Will pogroms make their return in Ukraine?

Here’s a new post I wrote for the World Policy blog:

Could Europe witness its first pogrom against Jews since the 1940s? As Ukraine inches closer to civil war, the country’s Jewish population is growing anxious. Late last month, a Kiev rabbi made headlines when he urged his co-religionists to leave the country. A Ukrainian-born member of the U.S. Jewish advocacy group UJA Federation recently told me that his organization is monitoring the situation in Ukraine with great concern.
Cause for the anxiety is the rise of the Right Sector, a nationalist militant group crucial to President Viktor Yanukovych’s overthrow that now appears to hold great sway over the fragile Ukrainian government. Some members of the Right Sector are overt anti-Semites. Isolated beatings of Jews around Kiev’s independence square have already been reported. This weekend, the Right Sector called for its members to mobilize against a Russian intervention. The prospect of an armed, anti-Semitic mob in a largely lawless country should give everyone cause for alarm.

To Westerners, fighting for freedom and attacking Jews seem like an anachronism. But anti-Semitism has always existed alongside the Ukrainian independence movement. Throughout the 20th century, every uprising or civil war in Ukraine was accompanied by mass murder of Jews. The parallels to today are disturbing.

The first violent struggle for Ukrainian independence took place during the Russian civil war between 1918 and 1920. Following the collapse of the Tsarist Empire, Ukrainian nationalists declared an independent Ukraine, and tried to defend it against the Red Army and White troops. Anti-Semitism was widespread at the time, and all warring parties on the territory of today’s Ukraine committed pogroms. But the nationalists of the Ukrainian Directorate were especially brutal.

Nationalist troops murdered thousands of Jews – at least partially because they associated all Jews with the hated Bolsheviks. Jews were strongly represented in the Bolshevik leadership (the commander of the Red Army, Leon Trotsky, was a Jew), and nationalists often spoke of the “Jew-Bolshevik” as their enemy. Killing Jewish people was justified as a means of fighting against Bolshevik collaborators. In fact only very few Ukrainian Jews had ties to the Bolsheviks, but that did little to dispel the myth of their collaboration.

During World War II, certain Ukrainian nationalists once again targeted Jews as alleged agents of Bolshevik rule. Following the Nazi invasion in 1941, Ukrainians killed a large number of Jews in pogroms with the help and at the instigation of the Germans. The pogroms would never have happened without German encouragement, and they pale in comparison to the subsequent mass murder at the hands of SS and Wehrmacht. But they are nevertheless continuation of Ukrainian nationalist anti-Semitism.

As historian Timothy Snyder writes in his book “Bloodlands”, the Nazis were able to recruit Ukrainians en-masse because they played on the popular belief that Jews were responsible for the hated Soviet power, which had killed millions of Ukrainians through famine and terror in the 1930s.

Today’s militant Ukrainian nationalists trace their roots back to the nationalists who fought Bolshevik power during the civil war and in the 1940s. They also employ a very similar brand of anti-Semitism as some of their predecessors.

In 2004 Oleh Tyahnybok, leader of the nationalist Svoboda party and one of the three signatories of last month’s interim peace deal with Yanukovych (along with Vitali Klichko and Arseniy Yatsenyuk), alleged that a “Jewish-Muscovite Mafia” is ruling Ukraine. By replacing the term “Jew-Bolshevik” with “Jew-Muscovite,” Tyahnybok continued the tradition of blaming Jews for supposed Russian aggression. That Jews were attacked during the protests against Yanukovych seems to indicate that others think like him.

In 1919, 1941 and today, the suggestion that Ukraine’s Jews are somehow collaborating with Moscow is ludicrous. Moreover, then as now only a small minority of Ukrainian nationalists is anti-Semitic. But Ukraine’s history shows that a radical minority can cause devastating violence and discredit an entire freedom movement.

In many ways, the situation of Ukraine’s Jews is much more secure today than in 1919 or 1941. It is still far from clear if a civil war will break out. And even if the country succumbs to violence, Jews are less likely to suffer. Ukrainian nationalists today are far more dependent on public opinion and support from the West, and would hopefully be loath to jeopardize this by attacking Jews.

