The Revolving Door: Public Service Increasingly a Conduit to Lucrative Lobbying Careers

Capitol Building

Capitol Hill is home to the offices of 535 legislators who increasingly find themselves catering to the interests of corporate clients as the pervasive influence of K Street in politics grows. December 10, 2005 (Kate Mereand/Wikimedia Commons)

Bribes masquerading as gifts and political contributions are nothing new to Washington. In Mark Twain’s 19th century work, The Gilded Age, he delineates a step-by-step methodology for bribing members of Congress. What is novel to America’s political system is the increasingly common revolving door that connects ex-political staffers and retired politicians with lucrative careers in the lobbying industry. While political contributions and gifts remain in the arsenal of any Washington lobbyist, their effectiveness in allowing lobbyists to influence legislation has been surpassed by retired insiders making their way to K Street.

Notorious lobbyist Jack Abramoff remarked in his book Capitol Punishment that the most effective way to influence a politician was to offer his/her chief of staff a lobbying job following their stint on the hill. From that point forward, not only would Abramoff have unrestricted access to a politician, but also staffers would actually go out of their way to promote his clients’ interests.

Many politicians often bite at the prospect of lucrative lobbying salaries, despite a life-long commitment to public service. In Mark Leibovich’s book, This Town, he cites a frightening statistic: “In 1974, 3 percent of retiring members of Congress became lobbyists. Now 50 percent of senators and 42 percent of congressmen do.

Consider retired Senator Judd Gregg, whose tenacious fight for transparency and ethics in the financial industry ended as soon as he left office and took a high-paying ‘consulting’ job at Goldman Sachs. More astonishing is ex-congressman Billy Tauzin, who earned nearly twenty million dollars between 2006 and 2010 as a lobbyist for the pharmaceutical industry.

Even high-profile politicians cannot always resist the temptation of lobbying salaries. Former Senate minority leader Tom Daschle, who played a key role in drafting universal health care legislation, earned an annual salary of $2.1 million only a few years after his leaving the Senate. While Daschle vehemently denies working as a lobbyist, his recent employment has been with lobbying firms specializing in health care, albeit as a ‘consultant’.

It is unclear precisely what these ex-politicians are providing in exchange for their astonishingly high compensation packages. No doubt some utilize their influence on the Hill to sway current members of Congress to draft legislation that benefits their clients. There remains serious ambiguity, however, as to whether or not these politicians preemptively advanced their future employer’s interests while in office at the prospect of being duly compensated following retirement.

K Street NW at 19th Street

K Street in Washington DC is home to some of our capitol’s most prominent lobbying firms. There are currently 23 lobbyists in Washington for every member of Congress. February 24, 2005 (Erifnam/Wikimedia Commons)

This tacit collusion between elected officials and the private sector goes against the very concept of public service and the notion of a democratic process unfettered by private sector interests. While laws exist that bar ex-congressmen and senators from working in lobbying for two years after being in office, most bypass this restriction by refraining from formal registration as a lobbyist. After all, there is no law against working as a ‘consultant’.

Public service implies some form of personal sacrifice, often in the form of time and compensation. With this in mind, is it too much to ask that our public servants refrain from profiting from the private sector following their retirement from politics?

Indubitably, successfully curtailing the migration of politicians from Capitol Hill to K Street will be futile as those we have entrusted to make our laws have a vested interest in preserving the status quo. As attempts at lobbying reform continue in Congress, however, an important question remains: how do we define lobbying?

After all, the day that Congress passes a law barring ex-political staffers and politicians from working as lobbyists and consultants is the day we see an influx of political veterans working as ‘policy advisers’ with seven-figure salaries. Who knew public service could be so rewarding?

The views expressed by the author do not necessarily reflect those of the Glimpse from the Globe staff and editorial board.

The Tragedy of Media Sensationalism in America

It has been over two months since Malaysia Airlines Flight 370 lost contact with air traffic control and disappeared, triggering the most expansive search and rescue attempt in history. The hunt for Flight 370 continues to this day with a multinational coalition conducting a targeted underwater search in the Southern Indian Ocean.

The tragedy enshrouding the presumed loss of 227 passengers and 12 crewmembers has elicited extensive media coverage, with CNN providing non-stop coverage for weeks at a time. Typical of American media, the vast majority of this coverage has been rich in speculation and lacking in substance.

