers’ loss functions — specifically, a greater aversion to unanchored inflation expectations than to prolonged disinflation.

Formal analysis reinforces this interpretation. Economists Michael Kiley and John Roberts that in low-rate environments, even symmetric preferences can generate asymmetric outcomes because policy space is truncated on the downside. Over time, these outcome asymmetries can become embedded in expectations, creating a self-reinforcing cycle in which private agents internalize the belief that inflation targets are ceilings rather than midpoints.

The critical issue is not whether asymmetry exists, but whether it is acknowledged and managed. When central banks insist on symmetry while systematically tolerating deviations in one direction more than the other, they weaken the informational content of the target itself. Expectations adjust not to formal statements, but to repeated patterns of behavior. Transparency about trade-offs, by contrast, can preserve credibility even in the presence of unavoidable asymmetries.

This raises deeper institutional questions: Should inflation targeting frameworks explicitly incorporate asymmetry? Or should they continue to aspire to symmetry while correcting deviations ex post? The former approach risks politicizing policy by making value judgments explicit; the latter risks eroding credibility by maintaining a rhetorical commitment that practice does not fully support.

The Japanese case

Japan offers the most sustained empirical example of how asymmetry can become institutionalized under persistent disinflation. Since the late 1990s, the Japanese economy has operated in a regime characterized by chronically low inflation, repeated encounters with the effective lower bound and deeply entrenched deflationary expectations. In this environment, asymmetry emerged as a durable feature of monetary policy design and implementation.

The policy evolution of the BoJ reflects an explicit recognition that conventional inflation-targeting symmetry was unattainable under prevailing structural conditions. The introduction of Quantitative and Qualitative Monetary in 2013, followed by the adoption of Yield Curve Control () in 2016, marked a decisive shift away from short-rate management toward balance-sheet and yield-curve policies explicitly aimed at reversing deflationary psychology. These measures, paired with increasingly strong forward guidance, including state-contingent and open-ended commitments to maintain accommodation until inflation “exceeds” the target in a stable manner.

From a loss-function perspective, Japanese monetary policy became overwhelmingly asymmetric. Downside deviations from the inflation target were treated as very costly, while upside deviations were regarded as either benign or desirable. This orientation was consistent with theoretical favoring history-dependent or overshooting strategies in low-inflation environments by economists GB Eggertsson and Michael Woodford and former Fed chair .

In practice, however, repeated shortfalls in realized inflation weakened the informational content of the target itself. A growing empirical literature how persistent outcome asymmetry reshaped expectation formation in Japan. Inflation expectations became increasingly backward-looking and adaptive, responding more strongly to realized inflation than to policy announcements or stated targets.

As forward guidance became progressively but less effective, private agents rationally discounted official commitments, anchoring expectations to historical experience rather than to the central bank’s stated reaction function. In this sense, the Japanese case illustrates the limits of commitment once credibility has been eroded by prolonged underperformance.

The Japanese experience also highlights a critical distinction between commitment intensity and commitment credibility. Despite unprecedented balance-sheet expansion and explicit overshooting commitments, inflation expectations remained stubbornly below target throughout much of the pre-pandemic period. This outcome is consistent with earlier analyses that when the effective lower bound binds repeatedly, even optimal policy may generate asymmetric results.

The post-pandemic inflation episode provided a revealing stress test of this asymmetric regime. As global inflation rose sharply in 2021–2023, Japan briefly experienced above-target inflation, driven primarily by imported cost pressures rather than domestic demand. Yet the BoJ’s response remained cautious and delayed relative to other advanced-economy central banks, reinforcing the perception that tightening is viewed as disproportionately risky given the fear of reentrenching deflation. The gradual modification and eventual exit from YCC reflected this deeply asymmetric reaction function rather than a reversion to symmetry.

From a comparative perspective, Japan complements the US and euro-area experiences by illustrating a different manifestation of the same underlying phenomenon. Asymmetry arises not only from fear of unanchored inflation expectations on the upside, but also from fear that premature tightening may reactivate deflationary dynamics. In both cases, the inflation target ceases to function as a true midpoint and instead reflects the dominant tail risk perceived by policymakers.

This broadly implies that asymmetry should be understood not as a policy error or a temporary deviation, but as an endogenous outcome of monetary regimes operating under persistent structural constraints. Japan demonstrates that once expectations internalize a one-sided reaction function, restoring symmetry becomes increasingly difficult, regardless of the formal framework in place. This reinforces a central lesson of modern monetary policy: Credibility is path-dependent, and frameworks cannot be evaluated independently of the regimes in which they are repeatedly tested.

Credibility in an uncertain world

Inflation targeting has never been merely a stabilization technology. It is fundamentally a coordination mechanism. Its effectiveness lies in its ability to align decentralized decisions — wage bargaining, price setting and investment planning — around a shared nominal anchor. That coordinating function depends critically on shared beliefs about how the central bank will respond to deviations from target, not simply on the formal statement of the objective itself.

When an inflation target is perceived as a ceiling rather than a focal midpoint, the underlying equilibrium shifts. Firms become more reluctant to raise prices, workers moderate wage demands and inflation expectations gradually drift downward. When overshoots are met with swift and forceful policy responses while undershoots are tolerated for extended periods, symmetry exists largely in rhetoric: The target ceases to anchor expectations and instead defines a one-sided constraint.

The experience of the past decade suggests that symmetry cannot be assumed. It must be continuously produced through consistent action, credible communication and institutional arrangements that reinforce the central bank’s willingness to respond to deviations in both directions. In an environment characterized by recurrent supply shocks, geopolitical fragmentation, climate-related disruptions and increasingly complex fiscal-monetary interactions, maintaining that symmetry has become structurally more difficult.

Asymmetric inflation targeting should therefore be understood not primarily as a doctrinal choice, but as an emergent property of modern monetary regimes operating under binding constraints. The challenge for policymakers is not to deny this reality, but to confront it explicitly: to distinguish between asymmetry as a necessary adaptation to tail risks and asymmetry that, over time, erodes the informational content of the target itself.

Vitally, the post-pandemic period complicates how symmetry is assessed. Central banks have both undershot and overshot inflation targets over the past decade, with the most visible overshoot occurring during the Covid-19 shock and its aftermath. That episode did not create the underlying asymmetry; it temporarily overlaid a large positive inflation shock on frameworks that had already displayed persistent one-sided tendencies before 2020. In doing so, the overshoot mechanically pulled multi-year inflation averages closer to target, making outcomes appear more balanced than the underlying reaction function may be.

The open question is whether central banks now revert to pre-pandemic asymmetry as inflation approaches target, or whether the experience of the effective lower bound and the political costs of inflation have produced a more cautious — and potentially different — policy equilibrium.

Failing to draw that distinction risks undermining the very expectations that give monetary policy its leverage. A nominal anchor that restrains drift in only one direction eventually becomes less an anchor than a tide marker, recording deviations after they occur rather than preventing them.

[ edited this piece.]

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Consequently, what Leontief could see through matrices and production , AI can operationalize today in real time, across geographies and cultures. But the real promise does not lie in computation alone; it lies in embedding AI within systems of inclusive growth, decentralized participation and cultural adaptation.

Furthermore, Leontief’s input-output was an elegant representation of how an economy works: the output of one industry is the input of another, forming a complex network of dependencies. It was a deep step forward in economic planning, enabling governments to visualize what investment, policy changes or sectoral interlinkages could result in. However, Leontief’s model assumed data to be a input.��

Beyond borders: AI’s silent transmission of intelligence

With AI today, data is dynamic, in real time, and deeply . Machine learning systems draw upon information from millions of sources, user behavior, satellite images, medical scans, voice recordings, language patterns — forming intelligent networks that can inform decision-making across sectors like never before. This transformation is much more than digital acceleration; it is a structural shift toward interconnected intelligence.

What makes this development particularly apposite today is the emerging fault lines in global cooperation. From trade wars to technological bifurcation, the promise of seamless has frayed. Supply chains are becoming more insular, intellectual property regimes more protectionist and technological ecosystems more fragmented. Yet amidst this fragmentation, AI emerges as a unifying force. It does not respect borders in the classical sense. A model trained on agricultural data from Vietnam may be adapted for use in Ethiopia; voice-to-text tools developed in Hyderabad are improving accessibility for visually impaired users in Argentina; and logistics systems from Singapore are being repurposed for rural markets in Ghana. This is not the flow of capital, nor the movement of goods; it is the silent transmission of intelligence. And this, in essence, is the extension of Leontief’s vision beyond production into the digital realm of insight.

What AI adds to Leontief’s formulation is the ability to integrate not just industrial output but human context. Data collected in a coastal village in Kerala about crop disease patterns can be merged with satellite data on rainfall, and machine learning models can forecast agricultural risks that guide both local farmers and insurance policy designers. In this expanded input-output ecosystem, education feeds into innovation, which in turn enhances health systems and manufacturing. 

Cultural intelligence and inclusive AI: bridging the global divide

The circularity of development becomes tangible. In today’s AI-enabled world, these loops are not linear; they are dynamic, adaptive and capable of learning. The promise is immense: inclusive, responsive and culturally rooted economic policy reflecting the lived realities of people rather than abstract aggregates

Subsequently, one of the most striking things in the rise of AI is how it carries memory and nuance with it into technical systems. Conventional economic models struggle to account for nonmarket activities, social hierarchies, or local knowledge. But AI can embed, if it is trained in ethical and inclusive ways, multiple languages, dialects and region-specific practices within the very design of its systems

In the Indian context, platforms like are building multilingual large language models in Indian languages and contexts, ensuring that voice-based interfaces can speak as fluently to the rural woman in Chhattisgarh as to a city-based engineer. Moreover, in Africa, local are feeding Swahili, Yoruba and Zulu into models that interpret public service needs so much more accurately than any Western imports ever could. This isn’t cultural homogenization; this is cognitive expansion. AI acts as glue not only across sectors but also between ways of knowing.

However, like all transformative technologies, AI’s impact rests on its architecture of access. As of 2024, most of the computing power, foundational models and talent pipelines are controlled by a few countries. The serious emerging concern is data colonialism — where data extracted from the Global South powers profits in the North. Here lies the real test of inclusive development — whether countries such as India can shape the terms of engagement. One viable way could be through open-source models, public digital infrastructure and participatory governance mechanisms. The Digital Public Infrastructure , inclusive of the Universal Payments Interface,�� Aadhaar and Open Network for Digital Commerce (ONDC) — of India has already shown the strength of creating interoperable systems that serve citizens first. If extended into AI, this can democratize access to datasets, hold algorithms accountable and anchor innovation in public purpose.

Therefore, it is not some theoretical vision, but it is unfolding. AI-based remote sensing helps Indian states floods better. In this regard, credit-scoring models using alternative data help first-time borrowers loans. AI-enabled allow students from resource-starved regions to conduct complex science experiments. These are modern-day input–output loops — not between coal and steel, but between voice data and policy, between satellite imagery and disaster relief, and between language processing and job creation. AI is making the logic of Leontief come alive in a radically new form, with very real consequences for human development.

AI’s cultural bridge: democratizing intelligence, expanding possibilities

Going forward, the task is very clear: to avoid a branching whereby AI continues to be built in a handful of , while the rest of the world remains limited to passive consumers of smart solutions. The only way to do that is by building actively AI-integrated economic planning rooted in local contexts but open to global collaboration. Leontief’s tables now have to be re-imagined as neural maps tracking how education policy affects research output, how healthcare diagnostics impact labour productivity and how cultural inclusion drives technological adoption.

Policy needs to zoom from the macro down to the micro, where AI is the connective tissue. International institutions, in this context, have to assume a more facilitative role — not to prescribe models but to enable code commons, transnational datasets and cooperative regulatory frameworks. A global AI ethics council — possibly under the G20 or a re-energized United Nations Educational Scientific and Cultural Organisation (UNESCO) AI Ethics — could lay down protocols for equitable use, data dignity and algorithmic transparency. India, with its techno-democratic ethos, is uniquely placed to lead this conversation across the North and South, tech and tradition, code and community.

At the end of the day, this is not about AI for automation but about AI for augmentation: augmenting human capacity, institutional resilience and cultural depth. Leontief could not have foreseen neural networks, but he most certainly foresaw systems whereby parts would work harmoniously for the whole. 

