The Great Greek And Spanish GDP Mystery – One Hypothesis

Many an economic eyebrow must have been raised last Friday when Europe’s first quarter GDP data was released, and people discovered that the Greek economy had suddenly surged forward, rising by 0.8% over the level it had attained in the last three months of 2010 (or at a 3.2% annual rate, or faster than the US). Since almost everyone with knowledge of the situation is forecasting a further contraction in the economy this year, the result may have been thought to be a surprising one. Continue reading

Oh My

Removed from a Paris-bound plane.

Dominique Strauss-Kahn, the head of the International Monetary Fund, was removed from a Paris-bound flight on Saturday afternoon minutes before takeoff after a New York City hotel housekeeper accused him of sexual assault, the police said. …

Strauss-Kahn was being questioned after a 32-year-old chambermaid complained that a naked Strauss-Kahn sexually attacked her in his Manhattan hotel room, the police said. The maid, who said she broke free, suffered minor injuries, police said.

The NYPD expects to bring formal charges Sunday morning, New York time.

On being partisan, while unsure of your own party

The all-you-can-eat reasons buffet is open at the Telegraph. Charles Moore says that tuition fees are unfair on students in general:

The poll tax went wrong because it came in, for many, at punitively high rates, with more losers than gainers. You got the bill long before you got the benefit of better-run councils. Tuition fees may incur the same problem. The loss is certain, the gain uncertain. From the autumn of 2012, the fees will almost triple to £9,000 per year, a sum that less than 10 per cent of the population (and virtually no students) could pay out of post-tax income. So most students will incur debts amounting to more than £30,000.

While also being unfair to those students who happen to have wealthy parents:

If you are a citizen of Bahrain or Brunei or Brazil, you can get your child into a pretty decent British university without his or her grades getting more than a cursory glance, because you will be paying the full fees, for which that university is desperate. That option is not open to British students – an anomaly which Mr Willetts was trying to address with his “gaffe” this week.

In conclusion, a one-two combo of special pleading and mincing:

The Conservative part of the Coalition has made a point of not sucking up to those who Mrs Thatcher used to call “our people”. That may be acceptable as part of the “we’re all in this together” theme of recession. But once “our people” start to feel positively persecuted, they will take their electoral revenge. You cannot build the Big Society – let alone a Tory election victory – by disrespecting the leading 15 per cent of its citizens.

A third of whom can’t afford the £9,000 p.a. tuition fees out of their post-tax income. You also have to ask: what’s the mechanism of this ‘electoral revenge’, exactly? Voting Lib Dem? Voting for UKIP? Labour? Is he still the editor?

Is There Really Such A Thing As A Eurozone Credit Cycle?

America, we know, has a currency union that works, and we know why it works: because it coincides with a nation — a nation with a big central government, a common language and a shared culture. Europe has none of these things, which from the beginning made the prospects of a single currency dubious.
Paul Krugman – Can Europe Be Saved?

All theory depends on assumptions which are not quite true. That is what makes it theory. The art of successful theorizing is to make the inevitable simplifying assumptions in such a way that the final results are not very sensitive.’ A “crucial” assumption is one on which the conclusions do depend sensitively, and it is important that crucial assumptions be reasonably realistic. When the results of a theory seem to flow specifically from a special crucial assumption, then if the assumption is dubious, the results are suspect.
Robert Solow, A Contribution To the Theory of Economic Growth, 1956

One of the key premises underpinning the establishment of the Euro as a common currency to be shared by a number of individual national states rather than one single nation was the central idea that the several economies of the participating countries would eventually converge to one common typology. That is to say, even if the individual nations would not be dissolved into one single superstate, then the idea was that the difficulty this could obviously create would be overcome by the generation of a number of different, but to all-important-economic-effects identical economies, each one a replica (in minature or “a lo grande”) of the other. Absent this, it is hard to see how people could have convinced themselves that having a single currency and a single monetary policy could possibly work in the longer term. Continue reading

Premature Evaluation: Yalta by S.M. Plokhy

Did FDR give away too much at Yalta? Was Churchill sketching out percentages of influence in Eastern and Southeastern Europe with Stalin? How far did Stalin’s plans for annexations run? And was the Cold War inevitable?

