Vol 18, Iss 1

JOURNAL of GLOBAL AFFAIRS EUROPE SAIS

Volume 18 Issue 1 Spring 2015

The SAIS Europe Journal of Global Affairs

Volume 18 Issue 1 Spring 2015

Published by The Johns Hopkins University Paul H. Nitze School of Advanced International Studies SAIS Europe The SAIS Europe Journal of Global Affairs was established by the students at SAIS Europe in 1997 to provide a forum for the discussion and dissemination of ideas about current issues in the field of international relations. The Journal aims to provide a formal outlet for thought-provoking scholarship from students and faculty at SAIS Europe and other graduate institutions, and welcomes work from experts and practitioners.

The Journal is published annually and online articles are published on a rolling basis. The views expressed herein are solely those of the authors and do not represent the opinions of the Journal staff. Neither the Journal nor SAIS Europe itself guarantee the accuracy of the data included in this publication and accept no responsibility for the consequences of its use.

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The authors of the articles in this journal maintain the intellectual property rights of the contents. Anyone wishing to reproduce these articles must contact the individual authors to obtain their permission. Please contact the SAIS Europe Journal of Global Affairs for more information.

Submissions

Articles for submission to the Journal are accepted on a continuous basis. Article selection for the print edition takes place in March. Submissions will be judged according to the academic merit and relevance to the selected theme. Articles may be submitted at the Submissions Team to the address specified online. Authors should also include a current biography, contact information, and an abstract of the article.

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Cover Design by Roku Fukui Table of Contents

Letter from the Editor ��2

Letter from the Director of SAIS Europe ��3

Updating the Emergency State David C. Unger ��4

The Over-Promised and Over-Threatened Impacts of Eurozone Membership Gabor Debreczeni ��14

Interview On Feminism, Gender Roles, and Sex: An Interview with Lynne Segal Editorial Staff ��29

(Un)Productivity in the Digital Age Mitko Grigorov ��36

Between Scylla and Charybdis: Migrants’ Dangerous Odyseey Across the Mediterranean Valerie Tan ��46

Holding Trees Hostage: Ecuador’s Attempt to Share the Costs of Preserving the Amazon Jayant Gandhi ��52

Interview On the BRICS, the Security Council, and New Global Order: An Interview with Professor Andrew Hurrell Editorial Staff ��63

The Agenda Setting Power of Media in International Affairs: How Media Coverage on U.S. Surveillance Programs and U.S. Military Operations Prevent Us From Becoming a Distopic World Gerd Gensbichler ��72 Gucci & LVMH: A Hostile Takeover Battle Across the Atlantic Samine Joudat ��84

Book Review David J. Blacker’s The Falling Rate of Learning and the Neoliberal Endgame George Fogarasi ��97

Acknowledgments

The SAIS Europe Journal of Global Affairs would like to acknowledge and thank those individuals who have provided support during the year, including Director Michael Plummer, Professor Mark Gilbert, Bart Drakulich, Barbara Wiza, the SAIS Europe student government, and members of the SAIS Europe administration. Thank you also to the students and faculty who contributed to the annual fundraising campaign. 2014-2015 Staff

Editor-in-Chief Colin Wright

Managing Editor of Print & Archives Print Layout & Design Editor Carsten Schmiedl Kara Wilson

Executive Editor - Submissions Executive Editor - Content Eloise Waldon-Day Patrick Rear

Chief Copy Editor Webmaster Carly Page Jayant Gandhi

Director of Business & Fundraising Director of Marketing Katelyn Budd Giuliano Morse

Associate Submissions Editors Roku Fukui | Jeff Suppes

Social Media Manager Eric D’Angelo

Graphic Design Leads Roku Fukui | Briana Lazerwitz | Dana Al Zaben

Photographer Serena Quiroga

Associate Copy Editor Nikhil Gupta

Marketing Leads Wyn Bellhouse | Clay Kitchura | Julienne Lauler

Web Design Leads Waleed Khoury | Xiang Wang SAIS EUROPE JOURNAL OF GLOBAL AFFAIRS Letter from the Editor

Dear Readers,

With this edition, the SAIS Europe The staff this year worked tirelessly to Journal of Global Affairs counts 18 years update the Journal so that its previous of publication as SAIS Europe itself academic publications would be more celebrates 60 years at the Bologna Center. accessible to researchers. To that aim, Our graduate student run publication we redesigned our website entirely has previously been The Bologna Center with markedly more interactivity, and Journal of International Affairs, but the digitized every article published in the name was changed for two reasons. Firstly, Journal since its inception. I encourage “SAIS Europe” because the European you to appreciate the fruits of their campus in Bologna is but one of the three labors and view our other publications at locations of SAIS, and secondly, “Global www.saisjournal.org. We also investigated Affairs” because current affairs are born new and exciting avenues for marketing of an interconnected world influenced by and fundraising which have helped to more than nation-states. grow the reach of the Journal. This was no small set of tasks, and I commend This year we also forwent a theme, the efforts of the volunteers who worked opting instead to review any submissions towards its completion for such long relevant to global affairs. We did so for the hours. Journal to reach a wide audience and for our submissions team to have unlimited Building on the previous 17 years of room in seeking new submissions. Rather thoughtful academic contributions, than establishing a common thread for and after a year working alongside a authors at the start of the year, the tone of committed and innovative team, I am the publication would unfold with global proud to present Volume 18 of The SAIS events and authorial ideas. Owing to this Europe Journal of Global Affairs. broad approach, and our submissions team’s hard work, you will find herein a Sincerely, set of articles spanning many disciplines -- from interviews with renowned Colin Wright academics analyzing emerging markets, Editor-in-Chief to tales of corporate takeovers written April 2015 by bright graduate students. The decision as to which published articles would be included in this physical subset was a difficult one, but these represent some of the best submissions to our journal this year.

2 VOLUME 18 Letter from the Director

Dear All,

I am delighted to open this year’s new are all experts in their respective fields, SAIS Europe Journal of Global Affairs, and their reputation has ensured our which may have a new name but continues continual presence at the very top of a great tradition of scholarship that is the rankings of professional schools in now in its 18th year. The new moniker global affairs. The SAIS Europe Journal underscores the global nature of the constitutes an important expression of journal and is reflective of the interests this research focus and has published of current SAIS students and alumni. innovative and pioneering work over past This year the Editors decided to forego a decades, pushing the envelope in a wide central theme in order to focus on a broad variety of areas. I’m sure you’ll agree with audience, permitting the exploration of a me that this year’s issue is no exception. wide variety of multidisciplinary topics. There is plenty there for all of us to enjoy! The SAIS Europe Journal has built a new website (www.saisjournal.org) to better The launch of the SAIS Europe Journal of showcase the hundreds of articles that Global Affairs is particularly fitting given have already been published in the Journal, that this year marks our 60th Anniversary. building a future on the firm foundations SAIS Europe has grown from a small of the SAIS tradition. I’m sure you’ll find cohort of European and American it to be an excellent resource. students focusing on transatlantic relations in 1955, to a truly global Sincerely, institution including students and faculty who hail from all corners of the world. Michael G. Plummer Subjects studied range from functional Director of SAIS Europe areas such as international economics and Eni Professor of International Economics conflict management to regional studies The Johns Hopkins University on Europe, Latin America, Asia, and the April 2015 Middle East. It is the oldest American graduate program in Europe and we are very proud that our graduates have risen to prominent positions in government and business all over the world. Our alumni now number over 7,500, and represent over 115 nationalities.

SAIS is dedicated to cutting-edge multidisciplinary research. Our faculty

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Updating the Emergency State David C. Unger Did President Obama try to end the Emergency State? In my judgment he did not. Could he have succeeded if he tried? Again, in my judgment, probably not. Like most presidents, Obama, has fought tenaciously to hold on and even increase every Emergency State increment to executive power successfully asserted by any of his predecessors, whether or not there is any constitutional mandate for that increment. His successors will most likely do the same unless the voters and/or the Congress insist otherwise.

Torture and Accountability the years after the Sept. 11, 2001 terrorist attacks. Repulsive as many of the grisly Last month, the Senate Intelligence new details revealed were, they came from Committee offered the world an edited a redacted executive summary of a longer but gruesome glimpse at how far and far more detailed classified report Washington and its national security detailing the variety of cruel and unusual agencies strayed from America’s punishments the Central Intelligence founding values and traditions, as well as Agency and its contractors inflicted on international and domestic law, during hundreds of secretly held prisoners, many

4 VOLUME 18 later discovered to be innocent of any internment of hundreds of thousands of terrorist crimes. Blandly called a “Study Japanese citizens and non-citizens during of the Central Intelligence Agency’s World War II, etc. And such violations Detention and Interrogation Program,” of our laws in values by our elected the committee report was a catalogue of leaders will almost surely happen again tortures carried out under the authority in the future; that is unless or until the of the United States government on American government and people insist detainees in United States custody who on a return to constitutional norms, had been covertly whisked away to “black” consistent adherence to the rule of law, off-off-the-books prison sites around the greater transparency in government world.1 decision-making and accountability for those who knowingly set aside the law How did this happen in a country whose and the Constitution to commit patently Constitution explicitly bars inflicting illegal acts in the name of national “cruel and unusual punishments” and security. The Obama administration’s guarantees all persons “due process of law”? refusal to prosecute those implicated in And how can those responsible for these the unlawful activities under the CIA’s actions not be prosecuted by a country Detention and Interrogation Program, which is a state party to the International including those ranking officials who Convention Against Torture, the relevant ordered or authorized it, is a thoroughly provisions of which have been enacted discouraging sign. The crimes may have by Congress as binding domestic law for been committed under George W. Bush, offenses committed inside and outside but the cover-up, or at least the refusal to the United States”?2 Dubious legal prosecute, is taking place right now under opinions by Bush administration officials Barack Obama. The Emergency State, as before the fact and exceptions enacted by ever, remains a bipartisan project. Congress in the 2006 and 2009 Military Commissions Acts after the fact fail to Consider the message this refusal to provide adequate answers. 3 prosecute sends to future national security operatives trying to balance In fact, those White House and political pressure for results with moral congressional actions constitute part of and legal scruples about resorting to the question we are asking here. Such illegal methods. As things now stand, illegal and unconstitutional practices that message seems to be “go ahead and were not and are not supposed to do it”. Lack of results may turn out badly happen under the authority of the for your career, but “taking the gloves off ” United States of America. But they did and operating on the “dark side” likely happen. Further, similar departures from will not. Such signalling will shape the constitutional standards repeatedly took conduct not only of future interrogators, place even before 9/11 - e.g., undeclared but also of their political and bureaucratic wars from Korea in 1950 to Syria in 2014, bosses tempted to give such orders. The

5 SAIS EUROPE JOURNAL OF GLOBAL AFFAIRS same kind of signal, unfortunately, is constitutional way, as the United States sent by polls taken after the release of had done in a much shorter space of time the Senate Intelligence Committee’s after Pearl Harbor. Presidents ignore report that show most Americans the Constitution’s requirements because now think torture can be justified.4 they can, and they can because voters Neither the American government nor and legislators let them get away with it. the American people now seem to be And when they are challenged, they cite demanding a return to America’s lawful Emergency State shortcuts taken by their and constitutional traditions. That makes predecessors, and the negligent passivity it all too likely that this sorry chapter of past congresses, as if those were of American misconduct, with all the constitutionally justifying precedents. damage it has done to our democracy at home and our reputation abroad, will be This Emergency State alternative rulebook repeated. has now come to apply not only to national security questions, but to wider areas of Still An Emergency State our national and international life. One example is Congress’s habitual readiness In my book, The Emergency State, to delegate much of its constitutional I describe and analyze what is now a authority over international commerce 75-year-long history of constitutional to the executive under so-called fast short cuts and evasions taken in the track authority. This unfortunately allows name of national security that have presidents to shape the trade, investment incrementally endowed the United States and intellectual property regimes that with a kind of parallel national security now govern so much our economic constitution.5 It periodically reverts lives behind closed doors with minimal to this alternative playbook when the democratic transparency and oversight. requirements of the real Constitution With so many important decisions seem too cumbersome, too politically about war, peace and the ground rules perilous or too difficult to explain to the for globalization essentially taken off the public. Since the end of the Cold War table for open political debate, it is little and its attendant thermonuclear perils, wonder so many Americans feel alienated these shortcuts have rarely been justified from their politicians and distrustful of by any operational need to act faster than Washington looking out for its own. the Constitution allows. Think about the 18-month lead up to the 2003 invasion of The main thesis of the Emergency Iraq or all the agonizing back and forth State is that the politics of national media discussion about bombing Libya, security, especially during the Cold War Syria and Iraq. Even the retaliatory decades, contributed to an expansion attack against Afghanistan after 9/11 of executive powers, including a much had an almost one-month lead-time, expanded power to keep government plenty of time for doing things the actions veiled in secrecy. That makes it

6 VOLUME 18 almost impossible for ordinary citizens, That dominant mindset explains the early and even most of Congress, to know Cold War Emergency State. And given what our government is really doing and what we know about bureaucratic inertia to hold it democratically accountable. it may even go some way to explaining The way national security policy has later Cold War versions. But that can developed under the Emergency State only take us up to 1991, after which there pushed aside the separation of powers was no more Soviet Union and “Red and the democratic accountability that China” had become a strategic ally and the framers of the U.S. Constitution economic partner of the United States. counted on to preserve the republican If we can understand why the United and democratic achievements of the States did not return to its pre-Cold American Revolution. War constitutional ways after 1991 and why the Truman administration’s visions The original rationale for the national of anti-Soviet “containment” seemed security state was fear. U.S. foreign to glide seamlessly into new theories of policymakers of the 1940’s and early “enlargement” that did not even require 1950’s, men like Dean Acheson, a super-power enemy to keep the zero James Forrestal, Paul Nitze and John sum geopolitical game going, we can Foster Dulles, sincerely believed that better understand why Barack Obama expansionist Stalinist Communism has become America’s 13th consecutive posed an existential threat to America’s Emergency State president. Bureaucratic freedom, prosperity and survival. With inertia may provide some of the answer. the benefit of hindsight and archives, we Has Obama reshaped the CIA, or has now know that a great deal of misreading the CIA reshaped Obama? Are long of Soviet capabilities and intentions and habits of cold war thinking and political some fevered worst case hypothesizing discourse drawing the U.S. into a needless underlay these views. But honestly zero sum battle with Russia in places believing what they then believed, these like Ukraine, Georgia or Moldova? Are influential policy shapers of the early those same habits threatening to turn the Cold War felt their responsibility was to promised pivot to the Pacific into a new protect Americans from this existential containment dynamic with China? threat, even if that meant adopting some of the other side’s tactics and jettisoning The perennial potency of fear as a force some of America’s constitutional scruples. in American domestic policy, and its And that is exactly what some of them, corollary, politicians’ perennial fear of in policy papers such as NSC 68 of 1950, being accused of weakness on national said was required. The minority that security, something my SAIS colleague thought otherwise left, or was driven out, Professor John Harper has described as of government during the Truman and an “iron law” of American politics, may Eisenhower years. also be operative here. (Such reflexive political pressures seemed to push

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Obama out of his original resolve to steer citizens) should not be “deprived of life, clear of Syria’s messy civil war). Another liberty or property without due process factor may be the longstanding article of law” (Fifth Amendment). “Cruel and of faith among U.S. policymakers that a unusual punishments” should not be globalized Open Door to American trade inflicted.7 and investment is essential to America’s prosperity and even survival. That deeply These Constitutional guarantees had rooted view preceded Woodrow Wilson’s been ignored, sidestepped or defied by liberal internationalism, the Cold War the George W. Bush administration, and the war on terror and continues to as candidate Barack Obama rightly motivate constitutional short-cuts like complained. And they continued to be fast-track today. ignored, sidestepped or defied by the Obama administration, even during its Obama’s Promise of Change first two years when it could call on strong Democratic majorities in both houses of The prospects for change looked different Congress. right after Barack Obama was first elected president in 2008. Many of his supporters The contradiction remains to this day hoped that he might move the U.S. away between the Obama administration’s from the Emergency State paradigm policies for “keeping America safe and and back toward the Constitution. There secure” and the commonly understood were ample reasons for those hopes. The requirements of the U.S. Constitution. Emergency State failed to protect the This contradiction undermines not just country from the 9/11 attacks and failed the civil and political rights of Americans to make Americans feel safer during and foreign nationals under U.S. custody the years that followed. And there was or jurisdiction. It also undermines the that repeated Obama campaign line Constitution’s careful and delicate that “there should be no contradiction balancing of the respective war powers of between keeping America safe and secure the executive and legislative branches. This and respecting our Constitution.”6 imbalance has been the norm since the There should be no such contradiction. Truman Administration, and it is still the The right to habeas corpus should “not norm under the Obama administration. be suspended” (Article I, Section 9) “Freedom of speech, or of the press” Only after the 2010 election can should not be abridged nor “the right to Republican congressional resistance be peaceably assemble” be interfered with invoked to explain why Obama did not (First Amendment). Telephone and do more to deliver transformational Internet data and other personal “effects’ changes. Before that, we have to look at should not be subject to “unreasonable” Obama’s own choices – his ruling out or unwarranted searches (Fourth in advance any punishment of those Amendment). Persons (not just U.S. responsible for possible criminal offenses

8 VOLUME 18 like those detailed in the torture report, them. But Obama has failed to use his his decision not to rein in NSA spying full executive authority to release even all on the phone calls and Internet messages of those prisoners found to be no longer, of ordinary Americans, his expansion of or never, dangerous. Obama also issued the assassination by drone program from an executive order at the start of his first known targets believed directly connected term revoking the Bush administration to terrorism to signature strikes (aimed at order that permitted CIA torture. But those who fit a statistical profile, or are an executive order, unlike congressional in the wrong place at the wrong time). legislation, leaves the door partly open A president who believed that “there to future abuses. And some critics argue should be no contradiction between that loopholes remain for detainees in keeping America safe and secure and the custody of the military’s secretive respecting our Constitution” would not Special Operations command. Obama have behaved that way. reformed procedural rules for military commissions, but continued to prosecute After the 2010 mid-term elections, cases in these commissions, rather than Obama’s defenders can point to return to the Constitutional framework unyielding Republican opposition and of Article III Courts supplemented, legislative gridlock. But the Constitution where appropriate, by courts martial was not written to apply only when the under the procedural safeguards of president and the Congress agree on basic the Uniform Code of Military Justice. policy issues. In that case there would After Edward Snowden’s revelations of be little need for checks and balances widespread NSA spying on U.S. civilians, or separation of powers. It is political Obama announced new, more restrictive difference that puts our constitutional guidelines for NSA surveillance, but system to the test, and unfortunately, it continued that surveillance outside has been increasingly failing that test normal Fourth Amendment and privacy since the end of World War II. guarantees. 8

It is not that nothing changed after Opportunity Lost January 2009. On his first day in office, Obama issued an executive order to Obama’s mandate for change was close within a year the detention facility lost not only, or even primarily, on at Guantanamo Bay, Cuba, where the national security front during his “unlawful enemy combatants” are held first two years. Even more important beyond the normal reach of federal were domestic disappointments like courts. Guantanamo is still open, even stinting on job creating investments in though most of the prisoners there have infrastructure and education, choosing a been determined safe to release and the maddeningly complex and bureaucratic administration has the legal power to approach to health insurance that send them to countries willing to receive sacrificed affordability, universality and

9 SAIS EUROPE JOURNAL OF GLOBAL AFFAIRS user friendliness for the sake of getting Street, under the next administration, or industry lobbyists on board and that even under this one, are easy to imagine. subordinated overall health care cost Six years into the Obama administration, reductions to arcane beltway games America’s longest war continues in like CBO budget scoring. That meant Afghanistan. America’s combat mission pursuing real reductions in private was supposed to end on December 31, sector costs counted for nothing and 2014, but given recent military and being able to estimate (optimistically) political developments in that country out-year neutral impact on the federal (and in Washington) it is hard to imagine budget counted for all. Though these that the “residual” training force of more issues had little directly to do with the than 10,000 U.S. troops will not engage para-constitutional Emergency State I in combat.9 Look what happened in wrote about, they had much to do with Iraq. The last U.S. combat troops left at Obama’s failure to sustain the kind of the end of 2011. But for the past few broad popular support that would have months, after Iraq’s American-trained been needed to challenge the political and army crumbled in the face of ISIS., U.S. economic power of a military-industrial air strikes and training forces have been complex that has been fortifying itself at reintroduced. ISIS’s rapid capture of public expenses at least since the days of strategically sensitive territory required Dwight Eisenhower. a U.S. response. But the one Obama has now chosen looks like a pale shadow Maybe that was more than any president of the one that did not work under could do. Maybe it was more than the his predecessor, with U.S. firepower American public wanted or would have put at the service of a sectarian Shiite supported during those first two years government in Baghdad against a Sunni of the Obama administration. We may minority population disenfranchised never really know. But that is what it and embittered by the last round of U.S. would have taken to start meaningfully intervention and its political sequels.10 rolling back the Emergency State. In neither case has Obama sought Despite the widespread public or obtained explicit congressional disenchantment with the reigning endorsement for reintroducing U.S. national security paradigm (Iraq and military forces into “hostilities,” as Afghanistan) and reigning economic explicitly required by the War Powers paradigm (an under-regulated Wall Resolution.11 Obama did invite Street and trade agreements written congressional authorization when he behind closed doors) that drove the 2008 considered air strikes against Syria’s presidential election, Obama has spent chemical weapons sites in 2013, before much of the past six years building back a diplomatic solution made that issue those paradigms, to the point where moot.12 Before that happened, Obama repeat performances in Iraq and on Wall was derided across the political spectrum

10 VOLUME 18 and in the media as dangerously weak private personal communications of for his brief flirtation with constitutional ordinary Americans in secret, and to war making.13 It was not an encouraging withhold vital information about public precedent. The Emergency State is not policies from Congress and the public. simply a product of presidential over- These policies, on top of six previous reach. It is a codependent system that decades of Emergency State shortcuts, many political actors regularly participate hobble the constitution’s system of in. checks and balances and erode basic constitutional rights. Nobody who paid close attention to Obama’s 2008 presidential campaign And while the Obama administration expected him to turn away from the has been unwilling to prosecute those exercise of American military power. responsible for torture, a crime under U.S. His argument then was that the war he and international law, it has zealously considered necessary in Afghanistan prosecuted more Americans than any had been dangerously under-resourced previous administration for various forms to pursue an unnecessary war of choice of national security whistleblowing, in Iraq. Obama also pledged to pursue including going to the press when all Osama bin Laden, if necessary by internal challenges of questioning were military actions in Pakistan, without the blocked. The well-known cases of Chelsea permission of the Pakistani government. Manning and then Edward Snowden But what many did expect, given the are among the most spectacular. But thrust of Obama’s 2008 campaign was before that came, the legal harassment a return to waging foreign wars (and of NSA whistleblowers Thomas Drake, domestic national security prosecutions) William Binney, J. Kirk Wiebe and under the actual constitutional rules, not Edward Loomis, who challenged the bizarrely reinterpreted, rewritten and billions of dollars wasted on a flawed sometimes unrecognizable versions of the surveillance system and John Kiriakou, George W. Bush administration. a former C.I.A. employee serving a federal prison sentence for disclosing That did not happen. Instead of returning the name of a fellow intelligence agent to constitutional norms, Obama’s Justice involved in torture. My point is not that Department has spun out new legal this kind of risky whistleblowing should doctrines through memos that argue always be immune from punishment. It (so far as we can tell since many are still is that the Obama administration sends classified and others heavily redacted) an unmistakable message to present that presidential Commander-in Chief and future members of the intelligence powers or long ago Congressional community by giving blanket immunity authorizations to use military force to torturers while throwing the book at authorize this president to kill American whistleblowers. And while outgoing citizens without due process, to monitor Attorney General Eric Holder has

11 SAIS EUROPE JOURNAL OF GLOBAL AFFAIRS recently expressed reluctance to jail Like most presidents, Obama, has fought reporters for doing their jobs, a New York tenaciously to hold on and even increase Times national security reporter, James every Emergency State increment to Risen, still faces exactly that prospect. executive power successfully asserted by any of his predecessors, whether or not It is of course too early to reach any final there is any constitutional mandate for judgments on Obama. There are still that increment. His successors will most two years to go in his presidency, and likely do the same unless the voters and/ although Obama has shown a recent or the Congress insist otherwise. That appetite predilection for pushing the kind of public pushback occurred, briefly, limits of his executive powers, he will still in the post-Watergate, post-Vietnam have to deal with likely pushback from years of the 1970s. But it did not last long a new Republican Senate majority that or produce much lasting change. The prominently includes Senator Rand Paul Foreign Intelligence Surveillance Act of Kentucky, a constitutional-minded (FISA) was one result of those reforms libertarian who may mount a serious until George W. Bush’s lawyers invented presidential campaign. Even when it ways to bypass it and a Democratic comes to the past six years, we do not yet controlled congress obliging amended it know how hard and for how long Obama in 2008. may have tried to move away from the hyper Emergency State style of his In his final two years, Obama now seems immediate predecessor. We have not yet determined to do bold things by executive seen most of the classified internal papers order, like liberalizing immigration that might let us see what policy options enforcement and normalizing diplomatic were presented to the president and what relations with Cuba. It is psychologically he pushed his officials to do. But while understandable that Obama wants to do there is a lot we do not yet know about big things before he leaves office. But process there is much we do know about he is doing them not on the basis of his outcomes, and these suggest that the two solid presidential electoral mandates Emergency State not only remains intact, but in the wake of his biggest electoral but has in significant ways been expanded repudiation. While this can produce during the past six years. good policy, it weakens rather than strengthens our constitutional system. A Preliminary Judgment The bold government by executive order that thrills the left today could Did President Obama try to end the be succeeded by equally bold executive Emergency State? In my judgment he orders that thrill the right tomorrow. This did not. Could he have succeeded if he is not the way American democracy is tried? Again, in my judgment, probably supposed to be governed. America is still not. a constitutional democracy – though no longer a robust or healthy one. And for

