Crony capitalism, phony democracies, and anti-Americanism go hand in hand

Particularly upsetting to defenders of free markets is that crony capitalism gives capitalism a black eye wherever it goes....

One of the irritating habits of the American mainstream media is their insistence that President Vladimir Putin has been rolling back democracy in Russia. There never was democracy in Russia; there were crony capitalists managing a democracy stage show with the complicity of the USA and some EU governments. That has also been the case for much of the developing world.

I think you could graph the extent of US-backed crony capitalism in a developing country with the extent of anti-Americanism there. I'd say the same holds true for the connection between European-backed crony capitalism and anti-EU feelings. There is also a connection between anti-globalism and crony capitalism's worst excesses in the developing world.

Latin America is swerving left, and distinct backlashes are under way against the predominant trends of the last 15 years: free-market reforms, agreement with the United States on a number of issues, and the consolidation of representative democracy. This reaction is more politics than policy, and more nuanced than it may appear. But it is real.
--Jorge G. Castañeda
Latin America’s Left Turn
Foreign Affairs
May/June 2006

Okay, now we're ready to bone up on the meaning of crony capitalism:

[...] One legitimate reason for the opposition to capitalism in Latin America is that it frequently has been "crony capitalism" as opposed to the competitive capitalism that produces desirable social outcomes. Crony capitalism is a system where companies with close connections to the government gain economic power not by competing better, but by using the government to get favored and protected positions. These favors include monopolies over telecommunications, exclusive licenses to import different goods, and other sizable economic advantages. Some cronyism is found in all countries, but Mexico and other Latin countries have often taken the influence of political connections to extremes. [. . .] The excesses of cronyism have provided ammunition to parties of the left that are openly hostile to capitalism and neo-liberal policies. [...]
--Gary Becker
Moving Left in South America (*)
The Becker-Posner Blog
May/June 2006

There is more than one reason for Latin America’s leftward turn, and once you’ve read the essays by Castañeda and Becker in their entirety you'll be well positioned to grasp the scope of the trend.

What, if anything, can the US government do to help the most affected countries move toward ‘competitive’ capitalism?

I would prefer to see the Office of Business and Commercial Affairs removed from the US Department of State but at the least Congress could closely monitor it. The office puts US businesses in a position to influence US foreign policy outside the glare of the American public’s attention.

But I think the government is very limited in what they can do until more US voters get clear on the connection between anti-American sentiment and the neocolonialist outlook and actions of many globalized US companies.

Yet the worst offenders wrap their plundering in the language of free markets, globalization, and patriotism. Hey it isn't patriotic to rip off the world’s poorest with the help of their oppressive governments; it is damn stupid, in these days of portable nukes.

Ayn Rand would roll in her grave at such a distortion of capitalism's intention, which of course is free competition, not state control of the marketplace.

* Hat tip to the World Bank Group's Private Sector Development (PSD) blog for alerting me to Becker’s analysis.

China to prosecute blind farmer who resisted One-Child policy

"Everything that has happened runs counter to Hu Jintao's talk of democracy and governing by law. We live in a nation without law, a nation without morality."

While reading of the draconian official response to Chen’s whistleblowing I found myself recalling Thomas Pentagon’s New Map Barnett’s inane comment about China in his latest book: "China . . .is not really a threat to anyone except small island nations off its coast . . ."

I think there must be a special hell for China's American apologists.

Chinese to Prosecute Peasant Who Resisted One-Child Policy
Decision Reveals Growing Clout of Beijing Hard-Liners
By Philip P. Pan
Washington Post Foreign Service
Saturday, July 8, 2006; Page A12

BEIJING, July 7 -- The Chinese government is preparing to prosecute a blind peasant who exposed excesses by authorities in enforcing the one-child policy in eastern China, where local officials were accused by residents of forcing thousands of people to undergo sterilization or to abort pregnancies. The decision, disclosed by court officials Friday, follows a prolonged bureaucratic stalemate in the ruling Communist Party over how to handle the allegations in the city of Linyi, and it highlights the growing clout of hard-liners in the party since President Hu Jintao took office three years ago.

Chen Guangcheng, 34, the blind rural activist who drew international attention to a violent crackdown on unauthorized births in Linyi last year, is scheduled to be tried July 17 on charges of destruction of property and assembling a crowd to disrupt traffic, according to his attorney, Li Jinsong.

The charges stem from an incident in March in which Chen is accused of leading a protest against local officials who had illegally confined him to his house and who were beating villagers who tried to help him, Li and residents of Chen's village said.

Chen's trial could renew international scrutiny of China's population-control practices, and it represents a major setback for reformers in the government who have been trying to soften the one-child policy and eliminate the abuses long associated with it.

"There isn't much hope," said Chen's wife, Yuan Weijing, by telephone from the family farmhouse, where she has been detained. "Everything that has happened runs counter to Hu Jintao's talk of democracy and governing by law. We live in a nation without law, a nation without morality."

The U.N. Population Fund, which has a significant presence in China, has repeatedly raised Chen's case with the Chinese government, and senior U.S. officials have also pressed the government to release him.

In late May, two U.S. diplomats who tried to visit Yuan were physically removed from the village by local officials, she said.

Nearly a dozen lawyers from Beijing have also attempted to visit the village in recent months without success, and several have reported being threatened, detained or beaten by officials or thugs hired by them.

Li said police allowed him and a colleague to meet with Chen last month, but said they prevented them from discussing his defense. When they tried to visit Chen's village to interview his wife and gather evidence, thugs assaulted them and overturned their car, he said.

"They're afraid of information getting out," said Li, who recorded a death threat he received in Linyi, located 500 miles southeast of Beijing. "They don't want the leadership in Beijing to know the truth about what's happening there."

Before he was detained in September, Chen had tried to organize a class-action lawsuit against Linyi officials, alleging they were illegally forcing parents with two children to be sterilized and women pregnant with a third child to have abortions. Residents also accused officials of detaining and torturing relatives of people who fled the crackdown.

Chen's cause drew support from lawyers, scholars and civic activists across the country, and the government agency responsible for population policies in China, the National Family Planning and Population Commission, launched an investigation in August. At the time, a senior commission official, Yu Xuejun, said he supported the efforts of "ordinary people" in Linyi to assert their rights in the courts, and even offered to help them find lawyers.

A month later, the commission announced it had uncovered evidence of the abuses in Linyi and said some officials there had been fired and detained.

But local authorities fought back, placing Chen under house arrest and launching an aggressive campaign to damage his reputation and deny his allegations. Party sources said Linyi officials distributed a report in Beijing that portrayed Chen as a tool of "foreign anti-China forces," accused him of violating the one-child policy and made much of the fact that he had received overseas funding for his work as an activist on behalf of the disabled.

Linyi officials also lobbied the Foreign Ministry and the powerful Propaganda Department, which agreed to ban any discussion of Chen in the state media and the Internet, the sources said.

For months, the party appeared torn about how to proceed, but the decision to prosecute Chen suggests that the Linyi officials have outmaneuvered others in the government who wanted to use the case to send a strong signal to local officials that forced sterilization and abortion would not be tolerated.

The government has declined to say how many officials were punished in Linyi or to identify any of them, but a Beijing official said "very, very few" were disciplined and a journalist said he was told the total was no more than five. Li Qun, the party chief in Linyi, and other local officials also declined repeated requests for comment.

By linking Chen to hostile foreign forces, party sources said, the Linyi officials made it politically risky for anyone to intervene on his behalf. The national population commission, for example, rebuked Linyi officials and singled them out for criticism, but refrained from defending Chen or bringing the case to top party leaders, the sources said.

"In the current political environment, in this political system, no official has any incentive to help him," said one Chinese scholar involved in the case who spoke on condition of anonymity. "The risks to your career are great, and there's little to be gained . . . . So the conservatives have a big advantage."

Chen's case was also complicated by an internal party debate over the future of the one-child policy. Some party officials and scholars have urged the government to relax the policy, arguing that it now causes more harm than good and that China faces a retirement crisis as its working-age population shrinks. But provincial leaders and others in the party have resisted.

A party official involved in the debate said Hu and others on the ruling Politburo Standing Committee are unwilling to take a position on the issue ahead of a leadership conference next year. As a result, he said, many in the party are not sure whether they should support Chen or condemn the Linyi officials.

Mexico’s Presidential Election: Cucarachas win

REVISED SATURDAY morning

A map of how Mexico voted on Sunday is even more striking than those red-blue maps showing [the US] electoral divide. Relatively wealthy northern states that have prospered from business ties spanning the nearby US border went heavily for [Felipe] Calderon. The poor, distant, left-out southern states went for AMLO [Andres Manuel Lopez Obrador], as did metropolitan Mexico City, where AMLO has served as mayor.
--Eugene Robinson, Washington Post, July 7

Felipe Calderon, who campaigned on the pledge, ‘Let’s have six more years of hoping free-market reforms trickle down to Mexico’s poor,' has been declared the official winner.

Amlo is hotly contesting the tally, of course. It will be settled in the court by September 6 or maybe sooner if Amlo calms down and puts on his thinking cap. The narrowness of Calderon's victory (he won by 35.88%, Amlo won by 35.31%) puts Amlo in a great position to wring concessions out of Mexico’s hopelessly corrupt ruling party.

