“The people want the fall of the regime” was the slogan made famous by the Arab Spring. In 2011, what the people wanted, they often got, as authoritarian governments were toppled in Tunisia, Egypt and Libya.
The lesson of that year looked similar to that learnt in Europe in 1989: if enough demonstrators come out on to the streets, they can become an irresistible force for change — though the political order that eventually emerges may not always reflect the protesters’ aspirations.
In 2020, however, people power looked less of an unstoppable force. There were plenty of popular demonstrations across the world this year, but few have led to clear political victories for the protesters.
Why might street protests be losing their power? Two trends seem to be emerging. One is that authoritarian governments are getting better at repression. And in the case of broad-based social justice movements such as Black Lives Matter, diffuse aims make it harder to define success.
In Hong Kong the pro-democracy movement that, at its height, brought millions of people on to the streets has been crushed by the passage of a new national security law drawn up in Beijing. Two young leaders of that movement — Joshua Wong and Agnes Chow — were jailed this month. In Belarus, months of mass protests following a flawed election have failed to dislodge Alexander Lukashenko as president. In Thailand, the military-backed government continues to resist demands for constitutional reform.
There have been deaths and disappearances inflicted on protesters in Belarus — but, elsewhere, official repression has avoided mass street violence. Troops were not deployed on the streets in Hong Kong. Instead protesters have been arrested and jailed, with ringleaders tracked using social media and surveillance technology.
The international political environment also matters. In Egypt in 2011 or the Philippines in 1986, US-sponsored autocrats found that support from Washington was withdrawn in response to popular pressure. But in Belarus, the key outside power is Vladimir Putin’s Russia, which has every interest in seeing street protest movements fail.
China is the sovereign power in Hong Kong, and the Thai military increasingly looks to Beijing rather than to Washington. Ironically, Russia and China — two countries that were once seen as the sponsors of world revolution — have now become deeply reactionary in their response to popular movements that threaten established power.
By contrast, the Black Lives Matter movement against racial injustice and police brutality was perhaps the biggest social protest movement seen in the US for decades. It brought millions of people on to the streets: impressive, given that BLM took place in the middle of a pandemic.
But widespread support for the BLM did not necessarily translate into an easily actionable agenda. The Democrats would not endorse a demand to “defund the police” during the 2020 election. However, the movement sparked a broader demand for racial justice whose effects are likely to play out in business and society over the course of many years.
Here are some of the movements that defined the year:
US: Black Lives Matter seeks racial justice
The police killing of George Floyd in May sparked protests across the US and around the globe. Video of Floyd, a 46-year-old black man, being pinned down for more than eight minutes by a white police officer in Minneapolis, Minnesota, went viral.
It sparked outrage in big US cities, as well as smaller towns and suburbs where people had not previously protested against police violence en masse.
Floyd’s death reignited long-simmering tensions over racial injustice in the US and breathed new life into the Black Lives Matter movement, which started after George Zimmerman was acquitted for the 2012 killing of Trayvon Martin, an unarmed black teenager.
Thailand: Students march for reform
Thailand’s youth protests began after a court banned Future Forward, a popular opposition party, in February. The dissent went online during lockdown from March, then resurfaced outdoors from July.
A “Free Youth” movement, drawing on the legacy of past democratic uprisings and pop culture iconography, demanded the resignation of ex-junta leaders, a new constitution and an end to the harassment of dissidents. Radical students then made formerly unutterable demands for reform of the monarchy.
Older supporters have joined in, as have schoolchildren. But the protesters have not yet been successful in securing any of their core demands. Police have opened lèse majesté (royal insult) cases against more than two dozen protest figures. The students are digging in, too, and promising more action in 2021.
Belarus: Lukashenko’s stolen election
Enraged by authoritarian leader Mr Lukashenko’s claim to have won re-election in a deeply flawed vote in August, tens of thousands Belarusians flooded on to the streets in protest. The biggest demonstrations in the capital, Minsk, drew as many as 200,000 people — and for a brief moment Mr Lukashenko’s opponents hoped his autocratic 26-year rule was coming to an end.
But Mr Lukashenko’s security forces responded savagely. Tens of thousands of Belarusians have been detained, many have been injured and several have died. At the height of the protests, Mr Putin, the Russian president, pledged to support Mr Lukashenko. Combined with the crackdown and freezing winter conditions, Mr Lukashenko has been able to cling to power.
