My First Post at the Lowy Institute: 3 Non-Predictions for 2014


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So this year, I am writing twice a month for the Lowy Institute – a foreign policy and international relations think-tank in Australia. My work will go on their blog-line, called the Interpreter. My author page with them is here. I’ve had Lowy in my own blog-roll (on the right side of this page) for awhile. It is a good site, particularly if you are interested in Australia. Now Lowy is seeking to break out into East Asian politics more generally. I am happy to participate in that, and I would like to thank the Interpreter editor, Sam Roggeveen, for recruiting me. My first post with them, here, was about two weeks ago. Sam had the clever idea to invert the usual ‘predications for the coming year’ pieces that fill January with predictions of things that won’t happen. My own record of predictions on this site (2010, 2010, 2011) are pretty spotty, so this was a nice challenge.

So here are three things that you think might happen in Eat Asia this year, but won’t:

1. There will be no Sino-Japanese war. Any scuffles will be contained.This was would be so destructive, there’s no way the CCP will let the PLA pursue real escalation.

2. North Korea will not change. That might sound like the safest prediction ever, but actually political science and Korea studies have a long history of arguing that NK is about to collapse. But it won’t.

3. ASEAN will stay useless and over-rated. Western liberals and international organization majors really, REALLY need to stop hyping ASEAN. It’s a joke, and it will stay one. The real story in Asia is its refusal to regionalize/organize, not the incipient regionalization westerners are so desperate to find in every meeting of Asian leaders. And don’t even talk to me about ASEM. These are all talk-shops. East Asia is the land of Hegelian nation-state. Get used to it.

Here’s that full essay:

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Seoul 2012 Nuclear Security Summit


K-schmaltz! : where’s Dr. Strangelove when you need him to bomb Arirang back to the stone age?

 

This week is the big nuclear security summit in Seoul, with something like 60 attending countries and over 40 heads of state or government. Bobby McGill from Busan Haps magazine here in town asked me for a brief write-up; this is the re-print. Here are the issues as I see them from Korean IR and the local media. For full-blown think-tankery on the summit, try here.

1. Obama’s personal commitment to de-nuclearization: I can’t think of any president since Reagan who seems as personally offended by nuclear weapons as Obama. Back in the day, Reagan watched ‘The Day After,’ ‘Wargames’ and other nuclear war movies and came to dramatically oppose mutually assured destruction as it had underpinned US policy since flexible response. This helped Reagan achieve the first nuclear stockpile  reduction in history (the Strategic Arms Reduction Treaty – a point anti-New Start neocons conveniently forget). But Obama is going beyond that, talking about ‘global zero’ – the complete elimination of all nuclear weapons everywhere. Wow. This is why there have been two of these summits in three years, but nothing like this under Bush. To be honest, I don’t think the complete elimination of the American nuclear deterrent is probably not a good idea (although we can go pretty low); nuclear weapons are the ultimate guarantor of US sovereignty and democracy, and many US allies, like SK, rely on our extended deterrence. In any case, Obama’s personal interest in this issue is a major driver for this thing.

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It’s Time to De-Russianize the BRICS — UPDATED (twice): Response to My Critics


UPDATED, March 22, 24: This post got a lot of traffic, due to Andrew Sullivan’s citation of it. Thank you to all those readers coming for the first time; please come again. The criticisms levelled here have been similar to those made at the Duck of Minerva, where I also blog. It seems there are three main critiques, although you may wish to scroll further down to the original post first: 1. I exaggerated; Russia is still a great power. 2. I didn’t provide enough data and links. 3. I don’t really ‘get’ Russia, or I’m just recycling western propaganda.

(In passing, I find it both curious/frustrating as an author that what I think is my more creative and fresh work in the last few months [this or this series] didn’t get nearly so much attention, whereas lamenting Russia’s postimperial decline, which so many have done before me [see all the links below], got an explosion of interest. Not quite sure what to make out of that…)

1. I overshot in saying Russia isn’t a great power anymore.

Ok, but not by much. I’ll agree that it was probably gratuitous to call Russia a ‘joke’ as a great power. But then again, be honest with yourself and tell me you didn’t laugh: when Putin rode around shirtless on horseback, when Putin stage-managed a discovery of ‘antiquities’ while scuba diving, when Putin claimed the State Department and Secretary Clinton were fomenting the Moscow protests, when Zhirinovsky “backed free vodka and the reconquest of Alaska,” when the president fired a minister on live TV (!), the minister refused (!!), and Medvedev responded with farcical lecture on Russia’s globally-regarded ‘constitionalism’ (!!!). Or just read this from Gawker on the Putin the crossbow-toting whaler and tell me you don’t burst out laughing – over a head of state with superpower pretensions?

