John Oliver, burning tires and flowers. Why do these three seemingly disparate entities belong in the same list? They each indicate just how dangerous Ecuadorian President Rafael Correa is and could become.

Correa’s eight-year reign, now in its third term, has brought significant benefits to the people of Ecuador, including an impressive drop in the poverty rate from 37% in 2007 to 22% in 2014 and stability to a nation that in the prior decade saw seven presidents removed from office before completing their terms. But an alarming combination of hypersensitivity to criticism, obsession with power at any cost and a faltering economy could push Correa to civil war with his people—or worse, trap them in an oppressive, smothering dictatorship.

The President’s hypersensitivity manifests itself in Ecuador’s poor record on freedoms of expression and the press. Freedom House has labeled Ecuador “Not Free” in its Freedom of the Press category for 2015, citing strict censorship laws passed by the Correa regime, specifically a 2013 law, The Organic Law on Communications, that allows more government regulation of the media by dictating the types of information that can and cannot be presented and expanding governmental monitoring capabilities.

Moreover, Human Rights Watch has noted several cases that used the Digital Millennium Copyright Act, a US law that requires websites to remove content on the grounds of copyright infringement without ever going through the judiciary. President Correa, according to Human Rights Watch, has used this precedent to compel global social media sites to remove content that is critical of his administration. The cases were all brought by a Spanish firm representing media entities linked to the regime, including the public TV station, the political party and even a government ministry.

But, then again, grotesque media censorship is not all that surprising coming from a man who angrily tweeted John Oliver for condemning his underwhelming record with regard to freedom of the press.

Troublingly, Correa’s penchant for stifling free and fair journalism by any means necessary – including calling one female journalist a “fatty” in order to discredit her – is not his worst leadership quality. In addition to his distaste for media criticism, he often responds to protests against his policies with state-sanctioned cruelty.

During August 2015, a national strike was called to protest controversial inheritance tax policies, the expansion of oil drilling and mining, changes to labor laws and pensions, repression of the freedoms of speech and the press, and constitutional amendments (discussed later). In response to the demonstrations, reports state that the Ecuadorian police used tear gas and clubs on protestors, arrested and searched citizens arbitrarily, declared a warrantless “State of Exception,” and even targeted female protestors’ “intimate regions” during attacks—all while Correa publically praised the police.

Police violence and excessive use of power are not new to the Correa regime. In 2010, after a demonstration during which members of the air force and police department blockaded major thoroughfares with burning tires to protest cuts in benefits, the President responded by publically declaring that “no pardon or forgiveness” would be given to those involved. Correa even stated that he would attack members of the opposition political party, who he accused of attempting to stage a coup.

His sensitivity and violent streak depict a man with a need to hoard power, an image only enhanced when examining the aforementioned constitutional reforms. If adopted, Correa’s proposed amendments to the Ecuadorian constitution would eliminate term limits for public officials. These amendments would, in theory, allow him legislative freedom to rule for life should he continue to win elections, and are being advertised by the ruling party despite a 14-point drop in the President’s approval rating, an overall disapproval rating of 55% and 50% of Ecuadorians saying they no longer trust him.

The most immediate threat to Correa’s coveted power might not come from the people of Ecuador, but rather its economy. As oil prices have fallen and the dollar – Ecuador’s currency since 2000 – has strengthened, Ecuador’s economic activity has stalled; public coffers are beginning to dry up and Correa has lost a valuable leverage over his people. As a commodity exporting country – its two major exports being oil and bananas – volatile commodity markets affect Ecuador disproportionally.

Concurrently, the sanctions placed on Russia in response to President Putin’s aggression against Ukraine have also gravely affected Ecuadorian cut flower exports. The flower industry in Ecuador employed over 100,000 people and generated $873 million in business in 2013, with Russia as one of its principal buyers. As such, imposed sanctions have hurt the Ecuadorian flower industry. Ecuadorian industry is losing competitiveness across the board and it is unable to devalue its currency in order to spur export competitiveness.

Correa also poses an economic threat to foreign markets. He came to power in 2008 by defying the international monetary community and defaulting on his country’s debt. His economic legacy is volatile at best, and, with access to total power, he could initiate a crackdown on foreign investment in the form of creeping expropriation—investment that totaled over $725 million in 2013 and reached an eight-year high with over a billion dollars invested in 2008. The US State Department has labeled Ecuador fairly open to FDI in the past, indicating any attempt by Correa to close off foreign economic involvement could affect the significant international presence in the national economy. Moreover, because Ecuador has adopted the dollar, the American Federal Reserve Bank has control of Ecuador’s currency; the American government should have vested interest in the stability of democracy and free trade there.

The Twitter war with John Oliver proves that Rafael Correa will do anything in his power to discredit and silence his critics. How he handled the burning tire protest and others since then prove that he will publically call for and subsequently condone the use of force in response to demonstrations against his policies, stifling dissent. Most importantly, the issues with commodity exports demonstrate the fragility of Ecuador’s economy, the performance of which was Correa’s one legitimate claim to the popularity and adulation he so clearly covets. His disapproval and distrust numbers keep climbing while simultaneously he and his party are increasing attempts to codify in Constitutional law his indefinite right to the Presidency. If he continues losing popularity, the situation will worsen.

For the sake of the people of Ecuador and foreign investment in the country, vigilance is necessary, lest Correa forcefully construct an oppressive, leftist state. He may be “one of Latin America’s most popular leaders” today, but Rafael Correa is a ticking time bomb set to go off in the near future with clear potential for disaster.

The views expressed by the author do not necessarily reflect those of the Glimpse from the Globe staff, editors or governors.

