Thursday12 September 2019 ★ FINANCIAL TIMES 9

Opinion

P

opulists are amassing an

empire on which the sun

never sets. Leaders of their

stripe govern as far east as the

Philippines and as far west as

the US. The European branch now has

no less a nation than Britain as its unoffi-

cial garrison. When Jair Bolsonaro was

elected president of Brazil almost a year

ago, several more time zones were

folded into the widening realm.

Naturally enough, then, liberals fear

encirclement and subversion by a kind

of Popintern, run or at least egged on by

Washington, just as the Comintern took

orders from Soviet Moscow. The idea of

liberalism penned in under an Ameri-

can-led siege is not the Bizarro World

plotline it seems. Donald Trump really

has been friendlier with strongmen than

with more conventional allies. The US

president’s former aide teve BannonS

really is working on what he calls a

“global populist movement”.

The trouble is that the first and sec-

ond of those words repel each other like

magnets. Several years after its break-

through, we still talk of populism as

something of a monolith. To continue to

do so is to give it too much credit. What

its adherents have in numbers and

geographic spread, they lackin cohe-

sion. And of all their differences, the

deepest is between the US and the rest.

It should not need saying that what

Mr Trump jeers as “globalism”, much of

the world thinks of as Americanism. To

be a nationalist in, say, France or parts

of Asia, is to renounce a recognisably

American (or least Anglo-Saxon) cast

of mind: commercial, individualist,

morally liberal.

Populists in these places might look to

Mr Trump for lessons in how to win

elections. They certainly value the cover

he gives them for behaviour his prede-

cessors often scolded and punished. But

there will always be a limit to their affin-

ity. Their interests can only overlap so

much with a man who sees the world

as a web of potential openings for US

business and US power.

This tension does not just exist in

theory. Examples of intra-populist

schism are multiplying. Few world lead-

ers resemble Mr Trump in style and

idiom as much as the Philippine Presi-

dent Rodrigo Duterte. And still the pair

clash over the latter’scloseness to China.

Few get on with Mr Trump as natu-

rally as Indian Prime Minister Narendra

Modi. And still the US hasstripped Delhi

of preferential trade status. As for Tur-

key’s President Recep Tayyip Erdogan,

he has upset the White House by urn-t

ing to Russiafor defence purchases.

Even in Mr Trump’s dealings with the

UK, cracks show as soon as the super-

ficial bonhomie gives way to anything of

substance. British voters, fans of Brexit

included, will not countenance a trade

deal that exposes the National Health

Service to what they see as a feral Amer-

ican profit motive.Their government

ignores them at mortal political cost.

The wonder is not that such splits

happen among populist kin. The won-

der is that they do not happen more

often. They probably will. Populism is

not much of a binding agent. The fact

that two governments share a commit-

ment to the nation state and a kind of

tonal belligerence is not enough to bind

them. If anything, it makes them like-

lier to assert their raw interests until

they clash.

No doubt, populists can act as spoilers

of the existing world order. But whether

they can forge another one, with a Davos

or Bretton Woods of their own, must

be more doubtful. Their animating

premise, after all, is the essential sep-

arateness of nations. Their diplomatic

style — that air of permanently offended

amour propre — makes for inherent

rockiness. The idea of a multinational

populist movement is not quite a con-

tradiction in terms, but it is getting

there. There are lots of populisms. To

speak of them in the terrifying singular

is alarmist.

Even if populists could act in some-

thing approaching concert, the US will

always make for an awkward leader.

Versed in the history and thought of the

European right, Mr Bannon must know

how much it fears the debasement of

the continent’s culture by the capitalism

that Mr Trump incarnates. When the

leaders of Singapore and Malaysia

asserted “Asian values” in the 1990s,

it was likewise in opposition to a US-

flavoured materialism. Whatever their

personal fondness for Mr Trump, popu-

lists in these regions still have the same

qualms about American influence. He

will find it ever harder to corral his sup-

posed brethren from London to Manila.

When the Soviets found worldwide

revolution too difficult, they settled

for the consolidation of their ideology

at home. It was more than enough to be

getting on with. Mr Trump will end up

in the same place. Call it populism in

one country.

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An animating premise

of these parties

is the essential

separateness of nations

The myth of a unified world populism

procedures, but the response smacks of

being too little, too late.

