Wednesday, 15 April 2015

The Coronation of Hilary Clinton

Portrait by John Springs 
For the staffers who have been frantically working on the worst kept secret in Washington, the months of working out of coffee shops and crashing on relatives' couches in and around New York are as of this Sunday over.  After carefully crafting the framework of the formal campaign machine for the better part of four months, Hilary Clinton finally announced her candidacy for president in 2016 last Sunday.  Being the only big ticket candidate on the Democrats' radar for the better part of two years, her announcement came as a surprise to nobody.  And yet while several analysts have warned of the dangers of inevitability, as more of Clinton's campaign team and network of advisors are revealed it increasingly looks like the Democratic Party establishment has not only accepted Clinton but embraced her.

In the months leading up to the announcement it was interesting to note that many of the names being floated for top jobs on the campaign were veterans of the 2008 and 2012 Obama campaigns as well as recent departures from the White House.  John Podesta, who has been tapped to serve as campaign chairman was until recently a key advisor to the Obama Administration and served on the President's transition team in 2008.  Furthermore, some of the players who were instrumental in implementing Obama's youth targeted and data driven "get out the vote" initiative back in 2008 have resurfaced here in similar roles.  Obama's 2008 and 2012 digital strategists Teddy Goff and Andrew Bleeker are expected to be advising the Clinton campaign on its own plans for utilizing the Internet.  This is all in marked contrast with this point in the 2008 election cycle, where establishment Democrats were visibly split into several camps, with John Edwards, former New Mexico governor Bill Richardson, and even Joe Biden also being posited as viable candidates early on.  Compare that to now where nine months out from Iowa, Clinton has successfully monopolized the support of beltway Democrats.  And unlike the time when establishment Republicans faced open rebellion from their party's Tea Party elements in 2012, the anticipated progressive rebuke of Clinton's "establishment" credentials has so far failed to materialize.

Having gained the implicit approval of liberal champion and congresswoman Elizabeth Warren, Hilary Clinton has likely removed the final potential roadblock to the 2016 Democratic nomination.  The two other frequently mentioned candidates, former congressman Jim Webb and former Maryland governor Martin O'Malley, simply do not pose the same threat to Clinton that Warren and the progressive wing of the party do.  While it is easy to understand why Webb, a gun-loving former Reagan administration official, has limited appeal, O'Malley is a more interesting case.  He served as Mayor of Baltimore for eight years, and another eight as governor.  In 2011 he was elected Chair of the Democratic Governors Association, which he served as for two years.  Articulate, intelligent and well liked, in 2005 Business Week called him one of the Democratic Party's "rising stars", alongside Obama and current Chicago mayor Rahm Emanual.  But while Obama, then a freshman congressman, was able to launch himself onto the national stage, why have O'Malley's national ambitions largely stalled?

A fact that's largely been overlooked regarding Obama's rapid rise to prominence since first being elected to Congress in 2005 is the significant establishment backing that was required to launch his brand nationwide.  His personal story is compelling yes, but the central role of that story in his initial presidential campaign was the careful result of a DNC effort to find a message that would resonate with key swathes of the electorate.  Obama's story, that of a young, charismatic, mixed-race, Harvard Law educated freshman congressman who had spent years organizing at a grassroots level in Chicago was, in the DNC's estimation, fresh enough to mask the centre-left policy positions he shared with most mainstream Democrats.  That many of the voters targeted by Obama (students and college educated women, both of which are overwhelmingly liberal) found him "not liberal enough" just months into his administration only confirmed it.  "Change" was an intoxicating slogan, projecting the image of a political outsider as fed up with Washington as the average voter.  And yet, Obama was still at the core an establishment candidate who received backing from some of the Democrats' wealthiest donors.  Normally, the monolith that was Obama's donor base in 2008 and 2012 would be dispersed amongst several viable candidates, but instead it seems that many prominent Obama financiers threw their support behind a Clinton campaign over a year ago.

