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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.

30 November 2005

Lord John Browne

Yesterday, I had the chance to listen to Lord John Browne, chief executive of British Petroleum. There is a variety of issues that deserve comment, both about BP’s strategy in general and Lord Browne in particular. But I want to focus on one idea instead: what impressed me was how Lord Browne contrasted with the oil executives that appeared in the Senate a few weeks ago to testify on and defend their corporate profits.

If anything, BP understands the role of communications—the need to explain a “big business” in simple and comprehensible terms. Lord Browne was masterly in that. If I can paraphrase him (this came in Q&A): most people understand small businesses, he said; but when it comes to businesses with 100,000 employees (BP employed 102,900 at Dec 2004), it is harder for the public to understand what goes on. Companies need to explain what they do and why they do it. They need to be cognizant of their cycle of responsibility, a group that involves employees as well as those affected by the company, and reach out to them.

It is not possible to make all this money, Lord Browne said, without doing something right, without offering goods and services that people want. A few weeks ago I scorned at the various calls on big oil to make sacrifices (14 Nov 05). It was rewarding to see the chief executive of Europe’s biggest company be equally unequivocal about the merits of the world oil market and simultaneously understanding of the role of his company in the world—a chief executive willing to explain the oil business without being smug or defensive.

It is a pity we did not see Lord Browne in those Senate hearings.

Yesterday’s speech: John Browne, “Energy Security: Responding to the challenges,” Speech at Brookings Institution, 29 Nov 05 (link); and an article on climate change: John Browne, “Beyond Kyoto,” Foreign Affairs, July / August 2004 (link)

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29 November 2005

The futility of empire?

Anatol Lieven writes in today’s Financial Times: “it is pointless to dream of long maintaining an American empire for which most Americans will neither pay nor fight.” Although I think Mr. Lieven is on to something that needs discussion—the ability to sustain political support to undertake serious missions abroad, I also fear that he is extrapolating too much from the present. The Iraq war is a peculiar one in many ways—a defining moment but a unique one too. I doubt that we can project all the problems that America faces today, internal and external, into the future with much confidence that they constitute permanent features of American life.

Anatol Lieven, “Decadent America must give up imperial ambitions,” Financial Times, 29 Nov 05

UK and the EU budget

In an effort to reach a budget deal for the period 2007-2013, the United Kingdom has campaigned for a lowering of the EU overall budget. EU officials believe cuts will bring Europe’s budget down from 1.06 to 1.03 of GDP (1), though the cost-cutting will be mainly felt in Europe’s eastern and poorer regions.

In a way, Britain has a point: many countries hardly use up all the funds earmarked for them and so cutting their allowance is a sensible, if only symbolic, thing to do. But the British move seems also disingenuous: having failed to renegotiate the future of the Common Agricultural Policy (CAP), the British are turning elsewhere for their cuts. They are fighting the poorer regions because they cannot take on the richer, established powers (i.e. France).

The political dimension is interesting—is the UK trying to create an “agricultural wedge?” There is reason to think so: by cutting general regional funds, the countries who stand to lose will speak up to maintain their privileges. Tony Blair could hope that the momentum for keeping the funds in general will make them more willing to give up agricultural funds in particular. But this spells fierce domestic political battles.

The details of the UK proposal are still being worked out—but there is something interesting brewing here.

“UK under fire on plan to cut aid in EU budget,” Financial Times, 29 Nov 05


28 November 2005

Guarding American secrets

The US Commerce Department is increasingly active in trying to restrict the access that Chinese nationals (even if no longer Chinese citizens) have to advanced research and technology in America. As the Financial Times writes, “Espionage should, of course, be taken with the utmost seriousness … But to besmirch an entire nationality is not only reckless, but counterproductive.”

I find that the arguments here are familiar. My one thought goes back to AQ Khan, the Pakistani scientist who maintained an underground global market for nuclear technology. If anything, Dr. Khan’s story underlines the manner in which technology changes hands—North Korea, Iran, and Libya did not need their own scientists in Pakistan to get access to sensitive technology. This is not to suggest the inevitability of espionage, but rather to reinforce the notion that access should be managed based on the value of the information, not the nationality of the researcher.

“American Paranoia,” Financial Times, 28 Nov 05

Defending Wal-Mart

Sebastian Mallaby in today’s Washington Post on Wal-Mart:

“There's a comic side to the anti-Wal-Mart campaign brewing in Maryland and across the country. Only by summoning up the most naive view of corporate behavior can the critics be shocked -- shocked! -- by the giant retailer's machinations. Wal-Mart is plotting to contain health costs! But isn't that what every company does in the face of medical inflation? Wal-Mart has a war room to defend its image! Well, yeah, it's up against a hostile campaign featuring billboards, newspaper ads and a critical documentary movie. Wal-Mart aims to enrich shareholders and put rivals out of business! Hello? What business doesn't do that?”

Beyond the rhetorical opening, Mr. Mallaby raises serious issues about Wal-Mart, what it does and what it represents. In my mind, the message is two fold: first, that the gains from trade are not restricted to the wage people earn—their money’s purchasing power is just as important. As Mr. Mallaby writes, the gains from the lower prices that people pay at Wal-Mart offset the lower wages that can be attributed to Wal-Mart’s business practices. This means that Wal-Mart represents a net gain.

The second message is a derivative of the first: the conventional wisdom (I am tempted to use the word “hysteria”) suggests that high-tech innovation is the sole guarantor of living standards in developed countries. Wal-Mart’s story should make us think again: it is impossible to judge living standards by looking only at what people earn rather than what they spend their money on. Even a reduction in wages can make someone better off if the things they buy are proportionately cheaper than they were in the past. This doesn’t mean that earning less money is good—it just suggests that it is insufficient to look at wages alone to tell the tale of globalization.

Sebastian Mallaby, “Progressive Wal-Mart. Really.” Washington Post, 28 Nov 05 (link)

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25 November 2005

Tribute to George Best

George Best, one of the greatest footballers ever, passed away this morning aged 59. The BBC has a moving tribute to the man and player; Michael Crick ends his ten-minute long video on Best this way: “perhaps we should just accept what he was: a rare genius flawed by far from rare addictions.” How true.

“Football legend George Best dies,” BBC News, 25 Nov 05 (link); photo link

Liberty and competence

Charles Krauthammer writes today about the authenticity of America’s devotion to freedom around the world:

“… as you walk the streets of Washington, it is harder to discount America's quiet homage to foreign liberators -- statues built decades apart without self-consciousness and without any larger architectural (let alone political) plan. They have but one thing in common: They share America's devotion to liberty. Liberty not just here but everywhere. Indeed, liberty for its own sake … Many around the world find such sentiments and the accompanying declarations hard to credit. Europeans, in particular, with their long tradition of realpolitik, cannot conceive of a Great Power actually believing such hopeless idealism.”

