October 21, 2014

The Similarities Between Germany and China


Geopolitical Weekly
TUESDAY, OCTOBER 21, 2014 - 03:00 
 
Stratfor
By George Friedman

I returned last weekend from a monthlong trip to both East Asia and Europe. I discovered three things: First, the Europeans were obsessed with Germany and concerned about Russia. Second, the Asians were obsessed with China and concerned about Japan. Third, visiting seven countries from the Pacific to the Atlantic in 29 days brings you to a unique state of consciousness, in which the only color is gray and knowing the number of your hotel room in your current city, as opposed to the one two cities ago, is an achievement.

The world is not getting smaller. There is no direct flight from the United States to Singapore, and it took me 27 hours of elapsed travel to get there. There is a direct flight from Munich to Seoul, but since I started in Paris, that trip also took about 17 hours. Given how long Magellan took to circumnavigate the world, and the fact that he was killed in the Philippines, I have no basis for complaint. But the fact is that the speed of global travel has plateaued, as has the global economic system. There is a general sense of danger in Europe and Asia. There is no common understanding on what that danger is.

I was in Seoul last week when the news of a possible wave of European crises began to spread, and indications emerged that Germany might be shifting its view on austerity. It was striking how little this seemed to concern senior officials and business leaders. I was in the Czech Republic when the demonstrations broke out in Hong Kong. The Czechs saw this as a distant event on which they had opinions but which was unlikely to affect them regardless of the outcome.

There has been much talk of globalization and the interdependence that has flowed from it. There is clearly much truth in arguing that what happens in one part of the world affects the rest. But that simply was not evident. The eastern and western ends of the Eurasian landmass seem to view each other as if through the wrong side of a telescope. What is near is important. What is distant is someone else's problem far away. 


Germany and China as Economic Centers

There is symmetry in this view. Europe cares about Germany and Asia about China. In some fundamental ways these countries have a substantial amount in common. China is the world's second-largest economy. Germany is the world's fourth-largest exporter. Both countries are at the center of regional trade blocs -- Germany's formal, China's informal. Both trade on a global basis, but both also have a special and mutual dependency on their regions. China and Germany both depend on their exports. Germany's exports were equivalent to 51 percent of its gross domestic product, or about $1.7 trillion, in 2013, according to the World Bank. China's exports equaled 23.8 percent of a larger GDP, or about $9.4 trillion.

 

The two countries at the center of their respective regional systems have both been extremely efficient exporters. The United States, by comparison, exports only 14 percent of its GDP. But it is precisely this ability to export that makes both Germany and China vulnerable. Both have created production systems that outstrip their capacity to consume. For Germany, increasing consumption can be only marginally effective because it is already consuming at near capacity. For China, there is more demand, but much of it is among the roughly billion people who lack the purchasing power to the buy the goods China produces for the regional and global market. China's society lives on a steep cliff. On top of the cliff is a minority who can purchase goods. In the deep valley are those who cannot -- and also cannot readily climb the cliff. Thus, like Germany, China's effective demand cannot absorb its exports.

Therefore, economic viability for both Germany and China depends largely on maintaining exports. No matter how much they import, their exports maintain domestic social order by providing a significant source of jobs right away, rather than in some future scenario involving the rebalancing of their work forces. For Germany, which has memories of massive social dislocation in the 1920s, maintaining full employment cuts to the heart of the country's social order. For China, whose Communist Party was shaped by the rising up of the unemployed in Shanghai in 1927, maintaining full employment is a bulwark in defense of the government. Both countries look at unemployment not only in terms of economics, but also in terms of social stability and governmental survival. Therefore, exports are not simply a number, but the foundation of each country.

An Economic Model's Shortcomings

The problem with an export-based economy is that the exporter is the hostage of its customers. Germany's and China's well-being depend not only on how they manage their economies, but on how their customers manage their own economies. If the customer's economy fails, the customer cannot buy. It doesn't matter whether the problem is a policy failure or a cyclical downturn -- the exporter will pay a price. Both Germany and China exist in this precarious position.

