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Kosovo would thus gain some essential trappings of statehood.
However, a decision-making body consisting of delegates from Kosovo, Serbia, and the European Union would be given full authority over major foreign policy issues (for example, alliances and relations with international economic institutions), defence, borders (in case Kosovo wished to join with Albania), and the treatment of Kosovo’s Serbian minority.
As a result, Kosovo and Serbia would constitute two distinct international subjects, bound by a confederation hinging on a common decision-making body.
Of course, this confederation would be asymmetrical, because the Serbian government’s sovereignty over the rest of Serbia would remain intact and unlimited, whereas the Kosovar government’s “sovereignty” over Kosovo would be restrained.
To avoid one of the two parties getting the upper hand and imposing arbitrary decisions, the common decision-making body should consist of four Serbian delegates, two Kosovar delegates, and three representatives of the EU, thus requiring both sides to gain the support of the European delegates.
In addition, the EU should create a small but effective military force (say, 5,000 troops) to back up the common body’s decisions.
As with any compromise, the contending parties would both gain and lose from this arrangement.
Serbia would save face, and would continue to have a say on crucial matters concerning Kosovo, including the treatment of the Serbian minority.
Kosovo would acquire limited independence, with its status rising from a province of a sovereign state to an international subject capable of entering into certain agreements with other states and even joining the UN.
The EU would benefit as well, by contributing to the stabilization of a highly volatile area.
Subsequently, the EU would monitor Kosovo and prevent any dispute that might turn violent.
A final advantage of this solution is that it would be temporary.
Historically, confederations sooner or later either become federations (as occurred in the US, Germany, and Switzerland) or, pushed by centrifugal forces, split up (as with the United Arab Republic, established in 1958, which split three years later into Egypt and Syria).
The confederation I advocate would thus constitute an intermediate stage (lasting five or ten years), at the end of which Kosovo is likely to become fully independent.
Delaying a final solution in this way would provide time to verify Kosovo’s prospects of joining the EU and thus eventually sharing “sovereign authority” with other independent states, which could deflate Kosovars’ dangerously robust nationalistic demands.
A Conspiracy So Immense
NEW YORK – Is this the Age of the Conspiracy Theory?
Plenty of evidence suggests that we are in something of a golden age for citizen speculation, documentation, and inference that takes shape – usually on the Internet – and spreads virally around the globe.
In the process, conspiracy theories are pulled from the margins of public discourse, where they were generally consigned in the past, and sometimes into the very heart of politics.
I learned this by accident.
Having written a book about the hijacking of executive power in the United States in the Bush years, I found myself, in researching new developments, stumbling upon conversations online that embrace narratives of behind-the-scenes manipulation.
There are some major themes.
A frequent one in the US is that global elites are plotting – via the Bilderberg Group and the Council on Foreign Relations, among others – to establish a “One World Government” dominated by themselves rather than national governments.
Sometimes, more folkloric details come into play, broadening the members of this cabal to include the Illuminati, the Freemasons, Rhodes Scholars, or, as always, the Jews.
The hallmarks of this narrative are familiar to anyone who has studied the transmission of certain story categories in times of crisis.
In literary terms, this conspiracy theory closely resembles The Protocols of the Elders of Zion , featuring secretive global elite with great power and wicked aims.
Historically, there tends to be the same set of themes: fearsome, uncontrolled transformative change led by educated, urbanized cosmopolitans.
Students of Weimar Germany know that sudden dislocations and shocks – rapid urbanization, disruption of traditional family and social ties, loosening of sexual restrictions, and economic collapse – primed many Germans to become receptive to simplistic theories that seemed to address their confusion and offer a larger meaning to their suffering.
Similarly, the “9/11 Truth Movement” asserts that al-Qaeda’s attack on the Twin Towers was an “inside job.”
In the Muslim world, there is a widespread conspiracy theory that the Israelis were behind those attacks, and that all Jews who worked in the buildings stayed home that day.
Usually, conspiracy theories surface where people are poorly educated and a rigorous independent press is lacking.
So why are such theories gaining adherents in the US and other affluent democracies nowadays?
Today’s explosion of conspiracy theories has been stoked by the same conditions that drove their acceptance in the past: rapid social change and profound economic uncertainty.
A clearly designated “enemy” with an unmistakable “plan” is psychologically more comforting than the chaotic evolution of social norms and the workings – or failures – of unfettered capitalism.
And, while conspiracy theories are often patently irrational, the questions they address are often healthy, even if the answers are frequently unsourced or just plain wrong.
In seeking answers, these citizens are reacting rationally to irrational realities.