These are the sorts of howlers and hijinks we expect from leaders like Qaddafi, with his retinue of female ‘bodyguards,’ or Idi Amin, with so many gold medals on his uniform you could store it in a bank vault. But modern states, desirous of global prestige, seeking to be taken seriously at the highest levels of the game, just don’t do this stuff. Could you imagine Wen Jiabao doing he-man photo-ops? You’d laugh, right? Well… Putin’s become a punchline, regardless of Russia’s other strengths, which is ultimately what motivated the original post.

As Niall Ferguson put it last December, “Russia—who cares? With its rampant voter fraud and declining population, the country is careening toward irrelevance. …Russia isn’t quite “Upper Volta with missiles”—West German chancellor Helmut Schmidt’s immortal phrase. But it’s certainly a shadow of its former Cold War self. The U.S. economy is 10 times larger than Russia’s. Per capita gross domestic product is not much higher than in Turkey. Male life expectancy is significantly lower: 63, compared with 71 on the other side of the Black Sea. And the population is shrinking. There are nearly 7 million fewer Russians today than there were in 1992. By 2055, the United Nations estimates that the population of Egypt will be larger. Remind me: why did Goldman Sachs group Russia with Brazil, India, and China as the “BRICs,” supposedly the four key economies of the 21st century? Give me Turkey or Indonesia any day.” That’s exactly right (I know people think Ferguson is a neo-victorian apologist for empire, but hold that thought),  and it should deeply worry and embarass Russians that the rest of the planet thinks this way about one of the world’s great cultures. I wrote something similar last fall when Putin announced his re-taking of the presidency, and the whole world shrugged.

Here is more from the Duck of Minerva comment section:

“My interest was more developmental than realist-theoretical. On re-reading the post, it was a bridge to far to say that Russia isn’t a great power anymore. It still is, by the skin of its teeth. Nukes compensate for other areas of decline, I suppose, as you are suggesting. De Gaulle saw this, as did N Korea.

My real goal was to developmentally differentiate between Russia and the other BRICS. That BRICS moniker is to imply some level of cosmopolitan comfort with the modern world economy and rapid growth to greater weight within that economy (hence my reference to Parag Khanna). The other 4 BRICS capture that upward trend – as do other economies like Turkey, S Korea, Mexico, or Indonesia (hence my preference for Khanna’s term ‘second world’). But Russia really doesn’t. Russia is slipping, not rising and has been, more or less, since the late 1970s. That’s quite a hegemonic decline. Its internal rot is pretty severe now. Its Transparency International score in 2011 is a staggering 143 out of 182, putting it in the company of Nigeria, Belarus, and Togo, and obviously calling into question not just its BRIC credentials, but its great power ones too. And the shirtless one’s return puts off a turn-around for another six to twelve years. Given that China rose to the ‘G-2’ in just 30 years, 20+ long years of Putinism (after 10 years of Yeltsin chaos plus late Soviet stagnation) portends a disaster for Russia. This is the real reason for the Moscow protests. They see this now.

Rotation at the top is just one marker for BRIC normalization, but other obvious red flags include the relentless xenophobia of the Putin regime, the alienation from the WTO, the huge missed opportunities of globalization, the blow-out levels corruption and state capriciousness including the murder of journalists, the third worldish reliance on carbon and weapons exports, the 19th century ‘spheres of influence’ obsession with countering the West in Eurasia, the confiscatory attitude toward private wealth most obvious displayed in the Khodorkovsky case, or Putin’s laughably ridiculous throwback-to-Kaiser-Wilhelm bravado of hunting on TV with a crossbow or fighting stage-managed martial arts contests. Does that sound like a BRIC or Khanna’s ‘second world’? Not really. It sounds like Venezuela or Iran. It sounds like an angry, Weimar-style pseudo-democracy high on petro-dollars with a ‘postimperial hangover,’ as Vice-President Biden once put it. Hence the argument that BRIC/second world is the wrong developmental category for Russia. For more of this, ‘should the R be taken out of the BRICS’ debate, try here and here. For a similar write-up on how Putin’s return will critically aggravate so many of Russia’s outstanding problems, try here.