Already Calderon has felt constrained to offer Amlo a position in the new Cabinet, which underscores Calderon's weak victory. And even after the court rubberstamps the official tally, Mexico’s Congress will still be sharply divided. That observation cuts both ways; there is no question that the majority of Mexico’s middle- and upper class prefer six more years of the known rather than Amlo’s left-leaning populist reforms. So there are advantages for Amlo in being the narrow loser.

All this begs the question: Who is the clearest winner in Mexico’s election? To be kind, one might say “Democracy,” because this presidential election is a big improvement over the last and an impressive 59% Mexicans voted.

But the biggest winners are the banks and companies that charge fees for handling remittance payments from Mexicans working in the USA.

Yet many workers, who send money to relatives back home who've not seen the benefits of Fox's free market reforms, were unable to vote in Mexico’s presidential election. That's because the border-town polls were overwhelmed by the large number of US-based Mexicans who tried to vote.

From anecdotal accounts, the poorest Mexican workers who descended on the border-town polls were voting for Amlo or trying to. Or to be more precise, they were voting to throw out Calderon’s corrupt political party.

If all the US-based Mexicans who tried to vote for Amlo could have done so, would that have given Amlo the quarter million votes he needed to tie or beat Calderon? It certainly would have made Calderon’s victory even narrower.

But then we have to remember that this is Mexico we’re talking about. The ruling class there is still firmly in charge. So, not surprisingly, PAN picked up more congressional seats in the election:

Fox's Party Gains in Mexico Congress, Universal Reports
July 4 - (Bloomberg) -- Mexican President Vicente Fox's National Action Party overtook the Institutional Revolutionary Party as the biggest seat-holder in Congress in the July 2 elections, Universal reported.

Fox's party gained 62 seats in the 500-seat lower house for a total of 210 and six seats in the 128-member Senate, for a total of 53. The Institutional Revolutionary Party, which ruled Mexico for seven decades before Fox's 2000 election win, lost 90 seats in the lower house for a total of 113 and 21 seats in the Senate for a total of 37, Universal said.

The figures indicate the National Action Party has the most seats in the both houses of Congress. The Party of The Democratic Revolution has the second-most seats in the lower house and the same number of seats as the Institutional Revolutionary Party in the Senate, Universal said. [...]

More on stalled WTO Doha round of talks

Dave Schuler at The Glittering Eye responds to Monday's Pundita post on the WTO Doha round, which calls for a Pundita response:

"Dear Pundita:
I've already posted my thoughts on the incipient collapse of the [WTO Geneva] talks here.

Frankly, I have reservations about Robert Wade's analysis. First, consider this lead-off quote:

"Forcing through very low tariffs on industry will not lead to a more even global distribution of income and wealth"

Is that objective a legitimate one? There's a simple way of creating a "more even global distribution of income and wealth": make America poorer. That won't make a single child in Zambia (for example) healthier or prevent him or her from starving. Perhaps it will assuage the guilt of a few European intellectuals.

"This will give you better market access for your agricultural exports, in line with your comparative advantage"

That isn't what Lopez Obrador has been saying in his campaign for the Mexican presidency. What he's been saying is that America's comparative advantage in agriculture is so overwhelming that protections are needed to prevent economic disruption in Mexico.

Well, economic disruption is exactly what's needed. Without it poor people will just stay poor. [Regarding Wade's observation:]

"A recent study of 50 developing countries [with] substantially liberalised trade during 1980-2000 found that only 20% (mostly in east Asia) experienced a significant increase in exports and in value-added manufacturing; half the countries experienced de-industrialisation."

I wish the actual study had been cited in the article. How did they disaggregate the effects of trade liberalization from the effects of China's and India's abandoning their policies of autarky or European countries exporting their industries to China? Or the shell game that those signatories who've actually lived up to their obligations under
the Kyoto Protocol have used to do so?

This strikes me as post hoc propter hoc.

As I noted in my own post I think we ought to abolish agricultural subsidies. But anybody who thinks that abolishing our subsidies will suddenly make Mexican corn (for example) competitive is fantasizing. The numbers just aren't there.

The Europeans and Americans aren't the only ones with market-distorting agricultural subsidies. North Vietnam's (!) enormous subsidies for coffee production have thrown the world coffee market into a cocked hat.
Dave Schuler"

Dear Dave:
I have no quarrel with the observations in your post nor with the criticism you expressed about Wade’s views. However, Pundita is intent on frying bigger fish than agricultural subsidies, which are red herring in the context of analyzing the Doha agenda. To repeat the question I stated in the Monday post: Is the Doha agenda workable under any conditions?

Perhaps I should have made it clearer that I highlighted Professor Wade’s Guardian piece because it specifically addresses the rationale for the Doha round and outlines the ‘counterinsurgent’ Nama agenda. No other article I found on the collapse of the WTO Geneva talks does this.

In short, whatever one might think of Wade’s specific arguments and conclusions, he unerringly goes to the heart of the matter – “trade aid” vs. Nama -- and from there pronounces Doha unworkable. He is right in that regard.

Many Americans (indeed, many outside the trade negotiations!) don’t understand that the Doha round rests on the concept of using trade concessions to aid the development of the poorest countries (which contribute only 1% or less to global trade).

Is fashioning development aid out of laws pertaining to global trade a helpful, let alone rational, approach to aiding the LDCs? The approach certainly plays havoc with the concept of free trade and undercuts the rationale for a trading organization, which of course has the objective of trade and not global development aid!

And of course it sweeps development aid issues under the rug of trade deals. It is also patently unfair to the most productive developing countries, which, after climbing out of LDC status, are expected by the Doha round to make trade concessions to the LDCs in a manner that even the richest developed country can balk at!

Indeed, the concept behind the Doha round is so screwy that one has to look at the historical context to understand how it came about: The round was launched in November 2001 –- two months after it was brought home to the world’s most productive nations that the least productive countries make a great breeding ground for terrorism.

And even as early as 2001 Tony Blair, Gordon Brown and others in the EU were viewing with concern the massive debt that several African nations had incurred. At that time they were casting around for ways to reduce the debt without actually writing it off. (A debt write-off was out of the question from the US side.) They saw in the idea of using trade deals to fashion development aid a means to offset the debt payment burden for the poorest countries.

Also, by 2001, the multilateralism espoused by the Chirac School of foreign policy, and which underpinned the creation of the World Trade Organization, was running afoul of the harshest realities of unrestricted globalized free markets for the poorest nations. Here’s a representative sample of the criticism of WTO and globalization that had built by early 2001:

As for the so-called positive relationship between free trade and growth, the emerging consensus is laid out by Harvard Professor Dani Rodrik:

"Do lower trade barriers spur greater economic progress? The available studies reveal no systematic relationship between a country's average level of tariff and non-tariff barriers and its subsequent economic growth. If anything, the evidence for the 1990's indicates a positive relationship between import tariffs and economic growth.

“The only clear pattern is that countries dismantle their trade restrictions as they grow richer. This finding explains why today's rich countries, with few exceptions, embarked on modern economic growth behind protective barriers but now display low trade barriers."

In the face of such evidence, C. Fred Bergsten, the head of Washington's Institute of International Economics (IIE), a noted partisan of free trade and the WTO, now says that there "has to be an honest recognition and admission that [free market globalization] has costs and losers," [that] "globalization does increase income and social disparities within countries" and "does leave some countries and groups behind."
--March 2001, Walden Bello, Bangkok Post

Whether or not you agree with Bergsten’s conclusion, it represented the climate of opinion in 2001, which set the stage for the first Doha round.

However, the grand idea behind Doha did not go swimmingly well in actual practice. In fact, it went virtually nowhere except to generate a lot of paperwork and meetings and generally irritate everyone at the subsequent negotiation rounds. By the time of the Hong Kong Doha round in December 2005, the developing countries were in full-scale revolt.

At the conference they formed a coalition of the poorer countries (the Hong Kong 100, by now grown to 110) to demand the impossible: that the rich countries live up to the principle on which the Doha round was founded. The revolt was led by the more developed countries; specifically, India and Brazil, with China quietly egging them on.(1)

Now watch carefully; don’t blink: Because the Doha principle is unworkable, why go to war over it? Well, do we honestly expect India and China to sit up nights worrying about the plight of African governments that are so corrupt and inept that giving them more aid in any form is pouring money into a black hole?

And do we expect the trade ministers in the up-and-coming countries to go along with trade concessions to the LDCs that they didn’t receive when they joined the WTO?

To put it bluntly, staging a revolt was the only way to grind Doha to a halt and thus, hold onto trading advantages for the most productive developing countries. That is why the collapse of the next round of talks (last week in Geneva) was a foregone conclusion.

Indeed, India’s trade minister pronounced the talks a bust before they got underway. He even refused to be on time for the opening of the conference on the insulting excuse that he wanted to watch a World Cup game between Germany and Argentina. (Argentina’s trade rep showed up on time for the conference.)

Through such actions India’s government is saying that if the WTO is going to create laws that strong-arm the poorer countries into charity under the rubric of trade, India declares the trade talks –- and WTO -- a farce.

