Tom Friedman: Food Prices & Revolutions (On Economic Connectivity)
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A key element of the Revolutions in Tunisia and Egypt: rising food prices. As food and energy prices rise and public budgets come under strain, some food and gas subsidies are eliminated — thus creating the conditions for mass protests. But what is the ultimate cause of those food price increases? The short answer: China’s connection to the world economy.

See Thomas Friedman: “China, Twitter and 20-Year-Olds vs. the Pyramids”, The New York Times: “Of course, China per se is not fueling the revolt here — but China and the whole Asian-led developing world’s rising consumption of meat, corn, sugar, wheat and oil certainly is. The rise in food and gasoline prices that slammed into this region in the last six months clearly sharpened discontent with the illegitimate regimes — particularly among the young, poor and unemployed”. [DATA: Wheat prices chart; oil prices chart]

Topic for Discussion: Realism, Liberalism and MENA Revolutions [NOT Required reading!]
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Not an abstract discussion! What seemed exceedingly abstract only a few days ago has now become a very tangilbe matter: what to do about Libya? What to do about Bahrain, Syria? Every one of the so-called Great Powers ––America, Canada, the EU, BRICs–– has to take a stance on Libya. It’s a battle between realists and liberals! Read the following statements and analyze whether they come from a LIBERAL o REALIST perspective. In each case, briefly state the opposing argument. Most answers are obvious; but the point of this discussion is to remember that great powers sometime have to take dramatic decisions in a matter of … days.

Background info: Libya and oil. Map of oil and gas resources. Before the crisis, Libya produced 1.58 million barrels of oil per day, about 2% of global oil supplies. Oil price rose sharply [chart]. However, Opec’s spare capacity stands at about 4.7m b/d — a comfortable cushion. A contagion scenario affecting production in Algeria, Oman, Yemen and Bahrain would see prices skyrocket to about $150-$220/barrel. Were unrest to hit Saudi Arabia, the spike could be sharper. And that would mean a very sharp worldwide recession.

[1] “If Col Gaddafi’s regime wins its civil war, consider the next phase. There will be more massacres and refugees. What then? Indefinite containment and sanctions on a pariah state endowed with wealth, pathological leadership and experience in state use of clandestine terror networks An objective can be stated simply: Col Gaddafi out of power”. (Philip Zelikow: “Only a no-drive zone can stop Gaddafi’s forces now”, Financial Times, March 26). Counsellor of the US Department of State, 2005-2007.

[2] “Absolute monarchies in the Arab world will need to contemplate constitutional monarchy and power sharing of they are to survive” (David Gardner: “And so to chapter two of the great Arab awakening”, Financial Times, March 20).

[3] “America has little strategic interest in north Africa but a lot at stake in the Gulf”. (Quoted by David Gardner: “And so to chapter two of the great Arab awakening”, Financial Times, March 20).

[4] “Hosni Mubarak kept conflicts at bay; authoritarian regimes in the region are the only alternative to chaos or radical Islam”. (Quoted by Roula Khalaf: “Making history in the street”, Financial Times, March 27).

[5] “In the region, 60% of the population is under 25; they have the internet, and they are aware of the things that happen around the world”. (Quoted by Roula Khalaf: “Making history in the street”, Financial Times, March 27).

[6] “Mohamed El-Baradei, Nobel laureate and opposition figure: they [the networked generation] know that nothing will change in terms of social justice and economic demands except through democracy”. (Quoted by Roula Khalaf: “Making history in the street”, Financial Times, March 27). [ElBaradei video].

[7] “Western powers are nervous about being sucked into a third war in an Islamic country after the painful experiences of Afghanistan and Iraq”. (Quoted by David Gardner: “And so to chapter two of the great Arab awakening”, Financial Times, March 20).

[8] “Mr Cameron is plainly guided by moral conviction; but this is a dangerous indulgence for a leader facing so many problems at home”. (Max Hastings: “Why the military is right to fret over Libya”, Financial Times, March 25).

[9] “Should this commitment expand any longer in terms of cost, time or intensity, I do think it’s important for Congress to be consulted and included in the decision-making process”. (Senator Chris Coons, a Democrat member of the Senate foreign relations committee, quoted by Richard McGregor: “Obama struggles for clarity in messy conflict”, Financial Times, March 25).

