Lowy Institute

We've all known that annoying dinner party guest who excels at cultural one-upmanship. If someone mentions a movie, they will say it's not a patch on the novel. If you mention that you just returned from Bangkok, they'll tell you it was better in 2006 when they spent a month there during the coup. Let's call it the 'Das Rumpolschk' school of conversation.

So it's become cool over the last few years to profess a preference for the original British House of Cards series to Kevin Spacey's popular remake, now in its third season. Having watched the first two seasons, I still think the American remake is superior, but Christopher Orr's article on why the British are better at satire makes a pretty solid argument against the new version and particularly Spacey's lead character, Frank Underwood:

Underwood has no meaningful ideology or purpose beyond the acquisition of power. Like his predecessor, he occasionally dabbles in homicide, but he poses no evident threat to the body politic itself. Two seasons in, he has not yet sought to start a war or turn back the clock on civil rights or otherwise realign the course of the nation. He’s a pro-Establishment centrist—essentially a southern-fried version of Steny Hoyer, the current Democratic whip. What’s so scary about a guy like that?

But whatever you think of House of Cards v2, it is producing some good satire of its own:

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During my Army career I was a military planner. I worked on lots of plans. Most were never executed, but others were. Some were standing plans that were annually revised, while others were worked up at the behest of someone higher up the operational chain. I got to know the ADF planning process pretty well and became someone that could be described as a 'military planner'.

Prime Minister Tony Abbott with Chief of Defence Force Air Chief Marshall Binskin inspecting damage in Queensland in the wake of Typhoon Marcia.

In the ADF, you could say the Chief of the Defence Force is formally the 'leading military planner', given he is the one who provides military advice to the Government and 'owns' Joint Operations Command. In practical terms though, the Chief of Joint Operations has carriage of developing operational plans, so he is really the ADF's leading military planner.

Service chiefs would have input into the plans as they are developed, but they aren't planners in their own right. They have a 'raise, train and sustain' responsibility, but not a operational military planning function.

So when The Australian penned this exclusive expose of Prime Minister Tony Abbott's plan to invade Iraq, I was intrigued.

According to the story, the PM raised an operational planning idea in his office and then sought the advice of Australia's 'leading military planners'. Not the normal way of doing things, for sure, but plausible. By the time I got to the second paragraph, however, my 'sloppy journalism' warning light began flashing. And when I noticed that the article failed to define who 'Australia's leading military planners' were, the light stopped flashing and just stayed on.

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Then the Chief of Defence Force weighed in to say the matter had never been raised with him formally or informally, and the vultures began to circle over the entrails of The Australian's sensational but poorly researched exclusive.

I assumed that a correction would ensue and that the journalist would have been advised by a military planner of the dictum that one should 'never reinforce failure'. So when The Australian clarified the situation this weekend I was somewhat surprised to find more imprecision and hype.

The previously reported 'unilateral invasion of Iraq' that was discussed with 'leading military planners' was now a dinner party discussion where the PM expressed frustration at the slow pace of deployment of ADF elements into Iraq (damn that Iraqi sovereignty issue) and perhaps asked aloud why we couldn't just take Mosul quickly. The main guest was the Chief of Staff of the US Air Force, who The Australian breathlessly claimed was 'the Pentagon's senior official overseeing the US-led war against Islamic State in Iraq'.

Even though the term 'overseeing' is left undefined, I'm pretty sure that the senior Pentagon official overseeing the war would be the Chairman of the Joint Chiefs of Staff. The Chief of Staff of the Air Force provides air force capabilities to the CENTCOM commander (based in Florida), who actually oversees the operational conduct of the war. The US Navy, Army and Marine commanders do the same for their service branches.

But never mind, one shouldn't let inconvenient facts get in the way of a good story. Rather, my attention was focused on the fact that the people objecting to the PM's proposal had in the space of a week gone from 'Australia's leading military planners' to 'others at the table'. Perhaps the confusion over who Australia's leading military planners are could be put to bed if the list of those attending the dinner was published by the newspaper.

After reading both stories all I know is that if, during my time in the Army, I briefed an operational plan to a real 'leading military planner' that was equally poorly staffed and thought through, I would have been told in no uncertain terms where I had failed to meet expectations.

To use a military planning term, it would appear that in writing about the military planning process the journalist in question has, either wittingly or unwittingly, been part of someone's anti-Abbott 'shaping and influencing' operation.

Photo courtesy of Australian Defence Image Library.

  • Curious about how much Chinese aid in spent in the Pacific? Check out  Mapping Chinese Aid in the Pacific, by Dr Philippa Brant. It's the first comprehensive survey of Chinese-funded aid projects in the Pacific Islands region, presented as an interactive map.
  • Aid data has the potential to radically alter the way development is delivered, but will donors recognise the benefits of investing in it?  'How to Fund a Data Revolution', by Claire Melamed (ODI) and Grant Cameron (World Bank).
  • Only when Ebola was framed as a security problem did it prompt global action.
  • Real World Development Indicators: suggests helpful indicators such as 'Probability that Prime Minister/President seeks medical treatment in their own country'. (Thanks Sam.)
  • The International Criminal Court is in crisis, and it always has been.
  • The value of remittances: Westpac will shut down accounts that use money transfer organisations to send money abroad.  Will this affect Australians' ability to provide direct cash injections to friends and family in developing countries? 
  • Why a 'social progress index' is a better benchmark than GDP. Interesting TED talk from social progress expert Michael Green:



Australia's embattled prime minister got less, and more, than he bargained for during his quick visit to New Zealand over the weekend. Australia may have lost the World Cup cricket fixture to a rising New Zealand team, but Tony Abbott got a rare vote of confidence in his leadership style from his Kiwi counterpart John Key. Yet on the most urgent subject for trans-Tasman consultation — the response to ISIS — Mr Abbott and his colleagues may well be thinking that New Zealand's political leaders are collectively divided and individually confused.

