Monthly Archives: October 2010

A Non-Multicultural Germany

A Turkish Parade in Berlin

A Turkish Parade in Berlin

German Chancellor Angela Merkel last week asserted that multiculturalism had “utterly failed” in Germany. Her comments, offered as part of a broader speech to young members of the Christian Democratic Party, provoked sharp debate. And it was a somewhat surprising development, given Merkel’s history of trying to placate both sides of the argument by simultaneously calling for stricter integration standards for immigrants while simultaneously calling for the public to accept the religious freedom of immigrants, particularly the existence of mosques.

In a sense, the German debate echoes similar debates in the United States, where concerns over the “Ground Zero” mosque have stoked anti-immigration and anti-Muslim sentiment. Recent polls in Germany show that 1/3 of the population believes the country had been “overrun by foreigners” and over half believed that “Arabs are “unpleasant people.”

Other German leaders reflected this sentiment. Earlier this month, Horst Seehofer, head of the Christian Social Union, the Bavarian sister party of Chancellor Angela Merkel’s Christian Democrats, called for Germany to halt immigration for Turks and Arabs on the grounds that they have difficulty assimilating into German society. And in August, Thilo Sarrazin, who is a member of the governing board of the Bundesbank, Germany’s equivalent of the U.S. Federal Reserve, published a book in which he claimed that immigration from Turkey and the Arab world had made Germany “more stupid” and that Arab and Turkish immigrants had no useful function “except for the trading of fruit and vegetables.”

But the problem of integration in Germany is complicated by the nature of German citizenship and the history of Turkish immigration. German citizenship is based on the principle of jus sanguine, or right of the blood. This means that individuals acquire their citizenship from the based on the nationality of their parents rather than from the country in which they were born (jus soil). As a result, millions of ethnic Turks, born in Germany as the children of workers who migrated to Germany in the 1960s to satisfy German demand for labor under the Gastarbeiter (Guest Worker) program. These ethnic Turks grew up in Germany, attending German schools, speaking the German language, and often even adopting German customs and traditions. But because of the principle of jus sanguine, they were not entitled to German citizenship.

Changes to German citizenship laws passed in 2000 were intended to rectify the worst instances of this. Under the new law, a person born in Germany to parents who had legally resided in Germany at least three years prior to their birth and who does not have citizenship in another country can apply for German citizenship after they turn 23 years of age.

But, as in the United States, recent economic difficulties have sharpened tensions between eh various ethnic communities that comprise the country. In Germany, Turks have become the target for economically disenfranchised Germans. In the United States, Hispanics and Muslims have played a similar role. But rather than rejecting multiculturalism as the problem, perhaps the underlying issues of alienation and economic disenfranchisement should be the target of public policy.

Security Council Reform

Meeting of the United Nations Security Council

Meeting of the United Nations Security Council

The election of five new non-permanent members to the United Nations Security Council earlier this month presents some interesting insights into the ongoing debate over Security Council reform.

Arguably the United Nations’ most powerful and important body, the Security Council is charged with maintaining international peace and security. It is the only UN body with the power to enforce its decisions, using either direct military force (through UN peacekeeping operations) or pressure (economic sanctions and the like) to do so. The UN Security Council has fifteen members. Ten members are non-permanent, elected to two-year rotating terms on a regional basis. There are also five permanent members (the United States, the United Kingdom, France, China, and Russia), each of which has veto power over the decisions of the body.

For more than twenty years, the topic of Security Council reform has been the bugaboo of United Nations politics. The current structure of the Security Council is a legacy of post-World War II politics, with the five permanent members being the victorious allied powers. But the world has transformed dramatically since 1945, and the changing power distribution of the world threatens to leave the Security Council in the lurk.

Several countries, including Germany, Japan, Brazil, India and South Africa have been actively lobbying for a permanent seat on the Council. Because any decision to restructure the UN Security Council requires the approval of the Council itself, any current permanent member has the ability to veto proposals which would remove their seat. Thus, removing a country like France or Britain—which arguably have less of a claim to global importance than Brazil or Japan—is not in the cards, The only solution is to expand the number of permanent seats on the Council. But too many veto powers on the Council threatens to undermine its ability to make decisions effectively. This is why despite regular calls to reform the Council, real reform has stagnated.

After the most recent elections, many of the most important non-permanent members were elected to the Council, including India, South Africa, Brazil, and Germany. Judah Grunstein at World Politics Review has a great discussion of the implications of the current Security Council,  including an intriguing possibility of an emerging South-South voting bloc.

The current composition of the Council certainly means that the United States will have greater difficulty influencing the direction of the organization. Historically, it’s been fairly easy for the United States to offer increased aid or other incentives to a smaller country to secure its cooperation. But larger, more independent countries may be less willing to cooperate. The recent experience of Brazil and Turkey voting against Iranian sanctions (despite concerted pressure by the United States to vote in favor) provides but one example of what should be an interesting year in the United Nations.

