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Sunday, August 30, 2026

The irresistible rise and fall of Evo Morales

Evo Morales ceremony

First published at The Ideas Letter.

Rodrigo Paz Pereira’s election to the presidency of Bolivia in October 2025 ended a long political era. Evo Morales’s Movement for Socialism (MAS) had held power for almost two decades, unbeatable both in the streets and at the ballot box. This time it didn’t just lose the election. It ceased to exist as a political force. The new government’s slogan, “capitalism for everyone,” signaled a dramatic break from the MAS’s state-centric discourse. And Paz’s choice of ministers made it clear that the change runs deeper: his cabinet is noticeably whiter, reflecting the decline of indigenous representation that had characterized the Plurinational State under the MAS.

Bolivia’s new era has also produced a powerful image: the exile of Morales in the Chapare, the subtropical region of the Cochabamba Department known for its coca leaf crops. Coca-growing peasant unions, which function like militias, are protecting the former president from arrest stemming from several ongoing judicial proceedings — including one involving the alleged abuse of a minor, a partner said to be underage when the relationship began. The kidnapping of Nicolás Maduro in Venezuela has fueled fear among Evistas that the “gringos,” who have regained influence in the country, might collaborate in his detention should Paz find it convenient. In La Paz, rumor has it that such support has already been requested but that, for the moment, the Americans have shown no interest.

The man who was once one of Latin America’s most iconic presidents, wielding virtually unchallenged power from 2006 to 2019, can no longer move freely around the country today for fear of being jailed. He divides his time between politics and raising tambaqui, a fish popular in the region. Morales retreated to this safe haven—the region where his political career began in the 1990s — hoping to withstand a campaign to demonize him.

Morales was the most powerful president in Bolivia’s history, even more so than Víctor Paz Estenssoro, the leader of the 1952 National Revolution who nationalized the mines, pushed through agrarian reform, and established universal suffrage. Morales was also the longest-serving president in a country frequently wracked by political instability: 13 years, 9 months, and 19 days. And his star shone well beyond his home country.

Morales was one of the most popular leaders of Latin America’s pink tide. His trips abroad drew huge and enthusiastic crowds, captivated by his aura as an indigenous, socialist, and anti-imperialist icon. If Luiz Inácio Lula da Silva projected the image of a metalworker from Brazil’s impoverished Northeast who forced his way to the presidency, Morales was an Aymara (one of Bolivia’s major indigenous groups) from the deep Altiplano who migrated with his family to the Chapare jungle. Against all the odds, and wielding pronounced anti-American rhetoric, he built a political career that led to the pinnacle of power.1 How did he do it, and what is the nature of this leader’s legacy?

Andean capitalism

Morales’s “Democratic and Cultural Revolution,” launched in January 2006 with a ceremony at the pre-Columbian ruins of Tiwanaku, drove two historic processes that sought to reshape Bolivia: the nationalization of hydrocarbons and the convening of the Constituent Assembly. The “recovery of gas” was part of a long-held revolutionary nationalist tradition based on the idea, popularized by the Uruguayan writer Eduardo Galeano’s famous book on Latin America’s “open veins,” of a poor country sitting atop enormous riches plundered by large corporations. According to this view, placing natural resources under state control would finally make industrialization possible. In parallel, the Assembly set another goal: building a plurinational country that truly reflected the country. But the leap from nationalizations (in the 1930s, ’50s, ’70s, and 2000s) to industrialization encountered obstacles. The state traditionally lacks the capacity to carry through such processes, which often end in disappointments that feed new cycles of economic liberalism.

Faced with the difficulty of grasping Bolivia’s complex sociopolitical dynamics, analysts often reach for the idea of abigarramiento (“motley society”), introduced by the Marxist sociologist René Zavaleta in the 1970s. This concept sought to capture the existence of social formations in which multiple historical temporalities, modes of production, and cultural horizons overlap without ever fusing. It is not simply diversity, it is a conflictual, unresolved coexistence between different societies that never quite became one.

The neoliberals of the 1990s, above all President Gonzalo Sánchez de Lozada, tried to address these realities with the tools of multiculturalism, backed by the World Bank and other multilateral lenders. Under this framework, several reforms were introduced that expanded indigenous-peasant participation in municipal spaces. But when Sánchez de Lozada attempted to extend liberal democracy into the countryside, indigenous-peasant actors appropriated these mechanisms to reinforce their own power through their unions and community institutions — which were anything but liberal. The MAS, though it opposed those reforms, became one of their principal beneficiaries.

