Friday, February 25, 2011

Shocking

. Friday, February 25, 2011
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I see that Krugman has embraced Naomi Klein's "Shock Doctrine" to explain the Wisconsin kerfluffle. Cowen linked to his excellent review of the book here, but we've covered her too. See here for Oatley's takedown, or here for other entries. Emmanuel also had a nice rebuttal here.

The blogosphere has been filled with debate about the Wisconsin unions, and I don't have time for detailed comment, but here's what I think in a nutshell: I have nothing at all against collective bargaining as a matter of principle. In fact I'm very much in favor of it. The right to free association is (or should be) more or less absolute, and if organized labor can capture more of the surplus from economic production then bully for them. That, of course, is not the case here. The unions have agreed to wage and benefit reductions already, and the current battle is over the right to collectively bargain at all. But the right to collectively bargain is only valuable if bargaining collectively gets concessions for labor. Since that isn't happening, this strikes me (mostly) as symbol over substance. The principle is worth defending, fine, but it's important to choose one's battles wisely. The most likely short-run result of this seems to be the firing of 1,500 public sector workers. It's hard to see how that's a win for the union or anyone else. Too many victories like that and the unions can't survive. A lack of pragmatism seems to be unions' Achilles Heel.

I do find it interesting that this is exclusively about public sector unions. Does it change the usual labor/capital narrative when "capital" is replaced by "citizens of Wisconsin"? I suppose the response is "not all the citizens", but it really is if we're talking about closed schools, fewer social services, etc. Or about democracy. Yes, the rich could pay more in taxes to balance the budget, but the duly elected government of Wisconsin has decided to go a different direction, as they promised they would during the last campaign. (Well, the ones that have remained in the state have made that decision, at least.) Don't like it? There's another election in a couple of years. That's how these things work.

FDR, for one, was in favor of public union busting, believing that they worked against the interests of the citizenry:

Particular­ly, I want to emphasize my conviction that militant tactics have no place in the functions of any organizati­on of government employees.

Upon employees in the Federal service rests the obligation to serve the whole people, whose interests and welfare require orderlines­s and continuity in the conduct of Government activities­. This obligation is paramount. Since their own services have to do with the functionin­g of the Government­, a strike of public employees manifests nothing less than an intent on their part to prevent or obstruct the operations of Government until their demands are satisfied. Such action, looking toward the paralysis of Government by those who have sworn to support it, is unthinkabl­e and intolerabl­e.


I wouldn't say that (it violates what I wrote above), so I guess I'm to the left of FDR on this one.

I know nothing about judicial precedent here. Could unions accept the law to keep their jobs, but then sue and have it overturned later? If so, that seems like the savvy move.

Thursday, February 24, 2011

This Is What Adjustment Looks Like (An Ongoing Series)

. Thursday, February 24, 2011
0 comments

Increasing inflation in China causes a real exchange rate appreciation. Michael Pettis:

[T]he month-on-month increase in prices suggests that inflation is running at just under 13% annually, although month-on-month numbers are always suspect because they don’t correct for seasonality and one or two big numbers can have a disproportionate effect. Still, although the CPI inflation number was below market expectations it is nonetheless well above the PBoC’s comfort level, which is officially 4%. In December the year-on-year rise in prices was 4.6%.

This stubbornly high inflation number, coupled with good growth numbers and a surge in exports will, I suspect, give Beijing the sense that it has room to tighten, so I expect that we will continue to see measures such as interest-rate and minimum-reserve-requirement hikes to slow down economic growth. In keeping with this on Friday the PBoC announced yet another 50-basis-point hike in minimum reserves (making it the fifth hike in five months).

But will these measures bite? My guess is that they will at first, but that when they do they will be quickly reversed. Any real attempt to reduce the sources of overheating will cause economic growth to slow too quickly, and Beijing will change its mind, especially if, as I expect, inflation peaks soon and starts to decline.

Let’s face it – most Chinese growth is the result of overheated investment, and removing the sources of overheating without eliminating growth is going to prove impossible. I have been making the same argument for at least two or three years, and so far we have seen how Beijing veers between stomping on the gas when the economy slows precipitously and stomping on the brakes when it then grows too quickly. I don’t believe anything has changed.


More at the link.

PSA

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Barry Eichengreen will be speaking as part of the Global Governance and Democracy series at Duke tomorrow, 4 pm. Details and an excerpt from his new book here. Most of the IPE@UNC contingent will be there; some of us will be attending a private meeting earlier in the day as well. If something interesting happens we'll let you know.

Monday, February 21, 2011

Realism, the EU, and Germany

. Monday, February 21, 2011
2 comments



In response to this post, Stephen Walt writes:

Accordingly, a realist account of the EU would stress that these states agreed to constrain their own autonomy and sovereignty largely in response to an unusual power configuration (i.e., the Cold War), and as much for security reasons as for purely economic ones. The end of the Cold War removed that power configuration, and we have seen the EU both expand and fray ever since. Germany's unwillingness to keep subsidizing profligate countries and European concerns about the implications of Germany's increasingly dominant role (as highlighted in this NYT article) are consistent with that view.


I think this is an especially poor account of both the history of the EU, and what an appropriate realist view of it could be. On the first point, the majority of significant EU integration has happened since the end of the Cold War. Prior to that it was almost exclusively and economic community, not a security community. (That's what NATO was for.) Since then the political and economic ties have grown stronger. True, the move towards the constitutionalization of the federation failed in 2004, but both Maastricht and Lisbon have happened since 1989, as has the Stability and Growth Pact and indeed the creation of the Euro itself. 15 of the 27 EU members have joined since the collapse of the Warsaw Pact. So there's been quite a lot of expansion in membership* and purpose. And to the extent that any fraying has gone on it's not because of power transitions or the dissolution of the USSR, but because the monetary union was built on the false premise that an accompanying fiscal union was unnecessary so long as countries pretended to abide by Maastricht. The fallout from the financial crisis has brought that illogic into sharp focus, but security concerns have absolutely nothing to do with it.

On the second point, it's right to emphasize Germany's dominant role, but wrong to think of it as only becoming salient recently. In fact, the best realist argument is the opposite: that the EU became more institutionalized post-Cold War -- including the establishment of the EMU -- in order to resolve the German question. The process of German reunification which, not coincidentally, corresponds to the period of increasing EU integration tilted power balance even further in Germany's direction. This also at a time when the US might have been assumed to draw down in Europe (Walt, like many others, expected and still expects NATO to dissolve any day now, or at least become a shell of its former self.) In other words, the EU serves a similar role with w/r/t Germany that NATO served with the US: by codifying and institutionalizing the relationships between more and less powerful states, the hope was that security dilemmas (including political economy security dilemmas) would dissipate. Or, as Ikenberry would put it, the EU integration project made Germany's commitment to "strategic restraint" credible.