The division is over whether New Zealand should send what the Key Government advertises as a training deployment to Iraq. The announcement of this decision, reported in these pages by Anna Powles, had been preceded by months of a painfully slow warm up act by a Government clearly uncomfortable about being seen to make any sort of direct contribution to combat. In prematurely ruling out a special forces role early on, the Government robbed itself of a contribution that might have been its most valuable. Mr Key's explanation of that limit – that this is Iraq's war to fight, and not New Zealand's – is an unconvincing balancing act born largely of domestic political calculations.

Abbott also had an audience with the leader of New Zealand's main opposition Labour Party (spelled with a 'u'; ie. correctly). The newly installed Andrew Little will certainly have grabbed the attention of many of his supporters by indicating that he told the Australian leader that the RAAF's air strikes against ISIL were a good idea. Here at least there seems to be some common ground with the National Party leadership. But the Labour leadership is opposed to the training mission, arguing that it is too small to make a difference and that New Zealand had no business propping up Iraq's armed forces, which have a track record of corruption and ineffectiveness.

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Quite how Little reconciles these positions is an interesting question. Labour has shown little if any interest in investigating what New Zealand might do to support the anti-ISIS military coalition in combat missions. Little would be even more reluctant than Key to advocate a special forces role. This leaves Labour open to the charge, which Key is bound to hammer home, that it supports the aims of the coalition but is in no mood for New Zealand to make any sort of military contribution to it.

As I noted in a panel discussion held in New Zealand's parliament last week, there are also tensions in the Key Government's approach. Understandably, there appears to be a good deal of cynicism in New Zealand that a training mission can and will remain precisely that. Indeed the Government's language on what its forces will and will not do, and how they are comprised, leaves it with a fair amount of wiggle room.

But on one issue Prime Minister Key seems firm. New Zealand's forces will be in Iraq for only two years and then they will come out. As this exit date comes before the next general election in New Zealand, in theory at least National is not committing any future government to continue the mission it has started. But at that point the trans-Tasman partners may be in different positions. In one interview Mr Key said he expected 'Australia will stay longer, so they'll either backfill with more people of their own or maybe they'll find another training partner or whatever.'

This must make interesting reading for planners in Canberra who need to find extra Australian forces to ensure that the New Zealanders have a larger training mission in Iraq to contribute to. The joint statement from the Auckland visit politely refers to this situation by noting that Mr Abbott's 'discussion with Prime Minister Key had informed Australia's consideration of what further assistance it would provide Iraq.' Perhaps a tenth New Zealand wicket at Eden Park would have been a more satisfying present.

Photo by REUTERS/David White.


Mapping Chinese aid in the Pacific, an interactive map launched by the Lowy Institute today, is the first comprehensive survey of Chinese-funded aid projects in the Pacific Islands region.

Lowy Institute Research Associate Dr Philippa Brant drew on over 500 sources including budgets, tender documents, government statements as well as interviews and site visits to create this map. It is the first time this data has been systemically collected, verified, analysed and mapped for Chinese aid projects from 2006 onwards. Users can search via country, year and sector, as well as compare Chinese aid with other aid donors in the region.

Key findings include:

  • Since 2006, China has provided US$1.4 billion in foreign aid to Pacific Island countries.
  • China is on track to overtake Japan as the third largest donor in the region. But at a regional level, Australia is and will remain the most significant external actor.
  • In some countries however, Chinese aid amounts are rivaling that of traditional partners.

Jump in by pressing 'Explore Now' button, or visit the full-screen version on the Lowy Institute website. And note that the interactive can be  embedded on other websites too. Just click the 'Share' button to copy the code:



The gangland-style killing of Boris Nemtsov on Saturday marked the worrying return of political assassination to Russia's internal power games. While Russia has remained one of the most dangerous places to be a government opponent or outspoken journalist, murders of opposition members have actually tapered off in recent years.

Nemtsov was shot four times as he walked on a bridge across the Moskva river, only metres from the Kremlin walls, and just one day before he was due to lead a protest rally against Vladimir Putin. 

Muscovites march to commemorate Boris Nemtsov. (REUTERS/Maxim Shemetov.)

For Kremlin critics, the most likely culprits will be those close to Putin's inner circle, most of whom have backgrounds in the FSB. There is a fairly lengthy set of precedents for such an assumption. In 1998 Galina Staravoitova, the human rights campaigner and democratic politician, was gunned down outside her apartment in St Petersburg. The assassination's organisers were officially found in 2013, yet questions remain about the alleged role of organised crime gangs, rival politicians and the Russian security services in ordering the hit.

Sergey Yushenkov was shot dead outside his apartment in 2003. He had been investigating charges that the FSB was behind the pair of apartment bombings in Moscow during 1999 that were subsequently blamed on the Chechens.

Paul Klebnikov, the editor of Russia's Forbes magazine, was shot and killed in 2004 while working on a story about Kremlin corruption and embezzlement during the reconstruction of Chechnya.

In 2006, the anti-Putin journalist Anna Politkovskaya was shot dead at her home. And a month later, the Russian defector Alexander Litivinenko was sensationally poisoned with polonium in London. His death came after he had written a book alleging that the Kremlin was behind the bomb plots of 1999, which were subsequently used as justifications for war in Chechnya.

According to this prominent view, members of the siloviki – politicians and officials originally from the security services – have methodically been doing away with anyone who might challenge their privileged positions. This includes meddling in the affairs of other countries. A case in point was the poisoning of the anti-Russian Ukrainian presidential candidate Viktor Yushchenko with dioxin in 2004, which left him badly disfigured. And before his death Nemtsov was compiling a report which his supporters claim showed direct proof of Russian involvement in the conflict in Ukraine.

A second possibility accepts that the siloviki are responsible, but with the added caveat that they acted with Putin's blessing. In other words, Putin is directly complicit in Nemtsov's killing, and potentially in past murders too.