2. I didn’t provide enough data.

Ok, so here you go. It’s pretty easy to find. Please read the links above and these below. From the Duck:

Actually there’s lots of data on this that’s pretty easy to find with Google. I suppose I should have included more links orignally, but I thought a lot of this was common knowledge at this point. But here you go; all the following links come from the last few years:

a. On demography, I was thinking of Nicolas Eberstadt’s work. He’s been writing on this for a long time now, most recently November 2011 in Foreign Affairs. His title, ‘The Dying Bear,’ is pretty blunt about the population contraction. For more, try this.

b. On corruption so high, it’s incommensurate with being a great power, here’s that Transparency International score again.

c. It is downright heroic, if not irresponsible, to suggest that alcoholism is not a huge problem in modern Russia and severely impacting men’s health and mortality: here or here. Just look at those estimates of average male lifespan – around 60! Gorbachev even thought alcoholism imperiled the very existence of the USSR and launched a major government campaign against it.

d. On the brain drain, try here.  Note the big listed reason – problems with the Putinist regime – and their profile: “vast majority of those who admitted wanting to leave were under 35 years old, lived in a major city, and spoke a foreign language.”

e. On the economic overreliance on carbon and how weak the economy really is under the hood, try this from the Financial Times just today. More generally try this and this from the Economist how post-‘reelection’ dysfunctional.

For what it’s worth, this wasn’t intended to be ‘anti-russian gloom and doom.’ I studied in Russia for a bit and spoke it reasonably well once; I’d like to think I am sympathetic. But simply denying Russia’s internal decay is not really a response – as the Moscow protestors themselves understand.”

3. I am not sympathetic enough to Russia’s unique condition/I’m just spinning western propaganda.

Maybe, but I did study there for a bit, and I could speak the language pretty well once. And none of that really changes how Putin is dragging Russia down.

From the Duck:

“On my empathy, try this, which I wrote in 2009, long before this flap. I noted how Americans vastly underestimate how much Russia did to win the Second World War and that our Spielbergian self-congratulation leads us to overlook the huge suffering of Russians at the hands of the SS: “I didn’t really realize this much until I went to Russia to learn the language and travelled around. The legacy of the ‘Great Patriotic War’ is everywhere. Everyone lost someone, and frequently in brutal circumstances Americans can’t imagine. Every Russian guide you get will tell you how Americans don’t know much about war, because we were never invaded, occupied, and exterminated. The first time I heard that, I just didn’t know what to say. You can only listen in silent horror as the guides tell you about how the SS massacred everyone with more than a grammar school degree in some village you never heard of before, or how tens of thousands of those Kiev PoWs starved or froze to death because the Wehrmacht was unprepared for such numbers and the Nazi leadership just didn’t care.” Please note that a Russian even graciously commented there about how rare it is for Americans so say stuff like that. I did study in Russia; I did have friends there; I do have some language and culture skills. So I’d like to think of myself as a sympathetic critic. My real concern is that Putin’s awful misgovernment of Russia is pushing it towards irrelevance, per Ferguson above, and as I think the protestors intuit. Putin has become a global laughingstock, and he’s pulling Russia down with it.

I don’t disagree that Russians have deep social energies that we miss by focusing on Putin and the Kremlin, but one could say that about almost any country. Most peoples like to think of themselves as proud, energetic, innovative, unique, etc. Americans love to call themselves exceptional, and Koreans regularly tell me how the ‘miracle on the Han’ proves how Korea is the most awesome, cohesive, energetic, team-work society in the world that can overcome anything. Ironically, the most consequential grassroots/civil society movement in Russia is the anti-Putin protests, which fits my argument.

