Posts of March 2012

Globocop No More: United States After Unipolarity

♠ Posted by Emmanuel at 3/29/2012 09:34:00 AM

LSE IDEAS has been churning out special reports at such a furious pace that I almost forgot to mention this one concerning The United States After Unipolarity. The title pretty much sums up what the contributions here say, although the various contributors do question the extent to which the--pardon the phrasing--globocop role will be outsourced to other nations or regions if not relinquished altogether. In the latter sense, what we may have is not a "changing of the guard" but rather the removal of guard duties not only in security matters but also in global economic governance and so on. While some folks such as yours truly are convinced that movement to a multipolar, superpowerless world is (a) inevitable and (b) a good thing, LSE IDEAS head honcho Michael Cox is less optimistic. As usual with LSE IDEAS, there is no "house" opinion evident (not that we'd want to have one):

However not all authors are equally pessimistic for America’s future. In a foreword, Professor Michael Cox, Co-director of LSE IDEAS, suggests that Europe’s debt crisis could strengthen the US by leaving it perfectly placed to exploit the economic revolution in Asia and to be the “strategic balancer to China’s rising power.”

Still, the dominant theme in the contributions is that America's debts will drown it in a sea of red on present course, diminishing its residual urges for playing globocop. Again, it's not necessarily a bad thing considering that they've spent an estimated $4 trillion on foreign misadventures--including Afghanistan which it's in the process of losing without ifs and buts. Anyway, back to the press blurb:

Professor Morgan, from the University of London, writes that predictions for the US to hit its highest ever debt level in 2023 mean that resources will increasingly be eaten up by social security and medical benefits, leaving the nation increasingly unable to exert power with military or economic levers. He says: “From 2020 onward the future for US military power looks bleaker without a domestic correction of fiscal course. “The United States is slowly awakening to the reality that growing public indebtedness represents the greatest threat to its power and prosperity in the twenty-first century.”

Others authors in the study share this analysis: Dr Adam Quinn, from the University of Birmingham, suggests America will have to start making hard choices about areas in which it will leave itself vulnerable as shrinking military budgets remove the luxury of universal protection. The report points out that the final bill for US involvement in Afghanistan, Iraq and Pakistan is estimated at more than $4 trillion.

Alike with our other reports such as the one on India not likely to become or even aspire to superpower status, PDFs of the individual contributions are available online, although you will have to purchase print copies for posterity. Here's the summary on our (LSE IDEAS, not the main LSE website) page:

Much has been made over the last few years of the prospect of a power transition taking place in world politics, as the United States' dominance of the international system appears increasingly under threat. If this narrative of American decline is at least partially correct then the United States will be forced to rebalance its foreign policy to a world that is no longer 'unambiguously unipolar'.

In this report, we asked a selection of experts to assess the challenges the Obama administration has faced in making that adjustment across a series of policy areas, from redefining how America funds and uses its military, through addressing global economic imbalances, to changing how others in the world view and work with the United States. The authors argue that the Obama administration has attempted to adjust US foreign policy in recognition of changes in the international order. They point to the domestic constraints and political cleavages that stymie that adjustment, and to the international difficulties that arise not just from pursuing a post-unipolar foreign policy, but also from the realities of a post-unipolar world itself.

Tired of the World Bank? Enter BRICS Dev't Bank

♠ Posted by Emmanuel in Africa,China,Development,Latin America,Russia at 3/28/2012 11:58:00 AM

You hoped that the IMF and the World Bank would reflect more of the changes in the world economy by giving more input and leadership to major emerging economies. But, as the IMF succession process proved and the current World Bank "search" (stitch-up is the more accurate term) is proving, Western dominance is still on the cards at these institutions. What can I say? Some people resist change. There has been much lip service from them about including new voices, but at the end of the day, nothing's really changed.

So, if you're tired of poor countries lending to rich countries for things other than what institutions like the IMF were designed for, what we may have here is a "league of their very own" solution. You can be sure that LDC observers with any awareness are unhappy about the IMF currently lending a majority of its funds to Europe. As it so happens, something on the agenda of the ongoing BRICS meetings in New Delhi concerns the creation of a development bank by developing nations for developing nations. (Note that it's the BRICS summit not just the BRICs summit after the inclusion of South Africa in 2010 in addition to Brazil, Russia, India and China.) From the Indo-Asian News Service:

A BRICs development bank will be very useful, particularly to Africa, but a major challenge that may come on its way is aligning the interest of the member countries, said experts. "Within the BRICS group, governments are seeking tangible areas of collaboration, clearly one is [a] development bank. The point of BRICS bank is a very noble venture," said Martyn Davies, CEO of the market research firm Frontier Advisory. "It will be very beneficial, particularly to the sub-Saharan Africa," Davies said at a seminar organised by his company in partnership with Johannesburg Stock Exchange.

The matter is on the agenda of the BRICS' -- Brazil, Russia, India, China and South Africa -- two-day summit in Delhi starting Wednesday. Davies said the main challenges in setting up a BRICS bank will be risk management and aligning the respective interest of the member countries. "Cash is not a problem," he added. State Bank of India's (SBI) Africa head Mathai Vaidyan said the idea is good, but it will be very difficult to arrive at a consensus.

It's a continuation of dicussions by various industry representatives about how investment among LDCs can be enhanced:

Tuesday's seminar themed "The Commercial Strategies of Emerging Markets and New Emerging Multinationals in Africa" was attended by senior bankers and business representatives from the BRICS nations.The meeting shared the experiences and challenges faced by companies from BRICS countries, as well as ideas on how the emerging markets can boost investment in Africa. "I think the challenge is the creation of efficient bureaucracy through which capital will be deployed into infrastructure development, particularly in Africa," Davies told Xinhua. The Africa head of a Brazilian company added: "If it matches the interests of all members, let's go for it."

There is a massive literature on Western nations using Bretton Woods institutions for their own objectives rather than development per se. Given that Western nations helped set them up, regional development banks alike the Asian Development Bank, Inter-American Development Bank and African Development Bank are not entirely free from this criticism either. So, why not an LDC development lender? Certainly these countries do not lack for investible funds at this point in time given that most are running sizable external surpluses.

That said, the political obstacles are formidable in terms of siting, coordination and supervision and so forth were they to push through with the BRICS Development Bank [BDB--you heard it here first; Jim O'Neill, eat your heart out!--or probably not]. Who's to say that these countries will by themselves be free from the bickering at the IMF and World Bank which is driving them to set up shop elsewhere?

I must also note that such plans are hardly unique. Witness the still missing in action Banco del Sur. Ah well, I suppose it's a start. May it lead to something concrete and useful--something noticeably lacking in the history of South-South cooperation.

UPDATE: Also see an earlier al-Jazeera article on the purported BRICS Development Bank.

Did Global Financial Crisis Curb Carbon Emissions?

♠ Posted by Emmanuel in Americana,China,Development,Energy,Environment at 3/27/2012 12:23:00 PM

In a rather disappointing word, no. Intuitively, you may have expected worldwide carbon emissions to drop given a slowdown in global economic activity. However, it is a tale of two different worlds--the Global North (developed nations) and the Global South (the developing nations). While the likes of North America and Europe did experience fairly significant slowdowns in both economic activity and corresponding carbon emissions, that pattern did not hold in the developing world.

While searching for material on global environmental governance for my IPE class--I am the very model of a modern IPE instructor--I came across a very informative piece from Science Daily regarding recession and carbon emissions. The gist of it is as I mentioned above was nary a blip in LDCs' emissions, powered especially by major emerging economies:

The sharp decrease in global carbon dioxide emissions attributed to the worldwide financial crisis in 2009 quickly rebounded in 2010, according to research supported by the Carbon Dioxide Information Analysis Center at the Department of Energy's Oak Ridge National Laboratory. In 2010, emissions reached an all-time high of 9.1 billion tons of carbon, compared with 8.6 billion tons in 2009. The downturn was also followed by milestone carbon dioxide emissions from the developing world's emerging economies. In developing countries, consumption-based emissions, or those emissions associated with the consumption of goods and services, increased 6.1 percent over 2009 and 2010.

