As the 20-hour assault by Taliban insurgents on Kabul's diplomatic and military enclave drew to a close on Wednesday, insurgents and coalition forces decided to prolong the battle the modern way: on Twitter.
If the continued insurgency in Afghanistan represents a failure of dialogue, the spat between the Taliban and the press office of the international security assistance force (Isaf) on Wednesday proved that they are ready to exchange words directly, even if their comments offered little hope of peace being forged anytime soon.
The argument began when @ISAFmedia, which generally provides dry updates in military speak of the security situation in Afghanistan, took exception to comments from a Taliban spokesman, tweeting: "Re: Taliban spox on #Kabul attack: the outcome is inevitable. Question is how much longer will terrorist put innocent Afghans in harm's way?"
The Taliban – who, when in power, eschewed most modern technology, including television and music players – decided to point the finger of blame back at the international forces for endangering Afghan civilians. Showing an affinity with textspeak, Taliban tweeter Abdulqahar Balk (@ABalkhi) wrote: "@ISAFmedia i dnt knw.u hve bn pttng thm n 'harm's way' fr da pst 10 yrs.Razd whole vllgs n mrkts.n stil hv da nrve to tlk bout 'harm's way'"
@ISAFmedia was moved to respond by providing statistical backing for its case. "Really, @abalkhi? Unama reported 80% of civilians causalities are caused by insurgent (your) activities http://goo.gl/FylwU"
But @ABalkhi questioned the value of the quoted statistics, pointing outin somewhat sarcastic tones that Isaf, an organisation established by the UN security council, was using figures from another UN body (the UN assistance mission in Afghanistan) to try to win the argument: "@ISAFmedia Unama is an entity of whom? mine or yours?"
Naturally, this led to many Twitter responses. Counterterrorism expert Daveed Gartenstein-Ross got off the best quip: "And then... ISAF and the Taliban unfollowed each other."
OK, seriously, what is the takeaway from this sort of exchange? Is this kind of interaction a uniquely 21st century form of statecraft, or just old wine in new, snarker bottles?
It's very tempting to roll one's eyes and say that we've seen this sort of thing before. CNAS' Andrew Exum argues that this exchange is similar to the "cross-trench trash-talking" of the Spanish Civil War. Which would be true... if the majority of the rest of the world had the option of witnessing the trash-talking in real time.
No, this is something different, something that I suspect is activating Anne-Marie Slaughter's sixth sense of detecting "modern social-liberal" trends. And as more and more international affairs heavyweights go on Twitter, it might be a harbinger of a whole new arena of the world politics sandbox.
What I'm not sure is whether this kind of Twitter exchange is terrifically meaningful. As the Guardian story observes, it came about in response to real-world events in Kabul, so in some ways the Twitter engagement between public spokespeple is simply an extension of traditional global public relations. PR has been a part of world politics since the days of E.H. Carr, so I'm not sure this is really all that new and different.
That said, I'll close with two questions for which I do not have easy answers. The first is whether this kind of engagement on Twitter is a legitimating act or not. Does ISAF, by engaging the Taliban on Twitter, elevate the latter group somehow in the global public sphere? This was an argument that the Bush administration used to make for why it would not negotiate with Iran or North Korea. The Bushies posited that the very act of sitting down to talk with these odious regimes conferred legitimacy on them that they otherwise would not have earned. That was a somewhat dubious proposition when dealing with governments of sovereign states. What about non-state actors, however? What about cranks on Twitter? I'm not sure.
The second question is.... is it even possible to win at Twitter fight club? In an exchange with Exum, former debate champion Gartenstein-Ross made an trenchant point about online debate:
[I]t’s generally hard to win a name-calling contest. If I call someone an America-hating pinko, they can fire back that I’m a right-wing tool of the military industrial complex. Those two insults seem essentially to cancel each other out: why give someone an area that can end up a draw if I believe that I can prove all of my other arguments to be correct? Second, I find that if I’m civil, I can actually (sometimes) persuade people I’m arguing against that they’re wrong about an issue. In contrast, if I begin a debate by insulting someone, it only further entrenches him in his initial position, thus making it more difficult to talk sense into him.
Twitter tends to bring out the
ass snark in me, and I suspect I'm not the only one, so I wonder if, in the end, Twitter exchanges in world politics will all wind up as stalemates (unless either Dave Weigel or Keith Law take an interest in international relations). That said, the ISAF/Taliban exchange did seem pretty civil by Twitter standards -- so maybe PR professionals will live up to Gartenstein-Ross' standards.
What do you think?
Remember that global political economy funk I was feeling about ten days ago? I think Felix Salmon caught it, and caught it bad. Riffing off of a George Magnus research note for UBS, Salmon thinks that we're currently experiecing, "the most uncertain outlook, in terms of the global political economy, since World War II ended and the era of the welfare state began."
If you think that's dramatic, consider this paragraph:
Most fundamentally, what I’m seeing as I look around the world is a massive decrease of trust in the institutions of government. Where those institutions are oppressive and totalitarian, the ability of popular uprisings to bring them down is a joyous and welcome sight. But on the other side of the coin, when I look at rioters in England, I see a huge middle finger being waved at basic norms of lawfulness and civilized society, and an enthusiastic embrace of “going on the rob” as some kind of hugely enjoyable participation sport. The glue holding society together is dissolving, whether it’s made of fear or whether it’s made of enlightened self-interest.
Magnus says something similar in his note, lamenting the "malaise in politics and policymaking," albeit conceding that, "While there is plenty of talk about endgames of war and conflict, muddling through and the rediscovery of good politics are just as, if not more likely." Walter Russell Mead nods along sagely, while John Sides is more skeptical.
In part for reasons proffered here, I'm more sympathetic to Sides than Salmon. Another reason is that Salmon's gloominess seems to be swamping the data. Edelman's 2011 Trust Barometer, for example, suggests that Salmon is exaggerating the "massive decrease of trust" across-the-world claim juuust a wee bit. That survey is not perfect (it's targeted at the top 25% of income-earners). It's also not all good news -- the advanced industrialized democracies are not strong reservoirs of trust right now. That said, the increase in trust -- not to mention the continued decrease in crime in kep places -- is broad-based enough to suggest that perception is overwhelming reality.
I'm not without concerns -- the disconnect at the global economic governance level is pretty disconcerting, and even G-20 optimists are starting to sound like me. Furthermore, the longer that sluggish growth and anemic job creation persists in the advanced industrialized democracies, the gloomier things get. If Reinhart and Rogoff are correct, Salmon is just demonstrating rational expectations.
Still, given the general suckiness of the global political economy over the past few years, what's striking is not the signs that the world is falling apart, but rather the dogs that haven't barked.
What do you think?
There's been some interesting blog commentary on my debate with Anne-Marie Slaughter, and I encourage international relations theory geeks to check it out. Over at the Monkey Cage, Henry Farrell makes an interesting intervention. You should read the whole thing, but here's the part I found particularly provocative:
Rather than seeing the international sphere as a space for inter-state power politics, or as a space for networked common action, we can think of it as a space for contagion.That is, think of it as a space where ever-multiplying and ever-ramifying sets of networked relationships across border serve not to enable problem-solving DIY diplomatists, but instead to transmit social influences in ways that are difficult to predict ex ante. This would mean taking seriously the kinds of complexity theory and network theory arguments that Anne-Marie mentions, but following them to a quite different set of conclusions than she does.
The world that complexity theory and network theory depicts is one where actions have highly unpredictable consequences. This follows both from theoretical arguments about processes of contagion across large scale networks, and from empirical research conducted via e.g. experiments....
Just because the world has become more networked, it does not mean that states can either (a) easily use networks to pursue their policy goals, or (b) turn over responsibilities to networks that will self-organize around socially useful tasks and responsibilities. To the extent that networks’ politics are predictable, they will conform to the same kinds of (frequently unpleasant) politics as do states. That is, they will be characterized by power inequalities (sometimes gross), actors pursuing their self-interest while entirely blind to the needs of others, and the rest of the shebang. To the extent that networks’ politics unpredictable, they will be unlikely to be useful tools of policy.
This is a story with far fewer helpful policy lessons than either Dan’s or Anne-Marie’s. It points to plausible developments in world politics, without providing any very obvious tools to deal with them.
I need to process Henry's arguments more before making a fully thought-out response. This is a blog, a two half-assed thoughts should suffice for now. First, Henry gets at something that was implicit in the exchange between Anne-Marie and myself: the notion that powerful actors possess considerable agency in world politics. Slaughter and I might disagree about who those actors are, but we assumed that power = agency. Farrell's point about contagion is that this presumption does not necessarily hold. And the policy implications of that suggestion are rather jarring, to say the least.
Second, however, my own theoretical predilections lead me to wonder whether powerful agents can halt/regulate/control the spread of contagion more . The Arab Spring suggests such possibilities. So far, the general unrest in the region has toppled a regime in Tunisia, partially toppled regimes in Egypt and Yemen, led to a civil war in Libya, and led to... something in Syria.
This is not insignificant, but it's worth remembering that the wave of unrest was much larger than those countries. Early protests in Iran went nowhere -- in no small part because the Iraniann state has gotten very, very good at cracking down. Led by Saudi Arabia, the Gulf monarchies have by and large kept populist demands at bay, going so far as to invite Jordan and Morocco to join the Gulf Cooperation Council.
I'm not trying to pull a Kevin Bacon here; the Arab Spring is Big Earthshaking Stuff. My point, rather, is that not every contagion proceeds unimpeded -- there are counter-contagions as well. When and how those counterwaves happen is worthy of consideration.
What do you think?
[WARNING: THE FOLLOWING IS AN OPTIMISTIC GLOBAL POLITICAL ECONOMY POST]
Note: in my last blog post, I might have sounded juuuuust a wee bit pessimistic about the state of the global political economy. That was my intent, but it wasn't necessarily how I actually felt. My aim was to assemble as negative a brief as possible about the state of the global political economy. The aim of this post is to argue that, despite all the recent bad news, the fundamentals of the global political economy are surprisingly sound. I'm not actually as optimistic as the rest of this post suggests, either -- but I do lean more in this direction. The fact that I'm blogging this from a zombie-proof vacation redoubt should in no way affect your evaluation of the following few paragraphs.