Protests are still taking place, albeit in decentralised form, in recent weeks to make it harder for security services to stamp them out. Opposition leaders hope that when the weather improves in the spring, the temperature of the protests will rise again too.
Poland: Anti-abortion opposition
The women’s rights protests that rocked Poland this autumn were triggered when a Constitutional Tribunal ruling paved the way for the country’s abortion laws — already among the strictest in Europe — to be tightened further.
The announcement sparked a furious backlash. Hundreds of thousands of Poles came on to the streets in towns and cities across the country. Following a huge protest in Warsaw at the end of October that drew about 100,000 people, the government backed down, preventing the ruling from coming into force by simply refusing to publish it.
That decision leaves Polish women in limbo. The abortion rules have not officially been tightened but some doctors are now reluctant to perform the procedure because of the legal uncertainty surrounding it. There is also the risk that the government could try again.
Hong Kong: China’s security law crackdown
Beijing’s imposition of a national security law on Hong Kong was aimed at extinguishing the 2019 pro-democracy movement in the city. While it has partially achieved its aim — street protests have been all but crushed — it has sparked international retaliation against China from the US, the UK and others, and raised questions over the future of the rule of law on which the Asian financial centre depends.
Under the new law, crimes ranging from secession, subversion, terrorism and collusion with foreign elements are punishable with up to life imprisonment.
Critics say the legislation’s wording is vague and that it violates the political, civil and legal freedoms guaranteed to the territory on its handover from the UK to China in 1997. The government has backed up the law with the arrest of high-profile activists while forcing others into exile.
Germany: Anti-mask protests
What started last spring as quirky, scattered protests against Germany’s coronavirus regulations has become a more radicalised movement. Some protesters insist they remain non-violent, and have legitimate concerns over the legal basis for pandemic measures. But they are rallying alongside a wide spectrum of hippies, neo-Nazis and conspiracy theorists.
The main organising force is a network that call themselves “Querdenker”, or lateral thinkers. They shocked the country in August, when protesters at a large rally in Berlin tried to storm the Reichstag. Many carried flags of the far-right Reichsbürger movement, which rejects the legitimacy of the postwar German state.
Since then, the protests have become more violent. Several policemen were injured at rallies in Leipzig and Berlin. One group among the protesters unnerved Germans by comparing themselves to Holocaust victims or Nazi resistance fighters. Federal and state intelligence agencies have issued warnings and put some of Querdenker chapters under surveillance.
US: Anti-lockdown protests
Starting in April, thousands of Americans in more than a dozen states participated in protests against the coronavirus stay-at-home orders that had shut down large parts of the US economy.
Many of the protesters were “ruby red” conservatives who bristled at what they saw as government over-reach. But in some places they were joined by moderates from the business community who fretted that the measures were resulting in tens of millions of people losing their jobs. Far-right extremist groups, such as the Proud Boys, were highly visible participants.
Some of the biggest protests took place in the industrial Midwestern state of Michigan, where Democratic governor Gretchen Whitmer faced fierce criticism from not only her Republican constituents but also the president. In October, federal and local prosecutors in the state charged 14 men with conspiring to kidnap Ms Whitmer as part of a militia plot ahead of November’s US election.
Lebanon: Anger at state corruption
Lebanon’s nationwide protest movement, which erupted in October 2019, toppled prime minister Sa’ad Hariri’s government within weeks. The overthrow of the entire political class — deemed corrupt by protesters — seemed imminent.
The leaderless demonstrators were largely driven off the streets in 2020 by coronavirus and economic hardship. But the catastrophic port explosion in August, which killed around 200 people and injured thousands, brought protesters roaring back.
Thousands thronged the capital, blaming state incompetence and negligence for allowing some 2,750 tonnes of explosive chemicals to languish in central Beirut for six years. Security forces cracked down violently, eventually deterring demonstrators. So did a sense of futility. After the government resigned, parliament eventually returned the previous premier, Mr Hariri.
Additional reporting by Lauren Fedor in Washington, James Shotter in Warsaw, Nicolle Liu in Hong Kong, John Reed in Bangkok, Erika Solomon in Berlin and Chloe Cornish in Beirut
Investors lambast Sunak’s plans to raise corporation tax
Chancellor Rishi Sunak on Wednesday set out plans to increase the corporation tax rate from 19 to 25 per cent for larger businesses in 2023 — the first time it will have been raised since 1974.
The Treasury estimates the move will raise £17bn in 2025-26, but investors expressed concern because of how it could reduce dividend payments by companies.
