POL214 op-ed 2: Putin is not insecure

Russia’s President Vladimir Putin solidified his hunger for control by invading Ukraine and disregarding attempts to fix a heavily suffering economy. Blaming the West for Putin’s aggressive actions simply evades his responsibility for disrupting international order.

Putin’s main goals include hindering NATO’s expansion / stopping Ukraine’s inclusion and perhaps reconstituting the Soviet Union. His aggressive persistence and strict prioritization of geo-political influence no longer puts Putin on the defensive.

The notable drop in oil prices over the last few months and the tightening of economic sanctions has stripped Russia of billions in budget revenue and exiled them from some of the world’s largest capital markets. The ruble’s dramatic decline to historic lows in December forced Russia’s Central Bank to hike up interest rates by 6.5 percent, putting it over 16 percent higher than the United State’s current market interest rate.

Putin’s prioritization of Ukraine over an alarmingly suffering Russian economy overshadows arguments for Putin’s insecurity. According to Russian supporters, the US and its European allies are to blame for Russia’s pushback in Ukraine. Putin has emphasized that NATO’s enlargement and the West’s backing of pro-democracy movements in Ukraine threaten Russia’s core strategic interests.  Supporters recognize Putin’s fear that NATO would host a naval base in Crimea, motivating his actions to annex the peninsula.

Despite signing peace deals in Minsk in September 2014 and February 2015, Russia continues to overrun Ukrainian troops, break ceasefires and endure fighting. As of this month, over 6,000 people have been killed in the Russian-Ukrainian crisis. Senator John Kerry reiterated the US and EU’s united diplomatic stances on Russia-Ukraine in a less-than-amicable meeting with Russia’s Foreign Minister.

Putin’s reactions to the economic sanctions are tenacious, not timid, in tone. After one Minsk summit, Putin responded, “I want to remind you that Russia is one of the most powerful nuclear nations…our partners should always be aware that no matter in which condition their governments may be or which foreign policy concepts they may pursue, it is better not to come against Russia as regards a possible armed conflict.”

While it is reasonable to see Ukraine’s attempts to move further west as potentially threatening to Russia, Putin’s characterization as completely fearful and insecure is misleading. Instead, he has instigated a powerful and comparably stable group of US-EU allies to impose harsh economic sanctions, further crumbling the Russian economy. Putin could take steps to ease these sanctions through negotiations, but he chooses to continue to exacerbate conditions in Ukraine and his own country. If Putin were truly fearful, would he let his country reach the brink of a recession, solely to keep Ukraine at least neutral? Is NATO to blame for Putin’s desire for control?

Since 1999, Russia’s GDP per capita doubled, providing Putin with an economic cushion and a sense of legitimacy. After being accustomed to Putin’s trend of economic success, it will be interesting to observe citizens’ reactions to the harsh realities of sanctions.  Large banks controlled by three friends of Putin have seen about $640 million of assets frozen in the US, Putin slashed Kremlin salaries and international reserves fell by 25 percent. Regardless, Putin has not abandoned his violent agenda in Ukraine and tolerates a distressing economy.

Obama and the EU continue to discuss expanding economic sanctions, but the impact of this stick-based method will depend on Putin’s persistence. Characterizing Putin as merely insecure and defensive to NATO and the West shields his unrelenting approach. If Putin were so insecure, he would be frightened that his once growing economy has touched record lows. He would not risk approval and financial capabilities by choking his economy in order to obtain a sliver of Europe. Instead, he has hastily reacted to Ukraine’s yearning for independence.

After breaking two peace agreements, watching sanctions aid a plunging ruble and reaching the edge of recession, Putin maintains his assertiveness. By portraying Putin as apprehensive, Russian supporters point blame towards NATO, who simply endorse the Ukraine acting freely. The West is not at fault for the 6,000 lives lost in the Ukrainian conflict, but Putin’s forceful approach is.

POL214 op-ed: Obama's moves with Cuba

President Obama’s move to normalize relations with Cuba ignores the advice of Cuban-American Congress members that further engagement will be more harmful than helpful. Discussions of funding for a US Embassy in Havana continue to spark controversy in Congress.

Alan Gross’s release gave the Obama administration too much false hope. Gross’s imprisonment shows the vulnerability of both the Cuban people and American visitors, shielded under Castro’s anti-democratic constraints. It demonstrates the long-standing lack of free speech and political opposition in Cuba, and a government that is unprepared to handle additional concessions.