Here Pundita must pause to remind the naïve among our readers that of course India and the other productive developing countries do not come right out and say all that. How can they, without being perceived as – er, not terribly concerned about the world’s poorest? In lieu of bluntness they mounted a storm of protest that they knew would break against the iron will of the richest countries, thereby neatly collapsing Doha.

Professor Wade’s view clearly does not question the rationality of the Doha round; he seems to believe that what we really need is a round of talks with more teeth than Doha. So he does not question the concept on which Doha is founded, whereas Pundita does – and which I argue any reasonable person without a degree in economics should.

If one is tempted to laugh at the thought that trade laws could really be used as outright aid: realize that the same scoundrels dug in and around the United Nations are not playing when they call for the rich to completely turn out their pockets to the poor.

Calls are mounting to make the WTO more “democratic” in its decision-making process by establishing a parliamentary system of voting; indeed, the idea has had trouble getting off the ground only because of arguments that the rich countries at WTO would still have means to circumvent a parliamentary system of voting. (1)

The Jeffrey Sachs contingent wants the world’s poorest nations, which again I stress contribute 1% or less to world trade, to have as much say on trade matters as the world’s most productive nations.

That’s where things are heading; perhaps all that has saved us to this point from such madness is the common sense of the most productive developing countries. They don’t like being on a decision-making par with nations that are a bottomless pit for aid; neither should any sensible government negotiating trade deals.

1) For a very clear primer on the issues cited by the Hong Kong 100, see two articles at the BBC website; they're a 'must' read if you're trying to understand the current impasse at the trade talks and the larger issues pertaining to the Doha round:

POOR NATIONS UNITE AT TRADE TALKS and Key issues at the Hong Kong talks.

2) From Wikipedia:

While most international organisations operate on a one country, one vote or even a weighted voting basis, many WTO decisions, such as adopting agreements (and revisions to them) are officially determined by consensus of all member states. The advantage of consensus decision-making is that it encourages efforts to find the most widely acceptable decision.

Main disadvantages include large time requirements and many rounds of negotiation to develop a consensus decision, and the tendency for final agreements to use ambiguous language on contentious points that makes future interpretation of treaties difficult.

In reality, WTO negotiations proceed not by consensus of all members, but by a process of informal negotiations between small groups of countries. Such negotiations are often called "Green Room" negotiations (after the colour of the WTO Director-General's Office in Geneva), or "Mini-Ministerials", when they occur in other countries. These processes have been regularly criticised by many of the WTO's developing country members which are often totally excluded from the negotiations.

WTO Doha Round: Trade Aid vs Nama Agenda

I've bumped today's post on crony capitalism until after the 4th. I want to start plowing into the debacle at the WTO trade talks. The stalemate at Geneva this past weekend gives signs of ringing down the curtain on the Doha round of trade talks, which started in November 2001. (For a look at various points of view on the failed talks see the next post.)

Pundita’s question is whether the Doha agenda is workable under any conditions. The agenda rests on the concept of using trade concessions to aid the development of the poorest countries (which contribute 1% or less to global trade).

Is this approach to aiding the LDCs a rational basis for trade deals between virtually all the world's countries? Today, only 15 small nations have no involvement with the World Trade Organization; all the rest belong to WTO, or have observer status there and/or are working on entry to the WTO).

Anger about perceived US and EU obstructionism over the issues of agricultural subsidies and tariffs diverts attention from the bald fact that the 'advanced' developing countries are not happy with WTO trade aid (which amounts to trade concessions) to the least developed countries. The concessions give the LDCs a big edge over the ADCs in trade with the most developed countries.

Those who see in the stalled WTO talks a further challenge to multilateralism are looking at things from 11 years ago, when the WTO evolved out of the old boy’s club called the International Trade Organization. Today, so many countries belong to WTO – each country representing for their own interests – that the sheer volume and complexity of trade issues forces many countries into bilateral agreements and regionalized trading blocs.

So where does this leave the Little Guys? Well, right now they’re mad as hell and not going to take it anymore. One hundred of the world’s developing nations staged a revolution at the WTO talks in Hong Kong in December. They refused to make any more tariff and subsidy compromises with the developed nations until the intention of the Doha round (trade aid) was honored.

The HK 100 again stuck to their guns at the Geneva talks this weekend; India’s lead trade negotiator walked out of the meeting and pronounced it a bust even before the conference got under way.

Robert Wade, professor of political economy at the London School of Economics and author of Governing the Market, hopes the Doha round is dead. He argues in today’s UK Guardian that the Nama agenda (which he explains in the following piece) has overrun the Doha agenda.

He’s right. But again, we need to look at the big picture of today’s trade negotiations before hoping a new, improved round of talks will rise from the ashes of the Doha round. First, though, we’ll look at where things stand from the professor’s point of view:

The Doha talks must fail for the sake of the world's poor
By Robert Wade
The Guardian
Monday July 3, 2006

"Forcing through very low tariffs on industry will not lead to a more even global distribution of income and wealth

"Among those who care about multilateral trade negotiations the air is thick with talk of crisis in the Doha trade round. Should we be crossing our fingers that agreement is reached around the sort of deal that the parties are negotiating? Pascal Lamy, the World Trade Organisation's director general, says that the price of "failure" would be high.

"The question is: high to whom? The price of failure to agree a deal within the current parameters would certainly be high for the developed countries; but it is not clear that it would be high for most developing countries. To simplify: developed countries have low tariffs on industrial and service imports and high tariffs (or other forms of protection) on agricultural imports. Developing countries have substantial tariffs on industrial and service imports and on some agricultural imports.

"In the Doha round, developed countries are saying to developing ones: "You must make cuts in industrial, service and agricultural tariffs, and then we will make cuts in our agricultural tariffs and other agricultural supports. This will give you better market access for your agricultural exports, in line with your comparative advantage; and we will get better market access for our industrial, service and agricultural exports."

"The developed countries are insistent that developing countries make big cuts in protection on non-agricultural imports, so much so as to yield the acronym Nama (non-agricultural market access). The developed countries are making a big push to get developing countries to accept Nama proposals.

"Most developing countries face serious dangers of de-industrialisation if they accept the basic terms of this negotiation. They risk becoming more specialised than at present in the production of primary commodities and simple, labour-intensive products, and even less diversified in the production of more complex, rich country goods.

"This may suit the collective interest of developed countries quite well, but it would be a bad result for the world. I take it as given that the world interest (at least of the human species) favours a more equal distribution of income and wealth. My argument is that faster, catch-up economic growth and industrialisation in developing countries is unlikely in conditions of free trade, for at least three reasons.

"First, virtually no country has managed to industrialise and become "advanced" without going through a stage of protecting new basic industries. As the domestic industrial sector became deeper the now-advanced countries liberalised their trade selectively and gradually.

"The colonies of these countries were forced to liberalise quickly and unselectively, and experienced rapid de-industrialisation. It is a general law of industrialisation that more advanced countries try to open the markets of less advanced ones to their products, claiming that doing so is good for all.

"Second, industrialisation in today's developing countries is unlikely in conditions of free trade because they will then tend to specialise in exports from their existing efficient industries and agricultures. Their further development depends on diversifying into higher value-added activities in which they are not presently efficient. Their diversification into new activities is unlikely without the use of industrial policy, including both tariffs and other forms of support.

"A recent study of 50 developing countries which substantially liberalised trade during 1980-2000 found that only 20% (mostly in east Asia) experienced a significant increase in exports and in value-added manufacturing; half the countries experienced de-industrialisation.

"Third, the developed countries have tightened their protection of new technologies through the WTO's trade-related intellectual property (Trips) agreement, making it more difficult for developing countries to obtain advanced technologies than in the more permissive regime when today's advanced countries were developing.

"So the developing countries should strenuously resist the Nama agenda. They should push for rules that allow developing countries more latitude to set tariff levels in line with the maturity of their industries, and with variation rather than uniformity in tariffs across industries in line with differences in the time needed for upgrading. And they should push for relaxation of Trips.

"No one is saying that such trade rules guarantee success. Trade protection, like any powerful instrument, can be used well or it can be used badly as it has been in Latin America, India, New Zealand and elsewhere. On the other hand, we can be fairly sure that by forcing developing countries to move quickly to very low tariffs on industry, the Doha round, if it "succeeds", will push many developing countries towards de-industrialisation.

"In which case, better that it "fails". Then the newly assertive bloc of leading developing countries could take the initiative for a new trade round within more sensible parameters. So no crossed-fingers for the "success" of the Doha round."
R.Wade@lse.ac.uk

Six news reports on stalled WTO talks

US alone can lead the WTO salvage mission
Seetha
DNA India
Sunday, July 02, 2006
"[ . . .] US trade representative Susan Schwab came to Geneva, say sources in the Indian [WTO] delegation, with no mandate to move forward on agricultural subsidies. The huge subsidies the US gives to its farmers enable them to sell their products cheap in the world market, making it difficult for other countries to compete, they add. The last US offer was a 53% cut in these subsidies. In return, it wanted very substantial cuts in agricultural tariffs globally.