Many citizens believe, rightly, that their mass media are failing to investigate and document abuses.
Newspapers in most advanced countries are struggling or folding, and investigative reporting is often the first thing they cut.
Concentration of media ownership and control further fuels popular mistrust, setting the stage for citizen investigation to enter the vacuum.
Likewise, in an age when corporate lobbyists have a free hand in shaping – if not drafting – public policies, many people believe, again rightly, that their elected officials no longer represent them.
Hence their impulse to believe in unseen forces.
Finally, even rational people have become more receptive to certain conspiracy theories because, in the last eight years, we actually have seen some sophisticated conspiracies.
The Bush administration conspired to lead Americans and others into an illegal war, using fabricated evidence to do so.
Is it any wonder, then, that so many rational people are trying to make sense of a political reality that really has become unusually opaque?
When even the 9/11 commissioners renounce their own conclusions (because they were based on evidence derived from torture), is it surprising that many want a second investigation?
Frequently enough, it is citizens digging at the margins of the discourse – pursuing such theories – who report on news that the mainstream media ignores.
For example, it took a “conspiracy theorist,” Alex Jones, to turn up documentation of microwave technologies to be used by police forces on US citizens. The New Yorker confirmed the story much later – without crediting the original source.
The mainstream media’s tendency to avoid checking out or reporting what is actually newsworthy in Internet conspiracy theories partly reflects class bias.
Conspiracy theories are seen as vulgar and lowbrow.
So even good, critical questions or well-sourced data unearthed by citizen investigators tend to be regarded as radioactive to highly educated formal journalists.
The real problem with this frantic conspiracy theorizing is that it leaves citizens emotionally agitated but without a solid ground of evidence upon which to base their worldview, and without constructive directions in which to turn their emotions.
This is why so many threads of discussion turn from potentially interesting citizen speculation to hate speech and paranoia.
In a fevered environment, without good editorial validation or tools for sourcing, citizens can be preyed upon and whipped up by demagogues, as we saw in recent weeks at Sarah Palin’s rallies after Internet theories painted Barack Obama as a terrorist or in league with terrorists.
We need to change the flow of information in the Internet age.
Citizens should be able more easily to leak information, pitch stories, and send leads to mainstream investigative reporters.
They should organize new online entities in which they pay a fee for direct investigative reporting, unmediated by corporate pressures.
And citizen investigators should be trained in basic journalism: finding good data, confirming stories with two independent sources, using quotes responsibly, and eschewing anonymity – that is, standing by their own bylines, as conventional reporters do.
This is how citizens can be taken – and take themselves – seriously as documenters and investigators of our common situation.
In a time of official lies, healthy investigative energy should shed light, not just generate heat.
A Constitutional Coup in Ukraine
Changing constitutions is always a risky business.
But it is a downright dangerous one when undertaken to benefit one man alone.
Indeed, when a president volunteers to reduce the powers of his own office, you can be certain that he is up to no good.
That is exactly what is going on in Ukraine, where President Leonid Kuchma proposes to junk our presidential system and replace it with a strange type of parliamentary system he has concocted.
Kuchma has not suddenly converted to the view that parliamentary democracies are better than presidential ones.
No, Kuchma wants to change Ukraine's constitution for no other reason than to maintain his grip on power.
Today, Kuchma rules as an all-powerful president.
But his term ends next year and he cannot run again.
So, instead of retiring gracefully, as presidents from Bill Clinton to Boris Yeltsin routinely do, Kuchma wants to change the constitution in order to become an all-powerful prime minister who will never face a limit on the length of his term.
Of course, constitutions are not meant to protect the status quo if the status quo is rotten.
Constitutions can, and should, accommodate reform when necessary.
A powerful president, however, is not necessarily wrong for Ukraine.
In our wrenching postcommunist transition, it is essential that a government can act decisively.
To change a system that seems best suited to Ukraine's circumstances, you need a good reason.
The Ukraine president is authorized to appoint and sack the prime minister, dissolve parliament if he wishes, and rule by decree if he judges that the country's institutions are in danger.
He maintains day-to-day control over every aspect of government.
Sopuissant a Caesar must be above reproach.
Kuchma is not.
On the contrary, what is rotten in Ukraine is not its constitution, but its president, who is mired in charges of corruption and orchestrating the murder of journalists.
As president, Kuchma is grotesquely unpopular.
Even Slobodan Milosevic had more support in Yugoslavia before his fall.
So Kuchma knows that he cannot rely on handpicking his successor, as Yeltsin did in Russia.
Unable to assure himself of a tame presidential successor, Kuchma wants what he calls a "parliamentary republic" with a weak president and powerful prime minister.
