.comment-link {margin-left:.6em;}

Thursday, March 29

America's Whatever Works school of foreign policy officially launches

Well, it's now official: the United States of America has embarked on the empirical era of foreign relations. On Tuesday, in his first speech in the US since taking office, Defense Secretary Robert M. Gates told the Turkish-American Council in Washington that henceforth American foreign policy must be a blend of all approaches -- realist, idealist, pragmatist, whatever, "with different emphases in different places and at different times. What matters are results."

What?! Results matter? Facts on the ground take precedence over theories propounded by schools of foreign policy? We'll see what our nation's most energetic foreign policy institutes and foreign lobbies have to say about that! Meanwhile, let's celebrate.

Wednesday, March 28

Democracy between the devil and the deep blue sea.

I'll preface this essay with the observation that if the problem I discuss were easy to solve, humanity could expect to be living in a golden age by the middle of this century.

Since the inception of this blog Pundita has periodically bashed US foreign policy initiatives that indiscriminately push onto developing countries neoliberal economic reforms such as privatization and ending subsidies to large industries. I haven't got much of a hearing in Washington. But now, writing in the current issue of Foreign Affairs, Ashutosh Varshney has laid out a discussion of my pet gripe that even a high school senior should be able to grasp.

Varshney illustrates exactly why it's working at cross-purposes for developed nations to promote democracy in a poor country while insisting that the country also be a model for privatization of industry and other neoliberal (market-oriented) reforms.

It is inarguable that all the world's poorest countries are in desperate need of neoliberal reforms. But the problem, as Varshney explains in India's Democratic Challenge, is that the more the poor get involved in voting, the more likely they are to block their government from making needed economic reforms that cause short-term pain to the poor or don't show results fast enough.(1)

It comes down to this: If you were poor and had the right to vote, would you vote yourself a huge pay cut or out of a job, if your vote brought in economic reforms that would benefit your entire society in the long run?

If you reply that America managed to accept the pain that went along with neoliberal reforms, you're overlooking many factors. As Varshney points out:
[...] market-based policies meant to increase the efficiency of the aggregate economy frequently generate short-term dislocations and resentment. In a democratic polity, this resentment often translates at the ballot box into a halt or a reversal of pro-market reforms.

In the West, such tensions have remained moderate for at least three reasons: universal suffrage came to most Western democracies only after the Industrial Revolution, which meant that the poor got the right to vote only after those societies had become relatively rich; a welfare state has attended to the needs of low-income segments of the population; and the educated and the wealthy have tended to vote more than the poor.

The Indian experience is different on all three counts. India adopted universal suffrage at the time of independence, long before the transition to a modern industrialized economy began. The country does not have an extensive welfare system, although it has made a greater effort to create one of late.

And, defying democratic theory, a great participatory upsurge has marked Indian politics, a phenomenon that is only beginning to be understood by scholars and observers: since the early 1990s, India's plebeian orders have participated noticeably more in elections than its upper and middle classes.

In fact, the recent wisdom about Indian elections turns standard democratic theory on its head: the lower the caste, income, and education of an Indian, the greater the odds that he will vote.
What about the Asian economic miracles? Varshney notes:
South Korea and Taiwan embraced universal-franchise democracy only in the late 1980s and the mid-1990s, two decades after their economic upturn began. Other economically successful countries in the region, such as China and Singapore, have yet to become liberal democracies.

[...] Democratic politics partly explains why, for example, privatization has gone so slowly in India compared to in China. In India, workers have unions and political parties to protect their interests. In China, labor leaders who resist job losses due to privatization are tried and jailed for treason and subversion [...]
If you ask, "What about Europe?" Well, the Europeans think just like all people everywhere. As The Economist notes in their report about the European Union at 50, which I quoted from on March 25:
The poor performers in Europe have been the core countries of the euro, in particular France, Germany and the Italy [...]

Nor is there much disagreement among economists about what [the] cures should be. In all three countries, labour and product markets are too highly regulated, holding back employment growth and making their economies less flexible. Both the IMF and OECD have been urging further liberalisation as the only sure route to better economic performance. Even Europe's political leaders understand this, though they are also swift to spot political obstacles to reform.

As Luxembourg's Mr Juncker once said, "we all know what to do, we just don't know how to get re-elected after we've done it."
In short, low income European voters have the same distaste for further belt tightening that Indians experience, even when reforms promise to remove an obstacle that limits their country's economic growth.

And population number is a huge factor: a little foreign aid goes a long way in a small European country -- and massive amounts of aid, both outright and in the form of development loans, has been poured into Eastern Europe. In countries with large populations, such as Indonesia and India, giving aid can seem like trying to fill a bottomless pit.

The good news is that since India's statist government embarked on economic reforms 15 years ago, when roughly one-third of the country lived below the poverty line, poverty has greatly decreased. Yet today, a quarter of India's 1+ billion citizens still live on less than $1 a day. So, economic progress has been damnably slow, while at the same time voting among India's poor has boomed.

I hasten to stress that resistance to economic reforms among poor voters is not the only reason that India and other poor democratic nations are facing obstacles to economic growth. Mexico, for example, has hit a ceiling because their ruling political party is loath to press for economic reforms that put a squeeze on the elite. Ashutosh Varshney is simply pointing out an issue about democracy that has been ignored by economists and foreign policy wonks who push neoliberal reforms on poor democratic nations: when the poor greatly outnumber the rich and middle class at the voting booth, economic reforms that cause short-term dislocations tend to be rejected by the majority.

Another straw to the camel's back of democracy is that the demands of globalization exacerbate the need for economic reforms. Varshney explains:
A start toward privatization was made in 2001 [in India], but unions and some political parties have vigorously resisted it. To help millions of small producers, many manufactured products continue to be reserved for "small-scale investors" (a status that caps investment at $250,000 per industrial unit), although in 2001, garments, toys, shoes, and auto components were finally removed from the reserved list. No proposal for a complete dereservation of all industries has yet been seriously entertained, hampering the ability of many Indian companies to compete with their counterparts in other developing countries, notably China.
So does this mean that China's dictatorship model of government has the edge over democracy in the globalization era? In some ways in the short run, yes. But as Varshney points out, India's mature democracy "has a viable solution to the problem of political transition: the party, or coalition of parties, that wins elections will run the government. Transition rules are now deeply institutionalized in India, and [so] long-term political stability is a virtual certainty."

China, on the other hand, is a tinderbox waiting for another revolution from the disenfranchised masses. Keep in mind that:
In China, rural and urban inequality grows at alarming rates, stirring unrest amongst those hundreds of millions who remain impoverished. In fact, China, responsible for only 6 percent of world trade, has actually lost manufacturing jobs in the past ten years.(2)
In India, the impoverished can take to the voting booth to change the way their government does things. In China, there is no option but to revert to the Maoist revolutionary mode, which only sets the stage for another military dictatorship mouthing slightly different slogans.

If you find yourself thinking of the Middle East and Iraq in particular while reading this essay -- why yes. The prevailing wisdom in the US government is that since Iraqis are suffering so much anyhow, might as well build the country on the foundation of neoliberal economics. But Washington also wants Iraq to be a democracy -- and not just the stage show variety.

We want to see smiling Iraqis waving their purple-stained fingers after voting in fair elections. But most of those Iraqis are poor, so one shouldn't expect them to ponder in the voting booth, when asked whether they want their government to put them back to work or wait for private industry to give them a paycheck.

"Oh no," wail neoliberals. "If the Iraqis do that, they head right back to a centrally planned economy. The next thing is a return to Stalinism. Then come the death camps for Iraqis who don't want to starve while waiting for a ten-year plan to work!"

Is there a golden mean -- a way to balance economic reforms with immediate social needs? No. A golden mean exists only on paper when economic theories meet up with societies. But there are strategies to wiggle through reforms without toppling a democratic government.

There is the ice cream strategy. Brazil's president recently launched a painful economic reform while increasing a popular welfare-type program.

There is the nibble-around-the edges strategy, which concentrates on economic reforms affecting sectors that mostly concern the elite, such as stock market reforms. This, on the theory that a larger investor class eventually helps the entire economy.

There is the carpetbagger strategy, and the time-honored vote-buying strategy. But in the end of all strategies are the really painful realities. As Varshney puts it:
[...] if market-oriented economic reforms are to be embraced in areas directly relevant to the masses, politicians will have to answer the following questions: How will the privatization of public enterprises, the reform of labor laws, and the lifting of agricultural subsidies benefit the masses? And how long will the benefits take to trickle down?

All of these reforms are likely to enhance mass welfare in the long run. Therefore, for democratic politicians, this problem will effectively mean taking measures such as reserving a substantial proportion of the proceeds from privatization for public health and primary education, constructing safety nets for workers as labor laws are reformed, and coming up with a plan for a second green revolution in agriculture in return for drawing down the current agricultural subsidies.

The last one, in particular, will require both opening up agriculture to market forces and greater public investment in irrigation, agricultural research, and rural infrastructure and education.
Varshney's advice for India's government holds true as well for many other countries -- and for wealthy governments that invest significant development aid in the world's poorest democracies.

The basic formula is that the more a foreign donor government values democracy, the more carefully the government should promote economic policies that cause short-term pain to the donor country's poor.

President George Bush might have been acknowledging this formula during his recent tour of Latin America in his remarks about "social justice." But his notable silence on the high tariff that protects American corn farmers, and which makes ethanol more expensive to produce in the US than Brazil, illustrates that the basic principle underlying the formula applies to all democratic nations.

However, putting aid money behind social justice programs comes too late in the day to avoid the huge leftward turn in Latin America, which is largely a backlash against indiscriminately applied neoliberal theories.

