November 2011 Issue 1 路 Free
international affairs magazine
age of
the new
auster ity 9
the 2 1 econo st-centur y mic p ill
of the Attack utical aerona drones
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Iceland: the debt blame ga m
e
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The sidef o s effect y austerit s measure
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November 2011 · Issue 1
Editorial staff Editor-in-Chief Reid Standish Interaction Editor Alexander Dirksen Design Editor Adam Cristobal Copy Editor Erika Zell Web Coordinator Andrew Kumar
The Hidden Transcript is a student-run publication
This issue’s writers Timothy Choi Alexander Dirksen Tiffany Grendle David Proctor Reid Standish Erika Zell
which aims to create a dialogue between SFU students on pressing international issues. Founded in summer 2011 by a small group of likeminded students, the magazine exists to facilitate discussion and provide unique analysis on the wide array of political, social, and economic issues that are currently seen across the globe. Inspired by the work of acclaimed anthropologist and political scientist James C. Scott, The
We would also like to thank Elite Planning Group Nick Standish SFU School for International Studies
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Hidden Transcript exists to engage with students and focus on current events, while exposing the theories behind common narratives and discussing ideas that are currently shaping the world. In doing so, the publication seeks to bring the ‘hidden’ elements of international affairs into the public domain, and counter popular assumptions, while bringing new insights to light. What follows is the inaugural issue of The Hidden
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continued blog posts, articles, videos, and analysis. Thank you for your support. — Reid Standish, editor-in-chief
THE HIDDEN TRANSCRIPT
The trillion dollar question Is austerity the answer to the world’s current economic woes?
November 2011 · Issue 1
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Alexander Dirksen
The last 30 years: neoliberalism in retrospect The economic changes of the past three
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decades have not only revolutionized our means of exchange, but have altered our very existence Tiffany Grendle
Attack of the drones Will the unfolding age of austerity undo the robotics revolution? Reid Standish
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THIS ISSUE “The age of irresponsibility is giving way to the new age of austerity.” — David Cameron A sustained recovery from the dramatic rise and fall
The U.S. navy adrift U.S. naval development? Timothy Choi
Iceland: the blame game Iceland’s unique strategy in coping with the 2008 crash may set an unexpected precedent
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David Proctor
Cost-cutting Kiwis Social welfare, emigration, and the age of austerity in New Zealand Benjamin Contreras
Please read the warning label Global cost-cutting may be giving us more than we bargained for Alexander Dirksen
of the world economy in the new millennium is soon to become one of our generation’s greatest challenges. the economic recession has transcended state borders and national budgets, becoming an issue of international concern. As such, while varying in the scope and approach of their respective policies, governments have developed a similar approach to the recessionary effects and their deeply rooted causal factors, cutting costs and trimming the fat from their bureaucracies. This collective response of world leaders has brought about a transformative shift in public policy, heralding
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in the “new age of austerity.” In the debut issue of The Hidden Transcript, we deconstruct aspects of this emerging phenomenon from a multidisciplinary approach, addressing issues spanning from predator drones to political lobbyists, in regions as diverse as Washington and Wellington. We hope that this collection of articles will spark both interest and debate in what is sure to be an exciting (if at times tumultuous) period in international affairs. Thank you for your continued support, and enjoy the issue! — Alexander Dirksen, interaction editor
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November 2011 路 Issue 1
austerity n.
A policy of lowered spending, and a reduction in the amount of services provided. Austerity policies are often used by governments to spending and are often coupled with increased taxation to pay back creditors to reduce debt.
THE HIDDEN TRANSCRIPT
THE TRILLION DOLLAR QUESTION Is austerity the answer to the world’s current economic woes? Alexander Dirksen
November 2011 · Issue 1
Of these traits, a rationality and creativity are the most intriguing in light of historical developments in the 20th and early 21st century. It is believed that the ability to think and act in a rational manner has provided us a means with which to tackle unexpected events in a manner conducive to the continued well-being and security of our species. Creativity has provided us the tools with which to innovate, allowing us to overcome obstacles through fresh approaches and ideas. When these two abilities are combined, we possess a skill set with which to adapt to a rapidly changing world. Yet despite these strengths, an examination of our actions in the modern era appear to suggest that we have failed to use these evolutionary assets to their full potential, particularly when we have been faced with monumental challenges which require our immediate attention. Rather than addressing concerns in a calculated, rational
D
manner and stimulating discussion and debate regarding espite the similarities we share with both the
the most effective means through which to solve the
ancestors of our genus and the primate order of the present, the human race is unique. We pos-
sess a series of traits and characteristics stemming from our cognitive center that distinguish us from the remainder of the animal kingdom — the ability to perceive the world around us in an abstract manner, to develop a conception of a distinct ‘self’ within our society, and a desire to seek a spiritual being to give meaning to life’s complexities. In these regards, we stand alone.
Source: World Bank, 2001
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November 2011 · Issue 1
issue at hand, we have instead fallen back upon an estab-
creation of a series of black and white alternatives removes
lished decision-making process which does more harm than
the ‘gray area’ from political debate, and with it, unseen,
good in regards both to our short and long term prospects.
innovative alternatives.
From the threat of communism during the Cold War to
This tendency to present a possible solution as the only
the threat of terrorism in the post-9/11 period, a pattern of
solution has been historically illustrated in the realm of
practice in the political sphere has emerged:
international affairs. The strategy of containment pursued during the Cold War was portrayed as a necessary mea-
1.
At the onset of a crisis, governments move quickly
sure to counter Soviet strength, the ‘war on terror’ the only
in order to convey a sense of stability to their people.
means through which to ensure that al-Qaida would no
A rapid response is believed to convey a sense that
longer pose a threat to the nations of the world. Yet the ‘red
normalcy will soon return, regardless of the severity
scare’ produced a buildup of nuclear capabilities far greater
of the matter at hand.
than the threat posed by the Soviet Union, while the ‘War on Terror’ has further destabilized an already tenuous situ-
2.
ation. By following a political behavioural pattern which capital’s inner chambers until a policy has been
comes at the expense of our rationality and creativity, the
agreed upon.
long-term effects of these crises will continue to be felt for years to come.