But the parliament he has in mind is a mutant, one where the authoritarian rule of the criminal clans Kuchma controls will continue, unabated, behind the facade of parliamentary procedure.
People too easily forget Ukraine, this big country on the border of the soon-to-be enlarged European Union.
But any attempt to prolong Kuchma's rule will create such a political mess that it is not absurd to fear that Ukraine could follow Belarus and the Balkans of the early 1990's into outright dictatorship and chaos.
Indeed, this scenario could worsen, because Russia is unlikely to sit around idly and watch Ukraine unravel.
Intervention of some type seems more likely in such circumstances.
Only an imperial Russia, however, would dare reabsorb Ukraine.
But an imperial Russia cannot be a democratic Russia.
So Kuchma endangers freedom and human rights not only in Ukraine, but ultimately threatens Russia's democracy as well.
Luckily, there has never been a better time for the West--particularly the EU--to nudge Ukraine back from the brink.
With EU expansion coming next spring, all Ukrainians fear that a new wall will cut their country off from the Union's easternmost border in Poland.
Although the job of maintaining Ukraine's democracy is primarily one for Ukrainians, the EU can help if it takes practical steps to reassure Ukrainians that they won't be cut off from the rest of Europe.
A generous visa regime and the use of regional development funds in Ukraine that will benefit impoverished eastern Poland, are two possible inducements.
But these should be made conditional on Kuchma leaving the country's constitution and democracy alone.
The EU should not fret about interfering in Ukraine's domestic affairs.
After all, it hesitated little a few years ago to put a current member state, Austria, on notice that it was watching out for the welfare of that country's democracy.
The wayward Kuchma is far more deserving of Europe imposing safeguards to ensure his good behavior.
Similarly, the US should cast a wary eye at Kuchma's decision to send troops to Iraq.
It cannot be the case that America's fidelity to democracy in Ukraine can be so cynically purchased.
Within Ukraine, a government capable of truly governing should seek to adopt EU laws and norms in exactly the manner that the countries poised to join the Union have done, thus helping to clean up the murky system in which Kuchma's criminal cronies flourish.
The constitution must be reformed, but not to shift power from one unaccountable leader to another.
What is needed are clear checks on arbitrary rule, and transparency in decision-making.
No one should doubt that Kuchma intends to stay in power, no matter what.
Less certain is whether he will feel secure enough to hold a presidential election (or any other kind of election) if he cannot change the constitution in a way that guarantees his continued misrule.
It is, after all, President Kuchma who is discredited, not Ukraine's constitutional arrangements.
A Contagion of Bad Ideas
NEW YORK – The Great Recession of 2008 has morphed into the North Atlantic Recession: it is mainly Europe and the United States, not the major emerging markets, that have become mired in slow growth and high unemployment.
And it is Europe and America that are marching, alone and together, to the denouement of a grand debacle.
A busted bubble led to a massive Keynesian stimulus that averted a much deeper recession, but that also fueled substantial budget deficits.
The response – massive spending cuts – ensures that unacceptably high levels of unemployment (a vast waste of resources and an oversupply of suffering) will continue, possibly for years.
The European Union has finally committed itself to helping its financially distressed members.
It had no choice: with financial turmoil threatening to spread from small countries like Greece and Ireland to large ones like Italy and Spain, the euro’s very survival was in growing jeopardy.
Europe’s leaders recognized that distressed countries’ debts would become unmanageable unless their economies could grow, and that growth could not be achieved without assistance.
But, even as Europe’s leaders promised that help was on the way, they doubled down on the belief that non-crisis countries must cut spending.
The resulting austerity will hinder Europe’s growth, and thus that of its most distressed economies: after all, nothing would help Greece more than robust growth in its trading partners.
And low growth will hurt tax revenues, undermining the proclaimed goal of fiscal consolidation.
The discussions before the crisis illustrated how little had been done to repair economic fundamentals.
The European Central Bank’s vehement opposition to what is essential to all capitalist economies – the restructuring of failed or insolvent entities’ debt – is evidence of the continuing fragility of the Western banking system.
The ECB argued that taxpayers should pick up the entire tab for Greece’s bad sovereign debt, for fear that any private-sector involvement (PSI) would trigger a “credit event,” which would force large payouts on credit-default swaps (CDSs), possibly fueling further financial turmoil.
But, if that is a real fear for the ECB – if it is not merely acting on behalf of private lenders – surely it should have demanded that the banks have more capital.
Likewise, the ECB should have barred banks from the risky CDS market, where they are held hostage to ratings agencies’ decisions about what constitutes a “credit event.”