The fault is not in the theories but in the Promised Land mentality that infests multilateral development institutions and Western foreign development planning. A half century ago, the promised land in development circles was the centrally planned economy "with a closed trade regime, heavy state intervention, and an industrial policy that emphasized import substitution," as Varshney puts it. Then development circles went gaga over capitalist reforms.

If the US wants the poorest democratic nations to modernize, we need to pay as much attention to the immediate demands of the poor in those nations as to the long-term benefits of economic reform.

This advice isn't rocket science. If lingerie makers can come up with different sizes for a bra, if dressmakers can make a pattern for several dress sizes, why can't the US government -- and, indeed, all wealthy governments -- construct foreign development policies on a case-by-case basis?

There is no promised land -- no one strategy or type of development policy that works to serve US interests while serving the needs of modernizing nations. There is only constant adjustment, which was not possible even 15 years ago. But in this era of the internet and global TV, it is relatively cheap to closely monitor how reforms and aid are working their way through a society, and adjust development aid accordingly. Change should no longer be the work equivalent of turning the Grand Canyon around.

1) India's Democratic Challenge

The entire essay is not available online, but the writing (which I've barely skimmed in this essay) is so important to so many issues that it is worth $5.95 to purchase the PDF version from Foreign Affairs magazine. See the purchase icon at the above link.

2) China, India Superpower? Not so Fast! Despite impressive growth, the rising Asian giants have feet of clay by Pranab Bardhan.

Tuesday, March 27

Ominous sign on Iran

Yesterday The Washington Post carried another of their rosy reports on the US Treasury-State Department financial strategy to soften up Iran at the nuclear bargaining table.(1)(2)

"More than 40 major international banks and financial institutions have either cut off or cut back business with the Iranian government or private sector" as a result of the campaign.

Iranian President Mahmoud Ahmadinejad's wild statements on the international stage have perhaps done as much to scare off the financiers as the US campaign, but the strategy is certainly putting the squeeze on financing for the Iranian government's petroleum development projects. And Iranian importers are suffering, "with many having to pay for commodities in advance when a year ago they could rely on a revolving line of credit."

However, embedded in the report is a very ominous sign about how things are really going in Iran: The Iranian Revolutionary Guard Corps (IRGC) "control and influence in the Iranian economy is growing exponentially under the regime of Ahmadinejad," according to Treasury undersecretary for terrorism and financial intelligence Stuart Levey.
The new [US financial campaign] particularly targets financial transactions involving the [IRGC], which is now a major economic force beyond its long-standing role in procuring arms and military materiel. Companies tied to the elite unit and its commanders have been awarded government contracts such as airport management and construction of the Tehran subway. The practice has increased since the 2005 election of [Ahmadinejad], U.S. officials say. The Revolutionary Guard -- of which Ahmadinejad is a former member -- is part of the hard-line leader's constituency.
It seems the IRGC represents the most fanatical faction in Iran, and now it seems as if their economic clout is strengthening their vise-like grip on the country. So Pundita worries that the UN sanctions and the US financial campaign could have the opposite intended effect -- unleashing the kind of bunker mindset and actions that characterized Saddam Hussein's response to UN sanctions.

I note that the 15 British troops wrongfully detained in Iran last Friday were seized by the IRGC navy unit, which operates separately from Iran's navy.

1) Iran Feels Pinch As Major Banks Curtail Business by Robin Wright, Washington Post Staff Writer.

2) See also Pundita's Treasury puts the whammy on Axis of Evil.

Shanghaied!

Nobody's clowning around anymore with language; the "independence" word is now openly used by UN negotiators with regard to Kosovo. The Kremlin is still hopping mad about the US-led UN plan to give Kosovo independence. Serbia has denounced the plan and Russia has threatened to veto the UN resolution when it comes to a vote in May and to demand a review of all previous UN resolutions on Kosovo.

While the biggest EU powers support the independence plan, Russia and Serbia aren't the only ones upset about it. EU members Spain, Greece, Romania, Slovakia and Cyprus are backing Belgrade's assertion that the Balkan country shouldn't be further -- balkanized.

China has remained silent about where they will stand the issue at the UN. Beijing might well remain mum, if only to keep Berlin happy. But given China's strong stance against separatism, the Kosovo deal is another spur to increased China-Russia cooperation, which is growing by leaps and bounds --
Russia’s more assertive, anti-Western foreign policy may increasingly push Moscow into the arms of countries with similar foreign outlooks (i.e. China and Iran). The growing importance of the Shanghai Cooperation Organization (SCO) -- whose members include China, Russia, Tajikistan, Kyrgyzstan, Kazakhstan, and Uzbekistan -- is one manifestation of this security reconfiguration. [India, Iran, Mongolia, Pakistan and Afghanistan have observer status.]

Begun as a sleepy mechanism to demilitarize China’s borders a decade ago, the SCO has slowly morphed into a powerful player in an energy-rich region teeming with terrorists and drug pushers.

The Shanghai club is retooling its mission statement to include counterterrorism operations, intelligence sharing, and even election monitoring. Meanwhile, the orientation of its members is increasingly aligning to project a more united front that experts say is, if not hostile to, then outwardly suspicious of U.S. military, economic, geopolitical interests in Central Asia. Iran, currently an SCO observer, is clamoring to join the club."
-- Lionel Beehner, staff writer for the Council on Foreign Relations
Here's Ria Novosti's recent take on the SCO:
The primary ambition of the SCO is to ensure regional security by combating drug trafficking, illegal arms trade, and trans-border crime. It also works to boost economic cooperation in the region and to create favorable conditions for trade and investment. Promotion of closer cultural and humanitarian ties is another important area of the alliance's activity.
Russia-China relations are blossoming. China's President Hu Jintao is in Russia for a three-day visit with Russia's President Vladimir Putin. Hu's visit kicks off Russia's "Year of China" exhibition, which reciprocates last year's "Year of Russia" in China. The Russia exhibition is the biggest sponsored by China in a foreign country. About 200 enterprises and organizations from around China, including the Hong Kong and Macao special administrative regions, will attend the exhibition, with more than 15,000 kinds of products on show.

Hu and Putin are also signing $4.3 billion in agreements and contracts, and issuing joint statements on international issues and their increased efforts regarding the Shanghai Cooperation Organization:
MOSCOW, March 26 (Xinhua) -- China and Russia on Monday pledged efforts to promote multilateral cooperation within the framework of the Shanghai Cooperation Organization (SCO). The SCO is becoming an influential force in the region and on the international arena, and promoting multilateral cooperation with the framework of the SCO is a foreign policy priority of both China and Russia, a China-Russia joint statement said.

As the SCO enters a new stage of development, close political dialogues on urgent international issues are of great significance, visiting Chinese President Hu Jintao and his Russian counterpart Vladimir Putin said in the statement issued on Monday. According to the statement, both sides agreed to take coordinating measures to expand and deepen trade and economic cooperation among the SCO members. China and Russia will also enhance cooperation with Central Asian countries in politics, trade and economy and security within bilateral frameworks and the framework of the SCO, it said.

Monday, March 26

First, know yourself

There is a similar ring to the stories of Ayaan Hirsi Ali and Hassan Butt. Hirsi Ali, a Muslim Somali, escaped to Holland in order to avoid an arranged marriage. After 9/11 she found herself questioning the tenets of Islam:
"I hated to do it," she wrote in her book Infidel, "because I knew that I would find bin Laden's quotations in [the Quran]."

Partly as a result she lost her faith, concluding that the Quran spreads a culture that is "brutal, bigoted, fixated on controlling women, and harsh in war," and that should not be tolerated by European liberals.(1)
Yet Ms Hirsi Ali became a pariah in her adopted country because of her resounding rejection of Islam and embrace of Western secular values:
Curiously, what seems to rankle Europeans most is the enthusiasm with which Hirsi Ali has adopted their own secularism and the fervor with which she has embraced their own Western values.(1)
Hassan Butt is an ex-recruiter for al Qaeda. Mr Butt, a Briton of Pakistani descent, began to question the rationale for killing civilians after the London Train bombings. From a 60 Minutes interview with correspondent Bob Simon, aired last night:
He began asking questions of his handlers, theological questions. He wanted to know whether the bombings could ever be justified in Islam. He waited and waited for answers. Months later, he was summoned by his handlers to a meeting in the Middle East. But he wasn’t given answers, only new orders.

"They were trying to force me into Iraq to fight basically," Butt says.

"So, to summarize, you're asking, basically, why should we be killing innocent people?" Simon asks.

"That's correct," Butt replies.

"And the answer you eventually received is go to Iraq and perhaps carry out a suicide mission?" Simon asks.

"Go to Iraq to basically – the actual word that they used was that I needed 'reprogramming.' And Iraq would give me the opportunity to basically be reprogrammed for what I needed, I mean. I was quite shocked at the analogy," Butt says.

"To think that ... firstly, I'm neither a computer nor a robot. And I don't know on your say so, I do on God's say so. And if you can't justify to me or prove to me that this is what God wants, then I'm gonna have to go my separate way." [...]

Butt says it was after that meeting that he began answering his questions, himself.

"What I've come to realize is that killing for the sake of killing, and killing in the name of Islam for the sake of killing, is completely and utterly prohibited. And there's a big disease, a big problem and a cancer in the Muslim world. And it's a very dangerous cancer, and it needs to be dealt with," he says.

How?

"And I really believe, if Muslims can pluck up their courage to ask questions, regardless of the consequences, then I do see that there is still hope, you know, to solve, to cure this cancer," Butt says. [...]

"The position of moderate Muslims is that Islam has nothing to do with terrorism. Do you buy that?" Simon asks.

"No, absolutely not. By completely being in denial about it's like an alcoholic basically. Unless an alcoholic acknowledges that he has a problem with alcohol, he's never gonna be able to go forward," Butt argues.

