Friday, July 29, 2011


"Since becoming leader of France's Front National in January, Marine Le Pen has started to shift her party away from the far right. She has not only dropped the overt racism and Islamophobia of her father but also adopted hard-left economic policies. "Left and right don't mean anything anymore – both left and right are for the EU, the euro, free trade and immigration," she said when opposing me in a recent dinner debate on the future of Europe in Paris. "For 30 years, left and right have been the same; the real fracture is now between those who support globalisation and nationalists...."

She presents her party as a nationalist force – in British terms, the United Kingdom Independence Party rather than the British National Party. In its hostility to the EU and to immigration, the Front National has much in common with Austria’s Freedom Party, the Danish Peoples’ Party, the True Finns, the Sweden Democrats and Geert Wilders' Party for Freedom in the Netherlands. Populist, illiberal parties are flourishing in the most sophisticated, liberal societies of Northern Europe.

Although Le Pen is changing her party's brand, she is no Gianfranco Fini: he led his party away from neo-fascism towards the pro-European centre of Italian politics. Le Pen's European policies remain extreme: she urges France to leave not only the euro but also the EU. Her economic platform is one of national economic autarky: she wants to protect France from globalisation by erecting high tariff barriers. Her economic platform is in fact quite close to that of Jean-Pierre Chevènement, the veteran anti-European and former Socialist minister. Earlier this month she appealed to Chevènement to work with her – but he rebuffed her advances.

Le Pen's line on the euro and the EU may be extreme, but given the mess that Europe is in, her views may not cost her votes among those who want to kick the Paris and Brussels elites for their (apparent) complacency, smugness and incompetence. She wants France to leave the euro so that it can devalue and become more competitive. While China and the US benefit from being able to devalue, she said, the eurozone suffers from low economic growth. "To save the euro we are asking the Greeks to make huge sacrifices through austerity, and soon we will ask the same of people elsewhere, even in France. The euro will lead to war."

When I responded that devaluation would destroy the French people's purchasing power, she said that only 'BCBGs' (short for bon chic bon genre, that is to say the fashionable middle class) would complain about devaluation; they buy the foreign goods and holidays that would cost more, whereas most poor people buy things made in France (a point that is highly debatable).

She complained about sovereignty draining away to Brussels and said that we live in a Union Soviétique Européenne. The EU represents the interests of big financial groups, she said, and encourages immigration in order to put downward pressure on salaries. She said that her country needs a French agricultural policy, rather than a Common Agricultural Policy, since the CAP was giving too much aid to Central Europeans....

When I said that rather than trying to compete directly with China, France should go up market and produce goods and services that the Chinese cannot, she argued that they could now beat France in any industry – as they were doing by building high-speed trains. I responded by praising the prowess of France’s world-beating companies in areas such as luxury goods, agribusiness, energy and aerospace – so she joked that the best proponents of Sarkozyism came from Britain.

The obvious critique of her line on the EU is that France, on its own, is rather small compared to China and other emerging powers, and that it therefore needs the EU to amplify its voice in the world. But she had no truck with that argument, saying that France on its own had a big voice. "I am a gaullienne, and the general would be horrified to see the EU today…I want an association of sovereign nation-states; that would allow us to influence Russia and the wider world." And when I suggested that the EU had the merit of constraining German power, she said Germany already dominated the EU. "When Germany has a constitutional problem, we change the EU treaty; but if France has a problem, we have to change our constitution...."

I think Le Pen is right when she says that the main political divide in Europe is between nationalists and globalisers. But the solutions that she offers to complex problems are far too simple. Her language resonates with the common man: she is on the side of the little people against foreigners, international bureaucrats and big capitalists. And her economic nationalism goes down particularly well in France, a country that is probably more hostile to globalisation than any other European country".

Charles Grant, "Marine Le Pen and the Rise of the Populist Right," Centre for European Reform 20 July 2011, in

"Men live not in markets but in communities. For the past few hundred years, those communities have been grouped, voluntarily or (more often) coercively, in states. After the experiences of 1914-1945, Europeans everywhere felt an urgent need for the state: the politics and social agendas of the 1940's reflect this anxiety above everything else. With economic prosperity, social peace and international stability, however, that need slowly evaporated....Legitimacy is a function of capacity: it is in part because the disarticulated, ultra-federal state of Belgium, e.g. has sometimes appeared to not keep its citizen safe that its legitimacy has been called into question. And although the capacity of the state begins with arms it does not end there, even today. So long as it is the state---rather than a trans-state entity---which pays pensions, insures the unemployed and educates children, then that state's monopoly of a certain sort of political legitimacy will continue unchallenged. Over the course of the twentieth century the European nation-state took on considerable responsibilities for is citizen's welfare, security and well-being. In recent years its has shed its intrusive over-sight of private morality and some-but not all-of its economic initiative. The rest remains intact."

Tony Judt, Postwar: A History of Europe since 1945(2005).

With last week's horrific events in Norway it is easy and indeed almost morally justified to dismiss out of hand the arguments and nay indeed the thinking of the likes of Mlle. Le Pen. And indeed avant the events in question, Mr. Charles Grant cogently if rather one-sidedly makes the classical bien- pensant argument against right-wing Populist politics. And to be perfectly honest, Mr. Grant does indeed score a good number of debating points vis-`a-vis Mlle. Le Pen. An exercise which au fond is hardly a difficult one. Regardless of this factum and regardless of the fact that most if not all of the Droit Populist movements and parties in Europe have an air of inveterate and inexorable stupidity and indeed chicanery, it would be mistaken I believe to simply ignore the underlying forces and motives which help to explain the resurgence, now indeed almost European-wide of the likes of Mlle. Le Pen. Simply put, the European project has in the last twenty to twenty-five years run into the ground as it relates to improvements to people's economic situation. As the Financial Times recently reminded everyone, in the past twenty to thirty years, growth in per capita income has been abysmally small if non-existent in most of Western Europe if one is looking at the middle and lower-middle classes. It is only among the truly upper-crust (people's whose per capita income is $250,000.00 and above) and to a lesser extent the poorer elements of society, that per capita income has still continued to grow at a healthy pace 1.

