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anonymous

Ireland Refuses EU Bailout - 0 views

www.stratfor.com/...116_ireland_refuses_eu_bailout

geopolitics europe ireland

shared by anonymous on 17 Nov 10 - Cached
  • where the Greeks begged for a bailout earlier this year and then railed (and continue to rail) against the budget cuts they are being forced to abide by to maintain the intravenous drip of euros, the Irish are already nearly two years into a self-imposed austerity, all without any serious protests or strikes. 

  • Few argue that Germany is the economic center weight of the union, with every significant member-state counting Germany as its single largest trading partner. But not Ireland. Ireland is dependent upon Germany for a smaller proportion of its economic well being than any other state in the union, trading about twice as much with the United States or the United Kingdom than it does with Germany.
  • Ireland has — twice — voted down EU treaties, and in the aftermath been immune to the political pressure emanating from Paris and Berlin.
  • ...2 more annotations...
  • Berlin’s goal is pretty clear, so clear that a key architect of the Greek bailout — Christian Democratic Union lawmaker Michael Meister — has emphatically noted that not only is an Irish bailout inevitable, but one condition for it will be the alteration of Ireland’s corporate tax structure to something more in line with European norms.
  • What STRATFOR finds the most interesting about this is that Ireland is no longer alone in resisting Germany’s rising strength: There are now glimmers of recognition across Europe that the Germans are attempting to use their dominant economic position to rewire the European Union more to their liking.
  • anonymous on 17 Nov 10
     
    "Financial markets roiled Tuesday on rumors - often reported as news - that the European Union (EU) was about to issue a second bailout, this time to Ireland. In a curious twist of events, the rumors of a bailout didn't start in Dublin, but in Berlin. And the denials of those rumors came from the Irish themselves. The Irish government went on to emphasize that Dublin had not only not asked for a bailout, but that Irish officials at Tuesday's meeting of EU finance ministers went with the explicit goal of convincing everyone that such a bailout was not needed. After several years of everyone from banks to airlines to construction firms to Greece asking for a bailout, it's a little odd to have a state refuse one so emphatically." At StratFor on November 17, 2010.
anonymous

Message to Muslims: I'm Sorry - 0 views

www.nytimes.com/...19kristof.html

politics media religion

shared by anonymous on 27 Sep 10 - Cached
  • Ah, balance — who can be against that? But should reporting of Pope Benedict’s trip to Britain be “balanced” by a discussion of Catholic terrorists in Ireland? And what about journalism itself?
  • As one, Carla, put it on my blog: “Catholics and Jews did not come here and kill thousands of people.” That’s true, but Japanese did attack Pearl Harbor and in the end killed far more Americans than Al Qaeda ever did. Consumed by our fears, we lumped together anyone of Japanese ancestry and rounded them up in internment camps. The threat was real, but so were the hysteria and the overreaction.
  • anonymous on 27 Sep 10
     
    "Ah, balance - who can be against that? But should reporting of Pope Benedict's trip to Britain be "balanced" by a discussion of Catholic terrorists in Ireland? And what about journalism itself?"By Nicholas D. Kristof at The New York Times on September 18, 2010.
anonymous

Britain's Strategy - 1 views

www.stratfor.com/...britains-strategy

america pacific logic geopolitics

shared by anonymous on 01 May 12 - Cached
  • Britain's rise to its once-extraordinary power represented an unintended gift from Napoleon. It had global ambitions before the Napoleonic Wars, but its defeat in North America and competition with other European navies meant Britain was by no means assured pre-eminence.
  • The defeat of the French fleet at Trafalgar and the ultimate French defeat at Waterloo then eliminated France as a significant naval challenger to Britain for several generations.
    • Erik Hanson
      Erik Hanson on 07 Jun 12
       