Loosening economic policy towards Cuba derives from the impression that more money will mean more freedom for the Cuban people. However, this is not necessarily true. First, more money means additional funds for the Castro administration. This helps them cumulate power and damages the possibility of other political parties forming. Second, Castro’s government does not prioritize dialogue with Washington. Instead, the US providing concessions sends the message that Castro does not need to change his oppressive nature. This leads to a third point, that the movement towards economic engagement shows weakness. Keep doing what you are doing and eventually, the US will give in. Is this a safe message to send to ISIS?

Most baffling to me is the refusal to listen to the most informed members on the subject—Senator Marco Rubio (R-FL), Senator Ted Cruz (R-TX), Senator Bob Mendez (D-NJ), and Representative Ileana Ros-Lehtinen (R-FL). These are just 4 of the 7 Cuban-American Congressmen (and women) opposing further engagement with Cuba. This opposition comes from both the Democratic and Republican parties. Rubio and Ros-Lehtinen expressed their strong discontent with Obama unilaterally reversing US-Cuba foreign policy and emboldening the Castro regime.

Rubio responded to Obama’s State of the Union on US News, saying, “I don’t know of a single contemporary, reluctant tyranny that has become a democracy because of more trade and tourists. China is now the world’s richest tyranny, Vietnam continues to be a communist tyranny. And [Myanmar] Burma, even though they actually agreed to some democratic openings when the U.S. recognized them diplomatically, they have actually begun to take back a lot of those democratic openings.”

Cuba owes more than signs towards human rights and a less oppressive political culture. The Castro’s are accountable for $6 billion in assets seized from American citizens and businesses after the 1959 Cuban revolution. Those who agree with President Obama—that the embargo and current state of US-Cuba relations are outdated—fail to acknowledge recent acts and potential capabilities. If the country were ready for the embargo to be lifted, it would not have American prisoners until as recently as last month. It would not have a number of political prisoners still jailed for their anti-Castro sentiments. Let us not forgot the motivations behind upholding the embargo in Cuba: a communist, state-owned economy (still largely in place), previous cooperation with the Soviet Union, allowing missiles to nearly touch the Florida shore, and ties with Islamist tyrannies and other Latin American rogue states.

The relaxed travel restrictions to Cuba now make it seemingly easy to cross the border. Americans no longer have spending limitations during their visits and have permissible use of US credit and debit cards. However, there is too much uncertainty to allow such unrestricted travel and spending. With Gross’s release so recent, Obama cannot ensure that travelers will not be subject to the same consequences as Gross. Democratization is a long-term process, one to which Castro has not fully committed. Rather, American lives are at stake because of Obama’s obsession with being the popular kid at the international lunch table.

While it is difficult to confirm which solution will yield the most successful outcome for Cuba, Obama’s unilateral and rash thinking are most concerning. With 7 Cuban-Americans between the Senate and the House, representing both parties, it is unimaginable that Obama overlooks their opinions and expertise.  These are the members with the most relevant insight and first-hand knowledge. Hopefully the democratic process will triumph, and propping up embassies in Havana or loosening the embargo will not happen during this unfitting time.

Engaging with Castro and providing unwarranted concessions is a symbol that America will eventually submit to the most stubborn, anti-democratic nations. Conceding to Cuba’s long-standing oppressors has weakened the US’s international position and has damaged the hopes of political protesters in Cuba. If Obama would consider the voices of his fellow Cuban politicians, maybe he would recognize the issue.

Winners & Losers

Throughout the term, there has been a consistent theme in our discussions: with a macroeconomic change, there will be winners and there will be losers. Initially we talked about this concept on a broader scope and reviewed Wolf and Stiglitz's perception of the win/loss relationship as it relates to globalization. Wolf acknowledges that some developing countries have not exactly benefitted from globalization, but reminds readers to reflect on the worse conditions in the past. Globalization, however, is not the only political/ economic trend producing winners and losers. In fact, I've applied this concept to a majority of current events/ news articles, and expanded upon the idea by constantly asking "what if" or questioning "the other side".

The plummeting price of oil is a current and perfect example of winners and losers resulting from an economic change. Obviously, oil importers see this as a positive opportunity, while exporters mourn over lost profit. Importers=winners, exporters=losers. The question: which effect is stronger? Will this result in a global net gain or loss? I came across an article in the Wall Street Journal that outlined the win/ loss relationship in the oil price drop, and even offered a hypothesis to my question.
While most oil price drops have been associated with economic downturns and recession, economists are saying that this time is different. According to IMF MD Christine Lagarde, "There will be winners and losers, but on a net-to-net basis, it's good news for the global economy." Researchers estimate that the price decline could add almost 1 percentage point to global growth over the next 2 quarters. The picture below quantifies the wins and losses...

