INDIA SECRETLY BUILT NUCLEAR WEAPONS

The Challenge Of A Multi-Polar Nuclear Age – Analysis

Russia launches Sarmat intercontinental ballistic missile at the Plesetsk testing field on April 20. Photo Credit: Russian Defense Ministry video screenshot

 June 11, 2022  

By IPCS

By Vice Admiral Vijay Shankar (Retd)*

Of Parity, Assured Destruction, & Mistrust

For the last 77 years, since the US first detonated nuclear weapons and annihilated the Japanese cities of Hiroshima and Nagasaki, an eerie ambivalence has prevailed on the sect of nuclear use. On the one hand, some scholars and practitioners are convinced of the myth of usable nuclear weapons. On the other, governments are devising policies for their use. Meanwhile, Russia is toying with the idea of escalating the war in Ukraine to nuclear levels, simply in order to de-escalate the on-going conflict. On the other side of the globe, China is designing a strategy to provide greater flexibility in the use of nuclear forces.

Significantly, the first nuclear attacks also defined the basis of nuclear stability. The relationship between the bellicose nuclear-armed states was marked by three characteristics: the quest for parity in arsenals, the certitude of mutual destruction, and a bizarre level of mistrust that drove states to adopt grotesque stratagems. Noam Chomsky has pointed out just how abominable the US nuclear war plans could be: “This US nuclear war plan, if our first alert system had alerted a Soviet strike, would have delivered 3200 nuclear weapons to 1060 targets in the Soviet Union, China, and allied countries in Asia and Europe.” General Butler, a former commander-in-chief of US Strategic Command, put it succinctly when he denounced current nuclear programmes and systems as a death warrant for humanity.

Flawed New START

The New Strategic Arms Reduction Treaty (New START) was signed on 8 April 2010 by the US and Russia. The instrument was a continuum of a bipartisan process to reduce nuclear arsenals. In 2021, the two parties agreed to extend the Treaty by five years. The key provision of the agreement limits nuclear warheads, delivery vectors, and launchers and institutes a system of verification.

The Treaty is, however, amiss, both conceptually and in substance. Conceptually, it is neither inclusive of all nuclear-armed states nor does it identify ‘mistrust’ as a key factor that stokes scepticism. In substance, it fails to recognise that all nuclear weapons, including tactical, are weapons in the same category, because when used, they have the potential to escalate to mass destruction. In addition, the Treaty pays no heed to the fact that warheads held in reserve can very quickly be deployed. But where it is fatally flawed is its inability to institute measures that diminish the intent to use. It doesn’t demand all nuclear-armed states to abjure the first use of nuclear weapons as an essential doctrinal point that allays the perils of nuclear devastation.

Nuclear Weapons: An Umbrella for Conventional War

Just how consequential the threat of use can be has been demonstrated in the course of the Ukraine conflict. Russia has obliquely threatened the use of nuclear weapons to provide an umbrella for its war. This has turned the Cold War idea of deterrence on its head. Moscow is using the deterrence value of its nuclear arsenal not to protect Russia but rather to provide space for conventional action. The Kremlin introduced an explicit nuclear dimension through its various declarations. On 18 February 2022, Russia conducted nuclear force manoeuvres prior to invading Ukraine. The event left little doubt as to the linkage of the timing with the impending conflict. On 24 February, Moscow warned NATO in a declaration that there would be unprecedented consequences should a third state attempt to obstruct Russia’s designs. President Putin went further on 27 February, announcing that Russia’s nuclear forces had been placed on “special alert.” This kind of public announcement regarding nuclear forces was last proclaimed by the US during the 1973 Yom Kippur War. Foreign Minister Sergei Lavrov later noted cryptically that a third world war would be “nuclear.”

The Bluff of Extended Deterrence

In this milieu, the very idea of ‘extended nuclear deterrence’ takes an outlandish turn. The logic of guarantee against a nuclear attack on a third country implies that the guarantor launches a retaliatory nuclear strike. It also implies that the guarantor accepts the consequences, irrespective of circumstance, extent of convergence of interests, or degree of mutuality. This, as recent events in Ukraine have shown, is not rational.

Extended nuclear deterrence demands that both guarantor and beneficiary accept the same conditions of nuclear use, magnitude of response, and norms for escalation, and share the same strategic interests. Since none of these propositions are indubitable, the substance of extended nuclear deterrence is ultimately dependent on the guarantor accepting catastrophic consequences on behalf of a third party. States under this canopy might want to re-consider the credibility of extended nuclear deterrence in contemporary strategic circumstances. The reliance on the nuclear deterrent capabilities of a major power is much more an act of clutching at a straw than a reflection of reality.

Prospects for Nuclear Stability: A Revisit

Many factors that deterred military conflict during the Cold War and after have weakened. The growing parity of arsenals, absence of moderating pressures, and power imbalances between states have exposed underlying stresses within the global system and increased the probability of conflict.

Russia’s case is symptomatic of the current anarchic state of affairs. Having lost the economic, technological, and political heft of the Soviet era, it retains great power aspirations, demands exceptionalism, and clings to nuclear superpower status. Its nuclear arsenal is a key component of leverage: it endows immunity from military pressure and the leeway to pursue an independent foreign policy.

Nuclear deterrence today can only work in conjunction with agreements, limitations, and transparency. Without these, it brings antagonistic powers to the brink of nuclear war in a crisis. In the present fragile conditions of deterrent relationships, the prospects for nuclear stability among the nine nuclear-armed states will remain forlorn.

