When I took my first class on International Relations in college I was especially excited to participate in a exercise at the end of the term: everyone in class would get into groups and simulate a regional conflict with individuals acting as certain countries. I got Turkey, and it was my job to negotiate Georgian membership in NATO. The group included someone playing Georgia, the US, Iran, and Russia was supposed to have a representative but she was sick that day. It ended with me (Turkey) yelling at Iran’s sassy representative until the United States mopped things up and signed a treaty. In reality Turkey and Iran have had several shouting matches throughout history, dating back to the Ottoman and Safavid empires.

We were allowed to bicker in part because the professor was distracted by 30 other students at the time but also because certain facts about the group presented themselves. Iran and Turkey are similarly sized countries with populations of about 75 million each, with economies sized by the IMF at $930.236bn and $1,054.560 respectively. Before the US got involved, neither me (playing Turkey) nor Iran’s representative had enough of a relative advantage to sway Georgia; it took a superpower to alter the dynamics of the group. International politics aren’t usually that simple, but the exercise has always intrigued me. I’ve wondered since then what patterns you could find by taking a simple measurement of a country’s relative power (like wealth) and looked a differences within real international working groups.

In this blog I want to look at relative power and measure it within various international organizations. But before I go any further I want to make one point clear: I am not attempting to predict actual influence in international organizations, I am merely measuring theoretical influence in these organizations and leaving it up to the viewer to draw whatever conclusions from this. Having said that, I’ve found several articles about recent events that relate to the power-dynamics in these organizations. For most of these graphs I will be using Gross Domestic Product based on Purchasing Power Parity as a basis for potential influence in groups. I collected the statistics from the IMF (here) and all but a few exceptions are from 2011.

For my first group I would like to present the Arab League, with the Gulf Cooperation Council as a subgroup:

(note: the Palestinian Authority and Somalia were omitted as they lacked recent statistics, Yemen and Libya’s numbers are from 2010)

I think this graph is especially important as recent uprisings in the Middle East have captured the attention of the world. Like so many things in the region, the uprisings must be viewed in a context includes more than just relative GDP, but this graph offers some perspective on recent events. Just as Tunisia had seen its president abdicate power and Cairo’s Tahrir Square was swelling with protestors, the Gulf Cooperation Council (led by Saudi Arabia) invited the Morocco and Jordan to join the oil producing group.  The move was widely interpreted as an effort to stymie the revolution retain Saudi Arabia’s influence in the Arab League. Even without adding Jordan and Morocco the combined wealth of the Gulf Cooperation Council makes up 46% of the Arab League, it would have a majority of the League’s wealth were it to include the two monarchies.

Palestine is a perennial feature of Arab League summits, so it should come as no surprise Arab states frequently vie for influence over the politics of the territory. Egypt has repeatedly tried to broker unity within the Palestinian government; Saudi Arabia has tried to take the initiative on Arab leadership in the Israel-Palestine conflict. Personally, I think it’s no coincidence that the two largest economies in the Arab League have both taken such a critical role in the Israel-Palestine conflict. While Arab League efforts to resolve the Israel-Palestine have stagnated recently, the situation in Syria has been very much on the agenda.

While conflict and upheaval has often characterized the Middle East, Latin America has seen a recent flourishing of democracy and regional integration. For this region I would like to present two graphs representing different regional organizations:

UNASUR (The Union of South American Nations) is the main body for regional integration in South America, but its significance to greater Latin America was enough to move Mexico and Panama to observe the treaty signing that created the institution. It’s not hard to see how relative power in this institution could easily mirror the simulation I participated in in class. In 2010 a dispute between Colombia and Venezuela gave the new organization a role in resolving a long-brewing confrontation. Like Turkey and Iran, Colombia and Venezuela are neighbors with somewhat similar means ($467bn GDP for Colombia versus $370bn Venezuela) but very different ideology/foreign relations. Colombian president Álvaro Uribe, having just signed an agreement with the US to build a new base there, accused Venezuelan president Hugo Chávez of giving FARC material support. Pressure from UNASUR helped to prevent war and in August the two countries resumed diplomatic relations.

While UNASUR represents a successful  South American effort towards integration, the wider Latin America has seen varied progress towards the goal of integration.

As the Arab League seeks to integrate the Arab World, CELAC (The Community of Latin American and Caribbean States) seeks to integrate Latin America. Both groups therefore exclude obvious regional powers: the Arab League is often maligned for excluding Israel and Iran, while CELAC was created (intentionally) to promote Latin American integration without US, Canadian, or European involvement. A potential obstacle to CELAC’s success is that unlike UNASUR, Brazil faces a rival in Mexico. While Brazil is a decorated member of the BRIC (a bloc of emerging economies) and has a much larger population (190 million vs. 112 million) Mexico grew at a quicker pace in the last two quarters. Perhaps in relation to this recent shift, Brazil and Mexico are now in trade dispute with one another. Guido Mantega, Brazil’s finance minister, has recently suggested that the trade group Mercosur (part of UNASUR) increase its tariffs with outside countries, including Mexico. This doesn’t have to spell doom for the dream of Latin American integration, but it does reveal a potential rivalry that could threaten wider regional integration.

CELAC has been championed by leftist leaders in the region like Bolivia’s Evo Morales and  Hugo Chávez as an alternative to the Organization of American States, since it lacks the US and Canada. At a summit last year two declarations were adopted by the organization that reflected this reality; Argentina’s claim to the British-controlled Falkland Islands (called the Malvinas in Argentina) was supported and the US embargo on Cuba was criticized. While these declarations were adopted by all CELAC members, the body went short of calling for any direct action on the issues. Journalist Andrew Cawthorne posits that pro-US members like Mexico, Chile and Colombia have prevented CELAC from adopting more radical action against Western interests in the region. This scenario is an example of how organizations can easily lose the capacity to act unilaterally when political and economic divisions are present. The combined GDP share of Mexico, Chile and Colombia represents 35% of CELAC.

Sometimes regional groups can be so effective that they’re summits become used to coordinate bigger goals than their membership suggests. This was the case with ASEAN (Association of Southeast Asian Nations), a group founded in 1967 to represent Asian countries sandwiched between giants like China and India to the north and Australia to the south.

Security and economic integration are both included in ASEAN’s charter, but the group’s effectiveness has been varied between the two mandates. Cambodia and Thailand have had an ongoing border dispute that has persisted despite an ASEAN brokered agreement that includes Indonesian monitors in the area. But while ASEAN’s effectiveness at settling regional conflicts has been varied, it’s economic importance cannot be understated. The group plans to implement a Free Trade Agreement in 2015, which has smaller countries like Timor-Leste eager to join quickly.

ASEAN attracting small regional nations may not seem like a big deal, but certainly role in the response to the 1997 Asian financial crisis was. The financial crisis devastated much of Asia and the IMF’s response was highly criticized by many inside Asia and beyond. In 2000, finance minsters from ASEAN member-states plus China, Japan, and South Korea met at and produced what is now called the Chiang Mai Initiative. What started out as a currency-swap agreement has evolved (at least conceptually) into a regional bailout fund, with a role akin to the IMF itself. The initiative is managed at a summit connected to the annual ASEAN meetup, with the expanded group called ASEAN+3. Now, with a bailout fund of $240 billion, ASEAN+3 is a critical piece of Asian integration. What does a graph of this expanded group look like?

