Trade
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Ronald I. McKinnon is an applied economist whose primary interests are international economics and economic development-with strong secondary interests in transitional economies and fiscal federalism. Understanding financial institutions in general, and monetary institutions in particular, is central to his teaching and research. His interests range from the proper regulation of banks and financial markets in poorer countries to the historical evolution of global and regional monetary systems. His books, numerous articles in professional journals, and op-eds in the financial press such as The Economist, The Financial Times, and The Wall Street Journal reflect this range of interests.

 

 

Event Summary

Professor McKinnon first outlines the two major assumptions behind his paper (available on this page). First, that from December 2008 to August 2011, an inflow of "hot money" to emerging economies resulted from low U.S., European, and Japanese interest rates. Since then, the trend has reversed in the wake of the European banking crisis and bank lending has fallen. Second, the dollar remains the widespread central bank reserve currency despite instability in the U.S. system. 

 

McKinnon voices concern about Federal Reserve Chairman Ben Bernanke's zero interest rate policy, calling it an overreaction to the crisis and a "lose-lose" policy as it deters investment in the U.S. while simultaneously spurring destabilizing hot money flows to surrounding emerging markets. These countries are in turn forced to suppress interest rates to mitigate the inflows, and to build up dollar reserves to keep exchange rates in check. The zero interest rate policy also stimulates carry trades in commodities by speculators.

 

The belief that under a zero interest rate regime, inflation will stimulate the economy by bringing real interest rates to negative levels, is misplaced in McKinnon's view. He argues that this simply adds uncertainty and interferes with efficient bank intermediation, as banks hold high excess reserves and tighten lending, causing a procyclical contraction as has been seen in the United States and Europe. He contrasts this approach with China, which stabilized its economy following the “dot-com” bust by expanding rather than contracting bank credit. He criticizes U.S. pressure on China to appreciate or float its currency, asserting that these strategies would fail to reduce China's trade surplus.

 

McKinnon suggests that international reforms should target interest rates instead of exchange rates.  He recommends coordination between central banks of the major industrialized countries, especially the United States, European countries, and Japan - to collectively raise interest rates to approximately 2%. This would improve overall bank intermediation, and would benefit both central and peripheral countries in Europe.

 

A question and answer session following the talked addressed topics including: the likelihood of a coordinated effort between central banks; the potential effects of Kucinich's monetary reform proposal; the potential negative effects on real growth from carry trades, and whether this is a cause for concern; and the effects of bank borrowing trends in Europe on the European monetary system.

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William D. Eberle Professor of International Economics
R_McKinnon_headshot.jpg PhD

Ronald McKinnon is the William D. Eberle Professor of International Economics at Stanford University. Currently, he is researching trade and financial policy in less-developed countries, the transition from socialism in Asia and Eastern Europe, the foreign exchange market and U.S.-Japan trade disputes, European monetary unification and international monetary reform, and the economics of market-preserving federalism.

Recent books by McKinnon include The Order of Economic Liberalization: Financial Control on the Transition to a Market Economy, 2nd edition (1993); The Rules of the Game: International Money and Exchange Rates (1996); and Dollar and Yen: Resolving Economic Conflict between the United States and Japan (with K. Ohno, 1997). Recent (1997) articles include "Credible Liberalizations and International Capital Flows: The Overborrowing Syndrome" (with H. Pill); "The East Asian Dollar Standard, Life after Death?" (1999); and "The Syndrome of the Ever-Higher Yen: American Mercantile Pressure on Japanese Monetary Policy" (with K. Ohno and K. Shirono, 1999). McKinnon teaches international trade and finance, economic development, money and banking, and financial control in developing and transitional socialist economies.

Ronald I. McKinnon William D. Eberle Professor of International Economics (Emeritus) Speaker Stanford University
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Prince Moulay Hicham Ben Abdallah was interviewed in the September/October issue of the French journal Le Débat, providing his unique insight on the Arab Spring events as a member of the Moroccan royal family and scholar at the Center on Democracy, Development, and Rule of Law. Ben Abdallah candidly discusses the dynamic political and social underpinnings of the revolutions and makes dramatic predictions about the potential for democracy to take root in Arab states. The bottom line - nothing will go back to the way it used to be.

Interview by Stephen Smith

This is translated from the French version that appeared in the French journal, Le Débat.

There is no one better able to provide a more informed perspective on the upheavals in the Arab world than Prince Moulay Hicham ben Abdallah El Alaoui. The first cousin of the King of Morocco, Mohammed VI, and heir to a long Pan-Arab line through his Lebanese mother, he is also a research fellow at Stanford University's Center on Democracy, Development, and the Rule of Law in California. In 1994, he established the Institute for the Transregional Study of the Contemporary Middle East, North Africa and Central Asia at Princeton University, where he went to college. He also directs the Foundation for Social Science Research on North Africa and the Middle East which bears his name. Born in Rabat in 1964, Moulay Hicham settled in the United States in 2002 for the reasons he explains below.

Stephen Smith. – You bring a number of qualifications to your views on the Arab world: as a member of the royal family of Morocco, as the "red prince" either loved or hated by the media, and also as a Stanford University researcher and sponsor of a research foundation focusing on North Africa and the Middle East. So tell us, on behalf of whom and in what role do you speak?

Moulay Hicham. – Nobody invents himself. I belong to Morocco's ruling family through my father, Moulay Abdallah Ben Mohammed El Alaoui, and I am very proud to be part of a monarchy that joined with the people to put an end to colonialism. Through my Lebanese mother, Lamia el-Solh, I belong to one of the Arab world's great nationalist families, a family planted across the entire region. But my "familiarity" with the Arab world does not come just from my parentage. After I finished Princeton, I pursued research on transitioning from authoritarianism to democracy. At present, I am a Consulting Professor at Stanford. In short, it’s a whole package. I grew up in the palace alongside my cousin, who became King Mohammed VI. I spoke up to King Hassan II very early on, while learning a great deal from him, and while accompanying my father – when he served as his brother’s personal representative– on diplomatic missions abroad. After my uncle died, I continued to maintain publicly that the Makhzen -- that is, the patronage network that effectively runs Morocco -- needed to perish for the monarchy to thrive and serve Moroccans. I also came out against the caliphate, that is, against a monarchy under the "Commander of the Faithful," which mixed political and religious prerogatives. I still believe and defend all of that, both because of what I am and because of what I have made of myself. Of course, no one is self-invented. But I am also the product of my journey and of my study. One can be whole, at least I hope so.

