A new report from ECFR on Russia makes startlingly depressing reading:

• The economic crisis has exposed a governance crisis inside Russia: even Putin now admits that as much as 80% of Kremlin orders have been ignored in the regions. Instead of modernising, Russia in 2010 was as corrupt as Papua New Guinea, had the property rights of Kenya and was as competitive as Sri Lanka.

• The crisis has also prompted a foreign policy rethink inside Russia: Russia is now aiming for a low cost sphere of influence in the post-Soviet space and is increasingly nervous about China.

The report claims that, having tried to project itself as an equal to Brazil, India and China, Russia is now entering a “post-BRIC” phase defined by deep pessimism about its future prospects.  The report repays very close reading.

Doug Saunders of Canada’s Globe and Mail has an interesting post on whether the economic boom that lasted from the early 1990s to the late 2000s was worth it. He concludes, on the basis of incomes, home ownership rates and household debt in the US, Canada and Europe, that ‘in the countries that kept a lid on consumer and mortgage lending, the economic boom was worth all the hype. Everywhere else, it was like a bad dream.’ By this analysis, only France, Canada and Germany have reaped sustainable rewards.

But what if we take a wider view? In a globalised world, it is not only recessions and financial crises that cross borders, but also goods, money, people and knowledge. As global trade, aid and migration have increased in the past two decades, at least some of the economic benefits of the boom are likely to have had impacts beyond the borders of North America and Europe.

So how are things looking on a global scale? Was the boom worth it for the world as a whole? Well, so far, emphatically yes. Take poverty for example. As David showed on here a few weeks ago, world poverty has plummeted - from over 40% of the population in 1990 to just over 20% today. Or look at life expectancy – another key aspect of quality of life and one which you would expect to improve as economic growth helps people and countries pay for health care and better diets. That too has improved, by a massive five years worldwide since 1990. And in education, increases in which will help countries to maintain in the long-term their advances in other areas, the number of children who are out of school worldwide has shrunk by a third in the past two decades.

Of course, it’s much too early to predict whether all or any of these improvements will survive the current crash (let alone the environmental damage that has gone hand in hand with growth), and it’s difficult to disentangle the effects of the boom from the effects of, say, better governance in poor countries. But it’s also too early to say the boom wasn’t worth it. The world is a much wealthier, healthier and more knowledgeable place today than it was before the boom started, and even if stagnation takes hold and there are no further improvements in the imminent future, many people will still be in a better place than they were 20 years ago. It seems unfashionable to be pleased about anything in today’s gloomy atmosphere, but taking a global perspective is a cause at least for temporary cheer.

“It is disappointing that the country cannot liberate itself from the desire to subsidise borrowing to finance house purchases,” complains Martin Wolf in his review of George Osborne’s autumn statement. “Why should the government subsidise people to speculate on property prices?”

Wolf fails to understand the logic of the new policy. It’s not the first time buyer who is really being subsidised by mortgages backed by the British government. They are simply entering an overpriced market, and taking on debt that will strangle some of them in what Wolf expects to be a ‘lost decade’.

Instead, it is those who are exiting the market who will benefit if the Chancellor’s largesse succeeds in propping up prices – that’s the elderly who are dying and passing on the proceeds from a house sale to their children (who tend to be in late middle age), or the baby boomers themselves as they downsize in preparation for retirement.

Any government policy that keeps house prices artificially high benefits the old not the young. Of course, banks will do quite nicely from government-backed 95% mortgages as well – they can relax lending standards and we all know where that leads.

I remember being astonished by the rose-tinted specs donned by the UK’s Office of Budget Responsibility (“independent and authoritative analysis of the UK’s public finances”) as as it was created in the run up to the 2010 budget:

We expect the economic recovery to strengthen in 2010 and beyond, as private sector demand continues to pick up. We estimate that trend output will grow at just over 2¼ per cent over the next three years…

From 2011 onwards, GDP is expected to grow at an above-trend rate as the economy rebalances away from consumption towards investment and net exports.

That worked out well, didn’t it? Here’s a graphic showing how badly the OBR got it wrong (Datablog has an interactive version).

