Posts of May 2011

Fukushima Fallout: German Hypocrisy on Nukes?

♠ Posted by Emmanuel in Energy,Environment,Europe at 5/31/2011 12:01:00 AM

As someone with an interest in both the introduction of innovations and sources of energy, I have closely followed developments in the public acceptance of nuclear power. To be sure, this acceptance varies country by country. What's more, harrowing incidences alike those of the Fukushima power plant tend to elicit different responses.

A few weeks ago, I probed why the French have not really questioned their reliance on nuclear power despite Fukushima reminding us all of its obvious hazards. On a crudely instrumental level, the French would be shooting themselves in the foot if they themselves expressed reservations about nuclear power since they are the world's biggest users and exporters of the technology. How would it look like to prospective customers if France itself began doubting the safety of its atomic products and services? Given French pride in their engineering achievements, there's also an element of distancing--"our" nuclear plants are safer and are not in an earthquake zone besides.

An interesting contrast is Germany. To be sure, there have been many u-turns here. Chancellor Merkel's socialist predecessors decided to phase out this technology before the CDU decided to extend its operational life. However, the recent Japanese calamity has resulted in another reassessment that (they say) will result in the irrevocable closure of these plants. And on and on it goes:

Germany's coalition government has announced a reversal of policy that will see all the country's nuclear power plants phased out by 2022. The decision makes Germany the biggest industrial power to announce plans to give up nuclear energy. Environment Minister Norbert Rottgen made the announcement following late-night talks.

Chancellor Angela Merkel set up a panel to review nuclear power following the crisis at Fukushima in Japan. There have been mass anti-nuclear protests across Germany in the wake of March's Fukushima crisis, triggered by an earthquake and tsunami.

Mr Rottgen said the seven oldest reactors - which were taken offline for a safety review immediately after the Japanese crisis - would never be used again. An eighth plant - the Kruemmel facility in northern Germany, which was already offline and has been plagued by technical problems, would also be shut down for good. Six others would go offline by 2021 at the latest and the three newest by 2022, he said. Mr Rottgen said: "It's definite. The latest end for the last three nuclear power plants is 2022. There will be no clause for revision.

Yes, whatever. While German deep greens may rejoice, there's the important matter of how Germany will replace the nearly 25% of its electricity needs accounted for by atom splicing. Yes, there will be the standard paeans to energy saving and renewable sources in this politically correct age. As I blogged earlier, though, it appears (non-CCS) King Coal is making a comeback to help fill the void. More questionable yet if eliminating nuclear power is really your goal is that the Germans appear to be buying more power from...the French. So, having let up on nuclear power, it looks like it's becoming more reliant on, er, others' nuclear power:

France became a net exporter of electricity to Germany last month after the Japanese atomic disaster and subsequent shutdown of German reactors reversed an electricity trading trend between Europe’s biggest markets. In April, France was a net exporter of power to Germany for the first time since the summer months of June, July and August last year, according to data published on the website of Reseau de Transport d’Electricite, the grid operator owned by Electricite de France SA, Europe’s biggest power generator.

Overall, French power imports from Germany outstripped exports last year. Power trading between the countries may change following German Chancellor Angela Merkel’s decision in March to shut the country’s seven oldest reactors and today’s announcement of an exit from the power source by 2022.

EDF operates France’s 58 nuclear reactors which allow the country to be an net power exporter to European neighbors and provide relatively cheap electricity to customers at home. The state-controlled utility is developing a new atomic plant at Flamanville in Normandy and has plans for another in northern France at Penly. Since the Fukushima disaster in March, French President Nicolas Sarkozy, who is facing an election next year, has vowed to continue to invest in the atomic industry.

France, which relies on nuclear plants for about three- quarters of its power needs, exported a net 509 gigawatt hours to Germany last month compared with net imports of 618 gigawatts during the same month last year, RTE said. In the most recent month, Germany joined Belgium, Italy, Spain, Switzerland and the U.K. in relying on France for more power imports than exports, the data indicates.

So, not only does Germany lose more energy independence via this move, but it too is buying nuclear power from its neighbour at a presumably higher cost. And of course, it's a ridiculous application of NIMBY--Not In My Back Yard. Not only are the Germans incentivizing the French to ramp up nuclear power production, but there is no wholesale safety improvement in moving nuclear power production to your next-door neighbour. You may not see the plants in your immediate surroundings, but it would be ludicrous to think fallout from a major accident in France would somehow skip Deutschland. And how exactly does increasing coal usage figure into a green economy?

The BBC also has an interesting piece on the politics of nuclear power in the Fatherland. As I said, Germany's policy makes little sense from an economic or environmental sense. Even if you're an environmentalist opposed to nuclear power, you'd probably agree.

UPDATE: Estimates place German phase-out of nuclear power as adding 20 to 40 million tons of carbon dioxide annually as it returns to fossil fuels. Talk about dubious reasoning.

American Badass: Kraft Gordon Gekko'd Cadbury

♠ Posted by Emmanuel in Europe,Marketing,Trade at 5/30/2011 12:02:00 AM

[NOTE: The candyman is often portrayed in popular culture as a sweet-talking but devious character. Here's one named...Kraft. I almost forgot about it until I witnessed the sickly sweet made-for-TV Obama visit to the UK. Unlike fawning by the uninformed over an insubstantial political figure, here's unsweetened commentary on a distinctly souring transatlantic trade relationship.

This post is a follow-up to the post I made earlier regarding the Kraft takeover of the UK's largest confectioner, Cadbury. If you will recall, I was opposed to this move on degustatory and economic grounds. Others were even more adamant--see the image to the right. While there are fine American chocolates alike San Francisco's famous See's Candies, let's just say American mass-market chocolates are not up to snuff. (To those who care, Cadbury represents affordable but good quality chocolates.) Others too had concerns about Kraft adopting typical American corporate raider-style asset stripping of Cadbury assets and laying off of staff. To assuage such fears, Kraft's then-leadership made promises to maintain both,

On the positive side of this acquisition, the famous Cadbury brand has spearheaded Kraft's efforts at opening up consumer markets in the world's fastest emerging developing countries--think especially of India:

With the acquisition of Cadbury, Krafts portfolio has expanded beyond 40 confectionery brands, each with annual sales of more than $100 million. Kraft has now become the biggest player in the global chocolate industry with popular [Cadbury] brands like Dairy Milk, Creme Egg, Flake, and Green & Black’s. Kraft’s global market share in chocolates and candies currently stands at 12.5% by our estimates.

In addition to owning some of the more popular confectionery brands, Cadbury has also helped Kraft expand its global reach, mainly in the European Union and the Asia-Pacific region. For example, in India, Cadbury is almost synonymous with chocolate, given that the company has been present for more than 60 years in the country selling popular brands like Dairy Milk, 5-Star and Perk. Cadbury also expanded Kraft’s presence in Europe’s chocolate markets of Poland, Russia, and France.

Kraft has indicated that its profits in the Asia-Pacific region have recorded double-digit growth since 2008. Kraft is looking to penetrate the lucrative Indian market by leveraging the Cadbury brand to sell its own flagship Oreo cookies and powdered beverage Tang. India has become the fastest growing market in Asia-Pacific for Kraft with around 40% growth during Q1 2011, double the 20% growth for China and Indonesia.

On the negative side here we are so many months later and, to no one's real surprise, the Yanks do not appear to be keeping their end of the bargain. Indeed, their CEO doesn't even bother to come to the UK when called to explain Kraft's nefarious activities before parliament. Call it choco-patriotism, but it's been classified as an act of high treason akin perhaps to extrajudicially executing Cadbury's British heart and soul. Let's just say all is not well in terms of plant closures, staffing, and integration. And with each UK Kraft gaffe, lawmakers become keener on tightening acquisition laws to repeat this miserable experience:

Ramifications from the bitter battle spread far beyond Bournville, Cadbury’s historic home in the English Midlands. Irene Rosenfeld, Kraft chief executive, continues to ruffle feathers by snubbing UK lawmakers – a parliamentary report on the acquisition, issued on Monday, refers to her failure to respond to their summons as a “sorry episode”. Take-over rules are being redrawn – in a way that bankers warn will hamper the purchase of British companies – after Kraft reversed pledges to keep open a Cadbury plant in Somerdale, west England. (Inspection of the plant, asserts one banker, entailed little more than “a quick Google Earth”.)