Concludingly, AI can deliver just that — if shaped wisely — not a fragmented digital privilege, but systemic, inclusive growth. It is now time to reclaim the lost promise of globalization through an intelligence that learns from the world and returns value to it. The future may not belong to those with the biggest server farms but to those who can make sure intelligence, much as development, is shared, ethical and deeply human.

[ edited this piece.]

[Ainesh Dey edited this piece.]

The views expressed in this article are the author’s own and do not necessarily reflect 51�Թ�’s editorial policy.

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Johnson argues that a strong US dollar (the straw) sucks up liquidity from global markets (the milkshake) into dollar-denominated debt and assets.

51�Թ� Editor-in-Chief Atul Singh has explained the Dollar Milkshake Theory simply. According to this theory, the dollar owes its strength not to markets, superiority of technology or confidence in future growth, but to expansionary monetary policy distortions. As Singh says: 

A constant supply of artificially cheap credit and market interventions has created a global economic order in which capital is allocated not based on productivity, innovation, or comparative advantage, but instead on the relative ease of financial arbitrage. No currency or commodity allows for this arbitrage better than the dollar. Moreover, policymakers believe that the US dollar is the only truly safe currency in the world and that increased geopolitical turbulence is likely to lead to a greater demand for dollars.

According to the Dollar Milkshake Theory, the US dollar acts like a bully in the global economy. Those who buy into this theory base their argument on the following:

1. The US dollar is still the world’s reserve currency.
2. Most global trade happens in dollars.
3. Most foreign debt is denominated in dollars.
4. The entire global financial system runs on dollars.

The inevitable question arises: Why?

Convenience

Imagine you own a market. You sell oranges, bananas and black olives. You have buyers from different countries, and they would like to pay in their local currencies, and you price the goods in many different currencies. Bananas in dollars, in euros, and in yen. When foreign exchange rates change overnight, you would have to change the price tags in the morning, or risk getting taken advantage of. Your oranges could be copper, your bananas gold and your black olives, crude oil. Now, imagine selling copper, gold and crude oil in different currencies. Suffice to say, your life is much easier if you price everything in the same currency!

Necessity

Imagine living in the Principality of Seborga, a small village in Italy that claims independence. It uses a local currency called the Seborga Luigino (SPL). There are only a few thousand SPL coins in circulation. Your local gas station is running dry and you order a fuel truck to replenish the tank. For the refinery that lies outside the Principality of Seborga, your local SPL coins are worthless, since they are not convertible into any goods outside of the principality. So, you need to pay with a currency that is globally accepted, which, in this case, is the euro. That’s what happens to importers in many countries that do not have a globally accepted currency and they are forced to use the dollar!

More Necessity

Imagine you are a vanilla grower on the island of Madagascar. Your production is growing. You need a larger storage and packaging facility. The local banking infrastructure is underdeveloped, so you apply for a loan from the World Bank. The World Bank believes you will be able to pay back the loan in five years. But the bank has no Malagasy ariary (MGA), which is the local currency. Also, the bank does not want to be paid back in MGA, since nobody knows how much it will be worth in five years’ time. The World Bank lends in dollars; it wants to be paid back in dollars, and you don’t have a choice but to use dollars!

Fear

Imagine you are responsible for investing the $1.3 trillion foreign currency reserves of the Bank of Japan, which are the result of years of trade surpluses achieved through the hard work of Japanese workers making some of the world’s most reliable cars. Suppose you could choose any currency of your liking, which one would you pick? 

Foreign exchange investing carries risk. If your investments lose money, you will lose your job. So, you want to avoid losing money and definitely avoid blame if you end up losing money. Here, the old saying applies: “Nobody ever got fired for buying IBM.” This means that if you are the head of the IT department, and you bought IBM computers, you will not get fired even if those computers don’t work, because (a) they are very unlikely not to work, and (b) nobody can fault you for buying the “gold standard” in computing!

As a non-American central banker, you prefer US dollars, since you are unlikely to lose your job for buying them.

Practicality

Imagine you are the central banker of an oil-exporting country on the Arabian Peninsula. Your oil revenue makes up between 35% to 40% of the gross domestic product (GDP). This means an awful lot of dollars are coming into the country since you are selling oil for dollars. Your local currency is either pegged to the dollar, as in the case of Saudi Arabia, United Arab Emirates, Iraq and Qatar, or to a basket of international currencies, as in the case of Kuwait.��

In theory, you could exchange your dollar proceeds from oil into local currency. But the amount of incoming dollars relative to the size of your local currency is so large that the peg would break, and your exchange rate would go through the roof. You are better off keeping the dollars, recycling them into US Treasury securities instead.

Despair

Ecuador adopted the US dollar in 2000 after a severe financial crisis destroyed the value of its currency, the sucre. Was it a success? Initially, yes. The move killed hyperinflation and stabilized the economy. However, Ecuador now had a currency it did not control, and the same holds true for interest rates. When oil prices — Ecuador’s main source of revenue — dropped, the government was unable to devalue its currency.��

A central bank acts as the ‘lender of last resort’. In a credit crisis, it can help to reliquify lending markets by purchasing assets (loans) and taking doubtful loans off commercial banks’ balance sheets. This prevents bank runs and enables credit creation to continue. However, Ecuador’s central bank cannot “print” dollars and create credit in a crisis. Unsurprisingly, Ecuador has defaulted on its external dollar liabilities twice already. Following these defaults in 2008 and 2020, Ecuador “survives” only thanks to dollar loans from the International Monetary Fund (IMF).

We now know why the world uses the dollar. Now, another question arises: Why does the dollar strengthen in a crisis?

1. The size effect

The US equity market has a market capitalization of nearly $70 trillion and commands a 48% share of the global equity market. Foreign investors own a relatively small share of the US domestic market. Because of the sheer size of the US equity market, foreigners have a relatively small impact on stock prices. 

In contrast, the German equity market has a market capitalization of $3 trillion, comprising only 2% world market share. Notably, American investors own around a third of German stocks and, consequently, have a major impact on stock prices.

In a crisis, investors cut risk by withdrawing from foreign “adventures,” recoiling from less familiar markets. US investors repatriating money from German equity markets have a far greater impact on stock prices than German investors selling shares of American companies. This phenomenon intensifies crashes for the German stock market, while the US market is largely insulated from capital outflows and, more often than not, rebounds quickly.

2. The lending effect

A lot of dollar lending outside of the US is done in so-called eurodollars. To keep things simple, those dollars are created outside the US banking system. They are literally lent into existence by non-US institutions. The eurodollar is a currency without a central bank, even though its value is pegged to the US dollar. The Federal Reserve, rightly, does not feel “responsible” for those eurodollars. They are created outside the Fed’s jurisdiction. Also, they lie outside US regulations and were created without its blessing. Those eurodollars have no lender of last resort.

A credit crisis often begins with an innocent event: some borrower cannot service its debt. The bank licks its wounds, writes down the loan and takes a loss. It instructs the credit committee to be “more careful” going forward. After this event, the bank may decide to lend less aggressively or not to extend credit lines to certain borrowers. These borrowers then go on to knock on other doors, often without success.

The lack of a lender of last resort creates a potential instability for the eurodollar market. It is best compared to a game of musical chairs. As long as the music plays, the kids happily dance around and enjoy the party. When the music stops, a mad scramble for available chairs ensues and often ends up causing panic. Even the absence of a single chair throws the entire party into disarray.

In a crisis, forced repayments of Eurodollars often cause dollar shortages. This occurs because the loan proceeds have been invested in longer-dated assets that cannot immediately be liquidated. Access to on-shore dollar creation is only possible through a US financial institution willing to extend additional dollar loans, which will come at a price. In case of a severe shortage, the Federal Reserve might offer so-called dollar swap lines to foreign central banks, which, in turn, can use those to lend dollars to financial institutions in their jurisdictions. The Federal Reserve takes neither currency nor counterparty risk — those remain with foreign central banks. Under the current US administration, the withholding of swap lines could be used as a weapon, even against countries formerly believed to be allies.

3. The flight to a safe haven

A similar phenomenon occurs on the investment side. When times are good, investors venture out on the risk ladder, often attracted by higher yields abroad. Currently, Brazilian government bonds yield above 13%, compared to just above 4% for the US. To invest in Brazilian bonds, you first have to purchase Brazilian reals using US dollars. This demand for reals appreciates the value of the Brazilian currency. 

When a crisis hits, investors panic and retreat to the safest assets possible. Despite rising US debt and excessive money printing, US Treasuries remain the ultimate safe haven for investors worldwide. No other alternatives exist at scale. Investors sell Brazilian reals and buy US dollars. Hence, the dollar appreciates.

Everyone needs dollars to pay their debts, fund their trades and buy safe assets. In a crisis, though, dollars are flowing back to America. The most basic economic law of supply and demand tells us what happens next — the dollar appreciates as demand spikes while supply outside the US shrinks.

What does the Dollar Milkshake Theory predict

In a crisis, a stronger dollar makes everything worse for the rest of the world. Foreign companies with dollar debt suddenly owe more in their local currency. This creates more stress, more defaults and a greater flight of capital back to the US.

The US literally “drinks the milkshake” of global liquidity. This phenomenon happened both in 2008 and 2020: Despite financial crises and extremely loose monetary policy, the dollar strengthened as global capital fled to the only market big enough to absorb it. America’s financial dominance means even a crisis originating in the US strengthens America’s position.

Valéry Giscard d’Estaing, the late French finance minister and president, captured this phenomenon with the term privilège exorbitant — better known as ”exorbitant privilege” in English — for the dollar. Simply put, this means that the issuer of the international reserve currency can issue debt at cheaper rates than other countries and run perpetual trade deficits with impunity.��

Having a trade deficit means more stuff is coming into the country than leaving. It also means more money leaving the country than coming in. Every other country experiencing large, persistent trade deficits would inevitably see its currency depreciate. Recipients of the currency of a country running a trade deficit would want to exchange it for local money. An increased supply of this currency would exert downward pressure on its exchange rate value. Once this currency has a lower exchange rate value, exports would become cheaper and imports more expensive. This would encourage exports and discourage imports until, ideally, the trade balance would reach equilibrium.

This does not happen in the case of the dollar because of its status as the international reserve currency. Everyone wants the dollar, allowing the US to run persistent trade deficits. But such a status comes with strings attached.

Exorbitant privilege comes with a dangerous curse

As the international reserve currency, the dollar is hoarded globally. This stops the dollar from depreciating and pumps up its value artificially. Over the last few decades, this persistent overvaluation caused a hollowing out of the US manufacturing base. The number of employees in the manufacturing sector declined from in 1980 to a mere today.

A strong dollar not only discourages exports but also encourages imports. It serves as a transfer of wealth from foreign workers to US consumers. The latter can afford a higher standard of living by spending less on imported goods thanks to the strong dollar. In contrast, foreign workers need to produce additional goods for export to satisfy their trade surplus. In exchange for goods consumed by Americans, exporting economies receive foreign-denominated IOUs — dollars. In aggregate, exporter nations will never be able to collect on these IOUs because this would require the US to run a trade surplus.

Being the issuer of the world’s reserve currency is indeed an exorbitant privilege in the short term. In the long term, though, this privilege turns into a dangerous curse, hollowing out the industrial base and causing overindebtedness. This is not a desirable position for the economy of the world’s reserve currency because industrial decline and overindebtedness inevitably lead to a financial crisis.��

This phenomenon has occurred in recent history. Before the US, the UK enjoyed exorbitant privilege from 1815 to 1945. In 1815, when the Duke of Wellington beat Napoleon Bonaparte in the Battle of Waterloo, British national debt for more than half of the world’s traded securities. In February 1943, the pound sterling 74.9% of central bank foreign exchange reserves. The story of British industrial decline is all too familiar to be repeated here.

Before the British pound, the French livre briefly had currency reserve status. The Dutch guilder replaced the Spanish real, which substituted the Portuguese real. The Venetian ducat took the crown from the Florentine florin. Note that most reserve currencies lasted around 100 years.

