Monday, August 9, 2010

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Global Warming Could Stifle Economic, Political Stability


Benjamin Olken, an economist at the Massachusetts Institute of Technology, said that global warming is not just going to devastate agriculture in developing countries, the link between “high temperatures and poor growth is much stronger than we’d realised.”

Olken said that his team’s study is the first to link climate change with economic growth, reports New Scientist.

The authors say that high temperatures could even undermine scientific productivity.

If global temperatures rise as predicted, the economic gap between rich and poor nations will have doubled a decade from now. In 50 years’ time the gap will have widened 12-fold.

For the study, the team looked at how temperatures affected economic growth in the past 50 years.

The researchers found that while rich economies seemed resilient to temperature rises, the GDP of poor countries dropped by 1 per cent in years when those temperatures rose 1 °C or more above the regional average.

They also found that the number of scientific papers – a measure of innovation – also fell in poor countries in hot years, as did economic investment in the region.

Breakdown in government was more likely, as were political coups.

Olken said his results are consistent with other studies showing that high temperatures increase civil unrest, and that drought can lead to political instability.

Hungary Like A Wolf for IMF Loans? Perhaps Not


European financial markets were in for a bit of a surprise Monday as Hungary was not able to agree with the EU and IMF on conditions for the release of another tranche of its EUR 20 billion standby agreement concluded in 2008. Current Hungarian Prime Minister Viktor Orban of the right-of-centre Fidez party ousted the previous socialist leadership which negotiated the IMF deal. Orban had already been PM from 1998 to 2002, but lost at the polls in 2002 and 2006. As is often the case in politics, traditional notions of "left" and "right" do not always match when it comes to dealing with the IMF and other foreign interlopers. Whereas the previous government was obviously more amenable to making concessions--especially on the fiscal austerity front--the current government is not quite.

And so we have a populist backlash against the IMF. Ho-hum, where have we seen this movie before...

    Hungary's government said the International Monetary Fund and European Union are ignoring the economic risks of excessive austerity measures and that Budapest can't make deeper spending cuts now, despite a punishing reaction from markets after bailout-loan talks between the two sides broke off this weekend.

The Hungarian currency, the forint, on Monday fell to its lowest level against the euro in more than a year, and the cost of insuring Hungarian government bonds against default jumped sharply after the IMF and EU walked out of talks with Budapest on Saturday, saying the government wasn't doing enough to shrink its budget deficit...

The new populist government of Hungarian Prime Minister Viktor Orban is trying to push back, arguing that further budget cuts risk stifling the country's nascent economic recovery. Hungary's gross domestic product is forecast to grow by about 0.6% this year, after contracting 6.2% in 2009.

"We've been through more than four years of austerity and that's why we have lost our competitiveness," Hungary's economy minister, Gyorgy Matolcsy, said in television interview Monday. "We told our partners that further austerity packages were out of the question."

Mr. Matolcsy also said the government planned to go ahead with a hefty new tax on [Western--see below] financial institutions aimed at raising nearly $1 billion to boost government revenue this year, despite concern from the IMF and EU that the measure would constrain economic expansion. "The only alternative to the bank tax is austerity," Mr. Matolcsy said. And that "would dampen growth more..."

If the government fails to strike a deal with the IMF and EU, it won't be able to draw on the remaining funds in a €20 billion ($25.9 billion) rescue package obtained in 2008, when it was unable to raise money amid a global credit crunch. Hungary hasn't drawn any money from the standby loan so far in 2010, and doesn't need funds to finance itself for the rest of the year.

Aside from not needing the IMF loans just yet, there are other reasons why the Fidesz party is undertaking this gambit. With local elections upcoming, a populist backlash may be just the thing to win votes and solidify a government majority. What's more, this backlash is further enhanced with revenue generation plans aimed at big (read: Western) banks while sparing indigenous firms that are of more modest size. Reuters has a neat Q&A from which the following are taken:

    IS FIDESZ TRYING TO BUY TIME FOR LOCAL ELECTIONS?

Fidesz won a parliamentary election in April on the promise of generating growth and jobs through tax cuts, which appears to have been its only economic policy plan, analysts say. Global markets have taken a sour turn, however, and the government was forced to abandon its budget loosening policy. It has done so half-heartedly, and the programme it was forced to put forward in June reflects a resentment toward austerity.

