issue: Foreign Policy & Defense

PPI Abroad: Digital Trade Study Group Recap

Posted on by The Progressive Policy Institute

Last week (April 22-25), PPI returned to Europe for an intensive round of high-level meetings and one big public event in three capitals, Paris, Brussels and Berlin. It was the third PPI project in Europe in the last 18 months, a sign of our commitment to increasing awareness about the rise of the data-driven economy and its implications for policymakers.

PPI has long been a catalyst for transatlantic dialogue since we helped Bill Clinton and Tony Blair launch the “Third Way” conversations among progressive leaders. Most recently, our work in Europe has centered on measuring the volume and economic value of cross-border data flows.

Our focus last week was mainly on digital trade, and the need to fend off some truly bad proposals in Europe that would at a minimum erect barriers to cross-border data flows, and at a maximum balkanize the Internet by creating an exclusively European cloud. At a time when both America and Europe are plagued by slow economic growth, any actions that would choke off digital innovation and trade make little sense.

To underscore the point, we led a bipartisan “Digital Trade Study Group” consisting of 10 senior Senate and House staffers with expertise in digital policy issues to Europe. They learned much about European attitudes toward data protection and privacy – including the emotional response to the NSA revelations, especially in Germany – and the presence of a bipartisan group of knowledgeable Hill staff impressed upon the European officials we met that Congress has a growing interest in resolving disputes over trade in general and digital trade in particular. From the feedback we’ve received, the trip was a big success.

Here are some highlights:

  • In Paris, the Study Group met with economic researchers with the Organisation for Economic Co-operation and Development (OECD). This meeting made clear that no one has developed a way to accurately capture and measure the contribution of data-driven innovation and trade to economic growth. As Michael Mandel, PPI’s chief economic strategist, has noted in a series of groundbreaking reports on the measurement challenge, this makes it difficult for policymakers to weigh the likely effects of new regulations. In a second session, the group discussed the OECD’s work on tax base erosion. The G-20 has tasked the OECD to explore ways to prevent international companies from sheltering profits and income from national tax collectors.
  • In Brussels, our traveling party met with several high-ranking EU officials who discussed the progress of the transatlantic trade agreement (TTIP), data protection and how Europeans view the crisis in Ukraine. Additionally, our group was briefed by U.S. officials on digital trade issues and received a preview of the upcoming European election.
  • Also in Brussels, PPI teamed up with the Lisbon Council for a major public event on these themes featuring EU and U.S. trade officials, as well as economists and representatives from European businesses. At that event, we released a joint report co-authored by PPI’s Michael Mandel and Lisbon Council’s Paul Hofheinz on “Bridging the Data Gap: How Digital Innovation Can Drive Growth and Jobs.” It highlighted a large and growing “data gap” between the U.S. and the EU that ought to give Europeans pause.
  • We concluded our trip in Berlin, where long-time PPI friend John Emerson, U.S. Ambassador to Germany, kindly hosted us for an insightful breakfast briefing on U.S.-German relations. Next the group met with a representative of Bitkom, the major association of the digital industry in Germany. Our last event was a dialogue with German political, business and intellectual leaders organized by Das Progressive Zentrum, a Berlin think tank. Focusing on the need to rebuild trust between America and Germany in the wake of the Snowden revelations, it was a blunt, intense and illuminating conversation.

This trip was extremely productive and highlighed that PPI is building an extensive network of European contacts and partners who share our commitment to finding common ground on questions of trade, digital innovation and stronger economic growth.

Bloomberg: EU Risks Hurting Growth in Data Safeguard Effort, Study Finds

Posted on by The Progressive Policy Institute

Rebecca Christie of Bloomberg wrote an article covering PPI’s transatlantic conference and paper release in Brussels last week. The paper, Bridging The Data Gap: How Digital Innovation Can Drive Growth and Jobs, aims to measure the costs of data protectionism  and knee-jerk reactions to NSA revelations may hurt European economies. Michael Mandel, co-author and PPI’s chief economist explained:

A European Internet might sound like a grand, patriotic idea…But were it to take shape, it would harm few people or places more than Europe and Europeans themselves.

You can find the full article on Bloomberg’s website, here.

Bridging The Data Gap: How Digital Innovation Can Drive Growth and Jobs

Posted on by The Progressive Policy Institute

Seldom has the world stood poised before economic changes destined to bring as much palpable improvement to people’s lives and desirable social transformation as “big data.”

Breathless accounts abound of the huge amounts of data that citizens, consumers and  governments now generate on a daily basis in studies ranging from the French Prime Minister’s Commissariat général à la stratégie et à la prospective study on Analyse des big data: Quels usages, quels défis to Viktor Mayer-Schönberger and Kenneth Cukier’s seminal Big Data: A Revolution That Will Transform How We Live, Work and Think.

But the larger revolution will come not from the exabytes of data being generated on a daily basis, but through the vast advances in analytics that will help us convert this information into better lives, and better societies. Already, many companies are using the new information to offer more tailored products and services to customers; consumers are receiving more effective healthcare; clever administrations are cutting pollution and commuter transit times; people of all types are being entertained and educated in fascinating new ways; and entrepreneurs who seize the opportunity are helping raise North America and Europe from the longest economic recession since statistic-taking began.

Download the full report here.

Michael Mandel and Paul Hofheinz presented their paper today at the PPI & Lisbon Council joint event: New Engines of Growth: Driving Innovation and Trade in Data. 