12 VOLUME 18 most of the past six years, as for most of 9. http://www.nytimes.com/2014/12/07/world/ the preceding six decades, the Emergency asia/1000-extra-us-soldiers-will-remain-in- afghanistan-.html?emc=eta1 State has been busily entrenching itself. 10. http://www.nytimes.com/2014/12/09/world/ middleeast/allies-to-bolster-us-troops-advis- David C. Unger (born March 5, 1947, ing-iraqis.html Brooklyn, NY, USA) is a former foreign 11. http://avalon.law.yale.edu/20th_century/ affairs editorial writer for The New warpower.asp York Times (1977 - 2013) and author 12. http://www.nytimes.com/2013/09/01/world/ middleeast/syria.html?pagewanted=all&- of the book The Emergency State. He module=Search&mabReward=relbias%3As is currently an Adjunct Professor at %2C%7B%221%22%3A%22RI%3A10%22 Johns Hopkins University, School %7D of Advanced International Studies 13. http://www.nytimes.com/2013/10/23/world/ Europe, at Bologna. middleeast/obamas-uncertain-path-amid- syria-bloodshed.html?pagewanted=all

Notes Title Page Photo Credit

1. Senate Select Committee on Intelligence, Barack Obama at White House Gun Vio- Study of Central Intelligence Agency’s De- lence Meeting by Pete Souza - https://www. tention and Interrogation Program, 2014 flickr.com/photos/whitehouse/8476839488 2. United States Constitution, Fifth and Eighth Amendment; http://www.state.gov/documents/organization/100296.pdf, ; http:// www.law.cornell.edu/uscode/text/18/2441; http://www.loc.gov/rr/frd/Military_Law/ pdf/PL-109-366.pdf 3. http://www.nytimes.com/ref/international/24MEMO-GUIDE.html; http://www. intlawgrrls.com/2009/10/military-commission-act-of-2009-new-and.html 4. Washington Post-ABC News Poll, Decem- ber, 11-14, 2014 5. The Emergency State, David C. Unger, Pen- guin NY, 2012 6. Sept. 8, 2008, BarackObama.com town hall campaign meeting in Farmington Hills, Michigan https://www.youtube.com/ watch?v=KqE3j10keLc 7. http://www.archives.gov/exhibits/charters/ constitution_transcript.html 8. http://www.whitehouse.gov/the_press_of- fice/Closure_Of_Guantanamo_Detention_ Facilities; http://www.whitehouse.gov/the_ press_office/EnsuringLawfulInterrogations; http://www.nytimes.com/ref/international/24MEMO-GUIDE.html; https://www. eff.org/deeplinks/2014/01/rating-obamas- nsa-reform-plan-eff-scorecard-explained

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The Over-Promised and Over-Threatened Impacts of Eurozone Membership Gabor Debreczeni There is no definitive answer as to the impact on a country’s macroeconomic indicators of joining the Eurozone. There is little impact on a country’s trade dependence. Peripheral countries suffered in terms of unemployment, but weakly gained in terms of incomes. However, no doomsday image emerges. While this appears to limit the short-term economic upside of the currency union project, it brings into the forefront the Eurozone’s aforementioned political considerations: eliminating competitive devaluations, having a common European monetary voice and tightening economic and political bonds within Europe. If this appeals to a prospective Eurozone member, they should not hold back for economic fears.

“Then came actual euro notes – and they all lived happily ever after, for values of ‘ever after’ < 11 years.” – Paul Krugman

Introduction in 1999, the economic distinctions between being a member of the currency Ever since the founding of the eurozone union and remaining outside of it have

14 VOLUME 18 been dramatized by politicians, the media, the ability to cater monetary policy to and economists. The hype has extended local economic conditions, but Krugman in both directions, fueling guilds of argues that an even more important doomsayers on both sides to predict function of a small currency is to give economic disaster if a country should the region the ability to adjust its wages either enter, or refrain from entering via depreciation in the currency. Because the currency union. This paper looks for of human psychology and the nature of evidence of such extreme divergences contracts, it is extremely difficult to adjust between the fates of the countries that wages downward without such currency joined the eurozone versus those that did depreciation. Krugman gives Spain as an not. This is done first by considering how example of when this might be desirable distortionary the euro is as a currency – for it is a place where wages were driven for its weakest and strongest members, high by an unsustainable property bubble and second by comparing the economic and the resulting full employment, and fates of comparable countries that made are now inefficiently stuck there with different decisions regarding their entry few options for downward adjustment. into the eurozone. To tease a bit of the Of course, this type of thinking does conclusion: there are few dramatic broach dangerously close to the type of differences using either approach. competitive devaluing the EU tried to avoid with the institution of the eurozone. The Optimum Currency Area Nationalists continue to rue the loss of the option to devalue.2 It is logically clear Academics and politicians have debated that there is a limit to the arguments the economic advantages of a common for small currency areas, as Snider has currency for decades. To quote Paul argued, among others, because otherwise Krugman, they are “reduced transaction the result would be the reduction ad costs, elimination of currency risk, absurdum argument that every person greater transparency and possibly should have their own currency.3 So, some greater competition because prices are aggregation into a common currency area easier to compare.”1 Of course, while is clearly warranted, and the outstanding the economic considerations were questions are: how to balance the costs equally trumpeted, the EU’s primary and the gains, and how big is best? consideration in the establishment of the Much ink has been spilled on discussing eurozone was always politics, and even whether the eurozone is an optimum geopolitics – the EU sought primarily to currency area, with the main criteria tie the region together both economically for this determination being that and politically to ensure peace, and also it be “composed of regions affected hoped to prevent economic warfare via symmetrically by disturbances and competitive devaluations. between which labor and other factors of productivity flow freely.” 4 This paper There are, of course, arguments for keeping seeks to deal with marginal cases – currency areas small. The obvious gain is what countries have gained and lost 15 SAIS EUROPE JOURNAL OF GLOBAL AFFAIRS in a comparative context by joining or currency to be a function of a country’s refusing to join the eurozone, and what productivity and its net foreign asset countries could expect should they do so position, which is itself mostly a function going forward. of the country’s external deficits. They calculate that the euro has been too The Misalignment Problem strong for peripheral countries as a collective since the common currency’s One issue present in currency unions of inception. If it is assumed that the euro any size is the problem of misalignment is fairly valued for the eurozone as a – that the value of the currency is not whole,7 Coudert et al. calculate that in representative of, or optimal for, all 2010 the currency was approximately of the diverse economic conditions of 12% too strong for Greece, 6% too the union’s sub-regions. Although this strong for Portugal, and about fair for problem is very much not unique to the Spain, Ireland, and Italy. On the flip side, eurozone, it is frequently brought up in they calculate that the euro is too weak the context of the eurozone because those by 15% for Finland, and by about 8% for examples are so intuitive, and resonate Germany and France. These numbers are with the overarching European economic non-negligible, though not particularly narrative. It’s told as follows. If they had dramatic. By reference, in 2002, near separate currencies, Germany’s currency the height of American hand-wringing would be stronger than the euro, and about China’s undervalued currency, peripheral countries’ currencies would economists estimated that the renminbi be weaker than the euro. The status quo was about 30-35% undervalued. 8 helps German exporters, and by extension the German economy. The status quo Some studies have found substantially also hurts peripheral exporters, and by higher misalignments than Coudert extension the peripheral economies. End et al., but have done so under the of story. assumptions of a traumatic breakup of the monetary union, resulting in While the issue of misalignments is headlines as extreme as predictions of obviously more complicated than that, an 80% drop in the value of the Greek the data does show the existence of currency, and a 30% drop in the value of misalignments. It must be said that currencies on average across Europe. In given that the calculation of equilibrium that scenario, only Germany’s currency exchange rates for non-existing currencies emerged stronger than the current euro, is a theoretical economic exercise, precise by 4%.9 While this data isn’t very useful answers are difficult to pin down.5 for the misalignment conversation, it is Coudert, Couharde, and Mignon find a useful illustration of the direness of a shocking amount of volatility in the the warnings out there about a eurozone measurement of misalignments.6 They breakup. consider the equilibrium value of the What is causing the misalignment?

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While lower productivity in peripheral have focused on traditional arguments. countries is certainly a culprit, Coudert Willem Buiter focused on the recent et al. actually find that the main convergence of the U.K. economy toward mechanism for misalignment in the sufficient satisfaction of the optimal periphery is differential inflation. They currency area conditions referred to find that inflation in the periphery was earlier, as well as on an argument that the higher than in the core of the eurozone, U.K. is more vulnerable to financial crisis driven by the overheating pre-crisis without eurozone membership because it economy, especially via capital flows is a country that has “a large internationally from the core into peripheral real estate. exposed banking sector, a currency that is This mechanism worsens the periphery’s not a global reserve currency, and limited terms of trade, lowering competitiveness, fiscal capacity relative to the possible and directly increasing the currency size of the banking sector solvency misalignment. As mentioned earlier, gap.”11 Patrick Minford similarly argues Krugman also focuses on the role of for the U.K. to join the eurozone for inflation as a culprit, going so far as to reasons enumerated earlier: lowered suggest that the clearest solution to transaction costs, lowered exchange rate the eurozone’s struggles would be a risk, and increased transparency in price higher inflation target that would allow comparison.12 Similar conversations have peripheral regions to lower real wages, as occurred in Sweden. James Reade and well as to lag the core countries’ inflation Ulrich Volz focused on similar arguments in order to lower the degree of currency for Sweden to join the Eurozone, misalignment. highlighting that the country already lacks much monetary independence from Whither the U.K. and Sweden? the European Central Bank, and that it is worrying that Sweden is a “small open Given the prevalence of the rhetoric that economy with an internationally exposed Germany and the rest of the eurozone financial sector.”13 core profits from a euro artificially weakened by the periphery, it is surprising Recalling the above-mentioned that the currency-weakening argument theory that the two major theoretical hasn’t been raised as a reason for the determinants of an exchange rate are U.K. and Sweden to join the eurozone. productivity and external deficits, it While today’s political considerations is possible to arrive at a guess of how would clearly prohibit either country misaligned the euro would be as a from making a serious attempt,10 the currency for Sweden and the U.K. Firstly, lack of even light debate on the issue is note that as of 2013 Sweden and the surprising. U.K. had productivity levels marginally above and marginally below the eurozone While papers have been written arguing average respectively. This placed them for the U.K. to join the eurozone, they about 10% below the eurozone core, and

17 SAIS EUROPE JOURNAL OF GLOBAL AFFAIRS below Ireland, but substantially above barriers created for imports, by induced the eurozone periphery.14 15 The two distortions in the domestic market, countries diverge significantly with regard and by imported inflation. It is clear to external deficits. The U.K., like the that misalignments in the eurozone are peripheral countries other than Ireland, small compared to other recent cases of is below the EU average, with an average currency misalignment, including China deficit of 3% from 2010 to 2013. Sweden, over the last decade. on the other hand, has averaged a surplus of 6%, among the highest in the region, Pairwise Case Studies and comparable to the Netherlands and Germany.16 The many EU member states that are not eurozone members provide us with This exercise goes some ways toward convenient controls for analyzing the justifying silence on the boost the economic experiences of eurozone economies of the U.K. and Sweden would members since the introduction of the receive from joining the eurozone via common currency. In this section, four artificial weakening of their currencies. sets of countries are analyzed. Each While currencies are capricious beasts, set was chosen because of their shared and as such firm predictions are foolish economic trajectories before a subset of endeavors, this data suggests that the the countries joined the eurozone. Their U.K. would not gain a substantially similarity was analyzed by comparing weaker currency by joining the eurozone, unemployment data, income data, and might even receive a marginally economic size, and trade dependence stronger one. Sweden would probably for pairs of countries. 17 In the following weaken its currency somewhat by joining sections, the numbers in parentheses the eurozone, maybe by roughly 3-5%, denote difference scores, which range placing it among the less misaligned of from the low teens for countries that had the core eurozone economies. extremely similar economic experiences in the recent past to the low 1000s It seems then that joining the eurozone for countries that had very different would have only small impacts on the economic experiences. values of the currencies of the U.K. and Sweden. The economic impacts Cyprus, Slovenia and Malta, in of misalignment on current eurozone Comparison with Hungary and the members are difficult to measure because Czech Republic there is no conclusive economic research on the impact of artificially weakened Cyprus adopted the euro in 2008. During or strengthened currencies on economic the preceding five years, by our similarity activity. It is well-understood that a weak metric, its trajectory was least different currency results in higher exports, but it to Slovenia (85), Malta (241), the Czech is unclear how that is balanced out by Republic (247), and Hungary (275),

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while it was most different to Germany their low difference scores, it makes sense (1055) and Poland (1002). Given that to consider the experiences of these five Cyprus and Malta entered the eurozone countries in unison.18 at the same time, and Slovenia had While Cyprus was clearly affected in entered only the previous year, and given an outsized way by Greece’s role in

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the last decade’s economic crises, the countries. unemployment chart below still tells a cautionary tale about the experiences of The Core Experience: Sweden, the countries discussed in this section, Denmark and the UK in Comparison as two of the three countries that joined with Core Eurozone Countries the eurozone (Slovenia and Cyprus) saw spikes in unemployment that The core countries exhibit more were not seen in their non-eurozone similarity with each other than the set of counterparts. By 2013, the new arrivals enlargement countries discussed above, into the eurozone had lost an average of and as such, it requires a little more five places in the rank of EU countries subjectivity to select a set of comparables. by unemployment, while the two control Given that most core countries joined countries had gained an average of four the eurozone in 1999, the period under places. discussion in this section for the sake of finding comparables is 1994-1998. Incomes, however, tell the opposite During this time, Sweden was least story, as Hungary has fallen away from different from Denmark (102), the UK what had been a relatively tight pack (123), Finland (130), Belgium (131) and and Cyprus, Malta, and Slovenia have Germany (141).19 While at first glance, it inched toward the median for per capita might make sense to group the three core incomes for EU member states. There holdouts from the eurozone into one was no discernible trend as to whether comparison, their comparables turn out entry into the eurozone increased or to be strikingly different. At the time, the decreased trade prevalence for this set of UK was least different from Germany

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(78), Italy (118), Sweden (123), France manifestations to different degrees of a (145), and Denmark (162). In turn, small-country/big-country dichotomy. Denmark was least different from Austria For the sake of clarity, then, the data (37), Sweden (102), the Netherlands is presented separately for the three (146), the UK (162), and Germany (211). holdouts. Some of the differences seen are clearly Interestingly, the results here are inverted

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from those gathered from the enlargement incomes Sweden has picked up ground countries considered above. In the case of in terms of its comparables, as it is now Sweden, the unemployment data flatters ranked second in the EU. Again, the the eurozone, as both Germany and picture on trade dependence is mixed, Finland have seen meaningful falls in with Germany gaining substantially, but their comparative unemployment since with Finland and Belgium losing ground. joining the eurozone, while on average The charts comparing Denmark to its

22 VOLUME 18 comparables – Austria, the Netherlands, increasing their trade reliance, and with and Germany – are not included Germany’s increase continuing to look here because the results are largely dramatic. inconclusive, and are similar to a muted version of Sweden’s case discussed above The Peripheral Experience: Portugal (with Denmark seeming to do marginally and Greece, in Comparison with the worse than the eurozone countries by Czech Republic and Romania unemployment, and seeming to do marginally better by income). The muted Another interesting comparison made results shouldn’t be surprising since available by this data is between the Denmark’s currency has been effectively eurozone countries that are today called pegged to the euro since the currency’s peripheral (Greece, Spain, Portugal, and introduction in 1999. Ireland), and non-eurozone Eastern European countries in the late 1990s. The comparison of the UK to the large Unfortunately, each of the peripheral core eurozone countries, Germany, countries has different Eastern European Italy and France, yields similarly muted countries as their comparators, but the conclusions, though this example is comparison is illuminating. At the time, more favorable to eurozone membership, among non-eurozone countries, Greece as the UK seems to perform marginally was least different from Poland (139) and worse than its eurozone comparators in Croatia (183), Spain was least different both unemployment and income. The from Poland (188), Portugal was least countries’ record on trade reliance is also different from the Czech Republic (87), inconclusive, with both the UK and Italy Romania (146), Slovenia (187), and

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Croatia (196), while Ireland was least Portugal, all of the peripheral countries different from Slovakia (161), Hungary had better comparators among countries (225), and Slovenia (233), though it that joined the eurozone in 1999. must be noted that with the exception of

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Looking at the experience of Spain, incomes is inconclusive, while the trend of Greece, Poland, and Croatia, a similar trade dependence suggests light evidence story is seen as with the enlargement that the non-eurozone countries gained countries – the peripheral countries that some ground in trade. have joined the eurozone have done poorly with regard to unemployment, Recent Eastern European Additions: but have done marginally better than Slovakia and Estonia the non-eurozone countries with regard to incomes. All four countries have At the time of its addition to the eurozone increased their trade dependence in in 2009, Slovakia was least different the recent past, but Poland’s increase is (in the entire EU) to Hungary (183), especially noteworthy. Croatia (272), the Czech Republic (283), and Bulgaria (287). Meanwhile, in 2011, While Portugal’s and Ireland’s Estonia was least different to Lithuania comparables are quite different, the trends (33), Latvia (119), and Hungary (195). are similar enough to not be obscured So, both are seemingly natural cases for when considered together. Similar to the study. case considered above, there is a pattern of worsening unemployment in the Interestingly, for Slovakia, the data does eurozone-joining peripheral economies not lend further support to the earlier that was not seen in the comparable findings that less developed additions non-eurozone economies. The picture of to the eurozone tend to struggle with

25 SAIS EUROPE JOURNAL OF GLOBAL AFFAIRS unemployment, as the relationship experience of peripheral countries when between joining the eurozone and joining the eurozone. It seems clear that unemployment is inconclusive here. they suffered in terms of unemployment, Furthermore, Slovakia seems to have done but weakly gained it terms of incomes, marginally better than its comparators by when contrasted with comparable income, and its comparators have weakly countries. This conclusion is particularly increased their trade dependence relative robust because it was previously to Slovakia. For the latter case, Estonia theoretically justified – weakly rising has tracked its comparators closely in incomes and falling employment is fully both unemployment and incomes since consistent with Krugman’s admonition joining the eurozone, providing little that the peripheral eurozone countries’ directional evidence. problems are due to a combination of insufficient eurozone inflation and Summary the resultant inability to adjust wages downward, which is a particularly While many weak conclusions were worrying issue in the aftermath of an reached in the above sections, by far the asset or economic bubble. clearest conclusion reached is that there is no definitive answer as to the impact But, in the end, it is clear that no on a country’s macroeconomic indicators doomsday image emerges around entry of joining the eurozone, and that any into the eurozone. Denmark, the UK, impact is likely to be quite muted. This and the enlargement countries should result is in direct contradiction to both have no major economic qualms about the expectations of the promoters of the entry. This makes it clear that the current eurozone upon its inception (who foresaw state of extreme public negativity in rising prosperity within the eurozone) most prospective eurozone entrants is a and to the dire predictions of prevalent marketing issue. While this result and doomsayers in the media, as well as viewpoint might be disappointing as it politicians who engage in nationalist seems to limit the short-term economic anti-euro and anti-EU debates. The most upside of the currency union project, shocking non-effect found in this paper it brings back into the forefront the is that joining the eurozone seemed to aforementioned political considerations have close to no impact on a country’s for the common currency project: the trade dependence, a metric that had been elimination of competitive devaluations, expected to be markedly impacted by having Europe be able to speak as decreasing transaction and risk-related a common monetary voice and the costs to international corporations once a tightening of economic and political country joined the eurozone. bonds within Europe. If this appeals to a prospective eurozone member, they The most robust conclusion to be gleaned should not hold back for economic fears. from the cases above has to do with the Of course, it is necessary to be cautious

26 VOLUME 18 about these results. In 1999, shortly Times, 2012. http://krugman.blogs.nytimes. after Sweden decided not to join the com/2012/06/24/revenge-of-the-optimum-currency-area/. eurozone, Lars Heikensten, the First 2. Christopher Houseman. “UKIP, Nationalism, Deputy Governor of the Sveriges And The World Wars,” [Online] Riksbank, Sweden’s central bank, warned UKIPDAILY, 2014. http://ukipdaily.com/ that analysts and politicians should be ukip-nationalism-world-wars/. 3. Delbert Snider, “Optimum adjustment cautious that they remember that many of processes and currency areas,” [Online] Essays the economic advantages of being in the in International Finance, 1967. https://www. eurozone are likely to manifest themselves princeton.edu/~ies/IES_Essays/E62.pdf. over the long term. At the time, he was 4. Barry Eichengreen, “Is Europe an Optimum particularly worried about access to Currency Area?” [Online] NBER Working Papers, 1991. http://escholarship.org/uc/ capital markets and the locational choices item/40m5g6pp#. of large multinational companies – the 5. One might remember Youram Bauman’s quip latter process can, of course, take decades that “the three most terrifying words in the to shake out.20 As such, while we’ve yet English language are ‘macroeconomists agree that.’” to see consistent and meaningful impacts 6. Virginie Coudert, “On currency from the decisions made on whether misalignments within the euro area,” or not to join the eurozone (with a few [Online] CEPII Document de Travail, 2012. exceptions mentioned above), it cannot http://www.cepii.fr/PDF_PUB/wp/2012/ be ruled out that dramatic trends will wp2012-07.pdf. 7. The authors do not assume this, and calculate emerge in the decades to come. that the euro is too strong for the eurozone by 8%. As such, they calculate all of the above- Gabor Debreczeni is a first-year MA referenced numbers to be 8% higher than I student in International Development. am quoting. He was born in Hungary shortly 8. Bruce Stokes, “Why misaligned currencies before the fall of the Iron Curtain into matter,” [Online] National Journal, 2002. http://connection.ebscohost.com/c/ an internationally-minded family, articles/6430504/why-misaligned- and as such has been fascinated by currencies-matter. the European integration project ever 9. Mark Cliffe, “EMU Break-up,” [Online] since. He studied Economics at Yale ING Global Economics, 2011. https://www. University in the United States, worked ingbank.pl/_fileserver/item/1004218. in finance on three continents, and is 10. In a recent Eurobarometer survey, 73% of Swedish respondents reported that now most interested in infrastructure they were against Sweden joining the development in developing countries, eurozone. European Commission, “Standard but continues to dabble in the areas Eurobarometer 82 / Autumn 2014 – TNS of urban planning and international opinion & social,” [Online] 2014. http:// ec.europa.eu/public_opinion/archives/eb/ economic integration as well. eb82/eb82_first_en.pdf. 11. Willem Buiter, “Why the United Kingdom Notes Should Join the Eurozone,” [Online] 2008. http://willembuiter.com/ifeuro.pdf. 1. Paul Krugman, “Revenge of the Optimum 12. Patrick Minford, “Should Britain Join the Currency Area,” [Online] The New York Euro?” [Online] 2002. http://www.iea.org. 27 SAIS EUROPE JOURNAL OF GLOBAL AFFAIRS

uk/sites/default/files/publications/files/ org/review/r990906b.pdf. upldbook147pdf.pdf. 13. James Reade & Ulrich Volz, “Should Sweden Title Page Photo Credit join the Eurozone?” [Online] VOX, 2008. http://www.voxeu.org/article/why-sweden- Euro by Alf Melin - https://www.flickr.com/ should-join-eurozone. photos/alfmelin/7035825939/ 14. Estonia brings up the rear; its productivity is about half of the eurozone average. 15. OECD, “Level of GDP per capita and productivity,” [Online] OECD.StatExtracts, 2015. http://stats.oecd.org/Index. aspx?DataSetCode=PDB_LV#. 16. The World Bank, “Current account balance (% of GDP),” [Online] 2015. http://data. worldbank.org/indicator/BN.CAB.XOKA. GD.ZS. 17. The unemployment, income, economic size, and trade dependence data is from the World Bank and can be found at data.worldbank. org. GDP per capita is used as a proxy for income, GDP is used as a proxy for economic size, and exports/GDP is used as a proxy for trade dependence. Unemployment in this paper always refers to unemployment rate rather than the number of unemployed. The difference scores were calculated as follows. For each year from 1994 onwards, the current 28 members of the EU were ranked from 1 to 28 for each of the four metrics discussed above. For each pair of countries, the difference score for each year is the sum of the squares of the differences between their rankings in each of the four metrics. Squared differentials were used to emphasize extreme differences in any of the metrics. To arrive at the final difference score, the difference scores for each of the previous five years were averaged. 18. As a sanity check, Malta in 2008 was least different from Estonia (102), Slovenia (105), Hungary (158), the Czech Republic (203), Lithuania (214), and Cyprus (241). In 2007, Slovenia was least different from Hungary (54), the Czech Republic (63), Cyprus (78), Malta (100), and Estonia (146). 19. Just for the sake of curiosity, Sweden was most different from Bulgaria (936), Latvia (902), and Lithuania (870) at the time. 20. Lars Heikensten, “Should Sweden join the euro area?” [Online] 1999. http://www.bis.

