The Hypocrisy of Elon Musk
A round-up of things that have caught my eye or ear this week including what Trump doesn't understand about Ukraine, the future of dollar supremacy, America's war on EVs and the possible end of Maduro
1. Trump’s Ukraine Myopia
What worries me about Donald Trump’s claim to have a detailed plan to end the Ukraine is not just that it is unworkable for reasons that I discussed here, but that it betrays a fundamental misunderstanding of what this war is about. There’s a trope in US Republican circles that takes at face value Vladimir Putin’s claim that what lies at the heart of the conflict is Russia’s legitimate concern about Nato’s eastward expansion. On this analysis, all that it takes to resolve the conflict is to convince Kyiv, after it has surrendered whatever territory is deemed necessary to appease Russia, to accept security guarantees that fall far short of Nato membership.
Yet as this piece for Foreign Policy magazine points out, what Russia really fears is not Nato but the European Union. It was the decision by Viktor Yanukovych, Ukraine’s then-president, to reject an Association Agreement with the EU in favour of a trade deal with Moscow that led to the Maidan protests in 2014 which ended with 108 deaths, Yanukovych’s flight to Moscow, and the initial Russian invasion. I met a delegation of Ukrainian MPs from Yanukovych’s party in London on the eve of that decision where it was clear they were under intense pressure. The Ukrainian public saw aligning themselves with the EU as the best way to guarantee their independence, democracy and prosperity. For the same reason, Putin would never let it happen.
That is why Putin apologists such as Nigel Farage (and Boris Johnson before he changed his tune in 2022) are half right when they blame the EU for the war in Ukraine. The question that these anti-Europeans never ask themselves is what was the EU supposed to do? The dream of EU membership was a legitimate Ukrainian aspiration. The Yanukovych government had sought an association agreement and the EU had negotiated one in good faith. It was Yanukovych who bowed to pressure from Moscow to reject the deal, and the Ukrainian people - and later Ukrainian parliament - that in turn chose to reject Yanukovych. The EU could hardly have walked away.
The same considerations apply today. Goodness knows how many Ukrainians have died in this war. What is certain is that they are not dying for Nato membership. They are dying for EU membership, which is now even more intensely supported than in 2014. Yet the two are linked. If there is one lesson that the EU has surely internalised from this war, it is that it cannot extend its single market, let alone single currency, to countries that cannot maintain their own security. That means that Nato membership, or something very close to it, is essential to keep that aspiration alive. Does Trump really believe that Ukrainians would settle for anything less?
There is one other aspect of Trump’s position that is troubling. For all of America’s history it has stood against imperialism and colonialism. Yet as the authors of the FP piece note, Russia’s war in Ukraine is nothing if not imperialist:
Russia, by aiming to prevent the EU’s enlargement and impose its own control over Ukraine, Moldova, and Georgia, is on a campaign to reassert its imperial idea in Europe. This poses an immense challenge to the credibility of the EU’s post-imperial vision to achieve collaborative regional governance through integration—ultimately the raison d’être of the bloc. Russian success would also risk legitimizing expansionism elsewhere by emboldening other countries to follow similar imperial strategies against their neighbors.
A Trump peace deal, in the unlikely event that he managed to deliver it, would not make the world safer but would lead to even greater global instability.
2. Dollar dominance
One of the oddest lines in the Republican Party’s very odd party platform was pledge number 13 out of a list of 20 single line pledges: “Keep the US dollar as the world’s reserve currency”. Odd because to the rest of the world, the “exorbitant privilege” of issuing the world’s reserve currency is such an obvious benefit in terms of lower borrowing costs, why would one even think of trying to undermine it. On other hand, not odd because in the increasingly batty world of the American populist right, some people dream of doing exactly that. Here’s a clip of JD Vance, Trump’s vice presidential nominee, questioning Fed chairman Jay Powell last year on whether the dollar’s reserve currency status was not in fact a “curse”.
I’ve written regularly over the years about the risks to the dollar’s reserve currency status, not least from the increased use of financial warfare which risks undermining global confidence in the dollar as a safe haven (and which will only have intensified following the G7s decision last month to confiscate the profits of frozen Russian central bank assets) as well as the growing concern over the US debt trajectory, reflected in the dollar debasement trade. Every time, the push back is the same, amounting to “What’s the alternative?”. Katie Martin had a good column in the FT a few weeks ago which set out why the dollar doomsters are wrong.
Nonetheless, I tend to agree with this piece by Mark Sobel, a former senior US Treasury official and now the US chairman of OMFIF, the central bank think-tank. He argues that dollar supremacy is too entrenched to be at risk in the next four years, regardless of anything Vance might want to do. But if Trump wins, all the various pillars that currently support dollar supremacy - faith in US institutions, confidence in the sustainability of the US debt trajectory, and what little restraint remains in the American weaponisation of finance - will be eroded. In short, this is one promise that Trump is likely to keep. But he will make it much harder for his successor.
3. America and EVs
I wrote last week about my puzzlement at how the European far right could be so anxious about immigration yet opposed to measures to combat climate change in the context of the havoc that extreme weather was causing in Africa. Yet what is even more baffling is the opposition of the right-wing in America to measures to tackle climate change when it is causing havoc at home. This piece from the Brookings Institute, a US think-tank, asks the very reasonable question: Why isn’t hurricane Beryl spurring bipartisan action to tackle climate risks?