Germany and China are dealing with the fact that their customers' appetites for goods are declining -- whether because of price competition or because of economic decline. Europe is in economic turmoil. Southern Europe is suffering from massive unemployment, and the rest of Europe is experiencing slower economic growth, no growth, or even decline. Demand in this market is essential to Germany, and it is difficult to maintain demand under these circumstances. It is not surprising, then, that the German economy appears to be moving to recession.


Conversation: Managing China's Economic Slowdown
China's problem is different from Germany's, if somewhat more hopeful in the long run. The 2008-2009 global financial crisis decimated China's low-end export sector. The crisis halted the decadeslong low-cost export boom that the Chinese government had kept alive well beyond its natural life span through years of systematic wage repression and wasteful subsidies, both direct and indirect, to manufacturers. As a result of the crisis, the portion of China's GDP tied to exports collapsed almost overnight, from 38 percent in 2007 to just under 24 percent now. This collapse has forced Beijing to keep the economy on life support through massive expansion of state-led investment into housing and infrastructure construction. The housing boom is showing signs of having finally run its course.

Beijing is pinning its hopes, in part, on a revival of China's export manufacturing might -- not of the low-cost, low-value added goods that were once the country's mainstay, but increasingly of the kind of value-added goods proffered by more-advanced export economies such as South Korea and Germany. However, this evolution is a long-term goal, not one that can be realized in one, two or even five years. In the meantime, Beijing will struggle to maintain stable growth and high employment in the face of an anemic low-end export sector, a deflated housing and construction bubble, less-than-robust domestic consumption, and inadequate services and high-end manufacturing sectors.

Germany's and China's regional partners may not, in the long run, benefit from German and Chinese export power. It is interesting that in general, everyone fears the major readjustment that might be coming. Germany's power and ability to flood markets are seen regionally as problems that need to be corrected. At the same time, Germany's regional trade partners understand the instability that readjustment would bring and are content, particularly among the corporate and financial communities, to maintain the current order with Germany at the center. The same might be said for China. When I spoke of China's weakness, there was no longer any resistance to the idea, as there was a few years ago. At the same time, no one was eager to see a changing of the guard. The western and eastern parts of Eurasia were each built around the power of a single country: Germany in the west and China in the east. Each region understands the economic price it pays for German and Chinese power, and each region understands that pivoting around these two countries provides an element of stability.

Variables in East Asia and Europe

Another wild card exists in each region. In Europe, it is Russia. In East Asia, it is Japan. Russia has already become active in asserting itself. It is not challenging German power, as Russia is not an industrial competitor with German exports. Rather, the country is an exporter of energy needed by Germany and Europe, and it is a significant, if regional, military power. In Eastern Europe where I travelled, the discussion frequently turned on the question of whether Germany and Russia had reached some sort of secret accord that was playing out around the Ukraine crisis. If there is an agreement, then the region will have to dance to the Moscow-Berlin tune. If there is no deal, then no one wants to see Germany destabilize. But there is also a sense that there is nothing to be done about it.

In East Asia, there was also a sense that Japan is reappraising its postwar pacifism and preparing to take a more active military role in the region. Concerns about Japanese remilitarization were much less visible in Singapore than in Korea, and it is not an overwhelming concern anywhere. But there was still the feeling that as China enters an unpredictable phase economically, it enters one socially and politically as well. All of Japan's forays among the small islands to China's east may portend more aggressive moves. My own view -- that China is not nearly as capable militarily as it might appear -- was at once acknowledged and brushed off. In the region, risks can't be taken. Japan was seen as the wild card. Still the world's third-largest economy, with a substantial military establishment already, Japan might find it necessary to be a counterweight to China. There is as much enthusiasm for this in East Asia as there is for Russian aggressiveness in Europe.

Seeing Both Sides of Eurasia

A trip to both East Asia and Europe allowed me to see two things I never quite noticed before. The first is the symmetry between the two ends of Eurasia. Both are built around a strong exporting power that is now in very dangerous waters. Neither export powerhouse is loved in its home region, but few regional trade partners are eager to deal with the risks that instability might bring. And in each region there is an actor just off stage that is flexing its muscles and potentially changing the way the regional game is played.

The second thing I noticed, which I don't think I would have seen without flying first to Singapore, then to Europe and then to South Korea, is the degree to which the two ends of Eurasia are decoupled. We talk about global interdependence, and it is real. But while, whatever the economic dynamics, each region is intellectually aware of what is going on at the other end of Eurasia, each sees the other as distant and ultimately unconnected from its concerns. They are aware of each other, but not concerned about each other, as each region plays its own game. What makes this ironic is how similar the two games are.

