Half Keynes

When the private sector exhausted itself and no longer knew how to handle the 2008 financial crisis, it looked to governments to bail them out. Although much criticised for concentrating on rescuing the perpetrator and not the victims, government responses from London to Washington probably managed to avert an even deeper crisis, and led many observers to declare that Keynes was back. Even in neoliberal Chile, governments realised that they had to spend in bad times, and hoped to recuperate their investment (and cut back on spending) when the situation returned to positive growth.

But now that the bank executives are again making bonuses, it seems there is not need to wait that long. So while unemployment remains high and growth remains weak in the United States, the Republicans have called in their chips, forcing a huge cut in spending before the economic is ready to sustain it. It's only Half Keynes.

The results will be evident. And just in time for 2012.
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Washington Diaries

I have been in Washington for several days, meeting with academics, politicians, students and policy wonks. It has been most stimulating. I have learned something from every conversation.

The visit has coincided with the debate over the US government shutdown, currently reaching fever pitch. It is fascinating to watch. Mark Twain said that there are lies, damned lies, and statistics. This week there has been lies, damned lies, and a budget negotiation.

In the end, it appears that the budget negotiation is not about the budget at all, but rather it is a struggle over the future of the Republican Party. The mainline Republicans, including the Speaker, are trying to control the Tea Partyers, teach them a thing or two about politics. the Tea Partyers just want to make themselves felt, show their power, and make an ideological point.

Obama can only gain from this. In the short run, I think people will know to blame the Republicans. In the long run (ie. the presidential race), this kind of Republian in-fighting can only make it more difficult to select an acceptable nominee. The primaries will be brutal.

What is also striking is that all this is going on just a few days after the Jaqueline Van Rysselberghe fiasco in Chile, which served to show just how divided the right is in Chile -- not unlike the American Republicans. Like President Obama, the Concertación has a chance to capitalize on this division. Like President Obama, however, the Concertación is distracted. Not in Iraq or Libya, but with eternal questions over its own future. What does it stand for? What does it offer? What keeps it together?

Many former Concertación types are currently living in Washington. They should be watching US politics with an eye to their coalition's own future.
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I will survive

This is not really about Chile, or even Latin America for that matter.

But it seems appropriate to refer to what is probably the United States' biggest foreign policy challenge of the moment -- and that's really saying something.

The article is about Gaddafi, but what has been even more fun than watching Gaddafi give strange speeches from strange places wearing strange outfits, is watching the Obama administration struggle to keep up with events in the Middle East. A friend of mine who works in the US State Department quipped the other day that if someone would have told him three months ago that Mubarak would be out of power and the US would be at war in Libya, he would have thought they were smoking something. Apparently, a week is a long time in politics, and a really long time in foreign policy. Just ask Musa Kusa.
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Mr Obama comes to town, part II

Somewhat belatedly, here's a column I wrote last week on the speech that Barack Obama gave in Santiago. Billed as a new Alliance for Progress, the policy Obama outlined was little more than a rehashing of existing policy towards the region.

The most substantial change, in my view, was an insistence on partnership, rather than US leadership. The American president quite rightly recognizes that it is difficult to claim political, economic, and moral leadership when his country is in such political, economic and moral trouble. When many Latin American countries are in better fiscal shape than the US, when the US dollar is losing value against commodity-inflated economies, when the level of political discourse in the United States seems to fall to Latin American levels of animosity and populism, the US begins to look like just another country in the hemisphere.

Still, there is a place for US leadership and the region continues to look to the United States. Obama would be foolish to overplay his hand in this regard. As Libya shows, President Obama tends to shirk his global responsibilities until it becomes absolutely necessary, for fear of being labelled an imperialist. He should worry less about what his Harvard classmates and Michael Moore might say, and worry more about promoting democracy and helping those who fight for it.
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Mr. Obama comes to town

I don't even want to think about what traffic will be like tomorrow. The visit of anAmerican president always implies a major security operation, which means that downtown Santiago will be a mess.

The visit of an American president also lways implies some national soul searching. Is his visit a slap on the back for the current Chilean administration, or a comment on Chile's place in the world? What kind of activities will there be for the president, and for his family? Are they appropriate? Are the guests invited to the official dinner the right ones? What is the exact nature of the nuclear agreement signed? Will Obama comment on sticky subjects like the Mapuches? Will he be fed over-antibioticized salmon?

It seems that one place to start contemplating the 22-hour blitz-visit is reading the interview Obama granted El Mercurio.
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It ain't the economy, stupid

An Adimark poll released last week showed that the Piñera government's support has not fallen, but seems to have stabilized in the low forties. This suggests two things -- first, that the high point a few months back was really a bit of a honeymoon based on the dramatic rescue of the 33 miners, and second, that for all its antics, its spending, its support in the media, the government has been unable to win new support. The right maintains 40-45% of the vote, which is pretty much the percentage Pinochet achieved in 1988. In this respect, the numbers are not so interesting.

Except that they come at a time of falling unemployment and high growth rates. Go to any restaurant, any mall, and people are busy buying flat screen TVs, iPads and new cars. It is estimated that 200,000 new cars were introduced to Santiago roads last year. And most of them are driving to work at the same time as me.

So what's going on? One possibility is that people are adjusting their expectations. That's what this latest poll shows. They were hoping for change, and got more of the same. Americans might be able to relate. Unlike the US, however, about 70% of those polled say that the previous administration -- Michelle Bachelet's -- was better. This will drive President Piñera bonkers.

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The Unbearable Lightness of Van Rysselberghe

Summer is always one, long, slow news day. Which is why minor stories often get blown way out of proportion. The US shark attacks of the summer of 2001 are a good example. But this summer, video tape of the former mayor of Concepción, and current intendant of the same region, Jaqueline Van Rysselberghe, appeared in which she admits to having invented stories in order to obtain funds from the government. The government’s mishandling of the case has meant that it has been THE story of the summer.

The Concertación has threatened to present a constitutional challenge to Van Rysselberghe’s position. Up to today, this has seemed a weak strategy, almost a tit-for-tat for occasions when the right did the same to its ministers, most notably, Yasna Provoste. But today the government announced it was standing by Van Rysselberghe, arguing that the lies are only a minor misdemeanor. It is to be assumed that the opposition will now go ahead with the constitutional challenge.

Observers tend to explain the government’s long delay, and now the defense, in terms of Van Rysselberghe’s very strong regional support and the support her party, the UDI, has demanded of the government.

My take is slightly different. Sebastian Piñera’s strategy all along has been to weaken, and eventually destroy the hard right, which is mostly found within the UDI. If he manages to do so, he creates a new centre-right, almost the equivalent of a right-wing version of the Concertación, which would then occupy the middle ground in Chile as the Concertación meanders leftwards, and can therefore stay in power for many years. By defending Van Rysselberghe, he is showing the world, one again, who is in the UDI and charging a very high price from the UDI, the details of which should become apparent in the future.

Most people think the UDI owns the government. As of today, it’s the other way around.