I assume Walt would reject that argument, because a realist would (generally) argue that institutions are incapable of restraining great powers**, but if so then he has quite a lot left to explain.

*A lot of this is pure selection effect: many of the new entrants to the EU were part of the Warsaw Pact prior to 1991 and thus could not join the EU before. But that doesn't explain Austria, Finland, Sweden, and Cyprus. Nor Turkey's constant flirtations.

**This is why John Ikenberry isn't considered a realist, which is case-in-point of why realism is a dirty word these days.

Sunday, February 20, 2011

QOTD

. Sunday, February 20, 2011
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Interfluidity:

It is not those who advocate, but those who prevent, stabilizing transfers of purchasing power, who are the true Marxists. These self-styled capitalists do not espouse Marx’s theories, but they do something much worse: They perform them. They behave in precisely the way that Marx expected capitalists to behave. They cripple the American system’s greatest strength — its ingenuity, flexibility, adaptability. They prevent the sort of collective action through which earlier generations proved that capitalism could made be consonant with decent, stable, and broadly prosperous societies. In doing so, they risk proving Marx right.

Saturday, February 19, 2011

A Matter of Perspective, I Guess

. Saturday, February 19, 2011
1 comments

The Washington Post headline:


"House Approves Dramatic Cuts in Federal Spending"
Total of Dramatic Cuts: $60 billion

Projected Budget Deficit: $1.645 trillion
Dramatic Cuts as percent of GDP: 0.004
Dramatic Cuts as percent of Total Budget: 0.0162
Dramatic Cuts as percent of Budget Deficit: 0.0375

Even this tiny cut is unlikely to stick.
House Republicans pushed the legislation through after a marathon debate capped off by an all-night session Friday that spilled into Saturday morning. During the bleary-eyed final roll call at 4:35 a.m., 235 Republicans were joined by no Democrats in support of dramatic spending reductions that they said were needed to address a soaring annual deficit of $1.6 trillion; 189 Democrats -- as well as three Republicans -- opposed it, accusing Republicans of writing the bill with a "double meat ax."
Only one trillion five hundred and forty billion left to go.

Global Savings Glut Redux

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Bernanke is back with the global savings glut argument, this time at a Group of 20 meeting in Paris.
Although Bernanke phrased his argument about the root causes of the crisis in cautious, technical language, it boils down to this: The trillions of dollars that global investors poured into the United States from 2003 to 2007 fueled a gigantic housing and mortgage bubble. When it popped, the financial system imploded and the country fell into a deep recession. Bernanke argued that if that money had been channeled into building new factories and roads in the United States, instead of ever-higher property values, it might have had long-term payoffs and global investors and ordinary Americans might have been better off.
Ah, yes. But why wasn't it channeled into factories?
Bernanke drew an explicit parallel between the crisis in the United States in 2007 and that in East Asia a decade earlier. Like the United States, Thailand,Singapore and other rising Asian nations had taken on a gush of international capital (though in that case it was because investors hoped to profit from those economies' extraordinary growth, not because they were viewed as a safe harbor for savings).
Wasn't Asia also a real estate bubble?
[Bernanke] again made the case that countries such as China that deliberately depress the value of their currencies are endangering the world economy by making it more prone to financial crises.
If everyone agrees that the RMB has been undervalued, wouldn't that imply that the dollar has been overvalued? So why did all that capital "gush" into real estate rather than factories?

Friday, February 18, 2011

Will Wilkinson Explains Why Politics Is Not a Morality Play

. Friday, February 18, 2011
5 comments

En fuego, here:

We’d very much like to increase nutritional assistance for impoverished children. In fact, we’d love to. What could be better? But, you see, we have promised very large, richly-deserved pensions to some very important people very dear to our hearts, and, to put it frankly, money these days is, well, tight. I know. It’s very dispiriting. If only the selfish rich bastards would pay their fair share of taxes! But, no. No. Whatever happened to the idea that we’re in it together? Huh? Whatever happened to love for our fellow man? It’s sad. Anyway, we are so sorry the bastards have chosen to steal from the mouths of hungry children. I wish we could do something. I really wish we could.


This, by the way, applies as much to private v. public redistribution as vice versa. And it applies even more to those not lucky enough to have been born in a rich country with a robust safety net. So while you fight like a brave for the last ounce of Medicare, remember that billions have nothing approaching it.

The moral is: ante up or shut up. And if you care about anything like equality or any other egalitarian principle, then you should be lobbying for a huge redistribution from the U.S. to the rest of the world. Starting with more liberal immigration policies. If you're not serious about this, then you're not serious.

Wednesday, February 16, 2011

Modeling Global Financial Integration

. Wednesday, February 16, 2011
4 comments

In the interest of shameless self-promotion, take a look at a cool animation that Kindred assembled from quarterly BIS banking data between 1999 and 2010. This network depiction stems from our first joint effort (and the "our" here includes Sarah Bauerle and Andrew Pennock as well as Will and me) to apply complex network theory to international financial integration (you can read the full paper here). The single frame above is one of 43 quarterly observations.


Some explanation. Ties between countries are weighted and directed. If country i holds bank assets in country j, a black curved line connecting the two nodes marks that tie. In this way, the out-degree of i is the in-degree of j. If j holds bank assets in i, a gray curved line marks that tie, and the out-degree of j is the in-degree of i. The thickness of a tie represents the size of the bank holdings. Node size is the sum of a country’s in-degrees originating from all other countries in the network. White nodes have a higher in-degree than out-degree, meaning that they are net recipients of financial assets. Gray nodes have a higher out-degree than in-degree, meaning the opposite.

The animation nicely illustrates the deepening of financial interdependence, as measured by cross-border banking deposits, in the first decade of the 21st century. It illustrates the accumulation of the financial imbalances that lay at the base of the 2008 crisis. It also highlights the centrality of the United States in the contemporary global financial system, even in spite of the United States' role as originator of the largest global financial crisis since the early 1930s.


UPDATE: [Credit where it's due: for the animation I worked off some basic code from Kieran Healy, found here. I modified it for our purposes of course, but without his basic gifpipe code I wouldn't've been able to put it together with my limited programming skills. So thanks, Kieran, for making your stuff publicly available.