3.
Once a means forward has been established, it is presented to the population.
The onset of the current economic recession appears to be following a similar trajectory. Politicians have made the case for the pressing need to pursue austerity measures —
decision may be required to respond to a natural disaster, as
past, the world economy will come to a grinding halt, result-
a failure to do so runs the risk of worsening conditions. Yet
ing in higher unemployment and more dramatic economic
in regards to public policy, acting upon a culmination of emotion and adrenalin may prevent one from assessing the full range of effects of a proposed solution, particularly in regards to longterm prospects. Furthermore, in granting politicians legislative powers it is widely assumed (but not proven) that they possess a series of capabilities and traits which make them bet-
effects than what is currently be-
By following a political behavioural pattern which comes at the expense of our rationality and creativity, the long-term effects of these crises will continue to be felt for years to come.
ter equipped than the average
ing experienced around the world. Thus, the cycle of policies being presented as necessary, natural actions continues. The current response to the looming threat of debt is no different than past responses to communism or terrorism. Both relied upon the assumption that the world could be compartmentalized into distinct categories, that our cognitive capacity for innovation
citizen to respond to a crisis. Yet the dangers of ‘groupthink’
was limited to a ‘right’ and ‘wrong’ alternatives, and that
are well established, and politicians are not omniscient
the interpretation of past and present realities by those ad-
beings. While an Athenian-style government in which each
ministrations was built upon a solid foundation of evidence
member of society has an equal say is far from realistic, the
free of bias and ideology. With this trend in mind, is auster-
selectivity of those with a voice in such periods is dangerous.
ity truly the answer to the current recessionary period?
Finally, rather than present a policy as one of many possible avenues with which one may address an issue, it is instead
The threat of the increasing volatility of the international economy is real, and failure to adequately respond
presented as one side of an equation — its implementation is argued to lead to future success, while failing to do so will
aggressively pursuing reductions and cuts without tak-
produce a series of adverse, negative consequences. Thus,
ing a moment to assess whether this is the best (or only)
policy is presented as a natural response to an issue, rather
response to a complex phenomenon, governments around
than an idea created by a collection of individuals (politi-
the world are yet again falling victim to limiting, irrational behavior which runs counter to some of our species’
decision making process we undertake on a daily basis. The
greatest strengths.
THE HIDDEN TRANSCRIPT
The last 30 years: neoliberalism in retrospect The economic changes of the past three decades have not only revolutionized our means of exchange, but have altered our very existence
November 2011 · Issue 1
However, if you start to look at social inequality, the last 30 years start to shape up quite differently. In many instances, the neoliberalization that the global economy has undergone has increased social inequality, even at the same time that it has lifted some of those at the bottom out of poverty. If you look at the concentration of wealth, the very top bracket of society has seen immense concentrations of wealth since neoliberal reforms were As this reality sets in, the question changes. Who is tions of political and economic power, it has largely benin the U.S. were worth on average approximately $680 million. Today, they are worth approximately $2.8 billion. Similarly, in 1996 the net worth of the 358 richest people was equal to the combined income of the poorest 45 per cent of the world’s population (2.3 billion people). Perhaps more illustrative of the wealth inequality, in 2003, the assets of the world’s top three billionaires were
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Developed Countries and the 600 million people living there. Although alarming, these inequalities have been
rom the 1970s to today, the organization of the world economy has undergone substantial changes. Globalization has retooled cultures,
The strength of the neoliberal ideology, on a popular
reoriented economies, and reinvented governments, all
level, is its emphasis on individual liberty, freedom, and
under the banner of market freedom. Today, the current
personal responsibility. However, as Karl Polanyi noted,
economic system appears at an impasse. The economic
there are two kinds of freedom in a market society, one
turbulence of 2008 still lingers and is manifesting itself
good and one bad. Amongst the good is freedom of speech,
in new forms in the United States and the European
freedom of association, freedom to choose one’s job, et
Union. However, beyond the current backdrop of economic chaos and austerity measures, the historical narrative of the past 30 years is worthy of further scrutiny, mainly to determine whether the trend towards neoliberalism should be viewed positively or negatively. If you compare poverty rates
cetera. Yet, the duality brings
Neoliberalism confers rights and freedoms on those whose income and security need no enhancing, while leaving a small scrap for the rest.
from 1980 with poverty rates
the bad as well: freedom to exploit one’s fellow man, freedom to keep innovations away from dom to make inordinate gains without commensurable service to the community. For Polanyi, it was this duality within liberal and neoliberal utopianism that led him to conclude that eventu-
today, you will see a 29 per
ally the bad freedoms would
cent reduction over the past 30 years. Similarly, when
take over; with the idea of freedom degenerating into the
you consider that India and China have seen consistent
mere excuse for free enterprise. The only way to maintain
growth rates of at least 10 per cent per year over the past
and spread this utopian vision becomes violence, force,
30 years, it begins to look like the world is better off than
and eventually authoritarianism. In effect, neoliberalism
it was. Neoliberal reforms were able to be spread globally
confers rights and freedoms on those whose income and
and have brought employment and foreign direct invest-
security need no enhancing, while leaving a small scrap
ment to many nations in dire need.
for the rest.
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November 2011 ¡ Issue 1
Source: UNDP Human Development Report 1999, 2005
This dichotomy is ever-present in the world today.
freedom has also prevented many of these innovations
China, in the wake of neoliberal reforms, now exemby oppressive patenting regimes and shameful corporate practices. With that said, the last 30 years were a transformahours a day, seven days a week, under horrifying
tive period: globalization and international markets
conditions for a fraction of what could be deemed a
reshaped national economies and societies — all under the guise of neoliberal ideology. In the aftermath of
also free to have their labour exploited — a freedom
the 2008 economic crisis, with debt crises across the
to bondage. In contrast, 30 years of neoliberal reforms
developed world and populist protests taking hold, one
have produced immense concentrations of corporate
can only wonder where the next 30 years will take us and if the pendulum of the dual freedoms will begin to
transportation, and retail. The freedom of the market has turned out to be nothing more than a convenient means of spreading corporate monopoly power and Coca Cola everywhere without constraint. some to accept. Indeed, over the last 30 years, corporate innovations made possible by market freedoms have led to the creation of numerous vaccines, AIDS drugs, and high-nutrient crops. Yet, the duality of
swing the other way.