      (Sorry I'm late) To be fair, most of the "French" ships were Spanish.
  • Not only was Britain the dominant political and military power, it also was emerging as the leader in the Industrial Revolution then occurring in Europe.
  • ...25 more annotations...
  • Napoleon's devastation of continental Europe, the collapse of French power and the underdevelopment of the United States gave Britain an advantage and an opportunity. 
  • Britain also benefitted from the Napoleonic Wars' having crippled most European powers. Britain was not under military pressure for most of the century, and was not forced into a singularly exploitative relationship with its empire to support its wars. It thus avoided Hitler's trap.
  • This began to change in the late 19th century with two major shifts.
  • The first was German unification in 1871
  • The second challenge came from the United States, which also was industrializing at a dramatic pace -- a process ironically underwritten by investors from Britain seeking higher returns than they could get at home.
  • The German challenge culminated in World War I, a catastrophe for Britain and for the rest of Europe. Apart from decimating a generation of men, the cost of the war undermined Britain's economic base, subtly shifting London's relationship with its empire. Moreover, British power no longer seemed inevitable
  • World War II, the second round of the German war, broke Britain's power.
  • Britain lost the war not to Germany but to the United States. It might have been a benign defeat in the sense that the United States, pursuing its own interests, saved Britain from being forced into an accommodation with Germany. Nevertheless, the balance of power between the United States and Britain completely shifted during the war. Britain emerged from the war vastly weaker economically and militarily than the United States. Though it retained its empire, its ability to hold it depended on the United States. Britain no longer could hold it unilaterally. 
    • Erik Hanson
      Erik Hanson on 07 Jun 12
       
      I think many would argue that Britain didn't retain its empire, but lost large parts of it, even if it clung to a few key colonies for a while longer.
  • British strategy at the end of the war was to remain aligned with the United States and try to find a foundation for the United States to underwrite the retention of the empire. But the United States had no interest in this. It saw its primary strategic interest as blocking the Soviet Union in what became known as the Cold War.
  • The U.S. political intervention against the British, French and Israeli attack on Egypt in 1956, which was designed to maintain British control of the Suez Canal, marked the empire's breaking point. Thereafter, the British retreated strategically and psychologically from the empire.
  • the British aligned themselves with the U.S.-dominated alliance system and the postwar financial arrangements lumped together under the Bretton Woods system.
  • The British, however, added a dimension to this. Unable to match the United States militarily, they outstripped other American allies both in the quantity of their military resources and in their willingness to use them at the behest of the Americans.
  • Britain could not be America's equal. However, it could in effect be America's lieutenant, wielding a military force that outstripped in number -- and technical sophistication -- the forces deployed by other European countries.
  • The goal was to accept a subordinate position without being simply another U.S. ally.
  • The United States was not motivated to go along merely out of sentiment based on shared history, although that played a part. Rather, like all great powers, the United States wanted to engage in coalition warfare and near warfare along with burden sharing.
  • A good example -- though not a very important one -- was London's ability to recruit U.S. support in Britain's war against Argentina in the Falkland Islands, also known as the Malvinas. The United States had no interests at stake, but given that Britain did have an interest, the U.S. default setting was to support the British. 
  • There were two dangers for the British in this relationship.
  • The first was the cost of maintaining the force relative to the benefits.
  • The second was the danger of being drawn so deeply into the U.S. orbit that Britain would lose its own freedom of action, effectively becoming, as some warned, the 51st state.
  • Britain has developed a strategy of being enmeshed in Europe without France's enthusiasm, at the same time positioning itself as the single most important ally of the only global power. There are costs on both sides of this, but Britain has been able to retain its options while limiting its dependency on either side.
  • While the United States remains Britain's largest customer for exports if Europe is viewed as individual countries, Europe as a whole is a bigger customer.
  • Britain has positioned itself superbly for a strategy of waiting, watching and retaining options regardless of what happens. If the European Union fails and the European nation-states re-emerge as primary institutions, Britain will be in a position to exploit the fragmentation of Europe to its own economic and political advantage and have the United States available to support its strategy.
  • If the United States stumbles and Europe emerges more prominent, Britain can modulate its relationship with Europe at will and serve as the Europeans' interface with a weakened United States. If both Europe and the United States weaken, Britain is in a position to chart whatever independent course it must.
  • Whatever the British thought of Iraq, a strategy of remaining the most reliable ally of the United States dictated participation.
  • The British strategy represents a classic case of a nation accepting reversal, retaining autonomy, and accommodating itself to its environment while manipulating it. All the while Britain waits, holding its options open, waiting to see how the game plays out and positioning itself to take maximum advantage of its shifts in the environment.
  • anonymous on 01 May 12
     