As evidenced by this graph, ASEAN has an outsized influence on the region it now helps to integrate.

When it comes to challenges facing a regional organization, the AU (African Union) has to be far in the lead. of the 20 countries with the lowest Human Development Index ranking 19 are members of the AU (source). With recent coups in Madagascar and Mali and Zimbabwe in perpetual crisis, the AU exists in a region that needs security and economic cooperation desperately.

(note: South Sudan, Western Sahara, and Somalia lacked current info, also not included due to GDP being under 15bn: Benin, Malawi, Rwanda, Niger, Guinea, Mauritania, Togo, Swaziland, Zimbabwe, Sierra Leone, Eritrea, Gambia, Lesotho, Central African Republic, Burundi, Djibouti, Seychelles, Cape Verde, Guinea-Bissau, Liberia, Comoros, São Tomé and Príncipe)

The AU faces several internal conflicts: the Arab north is sometimes ambivalent about the role in the AU, something brought under the spotlight when Jacob Zuma and other leaders tried to broker an AU peace plan in Libya. The AU opposed any foreign military intervention, even as Qaddafi’s troops threatened to massacre Benghazi. With a somewhat disengaged Arab north, the largest countries that back the AU enthusiastically are Nigeria and South Africa, whose support is often critical for AU resolutions.

Despite being a diverse organization with large regional/ethnic divides the AU has acted decisively on occasion. Led by Nigeria’s ambassador B. Paul Lolo the AU suspended Mali swiftly after an illegal coup took place. But sometimes the perverse influence of geopolitics has been maligned in the AU. Notably, Mugabe’s Zanu-PF government in Zimbabwe was accused of being “sheltered” by a sympathetic administration in South Africa during the worst political violence in 2008. Whether or not the AU suffers from the problems associated with power dynamics, its success is critical for the region, and perhaps the world.

With the recent election drama in France and Greece it would feel remiss to leave out the European Union in this blog.

(note: underlined countries do not use the Euro currency)

I’ll leave coverage of the eurozone sovereign debt crisis out of this as I have covered it in several other posts (and I plan on writing more shortly), but I’ll highlight a few broad observations about the EU’s politics. The UK is the largest non-Euro member-state and is often seen as the most eurosceptic member. This has distanced its role in enhancing the powers of the EU and has sometimes seen it act as a check on Franco-German aims to do so. One of the biggest recent events to upset this equilibrium has been the election of French Socialist François Hollande. German chancellor Angela Merkel actively supported his rival, incumbent Nicolas Sarkozy during the election, and many now ponder what impact the election will have on Franco-German relations. I’ll write more on this later in a dedicated EU/EuroApocalypse post.

I want to reiterate a point: as compelling as I find all of this, I have to be intellectually modest here and admit that most of it is conjecture. I’ve found most of the articles supporting this theoretical perspective on group power because I probably have a bias when I read articles about international news. Despite this, I’ve found myself drawn to this interpretation of events; I simply can’t look at news relating to China’s vetos in the UN Security Council, or India’s nuclear trade agreement with the US without seeing this interpretation of events shaping my opinion. In the very least, I hope you’ve found this to be interesting to read about.

If you’re reading this because you found one of my graphs while desperately trawling the web for statistics for an essay, feel free to use them! unless otherwise noted all of my graphs use data from the IMF found here and I’ve taken it on myself to post all of the excel docs below:

arab league GDP pie 2011

ASEAN GDP PPP 2011 pie

ASEAN+3 GDP PPP 2011 pie

AU 2011 BIG LIST

AU 2011 gdp pie

CELAC GDP PPP 2011 pie

EU27 GDP PIE 2011

NATO 2010 military spending

NATO 2011 GDP PIE

UNASUR GDP PPP 2011 pie

If you know anything about me, you probably know that I watch the polls for national elections like a watch college football: obsessively. While polling is an imperfect science, it offers the best glimpse into an electoral result before people vote. Politicians dedicate massive resources to poll constituents, either by conducting polls in house or by contracting polling organizations. Polls often determine how and what a candidate will speak about in public addresses, or what promises might be made on the campaign trail. It should come as no surprise that Governor Mitt Romney has distanced the healthcare reform he implemented in Massachusetts from Obama’s healthcare reforms; after all, polls show a majority of Americans oppose Obama’s healthcare legislation.

While politicians usually keep their in house polling private, there is a wealth of polling data that is public and well organized. RealClearPolitics collects polling data from a wide variety of sources and nicely organizes them into polling averages for a particular race. Using multiple polls adds legitimacy and a degree of predictability to polls.

In this post I’d like to focus on the polling on the US Presidential election and the implications on the electoral geography in 2012. When I say electoral geography I am referring to the relative significance of certain US regions in presidential elections. The US uses the Electoral College system, which isn’t really as complicated or unfair as its maligned for being. Every state is given a number of Electoral College (EC) votes based on their total congressional delegation: the total number of Senators and Representatives. Every US State gets two Senators regardless of size, while Representatives are allotted based on population. Because most states (Nebraska and Maine allot some EC votes by congressional district) are winner-take-all, certain larger states are immensely important. In 2008, Obama turned many states that were considered “safe” Republican holds blue:

Most notably Obama turned Indiana, Virginia, North Carolina, and one congressional district in Nebraska blue. Obama’s victory was so sweeping that he could have lost California and New York and still won the Electoral College; but much has changed since 2008. It is looking increasingly unlikely that Obama can win many of these states that he turned blue four years ago, and persistent high unemployment has made Obama vulnerable in a number of states. All of this makes for an election with many more “swing states” than previous elections have had:

Polling comparing Obama to the Republican field for 2012 has been both extensive and varied in results. Most polls show that right now Obama would easily defeat any of the GOP contenders by both popular vote and Electoral College, with the exception of Mitt Romney. Because Romney is leading the Republican Primary right now and polls the closest to Obama, I will use polls comparing Romney to Obama as a basis for my electoral maps. With the exception of Missouri, every state I listed as a swing state on the map above was won by Obama in 2008. Instead of laboring over the polling in every state I will justify my decisions briefly here: Michigan, Minnesota, and Wisconsin aren’t “swing states”  because recent polls have Obama winning each state by at least 8% (the same margin that polls show Romney winning in Georgia).