THE HIDDEN TRANSCRIPT
ATTACK OF THE DRONES Will the unfolding age of austerity undo the robotics revolution?
November 2011 · Issue 1
But this does not mean that the future necessarily belongs to UAS. As military thoughts turn to the threat posed by more powerful potential adversaries, such as China or Iran, rather than jihadist militants and terrorists, will enthusiasm for unmanned aircraft continue unchecked? Or will having a pilot in the cockpit remain the least risky option for the majority of missions, as proponents of the wildly over-budget F-35 joint strike If the answer favours the drones, then the world may be just at the beginning of a genuine revolution in warfare. It would be a revolution dominated, at least at the
Reid Standish
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start, by America, which accounts for the overwhelming majority of UAS. However, other countries such as Britain and Italy, have also been quick to deploy armed
ver the past decade unmanned aerial systems
drones, and Israel, with a thriving UAS industry, is
(UAS) or ‘drones’ have become the counter-terror-
already using drones in a wide variety of roles.
ism weapon of choice. Since 2005, there has been
a 1,200 per cent increase in combat air patrols by UAS.
BIG PLANS AHEAD
Hardly a month passes without claims that another drone-
Two years ago, the U.S. air force announced its future
launched missile has taken out an al-Qaida or Taliban
UAS development in the report “Unmanned Aircraft Systems Flight Plan 2009–2047”. The most fascinating
than by its manned strike aircraft and more recruits are
thing about the report was its vision of a networked family of UAS. Drones would be built around a com-
However, UAS procurement and development may lack
mon airframe of differing sizes and would utilize an
allies against powerful and conservative constituencies. These include skeptical military bureaucrats, fast-jet pilots,
as possible. The successors to today’s Reaper would be able to do more things: from defending airspace against
weapons programs and the jobs that go with them.
enemy intrusion to attacking enemy air defences — all tasks that the F-35, its manned competition, has been
THE CHANGING OF THE GUARD Under President Barack Obama, the frequency of drone
plan assumes that the next generation of drones will
strikes on terrorists in Pakistan’s tribal areas have risen substantially, from one every 40 days during George
operational autonomy including — if legal and ethical
W. Bush’s presidency, to one every four. Furthermore,
questions can be resolved — the ability to shoot to kill.
the Obama administration has made it clear that as America draws down its forces in Afghanistan over the
ever work well enough to take out targets autonomous-
next three years, there will be no let up in drone strikes, which are partly responsible for pushing al-Qaida
be possible to overcome the technical problems. In 30
against the wall. The Reaper MQ-9 aircraft, the hall-
years, it should be feasible to imbue drones with all the capabilities of manned aircraft as well as some extra
extremely vital weapon in the war on terror. Its ability
powers of their own. However, this expansion beyond
to loiter for up to 24 hours, carefully observe activity
the original UAS mandate has left many skeptical of the necessity of further development, especially given the
accuracy has made it an essential weapon in America’s
growing budgetary debates underway in Washington and beyond.
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November 2011 路 Issue 1
Unmanned air systems as a percentage of total systems
Israel
9% China
United States of America
56%
12% Others
Britain
France Russia
8%
Pan-European
6%
2%
2%
3%
Source: IHS Industry Research and Analysis; Teal Group
THE HIDDEN TRANSCRIPT
November 2011 · Issue 1
However, the future can’t be stopped; only our
FUNDING THE FUTURE The growing austerity of the defence budget is an ac-
adaptation may be delayed. Austerity in the Pentagon
cepted reality, and it’s becoming clear that the budget
will no doubt come with a large learning curve and
ahead. The most recent news is that the defence de-
where protecting more traditional manufacturing jobs
partment will seek about $113 billion for new weapons austerity measures are bringing to the Pentagon is is still about $7 billion less than what the Pentagon
similar to the old verus new dichotomy that is ram-
planned for a year ago. The
pant in every aspect of America,
same approximate decline will
such as stalwarts to old-style
happen in research and de-
energy technologies, like coal,
velopment, with the Pentagon seeking $75.7 billion at last report — $4.7 billion below
assumes that the next generation of drones will
What matters even more is how the shrinking funds are divided. Most of the Pentagon’s costliest acquisition programs are far from of completion in the short term. For instance, according to the Government Accountability
ing advances of green energy technologies. Moving forward, the lesson
the $80.4 billion previously sought.
who routinely resist the impend-
giving them a high degree of operational autonomy including — if legal and ethical questions can be resolved — the ability to shoot to kill.
we should take away is that the solution is neither fullscale resistance nor full-scale change solely for change’s sake. Rather, against the backdrop of a shrinking budget and a future trend of continued austerity, it is best to remember not to sell the future short. Preserving part of the budget for new technolo-
F-35 acquisitions runs to $273.3 billion (2,443 aircraft
gies and research and development, even in the tough-
at $112 million average unit price) and another roughly $1 trillion in lifetime operations and maintenance
the original contexts of new technologies and taking
costs. The numbers in this remaining balance category
them to their ultimate conclusions. For UAS, this may
may change in the years ahead, particularly, whether
mean revolutionary things for how wars are fought.
the F-35 expands in costs and delays again. Other programs might even be cut, a fate that the marine corps’
UAS, two years ago, Secretary of Defence Robert Gates conceded that the F-35 would probably be the last
The underlying point is that there is a huge amount of spending still required in order to complete commit-
may make it take longer than UAS visionaries had
ments on current programs.
originally thought, the robotics revolution appears to
The issue isn’t that there won’t be new spending on new systems, but that squeezing programs once supported by contingency funds into a smaller main-line lot that has been cast to UAS under the Pentagon. As the Pentagon wrestles with declining overall budget numbers, new technologies become a more direct threat to the old. In bureaucracies, the old is not only more established, but often has the advantage in any battle: it is more likely to have internal constituencies, and can often gain support from members of Congress who wish to protect existing factories and jobs in their and future pork barrel spending.
be here to stay.