So, when we last left off this debate, things were looking grim. My concern in the last post was that the persistence of hard times would cause governments to take actions that would lead to a collapse of the open global economy, a spike in general riots and disturbances, and eerie echoes of the Great Depression. Let's assume that the global economy persists in sputtering for a while, because that's what happens after major financial shocks. Why won't these other bad things happen? Why isn't it 1931?
Let's start with the obvious -- it's not gonna be 1931 because there's some passing familiarity with how 1931 played out. The Chairman of the Federal Reserve has devoted much of his academic career to studying the Great Depression. I'm gonna go out on a limb therefore and assert that if the world plunges into a another severe downturn, it's not gonna be because central bank heads replay the same set of mistakes.
The legacy of the Great Depression has also affected public attitudes and institutions that provide much stronger cement for the current system. In terms of publuc attitudes, compare the results of this mid-2007 poll with this mid-2010 poll about which economic system is best. I'll just reproduce the key charts below:
The headline of the 2010 results is that there's eroding U.S. support for the global economy, but a few other things stand out. U.S. support has declined, but it's declined from a very high level. In contrast, support for free markets has increased in other major powers, such as Germany and China. On the whole, despite the worst global economic crisis since the Great Depression, public attitudes have not changed all that much. While there might be populist demands to "do something," that something is not a return to autarky or anything so drastc.
Another big difference is that multilateral economic institutions are much more robust now than they were in 1931. On trade matters, even if the Doha round is dead, the rest of the World Trade Organization's corpus of trade-liberalizing measures are still working quite well. Even beyond the WTO, the complaint about trade is not the deficit of free-trade agreements but the surfeit of them. The IMF's resources have been strengthened as a result of the 2008 financial crisis. The Basle Committee on Banking Supervision has already promulgated a plan to strengthen capital requirements for banks. True, it's a slow, weak-assed plan, but it would be an improvement over the status quo.
As for the G-20, I've been pretty skeptical about that group's abilities to collectively address serious macroeconomic problems. That is setting the bar rather high, however. One could argue that the G-20's most useful function is reassurance. Even if there are disagreements, communication can prevent them from growing into anything worse.
Finally, a note about the possibility of riots and other general social unrest. The working paper cited in my previous post noted the links between austerity measures and increases in disturbances. However, that paper contains the following important paragraph on page 19:
[I]n countries with better institutions, the responsiveness of unrest to budget cuts is generally lower. Where constraints on the executive are minimal, the coefficient on expenditure changes is strongly negative -- more spending buys a lot of social peace. In countries with Polity-2 scores above zero, the coefficient is about half in size, and less significant. As we limit the sample to ever more democratic countries, the size of the coefficient declines. For full democracies with a complete range of civil rights, the coefficient is still negative, but no longer significant.
This is good news!! The world has a hell of a lot more democratic governments now than it did in 1931. What happened in London, in other words, might prove to be the exception more than the rule.
So yes, the recent economic news might seem grim. Unless political institutions and public attitudes buckle, however, we're unlikely to repeat the mistakes of the 1930's. And, based on the data we've got, that's not going to happen.
[WARNING: THE FOLLOWING IS A VERY PESSIMISTIC GLOBAL POLITICAL ECONOMY POST]
So, just to sum up the past week or so of global political economy events:
1) U.S. government debt got downgraded by Standard & Poor;
2) Global equity markets are freaking out;
London Britain is burning;
This all sounds very 2008, except that it's actually worse for several reasons. First, the governments that bailed out the financial sector are now themselves the object of financial panic and political resentment. Second, the tools used to try and rescue the global economy in 2008 are partially to blame for what's happening right now. Despite all the gnashing of teeth about the Fed twiddling its thumbs, it's far from clear that a QE3 would actually stimulate anything besides a rise in commodity prices.
With both Europe and the United States unable to stimulate their economies, and China seemingly paralyzed into indecision, it's worth asking if we are about to experience a Creditanstalt moment.
The start of the Great Depression is commonly assumed to be the October 1929 stock market crash in the United States. It didn't really become the Great Depression, however, unti 1931, when Austria's Creditanstalt bank desperately needed injections of capital. Essentially, neither France nor England were willing to help unless Germany honored its reparations payments, and the United States refused to help unless France and the UK repaid its World War I debts. Neither of these demands was terribly reasonable, and the result was a wave of bank failures that spread across Europe and the United States.
The particulars of the current sovereign debt crisis are somewhat different from Creditanstalt, and yet it's fascinating how smart people keep referring back to that ignoble moment. The big commonality is that while governments might recognize the virtues of a coordinated response to big crises, they are sufficiently constrained by domestic discontent to not do all that much.
So... is this 1931 all over again?
There are three aspects of the current situation that make me fret about this. The first is the sense that developed country governments have already tapped out all of their politically feasible methods of stimulating their economies. This is the time when both politicians and voters start to ask themselves, "Why not pursue the crazy idea?"
The second is whether the Chinese government will do something to satiate their nationalist constituency. Neither Joe Nye nor James Joyner thinks this is likely, and I tend to agree that any effort at economic coercion will hurt China as much as the United States. When autocrats are up against the wall, however, then they might take risks they otherwise would never consider.
The third is this working paper on what causes societal unrest in developed economies (h/t Henry Farrell). The abstract suggests more trouble on the way:
From the end of the Weimar Republic in Germany in the 1930s to anti-government demonstrations in Greece in 2010-11, austerity has tended to go hand in hand with politically motivated violence and social instability. In this paper, we assemble crosscountry evidence for the period 1919 to the present, and examine the extent to which societies become unstable after budget cuts. The results show a clear positive correlation between fiscal retrenchment and instability. We test if the relationship simply reflects economic downturns, and conclude that this is not the key factor.
So... there are, unfortunately, numerous reasons to think that we're headed down a bad road... which is the pretty much point of this post.
Readers are encouraged in the comments to offer counterarguments for why things aren't as bad as 1931. I'll be offering some thoughts about why 1931 won't happen again later in the week.
After last night's stunningly useless set of speeches, I'd put the odds of the U.S. not raising the debt ceiling by August 2nd at 1 in 2. Like many other observers, I'm finding it increasingly difficult to envision a deal that would get through the Senate while attracting a majority of House Republicans [You meant a majority of the House of Representatives, right?--ed. No, I meant a majority of House Republicans. I'm pretty sure that Boehner and the rest of the House GOP leadership will refuse to pass any debt ceiling plan that relies too much on House Democrats.]
So, it's gonna be a fun few weeks for those of us who study the global political economy. Let's start by thinking the unthinkable -- what will happen if there is a default?
I've expressed my feelings on the matter already, and I'm hardly the only one. That said, I've also
hedged my bets been flummoxed by the lack of market reaction to the DC stalemate. The lack of market reaction to date has emboldened House GOP members to stand fast. Could they be right?
Tom Oatley, who pooh-poohed my fears of the debtpocalypse last week, makes an interesting point about the composition of U.S. debt-holders:
By these figures, about 63% of US government debt is owned by central banks (foreign and domestic) and/sovereign wealth funds. Most of these entities are American friends and allies. Another 4% is owned by US state and local governments. That leaves 33%--about $4.8 trillion--in private hands. Of this, the financial institutions with the most restrictive regulations regarding asset ownership (depository institutions) own only 2% of the total ($290 billion). Mutual Funds, who may or may not have to dump downgraded debt, hold another 9% ($1.35 trillion).
What's the point? The discussion about the impact of US default revolves around the market response to default. Useful to recognize that most of the US government debt is held by public-sector agents who are much less sensitive to balance sheet pressures and regulatory constraints. These public sector agents are also substantially more sensitive to "moral suasion" and direct appeal than private financial institutions. The structure of ownership of US debt might dampen the negative impact of any default that does occur.
This is pretty interesting. Oatley focuses on "moral suasion," but there's also a national-interest motive for many U.S. debtholders. Most of the official holders of U.S. debt have a strong incentive for a) the value of their holdings not to plummet; and b) the United States economy to continue to snap up other their exports. If China, for example, is buying up U.S. debt to sustain its own growth, then neither a technical default nor a ratings downgrade should deter China or other export engines from continuing to buy U.S. debt even if there's a spot of trouble.
So it appears that complex interdependence will force America's rivals to continue to hold U.S. debt even after the debtpocalypse!! The United States in the clear, right?
Not so fast. Here are five "known unknowns" I can think of that might complicate Oatley's analysis:
1) What if the creditors form a cartel? In my 2009 paper, this was the one scenario that gave me the heebie-jeebies, because it's the one scenario under which creditors can wring geopolitical gains from debtor states. Any kind of default can act as a focal point moment in which U.S. creditors decide it's time to apply a haircut to American power and influence.
I don't think this is going to happen, because the national interests of American debtholders remain divergent. That said, if U.S. allies interpret default as a signal of U.S. unreliability in times of crisis, then all bets are off.
2) What about the economic nationalism of China? China is the largest foreign debtholder, which gives it a certain agenda-setting power in moments of crisis. There are a lot of compelling reasons why China would decide to try to minimize the economic disruptions . On the other hand, there's a lot of resentment on Chinese Internet boards already about the Chinese purchases of U.S. debt. During a period in which the CCP is already concerned about domestic instability, one could envision a scenario whereby they try to mollify nationalists at home by acting out against the United States.
3) What would be the effect of a mild market reaction on the House of Representatives? The less the markets react, the less that the House GOP will feel a need to do anything. There will come a point, therefore, when official debtholders might need to signal to the House that, in IPE lingo, "s**t needs to get done." That signal would in and of itself roil markets, not to mention the effects the current uncertainty is already having on the real economy.
4) What is the fiscal shock from a default? There are two causal mechanisms through which a default could affect the global economy. The first is through panic and uncertainty roiling financial markets. The second, however, is from a dramatic fiscal contraction due to limited government spending. Given the lackluster state of the current recovery, it wouldn't take much to tip the United States back into recession.