"And as long as we, as Muslims, do not acknowledge that there is a violent streak in Islam, unless we acknowledge that, then we are gonna always lose the battle to the militants, by being in complete denial about it."
Mr Butt's attempt to reform Islam from the inside has made him a pariah to his friends and family and placed his life in danger. He ain't seen nothin' yet in the way of resistance, if he continues to call Islam to task. If the experience of Hirsi Ali is any guide, Butt's biggest detractors will come from British and other European non-Muslims who were brainwashed by their government into believing that multiculturalism is the defining principle for humanity.

Hassan Butt detailed for 60 Minutes some of the tactics used by al-Qaeda recruiters, but what is most striking about his account is that until the London bombings, the very open and public recruitment went ahead with the full knowledge and approval of the British government. Mr Butt is by no means the first person to have made the observation, but it bears repetition as often as possible. From the 60 Minutes interview:
Butt was only 16 when he was recruited by the network. Like thousands of other young British Muslims, he became exposed to some of the most radical Imams in Britain – Imams who supported attacks on westerners all over the world and believed that they had a tacit agreement with the British authorities.

They could preach hatred, they could recruit followers, they could raise funds, and they could even call for Jihad – Holy war – as long as they didn't call for attacks on British soil. London became such a safe haven for Muslim militants that it came to be known as "Londonistan."

"Do you think this was an unspoken deal with the establishment? That, do whatever you want here as long as you don't blow us up?" Simon asks Butt.

"Absolutely. I believe that sincerely," Butt tells Simon. "That was an unspoken deal. And as a result of that, what tended to happen is the British government lost count of how many people were going abroad getting trained and coming back and going into operational mode as sleeper cells."
Writing in yesterday's Washington Post Outlook section, Professor Bruce Hoffman quotes Sun Tzu to make his point that we're fighting blind if we don't know the enemy -- "their motivation and mind-set, their decision-making processes and command-and-control relationships, their organizational dynamics and their ideological appeal." (2)

Spurred on by the quotation, I eagerly plowed through Mr Hoffman's essay on psyops, but found nary a sentence pertaining to the second part of Sun Tzu's advice: "If you know the enemy and know yourself, you need not fear the results of a hundred battles."

Of course it is important to know as much as possible about the enemy. Butt makes the interesting point that many Muslims he recruited were initially drawn to jihadist teachings because they didn't want an arranged marriage. The violence-preaching imams told them they could marry any woman they pleased, provided she was Muslim. However, the studious silence of non-Muslim British society about Islam's violent aspects aided and abetted the imams at every step.

How could this happen? It happens very easily, when you don't know yourself. From there it's a hop and a skip to accepting the propaganda that getting along with others is a higher priority than thinking for yourself.

Western civilization rests on the belief that it is the basic duty and right of every human to learn how to think for himself. Ayaan Hirsi Ali and Hassan Butt invoked their basic right and thus, rather easily broke free of the conditioning that caused them accept false teachings.

It will be much harder for the British and others in the European Union to break free of their conditioning because the union is held together as much by compromise with diverse cultural beliefs as by common economic interests.

At some point, EU governments raised compromise to the status of a kind of god, and now woe betide any citizen of the European Union who dares to place one set of cultural beliefs above another. It is this kind of thinking that delivered the West to the Muslim terrorist bombers. It is the kind of thinking that favors understanding others while you don't have a clue as to what you're all about.

1) Europe can't grasp Hirsi Ali, who has the gall to speak her mind by Anne Applebaum.

2) We Can't Win If We Don't Know the Enemy by Bruce Hoffman.

Sunday, March 25

Happy 50th Birthday, European unification project! But is America the EU's doberman?

I'm not sure that the European Union and its precursors can take the lion's share of credit for decades of more-or-less peace on the European continent, but the unification project was there and growing through the past half century, so let's be generous. For the most part the Europeans decided on negotiation instead of war, which is a huge improvement over the half century leading up to the end of World War Two.

In the March 17-23 issue, The Economist pulled together a special report on the EU at 50 titled, Europe's mid-life crisis. It's worth the trouble to obtain the report, which is cogent, comprehensive and sprightly -- the last meaning that you will not fall asleep while reading.

The EU, according to The Economist, is not so much beset with crisis as with three complex interrelated challenges:

> Revving up the lagging EU economy and dealing with how some EU members are handling the euro currency. On one level the euro currency has been successful; it now accounts for a quarter of the world's foreign currency reserves. But the success of the euro within the EU bloc depends increasingly on national EU governments implementing stiff internal economic reforms which are generally unpalatable to an electorate.

> Finding agreement on what, if anything, is to be done about the EU draft constitution in limbo since the Dutch and French rejected it; and

> Working through the perceived "democracy deficit" that EU member nations feel in their relations with the EU bureaucracy.

The report explains each issue and also analyzes how Brussels is dealing with foreign relations. While the EU has no formal foreign policy to speak of (that will change if the EU Constitution ever gets ratified by all members), it wields enormous influence in international affairs, which as Pundita readers know I've endlessly groused about on this blog.

The Economist highlights a fact that doesn't receive much remark in America:
By far the most successful EU foreign policy has been its own expansion. In the 1980s the prospect of joining [the EU] played a critical part in ensuring a smooth transition from dictatorship to democracy in Greece, Spain and Portugal. More recently it has transformed the east European countries as they moved from communist central planning to liberal democracy. And Turkey has made wholesale changes in its politics, economics and society largely to boost its chances of joining.

Indeed, judged in terms of success in exporting its values to its backyard, the EU has done much better with its neighbours than the United States has with central and south America, largely because of the carrot of enlargement.
However, EU members are now feeling "enlargement fatigue."
Opinion polls for the whole region union still show a narrow majority in favour [of continued EU expansion] but in some countries the mood has turned sharply against. [...] Brussels folklore has it that widening (admitting new members) naturally conflicts with deepening (further integration of existing members).
Although there are ways to mitigate the widening vs deepening conundrum, the controversy about Turkey's ascension to the EU, which The Economist report examines, has been a lightning rod for qualms about further EU expansion.

But the problems don't take away from the stupendous fact of the union. The Europeans are creating a sort of new Roman Empire, but one based on trade benefits and negotiation instead of military aggression. That is a great accomplishment, even if cynics would remind us that the union has relied on US military might to conduct their expansion in peace.

Before raising my glass in a toast, I will strike a cautionary note for the United States. I am prompted by remarks in The Economist's projection of what the EU might look like at 100:
In the dangerous second decade of the century, when Vladimir Putin returned for a third term as Russian president and stood poised to invade Ukraine, it was the EU that pushed the [Barack] Obama administration to threaten massive nuclear retaliation.
If you tell me that surely The Economist writer is joking, I'd call it a Freudian slip. There's a feeling among the EU leadership (and in Moscow) that the US is so anxious to hold onto the Nato alliance that Brussels can manipulate Washington into doing just about anything if European security is directly involved. This helps explain Putin's actions to limit EU-US machinations in Russia. And it explains Pundita's sour-grapes view of Brussels when it comes to US foreign policy matters.

Saturday, March 24

Preah Maha Ghosananda: With a Boundless Heart

Preah Maha Ghosananda
Mar 22nd 2007, The Economist:

"Preah Maha Ghosananda, “the Gandhi of Cambodia”, died on March 12th, aged 78.

"ASIA'S great spiritual leaders tend to build shrines round themselves. There they sit, disciples at their feet, handing down instructions for achieving the perfect life. When Preah Maha Ghosananda, in later years, became associated with Buddhist temples in Rhode Island and Massachusetts, his admirers would expect to find him there. He seldom was. He would be far away, walking.

"Where he walked was often remote, but it was neither safe nor quiet. He would tread, a little bird-like man with hands folded and head bowed, along narrow paths that threaded through the jungle-forests of central Cambodia. Care was necessary, for the ground had been sown with landmines up to the edge of the trails. Humidity would mist his glasses and slick his bald head with sweat. His orange monk's robes, hitched up to show stout boots and socks, would tangle in the bushes. Behind him, chanting to the beat of a drum, would stream 200-300 laymen, monks and nuns, walking across Cambodia for peace.

"Though Ghosananda led these Dhammayietra, or “Pilgrimages of Truth” in the early 1990s, well after the signing of peace accords to end a civil war between the remnants of the murderous Khmers Rouges and the new, Vietnamese-backed Cambodian government, he often found war still raging. Shells screamed over the walkers, and firefights broke out round them. Some were killed. The more timid ran home, but Ghosananda had chosen his routes deliberately to pass through areas of conflict. Sometimes the walkers found themselves caught up in long lines of refugees, footsore like them, trudging alongside ox-carts and bicycles piled high with mattresses and pans and live chickens. “We must find the courage to leave our temples”, Ghosananda insisted, “and enter the suffering-filled temples of human experience.”

"Many of the villagers they met had not seen a Buddhist monk for years. In the old Cambodia, before the Khmers Rouges in April 1975 had proclaimed a new Utopian era, “forest-monks” had been a part of rural life, wandering through with staves and bowls, exchanging a handful of rice for a blessing. Now, though the Khmers Rouges had outlawed nostalgia, had razed the monasteries and thrown the mutilated Buddha-statues into the rivers, old habits stirred. As they caught Ghosanada's chant, “Hate can never be appeased by hate; hate can only be appeased by love”, soldiers laid down their arms and knelt by the side of the road. Villagers brought water to be blessed, and plunged glowing incense sticks into it to signal the end of war.

"Ghosananda himself had missed the horrors of the Khmer Rouge years. His family, ordinary peasant folk from the Mekong delta, had been wiped out; monks like him, “social parasites” as they were now branded, were defrocked, forced to labour in the fields, or murdered. Out of 60,000 only 3,000 were left alive, and those had fled. But Ghosananda had gone to Thailand to learn meditation in 1965, staying for years in a hermitage in the forest where only the buzz of insects disturbed him. Not until 1978, when he went to minister to Cambodian refugees in the camps on the Thai border, did he learn that Buddhism had been destroyed in Cambodia, although almost all the people had adhered to it. He decided then that his duty was to restore his country's sacred foundation.

