Reports of America's Political Collapse Are Probably Premature

There's a lot of gloom about America's political system lately. The concern, increasingly, is not so much that individual politicians or even political parties are leading the country down the wrong path (though those concerns certainly abound as well), but rather: there are increasing doubts as to whether the structure of America's political system can even continue to serve it well.

In a recent article in the International Herald Tribune, David Brooks commented: "Usually when I travel from Washington to Britain I move from less gloom to more gloom. But this time the mood is reversed. The British political system is basically functional while the American system is not." He talks about how, though the two main parties "are happy to rubbish each other," they actually agree on more than they disagree.

This is a type of consensus about how to move forward that we in America can only dream of, it seems. Indeed, I can barely hide my admiration and envy of the British and the "adult" decision its electorate has made to put two parties into office that have touted a message of radical reform, coupled with searing spending cuts and some tax increases to boot. The Conservatives came to power while actively expressing the viewpoint that this had to be done. The voters, seemingly, agreed.

All true. But there are two problems with this narrative. For one, voters were not entirely certain what they wanted and were obviously torn, as they failed to give any single party a majority in an electoral system, like America's, that is designed to do just that. The Conservatives don't have a full mandate, they must share power with the liberal democrats. Fine, you say, but the LibDems and the Tories (the nickname for the Conservatives) still came together to agree on the current reform package. This is true, but it may have just been time. Bond markets were already getting edgy about Britain's debt. A looming crisis can compel. The other side of this, too, is that the election may have been more a renunciation of the Labor party, which had ruled Britain for more than a decade, rather than a vote FOR the Tories or the LibDems. The electorate, therefore, seems much less coherently for the changes that are occurring in Westminster than the election results might have us believe.

The second problem is that none of this represents systematic problems, in the sense of a problem with the system's structure itself (as opposed to problems spread throughout a system, another definition of the word "systematic"). As Brooks mentions in his Op-Ed piece, "a generation of misrule between 1945 and 1979 left the U.K. with three large problems: a stifled industrial economy; an overcentralized welfare state; and an enervated people, some of whom are locked in cycles of poverty." Indeed, the 1970s were an extraordinarily tumultuous time in British politics, with Scottish and Irish voters plumping for local parties in 1974, causing a hung parliament (a parliament with no party in the majority). The first coalition that was formed broke down within months. Another election in the same year produced a majority, but defections later destroyed this. In-fighting caused further problems. At the same time, inflation was high, peaking at over 20%. The government tried to stop this by forcing wages to stop rising. This worked fairly well, it seems, but you can imagine the uproar from labor unions. Strikes led to important services being shut down repeatedly and to a huge loss in productivity. Perhaps the most embarrassing event occurred in 1976, when Britain required an IMF bailout! The gloom and sense of political decay must have been palpable!

This all ended with the thumping election victory of Margaret Thatcher's Conservative Party in 1979. Her party introduced numerous reforms, broke the defiance of the unions (with electoral support), and got the country moving again. My point here is not to discuss the controversial aspects of her reign. Rather, the point is: I am sure Britons must have begun to doubt the ability of their political system to provide for a stable, well-managed country during the difficult 1970s. And yet, that very same system produced a political consensus that went on to last for 18 years and to fundamentally change the United Kingdom. The subsequent Labor Government, though it presided over financial deregulation and a boom that turned to bust, also made sweeping and positive changes based on solid electoral victories. The system produced good and bad governments, but the system itself was not fundamentally changed. This is important to remember as we look longingly across the Atlantic at those grown-up British, prudently taking self-administered medicine.

My point is: America has had rough and divided times before, too, and has survived (though the biggest division in history led to the Civil War, which is a rather dramatic version of "surviving"). The problem is not really the system, but that the electorate is honestly uncertain of the best path forward. In this environment, two competing ideologies are espoused by leaders, and Americans seem intent on trying them both simultaneously. In the end, there may be some sort of real crisis (like bond market jitters) that forces real change, but the electorate needs to get its act together first.

That said, there are a few systemic issues that serve to intensify problems, primarily by intensifying polarity. The main culprit here, to my mind, is Gerrymandering. This is drawing voting districts in such a way that seats become safe for one party or another. This is not a partisan issue; since both parties "benefit" from it, at least locally and in the short term, both do it frequently. California has been one of the worst examples, though I believe it has now enacted legislation to put this to an end.

Making seats safe for one party or other leads to polarization because the general election no longer matters. Instead, the primary matters. For example, if a district is so gerrymandered that only a democrat has a chance of winning, then the democratic primary becomes the de facto election. To win the primary, a candidate must pander to the party base. That means they can ignore republicans and independents. (This is, of course, all true for same republican seats, too.) What's more, the democratic voters themselves can ignore the others, too. Normally, voters might think "well, I don't agree with all this candidate says, but I think she has a better chance of beating the republican." If voters know the primary candidate will win the election, they can easily vote for the one closest to their beliefs (which are "extreme" by their very nature, as democrats and republicans are left and right of center, respectively, and their fired up bases on the extremes are the ones surest to vote in primaries). Less political polarization would go a long way to helping America find the consensus needed to move ahead and solve problems. The Senate cannot be gerrymandered, since senators are elected state-wide. This is why the senate has a reputation for being the "saner" of the two houses (another reason is the longer senate term, meaning senators don't have to constantly campaign and can actually get on with governing as they reason is best).

But even gerrymandering is not a problem to make or break America. It, too, can be fixed via the electoral process if voters want to fix it. What America needs most is informed and diligent voters to move the country onto the right path, or, at the very least, a coherent one. No system in the world can counter an electorate that is not doing its job except, of course, for a dictatorship. When voters have not paid attention in the past (or even the present: think Venezuela), this is also precisely what they have gotten. THAT would be a broken political system. America's, as yet, is not.

Israel and Palestine: What's the Strategy?

I have argued before (and I'm not the only one) that it is impossible for a conflict to be settled if one side thinks it would do better to continue the conflict. My previous example was Afghanistan, in which all Afghans, including the Taliban, know that the US will not remain forever (see post). The Taliban know that time is on their side. Whenever a disagreement seems intractable, something like this probably lies behind the scenes.

Take the long fight between the Israeli government and authorities representing the Palestinians. There seems to be no ending this fight. But why? It is easy to see why Palestinians believe time is on their side, if for none other than demographic reasons: the Palestinian population of the region, including inside of Israel proper, is increasing more quickly than the Israeli population. Beyond that, there seems to be a general, but gradual, shift in world politics away from unquestioning support of Israel. This has a couple reasons, among them a relative decline of the "West" along with the slow slippage of the Holocaust into something only read about in history books.

In this environment, it would seem wise for Israel to talk tough but to try to find a solution as quickly as possible, allowing it time to mend relations with antagonistic neighbors. Instead, Israel's Prime Minister Benjamin Netanyahu has announced that Israel will not accept a path to peace that his predecessor had already essentially agreed upon. In effect holding up hopes, then changing the terms at the last minute. There seems to be no rush for peace. What is going on here? There are a few possible explanations:

1. Israelis, too, feel that time is on their side and that the Palestinians will eventually give up hoping for a better solution. This may also fit in with creating "facts on the ground" by continuing settlements on the West Bank, making their eventual removal politically all but impossible in the future. This is like a game of chicken.
2. Another possibility, and this is one that I seem to hear coming from Israel, is the one I call the panic strategy. Israelis are well aware that time is not on their side. Furthermore, they do not believe that even a two-state solution will convince their hostile neighbors to leave them alone. Better, then, to try to push for all concessions they can, now, while they still have clout This, too, is a somewhat different game of chicken.

One of the most important concessions for Israel, and one that is entirely understandable, is that Hamas renounce the use of violence and recognize Israel's right to exist before it even begins to negotiate with it. Ironically, diminished US and European support for Israel might actually end up helping Israel in this regard: as long as the US was seen to be 100% behind Israel, the Palestinians did not feel there was any way to be sure that their concessions would be met with real concessions from Israel. With President Obama putting public pressure on Israel, while still leaving no doubt as to his support for Israel's security, Palestinians may become less uncomfortable with making concessions, while still seeing that Israel is not about to be weakened to the point of making more concessions than it has hinted at in the past.

In such an unstable place, a little more trust could go a long way.

The Road to a PhD Program: Final Act

For personal reasons, I'd stopped commenting my road to a PhD program. The last post I wrote on the subject is now almost a year ago!

Some plans changed and I ended up applying to schools in England in the greater London area. The hardest part was writing the dissertation proposal, which I had to do really quickly while simultaneously rushing to finish my master's thesis. My topic is Terrorism and Deterrence, and I hope to find whether terrorism can/has ever been deterred. That'll be my course of study for the next three years.

So: I obviously got in somewhere! I've accepted an offer to study at King's College London in their War Studies Program, which I am very excited about! Now just to jump through numerous immigration hurdles (essentially technicalities, but still a toootal pain in the ass).

The next items I write on this subject will be the Road to a PhD (minus the program part), in which I'll talk about the trials and tribulations of actually doing the research and writing the damn thing. It will surely be a combination of enjoyment at involving myself in my own research, and horrible suffering ;-).

Stay tuned...

A Flight of Fantasy

OK folks. I like to talk about "real" issues, but today I'm going to go a bit off the usual track with a little trip into theoretically-possible-land, just for fun.

