The situation in Egypt is massively unclear and uncertain. Both presidential candidates have claimed victory, but most observers believe that Mohammed Morsi, the Muslim Brotherhood candidate won. We should get the official results on Thursday. Clearly, however, the race will be contested. Meanwhile, thousands have gathered in Tahrir Square to protest the military’s actions to assume political control and to dissolve the Parliament. Battlelines are being drawn between the secularists and the supporters of the Muslim Brotherhood, although it is unclear to what extent the Muslim Brotherhood wants to establish a theocratic state. One can only hope that the Egyptian people remain firm in their demands for an effective voice and that violence is kept at a lowest level possible given the uncertainty.
The U.N. Conference on Sustainable Development began on Monday with about 50,000 participants. It has been 20 years since the first meeting in Rio de Janeiro and, unlike the first meeting which was full of promise, this meeting is rife with pessimism. The current economic crisis has overwhelmed the willingness of many states to undertake commitments that could compromise economic growth in the short run. Most analysts expect little progress from the current meeting–a great tragedy.
Angus Maddisson is perhaps the world’s most influential economic historian–he is a true wizard when it comes to economic data. Here is his visual portrayal of global economic grwoth from the year 1 to the present.
I was wrong–Syriza did not get the largest plurality of votes in the Greek election. New Democracy, a conservative party that is pro-Europe, got the largest number of votes, but still not enough to get a majority in Parliament. So we will watch how New Democracy woos PASOK, the socialist party which came in third to Syriza, to form a coalition. These are the two parties that brought Greece to this sorry state, so it’s hard to be optimistic about the future. Unfortunately, the neo-Nazi party got enough votes to get seats in the Parliament.
In other election news, the Egyptian military issued a new constitution on its own as soon as the election was over. Essentially, it declared martial law and gave itself the right to write a new permanent constitution. Nothing good can come of this move–we will have to see how violent the reaction to the coup is.
In the third election of the day, French Socialists won an absolute majority in the Parliament, giving President Hollande a very strong hand to deal with Germany. The politics of the European Union have decidedly swung toward a less austere economic policy, and Chancellor Merkel’s own position within Germany seems to be weakening as well. We’ll see how the G-20 meeting in Mexico starting on Monday interprets these political results.
By this time tomorrow (8:30 pm, EDT) we should be beginning to get some sense of how the Greek elections went. Right now, the consensus seems to be that the election will not yield a strong government which would simply prolong the agony of the euro. The European Central Bank, the Bank of England, and the US Federal Reserve all appear to be ready to flood the world with money if the euro starts to tank. I have begun to think that the Radical Left Coalition (Syriza) will win the largest number of votes, primarily as a protest vote against Germany.
We will also be getting some results from Egypt, although the meaning of the election will be difficult to interpret. The military’s dissolution of the Parliament generally means that Egypt will have a President without a constitution or Parliament. If Shafiq wins, it will be almost as if Mubarak never left. I imagine that more protests are highly likely, no matter who wins the election.
On Monday the G20 will be meeting in Mexico and the countries will have much to talk about. I expect the IMF to get promises of more money to lend to indebted countries in Europe. More money is certainly necessary, but what is most important are the conditions attached to the money. I doubt that the European states can endure more austerity without some political fallout.
I try not to link to New York Times articles because of the paywall, but Floyd Norris has written a very provocative essay which has been a strong, unspoken undercurrent to the entire European economic crisis: that Germany maintains its hard-line position because those policies benefit Germany at the expense of its partners in the eurozone. In essence, the argument is that Germany is making sure that all the possible private losses within Germany are shifted to the governments of the indebted countries. In addition, the weakening of the euro benefits German exporters. While no one should underestimate the extent to which German history dictates German policies (the hyperinflation of 1933 and the costs of reunification in 1992), there is a large element of truth to the alternative explanation.
The political situation in Egypt seems even more precarious. The dissolution of the Parliament raises all sorts of questions about who will write the new constitution, and the military has ordered new regulations designed to stifle dissent prior to the elections next week. This essay in Foreign Policy is particularly pessimistic about Egypt’s future.
Brad DeLong and Barry Eichengreen, two of the premier economists in the world, have written a new preface to Charles Kindleberger’s magisterial work, The World in Depression. I recommend it in the strongest possible terms–it is a superb analysis of what’s going on the Europe right now and how we are all perilously close to replicating all the failures of the 1930s. If you want to know why things in Europe look so bleak, then read this essay.