There is friction in executive suites, too. Welding together two organisations with disparate cultures has resulted in an exodus of senior former Cadbury executives as the nexus of power migrated from the UK to Kraft’s European headquarters in Zurich. The tension reaches all levels of former Cadbury staff, from the commercial division to the factory floor.

Ah yes, the missing American overseer:

All this has left Ms Rosenfeld unfazed. The representatives she sent to appear before a parliamentary select committee were best placed to handle questions about the British market, she says. Speaking to the Financial Times before Monday’s statement from the committee, she said: “We have clearly shown ourselves to be good stewards of the brands, and yet the continued assault has been somewhat surprising. “I think we’ve done everything possible to address concerns, to respond to issues, and the focus remains on making sure that this integration is successful.”

Defectors from Cadbury and politicians beg to differ. They say the speed of the integration, allied to the fact that the hostile nature of the bid precluded due diligence, has made the process more fraught. Ms Rosenfeld’s perceived disdain, for workers as well as parliament, has added to the rancour.

And here's something on the legal changes in the works:

This week, in one of the biggest shake-ups of UK dealmaking rules in decades, a round of consultation by the Takeover Panel on proposed changes to rules governing mergers and acquisitions comes to a conclusion. In October, the panel unveiled proposals aimed at redressing the balance of power between bidders and target companies, and improving disclosure for the benefit of employees and shareholders. They are expected to come into effect this year.

The proposed rule changes are the result of a feeling among some senior politicians that UK companies like Cadbury were being acquired for short-term gain at the expense of the best interests of their investors and staff.

Already bankers and lawyers are preparing themselves for the impact of the proposed changes. One is a tightening of the so-called “put up or shut up” period, requiring a publicly named bidder to declare formal intentions within 28 days of an approach. At present, the clock starts ticking at the request of the target company. The aim is to reduce the time a company can be “in play”, after several recent potential takeovers – including Kraft’s – dragged on for months.

More on the new measures here. So it's definitely a mixed bag--not all treats with a lot of Yankee tricks mixed in leaving a regrettable aftertaste. I certainly am wary of the Americans screwing over this great brand built over decades for short-term gain as is the habit of a lot of their kind.

On the Record: Fukuyama On PRC's History Ending

♠ Posted by Emmanuel in China at 5/28/2011 02:59:00 PM

Non revocare--I will not recant. Despite penning probably the biggest crock of them all--the end of history in which all political-economic forms were to converge on capitalist democracies--ex-neocon Francis Fukuyama remains one of the foremost commentators on the political economy scene. Which, of course, prompted me to think it doesn't matter that you're correct, but that you are first to pen a memorable idea. Although backtracking on this idea given the weight of evidence to the contrary since that bit of post-1989 triumphalism, you get the feeling that Fukuyama still clings to the end of history thesis as a normative position. In other words, while Fukuyama admits he may have been off in a predictive sense, in the end [ahem] we should aspire for history proceeding in the way he foresaw since it maximizes the liberties he presumes we all value.

As proof, I offer his latest ruminations while having his session of Lunch With the FT--or, more specifically, Martin "Why Globalization Works" Wolf. Apparently not chastened about tackling Big Topics, Fukuyama is midway in preparing two books on the history of political order. (The first one has been out for a couple of weeks.) Coming from roughly similar orientations, you will not be surprised that Wolf throws many softballs for Fukuyama to swing away at. In particular, we have this enduring, largely Anglo-Saxon idea that economic freedom and the aspirations it promotes will eventually lead people to clamour for political freedom:

China, however, is moving rapidly towards a modern economy and I ask Fukuyama how prosperity will affect its political order.

“I think that this is one of the big drivers of democracy that are missed by people that just look at the economic conditions,” he says. “If you are a poor peasant, all you’re worried about is getting food on the table for your family. But as you get more educated, you can worry about things like, ‘Does my government allow me to participate?’ Your world outlook then changes. There’s no reason why this shouldn’t happen in China...”

He ploughs on: “I think you’re right that when you got a whole country of 800m college educated middle class people, you can’t run this thing in a very paternalistic, top-down fashion. The big problem is these same people could be motivated by nationalism – there’s a lot of other ways of mobilising people.”

So at the extremes it's jingoism or the end of history, eh? Why Fukuyama--or Wolf for that matter who works for a widely-read publication reporting on current events--doesn't cite the recent Singaporean elections is certainly intriguing. Events in the city-state can be interpreted two ways. End of History-wise, the emergence of actual opposition parties despite concentrated state efforts to muzzle them certainly suggests an interrelationship between economic development and desire for political liberties. On the other hand, Singapore achieved a very high level of development sometime ago, indicating that this episode is not only delayed but also a reproach of the ruling party rather than outright displeasure being shown.

At least he's broken away from his erstwhile ideological bedfellows on the use of military means to make history end sooner. That's progress.

Screw Copenhagen; The Way Forward on Climate

♠ Posted by Emmanuel in Environment at 5/27/2011 12:01:00 AM

Let's face hard reality here: as the ill-fated Copenhagen 2009 climate summit indicated, we are even father away from a binding, multilateral climate deal as we are from completing the WTO Doha Development Round. Too many diverging interests, too few common interests, and climate change deniers everywhere was never going to be a recipe for a deal.

Just this Wednesday, I had the pleasure of listening to a talk by Global Governance 2020--a group of international researchers who are trying to figure out where we go from the Copenhagen debacle. Their brief, to-the-point report is available online from their website. Alike the earlier article by Robert Falkner et al. that I featured on this blog sometime ago, they too are pessimistic about a comprehensive agreement to replace the Kyoto Protocol. Instead, it may be more feasible to come up with a range of smaller agreements that particular parties are interested in. For this approach, it is hoped that a series of more manageable, more readily negotiable deals will add up to more than a grand deal shot through with weasel words, opt-outs and escape clauses.

Global Governance 2020 sees virtue in bottom-up action as it envisions a number of scenarios. In the unlikely event of a successor to Koyoto coming to fruition in the immediate future, we may be better off placing our bets on a "coalition of the ambitious" driving the agenda forward. The entire report is available online for your consideration. What follows are the most likely scenarios from the executive summary:

A global agreement on binding emissions reductions is unlikely, but progress against climate change can still be made through a patchwork of initiatives and commitments by forward-thinking countries, sub national governments, international organizations businesses, and civil society. That is the conclusion of a working group of experts from China, Germany and the United States. As part of the Global Governance 2020 program, the group has been convened in the aftermath of the Copenhagen conference in late 2009 by the Global Public Policy Institute and its partners, the Hertie School of Governance, the Shanghai Academy of Social Sciences, Fudan University, the Brookings Institution, and Princeton University.

The Working Group represented a diverse, carefully selected collection of individuals who work on climate change in academic, industrial, and governmental capacities. Over the course of a year, the Working Group applied scenario planning methodology to envision different ways the world might approach the challenge of climate change over the next decade. This Executive Summary outlines the three scenarios envisioned by the Working Group, as well as the insights and policy recommendations that derive from them.

Three Possible Directions for Climate Governance

Our scenario analysis produced three possible outcomes for climate governance in 2020. Scenario 1, “Kyoto 2.0,” results from a growing international consensus on the necessity of deep emission cuts based on a series of global treaties. The result is a comprehensive, UN-led solution to climate change and the subsequent establishment of low-carbon economies around the world. Given the latest developments in Copenhagen and the results of Cancún, this scenario is highly unlikely to become reality.

Scenario 2, “Stalemate,” presents climate governance in ruins. The United Nations Framework Convention on Climate Change (UNFCCC) process unravels with short-term thinking trumping long-term policy making. Neither the United States, China, Europe, nor developing countries see themselves in a position to take the lead in combating climate change.

Scenario 3, “Patchwork governance,” witnesses a stalled UNFCCC process but also the initiation of a UN-plus process. A broad coalition of ambitious and pragmatic countries, regions, cities, companies, media, non-governmental organizations, and thought leaders contributes to the emergence of a complex, multilayered governance landscape. If scenario 1 cannot be achieved, this is the second best option.

