NATO PR Campaign

NATO is trying to revitalize its image by stressing the importance of the alliance's core values and connect with younger people. Here is an example of this initiative via YouTube.

Comments are welcome and encouraged as usual.

Snacks for Thought: July 21, 2009

Snacks for Thought is a weekly round-up of thought provoking news, commentaries and opinions from around the web.

1. Although this is a joke, AIDS's impact on human life, economies and entire cultures isn't.
2. Microsoft experiments with price elasticity in the midst of the economic crisis. Will it work?
3. Which way should U.S. foreign policy go? Let the debates begin.
4. Israeli settlements are pretty costly for the Israeli taxpayers: nobody said colonialism was cheap.
5. The Arab world's plethora of problems is nothing new.
   

Fly mighty eagle...fly...?

Today, America's eagle perches lonely, confused, and distraught at the tip of the global pyramid. It was not always this way. Back in 1947, with America emerging from the death and destruction of World War 2 as the newly crowned leader of the Free World, a young and astute diplomat by the name of George Kennan wrote the following in his infamous article 'X':

Soviet pressure against the free institutions of the Western world is something that can be contained by the adroit and vigilant application of counterforce at a series of constantly shifting geographical and political points, corresponding to the shifts and maneuvers of Soviet policy, but which cannot be charmed or talked out of existence.

The excerpt is highly revealing, and helps make sense of America's foreign policy decisions for the next four decades. First, Kennan identifies the threat as 'Soviet pressure against the Western world', and by doing this provides a clear focal point for American cognitive, diplomatic and material resources. Secondly, he proposes a strategic plan for applying power via a Newtonian logic of action and reaction. Wherever Soviet pressures posed a direct and credible threat to American interests, the U.S. would apply a countervailing force to neutralize and possibility scale back Moscow's influence. Third, the operational theater was purposely kept fluid and vague because the struggle was understood to be of global proportions. Geopolitical hotspots focused on countries with ambivalent or uncommitted political loyalties to Washington or Moscow.

It is fascinating that this short excerpt can encapsulate so clearly American grand strategy for the next four decades. The message was clear: containment of Soviet expansionary pressures must be counteracted, but only in limited geographic 'pressure points', and with manageable effects on world and regional instability. Everybody, friend and foe alike, knew their role, understood the rules, and clearly understood the potentially disastrous consequences for breaking them - Mutually Assured Destruction (MAD.)

CIA and Western intelligence operatives played a sometimes dangerous, always twisted, and occasionally comical, game of cat and mouse with their KGB counterparts in almost every corner of the globe. But fundamentally, both sides committed to the rules of the game. In an ironic way, Kennan's containment policy was helpful for Soviets as well. It drew clear lines in the sand. Some areas were fair play for competition, others were absolute red lines. If the message wasn't clear enough, the Cuban missile crisis reiterated that fact in no uncertain terms.

But unless you've been living on Mars, the Cold War is over, the Soviets are history, and America is the only superpower standing. Its navy freely navigates and polices the seas, its economic system has been adopted by its former Communist adversaries, and its economy and military spending dwarf those of its closest competitors. Despite all this, America has no discernible grand strategy to speak of today.

Many strategic thinkers, both within and outside the American government, are no-doubt nostalgic for the days of bipolarity (two superpowers.) Things were much simpler then. As long as the Communism and Soviet threat remained, policy differences were a matter of style over substance.

But two decades after the fall of the Berlin Wall, America's eagle is confused and distraught. Debilitating wars abroad, a plummeting international image, gargantuan domestic economic problems, and increasingly confused military and diplomatic establishments, all underwrite the sorry state of contemporary American grand strategy. America seems to be wondering aimlessly with diminishing friends and increased resistance to its power around the world.

The fundamental problem lies in Washington's inability, or unwillingness, to respond to the changing nature of international relations. New powers are emerging on every continent demanding more autonomy, more respect, and a louder voice in the management of the planet's affairs. The Chinese, Indians, and Russians are pushing for a gradual shift away from the dollar and to a new international reserve currency. The Europeans are looking to solidify their political union in order to capitalize on the growing economic power of the continent. Brazil is becoming the unquestioned regional leader in South America - once America's jealously guarded 'strategic back yard.' Saudi Arabia and Iran are both cognizant of America's waning capabilities and influence, and have started taking more assertive stances in the Middle East.

