Special Briefing: Will the US Be Blamed for the Next Global Recession?

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This is an OZY Special Briefing, an extension of the Presidential Daily Brief. The Special Briefing tells you what you need to know about an important issue, individual or story that is making news. Each one serves up an interesting selection of facts, opinions, images and videos in order to catch you up and vault you ahead.

WHAT TO KNOW

What happened? As world leaders congregate in Buenos Aires, Argentina, for their two-day G-20 summit, they have plenty to discuss. They’ll focus on Ukraine’s ongoing conflict with Russia, the U.K.’s impending split from the EU, and international outcry over the murder of dissident Saudi journalist Jamal Khashoggi. But let’s not forget the global economy: The summit’s taking place at a time when the U.S. economy appears to be chugging along smoothly, while many others, from Europe to China, aren’t doing quite as well. The full-blown trade war between Beijing and Washington is of utmost concern. 

Why does it matter? In the era of globalization, the consensus (even among rivals) has always been that ripple effects from economic turmoil in one major economy would eventually reach others. In other words, everyone was invested in everyone else’s success. While that’s still the case, it raises a new question: Will the American retreat from multilateralism under the Trump administration’s “America First” approach — here’s looking at you, punitive trade policies — spark global economic chaos just for the sake of keeping the U.S. economy humming? 

HOW TO THINK ABOUT IT

Everyone’s feeling it. Globally, it’s not a great time. With the U.K. leaving the European Union, few observers — including the British government, which predicts an economic contraction of at least 3.9 percent after Brexit — expect cheerful economic times. Meanwhile, Germany posted its first loss in three years, about 0.2 percent of GDP in mid-2018, while the eurozone’s growth rate of around 0.2 percent was the slowest since 2014. Japan’s economy shed 0.3 percent, and Chinese growth is at a decade-low. Meanwhile, experts have warned the robust growth of 2017 may not return. “Risks are beginning to materialize,” IMF chief Christine Lagarde recently said.

But the US is doing fine. Right? The dollar is strong, the economy’s growing at a 3.5-percent annual pace, and unemployment is under 4 percent. Meanwhile, the stock market recently rallied at indications from the Federal Reserve that an imminent rate hike is unlikely. Still, some forecasters are worried because economic recoveries never last forever — and there are signs the U.S. is already slowing down. Home and auto sales have peaked, analysts believe, and all it might take to throw the country into another recession is a combination of higher interest rates, rising inflation and sputtering corporate confidence. But if not, the current period of American economic growth could soon rival any since at least the Civil War.

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New York Stock Exchange

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Searching for stability. The current iteration of the G-20 took shape a decade ago amid global economic catastrophe. Back then, the West realized that a full recovery — read: the world economy’s future — hinged on fast-growing developing economies. But now the world’s more tuned in to what President Donald Trump will do (or say). Given his economic threats against Beijing, world leaders are undoubtedly hoping Trump and his Chinese counterpart, Xi Jinping, can holster their guns. Why? Because they know that whatever happens between these two powerhouses will have ripple effects that impact their countries too.

So who’s hurting who? Some analysts estimate the current $200 billion in tariffs on Chinese products could damage Beijing’s economy “very badly.” But U.S. firms in sectors as diverse as agriculture and automaking say they’re already taking hits too, citing increasing costs and other negative factors on their business. More broadly, if Trump and Xi fail to make headway at this year’s G-20, their ongoing trade war could disrupt global supply chains even further — spelling trouble for other major economies. “It got bigger than anyone thought it was going to get,” said one expert. Still, one potential bright spot emerged on Friday as the leaders of the U.S., Mexico and Canada inked a new trade pact replacing the North American Free Trade Agreement.

WHAT TO READ

Are We at “Peak America”? by Fareed Zakaria in the Washington Post

“While the United States continues to outperform other advanced economies, the ‘rise of the rest’ also continues, with China, the world’s second-largest economy, growing at three times the pace of the United States.”

Trump’s China Policy Is a Triumph, by Greg Autry in Foreign Policy

“The hard-line U.S. policy has been effective and should be maintained until China demonstrates real, substantial behavioral change such as no longer requiring forced joint partnerships and ceasing its vast state-run cyberespionage program.”

WHAT TO WATCH

Trade Face-Off: What Trump and Xi Want From Their G-20 Talks

“Don’t expect a trade agreement with all sorts of clauses and particulars. The very best, the most you’re going to get out of this is an agreement to talk further.”

Watch on the Wall Street Journal on YouTube:

Protests Continue in Argentina on Eve of G-20 Summit

Watch on Global News on YouTube:

WHAT TO SAY AT THE WATERCOOLER

Do tariffs ever work? When President Barack Obama imposed 35 percent tariffs on tires imported from China, economists estimated the U.S. tire industry saved a maximum of 1,200 jobs — though it came at a price of around $900,000 per job. And 21 months after enforcing tariffs of up to 30 percent on steel from Europe, Asia and South America in 2002, President George W. Bush withdrew them — but only after they cost some 200,000 American jobs.