The Challenge

Cold War nuclear paradigms cannot be further tweaked to provide an illusion of stability to the nine nuclear-armed states. Priority should be given to identifying methods to dispel mistrust while advancing the idea that globally, nuclear surety is neither served by ‘parity’ in arsenals nor ‘assurance’ of total devastation. The former has brought a multi-polar encore of an arms race into play, while the latter is a return to barbaric times when extinction was propagated as a solution.

Today, economics and interdependence are the engines of global power. Yet there is reluctance to step back from military situations such as what we see in Ukraine. Nuclear weapons cannot be reduced to a gambler’s game of dare. But to remove it from arsenals altogether is not practicable, especially since states are not ready to wean themselves from an instrument of power. The answer lies in transparency, shadowed by a withdrawal from this calamitous obsession through a general adoption of a policy of no first use (NFU) of nuclear weapons. This is a first step towards disarmament.

*Vice Adm Vijay Shankar (Retd) is Distinguished Fellow, IPCS, and former commander-in-chief of the Strategic Forces Command of India.

IPCS (Institute for Peace and Conflict Studies) conducts independent research on conventional and non-conventional security issues in the region and shares its findings with policy makers and the public. It provides a forum for discussion with the strategic community on strategic issues and strives to explore alternatives. Moreover, it works towards building capacity among young scholars for greater refinement of their analyses of South Asian security.

India's Pursuit of Nuclear Weapons

Andy Zhao
May 24, 2016

Submitted as coursework for PH241, Stanford University, Winter 2016

Peaceful Beginnings

Bhabha's Three Phase ProgramAt India's conception in 1947, Prime Minister Nehru began an ambitious nuclear program to bring prestige and inexpensive electricity to India. [1] India's nuclear program began as a peaceful push for inexpensive energy, but the nuclear fuel for the reactors also produced plutonium for a potential nuclear weapon. With the assistance of Canada and the United States, a Pressurized Heavy Water Reactor (PHWR) was built that bombarded U-238 with neutrons to chain react to form Pu-239. The CIRUS reactor was built in 1960 with international aid with the intention that it was solely for peaceful energy use even though the plutonium byproducts would be potent bomb fuel. [2]

 Building this PHWR was the first step in a 3-phase program planned by Dr. Homi J. Bhabha (see Fig. 1) that would eventually exploit India's large thorium reserves for civilian energy. Bhabha, a Cambridge trained physicist that worked under the scientific giants Dirac and Bohr, was the visionary of India's nuclear program. In 1958, Bhabha claimed India had the capability to build a nuclear bomb within 18 months of the decision (2 years before France and 6 years before China had the capability). In 1972, the signal was given to the scientists and engineers to build the bomb, which culminated in India's nuclear test of 1974. [3]

Bhabha envisioned a three-stage plan for India's civilian nuclear program that also kept the nuclear weapons option open:

1. Pressurized Heavy Water Reactors (HWR) were used to generate electricity by bombarding naturally mined U-238 with neutrons - leaving Pu-239 as a byproduct of the fission reaction. This was preferable to a Light Water Reactor, which would have required enriched uranium. India received assistance from Canada with the finished HWR CIRUS reactor in 1960 and heavy water from the U.S. on conditions that the reactor would only be used for peaceful purposes. [2] However the plutonium from the CIRUS reactor was diverted to India's bomb detonated in 1974. Bhabha decided in 1958, while CIRUS was being constructed, to build the Phoenix reactor that would be used to extract the plutonium from the spent fuel using the PUREX process developed by the U.S. and declassified under Atoms for Peace. [1]

2. Fast Breeder Reactors (FBR) utilize the Pu-239 from the first stage to create more fissile material than they consume. A mixed-oxide fuel is produced and reacted with enriched uranium to create more Pu-239. After enough Pu-239 is gathered, thorium will be used in the reactor to produce U-233. [4]

3. Advanced Heavy Water Reactors utilize U-233 and India's vast thorium reserves to create significant amounts of energy for the country. Other options existed as well, but the ultimate goal was to exploit the country's thorium reserves to produce cheap, sustainable energy for the nation. [4]

Expanding Nuclear Program

Bhabha executed his plan without any domestic opposition and full support from Prime Minister Nehru. India's Atomic Energy Commision's (AEC) budget increased from 1954 to 1956 by 12 times; by 1958, AEC acquired 27% of all government investment in research and development, creating one of the world's largest teams of nuclear scientists and engineers, sending 1,104 Indian scientists to get trained at Argonne Laboratory School of Nuclear Science and Engineering from 1955 to 1974 (when the U.S. began to declassify thousands of reports, including papers on plutonium separation). [1]

Bhabha prevented the International Atomic Energy Agency (IAEA) from interfering with his Three Phase Program (that kept the military option open). The international community wanted to ensure that resources were not being diverted to militarize countries' nuclear programs. However, Bhabha revised a statute to prevent interference in the economic development of states and cited how linked India's nuclear program was to India's economy. There was no resistance from the IAEA or domestically over Bhabha's nuclear stance. Parliament was silent in discussing India's nuclear weapon option. [1]

Indian scientists were able to secretly push towards a nuclear explosion, which demonstrates the lack of military and Parliamentary involvement. In 1968 scientists began to design the device used in the Pokhran explosion in 1974 without any direction, not even from Prime Minister Indira Gandhi. [1] During this secret phase of operation, Rajagopala Chidambaram was tasked to derive the equation of state for plutonium to find how the density of plutonium related to temperature and pressure. This knowledge was essential to achieving a critical mass during symmetric compression of plutonium to get a fission chain reaction. Further, the construction of the Purinma reactor that began in 1970 was commissioned by the AEC under the guise of a fast breeder reactor. The true reason behind Purinma was to reconfirm the fast fission cross-section data of Pu-239 since the published data by the U.S. was not trusted. [1]