But anti-Semitism is never entirely rational, and the West needs to brace for the possibility that a few radical Ukrainian nationalists could attack Jews even if it runs counter to their own interests. To prevent this, the U.S., the E.U., and the Ukrainian government need to make it clear to Svoboda and the Right Sector that any violence against Jews will turn them into pariahs and cause them to lose any potential support. This is not only in the interest of Ukrainian Jews, but of all Ukrainians who hope for closer ties to the E.U. After all, anti-Semitic violence could discredit the Maidan revolution and do more damage to the Ukrainian struggle for independence from Moscow than Putin ever could.

Putin’s invasion of Crimea has already thrown Eastern Europe back into the dark days of 20th century imperialism. Now it is up to Western leaders to make sure anti-Semitic violence doesn’t also make its comeback.

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What if Ukraine had nukes?

Ukraine is caught in a struggle between the E.U. and Russia over influence in Eastern Europe. The E.U. is vocally supporting the protesters, who  demand that President Yanukovich sign an association agreement with the E.U., echoing pro-European demands of the Orange Revolution of 2004. Russia, on the other hand, has granted Ukraine loans and cheap gas in order to keep the country in its own economic and political sphere of influence. This struggle over influence has led to significant tension between Moscow and Brussels.

Now imagine how much higher tensions would be if Ukraine had nuclear weapons.

As Steven Pfifer, a former U.S. ambassador to Ukraine, points out in an article for the Brookings Institution, Ukraine could well have become a nuclear power. The young country inherited “176 intercontinental ballistic missiles (ICBMs), 44 strategic bombers and some 1900 strategic nuclear warheads” from the Soviet Union. Luckily it agreed to surrender all its nuclear capabilities in the Tripartite Agreement of 1994. It would have been extremely expensive for Ukraine to keep its nuclear weapons anyway – but not impossible. Had Ukraine’s leadership chosen a different course, Pfifer writes, consequences could have been catastrophic:

“Had Ukraine tried to hold on to a nuclear arsenal, the last 20 years would have seen a very different history. It is hard to imagine the very positive developments that took place in U.S.-Ukrainian relations in the mid-1990s—greatly expanded reform assistance, frequent summit meetings, the establishment of a strategic partnership and the creation of the U.S.-Ukraine Binational Commission, chaired by Vice President Al Gore and President Leonid Kuchma—had Kyiv held on to nuclear weapons.

Nuclear weapons also would have thwarted the development of Ukraine’s relations with Europe. NATO would not have agreed to a “distinctive” NATO-Ukraine partnership or a NATO-Ukraine Council in 1997, and Kyiv would have had little reason to expect much from the European Union.

Moreover, no issue between Moscow and Kyiv would have proven more contentious. Had the Russians believed that Ukraine would seriously try to keep nuclear arms, they would have resorted to all kinds of diplomatic, political, economic and other pressure to force a change of policy course.  If—or when—the issue boiled over into a full-fledged crisis, the Ukrainians would have faced Russia alone, with no international support whatsoever.”

In 2014, a Ukrainian nuclear arsenal would have substantially raised the stakes in the Russian-European power struggle over Eastern Europe. Russia would certainly be more anxious over the possibility of losing Ukraine to the West, and perhaps more willing to intervene in its neighbor’s affairs. Nuclear weapons are often said to guarantee a country’s independence. But in Ukraine’s case, the opposite seems true.


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Three stories from 2013 that will matter 20 years from now

In reviewing 2013, The Atlantic recently took a deep look into the future. Rather than list the most significant events of the past year by their immediate impact, editor Moses Naim presented us “the stories from 2013 that will reshape the world long after this year draws to a close”. The stories Naim chose were: the shale-gas boom, America’s battered reputation abroad, tensions in the Middle East, China’s new assertiveness, and growing discontent over social inequality.