Richard Buxton, fund manager at Jupiter, an investment group, said Sunak’s proposed increase in the corporation tax rate amounted to a “sizeable bite” out of businesses’ profits.
“When looking at potential profits over a three to five year time horizon investors will have to factor this in, and it will erode earnings and potential dividend growth,” he added.
“In turn, this may at the margin reduce the attraction of UK equities to both domestic and international investors.”
The UK is one of the world’s most popular financial markets for income-seeking investors.
Tom Stevenson, investment director at Fidelity International, a fund manager, said Sunak’s increase in the corporation tax rate would leave the UK just about competitive “but shareholders in the largest, listed companies that will bear the brunt of the measure will not welcome this”.
David Page, head of macro research at Axa Investment Managers, another investment group, said he expected more countries to raise corporation tax rates like the UK, but added: “Does this make the UK less attractive? At the margins yes.”
Nigel Green, chief executive of deVere Group, a financial adviser, said Sunak’s move “will reduce profit after tax and slash the profit available for dividends. This will not go unnoticed by those looking to invest in the UK”.
Sunak said in his Budget speech in the House of Commons that even after his corporation tax reform, the UK’s headline rate would still be the lowest among G7 nations.
But experts said the UK does not look as competitive internationally on other measures, because it is much less generous than other countries — including France and Germany — in the share of capital spending that companies are allowed to set against taxable profits.
An OECD measure of the effective marginal corporate tax rate — the amount of tax a hypothetical company pays on an extra pound of profit — shows the UK is close to the average among developed economies now, but could have one of the toughest regimes among the international organisation’s member nations after 2023.
“The headline rate is not the only thing that matters . . . Mr Sunak is taking a gamble that raising corporate taxes further up the international pecking order won’t have too terrible an effect on investment,” said Paul Johnson, director of the Institute for Fiscal Studies.
The IFS said the extra revenue stemming from the higher rate of corporation tax would in the long run be less than the government’s £17bn a year estimate.
A higher rate would reduce incentives for companies to make investments that would increase profits in later years, it added.
Sunak said on Wednesday the majority of businesses would avoid the corporation tax reform given a rate of 19 per cent would apply to businesses making profits of less than £50,000 each year.
He added the rise in the corporation tax rate to 25 per cent for larger companies in 2023 will be preceded by a new allowance for capital spending, providing a “super-deduction” of 130 per cent on new plant and machinery.
Dan Neidle, a partner at the law firm Clifford Chance, said the two year tax break would be a strong incentive for companies to accelerate investments that were in the works, although it was not long enough to generate new capital spending that took time to plan.
Tax campaigners TaxWatch UK also criticised the move, saying it would give a tax break to companies that have thrived during the pandemic, including Amazon.
Analysis by TaxWatch found Amazon Services UK, an entity that provides warehousing and delivery services, would have its corporation tax bill wiped out based on its last reported spending on plant and machinery. Amazon declined to comment.
Several smaller companies announced they would bring forward investments as a result of Sunak’s proposed tax break, although larger businesses including defence manufacturer Meggitt said that it would be more difficult to change long term plans.
Tony Wood, chief executive of Meggitt, said the company made “decisions on where to do [the] engineering effort based on what is right for the decade rather than what is right for the two year timeframe”.
But Gavin Cordwell-Smith, chief executive of Hellens group, which owns a paving slab manufacturer in Sunak’s Richmond constituency, said that “as a direct consequence of the [chancellor’s super deduction] announcement, we have already decided to accelerate our growth plans, including a new production line”.
Chemicals maker Christeyns will also bring forward investment plans — and likely increase them — in three factories, said director Nick Garthwaite.
Some business leaders expressed concern at how Sunak’s planned tax break would only last two years, and be immediately followed by the increase in the corporation tax rate to 25 per cent.
“The chancellor wants a two year investment boom, but we will then go from feast to famine at a time when the consumer recovery might be tailing off,” said one executive.
Additional reporting by Sylvia Pfeifer in London
China’s leaders focus on post-Covid economy at annual meeting
China’s National People’s Congress, the country’s annual rubber-stamp parliament session, will convene on Friday for a meeting set to focus on a problem many other countries wished they had: how to rein in an economy that has rebounded from the coronavirus pandemic.
“There have been intense discussions about monetary and fiscal policy,” said Wang Jun at the China Center for International Economic Exchange, a government think-tank in Beijing. “The primary goal is to stabilise leverage, but if policy [tightening] goes too far too quickly it may have a negative impact on financial markets as well as the real economy.”
