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  • October 30, 2013 12:33 PM | Anonymous
    Twenty years ago, the United States, Mexico, and Canada launched a bold experiment known as the North American Free Trade Agreement (NAFTA), which created the largest free trade area in the world. NAFTA removed trade barriers, opened our markets to one another, and allowed for unprecedented regional cooperation on a broad range of security, social, and commercial issues that have benefited each of our countries and economies.

    Two decades later, U.S. goods-and-services trade with Canada and Mexico has grown to $1.2 trillion. Our goods exports to Canada and Mexico in 2012 were $508.1 billion, up 258 percent since NAFTA was implemented. The GDP of each of our nations has grown by more than 50 percent and, combined, we now account for about a quarter of the world’s GDP ($18.7 trillion).

    This week, I joined Canadian Minister of International Trade Ed Fast, Mexican Secretary of Economy Ildefonso Guajardo, and numerous business leaders at the North American Competitiveness and Innovation Conference in La Jolla to focus on how continued cooperation between our three nations can propel us forward, strengthen our economies, and create jobs. The partnerships we’ve achieved through NAFTA are a very strong foundation, but we have to expand them to take advantage of new opportunities in an increasingly global economy.

    NAFTA has helped integrate and strengthen our supply chains, increase trade, and build business in the United States and our neighboring countries, but it is important that we continue working together to deepen our economic relationship. And we are doing that undefined both trilaterally through engagements like the conference in La Jolla and multilaterally through the ongoing Trans-Pacific Partnership negotiations.

    Along with the United States, Canada and Mexico are members of the 12-country Trans-Pacific Partnership, which is currently being negotiated with some of the world’s largest and fastest-growing economies. Once completed, the TPP, which will create a single trading community that represents nearly 40 percent of global GDP, will give the United States, Canada, and Mexico improved access to markets across the Asia-Pacific region and will support even more export-oriented jobs. Today, approximately 10 million American jobs are supported by goods-and-services exports to countries all over the world.

    In TPP, we are seeking new and strengthened commitments that go beyond NAFTA in priority areas for the United States, such as those related to labor and to the environment. We’ll also get to address new issues like the digital economy, which weren’t even in our lexicon when NAFTA was negotiated. TPP negotiations are an opportunity to act on President Obama’s promise to improve upon NAFTA and make trade work better for America’s working families.

    It’s no secret that increased globalization brings with it increased competition, and as competitors seek to expand their reach globally, it is our job to showcase why North America remains the most attractive place in the world in which to do business. Our advantages are many. We’re a market of more than 460 million consumers, projected to reach 630 million by 2060. Our economies are growing. North America is a source of abundant and affordable energy, and we have a skilled, productive, and affordable workforce. We’ve made tremendous investments in research, development and innovation that will pay dividends in years to come.

    At the North American Competitiveness and Innovation Conference, we’re working on ways to build on our strengths and enhance the advantages to doing business in North America. Our countries are working together to align our regulations in certain sectors, deepen our supply chain integration in key industries, promote the advantages of investing in North America, support economic development initiatives to strengthen our border communities, encourage entrepreneurship, and promote North America as a tourism destination.

    As we unite around common goals and work toward even greater integration, we can look forward to a stronger and more competitive North America.

    Pritzker is U.S. Secretary of Commerce.

    _____________________________________________________________________
    Reprinted from U-T San Diego published October 30, 2013. To view article, go tohttp://www.utsandiego.com/news/2013/oct/30/nafta-partners-seek-to-build-on-successes
  • September 07, 2012 12:31 PM | Anonymous
    Europe's financial turmoil and the impact it could have on the rest of the world are the overriding focus of international financial markets. Will the euro survive? Would its failure spark a deep global recession? How would the fallout affect the United Statesundefinedeven the coming presidential election? To understand Europe's prospects, we must debunk several misconceptions that have emerged about the crisis. And we must understand that Europe's troubles may spark a deeper unionundefinedfiscal as well as politicalundefinedthat could protect the continent from similar crises in the future.

    1. The Europeans will never get their act together.

    The euro area will never be a United States of Europe, and the cacophony of voices on the continent will continue to spook the markets. But given this challenge, the euro area countries have responded to the crisis with impressive speed.

    To defend against the financial collapse of the weaker members, they have created joint rescue funds approximating $1 trillion. The European Central Bank has lent trillions more, like the Federal Reserve, and has just reaffirmed that it will do as much as necessary to avoid catastrophe. The euro area countries have agreed on firm fiscal rulesundefinedwith stiff enforcement penaltiesundefinedto limit future budget deficits. They are moving toward a partial fiscal union, through which the strongest countries will help fund the weaker partners. They are working out a full banking union that will prevent bank runs by providing Europe-wide deposit insurance. The debtor countries are implementing politically difficult budget cutbacks and major structural reforms to promote growth, such as easing firing procedures and thus encouraging hiring as well as greater productivity.

    The euro area's strong members, Germany in particular, cannot say they will provide unlimited bailouts; that would take the pressure off the debtors. Driven by the markets, however, the euro area seems on track to complete the economic and monetary union that was promised two decades ago and whose absence brought on the current difficulties.

    2. Greece's departure from the euro area would doom the single currency.

    If Greece, the weakest link, is forced out of the monetary union, that would actually strengthen the currency. The result would be so chaotic for Greece that the other debtor countries, observing the wreckage, would do whatever it took to avoid the same fate, cutting their deficits even more quickly and accelerating other reforms.

    Moreover, to avoid the risk of fallout elsewhere in the euro area, the strong Europeans would couple “Grexit” with sharp increases in the size of their financial firewalls and would speed up banking and fiscal integration. By shedding Greece, the euro area could emerge stronger.

    3. German taxpayers will never bail out Greek (or Spanish or Italian) pensioners.

    Germany is and will remain the paymaster of Europe, complaining loudly and demanding austerity and reform, but coughing up however much is necessary to hold the euro area together. It has already provided the bulk of the rescue funds and financed most of the debtor countries' deficits through the European Central Bank.

    There are many reasons for Germany's staying power. First, the entire European integration project of the past six decades, of which the euro is now the decisive symbol, arose from the devastation wreaked by Germany over the previous century. The Germans will not run the risk of destroying Europe againundefinedsomething with which they could be fairly charged if they pull the plug. Moreover, Germany's export-based economic model rests squarely on the euro: The country runs the world's largest trade surplus, but it enjoys a highly competitive currency against the rest of the world because the exchange rate of the common currency reflects the economies of its weaker neighbors as well as the German powerhouse. And German banks are heavily exposed in the debtor countries, so German taxpayers would have to rescue them if Spain or Italy failed.

    Smaller creditor countries, such as Finland and the Netherlands, may be reluctant to lend more. But in Germany, every political leader and most voters are fully aware of these political, moral and economic necessities, and pro-euro parties have won every major electionsince the crisis erupted.

    4. If austerity measures continue, voters will revolt and extremists will take over.

    One of the most amazing aspects of the euro crisis so far is that the political center has held in every debtor country. Incumbent governments have been rejected in all of them, but radical alternatives from both the left and the right have been rejected even more soundly.

    Portugal and Ireland have stuck to the austerity commitments required as part of their bailouts, while Spain and Italy have gone beyond, with more spending cuts, higher taxes and major labor-market reforms. Only Greek voters flirted with a rejectionist party, but a bank run quickly forced them to reverse course.

    The Europeans have now added a crucial growth dimension to their emphasis on austerity, adopting jointly financed infrastructure investments and pro-growth reforms that will further solidify political support.

