Category Archives: Roskin IR 7/e

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?

Who Governs Lebanon?

Lebanon's Prime Minister, Saad al-Hariri, waves to the crowd at a political rally.

Lebanon's Prime Minister, Saad al-Hariri, waves to the crowd at a political rally.

Incumbent Prime Minister Saad al-Hariri will remain in his post as head of a caretaker government in Lebanon, according to a report by the BBC yesterday. Lebanon had been poised to enter a period of political deadlock and uncertainty, and the Arab League described the situation in Lebanon as “tense,” after eleven ministers from Hariri’s ruling coalition resigned last week. The ministers, all of whom have ties to the powerful Hezbollah party, are angry about plans by a United Nations-backed tribunal to indict several of its members for their alleged involvement in the 2005 assassination of former Prime Minister Rafik Hariri, who was also the father of current Prime Minister Saad al-Hariri. Their decision effectively dismantled the government of national unity [glossary] that had been in place since 2008.

Lebanon appears to be entering a prolonged period of political stalemate which, unlike the longstanding stalemate in Belgium, will likely paralyze the country. The country is sharply divided along religious and sectarian lines and has a history of civil conflict. The National Pact, the informal agreement that has governed Lebanese politics since 1943, mandates that the top three political posts in the country be allocated on the basis of religion, with the country’s president be a Maronite Christian, its Prime Minister be a Sunni Muslim, and its Speaker of the Parliament be a Shi’a Muslim. The Pact also reserves half the parliament for Christian parties and half for Muslim parties. 

Further, neighboring powers, including Syria, Saudi Arabia, and Israel, have regularly intervened in Lebanese affairs.

The current political standoff in Lebanon is more than a simple problem of coalition [glossary] politics. Hezbollah, the favored party of the country’s Shi’a population, is more than an opposition party. It is also the most powerful military force in the country and frequently operates as a government in its own right, operating its own satellite television station and providing social services like subsidized housing and welfare support to people across the country. Internationally, Hezbollah’s paramilitary wing has been a strong opponent of Israel.

If al-Hariri is unable to re-establish a majority coalition in the parliament—a situation that appears highly unlikely, given Hezbollah’s strong opposition to the release of tribunal findings—Lebanon appears likely to remain in a political quagmire. Neither side can form a ruling coalition without the support of the other, but neither side appears willing to compromise.

But concerns also run deeper. Many domestic observers are cautioning that the political standoff could turn violent, rekindling tensions remaining from the Lebanese Civil War. And if that takes place, it is possible that Israel would feel compelled to intervene, as it did most recently in 2006, resulting in the displacement of some 1.5 million people in northern Israel and southern Lebanon  More broadly such a conflict would also endanger the ongoing talks with the Palestinians. Unlike the political stalemate in Belgium, which has been unable to form a ruling coalition in its national parliament since elections in July 2010, the political stalemate in Lebanon appears both more fragile and more dangerous.

The Future of Sudan and Africa’s Artificial States

Voter Registration ahead of South Sudan's Independence Referrendum.

Voter Registration ahead of South Sudan's Independence Referrendum.

On January 9, 2011, the people of southern Sudan will take part in an unusual election that will determine the future of their conflict-ravaged country. They will vote on whether or not they will continue to be part of Sudan, or whether they will break away and form their own, independent country of South Sudan. Rarely have such decisions been taken lightly. While the breakup of the former Eastern European state of Czechoslovakia into two separate states (the Czech Republic and Slovakia) was relatively peaceful, far more often the question of Secession leads to violent efforts to preserve the existing distribution of power. In Biafra (Nigeria), East Pakistan (Bangladesh), Chechnya (Russia), Eritrea (Ethiopia), Kosovo, Bosnia, and even in the United States during the U.S. Civil War, efforts by one group of people to break away from another and form their own state are often met with a sharp—frequently violent—response.

Most observers believe the people of South Sudan will vote in favor of independence, and the international community has slowly begun to mobilize in anticipation. But there will be many issues to deal with: citizenship and nationality, distribution and control over natural resources, security, international treaty obligations, currency and trade, just to name a few. Complicating the situation is the distribution of Sudan’s oil resources. While the oil reserves are located primarily in the southern part of the country, the pipelines to ship it out of the country and sell the oil flow through the north. Any peaceful transition will have to address these complicated issues.

