by Alex Evans | Jan 4, 2008 | Europe and Central Asia, Influence and networks
Now that the European Constitution Treaty has been agreed, all the usual froth about Europe’s place in the world can be expected to redouble. Groan. So it was amusing to read John Thornhill‘s unvarnished account yesterday of how the Chinese and the Indians see the EU:
The senior Chinese official did his best to be polite. When, at a recent conference on Europe and Asia, I asked him how the Chinese viewed Europe, he chewed thoughtfully on a canapé before replying: “Europe needs to rediscover its entrepreneurial spirit.”
Many of his compatriots are more openly contemptuous, at least judging from a study by Chatham House and the Robert Schuman Foundation, reflecting the views of Chinese policymakers. Europe is more of an edifice of the past than the future, said one Chinese commentator. “Europe appears defensive, introspective, decadent and tired, too prosperous to continue to take risks, too complacent to accept change; Europe is a continent that has lost its ambition and its place in the world.”
The Indians are even more scathing. A similar study in 2006 found that Indian commentators considered Europe to be in economic decline, “too small, divided and anchored in the past” to flourish in the future. Many also saw Europe as racist and protectionist, and its claims to be a “soft power” laughable.
And this is before the EU acquires its own diplomatic service, which thanks to the Constitution Treaty it can now look forward to. The smart money in Brussels is on the whole exercise turning into a debacle: an entire diplomatic corps will need to be assembled from scratch, composed of people who for the most part have never worked in foreign policy. It’ll be fun to watch, if nothing else…
by Richard Gowan | Jan 3, 2008 | North America
So, Iowa is upon us and assuming that (at a minimum) it delivers a victory for either Mr. Huckabee or Mr. Romney, journalists everywhere will be churning out pieces of the “American Voters Are A Bit Odd” variety. Expect lots of stuff about how religion sets the U.S. apart from Old Europe, and so on ad nauseam. In this context, it’s worth skimming this snap-shot of opinion polls of American voters, put together for the annual New York Times New Year’s quiz. There are a few hints of nuttiness, although nothing you wouldn’t expect from pretty much all Western electorates. And, on average, the American voter seems to be, well, normal – and on torture, the death penalty and cell phones, extremely sensible:
87% think an innocent person has been executed in the previous 15 years. 62% fly the Stars and Stripes at home, in the office or in their car. 81% think smoking in movies encourages teenagers to take up the habit. 68% think circumstances exist in which a patient should be allowed to die. 69% believe “waterboarding” to be a form of torture. 65% of pet owners give holiday gifts to their furry friends. 47% believe that “nearly everything causes cancer.” 33% changed summer vacation plans because of gas prices. 15% abstained from sex until they were at least 21. 31% of Southern coastal residents would not evacuate if a hurricane struck. 65% spend more time with their home computer than with their spouse. 57% drink coffee every day. 56% oppose allowing cell phones to be used during flights. 7% are prepared for a disaster or emergency. 67% consider full-fat ice cream to be “worth the guilt.” 85% of women would rather reveal their age than their weight. 11% know the recommended number of calories to consume daily. 58% have no homosexual friends or relatives. 61% think it is too soon for movies about the Iraq war.
by Alex Evans | Jan 3, 2008 | Climate and resource scarcity
Martin Wolf opines in his blog that his last column of the year is possibly also his most important of the year. He’s right. His subject: prospects for civilisation if we move to a zero sum world economy. His premise:
We live in a positive-sum world economy and have done so for about two centuries. This, I believe, is why democracy has become a political norm, empires have largely vanished, legal slavery and serfdom have disappeared and measures of well-being have risen almost everywhere. What then do I mean by a positive-sum economy? It is one in which everybody can become better off. It is one in which real incomes per head are able to rise indefinitely. How long might such a world last, and what might happen if it ends?
