Thursday 22 Oct 2020 | 14:42 | SYDNEY
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About the project

The Global Issues program examines themes that lie at the intersection of global political trends and Australia’s interests, specifically US foreign policy, global migration & multilateral institutions.

The program has published ground-breaking papers on diasporas, the provision of consular assistance to Australians overseas, and Australia’s asylum-seeker policy.

Latest publications

Wall on Wall in Berlin

German photographer Kai Wiendenhofer has photographed some of the world's most contentious and heavily defended barriers, from Belfast to Korea to Israel to Mexico.

Some of his work is now on display in mural form in Berlin, exhibited on remains of the Berlin Wall. Below you see a Berlin local cycling past a shot depicting the Korean DMZ.

Global growth gloom: Let's calm down

The IMF has updated its forecasts for global growth. The Financial Times reports that the IMF has 'slashed its forecasts' and that 'the downgrades highlight the gathering clouds around the world economy'. The Wall Street Journal opens its reporting on the update like this: 'investor fears that the end of easy money is at hand are ricocheting around the globe, slamming financial markets and squeezing economic growth prospects from Brazil to Turkey.' 

This sounds like a big deal, but the latest Fund update trims just 0.1%* off the global growth forecast it made in April for the current year, and has taken 0.3% off its forecast for next year.

Emerging economies' growth forecasts, which feature in the dire media reporting, were trimmed by exactly the same amount, and are still comfortably in excess of 5%.

If the Fund's current forecasts come to pass, growth this year will be one-third faster than last year (3.5% against 2.6%) and 2014 should be a bit stronger still. This is certainly a very weak recovery (upswings are often around twice this pace), but this is hardly news.

That said, there is a problem with the Fund's forecasting record during this recovery. The IMF has been consistently too optimistic, forcing it to revise its forecasts as reality catches up. Each downward revision, even if modest, creates a melodramatic headline.

The IMF shared the widespread optimism that the economy was recovering satisfactorily after the stimulus spending in 2009. For 2012, its initial forecast for global growth was just over 4%; the outcome was 2.6%. Similarly, the initial forecast for this year was just over 4%; it is now 0.6% lower at 3.5%. Next year started at 4% and now stands at 3.7%. 

It is intrinsic in the IMF forecasting process — in principle independent of national authorities but in practice influenced by official forecasts — that it will be too optimistic during slow times, being careful not to 'talk the economy down.'

But if the IMF had correctly forecast Europe's 1.0% fall in GDP in 2012, could policy makers have left their austerity policies unmodified? For the current year, the initial forecast of 1.4% for Europe made in April last year took pressure off policy makers; would they have appreciated it if the IMF had, at that stage, produced its current 2013 forecast of 0.3%?

Of course the context of the initial forecasts was different: the IMF shared a widely held view that the global economy was recovering. This, however, doesn't absolve the Fund. Official growth forecasts (including the Fund's) are different from, say, weather forecasts, because they influence the outcome.

Even without political pressures, it's hard to get growth forecasts right. As a recent review of (Australian) Treasury macroeconomic forecasting found:

In common with many forecasters in Australia and overseas, Treasury has experienced mixed success forecasting over this period. In particular, the identification and prediction of major turning points in economic activity recently has been a failing of most forecasters around the world.

The models cannot capture the complexity of the real world and in any case don't incorporate the sorts of shocks which throw forecasts far off track. But forecasting is still the basis of policy, so we have to go on doing it.

So are we at a forecast inflection point now, needing a significant revision to the baseline projection, justifying the alarmist headlines?

Much has been made of Fed Chairman Bernanke's statements on quantitative easing (QE), while others point to China's liquidity glitch. QE was always going to be tapered. After all, this tapering just means a slowing down of the increase in the Fed's holdings of government securities, leaving an actual winding back of its holdings to a much later date. Bernanke's commitment remains firm: leave the policy interest rate (which is the instrument that matters most) at zero until unemployment falls to 6.5% (compared with the current 7.6%). The prospect of a somewhat faster US recovery next year is good. Growth this year is being held back by a 2% of GDP fiscal contraction. Easing off on this austerity next year would give the US recovery the opportunity to follow a more normal pattern of acceleration. 

The liquidity glitch in China was, in itself, unimportant. For all the talk of China slowing, the step down from 10% growth to the current rate of around 7-8% occurred five years ago, and the overwhelming majority of forecasters still have a forecast starting with '7' as their central probability, matching the government's target. Credit tightening might reduce growth to the bottom of the 6-8% band, which is now the normal underlying pace of growth, but slower growth will provoke a policy response.