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Why would Putin want to kill Nemtsov? For one thing, it would be a pre-emptive strike on any domestic unrest, sending a message to his opponents after he had just reluctantly reined in pro-Russian rebels at the Minsk 2 peace talks. Hence Putin's calculations would be driven by the need to show strength, to terrorise dissenters, and avoid the perception of weakness among Russia's sizeable far right.

But one wonders whether this can be true. After all, it runs counter to Putin's domestic interests. What could be gained from eliminating a marginalised critic, without even a seat in parliament, and stirring up internal unrest? Perhaps he could blame it on Ukrainian spies as a pretext for invasion? Yet he has accomplished more or less what he wants in the Ukraine. In truth, the optics of Nemtsov's killing, his body lying in the street with St Basil's as backdrop, are bad for Putin. The episode will automatically draw support away from the Kremlin, and a crackdown in the aftermath will only make that worse.

There is a third possibility: that fellow liberals, perhaps with links to Ukrainian nationalists, killed Nemtsov. In the lead-up to the last presidential election, Putin himself had issued a warning that anti-Kremlin figures could be murdered by their own kind. That would foment a crisis which could then be blamed on the government. If a Ukrainian fifth column was involved, the rationale would be that killing Nemtsov would spark a wider war with Ukraine, and thereby hasten Kiev's entry into NATO.

That sounds pretty fantastical, but we should not be too quick to rush to judgment. After all, there is now significant evidence that Ukrainian nationalists played a role in the violence unleashed at Kiev's Euromaidan, and that it was not just the security services to blame for violence. Hence it is possible (albeit unlikely) that Nemtsov was deliberately made a martyr.

On the face of it, though, it seems most likely that someone with government connections was ultimately responsible. The hit was well planned, the scene was a highly symbolic backdrop, and the target was an individual who had long been a thorn in the side of government officials. If so, it is unlikely Nemtsov's murder will be solved any time soon, since the culprit(s) would have been careful to distance themselves from the actual triggermen.

By the same token it is far too simplistic to blame 'the FSB'. Kremlin politics are extremely complex and virtually impossible to reliably track. There are four to seven competing factions, some of which overlap. All of them involve members who swap sides. Some are frequently tagged 'hardliners', like the groups controlled by Igor Sechin and Nikolai Patrushev. Others, like Sergei and Viktor Ivanov, are sometimes branded more moderate. But they are far from a united cabal, and Putin regularly moves individuals up and down to keep them on their toes. Any one of these groups, or their supporters, could have been involved, which makes getting to the bottom of the case even harder. Or it could have been none of them: some other highly plausible potential culprits include organised criminals and Russian ultranationalists. Each had a reason to kill Nemtsov, whether driven by the profit motive or by a hatred of liberal ideology.

Nemtsov knew he might be killed. He had spoken of the possibility as recently as a fortnight ago. Yet his death is more than just a sign that liberals are once again potential execution targets. It will be a vital test of opposition to Putin's rule inside Russia. Nemtsov's murder has already caused popular outrage, as evidenced by this morning's march in Moscow. If it sparks widespread civil disobedience, it will be a sign that Putin's seemingly immovable spot at the apex of Russian politics is vulnerable. But if the liberal intelligentsia accept it meekly and with only token protests, it will demonstrate the direct opposite: that there is still no realistic alternative to the government in the Kremlin.


Bringing together the best longer Interpreter articles you were too busy to read this week.

On Monday, Prime Minister Tony Abbott gave the National Security Statement, which addressed the threat of radical Islamic terrorism and how the Government has chosen to respond. Sam Roggeveen gave a first take on the implications:

'In Australia and elsewhere, the threat of terrorism has become a terrible fact of life that government must do all in its power to counter', said Abbott. Just like when an airline tells you that 'safety is our number one priority', this is one of those reassuring statements which doesn't actually withstand much scrutiny. If airlines made safety their top priority, their planes would never leave the ground. And if governments did all in their power to stop terrorism, we'd be living in a police state with a dying economy. As Abbott acknowledges later ('We will never sacrifice our freedoms in order to defend them'), the fight against terrorism is, like all public policy, a trade-off. We can't have perfect security, just as we can't have perfect freedom. We would have a much saner public discourse on terrorism if our leaders acknowledged this simple fact from time to time.

Next, Rodger Shanahan wrote on the Government's plan to strip the citizenship of dual citizens found to be traveling to the Middle East to join jihadist groups:

The civil libertarian argument, however, fails to address what I would argue is a more serious issue: the potential eradication of targeting constraints for Australian intelligence agencies and military forces in dealing with Australian citizens engaged in terrorist activities overseas. The possession of Australian citizenship rightly imposes limitations on how much information Australia's spy agencies can collect, and perhaps more importantly who they can share it with. There have already been legislative amendments to strengthen the intelligence-collection powers of these agencies, but dealing with non-citizens gives them much greater flexibility in sharing information.

So, rather than dual citizens simply becoming someone else's problem or able to undertake violent actions elsewhere, such a move may actually free up Australian authorities to address the problem by sharing information on foreign fighters or terrorists who were formerly Australian citizens.

Preparations in Indonesia for the execution of Andrew Chan and Myuran Sukumaran continue. On the back of comments made by Prime Minister Tony Abbott regarding Australia's aid to Indonesia during the Indian Ocean tsunami in 2004, a campaign has started in Indonesia to collect coins to repay Australia. Catriona Croft-Cusworth on the politics around aid:

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But while Indonesia is wealthy, it is also deeply unequal. If Indonesians were to repay the $1 billion to Australia in coins, all 250 million of the population would have to donate about $4 each, or about 40 one-thousand Rupiah coins. For roughly 50% of the population, that would be the equivalent of missing out on a morning coffee. For the other 50%, it would mean giving up two days of living costs. This is not to say Indonesia could not afford to repay the money — it easily could (especially with the vice president involved). My point is that while the country overall is no charity case, for the recipients of aid Australia's assistance is no small change.

