Category Archives: Goldstein International Relations Brief 4/e

Measuring Progress: The Failure of the United States?

Blogging at the Global Dashboard, Alex Evans posted an interesting graph comparing the International Monetary Fund’s “advanced economy” countries across a number of measures. The graphic is reposed here:

As Evans notes, the graphic paints a pretty sad picture about the standing of the United States in several key measures of development, including income inequality, food insecurity, life expectancy, prison population, and student performance in math and science. In all of these categories, the United States ranks at or near the bottom of the 33 countries included in the study. Despite having the largest economy in the world, the United States has not been able to translate its economic prowess into social development as effectively as many of our fellow developed countries have.

It’s enough to make one rethink the whole development project.

Advertisements

Democratization and Popular Protest in the Middle East

Libyan Protestors in Benghazi city.

Libyan Protestors in Benghazi city.

For several weeks I’ve resisted the temptation to blog on groundswell of popular protest rocketing across the Middle East. In part, my hesitation was driven by the expansive coverage already offered by some of the best bloggers on the internet: Daniel Drezner, David Rothkopf, Duncan GreenGideon Rachman, and Stephen Walt have all blogged on events in recent days. In part, my hesitation was also driven by the excellent coverage offered by the Daily Show  in recent days as well. But recent events in Libya, where Moammar Gadhafi, who has been in power for more than 40 years, has been engaged in a desperate struggle to put down popular protests by ordinary Libyans demanding democratization—and more specifically a recent blog post by political scientist Benjamin Barber—sparked my curiosity.

Benjamin Barber is probably already well-known to most readers of this blog. His work on democratic politics (strong vs. thin democracy) as well as his work on globalization (Jihad vs. McWorld) make him a staple in most comparative politics and international relations programs. Writing at the Huffington Post last week, Barber made the case that whether or not Gadhafi is able to hold on to power Libya will likely face ongoing domestic turmoil—if not outright civil war—rather than the establishment of a democratic polis.

In Egypt, despite the success of popular protests in forcing the resignation of President Hosni Mubarak, there is similar reason to suspect that the democratic hopes of the masses will be dashed. Remember that it was the military that assumed control of the Egyptian government following Mubarak’s resignation, despite constitutional provisions that his successor should have been the head of the Egyptian parliament. The military is promising elections in September, but that remains months away.

And even if democratic elections are held in countries like Egypt, we still have to be aware of the limits of elections as a proxy for democracy. Real democracy—strong democracy, in Barber’s terms—requires more than elections. As Barber notes, the notion of radical individualism that lies at the heart of liberal political theory produces a limited form of democracy which negates the idea of community central to real (or strong) democracy. For Barber, then, it is the excess of liberalism that undermines democratic structures in the west and facilities cynicism and alienation.

The popular protests taking place across the Middle East in recent weeks is a sign of the strength of civil society in these countries. Despite decades of suppression, civil society in these countries is proving its vitality. Translating the strength of the popular protests into a democratic polis will clearly be a major challenge for the countries of the Middle East in the near future. Clearly there is reason for doubt. But there’s also reason for hope.

What’s Driving Food Prices?

Women farmers on a sugar plantation in Mozambique.

Women farmers on a sugar plantation in Mozambique.

Global food prices continue to increase. According to the UN Food and Agriculture Organizasiton, global food prices reached the highest level on record in January, surpassing the mark previously set during the 2007-08 global food crisis. Last week, the European Union took the dramatic step of loosening longstanding import restrictions intended to protect European farmers from international competition. The move, which clearly hints that European markets are tighter than most observers believed, came on the heels of announcements by the US government that its corn harvest will likely be smaller than originally forecast. Meanwhile, international protests over higher food prices continue to rock governments around the world, most recently in Yemen.

What’s driving food prices higher? Obviously, production shortfalls and increasing demand in emerging economies are a part of the explanation. The diversion of food into ethanol fuel production, most notably for US corn production, is also an element.

But last week, Fed Chairman Ben Bernanke was forced on to the defensive. According to some critics, the decision of the US Federal Reserve to engage in a policy of quantitative easing, intended to increase the supply of money in the US economy in order to fuel economic growth, has driven investors into commodity markets, including food commodity markets, driving prices up. 

Although Bernanke strenuously denied the charges, the world’s top sugar traders last week echoed a similar concern. In a letter to the ICE Futures US exchange, the World Sugar Committee condemned “parasitic” computer traders who engage in high-frequency speculative trades which “only serve to enrich themselves at the expense of traditional market users.”  Sugar prices last week hit their highest levels in more than 30 years.

The Challenge of a Two-Speed Europe

German Chancellor Angela Merkel and French President Nicolas Sarkozy at the Summit of EU Heads of State.

German Chancellor Angela Merkel and French President Nicolas Sarkozy at the Summit of EU Heads of State.