Finally, you raise an interesting question about whether all the issues I discuss combine into real momentum for decline. I wonder how that could not be the case, unless the leadership changes. Russia’s traditionally been a top-down place. It’s hard to see turn-around coming from below. (Again, this is why the protests are so important; they’re trying to change that.) Russia’s been slipping for three decades now. I agree it hasn’t fallen off a cliff, like, say, the end of the Ming dynasty or something, but a generation’s worth of negative trends is slowly chewing away at Russian power. I have stepped back from the original statement that Russia is not a great power; that was overreach. But the margins are narrowing.”

———————–  ORIGINAL POST ——————————————-

With Putin’s ‘return’ to the presidency, Russia is now officially a joke as a serious great power state. True, Putin has been ridiculous for awhile, what with those shirtless photo-ops that came across like desperate, bizarre geopolitical ‘ads’ that Russia is still a superpower. But this is different. Not even Chinese elites play the sorts of merry-go-round games at the top that Putin has engineered in the last 6 months. To their great credit, Chinese presidents and premiers serve and go. Russia is now the only one of the BRICS in which power does not rotate. Instead, Putin is starting to look like one of those oil-rich Arab dictators who never leaves, continually gimmicking the the ‘institutions’ and ‘constitution’ to justify how, mirabile dictu, he keeps staying in power. In the meantime, the real power structure morphs into an oil-dependent, rent-seeking, cronyistic despotism. And like those Arab dictators, Putin is facing a local resistance that increasingly realizes that Putinism is taking their country nowhere but nest-feathering. To paraphrase Helmut Schmidt, Russia’s pretty much a petro-state with nukes at this point.

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5 (Bad) Options for Dealing w/ NK (3): Defense Build-Up to Harden SK


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Part 1 is here; part two is here.

Last week I spoke at the Korean Institute of Defense Analysis. I presented four options for dealing with NK that have all broadly failed: negotiations (NK doesn’t seem to take them seriously), muddling through crisis-by-crisis (condemning the long-suffering NKs to permanent repression and leaving SK open to regular provocation and blackmail), China (despite its widely touted leverage over NK, China doesn’t seem willing or able to use it), and Sunshine Policy bribery (a noble effort that failed, however unfortunately). My review left me with this final choice that I find disagreeable, but I see little alternative at this point (i.e., after the Cheonan and Yeonpyeong incidents last year).

5. Defense Build-up: The idea here is to create space from NK by building a hard ‘shell’ around SK to insulate it from NK antics. The attraction is its unilateralism. Instead of waiting for NK or China to come around, SK can act proactively. Given that SK only spends 2.5% of GDP on defense, there is clear room for more spending. Certainly, the US, which regularly bemoans low allied defense spending, would welcome a more robust SK defense. Indeed, given that SK borders one of history’s worst, most unpredictable rogue tyrannies, SK defense spending is probably too low. Much of the gap has been filled by US forces in country, but with the US in relative decline, SK defense hikes are likely anyway.

A questioner asked me what should SK spend the money on. I made this argument earlier too, after Yeonpyong, but it seems to me that C4ISR, a larger navy, and missile defense would be good choices (although I am no formal military type, so readers comments here would be great). C4ISR are capabilities that SK leans heavily on the US for. A better navy would help harden SK in the Yellow Sea, where most of the clashes take place. And theater missile defense (TMD), which the US has approached SK about a few times, could help neutralize the burgeoning missile threat. In conversation, I rejected armor, because it has stronger offensive implications. A lesson from the offense-defense balance literature in IR is to try to buy defensive weapons as much as possible, in order to lesson your adversary’s paranoid reaction. But more generally, the idea is similar to McNamara’s ‘flexible response’ – give SK a wide range of capabilities to credibly counter NK provocation however it might occur. Needless to say, such ‘full spectrum dominance’ would be expensive, but I don’t see too many alternatives now. (Here is a good essay on defense transformation in Korea.)