Mr. Krauthammer, I feel, is right to identify the disbelief and incredulity that receives America’s message of freedom abroad. But there is a parallel current that beats a different tune, free of the cynicism about America’s intentions yet equally pessimistic about America’s role abroad. For this crowd, America’s intentions do not count as much as the perseverance in staying the course and the capacity to appreciate the complexities of locality in micromanaging an empire. And whatever the grudge with the cynics, these skeptics may be on to something.

Charles Krauthammer, “Sweet Land of Giving,” Washington Post, 25 Nov 05 (link)

23 November 2005

Alliance maintenance

The Financial Times reports on a row that has yet to be resolved between America and Britain over weapons technology transfers: “The UK looks set to lose its five-year battle to win a waiver on strict US arms export controls after being told by Bush administration officials that political opposition on Capitol Hill to the transfer of sensitive technologies had become insurmountable” (1).

The opposition to the waiver is led by Henry Hyde (R-IL), Chairman of the US House international relations committee; “[Mr. Hyde] is said to be concerned by Britain’s lack of specific laws preventing transfer of military technology to third countries. Given the UK’s open defence market, Mr Hyde has warned that technologies transferred to Britain may find their way to capitals less friendly to American interests” (1).

This is an interesting piece of news, if only because of its wider significance. The past few years have witnessed an intense political debate about the role that alliances should play in America’s foreign policy. In broad terms, allies tend to court America largely in order to gain favor with the world’s greatest power. This is especially true in foreign policy projects such as Iraq where (save perhaps the UK) few countries believed that their immediate national interests were at stake.

But the fragility of the courtship is obvious as close attachment to the superpower carries a political cost domestically: Jose Maria Aznar paid for it in Spain; and other governments have tried to minimize their commitments to Iraq (South Korea being the latest example) and downplay their alliance to America.

The importance of this last piece of news should be seen in this light: when the costs of being too close to America are high, then the rewards need to be high as well to compensate for the increased political risk that foreign leaders bear. When close allies such as Britain cannot reap the benefits of close attachment, then foreign leaders are bound to rethink the optimum level of courtship they should accord America.

I cannot help but think of one article written by a former professor of mine about the US decision to downside its military base in Keflavik, Iceland. Although its rhetorical hyperbole is obvious, there is a point here that is not made often enough: “The world continuously watches what we do. Our military actions in Afghanistan and Iraq have shown that it does not pay to be an enemy of the United States. Our actions in Iceland show that it may not pay to be a friend of the United States, either.”

(1) Peter Spiegel, “UK denied waiver on US arms technology,” Financial Times, 23 Nov 05
(*) I was sent this article directly by the author and have not found a reference for it, though I believe this is the full citation: Michael T. Corgan, “Bandaríkjamenn og varnarsamningurinn,” [The United States and the defense agreement], Morgunbladid (an Icelandic daily), June 2003, pp. 32–33.


Chavez’s oil to Mass

Venezuela has signed a deal to send subsidized heating oil to poor residents in Massachusetts: “The agreement projects that CITGO [Venezuela’s US-based subsidiary] will offer over 12 million gallons of heating oil at a discount of 40 percent below market prices over the next four months.” Congressman Bill Delahunt (D-MA) intoned: “It is gratifying that at least one major oil company is willing to step up to help – voluntarily and at its own expense.”

Only time will reveal the significance of this move. But at least it reminds us why oil exporters have so many economic problems: when money comes their way, they choose to spend it on political maneuvers such as this. The magnanimity of the moment may be heartfelt and surely its effects will make a difference; but high prices will not last forever, and Hugo Chavez may find that his oil profits led him to tactical indulgence in foreign diplomacy rather than strategic leadership at home and abroad.

“Delahunt: First-in-nation CITGO commitment to winter fuel discounts,” Press Release at Congressman Bill Delahunt’s website, 22 Nov 05 (link)


22 November 2005

Kissinger and multilateralism

Henry Kissinger has an article in the Washington Post on the challenges facing the new coalition government in Germany. It is interesting and I recommend you give it a read; but I thought I would pull out one of the thoughts whose relevance transcends the scope of German politics:

“In the end, the issue of multilateralism vs. unilateralism does not concern procedure but substance. When purposes are parallel, multilateral decision follows nearly automatically. When they diverge, multilateral decision making turns into an empty shell. The challenge to the Atlantic Alliance has been less the abandonment of procedure than the gradual evaporation of a sense of common destiny.”

Henry Kissinger, “Will Germany's Coalition Work?” Washington Post, 22 Nov 05 (link)

Kennedy at 42

President John F. Kennedy was assassinated on this day forty-two years ago. In his tribute, I append a few quotes from his speech at American University (10 June 1963, audio & text here)—a speech that I have always found to be one of his best.

“I have, therefore, chosen this time and place to discuss a topic on which ignorance too often abounds and the truth too rarely perceived. And that is the most important topic on earth: peace. What kind of peace do I mean and what kind of a peace do we seek? Not a Pax Americana enforced on the world by American weapons of war. Not the peace of the grave or the security of the slave. I am talking about genuine peace, the kind of peace that makes life on earth worth living, and the kind that enables men and nations to grow, and to hope, and build a better life for their children -- not merely peace for Americans but peace for all men and women, not merely peace in our time but peace in all time.

World peace, like community peace, does not require that each man love his neighbor, it requires only that they live together in mutual tolerance, submitting their disputes to a just and peaceful settlement. And history teaches us that enmities between nations, as between individuals, do not last forever. However fixed our likes and dislikes may seem, the tide of time and events will often bring surprising changes in the relations between nations and neighbors. So let us persevere. Peace need not be impracticable, and war need not be inevitable. By defining our goal more clearly, by making it seem more manageable and less remote, we can help all people to see it, to draw hope from it, and to move irresistibly towards it.

No government or social system is so evil that its people must be considered as lacking in virtue. As Americans, we find communism profoundly repugnant as a negation of personal freedom and dignity. But we can still hail the Russian people for their many achievements in science and space, in economic and industrial growth, in culture, in acts of courage.

Finally, my fellow Americans, let us examine our attitude towards peace and freedom here at home. The quality and spirit of our own society must justify and support our efforts abroad. We must show it in the dedication of our own lives -- as many of you who are graduating today will have a opportunity to do, by serving without pay in the Peace Corps abroad or in the proposed National Service Corps here at home. But wherever we are, we must all, in our daily lives, live up to the age-old faith that peace and freedom walk together. In too many of our cities today, the peace is not secure because freedom is incomplete. It is the responsibility of the executive branch at all levels of government -- local, State, and National -- to provide and protect that freedom for all of our citizens by all means within our authority. It is the responsibility of the legislative branch at all levels, wherever the authority is not now adequate, to make it adequate. And it is the responsibility of all citizens in all sections of this country to respect the rights of others and respect the law of the land.