Each of the OBR’s forecasts – including the one released today for George Osborne’s autumn statement – has been markedly less optimistic about the near term than its predecessor, while continuing to be sure things will look a lot better in just a few years’ time.

Initially, I put the OBR’s eagerness to please the government down to weak leadership and expected things to improve when the fearsome Robert Chote took charge of the new body. But, if anything, they have got worse. Here’s the OBR’s latest fan chart which shows how bad (good) things could be fir the UK economy, based on errors in previous Treasury forecasts. Looking at it and you’d conclude that – worst case – the UK might lose 2% of GDP next year (dreadful, but nothing like as bad as 2008):

The OBR also makes a big deal of how important it is to “recognise uncertainty” and to “stress test” its assumptions. One stress is (surprise, surprise) further turbulence in the eurozone:

Our central forecast is predicated on the euro area finding a way through its current difficulties, with the effect on confidence, credit conditions and economic activity taking some time to unwind, but with the financial sector returning to a stable position by the start of 2014. In this scenario we consider the implications of the financial sector taking longer to normalise (for reasons either to do with events in the euro area or with domestic factors).

The central prediction, then, is for a two-year quick fix for the euro, which seems highly implausible to me. What about the downside? All we get is a scenario that models “persistent tight credit conditions… for reasons either to do with events in the euro area or with domestic factors.” And that leads to… a blip. Growth is totally unaffected next year (GDP up 0.9%) and is only very slightly lower in the next two years (GDP up 1.6% and 2.3%). After that, life is back to normal.

At a time of maximum danger for the UK economy, we have a fiscal watchdog whose ‘stress’ tests are ludicrously unstressful, because anything harsher “is impossible to quantify in a meaningful way.” It’s like a doctor who suspects her patient is dying of cancer, but focuses on his ingrowing toenail because it’s “easier to see.”

George Osborne promised us a body that would reassure the public. Instead, the OBR has persistently failed to model the forces tearing the British economy apart. His new creation risks becoming a laughing stock if it doesn’t quickly mend its ways.

I was dismayed to read the Telegraph’s account of the Foreign Office’s forward planning for the collapse of the eurozone. Apparently, ministers are telling embassies to expect riots on the continent, and a flood of British citizens heading home for Blighty, in tubs and dinghies and pedalos. There was cheeriness from the FT’s Wolfgang Munchau as well, who wrote on Monday, in an upbeat piece called ‘The Eurozone only has days to avoid a collapse’:

If the European summit could reach a deal on December 9, its next scheduled meeting, the eurozone will survive. If not, it risks a violent collapse. Even then, there is still a risk of a long recession, possibly a depression.

The Guardian’s political blog tells me the Treasury is already ‘hard at work’ on a contingency plan:

They are losing sleep over fears of a run on the banks in Italy and some of the other troubled eurozone members. This is what one Treasury source told me: “The five to midnight scenario will be a run on the banks in Greece, Italy and Portugal. Spain is fine. There is already a drawdown from banks. But we haven’t got to a run on the banks yet.” [Why is this official so confident that 'Spain is fine'?]

So what will happen if the unthinkable occurs and the eurozone does collapse? I’d like YOU, the well-informed Global Dashboard community, to tell me, so I can prepare in my London bunker.

Here are my rash predictions:

1) The further rise of far-right nationalist political parties and xenophobia towards immigrants. You’re already seeing this happen in Greece.

2) The Russian government exploits the power vacuum. I’m not saying Russian tanks will be rolling down the Champs Elysees anytime soon. But one of the main ‘points’ of Europe, it seemed to me, was to act as a collective bargaining bloc with Russia, and as a collective buffer against Russia’s imperialist ambitions. What happens when that buffer disintegrates? Keep an eye on the EU’s eastern border next year, particularly Ukraine, Belarus and Georgia.

Any other predictions?

Back in 2007, Paul Dacre – editor of the Daily Mail – told a House of Lords Select Committee “in the editorial line and in terms of the leader column, we are consistently against the Human Rights Act.” I think we’ll all agree that Dacre has been true to his word – the paper’s opposition has been remorseless and unyielding ever since.