And as is widely noted, much of this stagnation if not necessarily due directly to so-called 'globalization' of the last twenty or more years, at the very least it seems to be affected by the same. And this correlation has not passed unnoticed among the demographic groups which provide the electoral cannon fodder for the Populist parties of the Right in Europe. Unlike say the bien- pensant, 'chattering classes', who until quite recently were impervious to the economic changes of the last twenty to twenty-five years or so, the traditional manual lower orders, as well as the lower-rung of the white collar salariat, have been feeling for quite sometime the negative effects mentioned above. In that respect, Mlle. Le Pen's gibe that it is only the 'BCBG's' which would be negatively impacted by a 'go-it-alone' economic strategy is to some degree correct. And while no one can argue that France or any other European country can alone successfully endeavor to engage in economic autarky, it is not very surprising given the trajectory of the recent past that much of the wider European public, is unconvinced if not negatively impressed by the vision of a 'wider and deeper' European Union as advocated by elites in Brussels, and the various national capitals. Indeed, one is highly amused over the fact that nowhere in Mr. Grant's essay, is there the least understanding of how much legitimacy the entire EU project has lost with the European public, due to the debacle of the Euro-crisis, first in Greece, then Ireland & Portugal with the both Spain and Italia now also coming under pressure. Given the fact that the self-same elites who are chiefly responsible for the Euro-crisis, are still in power in almost every European capital and in Brussels, the popularity of Mlle. Le Pen, et. al., is all too readily understandable. And what pray you might ask is the 'solution'? Insofar as one may view 'Populism' as a sort of political illness, one is tempted to say that ignoring the symptoms and for that matter the disease is hardly likely to result in anything positive. And in fact, I for one am quite willing to view with favor some aspects of the Populist programme: i) much, much stricter controls on non-European immigration; ii) a much greater distrust of the role that the financial services industry plays in the European economy; iii) the need for a greater emphasis on traditional values and allegiances and the need to relegate permanently in storage that policy dysfunctionality known as 'multi-culturalism'. Ideas which unfortunately our bien-pensant elites view with disfavor if not worse. All of these items, if employed with moderation and intelligence can hold the fort when confronting the 'populist tide'. Otherwise, I am afraid that horrific occurrences such as those which occurred last week may not be a one-time event.

1. Chris Gilles,"Spectre of stagnating incomes stalks globe," The Financial Times. 27 June 2011, in

Sunday, July 24, 2011

Russia's Economic Future: a differing point of view

"Russian industrial production has been growing at a rate as fast as that of any society of which we have record, and greater than most. The technical quality of their heavy industry is no less impressive....In 1928 in Russia 'the state of technology was generally backward, and labor skilled in modern technology was scarce'. Two years ago the Soviet Union produced more than twice as many bachelors
of science as the United States and over two and half times as many engineers."

Dean Acheson, Power and Diplomacy (1958), pp. 11-13.

"It is significant that in the 1970's Japan and Russia are at similar levels of per capita development. Individual indicators naturally vary, due to many factors. On a per capita basis, for example, Japan produces twice as much steel as Russia, but consumes only three-quarters as much energy. In terms of real gross national product
per capita the two countries were at about the same level in the 1960's, though since then Japan has forged ahead. Instead of being one-quarter to one-third the level of the United Kingdom in real GNP per capita, as they were in the 1870, they
are not about equal with it."

Cyril Black, et. al. The Modernization of Japan and Russia: A Comparative Study (1974), pp. 14-17 & passim.

As the above two texts clearly show, Russian economic prognoses have not altogether been a very clear-cut business. In retrospect, the near-paranoia of the American decision-making elite, circa the mid-1950's (Acheson's words hardly being unusual for that time period) reads most ironically indeed. Of course it is child's play to see post-facto, that beginning in the mid-1950's the Stalinist economic model had become dysfunctional and was no longer able to produce the requisite growth rates of earlier time-period for an economy which had au fond, become modernized (albeit at the costs of oceans of blood). It was only in the late 1960s', early 1970's that a dawning awareness was sinking in among both policymakers and academic experts that Sovietskaya Vlast was beginning to suffer serious problems in economic growth, productivity & efficiency 1. In that respect, the Cyril Black et. al., book appears to have been completely outdated prior to even publication. And of course one may very well ask how valid were the statistics that Black and company use to obtain those per capita income measurements that resulted in Sovietskaya Vlast being equal to or greater than the contemporary United Kingdom. At this point one may very well recall that the American intelligence outfit, the CIA, which still sponsored much academic Sovietology in the later Cold War, only considerably reduced Soviet GDP in the late 1980's in the period of Glasnost. In short when discussing the Russian economy (like one is tempted to say the contemporary Chinese economy), one is tempted to warn: caveat lector!

With all that being said, the article found below by Anatoly Karlin, is I believe worth reading inasmuch as he correctly I believe puts paid to a certain amount of negative analysis of the Russian economy which one reads rather constantly in the Anglo-American press 2. Not that per se there are not criticisms that one can make of the current Putin-Medvedev duumvirate. Merely that a good deal of the criticism made are either misplaced or completely erroneous 3. The chief one to my mind is the fact that with Russian having both rates of urbanization and per capita income which are measurably higher than that of the other so-called 'BRIC' countries, it is hardly possible to expect that Russia would duplicate the rates of growth of these countries. Especially since as Karlin points out, those of Brazil are hardly higher than those of Russia as of 2010. The upshot is that as Karlin correctly notes, 'declinist rhetoric' about Russia's economic future is based more upon comparing apples and oranges than about making a fully contextualized comparative study of Russia and those other economies which it should be compared to. But then again, Russia in the Putin era, if not before always seem to provoke these types of unfair comparisons. With that being said of course, one on the other hand cannot gainsay analysis such as those offered by the ever-wise, Dmitri Trenin and company that in point of fact, in absence of structural changes in the certain key sectors of the Russian economy in the next ten to fifteen years, what George Magnus in the Financial Times has characterized as the 'middle-income trap', will indeed 'trap' Matushka Russia 4.

