Iceland Considers Dollarization (Canadian $ That Is)

More so in years long past, many countries used to adopt the US dollar as their own to assume the benefits conferred by the world's standard currency. Among other things, these included liquidity, price stability and being a reasonable store of value. While an independent monetary policy was forsaken--or at least "outsourced" to the Fed--many smaller economies came to the conclusion that adopting the US dollar outweighed the benefits. In recent years, of course, the dollar's uncertain status has begun to erode its advantages and hence the lure of dollarization.

For some time now, the small, open economy of Iceland has been looking to replace its krona with something less volatile in the wake of its financial crisis that eventually ended in tears via an IMF bailout. How do you quell the "violence of the market"? Being a small, open economy renders one's own currency more subject to the changing winds. As a European nation, Iceland naturally thought of joining the EU and particularly the EMU to solve this issue, but lately it's had second thoughts given the variegated PIGS implosions. That is, if many of those countries have gone to the IMF poorhouse anyway, what's the advantage for Iceland? In reality, the conditionalities applied there were less harsh than those in Greece or Portugal, allowing for populist measures to pass:

Not only are Icelanders taking note of the increasingly frantic efforts of politicians in countries hundreds of kilometres away to save the euro, they are finding that their own financial circumstances constitute less of an emergency. The conditions attached to their bailout by the IMF seem comparatively lenient.

The new government of 2009 was allowed to carry on borrowing and spending for another year before the cuts kicked in. In the meantime, devaluation - something impossible for eurozone members - meant all-important exports suddenly became competitive again. Unemployment is already falling. Many people's mortgages were quietly "re-negotiated" by the newly nationalised banks.

The richest 5-7% of the population have been subjected to a new wealth tax. The welfare state and the health service were shielded from the biggest savings and public sector workers have recently been awarded an above-inflation wage rise. Opinion polls suggest a clear majority of Icelanders now oppose joining the EU and the finance minister, overseeing all these changes, is among them. 

Now there is talk of adopting dollars instead of euros. But, the interesting this is that they're talking about Canadian dollars here. I've often thought of Canadians as the more civilized North Americans, on a far sounder economic footing than their restless, warmongering neighbours. These folks actually understand that deficits do matter. There are excellent reasons why the loonie (Canadian dollar) has strengthened so much against the play money used by those free lunch lovers across the border. You needn't wonder who's still got a triple-A debt rating, either.
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Accordingly, the Globe and Mail brings us five reasons for the improbable adoption of the loonie by Iceland. As it turns out, some Canadians are pushing for it with gusto:

1. Seigniorage: “Printing money is a good thing for Canada,” [economist Justin] Wolfers said. “Every dollar in circulation is on the debit side of the central bank’s balance sheet, and they’re effectively borrowing from the Icelanders at a zero-per-cent interest rate.” So if there are no strings attached, why not? Or, as Mr. Wolfers put it, referring to Iceland, “as long as you’re a bastard, it’s all profit.”

2. A stable currency: Iceland could of course benefit from a devalued currency. Instead it would get a strong, stable currency that has been something of a haven during this post-crisis period of uncertainty. While strong, exporters at least know what to expect. Consider, too, that the Canadian dollar is liquid. The krona was "blasted through smithereens and very few banks can trade [it] in anything else than very small amounts..."

3. Respected central bank: Iceland would of course have no say in monetary policy, but it would have a currency overseen by a very strong central bank and governor, who led Canada out of the recession admirably. Mark Carney is also respected on the global stage, having recently been named to head up the Financial Stability Board.

4. Fiscal, economic stability: Iceland has no reputation in the wake of its banking collapse. Who would you prefer at that point, a euro zone crippled by recession and a two-year-old debt crisis, or Canada? With Canada, you get a stable, if lukewarm, economic outlook, a government that’s still rated triple-A, and a fiscal standing to die for (if you’re Greece or Portugal). And, we can count.

