Archive for March, 2010

Brazil: Does Lula have coattails?

March 30, 2010
Can Lula translate his government's popularity to Dilma Roussef, his chosen candidate for president?  Source: Google Images Can Lula translate his government’s popularity to Dilma Roussef, his chosen candidate for president? Source: Google Images

After Lula, it looks like it’s the battle between Dull and Duller.  Brazil’s presidential election in October is an important one, as the country’s success and new-found leadership role within the BRICs and G-20 make Latin America’s largest economy critical on the world stage.  Lula has charisma, but his anointed successor from the PT party, Dilma Roussef, does not.  Luckily for her, her rival, Jose Serra, who is ahead in the polls, is as dull or duller than she.  That’s why he was trounced by Lula in 2002, for a time causing Brazilian bonds to trade at default spreads. 

CSFB reports today (see below) that Serra remains ahead in opinion polls.  Though slightly wider in March, Serra’s lead over Dilma has narrowed in recent months.  The popularity of the Lula government (of which Dilma is a leading member) remains in the stratosphere, with 76% of those surveyed in March appraising the government as “excellent/good.”  Yet only 45% of those saying so said they would vote for Dilma, which is not good enough for her to beat Serra, once mayor of the city of Sao Paulo and now governor of Sao Paulo State, Brazil’s most populous state and the one packing its economic punch.   It’s too early to call this important election, but narrowing poll numbers this far out must worry the Serra campaign.  A recent profile of the dour Social Democratic administrator can be found in this  Economist article

From today’s CSFB report:

Poll shows wider gap between voter intentions for José Serra and Dilma Rousseff in the presidential election. The Datafolha poll, published on 27 March, showed higher voter intentions in the presidential election for José Serra (PSDB), currently the governor of São Paulo, and a slight decline in intentions to vote for Dilma Rousseff (PT), the chief minister of the presidential staff, reverting part of her gain in February’s poll. Voter intentions for Dilma Rousseff declined from 28% to 27% from February to March, while voter intentions for José Serra rose from 32% to 36% (Exhibit 1).
Serra’s leading position in the simulations of the first round of voting in the presidential election rose from 4pps in February to 9pps in March. Voter intentions for federal deputy Ciro Gomes (PSB) went from 12% to 11% from February to March and remained stable at 8% for the former minister Marina Silva (PV). In the simulations for the second round, Serra obtained 48% of voter intentions versus 39% for Rousseff.
We believe that the wider gap between the voter intentions for Serra and for Rousseff represent a natural variation in opinion polls and does not point to any trend for the coming months. Since the February Datafolha poll, José Serra has suggested he would be the PSDB’s pre-candidate for president, which has bolstered his visibility among voters in recent weeks. Until the campaign starts in July, the scenario should continue to favor the government’s candidate, in light of the Lula administration’s high approval ratings. The March Datafolha poll showed that the administration’s “excellent/good” rating rose from 73% in February to 76% in March, the highest level in the time series (Exhibit 2).

An increase in voter intentions for Rousseff will depend on the government’s ability to transfer to its candidate the votes of those appraising the administration as “excellent/good.” In March, 45% of voters appraising the administration as “excellent/good” indicated they would vote for Rousseff in a possible second-round election dispute with Serra (Exhibit 3). Thus, a substantial increase in voter intentions for Rousseff would require an increase in this percentage.

Rise in median market forecast for IPCA inflation in 2010, from 5.10% to 5.16%.The Market Readout released yesterday (29 March) points to a rise in the median market forecast for IPCA inflation in 2010, for the tenth week in a row, this time from 5.1% to 5.16% (Exhibit 4). The higher expectations for IPCA inflation are explained mainly by the revisions in projections for short-term inflation, from 0.44% to 0.48% for the March IPCA index and from 0.39% to 0.40% for April. Conversely, after rising for two straight weeks, the median forecast for IPCA inflation in 2011 remained stable at 4.7%.

In our opinion, the upward revision in market expectations for IPCA inflation in 2010 was caused primarily by higher-than-expected consumer inflation in Q1 2010 and in April. While the median of expectations for cumulative inflation from May to December 2010 fell from 2.76% on 8 January to 2.69% on 26 March, expectations for cumulative inflation from January to April rose from 1.74% to 2.43% in the period. These results suggest that the majority of market participants merely incorporated the higher-than-expected inflation in Q1 2010 into their projections for 2010 inflation (Exhibit 5). We believe that the fact that the rise in inflation in the first few months of the year was mostly the result of higher prices of a seasonal nature (e.g., increase in tuitions) or a temporary nature (e.g., higher inflation in fresh food prices) means that the higher-than-expected inflation in the short term has not raised inflation expectations for longer horizons.

We do not expect market forecasts to increase significantly over the next few weeks. Our projections for IPCA inflation in March (0.45%) and April (0.40%) are near the median market forecast. Although the recurrently higher-than-expected inflation in recent months has increased uncertainty as to the dynamics of inflation in the short term, we think a reduction in consumer inflation is very probable in the coming weeks, especially because of the reversal of the price hikes that caused the higher inflation in Q1 2010.
Among the expectations for other economic indicators in 2010, we highlight the stability in the median forecast for the Selic basic rate at the end of 2010 at 11.25%, which assumes five consecutive 50bps increases in the Selic rate starting in April.

President Obama: Masterful politician

March 28, 2010

 

Soaring above...well...in the fray.  Source:  Google Images
Soaring above…well…in the fray. Source: Google Images

I don’t agree at all with the Economist’s leader this week, which suggests that Barack Obama’s presidency was headed for failure until his health care victory last week.  The health care victory was the icing on the cake, coming fourteen months into Obama’s first term, after he rescued the planet from an economic meltdown in a cooperative effort with other G-20 leaders, pulled the Security Council behind him in a tougher stance toward Iran, negotiated nuclear arms reductions with the Russians, and improved America’s image in the world.  Bravo, Mr. President!