I'm still not fully convinced: if oil price declines have been associated with economic downturns in the past, then why is this time so different? The article says, "part of the boost comes from lower transportation and manufacturing costs, particularly for energy-intensive industries such as airlines and steelmaking. The primary benefit is more cash in consumers' wallets as they spend less of their paychecks fueling their vehicles, spurring more consumer spending." This makes sense, but I don't see how this is different than previous major oil price declines; wouldn't a boost in consumer spending happen every time? The Wall Street Journal explained that the difference partially results from the supply/ demand ratio for oil, with a higher percentage attributed to supply causes. However, JP Morgan predicts a much narrower margin, or lower ratio, between the two causes, suggesting uncertainty in the accuracy of this ratio. Also, as Rosenberg explained, one reason the US is having trouble reaching the inflation target is because of the falling commodity prices. The world is experiencing slow growth, with continued deflationary pressures in Europe, Japan in a recession and loosened monetary policy in China in response to its "worrisome" slow growth in the 3rd quarter. While I want to be optimistic about the global impact of oil price declines, I can't help but to be curious. I wonder if maybe this growth statistic is overstated, shielding us from the overall weak global economic conditions and issues, especially in key regions/nations, and from historical trends in oil price drops/economic downturns. We've heard on numerous accounts that deflation should be treated as vigorously as inflation, and these oil prices reflect global deflationary trends. So, how optimistic should we be? Why are we ignoring the past?  In the words of Richard Clarida, "The US is the best student in a very mediocre class."

WTO Conference Lexington, 2014: On Behalf of the World Bank Group

To begin, I’d like to highlight some of the World Bank Group’s most recent successes in nations and regions present at the Whirled Trade Organization’s Lexington Round Meetings:

• As of November 2014, the Bank’s $180 million IBRD infrastructure loan to four cities in China significantly strengthened the capacity for urban planning to create a better urban environment for more than 3 million people.
• In June, a $100 million Floods Emergency Recovery Project was approved to aid those most affected by the worst flooding recorded in history in Bosnia.
• Over past two decades, the World Bank has contributed over $1.4 billion in financing for rural water supply and sanitation in India, and about 24 million people in have benefited from these programs.
• In Brazil, the World Bank has given technical and financial support to a program reaching 13 million impoverished families who have never benefited from social programs.
• The World Bank's, more specifically the IDA’s, largest contributions lie in the African Union. The IDA’s chief goal is poverty reduction by providing concessional loans and grants to programs that boost economic growth and ultimately improve living conditions. Between 2003-2013, the IDA provided $66 billion in financing for projects in Sub-Saharan Africa and between 2005 and 2008, the number of people living on less than $1.25 a day fell by 9 million. [1]

This worker takes a break from weeding peppers on Sudo Forto's farm. Since receiving assistance from the World Bank in 2010, Forto has expanded his operations and hopes to employee more people soon. (Bosnia)

Newly constructed sewer interceptors and pipelines along the Jinsha River  (China)

 As a representative of The World Bank Group, I would like to speak on behalf of the International Development Association (IDA), the sector of the World Bank that helps the world’s poorest countries. To be eligible for such funds, countries must meet the following criteria: 1) Relative poverty defined at GNI per capita $1,215 or below (2015), 2) Lack creditworthiness to borrow on market terms [1]. To put definitions in perspective, the US’s most recent GNI per capita measure stands at $53,960. While the IDA processes are important to understanding the branch’s functionality, in the interest of timing and objectives, I will not go into great detail. Rather, I would like to address points III and IV on the WTO agenda.

The IDA and World Bank agree that NTBs, especially in the areas of agriculture, that are prohibited include those technical trade barriers that are not demonstrated to be unsafe for human consumption. I’d like to reiterate the conditions of those least developed countries, which have limited capital and resources, and furthermore are unable to repay loans with near-zero interest rates. According to research done by the WTO in 2002, unfair First World (trade) barriers have cost developing countries US$700 billion a year in lost export earnings [5]. Unfair restrictions qualify as those products that are not fully proven to be unsafe. Trade restrictions like these are disadvantageous to developing countries because these barriers are frequently applied to products where developing countries have a comparative advantage, such as agriculture. The process behind deeming products unsafe remains somewhat ambiguous, and perhaps requires a more leveled, transparent method. If these discriminations are unmanaged or unrestricted, the World Bank will be hindered from reaching its main goal of extreme poverty reduction.

