Monthly Archives: December 2009

Towards a European Foreign Policy

Charlemagne’s Notebook at the Economist has a great blog on the evolving foreign policy of the European Union. According to the story, the European Commission and the national governments are at odds over the future of Europe. Member states are worried that the Lisbon Treaty may grant the EU’s new High Representative (read: Foreign Minister), Baroness Catherine Ashton, greater autonomy in foreign policy decision making than the Member States are comfortable with.

But more interesting are the underlying differences between the governments of the Member States and the European Commission on the nature of foreign relations. According to Charlemagne’s Notebook, EU Member States tend to have a foreign policy generally based in tenants of realism. But because of the nature of the power and authority afforded the European Commission, EU foreign policy tends to be dominated by liberals. Because it lacks a standing military and is unable to exercise hard power, the European Union relies almost exclusively on soft power. In other words, according to Charlemagne,

“The Eurocrats who currently staff the commission’s worldwide network of delegations know how to manage programmes, and talk about trade and development, goes the charge. They are not diplomats. Leave the Eurocrats in charge of the EAS, and national diplomatic services will send duffers on secondment to the EAS, rather than their high-flyers.

That certainly won’t make Ashton’s job any easier.

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How the Fed Works

Time Magazine named Fed Reserve Chair Ben Bernanke thier person of the year. To celebrate, they produced a short video explaing how the Fed works. At 3 1/2 minutes, it makes a good intro to the topic for classes. Enjoy!

Recovery Delayed is Recovery Lost: Inflation vs. Unemployment

The U.S. economy continues to sputter along and the Federal Reserve apparently unable (or perhaps more accurately, unwilling) to do much about it. Unemployment in the United States continues to hover above 10 percent, and in some regions of the country it is much higher: Michigan has 14.7 percent unemployment, Rhode Island 12.7 percent, and South Carolina, Florida, and Nevada are all at 12.3 percent.

As the U.S. economy continues to struggle, Federal Reserve Chair Ben Bernanke was testifying before Congress to be reappointed to his position. Several prominent economists offered their questions for Bernanke via the Real Time Economics blog at the Wall Street Journal. The one question that has generated the most discussion was posed by Brad Delong, who wanted to know why the Fed continues to maintain a zero-tolerance policy towards inflation rather than adopting the 3 percent inflation target accepted by some countries. Bernanke’s answer has received a great deal of attention. According to Bernanke,

The public’s understanding of the Federal Reserve’s commitment to price stability helps to anchor inflation expectations and enhances the effectiveness of monetary policy, thereby contributing to stability in both prices and economic activity. Indeed, the longer-run inflation expectations of households and businesses have remained very stable over recent years. The Federal Reserve has not followed the suggestion of some that it pursue a monetary policy strategy aimed at pushing up longer-run inflation expectations. In theory, such an approach could reduce real interest rates and so stimulate spending and output. However, that theoretical argument ignores the risk that such a policy could cause the public to lose confidence in the central bank’s willingness to resist further upward shifts in inflation, and so undermine the effectiveness of monetary policy going forward. The anchoring of inflation expectations is a hard-won success that has been achieved over the course of three decades, and this stability cannot be taken for granted. Therefore, the Federal Reserve’s policy actions as well as its communications have been aimed at keeping inflation expectations firmly anchored.

Given that inflation and unemployment are inversely related (as one goes up, the other generally goes down), keeping inflation near zero means accepting higher rates of unemployment. Conversely, addressing the challenge of unemployment would mean living with slightly higher rates of inflation. The Fed’s insistence on keeping inflation near zero this means that we have to accept higher rates of unemployment during the economic downturn. And thus the debate.

According to Ryan Avent at the Economist’s Free Exchange blog,

Personally, I think that Mr Bernanke owes us all a better explanation of why he has opted to place so much more emphasis on the price stability aspect of his mission than the full employment aspect. And, there should be a policy debate on this question, the resolution of which should inform the choice to reappoint (or not) Mr Bernanke. But that’s clearly not going to happen. It’s unfortunate. But it is what it is. Best to focus on the next question—how to minimise the fall-out from five or more years of high unemployment.

Paul Krugman concurs, observing

Future economic historians will, I believe, see this as fundamentally absurd — as absurd as the inflation fears that paralyzed the Bank of England in the early 1930s even as the world went into a deflationary spiral. Yes, there may someday be a 1970s-type episode in which the Fed needs to fight inflation, not encourage it — but it’s a long way off. Furthermore, why on earth would we imagine that the Bernanke Fed, by showing itself willing to inflict gratuitous pain in 2010, would make it easier for whoever is running the Fed in, say, 2020 to control inflation then, let alone that the tradeoff of real pain now versus hypothetical pain much later, if it even exists, is worth making? Anyway, as far as I can see nobody is even trying to assess these alleged tradeoffs seriously. Instead, the notion of an unchanging inflation target — not to be revised even in the face of the worst slump since the Depression — has acquired a sort of mystical force; it has become identified with the notion of Civilization, in much the way that a previous generation assigned mystic significance to the gold standard.

Not much of a silver lining there.

Obama’s Peace Prize Acceptance Speech

President Barack Obama on Thursday delivered his speech accepting the Nobel Peace Prize. Already there has been much analysis, and Stephen Walt has called for us to ignore the speech, describing it as “thoughtful, self-effacing, nuanced, balanced, eloquent, lucid, well-delivered, etc. etc. (yawn)” but “suggest[s] we focus our attention henceforth on what he actually does.”

