Failure of western democracy, tensions between the US and China, the Arab Spring and other major global events.
Margaret Thatcher’s biographer Charles Moore discusses the former Prime Minister’s legacy. Moore provides insights as to how Margaret Thatcher’s stance on the market economy developed and how she popularised it. He seeks to outline her approach to foreign affairs, in relation to the EU, the US, and her broad approach to the Cold War.
http://vimeo.com/85613703
Ian Goldin, Professor of Globalization and Development at the University of Oxford, discusses the challenges of cross-border governance presented by globalization and presents 5 core principles necessary for a solution:
….Yesterday’s structures are not equipped to deal with today’s problems, but thankfully it is not too late. Aggressive action must be taken, and such action would be effective if it incorporates five core principles which I have developed together with my Oxford colleague, Ngaire Woods. First, global action is only required on global problems. Local jurisdictions matter and should continue to address local and national problems on their own terms.
Second, while not everyone must be included in global negotiations, inclusion of key actors is essential. It is an obvious point that if the biggest polluters are left out of climate change agreements, the agreement is useless—but this principle must be central to any reform efforts.
Third, efficiency is essential. Unwieldy bodies that include everyone are worse than nimble, exclusive bodies that involve the key players. Who are the key players? It depends on the issue. The small island nation of the Maldives, sinking from rising sea levels, should not be included in questions about regulating climate change but must be included on negotiations about mitigating its impacts. If small groups of key countries with much at stake are involved, gridlock can be broken.
Fourth, legitimacy is required for effective global governance. A system must be in place wherein countries may disagree with certain rules of the game, but accept the referees. Fifth, enforceability is paramount. None of these principles matter if they cannot be enforced.
Global governance is the challenge of our time. Our arsenal of stale institutions cannot cope with existing threats to peace, stability, and prosperity. Whether we like it or not, we are all in this together. It’s time we start acting like it.
Read more at EUROPP – Divided Nations: Why global governance is failing, and what we can do about it.
I came across this opinion piece I wrote for Memorial Day three years ago. How little has changed:
Who kept the faith and fought the fight;
The glory theirs, the duty ours.
I would like to make this quote from Wallace Bruce the theme of today’s newsletter on Memorial Day, May 30th.
We often take for granted the institutions that our ancestors sacrificed so much to secure. Have we fulfilled our duty to preserve the freedoms that they sacrificed so much for? And have we held the members of our institutions to account for the neglect of their duties?
Some legislators only wish vengeance against a particular enemy. Others only look out for themselves. They devote very little time to consideration of any public issue. They think that no harm will come from their neglect. They act as if it is always the business of somebody else to look after this or that. When this selfish notion is entertained by all, the commonwealth slowly begins to decay.
Little seems to have changed since Thucydides made this observation in about 400 BC, a century after the foundation of democracy in ancient Athens. The fundamental weakness of democracy seems to be that those who are elected to office tend to place their own interests ahead of the interests of their electorate — and ahead of the interests of the nation. Not surprising when, as Thucydides pointed out, they believe that little harm will come from their neglect. But if enough legislators place their own interests ahead of those of the country, they will cause irreversible damage.
By placing their own interests first, I do not necessarily mean that office holders seek to enrich themselves at the expense of the taxpayer — although that does occasionally happen. Rather that they define their primary duty to their country as re-election. The pressure to get re-elected is bound to influence their thoughts and actions on almost every issue.
The temptation to manipulate the system to maximize your chance of re-election is too great for most politicians to resist. In fact it has become so ingrained that the whole economy, and the stock market particularly, is subject to the political cycle. Jeremy Grantham explains the presidential cycle in his last quarterly newsletter:
In the first seven months of the third year (of the presidential cycle) since 1960, Year 3 has returned 2.5% per month for a total of 20% real (after inflation adjustment)…. Now, 20% is perilously close to the total for the whole 48-month cycle of 21%. This means, of course, that the remaining 41 months collectively return a princely 1%.