There is no doubt these stories are big, and will matter for years to come. But Naim only picked stories from the headlines, while the developments that matter in the future are often those contemporaries overlook. Take the 1980s, for example. Everyone back then knew that the slow collapse of the Soviet bloc or China’s turn towards a market economy would be a big deal for years to come. But hardly anyone foresaw that the rise of Islamist militancy in Afghanistan or Reagan’s financial deregulation would shake the world two decades later. In this spirit, here are the three most overlooked stories from 2013 that will shape our world for years and decades to come:

1. Crowdfunding

Following the 2008 financial meltdown, the U.S. government embarked on a string of regulatory reforms culminating in the Dodd-Frank Act. In effect, the new regulations made lending more difficult and less profitable for banks, discouraging the type of risk taking that led to the crisis. But while banks are curtailed, private equity and hedge funds are largely left to do whatever they want. In commercial real estate, which I cover for the Real Estate Weekly, this regulatory imbalance has already led financing to shift from traditional bank loans, which have become more rare and expensive, to private equity.

This is where crowdfunding enters the picture. In September, the Securities and Exchange Commission made it legal to raise funds from accredited investors in the U.S. via the internet. Since then, crowdfunding startups have become almost hyperactive. Much like private equity, crowdfunding is now subject to less stringent regulations and capital requirements than banking, which means they can delve into more risky projects and offer higher returns.

Such legal incentives matter. With banks constrained, the newly liberated crowdfunding firms will join private equity in shifting financing away from banks. Ten years from now, will you still deposit your $5,000 savings with a bank if you can get twice the return by investing them in a crowdfunded skyscraper or in private equity funds, which are increasingly targeting small-time savers?

For centuries, financing has been dominated by the banking sector. 2013 could be the year this begins to change.

2. East Africa’s Monetary Union

We can ignore Africa because the whole continent is a basket case full of corruption and civil wars, right? Wrong. One day, Africa’s economy will be huge. And 2013 might be the year its turnaround finally took off with a surprisingly little-noticed policy decision.

In November, Rwanda, Uganda, Tanzania and Kenya signed a deal to establish a single currency within ten years.This could be a huge step for several reasons. First of all, it is undisputed that enlarging a market spurs growth. Rwanda and Kenya, despite all their troubles, are already very innovative, for example in their use of mobile-phone banking. With wages rising in China, a unified, low-wage market in East Africa with improved communications and innovative financing could attract much more foreign and domestic investment.

Monetary union could also make the region more politically stable. Once countries are tied together in a single market, each member state has an interest in keeping the others peaceful and stable. If an insurgency broke out in one state, other governments would be far more likely to help and  intervene quickly than they are today, in order to prevent the union from losing credibility. In essence, this would be the military version of the bailouts we recently saw in the Eurozone. Rebellions frequently break out in Africa because governments and their armies are weak. But rising up in rebellion against four governments simultaneously is daunting, even in East Africa.

There are still many factors that could derail the monetary union – from inter-ethnic tensions over corruption to spillover from Somalia’s civil war. But if it succeeds, the union could grow to include more and more countries, kick-starting a new age of African stability and prosperity.

3. Commercial Drones

In November, Amazon CEO Jeff Bezos announced that he intends to use drones to deliver parcels. This could be the first step towards the use of commercial drones across the world. Dystopia? Probably not.

According to Neil Jacobstein, commercial drones could be the next internet – developed by the military but soon spreading out to transform the world. In The World Policy Journal’s recent fall issue, Jacobstein makes the case to legalize their use, albeit with strict security regulations.

He has a point. Drones, if safe, can revolutionize our world much in the way the internet has. They could drastically reduce transportation costs, bringing the world closer together and boosting growth. In the long run, they could also lead to a revival of remote areas. Who needs to live close to shops if you can have everything you need (maybe even Thai Food from your favorite restaurant?) delivered by drone into the Canadian wilderness?

Commercial drones can create a new world of physical (not just technological) connectivity. This is why, twenty years from now, Bezos’ 2013 announcement  could be far bigger than any speech by Barack Obama.

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The Economist says 2014 is like 1914. Is it?

Here’s an interesting thought: we may be months away from World War III. This, in essence, is the argument by an op-ed in The Economist’s holiday issue. Looking back at new year 1914, the (unnamed) author concludes that the world back then was living in globalized prosperity and no one saw the catastrophe coming. This complacency, the author writes, was in part to blame for the war’s outbreak. A hundred years later, the author finds a similar complacency with regard to the territorial dispute in the South China Sea:

Yet the parallels remain troubling. The United States is Britain, the superpower on the wane, unable to guarantee global security. Its main trading partner, China, plays the part of Germany, a new economic power bristling with nationalist indignation and building up its armed forces rapidly. Modern Japan is France, an ally of the retreating hegemon and a declining regional power. The parallels are not exact—China lacks the Kaiser’s territorial ambitions and America’s defence budget is far more impressive than imperial Britain’s—but they are close enough for the world to be on its guard.

