Shadow Government

Diving into summitry

So far as I know, there is no summit taking place at the moment to address Europe's problems (the Euro2012 quarterfinal between Greece and Germany doesn't count). Given the frequency of meetings between leaders --- the G20 earlier this week, a major European summit next week -- it would seem easier just to report when the leaders have retreated to their own capitals to regroup.

One can hardly begrudge the European leaders their meetings; there is no global economic issue more pressing than the looming euro crisis. But it is worth keeping the frequency in mind when we try to determine whether big, expensive global conclaves accomplished anything. So how should one grade a summit?

In the spirit of next month's London Olympics, I think it would be appropriate to adopt the diving approach of adjusting scores for the degree of difficulty. If Olympic divers perform only elementary dives, with nary a flourish, they will not end up on the podium.

Summitry has its equivalents. The Obama administration emerged from the G20 summit in Los Cabos, Mexico claiming progress; they had impressed upon their European colleagues the urgency of resolving the crisis.

Judges say: Reasonably executed, but negligible degree of difficulty. The Europeans were aware they had a crisis. It's been in all the newspapers. They understand how serious it is; they live there. Yes, there will be negative repercussions for the rest of the world when the euro splits apart, but the potential for repercussions had already fully grabbed their attention.

What else? Per Reuters:

"Euro area countries pledged to "take all necessary policy measures" to safeguard monetary union. Europe also intends "to consider concrete steps towards a more integrated financial architecture", including common banking supervision, bank recapitalization, winding down of failed banks and guarantees for bank depositors..."

Judges say: Yawn. There was a time when this maneuver would have drawn delight from the crowd. Markets would have rallied for days on promises to ‘do what was necessary,' to ‘consider concrete steps' (ever so much better than considering feeble steps). But now one must do more to impress.

The European crisis certainly features a loss of confidence among investors and the public, but it is not exclusively about a loss of confidence. President Obama seemed not to grasp this, when he enthused about summit pledges "breaking the fever" gripping Europe. There are real and pressing problems that require substantial resources and dramatic shifts in sovereign powers. Far too many previous summits ended in "plans to have a plan" or statements of resolve and good intentions. Market critiques have become increasingly discerning.

When earlier this month European governments announced an actual plan to direct real money toward salvaging Spanish banks, the market soured on it in a matter of hours, as details became available. The problem was not the plan's evanescence, it was that the resources for the bailout were being added to the tab of the Spanish government, which was already overburdened. Further, it looked likely that these new loans would take precedence over old loans and thus worsen the already gloomy outlook for holders of regular Spanish government debt.

So what could our avid summiteers do to impress? The problem is sufficiently complex that it probably cannot be solved over a weekend of bilateral chats. But it is worth keeping in mind the three dimensions of the crisis:

  • Banking: The proximate cause of Spain's problems is its teetering banks, who continue to suffer from plunging real estate prices. Other European banks are stuffed with dubious sovereign debt. They are all trying to raise capital as their stock prices sink.
  • Sovereign debt: Greece, Ireland, and Portugal have already required bailouts. Italy and Spain are seeing steadily increasing costs when they try to borrow from markets. As the third and fourth largest euro zone economies, respectively, a full bailout does not look feasible.
  • Growth and employment: When economies shrink, tax receipts fall, deficits grow, and people suffer. Unemployment in Spain and Greece exceeds 20 percent.

Back to our exacting judging. To get a high score, you have to nail all three of these. The problem with the recent Spanish bank bailout was that it addressed the first while worsening the second. The problem with grand austerity plans is that they address the second while neglecting the third. The problem with ambitious plans for a growth agenda is that they address the third while worsening the second.

In the midst of such an intricate challenge for our euro zone performers, having outsiders lecture them on the seriousness of the problem might even come across as annoying. By these standards, the G20 summit did nothing to pull the euro zone out of its dive. Since leaders managed to paper over their differences and preserve the appearance of comity, we can score it as a straight, simple entry into the water, rather than a belly flop. But no need to stick around for the award ceremony.  

Phil Levy

Shadow Government

Why more nuclear weapons is not the answer

The political scientist Kenneth Waltz, who is known, among other things, for his view that nuclear proliferation is a good thing, recently weighed in on the subject of Iran. Writing in the pages of USA Today in advance of an article in Foreign Affairs, Waltz argues that, "a nuclear-armed Iran would probably be the best possible result of the standoff and the one most likely to restore stability to the Middle East."

Waltz writes that diplomacy and sanctions are unlikely to convince Tehran to abandon its quest for nuclear weapons, concluding that, "a country bent on acquiring nuclear weapons can rarely be dissuaded." He similarly dismisses the possibility that Iran could stop short of producing nuclear weapons, arguing that leaders in Tehran would see a "bomb in the basement" as an insufficient deterrent to Israel. Rather, he believes the most likely future as one in which Iran overtly acquires a nuclear weapon.

Such a diagnosis is hardly unique. What is likely to grab attention is his prescription. He argues that Iranian nuclear weapons would be a good thing for the stability of the Middle East. In his words, "policymakers and citizens worldwide should take comfort from the fact that where nuclear capabilities have emerged, so, too, has stability. When it comes to nuclear weapons, now as ever, more could be better."

Waltz is a serious scholar, and his argument deserves serious attention, even if his embrace of nuclear weapons is the sort of thing that makes policy-makers doubt the value of the academy in policy debates.

As befits an international relations theorist, his arguments about the prospects and consequences of proliferation are categorical. Sweeping statements are fine when it comes to theory, but Waltz's assertions regarding proliferation all too often collide with the facts.

In fact, as Waltz concedes later in the piece, the spread of nuclear weapons is hardly inevitable. Over the last seventy years, a number of countries -- including Argentina, Brazil, Sweden, South Korea and Taiwan -- launched nuclear weapons programs only to abandon them because of foreign pressure and domestic political change. South Africa fielded a nuclear arsenal only to give it up for similar reasons. Most recently, Muammar Qaddafi gave up Libya's nuclear program in response to a series of carrots and sticks. And contrary to the arguments of some, governments have used force to interdict a country's nuclear ambition, including Israel's 1981 attack on Iraq's Osirak reactor and its 2007 attack on Syria's Al Kibar reactor. As Sarah Kreps and Matthew Fuhrmann show in an article in The Journal of Strategic Studies last year, peacetime attacks on nuclear facilities can delay proliferation, particularly when launched well before the nuclear threat is imminent. Such attacks are, however, the least legitimate under international law and are thus most likely to elicit censure.

If Waltz's fatalism regarding the acquisition of nuclear weapons is misplaced, then so too is his optimism regarding the impact of nuclear possession on state behavior. Not all states are alike. Nuclear weapons in the hands of North Korea or Iran are of far greater concern than those in the hands of Israel or India. Nor would all would agree with his assertion that "fears of proliferation have proved to be unfounded." The world is a more, not less, dangerous place because of North Korea's possession of nuclear weapons, and it would be an even more dangerous place should Tehran get the bomb.