If at first you don't succeed: Ireland and the Lisbon Treaty.

In June 2008, a proud nation riding on a wave of prosperity voted no to the Lisbon Treaty. On October the 2nd the people of Ireland will vote again. The current landscape is vastly different to that of June 2008. With hopes that the Irish banks are solvent looking increasingly fanciful, house prices down 20-30 percent and still falling, and unemployment at a 14 year high the swagger of the Celtic tiger has been humbled. What does this mean for Eurocrats anxiously chewing their nails in Brussels?

At the moment it is looking likely that they will soon be able to rouse from EU from its institutional hibernation and into an era of a European President, a diplomatic service and perhaps a European army. Unfortunately, the no vote of last year was more an inditement of the incompetence of Irish politicians, voters parochial focus, and the vulnerability of the public to base, if well funded, scaremongering. The government’s negotiation of guarantees regarding the autonomy of Ireland’s policy on military neutrality, taxes and abortion will starve the no campaign of its signature objection. The Irish people have come to the realisation that a country of 4 million people cannot claw its way out of such a deep economic quagmire without the benefits of EU membership. Similarly, the government has hopefully learned its lesson and we should not see a repeat of the mind-blowing naivety displayed by the Foreign Minister Dermot Ahern when he admitted to the press that he had not read the treaty. These evolutions all favour a Yes vote. However, lets look at these areas in more detail.

According to a recent report by 66 leading non-government economists, while it is difficult to compute the exact benefits of a Yes vote, the deleterious effects of a No vote are much easy to identify. A No vote would impact negatively on international confidence in the Irish economy and thus increase our cost of borrowing. Similarly, our role as a committed member of the EU helps attract international investment. DFI is the lifeblood of the Irish economy, a no vote would imperil our attractiveness to large multinationals looking for a base in Western Europe. On balance 91 percent of the economists believed that from a purely economic point of view Ireland should vote yes.

It is also relevant to note that the result of Ireland’s vote will have effects far beyond those on the Irish economy or the careers of EU Presidential hopefuls. As an economic and regulatory pole the institutional health of the EU directly impacts on the countries which border it. A revitalised EU would act as a stabilising and moderating force across Russia’s eastern borders as well as in Turkey and thus into the Middle East. An outdated and stagnant structure could well provoke instability. This is a reality, our actions do not happen in a vacuum and we should not act like they do.

Thankfully, a majority of Irish people see Ireland’s membership of the EU as a positive thing, a recent Irish Times poll put that number at 80 percent. The challenge for the Yes campaigners is to motivate voters given the treaty is largely a matter of improving political and administrative procedures. Sexy it is not. However, by centering their campaign about whether we want to be part of a more effective European Union, banishing any lingering complacency and ruthlessly countering the No campaign’s propaganda a Yes vote is highly achievable. MEP’s fingernails should be safe.

Is Europe irrelvant?

Europe is what the French term “le vieux continent”. The continent from whose midst sprang explorers and colonisers, thinkers and emperors, and both the industrial and the agricultural revolutions. However, while the internal landscape of what Mark Mazower termed the “Dark Continent” has arguably become somewhat brighter, is its ability to project its influence across the world slowly fading away?

Europe’s influence, as once manifested by British naval dominance or the Dutch trading empire, is but a distant memory. Although Europe’s economic and military strength arguably began to wane, at least in relative terms, from the beginning of the 20th century it took the Second World War to force the European elites to face up to this harsh reality. Their response was to look to the US, and to project an image of Europe as an ideological, economic and strategic ally, a bulwark vital to preserving US security. This perception was mutual and post WW II Europe’s security and prosperity were greatly aided by both American dollars (Marshall Aid) and guns (NATO).

However, any depiction of Europe as an exhausted continent surviving by virtue of American largesse and defined solely by an American tropism is overly simplistic. Efforts to construct, a European union which would fuse the various attributes of the European Nation states into one cohesive and potent actor have progressed, albeit at a varying pace, since its foundations were sketched out by the Treaty of Rome in 1958. Indeed, the EU is now a Union of 27 countries, a Union which continues to pursue the goal of a borderless economic area with the free movement of capital, goods and people. With a central bank and a common currency to which 16 states adhere, the EU is the singular most successful example of regional integration in the world. Taken as a single entity it is the largest economic unit in the world with a GDP of over $13 billion (PPP).

With this statistic in hand it would seem hard to dismiss the EU as irrelevant, for surely the world’s largest economy has enormous influence in a world seemingly mesmerized by materialism. Yet this fact simply papers over the reality that the European Union remains a grouping of states who seek above all to guard and then to maximise their self interest. As a consequence any effort to act as a coherent bloc engenders a long and complex process which ends in deadlock more often than in agreement. The economic sword which Europe wields is ultimately blunted by the reality that it remains a collection of nation states.

Europe’s hand is further weakened by the demographic weakness of the continent, or what is commonly referred to as its “ticking time bomb”. Europe’s population is growing older and while this may render conflict less likely it also poses significant fiscal challenges to Europe’s current system of social welfare and pensions. The US has a stronger demographic outlook while India and other developing countries make Europe’s demographic look like a form of advanced sclerosis. Militarily Europe is a pale shadow of its former self. European defence spending languishes at around 1.7%, compared to US spending which stood at just over 5% in 2008, while China continues to increase its defence budget by over 10% annually. Robert Kagan’s quip that Europeans are from Venus while Americans are from Mars seems to ring true.

Several recent events lend credence to the thesis that European influence and power are on a downward slope. Russia felt confident enough to both invade Georgia and to engage in a diplomatic conflict with Britain within the last year. Following the disturbances in the aftermath of the disputed elections in Iran, it was British diplomats who were detained rather than those of the “great Satan”. Britain one of Europe’s most powerful countries is perceived as toothless. China’s decision to cancel the EU-China summit in 2008 as well as moves towards a G 2 unit seems to confirm the hypothesis of a European decline towards irrelevance.

However, there are certain recent trends or even points of view which contradict the notion of a degenerative European decline. Firstly, the ideological conflict derided as passé by Fukuyama and others in the 1990’s is back. This is evident when one looks at the increasingly alluring form of authoritarian capitalism which has catapulted China into its role as a superpower and which until recently seemed to be propelling Russia back to its former greatness. Faced with this challenge, Europe the continent which invented what has proven to be the most effective form of political organisation in history – the nation state – can play a key role in reinforcing the bedrock of liberal democracy on which the US is built. The US should not underestimate the role that Europe can play in disseminating and protecting the values which the US prizes. This role has been reinforced within the last 10 months as the ideology behind profit driven US capitalism has been discredited by the financial crisis and the ensuing economic downturn. Europe’s social market capitalism has suddenly become increasingly attractive to countries who have been shocked by the widespread destruction seemingly inherent to the American model. This ideological influence confers Europe with a sense of relevancy which it would appear difficult to ignore, in particular in the midst of current efforts to reform capitalism.

Using the definition advanced by Joseph Nye which sees power as a diffuse and multiform concept one can point to this ideological influence as well as the EU’s ability to create rapidly universalising norms, regulations and standards as evidence of the EU’s widespread “soft power”. The fact that the Wall Street Journal and other papers have begun to refer to Europe’s efforts to enforce various norms as proof of its “normative imperialism”, suggests influence and power and definitely not irrelevance. Similarly the fact that Europe contains two states who are both permanent members of the UN security council and have nuclear weapons denotes a certain relevance.

A further point of view is that of Gideon Rachman who sees Europe’s weakness as the means of acceding to a sort of “nirvana”, a way for Europe to surrender the multitude of responsibilities which clutter the agendas of the world’s great powers. For him, Europe has thrown off its yoke and the “white mans burden” or a sense of a “mission civilisatrice” have no place in the new Europe. I agree with him that Europe’s presence on the world stage has shrunk considerably from the giddy heights of the pre-20th century world. However, it is far from irrelevant. Nonetheless, the question as to whether the path towards irrelevance is an attractive one demands serious reflection.

The success of Europe’s endeavour to become the pioneer of a new type of power will ultimately define the continents relevance in the 21st century.

Going Soft. Does Barack Obama need to start flexing his muscles?

During the Presidential campaign and even during the primaries, Obama’s opponents were swift to underline his relative lack of foreign policy experience and question his ability to make tough decisions. Following his election, his subsequent commitment to dialogue and the abandonment of the Bush era Manichean rhetoric these voices began to decry the Carter-esque weakness of President Obama. To critics such as Rush Limbaugh he is too soft on America’s enemies and too quick to talk where only force will be understood. To what extent, if any, are these criticisms valid?

