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Thesis & Antithesis

A critical perspective on energy, international politics & current affairs

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Location: Washington, D.C.

greekdefaultwatch@gmail.com Natural gas consultant by day, blogger on the Greek economy by night. Trained as an economist and political scientist. I believe in common sense and in data, and my aim is to offer insight written in language that is clear and convincing.

31 October 2005

Convergent prices

The Financial Times reports today: “The cost of buying a range of goods and services in big European cities has become more similar … Comparing the price of a basket of 250 mostly branded goods across seven European cities, it found that the gap between Paris, the most expensive eurozone city, and Madrid, the least expensive, was only 3.8 per cent” (1). Too bad that the average income for a Spaniard is $23,300 while for the French it is $28,700, a difference of more than 20%. My friends in Greece will surely agree that price convergence is probably the worst effect of joining the eurozone.

But this is unlikely to make big headlines in Brussels—any indicator that Europe is converging is a good thing; after all, price convergence is a predictable short-term outcome of a common monetary zone (the long term effect should show a convergence in tradable goods and a divergence in non-traded goods according to income and spending patterns; the evidence suggests that this may be happening already). In other words, this report underscores one of the problems in the thinking about Europe: moving together in one area is not all that helpful if we diverge elsewhere. Nowhere is this truer than a convergence in prices while incomes fail to converge too.

(1) Chris Giles, “Growth in EU price convergence,” Financial Times, 31 Oct 05


Defending realism

Charles Krauthammer paints an unfair portrait of realism in his Sunday piece in the Washington Post (1). It is not that realism is adverse to freedom; rather, it is skeptical about relevance of freedom in crafting policy. To say that people want freedom is hardly useful—the Hungarians wanted freedom in 1956, the Czechoslovakians in 1968. But it took Mikhail Gorbachev to dismantle the Soviet Empire, even though opposition to the USSR was ever-present.

It is also not true that realists prize stability above everything else. Instead, they fear sudden change: to uproot a political order, it is necessary to unleash human passions that might be hard to control—to release energy whose direction cannot be forecasted. The realist recognizes that many crimes are tolerated for the sake of stability; but just as many are committed in the name of radical change by those who think they can revolutionize human nature and politics.

In other words, realists acknowledge the frailty of human nature; they understand than when order break downs, humans seek cover in familiarity: the nation, their religion. What realists exude is a sense of limitation and humility in affecting change—and that is a useful counter instinct to those who want to change the world.

(1) Charles Krauthammer, “The realist who got it wrong,” Washington Post, 31 Oct 05 (link)

28 October 2005

Central bank salaries

The following table is from the Lex column in today’s Financial Times; it lists the salaries that some Central Bank governors are earning around the world. That the American Fed chair, probably the most important in the list, earns so little is one striking thing. The other striking thing is the high salary that so many European central bankers earn—given that they do not even have the usual prerogative of setting interest rates in their countries (in the Euro area, rates are set by the ECB).

27 October 2005

The Volcker report

Today Paul Volcker, former chairman of the Fed, will issue the final portion of his investigation into the oil for food program. I had the chance to hear him speak yesterday and wanted to offer some reflections. My first impression was awe: Mr. Volcker is a towering figure, literally and metaphorically. He exudes confidence and integrity like few others. And he is very likeable. I have a sense that this helped the investigation a lot. It will be much easier to accept comments coming from a man such as Paul Volcker; it is almost impossible to not be swayed by his power and charisma, and this was surely an asset for the investigation.

I found his take rather interesting. He received a lot of help from the UN secretariat and had uninhibited access to UN records. (Humoring, he advised against criminal wrongdoing after having seen the enormous paper trail left behind for investigators to look through). He was also excited about the cooperation of foreign governments although less so about certain bodies within America. This contrasted with the general perception that this is an American-driven effort. This is not the angle I got from listening to Mr. Volcker (audio link here).

But whatever my sense from listening to him, I retain my initial view on this: that the likely effect will be that certain forces in America will seize on the report to further their anti-UN agenda (I can almost hear the Wall Street Journal editorial page emphasizing the inadequacy of the UN), and that other countries might rebuff the report’s useful comments simply because they disapprove of the matter in which Americans made use of the investigation. Let’s hope I am proven wrong in this.


Cow politics?

The New York Times has an editorial today lambasting the lavish agricultural subsidies that developed countries bestow to their farmers. It writes, “The Australian trade minister, Mark Vaile, pointed out the other day that a typical cow in the European Union receives a government subsidy of $2.20 a day - more than what 1.2 billion of the world’s poorest people live on every day. Some experts say the developed world could lift 140 million people out of that mire of poverty if it really reformed the way it managed agricultural trade” (1).

Here’s my problem with this line of thinking: it converts what is a domestic political issue into an issue of international morality. It makes more sense to me to be having a different dialogue: to ask whether it is right for urban areas to be subjected to the triple tax of agricultural subsidies—one is the subsidy itself, the second comes from the higher prices consumers have to pay for foodstuffs, and the third comes from the foreign aid to support farmers in the developing world whose produce is crowded out.

The audience to win over is those in the developed world who pay directly for the subsidies, not the 140 million people in the developing world whose lives can be improved with freer traded.