    Britain controlled about one-fourth of the Earth's land surface and one-fifth of the world's population in 1939. Fifty years later, its holdings outside the British Isles had become trivial, and it even faced an insurgency in Northern Ireland. Britain spent the intervening years developing strategies to cope with what poet Rudyard Kipling called its "recessional," or the transient nature of Britain's imperial power. It has spent the last 20 years defining its place not in the world in general but between continental Europe and the United States in particular.
anonymous

The Origins and Implications of the Scottish Referendum - 0 views

www.stratfor.com/...plications-scottish-referendum

shared by anonymous on 16 Sep 14 - Cached
  • the idea that the union of England and Scotland, which has existed for more than 300 years, could be dissolved has enormous implications in its own right, and significant implications for Europe and even for global stability.
  • In many ways, this union was a pivot of world history. To realize it might be dissolved is startling and reveals important things about the direction of the world.
  • Scotland and England are historical enemies. Their sense of competing nationhoods stretches back centuries, and their occupation of the same island has caused them to fight many wars. Historically they have distrusted each other, and each has given the other good reason for the distrust.
  • ...30 more annotations...
  • The British were deeply concerned that foreign powers, particularly France, would use Scotland as a base for attacking England. The Scots were afraid that the English desire to prevent this would result in the exploitation of Scotland by England, and perhaps the extinction of the Scottish nation.
  • From an outsider's perspective, Scotland and England were charming variations on a single national theme -- the British -- and it was not necessary to consider them as two nations.
  • We need a deeper intellectual framework for understanding why Scottish nationalism has persisted.
  • The French Enlightenment and subsequent revolution had elevated the nation to the moral center of the world. It was a rebellion against the transnational dynasties and fragments of nations that had governed much of Europe.
  • After the French Revolution, some nations, such as Germany and Italy, united into nation-states.
  • After World War I, when the Hapsburg, Hohenzollern, Romanov and Ottoman empires all collapsed
  • A second major wave of devolution occurred in 1992, when the Soviet Union collapsed
  • The doctrine of the right to national self-determination drove the first wave of revolts against European imperialism in the Western Hemisphere, creating republics in the Americas.
  • The second wave of colonial rising and European withdrawal occurred after World War II.
  • the entire world could not resist the compulsion to embrace the principles of national self-determination through republican democracy. This effectively was codified as the global gold standard of national morality in the charters of the League of Nations and then the United Nations.
  • The incredible power of the nation-state as a moral principle and right could be only imperfectly imposed. No nation was pure. Each had fragments and minorities of other nations. In many cases, they lived with each other. In other cases, the majority tried to expel or even destroy the minority nation. In yet other cases, the minority demanded independence and the right to form its own nation-state. These conflicts were not only internal; they also caused external conflict over the right of a particular nation to exist or over the precise borders separating the nations.
  • After the war, a principle emerged in Europe that the borders as they stood, however imperfect, were not to be challenged. The goal was to abolish one of the primary causes of war in Europe.
  • The point of all this is to understand that the right to national self-determination comes from deep within European principles and that it has been pursued with an intensity and even viciousness that has torn Europe apart and redrawn its borders.
  • One of the reasons that the European Union exists is to formally abolish these wars of national self-determination by attempting to create a framework that both protects and trivializes the nation-state.
  • The possibility of Scottish independence must be understood in this context.
  • Nationalism, the remembrance and love of history and culture, is not a trivial thing. It has driven Europe and even the world for more than two centuries in ever-increasing waves. The upcoming Scottish election, whichever way it goes, demonstrates the enormous power of the desire for national self-determination. If it can corrode the British union, it can corrode anything.
  • There are those who argue that Scottish independence could lead to economic problems or complicate the management of national defense. These are not trivial questions, but they are not what is at stake here.
  • At best, the economic benefits are uncertain. But this is why any theory of human behavior that assumes that the singular purpose of humans is to maximize economic benefits is wrong.
  • Humans have other motivations that are incomprehensible to the economic model but can be empirically demonstrated to be powerful.
  • If this referendum succeeds, it will still show that after more than 300 years, almost half of Scots prefer economic uncertainty to union with a foreign nation.
  • This is something that must be considered carefully in a continent that is prone to extreme conflicts and still full of borders that do not map to nations as they are understood historically.
  • The right to national self-determination is not simply about the nation governing itself but also about the right of the nation to occupy its traditional geography. And since historical memories of geography vary, the possibility of conflict grows.
  • Consider Ireland: After its fight for independence from England and then Britain, the right to Northern Ireland, whose national identity depended on whose memory was viewing it, resulted in bloody warfare for decades.
  • England will be vulnerable in ways that it hasn't been for three centuries.
  • This is not an argument for or against Scottish nationhood. It is simply drawing attention to the enormous power of nationalism in Europe in particular, and in countries colonized by Europeans.
  • the idea that Scotland recalls its past and wants to resurrect it is a stunning testimony less to Scottish history than to the Enlightenment's turning national rights into a moral imperative that cannot be suppressed.
  • At a time when the European Union's economic crisis is intense, challenging European institutions and principles, the dissolution of the British union would legitimize national claims that have been buried for decades.
  • But then we have to remember that Scotland was buried in Britain for centuries and has resurrected itself. This raises the question of how confident any of us can be that national claims buried for only decades are settled.
  • For centuries, nationalism has trumped economic issues. The model of economic man may be an ideal to some, but it is empirically false.
  • I think that however the vote goes, unless the nationalists are surprised by an overwhelming defeat, the genie is out of the bottle, and not merely in Britain. The referendum will re-legitimize questions that have caused much strife throughout the European continent for centuries, including the 31-year war of the 20th century that left 80 million dead.
  • anonymous on 16 Sep 14
     