India's search areas for Malaysia Airlines Flight 370 (2)

India’s search areas for Malaysia Airlines Flight 370. March 19, 2014 (Indian Navy/Wikimedia Commons)

News outlets’ traditional responsibility was to report on facts and provide pertinent analysis. This traditional model of reporting, however, has been increasingly threatened by the media’s dependency on advertising revenue. In his book Manufacturing Consent, Noam Chomsky discusses this funding constraint as a serious impediment to unbiased, factual reporting. As a result, news channels – vying for increased viewership and advertisers – are more inclined to cater to sensationalism over substantiated and relevant news stories.

From extensive discussions of the Bermuda triangle and theories of black holes, to calling on psychics as expert contributors, American reporting has deviated from this traditional model of reporting to instead propagate misinformation and speculation. Discussion of conspiracy theories piques human curiosity and galvanizes viewership, but there is no place for such unsubstantiated reporting on stations claiming to provide corroborated news and relevant analysis.

To the chagrin of traditional journalists, such sensationalist reporting has proven highly popular. In the case of CNN, their round-the-clock reporting effectively doubled their prime-time ratings, resulting in their viewership temporarily outpacing Fox News’ audience for a short duration.

Satterfield cartoon on sensationalism and media stereotypes of the Apache

Satterfield cartoon on sensationalism and media stereotypes of the Apache. November 3, 1905 (Bob Satterfield/Wikimedia Commons)

This style of news reporting may satiate American consumers’ demand for overdramatized entertainment, but comes with its share of negative externalities. Over the course of CNN’s coverage of Flight 370, there were scores of more relevant and pressing global and domestic issues warranting coverage that were passed over. From Russia and China’s plans to discuss trading oil in foreign currencies to threaten America’s petrodollars to the geopolitical crisis in Ukraine, there were (and are) numerous news stories of greater consequence that a more informed populous should be aware of.

It is a tragedy in and of itself that America’s major news sources are incentivized to pass over stories of global significance in exchange for outlandish stories that garner viewership and advertising revenue. That American consumers of news are more intrigued by conspiracy theories than by reporting with the potential to impact their lives is a sad truth to confront in a world on the edge of conflict and crisis. The mainstream media’s coverage of this event proves that we have lost more than 239 innocent civilians – we have lost our commitment to responsible reporting as well.

The views expressed by the author do not necessarily reflect those of the Glimpse from the Globe staff and editorial board.

Improving Economic Prospects in the Land of Silver

Plaza Congreso BA

The Thinker in El Plaza Congreso, adjacent to official government buildings in Buenos Aires, Argentina. December 9, 2010 (David Berkowitz/Wikimedia Commons)

Argentina was a gold mine of economic opportunity in the early 20th century. Blessed with trade surpluses in commodities, an influx of foreign technological innovation and development, and a growth rate of 6% (the fastest in the world at the time), Argentina attracted hundreds of thousands of European immigrants.

With the exception of commodity exportation, Argentina’s recent economic condition has soured. The last half-century has been marked by economic decline, political instability, and diminishing geopolitical influence. Consider that when President Obama visited the Southern Cone in 2011, he flew from Chile to Brazil deliberately passing over Argentina. While significant capital inflows from China largely insulated Argentina from the global economic crisis, economic and political turmoil persist to this day. Inflation estimates are above 30%, its expropriation of Spanish petroleum giant Repsol have made those in the international business community wary of FDI, and its export and import quotas have proven disastrous to farmers, businessmen, and consumers alike.

If President Kirchner’s successor seeks to guide Argentina towards a path of economic and political stability, he/she must assuage concerns of an impending crisis, and work swiftly to ignite a stagnant economy. Reviving the economy will be easier said than done in a country whose Ease of Doing Business ranking is 127 out of 189, trailing, among others, Nigeria and Pakistan. A more challenging hurdle will be reducing Argentinean dependence on natural resource exports. As tempting as it may be to ride the commodity wave to economic solvency, diversification of the nation’s income will prove imperative to Argentina’s future growth and stability. Developments in added-value manufacturing and the service industries will better isolate Argentina’s economy from fluctuations in global commodity prices. Diversification will also require improvements in education and infrastructure, areas in which Argentina is particularly deficient.