Politically, this fella is no slouch.  Obama may well avoid what happened to Bill Clinton in ’94, a massive mid-term reversal, with the likes of Newt Gingrich snickering in the hall, John Boehner today looking  like a dim photocopy of the Newt.  Sure, the president has been aided by the Republican victory in Massachusetts.  Yes, that’s right — aided by the Republican victory, a wake-up call that came ten months before the mid-term elections, just in time to deflate the egos of many in the West Wing, to cobble together a realistic health care victory, and to lay the foundation for a multi-month comeback to a mid-term election victory, or at least a less-nasty defeat.   Such a Democratic upset this November seems more likely now, given the current state of the know-nothing Republican Party, as hamstrung by their defunct ideology and mediocre leadership now as they were in October 2008 when they couldn’t understand that capitalism would be saved by government intervention.

Let’s not underestimate the dimensions of this political success.  I, not knowing much about Barack Obama in 2008, underestimated the mettle of this (at the time) inexperienced, leftish, mediocre legislator with barely any time outside the Illinois legislature.  He is one of those lucky bets that is paying off.  

Obama, his advisers, and dare I say it, the Democratic leadership of Congress, played this thing like a symphony.  Right on the heels of the Mass. election, which I wrote about in January, it would have been highly unpopular to ram health care reform through, utilizing the funky procedures they are employing right now.  Steny Hoyer had to button his lip in January.  Now, the country has barely noticed how the Democrats are passing this thing.  The Dems realized that not passing health care reform would be worse than stealing it in the middle of the night.  President Obama can claim that he has done something for the American people, something big, and yes, controversial.  But this accomplishment will be remembered as such, and everyone will forget how it was done.  Brilliant insight on the part of the Democratic leadership.

Even better, the president held that mock-bipartisan discussion with the Republicans right after the Mass. election, providing fodder for his future argument on the hustings, that “I reached out to them and they bit my hand.”  Now, he can dispense with the facade of bipartisanship (something he has never really exhibited), just when you want to dispense with bipartisanship, that is, in the run-up to an election.  The gloves are off, folks, and the Democrats are towering over a party in disarray, drifting to the right, and sipping tea.

Now, what do you do with this victory?  This is the question the Economist asks.  Undoubtedly, the Obama people will answer, “Get re-elected.”  And for starters, this means doing as well as possible in the mid-terms, to allow for a legislative foundation to pass more of the Obama agenda, though no one is quite sure what that is.  Then, run in 2012 as the early 21st century’s FDR, the remnant of the right quivering in their jack-boots.

To keep up the momentum, the President just jaunted off to Afghanistan, to underscore his key foreign policy priority and to make indelible his new-found image of toughness.  Having sustained criticism for dithering and allowing others to lead him, whether Democrats in Congress or foreign leaders, Obama is in pursuit of a victory abroad to match the massive, bloody victory he just won on the homefront.

I opposed health care reform in this blog.  Not that I oppose health care reform per se.  In fact, I am for it.  It is the fair and right thing to do in America, and one of those important actions, so intangible yet so necessary, that underpins social peace and the fabric of our society. However, I oppose health care reform, an expansion of government entitlements, at this time.  I still feel that America’s gravest fiscal crisis in history — the one we are in, which is set to get worse —  is no time to expand entitlements.  Entitlements — unemployment insurance, medicare, medicaid, social security, health care, etc. — could undermine America’s finances, if a medium-term fiscal plan is not put forward that puts government debt (now approaching an unhealthy 90% of GDP) on a downward trajectory.  On this, I concur with the Economist.

I was impressed that the CBO found a way to fully fund health care reform, albeit with uncertainty that the revenues will be there.  Cost containment is another uncertainty.  Hats off to the Democrats for seeking a way to expand entitlements without further busting the budget.  I do feel that some credit for this is due to those of us who put pressure on the party in power to respect fiscal rectitude, including many in the party of “no”.  Democracy works.  

I was a country risk analyst for fifteen years.  Country risk analysts are a breed that understands what is at stake with a deterioration in America’s public finances.  Country risk analysts assess the likelihood that a sovereign government will pay back its debts in full and on time.  Rating agencies, where I was a managing director for sovereign ratings for much of the past decade, assign letter ratings — AAA, BBB, BB, etc. — that rank countries by their sovereign credit risk.  Alas, the US is now in danger of losing its cherished AAA rating — the highest rating, the lowest risk — if the deterioration is not reversed in public finances (not to mention the trade deficit, which is driven in part by government deficits).  I wrote on these matters last fall — a piece on fiscal policy and one on trade — and earlier this year on the prospect of the US losing its AAA.

Americans are spoiled.  Never having experienced a real sovereign debt crisis, similar to what was experienced in Mexico after 1994, in Thailand, Korea, Indonesia and Russia after 1997-98, and in Argentina after 2001, Americans don’t worry about their governments’ finances.  Most argue today that the US, wealthy as it is, can afford health care reform.  But they don’t want higher taxes to pay for it.  There has never been a worry about the safety and soundness of US government bonds.  There have not been lines in America outside of defunct banks of depositors seeking their money since the Great Depression.  This is why the backlash against the bank bailout last  year was so strident…and so ill-informed.  Country risk analysts know better and understand that America has bought some time with its stimulus package and bank rescue, but had better balance its books in short order.  My worry is that the president and his inner circle are not as on top of these risks as the average country risk analyst is.  Hopefully, Geithner and Summers and others will bend the president’s ear regarding fiscal rectitude, if they are allowed to remain in power.

America’s economy remains strong and large.  The US dollar remains the world’s reserve currency. American competitiveness in high-technology, education, services, agriculture, defense and other industries remains intact.  It would take some serious further mismanagement for the US economy to lose its position of number one.  In 1905, Argentina had one of the leading economies in the world.  Through over a hundred years of mismanagement, Argentina became the number one sovereign financial pariah, with a massive sovereign bond default in 2001.