I've been reading Francis Fukuyama's latest book. It discusses how political orders formed. It took thousands of years of human development to move from small bands to tribal organizations, and another few thousand to move from that to anything resembling a state, with many setbacks along the way. This progress was essentially evolutionary in nature: it wasn't within anyone's power to make it happen, though individual leaders certainly played an important role in pushing changes at the right moments.

This made me think: will this process continue? Will this one day create a world state, a federation with a single global defense force and global, hopefully representative, government?

There are several reasons why such a thing could be a dream or a nightmare, but let's ignore those for now, that's not what I want to discuss. Rather, I'd like to discuss ways we could feasibly move closer to that in an organic, evolutionary way.

One of the first steps might be something I've proposed for a long time. Tired of visa restrictions and immigration crap, I thought to myself "why do we even need to restrict movement like this between rich countries?" I know, the "rich country" part doesn't sound too nice, but let's face it: allowing everyone to move all over is not going to happen anytime soon. But, if the US were to open its doors to Canadians and vice versa, do we really think there'd be a stream of immigrants rushing over the border and overwhelming one side or the other? That seems patently absurd. So how about it?

Step 1: The North American Union
This has been a dream for a long time. Initially, it was hoped that NAFTA might lead to this. Lately, though, it seems unlikely that Mexico could be part of such an immigration and customs union (and border controls between the US and Canada have gotten more stringent, not less). Somewhat more likely in our lifetimes: a union between the US and Canada. What would such a union entail? It wouldn't have to be anything as close and organized as the EU. No monetary union, either, both countries would keep their currencies. Both countries would remain solely sovereign; there would be no "government" for the union or anything, no North American Parliament or the like. No, just a single market: goods, services, people, and capital could flow freely back and forth. Americans could work in Canada and vice versa. Each country would still be able to make, enforce, and interpret its own laws as it saw fit. It would open up most of the continent for most of its people to live, work, and play wherever they wanted.

Such a union would only require a treaty between the two countries. The only things they'd have to agree on would be eliminating all barriers to cross border trade and investment, as well as agreeing to allow nationals of the other side to live in work in their countries. This would require some harmonization of foreign policy, specifically for a customs union. Both sides would have to agree on what was allowed in and out of the area and what tariffs, etc., if any, they ought to apply. Also, immigration policy would need to harmonized to some degree for security reasons (the US is a lot stricter). That said, they wouldn't have to agree completely on immigration policy. EU countries do not (though this is admittedly sometimes problematic). The freedom of movement would only apply to citizens of both countries, not to immigrants/non-citizen residents, etc. For example, someone from outside the North American Union (NAU) who has a work permit for Canada would not automatically be able to work and live in the US. Since there would be no border controls, however, it would be impractical to stop such a person from visiting the US freely, which is why immigration security policies would have to be harmonized. This, in principle, is the way the EU works.

Alternatively (and this would be a better solution, but one that would require more difficult political consensus) the two countries could agree to adopt the same immigration rules and have a visa system with visas valid for both countries. I mean, we're dreaming here, right?

So let's continue along this logical route, suspending our disbelief a little bit longer.

Step 2: Joining other unions
The same logic that says Americans need not fear a rush of Canadian immigrants providing cheap labor and vice versa also goes for a similar union agreement with the EU. No, I don't mean joining the EU. That would mean surrendering sovereignty at a level the US would not agree to any time in the foreseeable future, assuming Europeans would even want this. After all, much of the impetus behind the EU was to be able to act as a counterweight to American power, not have the system dominated by it yet again. The same type of bilateral treaty could apply again. Canada, the US, and the EU could agree to create a customs and immigration union (again, not necessarily allowing free movement for third-country immigrants) between the EU and the more loosely organized NAU. Again, no transatlantic parliament or superbureaucracy needed, just a bilateral treaty. Now Germans could live in work in the US, Americans in France, what have you. And again, why not?

This time, we could even take a step back from immigration cooperation, since eliminating border controls would be impractical across the Atlantic. If every member region or state still had border controls, there would be no need to harmonize immigration security. No need, therefore, for the EU to adopt the US's rather draconian measures, etc. No difficult political agreement necessary.

Step 3: Continued expansion
Now that we've come this far, why not make similar agreements with countries like Australia, New Zealand, and Japan? Maybe South Korea and Singapore? The Japanese really don't like opening up to immigrants of any kind, so this could prove even harder than the other steps. But even without Japan, it seems hard to find a good reason to oppose a customs and residency union with Australia and New Zealand.

How does this relate to world government? Well, these unions were limited to developed countries due to the "economic refugee" problematic, if you will. But many other countries are developing and may catch up with us over the coming century. What's to stop Brazil or even China from joining? The answer, of course, is realpolitik, I fear. This would cause a two-steps-forward, one-step-back sort of dynamic. Nonetheless, it's still juuuust conceivable that something like this could lead, maybe in hundreds of years, to such freedom of movement, where people can vote for governments and things with their feet. Governments could be forced by people leaving either to close the doors again and lose all the benefits of openness, or change their policies to please their people. In such a world, people might eventually break loose from nationalistic ideas -- and it might for the first time actually be sensible to do so completely -- and really begin to be citizens of the world. Could a world government, built organically from the ground up following societal evolution, be that far behind?

Well, not in our lifetime, and maybe still never, but I see this as one possible path for how it could conceivably evolve. Human history is a long process of political organizational development. We tend to view the world now as "developed." But maybe it still has a ways (like, 1,000 years) to go...

Four Lions: Sensitive Tragi-Comic Perfection only the Brits Could Pull Off

I don't often do film reviews, but I thought this one deserved an exception. The film is Four Lions, by British director Christopher Morris. SPOILER ALERT! The film caused quite a stir when it came out because it seemed to be tempting fate: it makes fun of terrorists. The film would indeed be provocative and perhaps distasteful if that were the only point. The film intertwines tragedy and comedy to make fun of much more than terrorists. The end result is funny-in-a-sad-way.

The terrorists portrayed in the film are complete idiots. Alas, so is just about everyone else in the film, especially the police, who proclaim quite inexplicably at one point that they had "shot the right guy," but that the "wrong guy then exploded." The part I enjoyed best though was, I would say, the central message of the film: each side's actions essentially amounted to an own-goal. The terrorists end up killing very few non-Muslims, killing many more Muslims in the process, including, by accident, Osama bin Laden himself! They also, comically, kill a sheep and a crow. At the same time, the police end up killing only innocent civilians. When they finally catch some guys for questioning, they take in the very man who tried to convince the men who were planning a terror attack not to do it. This may be because the man the police arrest and take to a location "in Britain but technically in Egypt," is a very devout Muslim and wears traditional dress, making himself a target. He had always preached peace and frowned upon the violence planned by his compatriot, trying to get him to come to prayer meetings and forget his violent mission.

The film goes a long way towards underscoring the senselessness of violence (not least by having a cast of terrorist characters who mostly had no idea what it meant to blow themselves up), but also highlights the difficulties inherent in stopping it along the way, either by reason (the peace-loving Muslim who tries to stop the terror group with words) or by force (the bumbling police). At base it is a sad story with extremely comedic juxtapositions (listening to silly pop songs while driving to a suicide mission or wearing ridiculous-looking costumes to smuggle bombs into a marathon). Watch it, but don't expect to laugh all too hard, the seriousness of the subject has not been forgotten by anyone, especially not by Christopher Morris.

Bashing the Idea of Central Banks

I saw Ron Paul on the Colbert Report the other night. As usual, he was bashing the concept of a central bank, arguing for a return to the gold standard, which he asserted would bring down the price of oil. This sort of delusion keeps coming up, though it is actually much more rare than it seems on account of all the media attention Ron Paul gets. Still, it deserves countering, because the audience cheered his comments, presumably not knowing the implications of what he was suggesting.

Would a return to the gold standard bring down oil prices? Measured in plain old dollars, yes. There is a problem with this, however. First off, it is not within the power of the Federal Reserve or any other central bank to change the relative price of oil, for example as a percentage of your paycheck -- at least not without catastrophic consequences. To see why, let's go through the steps the Federal Reserve would have to take to re-peg the dollar to gold and what would happen as a result of each step.

As I'm writing this, the gold price is $1,530.60 per ounce. If the Fed wanted to peg the dollar to gold at the current rate, what it would have to do would depend on further market pressures on the gold price (whether it wanted to go up or down). Pegging to gold would mean the price would remain $1,530.60 forever. If people started buying more gold, thus putting upward pressure on the price, the Fed would have to encourage people to sell their gold and buy dollars instead, so that its gold reserves didn't get depleted. The way to do this is to raise interest rates. Gold pays no interest, so it is not attractive if you can make money by keeping your money in currency (like dollars) rather than gold -- as long as you believe the currency is stable. Raising interest rates could re-stabilize the gold reserves and ensure the price stays the same.

The problem is: the economy is fragile, and the prices for many consumer goods are rising only very slowly at best. Higher interest rates would mean loans would also become more expensive, and putting your money in a bank account earning interest more attractive. Spending money now is also less attractive if you believe things will be cheaper tomorrow. Better to wait and earn interest on your cash today and then buy later. Consumer spending and company investment would fall. This would mean fewer orders for goods, less work for factories and construction companies, etc etc. This would lead to another recession, negative growth, rising unemployment, and falling wages. As demand for goods falls, so will demand for oil. As the ripples of a second American recession spread over the world, demand for oil could fall globally. It is therefore very plausible that the oil price could fall faster than wages, making oil cheaper. The downside is that wages as a whole would fall and unemployment would rise. This is a high price to pay for a cheaper tank of gas.

