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151. Owners of the Republic: An Anatomy of Egypt’s Military Economy

Author:
Yezid Sayigh
Publication Date:
11-2019
Content Type:
Special Report
Institution:
Carnegie Endowment for International Peace
Abstract:
The Egyptian military accounts for far less of the national economy than is commonly believed, but its takeover in 2013 and the subsequent rise of President Abdel Fattah el-Sisi have transformed its role in both scope and scale and turned it into an autonomous actor that can reshape markets and influence government policy setting and investment strategies. The military delivers massive infrastructure projects, produces consumer goods ranging from food to household appliances, manufactures industrial chemicals and transport equipment, and imports basic commodities for civilian markets. It has expanded into new sectors as diverse as gold prospecting, steel production, and managing religious endowments and pilgrimage. In parallel, thousands of retired senior officers benefit from the military’s powerful political influence to occupy senior positions throughout the state’s civilian apparatus and public sector companies, complementing the formal military economy while benefiting themselves. The military boasts of superior managerial skills and technological advances and claims to act as a developmental spearhead, but its role comes at a high cost. It has replicated the rentierism of Egypt’s political economy, benefiting like its civilian counterparts (in both the public and private business sectors) from an environment in which legal permissibility, bureaucratic complexity, and discretionary powers allow considerable space for predation and corruption. At best, the military makes good engineers, but bad economists: the massive surge of megaprojects in public infrastructure and housing it has managed since 2013 is generating significant amounts of dead capital and stranded assets, diverting investment and resources from other economic sectors. The military economy’s entrenchment is detrimental to Egypt’s democratic politics, however flawed. The military economy must be reversed in most sectors, rationalized in select remaining ones, and brought under unambiguous civilian control if Egypt is to resolve the chronic structural problems that impede its social and economic development, inhibit productivity and investment, subvert market dynamics, and distort private sector growth. Nor can any Egyptian government exercise efficient economic management until informal officer networks in the civilian bureaucracy, public sector companies, and local government are disabled. Rosy assessments of Egypt’s macroeconomic indicators issued by Egyptian officials and their counterparts in Western governments and international financial institutions disregard fundamental problems of low productivity and innovation, limited value added, and insufficient investment in most economic sectors. These officials may be hoping Sisi can somehow build a successful development dictatorship, which would explain why they gloss over the social consequences of his administration’s economic approach and its fierce repression of political and social freedoms and egregious human rights violations. A corollary is the faith that the military is as good an economic actor and manager as it claims to be, and that it will withdraw from the economy as the latter grows. Yet current trends suggest Sisi will remain hostage to key partners in the governing coalition, including the military leading its involvement in the economy to accelerate.
Topic:
Military Affairs, Economy, and Military Government
Political Geography:
Middle East, North Africa, and Egypt

152. U.S. Foreign Policy for the Middle Class: Perspectives from Colorado

Author:
Salman Ahmed, Allison Gelman, Wendy Cutler, Rozlyn Engel, David Gordon, Jennifer Harris, Brian Lewandowski, Douglas Lute, Daniel M. Price, Christopher Smart, Jake Sullivan, Ashley J. Tellis, Richard Wobbekind, and Tom Wyler
Publication Date:
11-2019
Content Type:
Special Report
Institution:
Carnegie Endowment for International Peace
Abstract:
The American middle class is already taking center stage in the 2020 presidential electoral campaign, even in relation to debates about foreign policy. While the U.S. economy has been growing and unemployment rates have fallen, too many Americans still struggle to sustain a middle-class lifestyle. Meanwhile, major multinational corporations, China, and other foreign competitors reap enormous benefits from a global economy that U.S. leadership and security has helped underwrite. Therefore, candidates on both sides of the aisle have ample cause for debating whether changes to U.S. foreign policy are required to better advance the economic well-being of America’s middle class, even if middle-class fortunes largely depend on domestic factors and policies. This debate will be relevant long after the electoral cycle is over, however, and will influence the trajectory of U.S. global leadership and international affairs for decades to come. National security and foreign policy professionals in government need to be fully involved in this discussion, yet many are understandably consumed by geopolitical and security developments abroad and are, therefore, often distant or disconnected from economic realities at home. They rarely get to hear what Americans beyond Washington, DC, think about how U.S. foreign policy–related efforts may or may not intersect with these realities. Thus, the Carnegie Endowment for International Peace initiated a new line of research on “foreign policy for the middle class” to help address this gap and bridge an important divide. In 2017, Carnegie convened a bipartisan task force of former senior policymakers to provide strategic direction to this research and ultimately make concrete recommendations. To inform these recommendations, the task force and a research team—including Carnegie scholars and university researchers—are gathering data on both the perceived and measurable economic effects of U.S. foreign policy on the middle class in three U.S. states in the nation’s heartland (Ohio, Colorado, and Nebraska). This report on Colorado, prepared with economists at the University of Colorado Boulder, is the second of the three case studies. The first study on Ohio, undertaken with The Ohio State University, was published in December 2018.1 Across multiple locales in Colorado, the research team conducted interviews and focus groups with state and local officials, economic developers, small business owners, employees, community leaders, teachers, nurses, tradesmen, and others who comprise, employ, and/or advance the interests of middle-class households. The conversation focused on how those interviewed assessed the economic well-being of Colorado’s middle class and whether they believed any significant changes in U.S. foreign policy could yield a better outcome. The interviews and focus groups took place between February and May of 2019, reflecting the events and policies up to that time.
Topic:
Foreign Policy, Politics, Economy, Class, and Defense Industry
Political Geography:
North America and United States of America

