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341. Kuwait's Elections Exacerbate Differences between Ruler and Parliament

Author:
Simon Henderson
Publication Date:
07-2006
Content Type:
Policy Brief
Institution:
The Washington Institute for Near East Policy
Abstract:
The June 29 parliamentary elections in Kuwait achieved international media coverage because women were allowed to stand for office and vote for the first time in the sheikhdom. Less well reported were the local political divisions that had brought about elections a year earlier than expected. The results of the balloting—in which, incidentally, none of the women candidates won office—worsened the divisions between the Kuwaiti government and the National Assembly and could lead to greater public disagreement about the character of the country's alliance with the United States.
Topic:
Democratization, Development, and Politics
Political Geography:
United States, Middle East, and Kuwait

342. One Year after the Cedar Revolution: The Potential for Sunni-Shiite Conflict in Lebanon

Author:
David Schenker
Publication Date:
06-2006
Content Type:
Policy Brief
Institution:
The Washington Institute for Near East Policy
Abstract:
Acting Lebanese interior minister Ahmad Fatfat arrived in Washington June 20 for his first official visit in his new capacity. The U.S. trip comes one month after a radical Sunni Islamist organization was legalized in Lebanon, and just weeks after thousands of Shiite Hizballah supporters rioted in Beirut after the broadcast on LBC television of a comedy skit satirizing Hizballah leader Hassan Nasrallah. These developments highlight growing tensions between Sunnis and Shiites in Lebanon. Unchecked, this dynamic could lead to a resumption of the type of conflict that has long plagued Lebanon and threaten the gains of the Cedar Revolution.
Topic:
Conflict Prevention, Development, and Religion
Political Geography:
United States, Washington, Middle East, and Lebanon

343. Iranian Azeris: A Giant Minority

Author:
Ali M. Koknar
Publication Date:
06-2006
Content Type:
Policy Brief
Institution:
The Washington Institute for Near East Policy
Abstract:
Recently in Iran, tens of thousands of Iranian Azeris took to the streets for several days of demonstrations touched off by the May 12 publication of a racist cartoon in the state-run Iran newspaper. (The cartoon depicted an Azeri-speaking cockroach.) Iranian security forces cracked down violently on the demonstrators, killing at least four people (Azeri nationalists claim twenty dead), injuring forty-three, and detaining hundreds of others. These developments indicate brewing discontent among Iran's Azeri population and should be studied for their implications for U.S. and Western policy toward Tehran.
Topic:
International Relations, Security, and Development
Political Geography:
United States, Iran, and Tehran

344. Miscommunication between Iranian Society and the West on Iran's Nuclear Program

Author:
Mehdi Khalaji
Publication Date:
02-2006
Content Type:
Policy Brief
Institution:
The Washington Institute for Near East Policy
Abstract:
In recent months, the growing controversy surrounding the Iranian nuclear program and Western suspicions about the military intentions of the Iranian regime has reached a crucial phase. A serious problem for the Western campaign to press the Islamic Republic about its nuclear program is that Iranian society has been indifferent or hostile to the West's efforts. The United States in particular needs to find ways to reenergize its outreach to Iranian society.
Topic:
International Relations, Development, and Nuclear Weapons
Political Geography:
United States and Iran

345. America and the Middle East, circa 2006

Author:
James F. Hoge Jr. and Stuart Rothenberg
Publication Date:
01-2006
Content Type:
Policy Brief
Institution:
The Washington Institute for Near East Policy
Abstract:
Barring any unforeseen developments in the region, there will be very little change in U.S. policy toward the Middle East this year. Terrorism will remain the top priority overall. In addition, the Bush administration will continue to maintain the priorities that have defined American approaches over recent decades, such as preserving energy supplies, containing strife, ensuring Israel's existence, and working with allies such as Turkey. Further, the White House will reiterate its condemnations of the Syrian regime—though it will refrain from more active policies of regime change for fear that a new government would be even worse. However, the issues of democratization, Iraqi development, the Iranian nuclear program, and the Israeli-Palestinian issue will also be high on the agenda in 2006.
Topic:
International Relations and Development
Political Geography:
United States, America, Washington, and Middle East

