Usually these weekend posts examine unexpected ways in which the world is changing. Here we do the opposite, matching current news with past posts from this site.
- “Stimulus Thinking, and Nuance“, New York Times, 1 April 2009 — About Hitler’s economic policies, one of the keys to his success.
- “The Water-War Myth“, Jack Shafer, Slate, 2 April 2009 — “Spike those stories about water disputes leading to armed combat.”
- “Causes and Consequences of the Oil Shock of 2007-08“, James Hamilton, Brookings Institute, 23 March 2009 (70 pages)
- “Pentagon preps for economic warfare“, Politico, 9 April 2009
- “The Clock Ticks for Europe“, Desmond Lachman, American Enterprise Institute, 8 April 2009
The following is an addition to the FM reference page An Army near the Breaking Point – studies & reports. No excerpt provided.
- “Defense Task Force on Domestic Violence“, 28 February 2001 — Last report of the 3 year project
(1) Strong economic growth, esp vs. France and Poland, was a key to Hitler’s success
“Stimulus Thinking, and Nuance“, New York Times, 1 April 2009 — A frequently mentioned point on the FM site about the Great Depression. Excerpt (emphasis added):
In the summer of 1933, just as they will do on Thursday, heads of government and their finance ministers met in London to talk about a global economic crisis. They accomplished little and went home to battle the crisis in their own ways.
More than any other country, Germany – Nazi Germany – then set out on a serious stimulus program. The government built up the military, expanded the autobahn, put up stadiums for the 1936 Berlin Olympics and built monuments to the Nazi Party across Munich and Berlin.
The economic benefits of this vast works program never flowed to most workers, because fascism doesn’t look kindly on collective bargaining. But Germany did escape the Great Depression faster than other countries. Corporate profits boomed, and unemployment sank (and not because of slave labor, which didn’t become widespread until later). Harold James, an economic historian, says that the young liberal economists studying under John Maynard Keynes in the 1930s began to debate whether Hitler had solved unemployment.
(2) There probably will be no wars over water
“The Water-War Myth“, Jack Shafer, Slate, 2 April 2009 — “Spike those stories about water disputes leading to armed combat.” A follow-up to the FM site’s There is no “peak water” crisis, 19 June 2008 . Excerpt:
Water scarcity in the region results in “conflict and tension,” Barnaby adds, but the Israeli and the Palestinian officials have successfully used a committee (controlled by the Israelis) to peacefully resolve problems. In other places where competition for water should theoretically escalate into violence, Barnaby finds similar resolution. Egypt has become more fluid in its relations with its water neighbors because it wants to improve the climate for trade. Similarly, India and Pakistan, which war with each other with the same frequency that other nations exchange sister cities, have so far used a World Bank-arbitrated treaty to make water peace.
Barnaby wanted to revise the thesis for her water book, but her publisher pointed out that “predicting an absence of war over water would not sell” many copies. So she bagged the idea.
Despite Barnaby’s findings, other writers sense water wars in the making. The March 31 issue of The Nation includes a feature titled “Blue Gold: Have the Next Resource Wars Begun?” that cites a report (PDF) by the British nonprofit International Alert that names 46 countries “where water and climate stress could ignite violent conflict by 2025” and quotes U.N. Secretary-General Ban Ki-moon as saying, “The consequences for humanity are grave. Water scarcity threatens economic and social gains and is a potent fuel for wars and conflict.” Last month, a new U.N. water study about water scarcity warning of “a global water crisis … leading to political insecurity at various levels” prompted ominous coverage around the world (the Independent, the Sydney Morning Herald, the Bangkok Post, Bloomberg News, AFP, and elsewhere).
None of my skepticism should imply that I think everybody everywhere has all the clean, cheap water they need. Water, like all resources, is scarce, and I accept that scarcity can cause conflict. But before anyone starts frightening themselves about impending water wars, they might want to consider Barnaby’s observation that in the last five decades there have been no “formal declarations of war over water.”
Although Israel has fought wars with Egypt and Jordan, Barnaby notes, it has never fought one over water, and “more ‘virtual’ water flows into the Middle East each year embedded in grain than flows down the Nile to Egyptian farmers.”
