Americans of course have always looked at the world from the view of a great power and the relationship to Europe has never been exclusive. But during the Cold War the European allies were at the center of America’s political and military strategy to contain Soviet Communism. These days are over and there hasn’t been a President in the Oval Office as eager as Barack Obama to transform the security structures he inherited from the Cold War. Defense projects have been reevaluated, the State Department for the first time is undergoing a profound policy review process and the G20 has already substituted the G8 as the relevant format for decision-making among the big players.

For more than sixty years the common enemy in the east bound the US and its European allies together. And leaders from both sides of the Atlantic took this relationship pretty much for granted. Today there is criticism that President Obama shows no enthusiasm for the transatlantic relationship and lacks emotional ties with European leaders. Despite the fact that Obama has been to Europe eight times since he took the oath of office, which is hardley a sign of disinterest, it needs to be realized, that on both sides of the Atlantic a new generation of politicians is now in charge.

It is a generation that did not experience the Second World War, like Helmut Schmidt or George H.W. Bush, or was politically formed by the Cold War like Helmut Kohl and Ronald Reagan. Thus the decades of close personal and emotional relations between the Atlantic partners are over. But what sounds disappointing in the first place is nothing more than the consequence of NATO’s successes. Europe’s security is no longer threatened by an external enemy. So instead of being nostalgic about the Cold War solidarity the new situation should be seen as a chance. It provides the opportunity for the necessary evaluation of structures and readjustment of political priorities. The transatlantic relationship will not lose its importance, but it certainly needs a new foundation.

From global warming, international terrorism to the rising economies of the south, the new global agenda is demanding a common approach. Above all, the western model of democracy is under pressure in many parts of the world. But unlike in the Cold War days it will not be sufficient to point out human rights violations and the lack of individual freedom while relying on the attractiveness of one’s own way of live. In the last decade countries such as China succeeded in fighting poverty and lifting millions of people up to modest wealth, and as a result created political legitimacy for the authoritarian rulers. Instead of lecturing the world about democracy the west needs a new emphasis on poverty reduction and wealth creation. And it should seek closer cooperation with countries like Brazil who have chosen a democratic way to achieve those goals.

The Bush-years demonstrated bluntly that military might without legitimacy is not sufficient to defend the US position in the world and that the US needs allies and friends. Europe on the other hand, will in the years to come dedicate the biggest share of its energy to the EU-integration process and therefore should have a natural interest in maintaining a US security commitment. Given the experiences from American history this commitment is far from assured. After World War I the isolationist camp dominated US foreign policy until the Japanese attack on Pearl Harbor reestablished the American presence on the continent.

In today’s polarized American politics isolationist themes are resurrected for instance when congresswoman Michele Bachmann from Minnesota stated that she doesn’t want the US to be “part of the world economy” because “this is a very bad direction because when you join the economic policy of different nations, it is one short step to joining political unity and then you would have literally, a one world government.” Of course, this is not the view of a majority, but after the mid-term-elections in November Mrs. Bachmann and her supporters within the Republican Party might become even more influential.

Unless it modernizes its economy and society, Russia can forget its claim to status as a world power in the twenty-first century and will continue to fall behind both old and newly emerging powers. Moreover, Russia needs partners for its modernization, because its population and economic potential are too small for it to play an important role by itself in the emerging new world order. Russia’s strategic nuclear weapons will be insufficient to ensure it a place among first-rank powers.

But where can Russia turn? Towards East Asia? To the south and the Islamic world? Neither of these is a serious option. As it is, Russia can turn only towards the West, and to Europe in particular.

For Europe, however, Russia’s role is of critical strategic importance. Even a partial revision of the post-Soviet order in the direction of an increased Russian grip on ex-Soviet states or satellites would drastically change EU strategy and security policy.

Both sides claim to want improved bilateral relations, but there is room for doubt about whether Russians and Europeans actually think about their relations in the same terms. A look beyond the cordial rhetoric reveals profound differences.

When Russia’s former president and current prime minister, Vladimir Putin, declared several years ago that the greatest disaster of the twentieth century was the demise of the Soviet Union, he didn’t just speak for himself but arguably for the majority of Russia’s political elite. The overwhelming majority of Europeans, however, probably view the USSR’s breakup as a cause for celebration.

Indeed, today’s Russia avowedly seeks to reverse the post-Soviet order in Europe that emerged after 1989/1990, at least in parts of its neighborhood, while the Europeans and the West want to maintain it at all costs. So long as Moscow doesn’t understand these fundamental differences and draw the right conclusions from them, Europeans won’t view Russia’s opening towards the West as an opportunity, and Russia will always encounter deep mistrust in Europe. But this doesn’t preclude practical and pragmatic co-operation in numerous areas.

Russia today has retained its strength only as a supplier of energy and other natural resources. It is therefore no surprise that Putin has sought to use this lever to rebuild Russia’s power and to revise the post-Soviet order.

Russia’s natural gas supplies to Europe play a vital role in this regard, because here, unlike in the case of oil, Russia’s bargaining position is very strong. Even more importantly, its direct neighbors are either completely dependent on Russian gas supplies – Ukraine and Belarus – or, like Azerbaijan and Turkmenistan, are dependent on Russia’s pipeline system to sell their gas output.

