Libyan leader Muammar Gaddafi has fled Libya and may be heading for Venezuela, William Hague said today.
The Foreign Secretary said he had seen ‘information’ that suggests Gaddafi is on his way to the South American country – as Libya was up in flames today with reports of around 400 dead.
The dictator was said to have fled as the country, which he has ruled for more than 40 years, was up in flames after anti-government demonstrators breached the state television building and set government property alight.
The country’s diplomats at the UN are calling for Gaddafi to step down. Deputy Ambassador Ibrahim Dabbashi said that if Gaddafi does not reliqniquish power, ‘the Libyan people will get rid of him’.
But officials in Venezuela, where president Hugo Chavez is an ally of the Libyan dictator, denied any suggestions that Gaddafi was seeking refuge there. Information minister Andres Izarra said the reports were ‘false’ .
Because of the country’s severe media restrictions, information out of Libya is extremely difficult to verify. Protesters send reports to Libyan exile groups or to open-source organizers such as Shabab Libya, which then filter through to social or traditional media. On Saturday, Switzerland-based exile groups told Reuters that protesters had completely seized Bayda, also located in the east. In the broken, urgent English common to such dispatches, Shabab Libya reported on Twitter, “Now breaking from #bayda they fought and beat the mercenaries and hanged them in the valleys surrounding bayda. now %100 secure.” Reuters later added that government forces were attempting to retake the town.
Even by the mildest and most reliable accounts out of Libya, the uprising there has been far more violent than any of those across North Africa and the Middle East. Other such demonstrations have emphasized nonviolent occupation, with protesters seizing a central location such as Cairo’s Tahrir Square and holding it against government attempts to disperse them. Libyan protesters began as the others, gathering peacefully in city centers. But over the past week, perhaps in response to the brutal and often fatal government response, the demonstrators have gone from enduring the crackdown to actively fighting back. Matching aggression with aggression, and likely fearing for their lives if they fail, the enraged protesters of Benghazi and elsewhere are attacking security forces and buildings. It’s not that Libya’s protesters are especially violent; the severity of Qaddafi’s crackdown has forced them to choose between going on the offensive or accepting annihilation.
For now, it’s impossible to know for sure whether protesters really did secure Libya’s third-largest city, whether the lush Mediterranean hills outside the city are punctuated with the hanging bodies of security forces, or whether government militias launched a counter-assault that may still be ongoing. But such claims are in line with a pattern of jarringly violent reports out of Libya. Security forces opened fire on a funeral procession in Benghazi, Al Jazeera reports, killing at least 15 mourners. According to BBC News, army snipers are firing indiscriminately at protesters. Libyan social media outlets, which have been several hours ahead of traditional media but may be prone to exaggeration, carry several shocking reports: that protesters have set fire to government buildings in the western city of Yifran, that security forces are raining mortars on civilians in Benghazi, that children are among the dead.
The Libyan protests have been inspired by the wave of uprisings across North Africa, but they grow out of deep-seated poverty, unemployment, and political repression at the hands of yet another entrenched despot. Whether they will result in Libya achieving the sort of change experienced by Tunisia and Egypt is impossible to say, but early signs indicate that whatever the outcome, a high price is likely to be paid in human life.
Complicating matters is Libya’s unusual position in world affairs. Not long ago it was a pariah nation. But since 9/11, it has wormed its way back into favor with the United States and Europe because Qaddafi joined the war on terror, cooperating in the Lockerbie bomb investigation, coming down hard on al Qaeda, and kicking out terrorists he had once sheltered. At the same time, he has steered Libya into an increasingly powerful position in world politics because of its vast oil reserves. Libya has an especially close relationship with its former colonial master, Italy. It now provides about 20 percent of all Italy’s oil imports and has invested in sizeable amounts in that country’s energy infrastructure including the transnational energy giant ENI.
Along with their energy deals, Italian Prime Minister Silvio Berlusconi and Qaddafi have agreed to work together to stem the increasing numbers of migrants seeking a better life in Europe. In addition to those leaving from North Africa, thousands more have been moving up the Red Sea from Eritrea, Sudan, Somalia and other countries. Their point of entry is Italy–specifically, the small Italian island of Lampedusa, which lies in the Mediterranean midway between Libya and Sicily.
In 2009, Qaddafi and Berlusconi made an agreement that became part of an open and often vicious campaign against migrants: Libya would try to keep them from leaving in the first place; if they got out, Italy would send them back to Libya without providing them a chance to make asylum claims.
In Libya, it appears that Saif al-Islam Gaddafi got his answer to the ultimatum delivered last night. He warned of a bloody reprisal by the regime if protestors did not cease. Now that the rebels have called Gaddafi’s bluff, he has to wonder whether the “five million” in his military will respond to his call, or join the protestors in ridding themselves of Libya’s petty dynasty.
Speaking of which, where is Col. Moammar? If he was still in Libya, wouldn’t he be the man to put on television and rally the army to the regime?
While events are murky at best, it seems unlikely that Gaddafi’s regime can survive. What will follow it is, at this point, anyone’s guess.
That sets up an interesting comparison. The United States supported Mubarak’s government in Egypt for several decades, militarily and otherwise. Now, the frequently anti-American tone of Egypt’s rebels is often attributed to that support. Many commentators argue that the U.S.’s support of Mubarak was short-sighted, and that it will be our own fault if the government that ultimately emerges in Cairo is anti-American.
Perhaps so. But if that theory is correct, shouldn’t we see a different result right next door, in Libya? The U.S. has never supported Gaddafi; on the contrary, we tried to assassinate him at least once. So does that increase the likelihood that the rebels who detest Gaddafi will be friendly to America when some combination of them take power? On its face, that makes sense; one can draw an analogy to Eastern Europe, where the governments that took power upon the collapse of the Soviet Union were almost uniformly pro-American.
Will the same thing happen in Libya? I don’t know; but history seems to be setting up a laboratory experiment in north Africa.
In Sayf-Al-Islam’s rambling speech last night on Libyan State television, he blamed the current unpleasantness in his country on, as near as I can determine, crazed African LSD addicts.
This isn’t going down as well as Sayf had intended, and Libya seems less stable than 24 hours earlier. Indeed, Sayf’s off-the-cuff remarks managed to make Hosni Mubarak’s three speeches seem like a model of professionalism, which I would not have thought was possible a week ago.
Indeed, it is striking how utterly incompetent leaders in Tunisia, Egypt, and Libya have been at managing their media message. Speeches are announced, then never delivered on time, and then delivered with production values that woulds embarrass a public access channel in the U.S. It’s like political leaders in the region have discovered blogs just as the young people has moved on to Twitter or something. [Er, no, that’s the United States–ed.] Oh, right.
Having just finished a week of intense media whoring, methinks that one problem is that most of these leaders have simply fallen out of practice (if they were ever in practice) at personally using the media to assuage discontent. I’ve been on enough shows on enough different media platforms to appreciate that there is an art, or at least a tradecraft, to presenting a convincing message in the mediasphere. Authoritarian leaders in the Middle East are quite adept at playing internal factions off one another. That’s a different skill set than trying to craft a coherent and compelling media message to calm street protestors no longer intimidated by internal security forces.
It looks to me as if this is all but over. Ambassadors abroad are resigning right and left. There are no signs of the regime’s authority in the capital, except a few pockets of troops loyal to Qaddafi. Amazing. Look at the map. From Tunisia through Libya to Egypt and Bahrain, regime change has come from below in just a few weeks. Now wonder the King of Jordan is getting a little jumpy.
Can you imagine the mood among the Saudi dictators right now?
If you happened to be watching NBC on the first Sunday morning in August last summer, you would have seen something curious. There, on the set of Meet the Press, the host, David Gregory, was interviewing a guest who made a forceful case that the U.S. economy had become “very distorted.” In the wake of the recession, this guest explained, high-income individuals, large banks, and major corporations had experienced a “significant recovery”; the rest of the economy, by contrast—including small businesses and “a very significant amount of the labor force”—was stuck and still struggling. What we were seeing, he argued, was not a single economy at all, but rather “fundamentally two separate types of economy,” increasingly distinct and divergent.
This diagnosis, though alarming, was hardly unique: drawing attention to the divide between the wealthy and everyone else has long been standard fare on the left. (The idea of “two Americas” was a central theme of John Edwards’s 2004 and 2008 presidential runs.) What made the argument striking in this instance was that it was being offered by none other than the former five-term Federal Reserve Chairman Alan Greenspan: iconic libertarian, preeminent defender of the free market, and (at least until recently) the nation’s foremost devotee of Ayn Rand. When the high priest of capitalism himself is declaring the growth in economic inequality a national crisis, something has gone very, very wrong.
This widening gap between the rich and non-rich has been evident for years. In a 2005 report to investors, for instance, three analysts at Citigroup advised that “the World is dividing into two blocs—the Plutonomy and the rest”:
In a plutonomy there is no such animal as “the U.S. consumer” or “the UK consumer”, or indeed the “Russian consumer”. There are rich consumers, few in number, but disproportionate in the gigantic slice of income and consumption they take. There are the rest, the “non-rich”, the multitudinous many, but only accounting for surprisingly small bites of the national pie.
Before the recession, it was relatively easy to ignore this concentration of wealth among an elite few. The wondrous inventions of the modern economy—Google, Amazon, the iPhone—broadly improved the lives of middle-class consumers, even as they made a tiny subset of entrepreneurs hugely wealthy. And the less-wondrous inventions—particularly the explosion of subprime credit—helped mask the rise of income inequality for many of those whose earnings were stagnant.
But the financial crisis and its long, dismal aftermath have changed all that. A multibillion-dollar bailout and Wall Street’s swift, subsequent reinstatement of gargantuan bonuses have inspired a narrative of parasitic bankers and other elites rigging the game for their own benefit. And this, in turn, has led to wider—and not unreasonable—fears that we are living in not merely a plutonomy, but a plutocracy, in which the rich display outsize political influence, narrowly self-interested motives, and a casual indifference to anyone outside their own rarefied economic bubble.
Through my work as a business journalist, I’ve spent the better part of the past decade shadowing the new super-rich: attending the same exclusive conferences in Europe; conducting interviews over cappuccinos on Martha’s Vineyard or in Silicon Valley meeting rooms; observing high-powered dinner parties in Manhattan. Some of what I’ve learned is entirely predictable: the rich are, as F. Scott Fitzgerald famously noted, different from you and me.
What is more relevant to our times, though, is that the rich of today are also different from the rich of yesterday. Our light-speed, globally connected economy has led to the rise of a new super-elite that consists, to a notable degree, of first- and second-generation wealth. Its members are hardworking, highly educated, jet-setting meritocrats who feel they are the deserving winners of a tough, worldwide economic competition—and many of them, as a result, have an ambivalent attitude toward those of us who didn’t succeed so spectacularly. Perhaps most noteworthy, they are becoming a transglobal community of peers who have more in common with one another than with their countrymen back home. Whether they maintain primary residences in New York or Hong Kong, Moscow or Mumbai, today’s super-rich are increasingly a nation unto themselves.
The super rich, she writes, “are becoming a transglobal community of peers who have more in common with one another than with their countrymen back home.” Thus the fury of the financial elite at the suggestion that perhaps they were responsible for the crash of 2008 or that they owe it to the rest of the country to do anything about it:
When I asked one of Wall Street’s most successful investment-bank CEOs if he felt guilty for his firm’s role in creating the financial crisis, he told me with evident sincerity that he did not. The real culprit, he explained, was his feckless cousin, who owned three cars and a home he could not afford.
….A Wall Street investor who is a passionate Democrat recounted to me his bitter exchange with a Democratic leader in Congress who is involved in the tax-reform effort. “Screw you,” he told the lawmaker. “Even if you change the legislation, the government won’t get a single penny more from me in taxes. I’ll put my money into my foundation and spend it on good causes. My money isn’t going to be wasted in your deficit sinkhole.”
I don’t know if this attitude is truly new. Maybe not as much as Freeland suggests. Still, it certainly feels as if America is dominated more and more by an elite class that cares less and less about the public good because they don’t really feel like they have a stake in the public good anymore: they’ve never served in the Army or the Peace Corps, their kids never come within yelling distance of public schools, they donate their money exclusively to their own churches and their own global foundations, and they whine constantly about taxes even though their incomes have skyrocketed and tax rates have fallen dramatically over the past several decades. To them, taxes aren’t part of a social contract, they’re just pure welfare: they don’t care about education or infrastructure or unemployment or healthcare because they don’t have to. Within their own bubble, they don’t need to rely on the public versions of any of that stuff.
The whole thing is very good, though I have a small quibble with this passage:
What is more relevant to our times, though, is that the rich of today are also different from the rich of yesterday. Our light-speed, globally connected economy has led to the rise of a new super-elite that consists, to a notable degree, of first- and second-generation wealth. Its members are hardworking, highly educated, jet-setting meritocrats who feel they are the deserving winners of a tough, worldwide economic competition — and many of them, as a result, have an ambivalent attitude toward those of us who didn’t succeed so spectacularly.
If “ambivalent” is code for disdain — passive or otherwise — then these nouveau riche aren’t so different from their predecessors; with few historical exceptions, the rich have always been ambivalent about the poor and less fortunate. Indeed, I wouldn’t be shocked if the presence of “meritocracy” (as if these people have no prior advantages) intensified feelings of disdain. After all, if you can succeed, why can’t these people (and as a corollary, “what right do they have to my wealth”)?
To be fair, disdain for the less fortunate is completely understandable as a response to visible disparities. On some level, we all know that our position is an accident of birth. For a lot of people, a sense of class superiority is a necessary part of the illusion that they are “deserving” of their good fortune.