If the reformists of the ’90s sought to combine multiculturalism with neoliberalism, Morales and his government combined multiculturalism with revolutionary nationalism. But there was one crucial difference: This time indigenous people were no longer the supporting cast of an elite-led project but the protagonists. Morales was president, commander-in-chief of the armed forces, and a kind of spiritual leader of the nation. As the historian Françoise Martinez has shown, in the 1925 centennial album marking Bolivia’s independence — a richly illustrated 1,142-page publication — indigenous people were barely visible, dismissed as an obstacle to civilization. Later, with the 1952 Revolution, indigeneity became part of the nation, but often in folklorized form. Now, with Morales, the nation’s family photo placed indigenous people at its center.

Even so, the economic and social model implemented by the MAS was less radical than foreign observers tend to assume. Terms like suma qamaña (living well) and communitarian socialism gained traction in leftwing political analyses on Bolivia. In reality, the economic model was closer to what former vice president Álvaro García Linera called “Andean capitalism.” The concept lacked epic resonance and was largely set aside, but it captured the MAS project better than the communitarian-socialist rhetoric that surrounded it.

Although the MAS won the support of indigenous communities, it was above all the party of informal and semi-informal economies (peasants, merchants, mining cooperatives, among others), sectors with a strong entrepreneurial spirit and an ambiguous relationship to the state. They demanded its services while rejecting its interference, since these economies were built on strong family ties rather than state institutions.

The MAS’s most loyal base was the coca-leaf growers of the Chapare, in the subtropical lands of Cochabamba in central Bolivia. This is an important sector for Bolivia’s peasant movement, marked by little communal culture, stigmatized as “narco-traffickers” (because so much of the coca leaf is diverted into the production of cocaine), and hardened by the fight against US-backed coca eradication in the 1990s and early 2000s. Morales and his faction effectively reclaimed this “millenary leaf” as a symbol of national dignity and anti-imperialist struggle, rallying behind the slogan ¡Kawsachun Coca, Wañuchun Yanquis! (Long live coca, death to the Yankees!).

At the same time, the MAS, founded in 1999, managed to unite the whole of Bolivia’s traditionally fragmented left. It brought together indigenist, Marxist, and left-nationalist traditions, but its core was unions and social organizations, unified by their criticism of neoliberalism and “internal colonialism”: the colonialism of Bolivia’s own elites, who replaced the Spanish colonizers after independence in 1825. Like Bolivia itself, the MAS is also a “motley” party. The party expanded from the countryside into the cities in a process the political scientist Moira Zuazo called the “ruralization” of Bolivian politics. Peasants replaced miners, the traditional vanguard of Bolivia’s popular movement, following the crisis of state-run mining in the 1980s. But this ruralization unfolded in the context of rising social mobility and migration: Young people left to study in the cities and later returned to the countryside, and rural leaders enmeshed with urban politics. This gave rise to the emergence of what the anthropologist Alison Spedding termed “semi-peasants.”

The MAS emerged out of massive social mobilizations, such as the water and gas wars, which plunged the entire political system into crisis. But this occurred against a backdrop of deeper shifts: the decline of La Paz’s traditional elites, which had long wielded power, and the useless struggle of Santa Cruz’s elites — based in the country’s agroindustrial east — to convert their economic power into national political hegemony.

New indigenous elites

This decline has left the traditional elites of Andean western Bolivia — La Paz’s above all — increasingly dependent on the rents of their participation in political power. In parallel, an indigenous-mestizo bourgeoisie has emerged, controlling much of trade, mining, and even smuggling. These indigenous-mestizo nouveaux riches display their wealth publicly in various ways. The most traditional is through festivals, such as the Gran Poder, but in recent years they have built the so-called cholets — a blend of the words cholo (urban indigenous) and “chalet.” These are multistory buildings, brightly colored and lavishly ornamented, that typically combine shops or event halls with the owner’s residence on the top floor. These buildings can reproduce structures resembling the Titanic, the Eiffel Tower, or superheroes like Iron Man: a kitschy architecture designed to display wealth and power. Most of these buildings rise in El Alto, a city of about one million overlooking La Paz that at first glance appears poor and chaotic, but behind that impression lies enormous economic dynamism. Some indigenous intellectuals, such as Pablo Mamani, speak of qamiris to define these wealthy indigenous people. “There is the emergence of an Aymara elite that has the economic capacity and the imaginative capacity to create costly constructions, in a creative, neo-Andean form,” Mamani writes. “They are part of an emergence that deserves not only an urbanistic gaze, but an economic, sociological, and political one, in order to understand its dimensions.” These economic sectors are integrated into “globalization from below,” with growing commercial ties to Asia. There is also a large mestizo sector that controls the powerful mining cooperatives — including those devoted to gold mining, which is enjoying an unprecedented boom.

