Neg for Venezuela Practice Debate

Advantage Two Answers

Frontline

( ) Econ resilient

E.I.U. ‘11

(Economist Intelligence Unit – Global Forecasting Service, 11/16/’11

(http://gfs.eiu.com/Article.aspx?articleType=gef&articleId=668596451&secID=7)
The US economy, by any standard, remains weak, and consumer and business sentiment are close to 2009 lows. That said, the economy has been surprisingly resilient in the face of so many shocks. US real GDP expanded by a relatively robust 2.5% in the third quarter of 2011, twice the rate of the previous quarter. Consumer spending rose by 2.4%, which is impressive given that real incomes dropped during the quarter (the savings rate fell, which helps to explain the anomaly.) Historically, US consumers have been willing to spend even in difficult times. Before the 2008-09 slump, personal spending rose in every quarter between 1992 and 2007. That resilience is again in evidence: retail sales in September were at a seven-month high, and sales at chain stores have been strong. Business investment has been even more buoyant: it expanded in the third quarter by an impressive 16.3% at an annual rate, and spending by companies in September on conventional capital goods (that is, excluding defence and aircraft) grew by the most since March. This has been made possible, in part, by strong corporate profits. According to data compiled by Bloomberg, earnings for US companies in the S&P 500 rose by 24% year on year in the third quarter. All of this has occurred despite a debilitating fiscal debate in Washington, a sovereign debt downgrade by a major ratings agency and exceptional volatility in capital markets. This reinforces our view that the US economy, although weak, is not in danger of falling into a recession (absent a shock from the euro zone). US growth will, however, continue to be held back by a weak labour market—the unemployment rate has been at or above 9% for 28 of the last 30 months—and by a moribund housing market.

( ) No diversionary theory – it’ll be small scale if it happens

Harrison ‘11

(Mark, Department of Economics, University of Warwick, Centre for Russian and East European Studies, University of Birmingham, Hoover Institution on War, Revolution, and Peace, Stanford University, “Capitalism at War” Oct 19 http://www2.warwick.ac.uk/fac/soc/economics/staff/academic/harrison/papers/capitalism.pdf)

Diversionary wars In the concept of diversionary wars, political leaders seek and exploit conflict with external adversaries in order to rally domestic support. The idea is well established in the literature, perhaps because the theoretical case is quite intuitive, and narrative support is not hard to find. In fact, it may be too easy; as Jack Levy (1989) pointed out, few wars have not been attributed to political leaders’ desire to improve domestic standing. The idea of diversionary wars is directly relevant to a discussion of capitalism only if it can be shown that capitalist polities are more likely to exploit foreign adventures. One reason might be advanced from a Marxist perspective: perhaps capitalist societies, being class-divided, are more likely to give rise to wars intended to divert the workers from the cause of socialism. A longstanding interpretation of the origins of World War I in domestic German politics conveys exactly this message (Berghahn 1973). This view does not sit well with the equally traditional idea that a class-divided society is less able to go to war. The official Soviet histories of World War II used to claim that, under capitalism, divided class interests made the working people reluctant to fight for the nation. Because of this, the workers could be motivated to take part only by “demagogy, deception, bribery, and force” (Grechko et al., eds 1982, vol. 12, p. 38; Pospelov et al., eds 1965, vol. 6, pp. 80-82). Quantitative empirical work has lent little support to the idea (Levy 1989). Exceptions include studies of the use of force by U.S. and British postwar governments by Morgan and Bickers (1992) and Morgan and Anderson (1999). They conclude that the use of force is more likely when government approval is high but the government’s supporting coalition is suffering erosion. They also suggest that force is unlikely to be used at high intensities under such circumstances (because likely costs are high, eroding political support) or when domestic conflict is high (because conflict would then be polarizing rather than consolidate support). Another line of research suggests that new or incompletely established democracies are particularly vulnerable to risky adventures in nation-building (Mansfield and Snyder 2005). One inspiration for this view was the record of the new democracies born out of the former Soviet Union and Yugoslavia. More recently, Georgia seems to have provided out-of-sample confirmation. Suppose diversionary wars exist. Is capitalism somehow more internally conflicted than other societies, and so disproportionately likely to externalize conflict? As a comparator, the case of fascism seems straightforward. Fascism did not produce diversionary wars because, for fascists, war was not a diversion; it was the Schwerpunkt. The more interesting case is that of communism. Communists do not seem to have pursued diversionary wars. But the domestic legitimacy of Soviet rule visibly relied on the image of an external enemy, and thrived on tension short of military conflict. Soviet leaders used external tension to justify internal controls on movement, culture, and expression, and the associated apparatus of secrecy, censorship, and surveillance. When they tolerated trends towards détente in the 1970s, they subverted their own controls. An East German Stasi officer told his boss, repeating it later to Garton Ash (1997, p. 159): “How can you expect me to prevent [defections and revelations], when we’ve signed all these international agreements for improved relations with the West, working conditions for journalists, freedom of movement, respect for human rights?” If Soviet foreign policy was sometimes expansionist, it sought expansion only up to the point where the desired level of tension was assured. Bolsheviks of the 1917 generation knew well that too much too much conflict abroad encouraged defeatist and counter-revolutionary sentiments at home. Oleg Khlevniuk (1995, p. 174) noted: “The complex relationship between war and revolution, which had almost seen the tsarist regime toppled in 1905 and which finally brought its demise in 1917, was a relationship of which Stalin was acutely aware. The lessons of history had to be learnt lest history repeat itself.” Stalin did all he could to avoid war with Germany in 1941 (Gorodetsky 1999). Postwar Soviet leaders risked war by proxy, but avoided direct conflict with the “main adversary.” Faced with unfavourable odds, they tended to withdraw (from Cuba) or do nothing (in Poland) or accepted them with great reluctance (in Hungary, Czechoslovakia, and Afghanistan). Diversionary tension must fall short of diversionary war. From this follows an acceptance that capitalism, because of its tendency to give rise to democratic structures and political competition, has been more open to diversionary wars than other systems. But the empirical research and analysis that underpin this conclusion also imply that such wars would generally be small scale and short lived, and the circumstances that give rise to them would be exceptional or transient. We should place this in the wider context of the “democratic peace.” As Levy (1988) wrote: “Liberal or democratic states do not fight each other … This absence of war between democracies comes as close as anything we have to an empirical law in international relations.” Since all liberal democracies have also been capitalist on any definition, it is a finding of deep relevance.