Peaceful Nuclear Explosion and Weaponization

In 1972, Prime Minister Indira Gandhi authorized developments for a Peaceful Nuclear Explosion (PNE). And in May 1974, the PNE was detonated in Pokhran and it was the culmination of India's entire nuclear program up until that point. Subsequent nuclear testing and weaponization was not a priority after the PNE because bomb building was not Indira Gandhi's purpose for the PNE . After the PNE, India was extremely slow to further develop its nuclear weapons capability. Canada felt betrayed and cut India off from further nuclear assistance. This led India to fully transition into a self-sufficient homegrown nuclear program without international aid. While the nuclear scientists wanted to conduct further tests, Indira Gandhi saw the marginal benefits for India's security were not worth the mounting costs and backlash. India would not test another nuclear explosion for twenty-four years. The final push for weaponization did not gain momentum until the late 1980's. Historical evidence shows that Indian policy planners were acutely aware by the spring of 1988 that the window of opportunity for preventing Pakistani nuclearization had closed. And instead of practiced restraint, there was urgency among them to bring weapons online. [5] India elected to weaponize their nuclear devices in 1989, but the process of integrating them with aircraft delivery system took until about 1994-1995. There were significant technical hurdles to overcome since India's nuclear program was never tied to the military that controlled the delivery systems. India's nuclear compartmentalization caused the Air Force to purchase French Mirage combat aircraft without understanding the challenges of a nuclear device being on board. [5]

India's Current Nuclear Status

India's nuclear program is unique because it has been so separate from military and legislative structures in India. This severance has ultimately led to an autonomous domestic nuclear program, but it has come at the cost of international segregation and inadequate nuclear power plants due to the lack of support from international nuclear bodies. In January 2015, India sought to join the Nuclear Suppliers Group (NSG) with the support of the U.S. While India seeks to be brought into the international nuclear order, they still have not signed the Nuclear Non-Proliferation Treaty or the Comprehensive Test Ban Treaty as they continue to produce fissile materials in their reactors and rely on nuclear weapons for their national security. [6] India's current nuclear capacity includes 21 reactors with 5789 MW in operation (by the end of March 2014, nuclear energy was 1.68% of India's energy capacity), 1000 MW under commissioning, and 2800 MW under construction. [7]

© Andy Zhao. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.

References

[1] G. Perkovich, India's Nuclear Bomb: The Impact on Global Proliferation (University of California Press, 1999)

[2] R. Rajaraman, "Estimates of India's Fissile Material Stocks," Science and Global Security, 16, 74 (2008),

[3] O. Marwah, "India's Nuclear and Space Programs: Intent and Policy," International Security 2, No. 2, 96 (Fall 1977).

[4] S. Parekh, "India's Three Stage Nuclear Program. Physics 241, Stanford University, Winter 2014.

[5] G. Kampani, "New Delhi's Long Nuclear Journey," Int. Security 38, No. 4, 79 (Spring 2014.

[6] B. Karnad, India's Nuclear Policy (Praeger Security International, 2008).

[7] Central Statistics Office, Government of India Energy Statistics 2015. March 2015.

Indian Nuclear Program

History Page Type: 

International Nuclear Programs

Profiles: 

Homi J. Bhabha

Raja Ramanna

Date: 

Thursday, August 23, 2018

 

India tested its first atomic bomb in 1974 but did not develop a significant nuclear arsenal until more than two decades later.

 

Early Development

In August 1947, the partition of British India created the independent Republic of India and Dominion of Pakistan. Shortly afterwards, a group of Indian scientists led by physicist Homi Bhabha—sometimes called “the Indian Oppenheimer”—convinced Prime Minister Jawaharlal Nehru to invest in the development of nuclear energy. The subsequent 1948 Atomic Energy Act created the Indian Atomic Energy Commission “to provide for the development and control of atomic energy and purposes connected therewith” (Bhatia 67).

Caption: 

A U.S. satellite photograph of the Bhabha Atomic Research Centre, 1966

In its early stages, the Indian nuclear program was primarily concerned with developing nuclear energy rather than weapons. Nehru, who called the bomb a “symbol of evil,” was adamant that India’s nuclear program pursue only peaceful applications (66). Nehru nonetheless left the door open to weapons development when he noted, “Of course, if we are compelled as a nation to use it for other purposes, possibly no pious sentiments of any of us will stop the nation from using it that way.” India also opposed the United States’ Baruch Plan, which proposed the international control of nuclear energy, on the grounds that it “sought to prohibit national research and development in atomic energy production” (67).

Serious development did not start until 1954, when construction began on the Bhabha Atomic Research Centre (BARC) at Trombay. Essentially the Indian equivalent to Los Alamos, BARC served as the primary research facility for India’s nuclear program. This period also saw a massive increase in government spending on atomic research and heightened efforts for international scientific collaboration. In 1955, Canada agreed to provide India with a nuclear reactor based on the National Research Experimental Reactor (NRX) at Chalk River. The United States also agreed to provide heavy water for the reactor under the auspices of the “Atoms for Peace” program. The Canada India Reactor Utility Services—more commonly known by its acronym, CIRUS—went critical in July 1960. Although billed as peaceful, CIRUS produced most of the weapons grade plutonium used in India’s first nuclear test.

 

Peaceful Nuclear Explosions

Although tension with Pakistan was later a contributing factor to India’s nuclear weapons program, it was actually conflict with China that first prompted India to build an atomic bomb. In October 1962, war broke out between the two countries over a disagreement regarding the Himalayan border. India appealed to both the Soviet Union and the United States for assistance, but the two superpowers were at the time distracted by the ongoing Cuban Missile Crisis. The month-long Sino-Indian War ended in victory for China and humiliation for India.