Axelrod has something Miliband needs: an understanding of swing voters

Posted on by The Progressive Policy Institute

It’s not unusual for Britain, ahead of a national election, to be swarming with American political consultants. What is odd is seeing top members of President Obama’s political team deploy to opposite sides in the coming battle.

David Axelrod, Obama’s chief consigliere, has just signed on to help Labour craft its strategy for next year’s election. But in what many Democrats regard as a dumbfounding act of apostasy, Jim Messina, who ran Obama’s 2012, has hired out to David Cameron’s Tories.

Perhaps the two high-priced operatives, who know each other well, will simply cancel each other out. But in truth they bring very different skills to their respective campaigns. Messina is a master organiser who oversaw Obama’s state-of-the-art voter mobilisation effort in 2012.

Axelrod is a strategist who helped Obama wrest the Democratic nomination from Hillary Clinton and go from first-term Senator to first black President in 2008.

It’s hard to say how Axelrod’s talents will translate into the British context. The impact of campaign consultants – who always have a 50-50 chance of winding up on the winning side – is routinely exaggerated by political reporters and insiders.

Consultants are rarely better than the candidates they serve and, let’s face it, Axelrod is likely to find in Ed Miliband a somewhat less charismatic commodity than Barack Obama.

But Axelrod does have something Miliband needs, and it’s not a passion for grappling with inequality, as some media reports have said. The Chicago-based Axelrod is a man of middle America, not a creature of Washington. He has an intuitive grasp of the pragmatic nature of US voters, especially those without strong partisan attachments.

In short, where Messina is a whizz at energising true believers, Axelrod knows how to talk to swing voters.

What those voters want is a plan for reviving economic dynamism and opportunity, not a “populist” narrative that casts them as helpless victims of an all-powerful plutocracy. Their answer to inequality is not to pull down the mighty, but to create more jobs with decent pay, get wages growing again along with productivity, and rebuild middle class prosperity.

In America at least, this difference between a politics centred on economic aspiration and one centred on class grievance is crucial. Like Bill Clinton before them, Obama and Axelrod fashioned successful presidential campaigns by stressing the former.

Axelrod deftly read the public mood in 2008. There was a powerful revulsion to politics as usual in Washington. Axelrod presented Obama as the ultimate outsider, turning his relative lack of political experience into a key selling point. This experience may prove useful for Milliband and Labour, who likewise must craft a powerful argument for political change even as the UK economy improves.

In any event, Axelrod’s feel for the kind of ideas that move persuadable voters will likely prove an asset.

This article was originally published by the London Times here.

Bringing U.S. Energy Policy Into the 21st Century

Posted on by The Progressive Policy Institute

U.S. lawmakers don’t drive around in 1970s-era cars, yet they don’t seem to mind energy policies that are equally out of date. Attempts to export shale oil and gas, for example, have run smack into legal and regulatory barriers as old as a Gran Torino.

Energy companies have been urging Congress to lift the lid on exports and start treating oil and gas again like any other commodity that’s freely traded in world markets. Tapping global demand for U.S. shale oil and gas, they say, will spur domestic production and create even more jobs in a sector that’s already racked up robust employment gains.

Russia’s naked power play in wresting Crimea from Ukraine has given fresh impetus to the export push.

From outraged Republicans to eastern Europeans living anxiously in Moscow’s shadow come calls to use America’s shale windfall to wean Europe off dependence on Russian gas, oil and coal.

The idea that surging U.S. gas and oil production is a new source of geopolitical power is a seductive one, though there are practical difficulties inherent in using energy as an instrument of foreign policy.

Vladimir Putin’s Russia is not as scary as the Soviet Union, but it remains an energy superpower. Moscow supplies Europe on average with roughly a third of its energy; many Baltic and central European countries rely almost completely on Russian gas, oil and coal. Some observers think such realities have muted Europe’s reaction to Putin’s aggression.

Taking market share from Moscow would diminish its political leverage, while also weakening its petro-centric economy. Energy accounts for as much as a quarter of Russia’s GDP, 60 percent of its exports, and the lion’s share of its revenues. The problem, of course, is that Washington doesn’t export oil and gas, companies do. They go where the profits are, not where geopolitics dictates.

In any event, U.S. gas and oil exports are stalled by old laws and rules as well as potent domestic opposition. For example, the 1975 Energy Policy and Conservation Act bars most exports of U.S. crude oil. Exporting natural gas isn’t illegal, but it requires getting the U.S. Department of Energy’s approval to build terminals for liquefying the gas so it can be shipped overseas. Amid industry complaints that the Department of Energy is slow-walking approvals, Congress recently held hearings on ways to expedite LNG export licenses.

America’s import-oriented energy policies are a legacy of the 1970s energy crises. They are predicated on an assumption of fossil fuel scarcity and U.S. vulnerability to volatile global oil markets. Today’s reality is abundance, thanks to horizontal drilling techniques and shale fracturing, aka, “fracking.” Next year, the United States is expected to overtake Saudi Arabia as the world’s largest oil producer.

The energy world has been turned on its head, but U.S. policies haven’t changed. Powerful interests are invested in preserving the status quo. Chemical companies, which use natural gas as a feed stock, say ramping up exports would raise domestic gas prices and thereby threaten a revival in U.S. manufacturing. Some analysts say we’d be better off using more natural gas in the transportation sector, for cars as well as heavy-duty trucks, because this would cut both carbon emissions and oil imports.