So with 146 EC votes apparently up for grabs, one might ask why I titled this post “Why Ohio Means Everything,” surely 18 measly EC votes isn’t going to dictate who wins, right? Ohio’s significance as a key swing states derives from a historic fact: no Republican has ever won a presidential election without winning Ohio. One can counter that history does not determine the future; after all, no Democrat had won Virginia since 1964 before Obama broke that trend in 2008. But Ohio’s historic significance is less important here than its contemporary trends. Ohio and Pennsylvania share the distinction of being large swing states, but Pennsylvania’s demographics give it a slightly Democratic lean in national elections. For reference, the Cook Partisan Voting Index (PVI) shows Pennsylvania as D+2 and Ohio at R+1 (for perspective they rank Alabama at R+13 and Massachusetts at D+12). Part of this derives from the voting tendencies of the large metropolitan areas on both states. In 2004, Ohio’s Cleveland and Columbus metro areas supported John Kerry, while Cincinnati sided with George Bush. Pennsylvania’s large Philadelphia and Pittsburgh metro areas strongly supporting Kerry back then.  Bush ended up winning Ohio by 2% and losing Pennsylvania by 3% that year. Four years later both states would turn blue, with Obama winning Ohio by 4% and Pennsylvania by 10%. This trend is older than recent history: Ohio has not voted Democratic without Pennsylvania also doing so since 1948!

Interestingly, new polls actually show Obama doing better in Ohio than in Pennsylvania (it should be noted that polls in Penn. are a month older). Both RCP averages have Obama winning by 4.5% and 3.2% respectively (see previous links). Some have suggested that a recent referendum on collective-bargaining rights for public sector employees may have pushed Romney’s support down in Ohio. Were these polls to translate into wins for Obama, Romney’s chances to win the election in 2012 look much different:

For Romney to win, he would need to net 100 EC votes out of 108; Obama, on the other hand, could win by taking just ten. This makes the polls in the remaining swing states critical to Romney’s changes; here is a list of RCP averages in the remaining states:

Colorado (8/4 – 12/4): Obama +4.5%*

Florida (1/19 – 1/27): Romney +0.3%

Iowa (7/5 – 11/29): Obama +2.6%

Missouri (11/9 – 1/29): Romney +1.5%

Nevada (10/20 – 12/20): Obama +3%

New Hampshire (11/28 – 2/2): Obama +3.5%

New Mexico (6/23 – 12/12): Obama +11%*

North Carolina (12/1 – 1/11): Romney +2.6%

Virginia (12/11 – 1/18): Obama +1.7%

(note: *only one polling organization used, I was unable to find polls for Indiana.)

Even if Indiana went to Romney, his chances of winning 100 EC votes from these states is low. The problem doesn’t just come from larger swing states like Florida and Missouri, but from smaller ones as well. If Ohio goes blue, states as small as New Hampshire and Nevada could tip the EC advantage in Obama’s favor. Expect campaigning in the buckeye state to be brutal. Some speculate that the recent jobs report will alter the dynamics of the presidential race, in what ways remains to be seen. I, for one, plan on watching these polls obsessively over the next year; so much can happen between now and November!

After months of mental stagnation I’ve decided to return to the world of blogging with an extra spergy post on the economic policies being considered on both sides of the Atlantic. Before I expand on this subject I want to send a special thanks to economist bloggers Paul Krugman, Brad DeLong, and Matthew Yglesias for inspiring me. I absolutely don’t belong in the same category as them but I feel so much better informed by their blogs. For anyone looking to learn a little bit more about economics or economic theory I highly recommend following these blogs. For additional perspectives from economists you should also consider the blogs referenced in this compelling economist article.

The topic for this post will be the economic policies that are currently being considered in both the European Union and the United States. Before I go further I want to define two terms that I will be using a lot in this post:

Austerity: “In economics, austerity is a policy of deficit-cutting, lower spending, and a reduction in the amount of benefits and public services provided.[1] Austerity policies are often used by governments to reduce their deficit spending[2] while sometimes coupled with increases in taxes to pay back creditors to reduce debt.[3]” (from wikipedia)

Expansionism: “some have linked the term to promoting economic growth (in contrast to no growth / sustainable policies).” (also from wikipedia)

While some time has passed since the debt ceiling standoff and subsequent downgrade by Standard and Poor rocked US markets, the debate remains central to US economic policy. In recent Republican debates austerity has been almost universally endorsed. Governor Rick Perry went  so far as to propose eliminating three government agencies, though which three is still up for debate. This stance on austerity has also been endorsed by Republicans in Congress, with multiple proposals to reduce government spending in the short and medium term.

Across the Atlantic, similar proposals have not only been proposed but have been implemented in several countries that were affected by the Eurozone debt crisis. Germany’s Angela Merkel has been one of the most ardent proponents in the Eurozone for an austerity-centered response to debt crisis. The economist states:

Italy and Greece, under new technocratic governments, may now be more serious about living within their means and reforming their faults. France, which has run budget deficits since 1974, is adopting austerity. Spain has introduced a constitutional debt brake.”

In both Europe and the United States austerity has been proposed as a solution to the risk of bond market action on sovereign bonds. I think it is critical to understand a few key elements of what this “bond market action” implies here. When governments seek to borrow money, they auction sovereign bonds denominated in the currency used by those respective governments. Governments then have to pay back those bonds with interest. This interest is called the “yield” and has an inverse relationship to demand for those bonds. So if a bond is in high demand, the yield will be low, while a bond with low demand will have a higher yield.

Ratings agencies, which represent the interests of bond-buyers will give ratings on sovereign bonds based on how likely they think they will be repaid. Even though a nation’s sovereign debt rating can be related to its yield, the two don’t always correlate to one another.  When the United States lost its AAA rating from Standard and Poor (the other two major ratings agencies kept the AAA for the US) stock markets lost record volume but demand for US sovereign debt actually went up. As I write this the yield on US 10-year bonds stands at 1.89%, while it stood at 3.01% on July 20th, 2011.

While 2% is considered serviceable, higher yields can cripple a country by forcing it stop borrowing altogether. Greek 10-year bonds have yields more than ten times higher than their US or German equivalent:

At present, Greece would have to pay 34% interest on a ten year loan. This has effectively locked Greece out of selling its debt. It would seem natural then, that the countries that are now bailing out Greece would insist that Greece cut government spending sharply and try to raise more taxes to cut its deficit. After all, if Greece were able to finance its spending without having to borrow money, yields wouldn’t matter, at least in the immediate term. Germany, the biggest Eurozone economy, has led the push for austerity in Greece and other Euro countries with dangerously high yields (Italy, Spain, Portugal, Ireland have all faced high yields).

There is a danger to this logic though, that comes with the effects of austerity. In return for the first bailout, Greece agreed to sharply reduce public spending, including cuts in pensions and wages for public sector workers, yet it still fails to meet deficit targets set by the EU. Germany is now proposing that the EU take direct control over Greece’s government spending, something deeply unpopular in Greece (source). The problem that comes from this arrangement is that austerity has not let to growth in Greece’s economy. In fact, since the first bailout in April 2010, Greece has seen its economy contract sharply:

This is as troubling as this looks, it easily could have been predicted. When you lower spending like Greece has done, you are in effect giving public sector workers/pensioners less money to spend, lowering demand. This weakens economic output across all sectors of the economy, as private businesses adjust to lowered demand by laying off workers and producing less. This does more than just damage the livelihoods of Greek citizens, it actually exacerbates the government’s finances. As Greece’s tax base becomes less wealthy, the government must either raise taxes further (which certainly does not stimulate growth) or continue to run a budgetary deficit just to maintain the status quo.