Fidesz hopes to maximise popular support for the local elections on Oct. 3. Before ousting the Socialists from power in April, the party had won voters by campaigning against a series of austerity measures by the left. Coming out with such measures of their own would risk alienating swathes of the electorate. If they are to consolidate their power at the local level that will give Fidesz 3-1/2 years without an election, giving the government a freer hand.

Hungary's existing IMF/EU agreement will expire by October, giving Fidesz enough time to secure a safety net to fall back on. It remains to be seen whether the patience of markets will last another two months.

IS THERE A DANGER FIDESZ WILL RISK CONTINUED MARKET SELLOFF?

Yes, there is. Fidesz's popularity is rooted in a populist agenda that eschews austerity. To execute its agenda -- supporting families and small businesses at the expense of taxing banks and multinational firms -- Fidesz needs to control local governments. The breaking point will likely come soon after the local elections, which will coincide with writing next year's budget and the expiry of the current IMF/EU aid deal. If Fidesz does win local elections with a strong mandate, it can relax the populist agenda.

WHAT IS FIDESZ'S ECONOMIC PHILOSOPHY?

The party has proposed legislation to lower the tax burden on households and companies and wants the financial sector -- mainly banks with west European parents -- to foot the bill...Fidesz, which wants to distance itself from leftist governments of the past 8 years, loathes the idea of austerity for fear of being branded the same as the Socialists.

Its efforts to meet the 3.8 percent of GDP budget deficit goal centre on a financial sector tax. Fidesz's reluctance to introduce harsher spending cuts and its insistence on the bank tax strengthened its populist image among investors.

Introduction to International Politics (POLS0400)


This course analyzes sources and patterns of conflict and cooperation in world politics. It focuses on realist, liberal, constructivist, feminist, and Marxist interpretations. The course considers global security and international political economy during the Cold War and beyond, concluding with an evaluation of efforts to prevent ethnic and civil conflict in contemporary world politics and to strengthen international cooperation in resolving common global issues.

Note: This introductory course is recommended for students in their first or second year of study at Brown, before they take most of the other required courses for the concentration. All IR concentrators must take POLS0400.

Global Political Economy: Theory and Practice (3rd edition)


This up-to-date book provides a balanced, in-depth background to main IPE theoretical approaches, examines IPE issues in historical perspective, and discusses domestic-international linkages.  Managing the Global Economy Since World War II: The Institutional Framework; The Realist Perspective; The Liberal Perspective; The Historical Structuralist Perspective; International Monetary Relations; Foreign Debt; Global Trade Relations; Regionalism and Global Trade Regime; Multinational Corporations and Global Production; International Development; Current Trends in the Global Political Economy.

Sunday, August 8, 2010

Obama's $20B Oil Fund, Energy Policy and his "Lost" Year


President Obama's announcement of a $20 billion escrow fund to help pay for Gulf economic damages from the oil spill likely won't be enough to cover projected damages to the economy, environment and livelihoods in the region. Early this month, I've estimated those costs potentially to be in the $50-80 billion range, not including clean-up costs.

Ultimately, BP might not be able to afford the damages it is responsible for, as its North American unit has assets valued at about $50 billion. The US and Obama should look at other ways of balancing the ledger, by reducing U.S. oil and gas subsidies ($15-35 billion per year) and transferring those funds to Gulf clean-up, environmental and economic restoration while creating a true foundation for clean energy and alternative fuels development.

Obama called during his Tuesday White House address for a new energy economy: "For decades, we have known the days of cheap and easily accessible oil were numbered. For decades, we've talked and talked about the need to end America's century-long addiction to fossil fuels...Time and again, the path forward has been blocked--not only by oil industry lobbyists, but also by a lack of political courage and candor."

This demand was also made at the beginning of his presidency when he kicked off numerous clean energy and alternative energy funding measures, mainly through ARRA funding to US Department of Energy programs.

In his early Oval Office days, Obama even went after sprawl, the energy inefficient, destructive and now economically bankrupt car-dependent form of development that has also dominated the United States "for decades," but that rarely is addressed by national policymakers in the executive or legislative branches of government.

Then came Spring 2009 to Spring 2010, a lost year for energy and sustainability policy, when all minds and actions at the White House were about health care reform. President Obama rarely mentioned cleantech or sustainability policy. His staff were up to their eyeballs in health care discussions, with one day a month dedicated to a staff meeting on "the environment" (with no regular meeting devoted to clean energy jobs or sustainable economic development).