The fiercest opposition to exporting oil and gas comes from environmental activists. In an open letter (PDF) to President Obama, a coalition of environmental groups led by anti-XL Pipeline crusader Bill McKibben, slammed the administration’s plans for building LNG terminals along U.S. coastlines. “We believe that the implementation of a massive LNG export plan would lock in place infrastructure and economic dynamics that will make it almost impossible for the world to avoid catastrophic climate change,” the letter asserts. Most of the nation’s fossil fuel reserves, it adds, should stay “in the ground.”

It’s highly unlikely, though, that the public will support attempts to stuff the shale genie back in its bottle. According to the U.S. Energy Information Administration, jobs in the oil and natural gas industry grew by 32 percent between 2007 and 2012, even as overall employment fell 11.4 percent. The glut of cheap gas is also a boon to energy-intensive industries in the United States, which are beginning to attract significant investment from Europe, where energy costs are much higher.

Moreover, it’s not a foregone conclusion that taking advantage of America’s shale bonanza will bring on an environmental catastrophe. On the contrary, fuel switching in the electricity sector from coal to natural gas already has brought a 10 percent decline in U.S. greenhouse gas emissions, according to the Environmental Protection Agency. If gas catches on as a transport fuel, that also would yield lower emissions. In any event, fossil fuels will continue to be a major part of America’s fuel mix for decades to come, green fantasies notwithstanding, and lawmakers must manage the nation’s energy portfolio — including zero-carbon-emitting nuclear energy—in a way that both spurs economic growth and reduces the risks of global warming.

In truth, no one really knows what will happen if America once again becomes a major energy exporter. We can’t say for sure whether domestic prices will spike, or how global markets would react to an influx of U.S. oil, or what the net effect on global carbon emissions would be. Nor is it certain that exports by energy companies would buttress U.S. diplomacy. The sensible course is to experiment—to lift restrictions on oil and gas exports at a measured pace, measure economic and environmental impacts, and make adjustments as we go. That should be part of a political bargain in which Democrats agree to ease export controls in return for GOP support for more public investment in research and development of renewable fuels and clean technology.

What makes no sense is to let the dead hand of 40-year-old energy policies constrain America’s freedom of action today. As the shale revolution approaches its 10th anniversary, it’s time to bring U.S. energy policy into the 21st century.

This piece was originally published at the Daily Beast.

Politico Magazine: Rand Paul’s Foreign Policy Is a Mess

Posted on by The Progressive Policy Institute

If the Crimea crisis has revealed flaws in President Barack Obama’s passive “realism,” it has also exposed the utter incoherence of Rand Paul’s foreign policy—which, despite a reputation for being principled and bold, is in fact all over the place.

If that sounds too harsh, try making sense of the Kentucky senator’s contorted response to Russia’s aggression in Ukraine. Paul, the latest favorite for the GOP’s 2016 presidential candidate, came out blasting in a recent Time op-ed, declaring that Russian President Vladimir Putin “must be punished” for violating Ukraine’s sovereignty and asserting that Obama isn’t up to the job. “If I were president, I wouldn’t let Vladimir Putin get away with it,” Paul huffed.

Such gasconade seemed out of character for the anti-war libertarian. He opposes U.S. intervention just about everywhere—whether in Syria, which he sees as an invitation to another Iraq-style quagmire, or Iran, where he rejects preemptive U.S. strikes in favor of diplomacy or, failing that, a containment policy. Sure enough, the day after his Time article appeared, Paul was back to his usual dovish tone. In a Brietbart op-ed, he prescribed the “strategic use of soft power” to counter Putin and accused unnamed politicians—clearly his GOP presidential rivals—of beating their chests: “What we don’t need right now is politicians who have never seen war talking tough for the sake of their political careers.” Those who invoke Ronald Reagan to justify their bellicosity, he added, should remember that some similarly overzealous hawks called the Gipper an appeaser for negotiating nuclear arms accords with Soviet leaders.

Confused?

Let’s step back to January 2011, when the ophthalmologist-turned-politician Paul rode the high tide of Tea Party insurgency into the U.S. Senate. Despite having zero international experience, he was nothing if not clear and consistent on foreign policy. Like his father and libertarian icon, the now-retired Texas congressman Ron Paul, Rand called for America to mind its own business instead of trying to solve other countries’ problems. He regularly excoriated GOP neoconservatives for having pushed the nation into protracted and costly wars during the Bush administration, and made no secret of his desire to get America out of the superpower business.

Continue reading at Politico Magazine.

Putin Is a Threat to the Free World America Helped Build

Posted on by The Progressive Policy Institute

In occupying Crimea, Vladimir Putin has brought the Russian bear, snarling and clawing, out of its post-Cold War hibernation. An anxious world awaits America’s response.

President Obama’s challenge is three-fold. The first and most urgent task is to discourage Putin from authorizing deeper incursions into Ukrainian territory on the pretext of protecting their Russian-speaking compatriots from “fascists.” That could be the thread that unravels Ukraine‘s independence.

Sending Secretary of State John Kerry to Kiev this week is a welcome gesture of U.S. solidarity, but in truth there is little Washington can do to stop Putin from grabbing a larger chunk of the country. No one is prepared to go to war over Ukraine, and the Russian strongman knows it. Nonetheless, Obama should spell out an escalating chain of penalties Russia will incur for further aggression.