"The US’ rigid position stood out from that of the EU, which expressed its willingness to extend tariff cuts from 39% to 50%, provided the former climb down on the agricultural subsidies front. WTO director-general Pascal Lamy, who has the responsibility of salvaging the round lies, will have his work cut out in persuading the US to yield ground. But even assuming he gets some concessions from the US on agriculture, the question of industrial tariffs still remains. The battle for the developing countries will be tougher here, because the US and the EU — at daggers drawn on agriculture — stand together on this. They want a tariff cut formula that will mean developing countries will undertake big cuts, something the latter are not ready to concede.

"If the US makes improved offers on agriculture, it will demand its pound of flesh on industrial tariffs. That will clearly put Nath in a cleft stick, caught between the need to protect agriculture and industry.

"Nath has been making the point that the Doha Round is a development round and is all about increasing trade flows from developing countries to the developed countries, and not the other way around. But it’s not clear if the developed bloc will pay much heed to this."

http://www.dnaindia.com/
report.asp?NewsID=1039153

India expects new talks to break WTO deadlock
Mumbai Mirror Bureau

"[India's Commerce and Industry Minister] Kamal Nath wanted to come back from Geneva two days before the meeting ended as there was no negotiating space at WTO

"New Delhi: “I cannot be in a meet that does not recognise Indian farmers’ need. I had gone to Geneva to see what Indian farmers can get and not what they can give,” Commerce and Industry Minister Kamal Nath said on his arrival here on Sunday after he pulled out of the WTO Mini Ministerial meet as Indian farmers’ interests were not being protected at the meet.

"He, however, hoped for new talks by July-end to break an impasse in World Trade Organisation negotiations which collapsed in Geneva on the weekend. The December 2006 deadline for completing Doha round now seems quite difficult with the Geneva talks collapsing.

"The Minister disclosed that he had decided to return from Geneva two days before the meeting was scheduled to end as there was no point of continuing as the major trade powers failed to make any breakthrough.

“I came to the conclusion that there is just not any negotiating space, because there is really a difference of perception. We could not have been part of any agreement that does not address the development concerns of developing nations,” Kamal Nath told Mumbai Mirror.

"On the US charge that the developing countries were seeking protection for 98 per cent of their products, Nath noted that they were in fact seeking 100 per cent protection for their agriculture and infant industries. It is a period of reflection for developed countries as they could provide leadership to strengthen a multilateral trading system.

"India’s stand has been endorsed by 110 developing countries, which feel that developed countries should give something for the betterment of the developing nations. Nath added, “We want a pact at WTO which increases our economic growth from 8-9 per cent to 10-11 per cent and it cannot subscribe to an agreement that brings it down to four-five per cent.”

"At WTO, the developing countries are demanding greater access to the agricultural markets of developed countries while the industrialised nations want the developing countries to open up their markets for services and industrial goods.

"The talks are stuck because no agreement is in sight on cut in agriculture tariffs and domestic subsidies that developed countries should make so that products from developing countries could enter their markets and compete.

“We could not have been part of any agreement that does not address the development concerns of developing nations”

http://www.mumbaimirror.com/nmirror/
mmpaper.asp?sectid=13&articleid=
7220062275043772200622719796

Poor states ‘let down’ as WTO talks falter
by Mathabo Le Roux
Business Day
"[ . . .] South Africa's chief trade negotiator, Xavier Carim, called the line taken by the US and the European Union (EU) “anti-developmental” and out of touch with the agreement reached at Doha that poorer countries should benefit from the round. “We’re really running out of time,” Carim said. There was, however, a sharper understanding of the critical issues that needed to be breached.

"The key issues that remain are the extent to which the US is prepared to reduce agricultural subsidies and the EU’s standing on the reduction of agricultural tariffs.

“With the EU it is a matter that they say they are prepared to do more, but there is no indication of what that means. It is a very nebulous offer,” Carim said.
The other issue that remains, from a developed world viewpoint, is developing countries’ failure to move on a reduction on industrial tariffs.

"Developing countries are, however, exasperated at the extent of reductions in industrial tariffs demanded by developed countries, with one commentator from the Congress of South African Trade Unions (Cosatu) calling it “a joke”.

"The industrial tariffs were a different dynamic, with developed countries proposing tariff cuts which could be damaging to industrial development in the developing world, Carim said.

"On the table is a demand for tariff cuts of up to 70% on industrial goods, which he called extremely severe.

“It does not compare with what they are prepared to give on agriculture, and in terms of industrial discussions they are offering reductions of 23%. There is complete imbalance.”

"South African trade union representatives who attended the Geneva talks said a commitment on industrial tariffs could have severe implications, preventing SA from formulating and implementing “decent industrial policy” aimed at economic growth and job creation.

“Above all, we feel this must be a real development round, without new demands for concessions from us,” said Cosatu economist Neva Makgetla. “No deal is better than a bad deal.”

"Not all developing countries would lose if the demand on industrial policies was pushed though, said a Cosatu spokesman."

http://www.businessday.co.za/
articles/topstories.aspx?ID=BD4A225713

[Australia] PM blames Europe over WTO talks
By Shane Wright
Australia Finance News
July 03, 2006

"PRIME Minister John Howard today blamed Europe for the near collapse of world trade talks, saying it had to go further to slash farm protection levels.

"Mr Howard, who may be dragged into the World Trade Organisation (WTO) talks directly, said it was European intransigence on agricultural protection that was putting the negotiations at risk.

"The leaders of the G6 grouping - Australia, Brazil, India, Japan, European Union (EU) and the United States - may have to involve their leaders in a summit to break the deadlock on the trade talks.

"It follows the failure of world trade ministers to come to an agreement on a framework that would pave the way for cuts in farm subsidies and tariffs, and greatly increase quotas for agricultural goods.

"WTO Director-general Pascal Lamy has been given the job of talking directly to major players during the next four weeks to hammer out some type of agreement. Failure on his part could have the talks, that have already been going for five years, drag on indefinitely.

"Mr Howard said Europe and Japan had so far failed to match the more ambitious proposals put up by the US that would go some way to opening trade in agricultural products across the globe.

"The Americans, to their credit, got the ball rolling, and unless there's an adequate response from the Europeans it won't happen," he told Macquarie radio.

"So I still believe that the big stumbling block is the intransigence of the European Union."

"A recent Organisation for Economic Cooperation and Development report found the EU paid its farmers more than $180 billion worth of protection during 2005 - the most by any developed nation bloc.

"But Mr Howard remained upbeat that despite the major setbacks facing the WTO, the negotiations had not completely collapsed.

"It is critical that we don't allow these talks to fall over, but they'll fall over unless the countries that practice the highly protectionist agricultural policies - and that's the Americans, the European Union and the Japanese - agree to reduce their protection," he said.

"Australian farmers were not so upbeat, with the National Farmers' Federation expressing fears there may not be a deal for some time.

"Federation president David Crombie said that unless the international community worked together, any chance to slash agricultural protection could be lost.

"Because of the lack of movement from the European Union on agricultural-market access and, as a result, no further movement from the United States on agricultural domestic support, precious little has been achieved this week," Mr Crombie said.
"It now looks most unlikely that agreement on a final Doha deal will be reached any time soon - this will be a severe blow to Australian farmers."

"Trade Minister Mark Vaile, who took part in the Geneva talks, said the failure so far to reach a deal could be a wake-up call for the WTO and its 149 member nations.

"You need to have a near death experience to sort of, crack open the door, if you like, to move to the next stage," he told ABC radio.

"The events of the last couple of days and this impasse is what could be loosely called a near death experience."

http://finance.news.com.au/story/
0,10166,19668571-462,00.html

Call for Lamy to step in after talks stalemate
By Alan Beattie and Frances Williams in Geneva
Financial Times
July 3 2006 03:00

"Leading countries in the Doha round of trade talks have asked Pascal Lamy, head of the World Trade Organisation, to broker a deal between them after a meeting of ministers this weekend was deadlocked from the start.

"The Geneva-based talks, involving several dozen ministers, stalled as soon as they opened on Friday. The US again demanded bigger cuts in farm tariffs while most other countries once more said Washington should first cut farm subsidies, a stand-off that Mr Lamy said would lead to crisis. The talks, planned to continue until today, petered out on Saturday.

"With an end-July deadline for agreeing the size of tariff and subsidy cuts looming, the Group of Six - the US, EU, Japan, Brazil, Australia and India - asked Mr Lamy to mediate between them. Peter Mandelson, EU trade commissioner, scotched rumours that Mr Lamy would produce his own proposed text, saying: "Pascal Lamy should act as the catalyst, but not the author of an agreement."

"Mr Lamy will report back in two weeks on whether a G6 deal is possible. Mr Mandelson said heads of government could also be asked to break the logjam.

"At the weekend Washington was often a lone voice calling for much biggercuts in farm tariffs. Brazil, a prodigious agricultural exporter and usually aUS ally in farm talks, this time put pragmatism and solidarity first, lining up with other developing countries to say that US stubbornness was preventing progress.

"The EU is trying further to isolate the US by reaching an accord on farm tariffs with the influential Group of 20 developing countries, led by Brazil.

"Brussels is privately talking about a 51 per cent average cut in tariffs; its first offer of 39 per cent was widely derided as inadequate.

