Tuesday, December 6, 2011

East and West at a crossroads....

East and West at a crossroads....
By Francesco Sisci

BEIJING - Timeframes in history are not constant. Sometimes decades go by without major changes, while in other times, the shape of the world changes in days or weeks.

Last week perhaps was one of those times, as the four corners of the world showed signs of great change.

On Friday, December 2, the American unemployment rate dropped to 8.6%, the lowest in over two years, basically since the beginning of the financial crisis. It is a clear indication that the economic line of President Barack Obama is paying off. This sign of success is especially important since economies in other parts of the world have begun to falter. This, plus Obama's success in backing the Arab Spring in the Middle East and in the killing of the super-CIA-Bogey-man-terrorist Obama Bin Laden, should secure his re-election.....

In the same hours, Chancellor Angela Merkel, the most powerful person in Europe, announced to parliament her intention to push for a greater European political union, work for a unified European ministry of finance, and back the debts of the weaker countries. It is a green light to the much-expected European political union, and it can be a quantum leap for the beginning of a new major player in global politics. It is also a major signal of the beginning of a possible global economic recovery.

Meanwhile, China cut interest rates by 0.5% and dropped deposit requirements for banks as industrial production fell in October following deep declines in orders. Significantly, exports to Italy, the fuse of a global economic crisis, crashed by a dismal minus 18% in October. As private companies, the major engine of exports, sputter and continue to close down, leaving a growing trail of bad loans to the banks and jobless people in the streets, China's central bank figured it could do nothing but try to push up growth. This despite concerns of inflation, which is hovering around 5%, and of a real estate bubble. But all in all, together with the US and European signs, this could push the global economy in the right direction in future months.

However, will we have those future months to look forward to in the next few weeks?

The political temperature in the Middle East has been rising fast. The Muslim Brotherhood had significant success in last Monday's Egyptian elections. This could boost the morale of people of Hamas, in the Israeli-controlled West Bank. Despite the group's pledges of not being radical and reassurances of not having ties with terrorist organizations, some people in Israel are growing worried that the price of the Arab Spring could sooner or later be paid by Israel. Egypt is not alone. Syria is on the verge of collapse, and a new government could reclaim the Golan Heights, occupied by Israel for over 40 years and important for their strategic position and as a source of fresh water.

In fact, the result of the new democratically elected governments in Arab countries could well be a rekindling of the old rhetoric against Israel and in favor of the Palestinian cause - and that could mean worse ties with Israel. If democracy turns sour once again in those countries, the new local strong men might want to prove their mettle with the crowds by pumping up the anti-Jewish rhetoric, which would worsen ties with Israel. In sum, in either case, a scenario of greater political isolation around Israel is likely, and this could be something that could also bring a new war in the region.

That perspective has possibly already moved past the drawing tables, when last week a motley crowd attacked the British embassy in Tehran. In retaliation, London closed down the Iranian embassy in UK because of growing concern about the Iranian nuclear program. These moves multiply the possibility of an air strike against Iran, which could delay its program but also could further heat up temperatures in the region.

Then the new leaders, born out of the so far US-supported Arab Spring, will be left with no choice but to condemn the US-vetted strike. In that case, the strike should be avoided by all means. But if Tehran does not back down on its nuclear program, that could be a sign that the US - or worse, Israel - is a paper tiger.

This brings us back to the beginning. How can the US strike a balance between reining in Iran, carrying on backing the Arab Spring, and supporting Israel? It should think of something out of the picture, and possibly sort out some form of solution to the Palestinian issue that could shield Israel from the popular sentiments in the Arab world while giving the US a freer hand against Iran.

The choice could be even more difficult for Europe, now that it is on the path to unification. Intervention in Libya was divisive, as France (a euro member) and the UK (a non-euro member) were enthusiastic about the war, while Germany (the euro's engine) was against it. Can Europe on the path of political unification withstand the stress of a divisive policy on the Middle East? Can foreign policy divide Europe as much as market speculation drove it together?

Despite Merkel's recent pledges, there is no timetable or fixed agreement for the European Central Bank intervention in the market or the unified European financial authority and energies to political unification can easily get disrupted.

In a different fashion, but driving the same point, could China, watching the ongoing US encirclement and in the throes of a difficult economic moment, be willing to collaborate on solving the Iranian issue? Its gains could be long-term (further proof of its will for political integration into the US-led world), but in the short term, Beijing may see a threatening wave of revolutions and destabilization moving from Egypt, Libya, Syria, Iran, and reaching out to China. However, many Chinese pundits believe external dangers are dismissible as long as domestic issues are under control. Perhaps the opposite is true now.

The suicide of over a dozen Buddhist monks in Tibet, the over 100,000 demonstrations a year have not destabilizing the country, neither are major destabilization in sight because of the high inflation or the growing unemployment. China is internally extremely resilient. But foreign policy, not taken in due care by top decision bodies, could be disruptive as it influences ties with neighbors and imports and exports, ie some 40% of the total China gross domestic product, while domestic consumption is picking up only slowly. Yet, many Chinese so far seemed unable to grasp the fact that political reforms are necessary also to improve Beijing's standing abroad and thus to navigate China through very complicate and difficult times.

Meanwhile, the US and Europe are not showing the best of their democratic political systems. In America, Republican and Democratic partisan politicking seem to break up all major political decisions, so crucial economic decisions are postponed or watered down. In Europe, similar national politicking has caused the present crisis by delaying important economic decisions for months. Either political process is likely to drag on giving to China and other countries the impression that Western countries are indecisive and inconclusive in a moment when strong stewardship would be needed.

Here, any of these local crises could have a global impact, and anybody should be following all these hot spots at the same time paying attention that things keep under control. It is a very difficult exercise, especially if everybody is just waiting to receive the balls he is handed.

The thinking should be different. Major countries should think of concerted action to address these problems, starting perhaps with the Middle East, which is at one time the most intractable, as definite solutions are most unlikely, and also the one where there is less conflict among major players. This would require a high degree of mutual trust whereas China, its neighbors and America are just second-guessing each other more than ever. Unless some action is taken soon, chances are that something will go very wrong very soon. Usually, in history and in human affairs, if things can go wrong, they usually do.....

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