Greece is not alone in its struggle to grow as the effects of austerity bite, other Euro countries that have recently implemented austerity have seen growth slow:

This graph measures annual GDP growth in the Q3 2011, and with the exception of Slovenia, all of the worst performers had to implement some form of austerity in response to high yields/EU intervention.

It is not just the opinion of amateur bloggers (like me) or angry protesters in Greece that austerity alone cannot ensure debt repayment. Standard and Poor recently downgraded 9 Eurozone countries, and in its FAQ explaining the downgrades stated:

… As such, we believe that a reform process based on a pillar of fiscal austerity alone risks becoming self-defeating, as domestic demand falls in line with consumers’ rising concerns about job security and disposable incomes, eroding national tax revenues.”

The German response to the downgrade borders on intransigence:

German chancellor Angela Merkel has called on eurozone governments speedily to implement tough new fiscal rules after Standard & Poor’s downgraded the credit ratings of France and Austria and seven other second-tier sovereigns.”

This is especially swaying because ratings agencies like S&P have no vested interest in placating debtor states, but instead act on behalf of creditors. Fears over German stubbornness over austerity has led to a recent outpouring of criticism from the world’s economic leaders. IMF head Christine Lagarde, US Treasury Secretary Tim Geithner, and Financier George Soros all warned of dangers of austerity at the recent World Economic Forum at Davos. At a separate summit, Nobel prize-winning economist Joseph Stiglitz warned that Germany was pushing Europe towards a suicide pact, saying:

It is like blood-letting, where you took blood out of a patient because the theory was that there were bad humours. and very often, when you took the blood out, the patient got sicker. The response then was more blood-letting until the patient very nearly died. What is happening in Europe is a mutual suicide pact

It’s worth noting that Stiglitz had similarly critical things to say about US austerity, pointing out that the US has shed 700,000 public sector jobs over four years. While European austerity has been rightly criticized for its futility, it must be pointed out that Eurozone countries have faced something that the US has not, high yields. One of the most baffling aspects of the aspects of the recent push for austerity across the Atlantic is that, while the US has lost its AAA rating by S&P, its yields have stayed historically low. While it makes little sense for Greece to endure agonizing economic contraction from austerity, it makes considerably less sense for the United States to follow that path. While borrowing costs for the US government are historically low, unemployment remains stubbornly high.

It should be both shocking and perplexing that in spite of this Republicans in Congress have held up virtually every piece of expansionary legislation recently proposed. Republicans have been so opposed to promoting growth through legislation that they nearly blocked a tax cut designed to boost growth from being renewed until they came under intense political pressure and relented.

On both sides of the Atlantic there has been a drive for austerity that has hitherto done little to calm the markets OR promote growth. And while countries with high yields have faced inevitable pressure to reduce deficits, the real tragedy stems from the lack of leadership from countries with the room for maneuver to lead and coordinate expansionary policies. The political systems in Germany and the United States have both been alarmingly inflexible and wrong-footed in their respective approaches to promoting economic growth and stemming the threat of double dip recession.

As you might have noticed I haven’t updated this blog for some time, I’d like to address why this is and what I plan on doing about it.

Many things have come up in my life recently that have made it hard to focus. In addition to being unfocused for personal reasons, I have been struggling to find anything, ANYTHING positive to write about. The world economy is faltering as Italy’s 10-year sovereign bond yields approach unsustainable levels while my favorite sport is becoming a global story for all the wrong reasons. In truth, I was planning on writing a blog about recruiting class rankings vs. BCS rankings in college football but I can’t bring myself to even care about the sport right now, what happened at Penn State makes the entire exercise seem pointless.

So here’s where you can help, if you have any suggestions for a good blog post, please comment and I will give it all the thought and dignity it deserves, and possibly incorporate (read: steal) it into my blog. 😀

If you have disposable income (not denominated in Euros please) consider sending it to RAINN, the group advocates for survivors of sexual violence.

I can assure you this blog is not dead, yet. (when the US sells ICANN to China I can’t make any promises though 😉 )

Yes you read that correctly, this blog is not about East Asian geopolitics or the debt-to-GDP ratio of OECD members, this blog is about Pop Culture. I’ve been overwhelmed by the deluge of bad/terrible news relating to the economy and the state of world affairs lately. I don’t really want to know whats going in US/world politics right now. So instead I’ve decided to write a blog about something that mildly irritated me during the last Academy Awards winner. I have no qualms with The King’s Speech getting the award but I felt like it winning betrayed the  betrayed mainstream and critical acclaim The Social Network had received.

I felt like there was a generational gap in the two film’s importance. For me, and younger people I think Facebook’s cultural importance is ubiquitous. When the film came out its tagline was “You can’t make 500 million friends without making a few enemies” it seemed cool, and underscored the enormous importance of Facebook. The film reminded me of Pirates of Silicon Valley, or other films that helped to characterize the rise of companies that represented a sea change in society not just a new product that consumers bought. But this blog isn’t about my weird opinions about movies, it’s actually about the award itself.

The Academy Awards are one of the few non-sports TV events that I watch consistently. I’ve always liked that in order to win an Oscar, a film is not judged on its sales or its popularity, but by its merit. Recently I finally bothered to look into the rules for selection and voting in the Academy Awards. According to Wikipedia there were 6000 Academy Awards voters in 2007. For most award categories voters vote for awards that relate to their categories (actors vote for actors etc.), But a critical exception is voting for Best Picture, where all voters are eligible. While have no problems with the film industry being involved, but I think the vote would be fairer if film critics were given a share of the vote as well. I feel this way in part because my other TV-watching addiction comes from College Football, where human polls play a more important role than in any other sport. For years people have criticized the human elements of College Football in polls for being biased, and sometimes error-prone. Often there are ballots from the Coaches Poll where one or two teams in the  top 5 aren’t on their ballot at all, and coaches almost always rank their teams higher than average.

I can imagine voters for the Oscars are similarly prone to personal bias, though the large number of voters probably mitigates this risk. If it weren’t for two websites, I probably wouldn’t question the Oscars outcomes at all, most of the time I don’t see all of the nominated films anyway. But thanks to Metacritic and Rotten Tomatoes there are now more refined ways of determining how well received a film is with critics.

Rotten Tomatoes has been in existence for some time (I can recall reading it in high school) and its method has stayed simple and consistent for some time: select from a list of critics (a much wider list than metacritic) and determine whether each review is positive or negative, then give a percentage of all reviews that are positive. So, for example, if you wanted to know how many people thought The Sweetest Thing was utterly without merit (it is) you just on RT and, lo and behold, only 26% of critics wrote a positive review for the film. This was based on 107 reviews from sources ranging  from Richard Roeper of Ebert & Roeper to Christine Blosdale of BeatBoxBetty.com, a website that looks trapped in the 90s. Having a broad pool of reviews isn’t necessarily a bad thing, it helps to limit the impact of one bitter film critic rating a film “0” and devaluing an otherwise popular film.