Which, by and large, it is not. The most troubling similarity between 1914 and now is complacency. Businesspeople today are like businesspeople then: too busy making money to notice the serpents flickering at the bottom of their trading screens. Politicians are playing with nationalism just as they did 100 years ago.

The comparison between China and Germany – and Europe in 1914 and Asia in 2014 in general – seems like a stretch. Germany went to war because it felt its back against the wall and was loosing the peace. It was encircled by a hostile triple entente that had more economic and military strength, and was fearful of falling behind the booming U.S. and industrializing Russia, as historians like Niall Ferguson have argued. A quick victory through a surprise attack in the near future seemed like Germany’s best chance to become a true world power.

China today, on the other hand, knows that it is destined to become the world’s leading economy and a military superpower within the next few decades. Unlike Germany in 1914, time is working in its favor, and going to war over territorial disputes now would only derail its rise. Similarly, Japan can’t afford any war in the near future, crippled by government debt and a weak military. A war may still happen once China is no longer on the rise and feels its time has come, and once Japan has built up a stronger military. But that won’t be anytime soon, and certainly not in 2014.

While World War III isn’t imminent, the article makes the important point that we should never underestimate the potential for another great war. Much like 1914, Westerners today have taken over the naive view that wars only happen in poor countries. The lesson of World War I suggests otherwise.


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Is the Iran Deal as Bad as the Munich Agreement?

Not at all. Read my take on why Munich’s failure makes a strong case for appeasing Iran, written for the World Policy Journal’s blog: http://www.worldpolicy.org/blog/2013/12/03/munichs-failure-reason-iranian-appeasement

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Russia Is Stuck in the Brezhnev Trap

It looks like the BRICS have turned into the BICS. A week ago, Russia’s economic minister forecast that the country’s GDP would grow by a mere 2.5% annually through 2030 – well below an expected global growth of 3.5%. This is a huge disappointment for the many Russians who hoped the country could finally escape from relative poverty and take its place among the world’s economic – not just military – superpowers. It also conjures up unwelcome memories of Soviet stagnation in the 1970s and 80s.

Stalinist industrialization in the 1930s created dramatic growth for three decades, with the interruption of World War II. Economic progress in the 1950s and 60s was so impressive that many Western thinkers came to the conclusion that a Soviet-style planned economy was superior to the free market. But with Leonid Brezhnev’s rise to power in the late 1960s, two decades of stagnation set in, culminating in the USSR’s collapse in the late 1980s.

The Soviet experience became a basic lesson of development economics: a centralized, planned economy can be very good at creating growth initially, but beyond a certain point it lacks the capacity to innovate and begins to stagnate.

This lesson seems to be lost on Putin. His economic system is a far cry from Stalinism, where centrally administered five-year plans determined the allocation of virtually all resources. But it has the same tendency to shower large industrial monopolists with funds at the expense of everyone else. Russia’s boom of the early 2000s came on the back of oil and gas exports by the country’s two state-run behemoths Rosneft and Gazprom. Independent companies – faced with corruption, bureaucracy and an underdeveloped banking sector – have had a much harder time.

Unsurprisingly, Russia has been slow to recover from the 2008 recession. Its economy is too dependent on oil and gas prices, which seem likely to go down as fracking expands around the world, and may now be entering a new Brezhnev era.

Several government officials, among them Prime Minister Medvedev, have acknowledged the need to reform the economy. But so far, attempts at change have been too timid.

The problem is that serious reform is incompatible with Putin’s ideal of vertical power. He sees corporations not just as economic actors, but as political tools. In foreign affairs, he has used Gazprom’s gas exports to put political pressure on Ukraine and arms exports to strengthen ties with allies such as Syria. Domestically, he has used Rosneft and Gazprom to delight voters with artificially cheap energy and put loyal supporters into well-paid jobs.

