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11111. China's economic reform plan will probably fail

Author:
Derek M. Scissors
Publication Date:
02-2014
Content Type:
Working Paper
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
Reactions to the Chinese Communist Party's announcement of major economic reforms in November have ranged from unbridled optimism to skepticism about the party's ability to implement sweeping change. In fact, the reforms themselves are flawed in multiple ways-most are inauthentic, uncredible, or nonviable. However, the areas of land and finance offer more limited prospects for true reform. The primary means of judging reform progress should be progress in reducing excess capacity. The most likely outcome is that the party will claim success but the economy will slowly stagnate, harming China's partners.
Topic:
Economics, International Trade and Finance, and Reform
Political Geography:
China and East Asia

11112. French hard power: Living on the strategic edge

Author:
Dorothée Fouchaux
Publication Date:
02-2014
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
The following National Security Outlook is the ninth in AEI's Hard Power series, a project of the Marilyn Ware Center for Security Studies. In it, Dorothée Fouchaux examines the state of French forces and France's most recent effort to prioritize its strategic goals and square them with its military capabilities.1 Certainly since Charles de Gaulle's presidency, France has maintained a tradition of thinking strategically for itself-often, admittedly, to the aggravation of its allies. This tradition remains strong and, if anything, has been reinforced in recent years by the sense that the United States is pivoting away from Europe and would like to reduce its footprint in Europe's troubled periphery. With its latest defense white paper, Paris has laid out a program to maintain its "strategic autonomy" through a combination of nuclear deterrence, enhanced intelligence efforts, and discrete power-projection capabilities. But France faces flat defense budgets, the increased cost of its military interventions in Africa, and prospects that budget shortfalls will not be overcome by the sale of public shares of national defense companies or export sales of military hardware. Consequently, some doubt that an even smaller French force will have sufficient resources to address existing problems in readiness and needed capabilities while sustaining a defense research-anddevelopment base sufficient to keep future French forces armed with advanced equipment. In short, France really is living on the strategic edge.
Topic:
Foreign Policy and Defense Policy
Political Geography:
Europe and France

11113. Azerbaijan's Iran problem

Author:
Michael Rubin
Publication Date:
01-2014
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
Since Azerbaijan regained its independence in 1991, it has been only the world's second Shi'ite-led state after Iran. Azerbaijan respects separation of mosque and state, and despite pressure from its neighbors, remains independent from political domination. Given its strategic importance, safeguarding the country's independence remains a US priority. And the threat from Iranian meddling is particularly acute. From Tehran's perspective, the combination of Azerbaijan's pre-19th-century Iranian past, modern Azerbaijan's embrace of secularism, and its relative economic success challenge Iran's legitimacy. As Iranian authorities have sought to undermine and destabilize Azerbaijan through political, clerical, charitable, and media channels, Azerbaijan's counterstrategy has been both restrained and effective.
Topic:
Foreign Policy, Islam, Sovereignty, and Governance
Political Geography:
United States, Iran, and Middle East

11114. Russia's precarious Olympics

Author:
Leon Aron
Publication Date:
01-2014
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
Every Olympiad is a complex and, until the end, uncertain endeavor. In the case of the 2014 Winter Games, which begin February 7 in Sochi, Russia, the challenges and vulnerabilities are far more significant and numerous than usual. It will be the first (and almost certainly the last) Winter Games in the subtropics. Virtually the entire infrastructure had to be built from scratch and in haste, with abuse of laborers and corruption overhead likely further compromising the construction. While various interest groups exploit every Olympiad to draw international attention to their causes, protests in Sochi could be particularly intense. Finally, and most ominously, Sochi is next door to a fundamentalist Islamic uprising in which terrorism claims victims almost daily. For the sake of the athletes and millions of fans, one hopes that none of these potential problems will precipitate a disruption, much less a crisis or bloodshed. Yet in their choice of location and the manner in which they have gone about organizing the Games, the Russian authorities have greatly increased that risk. By highlighting some key features and practices of Vladimir Putin's regime, a major setback at the Olympiad could deal a serious blow to the regime's legitimacy, prompt national soul searching, and trigger another round of civil resistance in search of reforms.
Topic:
Corruption, Islam, Insurgency, Infrastructure, and Governance
Political Geography:
Russia

11115. America vs. Iran: The competition for the future of the Middle East

Author:
Danielle Pletka, Frederick W. Kagan, and J. Matthew McInnis
Publication Date:
02-2014
Content Type:
Working Paper
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
A review of the soft-power strategies of both the United States and the Islamic Republic of Iran in the Middle East and Afghanistan makes clear a disturbing fact: Tehran has a coherent, if sometimes ineffective strategy to advance its aims in the Middle East and around the world. The United States does not. This project began with two tour d'horizon reviews of Iranian activities throughout areas Iran has, by its actions, defined as its sphere of influence. From the Persian Gulf through the Levant and into neighboring Afghanistan, the Islamic Republic has consistently invested in soft- and hard-power activities designed not only to extend its own influence but also to limit both American and hostile Arab aims. And while the latter part of the Ahmadinejad administration saw waning rewards for Tehran's efforts-a result more of the growing Sunni-Shia divide in the Middle East than of changes in strategy-the continued existence of a coherent Iranian strategy to dominate or destabilize the region should not be ignored. This report, the culmination of a process of both examining Iranian actions and surveying American policy, policy responses, and soft-power strategies in the region, focuses on the US side of the equation. Despite the Obama administration's commitment to replace hard power with smart power, what the United States pursues in the Middle East is a set of incoherent, ineffective, and increasingly irrelevant policies.
Topic:
Foreign Policy, Defense Policy, Islam, and Bilateral Relations
Political Geography:
Iran, Central Asia, and Middle East

