Lack of Coordination — Everywhere

Coming back from Memorial Day, we are confronted with madness and sadness in so many places — and mainly due to the inability of people to work together.  Let’s go down the list:

THE PAIN IN SPAIN

Greece was always small beer — although bankrupt, it’s economy is small enough that Europe could have absorbed all of Greece’s debts.  Instead, Greece has been serving mainly as an example of what will NOT happen if a Euro country gets in trouble, namely the other Euro members will not stand behind its debts.

The real danger was that this example would prove self-defeating if one of the major EU economies got into trouble — if the stronger Euro countries won’t stand behind the weaker, then investors should run at the first sign of weakness in a major economy.  That is why Spain and Italy now face borrowing costs of 6-7%.  As I’ve said, if I am deemed a better credit risk than the governments of Spain or Italy (judging by the fact that my home mortgage is 3.25%), something is severely wrong.

Spain’s banks were crippled by the housing bust in that country.  But the government does not have the money to bail out its banks, as it can barely pay its own bills.  So now Spain’s banks are looking for help.  Where will it come from?  The ECB has said saving banks is not its job.  So the latest plan is some kind of European “banking union” where the region’s banks will come together to backstop each others losses.

This spreading of risk through the banking system sounds good in theory – but in practice it means deposits in German banks will be used to bail out banks in southern Europe. I don’t see the agreements necessary for this to occur happening quickly or easily.  The failure of European nations to coordinate their fiscal systems several years ago leaves them unable to respond to crises in individual states. So we are sliding towards a major banking crisis on top of a sovereign debt crisis across Europe, with no clear exit in sight.

OLD vs. NEW in EGYPT

Two months ago, I said that Egypt was in the grip of a struggle between the Army and the Muslim Brotherhood for control of the nation.  The presidential election showed this all too well.  In an election with a suspiciously low turnout of around 40% (how can that be in the first free election in Egypt in 5000 years?), two dark horse candidates emerged as leaders:  Ahmed Shafik, former military officer, Mubarak’s last prime minister and a counter-revolutionary who promises to put safety and order above any meaningful change in society, and Mohamed Mursi, the official and more conservative candidate of the Muslim Brotherhood.

How is this possible?  Mursi was the beneficiary of the Brotherhood’s extensive national organization, which turned out the vote.  Shafik may have been the beneficiary of fear of unknown change, of a desire for a firm hand, and of the influence of the army and Mubarak holdovers using their remaining patronage pull.  The pre-election poll leaders, Amr Moussa and Aboul Fotouh, finished third and fourth.  Together, these two relatively moderate and liberal candidates got nearly 40% of the votes cast — but both of them failed to makethe run off.  But the failure of moderates to coordinate their votes and support a single pro-revolutionary candidate means that NO moderate candidates remain standing.  Egyptians instead face a choice between two conservative candidates, a secular conservative in Shafik vs. a religious conservative in Mursi.

Supporters of the revolution are now bitter and Egyptians in general are worried about what direction they are heading.  My prediction — the Brotherhood’s organization and rejection of Shafik for his ties to the Mubarak regime will give Mursi the victory.  That will leave the Brotherhood in firm control of both the Presidency and the legislature.  Expect a strong risk of a military coup if the election goes that way; I am not sure that Shafik’s entry to the final was wholly legitimate; his success so far represents a last-ditch effort by the miltary to keep the Brotherhood at bay and hold onto power themselves.  Will they let themselves be wholly marginalized by a Mursi victory?  Not without a fight, I fear.

SYRIA’s SREBRENICA MOMENT

The brutal, distressing massacre of men, women, and children with shells and hand weapons in Houla again exemplifies the point I made earlier — the Assad regime is a typical dictatorship in trouble, viewing all opponents as traitors and mortal threats and willing to do anything to stay in power.  The massacre has now exposed the harshness and ugliness of the regime in a way that is unavoidable.  What will happen now?  Nothing at first, because Russia will block UN action and Iran will continue to support the regime.

But before too long, the world will feel compelled to offer more assitance to Syrian civilians and the opposition, supporters of Bashar will peel away in disgust, and the government’s power will erode.  This will not be apparent at first, but when a turning point comes, desertions will snowball and the regime will suddenly find itself with too few supporters to stay on.  How soon this happens depends on how soon the GCC, Arab League, Turkey, and Western powers can coordinate on sustained plans to support the anti-Assad forces.  This is not easy, but should happen later this year.

Lack of coordination is responsible for so many of mankind’s woes; from the environment to the economy, from fiscal stability to sound governance.  Let’s hope we do better in the months ahead.

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About jackgoldstone

Hazel Professor of Public Policy at George Mason University
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One Response to Lack of Coordination — Everywhere

  1. Eric Selbin says:

    Do you think the Army’s out ion Egypt is for Shafik to be knocked out and Sabahi elevated to the second spot? I find it hard to believe they will stake their future on Shafik given the reaction and the almost certain victory of the Brothers…

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