Just two short weeks ago Sarah Palin was the darling of media and public alike. Commentators gushed about her common man appeal, right-wingers fainted over her abortion and gay marriage positions (not to mention her looks), and pollsters reported a meteoric rise for the McCain-Palin ticket. And the Democrats were confused, unsure whether to attack Palin on lack of experience (and risk highlighting Obama’s own short resume) or extremism (and risk alienating religious voters) or to just ignore her and focus on McCain (but miss the opportunity to attack a vulnerable candidate).
Fortunately for all of us, Palin’s resume (or pitiful lacks thereof) speaks for itself. Check out Palin’s one-on-one with Katie Couric from earlier this week:
The Palin “bounce”, once celebrated by the Republicans, has fallen back to earth. But the fall may not stop at the pre-Palin status quo of a slight Obama lead. Instead, Palin now threatens to drag down McCain even further than before. Consider a September 26 opinion from Kathleen Parker, a nationally syndicated conservative columnist, who decries the “Palin problem”, which could be roughly defined as an inability to say anything intelligent about any of the serious problems facing our nation.
To be honest, it was only a matter of time before conservatives soured on Palin. She’s totally out of her element, particularly in foreign and economic policy, and there’s nothing that conservatives hate more than a risky neophyte (consider their dislike for Obama). But Obama’s now surging in the polls, and at least in part because Sarah Palin’s been exposed.
In early August, Russian tanks rolled into Georgia and IR students the world over started celebrating the return of their field of study to mainstream relevance. Then, I thought for about two seconds and realized that was a very twisted version of wishful thinking. First of all, none of us should wish the return of the Cold War, it would be miserable (doing missle drills during the middle of your work day would be very annoying). Second and more importantly, it just is not realistic. Reason being–and I will use a quickly tiring cliche here–is that the world is too interconnected.
I cite as my principle evidence what has happened to the Russian economy post-Georgian invasion. In this recent article, FT reporters list a number of disheartening statistics if you are a Russian investor. The main statistic is that the Russian stock market has plunged 45% since May. While this slide predates the invasion of Georgia, its hard to say that the Russian economic slide and bellicose Russian behavior are not related. It may also be true that the correlation is the reverse of what you would expect, that the economic slide precipitated the Russian invasion because politicians wanted to show national strength amidst economic weakness. I highly doubt that to be the case, but if that was their strategy, then they only accomplished further weakening their economy and putting themselves further into a corner politically. Regardless of what they may have thought, sabre-rattling is not an effective course of action anymore.
The difference between now and the pre-1989 world is economic inter-connectedness. The USSR could behave the way it did because it actually had control of a sphere of influence both politically and economically. In those days, its satellite countries traded within the Soviet bloc and their currencies were not traded on open markets. Now, even the Ruble is traded on an open market and former Soviet countries of all shapes and sizes (Russia included) are joining the free trade regime. Ukraine and Georgia may not be members of NATO but they are members of the WTO. Then there are the EU members from the former Soviet bloc like Poland. Russian wealth is also largely dependent on Europe buying Russian oil. In short, these economic ties preclude any swift turn backwards in time or allegiance to the Cold War.
What does this have to do with the impending presidential election? Well, from the Republican side we have a man with a wealth of foreign policy knowledge and experience who professes to be an economic novice. On the Democratic side we have a very intelligent yet untested man who seems to understand the way the world works. Because of his inexperience (yes, I said it but I don’t mean it like that) it is hard to say if Mr. Obama would be capable of handling foreign policy’s complexities but he has given every indication that he is intelligent enough to understand it fully. However, I view Mr. McCain’s foreign policy record as detrimental. He has foreign policy experience but his views were cemented during a truly bygone era when communists were communists and foreign policy entailed blockades and nuclear buildups. Now, the so-called “communists” are better capitalists then we are and blockading just about anyone hurts someone’s pockets that we do not want it to. The fact is that economics is foreign policy and foreign policy determines the prevailing economics. Having a rudimentary understanding of either, or even claiming that the two are separate, is simply unacceptable.
There’s been quite a lot of discussion recently about the crippling burden of debt faced by many Americans, and understandably so – the rippling effects of the mortgage crisis have a number of analysts suggesting that the U.S. economy is heading towards recession.
Unfortunately, it doesn’t seem that many lessons from the recent crisis are especially clear, at least as far as policy prescriptions might go. While it is true that many lenders were certainly irresponsible, many borrowers freely admit that they were, too. And while the availability of easy credit certainly contributed to the growth of debt, it’s important to recognize that, in general, access to credit is a very positive thing, provided that it is offered and taken responsibly, with rational pricing of risk all around. To put it more concretely, while access to credit and the resulting growth of debt led to many Americans losing their homes, access to credit helped put some of them in those homes in the first place, and it helped others improve aspects of their lives, if only in the short term given how events played out. Without excusing irresponsibility on the parts of the various players involved in the recent debt crisis, I think it’s essential to note that addressing the problems in these markets entails what might end up being a fairly delicate balancing act, and that the parameters governing such an act aren’t necessarily known.
I can’t help but wonder, though, if we wouldn’t be able to achieve a lot by focusing on some of the informational aspects of the decisions made by consumers. Specifically, I wonder about the role financial illiteracy and opacity played in convincing borrowers to take on risky high-interest-rate loans of various sorts. Was it the case that many borrowers didn’t understand the economic risks they faced in general (e.g. the risk of medical emergencies or layoffs), some of which might be large enough to force them to default? Did they, perhaps, fail to understand the risks associated with ARMs, or the terms underlying their credit-card debt, or the specifics of any of the myriad of other debt instruments that were purchased? It’s an empirical question, surely, though I think it’s somewhat intuitive: who hasn’t been at least somewhat confused by the terms and fees associated with a bank account or credit card? If it is indeed the case that these sorts of misunderstandings were important in the evolution of the current financial crisis, perhaps there is a role to be played by government in promoting financial education or enhanced transparency of financial contracts, independently of any regulation of the terms of those contracts.
From what I know of the literature in general, the evidence about the efficacy of financial education and transparency interventions is mixed. But I can’t help but think that it’s important to continue exploring this area. The economic world becomes more complex every day, and it seems that the importance of the effective management and transmission of information grows with it. Perhaps focusing on better financial education and transparency on the ground will prove to be a more valuable (and workable) approach than playing an outmoded blame game.