153. Global Waste Trade Chaos: Rising Environmentalism or Cost-Benefit Analysis?

Author:
Margareth Sembiring
Publication Date:
07-2019
Content Type:
Working Paper
Institution:
Centre for Non-Traditional Security Studies, S. Rajaratnam School of International Studies
Abstract:
International garbage disputes are rare. Lately, however, the world witnesses waves of newsworthy trash saga. From the Philippines shipping containers of rubbish back to Canada, to Malaysia planning to return tons of garbage back to countries of origin, to China’s near-total ban of plastic waste import, it is hard not to wonder whether this is a real sign of rising environmentalism. Have countries begun to think that the environment is worthy of a similar priority as the economy? This Insight argues that behind the seemingly growing pro-environment attitudes, it still remains to be seen whether this trend is sustainable in the long run. Considering that the global waste trade is a multi-billion dollar industry, the balance may tip to favour the economic activities again once the dust has settled back. The paper first looks at a brief description of the global waste trade industry. It then discusses some of the contemporary development in the global waste industry particularly on the issues of waste smuggling and China’s plastic waste import ban. It describes related experiences in Indonesia, Malaysia, Vietnam, the Philippines and Thailand.
Topic:
Security, Environment, Economy, Trade, and Waste
Political Geography:
China, Malaysia, Canada, Philippines, Southeast Asia, and Global Focus

154. Trump’s Trade Wars: A New World Order?

Author:
James M Dorsey
Publication Date:
11-2019
Content Type:
Special Report
Institution:
The Begin-Sadat Centre for Strategic Studies (BESA)
Abstract:
President Donald Trump’s declared economic protectionism has taken the US’s international relations with several foes and allies into uncharted territory. His open-ended trade wars with several nations have triggered criticism among conservatives and liberals alike in the US. He has justified his actions by arguing for a downturn of America’s trade deficit, but the American people don’t seem to be on board with his logic. A recent Harvard CAPS/Harris Poll survey shows 63% of registered voters believe tariffs imposed on Chinese products ultimately hurt the US more than China, while 74% said American consumers are shouldering most of the burden of those tariffs. The political network funded in part by billionaire libertarian Charles Koch has contested Trump’s approach toward China and is trying to shape an alternative strategy for 2020, the year of the US presidential election. One Koch senior official has acknowledged, “It doesn’t penetrate with the people that are willing to go along with the argument that you have to punish China.” There is now a pursuit of a “two steps back strategy,” which will involve putting together a team of almost 100 business leaders to call on the Trump administration and lawmakers to end the trade war with China. This paper examines the ramifications of President Trump’s policy of economic sanctions and tariffs vis-à-vis several nations and international groupings. It also looks at China’s counter-strategy and considers whether Middle Eastern countries like Saudi Arabia will be caught in the web of the current trade wars.
Topic:
International Relations, Economy, Trade Wars, Trade, and Donald Trump
Political Geography:
North America and United States of America

155. Are Central Banks Out of Ammunition to Fight a Recession? Not Quite.

Author:
Joseph E. Gagnon and Christopher G. Collins
Publication Date:
11-2019
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Central banks in the three largest advanced economies (the United States, Japan, and the eurozone) have only limited ammunition to fight a recession based on the tools used to date. The Federal Reserve has the most amount of tried and tested ammunition in this group. If a recession were to hit the US economy now, the Fed would be able to deliver monetary stimulus equivalent to a cut in the short-term policy interest rate of about 5 percentage points, which is sufficient to fight a mild but not severe recession. The European Central Bank and the Bank of Japan have little ability to ease policy with tools used to date, about the equivalent of a 1 percentage point cut in the policy rate. But they can engage in more exotic forms of monetary policy, such as large-scale purchases of equity and real estate and direct transfers to households, which the Fed cannot do. These tools, however, are largely untested and face political resistance. An important implication of this analysis is that raising expected inflation before a recession hits has a much larger benefit than has been widely recognized. A higher long-run inflation rate gives central banks more room to not only cut their policy rates but also use forward guidance and quantitative easing to reduce longer-term rates.
Topic:
Global Recession, Economy, and Central Bank
Political Geography:
Japan, Europe, North America, and United States of America