S. S. – What does the "Arab Spring" mean to you? And, for starters, is the right name being used?

M. H. – I'm not sure it is. I would rather talk about an "Arab Awakening," because spring is a season, thus ephemeral and cyclical. And I do not believe the Arab world can reverse course and go back to sleep. But no matter what term is used, we need to get rid of culturalist prejudices about "the Arabs” and ahistorical readings of Islam. Ever since Leibniz and, following him, Ernest Renan, spoke of the fatum mahometanum, we were not far from believing that an immutable form of despotism was built into the genes and religion of the Arab world. Good riddance! An oppressed Arab is first and foremost someone who, like any other oppressed person, seeks to become emancipated. Of course, we need be intellectually honest: if a tidal wave of democratization is breaking across the Arab world, we have to explain its relevance within the context. If it isn't "Arabness" mixed with Islam, what is it? I don't have a ready-made answer. No doubt, it's a cluster of factors, including a particular kind of political archaism/throwback arising, first, from colonization, followed by a decolonization defined by the "catastrophe" – the nakba – that was the establishment of Israel in Palestine; there is also an economy based on oil rents, which sharpen geopolitical rivalries and foster the betrayal of the elites. Add to that a generous helping of "Orientalism," and we're probably not far from a stew simmering until the lid blows.

S. S. –For some time, everybody has been eating humble pie about having spoken, in the past, about the "Arab street," a term one now sees as a mere culture-based prejudice. Isn't that paradoxical, right when so many Arabs are actually taking to the streets?

M. H. – Yes, it turns things on their head, but I can understand how people would be ready to abandon the cliché about the sleeping volcano that the "Arab street" was supposed to be. That’s true for us as well, who see the Arab street – al shariai al arabi – as the opposite extreme from the Rais, king, or omnipotent "sultan." The street now needs to turn into public forum -- that is, a public opinion that doesn't sweep away everything in its path, but rather expresses itself in a steady, organized fashion, because, henceforth, governments will have to take into account the will of the governed. To stick to the metaphor: the devastating flood must become a canal that irrigates democracy.

S. S. – For the time being, the street does not speak the language of institutional politics and expresses itself instead in the – moral – register of indignation. In concrete terms, how can "the Dignity Revolution" be achieved?

M. H. – Politics, for its part, needs its share of dreaming. When people want to create a new order, they don't use hackneyed words. The vocabulary of socialism and liberalism cannot convey the dream spilling into the streets of the Arab world – nor, in fact, can the language of religion, which is not the least we have learned from the events taking place since the start of the year. With these events, we enter the field of indignation or, rather, the of a dignity to be restored after a long series of degradations: endless reigns, predatory police states, trampled rights, and mock kingdoms, not to mention the doublespeak about the Palestinians, our favorite victims, whom our dictators have used as a pretext to turn around and victimize us. Dignity – karama – has become the new value to which we refer. What could be easier to understand? Of course you are right to say that taking to the streets over and over again is useless if these marches do not lead to the halls of power in the end. But how? In Tunisia, they are in the process of seeking the way, day by day. In Egypt, the army has joined the people, but we still don't know if it was to confiscate the Tahrir Square victory or bring it to completion. In Syria, demonstrators are confronting part of the armed forces, with the possibility of a widespread insurrection. In Morocco, the February 20 Movement – and it may not be by chance that the common denominator is limited to a date... –, the slogan "Freedom, dignity, social justice," and mobilizing "until all demands are met" need to move from speech to action, because telling the truth is not enough to bring about change.  Finally, Libya is a case apart and, I fear, will remain so, due in part to outside intervention. Is it possible to impose democracy manu militari, By external intervention, without, perforce, betraying the message of popular sovereignty being proclaimed?

This is a question that can no longer be ducked, ever since Iraq was invaded in 2003 under the banner of democracy as a corollary of regime change – however harmful the regime brought down under such circumstances. In Libya as in Iraq, this raises the issue of national unity. Unfortunately, bombing "Gaddafi's country" to turn it into a democracy, may well split Libya itself back into its three former components: Tripolitania to the west, Cyrenaica to the east and Fezzan in the great desert south.

S. S. – Through an extreme simplification harking back to Lenin's definition of communism in 1920's Russia as "Soviets plus electricity," the Arab Spring has been explained by the press as "social networks plus youth." So, first of all, what do social networks have to with a revolt for democracy?

M. H. – It is clear what reporters mean by that: the cyber-revolution would favor democracy because social networks are per se "democratic," allowing anyone to make connections while eluding the usual gatekeepers, starting with reporters themselves, and outwitting the censors. Only, it's not that easy. First, access to the Internet and, even more so, to social networks such as, for example, Facebook, is still far from universal in the Arab world. While 40% of Moroccans and a third of Tunisians have access to the Internet, only 21% do in Syria, with 10% in Yemen. A quarter of Tunisians use Facebook, but only 9% of Egyptians, and so few Syrians and Yemenis that they are statistically insignificant. Next, in particular, while digital media function "democratically," their content is not necessarily democratic – and nor, therefore, are the results of networking at the electronic speeds that dazzle all of us. Since 2009, Harvard University has been doing an in depth study on the Arab blogosphere – titled Mapping the Arabic Blogosphere: Politics, Culture, and Dissent – by indexing some 35,000 sites and examining 4,000 of them closely. The authors, in their conclusions, warn against the illusion of a "techno-democracy." For technology changes the rules of the game, but does not predetermine its winner. History is also instructive: nobody would claim that the telegraph lit the fuses all at once in Tunisia, Libya and Egypt in 1919, or that The Voice of the Arabs – the famous short wave radio station in Cairo – explains the Pan-Arabism of the 1960's. Technology merely served – efficiently – to relay Woodrow Wilson's fourteen points for "making the world safe for the democracy" in the first case, and in the second, Nasser's charisma. And nothing would have happened if local players had not seized upon the ideas of either of them.

S. S. – So new media are a condition rather than a cause. And what about youth or, more specifically, the age pyramid of a given population?