On the other hand, metacritic uses a very selective list of critics who mostly write for large publications (The Rolling Stone, The New York Times) and they average their scores for films using a 0-100 metric. Perhaps in response to this, Rotten Tomatoes now offers a “top critics” tab that narrows ratings to ~45 of the best reviewers. But this doesn’t change a fundamental difference between the two websites: one answers “how good do most critics think this film was” the other answers “how many critics thought that this film was good?”. I think both have their merits but metacritic’s strategy is more useful for determining which movies ought to win awards.

I’ve created bar graphs that compare films selected for the past four Oscars in the “best picture” category and I’ve ranked them by their metacritic score (underlining the film that actually won). I also listed Rotten Tomatoes’ percentages using the “top critics” option from the site:

Starting with 2007:

I think this year best summarizes the differences between the two methods: I liked Juno, I bet most filmgoers liked Juno, but that doesn’t mean that most people thought it was exceptionally good. I liked There Will Be Blood too but I think it represented a deeper meaning, a heavier and more complicated reality than Juno did, and simply asking critics if they liked a movie will never show this distinction. I wouldn’t draw too much from No Country for Old Men losing out as the difference was likely down to how much coffee Ebert drank when he wrote the review.

2008 shows more variation:

An interesting advantage of using metacritic scores over Oscar winner outcomes is that you can actually compare how good a year in film did compared to years on average. 2008 looks like a weaker year using metacritc. I agree that Slumdog Millionaire was the best film of 2008, but I don’t think it would have won in a different year. It’s also interesting to see how poorly The Curious Case of Benjamin Button and The Reader fare, perhaps I should note that The Dark Knight scored higher than the bottom 3 nominees with 82 on metacritic  : – )

2009 introduced a 10 nominee process:

The suspense of the Oscars race between The Hurt Locker and Avatar does not bare out when using metacritic, as the gap is wide. Avatar’s high chances at the Oscars could have been related to its reputation as a rev0lutionary step in film production and special effects in particular. Needless to say, critics were less impressed by this.

And now my favorite year, 2010:

I think 2010 was the best year in film in the past decade by far. Individual films from other years might compete on merit but 2010 had so many good films. I personally loved 127 Hours, Inception, and The Social Network for their own particular directions and thought/read mostly positive things about The King’s Speech, Toy Story 3, The Fighter and The Kids Are All Right. I didn’t watch/read about True Grit or Winter’s Bone. The only film I actually disliked was Black Swan, which I found to be too formulaic and predictable.

Finally, which of these films was the best overall? My final graph:

This is how metacritic views the nominees for “best picture” over the past four years. What do you think?

 

From the BBC: China has reacted angrily to a US deal to upgrade Taiwan’s ageing fleet of US-built F-16 fighter planes.

This recent development where the US has agreed to a $5.85 billion renovation plan has renewed a long standing dispute between both (The People’s Republic of) China and Taiwan (Republic of China) and China and the United States. Comprehensively explaining the conflict would be both time consuming and needless, there are a variety of great sources on the matter.

Here is a quick summary, between 1945 and 1950 China had a civil war between the Communist Party led by Mao Zedong and the sitting government ruled by the KMT. Eventually the Communist Party captured the entire mainland of China and the KMT was forced to retreat to the Island of Taiwan, no armistice was signed. The US is involved in the hostilities because it supported the KMT both the during the conflict and afterwards by refusing to recognize the Communist controlled mainland as the legitimate government of China for some time. For several decades the ROC (Taiwan) refused to lift its claim over all of mainland China, with many additional countries contained in their claim (see below):

Incidentally, the People’s Republic of China also claims the entire territory of Taiwan, calling it the “Taiwan Province, People’s Republic of China.” As time has progressed, relations between the two entities has been fraught with conflict and frequent military and diplomatic posturing. Currently only a handful of countries fully recognize Taiwan as an independent state, most of them are small states. Despite America’s lack of official recognition of Taiwan it continues to support Taiwan both militarily and politically under the Taiwan Relations Act. Thus the F-16 package recently signed between Taiwan and the US isn’t anything new.

What is new, however, is the regional balance of power and its impact of relations across the Taiwan Strait. While relations have been better in recent history, there have been notable flareups in the past 20 years. These flareups (along with cross-strait relations at large) have been keenly observed by diplomats and academics alike. They watch with particular attention because cross-strait relations are often viewed as a bellwether of China’s military and economic rise and its relationship with the US, who China is now beginning to rival in economic output (using PPP, more on this later). Relative changes in the balance of power between both China and Taiwan and China and the US should be seen as a background for conflicts across the strait of Taiwan.

If one were to use only the Realist or Neo-Realist schools of thought on these relations, one might puzzled by the continued support the US gives to Taiwan. After all, Taiwan is a small country of just 23 million people, which trades less with the US compared to China. But this would be viewing things from an ahistorical perspective. Taiwan’s democracy and historic political ties with the US were once backed by a level of military spending that was closer to China’s than it is now. Without disregarding the current tension over this recent US F-16 deal, I would like to present graphs of relative power that play as a backdrop for the cross-strait relations over the past 20 years, focusing on events in 1995-6 and 2008.

Below is a graph I made using data from SIPRI on military spending from the US, Taiwan and China. (The excel spreadsheet is free if you fill out a small form here):

As one can see, in 1990 despite China seeing substantial growth in the 80s and having a population over a billion, it spent only 46% more on its military than Taiwan. China also had (and continues to have) a large border with numerous flashpoints (Arunachal Pradesh with India, among others) that could have complicated any military deployments near the Taiwan Strait. In 1995 this figure changed only slightly, with Taiwan still spending nearly 50% of what Mainland China spent on its military. This complicates a Realist/Neo-Realist interpretation of the 1995-6 Taiwan Strait Crisis.

During this crisis the then president of Taiwan Lee Teng-hui began moving away from a One China policy towards an Independent Taiwan stance. This angered PRC officials and made his 1995 visit to his alma mater, Cornell, a diplomatic crisis both between China and Taiwan and between China and the United States. In 1995 and 1996 China conducted a series of missile tests and eventually an amphibious assault exercise in the Strait, acts frequently viewed as a tool to intimidate voters in Taiwan from voting for Lee Teng-hui. The US responded with what was dubbed “the biggest display of US military power in Asia since the Vietnam War” sending two battle carrier groups into the region. Lee Teng-hui won the election that year, and tensions remained high for some time afterwards. But if China was willing to threaten Taiwan, perhaps it no longer feared Taiwan’s military. Perhaps instead, China wanted to test the alliance between Taiwan and the US.

Comparing US military Spending to China’s paints an asymmetrical picture:

In 1995 the US military spent almost 20x as much as China on its military! But the reason people are eying the Taiwan Strait as a bellwether has as much to do with the economic rise of China as its military rise. After all, a country can only spend as much on its military as its citizens are willing to sacrifice in money for whatever potential benefits that military might bring. While China’s military spending is still a fraction of US spending, its exponential increase underscores the fast-changing pace Asian political geography.