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On Feminism, Gender Roles, and Sex: An Interview with Lynne Segal Editorial Staff

Lynne Segal is an Australian-born, British-based socialist feminist academic, author, and activist. She has taught in higher education in London, England since 1970, at Middlesex Polytechnic from 1973. In 1999 she was appointed Anniversary Professor of Psychology and Gender Studies at Birkbeck, University of London, where she now works in the School of Psychosocial Studies.

1. Your 1994 book, Straight Sex: (about the straight sex and the politics of Rethinking the Politics of Pleasure pleasure) as relevant as ever. Are women is being republished this year. What more autonomous and in control of their prompted you to republish the book own lives and bodies in this new century? after 21 years? What makes it relevant Or are women, when we’re young, to today’s generation of young women? more objectified and sexualized than ever – indeed, perhaps, at even younger Times have certainly changed, although ages? Start talking about sex today and, people disagree about how to interpret just like yesterday, we quickly run into those changes. This, in itself, makes trouble unless we stick to jokes, or gender re-thinking our old feminist debates cliché. Consensus on this subject is hard 29 SAIS EUROPE JOURNAL OF GLOBAL AFFAIRS to achieve with anyone, not just with concerning gender relations have created feminists! So returning to Straight Sex a world where the symbolic grip of sexual and a frank conversation can do no harm. difference is constantly being repackaged Trying to face up to the strange unruliness and flaunted back to us commercially, as of desire is what led me to write Straight objects for identification and desire. In Sex. As one example, it’s not only sex the face of continual social upheavals, workers who know that what men want, we see the gritty determination put into as often as not, is to be sexually passive. maintaining some traditional façade of Of course, what men do not want is for sexual difference. This is presented as the women – and even more so, other men only secure sanctuary of love, caring and – to know this: therein lies the ‘politics’ commitment. It bolsters, above all, the of pleasure. These are the thoughts that myth that traditional family structures emerge most strongly in Straight Sex. will survive to protect us. In the meantime, welfare entitlements are further whittled 2. What do you think are some of the away, in increasingly insecure societal and most important issues women face in economic contexts. 2015? This means most of the old issues drawing Obviously the continuing endemic us into women’s liberation remain, but nature of violence against women is one they will be more prominent for some of the most important issues to combat women than others. I would argue globally. Everywhere, it is heightened that it is the divisions between women in situations of war, conflict, and other themselves, more than that between the situations of precarity and stress (so sexes, which we have seen deepening over widespread today), which always impact these decades. most inescapably upon those with the least resources to protect themselves. 3. In your book you reject the idea that The austerity policies that have been men are an enemy to feminism. How implemented since the recent collapse – do you see men’s role in the feminist a collapse due to the fiscal gambling of movement and discourse today? How the wealthy – have also harmed the most important is male input in a movement vulnerable, the furthest-removed from about women’s rights? any responsibility for the crisis: as ever, it has not harmed those whose careless risk- There can be no women’s liberation, many taking created it. Women in particular, in feminists once said, without there being their caring jobs (whether in waged work, changes in men and masculinity. Our aim or in the home) have been hardest hit was to transform society in a more equal by austerity. These are among the most and caring world, less exploitative of important issues. people and the resources we all rely upon. Women’s lives overall change when the However, four decades of social volatility workplace is made more compatible with

30 VOLUME 18 the unpaid work of caring and community pornography. building, with women and men largely sharing many of the challenges, joys and No, the level of vitriol towards successful burdens in these different spheres. That women does not surprise me, however remains as true as ever, and some men much it distresses me. Women have have always known this. always been blamed for the social ills of this world, and in fact the idea of That is why a minority of men, across projecting wickedness onto women time and place, have supported women’s has historically been more vicious and and feminist struggles. In an increasingly lethal than it is today. For instance, it militarized and, in many areas, still took centuries to root out the scare of impoverished world, we do need women ‘witchcraft’ in Europe, which primarily and men to work together for progressive targeted older, vulnerable women. change, however autonomously we may choose to organize. Men’s input remains 5. How well do you feel our Western important. Yes, men remain advantaged, culture responds to aging and older in so many ways, by the greater respect and people, particularly older women? freedoms still accorded to men overall, compared to women overall. But men are As you know, I have just written a book also disadvantaged in a world where they about this – Out of Time: The Pleasures must always appear the ‘stronger’ sex. & Perils of Ageing – so I’ve been doing a lot of thinking about age in our society. 4. What do you think about misogyny We are always ageing, and there are on the internet? Is the rise of the generalities and particulars at every misogyny on the internet exacerbating juncture. However cultures of ageing, or reflecting existing sexist attitudes? it should be obvious, have always been Do you find the level of vitriol displayed gendered – whatever the time and place. online against prominent female I am hardly the first to notice this. From activists surprising? New York, over 40 years ago, Susan Sontag was pointing out the double standard of I am sure it can both exacerbate and ageing, indicating that women are aged reflect existing attitudes. But deep levels by culture far faster than men. of misogyny and women-blaming have always existed, taking us right back to the Women are also discarded sooner, both nonsensical narrative of Eve betraying in the public world and, increasingly, in Adam in the Garden of Eden. Sexism the private world as well. It is ‘femininity’ has never simply reduced to sex, it can be and ‘womanliness’, in particular, which found in all fields of life. Its origins come, have always been so firmly grounded tragically, from the most respectable in the youthful and fertile body, which of sources, just as often as from the means that generally, women are silently demeaning images of mainstream sexist stamped as undesirable, frightening or

31 SAIS EUROPE JOURNAL OF GLOBAL AFFAIRS pitiful decades earlier than men. Old sexuality? Can there be such thing as women in particular are still far more “female-friendly pornography”? likely to end up alone, unprotected and (for some) impoverished. The most Well, our world tends to commodify terrifying images of old age have always female pleasure and expressions of had a female face: the witch, old hag, female sexuality, along with everything medusa, harridan – whether in myth, else. Right now, as my American friend folk-tale or contemporary horror movies. Leonore Tiefer has written much about, This creates a residue of fear, including in the pharmaceutical companies are women ourselves, which we need to try to promising to release a female Viagra, combat. Fortunately, many older women hoping to make as much money from it today in public life are trying to do just as they did with the male version. I doubt this. they will be anything like as successful, since women tend to be a little more 6. Do you believe gender roles have sophisticated about the world of sex changed significantly in your lifetime? and desire. We hardly reduce this to the Are structural gender understandings erectile state of any single organ... still an obstacle to equality? We still see the world in the sense of a binary gender More seriously though, I do think more model. Can our Western culture allow women, especially young women, have a for another paradigm? slightly fuller language to discuss their bodies and desires. At least, I hope so. I think that, while there has been a shift However, this can vary greatly depending to a degree and women do enter spaces on how open and communicative their they were excluded from in the past, parents, friends and mentors have been the old gender binaries have ways of able to be in discussing intimate matters. consolidating themselves. Their precise In many parts of the world - above all, detail may change, but certain hierarchical incredibly, in the US - huge battles have codings remain. Often these are attached been fought to keep young women as to the ways in which mothering and other ignorant and vulnerable as possible. It is, caring responsibilities can continue to as the American feminist Judith Levine marginalize women in the turbo-charged, has written, actually harmful to minors to neoliberal workplace. I don’t think things deny them any good sex education. will change dramatically unless and until this changes. Modern corporate capital is 8. What are your thoughts on the latest not compatible with a world in which the threats to women’s bodily autonomy in intimate worlds of care, commitment and the US? Is this a threat to the feminist community attachments are truly valued. movement, and what are the options for the feminist movement in combatting 7. Do you think our culture encourages it? female pleasure and expression of female

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It is true that there are many threats to limits to equality. women’s bodily autonomy in the US (and elsewhere). The denial of a woman’s 10. Is there a place for radical feminism right to choose a termination, if she find in 2015? herself pregnant without wanting to be, is a particularly huge threat to women’s There is a place for any belief in 2015, bodily autonomy. And of course, this whether or not I share it. In the UK, impacts differently across class and ethnic Finn Mackay has recently written a book lines. Some women will have no problems reclaiming the political stance of radical accessing treatment, whereas for others - feminism, which she feels has been in fact, for the most vulnerable - things undervalued, especially in contemporary will be quite the opposite. Again as I said feminist scholarship. This led her to above, austerity regimes have hit women found the London Feminist Network, hardest in the US and the EU alike. and to revive the Reclaim the Night They’ve had significant consequences for Marches (RTN) of the late 1970s. Given the increase in violence against women, the continuing prevalence of violence as well as other threats to women’s against women, this serves a useful independence and our ability to lead purpose. Interestingly, Mackay herself fulfilling lives. insists that she, like all the feminist activists she knows well, is politically on 9. Are there biological limits to the left, anti-capitalist and in favour of equality? a peaceful, egalitarian world. So to that extent, I have no quarrel with her politics. Although people think it is not, this is a Yet, for me they will always be very strange question. Of course there are incomplete. In my view, you need more no biological limits to equality unless we strategies than radical feminism has ever want there to be. It all depends upon how been able to offer to build coalitions that we interpret and deploy what biological might have some chance of impacting differences exist. upon mainstream politics. Without this I cannot see how you get closer to creating We could say, for instance, that since any sort of socialist or peaceful future. nature made the average man marginally taller and physically stronger than the 11. The revolutionary attitudes of the average woman, and since men cannot do 1960s have been described as a ‘pop the utterly essential work of reproducing culture blip’. In the light of the recent themselves, men should occupy the upsurgence of different movements in lesser, hardest working position in the UK (Occupy, Focus E15 Mothers, society. Women therefore, like Queen various socialist + feminist activism), Bees, should be the more valued, and do we need broader social radicalisation understood as born to rule over men… (as accompanied the women’s liberation As I said, of course there are no biological movement of the 1970s) to achieve

33 SAIS EUROPE JOURNAL OF GLOBAL AFFAIRS further gains for women? to degrade! It all fits together, in one noxious spew, where cultures of blame are Of course we do. In my view feminism is encouraged by regressive forces to divert always strongest when it is able to unite attention from criticism of the powerful, with other progressive groups, men and onto contempt for the powerless. Think women alike, fighting for change. Given of the Tea-Party (formed by the corporate the wretched state of things at present for billionaires) the Koch brothers in the US, so many people, especially the young, and or the success of UKIP here. Thatcher was many of the elderly, we need this more iconic for playing this game, but she was than ever. a mere puppet in the hands the corporate interests she served. Just to take the situation of housing in London. Every possible effort needs The way to begin to build any fairer and to go into organizing to stop the take- better world, and protect environmental over of all our public spaces and housing resources, is to recognize how potentially resources by the global rich, who have vulnerable we all are. But the few been laundering their ill-gained money are safeguarded in every way from buying up London property. There is so recognizing this. The many, in precarious much that is rotten and dangerous in the times, are directed towards blaming all current world order. Most people know it, those more vulnerable than themselves, but have little idea how to change things. as if they were the cause of the difficulty. It is always more resources for hope that On the contrary, it is only by turning needed, and the combination of Left and such thinking on its head, and aligning feminist activism is surely the best way of ourselves with the most dispossessed, finding those resources. that we can think though any genuine way forward, together. Syriza has tried to 12. The principle of multiculturalism do this in Greece, building upon the sorts in Europe is currently facing a huge of grass-roots resistance that we can see challenge. How should we integrate all around us, once we care to look. different understandings of women’s rights? 13. What lessons do you hope women take away from this book and your other Given the explosion of ethnic violence academic publications? and conflict we have seen over the last few decades, few things are more important That’s a big question. Gaining some than to be fighting racism, and everything understanding of the complexity of all that breeds it. We are encouraged in human affairs, I guess. My framework harsh times, in which we have been living is that of a Left feminist. I look at the of late, to find scapegoats on whom to multifaceted nature of gender, class, project rage and sense of failure. Find ethnicities and all the intersections an immigrant to blame! Find a woman of power relations, as they shift and

34 VOLUME 18 refashion themselves across time and the androcentrism of discourse; the place. It’s important to note that sexuality problematic ways of men determined to and desire has always been entwined with shore up their entitlements with the flaky these hierarchies of power; not only in mantle of masculinity? Well, the first the gender regime, but in the disowned way to do this, I argued in Straight Sex, desires historically projected onto was by questioning, not affirming, all the those ‘others’ we dominate and exploit. traditional assumptions around gender. Feminists have been at the heart of trying In particular, I rejected that absurd active/ to understand all this. passive divide, constructing what Judith Butler called the ‘heterosexual matrix’: And yet we have always faced our own the belief that the terms “male” and problems, trying to tie the protean “female” and “masculine” and “feminine” complexity of personal intimacy or are only existent within the heterosexual desire, to any consistent feminist sexual matrix, and are just common terms that politics. Certainly, the personal is a keeps the matrix concealed, to protect it part of the political, and vice versa… from radical critique. but this does not mean that the power dynamics we eroticise and explore in our It is not hard to notice that what actually individual worlds are the same thing as happens in consensual sexual encounters a collective effort to end social dynamics often bears little relationship to those of domination and exploitation. Not at binary divisions, that so oppressively all. This is what the so-called feminist insert themselves into our thought and ‘sex wars’ were all about – refusing to language. However secure or fragile our distinguish the psychic and the social. hold on power in most areas of our lives, This was never just a mother-daughter desire can render any one of us helpless – affair, though it was often presented as whatever our gender or sexual orientation. that. We challenged and fought with each In passionate sexual relationships, in love, other, from the beginning – as straight, we are all vulnerable. As Judith Butler says lesbian, Black, working-class women, and in Undoing Gender, addressing the perils more. of desire: “Let’s face it. We’re undone by each other. And if we’re not, we’re missing It was drawing upon both psychoanalysis something. If this seems so clearly in the and critical theory that I dared, in case with grief, it is only because it was Straight Sex, to return again to all those already the case with desire.” questions we had raised in the first Interview Conducted by Eloise passionate days of women’s liberation. Waldon-Day How might it still be possible to develop loving, pleasurable and responsible sexual politics around heterosexuality, Title Page Photo Credit despite all we now know about the solid Feminist Fist by Eva the Weaver - https://www. phallocentrism of the symbolic order; flickr.com/photos/evaekeblad/2230497789

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(Un)Productivity in the Digital Age Mitko Grigorov This paper examines why productivity has not increased significantly during the current Digital Revolution, despite rapid and intense technological progress. This paper presents statistical data on productivity and gross domestic product (GDP) growth across a number of economies for the past 40 years. It then reviews several economic and history of science and technology theories about the current lower than expected productivity, including from Industrial and Technological Revolutions. It then presents several explanations for the delay in productivity growth that are specific to the Digital Revolution.

Productivity Statistics improved communications, flexible work arrangement, increased automation, and For once, our own intuition aligns with more efficient distribution of labor (or economic models in telling us that substitution of labor with technology in new technologies should translate into some cases). And yet, the numbers – the increases in productivity, faster-than- crux of the digital age – tell an entirely normal GDP growth, and ultimately different story. Despite the enormous higher standards of living. The digital growth in computer power and a myriad revolution has heralded an age of of technological inventions, productivity

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Source: OECD, 2014; IMF, 2014 has largely stalled.1 (the United States, Japan, Germany, France, the United Kingdom, Italy, and Understanding the factors affecting Canada) for two main reasons: 1) these productivity growth is crucial as it is data are reliable; 2) in the two periods, the the most accurate measure of how fast G7 countries accounted for a significant the standards of living improve.2 The share (between 60 and 70 percent) of the economic theory states that the more global economy. Productivity grew by 2.6 the average worker produces, the more percent on average between 1970 and the average worker should take home. 1990.4 With that pace, productivity – and This relationship holds true even in an by proxy the standards of living – should era, as Thomas Piketty (2014) has argued double every 27 years. The difference recently, in which a disproportionate between this and the more recent period, amount of total income goes to the covering 1991 to 2013, is staggering. In owners of assets and capital, rather than the last 23 years productivity grew by only to the providers of labor.3 1.7 percent on average, which translates into doubling of the standards of living We can divide the period between 1970 every 41 years.5 To put it another way, the and the present day into two parts (dotted data during the former period suggest line on Figure 1) of relatively equal productivity would have increased eight length, with the second covering the time times during one’s lifetime, while only when the Internet and advancement in four times for the data in the latter communications technology became an period.6 While it is true that the second important part of the economy. For this period encompasses the Dot-Com Bust analysis, we use data for G7 countries of 2001 and the Global Financial Crisis

37 SAIS EUROPE JOURNAL OF GLOBAL AFFAIRS that started in 2008, the first period Literature Review includes financial troubles of no less calamity: two oil crises in the 1970s and Some economists and historians of the notorious market crash of 1986. In economics, looking at the United States, fact, when we look at the productivity argue that productivity and GDP growth and GDP growth in Figure 1, we see were already slow even in the first period that with the exception of the downturn (1970-1990), compared to the decades during the Global Financial Crisis, the between the end of the World War II second period actually seems less volatile. and 1970.9 However, productivity in We observe a similar trend for real GDP, the United States between 1946 and which grew by 3.3 percent between 1970 was actually comparable to the 1970 and 1990 (or doubling every 21.5 average G7 productivity growth in the years) and 1.9 percent between 1991 and 1970-1990 period. In the same post- today – doubling every 36.5 years.7 To war era, productivity grew even faster quote Nobel Laureate and economics for other G7 economies (in France, for heavyweight Robert Solow, one still sees example, this productivity growth was the computer age everywhere else but not close to 5 percent), but this should also in productivity statistics.8 be interpreted with caution as those

Source: OECD, 2014

38 VOLUME 18 countries were recovering from destroyed is subject to diminishing returns in its infrastructure after the war; and given ability to increase economic growth.11 He the low starting point and the influx of also notes that it is highly unlikely that financial resources through the Marshall the next couple of decades will match Plan, it is natural that growth rates will the inventions of the previous ones. If be higher. this view holds, productivity growth will remain low in the near future at around 1.3 Gordon also observed that productivity percent per year.12 The issue of trying to in the United States actually increased explain this delay in productivity growth slightly in the most recent period (1.79 by diminishing returns to technology percent between 1990 and 2013, Table is that in such explanation we rely on 1), especially between 1995 and 2004 purely economic theories. However, (average of 2.29 per year).10 However, the such delay is paradoxical from the point United States is in this regard an outlier of view of current economic theories as and should not be considered in isolation. they view technology as disembodied and As Table 1 shows the United States was hence any change in technology should one of only two countries for which the translate instantaneously in changes in productivity growth was lower for 1970- productivity.13 By using the standard 90, compared to 1990-2013. For most economic model to describe this delay, countries for which reliable productivity we end up in the contradictory situation data are available, the decrease in of using a theory that does not agree with productivity in the last two decades what we observe to describe the reasons compared to the two preceding decades for what we observe. is astounding. Nor is the downturn only confined to countries that started at a Gordon, however, notes that the years very low level of economic development from 1906 to 1928 – at the height of and were largely played catch-up between the Second Industrial, or Technological, 1970 and 1990, such as South Korea. The Revolution – also saw slow growth despite differences for countries that were in a important inventions, such as electricity, similar technological development as the cars, paved roads, plumbing and running United States in 1990, including France water. If delayed economic progress and Japan, are just as pronounced. is a natural subsequence of intense technological progress, perhaps the curse So why has the advent of personal of diminishing returns to technology is computers, the Internet, cell phones, not inevitable. Such a view is reinforced emails, smart phones, efficient word when we consider the two preceding processors and data analysis tools, cheap industrial revolutions. Crafts and Harley videoconferencing, and a myriad of other and Antras and Voth explore the British inventions failed to translate into higher Industrial Revolution of 1770-1860.14,15 productivity and income growth? Gordon Their models show that productivity argues that that technology in general growth during the Industrial Revolution

39 SAIS EUROPE JOURNAL OF GLOBAL AFFAIRS was relatively slow, especially in its initial Given the limitations of the literature stages. Antras and Vorth’s model shows a on the issue, this section offers several moderate acceleration after 1800. explanations for the delay in productivity growth. To begin with, there is all that Several historians of technology, such as “noise.” We just don’t have all the David and Rosenberg, have hypothesized information we need; we are inundated that this delay could be the result of a slow with data most of which are of little diffusion of the new technologies and the relevance to our work. The more of it time it took to learn how best to take there is, the lower our ability to find advantage of the new technologies even what we really need. Or to put it in other after they have been incorporated.16,17 words, we are looking for the same old They focus on the Second Industrial needle in an ever-growing haystack. This Revolution and the diffusion ofis not just poor knowledge management; electrically powered engines in industrial it’s a natural outcome of a system that has America. Such technologies diffused only grown infinitely more complex. We call with great delay and even then it took the Digital Age, “the age of information,” time until managers and workers learned but with the same validity we might as how to best take advantage of this newer well call it, “the age of disinformation.” and superior technology. Building on This abundance of information (whether these ideas and using a quantitative relevant or not) forces us in very narrow model of technological diffusion, Atkeson specializations, making us less capable & Kehoe show that several decades of keeping track of the big picture. The could pass before a sustained increase second issue is that along with improved in the pace of technical change leads to access to resources (human, data, capital), corresponding increases in productivity.18 the computer age offers an innumerable ways for time wasting, in which we Thus a delay in productivity growth happily engage. From news and social occurred both during the First and the networks to games, videos, dating sites, Second Industrial Revolutions. But and online shopping, the Internet seems while we can explain the first with the built to distract us from the task at hand. enormous social change it brought as people moved from the villages and As noted, several respectable studies have agriculture to the towns and industry, and disproven the claim that productivity we can argue that the protracted diffusion grew with astronomical rates during of a completely new technology slowed the previous two industrial revolutions, productivity in the second, we are still at so calling the digital age the “Third pains to explain what is causing the delay Industrial Revolution” might be more during the current Digital Revolution. accurate than most people would think, but for the wrong reasons.19,20 Much Checks to Productivity in the Digital like the enormous social change of Age the Industrial Revolution in the late

40 VOLUME 18 eighteenth and early nineteenth century, indeed an important development as, per there is a comparable economic change David and Rosenberg, we would expect a at hand as labor is reallocated from larger lag in manufacturing productivity manufacturing to services. However, the growth compared to the services as it services sector has a slightly different takes longer for the new technologies to production function than manufacturing. get incorporated.22,23 Thus, the diffusion While efficiency in manufacturingof new technologies alone cannot explain depends only on the producer, efficiency the lag in productivity growth. in the service sector depends both on the producer and the consumer. If a worker is So why is productivity so sluggish in performing an operation on an assembly the services and the restaurant sector line that produces running shoes (let’s in particular? In the average restaurant, say he is gluing the tongue to the rest of patrons spend time on their phones the shoe), whoever ends up wearing the before ordering, which, apart from shoes has no effect on how quickly (or increasing the time until ordering, also slowly) and with what quality the worker creates inefficiencies by making the attaches the tongue. The two exist in two server return to the table several times.24 separate places in time and space. This is Then the customers take pictures of not the case with many services. themselves, the food, the restaurant, often making staff members take group photos Unlike in manufacturing, the producers (and retaking them), further wasting and consumers of services interact in time. Then, they spend more time on the same temporal, and often spatial, their phones before asking for the check environment. You are sharing the time and even more after paying their bill. In and space with your service provider the end, the serving time per table might when getting a haircut for example. Let’s almost double because of inefficiencies.25 look at the restaurant business.21 If our This betrays one of the major aspects argument holds, we should expect that of today’s changing market. While the levels of productivity be very different new technologies might increase the for the services and manufacturing productivity of the producers of services, sectors. This is indeed the case. In fact, they also generate a countervailing according the Bureau of Labor Statistics, movement that decreases “productivity” productivity in the restaurant industry on the consumer’s side of the process. has not increased at all in the past ten Producers hence invest more input for years, a rather worrying development. the same level of output because the Productivity in some other service sectors, nature of demand in the digital age has such as retail, has increased somewhat changed.26 At the end, many of the new (around 20 percent in the past ten years), technologies that we expect to increase but this increase is nowhere near the gains productivity end up decreasing it.27 seen by the manufacturing sector, which A fourth issue is the information- has soared by 50 percent (Figure 2). This is packaging problem. Information used to