346. The Role of Federalism in Developing the US during Nineteenth-century Globalization

Author:
Eric Rauchway
Publication Date:
07-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
During its development into a continental empire, the US, like other countries relied on the investment of capital and labour from abroad; unlike other countries, the US had a peculiar political institution, federalism, which channeled these resources and also determined the course of protest against these resources. The paper argues that federalism played a key role in determining the course of US economic development and reaction to this early instance of globalization, a role with possible lessons for other countries today.
Topic:
Development, Globalization, and Politics
Political Geography:
United States

347. Central Banks as Agents of Economic Development

Author:
Gerald Epstein
Publication Date:
05-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
In the last two decades, there has been a global sea change in the theory and practice of central banking. The currently dominant 'best practice' approach to central banking consists of the following: (1) central bank independence (2) a focus on inflation fighting (including adopting formal 'inflation targeting') and (3) the use of indirect methods of monetary policy (that is, short-term interest rates as opposed to direct methods such as credit ceilings). This paper argues that this neo-liberal approach to central banking is highly idiosyncratic in that, as a package, it is dramatically different from the historically dominant theory and practice of central banking, not only in the developing world, but, notably, in the now developed countries themselves. Throughout the early and recent history of central banking in the US, England, Europe, and elsewhere, financing governments, managing exchange rates, and supporting economic sectors by using 'direct methods' of intervention have been among the most important tasks of central banking and, indeed, in many cases, were among the reasons for their existence. The neo-liberal central bank policy package, then, is drastically out of step with the history and dominant practice of central banking throughout most of its history.
Topic:
Development and Economics
Political Geography:
United States, Europe, and England

348. International Finance and the Developing World: The Next Twenty Years

Author:
Tony Addison
Publication Date:
02-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Much has changed in international finance in the twenty years since UNU-WIDER was founded. This paper identifies five broad contours of what we might expect in the next twenty years: the flow of capital from ageing societies to the more youthful economies of the South; the growth in the financial services industry in emerging economies and the consequences for their capital flows; the current strength in emerging market debt, and whether this represents a change in fundamentals or merely the effect of low global interest rates; the impact of globalization in goods markets in lowering inflation expectations, and therefore global bond yields; and the implications of the adjustment in global imbalances between Asia (in particular China) and the United States for emerging bond markets as a whole. The paper ends by noting the paradox that today we see ever larger amounts of capital flowing across the globe in search of superior investment returns, and yet the financing needs of the poorer countries are still largely unmet.
Topic:
Development, Economics, and International Trade and Finance
Political Geography:
United States, China, and Asia

349. U.S. Slowdown: Self-Correcting or Self-Reinforcing?

Author:
John H. Makin
Publication Date:
11-2006
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
The U.S. economy has slowed to a level below its trend growth rate during the second half of 2006. Trend growth, the rate that can be sustained over time without rising inflation, is probably about 3 percent, having been reduced by a quarter of a percentage point by weaker productivity data. As has often been the case over the past five years, the slowdown itself has set into motion market adjustments that may mitigate or even reverse it. Since August, interest rates on benchmark tenyear treasuries have dropped by about 60 basis points. That reduction, coupled with a stock market that is rising in part because of lower interest rates, has caused an easing of financial conditions equal to nearly 100 basis points since late June on the Goldman Sachs Financial Conditions Index. Meanwhile, since August, the price of oil has dropped by about $18 per barrel—which, if sustained, would be enough to add about 0.7 percentage points to U.S. growth over the next year.
Topic:
Development, Economics, and Markets
Political Geography:
United States and America