For Wolf, the two issues that might trigger the end of a non-zero sum world economy are climate change and energy security. You might argue for casting the net a little wider, to include water scarcity, agricultural yields, fisheries depletion and population – and their interconnections with each other and with energy and climate – but the basic analytical frame is still right.
Wolf leaves his readers in no doubt about what he thinks is at stake: “fossilised sunlight and ideas have been the twin drivers of the world economy. So nothing less is at stake than the world we inhabit, by which I mean its political and economic, as well as physical, nature.” For Wolf, you see, “a zero-sum economy leads, inevitably, to repression at home and plunder abroad.” He explains –
In traditional agrarian societies the surpluses extracted from the vast majority of peasants supported the relatively luxurious lifestyles of military, bureaucratic and noble elites. The only way to increase the prosperity of an entire people was to steal from another one. Some peoples made almost a business out of such plunder: the Roman republic was one example; the nomads of the Eurasian steppes, who reached their apogee of success under Genghis Khan and his successors, were another. The European conquerors of the 16th to 18th centuries were, arguably, a third. In a world of stagnant living standards the gains of one group came at the expense of equal, if not still bigger, losses for others. This, then, was a world of savage repression and brutal predation.
In a positive sum economy, on the other hand, all of this changes.
Democratic politics became increasingly workable because it was feasible for everybody to become steadily better off. People fight to keep what they have more fiercely than to obtain what they do not have. This is the “endowment effect”. So, in the new positive-sum world, elites were willing to tolerate the enfranchisement of the masses. The fact that they no longer depended on forced labour made this shift easier still. Consensual politics, and so democracy, became the political norm. Equally, a positive-sum global economy ought to end the permanent state of war that characterised the pre-modern world. In such an economy, internal development and external commerce offer better prospects for virtually everybody than does international conflict.
And this is why climate change and energy security cause him such shudders. For:
“…the biggest point about debates on climate change and energy supply is that they bring back the question of limits. This is why climate change and energy security are such geopolitically significant issues. For if there are limits to emissions, there may also be limits to growth. But if there are indeed limits to growth, the political underpinnings of our world fall apart. Intense distributional conflicts must then re-emerge – indeed, they are already emerging – within and among countries.
The response of many, notably environmentalists and people with socialist leanings, is to welcome such conflicts. These, they believe, are the birth-pangs of a just global society. I strongly disagree. It is far more likely to be a step towards a world characterised by catastrophic conflict and brutal repression. This is why I sympathise with the hostile response of classical liberals and libertarians to the very notion of such limits, since they view them as the death-knell of any hopes for domestic freedom and peaceful foreign relations.
The optimists believe that economic growth can and will continue. The pessimists believe either that it will not do so or that it must not if we are to avoid the destruction of the environment. I think we have to try to marry what makes sense in these opposing visions. It is vital for hopes of peace and freedom that we sustain the positive-sum world economy. But it is no less vital to tackle the environmental and resource challenges the economy has thrown up. This is going to be hard. The condition for success is successful investment in human ingenuity. Without it, dark days will come. That has never been truer than it is today.
Now that is a column. I’ll post a proper comment on it in the next couple of days. But for now, just reflect on how rare it is to see a heavyweight commentator prepared seriously to consider the implications of a scenario in which the uncertainties on energy and climate change go against us.
Wolf’s narrative here – on both problem and solutions – is situated at the ‘civilisation’ level. It’s impossible to think intelligently about either the causes of a zero sum scenario, or about potential paths through it, without thinking hard about our capacity as people to take collective decisions; the risks if we fail to use that capacity effectively; our conception of the good life and the values that underpin it; and the question of whether we can recognise that in a situation of scarcity, interdependence and equity become the same thing.
In other words: Wolf’s solution narrative is commensurate with his problem narrative (c.f. David and my discussion of this in Climate Change: the State of the Debate).