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The U.S. navy adrift:
It can be seen that the current state of the U.S. carrier
nuclear-powered carrier, built back in the 1960s, is about to a new class of carriers, will not be ready for several years. only have 10 to work with in the near future.
affect U.S. naval development? Timothy Choi
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Financial constraints are currently prompting navy leaders to consider extending the construction time of USS John seven years. On the face of it, spreading $10.3 billion (the cost of each new ship, double that of the old ones due to the
bama’s recent announcement of $450 billion in funding cuts to the Pentagon has sent military
great way to make the pill easier to swallow. However, this
leaders spinning. For the United States’ navy,
would be a short-sighted decision, making the retention of
these cuts will have immense implications for America’s ability to project power abroad. Compared to its army and its
to increase incentives for keeping skilled labour would have a cascading effect on the costs necessary to build the carrier.
unit basis — warships cost at least an order of magnitude
This problem would affect all suppliers for the program,
more than planes and tanks. Thus, in conjunction with the
down to the — literally — nuts and bolts. Thus, in the long run, this cost-saving measure would be counter-productive.
worried about the potential effects of the budget cuts. Thinking of the American navy usually brings to mind the
Modifying the Kennedy’s schedule opens the question of what will happen to the vessels that come after her. This
nuclear-powered aircraft carrier, that ‘100,000 tons of diplo-
could potentially lead to a chain of problems, including
macy’, its associated escorts, and how there are 11 of them
extending the service life of current carriers beyond their optimal material state, endangering the safety of their crews.
than two. The general reaction is: “Why do you need so many? If you’re desperate for funds, just get rid of a few!” This discounts the fact that World War II saw America with over 20 large carriers and around a hundred smaller ‘escort’ carriers, so 11 today really isn’t that many. What the casual observer misses is that in order for a navy to have a carrier continuously deployed in
Of course, none of this may mean
Compared to its army and its air force, the navy refunds on a per-unit basis — warships cost at least an order of magnitude more than planes and tanks.
much if carriers no longer remain the ultimate instrument of war and coercive diplomacy. In a world of non-state actors such as pirates, drug-runners, and small-boat terrorists, an entire carrier strike group may not be the most effective means of dealing with the threat. As recent developments in warfare point towards actions on land and in the littorals, there is a movement
regions far from home, it has to have at least three carriers for every one deployed: while one
the navy to something more suitable for operations in those
is at the front, one is returning home, another is working up
theatres. Thus, upon the Marine Corps’ request to more
and training its crew, and the fourth is under maintenance
effectively support troops on land, the Zumwalt class stealth
or refurbishment. Thus, the United States effectively has
destroyer was developed. Built around the need to provide
three carriers available for operations at any one time — not time and it can be easily seen that America is at its limits; in fact, were it not for the fact that USS George Washington is permanently forward-based in Japan, America would not be
new destroyer design since the end of the Cold War, the class
able to sustain its current deployment schedule.
will be a showcase of the most advanced U.S. naval technol-
THE HIDDEN TRANSCRIPT
80%
November 2011 · Issue 1
National U.S. defense spending as a percentage of federal budget
60%
as a percentage of GDP
40% 20% 0% 1940
1950
1960
1970
1980
1990
2000
2010 Source:
ogy available. Yet, these same technologies are prohibitively
minesweeping. These modules have encountered technical
expensive — so much so, in fact, that only three of these vessels will be built and its ambitious multi-purpose radar
implementation correspondingly delayed. Further, they add
will be curtailed. Considering the earlier-stated operational
several hundred million dollars to the cost of each ship. Sur-
requirement for a three-to-one ratio regarding ship availability, this means that there can be, at most, only one on
program is one of the few that appears to have congressio-
the front lines at any time. With U.S. forces conducting land
nal support — purchases have continued to be approved for
-
the past few years. Part of this may be due to the nature of
nancial constraints have limited the ability of the U.S. navy
the procurement process, which has two different compa-
to support operations on land.
nies building two drastically different designs in two very
To better combat non-traditional threats (admittedly, piracy is not exactly a modern phenomenon), the navy has
Mobile, Alabama. Thus, Congress’s willingness to support
The vessels were originally conceived to be a quick (40-
the desire to provide jobs to both regions.
plus knots), inexpensive (about $200 million per ship), and
From the three examples given, it is easy to see the
least 55) for conducting operations in coastal regions and
U.S. navy in the coming years. Although it will remain the
supporting Special Forces troops on land. In reality, how-
preeminent power on the seas, the way it will evolve may not
ever, we’ve seen the opposite — they’re expensive (about
be what navy planners envisioned before the recent series of
$400-plus million each), fragile (built to civilian rather than naval survival standards), and with little room for
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under a full load). The concept certainly has merit: ships that can change their operational roles in a matter of hours
envisioned by his British contemporary, Sir Julian Corbett. Regardless of the impetus for the switch — either an
Such modules include anti-surface warfare (essentially
economically-motivated, rational decision on the part of the
adding a pair of 30-millimetre cannons and some land-
navy, or a response to unexpected events — it is clear that
attack rockets to the standard 57-millimetre cannon on the bow), anti-submarine warfare (to be conducted by the ship’s helicopter and unmanned underwater vehicles), and
profound impact on the structure of the U.S. navy.
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Is geography irrelevant? The EU, the euro, and the continent: one of these things is not like the other Erika Zell
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oes geography still matter? The question is hotly debated in academic circles, with one side scrambling to defend their life’s work and another
proudly pointing to achievements in technology, transportation, and public policy. The problem with geography is it’s no longer so cut and and features, and human geography that rears its head as a sense of space and place. There are also cultural, political, and urban issues to be explained. How can we possibly Typically, when the relevancy of geography is questioned, geography is taken to mean ‘physical distance’. In an age when we can move goods across oceans, money across borders, and information can circle the world faster than you can say ‘snail mail’, it’s easy to see how we are fast approaching a time when geography doesn’t have to matter — but every day we make conscious choices that prove we’re not ready to let go of the idea of physical space just yet.