Second, Washington must orchestrate a global chorus of condemnation of Russia’s blatant violation of Ukraine’s sovereignty, reinforced by sustained diplomatic and economic pressure on Putin to withdraw his troops. The third task is to solicit economic aid to help stabilize Ukraine’s fragile new government and lessen its dependence on Russia.

Pundits are calling the crisis the gravest test to date of Obama’s international leadership. Perhaps, but there’s a larger question: Can the divided U.S. government, which can scarcely pass a budget or fill key posts, muster a coherent and forceful reply to Putin’s attempts to bully Russia’s neighbors into submission?

This shouldn’t be a partisan issue, but some Republicans just can’t help themselves. Russia’s aggression, they charge, is the bitter fruit of Obama’s weakness. Never mind that Putin also invaded neighboring Georgia in 2008 on George W. Bush’s watch.

Evidently, the “blame America first” mentality that Republicans used to attribute to Democrats has migrated from the left to the right of the political spectrum.

Occupying Crimea is part of Putin’s grand strategy to restore a strong Russia that’s once again respected — i.e., feared — and halts the advance of Western-style democracy into what Moscow regards as its historic sphere of influence. This complicates Putin’s plan to organize a “Eurasian Union” of compliant autocracies as a counterweight to the European Union.

The Russian leader and former KGB operative has called the 1991 break-up of the Soviet Union a tragedy. But that doesn’t mean he has grandiose visions of recreating Stalin’s old empire. Instead, the wily Putin is trying to revise, not reverse, the Cold War settlement. That’s why he’s focusing on countries on Russia’s borders with large ethnic or Russian-speaking populations. Putin would like to reabsorb as many of them as possible, which is why he doesn’t want these countries to follow the Baltics and Eastern Europe in turning to the West. In championing supposedly endangered Russian minorities, and reestablishing the Russian Orthodox Church as the state religion, Putin is trying to revive the old Russian nationalism of the Tsars.

Unfortunately, he also seems bent on resurrecting the worst features of that tradition — creeping imperial expansion, stifling autocracy, paranoia about being “encircled” by enemies and resentful envy of the modern West, led nowadays by America.

This backsliding from the hopeful days of post-Soviet Russia, when Boris Yeltsin tried to put his country on a “normal” course toward market democracy, is a tragedy for Russians, not just their fearful neighbors. Fabricating conflicts with newly independent neighbors and whipping up anti-Americanism strikes a revanchist chord, especially among older Russians. Moreover, such antics distract the world’s eye from popular protests in Russia, as well as harsh crackdowns on dissent and civil society, and the ruthless stamping out of real political competition.

President Obama hasn’t paid nearly enough attention to the rising authoritarian tide in Russia. Instead, in classic “realpolitik” fashion, the White House keeps emphasizing the need to win Russia’s cooperation on what it regards as more important issues, like reaching a political resolution of Syria‘s civil war (though Moscow has no interest in Assad’s departure) and striking a nuclear deal with Iran.

More fundamentally, Obama appears to have internalized the critique — which now joins the anti-war left to the libertarian right — that America’s problems abroad stem mainly from our own moralizing and overreaching, not what bad actors elsewhere do. That’s why he has demoted freedom and democracy as U.S. foreign policy goals, and stood aloof from the Syrian bloodbath, even as the human and strategic costs of inaction keep mounting.

Let’s hope the Ukraine crisis jolts the president out of his solipsistic complacency. Russia’s resort to brute force to intimidate its neighbors is a threat to the international system shaped and sustained mainly by American power over the last half-century. Are we really too war-weary, overstretched or poor to rise to this new challenge? Not unless our leaders think we are.

This op-ed was originally posted in Real Clear World, you can read the original article on their website here.

China’s Data Fog

Posted on by The Progressive Policy Institute

China recently released its January trade data, showing export growth of 10.6% and performing way above predictions – if you believe the numbers.  Many don’t.  After last year’s round of inflated figures, stories began to appear about just how businesses were cooking the books.  For example, some corporations were sending their goods on a “round trip” to Hong Kong and back, whereby a good produced in China goes “abroad,” to count as an export for tax purposes, and then is brought back to the mainland and sold at a premium because the same good is now also an “import.” Businesses being less than honest is neither a new nor a China-specific phenomenon — but as with every accomplishment the Chinese seem to be doing it bigger and more prolifically than most.

Exports aren’t the only quarter where domestically counted economic indicators have come under criticism.  Former Prime Minister Li Keqiang was quoted in a 2007 communique recently released by Wikileaks describing the data used to report China’s GDP as “man-made.”  In 2013, a Chinese university released a Gini coefficient estimate, a measure of a country’s rich-poor gap, at .61.  A short month later the Chinese government released their first official estimate in a decade coming in at 0.47 – where 0 is perfect equality and 1 is extreme disparities in wealth. (The U.S. for comparison is a middle-of-the-pack nation with a World Bank Gini coefficient of .45).  Foreign economists familiar with China labeled the official number, politely, as ‘optimistic.’

These examples highlight two related, but separate issues: Chinese economic data is manipulated at both the macro and at the micro level.  Government offices are incentivised to report good numbers and individual firms/households are incentivised to hide their wealth and keep it out of China.  Exacerbating the government’s stranglehold on numbers with any meaning is the aggressive harassment of investigative reporters.  Last December’s reporterpocalypse, whereby in retaliation for “biased” articles Beijing held up the visas for dozens of foreign reporters, was resolved only by United States Vice President Joe Biden’s direct intervention.  Even so, China has continued the trend of kicking out individual journalists with the banning of another New York Times reporter two weeks ago.  Of course, no one has it as rough as the Chinese national reporters, who are subject to intimidation, jail time, and annual mandatory classes on how to be a loyal “marxist” reporter.