Breaking out of the Brezhnev trap is impossible without curbing the influence of the large state monopolists. Putin is reluctant to do so because it would diminish his power over the private sector. But as long as Russia’s economy stagnates, his government has no future. Sooner or later, Putin may have to accept a small loss of influence over the private sector so as not to lose power altogether.

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Nuclear war was imminent in 1983. Who knew?

Recently declassified documents show a NATO military exercise in 1983 came close to provoking a war with the Soviet Union. Moscow misinterpreted the exercise, called “Able Archer”, as actual preparation for war and responded immediately, The Guardian writes:

“As Able Archer commenced, the Kremlin gave instructions for a dozen aircraft in East Germany and Poland to be fitted with nuclear weapons. In addition, around 70 SS-20 missiles were placed on heightened alert, while Soviet submarines carrying nuclear ballistic missiles were sent under the Arctic ice so that they could avoid detection.”

“The cabinet secretary at the time, Sir Robert Armstrong, briefed Thatcher that the Soviets’ response did not appear to be an exercise because it “took place over a major Soviet holiday, it had the form of actual military activity and alerts, not just war-gaming, and it was limited geographically to the area, central Europe, covered by the Nato exercise which the Soviet Union was monitoring”.”

The episode shows two things. First, Reagan’s aggressive rhetoric against the USSR in the early 1980s was more dangerous than we thought, as it gave Moscow reason to believe an attack was in the works. Second, it shows that the by far the most likely cause of nuclear war is accident or misunderstanding. There is nor rational reason to start a nuclear war, as long as mutual destruction is assured. But false information over an imminent attack can upend this balance from one moment to another. In the words of Peter Burt, director of the Nuclear Information Service (NIS):

“The Cold War is sometimes described as a stable ‘balance of power’ between east and west, but the Able Archer story shows that it was in fact a shockingly dangerous period when the world came to the brink of a nuclear catastrophe on more than one occasion.”

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China’s Economy May Surprise its Skeptics

For as long as commentators have warned of China’s coming world domination, others have dismissed its rise as a temporary phenomenon. The latest of the China pessimists is Josef Joffe, an influential German journalist. In the Wall Street Journal’s Saturday Essay, Joffe uses 20th century history to argue that China may never become as powerful as many assume.

His argument is based on two observations. First, he writes, every economic boom in history was followed by a slowdown. His reference to Japan is fitting: 25 years ago many Americans feared that a booming Japan would supplant the U.S. as the world’s economic superpower. But the boom was followed by two decades of economic stagnation, and Japan never came close to rival U.S. influence over the global economy.

The gist of Joffe’s argument is in his second observation. 20th century authoritarian governments have been successful at creating rapid economic growth initially, he writes – but never in the long run. Political elites in authoritarian systems resist change in order to preserve their vested interests:

“The larger the state, the richer the rents. If the state rather than the market determines economic outcomes, politics beats profitability as an allocator of resources. Licenses, building permits, capital, import barriers and anticompetitive regulations go to the state’s own or to favored players, breeding corruption and inefficiency. Nor is such a system easily repaired. The state depends on its clients, just as its clients depend on their mighty benefactor. This widening web of collusion breeds either stagnation or revolt.”

In other words: China will stagnate unless its regime is toppled by revolution. But even revolution won’t raise China’s economic bar. Unlike the classic champions of liberalism, Joffe doesn’t believe that democracy is more compatible with growth than authoritarianism: “The irony is that both despotism and democracy, though for very different reasons, are incompatible with dazzling growth over the long haul,” he writes. According to Joffe, the democratic welfare state is just as effective in slowing growth as a powerful authoritarian elite.

If we are to believe Joffe, China has no chance to become the world’s economic superpower, no matter what it does. But the problem with Joffe’s argument is that he ignores China’s ability to reform.

Pointing to the French Ancien Regime and the Soviet Union, Joffe claims that authoritarian systems are unable to reform themselves because of the power of vested interests. But China itself is the best evidence that reform of authoritarian systems is not impossible. China has all the vested interests Joffe writes about, and yet it managed a gradual transition to a semi-free market economy. If such change is possible in the face of hostile parts of political elites, there is no reason to believe that further reform won’t happen.

The Soviet Union may have collapsed, but people often forget that Gorbachev made some promising attempts to reform the system. Had he gone about it more patiently – and wisely – the Soviet Union may well have survived as a more modern socialist state, much like China did.

