Romania's Never-ending Constitutional Predicament

 September 23, 2012

My regular readers might have been left with the impression that, whilst displaying a keen interest in global geopolitics, I tend to shy away from Romania’s problems. These, to be sure, have recently boiled over into a fully fledged conflict between members of Parliament and the President. Nor is this a new development. For the second time in five years, the Parliament has impeached the President, who got his job back only via two referenda, the latter of which has had to involve 50 percent plus one of the Romanian electorate.

In 1995 I have attended a Roundtable with the Romanian Government conference organised by The Economist in Bucharest. On that occasion, I have circulated a geopolitical essay, “A Vision of Romania in the Third Millennium”, dealing with the country’s most pressing concerns and their possible solutions. Unfortunately, although it had gathered a following in far-flung places like Kazakhstan, the arguments fell on deaf ears in Bucharest. One of the main points I was making was that Romania’s 1991 constitution did not respect the principle of the separation of powers, which in fact was found to be at the root of the country’s institutional blockage today.

In 2003, some recommendations from my essay were incorporated via referendum into the Romanian constitution by the social-democrats, whilst others – notably the restitution of the former king’s properties – were adopted after 2004 by the liberal administration that governed the country for four years.

This time around (2012), the President has fallen victim to his own, ill-inspired, austerity measures. In truth, the immediate cause of the 1989 popular uprising in Romania was the savage austerity program adopted throughout the 1980’s by the late dictator Nicolae Ceausescu, aimed at reducing Romania’s foreign debt. The methods were different. The popular discontent provoked was very similar.

In a place like Romania, today’s austerity measures have come on top of a 20-year-long liberalisation drive deemed by specialists as misguided:

“The various tentatives of imposing, by forceps, economic liberalism on peoples who were ill-prepared for it, have contributed to a large extent to the unravelling of their social fabric, and have proved disastruous from this point of view. These gave way to an explosive cocktail of nationalism and populism […] and favoured separatisms, the dismemberment of Yugoslavia remaining in this respect the most striking example.” (Pascal Lorot, A qui profite la guerre ?, Paris, 2003, p.50 ; translation of quotation by FP)

Romanians’ anti-Western misgivings of late (or those of Hungarians, for that matter), are a logical reaction to the beastly way in which the principles of the Washington consensus have affected their living standards – a point I was trying to make as early as 1998 in one of my articles in Curentul (“The Privatisation Policies of Central and Eastern Europe”) and again in a more comprehensive study of 1999-2000, “Romania’s Lost Decade”.

Any serious effort of tackling Romania’s institutional, economic and political problems should start with the adoption of a new fundamental law, to replace the 1991 constitution whose flaws led to the 2007 and 2012 deadlock (for details, see my e-book “Reconstructia Constitutionala in Romania”, link on my Romanian language blog).

Moreover, Romania’s politicians should pay much closer attention than in the past to the country’s geopolitical position within its region and within the European Union as a whole *. In practice, this means that the polity can no longer avoid subjects such as territorial organisation on a regional basis, as well as the rest of the geopolitical solutions treated in my 1995 essay.

 

* Alas, because of Stalin’s aversion to it, after initially falling for Mackinder’s “pivot of history” theory which led to the Ribbentrop-Molotov Pact and to Romania’s loss of Bessarabia (nowadays the former province is the Republic of Moldova), geopolitics became taboo in Romanian academic and political circles, to this day.

A US Military View of Global Geopolitical Shifts

 April 24, 2012

A year ago, a group of superior US officers with Republican credentials were involved in a geopolitical brainstorming session at the National Defense University in Washington. The group was asked to provide answers regarding the US’ place in the world and to outline a ten-year national security plan. Edward Luce was invited to attend and he subsequently summarised the group’s findings in a book, Time to Start Thinking, America in the Age of Descent, published in 2012.

The sixteen officers arrived at the conclusion that the biggest threat to US national security was not represented by the country’s external enemies, but by America’s decaying economy, infrastructure, education and health systems, and by its ballooning public debt. In their assessment, it will be next to impossible to keep the US as a world hegemon after 2020 : eventually, America could continue to provide the public goods associated with international law and order only if it were to share domination of the world with equally powerful nations, like China or super-states such as the EU.