Europe is still mired in the problems of the periphery, with chronic gloom firmly established as the 'new normal.' UK growth is still constrained by austerity. If financial markets continue to panic over QE, capital outflows from emerging countries will present some nervous moments for policy makers, but they are better prepared than in the past.

In summary, the Fund was too optimistic when it released its April forecast, and has belatedly trimmed this back. The global recovery is lamentably slow, but there seems no good reason for the dramatic headlines.

*The Fund presents its growth figures in two ways: as year-on-year growth rates and as 4th-quarter-on-4th-quarter. The latter are used here as they give a better representation of the shape of the cycle (for discussion, see this RBA appendix).

Photo by Flickr user lragerich.

Want your report to be read and believed? Mark it 'Secret'

New research summarised by suggests that readers judge a document to be more credible when they're told it is classified:

In one experiment, subjects read two documents from 1995 about whether the U.S. should intervene to prevent the sale of fighter jets from Belarus to Peru -- a real debate from this era -- one from the State Department supporting intervention and one from the National Security Council opposing it. Some participants were told that the State document was "classified" at the time the decision was made, others were told that it was the NSC that was secret. "On average, the judgment of information quality when it was secret was significantly greater than the judgment of information quality when it was public," they write.

As I wrote back in 2010 at the height of the WikiLeaks debate, this is a cognitive trap: just because information is classified, does not mean it is valuable.

Photo by Flickr user corporatemonkey.

Development links: South Sudan, peak water, Pacific, G(irls) 20 and more


Interview: Adam Alter part III

Here's part 3 of my interview with Adam Alter, author of Drunk Tank Pink: An Other Unexpected Forces that Shape how we Think, Feel and Behave, in which we've discussed the subtle non-verbal cues that make up such an important but neglected part of international business and diplomacy. Here's part 1 and part 2.

SR: You said in your previous answer that 'so much of what determines the success and failure of an interaction is hidden from view in the form of subtle contextual cues'.

Foreign ministries and companies doing business internationally place a lot of emphasis on literacy in the most literal sense – that is, teaching their staff the local language. But it seems to me you are referring to what is sometimes called cultural literacy. What should these organisations be doing to better prepare their staff for interpreting these subtle contextual cues you refer to?

AA: There are three answers to your question, moving from the most obvious to the progressively more obscure. The first, straightforward, answer is that it's always important to understand how your own home culture differs from the cultural backgrounds of the people with whom you're interacting.

Before the Sydney Olympic Games, in mid-2000, I was working part time at a retail store. Our manager distributed a sheet of paper titled 'The Dos and Don'ts of Interacting with Olympic Visitors.' The sheet listed a long series of gestures, verbal patterns and mannerisms that we Australians use freely but which people from one or more foreign cultural backgrounds found offensive. The thumbs-up gesture, for example, is offensive to people in parts of Africa, South America, and the Middle East, just as an extended middle finger is offensive to Australians (but is no different from an extended index or ring finger in other parts of the world). These differences seem trivial, but adopting the wrong gesture can sink an otherwise smooth diplomatic interaction.

The second answer is more complicated. Some cultural differences are less explicit; they're more difficult to enumerate on a list like the one our manager handed to us before the 2000 Olympics. After almost a decade in the US, I continue to exhibit 'tells' that betray me as a foreigner, and each year my students still describe me as 'the Australian professor.' Even with a perfect American accent (my accent is far from American), I'd use words and perhaps even subtle gestures that Americans tend not to use.

My experience isn't unique, so much so that these verbal give-aways have a name — the Biblical term, 'shibboleths' — and they've been used throughout history to distinguish the ingroup from outgroups. During World War II, for example, US soldiers stationed in the Pacific asked unidentified persons to utter the word 'lollapalooza', believing that Japanese soldiers and citizens would confuse the Ls for Rs.

In contrast to the first set of differences, these are difficult or impossible to eliminate, and it's a waste of resources and effort to try. Still, it's worth trying to recognise and catalogue those differences over time in a diplomatic context, because humans are notoriously and reflexively critical of outgroup members, and as these subtle cultural differences mount up, they have the potential to dampen diplomatic relations.

The third answer is the most subtle, and it's the subject of fairly recent research. With the advent of cheaper global travel, widespread global commerce and trade, and the internet, humans are exposed to more cultures in a year than they encountered in their entire lives before the late 20th century. Consequently, we store and slowly take on board foreign cultural habits and worldviews.

Researchers believed, until the early 2000s, that people had to immerse themselves in a foreign culture for many years before they adopted that culture's behaviour patterns and mental styles, but that appears not to be the case. Merely being aware of a foreign cultural ideal or behaviour style makes it more likely that a person will adopt that style, subconsciously, when reminded of or immersed in that culture. When Australian businesspeople and diplomats travel to the US, for example, they unwittingly become Americanised versions of themselves; the same is true of any other foreign culture.