5. Our glowing hearts For Iceland, do not underestimate friendship in this post-crisis era of currency manipulation and mounting trade tensions. We’re a wonderful people, they’re a wonderful people. We’ve got a beautiful country, they’ve got a beautiful country. True, it gets cold in Canada in the winter, but remember we’re talking about Iceland. And surely we can forgive them for Björk.
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It's a fairly off-the-wall thing to do to adopt the Canadian dollar, but hey, the economic rationale seems to be straightforward once you get over the initial shock of the idea.

Jackson-Vanik, Cold War US-Russia Trade Irritant

I recently visited Singapore and was given a quaint reminder of days gone by when, while checking into my hotel, I noticed a separate registration section needed to be filled by unmarried guests sharing the same room. Quibble if you will with the moralistic tone of this practice, but it's definitely not in tune with the times. In a similar vein, I came across yet another practice that seems to have been lifted from antiquity concerning the application of the Jackson-Vanik amendment against Russia which dates from the heyday of one Leonid Brezhnev.

In 1974, Senator Henry Jackson (D-WA) and Congressman Charles Vanik (D-OH) introduced the eponymous amendment which forbids the US from granting most-favoured nation (MFN) status or permanent normalized trade relations (PNTR) in American trade legalese to nations that restricted emigration of their citizens. The Soviet Union had effectively put into place severe limits on emigration to Western nations--especially its most skilled including Jewish citizens. Call it the totalitarian, zero tolerance approach to brain drain. In turn, I assume that the US found this practice to be a gross violation of human rights based on the Universal Declaration of Human Rights wherein Article 13 (2) states "Everyone has the right to leave any country, including his own, and to return to his country."

But that was a long time ago in a political context far, far away. While Jackson-Vanik has become an all-purpose American cudgel against Russia, the honest truth is that the Sov...I mean, Russians have long since relented on such limits to emigration. Nearly all mainstream media commentators have missed this important point that they are now "in compliance" with Jackson-Vanik. Inter alia, over a million Jews have emigrated from the USS...I mean, Russia to Israel. Nowadays, Israelis are instead complaining of integration issues arising from too much emigration from Russia:

Twenty years after Russia opened its doors to mass emigration, the number of immigrants choosing to move to Israel has stagnated. Since 1989, over one million Russians have immigrated to Israel. In the past few years, Israel has seen an average of between five and six thousand Russian immigrants per year.

Professor Eliezer Leshem, a former Hebrew University professor and current Professor Emeritus at Ariel University Center of Samaria, believes that the current cessation of immigration may have something to do with discrimination many Russians felt while being absorbed into Israeli society.

Russians have long been able to settle wherever they want--including the United States as I myself remember from my MBA days when many American classmates had Russian wives. Yet the US has found it politically expedient to continue applying Jackson-Vanik against Russia. A few months ago I relayed the much-anticipated news that Russia would at last join the WTO. The problem here with regard to Jackson-Vanik is that the WTO requires that its members extend MFN treatment to one another. Hence, the Obama administration's recognition of this basic understanding is behind its argument to lift Jackson-Vanik against Russia.

Speaking of Cold War remnants, though, it is unsurprising that it's the neoconservative wing of American politics that is most fervently opposed to removing Jackson-Vanik (which is doubly odd in that Democrats authored this legislation long ago.) For instance, that bastion of right-leaning thought the WSJ op-ed pages says a repeal of the amendment would come "From Obama With Love" by effectively approving of Vladimir Putin's suspect election victory (among other nefarious practices).

To cut a long story short, the US has only two real options here regarding Russia's membership as a Congressional Report Service report anticipated in 2005. First, the US can do what it has done for several other nations it has applied Jackson-Vanik against by granting MFN status upon WTO accession. Which is what several Democratic lawmakers have been pushing for quite some time now. Second, the US can relive the Cold War by refusing to grant PNTR status to Russia, which violates its WTO MFN commitments. The only possible workaround is for the US (and by implication Russia) to pretend the WTO doesn't exist:

[I]nvoke the "non-application principle" of the WTO. For newly acceding countries, a member of the WTO can opt out of WTO commitments with respect to the newly acceding country if it invokes the “non-application” principle [Article XIII of the Marrakesh Agreement to be precise]. If the U.S. were to invoke the non-application principle against Russia, it means that the U.S. would refuse to honor its WTO obligations to Russia. But non-application is reciprocal. So the U.S. would not have any assurance that its exporters or investors would be treated in Russia according to Russia's WTO commitments.