It’s not that these people are utterly bereft of noblesse oblige: Chrystia points out that “in this age of elites who delight in such phrases as outside the box and killer app, arguably the most coveted status symbol isn’t a yacht, a racehorse, or a knighthood; it’s a philanthropic foundation.” But those philanthropies don’t benefit the left-behind middle classes: they tend to follow a barbell distribution, with the money going either to the world’s poorest or else to well-endowed universities and cultural institutions. The US middle class is sneered at for being fat and lazy and unworthy of their wealth:
The U.S.-based CEO of one of the world’s largest hedge funds told me that his firm’s investment committee often discusses the question of who wins and who loses in today’s economy. In a recent internal debate, he said, one of his senior colleagues had argued that the hollowing-out of the American middle class didn’t really matter. “His point was that if the transformation of the world economy lifts four people in China and India out of poverty and into the middle class, and meanwhile means one American drops out of the middle class, that’s not such a bad trade,” the CEO recalled.
I heard a similar sentiment from the Taiwanese-born, 30-something CFO of a U.S. Internet company. A gentle, unpretentious man who went from public school to Harvard, he’s nonetheless not terribly sympathetic to the complaints of the American middle class. “We demand a higher paycheck than the rest of the world,” he told me. “So if you’re going to demand 10 times the paycheck, you need to deliver 10 times the value. It sounds harsh, but maybe people in the middle class need to decide to take a pay cut.”
This mindset is dangerous, but it’s not clear how dangerous it is.
The real threat facing the super-elite, at home and abroad, isn’t modestly higher taxes, but rather the possibility that inchoate public rage could cohere into a more concrete populist agenda—that, for instance, middle-class Americans could conclude that the world economy isn’t working for them and decide that protectionism or truly punitive taxation is preferable to incremental measures such as the eventual repeal of the upper-bracket Bush tax cuts.
Mohamed El-Erian, the Pimco CEO, is a model member of the super-elite. But he is also a man whose father grew up in rural Egypt, and he has studied nations where the gaps between the rich and the poor have had violent resolutions. “For successful people to say the challenges faced by the lower end of the income distribution aren’t relevant to them is shortsighted,” he told me. Noting that “global labor and capital are doing better than their strictly national counterparts” in most Western industrialized nations, ElErian added, “I think this will lead to increasingly inward-looking social and political conditions. I worry that we risk ending up with very insular policies that will not do well in a global world. One of the big surprises of 2010 is that the protectionist dog didn’t bark. But that will come under pressure.”
If this is true, then the members of the super-elite should be falling over each other to pay more in taxes out of simple enlightened self-interest—rather than saying that a perfectly sensible tax hike is “like when Hitler invaded Poland in 1939.”
But it seems to me that the inchoate anger of the masses shows no sign of cohering into anything at all, let alone protectionism, which seems to have been dying a slow death ever since the protests against Nafta. The Tea Party, which is the closest thing we have to a populist revolt, is bought and paid for by plutocrats and shows no protectionist tendencies whatsoever. If they keep on going on their present trajectory, they’re just as likely to continue unimpeded as they are to run into some kind of atavistic class warfare.
So I’m unconvinced that the plutocrats have any real incentive to restrain themselves, or to stop moaning around an Upper East Side dinner table that $20 million a year isn’t all that much—it’s really only $10 million a year, after taxes.
Ms Freeland expresses the hope towards the end of her article that the global super-rich will at some point realise that in the long run, by refusing to pay the taxes that are needed to maintain the infrastructure of the countries they operate in or to educate the workers they expect to staff their businesses, they are courting a disastrous political reaction: protectionism, confiscatory taxes, or something worse and more violent. I’m not entirely sure the super-rich need fear such a reaction. Back in mid-2009, Barack Obama told the assembled plutocrats of Wall Street that they ought to be more grateful to him; he was “the only thing standing between you and the pitchforks.” The plutocrats smiled, and departed by helicopter. To the extent any pitchforks have been seen, they were applied to the Democrats’ behinds last November. Perhaps, rather than attempting to stand between Wall Street and any hypothetical pitchforks, Mr Obama should have gotten out of the way.
The other day I was on a Singapore Airlines flight in which every video feature on the inflight entertainment system was preceded by an advertisement for condominiums in a luxury beachfront apartment/shopping development with three canted, burnished-steel towers supporting a huge steel lintel with an artificial park on top, trees, lake, and all, 200+ metres up. It looked like the spoiler of some gigantic Formula 1 racecar. As the ad played, a chyron across the bottom of the screen repeated something along the following lines: “Republic of Singapore, zero capital gains tax, zero wealth tax, zero inheritance tax…” ad nauseum. I sort of think this is the world the super-wealthy are operating in, one in which every threat made by some puny government can be flicked away by the threat of moving to Singapore or some other principality slavishly devoted to wealth. Though given that I was watching this ad in economy class, it’s probably just some pathetic low-rent imitation of the real thing, which is in fact beyond the imagination of mere wage-earners like me. There’s a Victor Pelevin short story along these lines, in which a Russian neuro-physicist discovers that the possession of a certain quantity of dollars propels people’s consciousnesses into an alternative dimension; to all outward appearances such oligarchs seem to still function in our reality, but in fact they are experiencing a universe invisible and completely alien to us mortals. State security authorities promptly hook up a couple of money-nauts to a psychic imaging machine developed by the KGB and transfer billions of dollars to their accounts. It turns out that the universe, as they experience it, looks like a long corridor, lit with a faintly greenish light, with something unidentifiable just around the corner. It’s a strangely haunting, off-kilter story. As Ms Freeland says, the Russians always seem to be sharper at expressing these kinds of things.
It’s always a little amusing (and, to me, still a bit stunning) to read about the really rich and how rich they are and what that level of really richness allows the really rich to do. But the interesting policy questions continue to be, first, what are the sources of the wealth and, second, what distortions result from it. On the first, it seems to me that we should obviously think differently about money earned from superstar effects and money derived from access and rent-seeking. Rich growth wealthy from the invention of Google or bets against an unsustainable housing bubble are in a different category from those who happened to know the people doling out government contracts or mineral rights.
But the second issue is actually the more important, and it’s the one for which we currently lack a firm grasp. What does this concentration of wealth mean? We read Ms Freeland and other similar stories, and it’s clear that the rich have strong opinions. And they channel their vast resources in support of their opinions, and they build institutions and hobnob with policymakers and opinionmakers and rotate through administrations, and one eventually asks: is the mass of non-rich people being hoodwinked? Are the elite systematically bending the rules to favour themselves and undermine a modern society based on broad improvements in living standards?
Well, are they? I don’t know. Part of the problem assessing the impact of the shadowy world of global billionaires on public policy is that it’s so shadowy. It does seem like the circuit of elite elbow-rubbing events is designed, in part, to help align the worldview of politicians and journalists with that of the very rich. And if that’s the main route through which the elite wield influence, then we could be in trouble, given the extent to which the media world’s economic troubles are pushing it toward models based on support from moneyed patrons.
Fifteen years ago Samuel Huntington coined the term “Davos Man” to describe the kind of globalized elite that jetted off from global conference to global conference. His point was that Davos man was an exceedingly rare bird, and that nationalism, religion, language and culture were still the most potent forces binding groups together in the world.
It’s in this context that I read Chrystia Freeland’s new cover story in The Atlantic. It’s well worth the read, but like Kevin Drum, I’m not sure that the phenomenon Freeland is identifying is all that new.
Furthermore, I’m not entirely convinced they’re as powerful as Freeland or Drum or Felix Salmon suggests. As Freeland pointed out, they fought a lot of the Obama administration’s first-half policies tooth and nail — and they actually lost a fair amount of the time. Indeed, nary a year ago some pundits were declaring the death of Davos man.
That said, there are three trends that are worth further consideration. First, as Freeland observes, the rich are now work much harder than they did a century ago. Second, more and more of the rich are coming from outside the OECD economies.
Third, the rich have attracted a lot of intellectual capital into their web. Indeed, the call for an economist code of ethics is based in no small part on the ways in which successful economists score moneymaking gigs as they move up the career ladder.
Again, I’m not sure if Freeland is right. I am sure that it’s an interesting argument however. So, in the interest of further research your humble middle-class blogger is headed off tonight to investigate the beliefs and activities of the super-rich from much closer than normal.
As the Korean peninsula enters what U.S. Secretary of Defense Robert Gates calls “a difficult and potentially dangerous time,” the long-dormant Korean conflict is rumbling back into the public consciousness. Government officials from the U.S., South Korea, Japan, the Philippines, and other states throughout the region are planning for the worst-case scenario: renewed war, perhaps nuclear, and a massive exodus from South Korea. If tensions continue to escalate, hundreds of thousands of foreign civilians living in South Korea will flee, sparking one the biggest mass-evacuations since the British and French pulled 338,000 troops out of Dunkirk in 1940.
Even under the best conditions, a mass evacuation is no easy task. In July 2006, as a battle brewed between Israel and Lebanon-based Hezbollah militants, the U.S. took nearly a month to evacuate 15,000 Americans. According to the Government Accountability Office, “nearly every aspect of State’s preparations for evacuation was overwhelmed”, by the challenge of running an evacuation under low-threat conditions in a balmy Mediterranean summer.
Evacuating a Korean war-zone would be far harder. And the U.S. would likely have no choice but to ask China for help.
If North Korea launches another artillery strike against South Korea–or simply hurls itself at the 38th parallel–the resulting confrontation could trigger one of the largest population movements in human history. According to one account, 140,000 U.S. government noncombatants and American citizens would look to the U.S. government for a way out. And that’s just the Americans. Hundreds of thousands of South Korean citizens and other foreign nationals would be clamoring for any way off of the wintery, dangerous peninsula.
In the absolute worst case, tens of millions of South Koreans and hundreds of thousands of foreigners, some wounded, some suffering from chemical, biological or even radiological hazards, will flee in the only direction available to them: south. The country’s transportation system would be in nationwide gridlock as panicked civilians avail themselves of any accessible means of travel. In this desperation and chaos, the U.S. military has the unenviable mission of supporting and evacuating U.S. citizens, all while waging a fierce battle along the DMZ.
South Korea has started to defend itself again against the North. It’s about time. For too long South Korea has been lax about the threat it faces.
It’s refusal to back down in the face of the North’s bluster about a calamitous attack should it proceed with a military drill on Yeonpyeong island, part of an area that the North claims as its sphere, was a promising sign. South Korean president Lee Myung-bak entered office with the claim that he would toughen up policy towards the North. He didn’t. The result was that the North kept hitting the South with impunity, whether it was attacking the South’s sea vessels or the island. Further tests are surely in the offing.
The North, however, is dependent on China and may not be as mercurial as it’s often depicted. The blunt fact is that it backed down from its dire threats against the South. The military drill went as it was supposed to. The North’s bluff was called.
Maybe former New Mexico Gov. Bill Richardson had a hand as well in getting the North to stay its itchy trigger finger. Richardson, a maverick operator if there ever was one, likes to hold powwows with the world’s dictators, a trait he shares with former president Jimmy Carter. But Richardson often seems to get results, in contrast to Carter. Richardson is asserting that the North is offering some concessions on its nuclear program.
Overblown threats and North Korea go together like Kim Jong-il and Japanese pornography. But if South Korea goes forward with a live-fire drilling exercise — something that could happen as early as today — Pyongyang is threatening to reignite war on the Korean peninsula. Only it doesn’t look like it’s actually mobilizing for a sustained attack.
All eyes return to Yeonpyeong island, a South Korean island just south of the maritime armistice line that the North attacked in November. A few miles from the west coast of the Korean Peninsula in the Yellow Sea, it’s where South Korea’s military insists it’ll shoot off its K-9 howitzers, 81-mm mortars and 105-mm and Vulcan Gatling artillery guns. The target is an area southwest of the island — that is, away from North Korea. A contingent of about 20 U.S. troops will be on-site, ostensibly to provide medical backup, intel and communications support.
Their real presence probably has more to do with dissuading North Korea from attacking the South in response. Its official news agency put out a statement from military leaders that it will launch an “unpredictable self-defensive blow” if the drill proceeds. North Korea shelled the island last month after a previous exercise, killing two South Korean marines and another two civilians. This time, Pyongyang vows, its response will be “deadlier… in terms of the powerfulness and sphere of the strike.”
Civilians fled Yeonpyeong on Sunday. But North Korea didn’t look like it was preparing to back up the retaliation talk. The Wall Street Journal reports that military surveillance of the North showed “no signs of unusual troop movement or war preparations,” and the bellicose rhetoric didn’t come from Kim’s offices directly. Reuters reports that North Korean artillery units are on elevated alert, but that appears to be the extent of any buildup.
An ominous showdown between North and South Korea was forestalled Monday after the North withheld military retaliation for South Korea’s live-fire artillery drills on an island that the North shelled last month after similar drills.
The North claims the island and its surrounding waters and had threatened “brutal consequences beyond imagination” if the drills went forward. But the North’s official news agency issued a statement Monday night saying it was “not worth reacting” to the exercise, and a statement from the North’s military said, “The world should properly know who is the true champion of peace and who is the real provocateur of a war.”
The apparent pullback created a palpable feeling of relief in South Korea, where many people had been bracing for a showdown.
So now North Korea also wants to restart the Six-Party Talks? What just happened? As always, trying to explain North Korean behavior is a challenging task. Here are some possible explanations:
1) North Korea finally got caught bluffing. True, they have the least to lose from the ratcheting up of tensions, but that doesn’t mean they have nothing to lose from a military escalation with the ROK. The past month of tensions got everyone’s attention, and North Korea is only happy when everyone else is paying attention to them.
2) Kim Jong Un was busy. One of the stronger explanations for the DPRK’s last round of provocations was that this was an attempt to bolster Kim the Younger’s military bona fides before the transition. Reading up on what little is out there, it wouldn’t shock me if he planned all of this and then postponed any retaliation because he’d organized a Wii Bowling tournament among his entourage.
