Violence in Venezuela Amidst Election

The American presidential race has been so all-consuming, especially in the last few weeks, that little else has made the front page of the papers. A short article in Reuters today though was attributed to Venezuelan politics, a country also currently preparing for an election. As I was reading the article I was surprised by the number of ways in which the election was similar to the US’s. Incumbent President Hugo Chavez has, among other accusations, been criticized for his nationalistic leanings.

On a political level, nationalism has hurt the country by detracting foreign investors and alienating business. Venezuela’s cost of closure is most certainly higher than China and Iran, countries listed within the article as potential investors because of a background as allies. While the economic benefits for the country are relatively clear, I was surprised that the authors of the article focused only on the potential benefits for Western investors. Removing trade barriers would certainly help western countries in their trade with Venezuela, but the effect on the nation itself would be much larger. Moreover, in an article focused on the Venezuelan election, it seemed ironic that the effects of that election would be analyzed from a decidedly Western perspective.

Returning to the election itself and similarities to the US, the candidate challenges Chavez is Henrique Capriles. Capriles is described as a supporter of “pro-business government with strong welfare policies” but has been called a “heartless capitalist elitist” by Chavez. In terms of big business, then, there’s a connection between the two versus Obama and Romney. Perhaps it’s in light of these similarities that I was even more shocked by the recent news that a government-issued van had killed three pro-Capriles activists. The violence isn’t as surprising to native Venezuelans who have listed crime as their first concern in the election—the country’s crime rate is exceedingly high.

And yet Chavez insisted that “it’s not with violence that we face off. It’s with votes, ideas, peace.” Given that the Chavez himself appears to promulgate the crime rate within the country, his hypocrisy is overwhelming. Perhaps I’m just feeling the effects of our discussion last week on Obama and Romney’s campaign ads on trade barriers with China, but it seems as though that’s the running similarity in global politics today—hypocrisy from those in or running for office.

Here's the link to the Reuters article: http://www.reuters.com/article/2012/10/01/us-venezuela-election-idUSBRE88T0CC20121001

The Fight Between China and Japan

In a fight over the factors of production, China and Japan relations have continued to deteriorate as both countries attempt to lay claim on a set of supposedly natural gas-rich islands. Why is the issue worrisome? Aside from the fact that the world’s second and third largest countries, who just happen to be neighbors, cannot seem to get along, the results of their feud has lead to a halt in free trade talks.

This report from Reuters describes the hope that these protectionist measures will soon come to an end. Why has the relationship failed in the past few decades? One possible question is motivation—for these large trade-controlling countries, the opportunity cost of closing their borders is relatively low. A Chinese professor and national monetary policy advisor insisted, however, that “it will be a big loss for Asia if the process is terminated.” Why? More than either China or Japan, those East China Sea islands the two countries are fighting over will be hurt by closing borders. The country with the most at stake is probably South Korea, the third player involved in the free trade talks but one who is dominated by the significantly larger economies of its neighbors.

Perhaps its my ego-centric nationalism at work, but I found myself wondering about the US’s stance on such a predicament. Wouldn’t restricting free trade have harmful effects around the world considering the interdependency between China and the United States? Yet if China and Japan harm each others economies enough, it would eliminate competition for the US in returning to its hegemonic power of the 20^th century.

Yes, the breakdown of talks between China and Japan would hurt their economies and in doing so perhaps allow an opening for the US to return to dominance, but doing so would punish not just the economies of China and Japan but more significantly the smaller countries such as South Korea whose national economy depend on its larger allies.

Is China the new United States?

Diplomatic and defense editor for BBC News Mark Urban asks in an article from this past week whether the United States is a declining empire or rather a country geared to counteract its rising competition. In Thomas Friedman’s dramatized viewpoint, globalization is increasingly leaving the United States behind, trailing in the wake of its more determined STEM students, China and India. Urban offers no opinion of his own, rather cataloguing the reactions to the US’s recent downturn. Most significantly, is the US the Great Britain of the 21^st century?

The most alarming statistic that Urban cites is the enormous (and growing) national debt that now exceeds $16 trillion dollars. As a result Obama, as Urban mentions, argues that “it is time to focus on nation building here at home.” This protectionist attitude catapulted the United States into world dominance during the early 1900’s as war dominated the globe, but it also crippled Germany following World War I by ignoring the economic plight of struggling nations. What will be the international effect then of the US’s nationalistic viewpoint? Will it limit the growth of the US’s new competition in China?

The US could turn inward and focus on its domestic trade as a means of promoting its own internal growth. China’s limitations on globalization to promote its domestic economy have preceded its development as a country that, through its absorption of US debt, now controls the world’s superpower. Yet China is not yet comparable to the US—it only recently became a dominant interest in the world economy. It does not, in other words, represent the 21^st century US to America’s 19^th-century Great Britain. If the US closes its borders to trade with developing nations, however, it may very well condemn itself to the title of former superpower. In order to counteract Chinese (and global) competition, America must stop spending and start to eliminate losses through an increase in economic efficiency.