5) What if there's another AAA bubble? FT Alphaville's Tracy Alloway provided another interesting chart earlier this month on the distribution of AAA securities:
As Alloway warns:
[W]atch what starts happening from 2008 and 2009.
The AAA bubble re-inflates and suddenly sovereign debt becomes the major force driving the world’s triple-A supply. The turmoil of 2008 shunted some investors from ABS into safer sovereign debt, it’s true. But you also had a plethora of incoming bank regulation to purposefully herd investors towards holding more government bonds, plus a glut of central bank liquidity facilities accepting government IOUs as collateral. Where ABS dissipated, sovereign debt stood in to fill the gap. And more.
It’s one reason why the sovereign crisis is well and truly painful.
It’s a global repricing of risk, again, but one that has the potential for a much largerpop, so to speak.
We know that a downgrade of U.S. Treasuries would likely lead to a downgrade of state and municipal bond ratings as well. We also know that the ripple effects from the collapse of asset-backed securities were much larger than anticipated before the 2008 crisis. This is why the possible knock-on effects of downgrade so many AAA asserts makes me itchy. Even if banks and other financial institutions have minimal exposure to U.S. Treasuries, I don't think it's possible for them to have minimal exposure to all U.S.-based AAA sovereign debt.
These are just the five known unknowns that I could think of in the past hour -- there are probably many, many more. Readers are strongly encouraged to add them in the comments.
Your humble blogger is taking a short vacation, because so much friggin' stuff has happened in the past half-year. Indeed, in 2011 to date, the planet has lived up to FP's motto: the world is not a boring place. Wars, revolutions, natural disasters, non-natural disasters, the possibility of sovereign defaults -- for a world politics junkie, it's been very exciting
Does exciting mean the coming of end-times, however? I ask because the New York Times' Azam Ahmed observes the latest trendy investment -- Armageddon funds:
On a related note, Jay Ulfelder looks at the release of the 2011 Failed States Index and Admiral Mike Mullen's worries about a possible increase in the number of failed states. Ulfelder is more sanguine than Mullen:
Your humble blogger is headed to China for the next few days as part of a conference sponsored by the MacArthur Asia Security Initiative and the School of International Studies at Peking University, at which we will be discussing "What roles do power, history, ideas, and other legacies and factors play in shaping the American and Chinese approaches to sovereignty?" and "What is distinctive about the American and Chinese orientations and what are the implications of their preferences for the international order?" and "Could I please have an extra serving of tripe?" OK, that last one will just be a personal quest for yours truly, but you get the idea.
We will also be "Meeting with high-rank officials from the Ministry of Foreign Affairs and the International Liaison Department of the Central Committee of the CPC" -- so with luck, I'll be able to post blog items that will impress Chinese readers more than, say, your average Tom Friedman column. Assuming, that is, that the interwebs are semi-friendly over there.
While I am
praying for an upgrade on my flight to Beijing winging my way to the Middle Kingdom, go and contemplate Gideon Rachman's latest in the Financial Times. He points out that should China supplant the United States during this decade, it will be a very strange superpower indeed:
The ascent of China will change ideas of what it means to be a superpower. Over the course of the American century, the world has got used to the idea that the world’s largest economy was also the world’s most obviously affluent nation. The world’s biggest economy housed the world’s richest people.
As China emerges as an economic superpower, the connection between national and personal affluence is being broken. China is both richer and poorer than the western world. It is sitting on foreign reserves worth $3,000bn. And yet, measured at current exchange rates, the average American is about 10 times as wealthy as the average Chinese....
The power of China – combined with anxiety about the frightening public debts being built up in the US, the EU and Japan – will challenge western ideas about the relationship between democracy and economic success. Ever since the US became the world’s largest economy, towards the end of the 19th century, the most powerful economy in the world has been a democracy. But, if China remains a one-party state over the next decade, that will change. The confident western slogan that “freedom works” will come under challenge as authoritarianism becomes fashionable, once again.
What do you think? More tripe, or go for the chow fun instead?
I'm going to go out on a limb and state unequivocally that I think civil liberties and gender equality are Very Good Things. All else equal, I'd much rather live in a society in which freedom of speech is protected and women have all of the rights and opportunities afforded to men.
I bring this up because a common assumption that guides much of global economic policy is that as developing countries get richer, they will start valuing these qualities as well. There's a belief that regardless of the sequencing, political modernization will not trail too far behind economic modernization. Even in anomalous countries like Singapore, for example, there are trends suggesting that richer societies start demanding all those political and personal freedoms that many in the West take for granted. Crudely and simply put, a guiding assumption behind much Western policymaking (as well as many foes of the West writ large) is that modernization = Westernization.
I bring this up because China and India are, at the present moment, trying to prove this assumption is wrong. China has been getting very rich very fast, and yet the Chinese government seems more repressive than ever. So much for political liberties.
In some ways, India is even more troubling, as the New York Times' Jim Yardley report:
India's increasing wealth and improving literacy are apparently contributing to a national crisis of “missing girls,” with the number of sex-selective abortions up sharply among more affluent, educated families during the past two decades, according to a new study.
The study found the problem of sex-selective abortions of girls has spread steadily across India after once being confined largely to a handful of conservative northern states. Researchers also found that women from higher-income, better-educated families were far more likely than poorer women to abort a girl, especially during a second pregnancy if the firstborn was a girl....
The study, being published in the British medical journal The Lancet, is the latest evidence of India’s worsening imbalance in the ratio of boys to girls. The 2011 Indian census found 914 girls for every 1,000 boys among children 6 six or younger, the lowest ratio of girls since the country gained independence in 1947. The new study estimated that 4 million to 12 million selective abortions of girls have occurred in India in the past three decades....
Dr. Prabhat Jha, a lead author of the study, noted that the use of sex-selective abortions expanded throughout the country as the use of ultrasound equipment became more widespread. Typically, women from wealthier, better-educated families are more likely to undergo an ultrasound, Mr. Jha said, and researchers found that these families are far more likely to abort a girl if the firstborn is a daughter.
“This is really a phenomenon of the educated and the wealthy that we are seeing in India,” said Mr. Jha, director of the Center for Global Health Research at the University of Toronto.
Census data has already confirmed that the problem has accelerated since 2001. The 2011 census found about 7.1 million fewer girls than boys under the age of 6, compared with a gap of roughly 6 million girls a decade earlier (emphasis added).
The steady decline in the ratio is surprising, and counterintuitive, in view of India's progress in recent decades in improving the levels of female literacy and increases in income per person....
the value of the analysis by Jha and colleagues is mainly independent confirmation of two important aspects of the sex ratio in India that have been reported previously with different data. The first is that sex imbalance at birth seems to be particularly concentrated in households with high education and wealth. This pattern suggests that dominance of the son-preference norm is unlikely to be offset, at least in the short term, by socioeconomic development. Second is that the overall problem of sex imbalance seems to arise throughout India, including in Kerala, which has often been characterised as a model state for social development and gender equality. The problem of sex imbalance seems to be a function of socioeconomic status, not geography.
As India gets richer, this problem will only get worse.
Now, this might be one of those "it's always darhest before the dawn" kind of trends, in which after a certain wealth threshhold, trends will shift back towards a more classical liberal direction. Maybe. I don't know, and anyone else who tells you that they know is bulls**tting you. Based on this study, however, the question of whether China and India will ever embrace liberal political and cultural norms is not going to go away anytime soon.
What do you think?
*A hat tip to @laurenist for the very clever title to this less-than-clever post)
One of the complaints I commonly hear about the study of global political economy is that it's sooooooo boring. Security studies has guns and bombs!! IPE/GPE has.... capital adequacy standards.
Well, I think it's safe to say that events over the weekend have made both global political economy and global governance more interesting:
Talks on the Greek sovereign debt crisis and French presidential politics were both thrown into disarray after Dominique Strauss-Kahn, managing director of the International Monetary Fund, was escorted off an aircraft in New York over the weekend to face sex charges.
Mr Strauss-Kahn was expected on Sunday to appear before a New York court and plead not guilty to charges of committing a criminal sexual act, attempted rape and unlawful imprisonment, according to his lawyers.
The charges resulted from an alleged incident at the Sofitel Hotel in Manhattan on Saturday afternoon involving a 32-year-old maid who said that she had been sexually assaulted in a $3,000 per night suite in which police found the IMF managing director’s mobile phone. Police said on Sunday night that the maid had picked Mr Strauss-Kahn out of a line-up. Sofitel said the maid had worked for them for three years.
Both the Financial Times and The New Yorker have been all over this since the arrest on Saturday night, and I won't try to replicate their coverage here. Let's try to parse out a few of the implications:
1) The IMF issued a terse statement that boils down to "The IMF remains fully functioning and operational." This has the whiff of this scene from Animal House -- except that I suspect acting Managing Director John Lipsky and his awesome moustache will do a much better job of keeping everyone calm than Kevin Bacon ever did. The real tangle would come is Strauss-Kahn -- or "DSK" as he's known in France -- fights this in court and refuses to step aside gracefully. It already appears, however, that the IMF won't invoke diplomatic immunity -- and based on past behavior, DSK would likely resign first.
2) One does wonder if this scandal will finally upend a decades-long convention that dictates the head of the IMF being a European and the head of the World Bank being an American. On the one hand, this same kind of talk occurred after Paul Wolfowitz had to resign as World Bank president in 2007, and Robert Zoellick replaced him. On the other hand, that was a whole financial crisis ago.
3) So, in the past five years, two heads of international financial institutions have been implicated in scandal. I'd recommend Swiss authorities take a good, hard look at Bank of International Settlements General Manager Jaime Caruana. These jobs clearly seem to attract bad seeds. At this rate, these institutions will make the IOC or FIFA start to look ethical.