As a result, 2009 marked the first time that developing countries had higher consumption-based emissions than developed countries. "Previously, developed countries released more carbon dioxide, but that's no longer true due to emerging economies in developing countries, such as China and India," said Tom Boden of ORNL's CDIAC. "This trend will likely continue in the future based on current developments."

The news release further argues that the increasing energy intensity of the world economy (more energy inputs needed per GDP of output) accounts for this unpromising pattern. The accompanying graph tells the story. Note that it separates these emissions into production and consumption:

The problem is one of historical fairness in curbing carbon emissions: how can developed nations tell developing ones with a straight face that they should drastically cut emissions now that they are now responsible for the lion's share of them? After all, developed nations are responsible for more of them when viewed in a historical perspective. As one of my students pointed out, it's a rehash of Friedrich List's "kicking away the ladder" criticism, but instead involving carbon-intensive means of development instead of tools of industrial policy. Having developed through the use of carbon-intensive industries, are these industrialized nations now "kicking away the ladder" to development they themselves once used?

It puts me in a bind. While perhaps unfair to LDCs, the honest truth is that Mother Earth could not care less if these emissions emanate from rich or poor nations.

NOTE: The US Energy Information Administration has specific emissions figures for countries such as superpolluters China and the United States that mirror the findings above. Indeed, the current slowdown in manufacturing activity in China--five straight monthly declines--may bode better for the environment than the global financial crisis did.

World Bank Boss: Kim, Okonjo-Iweala or Ocampo?

♠ Posted by Emmanuel in Africa,Bretton Woods Twins,Health,Latin America at 3/26/2012 05:30:00 PM

I'd like to say the competition to become the next World bank president is heating up if it weren't for the common understanding that it will be another American stitch-up. While I'd have preferred the term "whitewash," the White House has thrown those of us who are critical of Western domination of these institutions a curveball by nominating an Asian-American candidate in Jim Yong Kim. Thinking it over, I can offer a number of pros and cons. Starting with the good stuff I can think of--I am a charitable lad, yes...

Global health is one of the areas where multilateral development institutions have actually made significant strides. Disease prevention is usually a large-scale intervention, and it is here where top-down efforts have shown promise. Witness the eradication of smallpox and the near-eradication of river blindness for instance. Since Kim's global advocacy is more on TB and HIV/AIDS, the more tentative results there are not really indicative of a lack of skill but of the increased difficulty in addressing the illness at hand;
Becoming a university president--especially at a venerable Ivy League institution like Dartmouth--involves no small amount of political skill (Larry Summers notwithstanding);
It will be a welcome change to have a physician by training head the World Bank instead of yet another economist or political scientist;
It is also good that Jim Yong Kim is not a loyal party figure alike Zoellick and his American predecessors but rather someone who does not really come from the inner circles of US politics.

On the downside, though...

This "pick a non-Caucasian to silence the critics" strategy would work better even as a token if he came from an LDC. Remember, South Korea famously joined the OECD in 1996 just before the outbreak of the Asian financial crisis a year after. We kicked it out of the G-77 after acceding to this rich country club, so he's not really someone who comes from today's Global South;
His post as a university president aside, he will need to juggle conflicting interests from rich countries wishing to keep their hegemony at the World Bank as is and poor ones that are interested in being more involved in global governance but have found it hard to be among the big boys. There is not much from his previous experience that may prepare him for the rough-and-tumble of development politics.

Let's now turn to Ngozi Okonjo-Iweala, the Nigerian who's put her name up for candidacy via her supporting countries' World Bank representative. Also there's Jose Antonio Ocampo, the Colombian candidate put forward by a number of Latin American nations. Alike the bid by the Mexican Agustin Carstens to replace the infamous Dominique Strauss-Kahn at the IMF, it's probably best not to take these two bids very seriously (unfortunately)...

The Jim Yong Kim ploy aside, the US shows no signs of breaking its stranglehold on World Bank leadership anytime soon, so both bids are forwarded more as "protest" votes;
Alike Carstens, both LDC candidates are hampered by iffy support from disunited developing countries. After all, they've again failed to rally around a single candidate. Alike the Americans with their blinders, those that have volunteered someone have chosen a person from their own region. Not much "third world solidarity" here, eh? United we stand, divided we fall it is once more;
Moreover, many other LDCs would probably be dissuaded from backing someone other than the US pick in justifiable fears of retribution from the West through vetoing future World Bank loans and grants;
What's more, many "realists" would prefer to just aim for the backup spots alike being a World Bank managing director (the #2s). Indonesia's Sri Mulyani Indrawati probably understands this glass ceiling more than most. Call it the Zhu Min strategy;
Okonjo-Iweala and Ocampo are hardcore development persons familiar with those working in this area and many LDC grandees. However, this status may actually detract from the idea of bringing in new blood in development work.

So in some (symbolic) ways Jim Yong Kim marks a real break as the American nominee--in terms of being a doctor by profession and an outsider to US politics. That said, these token gestures are unlikely to comfort the likes of yours truly since the guy probably knows who butters his bread when push comes to shove. At least U2's Bono was non-American. The more things change, the more things stay the same.

UPDATE: There is a lot of relevant material on the succession debate from the "World Bank President" site co-authored by my colleague Peter Chowla of the Bretton Woods Project.

'The World Economy Reeks Again, So Buy Yen'

♠ Posted by Emmanuel in Currencies,Japan at 3/23/2012 09:53:00 AM

I have an avowed love-hate relationship with newswire coverage of various financial markets. With regard to currencies, one of the things I am most cautious about is the need to constantly provide explanations of why currency movements occur. I suppose having to provide a laundry list of reasons is a necessary task in the news business. Yet, the ephemeral nature of the task makes it subject to no small amount of improvisation and, dare I say it, conjecture.

Something that's fascinated me as of late are movements in the Japanese yen. Despite the continuing deflationary situation, the aftermath of the terrible tsunami and their budget deficit over 200% of GDP, the yen managed to strengthen to all-time (nominal) highs. Many reasons have been given for the mighty yen--some convincing, others less so.

However, the yen appears to have run out of nitro or whatever is fuelling its ascent in recent weeks as the currency has shown signs of coming back to Earth and the gravity of Japan's unpromising economic situation reasserts itself. Or think again. What we've have in the past few days is the yen strengthening against most other major currencies as "risk off" conditions indicative of the global economy slowing down once more favour it once more as a safe haven bet (of sorts). From Reuters:

The safe-haven yen held on to overnight gains in Asia on Friday, having risen across the board as investors gave risk currencies like the Australian dollar a wide berth on worries about the health of the global economy. Surveys on Thursday showed manufacturing shrank for a fifth month in China, while factory activity in Germany and France -- Europe's two biggest economies -- suffered big falls.

This prompted investors to dump growth-linked currencies and take shelter in the yen, which rose against the dollar, euro, Aussie and kiwi. The dollar fell more than 1 percent on Thursday to a 1-1/2 week low of 82.31 yen, before recovering a bit of ground to last stand at 82.60. "Fears of a Chinese hard landing are on the rise; overdone we think," said Vincent Chaigneau, strategist at Societe Generale. "Concerns over Europe are burgeoning again, rightly so given the weak economy and the toxic focus on enlarging the firewall," he added.

So we have above the World Economy Reeks explanation for safe haven flows into the yen without necessarily comprehending why the Japanese yen would be a safer choice than, say, the Canadian dollar. At the risk of adding to this already long laundry list of explanations of how Things Going Wrong Elsewhere Affect the Yen, consider too the annual Yen Repatriation Story in the run-up to the end of March when Japan's financial year ends. Some IPE bozo explains the phenomenon thusly:

Longtime FX followers will know that yen movements around this time of the year are attributed to repatriation flows as firms wrap up their fiscal year at the end of March. That is, they need to reconvert their foreign exchange holdings back to yen for the purposes of financial reporting as they close the books.

However, the MoF indicates that it canvassed Japanese MNCs' requirements for purchasing yen for the said event and found that there would be no large requirement this year. Go figure; FX is an especially wacky game to speculate in.