The Egyptian presidential elections are scheduled for Sunday and Monday, and the Supreme Constitutional Court has dissolved the Parliament and ruled that the once close ally of Hosni Mubarak, Ahmed Shafiq, must be allowed to run for President. The ruling is a blow to the Muslim Brotherhood, but Shafiq had already qualified as one of the two top vote getters in the preliminary election. He now can legally run which will make the election more legitimate. But since the Constitutional Court is backed with former associates of Mubarak, the legitimacy of its rulings will now be seriously questioned.
The Senate Banking Committee had Jamie Dimon, the head of JP Morgan, as its chief witness today. Ostensibly, the hearing was held to investigate whether the risky investments that led to a near-financial collapse in 2007-08 are being continued in light of the least $2 billion (more likely $7 billion) loss experienced by JP Morgan this year on what it claims was a “hedge” investment. The idea that the Senate Banking Committee could investigate JP Morgan in any serious way is a sick joke: 16 of the 22 Senators on the committee received campaign contributions from the firm (2 current Senators are retiring and are therefore not collecting any campaign contributions). ProPublica did an investigation on how deeply in JP Morgan’s pocket the Committee actually is. This phase of American democracy is a sick farce.
Revolving Door
One current staffer on the Senate banking committee, Dwight Fettig, is a former lobbyist for JP Morgan. In 2009, the bank hired him to work on “financial services regulatory reform.” Meanwhile, JP Morgan is stacked thick with former committee staff.
· Naomi Camper – Currently a lobbyist for JP Morgan. Prior to that, from 2001-2004, she was an aide to Senator Johnson.
· Kate Childress –A JP Morgan lobbyist since 2008, she is also a former aide to Chuck Schumer, D-N.Y., who sits on both the Senate Banking and Finance committees.
· Steven Patterson –A JP Morgan lobbyist and formerly a staff director for economic policy for the Banking committee.
· Nate Gatten— A JP Morgan lobbyist based in London who was reportedly called back to Washington recently to help with the company’s damage control. He is a former lobbyist for Fannie Mae, and, in the 1990s, was a banking aide to former Senator Robert Bennett, R-Utah, who also sat on the committee.
· P. Michael Nielsen – A lobbyist with a firm run by former Senator Bennett, he hasbeen retained by JP Morgan for help with federal probes, according to Bloomberg. He was also a senior policy adviser to the committee from 2007 to 2010.
American Banker also reported that three other outside lobbyists currently working for JP Morgan were once affiliated with the committee:
· Jason Rosenberg – A lobbyist at The Glover Park Group and formerly an aide to Jon Tester, D-Mont., who sits on the committee.
· Jenn Fogel-Bublick – A lobbyist at McBee Strategic Consulting and formerly a Democratic counsel on the committee.
· Mike Chappell – A lobbyist for Fierce, Isakowitz & Blalock and a former press assistant to Senator Roger Wicker, R-Miss., another committee member.
A former senator on the committee, Mel Martinez, R-Fl., is also now the JP Morgan exec in charge of Florida, Central America, and the Caribbean. Martinez waselected to the Senate in 2004 and went to the bank in 2010. Bloomberg reported that he was called to Washington after the losses were reported.
Lobbyists for JP Morgan appear to be keeping busy. The bank spent $7.6 million on lobbying last year, according to the Center for Responsive Politics.
Campaign Contributions:
JP Morgan has also been a generous donor to banking committee members, both Republican and Democratic.
· JP Morgan is the second largest campaign contributor to Johnson, the committee chair, and to the top Republican on the committee, Richard Shelby of Alabama,over the past twenty years, according to a tally from American Banker.
· JP Morgan employees have donated more than $80,000 to Johnson since 1998 and more than $136,000 to Shelby since 1990.
· So far in 2012, Dimon has personally donated to committee members Bob Corker, R-Tenn., and Mark Warner, D-Va. In 2008, he gave $2,000 each to Johnson and Shelby.
· Six of the 22 members of the banking committee have not received any money from JP Morgan PACs or employees in recent election cycles. Two of those members are retiring and aren’t collecting campaign funds.
Despite tough new laws against political protests, the Russian people came out to protest against the government of Vladimir Putin. The people are still angry about what they regard as a stolen election, and the widespread belief that the government is corrupt. As I have indicated before, I believe that the many protests that are going on in the world are all loosely connected by a general dissatisfaction with the connection between governments and the people.
