CIAO DATE: 11/2012
Volume: 91, Issue: 5
September/October 2012
The Crisis of Europe
Timothy Garton Ash
After World War II, Europe began a process of peaceful political unification unprecedented there and unmatched anywhere else. But the project began to go wrong in the early 1990s, when western European leaders started moving too quickly toward a flawed monetary union. Now, as Europe faces a still-unresolved debt crisis, its drive toward unification has stalled -- and unless fear or foresight gets it going again, the union could slide toward irrelevance.
Why the Euro Will Survive
C. Fred Bergsten
The euro’s naysayers have it all wrong. True, the continent’s powerhouses have yet to agree on a clear plan to save the common currency, as each one is seeking to secure the best deal for itself. But they all also know that the collapse of the eurozone would be a political and economic disaster, so they will ultimately pay whatever price is necessary to keep it together.
Germany's Unsustainable Growth
Adam Tooze
With the euro in crisis, Germany has come to seem like a lone island of fiscal stability in Europe. Its debt levels are modest, its government bonds are safe havens for investors around the world, and it has avoided the kinds of private credit booms and housing bubbles that have destabilized the rest of the continent. The German economy, fueled by record exports, has grown steadily, expanding by a quarter over the last decade. But beneath the glowing headlines lies a darker story: Germany's economic position is simply unsustainable. For starters, much of its trade surplus has been earned at the expense of the corresponding current account deficits of the European countries in crisis. At the same time, this outsized surplus goes hand in hand with major imbalances within Germany's domestic economy. German businesses have invested their profits abroad, helping finance foreign imports. Meanwhile, as German money has flowed out of the country, domestic investment has languished at unprecedentedly low levels. Germany, like other rich, polluting, and aging countries, faces enormous long-term challenges. Its work force is shrinking, its energy sector needs to be remade, and its public infrastructure has gone too long without improvement. For all the talk of its financial strength, Germany has so far squandered the opportunity to secure long-term economic growth by addressing these challenges through badly needed domestic investments.
Bucking Beijing
Aaron L. Friedberg
United States worries about China’s rise, but Washington rarely considers how the world looks through Beijing’s eyes. Even when U.S. officials speak sweetly and softly, their Chinese counterparts hear sugarcoated threats and focus on the big stick in the background. America should not shrink from setting out its expectations of Asia’s rising superpower -- but it should do so calmly, coolly, and professionally.
The Other Russia
Daniel Treisman, Mikhail Dmitriev
Moscow’s anti-Putin protesters have captured the world’s attention. But does their message resonate outside the big cities? New research shows that although Russians in the provinces have no taste for revolution, noisy street protests, or abstract slogans, they are deeply unhappy with the current political system and may soon demand change themselves.
The Rise of Settler Terrorism
Daniel Byman, Natan Sachs
Israeli authorities in the West Bank have long worried about stopping Palestinian terrorism. Now, they need to add a new item to the agenda: stopping radical Jewish settlers who have begun attacking innocent Palestinians and Israeli soldiers alike. Jerusalem has to the stop the violence, and Washington should help.
Barry Friedman
Pundits predicted that the U.S. Supreme Court’s ruling on the Affordable Care Act would make history. In fact, by upholding the individual mandate as a tax, the justices took themselves largely out of the picture, ensuring that the debate over health care will play out in the political sphere, where it belongs.
America the Undertaxed
Andrea Louise Campbell
Compared with other developed countries, the United States has very low taxes, little income redistribution, and an extraordinarily complex tax code. If it wanted to, the government could raise taxes without crippling growth or productivity. Tax reform is ultimately a political choice, not an economic one -- a statement about what sort of society Americans want.
The Scottish Play
Charles King
As a referendum on Scotland's independence looms, the question of the region's place in the United Kingdom has become the most pressing issue in British politics. Its experience shows how a smart secessionist party can dismantle a functioning country, and how central governments eager to buy off regions can end up making matters worse.
Arms Away
Ethan B. Kapstein, Jonathan Caverley
For two decades, the United States has dominated the global arms trade, reaping a broad range of economic and geopolitical benefits in the process. But shortsighted decisions to produce expensive, cutting-edge weapons systems, rather than cheaper, more practical ones, are squandering this monopoly and letting other countries get into the market.
Latin Lessons
Ray Suarez
Discussions of Hispanic Americans in the media and on the campaign trail are warped by ignorance about who they really are and what they really want. A new book seeks to fill the gap with a data-rich portrait of this complex community.
Government, Geography, and Growth
Jeffrey D. Sachs
According to Daron Acemoglu and James Robinson's Why Nations Fail, economic development hinges on a country's political institutions. But their monocausal analysis ignores other important factors (such as geography) that can also affect growth.
Johnson the Power Broker
H.W. Brands
In the latest installment of his epic biography of U.S. President Lyndon Johnson, Robert Caro reveals a man who obsessively sought power to assuage a misplaced sense of his own suffering -- but also to help those whose struggles were less abstract.
Colin H. Kahl, Kenneth N. Waltz
U.S. and Israeli officials have declared that a nuclear-armed Iran is a uniquely terrifying prospect, even an existential threat. In fact, by creating a more durable balance of military power in the Middle East, a nuclear Iran would yield.
Is Growth Good?
Frances Beinecke, Dennis Meadows, Jørgen Randers, John Harte, Mary Ellen Harte, Bjørn Lomborg
ENVIRONMENTALISTS DO NOT OPPOSE GROWTH Frances Beinecke In 1970, U.S. President Richard Nixon signed the Clean Air Act into law, launching one of the most successful public health and environmental programs in history. In the first decade that followed, in Los Angeles, the amount of pollution from ozone -- the main component of smog -- exceeded government health standards on 200 days each year. By 2004, that number had dropped to 28 days. In the 1970s, also as a result of polluted air, nearly 90 percent of American children had lead in their blood at levels higher than what the Centers for Disease Control and Prevention deemed safe, and parents were alarmed by studies showing that lead interfered with cognitive development. Today, only two percent of children have such high levels of lead in their bodies. By controlling hazardous emissions, the Clean Air Act delivered these and many other health benefits. And it did so without curbing economic growth. The United States' GDP has risen by 207 percent since the law was passed over four decades ago. And because the law sparked innovation -- from catalytic converters, which convert toxic exhaust fumes from automobiles into less dangerous substances, to smokestack scrubbers -- pollution reductions have proved relatively inexpensive. According to the U.S. Environmental Protection Agency, for every dollar the United States has spent on cutting pollution through the Clean Air Act, it has gained more than $40 in benefits.
Stimulus or Reform?
Menzie D. Chinn, Raghuram G. Rajan, Karl Smith
Since weak demand is at the heart of the recession, governments need to enact not just structural reforms but also stimulus programs, argues Menzie Chinn. Such reforms, moreover, don’t always work out, writes Karl Smith. Raghuram Rajan demurs.