But let's not stop here. I believe the current price of oil reflects global uncertainty and the unusual conditions we see today -- in other words: I think there's a gold bubble. It's therefore also very possible the gold price would want to fall. If people around the world believed the Fed's commitment, they would start buying dollars and selling gold, since dollars would provide a better return. The dollar price would go up (compared with other currencies). This would make American exports more expensive in other currencies, and imports really cheap. Companies in America (like Caterpillar, the one that makes excavation equipment) that rely on exports, would be severely damaged. America's current account deficit would widen even further. What's more, the Fed would have to move to extreme measures to keep the gold price UP. It would have to loosen monetary policy even more. Since it cannot really do this, the gold price would likely fall, making the Fed look foolish and unable to be trusted. This would all cause the very thing Ron Paul despises: loose monetary conditions and possibly bubbles.

It all boils down to the fact that the gold standard is arbitrary. Why should we maintain a constant price for gold? Who cares? Gold has no, or little, intrinsic value other than that it is shiny and pretty. The current system is to "peg" the currency to consumer prices, targeting a slow rise of about 2% per year in most countries. It makes much more sense to preserve a currency's overall purchasing power as measured in everyday goods, rather than its nominal value in a good that most people will never own very much of and still fewer can have any real use for. Gold, like any single commodity, is also unstable. A gold mine in South Africa shutting down (this happens) would cause interest rates around the world to rise and tip the global economy into recession. Why do that?

Having an "oil standard," by the way, would be foolish for all the very same reasons, even though oil is a critical good we frequently need. If we pegged the dollar to oil, interest rates would rise dramatically every time there was a shortage of oil, plunging at least the American economy into recession, but probably much of the rest of the world along with it. Oil would still get more expensive in real terms, because wages and prices for other goods would fall as oil stayed put. Eventually the fall in demand caused by the recession would bring oil down, causing loose policy again and a recovery. This is the nasty boom-and-bust cycle associated with old-school capitalism, the same type we thought we'd beaten until the last crisis. Still, though, accepting an oil or gold standard would mean accepting a boom-and-bust cycle that we could have zero control over. Most of us think steering against such cycles and evening them out is a good thing -- this is one goal of central banks'.

Note, too, that this boom-and-bust could all be caused by supply shocks rather than too-high demand. One could actually argue for lower interest rates in response to supply shocks, even though this would accelerate oil-price increases. This is because oil is so important. As its price rises, people and companies are forced to cut back on other spending so that they can continue to buy (more necessary) oil. This could cause overall prices except oil to fall, especially if unemployment is already high (like today in America), meaning bargaining for higher wages is difficult. Rather than let everything else fall, there's a reasonable argument for stimulating the economy in response to the growth-killing effect of an oil supply shock.

Besides, as oil becomes dearer over the decades, there will be a slow shift away from it. Eventually, it won't be such an important commodity, so an oil standard would become increasingly anachronistic, in addition to never having been a good idea in the first place.

Inflation-targeting of consumer prices remains one of the best ideas central banking has ever had. It's not enough, and not all other ideas have been good, but let's not throw the baby out with the bathwater and return to a system that doesn't make sense anymore (it only ever made sense because gold had just happened to become the default world currency) out of pure nostalgia. I'll give you a hint on what to focus on for stability: property bubbles and flows of "hot money." Central banks are re-thinking their approaches to these, too. Let them get on with it. And STOP interviewing Ron Paul! It reminds me of Paris Hilton's energy policy suggestions, except that hers were actually logical!

Realism and Terrorism

Political realism is a school of thought that believes that nation-states are the essential actors in the international system (not individuals, groups, or corporations) and that there are structural reasons that the world functions the way it does that are beyond the immediate influence even of world leaders and powerful nation-states themselves. Due to its focus on the "big picture" --the structure of the whole international system and the distribution of power among the nation-states within it-- many have argued that realism is becoming increasingly irrelevant in a world of asymmetric warfare with non-state actors like terrorists. Indeed, how can a model that, at its base, excludes all parties below the level of the nation-state have anything to say about terrorism?

It is true that realists have often ignored terrorism almost completely, preferring to view the problem as one of crime-fighting that can be addressed by nation-states, like ocean piracy in the 19th century (also something outside realist models). The structural realist model can be applied to terror groups, however. It simply has to be "translated" to the new environment. Doing so can yield some interesting insights and immediately suggests some policy responses (which are, luckily, already being put in place to some extent).

Reading Leah Farrall's article in Foreign Affairs, How al Qaeda Works, I was reminded of a somewhat similar article in International Security (Vol. 33, No. 2, Fall 2008) by Mette Eilstrup-Sangiovanni entitled “Strengths and Weaknesses of Networks: Why al-Qaeda may be Less Dangerous than Most Think.” These two make opposing arguments, with the former asserting that al Qaeda is stronger than ever and the latter calling this idea into question, as the title suggests. What they both agree on, however, is the way in which al Qaeda's network is structured. Farrall's article distinguishes between "franchises" and "branches" within the network, similar to the way McDonald's stores are usually owned and operated by franchisees, but are sometimes run by McDonald's directly (branches). The point is that the structure is highly decentralized. Minor established terror groups apparently apply for al Qaeda franchise status.

So what does all this have to do with realism? Translate the structural nation-state model onto the individual terror units (franchises, branches, the al Qaeda core, and other unrelated terror groups) and you have what one might call a "terror system." Crucially, the al Qaeda franchises have local goals that are generally more important to them than the sweeping, global goals espoused by al Qaeda itself. To be a franchisee, however, these groups must help out with al Qaeda's global mission. In return, they gain expertise, funding, and other support for local terror operations largely of their own choosing. As long as their interests coincide in this arrangement, we can expect cooperation between local groups and the al Qaeda core.

The realist model, however, provides many insights into the formation of alliances and the reasons why groups' divergent interests may drag them away from cooperation, quite possibly in spite of their professed wishes for such cooperation. The point is: we must find ways to bring franchisees' interests out of alignment with those of al Qaeda, thus weakening the entire network.

This has apparently already been done in at least one case: against the Moro Islamic Liberation Front (MILF) of the Philippines. American and Filipino authorities worked to change incentives for the MILF, punishing it more heavily for working with al Qaeda, while using carrots to encourage it not to do so and to come to talks with the government about its local goals. Al Qaeda operatives have apparently stopped using the MILF's training camps in the Philippines. This was the successful application of a realist, divide-and-conquer deterrent strategy, one known since at least Roman times. This is also the topic of my coming PhD dissertation. More to come in about three years...

Libyan Oil, Cynicism, and Anti-Americanism

"We can't be holier than the pope!"
Here we go, I thought to myself.
"America doesn't march into a country to rescue people being abused by their own government. If this were in Saudi Arabia it would never happen. The Americans are good friends with the Saudi rulers and wouldn't do a thing to help the people there."
Next came the inevitable: Libya has oil, so clearly that's what America wants because Americans all drive big cars, which leads them to march into every corner of the world and take every drop of oil they can get.

This diatribe was, unfortunately, from an Austrian acquaintance of mine, but it's easy enough to imagine an American arguing along similar lines. In fact, the nationality of the speaker is pretty irrelevant, because the theme is the same: America is not a force for peace, it is just interested in itself and, above all, getting more oil.

Now, I'm a realist and that makes me lean towards cynicism myself much of the time, but this goes above and beyond cynicism. The arguments are muddled and don't really make sense (I'll get to this below), which leads me to think the argument itself is secondary; it is the point that America is doing the wrong thing (again) that matters. When arguments are left out and the conclusion is the same regardless of the facts, we call this prejudice. It comes in many forms: racism, anti-Semitism, homophobia, Islamophobia, and, in this case, anti-Americanism.

The anti-American argument in this case, as is usual, uses some good points. Does America put its own interests first? Sure, most of the time it does. Just as any other country, when it comes down to it, does. Is America addicted to oil? You betcha. Is that addiction a bad thing? Sure is. Would America attack Saudi Arabia? It would surely be extremely reluctant to do so, but the full answer to this is more subtle. As I answered at the time "it would depend on who had the upper hand." This is precisely what happened in Libya. (Read on!) Let's address the argument piece by piece.

First is the oil issue. There are a number of reasons why this argument makes no sense. First off: the world was receiving oil from Libya with Gaddafi in charge. If that's all the West had been interested in, surely it would have supported Gaddafi from the outset, rather than rebel protests that looked to destabilize a regime that had become quite friendly to the West. Second, Libya has a lot of reserves, but the shortfall of around 1.4 million b/d of oil from there can be made up for elsewhere. Saudi Arabia, Kuwait, Nigeria, and the UAE were set to pump an additional 1 million b/d to make up for most of the Libyan short fall on their own.

As an oil producer, Libya ranks behind the traditional oil producers Saudia Arabia, Kuwait, and Russia, but also behind the United States, the EU, and Norway. Has the unrest and supply cut-off in Libya driven oil prices up? Sure, but so has the unrest in the Arab world in general and, more recently, fears that Japan's nuclear disaster will cause a move towards petroleum as a substitute energy source. It is simply not worth getting involved in yet another foreign military mission over 400,000 b/d of oil. Anyone who tells you that this is what America is doing is missing something.