The sense that the European economy is poised toward a major crisis is growing, and it is precisely that belief that accelerates the process of collapse. The belief that Greece will be forced to leave the eurozone means that everyone who currently has Greek assets priced in euros wants to convert those assets into a currency that is beyond Greek control. If Greece drops the euro and converts to the drachma, the actual value of the drachma will be about 70% less than the value of the current euro. The desire to convert currency creates a process of capital flight, which simply makes the economy even weaker. So governments try to prevent capital flight by not allowing conversion. But as soon as those new controls are implemented, the desire of people to convert their assets becomes even more intense. We are currently witnessing the deepening of panic in Europe.
A poll run by TrustLaw that asked almost 400 experts on gender equality about which countries have the highest degree of gender equality came up with this ranking: 1. Canada 2. Germany 3. Britain 4. Australia 5. France 6. United States 7. Japan 8. Italy 9. Argentina 10. South Korea 11. Brazil 12. Turkey 13. Russia 14. China 15. Mexico 16. South Africa 17. Indonesia 18. Saudi Arabia 19. India. Obviously, the poll emphasized the questions of legal definitions of gender equality, but the results are quite interesting.
I heard speeches by Madeline Albright and Hillary Clinton today at Wellesley College. It was the kickoff for the first summer institute of the Women in Public Service Project and it was truly inspiring. There were 50 women leaders from all over the world (although the majority were from the Middle East and North Africa) getting together for two weeks of workshops on leadership skills. The energy and commitment was palpable and powerful.
Leaving the conference, I heard about the report by the Federal Reserve on how the Great Recession of 2007-08 affected the American middle class and I went from high to low. In just 3 years (2007-2010), the American middle class lost about 40% of its wealth (income and assets, most importantly the value of a house). This precipitous loss was felt most acutely by younger middle class families. Unfortunately, the economic horizon remains cloudy for most Americans (and for most of the world right now).
And then tonight I read this report from the BBC on looming resource shortages in the world. It is a Malthusian analysis–that is, it assumes a straight line extrapolation of current trends–that I do not believe to be a valid frame of analysis (human systems are incredibly dynamic and ingenious). But much of the analysis deals with the next 20 years, which is a short time period to apply changes and fixes. Needless to say, the report is very depressing. I think it is just time to go to bed.
The climate change debate is pretty much settled, except for those individuals who have a financial interest in hydrocarbons. But getting accurate data on a global scale is admittedly very difficult. A new study suggests that the CO2 emissions from China have been significantly understated over the years, due to poor reporting at the local level. But a 20% underestimate is significant. It may be the case that the world is already past the tipping point toward a new climate.
Talks between Iran and the International Atomic Energy Agency yielded no tangible progress. The main issue in these talks concerned IAEA access to one of the nuclear facilities. Access to the Parchin facility is not required by the Non-Proliferation Treaty, but members of the UN Security Council believe that the facility is being used to test explosive devices that may be used in a nuclear warhead. I doubt that the end of negotiations will trigger any immediate action, but the upcoming June meeting in Moscow will unquestionably be a turning point.
Many countries have recently experienced economic slowdowns: Brazil. India, and China. In one of these cases, however, the cause of the slowdown seems to be profoundly political and not economic. The Economist analyzes the slowdown in India and places the blame squarely on the governance system.
The New York Times reports that the number of suicides in the military has, for the first time, been higher than the number of combat deaths. This legacy of the war in Afghanistan is one of the saddest, and symptomatic of the difficulties in fighting the war and the ambiguities of its mission. It is also an important indicator of the separation between the military and civilian life, a dangerous divide in any democracy.
The Russians are great chess players, and they checked the US in its efforts to organize international action with respect to Syria. The Russians proposed an international conference and insisted that Iran, a major ally of Syria’s President Assad, be invited to the conference. This gambit puts the US in an awkward situation: it desperately wants international action and needs Russian participation in an international conference, but it doesn’t recognize Iran and would be loathe to sit at the same table with the Iranians. Let’s see what move the US proposes to move forward.
As anticipated, Spain has asked for money to bailout its failing banks. It is asking for about $125 billion, and the request comes after repeated promises by the government that outside money was not necessary. We don’t yet know what the EU and the IMF are asking for in return for the line of credit,but it seems certain that the Spanish will be required to make even more sacrifices. With an unemployment rate of 25% it’s hard to imagine how difficult life in Spain will become.
World Politics News 