17 February 2012   Leave a comment

One of the consequences of the debt crisis in the eurozone is that as some nations are forced to undergo austerity programs to reduce wages, other nations within the some (especially Germany) enjoy a competitive advantage.  The discrepancy occurs because the common currency, the euro, weakens as growth slows in the countries undergoing austerity–in effect, the euro devalues.  This means that the exports of the stronger countries are more attractive to countries outside the eurozone leading to even stronger economies.  The growing discrepancy between the weak euro countries and the strong euro countries will inevitably lead to political friction.  We’ll see if this friction has any effect on the cohesion of the EU as a whole.

The Oil Drum is a fascinating blog on energy related issues, and its most recent post is a fascinating summary of global energy consumption over the last century.  It is a very detailed post, so I won’t be asking any questions about it on the weekly quiz in American foreign policy.  But for those who wish to see how the use and sources of energy have changed throughout the period of high industrialization, the post is incredibly revealing.  The only possible conclusion is that the historical trends are clearly unsustainable–something has got to change.

The question of how income inequality affects economic growth is perhaps one of the most pressing questions facing the world at this moment.  Much of the historical evidence on income inequality suggests that it often leads to economic decline.  There is evidence that this outcome is increasingly likely in the developed world.

Posted February 17, 2012 by vferraro1971 in World Politics

16 February 2012   Leave a comment

First, I need to apologize to the students in American foreign policy.  I had told you that I was going to ask questions on the quiz from 13 February, but the quiz actually had questions from another date on the syllabus.  This was a serious mistake on my part since I know that there is a strategy to studying, and I sabotaged that strategy.  I haven’t decided how to atone for my sins, but I will.  Perhaps I will  drop the grades for the quiz on 15 February.  Maybe I will count them only if the scores are higher than any student’s overall average without them.  I am a creative person, so somehow I will make it  up to you.  In the meantime, please accept my apologies.

How bad is it in Greece?  Really bad and getting worse.  I am beginning to think that the EU wants the Greeks to leave the Union.

The UN is scrambling to try to prove its relevance to the deteriorating situation in Syria.  There seems to some movement in the Russian position, but it is not enough yet to make a difference.  But the Russians are clearly feeling the heat of international public opinion.  Perversely, the instability in the Middle East has led to large economic benefits to Russia–oil price increases are bolstering the Russian economy.

Posted February 16, 2012 by vferraro1971 in World Politics

15 February 2012   1 comment

Here’s an insider’s view of what is happening in Greece.  It is quite different from the media’s point of view.

“A personal journey to the heart of Greece’s darkness” Financial Times 15 February 2012

By Richard Parker

From November 2009 to December 2011, I commuted across the Atlantic between my “day job” at Harvard, where I teach economic policy, and Athens, where I served as an adviser to George Papandreou, prime minister. I had known him since the 1970s, and my value to him was as a friend and as a non-Greek economist without fixed interests or allies to defend.

I normally started my visits at Maximou mansion – Greece’s White House – reviewing details of reform efforts, the markets’ relentlessly negative opinions, polling data and press coverage with Mr Papandreou and top aides. I’d then head out to ministries, banks, research centres, embassies, newspaper offices and universities. When international officials or key bankers were in town, I’d often join them.

I also spent long hours well down the bureaucratic ladder, where the hard work of implementing massive and complicated changes was taking place. I found my share of fools, time-servers and pettifoggers worthy of Gogol – but I also found dedicated men and women, whose frustrations rivalled the young anarchists on downtown Exarchia street corners.

The lessons I’ve taken away don’t bode well for Greece or its rescuers.

Greece desperately needs reforms. Mr Papandreou knew this well before the crisis, as did most Greeks. But the larger problem was the panic that swept over Europe and the easy moralising that financial crises evoke. Greeks were cast as tax-evaders, lazy and anti-business, their government as over-indebted, bloated and corrupt – a situation that required castor oil and humiliation.