4) The French reaction to DSK's arrest might cure many Westeners of the schadenfreude they felt in response to Pakistani conspiracy theories surrounding the death of bin Laden. As Philip Gourevitch blogs:
This being France, within minutes of the first news of D.S.K.’s arrest, there were rumors that he was the victim of a plot. Christine Boutin, the leader of the Christian Democrats in France, declared that D.S.K. had been entrapped, although she did not specify by whom, or how—but there was no shortage of possibilities floating in the French ether today: Sarkozy, of course, or Socialist rivals, or else, I heard someone say, the Russians who are unhappy with how he has dealt with them at the I.M.F., or maybe the Greeks, whose economy has self-destructed almost as thoroughly as he now has. You could even find D.S.K. being called the new Dreyfus. In conversations with writers, and reporters, and intellectuals around Paris today, I found that nobody quite believed these fancies, but nobody could resist speculating about them either. D.S.K.’s behavior, in and of itself, was just too suicidal to make sense entirely by itself.
See also Adam Gopnik on these points.
The real problem with the arrest is that it appears that the only French politician to offer the right response is ultranationalist Marine Le Pen, who correctly observed that given DSK's past indiscretions with women, this was a long time coming. This will onky boost Le Pen's chances of advancing to the second round of the presidential election. Richard Brody explains why that's a problem:
The world of French politics is haunted by the 2002 elections: then, backers of the eliminated moderate-left candidate, Lionel Jospin, a Socialist, joined forces with the moderate right to give Chirac an overwhelming victory in the runoff, in a repudiation of the F.N. One of the leading factors in Jospin’s first-round elimination was the fragmentation of the left among candidates from a variety of parties. Now, it’s the unpopular Sarkozy whose party is falling apart, and who is doing his best not to offend the F.N. (as in recent regional elections, in which he expressed no second-round preference between that party and the Socialists), in the hope of siphoning away enough of its voters to slip into the second round instead of Marine Le Pen.
In effect, Marine Le Pen is the spoiler: any candidate she faces in the second round is sure to win (because voters and parties will unify to keep the far-right out of power); she will either eliminate the moderate right or the moderate left.
Elections in which one of the two choices is simply unelectable are unhealthy for democracy -- they lead to malaise and alienation from the democratic process. Unfortunately, it looks like France is headed in that direction.
5) I hereby issue a challenge to the readers to come up with their best joke about IMF conditionality and DSK in the comments.
Your humble blogger is in Brussels
recovering from jet lag to discuss Very Important Questions about the future of global trade. Since I'm thinking about this topic, it's worth noting that former U.S. Trade Representative Susan Schwab wrote, by trade policy standards, a rather provocative Foreign Affairs essay on the Doha round. The first paragraph:
It is time for the international community to recognize that the Doha Round is doomed. Started in November 2001 as the ninth multilateral trade negotiation under the auspices of the General Agreement on Tariffs and Trade and its successor, the World Trade Organization (WTO), the talks have sought to promote economic growth and improve living standards across the globe -- especially in developing countries -- through trade liberalization and reforms. Yet after countless attempts to achieve a resolution, the talks have dragged on into their tenth year, with no end in sight.
Schwab suggests that negotiatiors admit defeat on Doha, agree on whatever has been agreed, and ditch the bargaining round template that's governed most GATT/WTO trade talks in favor of more plurilateral approaches.
I confess to mixed feelings about this argument. On the one haand, Schwab is correct that Doha is deader than a doornail, and the G-20 loses just a little credibility every time it pledges to finish the round in a communique. That said, I'm dubious of what plurilateral measures can do on their own, and in the absence of forward momentum at the WTO, more and more trade action will take place outside WTO auspices.
What do you think? Should Doha just be declared dead?
Your humble blogger has not been
contributing to the Osama-a-thon here at FP blogging all that much, because he was busy being a moosehead attending the 2011 Estoril Conference. Many Important topics were covered at this conference, including:
1) The eurozone crisis;
2) The global governance crisis;
3) The crisis in the Middle East;
4) Other global security challenges;
5) The life and times of Larry King.
It was that kind of conclave.
Actually, that really doesn't do it justice. Here's a link to the opening video. Even that doesn't do it justice -- the opening ceremonies featured a sporano suspended 50 feet in the air, a gospel choir, a drum corps, and what I can only assume are the backup dancers for Lady Gaga's music videos.
For a rundown of what the Big Cheeses said at the conference, check out my Twitter feed. The major substantive takeaway I got from the conference is that Portugal would like to do a serious hurt dance on Fitch, Moody's, and Standard & Poor. Half of the conference presenters were Portuguese, and most of the audience was as well. Here is a sampling of the questions the Portuguese asked anyone talking about anything remotely related to economics:
"Why do the bond rating agencies still influence markets after they failed so badly in 2008?"
"Shouldn't the bond-rating agencies be punished for their malfeasance last decade?"
"Aren't the bond-rating agencies to blame for everything bad that has happened since 2008?"
"What do you think of the idea of creating a European standard-ratings agency?"
"Say, has anyone thought about taking the heads of the bond-rating agencies and putting them in a duffel bag?"
OK, I made that last one up, but not the others.
Obviously, the Portuguese have very good reasons to be stressed out. And the bond-rating agencies deserrve an awful amount of flack. Still, the idea that they -- and they alone -- triggered both the 2008 financial crisis and Europe's sovereign debt crisis is absurd. They are far more the symptom than the cause of the crisis.
More blogging after
my eyes adjust to not seeing Lady Gaga's backup dancers everywhere I turn the weekend.
Today is Patriots Day in Massachusetts, which means it's a school holiday, which means I'm at home with the Official Blog Children. Because I don't have much time to blog in-depth about much, I'd like to address a shallow topic this AM -- Donald Trump.
The current frontrunner for the 2012 GOP presidential nomination has made a few comments hinting at how he would approach foreign economic policy. Let's take a look, shall we?
From the Wall Street Journal:
As for foreign policy, Mr. Trump said he is "only interested in Libya if we take the oil," and that if he were President, "I would not leave Iraq and let Iran take over the oil." He remains sharply critical of the Chinese, asserting that as President, "I would tell China that you're either going to shape up, or I'm going to tax you at 25% for all the products you send into this country."
"I'm all for free trade, but it's got to be fair trade," he said. "China has taken advantage of this country for a long time." Regarding the $300 billion he said China stands to make from trade with the U.S. this year, Mr. Trump said, "What's protectionism? ...I want to be protected if that's the case." As for pending trade deals with Colombia, Korea and other countries, he said he would only sign them if they were the right deals for the U.S. "If it's a bad deal, I wouldn't sign it," he said.
Here's a fun little project for the commenters: predict what would happen to the global political economy if, in fact, President Trump seized all of Iraq's oil reserves and slapped a 25% tariff on Chinese exports. Hint: I don't think it ends well.
As for the trade deals, given that almost all of Panamanian and Colimbian exports come into the United States duty-free, I'm dying to hear how the Donald is going to improve upon them.
The stuff from the WSJ is boilerplate economic populism mixed with a healthy dollop of ignorance about the global economy -- but then there's this exchange with CNN's Candy Crowley:
Donald Trump says that the "right messenger" could tell OPEC to lower crude oil prices, insisting that prices "will go down if you say it properly."....
Asked on by CNN host Candy Crowley what his idea would be to get OPEC to lower crude oil prices, Trump said: "It's the messenger."
"I can send two executives into a room. They can say the same things; one guy comes home with the bacon and the other guy doesn't," Trump said. "I've seen it a thousand times. ... We don't have the right messenger. [President Barack] Obama is not the right messenger. We are not a respected nation anymore and the world is laughing at us."
Well, I agree with Trump that the world is laughing at someone.
The statement that the U.S. is "not a respected nation anymore" is flatly false. As for whether the "right messenger" can convince OPEC to lower crude oil prices, methinks that Trump is vastly exaggerating the ability of any messenger to tell countries to act against their economic and political self-interest (not to mention OPEC's influence over oil prices). Well, that or he's been watching this scene way too many times.
According to Politico's Maggie Haberman and Ben Smith:
More than anything else, according to those who’ve spoken to [Trump], he doesn’t want to be seen as the butt of this particular joke.
“He gets mad that people aren’t taking him seriously,“ said one Republican who’s spoken with him.
So, just for the record , this is me trying to take Donald Trump's policy pronouncements seriously. That said, I'd like to thank the Donald for providing such easy blog fodder on a holiday!
My post last week on the dubious legitimacy/effectiveness of the G-20 has prompted a few responses. Let's take them in order, shall we?
Colin Bradford responds by arguing that I'm judging the G-20 strictly by its summitry, which is unfair:
The G-20 is not just a summit meeting of leaders. The G-20 has a very active track, which has been in existence since the Asian financial crisis in the late 1990s, of at least biannual meetings of finance ministers and central bank presidents. In addition, G-20 deputies and G-20 sherpas often meet to advance the agenda for the leaders. More than that, as a result of the activities in the finance ministers/central bank presidents track, there is now a network of senior officials continuously active not only in preparation for G-20 meetings, but also in dealing with crises and unexpected challenges.
What this means is that the new, more inclusive configuration of major economies from every region of the world that constitutes the G-20 is a process -- communicating, consulting, and even, on good days, coordinating among 20 countries, not eight. The G-20, in other words, is not an event.
Lest this sound too pie-in-the-sky, it should be pointed out that even former Bush administration sherapas are echoing Bradford's point.
As someone who worked on both G-20 and G-7 policy coordinaion while at the Treasury, I've experienced Bradford's point about the value of process first-hand. The thing is, the value-added of said process does require the occasional concrete outcome -- and the last 18 months have been underwhelming on that score. Bradford makes a valid point in observing that the kinds of policy coordination under debate in the G-20 are much more intrusive than anything that was talked about in the old G-7. Still, at some point you want to see some outcomes, and based on what happened over the weekend, I'm fairly confident in my pessimism.
CIGI's The Munk School of Global Affairs' Alan Alexandroff thinks I'm being too pessimistic because I'm relying on the international press coverage:
I and others have pointed out... the persistently negative international financial press – read this as the WSJ, the NYT and the FT at least. Differences are always played up; and agreements are generally characterized as inadequate. And it is here that Dan and I differ.