Somewhat more seriously, it’s possible that there are domestic divisions between the military, the Foreign Ministry, and the Workers Party, and that the latter two groups vetoed further escalation.
3) China put the screws on North Korea. For all the talk about juche, North Korea needs external aid to function, and over the past year all the aid lifelines have started to dry up — except for Beijing. As much as the North Koreans might resent this relationship — and they do — if Beijing leaned hard on Pyongyang,
4) North Korea gave the ROK government the domestic victory it needed. Bear with me for a second. The shelling incident has resulted in a sea change in South Korean public opinion, to the point where Lee Myung-bak was catching hell for not responding more aggressively to the initial provocation. This is a complete 180 from how the ROK public reacted to the Cheonan incident, in which Lee caught hell for responding too aggressively.
Lee clearly felt domestic pressure to do something. Maybe, just maybe, the North Korean leadership realized this fact, and believed that not acting now would give Lee the domestic victory he needed to walk back his own brinksmanship.
5) Overnight, the DPRK military hired the New York Giants coaching staff to contain South Korean provocations. Let’s see… a dazzling series of perceived propaganda victories, followed by the pervasive sense that they held all the cards in this latest contretemps. Then an inexplicable decision not to do anything aggressive at the last minute, after which containment policies fail miserably. Hmmm… you have to admit, this MO sounds awfully familiar.
If I had to make a semi-informed guess — and it’s just that – I’d wager a combination of (1) and (4).
There is a danger in this business. If you don’t mark your beliefs to market occasionally, and throw out worthless intellectual trash, you ossify–you become one of those demented old coots detached from reality ranting unintelligibly at the moon.
[…]
So what major analytical mistakes–errors of either theoretical analysis, of empirical description of reality, or of applying theory to reality–have I made in the past decade?
I can think of three offhand to start the ball rolling. I erred:
In my belief that central banks had the tools, the skill, and the political will to stabilize economies at high levels of employment and low levels of inflation, and thus that fiscal policy and financial institutions policy no longer had any compelling stabilization policy role to play.
In my belief that large, leveraged financial institutions had sufficient caution and sufficient control over their derivatives books that their derivative positions did not pose major systemic risk.
In my belief that the principal threat to the world economy would come from the fact that in a crisis the shaky long-term finances of the U.S. social insurance state might provoke a collapse of confidence in the long-term value of the dollar.
These were three biggies. But surely there were others. What were they?
I shared in one and two, though not three. I’m starting to believe in #3 however.
(That said, I would word #1 differently; for instance, I have long believed in automatic stabilizers and still do and I remain more skeptical of “ramp-up” spending than Brad. I would phrase #2 to focus on the balance sheet more generally and not derivatives per se.)
I also take the data on slow median income growth more seriously than I used to. I no longer think those numbers are a mere statistical artifact.
What can you all cite as changed beliefs? Examples like “Person X or Policy X turned out to be even worse than I had thought” do not count.
It’s a Friday in August, with nothing to report but the dismal GDP figures we were all expecting. So I’ll start with the Iraq War:
1) I erroneously believed that I could interpret the actions of Saddam Hussein. He seemed to be acting like I’d act if I had WMD. Whoops! I wasn’t an Iraqi dictator, which left huge gaps in my mental model of Hussein.
2) I erroneously extrapolated the experience of World War II to Iraq. This took several forms:
a) I overlooked the fact that Japan and Germany were both stable bourgeois nations with solid industrial bases long before we got into the act.
b) I overlooked the fact that we completely destroyed this nations before occupying and reconstructing them.
3) I was insufficiently empathetic in imagining how Iraqis would feel about our invasion. We liked the French for giving us military help during the Revolution. Now imagine that France had invaded in order to liberate us from the British. Even if they really did eventually leave, this would have had much worse results. Looking back, my confidence in our liberatory powers seems terribly callous, and it doesn’t really do the dead Iraqis much good that I’m sorry for it.
These things led me to underestimate the time and expense of the war (both fiscal and in human lives), and underestimate the benefits. Maybe history will vindicate the invasion, but I can’t say this seems likely.
Onto the financial crisis, where my erroneous beliefs are probably pretty typical:
1) I recognized the housing bubble pretty early (the first mention I can find on my old blog is in 2002)–but I had no idea it would have these kinds of broad, devastating effects. If you had asked me in 2006 what would happen as a result, I would have pictured
a) a wealth-effect lead recession, as consumers realized they weren’t as rich as they thought
b) a decline in the construction industry
c) some bank failures.
I would not have pictured wholesale runs on the money markets, the collapse of the shadow banking system, and 10+% unemployment.
2) I believed in the “Great Moderation”. That is, I believed that the Fed and prudent fiscal policy had, to a large extent, tamed the business cycle. I did not believe that there was even a small risk of another Great Depression; I believed that the Fed could and would prevent the contagion from spreading. Arguably they (and the Treasury) did, but I did not imagine anything close to that level of intervention being necessary.
3) I believed regulators were smarter than they were. In 2004, when the SEC decided to let the investment banks lever up to 30-to-1 instead of 12-to-1, because after all, the SEC had the tools to quickly identify and stop any contagion, I would have said they were probably right. (I’m not sure I was aware of it).
4) I believed bankers were smarter than they were. Or rather, I believed the system was smarter than it was. Individual bankers making idiotic mistakes? Absolutely. The occasional bank being brought low? Sure–it happens pretty regularly, in fact. But the whole banking system taking its entire balance sheet to the roulette table and laying it all down on a single bet? Ridiculous.
5) I expected any crisis to come from America’s gaping current account balances and its long-term entitlement problems. Again, arguably this was true, if you believe the “Global Savings Glut” theory (I’m inclined to). But I expected the problems to come via a currency crisis, not a global meltdown touched off by crappy US mortgage bonds.
6) I believed that over reasonably long time-frames, modest investments in equities would allow you to retire in comfort.
7) I believed that securitization mitigated risk by spreading it around, rather than enhancing risk by reducing transparency.
8) As a corollary, I believed that on the whole, Fannie/Freddie were harmless–not a libertarian ideal, of course, but hardly the worst thing the US government was doing. I still don’t think they were the worst thing the US government was doing, but I think that their distortions of the market were toxic, and have been especially so in the wake of the crisis*.
9) I believed we knew a lot more about the Great Depression, and how to fix such a thing, then we turned out to. I don’t think we know much at all about the various roles of fiscal and monetary policy; I think the only lessons we know for certain are “don’t peg your currency”, and “don’t let the banking system collapse”.
10) I underestimated the danger that new financial instruments pose to a system in which neither the bankers nor the regulators understand their unexpected effects.
Random policy things I was wrong about:
1) The bankruptcy reform reduced bankruptcies more, and for longer, than I expected. Still don’t think it was on net good policy, but about this empirical effect Todd Zywicki was right, and I was wrong.
3) I was too optimistic about Doha; I no longer expect any serious trade liberalization for at least the next decade, maybe more.
On the political side:
1) I would never have imagined the 21st century United States Government effectively nationalizing an automaker and an insurance company.
2) I was astonished that Democrats managed to hold their coalition together to pass an incredibly unpopular policy in the odd belief that it would somehow get more popular later. (Oops)
3) I would never have predicted the emergence of the Tea Parties as an important phenomenon.
1. My way of thinking about the price/rent ratio for housing (see this post from 2003) caused me to think in terms of values that might be reasonable, not historical norms. When the price/rent ratio went above historical norms, I did not consider this in and of itself as an alarming sign. If I had, I would have started worrying much sooner and much more about high house prices.
Until very late in the game, I thought that the biggest threat to the housing market was an increase in the real interest rate, as opposed to a purely internal bubble/collapse.
2. I was sure that the stress tests used by Freddie and Fannie and the capital regulations at bank were sufficient to keep those institutions from taking on excessive credit risk. I thought that the sub-prime crisis would only cause newer, peripheral institutions to go bankrupt.
Incidentally, the Report released yesterday by the regulator overseeing Freddie Mac and Fannie Mae was very disappointing to me in that it says nothing about stress tests. What I would like to know is this: as of December, 2007, how much capital should Freddie and Fannie have been holding in order to conform to the regulatory stress test requirements? Did they have enough? Too little? More than enough? Then, subsequently, how bad was the housing price outcome relative to the stress tests? And what do the stress tests say now?
I strongly suspect that the actual house price outcome was not dramatically worse than what is used in the stress testing methodology. Instead, I suspect that Freddie and Fannie were way under-capitalized all along based on the stress tests, and that the regulator was not aggressive in dealing with the problem. My guess is that the regulator is not terribly eager to bring this to our attention.
3. I thought that the economy had become less susceptible to cyclical downturns. In April of 2003, I wrote The Elastic Economy, which argued that “the private sector has become more chaotic but more robust.” Read the whole thing. I also believed that inventory corrections would be less of a problem, for two reasons. First, the share of GDP represented by automobiles and other durable goods is much lower. Second, computer systems have made inventory management less mistake-prone.
4. I’ll talk about derivatives, not because I was wrong but because Brad and Tyler bring them up. From the late 1990’s until 2008, I was not interested in financial markets, so derivatives were off my radar screen. Back in 1986, the Fed published a book-length staff study on “Financial Futures and Options in the Economy,” and I wrote a chapter called “Futures Markets and Transaction Costs.” My view was that derivatives markets on organized exchanges serve to reduce transaction costs. Then and now, my thinking tended to downplay the role of derivatives as hedging and risk-management tools. So I would probably not have drunk the Kool-Aid that said that these were making financial markets more able to handle risk.
Back in the 1980’s, I got the sense that a lot of financial executives who played around with derivatives had insufficient understanding of option-pricing models. (You should have seen some of the S&Ls that bought “CMO residuals” for yield back in the 1980’s. I had not yet coined the term “suits vs. geeks divide,” but the phenomenon certainly existed.) So the fact that some companies blew up because of derivatives is not a shock to me. And I don’t think that regulated exchanges are the answer. Google for “Arnold Kling credit default swaps exchange” to see why.
I first heard about credit derivatives when my former Freddie Mac colleague Frank Vetrano mentioned them during a break at one of our fantasy baseball auctions one year at Dave Andrukonis’ house. This was some time around 1999 or 2000, after I had left Freddie, and I did not think that credit derivatives made much sense or would amount to anything. Judging by subsequent market volume, I was clearly wrong in thinking they would not amount to anything. As to whether they make sense, I think one could say that is still an open issue.
5. I would say that I have become less of a Keynesian since the crisis took place. Before the crisis, I would have stuck up for Keynesian macro, with the proviso in (3) that I would have thought that Keynesian demand policies would be needed less going forward. I was always a skeptic on monetary policy, and I continue to have a lot of skepticism. But I developed the whole Recalculation Story and related ideas as kind of a delayed, semi-subliminal response to a Tyler Cowen blog post as well as thinking about various empirical phenomena, such as the JOLTS data. However, whether I was most wrong in believing in Keynesian economics before or whether I am most wrong now in believing the Recalculation Story is certainly an open issue.
Looking back on my eighth (!!) year of blogging, here are the big things I think I got wrong over the past year:
1) The Green Movement did not cause Iran’s regime to crack up. Score one for the Leveretts — Iran’s regime has effectively silenced the Green movement, without any visible internal cost. Indeed, the regime now seems entrenched enough so that the fundamentalists and conservatives can now ignore reformists and start turning on each other. I confess, I though the Ashura protests marked an inflection point on Iran. Nope. The regime has suffered some serious costs from its internal repression, but Khamenei ain’t going anywhere anytime soon.
2) Iceland was willing to pay the price of financial isolation. I knew that Icelanders were outraged at the notion that they had to help bail out Icesave depositors in England and the Netherlands. I also thought, however, that when the question was put to a referendum, Icelanders would pause for a moment and consider the ramifications of financial isolation. Um… whoops.
3) The G-20 was been far less useful than I anticipated. A year ago at this juncture I was pretty pessimistic about the prospects of G-20 macroeconomic policy coordination. I was hopeful, however, that the G-20 could function effectively as a mechanism to pressure China into revaluing the yuan.
And… things are worse on both fronts than I anticipated. At Toronto, the G-20 encouraged contractionary fiscal policies way too early, helping to push the global economy into double3-dip territory. On the yuan, China has niminally pledged to let the yuan float, but acual movement has been pretty meager.
Being someone who understands progressives, Mr. Yglesias makes the case for deregulation in terms likely to appeal to his colleagues on the left. What would be nice is if more people on the right could be similarly persuasive. Of course, capitalizing on common ground or winning converts on individual issues requires an accurate understanding of what motivates people with different ideologies, so it isn’t surprising that a Yglesias fan invoked Cato in that Tweet. It’s a place where several staffers are daily deepening our understanding of where liberals and libertarians can work together.
I’m glad Conor recognizes the value of the work some of us at Cato have been doing to make productive liberal-libertarian dialogue and collaboration possible. Alas, all good things must come to an end.
Brink Lindsey Joins Kauffman Foundation as Senior Scholar
Economic researcher and author to contribute to Kauffman’s growing body of work on firm formation and economic growth
KANSAS CITY, Mo., Aug. 23, 2010 – The Ewing Marion Kauffman Foundation today announced that Brink Lindsey has joined the Foundation as a senior scholar in research and policy. Lindsey will use his expertise in international trade, immigration, globalization and economic development to identify the structural reforms needed to revive entrepreneurial innovation, firm formation and job creation in the wake of the Great Recession.
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As for me, my official last day at Cato is September 15. Expect more blogging and sketches.