The brainstorming group advocated reducing by 100,000 soldiers the numbers of the military, as well as cutting US military spending by 20 percent. It also proposed to close down military bases from Germany, South Korea and elsewhere, and to allow China to rule over Taiwan in exchange for accepting the reunification of South and North Korea.

The amount of money thus saved from military spending should be used to improve America’s infrastructure and to greatly expand foreign aid programmes, which currently stand at only one percent of every $100 the US spends every year.

Their assessment of the dire situation of the US economy was reinforced by Admiral Mike Mullen, who said that, as a country

“we are borrowing money from China to build weapons to face down China, which is clearly a broken strategy”.

The conclusions of the brainstorming session are echoed in the article “A National Strategic Narrative”, by Captain Wayne Porter and Colonel Mark Mykleby writing under the pseudonym “Mr Y”, in Foreign Policy magazine. The two officers claim, quite rightly, that the US should – in order to practise “smart power” abroad – practise “smart growth” at home first.

As anyone would agree, the ranks of the US military do not seem to conform to the cliché of a military caste bent on world domination. If anything, the two examples above go to show that the enlisted men and women of the United States army are perhaps more patriotic in their approach to their country’s problems than many Washington politicians up to the highest level. This happens, unfortunately, because the latter all too often fall prey to well-written but deeply flawed articles and studies such as Robert Kagan’s “The Myth of America’s Decline”, that represent the views and ambitions of the neo-conservative political fringe.

The "Rise of the Rest"

 April 17, 2012

In an intelligent and highly readable essay, Fareed Zakaria, a close Obama adviser, analyses the fundamental changes in the distribution of power in international affairs, away from US dominance. He claims that what we are witnessing today is one of geopolitics’ “tectonic power shifts”, the third in the last five hundred years in order of magnitude. The first such power shift started in the 15th century, propelling the western world to global dominance. During the period, which peaked in the 18th century, the modern world was shaped by the agricultural and industrial revolutions.

The second power shift occurred at the end of the 19th century, with the rise of the United States of America. For 120 years, Zakaria writes, the US economy enjoyed an almost constant 25 percent share of the world’s GDP. The country’s political, military, economic and cultural predominance peaked between 1945 and 1975, remaining to this day the dominant political and military power globally.

The third and latest major shift in geopolitics is currently underway, being labelled by Zakaria as “the rise of the rest” (Japan, China, India, Brazil). As a result of this, the economic and financial power is moving away from the US, even if technically speaking the world is still being dominated politically and militarily by it. This veritable “imperial decline” of the United States is squarely blamed by Zakaria on a dysfunctional political system, one that is unable to correct the malfunctions affecting the US’ economy. Still, he is optimistic that “the US will remain a vital, vibrant economy, at the forefront of the next revolutions in science, technology and industry”.

From an international relations point of view, the problem left unsolved by “the rise of the rest” is the reallocation of political and military power among the main protagonists of the new age. The danger inherent in the current situation is that the new economic superpowers might in turn join the ranks of the EU, as the political dwarves and military worms of our time.

If during the 18th century the world’s affairs were dealt with by “the concert of European powers”, in a multipolar fashion, during the 20th century leadership in global affairs was exercised in a bi-polar manner by the US and the USSR. Since the USSR’s implosion, we continue to live in a unipolar world, although efforts are being made to suggest a variety of new leadership formulae, from G2 to G3 to G20. For IR specialists, politicians and geopoliticians alike, the challenge is to select the best possible leadership arrangement, one which would reflect – from a military and political point of view – the new shifts in economic and financial power that have taken place over the past two decades. Failing this, global governance could remain the sole preserve of the United States, which in turn could generate significantly increased international tensions and anti-American sentiment.

Is the EU Ready for a G3 World ?

 April 10, 2012

One of the key issues in IR & geopolitics is that of hegemonic transition. In the space of only thirty years, the world as we knew it has gone from bi-polar (international affairs dominated by the USA and the USSR) to unipolar (with the US as the only superpower left), to what is now a disorganised and anarchic state of affairs most commonly known under the label of G-zero.

As much as we would like to see a multi-polar world order emerging, the most touted options in IR to date are that of a G-2 order (“Chimerica”), or a G-3 world with the USA, China and the European Union in charge of global governance.

