The List

The List: Five Governments That Deserve to Fail

A number of leaders around the world are on the ropes right now. That's not necessarily a bad thing.



The leader: President Mikheil Saakashvili

Why he's got to go: Economic and foreign-policy incompetence. Russia might have started the war, and the global economy might be rocky, but Saakashvili's policies haven't helped.

The story: Georgia has deposed every one of its leaders since it gained independence from the Soviet Union in 1991. Saakashvili, who came into power in the 2003 peaceful "Rose Revolution" and won an open election in January 2008, may be next.

The Georgian economy grew rapidly between 2004 and 2007 -- between the end of the country's political strife and the beginning of the global economic crisis. But much of Georgia's new wealth relied on foreign direct investment, which has dropped steeply, and little of it trickled down past the country's elites.

The August 2008 war -- in which Russia sent troops deep into Georgia after Tbilisi tried to retake control of the separatist South Ossetia region -- did not help matters. It destroyed already tense relations with one of Georgia's largest trading partners and slashed direct foreign investment more than 50 percent. This left the country even more exposed to the continued and accelerated global downturn because Georgia requires more than $4 billion in support from foreign governments and organizations to stay afloat. Saakashvili himself called the current situation "a major existential struggle."

Saakashvili's response to the latest crisis -- the 20,000-person protests that have shut down Tbilisi for a week -- has been to point the finger at the Kremlin. But, even if Russia is funding the protesters, Saakashvili should focus on addressing their core complaints: corruption, lack of accountability, and politically motivated prosecutions that have targeted some of Saakashvili's opponents.

His one saving grace? The opposition candidates don't look much better.



The leader: Prime Minister Abhisit Vejjajiva

Why he's got to go: Politicking when he should be governing. Aiding the poor through the downturn should be a bigger priority than scrapping with rivals.

The story: Thailand has been in a state of political turmoil since 2006, when a military coup ousted then Prime Minister Thaksin Shinawatra. Ever since, Thaksin, a wealthy businessman with strongly populist tendencies, has continued to broadcast potent political messages to his supporters in the country.

For the past month or so, up to 100,000 "red shirt" protesters who support Thaksin have rallied against Abhisit and periodically forced Bangkok to shut down. This month, protesters forced the government to call off a summit of leaders from the ASEAN trade bloc -- a tremendous embarrassment for Abhisit -- and provoked a military response that left two dead.

In all likelihood, Thaksin's Keynesian economic policies would benefit Thailand more than Abhisit's. But regardless of which man seizes power, one thing is certain: Their perpetual infighting has severely harmed the country. An Asian Development Bank economist said political turmoil may cause the economy to contract 5 percent this year, revising his estimate from 2 percent. If neither of the two men can gain control and provide peace, at least they should find a way to protect the Thai economy instead of driving away foreign investment, tourism, and assistance.



The leader: Prime Minister Pushpa Kamal Dahal, known as Prachanda

Why he's got to go: For failing to bring political or economic stabilization

The story: For the past three years, royalists and Maoists in Nepal have engaged in a peace process, following the ouster of the country's 240-year-old monarchy after a long and bloody guerrilla war. With a coalition government and new populist policies, the country has faced an unprecedented political reconciliation challenge. The hardest part for Nepal has been integrating its nearly 23,000 Maoist fighters into the Army, once the strong arm of royal power, and creating a productive legislative body.

The two rival sides have found it difficult to work together. The remaining royalists have balked at many of the populist proposals of the coalition government's Maoist leader, Prachanda. And by moving to the center and making necessary political changes, Prachanda risks alienating his partisans. For instance, a rule about how minorities will be proportionally represented in Parliament caused a series of ethnic flare-ups. Far-left protests have started to occur in the countryside, threatening the tenuous political process.

It doesn't augur well for the country. Any political problems will necessarily compound its extraordinarily weak economic situation, just as economic problems may spur political dissent. According to one economist at the Asian Development Bank, "The country is already facing the grave challenge of sustaining the growth and the poverty-reduction gains of the past decade." This means Prachanda must maintain political stability and avoid any violence at all costs -- or Nepal risks catastrophe.