Meet El Peje, the ‘Why Should We?’ President of Mexico

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New Mexican President Andrés Manuel López Obrador, AMLO to friends and detractors alike, sits at a curious place in an even more curious time on both sides of the border. Replacing the widely and wildly reviled Enrique Peña Nieto with his inauguration Saturday, AMLO — also affectionately called La Piedra (The Rock), El Comandante (The Commander) or El Peje, after a fish — is delivering a kind of realpolitik that recalls no one if not his north-of-the-border neighbor, Donald Trump. Not in tone and timbre but in substance as his gut-level convictions spring from a willingness to ask: Why should we?

Obrador, in catering to a hard-core base from both ends of a very different political spectrum under the rubric of the National Regeneration Movement (MORENA), and composed of members of Mao-influenced and social-conservative parties, is laying out a program like a man with nothing to lose. Closing a year of economic volatility driven by political uncertainties, Mexico’s fortunes as the 15th largest economy in the world are facing some fairly significant stressors.

Few of the stressors have to do with caravans of Honduran migrants. Many have to do with systemic corruption, crime, 43 percent of the population living in poverty and the ever-shifting relationship with its well-muscled neighbor to the north.

We will see if AMLO will live up to expectations or if he will become the classic imperial president.

Gabriel Osorio Vargas, attorney

“AMLO is the culmination of a need for the political openness that Mexican politics and society has been claiming since the October ’68 protests when students were massacred,” says attorney, South American scholar and socialist Gabriel Osorio Vargas. “But Mexico also remains deeply contaminated by corruption, from the central executive to the municipal presidencies.”

So in the spirit of countering those forces that have bedeviled past Mexican presidents, and with the wind at his back and parliamentary majorities in his pocket to start his six-year term, Obrador, 65, is pushing reforms both structural and singular. By lowering the constitutional bar for when referenda can be called and spreading his own delegates among the states to report to him on all federal programs, Obrador is stepping, none too gingerly, around governors — with real and practical outcomes. Most recently, that meant shutting down Mexico City’s partially built $13 billion international airport, the standard municipal cash sop.

 

Supported by 70 percent of the 1 million Mexicans who voted to cancel the two-year-old project, the move not only breaks the massive undertaking into more manageable improvements to existing airports, but it also starts to tighten the spigot on corruption fuel, also known as cash. It’s a turn that concerned markets — there was an immediate sell-off of the peso — but doesn’t concern Obrador at all.

“Corruption is what had done the most damage,” Obrador said in a campaign stump speech in Veracruz. 

Osorio Vargas seconds the sentiment. “Seventy years of PRI and PAN governments, which dominated the political space between the 1930s and 2018, didn’t just usher in AMLO,” says Osorio Vargas. “It ushered in a public willingness to have MORENA make the changes the people are demanding.”

Obrador is the vehicle for change, but he’s hardly a fresh face. The Tabasco native is a decades-long veteran of progressive politics who served as mayor of Mexico City from 2000 to 2005 and twice lost presidential races before breaking through with his romp in June — claiming 53 percent of the vote in a five-candidate race, more than 30 percentage points better than the next closest candidate. 

While people might be demanding them, his changes are confusing economists and a few critics. “He mocks critics as being part of this rich class,” says Miguel Ferrigno, who just finished his term as a member of the city council of San Pedro Garza García, part of the Monterrey metropolitan area and the municipality with the highest GDP in Mexico. “But giving monthly subsidies to all high school students, some college undergrads, young adults that neither work or study and doubling the pensions for all citizens that are 65+ years of age? How’s he going to do that?”

This populism, popular with the aforementioned “people,” even as muddled as they may be about the “hows” of paying for it all, signals that Obrador is much less market-friendly than his predecessors. Manufacturing and construction economic indicators are improving post-election, but stocks have been skittish and Fitch Ratings has revised its credit rating outlook for Mexico to negative, Honduran migrants are being tear-gassed at the border and homicides jumped 27 percent last year to 31,174 — making it Mexico’s most murderous year on record.

“We will see if AMLO will live up to expectations,” Osorio Vargas said. “Or if he will become the classic imperial president of the PRI Mexican political system.”

As Obrador’s website rocks a picture of him gripping and grinning next to Trump son-in-law Jared Kushner, Secretary of State Mike Pompeo, Department of Homeland Security Secretary Kirstjen Nielsen and Secretary of the Treasury Steven Mnuchin, the new president clearly comes to deal, with migration and a massive trade deal critical in the weeks and months ahead. In a book he published pre-presidency — Oye, Trump, or Listen, Trump — culled from past speeches and written in the form of an open letter, AMLO ends with “I send you a warm hug.”