If you’re interested, here’s the link to the article: http://www.bbc.co.uk/news/world-us-canada-19667754

Who Do You Want to Fly? Competition Continues between Boeing and Airbus

Should the United States continue to subsidize its industries in order to promote domestic growth even if the result is a global reduction in efficiency? Subsidies provide necessary relief to developing countries’ industries not capable of combating international competition, but the United States certainly does qualify as developing. And yet its subsidy for jet engine manufacturing has led to healthy growth in the long run—Europe saw the success of the Boeing initiative and sparked the creation of Airbus. Despite a short-term inefficiency, in the long run this competition in subsidies has led to better products not just for American consumers but around the world.

The competition between Boeing and Airbus commenced twenty years ago, but the industry received recent attention in this article detailing the potential merger between Airbus and the global defense and aerospace company BAE Systems. As the article points out, BAE is based in London, a fact that worries US authorities concerned with protecting the domestic economy.

Among these grievances are national security claims, for a large portion of Airbus stock is controlled and maintained by French investors. France, as the article points out, has historically been more willing than its neighbors in dealing with unfriendly countries around the world. In the face of the merger then, the US will face potential security risks should France decide to share its newfound military defense knowledge with high bidders such as Iran.

More importantly, the merger threatens to destroy competition by dominating the defense industry with what the article’s author calls “the world’s largest aerospace company.” The US can’t compete with this mega-company in the face of its decreased military spending.

Are these reasons enough for the US to prevent the passing of the merger? The objections are largely domestic for the United States, calling into question whether the US should relax its protectionist stance in favor of more free trade. The US, as the article mentions, has significant pull in the decision because its defense market dominates international consumers; Airbus’ goal in absorbing the fiscally stagnant BAE is to establish itself within the US market.

The article’s author, Steven Pearlstein, suggests that the US should favor the merger because it will spur new competition that will ultimately aid the American taxpayer. His decision rejects the need for US protectionist trade restrictions. Thomas Friedman, it appears would disagree. His melodramatic panic over the effects of globalization suggests that he doesn’t believe the US can rebound from newfound competition. Yet in order to spur economic growth, the US must lower its trade barriers and compete with Europe rather than hiding behind its own technological subsidies. 

From the Post: the Auto Parts Industry Struggle in China and the US

This morning's Washington Post detailed the recent struggle between the United States and China over the auto parts industry in this article titled 'Why It Matters.' The US has accused China of subsidizing its auto-parts, many of which are headed to the United States after production. China, in turn, placed duties on American exports that it says violate international dumping laws. Why, indeed, does it matter?

The subsidized cost of the auto industry exports by each of these countries has faced increased attention in the past few weeks due to the rising tension in the American elections. These subsidies prevent jobs in each of the home countries by eliminating the possibility for competition, and given the continuing state of unemployment in the United States, the issue has become a hot topic for American voters. 

More important than its effect on the election, however, is the effect on globalization of these subsidies. Are the cuts a necessary means of protectionism or a violation of the WTO's free trade laws? The WTO is faced with answering that question, but Joseph Stiglitz offers his own perspective on these nontariff barriers by insisting that America uses a "double standard…for ascertaining predatory pricing" internationally (93). Stiglitz suggests instead that "there should be a single standard for unfair trade practices" (93). 

The argument is reminiscent of the controversial subsidies the United States places on agriculture. In order to support the domestic market, the US offers enormous subsidies to its farmers, yet the move inhibits international competitors from remaining in the market. This eventually hurts the American consumer. If operating on a fair trade basis, these agriculture subsidies should be reduced despite their potential harm to the American agriculture industry. And if the issue in the auto industry is truly reminiscent of the agriculture trade, perhaps the US should reconsider whether its subsidies do more harm than good in preventing the promotion of both free and fair trade. 

News from the IHT: "University Ranking Shows Boom in Global Student Mobility"

The International Herald Tribune posted a blog a few days ago concerning the 'globalization of education.' The article speaks to the recent rise in the number of students studying internationally at the top 100 universities in the world. Given that these 3.4 million students are receiving an education away from their home country, what effect should this mobility have upon both the home and host countries for these students?

The Tribune article addresses the question but offers no definitive answer. Yes, there are economic incentives to this movement, most importantly the influx in (post-grad) highly skilled labor. Yet these students have the ability to return home following their graduation, leaving the country that has educated them to now face competition from their former pupils. Joseph Stiglitz suggests that in fact this is the best case scenario; more detrimental is the pattern in which students don't leave their host countries after their education has been completed. Instead, they are enticed by the jobs and opportunities that surround them and in turn their home nation loses another of its best and brightest. 