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Source: U.S. Bureau of Labor Statistics, 2014 be packaged for cumulative consumption. is packaged and the actual new digital One would read article one and then reality.28 Marshall McLuhan would proceed to article two, and so on and so have been proud: in the Digital Age, the forth, moving up one’s personal learning medium truly is the message. curve. In the digital age information is packaged into singular how-to articles, Fifth, we will look at the re-adjustment which deal with discrete, concrete tasks. problem. This is simply the time spent The learning curve is not one of knowledge, adjusting to new versions of the same but of knowledge management. To technology or to the latest fad. This put it another way, before the digital happens when a company updates to revolution, it used to be about what one Windows 7 from Vista, just to change knew; now it is how quickly one can to Windows 8 in a couple of years, Google it. But our brains continue to or to a new graphics editor or email/ work the way they have for centuries: to messaging client, or when one learns a internalize something, we need to put it new programming language because of on top of something we already know. marginal improvements. With so many This is difficult when every unit on the updates and new versions, there is a Internet (and by extension the way we learning curve even if the new version deal with knowledge management) is is more intuitive and user friendly. This self-contained and somewhat detached notion is consistent with Atkeson and from the rest of reality. We end up in a Kehoe, whose models shows that the situation, in which many organizations large stock of built-up knowledge in the are struggling to find effective ways to old economy prior to the Technological manage knowledge without much success Revolution was the reason the transition as there is a widening gap between was slow.29 how our strategies assume knowledge

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This is true to an even larger degree when Conclusion we consider management practices in the Digital Age. We will call this last issue This paper explored why productivity has the “Great War” management problem. not increased significantly during the World War I saw an unprecedented current Digital Revolution, despite rapid advancement of military technology. and intense technological progress. It The machine gun became the main presented statistical data on productivity defense weapon, tanks started rolling and GDP growth for several economies across the fields of Europe with menace, for the past 40 years. It also reviewed and the aircraft was introduced, first several economic and history of science for reconnaissance and dropping the and technology theories. Acknowledging occasional bomb, but later as fighters and the gap in the existing literature, it offered for air-to-ground operations. Despite all essay style explanations for delayed these advances in technology, military productivity growth. strategy remained relatively unchanged since the war of 1870. This led to a virtual The digital world is expanding at an stalemate, a prolonged war of attrition, ever-increasing rate. It has taken on and countless casualties. What does this a life of its own, causing the gears of have to do with management in the supply and demand to be just a bit out digital age? Technology has again grown of sync. It is likely that technology will so fast that it has surpassed our strategies. continue to grow in the future without While we function at the edge of the a corresponding growth in productivity, future, management is still rooted deep a rather unsettling thought for many in the past. The sheer amount of work an economist. But while we are busy hours spent in unproductive meetings, updating our economic theories, we preparing unnecessary reports, and should also learn to build our great ant completing outdated administrative tasks colonies on the shifting quicksand of is staggering. All of these allocate labor to global information. For what we know unproductive activities or break the flow is that, although Industrial Revolutions of productive labor. This problem is akin bring enormous positive change and to what described as the “displacement benefits to society by expanding the of goals” in a bureaucracy.30 The rules production function, they do so only and procedures that initially served to with a lag, which can be as long as four prevent administrative and financial decades. Productivity did not pick up chaos became goals of their own. The until after 1800, although the Industrial bureaucrat works toward rules and Revolution started as early as 1760. The regulations as an immediate goal the way same was true for the Technological many of today’s managers work toward Revolution that started around 1900, but maintaining structures that are dated and productivity only increased significantly found wanting in the Digital Age. after World War II. The initial stage of the current Digital Age started in the

43 SAIS EUROPE JOURNAL OF GLOBAL AFFAIRS late 1970s, although its effects were not and Cooperation. (2014). Productivity felt until the early 1990s. Thus we might growth. Retrieved Nov. 12, 2014, from OECD Statistics. For the purpose of this currently be near the turning point when paper productivity is measured using the productivity will again pick up and, classical method first described by Robert as was the case with the previous two Solow in his seminal paper in 1957. Some Industrial Revolutions, finally lead to a other methods such as potential total factor productivity, shifts in the world technological more equitable distribution of wealth. frontier, and Malmquist indices (Growiec, 2010) are bound to produce slightly different Mitko (BC’10, DC’11) is an analyst results, but the main message about the at the Research Department of the differences between the periods should be International Monetary Fund. He consistent regardless of the measurement. previously worked as a World Bank 5. Ibid., 2014. consultant and Fox News writer and 6. It should also be mentioned that during both periods the fruits from productivity growth editor. His research interests include were distributed unequally with the top end of the effects of industrial revolutions on the income distribution benefiting the most. productivity and growth, as well as At the same time, real wages (how much stuff the development of digital and crypto the average worker can buy with what he or she takes home) have largely stagnated. currencies. Mitko fondly remembers 7. International Monetary Fund. (2014). Real his time at SAIS Bologna, where he GDP growth. Retrieved Nov. 12, 2014, from served as an editor of this journal and World Economic Outlook database. played the bass in SAIS’s own “Justin 8. Solow, R. M. (1987). We’d better watch out. and the Junk Bonds.” New York Times Book Review, 36. 9. Gordon, R. J. (2000). Interpreting the “one big wave” in US long-term productivity Notes growth: Springer. 10. Op. cit., OECD, 2014. 1. Brynjolfsson, E. (1993). The productivity 11. Gordon, R. J. (2012). Is US economic growth paradox of information technology. over? Faltering innovation confronts the six Communications of the ACM, 36(12), 66- headwinds: National Bureau of Economic 77. Research. 2. Martínez-García, E. (2013). Technological 12. Ibid. progress is key to improving world living 13. Atkeson, A., & Kehoe, P. J. (2001). The standards. Economic Letter, Federal Reserve transition to a new economy after the second Bank of Dallas industrial revolution: National Bureau of 3. Piketty, T. (2014). Capital in the Twenty- Economic Research. first Century: Harvard University Press. 14. Crafts, N. F., & Harley, C. K. (1992). Output Although outside of the scope of this brief growth and the British industrial revolution: paper, the relationship between technological a restatement of the Crafts‐Harley view. The progress and equality is an important one. Economic History Review, 45(4), 703-730. In the current Digital Revolution, much like 15. Antras, P., & Voth, H.-J. (2003). Factor during the Industrial Revolution and the prices and productivity growth during the Technological Revolution, the distribution British industrial revolution. Explorations in of the fruits of production has been – at Economic history, 40(1), 52-77. least initially – skewed toward the owners of 16. David, P. A. (1990). The dynamo and the capital computer: an historical perspective on the 4. Organization for Economic Development modern productivity paradox. The American

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Economic Review, 355-361. 17. Rosenberg, N. (1976). On technological expectations. The Economic Journal, 523- 535. 18. Op. cit., Atkeson & Kehoe (2001). 19. Op. cit., Crafts & Harley (1992). 20. Op. cit., Antras & Voth (2002). 21. According to the National Restaurant Association, this is a 700 million dollar industry with 14 million employees and close to a million locations in the United States alone. 22. Op. cit., David (1990). 23. Op. cit., Rosenberg (1976). 24. Hu, E. (April, 2014). Restaurants: The Modern-day lab for our smartphone- obsessed ways. Blog posted to http://www. npr.org/blogs/ 25. Ibid. 26. We should note that if we bring utility into the equation, things could look a bit different. Perhaps customers are getting more utility from restaurants by taking pictures with the food or making the experience part of their daily online routine. And perhaps we get more satisfaction from a presentation that is to our liking no matter the information being transferred. So at the end, while the producer’s surplus (what the producers benefit from “selling” their product) is being diminished, the consumer’s surplus might be increased to counter those losses. 27. Bernstein, E. S. (2012). The transparency paradox a role for privacy in organizational learning and operational control. Administrative Science Quarterly, 57(2), 181216. 28. Romano, N. C., & Nunamaker Jr, J. F. (2001). Meeting analysis: Findings from research and practice. Paper presented at the System Sciences, 2001. Proceedings of the 34th Annual Hawaii International Conference. 29. Op. cit., Atkeson & Kehoe (2001). 30. Merton, R. K. (1962). Bureaucratic structure and personality. Reader on Bureaucracy.

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Between Scylla and Charybdis: Migrants’ Dangerous Odyssey Across the Mediterranean Valerie Tan According to the UNHCR, 75,000 people attempted to cross the Mediterranean in the first six months of 2014 with 800 dying before reaching land. Yet people still insist on making the journey. On the other side of the Mediterranean is the European Union, which persecutes some who have survived the journey while providing sanctuary to others. It is high time for European Union member states to work together to find a durable and sustainable solution to the situation in the Mediterranean. This paper briefly discusses the main reasons migrants embark on such a perilous journey and suggests elements of a strategy to address this issue.

On October 3, 2013 a small fishing passed since then, and yet the number vessel carrying almost 500 passengers of migrants making the treacherous capsized a few hundred meters off the journey across the Mediterranean has coast of Sicily.1 Among the dead were not abated. According to the UNHCR, two pregnant women and three children 75,000 people attempted to cross the while 200 were lost at sea. A year has Mediterranean in the first six months

46 VOLUME 18 of 2014 with 800 dying before reaching Mare Nostrum — its search and rescue land. Between July 1 and September operation — has saved over 100,000 lives 30, the number swelled to 90,000 with in its one year of operation. According 2,200 deaths.2 This means that in a two- to the Italian navy, it is a “military and month span, the risk of dying during a humanitarian operation” whose goal is sea crossing doubled compared to the primarily to save lives while combating entire first half of 2014, and yet people human trafficking.4 However, despite still insist on making the crossing. These its valiant efforts, Mare Nostrum falls statistics are alarming, and the people short of its goals given the vastness of the behind those numbers are calling for help. Mediterranean and the number of people The Mediterranean is at its deadliest, crossing in small boats. In 2013, 60,000 becoming a modern-day Charybdis people made the crossing to Europe. By swallowing desperate migrants on an the beginning of October 2014, 165,000 odyssey to perceived safety. However, people crossed the Mediterranean.5 With on the other side of the Mediterranean these numbers, Italy cannot effectively is the European Union: A Scylla that carry out its rescue mandate. Together persecutes some who have survived the with other coastal states like Greece and journey while providing sanctuary to Malta, it struggles to save as many lives as others. This paper briefly discusses the possible while maintaining secure borders main reasons migrants embark on such a and economic stability. perilous journey across the Mediterranean and suggests elements of a strategy for a A primary cause for the swell in migrants sustainable solution to the crisis which crossing the Mediterranean is the primarily relies on increased European continued internal strife and conflict involvement. The European Union is in Northern Africa and the Middle teetering on a delicate balance between East. From Egypt’s political unrest humanitarianism and security, with the to Eritrea’s authoritarian crackdown latter unfortunately taking precedence and Syria’s bloody civil war, people are in political agendas. European Union leaving by the thousands. The situation member states need to work together in the Mediterranean is a mixed to find a common migration policy that migration phenomenon. People are puts humanitarian aid to the fore, or else compelled to leave for various reasons, thousands of innocent lives will continue from persecution to lack of economic to be lost to the sea. and social opportunities. Moreover, sealed land borders and other physical The Mediterranean, a Migrant’s restraints to movement have driven Charybdis people to the sea. Even migrants who attempt to obtain appropriate documents Since the Lampedusa tragedy of 2013, to migrate are turned away and are left Italy has been the only state to actively with no safe alternatives.6 The UNHCR take action in assisting migrants at sea.3 estimates that half of the crossers come

47 SAIS EUROPE JOURNAL OF GLOBAL AFFAIRS from Syria and Eritrea.7 This shows that a government to ensure those rights, the impossible circumstances of war people will increasingly find themselves and conflict drive people to desperate boarding unseaworthy vessels to find measures to survive. Libya, which was a a government that will. It is tragic that thriving metropolis for migrants all over people are compelled to risk their lives the region, has since disintegrated into for the mere chance of obtaining their a failed state. After the overthrow of innate right. Muammar Gaddafi, economic prospects in Libya have all but disappeared, and The EU: Six Heads Are Not Better than traffickers are reaping the benefits of One the country’s chaos. Without proper law enforcement, emboldened traffickersThe European Union can no longer subject passengers to the most inhumane afford to ignore the situation in the conditions including rape and torture.8 Mediterranean, and it is high time for Frontex — the European Union’s border member states to work together in finding patrol agency — estimates that one boat a durable and sustainable solution. By far earns up to 1 million euros for its owner – the most pressing and immediate response regardless of whether its passengers reach needed is a policy of burden-sharing EU soil.9 Moreover, with Mare Nostrum within the Union. There must be political in place, traffickers are now purposely will to see that the coastal states’ migrant sinking boats to be rescued, adding to the problem is just as much a problem for the death toll and human suffering. Indeed, inner states. As Italian Foreign Minister traffickers have turned the Mediterranean Federica Mogherini said, “Refugees are in into Charybdis, and their despicable the EU as soon as they arrive in Italy”.10 actions continue to feed it. There must be more equity within the EU in dealing with the migration crisis. Another reason for continued crossing At best, it is economically imperative for through the Mediterranean is Europe’s the EU to heed the call of the front-line proximity and stark contrast of stability states. Although migrants enter through compared to that of the sending Italy and other coastal states, they do not countries. With instruments such as the remain and instead move north towards EU Charter of Fundamental Rights, the Germany and Sweden.11 At the very Convention of Human Rights and the least, it is a moral imperative that the EU European Court for Human Rights, the stops turning a blind eye. EU sends a clear message that respect for dignity of life is embedded in its Burden-sharing can start financially, laws. This is a dream for migrants whose with the EU appropriating funds for home countries not only lack the rule of the coastal governments to be able to law, but also even basic institutions that maintain a humane and organized system can protect them. Human rights may be for accepting refugees. Reception centers universal and inalienable, but without in Italy, Malta, Cyprus and Greece are

48 VOLUME 18 becoming overcrowded, and the increase must realize that ignoring them will cost in arrivals brings a decline in quality much more. of services and treatment available to migrants. Reception centers need to be just Institutionally, the EU must introduce that – a place that is receptive of migrants, reforms to its Dublin Regulation. Signed and not one that serves as a prison or in 2003, the Regulation states that Asylum limbo for those who barely survived their applications can only be processed where last difficult journey. A quota system refugees first step foot on EU soil.15 could also be put in place, whereby EU This puts undue pressure on EU coastal states accept migrants equitably. Family and periphery states, which become reunification should be the primary discouraged from processing migrants consideration for resettlement, followed and continuing their rescue operations by job matching and other economic and because of the strain on their coffers and social considerations that best fit both the resources. Unfortunately, the convention receiving state and migrant. seems to primarily protect the territorial integrity of member states based on Given Mare Nostrum’s success in saving unfounded fears of migrant inundation. lives, the EU should also consider Instead, the convention should have been having a well-funded EU-wide Mare based on each state’s obligations under Nostrum operation that has a clear the Geneva conventions of 1951. After all, mission to first ensure the safety of all the discussion is about people who need human lives at sea and then maintain protection and have skills to offer, not the security of EU borders.12 In August, parasites. With the Dublin Regulation, the European Commission announced the EU created a fortress against a Triton, a Frontex-led operation meant perceived enemy army of migrants, and to complement Mare Nostrum.13 While has unfairly made states like Italy, Greece, Triton gets its feet wet (literally), the Spain and Malta its first line of defense, search and rescue systems in place must but without providing much needed be strengthened. Italy and Malta have the reinforcement. two largest search and rescue operations in the Mediterranean. Yet, they are often Migrants only choose the perilous at odds in their definitions of distress crossing on the Mediterranean because calls and disembarkation procedures.14 they have no other options.16 With Finger-pointing and frustration can be land borders sealed tight, sea crossing eliminated with support from the rest is the only available route, and this of the EU. If search and rescue zone has been capitalized on by traffickers. responsibilities are clearly marked and The establishment of a safe route for adequate funding is in place, cooperation migration would allow the suffering can be more efficient, and more lives can and inhumane treatment of migrants to be saved. The cost to pay attention to the be mitigated. Moreover, the safe route refugees may be high, but by now the EU can make it easier for the EU to filter

49 SAIS EUROPE JOURNAL OF GLOBAL AFFAIRS migrants and properly process their status move need not be exercised. Migration without any risk to their lives or dignity. is a choice – the fact that conditions A legal safe alternative that maximizes exist in this world that compel people to opportunities brought by migrants while choose to endanger themselves and allow minimizing costs to receiving countries themselves to be treated inhumanely is a is paramount to finding a sustainable dark stain on the world’s moral conscience. solution. Joint border security protocols Indeed, migrants are constantly placed should be established between EU between Scylla and Charybdis; they face periphery states and non-EU states on an option of two evils – to stay and risk the border. There are ways for border their lives, or to leave and still risk their security to be maintained without lives. No one should have to choose to sacrificing human dignity. Further, safe go through sub-human obstacles just for routes should not just be established for the smallest chance of living humanely. access to the European Union but also to The EU must act, or else it will find move within it. Though free movement its conscience at the bottom of the for EU citizens is guaranteed, the Dublin Mediterranean together with the lives of Convention restricts refugees and asylum those it failed to protect. seekers’ ability to move around EU states for fear of being “Dublined”. Migrants Valerie Tan is a first-year International are forcibly returned to their first country Development concentrator at the of arrival, which in many cases leads to Johns Hopkins School of Advanced being imprisoned for moving irregularly. International Studies in Bologna. She This situation is in and of itself a violation studied International Relations with a of the human right to movement. The focus on the History of War in Boston EU needs to address this issue and ensure University for her undergraduate that the same rights and privileges are degree. After college, Valerie worked available to migrants wherever they are in in the US, the Netherlands and the Union.17 the Philippines doing NGO work, anti-terrorism and anti-corruption Finally, the EU must work with sending respectively. She was born and raised countries like Libya, Egypt, Syria and in the Philippines. Eritrea to stabilize them and create better living conditions so that would-be Notes migrants would no longer feel compelled to leave. No one can prevent an individual 1. BBC News, “Italy boat sinking: hundreds from moving. Pure chance put them in feared dead off Lampedusa”, 3 October 2013, http://www.bbc.com/news/world- their country of birth, and the choice europe-24380247 to move to another country is their 2. UNHCR, “Mediterranean crossings more inalienable human right. Therefore, the deadly a year after Lampedusa tragedy”, EU must work with sending countries 2 October 2014, http://www.unhcr. org/542d12de9.html to create conditions where this right to 3. Amnesty International, Lives Adrift:

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Refugees and migrants in peril in the central Mediterranean Index: EUR 05/006/2014, 30 September 2014, http://www.amnesty.org/ en/library/info/EUR05/007/2014/en, p. 7 4. Ibid. p. 23 5. UNHCR, “Mediterranean crossings more deadly a year after Lampedusa tragedy” 6. Amnesty International, “Lives Adrift”, p.16 7. UNHCR, “UNHCR chief Guterres and Angelina Jolie warn of mounting crisis in the Mediterranean”, 15 September 2014 http:// www.unhcr.org/5416e8db9.html 8. Amnesty International, “Lives Adrift”, p. 15 9. Frontex, “People Smugglers: the latter day slave merchants” http://frontex.europa.eu/ feature-stories/people-smugglers-the-latter- day-slave-merchants-UArKn1 10. Der Spiegel, “Europe’s African Refugee Crisis: Is the boat really full?”, 15 April 2014, http://www.spiegel.de/international/ europe/european-refugee-crisis-worsens-in- mediterranean-a-964304.html 11. Amnesty International, “Lives Adrift” p.54 12. Ibid., p.30 13. Ibid., “Lives Adrift”, p. 57 14. Ibid., p. 27-33 15. European Commission Website, http:// ec.europa.eu/dgs/home-affairs/what-we-do/ policies/asylum/examination-of-applicants/ index_en.htm 16. Amnesty International, “Lives Adrift”, p.7 17. Ibid., p. 59

Title Page Photo Credit

MOAS Rescue Migrants in the Mediterranean by MOAS - http://commons.wikimedia.org/ wiki/File:MOAS_rescue_migrants_in_the_ Mediterranean.JPG

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Holding Trees Hostage: Ecuador’s Attempt to Share the Costs of Preserving the Amazon Jayant Gandhi Ecuador thought they would shock the world into action with their call for international funding to prevent the exploitation of oil reserves under their Yasuní-ITT National Park. The response was silence and inaction. Why? This paper examines Ecuador’s Yasuní-ITT Initiative that sought to share the costs of preserving the Amazon Rainforest and its apparent failure through the lenses of collective action theory and cost-value analyses. While the initiative was unsuccessful this time around, with some adjustments it could prove a useful model for future conservation efforts.

Introduction culmination of the Yasuní-ITT Initiative started five years earlier by the Ecuadorian In 2012, Ecuador made an ultimatum to government in order to offset the cost of the world: pay us $3.6 billion or we will not drilling for oil in a protected region cut down 1200 sq. km of rainforest. This of the Amazon rainforest (the Yasuní- was not so much a threat, but rather the ITT National Park). The international

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Source: Bass, M., Finer, M., Kreft, H., Cisneros-Heredia, F., McCracken, S., Pitman, N., & English, P. (2010). Global conservation significance of Ecuador’s Yasuní National Park. PLoS ONE, 5(1), 1–22. response was underwhelming--only The benefits gained from a well-preserved about $8 million of the target was raised Amazon (the increase in biodiversity, the (with another $100 million pledged, but natural carbon-sink it provides, etc.) are not delivered) and Ecuador decided to ones that are difficult, if not impossible, move forward with the drilling project, to preserve through privatization, yet are hoping to produce oil in the area as early shared by the entire global community. as 2016. While it may seem that Ecuador’s Ecuador’s request presents an interesting actions were practically extortionary (and alternative to the traditional approach to indeed many governments felt that way) preservation. But why exactly did their they raise an interesting question of who attempt fail if it is truly in the global should have to bear the costs of preserving community’s best interest to preserve the and maintaining the Amazon. Brazil Amazon? Was their price was too high for has also struggled with this question the international community? Or was the and has succeeded in combating some very nature of the request problematic? deforestation internally; still, their impact One side is an issue of valuation and the was far from the levels they could be if other a collective action problem. Both costs were more evenly spread among probably played a role in the failure of actors. the Ecuadorian proposal, but neither are insurmountable obstacles.