It would certainly have been a rather pointless process to extract all sorts of commitments from Russia to accede to the WTO only for its most influential member to ignore the fact that Russia is indeed a WTO member. But, that's world politics for you. Note however that business lobbies think it would be a daft idea not to repeal Jackson-Vanik after everything that's transpired:

The business community has also “come out in full force,” going on the Hill to make it clear Russia is a priority, said the Baucus aide. A business coalition–whose members include major groups such as the U.S. Chamber of Commerce and National Association of Manufacturers as well as multinationals such as Boeing Co. and General Electric Co., announced earlier this month that restoring trade relations with Russia will be the top trade priority this year.

If this is indeed what will occur, note that the only current WTO member with the dubious distinction of not being granted MFN status by the US is Moldova:

In practice, the U.S. has dropped Jackson-Vanik on all countries that have acceded to the WTO with one exception. In the cases of Albania, Bulgaria Cambodia, Estonia, Latvia and Lithuania, Jackson-Vanik was repealed prior to accession. In the cases of Mongolia, Armenia, Georgia, Kyrgyzstan it was repealed after accession, so the "non-application" principle was invoked, but eventually removed within a year or two. (In the case of Georgia, non-application was never invoked since Jackson-Vanik was removed soon enough after accession.) Only in the case of Moldova does Jackson-Vanik still apply to a country that acceded to the WTO.

Moldovans too have been freely emigrating for years, so their holdup must be for other reasons.

We'll see what happens as the US congress begins deliberations over the implications of Russian WTO membership later this week. Even Putin's opponents can agree that trade with Russia should not be curtailed via Jackson-Vanik (but rather economic ties with specific human rights offenders through separate legislation). Me? I'll be cueing up Springsteen's "Glory Days" as a backhanded salute to those poor souls who simply cannot accept that the world has moved on--in the wink of a young girl's eye.

Boeing Flies High With Chinese Over EU Carbon Cap

For all the trade conflicts going on between China and the US, here's something that goes against the grain.Think of the US being a beneficiary of a trade conflict involving China and some other country.. That is exactly the sort of thing going on here. To be sure, China and the EU have at least as much trade conflict going on as China and the US. However, that this particular PRC-EU spat redounds to the benefit of the US is remarkable.

A few moons ago I discussed the possibilities for the EU initiating a nasty trade row over it extending its carbon emissions regulations to cover aircraft emissions in 2012 [1, 2]. It's certainly true that the airline industry should be covered in an environmental regulation scheme insofar as jetliners obviously have carbon emissions. However, controversy surrounds the EU also including miles incurred by foreign airlines landing in EU airports and not only those within EU airspace. That is, foreign carriers and their home nations claim unjust inclusion over "extraterritorial" grounds. In this regard the world's superpolluters China and America are united to name check a now-defunct airline.

With these regulations coming into effect in 2012 without much attention paid to the foreign dissenters, it may finally be coming to pass that substantial orders for Airbus aircraft by Chinese carriers may be cancelled in favour of those of Boeing. Or at least a senior PRC official hints while Airbus parent company EADS is in limbo over halted deliveries...

China's ambassador to the European Union said it "makes sense" for Chinese airlines to shun Europe's Airbus planes in favor of competing American models from Boeing Co. in response to the EU's new levies on aviation greenhouse emissions. Wu Hailong's comments are among the first by a senior Chinese official linking Beijing's displeasure with the EU's emissions trading system, or ETS, to jetliner sales by the Airbus unit of [EADS].

EADS chief executive Louis Gallois on Thursday said that the Chinese government is withholding final approval on contracts for 45 Airbus jetliners with a catalog value of $12 billion because of ETS. Mr. Wu said that when the EU includes a Chinese airline in the ETS, "it makes sense for them to go to Boeing."