The United States, as the world knows, will never start a war. We do not want a war. We do not now expect a war. This generation of Americans has already had enough -- more than enough -- of war and hate and oppression. We shall be prepared if others wish it. We shall be alert to try to stop it. But we shall also do our part to build a world of peace where the weak are safe and the strong are just. We are not helpless before that task or hopeless of its success. Confident and unafraid, we must labor on--not towards a strategy of annihilation but towards a strategy of peace.”

EU Globalophobia

This is from the Lex column in today’s Financial Times:

21 November 2005

Leaving Iraq already?

Paul Krugman writes in today’s New York Times: “The only way to justify staying in Iraq is to make the case that stretching the U.S. army to its breaking point will buy time for something good to happen. I don't think you can make that case convincingly. So Mr. Murtha is right: it's time to leave.”

Implicit in the argument by Representative John Murtha is that the American presence is fuelling the insurgency and that when America departs, the potency of the insurgency will subside. I have my doubts. It would be like saying that after the Soviet withdrawal in 1989, Afghanistan would return to normalcy. The insurgency might lack an obvious enemy after an American withdrawal, but it will regain its ability to fight, as the enemy will be weaker now.

It is difficult to forecast what path Iraq will follow were American troops to leave soon, but it is premature to suggest that the American presence is contributing only to the problem and not the solution.

Paul Krugman, “Time to Leave,” New York Times, 21 Nov 05

Dayton & Iraq

Today marks the tenth anniversary of the Dayton Accords whose aim was to put an end to the war in Bosnia. There are various commentaries about the applicability of the Dayton lesson to Iraq. I have chosen two samples to offer a general impression of what is being written:

From the Financial Times: “Perhaps Bosnia’s most fundamental lesson is the importance of American patience and persistence. In 1995, the US military went into Bosnia with a deadline. Fearing casualties and doubting the American people’s resolve, the Clinton administration promised that the US would get out within a year. Yet it stayed for almost 10, leaving only last year after turning the mission over to the Europeans” (1).

From the Washington Post: “They [Bosnian delegation] will arrive in a Washington where, one month after the ratification of a similarly imperfect constitution in Iraq, Democrats are calling for a timetable to withdraw U.S. troops, and where even the Republican chairman of the Senate Armed Services Committee, John Warner, is hinting that Iraqis have 180 days to pull their country together. They will lunch at a State Department that has delegated the daunting work of forging an Iraqi compromise to its ambassador in Baghdad, with next to no help from the president or U.S. allies and no power to sequester anyone on a military base [where Dayton was signed]. The Bosnians will have a chance to hear both Democrats and Republicans talk, not about how to succeed in the latest American intervention but about how the other party is lying about it” (2)

I see a different message: it took three years for America to get things right in Bosnia, following a period of inertia, inaction and diplomatic second-guessing. Maybe wars are tough to manage and there needs to be a period of chaos before things improve. The real question is whether the chaos is irreparable—but the answer to that question is in Iraq, not Dayton.

(1) Derek Chollet, “Why Iraq’s neighbours must have a stake in its future,” Financial Times, 21 Nov 05
(2) Jackson Diehl, “The Bosnian Example for Iraq,” Washington Post, 21 Nov 05, (link)

Uranium in Zimbabwe

Robert Mugabe, Zimbabwe’s president, has announced that “we have found uranium … but when we mine it we would not want it to be used in bomb-making … We would use it to give us electricity.” You have to love Mother Nature for endowing countries such as North Korea and now Zimbabwe with the materials necessary to produce nuclear weapons. What fortune.

18 November 2005

American isolationism?

A poll by the Pew Research Center and the Council on Foreign Relations, quoted in today’s Financial Times, reports that 42% of Americans believe that the United States should “mind its own business internationally and let other countries get along the best they can on their own” (1). This news worried the Financial Times and has sparked a tiny debate on isolationism.

My own feeling is that there is nothing in these numbers: the country’s mood over Iraq is surely skewing the poll. I doubt that many of the respondents understand what it means to “mind your own business” in world politics, nor do they appreciate the complexity of the relations that America has with other countries. The nature and extent of America’s commitment abroad is surely an interesting subject to reflect upon, but isolationism is simply not an option.

Edward Alden, “Iraq war sparks an isolationist backlash,” Financial Times, 18 Nov 05
Walter McDougall’s Promised Land, Crusader State has a nice interpretation of US isolationism in the nineteenth century—Chapter 2 called “Unilateralism, or Isolationism (so called)”

17 November 2005

Galloway’s prerogative

I was too busy this morning to reflect properly on Galloway’s speech. So here is my thought, coming from Leon Trotsky who said this about New York intellectual Dwight Macdonald: “Everyone has a right to be stupid, but Comrade Macdonald abuses the privilege.” How true.

Galloway in Damascus

British MP George Galloway was in Damascus and spoke at Damascus University about Syria, the war in Iraq, and about America and Britain (the “imperial powers”). It is an interesting speech to listen to (video / text from MEMRI); some excerpts:

“And the third reason why they will never invade Syria is sitting here and is outside in the streets. It is that if they dared to invade Syria, every dignified person in the country would fight them exactly as the people of Iraq are fighting them now.

When Hitler was on the French coast and my country stood alone, when the Americans were watching the war on television before they joined it, we faced a violent foreign military invasion. And of course there were collaborators in Britain who would have collaborated with Hitler if he had landed, but the vast majority of British people would have fought Hitler, with their teeth, if necessary, because no free people will allow itself to be occupied by a foreign army, and Syria is a free people and will never agree to such an invasion.”

“What your lives would be if from the Atlantic to the Gulf we had one Arab union - all this land, 300 million people, all this oil and gas and water, occupied by a people who speak the same language, follow the same religions, listen to the same Um Kulthum... The Arabs would be a superpower in the world if they had this unity, instead of the shameful situation in which the Arabs find themselves today.”

“So I say to you, citizens of the last Arab country, this is a time for courage, for unity, for wisdom, for determination, to face these enemies with the dignity your president has shown, and I believe, God willing, we will prevail and triumph, fwa-salam aleikum.”


16 November 2005

Phosphorus in Fallujah

From BBC news: “An Iraqi human rights team has gone to the city of Falluja to investigate the use of white phosphorus as a weapon by US forces” (link) This story has risen largely as a result of a RAI documentary that probed these allegations; I was sent a link to the documentary and thought I would post it up here (link to documentary).

Amman killings

Fouad Ajami in the Wall Street Journal on the Amman attacks:

“In truth, the tranquility of Jordan was deceptive, secured by a monarchy that has always been more moderate in its temperament than the population it ruled. "Iraqi Insurgent Blamed for Bombings in Jordan" was a headline on the front page of the New York Times of Nov. 13: Not quite! For Abu Musab al-Zarqawi, as his nom de guerre specifies, is a man from the town of Zarqa, a stone's throw from Amman. The four Iraqis who brought calamity to Jordan were in the nature of a return visit, blowback from a campaign of terror and incitement, and a traffic of jihadists that had sent deadly warriors of the faith from Jordan to Iraq. Even as they mourned their loss, the Jordanians could not see or acknowledge the darkness with which they viewed the world around them. "Zionist terror in Palestine = American terror in Iraq = Terror in Amman," read a banner held aloft by the leaders of the Engineers' Syndicate of Jordan who had come together to protest the hotel bombings.