Formerly, China’s data fog wouldn’t have much global impact.  But in an age of unprecedented investment, trade, and interdependence China’s behavior is a problem for actors worldwide.  U.S. current Foreign Direct Investment in China is a cool $51 billion, most of which is tied up in manufacturing and outside of finance.  American investors need to know the true quality of the environment in which they spend U.S. dollars.  Furthermore, globalization has led to the unprecedented integration of economies whereby governments need accurate data from abroad to determine domestic competitiveness.  Finally, as the 2007 financial crises demonstrated – failure in the number one (and presumably two) global economy has consequences far beyond a single state’s borders.

Can the US or other outside forces encourage transparency?  The fact is that the United States government has little to no political capital in Beijing.  When Chinese officials are approached directly by US counterparts, their “advice” is interpreted as at best, condescending and at worst, part of a massive beltway plot to keep China down.  This situation illustrates one aspect of a global sea change where the most effective ambassadors aren’t coming from the government, they are the corporations.

For corporations however, the need for accurate information is tempered by other considerations.  Companies operating in China have an obvious vested interest in staying on the good side of local/national authorities.  It’s hard enough to get things done even when you are courting, bribing and hiring the relatives of the right people.  But that doesn’t mean we should underestimate how much China wants to attract foreign business, and the leverage that this desire gives investors.  With the roll out of Shanghai’s new Free Trade Zone, Beijing has shown its hand.  The government desperately wants to shift the focus of China’s economy away from heavy industry and towards financial and service sectors – ideally with foreign role models around to “unleash diversity and competition.”

Encouraging transparency in China, the United States’ biggest trade partner and the number two global economy, is good economic policy and a smart business strategy.  Both official and commercial actors need to participate in lobbying for transparency.  In the end, the prospects of foreign businesses in China contribute to the development of the US and the global economies.  Governments and the participating corporations are responsible for pressuring China to do the right thing, and as their relative power shifts, pressure is best applied through multiple governmental and business channels.

 

Innovation from 9 to 5: China’s Economic Test

Posted on by The Progressive Policy Institute

China is investing more in R&D than the European Union, according to soon-to-be-released data from the Organization for Economic Cooperation and Development (OECD).  This milestone reflects a multi-pronged effort by Chinese policy makers to spur economic innovation. Other measures include incentives to lure foreign educated Chinese back home,  patent targets and subsidies, and a strong emphasis on market driven change and innovation across sectors in the recent national memo from President Xi.

The Chinese strategy of focusing resources on modernization has paid big dividends for the national economy and Chinese workers since Deng Xiaoping opened China to Nixon and the world in the 1970s. First heavy than light industry flourished under focused, deliberate state nourishment, leading China to its present status as the world’s second-largest economy. But this model of state-directed development faces new challenges as the standard of living rises and factories face competition from other countries with even cheaper labor, such as Vietnam and Bangladesh. Now that Chinese workers face threats to their job security, the government is asking: How can we innovate our way up the economic value chain?

The Chinese Communist Party has long justified its political monopoly by acting as the benign steward of transformative economic growth. But as growth rates flag, the difficulty of moving toward higher-valued added activities has presented the Chinese version of “it’s the economy stupid.” Unfortunately for President Xi Jinping, the party’s authoritarian ways are antithetical to the type of culture that has traditionally led to the entrepreneurial innovation the party seeks to develop.

Innovation is inherently disruptive. But the business environment, the legal environment, and societal pressures in China combine to foster businesses and businessmen who curry favor with officialdom and make few waves. Chinese schools feature rote memorization of the “correct” answers to any and all questions, stifling any instinct a student may have to think outside the box. Recently, the government officially endorsed a rehashing of ancient Confucian thought emphasizing obedience and deference to authority. Professors who ask China to follow its own constitution and develop rule of law get sacked.  Beijing would like to believe that it can suppress freedom of speech and thought, forego a genuine rule of law, and maintain strict political control, all while building a dynamic, modern economy. It has done an impressive job of organizing the economy around the imperative of “copy to catch up.” But it’s a lot harder to force people to be creative by decree.

After decades of following Western models of economic development, Chinese politicians now denounce the predetermined path in favor of forging a new “Chinese way” of combining free markets with controlled government. Ideally, China would develop an economy driven by a flexible, creative, innovative work force without transitioning to the classically liberal social and governmental structure traditionally necessary to cultivate that kind of human capital. The writing on the wall reads: “Be creative and daring! Only at work, never in any other capacity.”  China’s attempt to quarantine innovation underpins the success or failure of their targeted economic transformation and with it the fortunes of the CCP. It is dangerous to join the chorus of voices heralding China’s downfall since 1949, but this contradiction looks like a giant roadblock on the path forward.

Washington Monthly: Nelson Mandela: (Almost) the Last of the Lions

Posted on by The Progressive Policy Institute

The passing of Nelson Mandela marks nearly the end of the generation of great leaders who presided over the astonishing half-decade of 1989-1994, when the post-World War II status quo came to a resounding and surprisingly bloodless conclusion with the collapse of Communism in Europe and Apartheid in South Africa.