With the PRC becoming an important source of passengers--both businesspersons and tourists--this row is set to run:

Officials in Beijing have not commented officially on Mr. Gallois's statement that China was delaying approval. In China, airplane orders have traditionally required government approval. Mr. Wu in Brussels said that Chinese airplane orders are "largely a commercial decision by the airline, but of course their decision will be influenced by the position of the central government on ETS." 

While environmentalist may commend EU nations on their commitment to the environment, its environmental ministers of course do not necessarily represent the manufacturing constituencies where Airbus models are made and assembled. In this way a smaller but more evenly spread out industry alike agriculture has better representation of its interests in Brussels compared to a larger but more concentrated one alike aeronautics.

Still, if there ever was a trade and environment issue ripe for a WTO Dispute Settlement Mechanism case, it would be this one.

Yanks Never Learn: US Imports Hit Record High

This has to be the most ridiculous story I've seen all week long. One that once again demonstrates that you don't have to go much further than the Yahoo! News front page for IPE-relevant material. For all the hot air about "global rebalancing," the Yanks seem to be repeating the Bushite formula for Guaranteed Economic Disaster, with PIGs' pork seasoning for added flavouring to keep things current. We already know that after having run massive fiscal deficits which did not nothing other than make things ripe for a crisis, the US have upped the ante by running trillion dollar budget deficits for four straight years with no end in sight.

Others said, "well at least the current account deficit is getting under control." Which, unfortunately, is not really happening. The trouble with these people is that they do the same thing over and over again and expect different results. Just as a consumption binge was driving US "growth" in the run-up to the crisis, so we have another one going on now. The evidence is a return to skull-crushing external deficits to accompany the budgetary one. They don't call them twin deficits for nothing as US imports hit all-time highs:

The U.S. trade deficit widened more than expected in January as high oil prices and resurgent demand helped pushed imports to a record high, a Commerce Department report showed on Friday. The trade gap swelled more than 4 percent to $52.6 billion, the highest since October 2008. The department also raised its estimate of the December trade deficit to $50.4 billion, from its previous figure of $48.8 billion. Imports rose 2.1 percent to a record $233.4 billion. China accounted for a big share of the gain, with imports from that country rising 4.7 percent to $34.4 billion. 

For the chronologically-minded, the Reuters article reminds us of the last time the US began running these sorts of external deficits:

Goods imports reached the highest level since July 2008, just before the financial crisis caused world trade to plummet. Stronger U.S. demand also pushed imports of services, autos, capital goods and food, feeds and beverages to record highs. 

The overall point is this: the US economy has not really reoriented itself away from being consumption-driven. Although American exports are rising, they obviously aren't rising enough to offset runaway increases in consumption-driven importation.

Though I hate to make predictions, consider the situation at the moment Stateside to what it was right up to the breakout of the crisis when many economic commentators believed that things were just hunky-dory: Back then you had colossal budget and current account deficits plus a run-up in equity prices--record stock market index levels even--driven by money-for-nothing monetary policies. Add in other suspiciously good macroeconomic figures such as that for employment. And at the present time we have...exactly the same sorts of things.

Everything old is new again. Indeed, some people never learn. Another walloping of the US economy looks like it's in the offing, and it would be interesting to see the aftermath if it happens before the 2012 presidential elections. Yet sooner or later the US will pay a well-deserved price for its renewed prodigality--unless you're of the free lunch persuasion, of course.

India Isn't a Superpower (and May Never Be)

It's once again time to feature an LSE IDEAS publication as I sometimes do. Although hosting Niall Ferguson was something of an event for us--he is in many respects a one-man travelling circus of his own--we now have another Phillip Roman chairholder in Ramachandra Guha. Although he is somewhat less well-known to Western audiences than the aforementioned economic historian, Guha nevertheless brings some unique perspectives on modern India. For a research centre that purportedly concerns itself with grand strategy, IDEAS is of course particularly interested in what's up with China and India as well as what role they will play in the future. So, just as we had US-China relations historian Chen Jian as the Phillip Roman chair a few years back, now we have Ramachandra Guha.He's been making the most of his time at LSE IDEAS by drawing much favourable attention to his, well, ideas [1, 2].

