July 7, 2016 A leader’s potential actions are far more limited than one would think.
By Jacob L. Shapiro
Geopolitics is not simply the intersection of geography and politics. At its core, understanding geopolitics is about understanding power. I would define power simply as the ability to either make someone do what you want them to do or make something happen that you want to happen.
The irony about studying power is that most don’t actually possess it, and for those who do, their ability to use it is ephemeral. It is easy when writing about politics to be seduced by what is possible. It is much harder to see what is impossible, but also much more useful.
The word “constraint” is what we use internally to describe the impossible. It is the geopolitical corollary to the Sherlock Holmes principle: “Once you eliminate the impossible, whatever remains, no matter how improbable, must be the truth.” And it grounds our forecasting methodology. Once you have identified the constraints, whatever is beyond them, no matter what one says or believes, is not going to happen.
Take, for example, the burgeoning awareness in the world of the Italian banking crisis.
This was a development we forecast in December, and it has been striking to watch as the Financial Times on July 3 and the Wall Street Journal on July 4 picked up the story, citing sources that said Italy would flaunt EU regulations against using public funds to pump money into the system. From there it was off to the races, and the story was picked up by over 180 different newspapers, if Google News’ counting algorithms are to be trusted.
One of the questions that readers have posed to us and that we have debated internally is, why is the EU, and by extension Germany, being so tough on Italy? For over a year, Brussels, with Berlin’s backing, has shot down proposal after proposal from the Italians as they attempt to deal with the over 17 percent of non-performing loans that are weighing down their banking sector. Germany very clearly needs to preserve its access to the European market, and the existence of that market is dependent on not letting its third largest Continental economy go up in flames. Why not let the Italians bail out their banking system? And if that doesn’t work, why wouldn’t Germany take the drastic step of bailing the Italians out themselves?
There are a number of reasons, but the key one to understand is that German Chancellor Angela Merkel is not simply free to do as she pleases, or even to do what she thinks is best. The voters who elected her don’t want to bail out the Italians. The business interests intertwined with the German political elite don’t want to bail out the Italians either, and they have the luxury of taking this position because they are more insulated than the common depositor when it comes to the fall-out from the type of cascading systemic crisis that is possible. And German lawmakers, keen to preserve competition rules and deter other countries from risky banking practices, don’t want to see Rome use its own funds to bail out private institutions. People don’t intentionally walk into catastrophes. They are often dragged into them against their will.