Indeed, one positive achievement by European leaders at the recent Brussels summit was to begin the process of reining in both the ECB and the power of the American ratings agencies.
Indeed, the most curious aspect of the ECB’s position was its threat not to accept restructured government bonds as collateral if the ratings agencies decided that the restructuring should be classified as a credit event.
The whole point of restructuring was to discharge debt and make the remainder more manageable.
If the bonds were acceptable as collateral before the restructuring, surely they were safer after the restructuring, and thus equally acceptable.
This episode serves as a reminder that central banks are political institutions, with a political agenda, and that independent central banks tend to be captured (at least “cognitively”) by the banks that they are supposed to regulate.
And matters are little better on the other side of the Atlantic.
There, the extreme right threatened to shut down the US government, confirming what game theory suggests: when those who are irrationally committed to destruction if they don’t get their way confront rational individuals, the former prevail.
As a result, President Barack Obama acquiesced in an unbalanced debt-reduction strategy, with no tax increases – not even for the millionaires who have done so well during the past two decades, and not even by eliminating tax giveaways to oil companies, which undermine economic efficiency and contribute to environmental degradation.
Optimists argue that the short run macroeconomic impact of the deal to raise America’s debt ceiling and prevent sovereign default will be limited – roughly $25 billion in expenditure cuts in the coming year.
But the payroll-tax cut (which put more than $100 billion into the pockets of ordinary Americans) was not renewed, and surely business, anticipating the contractionary effects down the line, will be even more reluctant to lend.
The end of the stimulus itself is contractionary.
And, with housing prices continuing to fall, GDP growth faltering, and unemployment remaining stubbornly high (one of six Americans who would like a full-time job still cannot get one), more stimulus, not austerity, is needed – for the sake of balancing the budget as well.
The single most important driver of deficit growth is weak tax revenues, owing to poor economic performance; the single best remedy would be to put America back to work.
The recent debt deal is a move in the wrong direction.
There has been much concern about financial contagion between Europe and America.
After all, America’s financial mismanagement played an important role in triggering Europe’s problems, and financial turmoil in Europe would not be good for the US – especially given the fragility of the US banking system and the continuing role it plays in non-transparent CDSs.
But the real problem stems from another form of contagion: bad ideas move easily across borders, and misguided economic notions on both sides of the Atlantic have been reinforcing each other.
The same will be true of the stagnation that those policies bring.
A Cool Calculus of Global Warming
The British government recently issued the most comprehensive study to date of the economic costs and risks of global warming, and of measures that might reduce greenhouse gas emissions, in the hope of averting some of the direst consequences.
Written under the leadership of Sir Nicholas Stern of the London School of Economics, who succeeded me as Chief Economist of the World Bank, the report makes clear that the question is no longer whether we can afford to do anything about global warming, but whether we can afford not to.
The report proposes an agenda whose cost would be equivalent to just 1% of annual consumption, but would save the world risk equivalent costs that are five times greater.
The reported costs of global warming are higher than in earlier studies because it takes into account the mounting evidence that the process of global warming is highly complex and non-linear, with a non-negligible chance that it may proceed much faster than had previously been thought and that the extent of warming may be much greater than had previously been thought.
Indeed, the study may actually significantly underestimate the costs: for instance, climate change may lead to more weather variability, a possible disappearance or major shift of the Gulf Stream – of particular concern to Europe – and a flourishing of disease.
When I served in 1995 on the Intergovernmental Panel on Climate Change, the scientific group that periodically assesses the science of global warming, there was overwhelming evidence that the concentration of greenhouse gases in the atmosphere had increased markedly since the beginning of the industrial revolution, that human activity had contributed significantly to those increases, and that they would have profound effects on climate and sea levels.
But few saw, for instance, the Artic ice cap melting as rapidly as now seems to be the case.
Still, some suggest that because we are not certain about how bad global warming will be, we should do little or nothing.
To me, uncertainty should make us act more resolutely today, not less.
As one scientist friend puts it: if you are driving on a mountain road, approaching a cliff, in a car whose brakes may fail, and a fog bank rolls in, should you drive more or less cautiously?
Global warming is one of those rare instances where the scientific community is more fearful of what may be happening than the population at large.
Scientists have glimpsed what the future may portend.
As the Stern report points out, as usual, the poor are the most vulnerable.
A third of Bangladesh will be underwater by the end of this century.
The Maldives and a host of Pacific Island states will disappear: our twenty-first-century Atlantis.
To an economist, the problem is obvious: polluters are not paying the full costs of the damage they cause.