This week Julian Snelder wrote on the economic dangers associated with debt build-up in China:

For now, total debt continues to outpace nominal GDP growth by 6-7% annually, meaning that debt/GDP keeps piling up. There is an insouciant view, expressed once to me by a Japanese central banker when discussing quadrillions of yen of public borrowing, that debt is 'just a bunch of zeroes.' It doesn't matter, since it's 'owed to ourselves.' But Japan's experience actually informs otherwise. And Goldman's historical database suggests that a growth hiccup of at least 2-4 percentage points would normally ensue. The days of 7-point-something growth may be over soon.

Stephen Grenville responded to an argument that International Economy Program Director Leon Berkelmans made last week. Was quantiative easing the best tool to stimulate economic growth post-2008?:

Fiscal policy gives a more direct and powerful stimulus at the trough of the cycle without depreciating the exchange rate, while monetary policy is feeble in these circumstances. The extreme monetary settings (near-zero policy interest rates and huge excess central bank liquidity), while giving an abnormal boost to international competitiveness, distorted the longer-term price signals for both investors and savers.

QE was a desperate effort to compensate for recovery-sapping fiscal austerity, which was itself a product of political failings and serious macro policy misjudgments. QE might have been an admirable second-best policy, but it was still 'beggar-thy-neighbour'.

And Leon responded:

I agree that QE (where the Federal Reserve purchased long term government bonds along with securities backed by mortgages) was second-best policy, but for different reasons. I think negative interest rates would have been better. But I strongly disagree that QE was 'beggar-thy-neighbour'.

In fact I think QE was quite effective.

My thinking on the topic has been strongly influenced by a paper released by some of my old colleagues at the Federal Reserve. In the paper they evaluate the effects of quantitative easing and the forward guidance provided by the Fed (forward guidance is when the Fed signals it will keep interest rates at zero). The authors of the paper estimate that these policies subtract 1.25 percentage points from the unemployment rate and add 0.5 of a percentage point to inflation. That's quite impressive!

Murray McLean addressed Australia-Japan relations in light of the controversy over the future Australian submarine project:

Australia will also keenly pursue its national interests, and if that means a decision to purchase Japanese submarines then this should not, as some commentators argue, risk affecting our relations with China. Australia's national interests dictate that we place a high priority not only on our relations with Japan but also with the US, China, India, Indonesia, and other key Asian countries. Management of these relationships is not a zero-sum game. Each can be developed on its own merits and in ways that maximise Australia's national interests without making one contingent upon the other.

The G20 might be losing its way, says Tristram Sainsbury:

The first discussions by finance ministers under the Turkish presidency, held in early February in Istanbul, were underwhelming. Despite statements from Canadian Finance Minister Joe Olivier that global growth needs akickstart and from Christine Lagarde that this year has the potential to be a special one for collective action, the Istanbul meetings were most notable for a lack of consensus. Even after a marathon communique drafting session that lasted more than 24 hours, countries could not agree on how to spur growth and were reluctant to commit to the Turkish hosts' plans for binding investment targets.

Another big announcement on Monday was Foreign Minister Julie Bishop's plan to travel to Iran in April. This is a smart move, argues Dina Esfandiary:

First, no senior Australian official has set foot in Iran in over a decade. In fact, no senior Western official other than Catherine Ashton, the lead negotiator for the EU, has been to Iran in that time. Secondly, Iran is not a foreign policy priority for Canberra. The little communication that has existed between Canberra and Tehran focused on addressing concerns about 'boat people'. The only other way Iran figured on Canberra's radar is because of Tehran's importance to the US, Australia's most important ally.

There is a scattering of reports that ISIS is attempting to make in-roads in Afghanistan. Susanne Schmeidl thinks the country has bigger problems:

Afghanistan is in enough trouble already, and for what it's worth it has had an 'Islamic state' for much longer than Syria or Iraq. After all, the Taliban officially goes by name Islamic Emirate, and has thus long laid claim to the 'Islamic state' brand. The fact that ISIS called itself the 'Islamic State of Iraq and al-Sham' might actually be a nod of acknowledgment from one quasi-state to another that such an ambition is already established in Afghanistan.

Though much has been made of the similarities between ISIS and the Taliban, such as their focus on conquering territory, maintaining an army and governing structure (all trademarks of states), they are not the same. 

Mike Callaghan weighed into the Greek debt debate:

Greece needs a more flexible program than the one imposed by the EU/ECB/IMF that has resulted in a 30% decline in the size of the economy and mounting poverty. It also needs a program that recognises that Greece’s debt levels are not sustainable.

But for this to happen there needs to be a major change in approach by the EU. This may be the biggest stumbling block in resolving the Greek crisis.

Paul Barker on what lower energy prices will mean for the one-track PNG economy:

Low oil and gas prices provide a sobering but potentially valuable reminder of the need to avoid the pitfalls of the 1990s. The PNG Government needs to avoid squandering funds on low priority activities and one-off events, establish and operationalise the long-delayed sovereign wealth fund, revitalise the anti-corruption and accountability effort, and focus policies on establishing favourable conditions for economically and environmentally sustainable activities, particularly in agriculture. It also needs to focus spending on the needs of all Papua New Guineans and not just selected parts of the community, especially by encouraging young men and women to participate actively in the economy.

Photo courtesy of Flickr user Tony Abbott.


It seems my colleague Stephen Grenville is somewhat sceptical of quantitative easing (QE). He says 'QE might have been an admirable second-best policy, but it was still "beggar-thy-neighbour".'

I agree that QE (where the Federal Reserve purchased long term government bonds along with securities backed by mortgages) was second-best policy, but for different reasons. I think negative interest rates would have been better. But I strongly disagree that QE was 'beggar-thy-neighbour'.

In fact I think QE was quite effective.