In the case of the dollar, it seems inevitable that the milkshake becomes so big that it breaks the straw. America’s monetary superpower has become so asymmetrically dominant that it destroys the host country, and with it the current monetary system. A dollar has no intrinsic value. It is neither backed by gold nor land. Ultimately, the dollar is a fiat currency. People around the world accept it out of convenience, practicality, necessity and other reasons enumerated above.

Most importantly, people accept the dollar because of trust in the US government. If that trust erodes significantly, people will stop using the dollar as a store of value, even if they continue to use it as a means of exchange.

The views expressed in this article are the author’s own and do not necessarily reflect 51�Թ�’s editorial policy.

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In early 2026, Japan’s political class has rediscovered this temptation with remarkable unanimity, and markets are paying attention.

As Prime Minister Takaichi Sanae  the country toward a February 8 Lower House , an unlikely consensus has formed across lines: cut the . The slogans differ, the justifications vary and the proposed mechanisms range from temporary relief to more durable restructuring. But the direction is unmistakable. From the ruling Liberal Democratic Party (LDP) to fragments of the opposition, the political system has converged on the idea that households need relief now, visibly and unambiguously.

Ahead of the snap election, Prime Minister Takaichi has gone further, pledging to scrap the consumption tax on food. Yet the absence of a clearly articulated funding strategy is beginning to unnerve both financial markets and voters, raising questions about fiscal credibility even as political momentum for tax relief accelerates.

Market unease has been driven less by electoral politics than by the substance of the policy debate, especially proposals to cut the food consumption tax from 8% to 0% for a two-year period. While such a measure would provide short-term support to household spending, it is estimated to reduce government revenue by around ¥5 trillion (~$32.2 billion) annually. Given that the consumption tax is a cornerstone of Japan’s social security financing, the absence of a clear funding framework has raised concerns about further strain on already stretched public finances.

In electoral terms, this makes sense. In market terms, it rarely does.

Consensus in politics is comforting to voters. In financial markets, it is often interpreted as a warning sign. It surfaced most clearly in the bond market on January 20, 2026, when long-dated Japanese government bond (JGB) yields rose sharply, with 30-year yields reaching multi-decade highs of , reflecting investor caution over increased borrowing and fiscal uncertainty. When ideological disagreement disappears, it usually means constraints have loosened. And when constraints loosen, prices adjust.

At the same time, across the Pacific, the world’s reserve currency is absorbing its own political signal. US President Donald Trump, with characteristic bluntness, has that a weaker dollar is “great.” Treasury Secretary Scott Bessent has with the familiar incantation that the United States maintains a “strong dollar policy.” The market, however — ever literal, never sentimental — has listened more carefully to the president than to the footnotes.

These two stories — Japanese fiscal populism and American dollar ambivalence — are not parallel lines. They intersect. They meet most visibly in the yen, in Japanese Government Bonds and in a deeper question that increasingly defines advanced economies: whether social contracts are being renegotiated quietly through currency depreciation rather than openly through reform.

The consumption tax as political Esperanto

Japan’s consumption tax has always been more than a tax. It is a symbol — of intergenerational fairness, of fiscal realism, of Japan’s uneasy truce with arithmetic.

Introduced cautiously, raised painfully and defended technocratically, the tax served for decades as a signal not just to voters but to investors. It told a story: that Japan, despite its extraordinary public debt, understood the difference between stimulus and surrender; that its political system retained at least one instrument it was willing to adjust upward when necessary; and that aging, however daunting, would be financed rather than wished away.

That signal is now fading.

What is striking about the current election cycle is not merely that the LDP is flirting with tax cuts — Japanese incumbents have done so before — but that almost everyone is. The Centrist Reform Alliance, elements of Ishin no Kai (the Japan Innovation Party) and even voices historically associated with fiscal caution now frame consumption tax relief as unavoidable, almost self-evident.

The reasons are . Inflation has returned to Japan after a long absence, but wage growth has lagged. Households feel poorer even as employment remains high. Energy prices, food costs and housing-related expenses are more salient than abstract discussions of debt sustainability. And politics, like water, flows downhill — toward pain points that are immediate, visible and easily moralized.

The consumption tax is uniquely suited to this role. It is flat, transparent and paid by everyone. Cutting it feels like justice. Raising it feels like betrayal. It can be reduced without designing new bureaucracies or confronting entrenched interest groups. It produces instant political gratification.

For voters, this is relief.

For markets, it is ambiguity.

Because the issue is not the tax cut itself. It is the transformation of the tax’s meaning. Once a consumption tax becomes a bargaining chip rather than a pillar, it ceases to anchor expectations. Investors do not require proof of irresponsibility; they respond to the weakening of commitment. And in long-duration markets, commitment is everything.

When arithmetic meets electoral gravity

Japan’s government bond market has survived decades of theoretical insolvency by cultivating something rarer than discipline: credibility without illusion.

Investors tolerated extraordinary debt levels because they believed three things. First, that the Bank of Japan would remain accommodative enough to suppress volatility. Second, that inflation would remain structurally low. Third, that politicians — whatever they promised in campaigns — would eventually blink before crossing fiscal red lines.

The February election puts pressure on all three assumptions.

A consumption tax cut, especially if framed as permanent rather than explicitly temporary, does more than widen a deficit. It changes the story investors tell themselves about Japan’s political economy. It suggests that the system is becoming less willing to exchange short-term pain for long-term solvency. And markets, more than any electorate, trade on stories.

The emerging story is uncomfortable in its simplicity: Japan wants growth without reform, relief without funding and stability without sacrifice.

That story steepens yield curves.

Already, traders quietly that a decisive victory for the LDP could paradoxically weigh on JGBs rather than support them. A strong mandate for Takaichi might embolden fiscal expansion without revenue offsets. The irony is sharp but familiar: Political stability can increase financial volatility when it removes constraints.

As one strategist put it privately, with the candor markets reserve for off-the-record conversations: A weak coalition forces discipline; a strong one invites temptation.

This is not a crisis narrative. Japan’s bond market remains deep, domestically anchored and institutionally supported. But it is a repricing narrative. rise not because default risk has increased, but because political uncertainty has. Investors are demanding compensation for a future in which fiscal anchors appear more negotiable.

The yen as a political barometer

If JGBs represent Japan’s balance sheet, the yen is its mood ring.

The currency has weakened not simply because interest differentials remain wide, but also because policy signals have grown noisier. Markets are attempting to reconcile three competing forces that do not naturally coexist.

First, a Bank of Japan that has technically exited emergency policy, but cautiously, almost apologetically, mindful of Japan’s long struggle with deflationary psychology. Second, a government signaling fiscal generosity without articulating credible anchors. Third, an election calendar that rewards ambiguity and penalizes candor.

Against this backdrop, the yen behaves less like a currency and more like a — on belief.

The February election matters because it may clarify this uncertainty, or it may institutionalize it. A narrow result could restrain fiscal excess. A landslide could accelerate it. In foreign exchange markets, clarity matters more than ideology. Markets can price almost any policy. What they struggle to price is drift.

The uncomfortable truth is this: Japan does not need intervention to strengthen the yen. It needs belief.

Belief that inflation above target will be met with normalization rather than reinterpretation. Belief that tax cuts will be financed rather than deferred into abstraction. Belief that the social contract still includes arithmetic.

Absent that belief, any yen rally risks being temporary — another bounce in a structurally downward channel, another opportunity for markets to test official tolerance.

Trump, Bessent and the theater of the dollar

Across the ocean, the dollar is telling a different but related story.

When Donald Trump says that a weaker dollar is “great,” he is not making a technical argument. He is making a moral one. In Trump’s worldview, currencies are not prices; they are instruments of power. A strong dollar, like a strong ally, is only useful if it obeys.

Scott Bessent the danger of this framing. His insistence that the United States maintains a strong dollar policy is less a declaration than a firebreak — a reminder that institutional memory has not been entirely erased by political rhetoric.

But markets trade on power, not reassurance.

The dollar’s recent slide reflects more than interest-rate expectations or growth differentials. It reflects a growing suspicion that the United States may tolerate depreciation as a policy outcome, even if it refuses to name it as such, as in the Mar-a-Lago Agreement. That suspicion matters because it alters the behavior of global investors long before it crystallizes into formal policy.

For Japan, this shift is consequential. A weaker dollar removes one of the external constraints that once supported the yen. If Washington is ambivalent about dollar strength, Tokyo cannot rely on moral suasion or tacit coordination to stabilize its own currency. The old architecture — where the US defended dollar prestige, and others adjusted around it — is giving way to something looser and more transactional.

This does not require coordination to be destabilizing. It requires only plausibility.

The metaphor of the escalator

Think of global currencies as standing on a set of escalators.

For decades, the dollar rode upward, powered by growth, institutional credibility and political consensus around stability. Others adjusted around it. Now the escalator slows. It does not reverse — at least not yet — but the speed changes.

Japan, meanwhile, is stepping onto a different escalator — one that moves downward unless actively resisted. Consumption tax cuts, if unfunded, are like choosing lighter luggage while stepping onto a steeper slope. You feel freer. You move faster. But not necessarily in the right direction.

What connects Washington and Tokyo is not coordination, but convenience. Both are discovering that depreciation — explicit or implicit — can substitute for difficult conversations. It can delay reform. It can redistribute costs quietly. It can smooth politics while unsettling markets.

But appreciation or depreciation is not reform.

It is delay, priced daily.

And markets, unlike electorates, keep score continuously.

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The question too few leaders dare to ask is disarmingly simple: What do we believe business is for? Beneath balance sheets and business models lie assumptions about human nature, purpose and meaning. Those assumptions are, in essence, spiritual. They quietly drive decisions about where capital flows, whose lives are valued and what forms of harm are considered acceptable collateral damage.​

As an investor, entrepreneur and author of the forthcoming book, , I believe the answer is straightforward: business and investing are already moral and spiritual arenas, whether or not we acknowledge it. The only real choice is whether the spiritual forces shaping markets are fear and scarcity or compassion, dignity and interdependence. Treating spirituality as something we practice only on weekends while letting markets run on a narrow, extractive logic misses the deeper connection between our inner lives and the real-world impacts of our economic choices.

No more “business as usual”

Over the past decade, there has been a justified among workers, consumers and citizens against business as usual,with global showing that a majority of people now believe today’s version of capitalism does more harm than good, fueling protests over inequality, climate inaction and corporate power. Impact investing—investing in companies whose goal is not just to maximize financial returns but also to deliver social and environmental benefits—has developed products and funds that quantify climate risks, expose labor abuses in supply chains and channel capital to underserved communities.​

African fintech , a company founded by my Stanford Business School classmate Benji Fernandes (and one that I have invested in), gives people a faster, more transparent way to send money home from all around the world and pay family members’ bills directly, integrating with mobile money services across multiple African countries. In doing so, they challenge a long history of remittance intermediaries extracting value from some of the world’s hardest-working, least protected people.​

By securing regulatory approvals and emphasizing clear, honest pricing, NALA has created a remittance platform that seeks not only efficiency, but dignity and trust for low-income customers who have long been exploited by opaque fees. NALA has and become profitable, having netted over $15 million in revenue, raised $50 million in venture funding — including a $40 million Series A at a valuation above $200 million — and processed over $1 billion in payment volume in about 18 months.

When impact is limited only to scores and dashboards, it risks becoming a question of how to do just enough good to protect a brand, reduce regulatory risk or unlock a new pool of capital. Leaders then talk about “stakeholders” in the same breath that they treat communities and ecosystems as variables in a spreadsheet. The effect is subtle but corrosive: people sense the dissonance between the language of purpose and the reality of short-termism.​

This is not only an ethical problem; it is a strategic one. In a time of climate disruption, geopolitical fragmentation and technological upheaval, organizations that prioritize extraction over long-term relationships are structurally fragile. They rely on social and ecological systems remaining stable, even as their own practices help to destabilize them. By contrast, embedding spiritual values such as stewardship, humility and reverence for life into strategy is a form of advanced risk management.​

Integrating spirituality into business and investment practices

For many in business and finance, the word “spirituality” may trigger skepticism. It can sound vague, individualistic or at odds with analytical rigor. But the traditions that have sustained communities for centuries treat spirituality not as an abstraction, but as a disciplined practice, manifested in how we perceive reality and how we treat others. These practices can inform how organizations design products, govern themselves and allocate capital.​

Consider , an early-stage venture fund backing “tech-enabled wellbeing.” Its partners invest in companies building digital health platforms, mental health solutions and tools to help people live and work more mindfully. The fund applies classic venture discipline to invest in companies such as Anthropic and Function Health, with a focus on how technology can support human flourishing rather than erode it.​

Another example is the , which funds organizations that apply spiritual solutions to social problems and helps institutions become spiritually inclusive. Its grants support staff retreats and training in “faith fluency” on the conviction that inner work and a sense of sacred belonging are prerequisites for durable outer change.​

What distinguishes these efforts is not perfection but coherence. Instead of treating values as an afterthought, they start from the question: If we truly believe that every person carries inherent worth, and that the earth is not expendable, what follows for how we invest, hire, measure and grow?

