Tension? What Tension?

“Asia has emerged as a diplomatic hornet’s nest,” according to The New York Times, “even beyond the perennial threat of North Korea.” Secretary of State Hillary Clinton is in the midst of it all, trying to defuse “tension” between the United States, China and Japan. What is going on?

American commentators continue to dread a confrontation with China even as both powers are growing more interdependent every day. In spite of China’s economic ties across the region, there is fear moreover that East Asia is becoming something of a powder keg, about to explode any minute now.

There is real tension, of course. Although China and Japan are quickly becoming each other’s most important of trading partners, militarily they compete. The strong American military presence in Japan as well as its reluctance to sell the F-22 fighter airplane to Japan are complicating factors in a triangular relationship that is intricate to begin with.

The new Japanese government meanwhile is delaying the relocation of a American military base on the island of Okinawa despite Clinton’s demand that they “follow through on their commitments.” Three times, the secretary indicated that Washington is not open to compromise on the issue but Prime Minister Yukio Hatoyama campaigned for moving the base off Okinawa or even out of Japan altogether, reasoning that Japan should pursue a foreign policy more independent of the United States — exactly because of its sometimes bellicose language toward China.

Then there’s Taiwan. Its president, Ma Ying-jeou, has been pursuing a more conciliatory policy toward China which still likes to consider the island a renegade province of the mainland. While 1,500 missiles stand aimed and ready to fire across the Strait, Taiwan is a healthy, capitalist democracy which, for the time being, is not stressing the matter of de jure independence. Rather, China and Taiwan are in negotiation to reduce import and travel restrictions between the two countries: a necessary move for Taiwan considering the recent creation of a Southeast Asian free-trade zone that makes the island less attractive as trading partner to China.

The United States is bound by law to arm Taiwan, however, and a recent sale of missiles met with strong Chinese disapproval. Sino-American relations are still shaky but as Clinton said last Tuesday, “America’s future is linked to the future of this region, and the future of this region depends on America.” Obama was even happy to call himself a “Pacific president” and for good reasons: East Asia is fast becoming the new core of the world economy while politically, its integration can be fragile at times. American involvement is able spark discontent but it also helps smooth over differences by providing great power leadership to those nations fearing Chinese domination.

The political discord should not be exaggerated. Today’s tension springs from relatively minor disagreements and will, in the end, be resolved.

The Kremlin Two-Step

“Westerners often see Russian politics in terms of a high-level struggle between liberals and conservatives,” observes Dmitri Trenin, director of the Carnegie Moscow Center, writing for The Moscow Times. For instance, under President Boris Yeltsin, reformers fought nationalists while under Vladimir Putin, economic liberals opposed the siloviki — a class of politicians that originally served the security services and stresses national interests.

That view, argues Trenin, is a simplification of Russian politics and it fails to properly account for the Putin-Medvedev relationship.

To dismiss Medvedev as a mere Putin puppet — a constitutional bridge between Putin’s second and third presidential terms — would be both unfair and wrong. […] Conversely, portraying Putin as “a man from the past” and Medvedev as “a hope for the future” exaggerates the differences between them and omits the more important factors that unite them.

Dmitri Medvedev does appear to be more of a reformer, noting last November that the “country’s prestige and national prosperity cannot rest forever on past achievements.” Medvedev proposed modernization. Democracy, transparency, and a clean and healthy service economy were supposed to do away with a past of authoritarianism and heavy industry. All this is “borrowing massively from Putin’s vocabulary of 2000,” according to Trenin.

Medvedev was installed in the Kremlin as part of “Putin’s plan,” the substantive part of which was known as the “Strategy 2020,” a blueprint for renewed economic growth and diversification. Although last year’s financial meltdown hit Russia hard, it has only made Moscow modify and sharpen its scheme. “Medvedev is a key agent in its execution” and Putin chose him carefully — not only for his loyalty, “vitally important as that is.” The former president truly intends to move Russia forward. He “wants Russia to succeed in a world of competing powers.”

He has both money — the government’s budget and the oligarchs’ fortunes — and the coercive power of the state firmly in his hand. He is the arbiter at the top and the troubleshooter in social conflicts below. His most precious resource is his personal popularity, which adds a flavor of consent to his authoritarian regime.

That isn’t good enough though. An overwhelming majority of Russians support Putin but those are largely the people reminiscing about the Stalin era, longing for what Trenin calls “the preservation of a paternalistic state.” The best and the brightest aren’t among them.

Enter Medvedev. His Internet surfing, compassionate and generally liberal image helps recruit a key constituency — those beyond the reach of Putin himself — to Putin’s plan.