Why the US Ain't in the Inter-Parliamentary Union

♠ Posted by Emmanuel in Americana,Governance at 3/22/2012 08:43:00 AM

Here's another factoid you can use to embarrass even the most vaunted international relations pooh-bahs alike my blogging colleagues (especially of the garden-variety American sort): Ask them whether the United States is a member of the Inter-Parliamentary Union composed of nations that have legislatures. The response you'll probably get involves something along the lines of (1) "I didn't even know there was such as thing" and (2) "as a global promoter of democracy, the US is probably a member of it."

Both responses are embarrassing in the sense that, (1) even if the Inter-Parliamenary Union is obscure--hence my fondness of it--the folks who blather endlessly about democracy promotion are mostly unaware of its existence. What's more, (2) there has been no clamour on the part of these ostensible champions of democracy to regain lost US membership in the institution.

In any event, here's a neat description from a Congressional Report Service document on democracy promotion that I found while researching something related that speaks to this discrepancy of non-membership. From footnote 83:

The IPU was established in 1889 as an association of individual parliamentarians and the world’s first permanent multilateral political forum. The United States was one of the original participants in IPU activities begun in 1889 and formally joined in 1935 when the House and Senate enacted statutory authority for U.S. participation in the IPU (49 Stat. 425). Congressional participation in the IPU gradually diminished. In July 1997, Congress (through the Clerk of the House and Secretary of the Senate) notified the IPU that, given the diminished congressional participation, the U.S. Congress could no longer justify the annual U.S. contribution of almost $1 million or 15% of the IPU annual budget and had decided to reduce its membership status and proposed to make an annual donation of $500,000 to support the aims of the organization. The IPU Executive Committee did not accept the offer so, in 1998, Congress passed legislation to end U.S. participation on October 1, 1999 (ultimately attached to P.L. 105-277, Sec. 2503). It would presumably require new legislation to restore U.S. membership.

It is odd how American lawmakers in 1999 could not justify spending a million dollars annually on an institution that it was a founding member of that spoke to its avowed ideals. Meanwhile, they soon had little trouble justifying spending tens of billions annually year in and year out prosecuting (highly unsuccessful) misadventures in promoting democracy in places like Afghanistan and Iraq. While largely symbolic, what does US non-membership in the Inter-Parliamentary Union symbolize for these folks who endlessly bloviate about the importance of freedom?

Tracing Chinese (Linguistic) Hegemony in Asia

♠ Posted by Emmanuel in China,Culture at 3/22/2012 06:45:00 AM

For all the debate we have around here and practically everybody else especially those in policy circles about the meaning of China's rise--is it peaceful, is it developmentally beneficial for others, is it rising in such a way that it will eventually eclipse Western powers, etc--this sort of talk elides an important thing. That is, China has already had a profound influence on its neighbours for a very long time. Particularly through trade came the diffusion of several aspects of Chinese culture such as language.

A new feature from our friends over at World Policy Journal provides an example of China's enduring, multi-millennial linguistic influence in the region through the characters for "horse." It's a simple demonstration that reiterates the larger point that the Middle Kingdom's influence was once very considerable, and that it is not inconceivable that it can be again. Especially with trade flows emanating from there increasing by leaps and bounds, who's to say that those of us living near China aren't on the cusp of the PRC becoming dominant once more for better or worse?

The signs past and present, ah, point in that general direction.

Where's the Pork? US, Taiwan Fight Over Additives

♠ Posted by Emmanuel at 3/19/2012 03:31:00 AM

I am generally sympathetic to American agricultural techniques that others are squeamish about, but not with heavy-handed US trade advocacy that gives such techniques a bad name. Today we have another case in point in Taiwan .For one reason or another, erstwhile allies of the United States in the Asia-Pacific have vociferously contested the United States' attempts to sell what they believe are meat products of suspect safety. Witness the mass protests in 2008 against imports of older US beef into South Korea that are, by virtue of age, more susceptible to mad cow disease. Lest you think these were fringe protests, they almost toppled Lee Myun-Bak as tens of thousands took to the streets.

Nowadays we have a similar phenomenon going on in Taiwan. This time, though, the protests concern US pressure for the removal of Taiwan's ban on growth-enhancing additives--especially for pork. Controversies over the US using this sort of stuff are hardly new, nor are US efforts to remove barriers to their acceptance. Recall that nearly since the inception of the WTO in 1995, American trade authorities have been at it alike with its epic stand against the EU over beef hormones.

Whereas the likes of the EU have been proven to have political economies ideal for resisting American pressure on agriculture, Taiwan is not for a number of reasons. While the US is duty-bound to protect the ROC against PRC incursions, there are several other considerations besides. Ever since the PRC gained recognition at the United Nations as "the real China" and assumed its seat in the security council in 1971, Taiwan has been stuck in a diplomatic no-man's land. In political matters, its quasi-state status has been something other countries have taken advantage of. In economic matters, Taiwan has largely missed the boat on the proliferation of trade deals in the Asia-Pacific. Not only is it not a state in the eyes of most in the region, but those who are sympathetic to it are nonetheless wary of signing trade deals with Taiwan lest they offend the increasingly powerful PRC.

As it so happens, the United States is taking advantage of its "ally" Taiwan's vulnerability on both these fronts concerning the use of growth-enhancing additives. Alike in South Korea, the US throwing its weight around in agricultural matters has provoked a popular backlash as dung-throwing masses have accosted police forces in mass rallies. All these are occurring against the backdrop of Taiwan supposedly wanting to join negotiations to enlarge the APEC-based Trans-Pacific Partnership. Remember that Taiwan is, after all, an APEC participant:

Thousands of pig farmers throwing dung in the streets of Taipei. Demonstrators marching on America’s informal embassy wearing Uncle Sam hats and leering cow masks. Opposition lawmakers chanting slogans and occupying the speaker’s podium in parliament, disrupting the opening session and delaying the prime minister’s inaugural speech. These are all episodes in a growing row over meat imports into Taiwan that is pitting America, the island’s most important ally, against the vast mass of public opinion—and forcing the government of the recently re-elected president, Ma Ying-jeou, to manoeuvre frantically between the two.

At issue are American exports to Taiwan of meat that contains ractopamine, a controversial growth compound fed to cattle and pigs and which is banned by Taiwan, the European Union and China. The Americans want Taiwan to lift its ban. They point out that 27 countries have found meat from animals fed with ractopamine to be safe for humans, and are asking Taiwan to set maximum residual levels for allowable amounts instead. America has made clear that unless this is done it will not agree to any new economic initiatives with the diplomatically isolated island, including bilateral tax and investment agreements. And it will not champion Taiwan’s membership of the American-led Trans-Pacific Partnership (TPP), a nascent free-trade group.

The science of it is under scrutiny. While I am inclined to believe the US government's arguments about the practice's safety, many others beg to differ--including most Taiwanese:

Yet public opinion and Taiwanese meat producers vociferously support the ban. They claim that over 100 countries ban the drug (a claim the Americans contest). Toxicologists also argue that residual concentrations of the drug are five to ten times higher in offal, which is eaten by Asians but not often by Americans.

Call it the guano of globalization. It bears repeating that Taiwan's diplomatic isolation is largely due to the US warming up to China all those years ago. But, instead of shoring up Taiwan's economic vulnerability, the US does this sort of thing despite the ractopamine ban likely being WTO-legal. Despite my reservations about the cause of these protests, all I can say for Taiwan is that with friends like these..

Mobile Phones 4 Everything, Water Security Edn

♠ Posted by Emmanuel in Africa,Development,Security at 3/16/2012 08:39:00 AM

By now I'm probably known to longtime readers as the information and communication technology for development (ICT4D) skeptic guy due to my Foreign Affairs contribution casting doubt on the US state department's digital diplomacy efforts as well as the MIT Media Labs' One Laptop Per Child (OLPC) initiative. Well, that's not entirely correct, I must say. For instance, I have been following the cutting-edge innovations in sending remittances through these very technologies. As with most things, ideas to harness ICT for development differ in the quality of execution. Many will fail, but some will succeed.

