Partying Like It’s 1998

start with a country that, for whatever reason, became a favorite of foreign lenders, and experienced a large inflow of foreign capital over a number of years. Crucially, the debt thus incurred is denominated in foreign currency, not domestic (which is why the U.S., also a recipient of large inflows in the past, isn’t similarly vulnerable — we borrow in dollars).

.. Whatever the shock, the crucial thing is that foreign debt has made your economy vulnerable to a death spiral. Loss of confidence causes your currency to drop; this makes it harder to repay debts in foreign currency; this hurts the real economy and further reduces confidence, leading to a further decline in your currency; and so on.

.. Indonesia came into the ’90s financial crisis with foreign debt less than 60 percent of GDP, roughly comparable to Turkey early this year. By 1998 a plunging rupiah had sent that debt to almost 170 percent of GDP.

.. How does such a crisis end? If there is no effective policy response, what happens is that the currency drops and debt measured in domestic currency balloons until everyone who can go bankrupt, does. At that point the weak currency fuels an export boom, and the economy starts a recovery built around huge trade surpluses.

..  stop the explosion of the debt ratio with some combination of temporary capital controls, to place a curfew on panicked capital flight, and possibly the repudiation of some foreign-currency debt.

.. get things in place for a fiscally sustainable regime once the crisis is over.

.. Malaysia did this in 1998; South Korea, with U.S. aid, effectively did something like it at the same time, by pressuring banks into maintaining their short-term credit lines. A decade later, Iceland did very well with a combination of capital controls and debt repudiation (strictly speaking, refusing to take public responsibility for the debts run up by private bankers).

.. Argentina also did quite well with heterodox policies in 2002 and for a few years after, effectively repudiating 2/3 of its debt.

  • .. You need a government that is both
  • flexible and
  • responsible, not to mention
  • technically competent enough to implement special measures and
  • honest enough to carry out that implementation without massive corruption.

How to Destroy Democracy, the Trump-Putin Way

All around the world, strongmen are seizing power and subverting liberal norms.

fascism came out of particular historical circumstances that do not obtain today—

  • a devastating world war,
  • drastic economic upheaval, the
  • fear of Bolshevism.

.. When Naomi Wolf and others insisted that George W. Bush was taking us down the path of 1930s Germany, I thought they were being histrionic. The essence of fascism after all was the obliteration of democracy. Did anyone seriously believe that Bush would cancel elections and refuse to exit the White House?

.. So maybe fascism isn’t the right term for where we are heading. Fascism, after all, was all about big government—grandiose public works, jobs jobs jobs, state benefits of all kinds, government control of every area of life. It wasn’t just about looting the state on behalf of yourself and your cronies, although there was plenty of that too. Seeing Vladimir Putin and Donald Trump at the press conference following their private meeting in Helsinki, though, I think maybe I’ve been a bit pedantic. Watching those two thuggish, immensely wealthy, corrupt bullies, I felt as if I was glimpsing a new world order—not even at its birth but already in its toddler phase. The two men are different versions of an increasingly common type of leader:

  • elected strongmen ‘who exploit weak spots in procedural democracy to come to power, and
  • once ensconced do everything they can to weaken democracy further,
  • while inflaming powerful popular currents of
    • authoritarianism,
    • racism,
    • nationalism,
    • reactionary religion,
    • misogyny,
    • homophobia, and
    • resentments of all kinds.

.. At the press conference Putin said that associates of the billionaire businessman Bill Browder gave Hillary Clinton’s campaign $400 million, a claim Politifact rates “pants on fire” and about which The New York Times’ Kenneth Vogel tweeted, “it was so completely without evidence that there were no pants to light on fire, so I hereby deem it ‘WITHOUT PANTS.’”

.. A Freudian might say that his obsession with the imaginary sins of Clinton suggests he’s hiding something. Why else, almost two years later, is he still trying to prove he deserved to win? At no point in the press conference did he say or do anything incompatible with the popular theory that he is Putin’s tool and fool.

.. These pantsless overlords are not alone. All over the world, antidemocratic forces are winning elections—sometimes fairly, sometimes not—and then using their power to subvert democratic procedures.

There’s Recep Tayyip Erdoğan in Turkey—remember how when he first took office, back in 2014, he was seen as a harmless moderate, his Justice and Development Party the Muslim equivalent of Germany’s Christian Democrats? Now he’s shackling the press, imprisoning his opponents, trashing the universities, and trying to take away women’s rights and push them into having at least three, and possibly even five, kids because there just aren’t enough Turks.