Once more, the press blurb describes the contents of our latest special report well by considering India's fitness for superpowerdom if there ever was such a qualification [!?]:

The authors argue that despite India’s rising power and wealth it remains shackled by weaknesses which include corruption and poor leadership, extreme social divisions, internal security threats and religious extremism.

The report – India: the next superpower? – features essays by nine experts which examine the nation’s economy, defence, government, culture, environment and society. While they acknowledge the country’s formidable achievements in fostering democracy, growth and cultural dynamism, they generally agree that its structural weaknesses mean that it cannot yet call itself a superpower or be considered a full counterweight to the influence of China (as some in the West have hoped).

And the headliner as suggested above is the contribution of Ramachandra Guha:

Some of the report’s authors believe that India should not even aspire to be a superpower while it has so many internal problems unresolved...[Guha] lists seven reasons why India will not become a superpower; armed unrest from the Maoist Naxalite movement, extreme Hindu religious chauvinism, the degraded quality of leadership, a trivializing media, over-consumption of resources and incoherent policy caused by political coalitions. He concludes: “We need to repair, one by one, the institutions that have safeguarded our unity amidst diversity, and to forge the new institutions that can help us. It will be hard, patient, slow work.” 

This publication should be of interest not only to India specialists but for those who are seeking to know more about international affairs in general. There are individual chapters which are also interesting in their own right aside from that of Guha available as PDFs on our website. 

Happy reading!

The Kids Ain't Alright: Bahrain GP On In 2012?

With the Formula One circus about to commence in 2012, I though it would be interesting to revisit the plight of the Bahrain Grand Prix. Famously cancelled, rescheduled, and then recancelled due to public uproar over holding an event in an "Arab Spring" state--the ruling regime survived anyway--similar concerns arise over the race's fate in 2012. Meanwhile, wags have now dubbed it the "problem race" for 2012 given unresolved issues over holding such a race in what remains an absolute monarchy bent on keeping the status quo intact.

Who says that the race will go on? None other than multibillionaire F1 impresario and ringleader Bernie Ecclestone. (NOTE: Ex-Renault boss and arch-Eurotrash Flavio Briatore only has a store selling overpriced clothes called "Billionaire" when he himself isn't one.) So despite the potential CSR difficulties and the unsavouriness of it all, keeping the youth in check has made Ecclestone think the organizers have matter under control for sporting commerce to occur:

The latest opinion from the man representing the grand prix organisers is that it's all systems go for the Bahrain Grand Prix. We're exactly a year on from the day when the Bahraini people rose up against the ruling royal family and on the first anniversary of the protest there were few organized protests on the streets, mostly because the police had managed to keep a firm lid on them. This has heartened Bernie.

"We are (still) planning to go (to the Grand Prix). I've always said that if there was going to be any drama it would be on the Day of Rage," he told The Daily Telegraph. "They would have to do something then. People there seem confident that a race two months away will be all right."

For the Day of Rage, apart from demolishing the focus of last year's protest, Pearl Roundabout, large parts of the capital Manama were sealed off to prevent people reaching the site. In 2011 the government weren't expecting trouble, they reacted badly and all hell let loose. This year they were a lot more prepared. Armoured vehicles patrolled Bahrain's capital with police firing tear gas at protesters. That may prevent, headline-grabbing clips for the TV news, but it doesn't make the problem go away.

Mr E. thinks there isn't a scintilla of doubt that this year the Sakhir circuit is going to reverberate to the sound of 24 V8 engines. "The teams are not the slightest bit concerned. They seem happy that things will go ahead without problems. Last year was a more clear-cut decision not to go but things have changed a lot since then...[t]he only message I got was that there were some kids in trouble with the police," Ecclestone said.

Keep the brats away from the TV cameras and let the race continue? When it's become more an issue of riot control than a question of sport, well, some are more likely to raise their eyebrows than our man Bernie. While noting that his company has been paid the $40M fee by the organizers whether the race happens or not, Ecclestone says it's no longer about the money. Sports and politics...it's been a combustible mix oftentimes, hence the technocratic reply from Bernie that he's just doing his job:

One group of peers has called for a boycott of the country, whose authorities were found guilty of numerous human rights abuses last year. Another All-Party group of MPs is keen for the race to go ahead, believing it can be a catalyst for change.