The libertarian Cato Institute is parting with two of its most prominent scholars. Brink Lindsey, the institute’s vice president of research and the author of the successful book The Age of Abundance, is departing to take a position at the Kauffman Foundation. Will Wilkinson, a Cato scholar, collaborator with Lindsey, and editor of the online Cato Unbound, is leaving on September 15; he just began blogging politics for the Economist.
I asked for comment on this and was told that the institute does not typically comment on personnel matters. But you have to struggle not to see a political context to this. Lindsey and Wilkinson are among the Cato scholars who most often find common cause with liberals. In 2006, after the GOP lost Congress, Lindsey coined the term “Liberaltarians” to suggest that Libertarians and liberals could work together outside of the conservative movement. Shortly after this, he launched a dinner series where liberals and Libertarians met to discuss big ideas. (Disclosure: I attended some of these dinners.) In 2009 and 2010, as the libertarian movement moved back into the right’s fold, Lindsey remained iconoclastic—just last month he penned a rare, biting criticism of The Battle, a book by AEI President Arthur Brooks which argues that economic theory is at the center of a new American culture war.
Did any of this play a role in the departure of Lindsey and Wilkinson? I’ve asked Lindsey and Wilkinson, and Wilkinson has declined to talk about it, which makes perfect sense. But I’m noticing Libertarians on Twitter starting to deride this move and intimate that Cato is enforcing a sort of orthodoxy. (The title of Wilkinson’s kiss-off post, “The Liberaltarian Diaspora,” certainly hints at something.)
There are two big problems with Weigel’s insinuation. First, Cato has not changed or even deemphasized any of its positions on those issues where they have long differed with conservatives including the war on drugs, immigration, foreign policy, and others. If they were trying to move “back into the right’s fold,” one would think they would pulled back on these positions at least to some noticeable extent. Yet a quick glance at Cato’s website reveals recent attacks on standard conservative policies on Afghanistan, and the “Ground Zero mosque,” among other issues.
Second, it is strange to claim that Cato got rid of Lindsey for promoting a political alliance with the left at the very time when Lindsey himself recently disavowed that very idea, stating that “it’s clear enough that for now and the foreseeable future, the left is no more viable a home for libertarians than is the right.” If Cato objected to Lindsey’s advocacy of an alliance with the left, one would think they would have purged him back when he was actually advocating it, not after he has repudiated it. Wilkinson does still favor liberaltarianism, but apparently only as a philosophical dialogue. He holds out little if any prospect of an actual political coalition between the two groups.
Both Lindsey and Wilkinson have done much important and valuable work, and Cato is the poorer for losing them. At this point, however, there is no evidence that their departure was caused by a “purge” of liberaltarians intended to bring Cato “back into the right’s fold.”
CONFLICT OF INTEREST WATCH: I am a Cato adjunct scholar (an unpaid position). However, I am not an employee of Cato’s, and have no role in any Cato personnel decisions. In this particular case, I didn’t even know it was going to happen until it became public.
I won’t speculate on what’s going on at Cato. But, as much as I respect Brink Lindsey, both he and Wilkinson often expressed contempt for conservatism andconservative libertarians — Cato’s base, as it were — that probably didn’t help their causes. In Lindsey’s case, it was tempered by a kind of anthropological aloofness; in Wilkinson’s, less so.
American libertarianism is queer in that it can admit both rationalists and conservatives in the Oakeshottian senses. Reading Wilkinson it becomes clear that he is a classic rationalist. He derives his libertarianism a priori — a set of propositions on a chalkboard. Contrast with, for example, the average tea partier, who gets his as a uniquely American historical inheritance — a full-blooded tradition. Like most rationalists, Wilkinson thinks this is not just silly and sentimental but pernicious (one of his biggest bugaboos is patriotism).
And so, holding the same set of basic principles, but with different reasons, sends these two kinds of libertarians in two very different directions: the rationalists off toward liberaltarianism; the conservatives the classic Buckley-National Review fusionism.
Various libertarians (and, to a much lesser extent, liberals) have wondered, as Lindsey did in that 2006 piece, why libertarians so often align themselves with conservatives instead of liberals. Considering the number of anti-libertarian policies the conservative movement fights for, it seems slightly odd that libertarians would act as an arm of that movement. But I think the answer is sort of obvious: While some outlets, like those leather jacket-wearing rebels at Reason, just tend to go after whoever’s currently in power, most of the big libertarian institutions are funded by vain rich people. And these vain rich people care a lot more about tax policy (specifically a policy of not having to pay taxes) than they do about legalizing drugs or defunding the military-industrial complex. And if they’re keeping the lights on at Cato and AEI, they want Cato and AEI to produce research that relates more to hating the IRS and the EPA than to hating the NYPD or the FBI.
And Cato was born as a Koch family pet project. As in the Koch family that is bent on the political destruction of Barack Obama.
Anyway, Lindsey and Wilkinson aren’t saying anything about their departures, but, as Dave Weigel writes, it looks for all the world like “Cato is enforcing a sort of orthodoxy.”
A libertarian influence on the Democratic party in the realms of law enforcement, drug policy, and civil liberties would definitely be a good thing. But the big libertarian institutions are not really amenable to working with liberals.
But what’s especially interesting to me is how often we’ve seen moves like these in recent years. David Frum was forced out at the American Enterprise Institute after failing to toe the Republican Party line. Bruce Bartlett was shown the door at the National Center for Policy Analysis for having the audacity to criticize George W. Bush’s incoherent economic policies.
In perhaps the most notable example, John Hulsman was a senior foreign policy analyst at the right’s largest think tank, the Heritage Foundation. Hulsman was a conservative in good standing — appearing regularly on Fox News and on the Washington Times‘ op-ed page, blasting Democrats — right up until he expressed his disapproval of the neoconservatives’ approach to foreign policy. At that point, Heritage threw him overboard. Cato’s Chris Preble said at the time, “At Heritage, anything that smacks of criticism of Bush will not be tolerated.”
A few years later, Cato seems to be moving in a very similar direction.
Intellectually, modern conservatism is facing a painfully sad state of affairs.
These departures presumably spell the end of any possibility that Cato will leave the Republican tent (or even maintain its tenuous claims to being non-partisan). And Cato was by far the best of the self-described libertarian organizations – the others range from shmibertarian fronts for big business to neo-Confederate loonies.
On the other hand, breaks of this kind often lead to interesting intellectual evolution. There is, I think, room for a version of liberalism/social democracy that is appreciative of the virtues of markets (and market-based policy instruments like emissions trading schemes) as social contrivances, and sceptical of top-down planning and regulation, without accepting normative claims about the income distribution generated by markets. Former libertarians like Jim Henley have had some interesting things to say along these lines, and it would be good to have some similar perspectives
With Lindsey and Wilkinson out, perhaps there’s a chance for Nick Newcomen, the Rand fan who drove 12,000 miles with GPS tracking “pen” to scrawl the message above? If nothing else, his ideological chops are unassailable.
The American invitation on Friday to the Israelis and Palestinians to start direct peace talks in two weeks in Washington was immediately accepted by both governments. But just below the surface there was an almost audible shrug. There is little confidence — close to none — on either side that the Obama administration’s goal of reaching a comprehensive deal in one year can be met
Instead, there is a resigned fatalism in the air. Most analysts view the talks as pairing the unwilling with the unable — a strong right-wing Israeli coalition led by Prime Minister Benjamin Netanyahu with no desire to reach an agreement against a relatively moderate Palestinian leadership that is too weak and divided to do so.
“These direct negotiations are the option of the crippled and the helpless,” remarked Zakaria al-Qaq, vice president of Al Quds University and a Palestinian moderate, when asked his view of the development. “It is an act of self-deception that will lead nowhere.”
And Nahum Barnea, Israel’s pre-eminent political columnist, said in a phone interview: “Most Israelis have decided that nothing is going to come out of it, that it will have no bearing on their lives. So why should they care?”
That such a dismissive tone comes not from the known rejectionists — the Islamists of Hamas who rule in Gaza and the leadership of the Israeli settler community in the West Bank — but from mainstream thinkers is telling of the mood.
State Department officials had been sure that the statement, a formal invitation for both parties to enter direct negotiations, would be released earlier this week. But last-minute objections from both the Israeli and Palestinian sides forced new rounds of discussions, culminating in what Reuters reported was a conference call between Quartet members Thursday afternoon to discuss the latest draft.
“There are details that are still being worked out. You could quote Yogi Berra, I suppose, ‘It’s not over till it’s over,'” State Department spokesman P.J. Crowley said Thursday. “We think we’re very, very close to an agreement.”
Multiple diplomatic sources confirmed that the substance of the reported draft represents a compromise intended to accommodate the Palestinians’ calls for the pending Quartet statement to include several specific items that they believe are “terms of reference” for the direct talks but which the Israeli side sees as “preconditions” that Israeli Prime Minister Benjamin Netanyahu has pledged to reject.
The apparent compromise would result in a statement whereby the Quartet reaffirms a “full commitment to its previous statements,” according to Reuters, a reference to the March 19 Quartet statement issued in Moscow, but doesn’t explicitly repeat certain contentious language from that document.
Among the disputed items in that statement, which Netanyahu ultimately rejected, were calls for a Palestinian state to be established in 24 months and for Israel to halt all settlement building, including natural growth of existing settlements, as well as building and evictions in East Jerusalem.
Neither side wants to be seen as resisting the move to direct talks, which the Obama administration has been pushing hard to begin before Netanyahu’s 10-month settlement moratorium expires next month. If the Quartet is able to get its new statement out Friday, it will be about a week later than State Department sources had predicted, due to some extra shuttle diplomacy that the U.S. team had not anticipated.
When Special Envoy George Mitchell traveled to the region last week, he believed he had a deal with Palestinian President Mahmoud Abbas over the wording of the statement, but it was clear upon arrival that Abbas had additional concerns, multiple diplomatic sources said.
So, Mitchell called back home to Secretary of State Hillary Clinton to inform her that the Palestinians were not on board. After further negotiations, Abbas set forth his demands for what the statement should include, but when Mitchell brought those terms to Netanyahu, the Israeli prime minister told Mitchell he couldn’t accept them.
“We wanted the statement to include the same elements the March 19 statement included,” the PLO’s Washington representative Maen Rashid Areikat, who is in the region, told The Cable in an interview.
“The Quartet statement must be clear about how the quartet sees the terms of reference, the time frame, and the situation on the ground, such as the cessation of settlement activity,” Areikat said.
Mitchell was forced to return to Washington empty-handed, but left the National Security Council’s David Hale in the region to continue working the problem and negotiations continued.
Mitchell’s trip wasn’t a failure, according to Areikat. “I believe it was part of an overall discussion of progress with the parties, and if we see progress in the statement it will have been worth it,” he said.
The big news today is of course the announcement from Secretary of State Hillary Clinton that Israeli Prime Minister Benjamin Netanyahu and Palestinian President Mahmoud Abbas have been invited to Washington at the beginning of September to engage in the first direct talks between the two sides in two years.
The stakes are high on a regional and international level, but Clinton’s announcement left many things up in the air, by refusing to endorse the pre-1967 boundary as the starting point for negotiations on borders, and leaving so-called “final status” issues, like the fate of Jerusalem, land swaps, and settlements, to be brought up when Netanyahu and Abbas decide to do so.
Still, the onus is on the United States to bring the two sides together, as President Obama will have to deal with the backlash if talks fail. As Daniel Levy, the co-director of the New America Foundation/Middle East Task Force said today:
[Clinton’s] announcement covered very familiar ground, following a playbook that has been tried many times and found wanting. Instead of terms of reference to guide negotiations we received today a guest list for a September 1 White House dinner – even the chaperons for that dinner have a decidedly retro ring to them – Jordanian King Abdullah and Egyptian President Mubarak. Today’s announcement could have been an opportunity to introduce some clarity to proceedings and to jumpstart real decision-making (by for instance, defining border talks as being based on ’67 lines with one-to-one land swaps). Rather we were served ambiguity, and not it seems of the constructive variety……What today’s announcement has done is to raise expectations given the one-year deadline placed on the resumed talks. Yes, deadlines have been missed before, but this time the US national interest in resolving the conflict has been placed front and center and there is now broad consensus that the two-state option is passing its sell-by date. It was the Obama administration that insisted on the direct talks format as the way forward, and the ball will now be in their court to produce results.
It is easy to be cynical about the scope of this supposed breakthrough. By getting the two sides back into direct talks Mr Obama has merely returned to where George Bush was after his Annapolis summit of November 2007. Big deal: the direct talks initiated then got nowhere, even though Israel’s prime minister at the time, Ehud Olmert, was far readier for territorial compromise than is Mr Netanyahu. Even if, by some miracle, the two men came close to agreement, Hamas is still absent from the table. This means that half of the Palestinian movement would not be party to any deal and will try hard to sabotage one. So indeed will those Israelis in Bibi’s governing coalition who for reasons of ideology, security or both vehemently oppose the creation of a Palestinian state. It is better for the parties to be talking than not talking, but a betting man would not favour the chances of a breakthrough to peace.
That said, it would be a mistake to put the chances of success entirely at nil. When Mr Netanyahu and Mr Abbas hit the inevitable impasse, the Americans, who intend to be actively involved in the process through the person of George Mitchell, will doubtless table a bridging proposal. And this is the point at which the script could begin to depart from the precedent Mr Bush set at Annapolis.
Mr Bush left his push in Palestine to the end of his presidency, and with the Iraq war to fight never saw the peace process as much more than a distraction or palliative. Mr Obama, on the other hand, started early, and seems determined to persevere despite the pushback he ran into from Israel’s friends in Congress after his brutal confrontation with Mr Netanyahu over settlements in the territories. America’s president, in short, shows every sign of being a true believer in the necessity of solving this conflict, not least in order to redeem the promises he gave the Muslim world in his famous Cairo speech. A year from now, when the negotiation “deadline” expires, he may be approaching the final year of his presidency—but for all the parties in the region know he might still have another four-year term ahead of him. That will make it more expensive for the Israelis or Palestinians to resist whatever bridging ideas America brings to the table.