Russia certainly pursues economic interests with its gas-export policy – all the more so when gas prices are trending down – and it wants to expand its role on the European gas market to intensify the dependencies that now exist. But this is unlikely: Russia’s disruption of gas supplies in January 2009 made clear to the EU in no uncertain terms what price might have to be paid.

That is why “diversification of gas-supplier countries” has since been EU policy – including, first and foremost, the Nabucco pipeline project, which would open a southern corridor between the Caspian Sea, Central Asia, northern Iraq, and Europe. Nabucco would reach Europe via Turkey and would drastically reduce Caspian supplier countries’ dependence on Russia’s pipelines, and the new southeastern EU members’ dependence on Russian gas supplies. So it comes as no surprise that the Kremlin is trying to scupper Nabucco.

Two other developments promise to prevent increased European dependence on Russia: massive expansion of liquefied gas imports into the EU and – linked to this and to deregulation of the European gas market – the transition from long-term supply agreements and the oil-price peg to market-dependent spot prices.

Nonetheless, the primary goal of Russian gas policy isn’t economic, but political, namely to further the aim of revising the post-Soviet order in Europe – a quest that is not about the EU as much as it is about Ukraine.

Ukraine’s new prime minister, Mykola Azarov, was stunned when Putin unexpectedly confronted him during a joint press conference with a suggestion to merge the Ukrainian and Russian gas companies. Unlike the Ukraine government’s assent to extending the Russian Black Sea fleet’s deployment in Crimea – a decision that led to physical violence in Ukraine’s parliament – this was not a prolongation of the status quo, but a public demand for its revision.

With the Nordstream pipeline in the Baltic and the exorbitantly expensive South Stream pipeline in the Black Sea, Russia is not just trying to create direct gas connections between Russia and the EU that bypass Ukraine and undermine Nabucco. The main goal is to put pressure on Ukraine, as well as on Azerbaijan and Turkmenistan, which want to supply Europe with gas independently of Russia. Once those aims are achieved and/or Nabucco goes ahead, South Stream will be shelved because it doesn’t make economic sense.

In Europe and the United States, this challenge has been understood. Now it is necessary to stand by those in Ukraine who see a European future for their country, to open the southern corridor via Nabucco, and to accelerate development of a common European energy market. A decisive European policy will improve, rather than strain, relations with Russia, because it will result in more clarity and predictability.

Copyright Project Syndicate

I believe that these fears are exaggerated, even misplaced. And should things work out that way, this would be due more to a self-fulfilling prophecy on the West’s part than to Turkey’s policies.

In fact, Turkey’s foreign policy, which seeks to resolve existing conflicts with and within neighboring states, and active Turkish involvement there, is anything but in conflict with Western interests. Quite the contrary. But the West (and Europe in particular) will finally have to take Turkey seriously as a partner – and stop viewing it as a Western client state.

Turkey is and should be a member of the G-20, because, with its young, rapidly growing population it will become a very strong state economically in the twenty-first century. Even today, the image of Turkey as the “sick man of Europe” is no longer accurate.

When, after the UN decision, United States Secretary of Defense Robert Gates harshly criticized Europeans for having contributed to this estrangement by their behavior towards Turkey, his undiplomatic frankness caused quite a stir in Paris and Berlin. But Gates had hit the nail on the head.

Ever since the change in government from Jacques Chirac to Nicolas Sarkozy in France and from Gerhard Schröder to Angela Merkel in Germany, Turkey has been strung along and put off by the European Union. Indeed, in the case of Cyprus, the EU wasn’t even above breaking previous commitments vis-à-vis Turkey and unilaterally changing jointly-agreed rules. And, while the Europeans have formally kept to their decision to begin accession negotiations with Turkey, they have done little to advance the cause.

Only now, when the disaster in Turkish-European relations is becoming apparent, is the EU suddenly willing to open a new chapter in the negotiations (which, incidentally, clearly proves that the deadlock was politically motivated).

It can’t be said often enough: Turkey is situated in a highly sensitive geopolitical location, particularly where Europe’s security is concerned. The eastern Mediterranean, the Aegean, the western Balkans, the Caspian region and the southern Caucasus, Central Asia, and the Middle East are all areas where the West will achieve nothing or very little without Turkey’s support. And this is true in terms not only of security policy, but also of energy policy if you’re looking for alternatives to Europe’s growing reliance on Russian energy supplies.

The West, and Europe in particular, really can’t afford to alienate Turkey, considering their interests, but objectively it is exactly this kind of estrangement that follows from European policy towards Turkey in the last few years.

Europe’s security in the twenty-first century will be determined to a significant degree in its neighborhood in the southeast – exactly where Turkey is crucial for Europe’s security interests now and, increasingly, in the future. But, rather than binding Turkey as closely as possible to Europe and the West, European policy is driving Turkey into the arms of Russia and Iran.