Caption: 

Homi J. Bhabha

China also tested its first atomic bomb in October 1964, heightening the need for a nuclear deterrent in the eyes of some Indian officials. Homi Bhabha, for example, urged the Indian government to approve an atomic bomb program, arguing in one speech that “atomic weapons give a State possessing them in adequate numbers a deterrent power against attack from a much stronger State.” Indian Prime Minister Lal Bahadur Shastri was opposed to the bomb, but Bhabha convinced him that India could use nuclear weapons for peaceful purposes, such as engineering. According to Bhabha, India was not developing nuclear weapons, but “peaceful nuclear explosions” (PNEs). Shastri, for his part, affirmed, “I do not know what may happen later, but our present policy is not to make an atom bomb and it is the right policy” (Perkovich 56).

During this period, Bhabha frequently appealed to the United States to support Indian PNEs through its Project Plowshare program. In February 1965, Bhabha visited Washington, DC to pitch the idea of nuclear cooperation. He met with Under Secretary of State George Ball, who reported, “Dr. Bhabha explained that if India went all out, it could produce a device in 18 months; with a U.S. blueprint it could do the job in six months” (Perkovich 60). Although the accuracy of this statement was debatable, it was clear that Bhabha badly wanted the bomb. In the end, however, the United States decided against nuclear cooperation with India.

The year 1966 saw significant changes in the Indian nuclear program. In January, Prime Minister Shastri died of a heart attack and Indira Gandhi—the daughter of former Prime Minister Jawaharlal Nehru and a strong proponent of nuclear weapons—took his place. Less than two weeks later, Homi Bhabha died in a plane crash. Physicist Raja Ramanna, who worked under Bhabha beginning in 1964, was named the new head of BARC and was the principal designer of India’s first nuclear device.

 

Smiling Buddha

The decision to finally test a bomb was largely motivated by India’s desire to be independent from Western interference. In 1968, for example, India caused an international controversy when it refused to sign the Nuclear Non-Proliferation Treaty (NPT). The NPT established the United States, the Soviet Union, and the United Kingdom as recognized nuclear weapons states, while its non-nuclear signatories pledged not to develop nuclear weapons programs. India accused the nuclear powers of “atomic collusion” and took particular issue with the fact that NPT did not differentiate between military and peaceful nuclear explosions (Bhatia 78).

In August 1971, India took another step away from the West when it signed the Treaty of Peace, Friendship and Co-operation with the Soviet Union. In December 1971, war broke out between India and Pakistan over the separatist movement in East Pakistan (modern Bangladesh). China and the United States sided with Pakistan, and President Richard Nixon even ordered the US Navy’s Seventh Fleet into the Bay of Bengal. The war nevertheless ended with an overwhelming Indian victory and soured relations between India and the West.

Caption: 

The Thar Desert in Rajasthan, the location of the Pokhran Nuclear Test Range. Courtesy of Wikimedia Commons/Sankara Subramanian

In September 1972, Prime Minister Gandhi officially approved a nuclear test after touring the Bhabha Atomic Research Center. “There was never a discussion among us over whether we shouldn’t make the bomb,” affirmed Raja Ramanna. “How to do it was more important. For us it was a matter of prestige that would justify our ancient past. The question of deterrence came much later. As Indian scientists we were keen to show our Western counterparts, who thought little of us those days, that we too could do it.”

Ramanna led the BARC team of approximately 75 scientists who designed and built the plutonium implosion device. Test preparations were kept as secret as possible. The Indian Army was charged with digging a test shaft 330 feet underground at the Pokhran test site, approximately 300 miles southwest of New Delhi. On May 18, 1974, the 3,000 pound device exploded with a force equivalent to 8 kilotons of TNT. Ramanna reportedly informed Gandhi of the successful test through a coded message: “The Buddha is smiling.” Although officially known as Pokhran I, the 1974 test was informally named “Smiling Buddha” and is frequently referred to as such.

Smiling Buddha was billed as a peaceful nuclear explosion, but Ramanna later admitted that “the Pokhran test was a bomb” and was “not all that peaceful” (Reed and Stillman 237). Canada pulled its support for the Indian nuclear program shortly afterwards. The United States likewise considered the test a violation of the Atoms for Peace program and responded with sanctions against India. As Secretary of State Henry Kissinger affirmed, “The Indian nuclear explosion…raises anew the spectre of an era of plentiful nuclear weapons in which any local conflict risks exploding into a nuclear holocaust” (Bhatia 73).

 

Weaponization

Caption: 

An Agni-II intermediate-range ballistic missile during a parade in New Delhi, 2004

After testing its first bomb in 1974, India took over two decades to build a nuclear arsenal and delivery system capable of military deployment. In the years after Smiling Buddha, India had significant difficulty procuring nuclear materials from a suddenly hostile international market. Despite these challenges, the BARC leadership managed to construct their biggest nuclear plant to date—the Dhruva reactor—at Trombay in 1977. It would produce most of the plutonium for India’s nuclear weapons program, but did not reach full power until 1988. The Indian government also approved a ballistic missile program in 1983. Over the next decade, the Defense Research and Development Laboratory (DRDL) built the short-range Prithvi missile and the long-range Agni missile. Both were eventually equipped with nuclear warheads.

During the 1990s, India faced renewed international pressure—particularly from the United States—to curb its nuclear program with the advent of the Comprehensive Test Ban Treaty (CTBT), which sought to put an end to all nuclear explosions, including underground tests. India did not ratify the treaty; somewhat ironically, neither did the United States. Prime Minister Atal Bihari Vajpayee explained India’s motivation to develop nuclear weapons at a UN meeting in 1997: “I told President Clinton that when my third eye [an old Indian proverb] looks at the door of the Security Council chamber it sees a little sign that says ‘only those with economic power or nuclear weapons allowed.’ I said to him, ‘it is very difficult to achieve economic wealth.’”