The ideal would be to create an environment where SK could respond to NK provocation immediately, proportionately, and precisely. The game theory literature on cooperation argues that retaliation is most effective if, 1) it occurs immediately in response to provocation, so as to create an impression of one connected action in time, 2) it is proportionate to the original provocation so as not create either the downside impression of weakness or the upside impression of warmongering overreaction, and 3) it targets precisely those actors responsible for the provocation. Applying this to the Yeonpyeong shelling last year would result in immediate counter-battery fire onto exactly and only those NK batteries firing, and do only as much damage as SK suffered on its own island. Obviously this is an impossible ideal. No one even knew how many S Koreans were killed or how much property damage was suffered until after the incident. But to the extent investments in C4ISR could improve the information available to SK decision-makers and the rapidity and precision of their response, it will improve SK’s ability to respond ‘kinetically’ without necessarily creating a spiral. The ideal should be ‘perfect retaliation’: instantaneous, precise, and perfectly congruent to the damage done. While obviously impossible, defense spending hikes could narrow the technological gap and allow for better SK point-to-point counterforce and hence improved local deterrence. This should reduce the window of opportunity available to NK to get away with these sorts of strikes, if the political decision is made to respond.

Such hardening could insulate SK from NK, while also pushing NK to exhaustion, as the Reagan build-up helped lead to Gorbachev. The downsides of this option are:

A) It simply may not possible to de-link like this from NK. No matter what SK does to harden itself, it simply may not be possible to draw enough distance from NK and insulate itself. Here I argue that so long as half of SK’s population lives on the border with NK, the SK military’s hands are tied. Hardening would almost certainly require moving the capital out of Seoul which is just 50 miles from the DMZ and hence super-exposed.

B) I worry about the democracy costs to a young democracy that only just escaped military rule in the 80s. Regular readers will know that I bemoan the high price of the military-industrial complex in the US, and worry about the costs of semi-permanent war on US democracy. And here I am arguing for a ramp-up in SK…

The problem is that I just don’t see any other choices. Negotiation and the Sunshine Policy are failures. Yes, we should keep trying. Jaw-jaw is better than war-war. Talk is cheap, so why not? Maybe we’ll get lucky, but it is simply fantastical now to bet on that. The China path too has not lead to progress, and muddling through means more gulags and Cheonans. So improving SK’s position of strength could signal that NK cannot bully SK with provocations, push the NK toward competitive exhaustion, and improve SK autonomy in an era of US relative decline.

I suppose there is a sixth option – an invasion of NK. But to the credit of South Koreans, I have never heard this seriously entertained. I ask my students often what they think should be done, and I always mention this as a possibility (in part because it occurred in 1950). No one has ever raised their hand, even among my hawks. I guess that is the good news among all these bad options…

Libya Lessons (2): NATO is No Longer Necessary – Get Out Now


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Part one of this post is here. Here are a few more lessons to draw:

6. The International Criminal Court (ICC) is, unfortunately, encouraging dictators to dig in instead of scram. The ICC is classic liberal internationalism -a multilateral forum crafted mainly by the liberal democracies for the purpose of spreading international law and taming the ‘anarchy’ of international relations. It looks like a great idea, and indeed the US reticence to it is based on rather specious claims that US soldiers might somehow get hauled before it despite the myriad protections to prevent that from happening. (The real US concern is any constraint on war-making by the Pentagon, and the US obsession with its ‘exceptionalism.’) I support the ICC and wish the US would join.

That said, it is pretty clear that ICC indictments against Gaddafi and sons encouraged them to stay and fight, because flight was impossible. If they can’t flee to a safe haven – because the ICC makes it a sanctionable offense for any state to harbor them – then they have no choice but to stay and slug it out to the bitter end. And indeed, there is a nice rest home for Afro-Middle Eastern despots – autocratic Saudi Arabia. The Saudi took in Idi Amin in 1980 and Zine al-Abidine Ben Ali in 2011. Gaddafi would make a nice addition; perhaps he and Ali could reminisce about the good old days, like in some John Hughes movie for dictators. But once the indictments came down, the Gaddafis had nowhere to go, even though they were sending pretty clear signals for awhile that they would exchange an exit for abdication and an end to the conflict.

It seems to met that getting these guys out of power is the most important priority. The ICC, paradoxically, gets in the way. Remember that for awhile there it looked like Gaddafi might win or split the country. No one expected Tripoli to fall so easily. I think it would be a much better outcome to offer these guys just about anything they want to scram. Usually all they want is their family out with them, some cash to keep on with the good life, and immunity from prosecution. That strikes me as a pretty good bargain, even if if thwarts justice. And it is a good precedent for trying to get other autocratic nasties, like the Mugabe and Kim cliques in Zimbabwe and NK, out the way as well without a huge bloodbath.