Apart, that is, from when it wants to bully the Leveson Inquiry – and those witnesses who suspect (quite rightly) that they will be hunted down for all eternity if they testify against the tabloid press. Then human rights – for newspapers, at least – are fine and dandy:

Associated Newspapers is seeking a judicial review of Lord Justice Leveson’s decision to allow witnesses including journalists to give anonymous evidence to his inquiry into media standards.

The Daily Mail publisher wants to reverse a decision Leveson made following approaches from a number of individuals who claimed they wanted to give evidence anonymously without fear of reprisal.

In a claim form issued to the high court, Associated cites four legal reasons to overturn the anonymity ruling.

The publisher said it “fails to give effect to the principle of open justice”; that it would “contravene the principles of natural justice”; and that it infringes the rights of the newspaper group and others under article 10 of the Human Rights Act, which gives the right to free expression. It also argues that Leveson fails to identify a public interest to justify his decision.

Good, also, to see the Mail’s owners ticking off Leveson for not acting in the public interest – which Dacre defines as the freedom for newspapers to “publish what they believe is best for their markets” and “the freedom to identify those who have offended public standards of decency… and hold the transgressors up to public condemnation.”

So let us all join in defending Dacre’s human right to pillory us miserable sinners. After all, it’s good for us and it sells newspapers.

Under President Romney, 310m Americans won’t have any shared interests with any of the 6.7bn other people who insist on living in less exceptional countries:

I believe America is an exceptional and unique nation. President Obama feels that we’re going to be a nation which has multipolar balancing militaries. I believe that American military superiority is the right course.

President Obama says that we have people throughout the world with common interests. I just don’t agree with him.

Mitt – the man who would say anything to be President.

Many Western leaders have called for regime change in Syria. As Barack Obama said in August:

We have consistently said that President Assad must lead a democratic transition or get out of the way. He has not led. For the sake of the Syrian people, the time has come for President Assad to step aside.

Both the United States and the European Union have imposed sanctions. Turkey and the Arab League are likely to follow.

Many, including Richard Gowan of GD, bemoan the inability of the United Nations to act more resolutely.

But what exactly are all the leaders, analysts, and pundits promoting change in Syria actually expecting to happen? The Assad regime to simply hand over power and walk away after four decades?

This is highly unlikely. No other group has willingly given up power during the Arab Spring so far. In Libya, it took an eight-month civil war to topple the government. In Yemen, President Ali Abdullah Saleh continues to hang on, if precariously.

Moreover, the Assads have much more going for them then any of these other rulers. Despite some desertions, Syria’s military and internal security apparatus remains a cohesive force unlikely to disintegrate anytime soon. The economic and political elites are more cohesive, and supportive then those elsewhere—and more fearful of what change might bring. Despite growing hardship, few in Aleppo and Damascus, the country’s two largest cities, have defected. Iran is providing support for its closest ally. Western powers are unlikely to intervene, at least in any way similar to what happened in Libya.

Therefore, the regime is likely to hang on much longer then anyone now forecasts. And if it begins to buckle or actually falls, what follows is unlikely to be pretty. This is especially true given that the Syrian opposition is badly divided:

Seven months into the uprisings, the Syrian opposition has yet to develop a united voice and platform. Unless these disparate groups unite and present a credible and viable alternative to the Assad regime, both Syria’s fearful majority and the international community will find it difficult to effectively push for meaningful change in Damascus.

There are two particularly bad yet highly plausible scenarios for the country’s future if the pressure on the regime continues long enough.

In one, the government grows increasingly anxious about its hold on power, and unleashes an even more brutal crackdown
then what is now occurring, possibly on the scale of what it perpetrated in 1982 in Hama, when over 25,000 people were murdered.

In the second scenario, the government loses control over at least some of its territory, unleashing a sectarian civil war with ugly parallels to what occurred in Iraq in 2006-08 and Lebanon between 1975 and 1990. As Ed Husain of the Council on Foreign
Relations, one of the few people in the West repeatedly warning against the perils of pushing for regime change, wrote a few months ago:

The numbers being killed now will wither in comparison with a possible future civil war, if an increasingly sectarian Syria splinters between the ruling Alawites, the elite and urban Christians, the majority Sunnis, the Kurds, Druze and others. There is no civil society to engineer a peaceful transition, while Syria could plausibly become another Lebanon, acting as a proxy battleground for regional powers.