The next point is about America's leadership role in all this. America has actually been keen to give up the leadership of the mission and have NATO take it on. The biggest advocate of action has been France's President Nicolas Sarkozy, not Barack Obama. It was France that first afforded diplomatic recognition to Libya's Interim Government, long before it had become clear that it had effective control over most of the territory and its citizens. (This is a custom in international relations/international law, albeit one that's been broken several times: Croatia and Kosovo spring to mind.) So why was this guy blaming America (again)? Is there a good reason for the no-fly zone and all the fuss?

As I've pointed out, my acquaintance was right that America does not always get involved when a government is mistreating its people. Two things, though. For one, this is not absolute. America's involvement against the genocide occurring in the Balkans was because Bill Clinton believed it was the right thing to do (and was pressured/guilt tripped into doing something). American involvement in Somalia was also meant to keep peace and rebuild the state. The "CNN syndrome" struck in Somalia, however: images went around the world of dead American soldiers being dragged through the streets behind a pickup truck in Somalia. The American public was clear: if those people want to kill each other, then let them -- get our boys out of there. We did.

America will not usually react to human rights violations with force unless there are additional reasons (like national security) to do so or it is under heavy pressure. This may sound selfish, but the other half of the calculation involves whether or not a change is even reasonably achievable. We cannot topple every dictator, and even when we do, we may have a mess afterwards (as Iraq and Afghanistan have clearly shown). Last but certainly not least: American leaders must consider the costs to their own country, both in blood and treasure. America does well to choose its battles wisely.

So why Libya? It's not national security and, as I hope I've shown, it's not oil. So what is it? The Libyan situation is a simple case of having painted oneself into a corner. The US is acting because it feels heavy pressure to do so, from its allies in Europe, but also due to its, and its allies', actions. When it appeared the rebels were going to topple Gaddafi, supporting them was easy. Kind words were almost all that was required. An embargo was put in place. Gaddafi's accounts in America and (embarrassingly not until later) Europe were frozen. Then the tide turned in favor of Gaddafi.

The US, France, and Britain realized there was wet paint on the floor all around them and that the door behind them had just been closed. They had burned their bridges by making an enemy out of Gaddafi and declaring their support for the rebels. Now the rebels might lose. They basically had no choice but to step up their aid to the rebels. This would have occurred even in Saudi Arabia: If it long appeared the House of Saud was doomed to failure, the West would probably support rebels there. This is because that would be the most likely way to bring about longer-term stability and a quick, and therefore cheap, end to hostilities. They could, of course, fall into the same trap in that case if the tide turned there, too. Such are the problems that accompany marriages of convenience!

It helps in this case that the West is acting under the approval not only of the UN Security Council (in which Russia and China surprisingly decided to abstain rather than veto the no-fly-zone resolution), but also of the Arab League (though the latter is now more ambivalent since actual bombings have begun)! The operation has a level of international approval, and therefore legitimacy, not seen since perhaps Operation Desert Storm under Bush Senior.

So to recap: the US has reluctantly stepped in and taken up a (temporary, it hopes) leadership role in implementing a no-fly-zone with air strikes over Libya. It is doing so in support of rebels against a dictator, but probably would not be if it had not painted itself in a corner. It is acting with a great deal of international support and a UN mandate. It is not about oil.

All in all, while room for cynicism remains about the US and the West's final decision to act, the reasons for this mission are pretty darn good. Whether its a good mission in the sense of the likelihood to succeed, whether it will drag on forever, and how bloody it will get, is another discussion entirely. To imply that this is just another optional war waged by America to slake its oil thirst (or perhaps its alleged thirst for violence) is simply wrong and speaks of ignorance -- or just plain old anti-Americanism.

A painful victory for the first amendment

The Supreme Court recently ruled that protests held by the nutjobs of Fred Phelp's ultra-right-wing Christian fundamentalist church have the right to protest at soldiers' funerals due to the First Amendment. This is a painful victory for free speech, but a victory nonetheless. This is one of those "slippery slope" cases. No one would have a problem if Fred Phelps could legally be stopped somehow. Almost everyone finds the idea of protesting at just about anyone's funeral disgusting. But restricting free speech is a dangerous thing, as it is the most fundamental of rights in the Bill of Rights (that's why it comes first). Tyrannical governments restrict free speech first (no, I'm not Glenn Beck and am not going to argue that the US is about to descend into tyranny). In America, such a government would have to go through the Supreme Court first.

To twist this around a bit, imagine the following scenario: a group of people are viewed by society to be disgusting in their very existence. The thing they are protesting for is also viewed with disgust. Children walking by and reading picket signs might be demoralized. These people have no right to protest and to use our constitution against us.

That group could easily be homosexuals, or maybe communists. We had a "red scare" after all. The Bill of Rights and its nominal defender, the Supreme Court, protect us against mob ("majoritarian") rule. Liberal democracy (sorry to use the L-word, Republicans, but that's what America is) does not mean always following the will of the majority. It means laying unalienable rights and ground rules, protecting minorities, and then following the will of the majority beyond that. Even if everyone in the country is against something, it doesn't matter if that something is protected by the charter that forms the basis for the functioning of our entire society. (See tea partiers? Some of us "liberals" have read the constitution, too!)

Fear not! As always, the right response to people saying disgusting things is to use your own right of free speech to confront them. After all, the First Amendment gives you the right to say what you want (unless you are knowingly spreading defaming lies about others), but the First Amendment does not protect you from the consequences of what you say! Fred Phelps might have the right to picket, but we also have the right to be pissed off about it and to let him know that in no uncertain terms. If the whole country stood up to Fred Phelps and his nutso family, I bet they'd eventually cut it out. How about picket lines on public property outside their church every Sunday? How about counter-demonstrations at funerals? Youtube videos of people peacefully expressing their disgust at their actions in person? Let's get together people from different faiths (and none), veterans, patriots, communists, whatever. Let them know that while they have a right to send their message of hate, we are not willing to receive it and, though we have no legal power to enforce it, that we demand that they stop!

Maintaining our rights is a struggle, and defending them is not always easy, especially when you have to defend the rights of Nazis and other crazies. It's worth doing, though, because remember: the First Amendment is a double-edged sword, for both sides of any dispute.

Abortion as a right... and obligation?

I had a interesting (and somewhat fiery) discussion with a student the other day. We are both pro-choice, so it was a bit surprising that the excitement occurred while discussing abortion. She bemoaned that doctors in Austria are not required to perform abortions at the patient's behest. I said I thought that was just fine. She was angry, because abortion in Austria is still technically illegal, though it has been decriminalized, so there's apparently little problem in getting one in practice, especially in "liberal" Vienna. Well, she has a point, and as a pro-choice supporter, I think it should be up to the individuals involved to decide.

Still, abortion is not "just a medical procedure" like any other, as she tried to convince me. There are real ethical considerations involved, not to mention some very strong feelings (as she herself can surely attest). To brush others' concerns aside would be to commit the same bigotry that pro-lifers, in my view, do: wishing to force those who disagree with them to live by their rules.

To a certain extent, civilization requires that we do just that. Just a small example: I have been known to voice the opinion that speed limits in America are too low. Still, when I drive fast and am caught, I have to pay a fine. This is called the rule of law. It is definitely not tyranny, despite what some anarchists might have you believe. Again, though, abortion isn't just some ordinance. It is a topic that very often defies consensus. At the root of the problem are differing beliefs about when life itself begins. Such a question is almost impossible to answer in a way that will satisfy everyone. For this reason, the most logical conclusion for me seems to be to allow individuals to choose whether or not to have an abortion. At the same time, though, I think most people would agree that abortions are not wonderful things, but are instead a last resort. Efforts to encourage mothers to give up children for adoption, to help young mothers raise them themselves, etc., are all all right, so long as the mother, in the end, is free to decide.

So back to the doctors, now. Following the logic that abortion is controversial because the point at which life begins cannot really be defined, it stands to reason that doctors, too, may disagree on abortion. Some doctors may have deeply held convictions that tell them that abortion, when the mother's life is not in danger, is wrong. Maybe they just feel uncomfortable with it. After all, I have been told, and this seems very plausible, that few women choose to have an abortion lightly. It may be a decision that haunts them long afterwards. Why should we assume doctors are any different? They may also suffer from a moral dilemma and be robbed of sleep at night, even if they feel they've made the right choice, due to the difficulty of making such a decision at all. Because of this, I feel it is only fair that doctors be free to choose whether to perform abortions or not, assuming the woman's life is not in immediate danger (this caveat is crucial). Maybe they could be required to refer patients in a timely manner to another doctor who will do it. Another reason is that I suspect that the quality of a doctor's work might suffer if s/he were performing an operation s/he were strongly opposed to.

Let's remember that the guiding principle here is freedom. I know, it sounds really cliché and Bush-esque, but it's true. A woman's freedom to choose should not infringe upon a doctor's right to do the same.

In the long run, commodities are a bad bet

Commodities are booming at the moment. If you also happened to buy into silver at any time in the last year, you'll know this. It's seems as if the commodity boom will have no end. The "optimists" point out that we have a limited supply of natural resources, and demand for them shows no sign of declining.