But Daniel Drezner beat me to the punch, noting that Obama’s speech illustrates many concepts and theories in international relations, including realism, Neoliberal institutionalism, social construcivism, democratic peace theory, feminist IR theory, and human security, among others. He actually suggests that it would make a great final exam question for professors wrapping up the semester.

Drezner is certainly correct, but what struck me most about Obama’s speech was the irony. Just days after he announced a massive increase in the U.S. troop presence in Afghanistan, he is in Stockholm accepting the Peace Prize. In his speech to the committee, Obama said,

But as a head of state sworn to protect and defend my nation, I cannot be guided by their examples alone. I face the world as it is, and cannot stand idle in the face of threats to the American people. For make no mistake: Evil does exist in the world. A nonviolent movement could not have halted Hitler’s armies. Negotiations cannot convince al Qaeda’s leaders to lay down their arms. To say that force is sometimes necessary is not a call to cynicism — it is a recognition of history; the imperfections of man and the limits of reason.

He may well be right, but it’s certainly an interesting way to accept a speech promoting peace. And while it may be presented in a more elegant light, the underlying policy reflects the same priorities and goals as the previous administration espoused.

The Challenge of Climate Change

With the Copenhagen Conference scheduled to begin Monday, climate change is squarely on the international political scene. But while lots of people are talking about it—and despite claims of the United Nations’ top climate official—few are optimistic that any real progress will be made in Copenhagen. Alex Evans at Global Dashboard has gone so far as to outline the ways in which Copenhagen might fail, classifying the failures as: Bali #2, the Bad Deal, the Car Crash, the Multilateral Zombie, and Death By Diplomacy. The likelihood of a good deal is remote. In a post to Project Syndicate, former Soviet Premier Mikhail Gorbachev is already encouraging the international community to think about how to move forward from Copenhagen, describing the current political standoff (and the failure to agree on a new climate change convention to replace the Kyoto Protocol when it expires in 2012) as a game of Russian roulette.

The timing of Copenhagen is clearly less than ideal, following shortly on the heels of the embarrassing publication of emails suggesting climate scientists were manipulating charts to make them look more dramatic before publication (critics have termed this “Climategate.”) The release, while hardly rising to the level of scandal that it has been afforded, nevertheless offered climate skeptics ammunition with which to engage an uniformed public. (The issue even reached Jon Stewart’s Daily Show last week). And this is too bad, because climate change is clearly a major concern for international politics. From the emerging tensions between the United States and Canada over who controls the emerging Arctic sea lanes to the concerns over the impact of climate change on conflict in Africa, climate change is likely to be a (perhaps the) major driver of global politics in the near future. And while the international community debates who should bear the cost of addressing the challenge of climate change mitigation, the costs of not addressing climate change continue to mount.

Where are the Good Options in Afghanistan?

There’s some great analysis of President Barack Obama’s Afghanistan policy cropping up in the blogosphere. Speaking before officers at West Point, Obama outlined a compromise position on Afghanistan: a dramatic increase of the U.S. military presence in the country, combined with ah planned drawdown after 18 months. Like many compromises, Obama’s position is likely to please no one. Critics on the right assert that we must do whatever is necessary to win in Afghanistan, regardless of the cost. They argue that the commitment to begin the force drawdown in 18 months undermines that commitment. Critics on the left argue that the U.S. should not increase its troop presence in Afghanistan in the first place.

But some of the best analysis in coming from bloggers. Daniel Drezner takes Obama to task for implicitly relying on the same surge strategy that was used in Iraq. According to Drezner,

My hunch is that the surge is perceived to have worked pretty well–Iraq in 2009 is in better straits than Iraq in 2006.  If policymakers are unconsciously adopting this parallel, then the strategy will sell.

The thing is, Afghanistan is very, very different from Iraq.  As tough a nut as state-building is in Iraq, it’s a country with fewer ethnic and linguistic divisions, better infrastructure, a better educated citizenry, more natural endowments, and a longer history of relative “stability” than Afghanistan.  Whatever you think about the surge strategy, the odds of success in Afghanistan are lower than in Iraq.

Drezner concludes that Obama may have few good options when it comes to Afghanistan, a point on which Stephen Walt agrees. While Walt applauds Obama’s use of cost-beneift anlaysis based on national security interests in the speech, he, like Drezner, concludes that Obama had few good options. But for Walt, the logic of the decision brakes down. According to Walt,

With no good options before him, he went for the middle ground: We will escalate by sending 30,000 more troops but in eighteen months he’ll start bringing them home. The logic here is hard to discern: if the stakes are as important as he maintained, then setting a firm time limit makes little sense. Obama correctly refused to grant the corrupt Afghan government a “blank check,” but no serious analyst thinks we can train an Afghan army or create a strong Afghan state in a year and a half.  And if he is willing to cut Karzai & Co. off later, then success isn’t really a “vital national interest” after all. If that’s the case, why invest another $30 billion now?

One of the few bloggers supporting Obama’s middle path is Leslie Gelb of the Council on Foreign Relations, who criticized Presidents Kennedy and Johnson for pursuing a middle path in Vietnam, observing that, “Kennedy and Johnson steered a middle way because they felt they couldn’t win and couldn’t get out. Thus, they went step by step, deeper and deeper, doing just enough not to lose, pursuing a horribly costly war without any real prospect of a good outcome, simply hoping for something to turn up.” Gelb suggests that Obama’s centrist policies in Afghanistan make the best of a bad situation—and may indeed be the best path to success there.

So what do you think? Is Obama’s surge likely to produce results? Or will we reflect back on this decision in 18 months and think, “OK…that didn’t work…what now?”