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The Initiative the wealthy world should have to pay for the environmental benefits provided by The Yasuní-ITT initiative was launched rainforest-rich countries like Ecuador. in 2007 by Ecuadorian President Rafael Correa in order to prevent further The program, however, was not as deforestation of the large national park as successful as Correa would have hoped. a direct or indirect result of oil drilling. Only achieving a total pledged amount While deforestation of the Yasuní Park of $116 million since it began to collect has already occurred through concessions funds in 2010, it is clear that the initiative to oil companies, the Ishpingo- has not been able to bring about the Tambococha-Tiputini (the ITT in the redistribution of costs that were hoped last part of the name), which represents for.3 In fact, as of 2013, the initiative has about 12% of the total area of the national been officially abandoned by Correa’s park, has yet to be disturbed. The oilfields government and the initial groundwork in the ITT region are estimated to hold to begin drilling the three oil fields around 900 million barrels of oil, which has already begun. The initiative is not would amount to 20% of Ecuador’s total completely dead however, as calls to reserves. For a relatively poor country reinstate it through a referendum have like Ecuador that is dependent on its begun to gain momentum in the country.4 oil exports, this is a huge opportunity to forgo. Yet Correa designed an initiative This idea itself seems reasonable at to prevent drilling in the region for about first glance. Just as firms are expected half of the estimated economic value of to internalize their externalities, why the oil (at the time the total value was shouldn’t nations? Many nations claimed estimated to be more than $7 billion, that they did not want to participate out taking the price of oil to be $61 per of a fear that Ecuador would not uphold barrel).1 their end of their bargain and either drill anyways or put the funds into even Why would Ecuador be willing to even more destructive projects. While this consider forgoing extraction in exchange lack of trust is not entirely invalid, it was for only half their potential profits? something the Ecuadorian government According to Correa, Ecuador was in was aware of. In fact, they were actively a position to switch from “an extractive trying to ameliorate this problem through type of economy to a service economy.” the establishment of a UN-administered He did not mean that Ecuadorians would trust fund that would ensure the funds go be joining service sectors of the economy, towards reforestation, conservation, and 5 but rather that the rainforest itself could social development projects. Ultimately, be construed as a global service to be trust in the Ecuadorian government was sold on the world market.2 To Correa probably not the deciding factor. While it made perfect sense that the heavily ideally the cost for maintaining such an industrialized and polluting countries of important global good should be shared

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(perhaps with greater responsibility given Action, Mancur Olson describes the to those who produce more negative necessity of“providing some sanction, or externalities than others), there is little some attraction distinct from the public incentive for any one nation to act, making good itself, that will lead individuals to it all the more difficult for Ecuador to help bear the burdens of maintaining find support from the global community. the organization.” This lack of incentive for active participation would not only Along for the Ride make cooperation amongst large groups (like the global community) less likely, The collective action problem has long but it increases the chance that any been a central theme when talking one individual in the group will free- about international cooperation on ride. In fact, Olson points out that the matters of the environment. At its heart, burden of providing a public good or it is a question of who can effectively common resource in this system will manage and produce a public good or disproportionately fall upon the larger common pool resource within a large actors, while the smaller actors benefit group. The environment itself definitely without paying.6 fits the criteria of a public good (non- excludable and non-rivalrous), but Olson’s description of the collective certain environmental aspects are better action problem has become a key part described as a common pool or fall into in our understanding of why groups do different property schemes. The problem not necessarily achieve the most optimal of who should bear the costs for such a ends. This view of group behavior leads to good becomes the focus of the collective the conclusion that concentrated interests action problem. Ideally, it would be come to dominate any group that lacks shared equally among beneficiaries, but the ability to enforce incentives towards a the very nature of the collective action more general (and diffuse) goal. However, problem posits that this cannot occur this is not the only shape collective action spontaneously. can take, as pointed out in Todd Sandler’s Global Collective Action. In his 1965 work, The Logic of Collective

Source: Grether, Jean-Marie (2014). Global Collective Action – Summary of Todd Sandler’s 2004 Book. Université de Neuchatel – Faculte des Sciences Economiques

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Using Olson as a starting point, Sandler country in which they exist also receives explored how different resource and secondary benefits (such as erosion group structures would lead to different control and eco-tourism). These joint outcomes, refuting Olson’s idea that products that the host country receives noncooperation is inevitable. Sandler (and can exclude from others) change the posited that loosening the assumptions dynamic of the good from a pure public of some of the games used to predict good. If the ratio of excludable benefits to collective behavior (e.g. Prisoner’s total benefits is high then it is more likely Dilemma or Chicken) revealed a much that there will be an efficient allocation more complex view of public goods. of resources, since the good behaves more For example, by assuming costs are akin to a private good. Conversely there systematically shared, a normal game of is also a rivalrous aspect the public benefit Prisoner’s Dilemma results in a Pareto of a healthier environment. Damage to optimal Nash equilibrium. 7 the environment does prevent others from using it as efficiently. In essence, by In order to reach such Pareto optimal polluting more, a country is using up more results for transnational public goods “units” of environment at the expense of (TPG), international agreements become everyone else. This latter point served as a necessity. The often cited success of the part of the logic behind Correa’s plan. global effort to reduce the emission of harmful chlorofluorocarbons, responsible The main problem with collective action for the depletion of the Earth’s ozone with regards to the rainforests of Ecuador layer, was achieved through such an is more fundamental: there are just too agreement. Left to its own devices, a many players. The global benefits for country prefers a situation where every maintaining the Ecuadorian forests are other country bans the use of CFCs while too diffuse to incentivize anyone but they maintain their freedom to use them Ecuador itself to pay for its preservation. - a classic Prisoner’s Dilemma that could Viewing the cost of preserving the be overcome through an international rainforests as a payment to reduce the treaty. The key success of the treaty was externalities of polluting nations leaves us the establishment of trade restrictions in a standstill. The large number of agents on countries that did not participate. means that bargaining (as prescribed by This meant that countries now had a Coase theorem) becomes prohibitively disincentive to free-ride and would costly. Within a state this could be therefore seek to lower their emissions.8 remedied through command and control tools or a Pigouvian tax on the polluters, So where do the rainforests of Ecuador but in an international system with no stand in all this? Rainforests themselves supra-national force to enforce such rules, present an interesting case, because nothing will happen. And indeed that was 9 their benefit for existing (a healthier the result of the Yasuní-ITT initiative. environment) is a public good, yet the Ultimately, cost sharing would result

56 VOLUME 18 in the optimal allocation of rainforest could be possible. Treaties like the reserves. As Sandler pointed out, cost Kyoto Protocol have floundered because sharing leads to a modified version of incentives could not be strong enough to the Prisoner’s Dilemma where the Nash counter the marginal cost of abatement equilibrium lines up with the Pareto of greenhouse gas emissions. This does optimal result. The question is how to not have to be the case with deforestation. incentivize countries to share this cost. Economic activity is not as dependent on Obviously just asking them does not cutting down huge swaths of trees as it work, otherwise Yasuní-ITT should is on burning fossil fuels. So if there is a have seen more success. International reasonable incentive to participate in a organizations can help coordinate and global cost-sharing system for rainforests, restructure the game so that individual international cooperation can be achieved. state incentives align better with what is Of course, this is heavily dependent on globally optimal. the actual value of the rainforest.

Currently the UN-REDD’s REDD+ The Price is Right (Reducing Emissions from Deforestation and Forest Degradation) program is What is the value of a hectare of seeking to create a financial value for the rainforest? About $18,000 in 1990 USD. carbon storage of forests in developing Naturally, the value of any given area countries, hoping to eventually offer of rainforest is going to be dependent pollution credits to developed countries in not only on who you ask, but on the exchange for their support in maintaining potential resources that exist in the land. (and expanding) these forests.10 While Many factors contribute to the value of this is in line with Correa’s intentions, existing rainforests and different groups it too suffers from a lack of support value these factors differently. Some, like internationally, not only because of the the economic benefits of eco-tourism or collective action problem inherent to it, the carbon capture value of a forest, are but because it necessitates the creation of easier to quantify. Others, like the value a global carbon market. of biodiversity, are less so. Additionally, different actors will have different Mobilizing the international community incentives to deforest. Farmers and to any particular end is always a loggers want to expand their economic daunting task. Conflicting interests and activity while conservationists and disincentives to cooperate tend to inhibit indigenous populations would seek to progress, but if an agreement like the preserve their ecosystem. Combining Montreal Protocol or an international these disparate groups, you can arrive organization like REDD+ can implement at a global optimum that should be the incentives for active participation (or starting point when figuring out how more likely, disincentives for passivity) much a state like Ecuador should really then an initiative like the Yasuní-ITT be charging to preserve its forests.

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The previous figure of $18,000 comes Unlike REDD+ and other organizations from Danish researcher Lykke E. that have focused almost exclusively on Andersen and his cost-benefit analysis of the carbon storage value of rainforests deforestation in Brazil. While primarily (admittedly the largest global value focused on comparing the value of intact source), Andersen’s study incorporated rainforest to the value of the lands used many other externalities of rainforests for agricultural and logging purposes, into the analysis. Of considerable note is Andersen takes an in-depth approach his valuation of biodiversity. He focuses to valuing a hectare of rainforest. He on the scientific value of biodiversity concluded that the value to the global (and also the aesthetic value, in a separate community of a standing hectare of section on eco-tourism). He divides rainforest amounted to $18,000 USD- this value between direct and indirect 1990, but that Brazil saw higher economic values. The direct value is comprised of value in farming that land. Accordingly, it the increased pool of genetic material would require international intervention that can be used in medicine and genetic to reach the globally optimum amount of engineering as well as the component deforestation.11 materials derived from the many species of the Amazon used in modern medicine

Source: Andersen, Lykke E. “A Cost Benefit Analysis of Deforestation in the Brazilian Amazon.” Instituto de Pesquisa Economica Aplicada, Rio De Janeiro. January 1997

58 VOLUME 18 around the world. The indirect value by Jonas Busch, looked at these issues in comes from those species which have yet terms of the proposed REDD+ carbon to be discovered and could potentially be credits marketplace. Since REDD+ almost incredibly valuable to scientific research exclusively focuses on carbon storage, (again mainly medicine).12 priority is given to high carbon forests versus forests with high biodiversity. A more recent study of the costs of Busch argues that focusing solely on deforestation and the loss to biodiversity, carbon storage can lead to a less optimal

Source: Busch, Jonah. “Supplementing REDD+ With Biodiversity Payments: The Paradox Of Paying For Multiple Ecosystem Services.” Land Economics 89.4 (2013): 658.

59 SAIS EUROPE JOURNAL OF GLOBAL AFFAIRS climate outcome than if biodiversity was option open to the president to resume taken into account. The major difference resource extraction at any time. Correa’s in pricing schemes is that the one based moratorium on further drilling followed solely on carbon is a service payment: a year later in 2008. the supplier is providing the service of carbon storage. The integrated price is an As a member of OPEC, Ecuador’s opportunity cost scheme which would interest in producing or not producing oil bring in even more suppliers, as shown in tend to follow the decisions of the cartel. the graphs below.13 The current increase in OPEC production means that Ecuador’s budget will be even Looking at Ecuador, it is possible to apply tighter as oil prices fall. In fact, with a similar prices systems to its rainforests. negative current account (as of 2014), The first study gave us a good point of Correa’s government has been forced to comparison, but there are still two major begin preparations for oil extraction in differences that set the Ecuadorian the Yasuní-ITT region.16 case apart: an incredibly high level of biodiversity and oil.14 Another problem facing Ecuador’s desire to preserve its ecological heritage is Black vs. Green Gold the way in which it has valued the cost of preserving the Yasuní-ITT region. Cost benefit analyses of rainforests The $3.6 billion requirement is based with no subsoil assets have proven hard on the carbon-price of the petroleum to internalize within a nation as large underneath the soil, not the market price as Brazil. Ecuador’s rainforests face an once extracted. While it does make sense even steeper challenge. With about half to value the oil accordingly (since these the GDP per capita of Brazil and vast prices are less volatile), it does raise the potential for oil wealth, it is impossible to question of whether it would be enough expect Ecuador to carry the full cost of to stop Ecuador from extracting should preserving its rainforest. prices increase. The valuation also does not take into account the positive economic Ecuador has a long history of allowing benefits of leaving the forest intact. Using oil extraction in its national parks. Even Anderson’s price estimations of $18,000 though the area around Yasuní was per hectare, the Yasuní-ITT region can declared a UNESCO Biosphere Reserve be valued at more than $2 billion.17 This in 1989, it was only in 2007, after much number is not accurate for modern use, pressure from Ecuador’s large indigenous but it is clear that the economic value population, that a large portion of the park of maintaining the region’s rainforests became an “intangible zone” (meaning is immense. It should also be noted that no resources could be extracted from the more than half of that economic value is area).15 This did not affect concessions locally based (about 52%).18 already made to oil companies and left the In Ecuador’s defense, it was only

60 VOLUME 18 asking for half of the potential gains by is probably the only solution to the extracting the oil, so any gains they would Prisoner’s Dilemma of deforestation. But have received from the preservation without any means to enforce it on the of the forests could have likely been international stage, cooperation is unlikely. offset by this omission. The presence Maybe an international agreement can be of oil itself is problematic not only in reached that punishes those who do not determining a current valuation, but in pay their fair share in order to preserve ensuring preservation in the future. If the Earth’s rainforests in a similar manner deforestation is to be treated as a market, to how the Montreal Protocol punished as is the intention of the Yasuní-ITT countries who continued producing initiative, then perhaps the unwillingness CFCs. Unfortunately, it will probably to pay has more to do with the cost of take a much more dire climate situation abatement being far above the marginal for such an agreement to be created. In harm caused by losing this section of the the meantime, however, there is a clear Amazon. In a sense, the oil underneath need for accurate valuations of rainforest the region makes it ‘premium’ forest in lands that take into account their carbon terms of preservation. content, but also the many other benefits they provide. It’s All About the Money Jay Gandhi is a current MA candidate So was the failure of the Yasuní-ITT at Johns Hopkins SAIS Bologna initiative due to an insurmountable Center and a graduate of Georgetown collective action problem, or because the University’s School of Foreign Service cost of abatement was too high? Either with study abroad experience in one could sufficiently explain what Ecuador and Egypt. His focus has been happened, but a combination of the two on the interplay of science, technology, is the most holistic interpretation. It was and international affairs. He has a a collective action problem because the background in web development and incentive for other states to intervene and has worked at several different tech contribute was too low. The high price startups in multiple capacities. made it nearly impossible to create that incentive even after the Yasuní trust fund Notes and carbon credits were established. 1. Davidsen, Conny, and Laura Kiff. “Global Correa’s government tried a new Carbon-And-Conservation Models, Global Eco-States? Ecuador’s Yasuní-ITT Initiative approach to combating deforestation, one And Governance Implications.” Journal Of that is now being emulated by REDD+ International & Global Studies 4.2 (2013): (to only slightly more success…), and 1-19. p. 2 the benefits of trying definitely outweigh 2. Davidsen, et. al. p. 4 3. United Nations Conference on Sustainable those of not trying at all. Figuring out a Development, “The Yasuní-ITT Initiative: way to implement a cost-sharing regime shifting paradigms for a sustainable fu-

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ture”, 20 June 2012, http://www.uncsd2012. more generous discount rate (2%) the valu- org/index.php?page=view&nr=82&- ations he arrived at have probably increased type=1000&menu=126, accessed: 1/15/2015 due to continued deforestation driving up the 4. Associated Press in Quito, “Yasuni: Ecuador value of the remaining rainforests. abandons plan to stave off Amazon drilling”, 18. Refer to figure 3 for Andersen’s breakdown. 16 August 2013, thegaurdian.com, http:// His estimates have probably increased due to www.theguardian.com/world/2013/aug/16/ continued deforestation driving up the value ecuador-abandons-yasuni-amazon-drilling, of the remaining rainforests. accessed: 1/14/2015 5. United Nations Conference on Sustainable Title Page Photo Credit Development 6. Olson, Mancur. The Logic of Collective Action: A Kichwa Woman by CIFOR - https://www. Public Goods and the Theory of Groups (1965). flickr.com/photos/cifor/8640062260/ Harvard University Press. 7. Grether, Jean-Marie (2014). Global Collective Action – Summary of Todd Sandler’s 2004 Book. Université de Neuchatel – Faculte des Sci- ences Economiques 8. Barrett, Scott “Critical Factors for Providing Transnational Public Goods”. Expert Paper Series Seven: Cross-Cutting Issues (2006): 1-55 9. Grether 10. UN-REDD, About REDD+, http://www.un- redd.org/aboutredd/tabid/102614/default. aspx, accessed: 1/15/2015 11. Andersen, Lykke E. “A Cost Benefit Analysis of Deforestation in the Brazilian Amazon”. Instituto de Pesquisa Economica Aplicada, Rio De Janeiro. January 1997 12. Andersen pp. 23-24 13. Busch, Jonah. “Supplementing REDD+ With Biodiversity Payments: The Paradox Of Paying For Multiple Ecosystem Services.” Land Economics 89.4 (2013): 655-675. 14. Even for the Amazon the Yasuní national park is considered one of the most biologi- cally diverse places on Earth with thousands of unique species per hectare. In particular the Tiputini Biodiversity Station boasts an amazing amount of plant and animal species unique to the region (it also happens to lie near one of the three untapped oil reserves). 15. Davidsen, et. al. p. 10 16. OPEC. OPEC Annual Statistical Bulletin. 2014. http://www.opec.org/opec_web/static_ files_project/media/downloads/publications/ ASB2014.pdf, accessed 1/15/2015 17. Which because it took place in 1997 will most likely under represent the true modern value of standing rainforest. Even using his

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On the BRICS, the Security Council, and New Global Order: An Interview with Professor Andrew Hurrell Editorial Staff

Andrew Hurrell is Montague Burton Professor of International Relations and a Fellow of Balliol College at the University of Oxford. His research interests include theories of international relations focusing on international law and institutions, global governance, history of international relations thought and history of international law. His book “On Global Order: Power, Values, and the Constitution of International Society” won the International Studies Association for Best Book in the field of International Relations in 2009.

Your book, “On Global Order” tackles What I was trying to do in On Global the changing landscape of world Order was to say that there are at least governance, and the role of emerging two different ways of thinking about countries therein. Could you give global governance and international an overview of how this new world institutions. One was very much the paradigm will differ from our current dominant one through the 1990s and system? into the 2000s. We can call it the global governance way of thinking or the global

63 SAIS EUROPE JOURNAL OF GLOBAL AFFAIRS governance frame. It sets international gets pushed aside and emerging powers, relations within a world where the the rise of China proves that realism was dominant concerns are to do with the right all along. management of globalization, tackling global problems, and so on. My view is actually that we live in a kind of hybrid system where the two things The world of global governance, the world sit alongside each other. There is clearly of international institutions, and the a lot of governance, and a great deal of world of different forms of governance deep globalization. But we also see the beyond the state was very much the return of important aspects of a more orthodoxy of the 1990s and early 2000s. Westphalian geopolitical world. And this And what I wanted to do in On Global includes, hopefully, a potential return of Order was to say, “Yes, it’s all very well to the ‘power managing’ role of big powers. talk about going beyond Westphalia, but And it’s that sort of duality that I think there are important parts of international is really critical for understanding what politics where older, more state-based, emerging powers are doing, why there more power-based ways of thinking have are tensions and problems caused by never gone away.” They didn’t go away in them, but also how they can be brought the 1990s and the early 2000s. Instead, into a more effective system of global we took power for granted. Because of governance. the dominance of the United States, we could park a lot of the “power” analysis And so there’s something interesting on the side. So what I was doing between when we talk about those five 2005, 2006, 2007, was to say; “Look, BRICS countries. Russia has even at the height of thinking about recently demonstrated a bent for global governance, older patterns of expansionism, while India remains international society remain important.” non-interventionist. China builds its military pressures in the South China And as then we move forward and as sea while Brazil is still weakly armed. we talk more and more about emerging It’s easy to get fooled by the acronym powers, this older way of thinking has BRICS into thinking that the countries come back into firmer view. Not to share values and attitudes, but they replace, or not to push out the importance are actually very unique nations with of governance and institutions, but really disparate tendencies. What, if anything, to sit alongside it, indeed often in tension really cements the BRICS together? with it. So one sort of view would say, “Well as we hit harder times, we return to It is quite easy to point to lots of things, a world of states and power,” or as Robert as you say, that separate them: why there Kagan put it, the “return of history and are tensions and conflicts between them, the end of dreams.” This the realist view: either actual or potential, as, for example, Oh well, all this nice institution stuff with China and India. It’s very easy to

64 VOLUME 18 find lots of issues where they have very an institution in the development world different views of the problem in question. that represent, if not a challenge, a kind Think of nuclear proliferation: China as of alternative to the dominant Bretton an established nuclear power; India as Woods institutions. a nuclear power that sits outside, rather uncomfortably, of the core regime; Brazil, We have seen that the BRICS status that maintains a southern third world gives a certain amount of influence on position on nuclear issues. So you can the floor of the global stage, but on the certainly find things that separate them. regional level these countries still have But in many ways the remarkable thing balances to strike with their neighbors. is that they come together at all. After How do you think this BRICS status all the BRICS was an idea that came affects neighboring countries? For from Goldman Sachs and had to do with example, India competing with China business and emerging markets. It really while considering Pakistan. How do had nothing at all to do with international they handle their regional relationship? politics. And yet it has achieved a certain life, a certain institutionalization through There is a very common way of thinking BRICS summits and so on. about being a big power, which is to say, if you want to be a big power you have So then we have to think more precisely to be a regional power as well. For many about what it is. Well, it’s not an alliance; people, when you ask why Brazil and India it’s not a kind of clear strong coalition should be part of the core of the system, that is kind of deployed strategically, the answer is obvious: because they’re big directly, to counter, say, the power of regional powers. Hence people talk about the West. It is perhaps better seen as a emerging and regional powers as a way of caucus where a group of countries that capturing what these countries are about. see themselves as either on the margin And clearly also within the countries or in in quite a few cases in opposition themselves -- although by no means to dominant western countries can come universally -- you find claims to regional together: trying to develop common predominance; and a sense that they have positions or common ways at looking a natural right to be the dominant power at the world; and then very gradually, in the region. Just look at a map, just look embryonically, thinking of whether there at the size, just look at how big they are. are perhaps more concrete things that the Russia in its near abroad is a very clear BRICS might do together, such as trying example, or the very powerful tradition to build institutions that represent, to a within India sees itself as having a natural certain extent, an alternative to current position of regional dominance. arrangements or a kind of exit option. In this regard there has obviously been And yet if you then actually ask: Do a lot of attention focused on the BRICS these countries really dominate their development bank as an attempt to build regions? Are they able to manage their

65 SAIS EUROPE JOURNAL OF GLOBAL AFFAIRS regions? Are they able to provide regional costs as well as benefits. So the overall public goods? The answer is often far picture - whether you’re looking at Brazil more ambivalent. If you take the case of in South America, at India in South Asia Brazil, the relationship is a complex one. or at South Africa in southern Africa - Historically, Brazil didn’t actually have is often one where being drawn into a all that much to do with South America. region raises issues and difficulties, rather It was historically and linguistically than naturally providing a platform separate; and in terms of both culture for regional influence; let alone for and economic flows, its élites looked translating that regional influence into overwhelmingly to Europe and then to the global influence. And in this way, I think, United States for their external relations. that we might want to contest the theory The turn to the region is something that that if you want to be a great power, you we can date quite precisely at the end have to be a regional power first. of the 1970s and into the early 1980s, when regional ties gradually become Historically two of the most successful far stronger. This is most apparent with Great Powers were either not real regional integration within Mercosur regional powers or else were able to set and the southern cone, but the expansion the limits of their regional engagement. of economic ties takes placed elsewhere Britain was a great world power precisely as well. So Brazil increasingly becomes because it was a semi-detached European part of the region, more embedded in power. It was able to limit what was often the region and gradually — particularly called its continental commitment; and in the early 2000s — there emerges both as it became ever more deeply involved outside and inside Brazil an idea that - and couldn’t avoid becoming involved Brazil should play a more proactive role... - in European affairs, this coincided with I don’t want to say a hegemonic one, but its decline. For the United States, you certainly a leading role in the way the look at a map and say “well, obviously the region develops. United States is the dominant power in its Western Hemisphere”; but arguably But in reality acting on this idea turns out the critical thing about the United States to be far more difficult. Other countries and Latin or South America is not that it within a region (secondary states, as can dominate the region, but rather that people call them, or follower states) often it can ignore the region. It can simply say: turn out not to be very keen on following. “at this moment the region is unimportant Brazil wants to have a permanent seat on to us. We will not become very involved. the UN Security Council. But second- We will not become enmeshed and tier states within the region are not at embedded.” For example, at the moment, all obviously supportive of that. Equally, Mexico is falling in deep crisis. But the being engaged ever more in a region, United States is able to pretty much especially within a region that has lots of ignore this. Contrast that with the Soviet problems, raises difficulties and imposes Union and Eastern Europe. The Soviet

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Union was a dominant regional power, leading role in the region has come up. created a kind of de facto empire and yet Overwhelmingly the claim of successive the complications and costs of trying to governments has been that Brazil should manage that empire were central to its be more than simply a regional power: it decline. should be a global player and increase its influence and its connections globally; So you might say that actually being able it should push the idea that the world is to limit — to have discretion — over the multipolar; that it’s more open; that it’s terms of how you become involved in more diversified; and that the cooperation a region is more important than being amongst the countries of the Global able to say “I’m the regionally dominant South should be a central part of the way power, I manage the region, this is why in which this more plural, open world is I’m therefore a great power”. I think that constructed. That’s the dominant line of relation between regional and great power what Brazil has sought to do, rather than is far more complicated than it appears at power-seeking in any very direct sense. first sight. And it is not at all obvious that Indeed one of the puzzles about Brazil if you want to be a big emerging power has been historically that it doesn’t fit you have to be a regional power first. very well into the power seeking mode. It has sought less power than a straight You had mentioned how Brazil is a realist analysis suggests ought to have regional power that has aspirations to happened. be a globally dominant power. During your lecture last night you said that Many think of the origins and Brazil would like to be the first major explanations of this policy lie inside the power to reach this status through soft country. As with other developing and power means. As long as the traditional emerging powers, the principal focus of hard powers still exist and there are concern is with domestic, economic and still large militaries everywhere, is it social development. It is not with power actually possible for Brazil to achieve projection. The external correlate of this this through soft power? Or is it that, position is that foreign policy should as long as everyone else is carrying big directly serve development policy, rather sticks, speaking softly and carrying no than going down the great power road. stick won’t exactly work? That’s been iterated under many different administrations, even under the Lula I don’t think it’s fair to say that Brazil government where the idea of getting a wants to be a globally dominant power. bigger, a more visible role seemed very The primary line of argument and policy important. Even at this time and amidst has been that Brazil wants to be a global the talk of playing a more assertive player, plus, as I mentioned, that that international role, both the President and there have been times and places where many spokespeople laid emphasis on the the idea that Brazil should also play a developmentalist and development side