True, but there is a serious flaw to this logic. There's a market adage that basically says if you bet raw materials are going to get more expensive, you are selling human ingenuity short, and you are also betting on political stupidity and greed. Over the past century, commodities have actually gotten cheaper in real terms, according to The Economist. This has been due to ingenuity (vast increases in efficiency, mining, transport, and production).

Political stupidity and greed seem like pretty good long-term (or any-term, really) bets. But hold on: if you are betting on commodity price increases and greed, you are also betting on economic growth to drive those prices up. Failing ingenuity, if prices continued to rise, this would eventually stall growth and cause them to fall again (much as they did a mere two years ago).

Commodity prices can only rise if ingenuity is insufficient while growth nonetheless remains strong (let's just assume government foolishness and avarice are a given). Since rising prices eventually destroy growth, commodity prices essentially check themselves over time. The questions are:

1. How long a time?
2. What's going to bring them down; ingenuity, or recession?

These questions matter a lot, because some answers are painful. One way or another, though, another old adage will surely hold true: what goes up, must come down.

Palestinian elections in the West Bank: An opportunity for Fatah AND Israel

There has been talk of legislative and presidential elections in the West Bank, which would occur in September. This is an opportunity for Fatah to strengthen its mandate. It is also an opportunity for Israel. The reason? Hamas is refusing to go along with elections. This is good news for moderates for two reasons:

1. Hamas cannot come to power in the West Bank if it does not run. The idea of Hamas actually coming to power there gives Israelis chills.
2. It shows Palestinians that Hamas is not a viable alternative. Hamas's failure to hold elections lays bare its lack of democratic credentials.

If done right, then, the Palestinian Authority can show that it is the legitimate representative of the people, at least in the West Bank, while calling Hamas's credibility into question, including within the Gaza Strip. Israel and the West would do well to support free and fair elections and to respect their outcome. The alternative would likely be Palestinian unrest caused by an increasing sense that their (nominal) government is not respecting their wishes. This would be bad news for Israel, too.

What happens if Hamas, recognizing that it is being shown up, decides to hold elections in the Gaza Strip and to campaign in the West Bank? This is Israel's nightmare scenario, ending with Hamas winning both Palestinian territories. It doesn't have to end that way, however. It is not certain that Hamas would win. Israel and the West cannot continue with the cognitive dissonance of claiming to support democracy and human rights and then refusing to recognize elected governments, however.

This does not mean it should sit idly by. Many Western governments provide financial support to Fatah in the West Bank. They should continue to do so to support its campaign there, while underlining Hamas's failings. Concessions from Israel would help put Fatah in a better light as well. Isn't this outside influence just another form of meddling in "free" elections? Yes, but the choice and power would still be with the voters in the end. Under normal circumstances, this sort of meddling would be unacceptable, but these are not normal circumstances, I think we can all agree.

What if Hamas participated and won both territories? I'm not sure how likely that is, especially if other things are done right. Still, it is a possibility. One positive result would be Palestinian unity that would give Hamas a stake in the outcome of talks regarding all Palestinian land. Sure, this strengthening of their position would by default mean a weakening of Israel's. I would note, however, that Hamas has actually done a good job of keeping violence at bay in the Gaza Strip and promoting stability there. Hamas's rhetoric is still horridly anti-Israeli and sounds dangerous. It would be naive to underestimate this. Still, we are seeing an age-old effect: once the terrorist-insurgent group becomes a government, it has a stake in stability and non-violence. Controlling a state tends to have a moderating effect if one looks past rhetoric.

Why? It's hard to threaten an insurgent group. Invade? Big deal. We're guerrilla fighters and want to bring down the state anyway! That would only HELP us! If a group controls a country, however, the calculus looks decidedly different. Now there is someone who can answer for misdeeds who is a legitimate representative of the people there. They can be held to account more easily.

There are dangers, but the situation will only get more heated over time anyway. It's not now or never, but it is now or at some-unexpected-and-inconvenient-time-in-the-future-selected-by-revolutionaries. It's a choice between risky but principled vs. dangerous and fiery-ideological. I know what I'd pick...

Why inflation outside the US is neither the Fed's fault nor its problem

There's been a lot of bellyaching around the world lately about the US and, to a degree, Europe exporting their loose monetary policies to the rest of the world and causing inflation. It's mostly the US that people complain about, and European commentators do their fair share of the complaining as well. An article in Der Standard, a daily paper based in Vienna, Austria, this week claimed that the US was attempting to solve its problems by pushing them onto others by devaluing its currency. The currency value is a separate (though related) issue, so I'll come back to that later.

World-wide rates of inflation are neither the US central bank's fault, nor are they something the Fed should really care about. Other countries' inflationary problems are just that: their problems. It may sound harsh, but it's actually not. It helps, too, that this is simply the truth.

The Federal Reserve, the US's central bank, has the responsibility of setting and targeting interest rates for the United States. Its concerns are ensuring price stability and low unemployment. Over the last few decades, it's done a pretty good job at both, though it definitely shares blame for the financial crisis and the high unemployment it caused. The past has been discussed enough here, however (see previous articles on the subject starting in 2008). The reason interest rates in America are at record lows is very simple: unemployment is high and core inflation is extremely low at 0.8%. Most banks in the rich world target rates of around 2%. The Federal Reserve is, very rightly, concerned about deflation at the moment. Deflation would mean falling prices. It is very dangerous because falling prices encourage people to save more and spend less, which causes prices to fall farther. This is because you would rather save your money a little longer, knowing that TV you wanted will get cheaper. Likewise, companies concerned about costs will be reluctant to invest, as the prices they can charge will fall in the future. All this makes spending now less appealing than spending later. Cue the vicious cycle of deflation and recession. Cue Japan since its financial crisis in the early '90s. What's more, interest rates cannot drop below 0%, meaning deflation would be extremely hard to fight once it got going. With unemployment high and people worried about the economy, booming demand is also unlikely to drive up prices. All good reasons for super low rates. This is the Federal Reserve's responsibility. If the US economy sinks into deflation, the whole world would suffer from that, too.

The reason the inflation in the rest of the world is not the Fed's problem comes in two parts. For one, it is simply not its mandate. More importantly (and less selfishly), however: other states can set monetary policies of their own independent of the Fed. It is only their reluctance to do so that is causing problems! Economic conditions vary around the world and call for varied monetary policies. Overheating developing countries should raise policy rates, allow their currencies to appreciate, and yes: instate capital controls. A good way to do this would not be caps, but rather taxes on capital inflows (as Brazil has done). This would make their currencies effectively more expensive, while not damaging exports or encouraging imports too much. This damage to exports and encouragement of imports is a worry for developing countries that are on the receiving end of cash looking for higher returns. (If cash inflows drive up the currency, the country's exports become more expensive and imports become cheaper.) It is a justified worry, but the solutions lie with the countries in question -- not with the Fed. If the Fed were to raise rates just to make others happy, it would destroy the US's meager recovery, which would hurt everyone else, too. It just makes no sense.

Since inflation and hot money in the developing world are not the Fed's problem and can be addressed by developing world central banks, it stands to reason that the "fault" lies with them, not the Fed. Case closed.

How about the dollar devaluation Europeans are moaning about? Far from "pushing its problems on others," the Fed is now actually moving America out of a position where it buys everyone else's stuff on credit (essentially subsidizing everyone else's economies while plunging itself foolishly into debt). The US dollar is overvalued, judging by America's current account (essentially trade) deficit with the rest of the world. America's consumers are broke. They can't keep buying everyone else's stuff anymore. Sorry. You'll have to look for customers elsewhere, perhaps in your own country (Germany and China!). A devaluation of the dollar would be part of the global process of rebalancing that needs to happen for the world economy to be on a stronger footing. America needs to consume less; and save, invest, and export more. Places like Germany and China need to do the opposite. Germany can't go on repressing spending and wages within its borders to sell more and buy less outside its borders. The Fed is (actually inadvertently) taking a step in that direction.

Have monetary problems? Then implement policies to address them and stop whining about the Fed. Unless you're whining about overly lax regulation and the Fed's tendency to inflate bubbles repeatedly. Those are legitimate criticisms (and the latter is admittedly related to loose policy). We can discuss those another day (and I have in the past as well, the posts are still on this site). For now, suffice it to say that the Fed's policy, while not without risks for America itself, is necessary and the only real option. What's more, other countries are not powerless in the face of any possible risks and have the ability to protect themselves, if this is even really necessary. They should implement sensible policies themselves. The world is changing. Get over it and start changing with it.

Saudi Arabia: The Elefant in the Room

The protests in Egypt, which now seem to be dying down, leaving the regime still in place, have sparked a lot of talk about what other countries in the Arab world might have their autocratic regimes toppled by protesters. Jordan and Yemen, having experienced protests already, are obvious candidates. Absent from most discussions, though, is Saudi Arabia. This is presumably because most view it to be rock-solid. Or is it because the idea of a revolution or civil war breaking out in Saudi Arabia is too frightening to contemplate?

Robert Baer famously argued in an article in the Atlantic Monthly back in 2003 that Saudi Arabia was not nearly as stable as many presumed/wished. Aside from concerns about Saudi money funding Islamist outfits all over the globe (read the article, it's an eye-opener), the assertions of the frailty of the regime, as well as of the importance of stability in Saudi Arabia for world political and economic security, are unnerving:

• "Saudi Arabia controls the largest share of the world's oil and serves as the market regulator for the global petroleum industry.
• If the Saudi oil spigot is shut off, by terrorism or by political revolution, the effect on the global economy... will be devastating.
• Saudi oil is controlled by an increasingly bankrupt, criminal, dysfunctional, and out-of-touch royal family that is hated by the people it rules and by the nations that surround its kingdom."