My thinking on the topic has been strongly influenced by a paper released by some of my old colleagues at the Federal Reserve. In the paper they evaluate the effects of quantitative easing and the forward guidance provided by the Fed (forward guidance is when the Fed signals it will keep interest rates at zero). The authors of the paper estimate that these policies subtract 1.25 percentage points from the unemployment rate and add 0.5 of a percentage point to inflation. That's quite impressive!

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These estimates come from a large macro-econometric model of the economy called FRB/US. I worked closely with the model when I was at the Fed. The way the authors have estimated the effects of forward guidance is by changing the interest rate expectations of the private sector, keeping them lower than otherwise, which is expansionary. The effects of QE are modeled as pushing down the long term Treasury bond interest rate, which in the model positively affects stock market valuations and pushes down the corporate bond yield and the cost of borrowing for households. And yes, it also lowers the exchange rate, but it is only one channel of many that QE operates through.

It is important to emphasise that the strength of the relative channels of monetary policy are based on estimated relationships from past experience. These things are not just made up.

Now, the authors do not break out how much work is done by the exchange rate, but it beggars belief to think that the exchange rate response would account for much of that 1.25 percentage point decrease in unemployment in a relatively closed economy like the US (trade as a percentage of GDP is around 30%, which is low). Most of the work is being done by other channels, such as easier borrowing conditions for households and firms. QE and forward guidance is not beggar-thy-neighbour because most of the effect does not work through the exchange rate. QE likely has positive spillovers, as the IMF found. Quiet, sceptics!

Should we be cynical about the apparently large effects of QE?

I say 'no'. Sure, the effects are uncertain, and there should be largish confidence bands associated with these guesses. The model is not perfect after all, but I certainly think it is informative. These models are, in fact, invaluable for policy making. Without them, we would have no idea about the effects of many policy changes (economists call these policy changes 'multipliers').

Moreover, I'm confident that the guesses represent the best guesses of the authors. There would have been no political interference here to get answers that would make the Fed look good. Indeed, there are some messages in here that imply QE was not implemented optimally. For example, they state that the Federal Reserve's actions 'apparently provided only a small boost to the real economy during the recession and the initial recovery period'. Rather they find that the largest effect is happening this year, and next, well after the worst of the recession has passed.

When I worked at the Fed, there was never any trace of interference in the independent research of the staff – if there had been it would have been fiercely and stridently resisted. No, the large effects were not found in order to make QE look good. Rather, the large effects in these and other calculations likely convinced people in the Fed to apply QE with the force they did.

Photo courtesy of Flickr user International Monetary Fund.


The late-2014 'icebreaker' meeting between Philippine President Benigno Aquino and Chinese President Xi Jinping raised hopes for a de-escalation in bilateral tensions amid the ongoing territorial standoff in the South China Sea.

Benigno Aquino with Xi Jinping at APEC 2014 in Beijing. (REUTERS/Kim Kyung Hoon.)

Ecstatic about the possibility of a revival in Philippine-China relations, Aquino went so far as claiming a 'meeting of minds' with Xi during their short exchanges on the sidelines of the APEC summit in Beijing. It marked the first face-to-face talk between the two heads of state.

Since then, Filipino officials have expressed their optimism over a follow-up meeting between the two leaders in the near future, paving the way for a institutionalised high-level dialogue. A top-level Filipino diplomat recently confirmed to me that Xi and his foreign minister, Wang Yi, are expected to make an unprecedented visit to the Philippines for the 2015 APEC summit. There are, however, growing indications that the newly-generated sense of optimism has been premature, if not totally unfounded. 

To begin with, the Aquino-Xi meeting was not a pre-arranged formal dialogue; not even similar to those held between Xi and his Japanese and Vietnamese counterparts on the sidelines of APEC. While Vietnam and Japan have engaged in concerted efforts to establish crisis-management mechanisms with China, the Philippines is yet to negotiate a hotline with its northern neighbour.

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The ongoing legal standoff at The Hague, with the Arbitral Tribunal awaiting Manila's additional legal arguments against China, continues to embitter bilateral relations. Favouring bilateral dialogue and consultation, China has fervently opposed the Philippines' request for compulsory arbitration in the South China Sea, dismissing the Aquino Administration's legal maneuver as provocative and counterproductive.

Reflecting Manila's deep-seated mistrust towards Beijing, Filipino officials recently made a decision to effectively evict 18 Chinese experts employed by the National Grid Corporation of the Philippines (NGCP). The Chinese technicians, who have been involved in operating, maintaining and expanding the Philippines' electricity grid, have been working on behalf of the State Grid Corporation of China, which has a 40% stake in the NGCP. Filipino officials have (indirectly) cited national security considerations to explain Manila's refusal to renew the visas of the Chinese nationals. 

Earlier this year, Manila and Beijing once again exchanged bitter accusations when Chinese Coast Guard forces allegedly rammed three Filipino fishing boats navigating close to the Scarborough Shoal. Chinese Foreign Ministry spokesman Hong Lei tried to deflect criticism by accusing the Filipino fishermen of aggressive maneuvers while indirectly placing the blame on the Philippine Government by urging it to 'enhance supervision and allocation of its own fishermen to prevent such an incident from happening again.'

The Philippines has also been alarmed by the latest satellite imagery which indicates expanding Chinese construction activities on islands in the South China Sea. The Fiery Cross Reef, for instance, having been artificially expanded to over 11 times its original size, now hosts approximately 200 Chinese troops. Defence officials in the Philippines estimate China has completed almost 50% of its reclamation project on the contested feature, which could soon host its own airstrip as a prelude to a Chinese Air Defense Identification Zone in the South China Sea. China has also ramped up its exploration of hydrocarbon and fisheries resources in the area. While boasting the discovery of the Lingshui 17-2 gas field, located about 150km south of Hainan province, Chinese officials have also reportedly finished a comprehensive survey of fisheries resources in the contested areas.

