World Politics News   Articles for World Politics Course

Moisés Naím, a senior economic analyst at the Carnegie Endowment, offers an interesting interpretation of the protests in Chile, Turkey, and Brazil.  He revives an old theory, the theory of rising expectations, to explain the discontent.  Essentially, the theory suggests that economic improvements lead to expectations about the capability of the state which it is not capable of satisfying.  Naim attributes the theory to Samuel Huntington but the theory goes back much further.  Naim’s interpretation is plausible, but it ignores the issue of corruption which seems to loom quite large in the minds of the protesters.  Indeed, the “rising expectations” hypothesis seems to be so mechanistic that it divests authorities of the responsibility to remember that their primary job is to serve the public good.

The situation in Egypt seems to be heating up again.  There are protests scheduled for this weekend against President Morsi, but violence has broken out already.   The sentiment seems to be that Morsi and his supporters in the Muslim Brotherhood are becoming too authoritarian (reminiscent of the charges against Prime Minister Erdogan in Turkey), and, unfortunately, Morsi’s government is responding by cracking down on critical elements of the press and media.  It could be a very difficult weekend in Egypt.  In other protests in the world, Brazilian truck drivers have called for a 72 hour strike to protest government corruption.

For those who follow the news closely, the sharp rise in the interest rates Chinese banks charge each other (the so-called Shibor, the Chinese counterpart to the Western Libor) was unsettling.  The increase meant that the Chinese government had decided, for whatever reason, to stop lending money to banks on very easy terms.  Interest rate increases almost inevitably lead to slower economic growth, so the rest of the world took the action seriously, worried that a slower Chinese economy would undoubtedly have negative effects on the rest of the world.   But to understand the motives of the Chinese government in restricting money to lending institutions one also has to understand “shadow banking”, a term that refers to financial institutions that offer loans without having the deposits to back them up like traditional banks do.  Such institutions often lack the financial discipline (and government regulation) imposed by having deposits to honor and tend to lend in a more speculative and dangerous way.  And this is precisely the problem in China right now: there is too much lending of money that is not guaranteed by some sort of collateral.  If people begin to default on these risky loans, then the Chinese economy is at great risk.   We will have to see how the Chinese government navigates these treacherous waters.