In some of my work, for example, we've shown that Americans, who normally expect relatively little change in weather patterns and stock market data (eg. good weather and the appreciation of a financial stock will continue), adopt a more typically East Asian perception of change (what goes up must come down, and vice versa) when they walk through New York City's Chinatown, an Asian supermarket, or when they're exposed to typically East Asian symbols and images. This result holds true for people who have traveled regularly, particularly those who understand the East Asian concepts of balance and correction.

The short summary, then, is that diplomats who interact in foreign cultural contexts aren't the same people they might be at home, and it's important to work out which aspects of their mental lives might change as they move through those different cultural landscapes.

Flying through the zombie apocalypse

My review of World War Z got some attention over the weekend thanks to tweets from colleagues and RTs from a number of others. My thanks in particular to a couple of readers who pointed out that, although I said that the scene in the film showing a C-130 Hercules taking off from an aircraft carrier was 'highly improbable', it has in fact been done:

Note, though, that this was a one-off trial conducted in 1963 which required modifications to the aircraft. The US Navy concluded that the practice was unsafe and abandoned the idea. To revive it 50 years later in the middle of a planetary emergency seems a stretch, hence 'highly improbable'.

HIV: 30 years old and still drawing a global crowd

Thirty years after HIV first started to make global headlines, it's still doing it, but this time for what is deceptively good news. 

At this week's International AIDS Conference in Kuala Lumpur, there was the remarkable announcement that two previously HIV-positive men no longer had any trace of the virus after receiving stem cell transplants to treat their respective cancers (the announcement comes at 14:04 in the video below). This follows a similar case reported last year when a man diagnosed with leukaemia and infected with HIV also appeared to be cured after a stem cell transplant. News coverage of this development has been global. 



At first blush, this seems like the breakthrough researchers have been searching for, as the cure for HIV has remained elusive despite significant investment and major advances in treatment. But anyone who has expertise in or even experience of stem cell transplants knows that this process is very unlikely to be HIV's silver bullet.

Stem cell transplants used to treat life-threatening blood and bone cancers are themselves life-threatening. The procedure is complex and while there have been significant improvements in survival rates, the risk of death from the side effects of stem cell transplants is still unacceptably high. On top of that, these procedures are expensive and therefore don't readily translate into an affordable, across-the-board option, particularly in developing countries where the HIV epidemic has its strongest grip. 

But what this discovery does is offer greater insight into the makeup and behaviour of this virus which has killed around 35 million people in the three decades since its discovery. Australia has been a global leader in the response to HIV which in part is why the incidence of HIV/AIDS-related deaths in the same period in Australia comparatively low at around 7000.

HIV is a unique disease in the way it has broken free from the confines of being treated solely as a medical phenomenon.

It has brought together the most unlikely international collection of advocates and activists. Because of its tendency to impact disproportionately on society's minorities and marginalised — the gay community, sex workers, injecting drug users, women in developing countries, prisoners — its existence has shed powerful spotlights on human rights abuse which in turn has brought eminent jurists and human rights activists, including Justice Michael Kirby, into the colourful fold.

The pace of infection in the 1990s led to major funding initiatives in the 2000s which have reshaped international health funding. Its impact on the social and economic fibre of communities has led some governments to adopt innovative policies and practices previously considered dangerous, even illegal, such as Australia's clean needle exchange programs. And along the way, it has enlisted a swag of celebrities and global leaders as champions of the cause: Bill Clinton, Aung San Suu Kyi, Kofi Annan, Bono, Richard Gere, Bill Gates, Elizabeth Taylor, Elton John, Kylie Minogue and on it goes.

Medical researchers haven't been left behind — they are leading characters in this broad church of a community.

Every two years, this disease becomes the focal point for a mega conference which brings the entire church together to debate where this pernicious disease is going and how to arrest it. Last year's conference was in Washington. The next one, the 20th, will be in Melbourne in 2014. It's expected to attract 14,000 international participants, making it the largest conference ever held in Australia. Co-chairing will be two of the world's most important medical researchers into HIV: France's Françoise Barré-Sinoussi, who shared the 2008 Nobel Prize for Medicine for her contribution to the discovery of the virus, and Australia's Sharon Lewin

These conferences are always a heady and challenging mix for the country hosting, as the colourful array of participants whose professions, predilections and health status can push the boundaries on a range of immigration and policing policies. HIV has always had a tendency to challenge orthodox policy and so it's only fitting that a conference dedicated to it does the same.