The third rule of politics is don’t run for re-election during a recession. Ask George H. W. Bush who, despite successful prosecution of the first Iraq war, was beaten by Bill Clinton in 1992 with the slogan “It’s the economy, stupid.” (The second rule, by the way, is: never forget Rule #1)
Successive presidents/governments have failed to find a way to re-schedule elections to a time that bests suits them (despite many examples in the rest of the world). They soon, however, came up with an ingenious alternative: re-schedule the recession.
As soon as politicians realized they could spend future taxes as well as current taxes, the demise of the current system became inevitable. Prior to the Great Depression of the 1930s, governments were assessed on their ability to balance the books. Previous disasters with fiat currencies (continental and confederate dollars) were still fresh in the national consciousness. Only during times of war could they justify running a deficit. So much so that Herbert Hoover refused to run a deficit despite the deflationary spiral following the 1929 Wall Street crash.
When FDR lifted that constraint in the 1930s, with the acquiescence of a desperate public who were willing to try almost anything, an immense new power was born. Unfortunately with immense power comes immense responsibility — and successive governments have proved themselves unequal to the task.
It has become too easy for whoever is in power to spend future taxes to stimulate the economy and postpone a recession. The result is that their successor inherits a pile of debt, which if they attempt to repay, is likely to lead to a recession. So the game becomes one of pass the parcel, with each elected government adding to the debt and passing it on to the next.
If the ancient Greeks had the same power, the decline of Athens may have been a lot sooner. Their modern counterparts have demonstrated that the game cannot continue indefinitely. At some point the market will begin to question government’s ability to repay, raising interest rates to compensate for the risk of sovereign default. Their fears become a self-fulfilling prophecy, with higher servicing costs increasing the burden on the already-precarious fiscal budget.
The second actor in this modern form of Greek tragedy is the Federal Reserve. Without a compliant Fed, government efforts to kick the can down the road would be largely negated. An independent Fed could put the brakes on government efforts to stimulate the economy with borrowed money, merely by acting as a counter-balance to their actions. Unfortunately the Board of Governors are political appointments, nominated by the President and confirmed by the Senate. The Federal Open Market Committee (FOMC) may be more evenly balanced with the addition of the president of the Federal Reserve Bank of New York and four of the remaining eleven Reserve Bank presidents, who serve one-year terms on a rotating basis, but is still dominated by the seven Board members. You can be sure that very few mavericks are appointed as governors and that most dissenting votes come from the regions.
Elections are an expensive business and no candidate is likely to achieve re-election without financial backers, making them especially vulnerable to outside influence. The finance industry alone made $63 million in campaign contributions to Federal Candidates during the 2010 electoral cycle, according to the Center for Responsive Politics. That will buy you a lot of influence on the Hill, but is merely the tip of the iceberg. Interest groups spent $3.5 billion in that year on lobbying Congress and federal agencies ($473 million from the finance sector). While that money does not flow directly to candidates it acts as an enticing career path/retirement plan for both Representatives and senior staffers.
The revolving door between Capitol Hill and the big lobbying firms parachutes former elected officials and staffers into jobs as lobbyists, consultants and strategists — while infiltrating their best and brightest into positions within government; a constant exchange of power, influence and money. More than 75 percent of the 363 former senators or representatives end up employed by lobbying firms, either as lobbyists or advisors.
Are we likely to experience slow decay that Thucydides predicted? The present system is entrenched and likely to resist any attempts at reform. Evolution, however, does not occur in small increments. The norm is quite the opposite, with species enjoying long periods of stability followed by violent change when threatened with extinction. The current GFC presents just such an opportunity for change. The Tea Party movement, for example, is attempting to re-define the way that the system works, while I am sure that there are many Democrats who mistrust the motives of Washington.
If they fail to succeed, there is bound to be a next time. And probably sooner than we think.
The state that separates its scholars from its warriors will have its laws made by cowards,
and its fighting done by fools.~ Thucydides (c. 460 BC – c. 400 BC).