At the other end of the country, Santa Cruz’s white elites present themselves as Bolivia’s dynamic element. Resting on agricultural production, services to the hydrocarbons industry, and finance, they have operated since the 1950s as conservative, pro-market forces and are sometimes compared to the elites of neighboring Paraguay, which is traditionally conservative and virulently anticommunist.

The MAS’s Andean capitalism sought to acknowledge this reality and build an economy in which the state would control the rents from natural resources, above all gas, and use them to drive national development. In an article published in 2006, García Linera explained that, contrary to the views of various radical leftists, socialism was not possible in Bolivia. Accepting that reality, the goal then became “to once again place the state at the center of the Bolivian economy and, around it, integrate foreign investment, local private investment, and peasant, communal, and micro-entrepreneurial-artisanal sectors, aiming at a productive shock.” That shock never arrived, but the economy grew by about 5% annually during the MAS’s first decade, and Bolivia experienced a sustained economic boom driven by both rising commodity prices and a prudent macroeconomic policy.

The limits of left-wing populism

The MAS government was highly effective at shaping a new Bolivia, but it failed to build effective and enduring institutions. The 2009 Constitution was a great advance, but it was not backed by a solid state apparatus that could sustain the statist project. At the same time, the so-called “government of social movements” had two faces: social leaders were brought into it but only for their movements to be co-opted. Being the leader of a social movement became a stepping stone for entering the administration. The MAS came to be seen as a party of jobseekers. Despite its radical discourse, it neither wanted to nor was able to improve the state’s institutional framework, which remained at the mercy of the corporatist demands of its social base. That is why complex reforms, like those in health and education, never advanced. The long-awaited industrialization process was reduced to building factories — for paper, glass, milk — of dubious viability to satisfy the demands of small towns and communities.

But the greatest limit to the MAS’s proceso de cambio (process of change; the party’s term for its overarching political goal) undoubtedly was Morales’s own determination to remain in power indefinitely. From 2016, his obsession with reelection replaced any transformative agenda. That year, the government held a referendum: Should the constitution be amended to allow Morales to run for a fourth term? “No” defeated “Yes” by a narrow margin, but Morales disregarded the outcome. In addition, the ubiquity of Morales’s image and hyper-populist politics produced social fatigue and a disconnect with younger generations that had grown up under him, some of whom were even drawn to the libertarian Javier Milei in neighboring Argentina. What had once been new became old, as Latin America drifted rightward.

The first major rupture came in 2019, when Morales did seek a fourth term — and instead the election broke his hold on power. The vote count was suspended for nearly 24 hours; when it resumed, Morales’s lead had widened just enough to avoid a runoff. The opposition cried fraud. Weeks of protests followed, led by civic committees and opposition figures, until police units began mutinying in early November, which plunged the government’s authority into crisis. On November 10, with the military also withdrawing its backing, Morales resigned and went into exile. Jeanine Áñez, a little-known opposition senator, assumed the presidency days later; the MAS denounced a coup d’état. When she took power, she said that God and the Bible were returning to the presidential palace.

Emboldened, the Áñez government pushed for a vengeful conservative project that ultimately collided with reality. In 2020, the MAS showed it still retained its strength and, against all odds, returned to power with Luis Arce Catacora, a former economy minister, as president. The right-wing opposition retreated as the popular classes voted once again for their party.

But things were no longer the same. Tensions between Morales — now back from exile in Argentina — and the new president swiftly escalated. Arce’s government sought Morales’s imprisonment, and Morales, in turn, worked toward his former minister’s downfall. In fact, Morales’s current internal exile in the Chapare began under Arce’s government, which used state power to divide the MAS. But rather than opening up to build a broad alliance, the coca leader retreated ever further into the company of his most loyal followers.

The return of the right

The 2025 elections unfolded amid unforeseen circumstances. After Arce kept control of the MAS party label, Morales decided to found a new party, EVO Pueblo. He had been disqualified from running, and when he failed to have that overturned, he called on voters to spoil their ballots; in the first round, null votes reached nearly 20%. While this showed that Morales retained significant political influence, especially in rural or semi-rural areas, it no longer translated into institutional weight: The MAS was left with almost no parliamentary representation. Morales refused to back the MAS’s young senator Andrónico Rodríguez, who sought to lead a way beyond the internecine struggle between Morales and Arce. Despite having once been Morales’s political heir apparent, Andrónico came to be regarded by Morales as a traitor — as did, in Morales’s eyes, his vice president of nearly 14 years, García Linera.