We identify two windows of opportunity in which the decisions of key actors can shift climate governance from one scenario to another. In the next two years, the most important factor is the behavior of the world’s two largest emitters, China and the United States. Aggressive climate policies in either or both countries would serve as a catalyst for global action, sending a strong signal to industry and driving forward the multilateral process. Conversely, the failure of either nation to take aggressive steps to reduce emissions over the next few years will make it impossible to develop an effective global treaty to limit emissions before 2020.

In the latter case, which we consider most likely, our analysis highlights a second window of opportunity, closing around 2013/14, during which a multilayered governance network beyond the UN could emerge with sufficient support from ambitious governments, sub-national actors, industry groups, and civil society. We imagine that this patchwork scenario could create the conditions for an eventual rebirth of the global treaty process, but consider this unlikely before 2020. This figure displays the possible scenarios and decision points.

Like them, I foresee a world of scenario 3. This may not be an entirely negative thing given the current state of affairs in the arena of international negotiations.

On Serbian EU Accession: Ratko Mladic Caught

♠ Posted by Emmanuel in Europe,Security at 5/26/2011 02:28:00 PM

A few months ago I "offered" to hasten the process of Serbian EU accession by removing one of its principle obstacles--bringing war criminal Ratko Mladic to justice. By engaging in Soldier of Fortune-inspired bounty hunting to pick up multimillion rewards for his capture, I thought it was a pretty good financial prospect as well. Nothing became of that unsurprisingly--academics are timid rather than action-ready. With Slobodan Milosevic long gone and Radovan Karazdic behind bars, Mladic was the only left at large among the triumvirate of Balkan evildoers. (I also had a previous commentary on the interesting political economy angle of the IMF recognizing Kosovo at America's behest when most UN members do not.)

But lo and behold: after years of Mladic supposedly being hidden in plain sight, the Serbian authorities have now turned him in. The timing is interesting. To me, there are shades of tolerance of bin Laden running out. And with that, he is now off to the UN International Criminal Tribunal for the Former Yugoslavia. This is what that body had to say along with a brief backgrounder at the end:

The Prosecutor of the International Criminal Tribunal for the Former Yugoslavia welcomes the arrest today of Ratko Mladić, General Colonel and former Commander of the Main Staff of the army of the Serbian Republic of Bosnia and Herzegovina/Republika Srpska. He was indicted by the Tribunal on 25 July 1995 and was a fugitive from justice for almost 16 years.

In relation to the arrest, Prosecutor Brammertz stated the following: “I welcome the arrest of Ratko Mladić today in Serbia. We await arrangements for his transfer to The Hague where he will stand trial before the International Criminal Tribunal for the Former Yugoslavia.

We recognize the work done by the Serbian authorities, specifically the National Security Council and Serbia’s Action Team, in apprehending Ratko Mladić. We thank them for meeting their obligations towards the Tribunal and towards justice. We also acknowledge the efforts of the international community in supporting measures to secure Ratko Mladić’s arrest.

With the news of the arrest, we think first and foremost of the victims of the crimes committed during the conflicts in the former Yugoslavia. These victims have endured unimaginable horrors – including the genocide in Srebrenica – and redress for their suffering is long overdue. Ratko Mladić’s arrest is also significant for all people in the former Yugoslavia. We believe that it can have a positive impact on reconciliation in the region.

Today is also an important day for international justice. Ratko Mladić’s arrest clearly signals that the commitment to international criminal justice is entrenched. Today’s events show that people responsible for grave violations of international humanitarian law can no longer count on impunity.”

BACKGROUND

Ratko Mladić, Colonel General, former Commander of the Main Staff of the Bosnian Serb Army (VRS) is charged with genocide, crimes against humanity and violations of the laws or customs of war against Bosnian Muslim, Bosnian Croat and other non-Serb civilians in Bosnia and Herzegovina during the 1992-1995 war.

As set out in the Indictment, Ratko Mladić together with Radovan Karadžić was a key member of a joint criminal enterprise to permanently remove Bosnian Muslims and Bosnian Croats from the territory in Bosnia and Herzegovina claimed by Bosnian Serbs. To achieve this aim, Ratko Mladić, acted in concert with others to commit crimes in the locations and at the times alleged in the indictment.

As the most senior officer of the Bosnian Serb Army during the war, Ratko Mladić was the superior of Bosnian Serb Army members and other Serb forces integrated into or subordinated to the Bosnian Serb Army. As such, he had effective control over the forces who participated in the crimes alleged. Ratko Mladić is charged with planning, instigating and ordering each of the crimes.

Ratko Mladić is charged with crimes that include:

* the murder of close to 8,000 Bosnian Muslim men and boys in Srebrenica in 1995.
* the murders, persecution, forcible transfer, detention and mistreatment of Bosnian Muslims and Bosnian Croats during the campaign to permanently remove such persons from the territory under the control of the forces of Republika Srpska.
* the terror campaign and the shelling and sniping of civilians in Sarajevo by Bosnian Serb forces under his command and control which resulted in the killing and wounding of thousands, including many women and children;
* the taking of UN military observers and peacekeeping personnel as hostages in May and June 1995.

Nineteen years have passed since the first crimes listed in this indictment were committed. Sixteen years have passed since Ratko Mladić was indicted. Today he is in custody and will be brought to stand trial in The Hague.

Indirectly, it shows you how removing the main obstacle to EU accession--Mladic himself--means quite a bit to the Serbs. Although the matter of Kosovo's independence remains undecided, questions of national jurisdiction have seldom proven to be terminal hindrances to accession. Witness Cyprus. Demonstrating that there remain any number of countries that view joining the Eurozone as an attractive proposition aside, the grunt work lies ahead in meeting various EU chapters on accession.

It's not an easy task, and I daresay that the Greek experience--ironically, current Greek PM Paprendreou helped draft a plan for achieving Serbian membership--makes the supranational body more wary of fudges and kludges to meet targets alike those mandated by the Stability and Growth Pact. In that earlier post, I also mentioned how its neighbours were farther along the process. For now, however, it's truly game on and I wish our Serbian friends the best of luck.

Read My BRICs: No New French IMF Chiefs!

♠ Posted by Emmanuel in Europe,IMF at 5/25/2011 01:54:00 PM

Coming from a developing nation, I am a long-time follower of third world solidarity movements. The Non-Aligned Movement, the G-77 and the New International Economic Order (NIEO) are to me high points of South-South cooperation even if the results of their activities have often been muted. For many posts now, I have been agitating for a non-Western IMF chief alike what has been promised by Americans and Europeans for the longest time [1, 2, 3]. Or at least prior to Dominique Strauss-Kahn's--how do I put it--questionable extra-curricular activities. Certainly, it's time for the West to let the rest of us have a say in international economic governance if the system is truly a liberal institutional order. After all, the eastward shift in economic gravity is pronounced.

Yet, it is observably true that LDCs--particularly the major developing ones--are not as united as the Europeans are behind French Finance Minister Christine Lagarde taking over the top slot at the IMF. LDCs themselves fight over many things such as Brazil taking a dim view of China's currency policy or engaging in bikini wars. So, observers take the point of view that while developing countries agree on "anyone but another European" (or American for that matter), they don't have a single unity candidate alike Europeans backing Lagarde. Instead, they have squabbled over uniting behind a particular candidate, preferring to put forward their own nationals' names. So, unlike Europe, they fail in consolidating their voice. Remember: united we stand, divided we fall at the IMF.

To compensate, the representatives of the Brazil, Russia, India, China and South Africa (BRICs+ ?) have together put forward a position statement. While not entirely getting behind a candidate, as mentioned above, it's a positive step that they are at least seeing eye to eye on the need for diversity during a critical succession period:

We, as Executive Directors representing Brazil, Russia, India, China and South Africa in the International Monetary Fund (IMF), have the following common understanding concerning the selection of the next Managing Director of the International Monetary Fund:

1) The convention that the selection of the Managing Director is made, in practice, on the basis of nationality undermines the legitimacy of the Fund.

2) The recent financial crisis which erupted in developed countries, underscored the urgency of reforming international financial institutions so as to reflect the growing role of developing countries in the world economy.

