The Challenge of Nacro-States

A soldier stands outside military headquarters in Guinea Bissau following April’s coup.

It was reported last week that the government of Guinea-Bissau was likely providing shelter for expansive nacro-trafficking operations. According to the UN Office on Drugs and Crime (UNODC) for West Africa,  a large number of small planes have been making the transatlantic journey from Latin America to the West African nation, likely carrying cocaine which is then sent on to Europe. While West Africa has long been an important transit point for Latin American drugs moving to Europe, the UNODC now estimates that Guinea-Bissau accounts for at least half of all cocaine shipped through the region.

What makes this case particularly interesting is the role of the military coup. The West African nation has a long history of coups and coup attempts; in nearly forty years of independence, no elected leader has finished their constitutional term of office.

Last April, the country’s military staged a coup ahead of the second round of presidential elections. The new government is believed to have close ties to drug traffickers. According to a BBC report, top military officials are believed to be working with drug traffickers to facilitate their operations. The UN Security Council has sought to isolate the nation, imposing travel bans on coup leaders, and the US government has imposed financial sanctions on key officials under the Drug Kingpin Act.

The forces driving the development of the nacro-state are clear. Guinea-Bissau is one of the world’s poorest nations, with a gross domestic product of $970 million in 2011 (this works out to a per capita figure of approximately $600. This ties Guinea-Bissau at 172^nd place (out of 191 countries) in the world. Nacro-trafficking brings provides a key source of income and revenue in an otherwise exceedingly poor country.

At the same time, drug trafficking illustrates (the admittedly shady side) of globalization. The drug trade accounts for an estimated 5-6 percent of all world trade, a figure slightly greater than that of agriculture and automobiles combined.Indeed, a UNESCO report concludes that it’s behind only the global arms trade (and perhaps now the global oil trade) in market size. It is driven by regional specialization and comparative advantage, and highlights the challenges of weak and failed states and the dynamics of global inequality.

What do you think? What can we learn from narco-trafficking about the dynamics of globalization and international relations?  And what should be done about the situation in Guinea-Bissau? How, if at all, should the international community respond to narco-states? Take the poll or leave a comment below and let us know.

Economic Globalization Meets Shaky Economies: Fasten Your Seatbelts

Traders on the floor of the New York Stock Exchange on Thursday, when the Dow plunged more than 500 points.

Dramatic developments over the last few days have once again highlighted the interconnectedness of the world’s economies and the ease with which economic problems in one corner of the globe can quickly spread to others. Globalization refers to the integration of markets, cultures, and information networks and it has accelerated in recent decades with advances in communication technologies and increased global trade.

As reviewed in this timeline from BBC news, the 2007-2008 global financial crisis began with the sub-prime mortgage collapse in the United States, but economic turmoil quickly spread to Europe and beyond as banks that had invested in mortgage-backed securities suffered serious losses.  Similarly, the debt problems of Greece, Ireland, and Portugal since 2009 led to a decline in the value of the euro and have thrown the entire 17-country eurozone into crisis.

On Thursday stocks plunged on Wall Street; the Dow fell over 500 points in the biggest single day loss since 2008. Interestingly, most analysts attributed the selloff not primarily to concerns about the American economy, but to fears about the solvency of Italy and Spain–the third and fourth largest eurozone economies behind Germany and France.  The threat of a “contagion” effect is highlighted in this explainer from CNN:

“…Anxieties over Italy’s economic future have led many to wonder what its default might mean for Europe and beyond, with the dreaded word ‘contagion’ on many lips. [Former IMF executive board member Domenico] Lombardi believes the current situation is serious. ‘If you affect Italy, you can really weaken the euro significantly,’ he says, describing it as the ‘weakest link’ among Europe’s big economies.  Worse, he says, the European Union, the IMF and the European rescue fund do not have enough money to bail it out as they did smaller European economies — sparking a potential domino effect. So far the crisis has been limited to Greece, Ireland and Portugal, he said.  ‘But of course if the crisis was to hit Italy, it would spread also to France, to the rest of the euro area, and of course you would have contagion to the U.S. through the banking system.’ The huge public debt held by the United States also would make it more vulnerable to speculators, he added.”

How Standard and Poor’s decision (announced late Friday) to downgrade the U.S. credit rating will affect the global economy is the subject of great speculation this weekend. Officials from the G-7 and G-20 groups of major economies are holding conference calls this weekend to plan for further turmoil in the financial markets.

Is there anything individual countries can do, in a globalized world, to limit the damage they may suffer from a possible global contagion, or are they and their citizens at the mercy of the world economy?  Could protectionist trade practices and other tools of economic nationalism safeguard the U.S. or would this only make problems worse?

Choosing the Next IMF Chief: a European Power Grab?

Disgraced former IMF chief Dominique Strauss-Kahn and the front-runner to succeed him, French finance minister Christine Lagarde.