So it is with quite some interest that I read a new contribution in Global Policy concerning the use of mobile phones for water security in Africa, where several countries with the most extreme shortages of this valuable resource lie [click to enlarge image above]. Especially now when the finitude of water is becoming increasingly recognized, this previous resource benefits from being made more available in a timely manner. Not only are conflicts over water increasing, but the realities of climate change make it more important.

Hearteningly,many of the most advanced mobile telephony services are found in the African continent due more to necessity than anything else. Rob Hope, Tim Foster, Alex Money and Michael Rouse offer the following abstract and policy implications of their work:
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Water security aims to provide safe, reliable, affordable and sufficient water for people, agriculture, industry and ecosystems, subject to societal choices across related trade-offs and risks. Managing resource risks, delivering effective governance, promoting financial sustainability and achieving social equity are central to achieving water security. We explore how innovations in mobile communications have created an inclusive, secure and low cost architecture for financial and data flows to reduce risk and enhance water security. In Africa, water security challenges associated with climate extremes and population growth outstripping improved water services’ access are juxtaposed with its global lead in mobile commerce innovations, including mobile water payments. Market driven expansion of mobile network coverage and low cost, mobile handsets mean more Africans will be connected to mobile phone services than those receiving improved water services in 2012. The confluence of rapid mobile network expansion, mobile phone ownership, mobile water payments and smart metering technologies offer new policy pathways to water security to accelerate progress on sustainable, safe water access, particularly for those in the greatest need and those most difficult to reach. We chart emerging mobile water innovations in Africa and policy implications in the region and beyond.

Policy Implications

Mobile communication innovations offer an inclusive, secure and low cost architecture for financial and data flows that can reduce or share risk to enhance water security.
The confluence of mobile network coverage, mobile phone ownership, mobile water payments and smart water metering technologies has significant but uncharted potential to enhance water security.
Innovations are being driven by the commercial interests of mobile network operators with the distributional impacts and implications yet to be evaluated or shaped by policy and governance regimes.
Living in rural and remote areas may no longer be synonymous with a higher risk of water insecurity as mobile connectivity could permit innovative management models at scale

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At this point in time in the climate change game, all innovations of this sort that can actually address a significant problem are certainly welcome.

Iceland Considers Dollarization (Canadian $ That Is)

♠ Posted by Emmanuel in Credit Crisis,Europe at 3/14/2012 11:21:00 AM

More so in years long past, many countries used to adopt the US dollar as their own to assume the benefits conferred by the world's standard currency. Among other things, these included liquidity, price stability and being a reasonable store of value. While an independent monetary policy was forsaken--or at least "outsourced" to the Fed--many smaller economies came to the conclusion that adopting the US dollar outweighed the benefits. In recent years, of course, the dollar's uncertain status has begun to erode its advantages and hence the lure of dollarization.

For some time now, the small, open economy of Iceland has been looking to replace its krona with something less volatile in the wake of its financial crisis that eventually ended in tears via an IMF bailout. How do you quell the "violence of the market"? Being a small, open economy renders one's own currency more subject to the changing winds. As a European nation, Iceland naturally thought of joining the EU and particularly the EMU to solve this issue, but lately it's had second thoughts given the variegated PIGS implosions. That is, if many of those countries have gone to the IMF poorhouse anyway, what's the advantage for Iceland? In reality, the conditionalities applied there were less harsh than those in Greece or Portugal, allowing for populist measures to pass:

Not only are Icelanders taking note of the increasingly frantic efforts of politicians in countries hundreds of kilometres away to save the euro, they are finding that their own financial circumstances constitute less of an emergency. The conditions attached to their bailout by the IMF seem comparatively lenient.

The new government of 2009 was allowed to carry on borrowing and spending for another year before the cuts kicked in. In the meantime, devaluation - something impossible for eurozone members - meant all-important exports suddenly became competitive again. Unemployment is already falling. Many people's mortgages were quietly "re-negotiated" by the newly nationalised banks.

The richest 5-7% of the population have been subjected to a new wealth tax. The welfare state and the health service were shielded from the biggest savings and public sector workers have recently been awarded an above-inflation wage rise. Opinion polls suggest a clear majority of Icelanders now oppose joining the EU and the finance minister, overseeing all these changes, is among them.

Now there is talk of adopting dollars instead of euros. But, the interesting this is that they're talking about Canadian dollars here. I've often thought of Canadians as the more civilized North Americans, on a far sounder economic footing than their restless, warmongering neighbours. These folks actually understand that deficits do matter. There are excellent reasons why the loonie (Canadian dollar) has strengthened so much against the play money used by those free lunch lovers across the border. You needn't wonder who's still got a triple-A debt rating, either.
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Accordingly, the Globe and Mail brings us five reasons for the improbable adoption of the loonie by Iceland. As it turns out, some Canadians are pushing for it with gusto:

1. Seigniorage: “Printing money is a good thing for Canada,” [economist Justin] Wolfers said. “Every dollar in circulation is on the debit side of the central bank’s balance sheet, and they’re effectively borrowing from the Icelanders at a zero-per-cent interest rate.” So if there are no strings attached, why not? Or, as Mr. Wolfers put it, referring to Iceland, “as long as you’re a bastard, it’s all profit.”

2. A stable currency: Iceland could of course benefit from a devalued currency. Instead it would get a strong, stable currency that has been something of a haven during this post-crisis period of uncertainty. While strong, exporters at least know what to expect. Consider, too, that the Canadian dollar is liquid. The krona was "blasted through smithereens and very few banks can trade [it] in anything else than very small amounts..."

3. Respected central bank: Iceland would of course have no say in monetary policy, but it would have a currency overseen by a very strong central bank and governor, who led Canada out of the recession admirably. Mark Carney is also respected on the global stage, having recently been named to head up the Financial Stability Board.

4. Fiscal, economic stability: Iceland has no reputation in the wake of its banking collapse. Who would you prefer at that point, a euro zone crippled by recession and a two-year-old debt crisis, or Canada? With Canada, you get a stable, if lukewarm, economic outlook, a government that’s still rated triple-A, and a fiscal standing to die for (if you’re Greece or Portugal). And, we can count.

5. Our glowing hearts For Iceland, do not underestimate friendship in this post-crisis era of currency manipulation and mounting trade tensions. We’re a wonderful people, they’re a wonderful people. We’ve got a beautiful country, they’ve got a beautiful country. True, it gets cold in Canada in the winter, but remember we’re talking about Iceland. And surely we can forgive them for Björk.
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It's a fairly off-the-wall thing to do to adopt the Canadian dollar, but hey, the economic rationale seems to be straightforward once you get over the initial shock of the idea.

Jackson-Vanik, Cold War US-Russia Trade Irritant

♠ Posted by Emmanuel in Economic History,Migration,Russia,Trade at 3/13/2012 04:55:00 PM

I recently visited Singapore and was given a quaint reminder of days gone by when, while checking into my hotel, I noticed a separate registration section needed to be filled by unmarried guests sharing the same room. Quibble if you will with the moralistic tone of this practice, but it's definitely not in tune with the times. In a similar vein, I came across yet another practice that seems to have been lifted from antiquity concerning the application of the Jackson-Vanik amendment against Russia which dates from the heyday of one Leonid Brezhnev.

In 1974, Senator Henry Jackson (D-WA) and Congressman Charles Vanik (D-OH) introduced the eponymous amendment which forbids the US from granting most-favoured nation (MFN) status or permanent normalized trade relations (PNTR) in American trade legalese to nations that restricted emigration of their citizens. The Soviet Union had effectively put into place severe limits on emigration to Western nations--especially its most skilled including Jewish citizens. Call it the totalitarian, zero tolerance approach to brain drain. In turn, I assume that the US found this practice to be a gross violation of human rights based on the Universal Declaration of Human Rights wherein Article 13 (2) states "Everyone has the right to leave any country, including his own, and to return to his country."

