Tuesday, September 27, 2011

The Palestinians at the UN ... Does It Matter

The Palestinian Authority has applied to the UN Security Council for admission to the United Nations as a full member.   The application will be sent to a committee of the Council and if it is supported at that level and brought up for a vote, the United States will veto.  Action will shift to the General Assembly and the Palestinians will most likely seek upgraded observer status, perhaps as a “non-member state.” 

This is the culmination of a process that began shortly after the latest attempt by the United States to broker peace talks blew up last winter in a dispute over a freeze on settlements in the West Bank.  It is not a seismic shift in the landscape of Middle East conflict nor is it “... a tale told by an idiot full of sound and fury, signifying nothing ...”  It is a significant moment with consequences.

There are so many dimensions to the conflict between Israel and the Palestinians and the issues cut so deeply into people’s sense of themselves and their existence, that it is impossible to discuss it without implicitly taking stands and introducing bias.  There is no clinically detached language, no omniscient observer prospect.  All I can claim is a serious attempt to avoid unreflective partisanship.

[If only it were that simple ... I once read an article analyzing the conflict over “Jerusalem” which argued that you could remove that intensely emotional issue from the equation by renaming the city.  The author did not offer any suggestions.]

The United Nations arena.

Since the application for recognition is being considered right now, let’s start with trying to disentangle several ideas.

1) What does it mean to be a “sovereign, independent, equal nation-state”

Maybe the noted international legal scholar Frank Zappa said it best, “You can't be a real country unless you have a beer and an airline. It helps if you have some kind of a football team, or some nuclear weapons but at the very least you need a beer.”  Professor Zappa’s more formal colleagues would cite three conditions: defined territory, population, and a functioning government.  Ultimately each of those is a political criterion, decided upon by other nation-states.  The real criterion is: you’re a nation-state if enough other nation-states say you are.  And in the 21st century the members of the United Nations are the ones who decide who’s in and who’s not.

All states are equal at the UN but some are more equal than others.  It’s one state, one vote in the General Assembly (yup, the 1.3 billion citizens of China have the same formal status as the approximately 10,000 citizens of Tuvalu.)  But when one of the five permanent members of the Security Council votes “no,” that’s the end of that.

Regardless of the quality of your beer, you cannot be a full member of the UN until the Security Council says so.  But the General Assembly grants several different levels of observer status with different rights of participation in conferences and debates.  Right now the Palestine Liberation Organization is an official observer at the General Assembly and can participate in debates and discussions but not vote.  The Assembly, unencumbered by the veto and with an overwhelming majority of members sympathetic to the Palestinians, could easily decide to grant the Palestinian  Authority upgraded status as a non-member state.  This would matter for two primary reasons.  First of all, it is the Palestine Liberation Organization that has been recognized since the 1970s as the entity that is the observer.  The PLO is the umbrella organization formed to represent all the groups involved in the Palestinian resistance.  The largest group in the PLO has always been al Fatah, which was created and led by Yassir Arafat.  Changing the identity of the observer to the Palestinian Authority means it is a governing body not just a political party that is represented at the UN.  And that leads to the second crucial dimension -- “governing body” implies there is something to be governed, meaning a nation-state.  For everyone in Palestine, Israel, and the rest of the world who believes that a two state solution is the only viable option, this is a progressive step.  It will make it more difficult to maintain that the status quo is tenable.

The months of maneuvering leading up to the Security Council and General Assembly votes and the increased status and legitimacy for the Palestinian Authority will have consequences for all the major players in the Israeli-Palestinian conflict.

All politics is local

The major immediate impacts of this week’s activity will play out in the internal politics of the Palestinians, Israelis, and the United States.  The most important longer term international impacts will be on the United States.

The Palestinians.