Unfortunately, there is some evidence that this is beginning to happen in Homs, Syria’s third largest city. As the New York Times reported over the weekend:

As it descends into sectarian hatred, Homs has emerged as a chilling window on what civil war in Syria could look like, just as some of Syria’s closest allies say the country appears to be heading in that direction. A spokesman for the Syrian opposition last week called the killings and kidnappings on both sides “a perilous threat to the revolution.” An American official called the strife in Homs “reminiscent of the former Yugoslavia,” where the very term “ethnic cleansing” originated in the 1990s. . . .

Here it is not so much a fight between armed defectors and government security forces, or protesters defying a crackdown. Rather, the struggle in Homs has dragged the communities themselves into a battle that residents fear, even as they accuse the government of trying to incite it as a way to divide and rule the diverse country.

The risks involved at least partly explain why Turkey, the country with perhaps the most leverage over Syria, has been so reluctant to act more forcefully. They are also a perfectly legitimate reason for Russia and China and some developing countries to oppose a UN resolution (there may be other self-interested reasons involved too of course). As Russian Foreign Minister Sergey Lavrov warned last week, “This is all looking very much like a civil war.”

Given this context, it is worth reminding ourselves of a John Maynard Keynes dictum:

We should be very chary of sacrificing large numbers of people for the sake of a contingent end, however advantageous that may appear…. We can never know enough to make the chance worth taking… It is not sufficient that the state of affairs which we seek to promote should be better than the state of affairs which preceded it; it must be sufficiently better to make up for the evils of the
transition…

Syria is slipping further into chaos.  It’s sad to think that the Security Council has been debating the situation there for almost half a year to no effect.  Or, to be more accurate, the only effect has been to make lots of diplomats very unhappy, as I explain in the new edition of Pragati:

It’s hard to find a happy diplomat at the United Nations Security Council these days. Western officials grumble about the difficulty of negotiating with India, Brazil and South Africa (the IBSA countries) over the Syrian crisis, to say nothing of China and Russia. The non-Western powers, they suspect, are all plotting to frustrate the U.S. and Europe.

Piffle, reply the supposed plotters. The bleak mood in the Council is a result of the West’s distortion of the UN mandate to protect civilians in Libya. If NATO hadn’t used that as a basis for regime change, there might be real cooperation over Syria. Even the unhappiest European officials accept that other powers’ anger over Libya is genuine.

Does anyone gain anything from the stalemate? Russia arguably does. Earlier in the year it failed to halt Western interventions in not only Libya but also Côte d’Ivoire. As Russia’s main claim to leverage at the UN is its willingness to act as a spoiler, these set-backs made it look a shadow of itself. On Syria, its blocking power returned as it resisted – and in October vetoed – EU and US efforts to pass a resolution sanctioning Syria.

For China, the benefits have been less clear, as it prefers to look pragmatic on the Security Council. Nonetheless it felt obliged to side with Russia over Syria. But the real losers have been the IBSA countries, which have often looked trapped between the West and the Russo-Chinese axis as they have tried to respond to events in the Middle East.

But at least IBSA has emerged as a semi-credible diplomatic force in UN affairs, right?  I’m not so sure:

The fact that IBSA voted as a bloc can be interpreted as a success – it is generally recognised that the trio of powers have been significant swing voters in the Security Council this year. But this may only be a temporary phenomenon. Brazil is approaching the end of its two-year term on the Council, and South Africa continues to have a greater stake in acting as the leader of the African bloc than in aligning with India. IBSA’s brief moment of importance in the Council could soon be forgotten, and India’s leverage duly reduced.

Over the weekend, Will Hutton offered a ‘modest proposal’ so bizarre that it must have left his colleagues at the Observer fearing for his sanity.

David Cameron, he suggested, should…

… travel to Germany and make a speech in German – however embarrassing – spelling out the choices. If Germany is unprepared to accept them, he should argue that the least bad option is not for Greece to leave the euro – but for Germany, whose economy is strong enough to take the shock, to do so.

