Category: Current Affairs

  • The Euro and Sovereign Debt

    My colleague Richard Swedberg sent me this wonderful graphic today. Very rarely do you see a visual presentation of data that so clearly illustrates so many things so beautifully. He first showed this at an event on the EU Financial Crisis last Friday in which we both participated.

    10-Year Yield for Euro Zone Countries, 1993-2011

    For Euro-skeptics (not Europe-skeptics, mind you, Euro-skeptics), this is powerful evidence that the adoption of the Euro may have papered over some fundamental differences across economies. For those skeptical of the wisdom of international financial markets, this is powerful evidence as well that, well, maybe those who lend to sovereign governments don’t think very hard about things. (Why wasn’t Greece charged a premium? It seems unlikely that differences in the capacity of Germans and Greeks to service their sovereign debts were unknowable.)

    As JMP describes it, “so it looks like everyone thought Germany was just as creditworthy as Greece. Then, turns out, not so much.”

  • Wealth into Power, Indonesia Style

    In preparing for my Asian Political Economy seminar tomorrow, I ran across this quote from Bruce Dickson’s Wealth into Power: The Communist Party’s Embrace of China’s Private Sector. (By the way, this is a very good book, and comes highly recommended.)

    China’s continued economic growth challenges the common assumption that a market economy leads to democracy and common prosperity. In the short run and for the foreseeable future, it seems more likely to lead to a continuation of authoritarian rule under the Communist Party, as top leaders look for ways to govern better but not necessarily more democratically. So far, economic development has led to continued authoritarian rule as the CCP finds ways to adapt itself to the new situation in China. It is doing so by incorporating the growing number of private entrepreneurs into the political system – by integrating wealth and power – and by adopting new policies to address the social tensions created by rapid growth.

    I can’t resist imagining a similar passage to describe Indonesia in 1996.

    Indonesia’s continued economic growth challenges the common assumption that a market economy leads to democracy and common prosperity. In the short run and for the foreseeable future, it seems more likely to lead to a continuation of authoritarian rule under Golkar, as top leaders look for ways to govern better but not necessarily more democratically. So far, economic development has led to continued authoritarian rule as Golkar finds ways to adapt itself to the new situation in Indonesia. It is doing so by incorporating the growing number of private entrepreneurs into the political system – by integrating wealth and power – and by adopting new policies to address the social tensions created by rapid growth.

    Don’t misunderstand me: China 2012 is not the same as Indonesia 1996. The point, rather, is that if political change of the type that we saw in Indonesia in 1998 were on the horizon in China, we wouldn’t know it. We might even comfortably proclaim that the CCP is a coherent actor, that it anticipates its challenges, that it acts independently of the whims of political elites, that it can manage the marriage of state capitalism with private entrepreneurship, etc., even if none of these things were true. Sure, political succession will be difficult, but trying times have been managed before. Even the Bo Xilai case has shades of Benny Moerdani.

    Timur Kuran has written on the challenges of anticipating political change. Here is one accessible introduction.