Month: November 2015

Major Political Variables

Major Political Variables, according to Antoine W. van Agtmael, “Evaluating the Risks of Lending to Developing Countries”, Euromoney, April 1976, pp. 16-30.

 

I. Internal aspects

A. History
  • Time and mode of independence
  • Record of stability

B. Homogeneity

  1. Sense of national duty?
  2. History of conflict between ethnic or religious groups?
  3. Is there a dominant ethnic group or are groups of equal strength?

C. Forms of government

If democratic:

  1. Strong opposition parties with radically different ideology?
  2. Effective government or chaotic situation?
  3. Corruption?
  4. Voting along ethnic lines?
  5. Is government senstitve to needs of the population?

If military government:

  1. Widespread popular support or national liberation front?
  2. How strong is the army?
  3. Rivalries among army commanders?
  4. Underground opposition strong?
  5. Did military government follow ineffective, unpopular democracy?
  6. Does the regime have to rely heavily on repression or can it afford a certain degree of freedom?
  7. Do civil servants play a major role or are they alienated?
  8. What alternative power bases are there?
  9. Return to civilian rule planned?

If one-man, one-party state

  1. What if present leader dies?
  2. Are various ethnic groups represented in government?
  3. Is military large enough to be a major contender for power?
  4. Is civil service strong and independent?
  5. Is opposition effectively organized: does it have moral stature?
  6. Are there specific interest groups opposing the regime?

D. Sources of potential unrest

  1. Is there a suppressed minority group?
  2. Are the students, intellectuals, civil servants, military, businessmen, or public opinion alienated from government?
  3. Are there conflicts between the central government and traditional, regional centres of power?
  4. Is strong foreign influence resented?
  5. Is unemployment high?
  6. Has the cost of living risen sharply without offsetting wage increases?
  7. Is corruption widespread? Who are the victims?
  8. Is there a sense that the government is unusually ineffective or that there is no economic progress?
  9. Is economic progress confined to the centre or purposely spread over the country as a whole?
  10. Do the farmers own the land they till or are they mostly tenants with absentee landlords?
  11. Is the economic gap between elite and the populace widening or narrowing?

E. Drastic political changes

  1. Will a change in government or a coup lead to a drastic change in political orientation or economic chaos?
  2. Is there a chance of a civil war?
  3. Would a coup lead to political paralysis and a counterswing?
  4. Would the next political regime be more/less likely to renounce or reschedule debt for political/ideological reasons?

II. External aspects

A. Dangers of war

  1. Is the area as a whole explosive or calm?
  2. Are there major sources of conflict with neighbours?
  3. Will war seriously impair the economy?

B. Economic relations

  1. Is there a threat of an effective economic boycott?
  2. Are relations with major donors stable?
  3. Are relations with World Bank and IMF healthy?
  4. Are there plans for political agreements with major trade-blocs for ensured access to major markets?
  5. Does the county want to increase US investment and trade?
  6. Does the US government have any leverage?

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Maduro’s Crude Fate

Chavez’s 21st century socialism was built out of support from the poor and funded by high oil prices beginning in the early 2000’s. The ironic thing is that this experiment in 21st century socialism was only made possible thanks to the Free Market intrigues of Wall Street investment banks whose speculative activities contributed to about 60% of the increase in crude prices since 2003. The Revolution was financed by Wall Street. Supply and demand came 2nd. The great Bolivarian leader may have been reading those futile peak oil blogs (ASPO?) and imagining that his model of social development was guaranteed – the natural correction to societal collapse about to hit the western world as energy availability dwindled. Chavez died when crude prices were hovering around $100 a barrel – his successor Nicolas Maduro managed to ride the wave of post-Chavez sentiment for all it was worth but ultimately succumbed to the infernal logic of a socialist economy plugged into a capitalist framework – as these two graphs from Stratfor nicely demonstrate, Maduro’s popularity can be directly plotted against the global price of crude. Oil at $100 a barrel saw Maduro’s support at around 50% – $50 a barrel saw support drop to 50%. Vladmir Putin has also been unable to escape the horrid political logic of the petro-state, his country is experiencing a deep economic crisis. Putin and Chavez were cut from the same cloth – populist leaders struggling against American hegemony and NATO encirclement, providing unending vocal support for America’s Axis of Enemies and promoting vague concept of new world orders, which now appear bricked.

With the price of crude oil expected to remain between $50-$60 a barrel through 2017, it stands to reason that Maduro’s party will lose the upcoming election, but its not certain that the opposition will be able to turn things around without a herculean effort.