 O'Malley has stated that he is running for president, and judging from his record as a mayor and governor it is not unreasonable to think he'd be a good one.  But running a presidential campaign today means ad buys, PACs, data and staff, all of which require a fairly extensive donor network.  Having locked up vast swathes of the Democrats' donors roughly a year before the first primaries means that, barring a surprise Warren entry, Hilary Clinton has effectively iced out competition from other mainstream Democrats.  While Hilary Clinton will go to great lengths to stress that there is no "air of inevitability" this time around, party officials and donors' actions seem to suggest otherwise.  Sunday was a coronation, and make no mistake, Democrats firmly believe that Hilary Clinton is their ticket to the White House.  

Friday, 10 April 2015

Cyprus And Its Own "Grexit": A Roadmap for Greece?

Greek deputy finance minister Dimitris Mardas reassured the finance world last week that Greece would in fact meet an April 9th deadline to repay a 450 million euro IMF loan instalment on time, after comments his superior had made on television were construed by many to suggest that the country was actively considering renegading on its debt.  It did little to help already skittish investor confidence, and reignited speculation amongst many financial journalism outlets on a potential "Grexit" that is now to be expected whenever the newly installed anti-austerity government in Greece pokes its creditors in Brussels and Berlin in the eye.  But while the fracas unfolded in Athens, across the Mediterranean an unlikely and largely unheralded success story quietly wound down Monday.

in late 2012, the Cypriot government was in trouble.  Facing an over leveraged banking system exposed to (perhaps ironically) the stumbling Greek economy and an overheated real estate market, the subsequent downgrade to "junk" status of the country's debt meant that Cyprus was suddenly unable to turn to global equity markets in order to finance the stimulus and rescue packages needed to save its faltering economy.  Facing a looming default, in March of 2013 the Cypriot government agreed to a rescue package with the "troika" (the IMF, ECB, as well as the European Commission and Eurogroup representing the EU) consisting of a 10 billion euro bailout as well as strict reforms meant to forcibly instill confidence in the Cypriot banking system as well as the creditworthiness of the government.  The portion of reforms aimed at preventing a large scale exodus of money from Cyprus's banks are known as "capital controls", and were implemented in the hopes of buying more time for efforts to recapitalize the country's banking system and prevent panicked runs on the banks, which would most likely have resulted in a collapse of the system.  Initially quite strict (withdrawals from personal accounts were limited to 300 euros per day, and transfers to foreign banks were severely limited as well), the restrictions on the Cypriot euro were gradually lifted as the banks were further stabilized and confidence was slowly restored.

The measures were never popular, with leftist parties opposed to the package floating alternatives ranging from a reduction in the size of the military, a corporate income tax increase, and even outright nationalization of the banking sector.  A common theme among many opponents was resistance to what many believed amounted to EU-imposed austerity, championed by technocrats in Brussels who were only interested in preserving their economic and political union and cared little for the average Cypriot.  A blog attached to The Economist even went so far as to call the package "unfair" and "self defeating", arguing that the high political cost of such austerity preconditions for bailouts made them impractical if the EU hoped to maintain the goodwill of its constituent states.  Others worried that the implementation of such harsh measures would push Cyprus into the arms of Russia, from whom it had already received substantial financial aid.  Ultimately, it was not an easy road to recovery in Cyprus; the country's significant community of wealthy Russians who had stashed their wealth there had to be placated, and the first parliamentary vote on an assistance package failed amidst widespread protests.  And yet last month, two years removed from the bailout, a Bank of Cyprus official referred to the capital controls as "irrelevant", suggesting that the country's top economists were now confident enough in the state of the recovery that they were considering doing away with the last of the monetary restrictions first put in place two years ago, a milestone they quietly fulfilled earlier this week.