Fair enough, but I will say that my astringent evaluation of the G-20's recent activities are not only informed by press coverage, but also by off-the-record conversations I've had with both developed and developing-country participants in the G-20 process. [Oh!! Snap! Boom!!--ed. Yeah, that's right, I'm going all insider-y sources on you!] I'll be happy to hear feedback from those sherpas who think the process is working better than my "dead forum walking" characterization.
Art Stein argues that these blog exchanges are missing the key point:
The core issue, then, is whether for the G8 or the G20 disagreement and divergence over policy options are preferable to agreement, coordination, and a concerted response. There is a small literature among economists about whether macroeconomic policy coordination makes things better or worse. Implicit in Bradford’s argument is that disagreement and its policy consequences are not so bad and, implicitly, to be preferred to agreement between a less diverse set of actors. Perhaps. But what is the evidence? Is that true for every policy?
This is an excellent point, and one I made in All Politics Is Global -- sometimes noncooperation is actually the most efficient outcome. On macroeconomic policy coordination in particular, sometimes successful cooperation has brought about underwhelming policy consequences (see: Maastricht criteria).
That said, one could argue that part of the reason for the Great Recession was the absence of any serious effort to rein in mcroeconomic imbalances five years ago. Furthermore, Bretton Woods II is still persisting in the global economy. So, yes, I do think coordination in this case would be a good thing, and for a variety of excellebnt domesticf political reasons in the United States, China and Europe, it ain't happening.
Am I missing anything?
Colin Bradford has written a lot of useful and interesting material on global economic governance. I say this because I'm not really sure that his latest FP contribution meets the high standard of his prior work.
In "Seven New Laws of the G-20 Era," Bradford seems to be arguing that even if there are disagreements within the G-20, it's still an effective public policy forum. Here's a sample "law":
1. Visible disagreements can have positive side effects
Some commentators have argued that, because the G-20 reveals differences and divisions, the group itself must be a failure. Yet gone are the days when we could categorize a summit as a success or a failure based on the outcome document. Dichotomous thinking doesn't really work anymore. So if G-20 meetings display more tension than consensus, that might actually be a good thing. In its discord, the G-20 merely reflects the landscape of this dynamic 21st century. There is order and disorder in our world today, competition and coordination, conflict and consensus -- all going on at the same time. The G-20 is flushing those issues up not only for leaders to deal with but for publics to deal with as well. Unlike the G-8, the G-20 is creating stronger linkages between leaders and publics, because -- not in spite of -- the fact that the conflicts are visible.
Hmmmm..... nope, not buying this spin. Bradford's basic argument is that the G-20 exposes the fundamental disagreements so that the global public sphere can better understand the fundamental faultlines of global economic governance. The publicist that resides inside my brain can appreciate the virtue of this spin, but it's just that.
It's true that governance structures can serve as arenas of contestation. The problem with this logic is threefiold, however.
First, as a general rule, mass publics don't pay too much attention to high-falutin' economic summits. The issues are too arcane and the remove from daily life seems to large. So the only thing the public will digest from G-20 deadlock is that leaders can't agree on something.
Which leads to the second point -- in the end, publics usually want to see outputs from governance structures. There can be virtues from policy deadlock, but I'm thinking that if an issue makes it to the G-20 agendas it's because a lot of people want concrete policy action rather than additioonal bloviation. Continued disagreement will lead to mounting public frustration.
Which leads to the third point -- many national governments can endure long-lasting policy deadlocks because their domestic legitimacy is unquesioned. In the United States, for example, despite mounting frustration with a sclerotic policy process, there's not a huge groundswell for amending the Constitution to make it easier to pass laws. That's because both the Constitution and the U.S. government have been around for a while.
The G-20 doesn't have this legitimacy "cushion" to fall back on. It's not a national government with a monopoly on authority within its bailiwick. It's not a treaty body like the WTO or IMF. Unlike even the G-8, it can't point to decades of existence as a justification for its continued relevance. The G-20 rises and falls with its perceived effectiveness. While the forum had a good 2008 and a decent 2009, last year was a friggin' disaster. If the trend of policy gridlock continues, it won't matter what Nicolas Sarkozy proposes, the G-20 will be a dead forum walking.
Unfortunately, Bradford's essay sounds like a marriage counselor telling a troubled couple to "own your problems... embrace the discord." Sorry, not buying it.
Am I missing anything?
So this morning I checked the news and saw the following of interest:
2) The joint Saudi/UAE intervention into Bahrain threatening to become a regional flashpoint;
4) A poll suggesting that Ameticans' confidence in the American system of government had plunged to a 35-year low;
In other words, it looked like a full day of blog-worthy events, So you can imagine my utter delight at the fact that I spent most of today in an uber-academic conference, confined to a windowless, wireless room, not being able to blog about any of this.
Unfortunately, blogging time will not be ample for the rest of the week, as I'll be attending the International Studies Association annual meeting. So, let me step back and ask readers the following question: Five years from now, which of the five developments listed above will we look back and believe to be the most significant for world politics? Why?
I think the answer will still be the Japan earthquake, but I don't have any confidence at all in that prediction.
Your humble blogger is taking a brief break from teaching and
zombie book-whoring publicizing recently-released research to start work on new research. This requires me to be in Europe for the week. So, for some local color, it's worth asking how things are in the land of the euro, the eurozone, and the eurocracy.
Last year, during the epth of the Greek crisis, I argued that, "When going backwards isn't an option, and muddling through is no longer viable, the only thing left to do is move further along the integration project."
Last week, it seemed that France and Germany had come to the same conclusion. The Guardian's John Palmer provided a cogent summary on the deal that was being negotiated at Friday's European leaders' summit:
Angela Merkel, Nicolas Sarkozy and the other EU chiefs will sound out the parameters of a breakthrough deal which could take the euro area – at the heart of the EU – towards a de facto economic government. The deal will offer massive financial support for countries under the currency market cosh in return for governments accepting that national economic policy in future will first have to secure the broad approval of the rest of the euro area.
[You must be feeling sooooo vindicated right now!!--ed.] Oh, you betcha, got this one right on the money... wait, what's this Financial Times story by Peggy Hollinger and Peter Spiegel saying?
New cracks emerged at a summit of European leaders on Friday, as the prime ministers of several countries raised strong objections to a Franco-German plan that would commit all 17 users of the single currency to co-ordinating their economic policies....
[T]heir initiative triggered a backlash from other European Union leaders anxious to defend their national economic, labour and welfare policies.
In the summit’s concluding communiqué, European leaders also appeared to back off a commitment to give the eurozone’s €440bn bail-out fund new tools to help shore up struggling “peripheral” economies.
An initial version of the conclusions committed the EU to giving the fund more “flexibility” – a code word for new authorities such as buying sovereign bonds of struggling countries on the open market. After extensive debate, that language was taken out, however, and now only binds members to give the fund “necessary effectiveness”, a clear watering-down.
What happened? The Wall Street Journal's Irwin Stelzer explains:
Most countries profess broad agreement of the need for reforms along the lines Germany is demanding. Yet when confronted with the German-French package—the French have always favored some form of centralized economic management of the EU, including strict regulation and heavy taxation of the financial services sector that is centered in Britain—they balked.
Austria, with one of the lowest effective retirement ages in the euro zone, won't go along with an increase in the retirement age. Portugal won't buy into the end of wage indexation with inflation because it wants to offer a sop to public-sector workers whose wages have been cut by 5%. Neither will Belgium, Spain and Luxembourg. All in all, almost 20 countries at Friday's EU summit objected to the Germanization of their countries for one reason or another. So Germany refused to sign on to an increase in the size of the euro-zone bailout fund. "It was truly a surreal summit," commented Yves Leterme, Belgium's prime minister.
Stezler goes on to predict that there will be yet more Euro-muddling as a result of this deadlock. I'm sticking to my original prediction, however. As much as the European periphery dislikes the proposed grand bargain, some form of it will likely be accepted because the alternative outcomes seem even more unappetizing.
I'm at the point in my life when there are only three occasions that prompt the watching of cable news:
1) An election night;
2) A real-time breaking news event in which video has a comparative advantage over the web;
3) Being on the treadmill on a slow sports day with nothing good on basic cable.
So yesterday was no. 3, and I caught a report on Fox News about "pre-summit brinkmanship" on the part Hu Jintao. The headline was accurate: "China's President Hu Jintao: Dollar-Based System 'Thing of the Past.'" And I should stress that Fox News was hardly the only news outlet to jump on this turn of phrase.
That said, some perspective might be in order. The statement came from a
series of answers that
a committee of propaganda writers with the
stylistic panache of Andrei Gromyko Hu provided to the Wall
Street Journal and Washington
Let's reprint the question and answer in full, shall we?
Q: What do you think will be the US dollar's future role in the world? How do you see the issue of making the RMB an international currency? Some think that RMB appreciation may curb China's inflation, what's your view on that?
HU: The current international currency system is the product of the past. As a major reserve currency, the US dollar is used in considerable amount of global trade in commodities as well as in most of the investment and financial transactions. The monetary policy of the United States has a major impact on global liquidity and capital flows and therefore, the liquidity of the US dollar should be kept at a reasonable and stable level.
It takes a long time for a country's currency to be widely accepted in the world. China has made important contribution to the world economy in terms of total economic output and trade, and the RMB has played a role in the world economic development. But making the RMB an international currency will be a fairly long process. The on-going pilot programs for RMB settlement of cross-border trade and investment transactions are a concrete step that China has taken to respond to the international financial crisis, with the purpose of promoting trade and investment facilitation. They fit in well with market demand as evidenced by the rapidly expanding scale of these transactions.
China has adopted a package plan to curb inflation, including interest rate adjustment. We have adopted a managed floating exchange rate regime based on market supply and demand with reference to a basket of currencies. Changes in exchange rate are a result of multiple factors, including the balance of international payment and market supply and demand. In this sense, inflation can hardly be the main factor in determining the exchange rate policy (emphases added).
Meh. First of all, Hu isn't saying anything here that hasn't been said by other Chinese officials since early 2009.