    "The idea of Scottish independence has moved from the implausible to the very possible. Whether or not it actually happens, the idea that the union of England and Scotland, which has existed for more than 300 years, could be dissolved has enormous implications in its own right, and significant implications for Europe and even for global stability."
anonymous

Arizona, Borderlands and U.S.-Mexican Relations - 0 views

www.stratfor.com/...lands_and_us_mexican_relations

geopolitics

shared by anonymous on 03 Aug 10 - Cached
  • the entire issue cannot simply be seen as an internal American legal matter. More broadly, it forms part of the relations between the United States and Mexico, two sovereign nation-states whose internal dynamics and interests are leading them into an era of increasing tension. Arizona and the entire immigration issue have to be viewed in this broader context.
  • Until the Mexican-American War, it was not clear whether the dominant power in North America would have its capital in Washington or Mexico City.
  • Mexico was the older society with a substantially larger military. The United States, having been founded east of the Appalachian Mountains, had been a weak and vulnerable country.
  • ...31 more annotations...
  • The War of 1812 showed the deep weakness of the United States. By contrast, Mexico had greater strategic depth and less dependence on exports.
  • The American solution to this strategic weakness was to expand the United States west of the Appalachians, first into the Northwest Territory ceded to the United States by the United Kingdom and then into the Louisiana Purchase, which Thomas Jefferson ordered bought from France.
  • During the War of 1812, the British tried to seize New Orleans, but forces led by Andrew Jackson defeated them in a battle fought after the war itself was completed.
  • Jackson understood the importance of New Orleans to the United States.
  • Mexico therefore represented a fundamental threat to the United States.
  • In response, Jackson authorized a covert operation under Sam Houston to foment an uprising among American settlers in the Mexican department of Texas with the aim of pushing Mexico farther west.
  • Mexico’s strategic problem was the geography south of the Rio Grande (known in Mexico as the Rio Bravo).
  • The creation of an independent Texas served American interests, relieving the threat to New Orleans and weakening Mexico. The final blow was delivered under President James K. Polk during the Mexican-American War, which (after the Gadsden Purchase) resulted in the modern U.S.-Mexican border. That war severely weakened both the Mexican army and Mexico City, which spent roughly the rest of the century stabilizing Mexico’s original political order.
  • The U.S. defeat of Mexico settled the issue of the relative power of Mexico and the United States but did not permanently resolve the region’s status; that remained a matter of national power and will.
  • An accelerating population movement out of Mexico and into the territory the United States seized from Mexico paralleled the region’s accelerating economic growth.
  • The inclination of the United States to pull labor north was thus matched by the inclination of Mexico to push that labor north.
  • The U.S. government, however, wanted an outcome that was illegal under U.S. law.
  • Three fault lines emerged in United States on the topic.
  • One was between the business classes
  • The second lay between the federal government, which saw the costs as trivial, and the states, which saw them as intensifying over time.
  • And third, there were tensions between Mexican-American citizens and other American citizens
  • Underlying this political process was a geopolitical one. Immigration in any country is destabilizing.
  • Immigrants have destabilized the United States ever since the Scots-Irish changed American culture, taking political power and frightening prior settlers.
  • That equation ultimately also works in the case of Mexican migrants, but there is a fundamental difference. When the Irish or the Poles or the South Asians came to the United States, they were physically isolated from their homelands.
  • This is not the case, however, for Mexicans moving into the borderlands conquered by the United States just as it is not the case in other borderlands around the world. Immigrant populations in this region are not physically separated from their homeland, but rather can be seen as culturally extending their homeland northward — in this case not into alien territory, but into historically Mexican lands.
  • The Mexican-American War established the political boundary between the two countries.
  • The political border stays where it is while the cultural border moves northward.
  • The underlying fear of those opposing this process is not economic (although it is frequently expressed that way), but much deeper: It is the fear that the massive population movement will ultimately reverse the military outcome of the 1830s and 1840s
  • The problem is that Mexicans are not seen in the traditional context of immigration to the United States. As I have said, some see them as extending their homeland into the United States, rather than as leaving their homeland and coming to the United States.
  • when those who express these concerns are demonized, they become radicalized.
  • Centuries ago, Scots moved to Northern Ireland after the English conquered it. The question of Northern Ireland, a borderland, was never quite settled. Similarly, Albanians moved to now-independent Kosovo, where tensions remain high. The world is filled with borderlands where political and cultural borders don’t coincide and where one group wants to change the political border that another group sees as sacred.
  • Migration to the United States is a normal process. Migration into the borderlands from Mexico is not.
  • Jewish migration to modern-day Israel represents a worst-case scenario for borderlands.
  • An absence of stable political agreements undergirding this movement characterized this process.
  • The problem as I see it is that the immigration issue is being treated as an internal debate among Americans when it is really about reaching an understanding with Mexico.
  • Immigration has been treated as a subnational issue involving individuals. It is in fact a geopolitical issue between two nation-states. Over the past decades, Washington has tried to avoid turning immigration into an international matter, portraying it rather as an American law enforcement issue. In my view, it cannot be contained in that box any longer.
  • anonymous on 03 Aug 10
     
    "...the entire issue cannot simply be seen as an internal American legal matter. More broadly, it forms part of the relations between the United States and Mexico, two sovereign nation-states whose internal dynamics and interests are leading them into an era of increasing tension. Arizona and the entire immigration issue have to be viewed in this broader context." By George Friedman at StratFor on August 3, 2010.
anonymous

