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The Democratic Costs of a “Grexit”

To Grexit, or not to Grexit?

Greece’s negotiations with its creditors have not gone smoothly.  The Greek government treated an interim deal reached in February as a starting point for negotiations, while it’s creditors considered it more of an non-negotiable outline of a deal. The result has been two sides talking past each other; the longer this situation persists, the more likely a “Grexit”–Greece leaving the Eurozone and / or EU–becomes.

There is a ton of middle ground for the two sides–both want Greece to return to growth and full employment. The Greek government also wants a safety-net for people negatively affected by labor market and other structural reforms; pushing already impoverished people further into poverty is not only morally reprehensible, it is bad economics.

To prevent this result, Greece has passed an “anti-poverty law” to protect its most vulnerable citizens. The problem is financing this program; the Greek government needs room to implement needed structural reforms without further destabilizing Greek society.

In addition to staving off a humanitarian crisis, Greece also needs a long-term growth strategy beyond structural reforms. There are few options for the Greek government:

1) It can completely comply with creditor demands.

2) It can continue to push its lenders for more fiscal space (smaller primary surplus and / or promises of greater EU level aid / debt relief).

Or,

3) It can default on its debts and exit the Eurozone.

The first option is a non-starter, as the Greek government feels current demands would exacerbate social and economic hardship in Greece.

The second option would allow Greece to leverage more public money for safety net programs, educational and workforce training programs, and public private partnerships. This would allow Greece to avoiding default while mapping out a plan to boost economic growth.

The last option would be painful in the short-run as Greece would get battered by financial markets and possibly have to deal with currency instability as it reintroduced the drachma(?), but it would open policy space and make Greece much more competitive in terms of cost of doing business. A Grexit could also lead to a domino effect–if other ailing E.U. countries see a post-E.U. Greece succeeding, it would bolster anti-E.U. parties within these countries.

It is obvious that the second choice is in everyone’s best interests. Unfortunately, that is no guarantee this route will be taken:

Herman van Rompuy [former head of the European Council of EU leaders] told a Brussels conference that if Greece were to leave the euro zone, that would also have geopolitical repercussions in the current standoff with Russiaover Ukraine, emboldening Moscow to see Europe as weak.

Van Rompuy urged all sides to consider the political and geopolitical implications of such a step and not just the economic and financial arguments.

“I hope we will never have to answer the Grexit question,” he added

Greece staying in the E.U. is important for both sides of the negotiation. There are enough crises in the world without manufacturing one in Greece. It is exactly times like these when budgetary restrictions should be relaxed in the name of pragmatic, longer-term priorities. But so far Greece and it’s lenders have been unable to map out a solution that worksall parties involved, and so the current impasse and possibility of an “accidental Grexit” persists.

Greece did submit a new proposal to it’s creditors yesterday, and it was apparently strong enough that it got an unofficial endorsement from French Prime Minister Francois Hollande. This could be meaningful development, as heads of major European states have to this point been reluctant to acknowledge Greek concessions. It is a step towards the “political dialogue” Tsipras has been pleading for (framing the debate less in adversarial terms between debtor and creditor, and more as a mutual compromise between equal partners working towards a common goal).

“Democracy in Recession”

If Greece were to leave the EU, (aside from the economic impact) there would be significant geopolitical repercussions, including a Greek pivot towards Russia. The Greek government has already signaled it disagrees with EU sanctions on Russia. More recently, it was reported that Putin and Tsipras “did not discuss financial aid” on the sidelines of the St. Peteresburg International Economic Forum. Generally speaking, whenever someone has to defend that something “wasn’t discussed”, it means it either was discussed or very likely will be in the future.

This is not to say that Greece would stop being functioning as a democracy if it leaves the EU. In fact, it is a strong belief in democratic ideals that underpin the current standoff between Greece and it’s creditors. But a fracturing of the EU would certainly be a blow to the ideals the EU stands for–peace and prosperity through a cooperative, democratic international system. Specifically, if Greece signed a natural gas pipeline deal with Russia, it would undermine the current sanctions regime against Russia.

Even more alarmingly, Greece’s problems are emblematic of a greater inward shift by major democratic powers:

A recent NATO Poll found that “At least half of Germans, French and Italians say their country should not use military force to defend a NATO ally if attacked by Russia,” the Pew Research Center said it found in its survey, which is based on interviews in 10 nations.

In the United States, the study notes, support for NATO remains fairly strong. Americans and Canadians, it says, were the only nationalities surveyed in which more than half of those polled believed that their country should take military action if Russia attacked a NATO ally.

This is further evidence of a worrying global trend, what Thomas Friedman calls Democracy in recession”:

“…perhaps the most worrisome dimension of the democratic recession has been the decline of democratic efficacy, energy, and self-confidence” in America and the West at large. After years of hyperpolarization, deadlock and corruption through campaign financing, the world’s leading democracy is increasingly dysfunctional, with government shutdowns and the inability to pass something as basic as a budget. “The world takes note of all this,” says Diamond. “Authoritarian state media gleefully publicize these travails of American democracy in order to discredit democracy in general and immunize authoritarian rule against U.S. pressure.”