ArgentinayChile1929.TouringclubitalianoMilano

Map of Argentina circa 1929 depicting recent territorial acquisitions (Ufficio cartografico del Touring Club Italiano/Wikimedia Commons)

One thing Argentina is not deficient in is unfounded optimism. An Argentinean economist once lamented that his nation is destined for lackluster development, positing, “Argentina has always been a country with mediocre growth, believing that spectacular growth and riches are right around the corner, and when a good year comes, Argentines say, ‘Ah, here comes the life we’ve been waiting for and so deserve.’” Such misguided expectations must be replaced by shrewdness and sacrifice. Recovering from the current economic turmoil and moving towards a trajectory of sustainable growth will require drastic fiscal and monetary reforms.

Attempts to curtail government spending will likely aggravate an already sluggish growth rate, particularly after several years of costly welfare programs and President Kirchner’s wasteful spending. Also unpopular will be the inevitable currency devaluation once Argentina’s currency exchange is liberalized. Such unpopular policies have been postponed for far too long. Argentina must follow in Chile’s footsteps by increasing economic competitiveness in the global arena. For a country blessed with bountiful resources, its political malfeasance and bureaucracy remains the only thing slowing down what would otherwise be impressive growth. By fostering more competitive industries and implementing basic economic reforms, Argentina may become the gold mine it once was.

The views expressed by the author do not necessarily reflect those of the Glimpse from the Globe staff and editorial board.

The “Crocodile in the Yangtze”

Alibaba group Headquarters

Alibaba Group Headquarters in Yu Hang District, China. April 14, 2012. Thomas Lombard (Wikimedia Commons)

China’s largest e-commerce company, Alibaba, is set to make history in the coming months. Founded in 1999, Alibaba has the potential to set the largest initial public offering (IPO) in the US for a Chinese company and even exceed Facebook’s initial valuation in 2012.

While Alibaba has declined to comment on why it moved its IPO from Hong Kong to New York City, its decision is largely based on a disagreement between company executives and the Hong Kong Securities and Futures Commission. Unlike Hong Kong’s stock exchanges, the NYSE and the NASDAQ do not maintain a one-share per one-vote standard, allowing Alibaba’s key partners to maintain control over its board of directors.

Holding its IPO in the United States could also facilitate future acquisitions of American companies. Its recent investments in the Silicon Valley start-ups Tango and AutoNavi indicate that Alibaba is seeking market expansion at the international level. More than just a middleman between sellers and buyers, Alibaba allows its customers to pay bills, buy insurance, and even take out loans. Its wide range of services and competitive pricing structure are enticing to both consumers and venders. Moreover, Alibaba’s capital is substantial. In the past fiscal year, its estimated sales exceed $420 billion, which dwarfs the combined revenue of Amazon and eBay. Further, it boasts 300 million customers across China – a number that will surely grow in accordance with increased Internet penetration.

Flickr - World Economic Forum - Jack Ma Yun - Annual Meeting of the New Champions Tianjin 2008 (1)

Jack Ma Yun, Chairman and Chief Executive Officer, Alibaba Group, speaks during The Future of the Global Economy: The View from China plenary session at the World Economic Forum Annual Meeting of the New Champions in Tianjin. China 28 September 2008. Copyright World Economic Forum (www.weforum.org)/Photo by Natalie Behring (Wikimedia Commons)

The big question that remains is whether Alibaba is capable of competing with established Western brands in the global e-commerce marketplace. Jack Ma, Alibaba’s founder and former CEO, responded to doubts of Alibaba’s competitiveness: “Ebay is a shark in the ocean. We are a crocodile in the Yangtze River. If we fight in the ocean, we will lose. But if we fight in the river, we will win.” Ma’s tempered confidence is justified. Although Alibaba has enjoyed tremendous success in the People’s Republic of China, it may not enjoy viability in the global marketplace. Alibaba’s prospects of successful market penetration are poor, particularly in the United States where the market is already saturated with established firms, such as Amazon and Zappos. Alibaba’s micro-lending, insurance market, and investment services, however, could prove highly successful in several Latin American and African economies where such service industries are severely underdeveloped.

Yet, Alibaba’s main obstacle to success may be the Chinese Communist Party. Consider yuebao, Alibaba’s financial investment service that provides a 5% return on risk-free investments. Yuebao offers a fantastic yield in China where millions of laymen deposit their hard-earned yuan into bank accounts only to see its real value depreciate from an inflationary tax. As Yuebao continues to threaten Chinese banks’ monopoly on savings, its days may be numbered before the Communist Party intervenes. Only time will tell if Alibaba can fend for itself in the vast ocean of e-commerce. Continued expansion within China and throughout the developed and developing world may prove impossible. One thing is for certain: Alibaba’s biggest threat to global development no longer lies in America, but in Beijing’s Politburo.