But in order to fully modernize Russia, the Putin-Medvedev twosome has not only to appeal to young urban professionals; they need to offer them actual modernization as well. They “must break the stranglehold of corruption, establish accountability and free the media.” At some point, argues Trenin, the Kremlin will have to decide between steady marginalization and opening up the system, putting the established order at risk. “Given the weight of geopolitical factors in Russian decisionmaking, it is difficult to foretell which path they will choose.”

The Government of Whim

“We want our money back,” cried President Obama yesterday, “and we’re going to get it!” Announcing a Financial Crisis Responsibility Fee — a tax perfectly named for an era in which banks are held responsible for a recession that was beyond their control — the president promised American taxpayers that they would get “every single dime” which they are “owed” back. Don’t expect a tax cut any time soon though. “Back” here means: right into the state coffers for the government had had to borrow that money in the first place.

The fee will be in place for at least a decade with the possibility of being prolonged for as long as it takes to get the TARP money back. Only “large” firms are subject to the new regulation. Banks that hold less than $50 billion in assets are not affected. Indeed, the White House boasts, so much as 60 percent of the revenue will come from just the ten largest banks.

Describing TARP as “a distasteful but necessary thing to do,” the president admitted that against expectations, most of the money has been recouped already. But “most” is not enough. “If these companies are in good enough shape to afford massive bonuses, they are surely in good enough shape to afford paying back every penny to taxpayers.”

Not only are banks distributing bonuses again — which in itself is something the administration thinks they should be ashamed of — they are “once again engaging in risky bets to reap quick rewards,” said Obama and that does not “reflect what the country has been through.” It looks like “business as usual” to the president and for whatever reason, America can’t go back to that.

Wall Street is protesting. First, the government bailed them out because they were supposedly “too big to fail,” upsetting the natural order of the free market by rewarding failing businesses. Next, the very same financial institutions were held responsible for a crisis that started in the single-most regulated sector of the American economy — the housing market. Now, they are further penalized for a crime they did not commit as the White House announces a largely redundant policy that only reinvigorates existing misconceptions and hatred of the financial sector at large.

The president sees things differently. He denounced the “twisted logic” of Wall Street that supposedly argues that it would be “more appropriate for the American people to bear the costs of the bailout, rather than the industry that benefited from it,” adding, “even though these executives are out there giving themselves huge bonuses.” And these monocle-wearing, cigar-smoking big shots are complaining they’re being treated unfairly?

In fact, they are. Most banks didn’t ask to be bailed out. Rather they were coerced into participating in TARP and they paid back the money as quick as they could. Getting it all back is one thing. Demanding that they change their way of doing business is a serious infringement on their freedom of enterprise and shouldn’t be the policy of any government. That public opinion appears to be against banks and bonuses shouldn’t be reason enough for the Obama Administration to persecute them or capitalism as such. Such is the government of whim and it does not become a republic as the United States.

Sino-American Relations Still Shaky

While the current administration realizes that China is little threat to the United States, last year’s Impeccable incident, when the US Navy’s ocean surveillance ship was harassed by Chinese vessels in the South China Sea, came as a harsh reminder that the two superpowers don’t always get along.

Moreover, the two continue to clash on human rights, Taiwan, and China’s reluctance to push for sanctions against “rogue states” as North Korea and Iran. China’s accidental empire is a matter of concern for many Asian states, India foremost among them, and it is in part responsible for the Asian naval race.

In the United States, there are plenty of commentators who dread China’s military expansion while politicos typically fail to understand why the country is so hesitant to pursue a more aggressive foreign policy when it could be in the interest of the United States. The red giant appears to be waffling more than usual on the issue of Iran recently, rescheduling meetings and refusing to pledge anything concrete.

Meanwhile, Secretary of State Hillary Clinton, on a trip to Hawaii, Papua New Guinea, New Zealand and Australia, tries to pretend that nothing is out of the ordinary. “Everyone’s aware that China is a rising power of the twenty-first century,” she said Monday. “But people want to see the United States fully engaged in Asia, so that as China rises the United States is there as a force for peace.”

“Fully engaged” referring to a $1 billion arms sale to Taiwan, heavily criticized by Chinese officials last week. Clinton doesn’t expect any trouble though. “What I’m expecting is that we actually are having a mature relationship.”

Asked about Iran, Clinton proposed to push for “smarter” sanctions, targeting specific groups within the regime rather than the Iranian economy on the whole. “It is clear that there is a relatively small group of decisionmakers inside Iran,” she said. “They are in both political and commercial relationships, and if we can create a sanctions track that targets those that actually make the decisions, we think that is a smarter way to do sanctions.” Something the Chinese may be more willing to accept, perhaps?