( ) Decline doesn’t cause war

Barnett ‘ 9

(Thomas P.M Barnett, senior managing director of Enterra Solutions LLC, contributing editor/online columnist for Esquire, 8/25/’9 – “The New Rules: Security Remains Stable Amid Financial Crisis,” Aprodex, Asset Protection Index, http://www.aprodex.com/the-new-rules--security-remains-stable-amid-financial-crisis-398-bl.aspx)

When the global financial crisis struck roughly a year ago, the blogosphere was ablaze with all sorts of scary predictions of, and commentary regarding, ensuing conflict and wars -- a rerun of the Great Depression leading to world war, as it were. Now, as global economic news brightens and recovery -- surprisingly led by China and emerging markets -- is the talk of the day, it's interesting to look back over the past year and realize how globalization's first truly worldwide recession has had virtually no impact whatsoever on the international security landscape.¶ None of the more than three-dozen ongoing conflicts listed by GlobalSecurity.org can be clearly attributed to the global recession. Indeed, the last new entry (civil conflict between Hamas and Fatah in the Palestine) predates the economic crisis by a year, and three quarters of the chronic struggles began in the last century. Ditto for the 15 low-intensity conflicts listed by Wikipedia (where the latest entry is the Mexican "drug war" begun in 2006). Certainly, the Russia-Georgia conflict last August was specifically timed, but by most accounts the opening ceremony of the Beijing Olympics was the most important external trigger (followed by the U.S. presidential campaign) for that sudden spike in an almost two-decade long struggle between Georgia and its two breakaway regions.¶ Looking over the various databases, then, we see a most familiar picture: the usual mix of civil conflicts, insurgencies, and liberation-themed terrorist movements. Besides the recent Russia-Georgia dust-up, the only two potential state-on-state wars (North v. South Korea, Israel v. Iran) are both tied to one side acquiring a nuclear weapon capacity -- a process wholly unrelated to global economic trends.¶ And with the United States effectively tied down by its two ongoing major interventions (Iraq and Afghanistan-bleeding-into-Pakistan), our involvement elsewhere around the planet has been quite modest, both leading up to and following the onset of the economic crisis: e.g., the usual counter-drug efforts in Latin America, the usual military exercises with allies across Asia, mixing it up with pirates off Somalia's coast). Everywhere else we find serious instability we pretty much let it burn, occasionally pressing the Chinese -- unsuccessfully -- to do something. Our new Africa Command, for example, hasn't led us to anything beyond advising and training local forces.

Extensions – Econ resilient

( ) US econ resilient

Johnson ‘13

(Robert , CFA, director of economic analysis with Morningstar, Morningstar.com, “U.S. Economy Not So Fragile After All” – 1/19 – http://news.morningstar.com/articlenet/article.aspx?id=581616)

No, the U.S. Economy Has Not Been Fragile After All¶ Although most economists got at least some things right about the U.S. economy over the past two years, the one nearly universal error was the expectation that the economy was fragile. The U.S. economy has proven to be anything but fragile.¶ I believe this to be the single biggest error that economists have made over the last two years. During that time, the U.S. has survived the fallout from a major debt crisis in Europe, a divisive election, temporarily going over the fiscal cliff, gasoline prices that have been on a yo-yo, a tsunami in Japan, and Hurricane Sandy, which shut down New York and even the stock exchanges for a couple of days. These are not signs of a fragile economy.