Philippine Foreign Secretary Albert Del Rosario urged his ASEAN counterparts to show greater resolve and unity amid China's purported aim to 'establish full control' over the South China Sea. The topic was at the heart of his discussions with his Southeast Asian counterparts during the Foreign Ministers Meeting (FMM) in January. Malaysian Foreign Minister Anifah Aman tried to reassure his Filipino counterpart by stating that the other participants in the FMM 'shared the concern raised by some foreign ministers on land reclamation in the South China Sea.'

Singapore is slated to assume the role of the country coordinator for ASEAN-China relations in August 2015. There is some hope that there will be a more proactive push by ASEAN on negotiating a Code of Conduct (CoC) in the South China Sea. Singaporean Foreign Minister K Shanmugan has expressed Singapore's 'common goal to try and do as much as we can to try to get to a proper document on (the) CoC.' During the ASEAN Defence Senior Officials' Meeting Plus, held in Kuala Lumpur, the ASEAN leadership actually pushed for placing the CoC issue on the agenda of the following meeting to be held in November.

But it is far from clear whether ASEAN will find the resolve and unity to push China back to negotiating the CoC. What is increasingly clear is that Manila and Beijing have a long way to go before improving their troubled relations. 


The recently approved extension of the EU/ECB/IMF bailout program kicks the Greece debt problem four months down the road. Where to from there? Unless there is a major change in approach by both Greece and the EU, it will not be long before we are again fretting over Greece exiting the euro and the future of the euro itself.

Stephen Grenville says ‘Greek politicians have to learn to break election promises’, specifically promises that the austerity bail-out program would be rejected. Wolfgang Munchau says ‘Athens must stand firm against the Eurozone’s failed policies’, particularly the requirement to run a primary budget surplus of 3% while the country faces massive unemployment.

Both are right.

Rejecting the bail-out program would see a collapse in the Greek economy. So Greek politicians have, as Stephen recommended, broken their promises, achieving an extension to the program and agreeing to implement a series of reforms by June. While there remain doubts the Greek Government will deliver, the next hurdle is to negotiate a program to replace the one that expires in June. Here Munchau is right: Greece should stand firm in seeking changes.

Greece needs a more flexible program than the one imposed by the EU/ECB/IMF that has resulted in a 30% decline in the size of the economy and mounting poverty. It also needs a program that recognises that Greece’s debt levels are not sustainable.

But for this to happen there needs to be a major change in approach by the EU. This may be the biggest stumbling block in resolving the Greek crisis.

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Much of the focus has been on what Greece needs to do, with headlines such as ‘Greece now has a chance to change’. More attention should be placed on the need for the EU/ECB/IMF to change, and particularly to compromise on what they want from Greece. However, the politics in Europe are not compatible with the idea of compromise when it comes to Greece.

Greece has got a rough deal throughout the crisis. While it is responsible for the debt-loaded mess it is in, it was forced into a draconian and flawed bailout program in 2010. This was acknowledged in an IMF self-assessment. The Fund said the program was based on excessively optimistic assumptions, a gross underestimation of the impact of the austerity measures, and was inconsistent with the IMF’s rules that a country gaining exceptional access to resources should have a high probability that its public debt will become sustainable.

The IMF was pressured into approving the program by the EC because of the fear of contagion. If Greece’s debts were seen to be unsustainable, so might those of Portugal, Spain and Italy.

But there was also strong resentment towards Greece, particularly in Germany. The view was that Greece manipulated its statistics to get into the euro and the Greeks didn’t pay their taxes, retired too early and worked too little. There was no sympathy towards Greece.  Imposing tough conditions was necessary to obtain domestic support in Germany for a bail-out. That view remains today, evidenced by German business groups urging MPs to take a tough line on any extension.

Throughout the recent wrangling over the program, the EU was determined there be no weakening in the conditions and that Greece repay all its debts. As was the case with the initial bail-out program, this view was influenced by what was happening elsewhere in Europe rather than what is best for Greece.

The hard line taken by some EU ministers reflected the rise of anti-austerity parties in their own countries. The Spanish finance minister was particularly tough with Greece. This is not surprising because Spain’s anti-austerity party, Podemus, leads the opinion polls in the run-up to the election. If Syriza was seen to be successful, this would increase support for Podemus. Anti-euro parties are on the rise in France and Italy too.

Another factor behind the EU’s intransigence is the view that the risk of contagion is now much lower.  Europe now has  a firewall in the form of the European Stability Mechanism to support countries facing financial pressure. However, UK Chancellor George Osborne has warned that a Greek exit could be very damaging for Europe and the world. A messy Greek exit would indeed be a major shock to a fragile Europe.

The political fallout may be the most destabilising factor. Greece would default on its debts held by the ECB and EU (the IMF would likely be exempt). This would crystalise in the minds of European (particularly German) taxpayers how much has been lost in attempting to bail out Greece. This may well impact on the willingness to provide financial assistance to other countries and the commitment to the euro itself.

So the stakes are high for all parties to negotiate a successful bail-out program for Greece. The concern is that frustration and resentment towards Greece may continue to prevent Europe from making the necessary compromises.

Photo by Flickr user Glorgos.


The Asia Pacific is the most dynamic digital landscape in the world, home to the fastest adopters of new technology and the largest concentration of mobile and social media users. An escalation in online activism, changing cyber dynamics, developments in digital diplomacy and the exploitation of big data are shaping the region's engagement with the world.