Time, though, will tell if honey is more useful than vinegar and if an increasingly beleaguered Trump will return the embrace.

Read more: Why Mexico’s ‘first lady of the disappeared’ is ready to forgive.

At the G-20, It’s China, Not the US, That Argentina Loves Most

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As world leaders gather for the G-20 summit today in Buenos Aires to discuss infrastructure and sustainable food policy, all eyes are squarely on President Donald Trump and President Xi Jinping, who will likely meet to discuss the escalating trade war between the U.S. and China. Argentina shouldn’t be a level playing field: While China has been making investment inroads here, South America’s second-largest economy depends on the U.S., its second-largest trading partner after Brazil.

But since Trump’s inauguration, the U.S. commander in chief hasn’t paid a single visit to Latin America. Meanwhile, China has held out its hand to the region — and will continue to do so, with Xi expected to announce a multibillion-dollar increase in Beijing’s credit line for Argentina’s cash-starved government during the summit. Which may be why … 

72 percent of Argentines have a positive view of China, while only 60 percent feel the same way about the U.S.

A national survey of 1,009 people conducted this month by the Woodrow Wilson International Center for Scholars and Poliarquía Consultores, Argentina’s leading polling firm, found that despite China’s authoritarian regime and its poor human rights record, Argentines see China as an ally and approve of Xi more than they approve of Trump. 

A majority of Argentines — 59 percent — have a negative opinion of Trump, compared with the 17 percent who are turned off by Xi. “President Trump is disliked throughout Latin America,” explains Benjamin Gedan, senior adviser to the Wilson Center’s Latin American program and director of its Argentina Project. “His views on a range of issues, from trade to migration to climate change, are deeply out of step with public opinion in the region.” 

 

In the survey, those who supported the U.S. tended to be supporters of Argentine President Mauricio Macri, who is known for his business-focused government and love of soccer. But Trump’s lack of policy on Latin America has opened a window for China to gain influence — and Buenos Aires is a prize, says Gedan, who describes Argentina as a “major battleground” in the fight for influence over Latin America.

Before leftist President Cristina Fernández de Kirchner took office in 2007, China and Argentina had never had close ties. But when Fernández came to power, she reached out to Communist Party–led China. Macri has promised to distance himself from Beijing, citing lack of transparency in agreements signed between the two countries. But with the country in economic crisis, even he can’t ignore Xi and his offers of assistance. Gedan says Argentines still don’t have a lot of familiarity with China, and that unfamiliarity can be an advantage. “Whereas U.S.-Argentine relations have a complicated past,” he says, “China is largely seen as an important trade and investment partner for Argentina … with no historical baggage.” 

“Amid a severe economic crisis, it is reasonable for people to focus on the material benefits that the summit may bring to the country,” says Alejandro Catterberg, a prominent Argentine political analyst and president of Poliarquía Consultores. Forty-seven percent of Argentines surveyed said the summit should focus on boosting foreign investment. And while the U.S. has been attempting to persuade Latin American governments to distance themselves from China, it’s clear that the tide of popularity may be turning decisively east. 

Southie Tears on the Day Whitey Bulger Died

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In this occasional series, OZY takes to streets and neighborhoods across the globe to ask a simple question: “How was your day?”

Anna Weeks
Boston

On Oct. 30, 2018, the day 89-year-old mob boss James “Whitey” Bulger died, there were tears. The tears were shed by women in Boston for this killer of at least two women. While the families of his victims were rejoicing over Bulger’s murder, along with plenty of other people sickened by his crimes, Anna Weeks, wife of Bulger lieutenant Kevin Weeks, felt differently about the demise of Southie’s most infamous resident.

It’s important to remember that during the uproar over busing in the ’70s, the Bulger family had a powerful impact on both sides of the community. William Bulger, Whitey’s younger brother, was a fierce opponent of busing and had become a state senator at the same time that Whitey was head of the criminal underworld.

While most Americans believed in the president of the United States, many in Southie believed in Mr. James Whitey Bulger, or Mr. Jimmy, to some. They believed he kept the real bad people out of Southie, along with the bad drugs. Things got so much worse when he went on the run; that’s when all those teenage suicides took place.

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James “Whitey” Bulger, aka Mr. Jimmy to friends in Southie.

Source Getty Images

Everyone knew Whitey and the boys. Most feared them, some relied on them and some worked for them — but, like it or not, they were all better off with them around. The women’s deaths were tragic, and there is no denying that. I just don’t think Whitey sought out women to kill or wanted that to happen. But he had to make sure things went smoothly.

I have to get my point across, though, no matter how much many will disagree with me … in some ways, the town was better with Whitey.