This kind of policy is ironic, absurd, and shortsighted all at once. For centuries, Russia, Iran, and Turkey have been regional rivals, never allies. Europe’s political blindness, however, seems to override this fact.

Of course, Turkey, too, is greatly dependent on integration with the West. Should it lose this, it would drastically weaken its own position vis-à-vis its potential regional partners (and rivals), despite its ideal geopolitical location. Turkey’s “no” to new sanctions against Iran in all likelihood will prove to be a significant error, unless Prime Minister Recep Tayyip Erdo?an can deliver a real turnaround in Iran’s nuclear policy. This, however, is highly unlikely.

Moreover, with the confrontation between Israel and Turkey strengthening radical forces in the Middle East, what is European diplomacy (both in Brussels and in European capitals) waiting for? The West, as well as Israel and Turkey themselves, most certainly cannot afford a permanent rupture between the two states, unless the desired outcome is for the region to continue on its path to lasting destabilization. It is more than time for Europe to act.

Worse still, while Europe’s listlessness is visible first and foremost in the case of Turkey and the Middle East, this lamentable state of affairs is not limited to that region. The same applies to the southern Caucasus and Central Asia, where Europe, with the approval of the smaller supplier countries there, should firmly pursue its energy interests and assert itself vis-à-vis Russia, as well as to Ukraine, where Europe should also become seriously involved. Many new developments have been set in motion in that entire region by the global economic crisis, and a new player, China (a long-term planner), has entered the geopolitical stage.

Europe risks running out of time, even in its own neighborhood, because active European foreign policy and a strong commitment on the part of the EU are sorely missed in all these countries. Or, as Mikhail Gorbachev, that great Russian statesman of the last decades of the twentieth century, put it: “Life has a way of punishing those who come too late.”

The incident is not only meat for the tireless hosts of cable news shows; it also represents another chapter in the sometimes complicated relationship between the commander-in-chief and his generals. So it’s not coincidental that many commentators have drawn comparisons between Obama and Truman who, without further ado, replaced General Douglas McArthur after the latter had criticised his Korea policy.

McChrystal, of course, had nothing similar in mind, but like McArthur he had become a celebrity-like figure in Washington who overestimated his political role. McChrystal frequently travelled with journalists and used the media to boost his own image as a tireless ascetic military commander, who needs no more than four hours sleep a night and eats only one meal a day. It’s not the first time that McChrystal has got into political trouble. When he leaked a confidential analysis, a one-on-one with the president saved his job. But by allowing his staff to joke about Biden and security advisor Jones (‘a clown’), he has exceeded his credit. McChrystal granted the Rolling Stone exclusive access and he never denied the quotes that appeared in the piece.

After months of bad news from the Hindu-Kush (a rising death toll, a postponed military offensive in the country’s second biggest city Kandahar, etc.) the replacement of McChrystal comes at a bad moment for the president. And Obama’s decision is not without risk because it will unavoidably be seen as another setback for his Afghanistan strategy. To make things even more complicated, McChrystal was maybe the only US official in Kabul who enjoyed the confidence of Hamid Karzai and was widely respected among alliance partners.

With a defense budget higher than those of all countries of the world combined and military installations or production sites of defense contractors in almost every congressional district, what president Dwight Eisenhower, a former general himself, once called the ‘military-industrial-complex’ is today more powerful than ever. The army is the institution US citizens value the most. Americans are proud of their soldiers, and top generals are widely considered to be trustworthy non-partisan voices in a more and more polarised political environment. But the scandal depicts the mightiest army of the world in a bad light.

It is somehow ironic that the Bush administration’s disregard of military counsel contributed much to the current situation: When former defense secretary Rumsfeld ordered the US army to invade Iraq, he ignored the troop estimates of the joint chiefs of staff, sending only a small contingent. As a consequence of the disastrous conduct of the war, a ‘give the army everything they need to get the job done’ attitude has become widespread in Washington; and Obama himself promised to listen to his generals and deliver. This puts the generals in an extremely strong political position, making the McChrystal case even more sensitive. It also fits in the picture that there is now talk about Obama’s aides being concerned that Obama’s choice to replace McChrystal, General Petraeus, could someday himself run for president. But until then he has a new job to do. The outcome will determine not only his own, but also strongly influence the fate of his president.

It seems that after the sacking of ISAF commanders McNeil and McKiernan, the replacement of McChrystal marks the end of the reign of the ‘Big Macs’ in Afghanistan. But if General McChrystal enjoyed celebrity status, General Petraeus must be considered the ultimate rock star of the US army. No doubt, appointing the most prestigious American soldier, who successfully managed the Iraq surge and authored America’s new counter-insurgency-strategy (COIN), as McChrystal’s successor is a smart move. But all the stardust cannot overshadow the fact that things are not going well in Afghanistan. So far the surge did not produce similar results to the one instigated in Iraq in 2007. When McChrystal took over the command of ISAF his initial report was blunt: ‘Patience is understandably short, both in Afghanistan and in our own countries’. It remains to be seen whether there will be any patience left for General Petraeus.