  • China has dropped some of the world's largest tech companies, including Apple and Cisco, from its approved state purchases list in a move that has been linked to both Western cyber surveillance and domestic protectionism.
  • Fergus Hanson has proposed that the Government instigate a regional ICT response to discredit Islamic State messages in Southeast Asia and Australia. One of his recommendations — an interdisciplinary lab bringing together technologists, communications experts, tech firms and public servants — might be realised via the Government's newly announced body intended to monitor social media and disrupt terrorist propaganda.
  • Vietnam's regulatory approach to the internet is increasingly out of step with its booming technology sector.
  • The spokesperson for Taiwan's ruling Kuomintang party has used Foreign Policy magazine to urge his own party to turn its fortunes around by changing the way it uses the internet, shifting from thinking about it as simply a communications tool to using it to mobilise support and encourage public participation in policy development.
  • Can Tibetans trust Facebook? Prominent Tibetan author Tsering Woeser doesn't think so.
  • Based on 2013's Typhoon Yolanda in the Philippines, findings have been published showing how state-of-the-art social media processing methods can be used to assist humanitarian organisations during a crisis. More than 2 million tweets were analysed and geo-located as a part of the project.
  • After the People's Liberation Army announced strict guidelines for body weight, including that meeting the guidelines will be a promotion consideration, Chinese netizens turned on Mao Xinyu, the often-mocked and overweight grandson of Mao Zedong, who in 2010 become the youngest Major General in the PLA.

The growing geographic spread of ISIS has lately been part of the news chatter in tabloids and respected papers alike.

We know ISIS has tried to spread its propaganda to Pakistan and Afghanistan since late 2014 and proclaimed its leadership of that region in early January, with members of the Pakistani Taliban claiming loyalty to the group. One of ISIS's Afghan commanders who was in a recruitment video aimed at the region was killed at the end of January, and another was allegedly arrested by the Afghan Taliban.

However, police in Afghanistan's Ghazni province, where ISIS was reported to be fighting, recently denied the group had a presence there.

Nevertheless, many Afghan Government officials, Afghan analysts with links to Government, and some civil society activists I spoke to last year are set on making the case that ISIS is operating in Afghanistan. Their counterparts across the border in Pakistan seem to be less concerned, even if the link between the Pakistani Taliban and ISIS is ostensibly stronger.

Others however, remain sceptical, and the Taliban website has been suspiciously silent on the matter. Australia's Foreign Minister has been cautious about acknowledging an ISIS presence in Afghanistan (possibly because there is about as much evidence for its presence in Australia, considering the Sydney siege and two individuals arrested before they could strike), though the Australian Government continues to warn that ISIS may expand its operations to Afghanistan in the future.

The question is, why should we even bother looking for ISIS in Afghanistan?

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Afghanistan is in enough trouble already, and for what it's worth it has had an 'Islamic state' for much longer than Syria or Iraq. After all, the Taliban officially goes by name Islamic Emirate, and has thus long laid claim to the 'Islamic state' brand. The fact that ISIS called itself the 'Islamic State of Iraq and al-Sham' might actually be a nod of acknowledgment from one quasi-state to another that such an ambition is already established in Afghanistan.

Though much has been made of the similarities between ISIS and the Taliban, such as their focus on conquering territory, maintaining an army and governing structure (all trademarks of states), they are not the same. 

The Afghan Taliban still draws the majority of its recruits from within Afghanistan's Pashtun tribal structure, though it is known to also collaborate with many other ethnic and terrorist groups such as the Islamic Movement of Uzbekistan. There have been suggestions of Arabic trainers and mentors in Afghanistan, but generally Afghans have not liked them. Sunni Muslims have long been a majority in Afghanistan (no underdog status as in Iraq) and any sectarian problems have been predominantly of an ethnic nature, involving the Shia Hazara minority group. 

Rather than looking for ISIS, I worry more about Afghanistan's other problems, which provide ample space to breed more extremist and criminal groups, and should be addressed both by the Afghan Government and the international community.

The Afghan Taliban is losing command and control, and its self-financing structure has seen it morph more into a criminal group than an insurgency. A recent UN report argued that the Taliban was acting more like a 'godfather' than a 'government in waiting', something Gretchen Peterson argued in 2009 when she compared the Taliban to the Sopranos minus the chianti. The Taliban leadership has long denied fragmentation and emphasized its unwavering command and control. On the ground however, the story is different, and many Afghans resent the fact that some fighters no longer practice as their leadership preaches.

There is a lesson here for counter-terrorism as an answer to the problem of ISIS. Much of what the Taliban has become today can be linked to the 'kill and capture' policy of the US military, which not only alienated the local population but also eliminated a lot of older, mid-level commanders with allegiances to the old Taliban leadership and belief system. Forced to continuously refill their ranks, the Taliban fighters and commanders have become younger, many with a rather basic understanding of Islam and Taliban rules (such as the laheya). 

Thus, the very counter-terrorism policy designed to defeat the Taliban – which recently was quietly reinstated – has made the group into the different beast we are now dealing with; one that is far less likely to be reconciled into the Afghan Government. This should cause us to pause and consider if similar counter-terrorism approaches elsewhere might not also backfire. 

Another way to understand the appeal of groups such as the Taliban, or ISIS, is to recognise what I would call the enabling environment that breeds extremism.

In addition to rising poverty and unemployment in Afghanistan, high dowry prices have forced young men to delay marriage and seek work abroad, or even engage in crime or jihad to afford a wife. This creates frustration, so much so that the Taliban has tried to lower dowry prices in areas they control. ISIS's response to the same problem has been somewhat more 'creative'. Either young women are encouraged to volunteer to marry fighters or ISIS sanctions their rape, enslavement and forced marriage. The importance of this 'sexual conquest' or 'primitive gratification' in ISIS's strategy, and the attraction for many young men struggling to find their place in more modern societies, has been little analysed in trying to understand the group's universal appeal.

In many ways, what ISIS offers is what young marginalised men across the world, including in Afghanistan, seek: adventure, violence, power, sex and a sense of self and community.

If we analyse the appeal of extremists groups from this angle, then the international community needs to adjust its narrative of 'all is going well in Afghanistan' and ensure a longer-term development strategy. The Afghan Government needs to get serious about its reform agenda and address corruption within its ranks. Not an easy task, which is perhaps why some stick to the seemingly more straightforward promise of counter-terrorism, which in my opinion only fans the fire of groups like ISIS and the Taliban.