His associates knew the rules: Women were to be left in the dark about business, and you didn’t have sexual relations with family members. It was one of his associates, Stevie Flemmi, who made poor choices and did not abide by that rule. Stevie’s actions left Whitey no choice. There is no way I can excuse what Whitey did, but perhaps he couldn’t leave it up to Stevie to kill those two poor women without his supervision. I simply do not know.

 

Whitey had no problems with younger women if they cheated on him, or if he felt they were going to hinder his reputation. He simply told them to scram. Moreover, the young women Whitey dated were street smart, and in some ways he saved them. He paid for many of them to attend private schools during busing and afterward. Yes, of course, I understand it was wrong for him to have affairs with them. They were young but not innocent.

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Anna Weeks on her wedding day.

Source Courtesy of Anna Weeks

Whitey was always waiting for my friend Patty from St. Brigid’s and Cardinal Cushing High School to come out after class. The minute she walked out the door, she would hike up her skirt and undo a few buttons on her shirt and hop into the expensive car Jimmy had parked outside the school. They’d usually go shopping and she’d come into class the next day with a really gorgeous, expensive pair of shoes.

I was so jealous. I don’t know if they had sex or anything, but I do know he paid tuition for a couple of other students and helped their families pay their rent. 

I have to get my point across, though, no matter how much many will disagree with me, that I will always believe that in some ways, the town was better off with Whitey and his associates. Once he was gone, the condos pushed families out of their homes, drugs like heroin soared and family businesses couldn’t afford to pay rent anymore.

When Kevin and his first wife went out with Whitey and his girlfriend of 30 years, Teresa Stanley, they always went to expensive restaurants and ordered lobster and the finest wines available. Whitey loved to sing around the piano bar and just relax and have a good time out with his favorite girl. He would be a perfect gentleman to anyone he met in the restaurant, often sending over expensive bottles of wine to people he had chatted with.

It’s just hard to put that image together with the one where he killed two young girls. So I just don’t do it.

Is This Blue Apron Investor Aiming for the White House on a Poverty Platform?

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As Joe Sanberg spoke with Democrats everywhere from Ohio and Nebraska to Arkansas and Missouri ahead of the midterm elections, he consistently asked his audience something few politicians would — to look away from him. “Close your eyes,” says Sanberg, this time in a St. Louis suburb. “Picture when you couldn’t afford a bill or worried about making rent,” the 39-year-old says. “Remember the insecurity you felt. Now feel what it must be like for those who don’t experience that fear occasionally, but every hour of every day.”

This is unconventional politicking. After working on Wall Street for Blackstone and Tiger Global Management, the Orange County, California native made his fortune investing in startups like meal-delivery service Blue Apron and pay-what-you-want financial firm Aspiration. In the last few years, Sanberg has risen in California political circles by convincing the state legislature to pass an earned income tax credit in 2015 and then launching a one-man, $10-million program to advertise that credit. Since then, his advocacy group CalEITC4Me has signed up more than 2.2 million low-income Californians to receive more than $4 billion in income earned tax credits.

Now, owing to his travel schedule, Sanberg is stoking speculation about his political intentions. He’s taking meetings with Democratic Party chiefs in Iowa, New Hampshire and South Carolina — the critically important first three states on the 2020 presidential primary calendar. The vehicle was his Working Hero PAC, a national extension of his California efforts that endorsed 17 midterm candidates who promised to support an agenda to end poverty, which includes expansion of the EITC, a $15 federal minimum wage and single-payer Medicare for All.

The Democratic primary is becoming a caravan of business leaders, philanthropists and nascent politicos asking “why not me?”

“The worst part about financial distress is the isolation that comes with it,” Sanberg says, sitting in a booth at a St. Louis pub, wearing a “Families Belong Together” T-shirt and Target jeans. Social media compounds that loneliness, he adds, with people feeling both alienated by others’ perceived perfect lives and, therefore, less likely to speak about their own monetary struggles or identify it as poverty, which carries a stigma. “If you haven’t experienced homelessness, you haven’t been poor, so you can’t complain,” is the mindset he describes. 

But half of Americans can’t afford a $400 surprise expense. They are “a broken wrist, a few blown tires or a busted pipe in their home away from financial crisis,” as Sanberg likes to say on tour stops. It’s a feeling he empathizes with, having grown up with a single mom and moving into his grandparents’ house when theirs was repossessed.

Some believe his work outside the political realm can help inform future success within it. “What he was able to do as somebody not in political office was greater than the impact of any other Democrat in America over the past two years in terms of addressing poverty,” says Aspiration CEO Andrei Cherny, a former Arizona Democratic Party chairman and White House aide. “It makes you wonder how much he could do if he actually was in political life.”