Caption: 

The Shakti-I bomb prior to detonation during the Pokhran-II test series, 1998

Physicist Rajagopala Chidambaram, the head of BARC, was soon authorized to proceed with additional nuclear tests. Preparations were carefully concealed and engineers worked at night to avoid detection by American satellites. Operation Shakti—also known as Pokhran II—took place on May 11, 1998. India tested five nuclear devices, although not all of them detonated. Indian officials claimed that the bombs had a yield equivalent to 45 kilotons of TNT, but independent estimates put the number closer to 16 kilotons (Reed and Stillman 241). “India is now a nuclear weapons state,” declared Prime Minister Vajpayee days after the tests. "We have the capacity for a big bomb now. Ours will never be weapons of aggression.”

India faced almost universal condemnation in the aftermath of the Pokhran II tests. The United States said it was “deeply disappointed” in India’s decision, the United Kingdom expressed its “displeasure,” and Germany called the tests “a slap in the face” of the countries who had signed the CTBT. As Pakistani Foreign Minister Gohar Ayub Khan asserted, “India has thumbed its nose to the Western world and the entire international community.” Less than three weeks later, Pakistan conducted its first nuclear tests.
 

India’s Nuclear Weapons Today

Caption: 

Prime Minister Narendra Modi at the Bhabha Atomic Research Centre, 2014. Courtesy of Wikimedia Commons/Government of India

Soon after announcing its nuclear capabilities, India established the National Security Advisory Board, which devised a no-first-use policy for Indian nuclear weapons. This policy was later amended to consider a biological or chemical attack against India to be sufficient grounds for a nuclear response.

Although the United States implemented economic sanctions against India after the 1998 tests, Indo-American relations have since warmed. In 2005, the two countries agreed to the India–United States Civil Nuclear Agreement. The treaty allowed India access to nuclear materials through the international Nuclear Suppliers Group in exchange for safeguards on civilian nuclear facilities, including inspections by the International Atomic Energy Agency. Separate cooperation agreements have since allowed additional inspections.

Today, the civilian Nuclear Command Authority chaired by the prime minister has sole authority to authorize a nuclear strike. Some estimates put India’s nuclear arsenal at 135 nuclear warheads.

More Historical Resources: 

Bhatia, Vandana. "Change in the U.S. Nuclear Nonproliferation Policy Toward India (1998–2005): Accommodating the Anomaly." University of Alberta (Canada), 2012.

Perkovich, George. “Bhabha's quest for the bomb.” Bulletin of the Atomic Scientists 56, no. 3 (May/June 2000): 54-63.

Reed, Thomas C. and Danny B. Stillman. The Nuclear Express: A Political History of the Bomb and Its Proliferation. Minneapolis, MN: Zenith Press, 2009.

Chartbook 127 – The World Bank’s Global Take On The 1970s, Stagflation And Debt Crises.

Chartbook, Featured
June 9, 2022

This week the World Bank announced that it is slashing its forecast for 2022 global growth to 2.9%, down from 5.7% in 2021. This is the sharpest deceleration in a post-recession recovery in 80 years.

The baseline scenario projects a slight re-acceleration 2023, but in the event of a severe Fed tightening, an energy embargo triggered by the war and continuing COVID issues in China, that number could fall to as low as 1.5 percent.

With inflation also running at record rates, comparisons are being drawn to stagflation of the 1970s. Heavy-weights like Larry Summers and Olivier Blanchard have been to the fore in warning that inflation is now so rapid that to bring it under control may require a draconian monetary policy intervention.

This may well prove alarmist. Not only are the data on the degree of inflationary momentum ambiguous, but in the debate so far they are drawn overwhelmingly from the US and Europe.

The World Bank in the latest report on Global Economic Prospects for June 2022 takes a broader view. In a Special Focus section they take on the theme of Global Stagflation and the comparison to the 1970s. Their analysis, they claim, is the first to provide a systematic comparison of the current juncture with the stagflationary period of the 1970s. The previous literature has mostly focused on a comparison of high inflation during that period with today’s inflationary challenges and studied the role of monetary policy and commodity price shocks in driving inflation in the two periods. This study considers the stagflation of the 1970s and examines the role of fiscal policy and broader structural differences in explaining weak output growth and high inflation. Second, in contrast to much of the earlier work, which has focused on the United States, this study presents a global perspective by examining the evidence of stagflation, and the challenges posed by it, for a broad set of countries.5 The threat of stagflation is global since the current combination of high inflation and weak growth is highly synchronized across many countries. Third, this Focus explicitly links the Emerging Market and Developing Economy debt buildup of the 1970s that culminated in the debt crises of the 1980s to the stagflation of that era and its eventual resolution in advanced economies. The 1970s witnessed the first global debt wave fueled by a prolonged period of accommodative monetary policies in major advanced economies. Since 2010, the global economy has been experiencing the largest, fastest, and most synchronized debt wave of the past five decades amid a protracted period of monetary policy accommodation. The study considers the lessons of the debt accumulation of the 1970s for the current debt wave.

As the World Bank remarks,

The current juncture resembles the early 1970s in three key respects: supply shocks and elevated global inflation in the near-term, preceded by a protracted period of highly accommodative monetary policy in major economies, together with recent marked fiscal expansion; prospects for weakening growth over the longer term, which echo the unforeseen slowdown in potential growth of the 1970s; and vulnerabilities in EMDEs to the monetary policy tightening by advanced economies that will be needed to rein in inflation.