(1) “Cow politics,” New York Times, 27 Oct 05 (link)


26 October 2005

Let Europe be, Mr. Chirac

“Europe cannot stand still while its competitors forge ahead,” Jacques Chirac, the French president, writes in today’s Financial Times; “France will … never let Europe become a mere free trade area. We want a political and social Europe rooted in solidarity.” But why? The fruits of free trade are obvious: eliminating tariffs improves economic efficiency and enriches the state and the individual; free trade is a journey taken together. But what is the purpose of a political and social Europe? Why do we need a unified Europe for political and social solidarity?

Mr. Chirac has a few answers: “Globalisation spells enormous economic and social challenges. A united Europe is the only means to address them.” This is nonsense. It is an abdication of responsibility: member states and their presidents cannot figure out the answer, it seems to whisper, so we should all cuddle together, as if the European Union is the sentry of knowledge that is kept secret in Berlin, Paris, and Rome. Why is bigger better in coping with globalization: what about Taiwan, Singapore, Hong Kong, and South Korea? Why is Ireland, a tiny country, growing more rapidly than the European continental behemoths?

Mr. Chirac knows, but he refuses to acknowledge: “when corporations, tailoring global strategies to short-term profit considerations, take decisions that affect employment throughout the Union, such as relocation, our strength lies in numbers.” To blame corporations for short-term calculus is laughable from France’s pre-eminent politician, or any politician for that matter. But even more, by shifting the blame to corporate boardrooms, Mr. Chirac evades another question: who relocates, and why? Profit maximizers wouldn’t leave France or Europe if it were against their interests. Think about why they leave Mr. Chirac and you might channel some of our anger elsewhere: to your own politics rather than their bottom line.

In this competitive world, standing together is the strategy, and research and development is the tactic. “[Europe] must increase innovation and research to support tomorrow’s jobs,” Mr. Chirac writes. This is nice. Innovation and research seem perfect antidotes: they make intuitive sense for people who are desperate because they have lost their jobs, and, more important, they generate political dividends today because their true effects will not be felt for years.

But, as any serious economist knows, growth comes from two factors: the one is a reallocation of resources to more productive uses, the other is productivity. The former takes the form of a flexible labor market, lenient bankruptcy laws, and an efficient capital market (banks and stock markets, for example), to name a few. The second comes from specialization: technology, standard operating procedures, and economies of scale. You cannot improve the equation by increasing only side—technology is important but it is no panacea. And given the hostility to markets that Mr. Chirac so proudly displays, it may be no antidote at all.

Mr. Chirac closes with these words: “that states wishing to act together in addition to the common policies should be allowed to form pioneering groups. Such groups must remain open to those wanting to join them. We did so with the euro, Schengen and defence initiatives. Likewise, eurozone members should deepen political, economic and social integration.”

The logical connection of this last sentence eludes me. But here is my sense: it is never easy for an aloof politician to tell his people what is best for them. It is even worse when that politician comes from a different country, speaks a different language, and represents a wider public that has never chosen him to speak on their behalf. It just so happens that on top of these two comes a third sin: Mr. Chirac is just plain wrong. And no vision and rhetoric can correct for that.

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25 October 2005

Hariri shock

The New York Times reports today: “Some deeply troubling facts about the murder of Rafik Hariri, Lebanon's former prime minister, have now been established by a tough and meticulous United Nations investigation … top Syrian and Lebanese officials were deeply involved in planning and organizing this spectacular crime as part of an effort to terrorize restive Lebanese politicians into carrying out orders from Damascus” (1).

My feelings on the Hariri murder were summarized in my post “Victor’s justice” (19 Oct 05). The reason I post this quote from the Times is this: I am still amazed by the capacity of the media and the public to be shocked by the obvious (“Cindy Sheehan’s plight,” 19 Aug 05 offers a few more thoughts on this). Lebanon has been Syria’s turf for so many years; assassinating leaders that refused to yield to Damascus was “standard operating procedure.”

And yet the news that Syria might be involved in the plot to kill a former prime minister still manages to shock. This is just as shocking to me.

(1) “The UN Route for Syria,” New York Times, 25 Oct 05 (link)

24 October 2005

Happy birthday UN

On their birthday anyone deserves love for what is good, and fairness for what is bad. The United Nations is no exception. Few organizations get a worse press than the UN, exalted by fans, damned by critics, and usually exaggerated by both.

The tragedy of the UN is that it mixes the political with the ideal. It is the equivalent of a post-revolutionary shock where the dreams of the new order battle against the disenchantment of what has not come. And all along, there is the crowd that was uncomfortable with the whole idea in the first place.

These mixed attitudes often misread reality. The UN is a mirror of international politics, a stage for power games. As an organization, it will be stalemated by division and will be paralyzed by inaction. Without an independent budget or military, it is beholden to the moods and temperaments of its members.

The UN is neither as good as nor as bad as it could be. The bar for the UN is usually set high. This is why the question: “what has the UN done,” is not particularly useful. It is more important to ask: in what cases does the UN act as a force multiplier? What has the UN done that states would have found impossible or too costly to do on their own?

When put in these terms, the UN comes off well. It has made consultation, coordination and cooperation easier. It has created a permanent forum where disputes can be examined and maybe settled. And it offers an independent executive that can focus attention away from the narrow-minded interests of sovereign states.