The call for a more expansive realism

The timing for this conversation is not accidental. Around the globe, younger generations are whether they want to participate in economic systems that ask them to compartmentalize — to be one person at work and another in their communities of meaning. Many are leaving institutions they experience as spiritually hollow, even when those institutions offer material security. Their disillusionment is a warning sign: a system that requires people to sever their moral and spiritual lives from their economic lives is not healthy or sustainable.​

There is a deep hunger for credible alternatives. Leaders and investors who are willing to bring their whole selves into economic life — including their doubts, hopes and spiritual commitments — can help to meet that hunger. Doing so requires courage, because it means asking uncomfortable questions about complicity and privilege. It also requires humility, because no tradition or framework has all the answers, and because the communities most affected by extractive systems must be central authors of any new story.​ It might also mean rethinking ownership structures so that workers and communities share in both risks and rewards.​

The stakes extend far beyond any single initiative. Whether capitalism rediscovers its soul will shape not only balance sheets, but the possibilities for justice, belonging and ecological survival in this century. The choice is not between spirituality and realism. The choice is between a narrow realism that denies the full complexity of human beings, and a more expansive realism that recognizes people as meaning-seeking, relationship-dependent and spiritually alive. The latter is the soil in which an enlightened bottom line can grow.

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That repricing is now being reversed, which is already visible in earnings data. Real weekly earnings for employed women aged 16 and over have flattened, and in some periods declined, even as aggregate employment has remained resilient. As firms intensify return-to-office mandates, the gender pay gap in the United States has begun to widen again. Women working full-time earned about for every dollar earned by men in 2023 — the widest gap since 2016 — and recent earnings growth has tilted decisively toward men.

This has prompted a natural at The Wall Street Journal: Is the return to the office partly to blame?

When presence becomes a premium

The emerging answer is subtler than a simple indictment of offices. The issue is not location, but pricing. Physical presence has been repriced — and the burden of that repricing is falling unevenly. The contemporary gender pay gap is less about exclusion from work than about the terms on which work is offered: who must be where, when and at what cost.

Although these effects appear most clearly in gender-disaggregated data, the underlying mechanism is broader. Return-to-office mandates reprice caregiving and presence constraints that were previously absorbed by families and communities, with gender serving as the primary incidence channel rather than the root cause.

Strikingly, these dynamics fit squarely within an incidence — the party that ultimately bears the cost of a formally neutral rule once behavioral adjustment occurs — and institutional-design framework rather than an ideological one. Formally neutral workplace rules determine outcomes not by intent, but by who bears their economic burden. In this case, return-to-office mandates interact with pre-existing care constraints, revealing a broader institutional failure: the systematic mispricing of flexibility and caregiving time.

Firm-level decisions about presence impose external costs that are not internalized — slower human-capital accumulation, reduced matching efficiency and long-run fiscal drag — while the benefits of coordination remain privately captured. Framed this way, the argument is not anti-market, but pro-market. When care and flexibility are mispriced, productivity falls, the tax base erodes and valuable human capital is wasted.

Family and community structures historically mitigated these constraints by expanding the feasible set of work–family arrangements. Extended households, shared childcare and geographically rooted communities reduced coordination costs and allowed both parents to remain economically engaged. As these structures weakened through suburbanization, geographic mobility and career-driven sorting, the obligation to care did not disappear, but the infrastructure that made care compatible with economic freedom did.

As a result, caregiving now operates as a long-duration constraint on labor-market matching. Its costs are not always monetary; they appear as lost mobility, reduced risk-taking and diminished role reversibility — economic losses that remain largely invisible in conventional productivity or GDP metrics.

Japan provides a particularly clear illustration of this mechanism. While norms of family responsibility remain strong, three-generation households have largely dissolved — not because obligations disappeared, but because colocation did. As a result, both childcare and elder care now operate as long-duration constraints on labor-market participation and mobility. Importantly, the growing reliance on adult children for parental care has shifted substantial burdens across generations and cannot be regarded as a positive or sustainable solution. does a simple return to three-generation coresidence constitute an unambiguous remedy: Such arrangements often entail significant psychological and emotional costs, including stress, role conflict and reduced autonomy, which themselves affect well-being and labor-market behavior.

of adults in multigenerational living situations by Pew Research Center and ImPossible Psych Services that a substantial share report stress as part of their daily experience, rather than only benefit, underscoring that shared households can impose emotional and boundary challenges even as they provide care support. Psychosocial research on work–family conflict further that overlapping caregiving and work roles generate measurable stress and role conflict, which affect well-being and behavior.

Therefore, the economic cost of these arrangements is not limited to direct expenditures. Rather, it as reduced geographic mobility, narrower job matching, slower career progression and lower risk-taking over the life cycle. These constraints disproportionately affect prime-age workers precisely when returns to experience are most convex, helping to explain the coexistence of high human capital and persistent gender- and age-based labor-market segmentation. In this sense, Japan how the breakdown of informal care infrastructure transforms family responsibility into an economically binding constraint, even in the absence of explicit discrimination.

A repricing, not a retreat

Standard labor statistics can obscure what firm-level evidence increasingly reveals. Women are not leaving the workforce en masse. Instead, constraints are forcing a reallocation within it — first across roles and hours, and increasingly across participation margins. Faced with the withdrawal of hybrid options, women, particularly mothers, are more likely than men to switch jobs, decline promotions or accept lower-paying roles that preserve some control over time.

Flexibility has become a priced attribute. Those who need it most are paying through slower wage growth.

This distinction matters. A worker who is willing to forgo approximately of wages in exchange for remote work has not exited the labor market; she has been repriced within it through a compensating differential for flexibility.

The adjustment appears first in flows — job switching, promotion take-up, occupational sorting — and only later in stocks such as annual earnings. By the time the pay gap becomes visible in aggregate data, the underlying decisions are already sunk.

In economic terms, this is an . Although the rule is formally neutral, its economic burden falls on those with the least flexibility to adjust, so identical requirements can produce systematically unequal outcomes. A rule that appears neutral — be in the office — functions like a tax whose burden depends on constraints outside the workplace. Where childcare is scarce, commutes are long and household norms allocate care disproportionately to women, the tax falls asymmetrically.

Why presence bites harder now

Two structural features of today’s labor market amplify these effects.

First, the cost of care has risen faster than wages across advanced economies, while supply has failed to keep pace with demand. These constraints bind most tightly during early-career years, when earnings trajectories are most sensitive to interruptions.

In effect, parents of young children face an effective inflation rate well above headline consumer price index — which measures overall price changes across consumer goods and services, including volatile items such as food and energy. This is because childcare costs have risen far faster than general inflation and absorb a large share of household income.

When firms require physical presence, households with young children face a sharply asymmetric choice set: Someone must absorb the added coordination costs. Empirically and traditionally, that burden falls more on women.

This is not a story about preferences or “opting out.” It is a constraint story. Presence requirements function like a — a tax that creates a larger burden on lower-income taxpayers compared to middle- or higher-income ones — on households with young children. They are highest when income elasticity is greatest. The tax does not appear on pay slips, but it is visible in behavior.

Second, pay growth in high-skill occupations is . Returns accelerate with seniority, responsibility and access to leadership tracks. When advancement requires continuous visibility while flexibility is confined to junior roles, small differences in availability today translate into large earnings gaps tomorrow.

Remote and hybrid work briefly severed this link. Coordination was decoupled from location, allowing workers to remain fully engaged without bearing the full time and care costs of presence.

Rolling back flexibility restores the old mapping — and with it, the old penalties.

From micro trade-offs to macro drag

It is tempting to frame these outcomes as individual choices. That framing is misleading. When experienced workers accept lower pay for flexibility, firms lose output, governments lose tax revenue and households lose lifetime income. Aggregated across sectors, the effect becomes macroeconomic — particularly in aging economies already facing labor shortages.

Historically, families and communities absorbed many of the coordination costs associated with work and care through extended households, geographic stability and shared informal support. As these structures weakened, the obligation to care did not disappear, but the institutional mechanisms that made care compatible with full labor-market participation did.

The repricing of presence therefore reallocates costs that were once social and intergenerational onto individual households. These costs surface first as wage penalties and career slowdowns, but ultimately appear as lower fertility, weaker community attachment and reduced long-run labor supply. Gender differences reflect where these costs land, not why they arise.

help clarify the pattern. Across high-income countries, gender gaps in education and health are near parity, while gaps in economic participation and earnings persist. The problem is not human capital, but institutional conversion: how effectively economies translate capability into opportunity.

The return-to-office episode illustrates how quickly that conversion can deteriorate when flexibility is treated as a discretionary perk rather than as economic infrastructure. Where childcare systems, parental leave and bargaining institutions anchor flexibility, its pricing is stable. Where they do not, firms can reprice it unilaterally — and abruptly.

Measuring the wrong margin

Participation and educational attainment are measured meticulously. Schedule control, commute penalties and the wage cost of flexibility are not. As a result, inequality migrates to margins that conventional indicators underweight.

The graph below sharpens the diagnosis. Among prime-age women with a college degree, labor-force participation has risen since late 2023 for those without children and for those whose youngest child is school-aged. Only one group shows a sustained decline: women whose youngest child is under five. This divergence rules out broad or white-collar layoffs as the primary driver. Instead, it points to a binding constraint that operates precisely where return-to-office mandates and childcare costs interact. Presence is repricing participation at the margin where care is least substitutable.

The COVID-19 pandemic did not create a new labor market. It revealed that physical presence had long been mispriced, and briefly demonstrated that this price was institutionally chosen, not technologically fixed. The return to the office is therefore not simply a return to normalcy; it is a return to a clearing mechanism that preserves participation while gradually eroding parity.

The central question is whether modern labor markets price time, care and presence in a way that allows families, productivity and equality to coexist. When those inputs are mispriced, formally neutral rules can sustain employment while systematically reallocating costs onto households and caregivers.

Presence itself is not the villain. The problem is pricing it poorly. In a high-skill, high-coordination economy, how work is organized matters as much as who works. Getting the price of presence right is no longer a marginal workplace preference — it is central to productivity, equity and long-run economic growth.

[ edited this piece.]

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The uprising itself did not emerge from ideological agitation but from the breakdown of everyday reproduction. on essential goods has crossed catastrophic thresholds, the rial has effectively collapsed after losing over of its value since 2018, wages lag months behind prices and water scarcity — produced by extractive development, dam projects favoring elite agribusiness and systematic elite capture — has devastated entire regions. What is unfolding is a crisis of social order, where the existing arrangement can no longer secure consent and must increasingly rely on coercion to survive.

Economic collapse beyond sanctions

Much external commentary explains this collapse primarily through sanctions. This is analytically inadequate. Sanctions have undeniably intensified pressure, but they operate on an economy already hollowed out by decades of kleptocratic accumulation and militarized corruption.

The Islamic Revolutionary Guard Corps (IRGC) and affiliated foundations are estimated to control between of Iran’s economy, spanning construction, energy, telecommunications, ports and black-market trade. These entities extract rents while crowding out productive investment and remain largely outside taxation and oversight.

Scarcity is not evenly distributed; while food inflation exceeds 40–50% and wage arrears are widespread, resources continue to flow to proxy wars, missile programs and elite consumption in the absence of a military-Keynesian circuit capable of stabilizing wages, employment or household reproduction.

A comparison with other sanctioned economies clarifies this point. Russia, now the most heavily sanctioned major economy in the world, has avoided outright economic collapse despite financial isolation, export controls and asset seizures. Growth has and uneven, but inflation has largely stayed in the single digits to low double digits, unemployment remains contained and the state has retained fiscal capacity through centralized control of energy rents and redistribution.