Seeking the Future of Europe in the Ancient Hanseatic League - 0 views

www.stratfor.com/...urope-ancient-hanseatic-league

shared by anonymous on 11 Dec 14 - Cached
  • anonymous on 11 Dec 14
     
    "A bargain, forged in the fires of 2012's economic emergency, has defined the European Union for the past two years. It was an agreement made between two sides that can be defined in several terms - the center and the periphery, the north and the south, the producers and the consumers - but essentially one side, led by Germany, provided finance, while the other, fronted by Spain, Portugal, Ireland and Greece, promised change. In order to gauge this arrangement's chances of ultimately succeeding, it is important to understand what Germany was hoping to achieve with its conditional financing. The answer to that question lies in Germany's own history. "
anonymous

The Insanity of Our Food Policy - NYTimes.com - 0 views

mobile.nytimes.com/...he-insanity-of-our-food-policy

shared by anonymous on 19 Nov 13 - No Cached
  • The House has proposed cutting food stamp benefits by $40 billion over 10 years — that’s on top of $5 billion in cuts that already came into effect this month with the expiration of increases to the food stamp program that were included in the 2009 stimulus law.
  • Meanwhile, House Republicans appear satisfied to allow farm subsidies, which totaled some $14.9 billion last year, to continue apace.
  • The proposal is a perfect example of how growing inequality has been fed by what economists call rent-seeking. As small numbers of Americans have grown extremely wealthy, their political power has also ballooned to a disproportionate size.
  • ...20 more annotations...
  • While the money that they’ve picked from each individual American’s pocket is small, the aggregate is huge for the rent-seeker. And this in turn deepens inequality.
  • FARM subsidies were much more sensible when they began eight decades ago, in 1933, at a time when more than 40 percent of Americans lived in rural areas. Farm incomes had fallen by about a half in the first three years of the Great Depression. In that context, the subsidies were an anti-poverty program.
  • Some three-quarters of the subsidies went to just 10 percent of farms. These farms received an average of more than $30,000 a year — about 20 times the amount received by the average individual beneficiary last year from the federal Supplemental Nutrition Assistant Program, or SNAP, commonly called food stamps.
  • More than 80 percent of the 45 million or so Americans who participated in SNAP in 2011, the last year for which there is comprehensive data from the United States Department of Agriculture, had gross household incomes below the poverty level.
  • Historically, food stamp programs and agricultural subsidies have been tied together.
  • The Nobel Prize winning economist Amartya Sen has reminded us that even famines are not necessarily caused by a lack of supply, but by a failure to get the food that exists to the people who need it. This was true in the Bengal famine of 1943 and in the Irish potato famine a century earlier: Ireland, controlled by its British masters, was exporting food even as its citizens died of starvation.
  • A similar dynamic is playing out in the United States. American farmers are heralded as among the most efficient in the world. Our country is the largest producer and exporter of corn and soybeans, to name just two of its biggest crops. And yet millions of Americans still suffer from hunger, and millions more would, were it not for the vital programs that government provides to prevent hunger and malnutrition — the programs that the Republicans are now seeking to cut back.
  • While they encourage overproduction, they pay little attention to the quality and diversity of foods our farms produce. The heavy subsidization of corn, for instance, means that many unhealthful foods are relatively cheap.
  • This is part of the reason that Americans face the paradox of hunger out of proportion to their wealth, along with some of the world’s highest obesity rates, and a high incidence of Type 2 diabetes. Poor Americans are especially at risk for obesity.
    • anonymous
      anonymous on 19 Nov 13
       
