Obama’s debut on the world stage , more Auckland

This week will be dominated by coverage of Barack Obama’s first foray on the world stage, as President. Today and tomorrow he will be in London for the G20 gathering to discuss economic stimulus and financial reform. ( Expect fireworks from Brazil and other emerging economies being hit by a crisis that President Lula says was caused by blue eyed men with white skin.) He will also be meeting bilaterally with the leaders of Britain, China and Russia – where any help from the Russians on access for supplies into Afghanistan will hinge on concessions in Europe over missile deployment, and on no support for Ukraine joining NATO.

Then its Friday and Saturday in France and Germany to meet Nicolas Sarkozy and Angela Merkel. Brace yourself for the Carla Bruni/Michelle Obama photo ops. Obama will be attending a NATO conference that will focus on his calls for more troops and reconstruction aid to support the new, integrated US policy on Pakistan and Afghanistan.

Obama will then spend the rest of Saturday and Sunday in Prague for a European Union summit and will deliver a major speech on US missile proliferation in eastern Europe. The Russians object that they’re an offensive system right on their border, the US says it’s really a defensive system to counter Iran’s missiles.

With that sorted, he’s then off to Turkey for high level talks with an increasingly important US ally, and a forum on the West’s relationship with Islam. If this forum sees Obama making any further conciliatory gestures towards Iran, expect the Sunni heavyweights in the region like Saudi Arabia and Egypt to be mightily annoyed and calling for re-assurances, as the Cairo newspapers are already warning.

Obama – the – candidate may have charmed Europe only eight months on the hope and expectation of what a new White House incumbent might achieve. This time round, the new President will find concrete achievements very hard to demonstrate. Europe is unlikely to pour more funds into a stimulus package to counter a global recession widely perceived to have been largely America’s fault – and nor will it be sending many more troops to Afghanistan. Turkey may end up being the main source of fresh troops to help Obama out, though Britain and Poland could also offer some token increases. Expect headlines that Obama – particularly Michelle Obama – wowed Europe personally, but that the Europeans sent him home empty handed. 

The G20 / European Summit wings of the trip are likely to founder on basic differences in approach. The European response to the recession is to call for tighter regulation – or nationalization – of the financial system, while the US is asking Europe for bigger dollops of spending. (Thankfully, no one is taking the Roger Douglas approach that a deep recession is a great time to cut government spending) Still, any European skepticism about the White House approach is unlikely to counter the surprising level of domestic support of late for the direction is which Obama is taking the US economy:

An ABC News/Washington Post poll out today shows Americans are increasingly confident about the economy, a potentially persuasive tool for Obama at the G20 summit.
Forty-two percent of Americans now say that the country is moving in the right direction, up from 19 percent before Obama took office in January and just 8 percent last October.
Thirty-six percent of Americans still say the economy’s getting worse, but that is dramatically lower than the 62 percent who said that in January and a record 82 percent last October.

All this good will could evaporate of course, if the stimulus package fails to deliver – as a lot of observers expect it to do. Mainly because Treasury Secretary Timothy Geithner seems quite willing to overpay the banks for the toxic assets they hold, in the hopeful ( and mistaken) belief that the banks are inherently solvent and sound, but just temporarily illiquid. Perhaps what he should be doing instead is exert public control in return for the taxpayer dollars being poured in, fire the executives responsible and restructure the banking system. Adam Posen has a good recent post on this subject citing past problems with the Geithner approach, in Japan during the 1990s.

This is really what the Europeans mean when they call for ‘tighter regulation’. I liked this bit in Posen, about her political difficulty of re-capitalising banks :

In short, the U.S. government is looking to shovel capital into the banks without sufficient conditions, hiding rather than confronting the actual situation.

That is just like the Japanese government in their lost decade, or the U.S. officials during the 1980s before they really tackled the savings-and-loan crisis. In those cases, the delay simply made the problem worse over time and in the end the government had to put more money into the troubled banks directly, taking over or shutting down the weakest of them. Whatever the political culture, it would seem we have not learned from experience. Or perhaps we cannot act on our learning. The universal barrier would appear to be the political difficulty of recapitalizing banks. That seems obvious, but the constraint it puts on good policy is enormous.

That is why the Geithner plan is so complex and jury-rigged, to avoid the need for public requests for more money for banks. Unfortunately, it is unlikely to succeed absent additional public money and more-intrusive government action. The plan will buy some time and certainly some appreciation in bank share prices. Current shareholders will be getting a new lease on life with subsidies from taxpayers. For that reason alone, the plan certainly will cost the taxpayer more in the end than a more direct recapitalization with public control would have.


One small footnote to the Clark appointment to head the UN Development Plan. In Afghanistan, the UN reconstruction effort has been boosted by the recent appointment to Kabul of the former US diplomat Peter Galbraith – son of the economist J.K., Galbraith – as the leader of the UN’s ‘civilian surge’ that represents a key element in Obama’s new Afghan policy. New Zealand officials may remember Peter Galbraith for his role in East Timor’s transition to independence – where Galbraith ended up representing Timor against Australia in the divvying up of proceeds from the new nation’s oil and gas reserves.

Even so, Clark and Galbraith will have their work cut out winning hearts and minds for anything even vaguely resembling a modern democracy. To curry favour with conservatives during the run-up to the elections in August, President Hamid Karzai has just passed a law that legalises rape in marriage, and prevents women from stepping outside the house, going to the doctor, working or seeking education – that is, without the permission of their husbands to whom they must provide sex on demand.

Worse than the Taliban, some Afghan women are saying.


Yesterday I mistakenly said that one of the Maori representatives on the 23 person Auckland super council will be appointed by the Lord Mayor, when that call will really be made by the tribe with mana whenua status.

The ward ratios are even worse than I depicted. The most accurate and insightful commentary on the size of the wards per councillor for the six local councils envisaged can be found on Kiwiblog.

David Farrar makes an interesting case for Maori being over-represented on a population basis on the proposed super council, and cites these huge and wildly varying numbers per councillor at local level, that are far, far worse than the levels of democratic representation under the current system :

Rodney 54,000/1 = 54,000 Waitemata 261,000/2 = 130,500 Waitakere 198,000/2 = 99,000 Tamaki-makau-rau 397,000/2 = 198,50 Manukau 387,000/2 = 193,500 Hunua 72,000/1 = 72,000

These are huge, unmanageable population blocs. The anti-democratic implications of these changes – they make the Electoral Finance Act look like chicken feed – make it even more imperative that they be put to a referendum first, before adoption.


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