( ) Econ resilient – fundamentals growing

Stewart ‘13

(Hale Stewart spent 5 years as a bond broker in the late 1990s before returning to law school in the early 2000s. He is currently a tax lawyer in Houston, Texas. He has an LLM from the Thomas Jefferson School of Law in domestic and international taxation where he graduated Magna Cum Laude, seeking alpha, “Is The U.S. Economy Moving Into A Higher Growth Phase? Part 1 - The Positive” – Feb 5^th – http://seekingalpha.com/article/1158011-is-the-u-s-economy-moving-into-a-higher-growth-phase-part-1-the-positive?source=google_news)

All three of the above sectors -- housing, autos and manufacturing -- are bedrock components of the economy. If all three are doing fairly well, the worst that can happen is slow growth. There is simply too much of a multiplier effect of the combined total for a recession to occur with the above three expanding. However, this is before we get to the latest and upcoming fiscal follies from the people in Washington. We'll touch on that in Part 2.

( ) Recovery from 2008 proves economy resilient

Drezner ‘12

(Daniel, Professor International Politics Tufts University, October, “The Irony of Global Economic Governance: The System Worked” Council on Foreign Relations International Institutions and Global Governance)

In looking at outcomes, the obvious question is how well the global economy has recovered from the 2008 crisis. The current literature on economic downturns suggests two factors that impose significant barriers to a strong recovery from the Great Recession: it was triggered by a financial crisis and it was global in scope. Whether measuring output, per capita income, or employment, financial crashes trigger downturns that last longer and have far weaker recoveries than standard business cycle downturns.10 Furthermore, the global nature of the crisis makes it extremely difficult for countries to export their way out of the problem. Countries that have experienced severe banking crises since World War II have usually done so when the global economy was largely unaffected. That was not the case for the Great Recession. The global economy has rebounded much better than during the Great Depression. Economists Barry Eichengreen and Kevin O’Rourke have compiled data to compare global economic performance from the start of the crises (see Figures 1 and 2).11 Two facts stand out in their comparisons. First, the percentage drop in global industrial output and world trade levels at the start of the 2008 financial crisis was more precipitous than the falloffs following the October 1929 stock market crash. The drop in industrial output was greater in 2008 nine months into the crisis than it was eighty years earlier after the same amount of time. The drop in trade flows was more than twice as large. Second, the post-2008 rebound has been far more robust. Four years after the onset of the Great Recession, global industrial output is 10 percent higher than when the recession began. In contrast, four years after the 1929 stock market crash, industrial output was at only two-thirds of precrisis levels. A similar story can be told with aggregate economic growth. According to World Bank figures, global economic output rebounded in 2010 with 2.3 percent growth, followed up in 2011 with 4.2 percent growth. The global growth rate in 2011 was 44 percent higher than the average of the previous decade. Even more intriguing, the growth continued to be poverty reducing.12 The World Bank’s latest figures suggest that despite the 2008 financial crisis, extreme poverty continued to decline across all the major regions of the globe. And the developing world achieved its first Millennium Development Goal of halving the 1990 levels of extreme poverty.13 An important reason for the quick return to positive economic growth is that cross-border flows did not dry up after the 2008 crisis. Again, compared to the Great Depression, trade flows have rebounded extremely well.14 Four years after the 1929 stock market crash, trade flows were off by 25 percent compared to precrisis levels. Current trade flows, in contrast, are more than 5 percent higher than in 2008. Even compared to other postwar recessions, the current period has seen robust crossborder exchange. Indeed, as a report from CFR’s Maurice R. Greenberg Center for Geoeconomic Studies concluded in May 2012, “The growth in world trade since the start of the [current] recovery exceeds even the best of the prior postwar experiences.”15 Other cross-border flows have also rebounded from 2008–2009 lows. Global foreign direct investment (FDI) has returned to robust levels. FDI inflows rose by 17 percent in 2011 alone. This put annual FDI levels at $1.5 trillion, surpassing the three-year precrisis average, though still approximately 25 percent below the 2007 peak. More generally, global foreign investment assets reached $96 trillion, a 5 percent increase from precrisis highs. Remittances from migrant workers have become an increasingly important revenue stream to the developing world—and the 2008 financial crisis did not dampen that income stream. Cross-border remittances to developing countries quickly rebounded to precrisis levels and then rose to an estimated all-time high of $372 billion in 2011, with growth rates in 2011 that exceeded those in 2010. Total cross-border remittances were more than $501 billion last year, and are estimated to reach $615 billion by 2014.16 Another salient outcome is mass public attitudes about the global economy. A general assumption in public opinion research is that during a downturn, demand for greater economic closure should spike, as individuals scapegoat foreigners for domestic woes. The global nature of the 2008 crisis, combined with anxiety about the shifting distribution of power, should have triggered a fall in support for an open global economy. Somewhat surprisingly, however, the reverse is true. Pew’s Global Attitudes Project has surveyed a wide spectrum of countries since 2002, asking people about their opinions on both international trade and the free market more generally.17 The results show resilient support for expanding trade and business ties with other countries. Twenty-four countries were surveyed both in 2007 and at least one year after 2008, including a majority of the G20 economies. Overall, eighteen of those twenty-four countries showed equal or greater support for trade in 2009 than two years earlier. By 2011, twenty of twenty-four countries showed greater or equal support for trade compared to 2007. Indeed, between 2007 and 2012, the unweighted average support for more trade in these countries increased from 78.5 percent to 83.6 percent. Contrary to expectation, there has been no mass public rejection of the open global economy. Indeed, public support for the open trading system has strengthened, despite softening public support for free-market economics more generally.18 The final outcome addresses a dog that hasn’t barked: the effect of the Great Recession on crossborder conflict and violence. During the initial stages of the crisis, multiple analysts asserted that the financial crisis would lead states to increase their use of force as a tool for staying in power.19 Whether through greater internal repression, diversionary wars, arms races, or a ratcheting up of great power conflict, there were genuine concerns that the global economic downturn would lead to an increase in conflict. Violence in the Middle East, border disputes in the South China Sea, and even the disruptions of the Occupy movement fuel impressions of surge in global public disorder. The aggregate data suggests otherwise, however. A fundamental conclusion from a recent report by the Institute for Economics and Peace is that “the average level of peacefulness in 2012 is approximately the same as it was in 2007.”20 Interstate violence in particular has declined since the start of the financial crisis—as have military expenditures in most sampled countries. Other studies confirm that the Great Recession has not triggered any increase in violent conflict; the secular decline in violence that started with the end of the Cold War has not been reversed.21