The territory of  Palestine is physically divided into two geographic and political regions: the West Bank and the Gaza Strip.  The West Bank (of the Jordan River) has some relatively fertile farmland and grazing areas and some relatively developed urban areas.  The Gaza Strip contains one very large, poor city and desert.  It is one of the poorest areas in the world.  Since the end of the Six Day War in 1967 the two areas have been physically separated by Israeli controlled territory.  But until 2007 there was a set of functioning government institutions (The Palestinian Authority) that united both sections. Since Hamas took control of Gaza and expelled both military and civilian representatives of the Palestinian Authority in 2007 the political divide has been as sharp as the physical separation.  The Palestinian Authority (PA), headquartered in Ramallah, shares effective control of the West Bank with the Israel Defense Forces.  One major difference between Hamas and the PA is public position on Israel.  The PA has been willing, even eager, to negotiate; Hamas has disavowed any contact with what they scornfully refer to as “The Zionist Entity.”  The failure of the U.S. sponsored talks, plus growing tensions between Palestinian villagers and Israeli settlers in the Jordan Valley, have weakened the authority and credibility of the PA and allowed Hamas to build political support outside its base in the Gaza Strip.  If Hamas became the major force in both the West Bank and Gaza, it would end any hope of negotiations or other strategies for a Palestinian state and would pit the religiously conservative leadership of Hamas against the far more secular and modern majority of West Bank citizens.

The PA government in Ramallah has portrayed the entire UN saga as a triumph.  The official line is that for the first time Palestinians are controlling the initiative and forging a bold new path to the future.  The PA is organizing laudatory demonstrations (which both Israel and the PA fear will get out of hand and turn into real mass protests) to underscore the message that it can deliver the goods.  The great hope is that this diplomatic success, coupled with the real improvements in governance and delivery of services that have taken place in the past two years, will cut deeply into support for Hamas and forestall the kind of mass based expressions of discontent that have been the hallmark of the “Arab Spring” in Tunisia, Egypt, Syria and elsewhere.

Israel

Public opinion surveys in Israel have been very consistent for a long time.  The hypothetical “average Israeli” believes 1) some kind of negotiated settlement that gives the Palestinians their own entity is a good thing; and 2) there is no one with whom Israel can negotiate right now because the Palestinian Authority does not control the Gaza Strip and Hamas as seen as a terrorist group dedicated to the destruction of Israel.  The show at the UN will reinforce that perception, especially because the official line from the government of Israel that this “unilateral action” is contrary to the need for direct negotiations. 

In the short run a General Assembly vote to upgrade the Palestinian’s status will probably increase approval of the Netanyahu government’s hard line.  The UN is seen by many Israelis as hopelessly biased against Israel.  Many Israelis, inside and outside the government, are deeply ambivalent about the popular movements that have toppled Arab regimes, especially Egypt.  Mubarak may have been a dictator and oppressor, but he was a reliable Israeli ally, helping the effort to tame and control Hamas and stifling any public opposition to Israel.  The current interim regime is far less cooperative in the blockade of Gaza and the recent assault on the Israeli embassy in Cairo is taken as a frightening example of the wide spread animosity that could be expressed by a democratically elected regime. 

The Netanyahu government is actually quite weak and not wildly popular in Israel.  In the last elections for the Knesset, no party got a majority of the seats so there had to be a coalition government.  Netanyahu’s Likud (the major conservative party) got fewer seats than Kadima (a centrist party.)  But Netanyahu put together a coalition of small parties that included a very hard line nationalist party largely representing immigrants from Russia and two extremely conservative religious parties to get a very slender majority. 

A telling example of both how hard line some parties are and how weak Netanyahu is came a year ago.  On the very day that Prime Minister Netanyahu met with President Obama to promote the new round of peace talks, the Foreign Minister gave a speech in which he said the talks were useless and bound to fail.  Not only does this reflect his and his party’s distaste for negotiations, but it also shows that Netanyahu cannot insist that members of his own cabinet support an official government position.

There were public demonstrations against the government’s economic policies this summer.  The tremendous influence of the 300,000 or so settlers living in the West Bank and the conservative religious establishment on policy are resented by many Israelis.  But the “rally ‘round the flag” effect of increased support for the government in the face of negative events abroad is likely to kick in.  There is a great fear in Israel of being isolated and friendless in the world.  The inability of the U.S. to control the outcome in the UN plus the growing role of Europe (which is seen as pro-Palestinian) will reinforce that fear.  Even those in Israel who have been sharply critical of Netanyahu for picking a fight with President Obama and blame Netanyahu for the deterioration of the US-Israeli relationship are likely to show more support.