What a refreshing change from the legions of climate hacks who use the same hair-raising problem narrative as Martin Wolf – and then tell you that all you need do is turn off lights, recycle and remember not to leave your TV on standby.
by Alex Evans | Jan 3, 2008 | Conflict and security
I’ve been reading the Harvard Business Review’s excellent book on resilience. One of the best articles in it is How Resilience Works by HBR senior editor Diane Coutu, who finds that that “three fundamental characteristics seem to set resilient people and companies apart from others. One or two of these qualities make it possible to bounce back from hardship, but true resilience requires all three.” And they are these:
The first characteristic is the capacity to accept and face down reality. In looking hard at reality, we prepare ourselves to act in ways that allow us to endure and survive hardships. We train ourselves how to survive before we ever have to do so.
Second, resilient people and organisations possess an ability to find meaning in some aspects of life. And values are just as important as meaning; value systems at resilient companies change very little over the long haul and are used as scaffolding in times of trouble.
The third building block of resilience is the ability to improvise. Within an arena of personal capabilities or company rules, the ability to solve problems without the usual or obvious tools is a great strength.
by Alex Evans | Jan 2, 2008 | Global system
So says Ambrose Evans-Pritchard in the Telegraph, so it must be true. He writes: “As the credit paralysis stretches through its fifth month, a chorus of economists has begun to warn that the world’s central banks are fighting the wrong war, and perhaps risk a policy error of epochal proportions.” And what might that policy error be?
Buckets of liquidity are being splashed over the North Atlantic banking system, so far with meagre or fleeting effects … “Liquidity doesn’t do anything in this situation,” says Anna Schwartz, the doyenne of US monetarism and life-time student (with Milton Friedman) of the Great Depression.
Peter Spencer of York University continues:
“The central banks are rapidly losing control. By not cutting interest rates nearly far enough or fast enough, they are allowing the money markets to dictate policy. We are long past worrying about moral hazard … [The global financial authoritie] still have another couple of months before this starts imploding. Things are very unstable and can move incredibly fast. I don’t think the central banks are going to make a major policy error, but if they do, this could make 1929 look like a walk in the park”.
I’m not sure that the ‘chorus of economists’ saying that it’s an insolvency crisis rather than just a liquidity crunch is really so new – Nouriel Roubini was saying so back in mid-August, as we observed at the time – but let’s let that pass. Here are three interesting, if controversial, thoughts that emerge from E-P’s piece:
1. Remember what happened to Japan in the 1990s:
In theory, Japan had ample ammo to fight a bust. Interest rates were 6 per cent in February 1990. In reality, the country was engulfed by the tsunami of debt deflation quicker than the bank dared to cut rates. In the end, rates fell to zero. Still it was not enough. When a credit system implodes, it can feed on itself with lightning speed. Current rates in America (4.25 per cent), Britain (5.5 per cent), and the eurozone (4 per cent) have scope to fall a long way, but this may prove less of a panacea than often assumed. The risk is a Japanese denouement across the Anglo-Saxon world and half Europe.
2. E-P’s outlook for Britain:
The risk for Britain – as property buckles – is a twin banking and fiscal squeeze. The UK budget deficit is already 3 per cent of GDP at the peak of the economic cycle, shockingly out of line with its peers. America looks frugal by comparison. Maastricht rules may force the Government to raise taxes or slash spending into a recession. This way lies crucifixion. The UK current account deficit was 5.7 per cent of GDP in the second quarter, the highest in half a century. Gordon Brown has disarmed us on every front.
3. Something you may not have considered vis-a-vis the European Central Bank:
The ECB’s little secret is that it must never allow a Northern Rock failure in the eurozone because this would expose the reality that there is no EU treasury and no EU lender of last resort behind the system. Would German taxpayers foot the bill for a Spanish bail-out in the way that Kentish men and maids must foot the bill for Newcastle’s Rock? Nobody knows. This is where eurozone solidarity stretches to snapping point. It is why the ECB has showered the system with liquidity from day one of this crisis.
In other news, Nouriel Roubini finds that in 2007, cash (in short term Treasuries or money market funds) outperformed the stock market.