But almost none of the moralising clichés were true. Greek taxes were more than a third of gross domestic product, near the European average. And if Greeks were anti-business, why then were there more small entrepreneurs per capita than anywhere else in Europe? Government was not bloated in terms of employees – at a fifth of the labour force, it was about the European average. Corruption was clearly a problem, but our data showed it was concentrated – incomprehensibly to non-Greeks – in the health sector, where minor “gifts” to doctors secured early scheduling of surgeries.

What government suffered from most was a lack of technology and human-resource management. There was no computerised budget management; social security records and property rolls were maintained manually; sharing of routine data or work assignments across ministries was almost non-existent.

Fast-forward to Greeks’ current agony over the latest austerity measures, exacted for a 50 per cent writedown of privately-held bond debt and Europe’s second enormous aid package. Will the Greeks now finally make the reforms work, as optimists hope – or inevitably default, as the cynics keep warning?

My own guess, paradoxically, is both. The momentum for most reforms is there, as the latest “troika” report makes clear – desperately-needed computerisation is under way, work patterns are being reorganised, protected sectors of the private economy opened. But because there is no growth plan – austerity is not a growth plan – Greece faces a long, dark path.

A third of its economy depends on tourism and international shipping; neither is “controlled” by Greece. “Modernisation” of its internal economy means the spread of large firms in place of micro-enterprises, a structural shift complicated for a small economy searching for a niche between the hyper-efficient Germans and the low-cost Chinese.

The rescue deal, if agreed, buys Greece a small amount of wiggle room to make the necessary reforms. Some parts of the economy may be able to restart very, very slowly. But these export-oriented sectors will not absorb much labour; unemployment and poverty will remain high. It is a toxic political mix – but not necessarily a fatal economic one.

Models still project a 7 per cent primary surplus into the future – simply not feasible, and eventually Greece’s debt will have to receive a writedown, probably of about 40-60 per cent of GDP. But since the debt has shifted from private to public balance sheets, why must this become a contagion problem? Future European governments won’t like it – but better then than now.
The writer is a professor of public policy at Harvard University

Posted February 15, 2012 by vferraro1971 in World Politics

14 February 2012   Leave a comment

A new diplomatic tool has been added to world politics–rewriting the maps while a revolution is going on.  The Syrian opposition has been changing the names of places in Syria that refer to Assad’s regime on Google Maps.  The Syrians have protested to the United Nations, but to no avail.  I don’t think there are many historical precedents for such activities (although changes AFTER a revolution are rife).  I truly admire the creativity of the protesters.

The Egyptian revolution continues to confound.  This article from the Los Angeles Times is depressing since it documents a move away from gender equality in the revolution.  It is probably too early to tell whether this is a decisive setback or just a temporary one.

Posted February 15, 2012 by vferraro1971 in World Politics

14 February 2012   Leave a comment

Russell Shorto has a very long article in the New York Times on the effects of the debt crisis on Greek life.  It is a very long article so I will not ask any quiz questions on it, but it captures all the complexity of this tragedy in motion.  A short snippet:

“By many indicators, Greece is devolving into something unprecedented in modern Western experience. A quarter of all Greek companies have gone out of business since 2009, and half of all small businesses in the country say they are unable to meet payroll. The suicide rate increased by 40 percent in the first half of 2011. A barter economy has sprung up, as people try to work around a broken financial system. Nearly half the population under 25 is unemployed. Last September, organizers of a government-sponsored seminar on emigrating to Australia, an event that drew 42 people a year earlier, were overwhelmed when 12,000 people signed up. Greek bankers told me that people had taken about one-third of their money out of their accounts; many, it seems, were keeping what savings they had under their beds or buried in their backyards. One banker, part of whose job these days is persuading people to keep their money in the bank, said to me, “Who would trust a Greek bank?””

The virtue of the article is that it puts the many human faces on the crisis.

