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111. The Financial Rebalancing Act

Author:
Alan M. Taylor
Publication Date:
07-2011
Content Type:
Journal Article
Journal:
Foreign Affairs
Institution:
Council on Foreign Relations
Abstract:
The global financial crisis that began in 2007 has only just begun to recede, but economists and policymakers are already considering its future implications. Has the Great Recession introduced a new economic era? Or was it a temporary shock that will eventually correct itself? The answers to these questions will affect a number of vital economic issues, including the relationship between emerging and developed economies, the direction of international trade and capital flows, and the potential for currency wars or other economic conflicts. Both the recent crisis and the policies that ended it were unprecedented. Compared to other periods of economic turmoil, this crisis was not only unparalleled in scale but also unique in its causes -- among them, many argue, global financial imbalances. Basic economic theory presumes that capital will flow "downhill" from capital-rich developed economies to capital-scarce emerging ones, as investors in the first seek profits in the second. Yet over the past 15 years, capital has, on net, flowed "uphill" from emerging economies to developed ones. Although private capital did travel downhill, as conventional wisdom predicts, it was offset by vast government reserves from emerging countries, chiefly from central banks and sovereign wealth funds, heading uphill. When the recession struck, this unprecedented flow of capital and accumulated reserves suddenly seemed less of a mystery, as emerging markets facing problems began to use the reserves they had accumulated to ride out the economic storm. With that insurance on hand, they defended their currencies, averted capital flight, buffered their financial systems, maintained access to capital markets, and pursued fiscal stimulus programs more successfully than they had during previous episodes of economic turmoil and with greater confidence than some of the developed economies.

112. A Crude Predicament

Author:
Michael Levi and Robert McNally
Publication Date:
07-2011
Content Type:
Journal Article
Journal:
Foreign Affairs
Institution:
Council on Foreign Relations
Abstract:
Saudi Arabia and other OPEC members have long maintained large oil reserves to limit volatility in oil prices. But with key states now refusing to maintain such expensive buffers, the world must learn how to cope with big price swings in the years ahead.
Political Geography:
Saudi Arabia

113. The Crisis in Clean Energy

Author:
David G. Victor and Kassia Yanosek
Publication Date:
07-2011
Content Type:
Journal Article
Journal:
Foreign Affairs
Institution:
Council on Foreign Relations
Abstract:
After years of staggering growth, the clean-energy industry is headed for a crisis. In most of the Western countries leading the industry, the public subsidies that have propelled it to 25 percent annual growth rates in recent years have now become politically unsustainable. Temporary government stimulus programs -- which in 2010 supplied one-fifth of the record investment in clean energy worldwide -- have merely delayed the bad news. Last year, after 20 years of growth, the number of new wind turbine installations dropped for the first time; in the United States, the figure fell by as much as half. The market value of leading clean-energy equipment manufacturing companies has plummeted and is poised to decline further as government support for the industry erodes. The coming crisis could make some of the toughest foreign policy challenges facing the United States -- from energy insecurity to the trade deficit to global warming -- even more difficult to resolve. The revolution in clean energy was supposed to help fix these problems while also creating green jobs that would power the economic recovery. Some niches in clean energy will still be profitable, such as residential rooftop solar installations and biofuel made from Brazilian sugar cane, which is already competitive with oil. But overall, the picture is grim. This is true not only for the United States but also for the rest of the world, because the market for clean-energy technologies is global. Whether this shakeout will strengthen or weaken the clean-energy industry will depend on how policymakers, notably in the United States, prepare for it. The root cause of today's troubles is a boom-and-bust cycle of policies that have encouraged investors to flock to clean-energy projects that are quick and easy to build rather than invest in more innovative technologies that could stand a better chance of competing with conventional energy sources over the long haul. Indeed, nearly seven-eighths of all clean-energy investment worldwide now goes to deploying existing technologies, most of which are not competitive without the help of government subsidies. Only a tiny share of the investment focuses on innovation.
Political Geography:
United States

114. South Africa's Land Reform

Author:
Bernadette Atuahene
Publication Date:
07-2011
Content Type:
Journal Article
Journal:
Foreign Affairs
Institution:
Council on Foreign Relations
Abstract:
Under colonialism and apartheid, the ruling white minority stole vast amounts of land from black Africans in Zimbabwe and South Africa. Reclaiming this land became an important rallying cry for liberation movements in both countries; but in the years after white minority rule ended, it was extremely difficult for the new regimes to redistribute the land fairly and efficiently. In recent years, as the unaddressed land inequality in Zimbabwe became a pretext for President Robert Mugabe's demagoguery and led to Zimbabwe's demise, many observers have asked: Could South Africa be next? When Nelson Mandela took power in South Africa in 1994, 87 percent of the country's land was owned by whites, even though they represented less than ten percent of the population. Advised by the World Bank, the ruling African National Congress (ANC) aimed to redistribute 30 percent of the land from whites to blacks in the first five years of the new democracy. By 2010 -- 16 years later -- only eight percent had been reallocated. In failing to redistribute this land, the ANC has undermined a crucial aspect of the negotiated settlement to end apartheid, otherwise known as the liberation bargain. According to Section 25 of the new South African constitution, promulgated in 1994, existing property owners (who were primarily white) would receive valid legal title to property acquired under prior regimes, despite the potentially dubious circumstances of its acquisition. In exchange, blacks (in South Africa, considered to include people of mixed racial descent and Indians) were promised land reform. But the new government upheld only one side of the liberation bargain: South African whites kept their property, but blacks still have not received theirs. Political apartheid may have ended, but economic apartheid lives on.
Political Geography:
Africa and South Africa