The authors point out that the hurricane earlier this month caused 13 deaths and left 2.2 million without power, of whom 300,000 were still cut off a week later. What’s more, since at least 1980, the average cost of disasters has grown. In 2023, disaster costs totalled $92.9 billion across a record 28 separate disasters that cost over $1 billion. Yet even though an estimated 7 in 10 Americans experienced an extreme weather event in the last three years, only 54% of Americans view climate change as a major threat. That falls to just 23 per cent in some of the most disaster prone yet Republican-voting states, such as Texas, Florida, South Carolina, and Louisiana.
You would think that if anyone in America had a vested interest in trying to convince the US political system to take climate change seriously, it would be Elon Musk given that he is chief executive of Tesla, the world’s most valuable electric carmaker. Yet here is another puzzle. Musk has just agreed to donate $45 million a month to the Republican Party just as the Republican Party has spent four days in Milwaukee attacking EVs and is promising to slash EV subsidies. Indeed, as Tim McDonnell says in this piece for Semafor, this election is turning into an EV referendum. As he says:
EVs — parked at the intersection of climate, labor, and fears about China — are a natural flashpoint in the US culture wars. Depending on your perspective, they either herald the low-carbon economy and a domestic manufacturing renaissance, or represent a handout to China and a pernicious threat to the all-American industries of Big Oil and Big Auto by overreaching coastal bureaucrats.
Musk has tried to justify this apparent conflict of interest on the basis that his competitors need the $7,500 EV tax credit that Trump wants to scrap more than Tesla does. But Tesla also benefits from federal support for EV charging networks as well as Inflation Reduction Act subsidies for battery manufacturers. Meanwhile a recent Pew poll showed that the number of Americans that would consider buying an EV for their next vehicle has fallen to 29 percent from 38 percent last year.
The good news is that thanks in part to the Biden administration’s policies, US EV chargers are set to surpass gas stations in eight years. As the network expands, that should address a key source of anxiety among buyers. But it is nonetheless troubling that the US debate over climate action appears to be rapidly shifting away from one over the normal politics of distribution - who pays the price for the energy transition - to one of pure ideology. That won’t do anything to prevent future Hurricane Beryls but it does guarantee that the bill for climate inaction will only keep growing.
4. Venezuela
As a trainee investment banker in the mid-1990s, I spent a very enjoyable four months based in Caracas working on a project during what turned out to be a tiny window in Venezuela’s sad political history when it seemed to be on the cusp of becoming a liberal democracy. The project itself went nowhere but by the time I left I could have written an authoritative guide to the Caracas restaurant and nightlife scene. Sadly, there would have been no market for it because the country has since been wrecked by the authoritarian leadership of Hugo Chavez and Nicolas Maduro. The economy has halved in size, a staggering 8 million people, a fifth of the population, have emigrated in the last decade and 70 per cent of those who remain live below the poverty line. Utterly shameful for one of the world’s largest oil producers.
Yet for the first time since I was there in 1997, there is a glimmer of hope that Venezuela may be able to escape from this cycle of despair. The country goes to the polls next Sunday for the first time since 2018. Under a deal with the Biden administration, Maduro agreed to hold free and fair elections in return for an easing of some sanctions. Of course, Maduro has done everything he can to ensure that the election is not free and fair, including barring the leading opposition candidate, effectively barring Venezuelans overseas from voting, and refusing to allow the EU to send election observers. But polls suggest that Edmundo Gonzalez, a 74 year-old former ambassador who has never stood for office before and who has become the standard bearer for opposition to the regime, is on course to win.
As this piece in the Economist explains, no one can quite believe that Maduro will actually allow Gonzalez to win and that he will somehow find a way to rig the outcome. Nonetheless, it may just be that the opposition is just too far ahead, in which case the attention will turn to whether Maduro will agree to an orderly transition of power. This piece by the Council for Foreign Relations, a US think-tank, provides a more detailed analysis of the options, including the possibility that Gonzalez agrees to an immunity deal for Maduro. It is a tantalising prospect. If Maduro does go, it would be yet another sign in a year that has so far defied all the doom-laden early predictions that the authoritarians are on the retreat.
5. Bloody Ears
I spent far too much of my week trying to take the Republican Party seriously. Unlike I suspect most pundits on this side of the pond, I actually read the policy documents, digested the think-tank analyses and listened to the earnest podcasts. As I said in my post yesterday, I am still none the wiser what a Trump-Vance administration would do. But if you’re looking for something to listen to over the weekend to catch up, I recommend this episode of Pod Save America. It has the virtue of at least making me laugh out loud when they discuss Trump’s truly dreadful speech to the Convention when he rambled on unscripted about the blood flowing from his ears. Even aiming off for the fact that the podcast hosts are former Democrat staffers in the Obama administration, I am sure they are right when they say that with the right candidate capable of focusing the campaign on policy, Trump is so beatable.
Interesting point on the inability of Trumpite Republicans to see the need to address climate change in their pure self interest. Sometimes historical and dogmatic ideologies just don’t shift even in the face of unarguable facts. I was amazed for example how so many UK farmers voted Brexit - when the core plan was to abolish subsidies (I know, that hasn’t happened) and expose farming to market forces. It seems those farmers could not shift from an historic accepted wisdom of “EU bad”…..often learned at their parents’ feet. Something similar here.
I had hoped I had made clear in the following sentences that I profoundly disagree with the likes of Farage. But I think it is important to note that unlike American appeasers who see the Ukraine war entirely through the prism of a Cold War superpower conflict, European Putin-apologists such as Farage, Le Pen and previously Johnson have always understood that it is about the post-imperial EU project which they all oppose.