Posted February 14, 2012 by vferraro1971 in World Politics

13 February 2012   Leave a comment

The United States has announced new rules governing the role of women in combat.  The rules are not completely open-ended–some combat roles are still off limits.  Some countries offer women greater combat opportunities, which tend to be very important in determining promotions in the military.  Others are much more restrictive than the US.  As the world’s militaries become more technological and specialized, it will be interesting to see how the roles of women change.

The covert war between Israel and Iran continues as Iran targets Israeli diplomats abroad.  We can be certain that there will be a response to these attacks.  Most likely, the response will be dramatic.

Dani Rodrik, an economist at Harvard, has written a fascinating essay on the future of the nation-state in an era of globalization.  I have been reading on this issue since my undergraduate days in 1968–the outcome is less clear now than it was then.

Posted February 14, 2012 by vferraro1971 in World Politics

Quiz in American Foreign Policy, 15 February 2012   Leave a comment

The quiz in American foreign policy on 15 February will be on the blog articles from 9-13 February, and all of the readings on the syllabus for 13 February.

Posted February 13, 2012 by vferraro1971 in World Politics

12 February 2012   Leave a comment

Violence has erupted in Athens and other major Greek cities.  We still don’t have good reports yet about the extent of the rioting, but it appears as if the violence is widespread.  It is directed toward the Greek Parliament which must approve the terms of the debt agreement with major bondholders.  The terms are onerous on ordinary Greek citizens, and it is difficult to see how economic growth can return to Greece under the terms of the Agreement.   The Parliament must decide whether it stands with the Greek people or with the bondholders.

China is getting ready for a leadership transition.  Xi Jinping is slated to become the next leader of China and he is introducing himself to world leaders.  All political transitions are difficult, but this year will be quite tumultuous: China, Russia, the US, and France all will have national elections.  One should expect a high degree of unpredictability in the global system as these changes get closer.

Another article on an Israeli attack on Iran, this time by Michael Hirsh of the National Journal.  The steady drumbeat is getting harder to ignore, but the rationale for the attack is getting less compelling the more we learn about the complexities of the attack.

Posted February 12, 2012 by vferraro1971 in World Politics

11 February 2012   Leave a comment

Reading the European newspapers, one can’t help but feel that the recent Greek negotiations signaled a transition into a genuinely new phase of the economic crisis.  Helena Smith, a reporter who has covered Athens for more than 20 years as a reporter, wrote a column on how the mood seems to have changed.

The violence in Syria has spilled over into neighboring Lebanon.  Fighting broke out between the Sunni-based populations sympathetic to the forces opposed to Syrian President Assad and the Allawite/Shia minorities supporting President Assad.  This cleavage is part of the larger balance of power game being pursued by the Iranians in the region.  Spreading violence in Lebanon will only intensify security fears in Israel.

Stephen Walt has a great post on the Iranian nuclear issue.  Walt is a full-blooded realist, and his perspective is sharp and crystal-clear.

Posted February 12, 2012 by vferraro1971 in World Politics

10 February 2012   1 comment

The tortuous negotiations on the Greek debt reached some sort of resolution today, with promises being made by the Greek government for cuts in social spending that will cripple further the Greek economy.  It seems likely (right now) that these cuts will be approved by Parliament; it also seems highly likely that the Greek economy will go into a deep tailspin because of them.   Protests in Greece are continuing, but it is difficult to tell what effects they might have.

There are no changes to report in the situation in Syria.  The violence has now spread to the city of Aleppo, and the estimates are that more than 6,000 Syrians have been killed in the anti-government protests.  It is ironic that the the lack of action is partially due to Russian and Chinese anger over the previous UN intervention in Libya.  The major obstacle, however, remains the sheer difficulty of any external aid actually making the situation better.

A long-standing dispute between Great Britain and Argentina over the status of the Falklands/Malvinas Islands has flared up again.  Predictably, the dispute has arisen becuase of a growing belief that there is oil in the region.  The Falklands used to be a coaling station in the British Empire, but the Argentinians claim them as their territory (the Malvinas).  A war was once fought between the two countries, and it appears as if hostilities may arise again.

Posted February 11, 2012 by vferraro1971 in World Politics