In the second round of the 2025 elections, MAS voters no longer cast null ballots. In a contest between two right-wing candidates, they chose the lesser evil: the pragmatic Rodrigo Paz Pereira over the hardline former president Jorge “Tuto” Quiroga. Paz also benefited from the popularity of his running mate, Captain Edmand Lara Montaño, a former police officer who had been expelled from the force for exposing corruption and had become a TikTok influencer. Bolivia thus joined South America’s rightward shift, albeit incompletely. The MAS imploded, and the left-wing populist model had run its course. But unlike in some of Bolivia’s neighbors, it was not the far right that seized power. Even so, Paz’s government has positioned itself close to the United States (and to Israel) while trying to maintain ties with Lula da Silva in Brazil. Tellingly, Paz chose as one of his principal advisers the controversial Argentine Fernando Cerimedo, dubbed Latin America’s “MAGA man” by The Economist. Cerimedo, cofounder of the Argentine troll-newspaper La Derecha Diario, is an expert in dirty political warfare, or, in Steve Bannon’s terms, in “flooding the zone with shit.” But Cerimedo’s story in Bolivia ended badly: on August 18, Cerimedo was arrested at Bolivia’s Viru Viru airport, suspected of having sent hitmen to kill his ex-partner, the lawyer Nadia Beller. The case has sparked a political scandal of enormous proportions. Following the attack, Beller — who went from being a MAS supporter to a fierce anti-Morales figure — not only accused Cerimedo but also denounced a “corruption network” surrounding Paz that allegedly involves the president’s family.

The Paz government embodies a return to power of the traditional elites — not without significant doses of anti-indigenous racism — amid a spirit of revenge against the MAS. This vengeance was one of the forces behind the more than fifty days of roadblocks that shook the country in May and June of this year, triggered by a law letting small farmers’ land serve as loan collateral and fed by months of rising costs after the government had ended longstanding fuel subsidies the previous December. Even after Paz repealed the land law, the blockades continued, organized largely by the Bolivian Workers’ Central and peasant organizations such as the Túpac Katari Federation. It is a weak government, challenged by both the left and the radical right.

Scattered

The Bolivian left finds itself in crisis. Following the end of the Cold War and the neoliberal hegemony that took hold in Bolivia, it rebuilt itself from the countryside. Morales’s leadership unified an array of political groups and cultures; today the left has returned to its traditional scattering. The implosion of MAS has given rise to splintering factions that blame one another for the disaster. The question now is how a reconstruction of the unified left could possibly take place. What everyone agrees on is that the MAS era, as we knew it, has come to an end — and that Morales has permanently lost his aura as an exceptional leader.

This has happened, in part, because of the difficulty of the “process of change” to adapt to the new circumstances of the past two decades, especially social mobility. Today there are more students of indigenous origin at private universities, some coming from the countryside, while grassroots entrepreneurship has blossomed alongside economic growth. But today’s young people are more connected and globalized in their habits of consumption (including the specialty coffee shops that have taken over Bolivian cities) and their ideas (libertarianism is popular among some students). The discourses that mobilized enormous popular energy two decades ago now seem outdated. And Morales has done nothing to catch up. On the contrary, he has retreated into ideological positions that make it possible for him to praise “brother” Vladimir Putin as a “liberator of peoples” and to support Maduro. The question everyone asks today is whether the government will move forward with his arrest and what consequences that would carry if it does.

Even so, a new generation of young leftwing and pro-Indigenous social leaders and intellectuals is emerging, positioning themselves critically against both the MAS’s past government and the new rightwing administration. What remains of the MAS, and Morales himself — who retains influence in rural Bolivia — will have to reckon with this situation if they hope to survive and regroup. But the Bolivian left probably won’t be able to rebuild itself from either anti-Evista positions or an outright rejection of the “process of change.” The Bolivian left is searching for new leaders and political projects capable of regrouping the population left orphaned by the MAS’s implosion.

Pablo Stefanoni is editor-in-chief of Nueva Sociedad. He is the author of ¿La rebeldía se volvió de derechas? Cómo el antiprogresismo y la anticorrección política están construyendo un nuevo sentido común (y por qué la izquierda está perdiendo la iniciativa) (Siglo XXI, 2020) and Un fantasma recorre el mundo. Cómo funciona la máquina de guerra reaccionaria (y qué podemos hacer para enfrentarla) (Siglo XXI, 2026).

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    There is a story within the story here: The US ambassador who most fiercely opposed Morales in the early 2000s, Victor Manuel Rocha, turned out to be a Cuban agent — and his invectives against Morales may only have helped improve Morales’s standing in the polls.