What's more, Saudi Arabia's oil infrastructure is very vulnerable to attack. Shutting down just one or two major processing centers and pipelines could essentially stop the oil flow out of the kingdom. This could happen as a side-effect of a revolution (e.g. through neglect and a collapse in the support infrastructure between governments). Gasoline prices of $4 per gallon would then seem Utopian. The weak recoveries in the rich world could end with high inflation and higher interest rates. Unemployment would rise further.

Then there are the political consequences. Right now, US-backed Saudi Arabia can be counted on to act as a counterweight to Iran in the region and to ensure the free flow of oil and other goods off both of its coasts. Indeed, one theory about the reasoning behind the Iraq War was that some US policymakers feared the eventual collapse of Saudi Arabia and wanted to create an American ally (Iraq) to counterbalance Iran's influences in the region. If Egypt were ruled even by a moderate grouping including the Muslim Brotherhood, it could nonetheless be expected to take a decidedly less pro-Western stance. Now imagine losing Saudi Arabia as an ally, too, which has generally been willing to boost oil output when the US was in need and to provide a moderating political influence in the Middle East (at least through its official diplomacy, if not through the Islamist ventures it funds abroad!).

If Egypt and Saudi Arabia became real democracies (and this is a big "if," especially in the case of the latter), this would be something to celebrate, even as we learned to deal with the political and economic consequences as best we could. There is a whole range of possible scenarios. Some of them, though, border on the apocalyptic. Baer believes it's only a matter of time before Saudi Arabia collapses. It could be a turbulent and, at times, scary new world.

Egypt: a pretty pickle for America

Unrest continues in Egypt, sparked by the overthrow of the Ben Ali government in Tunisia. Egyptians want an end to the repressive regime of "President" Hosni Mubarak. Here in Vienna, protesters held up banners at Stephansplatz, the city's central square. The banners demanded "freedom for Egypt" and decried US and EU support for the Mubarak regime.

It looks like Egypt could conceivably head towards democracy. So why aren't the US and European countries rushing to push for this? The West's support for a repressive regime in Egypt began after the 1967 Arab-Israeli War. Then Egyptian President Anwar El Sadat, facing a nearly bankrupt state, civil unrest, and an Israeli occupation of much of its territory, realized that his only hope for a solution to all these interrelated problems was to get the US interested in the matter. He ejected Soviet military advisors from Egypt. It didn't help. In 1973, he started a war with Israel and gained back some territory. He stopped short, however, thinking international diplomacy would take it from there. Instead, this gave Israel time to regroup. It fought back and made large gains. The Camp David Accords settled the matter, for the most part, giving Egypt back the Sinai Peninsula. This was seen as a sell-out by much of the Arab world. Egypt thus became politically isolated from the rest of the Middle East. This meant it was more reliant on the US.

The US, for its part, was now more interested in providing support because of a simple calculus: if Egypt had continued to move forward, the US might have gotten dragged into a war on Israel's side. This might have brought in the Soviet Union on Egypt's side. This could have happened the other way around as well. No one wanted a direct war between the US and USSR. The US, from the 1970s on, took a closer interest in the Middle East and supported Egypt as a military power to help maintain stability in the region. This was useful as Iran's revolution meant that it turned away from the US. Egypt and later Saudi Arabia began to be seen as bulwarks against instability and terrorism.

Things have changed a bit. What to do? The alliance with Mubarak has always been an uncomfortable one of convenience. The US promotes democracy where it can, but must consider when it may be better to promote stability over democracy. Stability may not longer be viable in Egypt, so perhaps the US can support stability by supporting democracy -- carefully.

US policymakers are worried about the Muslim Brotherhood. Hamas, a Palestinian terror group-cum-political party (and rulers of the Gaza Strip), is an offshoot of the Muslim Brotherhood. Some of its members are extremist. They would probably win an election in Egypt. The problem is: there's a good possibility that they would only have ONE election. Then we'd have a repressive regime again, but one that is also anti-American.

Maybe this is inevitable. Give the people of Egypt the chance to choose for themselves. In the long run, having a repressive regime that was NOT kept alive by America would be a good thing, and would help America out of the cognitive dissonance caused by propping up an authoritarian regime. Egyptians might then no longer see America as the enemy behind the scenes. The current regime, regardless of the outcome of the current unrest, is not sustainable, in any case. Perhaps the US can provide careful support and midwife true democracy? Sound overly optimistic?

Sources: http://english.aljazeera.net/ and

Cleveland, William, and Martin Bunton. A History of the Modern Middle East. 4. ed. Boulder, CO: Westview Press, 2009. 

North Korea: Pay no attention to the man behind the curtain (China)

The situation with North Korea can seem confusing and infuriating. Why does North Korea provoke and then act friendly? Why is it so bent on getting nukes? Is Kim crazy? Why does China support North Korea, a would-be nuclear power in its backyard?

The answers to all these questions become pretty clear if you think of them as North Korean or Chinese leaders would. Why does North Korea yo-yo? Simple: it really wants nukes. Every time talks and improving relations get to the point where there's nowhere to go but giving them up, Kim starts the cycle from the beginning. He provokes, gets everyone riled up, then quiets down before a real mess starts and asks for negotiations again. All this buys time and has thus far avoided any real armed conflict. North Korea is closer to being able to launch nuclear warheads that can travel long distances, a considerable increase in its deterrent capability. At the same time, no one has attacked North Korea. A pretty successful strategy, from Kim's perspective.

But why is he so bent on getting nukes? This one is easy: no one invades a country with nukes, especially ones that pose a credible threat (they're borderline in North Korea, but still a risk), especially when no one is sure where they all are (the case in North Korea and Iran).

This leaves us with the last question: what's China's plan? Let's be China for a moment. What do we want? The same things most other countries want: autonomy in our internal affairs, security internationally, and to be able to trade freely with the rest of the world. North Korea would seem to cause insecurity, and America is a supporter of free trade, both ideologically and physically, with its naval presence in the western Pacific. This would seem to encourage China to take the US side on North Korea. It doesn't, because China dislikes US pressure to change its internal situation (criticism of the management of its exchange rate or its human rights record, for example) and sees its ability to project power in its region limited only by the US presence there, regardless of US intentions. These concerns seem to override, or at least ameliorate, China's worries over North Korea. The old diplomatic adage "let's you and him fight" applies here. China welcomes a distraction for America, while also free-riding on American action (it does not really want North Korea to become more powerful). China is also afraid of a collapse of the Kim regime because this might cause streams of refuges into China.

What should the US do? It is currently being duped by North Korea and China: paying for security in the region while not getting anywhere as far as its goals in the region. As I've argued previously, the US should make this China's problem. It should back up South Korea (and Japan) in the region where necessary, but it should not take the lead. This would force China to be more actively involved. It would make it impossible for China to free-ride on US peace-keeping and would also reduce the distraction-factor with regard to North Korea. It would also help to allay concerns about America's strong presence in the region because America would be speaking softly (while still carrying a "big stick"; Teddy Roosevelt would approve). China wishes to be a world power and claims to want peace. Here is its chance.

Unilaterally recognizing a Palestinian State may seem like a good idea -- it isn't

As Israeli and Palestinian leaders seem forever unable to settle their differences and agree to live side-by-side, and as Israeli settlements continue to go up in Israeli-occupied Palestinian territories, some states have begun to recognize a State of Palestine. In fact, the EU recently even seemed to imply that recognizing Israel implicitly meant recognizing Palestine. Wouldn't recognizing Palestine be a way to strong-arm the two sides into finally coming to an agreement and letting everybody get on with their lives? How likely is such an action?

As you may have guessed from the title, the answers are "not really" and "not very." First off, how good of an idea is unilateral recognition really? Recognition is a discretionary act. States are generally free to (not) recognize whomever they wish. Usually, though, one standard for recognition is that a state has a government that effectively controls its territory and the people in it. That can't be said for a would-be Palestine. There are three governments involved: the Palestinian Authority (Fatah), Israel, and Hamas.

"This is just legal doctrine," you might say. "Who cares?" It matters. By recognizing a Palestinian State, this would imply that relations between us and the Palestinian state are state-to-state. This would cause quite a legal pickle. States have a right to sovereignty and non-intervention. Doing business with Israel, whose presence would almost certainly be undesired within the new Palestine, could then be viewed as supporting an illegal breach of Palestinian sovereignty. This could conceivably allow the Palestinian Government to sue in, say, German courts companies and other organizations doing business with Israel deemed to support the government's occupation of another State.


This would force governments into uncomfortable situations. They should not recognize a Palestinian State unless they are ready for these situations and ready to be consistent with the implications for foreign policy. Most states in the "West" are not ready for this. They know this, too, which makes such a declaration unlikely until they are closer to being ready.

The other issue is more pragmatic: who would states do business with? Would they consider the PA the government of all of Palestine and ignore Hamas in Gaza (broadly in line with current policy)? Recognition by a majority of states around the globe might indeed force Israel out of Palestine, especially (and particularly) if the US were on board. This would cause a power vacuum, giving the PA and Hamas an opportunity to fight for control, but also opening up the possibility to further, smaller groups. International action could be required to stop the country from collapsing into violence, and Israel might simply go right back in.