But on the other hand, the UN suffers from the pitfalls of monopoly. It is inefficient. It wastes money. It has bureaucratic interests that very much color its thinking and operations. Worse of all, it claims a sole entitlement to legitimacy. This is silly, and it is dangerous, though the member states and their people are as much to blame for this as is the UN itself.

The usual angle is this: “if the UN didn’t exist, we would have to invent it.” I agree. But I would add one more thought: the invented UN would look very much like today’s UN, whatever the efforts to make it better.

Abu Ghraib ghosts?

On Saturday, the BBC ran a story about “soldiers [who] were filmed allegedly desecrating two bodies and then taunting locals” in Afghanistan (1). This is another incident in the war of symbols where Abu Ghraib and Guantanamo Bay are the towering stories.

This brings me to something I heard recently from two different sources, both intimately familiar with the Middle East and Iraq. When asked about Abu Ghraib, they both responded, “not a big deal.” If I can paraphrase them: Iraqis have lived with cruelty for a long time and they perfectly understood these images—it didn’t make much difference.

It is possible to make the argument that Abu Ghraib undermined the message that America was meant to bring forth a different order. In that sense, Abu Ghraib did not shock Iraqis but that’s not good. But the account I heard was different (again in paraphrase and elaboration): Iraqis understand the terror and nastiness of war. They will judge America by the end result. Abu Ghraib was hijacked to serve other agendas.

This was surely an interesting perspective that is not found often in the Western press.

(1) “Taleban burning claims 'harm US’,” BBC News, 22 Oct 05 (link)

21 October 2005

The blind lead the blind

The latest project for the Hugo Chavez – Fidel Castro connection is to offer medical services to patients suffering from eye diseases. The Financial Times reports, “Under Operation Miracle, Cuban doctors are performing as many as 1,500 operations a day in 14 locations throughout Cuba … In a recent speech Mr Castro said that the practice could eventually benefit as many as 25,000 people a year from the Caribbean – as well as 100,000 from Cuba, a similar number from Venezuela, and 120,000 from South and Central American” (1).

This is Mr. Chavez’s dream of “21st century socialism,” whatever that means. My own feelings are two: surging oil prices generate plenty profits; in Saudi Arabia these profits often find their way to charities that support militant groups. To spend the surplus on the blind and suffering is surely a more worthwhile goal.

But to claim that what is at play here is “21st century socialism” would be just as silly as claiming that Saudi Arabia’s GDP per capita is the result of prudent monetary policies and Wahhabi ideology. The Arabs have learned the hard way that oil profits come and go. Because their regimes are more stable than those in Latin America, they make no pretenses that their wealth is found in their own policies.

Latin America is different, but the oil is the same. Sooner or later Mr. Chavez will have to practice “21st century socialism” with less money. And that time will be a hard landing for Latin America, precisely because of Mr. Chavez’s diplomacy that has spread the oil wealth to the whole region, thus ensuring one thing: that when prices fall, it will not be Venezuela alone that will be thrown into turmoil. Caracas will drag the region down with it.

(1) Marc Frank, “Eye surgeons bring ray of hope to the Caribbean,” Financial Times, 21 Oct 05


20 October 2005

Miers present

Roe, the bad decision

Richard Cohen, of the Washington Post, has a column today on Roe v. Wade (1). I sympathize with Mr. Cohen’s position, which is why I quote him at length:

“The very basis of the Roe v. Wade decision -- the one that grounds abortion rights in the Constitution -- strikes many people now as faintly ridiculous. Whatever abortion may be, it cannot simply be a matter of privacy.

That right of privacy, first enunciated in 1965 in Griswold v. Connecticut, once made sense. It overturned a state law forbidding the use of contraceptives by married couples. The average person could easily understand that a right of privacy was at issue here. If the government telling you what you can and cannot do in your own bedroom is not about privacy, then what is? The Connecticut law had to go. If the state legislature wasn't going to take it off the books, then the court had to.

Abortion is a different matter. It entails so much more than mere birth control -- issues that have roiled the country ever since the Roe decision was handed down in 1973 -- and so much more than mere privacy. As a layman, it's hard for me to raise profound constitutional objections to the decision. But it is not hard to say it confounds our common-sense understanding of what privacy is.”

Mr. Cohen concludes that whatever one’s views on abortion, “a bad decision is a bad decision.” I agree. Much of the rancor over abortion issue can probably be explained by its inconclusive settlement in 1973.

(1) Richard Cohen, “Support choice, not Roe,” Washington Post, 20 Oct 05 (link)

19 October 2005

More on Saddam’s trial

There are two more things I would like to append on the Saddam trial. The first is my own post of 18 July 2005 which quotes some of the crimes that Saddam Hussein committed while in office (scroll down for more on that). The second is a column by Anne Applebaum of the Washington Post (1):

“[If] his Sunni countrymen learn what he did to Shiites and Kurds, if the Shiites and Kurds learn what he did to Sunnis, if Iraqis come to realize that his system of totalitarian terror damaged them all, and if others in the Middle East learn that dictatorships can be overthrown, then the trial will have served its purpose. That, and not an arbitrary standard of international law, is how the success of this unusual tribunal should be measured.”