The Swiss have evolved an impressive system that fosters a ‘noisy collaboration’ between the people and their elected representatives. Other places, like California where I live, also have I&R, but comparing Switzerland and California is instructive because the Swiss model is impressive while in California direct democracy teeters on being dysfunctional. The devil is in the details, and those details are crucial if direct democracy is to be brought to the EU and US levels.

In California, initiative campaigns are mounted by wealthy interests who gamble that it is better to take their chance with a popular vote rather than trying to lobby their pet project through the legislature. It takes about 750,000 signatures to put a constitutional amendment on the ballot – almost 3 percent of the state-wide population – and about three-fifths that for a non-constitutional statute.

That is an extremely high threshold to meet, so in actual practice the only players able to qualify an initiative for the ballot are wealthy individuals or organisations that can write a large check to the professional companies that employ an army of circulators paid about $3 per signature. It has been years since a state-wide initiative has qualified through the work of volunteers.

Because of these dynamics, direct democracy in California has been captured by wealthy special interests, which usually are looking either to feather their own nests or give a thumb in the eye to state or local government. Even when their measures lose, they have put the entire state in play, polarising the electorate and forcing non-wealthy interests to play defence and consume their scarce resources in a battle to stop Big Money from steamrolling the state. Ironically, this kind of dynamic is the exact opposite as that envisioned by California Governor Hiram Johnson, who in 1911 created this vehicle to allow the people to counter powerful railroad tycoons and other special interests.

But in Switzerland, the political leaders have crafted a better practice. They have a ‘proposal-counter proposal’ system in which, once an initiative or referendum qualifies for the ballot, the government is given a chance to either pass that law itself or put a counter-proposal on the ballot. Similarly, if the government passes a law, the people can put their own counter-proposal on the ballot or try to overturn the law.

This ‘proposal-counter proposal’ dynamic does a few good things. For starters, it unleashes a process that is less polarising and fosters a healthier give-and-take centred on more nuanced positions. It is not so ‘thumb in your eye’. That in turn facilitates a process that fosters more of an ongoing dialogue between the people and their elected representatives in a way that, over time, forges a broader consensus on issues that range from the mundane to the significant (such as restricting commercial trucking through the environmentally sensitive Alps, or a ban on Islamic minarets).

But a leading reason this dynamic works in Switzerland but not in California is because in Switzerland you need to collect far fewer signatures to qualify your measure for the ballot – about 100,000 signatures for initiatives, a bit more than one percent of the population – and 50,000 for a referendum. The Swiss also allow a longer period of time for collecting those signatures, up to 18 months, compared to a mere five months in California. This means non-wealthy interests can compete, able to use the I&R process to challenge a legislative law or advance their own law. And it means paid circulators are not needed to gather signatures, it can be done with all volunteer labour.

While lower qualifying thresholds result in a few more measures making it to the ballot, the amount is not substantial since even gathering one percent is a sizable undertaking. In California, it would mean collecting about 370,000 signatures for a constitutional amendment, not an effort that a few friends can decide to undertake over too many drinks in a bar. But that is low enough that serious individuals or groups lacking deep pockets can play in the game.

The Swiss model is not perfect. Like California, when it comes to the actual I&R campaigns Switzerland has inadequate campaign finance laws. They do not provide any public financing for underfunded campaigns, instead allowing private money to dominate. A billionaire like Christoph Blocher, a top leader in the right-wing Swiss People’s Party, can exert great influence and skew the public debate. The Swiss also have no donation reporting laws to speak of, resulting in a near-complete lack of transparency over who is giving how much money. At least California has decent campaign reporting requirements.

The public interest in any I&R campaign is best served when a robust public debate ensues where voters can hear as equally as possible from a range of viewpoints. At minimum, free media time should be provided for all significant viewpoints. Public financing for all campaigns, pro and con, should be considered (all campaigns could be required to pay 15% of the amount they spend on their own campaign into a common fund that is distributed to the underfunded campaigns). A free marketplace of ideas stimulated by public financing and free media time would foster the concordance process.

The European Union could close its democracy deficit by incorporating a well-designed I&R process into its structure. ‘Well-designed’ would mean: 1) a low number of qualifying signatures; 2) a sufficient period of time for gathering those signatures; and 3) public financing and free media time for pro and con campaigns. Fortunately, at least a few people in Brussels seem to be listening. The recently signed Lisbon Treaty created a European Citizens’ Initiative, which allows one million EU citizens – 0.2 percent of the electorate – the right to propose a new law or regulation to the European Commission via signatures collected over a 12-month period. This is the same right that the directly-elected European Parliament enjoys. I am still waiting for the United States Congress to grant American citizens this same right.

Outside the doors of the United States Senate is a medallion painted on the ceiling inscribed with the words ‘You are the Rulers and the Ruled’. The 21st century may see representative government evolve into a fuller democracy in which citizens will have the right to have their say on substantive issues much more than in the past. If I&R is designed correctly, the representatives have nothing to fear from ‘we the people’. Indeed, the rulers and the ruled can participate in a noisy but healthy collaboration that will reinvigorate this age-old invention of representative government.

