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Security Economy

The Missing Doctrine of Economic Warfare

Origami money gun
Origami Money Gun, Image: Dominik Meissner/flickr


This article was originally published by the International Security Observer on December 17, 2014.

The concept of economic warfare has been traditionally used for addressing the complementary economic tactics of armed conflict. In the near future it could represent a way of conducting war per se.

The balance of forces amongst states is no longer only measured by assessing the strength of conventional armed forces. The years since 1990 are often defined as the “geo-economics’ era”. Following the end of the Cold War, the economic domain has become the main criterion of measuring the state’s power, at both the regional and global level.[i] The current trend sees the balance of forces measured by economic indicators rather than by military capabilities. Hence, the confrontation amongst competitors in a certain region is often played by exploiting the points of weakness and dependencies of the opponent/s as well as putting in place financial measures aimed at damaging it or limiting its influence rather than threatening it with military means. In short, geopolitics seem to be experiencing a renaissance, heavily impacting–at times dominating–the realm of international relations due to a decrease in the likelihood of full-scale military escalations.

In effect, without the constraints of a defined world order, risks of local military escalations have become great at the point that full-scale military actions are very few while more limited interventions and/or wars by proxy have increased.

Categories
Human Rights Development Economy

North Korea: Northeast Asia’s New Tourism Hub?

This article was originally published by 38 North on 4 September 2014. Republished with permission.

At first glance, last week’s wrestling exhibition in Pyongyang seems to have been a one-off event similar to others with which North Korea has used in the past to try to shift attention away from its nuclear program. As such, it could be dismissed as little more than a dose of regime propaganda. However, this interpretation seems inaccurate. Instead, Kim Jong Un appears intent on actually developing the tourism sector to attract much needed capital inflows. Seen in this light, a group of international wrestlers fighting inside a North Korean ring and holding arm-wrestling competitions with local children can be interpreted as in line with recent efforts to attract more visitors.

Categories
Government Economy

Not Beyond Hope: Japan and TPP

 

Shinzo Abe speaking in 2012

George Bernard Shaw called second marriage “the triumph of hope over experience.” In restoring the Liberal Democratic Party (LDP) and its leader Abe Shinzo to power last month, Japanese voters seemed to be sending the opposite message: after three years of vesting their hopes in the Democratic Party of Japan (DPJ) with disappointing results, they opted to fall back on the LDP’s greater experience in governing.

Abe himself seems to have learned from his previous, unhappy experience as prime minister in 2006–2007. In his first public remarks after taking back the job in late December, he said, “There is no future for a country which has given up on growth.” The sentiment marked a refreshing change not just from the DPJ’s focus on austerity, but from Abe’s own disinterest in economic affairs during his earlier tenure in office. An older and wiser Abe is right to pay more attention to Japan’s economic health – and right that more growth is what the patient needs – but his policy prescriptions to date will not be enough to produce the lasting recovery he is hoping for.

Categories
International Relations Government Elections

Japan’s Coming Political Earthquake

Japan's Nationalists
Japan’s Nationalists. Photo: Al Jazeera/flickr

OSAKA – Japan is now confronting challenges at home and abroad that are as serious as any it has had to face since World War II’s end. Yet the Japanese public is displaying remarkable apathy. The country’s two major political parties, the governing Democratic Party of Japan (DPJ) and the Liberal Democratic Party (LDP) recently chose their leaders, yet ordinary Japanese responded with a collective shrug. But Japan’s political system is unlikely to remain a matter of popular indifference for much longer.

The DPJ first came to power in September 2009, with an ambitious program promising comprehensive administrative reform, no tax increases, and a freer hand in Japan’s alliance with the United States. But, owing to the party’s inexperience and incompetence at every level of policymaking – shortcomings that were compounded by the unprecedented devastation of the great earthquake of March 11, 2011 – the first two DPJ governments, under Yukio Hatoyama and Naoto Kan, ended with those pledges in tatters. Consequently, several dozen legislators, led by the perpetual rebel Ichiro Ozawa, defected from the DPJ, forming a new rump opposition party.

Categories
Government Finance

Venezuela – Oil Economy on Slippery Ground

Rusty oildrums, by Gabe/flickr
Oildrums, courtesy of Gabe/flickr

Will Venezuela be next to stumble into a debt crisis – ironically, a country well endowed with the world’s most sought after resource? In its most recent issue, The Economist raises this question, as rumors swirl that the Bolivarian Republic might not be able to repay its international obligations between 2012 and 2015. The possible default of one of the world’s foremost oil producers should give the international community pause although any crisis is unlikely to materialize immediately. However, as soon as oil prices fall considerably below $100 per barrel, the Venezuelan economy will be deprived of its main foreign income, and a debt crisis might not be far behind – possibly threatening  President Hugo Chavez’ long rule.

L’état, c’est Hugo

Despite high oil prices, Venezuelan GDP has been contracting for the last three years and inflation has been over 20 percent since 2007. Exports have been falling steadily and because power and water infrastructure falls short of much needed investment, Venezuelans are often forced to take cold showers. Even productivity in the state-owned oil company PDVSA has decreased by a third since Chavez took power in 1999. Chavez is infamous for his erratic behavior and his dislike of the private sector. During his 12-year rule, he has nationalized hundreds of domestic and foreign companies, closely regulated the economy and eliminated market mechanisms. In this way Chavez has paved the way for widespread corruption and inefficiency. Moreover, he has been governing by decree since December 2010, which grants him almost unlimited power to push through policies without parliamentary control. In Venezuela l’état, c’est Hugo. In this atmosphere of impunity many Venezuelan entrepreneurs have given up their businesses, and foreigners are increasingly reluctant to invest. In a recent country risk assessment Venezuela ranked 93 out of 100 – with civil-war plagued neighbor Colombia ranking a much higher 51.

The Achilles heel

As the government has successfully dismantled the private economy, Venezuela’s dependence on revenues from oil exports has increased, and imports have risen as many goods are no longer produced in Venezuela. Oil production makes up about a third of GDP and generates the lion’s share of the government’s revenue. Fluctuating oil prices are thus the Achilles heel of the whole economy. As soon as oil prices fall, Chavez might find it difficult to keep up public spending and to repay international obligations (net public debt was 29 percent of GDP in 2010). This might not only lead to a debt crisis and hamper economic growth but also to a decline in Chavez’ popularity. With plans to run again for president in 2012, he is in dire need of oil money to subsidize basic goods such as food. Otherwise the poorest will be hit even harder by rising food and living costs, with their incomes eaten up by staggering inflation – perhaps just like Chavez’ personal political future.

* For more information, please see our extensive resources on Venezuelan Energy, Economics, Politics and Security.