The energy price surge has rocked the entire world economy. In real terms the oil price shock of 2022 is in the same ballpark as 1979. The gas price shock is dramatically worse than anything previously seen.



From a global point of view it is clear that though inflation has ticked up in recent months, following decades of lowflation, we are still a long way from the great inflation of the 1970s.

World Bank SF1.1 A.

In both the advanced economies and emerging and developing economies, the World Bank analysis shows that the drivers of inflation in 2021-2022 are a cocktail of supply constraints, a demand shock and a surge in oil prices. In neither the advanced economies nor the emerging market world, are supply factors – the famous supply-chains – clearly dominant.

And despite this variety of shocks, long-term inflation expectations so far remain anchored both in the advanced economies and in the emerging market world.


In the US, inflation expectations have significantly risen, especially over the 12-month time horizon. But they are no more than half the levels seen in February 1980.



Wage inflation, which was a driver of wage-price spirals in the 1970s, is far more muted today, at least outside the US.



In the US, wage inflation is rapid, but remains behind price inflation, and, as the World Bank somewhat coyly remarks, in institutional terms there are huge differences between the 1970s and the present day. “Rigidities” are less pronounced, which is an unfortunate economist’s way of talking about the decline of organized labour and workers’ bargaining power.

Part of the reason that markets are as relaxed as they are is, that if the Fed and the other central banks see fit to take action, they have plenty of scope to do so before needing to resort to Volcker-style shock therapy.

Right now, interest rates all over the world are in negative territory. In the US they are deeply so.

In the 1979-1981, the initial impact of the Volcker shock was simply to raise rates to the level of inflation. Then, as inflation rapidly slowed, interest rates surged to historic highs. We are a long, long way from that today.



What worries the World Bank is what happens if the Fed were to actually make use of its leeway to raise rates. Here too, the 1970s have lessons to teach. The World Bank’s worry is of a major emerging market and developing world debt crisis.

At that time, as the World Bank writes,

Low global real interest rates and the rapid development of syndicated loan markets encouraged a surge in EMDE debt, especially in Latin America and many low-income countries (LICs), especially in Sub-Saharan Africa. In Latin America, total external debt rose by 12 percentage points of GDP over the course of the decade while, in LICs, it rose by 18 percentage points of GDP. Much of this debt was in foreign currency and short-term, as capital flowed from oil exporters to EMDEs with large fiscal and current account deficits (figure SF1.5.C).



When the Volcker shock hit, it delivered a savage blow to emerging market borrowers, turning the 1980s into a decade of debt crises. The litany of financial crises in the 1990s was even worse, but now it was banking crises that were to the fore.



Despite COVID the number of emerging market and low-income country debt crises has never returned to the 1980s peak. But debt accumulation in the last fifteen years has been dramatic and a larger share of borrowing is susceptible to variable interest rates. From a share of c. 20 percent in the early 2000s, the variable rate component has risen to 35 percent.

Even if dollar interest rates are still a long way away from imposing a real squeeze, the dollar itself poses problems.

In the 1970s following the collapse of the Bretton Woods system, the dollar devalued. By contrast, since the start of the Russian invasion of Ukraine, the dollar has strengthened sharply, exerting significant pressure on everyone who has borrowed in the currency, whether interest rate go up or not.



Those worst affected are emerging market and developing economies that are also commodity importers. They are being squeezed both by the appreciation of the dollar and the rise of commodity prices. And the bond markets are reacting. The spread paid by EMDE sovereigns that are commodity importers have surged by almost 250 basis points. Commodity exporters have seen a basis-point increase in their spreads of less than 100 points.

As far as the 1970s analogy in the advanced economies is concerned, the general impression conveyed by the World Bank’s analysis is that the similarities are more superficial than real. The World Bank expects global CPI inflation to fall back below 3 percent in 2023. 

But the real question is what price will the world economy pay? As far as emerging market and developing market debt is concerned, the burden is far larger than it was in the 1970s. So too, of course, is the sophistication of their governance institutions. What Daniela Gabor calls the “Wall Street consensus” has sunk deep roots. The much-feared global COVID debt crisis of 2020 failed to arrive. Instead the accumulation of new debt went on. We may get lucky. There may be no tapering disaster in 2022-2024. But the World Bank alerts us to where the most serious risks lie. Along with the distributional question in rich countries, the main focus should be on ensuring that the tightening in the global dollar system does not impose intolerable pressure on its weakest links around the world.

***

Robert Reich: How Biden Gets Re-Elected In 2024 – OpEd

File photo of US President Joe Biden. Photo Credit: Official White House Photo by Cameron Smith

 June 11, 2022  

By Robert Reich

My friends, I’m going to press the pause button on today’s news — including the House January 6 hearings — and try to answer a big question that hangs over American politics right now like a sword of Damocles: Does Joe Biden have a snowball’s chance of being re-elected in 2024?

With his current approval rate in the cellar, most pundits assume no (at age 81, he’d also be the oldest person ever elected president, slightly exceeding the typical American’s lifespan). The conventional thinking goes that if he gets the Democratic nomination for 2024 (a big if), Biden will be demolished by Trump (or a Trump surrogate like Florida governor Ron DeSantis) — putting America at the mercy of an even crazier authoritarian than Trump version 1.0.

That’s way too simplistic. Biden’s approval rating is now at around 40 per cent. Ronald Reagan was polling at about the same at this point in his presidency when he was grappling with inflation and the inevitable buyer’s remorse that voters feel a year and a half into a presidency. Two and a half years later, Reagan won 49 states in his re-election bid against Walter Mondale. (Reagan was then 73, just short of the typical American’s lifespan at the time.)