Well there is certainly less here than even the initial Obama spin would have had us believe. It seems to be that only an initial dinner is set. (”The United States will put its imprimatur on the talks in an orchestrated series of meetings that begin with a White House dinner Sept. 1 hosted by Mr. Obama.”) Beyond that? “Within the negotiations we’ve obviously had a lot of preparatory discussions with the parties on how to structure them,and we’ll need to finalize those, so we’re not in a position now to really talk about that.” Good grief. This has all the makings of a rushed announcement to try to put a horrid week for the White House behind them.”
It is interesting that Obama’s role is not yet finalized either. In fact, as my Israel expert points out, the death knell of the talks may be Obama’s own presence. After all, the Israelis have learned the hard way not to trust him, so it’s difficult to see how his presence could be a help. The telltale sign of the level of animosity between Obama and the Jewish state – he doesn’t yet have the nerve to visit Israel, where he could very likely face angry crowds. (”‘He looks forward to an opportunity to visit Israel,’ [Dan Shapiro] said of Obama, adding that such a visit would likely include a stop in the Palestinian Territories. The visit ‘could be very valuable and very meaningful at the right time.’”) Translation: he’s not going anytime soon.
The statements by others released on Friday were indicative of the low expectations that these talks engender among knowledgeable observers. AIPAC, which is obliged to cheer each step in the fruitless “peace process,” declares that it ”welcomes the renewal of direct peace talks between Israel and the Palestinian Authority (PA), as announced Friday by Secretary of State Hillary Clinton, and expresses its appreciation to the Obama administration for its efforts in making this goal a reality.” But even its usually bubbly tone was replaced by sober and somewhat skeptical caveats:
For talks to succeed the PA must match Israel’s commitment to conducting peace talks without preconditions or excuses, abandon its longstanding attempts to avoid making difficult choices at the negotiating table and cease incitement against Israel at home and abroad. Likewise, Arab states must heed the calls by the Obama Administration and Congress to take immediate and meaningful steps toward normalization with Israel, and they must provide the political support for the Palestinians to make the kind of significant and difficult choices that will be required.
An even more candid statement came from Senate candidate Pat Toomey, who said he was hopeful but also “wary”:
Too often such talks produce little substance, and devolve into casting unfair blame at Israel for its legitimate efforts to guard its own security, while ignoring the unending violence that is openly encouraged by Palestinian leaders. That is especially the case with negotiations that involve the United Nations, the Russians, and the Europeans. I encourage President Obama to work against that tendency, and to set the tone in these talks by stressing the very real national security concerns Israel is dealing with.
And what happens when the talks go nowhere? Will we face yet another intifada? Will the bridging proposals morph into a imposed peace plan? Who knows — not even Day 2 is set yet. The administration has imbibed the peace process Kool-Aid, but there is little evidence that it promotes peace or that the Obami are competent to oversee negotiations. And meanwhile the real Middle East crisis — the development of an Iranian nuclear weapon looms on the horizon. In a real sense, the “peace process” is nothing more than a dangerous distraction.
Coincidentally, according to today’s front-page administration-fed NYT story, one year is also the timeframe U.S. officials are now claiming Iran has before it achieves nuclear breakout capacity. The idea of this two-step media offensive, presumably, is to put pressure on Israel not to do anything “rash” before the new round of peace talks plays out, especially with news set to break tomorrow that the Bushehr reactor is ready to go. That’s consistent with the White House’s thinking all along: They’ve always believed that settling the Palestinian issue first will make it easier to deal with Iranian nukes by denying the mullahs an opportunity to exploit the great Muslim grievance. If a peace deal is struck, then theoretically the goodwill it’ll generate towards Israel and America among Sunni nations will neutralize the Muslim solidarity that Iran wants to exploit when the confrontation over its nuke program finally comes. I’m not sure how that’ll work in practice, though, since Hamas will play no role in the peace negotiations and has no interest in ceding Gaza to its enemies in the Palestinian Authority in the event that a peace deal is hashed out. On the contrary, with Iran’s full support, they’ll inevitably accuse Abbas of having sold out the Palestinian nation in order to inflame the same sense of Muslim grievance and solidarity that the peace talks are meant to mute. In fact, if O shocks the world and the talks start making serious progress, I assume Iran and Hamas (and Hezbollah, of course) will simply precipitate some sort of crisis in order to derail them. Which is to say, how can you expect any deal to hold as long as Tehran and its proxies still have fangs?
If you think today’s announcement that the Israelis and Palestinians are going to resume “direct talks” is a significant breakthrough, you haven’t been paying attention for the past two decades (at least). I wish I could be more optimistic about this latest development, but I see little evidence that a meaningful deal is in the offing.
Why do I say this? Three reasons.
1. There is no sign that the Palestinians are willing to accept less than a viable, territorially contiguousstate in the West Bank (and eventually, Gaza), including a capital in East Jerusalem and some sort of political formula (i.e., fig-leaf) on the refugee issue. By the way, this outcome supposedly what the Clinton and Bush adminstrations favored, and what Obama supposedly supports as well.
2. There is no sign that Israel’s government is willing to accept anything more than a symbolic Palestinian “state” consisting of a set of disconnected Bantustans, with Israel in full control of the borders, air space, water supplies, electromagnetic spectrum. etc. Prime Minister Netanyahu has made it clear that this is what he means by a “two-state solution,” and he has repeatedly declared that Israel intends to keep all of Jerusalem and maybe a long-term military presence in the Jordan River valley. There are now roughly 500,000 Israeli Jews living outside the 1967 borders, and it is hard to imagine any Israeli government evacuating a significant fraction of them. Even if Netanyahu wanted to be more forthcoming, his coalition wouldn’t let him make any meaningful concessions. And while the talks drag on, the illegal settlements will continue to expand.
3. There is no sign that the U.S. government is willing to put meaningful pressure on Israel. We’re clearly willing to twist Mahmoud Abbas’ arm to the breaking point (which is why he’s agreed to talks, even as Israel continues to nibble away at the territory of the future Palestinian state), but Obama and his Middle East team have long since abandoned any pretense of bringing even modest pressure to bear on Netanyahu. Absent that, why should anyone expect Bibi to change his position?
So don’t fall for the hype that this announcement constitutes some sort of meaningful advance in the “peace process.” George Mitchell and his team probably believe they are getting somewhere, but they are either deluding themselves, trying to fool us, or trying to hoodwink other Arab states into believing that Obama meant what he said in Cairo. At this point, I rather doubt that anyone is buying, and the only thing that will convince onlookers that U.S. policy has changed will be tangible results. Another round of inconclusive “talks” will just reinforce the growing perception that the United States cannot deliver.
It is possible that at some point in the next 12 months, the imposition of devastating economic sanctions on the Islamic Republic of Iran will persuade its leaders to cease their pursuit of nuclear weapons. It is also possible that Iran’s reform-minded Green Movement will somehow replace the mullah-led regime, or at least discover the means to temper the regime’s ideological extremism. It is possible, as well, that “foiling operations” conducted by the intelligence agencies of Israel, the United States, Great Britain, and other Western powers—programs designed to subvert the Iranian nuclear effort through sabotage and, on occasion, the carefully engineered disappearances of nuclear scientists—will have hindered Iran’s progress in some significant way. It is also possible that President Obama, who has said on more than a few occasions that he finds the prospect of a nuclear Iran “unacceptable,” will order a military strike against the country’s main weapons and uranium-enrichment facilities.
But none of these things—least of all the notion that Barack Obama, for whom initiating new wars in the Middle East is not a foreign-policy goal, will soon order the American military into action against Iran—seems, at this moment, terribly likely. What is more likely, then, is that one day next spring, the Israeli national-security adviser, Uzi Arad, and the Israeli defense minister, Ehud Barak, will simultaneously telephone their counterparts at the White House and the Pentagon, to inform them that their prime minister, Benjamin Netanyahu, has just ordered roughly one hundred F-15Es, F-16Is, F-16Cs, and other aircraft of the Israeli air force to fly east toward Iran—possibly by crossing Saudi Arabia, possibly by threading the border between Syria and Turkey, and possibly by traveling directly through Iraq’s airspace, though it is crowded with American aircraft. (It’s so crowded, in fact, that the United States Central Command, whose area of responsibility is the greater Middle East, has already asked the Pentagon what to do should Israeli aircraft invade its airspace. According to multiple sources, the answer came back: do not shoot them down.)
In these conversations, which will be fraught, the Israelis will tell their American counterparts that they are taking this drastic step because a nuclear Iran poses the gravest threat since Hitler to the physical survival of the Jewish people. The Israelis will also state that they believe they have a reasonable chance of delaying the Iranian nuclear program for at least three to five years. They will tell their American colleagues that Israel was left with no choice. They will not be asking for permission, because it will be too late to ask for permission.
When the Israelis begin to bomb the uranium-enrichment facility at Natanz, the formerly secret enrichment site at Qom, the nuclear-research center at Esfahan, and possibly even the Bushehr reactor, along with the other main sites of the Iranian nuclear program, a short while after they depart en masse from their bases across Israel—regardless of whether they succeed in destroying Iran’s centrifuges and warhead and missile plants, or whether they fail miserably to even make a dent in Iran’s nuclear program—they stand a good chance of changing the Middle East forever; of sparking lethal reprisals, and even a full-blown regional war that could lead to the deaths of thousands of Israelis and Iranians, and possibly Arabs and Americans as well; of creating a crisis for Barack Obama that will dwarf Afghanistan in significance and complexity; of rupturing relations between Jerusalem and Washington, which is Israel’s only meaningful ally; of inadvertently solidifying the somewhat tenuous rule of the mullahs in Tehran; of causing the price of oil to spike to cataclysmic highs, launching the world economy into a period of turbulence not experienced since the autumn of 2008, or possibly since the oil shock of 1973; of placing communities across the Jewish diaspora in mortal danger, by making them targets of Iranian-sponsored terror attacks, as they have been in the past, in a limited though already lethal way; and of accelerating Israel’s conversion from a once-admired refuge for a persecuted people into a leper among nations.
If a strike does succeed in crippling the Iranian nuclear program, however, Israel, in addition to possibly generating some combination of the various catastrophes outlined above, will have removed from its list of existential worries the immediate specter of nuclear-weaponized, theologically driven, eliminationist anti-Semitism; it may derive for itself the secret thanks (though the public condemnation) of the Middle East’s moderate Arab regimes, all of which fear an Iranian bomb with an intensity that in some instances matches Israel’s; and it will have succeeded in countering, in militant fashion, the spread of nuclear weapons in the Middle East, which is, not irrelevantly, a prime goal of the enthusiastic counter-proliferator who currently occupies the White House.
In an important article titled “The Point of No Return” to be published in The Atlantic tomorrow, national correspondent Jeffrey Goldberg recounts something many people didn’t realize at the time and still have a hard time believing. President George W. Bush knocked back Dick Cheney’s wing of the foreign policy establishment – both inside and out of his administration – that wanted to launch a bombing campaign against Iran. In a snippet I had not seen before, Bush mockingly referred to bombing advocates Bill Kristol and Charles Krauthammer as “the bomber boys.”
George W. Bush was showing his inner realist not allowing his own trigger-happy Curtis LeMays pile on to the national security messes the US already owned in Iraq and Afghanistan.
But that was several years ago. Today, there is a new US President, more Iranian centrifuges, and a different Israeli Prime Minister – and Bibi Netanyahu seems closer to a Curtis LeMay, John Bolton or Frank Gaffney than he does to the more containment-oriented Eisenhowers and George Kennans who in their day forged a global equilibrium out of superpower rivalry and hatred.
Goldberg, after conducting dozens of interviews with senior members of Israel’s national security establishment as well as many top personalities in the Obama White House, concludes in his must-read piece that the likelihood of Israel unilaterally bombing Iran to curtail a potential nuclear weapon breakout capacity is north of 50-50.
I’m not sure I miss Bush’s penchant for nicknames (mine was “Joe Boy”): it was far too frat boy by a lot. But occasionally the President struck gold, as Jeff Goldberg reports in a new piece previewed by Steve Clemons today: he called Bill Kristol and Charles Krauthammer “the bomber boys,” after their obsession with going to war with Iran–an obsession Bush eschewed in his more reasonable second term, when he retrieved his foreign policy from the Cheney Cult.
In the end, Bush was completely overmatched by the presidency. His time in office–the tax cuts, the Iraq war, the torture, the slipshod governance, the spending on programs like Medicare prescription drugs without paying for them, the deficits, the failure to foresee the housing bubble–was ruinous for the country. But I’ve got to say that “Bomber Boys” is a keeper. Kristol and Krauthammer are hereby branded for life.
It is more likely that the president and his advisers are more worried about validating the Bush doctrine that a preemptive strike is justified when the threat of a rogue regime getting hold of a weapon of mass destruction is on the table. Everything this administration has done seems to indicate that it sees a potential strike on Iran as more of a threat to the world than the Iranian bomb itself. Since Obama is almost certainly more afraid of another Iraq than he is of a genocidal threat to Israel’s existence, it is difficult to believe that he will take Hitchens’s advice.
I think some people in Washington — and elsewhere — have been letting the Israelis twist in the wind in the hopes that Israel will solve our Iran problems for us, and take the blame. I don’t think these “leaders” will like the outcome, and if I were the Israelis I wouldn’t be trying too hard to make it pleasant. Irresponsibility can be expensive.
Goldberg notes that with success, the Israelis will buy time (probably putting the Iranian program back 3-5 years), earn the secret thanks of most of the moderate Arab regimes in the Middle East, and will have stopped potential proliferation to terrorist groups in its tracks.