The G-2 formula was first advanced in US academic circles in 2006 by Jimmy Carter’s former national security adviser Zbigniew Brzezinski. In his view – and that of many IR specialists or diplomats like Henry Kissinger – the US and China should cooperate in order to reduce the threat of nuclear proliferation and to address together global problems such as trade surpluses, world hunger or climate change. The idea of a G-2 world order, however, has left both Washington and Beijing unimpressed. Its echoes were found only within some EU policy-making circles.

Thus in 2009, during a Sino-EU summit in Prague, the Chinese premier Wen Jiabao has stated that

“it is totally ungrounded and wrong to talk about the dominance of two countries in international affairs”. Indeed, as professor Jian Junbo from Shanghai comments in an article on this issue, “the responsibility of a G-2 member to jointly shape the world’s economy and international affairs is too far beyond China’s ability and ambitions”.

As he rightly points out, China is still a developing country with huge under-development problems, low per capita income and inferior military strength if compared to that of the United States.

China’s refusal to endorse a G-2 formula does not mean, according to ECFR specialists, that it would be adverse to the emergence of a G-3 order which would include the EU as well. As Mark Leonard and Parag Khanna argue in an article originally published in the New York Times, we are already living in a G-3 world,

“one that combines US military power and consumption, Chinese capital and labour and European rules and technology. The United States, the European Union and China are the three largest actors in the world, together representing approximately 60 percent of the world economy – with the EU being the largest of the three”.

Unfortunately, the EU’s strengths – the largest trade bloc, foreign investor and aid donor in the world – are constantly being undermined by an irresolute common foreign policy, or as former UK foreign secretary David Miliband put it, “confused messages, patchy coordination and relationships with global powers that lacked clarity, strategy or purpose”. (sources: Asia Times, Financial Times, Foreign Affairs, NYT)

The ASEAN Summit Prepares for Economic Downturn

 The 20th ASEAN summit took place last week in Cambodia. It ended after two days with a Phnom Penh Declaration, which basically reiterates the members’ commitment to establishing the ASEAN Economic Community by 2015. The summiteers were greeted in the capital’s Peace Palace by huge billboards depicting the smiling faces of the Chinese president Hu Jintao and that of the king of Cambodia. The official Chinese visit took place only two days before the opening of the ASEAN summit, leaving participants in no doubt as to the political allegiance of premier Hun Sen.

Thus during the summit Hun Sen insisted that China should be involved in the drafting of the Declaration of Conduct, a code of conduct meant to settle territorial disputes peacefully in the South China Sea. Given the reluctance of some of the participants, the drafting was not finalised on this occasion.

One of the most important decisions reached was that of increasing the emergency funding available to member countries in case of an economic downturn, from 120 billion to 240 billion US dollars, mirroring similar efforts undertaken by the EU’s political leaders with regard to the ESP. The so-called Chang Mai Initiative (CMIM) sets the rules for bilateral swap arrangements established in 2009 between the ten ASEAN members plus China, Japan and South Korea. The biggest contributors to the pool of money are obviously China and Japan, followed by Indonesia, Singapore, Malaysia, the Philippines and so on. The initiative’s authors were careful to point out that this was not meant to replace the IMF’s role in Asia – as much as they’d probably like it to – but rather to supplement it. (sources: Singapore Institute of International Affairs, Jakarta Post, Xinhua News, Huffington Post)

Development Eurobonds and Economic Growth

 March 31, 2012

The harsh austerity measures afflicting southern EU members like Greece, Spain, Portugal or Ireland are generating massive unemployment and negative economic growth, not to mention the type of social turmoil that can conceivably degenerate into civil war. As the European Union is far from a truly federal structure, fiscal transfers from economically viable member-states to distressed areas of the Union are currently out of the question. Still, policy measures aimed at reversing the negative trends in economic activity and employment should become the top priority both for Brussels and EU national governments, if the deterioration of economic conditions is to be prevented from spreading.

The amounts needed to kickstart economic growth in the south and to drastically reduce unemployment, to be sure, would have to be in the vicinity of 1 trillion euros. These would fund EU-wide mega-infrastructure projects in transportation, energy generation and the maintenance of adequate provision of education and healthcare services. Unfortunately, most EU governments are now locked in a battle to reduce their fiscal deficits, in a vain effort to appease restless international financial markets and speculators. One of the few solutions advanced by – among others – Jean-Claude Juncker, the president of Ecofin, is that of issuing eurobonds, although the idea was flatly rejected by Germany and France.