President Obama has made it clear that he views the world through a prism almost diametrically opposed to that which coloured the thoughts of George Bush. Where Bush saw the need to assert US hegemony through overwhelming force, a fact succinctly illustrated by the label applied to the invasion of Iraq in 2003 (Operation Shock and Awe), Obama seems more motivated by the pressing need to counter the anti-American sentiment which has blossomed in many parts of the world during the past decade with dialogue and engagement. Take Iran for example, where Bush seemed only to threaten a metal fist Obama has extended an outstretched hand- albeit one that has yet to be accepted.

While dialogue and engagement were also employed during the Bush era, the six party talks involving N Korea being one such example, they seemed to take a back seat to a more abrasive approach. Following the recent N Korean nuclear test Obama has increasingly come under fire for not knowing when to change track from soft to hard power. Obama’s capacity to at once empathise and reason, lecture and enquire, reassure and challenge would seem to be of little use when confronted by the intransigence of the isolated dictator. Words carry very little, and probably no, influence at the court of Kim Jong-il. Elsewhere, Benjamin Netanyahu’s unwillingness to bend to President Obama’s will with regard to the halting of the expansion of Israeli settlements seems to be another failure of soft power when faced with a refusal to compromise.

Yet this reading of both the North Korean and Israeli case are somewhat misleading. By engaging the other four members of the six party talks the “soft” approach can still exert pressure on Kim Jong-il’s regime through the tightening of closely targeted financial sanctions and reassure its neighbours through the formulation of a cohesive contingency plan. Similarly while Mr Netanyahu may seem closed Obama’s suggestions, Obama’s speech in Cairo may well have laid the groundwork for a fundamental rethink of US policy which would force Netanyahu into making the decision between compromise and profound damage to the US-Israeli relationships. Similarly, critics of Obama’s supposed reticence to respond decisively to pressing foreign policy concerns often overlook the fact that he is sending 20,000 more troops to Afghanistan and that drone attacks on targets in the AfPak area have increased since he came to power.

The much needed paradigm shift from the ineffective and ultimately self defeating world view of Bush should be welcomed by Americans as a valuable opportunity to reverse the decline of Amerian power and influence in face of what is increasingly being called the “Asian century”. The attempt to tar Obama with the label of an overly soft President is a reduction a more complex reality. The desire to engage with countries of great importance for global stability is both laudatory and necessary. The real danger, as Gideon Rachman so astutely pointed out in a recent article in the Financial Times, is that expectations for soft power surpass realistic barometers, for as Obama himself pointed out in his speech in Cairo - words alone are not enough.

However, Obama is aware that a successful combination of both soft and hard power is integral to the formulation of the “smart power” America must exude if it is to consolidate or even maintain its influence on a rapidly evolving world stage. Thus, Obama’s efforts to reinvigorate US soft power should be welcomed and not scorned. President Obama’s foreign policy does not rest purely on eloquent speeches and empathetic sentiment but rather on a pragmatic blend of both his and America’s strengths.

If this approach is deserving of criticism, I must be missing something?

Economic sanctions.

The recent underground nuclear test in North Korea has once again focused minds on the pressing need to control nuclear proliferation. Mr Obama’s laudable desire to see a non-nuclear world appears a distant utopia when confronted by the determined efforts of states such as N. Korea and Iran to arm themselves with nuclear capabilities. To most sane commentators the question is not should these two countries be permitted or even encouraged in their quest, but rather how can the rest of the world stop this quest before it becomes an even greater threat to regional stability. Inevitably, the responses to these two scenarios have varied, in large part as a function of the proponent’s position in the political spectrum, with diehard neo-cons continuing to support a surgical bombing campaign and more liberal aspects proposing dialogue backed up by a more comprehensive raft of economic sanctions.

While the absence of large scale public support for military intervention in Iran or North Korea as well as resource shortages have rendered it far less likely than it appeared to be in 2006 or even 2007, economic sanctions have remained at the forefront of many proposals. However, the effectiveness, desirability and morality of economic sanctions are the subject of much debate. Are economic sanctions effective in targeting political regimes? Should the US and other countries continue to build many of the policies around their implementation?

Many, but not all, of the criticisms levelled against economic sanctions originate in the humanitarian domain. The UN sanctions imposed on Iraq during the 1990’s are a vivid illustration of the negative effects of sanctions on the welfare of the people who live under the target regime. A 2003 report by the Norwegian Red Cross cited a negative correlation between economic sanctions and average life expectancy and employment levels, and a positive correlation with infant mortality. The suffering which these measures inflict upon the population leads to a number of outcomes; firstly it can lead to a criminalization of the economy and of civil society of both the target country and even neighbouring states, as people try to bypass the sanctions, and secondly it can lead to a “rally around the flag effect” and the demonization of the countries or bodies imposing the sanctions.

In response to these criticisms, the last decade has seen the emergence of the concept of “smart sanctions”. Much like the bombs from which they derives their name these aim to minimise the deleterious effects of the sanctions on the general population by specifically targeting the political regime through instruments such
as asset freezes, travel bans, and arms embargoes.

Efforts to justify the use of general economic sanctions and the human suffering inflicted by them is often based upon the belief that the benefits outweigh the costs and that other policy instruments such as crude force have a much higher human cost. Similarly, while the seminal work on the topic “Economic sanctions reconsidered” states that economic sanctions have only been effective in the partial or full attainment of their goals in 34 percent of the cases examined between 1914 and 2000, David Baldwin reminds us in “Economic Statecraft” that few other policy options except perhaps, direct application of military force have a higher success rate.

Faced with leaders as intransigent as Kim Jong Il the reality is that sanctions can often appear to the most politically expedient response to conflicts which offer few, if any, viable solutions. Economic sanctions demonstrate a will to tackle a problem, while avoiding often unpopular and costly direct intervention. However, their symbolic potency is enfeebled by increasing systemic impotency. In order for economic sanctions to be effective they have to be multilateral, and with the current recalibration of world power and the competition for influence and resources which this has engendered, consensus is far from easy to achieve. Also the level of influence which sanctions exercise is often a function of their impact on the country’s economic well being, and thus is closely linked to their impact on the well being of the population.

So where does that leave us? Economic sanctions often negatively impact on the well being of the people of the countries they target, yet both their efficiency and their inherent weakness springs from the level of economic stagnation they provoke. “Smart sanctions” seem on paper to annihilate the worrying side-effects but also risk not having the dosage necessary to solve the problem. Under domestic and international pressure to act politicians often take refuge behind the imposition of sanctions while failing to identify clear goals which they are supposed to achieved.

Economic sanctions are a lever of influence which can play an important role in foreign policy. However their efficiency is reliant on their implementation alongside other policy instruments, as part of a multilateral agenda and in the search of pursuit of clearly defined goals. Both North Korea and Iran illustrate the limits of sanctions, the difficulties of effectively targeting specific programs and the challenges posed to enforcement by a world defined to a large degree by globalisation and the multiplicity of trade and communication channels. While economic sanctions are by no means an end goal in themselves, they are a means of getting there. It is policy makers own interest to clearly demarcate the often blurry line between moral probity and political expediency.

A cry for help. But should we listen?

Back in February of this year Morgan Tsvangirai led his party into a unity government with the Robert Mugabe. Tsvangirai declared that although he was well aware of the risks implied by this strategy, he believed it best served the interests of the Zimbabwean people. Meanwhile, the rest of the world looked on sceptically, withholding financial support until they could see “evidence of true power sharing as well as inclusive and effective governance”.

Unfortunately, the world still waits for clear signs of any real devolution of power from Mugabe and his cronies to the MDC. Thus, while Mr Tsvangirai recently made a plea to the international community to provide Zimbabwe with the money it needs to escape the downward spiral of poverty, violence and crime into which it has descended, the US, the UK and other states remain hesitant to break out the check books.

The case of Zimbabwe aptly illustrates a dilemma which is oft replayed on the world stage. A country with a rather insalubrious ruler, a populace on the brink of starvation, and an opposition party whose existence is precarious, seems to be at last turning to a new and brighter page of its history. However, the old guard remains entrenched in the apparatus of the state and consequently donor countries not only fear that any final support would be siphoned off by corrupt bureaucrats and politicians but also that any help would encourage stagnation rather than progression by hiding the need for profound systemic reform.