(1) Anne Applebaum, “Justice in Baghdad,” Washington Post, 19 Oct 05, (link)

Welcoming Abbas

Dennis Ross and David Makovsky, both fellows at the Washington Institute for Near East Policy, have an op-ed in today’s Los Angeles Times, which describes well the prospects for Mahmoud Abbas, the Palestinian leader (1):

“Mahmoud Abbas is a different kind of Palestinian president. Unlike his predecessor, Yasser Arafat, who made a long-term strategy out of being a victim, Abbas has made it clear that he seeks to build a political culture of responsibility. He has repeatedly said (in both English and Arabic) that violence is counterproductive to Palestinian aspirations.While Arafat saw the misery of Palestinian refugees as a tool to be exploited for political purposes, Abbas has now given two speeches in the last month, in Arabic, declaring that it is time that Palestinians built housing for the refugees and that the Palestinian cause is not served by keeping refugees in wretched conditions. Such statements provide a way to demystify the refugee issue as a calling card of Palestinian grievance and as an impediment to an eventual peace agreement.”

(1) Dennis Ross & David Makovsky, “The un-Arafat comes calling,” Los Angeles Times, 19 Oct 05 (link)

Victor’s justice

As the trial of Saddam Hussein starts, many organizations are expressing fears that the tribunal may reinforce the perception of “victor’s justice.” There is no doubt that it will. After all, victor’s justice is precisely at play anywhere and anytime that a former leader is deposed and brought to a courtroom. To think otherwise would be to have unrealistic expectation of justice and law.

There is one example that comes to mind that is very appropriate: Hafiz al-Assad, ruler of Syria from 1971 to 2000, ordered in 1982 the Hama massacre, where upwards of 20,000 people are believed to have been killed. His son, Bashar al-Assad, may or may not have ordered the killing of Rafik Hariri, former Lebanese prime minister. Hafiz died of a heart attack in 2000, aged 70, and still master of Damascus. In contrast, Bashar lost Lebanon and may lose Syria too.

It was suggested by a keen observer of Middle Eastern politics that the death of Hariri resembled the adage of Marquis de Talleyrand: “It is worse than a crime, it is a blunder.” Those who commit blunders are more likely to end up in court than those who commit crimes.

Greenspan, the Keynesian

As the discussion on Alan Greenspan’s successor intensifies, a column by Martin Wolf, of the Financial Times, puts together many of the problems that the new Fed chairman is likely to face. But there is one part that I thought I would share:

“By current standards, the Federal Reserve is almost antediluvian. Surprisingly for a man once known as a gold bug and disciple of Ayn Rand’s libertarian philosophy, Mr Greenspan has emerged as the policymaker closest in spirit to Maynard Keynes.

This is not because the chairman believes in the naive Keynesian economics of the 1950s and 1960s. But Keynes would not have done so either. What Mr Greenspan shares with the father of macroeconomics is his trust in his own judgment, in discretionary policymaking and in the wisdom of managing the long run by treating it as a series of short runs.”

This philosophy, aided and abetted by supreme competence, is what America and the global economy needs in a future chairman.


18 October 2005

Oil temptations

The Financial Times reports, “a new left-of-centre government in Norway yesterday pledged to use more of the nation's oil wealth to improve welfare in the country named by the United Nations as the world's best place to live” (1). Whether this will actually happen remains to be seen; but it should remind us of the difficulties of using oil wealth constructively. As the world calls on OPEC countries and Russia to use their oil money to reconstruct their economies, the news from Norway should remind us of the difficulty to resist the temptation to spend the extra cash on political instincts.

(1) Paivi Munter, “Norway to increase welfare spending,” Financial Times, 18 Oct 05

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A letter’s authenticity

In today’s Los Angeles Times, Bruce B. Lawrence of Duke University suggests that the letter addressed from Ayman al-Zawahiri to Abu Musab al-Zarqawi is a forgery, probably of the Bush Administration (1). His argument centers around a strategic change for al Qaeda (the need to avoid killing Shiites in order to unite Muslims), the time delay between it being written and published, a request for a 100,000 payment and the message: “send greetings to Abu Musab al-Zarqawi.” He concludes that if the letter proved to be a forgery that would be an embarrassment for the President of the United States.

I have two thoughts on this: first, any sensible war correspondence has to include information that will make the enemy doubt the letter’s authenticity. This is neither here nor there, and it is easy to fall in the trap of “that’s what they thought we would think,” and enter into an endless game of hide and seek. Discerning from this if the letter is authentic is almost impossible.

My other point is that I would welcome America becoming a bit more Machiavellian. If it forged the letter, so be it. The problem would be if America got caught. In that case, it could come out and say: “we thought it was authentic but we were wrong.” If the job was badly done and it could be shown that the Bush Administration actually wrote the letter, then the true message would be: get better at playing the war game.

(1) Bruce B. Lawrence, “Fake letter, real trouble?” Los Angeles Times, 18 Oct 05 (here)

17 October 2005

Welcoming a reformer

Jose Manuel Barroso, president of the European Commission, is due in Washington this week. His visit comes at a moment when the internal dynamics in Europe are both stalemated and ripe for change, when the push to reform is obstructed yet the status quo remains profoundly unsatisfactory, when the questions that Europe is asking are producing answers that Europe does not want to hear.