Pollution is a global externality of enormous proportions.
The advanced countries might mean Bangladesh and the disappearing island states no harm, but no war could be more devastating.
A global externality can best be dealt with by a globally agreed tax rate.
This does not mean an increase in overall taxation, but simply a substitution in each country of a pollution (carbon) tax for some current taxes.
It makes much more sense to tax things that are bad, like pollution, than things that are good, like savings and work.
Although President George W. Bush says he believes in markets, in this case he has called for voluntary action.
But it makes far more sense to use the force of markets – the power of incentives – than to rely on goodwill, especially when it comes to oil companies that regard their sole objective as maximizing profits, regardless of the cost to others.
Exxon has reportedly been funding so-called think tanks to undermine confidence in the science of global warming, just as the tobacco industry funded “research” to question the validity of statistical findings showing the link between smoking and cancer.
Some companies even seem to celebrate the melting of the polar ice cap, because it will reduce the cost of extracting the oil that lies beneath the Arctic Ocean.
The good news is that there are many ways by which improved incentives could reduce emissions – partly by eliminating the myriad of subsidies for inefficient usages.
The US subsidizes corn-based ethanol, and imposes tariffs on sugar-based ethanol; hidden in the tax code are billions of dollars of subsidies to the oil and gas industries.
Most importantly, price signals that show the true social costs of energy derived from fossil fuels will encourage innovation and conservation.
Small changes in practices, when replicated by hundreds of millions of people, can make an enormous difference.
For example, simply changing the color of roofs in warm climates to reflect sunlight or planting trees around houses can lead to great savings on energy used for air conditioning.
We have but one planet, and should treasure it.
Global warming is a risk that we simply cannot afford to ignore anymore.
A Crisis of Trust
LONDON – Public trust in financial institutions, and in the authorities that are supposed to regulate them, was an early casualty of the financial crisis.
That is hardly surprising, as previously revered firms revealed that they did not fully understand the very instruments they dealt in or the risks they assumed.
It is difficult not to take some private pleasure in this comeuppance for the Masters of the Universe.
But, unfortunately, if this loss of trust persists, it could be costly for us all.
As Ralph Waldo Emerson remarked, “Our distrust is very expensive.”
The Nobel laureate Kenneth Arrow made the point in economic terms almost 40 years ago: “It can be plausibly argued that much of the economic backwardness in the world can be explained by the lack of mutual confidence.”
Indeed, much economic research has demonstrated a powerful relationship between the level of trust in a community and its aggregate economic performance.
Without mutual trust, economic activity is severely constrained.
Even within Europe, there is powerful evidence that countries where mutual trust is higher achieve higher levels of investment, particularly through venture capital investment, and are prepared to use more flexible contracts, which are also beneficial for growth and investment.
So if it is true that trust in financial institutions – and in the governments that oversee them – has been damaged by the crisis, we should care a lot, and we should be devising responses which seek to rebuild that trust.
In fact, the evidence for a crisis of trust is rather difficult to interpret.
In the United Kingdom, recent survey results are ambiguous.
Surveys promoted by financial firms tend to show that trust in them has not diminished much, and that people continue to trust them even more than they do the National Health Service or the BBC.
Surveys promoted by the BBC tend to show the reverse.
Chaos theory in mathematics explains such dependency on remote and seemingly trivial initial conditions, and explains why even the extrapolation of apparently precise planetary motion becomes impossible when taken far enough into the future.
Weather forecasters cannot forecast far into the future, either, but at least they have precise mathematical models.
Massive parallel computers are programmed to yield numerical solutions of differential equations derived from the theory of fluid dynamics and thermodynamics. Scientists appear to know the mechanism that generates weather, even if it is inherently difficult to extrapolate very far.
The problem for macroeconomics is that the types of causes mentioned for the current crisis are difficult to systematize.
The mathematical models that macroeconomists have may resemble weather models in some respects, but their structural integrity is not guaranteed by anything like a solid, immutable theory.
The most important new book about the origins of the economic crisis, Carmen Reinhart’s and Kenneth Rogoff’sThis Time Is Different, is essentially a summary of lessons learned from virtually every financial crisis in every country in recorded history.
But the book is almost entirely non-theoretical.
It merely documents recurrent patterns.
Unfortunately, in 800 years of financial history, there is only one example of a really massive worldwide contraction, namely the Great Depression of the 1930’s.
So it is hard to know exactly what to expect in the current contraction based on the Reinhart-Rogoff analysis.
This leaves us trying to use patterns from past, dissimilar crises to try to infer the likely prognosis for the current crisis.