Regarding point IV, my initial concern results from the wording of the statement. While it reads, “no member nation shall provide direct subsidies or financial support…”, I would like to establish and ensure that this will not extend to aid and development institutions such as the World Bank. Concerning the vague statement “financial support”, the World Bank’s capital consists of reserves built and money paid from 188 of member country shareholders. The IDA’s funds are replenished every three years by 40 donor countries [1]. Most importantly, I’d like to clarify that this “financial support” is not misinterpreted to include the donations made by the World Bank’s shareholders and donors, since they are in fact, “nations”.  In closing, the World Bank would like to stress that its main objectives should be highlighted and kept in mind by all member nations: to end extreme poverty and decrease “the percentage of people living with less than $1.25 a day to no more than 3 percent globally by 2030”, and to “foster income growth of the bottom 40 percent of the population in every country”. [1]

Annotated Bibliography: 

1. http://www.worldbank.org

The World Bank’s website provides the objectives for each branch of the bank, and results for each region. I used this to search projects and results for each region or nation.

2. Tutwiler, M. Ann & Straub, M., “Making Agricultural Trade Reform Work for the Poor”, International Food & Agricultural Trade Policy Council, 2005.

http://www.wto.org/ENGLISH/forums_e/ngo_e/posp50_agric_e.pdf

This source focuses on the World Bank’s ultimate goal of poverty alleviation by specifically addressing agricultural trade. While the authors acknowledge that aid alone cannot bring development and full poverty reduction for developing countries, they stress the need to eliminate non-tariff trade barriers in agricultural trade. Both developed and developing countries must eliminate these trade barriers.

Concluding quote: “To ensure that trade reform is pro-poor, the key is not to seek additional exemptions from trade disciplines for developing countries, but to ensure that the WTO agreement is strong and effective in disciplining subsidies and reducing barriers to trade by all countries.”

3. NON-TARIFF MEASURES TO TRADE: Economic and Policy Issues
for Developing Countries
DEVELOPING COUNTRIES IN INTERNATIONAL TRADE STUDIES, United Nations Publication, 2013.

http://unctad.org/en/PublicationsLibrary/ditctab20121_en.pdf

This publication summarizes the impacts of non-tariff trade barriers in trade liberalization. It provides definitions to relative terms (NTBs), their basic framework and more importantly, the implications of NTBs between developing countries.

4. Mold, Andrew. “Non-Tariff Barriers – Their Prevalence and Relevance for African Countries”, African Trade Policy Centre, 2005.

http://www.uneca.org/sites/default/files/publications/atpc25.pdf

This article provides a case study for the implications of NTBs on low-developed countries. According to their research, NTBs is a prevalent inter-regional problem. I plan to use this publication to discuss the impacts of NTBs established by industrialized countries on LDCs (in Africa) and the impacts of NTBs within a region of LDCs.

Quote: “Finally, African countries are not only victims of the growing prevalence of NTBs – they are also prone to using NTBs themselves to keep out exports of other African countries. The paper argues that African countries apply NTBs in a way that deeply damages the prospects for intra-regional trade.”

5. World Trade Organization, “Trade liberalisation statistics.”

http://www.gatt.org/trastat_e.html

This summarizes research done by the World Trade Organization. It includes the World Bank as a primary source. According to a world bank study, the elimination of FW-favoring trade barriers systematically approved by us would lift 300 million people out of poverty. An extension of World Bank research, in relation to this article, can be found at:

6. The World Bank, “Knowledge in Development Note: Trade for Development, 2009.

http://econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/EXTRESEARCH/0,,contentMDK:22452885~pagePK:64165401~piPK:64165026~theSitePK:469382,00.html

This goes into more detail/ examples about the implications of unfair trade restrictions imposed on developing countries.

“Moreover, an anti-agricultural bias prevails in the sense that if all goods markets globally were freed up, agricultural value added in developing countries would not only increase absolutely, but also relative to non-agricultural GDP. Since most of the poor in the world are developing country farmers, such a move would be a major contribution to poverty reduction globally.”

Saving the Planet: Is it a global priority?

U.S., EU override Australia to put climate change on G20 agenda

I've taken three environmental courses in my college career (not necessarily by choice) and not once have I felt scared or worried upon completing the course. Professors don't make it their goal to scare students into thinking that we are doomed from global warming. It's true, 95% of scientists agree that global warming is a real concern. Not only are there so many factors to consider, but these environmental processes are offered on extreme timescales. It may seem selfish, but I tend to consider the timescales that affect me, my family, my friends and anyone in the present, and even my future family. Because global climate change is such an extended process, with so much uncertainty, it is often difficult to really become frightened by this phenomenon.