"Step by step
He did not believe this could be done through grand temples or enclosed institutions. Certainly he could have gone that way. Like many others he had been a dek wat, a “temple kid”, washing the monks' dishes and carrying their alms-bowls. Unlike others, he became a monk and remained one, getting all his education in temples and eventually gaining a doctorate in Pali, the scriptural language of Theravada Buddhism. He was a polymath and an intellectual. Yet he could not stay out of the world. Rather than devoting himself to monastic scholarship, he built hut-temples in the refugee camps and handed out dog-eared photocopies of the Buddha's Metta Sutta, or Words of Love:

"With a boundless heart
Should one cherish all living beings:
Radiating love over the entire world
Spreading upwards to the skies,
And downwards to the depths...
On his walks his message remained the same. It needed no complication. The work, he knew, would be slow: “step by step”, as he liked to say. It would continue as long as Cambodians felt divided from each other and brutalised by their past.

After 1980 he was made much of. He represented the Cambodian government-in-exile at the United Nations, and was influential in the peace talks; in 1988, he was made Supreme Patriarch of Cambodia. Several times he was nominated for the Nobel peace prize. He founded more than 50 temples across the world. Some he spoke at; but his first priority lay elsewhere. It was to appear, birdlike, out of the Cambodian forest, to surprise a man digging or a woman washing; to remind them that the power of love was stronger than the forces of history; and then to move on.

"For the pure-hearted one
Having clarity of vision,
Being freed from all sense desires,
Is not born again into this world."

The Coalition of Punks

I was so blown away by the data he presented that I forgot to copy the link to a September 2005 post titled How They Vote at the UN by Dan Riehl at Riehl World View. I intended to comment on the post at the time but somehow the post got misplaced among the piles of reports that I snap up on a daily basis. When I went back to the site a few weeks ago to look for the link I couldn't find archives that far back.

I thought of Dan's post again while reading this morning that South Africa joined two other nonpermanent members of the UN Security Council, Qatar and Indonesia, in putting up resistance to the latest resolution on Iran's nuclear program. So on Friday the resolution was further watered down.

South Africa's government is now a cutout for China's foreign policy initiatives, which boil down to forging a coalition with every corrupt, poverty-stricken government that depends on transnational crime and/or oppression to keep them afloat.

Here's Dan's post if you missed it the first time around with my comments appended; it's a good guess that the voting pattern hasn't changed since 2005, although India (which shouldn't be considered an Islamic or Arab country) may now be throwing a more few votes to the US:
How they Vote in the United Nations

Below are the actual voting records of various Arabic/Islamic States which are recorded in both the US State Department and United Nations records:

Kuwait votes against the United States 67% of the time
Qatar votes against the United States 67% of the time
Morocco votes against the United States 70% of the time
United Arab Emirates vote against the U. S. 70% of the time.
Jordan votes against the United States 71% of the time.
Tunisia votes against the United States 71% of the time.
Saudi Arabia votes against the United States 73% of the time.
Yemen votes against the United States 74% of the time.
Algeria votes against the United States 74% of the time.
Oman votes against the United States 74% of the time.
Sudan votes against the United States 75% of the time.
Pakistan votes against the United States 75% of the time.
Libya votes against the United States 76% of the time.
Egypt votes against the United States 79% of the time.
Lebanon votes against the United States 80% of the time.
India votes against the United States 81% of the time.
Syria votes against the United States 84% of the time.
Mauritania votes against the United States 87% of the time.

U.S. Foreign Aid to those that hate us:
Egypt, for example, after voting 79% of the time against the United States, still receives $2 billion annually in US Foreign Aid. Jordan votes 71% against the United States and receives $192,814,000 annually in US Foreign Aid. Pakistan votes 75% against the United States receives $6,721,000 annually in US Foreign Aid. India votes 81% against the United States receives $143,699,000 annually.

Perhaps it is time to get out of the UN and give the tax savings back to the American workers who are having to skimp and sacrifice to pay the taxes or tell them to leave the USA and set themselves up in one of the countries that receive the aid, like Egypt or similar.
My heart is with Dan's suggestion, but we know what happens in American cities when banks redline neighborhoods that are poverty-stricken and crime infested: there is a flight of the middle class from neighborhoods that border the redlined neighborhood. That sets off a domino effect.

In the same manner, the US can't pull out of the United Nations just because there are gangs of punk governments roaming the halls. China's modus operandi is to forge alliances with other punks so that together they can thwart democracies. So America has to stay in there and battle it out, inch by inch, and that's easier if the United Nations remains on American soil.

With regard to the Islamic countries that overwhelmingly vote against the US at the United Nations -- the US pays a very high price for our support of Israel, but the price is worth it many times over.

Israel is a daily reminder to oppressive governments that litter the Middle East and Africa about what can be done with hard work. Israel was given only a lie with their barren land, but they fought and scrapped and made a vibrant democracy out of it. What's more, they accomplished the miracle with very little help from the US or any other government. Nor did the Israelis whine that the British once betrayed them every time they encountered a problem.

It's never how the other guy acts that is most important. With regard to how my government acts, I think our most serious battles are fought within the US government, not at the United Nations.

The US Sinophiles and corporate lobbies that want to partner with China, at any cost; the Arabists who want to make even more concessions to oppressive Arab governments and scale back US support for Israel; the factions that want to start a Cold War with Russia; the factions that want US foreign policy to cede to views of Nato allies; and the factions that want the US to roll back on a strongly defense-oriented foreign policy -- these are the toughest battles, and they define how the United States performs at the UN.

Friday, March 23

Frankly, yes.

From two comments about a December 2004 BBC article by Ahmed Rashid on Pakistan's President Parvez Musharraf's attempts to work out a deal with his major opponents:
"Western democracy is never going to work in Pakistan where there is so much illiteracy and poverty that one can buy vote in return of one time meal (DAWAT) or for a ride in the car to the polling station."
-- Mohammad Iqbal, Canada

-- "Ahmed Rashid talks of military rule not being able to work in the middle and long term. How wrong can he be. The reality is that democratically elected politicians turn Pakistan into their own fiefdoms, they deceive the public that is mostly illiterate and line their own pockets... Pakistan is like a trawler heading for the rocks in a storm in the middle of the night with no lighthouse in sight."
-- Abid Bashir, UK
From a March 21, 2007 report in The Washington Post Lawyers Press Musharraf with Protests:
To the lawyers and other Musharraf critics, the protests are about far more than a decision to suspend a judge. The larger question, they say, is whether Pakistan will be governed by the rule of law, or by one-man rule.

"People are starting to deeply resent this idea that he is the only one who knows what is right for Pakistan. Are the rest of us 160 million bloody idiots?" said Ejaz Haider, news editor of the Friday Times newspaper. [...]

The general public's failure to join the demonstration so far may be the result of the nature of the controversy. It hinges on complex constitutional questions in a country with illiteracy rates around 50 percent.
As of the 2001 census, the literacy rate in India was 65.5 %, but that's in a nation of over a billion people. And I think the commentator is closer to the truth; probably most among literate Pakistanis are not literate enough to comprehend much more in writing than street signs.

I do not know, and I do not think my nerves could take knowing, whether Pakistan is the all-time #1 recipient of multilateral agency development loans. In any case, over the decades the developed nations have poured mind-boggling amounts of aid and development loans into that country.

And what do we have to show for it? A narco state in control of nuclear warheads and under the thumb of Beijing, and which is now overrun by Taliban; a state peopled with "mostly illiterate" citizens.

Read, or re-read Ahmed Rashid's best-selling Taliban: Militant Islam, Oil and Fundamentalism in Central Asia or read his Jihad: The Rise of Militant Islam in Central Asia to understand why it was childishly naive to ever assume that globalization would put an end to war-oriented foreign relations policy.

For decades to come, a truly realistic US foreign policy will lean heavily on military strategies. If the doves don't like to hear that, they should pay less attention to the European Union diplomatic viewpoint and put more attention to reality.

Read Ahmed Rashid's March 22 op-ed Musharraf at the Exit for an overview of where things stand right now in Pakistan's political climate.

Wednesday, March 21

Nations of Ghosts

A wildly useless development scheme funded with stolen money is at the heart of Matt Dillon's hip suspense movie, City of Ghosts, which was filmed in Cambodia. In one scene, Harry the American Expat (in real life, Michael Hayes, the publisher of the Phom Penh Post), tells a newly arrived American, Jimmy, that he's a fool and doesn't know what he's getting into in Cambodia.

Jimmy is not exactly a fool. His father is a successful crook who taught him all the tricks of the flim-flam artist. But Jimmy survives his quest at the intersection of Cambodia's brutal government, Phom Phen's crime world, and Russian transnational crime only with help from his dad's cunning and a friendly local Cambodian with conscience.

I thought of City of Ghosts recently, when Indonesia's government announced what was already known in foreign aid development circles: most of the Western aid for victims of the Tsunami never reached the victims; it was stolen by Indonesians who were not victims of the flood. The biggest instances of theft will be traced to Indonesian officials if a serious investigation ever gets off the ground, which is doubtful.

City of Ghosts should be required viewing for every American with little understanding of what US aid and development projects -- and foreign policy initiatives based on aid and development -- face in the Third World.

I thought of the movie again when I came across comments at the World Bank's PSD blog regarding the World Bank Group's International Finance Corporation (IFC) report, Doing Business in South Asia:

Afghanistan has the most unfriendly business regulations in [South Asia], with low scores globally for registering property (most private land doesn't even have clear title); low scores for getting access to credit (there's no way to enforce collateral – legally); low scores for the red-tape required to trade -- in a country where up to 80% of firms import, it takes 88 days and 11 forms to ship in goods.