Russia’s experience demonstrates that sanctions alone do not mechanically produce economic disintegration. Iran’s disproportionate failure reflects the absence of state capacity oriented toward social reproduction. Where Russia’s authoritarian capitalism stabilizes key macroeconomic functions, Iran’s clerical-military elite has converted the state into an instrument of extraction, leaving the wider population exposed to shock.

From bazaar strikes to national uprising

The protests in Tehran’s bazaar following a currency shock, but their rapid spread revealed deeper contradictions. Bazaar strikes were soon joined by students, contract workers, industrial laborers, informal workers and the urban poor. The uprising then decisively into smaller western and southwestern towns — Lordegan, Malekshahi, Abdanan — where, in some cases, a majority of residents reportedly took to the streets.

These areas, long treated as expendable by a centralized state that extracts without reinvesting, have been especially hit hard by water shortages and ecological collapse. These were not peripheral disturbances but expressions of uneven development and internal colonization converging into a national rupture.

Initially, the regime allowed the protests to unfold, relying primarily on regular police forces. This restraint was tactical. By early January, the posture shifted decisively. Supreme Leader Ali Khamenei that “rioters” be “put in their place,” while IRGC-linked channels declared that “tolerance” was over and that the state would not “yield to the enemy.” On January 8, the authorities imposed a near-total internet and telecommunications . Under the cover of this informational darkness, the killing escalated sharply.

The IRGC shot thousands of unarmed protesters not only in Tehran, Isfahan and Mashhad, but across countless smaller towns and villages. There are of Russian-made heavy machine guns being used against demonstrators. Witnesses described scenes resembling war zones. Several noted a stark contrast with the suppression of the 2009 , when even armed units exercised relative restraint; this time, IRGC-linked forces fired sustained automatic bursts at full capacity. This marked the moment when the state abandoned even the pretence of mediation and revealed itself primarily as an apparatus of organised violence.

Repression as a security strategy

To legitimize this escalation, the regime has recoded popular revolt as a foreign conspiracy. Protesters are branded “terrorists” and agents of Mossad, a move that converts class antagonism into an existential security threat and radically expands the state’s claimed right to kill. Iran’s justice minister has the protests an “internal war,” while the head of the judiciary has “no leniency” for anyone accused of aiding the enemy. This discursive architecture closely parallels the logic through which the Israeli state has sought to normalize genocide in Gaza since October 08, 2023: the systematic erasure of civilian status through the universalization of “terrorism.”

Though sworn enemies, the Iranian regime and the Israeli state participate in a co-constitutive security imaginary, each feeding off the other’s violence to legitimate its own repression. Partisans on both sides amplify this dynamic, reducing human suffering to a geopolitical scoreboard in which atrocities are minimized, denied or excused depending on who commits them — turning human rights into a zero-sum contest rather than a universal claim.

Repression has extended beyond killing into the social fabric itself. Families are to the bodies of their dead and forbidden from holding funerals. Mourning is treated as subversion. This is not incidental cruelty but a deliberate strategy: grief is weaponized to prevent loss from becoming collective and political. By isolating trauma and privatizing fear, the regime seeks to fracture solidarity at its most human level. When the state can punish the living through the dead, resistance becomes unbearably personal.

Regime stability and opposition challenges

Despite the depth of popular rage, the regime may yet survive this phase. Power does not rest on ideology alone but on institutions, armed force and material interests. The ruling bloc remains largely cohesive under Khamenei, though there are persistent rumours of dissent, particularly over his obstruction of nuclear concessions that could ease the regime’s existential crisis.

The state can still mobilize hundreds of thousands of armed supporters, and significant sections of the propertied classes — senior bazaaris, oligarchs, rent-seekers embedded in state capitalism — continue to prefer authoritarian stability to revolutionary uncertainty. The uprising could even degenerate into armed civil war, especially given the scale of bloodshed already inflicted.

The opposition’s failure is structural rather than moral. It lacks durable organization, internal discipline and mechanisms capable of converting mass spontaneity into sustained power. Prince Reza Pahlavi has emerged as a prominent media figure, but not as an effective political organizer. His claim last year that he had secured the defection of 50,000 regime personnel through a televised QR-code campaign has not been substantiated. No such defections materialized when protesters were being massacred.

During a CBS News , when asked whether it was responsible to urge people into the streets as the death toll rose, Pahlavi replied, “This is a war, and war has casualties.” The remark reflects a familiar class politics in which leadership is exercised through rhetoric while risk is socialized downward. In the absence of organization, protection or material capacity, civilian death is moralized as historical necessity rather than recognized as strategic failure. In the absence of an alternative rallying figure, this form of symbolic leadership does not merely fall short — it reproduces the very logic of disposability on which authoritarian power depends.

This vacuum is especially stark given Iran’s social diversity. Ethnic minorities — particularly Kurds, who make up roughly of the population and possess some of the most organized and militarily experienced opposition forces — remain deeply distrustful of exile-led, Persian nationalist projects. Without a unifying framework capable of integrating these forces, fragmentation persists, allowing a centralized state to defeat resistance piecemeal.

The need for alternative power structures

What regime opponents lack is not bravery. They lack rooted organizations, parallel institutions and a shared political horizon capable of replacing the existing order rather than merely denouncing it. In 1979, the old regime fell not simply because it was hated, but because an alternative machinery of power had already begun to crystallize — however catastrophically that project later betrayed and destroyed its allies.

If the Islamic Republic collapses, it will do so violently. The people of Iran need urgent material support, including efforts to disrupt the regime’s ability to impose information blackouts and conduct mass murder in silence — we can do so through sustained pressure on governments and technology firms, support for secure communication infrastructure and refusing to allow repression in Iran to disappear behind manufactured opacity. Above all, they need organizational coherence and a politics grounded in everyday survival.

Without that, the uprising risks remaining what so many have been before it: historically justified, morally clear and brutally unfinished.

[ edited this piece.]

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Over the last decade, the American and European architects of the rules-based global order disabled it step by step, believing they would lose their centuries-old political dominance in competition with China.

More recently formed entities and forums, such as BRICS and the Shanghai Cooperation Organisation (SCO), are the pre-eminence in Asia of such institutions as the US-dominated World Trade Organization (WTO), the International Monetary Fund (IMF) and the World Bank. The economic influence of the US Government itself is receding. China does not need to confront the US in order to establish its authority in the region; it just needs to stand back and allow the US to continue disempowering itself.

Initially a diplomatic coalition of relatively non-aligned nations, the 10 BRICS nations are forging deeper commercial links each year, with applying to join in 2025. BRICS operates a renminbi-backed Cross-Border Interbank Payment System (CIPS), allowing to bypass the dollar-dominated trading system. Trump’s and weaponization of the US currency leave America’s friends and foes alike little choice but to seek alternatives to the dollar, or risk being ensnared in random sanctions and trade embargos. Washington and war by non-military means against 30 countries today.

The includes China, Russia, much of Central Asia, India and Pakistan, with Iran, Afghanistan and Mongolia as observers. Despite the fact that some members are unnatural allies and even adversaries, the SCO is becoming a regional platform for establishing Asian and Central Asian economic and trade norms.

It is as innate for humans to collaborate as it is for them to compete; governments in the pursuit of economic self-interest can manage these opposing motives. There is no better demonstration of this than the Chinese-seeded Asian Infrastructure Investment Bank (AIIB), which meets needs in Asia unfulfilled by the Asian Development Bank and the IMF. India, China’s frequent adversary, is the AIIB’s largest debtor.

When I joined the AIIB, not being a China specialist, I was unsure whether I could deal with its culture. The office culture can be a challenge sometimes; it is very Chinese and so different to what I have known. But the investment strategy is more objective than similar organisations I have worked for in the West. In fact, as we grow and bring in more members, Chinese influence reduces. It was designed this way. — AIIB manager

By purchasing power parity, Asia accounts for roughly of global GDP and 40% of consumption. Approximately of the world’s population lives in Asia, while roughly 23% of Asians still live in relative poverty. As China has demonstrated, governments that can promulgate effective development policies while allowing entrepreneurs to flourish can unlock a potent economic resource, one which is driven by the collective aspirations of their underdeveloped citizens.

Cooperation or conflict

From the early 1990s, policymakers and economists in Washington and most Western countries were sure their systems would prevail over China’s, and that as China accepted the principles of free-market economics, full regime change in Beijing would follow. Most Western attempts at regime change in the last 50 years have nevertheless failed, and continual US attempts since 1945 have been a primary cause of the weakening of the American empire.

US President Donald Trump’s New Year’s of Venezuelan President Nicolás Maduro and his wife was a direct assault on international law and upon the interests of not just China, but any nation depending on international law to guarantee its security. For more than ten years, China has been vital to Venezuela’s economic survival. In 2024, Venezuela sold of its oil to China, amounting to 480,000 barrels a day, paid for in renminbi. China invested $50 billion in Venezuelan infrastructure over the last decade, and Caracas holds $60 billion in Chinese loans, collateralized by oil.

Nations with respect for international law now need to speak out and distance themselves from Washington, or accept that their silence is complicity. Many Western nations have already stood by while Trump Canadian, Mexican and Danish sovereignty; in Gaza; Iran, Yemen, Somalia and Nigeria without declarations of war; and Venezuelan seafarers in the Caribbean because they might have been drug traffickers.

Washington’s actions over the past year will likely force a reassessment of assumptions within those countries that trade with China and yet have taken care not to undermine their loyalty to what they saw as the more law-abiding US. As the world becomes more multipolar and competitive, countries have more to benefit from trading freely with all, and more to risk and potentially lose from partisanship.

Block Quote:

Some of the infrastructure China built here was poor, and I think Beijing needs to govern private contractors on Belt and Road projects better. But overall, we prefer Chinese aid and investment because it comes with skilled engineers, know-how and good technology. They don’t lecture us on how we should manage our islands, which cannot be said for Australia and New Zealand. The US talked about doing more in the Pacific. But they threaten they will do less if we deal with China. — Pacific island official

Further conflict is inevitable unless the West realizes it must work with Beijing and acknowledge the changing global order, in which regional nodes of power interact within agreed frameworks. European and US leaders seem unable to see that the right partnerships with Beijing could help stem their nations’ economic declines, while increased attempts to isolate and contain China will most certainly accelerate them.

For its part, China must think more deeply about how to work with its major trading partners beyond sparring through tit-for-tat tariffs or flooding their markets with goods. China has already demonstrated it can strengthen the economies of geographical neighbors through trade and investment. This was and remains one of the motives behind the project. China’s over the last 20 years have largely benefited both Beijing and African states. Although different historically and in terms of level of development, Washington and Brussels could work with Beijing to agree on principles of trade and entente if they so wished.

Boundaries

In the 1980s and 1990s, when China was still weak, it imposed conditions on foreign investors, limiting ownership in businesses and excluding selected industries. Rather than erecting tariff barriers to staunch the flow of electric vehicles and renewable energy technology into their markets, Western governments would create greater trust and achieve more balanced trade if they required Chinese firms to form joint ventures to manufacture and share their technology.

When managing regional conflicts, China has less to gain than ever from trying to exact retribution for historical injuries. When Japanese Prime Minister Sanae Takaichi recently made alluding to a military alliance with Taiwan, Beijing would have projected more strength with a short, dismissive admonition rather than vociferous outrage.

The history of Japan’s invasion of China is taught in schools and most families have a relation who suffered at the hands of the Japanese. I know the West thinks we should just ‘get over it’. But it’s not that simple, and one who has not suffered doesn’t have the right to tell someone who has what to feel. You wouldn’t dare say ‘just get over it’ to a Jewish person whose family suffered in the Holocaust. — Chinese doctor 

The US and its allies use Taiwan to provoke China in the hope that it will destabilize and weaken it. Few Western politicians understand the history and contemporary dynamics of Taiwan; even fewer care for the people of the island, and none are likely to risk the lives of their soldiers to support its independence. The best situation for all is to accept the discomfort and quasi-stability of the status quo and encourage Taibei to renew dialogue with Beijing. Unfortunately, Washington fears China too much to let go of what it imagines, falsely, as its key instrument restraining its rise.

