Agents of Imperialism? Bolivia Expelled USAID

I have become captivated by the twists and turns of the Edward Snowden real-life spy caper. While the original accusation that the US was using its advantageous position in the Internet infrastructure to spy on its own citizens and its allies was expected--absolute power corrupts absolutely--its unfolding implications are far more interesting. Call it Frederick Forsyth...on crack. The IPE implications I've covered in some detail, from Ecuador unilaterally disavowing trade preferences given to it by the US to European lawmakers deliberating on whether to delay the start of EU-US FTA negotiations. The latest word is that EC President Manuel Barroso wants negotiations to occur alongside investigations of American spying. The sideshow is at least as interesting: I enjoy the (calculated) titillation as that master of self-promotion, former Russian spy Anna Chapman, has offered to marry spyboy / boytoy [!?] Edward Snowden and thus grant him rights to remain in Russia.

Back in Latin America, though, we recently had this misadventure of Bolivian President Evo Morales being harassed on his flight home from Russia by European nations France, Italy, Portugal and Spain--allegedly on suspicion that the Latin leftist may have been flying Snowden to Bolivian asylum. Just as spying has created a US-EU row, so too has perceived maltreatment of a Latin leader occasioned (surprise!) yet another continental conflict between the US and the Latin left. Where's Che Guevara when you need him--or Fidel Castro for that matter?

The story above pointed out something I was not previously aware of, though. Did you know that Bolivia expelled the US Agency for International Development (USAID) just last month? Just a short time ago Russia did the same as it was wary of the agency's "democracy promotion" agenda when it ought to have stuck with the task of development instead. Besides, who the heck needs all of that tied aid, anyway? At any rate, different country...same result. From Missus Clinton's favourite media outlet:

Bolivian president Evo Morales has expelled the US development agency from his country for allegedly seeking to undermine his leftist government. Morales claimed on Wednesday that the USAID is involved with "alleged political interference in peasant unions and other social organisations." He made the announcement before a crowd outside the presidential palace during a May Day rally. "Never again, never again USAID, who manipulate and use our leaders, our colleagues with hand-outs," Morales said in announcing the expulsion.

Given the United States' history of interfering in Latin America, you'd think USAID would have been more circumspect about "democracy promotion": fiddling with organized groups and so on. As with many things involving these parties, there is no real moral to the story, US protestations notwithstanding. Americans can be meddlesome hypocrites, while Latin blowhards like Morales blame the Latin left's repeated failures to lift their countries out of poverty on US interference. Same old, same old.

There are no protagonists here, but it does make you wonder if Morales has set himself up for additional harassment by expelling USAID.

Cengage

Over on his blog, Paul Krugman calls attention to the Cengage bankruptcy.  I am not sure why he thinks this event is noteworthy.  He seems to do so because Cengage is the publisher of my favorite textbook. I suppose it is schadenfreude on Paul's part.

If you are interested in the topic, I suggest you read this article.  The short story is that this is a Chapter 11 bankruptcy (a reorganization), not a Chapter 7 bankruptcy (a liquidation).  These are very different things. In this case, the equity holders are being wiped out, and the debt holders are the new equity holders.  Otherwise, not much is happening.  As the article states:

The transaction is expected to be largely a non-event for others doing business with Cengage. The company has permission from the lenders to keep using cash flow from operations to fund the business, and expects to keep paying vendors, authors’ royalties, and employees on schedule. (Since Cengage has substantial cash balances—a vendor Frequently Asked Questions document estimates the company’s liquidity at approximately $280 million—and expects to generate positive cash flow, it does not need debtor-in-possession financing.) The company plans to keep delivering orders in full, is not planning to renegotiate any customer contracts except as they expire as usual, and is continuing to launch new products.

So if you are a user of my favorite textbook, rest assured that it is business as usual.

With (Spying) Friends Like US, Who Needs US-EU FTA?

It seems the Yanks have gotten themselves into yet another fine mess with their Internet Unfreedom spying activities. [Hello NSA lackeys, I hope you're enjoying yourselves reading this post in between surfing porn sites.] Over the weekend, Der Spiegel added fuel to the fire over the US National Security Agency spying on Internet communications of American friends and foes alike. (Do the Yanks treat them all that differently?) Alike most everyone else, the Germans have come under massive surveillance:

The documents prove that Germany played a central role in the NSA's global surveillance network -- and how the Germans have also become targets of US attacks. Each month, the US intelligence service saves data from around half a billion communications connections from Germany.