      This is such a raw example of Unintend Consequences. The intention of policy architecture just can't account for ingenious manipulation 
  • Indian friends I met that day and in the following week were puzzled by this news: How could it be that in the richest country of the world there was still hunger?
  • Their puzzlement was understandable: Hunger in this rich land is unnecessary. What my Indian friends didn’t understand is that 15 percent of Americans — and 22 percent of America’s children — live in poverty.
  • Someone working full time (2,080 hours a year) at the minimum wage of $7.25 would earn about $15,000 a year, far less than the poverty threshold for a family of four ($23,492 in 2012), and even less than the poverty level of a family of three.
  • In his famous 1941 “four freedoms” speech, Franklin D. Roosevelt enunciated the principle that all Americans should have certain basic economic rights, including “freedom from want.”
  • And those numbers increased drastically with the onset of the Great Recession. The number of Americans on food stamps went up by more than 80 percent between 2007 and 2013.
  • In 2012, for example, two in five SNAP recipients had gross incomes that were less than half of the poverty line.
  • The amount they get from the program is very small — $4.39 a day per recipient.
  • The Center on Budget and Policy Priorities estimates that SNAP lifted four million Americans out of poverty in 2010.
  • with American consumption diminished from what it otherwise would be and production increased, food exports will inevitably increase.
  • By cutting back on food stamps, we are ensuring the perpetuation of inequality, and at that, one of its worst manifestations: the inequality of opportunity.
  • All of this exposes the Republicans’ argument in favor of these food policies — a concern for our future, particularly the impact of the national debt on our children — as a dishonest and deeply cynical pretense.
  • anonymous on 19 Nov 13
     
    "American food policy has long been rife with head-scratching illogic. We spend billions every year on farm subsidies, many of which help wealthy commercial operations to plant more crops than we need. The glut depresses world crop prices, harming farmers in developing countries. Meanwhile, millions of Americans live tenuously close to hunger, which is barely kept at bay by a food stamp program that gives most beneficiaries just a little more than $4 a day."
anonymous

Global Economic Downturn: A Crisis of Political Economy - 0 views

www.stratfor.com/...nturn-crisis-political-economy

geopolitics criticalthinking politics economics u.s. crisis

shared by anonymous on 15 Aug 11 - Cached
  • For classical economists, it was impossible to understand politics without economics or economics without politics.
  • The use of the term “economy” by itself did not begin until the late 19th century.
  • For classical economists, the political and economic systems were intertwined, each dependent on the other for its existence.
  • ...54 more annotations...
  • The current economic crisis is best understood as a crisis of political economy.
  • Moreover, it has to be understood as a global crisis enveloping the United States, Europe and China that has different details but one overriding theme: the relationship between the political order and economic life.
  • the origin of the current financial crisis was the subprime mortgage meltdown in the United States.
  • To be more precise, it originated in a financial system generating paper assets whose value depended on the price of housing.
  • From the standpoint of economics, this was essentially a financial crisis: who made or lost money and how much.
  • From the standpoint of political economy it raised a different question: the legitimacy of the financial elite.
  • Think of a national system as a series of subsystems — political, economic, military and so on.
  • Then think of the economic system as being divisible into subsystems — various corporate verticals with their own elites, with one of the verticals being the financial system.
  • A sense emerged that the financial elite was either stupid or dishonest or both.
  • Fair or not, this perception created a massive political crisis.
  • There was a crisis of confidence in the financial system and a crisis of confidence in the political system. The U.S. government’s actions in September 2008 were designed first to deal with the failures of the financial system. Many expected this would be followed by dealing with the failures of the financial elite, but this is perceived not to have happened.
  • This generated the second crisis — the crisis of the political elite.