    5. The euro crisis will tank the US economy and could even swing the presidential election.

    No doubt, the downturn in Europe has dampened exports and corporate profits in the United States, weakened employment and investor confidence, and cut perhaps 1 percent off our gross domestic product. Macroeconomic Advisers estimates that a collapse of the euro would produce a renewed recession here over the next year and an unemployment rate above 9 percent at least through 2013.

    But the world's emerging economies, led by China and India, account for half of the global economy and will continue to expand at about 6 percent annually for the foreseeable future. This is slower than before, but such growth will keep the global economyundefinedincluding the United Statesundefinedchurning for some time.

    In addition, the United States derives important benefits from Europe's troubles because the crisis diverts global capital into the dollar, especially Treasury securities, keeping our interest rates low and thus fueling at least a gradual recovery of housing and consumer demand.

    The likelihood that Europe will continue to muddle through will protect usundefinedand our electionundefinedfrom major economic repercussions.

    _____________________________________________________________________
    Op-ed published in the Washington Post on September 7, 2012. Reprinted from the Peterson Institute for International Economics website. To view, go to http://www.iie.com/publications/opeds/oped.cfm?ResearchID=2214 
  • February 29, 2012 11:14 AM | Anonymous

    A spate of recent articles in Chinese state-run media has raised speculation that the country's leadership may address the issue of political reform. Though the issue is by no means a new one, slowing economic growth, a widening income gap and public alienation from the political system are all threatening to undermine the Communist Party's claim to legitimacy, lending a new urgency to the problem. In order to head off the kind of unpredictable or even violent change that could accompany a political crisis, CPC leadership will try to introduce reforms from the top down, but because the current business and political elite have a disproportionate stake in the status quo, this will be easier said than done.

    Analysis

    Over the past week several Chinese state-owned media agencies, including the People's Daily and Xinhua, have commented extensively on the need for political reform. One People's Daily article published Feb. 23, while highlighting the challenges political reform would entail, suggested that failing to enact reforms would have a far more dire consequence: a full-blown political crisis. The following day, semi-state owned Global Times ran an article entitled "Reform Is a Consensus, The Path Is In Debate," which echoed the People's Daily article and laid out a conservative discussion of political reform and China's path forward.

    For the Communist Party of China (CPC), the need for political reform is not up for debate. Since 1978, the CPC has staked its legitimacy on economic growth, but this is showing signs of diminishing returns as growth slows amid the global downturn and as the inefficiencies of China's export-dependent model become more apparent. CPC leadership realizes that to stay in power, the regime will have to implement political reform to address the country's many social and economic inequities. However, top-down political reform has always been difficult to implement because it challenges the interests of people benefitting most from the current system, while bottom-up political change in China historically has taken the form of revolution. To pre-empt rapid or even violent change that would threaten the current system and the party's hold on power, CPC leadership will introduce political reform slowly and incrementally.

    Reform in a Chinese Context
    Rhetoric over political reform in China is not as alien as some may think, especially in the years since China's economic opening under former leader Deng Xiaoping. Chinese Premier Wen Jiabao and several high-ranking officials have in recent years repeatedly made high-profile statements about reforms, accompanied by increasing public discourse about the need for political reform. However, no explicit policy prescriptions have accompanied these statements, leaving many to doubt how -- and whether -- reform will be enacted. 

    The renewed calls through state media organs therefore have raised public expectations about reform. While no substantial steps could be taken until the 2012 leadership transition is complete and incoming leaders have consolidated their power, some believe that the new generation of leaders, many of whom are considered more liberal than the leaders in the current generation, may actively pursue reform. Nevertheless, even if the individuals in charge sincerely desire political reform, systemic hindrances -- not personalities -- will prove the biggest obstacle to the reform agenda.

    The timing of recent heightened rhetoric is not coincidental. Economically, the imperative for change is clear. After years of rapid growth, the Chinese economy is slowing, and Beijing expects that economic growth will continue to slow over the next few years. Economic restructuring in this context is needed to address corruption, the widening income gap and unequal access to political power, in order to preserve the CPC's legitimacy.

    Thus far, the CPC has paradoxically addressed the issue by further centralizing power and control over the economy, while attempting to promote wealth distribution and increased domestic consumption. But this centralization has been employed in a political system in which the business and political elite play a disproportionately large role in shaping economic policy. This could strengthen their already strong position at a time when their disproportionate wealth and power is starting to stoke feelings of unfairness in the rest of the population.

    As the CPC has evolved, an oligarchy has consolidated within the Party, forming a powerful bureaucracy and controlling the majority of the country's resources and wealth. Princelings, or the descendants of the original CPC elite, have risen to prominent positions in the CPC and in China's many state-owned enterprises. These moves have reinforced an already powerful political-economic network.

    The social environment in China also reveals the need for reform. China's economy is large, but its wealth disparity is immense: Around 0.2 percent of the Chinese population controls 70 percent of the country's wealth. This inequality has led to social frustration and has called into question the CPC's legitimacy.

    Empowering the middle class could help China maintain its dynamic growth by encouraging increased consumption, but the middle class is shrinking, due in part to economic hardship. This has distilled in the middle class a degree of distrust of the government, which came to the fore in urban political demonstrations, including China's Jasmine gatherings. By themselves these demonstrations posed little threat to the CPC, but they had the potential to unify citizens at the grassroots level to form larger movements, evidenced by the so-called Wukan model.

    Systemic Challenges
    Those calls for political reform have generated little momentum. They were substantially quelled, with the central government in turn employing a more conciliatory political approach or enforcing security crackdowns. Still, the issue remains the biggest threat to the government's sustainability.

    Governing China requires a strong central government. Centralized power characterizes the CPC today much as it characterized China's early dynasties. When the CPC came to power, its legitimacy flowed from sentiments opposing nationalism and Japanese imperialism, as well as from communist ideology. These sustained the Party even through the Great Leap Forward and the Cultural Revolution but were not enough to unify the country after those disasters. It was not until Deng promised economic betterment that the CPC found a new way to preserve its centrality.

    The CPC is beginning to understand that the current phase is untenable, since large segments of the country clearly have not realized economic betterment. While the general population today is better off than were its grandparents, there is a demonstrable and systemic wealth gap favoring the CPC elite and those associated with them. This phenomenon has occurred due to, not in spite of, the centrality of the CPC. The ruling party can and has instituted economic and social reforms in the past, but such reforms will have negligible effects without accompanying political reforms.

    While the CPC's decision-making process is more democratic than it has been in the past, only a small number of Party members participate. The general population knows that cronyism is still practiced. Demands from the bottom are increasing, as reflected by the rising public outcry against corruption and the increased airing of social grievances, which the Jasmine gatherings, among other political movements, sought to harness.

    The challenges of economic and social management now are moving beyond the control of the current CPC leadership structure. The central authority has weakened and can no longer dictate the terms of the economy. The CPC needs to redefine itself in order to avert a bottom-up movement for regime change, and to do so it must enact political reforms. The problem is that such reforms could risk either the collapse of the entire structure or the loss of power by CPC leaders.

    Political reform could come in the form of a major break within the Party that forces change from the inside, but the CPC desperately wants to avoid the kind of political instability this sort of split could bring; indeed, the whole point of instituting reform from the top is to avoid a political crisis. Any efforts undertaken toward political reform will thus be introduced slowly and incrementally in order to prevent putting the government's hold on power at risk.