 

Sanberg prefers to address the roots of questions and then, sometimes, the questions themselves. He has the earnestness of a nonprofit leader and the practicality of an entrepreneur. It tends to feel authentic, part of a persona that Melahat Rafiei, an Iranian-American progressive and former executive director of the Orange County, California Democrats, calls the “anti-Avenatti” — a reference to bombastic attorney Michael Avenatti who has become a Democratic star with his attacks on Donald Trump. While Sanberg refuses to say whether he’ll run for president, he’s clearly considering it. “I totally reject the idea that you defeat darkness with darkness,” Sanberg says of a Trump challenge. Instead, Democrats must appeal to “humanity’s best angels,” he says, often quoting speeches by John F. Kennedy and Martin Luther King, Jr. 

The prospect of a Sanberg candidacy gaining steam seems unlikely. But in the aftermath of Trump’s election, the Democratic primary is becoming a caravan of business leaders, philanthropists and nascent politicos asking “why not me?” And more than a few party veterans see in Sanberg’s poverty platform a way to cut through the divisiveness of a primary shaping up around immigration, race and impeachment. “Being anti-poverty, you have the ability to talk about a lot of things — you are pro-kids, pro-women, pro-working families and pro-education,” Rafiei says.

In a crowded field, Sanberg’s relative anonymity will handicap him. Even in early states, such as New Hampshire, “name-recognition is a big issue,” says Catherine Corkery, the Sierra Club chapter director in the Granite State. Without celebrity, he will need to harness his signature issue to break through, the way Medicare for All did for Bernie Sanders. Few knew the Vermont senator in 2016, but he “had a message that resonated,” says Sanberg adviser Rebecca Katz, a Democratic communications expert who has worked with New York City Mayor Bill de Blasio and former Senate Majority Leader Harry Reid. 

Sure, Sanberg didn’t play in a punk band like Beto O’Rourke. As a White man, he wouldn’t set historic precedents like Sen. Kamala Harris or former Housing and Urban Development Secretary Julian Castro. He doesn’t have the wealth of billionaires Tom Steyer or Michael Bloomberg, the experience of Gov. John Hickenlooper or Sen. Sherrod Brown, and certainly not the name recognition of former Vice President Joe Biden or Sen. Elizabeth Warren.

But while those potential candidates talk a lot about “inequality” and the middle class, the P-word doesn’t come up much. A Sanberg campaign would be an attempt to force poverty back into the presidential campaign discourse in a way it hasn’t been since John Edwards’ ill-fated 2008 run. This early primary-state tour could be an attention-grabber — not so much for a man but for an issue. “As we help more people, and as we explain how we’re helping people, I think people will pay attention,” he says.

Still, the man does have a personal narrative that resonates. When he closes his eyes, Sanberg sees the financial straits of his own childhood — including pots of Hamburger Helper that were stretched to last a week and the back room where he and his brother hid from gun-toting debt collectors when they came looking for their deeply indebted real-estate investor father. While Sanberg made it into Harvard, he had to borrow his way through his degree and couldn’t get home during the holidays owing to a lack of funds. And, after graduating, he applied for a Wall Street analyst gig with the high pay in mind — only because he wanted to support his family.

Most Americans will see themselves in that story, he figures, no matter whether they can also see him in the Oval Office.

Read more: Why are 1 in 5 Californians poor?

How a Phallic Baguette Found a Home in Central Paris

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There are many ways to come out to one’s grandmother. A heartfelt one-on-one, a personal letter, dispatching another family member to do it for you. For Richard Legay, the right way was to open a bakery specializing in penis-shaped bread and be the subject of a story on national TV. 

“For me, it was like an explosion, to say to the world: I’m gay and I’m proud to be gay,” says Legay of the bold move and subsequent coverage.

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The idea for the distinct shape came from a long-running family joke.

Source Fiona Zublin

That was 17 years ago, and while his grandmother wasn’t pleased then, she later came around. In the meantime, Legay — yes, that’s his real name, and he comes from four generations of bakers — has become a beloved figure in the Marais, in central Paris. His unmissable shop window is decorated with penis-shaped brioche, penis-shaped baguettes and penis-shaped tarts. He’s made penis-shaped croissants, he says, but it’s too much work to do every day. In January, you can find a penis-shaped galette des rois, France’s traditional holiday cake.

… tourists-in-the-know will often make a stop expressly to see the bready penises …

Before opening his bakery, the not-publicly-out Legay worked for a decade in a bank. His father had run a bakery in Nantes, near a military barracks, and a long-running family joke involved soldiers’ requests for genitalia-shaped treats. Around the turn of the millennium, Legay and his brother decided to make the request a reality and opened Legay Choc in Paris. “I said to my brother, we can’t do that in Nantes,” Legay explains. “We have to do it in Paris, in the gay district.”

 

When they opened, he was worried that the other bakeries would resent the gimmick, but there was no such animosity. People flocked, seeing it as a joke, and now tourists-in-the-know will often make a stop expressly to see the bready penises (which taste exactly the same and use the same recipe as a standard baguette tradition). Those who want to take one home as a souvenir can grab a specially preserved (and inedible) bread penis, bedecked in a hand-knitted hat and scarf for €5.