While human rights groups such as Amnesty International remain sceptical that Bahrain's rulers are delivering the human rights changes recommended by an independent international commission, the man who chaired that commission, Mahmoud Cherif Bassiouni, believes the race would "enhance national reconciliation".

Ecclestone, who describes his sport as "non-political", has repeatedly insisted that Formula One will travel to Bahrain this year as long as the organisers deem it to be safe. He said the decision had nothing to do with money.

Meanwhile, 22 April draws ever closer.

Masters of the Game: Vatican Diplomacy in Cuba

By far one of the most underresearched areas in IPE I would argue is the role played by religious institutions as diplomatic actors. Not only were the imperial conquests of earlier European colonizers usually phrased in terms of enlightening the unwashed masses, but religion remains a very significant phenomenon even in today's world which is becoming secularized only in certain respects.
 
Imagine a nation whose diplomatic tradition stretches back centuries to when Saint Peter took up the mantle of leadership in spreading the Christian faith. Wait a minute...there is no need to imagine such a nation since it already exists. As heirs to Simon Peter--himself literally chosen by (the son of) God to establish the church in earthly realms--various popes have found it necessary to navigate shifting political currents for centuries on end. So, in terms of accumulating "tacit knowledge," perhaps the most experienced diplomatic corps extant do not receive the recognition they deserve.  I speak of the Vatican's, of course.

By necessity, the Roman Catholic Church has practiced the diplomatic arts uninterrupted for centuries on end. Continuity of mission has its advantages. While they've given sanction to quite frankly idiotic misadventures alike the crusades, they've since left that bit of holy war-style nonsense to, well, American neoconservatives. Today's modus operandi is subtlety and long-term vision--more Chinese than American. That is, while the Chinese see the passage of a few years as but drops in the oceans of time, Yanks cannot even see past the next election cycle. If the Communist Party is ultimately only responsible to itself, the Pope is ultimately only responsible to the man above.

So it was with great interest that I read a fine contribution in Foreign Affairs by National Catholic Register journalist Victor Gaetan about how the Holy See is approaching Cuba. Unlike the retrograde, sanction-loving Americans still stuck in a Cold War frame of mind, the Catholic Church has taken a more progressive approach. Hate the sin of godless Communism, not the sinners, indeed. It's an approach that's paid dividends in Eastern Europe, so what's to stop it from working in Cuba as the winds of change blow strange?

It is a controversial balance. Cubans in the exile community vigorously criticize the Church because they think Church leadership on the island should challenge the dictatorship. But the Vatican takes the long view. Rather than overtly push for change, the Church has come to pursue a strategy of "reconciliation." It has inserted itself as mediator between the regime and its most daring opponents, both those imprisoned and those out in the streets. The Church is present and persistent, but it is nonpartisan. The attitude harkens back to the ostpolitik it practiced during the Cold War -- in most communist countries, especially in those where Catholics were a minority, clergy hunkered down, ministered to the faithful, and survived. Today, in countries ranging from Albania and Montenegro to Romania and Ukraine, Catholic communities are thriving.

By not consciously offending the powers-that-be with freedom 'n' growth shtick in that usual American tradition, the faith has made a comeback after Fidel Castro's earlier purge of the religious orders:

In the years since, the Catholic Church in Cuba has been resurrected. It has nearly doubled the number of priests and nuns in the country, most of them moving in from abroad. Today, Havana regularly grants the Church permits and allows purchase of rationed construction materials to renovate churches. The Church provides everyday services such as daycare centers and care for the elderly. It teaches religion and computer skills, and screens foreign films for teenage groups. As long as the Church restricts its activities to its property, it gets relatively free reign. The Church even opened a new seminary a few miles south of Havana in November 2010, the first church constructed since the revolution. And alongside a large American Catholic delegation, President Raúl Castro attended the dedication.