The recent spate of crises in the European Union has once again raised questions about the future of the European Union. As Greece and Ireland struggle to rebuild their economies, the debate over the future of the European Union is once again on the stage. At one extreme, Germany and France continue to push for further integration, particularly within the eurozone, the group of seventeen countries using the euro as their unified currency. At the other end, euroskeptics in the European Parliament continue to debate the need for the EU in the first place. Governments in the United Kingdom and many of the former Soviet-bloc countries appear to be hesitant about further economic integration.

This tension, which has long been known as the problem of a two-speed Europe, has become more pronounced in light of recent economic crises and the pressure placed on the euro by the collapse of the Greek and Irish economies. Blogging at the Finanical Times, Philip Stephens points out  that the euro has to date been maintained largely by the sheer will of the German government and its willingness to devote considerable resources (not to mention foreign policy clout) to support the euro and prop up several of the weaker European economies.  Euroskepticism, in other words, has not reached the German Länder. This is not to suggest that German magnanimity is the basis of the euro…Germany clearly benefits as well, as its exports to the rest of the eurozone indicate. But what happens if Germany decides that the euro is no longer a core part of its foreign policy vision?

Or more to the point, is the euro in danger? There is good reason to believe that future crises are in store for the eurozone. The economies of Portugal, Italy, and Spain leave considerable room for concern.

A far more likely scenario, however, would be the continued development of a two speed Europe, with France and Germany leading the charge for a more integrated economic policy within the eurozone, while Britain, the Scandinavian states, and many of the former Soviet-bloc countries, standing on the sidelines of economic integration while moving forward with political union. Certainly some interesting things to consider.

Rising Global Food Prices

Algerians protest cuts in government subsidies amid food price increases.

Algerians protest cuts in government subsidies amid food price increases.

There’s been a great deal of discussion about the impact of the recent spike in global food prices. From Oxfam to the UN Food and Agriculture Organization to the World Economic Forum, there’s been considerable concern expressed that global food prices are threatening political and economic stability around the world. David Bosco, blogging at Foreign Policy, suggested that the recent surge in political protests across the Arab world, from Algeria to Egypt, may be in part connected to increases in global food prices. Recent Gallup polling  found that respondents across 18 Sub-Saharan African countries ranked food security and hunger as the primary concern.

The spike in food prices is a concern for governments around the world. But few clearly understand the causes, and there remains considerable debate about both what is driving the price increases and what should be done about them. In a recent column for the Financial Times, Javier Blas argued that,

The current spike in food prices has followed the chain of events of the crisis of 2007-08 in almost every aspect, a worrisome prospect. First the crop failures; second the export restrictions; and third the initial food riots followed by governments taking emergency measures to control rising food costs, including price caps and cuts to import tariffs. And now the fourth element of the 2007-08 food crisis is emerging: panic buying.

And now, Paul Krugman has chimed in on the debate. According to Krugman, the recent spike is due primarily to production shortfalls linked to erratic weather patterns, which in turn are likely connected to global climate change. While I generally find Krugman’s analyses compelling, I think here he’s too quick to dismiss the impact of speculative investment in food commodities. Speculation clearly has an important role to play in smoothing out market fluctuations. But, as Timothy Wise argues on the Triple Crisis blog,

Some $9 trillion in trades take place in commodity derivatives, with 80-90% in over the counter (OTC) trading, outside of public scrutiny. Five banks control 96% of derivatives activity, giving a few players decisive market power. The ratio of non-commercial speculators to commercial hedgers (those with a commercial interest in the traded commodity) is by some estimates 4:1, roughly a reverse of the shares ten years ago when speculators accounted for 20% of the activity. Then, such speculators indeed provided liquidity to the markets without overwhelming them. That is no longer the case.

The problem, in other words, is not the existence of speculators, but the dramatic increase in the scope of speculative investment. And given the size of the trade, there’s little governments may be able to do to curb these activities

What Makes the World’s Happiest Country Happy?

Once again, Norway was named the World's Happiest Country.

Once again, Norway was named the World's Happiest Country.

Forbes magazine has released its annual ranking of the world’s happiest countries, using data compiled from the Legatum Institute’s annual prosperity index. The prosperity index is an effort to rank countries based on wealth, freedom, security, life satisfaction, and so on. As in years past, Norway topped the list.

While interesting in their own right, these sorts of indices also provide some interesting insights into broader questions of economic and political development.  In most studies, gross domestic product (GDP) per capita [glossary] is the proxy measure of development. The higher the GDP per capita, in other words, the more developed a country is. With its 2010 GDP per capita of approximately $47,000, the United States is relatively more developed than South Korea, with a GDP per capita of approximately $20,000. South Korea, in turn, is considerably more developed than Haiti, which has a GDP per capita of approximately $650. Indeed, the World Bank and other international institutions regularly categorize countries using GDP per capita. Thus, for World Bank lending purposes, maintains four categories of countries: low income countries, with GDPs per capita of less than $996, lower-middle income countries, with GDPs per capita between $996 and $3,945, upper-middle-income countries, with GDPs per capita between $3,946 and $12,195, and high income countries, with GDPs per capita of more than $12,195.