In a previous post I questioned the validity of the principles underlying the fundamentals behind seemingly indefinite aid flows, but in this case, the case for financial support to help restart an almost decimated economy and restore a failed health and educational infrastructure appears in my opinion to be relatively sound. If it was certain that the €6.2 billion requested by Mr Tsvangirai would go towards rebuilding the country and helping the Zimbabweans the decision would be far more straight forward, but recent signals and even a cursory look at the country’s institutions makes this seem unlikely.

The imprisonment last week of two journalists who had dared to criticise the regime and of a prominent human rights lawyer illustrates the continually oppressive nature of the Zimbabwean regime. Mugabe’s refusal to remove his supporters from the post of Attorney general and from senior positions in the Central Bank as well as a renewed wave of farm occupation by ZANU-PF loyalists suggests that few if any profound changes have occurred.

Mr Tsvangirai continues to assert his belief that the only way forward is to work alongside Mugabe as a stepping stone to a new beginning. Unfortunately, Mugabe’s intransigence and the continued scepticism of the international community could see the Zimbabwean people’s last vestiges of hope swept away by a further wave of violence, disease and famine.

The Recession and the State

Since the signing of the Treaty of Westphalia in 1648 the nation State has played the lead role in international relations. For while the internal make-up of the State has undergone several profound evolutions, in Europe from monarchy or empire down the path towards democracy, the characteristics of the international system have appeared to remain more constant. However, over the past twenty years or so there have been an increasing number of observers who have advanced the idea of a “decline of the state”.

Citing the increasing disillusionment with politics and the mounting influence of non-state actors such as multi-national firms, regional and international institutions and the ballooning role of pressure groups and NGO’s, academics such as Susan Strange declared a new era in International Relations. A new system in which States faced with issues which cannot be dealt with on a national level, such as terrorism, crime or climate change, no longer enjoy a monopoly of power, and will see their actions constrained by increasingly assertive and powerful non-state actors. Their authority eroded, they will no longer be the unquestioned and unchallenged kingpins of the international system.
The economic quagmire in which the world now finds itself entrenched provides a valuable opportunity to analyse the role of the hypothesis of a decline of the state. First of all, it is necessary to state that no state has yet collapsed as a result of the crisis. Similarly, calls for an international regulatory body have failed to take shape, and fiscal and monetary responses have emanated from national governments rather than from international or regional institutions. Even the European Union, often held aloft as a shinning beacon of hope for regional integration, has been unable to encourage member countries to form a single cohesive response to the economic turmoil, and the ECB has been widely criticised for its intransigence with regards to interest rates.

However, the IMF which had struggled to find a raison d’être in recent years has been infused with a new sense of purpose, much needed funding, and importantly states, led by Mexico, who are once again keen to do business with it. Indeed, the IMF is perhaps a prime example of an international institution which highlights the vulnerability of the state, its structural readjustment programs and other fiscal restrictions clearly violating the notion of sovereignty which lies at the heart of the Westphalian order.

In the introduction to her book “The Retreat of the State”, Susan Strange places particular emphasis on the importance of public opinion as opposed to academic opinion. Since the onset of the financial crises the public has not turned towards an NGO, the World Bank, or the large corporations, but rather they have demanded a response from the state. Although this would seem to convey the fact that the state remains the central actor, is this is really a sign that the State still remains authority over its territory and population. The fact that the so many states were forced, by the fear that a failure to do so would lead to a sort of financial Armageddon, to pour vast quantities of liquidity into both banks, insurance companies, and even manufacturers is surely as much a sign of the constraints that are placed on the state as it is of its pre-eminence.

The public’s faith in the abilities of large firms and in particular the banks has been profoundly undermined, pressure groups are increasingly in danger of being drowned out by fiscal imperatives and fretting central bankers, and the temptation to use nationalism to distract increasingly malcontent citizens risks undermined regional and international institutions. Do these factors dictate that the State’s authority will be restored and the principle of sovereignty restored to its once lofty perch?

The answer of course is no. For while world trade flows have sharply dipped and people have once again turned towards the state for a solution, this does not change the fact that we live in a globalised world in which high levels of interdependence render futile the efforts of single state units. Climate change can no more be countered by America, than the current recession can be ended by Alistair Darling and the British Exchequer. The nation States autonomy is significantly curtailed by the reality of this complex and interlinked world, and while the nation state is by no means about to disappear, its absolute power is no more.

Piracy in the Gulf of Aden: The legacy of a failed state.

In recent weeks pictures of teary reunions between liberated crew members and their families have once again brought piracy back to centre stage. Daring commando raids and Kalashnikov totting pirates have been gold-dust for a media otherwise engaged in an increasingly stale commentary of the global recession. Several prominent leaders have affirmed their commitment to combating the scourge of piracy, President Obama declaring that he was “resolved to halt the rise of poverty”.

In the meantime, attacks in the Gulf of Aden have continued and both ships and crews from all around the world are docked off the coast of Somalia in the possession of various pirate gangs. The response to the increased threat of piracy in the Gulf of Aden, while politically expedient is likely to be prove ineffective. Reinforcing the Naval presence in the area while potentially helpful is merely a superficial response to a more profound problem. With a vast area to patrol, 6.6 million square kilometres, and a limited number of ships, the international naval presence is spread thin.

The Gulf of Aden is a vital artery for world trade and approximately 20,000 ships pass through it every year. According to the International Maritime Bureau there were 111 attacks on shipping in the gulf last year of which 42 were successful. Sources from nearby countries put the ransom money from these operations at $350 million, a very significant amount in a country where GDP per capita hovers around $600. In recent months the naval presence in the area has been bulked up with forces now hailing from China, India, Italy, Russia, France, the United States, Denmark, Saudi Arabia, Malaysia, Greece, Turkey, Britain, and Germany patrolling the waters off the coast of Somlia. However, this approach seems to be having little or no effect on the security of shipping in the area, with the Maritime Bureau reporting over 70 attacks so far this year.

While the success percentage of the attacks is relatively low and the percentage likelihood of a boat even being attacked in the Gulf of Aden is around 0.5%, the threat from piracy has had several significant consequences. Insurance costs for boats travelling in this area have increased, and this twinned with the fear of attack has led to many ships being diverted around the Cape of Good Hope, resulting in higher costs and slower transport times. Also, boats passing through the Gulf pay for access to the Suez Canal providing much welcome income to the Egyptian government, with revenues declining Somali piracy could have a negative impact on regional stability. Estimates of the total cost of global piracy range from $1 billion to as high as $16 billion

How should be respond to the growing threat of piracy? The sheer vastness of the area to be patrolled renders patrols mostly ineffective, and shipping companies reject calls for convoys on the grounds that they would introduce too many constraints on ship movements. The UN introduced passed four resolutions in 2008 which aimed to help combat piracy by permitting the pursuit of pirates within Somali jurisdiction (with Somalia’s consent). Yet the reality is that prosecuting pirates is almost impossible due to the innumerable complexities of international law. Recent debates have centred on possible links between terrorism and piracy, but the links between the two seem at best “tenuous”.

Any responses up until this point have been almost entirely defensive in nature; arming crews, hiring private security to protect boats, and as discussed above increased naval patrols. Other suggestions are the formation of a regional anti-piracy framework such as that which was effective in combating pirates in the Straits of Malacca, which link the Indian and the Pacific Oceans. However this proposal, as well as that for the formation of a Somali coast guard, tend to overlook the internal instability in Somalia which renders any such step almost impossible. For as Defence Secretary Robert Gates recently stated “piracy will continue to flourish in the area until a stable government is installed in Mogadishu”.

The link between the absence of any central Somali authority and the growing incidences of piracy is illustrated by the fact that during the brief rule of the Islamic Courts Union in 2006 attacks in the Gulf were almost non-existent. However, political appetite for intervention to reinforce the authority of a Somali government could not be less. Not only does the US have haunting memories of the ill-fated military intervention in 1993 which has become synonymous with the call “Black hawk down”, but current interventions in Iraq and Afghanistan are currently absorbing the energies of many western nations.

What does this mean? The reality is that while the pirate attacks in the Gulf of Aden are a threat both to commerce and to the safety of crews, this threat is not sufficient to justify the land based intervention that is necessary to tackle the root of the problem. States and shipping companies will continue to follow a defensive strategy, aiming to minimise the number and success of pirate attacks. Meanwhile, the pirates will continue to invest in faster boats, better weaponry and more advanced technology. An escalation of violence, especially in the aftermath of recent US and French commando operations, seems almost inevitable.