Diamond urges democrats not to lose faith. Democracy, as Churchill noted, is still the worst form of government — except for all the others. And it still fires the imagination of people like no other system. But that will only stay true if the big democracies maintain a model worth following. I wish that were not so much in question today.

Look, I get it. The world is still emerging from a generational economic crisis. Democracies are first and foremost accountable to their electorates, and in the face of short-term problems it is difficult to sell the importance of dealing with seemingly longer-term issues. But this is what we should demand of our political leaders–the ability to meet peoples short term needs while simultaneously laying the groundwork for long-term peace and prosperity.

The Democratization Process

Modernization theory and recent history support the idea that sustained democratic movements must result from organic desire by local factions. When these natural movements towards democratic governance emerge, they must be nurtured.

Democratic movements are always opposed by those who stand to lose power should they succeed. If the primary champions of democracy (the U.S. and the E.U.) seem increasingly unwilling to provide the resources needed to defend those who share our values, democratic movements are less likely to take shape against adversaries that tend to have economic and military advantages.

Autocratic rulers have always used propoganda and media control to make democracy look less appealing. This job becomes easier when traditional democratic stalwarts appear unable to govern effectively at home, and unwilling to defend their ideals abroad.

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Transparency Thursday: Making Sanctions “Smarter”

Sanctions are defined as penalties or other means of enforcement used to provide incentives for obedience with the law, or with rules and regulations. In a foreign affairs context, sanctions are generally imposed by a group of countries (the greater the participation the more effective sanctions can be, and in many cases without strategic involvement sanctions can effectively be useless) in order to influence a political/military/economic  outcome abroad. Sanctions allow countries to show their dislike of a particular course of action without infringing on the sovereign rights of states and without military intervention. Sanctions are often used in the face of gross human rights violations. Prominent examples of sanctions in use today are North Korea, Iran, and Syria (covering both the government and the opposition).

Despite the ability to hold powerful interests accountable, sanctions are not a unanimously popular foreign policy instrument.  One reason, as stated before, is that without strategic agreements (neighboring countries, trade partners, ideologically aligned states) sanctions will be ineffective. They can lead to the formation of black markets, giving criminal organizations even more resources for nefarious activities. The main concern regarding sanctions however is in regards to their human rights implications.

Although sanctions are often meant to end human rights violations, their existence can actually exacerbate humanitarian crises, especially in the short run. While each sanction is uniquely tailored to the situation it is trying to influence, the indiscriminate shortages that sanctions generally cause affects everyone in society (and arguably vulnerable / marginalized groups the most). Because of this, the practice of imposing sanctions has evolved towards the imposition of “smart sanctions“. In essence, smart sanctions are more targeted sanctions (think freezing financial assets as opposed to a complete embargo), meant to put pressure on strategic parties while considering and sometimes providing aid to compensate for human rights issues that may arise.

Smart sanctions are the topic of today’s lesson. I am referring specifically to recent changes made in sanctions against Iran and Syria.

Iran: A little background, Iran is currently facing sanctions which are attempting to deter Iranian nuclear capacity development, which Iran has insisted is for peaceful purposes (medical), but the Western world has strongly opposed.

Iran is also in presidential campaign season, and preliminary reports do not look good for denuclearization and human rights interests:

“Mr. Jalili, known as Iran’s unyielding nuclear negotiator and a protégé of the supreme leader, Ayatollah Ali Khamenei, is emerging as the presumed front-runner in Iran’s presidential election on June 14, an unsettling prospect for future relations with the West. Mr. Jalili, 47, who many analysts say has long been groomed for a top position in Iran, is by far the most outspoken hard-liner among the eight candidates approved to participate in the election.”

“He has been featured in flattering terms in recent weeks in the semiofficial Fars news agency, which is connected to the Revolutionary Guards, as well as in dozens of Web sites and other news outlets. By contrast, the other candidates now sometimes discover their campaign appearances canceled for unclear reasons and often find themselves under sharp attack in interviews on state TV, while Mr. Jalili gets softball questions.”

“If he gets elected I foresee even more isolation and conflict, as he doesn’t care about foreign relations, the economy or anything,” the analyst said.”

To make matters worse, lack of transparency has marked previous Iranian elections.

“Iran’s presidential elections, lacking independent opinion polls and subject to manipulation, are notoriously unpredictable. In 2005, Mr. Ahmadinejad came out of nowhere to win. In 2009, millions of people took to the streets to protest what they said was widespread fraud in the voting that returned Mr. Ahmadinejad to office over the more popular opposition candidate, Mir Hussein Moussavi.”

In order to prevent against corrupt election practices, and possibly to help organize opposition to Mr. Jalili, the U.S. today announced it will repeal sanctions on mobile devices and  communication software / equipment. 

“The change is intended to help Iranians communicate through social media, text messaging and mobile-phone videos in order to overcome some of the media and communications restrictions imposed by Iranian authorities.

