Phase 1 of our Editorial Plan – a phase dedicated to tracing the structural changes occurring in the international system – has thus far mostly looked at intangibles. In other words, we at the ISN have explored, in a prism-like way, the roles of future forecasting; geopolitical thought; globalization, multiculturalism, and nationalism; evolving international norms and laws, etc., in shaping the international system. Indeed, these frameworks, processes and, yes, even ideologies may be to one degree or another ephemeral, but they have all contributed to the systemic changes we have seen in the last 20-30 years. (Even future forecasting can have a self-fulfilling prophecy component to it.) Influential as all these topics have been, however, a critic might ask when are we going to get “real” – i.e., when are we going to deal with the facts-on-the-ground reality of politics and its relationship to economics? The answer is “now.” Over the next several weeks, we will look at the past, present and future of the international economic and financial systems, we will then explore their relationship to global economic development, and we will close our enquiry by analyzing the current dynamics that exist between economics, politics and war. By looking at our three-part subject again in a prism-like way, we hope to highlight how economic and financial forces do indeed provide an impetus to wholesale change in the international system.
Liberal-minded economists are usually skeptical of taxation: taxes distort markets and lead to the inefficient allocation of resources. However, some taxes are better than others, and financial transaction taxes, such as the Tobin Tax, are certainly in that category.
Now, the European Commission is getting serious about introducing a financial transaction tax. Their proposal: levy a tax of 0.1% on every financial securities transaction performed by a financial institution based in the EU.
World-renowned for its delicious chocolate, accurate watches and safe bank accounts, Switzerland considers itself an island of political and economic stability at the heart of Europe. As a measure of success, the Swiss economy survived the 2008-09 financial crisis experiencing fewer devastating consequences than other industrial countries. Switzerland was not completely immune however, as the government had to come to the rescue of the financial industry in the fall of 2008.
Fearful of the potential fallout if banking giant UBS declared bankruptcy, the Swiss government deemed it necessary to bail it out in October 2008. The rescue package included a $6 billion convertible bond issued by the government and the establishment of a fund, supported by the Swiss National Bank, into which UBS transferred toxic assets once worth around $60 billion. In view of an annual GDP of roughly $550 billion the Swiss public entered a huge financial risk by saving UBS.
Since then, the Swiss economy seems to be back on track with slow but positive GDP growth. As immigration and energy issues dominate the media in anticipation of upcoming national elections, many seem to have forgotten about the complex and unresolved risks regarding the financial sector: Banks like Credit Suisse and UBS could still push the economy on the verge of collapse: They remain ‘too-big-to-fail” and profit therefore from an implicit state guarantee.
Often in development aid, misery and natural disasters determine where the money goes. The tsunami that devastated Banda Aceh in 2004 could be seen all over the news for many weeks. The recent Haitian earthquake is still very present in many minds and may touch our conscience in such a way that we gladly give our money to respective development agencies. As a consequence, these places are swarmed with NGOs, IOs and private initiatives creating and realizing projects.
Yet, isn’t that exactly the purpose of development aid? To help people in need? Yes, but meanwhile a disaster victim in Banda Aceh receives 5 tents, 7 pairs of shoes and tons of goods of development aid for years to come, children in the poorer regions of Africa, South America or elsewhere lack the public attention to attract comparable support.
Relying heavily on organizations such as the UN Development Programme or US Aid, funding of projects in unknown and remote areas can be very difficult. It is a widespread practice that agencies, especially those which count on private financial contributions, use the “big disasters” to raise money and then redirect these funds to cross-finance smaller, less known projects in other regions. However, this practice is often prone to intransparency, fraud and improper management.
I’m writing from Bern, where I’m attending the Swiss Network for International Studies‘ (SNIS) first yearly conference. The Network was established two years ago to promote interdisciplinary research in issues of international relevance among Swiss academics.
The international relations field is still pretty new at Swiss universities. It might well be a corollary of the fact that, for much of the past century, the country’s neutrality in international politics boiled down to passivity. Several speakers at the first day of the conference reminded us that Switzerland only joined the UN in 2002.
In any case, the young Swiss’ interest in international affairs is exploding at the moment: A Geneva professor talked to me about the exponential rise in student numbers since his university launched an undergraduate program in international relations.
Here are two highlights from the first day of the conference – based on my own biased personal interests…