Dani Rodrik's weblog

What does Spain need to do to get out of the crisis?

I just came back from a conference in Spain, where this was the question on the table. I made the following points.

First, expenditure cuts are not going to do the job on their own, unless accompanied by policies targeted directly at improving competitiveness.

Second, "structural reforms" (which in the Spanish context means largely labor market reforms that aim to reduce firing costs and decentralize wage bargaining to the firm level) are not a substitute for competitiveness policies.  Insofar as they eat up political capital, they may even backfire in the short-run.

Third, there are no easy solutions to Spain's competitiveness conundrum.  But the least bad solution is to engineer an economy-wide reduction in nominal wages and the prices of services (utilities, etc.) through some kind of social compact.

Easy?  No.  Any other practical alternative to a prolonged period of recession and high unemployment? Probably not.

Spain could always exit the eurozone of course. But the acrimony and uncertainty that this will cause in the short-run does not make it a practical alternative to incomes policies in my view.

Here is my presentation at the conference.

What is going on in Turkey?

Not what you read in the papers.

Forged documents, planted evidence, secret witnesses, anonymous informants — these have become the weapons of choice in the massive campaign underway in Turkey to destroy the secular old guard and discredit the government’s opponents. It may look like a mildly Islamist, but democratic government is using the rule of law to prevail over a militarist, hard-line secularist elite. But the reality is that the government and its supporters are waging a dirty war, in which hundreds of prominent individuals (officers, journalists, academics, lawyers) have been framed and incarcerated.

My wife Pinar Doğan and I described in an earlier article one of the most prominent cases before Turkish courts, the so-called Sledgehammer coup plot. Retired general Çetin Doğan and scores of other officers have been jailed since February on the basis of blatantly forged documents that purport to show that they planned to overthrow the newly elected AKP government during 2002-2003. (Disclosure: I am the son-in-law of Doğan.)  Since the publication of that article, we have accumulated more evidence that shows the coup plot documents are fabricated. (Click here to see for yourself.)

In a just published article in The New Republic, we provide an update and describe how a very similar pattern of fabrication and judicial misconduct runs through the other “Ergenekon” investigations as well.  The evidence in many of these cases strains credulity and disintegrates under close scrutiny. Typically, they are produced by anonymous informants and secret witnesses whose credibility is suspect and who have implausibly detailed knowledge about the crimes they allege.  The cases lack hard evidence such as confessions, fingerprints, or surveillance. The indictments are a mix of speculation with wild leaps of faith.  Tellingly, there are several clearly documented instances where the police and prosecutors have the “evidence” in hand before they are supposed to have been “discovered.”

Given the scope of the deception, we have come reluctantly to the conclusion that the government is at a minimum complicit in the massive perversion of justice that is taking place in the name of democratization. These fabricated cases target the government’s opponents, benefit the Islamist groups, and would have been difficult to mount without the cooperation and participation of the Justice and Development Party (AKP) and its supporters.

As long as it felt persecuted by hard-line secularists, the AKP did appear to advance the cause of democracy, rule of law, and human rights -- most significantly in its efforts to join the European Union. But now that it has the upper hand, it is undermining that same agenda.

And as if that were not tragic enough, liberals at home as well as Turkey’s friends abroad remain mostly oblivious to the severity of the events unfolding.

(Note: If you read Turkish, this is the place to go on the Sledgehammer case.)

At a bookstore near you…

but unfortunately, not anytime very soon!  If you want to read a good book in the meantime, read this.

Greek Lessons for the World Economy

The Greek crisis is yet another manifestation of the political trilemma of the world economy: economic globalization, political democracy, and the nation-state are mutually irreconcilable. We can have at most two at one time. 

Read the rest here.