Friday, August 28, 2026

 

Can Pax Silica De-Sinicize U.S. Supply Chains? – Analysis

Diplomats pose for a photograph after signing the Pax Silica declaration on December 12, 2025. (US State Department)

Key Takeaways:

  • Pax Silica is a U.S.-led coalition of about 24 countries aimed at building China-independent supply chains for critical minerals, semiconductors, and AI, with an early industrial hub planned in the Philippines.
  • Its success hinges on long-term endurance and concrete delivery; past U.S. initiatives (Blue Dot, B3W/PGII, IPEF) largely stalled at standards and pledges, while China has locked in partners through sustained industrial policy, refining capacity, and tangible BRI projects.
  • To compete, Washington must offer developing partners real value-added processing, technology transfer, and better regulation rather than mainly raw-material extraction or security-for-minerals deals, or risk losing credibility and ground in the tech race.

The U.S.-led Pax Silica initiative seeks to reduce dependence on China across critical-mineral, semiconductor, and AI supply chains, but its success will depend on sustained commitment, concrete project delivery, and meaningful benefits for developing-country partners.

In the high-stakes race for AI and computing power, China is moving up from the foundation to the front, catching up with the West. The United States is doing the reverse, rebuilding its material and production base to reinforce its lead. Washington is working backward to develop a complete supply chain independent of Beijing. Last December, the U.S. launched Pax Silica, a coalition of 24 countries aimed at creating a future AI ecosystem from energy and raw materials to advanced manufacturing. Its pioneering project, an industrial hub, is set to open in the Philippines. Endurance, continuity, and the question of whether geopolitics can trump economics will shape the prospects of this U.S.-led endeavor. 

From mining and refining critical minerals to accelerating domestic semiconductor production, China is becoming an emerging rule-maker in the evolving technology order. Since 2018, it has been hosting annual international AI conferences. To meet the challenge, Washington rolled out the Clean Network program in 2020 to prevent Chinese suppliers from dominating global information and communication solutions. However, outside U.S. allies, calls to ban Huawei and other Chinese vendors largely went unheeded, especially in the Global South. Affordability, performance, compatibility, lack of competitive alternatives, and the opportunity cost of being left out prevailed over US pressure. In 2023, Beijing proposed the Global AI Governance Initiative. Last July 16, 29 countries agreed to establish the World AI Cooperation Organization, which will be headquartered in Shanghai. With China’s entrenched capacity and growing confidence in both the hard and soft dimensions of the global digital infrastructure, the stakes are high for Pax Silica. Failure to compete may mean further erosion of U.S. technological lead. Two key challenges stand out. 

Playing the long game 

First is endurance. China’s rise as the world’s largest mineral refiner and production hub is neither inevitable nor providential. Rather, it is the result of a consistent industrial policy to develop national capacity, assured of a huge domestic demand, driven by ambitious targets and sustained by a willingness to bear great costs. It took about three to four decades for the country to become the world’s top ore processor and global factory. And it paid a steep price to attain this position, enduring tremendous environmental, health, and social harm, which were redressed in later years as the country’s economic strategy produced developmental dividends. 

China produces 76.35% of the world’s refined cobalt and 44.44% of refined copper. It also accounts for 79.38% of global graphite output, 69.23% of rare earths, 42.31% of molybdenum, 20.67% of bauxite (from which aluminum is derived), 17.8% of lithium, and 13.1% of silver. The U.S. has high import reliance on China for a range of critical minerals with civilian and military applications. These include yttrium (93%), bismuth (60%), rare earths (56%), antimony (54%), arsenic (52%), graphite (43%), magnesium (32%), tantalum (22%), gallium (19%), and tungsten (14%). These minerals are used in the manufacture of microchips, mobile phones, computers, consumer electronics, wind turbines, solar panels, electric batteries, transmission cables, precision-guided munitions, jet engines, and missile propulsion systems, among others. 

Pax Silica brings together affluent, technologically advanced countries and resource-rich developing nations. The U.S. is leveraging its alliances and partnerships to disperse production of critical minerals and industrial inputs and reduce the time needed to develop an integrated supply chain untangled from China. Cost and gain will be unevenly distributed, valuations may differ, and negotiation skills among members may vary. But lopsided deals in which some parties bear disproportionate harm, with few safeguards and little benefit, should be avoided. Metrics should go beyond commercial viability to include improved mining regulation, technology transfer, and more value-added processing or manufacturing in developing member countries. This will increase the initiative’s appeal and help future-proof long-term deals from potentially disruptive domestic politics. 