Overall [South Asia] scores worst on cost of firing and enforcing contracts. Small wonder, then, that India for example has only a jaw-dropping 8 million workers in formal employment [out of a work force of 458 million].

Try to imagine a government running a nation of a billion people where only 8 million of the citizens pay taxes. Realize that the rest of India's workers pay in other ways; they pay in bribes to the courts, the mobs, the crooked officials and the police. That means India's government is very limited in their efforts to modernize the country, which is why much of India is still a nation of ghosts -- ghosts of the colonial past.

The South Asia data are not the only figures available from the IFC report; click on the column headers to sort data for the real cost of doing business in all countries. Spend a few minutes playing with the data to give yourself a picture of what's wrong with many aid and development schemes launched in the poorest countries by the richer ones.

For Westerners who think that microfinancing is the answer, better read the Cato Institute's February report, A Second Look at Microfinance. PSD comments:

[The Cato study] considers the history of economic development and questions whether microcredit can do much to promote investment and growth. In it, author Thomas Dichter finds that economic growth usually comes first, and then credit becomes available more widely; even then, that credit is for consumption, not investment. From the conclusion:

"The average poor person in the past (and today) is not an entrepreneur, and when he or she has access to credit it is largely for consumption or cash flow smoothing. The average entrepreneur prefers to start with informal credit or savings rather than formal credit."
This is not to say that microfinance is useless; not by any means. However, what's downright counterproductive is the habit of seeing the New Promised Land in an economic development strategy that has limited application, then pouring huge amounts of money into the approach. That only attracts the kind of crooks Jimmy meets up with in City of Ghosts.

Americans are famous for the Promised Land approach to foreign development and aid, then there's always a backlash. We go gaga over a method of helping the world's poorest. Then Americans want to snap shut the checkbook when they find they've been taken for a ride. They call for the government to end foreign aid and pull out of the United Nations and the World Bank.

The bottom line is that development and aid, done correctly, are powerful tools in a government's foreign relations arsenal. So you can't fold your arms and say, "I won't play."

The European Union is the world's biggest aid donor, and the US is now in competition with China for influence in foreign countries via aid and development projects. Beijing does not mind funding schemes of the kind portrayed in City of Ghosts provided key officials in the target country are happy.

How to play it smart in the globalized era of corruption and crime? One way is for the US to gain greater control over development projects. A way to do this is to remain with the World Bank but follow the example set by the EBRD -- the European version of the World Bank. Of course several European countries are also members of the World Bank, but the Europeans set up a regional development bank to promote their interests on the continent. Note the strict control that the EBRD has over lending criteria:

The European Bank for Reconstruction and Development was established in 1991 when communism was crumbling in central and eastern Europe and ex-soviet countries needed support to nurture a new private sector in a democratic environment. Today the EBRD uses the tools of investment to help build market economies and democracies in countries from central Europe to central Asia.

The EBRD is the largest single investor in the region and mobilises significant foreign direct investment beyond its own financing. It is owned by 61 countries and two intergovernmental institutions. But despite its public sector shareholders, it invests mainly in private enterprises, usually together with commercial partners.

It provides project financing for banks, industries and businesses, both new ventures and investments in existing companies. It also works with publicly owned companies, to support privatisation, restructuring state-owned firms and improvement of municipal services. The Bank uses its close relationship with governments in the region to promote policies that will bolster the business environment.

The mandate of the EBRD stipulates that it must only work in countries that are committed to democratic principles. Respect for the environment is part of the strong corporate governance attached to all EBRD investments
[...]
A US version of the EBRD should keep it simple for the first decade and confine development loans to the Americas. That would shore USAID and other US foreign policy initiatives in Latin America.

The simple truth is that the farther a government gets from their base of operations, the harder it is to oversee development projects, and the less control they have over lending criteria -- a lesson that applies as well to microfinance.

In other words, the US should try something new for a change and work at getting development aid done right in the region nearest our shores. That does not mean abandoning multilateral development institutions or never doing aid and development outside the Western Hemisphere. It means playing it smart in this era.

Tuesday, March 20

The Greatest War

Dan Riehl has a way of saying in a few words what many people think. In Knowing Your Enemy he remarks:
It's important to know one's enemy in any struggle or conflict. Unfortunately for America, her greatest enemy may be America itself. Irresponsible political Liberalism, a mostly unaccountable media and an educated but unenlightened academia, they are the real forces against which the best of America must struggle, simply to be herself
I think many Americans who closely follow editorial opinion must feel sadness and anger at the number of fellow citizens who make a name for themselves by attacking American motives and goals.

I enjoin you to read the rest of Dan's essay. Yet I take issue with one of his observations: "Neither Iraq nor al-Qaeda represent the most important war in America's present [...]"

It can be said that the fight against slavery was only a narrative for America's war between Northern industrialists and Southern agrarians. And one can argue that the Nazi actions to create a master race were a fig leaf for what was simply a land grab. Yet there is no question that the Civil War and World War Two became battlefields for a clash of beliefs deeply held on both sides.

In the same manner, one can argue that al Qaeda is simply a mercenary army that will serve the highest bidder. And yet the rationale invoked by al Qaeda leaders strikes a deep chord in many Muslim hearts. At root, al Qaeda's narrative is a fight for the supremacy of tradition over the individual's right to doubt and dissent.

With regard to Iraq, I believed in 2003 and believe now that Saddam Hussein transferred the bulk of his WMD development program to Libya a few years before the US invasion. So, whether or not ongoing investigation turns up the existence of WMD in Iraq at the time of the invasion, I think it's splitting hairs to argue that Hussein had abandoned the quest for a WMD program in Iraq by the time the US invaded. I believe that Hussein's regime needed to be ended because he would not have been content to only challenge Israel and Iran with the possession of a nuclear weapon.

Then, the toppling of the Iraq Baathist government exposed situations in the country that dwarf US defense concerns. Everyone outside Iraq knew that things were bad in the country before the government toppled. Yet what we found behind the mask of a 1950s-style socialist government was a horror so great that it is difficult to encompass in words. A relative handful of men were holding millions in bondage to an ancient way of life that was inexorably killing off the Iraqi people.

So there was Paul Bremer, who was shrewd enough to know that his role in Iraq was nothing more than flotsam churned up by the war between the Pentagon and State. He had no real authority and yet he was expected to preside over chaos and somehow keep a lid on while Iraq was allowed to split into three warring regions.

What do you do when it occurs to you that everyone in authority around you is barking mad? Bremer decided that come hell and high water, by gum the Iraqi people were going to have a democratic Constitution. From that decision, the fig leaf of "freeing the Iraqi people" transformed into a narrative that vaulted an invasion about defense concerns into the greatest war of our generation.

Why do we fight? We fight because civilization collapses when large numbers of people are lulled into believing that the safety of tradition, and the rule of a few guardians of tradition, will save them from annihilation in the face of vast changes set to destroy them. We fight because the imperfections of democracy allow room for dissent with the status quo and the directives of a few.

Monday, March 19

Oh shit, it's almost springtime in Afghanistan and Pakistan is FUBAR!

The Taliban say they have massed 6,000 fighters and scared up weapons to bring down helicopters, so they can wage the mother of all battles against Nato in Afghanistan as soon as the snows melt.

Meanwhile, Britain is seriously ticked off at fellow EU members Germany, France, Italy and Spain, "who have so far not shown the adequate resolve to be part of a full Nato complement in Afghanistan" in time for the spring offensive.

Meanwhile Pakistan's President Musharraf continues to say 'Please understand me' to US envoys who threaten to cut military aid and do other dire things unless he gets real about rooting out al Qaeda and Taliban in the lawless territory bordering Pakistan.

Pakistan's latest move to deal with AQ is the Bajaur Accord. Bill Roggio at The Fourth Rail reported on March 17 on the accord signing:
It appears, like in the North and South Waziristan deals, that the government has openly negotiated with the Taliban and al Qaeda. [...] The North and South Waziristan Accords have been famous failures, as the Taliban and al Qaeda openly rule in the agencies, virtually free of harassment by Pakistani government security forces. Terror training camps have been established and battalion sized formations of Taliban fighters sortie from Waziristan into Afghanistan. The Bajaur Accord, like the North and South Waziristan Accords, signals the Pakistani government is unwilling to police its own borders, and is prepared to hand over even more territory to the Taliban and al Qaeda.
One of Bill's readers, "Joe," neatly summed the situation:
Musharraf is rapidly being squeezed into a corner and it is doubtful if he can last. On one side he is forced to sign peace deals with Taliban/AQ ceding large portions of territory to jihadists who have absolutely no intention of honoring the agreements and continue to expand their influence closer to Islamabad. Now he is also facing a revolt within the Pakistan middle and upper class over his treatment of a senior judge. Not good. Syed Ahahzdad had articles in Asia Times all this week talking about the magnitude of these problems and even detailed cooperation between these two groups to put pressure on Musharraf. Pakistan is close to if not already FUBAR.
FUBAR, for readers who aren't up on military terminology , means "fouled up beyond all repair" although the original statement is somewhat more colorful.

What are the other dire things the US has threatened if Musharraf's government doesn't get it together? From Bill Roggio's March 1 report on the US attempts to pressure Pakistan, US government sources quoted by The New Times on February 26 claim:
Pakistan has also been told that the US-NATO forces do not like to take any action by themselves inside Pakistani territory but if the movement of ‘people’ did not stop, there would be no other option left.
I note that President Bush didn't send any old envoy to talk tough to Pakistan's prez; he sent Vice President Cheney. That might help explain the recent movement from antiwar factions in the Democrat and Republican camps to portray Cheney as certifiably nuts. The campaign has heated up so much that columnist and GOP supporter Charles Krauthammer had to invoke his psychiatric credentials to argue that Cheney is sane.