The graphs below show the GDP (national income) of the three nations using exchange rates only, and does not factor in prices in domestic markets. If you wanted to compare how much bread people could buy this would not be a good source because bread might be cheaper in other countries. But if you’re looking at international trade (or purchasing arms) this is actually a better source than Purchasing Power Parity since exchange rates would come into play.

As you can see, China’s rise has transformed its comparative wealth with both the United States and with Taiwan. It also helps explain how China’s economic growth was partially matched by Taiwan in the early 90s. In 1995 Taiwan’s GDP represented ~38% of mainland China. Now it represents just 7.3% using exchange rates.

Now lets look at a final set of graphs showing GDP using Purchasing Power Parity. This should shore up the differences in cost between both Taiwan and China versus the USA.

The first difference you notice is that both China and Taiwan’s GDP double here. This is because China and Taiwan both partake in a form of currency manipulation. Essentially, by undervaluing their currencies, these countries give their citizens less buying power on the international market, promoting domestic consumption instead. Having an undervalued currency enables these countries to export at a lower cost as well.

This data comes from the IMF, which also forecasts future GDP. They predict that by 2016 China’s GDP will surpass the United States; by then Taiwan’s GDP would represent only 6.3% of mainland China’s GDP. This is all important because it might help to explain the recent detente between Taiwan and China, beginning in 2008. This has included high level talks between the leadership of both countries as well as economic integration, and most notably frequent cross-strait commercial flights.

I have a feeling that this recent policy change comes from a re-evaluation of Taiwan’s security dilemma from within. The term “security dilemma” is used by Realist and Neo-Realist theorists in International Relations to describe a state’s conflicting needs. A state must enough power to repel aggressor states but if that state becomes too powerful it will provoke other states to counter that strength either through alliances or by increasing their own security. A common measure of power/security in Realist theory is money (GDP) or other resources. Using this level of analysis, one would surmise that China’s rise in GDP was always a threat to Taiwan and other nearby states, but that Taiwan’s countering check on Chinese growth depended on US security assurances, as the US was stronger than China. Taiwan might now be betting on the US continuing to being a powerful ally, but wants to prolong the status quo until it can find new ways to counter China’s rise. There are, of course, other interpretations of recent developments. Expect to see more headlines regarding Cross-Strait relations, as the IR community watches with great anticipation.

(note: I haven’t written a blog in weeks because I’ve moved recently and have been working a great deal since then.)

One thing that is too often absent in the debate about immigration in developed countries has been the so-called “Brain Drain.” This term is used to describe the trend of mass emigration of skilled/highly educated workers (also called “human capital”) to a few high interest places. This trend has been documented both between countries and inside of countries. In the US, this has been described as “rural flight” while the international phenomenon continues to be called either “human capital flight” or simply the “brain drain.” Most developing countries see some form human capital flight, be it Ethiopia’s loss of doctors to Chicago or the high percentage of Chinese who study abroad and choose to stay abroad after graduating. While these countries lose human capital, many developed countries gain human capital as a result of this.

America and other developed countries benefit immensely from large amounts of highly educated individuals migrating to their shores:

(source)

The trend isn’t new, either. From the Chinese source we can see that even in the 1970s Chinese students were moving to the US with only a minority choosing to return. Similarly, the trend of educated individuals fleeing the countryside in America isn’t new; this map shows US migration from 1970 to 2000:

Something that’s always interested me when it comes to maps/graphs about the brain drain is they often break down either by country (which country is gaining and which is losing) or they only focus on recent statistics (who is moving where right now). Instead I would like to look at which parts of the US have the highest concentration of educated/skilled individuals. This is not intended to rank how intelligent parts of America are, or to malign the parts of the US where educational attainment is low. Instead I want to look at where the highest concentration of people with at least post-secondary education reside in the US. I decided to use the American Human Development Project in part because it allows you to measure these indicators by state but also by Congressional District (CDs). I think this is the best metric because US congressional districts have to be at least similar in population, only small states like South Dakota have wildly divergent congressional district populations. Of course there are other problems that can threaten congressional districts as units of measure: they can be gerrymandered to include disproportionate percentages of groups for political reasons. But while this could threaten the reliability of statistics on educational attainment, I don’t think it threatens the reliability of broader observations about educational attainment in the US.

Alright, now for my map and my methodology: I used a ranking of the top congressional districts in the US by percent of population with at least a Bachelor’s Degree. I made the threshold 32%, which produced 121 congressional districts. (You can find a table of this data here)

Many things can be noted from this so I will just list them first. The the states with the most CDs with at least 32% populations with a BA are: California with 18, New York with 13, and then Massachusetts with 8, several states then tie with 7. States not on the list include: Alaska, Arkansas, Delaware, Hawaii, Idaho, Iowa, Kentucky, Louisiana, Maine, Mississippi, Montana, N. Dakota, Nevada, New Mexico, Oklahoma, Rhode Island, S. Carolina, S. Dakota, West Virginia, and Wyoming.

What I found interesting was the heavy concentration in particular areas. Despite its smaller population, the Bay Area in California has nearly as many CDs (8) as the rest of the state (10). Massachusetts is similar in this regard: only two CDs in the state aren’t counted, the entire Boston Metropolitan Area is included. Massachusetts actually has more CDs on this list than Texas (with 3.8x as many people). Boston’s high concentration of respected universities is likely a factor in this, take a glance at this map I found on Radical Cartography of Boston:

Similarly, California’s Bay Area includes Standford University and UC Berkeley, which probably contributes to its high percentage of college graduates. But does my list adequately grasp which parts of the US have the highest concentration of skilled/educated workers? I decided that pruning this list down by making the criteria higher: what congressional districts have a 45% or higher population with at least a Bachelor’s Degree? lets see what we found (my updated list can be found here):

This pruning yields some interesting results. While many metropolitan areas were represented on the former map, this updated map excludes many large cities. only 4 CDs from southern states are listed, which makes them notable. The Research Triangle in North Carolina (a region where UNC, NC State, and Duke intersect) is represented, 2 CDs from the Atlanta metro area and one from Houston are included. The Boston-Washington DC corridor is well represented with 16 CDs, while California has 7. What’s notable about California is that when you raise the threshold to 45% it actually puts the Bay Area on top with 4 CDs, compared to the rest of the state’s 3.

Finally, I wanted to corroborate these findings with a final metric. We know now where the highest concentration of people with at least 4-year degrees are, but where do people who go beyond that tend to live? I took the 30 congressional districts with at least 18% or higher having a Master’s or Professional Degree (think medicine/law/engineering degrees). Here we find similar results with the previous graph:

Here we see that like in the other graph, the Boston-Washington corridor and California are leading the nation with 16 CDs and 7 CDs respectively. In addition to these dominant regions, Seattle, Houston, Chicago, Atlanta, and the NC Research Triangle appear to have to highest concentration of human capital.