But that was a long time ago in a political context far, far away. While Jackson-Vanik has become an all-purpose American cudgel against Russia, the honest truth is that the Sov...I mean, Russians have long since relented on such limits to emigration. Nearly all mainstream media commentators have missed this important point that they are now "in compliance" with Jackson-Vanik. Inter alia, over a million Jews have emigrated from the USS...I mean, Russia to Israel. Nowadays, Israelis are instead complaining of integration issues arising from too much emigration from Russia:

Twenty years after Russia opened its doors to mass emigration, the number of immigrants choosing to move to Israel has stagnated. Since 1989, over one million Russians have immigrated to Israel. In the past few years, Israel has seen an average of between five and six thousand Russian immigrants per year.

Professor Eliezer Leshem, a former Hebrew University professor and current Professor Emeritus at Ariel University Center of Samaria, believes that the current cessation of immigration may have something to do with discrimination many Russians felt while being absorbed into Israeli society.

Russians have long been able to settle wherever they want--including the United States as I myself remember from my MBA days when many American classmates had Russian wives. Yet the US has found it politically expedient to continue applying Jackson-Vanik against Russia. A few months ago I relayed the much-anticipated news that Russia would at last join the WTO. The problem here with regard to Jackson-Vanik is that the WTO requires that its members extend MFN treatment to one another. Hence, the Obama administration's recognition of this basic understanding is behind its argument to lift Jackson-Vanik against Russia.

Speaking of Cold War remnants, though, it is unsurprising that it's the neoconservative wing of American politics that is most fervently opposed to removing Jackson-Vanik (which is doubly odd in that Democrats authored this legislation long ago.) For instance, that bastion of right-leaning thought the WSJ op-ed pages says a repeal of the amendment would come "From Obama With Love" by effectively approving of Vladimir Putin's suspect election victory (among other nefarious practices).

To cut a long story short, the US has only two real options here regarding Russia's membership as a Congressional Report Service report anticipated in 2005. First, the US can do what it has done for several other nations it has applied Jackson-Vanik against by granting MFN status upon WTO accession. Which is what several Democratic lawmakers have been pushing for quite some time now. Second, the US can relive the Cold War by refusing to grant PNTR status to Russia, which violates its WTO MFN commitments. The only possible workaround is for the US (and by implication Russia) to pretend the WTO doesn't exist:

[I]nvoke the "non-application principle" of the WTO. For newly acceding countries, a member of the WTO can opt out of WTO commitments with respect to the newly acceding country if it invokes the “non-application” principle [Article XIII of the Marrakesh Agreement to be precise]. If the U.S. were to invoke the non-application principle against Russia, it means that the U.S. would refuse to honor its WTO obligations to Russia. But non-application is reciprocal. So the U.S. would not have any assurance that its exporters or investors would be treated in Russia according to Russia's WTO commitments.

It would certainly have been a rather pointless process to extract all sorts of commitments from Russia to accede to the WTO only for its most influential member to ignore the fact that Russia is indeed a WTO member. But, that's world politics for you. Note however that business lobbies think it would be a daft idea not to repeal Jackson-Vanik after everything that's transpired:

The business community has also “come out in full force,” going on the Hill to make it clear Russia is a priority, said the Baucus aide. A business coalition–whose members include major groups such as the U.S. Chamber of Commerce and National Association of Manufacturers as well as multinationals such as Boeing Co. and General Electric Co., announced earlier this month that restoring trade relations with Russia will be the top trade priority this year.

If this is indeed what will occur, note that the only current WTO member with the dubious distinction of not being granted MFN status by the US is Moldova:

In practice, the U.S. has dropped Jackson-Vanik on all countries that have acceded to the WTO with one exception. In the cases of Albania, Bulgaria Cambodia, Estonia, Latvia and Lithuania, Jackson-Vanik was repealed prior to accession. In the cases of Mongolia, Armenia, Georgia, Kyrgyzstan it was repealed after accession, so the "non-application" principle was invoked, but eventually removed within a year or two. (In the case of Georgia, non-application was never invoked since Jackson-Vanik was removed soon enough after accession.) Only in the case of Moldova does Jackson-Vanik still apply to a country that acceded to the WTO.

Moldovans too have been freely emigrating for years, so their holdup must be for other reasons.

We'll see what happens as the US congress begins deliberations over the implications of Russian WTO membership later this week. Even Putin's opponents can agree that trade with Russia should not be curtailed via Jackson-Vanik (but rather economic ties with specific human rights offenders through separate legislation). Me? I'll be cueing up Springsteen's "Glory Days" as a backhanded salute to those poor souls who simply cannot accept that the world has moved on--in the wink of a young girl's eye.

Boeing Flies High With Chinese Over EU Carbon Cap

♠ Posted by Emmanuel in China,Environment,Europe,Trade at 3/12/2012 02:35:00 AM

For all the trade conflicts going on between China and the US, here's something that goes against the grain.Think of the US being a beneficiary of a trade conflict involving China and some other country.. That is exactly the sort of thing going on here. To be sure, China and the EU have at least as much trade conflict going on as China and the US. However, that this particular PRC-EU spat redounds to the benefit of the US is remarkable.

A few moons ago I discussed the possibilities for the EU initiating a nasty trade row over it extending its carbon emissions regulations to cover aircraft emissions in 2012 [1, 2]. It's certainly true that the airline industry should be covered in an environmental regulation scheme insofar as jetliners obviously have carbon emissions. However, controversy surrounds the EU also including miles incurred by foreign airlines landing in EU airports and not only those within EU airspace. That is, foreign carriers and their home nations claim unjust inclusion over "extraterritorial" grounds. In this regard the world's superpolluters China and America are united to name check a now-defunct airline.

With these regulations coming into effect in 2012 without much attention paid to the foreign dissenters, it may finally be coming to pass that substantial orders for Airbus aircraft by Chinese carriers may be cancelled in favour of those of Boeing. Or at least a senior PRC official hints while Airbus parent company EADS is in limbo over halted deliveries...

China's ambassador to the European Union said it "makes sense" for Chinese airlines to shun Europe's Airbus planes in favor of competing American models from Boeing Co. in response to the EU's new levies on aviation greenhouse emissions. Wu Hailong's comments are among the first by a senior Chinese official linking Beijing's displeasure with the EU's emissions trading system, or ETS, to jetliner sales by the Airbus unit of [EADS].

EADS chief executive Louis Gallois on Thursday said that the Chinese government is withholding final approval on contracts for 45 Airbus jetliners with a catalog value of $12 billion because of ETS. Mr. Wu said that when the EU includes a Chinese airline in the ETS, "it makes sense for them to go to Boeing."

With the PRC becoming an important source of passengers--both businesspersons and tourists--this row is set to run:

Officials in Beijing have not commented officially on Mr. Gallois's statement that China was delaying approval. In China, airplane orders have traditionally required government approval. Mr. Wu in Brussels said that Chinese airplane orders are "largely a commercial decision by the airline, but of course their decision will be influenced by the position of the central government on ETS."

While environmentalist may commend EU nations on their commitment to the environment, its environmental ministers of course do not necessarily represent the manufacturing constituencies where Airbus models are made and assembled. In this way a smaller but more evenly spread out industry alike agriculture has better representation of its interests in Brussels compared to a larger but more concentrated one alike aeronautics.

Still, if there ever was a trade and environment issue ripe for a WTO Dispute Settlement Mechanism case, it would be this one.

Yanks Never Learn: US Imports Hit Record High

♠ Posted by Emmanuel in Cheneynomics,Credit Crisis at 3/10/2012 12:18:00 PM

This has to be the most ridiculous story I've seen all week long. One that once again demonstrates that you don't have to go much further than the Yahoo! News front page for IPE-relevant material. For all the hot air about "global rebalancing," the Yanks seem to be repeating the Bushite formula for Guaranteed Economic Disaster, with PIGs' pork seasoning for added flavouring to keep things current. We already know that after having run massive fiscal deficits which did not nothing other than make things ripe for a crisis, the US have upped the ante by running trillion dollar budget deficits for four straight years with no end in sight.