7. The American president needs to start declaring war again. Libya has all but set in stone the awful, dictatorship-looking, and very unconstitutional practice that the US president can war with minimal Congressional intervention or even approval. The president’s shenanigans around the War Powers Act were disgraceful. Obama made a good case for the war in March and April, and it would have been a good exercise in national deliberation on US warmaking after Iraq to have had a big national and Congressional debate. Instead, Obama – a constitutional lawyer no less! – took the low road; isn’t this one of the reasons we voted for him, and against the Bushist, I-can-do-whatever-I-want GOP?

8. Get NATO out as soon as possible, i.e., right now. The NATO mission, against high odds and great (and deserved) skepticism, helped. Don’t push your luck, and keep the mission as absolutely minimal as necessary. Once Tripoli fell last week, NATO should have withdrawn immediately. The NTC clearly no longer needs NATO assistance. Gaddafi is finished, not matter what his nut-ball sons say on TV. To keep NATO on-mission when it isn’t necessary anymore, only stokes the anger of countries, especially China and Russia, that dislike R2P already. If NATO keeps staying involved, it will indeed look like R2P means ‘regime change’ and not the protection of human rights. NATO’s desire to stay in the game is understandable: this is a nice win for NATO after a decade of GWoT confusion and transatlantic tension, and Libya’s course clearly impacts the southern tier of the NATO states. But those benefits are more than outweighed by the need for limits: the West is broke now, so it should set a precedent of restrained intervention, even when things are going well. Nor do we want anything like Iraq – where the US/West gets pulled deeply into domestic reconstruction by hanging around. The best way to prevent the mission creep everyone worried about in this operation is to end as soon as possible (i.e. in this case, when the NTC would no longer be wiped out in a bloodbath without NATO) and we have clearly reached that point now.

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NB: On an unrelated note, you should probably read this, from the foremost proponent of the ‘China threat’ school.

NB2: Last week I argued that the US needs another stimuls. US conservatives and the whole GOP field oppose this. But on Monday the yield on US Treasuries dropped below 2%! That hasn’t happened since the 40s. If that doesn’t tell you the USG should spend, because no else will – i.e., people are so desperate to save, they will even take just 1.98% interest on their savings – then nothing will. But I have no doubt the GOP will trash Obama’s jobs initiative today with no hesitantation. It’s going from bad to worse.

The EU has Sewn Up the IMF Race Already? …. plus some media


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I published an op-ed in the Korea Times last week on the IMF managing director (MD) race. For readers outside of Korea, the KT is a mid-level paper here in Korea, sort of like the Plain Dealer from my hometown Cleveland. The biggest paper in Korea’s landscape is the conservative Chosun Ilbo. The KT is smaller, and because it is written only in English, it has a substantial foreign readership beyond Korea. My op-ed is based on this post last week.

I am amazed at how quickly the replacement for Dominique Strauss-Kahn (DSK) is emerging as a European once again  – the French Finance Minister, Christine Lagarde (above). The Europeans seem to be moving lightning fast on this, before Asians or developing states can get their act together and congeal around one or two non-European alternatives. As I noted in the op-ed, there is no functional reason for the IMF MD to be a European. It has simply been precedent, justifiable so long as Europe was the second major pole in the global economy with the US. Well now there is a third, in East Asia, what Barnett calls the ‘New Core’ (the North Atlantic being the Old Core). Surely it’s time to give the new Core a shot at running one of the big international economic organizations of the world?

The EU has driven its economy into a ditch in the last few years, so I see no ‘competence’ reason why a European finance minister would be better than a Japanese or Singaporean banker, e.g. Nor have the last three European MDs of the IMF been very good. Horst Koehler (2000-04) and Rodriego de Rato (2004-07) were placeholding non-leaders who took the MD-ship in order to springboard into higher office back home. And of course, DSK just globally embarrassed the institution in a manner that basically epitomizes its critics’ worst fears. The narrative of a powerful wealthy white man assaulting an black immigrant female maid is straight out of the antiglobalization movement’s nightmare imagery. So there is no particularly history of ‘quality leadership’ from the EU to justify its sinecure either. In fact, quite given how bad the last three MDs in a row have been, it would be a good idea to drop the EU for a round or two.