"In the wake of the 2009 recession, declinist rhetoric has come to dominate discussion of Russia’s economic prospects. Jim O’Neill, the founder of the BRIC’s concept, has his work cut out defending Russia’s expulsion from the group in favor of Indonesia, Mexico, or some other random middle-sized country. Journalists in the Western media claim its economy is “not growing”, as do liberal Russian newspapers such as Vedomosti. Comparisons between Putin and Brezhnev (who presided over the Soviet Union’s period of stagnation, or zastoi) are piling up. Even President Medvedev isn’t helping the situation, telling a forum of international businesspeople that Russia’s “slow growth” hides stagnation.

I don’t want to exchange rhetorical barbs in this post (which you may note is not tagged as a “rant“), and my skills at mockery and picking apart tropes aren’t nearly as well developed as those of Mark Adomanis or Kremlin Stooge, so I’ll do what I do best and go straight to the statistics. And so we have Fact #1: what is described as stagnation for Russia is a growth rate of 4%. It grew 4.0% for 2010. It was 4.1% in Q1 2011, and the government predicts it will be 4.2% for the whole year. The World Bank predicts 4.4% in 2011, 4.0% in 2012; the OECD expects 4.9% in 2011 and 4.5% in 2012; and the IMF forecasts 4.8% in 2011, 4.5% in 2012, tapering off to less than 4.0% in the “medium-term.”

This does not strike me as being particularly bad by global standards. This is obviously no miracle economy of Chinese-like 10% growth rates, but Russia (4.4%; 4.0%) does not compare badly to the World Bank’s projected growth for other typical middle-income countries such as Turkey (4.1%; 4.3%), Thailand (3.2%; 4.2%), Brazil (4.4%; 4.3%), Mexico (3.6%; 3.8%), or South Africa (3.5%; 4.1%). Facing real stagnation, many countries in the developed world such as the UK could only wish for Russia’s growth rate; though this is an unfair comparison, because Russia is poorer and can therefore find it easier to grow faster (see economic convergence), it is not less unfair comparing Russia to countries such as India (8.4%; 8.7%) or Indonesia (6.2%; 6.5%) because the latter are so much poorer than Russia in their turn.

This discussion suggests that CONTEXT is vital when discussing the degree of stagnation in a country. One of the two major factors here is the current GDP of the country in question; real GDP, that is, because that is what growth refers to (i.e. if a country devalues its currency by half but output remains constant, then nominal GDP will fall by half but real GDP will remain constant; as such, real GDP per capita is also the better proxy for living standards and economic sophistication). Now there are two major estimates by international organizations of Russia’s real GDP. The IMF estimates it at $15,800 as of 2010, whereas the World Bank believes it is $19,800 (relying on recent joint research by OECD-Eurostat-Rosstat). There are grounds to believe that the latter is more accurate because the international price comparison data that goes into real GDP estimates is much more recent for the World Bank*. But regardless of which one you use, Russia’s GDP is still much higher than the other emerging markets or BRIC’s with which it is so frequently compared to – Brazil has $11,100, China has $7,500, Indonesia has $4,400, and India has $3,600.

This is extremely important for two reasons. First, it is much harder to grow quickly when you are already a mostly developed country (like Russia, Poland, Korea) than when you are a mid-level developing country (China, Brazil) or a poor developing country (India, Indonesia). The most important reasons are: (1) The potential to achieve rapid growth by transferring your population from rural agriculture to urban industry and services becomes exhausted; (2) the services sector, where productivity can’t be improved as fast as in industry, assumes a bigger share of GDP; (3) most importantly, those countries are far closer to the technological frontier or “best practice”, and hence must increasingly innovate their way to growth instead of reaping low-hanging fruit by adopting and copying from elsewhere. All this isn’t debatable – there is a ton of economic literature on this, it passes the common sense test, and it is basically a given.

The results, as you can see, are fairly stunning. A low population growth and relatively high base – Russia’s GDP per capita of $20,000 is equivalent to that of Poland, Hungary, and Estonia - means that as soon as 2020 Russia will be where Italy is today, with a GDP per capita of $31,500. Now granted Italy may have grown as well, but given its dismal record for the past decade and the growing financial tremors in the Eurozone even this is far from certain. In other words, even at “stagnant” growth rates of 4% per year Russia will have converged to the lower ranks of Western Europe’s rich countries (having overtaken Greece and Portugal outright)....

Nonetheless, the main facts remain intact: (1) It is growing from a relatively high base; (2) In an environment of approximately zero population growth; (3) The strength of state finances preclude any fundamental economic cataclysm as happened/is happening in Ireland, Greece, Latvia, etc. Taking into account these adjustments, a growth rate of 4% is entirely respectable and better than many if not most countries in the same general income bracket".

1. For an archtypical example of the state of the literature, circa the late 1960's, see the pertinent chapter in Alec Nove standard text of the time: Alec Nove, An Economic History of the USSR(1969).

2. Anatoly Karlin, "Russia's Economic Stagnation in Global Perspective," 19 July 2011, in

3. Anders Aslund, "The Kremlin's Crisis," Foreign Affairs. 20 May 2011, in, for a rather typical example. Others of the same ilk can be found regularly in the Financial Times, the Economist, the New York Times and the Washington Post inter alia`.

4. Dmitri Trenin et. al. "Russia in Mid-2011," Carnegie Europe Center. 22 June 2011, in; George Magnus, "China can yet avoid a middle-income trap," The Financial Times 29 June 2011, in The article intelligently describes and delineates the 'middle-income trap' generally.

Wednesday, July 20, 2011


"Britain has asked the US to step up its support for the Nato mission in Libya, amid continuing doubts over how the conflict against Colonel Muammer Gaddafi’s forces can be brought to an end.