Mr. Barroso is an advocate for change. Only Tony Blair and Gordon Brown can be said to match his potency and vigor for updating the European dream. But Mr. Barroso lacks the imagination of former leaders—his is not a vision to push Europe to new limits. He is an administrator whose task is to house clean. And yet for this he deserves plenty credit.

Perhaps his truest contribution has been to alter the balance of power in the EU; under his aegis, the Commission is no longer the place to streamline legislation and bequeath the peoples of Europe with more rules. It is an engine for reform: a place to speak of the need to move Europe past its inner instincts and to reach out to the world—to rediscover the confidence to engage and compete with the world, and with one another.

Mr. Barroso should be praised for this.


13 October 2005

Zawahiri’s concerns

Those who are looking for a scorecard on the war on terror can read Ayman al-Zawahiri’s letter to Abu Musab al-Zarqawi; because it is in the words of al-Qaeda’s number two man that comes the greatest evidence that this terrorist campaign is falling apart.

Al-Zawahiri knows he needs to win over the Arab masses. But this is a source of weakness. He knows that terrorism suffers from a strategic defect; “the mujahed movement must avoid any action that the masses do not understand or approve,” he writes. Al- Zawahiri is concerned about the fight between Sunni and Shiites, which is undermining the unity of the jihad. The excessive brutality on display during the killing of hostages is another way to alienate the public.

In other words, it is when terrorism becomes too decentralized that it also loses its cogency and coherency. We tend to think of al-Qaeda’s strength as lying with its disparateness—the fear that there are always sleeper cells terrifies Western authorities. But the more people are involved in the campaign and the more complicated it gets, the harder it is for the ordinary folk to follow it, to embrace it, and to champion. Al-Zawahiri knows this: “I repeat the warning against separating from the masses, whatever the danger,” he writes.

The failure to convert military victories into political capital is another of al-Zawahiri’s fears. This is the classic problem of terrorism: militants can destroy but they cannot create; they might have power to overthrow but not the strength to take over. Al-Zawahiri writes, “I stress again to you and to all your brothers the need to direct the political action equally with the military action, by the alliance, cooperation and gathering of all leaders of opinion and influence in the Iraqi arena.” What al-Zawahiri is saying is that there is more to terrorism than killing. But many terrorists have yet to understand that.

And so from al-Zawahiri’s letter comes the most solemn and damning critique of terrorism. As terrorism becomes more powerful it loses focus; it gets embroiled in killing and forgets that killing is only a means to an end—to capture political power. But rarely are those who are capable of running a state the ones in the basements plotting attacks against civilians. It is easy for terrorism to collapse under its own weight. This is the limit of terrorism and al-Zawahiri knows it better than anyone today.


Zawahiri’s letter

On October 11, 2005, the Office of the Director of National Intelligence released a letter between Ayman al-Zawahiri (al Qaeda’s number two) and Abu Musab al-Zarqawi (top fighter in Iraq). The letter is an insightful read into al-Qaeda’s strategies, ambitions and anxieties. It exudes a deep understanding of the battle between the militants and the West, and offers a comprehensive appraisal (and critique) of the battle so far. The full text can be found here; some highlights:

“It has always been my belief that the victory of Islam will never take place until a Muslim state is established in the manner of the Prophet in the heart of the Islamic world, specifically in the Levant, Egypt, and the neighboring states of the Peninsula and Iraq; however, the center would be in the Levant and Egypt.”

“And it is that the mujahedeen must not have their mission end with the expulsion of the Americans from Iraq, and then lay down their weapons, and silence the fighting zeal. We will return to having the secularists and traitors holding sway over us. Instead, their ongoing mission is to establish an Islamic state, and defend it, and for every generation to hand over the banner to the one after it until the Hour of Resurrection.”

“If we look at the two short-term goals, which are removing the Americans and establishing an Islamic amirate in Iraq, or a caliphate if possible, then, we will see that the strongest weapon which the mujahedeen enjoy - after the help and granting of success by God - is popular support from the Muslim masses in Iraq, and the surrounding Muslim countries.”

“We don't want to repeat the mistake of the Taliban, who restricted participation in governance to the students and the people of Qandahar alone. They did not have any representation for the Afghan people in their ruling regime, so the result was that the Afghan people disengaged themselves from them.”

“I repeat the warning against separating from the masses, whatever the danger.”

“Among the things which the feelings of the Muslim populace who love and support you will never find palatable - also- are the scenes of slaughtering the hostages. You shouldn't be deceived by the praise of some of the zealous young men and their description of you as the shaykh of the slaughterers, etc. They do not express the general view of the admirer and the supporter of the resistance in Iraq, and of you in particular by the favor and blessing of God.”

12 October 2005

Suicide in Damascus

Syrian Interior Minister, and former Syrian security chief in Lebanon, Major-General Ghazi Kanaan has committed suicide in his office in Damascus. He gave a last interview a few hours before his death, where he said: “We served Lebanon’s interests honourably and sincerely... We exerted joint efforts and spared no blood and this resulted in the liberation of Lebanon at a time that it was impossible to do so without Syria” (link).