The US has a ways to go before becoming Argentina, or even Greece or Britain, the latter more likely to lose its AAA than the US.  But, such intangibles as credibility of the US dollar and US assets could evaporate quickly.  Right now, those with cash in the world do not have a lot of options better than US dollar investments — euro investments look dodgy at best, yen investments are not so attractive, and other currencies do not provide the depth and safety to handle multiple trillions of investment dollars that pour into US, European and Japanese markets.  Not yet at least.  Watch this box on the Rising Powers to learn more about the risks and opportunities in the major Emerging Markets. 

The US economy and US power are in decline, for sure.  Don’t gnash your teeth or get panicky.  We’re talking about relative decline, which is inevitable.  With $45,000 in per capita income, versus China’s $3,500, America will not grow as fast as China.  The Chinese economy will overtake America’s in a matter of decades.  US power too — that is, America’s ability to influence events in the world — will also decline in relative terms. 

It is not time to move to Beijing.  What is critical is the manner and speed of America’s decline.  If America ensures that the Rising Powers remain cooperative members of the liberal interational world order — characterized by free trade, currency convertibility, market economies, democratization, the generally peaceful resolution of disputes, and cooperation among the world’s great powers — then America can decline with peace of mind.  Moreover, if America’s declining economic position does not occur suddenly and rapidly, producing dislocation and popular anger at home, then America can maintain its still-powerful, yet diminished position in the world with grace, proud of having led the most prosperous, fairest, least-bloody world order since humans stopped swinging from trees.

The surest way to protect the world’s liberal institutions and to co-opt the Rising Powers is for America to stay strong.  So, American policy makers must see every policy option through the lens of American power.  Balance must be sought between achieving a more equitable American society and reinforcing the pillars of American power.  That is why I opposed health care reform at this time, while I fully understand the political imperative of doing it now.  Those Democratic majorities won’t last forever.   

Flush with his health care success, President Obama’s first priority no doubt will be to win elections — first in 2010 and then in 2012.  To that end, he will attempt to chalk up victories in his chosen priorities.  He will seek tangible victories in Afghanistan, some movement in the Arab-Israeli conflict, and progress on jobs and financial re-regulation.  Nothing wrong with these priorities.  The only thing missing perhaps is this lens of American power.  Will such-and-such a policy bolster American power over the longer-term or not?  If not, do not expend political capital on it.  Is there anyone in the White House looking through this lens?  I hope so.    

Restoring fiscal soundness, which means cutting spending and raising taxes, should be priority number one, Mr. President.  The president, who has sought to recast his leftish record as a centrist, should embrace centrism — and its centerpiece, sound finances — wholeheartedly.  But he won’t.  No one believes that centrism wins elections.  I suspect if he did embrace centrism, he might be surprised that it could win elections.  As the first truly centrist American president, Barack Obama would be on his way to achieving another first, following his most recent first — health care reform.

Mideast Update: Watch Clinton’s Aipac speech

March 15, 2010

Bibi was defiant in the Knesset, refusing to halt Jewish settlement in East Jerusalem.  The Obama administration has turned up the heat, higher than at any time since 1991 when H.W. Bush/Baker withheld loan guarantees because of settlements.  This worries Israeli diplomats.  Hillary is set to give a speech at the AIPAC conference beginning in six days.  High diplomatic drama — the Rising Powers blog has been keeping you informed of the current events, the history, and yes, this blogger’s opinions on the stress in the alliance. 

In a past blog, I argued that Netanyahu’s foolishness reaped:

” ..no gain at all for Israel at the cost of modestly damaging US-Israeli relations, which, at least with the Obama administration, could prove hard to repair.  Having met Prime Minister Netanyahu a number of times when I was involved with rating Israel’s bonds, I suspect the buck stops with him. His hubris was behind this, if only in spirit rather than in deed.”

But, I pointed out that on the substance of Jerusalem, one must stop and think:

“…the point that Jerusalem should not be divided, should remain under Israeli sovereignty with strong guarantees for Muslim control over Islamic holy sites should not be dismissed out of hand.”

And…

” A few years ago, the Israeli leftist and peace activist and former Labor minister, Yossi Beilin, said that the deal with the Palestinians should be a swap – a Palestinian state in the West Bank and Gaza (including dismantling most Jewish settlements) in exchange for Israeli sovereignty over Jerusalem…  The nature of any deal is — you give something up, I give something up.  Yet the Arab position, notably in the much vaunted 2002 Saudi peace plan, is, Israel gives something up (withdrawing to the 1967 borders) and the Arabs agree not to make war.  I concede and you agree to take the gun away from my head… 

“Jerusalem is the third holiest city of Islam, but is the holiest spot on Earth for Judaism, not to mention the importance it holds for Christians.  During Jordanian rule over East Jerusalem, Jews were not allowed to visit the Cotel, or Western Wall.  Today, under Israeli sovereignty, the Islamic Waqf administers Islamic holy sites in Jerusalem.  In the West Bank, Jewish shrines have been destroyed under Palestinian Authority rule.  Israel protects Islamic sites under its control.

“The swap – Palestinian state and dismantling of most settlements for Israeli sovereignty over Jerusalem – is the right thing to do in my view. The Palestinian/Arab side has succeeded in moving the debate.  It is now about splitting Jerusalem. In return, maybe, just maybe, the Palestinian side would give up the so-called right of return of Palestinians to their pre-1947 homes in Tel Aviv, Haifa and elsewhere.  (Should Jews demand a return to Morocco, Iran, Iraq, Tunisia and other states where they lost all they had – or even just financial compensation?) This is called staking out an extremist position as a negotiating tactic.  Your adversary may ultimately concede out of exhaustion. Arafat was a master of this strategy, using terrorism and the intifadah as levers. 

“US policy, which many argue is biased toward Israel, inadvertently backed the Arab view on Jerusalem, thanks in large part to the handiwork of Bill Clinton at Taba (and quite frankly of Ehud Barak).  Bubba was guided only by his desire to be the man who brought peace to the Middle East, a sort of redemption for his impeachment over the Monica Lewinsky scandal.  It has been very good PR on the part of the Arabs to move the debate this way, and woeful PR on Israel’s part.  Israel has been woeful at PR since 1967.  But as they say in Texas, that dog won’t hunt.  The debate has already been moved. In order for Israel to obtain international legitimacy, it must negotiate over Jerusalem.”