The primary question that people on both sides of Eurasia asked was, "What is the United States going to do?" I was always asked about the decline of the United States and then, in the next sentence, asked about what the United States will do in Ukraine, Iraq or the South China and East China seas. There is a sense that Europe and China are far apart, but the United States is near. There was also a frustration that the United States is not prepared to play roles that would serve these regions' best interests and instead insists on pursuing what is seen as its own foolish ends. It was good to hear this, as it assured me the world has not completely uncoupled.

Distance does seem to disconnect people. Money might flow in milliseconds, and flights can be made in (too many) hours, but human lives are built around what is nearby and therefore familiar. Each region saw itself as unique. I might have been startled by how much they have in common, and Europe's and Asia's fates might be similar. But I have the sense that despite all we say about a small planet, similarity is not the same as being linked.



Read more: The Similarities Between Germany and China | Stratfor 
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October 16, 2014

Oil Prices Continue to Define Geopolitics


Geopolitical Diary
TUESDAY, OCTOBER 14, 2014 - 19:04   
STRATFOR
 
Editor's Note: Oil prices dropped steeply Oct. 14, with crude oil futures falling 4.6 percent to $81.84 per barrel -- the biggest decrease in more than two years. Brent crude dropped by more than $4 a barrel at one stage in the day, dipping below $85 for the first time since 2010. While these are relatively substantial drops, they are just one part of a continuing trend Stratfor has been tracking over the past few months. Factors behind the slump include weak demand, a surfeit of supply and the fact that many large Middle Eastern producers are reluctant to reduce their output.

In light of today's developments, we are republishing the following diary from Oct. 2, which details the reasons behind the falling prices and how the drops could affect oil-dependent countries around the world.

The global oil benchmark, Brent crude, fell Thursday to about $92 per barrel before rebounding to finish the day at around $94 per barrel, the lowest price since mid-2012. The latest sell-off follows one of the sharpest declines in a quarter in recent years, in which the price of oil slid about 16 percent. It may be premature to forecast sustained international oil prices lower than $90 per barrel, but if the price of oil remains close to where it is now, many oil exporting countries will feel the pain after basing their budgets on previous price expectations.

Simply put, the oil market has gotten overstocked. After spending much of the year producing only around 200,000 barrels per day, Libya has seen its production jump up by about 700,000 bpd since mid-June. The United States has continued its relentless expansion of oil production, with the latest Energy Information Agency figures estimating that U.S. production has increased by about 300,000 bpd since the beginning of August, and Iraq has experienced similar gains. Russia, Angola and Nigeria have also seen marked boosts in production. While most of the recent production increases are one-offs, North America could add another 1 million to 1.5 million barrels of production by the end of next year.

What is a Geopolitical Diary? George Friedman Explains.
Despite these noteworthy hikes in oil production, sluggish demand by European and Asian (particularly Chinese) consumers has proved just as important to oil prices. While China's demand will continue to grow, demand in developed countries will remain flat, as it has for a while. These factors only add to the concern that if left unchecked, oil prices per barrel in the $90-$100 range may persist for the foreseeable future.

Lower global oil prices will create challenges for several OPEC producers and others, particularly Russia. While some have suggested that OPEC will lower its production targets, it may not have the ability or the unity to coordinate a large enough drop in production to counter trends elsewhere and bring prices to a level more desirable to it (above $100 per barrel). If oil prices do return to this level in the near future, it likely will have little to do with OPEC's actions.

The Standoff Between Russia and the West

The first and most import consequence of lower oil prices is the effect it will have on the ongoing struggle between Russia and the West. Energy commodities dominate the Russian economy, particularly its exports. Any sustained drop in oil prices would directly impact the country's export revenues, and Russia's GDP would take a significant hit. The Kremlin's 2014 budget was based on oil prices averaging $117 per barrel for most of the year, with the exception of prices of $90 per barrel for the fourth quarter. For 2015, however, the budget has been pegged at $100 per barrel after much debate within the Russian leadership. While Moscow has significant financial reserves and can run a budget deficit if need be, Finance Ministry officials have estimated that lower oil prices could shave off 2 percent of Russia's GDP.