There is willful moral selectivity to spare: It is muqawama (resistance) in Iraq and irhab (terrorism) in Jordan.

Jordan will have to arrive at its own reckoning with darkness. Iraq is close by; what issues from Zarqa and makes its way to Iraq, the wind will bring back to Amman. Order must not only be enjoyed, it will have to be claimed and defended, and that yawning gap between what Arabs believe and the way they live will have to be closed.

An embarrassingly large number of Arabs, after 9/11, wanted schooling -- and shopping -- in London, but hailed the terror that struck its buses and transit. They were full of rage about Iraq's "suffering" under American occupation after years of looking away from the mass graves that littered the Iraqi landscape. Slowly, people in Arab lands will have to see their history as something they shaped by themselves, with their own hands. When this comes to pass, decent men and women will not have to arrive at moral clarity only on the day terror comes to their own doorstep.”

Fouad Ajami, “Blowback,” Wall Street Journal, 16 Nov 05


14 November 2005

Big oil sacrifice?

William Raspberry in the Washington Post makes his contribution to the debate on taxing the windfall profits of the oil industry. An excerpt:

“There is another way of looking at what happened last quarter. Katrina and the flooding that followed amounted to a national tragedy and a national emergency. Companies sometimes benefit from such situations. A bakery that somehow managed to stay open would certainly sell out of bread; if the owner could bake more bread, he could sell that, too. If the ingredients became more expensive, he would take that into account in setting the price of bread. But if he started charging $8 a loaf just because he could, you wouldn't be in the mood for cheery songs about the beauty of the free market.

There is also another way to respond to a national disaster, and lots of individuals, organizations -- even entire towns -- found it. I mean the response of sacrifice. Americans opened their hearts, their wallets and their homes to Katrina's victims. Where is the record of Big Oil's selfless largess? As Sen. Barbara Boxer (D-Calif.) told the oil executives: ‘Your sacrifice, gentlemen, appears to be nothing.’”

It is nice but useless to elevate something as mundane as supply and demand to a level of abstraction where this argument makes sense. To keep prices low would mean a shortage: a baker couldn’t feed everyone so a price hike is a reasonable reaction to scarcity. What is more, baking bread and refining crude oil are quite different—you can’t just automatically buy more inputs to meet output in oil as you can in baking.

The notion of sacrifice is ennobling but not terribly useful. For one, there is a coordination problem: even if one company felt magnanimous, others might not in which case the net effect would be the same. But more important, the idea that oil companies should sacrifice eschews the need for dealing with the real problem: there is a refining shortage in this country that needs to get solved. No sacrifice will solve this. Prices are the best mechanism to alert people of this.

Chevron Chairman David O'Reilly put it this way: “We had to respond to the market.” Mr. Raspberry interprets this thus: “But if prices were raised to cover additional costs, whence the record profits?” But prices do not just reflect costs; they reflect scarcity. If oil companies had ganged to create a crisis where none existed, then by all means bring them forth in the Senate and parade them in front of the American people for their wrongs. But the shortage is real and to deny this is futile.

William Raspberry, “An Oily Favor,” Washington Post, 14 Nov 05 (link)


Trifling distractions

Lucy Kellaway has a wonderful column in today’s Financial Times about distractions and their usefulness in life. Some excerpts:

“Here is how I write this column. First, I check both my e-mail accounts. I flick through the newspaper. Then I listen to my voicemail messages, and check my e-mail again. I go upstairs to get a banana from the staff canteen. On the way back down I meet a colleague and we do what everyone at the Financial Times has been doing for the past 10 days or so: we debate and dissect our new editor.

What makes interruptions a tricky subject is that they are not just a terrific waste of time – they are also essential. Interruptions can make us feel wanted. They help one come up with ideas by diverting one’s mind from the hamster wheel it was otherwise running on. They give variety to work and stop us getting too bored. Interruptions also direct us to stop one task when another has suddenly become more urgent.”

I have always defended by studying style, which consists of many distractions, on this basis. My only rule is that distractions have to be good from time to time: if you’re going to waste time, don’t waste it with boring or uninteresting people.

Lucy Kellaway, “On the merits of trifling distractions,” Financial Times, 14 Nov 05

12 November 2005

Yitzhak Rabin remembered

It is ten years since Israeli Prime Minister Yitzhak Rabin was assassinated in Tel Aviv for his decision to make peace with the Palestinians; world leaders have found their way to Tel Aviv to pay their tributes on this anniversary. The continuity of violence in the region can easily beguile us to downplay his legacy. But it in his footsteps that Ariel Sharon carries today: it was Rabin, the warrior, who first turned around to make peace. Rabin paid for this with his life. Maybe his death was a necessary twist in this tale: an outlet for people who were not ready for his vision. If his death lets another warrior, Sharon, succeed, then that would be the truest tribute to Rabin’s memory.

11 November 2005

Gasoline price freeze?

It is heartening to read Charles Krauthammer’s column today in the Washington Post on “pumping some seriousness into energy policy.” He writes: “for three decades we have done criminally little about it [the energy problem]. Conservatives argued for more production, liberals argued for more conservation and each side blocked the other's remedies -- when even a child can see that we need both” (1).

When it comes to specifics, Krauthammer calls for a $3/gallon price floor for gasoline. Here is how he puts it: “Every penny that the price goes under $3 should be recaptured in a federal gas tax so that Americans pay $3 at the pump no matter how low the world price goes.” Although the merits of a gasoline tax are indisputable, this specific tax structure is a bad idea. Politics aside, it forces the government to make judgment calls on the price of gasoline between intermediaries. Let’s say a refiner sells at price of $2.45/gallon to the gas station, and the station wants to sell it for $2.55. But the price at the pump is still $3. Are they trying to trick the government or are they earning reasonable returns? This is a tough call for the government.

This government vigilance would also undermine another part of Krauthammer’s argument: to build more refineries. The economics are stacked against refineries: refineries are less profitable than other parts of the oil business and domestic refineries are less profitable than foreign refineries. Given the disinclination to build refineries, a tax system that would prevent refiners from earning the desired returns would likely act as a disincentive to more refineries.

But don’t let the specifics distract from a discussion that America needs desperately.

Charles Krauthammer, “Pump some seriousness into energy policy,” Washington Post, 11 Nov 05 (link)

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Chirac in his youth

The Economist opens its leader this week with this quote:

“IN THE deprived suburbs, a kind of soft terror rules. When too many young people see nothing ahead but unemployment after they leave school, they end up rebelling. For a time the state can struggle to impose order, and rely on welfare benefits to avoid worse. But how long can this last?” -Jacques Chirac, January 1995 (five months before becoming president)

10 November 2005

Who fights America’s wars?