[10] “The main matter in the Middle East: managing Egypt’s democratic transition, and the Gulf, where a crackdown on Bahrain threatens to exacerbate Shia-Sunni tensions”. (Richard McGregor: “Obama struggles for clarity in messy conflict”, Financial Times, March 25).

[11] “We cannot be sure whether what we are seeing is a genuine democratic revolution; repression could rule the day. Anarchy, civil war, harsh police states, sectarianism, and severe Islamic rule are all potential alternatives to the sort of authoritarian regimes that have recently dominated the region. All of those outcomes are possible; none is likely to lead to greater freedom. Overall, we must be realistic about what to expect from a small degree of democratization. Immature or partial democracies are vulnerable to being hijacked by populists or extreme nationalists. A Middle East more influenced by public opinion could well be less willing to work against terrorism, or on behalf of peace with Israel. It is likely to be no more of a partner when it comes to providing oil at reasonable prices”. (Richard Haass: “How to read the second Arab awakening”, Financial Times, March 9). [video]. President, Council on Foreign Relations.

[12] “The Syria/Iran/Hizballah axis is a huge benefit to Iran and ending it would weaken Iran’s position greatly. Syria is Iran’s only ally in the Arab world and its land bridge to Hizballah. Recent reports of an Iranian naval facility in the Mediterranean reminded us of how valuable an asset Syria is today for Iran. If a Sunni-led Syria (and the country is 74% Sunni) ended the Asad regime’s romance with the ayatollahs, American interests in the entire Middle East would gain. Hizballah’s power in Lebanon would diminish instantly and the opposition to Hizballah—the March 14 movement, and Lebanon’s Sunni, Christian, and Druze communities—would grow stronger. Iran’s ability to threaten Israel would diminish if it lost what amounts to a land border with Israel through Lebanon’s Hizballah-controlled south. Moreover, every time a Middle Eastern tyranny falls, and especially so in the case of the tyranny most closely linked to Iran, it makes Iran’s own terrorist regime seem more outdated and anomalous in a Middle East where democracy is spreading.” (Elliott Abrams: “Syria, Iran, and American Interests”, Council on Foreign Relations, March 26).

[13] “For Moscow, the unrest in the Arab world is oddly double-edged. The resulting spike in oil prices has boosted Russia’s economy. On the face of it, the turmoil is a boon for Russia’s resource-dependent economy, taking oil prices close to the $120 a barrel in recent weeks. Economists say the increased prices could lift economic growth by 1 percentage point this year to at least 5%, the highest since 2008. Alexei Kudrin, finance minister, said in Monday that Russia’s budget deficit —built up through heavy spending during the financial crisis— would be eradicated if oil averaged $115 this year. Every $10 increase in the average price of crude oil swells Russia’s revenues by $20bn. That calculus underlie Moscow’s decision to abstain at the UN Security Council on Resolution 1973. Yet the Kremlin is watching uneasily the Middle East backlash against authoritarianism, corrupt and wealthy leaderships. ‘There is a sort of nervousness here that no one has observed before’, said an experienced foreign banker. ‘People are worried about contagion’. The oil windfall could restore Russia’s pre-crisis complacency, tempting it to backtrack on much needed corruption and reducing the state’s role in the economy. Polls suggest support for President Medvedev and Vladimir Putin, prime minister, remains at about 70%. But there have been signs of official jitters. (Catherine Bolton & Neil Buckley: “Russia in dilemma on Arab unrest”, Financial Times, March 16).

[14] “On Monday, officials were confronted with a rare moment of open disagreement between the two men who run the country. Prime Minister Vladimir V. Putin issued a lacerating critique of the allied attacks on Libya — the kind of protest that accompanied Western interventions in Iraq and Kosovo. President Dmitri A. Medvedev, who had articulated a more pro-Western position, rebuked his mentor, calling Mr. Putin’s language unacceptable.” Ellen Barry: “Leaders’ Spat Tests Skills of Survival in the Kremlin”, The New York Times, March 2011.

Liberal: Thomas Barnett
. Thomas P.M. Barnett: Twitter; blog; video; The Pentagon’s New Map. War and Piece in the XXIst. Century (New York: Putnam, 2004) [webpage].