The views expressed by the author do not necessarily reflect those of the Glimpse from the Globe staff and editorial board.

Why This May Not be China’s Century

Shanghai Skyline

The Shanghai Skyline, by dawvon (Pudong) via Wikimedia Commons.

Over the past few centuries, China has suffered its fair share of embarrassments.  From the Opium Wars to the Great Leap Forward, its hailed position as the middle kingdom has been eroded time and again.  Deeply engrained into the psyche of China’s populous is the belief that China must reclaim its position as a world power.  This stark contrast between China’s idealized status today, and the ruinous state of China a mere half-century ago, resulted in a cognitive dissonance among its populous that has no doubt been a strong catalyst for recent economic reforms.

Gradually implemented reforms such as dual-track pricing, liberalization of socialist policies, and expansion of investment between China and foreign powers has brought about three decades of maintaining nearly 10% growth rates, an extraordinary feat for a nation that was on the verge of collapse fifty years ago.

Its recent ascension as the world’s second largest economy, coupled with potential increases in domestic spending and widespread domestic and foreign investments, have led many to call this century “China’s century.” Yet this optimistic forecast quickly sours when one considers the slew of imminent crises confronting China over the coming decades.

Implemented to curb China’s booming population growth rate, the one-child policy is sowing the seeds of China’s demographic and economic crises.  With the vast majority of families proscribed from having more than one child, China enjoyed an enormous demographic dividend – defined as the economic benefit a country experiences when it has a low ratio of dependent to independent workers – over the past three decades.

This dividend is already starting to expire.  By 2050, 25% of China’s populous will be above the age of 65.  Attempts to solve the demographic crunch by relaxing the one-child policy will prove futile, as any increase in China’s birth rate will only reap modest effects some two decades from now.  Furthermore, as a consequence of this policy, China’s gender distribution has already taken a heavy toll.  A well-established trend in China is the preference of male rather than female children, which has resulted in scores of sex-selective abortions. With an estimated 30-40 million more boys than girls in China, millions of young bachelors will now be unable to find wives.  Add sexual frustration to their already bleak economic prospects, and millions of disgruntled male migrant workers will be even more inclined to take to the streets in the name of political protest.

In addition to economic stagnation and political upheaval is a housing bubble throughout the PRC.  Fueled by greed and overly optimistic homeowners, price to rent ratios across China have skyrocketed past stable levels.  Flawed social expectations have only exacerbated this impending bubble.  Across China owning a home is a prerequisite for finding a wife.  With millions of only children, bachelors are in a position to seek financial assistance from both parents and grandparents, and pay grossly inflated prices for real estate acquisition.  It is unclear how the Politburo plans to address the housing market’s impending crisis.  What is clear is that whether the housing market encounters gradual deflation or a bubble burst, China’s economic prospects will suffer as a result.

Government action to address widespread pollution will bring about similar economic decline.  Two winters ago, China’s AQI (air quality index) broke records when it surpassed 800. Prior to this incident, measures of AQI had never exceeded 500.  Across China, pollution’s wrath has affected the health and economic livelihood of its population.  In Beijing it is now common for parents to select their children’s schools based upon the quality of their air filtration systems.  One particularly noxious chemical, PM 2.5, is found in hazardous doses across Mainland China.  Until China adequately addresses this affront to its citizens’ health and well-being, it will continue to pay increasing social and economic costs.

In spite of China’s woes, there remains a chance at redemption.  This may not be China’s century in terms of economic and geopolitical supremacy, but it may be their century to pave the way for environmental protection, sustainable development, and economic and political reform.  In the words of Churchill, “Failure is never fatal, success is never permanent.  The only thing that really matters is never giving up.”  This of course assumes that China’s population of 150 million migrant workers doesn’t take to the streets, overthrow the Communist Party, and support a military coup.  That could just be the straw that breaks the camels back.

The Correspondents Weigh in: Crisis in Crimea

The Crimea Region is highlighted in Red on this map of the Ukraine (via Wikimedia Commons)

This piece will be the first of a special “Weigh In” series that is going to be started on Glimpse, which will focus on momentous current events.