He should say that while it was right for Britain not to join the single currency as it was previously constructed, if Germany were to act responsibly, Britain would peg sterling to a reformed euro and in the long run even consider joining the regime. Moreover, Britain would do this either way, he could argue – eventually joining a single currency in which Germany accepted its responsibilities or a single currency without Germany.

Now the idea that Cameron should offer to swap places with Angela Merkel at the heart of the Euro meltdown is, without doubt, genius. The Germans, I am told, feel cursed to stagger on endlessly chained to the corpses of weaker European nations. So… why not help out? Strap them to the UK instead!

But it’s Hutton’s tactics I worry about. Year after year, with consummate skill, he’s been inching [sorry, centimetring] Britain towards Euro membership.

Who can forget his moving plea from ’99 that the UK adopt the single currency because “we read the same bible, drink the same wine, haunt the same discos, play in the same Champions League” as our European neighbours?

Or his reassurances from 2002 that fears the Euro could crack were ‘scaremongering’ and ‘wishful thinking’? Or his masterful solution for the problem of one-size-fits-all interest rates (in a crisis, European countries survive by running up bigger deficits!)?

Or from November 2008, his Cassandra-like insight that only through immediate Euro entry – now, this minute – could the UK avoid ‘national bankruptcy’ and the ‘clutches of the IMF’?

Or perhaps most prophetic of all, his essay from just a fortnight ago, hailing European leaders for taking an ‘inspiring leap’ towards financial stability, by creating “a self-help club” in which every European country could be both strong and free?

But it’s the language thing that makes me fear Hutton is losing his marbles. Our PM may not be able to speak a word of yer’actual German, but he can do a hilarious German accent (this is taught to all boys as part of the British national curriculum). He even whipped it out on the campaign trail:

What’s more, he’s almost certain to push things too far by borrowing a costume from Prince Harry to make his big day in Berlin memorable for all concerned. The likelihood of embarrassment is overwhelming! He’s sure to come across more John Cleese than JFK.

No – what Cameron should do, obviously, is resign forthwith and allow Nick Clegg a fluent German speaker to take over. Clegg could then appoint a government of technocrats to prep the UK for Euro membership. I nominate one Hutton, W as our next Finanzminister….

Quote for the day:

The world has been slow to realize that we are living this year in the shadow of one of the greatest economic catastrophes of modern history. But now that the man in the street has become aware of what is happening, he, not knowing the why and wherefore, is as full to-day of what may prove excessive fears as, previously, when the trouble was first coming on, he was lacking in what would have been a reasonable anxiety. He begins to doubt the future. Is he now awakening from a pleasant dream to face the darkness of facts? Or dropping off into a nightmare which will pass away?

He need not be doubtful. The other was not a dream. This is a nightmare, which will pass away with the morning. For the resources of nature and men’s devices are just as fertile and productive as they were. The rate of our progress towards solving the material problems of life is not less rapid. We are as capable as before of affording for everyone a high standard of life—high, I mean, compared with, say, twenty years ago—and will soon learn to afford a standard higher still. We were not previously deceived. But to-day we have involved ourselves in a colossal muddle, having blundered in the control of a delicate machine, the working of which we do not understand. The result is that our possibilities of wealth may run to waste for a time—perhaps for a long time.

John Maynard Keynes – The Great Slump of 1930.

Sustainable Development: more than just windmills?

A few months ago, the Colombian government created what passed for excitement among international climate and development types, with its proposal for ‘sustainable development goals’.  In a paper that is surprisingly short given the talk it’s generated, they proposed a set of goals which, in essence, incorporate the current Millennium Development Goals, but go well beyond them in including a range of possible goals on sustainability and the environment.

At the time, Alex raised a set of important questions here on GD about the what, the who and the how of any future SDGs.  And over at CGD, Charles Kenny made a plea for the SDG and the MDG people to start talking to each other to provide some of the substance to underpin these ideas. 

And since then?  Global negotiations are funny things.  In the absence of almost any of the substance that Charles was asking for, and without answers to any of the questions posed by Alex, the SDGs have continued their onward march.  Representatives of thirty countries recently met in Bogata to agree some objectives for SDGs, based around reconciling poverty reduction and sustainability.