Extensions – US not key to global econ

( ) US not key—global economies decoupling

Caryl ‘10

[Christian Caryl is a Editor at Foreign Policy and Newsweek and a Senior Fellow of the CSIS at the Massachusetts Institute of Technology, “Crisis? What Crisis?” 4/5/10 http://www.foreignpolicy.com/articles/2010/04/05/crisis_what_crisis?print=yes&hidecomments=yes&page=full]

We went through a terrifying moment back in the fall of 2008. The financial system in the United States was imploding. It was impossible to predict how the effects would ripple through the rest of the world, but one outcome seemed inevitable: Developing economies were going to take a terrible hit. There was just no way they could escape the maelstrom without seeing millions of their citizens impoverished. Many emerging-market countries did experience sharp drops in GDP. Their capital markets tanked. Dominique Strauss-Kahn, managing director of the International Monetary Fund (IMF), sounded downright apocalyptic: "All this will affect dramatically unemployment, and beyond unemployment for many countries it will be at the roots of social unrest, some threat to democracy, and maybe for some cases it can also end in war." The Economist recently noted, "The Institute of International Finance (IIF), a think-tank in Washington, DC, forecast that net private capital flows into poor countries in 2009 would be 72% lower than at their peak in 2007, an unprecedented shrinkage." Virtually everyone expected to see the countries that had benefited so dramatically from growth in the years leading up to the crisis to suffer disproportionately in its wake. An entirely rational assumption -- except it hasn't turned out that way at all. To be sure, there were far too many poor people in the world before the crisis, and that still remains the case. Some 3 billion people still live on less than $2.50 a day. But the global economic crisis hasn't added appreciably to their ranks. Just take China, India, and Indonesia, Asia's three biggest emerging markets. Although growth in all three slowed, it never went into reverse. China's robust growth through the crisis has been much publicized -- but Indonesia's, much less conspicuously. Those countries, as well as Brazil and Russia, have rebounded dramatically. The Institute of International Finance -- the same people who gave that dramatically skepticism-inducing estimate earlier -- now says that net private capital flows to developing countries could reach $672 billion this year (double the 2009 amount). That's less than the high point of 2007, to be sure. But it still seems remarkable in light of the dire predictions. In short, the countries that have worked the hardest to join the global marketplace are showing remarkable resilience. It wasn't always this way. Recall what happened back in 1997 and 1998, when the Thai government's devaluation of its currency triggered the Asian financial crisis. Rioting across Indonesia brought down the Suharto government. The administration of Filipino President Joseph Estrada collapsed. The turbulence echoed throughout the region and into the wider world, culminating in the Russian government default and August 1998 ruble devaluation. Brazil and Argentina trembled. The IMF was everywhere, dispensing advice and dictating conditions. It was the emerging markets that bore the brunt of that crisis. So what's different this time around? The answers differ from place to place, but there are some common denominators. Many of the BRICs (Brazil, Russia, India, China) learned vital lessons from the trauma of the late 1990s, hence the IMF's relatively low-key profile this time around. (The fund has been most active in Africa, where they still need the help -- unless you count Greece, of course.) Many emerging economies entered the 2008-2009 crisis with healthy balance sheets. In most cases governments reacted quickly and flexibly, rolling out stimulus programs or even expanding poverty-reduction programs. Increasingly, the same countries that have embraced globalization and markets are starting to build social safety nets. And there's another factor: Trade is becoming more evenly distributed throughout the world. China is now a bigger market for Asian exporters than the United States. Some economists are talking about "emerging market