350. China Needs to Float the Yuan--for China's Sake

Author:
John H. Makin
Publication Date:
05-2006
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
In their April 21 press release following their spring meeting in Washington, D.C., the G7 finance ministers and central bank governors added an important sentence to their usual bland statement that exchange rates should reflect economic fundamentals: Greater exchange rate flexibility is desirable in emerging economies with large current account surpluses, especially China, for necessary adjustments to occur. In their April 21 press release following their spring meeting in Washington, D.C., the G7 finance ministers and central bank governors added an important sentence to their usual bland statement that exchange rates should reflect economic fundamentals: Greater exchange rate flexibility is desirable in emerging economies with large current account surpluses, especially China, for necessary adjustments to occur. The G7, significantly, also called for an increased role for the International Monetary Fund (IMF) to help countries, including those in the G7 but also China and others in emerging Asia, meet the macroeconomic and financial policy challenge of globalization. Specifically, the G7 supported the strengthening of IMF surveillance, including through increased emphasis on the consistency of exchange rate policies with domestic policies and a market-based international monetary system and on the spillover effects of domestic policies on other countries. The G7s endorsement of greater exchange-rate flexibility and of an enhanced IMF role in implementing it is important. The IMF, having been founded after World War II to maintain stable exchange rates among major economies, has become an advocate on behalf of the major economies of global exchange-rate flexibility. The lesson regarding the need for G7 currency flexibility was learned after Americas August 1971 abandonment of fixed exchange rates, which was followed by a decade of adjustments to higher oil prices that would have wreaked havoc under fixed exchange rates. The lesson for needed currency flexibility in emerging markets was learned after the disastrous attempt, fostered in part by the IMF, to impose fixed exchange rates during the Asian and Russian crises of 1997 and 1998, which prolonged and exacerbated the market gyrations caused by the crises. Sadly, China response to the G7-IMF call for greater currency flexibility has been both negative and misguided. China's foolishly insouciant attitude, captured in a comment by Zhou Xiao-chuan, governor of the Peoples Bank of China, carries with it serious risks both for China and for the world economy. Zhous remark was quoted on April 24 in the Wall Street Journal: [T]he speed of moving forward (on yuan appreciation) is OK. Its good for China and welcomed by many other countries. China's currency has appreciated only 1.2 percent since its initial 2.1 percent revaluation last July 21. That is less than OK. The total 3.3 percent revaluation against the dollar really represents no adjustment at all in view of the 1 to 2 percent inflation differential (lower in China) that has persisted between the United States and China over the past two years. If China had allowed prices to rise instead of mandating caps on prices of important commodities like gasoline, there would be less pressure for the yuan to rise in value. Both the intervention to cap the yuans appreciation and the capping of domestic prices are building up potentially disruptive inflation pressure inside China, as we shall see below. The most dangerous aspect of China's increased efforts to prevent yuan appreciation, as measured by accelerating reserve accumulation over the past year, is the rising pool of liquidity inside China that has resulted. The level of excess reserves in Chinese banks is now larger, relative to GDP, than the level of excess reserves built up in Japan from 2001 to 2005 during the years of a prolonged, desperate struggle against deflation. China's currency undervaluation, coupled with the massive liquidity buildup in its banking system, has resulted in excessive investment in China's state enterprises that have close traditional ties with the liquidity-sodden banks. The usual Chinese response to excess reserves has been to boost reserve requirements for its banks. But to absorb the huge pool of excess reserves now in place, reserve requirements would have to be boosted by 5 percentage points to 12.5 per-cent, going far beyond previous moves of 0.5 to 1 percentage point, and far beyond what China's shaky, insolvent banks could endure. When the Peoples Bank of China boosted its one-year benchmark lending rate on April 26 by 27 basis points (to 5.85 percent), it took a tiny step that will do little to tighten China's monetary stance.
Topic:
Development, Economics, and International Trade and Finance
Political Geography:
United States, China, and Washington