The leader: Prime Minister Vladimir Putin

Why he's got to go: Despite his popularity, he's to blame for failing to enact economic policies that would have aided Russia through the financial crisis. And he isn't helping now.

The story: Russia benefited richly from the global rise in stock and commodity prices during Putin's presidency. Between 2000 and 2007, the country's GDP more than tripled. Putin became enormously popular, enacting some social reforms and setting up a rainy-day fund. He also used the economic good times to consolidate wealth in the hands of a small cadre of Russian elites. And economic growth justified Putin's authoritarian control over the country and punishment of dissenters.

But since kingmaker Putin ushered Dmitry Medvedev into the presidency in 2008, the political and economic situation has looked much bleaker. Putin used the growth period to bolster Russia's oil, commodity, and gas companies to an all-important status, calling conglomerate Gazprom "one of the backbones of our economic growth" in 2004. But he did not encourage the diversification of Russia's wealth base. Commodity prices rely on global demand, which has fallen precipitously during the Great Recession, leaving Russia's economy needing oxygen.

Indeed, the country is hard hit. Stock prices are down more than 50 percent, and debt delinquency has skyrocketed. Unemployment is up. Growth was scratch in 2008, and the economy will contract in 2009. The ruble's in trouble. Yet Putin takes no blame and has retained a great degree of control. Without the accompanying prosperity, Putin's case for maintaining tight control over the country's "managed democracy" is much weaker.

Medvedev seems more amenable to new policies and has a stronger background in economics. This should, ideally, mean the end of Putin.

Ralph Orlowski/Getty Images


The leader: Chancellor Angela Merkel

Why she's got to go: For naysaying other countries' policies under the banner of economic responsibility

The story: Throughout most of the 2000s, Germany's export-based economy fared well. But with global demand weak, slowdowns in the industrial market, and woes in its banking sector, Germany succumbed to the Great Recession. Its economy is due to contract about 5 percent this year.

Merkel's administration -- especially Merkel herself -- has governed conservatively and prudently in domestic affairs. In foreign policy, she has been a mixed bag. Her government has pointed fingers and naysayed other countries' economic policies, spurring a chilly response from leaders of the United States, Britain, France, and Japan, among others.

In September, Finance Minister Peer Steinbrück accused the United States of precipitating the crisis, "spreading worldwide like a poisonous oil spill." Merkel responded to the United States' and Britain's stimulus packages by saying she would not join a "pointless race" to spend, though she ultimately had to put forth a 50 billion euro Keynesian package.

In a New York Times interview, Merkel explained Germany's hesitance to stimulus as stemming from a caution against inflation due to its aging population (Germany's demographics mean it will have fewer workers to repay the funds down the road). The response met with a shrug from the international community; Germany could simply take in more immigrants, as the United States does.

Ultimately, Merkel has been a federalist when the world needs internationalists. Taking a more proactive role in stimulating demand and buoying the G-20 economies would be worth it -- for Germany, the euro area, and the world.

The List

The List: Ditching the Dollar

Your guide to the latest international currency schemes.


What? A global supercurrency to supplant the dollar

The details: Last month, the governor of China's central bank, Zhou Xiaochuan, sent shock waves through the political and financial worlds by suggesting the world's largest foreign holder of U.S. dollars supported the creation of a new global reserve currency.

In an essay published in both Chinese and English, Zhou, without ever mentioning the greenback, articulated concerns about the inherent vulnerabilities and systemic risks in the existing international monetary system. The world needs a reserve currency disconnected from individual nations and... able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies, the essay went on to state.

Zhou recommended building on an existing asset and exchange system, a kind of synthetic currency that the International Monetary Fund (IMF) created in 1969. In the special drawing rights (SDR) program, the 185 IMF member states fund a pool of money that the IMF distributes in shares, or SDRs. This currency could be used for government finance, trade transactions, pricing commodities, and international accounting. G-20 leaders expanded the SDR pool by $250 billion at their recent meeting.

The suggestion comes as the Chinese government attempts to push the renminbi, whose principal unit is the yuan, as a reserve currency in Asia. In past months, China has completed currency swaps with Argentina, Belarus, Indonesia, Malaysia, and South Korea, among others; these allow China's trading partners to buy Chinese goods with the renminbi, rather than the dollar. Soon, some economists predict, the renminbi may become the de facto pan-Asian reserve currency and a much bigger global player.