The Heritage Foundation has just released a study on the composition of America’s military enlistees based on neighborhood income (used as a proxy to gauge household income). Here is the first paragraph of the study along with a graph which I found rather interesting (full report can be found here):

“A few Members of Congress, motivated by American combat in the Middle East, have called for the reinstatement of a compulsory military draft. The case for coercing young citizens to join the military is supposedly based on social jus­tice—that all should serve—and seems to be but­tressed by reports of shortfalls in voluntary enlistment. In a New York Times op-ed on Decem­ber 31, 2002, Representative Charles Rangel (D– NY) claimed, ‘A disproportionate number of the poor and members of minority groups make up the enlisted ranks of the military, while most priv­ileged Americans are underrepresented or absent.’ This claim is frequently repeated by crit­ics of the war in Iraq. Aside from the logical fal­lacy that a draft is less offensive to justice than a voluntary policy, Rangel’s assertions about the demographic makeup of the enlisted military are not grounded in fact.”

Chalabi in DC

I had the chance to see Ahmad Chalabi, Iraq’s Deputy Prime Minister, yesterday at the American Enterprise Institute (link). My impression was that the crowd was too skeptical, too suspicious to listen to his message. In the Q&A, journalists kept asking him about WMD and the pre-war times (there were about five or six questions on this; then I just got tired and stopped listening).

It saddens me that there was such little interest in what Mr. Chalabi had to say. A casual listener walks away with the impression that Mr. Chalabi is very aware of both the challenges in and the promise of Iraq. He understands how Iraq fits into the broader Middle East puzzle. And from those who are more intimately knowledgeable about his aspirations, he offers a radical rethink to what the Arab world should be about.

Given all this, I had to ask myself: you have a person here who is in charge of a monumental project, one that the president has linked to America’s security, and yet you waste all these questions asking things you know the answers to. I am not sure if that is because journalists wanted to ask these questions or because they feel compelled to do so; compelled by what they think their readers want and compelled by their own sense of being able to say they confronted Ahmad Chalabi.

In any event, my hunch is that whatever the mood in Washington, we will be hearing about Mr. Chalabi for a while.

09 November 2005

Razor thin econ logic

The New York Times must have what is the thinnest argument ever about taxing the windfall profits of oil companies. Its editorial reads: “A windfall tax is a good idea … The oil companies are indeed reaping profits from hurricanes and other events, and a strong case can be made for taxing those windfalls. But outsized consumer demand made those external events so profitable. To be effective, a windfall tax should be part of a strategy to reduce oil dependence. Such a strategy would depend on reducing consumption” (1).

My 5 Nov 05 post called Windfall Tax on Oil sets out the core of my thinking on this. But I wanted to add a few more numbers and comments.

The current spike in price is largely the result of the reduction of spare capacity: supply pretty much equals demand. Only Saudi Arabia has some spare capacity (about 1 to 1.5 mbd), but this is mainly heavy crude oil that is less attractive. Over the years, OPEC countries have been unable to increase their production capacity; in 1979, OPEC countries could produce 38.76 mbd; today, their capacity is 31.56 mbd (2). This lack of investment explains why prices are so high now and why the fear that there will be an oil shortage weighs heavily on so many people’s minds.

It is also important to remember that international oil companies sit atop 7% of the world’s undeveloped oil reserves; two thirds of the world total is off limits to the majors (mainly because it belongs to state companies with no foreign investment) (2). In other words, OPEC’s production capacity lies very much at the heart of the oil equation. This also explains why the lack of surplus capacity worries so many people.

The last comment has to do with refining since, thanks to Katrina and Rita, it too explains the spike in gasoline prices. This is from the Oil & Gas Journal (26 Sept 05): “In 1983, when refiners worked at an average capacity utilization rate of 72%, the country imported 1.7 mbd of product. Last year, the capacity utilization rate was 93%, and product imports averaged 2.9 mbd” (4). Given that no refinery has been built in America since 1976, it is no wonder that past capacity is reaching its limit.

In other words, the windfall tax does nothing to address the core issues that have led to the price spike. Hopefully public debate will gradually shift to allow discussion of a gasoline tax. But until then, we are likely to see rhetoric unmatched by substance. I very much agree with the words of the Wall Street Journal: “We [WSJ] realize that the Members [of Congress] need someone to deflect public anger toward, and that white, wealthy, male oil executives are targets from central casting. We also assume most Americans are smart enough to realize that no politician ever put gas in their tank or heat in their home.”

(1) “The Windfall Profit Tax,” New York Times, 9 Nov 05 (link)
(2) Kalincki & Goldwyn, eds., Energy Security: Towards a new foreign policy strategy. (Washington, DC: Woodrow Wilson Center Press), p. 79; and EIA (link)
(3) “NOCs 1 – IOCs 0,” Petroleum Economist, April 2005
(4) “Attention to refining,” Oil & Gas Journal, 26 Sept 05
(5) “Beltway oil drill,” Wall Street Journal, 9 Nov 05


Papers are fun

For many people this is the time to start writing term papers. There is one pearl of wisdom from a former economics professor of mine that I feel like sharing as you (we) venture into the unknown trappings of term papers. When I asked him if he approved of a rather ambitious paper topic, he replied: “Hey, this is only a term paper. One can be a little adventurous.” His words have guided me ever since in all the papers I have written.

The French finger of blame

Any country that points the finger of blame onto another is doomed to pay for it. This is from Anne Applebaum’s column in today’s Washington Post:

"Katrina's devastation points the finger at Bush's system . . . Issues forgotten for years are back to the fore: poverty, the state's absence, latent racism." -- Le Monde, Sept. 8, 2005

The quotation above appeared in a front-page article in France's newspaper of record. Just below was a cartoon showing the American president watching TV footage of black corpses floating in the water. "But, what country is this?" the caption had him saying to his generals: "Is it far away? We absolutely have to do something!"

Unfortunately, this column does not come with its own cartoon attached, so I'm forced to describe the one I think Le Monde should print this week: A drawing of the French president, Jacques Chirac, watching black neighborhoods go up in smoke. The president is asking his generals, "But, what country is this? Is it far away? We absolutely have to do something!"

Anne Applebaum, “But, What Country is This?” Washington Post, 9 Nov 05 (link)

08 November 2005

Piracy in Somalia

The news that a cruise ship came under attack from pirates surprised a lot of people; I heard someone ask “there are still pirates?!” upon hearing the news. I thought I would append some info on piracy—after all, terrorists have attacked cruise ships before (the Achille Lauro, a passenger ship, in 1985) and maritime attacks pose the most significant security threat relative to the inaction and inability to counter it.