Regarding arguments made by Stephen Walt, known for his criticism of Israel and the US-Israel alliance, I noted:

“He pushes heavily the argument of Israel’s invincible military and of the paper tigers that are Israel’s regional threats.  I would argue that history has shown that a mistaken belief in one’s invincibility, driven by perceptions from wars past, often precedes a military defeat.  A foreign policy realist like Walt should understand this.  So, friends of Israel would do well to be cautious about how strong they think little Israel, with its small territory, small population, dysfunctional political system, and few allies, is relative to its enemies.” 

And finally, in a piece I wrote on Hillary’s criticism of Israel’s “insult” of America, I noted that support for Israel in surveys of Americans has historically held pretty high:

“…the Secretary of State and the President are entitled to express their feelings of being insulted by Israel, as they were elected to do just that, communicate America’s position vis-à-vis foreign countries.  And, we as voters are entitled to review the Obama administration’s record on this and other issues in 2 ½ years and either keep them there or throw them out.  Polls of American attitudes toward Israel and the Palestinians consistently show over 50% for Israel, while support for the Palestinians remains stuck at below 20%.  Israel’s support rose to 63% in the most recent Gallup poll a month ago, found hereSupport for the Arab side, on the other hand, has crept up from near 10% to the mid-teens over the last 20-30 years.  In any case, Walt & Mearsheimer, I don’t know if these numbers can be explained simply in terms of the so-called vice grip of Jews over Congress and the media.  But, people who live by the polls, often die by the polls, and such numbers can change abruptly, although they haven’t for decades.  I’ll bet the “support for Israel” numbers will dip a bit as a result of the latest ”insult.”  Thanks, Bibi.”

Well, keep an eye out for Sec. of State Clinton’s speech at the AIPAC conference, and Biden’s meeting with Bibi in Washington, where he is coming to speak at the annual meeting of the nefarious but successful pro-Israel lobby.  She may give a peek at her cards, that is, how far the Obama administration is ready to take this, to exploit this diplomatic gaffe to pressure Israel to make concessions.  Trouble is, Netanyahu loves a good fight.

Middle East Update: Lula trip, Biden flap fallout, etc.

March 14, 2010
"Neutral" Lula and his dour friend.  Source: Google Images
“Neutral” Lula and his dour friend. Source: Google Images

The Rising Powers blog has devoted some time in recent days to the diplomatic flap over Israel’s embarrassment of US Veep Joe Biden with the announcement of East Jerusalem settlements.  See recent posts here and here.  To update you, President Lula of Brazil, the one-time labor union firebrand who has united his country of extreme riches and extreme poverty like no one before, is going to take a crack at bringing people together in the Middle East.  Where President Obama has been unable to bridge the gaps in the region, Lula has called on “someone with neutrality” to take a shot. Eh-hem, is that someone Brazilian?  The two-term President of Latin America’s largest economy and member of the exclusive club called BRIC will journey to Iran in May to offer some Brazilian optimism to Ahmadinejad and Khamenei, aka Dour and Dourer.  I wish Lula well.  As a long-time Brazil analyst, I applaud this man’s every effort.  A supremely positive force for the planet, unless you’re trying to protect the Brazilian rainforest.

In other post Biden news, a Maariv columnist was quoted in the NY Times on the subject, saying that Netanyahu is trying to placate both right-wingers in his coalition and the American ally, and thus finds himself dancing at two weddings; where will he be when the music stops? Nicely put!

And, the Biden flap has not slowed the Netanyahu government’s efforts to kill or capture Hamas military commanders and other killers, with the capture today by Israeli forces operating in Ramallah of Hamas terror mastermind, Maher U’dda. Would that the PA would nab these guys, right?

Finally, Hillary is slated to speak at the annual AIPAC Policy Conference which begins this coming Sunday in Washington.  What will she tell America’s nefarious Israel lobby, so successful yet so vilified by Walt & Mearsheimer and many others?

Hopefully, all the drama will move, however slowly, in the direction of peace…and fairness.

Image:  “Neutral” Lula and his dour friend.  Source:  Google Images.

Hillary: Israeli action an insult

March 14, 2010

With the voluble Veep safely stateside, Hillary took off the gloves and expressed just how pissed off she and the Commander-in-Chief are with ally Israel, the behavior of which she found an “insult” to the United States.  I wrote a piece on the Veep’s visit, found at this link and below.  President Obama voiced his anger through his favorite adviser, David Axelrod, on two Sunday morning news shows, though Israel managed to avoid a Sunday morning onslaught, thanks to the prominence of health care this week.  Axelrod was likely told to repeat Hillary’s “insult” language, to which he added the word “affront.”  Language like this is unusual in reference to the US-Israel relationship.  Last time, I can remember things this bad between the two Western allies was during Bush I (HW), when loan guarantees for Israel to help with the settlement of Russian immigrants, provided by the US in light of Israel’s restraint in the face of Saddam Hussein’s Scud attacks in the 1991 Gulf War, were to be withheld due to Jewish settlements on the West Bank.  Then Sec. of State Baker used colorful language to dismiss the power of Jews in America, and H.W. himself, in Walt & Mearsheimer fashion, attacked the Jewish lobby, complaining that he, as president of the United States was “one lonely little guy” against “powerful political forces.” By comparison, when Ariel Sharon told the West in 2001 that Israel would not be sacrificed like Czechoslovakia in 1938, W’s reaction was that this statement was “unacceptable,” exceptionally mild language given Sharon’s broadside.  The Sharon speech came after 9/11, as W was assembling an international coalition to invade Afghanistan and had expressed his “vision” of a Palestinian state, the first time a US President had explicitly called for a Palestinian state.    