Second of all, Hu didn't say that the RMB was going to be supplanting the dollar anytime soon. In fact, he pretty much said the opposite of that. China wants a multiple-reserve currency regime, and they're moving veeeerrrrrry slowly to bring their currency into the conversation. And minus the RMB, as I've said before, there ain't much in the way of viable alternatives right now.
If you read the rest of the answers, there's a lot of
"stiffly worded answers" mixed in with "a positive note on
bilateral ties," as Richard MacGregor of the Financial Times notes.
What I don't see is any brinkmanship.
Substantively, however, what about the future? Will a multiple currency reserve system work? It's a vision shared by Barry Eichengreen, Nicolas Sarkozy, and.... well, I'm not sure who else. I have my doubts, but I can't quite convey them in a single blog post.
What do you think?
Any book, journal article, magazine piece, op-ed, or blog post published in the last calendar year that made you rethink how the world works in such a way that you will never be able "unthink" the argument.
The 2008 financial crisis and its aftermath are still topic numero uno. As I told the editors of FP when they asked me for my favorite books of the past year, "If last year's crop of books was about the tick tock of what happened, this year's harvest was more about why it happened." Topic numero duo for me was the future of Sino-American relations in the global political economy. These two topics govern my list:
1) Michael Lewis, The Big Short: Inside The Doomsday Machine, Norton. By honing in on the few people who bet against the subprime mortgage boom, Lewis's book nicely demonstrates the myriad ways in which the bubble was allowed to inflate for so long -- and why the people who got it right were, to be blunt, too socially awkward to help the markets correct sooner.
2) Raghuram Rajan, Fault Lines, Princeton University Press. The best combined political economy take on the underlying domestic and international factors that contributed to the crisis.
3) John Quiggin, Zombie Economics, Princeton University Press. Quiggin ruthlessly deconstructs the ways in which market-friendly ideas devolved from rigorous theory into caricature. Free market advocates won't want to read this book, but they should.
4) Yu Yongding, "A Different Road Forward," China Daily, December 23, 2010. Anyone who thinks that it's possible to extrapolate China's recent growth trends indefinitely into the future needs to read this, like, now. Yu's brutally candid assessment of what's wrong with China's current growth model could easily be written off as the musings of a crank -- if it wasn't for the fact that the guy was a former member of the monetary policy committee of the Peoples' Bank of China, and that China Daily printed the op-ed in the first place.
5) McKinsey Global Institute, "Farewell to Cheap Capital," December 2010, and Goldman Sachs Global Economics Paper No. 204, "EM Equity in Two Decades: A Changing Landscape," September 2010 (tie). Both of these reports make a similar point -- a lot of the action in capital markets over the next two decades will be taking place in the developing world. The McKinsey report is particularly intriguing on this point: it suggests that United States will stop seeing historically low interest rates very soon, and won't see them again for at least a generation.
6) Nicholas Eberstadt, "The Demographic Future," Foreign Affairs, November/December 2010. Eberstadt's essay provides a cogent summary of the demographic future of every great power in the world, and the challenges each country -- including the United States -- faces in confronting its demographic future.
7) Pew Global Attitudes Survey responses to "economic power" question, April 2010. In their surveys, Pew asked respondents to identify "the world's leading economic power." Compare and contrast the countries where the plurality response was "The United States" versus those responding "China."
8) The Wikileaks' economics cables. The cables I've read that touch on economic policy are revealing, not because they say anything different from what one could read from open sources, but because they say the exact same thing as what one could divine from open sources. Now, there are important caveats that need to be kept in mind when interpreting these cables -- but I find this observation to be veeeeeerrrrry interesting.
9) GOP, "A Pledge To America," September 2010. When the GOP disappoints deficit hawks and Tea Party activists in 2011 -- and they will, they so, so will -- go back and look at this craptastic document to understand why. Marvel at a document that pledges to cut America's deficit while not touching Social Security, Medicare, Medicaid, defense, or raise taxes. After reading this, I stopped taking GOP economic policy pronouncements seriously.
10) Linda Jakobson and Dean Knox, "New Foreign Policy Actors in China," SIPRI Policy Paper No. 26, September 2010. This isn't just about foreign economic policy, but it provides a very useful lens into the fotreign policymaking machine of the Chinese government and the Chinese Communist Party.
I have to close with the depressing observation that there was no single peer-reviewed scholarly article in this bunch. Now, in fairness, it's very difficult to get something through the peer-review mechanism and have it still be au courant. Still, I'd be happy to hear from among the academics in the audience if there was any peer-reviewed scholarship that belongs on this list.
In an ironic twist of fate, I don't have the time to fully comment on the global political economy of the G-20 summit outcomes (except to say I told you so) because… er… I'm attending a global political economy conference.
So talk amongst yourselves about the
massive fail demonstrably non-cooperative outcome to answer the following query: Who wins and who loses in a world of non-cooperation? And if the G-20 countries can't agree on what they're supposed to negotiate, what will they talk about instead?
You know, as insults go, this one is pretty bush league:
China's credit-rating agency on Tuesday downgraded its rating for U.S. sovereign debt and warned of further cuts, in a pointed move ahead of this week's Group of 20 major economies meeting.
Dagong Global Credit Rating Co. Ltd., the only wholly Chinese-owned rating agency, cut its rating on U.S. debt to A from AA, citing the Federal Reserve's move last week to initiate another round of asset buying, worth $600 billion. It also placed the U.S. sovereign credit rating on negative watch.
"The new round of quantitative easing monetary policy adopted by the Federal Reserve has brought about an obvious trend of depreciation of the U.S. dollar and the continuation and deepening of credit crisis in the U.S.," Dagong said.
"Such a move entirely encroaches on the interests of the creditors, indicating the decline of the U.S. government's intention of debt repayment," the agency said.
Sounds very, very serious, until we get to this part of the story:
The downgrade of the U.S. rating by Dagong comes just over a month after the U.S. Securities and Exchange Commission denied the firm's application to officially rate bonds in the U.S.
At that time, Dagong called the SEC's move discriminatory and said it was considering legal action.
The SEC said in denying the application that "it does not appear possible at this time for Dagong to comply with the record keeping, production and examination requirements of the federal securities laws."
Indeed, even the New York Times' now-thrice-weekly story about rising Sino-American tensions observes:
In the rest of the world, the United States is still the strongest of credit risks, and the Chinese downgrade is not expected to have much real impact....
[T]hose critics, mostly countries that fear that recent American policy will devalue the dollar and undercut their competitiveness, do not appear poised to offer an alternative to an economic order that has been led by the United States since the end of World War II, or to the role the dollar has played for decades as the de facto world gold standard.
The Chinese, who have protested that the Federal Reserve is trying to unilaterally manipulate the dollar for the purpose of creating jobs at home, have been accused of doing exactly that for years - the root of many of the world's economic tensions today, in the eyes of Mr. Obama and his economic aides.
Look, clearly China is suffering from... an insult gap. Americans have been leading the world in trash-talking for decades now. China is trying hard to catch up, but I think the authorities in Beijing need some assistance in their game of catch-up.
I hereby call on all readers to offer, in the comments, ways that Chinese authorities can really sharpen their rhetorical jabs at the United States. In the spirit of kicking off the conversation, here are a few suggestions:
"Chinese Halitosis Institute Downgrades American Fresh Breath Index to BB: 'Seriously, What's The Deal With All The BBQ,' Asks Agency Head"
"Chinese Election Monitors Accuse Obama Administration of Rampant Ballot Fraud During Midterm Elections: 'It's No Myanmar, I'll Say That' According to Chief Monitor"
"Chinese Dietary Institute says American Food Leaves Them Hungry After Only 12 Hours"
Go to it.
As I said last week, the emergence of gridlock between the legislative and executive branches of U.S. government is going to put political pressure on the unelected components of government.
This isn't just a national phenomenon, however -- it's also an international one. What happens if the big players on the global stage can't agree -- either internally or externally -- on new arrangements to solve a mounting policy problem? If the problem clearly needs fixing, then pressure inevitably builds up to use a pre-existing mechanism to address the issue. Some elites in gridlocked countries will welcome this kind of development, because it allows them to bypass domestic impediments to policy change. Because this new possibility is both suboptimal and less than democratic, however, it inevitably builds up global resentments against unaccountable international institutions.
For exhibit A of this phenomenon today, let's wander over to John Broder's New York Times story on the latest developments in fashioning a policy response to climate change:
With energy legislation shelved in the United States and little hope for a global climate change agreement this year, some policy experts are proposing a novel approach to curbing global warming: including greenhouse gases under an existing and highly successful international treaty ratified more than 20 years ago.
The treaty, the Montreal Protocol, was adopted in 1987 for a completely different purpose, to eliminate aerosols and other chemicals that were blowing a hole in the Earth's protective ozone layer.
But as the signers of the protocol convened the 22nd annual meeting in Bangkok on Monday, negotiators are considering a proposed expansion in the ozone treaty to phase out the production and use of the industrial chemicals known as hydro fluorocarbons or HFCs The chemicals have thousands of times the global warming potential of carbon dioxide, the most prevalent greenhouse gas.
HFCs are used as refrigerants in air-conditioners and cooling systems. They are manufactured mostly in China and India, but appliances containing the substance are in use in every corner of the world. HFCs replaced even more dangerous ozone-depleting chemicals known as HCFCs, themselves a substitute for the chlorofluorocarbons that were the first big target of the Montreal process…
[T]he plan is not expected to be adopted this year. Large developing countries, including China, India and Brazil, object that the timetable is too rapid and that payments for eliminating the refrigerant are not high enough.
One advantage to using the Montreal protocol as a vehicle, supporters say, is that negotiations over the treaty have been utterly unlike the contentious United Nations climate talks that foundered in Copenhagen last year. Negotiators say that without legislative action on curbing greenhouse gases by the United States, little progress will be made when countries gather in Cancún, Mexico, late this month for another round of climate talks.
In a post-election news conference, President Obama noted that it was doubtful that Congress would do anything to address global warming "this year or next year or the year after."…
Daniel A. Reifsnyder, the deputy assistant secretary of state for environment and the nation's chief Montreal Protocol negotiator, said that it might take several years to persuade the ozone treaty countries to back the plan.