3) Accordingly, several international agreements have called for a truly transparent, merit-based and competitive process for the selection of the Managing Director of the IMF and other senior positions in the Bretton Woods institutions. This requires abandoning the obsolete unwritten convention that requires that the head of the IMF be necessarily from Europe. We are concerned with public statements made recently by high-level European officials to the effect that the position of Managing Director should continue to be occupied by a European.

4) These statements contradict public announcements made in 2007, at the time of the selection of Mr. Strauss-Kahn, when Mr. Jean-Claude Junker, president of the Euro group, declared that “the next managing director will certainly not be a European” and that “in the Euro group and among EU finance ministers, everyone is aware that Strauss-Kahn will probably be the last European to become director of the IMF in the foreseeable future”.

5) We believe that, if the Fund is to have credibility and legitimacy, its Managing Director should be selected after broad consultation with the membership. It should result in the most competent person being appointed as Managing Director, regardless of his or her nationality. We also believe that adequate representation of emerging market and developing members in the Fund’s management is critical to its legitimacy and effectiveness.

6) The next Managing Director of the Fund should not only be a strongly qualified person, with solid technical background and political acumen, but also a person that is committed to continuing the process of change and reform of the institution so as to adapt it to the new realities of the world economy.

It's a highly qualified statement, yes, but I am generally on board with the argument that maintaining a US (World Bank)-Europe (IMF) stitch-up of international financial institutions is certainly not conducive to evolving patterns of economic activity. Now, if only these developing countries could unite behind a single candidate, then the contra-Lagarde will be more of a reality than a theoretical persona.

The time is now. Don't take any more excuses and get it done. And certainly, LDCs can show great displeasure come voting time. Meanwhile, Eswar Prasad urges the major developing economies to act quicker in response to this European attempt to do an end run on the selection process:

The Brics are pushing hard for a competitive vote with more than one viable candidate, rather than just a pro forma process intended to confer legitimacy on the presumptive winner. There is a brief window of opportunity for emerging markets to make their point, even if they lose this round of the battle. To grab it, they must quickly up their game.

Japan and the US are the swing votes. They have restated support for a transparent and merit-based process, and have not taken sides yet. But neither wants the outcome to threaten its own privilege of appointing a deputy managing director. Therein lies an opportunity.

Emerging markets must first unify around one candidate. Each of the big players has its own agenda, so picking a candidate from among them may be a hard sell within the group itself. Augustin Carstens of Mexico has already thrown his hat in the ring and there are other excellent candidates from “neutral” countries, like Tharman Shanmugaratnam from Singapore, who could step into the breach.

Second, they must ensure China’s support by pushing to elevate Zhu Min, the highest-ranking Chinese representative at the fund, to a new, fourth deputy managing director position. Third, they must strike a bargain with Japan and the US to support them retaining their own deputy managing director positions for the next five years. Fourth, their candidate should draw up a clear list of governance reforms and a plan for acting on them to line up support from other developing economies.

This approach may seem mercenary. But it is time for emerging markets to shed the grand vision of pure merit-based selections and get down to the bare-knuckled politics that Europe is practising. This is not just in their own interests but also for the greater good of an institution that is now central to global financial stability.

I agree that "merit-based" selection is the stuff of pseudo-technocratic BS: this is raw international politics at the beginning of the 21st century. May the newer entrants prevail over the old order. While Lagarde presents herself as a candidate for diversity in being the first putative female IMF managing director, it's not necessarily the burning issue at the moment to be fair.

Bedsides, who's to say that there's a shortage of female LDC candidates for the job? How about Sri Mulyani Indrawati--formerly Indonesia's finance minister and currently the World Bank managing director? Figuratively speaking, the ultimate sacrifice in the service of third world solidarity may be the BRICs+ choosing a unity candidate outside their citizenry but also from a large LDC that looks like a force to be reckoned with--Indonesia.

Realizing the ($134 Trillion GDP) Asian Century

♠ Posted by Emmanuel in China,Development,India,Southeast Asia at 5/25/2011 12:02:00 AM

With all due to apologies to the late economic historian Angus Maddison (requiescat in pace), will half of world GDP be accounted for by Asia in 2050? It may seem a far-fetched notion now, but the Asian Development Bank has a new report out which suggests it's within the bounds of plausibility.

The key to achieving this feat says the ADB is for populous and fast-growing China, India, Indonesia, and Vietnam (two SE Asian countries, yay!) not to fall into a middle-income trap. That is, not succumbing to slowing growth rates and concomitantly stagnating income levels in the next five to ten years. If this trap is avoided, Asian GDP may approach $148 trillion and account for 51% of global output by 2050. But, if the region falls into this trap, it will "only" account for 32% of global output with a combined GDP of $61 trillion. It almost makes you proud to be an Asian during this exciting time when old Europe and enervated America are busy competing to see who can flush their continents down the toilet of history faster (I got tired of the dustbin of history, so there).

While these eye-catching figures are more conjectural than anything else, the challenges listed of making more optimistic scenarios come true are certainly worth paying attention to as we try and realize the Asian Century. Focuses the mind, eh? What follows are the key snippets from the executive summary, though the rest is well worth reading for all of those interested in geopolitics and IPE:

Makings of the Asian Century

The Asian Century scenario essentially extends Asia’s past success into the future, putting it on the cusp of a truly historic transformation. In this scenario, Asia’s GDP (market exchange rates) would increase from $16 trillion in 2010 to $148 trillion in 2050, or half of global GDP, similar to its share of the global population. With a per capita GDP of $38,600 (PPP), Asia in 2050 would have incomes similar to Europe today. It would have no poor countries (with average per capita GDP of less than $1,000), compared with seven today. All this assumes that Asian economies can maintain their momentum for another 40 years and adapt to shifting global economic and technological environment by continually recreating their comparative advantage.

Actions at three levels

But in its march towards the Asian Century, the region must tackle daunting policy, institutional and governance challenges along the way. Given widely varying country conditions, the precise actions and their timing must vary. Still, it is possible to draw the contours of the major changes necessary for the region along three dimensions: (i) national strategic and policy actions; (ii) collective regional actions to bridge the national and global agendas; and (iii) Asia’s interactions with the global community (Figure 1). The ability of the diverse countries in Asia to realize the promise of the Asian Century will be determined by their success, individually and collectively, in addressing these imperatives.

Maybe Costly Fuel Will Doom Low Cost Airlines

♠ Posted by Emmanuel in Energy,Environment at 5/24/2011 12:01:00 AM

Let me confess by that I live with the very embodiment of environmental evil. My flatmate is one of those Europeans who have taken advantage of the advent of low-cost carriers to travel around the continent affordably to see more of what it has to offer. This week Bratislava, the next Riga, maybe Prague in two weeks' time. This is so because certain environmentalists view short-hop flights as a unique form of devilry. When bus and train networks will take you pretty much anywhere you want to go, they argue, why fly Ryanair or EasyJet? Short-haul flights of the sort weekend vacationers like my flatmate take are said to be far worse in climate change terms than terrestrial transportation. Too, airports and the constant buzz of airplanes supposedly add to the noise pollution of already aurally challenging urban life. Living under a flight path, I certainly appreciate Icelandic volcanoes late in the evening!

So you have movements alike Plane Stupid here in the UK who spend their time fighting the expansion of major London airports alike Heathrow and Stansted. Recall the "Battle of Heathrow" a few years back. Certainly the potty-mouthed Ryanair CEO Michael O'Leary regularly tossing f-bombs in the direction of the green crowd does nothing to endear himself to them.

But wait. Despite the endless enviro-pessimism of this crowd, they should find comfort in costly aviation fuel--not diminished European appetite to rediscover scenic towns across the continent via air travel--dooming Ryanair and Easyjet expansion. Earlier on, the news was that Easyjet was now losing money, and that it did not plan to increase capacity for the first time ever:

Rising oil prices and aviation taxes have nearly doubled easyJet losses as the budget airline announced a freeze in fleet growth over the next two winters.

EasyJet admitted that consumers will not swallow the higher fares needed to offset higher costs, so aeroplanes will be parked in slower months to stem losses. The Luton-based carrier revealed the capacity squeeze as first-half pre-tax losses, racked up during the traditionally quiet six months to 31 March, rose from £79m to £153m.