Steven Hill is author of the recently published ‘Europe’s Promise: Why the European Way is the Best Hope in an Insecure Age’ (www.EuropesPromise.org) and a program director at the New America Foundation.

In The Plundered Planet, I note that beneath the average square kilometre of the OECD there are some €100,000 of known sub-soil assets. In contrast, despite the current heavy reliance of Africa on exports of natural resources, beneath the average square kilometre of Africa there are currently only around €20,000 of known sub-soil assets. This massive difference is not due to fundamental differences in geology: most likely Africa has more, not less, beneath its land since the OECD has been extracting its resources for two centuries. The lack of discoveries is explained by the lack of international investment in prospecting after African Independence. Over the next decade global prospecting will therefore concentrate on Africa: the current ‘Scramble for Africa’ is merely the inception of this process. If African discoveries approach OECD levels, the volume of resource extraction can increase around five-fold. Africa’s export earnings can thus rise massively even without further increases in global prices. Africa will have the best opportunity in its history for decisive transformation from poverty to prosperity.

However, as the radically different trajectories of Botswana and Sierra Leone illustrate, growth based on resource exports is critically dependent upon the quality of public choices. A long chain of decisions has to be got right, not just once but repeatedly for a generation. The upstream part of the decision chain involves reconciling strong incentives for prospecting with capturing as much as possible of the resource rents for society. This requires overcoming acute problems of agency, of time-inconsistency, and of asymmetric information. As the Niger Delta and the Gulf of Mexico demonstrate, it also requires the effective restraint of environmental damage. The downstream part of the decision chain is about harnessing revenues for sustainable growth. Resource revenues need to be treated distinctively: they come from the depletion of a natural asset and should be substantially offset by the accumulation of other assets. The only European model of prudent use of resource revenues is Norway, but the Norwegian model is inapplicable for Africa. Norway has more invested capital per member of the labour force than anywhere else on earth, whereas Africa has less. Hence, whereas it is appropriate for Norway to accumulate foreign financial assets, Africa needs to invest domestically. Africa’s poor record of investment suggests that typically its societies have not yet built the capacity to invest productively on a large scale. Indeed, for many years the International Monetary Fund has emphasised this constraint on ‘absorptive capacity’. Building this capacity, which I term ‘investing-in-investing’, is the most important and distinctive implication of Africa’s new and probably unrepeatable opportunity.

Africa’s opportunity has important implications for Europe. In its trade and political relations with Africa, Europe still has the advantage of proximity and familiarity, whereas the historic baggage of colonialism is fading. Resource extraction and the construction booms on which revenues are likely to be spent are huge opportunities for European companies. But the challenging nature of Africa’s opportunity also has implications for how Europe can best assist Africa to catch up. Historically, both the resource extraction sector and the construction sector have been corrupt. If Africa is to seize this opportunity, it is essential that European companies do not continue in this pattern, and that our banks do not serve as havens for the fruits of corruption. Corruption money has financed the patronage politics that have undermined African governance. Europe must set the global standards, which Africa needs in its business partners.

As resource revenues rise, Africa will gradually become less in need of our money. This is fortunate since between budget cuts and currency depreciations all of Europe’s aid budgets are likely to decline substantially. Yet, Africa will become more in need of precisely the skills in which Europe has excelled. Europe has a long history of large and effective public investment, both economic and social. It has a long history of building an informed society to which governments are accountable: something that Africa needs for the decision chain it now faces. It has a long history of the regional integration, which Africa, given its acute political fragmentation, needs more than any other region.

Europe will need Africa’s new dynamism. Africa will need the best of Europe.

Paul Collier is author of ‘The Plundered Planet, how to reconcile prosperity with nature‘, which was recently published by Penguin.

From ancient Rome to Britain until World War One, the world economic hegemon has always provided the currency for its sphere of influence. At the 1944 Bretton Woods Conference the torch was passed from the pound to the dollar despite Lord Keynes’ last-ditch efforts to switch to the Bancor, which would have been the first ever genuine international currency. Wasn’t America then the sole candidate for securing the liquidity the world was badly in need of? On the one hand, the dollar shortage exerted a deflationary pressure on the economies hit by the war and confronted with the heavy task of rebuilding their productive capacities. On the other, as the leader of the free world the USA considered the ‘dollar privilege’ as a sort of seigniorage right for a superpower in charge of the Western camp’s security.

As was to be expected, the USA eventually took advantage of that facility, inundating the world with dollars to the point that gold reserves were a mere fraction of the volume of dollars issued by the Federal Reserve. It is worth noting that the main dynamics at work were the successful attempts by Washington, through this massive oversupply of dollars, to dodge the ‘guns and butter dilemma’: the Vietnamese War and President Johnson’s Great Society social program were indeed the two pillars of US policy. Nixon broke the spell by decoupling the dollar from gold: Bretton Woods II was born with the responsibility of financing deficits transferred from the IMF to the market. But trust in American economic dynamism and strategic superiority was such that it made the financial markets very accommodating of a US profligacy which went unbridled through successive Presidential mandates until George W. Bush.

