Browsing articles in "Economics"
Apr 5, 2014
Erika Hernandez

Surviving and Thriving. France’s Front National


Marine Le Pen celebrating FN's electoral success at a press conference. Source: AFP/ Huffington Post

Marine Le Pen celebrating FN’s electoral success at a press conference. Source: AFP/ Huffington Post

The most recent municipal elections in France suggest that the right has gained ample ground in elections, mostly favoring the National Front (FN) and the Union for Popular Movement (UMP) parties. Despite Marine Le Pen’s considerable work in having the FN embrace a more conciliatory discourse, the FN is still considered as an extreme-right party around the world. The UMP, a center-right party, also performed fairly well as it was reported to have been taken “some hundred cities” from the left. President Francois Hollande’s party, the Socialist Party (PS), had major losses (150 towns were lost) that appear to be related to very poor economic performance and lack of political expertise.

The rise of the right in France came as early as the Third Republic and it has risen in moments of crisis. Several scandals triggered the emergence of the extreme right, such as the well-known “Capitan Dreyfus” affair, when this Jewish captain was forced to lifetime jail for having allegedly sold state secrets to the enemy. Antisemitist feelings became obvious for the first time in France. Eight years later, the sentence was reversed as it was discovered that document was forged to deliberately blame him. France’s right has slowly penetrated political circles. Today, the rise of the French right is strongly related to poor economic performance. Such a situation also comes along a very low voter turnout –61.5% of voters showed up. It is assumed that right-wing voters were more motivated to vote than their left-wing counterparts. French citizens are also disappointed with President Hollande in that his party has been unable to deliver political and economic promises. Doubtlessly, such as situation has taken a toll. The strength of the right is such that it has penetrated cities that have been predominantly left since 1912 –Toulouse, Roubaix, Amiens, Tours and Reims. During the second round, the combined left vote was 40% while for the mainstream right was 46%. Furthermore, a study showed that in 15 cities where the unemployment rates had been the lowest, the FN is present in only 11 cities. In the 15 cities with the highest unemployment in France, the FN systematically presented a candidate list and scores as high as 20% of votes –almost double.

FN’s good performance is also related to negative perceptions about immigration. During the period of 1975-1999, immigration in France was stable at an average rate of 7.4%. However, starting 2000, the French national statistics institute (INSI) reports higher immigration rates at an average of 8.6% per year. In periods of economic downturns like the one France is undergoing, immigrants tend to be regarded as job-stealers by nationals. Thus, citizens with these perceptions vote right as a way of rejecting immigration and embracing national identity. In addition to immigration, France’s unemployment rate is very telling in evaluating the reason why the extreme right won greater ground. When Francois Hollande came to power, unemployment was at 9.5. Today, France’s unemployment rate is about 11%. Yet, could it be possible that inequality has influenced the emergence of the right despite its welfare state? France is one of the major countries that prides itself for having a broad welfare system, through which it seeks to mitigate inequalities. Yet, data from the European Commission shows that there exists a rising trend of inequality – in 2002, its Gini was 27 and in 2012 was 30.5.

Will France’s future fall into right-wing hands? Current gains by the right can tell us about France’s future panorama. As a solution to the crisis, one austerity measure could be to cut state welfare provisions. Nevertheless, French people highly value their welfare system and many of them rely on it, particularly for medical emergencies. By mid-April, France needs to submit its spending plan to the European Commission, along with a plan for public-spending savings of 2015-2017. But how will public-spending will be reduced? The coming weeks will tell. If the economic cycle in the following years does not improve, it is likely that we will see some major cuts to France’s welfare state. Such policy-making would be supported by the continual rise of the right (FN) that advocates for a small state. Only if the leading left-wing party in the future, the PS, is elected once more and matches a period of good economic performance, then France’s welfare system could remain strong.