Others said, "well at least the current account deficit is getting under control." Which, unfortunately, is not really happening. The trouble with these people is that they do the same thing over and over again and expect different results. Just as a consumption binge was driving US "growth" in the run-up to the crisis, so we have another one going on now. The evidence is a return to skull-crushing external deficits to accompany the budgetary one. They don't call them twin deficits for nothing as US imports hit all-time highs:

The U.S. trade deficit widened more than expected in January as high oil prices and resurgent demand helped pushed imports to a record high, a Commerce Department report showed on Friday. The trade gap swelled more than 4 percent to $52.6 billion, the highest since October 2008. The department also raised its estimate of the December trade deficit to $50.4 billion, from its previous figure of $48.8 billion. Imports rose 2.1 percent to a record $233.4 billion. China accounted for a big share of the gain, with imports from that country rising 4.7 percent to $34.4 billion.

For the chronologically-minded, the Reuters article reminds us of the last time the US began running these sorts of external deficits:

Goods imports reached the highest level since July 2008, just before the financial crisis caused world trade to plummet. Stronger U.S. demand also pushed imports of services, autos, capital goods and food, feeds and beverages to record highs.

The overall point is this: the US economy has not really reoriented itself away from being consumption-driven. Although American exports are rising, they obviously aren't rising enough to offset runaway increases in consumption-driven importation.

Though I hate to make predictions, consider the situation at the moment Stateside to what it was right up to the breakout of the crisis when many economic commentators believed that things were just hunky-dory: Back then you had colossal budget and current account deficits plus a run-up in equity prices--record stock market index levels even--driven by money-for-nothing monetary policies. Add in other suspiciously good macroeconomic figures such as that for employment. And at the present time we have...exactly the same sorts of things.

Everything old is new again. Indeed, some people never learn. Another walloping of the US economy looks like it's in the offing, and it would be interesting to see the aftermath if it happens before the 2012 presidential elections. Yet sooner or later the US will pay a well-deserved price for its renewed prodigality--unless you're of the free lunch persuasion, of course.

India Isn't a Superpower (and May Never Be)

♠ Posted by Emmanuel in India at 3/09/2012 01:58:00 PM

It's once again time to feature an LSE IDEAS publication as I sometimes do. Although hosting Niall Ferguson was something of an event for us--he is in many respects a one-man travelling circus of his own--we now have another Phillip Roman chairholder in Ramachandra Guha. Although he is somewhat less well-known to Western audiences than the aforementioned economic historian, Guha nevertheless brings some unique perspectives on modern India. For a research centre that purportedly concerns itself with grand strategy, IDEAS is of course particularly interested in what's up with China and India as well as what role they will play in the future. So, just as we had US-China relations historian Chen Jian as the Phillip Roman chair a few years back, now we have Ramachandra Guha.He's been making the most of his time at LSE IDEAS by drawing much favourable attention to his, well, ideas [1, 2].

Once more, the press blurb describes the contents of our latest special report well by considering India's fitness for superpowerdom if there ever was such a qualification [!?]:

The authors argue that despite India’s rising power and wealth it remains shackled by weaknesses which include corruption and poor leadership, extreme social divisions, internal security threats and religious extremism.

The report – India: the next superpower? – features essays by nine experts which examine the nation’s economy, defence, government, culture, environment and society. While they acknowledge the country’s formidable achievements in fostering democracy, growth and cultural dynamism, they generally agree that its structural weaknesses mean that it cannot yet call itself a superpower or be considered a full counterweight to the influence of China (as some in the West have hoped).

And the headliner as suggested above is the contribution of Ramachandra Guha:

Some of the report’s authors believe that India should not even aspire to be a superpower while it has so many internal problems unresolved...[Guha] lists seven reasons why India will not become a superpower; armed unrest from the Maoist Naxalite movement, extreme Hindu religious chauvinism, the degraded quality of leadership, a trivializing media, over-consumption of resources and incoherent policy caused by political coalitions. He concludes: “We need to repair, one by one, the institutions that have safeguarded our unity amidst diversity, and to forge the new institutions that can help us. It will be hard, patient, slow work.”

This publication should be of interest not only to India specialists but for those who are seeking to know more about international affairs in general. There are individual chapters which are also interesting in their own right aside from that of Guha available as PDFs on our website.

Happy reading!

The Kids Ain't Alright: Bahrain GP On In 2012?

♠ Posted by Emmanuel in Middle East,Sports at 3/08/2012 10:53:00 AM

With the Formula One circus about to commence in 2012, I though it would be interesting to revisit the plight of the Bahrain Grand Prix. Famously cancelled, rescheduled, and then recancelled due to public uproar over holding an event in an "Arab Spring" state--the ruling regime survived anyway--similar concerns arise over the race's fate in 2012. Meanwhile, wags have now dubbed it the "problem race" for 2012 given unresolved issues over holding such a race in what remains an absolute monarchy bent on keeping the status quo intact.

Who says that the race will go on? None other than multibillionaire F1 impresario and ringleader Bernie Ecclestone. (NOTE: Ex-Renault boss and arch-Eurotrash Flavio Briatore only has a store selling overpriced clothes called "Billionaire" when he himself isn't one.) So despite the potential CSR difficulties and the unsavouriness of it all, keeping the youth in check has made Ecclestone think the organizers have matter under control for sporting commerce to occur:

The latest opinion from the man representing the grand prix organisers is that it's all systems go for the Bahrain Grand Prix. We're exactly a year on from the day when the Bahraini people rose up against the ruling royal family and on the first anniversary of the protest there were few organized protests on the streets, mostly because the police had managed to keep a firm lid on them. This has heartened Bernie.

"We are (still) planning to go (to the Grand Prix). I've always said that if there was going to be any drama it would be on the Day of Rage," he told The Daily Telegraph. "They would have to do something then. People there seem confident that a race two months away will be all right."

For the Day of Rage, apart from demolishing the focus of last year's protest, Pearl Roundabout, large parts of the capital Manama were sealed off to prevent people reaching the site. In 2011 the government weren't expecting trouble, they reacted badly and all hell let loose. This year they were a lot more prepared. Armoured vehicles patrolled Bahrain's capital with police firing tear gas at protesters. That may prevent, headline-grabbing clips for the TV news, but it doesn't make the problem go away.

Mr E. thinks there isn't a scintilla of doubt that this year the Sakhir circuit is going to reverberate to the sound of 24 V8 engines. "The teams are not the slightest bit concerned. They seem happy that things will go ahead without problems. Last year was a more clear-cut decision not to go but things have changed a lot since then...[t]he only message I got was that there were some kids in trouble with the police," Ecclestone said.

Keep the brats away from the TV cameras and let the race continue? When it's become more an issue of riot control than a question of sport, well, some are more likely to raise their eyebrows than our man Bernie. While noting that his company has been paid the $40M fee by the organizers whether the race happens or not, Ecclestone says it's no longer about the money. Sports and politics...it's been a combustible mix oftentimes, hence the technocratic reply from Bernie that he's just doing his job:

One group of peers has called for a boycott of the country, whose authorities were found guilty of numerous human rights abuses last year. Another All-Party group of MPs is keen for the race to go ahead, believing it can be a catalyst for change.

While human rights groups such as Amnesty International remain sceptical that Bahrain's rulers are delivering the human rights changes recommended by an independent international commission, the man who chaired that commission, Mahmoud Cherif Bassiouni, believes the race would "enhance national reconciliation".

Ecclestone, who describes his sport as "non-political", has repeatedly insisted that Formula One will travel to Bahrain this year as long as the organisers deem it to be safe. He said the decision had nothing to do with money.

Meanwhile, 22 April draws ever closer.

Masters of the Game: Vatican Diplomacy in Cuba

♠ Posted by Emmanuel in Latin America,Religion at 3/06/2012 12:18:00 PM

By far one of the most underresearched areas in IPE I would argue is the role played by religious institutions as diplomatic actors. Not only were the imperial conquests of earlier European colonizers usually phrased in terms of enlightening the unwashed masses, but religion remains a very significant phenomenon even in today's world which is becoming secularized only in certain respects.