China offered market, investment, and infrastructure to lock in long-term supply agreements. The Belt and Road Initiative (BRI) built roads, railways, ports, and industrial parks. On the ideational level, Beijing is positioning itself as a leader of the Global South, pursuing South-South cooperation with resource-rich developing countries in Asia, Africa, and Latin America. In 2021, the country launched the Global Development Initiative. The so-called resource curse has long plagued several poor but mineral-rich countries wracked by persistent conflict, corruption, and weak governance. The absence of such countries in Pax Silica is likely deliberate. The project does not want to get sucked into risky conflict areas early on or create missionary expectations. But there are cases that show how access to capital and technology can transform commodity exporters. For instance, Chinese investment upgraded Indonesia’s nickel-refining capacity, vindicating Jakarta’s resource nationalism and inspiring other countries to leverage their natural resources to elevate their position in the value chain. 

Washington should recognize this development. More developing states are exercising their agency to chart policies that maximize the value of their finite natural bounty, create better opportunities for their people, and reduce adverse impact on the environment. The U.S. should go beyond transactional minerals-for-security deals like those floated for Ukraine and DR Congo. Concerns that reshoring may mean Global South members will simply perform their usual role of supplying raw ores for processing abroad need to be allayed. America has to offer enticing incentives beyond alarming partners about the perils posed by a rival’s near-monopoly on rare earths and overcapacity. 

Less optics, more execution 

The second hurdle is continuity. Pax Silica is not the first major U.S. initiative intended to counter China’s burgeoning economic clout. The Blue Dot Network, rolled out in 2019, aimed to certify projects to access a diverse pool of funds, thereby providing an alternative to China’s largely state-backed BRI finance. It morphed into the Build Back Better World (B3W) in 2021 and rebranded as the Partnership for Global Infrastructure and Investment (PGII) the year after. But beyond adopting standards and principles, these pitches did not lead to a pipeline of projects. In 2020, the U.S. also proposed the Economic Prosperity Network to restructure supply chains disrupted by the COVID-19 pandemic. The Indo-Pacific Economic Framework (IPEF), launched in 2022, was seen as America’s counteroffer to free trade agreements (FTAs), which have become unpopular at home, but which regional partners hope to see as the economic largesse that complements deepening alliance ties. None of these proposals made much headway. 

In contrast, China’s BRI, criticisms and all, has delivered concrete projects. These include highways, a mass transit system, coal power plants, and fiber optic cable under the massive China-Pakistan Economic Corridor (CPEC). In Southeast Asia, notable completed projects include the Laos-China railway and Jakarta-Bandung high-speed rail (HSR). Malaysia’s East Coast Rail Link, set to open next year, and the ongoing Thailand-China HSR construction are also part of BRI’s broad portfolio. In an apparent role reversal, while Washington retreats from globalization, Beijing doubles down on promoting free trade, ratifying its membership in the Regional Comprehensive Economic Partnership (RCEP) in 2021 and upgrading its trade accord with ASEAN last year. In 2021, Beijing also applied to join the Digital Economy Partnership Agreement (DEPA) and a free trade pact that the US used to champion, the Trans-Pacific Partnership (TPP), which was rechristened as the Comprehensive and Progressive TPP (CPTPP) in 2018. The U.S. also ceded leadership in green energy and mobility to China by rolling back incentives for renewables and electric vehicles in favor of fossil fuels. Hence, Pax Silica needs to do better. Restoring the credibility of U.S. economic pitches is on the line. 

Even in the Philippines, site of the proposed debut Pax Silica project, U.S. pledges fell short. The $300 million acquisition by American private equity firm Cerberus of the former Hanjin shipyard in Subic, which filed for bankruptcy in 2019, was billed as the biggest public-private partnership in the 75-year history of Philippines-U.S. relations. But while the investment may have forestalled a possible Chinese takeover of the insolvent enterprise, the deal failed to revive the shipyard’s fortunes until another Korean company with a solid shipbuilding track record, HD Hyundai, entered the equation in 2024. In 2022, when Vice President Kamala Harris visited Manila, the US proposed a menu of initiatives, such as developing a nickel and cobalt processing facility and a geothermal power plant in Mindanao. Not much has been heard about these promises since then. 

Pax Silica can be transformative. Washington’s desire to break Beijing’s stranglehold on critical minerals can dovetail with partners’ desire to diversify markets and investors and grow their own industries. It makes sense for the Philippines, eager to catch up with fellow ASEAN peers, to offer attractive concessions to secure a potentially groundbreaking deal. Negotiation delays, whether efficiency-seeking firms will follow their governments, and leadership changes are variables that cannot be ignored. For instance, elections in Pax Silica members and non-signatory participants, such as the U.S., Philippines, and Taiwan, in 2028 may affect investors’ calculus. For sure, the initiative has stirred interest. Building urgency may be the next step. But the most important work is to ensure that proponents stay committed. Absent continuity and endurance, Pax Silica may worryingly join a growing number of U.S. initiatives that did not measure up.

