WASHINGTON, July 20, 2014 – This week in politics highlighted twin refugee crises in America and the Middle East, an airline tragedy and disgusting behavior in Eastern Ukraine, and rumblings of potential incipient interest rate hawkishness at the Fed – maybe.
After the murder of three Jewish teens, Israeli Defense Forces arrested 900 members of Hamas and other terrorist groups on the West Bank. Hamas, the de facto government of Gaza, launched an ineffectual missile barrage on Israel, and Israel retaliated with airstrikes on Gaza. If Hamas hoped for a new intifada on the West Bank, they are so far disappointed. The Palestinians are the most disorganized they’ve been in a generation. Hamas itself was humiliated by the ease with which their people were arrested, and the apparent impenetrability of Israel’s defensive missile shield, Iron Dome.
The IDF launched a ground offensive against Hamas, demonstrated once and for all that the two-state solution to the Palestinian refugee problem is a dead letter. The one-state solution involves Israel swallowing a toxic demographic pill. Israel’s way forward involves bad options all around, but none of them won’t be improved by the obliteration of Hamas.
The larger problem in the Middle East is an ocean of refugees created by perpetual, ever-spreading war. Four states – Libya, Lebanon, Syria and Iraq – can no longer be meaningfully said to be in business. Egypt is on life-support, propped up by the desperate monarchs of the Persian Gulf. Turkey is horrified that ISIS successes in Iraq could result in a Kurdish state, the one thing in the world that the Turks most dread. Yet it continues to buy oil from ISIS, thus giving them the possibility to further arm, further expand the war, and further increase the likelihood of a new Kurdistan.
The growing army of refugees has not been caused by Jewish settlers on the West Bank, nor by the lack of a Palestinian state. It is mostly engineered by Iran, which finds that war has other purposes than territorial gain or resource acquisition; it uproots and disperses potentially dangerous populations. This war may go on for decades. That Parisian and other European mobs are rioting over the IDF attack on Hamas as the root of Middle Eastern misery speaks volumes to their depraved lack of moral and intellectual seriousness. Pssst! It’s the refugees, stupid!
The flow of refugees in the Middle East is echoed in the Americas, where the weak states of Central America have created a climate of poverty and danger for young people there. Just as young Palestinian men face a desperate situation as the Middle East decays, so do the young people of Central America. The disarray of Mexico’s drug cartels has made the situation worse, increasing the levels of drug gang violence in Central America. Agricultural and economic failures have added to the misery.
The U.S. government response has been, as elsewhere in the world, confused and ad hoc. America bears some responsibility for the situation in Central America. Decades of an idiotic drug war promoted the growth of drug cartels and the undermining of Latin American governments, as did America’s clumsy attempts to manipulate the politics of the region (yet another echo of the Middle East). But, like Russian President Putin pretending that the debris of MH17 has nothing to do with him, America’s leadership is busy laying blame elsewhere, not developing a coherent policy based in law.
As usual, President Obama blames Republicans and George Bush, who signed the infamous 2008 act that Obama claims binds his hands with regard to young illegal immigrants (or refugees – what they are depends crucially on why they left home in the first place). If Obama finds his hands bound, it’s a first; he’s discovered for himself an almost unlimited power to selectively enforce the law on everything from health care to immigration.
Obama’s inability to find a consistent policy based in U.S. law and act forcefully on it has made him an object of contempt with Russia’s Putin, who nevertheless finds himself facing his own embarrassment. The destruction of Malaysia Airlines’ flight MH17 was almost certainly by means of a Russian SA-11 surface-to-air missile, or some variant of it. And that means Russian training.
The tragedy is made even more obscene – an astonishing improbability – by the behavior of Ukrainian rebels who control the area. Looting of the bodies and personal effects has been the order of the day, while drunken janitors-turned-warlords wave machine guns at western experts there to secure and investigate the crash site. The caricature of Russian-speaking partisans as crude, vodka-swilling thugs has a new lease on life. Just when we were ready to forget Khrushchev’s podium-pounding and Yeltsin’s drunken band-leading, we have the rebels and Vladimir Putin to remind us that Russia isn’t all ballet and Tolstoy.
At this point it seems almost anti-climactic to bring up Fed Chair Janet Yellen and her report to the Senate Banking Committee this week. But for everyone in the developed world who isn’t a refugee, that may have been the most important news of the week.
We will take it up later this week, but for now should recognize that there’s an interest-rate hawk somewhere in Yellen after all. She noted that unemployment is falling faster than expected, inflation is more than just a blip, and she seems sensitive to critics (including some within the Fed) that the Fed might overshoot on the timing of interest rate hikes.
But Yellen also believes that there’s a lot of labor not in the labor markets, that firms still find it easy to substitute capital for labor, and that the non-accelerating inflation rate of unemployment is around 5.4 percent, not the current 6.1 percent. Until unemployment falls to 5.4 percent, she will be more of a dove than a hawk.
When she does find her inner hawk, though, the world has a serious question to ponder: If Fed policy is arguably more important world-wide than it was a generation ago, what happens globally when an interest-rate hike starts sucking all the dollars floating around the world economy back to the United States?