.. Then there’s Hungary’s Viktor Orbán, who coined the term “illiberal democracy” to describe these elected authoritarian regimes, now busily shaping the government to his own xenophobic ends, and

.. Poland’s Andrzej Duda, doing much the same—packing the courts, banning abortion, promoting the interests of the Catholic church.

Before World War II Poland was a multiethnic country, with large minorities of Jews, Roma, Ukrainians, and other peoples. Now it boasts of its (fictional) ethnic purity and, like Hungary and the Czech Republic, bars the door to Muslim refugees in the name of Christian nationalism.

One could mention

  • Philippine President Rodrigo Duterte,
  • Egyptian President Abdel Fattah el-Sisi,
  • Israel’s Benjamin Netanyahu, and
  • India’s Narendra Modi as well.

Pushed by anti-immigrant feeling, which is promoted by

  • unemployment and
  • austerity,

right-wing “populist” parties are surging in

  • Italy,
  • Greece,
  • the Netherlands,
  • France,
  • Germany,
  • Austria, and even
  • Sweden and
  • Denmark.

And don’t forget Brexit—boosted by pie-in-the-sky lies about the bounty that would flow from leaving the European Union but emotionally fueled by racism, nativism, and sheer stupidity.

.. At home, Donald Trump energizes similarly antidemocratic and nativist forces. Last year, outright neo-Nazis marched in Charlottesville, and Trump called them “very fine people.” This year, Nazis and Holocaust deniers are running in elections as Republicans, and far-right misogynist hate groups like the Proud Boys are meeting in ordinary bars and cafés.

.. The worst of it is that once the leaders get into power, they create their own reality, just as Karl Rove said they would:

  • They control the media,
  • pack the courts
  • .. lay waste to regulatory agencies,
  • “reform” education,
  • abolish long-standing precedents, and
  • use outright cruelty—of which the family separations on the border are just one example—to create fear.

While everybody was fixated on the spectacle in Helsinki, Trump’s IRS announced new rules that let dark-money groups like the National Rifle Association and the Koch brothers’ Americans for Prosperity keep their donors secret. 

.. American democracy might not be in its death throes yet, but every week brings a thousand paper cuts.

.. There’s nothing inevitable about liberal democracy, religious pluralism, acceptance of ethnic diversity, gender and racial equality, and the other elements of what we think of as contemporary progress.

.. He has consolidated a bloc of voters united in their grievances and their fantasies of redress. The

  • fundamentalist stay-home moms, the
  • MAGA-hat wearing toughs, the
  • Fox-addicted retirees, the
  • hedge-fund multimillionaires and the
  • gun nuts have found one another.

.. Why would they retreat and go their separate ways just because they lost an election or even two? Around the world it may be the same story: Democracy is easy to destroy and hard to repair, even if people want to do so, and it’s not so clear that enough of them do.

Trump Arms an Adversary

Barack Obama tried to embrace him early on as a model for Muslim democracy, a policy that proved to be nearly as fruitless as the Russia Reset.

.. Trump, who has yet to appoint an ambassador to Turkey, has gone further, fulsomely calling Erdogan “a friend of mine” who gets “very high marks” for his leadership.

.. Trump seems never to have met a thug he doesn’t want to imitate and flatter. What’s inexplicable is why the administration, led by Defense Secretary Jim Mattis, would go ahead with the F-35 deliveries after Republican and Democratic senators tried to block the delivery until Turkey releases Pastor Brunson, drops its bid to buy Russian missiles, and improves its overall behavior.

The F-35 was leverage. We just squandered it

.. Worse, we did it just days before the election, handing Erdogan a political prize that he can wield as evidence that the United States doesn’t dare to oppose him and that he can continue to behave as he pleases.

In the meantime, a country now moving into Russia’s orbit will acquire one of the most sophisticated pieces of military hardware ever made.

.. If and when Erdogan goes fully anti-American — he’s already nine-tenths of the way there — what’s to keep him from allowing Russian technicians to take a closer look, so they might gain a better idea of how to shoot it down? Or from using it against American allies in the region, including Israel? If Obama were making this delivery today, Republicans would call it treason.

.. Should that happen, history will record that the United States did nothing to help, and much to hinder, the forces of freedom.