In addition to pace and cost issues, some countries say that HFCs have little impact on the ozone layer and thus should be handled under the United Nations climate change talks. Mr. Reifsnyder dismissed that as a legalistic argument and said that the ozone treaty could and should be used to achieve broader environmental objectives.
"What we've found is that the Montreal Protocol has been a very effective instrument for addressing global environmental problems," Mr. Reifsnyder said in an interview. "It was created to deal with the ozone layer, but it also has tremendous ability to solve the climate problem if people are willing to use it that way."
If I was the policymaker in charge of pushing action on climate change forward, I'd be very tempted to agree with Reifsnyder. This might be a way of achieving a deliverable that would simply not be possible under the Copenhagen Accord or the United Nations effort to negotiate a successor to the Kyoto Protocol.
On the other hand… this is also an action that would inject political controversy into what was a ridiculously successful accord. It will push another governance process that's already in critical condition into hospice care. Plus, I'm not sure it will work -- China and India are going to stoutly resist this move.
My larger point, however, is that political paralysis in certain global governance forums is simply going to trigger a search for more suitable global governance structures. That search isn't going to change the underlying disagreements, however, and it just might cause an erosion of faith in the few multilateral structures that do appear to work well.
Keith Bradsher reports on the latest move in Chinese economic statecraft:
China, which has been blocking shipments of crucial minerals to Japan for the last month, has now quietly halted some shipments of those materials to the United States and Europe, three industry officials said this week.
The Chinese action, involving rare earth minerals that are crucial to manufacturing many advanced products, seems certain to further intensify already rising trade and currency tensions with the West. Until recently, China typically sought quick and quiet accommodations on trade issues. But the interruption in rare earth supplies is the latest sign from Beijing that Chinese leaders are willing to use their growing economic muscle.
"The embargo is expanding" beyond Japan, said one of the three rare earth industry officials, all of whom insisted on anonymity for fear of business retaliation by Chinese authorities.
They said Chinese customs officials imposed the broader restrictions on Monday morning, hours after a top Chinese official summoned international news media Sunday night to denounce United States trade actions....
The signals of a tougher Chinese trade stance come after American trade officials announced on Friday that they would investigate whether China was violating World Trade Organization rules by subsidizing its clean energy exports and limiting clean energy imports. The inquiry includes whether China's steady reductions in rare earth export quotas since 2005, along with steep export taxes on rare earths, are illegal attempts to force multinational companies to produce more of their high-technology goods in China.
Despite a widely confirmed suspension of rare earth shipments from China to Japan, now nearly a month old, Beijing has continued to deny that any embargo exists.
Industry executives and analysts have interpreted that official denial as a way to wield an undeclared trade weapon without creating a policy trail that could make it easier for other countries to bring a case against China at the World Trade Organization.
So far, China seems to be taking a similar approach in expanding the embargo to the West.
Hat tip to Will Winecoff, who asks, quite reasonably, "What in samhell is China thinking?"
Assuming that the New York Times story is accurate, there are three ways to think about what Beijing is doing. First, this could just be all about domestic politics. Bradsher notes that the decision was made after a Central Committee meeting. It's possible that as the currency wars heat up, and as the U.S. starts complaining to the WTO, there was a need to assuage some nationalist outrage. Of course, no one really knows what Chinese domestic politics looks like, so who the hell knows how much validity to give to this argument.
The second way to look at it is that China's leaders have been reading The Sanctions Paradox. I argued in that book that high expectations of future conflict between the sanctioning and the sanctioned state would lead to frequent episodes of economic coercion, but each attempt would yield only minimal concessions. So far, this model holds up: the past month of China's rare earth export controls have yielded them exactly one returned fishing boat captain. Maybe they are hoping that extending the ban to the United States will force Washington to back down in their WTO complaints. Given rising conflict expectations, that's about the most they're going to get from this action.
The third way to think about it is that China is being ridiculously short-sighted in their use of economic coercion. As Patrick Chovanec notes at Seeking Alpha:
[China] really shot itself in the foot. By flexing its muscles so eagerly, over a relatively minor incident, it alarmed its customers and possibly frightened them off, when a softer approach might have lulled them into continued and deepening dependence. There's no question that China can extract rare earths at the cheapest price, in purely monetary terms. But now China's trading partners must be seriously wondering, what could the real price amount to, when the bill eventually comes due?
China's foreign economic policies with respect to raw materials suggests that Beijing doesn't think market forces matter all that much -- what matters is physical control over the resources. This is a pretty stupid way of thinking about how raw materials markets function, and it's going to encourage some obvious policy responses by the rest of the world. Non-Chinese production of rare earths will explode over the next five years as countries throw subsidy after subsidy at spurring production. Given China's behavior, not even the most ardent free-market advocate will be in a position to argue otherwise.
More importantly, China's perception of how economic power is wielded in the global political economy is going to have ripple effects across other capitals. If enough governments start reacting to China's economic statecraft by taking similar steps to reduce interdependence with that country, then China will have created a self-fulfilling prophecy in which geopolitics trumps economics. Another possibility is that the rest of the world will operate as before in dealing with each other, but treat China differently, developing CoCom-like structures and fostering the creation of explicit economic blocs.
That really would be the worst of both worlds for Beijing. China is growing, but the economic weight of countries that prefer market-oriented ways of doing business is still much, much larger.
In going for the short-term gain, China is inviting a long-term containment policy. That might allow for some rally-round-the-flag support at home, but it's going to be a massive net loss for their economy.
According to Bloomberg, Brazilian Finance Minister Guido Mantega would like the real to stop appreciating and for the rest of the world to cooperate on currency matters:
Brazil's real dropped the most in two weeks after Finance Minister Guido Mantega raised taxes on foreign inflows for the second time this month to prevent appreciation and protect exports from what he called a global "currency war."
Brazil, Latin America’s largest economy, raised the so- called IOF tax on foreigners' investments in fixed-income securities to 6 percent from 4 percent. It also boosted the levy on money brought into the country to make margin deposits for transactions in the futures market to 6 percent from 0.38 percent…
"This currency war needs to be deactivated," Mantega told reporters. "We have to reach some kind of currency agreement.” …
Mantega cited the Plaza Accord of 1985, when governments agreed to intervene to devalue the U.S. dollar against the yen and the German deutsche mark, as the kind of agreement that might be required. International policy makers failed to narrow their differences on intervention in currency markets during the International Monetary Fund’s annual meeting this month.
Hey, you know, I bet the G-20 would be a decent forum for Mantega to foster this kind of cooperation. It's a good thing that there's a G-20 Finance Ministers meeting this weekend in Seoul.
Brazilian Finance Minister Guido Mantega will not attend a meeting of Group of 20 member-country finance officials in South Korea this week, a Finance Ministry spokesman said Monday.
The spokesman said Mantega would remain in Brazil while the government studies possible introduction of foreign exchange policy measures to curb the strengthening of the country's currency, the real.
Brazil's government will be represented at the meeting by Finance Ministry International Affairs Secretary Marcos Galvao and Central Bank International Affairs Director Luiz Pereira.
Is this rank hypocrisy by Mantega? Not entirely. It's something worse -- a judgment by Brazil's policy principals that more will be accomplished by staying in Brasilia to stem the tide of inward capital flows than to go to Seoul to seek a multilateral solution to the current lack of macroeconomic policy coordination.
There's plenty of blame to go around on this, but if Brazil thinks the G-20 is not going to accomplish much… then the G-20 is a dead forum walking.
The past week has seen an escalating series of news stories about a looming "currency war," as country after country tries to drive their currency downward, the United States blames China as the source of original sin on this, and China
pisses off yet another country responds by digging in its heels, and the IMF wrings its hands.
If you need to read one article on why things are going down the way they are, it's Alan Beattie's excellent survey in the Financial Times of how countries as responding to this situation:
Washington is looking for allies -- particularly among the emerging economies, who complain about their own competitiveness and volatility problems -- in its campaign for exchange rate flexibility. Trying to take on Beijing single-handed makes the US vulnerable to the charge that it is a lone complainant blaming its own profligate shortcomings on the country that is kind enough to lend it money, holding the best part of $1,000bn in U.S. Treasury bonds…
Yet despite U.S. claims of broad support, backing appears sporadic…
[S]ome U.S. policymakers privately complain that European backing is patchy and tends to go up and down with the euro. In the first half of the year the euro was pushed lower by the gathering Greek crisis, by early summer falling 17 per cent below its January level. Focused on local difficulties, and with the German export machine powering ahead, European officials saw little need to take on Beijing over currencies and had little energy to do so…
Across the emerging economies, the plan of attack seems to be to keep quiet and pass the ammunition. Despite widespread recognition of the distortions China’s exchange rate policy appear to be causing, governments have generally preferred unilateral intervention to a public slanging match.
True, in April the governors of the Reserve Bank of India and the Central Bank of Brazil complained that Beijing was hurting their exporters.
But recently Celso Amorim, Brazil’s foreign minister, told Reuters: "I believe that this idea of putting pressure on a country is not the right way for finding solutions." Significantly, he added: "We have good co-ordination with China and we’ve been talking to them. We can’t forget that China is currently our main customer…"
With the prospect of diplomatic progress limited, currency policy in the U.S. and Europe may end up being conducted through domestic monetary policy. If, as seems possible, the U.S. Federal Reserve, the Bank of Japan and the European Central Bank return to quantitative easing in order to boost growth, their currencies are likely to weaken -- as the yen briefly did after the Bank of Japan’s announcement of looser monetary policy this week.
So, to sum up:
1) Every country is free-riding/buckpassing on this issue, hoping that the United States can dislodge China on its own.
2) The international regimes designed to prevent free-riding like this -- namely the G-20 and the IMF -- are not up to this task. [What about the WTO? -- ed. Fuggedaboutit.]
3) The source of China's rising power is not its hard currency reserves or its command over scarce rare earths, but its burgeoning domestic market.
4) Ironically, the United States and other countries want China to accelerate the growth of its domestic market, which would in turn give it more power. Even more ironically, China doesn't want to do this right now.