Although Russia has been able to weather the effects of U.S. and EU sanctions thus far for its action in Ukraine, the restrictions have already led some firms, such as Rosneft, to ask for financial assistance from the country's National Wealth Fund. A reduction in oil prices, and in turn lower revenues for Russia's budget, will constrain the Kremlin's ability to support Russian businesses hurt by sanctions the longer they are in place. With less of a financial cushion to soften to consequences of sanctions in the longer term, the Kremlin will have to moderate its position in the ongoing negotiations over the future of Ukraine to meet the demands of Western partners and achieve a reduction in sanctions.

Competition in the Middle East

As the West looks to gain from low oil prices in its struggle with Russia, it is also looking for an opportunity to negotiate with a beleaguered Tehran to come to some sort of a resolution on the Iranian nuclear program. For Europe, Iran and its large natural gas reserves represent one of the most promising long-term sustainable alternatives to Russian natural gas. Tehran is facing sanctioned export volumes, lower profit margins and ongoing expenses because of proxy conflicts in Syria and Iraq, and it can ill afford a sustained downturn in global oil prices. Progress on coming to an agreement with the West may be slow, which will only place more pressure on Tehran to negotiate. 

Saudi Arabia is also set on maintaining its global market share and has an opportunity in the short term to rely on its considerable foreign exchange reserves and low production costs to wait out other global producers. Riyadh's oil output is its most strategic resource, and one that the government is quick to use to its advantage. With summer temperatures beginning to cool and regional consumption starting to taper off, Riyadh can free up larger volumes to export, even at lower prices. The Saudis are also looking to leverage their short-term economic stability over rivals such as Russia, especially as they square off with Iran over the future of the Syrian government.

Saudi Arabia also has the ability to take a considerable number of barrels of oil offline if it wants to. Recently, however, it has offered discounts on its crude oil to secure market share for November, perhaps signaling to other OPEC members that while Riyadh may be willing to take its supply offline, others will have to do the same. But there is no incentive for other countries to reduce their output, since most Gulf producers will still manage to make a profit in the $90-$100 per barrel range; lowering production levels, therefore, would only reduce revenues.

The Americas and Beyond

Outside the Middle East, a decline in oil prices will also affect Venezuela. Officially, Caracas sets its budget at the low target of $60 per barrel of oil, a precedent begun by former President Hugo Chavez. Excess revenue could then be funneled elsewhere to off-budget expenditures to satisfy political patrons. Venezuela is in a dire financial position, needing oil prices perhaps as high as $110 to meet expenditures both on and off the book. Sustained low oil prices would severely hamper Caracas' ability to finance its imports, perhaps forcing government officials to get serious on selling foreign assets, such as Citgo, and gold from its central bank reserves, or offering even more attractive terms on loans for oil deals with the Chinese, though Beijing has recently balked at this. If oil prices stay low for an extended period, Caracas could also be forced to reconsider its deals with Cuba or programs like Petrocaribe.

Meanwhile, for developed massive oil importers -- Japan, China, India and the European Union -- low oil prices will give some respite to significant import bills. On the other hand, prices could also increase short-term strain in Europe, where energy has been the main factor pushing monthly inflation lower. While lower energy costs are good for Europe in the long run, they also raise the threat of deflation and inflame tension between the European Central Bank and Germany. 

Even though prices have likely bottomed out, the recent plunge in the price of oil serves as a reminder of how geopolitically significant energy prices can be. Energy supplies form the backbone of modern industrial economies, and energy resources are critical export commodities for those who possess a lot of them. As long as fossil fuels remain the dominant source of energy -- something that is likely to last at least another few decades -- oil supply and oil prices will remain critical.



Read more: Oil Prices Continue to Define Geopolitics | Stratfor 
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October 14, 2014

Adding up the nickels and dimes


Suhasini Haidar

http://www.thehindu.com/opinion/op-ed/adding-up-the-nickels-and-dimes/article6497578.ece?homepage=true

 

 
PTI IN STEP: "The expectations on the personal front between Mr. Modi and Mr. Obama were more than met given their interactions and the particularly poignant visit to Martin Luther King Jr's memorial." Picture shows them at the memorial in Washington.
 