Thomas D. Armstrong:

Recent op-eds have labeled Putin as a mastermind or a megalomaniac fool. I am of the opinion that Putin is a megalomaniac mastermind exploiting a disempowered US. However, debating Putin’s psychological profile is less constructive than analyzing the economic foundation of his regime. Putin and his Russia survive on energy revenues, and war is only making him richer. Unlike 2008, when Putin invaded Georgia, oil prices have held steady. In fact, the threat of sanctions on Russia have only driven oil prices marginally higher, up $2 dollars to $110.8/bbl as of writing. Putin is financing expansionist dreams (and his own savings account) thanks to his near-monopoly on Russia’s energy industry. Therefore, the best way to rein him in is to drive global energy prices down. The US can accomplish this quite easily with a reformed national energy policy. Currently, the US is sitting on an unused 727-million-barrel underground cache of crude oil, and is producing more and more natural gas by the day. If the US were to supplant Russia as Europe’s primary natural gas provider, and flood the global market with American oil exports, energy prices would plummet. A decrease from $110/bbl to $80/bbl would cost the Russian oil industry alone an estimated $120 billion, plus billions more in foreign exchange earnings. Putin is a deft leader, but even he could not survive such a sustained economic collapse.

Nick Kosturos:

Russia’s move to deploy soldiers in Ukraine is indicative of feelings of insecurity rather than confidence. Putin knows that such a large loss of influence in Ukraine, a critically important country in economic, cultural, and geopolitical terms, would be devastating to Russia’s ultimate goal of increasing its regional sphere of influence and international prestige. Putin’s domestic considerations and tensions can also shed light on these aggressive actions. If a small country like Ukraine can successfully stand up to the Kremlin by ousting its man from Kiev, what will Russians think of a leadership unable to control their “Small Russia?” Russia is acting out of desperation, not strength. Putin’s clownish justifications for Russia’s military actions do not hold up to scrutiny and are made under a façade by what I recently labeled an “imitation democracy.”

While the West has multilaterally condemned this act of aggression, which is a positive first step, it should now increase pressure on Russia to relent. In order to force Russia to withdraw and accept Ukraine’s sovereignty and a chance at a peaceful political transition, the West must maintain a multilateral and wide-ranging coalition of rejection, isolating Putin via sanctions on both his allies and competing oligarchs (including their overseas funds and visas), and by supporting Ukraine’s new government through assistance and advisement. At this point, conventional military power projection against Russia is not a viable option – no matter how tempting – as it could spark an unintended military provocation leading to conflict. The current situation is very difficult to manage, although the international community should know that the West ultimately has the upper hand. Russia’s desperate authoritarian strategy based on oppression is doomed to fail in the long-run.

Luke Phillips:

The situation in Crimea is nothing more than the Russians managing their own geopolitical periphery, and so far as it has to do anything at all with expansion, it is only due to the fact that Russian power is presently contracted to levels far below what Moscow would like. America would do and has done the same thing in the event of revolutionary unrest in our neighbor states, as is evidenced by our interventions in Mexico a century ago and in Cuba a half-century ago.

The question here, I think, is what the United States is going to do about it. Part of our grand strategy since the end of the Cold War has been to keep the Russians from establishing formal or informal dominion over the former U.S.S.R. Another part has been supporting the thin veil of liberal international order that girds the power politics flowing subtly underneath in an effort to at least grant a semblance of order and harmony in international affairs. These imperatives have come under increasing pressure in recent years, but in 2013 and 2014 more than ever before. I don’t know what the proper policy response should be, but I hope it isn’t more of the lectures, gestures, and silences with which President Obama responded to the Russians in the Snowden and Syria affairs.

Jacob W. Roberts:

America is in no position to intervene nor should it.  To the western world, Putin’s actions appear nefarious, but from the perspective of many Russians he is acting well within the parameters of international law.  Professor Tatiana Akishina of USC argues that, since the prime minister of Ukraine’s semi-autonomous Crimea region has called upon Putin for military support, his intervention is in accordance with international law.  Moreover, America has intervened with greater frequency and intensity over the past century, thus it is highly hypocritical of US authorities to castigate Russia for meddling within its region.  That being said, it is somewhat disturbing to witness Russia fail to respect the sovereign rights of an independent nation.  One can only hope that Putin’s intervention into the region will be short lived.