How curious that the former head of Syrian operations in Lebanon would kill himself just as the investigations into Rafik Hariri’s death are intensifying. All that can be said is Allaah yirHamuh (may God have mercy on him).

A soccer fatwa

In case you have not read it, I suggest you take a look at a soccer fatwa (religious decree) that was issued a couple of years ago and which recently made its appearance in the Saudi daily Al-Watan (full text at MEMRI, here). Believed to have been issued by Sheikh 'Abdallah Al-Najdi (whoever that is) it reads (some highlights):

"1. Don't play soccer with four lines [surrounding the field], since this is the way of the non-believers, and the international soccer rules require drawing [these lines] before playing.

4. Do not set the number [of players] according to the number of players used by the non-believers, the Jews, the Christians, and especially the vile America. In other words, 11 players shall not play together. Make it a larger or a smaller number.

12. When you finish playing, be careful not to talk about the game, and not to say 'we play better than the opponent,' or 'so-and-so is a good player,' etc. Moreover, you should speak about your body, its strength and its muscles, and about the fact that you are playing as [a means of] training to run, attack, and retreat in preparation for [waging] jihad for Allah's sake.

13. If one of you inserts the ball between the posts and then starts to run so that his companions will run after him and hug him, like the players in America and France do, you should spit in his face, punish him, and reprimand him, for what do joy, hugging, and kissing have to do with sports?”

At least there is doubt about whether the fatwa can really be traced to the hadith (the Prophetic tradition) since Mohamed probably didn’t spend much time talking about soccer when he was alive.

From Athens to Budapest

Hungary joins Greece as the latest member in the European Union’s creative accounting department. The news that Budapest fiddled with numbers to reduce its budget deficit (in an effort to comply with a 3% limit that so many countries have breached) says a lot about Europe.

It shows how Europe remains a place of sovereign states. Some states will cheat to avoid getting caught, while others will come out and flatly admit that they are not going to be within the 3% limit. So much for equality.

Playing with numbers also reinforces the idea that countries have yet to develop a serious allegiance to the idea of Europe. While unification is desirable, country comes first, as first comes the need not to be embarrassed internationally. From this need comes some incentive to cheat.

The story also reveals narrow-mindedness and a sense of zero-sum mentality—that compliance for the sake of compliance is less important. But a place where compliance is seen as a calculated political decision is a place that falls under the purview of international politics, not the domestic kind that Europe hopes to create.

Am I reading too much into this? Maybe I am. It was Disraeli who said, “there are three types of lies: lies, damn lies, and statistics.” He would probably add government and corporate accounts if he were around today.


The military balance

The Financial Times writes, “Two of Nato's most respected retired generals will issue today a stinging indictment of European military capabilities.” From the report: “Failure to meaningfully improve Europe's collective defence capabilities in the coming years would have profoundly negative impacts on the ability of European countries to protect their interests, the viability of Nato as an alliance, and the ability of European countries to partner in any meaningful way with the US” (1).

This is a serious critique; and a worrisome prescription. A healthy skepticism about world affairs would be welcome in Europe, which seems to be caught in a cocoon of peace. But the requisite investment in military spending can come about only one way: as a result of geopolitical rivalry with the United States.

The European Union has made no secret that it would like to offer an alternative to American leadership. But a military buildup cannot be the result of cheap talk from Europe’s leaders. It comes from a mindset which looks at the world and sees spheres of influence, which perceives the extension of American power as hostile. Until this is felt in Brussels, there will be no large buildup. And when it is felt, then the world will be in for big trouble.

This doesn’t mean that Europe should do nothing. A potent N. Africa strategy is what Europe needs more urgently (2). As immigrants travel, so will other goods, many of which Europe would prefer not show up at its shore. As a security threat, this is Europe’s number one priority. The number two priority should be an effective civilian-military force. To complement American hard power, this could be indispensable. It could also be deployed effectively and independently in regions where natural disasters have occurred (think Tsunami or the S. Asia earthquake of a few days ago) or as peacekeepers where others (America) is unwilling to commit troops.

In other words, a huge investment in military spending is neither necessary nor likely. What is more important is a clearer definition of what Europe wants to do with its military—but when the answer to that question leads to increased military spending, that will be bad news for everyone.

(1) Peter Spiegel, “European military capabilities criticised,” Financial Times, 12 Oct 05
(2) Mark Mulligan and Raphael Minder, “Spain and Morocco call for joint action over tide of immigrants,” Financial Times, 12 Oct 05

11 October 2005

Karen Hughes, Bayan Jabr

The Wall Street Journal has an editorial today endorsing Karen Hughes’ efforts to “sell” America in the Middle East. My thoughts on that are elsewhere; but in case you missed him, I thought I would put on a good word for Bayan Jabr, Iraq’s interior minister, who lambasted the Saudi Foreign Minister Prince Saud al-Faisal last week (from the BBC website here):

“We are Iraqis and we are responsible for solving our problems, we will not allow anyone to interfere,” said Mr Jabr, who sits in Iraq's parliament for the Supreme Council for the Islamic Revolution in Iraq (SCIRI), a Shia party. He added: “This Iraq is the cradle of civilisation that taught humanity reading and writing, and some Bedouin riding a camel wants to teach us.” Mr Jabr rounded on the Saudi regime, which he accused of treating millions of women and Shia Muslims as second-class citizens. “They have one god, he is the king, he is the god, and he rules as he likes. A whole country is named after a family.”