    _____________________________________________________________________
    Reprinted from the Stratfor Global Intelligence, February 29, 2012. To view, go tohttp://www.stratfor.com/analysis/china-reform-resilient-political-system 
     

  • February 28, 2012 11:32 AM | Anonymous
    The fall of the Soviet Union ended the European epoch, the period in which European power dominated the world. It left the United States as the only global power, something for which it was culturally and institutionally unprepared. Since the end of World War II, the United States had defined its foreign policy in terms of its confrontation with the Soviet Union. Virtually everything it did around the world in some fashion related to this confrontation. The fall of the Soviet Union simultaneously freed the United States from a dangerous confrontation and eliminated the focus of its foreign policy.

    In the course of a century, the United States had gone from marginal to world power. It had waged war or Cold War from 1917 until 1991, with roughly 20 years of peace between the two wars dominated by the Great Depression and numerous interventions in Latin America. Accordingly, the 20th century was a time of conflict and crisis for the United States. It entered the century without well-developed governmental institutions for managing its foreign policy. It built its foreign policy apparatus to deal with war and the threat of war; the sudden absence of an adversary inevitably left the United States off balance.

    After the Cold War
    The post-Cold War period can be divided into three parts. A simultaneous optimism and uncertainty marked the first, which lasted from 1992 until 2001. On one hand, the fall of the Soviet Union promised a period in which economic development supplanted war. On the other, American institutions were born in battle, so to speak, so transforming them for a time of apparently extended peace was not easy. Presidents George HW Bush and Bill Clinton both pursued a policy built around economic growth, with periodic and not fully predictable military interventions in places such as Panama, Somalia, Haiti and Kosovo.

    These interventions were not seen as critical to U.S. national security. In some cases, they were seen as solving a marginal problem, such as Panamanian dictator Manuel Noriega's drug trafficking. Alternatively, they were explained as primarily humanitarian missions. Some have sought a pattern or logic to these varied interventions; in fact, they were as random as they appeared, driven more by domestic politics and alliance pressures than any clear national purpose. U.S. power was so overwhelming that these interventions cost relatively little and risked even less.

    The period where indulgences could be tolerated ended on Sept. 11, 2001. At that point, the United States faced a situation congruent with its strategic culture. It had a real, if unconventional, enemy that posed a genuine threat to the homeland. The institutions built up during and after World War II could function again effectively. In an odd and tragic way, the United States was back in its comfort zone, fighting a war it saw as imposed on it.

    The period from 2001 until about 2007 consisted of a series of wars in the Islamic world. Like all wars, they involved brilliant successes and abject failures. They can be judged one of two ways. First, if the wars were intended to prevent al Qaeda from ever attacking the United States again in the fashion of 9/11, they succeeded. Even if it is difficult to see how the war in Iraq meshes with this goal, all wars involve dubious operations; the measure of war is success. If, however, the purpose of these wars was to create a sphere of pro-U.S. regimes, stable and emulating American values, they clearly failed.

    By 2007 and the surge in Iraq, U.S. foreign policy moved into its present phase. No longer was the primary goal to dominate the region. Rather, it was to withdraw from the region while attempting to sustain regimes able to defend themselves and not hostile to the United States. The withdrawal from Iraq did not achieve this goal; the withdrawal from Afghanistan probably will not either. Having withdrawn from Iraq, the United States will withdraw from Afghanistan regardless of the aftermath. The United States will not end its involvement in the region, and the primary goal of defeating al Qaeda will no longer be the centerpiece.

    President Barack Obama continued the strategy his predecessor, George W. Bush, set in Iraq after 2007. While Obama increased forces beyond what Bush did in Afghanistan, he nevertheless accepted the concept of a surge -- the increase of forces designed to facilitate withdrawal. For Obama, the core strategic problem was not the wars but rather the problem of the 1990s -- namely, how to accommodate the United States and its institutions to a world without major enemies.

    The Failure of Reset
    The reset button Hillary Clinton gave to the Russians symbolized Obama's strategy. Obama wanted to reset U.S. foreign policy to the period before 9/11, a period when U.S. interventions, although frequent, were minor and could be justified as humanitarian. Economic issues dominated the period, and the primary issue was managing prosperity. It also was a period in which U.S.-European and U.S.-Chinese relations fell into alignment, and when U.S.-Russian relations were stable. Obama thus sought a return to a period when the international system was stable, pro-American and prosperous. While understandable from an American point of view, Russia, for example, considers the 1990s an unmitigated disaster to which it must never return.

    The problem in this strategy was that it was impossible to reset the international system. The prosperity of the 1990s had turned into the difficulties of the post-2008 financial crisis. This obviously created preoccupations with managing the domestic economy, but as we saw in our first installment, the financial crisis redefined the way the rest of the world operated. The Europe, China and Russia of the 1990s no longer existed, and the Middle East had been transformed as well.

    During the 1990s, it was possible to speak of Europe as a single entity with the expectation that European unity would intensify. That was no longer the case by 2010. The European financial crisis had torn apart the unity that had existed in the 1990s, putting European institutions under intense pressure along with trans-Atlantic institutions such as NATO. In many ways, the United States was irrelevant to the issues the European Union faced. The Europeans might have wanted money from the Americans, but they did not want 1990s-style leadership.

    China had also changed. Unease about the state of its economy had replaced the self-confidence of the elite that had dominated during the 1990s in China. Its exports were under heavy pressure, and concerns about social stability had increased. China also had become increasingly repressive and hostile, at least rhetorically, in its foreign policy.

    In the Middle East, there was little receptivity to Obama's public diplomacy. In practical terms, the expansion of Iranian power was substantial. Given Israeli fears over Iranian nuclear weapons, Obama found himself walking a fine line between possible conflict with Iran and allowing events to take their own course.

    Limiting Intervention
    This emerged as the foundation of U.S. foreign policy. Where previously the United States saw itself as having an imperative to try to manage events, Obama clearly saw that as a problem. As seen in this strategy, the United States has limited resources that have been overly strained during the wars. Rather than attempting to manage foreign events, Obama is shifting U.S. strategy toward limiting intervention and allowing events to proceed on their own.

    Strategy in Europe clearly reflects this. Washington has avoided any attempt to lead the Europeans to a solution even though the United States has provided massive assistance via the Federal Reserve. This strategy is designed to stabilize rather than to manage. With the Russians, who clearly have reached a point of self-confidence, the failure of an attempt to reset relations resulted in a withdrawal of U.S. focus and attention in the Russian periphery and a willingness by Washington to stand by and allow the Russians to evolve as they will. Similarly, whatever the rhetoric of China and U.S. discussions of redeployment to deal with the Chinese threat, U.S. policy remains passive and accepting.

    It is in Iran that we see this most clearly. Apart from nuclear weapons, Iran is becoming a major regional power with a substantial sphere of influence. Rather than attempt to block the Iranians directly, the United States has chosen to stand by and allow the game to play out, making it clear to the Israelis that it prefers diplomacy over military action, which in practical terms means allowing events to take their own course.

    This is not necessarily a foolish policy. The entire notion of the balance of power is built on the assumption that regional challengers confront regional opponents who will counterbalance them. Balance-of-power theory assumes the leading power intervenes only when an imbalance occurs. Since no intervention is practical in China, Europe or Russia, a degree of passivity makes sense. In the case of Iran, where military action against its conventional forces is difficult and against its nuclear facilities risky, the same logic applies.

    In this strategy, Obama has not returned to the 1990s. Rather, he is attempting to stake out new ground. It is not isolationism in its classic sense, as the United States is now the only global power. He appears to be engineering a new strategy, acknowledging that many outcomes in most of the world are acceptable to the United States and that no one outcome is inherently superior or possible to achieve. The U.S. interest lies in resuming its own prosperity; the arrangements the rest of the world makes are, within very broad limits, acceptable.