M. H. – A country's demographic profile is significant but, once again, things are not so simple. Contrary to what is being said and written pretty much everywhere, the Arab world's population – except for the Gaza Strip and Yemen – is not exceptionally young, at least not relative to populations south of the Sahara. So, if the number of young people – chebab – was in and of itself a condition favoring the advent of democracy, sub-Saharan Africa would be a paradise of the popular will. Of course, there is a large number of youth in the fifteen to thirty age group in the Arab world, the result of a very high birth rate until the end of the twentieth century that is now arriving on the job market – where it can't find work, at least not work of adequate quantity or quality. Yet the same age group is much larger in sub-Saharan Africa, where, let it be noted, the World Bank presents this profusion as a future "demographic bonus" – this after having promised a  “demographic gift” to the Arab world twenty years ago. However, no matter how precious this human capital may be in absolute terms, it only becomes a “gift” or “bonus” if it can become invested in a society. Which takes us back to governance. Without good governance, the young find themselves out of work or, worse, lapse into violence. While the young need democracy to thrive, it is not a given that democracy prospers in a country with a particularly young population. In fact, studies show pretty much the opposite: you need a certain demographic maturity for democracy not just to take hold, but to last over the long term. Tunisia has the structural advantage of being a country with a median age of twenty-nine. All other things being equal, Tunisia has a greater chance of becoming a lasting democracy than, let's say, Yemen, where the median age is only eighteen. For the simple reason that it is not easy to run institutions when eight out of ten inhabitants are under thirty and expect opportunities to “succeed” from their elders, who are few in number. Lastly, I would like to mention that the UNDP’s excellent reports on human development in the Arab world focused on three structural impediments: not just poor governance, but inappropriate education of our young and the – far from resolved – issue of the emancipation of women. In the present euphoria, let us not forget what we had already understood while the horizon was still gray.

S. S. – You just mentioned sub-Saharan Africa. Do you find it striking that commentators on the “Arab Spring” are far more likely to mention the revolutions of 1789 and 1848, or the fall of the Berlin Wall in 1989, rather than the democratization wave south of the Sahara twenty years ago, after the end of the Cold War?

M. H. – Any comparison can be enlightening. However, Westerners tend to seek parallels in their own history, which they continue to view as the universal model, and the Arabs, who readily complain about discrimination, would be offended to be told they were following Black Africa... However, history does not repeat itself. But it would be productive to ask why the end of the Cold War allowed the liberation of sub-Saharan Africa, but not the Arab world? The importance of petroleum? The shadow cast by the Israeli-Palestinian conflict? Whatever the reason, we have a lot to learn from democratization south of the Sahara. Political pluralism is often limited to reducing the number of single party states, so to speak, and only a handful of countries have become fully democratic, while pseudo-democracies prevail in most States, with presidents serving multiple terms and popular elections that are decided in advance. At the other end of the spectrum, a handful of countries have even experienced, after their spring of democracy, an autumn of restored authoritarianism.  It would be reckless to deny that there is also a risk of unfinished, and even wayward or misguided transitions in the Arab world. Finally, the sub-Saharan experience serves as a warning about the fable of the bad prince and the good people. It’s a fable. Democrats are few and far between, not only at the helm of our States, but in the opposition, parties, associations, and bases as well.

S. S. – Concerning geopolitics at the end of the Cold War: the “Arab Spring” is a odd assortment of homemade revolutions. Anything extending beyond borders tends to lose speed, from Pan-Arabism to Jihadism, not to mention the last hegemon which, for a long while, served as the greatest foil, namely America. Even the centrality of the Palestinian problem seems to be in doubt.

M. H. – The Palestinian issue will come galloping back and take center stage again, but not as the political toy, not to say diversion, it once was. This said, I agree that nationhood, while a product of colonization, is raising its standard. Literally, too, because people are demonstrating everywhere under their national colors. Although not as a chauvinist-type of nationalism but, rather, a patriotism reviving the social bond whittled away by decades of authoritarianism. They are “making” community, but not a Pan-Arab or a religion-based, borderless community, and even less so an international jihadist one. Ossama bin Laden was politically dead; the Americans didn’t need to kill him. Political Islam, however, is more complex: the fundamentalists’ purpose was to target the nation-state they and might someday find a way forward to participation, if a consensus were built around democratic rules. Many Islamists – in Tunisia, Egypt and no doubt also Morocco – understand perfectly well that nobody is looking for a new authoritarianism, and that what they have to offer needs to be adapted to the political market. Reconverting the Islamists will be all the easier because in order to resist repression, they have often joined social networks for solidarity. I don’t want to speculate idly, but it is not out of the question for the Arab world to experience a Muslim democracy, just as Europe experienced, and continues to experience, a Christian democracy.

S. S. – Meanwhile, the dustbin of history is filling up helter-skelter: Pan-Arabism, global jihad, a hypnotic fixation on the West...

M. H. – Not everything ends up in the dustbin, but it is true that “all-inclusive” projects no longer hold an appeal. Pan-Arabism is not dead. To wit: we are presently experiencing a democratic Pan-Arabism, both joyfully and painfully. But historical Pan-Arabism is now seen for what it was, that is, a quest for unanimism, and, therefore, a false quest for modernity. Nevertheless, let us not forget the contexts in which past ideologies emerged. Pan-Arabism was a response to colonialism’s dividing to conquer, just as, later on, petroleum served as an economic weapon for resisting the dictates of the Cold War. Lastly, borderless jihadism in its Al-Qaeda guise, and what I would call the “Occidentalism” of the Arab world, were also branded by a dialectics of enclosure. Orientalism caricatured us – so we caricatured back. As for Ossama bin Laden’s jihad, would it have taken on the same dimensions if the Global War on Terrorism – George W. Bush’s GWOT – had not turned it into something larger than life? I believe these are legitimate questions that we can now ask.  But, in any case, we are no longer wedged between the authoritarian anvil, on the one hand, and the Islamist or American hammer, on the other. The Arab world has a triple liberation in its sights. It is no longer alienated by Al-Qaeda's terrorism or the political agenda of the neo-conservatives, who have lost their power in Washington. The Arab world has also begun to rid itself of its autocrats and, paradoxically, it is finally able to acknowledge that foreign domination may not have been so much the cause as, to a great extent, the consequence of its weakness.

S. S. – You have already alluded to that: the armed forces are playing a central role in bringing democracy to the Arab world.