However, it could be that the psychiatric profession has to admit to a new definition of insanity: Any American who believes that the United States of America is currently engaged in a war.

In support of this observation I bring you Tom Malinowski, an advocacy director at Human Rights Watch. He has the solution for halting al Qaeda in Afghanistan and Iraq and getting the Taliban to pipe down. As he explains it at the Washington Post's editorial page on Sunday: If we would just stop calling it a war on terror, what really isn't a war would stop.

As to how this could stop things such as surface-to-air rockets in Afghanistan and chlorine attacks in Iraq, I guess his thought processes are complex. But the gist is that if Qaeda & Co. are treated as criminals, they will stop glorifying themselves as soldiers and, one presumes, cooperate in being prosecuted by the US Department of Justice.

What Malinowski studiously overlooks is that one doesn't buy many shoulder-fired rockets and sophisticated explosive devices from bazaars along the Silk Route. Governments are supplying the weapons and paying for fighters who use terrorist tactics, which is why President Bush spoke of a "war on terror" instead of outright declaring war on certain countries.

However, I mention Malinowski's idea just in case you're tempted to hope that Washington Post editors have recently moved out from under the thumb of the US Department of State, which clings to the belief that the world's baddest guys respect diplomacy above force. Which is one way of saying that State is FUBAR.

Meanwhile, Canadian Mark Steyn had some choice words for Nato allies who are advancing to the rear in Afghanistan:
According to my dictionary, the word "ally" comes from the Old French. Very Old French, I'd say. For the New French, the word has a largely postmodern definition of "duplicitous charmer who undermines you at every opportunity".

For the less enthusiastically obstructive NATO members, "ally" means "wealthy country with no military capability that requires years of diplomatic wooing and black-tie banquets in order to agree to a token contribution of 23.08 troops." Incidentally, that 23.08 isn't artistic licence on my part. [...]

And these days "troops" is something of an elastic term, too. In Norwegian, it means "fighting men who are prepared to stand shoulder to shoulder with the Americans, as long as they don't have to do any fighting and there are at least two provinces between their shoulders and the American ones".

That's to say, Norway is "participating" in Afghanistan, but, because its troops are "not sufficiently trained to take part in combat", they've been mainly back at the barracks manning the photocopier or staging amateur performances of Peer Gynt for the amusement of US special forces who like nothing better than to unwind with five acts of Ibsen after a hard day hunting the Taliban.

Alas, even being in the general vicinity of regions where fighting is taking place got a little too much so the Norwegians demanded a modification of their rules of non-engagement and insisted their "soldiers" be moved to parts of Afghanistan where there's no fighting whatsoever by anyone at all. Good luck finding any
.
Meanwhile, spring is on the way in Afghanistan......

Saturday, March 17

Hamsterism and Being Helpful in Iraq

"Dear Pundita:
My question regards neoism, as in neoliberalism (as applied to international relations), neorealism, neoconservatism, etc. Do you think there is something unique to humans that disposes them to attach "neo" to a concept rather than devising a new descriptive term for a category of ideas?
Intergalactic Fan"

Dear Intergalactic Fan:
An idea might be so close to an earlier concept that one is justified in terming it neo, as in "neomercantilism," but Pundita gets your drift. Particularly if you're from another planet, it would be helpful if a new descriptive term was created for every new concept. That's so one isn't always having to run to Wikipedia to learn what the "neo" in front of a word refers to.

But it's fairly obvious that true neoists are a reincarnation of a pet hamster who pretty much lived on an exercise wheel. They can't go forward, you understand; they can only go round and round. Despite their claim to newness, they don't feel right with the world unless they are going over old ground.

Hamsterists, shall we call them, insist on applying the same solution to every problem, no matter how different the problems under consideration.

The fields of foreign policy and economics seem to hold a special attraction for Hamsterists. Famous examples of Hamsterism are Jeffrey Sachs -- who would apply neoliberal economic theory to Hell Itself as a solution to the heat problem there -- and Zbigniew Brzezinski. But U.S. Commerce Secretary Carlos Gutierrez is a classic example of Hamsterism, which he unleashed on US foreign policy initiatives in Iraq. When asked by President Bush to figure out some sort of useful plan for rendering immediate help to the Iraqis, here is what Mr Gutierrez decided:

A top priority for the Iraqi people was to transform Iraq into a showcase for neoliberal economic theories. To get the ball rolling, Gutierrez advised halting all food rations for Iraqis, as the way to kick-start Iraq's virtually nonexistent agriculture private sector. And he wanted the US to pressure Iraq's government to cease the monthly rations, which more than half of Iraq's population relies on for baseline sustenance.

This advice for a nation full of starving jobless people; a nation with massive water and electricity shortages, a nation with boarded up factories that can't produce farm fertilizer, much less farm tractor parts; a nation that is a laundry list of everything humanity's done wrong in government since 1,500 BCE; and on top of which a nation in the middle of war and in the throes of trying out a new form of government. A government that would have been toppled by riots if food rations had been suspended.

American readers who scoff at Pundita's explanation should read every paragraph of Rajiv Chandrasekaran's latest report about Washington bureaucracies at work on helping in Iraq, which recounts the Gutierrez debacle.(1) A reincarnation of a pet hamster is a straw to clutch at, if you can't bring yourself to confront that our secretary of commerce is a moron.

One might be tempted to laugh it off, if Mr Gutierrez had only advised. But he tried to actualize his hare-brained scheme. It is a credit to the human race that Iraqi and American officials in Iraq ganged up to block the "zombie idea" as one observer called it. But Gutierrez and his go-fers wreaked havoc before they were beaten back. A former embassy official summed up the horror of the situation:

"I can't tell you how many hundreds of hours everyone has wasted on this issue, when there were all sorts of more productive things they could have been doing with their time."

Not to mention all sorts of other places for US tax dollars.

Once you read the report you might observe that Gutierrez was simply carrying the ball forward for Paul Bremer, who proposed ending the food rations when he ran the CPA. I think Bremer has an excuse for everything wrong he did in Iraq; I think he was suffering from traumatic stress while he was working there. Gutierrez does not have that excuse; he was advising on the situation in Iraq from the safety and order of Washington, DC.

1) Washington at War Food Fight

Bill Roggio's reporting on Iraq

I don't know how Bill Roggio does it, and does it so well, year after year, day after day, but if you want to keep up-to-date on the Iraq theater of war, visit The Fourth Rail.

Bill's daily "Roggio Report" is now being published at the Weekly Standard. You might have to scroll down the WS page if you're following the link to the daily report from The Fourth Rail. But any which way you can, reading the reports is well worth the effort; they give a more complete (and often very different!) view of Iraq operations than the MSM.

On a personal note, Bill is one of those blogging reporters whose dedication and high standards have been an ongoing source of inspiration for me. Many times I have considered throwing in the towel -- and as recently as this morning -- but after a visit to Bill's blog, I say to myself, "Stop whining and start typing."

If you're new to Bill's reporting, here are a few links to get you started: Daily Iraq Report For March 16.

Al Qaeda's Chlorine Attacks: The Dirty War in Anbar.

Signs in Sadr City.

The Battle of Diyala.

Tuesday, March 13

The Democracy Doctrine: Not on its last gasp but its viewpoint too narrowly stated

Dear Pundita:
I am writing to tell you that I have been in the doldrums because I think President Bush's freedom doctrine has been killed off during the past year in the name of expediency and practicality. It's such a shame because it is an inspiring doctrine, and one worthy of the United States of America.
Claudia in Taos

Dear Claudia:
Get a grip. The bottom line has not changed, whether people accept or reject the idea that the United States can base foreign policy on the promotion and defense of democracy. In their rush to globalize trade and investment, the developed nations studiously ignored that a large swath of humanity has no say in how their government decides on trade and investment matters; they have no say in anything about the course of their government. But there's no pulling back from globalized trade and investing, and the attempt to do so can easily crash civilization.

Democratic institutions make globalization work, but there are two very different types of challenges to democratizing weak nations, in addition to the standard challenges to instituting democracy in a nation that's new to the practice:

1) Many governments categorized as democratic actually reflect illiberal or "stage show" democracy rather than the real deal; i.e., the country sees free elections but an elite class still has an iron grip on legislation, law enforcement, and government institutions.

2) When globalization brings to a developing country large-scale foreign investment and trade dominance by a more developed country, there is a backlash among the masses against the domestic government and the foreign governments backing globalized trade and investment.

The anti-globalization movement is one way of stating both factors. President Bush saw that the situation won't stand, if we want to continue to expand trade and global investing. So people should get the past the idea that Bush is a dreamer. He was just fingering a situation that was as plain as day in the wake of 9/11.

So why did Bush find himself in the position of the child in the The Emperor's New Clothes? Because it is setting a task the size and complexity of which the human race has never before seen, if you determine that democracy must be instituted in every nation -- and not just stage-show democracy, but the real deal. Human nature has a penchant for blinding itself when seeing includes the sight of insurmountable obstacles.

Yet when you deem an obstacle to be insurmountable that's an indication that you've stated the problem wrongly. Everyone with an engineering bent understands my point but government does not attract many engineering minds. So then the problem is stated as insurmountable and instead of restating, government butts its head against the insurmountable, then retreats into so-called realism.

In other words, the right approach is deemed impossible for want of a workable plan of execution. That's the reaction from many quarters with regard to the Bush Doctrine. But again, the fundamentals haven't changed: democratize more peoples or face suicidal decisions by governments to pull back from globalization of trade and capital flows.

That's why I keep saying to listen to Vladimir Putin, in the manner of taking instruction. Until we look at things through Putin's eyes, we can't understand the challenges to the Democracy Doctrine.

Putin is not on a power trip; he's a patriot. He dedicated his adult life to serving Russia. So why is he insisting on pulling back from certain democracy reforms?

