Economic Significance vs Political Significance

The headlines scream one set of stories but business activity and the financial markets often focus on another.

Nouriel Roubini is the economist who predicted the financial crisis and the Great Recession. The subsequent history of such economic prognosticators is that they are rarely as spectacularly correct as they were for that one big moment. However, they are always worth watching, at least for several years after their most important prediction, because others are watching and making decisions based on these impressions. In this article from his blog he offers his opinions on the impact of events in the Middle East. His take is that the most important story, what is happening in Bahrain and the other Gulf States, is not being adequately covered:

"Summary: Recent events in the Middle East reveal the emptiness of US foreign policy, our inability to assess situations before we jump in, and an important trend emerging into view.


The scorecard so far in the latest round of the never-ending Middle East game:

•Tunisia — Big changes, but minor effects on the region.
•Egypt — The western news media have exaggerated the significance of events. So far there has been no regime change. Meet the new boss, same as the old boss (with a slight change in the pecking order, the priority with which various elite groups feed at the trough).
•Libya — The nature of events unclear at this time. It’s probably a little crisis, magnified by the news media and our war-hungry geopolitical experts (see below).
•The Gulf States — The main event, changes in the big ring. There are powerful new trends emerging, revealing the true nature of US foreign policy — hence they’re almost ignored by the news media and our geopolitical experts (for whom truth is like kryptonite to Superman, or holy water to vampires). See below for details.
Libya, the small story

Past posts (listed below) have chronicled the child-like war advocacy of our geopolitical experts. Especially is their disinterest in the nature of the regime the rebels will establish if they win. They believe we should support a TBD regime (nature To Be Determined later), ignoring the possibility it might be worse than Qaddafi and company (despite his new-found reputation in the US news as a monster, the past century has seen many leaders compared to whom he’s Mother Teresa).

Worse, they don’t bother to assess the rebels odds of winning: the depth and breadth of their support — or their skills, cohesion, and organization. The same day that the UN approves a no-fly zone Stratfor finally stumbles on the obvious (they’re first over the hurdle, low though it be):

Throughout the conflict, rebel forces never took much territory by conquest, only coming to power as Gadhafi’s eastern forces disintegrated, took a neutral stance or defected. It was never entirely clear how many of those forces were really with the rebels — much less willing to fight and die with them. The emergent question in recent days is whether meaningful military resistance ever actually took shape in the east. … There has been little in recent days to suggest that the opposition was ever able to coalesce into much of a meaningful fighting force. There have now been unconfirmed rumblings that the military in the east has abandoned the opposition, though the extent of this remains unclear. In other places, local garrisons may have simply ended their neutrality or returned to Gadhafi’s side as his forces began to arrive in numbers.

Who might be the big winner in Libya? China, if Qaddafi gives Libya’s oil concessions to them (see this Bloomberg story). Libya would join the growing list of nations who want allies with cash, who want to do business — without telling them how to live (see How China builds its commercial empire).

The Gulf States, the big story

As described here on March 11, the big story is the move to the right of the Gulf princes. They have to chart their own course, away from America. The US pressure against their fellow autocrat in Egypt (abandoning an ally). The US failure in Iraq, converting a secular enemy to Iran into a fellow-Shiite theocracy (signs of incompetence in their major supporter). They’re moving away from the West, towards self-reliance. Away from liberalism, away from Democracy, towards repression and force.

Today we see these trends at work. The oppressed Shiite majority of Bahrain go to the streets, protesting. The Gulf tyrants send their troops across the border, firing at the crowds as needed. And Obama says nothing. Our war mongers, who scream for war to help the Libyans, say nothing.

The silence is deafening. We bow before the Gulf Council, genuflecting before their oil. Revealing our lofty rhetoric, poured out on Egypt and Libya, as empty words. What’s sad about this is that we’re consistently backing the losers, gaining a reputation only for fecklessness and hypocrisy. Not exactly realpolitik. Bismark would laugh at us.