Alessandro M. Sassoon:

There is a risk of ethnic cleansing. It starts with classification. Weeks before this conflict made the front pages of the New York Times, reports emerged that Russian-Ukrainians in Crimea were being given Russian Passports. Russians have lived in Crimea for some 200 years, and Ukraine has held the territory for half a century. Then there are the Tatars, the people for whom Crimea is an ancestral home dating back to the Mongol Khan Empire. The Tatar population, which accounts for 13% of Crimea’s inhabitants, is predominantly Sunni Muslim. Under Stalin’s Russia, the Tatars were accused of collaborating with Nazi Germany and deported en masse to other parts of Russia (read: Siberia). It should come as no surprise then that they are more keen on being governed by Ukraine than by Russia. As things stand, there are three populations with strong ethno-nationalist tendencies who inhabit a geographic area they all feel they have a historical, political, or legal claim to. Of the eight stages of Genocide, we’ve passed #5: polarization. That means preparation, extermination, and denial are next.

Sabrina Mateen:

Before this conflict, my knowledge of Ukraine consisted solely of “ex-USSR”. I assumed the region consisted of Russian natives, and that they were considered to be allies with their ex-country. However, with the news of an outbreak of civil war, it has become apparent that there are opposing nationalities, languages, and mindsets that are all helping to tear Ukraine into pieces. The conflict seems to be reaching increasingly dangerous heights as Russia begins to put pressure on Ukraine in the form of planned military drills and in one case, an unspecified military presence that looked to be Russians supporting Crimeans. Although the conflict is being called a civil war, it is beginning to seem like one of the many moves Putin has been making to restore Russia to its USSR-era square footage. It is important to see what the United States plans to do, as the Obama Administration is already under scrutiny after the ill-advised response to the crisis in Syria.  Any move from the newly war-shy United States will be seen as an escalation in a conflict that has all the makings of a new Cold War.

Kerry Collins:

Recent developments in the volatile Ukraine situation show the autonomous Crimea region voting to join the Russian Federation. Crimea has a Russian ethnic majority and is predominantly Russian speaking, so it might not come as a surprise that the region is in support of the secession. If it is what the people want, then perhaps the region should have never been a part of Ukraine to begin with. These recent moves that Crimea has made are violations of international law, which puts the United States in a tough response position. The President has been making frantic calls to Putin urging a diplomatic end to this crisis, but to no avail. Meanwhile, Putin doesn’t seem particularly concerned with US warnings. What the EU and the US bring to the table are economic sanctions, and it will be interesting to see if those “sticks” are enough to make Putin falter.

Blessed by Resources, Cursed by Politicians

The Iglesia de la Compania de Jesus, built in 1671 is Argentina's oldest church; Argentina's oldest university is on the same block. (Jacob W. Roberts)

The Iglesia de la Compania de Jesus, built in 1671 is Argentina’s oldest church; Argentina’s oldest university is on the same block. (Jacob W. Roberts)

President Cristina Kirchner’s health concerns last year are emblematic of the issues that have enshrouded Argentina’s economy and political scene for the past half-century. Over the past few decades Argentina has suffered economic crises, political scandals, and national tragedies. From a failed invasion of the Falkland Islands to the La Guerra Sucia (The Dirty War), in which the Argentinian military killed thousands of its own citizens and kidnapped thousands more infant children, the land of silver has had its share of national embarrassments. More recently in 2001, an attempt to peg the Argentinian peso to the US dollar resulted in default, runs on banks, and an enduring distrust in their financial system.

This distrust continues to manifest itself today. So much as stroll down Florida Street in Buenos Aires and shout, ‘Yo tengo dólares’ and you will be attacked by swarms of porteños (people of Buenos Aires) desperate to buy American currency for many pesos above the government-regulated exchange rate. Even a decade after the economic crash, there remains tremendous distrust in banks. Many Argentinians choose to stash loose cash under their mattresses rather than confront the risk of entrusting it in a financial institution.

Cristina’s leadership has hardly put her citizens’ fears to rest. Over a year ago, she expropriated YPF, a Spanish-owned oil company that her husband sold the rights to decades earlier while governor of Santa Fe. Curiously enough, the money from this deal has never resurfaced. As if encroaching on international law isn’t enough, Cristina has sought to alter the constitution to eliminate the term limits that prohibit her from seeking re-election. While she did not hesitate to dole out welfare benefits to the poor prior during the 2011 election, she was quick to scrap these pay outs following her successful re-election.