And, of course, the Vatican isn't doing all this without keeping an eye on the prize of, well, saving souls:

Playing the role of holy reconciler has afforded the Vatican three advantages. The Church has gained physical and operational space to expand its presence on the island. Second, [Cuban Archbishop] Ortega has brokered conflict, which fulfills the Church's mission ("Blessed be the peacemakers," the Bible reads) and gives it a recognized role, both in the country and outside. And lastly, and perhaps most important, in taking the long view, the Vatican is laying the groundwork so that it helps facilitate a nonviolent post-Castro transition.

You can't be a mug while you're doing God's work. It just goes to show you how what many perceive to be an ideologically "inflexible" organization alike the Vatican actually runs rings around the United States as the latter takes up the white man's burden of various idiotic crusades. Fiascoes in Afghanistan, Iraq, soon probably Iran...the list goes on and on as the homeland of the Qur'an burners engages in all sorts of idiocy by painting the US as a for good in a fool's morality play. Some people never learn.

Given the contemporary state of the US diplomatic corps, you get the feeling that the world would be a much better place if it outsourced diplomacy to the masters of the game with over two millennia of experience dealing with haughty sorts, whether they be the brothers Castro or the BushBama destroyers of the American dream. Predating nation-states by tens of centuries, the Vatican was on the scene long before Pax Americana, and it will be there long after it.

Celebrating the IPE Zone's Five-Year Anniversary

Five Years of Fearless Blogging

Unbeknownst to me, the IPE Zone just turned five in February.. Belatedly, then, it's time to celebrate! I once had a nearly octogenarian boss who morbidly observed that her peers were all retired and many dead besides. With blogging the very model of a throwaway medium, the cycle of existence is much, much shorter than that. I too observe that most of the peer blogs I started out with are by now inactive or have since moved on to the Great IP Address in the Sky. There also have been a lot of changes in where I draw readers from. I have been through all the fads and fashions cycling in and out: blog aggregators, syndication, Facebook, Twitter and now iPhones. I am sure there will be more to come.

Originally meant to house surplus class material way back when I was still a postgrad, I remain amazed at the longevity of this blog. I certainly didn't anticipate that I would still be maintaining it five years on. Reasonably good mainstream media coverage as well as it being the world's most visible dedicated IPE blog--Google "international political economy" to see for yourselves--have made it viable for me to continue.

All the while, I believe that the IPE Zone's diversity in terms of geographical and political-economic issue coverage appeal to a broader swathe of readers. It is encouraging that many visitors come from outside of Western nations as evidenced by our blog followers' profiles, for instance. I do appreciate that, IPE having been founded largely by American and British scholars, this blog may be a harbinger of better representation by neglected third world voices. Not that I can say the same for the World Bank and IMF, but I would certainly like to see moves away from much of the whitebread sameness that permeates much of the political-economic blogosphere. The world has changed. Obviously, people with similar backgrounds tend to view the world in the same way. It is thus remarkable that an outsider has persisted in making IPE more accessible to more folks online.

So here's looking forward to more years of pull-no-punches commentary. Whether it's questioning Western hypocrisy over leadership at international organizations or the self-serving rhetoric over the value of university education, there really ought to be other voices offering....attitudes of elegant despair on subprime globalization as the subtitle says. Here at least there's truth in advertising even if you may not entirely agree with the perspectives taken here.

It goes without saying that I too have persevered due to the continuing loyalty of IPE Zone readers despite times when I simply felt tired with the whole shebang. Like Comrade Bob Mugabe, this blog is still standing--albeit under what I hope are more positive reasons

White Man's Burden 2012: World Bank Succession

Take up the White Man's burden--
Have done with childish days--
The lightly proferred laurel,
The easy, ungrudged praise.
Comes now, to search your manhood
Through all the thankless years
Cold, edged with dear-bought wisdom,
The judgment of your peers! 

Well here is more discouraging news for those wishing for more diversity and better representation of LDCs at key international organizations. Just a few months back, the unexpected departure of Dominique Strauss-Kahn from the IMF revealed the hollow rhetoric behind calls for change in the tradition of Europeans having discretion over choosing the IMF head. While perhaps sudden, the unceremonious departure of le grande seducteur showed that when the opportunity finally came for change at that IO, none was forthcoming. The excuse then was that having several European nations in dire financial straits made it only natural to have a tried-and-tested European figure as IMF managing director.