    Put differently, unable to return U.S. foreign policy to the 1990s and unwilling and unable to continue the post-9/11 strategy, Obama is pursuing a policy of acquiescence. He is decreasing the use of military force and, having limited economic leverage, allowing the system to evolve on its own.

    Implicit in this strategy is the existence of overwhelming military force, particularly naval power.

    Europe is not manageable through military force, and it poses the most serious long-term threat. As Europe frays, Germany's interests may be better served in a relationship with Russia. Germany needs Russian energy, and Russia needs German technology. Neither is happy with American power, and together they may limit it. Indeed, an entente between Germany and Russia was a founding fear of U.S. foreign policy from World War I until the Cold War. This is the only combination that could conceivably threaten the United States. The American counter here is to support Poland, which physically divides the two, along with other key allies in Europe, and the United States is doing this with a high degree of caution.

    China is highly vulnerable to naval force because of the configuration of its coastal waters, which provides choke points for access to its shores. The ultimate Chinese fear is an American blockade, which the weak Chinese navy would be unable to counter, but this is a distant fear. Still, it is the ultimate American advantage.

    Russia's vulnerability lies in the ability of its former fellow members of the Soviet Union, which it is trying to organize into a Eurasian Union, to undermine its post-Soviet agenda. The United States has not interfered in this process significantly, but it has economic incentives and covert influence it could use to undermine or at least challenge Russia. Russia is aware of these capabilities and that the United States has not yet used them.

    The same strategy is in place with Iran. Sanctions on Iran are unlikely to work because they are too porous and China and Russia will not honor them. Still, the United States pursues them not for what they will achieve but for what they will avoid -- namely, direct action. Rhetoric aside, the assumption underlying U.S. quiescence is that regional forces, the Turks in particular, will be forced to deal with the Iranians themselves, and that patience will allow a balance of power to emerge.

    The Risks of Inaction
    U.S. strategy under Obama is classic in the sense that it allows the system to evolve as it will, thereby allowing the United States to reduce its efforts. On the other hand, U.S. military power is sufficient that should the situation evolve unsatisfactorily, intervention and reversal is still possible. Obama has to fight the foreign policy establishment, particularly the U.S. Defense Department and intelligence community, to resist older temptations. He is trying to rebuild the foreign policy architecture away from the World War II-Cold War model, and that takes time.

    The weakness in Obama's strategy is that the situation in many regions could suddenly and unexpectedly move in undesirable directions. Unlike the Cold War system, which tended to react too soon to problems, it is not clear that the current system won't take too long to react. Strategies create psychological frameworks that in turn shape decisions, and Obama has created a situation wherein the United States may not react quickly enough if the passive approach were to collapse suddenly.

    It is difficult to see the current strategy as a permanent model. Before balances of power are created, great powers must ensure that a balance is possible. In Europe, within China, against Russia and in the Persian Gulf, it is not clear what the balance consists of. It is not obvious that the regional balance will contain emerging powers. Therefore, this is not a classic balance-of-power strategy. Rather it is an ad hoc strategy imposed by the financial crisis and its impact on psychology and by war-weariness. These issues cannot be ignored, but they do not provide a stable foundation for a long-term policy, which will likely replace the one Obama is pursuing now.

    _____________________________________________________________________
    Reprinted from Stratfor.com, February 28, 2012. View article at http://www.stratfor.com/weekly/state-world-explaining-us-strategy 

    Editor's Note: This is the second installment of a new [Stratfor] series on the national strategies of today's global power and other regional powers.
     
  • February 20, 2012 11:23 AM | Anonymous
    WOLFGANG Schäuble is, in many ways, the strongest – perhaps even the last – Europhile in the German government. But open the pages of Greek newspapers and there he is, the German finance minister depicted in Nazi uniform. It is not just the inflammatory Greek press that dislikes him. The Greek president, Karolos Papoulias, lashed out at him last week: “Who is Mr Schäuble to insult Greece? Who are the Dutch? Who are the Finnish?”

    Mr Schäuble is, first and foremost, the German finance minister. As such his job is to protect the interests of the German tax-payer, from both the demands of his fellow ministers and the begging bowl held out by his European colleagues. As creditor-in-chief, one would expect him to be toughest in imposing conditions on Greece before granting a second bail-out.

    But the Schäuble problem goes beyond this necessary parsimoniousness. Consistently through the crisis, Mr Schäuble has adopted the hardest positions. First it was a paper circulated by his officials calling for the creation of a budget “commissar” with the power to control the Greek budget. Then it was his open talk a Greek default, and the fact that other European countries were “better prepared” to withstand it. Most recently, he suggested that Greece should postpone its elections so that the technocratic government of Lukas Papademos has more time to implement reforms.

    Many think Mr Schäuble has been deliberately pushing the Greeks into a chaotic default (one example is here). Even so, why do it so overtly? Why invite the crude and simplistic accusation the modern Germany is repeating the Nazis’ jackbooted occupation of Greece? It would be so much simpler to let somebody like the Dutch finance minister, Jan Kees de Jager, do the tough talking (see my previous post) while Germany holds back. Every finance minister of a creditor country must demonstrate that he (or she) is driving a hard bargain. Mr Schäuble knows better than most the many doubts that surround even a second vast bailout of Greece (see this report of the IMF's assessment). In the end, Mr de Jager’s menaces count for much less than Mr Schäuble’s; if Greece is to be cut loose the decision will be taken in Berlin, not The Hague.

    The FT's Quentin Peel recently recently had an interesting piece on the reasons for Germany's rigidity:

    Postwar Germany is both profoundly provincial and committed to Europe. The federal system keeps central government in check, locked into a system of coalition government that is consensual and slow-moving. Both politics and the bureaucracy are dominated by lawyers (Mr Schäuble is one) who believe passionately in the need for rules and respect for the law. It makes for a confusing mixture of compromise and inflexibility. Mixed messages emerge from the different centres of power, not least from the finance ministry and the chancellor’s office, until they can agree a common line.

    Some argue that Mr Schäuble’s very pro-Europeanism heightens his sense of betrayal by Greece, and the prospect that it could destroy the European Union’s greatest experiment in integration. There may be truth in this. But I cannot help but feel that that also something of the bad-cop routine in Mr Schäuble’s actions. He must act as if a Greek default is possible, even desirable, in order to turn the pressure on Greek politicians. If that means being portrayed as a Nazi, so be it; the alternative is to let Greek politicians think they are immune because the euro zone will never let them collapse.

    Still, Mr Schäuble's claim that the euro zone is ready for a Greek default sounds implausible. Last year European politicians were bending over backwards to avoid any sort of default, lest it destabilise the whole of the euro zone. Yes, the European Central Bank’s massive liquidity programme for banks (not sovereigns) has taken the edge off the panic. The reforms being enacted in Italy and Spain have helped too.

    But nobody thinks the euro zone has yet overcome the crisis. If it were otherwise, why insist on the fiction that the restructuring of private debt is “voluntary” simply to avoid triggering credit-default swaps? And surely, if Germany were serious about cutting off the Greeks it would be doing more to strengthen anti-contagion measures. On the contrary: Germany has so far resisted a proposal to strengthen the rescue fund by maintaining the temporary European Financial Stability Facility (EFSF) even after the creation of permanent European Stability Mechanism due later this year.

    The conundrum for the fiscal hawks is that issuing a credible threat to Greece requires issuing a credible guarantee that Italy and Spain would be protected from the consequences. But that is something that Germany will not do, for fear of reducing the reformist pressure on Italy and Spain. So through gritted teeth, Greece must be kept afloat in some mannerundefinednot at any cost, of course, but for some time yet, as long as the price is not too exorbitant. “We continue to believe that Greece can be saved. Or at least we continue to say so,” says one Eurocrat.