Photo courtesy of Flickr user Balazs Gardi.


Just a few moments ago I talked with the director of the Lowy Institute's International Economy program, Leon Berkelmans, about this week's developments in Europe. An interim deal has been thrashed out to give Greece a four-month extension so that it can work out how to pay its creditors. But as Leon explains, events may move faster than that timeline, with Greek tax revenues coming in at unexpectedly low levels.

We also talk about the larger significance of the Greek economy: 'why does Europe care so much about an economy smaller than that of New South Wales?', I ask. That prompts Leon to talk about confidence in the rest of the EU, and the spectre of bank runs.

Footnote: when the recording was over, Leon and I continued on the topic of bank runs, which in turn got us talking about the bank run scene in Mary Poppins. Here's the delightful number leading up to that scene, 'Fidelity Fiduciary Bank':


The view from Jakarta

You know there's something wrong with Australia's image in Indonesia when you find yourself the target of a heated tirade against your PM on the back of a motorcycle taxi first thing on a Monday morning. At the first mention of Australia my driver became livid: 'That Tony Abbott is such a bad guy! How dare he give money to Aceh and then ask for it back?'

This Jakarta driver may not have had all the facts straight, but the fact that he had heard of the efforts to return Australia's tsunami aid money showed that the movement has moved well beyond a series of tongue-in-cheek social media hashtags among students. Street protests to collect 'Coins for Australia' or 'Coins for Abbott' have spread from Aceh to the capital and beyond, with even the vice president offering to repay the $1 billion in aid contributed by Australia for recovery efforts after the 2004 Boxing Day tsunami.

The backlash stemmed from comments made by Abbott last week which implied that Indonesia could 'reciprocate' the generosity shown by Australia in 2004 by granting clemency for the two members of the Bali Nine drug syndicate now on death row. Indonesians on social media responded by offering to repay the aid in small change, using hashtags such as #KoinUntukAustralia or #CoinsForAustralia and #Coins4Abbott. Now protesters have moved offline to collect coins on the streets. Local media reported that at least one primary school in Central Java had joined the effort, with a teacher leading students to collect money outside school (a comment from one 10-year-old student: 'Even though this cuts into my pocket money, I'm proud to participate and I hope these coins can be useful for Australia').

The concept of the protest seems to have gotten lost along the way for some, but the original idea echoes the online legend of Samsung repaying a $1 billion fine to Apple over a patent infringement case in more than 30 truckloads of 5-cent pieces. As in the Samsung-Apple case, the symbolism of Indonesia returning Australia's aid in coins is intended to diminish the magnitude of the 'debt', as well as embarrass Australia for holding it over its increasingly wealthy neighbour.

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But while Indonesia is wealthy, it is also deeply unequal. If Indonesians were to repay the $1 billion to Australia in coins, all 250 million of the population would have to donate about $4 each, or about 40 one-thousand Rupiah coins. For roughly 50% of the population, that would be the equivalent of missing out on a morning coffee. For the other 50%, it would mean giving up two days of living costs. This is not to say Indonesia could not afford to repay the money — it easily could (especially with the vice president involved). My point is that while the country overall is no charity case, for the recipients of aid Australia's assistance is no small change.

It is realistic to acknowledge that states do not operate as individuals, and that Australia's aid program to Indonesia does come with some strings attached. Presumably this is what Abbott was referring to when he brought up the tsunami aid in relation to the plea for clemency for the Bali Nine members on death row. The trouble is, the main pulling point for those strings is the soft power that aid can bring for Australia. It's not difficult to imagine the offense caused by Abbott requesting the lives of two Australian drug smugglers as payback for the country's contribution to recovery efforts for a natural disaster that killed 170,000 Indonesians. It's a clumsy attempt at diplomacy that has only played into the nationalist rhetoric on sovereignty already surrounding the case in Indonesia.

It's important to remember that the aid program benefits Australia as well as Indonesia. It is in Australia's interests to maintain friendly relations with Indonesia, and to assist the country in developing an equitable and stable economy.  Soft power means Indonesian students wanting to come and study in Australia. It means a good relationship for trade, and safe travel for Australians. It means that as Indonesia's economy continues to grow, Australia is seen as a partner in the region. The cultivation of this soft power is what constitutes the strings attached to Australia's aid program. And by trying to use soft power as a point of force, Australia has found how quickly those strings can unravel.


University of Texas academic Alan Kuperman, a specialist on humanitarian military intervention, has a scathing essay (paywalled) in the latest issue of Foreign Affairs:

In retrospect, Obama’s intervention in Libya was an abject failure, judged even by its own standards. Libya has not only failed to evolve into a democracy; it has devolved into a failed state. Violent deaths and other human rights abuses have increased severalfold. Rather than helping the United States combat terrorism, as Qaddafi did during his last decade in power, Libya now serves as a safe haven for militias affiliated with both al Qaeda and the Islamic State of Iraq and al-Sham (ISIS). The Libya intervention has harmed other U.S. interests as well: undermining nuclear nonproliferation, chilling Russian cooperation at the UN, and fueling Syria’s civil war.

Despite what defenders of the mission claim, there was a better policy available—not intervening at all, because peaceful Libyan civilians were not actually being targeted. Had the United States and its allies followed that course, they could have spared Libya from the resulting chaos and given it a chance of progress under Qaddafi’s chosen successor: his relatively liberal, Western-educated son Saif al-Islam. Instead, Libya today is riddled with vicious militias and anti-American terrorists—and thus serves as a cautionary tale of how humanitarian intervention can backfire for both the intervener and those it is intended to help.

Also in the latest issue of Foreign Affairs, an essay co-authored by Interpreter contributor Tom Switzer, who writes with Bates Gill on the deepening of the US-Australia alliance

...for Washington, the U.S.–Australian partnership has become a special relationship with few equivalents in the world. But few outside a small circle of policy elites seem to have noticed.

Photo by REUTERS/Darren Whiteside.