However, linguistic ties being paramount, there is a set of favoured Anglophone nations who are exempt from a thorough covert investigation from the American spooks:

No one is safe from this mass spying -- at least almost no one. Only one handpicked group of nations is excluded -- countries that the NSA has defined as close friends, or "2nd party," as one internal document indicates. They include the UK, Australia, Canada and New Zealand. A document classified as "top secret" states that, "The NSA does NOT target its 2nd party partners, nor request that 2nd parties do anything that is inherently illegal for NSA to do."

The allegations right before US-EU FTA are scheduled to start. European responses thus differ based on the amount of spying each nation is purportedly subject to. The French are obviously up in arms over the idea that they should ink a free trade agreement with those stealing sensitive information from Europeans:

The spying allegations come just days before trade negotiations between the U.S. and the EU are scheduled to start on July 8. But [French President Francois] Hollande raised doubts about the talks, saying there should be no negotiations with the U.S. on any matter until it guarantees that it is not spying on its European allies. "We cannot have any negotiations or deals in any domain unless we've gotten these guarantees for France, and that goes for the EU as well," Mr. Hollande said.

However, the Brits who have not been targeted as much are more relaxed about the issue, saying the trade talks should continue anyway according to a UK spokesperson. Still, particularly alarming to the Europeans are claims that spying on the European Council building is widespread and unabated in their own lands:

The EU security experts managed to pinpoint the [spying] line's exact location -- a building complex separated from the rest of the headquarters. From the street, it looks like a flat-roofed building with a brick facade and a large antenna on top. The structure is separated from the street by a high fence and a privacy shield, with security cameras placed all around. NATO telecommunications experts -- and a whole troop of NSA agents -- work inside. Within the intelligence community, this place is known as a sort of European headquarters for the NSA.

A review of calls made to the remote servicing line showed that it was reached several times from exactly this NATO complex -- with potentially serious consequences. Every EU member state has rooms at the Justus Lipsius building for use by ministers, complete with telephone and Internet connections.

Ultimately, if serious objections are raised to the US-EU FTA over American espionage, they will likely come from the European Parliament instead of the European Council despite the latter coming under more direct American data attacks. Post-Lisbon Agenda, the European Parliament has expanded powers to turn down free trade deals--especially over human rights violations such as violating the privacy of Europeans. While the Americans can probably gain the acquiescence of European leaders through the time-tested way of buying them off in any number of ways, such a trick is harder to do with the more heterogeneous and newly assertive European Parliament given its increased discretion.

The EU Parliament used to be pretty lame, but it has since gained authority in certain respects. Unfortunately for the Yanks, these include again basing FTAs on human rights criteria. Martin Schulz, the current [German Social Democrat] president of that body, is certainly annoyed by the spying:

The head of the European Parliament has demanded that the United States provide full clarification over a report disclosed by American whistleblower Edward Snowden alleging that Washington spied on EU offices. Martin Schulz said on Saturday that the revelation would have severe impacts on the ties between the EU and the US if proven true.  

“On behalf of the European Parliament, I demand full clarification and require further information speedily from the US authorities with regard to these allegations,” Schulz stated.

At the very least, expect greater European Parliament scrutiny of these so-called "friends" of theirs in trade negotiations. After all, with lying and spying friends like the US, who needs enemies? 

UPDATE: France is suggesting that the US be given a "time out" by delaying US-EU FTA negotiations by two weeks. However, the European Commission does not agree. As I said earlier, the most likely source of disapproval will come from the European Parliament. That will happen later on assuming that the US and EU come up with something they believe domestic audiences shall sign up to.

The social pressure of overborrowing

The recent financial crisis has highlighted the sometimes very poor financial choices of households, in particular overborrowing. What leads people to borrow beyond their means or to take excessive risk of default or bankruptcy? Is it because of predatory lending with perverse incentives for loan underwriters? Plain stupidity of the borrowers? Or rational exuberance?