Addressing Climate Change

UN Climate Change Conference

UN Climate Change Conference

Clive Crook

has an interesting analysis of the New Republic’s recent editorials on the political economy of climate change. The short version is that the disconnect between climate change rhetoric and reality has undermined policy proposals to limit the impact of dramatic climate events. This is not to suggest that anthropogenic (human-driven) climate change is not occurring. It is, but its impact is difficult to assess and probably less-dramatic and immediate than climate change scientists have warned. To make matters worse, the impact of efforts to address climate change—by, for example, increasing the cost of polluting activities through taxes or regulation—are felt immediately. The consequence is that it becomes relatively easy to mobilize individuals to oppose legislation addressing climate change but it much more difficult to mobilize them to support it.

What we’ve done to date is to treat carbon emissions—one of the primary drivers of climate change—as a negative externality [glossary] and to attempt to establish policies which force firms and consumers to internalize those externalities. Cap-and-trade does this by creating a market in carbon emissions and requiring firms to purchase the right to emit carbon. Not surprisingly, most firms, especially those which already emit high levels of carbon, oppose such a policy. As The Economist’s Free Exchange blog notes, the introduction of a cap-and-trade system in the United States appears dead for the foreseeable future, given strong opposition by Republicans who will likely regain control over the House of Representatives in the fall.

Ultimately, the challenge of addressing climate change can best be understood as a collective action problem, in which the incentive for each rational actor (be it a state, a firm, or an individual) is to do nothing and to free ride [glossary] on the efforts of others to address the problem. This is because of the nature of efforts to address climate change. Preventing climate change is a classic example of a public good [glossary]. And because it is impossible to exclude someone who has not paid for a public good from benefitting from that same public good, the rational course of action for any individual actor is to free ride on the efforts of others.

At the domestic level, public goods are often provided by the state. National defense for example, is provided by the state because of its nature as a public good. Historically, fire prevention services might also have been considered a public good. But at the global level, the anarchic nature of the international system increases the incentives for states to free ride on the efforts of others, and the provision of global public goods is consequently much more contentious.

The solution is to change the way we think about the problem. According to Michael Shellengberger and Ted Nordhaus, long-term public investment in green energy provides a better alternative. Rather than increasing the cost of carbon emissions, reducing the cost of green energy is more politically palatable. There are problems with this solution to be sure. As the Free Exchange blog notes, research subsidies will likely not address the low-hanging fruit of easy, low-cost changes that have a minor (but important) impact. Further, absent changes which force the internalization of carbon price externalities, the incentives for green energy production are likely to be less dramatic than they might otherwise be. But in the political climate in which we currently operate, green energy subsidies might be the only path towards a more sustainable energy policy.

Smaller Government, Bigger Government: The Grass is Always Greener

James Kwak at The Baseline Scenario has a great discussion of income inequality in the United States today.  Citing a short paper by Michael Norton and Dan Ariely, Kwak breaks down the actual, estimated, and preferred income distribution as stated by respondents to the survey conducted by Norton and Ariely. According to the results, Americans perceive income inequality in the United States to be far more equal than it actually is, and desire it to be more equal still (see figure below). As Kwak summarizes, Americans want to be more like Sweden.

Actual, Perceived, and Preferred Level of Wealth Distribution inthe United States.

Actual, Perceived, and Preferred Level of Wealth Distribution inthe United States.

Ironically, however, developing the level of distributional equality that exists in Sweden is predicated on paying higher marginal taxes and accepting a much greater level of government involvement in the economy, two things that recent developments in American politics suggest are not on the front burner.

There’s another irony, however; one captured by Jon Stewart’s “Mob Swap” proposal last week. Across Europe, governments have been engaged in efforts to reign in the welfare state, to introduce a greater efficiency and reduce government debt burdens. These moves have provoked protests across Europe. Last week alone, 100,000 people took to the streets of Belgium to protest cuts in government spending, millions took part in protests in France challenging a proposal to increase the retirement age, and workers shut down the London underground. Meanwhile, Americans are protesting against expanded government programs, including the Troubled Asset Recovery Program (TARP) and the Obama health insurance reforms. The grass, it appears, is always greener!

Competitive Devaluation and the Race to the Bottom

Currency exchange boardConcerns that the world’s leading economies may be heading towards a competitive devaluation [glossary] crisis appear to be on the rise. In one respect, this is hardly a new concern—the United States has been complaining about the value of the Chinese renminbi for several years, culminating last week with the passage of a bill by the House of Representatives that would punish China if it fails to increase its currency value. But concerns seem to be spreading globally and are focused not just on China. Efforts by the governments of Japan, South Korea, and Taiwan, and Switzerland to devalue their currencies led Brazil’s finance minister, Guido Mantega, to warn that a “currency war” could emerge. Yesterday, the Institute of International Finance, an organization representing more than 400 of the world’s leading banks, issued a similar warning, cautioning that the lack of coordination could lead to greater currency protectionism. World Bank President Robert Zoellick responded optimistically, suggesting that currency “tensions,” not a “war” is the most likely outcome.