67 SAIS EUROPE JOURNAL OF GLOBAL AFFAIRS of what Brazil was doing. major powers to play a more power- based role once more, then that poses In so far as it has sought influence, Brazil a real dilemma for a country like Brazil has overwhelmingly done so through and must lead us to question the idea that what we might call a soft power route. Brazil might be the first power to achieve The current president, Dilma Rouseff, has broader status without having military suggested that Brazil might be the first power. That’s a real question. And it major power to achieve greater influence is striking that, even inside Brazil, the in the world without hard traditional question of hard power has become more military resources. If this did make any prominent. Twenty years ago it was very sense it was because it seemed to connect difficult to have a serious discussion in closely with a particular international Brazil about direct military power – and conjuncture where Brazil’s particular at the official level it is still something resources fitted in very well. If an aspect that Brazil is not interested in. And yet of soft power is the capacity to act that question is now there in a much effectively in international institutions or more direct form. Of course, how it plays if you have what one commentator called out will really not depend just on Brazil. “diplomatic GNP”, then clearly this will It will very much depend on the way the depend on there being serious institutions world goes and the balance between these and lots of global governance within different strands of international politics. which and around which you can play such a role. You can then say, for example: You mentioned the idea of the plural, “We are going to play a brokering role more open world, and how Brazil’s in negotiations on climate change, or on approach measures quite nicely with trade, or on human rights. We are going to the international order. Do you think seek to build bridges between the Global the kind of institutions that we have in North and the Global South. Or we are place adequately reflect that balance, going to try to address the legitimacy or structures such the UN need to be problems of global governance.” So there overhauled to allow the rise of countries you have a clear situation where the type like Brazil, with their softer approach? of power that a country has fits with how the international system operates. Well it’s a double-sided problem for emerging powers. As emerging but still But, as I suggested, if the we think relatively weaker states in the international about global politics as a hybrid mixture system, their preference is for a world of globalization on the one hand and of institutions that focus less on direct facing up to more geopolitical issues hard power. As such a country you need and problems on the other, then this will international institutions to project your change the situation. Then the dilemma own interests but also to protect against of what sort of power you have and need the power of more dominant states - to becomes much shaper. If it’s true that tie big states down within international the geopolitical situation is encouraging institutions. 68 VOLUME 18

So there’s a dominant concern for of a major power using the multiplicity sustaining and developing strong of institutions to maximize its leverage institutions. We ask the perennial and its power. It’s also a case that, from question: “Are emerging countries the side of emerging powers, causes real challenging global order and wanting to dilemmas. Even if you are not part of a overhaul it?” But the answer reveals that new institution – say a US-EU economic in many ways, rising powers are actually pact, many of the ground rules of the strong defenders of existing institutions. global economy are going to be set within Of course, at the same time, they want this new forum and will apply to you those institutions to be revised and as well. I think the issue of institutions reformed, and they obviously want those for emerging powers is very much this institutions to give them a greater say. ambivalent one. You have a dominant preference for institutions being there, The problem, of course, is that many and at the same time you want them to existing institutions are not in very good be reformed, so you want to push back. shape. We are going through a period in But you can’t push too hard, you can’t veto which, in almost every case and region, and block too much, because then you institutions are coming under real then risk pushing other states away from strain. They’re stymied, as in the case those institutions and undermining your of the World Trade Organization. The own position. Now it’s true that you too BRICS, particularly Brazil and India, may have some exit options. As we have have achieved a significantly greater role mentioned, the BRICS development and status within trade negotiations, but, bank is in some sense potentially heading at the same time, it’s become harder to in that direction. But this is still quite generate successful negotiations. Then marginal in the bigger picture of how you’re faced, of course, with the question global governance actually works. of alternative options. Talking about institutions and shaping One of the things that makes you a really institutions to allow for the BRICS, if Great Power in international relations is you were in charge of reforming the UN the capacity either to ‘go it alone’ or the Security Council, what do you think it capacity to choose between institutions: should look like? Which powers should forum shopping as people call it. So if you be on that council with the veto power? don’t get what you want in one institution or institutional setting, you create, exploit, Well the critical thing is in your last or develop an alternative institutional statement about the veto power. There setting. And we see that very clearly with are two questions, whether membership the push on the part of the United States should be expanded and whether to negotiate deeper trade agreements permanent membership should be across the Atlantic and the Pacific. expanded on the back of clear veto power. We’re in a situation where I think This example is a very classic instance almost everyone agrees that we have to 69 SAIS EUROPE JOURNAL OF GLOBAL AFFAIRS have reform of membership. It is sort running debate around Security Council of impossible to think of an institution reform that has to do with the relationship like the Security Council carrying on between effectiveness and legitimacy. existence with a membership that grew You need more countries for legitimacy, up in the way that it did. but you can’t have too many countries because then you create something that is The question, then, will come down to totally ineffective. And, at the end of the what is bound to be a really complex, day, when the circle closes, effectiveness and very difficult set of negotiations, is itself a part of legitimacy. If you have about exactly who should be included, an institution that does not and cannot and exactly how. I don’t think there work, then it is to be seen as illegitimate. is any kind of clear answer. All sorts So that then poses a limit on the numbers of people have tried to play the game of countries. Whether that limit is 22, of membership by looking at all the 25, whatever it may be, you have a real countries of the world and trying to rank problem. In the same way we have had them and trying to measure them. Saying, a similar issue with discussions about “Well countries that meet these precise expanding the G7/8 into the G20. It’s a criteria ought to be permanent members question of what the form and the size that of the UNSC,” -- either because of their actually allows effective negotiations and power, which tends to be the dominant effective agreements. Many negotiation line of thinking, or because of their theorists often talk about 12 to 14 being regional status. That, again, has several the maximum number where you can components. One is their capacity to be maintain close cohesion and potentially a regional manager. Another is in their reach agreement. capacity to be a regional representative, because of the idea that the members of So in the case of the United Nations the Security Council should in some way you have to look at all those things. I represent different regions of the world. personally think that it probably will A third criterion lies in their capacity happen, but not necessarily anytime soon. to contribute directly to the work and But when and if it does, it won’t be on the functions of the Security Council. Those basis of any sort of rational calculation. are broadly the three criteria that, almost Who will actually be included will follow everybody agrees on in theory, ought to from a series of political bargains, with sort of drive negotiations. You can look countries supporting other countries and at the world and you can play with those putting together various coalition and criteria and you can then say, “Well here likely producing outcomes that will look is the list, these countries ought to be odd. But then, in a sense, lots of outcomes members.” That happens both in practice in institutions often look odd; and I think and it happens, if you like, in more this won’t be any exception. theoretical discussions. As a final question, it seems like even as At the same time, we’ve also had a long- we are talking about the BRICS there 70 VOLUME 18 are even new acronyms being created more political or geopolitical influence. for the next set of countries. There’s This is something very different. You can talk of the MINT countries, and of the be an important emerging market without emerging “Next 11.” What do you think this having any necessary implications for will be the status of these countries in your geopolitical or your political status the coming years, and will we have an in the world. In terms of the two types exactly parallel conversation as these of power diffusion, I very much see both countries emerge even more? of these processes happening. But the broader power diffusion towards society I think that there are two ways of looking is the more important. The sort of longer at power diffusion. One is about power term trend is away from the capacity moving from one group of countries to of all centralized points of authority, another group of countries -- and they including especially states, to be able to might be the BRICS or they might be, as control their own societies and their own you say, the next kind of grouping down, regional environments. the MINTS or whoever. The other way of looking at power diffusion is in terms of a Power is diffusing in this broader sense, sort of broader process whereby societies, and I think that’s the dominant line that or groups within societies, maybe we have to come to terms with. And it even individuals as well, become more will certainly mean that the capacity mobilized and empowered. Obviously of a small group of Western states and that sort of power diffusion is very much societies to dominate the world is likely to linked with changes in information and continue to decline. But it will also mean technology and in the way that knowledge that the idea that there are new centres and ideas flow across the world. of power -- regional powers, emerging powers -- that can easily dominate And so we’re seeing both these kinds their own region and that can play the of power diffusion. They are related to traditional power political game will also each other, but they often cut across each come under increasing strain. So I think other. One part of the story we tell now, it’s very much the tension between those and we might tell in the future, will be two models of power diffusion that will about who are the next group of countries become ever more important in how we to become more visible, more important think about international relations. –although we have to keep remembering to ask: “important for what?” Jim O’Neill Interview Conducted by Eloise was talking about the BRICS in terms of Waldon-Day & Colin Wright emerging markets. He was talking about countries that will be important for the Title Page Photo Credit way that investors and traders and players in the global economy think about the Andrew Hurrell at SAIS Europe by Grace West, speaking at the Bologna Institute for places that matter. He wasn’t talking in any Policy Research (BIPR), February 2015 direct sense about countries that will have 71 SAIS EUROPE JOURNAL OF GLOBAL AFFAIRS

The Agenda Setting Power of Media in International Affairs: How Media Coverage on U.S. Surveillance Programs and U.S. Military Operations Prevent Us From Becoming a Distopic World

Gerd Gensbichler

This research sheds light on the U.S. government’s efforts to petition media professionals not to report on U.S. data surveillance and military engagements. After 9/11, warrant court based U.S. surveillance practices morphed into warrantless U.S. surveillance activities, and poor journalistic working standards led to a chilling effect in government-media relations during the Obama administration. This analysis illustrates the influence of media reports on the U.S. government in times of unclear U.S. policies. The findings of this paper underline the fact that journalistic non-compliance with governmental secrecy requests prevents our societies from becoming distopic democracies.

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Introduction chosen Eric Lichtball’s and James Risen’s report on the obscure Swift-Bank-Data Edward J. Snowden’s media accounts surveillance program in the New York on the global data surveillance activities Times (NYT), and Michael Hastings’s of the U.S. government have reignited a story on General McChrystal in Rolling heated debate about government-media Stone. The two stories illustrate well the relations. Already in the aftermath of agenda setting power of news reports 9/11, officials of the U.S. government have during the presidencies of George W. asked media professionals several times Bush and Barack Obama. not to report on the U.S. administration’s surveillance programs and military On June 23, 2006 Eric Lichtball and activities. Such petitions for media James Risen published the article “Bank secrecy are repeatedly brought forward Data is Sifted by U.S. in Secret to Block with the concern that reports on U.S. Terror” in the New York Times (NYT). surveillance and military activities give The article covered the secretive Swift terrorist organizations an inappropriate program that was initiated by the Bush warning bell and hence damage U.S. administration only weeks after the 9/11 security interests abroad. Journalists who attacks. By then, the Belgium based Swift have been confronted with such requests, data center routed international money however, refuse such secrecy petitions transfers that were worth $6 trillion a on the basis of the right to freedom day and mostly included overseas wire of speech as it is enshrined in the First transfers into and out of the United Amendment of the U.S. constitution. States. With the Swift program, U.S. Following the rationale of this debate we counterterrorism officials hoped to trace have to ask: Does the public have a right the financing channels of Al Qaeda by to know about the U.S. government’s acquiring Americans’ financial records on surveillance and military engagements? broad administrative subpoenas instead This article aims at giving an answer to of individual court-approved warrants this question. I argue that the media has which were standard in pre-9/11 to report on secretive U.S. surveillance surveillance practices.1 By departing from practices and opaque military activities basic transparency and accountability in order to prevent Western democracies rules the Swift program had the potential from becoming dystopic communities, to erode democratic processes in the which develop into frightening societies United States. As a whole, this article with an authoritarian character. I will and the subsequent reports in the NYT illustrate my argument by showcasing addressed the general question as to how the publication of two U.S. news whether or not the United States had stories led to a realignment of secretive become a night-watchman state during U.S. surveillance activities with civil the Bush administration. The fierce debate liberties rules and to a change within in the aftermath of Lichtball’s and Risen’s the U.S. military command. I have article led to the end of the criticized Swift

73 SAIS EUROPE JOURNAL OF GLOBAL AFFAIRS program and to the implementation of it showed a pattern during the presidency the Terrorist Finance Tracking Program of Bush to grow a powerful executive with improved accountability, privacy branch void of checks and balances and transparency rules. Lichtball’s and that normally characterize democratic Risen’s article demonstrated well the processes. But the Bush administration watchdog function of the press when was not the first one that tried to democratic processes in a country start to overstretch its executive powers. Already be impaired.2 To understand better why at the beginning of the 1970s, Vietnam Lichtball’s and Risen’s article had such a War protestors and civil rights activists political impact and eventually led to the in the United States learned that, under shut-down of the original Swift program, the presidency of Nixon, government let’s look at the political dynamics and officials had relentlessly eavesdropped on government-media relations in the them. The reporting on the widespread weeks and months before the article’s eavesdropping abuses led to the publication on June 23, 2006. introduction of the Foreign Intelligence Surveillance Act (FISA) in 1977. Under Governmental Pre-Publication FISA, U.S. intelligence surveillance Censorship and The Free Press Clause activities had to be authorized by individual warrants through a FISA Previous to the publication of Lichtball’s court.5 Within the United States, FISA and Risen’s report in the NYT, the raised greater awareness of privacy Bush administration had put significant concerns among its citizens. pressure on the NYT editor not to publish the article. This is noteworthy The Swift Program - Unlimited because both authors were not looking to Surveillance in The National Interest? produce merely sensationalistic news.3 As a consequence of the government pressure When 9/11 happened, millions of the NYT editors decided to delay the Americans watched on live TV as publication for a year. After additional airplanes slammed into the towers of the journalistic investigation, the editors of World Trade Center (WTC), producing the NYT finally decided to publish the smoke columns, and the twin towers report. The authors of the article relied in downtown Manhattan collapsed. on The Free Press Clause protecting Immediately after the attacks the Bush them against pre-publication censorship administration raised concerns that US based on the First Amendment of the intelligence and law enforcement agencies U.S. Constitution, while at the same time were handcuffed by legal and bureaucratic demonstrated responsibility by omitting restrictions and therefore could not react elements of the article that might have appropriately to the terrorist threat.6 endangered the lives of people or the A well staged speech prepared the effectiveness of the program.4 The NYT public for Bush’s declaration of a state insisted on publishing the article because of emergency on September 14, 2001,

74 VOLUME 18 followed by the secret implementation of Igniting a Public Debate – NYT the financial data and communications Report Stops Uninhibited Snooping surveillance programs via Swift (2001) on Confidential Data and the National Security Agency (NSA – 2002).7 Both of these programs Tightly connected to the question of worked under the assumption of a the sometimes narcissistic competition general surveillance warrant, a significant between the various U.S. intelligence units change compared to the FISA standards is that of the massive scope of the Swift established before 9/11.8 How can we surveillance program, which approached interpret this significant change in the search for terrorists like a needle in surveillance patterns of U.S. intelligence a seemingly endless row of haystacks since the WTC attacks? without court authorized individual warrants. The Swift surveillance practices Given the disastrous attacks of 9/11, it relied on an enduring state of emergency is understandable that the extraordinary that had lasted several years. Without security situation in the aftermath democratic control mechanisms, at least of the 9/11 terrorist attacks required at the Congressional level, such a state extraordinary measures by the U.S. is potentially a step away from George government. However, it is remarkable Orwell’s dystopia. At the time of the that after five years the emergency publication of the above-mentioned practices of the Swift program still article, the intelligence community on had not been realigned with the FISA the Swift program had only briefed a rules. Another remarkable aspect lies limited number of Congressional leaders. in the fact that the Swift data project Those that had been briefed still did not was led under the auspices of the CIA know what they did not know. Without together with the U.S. Department of congressional checks and balances, the Treasury, although the competencies for Swift program had become a permanent intelligence in cyberspace lie with the and a dubious short cut for the executive NSA.9 This sheds a light on the long branch of the government to bypass the lasting rivalries between the different U.S. legislature.12 intelligent services that seem to be based on a struggle of power between different The publication of Lichtball’s and Risen’s pockets outside of the U.S. government, article in the NYT ignited a public and which are detrimental to the national debate on the principles of accountability, security of the U.S. According to the transparency, and the role of U.S. report of the National Commission on intelligence services in the United States. Terrorist Attacks (NCTA) of 2004, these The NYT report from June 23, 2006 and rivalries are also in part responsible for the subsequent articles enabled the public not preventing the 9/11 attacks.10 11 to enter a vivid debate on governmental surveillance programs and raised awareness for the citizens’ right against

75 SAIS EUROPE JOURNAL OF GLOBAL AFFAIRS undue searches by the government.13 commander of the U.S. troops in 14 The Swift program also raised Afghanistan General McChrystal and international legal concerns because engendered a public debate on the policy Swift, the Belgium based finance data divide on Afghanistan between the U.S. platform, has international stakeholders military command and civil-commander from various countries. Under European in chief, and within the U.S. government law, personal data cannot be transferred itself.21 The military commander of the to other countries unless that country’s U.S. troops in Afghanistan, General privacy protections are perceived as McChrystal, had proposed a fully fledged adequate.15 The Austrian and German counterinsurgency (CoIn) strategy with governments, for example, favor stringent the rise of U.S. forces in Afghanistan by privacy protections because their citizens 40,000 troops.22 President Obama limited still remember the practices of the Nazis the rise of military forces to 30,000 troops and Stasi, who used personal information and wanted this to be published as an to destroy people’s lives. The Europeans transition effort to get out of Afghanistan mistrusted the American intrusion into with the strategy language “target, train European citizens’ affairs. In 2010 the and transfer.”23 Vice-President Biden’s European Parliament stopped the Swift idea consisted of a more moderate rise program.16 of troops than Obama proposed, and the deployment of police forces to train The Runaway General - Uncovering a Afghan police officers.24 U.S. Military Policy Divide The Threat to Liberty Comes From On June 22, 2010 Michael Hastings Within – Misled Petitions for Media published “The Runaway General” in Secrecy Rolling Stone. In his article Hastings bluntly reported on the U.S. troops’ Some protagonists of the public debate attitude that embraced a “disdain for in the aftermath of the publication of authority,” and came to Afghanistan The Runaway General argued, that the “halfway around the world to fight,” to article should not have been published “… drop a f…… bomb on this place.”17 because it increased the reputation 18 The publication of the article shamed19 damage for the U.S. government and the the attitude of American troops and put American armed forces in Afghanistan. pressure on the U.S. military command The U.S. Founding Fathers warned that for the betterment of actions and the the greatest threat to liberty comes from mindset of U.S. troops that had already within the society, under the advances severely damaged the reputation of of misled petitions for secrecy.25 In this American forces in the Arab world understanding I argue that to publish since Abu Ghraib in Iraq in 2004.20 The Hastings’s article was in the public publication of The Runaway General interest because if it had not been also led to the demission of the military published it would have exacerbated not

76 VOLUME 18 only America’s reputation damage, but consider the political jokes of Jay Leno also the failure of the U.S. securitization good information and do not search efforts in the Middle East. General for information in traditional media.34 McChrystal’s CoIn strategy, with the With The Runaway General, Hastings significant rise of troop numbers, did not seemed to be a chip off the old block: the sustainably curb Taliban terrorism, and author strings together myriad politically put the lives of many at stake.26 Publishing incorrect quotes, pubescent gestures and the article put public pressure on the U.S. the stereotyped lingo of junior military military and civil commands to rethink officers to provoke the feelings of the their Afghanistan policy, and to change readers of Rolling Stone, to make them military personnel and to try to improve participate in the story.35 Hastings troop attitudes in Afghanistan in order emulates the language of the interviewed to rescue America’s securitization and soldiers in his text bridges between the Soft Power efforts in the Middle East.27 quotes. By using the prejudgemental and In this situation it was a democratic duty biased language of McChrystal’s aides’ of the media to put the finger on the also in his own text passages the author shortcomings of U.S. operations in the blurs the lines between the position of Middle East, disseminating important the reporter and the protagonists of the information that aimed at warding off story. Besides, a good article embeds a further reputation damages for America personal story in a clear broader picture.36 and to prevent a U.S. securitization Although Hastings’s colorful descriptions fiasco.28 29 30 31 Unfortunately, the author of the conversations illustrate well the of this article achieved these goals by characters of his interview partners, the neglecting an important ethical rule in author fails to offer a clearer picture of journalism and poor journalistic writing the possible policies for Afghanistan and standards. its populace. Last, but not least, Hastings broke one of the principle journalistic Breaking Journalistic Rules – Press- rules, which prohibits reporting on Military Relations and The Chilling conversations that are declared off the Effect record.37 Following the old Roman question “Quis custodiet ipsos custodes? The article succumbs to the habits of the – Who shall guard the guards?”, it would glamour magazine Rolling Stone that is have been the responsibility of Eric prone to framing hard political facts as Bates, the editor of The Rolling Stones, entertainment in its few political reports. to make Hastings aware of these flaws Rolling Stone’s infotainment approach in his article and to re-edit his story tends to be more in the magazine’s own before publication.38 Hasting’s breach of commercial interest than a service for the off-the-record rule had implications the reader and sometimes rather peddles for the press-military relations after The news.32 33 Rolling Stone’s approach to Runaway General had been published. journalism also might attract readers that

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In the aftermath of the publication of the commanded McChrystal to Washington Rolling Stones article, relations between for a personal meeting in which the military and the press soured because McChrystal resigned from his command of a loss of trust in the ways media of the Afghanistan troops. One day after, reported on U.S. armed forces.39 U.S. on June 23, 2010, President Obama secretary of defense Robert Gates, for named General Petraeus as the new example, grew concerned about a too commander in Afghanistan. Petraeus’s lax and flat-out sloppy engagement of nomination found widespread support military officials with the press. On July on Capitol Hill. The new Afghanistan 2, 2010, he issued a Pentagon directive military commander of the NATO troops outlining how the military should and established good relations with leaders in should not interact with the media. On Afghanistan and Pakistan.43 Petraeus had the other side of the Rubicon, reporters also a better perception of the resonance covering the military voiced concern that of what he said and its effects on public the new Pentagon guidelines will have opinion and the government, and was a chilling effect on access to military widely credited with creating the type officials and information, which means of CoIn strategy that Obama said would that the public will end up getting less win the war in Afghanistan.44 Which information than it needs build its own effect did the article on the Afghanistan opinion about the operations of US policy have on the U.S. government? troops.40 How did the White House react on The Runaway General? Directly after the change of military command, the White House’s policy on Fatal Media Affinities – A Magazine’s America’s engagement in Afghanistan and Story That Ends a General’s Career Pakistan did not change significantly.45 46 In his first reactions in the public after President Obama had already had some the demise of McChrystal, president experience with McChrystal’s affinity to Obama emphasized that this “is a change wear his heart on his sleeve.41 In 2009, in personnel, but it is not a change in for example, McChrystal had publicly policy.”47 The lawmakers on Capitol lobbied for more troops for Afghanistan Hill welcomed this statement.48 Since at a speech given in London.42 Then Obama’s drawdown speech in 2011, on June 22, 2010, Hastings’s article however, U.S. troops in Afghanistan have was published. Obama was confronted continuously been reduced, with the aim with the bitter fact that McChrystal’s of fulfilling one of President Obama’s continued policy suggestions in the election campaign promises to get U.S. public had found a new climax, hollowing troops out of Afghanistan as soon as the president’s control of the military and possible.49 The last regular American eroding the trust among the members should have left Afghanistan by the end of the president’s war team. One day of 2014. But due to concerns that the after the article’s publication, Obama Afghan government will not be able to

78 VOLUME 18 guarantee stability in the country without offering the U.S. government the a residual force in Afghanistan, 10,800 possibility to change its secretive policies 55 56 57 U.S. troops still remain in Afghanistan.50 and programs. In both cases the The U.S. military forces will stay in the influence of journalism on public policy country until a new NATO support can be described with the agenda setting mission can guarantee that Afghanistan power of media: When policies of the does not suffer a similar military collapse government are not able to clearly shape as Iraq.51 the public opinion, media reports are able to shape the (re)actions of the U.S. First and Second Movers – When government.58 Hastings’s article led to Media Puts a Negative Spin on The the demotion of General McChrystal Government and a change of attitude of U.S. troops in Afghanistan, which were a prerequisite The months before Hastings’s article to start to restore America’s Soft Power; appeared were perceivably characterized to rebuild trust toward the United States by a governmental uncertainty on the in the Middle East.59 Similarly the public policy for Afghanistan. As I have already debate after Lichtball’s and Risen’s report illustrated above, the media coverage on the U.S. government’s surveillance before and after Hastings’s article on activities led to modifications in the the controversies between Obama Swift program. After a new vote of the and McChrystal, which McChrystal European Parliament, the Swift program - deliberately or not - took to the stage was restarted as the Terrorist Finance of the international media, eventually Tracking Program (TFTP). Its scope of drove the agenda of the White House.52 data has been reduced, and according to And when press puts a strong negative the French counterterrorism judge Jean- spin on news, the government has to Louis Burguière, the TFTP now complies react promptly and convincingly, or with civil liberties protections rules.60 public support erodes, which then allows All things considered, it becomes clear almost no time for contemplation for that mounting governmental pressure journalists and governments, which on journalists to refrain from reporting explains the quick and reaction of the on surveillance and military activities president in his decision to find a new is more harmful to our society and our military commander for the U.S. troops democratic values than dauntless media in Afghanistan.53 54 coverage.

The two articles of Lichtball, Rosen, Gerd Gensbichler is from Salzburg, and Hastings brought stories out of the Austria, and has lived in Austria, darkness and into the light, held the U.S. Italy, Spain and the U.S., working as government accountable and provided a teacher, university lecturer, and in space for public debate on the U.S. media. Gerd graduated from SAIS in surveillance and military engagements, Washington DC in May of 2014.