Mar 27, 2014
Erika Hernandez

Populist India? The Future of Indian Politics

Source: The Economist

Graph source: The Economist

For decades, India has been the perfect example of a stable democracy, which has often prevented criticisms regarding the perseverance of its consociational model. Lijphart’s theoretical contribution was that such model was grounded in a parliamentarian model that was more representative of minorities, a fundamental tool for solving conflicts across ethnic groupings. Yet, despite India’s so-called success, the latest events question the perseverance of such model. Could it be possible that Western values on fairness and income inequality be disintegrating the fabric of the caste system? What we know so far is that its GDP growth inconsistently reflects economic expectations of the lower echelons. Hence, although evidence already shows a resurgence of left-politics, there will likely be a stronger and greater resurgence of populism in India in the near future.

In India, discontent with corruption and inequality is on the rise as VIP motorcades travel across the streets of Punjab. Despite the new laws narrowing motorcades use to only top Indian government officials, this has done little to scale down the VIP cult. Not only has it contributed to increase government debt, but it also has offered employment to those with no or very few labor skills –like to people providing for security services. Such situation is also telling about the economy. First, although India’s GDP growth during the last two decades has had its greatest peak at 10.5%, recent statistics show that its GDP growth average of 2012 was of 3.2%. Second, despite its so-much appraised jump towards a more service-centered economy (services represent 56.9% of its GDP pie; industry, 25.8%; and agriculture, 17.4%), the kind of services sectors that it are not the kind that aggregates value in the long term. 85% of India’s jobs are found within the informal sectors; 11% of them are within formal companies. Today, most of value added jobs are not labor-intensive and, hence, are automatized, for the large part (such as the new Volkswagen plant.) Some of the non-value added jobs are those sitting on stools ‘guarding’ property, like guarding ATMs. In contrast, India has not been attracting as much foreign direct investment as Vietnam and Indonesia have been.

Given the large amounts of poverty, the government has been constantly forced to provide other solutions to unemployment and inequality. The poor have been integrated into the economy through the government’s NREGA program. This is a welfare program that guarantees 100 days of wage employment to those without manual skills in rural towns. In 2000, the government also designed special economic zones (SEZs) in order to establish areas with low tax rates and well-developed infrastructure but have had a limited success, with only the IT firms thriving. But the tolerance towards inequality has decreased. After having provided a bullet-proof escort from the Central Reserve Police Force to the business leader Mukesh Ambani –India’s wealthiest man, anger and outrage flooded the media. Additionally, riots in Maruti –caused by workers’ poor living conditions– have been regarded as a symptom of uneasiness with inequality in Indian society. The United Nations / DESA Working Paper No. 45 shows that inequality in the rural areas has decreased and increased in the urban areas, in average. What this probably means is that there has been an important migration from the rural to the urban areas, that foreign direct investment has had mildly mattered (possibly due to low levels) and that government programs have likely helped in this respect. Nevertheless, the arrival to politics of anti-corruption parties like Aam Aadmi Party (AAP) is also telling in that it is filling in for a need that Indians have not been provided for.

Today, India seems to recognize the importance of distributive politics more than ever. Regardless of dogma or caste system, the latest events do represent a barometer of increased social restlessness. If there has dominant left-politics in India, the arrival of AAP and its strong left-wing rhetoric suggests that, if it were to gain more power, it could lead the country towards populist politics. Although it propounds increasing accountability, it remains a question whether it will engage in austerity policies if encountered with large deficits. So far, it has made major electoral gains. Last fall, the party came in second place in local elections and pushed the incumbent Congress Party to a third place. The first place was taken by the Hindu nationalist Bharatiya Janata Party but it did not achieve a majority. There are other implications to this. Does this mean that acceptance for the caste system is diminishing and more Western values are being adopted? Does it mean that the strength of a consociational democracy depends upon a strong and equal system that replicates itself in politics and economics, in the end? Political science should carry out more research on this issue, as it would help to incorporate knowledge regarding the durability of consociational democracies.

Feb 6, 2014
Erika Hernandez

Carlos Moedas in Georgetown

The Politics and Economics of an Adjustment Program – The Case of Portugal

By Carlos Moedas
Secretary of State to the Prime Minister of Portugal

Carlos Moedas is an engineer, economist, banker and politician who is currently the Secretary of State to the Prime Minister of Portugal. In this capacity he oversees ESAME, the agency created to implement and control the program of structural reforms to which Portugal agreed to pursue with the European Commission, European Central Bank and the International Monetary Fund.