The post The Dangers of Rafael Correa’s Burgeoning Autocracy appeared first on Glimpse from the Globe.

Recently, the Huffington Post released a widely popular three minute compilation video of Donald Trump repeating the word China with varying degrees of contempt. As apparent in the video, candidate Trump has made attacking China a major plank in his platform, blaming them for America’s economic woes. Pointing fingers at China is not new; the American political right and left have strongly criticized China’s trade policy for many years. Constant bashing of China, especially by influential media figures, has created a dominant discourse that portrays the issue in black and white: Beijing is deliberately using policies like currency manipulation to grow their economy at the expense of other countries. This view is difficult to argue with in light of recent evidence after China, on August 13-15, devalued their currency by 3% against the dollar—the biggest change in value since 1994.  

Intuitively it might seem that the devaluation of the yuan is negative for the United States. In principle, a weaker currency makes exports cheaper and more competitive, attracting export businesses to China. This economic principle is used to explain why the US lost 3.2 million jobs to China between 2001 and 2013, 2.4 million of which were manufacturing jobs. This job loss has led to a strong negative perception in the US regarding China’s economic growth. In a Gallup poll, 40% of respondents thought that China’s rising economic power was a critical threat to the vital interests of the US, and 44% of them indicated it was an important one. However this time, Beijing’s move to depreciate its currency may actually be positive for both countries.

Firstly, it is important to understand that the weak yuan (with respect to the dollar) has hardly been a determining factor when it comes to the US’s trade deficit and job loss. While America has certainly lost several million jobs to China in the past 10 years, the vast majority has been a result of high wages and the high cost of manufacturing in the US. In fact, many jobs have gone to other developing countries such as Mexico, South Korea (800,000 and 70,000 jobs respectively) and India (65% of all offshored IT work). Additionally, the term “losing jobs” is a misnomer, as China’s rapid economic growth has dramatically increased the job market all across the globe, especially in the resource extraction industry and manufacturing of parts that have final assembly in China: a positive-sum game. The United States’ consumer culture, high budget deficit (which, according to the twin deficits hypothesis, can cause a trade deficit) and movement away from relatively low-paying blue-collar jobs have also played a major role in this labor market transformation.

Statistically speaking, the only time Beijing’s currency manipulation was so severe that it significantly reduced the competitiveness of American exports (by making Chinese products much cheaper) was between the years of 2007 and 2009, when the currency was 20-40% undervalued against the dollar. China had good reason to keep their currency artificially low because of the global financial crisis and its negative effects on their export industries. Because of the currency devaluation, their economy stabilized, helping the global economic recovery. However, outside of the economic crisis, Beijing has been careful not to be too anti-competitive, and has allowed the yuan to slowly appreciate against the dollar. Moreover, a high rate of inflation (especially wage inflation) associated with China’s fast economic growth boosts prices and diminishes their currency advantage.

Secondly, the rapid deceleration of the Chinese economy poses a serious threat to both the global and US one—the devaluation of the yuan can help temper this deceleration. China has been growing comfortably at an unbelievably consistent annual growth rate of 10% of GDP for more than a decade, but now is growing at less than 7% with projections for 6% next year. While 7% and 6% economic growth is a desired figure for most economies, China has been growing at much higher levels for a quarter century, and 7% has long been seen as the minimum growth rate needed for social, economic and political stability in a country that still has tens of millions of poor peasants.

Though generally a fast growth rate must reach more sustainable levels in the long-term to prevent a bubble from developing, the current rate of deceleration is too rapid for the world to properly adjust without harm. China has the second largest economy in the world ($10.36 trillion) and is a reliable driver of the global economy; their sudden decrease from a previously consistent 10%-plus economic growth has lowered commodity prices, decreased demand for American and European exports (total imports decreased by 17% in May), and could drag the already relatively anemic world economy into further economic doldrums. The recent currency devaluation serves as a stimulus to their sagging export sector, which faced a whopping 8% decline in July. The devaluation helps reverse their slowdown, or at least tempers the deceleration to the benefit of US exporters and global economic stability: both major US economic priorities.

Finally, the yuan devaluation generally marks a major positive change in Chinese policy. America’s biggest criticism of the Chinese government is its strong hand in the value of the currency and stifling of market forces. However, China’s economy has matured to a certain extent and accordingly, the Chinese Central Bank (CCB) is moving to let the yuan be more receptive to the international market. Due to their slowdown, there has been some capital flight, meaning that money and investment is leaving the country. The immensely volatile stock market signals this. With the downward pressure depreciating the yuan, the CCB satisfied market pressure through devaluation and have promised to let market forces have more power. With that said, the yuan is not completely free floating—the CCB has stated that they still reserve the right to intervene to stabilize the currency. This is an important assurance in order to prevent a massive free fall in the yuan’s value due to the current market volatility. Given their need for stability, they will likely stick to their promise for slow and steady liberalization of their currency market rather than breaking the promise recklessly, which would only create more confusion and distrust.

China’s currency manipulation is a convenient scapegoat for America’s shrinking manufacturing sector and large trade deficit. But even if China had a completely floating currency, jobs would still have left, and China would still have a skyrocketing economy (albeit with more unstable growth). While their recent devaluation may draw ire from Donald Trump and others, it may actually be a gift in disguise, by bringing stability to the weakening Chinese economy in the short-term and bringing the currency closer to the market value in the long-term.

The views expressed by the author do not necessarily reflect those of the Glimpse from the Globe staff, editors, or governors.

The post Yuan Politics: Understanding China’s Undervalued Currency appeared first on Glimpse from the Globe.