Facing its own scandal, the LSE set up

an inquiry by Lord Woolf, a former Lord

Chief Justice of England and Wales. He

found it was “behind the standard of

many global companies” in protecting

its reputation and called for “a culture

throughout the LSE which is sensitive to

risks and ethical values.” It nowkeeps

full details f all anonymous donationso

on a central register.

When Ito was appointed Media Lab

director in 2011, he was told of its “anti-

disciplinary” approach, breaking down

barriers among specialisms and allow-

ing creativity. Grey areas are productive

in research but they became paralleled

by financial rule bending.

Judgments about whose money to

take and which individuals trying

to launder their reputations should

be rebuffed, will never be an exact

science. But universities must be more

disciplined and more open.

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by many universities, as is its $472m

tally of gifts and pledges last year, but

both numbers pale beside Stanford’s.

Meanwhile, the Media Lab needs$80m

to operate annually, which it largely

attracts from “member” companies

includingEstée Lauder nda ExxonMobil

that gain access to its research and roy-

alty-free rights to patents.

Much of Mr Ito’s responsibility was

financial and he must have been

tempted to think that, in visiting

Epstein’s homes or his Caribbean island,

he was doing his job. Mr Ito’s judgment

and that of Peter Cohen, the Media Lab’s

former director of development, who

helped to keep the Epstein donations

anonymous, were flawed but the failure

was also institutional.

MIT may have decided that Epstein

was persona non grata but it did not do

enough to enforce it — the financier not

only funded the lab but research by

another MIT professor.Rafael Reif, MIT

president, hascalled in a law firm ot

investigate in addition to initiating an

internal review of its donor policies and

students and academics at MITpro-

tested earlier his year at its naming of at

new computer centre afterStephen

Schwarzman, the private equity billion-

aire, who donated $350m to build it. But

this does not stop them wanting to be

taught at the most prestigious universi-

ties by highly paid professors.

The Media Lab, which was co -

founded in 1985 by Nicholas Negro-

ponte to research and shape the wave of

convergence between hardware, soft-

ware and the internet, is at the heart of

this financial tension. As Silicon Valley

has grown in wealth and influence in the

past 25 years, so has Stanford, a Califor-

nian competitor to MIT in computer sci-

ence and now artificial intelligence.

MIT’s$16.4bn endowment s enviedi

according toan article n the Newi

Yorker that led to his resignation. He

also received $1.2m fromEpstein for

his own investment funds — the kind

of blatant conflict of interest that only

Wall Street financiers and technology

visionaries seem to find acceptable.

Mr Ito will not be the last university

leader brought down by accepting dona-

tions unwisely. According to Prof Lessig,

Mr Ito persuaded himself thatEpstein

was a changed character, despite a con-

viction in 2008 for soliciting prostitu-

tion, including from a minor. “Make

sure this gets accounted for as anony-

mous,” Mr Ito wrote in one email about

an Epstein gift.

Trusting in the reformed nature of a

rich reprobate who can provide funding

led to theresignation of Howard Davies,

former director of theLondon School of

Economics n 2011. The LSE hadi

accepted £300,000 from a foundation

run by Saif Gaddafi, son of the former

Libyan dictator, as well as taking him as

a PhD student in what one professor

called “a very risky gamble”.

Universities have become more reli-

ant on private donations to retain their

places in global league tables and to

attract students, whose tuition fees only

partly meet the bills. Stanford Univer-

sity drew $1.1bn in gifts in 2018, adding

to itsendowment of $26.5bn. A quarter

of its annual revenues came from

investment income, while university

students’ fees made up only 11 per cent.

Students are increasingly censorious

about where donations come from —

T

he Massachusetts Institute

of Technology’s Media Lab

flaunts a rebellious style,

dubbing itself“a house of

misfits” nda “the new Salon

des Refusés”, after a French exhibition

of rejected art works. But its relation-

ship withJeffrey Epstein, the financier

and paedophile, was revolting.

Its decision to take anonymous don-

ations from Epstein, who committed

suicide in jail last month while facing

charges of trafficking underage girls, led

to theresignation of Joi Ito, the Media

Lab’s director. Mr Ito is a technology

evangelist whose charisma and net-

working skills kept money flowing and

the Media Lab in business.