Chávez Shuts Down Shops

Until a few years ago, Venezuelan dictator Hugo Chávez was sometimes described as the benevolent kind but in recent years, his reign has grown ever more authoritarian. He abolished presidential term limits, withdrew Venezuela from both the World Bank and the International Monetary Fund in 2007, nationalized the oil industry and built relations with countries as Iran, Libya and Syria — not exactly the most friendly of nations.

In Venezuela, opposition against what may turn out be a president-for-life is mounting however. Protests are far from an unusual sight in the streets of Caracas. Tens of thousands of Venezuelans have already abandoned the country: artisans, engineers, lawyers, managers and scientists all fled socialism en masse last year. So much as one million people are estimated to have left the country since Chávez came to power. The exodus sabotages the country’s future and no industry is hit harder than oil on which the Venezuelan economy still thrives primarily.

Unsurprisingly, the voice of the opposition is silenced. Dozens of radio stations and two television networks have been pulled off the air already with Chávez attempting to pass legislation that will further penalize “media crimes.”

Last week, amid enduring economic hardship, Chávez devaluated the currency, cutting the exchange rate of the bolivar against the dollar by half for oil incomes and for goods deemed nonessential in order to bolster the state coffers. Currency controls have been imposed to prevent capital flight while inflation is likely to sour.

Earlier today, authorities backed by soldiers closed dozens of retail outlets for price gouging after a shopping frenzy had plagued the nation in reaction to the currency devaluation. Thousands of shoppers mobbed stores during the past week to snap up imported television sets and computers, worried that their savings would lose value soon. Chávez responded by sending troops to monitor prices in shopping districts. So much as seventy retailers were shuttered while raids continue this very day.

It is the typical cycle of government intervention at work: regulation is passed “for the common good”; the regulation fails, or works only temporarily; the private sector takes a beating; the economy turns down — at which point more regulation is proposed to save society from the supposed ills of the “free market.”

Chávez’ struggle against free-market capitalism and what he calls the “imperialism” of American businesses operating overseas is well recorded as are his numerous social programs. As is typical of any movement that begins by “redistributing” wealth, Caracas ends up distributing sacrifices these days. The industrialists were first to fall victim to the new regime. Then came the journalists and the independent thinkers, many of whom fled the country in response. Shopkeepers and entrepreneurs in general are next as today’s news amply demonstrates. In all likelihood, the persecution of his minority will fail however, finally undermining Chávez’ crusade against free enterprise because there are simply too many retailers.

Sadly, the Venezuelan people will bare the burden in the end as their country is internationally isolated and their standard of living declining sharply — all, Chávez insists, because of that evil, American capitalism.

Capitalism Under Persecution

Although banks are not exclusively to blame for the financial meltdown and subsequent recession, it has become popular practice in both media and government to ascribe all of today’s economic woes to supposed greed and irrationality on Wall Street. The chairman of the American Federal Reserve, Ben Bernanke was only the latest in a series of officials to call for greater supervision and regulation of the banking sector. Indeed, it has become one of the outspoken goals of the Obama Administration as well as recent G20 summits.

As rumors persist that the White House is to propose legislation that will impose a fee on international transactions, echoing a suggestion offered by the European Union last December, banks worry.

Goldman Sachs recently came under fire as it turned out bonuses to its employeed once again. How dared they, journalists and politicians cried alike, though the company had repaid the United States Treasury’s $10 billion TARP investment in June of last year already — with 23 percent interest.

Nevertheless, Goldman Sachs is now considering to force its executives and top managers to give up part of their earnings each year — to charity. As The New York Times reports, the details of the charity initiative are still under discussion while the firm is “trying to understand whether such gestures would damp public anger over pay.”

Whatever one may think of demanding that employees donate part of their income possibly against their choice, the mere fact that Goldman Sachs is contemplating such a policy is telling of the economic climate in which it has to operate.

Things may be even worse across the Atlantic. In the United Kingdom, the Labour government is bashing the rich with an extra tax on bonuses while in France, President Nicolas Sarkozy explicitly distanced himself from what he called the “excesses of financial capitalism.” Although his government can’t seem to solve a 8.5 percent deficit on its budget, Sarkozy relishes in “the victory of the European model.”

Increasingly, in the popular press and in the words of lawmakers, it is not quite capitalism itself that is condemned. Rather its “excesses” are blamed for all of today’s trouble. Although capitalism brought immense prosperity to the West, it is “too much” of it that is stopping the rest from catching up. Although capitalism is the only socioeconomic system that guarantees individual rights to life and liberty (because it cannot properly exist without them), it is for the sake of “society” that it must be tempered. Capitalism is justified as a necessary evil. It is justified on altruistic and utilitarian grounds — because, it is grudgingly admitted, capitalism satisfies “the common good.”