If America is to regain its swagger, it will have to base its foreign policy on an entirely new grand strategy. This strategy will have to take into consideration America's capabilities and aspirations on one hand, and the capabilities and aspirations of the emerging powers on the other. America's fundamental geopolitical and geoeconomic interests need not be compromised in the process. On the contrary, reliance on diplomacy, cultural exchanges, scientific engagement, aid, and above all...humility, will go a long way towards engendering the kind of good-will and trust that will allow America to adopt a more flexible approach to international relations. Brute force, and an over-reliance on military power should only be considered a last resort.

It is heartening to see Obama desperately trying to turn the tide. He has spoken of order above idealist adventurism, and democracy by persuasion as opposed to gun barrels. He has steered away from dictating, and has spoken of shared responsibilities - basically telling countries such as China to try and handle all the international responsibility they could stomach. He seems cognizant of the fact that the Neoconservative dream for an unrivaled 'American century' is simply inaplicable to today's international environment. Regardless of its superiority in military and economic power, America cannot continue operating as if it was business as usual. America must once again become 'in' and not merely 'of' the international community.

Obama has kicked off his young presidency with a massive public relations campaign spearheaded by a number of historic speeches in Cairo and Ghana, among others. His political capital is unprecedented and it will be very difficult for foreign governments to say no to him if he comes to the table with sensible proposals for collaboration and shared commitments to make the world a better place. Climate change, peace in the Middle East, democracy and human rights, and the global economy, as well as a range of international issues are problems looking for solutions. America, after experiencing the debilitating policies of the Neoconservatives on climate change, the War on Terror and nuclear non-proliferation, can mitigate the harm done to its reputation and interests across the world. What Washington needs is a bipartisan commitment to turn rhetoric into action, and action into progress on a number of international policy tracts.

It is no longer beneficial for America to try to preserve its Eagle's superior, but increasingly lonely, position at the helm of the global power hierarchy. Getting it to fly again is what American grand strategy should really aim for, and this cannot be done without help from emerging powers. The question is, can Washington muster the political will to enter into a complicated grand bargain with the rest of the international community - as messy and complicated as this may be?

The French Revolution & Institutional Reforms

Here is a very interesting piece of research that analyzes the economic effects of the French revolution on other countries in Europe. I'm going to sum up the points that I found most interesting:

1. The package of reforms the French imposed on areas they conquered included the civil code, the abolition of guilds and the remnants of feudalism, the introduction of equality before the law, and the undermining of aristocratic privilege.
2. Overall, our results show no evidence that the reforms imposed by the French had negative economic consequences. On the contrary, there is fairly consistent evidence from a variety of different empirical strategies that they had positive effects. In particular, our results are strongest for the later part of the nineteenth century, which we see as evidence for the fact that French-induced reforms created an environment favourable to the Industrial Revolution, which reached Continental Europe precisely in those decades.
3. Why did these reforms work when other externally-imposed reforms often fail? One possibility...is that its success may have been due to the fact that the reforms it imposed were much more radical than is typically the case. Many reforms fail because they are de facto reversed shortly after the implementation... The French, instead, reformed simultaneously several aspects of economic, social and political institutions of the “ancient regime” of Europe, thereby significantly weakening the powers of local elites and making a return to the status quo ante largely impossible.

Economic overview of BRIC countries

Here is an overview of the economic performance of the BRIC countries (Brazil, Russia, India & China) in the current global crisis. This should give us an idea of the economic health and future outlook of the world's leading emerging markets. Keeping an eye on these four economies is especially important considering the share of world GDP that they account for (close to 15%.) Since Goldman Sachs economist Jim O'neill coined the term 'BRIC' a few years back, the world has been waiting and watching to see if the big four will live up to the expectations thrust upon their shoulders by international investors and companies looking to take advantage of profit opportunites.

China

Growth pulled back from an extraordinary 13% in 2007 to 9% in 2008. This was the lowest rate since 2002. The IMF projects growth to slow to 6.5% in 2009 before picking up again to 7.5% next year.