Images from stratfor.com

Venezuela’s protracted crisis

The Bolivarian Republic of Venezuela is in the midst of a protracted crisis as severe economic recession and political repression contribute to social instability. Public frustration is rising due to a shortage of consumer goods and triple digit inflation, weakening support for President Nicolas Maduro and his United Socialist Party of Venezuela (PSUV). Parliamentary elections set for December 6 may well see significant gains by the opposition, but there are indications that the regime may not accept defeat peacefully.

Venezuela has been hit especially hard by the drop in crude oil prices since July 2014. Relying on crude oil for 96% of external revenues – priced at $117 a barrel to break even owing to the cost of social programs initiated by former president Hugo Chavez- has led to a GDP collapse of 10% this year. Price controls, a rigged exchange rate system and near hyperinflation have seen domestic industry as well as imports collapse, resulting in the country’s infamous “long queues” of people hoping to buy scarce necessities. Even hospitals are without key supplies. Frustration with high crime rates and economic woes led to the mass demonstrations that rocked the capital, Caracas in 2014, leaving over 40 people dead. Maduro’s response to the protests included the predictable denunciation of foreign interests attempting to undo the ‘revolution’ via economic warfare and conspiring with the opposition, leading to the arrest of key opposition figures, including Leopoldo Lopez of then Voluntad Popular, one of the 30 coalition parties comprising the opposition Democratic Unity Roundtable (MUD – a coalition housing “ideologies from Marxism to free-market conservatism, united only by a shared loathing of the government” – The Economist ) now led by Jesús “Chúo” Torrealba.

As a result of the crisis, Maduro’s approval ratings have dropped drastically: A poll taken in October reflected a 29% support base for Maduro compared to 44% in mid 2013. Another poll saw support for Chavismo – the left-wing ideology associated with Chavez – drop from 55.9% in 2013 to 21.3% in September 2015. Identification with the opposition increased from 31.6% to 68.3% in the same period. Defeat in the legislative elections pose a personal threat to many high officials being investigated for drug trafficking charges including the president of the National Assembly, Diosdado Cabello. In an attempt to attract support, the regime has increased imports of much needed resources and Maduro recently announced a 30 % increase in the minimum wage. The PSUV also benefits from the use of state resources for partisan campaigning as well as powerful media support while a number of MUD candidates have been disqualified, others arrested on spurious charges.

The months ahead may witness clashes between demonstrators and colectivos – armed civilian government supporters, especially in the aftermath of expected electoral fraud. The Ministry of Defense has declared that security forces are authorised to use lethal force against protesters. Maduro may be tempted to suspend the elections on the grounds of a national security crisis should defeat appear likely. Should the MUD emerge with a supermajority, the PSUV and military may refuse to recognise the win. This is consistent with Maduro’s recent statements that he will refuse to accept defeat. Discontent within the regime-entrenched military is growing however and is likely to support Maduro since the army has itself been deeply implicated in drug trafficking charges. A MUD majority will give the coalition the power it needs for a referendum on recalling the president in 2016, as well as replacing cabinet ministers and chavismo Supreme Court Judges. Another scenario involves the PSUV dominated legislature voting a reduction in its power before handing over the reigns, thus leaving the executive in a stronger, almost dictatorial position. These moves may aggravate the already unstable political environment expected in 2016.

 

U.S. – China relations

The U.S. – China relationship is an interesting example of the strategic consequences of globalization. Consider the seemingly bizarre situation in which the American superpower is actively investing in and thus facilitating the rise of China, which is becoming a greater threat not just to American interests around the world, but to global order itself?

Increased military spending and armaments production, as well as newly awakened strategic ambitions are all the result of a China with new-found capabilities and confidence, which followed the reforms of Deng Xiapoing. The problem is that these ambitions are bringing the country to loggerheads not only with the states in its maritime neighbourhood, but with the U.S. itself. Tensions over China’s island building activities in the South China Sea, threatening the internationally recognized legal frameworks that govern maritime affairs is one example of a rising power that sees world order as fluid, changeable, and changing.

Edward Luttwak, the brilliant strategic thinker and author of The Rise of China vs. the Logic of Strategy argues that the U.S. supports this arrangement at an unacceptable cost. Free trade may mean higher corporate profits in the short to medium term but comes at the cost of the slow deindustrialization of America. Luttwak writes it is “beneficial for Americans as consumers, borrowers, and financiers above all, while being harmful to Americans as workers and producers”. The CCP aim is to perpetuating this “unbalanced economic relationship for as long as possible, or rather until China emerges as the richer and more advanced country.”

Luttwak explains that there are three China policies at work in the United States; those of the Treasury, the Pentagon, and State Department; policies which often work at cross purposes.