Far more likely, unfortunately, is the possibility of a protracted conflict. Ahead of its break from Ethiopia, Eritrea fought an extended war of independence (lasting from 1961 to 1991). After a referendum and peaceful separation in 1993, the two countries went to war in 1998, fighting along their disputed border. The war, which lasted a little more than two years, cost Ethiopia and Eritrea—two of the world’s poorest countries—hundreds of millions of dollars and tens of thousands of casualties.

International observers are mobilizing to prevent a similar occurrence in South Sudan. George Clooney has lent his star power to support an initiative by the United Nations and Harvard University to use satellites to monitor developments in southern Sudan,  hoping to prevent genocide there. Meanwhile, former South African President Thabo Mbeki has called for unity and a peaceful transition, noting that many African states face similar challenges.

The broader challenge for African states rests in the artificiality of their national borders, many of which were set as a result of colonial interventions by European states. Peoples were combined and divided by national boundaries that were convenient for European powers, but bore little resemblance to the lived realities of the people themselves. Consequently, historical rivals were often combined into a single state, while peoples with shared histories and identities were frequently divided into separate states. For several decades after independence, the solution was essentially to ignore the problem. In 1963, the Organization of African Unity formally endorsed the borders established by colonial authorities nearly 100 years earlier. Such a move was perhaps politically necessary. Rather than reopening old wounds and engaging in a divisive discussion of redrawing political boundaries, they chose to go with what was there. But that decision also left many artificial states intact, with populations that desired autonomy an independence. There may be, in other words, many other South Sudans waiting to declare their own independence in an ever fragmenting map of Africa.

Economic Development and Intellectual Property

Chinese Solar Panel Production

Solar Panel Production: One of the areas China has been accused of engaging in development-through-copying.

Development has long been an elusive challenge. Despite more than sixty years of theorizing, debating, modeling, and discussing, I think a compelling case can be made that we really still don’t understand how and why development takes place. Sure, we understand the basics: corruption is generally bad, loans and foreign investment are insufficient, and so on. But there’s much, much more that we don’t really understand: How are democracy and development related? Is there a resource curse? What are the necessary conditions for economic growth? And so on.

So when Chris Blattman blogged on Chinese development last week, I read it with particularly interest. Blattman noted the negative coverage the Chinese purchase of a Spanish company received in the New York Times. According to the NYT,

The story of Gamesa in China follows an industrial arc traced in other businesses, like desktop computers and solar panels. Chinese companies acquire the latest Western technology by various means and then take advantage of government policies to become the world’s dominant, low-cost suppliers.

Blattman then goes on to deconstruct this narrative, noting that “there is nothing dark or nefarious here [just] good hold fashioned industrial policy at work.” He notes that the story of Chinese development-through-copying echoes previous patterns of development, including Europe in the 19th century, Japan after the Meiji Restoration, and the Asian Tigers in the 20th century.

Indeed, copying has long been a tool for developing countries to catch up with the industrial leaders of the day. For this reason, developing countries often afford much weaker intellectual property protection than developed countries. Weak IP protection, in other words, was frequently used as a developmental tool. As the U.S. Office of Technology Assessment noted in a 1986 report,

There have been political tensions between nations whose role as producers of intellectual property allowed them greater access to such products, and nations that imported technology products, and had only limited access to them.  When the United States was still a relatively young and developing country, for example, it refused to respect international intellectual property rights on the grounds that it was freely entitled to foreign works to further its social and economic development.

Ironically, however, today weak IP protection is often cited as a significant barrier to technology transfer. Further complicating the situation, the development of a uniform system of intellectual property protections deployed globally through the World Trade Organization also serves to preclude this avenue of development-through-copying.

The Politics of (Disappearing) Statehood

Local Fishers in Kiribati

Local Fishers in Kiribati

There’s an interesting debate brewing at the intersection of global climate change and international law. Historically, the idea of national sovereignty was based on the territorial integrity of the nation-state [glossary]. That is, the idea of statehood was defined, in part, by the physical territory in which the state exists.