Hillary is a gloves-off kinda gal and likes this kind of situation better than making nice; that’s what we all love (and sometimes hate) about her.  She was always Bubba’s spine; we believed her when she said she could handle the call at 3 am.  In fact, maybe this spat with Netanyahu goes back all the way to when Bubba intervened in Israeli elections in the 1990s in favor of Netanyahu’s rivals.  Bill and Bibi never got along, and the Clintons hold grudges. 

In any case, the Secretary of State and the President are entitled to express their feelings of being insulted by Israel, as they were elected to do just that, communicate America’s position vis-à-vis foreign countries.  And, we as voters are entitled to review the Obama administration’s record on this and other issues in 2 ½ years and either keep them there or throw them out.  Polls of American attitudes toward Israel and the Palestinians consistently show over 50% for Israel, while support for the Palestinians remains stuck at below 20%.  Israel’s support rose to 63% in the most recent Gallup poll a month ago, found hereSupport for the Arab side, on the other hand, has crept up from near 10% to the mid-teens over the last 20-30 years.  In any case, Walt/Mearsheimer, I don’t know if these numbers can be explained simply in terms of the so-called vice grip of Jews over Congress and the media.  But, people who live by the polls, often die by the polls, and such numbers can change abruptly, although they haven’t for decades.  I’ll bet the “support for Israel” numbers will dip a bit as a result of the latest “insult.”  Thanks, Bibi.

America is a funny place on the Israel/Palestinian issue.  I have noticed a rising distaste for Israel and a growing sympathy with the Palestinian cause, especially on college campuses.  The fact that the young are increasingly disposed to view Israel unfavorably is worrying to any friend of Israel.  On the other hand, America is divided on this.  I remember driving through Missouri and listening to a Christian radio station that ran a story about a popular church in Indiana that had acquired one of the Jerusalem buses bombed by Palestinian terrorists, killing and maiming Israeli civilians including children, and had placed the remains of this bus on the front lawn of their Baptist church in solidarity with the people of Israel.  As I said, America can be a funny place.  I am sure the politicians are aware of these trends and act accordingly.

Middle East: the Biden Visit — another viewBy Roger Scher

With the trip of the Veep to Israel and the Palestinian territories, there has been extensive commentary on the FPA site about the conflict in the region, including a report arguing for a two-state solution, produced by the Boston Study Group.  I agree with the prevailing view that the Israeli government made a huge gaffe by embarrassing the Veep with the announcement of the construction of 1600 homes for Israelis in East Jerusalem.  No gain at all for Israel at the cost of modestly damaging US-Israeli relations, which, at least with the Obama administration, could prove hard to repair.  Having met Prime Minister Netanyahu a number of times when I was involved with rating Israel’s bonds, I suspect the buck stops with him. His hubris was behind this, if only in spirit rather than in deed. On the other hand, the point that Jerusalem should not be divided, should remain under Israeli sovereignty with strong guarantees for Muslim control over Islamic holy sites, should not be dismissed out of hand.

FPA’s Israel blogger points out that the announcement on home construction, while the voluble Veep was in the region, was a snub at Israel’s most important ally.  As I said, I couldn’t agree more.  On the other hand, FPA’s Middle East blogger suggests that what Israel is ultimately up to is “ethnic cleansing,” a controversial term suggesting the forcible removal of ethnic groups, usually during war and often involving genocidal killing. A polemical, perhaps rabid statement, especially given that the blogger should have included, by his/her measure, the dismantling of Jewish settlements by the Israeli government under heavy international pressure.  Actually, ethnic cleansing is what occurred in the Krajina region of Croatia in 1995, when hundreds of thousands of Serbs were driven from their homes and many killed, as the Croatian army overran the region (with a blind eye turned by the West).  There are many similar such instances of ethnic cleansing.  Should the IDF overrun the West Bank and Gaza and drive Palestinians into Jordan or Egypt, then our friend at the ME blog would have a point.  Till then, pipe down.

The paper featured on the FPA site from the Boston Study Group advocating a two-state solution seems reasonable.  A two-state solution is clearly the best solution to the bi-national competition among Jews and Sunni Arabs for the same territory in the region.  The major problem I had with this document was the inclusion among the authors of Stephen Walt, whose bias against Israel and the US-Israel alliance is well-known.  His inclusion undermines the seriousness of the document.  (More on Dr. Walt below.) 

As for Bibi’s gaffe with the voluble Veep, I am not of one mind.  My principal position would be as noted above that the Israeli government achieved little and lost a great deal.  Maybe Bibi was suggesting that holding off on announcing construction in Jerusalem should be reserved only for a presidential visit.  While President Obama cannot visit every country, he has made Middle East peace (and his special pull in the Arab world) a centerpiece of his foreign policy.  Perhaps he should stop off in Israel some time. Nevertheless, it seems to me that this is an unadulterated diplomatic fiasco for Israel. Way to go, Bibi.  You should stick to economics and limit Yishai and other right-wingers to committees in the Knesset .

My secondary position comes more from emotion and a sense of what is right and wrong.  A few years ago, the Israeli leftist and peace activist and former Labor minister, Yossi Beilin, said that the deal with the Palestinians should be a swap – a Palestinian state in the West Bank and Gaza (including dismantling most Jewish settlements, aka “ethnic cleansing”) in exchange for Israeli sovereignty over Jerusalem.  Believe it or not, that’s what Yossi Beilin said before he participated in the much-more generous Geneva initiative.  The nature of any deal is — you give something up, I give something up.  Yet the Arab position, notably in the much vaunted 2002 Saudi peace plan, is, Israel gives something up (withdrawing to the 1967 borders) and the Arabs agree not to make war.  I concede and you agree to take the gun away from my head. 

History shows that no city should be divided.  Berlin was reunified.  Jerusalem is the third holiest city of Islam, but is the holiest spot on Earth for Judaism, not to mention the importance it holds for Christians.  During Jordanian rule over East Jerusalem, Jews were not allowed to visit the Cotel, or Western Wall.  Today, under Israeli sovereignty, the Islamic Waqf administers Islamic holy sites in Jerusalem.  In the West Bank, Jewish shrines have been destroyed under Palestinian Authority rule.  Israel protects Islamic sites under its control.