Imagine a nation whose diplomatic tradition stretches back centuries to when Saint Peter took up the mantle of leadership in spreading the Christian faith. Wait a minute...there is no need to imagine such a nation since it already exists. As heirs to Simon Peter--himself literally chosen by (the son of) God to establish the church in earthly realms--various popes have found it necessary to navigate shifting political currents for centuries on end. So, in terms of accumulating "tacit knowledge," perhaps the most experienced diplomatic corps extant do not receive the recognition they deserve. I speak of the Vatican's, of course.

By necessity, the Roman Catholic Church has practiced the diplomatic arts uninterrupted for centuries on end. Continuity of mission has its advantages. While they've given sanction to quite frankly idiotic misadventures alike the crusades, they've since left that bit of holy war-style nonsense to, well, American neoconservatives. Today's modus operandi is subtlety and long-term vision--more Chinese than American. That is, while the Chinese see the passage of a few years as but drops in the oceans of time, Yanks cannot even see past the next election cycle. If the Communist Party is ultimately only responsible to itself, the Pope is ultimately only responsible to the man above.

So it was with great interest that I read a fine contribution in Foreign Affairs by National Catholic Register journalist Victor Gaetan about how the Holy See is approaching Cuba. Unlike the retrograde, sanction-loving Americans still stuck in a Cold War frame of mind, the Catholic Church has taken a more progressive approach. Hate the sin of godless Communism, not the sinners, indeed. It's an approach that's paid dividends in Eastern Europe, so what's to stop it from working in Cuba as the winds of change blow strange?

It is a controversial balance. Cubans in the exile community vigorously criticize the Church because they think Church leadership on the island should challenge the dictatorship. But the Vatican takes the long view. Rather than overtly push for change, the Church has come to pursue a strategy of "reconciliation." It has inserted itself as mediator between the regime and its most daring opponents, both those imprisoned and those out in the streets. The Church is present and persistent, but it is nonpartisan. The attitude harkens back to the ostpolitik it practiced during the Cold War -- in most communist countries, especially in those where Catholics were a minority, clergy hunkered down, ministered to the faithful, and survived. Today, in countries ranging from Albania and Montenegro to Romania and Ukraine, Catholic communities are thriving.

By not consciously offending the powers-that-be with freedom 'n' growth shtick in that usual American tradition, the faith has made a comeback after Fidel Castro's earlier purge of the religious orders:

In the years since, the Catholic Church in Cuba has been resurrected. It has nearly doubled the number of priests and nuns in the country, most of them moving in from abroad. Today, Havana regularly grants the Church permits and allows purchase of rationed construction materials to renovate churches. The Church provides everyday services such as daycare centers and care for the elderly. It teaches religion and computer skills, and screens foreign films for teenage groups. As long as the Church restricts its activities to its property, it gets relatively free reign. The Church even opened a new seminary a few miles south of Havana in November 2010, the first church constructed since the revolution. And alongside a large American Catholic delegation, President Raúl Castro attended the dedication.

And, of course, the Vatican isn't doing all this without keeping an eye on the prize of, well, saving souls:

Playing the role of holy reconciler has afforded the Vatican three advantages. The Church has gained physical and operational space to expand its presence on the island. Second, [Cuban Archbishop] Ortega has brokered conflict, which fulfills the Church's mission ("Blessed be the peacemakers," the Bible reads) and gives it a recognized role, both in the country and outside. And lastly, and perhaps most important, in taking the long view, the Vatican is laying the groundwork so that it helps facilitate a nonviolent post-Castro transition.

You can't be a mug while you're doing God's work. It just goes to show you how what many perceive to be an ideologically "inflexible" organization alike the Vatican actually runs rings around the United States as the latter takes up the white man's burden of various idiotic crusades. Fiascoes in Afghanistan, Iraq, soon probably Iran...the list goes on and on as the homeland of the Qur'an burners engages in all sorts of idiocy by painting the US as a for good in a fool's morality play. Some people never learn.

Given the contemporary state of the US diplomatic corps, you get the feeling that the world would be a much better place if it outsourced diplomacy to the masters of the game with over two millennia of experience dealing with haughty sorts, whether they be the brothers Castro or the BushBama destroyers of the American dream. Predating nation-states by tens of centuries, the Vatican was on the scene long before Pax Americana, and it will be there long after it.

Celebrating the IPE Zone's Five-Year Anniversary

♠ Posted by Emmanuel in Service Announcement at 3/05/2012 04:09:00 AM

Five Years of Fearless Blogging

Unbeknownst to me, the IPE Zone just turned five in February.. Belatedly, then, it's time to celebrate! I once had a nearly octogenarian boss who morbidly observed that her peers were all retired and many dead besides. With blogging the very model of a throwaway medium, the cycle of existence is much, much shorter than that. I too observe that most of the peer blogs I started out with are by now inactive or have since moved on to the Great IP Address in the Sky. There also have been a lot of changes in where I draw readers from. I have been through all the fads and fashions cycling in and out: blog aggregators, syndication, Facebook, Twitter and now iPhones. I am sure there will be more to come.

Originally meant to house surplus class material way back when I was still a postgrad, I remain amazed at the longevity of this blog. I certainly didn't anticipate that I would still be maintaining it five years on. Reasonably good mainstream media coverage as well as it being the world's most visible dedicated IPE blog--Google "international political economy" to see for yourselves--have made it viable for me to continue.

All the while, I believe that the IPE Zone's diversity in terms of geographical and political-economic issue coverage appeal to a broader swathe of readers. It is encouraging that many visitors come from outside of Western nations as evidenced by our blog followers' profiles, for instance. I do appreciate that, IPE having been founded largely by American and British scholars, this blog may be a harbinger of better representation by neglected third world voices. Not that I can say the same for the World Bank and IMF, but I would certainly like to see moves away from much of the whitebread sameness that permeates much of the political-economic blogosphere. The world has changed. Obviously, people with similar backgrounds tend to view the world in the same way. It is thus remarkable that an outsider has persisted in making IPE more accessible to more folks online.

So here's looking forward to more years of pull-no-punches commentary. Whether it's questioning Western hypocrisy over leadership at international organizations or the self-serving rhetoric over the value of university education, there really ought to be other voices offering....attitudes of elegant despair on subprime globalization as the subtitle says. Here at least there's truth in advertising even if you may not entirely agree with the perspectives taken here.

It goes without saying that I too have persevered due to the continuing loyalty of IPE Zone readers despite times when I simply felt tired with the whole shebang. Like Comrade Bob Mugabe, this blog is still standing--albeit under what I hope are more positive reasons

White Man's Burden 2012: World Bank Succession

♠ Posted by Emmanuel in Bretton Woods Twins at 3/05/2012 03:16:00 AM

Take up the White Man's burden--
Have done with childish days--
The lightly proferred laurel,
The easy, ungrudged praise.
Comes now, to search your manhood
Through all the thankless years
Cold, edged with dear-bought wisdom,
The judgment of your peers!

Well here is more discouraging news for those wishing for more diversity and better representation of LDCs at key international organizations. Just a few months back, the unexpected departure of Dominique Strauss-Kahn from the IMF revealed the hollow rhetoric behind calls for change in the tradition of Europeans having discretion over choosing the IMF head. While perhaps sudden, the unceremonious departure of le grande seducteur showed that when the opportunity finally came for change at that IO, none was forthcoming. The excuse then was that having several European nations in dire financial straits made it only natural to have a tried-and-tested European figure as IMF managing director.

Again, PIGS countries are not suffering primarily from balance-of-payments problems the IMF was meant to address. Even Wolfgang Muchau, euro-hater, concedes as much:

However, it is hard to understand why everybody feigns surprise at the fact that current account imbalances can be financed indefinitely in a monetary union. Is this not one of the characteristics that distinguish it from a fixed-exchange rate system?

As long as banks have access to the central bank, and can provide good collateral, countries can run current account deficits for an infinite period. A friend of mine once remarked – when I asked about the significance of intra-eurozone current account imbalances – that the way to solve the problem sustainably was no longer to publish the figures. He was only half joking.