Over the last three decades, China’s leadership has shown a surprising willingness to reform the country’s economy. And there is a logical explanation for it: political elites in authoritarian systems want to preserve their privileges, but once a system stagnates and popular discontent spreads, the status quo becomes more dangerous to vested interests than reform. China’s regime has survived this long because it has understood this.

There are already many signs that China’s president Xi Jinping is planning further economic reforms, for example by liberalizing the country’s rigid banking sector. If China’s leadership continues to show the flexible pragmatism that has served it so well in the past, the state will retreat more and more, making way for the market.

China is able to reform its economy, which makes Joffe’s claim that the country will stagnate because of its political system at least questionable. I am not arguing that he is necessarily wrong. Perhaps China’s leadership will abandon the path of gradual liberalization and let the country’s economy lose steam – it all depends on the judgment of its leaders. But it is at least possible that the country’s economy will become more and more liberal – the prerequisite for continued growth.

Joffe makes a decent case that an annual GDP growth of 8% or more is unsustainable in the long run. But this argument is not new, and pretty much beyond dispute. The question is not whether China will slow down, but whether its growth will last long enough to make it the world’s economic superpower.

China’s economy faces many hurdles – an aging population, a lack of natural resources, possible separatist violence – and its political system may be one of them. But there is no historic law that states China can’t one day dominate the world economy.


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Runciman’s Theory of why Democracies Succeed

The question why some democracies fail and other succeed has generally been the preoccupation of those studying third-world countries, such as India and Pakistan. But the government shutdown has shown that this question should also concern anyone interested in the U.S., as the country’s political system seems more and more dysfunctional compared to Britain’s or Germany’s. The Economist recently reviewed two books by historians that take the longer view and try to explain democracies’ successes and failures. David Runciman’s The Confidence Trap: A History of Democracy in Crisis from World War I to the Present has an interesting theory, according to The Economist:

“Mr Runciman illustrates his thoughts with seven critical episodes: unforeseen war (1918), unexpected slump (1933), threats to post-war Europe (1947), possible annihilation in the Cuban missile crisis (1962), stagflation (1974), short-lived triumphalism (1989) and financial meltdown (2008).

Add those up, and you get a fair list of the challenges facing present-day democracies. So why do they repeat mistakes? Oddly, perhaps, for a historian, Mr Runciman suggests that ignoring the past is a democratic strength. Old problems recur, but never quite in the same form. Unlike autocracies, which are “fatalistic” and inflexible, democracies expect the future to be different. Counting on ceaseless change, in other words, helps democracy adapt and muddle through.”

As a historian, I am obviously a strong supporter of not ignoring the past. Had the Republicans looked back closely at 1996, they might have realized that shutting down the government was a bad idea. Either way, The Confidence Trap seems like an interesting book.

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Is Janet Yellen the Most Powerful Woman in World History?

The Atlantic’s Matthew O’Brien has a bold claim: Janet Yellen, the soon-to-be Fed Chair, will be the most powerful woman ever. While Queen Victoria, Maggie Thatcher and Merkel were or are very powerful, O’Brien argues, their power was limited by their countries’ borders. Yellen, on the other hand, will determine the economic fate of a country dominating the world economy, which gives her “more control over the global economy than any other living person once she’s confirmed as Fed Chair”.

The argument sounds compelling, but I think O’Brien overestimates the Fed’s power. Sure, the Fed could do some serious damage –  as it did with some bad decisions in 1929. But Neo-Keynesian thinkers have made a pretty compelling case that monetary policy itself can only go so far, and loses much of its impact when interest rates start nearing zero. The post-2008 crisis is a case in point. The Fed’s quantitative easing may have prevented further damage, but it was unable to create significant economic growth by itself. As long as fiscal policy doesn’t play along, Janet Yellen will by no means decide the fate of the world economy.

She will be very powerful, sure. But she won’t rule half the world – as Queen Victoria did. She arguably won’t even have as much influence as Angela Merkel, who holds the keys to Europe’s economic future.

Here’s the link: http://www.theatlantic.com/business/archive/2013/10/why-janet-yellen-would-be-the-most-powerful-woman-in-world-history/280423/

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