The death of Margaret Thatcher last year was the last such watershed moment although — unlike Mandela — the Iron Lady was as widely detested as admired. Like her ideological soulmate Ronald Reagan (who was secluded for a decade before his death in 2004), Thatcher had experienced a long period of decline and had been mostly out of the public eye for many years. By contrast, Mandela’s slow, excruciating, and very public demise brings to mind more closely the agonizing illness of Pope John Paul II, another great figure of the era whose death in 2005 similarly triggered waves of mass mourning.

A few of the secondary figures of that period persist, including the Polish Solidarity leader Lech Walesa, former South African President F.W. de Klerk, former German Chancellor Helmut Kohl, Archbishop Desmond Tutu of South Africa, and of course former U.S. President George H.W. Bush. But with the death of Mandela, the only surviving figure of truly world-historic significance from that era is Mikhail Gorbachev of the former Soviet Union.

Continue reading “Washington Monthly: Nelson Mandela: (Almost) the Last of the Lions” →

RealClearWorld: Iran’s Last Chance

Posted on by The Progressive Policy Institute

For all the bluster and thundering certitudes of President Obama’s critics, no one really knows for sure if Iran’s new government is serious about pursuing a nuclear weapon. Thanks to the deal struck in Geneva last weekend, we are likely to find out sometime in the next six months.

The agreement is intended to test Iran’s willingness to neuter its nuclear program in exchange for a way out of its deepening economic and political isolation. It is probably Tehran’s last chance to avoid a U.S. or Israeli military strike aimed at destroying its nuclear facilities.

Although fairly modest in scope, the Geneva deal carries some obvious risks. Relaxing economic pressure now may sap the international community’s will to maintain stiff sanctions on Iran indefinitely. And if the deal succeeds, Iran will gain a measure of international legitimacy without having to relent on its harsh internal repression, support for terrorism or hostility toward Israel.

Nonetheless, the worst outcome of all — for the United States, for Sunni Arab states terrified of Shiite Iran’s regional ambitions and for Israel — is an Islamic Republic with nuclear weapons. President Obama and Secretary of State John Kerry are trying to stave off that strategic calamity without resorting to war.

 Giving the president zero benefit of the doubt is Israeli Prime Minister Benjamin Netanyahu, who denounced the deal as “bad and dangerous.” For him, the agreement confirms growing suspicions that Obama will never resort to the one option — force — that can neutralize Iran’s nuclear threat, despite the president’s repeated vows to keep that option “on the table.” In fact, the deal effectively gives Iran six month’s immunity from an Israeli military strike.

Also convinced that the mullahs have taken Obama to the cleaners are U.S. conservatives. They complain that the agreement doesn’t require Tehran to stop all enrichment as a condition for sanctions relief. That’s true; it’s an interim agreement that slows down Iran’s nuclear program for six months, during which time a comprehensive resolution is supposed to be reached. Applying the same sledgehammer logic that led to the government shutdown debacle, Republicans evidently believe anything less than Iran’s immediate and unconditional surrender constitutes appeasement.

Meanwhile, some influential Democrats aren’t showing much enthusiasm for the Geneva deal either. Senators Chuck Schumer and Robert Menendez, chairman of the Senate Foreign Affairs Committee, have vowed to keep pushing for new sanctions on Iran anyway. Rather than turning the screws on Iran, though, this would likely shift the onus of intransigence from Tehran to Washington, embolden Iranian hardliners who oppose any bargain with the Great Satan, and undermine Obama’s negotiating leverage. Why should Iran’s comparatively pragmatic new president, Hassan Rouhani, take any risks for a peaceful resolution of the standoff if Obama can’t deliver on his commitments?

Now there’s talk on Capitol Hill of passing sanctions that won’t kick in for six months. But it’s almost always a mistake for Congress to try to micromanage foreign policy, especially delicate negotiations between two feuding nations that haven’t talked directly to each other since 1979.

Besides, the idea that layering on new sanctions will force Iran to capitulate totally misreads what motivates its rulers. Yes, the sanctions have inflicted growing economic pain, and Rouhani is eager to reduce that pressure. Tehran urgently needs hard currency, and it needs to sell its oil on global markets again. But Iran has added centrifuges, stepped up enriching and moved steadily closer to a nuclear breakout even as the international community has ratcheted up the economic and political pressure. The Islamic Republic, for which opposing American “imperialism” is not just a policy but a founding principle, isn’t going to cave in to demands from a U.S.-led coalition.

It might be induced, however, to embrace a face-saving formula in which the United States and its P5+1 partners tacitly acknowledge Iran’s “right to enrich” in exchange for a verifiable dismantling of its capacity to develop enough weapons grade uranium or plutonium to make a nuclear weapon.

Skepticism toward Iran is perfectly rational, given its deceptive behavior over the past decade, but creative statecraft demands more than straight-line extrapolation from previous experience. Sometimes, with imagination and courage, bitter antagonists do break through the crust formed by decades of profound mistrust, and find a new modus vivendi. That’s what happened during Nixon’s “opening” of China in 1972, at Camp David in 1979, in the Reagan-Gorbachev 1988 “walk in the woods” and the 1998 Easter accords that pacified Northern Ireland.

Under the interim deal, Iran will dilute or otherwise render harmless its highly enriched uranium and halt further enrichment above 5 percent. It will also stop fuel production for the heavy water reactor at Arak, which by producing plutonium could give Iran a second route to the bomb. In return, the coalition is offering about $7 billion relief from economic sanctions.