EasyJet highlighted the struggle for airlines to pass on soaring costs as revenue per seat slipped by 2.1%, which it attributed to a £1 increase in air passenger duty last autumn to £12 per flight. The near-doubling of losses was driven by a £43m impact from fuel, which now accounts for more than a quarter of the cost base, and a £21m hit from APD. EasyJet said it would hold its fleet size for its 2011 and 2012 winter programmes at 204 planes, while warning that it could change plans to grow its total fleet from 199 jets to 220 over the next two years.

Things are no better for Ryanair. Aside from not making much money, it now plans to reduce flight capacity for the first time in its history. It is also thinking of a move upmarket as low-cost fares look to have run their course for now:

Ryanair Holdings Plc (RYA) will cut capacity for the first time in its history next winter as fuel costs threaten to render dozens of routes unprofitable, ending decades of growth that made it Europe’s No. 1 discount airline.

Ryanair fell the most in 20 months in Dublin trading after Chief Executive Officer Michael O’Leary said he’d ground 80 of 300 jets and lay people off for the low season starting in October. Even with a 12 percent fare increase he forecasts net income no higher than last year’s 401 million euros ($563 million) -- or 18 percent less than estimated by analysts.

“It’s the first time ever that we’ll go negative on traffic,” O’Leary said in an interview. “We take delivery of 50 aircraft this winter so instead of running around trying to open up new bases and routes in November and December we’ll sit them on the ground. With higher oil prices it makes no sense.”

Ryanair has transformed the European airline industry since O’Leary took over in 1990 after studying the growth of Southwest Airlines Co. in the U.S., offering flights between cities never previously served by air and luring passengers from established carriers with bargain-basement fares and a no-frills service. More recently, the CEO signaled plans to attract higher-paying flyers after exhausting opportunities to lift sales by charging for everything from checked bags to credit-card bookings.

So there you go: costly fuel may do in the expansion of short-haul flights so reviled by the environmental crowd in a manner that all sorts of protests have failed to achieve all these years. At least the charity calendar survives, eh?

Vaclav Klaus: Climate Concern = Communism

♠ Posted by Emmanuel in Environment,Europe at 5/24/2011 12:00:00 AM

Something makes me rather certain that Czech President Vaclav Klaus would have made it big in America. Given that one of its major political parties doesn't even believe climate change exists, there is a lack of an American consensus that there is a problem at all. How can you then have global consensus when the world's second largest carbon emitter doesn't even recognize the existence of these life-threatening hazards? While similarly palaeolithic reasoning is familiar from deficit deniers--these pathologies tend to go together--climate change denial is IMHO more deleterious given its globe-spanning and life-endangering implications.

Today, it is my great displeasure to bring you further ramblings from Vaclav Klaus, Czech primitivist par excellence. Aside from providing a treasure trove of references from obscure climate change deniers, he now makes a stunning claim: Alike central planners of the Communist era that he so abhors, he believes that those advocating for controls on emissions are, you guessed it, today's totalitarians. He made this speech at Cambridge University, no less:

As someone who personally experienced central planning and attempts to organize the whole society from above, I feel obliged to warn against the arguments and ambitions which are very similar to those we had to live with decades ago. The arrogance with which the GWD [global warming debate] alarmists and their fellow-travelers in politics and media want to suppress the market, control the society, dictate the prices (directly or indirectly by means of various interventions, including taxes) is something I know well from the past. All the old, already almost forgotten economic arguments against communism should be repeated now. It is our duty to do so.

To conclude, I agree with many serious climatologists who say that the warming we experience or is on the horizon will be very small. Convincing argumentation can be found in Ian Plimer’s recent book. I agree with Bob Carter and others that it is difficult “to prove that the human effect on the climate can be measured” because “this effect is lost in the variability of natural climate changes”. From the economic point of view, in case there will be no irrational interventions against it, the economic losses connected with such a modest warming will be very small. A loss generated as a result of a completely useless fight against global warming would be far greater.

There's no convincing some folks. Maybe he'll name his grandchildren after Ayn Rand or something. In the meantime, comrade, don't drive an SUV lest I send you off to the gulag ;-)

PRC Still Idolizes Singapore, Warts & All

♠ Posted by Emmanuel in China,Development,Southeast Asia at 5/23/2011 12:02:00 AM

While pointed commentaries in official Chinese publications on perceived slights by Westerners (particularly Americans) against China are common, you often don't see these publications going out of their way to defend others being the subject of foreign defamation. The target in question here is Singapore. A few days ago I commented on various opposition parties gaining a 40% share of the popular vote in Singapore--a one-party state since its inception under Harry Lee Kuan Yew's People's Action Party (PAP). These opposition parties would have gained a larger share of the legislature had a proportional representation (PR) system been in place instead of a first past the post one. You can certainly argue that the minuscule Workers Party gains--6 out of 87 seats--would have been greater had Singapore not been subject to fairly obvious gerrymandering.

It is a well-known story by now how Deng Xiaoping's 1978 visit to Singapore helped set China's authoritarian development plans in motion. Here was a tiny country making its way in the world without its longtime leaders losing their tight control on the reins of power. Not only has the Communist Party of China (CPC) tried to emulate the PAP, but it has also observed how Singaporean politics evolve. From the PAP website, no less:

Ties go beyond such physical developments. In 2002, Zeng Qinghong, an alternative member of the Politburo of the Communist Party of China’s (CPC) Central Committee and a member of the CPC’s Central Committee Secretariat put it in a nutshell when he received in Beijing a delegation led by PAP Central Exco member Lim Swee Say.

He said: “The CPC values learning from the PAP’s experience of governance. This has become an important element of the exchanges between both parties.” To this end, Chinese officials have sat in at meet-the-people sessions and noted PAP MPs’ familiarity with citizens’ concerns. They have gone back and launched their own regular meetings with the public.

As China’s political reforms continue, they keep returning to observe how Singapore handles other issues.

So perhaps it was never going to be the case that Singapore's recent election results would go down well with Beijing's powers-that-be. After all, here was a one-party state that delivered a high standard of living to its citizens being reprimanded by these very citizens. At the very least, let's say it's not quite conducive to continuing processes of Chinese political reform aimed at broadening public input following Singapore.

So, in this China Daily op-ed, the response is one of blaming Westerners for blowing the Singaporean elections out of proportion. Linking events in Singapore with those in the Middle East is particularly given short shrift. In a nutshell, "Westerners don't understand us Asians":

The opposition in Singapore's parliamentary elections made a breakthrough on May 7, winning six out of 87 seats in the parliament for the first time. Shortly afterwards, Lee Kuan Yew and [former PM] Goh Chok Tong announced that they would quit the cabinet, drawing more attention to the political situation in Singapore.

Many Western media agencies quickly associated the political system of Singapore with the retirement of Lee and Goh as well as the setback that the ruling party suffered in the parliamentary elections. A British media outlet published an editorial under the headline "Singapore is taking the First Steps to True Democracy," and another Western media outlet claimed in its report that Singapore has never had a "real two-party system."

The Western media said directly that the existing political system of Singapore is not "true democracy," implying that only Western democracy is the genuine democracy. Some Western media reports even related the political changes in Singapore to the unrest in West Asia and North Africa, claiming that they were all the results of the global wave of democratization.

Then the op-ed begins to conflate democratic processes with economic development:

It seems that the Western media have forgotten about Singapore's remarkable economic achievements in recent years. Singapore's GDP grew nearly 15 percent in 2010, making it the fastest-growing economy in the world, and it surpassed certain Western countries in terms of per capita income and social security coverage. However, these facts were seldom mentioned in Western media reports.

Obviously, the Western media are not interested in how Singapore achieved great economic progress because the Eastern country's successful development mode is not in line with Western democratic standards. People can be reminded of the Western media's stereotyped viewpoints by the fact that even now they still call Singapore a "dictatorship" or "quasi-dictatorship."

Objectively, the changes reflected by the elections in Singapore are mainly from two aspects. The first is the start of the adjustment to the leadership succession within the ruling party through the appointment of new leaders and the retirement of old ones. The second is the changes in the demand of the new generation of voters who hope to raise the voice of the opposition in the parliament rather than expect another party to replace the ruling People's Action Party. The adjustment and changes does not represent major unrest in Singapore's political system.