  • The Tea Party movement emerged in part as critics of the political elite, focusing on the measures taken to stabilize the system and arguing that it had created a new financial crisis, this time in excessive sovereign debt.
  • Its argument was that the political elite used the financial crisis to dramatically increase the power of the state (health care reform was the poster child for this) while mismanaging the financial system through excessive sovereign debt.
  • The sovereign debt question also created both a financial crisis and then a political crisis in Europe.
  • What had been a minority view was strengthened by the recession.
  • The European crisis paralleled the American crisis in that financial institutions were bailed out. But the deeper crisis was that Europe did not act as a single unit to deal with all European banks
  • There are two narratives to the story.
  • One is the German version, which has become the common explanation. It holds that Greece wound up in a sovereign debt crisis because of the irresponsibility of the Greek government
  • The Greek narrative, which is less noted, was that the Germans rigged the European Union in their favor. Germany is the world’s third-largest exporter, after China and the United States (and closing rapidly on the No. 2 spot). By forming a free trade zone, the Germans created captive markets for their goods.
  • Moreover, the regulations generated by Brussels so enhanced the German position that Greece was helpless.
  • Which narrative is true is not the point.
  • The point is that Europe is facing two political crises generated by economics. One crisis is similar to the American one, which is the belief that Europe’s political elite protected the financial elite. The other is a distinctly European one, a regional crisis in which parts of Europe have come to distrust each other rather vocally. This could become an existential crisis for the European Union.
  • The American and European crises struck hard at China, which, as the world’s largest export economy, is a hostage to external demand, particularly from the United States and Europe.
  • The Chinese government had two responses.
  • The first was to keep factories going by encouraging price reductions to the point where profit margins on exports evaporated.
  • The second was to provide unprecedented amounts of credit to enterprises facing default on debts in order to keep them in business.
  • This led to a second crisis, where workers faced the contraction of already small incomes.
  • The response was to increase incomes, which in turn increased the cost of goods exported once again, making China’s wage rates less competitive, for example, than Mexico’s.
  • China had previously encouraged entrepreneurs. This was easy when Europe and the United States were booming. Now, the rational move by entrepreneurs was to go offshore or lay off workers, or both.
  • In the United States, the first impulse was to regulate the financial sector, stimulate the economy and increase control over sectors of the economy.
  • In Europe, where there were already substantial controls over the economy, the political elite started to parse how those controls would work and who would benefit more.
  • In China, where the political elite always retained implicit power over the economy, that power was increased.
  • In all three cases, the first impulse was to use political controls.
  • In the United States, the Tea Party was simply the most active and effective manifestation of that resistance.
  • In Europe, the resistance came from anti-Europeanists
  • It also came from political elites of countries like Ireland who were confronting the political elites of other countries.
  • In China, the resistance has come from those being hurt by inflation
  • Russia went through this crisis years ago and had already tilted toward the political elite’s control over the economy.
  • Brazil and India have not experienced the extremes of China, but then they haven’t had the extreme growth rates of China.
  • But when the United States, Europe and China go into a crisis of this sort, it can reasonably be said that the center of gravity of the world’s economy and most of its military power is in crisis. It is not a trivial moment.
  • Crisis does not mean collapse. The United States has substantial political legitimacy to draw on.
  • Europe has less but its constituent nations are strong.
  • China’s Communist Party is a formidable entity but it is no longer dealing with a financial crisis.
  • It is vital to understand that this is not an ideological challenge.
  • Left-wingers opposing globalization and right-wingers opposing immigration are engaged in the same process — challenging the legitimacy of the elites.
    • anonymous
      anonymous on 15 Aug 11
       