Some info on piracy can be found at the International Chamber of Commerce website, which has a weekly piracy report and some maps chronicling piracy incidents over the past few years (link). William Langewiesche of the Atlantic Monthly wrote a book in 2004 called the Outlaw Sea which describes the dangers of the ocean in a vivid and comprehensive way. And the following is a map from The Economist which illustrates terrorist attacks in SE Asia (10 June 04). This attack isn’t going to be the end of it.

Riots in France

I cannot resist quoting Rob Corddry of The Daily Show on the riots in France: “As you said it’s been twelve days of riots and the question is: how much longer can this go on before the French government surrenders. […] When you see the images of the violence in Iraq and the unrest in Argentina … it is refreshing to see a county implode in a violent orgasm of hatred and know they can’t pin this one on us.”

Torture tit for tat

Richard Cohen has an article on torture in the Washington Post today; he writes, “the only way you can reasonably expect an enemy to be decent to American POWs is if we are decent to them.” Reciprocity is one of the strongest arguments against torturing enemy prisoners. But I am not sure this is relevant on the war on terror: America’s enemies summarily execute their captives on television. Would the militants treat their prisoners any different if America’s interrogation techniques were changed? I doubt it.

Richard Cohen, “Torture, Shaming us all,” Washington Post, 8 Nov 05 (link)

The 60 CEOs

The Financial Times published a letter today from over sixty CEOs of multinational companies urging their governments to revitalize the Doha round of trade talks. My own fear is that until politicians are willing to make the case for trade, this business praise will amount to very little.


Syria debates Mehlis

The Syrian parliament spent a special session discussing the Mehlis report that investigated the assassination of Rafik Hariri, former prime minister of Lebanon, and which pointed the finger of blame resolutely on Syria’s leadership. Here are some excerpts (as reported by MEMRI; link for text and video):

Syrian MP: “You should look for the murderers of Al-Hariri in Tel Aviv and Washington. You should look for the perpetrators of this crime and for those who stood to gain from it. The Syrians will never forgive those who have made it their business to harm Syria.”

Huneim Namar: “The greatest thing that the Americans and Israelis achieved from this Mehlis report is to divert attention away from any possible role played by the Israeli Mossad, the American CIA, or any other party who may have been responsible for this crime, as well as to direct the spotlight exclusively on Syria.”

Anwar 'Ubeid: “What is happening today is an indication that America and Bush are coveting this nation's resources. Syria is the only thorn to remain in the eye of Zionism and its collaborators. Hence, the Mehlis report is a clear attempt to pressure and harm Syria, the Syrian people, and their leaders. We are all familiar with Lebanon and with the intrigues of its leaders. Collaboration flows in their veins, and treachery thrives in their midst. Today they repay Syria's loyalty to them with treachery. They repay the attempts to help them with an effort to destroy Syria, and to put pressure on us.”

07 November 2005

American tragedy, European comedy

What are we to make of the way that Europeans and Americans are coping with their current woes, Europe over its stagnated continental politics, America over its embattled presidency? Increasingly I am drawn to this conclusion: European politics are comic; American politics are tragic.

The cast of characters is one reason to think so. Jacques Chirac is supremely comical; his hyperbole and silliness is hard to match. To take him seriously would be too burdensome, too pessimistic. A few days ago he said that, “Liberalism is as dangerous an ideology as communism and, like communism, it will not prevail.” Take this soberly, and you might as well give up on politics.

Then there is Silvio Berlusconi. He has evaded public attention lately, primarily because his government is falling apart and he has decided that this is more urgent a matter than entertaining the crowds. But he will be back; he is the guest star of the show, always coming back, unanticipated yet thoroughly expected with a memorable performance that never fails to please.

On the other end of the Atlantic is George W. Bush. To listen to him for a considerable amount of time without a fleeing smile is daunting. His struggle to put together a coherent sentence (don’t even try paragraph) is funny. But he is not comic. Why? Because he can launch the nukes. He has started two wars in the past five years. While you are laughing, Bush could invade your country. No so funny anymore, right? But even if you were to have a laugh with W, there is always Dick Cheney. No laughs here, period. This is the uber-candidate to play the villain in any play.

American politics are sufficiently dramatic. There is cover-up, lies, deceit. The country is engaged in a “false” war. A conservative cabal is taking over. Democracy is under attack. And so is the American way of life: under siege from Muslim extremists, from Iran and Syria, from North Korea, from the wrath of God, recently manifested in the vengeful Katrina and Rita.

European politics are different. They lack the Hollywood touch, though not necessarily for lack of trying. The Europeans are too cynical to believe in the scaremongering that bedevils Americans. They may fear that their “social Europe” might be fading, but they lack the energy and stamina to sustain an assault. While American debaters beef up with energy and zealotry, Europeans answer with wit and ethnic slurs. The word “Anglo-Saxon” comes to mind. Oh, and the French. America’s black and white politics show intensity, Europe’s gray politics are just that: gray.

Take bird flu. Bush vowed to detect outbreaks anywhere they may happen (fight bird flu there instead of here—preemption, again). And he talked about pandemics. He also advertised a website: http://www.pandemicflu.gov/ in case you weren’t paying attention to the speech. And what did the European Union do? It held an emergency meeting in Brussels. On the EU website, you can now find a nice 19-page summary of the day-to-day actions that the European commission has taken since September 1 to protect Europe. See what I mean?

Politics to laugh at are always preferable to apocalyptic debates. It is no wonder that Americans are increasingly turning to Jon Stewart’s Daily Show for their news. But this is a sorry state of affairs, in either end. At least, modern communications offers the comfort of comparison: depressed Europeans can enjoy that they are not scared to death by their media while Americans can find solace that their leaders are not as comical as Messrs Chirac or Berlusconi. Some consolation …


Iraq’s unity

Peter Galbraith has a thoughtful piece in today’s Washington Post; he writes, “The United States should focus now not on preserving the unity of Iraq but on avoiding a spreading civil war.” He concludes: “As Yugoslavia broke up in 1991, the first Bush administration put all its diplomatic muscle into a doomed effort to hold the country together, and it did nothing to stop the coming war. We should not repeat that mistake in Iraq.”

Unlike Yugoslavia, the unity of the state and the avoidance of war in Iraq are intimately connected. The Sunnis can be placated largely by being promised oil revenues that lie beneath the Kurdish and Shia controlled areas. Their resolve to fight is very much a function of the unity of the Iraqi state. A Shia Southern Iraq would upset the balance in the region, feeding the anti-Shia feeling that exists in many places, most prominently Saudi Arabia. A Shia state might have fewer reservations about aligning with Iran, further destabilizing a fragile political balance. In the north, an independent Kurdistan would send ripple effects across many borders to their brethren Kurds, in Turkey, in Iran and in Syria.