. The Connectivit Approach to IPE. An interesting ––and modern–– example of “Complex Interdependence” (Chapter 4 of C. Roe Goddard, Patrick Cronin & Kishore C. Dash. International Political Economy). Barnett defines connectivity as “The enormous changes being brought on by the information revolution, including the emerging financial, technological, and logistical architecture of the global economy (i.e., the movement of money, services accompanied by content, and people and materials)”. In more concrete terms, connectivity can be defined as openness to trade flows (WTO membership, free trade agreements), plus openness to foreign direct investment (FDI) flows, plus access to broadband internet connectivity.

. Cell phones: the 4 billion mark! The number of mobile phone users worldwide will exceed 4 billion mark by the end of this year - two thirds of the population of the world. Time for a wake up call. According to the European Information Technology Observatory (EITO), the number of mobile phone users will rise from 3.9 billion in 2008 to 4.4 billion in 2009, an increase of 12 percent; Cisco: 1 Trillion Connected Devices by 2013. There will be 1 trillion devices connected to the Internet by 2013, said Cisco Chief Technology Officer Padma Warrior during her Wednesday keynote address at CTIA. Warrior argued the boom in connected devices, applications and mobile broadband would not only change the wireless industry but society in general. "The Internet is no longer just an information superhighway, it's a platform," Warrior said, citing the increased adoption of M2M technologies and the exponential growth of apps, which will hit 1.5 million by 2013.

. A New Approach to Center-Periphery Dynamics. The ‘Functioning Core’ includes those parts of the world that are actively integrating their national economies into the global economy and that adhere to the emerging consensus of free markets and strong political institutions (the rule of law). The Functioning Core at present consists of North America, Europe both ‘old’ and ‘new’, Russia, Japan and South Korea, China (although the interior far less so), India (in a pockmarked sense), Australia and New Zealand, South Africa, and the ABCs of South America (Argentina, Brazil, and Chile). That is roughly 4 billion out of a global population of more than 6 billion. The Functioning Core can be subdivided into the Old Core, anchored by America, Europe, and Japan; and the New Core, whose leading pillars are Brazil, Russia, India and China [the so-called BRIC countries]. ‘Gap nations’ are defined as nations “where connectivity remains thin or absent” (Pentagon’s New Map, p. 4) [See Map].

Some "Gap" benchmarks: [1] Dictatorship. “As soon as a leader declares himself ‘president for life’, disconnectedness becomes a near certainty” (PNM, p. 133); [2] Frequent leadership changes. (Bolivia, Ecuador, Argentina, Thailand); [3] The curse of raw materials. Venezuela, Bolivia, some Arab oil exporters: “Historically speaking, countries whose economic well-being relies extensively on the exportation of raw materials are some of the least connected states in the world.” (*); [4] Theocracies. They have “a dampening effect on connectivity with the outside world”; [5] Transportation problems. Paraguay lacks a good transportation connectivity with the outside world; [6] The treatment of women. (Blueprint for Action, pp. 256-259). (*) See Thomas Friedman. “The First Law of Petropolitics”, Foreign Policy, May-June 2006.

. Life in the (Disconnected) Gap: Thomas Hobbes. Inside the Gap, life is solitary, poor, nasty, brutish, and short”. [Leviathan, chapter XIII] (Barnett, pp. 161-166). No need to mention too many examples; some cases that come to mind: Guinea-Bissau president assassinated amid scenes of chaos; slaughter of senior military officers in Bangladesh; rape epidemic in Congo; Angola children tortured as witches. And the list goes on and on. 

. The Security Angle: Disconnectedness Defines Danger. “Disconnectedness is the ultimate enemy” (PNM, p. 124). “Once isolation is ended, and broadband connectivity is achieved for the masses, the forces of terror and repression can no longer hold sway” (PNM, p. 193). “Disconnectedness defines danger, so connectedness defines safety” (PNM, p. 331). That is what happened in Afghanistan in the early 2000s. According to Barnett, Libya is likely to follow a similar pattern if Kaddafy stays in power.