As for Trump, his popularity has plummeted since the 2020 election – a casualty not just of most Americans’ outrage at his big lie that the 2020 election was stolen from him and his role in the January 6th insurrection, but also of the poor showing (and terrifying characteristics) of many of his endorsees in recent Republican primaries The televised hearings by Congress’s select committee investigating the January 6 insurrection are unlikely to improve Trump’s standing with most voters.

Besides, much can happen between now and the next presidential election to alter the odds – not the least, the composition of Congress after the midterm elections, the outcome of the war in Ukraine, and the economy.

It’s true that many Democratic voters are unhappy with Biden — especially many of the young voters who surged into the 2020 election. They had expected Biden to pass more ambitious legislation on a range of issues — slowing climate change, subsidizing childcare and eldercare, lowering the prices of prescription drugs, expanding healthcare, and raising taxes on the rich to pay for all this.  

In some ways, Biden has had the worst of both worlds: The 2020 elections that gave Democrats control over both houses of Congress raised expectations that Biden’s proposals would be enacted, but senate Republicans torpedoed almost all of them (apart from benefits to tide people over during the second COVID wave and a deal on infrastructure). Biden also has had to cope with two Democratic senators – West Virginia’s Joe Manchin and Arizona’s Krysten Sinema — who vote like Republicans. Even if Manchin and Sinema were willing to support Biden’s proposals, they won’t join other senate Democrats in eliminating the filibuster. That means, under current Senate rules, at least 10 Republicans would have to agree with all fifty Democrats to limit debate and move to a vote – a nearly insurmountable obstacle.

An even more basic problem for Biden is that the Democratic Party he knew when he was elected to the Senate fifty years ago from blue-collar Delaware is not the Democratic Party that elected him in 2020. It’s now largely composed of young adults, college-educated voters, and people of color. In the intervening years, many working-class white voters who were once loyal Democrats joined the Republican Party. As their wages stagnated and their jobs grew insecure, the Republican Party channeled their economic frustrations into animus toward immigrants, global trade, Black people and Latinos, LGBTQ people, and “coastal elites” who want to control guns and permit abortions.

These so-called “culture wars” have served to distract such voters from the brute fact that the Republican Party has zero ideas to reverse the economic trends that left the working class behind. The culture wars have also distracted attention from the near-record shares of national income and wealth that have shifted to the top. As well as from the Republican’s role in pushing even more to the top through tax cuts and subsidies, attacks on labor unions, and refusals to support social benefits that have become standard in most other advanced nations (such as paid sick and family leave, universal healthcare, and generous unemployment insurance).

During his 36 years in the Senate, followed by eight as Obama’s vice president, I’m sure Biden became aware of the loss of these working-class voters. And he must have known of the Democrat’s failure to regain their loyalty.

The Obama administration expanded public health insurance, to be sure. But Democratic administrations also embraced global trade and financial deregulation, took a hands-off approach to corporate mergers and growing industrial concentration, bailed out Wall Street, and gave corporations free rein to bash labor unions (reducing the unionized portion of the private-sector workforce during the last half century from a third to 6 percent).

It was a huge error – politically, economically, and, one might even say, morally.

What accounted for this error? I saw it up close: the Democratic Party’s growing dependence on campaign money from big corporations, Wall Street, and wealthy Americans – whose “donations” (bribes) to both parties soared.   

Clinton styled himself a “new Democrat” who would govern from above the old political divides — “triangulate,” in the parlance of his pollster, Dick Morris. In practice, Clinton auctioned off the White House’s Lincoln Bedroom to the highest bidders, made Wall Street’s Robert Rubin his chief economic adviser, advocated and signed the North American Free Trade Act, opened the US to Chinese exports, and cleared the way for Wall Street to gamble.

Obama brought into his administration even more Wall Street alumni and made Larry Summers his chief economic advisor. Obama promptly bailed out the Street when its gambling threatened the entire economy but asked nothing of the banks in return. Millions of Americans lost their homes, jobs, and savings, yet not a single top Wall Street official went to jail.

Small wonder that by 2016, two political outsiders gave dramatic expression to the populist bitterness that had been growing – Bernie Sanders on the left and Donald Trump on the right. At the time, they even spoke the same language – complaining of a “rigged system” and a corrupt political establishment, and promising fundamental change.

Joe Biden saw all this unfold. He came to publicly regret his vote to ease banking rules. He never celebrated the virtue of free markets. He has been far closer to organized labor and more comfortable with non-college working-class voters than either Bill Clinton or Barack Obama. “I am a union man, period,” he has repeatedly said. He’s no free trader, either. Biden proposed relocating supply chains for pharmaceuticals, semiconductors, and medical supplies in the United States, and imposing tax penalties on companies that relocate jobs abroad and credits for those that bring them home. He has kept in place most of the trade restrictions that Trump placed on China.

During the 2020 presidential campaign Biden was billed as a “centrist” seeking bipartisan solutions. But he had big, non-centrist ambitions. Seeking to be a “transformative” president, he openly sought a New Deal-style presidency. Once in office, he proposed the largest social agenda in recent American history. That Biden failed to get most of this agenda passed in his first term was due less to his own inadequacies than to the Democrat’s razor-thin congressional majorities, the aforementioned Manchin and Sinema, and the Party’s own compromised position vis-à-vis the power structure of America.

But Biden’s and the Democrat’s deepest challenge was, and continues to be, voter’s distrust of the system.  

All political and economic systems depend fundamentally on people’s trust that its processes are free from bias and its outcomes are fair.

Trump’s big lie that the 2020 election was stolen from him has contributed to the distrust but is not responsible for it. Only about a third of Americans believe him.  