None of the unfulfilled expectations of Narendra Modi's visit to the U.S. takes away from his substantial achievements in restarting relations that had been in cold storage for months
"I do not think Prime Ministers visits actually produce nickel and dime outcomes," former National Security Advisor Shivshankar Menon said at an event in Washington this week when faced with questions about specific outcomes of Prime Minister Narendra Modi's visit to the United States. "I do not think that's the purpose. The purpose is to push relationship as a whole forward, which was achieved," he added.

Mr. Menon, the key official who has been squiring India-U.S. relations for the past decade — first as Foreign Secretary and then as National Security Advisor — can certainly not be faulted for his conclusions. Mr. Modi has won applause all around for his five-day visit to New York and Washington. Yet as the dust settles on the Prime Minister's travels, it is important that some amount of stocktaking or "nickel and diming" also be done in order to assess the real costs and benefits of the visit, as it represents a major point in Mr. Modi's foreign policy.
Comparing visits

The visit to the U.S. came in unprecedented circumstances. The past year has seen a sudden free fall for India-U.S. relations, symbolised by the extreme reactions to the Devyani Khobragade incident on both sides. Added to that was the awkwardness with which the U.S. handled ties with Mr. Modi, who was a clear front-runner in the elections. The late reachout to him over the visa ban had to be compensated for in a very short period of time after he was elected. As a result, Mr. Modi's U.S. visit cannot be compared with the first visits of previous Indian Prime Ministers. Atal Bihari Vajpayee, for example, had another sort of welcome because of the big thaw he brought in relations between the countries in 2000, as did Manmohan Singh when the nuclear deal was announced some years later or when he visited in 2009 — a year after the Mumbai attacks — as U.S. President Barack Obama's first state guest.

Nor can Mr. Modi's visit to the U.S. be compared to his visits to other countries given the high stakes, the importance of the India-U.S. relationship to his plans for the economy, and the pitch to the massive Indian-American community in the U.S. The visit then must be graded on the expectations raised on both sides. While the expectations on the personal front between Mr. Modi and Mr. Obama were more than met given their interactions and the particularly poignant visit to Martin Luther King Jr's memorial , the specifics or "nickels and dimes" do not add up on several other fronts.

 Mr. Modi's assurances to U.S. businesses already invested in India have gone a long way in securing their interest in the Indian market  In Washington, expectations were clearly enunciated — the administration hoped for support for the U.S.'s coalition against the Islamic State and a rethink on India's decision against the Trade Facilitation Agreement at the World Trade Organization. Even as Mr. Modi flew into New York, Mr. Obama made an impassioned appeal at the United Nations for a global effort to join the 40 nations who had joined the coalition to "degrade and destroy" the IS. The White House said publicly that Mr. Obama would discuss with Mr. Modi "current developments in Afghanistan, Syria and Iraq, where India and the United States can work together with partners towards a positive outcome." Officials said privately that "outcome" didn't have to be anything more than moral support, as the U.S. didn't require logistical support and already had enough ground support from Gulf allies. However, for India, even this would have been a departure from policy. Only in 2001 did the country back a U.S.-led rather than a U.N.-led coalition. Mr. Modi went a step further in rejecting the coalition request, criticising the U.S. for failing to include all countries (pointing to Iran and Syria at the U.N.), and chiding the U.S. over Afghanistan during an interaction at the Council on Foreign Relations, saying it shouldn't "pull out early" as it did in Iraq.

On the economic front, India insisted that no WTO deal could be allowed until a "food security" agreement also went "hand in hand." For Mr. Obama, however, as a beleaguered President, an agreement would have been something he could have touted as a success, not just domestically, but also internationally, ahead of the G-20 summit in Australia in November. It was for this reason that Secretary of State John Kerry, Commerce Secretary Penny Pritzker, and Acting Deputy U.S. Trade representative Wendy Cutler made India's support for the TFA the highlight of their trips to Delhi in the past few months, with Mr. Kerry even saying the government's reversal was "the wrong signal to the world." When Commerce Minister Nirmala Sitharaman said the "WTO deal wasn't dead," many U.S. officials took that to mean a deal could still be hammered out in time for the Washington summit, but were proven wrong.
India's wish list