11116. China invests (somewhat) more in the world

Author:
Derek M. Scissors
Publication Date:
01-2014
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
New data published in the American Enterprise Institute-Heritage Foundation China Global Investment Tracker show that China continues to invest heavily around the world. Outward investment excluding bonds stood at $85 billion in 2013 and is likely to reach $100 billion annually by 2015. Energy, metals, and real estate are the prime targets. The United States in particular received a record of more than $14 billion in Chinese investment in 2013. Although China has shown a pattern of focusing on one region for a time then moving on to the next, the United States could prove to be a viable long-term investment location. The economic benefits of this investment flow are notable, but US policymakers (and those in other countries) should consider national security, the treatment of state-owned enterprises, and reciprocity when deciding to encourage or limit future Chinese investment.
Topic:
Security, Foreign Policy, Development, Economics, Emerging Markets, International Trade and Finance, Foreign Direct Investment, and Sovereign Wealth Funds
Political Geography:
United States, China, and Asia

11117. Scarcity without Leviathan: The Violent Effects of Cocaine Supply Shortages in the Mexican Drug War

Author:
Juan Camilo Castillo, Daniel Mejia, and Pascual Restrepo
Publication Date:
02-2014
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Using the case of the cocaine trade in Mexico as a relevant and salient example, this paper shows that scarcity leads to violence in markets without third party enforcement. We construct a model in which supply shortages increase total revenue when demand is inelastic. If property rights over revenues are not well defined because of the lack of reliable third party enforcement, the incentives to prey on others and avoid predation by exercising violence increase with scarcity, thus increasing violence. We test our model and the proposed channel using data for the cocaine trade in Mexico. We found that exogenous supply shocks originated in changes in the amount of cocaine seized in Colombia (Mexico's main cocaine supplier) create scarcity and increase drug-related violence in Mexico.
Topic:
Crime, Economics, War on Drugs, Narcotics Trafficking, and Law Enforcement
Political Geography:
Colombia, Latin America, and Mexico

11118. Development as Diffusion: Manufacturing Productivity and Sub-Saharan Africa's Missing Middle

Author:
Vijaya Ramachandran, Alan Gelb, and Christian J. Meyer
Publication Date:
02-2014
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
We consider economic development of Sub-Saharan Africa from the perspective of slow convergence of productivity, both across sectors and across firms within sectors. Why have "productivity enclaves", islands of high productivity in a sea of smaller low-productivity firms, not diffused more rapidly? We summarize and analyze three sets of factors: First, the poor business climate, which constrains the allocation of production factors between sectors and firms. Second, the complex political economy of business-government relations in Africa's small economies. Third, the distribution of firm capabilities. The roots of these factors lie in Africa's geography and its distinctive history, including the legacy of its colonial period on state formation and market structure.
Topic:
Development, Economics, Industrial Policy, and Markets
Political Geography:
Africa

11119. From Maize to Haze: Agricultural Shocks and the Growth of the Mexican Drug Sector

Author:
Oeindrila Dube, Omar Garcia-Ponce, and Kevin Thom
Publication Date:
02-2014
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
We examine how commodity price shocks experienced by rural producers affect the drug trade in Mexico. Our analysis exploits exogenous movements in the Mexican maize price stemming from weather conditions in U.S. maize-growing regions, as well as export flows of other major maize producers. Using data on over 2,200 municipios spanning 1990-2010, we show that lower prices differentially increased the cultivation of both marijuana and opium poppies in municipios more climatically suited to growing maize. This increase was accompanied by differentially lower rural wages, suggesting that households planted more drug crops in response to the decreased income generating potential of maize farming.
Topic:
Agriculture, Economics, Poverty, War on Drugs, and Narcotics Trafficking
Political Geography:
Latin America and Mexico

11120. Migration as a Strategy for Household Finance: A Research Agenda on Remittances, Payments, and Development

Author:
Michael Clemens and Timothy N. Ogden
Publication Date:
02-2014
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
It is time to fundamentally reframe the research agenda on remittances, payments, and development. We describe many of the research questions that now dominate the literature and why they lead us to uninformative answers. We propose reasons why these questions dominate, the most important of which is that researchers tend to view remittances as states do (as windfall income) rather than as families do (as returns on investment). Migration is, among other things, a strategy for financial management in poor households: location is an asset, migration an investment. This shift of perspective leads to much more fruitful research questions that have been relatively neglected. We suggest 12 such questions.
Topic:
Economics, Migration, Political Economy, Poverty, Labor Issues, and Immigration