Friday February 7, 2014
McGhee Library
3rd floor of the ICC
Georgetown University

  Organized by: Department of Government; BMW Center for German & European Studies; MA in Democracy & Governance ; Luso-American Development Foundation


Jan 17, 2014

Cuba and the European Union – Moving Ahead

This week the European Union announced the decision to begin the process of ending with its “common position” of suspending relations with Cuba. Proposed in 1996 by then Spanish Prime Minister José María Aznar, the objective was to create some pressure on the island to foster democratic change. After twenty years of this policy and apparently much more for pragmatic reasons than for having achieved, even partially, its goal, the tentative date to normalize relations is 2015.

The EU common position is a rare tool in European foreign relations. Within its framework, all EU members adopt a single stance in relation to a specific issue or country. Common positions have been notably used for Congo, Zimbabwe (both of which have ended), and Cuba. Somewhat similar to the embargo imposed by the US, the EU common position had diplomatic and economic components. On the one hand, there wereare no bilateral agreements which would serve as a framework for any kind of relation between Cuba and the EU or its individual members. On the other hand, investment and business opportunities practically came to a halt.

Since some years ago, members of the EU (among those Spain) noticed the ineffectiveness of the agreement. They relied on a number of arguments. First, aside from Cuba, the EU common position was only used for Al-Qaeda. For some European foreign ministers, it was inadequate or exaggerated to place in the same category a Communist country and a terrorist organization. Second, they witnessed some, albeit arguably superficial and selected, changes in the island. The replacement of Fidel Castro by his brother Raúl as the president of the country, the relaxation of some controls (such as those related to international travel, for instance), and the release of more than seventy prisoners identified by the EU as political were taken as symbols that some things were occurring in Cuba. They are clearly far away from a full respect to the human rights of Cubans and from the openings that are conductive to a democratization, but they were enough for some to assess that the situation was not the same when the common position began. Thirdly, there were some instances in which the common position was ignored. For example, the release of political prisoners took place after a dialogue between Spain and Cuba, which should not have taken place because the policy did not allow for bilateral dialogues of any kind. As well, there were reports about visits between members of the Cuban and European Catholic Churches, which, again, were prohibited under the common position.

Spain successfully pushed for an ending of the economic embargo against Cuba in 2003 (its negotiation token was the release of the political prisoners). Ten years later, the Spanish newspaper El País mentions that the EU is the first foreign investor in Cuba, and that the EU is Cuba’s second foreign trade partner, after Venezuela. So, there was a material benefit to extract from finishing with the economic component of the common position. With the elimination of the diplomatic part, agreements could be reached between the two parts to improve their economic relations.

However, there are some caveats to ending with the European policy. For instance, Poland and the Czech Republic have notoriously insisted on the inclusion of a human rights observation clause in any bilateral agreement with Cuba, still to be negotiated. It remains an open question how the Cuban government reacts to this and, eventually, how it will be enforced. Additionally, members of the Cuban opposition have requested the EU to have a broader vision of its relation with Cuba. Blogger Yoani Sánchez criticized that in his visit to Cuba last week, Dutch Foreign Minister Frans Timmermans had meetings only with government representatives and not with the dissidence, who have many human rights and democracy projects that also need assistance from Europe.

The ending of the EU common position towards Cuba can be taken as an example of pragmatic foreign policy. Although its maintenance could have had some relevance in the discourse and in ethics (democracies not having relations with a non-democratic regime), the EU came to terms with the reality that the common position was not serving its objectives and that ending with it could yield material benefits. The European experience can thus be added to the list of cases of embargoes failing to promote democracy or which were surpassed by another set of goals.

Nov 14, 2013

Economic War

A group of people in Caracas loads a pick-up van with several home appliances, just bought at the new reduced prices ordered by President Maduro (from El Universal).

A group of people in Caracas loads a pick-up van with several home appliances, just bought at the new reduced prices ordered by President Maduro (from El Universal).