China's heavy reliance on export-led development made it especially vulnerable to the contraction in global demand. Fortunately, the government had saved much of its revenue in foreign exchange reserves (exceeding US $2 trillion at one point) and was able to respond with massive liquidity injections into the economy to offset the large drop in exports.

In the absence of significant aggregate demand recovery in developing countries - especially the U.S. - China is reconsidering its export-led growth strategy and looking to stimulate domestic consumer demand. But as previously touched upon here and here, the problem for Chinese planners is not simply one of fiscal and monetary policy. It is a social policy problem. How to change the 'culture of thrift' among the masses and turn them into spending machines. China's tumultuous contemporary history has forced many Chinese to follow a rigid doctrine of 'work hard' and 'save your shiny penny for the rainy day'. Changing society's risk-averse spending habits will not be an easy task.

India

The IMF predicts the Indian economy will slow its growth to 4.5% for 2009 before picking up slightly to 5.6% for 2010. The Indian ruling party (Indian National Congress) has won a strong mandate to govern in the recent federal elections. This should ensure the Congress's ability to continue moving forward - albeit at a gradual and careful pace - with its liberalization and reform measures for the economy.

A growing Indian middle class is responsible for increased import demands which has increased the current account deficit. On the export side, India is majorly reliant on Chinese demand for primary resources such as steel and minerals to feed China's industrialization boom. India is well aware of its junior partner position with respect to China, this is a motivating reason pushing it to diversify its economic links with the outside world in order to offset China's increasing economic power.

Brazil

The IMF predicts an economic contraction of -1.3% in 2009 before resuming growth at 2.2% in 2010. But Brazil is likely to make it out of the crisis in relatively good shape and without too much deterioration in its economic fundamentals. This is largely due to the government's fiscal prudence over the years, and its 'old fashioned' regulation policies which have kept banks in line and away from adventurism into risky waters of global finance. Exports have taken a hit like all countries, but much like China, government policies to stimulate the domestic economy have been quick and substantive. This has led to a deterioration in its fiscal position but should not be a cause of investor panic, if anything because most governments around the world are in the same boat.

Brazil has also been one of the most outspoken advocators of global financial coordination and reform of international institutions. It has used its relative position of strength amidst the recent global problems to push the case of developing countries for more democratic and equal decision-making power within international organizations.

Russia

Russia has undoubtedly been the hardest hit of the BRICs from the global crisis. The IMF predicts a -6.5% contraction in 2009, before growth picks up by 1.5% in 2010. Their are two main reasons for this large economic deterioration. First, Russian banks and companies were highly integrated into Western financial markets and as a result exposed to toxic assets. Secondly, the Russian government's primary source of revenue comes from exports of oil, which suffered large price drops on international markets.

The Russian government is trying to comfort its citizens and pledges that a repeat of the 1998 crisis, in which millions of Russian lost their life savings, will not be forthcoming. Russia's policy so far has been to focus on supporting banks and enterprises in need of financing by targeting those deemed most essential to the economic prosperity of the nation. The total amounts contributed as of April 2009 amounted to 6.7% of GDP - more than most G-20 government interventions so far.

Snacks for Thought: July 5, 2009

Snacks for thought is a weekly round-up of thought-provoking news, commentaries and opinions.

1. In typical economist fashion, Brad Delong can't seem to make up his mind on whether to blame Alan Greespan's low-interest rate policy prior to the crisis.
2. Another piece on America's power decline in the world and how to deal with it.
3. Arable land and global food security: creeping colonialism?
   
4. Wall Mart: where everyday low prices mean more jobs for the faithful
5. Sweet-talkers beware!!!
6. Costa-Rica, the Dominican Republic, and Jamaica top the list of the good life survey.

International relations, political economy and history from an unlikely source

The FBI released more documents of its interviews with Saddam Hussein prior to the dictator's transfer to Iraqi control and ultimate execution.

The information released in the documents is golden. Saddam Hussein discusses many issues, ranging from international relations, to political economy and development, to history and personal relations.

He was clearly squeezed out of every available piece of information before being sent to the gallows. His accounts will be incorporated into many books on Iraqi and Middle Eastern affairs in the future I am sure.

Here is the link to 27 declassified FBI documents for those of you interested.

Happy Canada Day!!

To all of my fellow Canucks. Enjoy the party and stay safe!