Cypriot president Nicos Anistasiades heralded that admittedly largely symbolic day as indicative of "the full restoration of confidence in our banking system and the stabilization of the economy of Cyprus."  And he's not wrong in asserting that significant progress has been made.  The flow of money within the country is now unhindered, the country has resumed borrowing (paywall) and the economy is finally expected to return to growth in 2015 after three years of recession.  While decisive action on the part of the ECB and Cypriot lawmakers no doubt played an important role in staving off a default and subsequent exit from the Eurozone, capital controls were imperative in allowing the structural issues within the economy (the banking sector's debt obligations at one point were nine times greater than the size of the Cypriot economy) to be resolved.  Despite initial public backlash, Cyprus today is in markedly better condition than Greece.  While the full extent of Greece's sovereign debt issues mean that capital controls, should they be implemented, would be in place for potentially much longer than they were in place in Cyprus, they present a more desirable alternative to the "Grexit" as a means of quarantining the country's financial troubles until a deal finally resolving the crisis is struck (or the ruling Syriza party in Greece is voted out), as opposed to continuing to simply bankroll the Greek government while subjecting it to austerity measures which are doing little to improve the long term viability of the country's economy.  But given how the Bank of England has all but thrown in the towel when it comes to Greece, it remains to see how much appetite remains amongst the EU's other core economies, especially Germany, for continued support in order to stave off a Greek default, especially given the latter's penchant for creative schemes aimed at alleviating its strict bailout conditions.  Barring a significant change in tune from the government in Athens however, its looking highly unlikely that a currency quarantine will be given a chance to help rectify the country's long running debt issues.    

Sunday, 5 April 2015

Russia's Love Affair With Europe's Far Right

A Cossak confronts a demonstrator (Associated Press)
Russia under President Vladimir Putin has forged an unusually aggressive foreign policy, a fact widely circulated in Western news media.  What has received little coverage outside of think tank and NGO circles however, is the full extent to which Putin and his inner circle have consolidated power within the country.  While military expenditures have increased significantly since Putin first took office in 1999, it has been accompanied by brutally effective asymmetrical tactics, which although successful at resolving internal conflicts like in Chechnya, have eroded civil liberties and subverted the democratic process to such a degree that in some aspects Russia now resembles North Korea as a crony-capitalist kleptocracy masquerading as a democracy.  Why has nothing or nobody, neither domestic nor otherwise, been able to put a significant dent in Putin’s seemingly imperial and authoritarian ambitions?

The 1990s were a tumultuous time for the then-nascent Russian Federation.  Still smarting from the breakup of the Soviet Union, which many blamed on the weakness of final Premier Mikhail Gorbachev, and plagued by civil strife, many in the country were understandably not optimistic about the future.  Radical privatization (dubbed “shock therapy”) of the Soviet era economy by Western-backed President Boris Yeltsin, whose supporters were pushing for rapid implementation of free market reforms, had resulted in the now infamous “cash for shares” fire sale of state-controlled assets at a fraction of their value to a small group of Soviet era political elite.  Global recession in 1998 exacerbated Russia’s economic woes, and brought the ruble to the precipice of collapse.  Yeltsin’s government underwent a period of significant political turmoil, with Yeltsin appointing several Prime Ministers in quick succession.

This was the scene in Russia when the world was first introduced to Vladimir Putin, then a largely unknown politician with roots in the foreign intelligence community.  Yeltsin spoke very highly of the technocrat-turned-Prime Minister, once even proclaiming Putin his heir presumptive.  Almost as if he was making good on a promise, Yeltsin abruptly resigned not much later, making Putin Acting President.  And so began a stranglehold on power which is now entering its 15th year.  During his time in office Putin has proven himself a master at populist politics, deftly weaving a network of support amongst seemingly disparate segments of Russian society.  By embracing revered institutions such as the military and Orthodox Church and tapping Russia’s proud military tradition, he has been able to propagate a myth that the country is under attack from a Western conspiracy; that the economic hardships of the 1990s was the result of seeking rapprochement with the West.  Putin has cast himself as a defender of the proverbial “Motherland” from foreign meddling, a theme increasingly prevalent in almost every facet of Russian policymaking today.  A “gay propaganda” law pushed through the Duma last year included clauses which seemed to insinuate that the Russian government viewed same-sex rights activists as foreign agitators.  Liberal minded opposition media outlets are regularly accused by what are likely Kremlin-backed “internet trolls” of parroting the American line. Conflating the fiercely nationalistic rhetoric of his supporters with “patriotism” has allowed Putin to virtually silence his opposition and justify actions within the purview of his agenda which otherwise would not be deemed acceptable.  Much like how the Cold War was a clash of ideologies, Putin has framed cold relations with the west, domestically at least, as a clash of values.  His brand of “leadership” has been lauded on Fox News, and provided as a contrast to President Obama’s purported weakness.  His methods have proven successful in stifling dissent and sending his popularity domestically soaring, but have left Russia isolated as the Kremlin’s foreign policy goals have alienated the West.  And yet for years Putin has quietly championed a policy that is only now beginning to bear fruit.