Is that worth initiating a strike that could lead to World War III?
What will the Russians do if the Israeli’s hit Bushehr? It is likely they will kill Russian technicians in such a strike since they are building the facility under contract with Tehran. Will Vladmir Putin take the death of Russian scientists and technicians lying down? What if he retaliates against Israel? What would be the American response to that?
August, 1914?
Unleashing Hezb’allah against the western world, stirring up trouble in Iraq by ordering the Shia militias into the streets, not to mention a missile campaign against Israel that could kill thousands (at which point Israel may decide that to save its people, it must expand its own bombing campaign, escalating the conflict to the next level) – this alone could ratchet up tensions causing the world to start choosing up sides.
And no America with the will or the self-confidence to step in and assist the world in standing down.
Obama’s foreign policy is not anti-American, unpatriotic, or designed to favor Muslims. It’s just weak. The president has made the conscious decision that the US is too powerful and needs to defer to supra-national organizations like the UN, or regional line ups like NATO or the Arab League when conflict is threatened. “First among equals” is not rhetoric to Obama. He means it. He has been thoroughly indoctrinated with the idea that most of the world’s troubles have been caused by a too-powerful United States and hence, only deliberately eschewing the promotion of American interests can redress this sin.
This will be the first world crisis since the end of World War II where American power and prestige will not be used to intervene in order to prevent catastrophe. Obama is betting the farm that his worldview will be more conducive to defusing a crisis than the more realpolitik and pragmatic point of view that has dominated American foreign policy for 65 years.
We are shortly going to find out whether good intentions really matter in international affairs
Somehow it manages to be both harrowing and mundane: No matter what Obama and Netanyahu end up doing or not doing, the Middle East is sure to be a more dangerous place in a year or two than it is even now — and yet we’ve been headed towards that Catch-22 for years, dating well back into the Bush administration. As dire as they are, the strategic calculations have become sufficiently familiar — a bombing run might not disable the program, might only postpone it for a year or two, might touch off a regional war with America in the middle — that I bet most readers will either glance at the piece or pass on it entirely as old news. The Iranian program is like having a bomb in your lap knowing that any wire you cut will detonate it, so you sit there and fidget with it in hopes that it’ll just sort of fizzle out on its own. Sit there long enough and even a situation as dangerous as that will start to seem boring. Until the bomb goes off.
I honestly don’t know what the answer to the Iranian nuclear question is.
The prospect of the likes of the Islamic Republic possession nuclear weapons is not something I look forward to. Then again, I’m still not all that comfortable with the idea of Pakistan having nuclear weapons, and don’t get me started about North Korea. Nonetheless, Pakistan has had those weapons for more than a decade now and they haven’t used them. Even same goes for North Korea. Both countries, of course, have engaged in nuclear proliferation, and that may be the greatest danger of an Iranian nuclear weapons program, not that they’d use them, but that they’d teach others how to make them. It’s entirely possible, then, that a nuclear-armed, or nuclear-capable, Iran, may not end up being as much of a threat as we fear.
Israel, however, doesn’t seem to be inclined to wait to find out how things will turn out. Their current leadership views a nuclear-armed Iran as an existential threat to Israel and, whether or not that is actually true, they’re likely to act accordingly. Unfortunately, their actions are likely to have consequences that we’ll all have to deal with.
If I were a Republican Party leader, and I didn’t care a whit about the welfare of the United States (and no, those two descriptors are not synonymous), I’d be feeling pretty good right now. My party will almost certainly pick up a lot of seats in Congress come November, which is the normal mid-term pattern after a big swing the other way, and this shift will make it even easier for the GOP to obstruct future Obama initiatives. More importantly, I’d be increasingly confident about regaining the White House in 2012 too.
[…]
Unfortunately for Obama, things don’t look much brighter when you turn to foreign policy. On the plus side, there’s a new arms control treaty with Russia (which he may not be able to get ratified), and surveys suggest that America’s global image has improved dramatically in many parts of the world. They smoothed over some disputes with Japan and are doing a good job of cultivating Indonesia, which is smart policy at a moment when China is becoming more assertive. But how many votes do you think that these modest successes will bring Obama in 2012? I’d say virtually none. And an improved global image isn’t much of an accomplishment, when you consider how bad things were when Obama was elected.
More importantly, Obama is likely to be O for 4 on the big ticket items that have defined his foreign policy agenda, and he will therefore be heading into 2012 without a major domestic or foreign policy achievement to run on. All that spells trouble for Democrats come 2012.
Just look at the list.
1. Iraq.
Obama didn’t get us into Iraq, and he’s doing the right thing to get us out more-or-less on the schedule that the Bush adminstration negotiated back in 2008. But it’s now clear that the much-vaunted “surge” was a strategic failure, and Iraq could easily spin back out of control once U.S. forces are gone. Even in the best case, Iraq can only be judged a defeat for the United States: we will have spent trillions of dollars and lost thousands of lives in order to bring to power an unstable government that is sympathetic to Iran and unlikely to be particularly friendly to the United States. Americans don’t like losing, however, and Obama is going to get blamed for this outcome even though it was entirely his predecessor’s fault.
2. Iran.
Obama made some good symbolic gestures at the beginning of his presidency, but he gradually reverted to the same fruitless approach that epitomized the Bush administration. In essence, the U.S. position on Iran remains: “first you give us everything we want — namely, a complete end to nuclear enrichment — and then we’ll be happy to talk about some of the things that you want.” This approach is not going to work, and that will lead war hawks — including some inside the administration — to claim that the only option remaining is military force.
One could argue that Obama got some bad breaks here — i.e., the contested 2009 election and subsequent turmoil in Iran undoubtedly made it much harder to do business with Tehran — but the key point is that meaningful progress on this issue is unlikely given the administration’s current approach. In the best case, we get stalemate; in the worst case, we get another war. Some smart people still think the latter outcome is unlikely and I certainly hope they are right, but there are influential voices inside and outside the administration who will continue to push for a more forceful response. If you don’t believe me, read Time‘s Tony Karon here. In any case, there’s little chance that Obama will be able to put Iran in the “win” column by 2012.
3. Israel-Palestine. Obama took office promising “two-states for two peoples” in his first term, and he appeared to be serious about it until the Cairo speech in June 2009. It’s been one retreat after another ever since, and as former U.S. Ambassador Martin Indyk acknowledged in a recent Ha’aretz interview, it was mostly due to pressure from the Israel lobby. In his words (not mine):
American Jews traditionally are pretty supportive of the Democratic Party. They voted overwhelmingly for Barak Obama, they tend to vote for Democratic candidates and they provide a good deal of funding for political campaigns. So the Jewish factor is always a critical factor for Democratic candidates. I don’t think it’s telling any secrets that there are a lot of people who have been upset with President Obama. And I think that the White House came to the understanding that they have a real problem there and they are going out of their way trying to show they are friendly to Israel and committed to peace.”
The focus now seems to be solely on getting some sort of direct talks started, but even if George Mitchell conjures up a rabbit from his hat, those talks aren’t going to lead anywhere. Settlements will continue to expand, the U.S. won’t do anything to stop them, and more and more people will come to realize that “two states” is becoming impossible. As I’ve said repeatedly, this situation is bad for the United States, bad for Israel and of course bad for the Palestinians. But it is also bad for Obama, because it means there’s yet another major issue where he will not be able to point to any progress.
4. Afghanistan. I agree with those commentators who say that the recent Wikileaks expose didn’t add a lot of new information about the Afghan campaign. Instead, it confirmed what we already knew from multiple sources: the war is going badly, our Pakistani “partner” is double-dealing, and Obama made a major mistake when he decided to escalate in 2009. How many of you are confident that we are going to turn things around? Now he’s stuck, which means he will be presiding over not one but two losing wars. He didn’t start either of them, but that won’t matter to the American electorate, and certainly not to the GOP, FoxNews, and the rest of the right-wing attack machine.
Add to that list the signs of a deteriorating relationship with China (an issue that has significant long-term implications), the lack of progress on climate change (another Obama priority that hasn’t paid off yet), and you have a presidency that will limp into 2012 without a lot of tangible foreign policy achievements to its credit. That wouldn’t be a problem if the economy were humming along, but as noted above, that isn’t likely to be the case.
To be sure, none of these problems are easy to solve, and the lack of progress (or in some cases, backsliding) in part reflects the very tough hand that Obama was dealt from the outset. But that excuse only goes so far. Obama’s fundamental error was to run try to run a very conventional foreign policy — one that turned out to be not very different from the second Bush term — in a situation that called for far more creative thinking and a willingness to try new approaches and stick with them even if it alienated some domestic constituencies. Instead, he’s got the usual suspects running Middle East policy and achieving the same results they did in the past. He’s “staying the course” in Afghanistan, even though plenty of smart people told him this was a losing strategy from the beginning. He’s adopted the same unimaginative and failed policy towards Tehran, and then seems surprised that Iran doesn’t leap to do our bidding.
My esteemed colleague Steve Walt writes today that Obama is in trouble for 2012 in part because he’s “0 for 4 on the big ticket items that have defined his foreign policy agenda.” I’ve got to disagree. There may be no full-scale successes yet — as if anybody thought Obama could solve the world’s problems in a year and half — but he’s actually doing far better than Walt suggests. Specifically, I’d largely agree with Walt on Afghanistan and Israel-Palestine, but both Iraq and Iran are more likely to be winners than losers. Beyond that, though, Obama will gain in stature by comparison with the lunacy currently dominating the Republican political establishment — which will likely only escalate as the political season develops and every GOP wannabe tries to outbid on the crazy.
Here’s my revised scorecard, following Walt’s list:
1. Iraq. Obama is on track to deliver on his campaign promise to withdraw from Iraq — something which voters might begin to notice next month when they discover that he has also met his promise to get down to 50,000 troops. He’s already almost there, without anyone really paying attention, and he has admirably resisted all pressure and temptation to relax the timeline in the face of the political paralysis of Iraq’s political class. What’s more, Iraqi security forces and state institutions have proven quite robust during the extended political crisis, and the general security trends are not nearly as dire as the headlines would suggest. Iraq should be a major positive for 2012 if Obama makes the case, as I’m sure he will: he kept his promise on his signature policy initiative and it has worked out pretty well.
And the GOP alternative is…. staying longer? I don’t see that as a political winner.
2. Iran. While I would have liked to see more robust engagement back at the start of the administration, and less of a rush to the pressure track, the fact is that Iran today is far weaker and more isolated than it was when Obama took office. He successfully built multilateral support for sanctions, and by all accounts the sanctions (including the additional unilateral ones) are starting to have a real effect. He seems to have effectively convinced the Israelis to not jump the gun. There’s a long way to go until 2012, but Iran should look like a policy winner by then. Pretty much the only two outcomes which could turn Iran into a disaster are either a successful nuclear test or a rash military strike by Israel or the U.S. I don’t think either is likely. There’s a chance for a major positive development, such as Ahmedenejad being driven from power and/or a major uranium exchange deal, but even the status quo of a weaker, isolated Iran will look pretty good.
And the GOP alternative is… war? I don’t see that as a political winner.
3. Israel-Palestine. OK, I’ll go with Walt on this one. I don’t see this really going anywhere, direct talks or no direct talks. I’m glad that the Gaza blockade has been somewhat eased, but that’s probably not enough for a passing grade. The real question here, to which I don’t have an answer, is how salient this issue will be come 2012.
4. Afghanistan. I’m also not feeling very good about this one. But the one ray of hope I see is that David Petraeus will try to do in Afghanistan what he really did in Iraq, not what popular mythology says he did in Iraq: cut deals with local forces and find a way to stabilize the situation just enough to be able to draw down and leave a reasonably stable state behind even if few of the deeper long-term political or institutional problems are solved. I’m not optimistic, though, and agree that I don’t see any way this is a political winner in 2012.
But again, the Republican alternative is… what? More troops for longer? Or is it taking off the gloves and killing more people? Or is it time to get out of Obama’s failed war? I lose track.
So my scoring is 2-4 on what Walt calls the signature issues — and batting .500 gets you into the Hall of Fame. But there’s more — the nuclear non-proliferation stuff is kind of a big deal, for example, and if START goes through could be a major accomplishment I have my doubts about the Republicans allowing anything at all to go through the Senate if they can stop it, but that would only fuel the argument about GOP irresponsibility). I would balance that out with my dismay over the failure to close Guantanamo and other civil liberties issues, but in the end all those issues together are probably a wash. Let’s say that overall he’s batting a bit over .300, with disappointing power numbers — not Hall of Fame, but pretty darned solid.
Here’s a brief rejoinder.
On Iraq: Marc is correct to point out that Obama has delivered on his campaign promise to get out of Iraq, and Obama is going to make a speech tonight designed to highlight that “achievement.” The problem is that Iraq will continue to be a headache for the United States for some time to come, and things could easily spiral back into the sort of internecine violence that was occurring in 2006. The administration and the Pentagon are “accentuating the positive” these days, but as the New York Timespointed out just this morning, there are significant disagreements about the actual level of violence and little doubt that things are heating up as we draw down. A front-page story also highlighted how corruption, inefficiency, and political stalemates are crippling Iraq’s electrical power system, even after the United States poured billions into trying to rebuild and repair it.
None of this is Obama’s fault. But remember that the end of the “combat mission” doesn’t mean an end to a significant U.S. presence there, and he’ll face continued pressure to “do something” if the situation deteriorates. And if Iraq does go south, you can be sure that the GOP and unrepentant neo-cons will blame it on those feckless Democrats. They’ll talk for hours about how the “surge worked” (which isn’t true), and suggest that everything would have been hunky-dory if McCain and Palin were in charge.