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Like many historically gay neighborhoods in cities across the world, the Marais still shows its pride. The sidewalks and many of the businesses are decorated with rainbows, gay bars are more common than in the rest of the city and guidebooks still point out historic gay landmarks. But, Legay says, many long-running business (and longtime residents) are getting priced out of the market. The Marais is now considered prime real estate for big brands that want to capitalize on its classic French vibe, and Legay says the gay bars, restaurants and even the LGBT library are closing one after another. “It’s changing. I’m quite sure that in five or 10 years, there won’t be any gay bars in the district,” he laments.

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You can buy a fresh baguette or take home a specially preserved souvenir version.

Source Fiona Zublin

Pro tip from Monsieur Legay: Keep an eye on the 19th arrondissement, still relatively inexpensive, which he says may be becoming the new gay district. But — while Legay is in the process of a hush-hush expansion to an as-yet-undisclosed location — it won’t have les baguettes magiques.

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The bready penises taste exactly the same and use the same recipe as a standard baguette tradition.

Source Fiona Zublin

Go There: Legay Choc

  • Location: 45 Rue Sainte-Croix de la Bretonnerie, Paris, near the Métro Rambuteau …. map
  • Hours: Wednesday to Monday, 7:30 am – 8 pm. Closed Tuesdays.
  • Pro tip: With the brioche, tear off the testicles one by one and dip them in your coffee.

The Sometimes Apocryphal Sins of Bolivia’s Worst President

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General Mariano Melgarejo, the 18th president of Bolivia, had barely been in office a year when he was — according to some sources — defeated in battle in La Paz, the capital, by his archrival, former President Manuel Isidoro Belzu. Instead of accepting defeat, Melgarejo gate-crashed the victory party at the Presidential Palace in La Paz on March 23, 1865. Belzu, who assumed Melgarejo had been brought as a prisoner, “decided to leave the room and receive him with a hug,” wrote 19th-century Bolivian historian Tomás O’Connor D’Arlach in General Melgarejo: Words and Deeds of This Famous Man

Bad move. According to D’Arlach, Melgarejo made his way through the throng of soldiers and civilians, shot Belzu dead and, leaving Belzu “shrouded in his own blood,” exclaimed to the crowd: “‘Belzu is dead! Who lives now?’” To which “some voices answered: ‘Viva Melgarejo!’” Other versions of the story have Melgarejo purposefully posing as a prisoner and showing Belzu’s body to the crowd. 

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Mariano Melgarejo

Source Public Domain

Whatever happened, Melgarejo remained president until 1871, when he was eventually ousted by General Agustín Morales, who swept to victory on the coattails of a massive rebellion of native Bolivians after Melgarejo attempted to introduce legislation to seize the land of indigenous communities, according to Erick Langer, a history professor at Georgetown University. A few months after losing power, Melgarejo was shot dead by his ex-lover’s brother. “His sole interests might be summed up in the four words: drink, women, gambling and gluttony,” wrote Charles Chapman in Melgarejo of Bolivia: An Illustration of Spanish American Dictatorships

Born near Cochabamba in 1820, five years before Bolivia achieved independence from Spain, Melgarejo was the “love child” of a Spanish man and a poor Quechua Indian woman, writes Ava Wilgus in South American Dictators During the First Century of Independence. He ran away from home at the age of 9 and shortly afterward entered the army, where, she says, “his audacity and valor gained him both promotion and fame relatively early.” Military valor was one of the main ways to rise to power in 19th-century Bolivia. The other was being born rich.  

In the 1850s and ’60s, Melgarejo worked for (and against) several presidents, helping to quash rebellions and stage coups in various corners of the tumultuous country. While he became a fairly well-known figure, says Langer, his predilection for drink and women meant he probably wasn’t seen as a serious leadership candidate. Even in 1854, when Melgarejo was charged with high treason for launching an unsuccessful coup against Belzu — yes, the same Belzu — he was able to get off after a group of Cochabamba residents submitted a petition asking the president to spare Melgarejo, blaming his actions on alcohol. While agreeing to their request, Belzu warned that they would “someday regret” their actions. Little did he know that the real regret would be his.

The most memorable anecdote of his rule involves a drunken Melgarejo stripping the British ambassador naked, trussing him “ass backward” to a donkey and parading him around Plaza Murillo.

When Melgarejo eventually assumed power — after taking advantage of the ill health of his longtime ally, President José María de Achá, to launch a coup in December 1864 — he did, at least, stay true to his core vices. He was not, Langer points out, “the first or the last” Bolivian president to enjoy a drink or take a mistress, but his excess in both regards was legendary.