A peek inside the conference. (Associated Press)
What may turn out to be an auspicious day for Russian foreign policy began in decidedly unsexy fashion on a dreary Sunday last month.  The inaugural Russian Conservative Forum kicked off as leaders of North American and European right wing parties gathered at a Holiday Inn in downtown St. Petersburg to ostensibly advance the brand of global conservatism.  And yet there was quite possibly nary a discussion of conservatism to be had.  Delegate after delegate tripped over themselves to declare their disgust with the supposed “European” and “American” way of life, and all of its homosexual, multicultural, globalized trappings; it was no coincidence that each party was essentially parroting Vladimir Putin’s agenda.  While his name was not attached to the meeting, it was hard to ignore the influence his United Russia party exerted over the proceedings.  The assembled parties were an array of distasteful ideologues which included Greece’s borderline neo-Nazi Golden Dawn and Italy’s Forza Nuova, amongst the more vanilla attendees.  Guests at what amounted to a fascist pep rally also included Holocaust deniers, Nazi sympathizers, and a Russian skinhead notorious for beheading a puppy in the name of publicity.

It is not surprising that this gathering was reminiscent of “Communist International”, an association of communist parties founded as an instrument of Soviet control over international communism back in 1919, a period of hostile relations with the West.  Internationally isolated, Lenin and his bolsheviks turned to the forum as a means of finding support and allies abroad.  While the first congress was attended almost exclusively by Soviets and had few foreign delegates, the organization soon came to be recognized as the face of international communism.  Reports indicate that today Russia is engaging in a similar campaign of currying favour amongst ideologically friendly parties not just in neighbouring countries but in western Europe as well.  Confirming what various reports and papers say, the French right wing party Front National admitted to taking a roughly 9.5 million euro loan from a state controlled Russian bank.  The FN went on to make unprecedented gains in last year’s European Parliamentary elections, forming a substantial pro-Russia bloc within European Parliament, a decent return on investment.  Under Putin, the Kremlin has sought closer relations with an array of far right political parties, from Hungary’s Jobbik to Austria’s Freedom Party, to Belgium’s Vlaams Belang.  Many backed Russia’s 2008 invasion of Georgia, and last year declared the referendum on Russian annexation of Crimea legitimate which begs the question; why would such fiercely nationalistic parties seemingly contradict themselves by unquestionably following the lead of another country?

 The answer has less to do with fascism, Russia, or even conservatism and more to do with political marginalization and hatred of a U.S and EU pecking order they feel their own countries are beholden to.  Hence the defiant policymaking and disdainful regard for both displayed by Vladimir Putin has won him many admirers amongst Europe’s far right, and made Kremlin funds much more effective at achieving its goals.  Having smartly nurtured such parties for years, rampant anti-EU sentiment amongst many Europeans over the past year or so mean that Moscow is just now beginning to cash in on its far right strategy.  As these parties increasingly score significant victories at the polls, actions like further Russian sanctions or even renewal of current ones might eventually become quite difficult.  Russia didn’t create Europe’s far right but Moscow cultivating vocal allies willing to sing Russia’s praises in European Parliament and legislatures across the continent is a classic case of my enemy’s enemy is my friend.