Also, a nerdy request: I wasn't able to find a way to put the country labels outside the graph, next to the nodes. I.e., I can move all the labels up or down, left or right, some constant distance. But I want to move them all outward so they sit next to their respective nodes, rather than above/below/to the side of the node. They would be more clearly visible that way. Any suggestions? I'm using igraph, because it supports tnet, so it would have to be something that works with those packages. -wkw]


UPDATE II: [This is the best data available. So, the small number of nodes isn't a modeling choice, but rather an artifact of data limitations. This is all discussed in more detail in the actual paper. -wkw]

Realism or Institutionalism? Wrong Question

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So Henry Farrell got to this Stephen Walt piece before I could, and I agree with everything Farrell says. Especially this:

If (as Walt seems sometimes to be suggesting in this post), realism is nothing more than the claim that national interests predominate in explaining international outcomes, then realism is theoretically very nearly vacuous. Moreover, the candidate ‘rival paradigm’ explanations are, under this broad definition, actually realist too. They have quite as much to say about state interests, and perhaps more to say about power relations than Walt does. If Walt has an actual realist explanation of what is driving European states apart – one that would presumably be rooted in the security dilemma or some other systemic phenomenon – it would be very nice to know what it is. He certainly doesn’t tell us about it in the post as it stands.


Indeed, an institutionalism without interests makes no sense. Why else create institutions?

But Farrell missed one strand I'd like to emphasize. If Walt really wants to use the EU as a test of rival paradigms, he's going to lose. In fact, he's already lost. Realists (generally) claim that institutions are merely extensions of state power, and thus do not constrain the behavior of (powerful) states in any significant way.* And yet it's clear that membership in the EU has caused states to behave differently than they otherwise would. Rather than devalue and/or default, Greece and Ireland are engaged in austerity. Rather than let them devalue and/or default, Germany and France are bailing them out in the short-run, and are considering a range of Euro-wide fiscal policies that would bring policy convergence on a number of issues. None of these actions would be taken if the EU didn't exist. So the institution is something more than an extension of Franco-German power, even if Franco-German power is reflected in the institution. Saying that the EU will not do anything that France and Germany don't want it to do is not the same as saying that France and Germany would behave the same way if the EU did not exist.

Note that at least some of the old-school institutionalists that Walt seems to be referring to wouldn't like an argument like the previous sentence. But I don't know of anybody who still hews to a that functionalist of a line. Certainly not Keohane. So I'm not sure who Walt sees as his foil. As Farrell notes, he references Andrew Moravcsik and Barry Eichengreen but neither is really an institutionalist the way Walt seems to be describing.

(Moravcsik's book on the EU has "State Power" in the title, and in this paper and this paper Moravcsik attacks neofunctionalist approaches to the EU. Moravcsik is definitely a liberal, but not the sort Walt seems to be referring to.)

But all of this ignores the real problem, which is that neither dogmatic realism nor dogmatic institutionalism helps us understand what's going on. Of course power and national interests are important, and of course the institution is important too. The maintenance of the institution itself is of national interest to member states. Neither is it a question of whether deeper integration will occur; it already has occurred. Never before had anything like the EFSF -- fiscal transfers from some EU states to others -- existed. Never before had the ECB intervened in bond auctions. The question now is whether this new integration becomes legally codified, or whether the cost of it becomes unbearable, and it is abandoned. Neither realism nor institutionalism helps us understand which is more likely.

So it's not just that Walt has the wrong answer, although he does, it's also that he's asking the wrong question.

*It's probably better to say that realists generally think of institutions as intervening variables, but not important independent variables. Like much else in realism this begs a question -- why would rational states waste time creating institutions if that's all the were -- but there it is.

Tuesday, February 15, 2011

Misc.

. Tuesday, February 15, 2011
0 comments

Things have been busy around here lately, so in lieu of a substantive post here's some links:

-- Dani Rodrik vs. Turkey. This has been going on for awhile, but in light of the "democratic" revolutions spreading through the Middle East it's worth noting that democracy is a long, uneven process. Rodrik accuses some in Turkey of operating a "state within the state", that is anything but democratic. I'm in no position to evaluate his claims, but if true they are damning.

-- The paradoxical politics of credible commitment. The conclusion is "Neat economic theory trips over messy political reality once again", and it illustrates the importance, but difficulty, of accurately matching interests to actions. Among other things.

-- Paul Krugman's posting template, revealed. Brilliant.

-- Iraq's economy is not doing well.

-- I'm not sure why Stephen Walt is still so concerned with debates that everyone else abandoned two decades ago, but he is. Here he tries to stack the deck in favor of realism in the context of the EU's ongoing debt crisis. I hope to properly smack this down sometime soon.

Friday, February 11, 2011

Aggregating Preferences

. Friday, February 11, 2011
2 comments

Every time a new poll of voter attitudes towards spending and taxes comes out, liberal commentators gleefully point out just how irrational the American public is. They seem to always want lower taxes and higher spending, but also a lower deficit/debt. Here, for example, is Krugman saying "The conclusion is inescapable: Republicans have a mandate to repeal the laws of arithmetic." And here is the Washington Post making their readers dumber:

Budget cutting is a top priority for the GOP, with 70 percent of Republicans in a new survey by the Pew Research Center saying the federal government should focus on reducing the deficit, not new economic stimulus. And in many cases, more Republicans now support cuts than did so two years ago.

But across 18 areas of federal spending, a majority of Republicans support decreasing spending in just one: aid to the world's needy.


This is stupid. For one thing, most (public) foreign aid does not go to the "needy poor", but rather to the military budgets of Israel and Mubarak's Egypt. There are perfectly good reasons for a pretty big consensus on cutting some of that spending. But more fundamentally, it is perfectly rational for a majority of individuals to support deficit reduction, while simultaneously opposing all means of doing so. Karl Smith points out one reason that is the case:

Suppose that you have three people. Adam, who believes in cutting spending to balance the budget. Bill who believes in raising taxes to balance the budget and Chris who believes that state balanced budgets are a pro-cyclical economic destabilizer that should be alleviated by federal transfers, or as he likes to say, “lame.”

Now we are going to ask a few questions.

First we ask: Should the state stick to its balance budget requirement? Adam and Bill say yes. Chris says no. We confidently conclude that the public wants balanced budgets.

Second we ask: Should we cut spending? Adam says yes. Bill and Chris say no. We confidently conclude that the public doesn’t want to cut spending.

Third, we ask: Should we raise taxes? Adam and Chris say no. Bill says yes. We confidently conclude that the public doesn’t want to raise taxes.

But wait a minute! Is the public insane! How can we balance the budget if we don’t cut spending or raise taxes.