(3) What caused the run-up of oil prices in early 2008?
“Causes and Consequences of the Oil Shock of 2007-08“, James Hamilton, Brookings Institute, 23 March 2009 (70 pages) — A follow-up to The secret cause of high oil prices of 6 August 2008.
This paper explores similarities and differences between the run-up of oil prices in 2007- 08 and earlier oil price shocks, looking at what caused the price increase and what effects it had on the economy. Whereas historical oil price shocks were primarily caused by physical disruptions of supply, the price run-up of 2007-08 was caused by strong demand confronting stagnating world production. Although the causes were different, the consequences for the economy appear to have been very similar to those observed in earlier episodes, with significant effects on overall consumption spending and purchases of domestic automobiles in particular. In the absence of those declines, it is unlikely that we would have characterized the period 2007: Q4 to 2008: Q3 as one of economic recession for the U.S. The experience of 2007-08 should thus be added to the list of recessions to which oil prices appear to have made a material contribution.
Although supply stagnated, demand was growing strongly. Particularly noteworthy is oil consumption in China, which has been growing at a 7% compound annual rate over the last two decades; (see Figure 9). Chinese consumption in 2007 was 870,000 barrels per day higher in 2007 than it had been in 2005.
How can it be that China was consuming more oil, yet no more oil was being produced? Mathematically, consumption in other regions had to decline, and indeed it did. Consumption in the U.S. in 2007 was 122,000 b/d below its level in 2005; Europe dropped 346,000 and Japan 318,000. And what persuaded residents of these countries to reduce oil consumption in the face of rising incomes? The answer is, the price had to increase sufficiently to reduce consumption in the OECD countries commensurate with the increase from China, given the stagnation in total global production.
(4) Economic warfare
“Pentagon preps for economic warfare“, Politico, 9 April 2009 — Follow-up to these posts:
- A brief note on the US Dollar. Is this like August 1914?, 8 November 2007
- Words to fear in the 21st century: Lǎo hǔ, lǎo hǔ, Lǎo hǔ, 14 July 2008
- Two essential texts in the theory and practice of financial warfare, 11 September 2008
- Rumors of financial war: Russia vs. US, 22 September 2008
(5) Will the European Monetary Union survive this downturn?
“The Clock Ticks for Europe“, Desmond Lachman, American Enterprise Institute, 8 April 2009 — A follow-up to Can the European Monetary Union survive the next recession?, 11 July 2009.
Time is running out for the European economy. As Angela Merkel’s German government stubbornly rules out further fiscal stimulus, all too many East European countries move closer to debt default. And as the European Central bank takes its sweet time to aggressively ease monetary policy, the Euro-zone’s Mediterranean countries, together with Ireland, sink deeper into recession. Connecting the dots, one must expect that the very survival of the euro will soon be thrown into serious question.
… Of even greater concern for the global economy are the cracks that are appearing in the Euro-zone as the euro now faces its most serious challenge since its 1999 launch. At the core of this challenge is the fact that the one-size-fits-all interest rate and exchange rate policy involved with euro membership cannot simultaneously meet the needs of all of the Euro member countries, many of which are now characterized by acute economic weaknesses.
In present circumstances, what might be an acceptable interest rate for Germany and France becomes overly burdensome for countries like Ireland and Spain, which are in the throes of major housing busts. It also becomes excessively onerous for countries like Greece and Italy, which have highly compromised public finances. Similarly, what might be an acceptable Euro exchange rate for member countries that have strong external fundamentals might be excessively punitive for countries like Greece, Portugal, and Spain that do not.
… In the end, the Euro might very well survive its present stress test. However, policymakers in Europe risk making a big mistake by seemingly ignoring the rapidly deteriorating East European situation and the recent rating agency downgrades of Europe’s Mediterranean countries.
Please share your comments by posting below. Per the FM site’s Comment Policy, please make them brief (250 words max), civil, and relevant to this post. Or email me at fabmaximus at hotmail dot com (note the spam-protected spelling).
For information about this site see the About page, at the top of the right-side menu bar.