Capitalism is a practical system. It does bring the greatest good to the greatest number of people. But that is of secondary concern. Primarily, capitalism is a moral system because it is only under capitalism that man can reap the rewards of his own labor. It is only under capitalism that man is free to choose his line of work, free to specialize in it, free to trade his products and services for those of others on a free market. It is only capitalism that ensures man’s unalienable rights to life, liberty and property and its ruling principle is: justice.

Twenty years after the Cold War ended, capitalism is in recession, to be compromised on at the first sign of trouble. Moreover, its greatest practitioners, the traders, the bankers, the industrialists, the businessmen have become a persecuted minority, carrying a burden of blame for a crisis that was beyond their control, subject to public scrutiny and special laws and penalized, not for their failures, but for their virtues; not for their incompetence, but for their ability; not for their errors, but for their accomplishments.

Businessmen have in part themselves to blame. Amid accusations of greed and selfishness, they appease, apologize and they compromise. They attempt to appease the loudest of their opponents who will never relinquish the struggle. They apologize for their very existence, denouncing “inhuman capitalism” as much as the most collectivist of commentators. And they compromise on capitalism, relying on lobbying, on private manipulation and on pull in order to extract momentary favors from government.

Businessmen have allowed themselves to be persecuted because they never stood up to defend capitalism. Rather they chose to undermine the system and let it take the fall for faults that were not its own. There are few capitalists today who ever bother to defend the philosophy they live by, if even they do so consciously. In their absence, capitalism can be vilified and destroyed almost soundlessly, at least until some remember the source of progress and prosperity again.

The Palin Brief

She overwhelmed the country as vice presidential candidate in 2008. The Left found plenty of reason to resent her and while initially hailed by Republicans as the hockey-mom voice of folksy America, conservatives soon found that underneath the no-nonsense layer of toughness that Palin exhaled, the then-governor of Alaska really had no intellectual depth at all. Combined with a candidate who failed to salvage anything but catch phrases from his heydays as a staunch and sincere conservative representative and senator, it was little surprise to anyone that the Democrats swept the nation and won both Congress and the White House.

Part of the right hasn’t given up on Sarah Palin however. Her 2009 autobiography Going Rogue: An American Life became a bestseller and whatever she writes at her Facebook page is quick to become a matter of national concern. Indeed, Palin has reinvented herself as speaking for the small-government tea party movement, warning of socialized medicine, death panels, and the Obama Administration delivering the country into the hands of terrorists — whom, she complains, are treated as criminals who have rights by this government. Outrageous!

As we previously argued though, another “I’m-just-like-you” president is hardly what the United States need. Not only is the country involved in two overseas wars; it is faced with the possibility of armed conflict in a third; it is still struggling with the effects of the greatest economic downtown in decades; and it will reform health care on the federal level which, in all likelihood, will bring about an enormous expansion of government responsibility and spending. All in all, one would think that there is plenty for the party of small government and free markets to talk about.

Unfortunately, much of the GOP is brain dead and conservatives tune in to listen to the likes of Glenn Beck, Dick Cheney and Rush Limbaugh who, rather than providing intelligent criticism of an administration that far from favors small government and free markets, warn that the president is pouring the country down the drain of socialism.

As strong and united as the Republican Party may seem, Republican voters are in fact extraordinarily divided. Not even half of the people who identify as a “Republican” approve of the direction in which the party’s leadership is taking them — whoever those “leaders” are supposed to be. No more than two out ten people favor Sarah Palin while just 1 percent said former President Bush embodied “the best reflection of the party’s principles.”

Conservatives are united in their opposition to the spending frenziness of the current Congress and White House but they are disappointed that the Republican Party opposes it so little. Sadly, the reason for this is that Republicans too have stopped defending free-market capitalism while more and more they agree that government is the answer to problems, not its cause.

Unsurprisingly, right-wing intellectuals long for the days of Ronald Reagan when there were plenty of political philosophers and economists to back up the party’s agenda. In his first inaugural address, President Reagan could say that the “freedom and the dignity of the individual have been more available and assured” in the United States “than in any other place on earth” because individualism was at its peak. Compare that with the religiously inspired Republican leadership of today. Reagan could boldly declare that “government is the problem” because his era’s generation of economists had amply proved it. Compare that with the endeavors of the last administration.