"The new figure would be close to the G20's proposal, which by most calculations is a 54 per cent average cut but which the EU reckons is 52 per cent. Both are well below the US's call for an average 67 per cent reduction.

"The theatre of combat this weekend involved proposals to let governments protect farm products from across-the-board cuts in agricultural tariffs. Susan Schwab, US trade representative, said the problem was the "three Ss" - the "sensitive" and "special" products on which cuts can be reduced or eliminated, and the "special safeguard mechanism" that allows poor countries to block sudden surges in farm imports.

"A group of more than 40 developing countries, led by Indonesia, want to be able to protect at least 20 per cent of all types of farm products to help their small farmers and rural communities. The US cited a recent calculation by WTO staff that some developing countries with farming concentrated in a few products could protect more than 90 per cent of their actual production. Washington wants them restricted to 1-2 per cent of all types of farm products.

"Mike Johanns, US agriculture secretary, said: "Tariff cuts cannot be undermined by open-ended loopholes."

"Mari Pangestu, the Indonesian trade minister who wants to protect rice growers, said WTO members had already agreed that countries could designate "special products" based on agreed criteria.

"The US cannot tell us what is and is not eligible," she said. "We agreed to an appropriate number of special products, not a limited one."

"The US and EU also continued an arcane squabble about how much the US plan for cutting subsidies would actually constrain American farm spending.

Copyright The Financial Times Limited 2006
http://www.ft.com/cms/s/
14c287da-0a30-11db-ac3b-
0000779e2340.html

Helping Mexico deal with their government corruption: no rose garden anywhere

[Re June 27 post Corruption in Mexican politics]
Pundita:
. . . How did Mexico's government get so corrupt, how has it stayed so corrupt, and how can America change it while still respecting Mexico's sovereignty?

I've always wondered why Mexicans allowed the rampant political corruption I always hear about - much like the government of the city of Chicago, IL is (supposedly) perpetually corrupt.
Art Lueck

Dear Mr. Lueck:
Thank you for your questions, which allow me to dredge up a few Pundita Golden Oldie essays and expound on themes near to my heart. As we head for the July 4th holiday I can’t think of a more fitting time to discuss the matters at hand.

More than a year ago Dave Schuler forwarded me the substance of an interchange that took place years ago between Suharto and Paul Wolfowitz. After hearing Wolfowitz’s complaints about endemic corruption in Indonesia's government, Suharto replied that what seemed to be corruption to Westerners was taking care of family to the Indonesians.

Of course that excuse is a crock -- Indonesia's bureaucrats were Westernized enough to skin the World Bank for uncounted millions -- so my reply to Dave was that I would do a post about the comment "when my blood pressure returns to normal."

So here we are today, with Pundia's blood pressure still elevated every time I recall Suharto's comment. This said, when looking at countries where paying graft is the only way to get anything done with relation to public works, it helps to think in pre-democracy terms. "Anything" points to the difference between Chicago-style corruption and government in countries such as Mexico, Indonesia, Russia and India. You don't have to bribe a Chicago official (plus pay the license fee) to get a driver's license in Chicago. But in countries such as Mexico, there is what is called 'vertical' corruption -- graft permeating the entire government structure from the 'federal' down to the local level, and in every department of government.

When Americans ask how corruption could be verticalized in a government that is even nominally democratic, we need to look at pre-democracy forms of government in those countries. I took a swipe at the issue in a 2004 blog titled To the Ramparts fellow billionaires! Save Russian democracy!

And Russia has something called verticalization of corruption. That kind of corruption is distinct from the corruption represented by the financial clout of the Oligarchs, although both kinds of corruption intersect. But the Oligarchs had so much power when Putin came into office that it's misleading to think of it as corruption. It was an oligarchic government, which formed the woof of the tapestry of governments in Eurasia. That government is not gone yet, and the remnants are fighting tooth and nail to retain power.

Mexico's history of government is more patriarchal than oligarchic, but the same concept applies: you're not engaging in graft, you're paying tribute to dignitaries who have complete control over dispensation of favors toward you. In places such as India (and Iran, if I am not mistaken) the system is simply called 'baksheesh.' Whatever name it goes by, it is a time-honored protocol of paying tribute to the ruler you petition for help.

Why cling to the protocol in a democratic nation, which is ruled by laws and not men? Because if democracy crashes, you'd best stay on the good side of powerful clans, which will snatch the crown and scepter out of chaos.

It's pulling teeth to overcome that mindset, even for those who are well-informed about the situation. Why is it so hard? Because the weight of history is on the side of that mindset, and so -- as happened in Sicily when the villagers contemplated fighting the Mafia bosses -- it takes realizing that uncertainty is the handmaiden to genuine democracy. That much uncertainty is a hard thing for peoples who can only remember depending on the governing decisions of clan patriarchs, kings and emperors to give them the illusion of certainty.

So while it certainly takes courage to protest in the streets against a repressive regime and cast one's vote in opposition to hired goons, it takes another kind of courage to live with the thought that if City Hall screws up in a democracy the buck stops at your desk.

I believe that once newly democratized peoples get very clear on just how much work a democracy entails, many prefer the tradeoffs to freedom under authoritarian government.

However, the wheel has turned for humanity. Now there are just too damn many of us clamoring for basics such as decent public education, functioning highway systems, and safe drinking water. And only a tiny minority among us can afford to pay baksheesh for every little thing that needs to be done in a modern society.

So that is enlightenment at the point of a gun: democracy is no longer a choice. Democratic government is the only way to accomplish the galactic-sized task of accommodating the basic living needs of megapopulations.

That is the stance we take in Punditaland, at any rate. I leave it to others to defend democracy in moral terms. I say there is no way to get good government in a modern, heavily populated, highly complex society unless the governing decision-making is spread among a majority of the adult population. Dependence on oligarchs and patriarchs to haul the burden of decision-making for us is a luxury the human race can no longer afford.

The most powerful counterargument is that the world's poorest cannot afford the time it takes to participate in even a representative democracy, so they must continue to accept the tradeoff of authoritarian government -- even though it's a suicidal decision.

I set off a small firestorm of protest when I made that point in Democracy Stage Show Kit. The essay’s critics were Westerners who clearly were not very familiar with the issues for global development and aid; one pointed out that the early American settlers were also greatly overworked but still found time to engage in participatory government in their region.

True, but the settlers did not have to walk 15 miles a day every day through civil war carrying just enough firewood on their head to cook the day's meal. There is no question that time management is a huge factor in a people's ability to sustain their participation in a democracy -- as any American carrying two jobs and commuting 20 miles a day through gridlock can attest.

The counter- counterargument was made by Muammar al-Gaddafi, of all people, who pointed out that democracy is not a Western invention and that it's basically the people in a tribe sitting around talking and making group decisions.

That is why Pundita was shocked speechless -- a very rare occurrence -- when I read that Bill Gates had sneered at the work to develop a $100 laptop computer for Third World peoples. He said that people wouldn't want to work with such a small computer screen. Has this man never heard of a Blackberry?

Third World peoples are already working on tiny screens as soon as they can get their hands on a cell phone. They’re text messaging in order to do business and discuss problems in their region.

Low wattage talk radio stations, firing up the cell phones -- by any which way that people in the harshest parts of the world can participate in the government, that is where US aid can do exponential good.

But now we arrive at the brass tacks of your questions because only a small number among Mexico’s population faces the kind of development problems that are rife in say, regions of sub-Saharan Africa. Whatever the pre-democratic model for Mexico government, the stage show that has passed for democracy in Mexico is propped not by ruling families but by something called crony capitalism -- and in Mexico’s case, that brand of capitalism has been promoted largely by the US government and the large US companies that lobby them.

Yet if non-democratic government can no longer be considered a time-saver, crony capitalism is an absolute albatross. Modern society can no longer support crony capitalism, which, for starters, created entrenched anti-Americanism in many parts of the globe and worked at every turn against American democratic ideals. It has done this by propping up more corrupt elites than you can shake a stick at. That is certainly the case for Mexico.

Crony capitalism will be the topic of my next blog but for now the term is the polite way that development professionals refer to neocolonialism. The problem for Americans is that if we pressure our government into suspending the practice as much as possible, another government – China, EU, etc. -- will be happy to take up the slack in Mexico and elsewhere.

The best I can say is that President Bush never promised the world a rose garden; all he said was that this is going to be liberty’s century and that we’d have to engage in a sustained struggle to bring it about.

Either we recognize that genuine democracy is the best security policy for the US or we don’t. We need to face that some Americans are not ready for the realization because -- in the short term – genuine democracy in the up-and-coming nations can work against increasingly globalized American jobs, companies, and investments.

To gain a little sympathy or at least understanding for this viewpoint: Are you willing to have your penion fund yank investment in Starbucks because the company does business in Saudi Arabia -- a country that treats women like brain-damaged children?

If you're a newspaper editor, are you willing to have one of your employees spend the rest of his life in a China jail if you push hard for stories that greatly embarrass China's ruling party?

And what about Mexico? If the US government fights crony capitalism there, can they deal with the flack if Mexico re-channels the bulk of their oil sales to China and the EU?

There is no easy answer – and the answers get harder when posed for less advanced countries. Years ago, during South Africa’s apartheid regime, a man with ties to the highest level of India’s government was asked to advise on whether India should yank their support for the regime. He bumped the question to me.