The most memorable anecdote of his rule, said to have taken place in 1867, involves a drunken Melgarejo stripping the British ambassador naked, trussing him “ass backward” to a donkey and parading him around Plaza Murillo before expelling him from the country. So unamused was Queen Victoria that she ordered a naval attack on Bolivia. After being informed that La Paz was hundreds of miles from the coast and 12,000 feet above sea level, she marked an X through her map of South America and declared, “This country does not exist.” Diplomatic relations were not reestablished until the 1900s.

 

Writing in Smithsonian Magazine, journalist Mike Dash has cast serious doubt on this story. (There is no way it happened in 1867, he asserts, before identifying Belzu rather than Melgarejo as the most likely protagonist.) Indeed, many of Melgarejo’s most infamous missteps are apocryphal — he is said to have donated huge tracts of land to Brazil in return for a magnificent white horse and, on a separate occasion, to have argued that Napoleon was a far superior general to Bonaparte, despite the two being the same person — but they deserve retelling, says Langer, because they are indicative not only of his character but also of the “kind of contra-propaganda” that blights Melgarejo’s image to this day.

The damage caused by his policies is easier to quantify, says Langer. Not only did Melgarejo cede enormous swaths of territory to both Brazil and Chile (thus paving the way for Bolivia to lose its gateway to the Pacific), but he — or, more accurately, his policymakers — also made the first attempt to privatize the communal land held by indigenous communities. Communities were given a choice: either pay for the land they had farmed for centuries or see it sold — at bargain-basement prices — to government cronies.

Although his land policy would ultimately result in his downfall, Melgarejo didn’t generally bother himself with the details of governance. That meant he was easily used by the technocrats of the day. “His one principle was to get money enough to keep the army satisfied and maintain himself in power,” writes Chapman. (And to fund frequent drinking parties.) Langer likens it to how he sees the relationship between the Republican Party and President Donald Trump: “Trump is destroying the party,” he reckons, “but Republicans are using him as a vessel to get things done.”

In August 1871, 10 months after his ouster, the Bolivian Parliament voted to annul all laws passed by Melgarejo. Despite this, he is still, “rather amazingly, seen as a bad guy by all sides,” says Langer. Current Bolivian President Evo Morales, for example, often blames Melgarejo for stealing indigenous land, forgetting that the land was soon returned to the communities and the lasting theft took place a few decades later.

Later in 1871, Melgarejo was shot dead when — having tracked his ex-lover Juana Sánchez down to Lima, Peru — he was denied access to the Sánchez abode. Not one to back down, Melgarejo tried to force entry and was shot dead by her brother. Even though he is widely remembered as Bolivia’s worst president, holding on to power for six full years in 19th-century Bolivia was “quite an achievement,” says Langer. If nothing else, “he sure had cojones.” 

Universal Basic Assets: A Smarter Fix Than Universal Basic Income?

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For 40 years, Robert E. Friedman and his Washington-based nonprofit Prosperity Now have helped millions of people from economically vulnerable communities gain financial security and stability. Income disparity, however, has only grown across the United States. Now, the 69-year-old Friedman is arguing for a macroeconomic fix — and it doesn’t involve the government just doling out cash. Instead, he advocates giving everyone assets like savings, education and homeownership, instituting a system of universal basic assets (UBA). And Friedman isn’t alone. 

As cities and countries across the world experiment with the currently in-vogue idea of universal basic income (UBI), a small but growing number of scholars, nonprofits and researchers are beginning to argue for an alternative framework for prosperity. At its heart, they’re pushing for a 21st-century version of the age-old proverb that it’s better to teach a man how to fish than to simply give him fish. Just four years ago, UBA as a modern concept was unknown. Today, it’s emerging as a challenger to UBI as a means to the same goal: less income disparity and greater opportunities for all. 

Marina Gorbis, executive director of nonprofit research organization Institute for the Future, has developed a framework around UBA that identifies essential resources every person should have access to, including housing, education, health care and the internet. Lenny Mendonca, chairman of public policy action and think tank New America, and a senior partner emeritus at McKinsey & Co., is highlighting limitations in the UBI concept to argue why UBA is the way forward to end poverty. Economists — from James Boyce of the University of Massachusetts Amherst to Florin Bonciu of the Romanian-American University in Bucharest — are researching the merits of UBA. And Friedman, in his book A Few Thousand Dollars, demonstrates how a few thousand dollars, access to education and homeownership assistance can set people up to save, invest and create their own wealth.

UBA could close the racial wealth divide in my lifetime.

Robert E. Friedman, founder, Prosperity Now

The U.S. already has the funding to make this possible, says Friedman. If the government reallocates the $729 billion it currently spends on tax incentives for homeownership like the home mortgage interest deduction, preferential capital gains taxes and retirement savings incentives, it could give each person in this country $2,200 annually, he argues. This would be different from UBI since UBA legislation would restrict the use of accounts to wealth-building investments like homes, new businesses and retirement savings and require savings matches. Supporters of UBA, such as Friedman, see it as a particularly useful solution to racial wealth disparity.