What future for Aid?

As countries revenue streams tumble and their debt obligations continue to rise, budgets are coming under increasing scrutiny. One facet of spending which is likely to meet with increasing opposition is aid commitments. This tendency will undoubtedly be widely decried as morally corrupt. However is this reaction justified, is aid really that vital? Should we urgently resist any attempt to cut aid, or as Dambisa Moyo declares, is aid is the problem rather than the solution?

Taking the case of bilateral aid (rather than emergency aid) to Africa there is a broad spectrum of opinions. Moyo, in her book Dead Aid, provides an avalanche of figures supporting her statement that aid has in fact constrained their ascent up the ladder of economic development by fostering a culture of dependency, encouraging corruption, and propping up repressive and autocratic regimes. She cites the case of Zimbabwe and the $300 million aid it received in 2003 as an example of providing a lifeline to a struggling dictator, while Professor Bill Easterly another prominent critic of aid cites western payouts to Mobutu Sese Seko of Zaire. The idea that aid could encourage corruption and lethargy on behalf of governments and state officials is one which seems plausible, because it is fungible aid may be easily stolen redirected or extracted and stories of Mugabe’s excesses in Zambia and that of other African leaders are well renowned. Indeed, in 1999, the Economist estimated that African leaders had stowed $20bn in Swiss bank accounts. What is more, the recent growth rates of several African countries heavily dependent on aid, when compared to the growth rate of other developing countries such as those of SE Asia do not act as a good advocate for increasing or even maintaining aid flows to these countries.

However, these figures taken in isolation can provide a somewhat misleading picture. Africa, suffers from what geographical determinists like Jared Diamond see as several natural disadvantages- a harsh climate, arbitrarily drawn borders, ethnic diversity etc. What is more, the fact that corrupt African countries receive a lot of aid is not proof of a causal link between aid and corruption. Paul Collier, an economist at Oxford, determined that aid flows are subject to less corruption than other revenue sources, such as those emanating from natural resources, a finding which suggests that aid is far from the absolute corrupter that critics make it out to be, but rather a result of a broader socio-economic context. Where there is significant disaccord is on the interpretation of statistical studies which attempt to establish a relationship between aid and economic growth. Where Moyo sees a hindrance, Burnside and Dollar, two economists at the World Bank found that aid is positively correlated with growth, albeit with a diminishing rate of return. While the studies on the impact of aid on economic growth may be somewhat open to contestation, aid has had other positive effects which are widely accepted even by its critics. Professor Easterly accepts that “foreign aid likely contributed to some notable successes on a global scale, such as dramatic improvement in health and education indicators in poor countries”, and a dramatic increase in life expectancy on the African continent. This equates to saving people’s lives, a fact that it would be difficult if not impossible to give a monetary value.

It is difficult to oppose the notion that large flows of bilateral aid provide a dangerous temptation to engage in corrupt practices. However, this can be countered by increased transparency and a more efficient monitoring of the spending of aid moneys. The idea of an international independent evaluation group made up of staff trained in the scientific method from the rich and poor countries, who will evaluate random samples of each aid agency's efforts seems particular noteworthy.

So what is the solution for Africa, a continent which remains firmly rooted at the bottom of league tables measuring economic performance, life expectancy and many others? Aid should not be viewed as a long term solution, nor should it be seen as disposable in the short term. Jeffrey Sachs, author of “The End of Poverty” is a proponent of the “big push” approach which advances the notion of a significant increase in aid in order to stimulate a rapid 'step' increase in Africa's underlying productivity, both rural and urban. Dambisa Moyo suggests a phone call to African governments telling them aid will stop in 5 years, in order to rouse them from their aid induced stupor and encourage them to seek help from international markets, in particular FDI and bond offerings. Robert Calderisi, who spent three decades working for the World Bank suggests cutting aid to African countries in half and focusing on supporting governments who are serious about pursuing reform.

Whatever approach is adopted it must keep at its forefront the welfare of the people of Africa, and favour their long term security and economic independence. However it is worth calling to mind the statement of President Kennedy that “to those peoples in the huts and villages across the globe struggling to break the bonds of mass misery, we pledge our best efforts to help them help themselves, for whatever period is required—not because the Communists may be doing it, not because we seek their votes, but because it is right. If a free society cannot help the many who are poor, it cannot save the few who are rich.”

Ireland's emergency budget: Swimming against the current.

I wrote some time ago about how the Irish economic outlook was looking bleak. Unfortunately the situation has since deteriorated. On the 27th of March Standard and Poor’s downgraded the Irish sovereign debt rating from AAA to AA-plus, and labelled its outlook rating as “negative” meaning a future downgrade could be on the cards. As fiscal receipts tumble and the demand for welfare payment booms the budget deficit for 2009-10 is estimated at around 12%. With Standard and Poor’s predicting that Ireland’s net general government debt burden could peak at over 70 per cent of gross domestic product by 2013, and GDP declining by 7.5% in the last quarter of 2008, the call for a decisive response could not be clearer.

So it was with a sense of baited breath that many in Ireland waited for the emergency budget which was released this Tuesday the 6th of April. The task facing finance minster Brian Lenihan was nothing short of Augean. Faced with a burgeoning public sector pension burden, a public service unwilling to forgo any of their privileges, a banking sector who have lost the confidence of investors and consumers alike, and a private sector who are facing an exodus of the FDI few, if any, can see the light at the end of the tunnel. Indeed, many were questioning if Brian Cowen’s government was capable of discerning a path which would lead Ireland back up towards daylight.

The emergency budget set out to try and slow Irelands slide towards ever greater debt and attempt to prop up a banking system which lies paralysed and some argue insolvent. The centre piece of the measures to reign in the deficit is a levy of 2, 4, and 6% respectively on the gross income of those earning above 5,028 euro, 75,036 and 174,980 euro. This levy seems to be a clear statement by the government that they believe that while the G20 calls for ever greater stimulus packages, Ireland simply cannot afford to further imperil its public finances. Brian Lenihan believes that the higher interest rates which would accompany further borrowing would outweigh the positive aspects of an increase in spending.
However, the government also announced the creation of the National Asset Management Company which will take over €80-€90bn of bad loans. This makes Ireland the first EU country to implement the much debated bad bank solution in a bid to restore liquidity in the Irish credit markets, and also burdens the government with the debt it is trying to minimise. The government argues that this is justifiable as the negative economic effects of a continued nuclear winter in Irish lending markets would be catastrophic for national GDP, unemployment rates and the confidence of the international markets.


While Brian Lenihan’s move against the consensus expressed at the G20 for financial stimulus may at first to appear to be foolish, the markets lack of faith in Ireland’s ability to repay its debt, the restrictions on monetary freedom imposed by membership of the Euro lend it a certain air of sagacity. Ireland’s recovery will depend on export led growth and thus it is key that we strive to minimise the extent to which our ability to respond to the eventual global recovery is compromised by the debt burden. The next task, in the name of both equality and economic rationality is to tackle the bureaucracy that cripples the efficiency of the public sector and the health of the Irish exchequer. This will be neither popular nor straightforward, but unless government spending is brought back into a sustainable range Ireland’s recovery will be seriously impaired. With the latest budget it seems that Brian Lenihan has picked the right road. Now he must continue in the same direction, delays must be avoided for in the current environment hesitation spells devastating consequences.

Friend or Foe? The USA and China.

(A map purporting to substantiate the Chinese claim that they "discovered" America before Columbus)

Sino-American relations are arguably the most important bilateral relationship in the world. While the EU surpasses both of them in terms of economic weight, I believe the shape of the international system over the next century will ultimately be decided by the relationship between China and America. However, since the early 1970’s when Kissinger and Nixon officially restored diplomatic contact with China, their relations have been continuously buffeted by an array of factors. From posturing over the status of Taiwan, to the occasional nationalistic anti-American outbursts, such as those that followed the accidental bombing of the Chinese Embassy in Belgrade by NATO planes in 1999, the formulation of strategy on both sides has been impeded by the perception and misperception of the others intentions.

What does the future of US-Chinese relations look like? To what degree are the scars from the fall of the Middle Empire from a position of almost unshakeable domination to its humiliation at the hands of the western powers during 19th century still present in China? And most importantly, is the US capable of seeing beyond the paradigm of the Chinese threat to that of China as a long term strategic ally?