In Yalta: The Price of Peace, S.M. Plokhy goes to the literature and the archives with these questions, and so far (I’m not quite halfway through) comes back with good arguments and answers. His most helpful point, to my mind, is to relocate Yalta as a wartime conference. He accompanies the negotiations and their background with details of which armies were where at what times. While victory in Europe looked certain for the Allies if they held together, it was by no means certain whose forces would reach key areas first, and it was even possible that the Grand Alliance would break before war’s end. It certainly would not have been the first time in European history that a coalition had foundered on the shores of victory.

Two quotations that bear on the overall argument:

Stalin’s words [in a discussion about creating the United Nations] were a reminder that the peace being negotiated at Yalta was not one between the Allies and the Axis but between the victors themselves. (p. 126)

On January 16, 1943, Moscow informed the Polish government in exile that it had decided to revoke a provision of their treaty recognizing the Polish citizenship of ethnic Poles who found themselves on Soviet territory after September 1939 [i.e., after the USSR had invaded the eastern parts of interwar Poland, in accordance with the secret protocols of the Molotov-Ribbentrop pact]. From now on they would be treated as Soviet citizens. (p. 159)

British leaders, having gone to war against Germany over Poland found it difficult to leave that country in Stalin’s sphere of influence without protest. Stalin, having seen Russia and the USSR invaded twice via Polish territory saw a friendly Polish government (for Stalinist values of “friendly”) as a necessity. Besides, the Red Army was in Warsaw, and the London Poles were in, well, London.

I’ll be interested to find out how much post-war conflict Plokhy sees as inevitable, given such deep divisions among the Allies on matters of both principle and practice. On the other hand, both East and West made compromises at Yalta, so maybe he will argue in favor of more contingency than is usually credited.

The research is solid, the prose is brisk, the details colorful and the argument clear. Good stuff.

Japan’s Economy Struggles For Air

With the arrival of the first real Japanese data since the Tsunami struck the immensity of the tragedy which Japan is passing through is only now gradually becoming apparent. Exports were down by a seasonally adjusted 7.7% in March over February, while imports were only fell by a much more modest 1.4%, with the inevitable consequence that the trade surplus which forms the lifeline for Japan’s fragile economy shrank sharply. In particular car production was badly hit, with output at Toyota plunging 62.7% during the month, while Nissan reported a drop of 52.4% and Honda put the shrinkage in its Japanese domestic production at 62.9% adding that output would be at 50 percent of its former projections until at least the end of June. Continue reading

After Osama

Juan Cole sets the stage:

Usama Bin Laden was a violent product of the Cold War and the Age of Dictators in the Greater Middle East. He passed from the scene at a time when the dictators are falling or trying to avoid falling in the wake of a startling set of largely peaceful mass movements demanding greater democracy and greater social equity. Bin Laden dismissed parliamentary democracy, for which so many Tunisians and Egyptians yearn, as a man-made and fallible system of government, and advocated a return to the medieval Muslim caliphate (a combination of pope and emperor) instead. Only a tiny fringe of Muslims wants such a theocratic dictatorship. The masses who rose up this spring mainly spoke of “nation,” the “people,” “liberty” and “democracy,” all keywords toward which Bin Laden was utterly dismissive. The notorious terrorist turned to techniques of fear-mongering and mass murder to attain his goals in the belief that these methods were the only means by which the Secret Police States of the greater Middle East could be overturned.

I’ve got to think the European militaries will be done with Afghanistan about as fast as is practicable. How much civic and NGO engagement remains afterward is an open question. The Schröder government in Germany may have said that the country’s security began in the Hindu Kush, but surely there are ways to secure Germany without soldiers in Afghanistan.

European support for new democratic governments in the Arab world will not be simple, given troubled colonial histories in some places and populist worries about Islam in others. Nevertheless, Europe has much to offer in both managing transitions and models of pluralist democracies that remain true to their varied national and religious backgrounds.

Ron Asmus, RIP

Ron Asmus, a key person in the 1990s enlargement of NATO and a tireless advocate of better European and transatlantic relations, died on Saturday, April 30. He was 53.

The Economist’s Eastern Approaches blog writes:

He was a discreet, wise and sympathetic presence in the region, in Washington DC, and in West European capitals for two decades, explaining to jittery ex-communist politicians that volume and frequency of public utterances does not correlate with effectiveness, to American officials and politicians that the goal of “Europe whole and free” still required patient and detailed work, and to West European leaders that a security grey zone in the east would be as bad for them as it would be for those consigned to it.

Just so.

He will be much missed, even among people who barely knew him, and his efforts missed among people who knew him not at all.