The action “aims to empower the Iranian people as their government intensifies its efforts to stifle their access to information,” according to a Treasury Department statement.”

“Providing the democracy movement in Iran with access to the latest social media organizing tools will strengthen their efforts to bring about positive change to a government that fears information it can’t control,” Democratic Representative Jim Moran of Virginia, who has sought such action, said in an e-mailed statement today.”

“The U.S. has supported attempts to boost democratic movements and stepped up efforts to stop regimes such as those in Iran and Syria from blocking social media through what Obama has called the “malign use of technology.”

In November, the administration imposed sanctions on Iranian officials –including the nation’s communications minister — and government agencies for blocking Internet access, mobile-phone lines and satellite-television channels to stifle free speech.

The Treasury named today additional individuals and entities for “contributing to serious human rights abuses committed by the Iranian regime, including through the use of communications technology to silence and intimidate the Iranian people.” The State Department issued visa restrictions on about 60 Iranian officials linked to human rights abuses.”

This story highlights the importance of media independence and transparency for effective democracy. The use of social media has been instrumental in “The Arab Spring” revolutions, enabling  the dissemination of information, while overcoming collective action problems that tend to allow powerful interests to remain in control to the detriment of society as a whole. Communications technology also has positive uses for healthcare, education, and e-governance. But in this case, it is clear that the U.S. is trying to allow more liberal Iranians to communicate, in hopes of challenging Mr. Jalili’s candidacy. Additionally, mobile devices make it easier to report political rights abuses, such as coercive measures at polls and other means of election-rigging.

At a recent ECOSOC Partnerships forum I was lucky enough to attend in my capacity as a UNDP intern, Mr. Suneet Singh Tuli, CEO of Datawind, called access to affordable mobile internet access a human right–I agreed with him, and it seems the Obama administration is of like mind. These smarter sanctions should help uphold electoral integrity in the upcoming elections, and should help improve the average Iranian’s opinion of America.

Syria has now been engaged in a civil war that has lasted over 2 years, claimed over 80,000 lives, and lead to over 1 million refugees and internally displaced people in the Middle-East. The civil war and refugee flows have threatened the already tenuous stability of the region, and a full blow humanitarian crisis has enveloped the entire country of Syria.

Gridlock in the U.N.S.C. has prevented direct international military intervention. Russia and China have repeatedly vetoed international intervention, championing Syria’s national sovereignty despite undeniable human rights violations committed by the Assad regime. As the fighting continues, and Western support has lagged compared to Russian military support of the Assad regime (with no signs of slowing down, as Assad has apparently just received a new shipment of Russian arms), the Syrian opposition has turned towards extremists groups for support, which has further complicated international involvement.

Recent actions show that the EU is reconsidering its position on it’s Syrian arms embargo.

“Divisions among European Union foreign ministers on Monday prevented the renewal of the arms embargo on Syria, raising the possibility of a new flow of weapons to rebels fighting to bring down the government of President Bashar al-Assad.

“While we have no immediate plans to send arms to Syria, it gives us the flexibility to respond in the future if the situation continues to deteriorate and worsen,” William Hague, the British foreign secretary, said after more than 12 hours of stormy talks.”

“The ministers did agree to renew all the economic sanctions already in place against the Syrian government.”

“There were also fears that Russia, which already sends arms to the Syrian government, would feel freer to send more.”

“The only effect you could have — let’s be realistic about this — is that it will stimulate the Russians to provide even more arms,” he said. “But they’ve been providing so many arms that I’m sure even more will not make much of a difference.”

While nothing will change immediately, it is significant the Europe has left the door open to providing military aid to the Syrian opposition in the future. The fact the Europe is taking the lead on this is encouraging. It also makes much more sense, as Europe is geographically much closer to Syria and it’s main ally Russia. While I am sure any coordinated European effort would have American support, it is nice to have the spotlight off American foreign affairs for a change.

There is also some concern that increased arms flow will undermine proposed peace talks in Geneva, which would include the Assad regime, the Syrian opposition, the U.S. and Russia among other participants. This is also a legitimate claim, although I see this as more of a measure to ensure the peace talks do bear fruit. European leaders are putting pressure on the Assad regime to negotiate a political transition by signaling their willingness to further aid the rebels should the peace talks break down. Syria has been in a hurting stalemate for sometime now, perhaps European powers are giving the Assad regime one more chance at a political transition to end this war before pursuing a military end.

These two stories are linked, as Mr. Jalili, a hardliner and supporter of Hezbollah, would likely step up support to the Assad regime if elected as Iranian president. Perhaps the Assad regime is just trying to buy time with “peace talks” until it has a stauncher ally in Iran.

There has also been the issue of whether Iran should be allowed to participate in Syrian peace talks (if you have been paying attention, the usual suspects are backing the sides you would expect them to in this dispute).

Sanctions are getting smarter, as human rights considerations gain more recognition as the cornerstone of the modernization process.  Will these “smart sanctions” help achieve the desired outcome without exacerbating human rights violations? Lets be cautiously optimistic; be sure to check back for regular updates on these evolving and inter-related issues.

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