With the benefit of hindsight, it appears that the dollar’s ‘exorbitant privilege’, as President Giscard d’Estaing once qualified it, probably played an important role in the race between America and the Soviet Union, allowing the USA – through Washington’s unrestrained external indebtedness and exchange rate policy – to share the burden of defense, including the arms-race which culminated in ‘star wars’, with its Western allies. The USSR, plagued with systemic inefficiency, did not enjoy the same transfers of resources from its own impoverished camp.

Once the race was over, the extravaganza went on, nurturing world economic growth, this time thanks to the transfer of Asian savings to the USA to finance the trade deficit, mainly through the massive purchase of Treasury bonds. Japan was footing the bill for American security whilst China was buying access to the US manufactured goods market.

The financial crisis that broke out on September 15th 2008, has been shown to have as its underlying origin the Fed’s lax monetary policy, which allowed for an abundance of liquidity and low interest rates, enticing households to go into debt through excessive use of credit cards or mortgage credit and financial institutions to take on excessive leverage at an unprecedented scale. The end of the boom sent a shockwave throughout an over-indebted US economy and triggered the subprime crisis. But the ultimate cause was US monetary policy and the fault line lay in the international monetary system.

Has the time of reckoning arrived? The self-interest of the USA may no longer lay in the continuation of the present system because it either makes its economy vulnerable to its Asian creditors or to a sea-change in the assessment of the robustness of the American economy by financial markets. Although it should remain for another generation the world’s leading economy, its relative weight is declining. For the EU, being subject to the vagaries of the dollar-based system constitutes the counterpart of the defence burden borne by the USA within the Atlantic Alliance. In this respect the EU behaves as a tributary ally of Washington and it will therefore not raise the issue of revamping the international monetary system. China takes an ambivalent view: On the one hand, as an emerging global economy and strategic power, it cannot satisfy itself with the present asymmetric system; on the other, as a large creditor, it must be careful about the real value of its dollar-denominated assets. For all players, the transition is critical and calls for a cautious step-by-step approach.

A Bretton Woods III must be conceived from now on, building up on the strengths and mending the weaknesses of the present system. This reform should cover a four-pronged agenda:

• Effective surveillance and gradual correction of all structural imbalances (including of the US and China) by the IMF;

• Giving more resources to the IMF so as to allow it to ease adjustment in poor and emerging economies;

• Rebalancing the governance of the IMF and the World Bank, by making more room for China and other emerging countries, and by substituting the EU for individual European Member States, and in particular the eurozone members;

Switching very gradually and cautiously from the dollar as a reserve currency to a basket of currencies including the renminbi. This implies a move to the latter’s full convertibility with the inherent risk of appreciation. This would ease the control of inflation and the move from an export-driven to a consumption-driven growth model in China. This would work towards smoother integration of China in the world economy and would contribute to the medium term recovery and rebalancing of the global economy.

Moving towards Bretton Woods III, calls for collective leadership which the G20 – extended to some poor countries – can provide. But the three largest economies, namely, the USA, China and the EU – a sort of G3 – have a key role to play in shaping the architecture of the system and piloting its implementation. If the EU means to become an effective player in the emerging multipolar world by assuming a growing role in the multilateral economic governance system, it must at the same time gain full autonomy with regard to its currency and more responsibility for its own defence since both issues are narrowly intertwined. This is what the future of the EU is about. A very long road ahead indeed.

This article is part of the book ‘After the crisis: towards a sustainable growth model‘, edited by Andrew Watt (ETUI) and Andreas Botsch (ETUI/ETUC) and published by the European Trade Union Institute (ETUI).

Twenty years after the collapse of the Soviet Union the world is only slowly adjusting to the new realities, while the old political structures have remained pretty much the same. The reform of the United Nations and its Security Council is dying silently in numerous committees, much to the frustration not only of countries like Germany and Japan, which have been hoping to join the exclusive club, but also of the emerging economies from the South, which have long felt excluded.

But it is not only about formal representation. I believe in order to understand the reluctance of countries like Turkey and Brazil to join the efforts of the United States and Europe in pressuring Iran to give up its nuclear programme requires an appreciation of their sentiment of exclusion and humiliation. From the revolutionary liberation movements to the dependency theory of the sixties and seventies, the countries of the South have created their own narrative on the reasons for their underdevelopment and political dependency on the West.

Whether you agree with it or not, without understanding this narrative of exclusion, western politicians will hardly learn to comprehend why leaders like Hugo Chavez or Robert Mugabe still enjoy solidarity among a vast group of developing countries, regardless of their political conduct. The same may unfortunately also be true for Iran’s president Ahmadinejad.

But the narrative, of course, is only one part of the picture. With the economic success of the emerging economies, a new political self-consciousness and the determination to defend their interests has emerged. The most striking example is Brazil, which opened 30 embassies around the world in the last years, enhancing her influence mostly in Africa. Brazil today is defining herself as a leading voice of the South, and the United States and its European allies better take her demands seriously. While some pundits look with scepticism at Brazil and regard her policies towards Venezuela and Iran as a pet-project of President Lula’s centre left workers party, it is important to stress that Brazil’s foreign policy is based on a broad bipartisan consensus. Foreign minister Amorim, who also served under Lula’s predecessor Cardoso, is the embodiment of this new consensus of the Brazilian elite and its highly skilled foreign service.