Thus, the deal should be a Palestinian state on most of the West Bank and all of Gaza in exchange for Israeli sovereignty over Jerusalem, but with mechanisms for Islamic interests to be under the control of Muslim/Palestinian entities.  Much as the Ottoman Turks allowed the French and Russians to oversee the interests of Christians in Jerusalem in the 19th century, some such mechanism involving a new Palestinian state, the Saudis, Jordanians and the Islamic Waqf could be found. That would be fair. 

Under Jordanian and Egyptian rule from 1948-67, the West Bank and Gaza were not permitted to become an independent Palestinian state, nor were refugees there allowed to integrate into Jordanian or Egyptian society, where other Sunni Arabs live.  A separate Palestinian nationality is a recent creation resulting from the war over Mandate Palestine (which at one time included Jordan, which even today is majority Palestinian).  By contrast, under Israeli rule, there have been Palestinian elections in the territories (much to everyone’s chagrin in Gaza) and a devolution of power to the Palestinian authority. The Palestinians can declare the capital of their new state Al-Quds if they want to, locating it on the outskirts of metropolitan Jerusalem, or they could keep it simply where it is today, in Ramallah.  The Germans moved theirs from Bonn to Berlin, so the Palestinians would likely follow their lead. 

The swap – Palestinian state and dismantling of most settlements for Israeli sovereignty over Jerusalem – is the right thing to do in my view.  Israel’s ultimate leftist, Yossi Beilin, backed this a while back. But, the Palestinian/Arab side has succeeded in moving the debate.  It is now about splitting Jerusalem. In return, maybe, just maybe, the Palestinian side would give up the so-called right of return of Palestinians to their pre-1947 homes in Tel Aviv, Haifa and elsewhere.  (Should Jews demand a return to Morocco, Iran, Iraq, Tunisia and other states where they lost all they had – or even just financial compensation?) This is called staking out an extremist position as a negotiating tactic.  Your adversary may ultimately concede out of exhaustion. Arafat was a master of this strategy, using terrorism and the intifadah as levers. 

US policy, which many argue is biased toward Israel, inadvertently backed the Arab view on Jerusalem, thanks in large part to the handiwork of Bill Clinton at Taba (and quite frankly of Ehud Barak).  Bubba was guided only by his desire to be the man who brought peace to the Middle East, a sort of redemption for his impeachment over the Monica Lewinsky scandal.  It has been very good PR on the part of the Arabs to move the debate this way, and woeful PR on Israel’s part.  Israel has been woeful at PR since 1967.

But as they say in Texas, that dog won’t hunt.  The debate has already been moved. In order for Israel to obtain international legitimacy, it must negotiate over Jerusalem.  That is why I don’t think it was productive for the Netanyahu government to have approved this housing project while Biden was in town.  And contrary to what Stephen Walt and others would say, time is not on Israel’s side.  Israel’s power will decline relative to its neighbors.  So, I agree with the Boston Study Group – a two-state solution is needed now, however unlikely under Bibi.

As for Stephen Walt’s participation in the Boston Study Group paper, he and offensive Offensive Realist John Mearsheimer have argued that US Middle East policy has been captured by Jewish power.  While discussing the influence of the Israel lobby on US foreign policy is fair and the political climate should be one in which criticism of this lobby should not be reflexively labeled anti-Semitism, the vehemence of the Walt & Mearsheimer claims and their clear distaste for Israel undermined their argument.  What’s more, the Walt-Mearsheimer thesis that the US-Israel alliance runs against US interests flies flagrantly in the face of the theory that Stephen Walt himself created, namely, the realist theory of alliances.  According to Walt, alliances that run counter to a nation’s interests will not endure. Well, the US-Israel alliance has endured, Steve, and many, including the voluble Veep, agree that Israel’s security and interests are often in America’s interests, much to your and your buddy John’s chagrin. 

Further, Walt’s chapter in the Boston Study Group report appears eminently reasonable, but reading carefully, one can discern his tilt against Israel.  He pushes heavily the argument of Israel’s invincible military and of the paper tigers that are Israel’s regional threats.  I would argue that history has shown that a mistaken belief in one’s invincibility, driven by perceptions from wars past, often precedes a military defeat.  A foreign policy realist like Walt should understand this.  So, friends of Israel would do well to be cautious about how strong they think little Israel, with its small territory, small population, dysfunctional political system, and few allies, is relative to its enemies.  Finally, thwarted on the conventional battlefield over the last 60 years, Israel’s enemies are finding effective non-conventional means to seek Israel’s destruction, including guerrilla warfare, WMD, human rights calls for one-person-one-vote, one state, the right of return, and an end to “apartheid” in Israel (yes, that means you, Jimmy Carter), the role of the Israeli Arabs, terrorism, the ballot box, usage of oil wealth, etc.  The myth of Israel’s invincibility could be one way Israel-bashers can weaken the state.

Middle East: the Biden visit – another view

March 12, 2010

With the trip of the Veep to Israel and the Palestinian territories, there has been extensive commentary on the FPA site about the conflict in the region, including a report arguing for a two-state solution, produced by the Boston Study Group.  I agree with the prevailing view that the Israeli government made a huge gaffe by embarrassing the Veep with the announcement of the construction of 1600 homes for Israelis in East Jerusalem.  No gain at all for Israel at the cost of modestly damaging US-Israeli relations, which, at least with the Obama administration, could prove hard to repair.  Having met Prime Minister Netanyahu a number of times when I was involved with rating Israel’s bonds, I suspect the buck stops with him. His hubris was behind this, if only in spirit rather than in deed. On the other hand, the point that Jerusalem should not be divided, should remain under Israeli sovereignty with strong guarantees for Muslim control over Islamic holy sites, should not be dismissed out of hand.