In order to respond to these questions one has to look at whether either country has what could be termed overarching foreign policy goals, and to the extent, or not, to which these are compatible. In the case of China since the reforms launched by Deng Xioaping its leadership have consistently reaffirmed two concomitant goals: economic modernisation and political stability. To which could be added territorial stability, and in particular a resolution to prevent Taiwanese independence. For America one can identify a desire to maintain and perpetuate their hegemony, which includes broadening the reach of their strategic and economic interests and to a lesser degree than his predecessor but still present under President Obama, the spread of American values.

Taking these two goals as the foundations of Chinese policy assumes that China will continue to adhere to Deng’s motto on the international stage - “hide brightness and nourish obscurity”. However, while the idea of a “peaceful emergence” and of a “world of harmony” were used to reassure both China’s neighbours and the west that China’s growth was not a threat, recently Chinese leaders have showed a greater readiness to employ the term great power. Yet this should not worry the West as although Chinese nationalism is a potent, volatile and worrying force, the Chinese leadership realise that the economic growth which provides the foundation of China’s political and social stability is dependent upon China’s insertion within the same international system which has allowed the quadrupling in size of the Chinese economy during the last two decades. Indeed, Robert Zoellick while assistant secretary of state in 2005 called on China to assume the role of a responsible stakeholder in the international system.

This call as well as the continued development of the Strategic Economic Dialogue (SED) under the tutelage of Henry Paulson are signs that the US recognises that if it wants to maintain its hegemony it needs to integrate China into the international system. In order to do so the US will have to coax China into overcoming its fear of multilateral engagement and continue to reform international institutions to ensure they remain congruent with an evolving reality. Any suggestion that the US should try and actively contain Chinese growth in a re-enactment of Kennan’s policy of containment displays an ignorance of the fact that globalisation has created a strategic and economic interdependence among states that renders this approach counter-productive. Similarly, I believe that this interdependence will prevent the realisation of the Sino-American conflict which John Mearsheimer views as increasingly probable.

While I have no hesitation in condemning the blatant disregard that Beijing routinely shows for human rights I believe that this will not derail US-Chinese cooperation. The fact that during Hilary Clinton’s recent visit to China she did not repeat the condemnation of China’s human rights record that she has vociferously voiced in the past was a further reminder that economic and strategic considerations will take precedence over humanitarian scruples. Indeed before she set off for Asia she declared in an interview with the BBC that "our pressing on those issues (human rights, Taiwan and Tibet) can't interfere with the global economic crisis, the global climate change crisis and the security crises."

The global economic crisis has served to highlight the need for increased cooperation between two and the urgency with which the west must try and increase China’s involvement in and commitment to international institutions such as the IMF and the WTO. Accusations over exchange rates and the temptation to engage in protectionism should be carefully avoided. While the Chinese government will face increasing civil unrest as many face the spectre of unemployment without any social security (some put the number of recent job losses as high as 20 million) , as Minxin Pei explains in a recent edition of Foreign Affairs its highly tuned mechanisms of repression mean it is unlikely to lose power.

Chinese growth looks set to continue. America has faltered, badly. However, with America looking to China to respond to Geithner calls for a bigger gobal stimulus and China heavily reliant on America both as a destination for its exports and as its major source of FDI conflict in the short term looks unlikely. China, at least for now, seems to believe that in its re-emergence “the road to the East runs through the West.”

Political stability under threat?

The idea of contagion is oft quoted by economic correspondents as they chart the diffusion of the liquidity drought throughout the economic world, yet its wider political implications have, in general, received scant column space. The notion that economic health impacts on the political sphere is universally accepted, yet how exactly will the current economic context impact upon the political landscape?

Will the crisis fundamentally weaken the appeal of the free market form of capitalism which has become the mainstay of the world’s democratic countries? Will this crisis, as that of 1929 did, push people towards the political extremes and polarize both opinions and parliaments?

The relationship between capitalism and democracy is oft debated, but as Charles Calomiris states, in recent times democracy has provided a framework conducive to spread and maintenance of individual freedoms upon which both capitalism and western society are founded. Yet the fate of capitalism has rarely seemed so uncertain, and Marx is undoubtedly chuckling in his grave at the exposure of many of its inherent contradictions. However, the FT newspaper has gathered together a group of fifty prominent actors and thinkers to reflect on “The Future of Capitalism”, and while many of them bemoan its current sorry state they propose a re-calibration of capitalism rather than its overthrow. A consensus is building around the fact that the future of capitalism will most probably involve smaller private markets, and bigger governments. The model of capitalism which began with the dawn of Reagonomics and Thatcherism has been thoroughly discredited and as the dominant ideology of the west its decline, along with other factors, surely heralds the end of any lingering attachment to Charles Krauthammer’s “Unipolar moment”. This ideological blow may well contribute to an eastern shift in the balance of power. However, while the lustre of free markets may have faded democracy seems unlikely to go away.

But what about the 1930’s, one may cry? While the triumph of totalitarianism following the stock market crash of 1929 and the ensuing depression set a worrying precedent, it is one unlikely to repeated. However, this does not preclude significant political turmoil, a fact attested to by the protests crushed by riot police in Vladivostok, the violent clashes in Greece and more recently the civil disorder in Guadeloupe. Governments have fallen, Latvia and Iceland being the most pertinent examples and the grand European project is on the ropes. While this crisis should by its very nature benefit the left, the French sociologist Emmanuel Todd believes that it may well signal the rise of right wing populous leaders such as Nicolas Sarkozy and Silvio Berlusconi and an attendant erosion of democracy faced with their authoritarian and demagogic leadership style. Aristotle was a firm believer in the role of the middle class as a stabilising force, but in this recession as they bear the brunt of the pain the recently named “coping class” is increasingly unable and unwilling to maintain the status quo. The true test of political stability and allegiance will come as citizens are confronted with the inevitable evolution in fiscal policy towards higher taxes. This stress test will happen both on a national level where stimulus plans will have to be paid for and on the European level where the flow of transfers towards the struggling eastern countries will have to intensify.

Popular discontent with the current situation, the perceived injustice of the aid to financial institutions, rising unemployment and burgeoning government debt will dictate a profound evolution in the economic policy of most political parties. For the foreseeable future both politicians and voters will be preoccupied with the search for a solution. However, the extent of the political implications of the economic crisis are ultimately dependent on its duration and severity. A relatively smooth return to growth and stability would mitigate any lasting political legacy, but a drawn-out recession would foster social unrest which could lead to the redrawing of the political landscape.

With the future looking uncertain, one certainty remains: we must work to end this recession, and end it quickly.

Israel and Palestine: Should we put off until tomorrow, something which we can't do today?

Is it time to give up on the hope of an immediate and comprehensive problem to the Israeli-Palestinian conflict? Should the quartet temporarily abandon its quest for a long term solution in favour of a short-term stopgap? In other words, is the current context so inhospitable to a lasting settlement that talk of a two-state solution should be sidelined in favour of securing a new ceasefire agreement?

In a recent policy brief for the Carnegie Endowment for International Peace Professor Nathan Brown argues exactly that. He declares that the current context is simply not compatible with the negotiation and enforcement of a permanent two-state solution. Between political division, widespread mistrust, and growing disillusionment with the efforts to provide a solution, the factors that constitute the barrier to such a solution are evident for all to see. One of the foundation stones of this barrier is Israel’s and Hamas’ refusal to recognise the others legitimacy. While this impedes the negotiation required for a long term solution it does not, as previous ceasefires have shown, preclude the negotiation of interim solutions.

However, in a recent presentation to the Brookings Institution, Senator John Kerry declared that behind the seemingly intractable conflict lies an opportunity for significant progress. In his opinion, the kernel of this opportunity is Obama administration and the leadership which it can bring to negotiations. Like Brown, Kerry recognises that with the uncertainty surrounding the new Israeli government’s commitment to a two state solution is worrying, but he also believes that there are “four major causes for hope”. The first of these regards the geopolitical consequences of the rise of Iran- fear of Iran’s increasing power has created a willingness among other states to work with Israel. The second of these is Arab Peace Initiative, which could help to create a home-grown framework for peace. The third is the fact that the boundaries of an acceptable solution are increasingly apparent, and the fourth is the dawning of the Obama administration.