German citizens are already questioning why they must come to the aid of their ‘neighbours’ hundreds of miles away; geography brought these countries together, but the Euro binds them. We can look at the issue in light of any number of current political events, many related to the age of austerity. First: Greece’s economic woes and the implications for the geographical boundaries, has seen its debt-to-GDP ratio balloon out of control. To help mediate its debt crisis, which is again constitutionally bound to geographical area, it is seeking the help of Germany, a country with equally arbitrary borders, but whose economy is markedly stronger. physical geography plays no part in this issue. If Germany chooses to bail out Greece, location will mean nothing. But physical borders, arbitrary or not, lead to a sense of place, which on a national scale leads to nationalism. If
THE HIDDEN TRANSCRIPT
November 2011 · Issue 1
Source: UN Human Development Report 1997
Germany refuses to bail out the Greeks, they can’t claim that geography prohibited their action, but it’s not much
policies, who knows if rumours of Greece or even Ger-
of a stretch to say that feelings associated with their
many leaving the Eurozone will become more than idle
physical landmass affected their willingness to referee
chatter? The interplay between the physical limitations
the situation.
of the continent and the drive for economic security is
This has interesting implications for the EU as a
throwing the relevancy of geography into a new light. Ge-
whole. German citizens are already questioning why they
ography gives countries both reasons to stay and excuses
must come to the aid of their ‘neighbours’ hundreds of
to leave; it’s something to hide behind and something to
miles away; geography brought these countries together,
triumph over in times of prosperity. Its shifting form says
but the Euro binds them. Continents don’t shift over hu-
a lot about international cooperation, or in recent times,
man timescales, but borders and currencies do. The Euro
the lack of it.
is only as strong as the economies that use it and what
In the end, geography will lose its relevance when
we’re seeing right now is that neither is particularly
we let it lose its relevance. And sadly, in light of recent
strong at all.
events, it appears that geographers can count on a little job security for a long, long time.
the EU, but in an age of austerity, all bets are off. As
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November 2011 · Issue 1
Iceland: the blame game
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f all the countries affected by the ongoing hardest hit. After the simultaneous collapse of
its three largest banks in October 2008, the nationalization of the Icelandic banking system has burdened the north Atlantic nation’s 311,000 citizens with a debt that
Iceland’s unique strategy in coping with the 2008 crash may set an unexpected precedent David Proctor
Icelandic media has said eclipses the per-capita cost imposed on Germany by the Treaty of Versailles. Iceland is a small country, but its crisis has attracted the eyes of the world, and in particular the eyes of other European countries that are also at risk of default. The Icelandic populace, after all, is attempting something unusual: despite urgent and constant demands from abroad that a repayment plan be implemented quickly, many Icelanders are refusing to allow their tax money
THE HIDDEN TRANSCRIPT
November 2011 · Issue 1
Source: World Bank 1999, 2002 to pay the debts of three failed private banks. offer deposit insurance to Icesave’s foreign customers. was privatized in 2003 following deregulation of the Icelandic banking system two years prior, and was at
there was no clear place to turn to recover the $8.2 billion
the centre of the crisis. With the country’s tiny popula-
in unpaid foreign deposits that remained. The British and Dutch governments had Icesave deposits returned to
turned its gaze abroad, and began to offer an internet
their citizens by offering a loan to the Icelandic govern-
banking service called Icesave to customers in Brit-
ment.
ain and the Netherlands. Because of the low overhead
In January 2010, however, Icelandic president Òla-
involved in operating an internet bank, Icesave was able
fur Ragnar Grìmsson surprised the British and Dutch
to offer higher interest rates than competitors in the
governments by vetoing a plan that would have repaid
countries in which it operated, and was therefore able to
well over $5 billion of the Icesave loan, claiming that it
accumulate billions in deposits.
was too unpopular to pass without a referendum. The
Just as Iceland’s small population meant the potential
following March, more than 90 per cent of voters opted against the plan, sending the three countries back to the
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T HE HID D EN T R ANS CR IP T
November 2011 · Issue 1
negotiating table. Despite a prime ministerial endorse-
a strategy that is sure to be watched closely by Greece,
ment of a replacement plan that was put to referen-
Ireland, and other European countries that are at risk
dum in April of this year, nearly 60 per cent of voters
of defaulting on their own debts.
still refused to take on the burden of a plan that would have required an average of $16,000 per citizen — plus interest — to be paid back before 2046. At the core of the dispute is the attitude that Ice-
Kaupthing, and Glitnir, however, the tiny economy still faces enormous challenges. Icelandic political
landers hold towards the crisis. Taxpayers in Iceland
leaders have made it clear that they believe that eco-
are reluctant to accept that they must foot the bill for
nomic recovery is contingent upon membership in the
what they see as irresponsibility on the part of bank-
European Union, but the government of Britain, upset
ers. The government has had little choice but to adopt
by Iceland’s continued refusal to promptly repay the
this sentiment: even after the failure of the second referendum, Icelandic government hope to cover the Icesave debt banki, and they are seeking to increase the amount of money they can take from that estate through litigation. In January of this year, urjon Arnason was arrested
Icesave debts, has threatened
Despite prime ministerial endorsement, nearly 60 per cent of voters still refused to take on the burden of a plan that would have required an average of $16,000 per citizen to be paid back by 2046
in connection with a Financial Supervisory Authority probe into market manipulation, along with several other
land’s accession process unless it makes real progress on a repayment scheme. Additionally, the governments of Britain and the Netherlands have refused to accept the results of the two Icesave referenda, announcing after the most recent that they were left with no choice but to pursue repayment in the courts of the European Free Trade Association. Iceland’s attempt to manage
its debt by refusing to assume full responsibility for it is a unique strategy, even in the context of a conti-
weeks and months. When Arnason was arrested, the FSA told reporters that they suspected that market
insuperable debt problem. It remains possible that Iceland will yet be able to avoid full responsibility for
to the eventual collapse of the bank and the Icelandic economy. Executives at the other two collapsed Icelandic banks were not safe, either. In May 2010, administrators of the liquidation of Glitnir sued many of the bank’s former shareholders and owners for $2 billion in a New York court, alleging that they were involved in fraud that was partially responsible for the bank’s failure. The suit principally names former chief shareholder Jon Asgeir Johannesson, saying that he and other leaders of the bank “conspired to systematically loot Glitnir Bank in order to prop up their own failbank, Kaupthing, have also been arrested amid allegations of embezzlement and trading irregularities. Whether or not litigation against former bank CEOs and executives will be able to cover a substantial amount of Iceland’s debts remains uncertain, but it’s clear that Icelandic authorities are giving it a try. It’s
the effort required to bring about such a result seems likely to be dwarfed by the effort required to repair the relationships that Iceland has with its neighbours.