China Photos/Getty Images 


What? A global supercurrency similar to the Chinese proposal

The details: Speaking in Moscow last month, Russian President Dmitry Medvedev put his support for supplanting the dollar in stark terms: Many of our partners maintain the point of view that everything is fine in this area, that all that is needed is a slight strengthening of major worldwide currencies, including the dollar. We hold another point of view. He strongly reiterated this idea at the G-20 conference.

Medvedev seconded China's support for expanding the IMF's special drawing rights program. He said the ruble, renminbi, and gold should join the dollar, euro, and pound -- the primary reserve currencies for the past 50 years -- in a multicurrency basket pricing the SDR.

The inclusion of gold bullion in the currency basket caused a press kerfuffle; numerous articles described Medvedev and Arkady Dvorkovich, the Russian government's chief economic advisor, as supporting a gold standard. In fairness, John Maynard Keynes and Franklin D. Roosevelt themselves recommended basing global reserve values on the price of gold and other commodities.



What? The sucre, a South American bloc currency

The details: At a regional summit last November, Venezuelan President Hugo Chvez called for the creation of an EU-type monetary zone and adoption of the sucre, a regional currency, to reduce dependence on the dollar. Chvez addressed leaders from the Bolivarian Alternative for the Americas (ALBA) trade bloc, which includes Venezuela, along with Bolivia, Cuba, Dominica, Honduras, and Nicaragua.

The proposal came with a heaping dose of criticism for the United States and other G-20 countries, which Chvez accused of purposely suppressing developing economies. He also recommended that South American countries abandon the IMF, an imperialist hand to dominate us.

We're not going to wait here with our arms crossed for the World Bank or the International Monetary Fund to come and solve the problems that this great threat [the United States] unleashed on the world, he said. The hegemony of the dollar must end, he added.

ALBA members seem to be in favor, agreeing in principle to developing the sucre within two or three years.



What? A common currency for Central Asia

The details: Iranian President Mahmoud Ahmadinejad suggested in March that the Economic Cooperation Organization (ECO) trade bloc -- Afghanistan, Azerbaijan, Iran, Kazakhstan, Kyrgyzstan, Pakistan, Tajikistan, Turkey, Turkmenistan, and Uzbekistan -- take up a common currency when it debuts its planned free trade zone in 2015. The process of obtaining one single currency in the trade and exchanges among members, and in the next stages with other countries and neighbors, should be designed, he said.

After the collapse of the closed socialist economy, the capitalist economy is also on the verge of collapse, Ahmadinejad said, railing against the hegemony of the dollar in foreign trade.

Were the ECO bloc to take up a common currency, it would rival the euro in its scope; the countries together have about 420 million people. Representatives from Kazakhstan and Turkmenistan seemed to support the general idea, and the topic will be taken up again at the ECO's next convention, in 2010.



What? The acmetal, a global currency

The details: In March, Kazakh President Nursultan Nazarbayev, speaking from the capital city of Astana, called for the creation of a world currency called the acmetal, a word coined from acme and capital.

There is no other choice available to us, if we really intend to utilize effectively this unique opportunity of overcoming the shortcomings of the Old World and building up a New one, the strongman opined in a pre-translated report. It went on to state, It so happened that the whole of our world has somehow unexpectedly and imperceptibly got into the tunnel of global crisis from where nobody is able to see where is the 'exit'.

The Kazakh leader described how the G-8 or G-20 countries could band together to create a transitional currency, the transital, before full global adoption of the acmetal. He also described a putative new world order brought on by the currency scheme: acmetalism.

Proposing new currencies is something of a hobby for Nazarbayev, who has advocated a Central Asian regional currency plan since 2003. He has called for the adoption of the altyn or yevraz in the Eurasian Economic Community (EEC), which includes Belarus, Kazakhstan, Kyrgyzstan, Russia, and Tajikistan. Moscow takes these suggestions as a slight, though. It has proposed that the EEC states band together and adopt the Russian ruble.