Both men acknowledge the reality that a solution to the Israeli-Palestinian must be a regional one. The direction of the next step taken to counter the Iranian nuclear program, stability in Pakistan, and the outcome of the current conflicts in Iraq and Afghanistan will all impact on the composition of any roadmap to peace between Israel and Palestine. However, even with a positive outcome in each of these areas tend to migrate towards Professor Brown’s stance. The rejuvenating power of the “Obama effect” has been diminished by the severity of the economic crisis, and the orientation of the new Israeli government threatens by its very nature to fundamentally undermine any efforts aimed at a two state solution.

While a suspension of the audacity of hope would not sit well with the Obama faithful it may well fit more smoothly with an increasingly jagged reality. Nathan Brown suggests a “Plan B” which waylays an approach centred on a two state solution in favour of “bare bones short term agreements and looking then to a medium term armistice”. This plan is based around the belief that these limited term agreements would foster an environment more conducive to the elaboration of a long-term solution. What remains key, independent of the approach chosen, is the inclusion of the Arab states in the process and the economic and political rehabilitation of the Palestinian state.

With each option the end goal remains the same, what changes is the timeframe. There is no denying that the only viable solution is one which proposes two states and which conclusively resolves the border question, the right to return, and Jerusalem. Any acknowledgement that the current situation may indeed hinder moves towards this solution must be accompanied by an iron clad commitment to creating conditions which favour its realisation. As Nathan Browne so aptly wrote “acknowledging and working with current realities does not mean accepting them as permanent”.

Put to the sword: What now for Globalisation?

While some choose to vilify globalisation, others worship it. While Naomi Klein identifies globalisation and the brand of “disaster capitalism” it has propagated as the root of the financial crisis, others view it as the only solution to the world’s current problems. In this post, rather than analysing the merits or otherwise of globalisation, I am going to examine whether the current context favours the advance of globalisation or if, as the Princeton economist historian Harold James argues, it sounds its death knell.

Last November capital flows to emerging markets reached their lowest level since 1995, and the market for international bonds collapsed. Gideon Rachman, writing in the FT, declared that this year’s World Economic Forum at Davos was characterised by a thinly veiled trend towards “de-globalisation”. British jobs for British workers. Buy American. Lend French. The reality seems to lend credence to this belief. The economist ran a cover with “the return of economic nationalism” emblazoned across the cover of one of its February issues. The success of this ‘return’ will be dictated by the outcome of the impending battle between nationalist and populist cries for increased protection and the affirmation of the reality that the hermetic sealing of any economy would not only be massively expensive but also ultimately Sisyphean.

This statement about de-globalisation holds if you believe that it is primarily about trade flows and international investment. However, globalisation can also be defined in a broader manner, in the words of the British political scientist David Held it is the “widening, deepening and speeding up of worldwide interconnectedness in all aspects of contemporary social life”. In this sense, the economic crisis will not reduce the ability of people around the world to communicate. The internet is not about to collapse, nor the vast networks of fibre-optic cables which support it. Religion is likely to benefit from the downturn as people seek solace in the spiritual. Criminality and terrorism will continue to develop increasingly global networks, while charities will be called in to pick up the pieces.

Those who equate globalisation to Americanisation will witness what Kushmore Mahbuabni terms as “the irresistible shift of power to the east”. However, globalisation has always been a vehicle for the spread of several cultures, and this shows no sign of abating. Although the internal hierarchy of the cultures it disseminates may now evolve.

Recent events have also highlighted the weaknesses of another interpretation of globalisation. Susan Strange and others who declared the “Retreat of the state” have been faced with a return to prominence of power politics. While traditional geopolitical calculations were never truly supplanted by non-state actors and economic considerations the recent nationalistic posturing of states such as Russia and Venezuela has underlined their importance. Nationalist sentiment might be inflamed by the crisis, but these nation’s means to act on this sentiment are being severely impaired by the continuing depression in the price of oil and natural gas- their major revenue source.

The outlook for globalisation is highly dependent on the manner in which you define the process. If you view it as an economic entity then de-globalisation is a reality. However, if you interpret it as David Held does then globalisation, in its complex entirety, will continue shape the world and the challenges we face.

Whichever interpretation of globalisation you choose one fundamental reality remains, the world is ill equipped to deal with many of the problems which it has raised or exacerbated. The recent uncertainty surrounding the future of the EU and continued question marks over the efficacy and the equity of other, among others, the UN and the IMF confirms this. For Moises Naim , editor of Foreign Policy, “the gap between the need for effective collective action at the global level and the ability of the international community to satisfy that need is the most dangerous deficit facing humanity.”

The need for a move towards global governance is intensifying. Yet no matter what the outlook for globalisation is, our ability and willingness to realise the changes necessary for such governance are, and will remain, severely lacking.

AfPak: a slide towards sedition?

The number one foreign policy priority of the Obama administration is clear: Asia. The recent visit of secretary of state Hilary Clinton and the appointment of Richard Holbrooke as the US envoy to Afghanistan and Pakistan confirm this reality. While the focus of Hilary Clinton’s visit was very much focused around economic and environmental issues, Richard Holbrooke’s primary task is one of stabilisation. In this post I am going to look at the challenges which he faces.

Mr Holbrooke is an eminently capable diplomat, indeed the FT recently described him as “the man whose robust diplomacy helped end the Bosnian war”. However, he will have to employ all of his experience and competencies if he is to be even mildly successful in his new role. The very fact that his mandate encloses both Pakistan and Afghanistan is emblematic of the fact that the Durand Line which divides the two states is scarcely recognised by the Pashtun people who populate the region it divides. The war in Afghanistan cannot be won by dealing with it in isolation. It is only by securing the commitment of the Pakistani government to do all in its power to fight against the jihadists that the US and its allies stand any chance of success. It was with this in mind that President Obama identified one of Mr Holbrooke’s most crucial tasks as persuading “Pakistan that they are endangered as much as we are by the continuation of those operations (jihadists).”

To what degree does this look likely? Although the successful impeachment of President Musharraf in August of last year seemed to signal an, at least partial, return to health of Pakistani democracy, recent events have created cause for worry. Many analysts have long accused Pakistan of covertly supporting the Taliban, who the Pakistani military hope to recruit as a strategic ally in the wider conflict with India. Baluchistan, the Federally Administered Tribal Areas, and the North West Frontier Province have come under the increasing control of the Taliban but it is events in the Swat valley that have highlighted the seriousness of the challenge Pakistan faces. The Swat valley, formerly a tourist paradise and located just three hours drive from the capital Islamabad is now under the rule of sharia law- a compromise agreed upon by the government following the increasing success of the campaign of terror Islamic militants have been waging in the valley. Similarly, with Pakistan now looking for a top up to the $7.6bn package secured from the IMF at the end of last year and an army which appears both increasingly unwilling and unable to counter the growing threat from Islamic militants the outlook does not look good.

Yet this approach tends to exaggerate the possibility of a theocracy being installed in Pakistan. The vast majority of Pakistani’s remain conservative and in recent years have manifested their rejection of the extremist Islamic parties through the ballot box. The US’s commitment to send a further 17.000 troops to Afghanistan should also have positive ramifications on the political situation in Pakistan. By replacing the pilotless predator drones, which are almost universally detested in both Pakistan and Afghanistan as the harbinger of indiscriminate death (the UN estimates that 455 civilians have died in Afghanistan in the past year as a result of air raids), and by limiting excursions across the border into Pakistan the US could help dampen the anti-Us sentiment which simultaneously destabilises the government and props up the jihadists. This strategy, is of course, largely dependent on the Pakistani government making greater efforts to patrol this bandit country.

The result of the conflict in Afghanistan will have a profound impact on the geopolitical canvas of Southern Asia. If the US can persuade Islamabad to take a significant stand against the jihadists in Pakistan and convince its NATO allies to boost or maintain their troop commitments in Afghanistan the outcome may even create a context which reduces the intensity of the conflict between India and Pakistan. If Islamabad’s inaction continues, Mr Holbrooke will find himself in a fully primed and rapidly enlarging geopolitical minefield.

Ireland, where to now?

Ireland is looking down the barrel of a gun. With its banks looking increasingly fragile, a housing market in precipitous decline, and a political establishment lacking coherence and vision, the gun is fully loaded. The Irish economy has grown by promoting its reputation as a knowledge based economy with access to the European Union. It has fostered enterprise with a liberal, indeed in hindsight far too liberal, doling out of credit and it has sought to ease social tensions with a series of “social partnership agreements”. These policies are rapidly coming undone.