No the public as individuals are completely sane, but when aggregated into a whole they become irrational. And, importantly there is no clear way to make them rational, since each person is answering truthfully and with complete knowledge of the facts.


That, as Krugman should know, is arithmetic. We should probably even expect this. When we ask a Yes/No question, we are almost guaranteed to get a majority in favor of one or the other. (Depends on whether or how strong of an option "Don't Know" is). In this case, that's a strong "Yes" in favor of deficit reduction. But if we then follow that up with a string of options of how to do that (18 in the WaPo survey of Republicans linked above, 13 in the Pew survey Krugman linked to), the broad-category majority will often -- even usually -- dissipate into a minority in each narrow category.

Here's a simple analogy to drive home the point: If you ask Americans if they like baseball, a majority will say yes. If you then ask them what their favorite team is, no team will get a majority. However, it would be daft to conclude from this that peoples' preferences over baseball are irrational.

Sometimes those options are nested, and when combined end up a majority (or even a supermajority, as in this example from Tyler Cowen). Sometimes they are not, or will not. But differences in the preferred means used to achieve an agreed-upon end is not a sign of individual irrationality, or even innumeracy.

You can sometimes get around this by changing the questions asked. Instead of asking "Yes/No" on a broad category then "Yes/No" on a series of smaller categories, for each category ask some variant of "If cutting Program X was the only way to balance the budget, would you want to do it?" I'll bet you find majorities pretty quick on many of those questions.

Final note: The Pew table that Krugman reproduces shows that in every single program, more people preferred cuts in 2011 than 2009.

Thursday, February 10, 2011

QOTD

. Thursday, February 10, 2011
0 comments

From Nir Rosen, via Tom Ricks:

This is not about Islamism; this is about regional alliances. Whether it's the Muslim Brothers or the Communist Party of Egypt who takes over after Mubarak, we can be certain that the new regime will be less of a puppet and less part of the American, Saudi, and Israeli alliance in the Middle East than Mubarak was. This is what the Saudis fear, that the architecture they have carefully crafted with the Americans is crumbling -- with Iraq ruled by the hated Shiites, Fatah in Palestine a joke, Iran ascendant, the Saudi proxies in Lebanon a failure. This has nothing to do with Islamism.

Wednesday, February 9, 2011

TAR!

. Wednesday, February 9, 2011
0 comments




Fire it up, folks. It's time to fly the flag. Tough game of course, but we're on the upswing. Should be good.

Power Up

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3 comments



I haven't posted anything in-depth the past few days because I've been busy with real work, and also because my blogging time quota has been dedicated to the comments to this post from John Quiggin (in response to this post by me, which was in response to his comments on my first retort -- and Phil Arena's "Amen" -- to this post by Quiggin), where I've spilt several thousand words at least. I've said a lot in there, much too much to summarize simply, but I think/hope it aggregates into something coherent. Probably the closest thing to "my overall view of the world" that I've put down. So, um, if you're interested in that you can plow through those lengthy comments to see if I've made any sense. And the argument is ongoing, although it seems to be dying down, so if you want to chime in please do. This is how I learn.

Anyway, at long last (in blogotime) Drezner weighed in with a sanity post, as I hoped and expected he would. And, in typical fashion, he expropriated the only marketable bit from the argument -- the title "The End of Power" -- but also spoke some sense.

While I was obsessing about Egypt last week, I see that John Quiggin, William Winecoff and others have been having a rollicking debate about the status of American hegemony, the fungibility of military power, and Boeing/Airbus subsidies. OK, that last one is less interesting, but I strongly encourage readers to go through the comment thread to that blog post. [KW: Yes! Please do! That way it'll seem like I didn't waste a bunch of time on the internet]


Drezner quotes a representative bit of Quiggin in which he (Quiggin) completely misunderstands how power works::

There's something missing from this debate that is worth raising, however -- a proper definition of power. For example, in his first post, Quiggin noted that "[advanced industrialized countries] might be said to have declined in relative terms. But this doesn’t seem to me to constitute 'decline' in any important sense." This is heresy to an international relations scholar, in that power is viewed as a zero-sum commodity.

This cheesed off Winecoff and others into pointing out the myriad ways in which the U.S. power profile is a) still outsized; and b) largely shaped the current global order we live in; and c) allowed entities like the EU to focus on welfare maximization rather than security.


I actually think Drezner got the [] in the quote wrong. It was pretty clearly referring to the US in particular, and not advanced industrialized countries generally. Anyway, It didn't cheese me off so much as make me wonder how a cosmopolitan social scientist with interests in social science generally and political economy specifically has such a strange view of power and influence.

I had put it this way:

[A] decline in relative terms is exactly what most people mean when they talk about the rise or decline of states. There's a storied IR debate about whether states are concerned about absolute or relative gains (or both), but basically everyone agrees that when we're talking about power and influence -- as opposed to, say, affluence -- relative differentials is what is important. So Quiggin is not only wrong here, he's got it perfectly backwards.


Drezner agrees, and helpfully goes on to talk about the different between compellence power and deterrence power:

[I]t is useful to think about the power to deter change from the status quo vs, the power to compel change in the status quo. In a deterrence scenario, countries use their capabilities to ward off pressure from other actors, or from structural pressures. In a compellence scenario, a powerful government threatens to use statecraft to extract concessions from other actors, or use power to alter the rules of the global game.


This is helpful in one sense, but obfuscates in another. It's helpful because it is definitely true that capabilities in one sphere does not necessarily imply capabilities in the other. It's also helpful because it can help separate which dynamics are present in which contexts. "Power" is a somewhat clumsy concept -- notoriously so, in academic IR -- so adding precision and context is good and right.

On the other hand, I think it gives Quiggin an out that he doesn't deserve. His point, generally, is that the US's power has already valleyed out, full stop. I think every IR person that has read that argument has completely disagreed, but that's to miss an even more fundamental point: The status quo is the US's ideal point, or relatively close to it. Even if US power has declined, at least at once it was the predominate power, capable of shaping the global order to a substantial (but not infinite) way. If deterrence/compellence is defined relative to the status quo, and the status quo predominately reflects the interests of one particular state, and that state has greater deterrence capabilities than any other state, then... you can finish the sentence. Compellence power isn't even needed, only deterrence power is.

FWIW, I believe the US has greater compellence power than any other state as well, even after some relative decline (this is the Drezner position too, I think, as well as nearly all of the IR profession), but that's almost irrelevant. Once a great power becomes a status quo power, it takes extreme, out-sized compellence powers by another state to change the system. Like, say, winning a World War, and then a Cold War in succession. That clearly hasn't happened yet. Or, as Drezner put it:

[N]either U.S. deterrent power nor other countries' compellence power has changed all that much, even in the economic realm. The rest of the G-20 can scream as loud as they want, but quantitative easing is going to continue. China has tried to find ways to use its newly found financial muscle to force changes in the international system, to little avail. To be sure, Russia, China and others can compel countries on their immediate periphery, but even a glance at the 2008 Russian-Georgian war suggests that even modest efforts like these are expensive and messy.