decoupling." Jonathan Anderson, an emerging-markets economist at the Swiss bank UBS, showed in one recent report how car sales in emerging markets have actually been rising during this latest bout of turmoil -- powerful evidence that emerging economies no longer have to sneeze when America catches a cold. Aphitchaya Nguanbanchong, a consultant for the British-based aid organization Oxfam, has studied the crisis's effects on Southeast Asian economies. "The research so far shows that the result of the crisis isn't as bad as we were expecting," she says. Indonesia is a case in point: "People in this region and at the policy level learned a lot from the past crisis." Healthy domestic demand cushioned the shock when the crisis hit export-oriented industries; the government weighed in immediately with hefty stimulus measures. Nguanbanchong says that she has been surprised by the extent to which families throughout the region have kept spending money on education even as incomes have declined for some. And that, she says, reinforces a major lesson that emerging-market governments can take away from the crisis: "Governments should focus more on social policy, on health, education, and services. They shouldn't be intervening so much directly in the economy itself." This ought to be a big story. But you won't have much luck finding it in the newspapers -- perhaps because it runs so contrary to our habitual thinking about the world economy. The U.N. Development Programme and the Asian Development Bank recently published a report that attempts to assess what effect the crisis will have on the world's progress toward the U.N. Millennium Development Goals, benchmarks that are supposed to be achieved by 2015. At first glance the report's predictions are daunting: It states that 21 million people in the developing world are "at risk" of slipping into extreme poverty and warns that the goals are unlikely to be met. Many experts wonder, of course, whether the V-shaped crisis we've witnessed so far is going to turn into a W, with another sharp downturn still to come. Some argue that the Great Recession's real damage has yet to be felt. Yet the report also contains some interesting indications that this might not be the case. "The global economic crisis has been widely predicted to affect international migration and remittances adversely," it notes. "But as the crisis unfolds, it is becoming clear that the patterns of migration and remittances may be more complex than was previously imagined." In other words, these interconnections are proving to be much more resilient than anyone might have predicted earlier. As the report notes, receipts of remittances have so far actually increased in Bangladesh, India, Nepal, Pakistan, Philippines, and Sri Lanka. Perhaps migrant workers -- those global experts in entrepreneurship and risk-taking -- know something that a lot of the rest of us don't. So why should we care? Anirudh Krishna, a Duke University political scientist who studies poverty reduction, says that there's a moral to the story: "Certainly cutting countries and people off from markets is no longer a sensible thing to do. Expanding those connections, bringing in a larger part of a talent pool into the high-growth sector -- that is what would make most countries grow faster and more individuals climb out of poverty." Echoing Nguanbanchong, he argues that governments are well-advised to concentrate on providing their citizens with education and health care -- the great enablers in the fight for social betterment. Microfinance and income subsidy programs can fill important gaps -- as long as they aim to empower future entrepreneurs, not create cultures of entitlement. This is not to say the outlook is bright on every front, of course. As the Economist noted, the number of people facing hunger recently topped 1 billion, the highest since 1970. The reason for that has more to do with the 2007-2008 spike in food prices than with the financial crisis. (Remember how the price of rice shot up?) We are still a long way from conquering poverty. There is still a huge -- and in some cases growing -- gap between the world's rich and poor. Yet how remarkable it would be if we could one day look back on the 2008-2009 crisis as the beginning of a more equitable global economy.