About Lucio Blanco Pitlo III

Lucio Blanco Pitlo III is a Research Fellow at the Asia-Pacific Pathways to Progress Foundation. He was a lecturer at the Chinese Studies Program at the Ateneo de Manila University and the International Studies Department at the De La Salle University and contributing editor (Reviews) for the journal Asian Politics & Policy. He is also a member of the Board of Directors of the Philippine Association for Chinese Studies. He obtained his Master of Laws from Peking University and a MA International Affairs at American University in Washington D.C.

View all posts by Lucio Blanco Pitlo III →

 

The Statist Peril Of Techno-Asset Inflation – OpEd

Dollar Inflation Balloon Ben Franklin Bill Money


By Brendan Brown


Key Takeaways:

  • The author defines “techno-asset inflation” as the interaction of monetary inflation and technological revolution that suppresses goods-price rises while driving intense asset-price inflation.
  • Historical parallels from the sixteenth-century Northern Renaissance (precious-metal inflows plus printing press and globalization) to today’s digital/AI era show how positive supply shocks camouflage monetary excess, benefiting governments, monopolists and crony interests while fostering malinvestment.
  • Current conditions under the 2% inflation standard and multi-decade tech boom are viewed as a high-risk episode of techno-asset inflation, with little indication that central banks are prepared to confront asset-price dangers rather than focus narrowly on consumer-price targets.

There is nothing new about the perils for peace and liberty which stem from the combination of monetary inflation and technological revolution. Indeed, we can find a prime illustration at the dawn of the modern age during the Northern Renaissance in Europe.

But first, towards better describing the peril, I urgently propose a new entry into the economics dictionary: techno-asset inflation. The definition is this: techno-asset inflation is found where monetary inflation and technological revolution interact to produce virulent asset inflation.

The positive supply shock emanating from the technological revolution bears down on goods and services prices. This expands the scope for monetary inflation by impeding an intensification of its symptoms in goods and services markets. Serious symptoms can trigger serious popular resentment. Under these circumstances it is in asset markets rather than goods markets that symptoms of monetary inflation are likely to become most severe. (Note that many asset inflations occur outside technological revolutions; some of these are twinned with positive supply shocks in the form of previous shortage whether due to for example famine, war, or cartel action, going into reverse).

Asset inflation in some of its phases can be popular. That is the case, for example, when there are widespread wealth gains which outweigh—in electoral arithmetic—the diminished or negative returns on government bonds and money. Simultaneously asset inflation might well be beneficial for some key actors, including—with some overlap— big government, election campaigners, crony capitalists and monopolists. These benefits, though, are problematic for a free society. And the malinvestment which is intrinsic to asset inflation eventually takes its toll on prosperity and can stimulate political extremism.

The asset inflation threat is now at a high level—comparable to dangerous episodes in history all the way back to the Northern European Renaissance in the sixteenth and early seventeenth centuries. Yet there is no apparent awareness of the peril in the news about the Fed’s evolving policy framework under its new Chair. Instead, the focus of official communication to date has been the promise of a zero-tolerance policy towards “persistently elevated” inflation.

The best that sound money advocates can now reasonably hope for—not expect—from the task forces at the Fed would be clues that this institution could make a start on tackling its in-built historic deflation phobia. Meanwhile, the laboratory of history does not justify optimism with respect to the menace of techno-asset inflation The history goes all the way back to the Great Monetary Inflation which accompanied the Northern Renaissance in Europe of the sixteenth century and extending into the early seventeenth century, when asset inflation in Holland emerged as the star symptom. 

The technological revolution then had at its core the printing press, great strides in scientific knowledge including astronomy, cartography, and actual exploration especially of the Americas. The monetary inflation with its source in precious metal inflows from Latin America went along with goods inflation averaging 2 per cent annually (in terms of gold prices of goods). The underlying monetary inflation (spawning goods and asset markets) was fiercer overall than the 2 per cent statistic (itself a highly imprecise estimate) might suggest, given the camouflage in goods markets. The camouflage resulted from the positive supply shock related to globalization (new lands discovered and brought into the global economy) and productivity gains (increased knowledge and transmission of information via the printing press).

Monarchs and their governments gained fund-raising advantage from the technology revolution coinciding with the precious metal inflows. There were three channels:

First, the underlying real increase in demand for gold and silver coins as explained by the rise in living standards; this was alongside individuals’ demand for gold and silver to make good the erosion of real monetary holdings by the inflation. This revenue was most important for governments which could get the gold/silver at well below the cost of mining (for example the Spanish sovereigns from their new lands in South America or the English sovereigns—especially Elizabeth I—from seized Spanish bullion boats). 