THE HIDDEN TRANSCRIPT
Cost-cutting Kiwis Social welfare, emigration, and the age of austerity in New Zealand Benjamin Contreras
I
November 2011 · Issue 1
are blowing. In New Zealand, the mood is markedly more pes-
simistic than across the Tasman. Part of this is cultural
Zealand’s deeply troubled purse. Incumbent prime minister John Key, sailing into the coming election on the highest popularity ratings of any prime minister in our history, is widely tipped to term, he has consistently — but cautiously — trimmed social welfare and reformed its programmes, and these cuts were the primary focus of his opponent Phil Goff’s attacks in the televised leaders debate at the beginning of the October. We can expect the cuts to continue if his plan to balance the books by 2014, and to steadily reduce the debt to below 20 per cent of national GDP thereafter, is to succeed. But it is somewhat of a misnomer to call these economic circumstances, at least for New Zealand, an ‘age of austerity’. That phrase has taken on ominous, more foreboding connotations. No longer does it refer only to
is nothing like those of European countries, or the United States. The National Party’s spending cuts are
news website stuff.co.nz found 65 per cent in support of the initiatives with only 28 per cent in opposition. But the current situation is hurting Kiwis, and however necessary they may be, the cuts will only make it worse. On average, 40,000 New Zealanders leave to live in Australia permanently or long-term each year. Jobs construction particularly suffering. Residents are keenly aware of this exodus, and the government has tried to incentivize staying at home in the form of liberal social welfare spending, which is among the most generous in the world. Tertiary student support is the highest in the OECD: interest-free student loans are available to all citizens and permanent residents in both full- or parttime study (as long as graduates stay to work in New students and are not added to loans. Working for Families, a hugely expensive scheme, grants tax credits to all New Zealand families depending on their income and
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T HE HID D EN T R ANS CR IP T
November 2011 · Issue 1
Sub-Sahara Africa
Middle East & North America
East/South
37%
69%
Developing world average
11%
35%
Americas
19%
Source: World Bank, 2001
the number of dependent children they have. Almost all
However, their advantage is that the national economy
public health care is free. Upon reaching 65, all citizens
is buoyed by the lucrative mining coming from western
and permanent residents are eligible for a universal
Australia and the country’s red centre — recent propos-
pension, granted regardless of how much they earned
als to mine in New Zealand were rejected by the public
while working.
outright. Having visited Sydney several weeks ago, the
So will reductions in social spending mean even more
sense in Australia is one of real optimism. There is a
New Zealanders leaving for Australia? The argument is instinctively attractive. Australia ter than most other developed countries. Even at the crisis’s height in 2009, as GDP contracted by three per
cousins. Again, this is partly cultural, but it is also very closely linked to New Zealand’s economic realities. Yet despite the booming economy, evidence does not demonstrate increased emigration to Australia. The highest levels of emigration — some 48,000 in 2008, a
and Canada, and six per cent in the United Kingdom,
year before the worst of the global recession — have
Australia not only avoided the recession but retained
plunged to fewer than 37,000 in 2010. As bad as things
impressive growth rates which only narrowly slipped
may be in New Zealand, fewer people are leaving — but
under one per cent. Even the devastating Queensland
the stream is still steady.
grain exports only temporarily slowed the economy. The
countrymen to wealthier pastures across the ditch. New
higher wages and living standards will always be an at-
Zealand and Australia share, in terms of the freedom of
tractive pull for a relatively modest nation such as New
their citizens to move between the two, a closer union
Zealand.
than members in the European Union, something which
New Zealanders are keenly aware of the exodus of our
Of course, Australia has its problems too. Its populous east coast, home to major urban centres like
makes emigration even more attractive for many. In the coming years, we may continue to witness the inor-
Brisbane, Sydney, Canberra, and Melbourne — the key destinations for Kiwi emigrants — is suffering heavily.
spending policies.
THE HIDDEN TRANSCRIPT
Anarchy & the age of austerity
T
November 2011 · Issue 1
of riots which caused major property damage and lead to hundreds of arrests. Back in 1981,
the main participants in the riots were youths living in ethnically diverse, immigrant neighbourhoods. But not all immigrant areas were affected. Riots were especially likely to break out in areas that were not only hit by economic deprivation, but that were also home to immigrant-origin communities that were de facto disenfranchised, lacking electoral power, and local representatives in city govern-
budget cuts in the U.K. and beyond
ment. This has left many wondering whether the England riots that occurred in August 2011 are similar to the disturbances that shook the island nation several decades ago.