( ) The U.S is not key – Asia fill-in and decoupling

Xinbo ‘10

(Wu, a professor and deputy director of the Center for American Studies at Fudan University in Shanghai, and a member of TWQ’s editorial board“Understanding the Geopolitical Implications of the Global Financial Crisis” The Washington Quarterly – 33:4 pp. –155163http://www.twq.com/10october/docs/10oct_Xinbo.pdf)

While China suffered moderately from the crisis economically, it has gained remarkably in politico-economic terms. For one thing, the Chinese model of development_ featured by a strong role of the state in economic development, stress on the real rather than the virtual economy, a high savings rate, measured financial market liberalization, etc._has empowered China to better resist the financial storm and minimize the losses associated with it. As a developing country, China’s experience appears more applicable to the developing world. For instance, as Alex Perry of Time magazine observed, ‘‘African governments look at Western economic instability over the past two years and find a better model in Asia’s extraordinary growth.’’8 In the post—ColdWar era, the U.S. model used to be hailed as the only way to economic prosperity. Now, the Chinese model seems to provide an alternative. To be sure, the Chinese model is not perfect and is actually confronted with many challenges such as a widening income gap, serious environment pollution, and rampant corruption. Yet, the record of tiding over two financial crises (the 1998—1999 Asian financial crisis and the 2008—2009 global financial crisis) and securing three decades of a high economic growth rate testifies to its strength. Unlike Washington, Beijing does not like to boast of its model and impose it on others, but the increased appeal of the Chinese experience will certainly enhance Beijing’s international status and augment its influence among developing countries. Even before the recent crisis, there was already discussion of decoupling Asian economies from the United States, given growing intra-Asian economic activities.9 The reality that China has already become the largest trading partner to some major regional economies, such as Japan, South Korea, and Taiwan, provided an additional incentive to further East Asian regional economic cooperation. Even in Japan, where the Democratic Party of Japan (DPJ) rose to power during the crisis in August 2009, Prime Minister Yukio Hatoyama noted that: [T]he recent financial crisis has suggested to many people that the era of American unilateralism may come to an end. It has also made people harbor doubts about the permanence of the dollar as the key global currency. I also feel that as a result of the failure of the Iraq war and the financial crisis, the era of US-led globalism is coming to an end and that we are moving away from a unipolar world toward an era of multipolarity.10 Hatoyama continued that, ‘‘Current developments show clearly that China, which has by far the world’s largest population, will become one of the world’s leading economic nations, while also continuing to expand its military power.’’11 He pledged to strengthen relations with Asian countries, particularly China, and work to build an East Asian Community. Behind this lies a recognition of China’s growing importance to Japan’s economic future. South Korea also expressed enthusiasm for forging a free trade agreement with China as early as possible. Taiwan signed the Economic Cooperation Framework Agreement (ECFA) with mainland China in June 2009, marking a major step forward in relations across the Taiwan Strait. The agreement, focusing on tariff concession and easier market access, will remove tariffs within two years on 539 Taiwan export items to the mainland worth $13.84 billion, as well as 267 mainland export items to Taiwan valued at $2.86 billion. The pact will also give Taiwan firms access to 11 service sectors on the mainland including banking, accounting, insurance, and hospitals.12 The financial crisis also prompted Beijing to boost its domestic consumption. As the great potential of its internal market is further released, it will serve both to thicken China’s economic ties with regional partners and to strengthen its role as an East Asian economic hub. In a nutshell, the financial and economic turmoil underscored China’s position as the engine of the Asian regional economy and even the global economy as well. In international politics, political and economic relations always follow each other. AfterWorldWar II, many regional members developed close economic ties with the United States, following tight political and security arrangements with Washington. By the same token, today and in the future, China’s deepening economic connections with its regional partners promise to expand its political clout in East Asia. Given China’s growing economic size and its excellent performance during the crisis, it is no surprise that the financial turmoil served to raise China’s status in global economic governance. The G-20 emerged from the crisis as the premier forum for international economic cooperation, shadowing the traditional role of the G-8 in world economy. China, as the world’s third largest economy and the largest foreign reserve holder, ascended to center stage within the G-20. The idea of a G-2, consisting of Beijing and Washington governing the world economy or managing international geopolitics, was tossed around among U.S. scholars and former government officials (although not endorsed by either Beijing or Washington), reflecting a recognition of China’s newly-accrued economic and geopolitical weight. In April 2010, the World Bank decided to increase China’s voting rights, making it the third largest voter in the institution. The IMF is also expected to raise China’s representation in its current round of reconstruction endeavors. All in all, the financial crisis benefited China by quickening the pace of the global economic and financial power transition, turning China from a peripheral member into a key player. Last but not least, the crisis gave credit to China’s currency Renminbi (RMB) for its strength and stability. Even before the crisis, the RMB was already used in some of China’s neighboring countries for settling accounts in border trade. The financial storm revealed the volatility of the U.S. dollar and highlighted the strength of the Chinese yuan. Although the RMB is not yet freely convertible, some of China’s major trading partners saw the desirability of increasing its holding as the U.S. dollar has been getting weaker, arousing concerns that an unstable dollar would lead to increased costs and risks for traders. Since the onset of the crisis, China has signed bilateral currency swap agreements with Argentina, Belarus, Iceland, Indonesia, Malaysia, Hong Kong, Singapore, and South Korea, with a total amount of 803.5 billion yuan (about $118.1 billion). Some countries also moved to take the RMB as one of its reserve currencies. It was the crisis that caused Beijing to think seriously about the regionalization of the RMB. To enhance that goal, the Chinese government undertook to push the RMB settlement pilots in the trade between China’s two most important exporting regions, Guangdong and the Yangtze River Delta, with Hong Kong and Macao, and between two Chinese provinces bordering Southeast Asia, Gaungxi and Yunnan, with the members of the Association of Southeast Asian Nations (ASEAN). In early 2009, Beijing also approved Shanghai’s ambitious goal of turning itself into an international financial center by 2020, matching China’s economic influence and the yuan’s international position. It will be a long journey for theRMBto become a major international reserve currency, but it seems that the global financial crisis has turned out to be its starting point.

Extensions “Diversionary theory wrong”

( ) Diversionary war theory is false

Boehmer ‘7

(Charles, political science professor at the University of Texas, Politics & Policy, 35:4, “The Effects of Economic Crisis, Domestic Discord, and State Efficacy on the Decision to Initiate Interstate Conflict”)