The NPC will run for about a week and is typically a forum where previously agreed measures and policy objectives are formally approved. Last year’s session, however, was dominated by Chinese president Xi Jinping’s surprise announcement of a stringent national security law for Hong Kong after the city was rocked by anti-government protests in 2019.
The gathering also provides the biggest stage of the year for Xi to project his unchallenged grip on both the government and the Chinese Communist party as he prepares for an unprecedented third term in power in late 2022.
China’s post-Covid recovery contrasts starkly with the situation in the US, where the pandemic has claimed the lives of more than 500,000 Americans and President Joe Biden is pushing Congress to pass a $1.9tn economic stimulus package.
Guo Shuqing, one of China’s most powerful financial regulators, warned this week about the dangers of “extremely loose monetary policies” in the US and other pandemic-wracked economies, saying the measures could cause “too much fluctuation” in Chinese financial markets.
He added that China’s property market was still afflicted by “relatively large bubbles” and suggested lending rates would “rebound” this year. Guo, who heads the banking regulator and is also the most senior party official at China’s central bank, pronounced late last year that the real estate sector was the country’s “greatest grey rhino in terms of financial risk”.
Guo’s comments sparked a sell-off on regional markets, illustrating the difficult balance he and other financial officials must attempt to strike. Stimulus measures rolled out by Chinese president Xi Jinping’s administration early last year helped spur investment but also propelled debt levels in the world’s second-largest economy to about 270 per cent of GDP.
“While the leadership feels confident about the economy’s trajectory, there is still a lot of uncertainty,” said Andrew Polk at Trivium, a Beijing-based consultancy. “Authorities need to find a way to unleash consumption and pick up slack from industrial production and real estate investment.”
Shuang Ding, chief China economist at Standard Chartered in Hong Kong, said Beijing was likely to reduce its budget deficit to 3 per cent of GDP, down from 3.6 per cent last year. But he also forecast the Chinese economy would grow at least 6 per cent year on year, with “substantial room for outperformance”, and create 11m jobs.
“The most pressing economic issues are how to withdraw from last year’s expansionary fiscal policy and how to increase consumption,” said Jia Jinjing, an economics professor at Renmin University in Beijing. “The central deficit budget will be lower than last year but still above 3 per cent. We cannot rely too much on increased debt to spur consumption.”
NPC delegates will also formally pass the party’s 14th five-year economic plan, which is focused on achieving “self-reliance” in a number of critical technology sectors as well as ambitious environmental goals, including reaching peak carbon dioxide emissions by 2030 and net-zero emissions by 2060.
The NPC session in 2020 was delayed for almost three months by the pandemic and fixated on the imposition of the national security law on Hong Kong.
This year, it is likely to approve measures that will further reduce the pro-democracy camp’s representation in the city’s legislature. It is also expected to unveil rules consolidating Beijing’s hold on an already pro-establishment “election committee” that chooses Hong Kong’s chief executive.
Dozens of Hong Kong democracy activists, including publisher Jimmy Lai and jailed student leader Joshua Wong, have been charged with alleged offences of the security law. In a speech last month, Xia Baolong, head of the Chinese government office responsible for Hong Kong, singled out Lai and Wong as “extremely vile anti-China elements”.
“There doesn’t seem to be any end to the crackdown,” said Willy Lam, a China politics expert at the Chinese University of Hong Kong. “Xi has made up his mind to snuff out Hong Kong’s opposition movement altogether. For ordinary people, Beijing will insist on ‘patriotic education’ in the schools and media.”
A Chinese academic who advises Beijing on Hong Kong issues said the territory had been “too unbridled” prior to last year’s passage of the national security law. “The central government had no other option,” said the academic, who asked not to be identified. “The Hong Kong opposition overestimated its power.”
Additional reporting by Xinning Liu in Beijing
Sunak goes big and bold to try to repair the public finances
Chancellor Rishi Sunak’s Budget was big, bold and broke many longstanding records for the public finances.
At an estimated £355bn, the level of UK government borrowing forecast for 2020-21 is due to be the highest since the second world war, reflecting the severity of the coronavirus crisis. It highlights the sheer scale of emergency state support for companies and households during the Covid-19 pandemic.
The tax rises announced on Wednesday by the Conservative chancellor for the middle of the decade — affecting businesses and individuals — will be the largest since 1993. The increases will raise the UK tax burden to its highest level since Roy Jenkins was the Labour party chancellor in the late 1960s.