First, he fears the further balkanization of ex-Soviet states, including territory now in Russia. And he has evidence to support the charge that the United States and Western Europe have conspired to balkanize Russia and the ex-Soviet states that are still allied with Russia.

Second, Putin believes that the democratic reforms of the Yeltsin era jumped the gun because Russia is not yet a fully functioning nation. The priority in Putin's view is to strengthen Russia's sovereignty; he believes that without that step, having no brakes on democracy will tear apart the institutions that keep Russia bumping along as a single entity.

Third, Putin believes that many attempts to liberalize Russia's democracy actually come from interests in the United States and Western Europe that want a big say in how Russia's government is run.

Are Putin's concerns overblown? From the US position, yes. But key is that today many other government leaders have similar concerns -- and they fear that a big backlash in their country against globalization can unseat their government. An ominous trend is that leaders with a truly dictatorial bent, such as Hugo Chavez, are making hay with the challenges to national sovereignty posed by foreign investment.

With regard to the sovereignty issue, Putin is not stating a situation that is unique to Russia. Iraq, for example, sees a large nomadic population that has a form of democratic decision-making -- the elders get together by consent from the rest of the tribe and hash out decisions. But the nomads don't have a sense of being Iraqi citizens and they don't have a strong commitment to Iraq as a distinct entity.

And even though they're not nomads, a similar situation exists in the Balkans between Albanians and Serbs. Clearly they have a greater commitment to ethnic ties than to a concept of nationhood.

Then the question becomes: how do you fully democratize a region that isn't really a nation?

So there is enough truth in Putin's concerns that the majority of the Russian people want to stay with his set of priorities for modernizing Russia -- even though that means scaling back liberal democracy.

Another question: How do you institute modern democracy in a region where people don't have clear ownership of property they reside on and can't enforce their ownership claims to a business? The notion of private property is closely intertwined with modern democracy because property owners tend to demand a say in how government works.

From this and other examples I could dredge up, while democracy is a clear-cut set of principles, implementation of a democratic society reflects a gestalt comprised of numerous complex situations. If the gestalt isn't there, a multi-pronged approach is needed to bringing it about. That's not as hard as it might sound, but it takes a lot of money and expertise to create or modernize institutions and legislation that support the democratic viewpoint, as the World Bank could tell you.

But even with the gestalt in place, globalization has mounted a challenge to democracy, which is reflected in Putin's most unpopular decisions with the developed nations. The bottom line is that globalized investment tends to support a country's entrenched ruling class, which doesn't like power-sharing with the rest of society. In a nondemocratic country or a phony democracy this factor is a huge obstacle to democratic reforms.

The Brussels crowd think they have the solution: downplay the sovereign nation and institute a global government. Here I am reminded of Mr Gurdjieff's advice to a disciple who asked how one could learn to love people in more unconditional fashion. G replied that loving a fellow human is a very big accomplishment, so first practice on animals; learn not to kick your dog. By the same token humanity is a long way from a globalized mindset in their personal affairs; just managing a national mindset is huge step.

But in the present state of capacity, even the most globally-minded cannot manage the complexities of democracy in many cases. So a global government cannot be a democratic one -- a fact that does not seem to bother the EC overmuch. No matter what they might say to the contrary, I think Brussels prefers oligarchy to democracy, which keeps people in the diapers stage of development. Besides, oligarchy is wildly impractical in the modern age because today's governance problems are so vast and complex that it's a joke to claim that an enlightened elite can govern a population in the millions.

So where do all these observations put us in relation to the Democracy Doctrine? First the good news: look back on the Cold War era to see how far we've come in our understanding of the problems with implementing the doctrine. President Bush's decision to address the deep causes of the 9/11 attack on America opened a new chapter in history, as did his assertion that should be no more US "deals," of the kind characterized by US policy during the Cold War. Much of what the US is now facing in Africa, the Middle East, and Latin America are problems left over from deals with autocratic governments -- deals launched by various powers during the Cold War.

The developed nations are still making unsavory deals; think of US relations with Pakistan, and German relations with Iran. But at least today the governments in such nations are clearly aware of the price they pay for such deal-making. The portability of strike weapons and the speed of information-sharing mean that governments can no longer kick the can down the road for decades when a deal blows up.

At the other end of the conundrum we face sophisticated arguments, of the kind that Moscow and Beijing mount, for repressing democracy.

Okay, I'm going to break off here. We'll take up the discussion tomorrow or later this week. For now, note that I have expanded a statement of the democracy problem to include the issues of sovereignty and globalized trade and investment, which the Bush Doctrine does not address.

Monday, March 12

Iraq: Boo-Yah! The counterinsurgency is working!

"Both friends and foes in Iraq had been convinced, in no small part by the American media, that the United States was preparing to pull out. When the opposite occurred, this alone shifted the dynamic."

Robert Kagan, a senior associate at the Carnegie Endowment for International Peace, has launched a broadside at the American media for their biased reporting on the Coalition war effort in Iraq. This, in the course of reporting in yesterday's Washington Post that "substantial" evidence is mounting that the new Iraq counterinsurgency strategy created by General David Petraeus and backed by a troop surge is having a significant effect in Baghdad and Ramadi. Of the media, Kagan writes:
No one is asking American journalists to start emphasizing the 'good' news. All they have to do is report what is occurring, though it may conflict with the previous judgments. Some are still selling books based on the premise that the war is lost, end. But what if there is a new chapter to the story?
From Kagan's report it seems the new chapter is being written. He quotes observations from NBC's Brian Williams that there has been a dramatic change in Ramadi since Williams's previous visit:
The city was safer; the airport more secure. The new American strategy of "getting out, decentralizing, going into the neighborhoods, grabbing a toehold, telling the enemy we're here, start talking to the locals -- that is having an obvious and palpable effect."

US soldiers forged agreements with local religious leaders and pushed al-Qaeda back -- a trend other observers have noted in some Sunni-dominated areas. The result, Williams said, is that "the war has changed."
Kagan quotes Iraq the Model bloggers Mohammed and Omar Fadhil's observations about the improvement in Baghdad:
The first impact of the "surge," they write, was psychological. Both friends and foes in Iraq had been convinced, in no small part by the American media, that the United States was preparing to pull out. When the opposite occurred, this alone shifted the dynamic.

The Fadhil's report, "One difference between this and earlier -- failed -- attempts to secure Baghdad is the willingness of the Iraq and U.S. governments to commit enough resources for enough time to make it work."

[...] Now, the plan to secure Baghdad "is becoming stricter and gaining momentum by the day as more troops pour into the city, allowing for a better implementation of the 'clear and hold' strategy."

Baghdadis "always want the 'hold' part to materialize, and feel safe when they go out and find the Army and police maintaining their posts -- the bad guys can't intimidate as long as the troops are staying."
Kagan observes that Baghdadis' greater confidence in the counterinsurgency has had several benefits:
The number of security tips about insurgents that Iraqi civilians provide has jumped sharply. Stores and marketplaces are reopening in Baghdad, increasing the sense of community. People dislocated by sectarian violence are returning to their homes. As a result, "many Baghdadis feel hopeful again about the future, and the fear of civil war is slowly being replaced by optimism that peace might one day return to this city," the Fadhils report. "This change in mood is something huge by itself."
As for Sadr and the Shiite militias, Kagan makes a good point
[...] it is possible they may reemerge as a problem later. But trying to wait out the American and Iraqi effort may be hazardous if the [Iraqi] public becomes less tolerant of their violence. It could not be comforting to Sadr or al-Qaeda to read in The New York Times that the United States plans to keep higher force levels in Iraq through at least the beginning of 2008. The only good news for them would be if the Bush administration in its infinite wisdom starts talking again about drawing down forces."
More bad news for Mookie: U.S. and Iraqi forces have established a presence in the once off-limits Sadr City. His militias are not taking that lying down; the Fadils report that while his militias are keeping a low profile, they've started a disinformation campaign in the attempt to discredit the new Coalition effort. But the proof is in the actions, and right now the Coalition is acting right on time.

Iraq the Model also has an interesting report on the policing aspect of Operation Imposing Law:
[...]A few days ago the government announced more traffic-related measures to support “Imposing Law” in Baghdad. Under the first order, it will be forbidden to park any private vehicles in the main streets of the city. Under the second -- a reinstating of an old order -- vehicles with odd and even numbered plates would only be allowed on the streets on alternate days. This means that only half of the several hundred thousand of private vehicles will be on the streets on any day. The order applies to private vehicles only, but cuts the work involved in screening vehicles approximately in half.

[...] Elsewhere in the capital the troops are using not only guns and Humvees, but also shovels and bulldozers. In areas such as Karrada and Palestine Street Iraqi soldiers and workers of the Baghdad municipal services are working on removing trespasses on public property and irregular roadblocks set by locals at earlier times. The measure sparked anger and dismay among some people whose businesses were damaged because the bulldozers also removed irregular kiosks and stalls.

An Iraqi officer explained the decision yesterday by saying that those illegal roadblocks and trespasses were making it difficult for the troops to quickly reach areas where intervention is needed.

Other law enforcement officials are also getting more serious in doing their job. Traffic cops who would normally stop a suspicious vehicle only if it passed by their post are now riding their motorbikes and chasing suspected vehicles down highways and other streets.

This is an indication that Imposing Law does not mean only sending soldiers to kill terrorists. It is reaching out to deal with other aspects of mess and to counter relatively “benign” violations-like breaking the “odd and even” traffic rule, defensive irregular roadblocks and unlicensed kiosks and stalls-by providing protection for the personnel of civilian departments while they do their job.

Saturday, March 10

Who runs the world? You're about to find out.

The world is run by five clerks who work above a grocery store in Geneva, Switzerland. I am not making this up, except the number could be more than five depending on the amount of square footage above the store.