But while we use GDP per capita as a proxy for “development,” the figures often tell us very little about what is actually going on in a specific country. Further, while we generally operationalize development as an increase in GDP per capita, an increase in GDP per capita may or may not actually result in an improvement in the quality of life or life chances in a given country. This is where other figures and indices come in. The Human Development Index, the Gender Empowerment Measure, and Happy Planet Index, even more specific measures like life expectancy, child mortality, or literacy rates can tell us a great deal about what is going on within a specific country.

One interesting comparison is to look at the top ten countries in the various measurements. Let’s take GDP per capita and human development.

According to the IMF, the ten wealthiest countries in the word in 2010 were:

  1. Luxembourg $104,390
  2. Norway $84,543
  3. Qatar $74,422
  4. Switzerland $67,074
  5. Denmark $55,113
  6. Australia $54,869
  7. Sweden $47,667
  8. The United Arab Emirates $47,406
  9. The United States $47,132
  10. The Netherlands $46,418

If we compare this to the top ten countries in the UNDP’s 2010 Human Development Index, which is a composite index which incorporates health, education, and wealth, we see some interesting shifts. The top ten rankings for the HDI are:

  1. Norway
  2. Australia
  3. New Zealand
  4. The United States
  5. Ireland
  6. Liechtenstein
  7. The Netherlands
  8. Canada
  9. Sweden
  10. Germany

Some countries, in other words, overperform relative to the size of their economies, while others tend to underform. Ireland, for example, moves up 7 spaces (from 12th largest economy to 5th best ranking in the HDI), while Germany improves 9 positions (from 19th to 10th). At the other end of the scale, Qatar and the United Arab Emirates experience a sharp drop in their rankings, falling from 3rd and 8th to 38th and 32nd respectively.

And where things get really interesting is when the various measures diverge greatly. When we’re looking at measures which incorporate concrete variables, such as infant mortality rates, literacy rates, or access to education, explanations can be relatively straightforward. One could make a strong case, I think, that the reason that Qatar and the UAE fall so sharply in their standings is because they have not been successful in converting the oil wealth both countries enjoy into social and health benefits for the country’s population as a whole.

But when we get into the fuzzy area of happiness and life satisfaction, things become much murkier. According to the Legatum Institute’s study, the world’s ten happiest countries are:

  1.  Norway
  2. Denmark
  3. Finland
  4. Australia
  5. New Zealand
  6. Sweden
  7. Canada
  8. Switzerland
  9. The Netherlands
  10. The United States

Money, in other words, helps but it doesn’t buy happiness. Wealth is certainly part of the picture—we don’t see very poor countries cracking the top of the charts. But size, trust and social cohesion, and extensive redistribution of wealth, also appear to play a role. Food for thought in development studies.

What’s Going on at the IMF?

International Monetary Fund Headquarters, Washington DC

International Monetary Fund Headquarters, Washington DC

Once the unabashed advocate for cutting government regulation and liberalizing economies worldwide, there have been recent murmurings from the International Monetary Fund moving in a dramatically different direction. This is not to suggest that critics of the IMF—most notably Joseph Stiglitz—have run out of ammunition. Rather, as Duncan Green has been reporting on his Oxfam blog, the IMF appears to be opening up to new proposals. For most, the concession that the state may have a role to play in development is hardly a dramatic finding. But from the organization that promoted cuts in government spending and liberalization of capitalism markets as the solution to nearly every economic and financial crisis from Asia to the United Kingdom, from Russia to Brazil, it’s quite a concession.

We’re specially looking at three developments, all covered by Duncan. First, in early February, the IMF began to rethink its traditional focus on inflation. In a paper co-authored by the IMF’s chief economist, Olivier Blanchard, the organization conceded that it had become too focused on inflation at expense of other goals, like fiscal policy, interest rate stability, and—wait for it—preventing global financial crises like the one that rocked the world beginning in 2008.

Later the same month, responding to increasing pressure from countries like Brazil, the IMF began to rethink its traditional opposition to capital controls.  For years, the IMF had promoted open financial markets as a central component of development strategies. But such openness carried significant risk of fostering financial instability. We saw this, for example, during the 1997 Asian financial crisis. In 1997, the IMF prescribed cutting capital flows as part of its reform package. But in 2010, it reversed course, conceding that capital controls, under certain circumstances,  may be an effective part of the policy toolkit to manage capital flows.

In April, the IMF announced its most dramatic change to date, announcing its support for establishing a “Robin Hood Tax” intended to force banks to pay for the direct and indirect costs associated with government interventions to bail out the banking sector following the global financial meltdown. While this initiative has stalled amid strong divisions between major players—particularly between the United States and France—the willingness with which the IMF embraced the proposal stood in stark contrast to its earlier positions on financial deregulation and lowering tax rates.

Now, in a new working paper published this month, two IMF economists draw a connection between inequality and the outbreak of financial crises, concluding that higher levels of inequality make an economy more prone to the kinds of crises that have rocked the global economy in recent years. They conclude that preventing future economic crises may depend on reducing the total level of inequality in any given society.

Duncan Green is right. They must be putting something in the water at IMF headquarters. How else do we explain the dramatic shifts taking place there?