The resignation of International Monetary Fund (IMF) Managing Director Dominique Strauss-Kahn after his indictment on sexual assault charges and the subsequent scramble to find his successor have ignited a controversy over Europe’s “right” to place a European at the helm of the IMF. Such a right is nowhere codified in the IMF’s founding document, but a longstanding “gentlemen’s agreement” between the U.S. and Europe–dating back to the creation of the IMF in 1944–says an American always gets the World Bank presidency and a European always heads the IMF.  The details of this arrangement are discussed in this explainer from Foreign Policy.  It is no secret that the world’s wealthiest countries control the lending decisions of the IMF and the World Bank due to these institutions’ weighted voting procedures, which give more votes to those who have contributed the most money (a measure that corresponds closely to the size of countries’ economies).  So on the one hand, a gentlemen’s agreement among the rich is not surprising.  But in a globalized world increasingly characterized by the rise of non-European powers (China, India, Brazil, and South Africa, among others) Europe’s prerogatives at the IMF appear outdated, counterproductive, and downright unfair to many. 

Some proponents of a European IMF chief have cited the IMF’s central role in rescuing countries such as Greece, Portugal, and Ireland during the eurozone’s current financial crisis.  In a scathing attack on Europe’s sense of entitlement, Paul Blustein quotes the Swedish finance minister as saying “We are in a very difficult European situation, and it’s quite natural that we would have a strong European influence in the IMF.”  Blustein then goes on to call this thinking unjust, unwise, and unethical:

“As the region most desperately in need of IMF loans — and IMF-guided discipline — Europe shouldn’t get to choose the person with the greatest influence over the terms. The blatancy of that conflict of interest ought to prick the conscience of even the most hard-boiled believer in realpolitik. And the handling of the eurozone crisis to date has already aroused widespread misgivings that Europe’s most powerful governments are using their sway over IMF policy to obtain deals that suit their political interests.”

Similarly, in response to the German government’s claim that the eurozone troubles require the new IMF chief to be familiar with the details of that crisis, Joshua Keating observes sarcastically: “Strangely, when the IMF was primarily giving loans to countries in Africa and Latin America, local knowledge didn’t seem to be quite as much of a factor.”

In contrast, David Bosco makes an interesting argument that it doesn’t really matter who heads the IMF given its decision-making rules, and that even if it did matter, officials appointed to positions in International Governmental Organizations are capable of acting responsibly and independently of national loyalties. 

Although a number of candidates from developing countries have been floated as potential successors to Strauss-Kahn, Europe seems to be coalescing around French finance minister Christine Lagarde. So at this point it appears unlikely that the streak of European IMF heads will be interrupted.

What do you think?  Is it fair that the Europeans have a perpetual lock on the IMF’s top post, to the exclusion of developing economies which are frequently affected most seriously by IMF conditionality, the practice of requiring strict adjustment policies (often involving tax increases and cuts to social programs) in exchange for loans?  Does this simply exacerbate the North-South gap and undermine the independence of the IMF? Or is this controversy much ado about nothing, given the limited power of the IMF head and the possibility that international civil servants just might be able to separate their national interests from the best interests of the international community?

The Future of the U.S. Global Position

A forthcoming report by Thomas Fingar, the U.S. intelligence community’s top analyst, has received little attention, but heralds some dramatic changes for the United States in the near future.  According to the Washington Post, Fingar’s report, entitled Global Trends 2025, observes that, “The U.S. will remain the preeminent power, but that American dominance will be much diminished” over the next 15-17 years, highlighting in particular the deterioration of U.S. leadership in “political, economic and arguably, cultural arenas.”  The major challenges?  Globalization, climate change, and regional destabilization brought about by shortages of food, water, and energy.  What’s more, in Fingar’s assessment, the extensive military resources of the United States will be our “least significant” asset because “nobody is going to attack us massive conventional forces.”

Fingar predicts a world in which the United States’ position is gradually eroded as other regional powers, including Europe and China, rise.  He also envisions a declining role for multilateral institutiosn like the United Nations and the World Bank.

Interestingly, the major concerns preoccupying U.S. foreign and military policy over the past eight years receive scant attention in the report.  Instead, Fingar emphasizes the impact of growing environmental crises on regional stability, particularly in the developing world.  Climate change and its associated conditions, including food shortages, drought, floods, mass migration, and political and economic upheaval—not al-Qaeda and Iran—represent the most significant policy challenges in Fingar’s assessment.

The award for best response to the report has to go to the Climate Progress blog, which says “Duh!”…but in a good way.  More generally, however, Fingar’s report does encourage us to rethink our understanding of security and foreign policy.  Is IR as a discipline too focused on military security and national foreign policy?  Do the (neo)realist and (neo)liberal approaches to IR help us to understand contemporary challenges in a meaningful way?  Or is it time for us to rethink our approaches?

Want to know more?  Read Fingar’s speech to the INSA Analytic Transformation Conference.  Unfortunately the report itself is not yet available for public consumption.