That’s palpable nonsense, of course, but my main point still stands: Iraq won’t be looking like a success story and Obama won’t get any political credit for it. If anything, the right will attack him for letting Iraq spiral back into violence and the left will be disappointed that we still have training missions, air assets, and private contractors there. Bottom line: Iraq will be a hard issue to run on 2012, and Obama’s main hope is that people won’t be talking about it much. I’ll be he’s got his fingers crossed on that one.
On Iran: Marc is also correct to credit the Obama administration with winning greater international support for its approach to Iran, and with successfully isolating Tehran from some past backers (e.g., Russia). And I certainly agree with him that the main GOP alternative — a U.S. or Israeli airstrike — would be folly. The problem, however, is that the current approach isn’t weakening the clerical regime, isn’t halting its nuclear enrichment program, and certainly isn’t preparing the way for some sort of détente or rapprochement. Indeed, isolating Iran and tightening the sanctions could easily strengthen the hands of those Iranians who are pushing to acquire a nuclear weapon, as opposed to those who reject this course or want to go near but not cross the nuclear weapons threshold.
In political terms, therefore, Obama’s Iran policy will have failed to produce any tangible benefits by 2012. Iran will have more centrifuges running, and more nuclear material stockpiled. Relations with Tehran will be no better, and maybe worse, than they were in 2009. War will still be an unattractive option — and let’s not forget that much of the international support for tighter sanctions reflects other states’ desire to keep the military option off the table — but that won’t stop the GOP from accusing Obama of appeasement, pusillanimity, naiveté, lack of will, etc. Marc is right that their alternative is worse, but assuming we don’t actually adopt it, they will be able to pretend that the Iran problem would have been solved by now if we’d just gone ahead and bombed.
As with a lot of my other analysis, I’d dearly love to be wrong about all of this. I would like to see the Afghan campaign succeed and it would be wonderful if Iraq settled down and prospered. I’d be thrilled if George Mitchell proved me wrong and actually delivered a viable two-state solution, and we could all rejoice if Iran and the international community reached a deal that kept Tehran from building nuclear weapons in perpetuity and opened the door to better relations. I like pleasant surprises as much as the next person, but I’ve learned not to expect them, especially when most of the signs point the other way.
As a global political economy person with a strong realpoliitik streak, here are the four issues I think should be given the largest weighting in any grading of Obama:
1) Great power politics: This is where Obama deserves his best marks, despite some occasional rocky patches. It’s safe to say that relations with Russia have been on the mend for quite some time. Wright is correct to point out the ups and downs with China, but the administration has reacted quite adroitly to China’s renewed confidence on the regional and global stage. U.S. relations with key Pacific Rim allies — South Korea, Japan, Indonesia, India, and even Vietnam if you want to go that far — have all been trending upwards. China now has to process these events, and whether its desire to throw its weigtht around is worth the price of a balancing strategy. This wasn’t how Obama planned things to go with China, but given Beijing’s behavior, I think they improvised and adapted quite well in this sphere. GRADE: A-
2) Correcting imbalances in the global economy: The last G-20 summit in Toronto demonstrated how poorly the Obama administration has done on this front. The administration went into that summit arguing that some countries need to continue priming the fiscal pump. The resulting communique did not reflect that assessment. Deficit hawks have won the war of ideas here — which would be fine if surplus countries like Germany and China balanced that approach by consuming more. They ain’t going in that direction, however. There’s been minimal progress on yuan revaluation, and real foot-dragging in the Eurozone about fixing what ails that region. Given the high hopes Obama administration put on the G-20, this has been a thoroughly disapponting performance to date: GRADE: D
3) Trade: Blech. Let me repeat that — blech. I understand that the administration is on barren political terrain when dealing with this issue. Still, the phrase “Obama administration’s trade agenda” is pretty much a contradiction in terms at this point. The Doha round is dead, and the only trade issue that has the support of policy principals is the National Export Initiative — and you know what I think about that. Unlike the other three issues, the administration hasn’t even bothered to put much effort onto this one — though the recent pledge to get the Korea-U.S. Free Trade Agreement (KORUS) ratified is promising. GRADE: F
4) Nuclear nonproliferation: Even an IPE guy like myself appreciates the virtues of a world in which nuclear weapons are heavily regulated. The Obama administration’s performance in this area has been mixed. START has been negotiated but not ratified, and the Nuclear Safety Summit seems like it was a success. Iran and North Korea seem unbowed, but at the same time the Obama administration has reinforced the multilateral arrangements designed to contain both countries (though this is interesting). At the same time, you can’t just grade for effort at this level, and the results have been disappointing with both countries. There is also something of a strategic mismatch between the Obama administration’s nuclwar ambitions and grand strategy ambitions. GRADE: B-
All grades are incomplete at this stage, but looking above, I’m more than a bit troubled. I don’t see the rebalancing or trade grades impriving anytime soon. If Obamas was one of my advisees, I’d probably have him stop by my office hours for a friendly but firm chat at this juncture.
I don’t expect to make much headway with Dan on this subject, but I think he’s all wet here for two reasons. The first is that “barren political terrain” he acknowledges. No president can reasonably be expected to put a ton of political muscle behind a lost cause, and major progress on, say, the Doha round, was pretty clearly a lost cause from the day Obama entered office. In the face of a catastrophic global recession, there was never even the slightest chance of gaining support either at home or abroad for any major trade initiatives, and it’s simply not reasonable to expect Obama to put any energy behind it. Not only would it have gone nowhere, it might even have been counterproductive. Better to wait until the global climate provides at least a bit of a tailwind.
Second, this isn’t a classroom, where you get an F for not showing up. In politics, you get an F for being counterproductive. Obama hasn’t been. He’s simply ignored trade as an issue. But he hasn’t done any harm, and under the circumstances that’s quite possibly about as much as a trade enthusiast could have hoped for.
I think Dan will be on firmer ground in a few years. When the economy picks up and trade issues get pushed back into the foreground, what will Obama do? We won’t know until it happens, and in the meantime his (lack of) performance should earn him an Incomplete, not an F.
The global economy has lived to fight another day, and that’s something to appreciate. As Mr Drum says, if as little progress is made over the next two years as over the last two, then there will be more cause for concern.
These are interesting points, but I fear that Drum and Avent are far too easy in their grading. Rewarding Obama for not making things worse on the trade front is like rewarding him for not invading Pakistan — kudos for not pursuing a spectacularly bad idea, but really, is that a positive accomplishment? I think not. Or to use another grading analogy — students can receive an F even if they don’t plagiarize.
As for Obama resisting the tides of protectionism, I’ll credit the separation of powers a bit more than Drum or Avent. The U.S. political system is arranged to make it very difficult for anyone to change the status quo. Even if Barack Obama wanted to pull the United States out of the World Trade Organization, for example, he likely couldn’t have gotten the necessary votes in Congress. The Obama administration has mildly resisted more hawkish member of Congress to “get tough” with China. That’s about it in terms of preventing protectionism. When I said Obama had done almost nothing on trade, I wasn’t kidding.
If I have a student who barely puts in any work and nevertheless writes great papers, they’ll receive a good grade. The outcome matters more as one matriculates. A student who barely puts in any work and has nothing to show for it? F city.
It is difficult to argue with the claims of long-form census supporters that the long form of the census is really important and vital (although we’ve given it a shot — see here for the latest in a series of posts entitled “WS on the census”). For example, how else can we find out how many people are Jedi knights?
According to the 2001 census, 21,000 Canadians listed “Jedi knight” as their religion. Dmitri Soudas, communications director for the prime minister’s office, made prominent reference to this fact in an email to the press gallery:
21,000 Canadians registered Jedi knight as a religion in the 2001 census.
Religion is asked every 10 years.
We made the 40-page long form voluntary because government should not threaten prosecution or jail time to force Canadians to divulge unnecessary private and personal information.
Canadians don’t want the government at their doorstep at 10 o’clock at night while they may be doing something in their bedroom, like reading, because government wants to know how many bedrooms they have.
The Ignatieff Liberals promise to force all Canadians to answer personal and intrusive questions about their private lives under threat of jail, fine, or both.
We’re not sure if Canadians want the government to show up on someone’s doorstep at 10 at night, but we are fairly certain that no government official wants to mess with a competent Jedi knight, especially if the knight has succumbed to the dark side of the force.
This is unfortunately the case for Canadian Hayden Christensen, whose Jedi name is Anakin Skywalker. Christensen is one of the three or four most significant adherents to Jedi knightry.
In spite of the significance of this Canadian to the faith, and in spite of Canada being, on January 12, 2009, the first country in the world to recognize the Order of the Jedi Inc. as a federally incorporated non-profit religious entity, Canada did not lead the world in Jedis.
According to 2001 census reports from the English-speaking world, England and Wales led the world in absolute terms, with over 390,000 (0.8%) Jedis. “The 2001 census reveals that 390,000 people across England and Wales are devoted followers of the Jedi ‘faith,'” the BBC reported in 2003.
England also has the distinction of having elected a Jedi Member of Parliament. Jamie Reed, then-newly-elected Labour Party MP, commented on the proposed Incitement to Religious Hatred Bill by saying, “as the first Jedi Member of this place, I look forward to the protection under the law that will be provided to me by the Bill.”
Canada also lagged behind Australia, with over 70,000 (0.37%) Jedis in 2001. In May of 2001, the Australian Board of Statistics released a press release to the media on the topic of Jedis. “If your belief system is “Jedi” then answer as such on the census form. But if you would normally answer Anglican or Jewish or Buddhist or something else to the question “what is your religion?” and for the census you answer “Jedi” then this may impact on social services provision if enough people do the same,” read the press release.
The honour of most Jedis on a per capita basis goes to New Zealand, with over 53,000 adherents, making up 1.5 per cent of the population, second only to “Christian” at 58.9 per cent (“No Religion” accounted for 28.9 per cent, with 6.9 per cent objecting to the question).
Membership in the Jedi Church is not restricted to English-speaking humans from Earth. “The Jedi Church recognises that there is one all powerful force that binds all things in the universe together, and accepts all races and species from all over the universe as potential members of the religion,” explains the official website of the Jedi Church.
Much like in this country, Canadians are required to fill out a census form every five years. A randomly selected group of people, however, are given a long-form census with invasive questions about personal relationships, work and migration histories, and family background, among other things. While I wouldn’t have thought that making such questions voluntary would be all that controversial, a surprising number of people are up in arms over the proposal.
Many groups are worried that a voluntary census would hamper the government’s ability to collect reliable data, which is then acquired by these groups at prices far below market value. Yet, considering that in 2001, 21,000 Canadians listed their religion as Jedi Knight, it would appear as though collecting information under the threat of coercion doesn’t work very well either. Census data from other countries also shows that the world’s Jedi population is growing. But as many European countries move to eliminate the census altogether, Canadian Jedis are up in arms.
Although the Jedis did assist the Rebel Alliance in overthrowing a tyrannical emperor, it’s clear that the Knights were originally set up to enforce the Galactic Senate’s big government agenda. Not to be outdone, the empire continues its assault on private property. Security cameras in Long Island caught Darth Vader holding up a bank yesterday morning. If only police in Long Island had census data showing the names and addresses of the local Jedi population, they might have an easier time apprehending the dark lord. And the circle is now complete.
I must say, I find Jesse’s lack of faith disturbing. Based on the Star Wars films, we know very little about the Galactic Senate’s pre-Phantom Menace agenda, but we do know that Chancellor Valorum is a pretty weak leader. We also know Palpatine’s designs. Upon becoming chancellor, he vows to put down the separatists, raises a Grand Army of the Republic, stays in power well beyond the expected number of years/terms, and finally reorganizes the Republic into the First Galactic Empire. That’s as big of a big government agenda as you’re going to get.
Are the Jedi big government advocates? That’s unclear. I think it would be more accurate to describe them as cartelistic — they refuse to permit a free market in learning the ways of the Force. After all, the Jedi Council’s initial inclination is not to train Anakin Skywalker despite his obvious talents, using some BS about fear as a cover. Only when Qui-Gon threatens to go rogue do they relent. The Council does not inform the Senate that their ability to detect the force has been compromised. They’re reluctant to expand their assigned tasks — they’re keepers of the peace, not soldiers. Just as clearly, their anti-competitive policies weakened their own productivity, given the fact that they were unable to detect a Sith Lord walking around right under their noses for over a decade.
So, were the Jedi perfect agents of liberty? No, probably not. But neither were they handmaidens to the greatest concentration of state power in galactic history.
P.S. Beyond George Lucas’ rather bigoted portrayal of anything involving commerce, another source of libertarian resentment against the Jedi might be their lack of respect for property rights. If the Force is an energy field created by all living things, then why the hell to the Jedi get to exploit it without compensating the creatures who create it in the first place? If you think about the Jedi as the Guardians of the Republic, this might sound absurd. Replace “Guardians of the Republic” with “rapacious strip-miners of primordial energy,” however, and suddenly they don’t look so good. At least the Sith stay small in number, so the externality problem is kept to a minimum.
In sticking to a small government/good big government/bad dichotomy, Drezner and Walker are missing the fact that the real problem with the Galactic Republic was the type of government. Sure, it’s fair to say that the Galactic Republic was large, but it was a completely decentralized institution, responsible mostly for facilitating trade, moderating disputes and maintaining a standard currency. They had no standing military and a weak chief executive, which is precisely how Palpatine took over in the first place. If anything, Palpatine’s ability to manipulate the initial dispute between Naboo and the Trade Federation into a full-on conflict is an example of what happens when government doesn’t have the ability to ensure the market remains free and fair.