The above scenario can be most easily imagined from a decidedly Western perspective. It is easy to imagine an international student staying in the United States after graduation in order to take advantage of the US's technology and capital. Many US students, however, similarly travel around the globe (most commonly to the UK) in order to seek a superior education. The trend is worrisome on a number of levels. Not only is the United States now losing its best and brightest, but are students within the US losing faith in the value of an American education? No. Rather, schools around the world are catching up and globalization is the cause. 

When considering these counterarguments Stiglitz appears to contradict himself. Fair trade would push for an increase in labor mobility because the United States and Europe focus their attention on the liberalization of capital flow and foreign investment while continuing to impose limits on labor flow. Yet Stiglitz also impresses upon his readers that the US is losing ground in its educational superiority. What should be done? The Tribune article would suggest that nothing can be done, for as university rankings expert John O'Leary puts it, "global student mobility is on a seemingly unstoppable rise." 

Tensions in North and South Korea

Perhaps because its such an anomaly with its secrets and borders, perhaps because I've seen that James Bond movie about North Korea, but the headline from the NY Times online caught my eye when it said "North Korea Rejects Offer of Aid From South Korea." Initially I'm not that surprised given the opposition in political backgrounds between the two countries, but when the offer concerns humanitarian aid I have to wonder where the benefit is for North Korea in rejecting such an offer? Of course the Communist country is protective but to what extent do its political affiliations have to directly impede the welfare of its people? I guess I shouldn't be surprised because it's not the first time a tyrannical government has refused aid for its own people, but in light of Martin Wolf's exclamation on the inevitability and progress seen in globalization, there seems to be no progress in political integration. Where is the line drawn? Where do politics and economics intercede? Even in two countries geographically so close, globalization has not yet merged the two nations ideologically.

What is the greatest challenge facing the leading actors in the international political economy in the 21st Century? (Timed Essay)

Martin Wolf in his work “why globalization works” defines globalization as a “movement in the direction of greater integration” (15). Wolf vehemently supports the concept of liberal market economies and global economic integration while acknowledging that “a necessary consequence…is the increased impact of economic changes in one part of the world on what happens in the others” (15). With globalization, countries are more and more dependent on the economic activities of nations far outside their borders. The expected benefits of these relationships are obvious--not only does the increase in trade allow for growth in each country's market economy, but it also spurs domestic competition and spreads innovative international technology. Wolf views even the classic criticism of liberal trade (that it benefits the productive economies of developed countries while taking advantage of developing nations) as an advantage to the global economic efficiency, for it provides the highest possible productivity. What Wolf does not touch on, however, is the danger that lies with nations' interdependency in terms of capital. Without checks on the rate at which globalization inevitably multiplies, an economic downturn experienced by one nation will have devastating effects across the globe.

Nowhere can the danger of interdependent market economies be seen more clearly than with the debt crisis in Greece. The creation of the Eurozone allowed for a fluid trade environment within the European Union, but as Greece threatens to default on its loans, all of the countries in the Union suffer from the decreasing value of the Euro. The European Union must continue to support Greece in order to stave off complete insolvency, but here Wolf’s premise becomes harmful. Every country in the European Union faces economic disaster if Greece’s struggles destroy the value of the Euro, and yet no country, newly prosperous Germany in particular, wants to sacrifice their own profit in order to aid an unstable nation fraught with political turmoil.

Yes, as Wolf lays out, the value of the Euro lies in the ease of currency flowing across borders. A globalized economy allows for the most efficient market, but do the risks of interdependency outweigh the benefits? Wolf would say no, but Greece’s recent failures create pause. If their economy continues to spin out of control and the country defaults on its astronomical debt, the entire European Union will feel the effect.

Furthermore, Greece is not the only country threatening the fate of the Eurozone. Like Greece, Spain’s economic situation is similarly troubling. High unemployment in the nation demonstrates a stagnated growth that threatens Spain’s market economy. Spain’s struggles in turn exacerbate the difficulty facing the EU. Just as with Greece, much of the country’s fate rests in Germany’s hands. One of the few countries facing economic gains, Angela Merkel’s nation must now decide to what extent it must support almost single-handedly those nations that have not successfully regulated their own economies.  

Economist Joseph Stiglitz speaks extensively to the dangers of globalization, highlighting the common criticism that Wolf glosses neatly over. Highly industrialized nations have benefitted greatly from globalization while leaving their less advanced contemporaries far behind. Yet in this instance it is not developed versus developing, but rather a group of developed nations. Should Germany focus on its own self-interest and increase its comparative advantage? In a short-term, nationalistic sense, the country should leave its struggling neighbor-states behind. Yet because of the interdependency promoted by globalization, the short-term benefits of establishing market dominance may lead to long-term costs across the continent.