The real source of distrust is the same force that ushered Trump into the White House in 2016: four decades of near stagnant wages, widening inequality, a shrinking middle class, ever more concentrated wealth at the top, and growing corruption in the form of campaign cash from the wealthy and corporations.

If Democrats retain control of Congress in the upcoming midterm elections (possible but unlikely, given the usual pattern in which the party in control loses it) Biden could still become a transformative president in the last two years of his first term if he focuses like a laser on reversing these trends.

Even if Democrats do not hold onto Congress, Biden could be a moral voice for why the system must be transformed. It’s his best hope for being reelected in 2024.

Robert B. Reich is Chancellor's Professor of Public Policy at the University of California at Berkeley and Senior Fellow at the Blum Center for Developing Economies, and writes at robertreich.substack.com. Reich served as Secretary of Labor in the Clinton administration, for which Time Magazine named him one of the ten most effective cabinet secretaries of the twentieth century. He has written fifteen books, including the best sellers "Aftershock", "The Work of Nations," and"Beyond Outrage," and, his most recent, "The Common Good," which is available in bookstores now. He is also a founding editor of the American Prospect magazine, chairman of Common Cause, a member of the American Academy of Arts and Sciences, and co-creator of the award-winning documentary, "Inequality For All." He's co-creator of the Netflix original documentary "Saving Capitalism," which is streaming now.

Residents ‘living in the shadow’ of Grenfell Tower on fifth anniversary of fire

Dozens died in block of flats in west London in 2017

Over 70 people died after a fire broke out in Grenfell Tower in west London in 2017. PA.

Neil Murphy

Residents have described what it has been like “living in the shadow” of Grenfell Tower, five years after the blaze that claimed 72 lives.

Members of the community in North Kensington, west London, spoke of how the fire “seems like it was last night”, with the tower a constant reminder of the trauma they have suffered.

The June 2017 disaster left the 67 metre-tall building dilapidated and charred.

READ MORE

Heaviness 'hangs over' London’s Grenfell community ahead of jubilee celebrations

Authorities took four months to cover the block in a protective wrap with green hearts and the message: “Forever in our hearts.”

Five years on, no decision has been made about the future of the building. But the Grenfell Tower Memorial Commission said a garden was “by far” the most popular idea from a survey of survivors, bereaved relatives and local residents.

Eman Yosry, a resident of Markland House tower block near Grenfell Tower, said the flats are “in front of us all the time”.

In an interview ahead of the anniversary on Tuesday, Ms Yosry spoke about losing many people she knew in the fire, saying: “I feel I can’t describe how sad and how difficult and painful it was.”

Growing tearful, she added: “I don’t know what to say.”

Ms Yosry said: “You can’t get away or forget what happened. It’s there, it’s in front of us all the time.

“Everywhere you go – you see Grenfell Tower. You go to anywhere near the area, you see the tower.”

Nahid Ashby, a resident of the Frinstead House tower block on the Silchester estate near the tower, said: “We’re still living in the shadow.”

Eman Yosry during an interview at the Grenfell Recovery Centre, west London, ahead of the fifth anniversary of the Grenfell Tower fire. PA.

Ms Ashby described what it was like waiting for months for authorities to cover the burnt-out tower.

She said: “A lot of people were saying from the very beginning: ‘Are you going to cover it so we don’t have to look at it?’

“But by the time they covered it, it felt even worse because, I don’t know, they’re just covering it all up because that fire shouldn’t have happened.”

Mohammad Tehrani, 66, who lives in Bramley House next to the tower, said the disaster was always on his mind.

Mr Tehrani, who was at the foot of the tower on the night five years ago, said he saw body bags being carried out of the building and watched debris falling from it.

Showing a video he took of the debris surrounding Bramley House in the morning, Mr Tehrani said he cleared it up as children walked past on the way to school.

The 66-year-old said the ordeal “seems like it was last night” for the community while authorities try to “brush it under the carpet”.

He said: “I mean for us it hasn’t aged.

“It just seems it was last night so five years (on) and they try to ignore, they try to brush it under the carpet.”

Mr Tehrani said he is now able to talk about the disaster without crying but it is still “inside me”.

He also said he still gets flashbacks at night, seeing people “behind the windows begging for their lives”.

“This is something that we’ve seen that we will never forget – no matter what you do, it’s in your mind.

“For four years I used to cry every time you asked me a question, I couldn’t control myself.

“I’m trying my best but it’s inside me still. You can’t help it.”

Mr Tehrani said the way the disaster has cast a long shadow on the lives of children in the community is “so bad”.

He added: “I feel so sorry for my grandchildren, I feel so sorry when I see the young people, because I don’t think they will have a good future because of the things happening.

“They don’t speak but it’s at the back of their mind – if I’m 66 years old and I cannot forget that night, just imagine.

“I mean even my granddaughter lost some friends in her school.

“They don’t say anything but obviously it’s internally affected them – all of them.

“Some of the children, I’ve heard from our community, they don’t even go to the gas fire, they don’t like to see their mother cooking on the gas fire.

“You see it’s so bad.”

Elizabeth Campbell, leader of Kensington and Chelsea Council, said: “On the fifth anniversary of the Grenfell tragedy, and always, our first and last thoughts are with those who lost their lives, their families and their friends.

“The bereaved and survivors continue to show incredible strength, courage, and solidarity, as they search for truth and justice.

“They have set us the challenge of being the best council – something I intend to strive towards."

A representative of the Department for Levelling Up, Housing and Communities said: “The Grenfell Tower tragedy must never be allowed to happen again and our thoughts are with the bereaved families, survivors and residents.”