The European Commission lacks the financial muscle to undertake such projects. To overcome that, it should, however, be enabled to issue a batch of one-off eurobonds earmarked for financing development and economic growth projects in distressed regions of the EU. Issued over a period of five years and sold exclusively to EU nationals, by a banking system that owes a lot to states and depositors alike, these eurobonds with long maturity dates could be an adequate financial instrument needed to raise large amounts of money in these times of huge economic stress.

By putting the European Commission in charge of the proceeds, the projects to be undertaken will not only benefit the countries most in need, but the European Union as a whole. As matters now stand, the alternative is to use crypto- financial transfers from northern countries to the South, which would result in higher taxation levels affecting the rich as well as the struggling European middle classes. The eurobond solution could also prove instrumental in redeeming the badly tarnished image of EU authorities, who are currently being perceived as a mere conveyor belt of highly unpopular austerity policies dictated by the financial markets.

"It's Economic Growth, Stupid !"

 March 28, 2012

Over the last two weeks, economic discussion among EU leaders has revolved around two main topics: austerity and increasing to 1 trillion euros the money available to the ESP. Few of the current leaders, if any, are concentrating on finding solutions to the real economic challenge facing the Union, that of kickstarting economic growth on the continent. As Barry Eichengreen argues,

“Though no one can say for sure what Tobin would have thought of Europe’s crisis, his priority was always the pursuit of full employment. One suspects that he would have urged European policymakers to dispense with their silly fixation on a financial transactions tax and instead repair their broken banking systems and use all monetary and fiscal means at their disposal to jump-start economic growth”.

With the exception of a few EU members (Germany, Finland, Austria, Denmark), growth is stagnant, or negative (in Greece, Portugal and Ireland, for example) and the average rate of unemployment has crossed the psychological threshold of 10 percent. Whilst countries like China have spent close to 1 trillion USD in 2008-2009 in order to maintain employment and growth, the EU is envisaging to invest a measly 100 billion euros to the scale of the continent, if that. To compound economic woes, aggregate demand in deficit EU countries is about to suffer further shocks as a result of the unwise implementation of draconian austerity measures.

According to Jean-Claude Trichet, former ECB director, the average budget deficit within the EU is 70 percent of the aggregate GDP. That compares very favourably with Japan’s 212 percent or with the US’ 100 percent public debt ratios. Maastricht Treaty “fair weather” provisions notwithstanding, most EU member countries could add a few percentage points to their deficits in order to adequately finance growth and employment investment schemes coordinated by Brussels. To avoid pressure from international financial markets, national governments could – as the Japanese have always done – sell their treasury bonds to their own citizens, vital stakeholders in a solid economic recovery.

Whether our political leaders realise it or not, the only way out of the current crisis is by spending close to 1 trillion euros over the next few years on various development and infrastructure projects. The EU’s energy security, for example, does need the Nabucco project to go ahead in order to diminish our dependence on Russian oil and gas and pipelines. Although the European Commission is trying to allocate money for other much- needed infrastructure projects, the EU budget is at the mercy of member states’ contributions. That brings into question Brussel’s ability to adopt and implement the pan-European growth agenda we need.

And yet, a comprehensive pro-growth strategy is essential, if both the employment and current sovereign debt crises are to be overcome. To get to it, national leaders should, however, do away with their fixation on golden rules and austerity measures, and start investing massively in projects that will slash the current unemployment rate, taming it to the levels experienced by Germany, Austria or Finland. The urgency of such an investment and spending agenda is, unfortunately, recognised only by economists. Unable to deliver the right mix of economic policies, EU politicians have found it more expedient to give in to xenophobia, racism and nationalism, some of them for electoral reasons.

Whilst populist discourse might in normal times prove helpful in winning elections, in the current economic climate it could only aggravate matters and prolong the crisis. In fact, voters in major European countries are more concerned with their diminished purchasing power and job prospects than with illegal immigration and/or security issues. Any politician or their advisers who fail to grasp that should make an exit from the political game. (sources: Project Syndicate, Le Monde, Reuters, Deutsche Welle, Xinhua)