And so we come to the announcement of current World Bank head Robert Zoellick that he will leave that institution shortly. While he is departing neither under inauspicious circumstances nor at an entirely unanticipated moment, the jockeying to keep the status quo intact is similar to the DSK situation. That is, pressure to keep the World Bank head an American choice remains. This time, the excuses are as follows:

It is politically unlikely that the US, which remains the World Bank's largest funder, would countenance a non-American head during an election year;
The United States is wary of relenting on World Bank leadership lest it be perceived as yet another sign of American decline;
The implicit understanding that the US will insist on having its way means that no LDC candidates have put their names forward (which in itself indicates regression from the IMF succession race in which some at least entertained the notion of an LDC head despite the inevitable outcome)

Alan Beattie further suggests that the same fig leaf covering yet another whitewash at a Bretton Woods institution may be of nominating a woman. Again, this sort of compromise is unlikely to placate LDC grievances. Honestly, though, it would be equally unlikely that LDCs themselves would agree on a single candidate to back. It's not as if there is a scarcity of viable candidates alike Indonesia's Sri Mulyani Indrawati--currently #2 at the World Bank and formerly Indonesia's finance minister.

Also see John Kerry on this matter. The more things change, the more things stay the same, indeed.

'The DNA of Human Rights'

♠ Posted by Emmanuel at 3/02/2012 08:12:00 AM

Here's an interesting counterpoint to the "Asian values" argument that prioritizes collective well-being over individual rights. While I to a certain extent buy into that argument, it is at this point in time largely due to objections to how Western nations that are usually loudest about blathering about human rights are hypocritical about them. Witness Bush minor's Guantanamo Ghraibing, or Obama's refusal to disavow himself of this taint by shutting down the American extralegal detention facility at Guantanamo Bay.

So it was kind of refreshing to hear someone argue for human rights in this day and age--especially when it is becoming increasingly passe among developing nations keen on developmental authoritarianism and its offshoots. The LSE's own Professor Conor Gearty argues for two things: (a) human rights are not necessarily a "Western" invention in being innate and that (b) human rights abuses committed in the name of preserving cultures ostensibly dedicated to such principles are not acceptable:

What are human rights and where do they come from?', asks Professor Conor Gearty in the latest Burning Issue lecture from the London School of Economics and Political Science. In the online public lecture, entitled 'The DNA of Human Rights' Gearty, a professor of human rights law and a practising barrister, looks at the history of human rights and ideas that have informed their development such as democracy and dignity.

Gearty challenges the notion that human rights are a western idea, a mere 'cultural accessory', or that they can be used to justify 'necessary evil' – as an excuse to go to war or to torture as part of interrogation for example... Professor Gearty argues: "We risk our culture if we collude in the idea that our way of life is so valuable that we can afford to depart from it in order to secure it..."

For Gearty human rights come from a "solidarity to the human race".He says: "We're driven to engage in an energetic empathetic solidarity - a commitment to a common project which does not distinguish people by their colour, gender, nationality or wealth, but one which sees their humanity."

Do watch the video of the lecture and see what you think. I myself though wonder why empathetic solidarity does not rule out respecting the wishes of those who can legitimately choose to prioritize collective well-being over individual rights. That is, why is still usually just Anglo-Saxons who are fond of this sort of dialogue? (With a few exceptions, granted.)

German Apprenticeship vs US/UK Uni-Jobless System

♠ Posted by Emmanuel in Americana,Education,Europe,Labor at 3/01/2012 11:39:00 AM

It is no big secret that there is a lack of good employment prospects for young people in Anglo-Saxon economies at the present time.* As I have illustrated, wages for US college graduates have been on a steady downward trend. At the same time, tuition fees are rising at a rate far outstripping the rate of inflation. This phenomenon is said to be driven by various (virtually broke) US states now charging the bejesus out of the students in their university systems--including those who previously could avail of significantly lower in-state tuition rates. Combine these two and you see that US higher education is a really lousy marketing prospect: pay far more, earn less. What a deal. Like the American dream, college education as a key to success is something of a sick joke. And of course that assumes you can find work at the current time which is far from guaranteed with youth unemployment (ages 16-24) being 18.4% in the US in 2010. Good luck with those increasingly onerous student debt loads, Joe College, as IOUs eclipse the $1 trillion mark in 2012.

The picture is no better in that other Anglo-Saxon economy the United Kingdom.The headline numbers are shocking: 21-year-old university graduates are nearly as likely (25%) to be unemployed as 16-year-old school leavers (26%) who have just taken their GCSEs. UK youth unemployment meanwhile has recently shot past the 1 million mark. If anything else, fees have risen at an even faster rate in the UK with tuition trebling to £9,000 at quality institutions and student protests breaking out all over Blighty. In the final analysis, however, it's the same banana for British students: pay far more, earn less (if uni grads can find work).

Being a practical sort, I think of myself as an educator first and a researcher second. IMHO, an "educator" doesn't deserve the title if s/he does not have an abiding interest in ensuring that one's students find work. Of course, the system does not often work this way in Anglo-Saxon institutions where professors are more concerned with publishing their work than ensuring that their students find work. It's a messed up priority system that brings you the results above.

Contrast these tales of Anglo-Saxon woe with the famed German apprenticeship system:

In Germany, seen by many as a model in this regard, a quarter of employers provide formal apprenticeship schemes and nearly two-thirds of schoolchildren undertake apprenticeships. Students in vocational schools spend around three days a week as part-time salaried apprentices of companies for two to four years. The cost is shared by the company and the government, and it is common for apprenticeships to turn into jobs at the end of the training. The youth-unemployment rate in Germany, at 9.5%, is one of the lowest in the EU. Apprentice-style approaches practised in the Netherlands and Austria have had similar results.

Contrary to what the same article quoted from above claims, the popular impression that the German model is driven largely by Germany's manufacturing exports is something of a stereotype which falsely excuses other from emulating Deutschland. David Soskice of "Varieties of Capitalism" fame highlights that the most popular apprenticeships are not necessarily export-oriented trades for males: auto mechanic, electrician, joiner, clerical worker and bank clerk. For women, they are: hairdresser, clerical worker, and medical assistant. The honest truth from manning agencies which should know what they're talking about is that the bulk of jobs in demand are not of the Thomas Friedman-ish "knowledge worker" variety but those of a more blue-collar sort. Yet they are quite remunerative once you get past biases against technical / vocational training.

It is high time we questioned why the Anglo-Saxon university system of higher education has gained more traction worldwide than the German apprenticeship system when the latter is more attractive in avoiding job-skill mismatches. There has been too much glamourization of university when the results obtained fall so far short of the mark. Perhaps it's a reflection of the Brits and Americans colonizing far more parts of the world to engage in the white man's burden. In any case, it's certainly an open question as to why so many other nations still pattern their educational systems on clearly broken societies than that of one which works. It is no coincidence that aside from having an excellent university system, Singapore also boasts the region's finest technical and vocational training.**

Make no mistake: American and British educational systems are dysfunctional not only in basic education but also higher education.*** It belies theories such as Douglass North's new institutional economics (NIE) that imply more efficient institutions thrive, especially if finding remunerative work is a goal. If so, the German model would have beaten the stuffing out of the Anglo-Saxon uni-jobless system a long time ago. Just as a rational consumer would on the balance prefer a German car to an American clunker or...well, they don't really make "British" cars anymore do they...so should any number of countries adopt a system that works rather than one that doesn't. Like all hat, no cattle Obama once implied, change is needed away from the inefficient university system towards apprenticeships that are not only more likely to provide skills employers actually need but leave out the guesswork in choosing qualifications. Let Germany show us the way.
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* There may even be an uptick in that American pastime of university shootings where they enjoy killing each other for the heck of it because of bleak prospects in this century, but that's another interesting hypothesis for another time. To get your Freakonomics on, try regressing university shooting deaths against the US unemployment rate.

** While the bulk of German school leavers go into apprenticeships, a little over a quarter do go into university education.

*** Moreover, I don't get why Americans keep complaining about a lack of job opportunities anyway when they are so b--chy about working with job satisfaction levels at all-time lows. That's modern America for you.

3/29 UPDATE: In crisis-hit Europe, Germany has just recorded a record low post-reunification unemployment rate. I guess some people know what they're doing.