Finding out where the largest concentration of human capital is a much easier question to answer than why that concentration exists in the first place. Here are some of my less informed ideas about these maps and why we find concentrations of human capital in a few places. One immediate assumption I had was that these elite regions must have the highest wages in the country and thus attract the most human capital as a result. But surprisingly, the top 30 districts didn’t directly correlate with higher wages. Comparing Income Index with % Master’s/professional degrees produced almost as many mismatches as it did hits. None of the Boston metro districts made it to the top 30 in Income Index and Seattle and 8 others were also not in the top 30 Income Index districts. I am by no means asserting that wages and education don’t correlate here, just that they don’t perfectly correlate this instance.

But some broad observations do appear to hold true: places with more than one elite university in near proximity tend to have more human capital (UC Berkeley+Stanford in the Bay Area, Boston’s plethora of top schools, The Research Triangle’s UNC+Duke, etc.). There also appears to be a based on type of industry for at least a few districts. Microsoft and Amazon.com are headquartered near Seattle and Boeing was headquartered there and still operates a large plant in the region. The importance of Silicon Valley cannot be understated: Facebook, Apple, Google, and Intel are all based there. Washington DC’s role as the epicenter of national political life and most federal agencies makes the region’s concentration of human capital almost inevitable (Imagine the human capital the CIA, FBI, NSA, DoD, DoS attract?). Finally, places of commerce like Houston and Chicago probably attract a great deal of human capital with a combination of incentives.

I think the question of critical importance for regions that lack these advantages in attracting human capital (be it a lack of quality universities or lucrative industries) is to attract human capital using alternative methods. According to one source, making housing attainable in the urban core where they say amenities/diversity/jobs/social life are usually concentrated. A compelling blog was written about attracting smart people to cities that rates cities by their potential and actual college graduates by sq/mile. Personally, I just hope that my city doesn’t get left behind in the zero-sum competition over human capital.

A crisis that began in the so-called “peripheral” Mediterranean nation of Greece has become a prolonged disaster, that has enveloped countries that are often seen as the “core” of the Eurozone economy. While in my earlier blog I described the bailouts of Greece, Ireland, and Portugal, many things have changed since then.

The Eurozone has bailed out Greece a second time, and the ECB (European Central Bank) has began purchasing sovereign bonds from Italy and Spain in an attempt to lower yields (interest owed by debtor countries) their debt. This has caused yields to drop on those bonds, though dangers still remain for the Eurozone. Leaders in Europe are now expecting the small Island or Cyprus to need a bailout, in part due to their banks exposure to Greek debt and also from a massive explosion that knocked out power in the island. But Cyprus is less important compared with rumors that emerged early last week: that France could lose its AAA rating and that it’s debt could come scrutiny. While all three major ratings agencies have denied a downgrade, shares in many French banks plummeted on the news. While yields on French debt have been stable, France remains one of the most exposed countries to Greek and other Eurozone debt. As this excellent graph from the BBC shows:

With Greece’s economy continuing to contract in part because of its austerity program, one might ask “what would happen if yields rose on French debt due to exposure in its banking sector and public finance to the Eurozone debt crisis?” I created a graph to illustrate this:

As with the previous blog‘s graph, this shows governments that have been bailed out in red, but now has countries that have been indirectly bailed out (Spain and Italy, via the ECB bond-purchasing scheme) are pink, and countries that might possibly require bailouts in orange.

This creates a much more threatening scenario for the Eurozone as a whole:

This graph shows that were Cyprus and France to both require bailouts, one could only expect non-bailed out states to meaningfully contribute, making potential creditors the minority of the Eurozone for the first time. This possible scenario might have colored Angela Merkel’s statements at today’s joint press conference with French counterpart Nicolas Sarkozy. She turned down the proposition that the Eurozone issue unique “Euro” bonds that would combine bonds with other Euro states, and instead suggested a requirement for eurozone members to balance their budgets should be enshrined in each of their constitutions. Skeptics have argued that austerity could cause too much immediate pain and could lead to new recessions in Eurozone or elsewhere. This comes at a time when the ECB has also been maligned for raising interest rates despite slow economic growth in most of the Eurozone (only Germany and smaller members saw growth of over 3% 2010). Perhaps skeptics should respect that Germany has long been the engine of economic growth in the Eurozone; its exports far outweigh any European competition. But while growth in Germany was robust in 2010, that has all changed. In this last fiscal quarter Germany grew by a mere 0.1%, causing global shares to drop on the news. This news partially vindicates Angela Merkel’s reluctance to expand bailouts in the Eurozone.

This raises a question: can the Euro currency survive in this dangerous climate? I think its still unlikely that the monetary union will collapse in the near term, despite the dire crises that have recently plagued it. One reason for my confidence is the threat it would pose to any member were it to go alone: Greece might be withering under austerity right now, but were it to reintroduce the Drachma and ignore all the debt it currently owes it would still face a primary deficit (the money it spends cannot be covered by the taxes it collects) and offsetting this with printed money could lead to hyperinflation. Meanwhile, Germany’s current stagnation would pale in comparison to damage to exports caused by Germany’s currency appreciating by 28% vs. the dollar, were it to abandon the Euro. With Germany and the debtor states alike bound to the single currency, the most likely option appears to be a grudging acceptance of further fiscal integration of the Eurozone by creditor states and the simultaneous agreement to endure austerity in the zone’s debtor states. The real question is whether this will be enough to save the currency.

UPDATE: to make it clear that the Eurozone is not alone causing financial upheaval I should point out that US is also failing to calm the markets by its own inaction. If the Fed  were to take bold steps towards stimulating the US economy as has been demanded, perhaps the Eurozone debt crisis would be more isolated in its disruption.

Usually I like to post blogs with specific topics, or at least themes that can unify several ideas/datasets coherently. Right now I’d like instead to write a blog with a few interesting things I’ve found recently.

First, I would like to post this graphic showing healthcare expenditure (% of GDP) over a selection of OECD (a rich nation club) members:


This graph was made using Google’s Public Data Explorer and can be found here. I’ll list the values in case you have trouble accessing the link: France 8.7% of GDP on public health, Germany 8%, US and Netherlands 7.3%, Canada 7.1%, and the UK at 6.9%. I think this is a critical graph when discussion on reforming healthcare in the US takes place. As an OECD country, we spend an average amount on public healthcare alone. But what’s not in this graph is our massive expenditure on private healthcare. Data for this was only available for the year 2007, so I made a different kind of graph:

This graph (also from Google Public Data Explorer) shows the real anomaly of healthcare in the US: despite spending a similar amount on public healthcare as other OECD members, we spend much more on private healthcare. This translates into a combined health expenditure of 16% of GDP for the United States. For comparison, here are the combined expenditures for the other members: France 11%, Germany 10.4%, the Netherlands 9%, Canada 10.1%, the UK 8.4%. This succinctly defines problem that some have with the coverage gap in the US which currently leaves ~15% uninsured and produces a very average life expectancy of 78.37 years (50th best in the world). I don’t want to comment further on this debate as I feel it is well covered in the media if you look in the right places.