On the Indian side, the list of expectations was far longer, but perhaps more realistic than the one the U.S. had. This was discernible from the moves the Modi government had made in the run-up to his visit. For example, the government's step to uncap the prices of drugs was criticised by several health NGOs, as it raised the prices of life-saving treatments manyfold. But this failed to elicit any relaxation from the U.S. on market access for Indian companies. The joint statement issued also referred to a "high-level" group that would deal with Intellectual Property Rights issues — a group that has even been criticised by advocacy groups in the U.S. On nuclear issues, U.S. companies GE and Westinghouse remain inflexible on India's supplier liability law, even as the joint statement referred to a dialogue on "all implementation issues." On renewable energy, the government had hoped for big technology partnerships, especially on solar and wind energy, as it had only recently scrapped an anti-dumping law in a move aimed at helping U.S. businesses. Yet all that was announced was the facilitation of loans to the tune of a relatively modest $1 billion from Exim bank. A much-touted education agreement for 'edX' or online education never materialised. On visas, despite Mr. Modi's announcement that U.S. nationals would be granted 10-year visas barring "exceptional circumstances," the U.S. was not forthcoming on the relaxation India had demanded on the H1B visa. Difficulties for IT companies remained unsolved. When asked about this at a briefing for journalists after the visit, a senior Indian government official only said that visas are no longer "linked to reciprocity." Finally, there was no mention of the specific plans for co-production in defence on missiles and naval equipment that had brought a flurry of U.S. officials — from Vice President Joe Biden and Senator John McCain to Defence Secretary Chuck Hagel and Deputy Secretary of State Bill Burns — to India in the past year.

None of the unfulfilled expectations takes away from the substantial achievements of the Prime Minister's visit though, of which the most notable was the restarting of relations that had been in effective cold storage for months. Mr. Modi's command of the Indian diaspora, a powerful and influential constituency in the U.S., was another obvious take away from the visit. And his assurances to U.S. businesses already invested in India have gone a long way in securing and growing their interest in the market here. But if the nickels and dimes of the visit are to add up to establish a much richer partnership between the "world's largest democracies," one must not ignore what was not achieved in the U.S., even as Mr. Modi and Mr. Obama prepare to meet each other again at the G-20 summit.

Student Movements: A Subject of Human Geography


Geopolitical Weekly
Tuesday, October 14, 2014 - 03:00  Stratfor  By Sim Tack

As student protests in Hong Kong continue, memories of the 1989 Tiananmen Square demonstrations naturally spring to mind. Less iconic but no less notable were the Hungarian Revolution of 1956, which began as a student movement; the 2007 Venezuelan protests, which started with a group of students demanding constitutional reform; and the 1929 protests in Paris, which challenged the role of churches in education.

Of course, each student movement is unique; the one underway in Hong Kong concerns Hong Kong affairs, not widespread democratic reform in China proper. And yet all such movements share characteristics that transcend borders, making them an ideal phenomenon through which to study geopolitics.

Student protests lay bare the social and cultural layers that move beneath the surface of geopolitics, much like subsurface currents flow beneath the waves of the oceans. Human geography forms the foundation of society and thus the systems that govern it. Even if we regard the state as the highest level of global policymaking and interaction, these social undercurrents are what move the generations, ideologies and cultural changes that shape the constraints under which states operate.

Patterns Emerge
From ethnic and religious sects to socio-economic divisions, human geography is as important to a state as the physical topography and resources that constitute it. Human geography exists in all states, and as with physical geography, revelatory, even educational, patterns emerge over time.

The way in which the ruled rise up against the rulers is one such pattern. These kinds of movements take a variety of forms, from peaceful demonstrations and strikes to violent insurgencies. Of these, student protests are perhaps the most intriguing because of the unique position in society that students occupy -- they are at the vanguard of a generation that often differs markedly from that of their forebears. It is at this fault line that competing ideologies and changing cultural identities collide.

That they are students means they are intellectually engaged, frequently espousing distinct political beliefs. But to be successful, student movements must galvanize the other areas of civil society. In that regard, they are often a good catalyst for change. Students are already grouped together at universities, often in urban areas, enabling student campaigns to evolve into broader protest movements. Of course, social media has made physical congregation somewhat obsolete, but proximity still simplifies the logistics of political action.