At a minimum the deal sets the clock back on Iran’s ability to acquire nuclear weapons. If we’re lucky, it will trigger a dynamic of horse-trading and incremental trust-building that could make bigger breakthroughs possible in six months. If not, then we’ll know that Tehran is once again stringing the international community along, and we’ll react accordingly.

In either case, the deal will clarify at last Iran’s real intentions — and the course America should pursue.

RealClearWorld published this article by PPI president Will Marshall.  You can find the original article here.

How Belgium Survived 20 Months Without a Government

Posted on by The Progressive Policy Institute

If you think a few days of “government shutdown” in the U.S. is bad, consider that in 2010-2011, Belgium had a political crisis that prevented formation of a government for 589 days. What may be most surprising, though, is that the Belgians found a way to keep their government programs and services running without serious interruption.

Belgians are far more divided than Democrats and Republicans in the U.S., split between a wealthier Flemish-speaking north with 60 percent of the population and a less prosperous French-speaking south. The cultural distinctions, linguistic antagonism, and regional separation between the two halves of the nation have long made it difficult to create a coherent majority in a parliament full of multiple small parties split along communal lines.

But the nation’s long-running divisions hit an all-time-low when the prime minister resigned in April 2010 and no new parliamentary majority could be established. Round after round of fruitless negotiations went on for the rest of 2010 and most of 2011. No faction or party was willing to compromise, nor could any single politician emerge as a unifying figure.

So what happened to the crucial work of Belgium’s government? Nothing much at all – things mostly went on as usual. The prior government stayed on in a “caretaking capacity” and the bureaucracy continued to hum along. As a report in Time put it: ” the absence of a government makes little difference to day-to-day life in Belgium…. Belgium deftly helmed the presidency of the E.U. in the second half of 2010, and the caretaker government last month headed off market jitters over its debt levels by quickly agreeing on a tighter budget. The country is recovering well from the downturn, with growth last year at 2.1 percent (compared with the E.U. average of 1.5%), foreign investment doubling and unemployment at 8.5 percent, well below the E.U. average of 9.4%. ‘By and large, everything still works. We get paid, buses run, schools are open,’ says Marc De Vos, a professor at Ghent University.”

Continue reading at the Washington Monthly.

Obama Has Demoted Liberty

Posted on by The Progressive Policy Institute

President Barack Obama has demoted liberty and democracy as primary U.S. foreign policy goals, at least where the Middle East is concerned.  So the president informed the world in his address to the United Nations last week.

Obama said four “core interests” would henceforth guide U.S. policy toward the Middle East and North Africa: protecting our allies, ensuring the flow of oil, fighting anti-American terrorists, and preventing the use of weapons of mass destruction. While he said U.S. efforts to “promote democracy, human rights, and open markets” will continue, they are now relegated explicitly to the second tier of U.S. interests.

Not so fast Mr. President. Shouldn’t Democrats at least be questioning Obama’s logic, if not raising objections?  After all, the president’s embrace of realpolitik is at odds with the party’s liberal internationalist outlook, which on balance has served America and the world well for seven decades.

Continue reading at CNN.

The New Politics of Production: A Progressive High-Growth Strategy

Posted on by The Progressive Policy Institute
Will Marshall’s piece, excerpted here, was part of the Policy Network’s recent publication “Progressive Politics after the Crash: Governing from the Left.”

The US is struggling to find a way out of overlapping economic crises. One is cyclical: a painfully slow, jobless recovery from a recession magnified by the 2008 financial crash. The other is structural: US economic output and job growth have fallen well off the pace of previous decades. Although liberal commentators seem preoccupied with rising inequality, America’s fundamental economic problem is slow growth.

Even before the recession struck, the once-mighty American job machine was sputtering. Between 2000 and 2007, the US posted its worst job creation record in any decade since the Great Depression. Not only have many good jobs vanished, but also real wages have fallen or turned stagnant for all but the top US earners.

Overall economic growth has been declining steadily since the halcyon years after World War II, when the babies boomed and GDP grew at a robust average of 4 per cent per year. National output fell to 3 per cent during the 1970s and 1980s, before picking up in the late 1990s. Since 2000, the economy has downshifted again, averaging under 2 per cent growth per year. Research from the Kauffman Foundation also suggests a loss of entrepreneurial verve. The number of business start-ups, which Kauffman says generate most of US net job growth, has plummeted by about a quarter since 2006.

If there is a bright spot in the US economy, it is the rebound of corporate profits and stock prices since 2009. Yet these gains also highlight a stark inequity: returns to capital are up, but returns to labour are down.

In President Kennedy’s day, US prosperity really did lift all boats. Today, however, productivity gains do not automatically translate into higher pay for workers, especially people with middling skills. ‘This is America’s largest economic challenge’, says the economist Robert J.  Shapiro. ‘People can no longer depend on rising wages and salaries when the economy expands.’

Amid such dismal conditions, Obama’s re-election by a comfortable margin (5 million votes) was an astounding political feat. Despite Republican challenger Mitt Romney’s claims that Obama fumbled the recovery, swing voters credited the president with having prevented the economy from capsizing during the perfect storm of 2008–9. It helped too that Romney offered no theory of his own for rekindling growth beyond hackneyed calls for lower taxes and regulation.

Unfortunately, little has happened since Obama’s victory to dispel the pall of economic pessimism that hangs over America. A late spring poll, for example, found that nearly 60 per cent of Americans worry about ‘falling out of (their) current economic class over the next few years’. No doubt subpar job growth is chiefly responsible for such unwonted gloom. According to preliminary figures, the number of people with jobs grew by only 28,000 (0.02 per cent) during Obama’s first term.