M. H. – Indeed. However, there are a multitude of possible outcomes. First, is there any army capable of influencing the course of events? In Tunisia, the army, compared to the Ministry of the Interior and its 155,000 agents, looked like a lightweight. Next, the army needs to be either professional, consist of conscripts, or backed up by paramilitary units, each of which would lead to radically different outcomes. In Egypt, a nineteenth century witticism about Prussia raises the question of whether it is a state with an army, or an army with a state. In any case, the Egyptian army is also an important economic player. The wheeling and dealing of its top officers will affect the on-going transition. In Syria, the Republican Guard, on the front lines against the protestors, is dominated by Alaouites, that is, by the minority in power, unlike the rest of the Army, whose composition reflects the majority in the Syrian population, over three quarters of whom are Sunni. Finally, in several Arab countries, the army is not one institution among others, to which a new role could easily be attributed in place of its old one. I am thinking, for example, of Algeria, as well as Jordan. In both cases, the army is an historical component of the state. One cannot be conceived of without the other. It is a given that they form an indivisible whole. Obviously, that complicates the equation.

S. S. – Is this why until now Algeria has remained on the sidelines of the present movement?

M. H. – Probably, but there are at the least two other strong reasons. First, the nine years of bloody civil war, between 1992 and 2001, remain piercingly fresh in everyone's memory – after that kind of shared trauma, you don't take risks. Second, as in most countries of the Arabian peninsula, petroleum money plays a buffer role. Petrodollars are a way to pay off discontent, at least in part, for a certain time. Until when? You're quite right to specify "for the time being."

S. S. – In non-petroleum producing countries, the major stumbling block is the economy. To the protestors, democracy epitomizes prosperity. The "Arab awakening" you mentioned earlier is likely to be hard.

M. H. – Right, because the link between public liberties and economic performance is not one of cause and effect, even though I think that in the end only economic actors freed from repressive constraints can and will want to give their best. However, in the short-term, the upheaval of the old order and the ferment peculiar to transitions will inevitably disrupt economic life. Tourists go elsewhere and investors remain on the sidelines while waiting for things to sort themselves out. At the same time, a rise in openly expressed demands weighs on the costs of production. Finally, you have to be realistic relative to the discourse of the industrialized countries. Not only has their support of democratization of the Arab world sometimes been hesitant but, in addition, it will remain verbal. There will be no equivalent to a Marshall Plan. In the midst of a financial crisis, when 20,000 Tunisian refugees were all it took for the Schengen area to close in on itself, what Western office-holder is going to risk making austerity worse in his or her country to promote Arab democracy? I would add, in all sincerity, that I am only halfway sorry about it, if at all. For our countries, this is a blessing in disguise, that is, an unintended benefit. As long as our institutional capabilities remain limited, a "democracy premium" would produce the same effect as any other source of income: it would feed corruption. In fact, this is the only thing I don't want to see democratized... Egypt, which has received forty billion dollars from the Americans since 1978 as a "separate peace dividend”, is a good illustration of my fears.

S. S. – In your country, Morocco, you are more than a committed observer. You are part of the problem. Do you also hope to be part of solution, or even the solution itself?

M. H. – Neither. Besides, I don't really see how I could be part of the problem, except for having earlier raised the issues which are now out in the open, while it would still have been easy to solve them. After Hassan II's death, I told Mohammed VI with all the sincerity my affection for him demanded, that real change was necessary, that modernizing the Makhzen was not enough. Since then, I have only seen the King, my cousin, twice, for strictly family events, where our exchanges have remained courteous and distant, as required by the circumstances. Politically, I am persona non grata at the palace.  I'm not complaining. I said what I had to say, but I was not heard by either Mohammed VI or by those information handlers who presented him as the "king of the poor" while dubbing me the "red prince." Better to just laugh about it! So I took some distance by moving with my family to the United States, and I congratulate myself every day for making a decision that has allowed me to achieve a lot both professionally and personally. Besides, and this is fundamental for me and my wife, it allows our children to grow up in an open, free environment. In short, I am not a problem to anyone at all, or at least I shouldn't be. For my part, I don’t have a problem with anybody. This also answers your imputation that I should see myself as the solution. No, not at all. If there is a solution, it is up to the Moroccans to find it together. In this regard -- that is, as citizen Hicham ben Abdallah -- I won't deprive myself of contributing what I can, to the best of my abilities. But I do not believe that democratizing Morocco has any special need of a prince. Just as I've also come to the conclusion that I’m in the King’s way, so I keep my distance. To be perfectly clear: I believe that involving myself more directly would be a disservice to democracy in my country, because, at this stage, it would add to the confusion. But I claim total freedom of expression, without any red lines I shouldn't cross. We'll see whether either the king or the February 20 Movement will complain about it.

S. S. – Since the subject has come up, let's get down to brass tacks: how do you view Mohammed VI's constitutional reform, which was adopted by referendum on July 1st, by 98% of those voting, with a 72% participation rate?

M. H. – Let's look at it from the right side:  I have no doubt that the constitutional reform proposed by the King was adopted by the great majority of Moroccans. Duly noted. That said, 98% "yes" votes and a 72% participation rate -- that is, almost double the previous election --is simply not credible. We'd hoped that the "score-making" machine had been mothballed once and for all, but it's back at full tilt: people were herded into buses, they were driven to the polls like electoral livestock and, to make sure they clearly understood what was expected of them, they had a sermon, dictated by the Ministry of Islamic Affairs, crammed into their heads in the mosques on Friday, June 25 – unheard of, even back in the days of Hassan II and his Minister of the Interior and grand master of referenda, the late Driss Basri! The kingdom's largest Sufi brotherhood, the Zaouiya Boutchichia, was mustered, and, just as disturbingly, so were gangs of young hooligans who were tasked with creating sometimes violent "counter-demonstrations." In short, if a progressive kind of democratization was the goal, and if – as I believe– a majority of Moroccans were ready to go along with this proposal, why turn a citizen referendum into a populist beiya (allegiance)? The modus operandi belied the purported objective. The Makhzen, cautiously hanging onto its privileges, abused the popular vote to establish a "party of order," that is, a rampart behind which to seek shelter. But that is a petty solution. The sacredness of the monarchy, while no longer written into the new Constitution, is reaffirmed in spirit in its most retrograde form in practices from another age. The result is twofold, and twice as destructive: on the one hand, the fears of the majority – the fear of losing their livelihood, of being alienated in a globalizing country with new and disturbing mores, particularly among the young... – were kindled, while the point was to create hope and confidence in a better future; on the other hand, the February 20 Movement can only harden its positions and may well find itself shoved into the arms of the extra-parliamentary Al Adl Wal Ihsan (Justice and Charity) Association Islamists. Besides, since Sunday July 3, the refuseniks of the Moroccan street have started marching again, by the thousands, under the slogan «Mamfakinch» (we will not let go).