This article examines the contemporaneous effect of low economic growth and domestic instability on the threat of regime change and/ or involvement in external militarized conflicts. Many studies of diversionary conflict argue that lower rates of economic growth should heighten the risk of international conflict. Yet we know that militarized interstate conflicts, and especially wars, are generally rare events whereas lower rates of growth are not. Additionally, a growing body of literature shows that regime changes are also associated with lower rates of economic growth. The question then becomes which event, militarized interstate conflict or regime change, is the most likely to occur with domestic discord and lower rates of economic growth? Diversionary theory claims that leaders seek to divert attention away from domestic problems such as a bad economy or political scandals, or to garner increased support prior to elections. Leaders then supposedly externalize discontented domestic sentiments onto other nations, sometimes as scapegoats based on the similar in-group/out-group dynamic found in the research of Coser (1956) and Simmel (1955), where foreign countries are blamed for domestic problems. This process is said to involve a “rally-round-the-flag” effect, where a leader can expect a short-term boost in popularity with the threat or use of force (Blechman, Kaplan, and Hall 1978; Mueller 1973). Scholarship on diversionary conflict has focused most often on the American case1 but recent studies have sought to identify this possible behavior in other countries.2 The Falklands War is often a popular example of diversionary conflict (Levy and Vakili 1992). Argentina was reeling from hyperinflation and rampant unemployment associated with the Latin American debt crisis. It is plausible that a success in the Falklands War may have helped to rally support for the governing Galtieri regime, although Argentina lost the war and the ruling regime lost power. How many other attempts to use diversionary tactics, if they indeed occur, can be seen to generate a similar outcome? The goal of this article is to provide an assessment of the extent to which diversionary strategy is a threat to peace. Is this a colorful theory kept alive by academics that has little bearing upon real events, or is this a real problem that policy makers should be concerned with? If it is a strategy readily available to leaders, then it is important to know what domestic factors trigger this gambit. Moreover, to know that requires an understanding of the context in external conflict, which occurs relative to regime changes. Theories of diversionary conflict usually emphasize the potential benefits of diversionary tactics, although few pay equal attention to the prospective costs associated with such behavior. It is not contentious to claim that leaders typically seek to remain in office. However, whether they can successfully manipulate public opinion regularly during periods of domestic unpopularity through their states’ participation in foreign militarized conflicts—especially outside of the American case—is a question open for debate. Furthermore, there appears to be a logical disconnect between diversionary theories and extant studies of domestic conflict and regime change. Lower rates of economic growth are purported to increase the risk of both militarized interstate conflicts (and internal conflicts) as well as regime changes (Bloomberg and Hess 2002). This implies that if leaders do, in fact, undertake diversionary conflicts, many may still be thrown from the seat of power—especially if the outcome is defeat to a foreign enemy. Diversionary conflict would thus seem to be a risky gambit (Smith 1996). Scholars such as MacFie (1938) and Blainey (1988) have nevertheless questioned the validity of the diversionary thesis. As noted by Levy (1989), this perspective is rarely formulated as a cohesive and comprehensive theory, and there has been little or no knowledge cumulation. Later analyses do not necessarily build on past studies and the discrepancies between inquiries are often difficult to unravel. “Studies have used a variety of research designs, different dependent variables (uses of force, major uses of force, militarized disputes), different estimation techniques, and different data sets covering different time periods and different states” (Bennett and Nordstrom 2000, 39). To these problems, we should add a lack of theoretical precision and incomplete model specification. By a lack of theoretical precision, I am referring to the linkages between economic conditions and domestic strife that remain unclear in some studies (Miller 1995; Russett 1990). Consequently, extant studies are to a degree incommensurate; they offer a step in the right direction but do not provide robust cross-national explanations and tests of economic growth and interstate conflict. Yet a few studies have attempted to provide deductive explanations about when and how diversionary tactics might be employed. Using a Bayesian updating game, Richards and others (1993) theorize that while the use of force would appear to offer leaders a means to boost their popularity, a poorly performing economy acts as a signal to a leader’s constituents about his or her competence. Hence, attempts to use diversion are likely to fail either because incompetent leaders will likewise fail in foreign policy or people will recognize the gambit for what it is. Instead, these two models conclude that diversion is likely to be undertaken particularly by risk-acceptant leaders. This stress on a heightened risk of removal from office is also apparent in the work of Bueno de Mesquita and others (1999), and Downs and Rocke (1994), where leaders may “gamble for resurrection,” although the diversionary scenario in the former study is only a partial extension of their theory on selectorates, winning coalitions, and leader survival. Again, how often do leaders fail in the process or are removed from positions of power before they can even initiate diversionary tactics? A few studies focusing on leader tenure have examined the removal of leaders following war, although almost no study in the diversionary literature has looked at the effects of domestic problems on the relative risks of regime change, interstate conflict, or both events occurring in the same year.3

( ) Low growth makes politicians cautious—they don’t want to risk war because it makes them vulnerable

Boehmer ‘7

(Charles, political science professor at the University of Texas, Politics & Policy, 35:4, “The Effects of Economic Crisis, Domestic Discord, and State Efficacy on the Decision to Initiate Interstate Conflict”)

Economic Growth and Fatal MIDs The theory presented earlier predicts that lower rates of growth suppress participation in foreign conflicts, particularly concerning conflict initiation and escalation to combat. To sustain combat, states need to be militarily prepared and not open up a second front when they are already fighting, or may fear, domestic opposition. A good example would be when the various Afghani resistance fighters expelled the Soviet Union from their territory, but the Taliban crumbled when it had to face the combined forces of the United States and Northern Alliance insurrection. Yet the coefficient for GDP growth and MID initiations was negative but insignificant. However, considering that there are many reasons why states fight, the logic presented earlier should hold especially in regard to the risk of participating in more severe conflicts. Threats to use military force may be safe to make and may be made with both external and internal actors in mind, but in the end may remain mere cheap talk that does not risk escalation if there is a chance to back down. Chiozza and Goemans (2004b) found that secure leaders were more likely to become involved in war than insecure leaders, supporting the theory and evidence presented here. We should find that leaders who face domestic opposition and a poorly performing economy shy away from situations that could escalate to combat if doing so would compromise their ability to retain power.