    The difficulty in imposing discipline and reform on Greece will be familiar to any parent of recalcitrant adolescents who do not want to do their homework. Dad may shout, cajole and threat; the kid may come to hate the parent. But if the kid refuses to study, he cannot be starved, beaten or thrown on to the streets. The parent may enjoy the illusion of infinite power, but authority ultimately involves much bluff.

    _____________________________________________________________________
    Reprinted from The Economist, February 20, 2012. To view, go tohttp://www.economist.com/blogs/charlemagne/2012/02/germany-and-greece 
  • February 20, 2012 11:22 AM | Anonymous
    WOLFGANG Schäuble is, in many ways, the strongest – perhaps even the last – Europhile in the German government. But open the pages of Greek newspapers and there he is, the German finance minister depicted in Nazi uniform. It is not just the inflammatory Greek press that dislikes him. The Greek president, Karolos Papoulias, lashed out at him last week: “Who is Mr Schäuble to insult Greece? Who are the Dutch? Who are the Finnish?”

    Mr Schäuble is, first and foremost, the German finance minister. As such his job is to protect the interests of the German tax-payer, from both the demands of his fellow ministers and the begging bowl held out by his European colleagues. As creditor-in-chief, one would expect him to be toughest in imposing conditions on Greece before granting a second bail-out.

    But the Schäuble problem goes beyond this necessary parsimoniousness. Consistently through the crisis, Mr Schäuble has adopted the hardest positions. First it was a paper circulated by his officials calling for the creation of a budget “commissar” with the power to control the Greek budget. Then it was his open talk a Greek default, and the fact that other European countries were “better prepared” to withstand it. Most recently, he suggested that Greece should postpone its elections so that the technocratic government of Lukas Papademos has more time to implement reforms.

    Many think Mr Schäuble has been deliberately pushing the Greeks into a chaotic default (one example is here). Even so, why do it so overtly? Why invite the crude and simplistic accusation the modern Germany is repeating the Nazis’ jackbooted occupation of Greece? It would be so much simpler to let somebody like the Dutch finance minister, Jan Kees de Jager, do the tough talking (see my previous post) while Germany holds back. Every finance minister of a creditor country must demonstrate that he (or she) is driving a hard bargain. Mr Schäuble knows better than most the many doubts that surround even a second vast bailout of Greece (see this report of the IMF's assessment). In the end, Mr de Jager’s menaces count for much less than Mr Schäuble’s; if Greece is to be cut loose the decision will be taken in Berlin, not The Hague.

    The FT's Quentin Peel recently recently had an interesting piece on the reasons for Germany's rigidity:

    Postwar Germany is both profoundly provincial and committed to Europe. The federal system keeps central government in check, locked into a system of coalition government that is consensual and slow-moving. Both politics and the bureaucracy are dominated by lawyers (Mr Schäuble is one) who believe passionately in the need for rules and respect for the law. It makes for a confusing mixture of compromise and inflexibility. Mixed messages emerge from the different centres of power, not least from the finance ministry and the chancellor’s office, until they can agree a common line.

    Some argue that Mr Schäuble’s very pro-Europeanism heightens his sense of betrayal by Greece, and the prospect that it could destroy the European Union’s greatest experiment in integration. There may be truth in this. But I cannot help but feel that that also something of the bad-cop routine in Mr Schäuble’s actions. He must act as if a Greek default is possible, even desirable, in order to turn the pressure on Greek politicians. If that means being portrayed as a Nazi, so be it; the alternative is to let Greek politicians think they are immune because the euro zone will never let them collapse.

    Still, Mr Schäuble's claim that the euro zone is ready for a Greek default sounds implausible. Last year European politicians were bending over backwards to avoid any sort of default, lest it destabilise the whole of the euro zone. Yes, the European Central Bank’s massive liquidity programme for banks (not sovereigns) has taken the edge off the panic. The reforms being enacted in Italy and Spain have helped too.

    But nobody thinks the euro zone has yet overcome the crisis. If it were otherwise, why insist on the fiction that the restructuring of private debt is “voluntary” simply to avoid triggering credit-default swaps? And surely, if Germany were serious about cutting off the Greeks it would be doing more to strengthen anti-contagion measures. On the contrary: Germany has so far resisted a proposal to strengthen the rescue fund by maintaining the temporary European Financial Stability Facility (EFSF) even after the creation of permanent European Stability Mechanism due later this year.

    The conundrum for the fiscal hawks is that issuing a credible threat to Greece requires issuing a credible guarantee that Italy and Spain would be protected from the consequences. But that is something that Germany will not do, for fear of reducing the reformist pressure on Italy and Spain. So through gritted teeth, Greece must be kept afloat in some mannerundefinednot at any cost, of course, but for some time yet, as long as the price is not too exorbitant. “We continue to believe that Greece can be saved. Or at least we continue to say so,” says one Eurocrat.

    The difficulty in imposing discipline and reform on Greece will be familiar to any parent of recalcitrant adolescents who do not want to do their homework. Dad may shout, cajole and threat; the kid may come to hate the parent. But if the kid refuses to study, he cannot be starved, beaten or thrown on to the streets. The parent may enjoy the illusion of infinite power, but authority ultimately involves much bluff.

    _____________________________________________________________________
    Reprinted from The Economist, February 20, 2012. To view, go tohttp://www.economist.com/blogs/charlemagne/2012/02/germany-and-greece 
  • February 23, 2011 11:01 AM | Anonymous
    How to Run the World: Charting A Course to the Next Renaissance by Parag Khanna
    STUART A. REID on THE SILLIEST FOREIGN POLICY BOOK OF THE YEAR


    Parag Khanna, the director of the Global Governance Initiative at the New America Foundation, is part of a generation of young foreign policy thinkers who believe that we have entered an altogether different era of international relations, one in which power is diffuse, the nation-state is far from omnipotent, and transnational problems threaten to unleash global chaos. Like the “Davos Men” described by Samuel Huntington, members of this cohort are committed internationalists and see national identity as increasingly irrelevant. But unlike their ideological predecessors, these young globalistsundefinedcall them “Davos Boys”undefinedhave little faith in the traditional channels of statecraft and existing international institutions. The body best identified as their professional association is the Forum of Young Global Leaders, a group of up-and-comers under the age of 40 that recently inducted Khanna into its ranks. And Khanna’s new book might prove to be their bible.

    This is not meant as a compliment. The book is representative of the muddled worldview of the Davos Boys, and of their addiction to their own globo-babble. Khanna, conveying gravitas by means of italics, tells readers that we are now living in a “hyper-complex ecosystem,” a “fluid, neo-medieval labyrinth” characterized by “islands of governance” and diasporic “spheres of responsibility”undefinednew words, it seems, for a new world. He is the type of writer who uses “dot-com” and “dot-gov” as adjectives when “corporate” and “governmental” would do. But the biggest problem with Davos Boys is not their convoluted writing; it is their misguided thinking. They overestimate how unprecedented today’s world is and how unfamiliar today’s problems are, and so they place too much faith in newfangled solutions.

    Khanna has a point when he says that the current international order, based on state-to-state interactions in forums such as the United Nations, is out of date. His proposed replacement is something he calls “mega-diplomacy,” a do-it-yourself approach that involves nongovernmental organizations, people-to-people deal-making, and partnerships between governments and companies. The anecdotes he collects of people and organizations taking matters into their own hands are often illuminating, and they suggest that something new is indeed afoot. In India, banks are helping stabilize the supply of electricity, since their ATMs break down without it. In Peru, multinational mining companies are training mayors in fiscal management. Across the globe, CEOs developing emissions-reducing technology, not politicians, are taking the lead in combating global warming.