The Middle East needs Mr. Jabr more than it does Mrs. Hughes.

Football, up and down

It has been a mixed few days for football (or soccer, if that’s your thing). In Liberia, George Weah, a former European football star, is one of the frontrunners in the national elections being held today. One of Liberia’s most prized exports, Mr. Weah was named footballer of the year in 1995; now he has returned home to try and heal his country from civil war (1).

Conversely, in Brazil, the government’s woes have been matched by a football scandal: official Edilson Pereira de Carvalho, one of the ten Brazilian referees accredited by FIFA, has admitted to taking bribes to fix games (2). The country is in shock. Sure, the government is corrupt. But football too? That’s just too much to handle.

It’s all about precedent. Corruption I can handle (anyone who follows Greek soccer has corruption built into the system). But will Mr. Weah’s election open the floodgates for more athletes to seek high office? I am afraid it might. Who’s the athlete-politician you would vote for (or against)?

(1) The BBC has an online profile of the main contenders (link)
(2) Jonathan Wheatley, “Soccer mirrors politics as Brazil referee admits fixing results,” Financial Times, 11 Oct 05

10 October 2005

Farm liberalization redux

Rob Portman, America’s trade representative, outlines in today’s Financial Times a vision to eliminate farm subsidies and tariffs. He writes, “The US will do its part and more, but consistent with the framework’s harmonisation commitment, greater cuts must be required by the European Union and Japan, which have much larger subsidies. All countries must also simultaneously deliver real market access” (1).

This is not the first time America has come out with a dramatic plan to salvage the Doha trade talks. But the excitement over this commitment needs to be tempered by two realities: the first is that the EU is unlikely to volunteer to reform the Common Agricultural Policy soon. Reform of the CAP was one of the reasons the EU’s budget deal was torn apart this summer; the separate issue of the UK rebate has yet to settled; and it also not clear whether the EU can psychologically close the one chapter—farm subsidies—that has endured as one of the Union’s economic rationales for over half a century.

The second reality has to do with the reformed future. This year was supposed to witness a liberalized market in textiles, according to agreements made in the WTO. But as the year started rich countries rushed to cut deals with China to curtail imports from that country to the West. In the European Union this led to crisis and embarrassment. A similar future, whereby international commitments are not met by realistic domestic pledges by governments, could unravel whatever deal is reached on agriculture at the WTO.

There is nothing in today’s declaration to justify celebration. The path to reform remains long and bumpy.

(1) Rob Portman, “America’s proposal to kick-start the Doha trade talks,” Financial Times, 10 Oct 05


Nobel Prize nukes

On Friday, the Nobel committee awarded its peace prize to Mohamed ElBaradei and the International Atomic Energy Agency. Today, the Swedish central bank has given the Economics prize to Thomas Schelling (shared with Robert Aumann) for his work on game theory and its application to strategic thinking and particularly nuclear war.

The immediate reaction to the peace prize was that it was a rebuke to the Bush Administration, much like the laurelling of Jimmy Carter in 2002 was supposedly meant to condemn America’s bellicosity. At a closer look it seems that the Nobel Committee has reverted back to a traditional position: awards given to encourage rather than reward peace. And there is no doubt that the IAEA needs to be strengthened to act more effectively against nuclear threats (1).

But then came the Economics prize, awarded to someone whose game theory thinking helped form nuclear strategy for many years. In his book, Strategy of Conflict, Schelling “argued that the capability to retaliate was more useful than the ability to resist an attack, and that uncertain retaliation was more credible than certain retaliation” (2).

And so the Nobel committee has something for everyone: a belief in the need for international regimes to control proliferation, and a resting confidence in the underlying dynamics of power to halt or inhibit the use of nuclear weapons. For those who were upset on Friday, Monday should come as a welcome surprise.

(1) Read Henry Sokolski, “The Nobel goes nuclear,” Wall Street Journal, 10 Oct 05
(2) “Game theorists share Nobel Prize,” BBC News, 10 Oct 05 (link)

07 October 2005

Petrol taxes

Samuel Bodman, US Secretary of Energy, resisted the idea that America should raise petrol taxes to encourage conservation because such taxes “would be more interference with the free market than we would like to see.” Now, the case against raising taxes today is sensible—with prices so high, taxes would be politically impossible and would add an undue burden on the markets, acting more as a distorting rather than a corrective adjustment.

But to claim that the case against petrol taxes has anything to do with the free market is silly. Given that petroleum production and consumption involve huge externalities—costs not borne by producers or consumers—this is a textbook scenario for a tax: to bring the social cost of petrol (the damage on the environment, its geopolitical costs, etc.) into the market price.

It is no accident that the Wealth of Nations is a 1000+ page book: there is more to a free market than the invisible hand. Those who preach the virtues of the market should do well to understand how it works.

Regional growth

This is from yesterday's Lex column in the Financial Times (6 Oct 05): "There is a greater variation in economic growth rates between regions within major countries than between the countries themselves. The most striking example is the UK, which has both the region with the highest and that with the lowest growth of the countries shown. In several countries, healthy national growth numbers driver by a minority of regions conceal localised recession."