Reid Standish
that there is no one cause to unrest and that the nature of most riots will vary as it spreads. However, there are several interesting parallels between 1981 and 2011. Then, as now, violence erupted on the heels of severe government cutbacks to services introduced by a conservative government committed to austerity budgets. city’s housing budget was just slashed from £44 million to £15 million, and the youth services budget was cut almost entirely, by 75 per cent. Similarly, the initial trigger for the riot was an act of police brutality, with the shooting of Mark Duggan. Most likely, this event did not occur in a vacuum. Many of the riots of the 1980s (as well as riots in France in 2005 and earlier) were set off by similar events, but they had been preceded by years of antagonistic relations between immigrants and the police. Then, politicians and the police reacted with surprise and condemnation. had warned the government years earlier that unrest was ments also show that policymakers and law enforcement hardship and discrimination — rather than criminal, alien cultures — were believed to be the main reason for the jor riots. Margaret Thatcher, by contrast, blamed youths’ “animal spirits.” Similarly, in the aftermath of the 2011 rioters’ lack of morals, rather than the larger social and economic environment that gave rise to them. However, there are also important differences. In contrast to the political situation in the 1980s, ethnic minorities are much better represented in the British govern-
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T HE HID D EN T R ANS CR IP T
November 2011 路 Issue 1
The economic crisis of the 1970s
Source: Harvey, The Condition of Postmodernity
THE HIDDEN TRANSCRIPT
November 2011 · Issue 1
second-generation immigrant born to Guyanese parents,
telling the BBC, “They should just look back to the les-
and many city councilors in Haringey (where Tottenham
son of Mrs. Thatcher. When she went through the great
is located) are also immigrants. Having said that, it is
recession in the early 1980s, she knew what was coming,
still unknown whether these achievements in represen-
she recruited more police,” highlighting a key feature
tation have been matched by policy gains.
of the growing evidence between austerity and social
In another major difference, violence this time around — in Tottenham as elsewhere — appeared to be much
unrest. It is also worthwhile to place the phenomena of auster-
less discriminating. In the 1980s, participants tended to
ity measures and social unrest in the wider, more global
target buildings and cars that were government oper-
context. In a recent paper, researchers Jacopo Ponticelli
ated. This time around, local shops as well as national
and Hans-Joachim Voth explore the link between auster-
chains were vandalized. Research about the riots in the
ity and social unrest in a historical context. Examining a
-
period from the end of the Weimar Republic in Germany
chael Keith, uncovered that initial participants were often quite distinct from those who joined in later once the word of unrest had spread. The former were locals employing targeted violence, while the latter were more likely to come from outside and to loot and destroy in an indiscriminately. Given the
in the 1930s to contemporary
“They should just look back to the lesson of Mrs. Thatcher. When she went through the great recession in the early 1980s, she knew what was coming, she recruited more police.”
media in mobilizing some of
demonstrations in Greece in 2010–2011, they conclude that austerity has tended to go hand in hand with politically motivated violence and social instability. This might explain why austerity measures are often avoided — as they come with the risk of demonstrations, general strikes, overall unrest, and an increased frequency of riots.
the rioters, these dynamics are
Although there is growing evi-
probably much more salient today, making it ever more
dence displaying the links between the increase of social
important to distinguish between groups of rioters and
unrest and the implementation of austerity measures,
to understand how the demographics of riots shift before
it is important to distinguish between the underly-
any conclusions about their causes can be reached.
ing causes and the triggers. As seen in the comparison between the 1981 and 2011 riots, budget cuts comprised the backdrop of the turbulent events, but the triggers
blamed the Conservatives’ draconian economic policies
were social and ethnic factors. Even looking at the wider
and the deplorable state of Britain’s inner cities that
historical context provided by Ponticelli and Voth, it is important to evaluate austerity measures along with
again in opposition, but the party, which has long shed
other social factors like nationalism and ethnic tensions,
its leftist image, has been much more timid in its criti-
which can have detrimental effects down the road, such as the example of the fall of Weimar Republic and the
has chosen to focus its response on helping those whose homes and businesses have been damaged and on con-
rise of German fascism. Anarchy and austerity are inexorably linked and as a
demning low standards of morality and lacking parental
new age of austerity dawns across the globe, the under-
responsibility. Therefore, it is highly unlikely that the
lying effects will go beyond nations’ economies. Social
riots will lead the government to reverse some of the
unrest may take a variety of forms — violent and non-
spending cuts affecting the inner cities. In fact, Prime
violent alike — but they may all be equally destabilizing
Minister David Cameron is considering taking state ben-
for governments. Budgets may be cut and social programs will disappear, but perhaps the biggest danger of
sures may be less severe cuts in policing. In the 1980s, Thatcher expanded the police force during a major
austerity measures is the hidden social cost in the form of continued unrest.
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November 2011 · Issue 1
IF STATES WERE STOCKS
T
Alexander Dirksen
he economic woes of Greece, Italy, Spain, Portugal, and Ireland have been well documented in recent months. What remains less clear is their future prospects in light of the recently implemented austerity measures. In this segment, we offer our assessment, treating these troubled states as stocks in an investor’s portfolio and employing the highly
sophisticated ranking system of good, bad, and ugly. The verdict? Your nest egg would not be enough for the convertible of your dreams quite yet, particularly if you placed your bets upon the Greek or Italian economies. GREECE
SPAIN
Burdened with heavy debt and mounting levels of frustration from its EU brethren, Greece's future forecast
ployment rate in the industrialized world (currently at 21.52%), with levels of poverty at similarly high levels.
required to place Greece in a position where a reversal of
As such, while the upcoming election may see a shift in
economic fortunes would be possible may test Merkel and
leadership, the move may be largely symbolic, as either
Sarkozy's willingness to save the current iteration of the
party will be given little to work with in regards to the
European Union at any cost, while the fragile political administration has yet to rally a collective front with
state at the end of October show a stagnation in GDP growth in the past quarter.
acceptance of the increasingly constricting terms of foreign assistance, nor secession from the E.U. and a return
Economic prospects: Bad
to the drachma look promising. ITALY Economic prospects: Ugly PORTUGAL
arguably its leader, Silvio Berlusconi, who appeared to
With an EU/IMF bailout totaling $78 billion in hand and
concerns in a timely manner. Yet even in his absence, the
the emergence of a new government under Pedro Coelho, Portugal appears to be moving towards the creation of
remain. As highlighted by Fareed Zakaria, Italy’s Eu-
a stronger economic foundation in the future. Recent
rozone GDP is three times that of the three countries
praise by Eurozone chief Jean Claude Juncker and the
which have already received bailouts from the European Union (Greece, Portugal, and Ireland), a statistic which
Portuguese bailout package are promising signs for a
haunts many politicians who fear the emergence of simi-
sustained recovery.
lar conditions in Rome to those in Athens.