So where is substance to the argument that somehow Europeans are somehow entitled to the MD-ship? There is none. It’s bogus. The real claim is tribal – the EU wants the position, because it bolsters Europe’s otherwise declining claim to global leadership and relevance. The EU is like a child running around the adult table waving its hands demanding attention. As Martin Wolf noted on this issue, if the IMF can’t change to accept new realities (the rise of  the rest, especially Asia and the BRICS), then unfairly excluded states will simply walk away from the institution. Asia has already flirted with this because it felt so high-handedly treated in the Asian Financial Crisis (AFC).

Finally, the argument that the IMF should have a European leader right now because the IMF will be working so much in Europe in the near-future, is so specious as to be nearly racist. I find this almost revolting. Back when the AFC hit (1997-98) and westerners were dispensing painful but necessary advice to Asia, no one in the West worried about white bankers dispensing hard medicine to Asians. To say, today, that German Chancellor Angela Merkel won’t trust anyone to run the IMF unless it’s a European she knows,  is so ridiculous, hypocritical, self-serving, and borderline racist, that it really should shock the non-western IMF members into some pretty harsh language in response. If the EU wants to run its economy over a cliff, that’s its own choice. But the EU has no special claim to line up the globe’s resources (through the IMF) to bail out foolish German bondholders badly exposed in Greece, Spain and Ireland. For a counter-example, ask if California, with its own nasty budget crunch, is getting a bail-out from the IMF? No; Americans will wrestle through that on their own, and the EU should too on Greece and the other euro-miscreants.

I find the sheer, bald-faced selfishness and parochialism of this just shocking, especially given how often the EU preens about the importance of multilateralism and international institutions, in obvious contradistinction to ‘mercantilist’ Asians and ‘cowboy unilateralist’ Americans. So here is a golden chance for the EU to really improve global governance, to make it fairer and more democratic. But no, they’d rather insist on tribal privileges. Bleh.

Does it need to be restated that the IMF is a global institution, not a European regional one? The IMF does have other lending responsibilities, and most of its non-European borrowers are vastly poorer than Greece or Ireland. The EU has huge resources compared to the many LDCs (less developed countries) of Africa, but I guess the IMF is really supposed to be a global slush fund for the euro mess.

As best I can tell, Lagarde is pretty competent, and may do a good job. I certainly hope so, and her first trip as MD should be to non-European borrowers, especially in Africa, to prove her credibility. But there is no substantive argument from her resume to set her apart. Try here and here for a nice run-down of all the good non-western candidates who won’t be considered, because Merkel couldn’t care less about global governance and multilateralism when her campaign contributors’ South European bond-holdings are about to be ‘hair cut.’ It’s all just tribalism and selfishness. The real European claim is narcissism – put off succumbing to the new global reality where Asian economies are easily as influential as the old Core’s.

Read this and this as well on this issue.

If Strauss-Kahn Resigns, How about an Asian to run the IMF this Time?


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I have no particular intelligence on the details of the Dominique Strauss-Kahn (DSK) case. I would only say what everyone would agree to: He should be investigated properly with due process and the assumption of innocence. (That we even need to say this in the US is now, unfortunately, necessary given the US flirtation with extra-judicial methods because of the war on terror.) That he was fleeing the US for his home country when he was arrested does not bode well; this is why he was denied bail. If he is found innocent, then he perhaps can stay on the job, unless this incident comes to be seen in a pattern of irresponsibility, even if formal guilt is not found. DSK was rebuked for an affair with an IMF staffer a few years ago, so perhaps this will tip him out, even if he is found innocent.

But any decision to retain him as IMF managing director (MD) should be based on the evidence, not because he has helped revive the IMF’s fortunes after a tough decade (because of heavy criticism of the IMF’s handling of the Asian Financial Crisis and globalization generally), nor because he has helped so much in the recent debt crisis, especially in Europe. I agree with both of those assessments, but they don’t really change the issue of whether or not he is personally responsible enough to complete his duties. It is also worth noting that infidelity is not a crime (DSK is married). The real issue is whether he tried to rape his alleged victim or not. If he did, he should obviously go. But the important distinction here is with the Clinton impeachment. If DSK’s wife can live with his libertinism, as Hillary Clinton was able to, then that is ultimately a personal issue. There is no need to import the ‘politics of personal destruction’ into the IMF. It is also worth noting that French politicians get far more leeway on personal indiscretions that US politicians. France’s longest serving modern president, Francois Mitterrand, had a love-child out of wedlock who was revealed after his death. Perhaps DSK never quite escaped that more tolerant expectation set.

