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Some thoughts on democracy/authoritarianism day

Sometimes the news-cycle fates align nicely to highlight a question deserving of more discussion. Today, that question was what role democracy promotion should play in the Obama administration's foreign policy and how the U.S. should interact with odious but strategically useful authoritarian regimes.

The big story of the day was obviously The Speech, which I thought contained some genuinely moving language on the importance of democracy, but was undercut somewhat by the administration cutting funding for democracy promotion in the very country where he was speaking.

The day's other big story is the 20th anniversary of Tiananmen Square and China's paranoid clampdown in response. (Sadly, I can't find any mention of the anniversary on the White House Web site.) Then there's also Wednesday's readmittance of Cuba to the Organization of American States over U.S. objections, not to mention the imminent elections in Iran.

With all this going on, it seemed appropriate to spend this morning listening to a great discussion on authoritarianism at the launch of Freedom House and Radio Free Europe/Radio Liberty's new report, "Undermining Democracy: 21st Century Authoritarians" at the Capitol. The report examines five states, China, Russia, Iran, Venezuela, and Pakistan as examples of a new class of authoritarian government, far savvier and more subtle in their methods than traditional dictatorships. (You can find a summary of the findings as well as an adapted version of Daniel Kimmage's section on Russia on this site.)

The report makes great reading, but the implications of it for U.S. policy are less clear. At this morning event, Robert Kagan, Peter Beinart and, James Traub -- three scholars who approach democracy-promotion from very political perspectives -- wrestled with this question in a panel discussion that got pretty heated at times. The central question was when it is appropriate for the U.S. to cooperate with the new authoritarian powerhouses, with Kagan taken a purist pro-democracy stance and Beinart and and Traub emphasizing the need for trade-offs and cooperation on issues like climate change (in the case of China) and nonproliferation (in the case of Russia.)

It strikes me that this is a bit of a false distinction. All three speakers agreed with the report's premise that the new and more sophisticated class of totalitarian regimes exist as a real and troubling phenomenon and pose a grave challenge to the goal of spreading democracy. They also agreed that these regimes are savvy enough that "engagement" whether economic or political, probably won't lead to meaningful political change. (As Kagan noted, autocrats tend not to give up power except by accident.)

I would also argue that it's neither new, nor particularly worth arguing, that sometimes the U.S. government will have to compromise its democratic values for strategic regions. My colleague Chris Brose recently noted with annoyance that President Obama talks about reaching out to non-democracies as if it's a new idea. Every modern administration has had to cooperate with non-democracies at times. (I would wager that had Robert Kagan's preferred candidate, John McCain, been elected and established a "Concert of Democracies" he'd still be meeting with autocratic leaders, if for no other reason than that we'd still be buying Saudi oil and Chinese manufactured goods.)

At the same time, American voters and leaders probably don't have the stomach for a purely realist foreign policy that discounts democracy and human rights entirely, nor should they. 

So is a degree of hypocrisy simply hard-wired into U.S. foreign policy? Unfortunately, it seems so. Hillary Clinton was pilloried at today's conference for saying that human rights should not get in the way of other strategic priorities, but I have a hard time imagining any U.S. administration that wouldn't take this line.

Every U.S. administration for the forseeable future will talk about human rights and democracy while at times cooperating with regimes that undermine those principles in the name of economic of security goals. George W. Bush's support of leaders like Vladimir Putin and Pervez Musharraf contradicted his pro-democracy rhetoric yes, but he also didn't really get much out of these relationships.

I believe that Obama is sincere in his "commitment to governments that reflect the will of the people." I also believe that he sincerely believes that putting this commitment aside in the case of Egypt, Russia, Iran, Venezuela, etc. is a strategic necessity that will pay dividends on issues ranging from clean energy to Arab-Israeli peace.

Does it make me uncomfortable that the president who spoke so movingly today about women's rights today spent the day before meeting the king of a country where women are treated as second-class citizens? Of course. But statecraft is a messy business and it's not the inconsistency that bothers me. It's the gnawing (I hope misplaced) worry that he may be setting himself up to fail on both counts. 

Passport

The quiet death of Geithner's controversial loan plan

Remember U.S. Treasury Secretary Timothy Geithner's plan to ease the credit crunch, the byzantine "Legacy Loans" program released to much hand-wringing this winter? It was, perhaps, the most ambitious, most confusing, most surprising governmental response to the Great Recession.

The idea was to help price and start a market for mortgage-backed assets on the banks' books. The government would assess and tranch the assets to sell at auctions to public-private investment partnerships; the government would eat the losses if the assets went sour.

Remember hearing about it recently? No?

That's because it's dead in the water, the New York Times reports.

The Federal Deposit Insurance Corporation indefinitely postponed a central element of the Obama administration’s bank rescue plan on Wednesday, acknowledging that it could not persuade enough banks to sell off their bad assets.

In a move that confirmed the suspicions of many analysts, the agency called off plans to start a $1 billion pilot program this month that was intended to help banks clean up their balance sheets and eventually sell off hundreds of billions of dollars worth of troubled mortgages and other loans.

Many banks have refused to sell their loans, in part because doing so would force them to mark down the value of those loans and book big losses. Even though the government was prepared to prop up prices by offering cheap financing to investors, the prices that banks were demanding have remained far higher than the prices that investors were willing to pay. 

The blogosphere's been all over sorting out what this means -- see Yves Smith and Ezra Klein, for examples.

Part of me thinks: goodness, isn't this the best of all worlds for everyone? The banks will be forced to mop up their own mess, and mark down the proper (low but existant) value of these assets at some point. (The i-banks' counterproductive and unethical desire to mismark and misprice concerns me a lot on this point, to be fair.) But if they want to wait for the assets to mature rather than moving them now, spreading their losses out over several years -- that's fine with me.

The government won't have to cajole hedge funds into participating, promising them some oversight concessions in return. That means hedge funds and the like can use their free capital, hopefully, on more productive investments. The government also won't have to subsidize the banks' losses on these assets, leaving those precious funds for other better purposes.

Plus, if the Geithner plan was always in part a confidence thing -- born of the perceived need to reassure banks that the government would not let them fail and would help ease the credit crunch -- this part of the plan seems to have worked. And without costing anything.

Here's looking forward to the other pieces, though.