Right, but the important fact is that the US is the status quo power. China and Russia aren't. And the US has been able to repel Russian and Chinese (and French and Brazilian, etc.) efforts to revise the system with ease. As in, it hasn't even been a conversation worth dwelling on.

Drezner calls this the "extinction of compellence power as we know it". I don't think so. I think it's a combination of a few things.

1. The overestimation of the US's compellence capabilities previously. It's frequently said that the limits of the US's power in the 21st century is demonstrated by the difficulty in pacifying Iraq and Afghanistan. But the US couldn't pacify Korea in the 1950s (when it was unquestionably the only global power), nor Vietnam in the 1960s-70s. In other words, a better lesson is that the capability to remove a regime is not the same as the power to reconstitute society in the wake. Power is always limited, even for the most powerful state. The US experience in Iraq is actually much better than the experience in Vietnam.

2. Selection bias. Drezner should be susceptible to this argument, since one of his best-known articles focused on the importance of unobserved events. Well, the lack of challenges (or feeble "challenges" that are mostly signaling to domestic audiences) to the order initiated by the US is evidence of the US' compellence power, just by way of carrots rather than sticks. Integration into the US's order gets you rich (Japan, Germany, China, etc.), segregation from it makes you poor (N. Korea, Cuba, etc.). This is the Ikenberry argument, although he never puts it quite that way.

I could go on, but this is long as it is, esp when combined with my previous posts and comments at Crooked Timber. But if something isn't making sense (this seems to happen a lot when non-IR people read what I write) I'd be happy to revise/revisit my claims.

Tuesday, February 8, 2011

Known Knowns

. Tuesday, February 8, 2011
0 comments

Wow. Fred Kaplan goes full-bore on Rumsfeld, in a review of his new memoir and legacy. I'm not going to excerpt it; you really need to read the whole thing.

Hard Problems in Social Science, Redux

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Last April, Thomas blogged about the Harvard "Hard Problems in Social Science" initiative. Here were his contenders:

A. Aggregation
Across levels of analysis--micro to macro
Across space--society is not defined by national borders.
Across policy domains--Very little happens in isolation.
In short, constructing general equilibrium models based on the knowledge generated from the last thirty years of partial equilibrium research.

B. Endogenizing Change
Partial equilibrium models kind of rule this out. Thus, endogenizing change requires prior development of theoretical models that are not wedded to an equilibrium conception of politics.


Here is what he wasn't so much interested in:

Defining what is meant by "a problem in social science" is a necessary first step that the conveners appear unwilling to take. As a result, the participants in the Saturday convention held very different conceptions. Many seemed to drop "science" to focus on social problems, e.g., the gender gap in pay; the racial gap in educational achievement; inability to engage in effective state-building operations. These aren't problems of social science, these are social problems. Some went the other way and focused on the science to the neglect of the "social" (like the lone political scientist presenter who focused on post-treatment bias. Perhaps important, but a problem of method not of social science per se. Taleb focused on inability to estimate tiny probabilities. Again, clearly important, not obviously a problem of social science in particular.


Here is the result of the symposium. In some ways Thomas should be pleased. In other ways, not so much.

(Edited to better characterize Thomas' previous post.)

Monday, February 7, 2011

Checking in with Vaclav Havel

. Monday, February 7, 2011
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Clintonian, in a way?

Almost immediately [after leaving the Czech presidency] he started setting up an ex-presidential office, something perfectly customary in the United States but largely unprecedented in Central Europe. It was not his style to go on the lucrative speaker circuit (he may be an exceptionally gifted speechwriter but he’s a middling speaker) or to leverage his celebrity in the world of business. He has also largely avoided commenting on public affairs back home. Rather, he has continued in what he was doing for most of his adult life—advocating human rights causes and supporting dissidents around the world—in Cuba, Belarus, Burma, North Korea.

In keeping with his holistic view of the world as a network of cultures, ideologies, and religions, Havel designed and developed a forum where all these strands of modern civilization can meet and debate. The Forum 2000 conference was first held in Prague in 1997 and was intended to be a one-off. But instead it took off. In October, the fourteenth Forum 2000 conference, attended by politicians, experts, journalists, philosophers, and religious figures, took place under the title “The World We Want to Live In.” ...

The model of American presidencies does not stop at offices and philanthropy but extends to a Havel Presidential Library, the only institution of its kind in Europe. It collects, archives, and presents all the available documents pertaining to Havel and his presidency.


Now he's directing his first movie. More here. Havel's words of advice for political dissidents living under oppression, as he was in 1978 when he wrote them, was to live as if you were free:

Is the basicjob of the "dissident" movements is to serve truth, that is, to serve the real aims of life, and if that necessarily develops into a defense of individuals and their right to a free and truthful life (that is, a defense of human rights and a struggle to see the laws respected), then another stage of this approach, perhaps the most mature stage so far, is what Václav Benda called the development of "parallel structures."

When those who have decided to live within the truth have been denied any direct influence on the existing social structures, not to mention the opportunity to participate in them, and when these people begin to create what I have called the independent life of society, this independent life begins, of itself, to become structured in a certain way. Sometimes there are only very embryonic indications of this process of structuring; at other times, the structures are already quite well developed. Their genesis and evolution are inseparable from the phenomenon of "dissent," even though they reach far beyond the arbitrarily defined area of activity usually indi~ cated by that term.

What are these structures? Ivan Jirous was the first in Czechoslovakia to formulate and apply in practice the concept of a "second culture." Although at first he was thinking chiefly of nonconformist rock music and only certain literary, artistic, or performance events close to the sensibilities of those nonconformist musical groups, the term second culture very rapidly came to be used for the whole area of independent and repressed culture, that is, not only for art and its various currents but also for the humanities, the social sciences, and philosophical thought. This second culture, quite naturally, has created elementary organizational forms: samizdat editions of books and magazines, private perfor~ mances and concerts, seminars, exhibitions, and so on. (In Poland all of this is vastly more developed: there are independent publishing houses and many more periodicals, even political periodicals; they have means of proliferation other than carbon copies, and so on. In the Soviet Union, samixdat has a longer tradition and clearly its forms are quite different.) Culture, therefore, is a sphere in which the parallel structures can be observed in their most highly developed form. Benda, of course, gives thought to potential or embryonic forms.of such structures in other spheres as well: from a parallel information network to parallel forms of education (private universities), parallel trade unions, parallel foreign contacts, to a kind of hypothesis on a parallel economy. On the basis of these parallel structures, he then develops the notion of a "parallel polis" or state or, rather, he sees the rudiments of such a polis in these structures.