In other words, a three-state scenario would purchase democracy and self-determination at the expense of stability. This is a gamble and probably a reasonable long-term goal: America should not become enamored with a unified Iraq. But we should at least recognize that the preservation of a unified Iraq and the avoidance of war are very closely connected. It will take plenty diplomatic ingenuity to pursue one without the other.

Peter W. Galbraith, “What are we holding together?” Washington Post, 7 Nov 05 (link)


Conserver l' energie

As the developed world intensifies the effort to conserve energy, it should turn to France for guidance. In the 1970s, the French government set up an Energy Conservation Agency. One of its functions was to enforce a peculiar law: oil companies were not allowed advertisements that “encouraged” energy consumption. This is how Daniel Yergin writes about it in The Prize:

“One of the two French national oil companies, Total, searched desperately for some way to keep its name in front of the public. At last, it had a brilliant idea. It started putting up billboards, picturing a beautiful piece of green French countryside, with a simple legend announcing “This is France” and signed “Total.” The ad was banned. A stunned Total asked why. “It is easy,” said Jean Syrota, the director of the Energy Conservation Agency. “Consumers look at this ad and say, ‘Oil companies are wasting a great deal of money on such ads, therefore the companies must be rich, therefore there must not be any energy problem, therefore it is all right t waste energy.’”


05 November 2005

Windfall tax on oil

To bridge the discrepancy between high oil prices and the inability of governments to reduce them, populist politicians have turned to the idea of a windfall tax on “excess” profits in the oil industry as a way to placate voters and reassure them that government is not sitting idly by as the price on the pump goes up. Pete Domenici, a Republican senator, said: “oil companies have failed to tell us and show us what they are doing with these profits that justify them” (1).

Windfall taxes are generally a bad idea. As the Financial Times put it, “What company would invest in oil exploration knowing that if prices collapsed, it would have to bear the cost, but if prices soared, government would grab back the profits?” (2). But there is a legitimate question that can be raised about the utility of windfall taxes.

The Financial Times explains it this way: “The trickier question is whether governments should tighten the tax regime on national oil reserves in the light of sustained high prices. In principle, governments should seek to capture the economic rent from oil reserves, over and above the risk-adjusted cost of capital. The higher the oil price, the higher the share of rent in corporate profit, so the higher the tax rate should be” (2).

I would give it a different slant: the oil business is cyclical and it has been so forever. The oddity is that oil companies have an incentive to keep it cyclical: sustained high prices compensate for past low prices; and when prices rise, companies have enough cash to invest in new projects that increase supply and help bring down the price. But the longer the tight market lasts, the more money they earn.

In other words, companies have an incentive to withhold investment until prices rise very high—the reason is that they can earn more in a tight market than in a glut. Now, most companies value projects with a $20/barrel price in mind; if the average price during the value of the project exceeds the projected price, they earn over and above what they had in mind. This is what the Financial Times means when it talks of rents.

Put this in the context of windfall taxes, and the case is this: windfall taxes would reduce this perverse incentive and force companies to make more timely investment since they would know (with certainty or not) that their “excess” profits could be taken away from them. The question to ask now is whether this syllogism is sound.

My sense is that it is not. For one, it assumes that companies act in unison, which they do not. Even if all companies have an incentive to maintain a tight market (which they do not necessarily because in the long run this could force consumers away from oil), individual companies have an inclination to free ride and capture these rents.

But the more important reason against this syllogism is OPEC: most of the new projects to balance the oil market have to come in places beyond the reach of the major international oil companies that are targeted for the windfall tax. To follow the logic offered above would be to misread the nature of the oil market and to follow cheap populist instincts in pretending (or avoiding) to solve a much more complex problem.

(1) “An oily slope,” The Economist, 5 Nov 05
(2) “No case for a windfall tax on the oil industry,” Financial Times, 31 Oct 05


Ballot initiatives

The New York Times has a very sensible editorial about the proliferation of ballot initiatives; it reads: “Government by referendum should come with a warning: vote yes at your own risk. Measures placed on the ballot by citizen initiatives are by their nature missing the devil of the details. The questions are designed to be brief, often to the point of being misleading or confusing. When the list is interminable, as it is in some states this year, the overwhelmed voter might be best advised to just say no” (1).

It seems almost axiomatic that giving people more power to decide on matters is a good thing. But most people lack the inclination, interest or details to judge the matter fairly. They are also rather restricted in their decision-making: they are usually given two choices to pick from, as if those two options represented the two most reasonable positions.

Ballot initiatives try to square off two impossible positions: they try to make ballots succinct and understandable and in doing so take away the nuts and bolts of government—“the devil of the details,” as the Times put it. There is a reason that America is a republic and not a democracy, going back to the Founders’ distrust of democracy. This is all too often forgotten by those who want to bring more and more initiatives before the public.

(1) “That flurry of ballot questions,” New York Times, 5 Nov 05 (link)

04 November 2005

A bad week for democracy

This has been a bad week for democracy: the French government is engaged in sub-urban warfare with restless youth in Paris’ suburbs, underlining the difficulty that European countries have in assimilating immigrants. The Dutch just marked the one-year anniversary of the assassination of Theo van Gogh by a Muslim radical. And Angela Merkel in Germany is struggling to put together a functioning government. Meanwhile there are strong winds against free trade and economic liberalism in Europe and Latin America.

There is reason, I find, to reflect on democracy’s vigor in the West just as intently as we have been about democracy’s prospects in the Middle East.


Deficits matter?

John Snow, the US Treasury Secretary, confessed to the Financial Times today: “This administration knows that deficits matter. We know they’re unwelcome.” This is slightly different from Vice President Cheney’s dismissal of a few years back: “Reagan proved that deficits don’t matter.” As an economist it just pains me that there is an actual debate about this; but at least the administration may be coming around to opening its Economics 101 textbook. It’s about time.


Clowns in Argentina

Mary Anastasia O’Grady, of the Wall Street Journal, writes today of President Bush’s visit to the summit of the Americas in Argentina. She quotes an Argentine friend who says: “I really don't know why President Bush has accepted to come to this show of political clowns where all of them will blame him for all the maladies that we so cleverly produced in our countries. Americans have to learn that they will never be loved but they have the responsibility for being respected.” I think the friend is on to something.

Mary Anastasia O’Grady, “Bush’s Perilous Journey South,” Wall Street Journal, 4 Nov 05

Tired of globalization

The Economist has devoted this week’s chief leader to globalization; its cover reads “Tired of globalisation: but in need of much more of it” (I append a photo because I think it says a lot). There is no doubt that The Economist is most eloquent when it comes to defending free trade and this issue is no exception. I just wanted to put here another quote from The Economist’s 160th anniversary edition, because I find it to be the most potent and succinct defense of free trade:

“Economic liberalism, much like political liberalism, puts great weight on checks and balances, on limits to power and hence to abuses of power. In economics, the most potent checking force bar none is competition. Bosses, shareholders and pro-business politicians all loathe it. They stand to gain, in one way or another, from conspiring to gull the public into regarding competition as a threat to the greater good, rather than to themselves. This is the context in which to think of free trade, an obsession of ours since we started. Liberal trade is nothing but enhanced competition. Anti-globalists have the logic exactly backwards. Far from empowering global fat cats, free trade holds corporate power in check and assaults the excess profits that protectionism, courtesy of pro-business politicians, gouges from the public.”