It then gets murkier with the suggestion that Singapore's woes are political rather than economic alike those of many Western countries:

Logically speaking, Singapore is already a developed country and should have the same status as developed Western countries, an assertion about which Western media agencies appear to disagree. Some Western countries are facing much more severe unrest compared with Singapore. Some European countries are deeply trapped in the debt crisis that will possibly cause a severe impact on the world economy.

However, are there any Western media agencies that have analyzed the problems in these countries from the angle of their political system? The issues facing Asian countries are surely issues involving their political systems, while the issues facing Western countries are limited to economic ones. Does this result from prejudice or ignorance?

Singapore does have its problems, but the problems facing Singapore are the ones that are emerging after it has developed to a rather high level. Public complaints about housing prices and the rise in the number of foreign workers are partly because of the higher demand generated by the people after they have led better lives and gained many benefits from development.

The future of Singapore does face challenges, but the challenges will surely not involve whether Singapore's political system will be closer to Western democracy or whether reforms coveted by some will occur. The real challenge is whether Singapore can continue the way of development that has been consistent with its context.

The political changes in West Asia and North Africa have made some Westerners more irrational about their political system and sharpened their sense of moral superiority. Such misconceptions and superiority are evidently not something constructive to the increasingly polarized world.

It's an odd mix: On one hand you have attempts towards self-reassurance--this is only a temporary setback for the PAP which has traditionally been responsive to the Singaporean people's concerns, China chose the right path in emulating Singapore, etc. On the other hand, movements towards democratization in the Middle East have also prompted suggestions that Western cultural imperialism is at work when foreign commentators mention Singapore's election results and Tunisia, Egypt, Yemen and the rest in the same breath. Doesn't raising GDP per capita justify political continuity?

In the end, there's little denying that China filters through the prism of Singapore the ides of (Arab) spring. Just as the Chinese leadership successfully navigated through the events of 1989 to outlast the Soviet Eastern bloc, so too does it see Singapore as a proxy for the durability of the (mostly economic) reforms it has undertaken since then.

Make no mistake: 1.3 billion-plus person China very closely follows political-economic evolutions in comparatively tiny Singapore and its slightly more than 5 million citizens. In turn, do not forget which country commissioned a commemorative statue of Deng Xiaoping (see image at top). This is a mutual admiration society with more than a little narcissism shared by both mentor and mentee.

Throwing a Shoe at China's Great Firewall Creator

♠ Posted by Emmanuel in China,Internet Governance at 5/23/2011 12:01:00 AM

[NOTE: This is the first of two China and authoritarian development posts.] In case you missed it, you should really get a hold of this. For some time, I've been fascinated with shoe throwing as a form of political protest [1, 2] and the lengths the PRC leadership goes through to maintain the Great Firewall of China (GFW)[1, 2]. So, it was inevitable that I would be most interested in the news that Fang Binxing--recognized as the architect of the aforementioned Internet censorship infrastructure--was pelted with eggs and shoes by a yet-unidentified protester:

Police in China say they are seeking a man who allegedly threw an egg and shoes at the designer of the country's Great Firewall of web controls. Fang Binxing was lecturing at Wuhan University, Hubei province, when the alleged protest took place. Reports of the attack spread quickly on Twitter after a user named Hanunyi posted his account of the incident.

Mr Fang is reviled by many Chinese web users for overseeing development of China's system of internet censorship. The computer scientist, who is Principal of Beijing University of Posts and Telecommunications, has been dubbed the Father of the Great Firewall.

Alas for his critics, alike George W. Bush, Mr. Fang was reportedly quite nimble in dodging incoming projectiles:

An officer at Luojiashan Public Security Bureau confirmed police were investigating the alleged attack, AP news agency reported. Protester covers mouth Protesters accuse China's government of stifling its critics and restricting freedom of speech

Hanunyi posted a live account of the alleged shoe-throw on his profile page, including a picture of a hand clutching an egg. "The egg missed the target. The first shoe hit the target. The second shoe was blocked by a man and a woman," he tweeted.

The Great Firewall, also known as the Golden Shield Project, blocks thousands of websites, including those linked to the Dalai Lama and the banned Falun Gong spiritual movement. It also filters keyword searches for sensitive topics such as Tibet or Liu Xiaobo, the Nobel prize-winning dissident.

According to some Twitter users, searches for "hanunyi" have also been blocked since the alleged attack on Mr Fang took place. China's government has invested heavily in controlling the internet, recently setting up a body to monitor censorship: the State Internet Information Office.

I myself have some questions. For instance, what was this guy lecturing about? Automatically filtering pornographic content by checking the amount of skin tone present in images? Certainly, this guy was never meant for public consumption. Yet as I always like to say, boys and girls, you're nobody in this world until people start throwing shoes at you (and maybe eggs too, for that matter). Dubya, Wen Jiabao...it's pretty rarefied company ;-)

Rumour Mill: Lord Mandelson, Next WTO Chief?

♠ Posted by Emmanuel in Economic Diplomacy,Europe,Trade at 5/21/2011 12:02:00 AM

I would advise you to take this latest report with a grain of salt. For, in the last few hours, Gordon Brown's statements championing a greater role for less-developed countries at the IMF which had been interpreted as his bid to become its next managing director have been pooh-poohed--by Brown himself.

That said, we have yet another New Labour stalwart waiting in the wings to fill posts in prominent international economic organizations. While British Prime Minister David Cameron scoffed at the idea of recommending Brown to become the next IMF chief, this new Guardian article suggests Cameron is keener on Peter Mandelson. Unlike Gordon Brown, Lord Mandelson remains remarkably unscathed by the financial crisis insofar as he was brought back by Labour from his role as EU trade commissioner to perform damage control instead of, let's be honest here, inflicting damage. And so the rumour mill churns again with the idea that the more amiable Mandelson has the ear of Cameron when it comes to replacing outgoing WTO Director-General Pascal Lamy who wraps up his second and last term in 2013:

In a sign of the prime minister's high regard for Labour's last business secretary, government sources indicated that Mandelson was seen in Downing Street as a strong candidate to succeed Pascal Lamy, who is to stand down as the WTO director general next year [actually, in September 2013 since his second four-year term began in 2009--but candidates' names must be put forward next year already].

"Peter Mandelson is a strong candidate for an international job," one government source said of Britain's former European trade commissioner. "The director general of the WTO, which will become available next year, is an obvious position. We are sure that Peter Mandelson would have a lot to offer."

The interest in Mandelson may be seen in Labour circles as troublemaking by the coalition, which is rubbishing Gordon Brown's unofficial campaign to fill the vacant position of managing director of the International Monetary Fund after the resignation of Dominique Strauss-Kahn. The former prime minister made a speech in South Africa calling on rich western countries to meet their pledges to fund education for the world's poor.

Mandelson has been ruled out by Britain as a possible IMF head because he is does not have the necessary qualifications as a former finance minister or a former central bank governor. "Peter Mandelson does not have enough credibility for the IMF," the government source said. But the government does believe he would be well placed to succeed Lamy, Mandelson's French predecessor as EU trade commissioner. Lamy is a highly respected figure, though Cameron has been highly critical of the WTO's failure to complete the Doha trade round.

The reporter's angle on the coalition further undermining Gordon Brown is a doubtful one insofar as Brown's chances of political rehabilitation are remote. Neither is he inflicting much damage to the coalition nowadays as he mostly remains silent in parliament.

OTOH, while I remain a Peter Mandelson fan, I doubt whether he fancies the job and if he's really the man for it. After all, he was most enthusiastic about returning from abroad (Brussels, to be exact) when Gordon Brown came a-calling. If he so liked British politics that he would rather have been the de facto PM of a doomed government than stick around in Brussels, why would he want to venture there again? Next, alike at the IMF, I remain keen on an LDC candidate for the post. Just as I was wary of Lamy gaining a second chance at not completing Doha, so should I express caution about another industrialized country head at the WTO. Given the current difficulties over international trade negotiations, LDC voices need someone who feels our pain. Honestly, I am not sure if another ostensibly left-leaning politician with a penchant for the good life is what the WTO needs.

Nevertheless, don't forget the Pascal Lamy was himself a European trade commissioner prior to assuming his current post, so there is precedent there.