S. S. – The King allowed democratic measures to be included in the new Constitution while feigning they were not conceded under pressure. Who is he kidding? And, as a matter of fact, is that enough?

M. H. – I don't think there was any intention to deceive anyone, but I fear the King may have fooled himself. People in Morocco, particularly members of the propertied classes, wonder if, with the vote, they can hold their own. As for me, I have interest in any reform completely lacking any enlightened, sincere intent, beyond seeking a short-term advantage, to move towards parliamentary monarchy. Some – very narrow –measures were put in place: a new title for the Prime Minister, who will henceforth be the "head" of a government which the King will continue to appoint and dismiss as he pleases; a number of "councils" were created, all controlled by the monarch, thus completing his "NGO-ization" of the Moroccan State, thus multiplying appointments with which to co-opt the members of both the political class and civil society; finally, a whole raft of "rights" were included in the Constitution, which will have to await their implementing orders, but will frequently prove, in actual practice, to be unenforceable. For example: while article 36 of the new constitution "prohibited" conflicts of interests and the abuse of office, do you really think the members of Mohammed VI's inner circle, whose names are regularly booed in the streets, are going to lose their incomes and positions, when the royal holding alone pulls in 8% of the Moroccan GDP? The Constitution might as well state that Makhzen is no longer the etymological root of the French word "magasin [store]" – which would be just as absurd. In this regard, we may well witness one predation layered upon another, if the new Prime Minister takes his new autonomy to the limits by seeking to insert his own clients into key state positions. In short, we could find ourselves with a street stall set up alongside the big "store."

S. S. – But if the King hasn't given up anything essential, why would he be mistaken? From his point of view, he remains in control of the country, while you acknowledge yourself that the protest movement is struggling to move from the street into the seats of power.

M. H. – First, allow me to clearly state how much sympathy and respect I have for the February 20 Movement. The young people who launched it are prophets of the people, because they are openly proclaiming the truth. Acknowledging that this is not enough to improve the daily lot of most people is not disparaging of them. It is just a reminder that a statement is not an act, saying is not doing. Something else to keep in mind is the experience of the Moroccan movida at the start of "M6's" reign, when greater freedom of speech in a new independent press made a nice illusion for a while. There's not much left. After the intoxication, the toxic. Nowadays, several protagonists from that period, such as Boubker Jamaï, Ali Lmrabet, and Ahmed Benchemsi, comment on events from abroad, where they now live. Next, while the King has ceded almost nothing to the popular sovereignty, he has ceded the essential where national unity is concerned. For a long time, I have been strongly in favor of recognizing Morocco's Berber culture. I believe richness lies in diversity. But this constitutional reform has institutionalized the fragmentation of the Moroccan State. The King attempted to innovate, and perhaps also to give assurances of openness by acknowledging the Berber language and Hassania, the language of the Sahrawi. But the text that was adopted has ended up twisting the cultural demands as well as the regional framework for localized democratization by creating a political market for identity brand selling. Are we really, over a half century after Independence, going to recreate the 1930 "Berber dahir," that sought to infect the Moroccan people with the seed of division? Morocco is not an American-style melting-pot, it's a big couscous where everything can be tossed in. However, the new provisions, which have been taken lightly, may spoil the national dish. When you leave certain ingredients out, the whole dish loses its richness.

S. S. – Earlier, you went as far as saying that Mohammed VI had erred to his own disadvantage. How so?

M. H. – The King has implicitly acknowledged the failure of the "executive monarchy" he set up at the beginning of his reign twelve years ago. The trade-off of a technocratic promise of top management performance against the further weakening of an already anemic political class has run its course. But who will now "inhabit" the new areas set up in the name of democratizing the system? The same political class, reduced more than ever to shadow theater? This is a fundamental contradiction: to win his gamble on renewal, Mohammed VI is counting on collecting the I.O.U.s from those for whom he’s done favors.  How could such people conceivably build a new institutional framework? And if, extraordinarily, they should manage to, their success would prove the king's failure at two essential levels. On the one hand, they would be proving they can manage the economy better than Mohammed VI and his inner circle, and that the royal "store" should close shop. On the other, they would be demonstrating that a new era of human rights is possible without repressing the Islamists, without the Temara torture center denounced by Amnesty International and Human Rights Watch, without the silent renditions of those presumed foreign terrorists whom Morocco has received entirely illegally as a favor to George W. Bush, who turned the Commander of the Faithful into the jailer of his fellow Muslim believers. In short, the new Constitution may help the Makhzen save some time, but the country will surely be the loser. Because, sooner or later, it is likely to turn against Mohammed VI.

S. S. – Since you have started making predictions, what future do you foresee for the "Arab Spring" as a whole?

M. H. – If this year has taught us just one thing, it's to be properly humble about our predictions... But I'm not trying to duck your perfectly legitimate question. So, first, I think the whole Arab world has just rounded a corner, maybe even passed a point of no return. Even if there is authoritarian regression, nothing will go back to the way it used to be. Next, I think we can identify three geographic and geopolitical areas – the Gulf States, the Near East and North Africa – provided we don't start seeing them as fatalistically-determined communities. And since we were just on the subject of North Africa, let's start there, where any outcome is possible. I think, for instance, that Tunisia has a real chance of managing a breakthrough to become the first Arab democracy. From a demographic, sociological and political point of view, all the conditions are there – which doesn't mean it's guaranteed. I am equally optimistic that Morocco will eventually become progressively democratized. On the other hand, Egypt runs the risk of a "frozen" transformation at some stage. As for Algeria, I'll admit I don't foresee anything besides a status quo, even though everybody knows it is untenable. And I am frankly pessimistic about Libya. It risks becoming a failed state, and was already fairly "Bedouin" under Gaddafi.