Not surprisingly, then, the recent talk of currency wars has generated significant discussion in the blogosphere. At the Economist, a robust debate has emerged, provoking a responses from Martin Wolf, Daniel Drezner, Paul Krugman, and Robert Reich.

Today, the value of national currencies is determined by the market. Countries can generally attempt to devalue their currencies either by “talking them down” (hinting of a policy to devalue their currencies, which leads investors to do the work for them), or by buying other currencies. Thus when Japan sought to devalue the yen last week, it purchased an estimated $20 billion using yen.

In theory, currency devaluation intends to make the national economy more competitive and improve balance of trade. This is one reason why currency devaluation was often a part of structural adjustment programs developed by the International Monetary Fund. When a country’s currency devalues, its exports become cheaper and its imports become more expensive in relative terms. In theory this should stimulate exports, encouraging economic growth.

But in practice, it’s often not this straightforward. Whether or not exports increase depends on a number of factors, only one of which is the real price of the good. And when multiple countries devalue at the same time, the risk of a beggar-thy-neighbor [glossary] race to the bottom intensifies.

The Paradox of “Development” Aid

Fireworks explode over the Closing Ceremonies of the 2008 Beijing Olympics.

Fireworks explode over the Closing Ceremonies of the 2008 Beijing Olympics.

According to a report by the Associated Press, the Chinese government received some $2.5 billion in foreign aid last year. In 2008, Japan provided $1.2 billion in aid to China. Germany offered about $600 million, with France and Britain providing slightly less. The United States also contributed, offering $65 million, primarily for programs encouraging the safe use of nuclear energy, public health, protection of human rights, and environmental protection programs. Additional aid was also provided through various multilateral agencies, including the United Nations Development Program (UNDP), and the World Bank, where the Chinese government is one the single largest barrowers, taking out approximately $1.5 billion per year.

While the grand scheme of things, $2.6 billion is not a remarkable amount of foreign aid, the amount received by China nevertheless dwarfs aid to many other countries, at least in absolute terms.  Ethiopia, for example, has a per capita gross domestic product [glossary] of just $900, less than 10 percent that of China. Despite its smaller economy and higher levels of poverty, Ethiopia received just $1.6 billion in foreign aid.

The staggering foreign exchange reserves held by the Chinese government have led some Western policy makers to question the county’s continued receipt of foreign aid. In 2010, China had an estimated $2.5 trillion in foreign exchange reserves, and benefitted from a trade surplus of $103.9 billion in the first eight months of 2010.

Some political leaders have called for a shift in aid from China to other countries in greater need. According to Adrian Davis, head of the British government aid agency in China, “People in the U.K. or people in the West see the kind of flawless expenditure on the Olympics and the (Shanghai) Expo and it’s really difficult to get them to think the U.K. should still be giving aid to China.” And there is reason to believe that aid to China may shrink.

The paradox of development aid is that it often fails to go to the countries that need it most. As the list of leading aid recipient countries over the past fifty years suggests, foreign aid donations usually have less to do with need than with other political considerations. From the signing of the Camp David Accords in 1978 until the U.S. invasion of Iraq and Afghanistan in 2001, Israel and Egypt were the leading recipients of U.S. aid, accounting for approximately 1/3 of all aid given by the United States. Yet neither is classified as one the world’s least developed countries. Iraq and Afghanistan have been among the leading aid recipients since the U.S. invasion.

According to a report by the Congressional Research Service, in 2004 (the most recent year the CRS compiled figures), the top 15 foreign aid recipients were:

  1. Iraq ($18,440 million)
  2. Israel ($2,620 million)
  3. Egypt ($1,870 million)
  4. Afghanistan ($1,770 million)
  5. Colombia ($570 million)
  6. Jordan ($560 million)
  7. Pakistan ($390 million)
  8. Liberia ($210 million)
  9. Peru ($170 million)
  10. Ethiopia ($160 million)
  11. Bolivia ($150 million)
  12. Turkey ($150 million)
  13. Uganda ($140 million)
  14. Sudan ($140 million)
  15. Indonesia ($130 million)

Of the top 15 recipients of U.S. foreign aid, only four (Afghanistan, Ethiopia, Sudan, and Uganda) are classified by the UN Conference on Trade and Development as being among the “least developed,” [glossary] and only two of the world’ twenty poorest countries makes the U.S. aid list: Afghanistan, where the United States is engaged in an ongoing war, and Ethiopia make the list. None of the world’s poorest countries (Zimbabwe, the Democratic Republic of the Congo, Burundi, Liberaia, Somalia, Guinea-Bissau, Niger, Eritrea, and the Central African Republic, with per capita gross domestic products of less than $750 each, make the cut.

So if it’s not poverty or economic need that is driving foreign aid, what is?