Guns or Butter? UK's Defence v Foreign Aid Debate

♠ Posted by Emmanuel in Cheneynomics,Development,Europe at 5/20/2011 12:02:00 AM

OK, so this is not strictly an application of the economic textbook guns-or-butter question of whether a nation should devote its resources to military or civilian priorities given a production possibility frontier. After all, the recipients of the "butter" ain't her majesty's subjects. Given that the UK is not as free-spending as the US is--over there Cheneynomic free lunch ideology has been ascendant for at least a decade now--it's a meaningful tradeoff with implications for foreign policy. PM David Cameron says he's of the "Live Aid" generation in justifying the preservation of aid spending, but let's say right-leaning sorts have...other priorities.

The general outlines of this debate go like this: The Conservative-Liberal government indicates that it will live up to its coalition agreement to "ring fence" or protect 0.7% of British GDP for foreign aid by shielding it from government cuts occurring elsewhere. (See an earlier post of mine on how the 0.7% of GDP target came about.) To which the defence secretary, unsurprisingly, wishes to keep the option of reducing foreign aid contributions to spend on arms. Protect your turf is still the operating principle here. That is, more guns, less butter:

Defence Secretary Liam Fox has challenged a plan to enshrine in law the UK's promise to spend 0.7% of its gross national income on overseas aid. In a letter leaked to the Times, Dr Fox says he "cannot support the proposal in its current form". A source close to Dr Fox said the issue was not the level of the target but how best to reflect this in law.

Downing Street said it remained fully committed to implementing its pledge in line with the coalition agreement. The BBC understands Dr Fox's letter was written to Prime Minister David Cameron about five weeks ago. The defence secretary said that "creating a statutory requirement to spend 0.7%" on overseas aid could lead to legal challenges and limit the government's options on where money was spent.

International aid is one of only a handful of areas, including health spending in England, being ringfenced from spending cuts over the next four years. Most other departments are seeing their budgets slashed - defence spending by 8% by 2015.

Given that foreign aid is less than a third of defence spending as the graphic in the link in the article indicates. What's more, the UK has some ways to go to reach the 0.7% threshold from its current level of below than 0.6%:

The promise to spend 0.7% of national income on aid by 2013 was put in the Conservative manifesto before the last general election and then repeated in the coalition agreement. A Downing Street spokesman said it was "fully committed to enacting the 0.7% commitment into law, in line with the coalition agreement". The 0.7% commitment is an international aspiration first mooted by the United Nations in the 1970s and reaffirmed by the world's leading economies in 2002.

Aid and development charity Oxfam said Dr Fox was "wrong" to question the government's approach. "British aid offers great value to the taxpayer," its chief executive Barbara Stocking said. "For little more than a penny in the tax pound we not only help those in need but also boost our standing in the world and increase our influence in the global corridors of power."

In the real world where the rest of us live in where deficits do matter (got that, Yankee deficit lubber?), these debates are more than rhetorical.

LDCs Strike Back: The Coloured Man's IMF Burden

♠ Posted by Emmanuel in Bretton Woods Twins,IMF at 5/19/2011 11:02:00 AM

Before getting to the topic at hand, let me point out Desmond Lachman of the AEI and his scathing indictment of Dominique Strauss-Kahn's performance as IMF managing-director--but without offering an alternative. From my vantage focusing on global governance, this much is clear: the "mistake" of Dominique Strauss-Kahn was favouritism toward Europe by granting Greece, Ireland, and now Portugal access to IMF funds meant for balance of payments troubles for what were, in essence, fiscal woes. Is this prudent lending? You first have to consider if the IMF should have lent to these countries at all. Latvia, Ukraine, Hungary, Iceland, Pakistan, etc. definitely had BOP woes so I have no issue with their borrowing. Lending to the abovementioned EU states genuinely rankles me, however.

That said, recent events have forced us to reassess the future of leadership at the IMF and the World Bank a bit further down the line when Robert Zoellick's term ends. In my previous post on the white man's IMF burden, I pooh-poohed the argument that European dominance at the IMF should be continued given current circumstances in peripheral EU economies. And now the cavalry has arrived to back me up, by which I mean the major developing economies. Hence the current post title lacking originality.

Let us consider the 500-pound gorilla of China weighing in on the issue. Just today, John Ikenberry--a name that should be familiar to nearly all IR scholars--launched his new book Liberal Leviathan at LSE IDEAS. It is a distillation of his longstanding conviction that the United States' relative decline is cushioned by the bedrock of liberal institutions it has established, including the IMF contemporaneously enough. Fortunately, I had the chance to ask him about IMF succession. To him, the Chinese leadership's statements on the matter demonstrate a continuing unwillingness to be more proactive in international institutions and "free ride" on others' work. Ikenberry further suggests that the careful wording is meant to possibly encourage an IMF chief from an LDC but save China from embarrassment if s/he is not. Anyway, here's what PRC Foreign Ministry spokeswoman Jiang Yu had to offer:

"We've taken note of this situation, and it would not be appropriate to further comment," ministry spokeswoman Jiang Yu told a regular news briefing when asked about the arrest of Strauss on sexual assault charges.

"You also raised the issue of the selection of the Fund's senior leadership. We believe that this should be based on the principles of fairness, transparency and merit."

To this observer, the "fairness" bit generally references the rising economic clout of LDCs and specifically their increased contributions to the IMF. After all, China now has the third most quota allocations in the IFI. At a broader Global South level, however, there is no sign of them uniting behind a single candidate to replace DSK. Given that it's early days, let's not make too much of this (yet):

Emerging nations have yet to unite behind a candidate to take over as the head of the International Monetary Fund, even as they reiterate their long-held stance that the position should not be reserved for a European. Brazil and South Africa have expressed a desire for an end to the tradition of the IMF’s managing director’s job going to Europe, just as they oppose the convention that the head of the World Bank is always an American.

Chile and China also have said that the position should be filled “on merit”, without publicly putting forward any candidates themselves. The likely resignation from the IMF of Dominique Strauss-Kahn, now in jail in New York pending the hearings of charges of sexual assault against him, has brought the sensitivities surrounding the job to the fore.

For many emerging countries the sinecures at the top of the World Bank and the IMF symbolise the old order established after the second world war, which they argue is no longer representative of the global economy.

South Africa and India certainly have viable names, but they are not tooting their horns too loudly at the moment:

In South Africa, Pravin Gordhan, finance minister, said Europeans “must be alive to changes in the world”. Mr Gordhan floated the name of Trevor Manuel, who was a long-serving finance minister in South Africa and who is now head of the national planning commission, calling him “highly respected in the world”.

India has been more cautious on possible changes in the leadership of the IMF, making little public comment on the management of any succession. Montek Singh Ahluwalia, the influential deputy chairman of the planning commission, has sought to damp speculation that he could be a possible candidate for the position of IMF chief. “I am not putting my name forward for any of these things,” Mr Ahluwalia, a former senior official at the World Bank and IMF, said. “I am quite happy with what I am doing and I am not looking for a change.”

To me this is a no-brainer: all change at Bretton Woods institutions to LDC heads is long overdue given that Europeans have always headed the IMF while Americans the World Bank. Are the demonstrated leadership qualities of Dominique Strauss-Kahn and, er, Paul Wolfowitz really that great? Nuff said.

UPDATE 1: TIME has a pretty good take on the succession topic, too.

UPDATE 2: Obviously, I have no problem with Dani Rodrik championing Kemal Dervis for this post, though he must be kidding if the French and Germans would consider him as "European" in justification.

US-Pakistan Ties Through the Lens of Pax Britannia

♠ Posted by Emmanuel in Economic History,Hegemony,South Asia at 5/18/2011 12:01:00 AM

Would you like to see Britannia rule again, my friend?
All you need to do is follow the worms

[NOTE: With ex-Pink Floyd member Roger Waters currently playing the London leg of his globetrotting revival of The Wall, I guess this post is apropos. There are reasons why I've included a clip of Sir Bob Geldof in imperial mode from the film version of The Wall.]