From The Power of the Powerless, available here.

Here are Havel's thoughts on Egypt.

Sunday, February 6, 2011

Something and Yellow

. Sunday, February 6, 2011
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This?



Or this?



I respect both franchises, but I hate Big Ben and the Steelers have won too much lately, so go Pack! Either way, this:

Saturday, February 5, 2011

Why Optimal FinReg Isn't Even on the Table

. Saturday, February 5, 2011
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Here's a nice little illustration of the difference between technological desires and political realities in financial regulation:

What is the optimal level of capital that a bank should hold? The new Basel III agreement sets a minimum level of 7% core Tier 1 capital, whose definition has been sufficiently tightened to consist almost largely of common equity. Under the Basel II rules, a bank could get away with just 2% common equity. But if Bank of England Monetary Policy Committee member David Miles is to be believed, regulators should really be forcing banks to hold as much as 20% core Tier 1 capital.


Miles, in other words, wants a 500% increase from Basel I and II in the amount of Tier 1 capital banks would have to hold. And maybe he's right: maybe that is the right amount. But that's basically irrelevant:

The Basel Committee calculated that just raising core Tier 1 capital ratios to 7% would require the world's 94 biggest banks to raise €600 billion ($821 billion) of equity, based on December 2009 balance sheets. If U.K. banks had to raise capital ratios to 17%, they would need an extra £757 billion ($1.2 trillion), more than twice their current market capitalization, according to UBS.


That is probably impossible in the current environment. As the article notes, Modigliani-Miller posits equivalence between debt and equity in the long run, but we're very much in the short run.

There's also a nice bit about the relationship between government policy and market expectations, and the political controversies over a supposedly technocratic policy.

As regulators have learned with Basel III, it doesn't matter how long banks are given to transition to higher capital requirements, the market will hold them to the higher standard straight away, a process known as superequivalence.

Still, Mr. Miles's analysis is useful in one respect; it shows the clear direction of thinking in U.K. official circles. British policy makers pushed hard in Basel for a minimum core Tier 1 ratio of 10%, supported by the U.S. and Switzerland. They are now winning support on the Financial Stability Board, which is overseeing the global overhaul effort, that the proposed additional capital buffer for too-big-to-fail banks should take the form of common equity. The U.K.'s Independent Commission on Banking also is considering further capital requirements for British banks over and above anything Basel demands.

Friday, February 4, 2011

Beware the Footballiphate

. Friday, February 4, 2011
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It's coming. Already taken over Egypt and most of the rest of the Middle East. And Italy is definitely gonna be a part of this one.

Thursday, February 3, 2011

ECB Fact of the Day

. Thursday, February 3, 2011
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Remember when I said that, by ignoring its legal mandate to not be the lender of last resort, the ECB was the only thing holding the EMU together? Here's what I meant:

As the scope of the Irish losses has grown clearer, private investors have been less and less willing to leave even overnight deposits in Irish banks and are completely uninterested in buying longer-term bonds. The European Central Bank has quietly filled the void: one of the most closely watched numbers in Europe has been the amount the E.C.B. has loaned to the Irish banks. In late 2007, when the markets were still suspending disbelief, the banks borrowed 6.5 billion euros. By December of 2008 the number had jumped to 45 billion. As Burton spoke to me, the number was still rising from a new high of 86 billion. That is, the Irish banks have borrowed 86 billion euros from the European Central Bank to repay private creditors. In September 2010 the last big chunk of money the Irish banks owed the bondholders, 26 billion euros, came due. Once the bondholders were paid off in full, a window of opportunity for the Irish government closed. A default of the banks now would be a default not to private investors but a bill presented directly to European governments. This, by the way, is why there are so many important-looking foreigners in Dublin, dining alone at night. They’re here to make sure someone gets his money back.


To put that into perspective, 86bn euros is roughly 112bn dollars. Irish GDP is about $230bn, so they've borrowed 50% of GDP from the ECB. Without those funds, they'd have to default and (probably) leave the EMU.

That's from Michael Lewis' story on Ireland. I wonder where he's booked his next ticket? Portugal?

UPDATE: Okay, I just finished Lewis' piece. This part stood out:

Ian turns out to have a good feel for what I, or anyone else, might find interesting in rural Ireland. He will say, for example, “Over there, that’s a pretty typical fairy ring,” and then explain, interestingly, that these circles of stones or mushrooms that occur in Irish fields are believed by local farmers to house mythical creatures. “Irish people actually believe in fairies?,” I ask, straining but failing to catch a glimpse of the typical fairy ring to which Ian has just pointed. “I mean, if you walked right up and asked him to his face, ‘Do you believe in fairies?’ most guys will deny it,” he replies. “But if you ask him to dig out the fairy ring on his property, he won’t do it. To my way of thinking, that’s believing.” And it is. It’s a tactical belief, a belief that exists because the upside to disbelief is too small, like the former Irish belief that Irish land prices would rise forever.


Apparently Lewis has a thing for mystical creatures, because that immediately reminded me of his story about the Icelandic belief in elves that lived underground, from his Iceland article (now gated, unfortunately). Among other facts and descriptions in the Iceland piece, the elves story was widely disputed; perhaps the fairies will be too. I don't remember anything from the Greece article, but I may go back and check.

Wednesday, February 2, 2011

Stop Pretending People Shouldn't Have Interests

. Wednesday, February 2, 2011
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Andrew Gelman:

Jonathan Chait mocks former senator Evan Bayh for taking a job as a D.C. lobbyist. ...

But hink of this from Bayh's point of view. After being one of 100 U.S. senators (and near the median, at that), it's natural to want to stay near the action and have some effect on policy. Lobbying is a natural way to do this. From this perspective, it's a direct extension of what he's been doing before. And if it pays well, so be it. I'm not one to turn down free money and I don't expect that others will do so either.


Jonathan Chait isn't being especially nasty about this, as these criticisms go. But he is a paid partisan, who spends every day of his professional life advancing the policy goals of himself and his employer. Why does he think that's purer than what Bayh is doing? Because he gets paid less, or has less influence?

Note that I don't think this is a character flaw, in Chait or Bayh. Instead I view it as, erm, politics. Which is definitionally about people and groups seeking to influence policy to their advantange by whatever means are at their disposal. It ain't a morality play, folks.