I have no intentions of belittling the issue of global warming. However, I think it is ironic and interesting, especially after Tuesday's readings, to point out that Australia did not even want to include climate change on the G-20 agenda. A recent article on the summit wrote, 

"Asked on Sunday if he accepted the climate change was potentially one of the biggest impediments to global economic growth, Australian Treasurer Joe Hockey said: "No. No I don't. Absolutely not."

"You just look at China. China is going to continue to increase emissions to 2030," he said. "Australia is doing the same amount of work on climate change as the United States over a 30-year period. Frankly, what we're focused on is growth and jobs."

Despite Australia PM Tony Abbott's efforts, climate change was put on the agenda. To think it sparked debate makes me wonder how much climate change is prioritized in the international political economy. I feel like it's something that is always squeezed behind monetary policy, trade, tax reform, etc. talks. In other words, how important is this topic in comparison to the other factors considered in economic growth? Because the timeframe for climate change, especially globally, is so large, I, along with Abbott, am skeptical about its place in comparatively short-term economic planning. The effects of fluctuations in the economy are often more tangible and immediate than large-scale climate changes, making people respond more sensitively to factors impacting the economy. If someone loses their job, what will MOST immediately prioritize: how to get back on their feet and back into the job market, or how to stop the factory next-door from environmentally harmful emission practices? I think a similar mindset applies on a global scale. 

According to the SMH, "G20 summit concluded on Sunday with agreements to close tax loopholes used by multinationals, improve trade, encourage the setting of early emissions reduction targets, strengthen banks, reform energy markets including gas, and coordinate a stronger response to the Ebola epidemic."

Stiglitz would respond to Australia's proposal with disdain, but would be happy to see that climate change action ultimately prevailed. After spending a fair amount of time criticizing the US for refusing to comply with global climate change initiatives, including the Kyoto Protocol, Stiglitz offers several suggestions towards prioritizing the planet during the ongoing globalization process. As a world leader and contributing polluter, Stiglitz expresses the need for the US "to make small expenditures in order to reduce risks of much larger expenditures down the line" (185). He argues that  we can afford it, and by not taking action, we are hurting the rest of the world by evading responsibility and setting a poor example, especially for developing countries. Inflation targets are one solution that Stiglitz offered for the climate change issue. If this isn't enough, he provides an alternative approach based on system of "sticks over carrots", or punishments to deter environmentally threatening practices in relevant industries. I guess the next step is to wait and see how well major polluters and G20 participants actually respond to the emission reduction targets...

G-20 Summit: Is the environment a priority?

U.S., EU override Australia to put climate change on G20 agenda

Asked on Sunday if he accepted that climate change was potentially one of the biggest impediments to global economic growth, Australian Treasurer Joe Hockey said: "No. No I don't. Absolutely not."

"You just look at China. China is going to continue to increase emissions to 2030," he said. "Australia is doing the same amount of work on climate change as the United States over a 30-year period. Frankly, what we're focused on is growth and jobs."

A post with my reactions to follow...

6 Banks Fined Over $4.3bill for Foreign-Exchange Manipulation

Currencies Settlement Is Latest to Ensnare Banks

I am wondering how several of our authors are responding to Wall Street's latest mishap. Six banks- Citi, JP Morgan, UBS, RBS, HSBC and Bank of America- are paying a total of $4.3 billion to US, UK and Swiss regulators to resolve allegations of manipulating the foreign-exhcnage market. Why did banks do this? BBC most clearly explains, "traders attempted to manipulate the relevant currency rate in the market, for example to ensure that the rate at which the bank had agreed to sell a particular currency to its clients was higher than the average rate it had bought the currency. If successful, the bank would profit."  Financial penalties are nothing new for these firms, who have racked up over $200 bill in penalties for interest rate manipulation, sanctions violations and "improperly selling a variety of financial products." Manipulation isn't a new concept either (let's not forget the housing crisis). After reading The Big Short and capturing Lewis's cynical view of Wall Street, I'm sure he is nothing less than surprised. In his book, he continuously points fingers at the Investment Banks for their manipulation in mortgage bond structuring. In Krugman's final chapters he addresses the need for heavy regulation of both the investment and shadowing banking systems. He'd probably say, "another example of the need to regulate banks (of both kinds)." After reading Lewis's book, I'd have to agree with this system of sticks. If the housing crisis wasn't enough, banks should be regulated and otherwise penalized for manipulative actions. However, I have to wonder, with such extensive internal/ external regulation, compliance and risk management departments at these banks, how do traders continue to get away with this?