It isn't news that already shaky US-Pakistan ties are under further pressure with the extrajudicial and extraterritorial elimination of Usama bin Laden. While you can certainly debate whether the intrusion was justified, this much is clear: Pakistan greatly resents the United States despite being quite dependent on it for aid, the IMF bailout, security cooperation and the rest. While we can debate American hegemony till the cows come home, there is little doubt that its economic and military heft is being felt by the Pakistanis. And, as many American commentators note, there has not really been all that much gratitude for US "largesse." You have Pakistani forces now shooting at NATO helicopters making excursions from nearby Afghanistan to avoid Usamagate II. Meanwhile, the Pakistani press is getting even more strident about American interference in its affairs.

Call it biting the hand that feeds what other provide. I'd argue, after all, that it's the Chinese ultimately lending to the Americans to lend to and supply the Pakistanis if we are more honest about this messed up world of subprime globalization. Pakistani PM Yousuf Raza Gilani has even called China his country's best friend in a reflection of strained ties with the US. Take that, Yanquis; some fine reward for all your troubles.

If you think US-Pakistan ties are frayed, roll back the years, decades, and centuries to the heyday of Pax Britannia for an even more uncomfortable relationship in the United Kingdom and Pakistan. While Pax Americana has not been formal in name--its tradition is ostensibly small r republican--Pax Britannia in all its majesty held sway over Pakistan at the height of its powers. Just as the visit of Senator John Kerry occasioned a lot of anger in Pakistan, it was only a few weeks ago that a representative of the erstwhile imperialist in Prime Minister Cameron visited Pakistan. Instead of urging further cooperation on anti-terrorism and so forth, I think Cameron actually did something smart by attempting to jettison some of the historical baggage.

You see, Cameron was caught on camera attributing a lot of what's wrong in Pakistan today to British colonial rule. By the measure of how the maps of today's regions look like--particularly in Africa and the Middle East--you can certainly argue that the British Empire has had a more profound effect on the modern world than the Americans ever did. Hence the unfinished business in places alike Afghanistan, Pakistan, and Iraq. Historical reappraisals of British Empiretend to go in cycles. Our own Niall Ferguson is of course of the opinion that yes they were often racist and killed/brutalized/enslaved us coloured peoples, but overall, they had a positive influence on the development of the modern world.

However, what Cameron did was, as far as I can observe, a more politically tactful ploy since he was received better than Kerry was. Indeed, British traditionalists were quickly up in arms against what they saw as the latest apologia for empire:

David Cameron has been criticised for being “simplistic and trendy” and for being “more PC than PM” for trying to apologise for Britain’s imperial past. Historians also said he was being naïve to suggest that many of the world’s ills can be traced back to when they were British colonies.

Seán Lang, a senior lecturer in History at Anglia Ruskin University, where he teaches British Imperial History, accused Mr Cameron of “touting for applause”. He told The Daily Telegraph: “His comment was simplistic and trendy - more PC than PM. I certainly wouldn't accept such a sweeping generalisation from one of my own students. “Perhaps the Prime Minister should spend a bit of time over Easter back at Eton, where the very strong history department could quickly put him right.”

The Prime Minister risked controversy when he appeared to blame Britain for the conflict in Kashmir and many other international disputes during a visit to Pakistan. Asked how Britain could help end the row over Kashmir, he insisted that it was not his place to intervene in the dispute, declaring: “I don’t want to try to insert Britain in some leading role where, as with so many of the world’s problems, we are responsible for the issue in the first place” [my emphasis].

Mr Lang said the Prime Minister’s comments showed why “people in public life need extensive, detailed and accurate historical knowledge, and why the seed of this needs to be sown in the school classroom”. He said that while Britain’s hasty withdrawal from India in 1947 certainly led to the Kashmir dispute, blaming the British overlooked “notably the heightening of inter-communal tensions between Hindus, Sikhs and Muslims”, he said.

Britain’s empire was a “multi-faceted phenomenon”, he said, which “cannot simply be categorised as ‘good’ or ‘bad’”. Mr Lang said that “even historians very critical of British imperial rule recognise that it also left considerable benefits.

In an odd twist, it turns out that Cameron meant this solely for Pakistani consumption, not British (although he probably had little fear of losing his invitation to the royal wedding). In fact, he's said to have directed some f-bombs in the direction of the reporters who made light of this slagging of Pax Britannia in Islamabad:

David Cameron swore angrily on the plane journey back from his trip to Pakistan after he learned of the row caused by his comment that Britain is to blame for many of the world’s problems.

The Prime Minister turned on a journalist who had reported his remark and said, ‘You f*****!’. The outburst came after Mr Cameron’s apparent attempt to distance himself from the UK’s imperial past had received a warm welcome from his audience in Pakistan.

The mixed legacy of British Empire continues to shape our world. However, I do think that despite being received poorly at home by some, Cameron's attempt at humility went down much better than did Kerry trying to lord it over the Pakistanis as if he were the new guv'nor. Having had much time to think what the loss of empire means, the British have a greater appreciation for the subtleties of winning friends and influencing people they did not necessarily have during their salad days.

With America waning, you'd hope it learns these skills, too. Lest we forget, others like the Chinese offer friendship with...fewer demands. At present, the US follows the worms.

The White Man's IMF Burden (Merkel Edition)

♠ Posted by Emmanuel in Bretton Woods Twins,Development,IMF at 5/17/2011 12:01:00 AM

As expected, jockeying for the appointment of the next IMF managing director has begun. In an odd twist on the American deficit lubber's argument that medium-term fiscal consolidation is a desirable objective but not one in the near term since the US is just recovering from a deep recession, we have Europeans offering the same. Here, Europeans who still hold voting rights out of proportion with their share of the world economy claim that while medium-term diversity among heads of Bretton Woods institutions is a desirable goal, it shouldn't happen immediately given the pressing woes of peripheral European economies Greece, Ireland, and Portugal.

Again, I must point out my longstanding objection that the IMF is primarily meant to handle balance-of-payments crises, not fiscal ones alike those being experienced by the troubled trio. What is more, I am not alone in sensing fairly blatant favouritism that is hampering IMF reform to reflect the changing global balance of economic activity as well as a simple misallocation funds. Why should poor countries' IMF contributions be used to assist rich countries that don't really qualify for assistance as per the IMF's articles of agreement concerning BOP difficulties? The IMF shouldn't be a pet EU institution. But enough righteous indignation; here are the Europeans on this issue:

Mr Strauss-Kahn’s arrest on sex charges at the weekend prompted some commentators to declare it may be an opportunity for emerging market countries to take charge of the multilateral lender. But European officials on Monday asserted their case for keeping the top job for a European, as is customary, with Angela Merkel, the German chancellor, leading the charge. Ms Merkel told reporters on Monday that finding a replacement for Mr Strauss-Kahn was “not a question for today”, but given the sovereign debt crisis on the eurozone periphery there were “good reasons” to propose a European candidate...

Didier Reynders, the Belgian finance minister, argued on Monday that “it would be preferable if we continued to hold these posts in the future”.

It becomes a question of, first, to what extent will developing countries protest the continuation of the (neocolonial, perhaps) status quo? Second and based on LDC reactions, to what length will Europeans go to preserve the unwritten tradition of appointing a European head? Various commentators have suggested the Europeans will strike a deal with the Americans who've traditionally appointed the World Bank president to keep things as they are--you scratch my back, etc. Either way, I predict a fight on our hands if history repeats itself:

The comments by Ms Merkel and Mr Reynders suggest that Europe will fight to maintain the tradition at the two institutions. The number two job at the IMF, held by an American, will also become vacant soon when John Lipsky, who is running the fund in Mr Strauss-Kahn’s absence, steps down at the end of August.

Emerging market countries argue that it is unacceptable for Europe and America to continue to stitch up the top jobs even as developing nations take a growing share of the global economy.

However, even European countries that were willing to consider an emerging markets candidate for the IMF this time are having second thoughts now that the fund is central to short-term European interests. Ms Merkel said that developing countries had a right to the top jobs in the “midterm”.

Just as you don't cure American debt addicts by continually providing their fix, so you shouldn't expect Europeans to change their ways by embedding outmoded habits even further. The time of Turkey's Kemal Dervis or a similarly qualified LDC candidate is long overdue. Certainly, you can't say developed nations have an automatic right to lead the IMF by virtue of their superior economic management in this day and age.