    But even if the state is losing ground to non-state actors, it is much too soon to pronounce the former dead. The biggest international problems are still solved by governments, not by organizations or individuals. It was states’ stimulus packages that got the world economy back on track after the recent financial crisis. And most of the nongovernmental organizations that Khanna sees as symptomatic of a post-Westphalian world are still aimed at changing states’ behavior, not at solving problems themselves. He heaps praise, for example, on Independent Diplomat, an organization whose freelancing diplomats advise stateless groups. Many of its clients’ demands, however, are merely pleas to governments, such as the Burmese exiles’ exhortations to reform their country’s military junta. (Khanna could have helped readers put his enthusiasm for Independent Diplomat in perspective had he disclosed that he sits on its board.)

    Even as Khanna describes the world as tangled and troubled, the proposals he puts forth tend toward the simplistic. What is to be done about financial crises? Khanna suggests that banks regulate themselves, guild-style. (Isn’t that how we got into this mess?) Instability in Pakistan? Build natural gas pipelines in the region. Border disputes in the Middle East? Connect countries with high-speed rail. Warring African states? Set up trans-boundary conservation parks and redraw, somehow, the continent’s internal borders. (“Make safari, not war,” he advises.) As for corrupt autocrats, just restrict their travel and, if that does not work, assassinate them.

    Davos Boys reject top-down schemes of global governance, seeing bottom-up solutions as the answer to much of the world’s strife. In this spirit, Khanna champions regional security institutions, which, since they are more representative and closer to the ground than global ones, he considers better suited to easing neighborly tensions. “Where regional security organizations are strong, there is order; where they are weak, there is chaos.” But that is too tidy. It gets the causality backward: regional institutions are the products of peace, not the reasons for it. The organizations that eventually became the European Union took root only after World War II settled Europe’s balance of power. It is hard to imagine a strong regional organization sprouting anytime soon in the Middle East: if the region has not yet chosen to build one, it probably will not come.

    Many of the bottom-up ideas in How to Run the World are based on little more than hyperventilating techno-optimism. Khanna appears positively obsessed with mobile phones, which in these pages become near-magical devices that can boost GDP, serve as symbols of individual freedom, diagnose diseases, help African diplomats lobby for free trade, and undermine authoritarianism in North Korea and Myanmar. “If you have a mobile phone and can tweet,” he writes, “you can reach out and touch someone.” Not for the first time, a catch phrase passes for analysis.

    Khanna also extols the deeds of a relatively obscure online petition web site named Avaaz. The group, he explains, floated a giant banner on top of the Great Barrier Reef to get members of the Asia-Pacific Economic Cooperation forum to agree on binding reductions in greenhouse gas emissions, and it bought billboards in China to shame the Communist Party into doing something about the genocide in Darfur. He does not mention that neither of those efforts worked: the Asia-Pacific Economic Cooperation forum never adopted binding cuts, and China never reformed its Darfur policy.

    Had Khanna followed up on another project that he touts, the One Laptop per Child program, he would have found similarly disappointing results. Khanna sees the program as an example of a successful public-private partnership, proof that innovative outsiders can help the poor. The program was announced in 2005 at the World Economic Forum’s meeting in Davos, an event he spends three entire pages gushing about. (“At WEF gatherings, everyone at the table is at the top of their game.”) But with its cost overruns, lower-than-expected orders, and let-them-eat-cake attitude toward the needs of poor people, the project has in fact become the very symbol of well-meaning globalism run amok.

    Herein lies the identity crisis facing Davos Boy. On the one hand, he thinks that mainstream international organizations are out of touch with the countries they are supposed to help, and so he sees the devolution and diffusion of power as a good thing. Believing that outside interference is the root of much evil, he sympathizes with the developing world and is wary of condescending to the oppressed. Yet on the other hand, Davos Boy also has great faith in the ability of the innovative NGO, the jet-setting philanthropist, or the plucky diplomat to slay the most vexing of problems with just the right silver bullet. This tensionundefinedbetween the globalist impulse to intervene and the localist impulse to distrust the resulting effortsundefinedis difficult to resolve. At one point, Khanna commends Madonna for helping “put Malawi on the map by adopting children from there” and Bono’s ONE Campaign for convincing governments to increase their foreign aid. At another point, he dismisses “sexed-up campaigns to ‘make poverty history’”undefineda phrase that just so happens to be the motto of the ONE Campaign.

    Despite his optimism about his own proposals, Khanna’s assessment of the future is rather pessimistic. He writes that the proportion of democratic countries has been declining in recent years, that the number of slaves in the world is at its highest ever, and that the spread of AIDS and other diseases “raises the specter of another Black Death.” In reality, the news is not so bad. While democracy, by some measures, has suffered a setback over the past five years, the long-term trend is promising. In 1973, when the NGO Freedom House began collecting data, it deemed only forty-three countries as “free”; today, that number is eighty-nine. (The revolutions in Egypt and Tunisia certainly give one hope for more.) Although figures that place the number of slaves today at 27 million suggest that there are more of them than every before, such estimates are at the high end of the range, and any given person had a far greater chance of being trapped in slavery during the mid-nineteenth century. Thanks to advances in prevention and treatment, the number of AIDS infections and deaths is falling. It is not clear what measure Khanna is using when he claims that national borders “rarely represent orderly calmness”: as statistics gathered by researchers at the University of Maryland’s Center for International Development and Conflict Management show, interstate conflict is rare and, since the end of the Cold War, getting even rarer. All the while, economic development has lifted billions of people out of poverty.

    By every conceivable metric, there is no better moment in the course of human history to be born than right now. Yet had Khanna acknowledged this, he would have been committing heresy against the church of neo-globalism that he represents. He would have been robbing his fellow Davos Boys of the pessimism that grants them license to discard the existing global architecture in favor of faddy cure-alls. After all, as the cliché goes, don’t new problems require new solutions? And so the only optimism that this school of thought permits is optimism about its own solutions. But as Khanna’s book demonstrates, they leave awfully little to be excited about.

    _____________________________________________________________________
    Stuart A. Reid is an associate editor at Foreign Affairs.

    Reprinted from The New Republic online, February 23, 2011. This article is available athttp://www.tnr.com/book/review/parag-khanna-run-world 
  • January 28, 2011 10:36 AM | Anonymous
    The Mubarak regime appears doomed, faced with the unambiguous demands of a broad swathe of the Egyptian population for the president to stand aside and for any notion that his son might succeed him to be abandoned. The longevity of the Egyptian regimeundefinedand of many of its Arab peersundefinedhad given a false impression of its strength. A stubborn refusal to countenance meaningful political reforms that could provide legitimate channels for the expression of grievances and for the advancement of new ideas has left the Mubarak regime vulnerable to the charge that it has forfeited its legitimacy. Egypt's historic position at the heart of the Arab world means that these dramatic developments will have a powerful resonance across the region.

    The ingredients for a popular revolt have been available in Egypt and in most other Arab countries for some time. Governments have largely recognised this, but have managed to preserve stability by a mixture of repression and subsidies, while carrying out market-based economic reforms designed to stimulate sufficient growth to raise collective living standards. The formula has worked inasmuch as it has enabled regimes like that of Hosni Mubarak and his erstwhile fellow autocrat, Zine el-Abidine Ben Ali, to stay serenely in power, year after year, decade after decade.