A New EU Governance Structure?

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The FT has abandoned it's "no cutting articles" policy, so I can link to their stuff again. And here's a piece about potential revisions to the EU economic government structure:

France and Germany are close to agreement on important elements of their plan for closer “economic government” in the eurozone, but they expect several weeks of negotiation with other European Union members to flesh out the details, according to high-level sources in Berlin.

The idea – termed a “pact for competitiveness” – amounts to a big concession by Angela Merkel, the German chancellor, to what was originally a French concept to beef up the policy co-ordination of the 17 eurozone members, rather than all 27 members of the EU.

However, Berlin government sources insist that the eventual proposal will have a strong emphasis on growth and competitiveness, as well as budget discipline, giving the plan a bias towards German policy content.


More details at the link. To me, this is how it looks these conversations are going:

Sarkozy: We need more policy coordination.

Merkel: Okay, then you all need to converge on our preferred policies.

Sarkozy: No no no. You don't understand.

Merkel: No, you don't understand. We've got the money. We've got the credibility. We've got outside options. We're not letting you all free ride. Take it or leave it.


Okay, okay, that's a bit of an exaggeration. But it seems clear that Germany is going to require a much stricter version of the Stability and Growth Pact before it agrees to any further integration. The article says that not only will public borrowing be restricted, but also higher retirement ages (sacrebleu!), harmonization of corporate tax rates (mon Dieu!), and other policies affecting competitiveness.

In other words, Germany is demanding the Germanification of Europe. We'll see whether those terms are acceptable.

Tuesday, February 1, 2011

This Is What Adjustment Looks Like (An Ongoing Series)

. Tuesday, February 1, 2011
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Gradual and uneven, but happening:

More steps toward the internationalization of the China’s capital markets are likely. There is talk that in the coming months, China may allow foreign companies to list their shares on the Shanghai stock exchange. There may be efforts to encourage the Panda bond market (foreign companies issuing yuan bonds on the mainland). The development will take place under the guiding hand of China, for whom stability remains a guiding principle. This evolution will build institutional capacity, but a fully open capital account and full convertibility of the yuan still appears to be at least several years away. It is far premature to speak of a challenge to the greenback by the redback (yuan), though it continues to catch the fancy of many observers.


Much more here. Meanwhile, here is the latest on Chinese inflation, large wage increases, and the real exchange rate. This part is interesting:

China’s $6 trillion economy used to be heavily dependent on exports for growth. Exports still account for about one-fifth of the economy, after excluding goods that are merely imported to China for final assembly and then re-exported. But China’s economy has grown powerfully for the last two years mainly on the strength of investment-led domestic demand. That demand, partly fed by low-interest lending by state-owned banks, is another factor in China’s inflation.

The Atypicality of U.S. Power and Influence, con.

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4 comments

My previous post criticizing John Quiggin for his views on the decline of the US attracted responses from him both here and at Phil Arena's place. To a large degree I think the disagreement between Quiggin and I (plus the other academic IR folks who have responded to him, every single one of which -- that I've seen -- has disagreed with him) stems from the fact that we're speaking different languages and seeing different worlds. For example, Quiggin asserts that the US has more or less the same amount of power and influence that any developed state with a comparable population would have. Ignoring the question of how it secured that level of development, I might agree with him if he'd said instead that the US has more or less the same amount of power and influence that any developed state with a comparable population would have, that also had the same preferences as the US has had, and that emerged victorious from the two major conflicts of the past century (the European wars and the Cold War) would have. In other words, I'd agree with him if he'd said the actual US has the same level of power and influence that a hypothetical country that resembled the US in every significant way would have. But these qualifications explicitly exclude the EU, Japan, China, or any other state/group of states.

In his comment on my previous post he writes:

As regards your claim that "the system was largely created and maintained by the US", I think the British might have something to say about that, as well as about the fact that there is life after decline.


To anyone with a basic understanding of the power politics that got the US into the WWII, and the system it set up afterwards, this is patently absurd. Quiggin is an economist, so I'm assuming he's talking mostly about economics, but even there he's still thinking in a too-narrow, reductionist way. What would the British "life after decline" look like if the US had not created and maintained a credible postwar order? Would British standards of living be different if it faced constant security threats from Germany and Russia during the past 60 years without a US alliance? Has Britain not benefited greatly, in economic terms, from the special relationship? To ask these questions is to answer them. Previous imperial declines were not so comfortable.

For the best treatment on this I'll refer readers and Quiggin to Ikenberry (esp. chapter 6). Summarizing, the US always intended to drastically revise the British order following WWII, and it did so. This was obvious at least as early as the 1941 Atlantic Charter and the terms of the Lend-Lease agreement, a precondition for the end of US neutrality which demanded the dismantling of the imperial preference system (and thus the empires themselves) and an institution of a rules-based, multilateral, non-discriminatory order centered on economic openness and national self-determination. These principles were sometimes honored in the breach, but this was nevertheless in stark contrast to the imperial competitions that led to the European wars, and Churchill knew that he was selling the British empire in exchange for the end of America's neutrality (although he tried to walk it back later, until the US rebuffed him). Britons that wish to dispute this characterization can take it up with their Bulldog if they like. The resulting postwar institutions -- UN, GATT, IMF, -- were based on these principles, as well as rehabilitation of the defeated Axis and the establishment of anti-imperial norms. All of these were insisted on by the US, and none of them were possible without it.

In other words, the postwar order the US established was focused on accommodation and reciprocity. So Quiggin's next challenge -- "There isn't a single one of these examples where the US has in fact prevailed over the united opposition of the EU and Japan." -- is completely missing the point. Setting aside the fact that it is far too early to consider the EU as a unified political bloc, or that the existence of the EU itself is inconceivable without the US's security blanket for the past 60 years, the EU and Japan have never put up a united opposition to the US on any critical matters because the system the US built and maintains rewards cooperation rather than conflict. This is, again, a reversal of previous imperial systems. And it's created a cessation of major-power war, and a level of international cooperation that is unique to history.

The result of that history is the present, where it's easy to highlight data points indicating pervasive US influence: the US has significant military bases in all of the countries Quiggin highlights as its supposed peers, including the EU and Japan, and many besides. None of them have significant bases in the US or anywhere else outside their territory. Is there not a significant asymmetry here? Some of the US' rivals have regional economic or political influence -- Germany within the EU, e.g. -- but none have significant sway beyond their neighborhoods, and none have decisive political or military influence even within them. To illustrate: if the US announced tomorrow that it would slash its military budget, the result of which was the complete withdrawal of all troops and closing of all bases in Europe, and ceded its security role to Germany, France, the UK, and Russia, does Quiggin actually believe that European relations would not change dramatically? What happens when Germany controls EU monetary policy and has the biggest military in Western Europe? What happens when Serbia moves back in for Kosovo? Note that (I infer, from suggestive things he's written) Quiggin actually supports some version of this scenario.