S. S. – What about the Gulf States?

M. H. – In their case, their common traits give them advantages: petroleum money, which disconnects the state from its citizens and makes them into dependents the weakness of civil society in spite of having a middle class; the high number of immigrants who do the basic work of the economy, at the lowest cost; and, finally, the lack of significant geopolitical pressure for democratization, thanks to their supply of petroleum. All of these conditions come together to smother any aspiration for greater freedom under a cozy down comforter. As the situation plays out, I expect the Arabian Gulf States will be the least affected by the great movement now taking place.

S. S. – Is that also the case for the Middle East, for other reasons, that is, because it is located in the eye of the storm?

M. H. – I don't think so. Anything can happen in the Middle East, especially in Iran and, even more so, in Iraq, where the state shaped under the American occupation – a state dominated by former exiles and ethnic marketing entrepreneurs – is corroded and corrupt to the extreme. Will this regime collapse? Are the American troops going to leave? And when? Everything is on the table. On the other hand, there are further determining factors in the Middle East. Pressure towards democratization has already led to a reconciliation agreement between Hamas and Fatah, although this agreement has yet to be put into action. Nonetheless, it is a given that the Palestinians, particularly the ones on the West Bank, are the ready-made pioneers of Arab democracy, thanks to their education and their – forced – openness to the world. But in absence of political freedom, under Israel's iron rule, only their institutional capabilities can be seen. Finally, almost five million Palestinian refugees living scattered about the Arab world have everything to hope from a democratization of their host countries. It still would not be the long-awaited "return" but, nevertheless, democracy would make adopting their second homelands more palatable.

S. S. – In which case Israel would lose its regional monopoly on democracy...

M. H. – It's almost a given. And we can wonder how the United States, in particular, will go about repositioning themselves in a strategic region with a multiplicity of partnerships available to them, without the opprobrium of supporting dictatorships. Of course, there will always be the pro-Israeli lobby in America to consider, which will endeavor to tip the scales to the detriment of the Arab democracies. But it will no longer be the same. All the less so, because Israel, under Benyamin Netanyahu’s frankly narrow-minded leadership, is on the verge of missing the boat. The current government continues to reason in terms of "peace between regimes" rather than "peace between people." Instead of making overtures to Arab public opinions – a term which henceforth needs to be in the plural –, the Israeli authorities are hunkering down while waiting for new Arab leaders to emerge, whom they hope to approach like the old ones. Speaking on behalf of the Israeli opposition, the centrist Tzipi Livni has publicly expressed regret about their short-sightedness. The "Arab Spring’s" window of opportunity could well close again without the Arab people having understood the interest of an historical compromise with Israel within a context of shared civil liberties. Nobody should complain later on if an anti-Israeli populism grabs the “pot” so rashly left there for it to snatch.

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Web tracking is pervasive: the average popular website incorporates over fifty third-party tracking mechanisms. And web tracking is unpopular: a majority of Americans oppose the practice. Do Not Track is a technology and policy response that would provide users with a simple, universal web tracking opt out. Both the Federal Trade Commission and the Department of Commerce have signaled support. This talk explores central questions in the ongoing web privacy debate:

* What information do third parties collect about users?
* What technologies do third parties use to track users?
* What limits does the online advertising industry's self-regulation impose?
* What should Do Not Track prohibit?
* Who should enforce it, and how?
* What would the economic impact be?
* Could it actually happen?

To learn more, visit http://donottrack.us and follow @donottrack.


Speaker Biography:

Jonathan Mayer is a computer science Ph.D. student and 3L at Stanford University. He graduated from Princeton University in 2009 with a concentration in the Woodrow Wilson School of Public and International Affairs.  Jonathan's area of study encompasses the intersections of policy, law, and computer science - with particular emphasis on national security and international relations. Jonathan works extensively with the Stanford Security Laboratory within the Computer Science Department and the Center for Internet and Society within the Stanford Law School.

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Jonathan Mayer Ph.D. Candidate in Computer Science, Stanford University, J.D. Candidate at Stanford Law School Speaker
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U.S. ethanol policy may be the single most significant contributor to world food price instability, states a Stanford study on the global costs of American ethanol. The rapid rise of biofuels has tied energy and agricultural markets together, making it difficult to assess one without understanding the other.

The price of corn recently hit an all time high, a departure from a long-term trend that has seen the cost of corn decline with each passing decade. Price spikes have happened before, and some experts viewed the latest jump as part of this familiar cycle. Stanford food policy economists Rosamond L. Naylor and Walter P. Falcon alternatively argue in a new paper released in The American Interest that we have entered a new era where agricultural commodity prices are increasingly driven by U.S. biofuel policies. This food and fuel linkage has, and will continue to have, major implications for global food prices and the world’s poor.

Over the last decade, the U.S. ethanol industry experienced a major increase in production and consumption as a result of beneficiary of tax breaks, tariffs and government mandates. In 2005, MTBE was phased out as a gasoline additive because of environmental and health risks, and ethanol became the preferred MTBE substitute. Production was further supported with a mandate to reach a minimum target of 15 billion gallons by 2015. 

A jump in the price of crude oil gave a further boost to ethanol as a potential replacement for petroleum. As a result, 40% of the U.S. corn crop is now devoted to ethanol production. These policies have been promoted under the banner of protecting the American farm industry, securing energy independence, and decreasing greenhouse gas emissions, and they have succeeded on a number of these fronts.

However, as a major global producer and exporter of corn, the rapid rise of ethanol production in the U.S. during such a short period of time has produced a fundamental change in the structure of demand for corn. Increased demand has led to higher and more volatile food prices, not only for corn but other agricultural commodities. If the United States, along with the rest of the G-20, is serious about stabilizing global food prices, U.S. domestic biofuels policy in its entirety will need to be re-examined.

High prices are a boon to the U.S. farm sector, but can be devastating for poor consumers with minimal income to spend on food. Food riots have broken out in several countries suggesting the new volatility in the price of staple crops has had a severe impact on developing economies. Where once the policies of the U.S. helped keep agricultural prices on an even keel, current support for the production of corn-based ethanol has reversed this stabilizing role. 

Given the bullish financial outlook for the U.S. agricultural sector, this is an ideal time to begin dismantling both ethanol and corn (and other major commodity) subsidies. Corn-based ethanol tax and tariff provisions together cost the federal government around $6 billion annually. Cutting these subsidies would help reduce the Federal budget deficit without harming the rural economy.