    Running out of excuses

    The Middle East autocrats came under some pressure domestically and from the West to embrace democratic reforms after the collapse of the former Soviet Union. However, they managed to resist these pressures largely through invoking the excuse of security. One of the most potent arguments was that over-hasty democratisation would lead to a takeover by Islamists who, once they were in power, would reject democracy and install repressive regimes dedicated to rooting out liberal Western values. Mr Mubarak often used precisely this argument, citing the example of Algeria, where political liberalisation after the food price riots of 1988 set off a disastrous chain of events culminating in a vicious civil war after the army intervened in January 1992 to stop the Front islamique du salut from sealing a general election victory. Mr Mubarak had his own battle with armed Islamists during the 1990s, and many Arab regimes, including Egypt, have had to contend with al-Qaida in the aftermath of the 9/11 attacks and the US-led invasions of Afghanistan and Iraq.

    The Bush administration sought to use the removal of Saddam Hussein as a means to persuade other Arab dictators of the virtues of democracy, but the moral force of these arguments was undermined by the bloody chaos of post-invasion Iraq.

    However, in the past two years the threat of al-Qaida has receded in most parts of the Arab world (with the significant exception of Yemen), and the democratic institutions set up in Iraq after 2003 have survived, after a fashion. In the absence of a credible Islamist threat and with Iraq showing that an adversarial political culture can survive in the Arab world, even in the most unpromising circumstances, the excuses used by the autocrats to postpone reform are wearing thin.

    What's the point of you?

    Mr Mubarak and his ilk are the inheritors of an anti-colonialist Arab nationalism that has served as an anchor for their regimes. Another critical element has been the struggle against Israel. Mr Mubarak himself served with credit as commander of the Egyptian air force in the October 1973 war. However, these higher purposes no longer apply since Egypt forged a strategic alliance with the US and signed a peace treaty with Israel. Mr Mubarak has sought to develop a new narrative based on the statistics of Egypt's economic development, but to all too many Egyptians the purpose of his regime has been reduced to ensuring its own survival, and even its reproduction in the person of Gamal Mubarak, and enriching a privileged business elite. He is seen by some as effectively collaborating with Israel in the denial of Palestinian rights. Mr Mubarak has delivered some economic advancement, but not enough to make a difference to the millions of Egyptians scraping by on a handful of dollars a month, and his legitimacy has been constantly undermined by the fraudulence of the electoral process and the brutality of the police.

    Who's next?

    Much of this can be applied to other Western-allied Arab leaders, notably including the departed Mr Ben Ali. The Arab monarchies of the Gulf, Jordan and Morocco are insulated to some extent by the overtness of their hereditary principle. The Gulf Arab leaders also have the benefit of huge oil export surpluses and relatively small populations. Libya, by contrast, could be vulnerable owing to its proximity to Egypt and Tunisia and the risk of popular and tribal disaffection with the jockeying for power between the offspring of Colonel Qadhafi.

    Some Arab leaders can still count on the security excuse. Yemen's embattled president, Ali Abdullah Saleh, has been compromised by revelations that he has invited the US to conduct supposedly covert anti-terrorist operations in his country, but he can also still derive some legitimacy from his fight to preserve Yemen's unity in the face of sectarian and secessionist threats and an active al-Qaida presence. The Algerian regime can deploy a similar defence, although al-Qaida is a much less potent threat there than in Yemen.

    Syria's president, Bashar al-Assad, was the prototype for republican Arab dynastic succession, which could yet come back to haunt him. Syria shares many of the features of Tunisia and Egyptundefinedmoderately successful economic performance, a large underclass living in poverty, a crony business elite and stifling one-party domination. However, Mr Assad has retained a higher purpose for himself in the concept of resistance, tapping into a populist vein through associating himself with the rousing anti-Israeli exploits of Hizbullah and Iran. At the same time, he has been careful to limit the scope for subversive debate over the Internet: Syria outlaws Facebook, and there were reports that the web had been closed down in Syria on January 28 as Egypt's protest movement launched its final push to unseat Mr Mubarak.

    _____________________________________________________________________
    Reprinted from the Economist Intelligence Unit - ViewsWire, January 28, 2011. To view, go tohttp://viewswire.eiu.com/index.asp?layout=VWArticleVW3&article_id=937770678&VWNL=true&rf=0 
  • January 28, 2011 10:09 AM | Anonymous
    With the ousting of the Tunisian president being followed by substantial challenges to the authority of both the Egyptian and Yemeni presidents, there is inevitably speculation about whether the pattern will be repeated elsewhere. In Sub-Saharan Africa, the overthrow of a regime by spontaneous popular uprisingundefinedrather than a military/palace coup, or the intervention of a rebel group from across national borders (as in the overthrow of Uganda's Idi Amin, or Rwanda in 1994)undefinedis extremely uncommon. Nonetheless, a number of Sub-Saharan governments may well be looking nervously at the unfolding events.

    One African country that does have form in the area is Madagascar, where in 2009 Andry Rajoelina was swept to power on a wave of popular support in the capital, as well as widespread resentment at the former president's heavy-handed manner and his government's favouritism towards his business empire, the Tiko foods conglomerate. However, enthusiasm has since faltered as the unelected administration headed by Mr Rajoelina has repeatedly deferred polls. The livelihoods of the urban poorundefinedparticularly those in the capital, Antananarivoundefinedhave suffered as a result of the political crisis and international sanctions imposed upon the country, and a popular uprising cannot be discounted. That said, there have been markedly few mass demonstrations as yet, and no figurehead who could mobilise popular discontent has yet emerged, suggesting that Mr Rajoelina and his administration are more likely to be overthrown by disaffected members of the security services than people power.

    Other possibilities include:

    * Cameroon, where some of the conditions seen in Tunisia also apply. The president, Paul Biya, has been in power since 1982, and, having altered the constitution, is set to stand again this year. Corruption within the bloated ranks of government, together with reports of the president's frequent and costly foreign trips, is fuelling popular resentment of an administration perceived to be self-serving and out of touch with the hardships faced by most Cameroonians. At the same time citizens have few avenues for democratic expressionundefinedopposition political parties have been largely marginalised and freedom of speech is curtailedundefinedand Mr Biya has relies heavily on the security services to maintain his authority and suppress discontent, often in a heavy-handed manner. Social unrest, fuelled by high levels of poverty and the rising cost of living, is already on the rise, and a violent crackdown by the security services could spark wider unrest. However, a series of small-scale protests have been taking place since third-quarter 2010, with little sign of momentum building as yet, while Mr Biya has been making a series of populist pledges. As in Madagascar, any threat to the regime is more likely to arise from the armed forces (increasingly ill-disciplined and dissatisfied) rather than the populace at large.

    * Nigeria. In April Nigeria will hold presidential elections that could be the most closely contested polls in year. The run-up to these is in any case likely to be fraught with outbreaks of political violence, and unrest could escalate if competing politicians choose to exploit existing fault linesundefinedsuch as the ongoing low-level conflict in the oil-producing Niger Delta; the Muslim-Christian divide, responsible for several serious explosions of violence in recent years; or a host of local tensions, such as between the Tivs and Jukuns in Benue stateundefinedfor their own ends. As elsewhere in the region, the government will use the army to control any such flare-ups, but this could lead to further tension given their poor training and the potential for human-rights abuses. A particularly contentious or poorly run poll could lead to much more substantial unrest, but Nigeria remains a relatively small risk: Nigerians seem almost inured to corruption and poor leadership, while the sheer size and diversity of the country would make a popular uprising difficult. Equally, it does not have a long-standing leader: although it was only in 2007 that power was first successfully transferred from one civilian leader to another, heads of state have changed relatively regularlyundefinedeven if they have all belonged to the People's Democratic Party. Serious instability in Nigeria would have a substantial impact both in the region and globally: it is Africa's second-largest economy, and most populous nation, as well as being a substantial player in the hydrocarbons industry. And this is one more reason why the government is unlikely to be overthrown: whereas in Tunisia there were limits on the willingness of the US (and other Western powers) to sustain the regime, Nigeria is simply too strategically important to be allowed to fail in this way.