05 October 2005

Fragile decision-making

The Financial Times quotes an official from a “heavyweight EU state” as complaining: “The British consulted the Turks and the Americans before they consulted us” (1). Now add Jack Straw’s jubilation as he hugged Abdullah Gul, Turkey’s foreign minister, as there you have it: style, personalities, and fortune are playing their usual role in international affairs.

It is easy to think of politics in grand strategic terms, defined by interests, alignments, and coalitions. But it is just as important to look at the personal side—who champions what, how people persuade those who hold out; and so on. It is no small matter that Jack Straw invested so much time and energy into getting talks with Turkey to start as scheduled. And whether officials feel a cold shoulder because they were left out of the inner circle of decision-making is just as important.

I remember that when Greece signed the accession treaty to join the European Economic Community in 1979, Giscard d'Estaing said: “It was not Greece that entered the community, it was Karamanlis” (Karamanlis was then Greece’s prime minister). In other words, geopolitics dictates that Turkey and the European Union will have to work together, in full partnership if possible, in association if necessary. The European peoples will, no doubt, have their say about that; but it will matter just as much who is at the helm of Europe and Turkey at that time—what their ambitions are, and their skills and temperaments.

(1) Daniel Dombey, “European diplomats raise eyebrows over US involvement in the deal-making,” Financial Times, 5 October 05


04 October 2005

Bali and Jakarta

Two things happened in Indonesia this weekend—the first was the attack in Bali which killed 22 and wounded over 100, and the second was the increase in the price of fuel mandated by the Jakarta government, followed by moderate protests. On Monday, the Indonesian rupiah opened down 1.5% but appreciated quickly to close slightly down from the US dollar; and the Jakarta Stock Exchange’s index closed up 0.4% (1). Did the markets get it right?

Following the announcement that the government would reduce fuel subsidies (which in turn was linked to a credit downgrade by the Standard and Poor’s rating agency), the stock market has been going up, and the rupiah has appreciated—both consistent with what economic theory would predict: a reduction in subsidies increases the country’s fiscal solvency, reduces expected inflation (to finance the subsidies), and lowers the crowding out effect of government borrowing (thus boosting the stock market).

Which brings up back to the market reaction on Monday; the markets predicted that what the Jakarta government does to change the macroeconomic fundamentals of the country is more significant for the country’s future than what three suicide bombers do. And when the Financial Times came out with a piece called “Bombing season is a cyclical inconvenience,” one has to wonder if the world has adjusted to terrorism as a fact of life. The news from Jakarta could be that we have.

(1) Shawn Donnan, “Markets stable as oil price rises welcomed,” Financial Times, 4 October 05

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Energy hog?

It took four years to write, negotiate, and pass the Energy Act of 2005. But that’s all history; now comes a public awareness campaign, led by the horrifically ugly “energy hog” who appears at houses that waste energy, to convince Americans to curb their energy appetite. It is a pity that energy waste is still seen in this light—conservation on the margin can be useful but it is just not enough. What is more, such a campaign can only be sustained while the public retains a sense of crisis—which it won’t for too long. But at least, there is recognition that this is silly, which is why you can waste plenty of energy in your home by visiting http://www.energyhog.org/ and beating up the energy hogs.

03 October 2005

Turkey talks

October 3 was supposed to be a celebration date—a time when east would meet west, as Turkey’s journey to join the EU would finally enter its final, and most difficult, phase. Instead it has become an embarrassment as the EU tries to decide whether full membership will be the only option offered to Turkey or whether the end point could lead to some other kind of union.

At first glance, this seems a sensible talking point; if anything, European leaders have recently discovered the peril of neglecting the sentiments of their people: to listen to their concerns—and many express those in regards to Turkey—seems only fair. After all, popular support for Turkey joining the EU is low (link).

But low public support for Turkey’s entry is hardly the whole story. The real question is not whether people support Turkey’s entry; what is more important to ask is, how much of the opposition to Turkey’s entry can be explained by Turkey’s current state of affairs (human rights violations, low standard of living, etc.) and how much has to do with Turkey’s underlying characteristics: most of all, Turkey being a Muslim country. In other words, can we say that opposition today will necessarily mean opposition tomorrow?

A second question is, how much of the popular opposition to Turkey’s entry has to do with the current realities in Europe—specifically, the fact that Europe’s economies are stagnant, increasingly inward looking and very fearful of immigration? And how much is related to the waning support for the European experiment in general?

These questions are not meant to digress. But they raise an important question—is 2005 a representative sample year for the EU to use as a benchmark? My suspicion is that it is not. A wealthier and more democratic Turkey and a wealthier and more confident Europe might find union easier to imagine, even if the fear of Islam will forever hang over European heads.

Which brings me to my final point: Turkey’s entry will not be decided for another decade. While it is hypocritical to open membership talks if membership is not what the EU leaders are willing to give, the decision to admit Turkey will not be theirs anyway. It is likely that populist leaders will call for referenda to ratify Turkey’s entry—that’s when Europe will speak. A constitutional-type scenario, where leaders are sent back to the drawing board after failed ratification, is likely for Turkey. That’s when a non-membership union can be contemplated.