China’s advantage in this conflict is patience. Absent an unlikely direct US military escalation, Beijing will wait for American regional influence to wane, so it may negotiate with Taiwan when tensions are lower. In the meantime, Taiwan is well shielded from coercion by any power, not because of its military might but because of its microchip production, which constitutes of the global supply and therefore the Mainland Chinese supply. Neither Beijing nor Washington can risk disruption to the supply, let alone its destruction from an invasion.

China’s leaders’ objectives are to secure domestic economic balance while reducing dependence upon those conspiring to contain it. It would be folly for the West to provide China with any cause to take a more radical, militant path in pursuit of its security.

Given the likelihood that China achieved 5% GDP growth in 2025 and laid the groundwork for similar growth in 2026, its economy is, with some caveats, recovering well. Beijing has shown resolve in engaging, without overreacting, to US trade coercion, restoring a substantial degree of public confidence in the process. But Beijing still needs to do more if it is to stabilize and strengthen its domestic economy, retain public trust over the long term and deal with an unpredictable geopolitical environment.

The country continues to experience persistently high , and unemployment among urban professionals is increasing. This is due in part to industrial automation and AI replacing white-collar processing, data management, accounting and service sector jobs, but companies are also continuing to retrench in the generally sluggish economic environment amid trade uncertainties. Yet, overall unemployment is still in single digits, with millions of manufacturing job vacancies. Some experts are noting an absence of clear signals from Beijing on regulatory policy as a key factor in subduing business confidence.

We know it is only a matter of time before business picks up. I don’t know what will trigger that. I travel to Japan and Europe, and see business confidence is low. This is not a Chinese phenomenon, but I do know China is well placed for a stronger recovery than Europe, and I expect the US, too. We’re still developing, and people are hungry for success. In Europe, there is a sense in the air of complacency, even defeatism, despite the fact that it has many good companies. — Technology marketing manager in Shenzhen

Balance at home

To reduce irrational domestic competition and overproduction, Beijing could reduce its local officials’ GDP targets further. For over a decade, Beijing has combined officials’ key performance indicators (KPIs) with sustainability objectives and anticorruption aims, but the imperative to deliver raw economic growth still dominates. Western policymakers are often too focused on GDP growth, but many of their counterparts in China are enthralled by it as the ultimate indicator of national success. However, GDP indicators reflect an economy’s temperature, but seldom its underlying health and long-term productive sustainability. Resetting local officials’ goals would help to stem deflation and expand consumption; it would also reflect better the values and aspirations for greater life-work balance and physical, even spiritual, development of the younger generation.

Having exceeded most industrial nations in the quality of its supply chains, logistics, smart manufacturing and robotics, it is logical that 30% of global manufacturing should be undertaken in China, a nation that is home to of the world’s population. The Chinese middle class also offer considerable consumer growth potential for imported raw materials, ingredients and brands, despite the current lull in domestic consumption.

While Western industrial companies are cautious about entering the Chinese market, global portfolio managers are less so. Interest in listed Chinese tech companies is rising in London, Europe and the Middle East, with the Hong Kong stock exchange, an early beneficiary, growing in 2025. Australia’s treasury estimated that China accounted for 19% of global GDP in 2024 and the United States for 16%, and by 2035, China will likely account for 24% while the US will be 14%.

There is no reason why the West cannot compete while still collaborating with China on the leading edges of manufacturing technology. China’s rise cannot be stopped, but it is not a rise driven by the rudderless juggernaut of the Chinese Government, bent on the destruction of its competitors’ markets, as Western media casts it. It is the essential dynamo of an emerging global economic order in which there will be many nodes of power and prosperity, and interwoven networks, which could bring greater common wealth and stability to China, the Global South and also, despite diminished primacy, sustained prosperity in the West.

The handshake that may change history

Indian President Narendra Modi attended the SCO meeting in Tianjin last year. He and Chinese President Xi Jinping discussed border disputes, expanding trade and future Chinese investment in Indian infrastructure.

Triggered by Trump’s imposition of a on most Indian exports to the US and his condemnation of the Indian economy as “dead”, China seized the opportunity for rapprochement. China has many reasons to form deeper economic relations with India. With a population of 1.43 billion, it is the only country with the potential to compete directly with China. It has a young, well-educated population, controls the Indian Ocean — through which of China’s oil imports pass — and is a founding member of the Quad, Washington’s performative attempt to create a military coalition to contain China in Asia.

India increased its high-tech exports by 400% over the last five years, reaching $23 billion, and accounted for of US smartphone imports last year. The Indian economy grew by more than 7% in 2025, anything but dead. The meeting between Modi and Xi may turn out to be as significant as Former US President Richard Nixon’s to China in 1972.

Together, Xi and Modi’s initiative may change a relationship marred by strategic and commercial conflict into an economic alliance no other nation or trading bloc can rival.

[ first published this piece as a business report.]

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Moreover, in major equity and derivatives exchanges, algorithms now initiate the majority of orders, according to the Bank for International Settlements () and the US Securities and Exchange . Thereafter, they respond to signals long before human analysts can interpret them, generating a form of price formation that is increasingly detached from deliberate judgment.��

As a result, during periods of stress, this compresses the time available for verification, leaving regulators, risk officers and central banks reacting to events that have already propagated through multiple asset classes. Contemporary reveal how profoundly speed reshapes market behavior. When Russian assets were frozen in 2022, the shock spread within seconds across energy derivatives, foreign-exchange exposures and clearing networks, as documented by the and the European Central Bank.��

The speed trap: how algorithms trigger global market shocks

The consequent turbulence did not begin with human panic but with automated responses that triggered before any policymaker or risk committee could intervene. In the same year, the UK gilt experienced a dramatic liquidity spiral driven by liability-driven investment strategies whose models reacted to sudden yield movements faster than the institutional mechanisms designed to stabilize them, as analyzed by the Bank of England.��

Moreover, in Asia, short-lived surges in the yen following intervention were rapidly amplified by momentum-based trading bots, consistent with Foreign exchange microstructure findings from the BIS. Conversely, in emerging markets, thin liquidity magnified the impact of ultra-fast algorithmic swings, a pattern noted in International Monetary Fund (IMF)�� . Subsequently, these episodes share a common structure where markets were not destabilized by misinformation or fundamentals, but by reaction speed, indicating a pattern that now appears across continents, linking market volatility not only to domestic policy shifts but to the increasingly synchronized behavior of automated global capital flows.

What makes this phenomenon dangerous is not speed in isolation, but the way it reorganizes market dynamics. Decisions happen faster than oversight can register anomalies. Algorithms designed by different institutions often rely on similar volatility signals, leading them to act in unison during stress. Liquidity that appears deep in calm periods evaporates instantly once risk-sensitive models withdraw from the order book, a phenomenon detailed in research on flash crashes. These effects reinforce one another, producing sudden discontinuities that no longer resemble traditional market cycles.

This is no longer a regional issue but a global one. Automated contagion now across borders and asset classes in ways that outpace even the most sophisticated supervisory systems. An instance in this regard could be seen in the case of the Middle East. Here, automated hedging in energy derivatives has intensified volatility around geopolitical shocks, as noted in the International Energy Agency Oil .��

Furthermore, in Europe, latency races between exchanges create unstable feedback loops that spill into bond, Foreign exchange and commodity markets, a dynamic described by the European Securities and Markets Authority’s (ESMA) of high-frequency trading risks. In developing economies, small signals trigger disproportionately large moves because local liquidity cannot absorb algorithmic surges. Across jurisdictions, authorities face the same asymmetry: markets respond instantly, while interventions are necessarily slower.

Regulatory lag: syncing policy with the speed of machines

Regulators, including the , ESMA and the US Securities and Exchange Commission, have repeatedly warned that existing supervisory frameworks lag behind the tempo of machine-driven markets. Capital ratios, leverage rules and reporting cycles were for human-paced decision-making. They do not address the risks that arise when shocks propagate faster than institutional response times. If velocity has become a structural feature of modern finance, then stability will increasingly depend on whether institutions can introduce friction and transparency into systems that currently prize immediacy above all else.

However, strengthening resilience does not solely require radically slowing markets but aligning their speed with the capacity of institutions to interpret and supervise them. Several are exploring measures such as minimum execution times and enhanced disclosure requirements for algorithmic strategies, as by the Monetary Authority of Singapore, as well as stress-testing frameworks that reflect the speed at which liquidity can disappear.��

On a different note, other proposals focus on ensuring that human judgment remains in key decision pathways, so that rapid shifts in exposure cannot occur without explicit oversight. What unifies these approaches is the recognition that financial stability now hinges on reconciling machine tempo with human and institutional time.

Therefore, the deeper challenge is conceptual. For decades, stability was defined through balance sheets, leverage ratios and credit . In the contemporary context, it is increasingly defined through latency. Though markets can withstand being wrong, they struggle to withstand being too fast, a conclusion echoed in BIS on speed-induced volatility. Therefore, these institutions that remain resilient will not be those with the most sophisticated algorithms, but those capable of restoring coherence to systems that move faster than interpretation itself.

Consequently, for policymakers, the challenge is not simply technical but institutional as global markets now share a common technological substrate, while regulatory capacity remains fragmented across jurisdictions. Therefore, without coordination, speed becomes an amplifier of geopolitical asymmetries rather than a neutral feature of financial infrastructure.

In conclusion, speed has become the new systemic variable. The question facing regulators and policymakers is no longer how to manage speculation or excess risk, but how to govern markets that operate beyond human reaction time. 

In this vein, stability in the 21st century will depend on whether financial systems can reintroduce the one element they have gradually eliminated: the capacity to pause, verify and intervene before machine-speed shocks become systemic crises.

[Ainesh Dey edited this piece.]

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That image of water seeking a new channel captures the first-order reality of the Trump administration’s trade policy. Tariffs have risen sharply, and the costs are landing where economists would expect: higher prices for tariff-sensitive goods, stress on firms reliant on imported inputs, and an implicit tax on households and businesses. Yet the system has adapted. The US is buying less directly from China, but more from Chinese-owned factories operating in lower-tariff such as Vietnam. Mexico has as an unexpected winner. And Beijing’s leverage over rare earth minerals has spurred new efforts to secure alternative supply — an industrial-policy subplot nested inside a tariff story.

The second-order reality is more subtle: Trade policy uncertainty also influences the US Treasury market through financial market sentiment. Asset-manager commentary from institutions such as and emphasizes that tariff escalation can increase macroeconomic uncertainty, raise bond market volatility and affect . In this environment, investor demand for duration becomes more cautious, implying an indirect but economically meaningful link between trade policy uncertainty and Treasury yields beyond mechanical supply-and-demand effects.

Understanding the Treasury channel requires starting with the obvious, then moving to the consequential. Obviously, tariffs raise revenue. Consequentially, the Treasury market is where America prices its future, and where policy uncertainty becomes a term premium that households and businesses end up paying.

CAPTION: Term premium on a ten-year zero-coupon bond. Via .

The direct economics: inflation, an implicit tax, and revenue

Tariffs are blunt. When imposed broadly, they raise costs across wide swaths of the economy. A tariff on an imported refrigerator is not just a tax on the foreign producer; it becomes a higher landed cost for the importer, which becomes either a lower profit margin, a higher price for the consumer or a combination of both.

Tariffs can also lift the price of domestic substitutes: If imported steel becomes more expensive, domestic steel producers can raise prices too, even if their cost base didn’t change as much. For consumers, the effect shows up in specific aisles: higher prices for furniture, toys and clothing; higher prices for some foods like , bananas and ; and price pressures that spread unevenly across regions and income groups.

For firms, tariffs are less a doctrine than a daily problem to be managed. One small but telling example comes from the trade-law trenches. Dan Harris, a Seattle lawyer who recently began working on tariffs, now importers on how to legally reduce duty exposure. The methods are not dramatic — restructuring contracts, separating allowable costs, adjusting declared values within the rules — but they absorb time, capital and attention that would otherwise be spent on production or expansion.

This logic repeats across supply chains. A buyer who purchases an injection mold outright embedding that cost in the tariff base of every imported unit. The decision is rational and lawful, yet it underscores a broader pattern: tariffs redirect effort toward avoidance rather than efficiency. The same appears in Vietnam, where factories have seen sudden order surges as US buyers shift away from China — only to face capacity constraints and renewed as tariffs spread. Supply chains adapt, but the adaptation itself is costly, unstable and rarely conducive to long-term productivity growth.