The trickier political and economic questions relate to reassessing mandates, and are likely off the table with the 2012 elections approaching. This is unfortunate, for these policies will continue to cause unrest in food markets far beyond American shores.

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In September 2011 the U.S. bilateral alliance system in the Asia-Pacific—the “San Francisco System” (SFS)—turned 60 years old. Against the expectations of theorists who argue that alliances cannot be sustained in the absence of a commonly perceived mutual external threat, the SFS remains operative and viable. It remains so even as multilateral approaches to regional order-building in the Asia-Pacific have proliferated. Although the identity and functions of the SFS have evolved, the speakers will argue that it remains—and will remain—a critical security mechanism in the likely absence of a comprehensive and consensual regional security arrangement that could supersede it. Their remarks will convey the findings and projections of a recent study of Asia-Pacific security undertaken by  Australian National University (ANU) and supported by the MacArthur Foundation’s Asia Security Initiative.

John Ravenhill returned to ANU in 2004, after holding the chair of politics at the University of Edinburgh from 2000. He currently directs the School of Political Science and International Relations at ANU’s College of Arts and Social Sciences. Before joining ANU in 1990, he was an associate professor at the University of Sydney, and assistant professor at the University of Virginia, after completing his PhD at the University of California, Berkeley.  He has held visiting professorships at the S. Rajaratnam School of International Studies; Nanyang Technology University, Singapore; the University of Geneva; the International University of Japan; and the University of California, Berkeley. His many articles have appeared in leading journals including World Politics, International Organization, Review of International Political Economy, Review of International Studies, New Political Economy, World Policy Journal, World Development, and International Affairs. His research interests include global political economy, especially the fields of trade and production, and Australian foreign policy.

William T. Tow came to ANU in early 2005, having been a professor of international relations (IR) at the University of Queensland and at Griffith University, and an assistant professor of IR at the University of Southern California. His visiting-scholar positions have included APARC (1999) and the International Institute for Strategic Studies (IISS) in London. Among his many writings are Politics in the Asia-Pacific: A Regional–Global Nexus? (edited, Cambridge University Press, 2009); Asia Pacific Strategic Relations: Seeking Convergent Security (Cambridge University Press, 2001); and articles in the China Journal, Review of International Studies, International Relations of the Asia-Pacific, China Quarterly, International Affairs, Survival, and Asian Survey. He also heads the ANU IR component of the Centre of Excellence in Policing and Security, was editor of the Australian Journal of International Affairs, has held positions with the Australian Department of Foreign Affairs and Trade and the Australian Fulbright Commission, and received an Australian Award for University Teaching in the Social Sciences Category.

Brendan Taylor’s writings include Sanctions as Grand Strategy (2010); American Sanctions in the Asia-Pacific (2010); and articles in Asian Security, the Australian Journal of International Affairs, International Affairs, and Survival.  In addition to leading the ANU-MacArthur Asia Security Initiative Focus Group (since 2009), he has served as associate investigator, Australian Research Council Centre of Excellence in Policing and Security; graduate studies convenor, Political Science and International Relations, ANU; and lecturer and post-doctoral fellow, SDSC.

David Envall is a Japan specialist with an interest in how foreign policy is made. He edits the ANU-MacArthur Project’s policy papers. His essays will appear in the Asian Journal of Political Science and in volumes on Australian-Japanese politico-security relations and on strategic and structural changes in the Asia-Pacific security environment.

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John Ravenhill Professor of International Relations, College of Arts and Social Sciences Speaker Australian National University (ANU), Canberra
William T. Tow Professor of International Relations, School of International, Political, and Strategic Studies Speaker ANU College of Asia and the Pacific (ANU-CAP), Canberra
Brendan Taylor Senior Fellow, Strategic and Defence Studies Centre Speaker ANU-CAP, Canberra
David Envall Postdoctoral Fellow, ANU-MacArthur Project, Department of International Relations Speaker ANU-CAP, Canberra
Panel Discussions

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Anna Lindh Fellow, The Europe Center
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Klaus Mittenzwei is an agricultural economist at the Norwegian Agricultural Economics Research Institute in Oslo, Norway. He completed his doctorate at the University of Life Sciences, Norway in 2001. His dissertation focused on the role of political institutions as a significant source for explaining agricultural policies. In a current follow-up research project funded by the Norwegian Research Council, he will analyze these findings in greater detail. Other areas of research include modeling the effects of agricultural policies on the economic, environmental and societal objectives of society. In particular, the CAPRI modeling system (covering world agricultural trade and the details of the agricultural policies in the EU-25, Norway and Turkey) is used to understand how agricultural policy reforms affect the often conflicting agricultural policy objectives like farmers’ income, productivity and public goods provided by the agricultural sector.

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Kevin Croke recently defended his PhD dissertation in the International Development program at Johns Hopkins-SAIS.  His dissertation, "Foreign Aid, Child Survival and Health System Strengthening in Tanzania and Uganda, 1996-2009," is based on fieldwork conducted in Tanzania and Uganda in 2009 and 2010.  He has previously worked with the World Bank, PEPFAR, Management Sciences for Health, Results for Development, and the East African NGO Twaweza.  He is currently working with the World Bank and Twaweza to develop a mobile phone survey platform for high frequency public service delivery monitoring in Tanzania.  At SAIS, Kevin has taught Introduction to Development and Comparative National Systems.

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Kevin Croke Doctoral student Speaker SAIS - The John Hopkins University
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Synopsis:

Robin Niblett, Director of Chatham House, delivered the following talk in The Europe Center series “The European and Global Economic Crisis”.

With measured optimism about the prospect for a way out of the current Eurozone crisis, Dr. Niblett argues that the introduction of the common Euro, seen by many in past years as a vanguard tool for European integration, is now potentially a functional wedge between ‘debtor’ and strongly capitalized nations.  