Again, PIGS countries are not suffering primarily from balance-of-payments problems the IMF was meant to address. Even Wolfgang Muchau, euro-hater, concedes as much:

However, it is hard to understand why everybody feigns surprise at the fact that current account imbalances can be financed indefinitely in a monetary union. Is this not one of the characteristics that distinguish it from a fixed-exchange rate system?

As long as banks have access to the central bank, and can provide good collateral, countries can run current account deficits for an infinite period. A friend of mine once remarked – when I asked about the significance of intra-eurozone current account imbalances – that the way to solve the problem sustainably was no longer to publish the figures. He was only half joking.

And so we come to the announcement of current World Bank head Robert Zoellick that he will leave that institution shortly. While he is departing neither under inauspicious circumstances nor at an entirely unanticipated moment, the jockeying to keep the status quo intact is similar to the DSK situation. That is, pressure to keep the World Bank head an American choice remains. This time, the excuses are as follows:

• It is politically unlikely that the US, which remains the World Bank's largest funder, would countenance a non-American head during an election year;
• The United States is wary of relenting on World Bank leadership lest it be perceived as yet another sign of American decline;
•  The implicit understanding that the US will insist on having its way means that no LDC candidates have put their names forward (which in itself indicates regression from the IMF succession race in which some at least entertained the notion of an LDC head despite the inevitable outcome)

Alan Beattie further suggests that the same fig leaf covering yet another whitewash at a Bretton Woods institution may be of nominating a woman. Again, this sort of compromise is unlikely to placate LDC grievances. Honestly, though, it would be equally unlikely that LDCs themselves would agree on a single candidate to back. It's not as if there is a scarcity of viable candidates alike Indonesia's Sri Mulyani Indrawati--currently #2 at the World Bank and formerly Indonesia's finance minister.   


Also see John Kerry on this matter. The more things change, the more things stay the same, indeed.

'The DNA of Human Rights'

Here's an interesting counterpoint to the "Asian values" argument that prioritizes collective well-being over individual rights. While I to a certain extent buy into that argument, it is at this point in time largely due to objections to how Western nations that are usually loudest about blathering about human rights are hypocritical about them. Witness Bush minor's Guantanamo Ghraibing, or Obama's refusal to disavow himself of this taint by shutting down the American extralegal detention facility at Guantanamo Bay.

So it was kind of refreshing to hear someone argue for human rights in this day and age--especially when it is becoming increasingly passe among developing nations keen on developmental authoritarianism and its offshoots. The LSE's own Professor Conor Gearty argues for two things: (a) human rights are not necessarily a "Western" invention in being innate and that (b) human rights abuses committed in the name of preserving cultures ostensibly dedicated to such principles are not acceptable:

What are human rights and where do they come from?', asks Professor Conor Gearty in the latest Burning Issue lecture from the London School of Economics and Political Science. In the online public lecture, entitled 'The DNA of Human Rights' Gearty, a professor of human rights law and a practising barrister, looks at the history of human rights and ideas that have informed their development such as democracy and dignity.

Gearty challenges the notion that human rights are a western idea, a mere 'cultural accessory', or that they can be used to justify 'necessary evil' – as an excuse to go to war or to torture as part of interrogation for example... Professor Gearty argues: "We risk our culture if we collude in the idea that our way of life is so valuable that we can afford to depart from it in order to secure it..."

For Gearty human rights come from a "solidarity to the human race".He says: "We're driven to engage in an energetic empathetic solidarity - a commitment to a common project which does not distinguish people by their colour, gender, nationality or wealth, but one which sees their humanity." 

Do watch the video of the lecture and see what you think. I myself though wonder why empathetic solidarity does not rule out respecting the wishes of those who can legitimately choose to prioritize collective well-being over individual rights. That is, why is still usually just Anglo-Saxons who are fond of this sort of dialogue? (With a few exceptions, granted.)