FPA’s Israel blogger points out that the announcement on home construction, while the voluble Veep was in the region, was a snub at Israel’s most important ally.  As I said, I couldn’t agree more.  On the other hand, FPA’s Middle East blogger suggests that what Israel is ultimately up to is “ethnic cleansing,” a controversial term suggesting the forcible removal of ethnic groups, usually during war and often involving genocidal killing. A polemical, perhaps rabid statement, especially given that the blogger should have included, by his/her measure, the dismantling of Jewish settlements by the Israeli government under heavy international pressure.  Actually, ethnic cleansing is what occurred in the Krajina region of Croatia in 1995, when hundreds of thousands of Serbs were driven from their homes and many killed, as the Croatian army overran the region (with a blind eye turned by the West).  There are many similar such instances of ethnic cleansing.  Should the IDF overrun the West Bank and Gaza and drive Palestinians into Jordan or Egypt, then our friend at the ME blog would have a point.  Till then, pipe down.

The paper featured on the FPA site from the Boston Study Group advocating a two-state solution seems reasonable.  A two-state solution is clearly the best solution to the bi-national competition among Jews and Sunni Arabs for the same territory in the region.  The major problem I had with this document was the inclusion among the authors of Stephen Walt, whose bias against Israel and the US-Israel alliance is well-known.  His inclusion undermines the seriousness of the document.  (More on Dr. Walt below.) 

As for Bibi’s gaffe with the voluble Veep, I am not of one mind.  My principal position would be as noted above that the Israeli government achieved little and lost a great deal.  Maybe Bibi was suggesting that holding off on announcing construction in Jerusalem should be reserved only for a presidential visit.  While President Obama cannot visit every country, he has made Middle East peace (and his special pull in the Arab world) a centerpiece of his foreign policy.  Perhaps he should stop off in Israel some time. Nevertheless, it seems to me that this is an unadulterated diplomatic fiasco for Israel. Way to go, Bibi.  You should stick to economics and limit Yishai and other right-wingers to committees in the Knesset .

My secondary position comes more from emotion and a sense of what is right and wrong.  A few years ago, the Israeli leftist and peace activist and former Labor minister, Yossi Beilin, said that the deal with the Palestinians should be a swap – a Palestinian state in the West Bank and Gaza (including dismantling most Jewish settlements, aka “ethnic cleansing”) in exchange for Israeli sovereignty over Jerusalem.  Believe it or not, that’s what Yossi Beilin said before he participated in the much-more generous Geneva initiative.  The nature of any deal is — you give something up, I give something up.  Yet the Arab position, notably in the much vaunted 2002 Saudi peace plan, is, Israel gives something up (withdrawing to the 1967 borders) and the Arabs agree not to make war.  I concede and you agree to take the gun away from my head. 

History shows that no city should be divided.  Berlin was reunified.  Jerusalem is the third holiest city of Islam, but is the holiest spot on Earth for Judaism, not to mention the importance it holds for Christians.  During Jordanian rule over East Jerusalem, Jews were not allowed to visit the Cotel, or Western Wall.  Today, under Israeli sovereignty, the Islamic Waqf administers Islamic holy sites in Jerusalem.  In the West Bank, Jewish shrines have been destroyed under Palestinian Authority rule.  Israel protects Islamic sites under its control.

Thus, the deal should be a Palestinian state on most of the West Bank and all of Gaza in exchange for Israeli sovereignty over Jerusalem, but with mechanisms for Islamic interests to be under the control of Muslim/Palestinian entities.  Much as the Ottoman Turks allowed the French and Russians to oversee the interests of Christians in Jerusalem in the 19th century, some such mechanism involving a new Palestinian state, the Saudis, Jordanians and the Islamic Waqf could be found. That would be fair. 

Under Jordanian and Egyptian rule from 1948-67, the West Bank and Gaza were not permitted to become an independent Palestinian state, nor were refugees there allowed to integrate into Jordanian or Egyptian society, where other Sunni Arabs live.  A separate Palestinian nationality is a recent creation resulting from the war over Mandate Palestine (which at one time included Jordan, which even today is majority Palestinian).  By contrast, under Israeli rule, there have been Palestinian elections in the territories (much to everyone’s chagrin in Gaza) and a devolution of power to the Palestinian authority. The Palestinians can declare the capital of their new state Al-Quds if they want to, locating it on the outskirts of metropolitan Jerusalem, or they could keep it simply where it is today, in Ramallah.  The Germans moved theirs from Bonn to Berlin, so the Palestinians would likely follow their lead. 

The swap – Palestinian state and dismantling of most settlements for Israeli sovereignty over Jerusalem – is the right thing to do in my view.  Israel’s ultimate leftist, Yossi Beilin, backed this a while back. But, the Palestinian/Arab side has succeeded in moving the debate.  It is now about splitting Jerusalem. In return, maybe, just maybe, the Palestinian side would give up the so-called right of return of Palestinians to their pre-1947 homes in Tel Aviv, Haifa and elsewhere.  (Should Jews demand a return to Morocco, Iran, Iraq, Tunisia and other states where they lost all they had – or even just financial compensation?) This is called staking out an extremist position as a negotiating tactic.  Your adversary may ultimately concede out of exhaustion. Arafat was a master of this strategy, using terrorism and the intifadah as levers. 

US policy, which many argue is biased toward Israel, inadvertently backed the Arab view on Jerusalem, thanks in large part to the handiwork of Bill Clinton at Taba (and quite frankly of Ehud Barak).  Bubba was guided only by his desire to be the man who brought peace to the Middle East, a sort of redemption for his impeachment over the Monica Lewinsky scandal.  It has been very good PR on the part of the Arabs to move the debate this way, and woeful PR on Israel’s part.  Israel has been woeful at PR since 1967.

But as they say in Texas, that dog won’t hunt.  The debate has already been moved. In order for Israel to obtain international legitimacy, it must negotiate over Jerusalem.  That is why I don’t think it was productive for the Netanyahu government to have approved this housing project while Biden was in town.  And contrary to what Stephen Walt and others would say, time is not on Israel’s side.  Israel’s power will decline relative to its neighbors.  So, I agree with the Boston Study Group – a two-state solution is needed now, however unlikely under Bibi.

