Archive for the ‘Political Economy’ Category

Obama won not only because of his extraordinary personal resilience, but also because a sufficient number of middle-class voters, while unhappy with the pace of economic progress, sensed that an Obama presidency would help them more than the policies championed by his Republican challenger, Mitt Romney, which were perceived as tilted to the affluent. Moreover, America’s ongoing demographic transformation makes it harder for candidates who are unable to reach out strongly to Latinos and other minority communities – something that Romney singularly failed to do – to carry the country.

Some aspects of the campaign, particularly the amount of money spent and its negative tone, struck many observers as objectionable. But the competitiveness of American democracy – the fact that an alternative always exists, and that those in power have to fight hard to stay there – was on admirable display for the whole world to see.

Obama will embark on his second term with the global economy at a crossroads. In the US, the uneven and weak recovery has been sustained by extraordinarily expansive monetary policies and ongoing large fiscal deficits. While corporate coffers hold mountains of cash, private investment stagnates. In Japan, solid economic performance remains elusive, while prime ministers succeed each other at a breathtaking pace.

Likewise, Europe is on life support, thanks to European Central Bank President Mario Draghi’s astute maneuvering and promises of unlimited intervention in sovereign-debt markets. But unemployment is at its highest in decades and growth has essentially stalled, even in Germany, while the troubled southern economies are mired in deep recession. The situation in Greece, moreover, has become socially unsustainable; Greece is small, but a total collapse there could have very negative financial and psychological effects elsewhere. Read more…

Kemal Derviş, a former minister of economy in Turkey, administrator of the United Nations Development Program (UNDP), and vice president of the World Bank, is currently Vice President of the Brookings Institution.

This storm could upend American politics — if we’re lucky.

By David Rothkopf

One reason U.S. politics is almost as popular as NASCAR among American sports is that it gives the little guy someone to root for. Of course, that’s almost never the candidates of the major parties, most of whom are odious concoctions of their own egos and the corrupting forces of money and ideology. But dependably, in campaign after campaign, a character sneaks on to the stage who captivates and highlights issues that otherwise would go unnoticed or under-examined.

Whether this candidate is a big-name iconoclast like New York’s Mayor Michael Bloomberg or a provocative outsider like Ron Paul — who, although wrong on plenty of issues, was dependably willing to challenge conventional wisdom — these folks liven up the debate. This year it took until the very end of the campaign to introduce 2012′s biggest truth-teller. Like Beyoncé and Cher, she is known by only one name. But few if any players in the current campaign are likely to have the same impact.

Ladies and gentlemen, meet Sandy.

Sandy, like many in an America with changing demographics, has overseas roots, hailing from the tropics. She rose to our attention in the south but ultimately, like so many others, she hit the big time in the northeast, and her political impact will extend well into the heartland of America, where this election will be decided. Like Joe Biden and Chris Christie, Sandy is an uncontrollable, wind-powered force of nature. Like many politicians, the first impression she may give the average voter is that she is all wet. But there is more to Sandy than meets her eye.

Sandy is a game-changer. For those of you who live far from the eastern shores of the United States, it is also worth noting that she is also a hurricane, a big one, currently cutting an 800-mile swath across one of the most heavily populated areas of the richest and most powerful nation on Earth. And in so doing, she is speaking volumes about subjects many U.S. politicians have avoided and, at the same time, she is having a major impact on America’s process of electing a president. Read more…

David Rothkopf is the CEO and Editor-at-Large of Foreign Policy, and CEO of Garten Rothkopf, an international advisory firm specializing in transformational trends especially those associated with energy choice and climate change, emerging markets and global risk.

As published in www.foreignpolicy.com on October 29, 2012.

Cristina de Kirchner has brought her country to the brink of the abyss.

By Daniel Altman

Step into a discount department store in New York or Miami these days, and you’re likely to hear Spanish in the aisles. Not just any Spanish, though — Argentine Spanish. The distinctive accent, where “y” becomes “zh” and the final “s” sometimes disappears entirely, has lately become the sound of a massive transfer of wealth. Ringing through American checkout lines, it is also the sound of another economic crisis on the way.

Argentina has become much more important to the global economy in the decade following its last crisis, which began in 2001. Back then, its exports were only worth about $31 billion, or 11 percent of its gross domestic product. Today, Argentina’s exports have almost doubled, even after accounting for inflation, and it is a central player in commodity markets ranging from lithium to soy. Yet its trading regime is notoriously fickle, and another crisis — economic, political, or more likely both — could cause severe disruption.

Argentines have been talking about the imminence of their next crisis for about two years now, and their economy is showing plenty of worrying signs. Private economists estimate that inflation is running between 20 and 30 percent, while the government has doctored economic statistics to such an extent that the International Monetary Fund may censure it. The peso trades at more than six to the dollar in the street, though the official exchange rate is 4.7. The central bank maintains the artificially high value of the currency by buying pesos with its reserves, while the government limits the purchase of dollars by ordinary Argentines.

The combination of high inflation in wages — as well as prices — and an artificially strong peso has been a boon to Argentine consumers, especially the upper-middle class. Foreign goods are cheaper than ever, as is tourism. Visitors to Argentina, on the other hand, will find prices for clothing, electronics, and other manufactures in Buenos Aires on a par with New York, London, or Tokyo. The question for many well-to-do Argentines is not whether they will go abroad to shop, but how they will sneak their purchases through customs on the way back. Read more…

Daniel Altman teaches economics at New York University’s Stern School of Business and is chief economist of Big Think.

As published in www.foreignpolicy.com on October 15, 2012.