5) The sum effect of all of this will be a series of uncoordinated interventions into currency markets that will increase market volatility, political posturing, and eventually lead to the erection of capital and/or trade controls.
Developing… in a very disturbing manner.
MANDEL NGAN/AFP/Getty Images
Europe's debt crisis is not going away anytime soon, which means that the crisis over European monetary union won't be going away either. As it turns out, the European Commission is on this, proposing things like "excessive deficit procedures" and the like.
Will this work? Well … let's go to the Economist's explanation for why the previous set of rules failed to prevent this from happening:
The “stability and growth pact” was supposed to limit each country’s budget deficit to 3% of gdp and public debt to 60% of GDP. It failed, in part because France and Germany refused to abide by it -- and even rewrote the rules when they breached the deficit limit.
In contrast, the problems that arose because different economies responded differently to the zone’s common monetary policy were underestimated. The sudden drop in real interest rates on joining the euro in Greece, Ireland and Spain fuelled huge spending booms. (Portugal had enjoyed its growth spurt in the late 1990s in anticipation of euro membership.) Rampant domestic demand pushed up unit-wage costs relative to those in the rest of the euro area, notably in Germany, hurting export competitiveness and producing big current-account deficits.
The euro allowed these internal imbalances to grow unchecked and now stands in the way of a speedy adjustment, because euro-area countries whose wages are out of whack with their peers’ cannot devalue.
So, what is to be done? In the past, European integrationists have been quite adroit at using periods of crisis and malaise to jumpstart further integration efforts. It's possible that this could happen again.
In this case, however, integration efforts are going to be very costly. The Economist explains:
[T]here are three ways for a country to restore competitiveness: devaluation (which reduces wages relative to those in other exporting countries), wage cuts or higher productivity. In the euro area, the first option is out. The other two rely on easing job-market rules so that pay matches workers’ efficiency more closely, and workers can move freely from dying industries and firms to growing ones.
I'm thinking unions will
develop breakout nuclear capabilities aren't going to be big fans of that second option. The third option seems like the ultimate political dream, except it involves eliminating regulations that likely benefit a lot of entrenched interest groups.
Another possibility is greater fiscal centralization. The Economist is not keen on this, but that's besides the point -- as Mary Sarotte points out at Foreign Affairs, there's a Very Important Country that's not going to go along with the move:
The challenge now is governance reform, not expulsion of member states. Reverting to national currencies would drive the values of reissued southern currencies into the ground and the deutsche mark into the sky, thereby undermining Germany's export competitiveness and job market, to say nothing of the collateral damage to the European Union and the single market. The eurozone crisis should not signal the end of the euro but rather the start of a long-overdue overhaul. The idea of a European Monetary Fund, endorsed by Wolfgang Schäuble (an elder statesman from the days of German unification and now a subordinate of Merkel), faded after Merkel dismissed it but deserves broader support. Germany also needs to reconsider its calls for painful fiscal discipline on the part of the weakest countries until their economies regain footing. Ideally, but perhaps not realistically, Merkel should return to previous German form and spearhead a revision of the Maastricht Treaty, leading a fresh effort to do for political union what Kohl and Mitterrand did for monetary union.
The unlikelihood of such a move exemplifies a fundamental problem within the whole European Union: there exists a built-in tension between the lofty goals of integration and member states' collective unpreparedness to think through the consequences of their ambitious project. The great achievement of the past has been to reconcile these contradictory impulses by focusing on practical agreements. It is time to do so once again and realize that the necessary consequence of monetary union is greater political union.
In some ways, what happens from here on out will be an excellent test of whether economic interdependence really alters national incentives. As I blogged a few months ago, "When going backwards isn't an option, and muddling through is no longer viable, the only thing left to do is move further along the integration project."
Of course, the European have spent the past few months muddling through some more. Given current trends, however, that option is going to disappear sooner rather than later.
Gideon Rachman notes that the WTO has been denuded of controversy, and wonders why:
It’s strange to recall that - just a decade ago - the World Trade Organisation was a deeply controversial organisation. It was the WTO that was fingered by the anti-globalisation movement as the handmaiden of ruthless western capitalism and oppressor-in-chief of the poor. The WTO summit in Seattle in 1999 degenerated into a street riot.
On Wednesday morning, however, the WTO staged a public forum in Geneva, without the need for riot police - and indeed without much public fuss at all. I chaired the opening session at the organisation’s modest headquarters on the banks of Lac Leman.
I think that one of the main reasons why the WTO is no longer in the line of fire is that the change in the pattern of world trade over the last decade - combined with a slump in the West and a boom in China and India - makes the idea that global free trade is a tool of western domination look increasingly absurd. The world has got a lot more complicated than that; and even the anti-globalisation movement has had to acknowledge that complexity, if only tacitly. These days, it is the developing nations that are pressing for completion of the Doha Round and the rich countries that are dragging their feet.
Hmmmm..... well, let's call Rachman's explanation the optimistic interpretation for why the WTO doesn't attract demonstrators anymore. Let me offer a more pessimistic explanation, which consists of two parts:
1) Finance is the new bogeyman. The 2008 financial crisis and the subsequent Great Recession were caused by bubbles in financial markets -- trade, at best, played a marginal role. Perhaps it's not that trade has become less controversial so much as finance and capital flows have become way more controversial.
2) The WTO is no longer liberalizing. The WTO does an impressive job of ensuring that the status quo of a (largely) open trading system keeps functioning. What has exercised protestors in the past however, was the notion that further liberalization was going to take place. Since the Doha round is deader than a doornail. why bother with protesting?
Now imagine a world where there was forward progress on the Doha round -- do you seriously think there would be no protests associated with the WTO? Oddly enough, in this case, a lack of protest is a bad sign for trade.
I would much prefer Gideon to be right -- but I'm pretty sure he's wrong.
I think it's safe to say that Venezuela's economy has seen better days. The government has been issuing something that looks an awful lot like food rationing cards. Now the Financial Times' Benedict Mander reports that Venezuela's new currency controls are affecting its import sector in a really sensitive area:
Unable to access enough dollars, local importers are feeling the pinch across a wide range of goods, from Scotch whisky, the nation’s favourite drink, to luxury foods and swanky cars....
Each month, whisky importers – some of the worst hit – say they can legally get only as much foreign currency as they would normally use in a day. Bars and restaurants fear the reaction when they run dry. “We’ve got enough boxes to last a few more weeks, but after that, I’m worried about what will happen,” said the manager of one bar.
The irony, of course, is that Venezuela is doing to itself what the United States has been trying to do to North Korea for years (and re-emphasized in the past few months) -- denying access to luxury goods for the elites.
Let's call these kind of measures Mad Men sanctions, shall we? Anything that embargoes sumptuous indulgences -- including alcohol, cigarettes, and Christina Hendricks -- counts as a Mad Men sanction. The question is, whether self-imposed or externally imposed, do they make a difference?
With respect to North Korea, I think the answer is pretty clearly no. This is mildly surprising. Even though I'm pretty skeptical about these kind of sanctions in general, the DPRK is one of the few countries where Mad Men sanctions truly are "smart." The North Korean elite leads a very segmented life, and making it harder to get Johnny Walker Blue affects very few average North Koreans. That said, while the North Korean elite appears to be tottering just a little, it's not because they're going into Scotch withdrawal.
Of course, there is a difference between an external actor imposing a Mad Men embargo and an internal actor screwing up the economy to the point that a petrostate needs to husband foreign exchange reserves. For IR grad students out there, it's a good test: is a regime hurt more from an externaly-created embargo or from an internally-created one?
[And what about the IR effects of Christina Hendricks?--ed. Definitely a question that begs for further research. Dibs!!--ed.]
Michael Buckner/Getty Images for Belvedere Vodka
Israel is a special country, and getting there is part of its special nature. If you choose to come, here are some useful travel tips that might make your voyage a more pleasant one:
Get to your gate on the early side. All trips to Israel involve a second - and to my eyes, at least - completely superfluous security check at the gate. I say superfluous because it seemed to be an exact duplicate of the security screening required to get to the gate in the first place. So, just to be clear, this is bad redundancy, not good redundancy.
Once on the plane, immediately be prepared for a high-stress effort to get the plane out of the gate. The reason is that most planes flying to Tel Aviv have a fair number of Orthodox Jewish families on board. Given that the average size of such a family is about five kids, there are a lot of child seats that need to be installed, seat-swapping that needs to be done, and so forth. On my flight, as well as Goldie's, Marty's, and B-Woww's, the flight attendants went to 11 on the panic meter because the plane couldn't leave the gate unless everyone was sitting down, and inevitably someone wasn't sitting down. Frantic warnings about missing slot times for takeoff will ensure. In all likelihood, the plane will settle down just at the last moment possible.
Go to the bathroom about 45 minutes before landing - because you're not allowed to get out of your seat for the last thirty minutes on a flight to Israel.
Israel is a member of the OECD, which means it has OECD levels of traffic. It will take some time to get from the airport to your hotel. The traffic signs are in Hebrew, Arabic and English, with many in Russian as well. Some of the English translations can be very direct. Next to one power line, it simply said, "Danger of Death."
As for Tel Aviv itself, my only useful geopolitical observation is that I've discovered the real reason that the U.S. embassy will never relocate from Tel Aviv to Jerusalem. Presidents repeatedly pledge to make this move, but it never happens.
Hard-bitten realpolitik types will explain that this is because of the ill will that such a move would engender within the Arab world. Ha!! The real reason is that the current U.S. embassy is located on some prime beachfront property next to the big hotels. If I was a Foreign Service Officer assigned to Tel Aviv, I'd do everything in my power to prevent moving the embassy away from a beach with powdery sand, warm Mediterranean waters, and bikinis and Speedos as far as the eye can see. It doesn't even matter if there's ever an Israeli-Palestinian peace - bureaucratic politics will keep that embassy right where it is.
Fortunately for embassy officials, and unfortunately for almost everyone else, there won't be a peace anytime soon. More on that in my next update.
Daniel W. Drezner is professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University.