In spite of the billions of dollars in agricultural products and commodities being exported to China and other nations in recent years, little of this money has led to domestic development. Driving from San Isidro into the capital, one will pass by thousands of impoverished Argentinians squatting in sevillas, shack-like dwellings constructed out of discarded metal, wood, and concrete. Critics of Cristina are quick to point out that when Cristina entered office there were only one-story shacks in this shantytown, but now it is hard to find a single shack under three-stories high.

These failures as both a nation and as an economy are difficult for many Argentinians to face. Their sense of national pride is nothing to scoff at. In the 1980’s there was a common saying in Europe that one should buy an Argentinian for what he is worth and sell him for what he thinks he’s worth. Even a century after Argentina’s position as the hegemon of the Americas was usurped, many still feel as though their nation is destined to regain its past glory. What few Argentinians will deny is that their country is a land blessed by resources and cursed by politicians. From Peron to Cristina, there have been many crises of leadership. Only time will tell if Cristina’s inevitable downfall will lead to a century of progress and internal development or continued stagnation and corruption. Until then it would be unwise to make any large deposits into El Banco de La Nación.

What’s Eating Brazil’s Rapid Growth Rates?

A demonstrator tries to stop the riot police during one of many protests around Brazil's major cities in Rio de Janeiro June 20, 2013. Tens of thousands of demonstrators marched through the streets of Brazil's biggest cities on Thursday in a growing protest that is tapping into widespread anger at poor public services, police violence and government corruption. REUTERS/Sergio Moraes

A demonstrator tries to stop the riot police during one of many protests around Brazil’s major cities in Rio de Janeiro June 20, 2013. Tens of thousands of demonstrators marched through the streets of Brazil’s biggest cities on Thursday in a growing protest that is tapping into widespread anger at poor public services, police violence and government corruption. REUTERS/Sergio Moraes

Only a few years ago Brazil was on the rise. Both a BRIC country and economic the superstar of Latin America, Brazil enjoyed fantastic growth rates as it rode the wave of a commodity boom. With a young population and many untapped growth opportunities, Brazil seemed poised for continued growth and prosperity.

Unfortunately, even the commodity king of Latin America is not immune to an economic malaise. In contrast to its impressive 7.5% growth rate in 2010, Brazil puttered along at a meager 0.9% in 2012. While growth rates are forecast to rise in 2014, social unrest abounds. Just last year, protesters took to the streets in response to hikes on bus fares and corruption scandals in addition to a general outrage for exuberant government spending on stadiums for the upcoming World Cup and Summer Olympics.

The protestors’ indignation is understandable but would be better directed at failed policies and excessive government spending than at publicized scandals. A whopping 11.3% of Brazil’s GDP is spent on public pension plans, comparable to OECD European nations with much older populations. Its public spending, which amounts to 38.5% of GDP, rivals that of many developed countries.

Opponents of austerity will counter that the anti-poverty policies embraced by former President Luiz Inácio Lula da Silva, or “Lula” for short, lifted nearly 25 million Brazilians out of poverty. Now close to half of Brazil’s population lives in the middle class, and while real income has increased by only 20% for the 10% wealthiest Brazilians, its poorest 10% have seen their real wages double in the last decade. So long as Brazil finds other paths to economic growth, such expensive state intervention can be sustained.

Brazil’s best shot at stimulating growth rates lies in meaningful reform. A disproportionate amount of Brazil’s education spending is lavished upon institutions of higher learning. More of this money should be spent on primary and secondary schooling, and less of it should go to teacher’s pensions, which are unsustainably high.

Reallocation of money from its inflated pension system to investments in infrastructure could pay enormous dividends to Brazil’s economy. While Brazil’s agricultural and commodity production is globally competitive, it is stymied by exorbitant transportation costs that eat up as much as 22% of the costs of production. Improved roads and developed transportation systems could work to alleviate this inefficiency.

Policy makers should also work to streamline its onerous tax code and customs procedures. Doing so would sharply curtail exportation and production costs, in turn bringing Brazilian products to a higher echelon of competitiveness. At the moment, manufacturing costs are continuing to rise while technological advances in production are stagnant. A concerted effort by policy makers to cut manufacturing costs does not need to be a priority, but should be on the backburner as a way of diversifying Brazil’s national income.

These barriers to economic growth are easily remedied. If President Dilma Rousseff or her successors adequately respond with sound economic policies in the coming decade, Brazil will be well on its way to solidifying its place as a world economic power. With a high national birth rate, copious amounts of land and resources, and countless opportunities for reform and infrastructure development, Brazil’s prospects are excellent. In the end, it is not a question of whether Brazil’s economy will continue to grow, but whether its government will allow it to.