Channel one: treasury supply — deficits, issuance, and tariff “cushions”

The US budget deficit is large by historic standards — of GDP in recent readings, roughly double the average pace from 1980 through the pre-Covid-19 pandemic era. Bigger deficits mean more Treasury issuance. If all else is equal, more supply requires either more demand or higher yields to clear the market.

Tariff revenue can, in principle, reduce the borrowing needed at the margin. Customs receipts have sharply in the high-tariff world, creating what some policymakers see as a fiscal cushion. But the margin matters: If tariffs tens or even hundreds of billions of dollars in annual revenue, that is meaningful — yet it is not transformative against structural deficits driven by entitlement spending and debt service costs.

The more important issue for markets is not just how much tariff revenue is collected, but how reliable that revenue is. Tariff receipts are unusually exposed to legal risk (court challenges to executive tariff authority), negotiation risk (trade deals that reduce rates or carve out exemptions) and macroeconomic risk (recessions or demand shifts that shrink import volumes). As the Bipartisan Policy Center , tariff revenue fluctuates with trade policy, legal outcomes and import behavior, making it an inherently volatile source of funding rather than a stable offset to deficits.

That volatility matters because bond markets price expectations and risk, not static arithmetic. Even when tariff revenue rises into the tens or hundreds of billions of dollars, it remains small relative to structural deficits driven by entitlement spending and rising interest costs. PBS NewsHour that claims of tariffs meaningfully stabilizing the fiscal outlook break down once the scale of federal spending and borrowing is considered.

Treasury yields therefore respond less to the existence of tariff revenue than to uncertainty around the longer-term fiscal path. When investors believe deficits may widen — because tariff revenue falls short, spending rises faster than expected or borrowing needs surprise to the upside — they demand higher compensation to hold long-dated debt. Because Treasury yields anchor mortgage rates and corporate borrowing costs, that repricing quickly tightens financial conditions across the economy.

Tariffs may reduce borrowing at the margin, but by introducing uncertainty into revenue projections, they can also raise risk premia — offsetting part of the perceived fiscal “cushion.”

Channel two: treasury demand — foreign buyers and trade relationships

If supply is one side of Treasury pricing, demand is the other — and trade policy influences demand most clearly through foreign investor behavior.

Foreign investors hold roughly of the US Treasury market, making their portfolio decisions central to US interest rate dynamics. During periods of tariff escalation, Council on Foreign Relations often raise concerns about a potential “sell America” trade, in which foreign official institutions reduce exposure to US assets as trade relationships deteriorate. Historically, however, such fears have rarely materialized in abrupt form. Even during episodes of trade conflict, foreign holdings of Treasuries have often remained stable or increased, reflecting Treasuries’ role as the world’s deepest and most liquid pool of safe collateral. In an environment of global uncertainty, investors typically prioritize liquidity and capital preservation, even when they are uncomfortable with the policy environment generating that uncertainty.

The more relevant risk, therefore, is gradual erosion at the margin. Central banks and sovereign wealth funds rarely engage in headline-grabbing sales. Instead, they can diversify quietly over time by allowing maturing Treasury holdings to roll off and reinvesting incrementally elsewhere. Over years, these slow-moving adjustments can meaningfully affect demand conditions at the margin.

Trade relationships matter in this process. Reserve composition has historically been influenced by trade networks, with countries tending to hold reserves in the currencies of their primary trading partners. If US protectionism leads to sustained shifts in global trade toward alternative hubs, reserve portfolios may adjust gradually in parallel — without a single triggering event, but with cumulative effects over time.

From a market perspective, this distinction holds weight. Treasury demand remains deep and resilient, but it is not immutable. Persistent trade fragmentation can slowly reshape the composition of global reserves, subtly reducing marginal demand for US debt even in the absence of overt selling pressure. Such shifts are easy to overlook in the short term, yet increasingly relevant for long-term rate expectations and term premia.

Channel three: tariffs, inflation, growth and the yield curve

The third channel operates through the macro economy: how tariffs affect inflation and growth, and how those effects are ultimately priced into financial markets.

Tariffs tend to raise prices directly by increasing import costs and indirectly by expanding domestic firms’ pricing power. At the same time, they can weigh on growth by raising input costs, disrupting supply chains and provoking retaliation. The resulting combination, higher inflation risk alongside weaker or more uncertain growth, is precisely the configuration that markets associate with elevated macro risk rather than a straightforward demand slowdown.

Markets typically express this tension through the yield curve. When investors believe tariffs will push up near-term inflation while clouding the longer-term outlook for growth, productivity and policy stability, longer-dated yields can rise even as growth expectations soften. This reflects the role of term premia. The long end of the curve is not simply a forecast of future short rates; it also embeds compensation for inflation volatility, fiscal uncertainty and policy risk.

Recent market behavior reinforces this interpretation. Gold prices have continued to even as US yields remain elevated, signaling that higher yields are no longer being read as a clean indicator of safety. Instead, both gold prices and long-term Treasury yields appear to be responding to the same underlying force: a rise in uncertainty and risk premia. When yields increase because investors demand additional compensation for fiscal, geopolitical and policy risk — rather than because growth prospects are improving — the opportunity cost of holding gold becomes less binding. In that sense, gold is not competing with Treasuries on yield, but reacting to doubts about their reliability as the world’s unquestioned safe asset.

Geopolitical shocks can accelerate this dynamic. Recent US military actions involving Venezuela briefly gold prices higher, not because they altered global trade flows in a material way, but because they reinforced perceptions of geopolitical fragility layered on top of trade and fiscal uncertainty. Such episodes matter less for their direct economic impact than for what they reveal about market psychology: When policy and geopolitical risks stack, investors demand protection that sits outside sovereign balance sheets.

This framework helps explain why JP Morgan’s bullish outlook for gold intact even without aggressive Federal Reserve (or Fed) easing. As long as term premia stay elevated, central banks continue to diversify reserves and geopolitical flashpoints remain unresolved, higher US yields do not suppress gold prices. Instead, they reinforce incentives to diversify away from US financial assets altogether. In that sense, gold’s rise toward $5,000 per ounce by late 2026 would not represent an anomaly driven by temporary fear, but a new equilibrium consistent with a more fragmented and risk-conscious global financial system.

The implications extend beyond gold. The same uncertainty that lifts demand for alternative stores of value also pushes up term premia in the Treasury market. Long-term yields rise not in anticipation of stronger growth, but as compensation for volatility and unpredictability. That repricing feeds directly into higher borrowing costs across the economy, tightening financial conditions even when the underlying trade shock itself appears manageable.

For households and firms, this channel is where trade policy becomes tangible. The ten-year Treasury yield anchors borrowing costs across the economy, including mortgage rates, auto loans and corporate financing. If tariffs contribute to persistently higher term premia, it results in a durable tightening of financial conditions, often outweighing any localized employment gains associated with reshoring or import substitution.

Higher yields also feed back into public finances. Rising interest rates increase government debt service costs, tightening the fiscal constraint and reinforcing deficit dynamics over time. What begins as a trade policy shock can therefore reappear as a budgetary one, amplifying longer-term sustainability concerns.

Globally, higher US yields tend to transmit tighter financial conditions abroad through capital flows and exchange rate pressures, increasing stress in more vulnerable economies. In that sense, the macro consequences of tariffs are not confined to domestic prices or output; they propagate through global financial channels.

For these reasons, Treasury yields are not merely an economic statistic. They are a strategic price — summarizing how trade policy, inflation risk, fiscal dynamics and global financial conditions intersect in real time.

Trade is like water… but it hides risks

The industry stories from the tariff era are familiar by now: lawyers building compliance playbooks, factories booming in Vietnam, Mexico benefiting from trade diversion, grocery importers cancelling shipments, governments accelerating rare earth strategies. Together, they reinforce the comforting that trade behaves like water: Block one channel and it simply flows around the obstacle.

That metaphor is only half true. Trade does reroute. The world does not stop trading because one country raises tariffs. But rerouting is not costless.

It can be inflationary, as supply chains move to higher-cost locations. It can lower productivity by fragmenting production networks built for efficiency. It can shift bargaining power across firms, workers and countries. And most importantly for markets, it raises uncertainty.

In financial markets, uncertainty comes with a price. In the Treasury market, it appears as a higher term premium — the extra return investors demand to hold long-dated US debt when the economic and policy outlook feels less predictable. That premium does not stay in the bond market. It is transmitted directly into mortgage rates, corporate financing costs and global capital flows.

Because US Treasuries are the benchmark asset of the global financial system, changes in their pricing ripple outward. What begins as a trade policy shock can become a broad tightening of financial conditions, shaping investment decisions at home and exporting stress abroad.

This is where trade policy becomes strategic. As economists Emmanuel Farhi and Matteo Maggiori in their model of the international monetary system, the global role of US debt rests on credibility — the belief that American public liabilities are safe, liquid and insulated from short-term political shocks. That credibility allows the United States to borrow cheaply and at scale.

Paradoxically, a policy framed as strengthening national power, if mishandled, can weaken the foundation of that power. Tariffs may redirect trade. But if they also raise uncertainty and risk premia, they can quietly erode the credibility and attractiveness of US debt — the asset on which American economic power ultimately rests.

The trade war’s hidden front is the bond market

The trade war has not broken global commerce but redirected it. Firms and countries are adapting quickly — routing around tariffs, shifting production footprints, building new compliance strategies and rebalancing trade relationships. That adaptability is real and will likely persist.

But adaptation carries costs, and the most important costs may not appear on a customs receipt. They may appear as a higher term premium in the Treasury market — a subtle repricing of US policy uncertainty that raises borrowing costs for households, businesses and the federal government itself.

This year and beyond, the most strategic way to think about tariffs is as a variable that interacts with Treasury supply, Treasury demand and the Fed’s inflation calculus. A trade policy that treats the Treasury market as an afterthought risks turning a tariff shock into a bond shock. In an economy built on the benchmark of US yields, a bond shock becomes everyone’s problem.

If “trade is like water,” then Treasuries are the riverbed. Policy can redirect the flow, but if it erodes the bed, the flood will not stay contained.
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Alongside early-harvest and launch tracks with the , and the Eurasian Economic Union (), plus a revived Early Progress Trade Agreement () with Canada, a clear picture of India’s new trade architecture is emerging. New Delhi is building high-quality, rules-based bilateral arrangements, phased where necessary, with partners that complement, rather than compete with, India’s strengths and priorities.

A pragmatic partnership with New Zealand

On one level, the India-New Zealand FTA is a straightforward extension of this — a pragmatic deal between two economies whose bilateral trade, while steadily growing, currently stands at a minuscule , thus leaving plenty of potential to unlock. On the other hand, it tells us something broader about where India is headed and how it intends to build prosperity, with people, not just products, at the center.

For decades, commentators have reduced India’s trade strategy to a binary: open the gates and risk import surges or stay cautious and forgo the scale and opportunity that the global economic order offers. That false choice collapsed when India refused to join the Regional Comprehensive Economic Partnership (), and instead rewired its negotiating posture around complementarity.

This shift in strategy has been made possible by a wave of internal reforms that reached a new peak in 2025. Major changes, most notably the rollout of Goods and Services Tax this year, alongside other key reforms under Prime Minister Narendra Modi’s tenure, including the simplification of foreign direct investment () norms, expanded production-linked incentive () schemes, digital governance and the implementation of the Labor Codes, have all contributed to investor confidence.

It is this transformed, future-ready India that now approaches trade negotiations from a position of strength. New Zealand fits that map. It is a high-income, rules-based economy that doesn’t compete head-to-head with India in mass manufacturing; instead, it welcomes Indian services, talent and consumer goods under transparent and fair terms.

Tariff liberalization, sectoral protections and prioritizing people��

Those terms are striking. New Zealand has granted access to all Indian exports. Not “most,” not “nearly all” — all. For India’s labor-intensive sectors — textiles and apparel, leather and footwear, gems and jewelry, marine products, toys, handicrafts — this is a once-in-a-generation opening; the kind you build upon to broaden value chains. Small exporters who dreaded duties and nickel-and-diming at the border can now quote with confidence, contract with certainty, ship with speed and expand their operations thanks to cash flows freed from tariffs.