Officials have told the Financial Times that Liam Fox, UK defence secretary, asked Leon Panetta, his new US counterpart, for more help with intelligence, surveillance, reconnaissance and aerial refuelling. The two men spoke in a phone call last week.

The request leaves the Obama administration facing a choice between disappointing its ally’s call for help and potentially angering the US Congress, which is increasingly sceptical about the conflict.

The issue is coming to a head as western officials express concern about the endgame in Libya. Many defence officials doubt whether Libya’s rebels, who on Sunday were battling for control of the town of Brega, can push their way through to Tripoli. But Nato countries are limited in the additional aid they can provide both because of the terms of the United Nations resolution authorising force and constraints on their own resources.

After leading the initial assault on Libyan defences in March, the US has insisted on taking a supporting role in the operation, partly because of problems on Capitol Hill.

Neither house of Congress has endorsed the action. The administration argues that such authorisation is not necessary, and maintains that Washington’s current participation in the conflict falls far short of “hostilities”. An enhanced US role could further strain such arguments.

UK defence officials said that Mr Panetta gave no commitment during the conversation with Mr Fox and the UK is still waiting for an answer from the Pentagon.

Mr Fox appeared on British television on Sunday, accusing Nato members of not doing enough to support the organisation’s military missions, including that in Libya. He noticeably did not mention the US in a list of countries that were playing a prominent defence role, adding: “There are rather too many absentees, which is unfair on our defence forces....”

But the defence secretary is under pressure to ensure the UK is not over-committed in Libya, having taken the de facto lead in planning for what happens after the conflict ends. He will outline to the UK parliament further cuts to the size of the regular army on Monday as part of a settlement with the Treasury on the size and cost of the UK’s armed forces by 2020".

David Dombey & Kiran Stacey, "Britain urges US to step up Libyan support." The Financial Times. 17 July 2011, in

"To complete this survey, the present position of the United States must be summarised. At present they are trying to have it both ways. Either Europe is the messy, dangerous place that she imagines, and pooled security full of snags and alligators; in that case, it cannot logically be trusted with a toothless pact. Or Europe is not half so bad; in that case, American post-war policy will be hardly judged by the future historian. Already there is among instructed Americans some uneasiness lest their policy be compared with that of Dogberry and Verges....For the purposes of our enquiry, however America may largely be written off since, comprehensibly, she neither lives, nor desires to live, in touch with reality so long as filmland is open to her and she has a good spell of illusion still ahead."

Sir Robert Vansittart, "An Aspect of International Relations in 1930." 1 May 1930, in Documents on British Foreign Policy, 1919-1939, Series Ia, Volume VII, (1975: Her Majesty's Stationary Office) pp. 848-849.

The perils of the Americans 'leading from behind', are fully laid out in the above referenced article in Monday's Financial Times. It is certainly quite clear by now, that sans greater American support, the entire NATO operation in Libyan will soon face the test of exhaustion of essential materials and support. With some news articles stating that if the conflict enters the month of October, that there will be very serious pressure put on British forces in particular. The fact of the matter is, that inasmuch as the Americans decided to endorse (admittedly belatedly) the Anglo-French push to oust the current regime in Libya back in late March, the Americans are part 'owners' of what is coming to be seen (perhaps erroneously) as a military stalemate. Au fond, if in fact the conflict were to enter the month of October, it would raise very serious questions about NATO's ability to operate militarily without the operation being almost entirely led, manned and thus controlled by the Americans military. And while the mere fact of a stalemate should not per se act as a sort of force majeure in terms of greater American involvement, one can see few plausible alternatives. Since if indeed NATO's prestige is dragged into the mud due to a near-debacle in the Libyan deserts, the USA's prestige will inevitably follow suit and surely be judged as the then Permanent Under-Secretary of State at the Foreign Office presciently judged that American entre deux guerre foreign policy would be judged by future historians: 'hardly'.

Sunday, July 17, 2011


"If Michael McFaul becomes the next U.S. ambassador to Russia, it will be another case of a scholar becoming a top diplomat, which is not uncommon in U.S. practice. Before he was appointed in 2009 as senior director at the National Security Council responsible for Russia, McFaul’s entire career was in academia and think tanks. His performance since then proves that scholars can be successful bureaucrats and, given the powers of office, achieve valuable strategic results that they would only dream about in their op-eds.

The Russian media have attributed McFaul with being the architect of the U.S.-Russian reset. This is certainly true, but as an architect, he could achieve what he did because he was only working to order and was given the backing of U.S. President Barack Obama. It was the president who commissioned McFaul to redesign U.S. policy toward Russia in accordance with Obama’s own worldview and in pursuit of his larger goals.

The irony, of course, was that when Obama moved into the White House, he cared relatively little about Russia per se. Focused on Afghanistan and Iran, he saw Moscow as a potential resource to help reach Washington’s central objectives in both Muslim countries. That resource, however, could not be used because of the botched Russia policies of the previous administration of President George W. Bush. Hence, the obvious and very pragmatic need for a reset.

Two years later, this approach has led to spectacular results. The Northern Distribution Network across Russia now amounts to 50 percent of the U.S. military transit to Afghanistan and is likely to become the principal supply route as the Pakistan option becomes more hazardous. On Iran, not only has Moscow supported United Nations Security Council sanctions against Tehran, but it canceled the sale to Iran of the S-300 air defense system, foregoing $1 billion in revenue. In an equally rare development, Moscow recently abstained at the UN Security Council abstention to allow the use of force against Libya’s Moammar Gadhafi. Although Russia is still not central to Obama’s foreign policy, it is a truly one of his largest success stories.

To Washington, this pragmatism has not come at the price of keeping mum on the issues where the U.S. and Russian governments disagree. McFaul has been criticized for co-chairing a group on civil society with Kremlin deputy chief of staff Vladislav Surkov. Yet he speaks openly on matters dealing with civil society and democracy in Russia, including the safety of journalists, the conditions in prisons and the fate of former Yukos CEO Mikhail Khodorkovsky. He speaks with as much candor as anyone in the current or previous U.S. administrations.