As Reagan assured a Moscow audience in 1988 though, “Freedom is the right to question and change the established way of doing things,” adding, in defense of capitalism, that freedom also implied “the continuous revolution of the marketplace.” Let us hope that as we continue to question and demand a different sort of change, somewhere in the party that once produced one of the finest of American leaders, there is still a voice of reason and pride. Until that happens, it would appear that we are stuck with Sarah Palin.

Japan’s New Finance Minister

While Japan continues to linger in economic trouble with little hope for imminent recovery, Prime Minister Yukio Hatoyama forced his 77 year-old finance minister Hirohisa Fujii to resign last week and had him replaced with Naoto Kan, a former civic campaigner against government corruption with virtually no experience in economics.

Behind the screens Ichirō Ozawa, secretary general of the Democratic Party of Japan, is manoeuvring the government to abandon some of its campaign promises, a pledge to cut petrol taxes for one thing. That Ozawa is nowadays refered to as “shadow shogun” is telling of the influence he exercises over Hatoyama’s cabinet. The party elder reportedly clashed with former finance chief Fujii who advocated limiting fiscal spending in order to reduce Japan’s gargantuan public debt. Kan apparently favors a more “flexible” approach to solving Japan’s budgetary woes — much to Ozawa’s liking

The appointment of Kan is not only a sign of Ozawa’s seniority however. With his record of fighting red tape, the new finance minister is also likely to be instrumental in this government’s effort to shift power away from career bureaucrats and into the hands of elected officials. Moreover, Kan was a prominent social activist before entering politics and previously served as health minister. As deputy prime minister, he was already tasked with developing a long-term strategy for dealing with Japan’s mounting public debt and in his new job, he is all the more able to turn his plans into a reality.

The Japanese Finance Ministry enjoys a reputation of being something of an impregnable bureaucratic fortress and reforming it to be more answerable to parliament will be quite a challenge for Kan. It successfully resisted past efforts to curtail its budget-making authority although in the late 1990s, the ministry did lose its power to regulate the financial sector to the Bank of Japan.

On taking office, Kan declared that the ministry “will now become a model of how to change Kasumigaseki,” Tokyo’s financial district. He left little room for doubt about his intentions, threatening to replace uncooperative officials and vowing to improve public oversight of the “special accounts,” the vast pools of capital of pension funds and the like that the government has controlled with little disclosure. How his more “flexible” approach to fighting the deficit will work out remains to be seen.

In Blogs We Trust

Don’t you miss the days of Web 1.0? When the Internet was young and filled with cute little HTML websites, simple blue hypertexts and the occasional animated GIF.

Few could suspect at the time how this series of tubes would come to change the media landscape in little over a decade until the World Wide Web dropped anchor in Eternal September. Newspapers didn’t have to try to attract readers with fancy graphics and think about charging them for online content yet. The Net was nothing to worry about.

But then came the blogs and the social networks and the rise of citizen journalism and opinion — not news — became the norm. Read more “In Blogs We Trust”

Mitchell: Peace in Two Years

Where last month the European Council decreed that there can only be a two-state solution to the Israeli-Palestinian conflict with Jerusalem as capital of both nations, American envoy to the Middle East George Mitchell is more nuanced, stating that Israel “annexed” East Jerusalem so that “for the Israelis, what they’re building in, is in part of Israel.”

Previously the United States demanded that Israel halt settlement construction altogether before any negotiations could resume. This was an unfortunate foreign policy failure on the part of the Obama Administration for it strengthened the Palestinians in their resolve in spite of Prime Minister Benjamin Netanyahu’s compromise to stop construction except of settlements already being built and homes being erected in Jerusalem.

The administration was not discouraged however and Secretary of State Hillary Clinton went on to meet with Tony Blair who still represents the Western world in regards to the Middle Eastern conflict. “It’s a difficult moment right now,” said Blair at the time, “but then it always is.” As we noted previously, “it is not unthinkable that Clinton […] will take on [the challenge of bringing peace to the Middle East] herself, shunting the [envoy] aside.”

Especially Jerusalem is a “very complicated, difficult [and] emotional” matter “on all sides,” acknowledged Mitchell.

Our view is, let’s get into negotiations, let’s deal with the issues and come up with a solution to all of them including Jerusalem which will be exceedingly difficult, but in my judgment, possible.

Indeed, Mitchell thinks he doesn’t need more than two years to finish the job. “Personally I think it can be done in a shorter period of time.” On top of that, the former senator noted that negotiations between Israel and Syria could operate in conjunction with any Israeli-Palestinian peace talks. As with any issue, the Obama Administration certainly doesn’t lack ambition when it comes to the Middle East though it’s not difficult to be skeptical considering that the conflict had raged for more than half a century already.