Moving on, I would like to move on to another recent interest of mine, academic dick waving. There are two publications that I’ve recently found that list eminent academics in two of my favorite disciplines: International Relations and Economics. The first is a survey (you can find here) that examines: “Teaching, Research, and International Politics.”

When respondents were asked “Please list the four scholars who have had the greatest impact on the field of international relations over the past 20 years.” They found:

Some interesting names here, any names you recognize? When asked “What do you consider the top five terminal masters programs in international relations for students looking to pursue a policy career?” they responded:

Again some very interesting schools on the list.

Now I’d like to move on to Economics using a list from RePEc. Who are RePEc you ask? well “RePEc (Research Papers in Economics) is a collaborative effort of hundreds of volunteers in 74 countries to enhance the dissemination of research in economics.” and who do they think are the best economists?

01 Andrei Shleifer

02 Joseph E. Stiglitz

03 James J. Heckman

04 Robert J. Barro

05 Robert E. Lucas Jr.

 06 Peter C. B. Phillips

07 Daron Acemoglu

08 Martin S. Feldstein

09 Jean Tirole

10 Edward C. Prescott

 11 Olivier Blanchard

12 Kenneth S Rogoff

13 Mark L. Gertler

14 Christopher F Baum

15 Paul R. Krugman

16 Thomas J. Sargent

17 John Y. Campbell

18 Lawrence H. Summers

19 Nicholas Cox

20 Barry Julian Eichengreen

21 Ross Levine

22 N. Gregory Mankiw

23 Ben S. Bernanke

24 Robert Ernest Hall

25 Elhanan Helpman

26 Gary S. Becker

27 Robert W. Vishny

28 David E. Card

29 Maurice Obstfeld

30 Michael Woodford

Personally my favorites are Joseph Stiglitz and Paul Krugman (his blog on NYT is excellent).

I hate writing an ideological blog post for many reasons. Foremost I believe that research and information is easily dismissed when it is attached to an ideology. Secondly, I think it’s possible to learn a great deal about the world without resorting to an ideological framework, so why not avoid it? This blog forgoes some of this belief in the hopes of raising some clarity on one of the biggest issues in US politics right now: US public debt.

Partially born from the Tea Party movement, but also from earlier advocates of debt reduction, there is now wide concern over the dangers of our public debt. There’s even this website that shows US debt figures by the second and subsequently crashes your browser. There is legitimate cause for concern, as the Eurozone has witnessed astonishing upheaval over some of its members’ sovereign debt. The US borrows a lot of money, with its current gross debt at around $14 trillion. But while groups have painted the US debt as a leviathan that presents an existential threat, I feel this is hyperbole.  Yes, the US borrows a staggering amount of debt to finance its government, but it also produces an enormous amount of money. The US has a GDP of about $14.6 trillion; it’s easily the largest economy in either Purchasing  Power Parity or Nominal enumerations, making its debt more serviceable than Greece’s because it owes a smaller amount of money than it produces annually. When comparing gross public debt to GDP instead of gross debt in absolute terms, the US debt looks considerably less out of control:

This graph was taken from Google Public Data Explorer, and can be accessed here. The data comes from the IMF, and shows US debt ballooning in recent years, though its still considerably lower than Greece’s debt or Japan in particular. This doesn’t mean the US would be fine was its debt to reach Japanese levels. But it begs the question: why are we so concerned about government spending if we could simply outgrow our debt?

Critics of the debt policy we currently have argue that the government has become massive and spends enormous amounts of money inefficiently. We do spend trillions of dollars on our government, but again we produce trillions more in income every year.

Again this graph is from Google Public Data Explorer and can be found here. I used data from 2001 onwards because the US didn’t have figures for government spending before then. We see from this graph that our government actually spends some of the least compared with other developed countries. Only Australia spends less as a percentage of GDP compared to the US. France spends over 54% of its GDP on government compared with the US’s 41%. The US falls well below the Eurozone average of 49%. So in perspective, our government isn’t a leviathan unless you only look at spending in absolute terms.

Why did we get here? It has been argued that Obama ushered in a new era of government spending. Spending as a percent of GDP did in fact grow in 2009, though it should be noted that TARP and the early Stimulus package contributed largely to these figures. Also important to note is that while these two bills consumed trillions of dollars in bailouts and stimulus monies, they were both passed while the US was in a recession. This means that the US economy was shrinking while these spending increases were taking place. US economic growth has been feeble in recent times, and because of this US receipts from taxes and other sources have been lower than before the recession.

This brings up an important point, taxes and spending aren’t just related to US debt, they are the determinants of it. When Bush cut taxes in his term, he lowered the amount of money the government could use to pay for services, creating a deficit. Before this, the US actually ran on a budget surplus for several years of the Clinton administration. One reason was that taxes were a little bit higher than they are now. During the Bush administration US taxes were low, compared to the rest of the OECD (a rich country organization):

I found this graph from wikipedia which nicely shows US debt and its growth through several administrations:

This graph is self-explanatory. Obama’s administration has seen the debt increase, but so did Reagan’s government, and both Bush administrations. Debt to GDP actually shrank under every Democrat elected president after WWII.

The New York Times has a compelling interactive article that graphs the debt crisis.

Taken from the article is:

This graph shows many things, but I think two are most important: First, Obama has done much to increase the public debt of the US, but the Bush administration did much more over his 8 year term.  Second, while China owns the largest amount of US debt of any foreign country, they only owe slightly more than US ally Japan, and three times as much debt is owed to individuals, local governments, or corporations within the United States than is owed to China.

Another compelling infographic comes from the same article courtesy of the New York Times:

This graph shows something I wanted to briefly talk about last. Ratings agencies like Moody’s and Standard and Poor are used by investors (or any buyer of sovereign debt) to estimate how likely a country is to repay its debt. The US has enjoyed the highest possible rating for several decades now. Moody’s and Standard and Poor both recently changed the outlook on US debt from Stable to “Watch Negative.” S&P explained, they view any failure to raise the debt limit as a threat to US credit worthiness, and did so not because of the size of US debt, but because of the danger of the US failing to repay its debts in the short term.

Finally, yields (interest paid by a debtor country to its creditors) on US bonds is still at a healthy 3.0%, not as low as Switzerland or Germany’s but still stable. Bond markets can be subject to bizarre movements, as Japan has seen its yields drop the lowest rate of any sovereign debt, despite having the highest debt to GDP ratio of any country and despite having a lower credit rating than the US. At the same time, most buyers of treasury bonds have little choice but to continue to buy US debt. As a different NYT article points out:

“There are limits to cutting back because other large bond markets, in Europe and Japan, are not nearly as liquid. “As long as the dollar remains the dominant currency there’s little choice for many in the public sector but to hold U.S. debt,” said the senior European policy maker. ”

While public debt is certainly a medium-term and long term concern, it makes little sense for us to risk default or make painful cuts to entitlement programs when put into perspective, our public debt is hardly as worrying as US unemployment or weak consumer spending currently is.