My own sense is that, even if found innocent because it turns into ‘he-said-she-said,’ it will be hard for him to stay on. The images of him in handcuffs, being pulled off a plane, standing sullenly in a court will make it hard to keep him. Paul Wolfowitz too was forced out of the World Bank presidency several years back for a similar, less egregious, personal affair. My guess is that DSK will have to go too.

For my own previous writing on the Fund, broadly sympathetic to its role, try here or here.

The issue of his replacement brings up a long-standing dispute over the leadership of the Bank and Fund. Precedent says the Europeans pick the IMF MD, and the US picks the World Bank president. This logic was based on the, previously reasonably accurate, claim that the North Atlantic represented the core of the world economy. Of course, it was more than this; prestige has always played a huge role, particularly for the Europeans. Having the IMF sinecure helped buttress Europe’s self-image as important central to global governance.

But you hardly need to be an economist to know that Europe’s role, relative to that of the US and Asia, has been in decline for awhile. Decolonization generally reduced Europe’s global footprint. Decades of slow growth and declining military spending has vaulted the US past the EU in the transatlantic partnership. The seemingly endless inability of the Europeans to put the EU into good working order – the euro mess, the constitutional-institutional rube goldberg structure of the EU itself, the continuing inability of outsiders to know who ‘speaks’ for Europe – cripples an EU global role. Just about everyone outside Europe thinks that the EU should have one EU seat on the UN Security Council, not two for Britain and France. Henry Kissinger famously quipped that he did not know whom to call if he wanted to talk to Europe, and that question is still unresolved. And of course, the rise of Asia has relatively squeezed the EU more than the US. I was at a conference last year where I made this point, and the EU speaker could at best only respond that the EU was a ‘foreign aid superpower.’ If that is all you got, it is time to step aside and allow the ‘New Core,’ Asia, to have a crack at the top-table of world politics. And last year, when I was at an IMF conference in Korea, Asian questioners did in fact ask DSK this, and he was response was, yes, the MD after him should be an Asian.

Everyone knows that Asia’s weight in the global economy has grown dramatically in the last several decades. The IMF’s own voting quotas have been re-ordered to reflect this. Chinese, Japanese, and Indians have already been pretty high up in the managerial order in both the Bank and the Fund.

My own sense is that a Japanese banker would be an excellent choice. Japan is the most open and mature of the Asian economies. The Bank of Japan has been downright heroic in its battle against deflation for years now; it is vastly more serious about Japan’s economic problems that Japan’s politicians. The BoJ has tremendous skills on issues that dog IMF debtors, like government debt, the money supply, or slow growth. A Chinese might be a more controversial choice, one the US and EU might veto, because China is highly interventionist and still a formally communist country. If China would object to a Japanese, likely out of sheerly nationalist resentment, then what about a Korean, Indian or Singaporean?

In short, Asia’s time to run one of the two Bretton Woods Institutions has arrived. Europe’s economic claim to that leadership role is now much-reduced. The euro is a mess; EU economies are carrying huge debt burdens; the EU remains unable to find a common voice despite decades of waiting and endless speculation; and the last few Europeans to run the IMF have been been pretty meager – Rodrigo De Rato lasted just three years (2004-07) and used the position to jockey for political position at home in Spain; before him, Horst Koehler (2000-04) did the same.

In fact, the only argument to keep a European one more time, is based on Europe’s weakness, not its strength; that is, because the IMF’s most important work in the next few years will be in Europe, it should have a European. But this strikes me as too clever by half and yet another gimmick to keep Asia from its clearly-earned place to run these institutions occasionally. By any reasonable criteria, Asia is qualified – probably more qualified actually given Europe’s economic state today – to take the MD-ship. The inevitable arguments to be heard in the next few weeks about Europe’s ‘weight’ in the global economy will just be mask the real,  tribal and prestige-driven desire to hang onto the last shreds of influence in an increasingly ‘post-atlantic’ world.