Archive for the ‘Political Economy’ Category

By Joseph S. Nye

When President Richard Nixon proclaimed in the early 1970’s that he wanted to secure national energy independence, the United States imported a quarter of its oil. By the decade’s end, after an Arab oil embargo and the Iranian Revolution, domestic production was in decline, Americans were importing half their petroleum needs at 15 times the price, and it was widely believed that the country was running out of natural gas.

Energy shocks contributed to a lethal combination of stagnant economic growth and inflation, and every US president since Nixon likewise has proclaimed energy independence as a goal. But few people took those promises seriously.

Today, energy experts no longer scoff. By the end of this decade, according to the US Energy Information Administration, nearly half of the crude oil that America consumes will be produced at home, while 82% will come from the US side of the Atlantic. Philip Verleger, a respected energy analyst, argues that, by 2023, the 50th anniversary of Nixon’s “Project Independence,” the US will be energy independent in the sense that it will export more energy than it imports.

Verleger argues that energy independence “could make this the New American Century by creating an economic environment where the United States enjoys access to energy supplies at much lower cost than other parts of the world.” Already, Europeans and Asians pay 4-6 times more for their natural gas than Americans do.

What happened? The technology of horizontal drilling and hydraulic fracturing, by which shale and other tight rock formations at great depths are bombarded with water and chemicals, has released major new supplies of both natural gas and oil. America’s shale-gas industry grew by 45% annually from 2005 to 2010, and the share of shale gas in America’s overall gas production grew from 4% to 24%.

The US is estimated to have enough gas to sustain its current rate of production for more than a century. While many other countries also have considerable shale-gas potential, problems abound, including water scarcity in China, investment security in Argentina, and environmental restrictions in several European countries. Read more…

Joseph S. Nye, a former US assistant secretary of defense and chairman of the US National Intelligence Council, is a professor at Harvard University and one of the world’s foremost scholars of international relations. He co-founded the important liberal institutionalist approach to international relations, and introduced the idea that states and other international actors possess more or less “soft power.”

As published in www.project-syndicate.org on July 11, 2012.

Sinopec is one of the few Chinese firms that has capital, operations and sales on a global scale.

 

Following the Chinese government’s mandate that companies should “go out” (走出去) or “go global” (走向世界), many observers anticipate that Chinese multinational corporations (MNCs) will secure a growing share of the international consumer market around the world. This may eventually occur, but for the time being China’s multinational corporations remain a very long way from playing in the premier leagues of international commerce.

How many Chinese corporations can you name? Most likely fewer than 10, or even five. We are all familiar with Tsingtao beer, Air China, Bank of China and Lenovo computers—and some may know names like Huawei Technologies, Haier appliances or China Mobile. But not a single one of these firms made the 2011 ‘Top 100 Global Brands’ list compiled annually by BusinessWeek and Interbrand. The global brand presence of China’s best-known multinationals is nowhere near the likes of Coca-Cola, GE, Intel, McDonald’s, Google, Disney, Honda, Sony, Volkswagen and similar global giants.

Yet when measured in terms of total revenue, it is clear that Chinese companies have steadily climbed up the global rankings. Twelve Chinese companies were included in Fortune’s Global 500 list in 2001. And only a decade later, in 2011, that number rose to 61 (including four with headquarters in Hong Kong). China now ranks third on the global list, only slightly behind Japan but well behind American firms. In 2010 these 61 Chinese enterprises had a combined annual revenue of US$2.89 trillion and an estimated overall profit of US$176.1 billion. Of the 57 mainland companies, 49 are state-owned enterprises (SOEs).

While ranking on the Fortune Global 500 list indicates the growing clout of Chinese corporations, it does not mean that a company is internationally active or even that it is a real multinational. When these companies are ranked by foreign assets and sales, it becomes clear that, with few exceptions, they all operate predominantly within China. In other words, despite the government’s directives and financial incentives to ‘go global’, many leading Chinese corporations have yet to do so.

So why have Chinese multinational corporations encountered difficulties in going global? Ten possible factors may explain it. Read more…

David Shambaugh is a nonresident senior fellow in the Foreign Policy Program and the Center for Northeast Asian Policy Studies (CNAPS) at the Brookings Institution. He is also a professor of political science and international affairs at the George Washington University in Washington DC.