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Notes tack. 10. National Commission on Terrorist Attacks 1. Lichtblau, Eric, and James Risen. “Bank Upon the United States, 2004. http://ww- Data Is Sifted by U.S. in Secret to Block w.9-11commission.gov/report/911Report_ Terror.” The New York Times, June 23, Ch11.htm. 2006, sec. Washington. http://www.nytimes. 11. Giraldi, Philip. “Deep Background.” The com/2006/06/23/washington/23intel.html. American Conservative. Accessed February 2. The press is “a watchdog, ... and a citizen’s 20, 2014. http://www.theamericanconserva- guide to action“. Like in the times of the tive.com/articles/deep-background/. civil rights movement, or the McClure Mag- 12. Calame, Byron. “Secrecy, Security, the Pres- azines at the beginning of the 19th century ident and the Press.” The New York Times, that forced legal standards against corruption July 2, 2006, sec. Opinion. http://www.ny- into being. Bennett, W. Lance, William Ser- times.com/2006/07/02/opinion/02pub-ed. rin, Geneva Overholser, and Kathleen Hall html. Jamieson. The Watchdog Role; in: The Press. 13. Cook, Timothy E. The Function of the Press Oxford, New York: Oxford University Press, in a Democracy; in: The Press. Edited by Ge- 2005. neva Overholser and Kathleen Hall Jamieson. 3. Lippmann, Walter. “Public Opinion.” Lon- Oxford, New York: Oxford University Press, don, New York: Harcourt, Brace and Com- 2005. pany, 1922. 14. The right against undue searches by the 4. New York Times Co v United States (Su- government is enshrined by the Fourth preme Court 1971). Amendment to the US Constitution. “Fourth 5. Risen, James, and Eric Lichtblau. “Bush Lets Amendment.” Accessed February 22, 2014. U.S. Spy on Callers Without Courts,” Decem- http://www.law.cornell.edu/constitution/ ber 16, 2005. www.ntimes.com/2005/12/16/ fourth_amendment. politics/16programm.html?pagewant- 15. Bilefsky, Dan. “Data Transfer Broke Rules, ed=all&_r=0 Report Says.” The New York Times, Sep- 6. Entman, Robert M. The Nature and Sourc- tember 28, 2006, sec. International / Europe. es of News; in: The Press. Edited by Gene- http://www.nytimes.com/2006/09/28/world/ va Overholser and Kathleen Hall Jamieson. europe/28cnd-swift.html. Oxford, New York: Oxford University Press2, 16. Lichtblau, Eric. “WikiLeaks Archive - Eu- 2005. rope Wary of U.S. Bank Monitors.” The 7. “Continuation of the National Emer- New York Times, December 5, 2010, sec. gency with Respect to Certain Ter- World / Middle East. http://www.ny- rorist Attacks,” 2007. http://georgew- times.com/2010/12/06/world/middlee- bush-whitehouse.archives.gov/news/ ast/06wikileaks-swift.html. releases/2007/09/20070912-2.html. 17. “The Runaway General.” Rolling Stone. Ac- 8. Risen and Lichtblau, “Bush Lets U.S. Spy on cessed March 20, 2014. http://www.rolling- Callers Without Courts.” stone.com/politics/news/the-runaway-gen- 9. Michael Hayden narrated an anecdote at eral-20100622page=6, 4. the Cybersecurity Students Challenge 2013 18. Ibid., 10. on how he had to explain and defend the 19. Hendler, Clint. “What We Didn’t Know Has NSA’s activities to his CIA counterpart when Hurt Us.” Columbia Journalism Review, Feb- he became director of the NSA. “Inaugural ruary 2009. Student Competition Features Day-after 20. Schmitt, Eric, and Carolyn Marshall. “In Responses to Major Cyber Attack.” Atlan- Secret Unit’s ‘Black Room,’ a Grim Por- tic Council. Accessed February 20, 2014. trait of U.S. Abuse.” The New York Times, http://www.atlanticcouncil.org/events/past- March 19, 2006, sec. /. http://www.nytimes. events/inaugural-student-competition-fea- com/2006/03/19/international/middlee- tures-dayafter-responses-to-major-cyber-at- ast/19abuse.html.

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21. A classical Clausewitz versus Jomini route of iban fighters. Mullen, Chairman of the Joint discussion that has determined debates with- Chefs of Staff, general Petraeus and general in Western governments for the last 200 years. McChrystal were locked into the counterin- Most military officers do not sympathize surgency policy with 40,000 more troops. Ac- with Karl von Clausewitz’s (1780-1831), but cording to Obama, the Generals should not Antoine-Henri Jomini’s (1779-1869) notion use the counterinsurgency language anymore. of war. Jomini’s maxims many times provided Pentagon officials wanted to tie up again on the military arguments it needed against the what had been agreed with the president: subordination of military authority to high- 40,000 instead of 30,000 troops. Colonel er political authority. This is what Clause- Tien of the NSC recommended the Presi- witz’s writing did not do: “War [is] merely dent to fire Petraeus presenting the argument the continuation of policy by other means.” that the military command proposes 40,000 Here, the military takes its direction from troops, but will be gone when Obama faces the state. Cf. in this context the reaction on re-election; and retired General Colin Powell the Rolling Stone story of House Appropri- reminded Obama that Obama is the com- ations Chairman David Obey (Democrats): mander in chief. Woodward, Bob. Obama’s “Since General MacArthur, General LeMay, Wars. New York: Simon & Schuster, 2010. there is a list of reckless generals who did not 24. Bob Woodward’s book Obama’s Wars presents understand that their role is to implement in chapters 19 and 20 a good oversight on the policy, not design it.” Davis, “Reactions to Afghanistan policy competition between the the Rolling Stone Report on General Stanley different personalities in Obama’s adminis- McChrystal”; Hench, Thomas J. “Clausewitz tration: Richard Holbrooke, then Special En- Vs. Jomini: Putting ‘Strategy’ Into Historical voy for Afghanistan and Pakistan, described a Context.” Academy of Managment Annu- Freudian giveaway of Secretary of State Hil- al Meeting Proceedings, 2009, 1–6. Hench, lary Clinton, which, according to Holbrooke, “Clausewitz Vs. Jomini: Putting ‘Strate- pointed to a still existing rivalry between Sec- gy’ Into Historical Context”; Davis, Susan. retary Clinton and Obama, and to the fact, “Reactions to the Rolling Stone Report on that Clinton felt detached from the policy General Stanley McChrystal.” WSJ Blogs process. General Lute proposed a counterter- - Washington Wire, June 22, 2010. http:// rorism plus (CT plus) strategy. Ibid.” blogs.wsj.com/washwire/2010/06/22/reac- 25. Gup, Ted. Nation of Secrets, The Threat to tions-to-gen-stanley-mcchrystal/. Democracy and The American Way of Life, 22. After General McChrystal assumed the com- The Growth of Secrecy in America. New mand of NATO operations in Afghanistan, York: Doubleday, 2007. the largest offensive operation and the dead- 26. Davis, “Reactions to the Rolling Stone Re- liest combat month for NATO troops in Af- port on General Stanley McChrystal” ghanistan started in June 2009. Furthermore: 27. According to Nye, the power of states under- Sanchez, Rick. “Scott Ritter, Former Chief lies a change in our days. In the information of UN Weapons Inspectors in Iraq: General age is important to win the hearts of people. McChrystal Should Be Fired for Insubordi- The latter is possible through the second face nation,” November 3, 2009. http://cnn.ch/ of power, through values, that are admired by TRANSCRIPTS/0911/03/cnr.07.html. other countries. Soft power rests on the ability 23. Chapters 18, 22, 25, 26 and 27 of Bob Wood- to shape preferences of others. Nye, Joseph S. ward’s book Obama’s Wars describe further in- Soft Power: The Means to Success in World ternal differences between the supreme mil- Politics. New York: Public Affairs, 2004. itary and civil-command: Obama’s national 28. There is myriad of examples where govern- security advisor Jones demanded a civilian/ mental officials asked media outlets not to good governance approach, especially at the publish information for the sake of public border areas of Afghanistan and Pakistan, security and public interest. Like in spring which were considered as safe havens for Tal- 2004, when Pentagon officials appealed to

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CBS Nightly News not to air its story on the neither. “McChrystal Story Now on Rolling prisoner abuse at Abu Ghraib; or in October Stone Site.” WSJ Blogs - Washington Wire, 2005, when local authorities asked WNBC June 22, 2010. http://blogs.wsj.com/wash- TV not to air immediately information on an wire/2010/06/22/mcchrystal-story-now- attack warnings on New York’s subway sys- on-rolling-stone-site/.; “Sources”; “BBC tem. Pentagon and New York City munici- - Newsnight: Mark Urban: What’s behind pality officials feared an inflammation of the McChrystal Obama ‘Rolling Stone’ Row?.” emotions of Iraqi people and public hysteria Accessed March 18, 2014. http://www.bbc. in New York City’s public life. Keeping Abu co.uk/blogs/newsnight/markurban/2010/06/ Ghraib secret and not to air terrorist threats general_stanley_mcchrystal_has.html. would have made the press complicit in an 38. Gup, Nation of Secrets, The Threat to Democracy abrogation of human rights and would have and The American Way of Life, The Growth of taken citizen the ability to make its own de- Secrecy in America.The Growth of Secrecy in cisions in order to protect themselves from America. imminent security threats. Gup, Nation of Se- 39. “McChrystal Takes Blame for Rolling Stone crets, The Threat to Democracy and The American Article.” Publicopiniononline.com. Accessed Way of Life, The Growth of Secrecy in America. March 19, 2014. http://www.publicopinion- 29. Ibid. online.com/nationalnews/ci_22317383/mc- 30. Cook, The Function of the Press in a Democracy; chrystal-takes-blame-rolling-stone-article. in: The Press. 40. “Military-Media Relationship Examined 31. Gup, Nation of Secrets, The Threat to Democracy After McChrystal’s Ouster | Video | PBS and The American Way of Life, The Growth of NewsHour | PBS.” PBS NewsHour. Ac- Secrecy in America. cessed March 19, 2014. http://www.pbs.org/ 32. Entman, The Nature and Sources of News; in: newshour/bb/media-july-dec10-mediamili- The Press. tary_07-08/. 33. Leigh, Robert D. A Free and Responsible 41. Washington, by Alex Spillius in, “White Press; A General Report on Mass Commu- House Angry at General Stanley Mc- nication: Newspaper, Radio, Motion Picture, Chrystal Speech on Afghanistan.” Tele- Magazines, and Books. Chicago: University graph.co.uk, 17:58, sec. worldnews. http:// of Chicago Press, 1974. www.telegraph.co.uk/news/worldnews/ 34. Seib, Philip. “Politics of the Fourth Estate. barackobama/6259582/White-House-an- The Interplay of Media and Politics in For- gry-at-General-Stanley-McChrys- eign Policy.” Harvard International Review, tal-speech-on-Afghanistan.html. no. Why Is Foreign Policy So Hard? (Fall 42. In chapter 32 of his book Obama’s Wars 2000). Woodward described the messiness and mis- 35. Lippmann, “Public Opinion.” trust that had been building up between the 36. Gutman, Roy. The Elements of A Good White House and the military. According to Newspaper Story. Mr Roy Gutman’s visit in Woodward this rift was a consequence of the class, March 3, 2014. prolonged Afghanistan/Pakistan strategy re- 37. According to the editor of Rolling Stone, view by president Obama before McChrys- Eric Bates, McChrystal’s staff authorized tal’s speech in London in 2009. Woodward, the article prior to its release. Bates said he Obama’s Wars. respected the boundaries by taking out some 43. “Afghan Shift: McChrystal Out, Petraeus anecdotes and quotes from McChrystal be- In.” NPR.org. Accessed March 19, 2014. cause they were off the record. According to http://www.npr.org/templates/story/story. McChrystal’s staff, however, the quotes that php?storyId=128029497. appeared in the article were made in “off-the- 44. Ibid. record” settings; Hastings misrepresented the 45. By then, Obama still had in mind his 2008 communication, and Rolling Stone did not elections campaign promise to withdraw return a call seeking comment for this story, troops from Afghanistan in July 2011; and

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state department officials proposed a swift New York: Three Rivers Press, 2007. deal with the Taliban, and to find a better 58. Lippmann, “Public Opinion.” plan to deal with the difficult relation with 59. “Afghan Shift.” Afghan president Karzai who undermined 60. Schrank, Leonard H., and Juan C. Zarate. American efforts in the region. “Afghanistan, “Data Mining, Without Big Brother.” The After McChrystal.” New York Times, July 2, 2013, sec. Opinion. 46. Ave, 1775 Massachusetts, NW, Washington, http://www.nytimes.com/2013/07/03/opin- and Dc 20036. “U.S. Policy toward Afghan- ion/data-mining-without-big-brother.html. istan—Suddenly in Serious Trouble.” The Brookings Institution. Accessed March 18, Title Page Photo Credit 2014. http://www.brookings.edu/blogs/up- front/posts/2012/02/28-afghanistan-kalb. Watching by Michael Wyszomierski - https:// Ave et al., “U.S. Policy toward Afghanistan— www.flickr.com/photos/wysz/10336800/ Suddenly in Serious Trouble.” 47. “Afghan Shift.” 48. Ibid. 49. Landler and Cooper, “Obama Will Speed Pullout From War in Afghanistan.” 50. “CFR Media Call on U.S. Policy in Afghani- stan Post 2014 with Seth G. Jones.” 51. Ryan, “Hagel Says U.S. to Leave up to 1,000 Extra Troops in Afghanistan.” 52. Robinson, The CNN Effect: The Myth of News, Foreign Policy and Intervention. 53. Seib, “Politics of the Fourth Estate. The Inter- play of Media and Politics in Foreign Policy.” 54. The Afghan president Karzai respected Pe- traeus. Other personnel decisions, however, were still pending. Ambassador Eikenberry, for example, lacked of enthusiasm for the CoIn strategy, and was barely on speaking terms with Afghan president Karzai. Richard Holbrooke, responsible for the civilian and political aspects, also had troubles with getting along with Karzai and Pakistani leaders. “Afghanistan, After McChrystal”; Goldman and Gienger, Goldman, Julianna, and Vio- la Gienger. “Obama May Gain `Breathing Room’ on Afghan Strategy.” Bloomberg, June 24, 2010. http://www.bloomberg.com/ news/2010-06-22/mcchrystal-offers-res- ignation-after-disparaging-remarks-on-afghanistan-war.html. 55. Seib, “Politics of the Fourth Estate. The Inter- play of Media and Politics in Foreign Policy.” 56. Entman, The Nature and Sources of News; in: The Press. 57. Kovach, Bill, and Tom Rosenstiel. The El- ements of Journalism, What Newspeople Should Know and the Public Should Expect.

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Gucci & LVMH: A Hostile Takeover Battle Across the Atlantic Samine Joudat

More than a decade later, the vicious battle between Gucci and Bernard Arnault’s Louis Vuitton Moët Hennessy remains an important case study in the failure of smart men to make measured choices. Why did such wise men make multiple mistakes causing negotiations to disintegrate? The work of the Harvard Negotiation Project and Robert Axelrod help elucidate the areas in which the characters involved could have acted differently. This case also highlights the new interconnectedness of global financial and corporate markets. Today, this case is cited as one of the most important in the history of fashion.

“As one would expect of a modern corporate conflict, the action in the battle for Gucci has taken place all over the world. If the protagonists have not been closeted with their lawyers in Amsterdam; they have been courting the fund managers who call the shots at Gucci’s institutional investors in London and New York; or making clandestine visits to Mr. Pinault’s opulent Parisian townhouse.” – Alice Rawsthorn, Financial Times, April 1999

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Introduction What led such wise men to fall prey to multiple mistakes and ultimately to the The acquisitive world of high luxury disintegration of negotiations? The often identifies itself through the lure answer lies within Robert Axelrod’s of its mystery, selling an aesthetic that expansion of the concept behind bounded appears elusive and transcendent of the rationality – the notion that humans are fray. The brutal battle between Louis constrained by the finite information and Vuitton Moët Hennessy (LVMH), Gucci time they possess, and also by their often Group, and Pinault-Printemps-Redoute irrational human emotions. Instances of (PPR) in the late 1990s, however, was missed information as well as hubris, greed, anything but above the fray. Sprayed and obstinacy were prevalent throughout out on tabloids across two continents, this case, compelling each side to defect the battle for control of Gucci became when they should have cooperated, and to a highly publicized saga between larger punish when they should have displayed than life personalities. contrition. Building on this concept, the Harvard Negotiation Project’s work on The story plays out as a failure of ideologically rigid positional bargaining smart men to make prudent decisions and the idea of a best alternative to in negotiation. Ostensibly about the a negotiated agreement (BATNA) is protection of the company he and also effective in helping explain why creative director Tom Ford had rescued an initially passive1 takeover attempt from the brink of collapse, Domenico De fragmented into a hostile showdown Sole adopted a maximalist position that across courtroom benches. The Gucci escalated the negotiations to their bitter case was conducted through a sub- extreme. Perhaps lost in the fight were optimal strategy, as close connections the principal interests of the company and power dynamics caused both sides to itself. Across the aisle, ruthlessly make irrational choices. successful French businessman Bernard Arnault, both lauded and feared for his The fascinating spectacle of the case aside, corporate acquisitions which turned the battle for Gucci also had two vital LVMH into the world’s biggest luxury implications. The first, and perhaps most conglomerate, adopted an equally rigid important, was the larger implication for position that led to his group ultimately corporate takeovers amid the backdrop losing out on Gucci. And finally, PPR of a newly unified Europe. An Italian chairman Francois Pinault, a keen company traded on the Amsterdam and businessman and a French powerhouse of New York stock exchange, represented by his own, allowed the struggle for Gucci American firms, run by an American and to devolve into a visceral power play an American-Italian, and vied for by two between himself and Arnault – a play powerful Frenchmen, the Gucci case was which he ultimately won, but perhaps at one of the first to reveal the realities of too high of a cost. a takeover attempt in a truly globalized

85 SAIS EUROPE JOURNAL OF GLOBAL AFFAIRS international context. This case illustrates his relationship with the Gucci family as the emerging confusion, complexity, and his clients.3 De Sole habitually butted also advantages of this new cross-border heads with Maurizio Gucci, who had reality that has spawned numerous case inherited the largest share in the company studies in business and law schools around his grandfather had established. A the globe. The second implication is in decade later, De Sole assumed the role relation to negotiation theory. An absence of chief operating officer in the wake of of cooperation in this story led both sides Maurizio’s inauspicious exit. A year after to an avoidable escalation. In line with that, De Sole was tapped to be president the claims of the Harvard Negotiation and chief executive officer as the company Project and the work of Robert Axelrod, prepared to go public under the Bahraini the case underlines the importance of investment group Investcorp.4 interest-based negotiation that separates principles from the problem as well as De Sole inherited a company mired the idea of a generous and cooperative in poor management, ostentatious iteration of game theory known as the overspending, and family feuding that Tit-for-Tat strategy (TFT). had ultimately driven the company to the verge of bankruptcy in 1993. A luxury This case study seeks to address the failure brand founded in Tuscany in 1923, Gucci of the actors involved in the negotiations initially burgeoned on the craftsmanship over Gucci and assess the broader of its supple leather items assembled by implications on European corporate artisan hands in Florence. By the mid takeovers and negotiation theory. It is 1980s, that storied heritage had diffused divided into five sections. Following into mediocrity as Maurizio and the this introduction, the principle actors rest of the Gucci family had sought to and timeline that formed the case will be generate more profit by mass-producing discussed. A section discussing the causal lower quality goods and licensing image instrument will follow. The implications rights to low quality manufacturers and section will then expand on the broader retailers.5 Investcorp, having already consequences of the case study. Finally, acquired half of the company’s shares, the conclusion will briefly summarize the ultimately wrested full control by buying story. out Maurizio in 1993. Two years later, a man contracted by his indignant ex- The Story: Actors and Timeline wife, Patrizia, gunned Maurizio down execution style in Milan.6 Italian born Domenico De Sole initially made his name upon graduation from Investcorp’s subsequent investment into Harvard Law School at the Washington De Sole paid off immediately. As chief D.C. firm of Patton, Boggs, & Blow.2 executive, De Sole promoted the young In 1984 he became president of Gucci and ambitious Tom Ford to creative America, lured to the position through director and vested in him full creative

86 VOLUME 18 control of the brand. From this vantage fashion, however, veiled its susceptibility point, the Texas native and New York to a takeover. Investcorp’s initial public Parsons School of Design graduate in offering had structured the company to architecture gave new life to the company. be assumed by a major stakeholder.13 Ford immediately reduced licensing rights During the period from the initial to Gucci-operated doors and high-end floating of its stock to the eventual retailers. He reinvented the label, evoking takeover battle, Gucci operated as the the sexy-chic aesthetic that defined the only Italian company ever without a brand in the 1950s and 60s.7 Slim and principal shareholder to which it was dark silhouettes, risqué marketing, and obliged to answer.14 In 1996, De Sole, sleek packaging reinvigorated Gucci and exploring options on how to defend galvanized a once decreasing customer against a potential takeover, concocted base.8 De Sole, for his part, retook control an American style poison pill dubbed of distribution and image rights for the Project Massimo – which when triggered brand. He traveled to meet disaffected in the instance of a takeover attempt Florentine artisans in person to rekindle would flood new company shares into the special relationship that once the market and dilute existing shares, produced Gucci’s renowned quality.9 making a potential majority takeover The ensuing result was a more efficient more expensive.15 Shareholders would production line, a more transparent ultimately strike down the proposal, but and conscious management team, and a the failed effort underscored Gucci’s generally more well run Gucci. vulnerability to a takeover. A vibrant and growing company with a bright future, it By 1995, when Investcorp decided to take was a matter of time before bidders came the company public, Gucci’s earnings had knocking. It is believed that during this surged from a net loss of $22 million two period Bernard Arnault first began to years prior to a staggering $1.2 billion acquire Gucci shares.16 valuation.10 To put the turnaround in an ironic perspective, Bernard Arnault Arnault was the second richest man in who would eventually launch an almost France, having first acquired his wealth $9 billion bid for the company in 1999, by virtue of his family’s real estate empire, refused to buy it for $350 million in and then by slowly building LVMH into 1994. By the end of ‘94, the Compagnie a luxury conglomerate. He assumed full Financière Richemont luxury group control of the group after a separate battle could not meet Investcorp’s $950 million in the late 1980s over Louis Vuitton and price tag, which was offered before the Moët champagne.17 At 35 he bought group decided to go public.11 The figure Boussac, a French textile company that below displays Gucci’s incredible growth included Christian Dior. He went on in sales in the subsequent years from 1994 to rattle France’s otherwise traditional (limited to data up to 2005).12 fashion industry, naming young designers Gucci’s prosperity in the world of John Galliano at Dior, Alexander

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McQueen at Givenchy, Marc Jacobs surprised and perturbed, responded that at Louis Vuitton, and Michael Kors at he, unlike Bertelli, was the C.E.O of a Céline. At first hated and criticized public company and had shareholders to for his ‘American’ style of aggressive answer to.20 corporate raiding and ruthless decision- making, Arnault eventually won the At this time Morgan Stanley advisor to begrudging respect of the French public Gucci Michael Zaoui conveyed his belief for his continued success and LVMH’s to De Sole that they should find a way to continued growth.18 turn Bertelli into an ally, instead of simply rejecting his offer. De Sole objected, Before Arnault’s eventual move on believing the act of reaching out would Gucci, however, it was Prada’s Patrizio portend weakness. De Sole’s nearsighted Bertelli that struck. In June 1998, failure to somehow turn Bertelli into an Bertelli emerged with a surprising 9.5% ally would come back to haunt him. “I purchase of Gucci shares.19 Unexpected wish I had,” De Sole would later say. “In and sudden, this materialized the Gucci life you make a lot of mistakes.”21 team’s worst fears. De Sole met with On 6 January 1999, it publicly emerged Bertelli, who contended that the two that Arnault and LVMH had acquired companies should work together and a 5% stock in Gucci. Arnault was forge a dynamic partnership. De Sole, adamant that it was a passive stake

88 VOLUME 18 and he had every intention of letting board. Arnault promised to consider Gucci remain independent. De Sole the offer, but on 8 February he rejected and Gucci managers, however, knew it outright. Arnault would not concede, this was the moment they had dreaded operating under the assumption that he most. As they deliberated on their had much more leverage than Gucci; options, they were stunned again as there was seemingly no way they could LVMH gobbled Prada’s shares and put prevent his creeping control of the itself at almost 15% ownership.22 As De company.27 Sole began a desperate and futile search for a white-knight investor to save the De Sole and his team at Morgan Stanley company from Arnault’s grasp (9 firms tried one last time to convince Arnault to denied his proposal), Arnault increased buy the company outright or come to a LVMH’s stake to 34.4% by 26 January.23 standstill agreement on a board member Meanwhile LVMH refused to make an swap deal. The price tag was set at $85 outright offer for Gucci,24 something a share – a steep price but still fair given required by French but not American Gucci’s strength and long term outlook financial laws upon purchasing this under Ford. After vacillating back and percentage of a company’s shares.25 forth, Arnault refused the offer and also backed out of any potential standstill Defenseless and vulnerable, yet fully agreement, pushing De Sole and Gucci to committed to a war of attrition, De their emotional limit.28 The next day, on Sole refused to give in to Arnault’s 18 February, Gucci employed a creative request for seats on Gucci’s board of and perhaps controversial last resort directors. Running out of options option – an employee stock ownership though, he finally agreed to meet Arnault plan (ESOP) they had kept in their back face to face. On the evening of 22 pocket. The ESOP would cost Gucci January, they met for the first time in the no money or effort, as it was a Trust set Paris offices of Morgan Stanley. Arnault up for company employees. Under it, maintained that his intentions were employees would receive a zero interest friendly and that he wanted Gucci to loan from the company to buy newly operate independently under LVMH issued shares. The Trust was granted control. De Sole maintained that Arnault the right to purchase up to 37 million should stop the creeping takeover or newly issued shares, of which it instantly make a full tender offer.26 The 70-minute bought over 20 million.29 The Trust meeting was cordial, but the two sides diluted every stockholder’s share (but not seemed as entrenched in their positions earnings, as the shares did not pay out as ever. dividends). The Trust suddenly owned Five nights later De Sole returned with 25.6% of the company, and LVMH was a proposal. LVMH reduces its stake diluted to 26%.30 to 20% and allows Gucci to operate independently, and in return Arnault Shocked, incensed, and scrambling, would be granted two seats on the LVMH immediately cried foul and filed