 The SDG train has clearly left the station – even though no one really knows what they are.  This is a little disheartening for innocent folk like me who like to believe that facts matter (yeah, I know, hopelessly outdated – I may as well be writing this on a Smith-Corona). 

Given that no one really knows what SDGs are, but they sound good and people seem to like them, what might they actually be?  Where is the meeting ground between environment and development that could form the basis of a set of goals, and what difference would it make to go about things this way? 

Putting sustainability into poverty reduction:

If the MDG project has been about putting forward a set of positive things that need to happen for poor people: more money, more health, more education, what are the sustainability goals that could fit into this sort of framework?  The things we need more of, from a sustainability and a development point of view, are, among others, more clean energy, more sustainable sources of water, and more food grown in ways that does not irrevocably deplete natural resources.  These are things one could imagine putting into a new set of goals to go alongside the more traditional MDG concerns of health, education and income.  Some of them, like water, are even in there already, though almost ignored.

So far so good, but the poverty reduction bit is actually the easy bit. (more…)

Spain’s general election campaign, which concludes next Sunday, has been a pretty dull affair. The Partido Popular, led by Mariano Rajoy, has maintained but failed to widen its substantial opinion poll lead over the governing (I use the word loosely) PSOE. A televised debate between the two main candidates – Alfredo Perez Rubalcaba is the PSOE’s chosen lamb to the slaughter – produced few fireworks. And the general apathy towards politics has been accentuated by the apparent predictability of the result.

Fortunately, there have been a few moments of levity. For it turns out that Mr Rajoy, generally a grey, awkward figure whose strategy is based not on enthusing the electorate as a whole but on avoiding statements that might give PSOE supporters a reason to get off their sofas and vote, is something of a ladies’ man. While he lacks the smooth charm of a Clinton – your average cricket bat is less wooden than Mr Rajoy appeared in last week’s debate – and the filthy lucre of a Berlusconi, Spain’s Prime Minister in-waiting has developed an idiosyncratic but highly effective method of appealing to the fairer sex: the Rajoy Head-Clamp.

Mr Rajoy has learned quickly. In order to avoid embarrassing rejections like this -

- the candidate has taken matters – literally – into his own hands. When I was at school, a fellow pupil who had little success in love was often accused by scurrilous peers of grabbing girls by the head in order to obtain a kiss. Mariano Rajoy uses a similar technique. Hardly a day goes by without some new picture appearing in the newspapers showing his vicelike grip on any woman who crosses his campaign trail. Here is an early example, in which he embraces a supporter despite her attempts to push him away:

And here he is – his grip firmer this time – with one of his party’s candidates for a local election:

You can see the evolution of the technique in this shot of Mr Rajoy with another supporter. This poor woman, her neck seized, has very little prospect of escape:

Even those closest to him – Mr Rajoy claims that most of his most valued advisers are women, and has said he is “comforted” that “they” [women] are playing an increasingly important role in public life – cannot escape his clutches. Here he is about to land a smacker on Esperanza Aguirre, the President of Madrid and one of his staunchest allies. Again, the Head-Clamp is deployed to devastating effect:

You might be surprised to hear that despite his easy way with women, Mr Rajoy’s gender policies have sometimes been criticised. He seems likely to take a firm line against abortion, for example, a policy many see as a denial of women’s rights. Some women are worried that he might repeal the PSOE’s gender equality laws. Here, too, however, the Head-Clamp has come in handy, for Mr Rajoy, obviously growing in confidence as more and more women succumb to his new seduction technique, has begun to use it to win round opponents. Celia Villalobos, for instance, is a rare Partido Popular figure who is in favour of abortion (and of gay marriage too, which her party strongly opposes). When Mr Rajoy met her in Málaga last week, this champion of feminism, undaunted by her radical stance, did not shrink from trying out the Head-Clamp:

There is only one line Mr Rajoy will not cross, having evidently concluded that some audiences are not yet ready for the trusty Head-Clamp. When he shows his tolerance of other religions by kissing Muslim women, he keeps his hands firmly behind his back:

Mariano Rajoy once said that “When a Spanish woman kisses, she really kisses.” In the Head-Clamp method, which it must be said gives the Spanish woman little choice, he has found a reliable tool for testing his theory.