. State-on-State War: a thing of the past! Barnett believes that wars between great powers and even state-on-state wars are extremely unlikely to happen. There are three reasons for this: (1) Nukes (the principle of MAD, or Mutually Assured Destruction); (2) the United States military superiority (America’s defense budget is many times greater than that of any other great power); (3) Connectivity (the economic and financial cost of war).

. The Unit of Analysis: Individuals. The faceless homo economicus of neo-classical economists has vanished; his place has been taken by real-world entrepreneurs and leaders. The emphasis is on: (a) poor people inside the Gap, increasingly able to access information and to connect to the world economy; (b) entrepreneurs and innovators of all countries, races, gender, social standing; (c) social leaders: India needs a Bill Gates, i.e. a tycoon who retires and fights poverty and disease; China needs an Erin Brockovich to fight for the environment; (d) founders of nations: successful founders of nations are endowed with a rare combination of ruthlessness (to get things done) and capacity for self-command (to resign voluntarily from power and set a lasting example). Barnett praises Deng Xiaoping –– whom he deems more important than Ronald Reagan, Margaret Thatcher and Pope John Paul II together. 

. The Unit of Analysis: Classes. Unlike Marxism, which focuses on the extremes, the connectivity approach to IPE has its eyes squarely on the middle class. From The Economist special report on “The new middle classes in emerging markets”: “For the first time in history more than half the world is middle-class—thanks to rapid growth in emerging countries. Following the historical examples of Britain and America, they are expected to be the dominant force in establishing or consolidating democracy. As a group, they are meant to be the backbone of the market economy. And now the world looks to them to save it from depression. With the global economy facing the biggest slump since the 1930s, the World Bank says that “a new engine of private demand growth will be needed, and we see a likely candidate in the still largely untapped consumption potential of the rapidly expanding middle classes in the large emerging-market countries.” This special report argues that many of these expectations are broadly justified; that there is indeed something special about the contribution the middle classes make to economic development that goes beyond providing a market for Western consumer goods.

The middle classes can, and sometimes do, play an important role in creating and sustaining democracy, though on their own they are not sufficient to create it, nor do they make it inevitable”. This is, in a nutshell, what Barnett calls ‘the ideology of the global middle class’ (Great Powers, 2009, p. 99). [See also the article by Goldman Sachs’ chief economist Jim O’Neill. “Boom time for the global bourgeoisie”, Financial Times, July 15, 2008: By 2030, 90 million people a year will enter the middle class –– defined as households with annual incomes between $6,000 and $30,000. The global bourgeoisie will by then number 2 billion people].

. The Unit of Analysis: Nation-States. Competition between nation-states has moved from the military to the economic level. “Competition has left the military sphere”. Nation-states will also compete for prestige: who organizes the best Olympic Games? Who will be the first carbon-neutral economy? Who will be the leading center for Sharia-compliant bonds or sukuks? (Key contenders: Dubai, Malaysia, Singapore, London). On the other hand, Old Core nations will have to cooperate with New Core powers, albeit reluctantly, to ease disconnectedness inside the ‘Gap’. Barnett: “The United States cannot simply shrink the Gap by itself” (PNM, p. 58). China and America are not enemies; but they aren’t friends either. THEY ARE FRENEMIES!

. The Emerging Political Culture in the New Core. Although Barnett never mentions him, his views on China and globalization have a lot in common with Gordon S. Wood’s analysis of the American Revolution (The Radicalism of the American Revolution, 1992). Wood’s point is simple: Whenever an enterprising population discovers the sheer immensity of the marketplace, a new political culture emerges – and it tends to challenge the existing political order (based on the principles of authority, paternalism and hierarchy). In other words, “connectivity eliminates the ability of elites to maintain their political standing” (PNM, p. 217). The spread of connectivity “cannot be denied to any gender, any faith, or any ethnic category whatsoever” (PNM, p. 361). India. Young Indian women working in call centers and making more money than their fathers; entrepreneurs emerging from castes that were not supposed to engage in business. (Barnett: the caste system is doomed!) China. The richest man in China is … a woman! (Cheung Yan –– the 49 year-old founder and chairwoman of top Chinese paper packager Nine Dragons Paper. Also, divorce rates are sharply up. Globalization empowers women, pure and simple, and the effects are the same the world over, blowing Huntington’s civilizational distinctions right out of the water.