Sure it’s easy to see Palpatine soliciting advice from John Yoo, but it’s not like his ultimate goal in conquering the galaxy was passing Social Security or health-insurance reform. If the Galactic Republic had been assembled with a strong but accountable executive that had control of a standing volunteer army with a monopoly on force, the trade dispute on Naboo would never have escalated into a full-scale war, the corporate entities that formed the separatists would have found it more difficult to raise armies, and Palpatine would have had a harder time pushing the Republic toward dictatorship — at the very least because the security and stability of the galaxy wouldn’t have been entrusted to a cloistered religious elite vulnerable to resentment and bigotry. Palpatine’s plot against the Jedi would never have worked had he not managed to, in Nixonian fashion, exploit resentment against a supposedly monastic order living a life of luxury in their giant palace in the middle of the Galactic Capitol — and if they hadn’t been replaced by a clone army with no emotional or social ties to the population.
OK, my turn. As much as I’d like to spend my time poking fun at typical libertarian assumptions about markets and Homo Liberal, which they assume are the only form of humanity and the only form of commerce, I’ll stick with something closer to home: political institutions. The Galactic Republic? We have a unicameral legislature, and as far as we can see each planet gets one vote.* The Republic appears to be pretty much absent in the internal affairs of the planets. The only policies it considers that we know of are war and trade negotiations. Within either (presumably) core planets such as Naboo, or peripherals ones such as Tatooine, the central government appeared to have little if any presence or authority. What does that sound like to you? You got it — it’s the Articles of Confederation. Sure, they call their legislature a Senate, but there doesn’t actually seem to be anything very Senate-like about it (just as there’s nothing very Senate-like about the United States Senate under the Constitution). Moreover, the crisis that Palpatine creates and uses to spark the wars that eventually lead to Empire is a crisis of weak government, not strong: it’s about trade disputes within the Republic!
There’s also some stuff about bureaucrats “really” running things in the Republic, but since our only evidence for that is that Palpatine said it as part of his manipulation of Amidala (and therefore it has less than a 50/50 chance of actually being true), I’ll have to pass on the opportunity to talk about how important it is to have politicians, and not civil servants, in charge. But it is. Although preferably, not Sith politicians. You don’t really want that.
I do have to get one shot in…Drezner complains about “Beyond George Lucas’ rather bigoted portrayal of anything involving commerce.” Really? Who’s the most likable character in the Star Wars movies? OK, not counting R2D2. Isn’t it Han Solo, galactic smuggler, pirate, and all-around scoundrel? Sure, Solo eventually realizes that there’s more to life than money, but that doesn’t mean he’s not fond of money, and we’re certainly fond of him. I don’t see it, at all. Presumably we don’t like the greedy Watto, but he’s a bad guy because of his slaves, not because he’s a businessman. (I suppose Jabba the Hut is a bad guy, but everyone likes him, right?). Perhaps Drezner is thinking of the Trade Federation. That’s a mistake! The Trade Federation aren’t actually the Bad Guys of the Clone Wars; the only Bad Guy of the Clone Wars is Palpatine.
You want a commerce-hater? That’s Star Trek, the Next Generation, and Captain Jean-Luc Picard, scourge of the Ferengi and 20th century businessmen. Star Wars? Sure, a strong and inexplicable bias against death sticks, but, er, um….
Where was I? I can’t remember. I wanna go home and rethink my life.
There are no great analogues for the Jedi in modern American society. They are a secretive, powerful religious sect contracted by the Republic to do vital governing tasks that include policing and diplomacy. Perhaps the Knights Templar were similar in some ways, although I don’t think the Knights had any real authority within European society. Their jurisdiction was the Holy Land. In some ways, the Jedi sound more like the Taliban than anything we’ve got going in the U.S.
Politically, it’s really hard to categorize the Jedi, or the Galactic Republic in general, because Lucas gives us so few policy issues to work with. The Republic turns a blind eye to slavery, not so much because they like slavery but because they just largely ignore what goes on on the Outer Rim planets. That’s not so much liberal or conservative as weak. It’s also largely unable to resolve a trade dispute among its own members. Bernstein’s analogy to the Articles of Confederation is spot on. But the Jedi don’t really seem to take positions on any of this stuff.
Update: Welcome Atlantic Wire readers! Wait, I’m a libertarian? How will I tell my children, Rand and Galt?
IN many countries, including the United States, there are calls for the government to spend more to jump-start the economy, and to avoid the temptation to cut back as debts mount.
Germany, however, has decided to cast its lot with fiscal prudence. It has managed rising growth and falling unemployment, while putting together a plan for a nearly balanced budget within six years. On fiscal policy and economic recovery, Americans could learn something from the German example.
Twentieth-century history may help explain German behavior today. After all, the Germans lost two World Wars, experienced the Weimar hyperinflation and saw their country divided and partly ruined by Communism. What an American considers as bad economic times, a German might see as relative prosperity. That perspective helps support a greater concern with long-run fiscal caution, because it is not assumed that a brighter future will pay all the bills.
Even if this pessimism proves wrong more often than not, it is like buying earthquake or fire insurance: sometimes it comes in handy. You can’t judge the policy by asking whether your house catches on fire every single year.
Keynesians have criticized fiscal caution at this point in the economic cycle, arguing that fiscal stimulus will give economies more, not less, protection against adverse events. But is that argument valid?
Certainly, in Germany, the recent history of fiscal stimulus wasn’t entirely positive. After reunification in 1990, the German government borrowed and spent huge amounts of money to finance reconstruction and to bring East German living standards up to West German levels. Millions of new consumers were added to the economy.
These policies did unify the country politically but were not overwhelmingly successful economically. An initial surge was followed by years of disappointing results for output and employment. Germany’s taxes remain high, and overall West German living standards failed to rise at the same rate as those of most other wealthy countries.
Persuading former East Germans to spend more as consumers turned out to be less important than making sure that they had the skills to mesh with the economic expansion of the country. It is no surprise that many Germans are now skeptical about debt-financed government spending or excessive reliance on domestic consumers.
In recent times, Germany has shown signs of regaining a pre-eminent economic position. Policy makers have returned to long-run planning, and during the last decade have liberalized their labor markets, introduced greater wage flexibility and recently passed a constitutional amendment for a nearly balanced budget by 2016, meaning that the structural deficit should not exceed 0.35 percent of gross domestic product.
1. I am not sure why the American left so near-unanimously lines up behind Keynesian recommendations these days. (Jeff Sachs is an exception in this regard.) There are other social democratic models for running a government, including that of Germany, and yet a kind of American “can do” spirit pervades our approach to fiscal policy, for better or worse. Commentators make various criticisms of Paul Krugman, but putting the normative aside I find it striking what an American thinker he is, including in his book The Conscience of a Liberal. Someone should write a nice (and non-normative) essay on this point, putting Krugman in proper historical context.
2. You sometimes hear it said: “Not every nation can run a surplus,” or “Can every nation export its way to recovery?” Reword the latter question as “Can every indiviidual trade his way to a higher level of income?” and try answering it again. Productivity-driven exporting really does matter, whether for the individual or the nation. It stabilizes the entire global economy,
4. The phrase “fiscal austerity” can be misleading. Contrary to the second paragraph here, even most of the “austerity advocates” think that the major economies should be running massive fiscal deficits at this point. (And Germany had a short experiment with a more aggressive stimulus during the immediate aftermath of the crisis.) They just don’t think it works for those deficits to run even higher.
5. The EU is an even less likely candidate for a liquidity trap than is the United States. That said, how to distribute and implement additional money supply increases would be a serious political problem for the EU. Simply buying up low-quality government bonds would work fine in economic terms, but worsen problems of moral hazard, perceived fairness, and so on. This problem should receive more attention.
This is all very nice, but it’s worth pointing out that Germany’s programme of fiscal stimulus was among the largest in Europe (across developed nations). Germany’s unemployment rate is low, and it declined through some of the worst portions of the recession, but it’s important to point out that this is due in part to an ambitious work-sharing arrangement, in which employers are encouraged to reduce individual hours worked rather than lay off employees. This policy certainly helps to mitigate job losses during a downturn (which makes for great countercyclical policy, and which reduces the fiscal cost of recession) but it’s more likely to delay necessary structural reforms than accelerate them.
And finally, as you can see at right, Germany is one of the few large European economies to increase its deficit from 2009 to 2010. And its planned deficit reduction in 2011 is among the smallest in the euro area. If Germany is more successful than other economies at pulling through recession, it may be because it’s better at performing the ideal policy move—a move the that Mr Cowen appears to criticise when it’s urged by members of the American left—bigger short-term deficits followed by a credible switch to fiscal tightening down the road.
Mr Cowen’s point still stands, to some extent; other countries shouldn’t berate Germany for having the good sense to do what they ought to be doing. But I don’t think it’s quite accurate to sell the German experience as one of a triumph of structural savvy over countercyclical good sense.
Certainly, in Germany, the recent history of fiscal stimulus wasn’t entirely positive. After reunification in 1990, the German government borrowed and spent huge amounts of money to finance reconstruction and to bring East German living standards up to West German levels. Millions of new consumers were added to the economy.
These policies did unify the country politically but were not overwhelmingly successful economically. An initial surge was followed by years of disappointing results for output and employment.
This passage makes me want to stick a pencil in my eye. Let’s consider the case:
1. This was not an effort at fiscal stimulus; it was a supply policy, not a demand policy. The German government wasn’t trying to pump up demand — it was trying to rebuild East German infrastructure to raise the region’s productivity.
2. The West German economy was not suffering from high unemployment — on the contrary, it was running hot, and the Bundesbank feared inflation.
3. The zero lower bound was not a concern. In fact, the Bundesbank was in the process of raising rates to head off inflation risks — the discount rate went from 4 percent in early 1989 to 8.75 percent in the summer of 1992. In part, this rate rise was a deliberate effort to choke off the additional demand created by spending on East Germany, to such an extent that the German mix of deficit spending and tight money is widely blamed for the European exchange rate crises of 1992-1993.
In short, it’s hard to think of a case less suited to tell us anything at all about fiscal stimulus under the conditions we now face. And the fact that a prominent commentator on current events apparently doesn’t know that, after a year and a half of debating this issue — well, as I said, I’m feeling fairly despairing.
Concerning Krugman’s first and second points, while no one was concerned about the West German unemployment rate post-unification, there certainly were concerns about the East German unemployment rate, which means that there were, at the very least, regional deflationary concerns specific to East Germany; note Krugman’s own comment that high unemployment brings about deflation as a “proximate risk.” As noted here, the unemployment rate in East Germany in 1992 was a whopping 15%. It went up to 16% in 1993, and remained steady in 1994. It was between 7-8% in West Germany during those periods. Unemployment in the former East Germany remains higher than it does in the West. Thus, contra Krugman, there were very real unemployment concerns post-unification, as East Germany struggled on the labor front, which helped raise legitimate deflationary concerns. The German government’s spending, as a consequence, did take place in depressed demand conditions, with high unemployment in East Germany haunting German policymakers.
But what about Krugman’s third point, which is that the Bundesbank’s decision to raise rates showed that there was no zero bound? Krugman makes it sound as though inflationary concerns stemmed from the fact that the German economy was doing well and did not have unemployment concerns, but as the above paragraph shows, the German economy was suffering significant unemployment in the East, which naturally raised deflationary concerns. To the extent that deflation was avoided, it was not because the employment situation was ideal. Rather, it was because of policies concerning the post-unification exchange rate, which Wikipedia actually covers (and Krugman does not):
When a customs union was created between the former East Germany (German Democratic Republic) and West Germany (the “old” Federal Republic of Germany), there was a dispute over the rate of exchange for conversion of East German money to Deutschmarks. The Chancellor (Helmut Kohl) decided to ignore the advice of the Bundesbank, and chose an exchange rate of 1:1. The Bundesbank feared that this would be excessively inflationary as well as very significantly impairing the economic prospects of the area of the former East Germany. This dispute was particularly public because of the Bundesbank policy of communicating openly on such matters. Although public opinion normally supported the Bundesbank in matters of combating inflation, in this case Helmut Kohl prevailed, and the President of the Bundesbank, Pöhl, resigned. The Bundesbank had to use monetary measures to offset the inflationary effect.
So deflation was avoided, and rates had to be raised. But they weren’t raised because the German economy had reached anything resembling full employment, with low demand. No one could argue that it had, with East German unemployment rates hovering in the 15-16% range. Yet, reading Krugman, one would naturally think that East German unemployment simply was not a factor.
All of this shows, of course, that Cowen has the better of the argument, both in terms of the debate over the German economy in the immediate post-unification stage, and in the debate over what Germany–and the United States and other developed countries–ought to do with regard to future fiscal and economic policies. I understand that Krugman is loath to admit that Keynesian stimulus policies don’t work, and anytime anyone brings forth an example of them not working, Krugman tries to argue that said example is not apt. It should surprise no one that his arguments on this issue have a tendency to be highly misleading.
About to hit the road for a long travel day, so don’t have time to do anything except point to the latest debate on fiscal policy: Tyler Cowen says the US could learn some things about fiscal policy from Germany, see here for his summary. But as Paul Krugman points out, it’s not clear what there is to learn since key conditions for fiscal policy effectiveness such as high unemployment and interest rates at the zero bound are not present in one of the key examples from Germany given in the column.
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Adam Serwer
Around The Sphere 
Talking About The Talking About The Talking… Do You Feel Cynical Or Dizzy?
Ethan Bronner at NYT:
Max Fisher at The Atlantic with a round-up
Josh Rogin at Foreign Policy:
Andrew Lebovich at Washington Note:
Lexington at The Economist:
Jennifer Rubin at Commentary:
Allah Pundit:
Stephen Walt at Foreign Policy:
UPDATE: Daniel Drezner and Heather Hurlburt at Bloggingheads
UPDATE #2: Hussein Ibish and Eli Lake at Bloggingheads
Max Fisher at The Atlantic
UPDATE #3: Daniel Levy at The Huffington Post
Taylor Marsh
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