Ireland’s desire to project an image of itself as a knowledge based economy could be in danger, due to the government’s plan to raise third level fees. A possibility loudly decried by recent student protesters. While there is a chronic need for an increase in funding for Irish third level institutions, a need exemplified by the budgetary difficulties currently facing University College Cork, the government’s proposal to increase the student registration fee is a regressive and superficial response to a deep seeded problem. As Michael Moran discussed in an earlier post (link) the notion of increasing the cost of third level education should not be dismissed outright. However, a solution is needed which will equitably distribute the burden of this increase in costs while also providing more than the €35 million envisaged by the government’s proposal. Unfortunately the government’s education strategy, which also includes an increase in primary class size, seems to lack any real vision for the future.

The banking system which fuelled the supply of easy credit has collapsed. Anglo Irish has been nationalised and any lingering confidence the international markets may have had in the others has taken a beating following a string of revelations regarding highly unethical trading practices and accounting manipulation. The nationalisation of Allied Irish and Bank of Ireland may only be a matter of time. Meanwhile an Irish economy starved of credit is slowly grinding to a halt and the central bank predicts a 4% decrease in GDP in 2009.

The State, whose own finances are looking increasingly fragile, has belatedly realised that it must act now if it hopes to salvage the possibility of a return to growth within the next five years. Brian Cowen and co. have finally acknowledged that the public sector pay roll and pension commitments are severely bloated. While private sector pay and pension payments have been forced downwards by the financial crisis and its impact on global markets, public sector workers have been protected under the terms of the national wage agreements and the fact that their pensions are indexed to the job rate! The editorial of the Irish Times on the 14th February stated that there is now a gap of 20 percent in comparable pay between the two sectors. In an attempt to redress this issue the government proposed a pension levy for workers public sector. The unions have labelled this measure as unjust and last Wednesday 120,000 public sector workers took to the streets of Dublin to manifest their discontent. David Begg general secretary of the Irish congress of trade unions (Ictu), which organised the protest, claimed that the burden of economic adjustment was being shared neither equally nor fairly. This protest and the squabbling in the Dail (the national parliament) set a worrying precedent for the governments saving plan of €2 billion.

So the situation doesn’t look rosy. Our economy is shrinking and as unemployment grows tax revenues will decrease and social welfare payments will increase. The reality is that Ireland is going to need to borrow approx. €20 billion this year and that our sovereign credit rating is set for a downgrade. What can be done? Greater unity in the Dail perhaps in the form of a national government or grand coalition would create a firmer base from which action could proceed. Acceptance of the fact that the pay of the public sector must be realigned with that of the private sector would facilitate a move towards greater fiscal responsibility. However, the most crucial step is the formulation of a coherent recovery plan which makes the hard decisions immediately. A plan that must be adhered to and that maintains the most vital services provided by the state such as healthcare, and education while cutting down on other spending. We must ensure that Ireland does not find itself submerged under a mountain of debt. Rather we should improve the fundamentals of our economy, notably our skill levels and our cost base.

A long term vision must take presence over our craving for short term comfort. Although I would like to avoid the Charlie Haughey-esque “tighten your belt” speech it seems rather difficult to promote any other approach. We must position Ireland to benefit from the inevitable, if seemingly distant, resurgence of the global economy.

From hawk to dove, an evolution of US foreign policy?

While many of Obama’s speeches have been characterised by soaring rhetoric, his discourse on foreign relations has been shot through with a strong dose of pragmatism. Bush declared the goal of “ending tyranny in our world” and offered us a utopian vision of a democratic Middle East. Barack Obama and his secretary of state Hilary Clinton have declared a three pronged approach driven by defence, diplomacy and development. The conspicuous absence of democratisation embodies an evolution from grandiose idealism to the realm of the achievable.

Today, Vice-president Joe Biden gave a speech at a security conference in Munich, Germany, in his words - “on behalf of a new administration determined to set a new tone in Washington, and in America's relations around the world". I wrote here about how the new administration had the potential to carve a new role for the US on the world stage. Since then the true extent of the economic crisis has began to unveil itself, there has been a war in Gaza, and Iran launched a rocket into space. These and other events have further complicated the task facing the highly capable foreign policy team Barack Obama has assembled in the White House and the state department.

American foreign policy is undergoing a thorough recalibration. The most obvious casualty of this re-orientation is the “War on Terror”. Indeed the closure of Guantanamo bay illustrates the realisation that the struggle with terrorism is more about the underlying ideologies than military force. This greater focus on “soft power” does not dictate a rejection of “hard power” but rather a more pragmatic approach to foreign relations which blends several strands of realism. The US seems determined to invoke what Joseph Nye termed “smart power”.

Mr Biden’s speech encapsulated this balance. He declared that while America will listen to the world, it will also demand that other countries play a greater role in world affairs. The allocation of a greater number of troops to Afghanistan, and the acceptance of ex-Guantanamo detainees are concrete examples of areas in which the Obama administration expects greater cooperation. This demand for greater support reflects the growing clamour that the US is playing the role of the world’s policeman, and in doing so exhausting itself, both militarily and financially. Other nations who are more than capable of playing a role are content to sit back and enjoy the benefits of the US enforced global order.

Biden’s speech also conveyed the fact that a return to multi-lateralism is on the cards with an emphasis placed on renewing the role of the UN, and the US’s relationship with both Russia and the EU. The UN has a key role to play in any world order, and any move to reform its cumbersome and often inefficient mechanisms would be an integral step to the formulation of a new world order. However, the idealism of these goals was tempered by the fact that the US plans for a missile defence shield in Europe will continue. This announcement, and the continuity of other policies enacted under the Bush regime, is a sign that the new regime is determined not to throw the baby out with the bath water. Each case will be evaluated on its merits rather than declaring a de facto tabula rasa.

Thus far the Obama administration has succeeded in fostering the possibility of progress through dialogue, while avoiding appearing to be weak. With economic nationalism rearing its ugly head, Iranian and Israeli elections looming, and weak commodity prices destabilising several already unstable states the optimum equilibrium between the carrot and the stick may become increasingly elusive. What is certain is that any state who reads the new regime as a pure bred dove will soon find itself confronted by the reality of American force. As Biden declared today “The force of arms won our independence, and throughout our history, the force of arms has protected our freedom. That will not change”.

A road to nowhere?

I recently wrote about the deadlock in the talks between Robert Mugabe and Morgan Tsvangirai on the formation of a coalition government in Zimbabwe (see here). Mr Tsvangirai and his party, the Movement for Democratic Change (MDC), cited Mr Mugabe's refusal to consider handing over the control of the police and the army as the major impediment to progress. On the 30th of January Mr Tsvangirai signed an agreement which will see him sworn in as the Zimbabwean Prime Minister (alongside President Mugabe), and the MDC occupy 11 of the 31 cabinet posts including finance health and education.What has changed since Mr Tsvangirai's despairing statement on the 19th of January, and should we be content?

A number of factors both domestic and international have come to bear over the past two weeks. Firstly, african leaders have been putting increasing pressure on Tsvangirai to join a coalition government. The South African Development committee (SADC) has played a key role in negotiations and according to recent reports was becoming frustrated with Mr Tsvangirai's refusal to enter into a coalition government. Indeed, it was South Africa the dominant power in the region who pushed Tsvangirai to accept joint control of the police and army, a proposal he had previously rejected. Mr Tsvangirai has had to be wary of his interaction with neighbouring countries as long term he will be reliant on there support in his quest to transfrom Zimbabwe's fortunes.

Secondly, Mr T.svangirai has recently spoken out about the urgent need to tackle the growing humanitarian crisis with Botswana’s president, Seretse Khama Ian Khama, declaring that Zimbabwe has “literally become like one big refugee camp, full of people who are living lives of misery” Western countries have made it clear that a rescue for the Zimbabwean economy will only be considered when Mugabe has been sidelined and reforms have begun. There are also hopes that MDC supporters and other members of the opposition who are currently languishing in jails around the country will be freed.

External pressure applied both by neighbouring countries and by the western powers has been key in the formulation of this coalition, but does this serve as an example of peaceful and desirable regime change? The first response must be 'yes', the international community has rightly supported the rightful victor in last years Presidential election. However, the fact that Robert Mugabe retains the support of the SADC, after an election their own observers denounced as neither free nor fair, sets a dangerous precedent for ruling parties who sense their hold on power slipping. The extent of human suffering that Mugabe has inflicted on his people, a suffering compounded by the western decision to withold state sponsored aid further complicates any evaluation of the West's role.