Earlier this week, Venezuelan President Nicolás Maduro ordered the stores of the major retail chain Daka to be “seized” by the government. The reason he argued was that their managers were staging an economic war against the country by artificially inflating the prices of their products, leaving them out of the reach of most Venezuelans and obtaining unacceptably lucrative earnings with their sales. The government “seizure” of the company implied discounts in the price of products, around 50%, removing their managers from their positions (five of them have been arrested), and putting the stores under control of the military. Further, Maduro urged Venezuelans to make the best of this situation and leave all store shelves empty by acquiring the goods they need. In some cases, lines of up to 400 people in front of retail stores have been reported.

The President’s decision to regulate Daka’s prices must be understood as part of a series of political and economic tendencies that have been going on for some time, related to three major problems Maduro has. First, the chronic bad shape of the economy. Although there have been a number of devaluations over the last months, the official exchange rate of the bolivar is still below that of the black market. This scenario is aggravated because the government has the monopoly on the distribution of foreign currency, sold recurrently in auctions. While the reduced official exchange rate could be compensated when bidders are willing to pay more bolivars for one dollar, there are several reports that the government is failing to deliver on time the money thus acquired. It can be thought that most people do not need dollars in their daily lives; however, international trade transactions work in that currency, and businessmen have complained that they cannot meet the paying plans for their suppliers, for which they cannot get the inputs for their production. In addition, without sufficient dollars it is difficult to import products into the country. As the press has been increasingly reporting since this summer, for the average Venezuelan this means scarcity in the most elementary products, such as toilet paper.

The second problem for Maduro is that there is an organized political alternative to Chavismo, the project he belongs to. This alternative is led by the governor of the state of Miranda, Henrique Capriles, and his Democratic Unity Table alliance of parties. In contrast to most of the time in which Maduro’s predecessor, Hugo Chávez, was in power, when there was a very high party volatility in the sense that the same party rarely appeared twice in a row in the electoral ballot and opposition parties received a rather low share of votes, Capriles has been able to maintain himself as a popular opposition figure. The clearest example of this is how close he has been to the winner of the 2012 and 2013 presidential elections: an 11% gap in the first case (in the previous election the gap between Hugo Chávez and his closest competitor was 25%) and 1.5% in the second case. Whether or not Capriles’ policies make sense or could contribute to ameliorate the situation in the country is beyond the point here; the relevant issue is that people have consistently voted for him. The most immediate consequence of Capriles’ popularity is that the support for Maduro and Chavismo has decreased.

The third problem of Maduro is that, in an environment of economic problems and a popular opposition, there are municipal elections on December 8. The seizure of Daka and the imposition of price discounts can be understood as part of the electoral strategy to improve the chances of a good performance of Maduro’s party, the United Socialist Party of Venezuela, to secure the position of Chavismo now that Chávez is gone, and to remove the threat posed by Capriles. Some other electoral actions are the proclamation of December 8, this year’s Election Day, as Hugo Chávez’s Day (which implies a flooding of images of Chávez and of reminders of the benefits of Chavismo); the granting of legislative powers to Nicolás Maduro in corruption issues (which could be used to eliminate political adversaries); constant accusations against Capriles’ supporters of benefitting from speculating with prices; or attempting to impose restrictions to the press to talk about the scarcity problem.

The scenario for the December 8 elections is quite uncertain. Some polls taken several weeks ago suggest that Maduro’s party will get the most votes, while others project the contrary result. Anyhow, the tendency seems to be that no political group will receive an overwhelming majority of the electorate’s support, implying that no substantive change in the political scene will take place: economic problems will continue and both Maduro and Capriles will retain their own support bases. Leaving economic and institutional manipulation aside, as long as electoral processes continue to be carried out in a legitimate way they can offer an escape valve to citizens’ concerns about politics. A much more serious problem will emerge if and when, as some local analysts have considered, either of the top political figures describes the situation as a stalemate and a zero-sum game between them.

Founded in 2004, Democracy and Society is a biannual print journal published by the Center for Democracy and Civil Society at Georgetown University. The D&S Blog provides web-only content, including special reports and investigative series, on issues relating to democracy and development.

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