Dr. Niblett, arriving directly from participating in the World Economic Forum in Dubai, and based on Chatham House research, described the “perfect storm” of the past two decades of credit-driven growth, divergence within the EU, rising debt-to GDP ratios of member nations especially in the cases of Italy and Greece.  His analysis combines these economic details with the following:

  • Demographics – high levels of unassimilated immigrants
  • European welfare economies still distributing resources at twentieth-century levels now in the twenty-first century
  • The rise of anti-immigrant and anti-free-trade populist parties
  • The weakening of Europe’s center parties
  • The “Russification” of Europe’s East – especially in recent events in Ukraine
  • The stalled integration of Turkey into the EU

The totality of the above paints a grim portrait of Europe under the weight of nearly impossible conditions.   And yet, Dr. Niblett underlines evidence for measured optimism:

  • Ireland is making strides to reform its economy
  • Ireland’s educated and yet unemployed workforce does have the possibility to immigrate to Europe
  • The UK is finally rebalancing its state budget and market liberalization
  • France is facing, albeit with massive labor protest, its state budget levels
  • Spain will likely turn over its government in the face of its massive youth protest
  • Italy is evaluating in its political process a series of budget reforms

These are the structural side of what Dr. Niblett sees as Europe’s tools for recovery.

On the side of European practice, the Franco-German proposals for European Central Bank “bailout funds” include new rules for transparency of internal government operations. This promises innovation to make the EU into an area of political and financial transparency, and to enable the EU to engage in direct investment, as evidence is beginning to show, in the world’s emerging economies.  In this sense, Dr. Niblett sees for Europe a competitive edge over the US in engaging in world markets.

Perhaps most sanguine of Dr. Niblett’s analysis is his reading of the Eurozone crisis as a force to push the member nations of Europe further towards supra-national economic strategies.  In order to participate in the investment in emerging markets, the Benelux countries, not to mention France, Germany, and neighboring European states, are responding to the crisis by considering policy that promotes investment and outsourcing for service-sector employment, instead of export commodities which have been undercut in recent years.

There is a risk, in Dr. Niblett’s view, that Europe will respond to the Eurozone crisis by fracturing into rival “clubs” of small and large or debt-restructuring and creditor nation-states.  But the European nations, especially those currently participating in the Eurozone, have untapped capacities for growth:

  • Educated youth
  • Underemployed female laborers
  • Outstanding higher educational institutions
  • Pent-up small- and medium-enterprise markets
  • Potential for growth in the service sector labor market
  • Room for more tightly integrating and rationalizing the region’s energy market.

Those interested in further detail and analysis are invited to visit the work and productivity at:

The Europe Center, at Stanford’s Freeman Spogli Institute for International Studies: http://tec.fsi.stanford.edu

Chatham House, at the Royal Institute for International Studies: http://www.chathamhouse.org/

 

Speaker bio:

Robin Niblett became the Director of Chatham House (the Royal Institute of International
Affairs) in January 2007. Before joining Chatham House, from 2001 to 2006, Dr. Niblett
was the Executive Vice President and Chief Operating Officer of Washington based
Center for Strategic & International Studies (CSIS). During his last two years at CSIS, he
also served as Director of the CSIS Europe Program and its Initiative for a Renewed
Transatlantic Partnership.

Most recently Dr. Niblett is the author of the Chatham House Report Playing to its
Strengths: Rethinking the UK’s Role in a Changing World (Chatham House, 2010) and
Ready to Lead? Rethinking America’s Role in a Changed World (Chatham House,
2009), and editor and contributing author to America and a Changed World: A Question
of Leadership (Chatham House/Wiley-Blackwell, 2010). He is also the author or
contributor to a number of CSIS reports on transatlantic relations and is contributing
author and co-editor with William Wallace of the book Rethinking European Order
(Palgrave, 2001). Dr Niblett is a frequent panellist at conferences on transatlantic
relations. He has testified on a number of occasions to the House of Commons Defence
Select Committee and Foreign Affairs Committee as well as US Senate and House
Committees on European Affairs.

Dr Niblett is a Non-Executive Director of Fidelity European Values Investment Trust. He
is a Council member of the Overseas Development Institute, a member of the World
Economic Forum’s Global Agenda Council on Global Institutional Governance and the
Chairman of the World Economic Forum's Global Agenda Council on Europe.

He received his BA in Modern Languages and MPhil and DPhil from New College,
Oxford.

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Robin Niblett Director Speaker Chatham House, Royal Institute for International Affairs
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In this article, Professor Christophe Crombez (Stanford University) and Wim Van Gestel (University of Leuven)  formulate a game-theoretical model of closed rule legislation in the presence of informational asymmetries. In the model, an agenda setter with private information proposes a policy to a legislature. The legislature appoints an oversight committee to monitor the agenda setter. Crombez and Van Gestel study the rationale for this appointment, and analyze the equilibrium oversight committee member choices for the legislators. They conclude that it is optimal for the legislators to appoint oversight committee members who are as far from them as is the agenda setter, but in the opposite direction, rather than do the monitoring themselves. The appointment of such oversight committee members represents a credible means for the legislators to commit to reject proposals that they only marginally prefer to the status quo.
 

 

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2011-2012 Visiting Scholar
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Jae-Seung Lee is a visiting scholar with the Korean Studies Program (KSP) for the 2011–12 academic year, and he is also currently a professor of international studies at Korea University. Before joining the faculty of Korea University, he served as a professor at the Institute of Foreign Affairs and National Security (IFANS) and at the Ministry of Foreign Affairs and Trade.

As a scholar in international political economy, Lee has authored a number of books and articles on Korea, East Asia, and Europe. His current research also includes the energy security and energy diplomacy of Korea, among others. During his time with KSP, he will conduct a research project on the geopolitics of East Asian energy relations.

Lee is currently an editor-in-chief of the Korea Review of International Studies and he also serves as a member of the Policy Advisory Board of the Presidential Secretariat (Foreign and Security Affairs) and as vice director of Ilmin International Relations Institute (IIRI). He was selected as an Asia Society Young Leader in 2006 and as a Young Leader by the InterAction Council, a group of former heads-of-state, in 2008. He has contributed op-ed articles to major Korean newspapers and has commented on international affairs for BBC, CNN, and Korean broadcast stations.

Lee holds a BA in political science from Seoul National University (1991), and an MA (1993) and PhD (1998) in political science from Yale University. He also earned a certificate from the Institut D’Etudes Politiques de Paris (1995). He has taught at Yale University and Seoul National University.

 

* His on-line expert interview with World Politics Review on South Korea's energy diplomay is available here.

* His on-line interview with BBC World on the Korean DMZ is available here.

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