Second, the scope for a quick rise in inflation-tax revenue from coin debasement, which would have given rise to more public discontent if price inflation (as measured in gold terms) had not been contained by the positive supply shock of technological revolution. This revenue was short-lived and indeed in England Queens Mary and Elizabeth on the advice of Thomas Gresham turned against debasement as practiced by Henry.

Third, the novel and swelling appetite for risky loans—as North European wealth-owners sought to get a high nominal return on loans to compensate for inflation whilst underestimating the risk of default (in modern terms we would describe this as desperation for yield). There was no such thing then as risk-free government debt; all sovereign debt was inherently high-risk. The European center for this loan market was Antwerp (whose population was then larger than London).

Tudor monarchs, Holy roman emperors, and Spanish kings raised funds in the rapidly growing Antwerp loan market. Henry VIII used as his Antwerp agent the merchant Thomas Gresham (of “Gresham’s Law” fame) and his Chancellor Thomas Cromwell had great business connections there. Of note, the Low Countries were the epicenter of economic growth in Europe at this time with corresponding wealth gains; and these countries were variously under the control of Spanish Monarch or the Holy Roman Emperor. All the easier to raise funds to wage war, which was happening now in the context of the Reformation, which Spanish Kings and Holy Roman Emperors sought to turn back.

Asset inflation also had the usual dimension of land prices and land speculation. In England, no doubt this facilitated and incentivized the grab of land from the monasteries by Henry VIII who sold it to a burgeoning merchant class. A terrifying example of the sovereign and religious authorities gaining from asset inflation, in the form of raising capital taxation including confiscation was the Inquisition, most of all in Spain, which financed itself by seizing the property of its victims.

Fast forward to the two great techno-asset inflations of the digital revolution alongside the monetary inflation of the 2 per cent inflation standard, both now in their fourth decade. The first ran from say the mid-1990s to the mid-2000s; the second from early in the second decade (say 2012) and is still on going. The increased supply of goods and services made possible by the ongoing revolution has evolved over time. First early in the revolution there was the general productivity surge in the US and most other countries. Then came the gains from globalization made possible by IT (and also driven by the crony politics of China’s accession to the WTO) alongside rapid productivity growth in the countries acquiring comparative advantage (think of Asia and microchip production).

As for all techno-asset inflations, this has been a good time for big governments raising funds. In modern idiom, persistent camouflage of monetary inflation in goods and service markets has encouraged the Federal Reserve and foreign central banks to pursue manipulated low interest rates. These central banks (and those to whom they answer politically) have been counting on (incorrectly since 2021 for multiple reasons) the camouflage continuing even despite some skepticism in some quarters about this AI phase. They have imagined that their own monetary skills under these circumstances could prevent consumer prices breeching their targets in a way which would trigger popular resentment. Credit risk premiums have been abnormally low for most of the time. Hence there has been a bulge in government indebtedness.

Monopoly capitalism has flourished. And so has crony capitalism. Cronies are heterogeneous, including criminal elements related to businesses which are in effect quasi-Ponzi-schemes in the epicenter of manic speculation. Think of the role of Enron as top election financier of George W. Bush in 2000 or FTX cryptocurrency exchange as second largest contributor to the Joe Biden campaign of 2020. 

And there have been the capital levies and confiscations facilitated by asset inflation. These include crucially a non-indexed capital gains tax and a downward manipulated level of interest rates subject to income taxation which makes no allowance for inflation. Governments have sought to increase the effectiveness of such levies against obvious payer-resistance by attacking traditional rights to bank secrecy and implementing international exchange of information on capital holdings and interest incomes. 

The great asset inflations of Europe in the sixteenth century ultimately led on to the most fantastic one of all in Holland, including the tulip bulbs and the stock in the Dutch East India Company. It took the invasion of Holland in 1672 by the armies of Louis XIV to bring a general crash across all asset classes. Possible ends to the present asset inflation are wide-ranging. The scenario of Chair Warsh and his working parties pre-empting political forces in tackling the threat of asset inflation are implausible.


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The Mises Institute, founded in 1982, teaches the scholarship of Austrian economics, freedom, and peace. The liberal intellectual tradition of Ludwig von Mises (1881-1973) and Murray N. Rothbard (1926-1995) guides us. Accordingly, the Mises Institute seeks a profound and radical shift in the intellectual climate: away from statism and toward a private property order. The Mises Institute encourages critical historical research, and stands against political correctness.

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