115. Defending Democracy in Cote d'Ivoire

Author:
Thomas J. Bassett and Scott Straus
Publication Date:
07-2011
Content Type:
Journal Article
Journal:
Foreign Affairs
Institution:
Council on Foreign Relations
Abstract:
In early April, in the final days of Côte d'Ivoire's torturous four-month-long political crisis, French and UN helicopters bombarded the presidential residence in Abidjan. This military operation sealed the fate of the incumbent, Laurent Gbagbo, paving the way for Alassane Ouattara, the widely recognized winner of the November 2010 presidential elections, to claim office. But the French and UN action had another effect: it triggered commentary and outrage about international interference -- in particular on the part of France -- in African affairs. Ivoirian newspapers backing Gbagbo fulminated about France's desire to retake its former colonies. The French press, meanwhile, obsessed about whether France's military intervention spelled a new era of Françafrique, the term, first introduced in the 1950s, for French interference in the internal affairs of its former African colonies. The New York Times ran a story about France's "long shadow" over its former colonies, and pundits around the world worried that these international actions could doom Ouattara's legitimacy. Such a Eurocentric focus, however, both mischaracterizes the internal dynamics of the conflict and misses the more significant diplomatic development -- namely, the role of African regional organizations. In the end, France and the UN did not win the war for Ouattara and his self-styled "Republican Forces." By the time France and the UN intervened, Ouattara's forces controlled 90 percent of the country and were on the verge of taking the commercial capital, Abidjan. International forces did manage to hasten Gbagbo's demise: in effect, accomplishing the inevitable and preventing a final attack on Abidjan, which would have resulted in a terrible humanitarian crisis.
Topic:
Humanitarian Aid
Political Geography:
Africa, United States, and New York

116. The Settlement Obsession

Author:
Elliott Abrams
Publication Date:
07-2011
Content Type:
Journal Article
Journal:
Foreign Affairs
Institution:
Council on Foreign Relations
Abstract:
Two recent books on the Israeli settlements explore their corrosive effect on Zionism and Israeli society. But despite the problems settlements cause, Washington should not overstate their importance for the peace process, argues a former U.S. deputy national security adviser.
Political Geography:
Africa and Israel

117. What China Wants

Author:
Andrew J. Nathan
Publication Date:
07-2011
Content Type:
Journal Article
Journal:
Foreign Affairs
Institution:
Council on Foreign Relations
Abstract:
Henry Kissinger's new book argues that the United States should yield gracefully to China's rise; Aaron Friedberg's gives the opposite advice. By focusing on intentions instead of capabilities, both books overstate China's actual power.
Political Geography:
United States and China

118. Secularism and its Discontents

Author:
Karen Barkey
Publication Date:
07-2011
Content Type:
Journal Article
Journal:
Foreign Affairs
Institution:
Council on Foreign Relations
Abstract:
Olivier Roy's new book argues that religion and culture are disengaging from each other thanks to globalization. But he underestimates the close interactions of religious movements and national politics on the ground in the Islamic world and elsewhere.

119. The City and the State

Author:
Sandy Hornick
Publication Date:
07-2011
Content Type:
Journal Article
Journal:
Foreign Affairs
Institution:
Council on Foreign Relations
Abstract:
New books by Witold Rybczynski and Edward Glaeser celebrate the ever-changing American urban experience. In proposing how to revitalize modern cities, however, both books underplay the critical role of the government.
Topic:
Government
Political Geography:
America

120. Arab Spring, Persian Winter

Author:
Dalia Dassa Kaye, Frederic M. Wehrey, and Michael Scott Doran
Publication Date:
07-2011
Content Type:
Journal Article
Journal:
Foreign Affairs
Institution:
Council on Foreign Relations
Abstract:
READING THE NEW MIDDLE EAST MAP Dalia Dassa Kaye and Frederic Wehrey With long-standing U.S. allies toppled or under pressure from unprecedented dissent across the Arab world, Michael Doran, in "The Heirs of Nasser" (May/June 2011), warns that Iran is poised to walk away from the Arab Spring a winner. In his view, the chaotic Arab political scene will allow Iran and its radical allies -- Hamas, Hezbollah, and Syria -- to stoke public frustration over unmet expectations or engage in subversive provocations, thereby embroiling new regimes in the region's old conflicts. In previous periods of regional upheaval, revolutionaries such as Egyptian President Gamal Abdel Nasser employed this strategy at the expense of U.S. and Western interests. Nasser played the Israel card to goad his Western-backed rivals into war, while exhorting their publics to rebel. Why, Doran argues, should one expect any less from Iran and its allies today? Certainly, the regional shakeup will give Iran and its allies much to prey on. The Arab world's secular, liberal youth movements, often hobbled by a lack of organization and leadership, will compete with long-established parties with starkly different views of the future, be they remnants of the old regimes or Islamist forces. The region's new governments will confront economic challenges that will limit their ability to meet the expectations of a youthful and increasingly impatient public. Meanwhile, the continued Israeli-Palestinian stalemate offers further ammunition for rejectionist forces to reinvigorate the region's tired scapegoats, redirecting the conversation away from talk about the failure of domestic governance. The United States' inconsistent policies toward the Arab revolts (for example, the varying U.S. responses to Bahrain and Libya) offer more fodder for Iran's resistance narrative. Still, although Iran and its allies will attempt to seize on these vulnerabilities to widen the gap between ruler and ruled, they are unlikely to achieve the success of Nasser. In fact, the political upheaval in the Arab world has led to at least three fundamental shifts in the regional order that have only sharpened the preexisting limitations of Iranian influence.
Political Geography:
United States, Israel, Palestine, and Arabia