Economic prospects: Good
Economic prospects: Ugly
THE HIDDEN TRANSCRIPT
Please read the warning label
T
November 2011 · Issue 1
he pharmacy of the world economy has been operating at full capacity over the past year, -
its patients back to health with the smallest amount of talist cures have not been tested in real-world environments, and as such, their long term side-effects remain unknown. However, the fact that some patients have
Global institutions are pushing governments to adopt austerity measures, but there might be side-effects we didn’t account for
already begun to demonstrate a resistance to their treatments does not bode well to their long-term prospects. of austerity . . . THE ENVIRONMENT Republicans are eager to see the demise of the Environmental Protection Agency (EPA) and big businesses fear increased legislation that may affect their bottom lines. Combined, this has resulted in resistance towards
Alexander Dirksen
stricter environmental regulation, which has garnered a recessionary period. Threatened that environmental laws may exacerbate the already bleak employment prospects in the United States, the Obama administration has taken heed, backing away from a crucial EPA proposal. As noted by The Economist: The rule would have reduced ambient ozone, a toxic gas created by power-plant emissions and exhaust fumes, to less deadly levels than America currently permits. According to the EPA, this would by 2020 have saved up to 12,000 lives and 2.5 million working days and school days lost to the toxic effect of ozone on American lungs each year. It would also have cost polluters and government up to $90 billion per year — a toll that, in hard times, Mr. Obama felt unable to levy.” The Obama administration does not stand alone in its dismissal of environmental reform in the age of austerity. The focus on climate change has diminished on the international stage, with pledges to address its effects The United Nations’ upcoming climate conference in Durban next month is widely expected to produce little in regards to substantive policy, especially when one considers that the last conference (Copenhagen, 2009) produced little more than a statement of interest and Any legislation with the potential for dramatic reductions in ozone emissions will require some concessions by the current ‘culprits’ of this environmental degradation.
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November 2011 · Issue 1
So long as economic conditions remain in their current
to ensure that they will become an integral part of the
state, it appears unlikely that large-scale policies aimed
political system in the years to come — the tougher the
at addressing the concerns of the green movement will
austerity measures, the greater the role these groups will
be implemented, as governments will favour those with
play in attempting to shape the discourse and debate. Whether this will be a positive or negative trend has yet
over those who promise a more eco-friendly future.
to be seen — while lobbyists are often seen as bringing attention only to those groups with large pocketbooks,
LOBBYISTS
others see the lobbying force as a way to bring smaller
While there are more lobbyists than the subjects of their
issues to the attention of politicians. Regardless, at times
impassioned pleas per square mile in Washington and relationship with the strength of the economy. to those they represent in the new age of austerity. As federal budgets shrink and expenditures are cut, interest
POVERTY While governments pledge austerity measures on behalf
calling on lobbyists to advocate on their behalf, attempt-
of the state as a whole, the effects of these policies are
ing to gain a foothold in a shrinking monetary supply. As
not equally distributed amongst its population. Among
noted by Peter Apps in a recent article for Forbes maga-
the hardest hit are its most vulnerable citizens and those
zine, this reliance upon lobbyists stems from both the
who provide services to these individuals. These concerns
contact base they possess and their ability to frame the
have been emphasized by a recent report by the FEANT-
interests of their clients as a valuable asset regards to
SA (the European Federation of National Organisations
the wellbeing of the state.
Working with Homeless People). Budgets for services
With no sector exempt from the monetary magnify-
associated with the homeless have come under increased scrutiny since 2008, with those involved in these types of
the military–industrial complex (advocating on behalf
social programs increasingly being required to do more
of arms and aerospace manufacturers, for example), the
with less and demonstrate higher rates of success in
energy sector (ensuring oil and gas corporations are not
regards to the stated objectives of their initiatives.
subject to the type of environmental legislation discussed above), and the business sector (both small-scale and big business). As such, lobbyists have positioned themselves
These restrictions and reduced budgets could not have come at a more inopportune time for these groups — as -
THE HIDDEN TRANSCRIPT
creased, the number of those living below the poverty line has
November 2011 · Issue 1
27
less upon troops. Technological advances such as predator drones
steadily increased. As a result, the number who they must serve has grown considerably, placing a serious strain upon resources and personnel. Further complicating these mea-
increasingly used, and it has been demonstrated that counterter-
sures is the perception that govern-
rorist initiatives can be undertaken
ments (particularly within the Euro-
without the costly deployment of
pean Union) are at times oblivious to the realities ‘on the ground’, claiming reducing the number of citizens living on the streets. The clash of social funding and budget cuts will remain a pivotal issue of debate in this new age of austerity. MILITARY The military, which has historically -
Lobbyists have positioned themselves to ensure that they will remain an integral part of the political system — the tougher the austerity measures, the greater the role these groups will play in attempting to shape the discourse and debate.
The defense budget, which has been the benefactor of increased funding
ground troops. Whether such a trend will continue under the next administration remains to be seen — the Pentagon has traditionally been skillful in justifying increasing rather than decreasing their percentage of the yearly budget. As a nation's security takes precedence over many other factors, the military may be one part of the government which
The pharmacy of the world economy continues to assist a greater number of patients than ever before in its history. The necessity of quick treat-
ments to address its ills has resulted in practitioners bypassing traditional checks and balances that normally ensure that administration has called upon the military to make nearly half a trillion dollars worth of cuts to its programs in the next decade,
issues raised within this article are a small collection of a
and the levels of future funding may also decrease. Such develop-
growing number of unintended consequences of austerity — and a number of these political patients may require emer-
some of Washington's greatest recent military successes relying
gency procedures in the years to come.