Mr Tsvangirai now faces his biggest challenge. Mugabe will do everything in his still considerable power to neutralise the MDC as a political force. However, it is only from within the organs of government that Mr Tsvangirai can introduce the reforms his country so badly needs. Trapped in a political quandry Mr Tsvangirai chose the high road, it is now the responsability of the international community, and in particular the SADC to make sure he doesn't get diverted.

A glimmer of hope?

The conflict in Gaza is not going to go away. There is not, nor will there be a quick-fix solution to the Israeli-Arab conflict. However, this does not mean that a solution is not possible. Since the declaration of the ceasefire on the 18th of January there have been both heartening and discouraging signs.

Firstly, the appointment of George Mitchell as the US envoy to the Middle East embodies the kind of coherent and pragmatic logic that many hope will define the Obama administration. Mitchell played a key role as a facilitator in the talks which led to the Good Friday agreement in Northern Ireland, and which have resulted in a power sharing executive, the symbolic reconciliation of Gerry Adams and Ian Paisley, and the disarmament of the major paramilitary groups. During the talks Mitchell won the respect of both sides through a patience which, although criticised by some at the time, proved ultimately successful. In an interview with the Guardian newspaper in 2007, George Mitchell set out the framework he used in Northern Ireland and one that, if applied, would bode particularly well for the Middle East (for an outline of this framework see this link) .

Another positive development is that the international community has taken a renewed interest in reviving the peace process in the Middle East. Indeed this could be one of the major positives Israel takes from this war, Tzipi Livni and Ehud Barak have widely criticised the UN and other international organisations for turning a blind eye towards Hamas rockets fired into Israel. The Israeli invasion of Gaza has created a situation where the international community can no longer stand idly by, and recent soundings about NATO patrols in the sea lanes near Gaza are one concrete example of a possible international intervention which could help the area move towards peace.

However, the signing of the ceasefire has not dictated an end to open hostilities. An Israeli soldier died in a bomb attack on the Israeli-Gaza border on Tuesday, an event followed by an eminently recognisable spiral of retaliatory attacks with Israeli first bombing targets in Gaza and then Hamas launching a missile into Israel. Hamas did not claim responsibility for the bomb attack and some sources attribute it to the group, World Jihad. This accusation highlights what will be a key challenge in any peace process; small groups of extremists who through acts of violence will attempt to derail any progress. Both Israel and Hamas will have to show restraint and take a long term viewpoint in this regard, an approach rendered significantly more difficult by Israel’s policy of deterrence which obliges it to respond disproportionately to any attacks.

The idea of a “media war” has gained increasing currency in regard to the Israeli-Palestinian conflict, with accusations from both sides about sinister media plots and hidden agendas, and Israel forbidding journalists from entering Gaza during the conflict. Debate surrounding media coverage has continued with the BBC and Sky television’s recent refusal to broadcast an emergency appeal for Gaza provoking widespread anger. Mark Thompson the director general of BBC cited the channel’s imperative to maintain its balanced and objective coverage of the conflict as the rationale behind the decision.

Any negotiations will require significant compromises. The question as to whether the war in Gaza has rendered these compromises more likely remains to be answered.

The “PIGS” of Europe.

No, this is not an article about common agricultural policy or even about the often unjust nature of stereotypes, this article is about a tale of giddy greed followed swiftly a sobering dose of reality. Portugal, Ireland, Greece, and Spain are oft cited as examples of the wonders of EU membership and unfettered free markets. However, in recent times these five countries have been among the hardest hit by the financial crisis and deprived of the option of currency devaluation their situation looks set to deteriorate further.

Spain’s unemployment rate has recently hit 14.6, its current account balance deficit now stands at 10% of GDP and along with Greece and Portugal it has seen its debt rating downgraded by Standard and Poor’s. These figures and in particular the downgrades have contributed to the consternation and worry which clouds the horizon at the Irish ministry of finance. On the 30th of September the Irish government insured the deposits of the three major Irish banks, Bank of Ireland, Allied Irish Banks and Anglo Irish Bank in a bid to restore confidence in a banking system which has seen massive erosion of shareholder value and more recently a scandal involving the Chairman of Anglo Irish. Mr Fitzpatrick, had 87 million euro of loans from the bank which he failed to he had sought to hide from investors by temporarily transferring them between banks, and which were seemingly overlooked by successive financial audits and reviews.

Continued turbulence in Irish financial markets, and growing concerns about the financial viability of Anglo Irish in large part due to its excessive exposure to the property markets led to its nationalisation on the 15th of January. This nationalisation has led to further speculation regarding the future of the State’s two biggest banks whose share price has continued to slump. The decline of the Irish bank shares and the similar fortunes of property prices have led to unprecedented levels of wealth destruction, as these two held pride of place as “safe bets” for would be investors. The outlook for the Irish economy was not improved by comments by EU Economic and Monetary Affairs Commissioner Joaquin Almunia who declared last Monday that Ireland’s economy was likely to contract by 5 per cent this year, the second weakest performance in the EU, behind only Latvia.

The severity of this economic contraction ultimately depends on the government’s ability to re-inject liquidity into the markets through a resumption of bank lending. The current situation, and one which is not unique to Ireland, is that banks terrified by the extent of their exposure to future losses are simply not lending. Rather they are scrambling to raise capital in a bid to secure their own liquidity.

With the government reportedly looking at insuring the billions of euro of bad loans that BoI and AIB may have, as well as plans to move forward the recapitalisation of the two banks( in the form of 2 million euro of preference shares into each of the two) the government recognises its imperative to act. However, just as a seemingly unfailing faith in the gravity defying nature of Irish shares and property once drove their prices skyward, so now an apparently unflappable pessimism is dragging them back down to earth.

With the banks crying out for recapitalisation and government finances moving further and further into the red, reform is inevitable. Yet where. In a education system impaired by ballooning class sizes? A health system caving in under the weight of an increasingly needy population? Tough decisions will have to be made, and quickly.

An emblem of hope, and one of despair.

Over the past few days the bleak economic forecasts, which have of late dominated media coverage, have been replaced with a much missed optimism. This wave of optimism, this audacity to see light where many see only financial ruin and depression has been generated by Barack Obama and his inauguration, scheduled to take place later today. Leadership in times of strife is of immense importance and many great leaders reputations have been forged amid turmoil and chaos, Winston Churchill became a symbol for resistance in war time Britain, Nelson Mandela for humanity in post apartheid South-Africa and FDR for an American return to health after the Wall Street crash of 1929.

Yet at this time of great optimism, the tale Barack Obama is juxtaposed with that of another politician, a politician who was also hailed by his people as a forebearer of change, an apostle of hope. This man's name is Robert Mugabe. For as Barack Obama prepares to enter the White House as America's 44th president so Mugabe clings to power in what remains of the country he once helped to liberate. Zimbabwe was once a shining example of African democracy with a productive economy and political liberty. Now, this Zimbabwe remains but a distant memory.

Today Zimbabwe has risen to infamy as the emobiment of the expression "Power corrupts, and absolute power corrupts absolutely". It's economy in tatters, even hyper-inflation seems insufficient to capture the concept of the recently introduced 100 trillion dollar bank note. Once the bread basket of Africa, following Mugabe's disastrous land reform program (see politically motivated land grab) there are now widespread food shortages. The recent outbreak of cholera which continues to rave throughout the country has resulted in a death toll fast approaching 2000.

Yet like the people of America did on the 4th November 2008, Zimbabwean's (under significantly less permissive conditions)also voted for change. Where the American people voted for Barack Obama they voted for Morgan Tsvangirai. However, the Zimbabwean people have been deprived of the change they voted for in the first round of election in 2008 (Morgan Tsvangirai's party the Movement for Democratic Change withdrew from the second round due to serious concerns about their own and their supporters safety). Mr Mugabe, faced with mounting international pressure agreed to a power sharing government but talks regarding this option collapsed in the face of Mugabe's intransigence with regard to key industries and in particular control of the police and the army. On Friday as Barack Obama was readying himself for his journey in the footsteps of Abraham Lincoln, Morgan Tsvangirai returned to Zimbabwe for the first time in two months to try and bridge the political impasse.

Yesterday, monday the 19th of january, as the world waited with baited breath to be once again enthralled by the rhetorical genius of its new favourite son, Mr Tsvangirai proclaimed the day "the darkest day of our lives” for those hopeful of political change in Zimbabwe, as talks on a new coalition government ended in failure.