Extensions – Econ decline not cause war

( ) Economic decline doesn’t cause war

Jervis,’11

(Robert, Professor PolSci Columbia, December, “Force in Our Times” Survival, Vol 25 No 4, p 403-425)

Even if war is still seen as evil, the security community could be dissolved if severe conflicts of interest were to arise. Could the more peaceful world generate new interests that would bring the members of the community into sharp disputes? 45 A zero-sum sense of status would be one example, perhaps linked to a steep rise in nationalism. More likely would be a worsening of the current economic difficulties, which could itself produce greater nationalism, undermine democracy and bring back old-fashioned beggar-my-neighbor economic policies. While these dangers are real, it is hard to believe that the conflicts could be great enough to lead the members of the community to contemplate fighting each other. It is not so much that economic interdependence has proceeded to the point where it could not be reversed – states that were more internally interdependent than anything seen internationally have fought bloody civil wars. Rather it is that even if the more extreme versions of free trade and economic liberalism become discredited, it is hard to see how without building on a preexisting high level of political conflict leaders and mass opinion would come to believe that their countries could prosper by impoverishing or even attacking others. Is it possible that problems will not only become severe, but that people will entertain the thought that they have to be solved by war? While a pessimist could note that this argument does not appear as outlandish as it did before the financial crisis, an optimist could reply (correctly, in my view) that the very fact that we have seen such a sharp economic down-turn without anyone suggesting that force of arms is the solution shows that even if bad times bring about greater economic conflict, it will not make war thinkable.

( ) Multipolarity makes your arguments untrue—economic decline doesn’t cause war

Thirlwell ‘10

—MPhil in economics from Oxford U, postgraduate qualifications in applied finance from Macquarie U, program director in International Economy for the Lowy Institute for International Policy (Mark, September 2010, “The Return of Geo-economics: Globalisation and National Security”, Lowy Institute for International Policy, google scholar,)

Summing up the evidence, then, I would judge that while empirical support for the Pax Mercatoria is not conclusive, nevertheless it’s still strongly supportive of the general idea that international integration is good for peace, all else equal. Since there is also even stronger evidence that peace is good for trade, this raises the possibility of a nice virtuous circle: globalisation (trade) promotes peace, which in turn promotes more globalisation. In this kind of world, we should not worry too much about the big power shifts described in the previous section, since they are taking place against a backdrop of greater economic integration which should help smooth the whole process. ¶ Instead of ending this section on that optimistic note, however, it’s worth thinking about some reasons why the Pax Mercatoria might nevertheless turn out to be a poor, or at least overly optimistic, guide to our future.¶ The first is captured by that all important get-out-of-gaol-free card, ‘all else equal’. It’s quite possible that the peace-promoting effects of international commerce will end up being swamped by other factors, just as they were in 1914.¶ Second, perhaps the theory itself is wrong. Certainly, a realist like John Mearsheimer would seem to have little time for the optimistic consequences of the rise of new powers implied by the theory. Here’s Mearsheimer on how the US should view China’s economic progress, for example:¶ ‘ . . . the United States has a profound interest in seeing Chinese economic growth slow considerably in the years ahead . . . A wealthy China would not be a status quo power but an aggressive state determined to achieve regional hegemony.’ 62¶ Such pessimistic (or are they tragic?) views of the world would also seem to run the risk of being self-fulfilling prophecies if they end up guiding actual policy. ¶ Finally, there is the risk that the shift to a multipolar world might indirectly undermine some of the supports needed to deliver globalisation. Here I am thinking about some simple variant on the idea of hegemonic stability theory (HST) – the proposition that the global economy needs a leader (or ‘hegemon’) that is both able and willing to provide the sorts of international public goods that are required for its smooth functioning: open markets (liberal or ‘free’ trade), a smoothly functioning monetary regime, liberal capital flows, and a lender of last resort function. 63 Charles Kindleberger argued that ‘the 1929 depression was so wide, so deep, and so long because the international economic system was rendered unstable by British inability and US unwillingness to assume responsibility for stabilizing it’, drawing on the failures of the Great Depression to make the original case for HST:¶ ‘ . . . the international economic and monetary system needs leadership, a country that is prepared . . . to set standards of conduct for other countries and to seek to get others to follow them, to take on an undue share of the burdens of the system, and in particular to take on its support in adversity...’ 64¶ Kindleberger’s assessment appears to capture a rough empirical regularity: As Findlay and O’Rourke remind us, ‘periods of sustained expansion in world trade have tended to coincided with the infrastructure of law and order necessary to keep trade routes open being provided by a dominant “hegemon” or imperial power’. 65 Thus periods of globalisation have typically been associated with periods of hegemonic or imperial power, such as the Pax Mongolica, the Pax Britannica and, most recently, the Pax Americana (Figure 9).¶ The risk, then, is that by reducing the economic clout of the United States, it is possible that the shift to a multipolar world economy might undermine either the willingness or the ability (or both) of Washington to continue to supply the international public goods needed to sustain a (relatively) smoothly functioning world economy. 66 That in turn could undermine the potential virtuous circle identified above.