“I thank god that I’ve never been obli-

gated to raise money for an institution

likeMIT,”wrote Lawrence Lessig, a

Harvard University law professor, in

a bungled attempt to defend his friend

Mr Ito. The pressure to attract donors

who fund research and pay for new

university buildings is indeed intense,

but Mr Ito behaved unconscionably.

He sought donations fromEpstein

although the latter was listed on MIT’s

donor database as “disqualified”

Epstein fed off

universities’

weakness

Institutions have become

more reliant on private

donations to retain their

place in global rankings

BUSINESS

John

Gapper

T

hey don’t call us dismal sci-

entists for nothing. Nearly

75 per cent of economists

surveyed in July by the

National Association for

Business Economics see aUS recession

by the end of 2021. But ask for data sup-

porting that forecast and you get no real

consensus. There are plenty of theories

about trade wars. US growth has slowed.

But the usual bubbles and imbalances

that trigger recession aren’t yet evident.

With consumption accounting for

nearly 70 per cent of growth, a recession

has to be transmitted through the US

consumer. The main question is when.

The good news so far is that Americans

remain robust spenders. Consumption

grew by 4.7 per cent annualised in the

second quarter, the fastest pace in four

years. Retail sales have also been strong,

with core sales (stripping out volatile

categories) accelerating between May

and July at the fastest pace in more than

15 years. The Bloomberg consumer

comfort gauge of personal finances, fac-

toring in pay growth and equity prices,

is near a two-decade high.

Payroll gains have broadly slowed this

year, averaging 145,000 jobs a month

compared with 215,000 last year. That is

the weakest pace since 2010. Given an

unemployment rate of only 3.7 per cent,

though, that is hardly cause to call in the

cavalry. Wage growth remained robust

at 3.2 per cent year-on-year in August,

the labour force participation rate actu-

ally rose and two early warning indica-

tors for the jobs market — hiring for

temporary positions and weekly work-

ing hours — strengthened.

According to Federal Reserve econo-

mist Claudia Sahm’s Recession Indica-

tor, the employment data raises virtu-

ally no red flags about a downturn over

the next two years. What’s scary, how-

ever, is that as New York Fed President

John Williams ays, “The consumer iss

now carrying all of the weight, or much

of the weight, for growth going forward.”

Other regional Fed presidents tell me

that local chief executives report uncer-

tainty around trade delaying invest-

ment and spending. They see vulnera-

bilities from a further escalation in

trade tensions prompting cutbacks and

lay-offs. Manufacturing — heavily

exposed to trade risks — has seen a pro-

nounced hiring slowdown.Thedata

suggests we are already in a manufac-

turing recession. Higher input costs

from tariffs may also reduce profits

enough that companies take on fewer

staff. Earnings for companies in the S&P

500 fell in the first half of this year. Most

analysts expect urther deteriorationf.

Americans might also cut spending if

equity markets face a sustained correc-

tion. Falling profits and the same head-

lines and tweets that dent CEO confi-

dence could alsospook investors. As

equity markets roll over, stockholders

may worry their wealth is evaporating

and rein in spending. Because the

wealthiest 10 per cent of households

hold around 85 per cent of all stocks

owned by Americans, a market correc-

tion may not on its own cause a contrac-

tion, but it could contribute to a sharper

slowdown.

A market drop, headlines about trade

wars, a rumbeat of recession warningsd

and dogmatic presidential tweets could

shake consumer confidence. Although

still high by historical standards, sur-

veys by the University of Michigan and

the Conference Board showed a drop in

consumer sentiment in August. Anew

poll ound 60 per cent of Americansf

expect a recession in the next year.

All these paths towards a weaker con-

sumer are “mights” at this point. But as

Dallas Fed President Rob Kaplan

warned, “If you wait until the consumer

is showing weakness, my guess is you’ve

waited too long.” Which leaves forecast-

ers stuck with the uneasy feeling a reces-

sion is on the way, but no specific sense

of how it will happen. We have to watch

all the channels that lead to the con-

sumer, and in the meantime follow the

sage advice ofeconomist Edgar Fiedler,

who once suggested, “If you have to

forecast, forecast often.”