But what happens if that territory disappears? This question is being asked by several small, low-lying island states fearing that their territory may become uninhabitable—or indeed disappear altogether—as ocean levels rise as a result of global climate change.

The law in this area is unclear. While the breakup of countries like Yugoslavia or the Soviet Union provides precedent for the breakup of existing countries, there is no precedent for the physical disappearance of a country. The government of the Marshall Islands is asking precisely this question.

And even if the country doesn’t disappear, it may become uninhabitable. Already, countries like Tuvalu and Kiribati are suffering from increasing salinization of groundwater supplies, as ocean water seeps into wells. If the islands become uninhabitable, what would happen to the citizens of those countries? Would they become a stateless population? Would they continue to have citizenship in a country that no longer exists?

And what about the economic rights of statehood. Under current international law, states possess extensive rights over territorial waters, which can be rich fishing grounds and home to other valuable resources. What happens if the islands from which the territorial waters are measured disappears?

There are many interesting questions but few real answers.

Wikileaks: Much Ado About Nothing?

Wikileaks founder Julian Assange.

Wikileaks founder Julian Assange.

The Wikileaks publication of more than 250,000 State Department communiqués has provoked considerable discussion in the blogosphere, but the emerging consensus seems to be that there is little in the leaked documents that could not be garnered by a close reading of daily national newspapers. Judah Grunstein at World Politics Review, Sam Roggeveen at the Lowy Interpreter, and Andrew Sullivan at the Atlantic’s Daily Dish all argue that the leaked documents at most confirm that U.S. foreign policy is pursuing the national interest fairly effectively, behaving in ways that we might expect powerful states to behave in the realm of global politics.

The is another discussion to be had, though. First, as Timothy Garton Ash blogs at the Guardian, while the leaked documents provide a fascinating insight into the conduct of U.S. diplomacy, a tension exists. As he puts it, “There is a public interest in understanding how the world works and what is done in our name. There is a public interest in the confidential conduct of foreign policy. The two public interests conflict.” Is there a tension between the secret diplomacy of the U.S. government and the need for transparency in a democratic political system?

This feeds in to a second, broader point. The dramatic expansion of the use of classified communications since the September 11 terror attacks. As David Rothkopf notes on his blog at Foreign Policy,

If the U.S. continues to see fit to grant security clearances to three million individuals and all the information in these leaks can be as easily transferred as they were first to a fake Lady Gaga CD and then to the Internet or a thumb drive then we must expect that just like intrigue, deception, bad policies, and earnest public officials trying to advance their national interests, breaches of security like these will become a permanent part of the landscape of international affairs. If such leaks are really as odious and dangerous as many in the United States government are now asserting (a view with which I am sympathetic) then the place they ought to begin assigning blame is on themselves for allowing the creation of a system in which one more widely understood fact of the way the world works is that most secrets are very hard to keep. 

In the end, the leaked documents will likely to do little either to endanger the conduct of U.S. foreign policy or to change the debate over the tradeoff between secrecy and transparency in the U.S. democracy. They provide an interesting—almost voyeuristic—insight into a specific moment in the conduct of U.S. foreign policy, but likely little else.

Stephen Walt has an interesting answer. On his blog, he asks “How much difference would it really make if all these “private” diplomatic meetings were public? Suppose there was no such thing as a “private” diplomatic meeting or a backchannel discussion. I can easily imagine that world leaders wouldn’t like it very much — but how much would world politics change if all these conversations were held in public so that people could see and hear what was being said?”

His answer is intriguing. He suggests that more open diplomacy would likely present far greater challenges for authoritarian leaders and governments than democratic ones, concluding that, “And aren’t all those people who are now defending the importance of diplomatic confidentiality really saying that there is a lot of information that our leaders have to keep from us, or else the world will all go to hell?” Certainly food for thought.

Foreign Policy’s Top Global Thinkers

President Barack Obama, No. 3 on the Foreign Policy list of the top 100 global thinkers.

President Barack Obama, No. 3 on the Foreign Policy list of the top 100 global thinkers.

Foreign Policy has released its annual list of the top 100 global thinkers. It’s an interesting mix of political and economic reformers, environmentalists, and elected and unelected officials. While we might quibble about some of the rankings, the list nevertheless makes for some interesting reading.