The United States

Support for Israel is coming to play an unprecedented role in American partisan politics.  American Jews have long been concerned about Israel for obvious reasons.  But this has never translated into a monolithic, unthinking, automatic approval of whatever the current government does.  Increasingly conservative, evangelical Christians have become strong partisans of Israel.  Readers of the Book of Revelations know that restoration of Israel is a precursor to Armageddon and the end times and Second Coming.  And that has translated into a knee-jerk, uncritical support for Israel.  The position of some evangelicals that Islam is evil and satanic reinforces the bias.

Prime Minister Netanyahu was warmly applauded when he addressed a joint session of Congress, even when he directly repudiated the positions of the United States government. Seemingly obscure and quite conventional statements of U.S. policy, such as the status of the 1967 borders as a starting point for negotiations, have been met with sharp criticism and damned as “selling out” Israel. 

The idea that “politics’ stops at the water’s edge” and foreign policy is the particular domain of bipartisan warmth and fuzziness has always been more fantasy than fact.  But it is very rare for a hot button foreign policy issue to become so embedded in rigidly partisan politics.

Many observers think Republican strategists see portraying anything less than complete agreement with the Netanyahu government as the same thing as being anti-Israel as the wedge issue that will split a significant portion of the Jewish vote away from its customary home in the Democratic party. The conventional wisdom is that the Republican candidate won the recent special election in New York city because he appealed directly to conservative older Jewish voters by blaming Obama for all the difficulties with the Netanyahu government and for not backing Israel completely.   Conservative Republicans have already begun to try to use the issue, sometimes in bizarre ways.  For example, over 40 Republican members of the House of Representatives issued a call for Israel to annex the West Bank and make it part of Israel.  (Why do I think that is bizarre?  It would essentially make Jews a minority in the expanded Israel.)

The White House is going to try to spin the UN actions as anything other than a major defeat for the United States.  That will be a major challenge because the U.S. has worked very hard for months to avoid a Palestinian application for full membership that we would have to veto. 

I think this week has very significant international implications.   The Palestinian application for full membership will be interpreted as sign that the Palestinians no longer regard the U.S. as an honest (albeit strongly biased) broker in potential peace talks.  The U.S. is widely perceived to have failed to exert any influence over Israel when it could not get even a very temporary freeze on settlement activity.  The assumption the U.S. is the indispensable player in peace talks because of its influence on Israel has been shattered.  And now the U.S. seems unable to influence either the Palestinians or the overwhelming majority of UN members.

While I think this is significant as another symptom of the evolution of an international system in which the United States is not as dominant as we have been (a topic for another entry), I do not think it affects the prospects for an enduring agreement between the Israelis and Palestinians, which look as distant today as they did twenty years ago. 

Saturday, September 17, 2011

The Troubled Euro Zone


For most of us, Europe is a nice place to visit but we wouldn’t want to live there.  And we pay little attention to European politics and even less, except when we’re trying to exchange dollars into euros, to European economics.   We may be aware that something has been going on this summer -- rowdy demonstrations in Athens and Madrid, riots in London, gyrations in stock markets that mirror the turmoil on Wall Street -- but it’s all been pretty peripheral. 

As I write this, there are pervasive worries that Greece will default on its debt, that other European economies will tank, that the euro is destined for the scrap heap and the grand scheme for European integration represented by the European Union will falter.

There are three big points that I think are worth commenting on.

1) The problems that have prompted austerity programs in Greece, Ireland, Portugal, Italy and the UK are to some extent very much like the problems afflicting the U.S. economy, since they revolve around short term deficits and long term debt.  And to a significant extent they are quite different because of the size and nature of the U.S. economy.  You can understand some of the underlying dynamics of the problems in Europe by thinking about the U.S. economy.  But you need to avoid the facile comparisons that equate our short and long term issues with the smaller and weaker European economies.

2) The fact that these countries are members of the European Union and the euro zone adds a dramatically different dimension to national economic issues.

3) The so called “Neo-liberal Washington Consensus” continues to dominate international economics.

1)  The roots of the European Crisis 

The collapse of the financial system that began with the bursting of the housing bubble in the United States in 2008 spread rapidly to the rest of the advanced capitalist economies in Western Europe.  The same lousy mortgages that were bundled, “securitized” and sold to U.S. investment banks and insured by folks like AIG were sold to European banks as well, with drastic effects on the ability of businesses and governments to borrow money when those mortgages turned out to be worthless.