The proliferation of new actors on the world stage is causing concern in western capitals and has given birth to a literature about the dangerous rising stars from the East and South, which has not always contributed to a rational debate. Nevertheless, I believe the left should embrace a more diverse UN, a demand that has been on the agenda of the political left in the West for decades now.

But the nuclear deal with Ahmadinejad also made clear that new actors do not automatically deliver convincing results. A closer look at the content of the nuclear deal with Iran indicates that Ankara and Brasilia failed to address the tricky questions, while Tehran made no commitment at all to give up its nuclear ambitions. That neither Lula nor Erdogan mentioned the ongoing violation of UN resolutions by Iran is not good news for the credibility of the United Nations.

The Cold War is over and the brave new world requires a new kind of leadership, and this is especially true for the developed countries in the West. But if countries like Brazil want to assume their legitimate role on the world stage, they will have to share responsibilities. Given the reactions after the announcement of the deal in Tehran, it seems quiet obvious that the US has underestimated Brazil’s and Turkey’s dedication to carry out this mission; and the images of the signing ceremony in Tehran indicate a rare moment of triumphalism over the establishment. But is a deal a good deal only because a country of the South has brokered it?

Closing Guantanamo would send a message that the days of violating core western principles are over; and it would help to restore the damaged reputation of the West as a whole. Yet so far the Europeans have been reluctant to respond to Washington’s requests – an attitude that marks a remarkable contrast to the enthusiasm about Obama’s election. Recent remarks by German interior Minister De Maiziere however, may indicate a policy change.

Since President Bush declared the ‘war on terror’, more than 700 people have been imprisoned at the US base in Guantanamo Bay. Conditions there have been scandalous ever since: Inmates have been tortured and isolated, their religious sentiments have been violated, and several have committed suicide. Besides wanted terrorists, the US government also imprisoned obviously innocent people.

On the campaign trail, Obama promised to close Guantanamo within one year. That has turned out to be more difficult than anticipated. Today there are still more than a hundred prisoners in Guantanamo. States in the US are unwilling to accept former inmates. The fact that some freed prisoners have rejoined terrorist groups has increased the pressure on President Obama to abandon his campaign-promise.

The administration’s attempts to reach out to allies for help are only slowly making progress, sometimes with astonishing results – bringing ethnic Uigurs, for example, to the pacific island-paradise of Palau. Sweden, Albania and Georgia, among others, have agreed to take prisoners. Germany has been on the US wish list from the very beginning (and I guess not because of its nice beaches). The German government has raised some legitimate concerns about security; but that has not been the only obstacle. Lawmakers from all parties have argued that they bear no responsibility whatsoever for the mess in Guantanamo.

And while this is certainly true, there is nevertheless an important argument to be made for aiding Obama in his efforts to close Guantanamo: Helping to facilitate the closing of Guantanamo is in our own best interest. The so-called ‘war against terror’ has not only seriously damaged the reputation of the United States; it has also become associated with the West as a whole. Germans and other Europeans have experienced this when they saw the acceptance of their presence in Afghanistan decline markedly. I believe that there is also a moral obligation to help release people who could have been freed a long time ago, but remain in Guantanamo simply because nobody has been willing to grant them asylum.

It should be obvious – and this lesson should have been learned from the Bush presidency – that the West can only fight credibly for democracy and human rights when western countries also apply these criteria in their own societies and policies. Probably nothing has suited Al-Qaida more than the double standards applied in Guantanamo. President Obama understood this lesson when he ordered the interrogation-practices to stop. But his policy is lacking coherence – at the US airbase Bagram in Afghanistan, the old policies continue. While human rights groups are demanding transparency, administration officials are divided over the question of how to proceed with the prisoners (estimated to be about 600 people). We should voice our concerns about Bagram, but we will be more likely to succeed, if at the same time we are helping the Americans to find a solution.

In his famous poem about the Girl from Guantanamo (‘Guantanamera’), Cuban national Hero Jose Marti wrote: ‘With the poor people of the earth I want to share my fate’. It seems that there are still far too many poor people in Guantanamo whose fate we could share.

By now of course everyone knows that Greece is in really tough shape, right? Practically at the cliff’s edge, ready to collapse? All the gloom and doomers have been telling us this for two months, so it must be true. But before we pronounce it so, let’s take a quick pop quiz:

Which country has less inequality, Greece or the United States? Which country has lower rates of infant mortality, Greece or the United States? Which country has greater age longevity and more affordable university education? Which country has a lower homicide rate and about one-tenth the number of people in prison, Greece or the United States? Which country has a lower rate of teenage births and lower rates of drug use? Which country emits far fewer carbon emissions per capita? Which country has affordable, universal health care for all its people, and pays about half as much money per person to receive it – Greece or the United States?

Surprisingly, the answer to all those questions is: Greece. Certainly Greece is going through a difficult spot in its long history, but how difficult depends on how you measure it. In some very important ways Greece is doing better than the United States (which also is saddled with enormous government deficits, as is virtually every country in the world, due to stimulus spending designed to jumpstart national economies after the global collapse).