This is the hallmark of the scholar-turned-official — to be intellectually incisive and precise and to stay focused on what is practically achievable. Before he joined the Obama administration, some took McFaul for an ideologue; after he had spent 2 1/2years at the National Security Council, he sometimes passes for a realpolitiker. In fact, he is neither. McFaul is a person who is clearly wedded to his values, norms and principles, but who is equally mindful of the real world out there and of U.S. national interests in that world.

As the probable next Tenant No. 1 at Spaso House, McFaul will have a difficult task. In what direction will U.S.-Russian relations move now that the reset has been achieved? Changing the very nature of the strategic relationship between the nuclear superpowers by cooperating on missile defense will be an arduous endeavor. Yet this is precisely what is needed — to move away from the still dominant adversarial strategic relationship and toward a cooperative one where neither party will regard the other as a potential adversary. The United States, the obviously stronger partner in the relationship, could be more accommodating, and this would serve its own best interests".

Dmitri Trenin, "Ambassador 'Mike' McFaul Could Help Reset." The Carnegie Moscow Center. 2 June 2011, in

"The conventional explanation for Vladimir Putin's popularity is straightforward. In the 1990s, under post-Soviet Russia's first president, Boris Yeltsin, the state did not govern, the economy shrank, and the population suffered. Since 2000, under Putin, order has returned, the economy has flourished, and the average Russian is living better than ever before. As political freedom has decreased, economic growth has increased. Putin may have rolled back democratic gains, the story goes, but these were necessary sacrifices on the altar of stability and growth....

This conventional narrative is wrong, based almost entirely on a spurious correlation between autocracy and growth. The emergence of Russian democracy in the 1990s did indeed coincide with state breakdown and economic decline, but it did not cause either. The reemergence of Russian autocracy under Putin, conversely, has coincided with economic growth but not caused it (high oil prices and recovery from the transition away from communism deserve most of the credit). There is also very little evidence to suggest that Putin's autocratic turn over the last several years has led to more effective governance than the fractious democracy of the 1990s. In fact, the reverse is much closer to the truth: to the extent that Putin's centralization of power has had an influence on governance and economic growth at all, the effects have been negative. Whatever the apparent gains of Russia under Putin, the gains would have been greater if democracy had survived".

Michael McFaul & Kathyrn Stoner-Weiss, "Mission to Moscow: Why Authoritarian Stability is a myth." Foreign Affairs. January-February 2008, in

Allow me be the first to admit that I was erroneously filled with foreboding when Professor McFaul was first mentioned as being appointed to head the National Security Council's Russian 'desk'. As the Senior staffer dealing with Russia on the American National Security Council, McFaul I thought was going to preside over a continuation of the Bush regime's anti-Russian / anti-Putin policies. And as we see from Dmitri Trenin's article, this has proven to be not the case. Which merely means that one cannot necessarily take entirely seriously the writings of academics on foreign affairs, prior to their term of office & time in power. The example of Henry Kissinger being of course the most notable of all: a skeptic of unbridled American hegemony vis-`a-vis Western Europe, he of course became notoriously thin-skinned and arrogant vis-`a-vis those same Western Europeans when he came to power, especially in the years spanning 1971-1976. Many other examples spring to mind of course. The upshot is that in the irony of history, the American President, least interested in both Europe and Russia has put forth possibly most rational and constructive Russian policy since the days of Bush the Elder. As Trenin cogently argues, while not necessarily muzzling American concerns about Russian human rights problems, McFaul has decided to work around such pitfalls and come to agreement with Moskva on issues of mutual benefit. Such as Afghanistan, Persia and so it appears so far Libya. While one cannot gainsay the fact that the current rulers in the Kremlin, for reasons of primat der Innenpolitik may engage in policies which might overturn the entire 'reset', at the moment, the policy appears to be one that in comparison with the state of the relationship circa 2007-2008, is almost idyllic. Leading this observer to echo, Mme. Mere (Mme. Bonaparte): 'let us just hope that it lasts'.

Monday, July 11, 2011


"David Cameron, who has returned from Afghanistan as a profoundly damaged figure, now faces exactly such a crisis. The series of disgusting revelations concerning his friends and associates from Rupert Murdoch’s News International has permanently and irrevocably damaged his reputation.

Until now it has been easy to argue that Mr Cameron was properly grounded with a decent set of values. Unfortunately, it is impossible to make that assertion any longer. He has made not one, but a long succession of chronic personal misjudgments.

He should never have employed Andy Coulson, the News of the World editor, as his director of communications. He should never have cultivated Rupert Murdoch. And – the worst mistake of all – he should never have allowed himself to become a close friend of Rebekah Brooks, the chief executive of the media giant News International, whose departure from that company in shame and disgrace can only be a matter of time.

We are talking about a pattern of behaviour here. Indeed, it might be better described as a course of action. Mr Cameron allowed himself to be drawn into a social coterie in which no respectable person, let alone a British prime minister, should be seen dead.

It was called the Chipping Norton set, an incestuous collection of louche, affluent, power-hungry and amoral Londoners, located in and around the Prime Minister’s Oxfordshire constituency. Brooks and her husband, the former racing trainer Charlie Brooks, live in a house scarcely a mile from David and Samantha Cameron’s constituency home. The two couples meet frequently, and have continued to do so long after the phone hacking scandal became well known.

PR fixer Matthew Freud, married to Mr Murdoch’s daughter Elisabeth, is another member of this Chipping Norton set. When Mr Cameron bumped into Freud at Rebekah Brooks’s wedding two years ago, he and Mr Freud greeted each other with exuberant high-fives to signal their exclusive friendship.

So the Prime Minister is in a mess. To put the matter rather more graphically, he is in a sewer. The question is this: how does he crawl out and salvage at least some of his reputation for decency and good judgment?".