In short: declaring that a Palestinian State exists would do nothing to solve immediate Palestinian problems. There still would be no unity and no viable government there. The border issue would still be unresolved, no matter what borders recognizing countries might unilaterally decide to recognize (if any, this is not a requirement of recognition). It would put additional pressure on Israel, which might cause less moderate groups to gain more power there, polarizing the situation further. Finally, it would cause legal conundrums at home. What would be the point of all that?

It is time to put more pressure on both sides to resolve the Israeli-Palestinian crisis. But the issues must be resolved from the ground up, starting with borders. A top-down approach based on unilateral recognition is messy, risky, and quite possibly counterproductive. There are no shortcuts when real resolve is what is really needed.

Why We Still Need the Military

A common theme to be heard when talking about the armed forces in Europe and America is that we spend too much money on them. "Where's the enemy?" someone I know asked. The answer is often along the lines of "the only enemies we have are ones made up by the military industrial complex to give itself a reason for existing." Since this spending is unnecessary, so the reasoning goes, the money would be much better spent elsewhere.

While there is probably scope to cut spending in America, which spends more on its military than the rest of the world combined, the idea that much too much is spent on the armed forces in general is flawed. America only spends about 4% of its GDP on the military, less than it spent during the Cold War and much less than a great deal of other countries. Military expenditures in Europe have also been declining for decades as a percentage of GDP.

All very well, you might say, but why even have a military at all? It may come as a surprise that the first reason, while perhaps the most obvious, is the less important one: there are enemies. Just think of Iran and North Korea. Ask Eastern European countries how they feel about Russia, and they will tell you they are still nervous about its influence and its sheer capabilities. But aren't we just making these enemies? If world leaders were younger and more female, the world would surely be a better place (someone recently argued this to me).

This brings me to the second, and more important, reason why we still need a military: stability. Whether Iran is an enemy or a friend is something that can change over time. Surely no person of sound mind would argue that Iran, in the sense of Iranians themselves, are the "enemy." The primary driving force behind the existence of militaries is not, as many believe, a desire for power. The quest for power is more of a byproduct of the actual cause: fear. How do we know what the intentions of any given state are? In a changing world, how can we be sure that these intentions will not change? The world is an anarchic place. There is no global police force that will come help countries if they are attacked by others. Just look at Georgia. The UN cannot fill this role and was never designed to be able to. It is a club of nation-states and cannot rise above them.

This policing role has fallen to certain countries over the centuries. Britain had it until WWI, the United States has taken it on since WWII. "But who says the world wants the US to go around policing it? How arrogant!" Yup, I've heard that (and indeed, as a younger man, have said it myself), too. In fact, the US tried to just mind its own business and let everyone get on with their own business. The problem was, Britain had been keeping order but wasn't able to after WWI. The result? WWII. There was no one there to check German power or make European countries feel more secure. The US learned from this. Since WWII, it has been committed to providing stability, at first focusing on Europe, and now, increasingly, on Asia.

Take Japan. Japan has not spent much on its military, freeing it to spend money on social programs and the like. All very nice for Japan. The reason it has felt safe enough to do this, however, is because the US has long guaranteed its security. China is increasing its military spending and has an enormous population. This makes Japan nervous. For now, however, the US has the capability to make Japan (and South Korea and others) feel secure enough. If the US were to withdraw from Asia, those countries would look at the regional giant, China, and know that China could really boss them around if it wanted to and they, as much smaller countries without credible militaries, would be able to do little about it.

The point is not that China is the enemy (nor even that Iran is). The point is that China is (becoming) powerful. Will it remain peaceful? Will is always respect others wishes, even if contrary to its own needs? It might. The historical record indicates otherwise, however. The US provides stability, for now, in an uncertain world. Its military is needed to do that. We may think it would be nice to live in a world without militaries, but there is just no way to do that. That is not (yet) the world we live in.

Afghanistan: It's a game of chicken, and the U.S. doesn't seem to know the rules.

There has been some talk recently about a possible dialog between Taliban leaders in Afghanistan and the Afghan government and/or the Americans. This has generally been welcomed, though most seem to realize that this is not the beginning of real peace negotiations. The problem is: the beginning of peace negotiations is not going to begin anytime soon, and never on U.S. terms. The reason is simple: Afghanistan is a game of chicken. The Taliban understand this. The U.S., it seems, does not.

For those unfamiliar with chicken, it's a fantastically (and idiotically) macho game wherein two men (usually, but let's not be sexist, there are plenty of idiot women out there, too) get in cars and drive at each other full throttle. The first one to swerve loses. Of course, if neither swerves, both lose a lot more than the game: they lose their lives. The stakes are high for two individuals in the game of chicken. In the Afghan version, they are high for millions of individuals.

There are a couple strategies for winning the game of chicken. One is to limit your options by, say, removing your steering wheel and letting the other side know you cannot swerve. This will simplify the game for them: lose the game or lose your life. Simple equation.

The other is to appear to be crazy. If the other side really believes you would rather die than lose the game, they will swerve first.

The Taliban have almost no reason to agree to a settlement on anything other than their own terms. The reason? The U.S. has played the game using the opposite of the second strategy above: everyone knows the U.S. will not stay there forever, no matter the cost. Obama wishes to start pulling out next year. The Taliban know this. The Taliban on the other hand, while not crazy (fanatic, perhaps, but not crazy), can much more convincingly assert that they will fight to the bitter end, regardless of the cost.

The choices here, then, are also simplified: the Taliban can fight for another year, maybe two, or they can just give up now. That's it -- they must only hold out a year. The U.S., on the other hand, can fight until it's bled dry, or it can cut its losses and run. The winner is predetermined here because the U.S. has shown all of its cards (and yes, I'm aware of the mixed metaphor with poker, just go with it).

If you were a Taliban leader, when would you chose to negotiate a peace agreement? "How about never, is never good for you?" seems a likely response.

Theory of Personal Relativity

This is a little break from the usual politico-economic musings of this blog. Unfortunately, this idea came to me in the night and I've forgotten most of the conclusions I came to and what I wanted to say. All I can remember is that I wanted to finally put this theory out there for the world. It's a theory I've had for a long time: time is relative.

No, I'm not talking about Einstein's relativity, I'm talking about personal relativity. We (it seems, at least) all know the experience: the older we get, the faster time seems to go. I have long thought that this has to do with our perceptions of our own lives. We can only conceive concretely of a time period as long as our own lives. Anything beyond that, though "conceivable" remains abstract. It remains abstract because we have never experienced it. This means that we perceive daily time as a fraction of our lives. For this reason, time seems to run ever faster.

Let's apply this in a very unscientific experiment. Do you remember when you were 5 years old and your mother took you shopping for AN HOUR?!? That's FOREVER! Now an hour can pass when I drift off in thought for a SECOND, I swear. The reason, as I've said, is simple: an hour is 1/43,800th of a 5-year-old's life. That doesn't sound like much, but an hour is a mere 1/262,800th of a 30-year-old's life. This means that an hour for a 5-year-old is equivalent to six hours for a 30-year-old (and 12 for someone who is 60).

Remember waiting for Christmas as a kid? I'm 28 now, and Christmas seems to whip around the year really quickly nowadays. Could it be that I'd have to have Christmas once only every 3.5 years to match my experience as a child? This is all a ballpark, but that really sounds right to me. It felt like I had to wait more than 3 years for Christmas to come when I was eight.

This also could help explain why children seem to learn so fast: for them, time is passing much more slowly! OK, there are a host of neurological explanations for that as well, so maybe this is pushing it. Still, if you are dealing with people significantly older or younger than yourself, using this formula might help put you in their shoes, especially if you're dealing with kids. This is also why a five minute time-out is so useful for a kid: it's an eternity for them already.

If the theory is right, there's bad news: life will keep flying by faster and faster. The good news is, the acceleration steadily slows as you age (an hour for a 30-year-old is only twice as long as it is for a 60-year-old). Still, not only are we not getting any younger, we're getting older faster and faster... :-/

Negative Interest Rates: Time for Japan to Experiment (again)?

As deflation has been feared in the last two years since the financial crisis, central banks have pulled out the stops to try to prevent and counter it. "Quantitative Easing (QE)" has been the name of the game. It basically involves buying up loads of debt, including direct purchases of government debt, by throwing on the printing presses to flood the market with cash. Normally when more and more currency chases the same amount of goods, prices should rise. Under the extraordinary conditions of the past two years, however, this has not been the case. Deflation has thus far been mostly avoided in the rich world outside of Japan, which has suffered inflation on and off for the past 20 years since its financial crisis in the early 1990s.

Japan has coupled QE with fiscal stimulus on and off for two decades, and yet still suffers deflation. There are also worries that Japan's capacity to stimulate with government spending may soon approach limits, though bond yields as of yet show no sign of this (Japan's debt is the highest in the rich world by far, but it is almost exclusively domestically held). Must Japan simply surrender itself to deflation, its economy a soufflé in a prematurely opened oven? Perhaps not. Japan has a few options. One would be more dedicated and aggressive QE. But there is also something else, something never tried before: negative interest rates.

Strictly speaking, there is no reason a central bank (or any bank, for that matter) could not offer negative interest rates. The problem is that many normal instruments of monetary policy would cease to function properly if this were done.