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03 November 2005

The Saudi predicament

The Financial Times reports: “The International Energy Agency, the oil sector monitoring body, on Wednesday said that oil prices by 2030 would be 50 per cent higher than today if Saudi Arabia did not muster the political will to invest billions of dollars in new production.” The IEA’s chief economist, Fatih Birol, is quoted in the article: “It is not a problem of availability of reserves or capital. We need to be sure that the increase in production will be high enough and a sustained production capacity increase policy is in place. That will need sustained political will” (1).

The challenge that Saudi Arabia faces will be crucial for the Middle East. Some numbers will help illustrate why: in 1979, Saudi Arabia had a production capacity of 10.84 million barrels a day (mbd); in 2005, that figure stood somewhere between 10.50 and 11 million. In other words, in a quarter century Saudi Arabia has been unable to increase its production capacity.

In 1986, Saudi Arabia’s GDP per capita (market exchange rates) was little over $8,000; today it is roughly over $11,700, hardly an impressive increase for a country with the world’s most abundant oil reserves. The third number to complete the picture: in 1982, Saudi Arabia’s investment stood at 27.80% of GDP; in 1992, at 20.37%; in 2002 at 18.11%.

Put the three numbers together and the expectation that Saudi Arabia will be producing 20 or 25 mbd in the next decades looks questionable. This is a country that has not invested and has been unable to raise the standard of living of its people—to take away money from consumption and put it into investment will be a monumental political challenge. Stay tuned.

(1) Carola Hoyos, “IEA warns of 50% oil price rise by 2030,” Financial Times, 3 Nov 05


The Blair alternative

To counterbalance the spigot of rubbish that is Jacques Chirac’s mouth (you can tell I am bitter about this man), I thought I would put up a link to a speech that Tony Blair gave to the European Parliament in June 2005. It is the most eloquent defense of Europe I have heard in a long time; and it is also a speech that was, sadly, quickly forgotten. With Germany in political turmoil, it is unfortunate that Jacques Chirac has taken up the task of speaking for Europe; if you wonder what an alternative view looks like, check out this speech.

Link: http://www.number-10.gov.uk/output/Page7714.asp


02 November 2005

Chirac and communism

Jacques Chirac is on a roll. This is from Martin Wolf’s column in today’s Financial Times:

“‘Liberalism,’ according to Jacques Chirac, ‘is as dangerous an ideology as communism and, like communism, it will not prevail.’ In this remark, astoundingly, the centre-right leader of a civilised nation draws a parallel between liberty and the 20th century’s most pervasive ideology of slavery. If elected leaders of the European Union utter remarks so foolish, indeed depraved, the effort to sustain open economies may founder, as it did in the first half of the 20th century.”

Martin Wolf, “If trade liberalization fails,” Financial Times, 2 Nov 05


The elusive debate on WMD

The New York Times editorial page asks this question about the Bush Administration’s case for invading Iraq: “If the intelligence was so bad and so moldy, why was it presented to the world as what Mr. Tenet, then the director of central intelligence, famously called "a slam-dunk" case? Were officials fooled by bad intelligence, or knowingly hyping it? Certainly, the administration erased caveats, dissents and doubts from the intelligence reports before showing them to the public. And there was never credible intelligence about a working relationship between Iraq and Al Qaeda” (1).

Maybe this is a debate to have one day. It is certainly less useful in conducting the war than it would be in reflecting on it in the future. But I have one more sobering thought: that foreign policy debates are so devoid of nuance. When we ask the question, why did the administration take out caveats and dissent, we should be asking another question as well: how would the public digest that? Can the public absorb a sustained discussion about meticulous evidence?

I remember when Saddam Hussein made his disclosure under Resolution 1441 the media showed images of a table-full of documents and CDs. Could we have had a discussion based on nuance, based on competing hypotheses? This is another question to ponder, one that is just as serious as the intentions of an administration.

(1) “Remember that mushroom cloud?” New York Times, 2 Nov 05 (link)


Europe, the next front?

Francis Fukuyama has a thoughtful piece in today’s Wall Street Journal on the challenges that Europe faces as the new battleground on the war on terror. Here is a quote:

“The real challenge for democracy lies in Europe, where the problem is an internal one of integrating large numbers of angry young Muslims and doing so in a way that does not provoke an even angrier backlash from right-wing populists. Two things need to happen: First, countries like Holland and Britain need to reverse the counterproductive multiculturalist policies that sheltered radicalism, and crack down on extremists. But second, they also need to reformulate their definitions of national identity to be more accepting of people from non-Western backgrounds” (1).

My comments on this line of thinking are two: first, the integration of Muslims into Western societies is no guarantee against terror—only a few need to fall through the cracks for a terrorist attack to take place. There is still a place for sensible policing against extremism; but the natural limits in combating terror suggest that it is more likely for Western Europe to learn to live with terrorism than to eradicate it.

My second comment is about the redefinition of Europe’s identity. I doubt this will happen. From a comparative political perspective, the American melting pot is an outlier; it is more reasonable to expect America to import nationalism than to export multiculturalism (though I don’t find either likely). Even if you think about the European Union—a relatively modest task of redefinition whereby Europe’s citizens think of themselves as Europeans—the foundation for this identity is shaky. And what is worse, it is the “new” identity that will be cast aside in a time of crisis—precisely the mood today in Europe.

In a way, Europe is an important front on terror. And to think of it as such requires a conceptual adaptation away from the “failed states produce terrorists” paradigm. But there is limit to what can actually change.

(1) Francis Fukuyama, “A Year of Living Dangerously,” Wall Street Journal, 2 Nov 05

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01 November 2005

Mugabe, the farmer

The BBC reports that Zimbabwe’s Deputy Agriculture Minister Sylvester Nguni told the Zimbabwe Farmers’ Union: “The biggest letdown has been that people without the slightest idea of farming got land and the result has been declining agricultural output” (link). This is in reference to Robert Mugabe’s land reform program which redistributed land away from white to black farmers. I can't help but remember a past cartoon from The Economist. Here it is.

Interviews in Guantanamo

The United Nations has rejected an offer by the Pentagon to visit Guantanamo Bay; the UN human rights monitors, who turned down the invitation, said they needed access to prisoners for private interviews, something that the American government is unwilling to give. All the same, the Pentagon reiterates that its invitation shows it has “nothing to hide.”

I remember another country that was chastised for its unwillingness to offer international monitors private interviews; its insistence on this point was that taken as a signal that it had something to hide and was unwilling to cooperate. Iraq, was it?