“People of color [in the U.S.] have just a few cents in assets for every dollar that Whites have,” Friedman says. “But UBA could close the racial wealth divide in my lifetime.” 

The idea of helping specific communities and demographics by offering them assets isn’t new. Under the Homestead Act of 1862, President Abraham Lincoln gave American settlers 160 acres of land to encourage migration West. They needed to pay only a small filing fee and remain on the land for five years to assume full ownership. Before the Great Depression, the average mortgage in the U.S. required a 50-percent down payment, with five years to pay the rest. Under President Franklin D. Roosevelt, the 30-year mortgage was introduced, allowing more Americans to buy homes. After World War II, U.S. military veterans were granted low-interest mortgages, free medical care and college tuition stipends, benefits made possible by what is known colloquially as the GI Bill. Individual development accounts were launched as an experiment in the mid-1990s — matched savings accounts that enabled low-income people to save for a home.

 

But none of those projects were universal in scope. Meanwhile, income disparity has continued to grow. Research published in December 2017 by economist Edward Wolff, using data from the federal Survey of Consumer Finances, showed that the richest 1 percent of American households own 40 percent of the country’s wealth, a proportion higher than at any point since 1962. “We need a GI Bill for the 21st century,” says Friedman.

It’s an idea that has appeal on both sides of the political aisle. Liberals are drawn to UBA’s “provide for everyone” ethos, while libertarians see it as a reason to cut the “safety net” of government subsidies like welfare and unemployment, says Friedman. The bipartisan appeal comes from the notion that asset-building gives people more options, says C. Eugene Steuerle, former deputy assistant secretary of the U.S. Department of the Treasury for Tax Analysis under President Ronald Reagan and co-founder of the Urban-Brookings Tax Policy Center. ”UBA is a middle-of-the-road policy,” he says. “It’s an ideal compromise between left and right because it promotes mobility and opportunity, and less dependence on government.” 

Universal Basic Income (UBI), which has roots going back centuries (the idea appears in Thomas More’s 1516 novel Utopia) and has seen a resurgence in recent years, has often been compared to UBA. But there are some fundamental differences. “Giving everyone cash is not progressive,” Mendonca argues in a manifesto he published on Medium in 2016. UBI doesn’t get to the cause of real human needs, like job training, he says. The latter allows for independence rather than reliance. The most important factor for implementation of UBA, Mendonca says, is that it can happen at the state and local level, without waiting for the federal government. “Most examples of social progress begin in tech-savvy cities,” says Mendonca, “because they see the future in front of them.” 

It was in one such city that Friedman began comparing UBA and UBI concepts, as the latter entered public discourse in recent years. Friedman, a fourth-generation San Franciscan, found himself asking, “Why are we treating low-income people as consumers rather than producers?” Basic assets, Friedman suggests, provide stock so you have a buffer if things go wrong. 

At the Institute for the Future, Gorbis is convinced that assets are a critical determinant of an individual’s resources, especially with the rise of the gig economy where many don’t have access to benefits like health insurance and retirement savings. “When you look at data, a lot of inequality is deeper than income — it’s also about debt,” she says, adding, “for poor people, housing is the main asset.” That’s why Gorbis suggests UBA should start with access to housing, but also include access to public resources like transit. If you can take public transit, you don’t need to own a car, she says. When basic assets were first discussed, the crowning jewel was land — upon which the Homestead Act was based. Then, all eyes turned to jobs as the ultimate means of security. Today, Gorbis says, we should begin to look at data. Access to data — the internet, online education and resources — significantly affects socioeconomic status. 

Not everyone is enthusiastic about UBA. While the concept is bipartisan to some degree, some on the right don’t see a big difference between UBA and UBI. “Giving people money is not the same thing as earning money,” says Grover Norquist, president of Americans for Tax Reform. Giving people assets is essentially the same thing, Norquist argues; rather, the government should get out of the way. 

George Mason University economics professor Bryan Caplan, a proponent of skills training over formal college education, agrees that UBA is not the answer to wealth disparity. “Anything that’s universal doesn’t make sense,” Caplan says. “It’s stupid to give stuff to everyone because not everyone needs it.” 

Still, UBA as a concept is gaining traction, and emerging from the shadows of UBI to challenge it. There’s more than a letter that separates them. At stake is the question of how America goes about reducing its wealth gap. 

Technology Is Opening Doors for Employees and Employers Alike

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OZY has come together with JPMorgan Chase to bring you a special series, giving you an inside look at how the world’s workplace is changing. Whether it’s in business, law or science, an emerging group of men and women worldwide are redefining what it means to be a powerhouse in today’s workforce. And plenty are going into business for themselves, often with an eye for sustainability.