Dimitris Georgarakos Michael Haliassos and Giacomo Pasini look at Dutch data and find rather something that looks like social pressure. Indeed, they find that borrowing is heavier among those who consider themselves poorer than their peers. In other words, they are trying to keep up with the Jones in the sense that they want to display the same material wellbeing as their peers, on a borrowed dime. I do not know how much peer pressure there is in the Netherlands, but I can imagine a series of countries where such pressures would be important, where you need to fit in by having the right car or the right house, or by taking the right vacations. And it seems unavoidable that some people will overextend themselves in such an environment.

Ecuador's Eco-Econ Gimmick: Pay Us NOT to Drill

Ah, Ecuador, home of central bankers with fake degrees and would-be destination of Edward "And the Truth Shall Set You Free" Snowden. Regardless of its harrumphing and chest-thumping, there's no getting away from the fact that Ecuador is a really, really hard-up nation. Just a few days ago, some faction of the Ecuadorian government claimed that it would unilaterally walk away from trade preferences given to it by the United States. More recently, though, Rafael Correa has implied that no such thing will happen and that Edward Snowden is not being granted asylum in Ecuador. Can't afford to upset the flower growers who provide one of Ecuador's few sources of foreign exchange, right?

So what is it, really? Let's just say these guys lurch from flights of fancy to the cold light of reality in the blink of an eye. Speaking of which, our friends over at the Bulletin of Atomic Scientists have an interesting feature wherein Ecuador's government--supposedly mindful of the environmental consequences of oil drilling but dependent on oil revenues at the same time--has a unique gambit to solve the environment / state revenue quandary. Get this: it is asking others to pay it NOT to drill, baby, drill in its ecotourism sanctuary known as Yasuni National Park:

This poses a quandary for Ecuador, a poor country that relies heavily on oil exports for income but is also an eco-tourism destination. As oil development continues to push deeper into the Ecuadorian rainforest, the government has put forth a unique proposal to protect a still-pristine tract covering about 700 square miles: It has invited other nations—most pointedly, those that grew rich on fossil fuels and are now worried about global climate change—to pay to leave the oil underground. At a time when the United States and other relatively wealthy nations are doing far too little to combat climate change, Ecuador’s proposal represents an innovative way to reduce emissions, and to protect habitat for monkeys, other wildlife, and indigenous humans in the process...

One-fifth of Ecuador’s known oil reserves are located beneath the three easternmost blocks of Yasuní National Park—the Ishpingo, Tambococha, and Tiputini sections, collectively known as ITT. They lie beyond the Tiputini Biodiversity Station in a remote area populated by only a few small groups of native people, some of whom live in voluntary isolation from the rest of the world. In a proposal called the Yasuní ITT Initiative, Ecuadorian president Rafael Correa has offered to forego oil drilling in these blocks in exchange for $3.6 billion from the international community. In so doing, the country would leave some 850 million barrels of oil untouched, and about 400 million tons of carbon dioxide un-emitted.

And how many takers have there been for this blackm...indecent prop...flimf...rack...I mean, financial arrangment? Few and far between. You see, it estimates the value of its 846 million barrels of recoverable oil in Yasuni National Park at $7.2 billion. If it collects half this amount in contributions for it not to drill by 2024, it won't do so. Otherwise, you know the, ah, drill::

The initiative was announced in 2010 and is hugely popular within Ecuador, but only a few European and South American nations have agreed to support it, promising about $50 million to the fund so far. Major outreach efforts just began this year, though, and Ecuador has a 13-year timeline for reaching its $3.6 billion goal.

The financial details on this fund to keep Ecuador from drilling are hosted by UNDP. You can even make a donation there if you wish. Me? I am generally sceptical of all things that have the words "official" and "Ecuador" in some combination.

Maybe that Snowden guy will "expose" the contrivances behind this plot if and when it becomes evident to him that he's been well and truly spurned by Ecuador.

The New CEA Chair

Click here to read my column in Sunday's NY Times.

Byebye Google Reader

Goodle Reader is set to close on Monday, and like me many have complained about the selfish decision of Google to trim services that are not profit making. People were hoping Google would reverse its decision given the loss of goodwill, but to no avail.

While I have a good substitute in the Old Reader, one can wonder what less substitutable Google service could be next on the choppimg block. That would be a service that provides little ad revenue and little information useful for ad optimization. Among the services I find most useful, Gmail and Google Maps seem safe. Google Scholar is not, as I do not see how Google an find something profitable in this rather niche product. But at least there is a good substitute for economists. Google Translate. however, has no viable substitute and I see no business case for it.