By Nikos Konstandaras

My country is hurtling toward an election that will decide its fate — whether Greeks will fight on to remain part of Europe’s core or succumb to their own weaknesses and turn inward, choosing isolation, anger and uncertainty greater than that from which they wish to flee.

The vote on Sunday will change our lives — determining not only whether we remain in the euro zone but also the nature of our society and the fate of the democracy that was re-established just 38 years ago after a dictatorship. We are bitterly divided between those who want to carry on with the reform process and those who want to turn back the clock. Our partners in the European Union are frightened of the consequences of our vote, but seem otherwise indifferent to our fate.

At a moment when the choices should be as clear as possible — between reform and stagnation, between Europe and isolation, between painful progress and the deceptive comfort of surrender — the issues are hopelessly confused by false expectations, by false choices and by the total failure of a political class that can’t propose solutions to the country’s problems and can’t forge a minimal national consensus on what is at stake and what needs to be done.

We face a choice between two deeply flawed alternatives. On one hand, there is New Democracy, a center-right party that has done much to undermine Greece’s economic reform and revival over the past two years. It refused to support the bailout agreement signed by the Greek government, the European Union and the International Monetary Fund on the grounds that it would stifle growth and so it undermined initiatives like tax reform that would have helped combat tax evasion by self-employed professionals and businesses. Yet it is now presenting itself as the responsible force that will stick to austerity and keep Greece in the euro zone.

On the other hand there is Syriza, a fractious coalition of 12 radical groups that has anointed itself the herald of leftist change throughout Europe and declares that it will immediately annul the bailout agreement while demanding that our partners continue to lend us money. The latter course could lead to the country’s swift exit from the euro and a chaotic and unpredictable future. Read more…

Nikos Konstandaras is the managing editor and a columnist at the Greek daily newspaper Kathimerini.

As published in www.nytimes.com on June 14, 2012 (a version of this op-ed appeared in print on June 15, 2012, on page A39 of the New York edition with the headline: How Greece Squandered Its Freedom).

The question of who will be allowed to take on debt, and under what conditions, will determine Europe’s future.

By George Friedman

Eurozone countries on June 9 agreed to lend Spain up to 100 billion euros ($125 billion) to stabilize the Spanish banking system. Because the bailout dealt with Spain’s financial sector directly rather than involving the country’s sovereign debt, Madrid did not face the kind of demands for more onerous austerity measures in exchange for the loan that have led to political instability in countries such as Greece.

There are two important aspects to this. First, yet another European financial problem has emerged requiring concerted action. Second, unlike previous incidents, this bailout was not accompanied by much melodrama, infighting or politically destabilizing threats. The Europeans have not solved the underlying problems that have led to these periodic crises, but they have now calibrated their management of the situation to minimize drama and thereby limit political fallout. The Spanish request for help without conditions, and the willingness of the Europeans to provide it, moves the European process to a new level. In a sense, it is a capitulation to the crisis.

This is a shift in the position of Europe’s creditor nations, particularly Germany. Berlin has realized that it has no choice but to fund this and other bailouts. As an export-dependent country, Germany needs the eurozone to be able to buy German products. Moreover, Berlin cannot allow internal political pressures to destabilize the European Union as a whole. For all the German bravado about expelling countries, the preservation and even expansion of the existing system remains a fundamental German interest. The cycle of threats, capitulation by creditors, political unrest and then German accommodation had to be broken. It was not only failing to solve the crisis but also contributing to the eurozone’s instability. In Spain, the Germans shifted their approach, resolving the temporary problem without a fight over more austerity.

The problem with the solution is that it does nothing to deal with the larger dilemma of European sovereignty and debt. Germany is taking responsibility for solving Spain’s banking problem without having any control over the Spanish banking system. If this becomes the norm in Europe, then Germany has moved from the untenable threat of expelling countries to the untenable promise of underwriting them. Europe, in other words, has accommodated itself to the perpetual crises without solving them. Read more…

George Friedman is an American political scientist and author. He is the founder, chief intelligence officer, financial overseer, and CEO of the private intelligence corporation Stratfor.

As published in www.stratfor.com on June 12, 2012.