89 SAIS EUROPE JOURNAL OF GLOBAL AFFAIRS a lawsuit to halt the maneuver they saw was that Ford and De Sole stay on as a declaration of war.31 What Pierre and not only run Gucci, but head a Godé, Arnault’s confidant and lawyer, new multiband conglomerate to rival and the rest of LVMH’s team had missed LVMH.34 The development was nothing was a huge loophole. They believed that short of stunning. Gucci seemed to go in accordance with New York Stock from losing control of the company to Exchange rules, no company could issue becoming part of a powerful group run new shares that amounted to more than by De Sole and Ford in a matter of weeks. 20 percent of its capital. However, they overlooked the absence of such a law in Predictably LVMH refused to go down Amsterdam, where Gucci was listed and without a fight. They sued to stop the whose laws they were playing by in this takeover. Meanwhile Arnault, whose situation.32 In the ensuing court hearings, control was reduced to a mere 20.7%, Gucci’s employees, represented by the simultaneously launched an audacious infamous CGIL labor union, showed up $8.7 billion ($85/share) bid to buy the in support of De Sole and Gucci.33 The company outright. Gucci refused and Dutch court decided to freeze the ESOP, asked for $88 per share, at which LVMH but it also froze LVMH’s voting rights, balked.35 After a tiresome and publicized granting Gucci invaluable time and a few weeks in court during which neither marginal moral victory. side hid its disdain for the other, the Amsterdam court upheld Pinault and The stroke of improvised genius by PPR’s purchase of Gucci’s shares (See Gucci’s Dutch and American lawyers chart below).36 Although a clear victory and the glaring miss by LVMH granted for PPR and Gucci, LVMH still owned a Gucci precious momentum. Their fifth of the company and promised to be a valiant fight caught the eye of France’s nuisance as a minority stakeholder. After richest man, PPR chairman Francois another two years of bitter disagreements Pinault. Pinault’s group was formalizing and an arduous back and forth, the three a strategy to break into the luxury parties came to a termination agreement industry, and they believed Gucci could on 10 September 2001. It entailed PPR be their opportunity. After multiple, would buying out all of LVMH’s shares secret meetings between Pinault and De over three years. An initial $812 million Sole and Tom Ford, as well as between would acquire 8.6 million shares at $94 C.F.O Robert Singer and top figures at per share. PPR would buy the remaining Pinault’s holding company Artemis, a minority shares, including LVMH’s last tentative deal was struck. PPR would 12%, in March of 2004 at a set price buy 40% of Gucci and simultaneously of $101.50.37 Gucci agreed to pay a buy Sanofi Beauté (ironically Arnault premium dividend to all shareholders had passed up on buying them months except for PPR. In turn LVMH, which earlier), a group within which Yves Saint actually made a hefty profit from its Laurent operated. Pinault’s condition shares, agreed to drop all legal charges

90 VOLUME 18 against PPR and Gucci.38 two were the richest men in France and already competitors across multiple Causal Mechanism: Entrenched sectors. These factors, irrational and facile Emotions and Constrained Information as they were, created an unbridgeable gap between the parties that made The dragged out legal battle between cooperation impossible. The gap was Gucci and LVMH, which became known only exacerbated by the complexity as the ‘Battle of the Handbags’ in the of the globalized financial context in media, never should have escalated to such which the story played out – with both a bitter conclusion. Understanding the sides suffering from a lack of complete emotional attachment of each character knowledge regarding the rules by which to his position, however, makes it easier they were playing. to understand why maximalist attitudes prevailed. Domenico De Sole and Tom The Harvard Negotiation Project’s (HNP) Ford’s understandable connection to the work on negotiation theory is helpful for company they rescued implicated that understanding why things deteriorated they were never going to consider letting so rapidly. In “Getting to Yes,” Harvard it go without a struggle. professors William Ury and Roger Fisher outline the ideological rigidity that often Bernard Arnault and his team at LVMH leads to failed negotiations. Their idea of acted in hubris, dictating terms because positional bargaining entails that when of their perceived leverage. Their negotiators lock into a struggle over set goals and intentions were always positions, they often tend to become so ambiguous and a sense of trust was never committed to that specific outcome that established. Finally, Francois Pinault and it becomes a part of their identity, leading PPR’s interjection that ostensibly saved to a zealous desire to achieve it no matter Gucci and pitted him against Arnault the consequences. It becomes more of a makes more sense considering that the contest of ego and will than of compromise

Source: Moffett, M. and Ramaswamy, K. (2002). FASHION FAUX PAS: GUCCI & LVMH. Glendale: Thunderbird School of Global Management.

91 SAIS EUROPE JOURNAL OF GLOBAL AFFAIRS and efficiency.39 The authors state, “The One of the many things Arnault missed, more you clarify your position…the more however, was that De Sole and Tom committed you become to it. The more Ford’s commitment to their company you try to convince the other side of the meant that their calculations were not impossibility of changing your opening necessarily logical or rational. This is position, the more difficult it becomes to understandable through the idea of do so. Your ego becomes identified with perceived fairness. The HNP team your position.”40 Judging by De Sole’s explains research that suggests an actor’s actions from the time he tried to concoct emotional perception of the fairness of a a poison pill until the day he announced deal will often dictate their willingness the partnership with PPR, his position to accept it, even if they have no leverage was firm and entrenched. or alternative solution.43 This was true for Gucci, who chose to defect and risk For Arnault, beyond the egoism involved greater losses instead of entering into any in his battle for Gucci and eventually sort of agreement with LVMH, who they against Pinault, it was his perceived viewed as a rival pushing them around. leverage that probably led him to overestimate his strength. Ury, Fisher, Beyond the emotional attachments that and the rest of the team at HNP define made negotiation so difficult in this case, leverage as the best alternative to a Robert Axelrod’s work on cooperation negotiated agreement (BATNA). In and bounded rationality is equally useful other words, if an actor is to defect from in understanding the mistakes made by negotiations or if they collapse, what is either side. Axelrod’s development of their outcome? Leverage or “the relative the Tit-for- Tat theory in the Prisoner’s negotiating power of two parties, depends Dilemma in the 1980s revealed a hugely primarily upon how attractive to each is effective wrinkle: initial cooperation the option of not reaching agreement.”41 followed by mirroring the other player’s Amid negotiations with De Sole, Arnault moves repeatedly (reciprocity) builds knew that his alternative to a standstill trust over time and reaps better results for agreement was to continue buying both sides. In his seminal “The Evolution shares of Gucci and increase his power of Cooperation,” Axelrod explains: without any particular impediment. His confidence based in this reality led Don’t be envious, don’t be the first to him to push Gucci around and renege defect, reciprocate both cooperation and on meetings and proposals multiple defection, and don’t be too clever… We times. He once even asked Gucci in are used to thinking about competitions almost taunting fashion what salient in which there is only one winner… But reason they had for him to consider their the world is rarely like that. In a vast proposal.42 Until Pinault and PPR came range of situations, mutual cooperation along later, Gucci had no such luxury. can be better for both sides than mutual defection. The key to doing well lies not in

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overcoming others, but in eliciting their allowed the arguably tide-turning ESOP cooperation.44 to take place. The emotional biases and information constraints that led to both It is not clear who defected first in the sides defecting and negotiations breaking Gucci case, but regardless both sides down in this case had huge implications continuously acted without cooperating, for finance and negotiation theory. leading to increasing hostility and deteriorating trust. Lack of transparency Implications was a key issue as well. Gucci always believed that Arnault simply wanted The most important implication in enough ownership of the company to the failure of Gucci and LVMH to control and hinder its growth, as Gucci cooperate was that it highlighted the new had emerged as Louis Vuitton’s main complexity of a mongrelized corporate competitor.45 Even financial analysts were financial world. A Wall Street Journal somewhat confused by Arnault’s rabid article covering the case at the time ambition to buy a company with whom reflected, “The brewing battle for Gucci his main jewel competed with in the is emblematic of the New Europe that same market.46 For its part, Gucci never is taking shape with the launch of the seriously heard Arnault out, immediately common currency and the globalization searching for defensive delay tactics until of industry: two Frenchmen squaring it could catch a break and find an escape off for control of a Dutch-based Italian route. company run by a U.S.-educated lawyer and an American designer, and advised The lack of trust was made even starker by London-based American investment by the complexity of the financial laws bankers.”49 of the case. Axelrod argues that actors in interaction are only rational up to the This case set the precedent for a host limited information and time available of mergers in the European Union and to them.47 Bounded by the constraint materialized a new globalized reality for of the information they had, both sides finance: receding barriers, international overlooked loopholes exploited by the investors, and cross-border rules. In the other. Arnault was able to exploit the lack same year Banque National de Paris (BNP) of a French law in the U.S. that requires bid $38 billion for Société Générale and a shareholder to make a tender offer on a Paribas and Olivetti bid $60 billion for company once it exceeded 34% control.48 Telecom Italia.50 Vodafone AirTouch, This allowed him to sit back and continue Mannesmann, Iberpistas, Acesa, FAG, a creeping takeover. The more blatant Fiat, and Montedison all were involved miss came from LVMH’s team, whose in similar hostile takeover attempts in the lawyers overlooked the fact that Gucci same time frame.51 Fordham Journal of was designated as a foreign company and Corporate and Financial Law reflected was subject to Dutch rules – rules that on the new reality in a 2003 entry,

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“Barriers between domestic economies are beyond the world of finance is in regards being reduced… These changes represent to negotiation theory, and the importance a movement toward a market-oriented of building trust and seeking mutual model. Specifically, European corporate gain. The failure of Gucci, LVMH, and finance is beginning to rely less on PPR to find a friendly way to resolve the concentrated stockownership; investors ordeal had adverse impacts on all three are…becoming more diverse.”52 parties. LVMH, of course, lost out on gaining the control it sought. Already As courts across Europe struggled to debt-laden PPR eventually had to pay a litigate emerging cases and manage steep price to finance its purchase of the nationalistic tendencies, the European entire company – which became more Union sought to put a regulatory costly due to the provision in the final framework in place. Amid the maze of termination agreement that mandated confusion, shareholders often took the it to buy all remaining minority shares worst hits. Donald Meltzer, head of at a set price of $101.50. This price was European mergers and acquisitions at agreed upon a day before the 9/11 attacks Credit Suisse First Boston contemplated on the Twin Towers sent the luxury in 1999, “If Gucci had conducted the goods industry into a multi-year free-fall situation as a full and fair auction for the as demand shriveled.55 stake and the accompanying governance rights, or made the transaction with Tom Ford, Domenico De Sole, and Pinault conditional on shareholder Robert Singer succeeded in saving approval, Gucci shareholders would have their company from Arnault, but their ended up with a higher value.”53 As it relationship with Pinault was not exactly stood at the time, Dutch law required a success. Ford and De Sole would neither measure. eventually leave in 2004, citing differences over creative autonomy with Pinault.56 In 2003 the European Parliament finally Meanwhile, the lack of cooperation and passed the EU Takeover Directive, the prevailing mistrust hung over the a framework designed to protect parties when again, in September 1999, shareholders and provide a semblance they engaged in another bidding war over of cross-border uniformity in dealing Fendi (LVMH won this round).57 with mergers and acquisitions. Private interests and nationalistic jostling for The implications of this case created influence meant that the Directive was huge ripples across the fashion, finance, diluted and left many issues unresolved, and law industries. Its importance still yet it was a monumental first step in echoes today as it is readily studied in better regulating cases like Gucci vs. business and law schools for its financial, LVMH.54 legal, and negotiation nuances.

The second implication of this case

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Conclusion Notes

More than a decade on from the vicious 1. ‘Passive’ depended on whom you asked. Ber- battle between Gucci and Bernard nard Arnault maintained till the end that his intentions were not aggressive. De Sole and Arnault’s Louis Vuitton Moët Hennessy, Gucci, however, perceived it as hostile from this case remains an important case the start. Nevertheless, the initial engagement study in the failure of smart men to was in no way as hostile and antagonistic as make measured choices. The work of the the way the case progressed and ultimately settled. Harvard Negotiation Project and Robert 2. Cohen, J. and Borobia, B. (2006). The Battle Axelrod help elucidate the areas in which Over Gucci Group. Singapore: INSEAD, the characters involved could have acted pp.1-23. differently to build trust and elicit mutual 3. Heller, R. (1999). Gucci’s $4 Billion Dol- cooperation. The consequences of the lar Man. Forbes Magazine. [online] Available at: http://www.forbes.com/ case, meanwhile, highlighted the new global/1999/0208/0203036a.html [Accessed interconnectedness of global financial 14 Dec. 2014]. and corporate markets. Today, luxury 4. Cohen, J. and Borobia, B. goods conglomerates, which proliferated 5. Forden, S. (2000). The House of Gucci. New York: Morrow p. 145. after the PPR-Gucci merger, cite this 6. Ibid., p. 225. case as one of the most important in 7. Cohen, J. and Borobia, B. the history of fashion. Tom Ford today 8. Burrough, B. (1999). Gucci and Goliath. Van- runs his own namesake label, headed by ity Fair. [online] Available at: http://www. Mr. De Sole. LVMH and PPR (since vanityfair.com/culture/features/1999/07/ lvmh-gucci# [Accessed 7 Dec. 2014]. renamed Kering) remain competitors to 9. Ibid. this day, continuing to write chapters in 10. Moffett, M. and Ramaswamy, K. (2002). the book that began with a spectacular FASHION FAUX PAS: GUCCI & LVMH. bang in 1999. Glendale: Thunderbird School of Global Management, pp.1-12. Samine Joudat, a first year M.A. 11. Singer, R. (2014). Samine Joudat Interviews Robert Singer on Gucci. candidate at SAIS, was born in Iran 12. Cohen, J. and Borobia, B. (2006). and raised in California. He is a 13. Burrough, B. (1999). Middle East Studies concentrator 14. Singer, R. (2014). focusing on emerging markets. A 2013 15. Burrough, B. (1999). 16. Ibid. graduate of UC Berkeley with a degree 17. Moffett, M. and Ramaswamy, K. (2002). in political science and international 18. Burrough, B. (1999). relations, his research interests 19. Ibid. include the influence of Western post- 20. Ibid. Enlightenment thought on Iranian 21. Ibid. 22. Moffett, M. and Ramaswamy, K. (2002). politics and renewable energy. 23. In a game of cat and mouse, Arnault watched Gucci closely, buying more stock every time they reached out to a potential white knight. 24. Gucci would have most likely entertained a tender offer, it would have given shareholders

95 SAIS EUROPE JOURNAL OF GLOBAL AFFAIRS

a premium for the change in ownership, and 53. Raghavan, A. and Kamm, T. (1999). Old Take- it would have signaled Arnault’s real interest over Laws Hobble New Europe, Calls Grow in owning the company. De Sole, Ford, and to Get Nations on Same Page. Wall Street Singer might have entertained actually work- Journal. [online] Available at: http://www. ing with Arnault in that scenario. But Ar- wsj.com/articles/SB945032792445030406 nault had no interest in an outright bid. [Accessed 26 Dec. 2014]. 25. Moffett, M. and Ramaswamy, K. (2002). 54. Slaughter & May, (2006). The European 26. Burrough, B. (1999). Takeovers Directive - An Overview. [online] 27. Ibid. Slaughter & May, pp.1-3. Available at: http:// 28. Ibid. www.slaughterandmay.com/media/39335/ 29. Moffett, M. and Ramaswamy, K. (2002). the_european_takeovers_directive_-_an%20 30. Ibid. overview.pdf [Accessed 22 Dec. 2014]. 31. Burrough, B. (1999). 55. The Economist, (2003). A Costly Luxury. 32. Ibid. [online] Available at: http://www.economist. 33. Singer, R. (2014). com/node/1565865 [Accessed 21 Dec. 2014]. 34. Ibid. 56. Rankine, K. (2003). Gucci Designer and 35. Moffett, M. and Ramaswamy, K. (2002). Chief Walk Out. The Telegraph. [online] 36. Ibid. Available at: http://www.telegraph.co.uk/ 37. Ibid. news/worldnews/europe/italy/1445983/Gu- 38. Ibid. cci-designer-and-chief-walk-out.html [Ac- 39. Fisher, R., Ury, W. and Patton, B. (1991). cessed 19 Dec. 2014]. Getting to Yes. New York, N.Y.: Penguin 57. Moffett, M. and Ramaswamy, K. (2002). Books Pg. 9. 40. Ibid., Pg. 8. Title Page Photo Credit 41. Ibid., Pg. 51. 42. Burrough, B. (1999). GUCCI by Simon A - https://www.flickr.com/ 43. Pon.harvard.edu. (2014). Program on Ne- photos/46214148@N00/4152261021 gotiation at Harvard Law School. [online] Available at: http://www.pon.harvard.edu/ [Accessed 21 Dec. 2014] 44. Axelrod, R. (1984). The Evolution of Cooper- ation. New York: Basic Books. Pg. 8. 45. Singer, R. (2014). 46. Moffett, M. and Ramaswamy, K. (2002) 47. Axelrod, R. (1997). The Complexity of Coop- eration. Princeton, N.J.: Princeton University Press. 48. Burrough, B. (1999). 49. The Wall Street Journal, (1999). Gucci Watch. 50. Hernadez-Lopez, E. (2003). Bag Wars and Bank Wars, The Gucci and Banque Nation- al de Paris Hostile Bids: European Culture Responds to Active Shareholders. Fordham Journal of Corporate and Financial Law, [online] 9(127-40). Available at: http:// ir.lawnet.fordham.edu/cgi/viewcontent. cgi?article=1138&context=jcfl [Accessed 15 Dec. 2014]. 51. Ibid. 52. Ibid.

96 VOLUME 18 Book Review: “The Falling Rate of Learning and the Neoliberal Endgame” by David J. Blacker George Fogarasi

George Fogarasi has worked in all levels of education, from kindergarten to universities. His writing ranges from an academic parsing of Hello Kitty to interviews with second tier Hollywood celebrities. When not teaching a course on “Food Booze and Culture” at Fleming College in Peterborough, Canada, he is happiest losing himself in distant forests or foreign labyrinths of street food stalls.

Automation and the relentless pushing analysis grimly insists that nothing can be down of wages create a shrinking market: done to stop the TRPF and the inevitable profits in the long run tend to go down. social and ecological eliminationism that Marx called this the tendency of The comes in its wake. Rate of Profit to Fall (TRPF). It’s why Henry Ford doubled workers’ wages Blacker explains how economic shocks so they could buy his cars, and why a caused by the TRPF—the Great century of falling profit later the World Depression, the Seventies oil crises, Bank concedes that unionization creates Thatcher and Reagan’s austerity, the a better functioning economy. bailout of Wall Street—have lurched capitalism forward into its present form Marx’s prescient examination of the in which individuals are expendable and TRPF is at the heart of David J. Blacker’s ready to be eliminated.1 “The Falling Rate of Learning and the Neoliberal Endgame.” His unflinching The youth of Ferguson and the banlieuers

97 SAIS EUROPE JOURNAL OF GLOBAL AFFAIRS know there are no high tech / high wage part of the surfeit of humanity logically jobs they can be educated into. With luck, slated for elimination.” Education is Blacker notes, they can “revert to their lumped together with other sectors, but traditional status as a kind of non-waged the terrain offers so much to examine: and economically precarious peasantry Pearson publishing applying to have and/or imperial military fodder.” And degree granting status; the increased therein lies business opportunity, the “ reliance on adjunct faculty; the budget- ‘searching under the couch cushions for driven canard of MOOCs and e-learning. loose change’ phase of late capitalism” Blacker quite possibly ignores such where schools, jails, medicine, the details because he insists there is nothing military and infrastructure are privatized that can be done within schools to stop to siphon ever scarcer profits upward. the inevitable changes that come in the “To think,” muses Blacker, “it was once wake of the TRPF. thought that the ‘long march through the institutions’ was being accomplished by He does, however, allow that there the left.” is political work to be done outside of education. His clever analogy is that He has a keen eye for such absurdity: “Of even the best prison guards with the late, the neoliberal form of capitalism, best reforms can only change what’s even amidst its self-referential hysteria, inside a prison. It’s what is outside of has in reality become an inversion of prisons (and schools) that ultimately what the right wing dreams it is.” Faced frames and defines what goes on in those with the TRPF, “arch-individualist titans institutions, and that is where change have somehow banded together with a must occur, according to Blacker, for it solidarity that would be the envy of the to be meaningful. most fervent syndicalist in order to rig the financial game for themselves.” Perhaps, as an educator, I delude myself Negative interest rates, quantitative into believing education can foster a easing and Syriza’s victory are at this more just world. Blacker, though, is moment responses to the TRPF. convincing in his argument that what Blacker dismisses the concept of “casino we teach and learn can do nothing to capitalism” because one can lose in a influence the inevitable trajectories of the casino. He suggests a better analogy TRPF. Hope, for Blacker, shrinks down in which the elite go to a casino, lose into a wholly atomized, personal affair. catastrophically, and are then given the He recedes into Stoic philosophy—drink house’s money in order to keep playing. well from the cup of life while you can— His vigorous macro examination of because our economic trajectory is set the TRPF is illuminating, but it lacks and we cannot come together to resist it. a granular analysis of the neoliberal Blacker notes that there is something attack on education that the book’s liberating about accepting fate, yet despite title promises. A “surfeit of workers” is himself, he underscores human agency conflated with a “surfeit of students… by noting that people have an “adaptive 98 VOLUME 18 capacity to learn” and can discover the the endgame; is there one? Despite the “lies contained in the stories of which we title of his book, the endgame is merely have become collectively enamored.” hinted at. Do we control the TRPF, or does it control us? The poetry of Marx’s “All that is solid melts into air, all that is holy is profaned” The book is at its apocalyptic best when it is grounded by the blow that follows: looks at the big picture. After the searing “and man is at last compelled to face with analysis of economic and ecological sober senses his real conditions of life, collapse, the chapter on student loans in and his relations with his kind.” Blacker the United States feels like an appendix. is stone sober in a world punch-drunk Ditto the chapter about students and free with derivatives, magically financialized speech. Even though Blacker’s academic credit and ever more people in the street chops are at their most powerful here— wanting to tear it all down. Blacker and it is amusing to learn about the “Bong doggedly follows the TRPF to trace our Hits 4 Jesus” Supreme Court case—it’s “real [now hyper-real] conditions of life” a parochial tangent for non-American to demystify our economic relations with readers on the heels of the ambitious first each other. In short, where Piketty points chapters. to why the system is skewed and unfair, Blacker notes that it can only implode. It would be heartening to believe that Blacker’s thesis merely projects an Anglo- Notes American template onto the world. In South America and Nepal, for example, 1. Blacker’s prose pulls no punches as he Marx and Marxism inform significant delineates the “‘shit rolls downhill’ nature reforms that might change the terrain of austerity that requires teachers and schoolchildren to pay for the solvency of of economic possibility. But this is still sinecured bankers and their political en- informed by capitalist macro-economic ablers,” the too big to fail “state-corporate forces, by economic growth, capital and hybrids that exist as government-secured wage labour: to flip Stein’s glib take on monopolies even while they spout neo- Oakland, there’s a global economic force liberal rhetoric about ‘freedom,’ ‘com- there, and built into its resilient heart is a petition’ and the like.” His fiery prose is grounded in meticulous scholarship, poison pill, the pesky TRPF. giving Blacker discursive leeway to pull Oddly, after making a relentless and off what might otherwise be dismissed as clear case for global collapse, Blacker apocalytic pamphleteering. pulls back to note that cyclical economic crises are central to the capitalist system Title Page Photo Credit and allow it to mutate into “successor Cover Image by David J. Blacker - systems that may be unrecognizable from http://ecx.images-amazon.com/images/ the point of view of their progenitors.” I/91WOeRxwFdL._SL1500_.jpg The system dusts itself off and carries on, bruising many, enriching a few. When is 99 Celebrating 60 years in Bologna