As for Stephen Walt’s participation in the Boston Study Group paper, he and offensive Offensive Realist John Mearsheimer have argued that US Middle East policy has been captured by Jewish power.  While discussing the influence of the Israel lobby on US foreign policy is fair and the political climate should be one in which criticism of this lobby should not be reflexively labeled anti-Semitism, the vehemence of the Walt & Mearsheimer claims and their clear distaste for Israel undermined their argument.  What’s more, the Walt-Mearsheimer thesis that the US-Israel alliance runs against US interests flies flagrantly in the face of the theory that Stephen Walt himself created, namely, the realist theory of alliances.  According to Walt, alliances that run counter to a nation’s interests will not endure. Well, the US-Israel alliance has endured, Steve, and many, including the voluble Veep, agree that Israel’s security and interests are often in America’s interests, much to your and your buddy John’s chagrin. 

Further, Walt’s chapter in the Boston Study Group report appears eminently reasonable, but reading carefully, one can discern his tilt against Israel.  He pushes heavily the argument of Israel’s invincible military and of the paper tigers that are Israel’s regional threats.  I would argue that history has shown that a mistaken belief in one’s invincibility, driven by perceptions from wars past, often precedes a military defeat.  A foreign policy realist like Walt should understand this.  So, friends of Israel would do well to be cautious about how strong they think little Israel, with its small territory, small population, dysfunctional political system, and few allies, is relative to its enemies.  Finally, thwarted on the conventional battlefield over the last 60 years, Israel’s enemies are finding effective non-conventional means to seek Israel’s destruction, including guerrilla warfare, WMD, human rights calls for one-person-one-vote, one state, the right of return, and an end to “apartheid” in Israel (yes, that means you, Jimmy Carter), the role of the Israeli Arabs, terrorism, the ballot box, usage of oil wealth, etc.  The myth of Israel’s invincibility could be one way Israel-bashers can weaken the state.

America: bad film from the declining power – the Oscars

March 8, 2010
C'mon Hollywood, you can do better than that!  Source: Google Images
C’mon Hollywood, you can do better than that! Source: Google Images

A bad year for film in America.  The Hurt Locker was a good anti-war film, but c’mon, Best Picture!  The past year may have been a record year for Hollywood financially, but in terms of art, Tinseltown is in decline.  Bad film.  Bad TV.  Bad Late night.  What we badly need is some insight into the human condition in a compelling narrative.  Perhaps the examination of an individual’s simultaneous capacity for good and evil.  Remember that film, Crash, a few years back?  It won Best Picture — deservedly.  Give us some more of that, Hollywood!

Sure, The Hurt Locker was a compelling profile of a horrible, though heroic, job — dismantling bombs.  And more generally, fighting wars is a horrible, thankless occupation pushed on our young men and women.  But anything deeper on war and peace, Hollywood fails to provide.  Yes, the adrenaline rush and even addiction that war forces on young men is an interesting angle.  But, as one war veteran commented, he did no know anyone who preferred that addiction to wife and son. 

Hollywood never tackles war’s complexities, never attempts to inspire or inform policy makers (and voters) who have to make decisions on war and peace.  What about the numbers of war dead, the reasons for these numbers, and the implications for whether or not America should fight wars?  More than 58 ,000 Americans died in Vietnam, whereas just over 4,400 died in Iraq (and over 30,00o were wounded).  And civilian deaths?   Most estimates put Iraqi civilian deaths due to the war at around 100,000, though other estimates reach as high as 600,000 to 1 million, including in this the result of increased lawlessness since the ending of Saddam Hussein’s regime. 

What about a film of counter-history of what the world would be like with Saddam Hussein still in power?  How many dead then?  What about the fragile democracy slowly taking root in Iraq, what would oppression in Iraq look like today under Saddam by contrast?  What would the civil war in Germany have looked like if the allies had intervened in 1936 when Hitler re-militarized the Rhineland?  Maybe 100,000 Germans dead in a nasty civil war instead of the 60 million who died as a result of WWII, including the genocide of 6 million Jews and millions of Gypsies and other enemies of the Reich.  What would that film have been like?  More fanciful than Avatar?  Certainly more interesting.

Estimates of the deaths in Rwanda where US intervention never took place range from 500,000 to 1 million.  In Darfur, where foreign intervention has been nearly non-existent, estimates of civilian deaths range from 50,000 to over 400,000.  The Congo has been a killing fields as well.  When is it right, or even necessary, to send young American men and women to war, to endure all the horrors shown in The Hurt Locker?  These are interesting questions — what is and what would have been — how much human suffering there has been and how much there might have been.  However, you will never get a deep probing of war and peace from Hollywood.  It is hard to write a narrative that deals with such issues.  Someone brave and creative should try.  If I were in the Academy, I’d take a long look.

Best Actor went to Jeff Bridges for Crazy Heart.  I love Jeff Bridges, but a film about a drunken musician who abandons his family and can’t look after a kid in a shopping mall and the irresponsible single mother who loves him!  Just what everyone in countries not friendly to America believes American values are all about!  The music in the film was good, but that was about it.  What about a film about a musician who struggles to avoid addiction and lead a normal life in an environment of rampant substance abuse?  I guess that is boring story.

At least this year, gratuitous violence was not celebrated the way it has been in years past.  The Departed, that piece of trash given us a few years back by that overrated purveyor of violence, Martin Scorsese, was a travesty when it won Best Picture.  I wrote about that in a blog a while back.  Why can’t more films like Crash win?  That film is the epitome of what I am talking about in terms of delivering an interesting insight into the human condition in a compelling narrative.  Angry racist white cop shows his humanity in a car crash by risking his life to save a black woman from a burning vehicle.  That is what it means to be human.  To be complex.  To be simultaneously good and evil.  Friend and foe alike of America should know that the richness of America exists in our arts, in our film, and not just in the two-dimensional characters — usually violent dirtbags — that strut across so many a silver screen and the never-ending flow of rock-em-sock-em action films that reap millions for mediocre people in Lala-land who have the gall to call themselves artists.