      This is why so much of American life seems like that proverbial puppet show. Politicians, at their basest, have a vested interest in portraying this as a problem between us-vs-them. It reflects heat.
  • The real problem is that, while the challenge to the elites goes on, the profound differences in the challengers make an alternative political elite difficult to imagine.
  • This, then, is the third crisis that can emerge: that the elites become delegitimized and all that there is to replace them is a deeply divided and hostile force, united in hostility to the elites but without any coherent ideology of its own.
  • In the United States this would lead to paralysis. In Europe it would lead to a devolution to the nation-state. In China it would lead to regional fragmentation and conflict.
  • These are all extreme outcomes and there are many arrestors.
  • But we cannot understand what is going on without understanding two things.
  • The first is that the political economic crisis, if not global, is at least widespread, and uprisings elsewhere have their own roots but are linked in some ways to this crisis.
  • The second is that the crisis is an economic problem that has triggered a political problem, which in turn is making the economic problem worse.
  • The followers of Adam Smith may believe in an autonomous economic sphere disengaged from politics, but Adam Smith was far more subtle. That’s why he called his greatest book the Wealth of Nations. It was about wealth, but it was also about nations. It was a work of political economy that teaches us a great deal about the moment we are in.
  • anonymous on 15 Aug 11
     
    Classical political economists like Adam Smith or David Ricardo never used the term "economy" by itself. They always used the term "political economy." For classical economists, it was impossible to understand politics without economics or economics without politics. The two fields are certainly different but they are also intimately linked.
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