Even under ideal circumstances, student movements can fail, and indeed history is rife with failure. But more often than not, student uprisings tend to be part of longer-term social, cultural or political change. After all, when student protests disappear, students themselves often go on to become part of a more mature generation that retains much of its ideological conviction.

Think, for example, of the May 1968 movement that shook France and several other countries in Europe. Despite failing to achieve many of its goals as it occupied university buildings in Paris, the baby boomer generation later became part of post-graduate society, fomenting far-reaching social and cultural change throughout Europe as the ideas of the New Left continued to bleed into the mainstream.

When a student movement fails to create change, oftentimes it will join or be subsumed by an existing political movement, acting either as a force that advances change or one that that highlights the continuation of ongoing social trends. France's revolution in June 1832 is a prime example. The notion of popular sovereignty had been in place ever since the French Revolution ended the monarchy. The return of the monarchy in 1814, after Napoleon's fall, however, ultimately compelled students to take to the streets in what was essentially an extension of the very same social pressures that had dominated the internal evolution of France for more than three decades. These particular protests in 1832, eternalized in Victor Hugo's Les Miserables, were struck down. But the underlying desires of the masses persisted, culminating in 1848, when the "Year of Revolution" saw the final collapse of the monarchy in France and generated a broader wave of social change throughout Europe.

Student campaigns have by no means been relegated to Europe. The United States witnessed profound student activism during the late 1960s and early 1970s, when the anti-war movement brought about countless protests. At its core was a demographic shift -- the baby boom, which spawned the primary group challenging policy at the time. Of course, these movements did not end the war in Vietnam; they barely convinced Washington to end the draft. But they exemplified the trends of the time, namely, the introduction of a new generation with a distinct ideology.

When student movements emulate broader social unrest, the results can be dramatic. In 1979, the Iranian Revolution radically changed the political identity of the country, facilitated in part by students who stormed the U.S. Embassy in Tehran. The ensuing hostage crisis united many sections of Iranian society in support of the revolution. Ironically, it was this generation of students that put down a later generation of students during the 2009-2010 Green Revolution.

A Society in Motion
Even prior to the current Hong Kong protests, China has had a rich history of student activism influencing society. In fact, the establishment of the People's Republic of China itself had its roots in student movements: Mao Zedong and Zhou Enlai discovered socialism and began to organize politically as student leaders in the early 20th century. In 1919, the May 4th Movement, which grew out of student demonstrations, arguably ushered in what would become the beginning of China's contemporary history when it lashed out against Beijing's response to the Treaty of Versailles.

Students were also at the forefront of the Cultural Revolution in 1966. They helped reinforce the personality cult of Mao as Chinese citizens revolted against capitalism and traditional Chinese culture. It was student repudiation of university leaders accused of opposing the Chinese Communist Party that initiated the actual protests, which in turn started the Cultural Revolution -- something much larger than a student cause, to say the least. 

Considering China's long history -- and the history of student movements -- the current protests in Hong Kong will not be the last time China faces social unrest. As a one-party state with immense geographic, social and economic diversity, China has faced significant calls for reform throughout the years. And the Communist Party will inevitably face more pressure as China changes. For China's is a society in motion: It is creating an urban middle class as its economy matures. Rising urbanization and private consumption have altered the interests and expectations of Chinese citizens, and as expectation rise, so too will pressure on the government to meet those demands.

Along with the emergence of a Chinese urban consumer class, there has been a veritable explosion in the number of students in China as higher education has expanded over the past decade. China is spending more money on higher education to create an educated work force better suited for the economy to which China aspires. But creating more students creates more opportunities for social unrest. The ability of these students to function the way China intends hinges heavily on the performance of the Chinese economy. If economic growth slows, the potential for unrest hastens.

It is difficult to gauge the ultimate effect of the protests in Hong Kong. Still, the student activism there reminds us why these subjects of society are well-suited to protest. Because of their position in the human geography, students will often be at the front of generational changes in their respective societies, even if they are not always the most decisive agents of change.

Editor's Note: Writing in George Friedman's stead this week is Military Analyst Sim Tack

  Read more: Student Movements: A Subject of Human Geography | Stratfor
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