Deciphering The Third Plenum Report

The Key to Addressing Reforms When You Have No Intention of Implementation

18th National Congress of the Communist Party of China

18th National Congress of the Communist Party of China. By 东方 [Public domain], via Wikimedia Commons

The hardest thing about running an authoritarian regime is assuaging the population’s desire for reform without actually doing so. It’s a tricky tightrope act that only the most agile of leaders can master. China’s recent Third Plenum of the 18th Party Congress captured this balancing act in action. Unlike the Third Plenum of the 11th Congress in which Deng Xiaoping clearly articulated a set of free-market, economic reforms, this most recent meeting was a charade. The document released after their three-day meeting, known as the Plenum Communiqué, contained some legitimate calls for change. The only problem was that even in its original language the document is incomprehensible; it lacks coherent solutions and legitimate policy reforms. A drug addict with a monkey stenographer might have been able to pound out a piece of similar – or perhaps greater – substance.

To be fair, identifying necessary reforms in a country plagued by environmental issues, social and economic inequality, and political malfeasance is no easy feat. If Xi Jinping, Li Keqiang and their band of merry men released a statement with too many calls for reform and policy changes, the bar would be set unreasonably high. At the same time, if in the Third Plenum they called for insufficient changes there would be tremendous public outrage that might precipitate political activism.

In this case, being vague is the best approach. If China’s leaders prescribed legitimate reforms for their economy and political systems, just think of the instability it might prompt. The millions of migrant workers who are denied health insurance, educational opportunities, and economic freedom would get overexcited. Calls to curtail environmental pollution would give the millions of Chinese who live in cities with toxic PM 2.5 levels such a sense of relief that they might pass out on the streets during rush hour, dying of asphyxiation from exhaust fumes. Discussing democratization or even more transparency in government might distract Foxconn workers from assembling iPads. It is clear that rushing into reforms without proper thought and consideration is a bad decision for a country still in the early phases of development.

Engaging In Premature Reform is Dangerous

For now the safest way to engage in reform is by avoiding said reform at all costs. They say the longer you wait for policy changes the better they feel. The right time for reform implementation, however, remains unclear. One can’t simply engage in pre-hegemonic reform. At the moment, the party is simply waiting for that special generation to come along. The wait of course will be worth it.
China’s 18th Party Congress can’t be upfront about the fact that reforms may be only attainable in the far-away future. China’s 1.3 billion people are bursting with all kinds of desires to experiment politically, economically and socially. If China was too upfront about its intention to postpone reform, there might be a nasty schism and nationwide protests. And it isn’t that the Communist Party doesn’t want to reform with its people. It just doesn’t feel ready.

How to Lead on Your Population in the Most Effective Way

Sure you can’t engage in it, but you definitely can talk about it. Even just saying the word over and over can excite your countrymen enough without succumbing to their desires. It’s for this reason that in the Plenum Communiqué there was a lot of mention of reform and other words that are sure to excite its disgruntled, frustrated citizens. According to a press release by the Beijing News, no prior Third Plenum report had as many uses of the word ‘reform’.

The Plenum stressed that to comprehensively deepen reform, we must hold high the magnificent banner of Socialism with Chinese characteristics, take Marxism-Leninism, Mao Zedong Thought, Deng Xiaoping Theory, the important ‘Three Represents’ thought and the scientific development view as guidance, persist in beliefs, concentrate a consensus, comprehensively plan matters, move forward in a coordinated manner, persist in the reform orientation of the Socialism market economy, make stimulating social fairness and justice, and enhancing the people’s welfare into starting points and stopover points, further liberate thoughts, liberate and develop social productive forces, liberate and strengthen social vitality, firmly do away with systemic and mechanistic abuses in all areas, and strive to open up an even broader prospect for the undertaking of Socialism with Chinese characteristics.

Chinese readers must have gotten excited just reading this. “Persist…”, “concentrate…”, “stimulate…” This proactive language would leave any reform-deprived person brimming with optimism, if only for a while. One Chinese blogger wrote, “In the end it’s not important whether the document is consistent from beginning to end, because everyone can find what they need in it.” So long as Chinese citizens are satisfied with their government toying with reform, the Communist Party may be able to kick the can down the road and refrain from true policy changes for some time. Sure, citizens’ reform frustrations will continue, but at least everyone can be assured that no one is rushing into any big decisions.