Why then is gloom and doom all we hear about Greece, 24-7? A good part of the reason is ideological. With US government deficits soaring, conservatives from the teabaggers to Fox News to Senate Republicans are sounding the alarm about a return to ‘big government’. Recently, former GOP presidential candidate Rudy Giuliani even stated that President Obama was moving the US towards – gasp – European socialism.

For conservatives like Giuliani, Glenn Beck and others, ‘Europe’ is a code word for ‘big government’, ‘high taxes’ and more recently ‘big deficits’. When they bash Europe they are really taking aim at government in the United States. All this talk of Greece – a small country that makes up only 2% of Europe’s economy – is being used to attack the Obama administration and its stimulus spending and budget deficits. ‘The US will end up like Greece!’ has become one of the conservatives’ rallying cries.

A second ideological front is glimpsed when you realise that most of the analysts and reporters are looking at this, not from the point of view of everyday Greeks, but from that of the bankers and bonds traders, and the investment class in general. The Electronic Investor Herd is skittish that they might not get paid back the money they have loaned to Greece. And most of the reportage on Greece’s situation comes from media outlets owned by corporations that reflect the commercial interests of its owners.

But from the average Greek person’s perspective, it matters little if Greece defaults on its debt or instead manages to roll over that debt at a high interest rate. Either way, Greece is going to have to enact austerity measures, and that will be a hardship for its people. Greece has been living beyond its means, rolling up deficit after deficit, and the bill has come due. In a country where many are able to retire at the age of 50 or 55, while the Germans are raising their retirement age to 67, this is not terribly surprising.

Even with Portugal’s economy (which is smaller than Greece’s) possibly added to the mix, this crisis has been manageable for the European Union. It’s not as if Europe is the only place suffering the aftershocks of the global economic earthquake that shook the world in 2008. California makes up 14% of the American economy, truly too big to fail, and had to issue IOUs to pay its bills and prevent default. California has been slashing social programmes and government jobs, and is being swamped by foreclosed homes. So why are we are hearing more about Greece than California? Because Greece has more rattled the investor class and the slavish corporate media that reflects its interests.

What’s more surprising is how much progressive media outlets also have echoed this simplistic ‘bad Greece’ storyline. Whether on NPR, the Huffington Post, or various European news outlets, many commentators have unleashed Greece-bashing tirades that have fed into the hysteria. Prominent among them has been Simon Johnson, a MIT professor and former International Monetary Fund economist who has departed from his usually sober and insightful analyses to become increasingly shrill with over-the-top gloom and doom predictions.

So Greece makes for a convenient punching bag for those who wish to score ideological points. If there’s any hope of ever having a more progressive government in the United States, we have to unwind this ‘government is evil’ conversation. Greece is just the latest episode in this longstanding, American-led Europe-bashing. Here is a sampling of the numerous gloom and doom headlines that have appeared in US media outlets in recent years, trumpeting the imminent collapse of Europe:

‘The End of Europe’; ‘Europe Isn’t Working’; ‘Will Europe Ever Work?’; ‘What’s Wrong with Europe’; ‘The Decline and Fall Of Europe’; ‘Old Europe Unprepared for New Battles’; ‘Western Europe Is Cursed’; ‘Reforms in Europe Needed’; ‘Is Europe Dying?’; ‘The Rise of the Fortress Continent’; ‘The Decline of France’; ‘Political Crisis Paralyzing Europe’; ‘Europe’s Long Vacation Is Ending’; ‘Why America Outpaces Europe’; and ‘Europe Turns Back the Clock’.

These alarming headlines appeared from 2003 until late 2006, when – surprise, surprise – it was discovered that the European economy actually was surging past the US economy. In fact, an article published in the international version of Newsweek on November 20, 2006, blared the headline ‘The Great Job Machine: Despite Its Laggard Reputation, Europe Continues to Grow Faster, and Create More Jobs, than America’ – yet that story never appeared in the domestic version of Newsweek.

Just as the media misreported weapons of mass destruction and completely missed an $8 trillion housing bubble, it frequently misreports Europe. The ideologically slanted US media continue to shield Americans from injections of reality that are badly needed to understand their country’s relative standing in the world. Even the reporting on street protests in Greece has been tinged with alarmist depictions calculated to scare Americans about Europe. I believe it’s a good sign that the Greeks are fighting to preserve their social contract from the marauding of the banks, the bonds traders and their previous governments that indebted them and then hid the debt with the help of Goldman Sachs. What I find truly worrying is that Californians, as well as their fellow Americans, are taking all of this lying down. There seems to be little fight in the American people, despite the lost ground.

And if there is little fight left in that Spirit of 1776 – and on top of that Americans don’t value government very much – they are never going to push for the adoption of better policies in which a smart and progressive government plays its suitable role, defined via the rough and tumble of politics.

Steven Hill is author of the recently published ‘Europe’s Promise: Why the European Way is the Best Hope in an Insecure Age’ (www.EuropesPromise.org).