India, for its part, has offered tariff liberalization on about of tariff lines, covering of bilateral trade value. This has been done through a calibrated blend of immediate cuts (sheep meat, wool, coal, most forestry and wood), phased reductions (oils, select machinery, wine) and carefully managed tariff-rate quotas for a handful of sensitive horticulture lines (honey, apples, kiwifruit).

But these concessions have been meticulously crafted to ensure that India’s most sensitive sectors remain protected. Dairy is the most prominent ; it is entirely ring-fenced. The shield extends further: animal products (other than sheep meat), key vegetables, sugar, some oils and strategic nonagricultural sectors such as gems and jewelry, copper and aluminum are all from tariff concessions.

This is an unmistakable signal that India will write modern, liberal trade rules, but it will do so while securing farmer incomes, Micro, Small and Medium Enterprises (MSME) resilience, and food security. This is not protectionism; it is democratic prioritization for a country where agriculture is a livelihood for and not just another sector to be casually bartered away.

The agreement’s spine, however, is not goods but rather services and mobility. New Zealand’s services commitments are its most ambitious to date, Indian firms broad access across IT and IT-enabled services, professional and business services, education, finance, tourism and construction.

Crucially, the agreement includes a Most-Favored-Nation () clause: if New Zealand offers better terms to another partner in the future, India automatically receives the same benefits. For India’s already globally competitive services sector, this means new opportunities to establish a presence in Oceania, recruit local talent and scale operations in a stable, rules-based environment.

But the real innovation is the Temporary Employment Entry Visa, a for up to 5,000 Indian professionals at any given time to live and work in New Zealand for up to three years, targeted at skill shortages (IT, engineering, healthcare, education, construction) and specialty roles (yoga instructors, Indian chefs, music teachers). Paired with the fact that the removes numerical caps on Indian students, guarantees 20 hours/week of work during study, and extends post-study work to 3 years for science, technology, engineering and mathematics graduates and 4 years for doctorates, as well as a 1,000-place Working Holiday scheme, and you’ve stitched the “living bridge” of a 300,000-strong Indian diaspora into the economic fabric.

Critics — some inside New Zealand’s politics — have that these mobility channels “give too much away.” That is an entirely incorrect framing, though. Global trade today is not a container-ship contest; it is a talent distribution contest. When shortages hobble , and sites, partnering with a country that supplies trained professionals under transparent, targeted and time-bound rules is not a concession for New Zealand; it is capacity building.

For India, talent mobility is not brain drain but instead brain circulation. Earnings, networks and know-how will eventually come home, while remittances in the interim can help stabilize families. Far from “giving away” jobs, this agreement allows New Zealand to fill gaps that its own workforce cannot meet. At the same time, the pathways it opens enable Indian professionals to gain global experience and return with skills that strengthen India’s economy — further enhancing India’s international reputation as a source of reliable, high-quality talent.

Implementation and future prospects

The FTA also does the dull yet decisive things right. Customs modernization commits India to release windows at the border. That single clause can save exporters more money than many tariff cuts, because time itself can act as a shadow tariff. The pact hardwires cooperation on and rules and creates Agri-Technology for kiwifruit, apples and honey. These plans mean both countries will collaborate on sharing best practices — needless to say, India will be the beneficiary.

Additionally, the agreement requires New Zealand to update its Geographical Indications () framework, thereby granting India the same rights as the EU to register wines, spirits and other goods, ensuring full parity in GI protection. Regulatory access for pharmaceuticals, medical devices and organic products has also been streamlined, reducing duplication and accelerating approvals.

There is also long-term capital behind this agreement: New Zealand has $ 20 billion in investment in India over the next 15 years. The scale of this commitment signals confidence in India’s economic trajectory and its potential as a global growth engine. The agreement also includes a rebalancing that allows India to take remedial measures if the delivery of investments falls short of its commitments. India has learned that FTAs without real capital and capability often disappoint; this one addresses both, the kind of long-term backbone that many earlier agreements lacked.

Of course, no agreement is without its challenges. The FTA will require careful implementation and timely ratification, efficient visa processing, and real delivery on its various Agri-tech and customs commitments.

But from an Indian perspective, the fundamentals are solid: the deal is structured to maximize opportunity while safeguarding core interests. It is precisely the template India should look to replicate — combining asymmetric access to goods that favors MSMEs with ambitious services and talent mobility. It is bilateralism that looks beyond tariffs, focusing instead on people, productivity and a true sense of partnership.

India’s new trade architecture is not merely about opening doors but about building bridges among economies, nations and, above all, people. In that vein, the India-New Zealand FTA is a blueprint for how the next decade of Indian trade can and should be built.

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The escalation: “gross incompetence” and indictment threats

The conflict reached a boiling point when reports surfaced that the Trump-aligned Justice Department was preparing to seek an indictment against Powell. The alleged charges do not stem from monetary policy errors, but rather accusations of perjury and “gross incompetence” related to the renovation costs of the Federal Reserve’s Eccles Building in Washington, DC

This legal maneuver follows months of escalating rhetoric. Since taking office in January 2025, President Trump has reportedly disparaged Powell in private and public forums, calling him a “moron,” a “jerk” and a “stupid person” on at least a dozen occasions. The animosity was on full display during a bizarre incident in , when Trump insisted on visiting the construction site of the Fed’s headquarters. During the tour, witnesses described the President jostling with Powell over cost overruns, using the backdrop of the construction zone to berate the Chairman in front of the press corps.

The Chairman of the Federal Reserve, of course, has very little involvement with the construction project.

Despite having Powell for the position during his first term, Trump has called for his resignation multiple times in the last year, frustrated by the Fed’s refusal to slash interest rates to zero. The threatened lawsuit — ostensibly about building management — is widely viewed by legal experts as a spurious pretext to remove a barrier to the President’s economic agenda.

Powell’s “video response” and the European shield

In a move that surprised Washington, Powell broke with the Fed’s century-old tradition of stoic silence. On Sunday, January 11, the Fed released a featuring a steely Powell looking directly into the camera. Without naming the President, Powell reaffirmed his commitment to the “rule of law” and the Fed’s mandate, declaring that he would not be intimidated by political pressure. The video, stripped of the usual central bank jargon, was a clear signal: Powell was not resigning.

The international community has rushed to Powell’s defense. On January 13, a coalition of 10 major central banks — including the European Central Bank (ECB) and the Bank of England — released a expressing “full solidarity” with Powell. The letter, a diplomatic bombshell, underscored that “the independence of central banks is a cornerstone of price, financial, and economic stability.”

However, the expression of support was not well received at home. Stephen Miran, a Trump-appointed Fed Governor who has become a vocal internal critic of the Powell consensus, dismissed the letter immediately. Miran the foreign intervention “not appropriate,” arguing that global bankers have no business opining on US domestic legal matters.��

The media reaction

Prominent voices in the financial world have begun to sound the alarm. Michael Bloomberg, the former mayor of New York City, published a stinging opinion titled “Let Powell and the Fed Do Their Jobs,” arguing that the politicization of the dollar would have catastrophic long-term consequences for US borrowing costs.

Market veterans like Mohamed El-Erian and Rob Arnott have also weighed in, though often with a focus on the broader implications of “fiscal dominance.” While El-Erian has frequently warned that the Fed is losing control of the narrative, recent discussions in the bond market suggest a growing fear that the Fed’s independence is being eroded not just by tweets, but by structural changes. 

Senator Cramer, a member of the Senate Banking Committee, that it “would be an elegant solution for the Fed chair to step down in exchange for dodging a political indictment”. Which carries the same vibes as offering to purchase someone’s corner store for a dollar “to avoid losing it to flames one day”.

“Well I’d love that, I mean, we all talked about getting him [Powell] out of there [Federal Reserve] Larry Kudlow on FOX News.

The attempt to fellow board member Lisa Cook — a case currently winding its way through the Supreme Court — further illustrates the administration’s “cleanup” strategy to install loyalists at the Board of Governors.

The Data: A “supercharged” economy complicates the narrative

The irony of the President’s demand for rate cuts is that the US economy, by many metrics, is running too hot, not too cold.

According to the Atlanta Fed’s “” model, the estimate for real GDP growth in quarter four (Q4) 2025 stands at a staggering 5.4% as of January 21, 2026. This “supercharged” growth rate defies the narrative of a recessionary economy in need of monetary stimulus.

Furthermore, inflation remains sticky. Core personal consumption expenditures (PCE) inflation — the Fed’s preferred gauge — is currently tracking around 2.7% to 2.8% year-over-year, above the 2% target. With unemployment at a relatively healthy 4.4% (as of December 2025), the data suggests the Fed should be cautious, not aggressive, in cutting rates.

The Taylor Rule calculation

To understand just how divergent the President’s demands are from standard economic theory, we can use the , a standard formula used by the Atlanta Fed and economists worldwide to estimate the “appropriate” federal funds rate.

In simple terms, the Taylor Rule is a formula for finding the “perfect” interest rate. If prices rise too fast (high inflation), the Fed needs to cool things down by raising interest rates. If people are losing jobs and businesses are closing (recession), the Fed needs to warm things up by lowering interest rates.

The rule starts with a “Neutral Rate.” This is the interest rate where the economy is cruising comfortably — neither speeding up nor slowing down. The neutral rate is assumed to be 2%. 

The Taylor Rule then looks at two gauges and tells the Fed to adjust the rate up or down: inflation and growth. 

For every percentage point inflation exceeds the target (currently 2%), the neutral rate is increased by the difference, multiplied by 1.5. With inflation at 2.7%, we should add 1.05 (0.7 x 1.5) to the neutral rate.

Next, the Taylor Rule considers GDP growth and the job market to determine if there is an “output gap” (when economic output is below potential), in which case points are deducted from the neutral rate.

However, with the latest estimate for Q4 2025 real GDP growth (5.4%), the US economy seems to be running “hot” and above potential. This would require a surcharge on the neutral rate. 

Given strong economic growth (around 8% nominal), the Taylor Rule prescribes a rate significantly higher — potentially over 5% — to prevent overheating. By this metric, Powell is already being incredibly dovish.

Governor Miran, however, argues that the neutral rate has fallen due to specific fiscal and migration factors. He has stated that the Fed Funds rate should be slashed immediately by 100–150 basis points (1–1.5 percentage points). Miran’s interpretation provides the academic cover for Trump’s political demands, suggesting that the “true” rule points to much cheaper money.

In December 2025, Miran claimed that official inflation was overstated, implying that monetary policy should be more accommodative (i.e., lower interest rates). He asset management fees contributing 30 basis points (0.3 percentage points) to core inflation. Have you ever heard your Uber driver complain about rising asset management fees?

Did you know that US health insurance premiums are apparently falling? That’s what recent government data . This occurs because the Bureau of Labor Statistics (BLS) uses an “indirect method” to calculate the health insurance component of the Consumer Price Index; it deducts benefits (payouts) from insurers’ retained earnings (profits). If your insurance raised your premium by 5%, but increased payouts by 10% (due to a bad flu season, for example), the insurance company’s profits shrink, which BLS will report as a price drop (even as you pay higher insurance premiums). Have you ever heard a person say, “My insurance reduced my premium?”

Implications: the dollar in the crosshairs

The assault on Powell and the attempts to purge members like Cook signal a shift toward a “pliant” Federal Reserve. If the central bank loses its credibility to fight inflation, the premium investors demand to hold US Treasury bonds could soar.

A long time ago, we used gold coins as a means of exchange. Those were replaced by receipts for gold coins, for safety and convenience. Then, the gold coins were removed, but we continued to exchange receipts, despite the fact that they had no tangible backing. Later, we moved to an electronic representation of those receipts. Today, stablecoins offer another layer of abstraction. 

Central banks’ formidable task is to prevent a loss in a trust-based system. Undermining central bank independence is the best way to destroy this fragile construct we call “money”. Once trust is destroyed, it is very hard to earn back, usually only by offering additional assurances, like a gold backing. 

The markets are reading the signs, bidding up the prices of gold, silver and many other commodities. There are no “lines at the gold shop” yet, but we are on the best route towards a disruptive outcome of irresponsible monetary and fiscal policies.

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