Peter Obourne, "David Cameron is in the sewer because of his News International Friends." The Daily Telegraph. 8 July 2011, in

"A Statesman is an easy man, He tells his lies by rote; A journalist makes up his lies and he takes you by the throat; So stay at home and drink your beer and let the neighbors vote. Because this age and the next age engender in the ditch, No man can tell a happy man From a passing wretch; If Folly link with elegance no man knows which is which."

William Butler Yeats, "The Old Stone Cross," in The Collected Poems of W. B. Yeats (1956), p. 314.

The miasma of corruption that is the 'telephone hacking' scandal in the United Kingdom is a most wretched business. Ordinarily it would not be a matter that I would care to comment on, except for the fact that: i) the whole business encapsulates the vulgarity and stupidity of both modern-day life and politics. That a plebeian and infra dig publication like the News of the World and its sub-human owners the Murdoch clan and their henchmen, were able to play such an important role in British public life as outlined by the Telegraph's chief political correspondent, Peter Obourne, is distressing in the extreme. Particularly, since such trends are observable throughout the Western World in the last half century if not longer; ii) I rely upon the British press for much of my own reading on a regular basis: from the daily Financial Times, to weeklies such as the Spectator & the TLS, as well as the London Review of Books and the Literary Review among others. What is to my mind one of the most unfortunate aspects of the entire business as outlined in Obourne's piece is that the current British Prime Minister, Mr. Cameron, and the Chancellor, Mr. Osborne, would allow themselves to become intimate with such obvious cads and bounders from the Murdoch circle as Mr. Coulson and Mlle. Brooks. What could they be thinking of? As Mr.Obourne correctly notes, they en faite, allowed themselves to sink into the sewer that is the News International apparatus. One can hardly imagine that either Lord Home or Harold MacMillan would have displayed such ill-judgment as to associate themselves with such odious creatures. All one needs to do is to paraphrase, Gladstone in reference to such a familial crew to sum them up, tutti quanti:

"There was never a Murdoch from Rupert of Adelaide on down, that had either morals or principles."

Friday, July 08, 2011


"The Greek parliament has voted, but the crisis goes on. The European Union’s current policy has been driven by the political imperatives of preserving the euro and avoiding another banking crisis – but it will not yield an enduring solution. The EU’s future depends on enabling its poorest member countries to regain their competitiveness – and this requires a very different approach.

Everyone knows that lending more money to someone who is already heavily indebted, and has few realisable assets and woefully inadequate income or earning power, creates problems. Putting the repayment date off for 30 years simply ensures that no one in authority today will be around when the time comes.

Moreover, it is plain that a large part of the new lending to Greece, which obviously cannot possibly be repaid by Greece, is in substance going to repay Greece’s existing creditors. New official lending is public (taxpayers’) money, and it is going to bail out Greece’s creditors; in particular banks with exposure not yet written down. There is certainly a need to prevent another crisis. Hence the motive for the proposed “rescue”: to prevent banks, including the European Central Bank, being hit by losses large enough to be embarrassing.

So the process of putting off the evil day is likely to continue. Anyone still holding or buying Greek government debt is relying on this; and there are indeed some people buying because the discount on Greek bonds is now so large that the price has almost arrived at a market clearing level and may be thought worth a speculative bet for those who believe the policy of postponing default will continue.

This policy is firmly entrenched, thanks to eurozone leaders’ focus on preserving the single currency and avoiding further turmoil in the banking system. But unfortunately, it will not be sufficient.

Economic distress in Europe’s periphery is real and will continue. The worst manifestation of this is unemployment, particularly among young people, inevitably bringing with it misery and the danger of unrest. This is the human cost of bad policy governing the management of the euro, combined with bad lending. This seems to have been forgotten or pushed to one side.

Greece cannot earn its way out of this mess. Its adoption of the euro made it uncompetitive and, so long as the euro remains its currency, this state of affairs will go on....

Regaining competitiveness is bound (as it always does) to involve a temporary reduction of labour costs and living standards and, in practice, the only way this can be done with relative harmony is through devaluation. We ourselves in the UK have been reminded of this very recently. As our own currency has depreciated over the recent past, we have regained competitiveness.

Accordingly, unattractive, expensive and messy though this is, dismantling the euro is the least woeful course of action. Otherwise social as well as economic trouble lies ahead and the economic future of the EU itself will be threatened".

Sir Martin Jacomb, "Greece has no future within the Eurozone." The Financial Times. 5 July 2011, in

"Practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back"

John Maynard Keynes, The General Theory of Employment, Interest and Money. (1936), Book, III, Chapter X.

The Grecian debt charivari or debacle continues apace with no real end in sight. The recent resolution of the latest installment of the crisis, has of course not resulted in any real solutions or even half-solutions. Merely a postponement of the ultimate question facing both Greece and the leaders of the Eurozone and the European Central Bank of either a real restructuring of the debt, with write-offs of seventy to eighty percent of the existing debt, or falling which, Greece declaring default and leaving the Eurozone. Either decision will be a difficult one to take, as the consequences of each are hard to contemplate. And rightly so, as there are justified dangers of either event becoming one of 'Lehman-like' proportions as the aftershocks of either decision are reverberated throughout the Eurozone. As the commentator, Philip Whyte, of the Centre for European Reform argued recently:

"It is unsurprising, then that the unpleasant choice facing Eurozone leaders has not gone away. If some of the peripherals are indeed insolvent, then relief in one form or another – via bail out or default – is inevitable. A taboo of sorts was lifted when the possibility of restructuring (or 'reprofiling') peripheral country debt was discussed by finance ministers at a 'secret' meeting on May 6th. But the question remains as politically divisive as it is explosive. It divides the German government internally. And the European Central Bank (ECB) is so implacably opposed to the very idea that its president, Jean-Claude Trichet, walked out of the meeting at which it was discussed. What explains the ECB's hostility to the prospect of debt restructuring?