The Treasury Department “in its everyday bureaucratic operations the U.S. Treasury is indifferent to the condition of U.S. industry, and specifically to the sharp decline, or outright disappearance, of entire industrial sub-sectors because of the unconstrained inflow of cheaper imports, notably including imports from China”. They are primarily interested in the trade imbalance which generates huge surpluses on the Chinese side, some of which flow into Wall Street. He writes that “the U.S. Treasury, under its current leadership as before, actively favors China’s economic growth and technological advancement –having no departmental responsibility, or perceptible concern, for the inevitable relationship between China’s overall economic and technological capacity and its resulting military aggrandizement.”

In the middle is the State Department, which maintains a balanced policy according to Luttwak, including:

  • proactive cooperation with China on a multilateral initiatives
  • containment , or an “energetic coalition building.. which is to be available to our friends who are threatened by the rise of china”
  • polite “ideological warfare” against the CCP invoking human rights etc.

On the opposite side is the ‘excessively antagonistic ‘Pentagon policy which emphasises the ‘containment’ side of State Department policies, putting China as the prospective “Main Enemy” justifying calls for increases in military spending and procurement programs. It also gives the “enthusiastic” Department of Defence a real enemy for the first time since the end of the Cold War, the elusive Islamist bogeyman providing a frustrating experience in high altitude bombing, dead end nation-building and the terrors of urban warfare.

The question is at what point do the benefits of interdependence outweigh the strategic costs of a Rising China?

Imperious Erdogan in the Age of Semtex and Democracy

Snap parliamentary elections are underway in Turkey today. This is round two in a game being played by Erdogan in the hopes of reversing the AKP’s declining fortunes. Erdogan’s message – the classic formula of a strong single-party government needed to guide a country through times of crisis seem to be missing the mark as election results are expected to broadly reflect those of June which saw his lose its parliamentary majority for the first time since 2002.

Erdogan’s troubles began when polls showed the new HDP party – founded in 2012 as the political wing of the Peoples’ Democratic Congress, a union of left-wing groups– might reach the 10 % threshold needed to enter parliament. The HDP scored 13% of the vote in June 2015, or 80 seats in the new parliament. The Nationalist Action Party (MHP) also won 80 seats, with both party’s gains coming at the expense of the AKP which won 258 seats in June compared to 327 in 2011 – dashing Erdogan’s hopes for an AKP dominance in parliament needed to push through the constitutional reform Erdogan needs to consolidate power in an executive presidency.

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“Last exit before dictatorship” headline of anti-government newspaper Cumhuriyet.

Following the June elections, Erdogan failed to form a governing coalition, opting instead for imperial ventures on the frontier in a bid to swing votes within the country by polarizing voters ahead of his planned ‘snap elections’. Going beyond his constitutional mandate, Erdogan also spent much time actively campaigning for the AKP – and spent an equal amount of energy campaigning against the HDP which he mischievously linked to the suicide bombings that rocked the country on multiple occasions. The October suicide bombing at a political rally in Ankara organized by the HDP and left wing NGO’s, and which left over 100 dead was blamed on a bizarre joint-venture between the PKK and ISIS, according to EU Affairs Minister Hatice Beril Dedeoglu. In both cases Turkish nationals linked to ISIS were implicated. The blasts follow on the heels of Erdogans abandonment of the PKK ceasefire signed in 2013 by launching air-strikes against Kurdish positions in Syria and Iraq as part of the country’s decision to finally engage ISIS. The military engagement of the Kurds across the border have clear geostrategic aims but ultimately appear linked to Erdogan’s tactic of accusing the HDP of sleeping with the enemy, so to speak.

Today’s results look to resemble closely the June numbers, which means Erdogan will need to push for a coalition government. There is a reasonable probability of today’s snap polls producing “an unstable AKP-MHP coalition” as the AKP fails to gain a majority of seats in Parliament. A coalition with the right-wing MHP is most likely due to an ‘ideological overlap’ between the two: both are conservative parties seeing eye to eye on the Kurdish issue since Erdogan ended talks with the PKK. This coalition may force a stronger anti-Kurdish stance which may very well lead to heightened instability in the country and a worsening of the countries economic woes.

Less likely is a “grand” coalition with the CHP (the Republican People’s Party) emerging. CHP leader Kemal Kilicdaroglu’s conciliatory stance on the Kurdish issue may lead to the new government resuming peace talks with the PKK, thereby restoring both security concerns and investor confidence in the country. A stumbling block to this coalition would be Erdogan’s insistence on pushing ahead ahead with his constitutional reforms which the CHP opposes, as well as the question of allowing investigations into corruption allegations against Erdogans family and inner circle. Another hung parliament as a majority coalition forming attempts flounder could be the result.

UpdateErdogan won. The AKP won a majority totalling 316 seats, not the 330 needed for constitutional change though. The HDP got 59, or 10%. The secular CHP dropped to 134 seats, and the nationalist MHP party dropped to 41 seats, compared to 80 in June’s election.

Image credit: Commondreams.org