Many governments run deficits – spend more money than they raise in taxes in a given year.  Mainstream economists generally agree that some deficit spending is actually a good idea if 1) it is being used for long term investments, like infrastructure, that increase economic growth (which increase tax revenues over time and – at least in theory – pays for itself); 2) it is being used “counter cyclically” – to stimulate demand during a recession or depression (and the other side of the coin is that governments cut spending and/or raise taxes when times are good to prevent inflation.) But if the deficit is for current consumption, that is to pay benefits or wages or for other programs, then it is generally regarded as a bad thing.    

Governments borrow money 1) directly from international banks and 2) on a larger scale by selling bonds that pay interest over a number of years.  The “collateral” for government loans is future tax revenues.  In the imaginary perfect world, a government would use the borrowed money to expand economic activity and its taxes and end up with enough extra money in the long run to pay back the loan or pay off the bonds.  In the short run, the borrowed money would improve the economy enough to let the government pay the annual interest on the loan or bonds, what economists call debt service.  Things go rapidly downhill when the economy does not grow fast enough and the government has to make debt service payments by borrowing more money.  At some point banks and investors stop making loans or buying bonds (or they start charging such high interest that the government can’t afford it.) 

This is very over simplified but, I hope, not such a cartoonish sketch that it is misleading.  Any discussion of deficits and debt is complicated by the recent brouhaha in Congress over the debt ceiling that obliterated the difference between short term and long term effects of spending and borrowing.  In Europe, as in the United States, annual budget deficits and the national debt are are different phenomena.

Greece (along with Portugal, Spain and Ireland) is in deep trouble right now because the government has consistently run deficits to pay for current programs and benefits and the underlying economy is weak.  Greece is a small country with – by European standards – a relatively low standard of living.  That means there is not a huge domestic market and exports become far more important than they are in the U.S.  But Greece does not have a large export market ... it is not a major agricultural producer, it is not a hot bed of high tech industry, it is not a manufacturer of machinery, etc.  Thus the long term prospects for sustained economic growth in Greece at rates that will let the government pay the current bills and keep long term debt at manageable levels are bleak when the global economy itself is faltering.

The Greek situation is quite different from the stronger European economies like Germany and France.  The United Kingdom is different from both the weaker economies like Greece or Portugal and the situation in France and Germany.  The UK does have a pretty strong economy that has been battered by the global financial crisis.  The austerity budget the government adopted last spring that slashed a lot of spending aimed at the poor and working class had, I think, as much to do with the Tory’s ideology as it did with presumptively dispassionate economic analysis.

The United States is distinctly different from both the weaker and the healthier Western European economies.  The U.S. differs from the smaller and weaker economies because our deficit issues are not driven by a fundamentally weak economy but by decisions on financing the Iraq and Afghanistan wars, tax policy, and the impact of the 2008 financial meltdown.  Our big problems are short term, not long term.  And the U.S. differs from Germany and France both  because of the sheer size and diversity of our economy and because of the role of the dollar as the world’s premier reserve currency. 

 But, as the cliche goes, I digress.

2) The Euro zone

From its formal inception in the Treaty of Rome in 1956, the European Union has reflected two very different visions.  One the one hand, the goal has been to create a political, social and economic unit that would transcend and render irrelevant the component nation-states.  The nationalism blamed for the bloodshed of the 19th and 20th centuries would be replaced by a pan-European identity.  On the other hand, the vision has been a much narrower focus on economic cooperation between nations and the goal the elimination of barriers to trade, not some larger transcendent “New Europe.” 

One vision leads to an emphasis on creating new institutions and fostering a common identity ... hence the European Parliament, the Court of Justice of the European Union, the European Council, the European Commission and the European Central Bank.  The other vision leads to an emphasis on the rights of nation-states and the limitations of “European” decisions compared to national decisions. 

Every major development on the path from the common market of 1956 to the Europe of today has generated skepticism from those who see traditional nation-states as the reality of politics.  The vision of a new Europe has been pronounced as dead or near dead time and time again.  So called Euro skepticism is especially pronounced in the United Kingdom.   The acronym PIGS, for Portugal, Ireland, Greece and Spain, complete with the negative connotations, works only in English. 