Pointing to a gruesome BBC TV report on tribal bloodshed in South Africa, he asked, “Do you really think these people are ready for democracy?”

I remember closing my eyes, closing out the images of butchered humans, but images of equally horrific civil strife in other heavily tribalized parts of the world rose before my mind’s eye. Yet there was no agony of indecision. It was as if I’d had my answer ready for ten thousand years.

I snapped, “We’ll never know whether they’re ready, will we, unless they’re given the chance.”

Many, many times since I have anguished over my reply. After seeing what happened in post-apartheid South Africa, I thought, ‘There must have been some way to have done the transition more easily.’

Then, no. Today, yes; now there are ways that First World governments could have helped the new government avert the worst. But the ways emerged just because so much horror ensued in the wake of such painful transitions.

There is simply no way to bring about liberty’s century without almost everybody getting hurt, one way or another. And the longer governments resist democratic reforms, the rougher the transition has been -- even with intervention by the First World governments.

Right now, the best way Americans can help the Mexicans is to first help ourselves by getting educated about the worst effects of Americans practicing crony capitalism in Mexico. Then we can set up a howl about the practice and enlist the aid of the many American businesspeople who look with distaste at that brand of capitalism.

The second way is to do whatever we can to support genuine pro-democracy organizations connected with Mexico that ask for Americans for help. (‘Genuine’ meaning organizations that are not a front for American corporate interests.)

Thirdly, we can breathe down the neck of USAID and State Department officials and World Bank project and program managers. And we can lean on US congressionals who sit on foreign relations committees.

State, USAID and the World Bank’s president are very clear on the need to put verticalized corruption out of business the world over. Against this are American corporate officers who ask, “Are you nuts or just born without a brain? How’re we supposed to compete in that country without making payoffs to officials?”

So here’s a tip: The more support Paul Wolfowitz receives from the general public for his anti-corruption drive, the more progress he can make at the Bank in that area.

The same holds true for giving support to crusading congressionals on both sides of the political aisle. The more well-reasoned arguments they receive from the public, the easier it is for them to fight for legislation that supports pro-democracy programs in the other parts of the world. (Just make sure the congressionals are not huffing and puffing on behalf of a foreign or US lobbying organization.)

Fourth, Americans who want to help in Mexico need more education on the nuts and bolts of democracy – how it works in practice and how to develop it in a country that doesn’t have our mature legislative infrastructure in place.

To paraphrase an Ayn Rand quote, before we can help others make democracy work, we need to learn just exactly how it works. I think many educated Mexicans leave Americans in the dust when it comes to understanding the technical issues, just because they are so involved in the process of making democracy work.

Imagine someone handed you a few million dollars and said, “Go to Mexico and help those people get more democracy.”

Just exactly how would you go about it? If you have workable ideas by all means send them to the World Bank, USAID or your favorite congressionals.

And speaking of education -- before we growl at USAID, State and the World Bank, we need to be informed about what they’re already doing to foster democracy in Mexico.

I tell you nothing is more embarrassing than to dash off an outraged email to USAID or the World Bank then receive a smug reply directing the outraged citizen to the programs they’ve already gotten underway.

Fifth, we can keep tabs on companies that work with USAID and the Bank to carry out technical assistance programs. Write them letters and take a general interest in their ideas and how the TA projects are coming along. Such companies are also a good place to find contacts in Mexico that might be interested in receiving help from individual Americans. One place to start is by reading about the contract that Casals and Associates received from USAID

Strengthening Democracy and Governance in Mexico
The U.S. Agency for International Development (USAID) Mission to Mexico awarded C&A a $22.5 million contract to assist Mexico in strengthening democracy and governance. The five-year award folds together several smaller USAID/Mexico democracy and governance contracts, including Project Atlatl, a two-year transparency and anti-corruption contract C&A was awarded in June 2001.

Under the new contract, C&A’s technical assistance to Mexico is focusing on enhancing public management and service delivery; improving institutional frameworks; developing incentives to increase public revenues; enhancing intra-government and citizen oversight; promoting participatory and responsive political processes to address policy priorities; and adopting state-of-the-art financial-management procedures to improve government performance and increase transparency and accountability.

A Regional Forum on Good Government, bringing together more than 250 Mexican government officials from 24 Mexican states and delegates from 11 countries in Central America and the Caribbean, was one of the project’s recent successes.

This mention of C&A should not be considered an endorsement. Pundita has no connection whatsoever with the website, the company or any of the associates and I won’t vouch for the company’s work. However, the website helps educate Americans who don’t work in technical assistance fields connected with global development.

Finally, we can muster more humility and patience than Americans are known for. Every time I become frustrated with the situation in Mexico I force myself to remember New Orleans two days after Hurricane Katrina struck.

Pundita was so shocked that I yelled at the TV screen, “Why do I bother finding examples in Russia and India? We’ve got the 14th century right here in the USA!”

Yes indeed; right here in America was oligarchic government and the feudal serf mentality –- the effects of which exposed for the world to see on satellite TV. I was so ashamed for my country that I wanted to crawl under the couch.

Yet the shame is money in the bank while trying to help people in other countries deal with their remnants of earlier centuries. It helps to quote liberally from America’s rocky history so that the people know we’ve been there, done that too.

Corruption in Mexican politics

"Millions of poor Mexicans have been threatened with exclusion from health care and social assistance programs if they do not vote for various [political] candidates ... Others, mostly in rural areas, have been given cash payoffs of $40 to $60 for their votes, a tidy sum in a country where the poorest families subsist on less than $4 a day," writes Manuel Roig-Franzia in yesterday’s Washington Post ( Dirty Politics 'Ingrained' in Mexico)

Roig-Franzia reports that coercion is so pervasive in Mexican politics that it could swing the outcome of the July 2 election. Yet the article also cites informed opinion that corruption is slowly being rolled back in Mexico; many Mexicans are fighting hard for genuine democratic elections and they intend to keep up the fight.

One of the Mexicans interviewed by Roig-Franzia observed, "In a democracy you have to fight for democracy every day."

That Mexican gets it; why don’t more Americans get it with regard to their southern neighbor?

Pundita believes that the most effective solution to illegal Mexican immigration is for the US government to use all available means to encourage genuine democracy in Mexico. That’s because I am looking at what is best for Mexico and for America’s long-term interests. Yet too many Americans are only concerned about obtaining dirt-cheap labor. So they throw their energy into debates about which immigration bill is ‘fairest’ for Mexicans.

Hello, what’s fairest is that Mexicans live in a prosperous democratic nation -- one that doesn’t have to send its citizens to perform menial labor in another country for coolie wages. But Mexico can’t prosper until grossly corrupt government and election practices have been stopped.

Much of the battle simply revolves around getting information to more Mexicans about how corruption works against their best interests. So I’d like to see more of America’s concerned citizens do the right thing, the fair thing, by channeling their concern for Mexico’s downtrodden into programs that are actually best for Mexicans. That’s what it means to be good neighbor.

Don't be shy

Al Kamen's In the Loop reports today that DOS has launched a new feature called Ask the Ambassador. You can now put questions directly to ambassadors around the the world via State's Ask the State Department webpage.

The site doesn't mention how frequently ambassadors will be available for a Q&A session, and it doesn't seem you get to pick the ambassador you'd like to question.

But to get the ball rolling, William R. Timken, Jr., former head of a family run roller-bearing company and "Bush campaign mega-contributor" and ambassador to Germany is fielding questions from the public.

Maybe some good opening questions for Mr. Timken are whether he speaks German; how he got to be an honorary citizen of Colmar, France; and if he has any previous foreign service work that would qualify him for a sensitive diplomatic post.

North Korea and the zen of interpreting satellite photo images

Pundita has a long-standing tradition of paying little attention to the news during the month running up to the G8 summit. That's because most international headlines during that period fall into the category of Mau-Mauing the G8.

I mention this quirk of mine because I assumed from the size of the diplomatic flap that North Korea had announced they were going to test launch a long-range missile. Finally I decided to actually read the news reports.

It turns out North Korea's government has said nothing, according to a news item in today's Washington Post.

". . . the government in Pyongyang has given no hint whether it will fire a missile," said Jane Coombs, New Zealand's ambassador to the Koreas, who met with top North Korean officials.

"They did not confirm that such a test was imminent ... nor did they deny that such a test was imminent," Coombs said Saturday in Beijing after a four-day trip to Pyongyang.

Meanwhile, according to the same article:

"Intelligence reports say fuel tanks have been seen around a missile at the North's launch site on the northeastern coast, but officials say it is difficult to determine from satellite photos if the rocket is actually being fueled."

Readers who recall last summer at this blog might join me in feeling a China Mystery Pig Disease moment coming on. So all we've got by way of hard evidence of a missile launch is that satellite images show something going on in North Korea around a missile site.

And by interesting coincidence, what might be fuel trucks were hauled to the missile site -- in full view of the spy satellites -- during the runup to the G8 Summit.

If I were Kim Jong-il, I'd want my issues to be dominating the summit, not dumb stuff like African debt relief, squabbles with Russia about energy, and the saber rattling toward Iran.