    * Uganda. Elections are also imminent in Uganda, with the president, Yoweri Museveni, seemingly determined to extend his 25-year rule, not least because substantial oil revenues are coming on stream. However, Mr Museveni's share of the presidential vote has declined in each of the last three elections, and if the poll should go to a second-round run-offundefinedas is feasible given that there are eight candidates standingundefinedthe incumbent might just lose to his main challenger, Kizza Besigye. The problem is that Mr Museveni would be highly unlikely to accept such a defeat, potentially leading to unrest over the conduct of the poll. Potential hotspots include Kampala and the Buganda region, an area with a constitutional monarchy and a local parliament. Set against that, the country's economic circumstances have improved of lateundefinedinflation has fallen sharply in the past year, improving living standards for many, and growth looks set to remain robustundefinedwhile Mr Museveni remains personally popular, not least because of his role in the overthrow of Idi Amin. In addition, Mr Museveni has total control of the Ugandan army and has strengthened his grip on the police force, which suggests that wider political instability is unlikely unless there should be a brutal crackdown by the security services.

    * Zimbabwe. In some respects, it is surprising that there has not been a popular uprising against the president, Robert Mugabe. In power since 1980, Mr Mugabe heads a repressive regime that has persistently manipulated elections and brutally cracked down on dissent, while at the same time implementing economic policies that led to more than a decade of recession, mass unemployment and inflation that eroded income per head by the day. Now, elections are in prospect once again (possibly this year), and all the signs are that the poll will once again be manipulated. Will this latest example of electoral theft finally provoke a mass uprising? Possiblyundefinedbut this is by no means guaranteed. Mr Mugabe, an extremely wily political operator, still retains support because of his role in the liberation war in the 1980s, and many of those who would oppose him have simply left the country in search of better prospects. At the same time, the head of the former opposition movement, Morgan Tsvangirai, has proved something of a disappointment, as has the country's experiment with power-sharing, and it remains to be seen whether the Zimbabwean populace will risk what is likely to be a vicious crackdown by taking to the streets in large numbers.

    All told, therefore, a re-run of the Tunisian regime changeundefinedwhich combined elements of a popular revolution and a coupundefinedseems unlikely to be repeated south of the Sahara. This does not mean that African governments are safe from overthrow: the region does not lack long-standing and greedy presidents, and highly repressive states, or populations facing high unemployment and with long-standing (but bottled-up) resentment. It is just that regime change executed by other elements of the eliteundefinedwhether the security services or disgruntled politiciansundefinedseems more likely. However, as the experience in Tunisia has shown, it can be the apparently stable regimes that fall.

    _____________________________________________________________________
    Reprinted from the Economist Intelligence Unit - ViewsWire, January 28, 2011. To view, go tohttp://viewswire.eiu.com/index.asp?layout=VWArticleVW3&article_id=2007770785&VWNL=true 
  • October 27, 2010 11:08 AM | Anonymous
    Former President Néstor Kirchner, considered the strongman behind current President Cristina Fernández de Kirchner, died on the morning of October 27th of a sudden heart attack. This will shake up the country’s political scene and create new uncertainties ahead of next year’s presidential elections. Mr Kirchner was the leader of his party and was expected to run for president again in October 2011. It is not yet clear how the political void left by his death will be filled, but the government’s economic policies are not likely to shift.

    Mr Kirchner (60) served as president from 2003 to 2007 and was succeeded by his wife, Ms Fernández, in a strategy that was designed by the “presidential couple” to allow them to alternate in power. He headed the governing Partido Justicialista (PV), and heavily influenced the policies of the Fernández administration. He was also the head of a regional grouping, the Union of South American Nations (Unasur).

    Although there had been growing concerns about Mr Kirchner’s death in recent months (he had had two cardiac procedures earlier this year), the shock of his death will reverberate strongly in the days and weeks ahead. He was undoubtedly the most powerful political figure in Argentina during the last seven yearsundefinedhaving taken office after the massive financial and economic crisis of 2001-02, and overseen two debt restructurings and, together with his wife, an impressive economic rebound.

    However, the Kirchners have faced major criticism over their heavy-handed economic policies and confrontational style of government, and Ms Fernández’s approval ratings plummeted at one point into the 20s (they have since recovered into the 30s, thanks to strong economic growth). Among the policies that have been attacked have been increased state control of the economy, interventions in the financial and agricultural markets, and maintenance of price freezes in various sectors. The government has also been criticised for taking over private pension funds and using Central Bank reserves for debt repayment. Most recently, the Fernández government has been engaged in a high-profile conflict with several media groups.

    Among the population, there has been growing dissatisfaction with rising crime and corruption, as well as the re-emergence of food price inflation, which is eroding real incomes and hitting the poor hard. Inflation in Argentina is among the highest in the world, and has been stoked mostly by the government’s loose monetary and fiscal policies.

    At the same time, however, Argentina has been posting brisk economic growth rates, thanks to government policies, high commodity prices and strong demand in major exports markets, such as China and Brazil.

    Elections wide open

    Mr Kirchner’s death will produce an initial outpouring of support for Ms Fernández, but this might not translate into a permanent increase in her government’s popularity. Though Mr Kirchner was expected to make a run for the presidency next yearundefinedand the government has been pump-priming economic growth to improve his chancesundefinedhe was probably not headed for any easy victory. His chances would have been undermined by rising discontent with inflation, crime, corruption and clientelism, and a desire for change after more than eight years of Kirchner rule. Other figures within the PJ now will scramble for leadership of the party to fill the void. A battle for the presidential candidacy will also ensue, but it is too early to predict its outcome.

    Various opposition figures already have emerged as possible front-runners in the upcoming presidential contest. Among these is Mauricio Macri, mayor of the city of Buenos Aires and leader of the Propuesta Republicana (Pro) party; the current vice-president, Julio Cobos (who broke with the government in 2008); and Congressman Ricardo Alfonsín (son of a former president, Raúl Alfonsín). However, the opposition’s chances hinge on whether they can maintain an electoral alliance behind one candidate, which is not yet clear.

    With Mr Kirchner gone, the electoral outlook has been shaken up completely, and will now depend on the leadership battle within the PV and the emergence of an alternate candidate. That could take weeks if not months to become clear.

    On the economic policy front, however, there is little reason to believe things will change until after the October 2011 elections are passed. Meanwhile, official inflation statistics will remain discredited, reflecting political meddling. The risk of nationalisations persists following the takeover of private pension funds in 2008, and the independence of the Central Bank is being steadily eroded. Combined with the new political uncertainties, along with concerns over the maintenance of strong fiscal and monetary stimulus measuresundefinedwhich are boosting inflationary pressures and raising further questions about the health of the public financesundefinedthis will sustain the risk of potentially destabilising increases in capital flight in the run-up to the 2011 polls.

    _____________________________________________________________________
    Reprinted from the Economist Intelligence Unit - ViewsWire, October 27, 2010. To view, go tohttp://viewswire.eiu.com/index.asp?layout=VWArticleVW3&article_id=1987546383&VWNL=true

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