An important feature of European development, supported by both those who seek a new Europe and those who seek to improve cooperation among existing states, is the common currency, the euro.  The initial major impact of the new money was to make business in Europe far more efficient.  Heineken no longer had to translate its costs and profit margin from Dutch guilders to German marks to French francs to Italian lira, Portugese escudos, etc.  Heineken buys its raw materials in euros, pays its workers in euros and sells the beer in euros. 

The euro zone has not abolished national economies and differences in productivity and costs of doing business, including taxes and some government policies.  The only way a huge economic unit like the euro zone, composed of a number of somewhat distinctive smaller units, can survive is if there is relative uniformity in wages, hours, working conditions and other costs of doing business, including taxes and inflation.  The European Central Bank was created to encourage states to coordinate their economic policies.  When the global financial crisis hit and some vulnerable states were in bad shape, the ECB expanded its responsibilities and launched a series of plans to stabilize government finances and international bond markets.

In effect, the strong European economies tried to share some of their strength with the weaker links.  That exposed Germany and France in particular to pressures on their own economies and what is seen by critics as spending their taxpayers’ money on bailing out other governments. Good old timey nationalism has resurfaced, too, with critics wondering why hardworking, thrifty northern Europeans have to come to the aid of feckless Mediterranean types. 

Decision making in Europe is complicated and even experts in European politics have a hard time explaining exactly how the Commission and the Parliament and the Council interact.  The European Central Bank Board of Governor is composed of members from the central banks of member states and they reflect different perspectives on risk and inflation.  The result, in the eyes of many critics, is that the steps the ECB and the political leadership of the European Union have taken to deal with the problems of the past year and half, have been too little and too late and too confused. 

If Greece is unable to make the interest payments on its outstanding debt, then the bondholders will have to change their balance sheets.  And if international banks suddenly have less capital than they thought (because the Greek bonds are now worth less) then they will have to cut back on loans to businesses and to other governments.  This will further retard already sluggish recoveries.  If a default in Greece or elsewhere results in the collapse of the euro and a return to national currencies, that will not only make the short and long term economic problems in Europe worse, but it will disrupt the global economic system. This will have real, tangible effects on Americans.  For better or for worse, our well being is tied to people and events far beyond our borders.

3) The Neo-Liberal Consensus

The International Monetary Fund, the World Bank and the U.S. Treasury are located within walking distance of each other in Washington, D.C. The number of economists working in those institutions or researching developmental economics in major research universities is quite small and many of them move back and forth between academic life and policy making at the IMF, World Bank or Treasury.    By the mid-1980s the professional economists had come to share a conventional wisdom about what Third World countries should do to spur economic development and came to apply that prescription to more developed countries as well.  The details and specific policy applications of this “Washington Consensus” differ to some extent, but all three global institutions accept the principles that governments in economic trouble should 1) open up their national economies to the globalized capitalist market system; 2) reduce the government’s role in the economy by privatizing the widest possible range of government activities; 3) slash government spending, especially on non-productive immediate consumption including the “safety net” programs.  The fact that the consensus is based on an updated version of the market capitalism first described by Adam Smith makes it “Neo-Liberal.” “Neo” because it is updated and revised, “liberal” in the 19th Century use of the term which is about 180 degrees from 21st Century progressive (since we don’t say “liberal” anymore) thought.

Like all prescriptions, this package is based on both empirical analysis and political values.  I think it is fair to say this approach is skewed in favor of the values and interests of the well off.  If governments have to sell bonds to investors, it is no surprise that the interests and preferences of those investors, be they rich individuals or managers of huge investment portfolios, cast long shadows over policy making.   It is no surprise that the prescriptions for Thailand, Kenya, Greece and the United States all involve immediate hardship for the poor and working class. 

I don’t mean to end this with a sneaky manipulation where you are supposed to think “Oh how fair, to punish the poor for the sins of the rich!”  The conventional wisdom argues that some short term distress may be the only guarantee of long term good times.  The political (moral) question is how much distress is justified.

A hundred years ago this all seemed simpler.  Nicaragua defaulted on its debt and the U.S. Marines went in and collected the taxes for several years until the debt was paid off.   The events of the past three years, initiated by the collapse of the housing market in the United States, have underscored the growing importance of a global economy.  The short term question is whether Greece and the rest of Europe can survive the current crisis.  The long term question is whether countries can act together to increase the benefits of the new economy and shield everyday people from the potential harms.