No, if I were Kimmie my major issue would be trying to convince the US that I need some protection, if I am going to act like a state leader and not the governor of a province in China.

In any case, an implied or real threat of a North Korea long-range test missile launch would be a shot across Japan's bow. And it would be a warning from China to the US not to keep encouraging Japan to take up nuclear arms.

But Pundita prefers not to meditate on the meaning of unclear satellite photo images. I prefer to focus on clear, unequivocal threats to US national security, such as the US Department of State.

Speaking of which, did you see Richard Perle's rag on State in The Washington Post Outlook section today? Here's one Perle salvo from the piece titled Why Did Bush Blink on Iran? (Ask Condi):

"Sen. Rick Santorum (R-Pa.) tried two days ago to pass the Iran Freedom Support Act, which would have increased the administration's too-little-too-late support for democracy and human rights in Iran. But the State Department opposed it, arguing that it "runs counter to our efforts. . .it would limit our diplomatic flexibility."*

Say, I have an idea. Why not give State their own patch of land; let them start their own country somewhere, like on the dark side of Pluto?

* For those who have been residing in a cave, Perle is an American Enterprise Institute Fellow and former assistant secretary of defense in the Ronald Reagan adminstration.

On the importance of never fully growing up

Someone just sent me this beautifully written piece by John Batchelor, which was published in last week's New York Sun newspaper (subscription only). The writing reminds me that it's not only American history John teaches on his radio show.

Pundita is a very grownup person, which means I am encrusted with cynicism. Yet sometimes I muster a grain of compassion for the young at heart, who tend to rail at homicide on a grand scale. The objective answer to John's angry question is that of course nothing has changed since World War One; it can't change because rationality and moral behavior are a never-ending process, not a sum.

But to toss a crumb of kindness, we're going to muddle through this century somehow, and the next and next.... As to how we're going to do this, in the same way humanity has gotten as far as we have: the genuinely tenacious ones among us never quit trying.

John Batchelor puts the World Cup in context

Observing these weeks of passion at the World Cup Championship in the German Republic is both a pleasure and a challenge.

The poet reminds us, "What was, is now."

When I read the exuberance of the cup wags who assure us that England is doomed, that Germany has cast aside its dogged dullness for a street game, that France is aged and Mexico is fresh and Brazil is magical and Italy is a starlet, I stare the harder and see these same judgments redirected nine decades from the green pitches of Germany to the forever haunted Flanders fields of Belgium.

It was the spring of 1915, and the British Empire and German Empire were digging in on the soggy farmland outside of the provincial town of Ypres. The war had ignited the previous summer amid charges of treachery and conspiracy between royal families who had spent the previous century kissing up to each other. The bloodletting of the early contest around Paris and in East Prussia had left both sides short of professionals and firepower, and now was the springtime of reinforcements.

The English called upon their colonials from South Asia, the South Pacific, the New World and Africa; and they were abetted by the polyglot French, Italian and Russian Empires. Meanwhile the Kaiser's staff drew upon the Austro-Hungarian Empire and the vast Ottoman Empire. Truly it was a world united by homicide. By late April a rainbow of hands was at work constructing the rudimentary trench lines from the North Sea. Near Ypres, the 1/5 battalion of the York and Lancaster Regiment, West Riding Division, hacked into the Argile de Flandres -- the impervious Flanders clay that caused the ridge-rippled terrain to turn into liquid mud in the rains. And
yet the spirits of the men who were actually under enemy fire remained strangely cocky and even World Cup jaunty.

"It is very exciting sport shooting at the Germans," wrote Company C to the folks back home at Barnsley, "but not very interesting when their snipers, who are deadly shots, send bullets whistling past our heads in rapid succession."

Most striking about this report is that it was written within days of the first-ever use of poison gas in a world war. On April 22, German artillery opposite Ypres fired 5730 cylinders of green-yellow chlorine gas that became a blue-white fog as it wafted westward over fire trenches where the unprotected French territorials fled in panic, vomiting and drowning in the discharge of their lungs. The Germans poured through and flanked the Canadian Division by nightfall. Irrationally brave, the English and Canadian regiments used rags soaked in urine as masks and counterattacked to hold the line.

The weapon of choice in the 20th century, WMD, changed nothing. Two years later, the frontlines were less than two kilometers away. The Flanders fields had been transformed by guns, gas, and blood into a planet of flooded craters and mud that moved with the vermin feeding on the remains.

And yet after the destruction of an entire generation of schoolboys, neither side had gained any advantage from Ypres to the Somme to Verdun --a worldwide scoreless draw that darkened the century.

Today, what presses me about the scenes of ecstatic Europeans and Asians and Africans and South Americans in the German stadiums is that these are the great-grandchildren of the men who survived Flanders fields and yet there is no guarantee anywhere in their faces that lessons have been learned. What gamely poured into the trenches now chants vulgarities as it pours into the stands. What sliced up the world with alliances now entangles it with associations and coalitions. The superstition, cultishness, sadism, and blind faith in revenge of the trenches have not vanished. Are they in hiding?

Where? At Baghdad? At Darfur? At Ituri? At Pyongyang?

"What was, is now."

If you shrug and say, it can't happen here, then you have already forgotten how heartbreakingly fast the glorious confidence of European civilization in 1914 was crushed into Siegfried Sassoon's awful epitaph of the Third Battle of Ypres in 1917 that was named for the tiny Valley of the Passion in Flanders, Passchendaele.

"I died in Hell. (They called it Passchendaele.)"

SWIFT justice

"Dear Pundita:
Does SWIFT fall within your area of expertise? The oddest things make front page news these days.
Dave Schuler"
The Glittering Eye

Dear Dave:
Dan Riehl at Riehl World View has links to interesting opinion on the SWIFT controversy and the ACLU stand with regard to laws specifically related to US national security issues.

For now I've sworn off reporting on GWOT issues so I won't add my comments.

However, Pundita notes while rolling on the floor with laughter that there are uses for SWIFT surveillance other than fighting terrorists. Give us a moment to wipe the mirth from our eyes and clamber back on our chair....

The uses include catching US companies creating undocumented offshore shell corporations, international crime syndicates doing money laundering, and rogue regimes purchasing stuff for nukes.

Yes indeed, it’s not only the terrorists and the ACLU who are huffy about US surveillance of SWIFT.

The controversy is part of the wider picture about the limits of globalization and democracy. So I dunno, Dave; it’s a question for the majority of US voters. What's certain is that when it comes to globalized money laundering the bad guys are always way ahead of the good guys. The question is how much civil liberty the citizen in a democracy is willing to sacrifice in order to level the playing field.

With regard to the odd headlines – I think they’ve been terribly odd since Bush first signaled the US intention to invade Iraq. Since 2002 much GWOT-related reporting has really been a window on the Beltway Wars: factions at State going after factions at the Pentagon, factions at CIA trying to run Bush out of the White House and run Rumsfeld out of the Pentagon, factions at the Pentagon going after State, factions at the DoD fighting with other DoD factions and trying to run Rummy out of the Pentagon. And everybody doing the CYA jig.

Maybe the Dewey Decimal System should be expanded to include a “CIA-State-Pentagon CYA” category.

That would be a big help to historians digging through the mountains of "We hate to tell you this" books published in the decade following 9/11.

An incredible ride

Well, I guess we're coming up on that time of year again: steeling myself for John Batchelor to go on summer vacation. No one deserves a vacation more, and he gets fine people to sub for him. I’m remembering Trooper Monica (Crowley) and Guy in Truck (Eric Shawn) sitting in, and last year the redoubtable ‘Chief Inspector’ John Terrett. And Larry Kudlow, who was still recovering from hip surgery during his week of subbing.

But I look back with nostalgia to a time when John simply ran repeats of some radio shows while he was away. And what shows they were. I think I probably speak for many Americans when I observe that I learned and rediscovered much about American history from John Batchelor segments.

And I don’t know how I would have managed to stay immersed in the War on Terror if not for John’s show. There are so many convergent situations, so many branches of the war, and so much bad news in the headlines that I think I would have tuned out after a year of it.

None of that ever fazed John Batchelor and his roster of regular guests. He turned war reporting and analysis into an incredible ride. He pointed out what was important and what was chaff and wrested order out of the chaos of conflicting reports and propaganda. The ride took the listeners to a hilltop and showed us the terrain below, in the way a general and his aides took to the highest ground in olden days to watch the battle unfold.

Bon voyage, John Batchelor – and thanks for your radio show!

Catching Up

After being greatly out of touch with the blogosphere for almost half a year I have a lot of catching up to do!

Readers who have been with this blog for a time might remember that Pundita is a huge fan of Dave Schuler’s Samoyeds. For those who share my infatuation there is a beautiful picture of Tally strutting her stuff for a competition.

Also from visiting The Glittering Eye I found that Dymphna at Gates of Vienna decided to take a look at UNICEF’s Day of the African Child. What she sees makes a good companion piece to the Michael Duffy book review of William Easterly’s The White Man’s Burden (See Pundita Monday entry.)

But the reason I visited GE was to catch up on Dave’s views on immigration at the US southern border. He's written a lot since my last visit, so that will be my weekend blog reading. I’ll be starting with Assessing the threat at our border and following the links to other essays on the topic.