156. Protectionism under Trump: The China Shock, Intolerance, and the "First White President"

Author:
Marcus Noland
Publication Date:
06-2019
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
In 2016, the United States elected an avowedly protectionist president. This paper uses US county-level electoral data to examine this outcome. The hypothesis that support for protectionism was purely a response to globalization is rejected. Exposure to trade competition encouraged a shift to the Republican candidate, but this effect is mediated by race, diversity, education, and age. If the turn toward protectionism is due to economic dislocation, then public policy interventions could mitigate the impact and support the reestablishment of a political consensus for open trade. If, however, the drivers are identity or cultural values, then the scope for constructive policy intervention is unclear.
Topic:
Economy, Trade, Donald Trump, and Protectionism
Political Geography:
China, Asia, North America, and United States of America

157. International Coordination of Economic Policies in the Global Financial Crisis: Successes, Failures, and Consequences

Author:
Edwin M. Truman
Publication Date:
07-2019
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper evaluates international efforts to diagnose the global financial crisis and decide on appropriate responses, the treatments that were agreed and adopted, and the successes and failures as the crisis unfolded. International coordination of economic policies eventually contributed importantly to containing the crisis, but the authorities failed to agree on a diagnosis and the consequent need for joint action until the case was obvious. The policy actions that were adopted were powerful and effective, but they may have undermined prospects for coordinated responses to future crises.
Topic:
Government, International Cooperation, Financial Crisis, and Economy
Political Geography:
Global Focus

158. Aggregate Effects of Budget Stimulus: Evidence from the Large Fiscal Expansions Database

Author:
Jérémie Cohen-Setton, Egor Gornostay, and Colombe Ladreit de Lacharrière
Publication Date:
07-2019
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper estimates the effects of fiscal stimulus on economic activity using a novel database on large fiscal expansions for 17 OECD countries for the period 1960–2006. The database is constructed by combining the statistical approach to identifying large shifts in fiscal policy with narrative evidence from contemporaneous policy documents. When correctly identified, large fiscal stimulus packages are found to have strong and persistent expansionary effects on economic activity, with a multiplier of 1 or above. The effects of stimulus are largest in slumps and smallest in booms.
Topic:
Budget, Economy, Fiscal Policy, and Stimulus
Political Geography:
Global Focus

159. Keeping Up with the Future: Upgrading Forecasts of Political Instability and Geopolitical Risk

Author:
Cullen S. Hendrix and Sooyeon Kang
Publication Date:
07-2019
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
The nature and magnitude of geopolitical risk is changing more rapidly than the ability to anticipate it, with increasingly severe economic consequences. This Policy Brief discusses the economic costs and risks associated with episodes of political instability, arguing that firms, government agencies, and international institutions must update their forecasting and risk assessment efforts to take global factors into account. Since the global financial crisis, political instability has shifted from emerging-market countries in the developing world to larger, more globally impactful econo¬mies. Acknowledging this changing risk profile—and developing better tools to predict major episodes of instability—will allow both policymakers and firms to plan with greater confidence.
Topic:
Economics, Geopolitics, Economy, and Political stability
Political Geography:
Global Focus

160. EU Trade Policy amid the China-US Clash: Caught in the Cross-Fire?

Author:
Ana González and Nicolas Véron
Publication Date:
08-2019
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
China's rapid rise and unique economic system and the increasingly aggressive and disruptive US trade policy are posing an unprecedented threat to the global rules-based trading and economic system. The European Union has critical interests at stake in the current escalation, even as it has so far been comparatively spared from US trade policy belligerence and China's reactions. In this context, the European Union should adopt an independent and proactive stance, building on recent efforts and going beyond them. The European Union, even more than the United States or China, has a strategic interest in the preservation of the global rules-based order embodied by the World Trade Organization (WTO). It must play a leading role in steering WTO reform and modernization, working closely with broadly aligned third countries such as Japan and other players. It should expand its outreach beyond its immediate negotiating counterparts in both the United States and China, and leading European officials at both the EU and member state levels should work at better understanding China. While strengthening its domestic policy instruments to address new challenges, such as the screening of foreign direct investment for security purposes, the European Union must also resist its own temptations of protectionism and economic nationalism. In support of these objectives, the European Union should prepare itself for difficult decisions, which may involve revising some of its current red lines in international trade negotiations. Conversely, the European Union should stand firm on principles such as refusing one-sided agreements and rejecting abusive recourse to national security arguments in trade policies. The European Parliament, in working with the European Council and the European Commission, will have a critical role to play in steering the European Union through these challenging times.
Topic:
Bilateral Relations, Economy, Trade Wars, and Trade Policy
Political Geography:
China, Asia, North America, United States of America, and European Union