The clerks work for a company called Petrologistics, which is the world's only source for OPEC oil production numbers that come from outside OPEC. That means Petrologistics is the only definitive source for sets of numbers that underpin the entire global financial sector and thus, Petrologistics keeps modern civilization from falling back into the dark ages.

How did Petrologistics get to be the sole arbiter of the OPEC production figures? Because the cartel members lie to the sky about the size of their country's oil reserves. That's so they can cheat other cartel members by producing oil above the agreed-upon quota, which is based on reserves.

How do we know that Petrologistics figures can be trusted any more than OPEC's? We don't. The company claims to have spies in every port -- presumably to count the oil barrels being loaded and offloaded from container ships. If that doesn't sound like a very reassuring way to collect data, there is no alternative except for the OPEC numbers. So everybody in the oil business, and all the world's currency traders, and international bankers, and governments take the Petrologistics fact sheet as their Bible for oil production numbers.

Next question: How wide is the divergence between the Petrologistics and OPEC numbers? The June 2005 Wall Street Journal article I'm referencing doesn't say, but it reviews a 2005 book, Twilight in the Desert by Matthew R. Simmons, a Texas investment banker with a Harvard Business School degree and 20 years' experience in oil. Simmons claims that the Saudis are considerably overstating the amount of their oil reserves.

"Again, there is no way to validate or dispute Simmons's claim because the Saudi version of the reserves number can't be vetted. In 1982, the Saudi government took complete control of Aramco (Arabian American Oil Company); since then the company has never released field-by-field figures for its oil production. Yet the Saudis claim that, for at least the next 50 years, they could easily double their current output of 10 million barrels a day.

"Simmons took a back door approach in the attempt to get near a realistic production figure. According to the Journal article:

"Simmons became suspicious of Saudi claims after taking a guided tour of Aramco facilities in 2003. To penetrate the veil, he turned to the electronic library of the Society of Petroleum Engineers, which regularly publishes technical papers by field geologists. After downloading and studying more than 200 reports by Aramco personnel, Mr. Simmons came up with his own portrait of Saudi Arabia's oil resources. It is not a pretty picture. [...]

"Simmons doubts that Aramco can increase its output to anywhere near the level it claims. In fact, he believes that Saudi production may have already peaked."

Simmons does have his critics, who argue "that, by relying on technical papers, he has biased his survey, since geologists like to concentrate on problem wells the way that doctors focus on sick patients." But from others who read the tea leaves, the truth is probably somewhere between Simmons's dire projections and the rosy story told by the Saudis. It's really anybody's guess.

So why am I highlighting a speculative report published almost two years ago? Because now Wretched at the Belmont Club blog is concerned about the Saudi oil reserve figures and the implications, if Simmons's projections are correct"

"The Oil Drum is suggesting that Saudi Arabian oil production is now declining due to depletion. It juxtaposes declining Saudi production against its rising recovery effort. They're running harder but they're slowing down. From the data, he reaches the conclusion that yes, the Kingdom is running out of oil. [...] I suggest that this is likely to place severe political strains on Saudi Arabia within a year or two at most.(1)"

I don't know whether the Saudis are running out of oil but I think it's beyond argument that they're running out (or maybe they've already run out) of oil that's cheap to extract, which is the story for many oil-producing regions. Back to the Journal article:

"The six major [Saudi] fields, having all produced at or near capacity for almost 40 years, are showing signs of age. All require extensive water injection to maintain their current flow."

The water injection is very expensive. So, even if dire predictions are wrong about the Saudi oil fields, we're still looking at the prospect of oil that is much more expensive than found today. What's the net result for the US?

To answer the question, visualize the US dollar. The greenback and in particular the petrodollar is America's major export. One of Pundita's earliest posts was to warn about the specter of petrocurrency wars, and periodically I return to the topic.

The use of US currency as the major medium of payment for major commodities, including oil, is a double-edged sword for the American economy. But nobody wants to think of the consequences for the global economy if the US dollar crashes, so it won't happen. The Lords of the Craps Table won't let it happen because The Casino -- the international monetary system -- has to stay standing. However, there is now underway a reasonably orderly progression from the dollar hegemony, which is not a bad thing for the US economy if the progression remains orderly. Russia is already denominating a basket of currencies as payment for their oil.

With those points in mind, tell me what happens when the price of oil goes up? Yes; the dollar gains back value it lost by having to share the stage with other currencies used to purchase oil. The higher the price of oil goes, the greater the dollar export cushion to the US economy. Recall that formula whenever you hear doomsday projections for the US if the Saudi oil fields running out.

All this said, the Saudis are getting off their bums (at least partly due to pressure from WTO, now that Saudi Arabia is a member) and casting about to diversify their economy; this, so they're not entirely dependent on oil revenues. As to how they're going to pay for the water needed for these diversification projects, I dunno, but here's the plan:

(Hat tip for the link to Buddy Larsen via Belmont Club comment section.) From the Financial Times via Wall Street Journal via T. Boone Pickens blog:

"Saudis build for less oil-dependent future
by Andrew England in Cairo, March 1:

“We have always believed in free trade but we needed to open up further,” says Fawaz al-Alamy, Saudi’s chief technical negotiator for World Trade Organisation accession. “We found out after the previous boom and the last decline that oil is a volatile commodity and we cannot keep a country hostage to it.”

"After the Saudi boom of the 1970s and early 1980s, gross domestic product growth in the Gulf’s largest economy dwindled to about 1 per cent annually, while population growth soared to about 4 per cent. During the current boom, its real GDP annual growth bounced back to between 4.2 and 6.4 per cent, with the size of the economy swelling from $188.5bn in 2002 to $348bn last year. Economists say nominal growth, a more accurate indicator, has been double-digit.

"After years of budget deficits, the government is now flush with petrodollars and was able to announce a record budget surplus of $70.7bn last year. Economists expect economic activity to be robust this year, even if real GDP growth slows on a reduction in oil output.

"Yet even with its abundant wealth, the world’s largest oil exporter faces tough challenges as it seeks to expand the private sector and reform the education system and labour market, which will be crucial to ensuring young Saudis find roles outside the public sector.

"The issues confront all Gulf states but in Saudi Arabia they are perhaps more acute as the kingdom is the Gulf’s most populous nation, and reforms could face resistance from the highly influential religious establishment. And, in spite of producing about 9m barrels per day, Saudi Arabia’s oil production per national citizen is lower than four of the other five members of the Gulf Co-operation Council, according to McKinsey and Co, the international consultants.

"Saudi officials say they have already begun the diversification process, citing the kingdom’s accession to the World Trade Organisation in December 2005 and the acceleration of economic liberalisation. Since then, non-oil exports have increased by 13 per cent annually to more than $20bn, while foreign direct investment has increased by 250 per cent to more than $5.6bn, Mr Alamy says.

"Much of the investment still focuses on the oil sector but a key element of the government’s strategy to spread funds wider is the construction of the economic cities, including King Abdullah City, to attract foreign and domestic investment, broaden economic activity throughout the kingdom and create hundreds of thousands of jobs.

"The plan, officials say, is to build on reforms and leverage the state’s competitive advantages – targeting energy-intensive industries, such as aluminium, steel and plastics, and utilising its location on the Red Sea.

"Sagia, the investment authority, is even looking to tap into the kingdom’s role as host of Islam’s two holiest sites. King Abdullah City’s port will be designed to cater for 300,000 Hajj pilgrims, and a new city on the edge of Medina will be seeking to attract Islamic investment, says Fahd al-Rasheed, deputy governor at Sagia.

“It’s based on economic rationale,” he says. “We have 25 per cent of the oil reserves in the world but only 2 per cent of the energy-intensive industries. For example, a major component for producing aluminium is energy and we know that we are 31 per cent cheaper than the US and Europe.” One goal, he says, is to corner 15 per cent of the aluminium market by 2020. Saudi Arabia’s current share is negligible.

"By the time the cities are complete in 10 to 15 years, their combined GDP is targeted at $150bn in today’s terms, with the creation of 1.3m jobs and a total population of 4.5m.

“The cities are designed in a way so that you establish the industries, that brings jobs, they bring families, they start buying real estate, they start requiring restaurants and shopping malls, so there’s a virtuous circle of real estate and job creation,” Mr Rasheed says.

"Some $100bn will be invested in infrastructure alone and the government is seeking private sector investment to finance the projects, with Sagia acting as regulator and promoter. Emaar Properties, the Dubai-based group, is a significant shareholder in Emaar Economic City, which is spearheading the King Abdullah city project.

"The targets are ambitious and some question whether the conservative nature of the state – where women are banned from driving and segregated in most work and social places – will enable it to compete with more liberal Gulf countries in terms of foreign investment.

"Security will be another factor in a country where extremists have attacked foreign workers in recent years. Four Frenchmen were killed this week.

"However, Brad Bourland, chief economist at Samba Financial Group, says the cities concept can work and adds that Saudi business will be a key factor in their potential success.

“There won’t be any big white elephant projects built in the desert,” he says. “The decisions will be driven by businessmen, so I think they are quite viable.”

"He adds that the government is managing its oil wealth well so far, reducing debt and spending cautiously so as not to exceed the state’s absorption capacity.

“Four years into the first oil boom, the country had a current account deficit, so although revenue grew tremendously in the 1970s, imports also shot up,” Mr Bourland says. “It is quite the opposite this time and imports as a percentage of oil revenue have actually declined. There is not a conviction that oil prices will stay high for ever.”

"But he warns it is unrealistic to expect the kingdom to reduce its oil dependency. “Oil is just too big,” he says. “The best you can do is try to smooth it out."

1) http://fallbackbelmont.blogspot.com/2007/03/
tho-merlin-sware-60s-should-come-again.html

2) http://blogs.wsj.com/energy/

This page is powered by Blogger. Isn't yours?