Partly, it reflects an odd theological attachment to the idea of creditor sanctity: come what may, debtors should pay. But it also reflects a legitimate fear of the consequences. There are 'known knowns': a restructuring of Greek sovereign debt, for example, would inflict losses on banks inside and outside Greece (at a time when many are still thinly capitalised), as well as on the ECB (which built up sizeable exposures to peripheral debt in 2010). And there are 'known unknowns': the ECB is not confident that a sovereign debt restructuring could be achieved without provoking 'another Lehman' – that is, a catastrophic loss of confidence in financial markets resulting in a pan-European banking crisis and contagion to countries such as Spain and Italy"

While the above referenced fear is a legitimate one, currently the policy in place is one that can only be with politeness called: 'papering over the cracks', AKA a 'faut de mieux' policy. Something that Mr. Micawber would no doubt be pleased with, but hardly anyone else should be. The fact is, as countless commentators have argued, the premise of the recent austerity measures voted on by the Greek Parliament with its privatization programme, is completely unreal and unworkable. With Greece's economy going into a prolonged reverse, cutting government spending will merely add fuel to the fiscal and economic fire. When added to the fact that no one seriously believes that sales of state assets will net anywhere near the twenty to forty billion Euros figures, that are being banded about. The upshot being that as Philip Whyte cogently notes:

"In any case, countries across the eurozone's indebted periphery will not return to solvency if their economies continue to contract. In the meantime, the three countries that have been shut out of the government bond markets – Greece, Ireland and Portugal – look set to become wards of European and multilateral institutions: they will owe a growing share of their outstanding liabilities to bodies such as the IMF, the ECB, the European Financial Stability Facility and its successor.

All this could poison European politics without resolving the economics. Taxpayers in the creditor countries will grow increasingly angry with their own politicians as the size of their contingent liabilities to the indebted periphery increases. Meanwhile, citizens in the periphery could revolt at endless, and potentially quixotic, austerity programmes – particularly if these come to be seen as policies imposed by foreigners to rescue private investors abroad. With national politics becoming ever more toxic, the very scenario that the ECB wishes to avoid (contagion and a messy default) might become impossible to avoid. If such an event came to pass, moreover, taxpayers in the creditor countries would bear more of the losses than private investors"

While in some circumstances a policy of 'muddling through', might conceivably make some sense, this is not one of those times to put it mildly. What needs to be done, is a hard restructuring of the private debt owed by Greece and other Eurozone peripheral countries. The fact that some French and German banks will be hard hit, and will have to tabulate on their books these losses, while regrettable can hardly be said to a 'Lehman moment'. The truth of the matter is that the leaders of the Eurozone and Monsieur Trichet in particular need to dispense with their obsession with 'creditor sanctity'. And the sooner the better. The fact is that Greece and most likely the other peripherals (Ireland, Portugal and perhaps Spain), will either need to do a hard restructuring or default and leave the Eurozone. And this decision cannot be postponed for another few years down the line. It needs to be made sooner rather than later. Any postponement will only make the situation worse and not better for all concerned. Unfortunately, Monsieur Trichet et. al., in their unjustified dislike of the first option, will inevitably result in making the second option the only one possible for the countries involved.

1. Philip Whyte, "Eurozone Debt Crisis: To restructure or not?" The Centre for European Reform. (June / July 2011), in

2. Whyte, op. cit.

Wednesday, July 06, 2011


"Mao dominated any gathering; Zhou suffused it. Mao’s passion strove to overwhelm opposition; Zhou’s intellect would seek to persuade or outmaneuver it. Mao was sardonic; Zhou penetrating. Mao thought of himself as a philosopher; Zhou saw his role as an administrator or a negotiator. Mao was eager to accelerate history; Zhou was content to exploit its currents".

Henry A. Kissinger, On China (2011).

"Whatever the qualities of Soviet Leadership, its training is eminently political and conceptual. Reading Lenin or Mao or Stalin, one is struck by the emphasis on the relationship between political, military, psychological and economic factors and the insistence on finding a conceptual basis for political action and on the need for dominating a situation by flexible tactics and inflexible purpose. And the internal struggles in the Kremlin ensure that only the most iron-nerved reach the top....As a result, the contest between us and the Soviets has had many of the attributes of any contest between a professional and an amateur: even a mediocre professional will usually defeat an excellent amateur, not because the amateur does not know what to do, but because he cannot react sufficiently quickly or consistently."

Henry A. Kissinger, "Reflections on American Diplomacy." Foreign Affairs. (October 1956).

Former American Secretary of State, Henry A. Kissinger's new book, On China, has received voluminous reviews and attention. The reviews, especially on this side of the Atlantic has been positive overall, even if few commentators are either unimpressed, much less convinced by Kissinger's apologia for the human rights record of the regime in Peking 1. Nor has the fact that Kissinger failed to disclose to readers his three decades of lucrative consulting work dealing with the leadership of the PRC, gone unnoticed. Not that per se, Kissinger's ultra-gingerly treatment of the PRC leadership a direct consequence of his business ties with every PRC leader from Deng Xiao-ping to Hu Jintao. Whatever else one may say about Kissinger and his views and past-policy dealing with the PRC, corruption is far from being the prime reason for Kissinger's behavior & viewpoint as it relates to China. Au fond,as the two above Kissinger quotes, one from 1956 and one from 'On China', show is that for reasons which are difficult for myself to explain fully, the former Secretary of State has never quite disengaged himself from his admiring if deeply mistaken view of the PRC's early leaders. For lack of a better description, one can only label it as 'Hegelian', in the sense of Hegel's 'world historical' view of Bonaparte in the aftermath of the battle of Jena. A point of view which confuses and obfuscates as much as it illustrates. Indeed, there are passages in Kissinger's book, as they relate to Mao and his involvement with the 'Great Leap Forward' as well as the 'Cultural Revolution', which clearly ring the 'weltgeschichte' bell. The fact that these musings are at best nonsensical, and at worse can be read as a form of exculpation for mass murderers (Mao, Chou et. al.) seems to have passed by most American reviewers by (not thankfully British ones) 2. With this mind-set it is not that surprising that as Margaret Macmillan, William Burr and other have pointed out in recent years, Kissinger and Nixon both came away mostly empty-handed from Peking in terms of the original diplomatic desiderata (mostly Vietnam-centric) for their rapprochement with the PRC 3.