The writer is a senior fellow at Harvard

Kennedy School

Consumers

cannot carry

he US economyt

for ever

Forecasters have an uneasy

feeling a recession is

on the way, but no specific

sense of how it will happen

Megan

Greene

AMERICA

Janan

Ganesh

Peter

Navarro

W

hen the US help e d

found the Universal

Postal Union in 1874,

it was seeking to create

“a single postal territory

for the reciprocal exchange of

correspondence”. ut the UPU’s anti-B

quated system for setting international

postal rates, known as “terminal dues”,

has not kept pace with the dramatic rise

in ecommerce and America is the

biggest victim.

Today manufacturers in countries as

small as Cambodia and as large as China

pay less to send small parcels from their

countries to New York than US

manufacturers do to ship packages from

Los Angeles to the Big Apple. This puts

American manufacturers and workers

at a significant competitive disadvan-

tage and forces the US Postal Service

to subsidise a system that weakens

America’s manufacturing base.

The US i s far from the only victim of

the UPU’s distorted system.Brazil, Fin-

land, Norway, and Canada, to name just

a few, likewise lose considerable sums;

and Iceland’s postal service nearly went

bankrupt because of the unfair rules.

Last autumn, Donald Trump, US

president, told the UPU that its unfair

treatment of Americamust stop. He

warned that the US would pull out of

the multilateral organisation unless it

amended its rules to allow the US to

set its own “self-declared” postal rates,

allowing the postal service to recover

appropriate costs from overseas ship-

pers. The State Department then

submitted a withdrawal notice that will

allow the US to leave the union on

October 17 after a mandatory one-year

waiting period.

The union has responded by calling

only the third extraordinary congress in

its nearly 150-year history to consider

appropriate reforms to the terminal

dues systems.

When members gather on September

24, the voting agenda will include two

options that would allow the US to “self-

declare” its own rates immediately. One,

known as option B and endorsed by

nearly 40 countries, would allow all

192 members of UPU to impose self-

declared rates immediately. This would

end the terminal dues system and give

all countries complete control of the

rates they charge for the domestic com-

ponent of international postal trans-

actions.

A second option, dubbed the “multi-

speed approach”, would also allow the

US to self-declare rates immediately,

while other countries would phase in

rate changes at speeds determined by

the Extraordinary Congress.

Either of these options ould keep thew

US in the UPU. But there are proposals

on the table that, if passed, would

trigger the prompt exit of the US from

the group. Not surprisingly, they are

supported by a number of the nations

that benefit most from the current

system, which allows them to treat the

American postal system as a piggy bank.

For example, so-called option A is a

cynical non-starter from the US point of

view. It would only raise rates slightly

and slowly while keeping in place the

strict caps on what the USPS and other

postal systems can charge overseas

shippers for domestic delivery. This

tweak would not only preserve the

current terminal dues systemdistorting

rates but also introduce other

inefficiencies.

What will be the outcome of the

extraordinary congress? Only two

things can be said with absolute

certainty: the US will start self-declaring

its rates soon after October 17 one way

or the other; and the US goes into this

meeting fully prepared to either stay in

or leave the UPU.

American presidents as far back as

Ronald Reagan have recognised the

inefficiencies of the UPU’s terminal dues

system. However, Mr Trump is the first

to confront the problem directly and

take concrete steps toward a solution.

Since last October, we have had a two-

fold mission: first to provide the UPU

with a workable set of amendments that

would allow the US to remain in the

body but also immediately self-declare

rates. Second, ensure that international

mail moves swiftly and without disrup-

tion if the US leaves the organisation.

Our team has moved in “Trump

time”, which is to say, as quickly as

possible. This is in direct contradiction

to those who would use international

diplomatic culture to maintain the

status quo through endless negotiations

and “further studies”. That is a trap we

refuse to fall into.

At the end of the day, the US simply

seeks a system of self-declared rates

within the UPU. That arrangement

would provide for fair and undistorted

competition for companies based in all

192 of its members.

The US team is heading to the extra-

ordinary congress to achieve that goal.

In the end, however, we will not allow

our desire to remain in the UPU to over-

come President Trump’s overarching

goal of fairness for America through

self-declared rates. Let the extraord-

inary congress begin.

The writer is assistant to the US president

for trade and manufacturing policy

Change the unfair international postal rate system now

Unless the rules

top favouring China,s

the US will quit the

nion in Octoberu