Was it any wonder that comprehensive climate change and energy legislation have since floundered in the Senate? There has been little attempt to project statistically or show how more sustainable technologies--wind, solar, alternative fuels, green building and infrastructure, water conservation technologies--are fast becoming become one of the more dominant economic sectors globally.

Meanwhile, sprawl and its economic (foreclosure meltdown); health (obesity); environmental and energy consequences (import more oil or drill ever deeper domestically) are running rampant, with little "political courage and candor" in admitting that all the latest technologies will do little do overcome these deep-rooted structural and economic phenomena.

There are untold billions of dollars we will collectively save if the Obama Administration, Congress and our communities are willing to examine and reform the root causes of the BP disaster.

Damage from spewing Gulf oil is occurring to millions or billions of life forms in nature, from plankton, to plants, to fish and aquatic species, to mammals and humans.

Planetary climate change from burning oil, gasoline and other fossil fuels is accelerating, and some developing nations suffering the worst early effects are human equivalents to the innocent pelicans and sea turtles gasping at this very moment for their last breaths.

Who is setting up the escrow fund to repair global destruction from climate change? Costs have been estimated at $80 to $500 billion annually and these will be steadily rising as drought, desertification, heat waves and catastrophic flooding impacts become more severe.

This is a tough question for any entity or nation to answer. The longer we wait in the United States to even pose the question of climate change reparations, however, the more the oil wells, pipelines, tailpipes and smokestacks will be uncontrollably spewing with the meter running, reducing our options in times of future crisis.

We need to get creative now, and go beyond creating mere taxes, penalties and escrow funds, and restructure our assumptions about the role of government, business and economic development.

Globally down to the level of our communities and neighborhoods, we need to awaken to the realization that the time of crisis is now upon us. We must respond in a scale that is appropriate to ensuring that quality of life is an issue not just for elite nations or people, but also for the "small people," whether in the United States or in developing nations, as well as for the biological tapestry that sustains us and the global economy. 

Warren Karlenzig is president of Common Current, an internationally active urban sustainability strategy consultancy. He is author of How Green is Your City? The SustainLane US City Rankings and a Fellow at the Post Carbon Institute.

Global Context (Afghanistan) A Thousand Splendid Suns

Reviewed by: Bruce Riley Ashford

This series of posts deals with the global context in its historical, social, cultural, political, economic, demographic, and religious dimensions in particular. We will provide book notices, book reviews, and brief essays on these topics. We hope that you will find this series helpful as you live and bear witness in a complex and increasingly hyper-connected world.

Khaled Hosseini’s second novel, A Thousand Splendid Suns, is a splendid follow-up to his first novel The Kite Runner which has sold almost 5 million copies worldwide. Whereas the first story dealt with the lives of two young boys, the second gives the story of two Afghani women, Mariam and Laila. The majority of the story takes place in Kabul, while moments of the story occur in Herat, Afghanistan and Murree, Pakistan.

Mariam is the illegitimate child of a wealthy man in Herat who keeps her at arms length. She struggles to understand why she cannot be like her father’s other children, and desperately wants her father’s attention. When she disgraces her father by visiting him in Herat, she returns home to find that her mother has committed suicide. As a result, Mariam’s father gives her in marriage to the much older Rasheed who takes her to Kabul. In the ensuing narrative, Mariam learns to cook and clean for her husband, wear a burqa, endure constant beatings and abusive sex, and deal with the pain of multiple miscarriages.

Eventually, Rasheed marries again, this time to Laila, who was raised in a good home with loving parents in Kabul. The ensuing narrative deals with the developing relationship of these two women who are married to the same man. The novel gives a colorful, and often sad, portrayal of Afghan society and culture, dealing with such themes as war, poverty, sexual abuse, and murder. Like The Kite Runner, it is an emotionally arresting book, as Hosseini’s well-crafted characters deal with the realities of turn-of-the-century Afghan life.

A Thousand Splendid Suns is recommended for its significance (1) as a well-written work of literature, (2) as a realistic and masterful portrayal of aspects of Afghan history and culture, spanning from the Soviet occupancy up until the recent post-Taliban era, and (3) as a reminder that there are countless thousands of women like Mariam and Laila, and men like Rasheed, who live mind-numbingly painful lives, and who have little or no access to the gospel.

Book: A Thousand Splendid Suns (2007)
Author: Khaled Hosseini
Genre: Fiction
Region: Central Asia
Length: 372 pp.
Difficulty: Intermediate