How would Quiggin characterize Japan's international influence? Perhaps he could consider the recent Korean kerfluffle. The Japanese response was to strengthen ties with the US, and not much else. How about the EU's response to Russia/Georgia? Inconsequential, if not non-existent. Which countries in the EU or Asia have any substantial role in Egypt, or elsewhere in the Middle East? France, perhaps, but it's the US that gives the country a third of its military budget and other aid too. Why do that? To ease security dilemmas (and it works!). None of these countries have any presence or influence in the whole Western hemisphere, and most have no significant influence outside of former colonies, if that. Etc.

In some cases counterfactuals are easy. It used to be said that when the US sneezes the world catches a cold. Now it seems clear that when the US reaches for a kleenex the world catches pneumonia. When the US has a financial crisis the European monetary union is brought to its knees, global equity markets drop precipitously, global GDP drops off a cliff, etc. When Japan had a similar crisis in the 1990s, were the effects similar? Has the EU's ongoing debt crisis had the same global effects? This is not just a question of population size. The US is central to the global economic network in a way that the EU and Japan are not.

Quiggin asks for specifics. I had mentioned in passing: financial regulation, climate change, arms control/missile shield, invasion of Iraq, monetary policy/exchange rates, integration of China into the global economic community, Israel. I further noted "But the point is even broader than that. If the E.U. and Japan agree with the U.S. on many or most major issues, isn't that evidence that the U.S.'s influence is greater, not lesser?" He responded:

The concession at the end says it all. There isn't a single one of these examples where the US has in fact prevailed over the united opposition of the EU and Japan.

In most cases, I don't even know what you are claiming. Are you suggesting that
*the (disastrous) outcome of the various Basel rounds was dictated by the US?
*Or that the mess in Copenhagen counts as a success for US policy?
* Or that the missile shield was imposed over the objections of, say, the Poles
* Or that the EU and Japan opposed the Iraq war (Japan and about half the members of the EU sent troops)

etc. Feel free to spell out at least one of the examples, and I'll be happy to respond


It's not clear what Quiggin means when he says "prevail" against some hypothetical union of the US' best allies against it. In order to prevail there must first be conflict. If the US creates and maintains a system in which conflict is Pareto-inferior, then there will never be conflict. I'll probably regret this analogy (I've never been good with them), but if parents provide an environment for their children in which it is better to heed instruction than to rebel, are we really to say that the parents have lost influence because they aren't fighting with, then defeating, their kids? That would be absurd. So if the US created a postwar order in which recovering and developing states alike can thrive and grow, is it to the US' discredit that they do not rise up against it? Seems like a non sequitur.

Are there minor quibbles about technical language in trade agreements, etc.? Of course. Interests are not perfectly aligned and US power is not infinite. But can Quiggin point to a single example in which a major revision of status quo rules in the WTO, IMF, UN, or any other significant international interaction/institution has shifted in a way that is significantly disadvantageous to the US? Any major power military conflicts? Any large-scale reorganizations of global politics in ways that violated US interests? Well, there's a challenge for him. I can't think of one, although I can think of plenty of the opposite. Even the invasions of Iraq and Afghanistan -- widely considered to be the height of American overreach -- have succeeded in their primary objectives of dismantling al Qaeda and removing Hussein. Did the US get everything it wanted at a cut-rate price? Nope. But to the US, are Iraq and Afghanistan in 2010 preferable to Iraq and Afghanistan in 2001? Perhaps it's cynical, but I think that that's obviously true.

Anyway, to go point by point on a few specifics so it doesn't look like I'm ducking:

1. Yes, although I wouldn't put it quite that way. As it happens I've blogged about Basel III a lot. I've argued that the Basel accords had little to do with what economists like Quiggin think they were about, which is preserving financial stability. Basel is about politics, not technocracy. Anyway, it's clear that the US was opposed by Germany and Japan in the creation of the rules, and the recent revision of them, and that the US got its way in both cases. This is the pattern of Basel negotiations. For more info, type "Basel" into the search bar in the top right. If you prefer your arguments to be peer-reviewed, see the Stigler-Peltzman model extended into an international context with power dynamics, using Basel I as a case study, here. When US interests butt up against German/Japanese interests, the US wins.

2. Yes. The EU and Japan have wanted a comprehensive global climate change agreement since at least Kyoto. The US has not. Which one has gotten its way?

3. Missile defense was probably not the best example, but after resistance towards ground-based missile defense from Europe, the US decided instead to just use warships. No other country in the world has the capability to make that choice, and no country in the world has the capability to prevent the US from making it.

4. The major powers that did oppose the Iraq invasion (Russia, China, Germany, France) did nothing more to stop it than give speeches and veto UN resolutions. Certainly none tried to do anything tangible to curtail the US' activity.

5. When the U.S. engages in a relatively conservative monetary expansion in the face of depressed, deflationary, and imbalanced economy, other countries shriek like they've been set on fire. The U.S. shrugs. Meanwhile, the nominal and real exchange rates of major export-biased economies are rising, which will likely end up forcing a realignment similar to that which occurred at the end of Bretton Woods. Which country (or group of countries) could force a similar adjustment from the US?

In my previous post I cited instances of demonstrative US influence in the IMF, World Bank, and UN. I cited peer-reviewed research in each case. I talked about its leverage over Egypt and other Middle Eastern states. I talked about the pacifying effect of the European and Asian security blankets, which is a common theme in IR theory. None of these have been rebutted.

I could go on, but either I've made my point by now or I haven't. Quiggin has argued that the US is not only in decline, it has already declined to the point that it is a typical power. In fact it is an exceptional power, with global reach in nearly every substantial issue area in global politics. The US has no peer. Normatively, that might be a bad thing. But positively it's practically inarguable.

None of this is to say that the US is omnipotent. Plenty of states and non-state actors do things that it doesn't like, and the US cannot force everyone to conform to its preferred behavior all the time. Perhaps its capabilities in this regard have deteriorated as other states have grown to rely less on the US for security and economic well-being. But to say that the influence of the US is typical -- even if its output-per-hour-worked or employment/population ratio is similar to other countries, to use Quiggin's examples -- is just wrong.

International Political Economy at the University of North Carolina: February 2011
 

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