What is starting to dawn on Vladimir Putin is that, in a free-market system, one is more beholden to one’s customers than to one’s suppliers. It is easier for customers to take their business elsewhere than for suppliers to do so.
Picture = 1K words: Guess who got the better of the natural gas deal? pic.twitter.com/H9aKZwzLBE
— Quartz (@qz) May 21, 2014
China’s biggest customers are Europe and the United States. Russia is attempting to switch their customer from Europe to China. That would move them further down, not up, the supply chain. As Prof Timothy Snyder points out:
…Putin would have to fall back on China, and Russia would become China’s Ukraine.
Interesting extract from Spiegel interview with Prof. Timothy Snyder from Yale:
SPIEGEL: What motivates Putin?
Snyder: I think Putin is playing an all-or-nothing game, geopolitically speaking. He no longer cares about tolerable relations with the EU or about a solid relationship with Ukraine. Putin has opted for something else, a much larger project, to destabilize Ukraine and the EU. It’s an all-or-nothing game because there is no going back, now that he has embarked on this path.
SPIEGEL: Can he win?
Snyder: There are two options now: Either he achieves his goals, or the European Union achieves political unity and ideological stringency. It would have to define itself as Russia’s adversary and, most of all, develop a joint energy policy with which it could affect Putin. If the EU could do that, there would be radical consequences for Russia. Then Putin would have to fall back on China, and Russia would become China’s Ukraine.
via Experts Discuss What Ukraine Crisis Means for Future of Europe – SPIEGEL ONLINE.
Chilling analysis by Simon Leitch of the use of force by Russia and China to achieve political objectives:
Because China and Russia are major powers with nuclear weapons, dangerous conventional forces and economic leverage, states seeking to deter them from territorial challenges lack credible threats. To address this they must learn the Cold War lessons of manipulating risk or forfeit the initiative to opponents.
This is a high-stakes game of chicken which could encourage smaller states to pursue their own nuclear deterrent and indulge in aggressive, irrational, North-Korean-style behavior in order to discourage aggression from their larger neighbors.
Read more at Ukraine crisis offers lessons in how to handle China's ambitions.
Congratulations to Jeffrey Goldberg for this opinion on John Kerry’s statement:
I will dissent from Boxer’s critique, both because I believe that Kerry is a pro-Israel secretary of state who worries about the Jewish state’s future, and because I myself have used the word “apartheid” not only to describe a possible terrible future for Israel, but also as a way of depicting some current and most unfortunate facts on the ground…….
I suppose this passage makes me an enemy of Israel, in the same way Kerry is an enemy of Israel, and in the same way that the former Israeli Prime Minister Ehud Barak (who is also Israel’s most decorated soldier) is an enemy of Israel, because Barak has also warned about the dangers of the status quo: “As long as in this territory west of the Jordan River there is only one political entity called Israel,” he said in 2010, “it is going to be either non-Jewish, or non-democratic. If this bloc of millions of Palestinians cannot vote, that will be an apartheid state.”
A two-state solution (the apartheid government in South Africa called them “bantustans”) will never resolve the conflict. Israelis face some hard choices.
Read more at Is Israel an Apartheid State? – Bloomberg View.
Vivid, sometimes chilling descriptions of the life of German soldiers during World War II brought to life in secretly recorded transcripts of German POWs. Historian Sonke Neitzel, co-author of “Soldaten: On Fighting, Killing, and Dying – The Secret WWII transcripts of German POWs.”
From Oleg Shynkarenko at The Daily Beast:
A journalist from Russia’s Moskva FM Radio broadcasting from Donetsk asked a local rebel commander, “Can you tell me your name?” He answered: “Of course, I am Paramonov Pavel Vladimirovytch.”
“Are you from Donetsk?”
“Of course not. I am from Yefremov, Tula region [Russia].”
“What are you doing in Donetsk?”
“I am helping brotherly people to defend their rights, do you have another questions?”
Read more at Russia Tells ‘Tourists’ How to Go Fight in Ukraine – The Daily Beast.