Over at another eclectic blog, Riehl World View, I’m learning about the
contradictions surrounding Ron Suskind’s The One Percent Solution, which is getting a lot of media buzz. There’s just something about the way Dan Riehl puts things that often elicits a bitter laugh from me. Dan's look at Suskind is another one of those essays.

After laying out Suskind’s portrayal of Abu Zubaydah as a moron incapable of hatching a terrorist plot, Dan pulls up other sets of data that call into question the portrayal. Suskind’s target, it seems, is not Zubaydah or al Qaeda but the Bush administration.

Speaking of al Qaeda, one of the decisions I made when returning to the blogosphere was that Pundita would no longer file occasional reports on the war. That was a hard decision because I want to show my continued support for GWOT and the Iraq Campaign. But for now, the GWOT blogs/websites I list on blogroll will have to suffice.

Pundita notes that Dan Riehl and Dave Schuler’s blogs are listed on the blogroll under the Eclectic category, but both also do useful analysis on war-related news and Dan snaps up war articles that might not get much play in the MSM.

I should also note that although I’ve listed Gates of Vienna blog under GWOT, the above link shows that the blog deals with other topics as well.

Now for some good news: Moscow-based blogger and UPS reporter Peter Lavelle has become a TV star! Pundita readers will recall that Peter is one of the winners of Pundita’s 2005 Weblog Awards (for Russia analysis). Peter wrote in May about the launching of his new show:

[…]IMHO (In my humble opinion) will start airing this weekend at Russia Today television. It is slated as a weekly program. I hope readers will drop by to catch the show - running Sunday during the second half hour of each hour.

The station's website is being updated [in May], but the web cast can be accessed at: mms://polar.rttv.ru/rttv […]

If you tune in, BE WARNED that Peter has not struck me as a GWOT supporter or a fan of the Bush administration. Yet his reports, analysis, and roundtable discussions about Russian political events are very valuable. The analyses are a counterweight to strongly biased views in the US mainstream media about Putin’s government. And Peter's news reports and panel discussions correct the skewed picture of Russia that American (and often, European!) reporting tends to present.

I think I’ve noted before that the only Russia commentator I trust aside from Peter Lavelle is Dr. Stephen Cohen, who guests regularly on John Batchelor’s radio show. Between listening to Steve’s reports and regular visits to Peter’s Untimely Thoughts blog, Pundita readers can be reasonably well informed about big political issues in Russia and Russia-US relations.

I’d like to catch up with all the blogs on the Pundita blogroll and some that aren’t but that’s as much as I can manage today.

Moo Goo Gai Pan school of diplomacy

"Pundita! I think Vladimir Putin must be a Pundita reader because he followed your advice to hire a public relations firm to improve his image in West. That helped a little but the US media are still trying to make him look like another Stalin. Do you have any more advice for him (I mean Putin) as he heads for the G8 summit?
Sleepless in St. Louis”

Dear Sleepless:
If I recall the summit is only four weeks away so drastic action is required. Pundita would advise that President Putin hold a press conference for American reporters and answer questions in Chinese-style Pidgin English.

If he has trouble with the syntax he can spend an hour dialing Chinese take-out restaurants in New York City and trying to order in English five dishes that are not on the menu.

I warn this is not so much advice as dangerous knowledge. It explains how China’s government has been able to get away with murder for decades with no more than a few taps on the wrist from the American press and government.

Stop and think: have you and your co-workers ever ordered borscht to go while pulling an all-nighter?

Foreign Aid Follies

Thanks to Beth Mauldin for this piece about William Easterly’s blistering attack on the West’s foreign aid failures in the Third World. Easterly knows what he’s talking about. Those who believe that Bill and Melinda Gates and Jeffrey Sachs should at least be lauded for ‘trying’ to help the world’s poorest need to realize that the West has been trying for a long time, and to the tune of USD trillions.

June 17
Michael Duffy
Sydney Morning Herald
Exposing the myth of Third World aid
PERHAPS the most important question of our time is why the West's efforts to help the world's poorest people have been so disappointing and even counterproductive. In the past 50 years, we have spent $US2.3 trillion on foreign aid, to disturbingly little effect. An important new book suggests this has had a lot to do with the arrogance of the "big push" approach favoured by many development economists and organisations such as the World Bank and the United Nations.

William Easterly is a professor of economics at New York University. He used to be a believer: for 16 years he was a research economist at the World Bank and worked extensively in Africa, Latin America and Russia. What changed his attitude was the growing amount of research showing the failures of aid, described in his book The White Man's Burden […]

Easterly says the $US2.3 trillion hasn't achieved what it should have. This is because much of it has been given as part of a never-ending series of internationally planned and co-ordinated "big plans". He believes the alternative would be to encourage more market-oriented activities among the poor themselves.

Those, such as Bono, Bob Geldof and the economist Jeffrey Sachs, who still advocate the traditional approach, he calls Planners, while those looking for a bottom-up alternative are Searchers.

According to Easterly: "In foreign aid, Planners announce good intentions but don't motivate anyone to carry them out; Searchers find things that work and get some reward. Planners raise expectations but take no responsibility for meeting them; Searchers accept responsibility for their actions … Planners at the top lack knowledge of the bottom; Searchers find out what the reality is at the bottom."

In effect he's saying that much foreign aid is delivered using a Soviet approach that Westerners would never dream of applying to their own economies. This might sound like a right-wing rant, but Easterly's book is full of data in support of his claims.

We often hear that the poorest nations are stuck in a "poverty trap" which prevents them from improving their standards of living. In fact, in the 50 years to 2001, the poorest 20 per cent of countries (excluding communist and Persian Gulf oil nations as special cases) on average increased their income by about the same amount as all other nations. Perhaps the most surprising finding in the book is that foreign aid appears to have had nothing to do with this: those nations that received below average aid improved as much as those that got above average.

The United Nations' Millennium Project to fight poverty argues strenuously that corrupt government in the Third World is not a major cause of poverty. Whether this is true is a growing debate in the aid industry. Drawing on the Polity IV research project on democracy, Easterly says there is actually a significant correlation between democracy and long-term growth, and that "poor countries grow faster than rich countries if they have good government". Why then do Planners deny this? Because their big plans rely on the co-operation of Third World governments, and would not be feasible if those governments are dysfunctional.

Easterly goes further, arguing that aid can actually prop up undemocratic governments. He draws a comparison between aid and the so-called "oil curse", where countries in which natural resources contribute a large proportion of wealth are more likely to be corrupt. The reason is that access to such resources is controlled by the government. Insiders grab most of the resulting revenue and resist any move towards democracy or a free market because this would endanger their income. The political structure of the country and its economy become frozen.

Easterly says aid can have the same effect: "High aid revenues going to the national government [for example, the dictatorship of Cameroon gets 41 per cent of its revenue from aid] benefit political insiders, often corrupt insiders, who will vigorously oppose democracy that would lead to more equal distribution of aid. Systematic evidence in a couple of recent studies suggests that aid actually decreases democracy and makes government worse."

One study found that aid was even more harmful to democracy than oil.

It's interesting to see how many of the things Easterly says are reflected in the experience of supporting Aboriginal communities with welfare. There, too, aid has often failed to achieve its major goals, and has propped up leaders who have siphoned off a lot of it to their own families and governed poorly, resisting any change that threatens their control.

They, like the dictators of the Third World, have been supported by the policies of white Planners, who are not responsible for the dismal failures of their plans and, on the rare occasions they're confronted with them, call for more of the same.

Easterly believes the time has come to abandon big plans and adopt a more humble range of approaches that involve much more feedback from aid recipients. We need to look at small things that work locally and see if they can be replicated elsewhere. One idea is for "development vouchers" as a way for the poor to tell us what they want most. But Easterly has no big plan of his own: he just thinks it's time for the post-colonial West to stop believing it still knows what's best for the Rest.

About the Author:
William Easterly is a professor of economics at New York University and a senior fellow at the Center for Global Development. He was a senior research economist at the World Bank for more than sixteen years. In addition to his academic work, he has written widely in recent years for The Washington Post, Wall Street Journal, Financial Times, Forbes, and Foreign Policy, among others. He is the author of the acclaimed book The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics. He has worked in many areas of the developing world, most extensively in Africa, Latin America, and Russia.

"None of us are prophets in our own times"

"Pundita, re your 'Perdition' essays:
Your cautions re Bill Gates et al's ‘programs’ are well taken. In any complex system -- and human societies are among the more complex ones around -- there are always emergent phenomena which are evident only under the correct conditions. Ergo, change the conditions and new, previously unsuspected, phenomena emerge. Sometimes it's a pleasant surprise....

One thing we always do (or, ahem, always ought to do) in networking is have a plan in place -- in advance -- on how we're going to roll back the changes we just made if things don't go quite as well as expected. We find it necessary more often than we'd like, because none of us are prophets in our own times.

How do you roll back the eradication of a disease which held populations to a level that could barely be supported by the local conditions? Make way for at least one of the Four Horsemen: War, Famine, Pestilence, Death.

It all comes down to being very, very careful what you wish for. And thinking really hard about what things will be like if you get it.
Annlee Hines"