And there is little relief in sight. The Congressional Budget Office forecasts weak GDP growth and abnormally high unemployment persisting to the end of Obama’s second term. America is stuck in a slow-growth rut. While liberal Keynesians are calling for more shortterm spending to kick-start the pace of recovery, what progressives really need is a bolder plan for overcoming structural impediments to more robust growth.

Instead of devising one, Obama is bogged down in Washington’s endless trench warfare over taxes, spending and debt. True, the president won a tactical victory in averting the ‘fiscal cliff ’ and forcing Republicans to swallow higher tax rates on wealthy households. Yet this modest blow for tax fairness did little to fix the nation’s debt or stimulate growth. In fact, distributional politics distracts progressives from a truly historic opportunity to lay new foundations for US prosperity in the twenty-first century.

To inspire hope for such a change, the US president must broaden his message from fairness to growth: he must put America back on a highgrowth path. By setting audacious goals – say, doubling the growth rate and halving unemployment by the end of his second term – Obama
would convey the requisite sense of national urgency

A clarion call for renewed growth would create political space for progressive initiatives – public investments in training and education, broad tax reform – intended to spread economic gains more widely. And, by fanning hopes for a reversal of America’s economic decline, such a call could help Democrats make inroads among white working-class voters.

These voters, once the backbone of Democrats’ New Deal–Great Society coalition, have since defected en masse to the Republican camp. A conscious campaign to start winning them back, while retaining the Democrats’ strong advantages with young and minority voters, is the key to building a durable progressive majority and ending the 50:50 polarisation that has paralysed Washington.

Read the entire piece by Will Marshall.

The Atlantic: It’s Time for a New United Nations

Posted on by The Progressive Policy Institute

In March of 2011 and just hours before the United Nations Security Council vote, Libyan dictator Muammar Ghaddafi promised citizens of Benghazi–his own countrymen–that he was “coming tonight” and that would show them “no mercy and no pity.” Gaddafi’s brazen statement telegraphed an impending attack with a high possibility massive civilian casualties.

In the Security Council immediately following Gaddafi’s threats, Russia and China–two permanent members with noted authoritarian governments themselves–abstained from voting on resolution 1973, which authorized “all necessary measures to protect civilians… including Benghazi.” (Germany, Brazil, and India, then-rotating members of the Security Council, abstained as well for their own reasons.)

In hindsight, Russia seems to have regretted its abstention. In January 2012, speaking about the growing civil war in Syria, Foreign Minister Sergei Lavrov told Australian TV that “the international community unfortunately did take sides in Libya and we would never allow the Security Council to authorize anything similar to what happened in Libya” in Syria.

That seems odd, because “what happened in Libya” was, on balance, a good thing: A sustained NATO air campaign unquestionably protected many more innocent civilians than it harmed and weakened Gaddafi’s forces en route to his downfall. What’s more, the Libya operation served as validation for those supporting the “responsibility to protect,” a 2006 Security Council mandate that called on parties involved in armed conflict to bear primary responsibility to protect civilians, approved by a unanimous 15-0 vote.

Continue reading at the Atlantic.

Foreign Policy: Absent Without Leave

Posted on by The Progressive Policy Institute

In the late 1960s, Britain signaled the end of its long run as a world power by withdrawing from major military bases east of the Suez Canal. Today, as the White House confronts the crisis in Syria, could America be facing its own “east of Suez” moment?

The historical parallels aren’t exact. Britain was an empire; the United States isn’t — despite the tendentious polemics of inveterate anti-Americans, from Noam Chomsky to Glenn Greenwald. Britain had already been surpassed by bigger superpowers by the 1960s. That hasn’t happened to America and isn’t likely to happen in the foreseeable future. But the debate over intervention in Syria has illuminated large and growing cracks in the internationalist consensus that has underpinned U.S. global leadership since World War II.

That consensus has been strained to a breaking point by feral partisanship and by a Republican Party increasingly in thrall to libertarian ideas. As a skeptical Congress awaits a possible vote on President Barack Obama’s proposal to use military force against Bashar al-Assad’s regime, the big question is whether the United States can still muster the internal cohesion to play a decisive role in world affairs.

In his prime-time address Sept. 10, Obama asked Congress to postpone the vote pending a possible deal with Russia that would transfer Syria’s chemical arsenal to international custody. The scheme could spare Obama the embarrassment of being rebuffed by Congress, where sentiment against a U.S. strike has been hardening. But the fact that Russian President Vladimir Putin, Assad’s enabler and the U.S. president’s tormentor in chief, is the one throwing Obama a political lifeline should give us pause about the deal’s merits. To be sure, the deal would be good for Obama, allowing him to boast that his threat to use force compelled Assad to give up his chemical weapons. It might also earn Putin a Nobel Peace Prize. But it won’t end the agony of the Syrian people, because it would leave Assad free to go right on killing them with conventional weapons.

If Washington forswears the use of force against Syria, as Putin is demanding, it will have paid a very high price for reinforcing the norm against chemical warfare. The Russian gambit, moreover, may founder on its sheer impracticality: Will Assad, his back to the wall, really give up his most fearsome weapon? And how will U.N. weapons inspectors be able to find and remove all the regime’s chemical weapons in the middle of a war zone? Even from a purely logistical standpoint, the Russian proposal may be close to impossible.

Read the piece at Foreign Policy.