The problem with deflation is that people know that prices will be lower the longer they wait to purchase things. It also means that even small returns on investments are good ones because even stuffing money under the mattress makes you richer if prices constantly fall. This means riskier investments are unnecessary. All this means that people save and stay on the safe side, rather than borrow, spend, and engage in entrepreneurial activities. This devastates an economy, which requires some risk-taking and spending to keep it alive.

If a bank offers you a loan at an interest rate below inflation, that is an extremely strong incentive. It means it is cheaper for you to borrow the money, buy something today, and pay later than it would be to wait. That is why negative "real" (i.e. below inflation) interest rates give such a boost to an economy (and can normally spark strong inflation if overused).

If inflation is negative, however, this becomes problematic. A bank could, in theory, offer you a loan at -3% interest with an inflation rate of -2%. You could still buy a car at a lower price with the loan than without, and the car dealer would get to sell the car at a higher price now than it would later. The problem is: the bank would pay the difference. Why should it do that? True, it might receive loans from the central bank at -4% interest, earning a spread of just 1%, but that's a profit, right? The problem is: the bank would earn a 4% profit if it just left the money in the vault, didn't lend to anyone, and gave it back to the central bank (or rolled over the loan, taking on more). In short, the bank still has every incentive NOT to loan out the money at a negative rate, never mind a negative real rate.

Negative interest rates could help reduce government debt and allow a government to spend more. It is therefore possible that they might work. They would also help banks to re-capitalize and absorb debts, allowing them to then offer very low interest-rate loans, at perhaps even 1%, something not achievable in normal times. These measures might be enough. If negative interest rates needed to reach consumers, however, because deflation had become so entrenched and the currency continued to appreciate instead of inflation rising, the central bank would have to get even bolder. It would have to start lending to businesses and maybe even consumers directly. Absolute insanity? Perhaps, but if all else fails, this is something that would surely work to drive up inflation. If not done carefully, it could also spark huge investor panic. Desperate times?

Liberalism and the Rise of China

"Liberalism" is a word with sometimes contradictory meanings. In international relations, it refers to a school of thought that supports internationalism: free trade, international institutions and laws, and, by association, the decline of realism, with its concepts of power, national interests, and the nation-state in a world of anarchy. The United States, many or most European states, and other "western" countries like Canada and Australia are, more or less, liberal powers (though all of them bow to the exigencies of realpolitik when they deem it necessary). China, too, is liberal, at least in the sense of free trade. It was quick to understand the benefits and reap the rewards of free trade. On foreign relations, however, China is decidedly realist.

While the EU and the U.S. often make trade and aid agreements contingent on certain human rights standards being met, China relates with other states as it suits it, largely ignoring what is going on within those states. Pakistan and Sri Lanka are two excellent examples. China has helped Pakistan build several nuclear reactors, even though China's membership of the nuclear Non-Proliferation Treaty (NPT) means it has a responsibility to prevent the proliferation of nuclear technology that could be used in weapons and is barred from providing nuclear assistance of any kind to non-members of the treaty (such as Pakistan). Admittedly, this is partly a response to America's bending of the rules (nonetheless the "proper way," by getting a legal exception to them passed) to do the same for India, Pakistan's arch rival and also a non-member of the NPT. (America did this largely because it sees China as a counterweight to India in the Indian Ocean and in the world.)

In Sri Lanka, China has been selling weapons at low prices and donating handsomely to infrastructure investment programs there, no strings attached. The U.S. and the EU had halted such activity after concerns arose about alleged war crimes being committed by government forces when fighting (and finally, after decades) defeating the Tamil Tigers, a separatist militia group. China's generosity has more than made up for the West's cutoff, so Sri Lanka was unconcerned about the West's threats. Will the West have any influence anymore?

The difficulty with liberalism is that it requires worldwide cooperation (at least until a world authority, replete with legislative, executive, and judicial institutions arises to run and enforce things, a simultaneously Utopian- and somewhat frightening-sounding idea). Even one systemically important straggler can bring the liberal system to its knees. During the world's brief "unipolar moment," in which the fall of the USSR has left the United States the world's only "hyperpower," this has been less problematic. The U.S. has had the resources and the lack of opposition necessary to push for such cooperation. However, this has never been a complete success, and unipolarity is ending (aided in part by a broad interpretation of U.S. goals leading to overstretch of its resources). China is on the rise, India and Brazil are possible future Great Powers, and Russia is insistent on not being forgotten. Economically, the EU is a Great Power, but it lacks the political, foreign policy, and military unity to have a real enforcement-related presence in the world. As the center of economic and military gravity shifts away from the U.S. and the EU (in relative terms), it will be increasingly harder for the West to make sanctions stick if other powers do not cooperate. It will also become ever harder to cajole them into cooperation.

The question that presents itself is: how much longer will it make sense to attach strings to aid and trade? If the strings mean both are turned down, and the presence of generous, no-strings-attached opportunities from elsewhere means the deals are not effective in shaping the world, then what is the point? The passed-over deals would benefit China and other realist opportunists and hurt the U.S. and the EU. At some point, concern about this loss of influence, and about China's rising military and economic might, will cause a shift to more realism in foreign and economic policy.

Realists are not prescriptive. It's not that they think things should be this way, it's that they assess that they are, whether or not we like it. In such circumstances, unfortunately, sometimes looking out for one's own interests, narrowly defined, is the best anyone can do. This will likely be the future of the world in the coming decades.

The Road to a PhD Program: One Step Forward...

I took the airport bus from Vienna Erdberg to Bratislava Airport (€20 round-trip) to take the GRE on Tuesday. The good news: the GRE is finally over. The bad news: my score was not what I'd hoped for. My verbal score had been much higher on the practice test I took, which lulled me into a false sense of security. Had it not been for that, maybe I would have studied more vocabulary and taken more time preparing. There's always more you can do and also more you can blame yourself for not having done.

There were also a couple of pleasant surprises, however. The first was that the experimental section of the GRE, which is usually hidden among the others, was stated explicitly and was optional. I found that fantastic. It came at the end, so I didn't have to worry about my score being dragged down by having the math section that counted come at the end of a three-hour test when I was worn out and ready to melt into the drain on the floor like that one Star Trek character from the show I obviously only watched once or twice. No really.

The other surprise was my math score: it was 90 points higher than on the practice test, which brought it up to where I thought I ought to be according to my own assessment of my math skills (nothing spectacular, but decent).

Overall, the total score was 20 points higher than the practice test score, but 450% of that gain was the math section. The actual verbal test seemed easier than the practice test, too! I was shocked when I saw the result.

For me, interested in a line of study/career that would involve a lot of analytical writing, the analytical writing section of the test is probably the most important. That has to be graded by a human, so I won't know about that score for another two weeks, probably. I am hoping essentially for a perfect score. That may be a little over-the-top, but that would save the rest of the GRE for me so... why not? I've aimed high and I'm hoping I've hit the target. If not, well, one of my favorite expressions is: "we'll cross that bridge when we come to it." You can't control everything (but you are free to try as much as you like ;-) ).

The North Korea Standoff: China's Moment?

After North Korea's alleged torpedo attack on its southern neighbor, it seems likely that tensions will increase between the two Koreas, which is likely to draw in China, Japan, the US, and Russia as well. This is the moment to encourage China to take on a more active role in maintaining stability in the world. China has not yet really demonstrated that it is willing or capable of doing this, but this is a situation in which I think the US ought to try to leave much of the work up to China. For one thing, China often uses North Korea as a bargaining chip in relations with the US and South Korea. You want to be responsible for North Korea? Fine, have at it!

There is more to this than cynicism, however. With the US still guaranteeing the security of South Korea, increasing its partnership if necessary, China will have even more riding on the North's stability than it does now. China dislikes having a nuclear-armed neighbor. Sure, the US and Russia have nukes too and may be too close for comfort, but they have shown themselves so far to be relatively responsible and predictable custodians. Not so the erratic Kim Jong Il. China also worries about the streams of refugees that might result from a collapse of the North Korean regime. Make this China's responsibility, and it might just take up the initiative and begin to act strongly, with US backing (as well as the backing of the rest of the Security Council, presumably).

Of course, the US should lay out a few clear conditions first, the main one being that, should the North Korean regime collapse (whether sooner or later), the people there will be guaranteed their right to democratic self-determination. They must be given the choice to become an independent state or to unite with the South, should the South agree to this as well. In such a situation, international aid, particularly from China, the US, and Japan, would be helpful in assisting South Korea in absorbing the devastatingly impoverished North.

With this foundational agreement set, the US could leave most of the footwork up to China. China is a major power, striving to Great or even Super Power status, at least economically. For the moment, it has shied away from pushing for these goals politically and militarily, content to simply make deals wherever the money is good and leave the US responsible for maintaining order and allow the free trade from which China (and everyone else, the US included, of course) so greatly benefits. It may be unsettling to some to imagine China as a Great Power (this author included), but there is an air of near inevitability about the progression. It is therefore better that China start practicing the work aspect that its weight brings with it. The US can help it do that while benefiting itself. Stepping back and letting China in would do nothing to reduce the relative distance between the two states in capabilities. Perceptions to this effect arising out of the appearance of a concession to China would be irrelevant and wrong. After all, how would it be a concession to nudge China to do more?