Justifying his approach, Sunak told the House of Commons: “Just as it would be irresponsible to withdraw support too soon, it would also be irresponsible to allow our future borrowing and debt to rise unchecked.”
As far as the public finances are concerned, the March 3 Budget will become known as a “give then take” affair that will reshape the relationship between the state and the private sector for many years ahead.
And the figures in the Budget documents confirm the coronavirus crisis has utterly transformed the public finances for the worse.
At the March 2020 Budget, when the UK had little clue about the enormity of the pandemic, the Office for Budget Responsibility thought the government would borrow £55bn in 2020-21.
Sunak, who unveiled a £12bn support plan for the economy in what was his first Budget, has since had to add huge amounts of public spending in 16 major announcements.
On Wednesday, he outlined another £40bn of support, bringing total spending to £344bn, according to the OBR: roughly 16 per cent of gross domestic product, and well above the average of 13.3 per cent among advanced economies.
It is this spending, alongside a loss of £90bn of expected tax revenues, that is set to raise the level of government borrowing to the highest level in peacetime.
In 2021-22, the government is still planning to spend £93bn on virus related support, mostly going to the NHS, but with large sums also for continued support for companies and households.
Karen Ward, strategist at JPMorgan Asset Management and a former adviser to Philip Hammond when he was chancellor, said Sunak was wise to keep splashing the cash in the next financial year. “The chancellor has rightly erred on the side of an extension that is potentially too long, rather than one that is too short,” she added.
With the colossal borrowing, underlying UK public debt, excluding temporary Bank of England schemes, is set to jump from a pre-pandemic forecast of 73 per cent of GDP by the middle of this decade to 97 per cent in the latest OBR prediction.
The 24 percentage point rise in the core debt burden is the second large jump in a little over a decade following the fiscal shock associated with the 2007-08 financial crisis. At about 100 per cent of GDP, UK public debt is now at its highest level since the early 1960s, when it was gradually coming down following the second world war.
This Budget was not just about fiscal support in 2021-22, but also stimulus to power the recovery, according to Richard Hughes, OBR chair. He said Sunak’s £25bn “super-deduction” in corporation tax would “stoke the recovery” and “encourage businesses to bring forward future investment into the next two years”.
But after 2021-22, the giveaways stop, and Sunak becomes the revenue raising chancellor, with very large increases planned in corporation and income taxes.
The moves risk damaging the UK’s international standing. In 2018, the OECD said the UK taxed corporate profits below the rich country average. Britain collected 2.6 per cent of national income through the levy, compared with the OECD average of 3.1 per cent.
By 2025-26, the OBR projections suggest UK corporate taxes will generate revenues above the OECD average, although Hughes said this level was “one [the UK] seldom sustained for very long in the postwar period”.
Paul Johnson, director of the Institute for Fiscal Studies, a think-tank, said Sunak’s corporation tax rise was a significant risk. “For all the rhetoric about it leaving the headline rate here below that in other G7 countries, our effective tax rate will be relatively high,” he added.
The tax rises will tackle the high level of borrowing, however, according to the OBR.
It projects the increases will lower the current budget deficit in 2025-26 from £37bn, had Sunak done nothing, to £1bn, almost balancing the government’s books excluding public investment. This is a core ambition of ministers.
Some economists thought Sunak should have been more explicit in setting new targets for the public finances.
Hande Kucuk, deputy director of the National Institute of Economic and Social Research, a research organisation, said the Budget needed “a comprehensive fiscal framework to build confidence in a sustained recovery given the significant uncertainty regarding the long-term effects of Covid-19 and Brexit”.
Other economists were more forgiving since there are huge uncertainties hanging over the public finances. The path of the pandemic is perhaps the largest, but Sunak also has to worry about the possibility of increased debt servicing bills if interest rates rise, and whether he can cut spending as he plans when the virus subsides.
Torsten Bell, director of the Resolution Foundation, another think-tank, was sceptical the chancellor would be able to reduce departmental spending.
The Budget documents showed a stealthy £4bn a year cut in spending alongside the tax rises. “He’ll end up spending more than that,” said Bell, adding this would add to pressure to proceed with additional tax rises.
But Sunak is an optimist, and hopes the uncertainty will go in his favour. If the economic recovery is sufficiently rapid, the chancellor will be looking to the OBR to cut its estimate of a 3 per cent long term hit to the economy from coronavirus.
And if that happens in a future Budget, Sunak can look forward to the possibility of tax cuts before the next general election.
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