Given the above background, it is not very surprising to find out that Kissinger has a very specific view of the future of Sino-American relations. As per Kissinger, notwithstanding the difference political and cultural make-ups of the two countries and their almost completely opposed views on such issues as Human Rights, the fact is, pace Kissinger that the two powers would best endeavor to overcome such differences in the hope of avoiding the worst:

"Neither the more triumphalist Chinese analyses nor the American version—that a successful Chinese "rise" is incompatible with America's position in the Pacific, and the world—have been endorsed by either government, but they provide a subtext of much current thought. If the assumptions of these views were applied by either side—and it would take only one side to make it unavoidable—China and the U.S. could easily fall into an escalating tension.

China would try to push American power as far away from its borders as it could, circumscribe the scope of American naval power, and reduce America's weight in international diplomacy. The U.S. would try to organize China's many neighbors into a counterweight to Chinese dominance. Both sides would emphasize their ideological differences. The interaction would be even more complicated because the notions of deterrence and preemption are not symmetrical between these two sides. The U.S. is more focused on overwhelming military power, China on decisive psychological impact. Sooner or later, one side or the other would miscalculate.

The question ultimately comes down to what the U.S. and China can realistically ask of each other. An explicit American project to organize Asia on the basis of containing China or creating a bloc of democratic states for an ideological crusade is unlikely to succeed—in part because China is an indispensable trading partner for most of its neighbors. By the same token, a Chinese attempt to exclude America from Asian economic and security affairs will similarly meet serious resistance from almost all other Asian states, which fear the consequences of a region dominated by a single power.

The appropriate label for the Sino-American relationship is less partnership than "co-evolution." It means that both countries pursue their domestic imperatives, cooperating where possible, and adjust their relations to minimize conflict. Neither side endorses all the aims of the other or presumes a total identity of interests, but both sides seek to identify and develop complementary interests"

The problem with this point of view, a problem which is overtly present in Kissinger's entire oeuvre as a 'historian' is that it neglects to take into account the true wellsprings of Chinese foreign policy 5. At the bottom, Chinese foreign policy is fundamentally shaped, just as the foreign policy of the Kaiserreich after the fall of Bismarck in 1890 was shaped, not by axioms of 'eternal' bases of the so-called 'Middle Kingdom,' but by contemporary-based primat der innenpolitik. Peking's current rulers, like Bulow, Hohenlohe and Bethmann, are obsessed with not being viewed as 'weak-willed' and 'unpatriotic' by its public and outlets which can be said to express 'public opinion', in a bureaucratic, authoritarian state. That and not any ahistorical, essentialist nonsense explains Peking's recent militaristic bombast over say Tibet, the South China Seas, and last years conflict with Japan. Much the same can be said about Peking's policy vis-`a-vis Formosa. If and only if, the leadership of the PRC, is changed by some internal disturbance or reform process, can we expect to see a more rationale, unemotional and peaceful foreign policy coming out of Peking. Until then, expect more of the types of roller-coaster foreign policy 'mood swings' from the PRC which the world has been subjected to in the last few years. Which is not to gainsay the fact of course that Kissinger is correct in noting that whatever their other faults, the ruling elite in Peking has no real wish to either succeed the USA as 'hegemon', or even to aggressively push-out the Americans from the Pacific-Orient region. And similarly, there is no reason to unnecessarily quarrel with the PRC, if this can be at all avoided. If indeed, China's rulers wish to be good 'stakeholders' in the current international system, then by all means let us endeavor to make that possible. With that being said, it behooves American and Western policy-makers to avoid a newer and costlier version of the Nixon-Kissinger policy of needless concessions to a ruthless and basically hostile ruling clique in Peking. Unlike the case of Bulow's Kaiserreich, such concessions will net us nothing, certainly not good-will merely a demand for more of the same from the rulers in Peking.

1. For American reviews, see: Max Frankel,"Henry Kissinger on China." The New York Times. 13 May 2011, in; Bret Stephens, "A Diplomat looks East." The Wall Street Journal. 12 May 2011, in;
Brantly Womak, "Henry Kissinger's 'On China.'" The Washington Post. 3 June 2011, in; Jonathan Spence, "Kissinger and China." The New York Review of Books.9 June 2011, in

2. See: Jonathan Mirsky, "What Henry Saw." The Literary Review. June 2011, in; Jasper Becker, "On China by Henry Kissinger -a Review." The Guardian.21 May 2011, in

3. Margaret MacMillan, Nixon and Mao: a week that changed the world. (2007); William Burr, The Kissinger Transcripts: The Top Secret talks with Bejing and Moscow. (1999).

4. Henry A. Kissinger, On China, op. cit.

5. One of the essentials aspects of the Kissingerian oeuvre is that per se, he is not, notwithstanding the subject matter of his first book (A World Restored) an academically trained 'historian'. At least not a historian in the empiricist, Rankean sense of the term. Kissinger's view of the craft of history is one closer to pre-Rankean 'historians', such as Arnold Toynbee, Spengler and even Hegel (nota bene: Kissinger's dissertation was not for Harvard's Department of History, but that of its Departmet of 'Government'). For whom 'history' is made of timeless and unchanging variables (AKA exactly the idea behind the 'eternal Middle Kingdom' view of China's foreign relations). The fact that history and its interpretation is forever being changed and changed again, is something for which Kissinger apparently has no idea of. Hence it is not at all surprising that the concepts of 'Primat der Aussenpolitik' and 'Primat der Innenpolitik' singularly fail to make a appearence in any of Kissinger's writings in the last fifty-five years. Nor that the causation of the Great War had many more reasons than merely the fact that England and its allies failed to 'integrate' into the international system, post-Bismarckian Kaiserreich. Id est. Fritz Fischer and his school.