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The Final Battle

Iraq at Home (Part 2): Realizing the New 3rd Rail of American Politics

“Congress and the American people will continue to support and protect the members of the United States Armed Forces who are serving or who have served bravely and honorably in Iraq.”House Concurrent Resolution 63 (2/10/07)

“You know education, if you make the most of it, you study hard, you do your homework, and you make an effort to be smart, you can do well. If you don’t, you get stuck in Iraq.”John Kerry (11/1/ 2006)

The most crucial factor – in terms of the domestic political battle over Iraq policy – is neither geopolitical nor about precedent and signaling (see the background to this article). The Republicans have owned the concept in recent years and have invoked it time after time in the debates in the House this week; Democrats are trying to wrest it away. It defines the parameters of U.S. policy in Iraq and both parties are grappling to invoke it with great fervor. It’s the first half of H Con Res 63 (stated above): support for our troops.

Literally, speech after speech after speech in Congress the past three days has centered on this concept. Democrats have begun every statement about Iraq along the lines of “I firmly support our troops” before making a segue to an appeal for reason, sometimes citing a concern for preventing the future loss of troops’ lives to reinforce this assertion. In a realm of dodged questions and shifty statements, it’s the new social security, the sole inviolable third rail of American politics. Just ask John Kerry, who found out about the danger of crossing this fine line in November 2006.

Across the aisle, Republicans claim that supporting the resolution undermines our faith in the troops and the job they’re doing. It’s inconsistent to oppose the surge and support the troops in the field, they say. Hearing of the debate back home, morale among troops in the field will be undermined (in truth, this is an unfortunate facet of America’s political system that makes the sustained, unilateral occupation of a country increasingly difficult for a democratic country). In the face of increasing radicalization and violence on the ground, endless months of waiting for Iraqis to “stand up,” and an increasing realization that victory doesn’t mean winning on the battlefield, the last bastion of argument in favor of the war in Iraq is support for the troops. As long as the GOP can link its policies to support for the troops the party ensures that the American people will not turn against them. Democrats are trying to disentangle the two.

The National Narrative
Although they differ as to the policy implications, supporting the troops is perhaps the only thing that the parties squaring off in Congress can agree upon. They do so solely because they know it carries the most weight with the American people. In fact, it cuts deeper than the current political landscape, past the flags waving on the bottom of the screen on MSNBC and FOX News in 2003 to America’s national narrative, which we are raised with and which embraces the sacrifice of our forefathers storming the beaches of Normandy, winning two world wars and the Cold War so that America, guided by liberty and democracy, could become the world’s guiding light and sole superpower. The sacrifice of our troops was integral to all of these, and it’s celebrated in pop culture (Saving Private Ryan, We Were Soldiers), promulgated by our grandfathers, and complementary to our sense of pride and strength. As the amalgamation of many cultures and peoples, the one element shared by all Americans is the belief in this national narrative, which is inherently constructed upon the role of American soldiers.

Moreover, how could one have a friend, brother, sister, father or a mother in the U.S. military and yet oppose the war? Soldiers display a faith in their superiors that is central to the functioning of a hierarchical organization; how then, can you tell them that you don’t believe in the cause for which they are prepared to die? We can’t, of course, and we don’t. Many times it’s far from being so explicit, too; instead of consciously going through this thought process – and faced with a complex, fluid and divisive situation – people eagerly seek out reasons that comport with arguments supportive of their friends and family. Regardless of political ideology, people are likely to gravitate towards the policy consistent with their social relations. It’s the “us” versus “them,” it’s Palestinians versus Israelis, it’s Indians versus Kashmiris. This is a human condition, and is found in all nations.

Thus, opposing the troops would be akin to opposing the national narrative and repudiating our ties among each other. The country has been through this process before. After Vietnam the country went through the same painful process, and many people did turn against the troops, spitting at them and leaving them to beg on the streets after returning home.

We cannot make the same mistake this time. The troops are not to blame. Clearly, opposing the troops isn’t the point, and can’t be. But when support for the troops is linked inseparably to failed policies, how do we separate them without violating our bond with our brothers and sisters?

A Painful Hangover
Doing so requires a national catharsis. Many find it inconvenient now, but on March 29th, 2003 over 70% of America supported the invasion; the figure jumped to 83% when the troops were mentioned (Gallup Poll “U.S. at War with Iraq 2). Compared with the close to 60% who now think the war was a mistake (Gallup Poll “February Wave 1”), resolving this massive shift involves overcoming considerable guilt. We feel shame toward the families of those who’ve died serving in Iraq and to the people of Iraq. We feel embarrassment at having to admit that we were wrong to the original opponents of the war in “old” Europe. Clear-consciences reward those who opposed the war for the right reasons from the start.

It requires absolving ourselves from a process (mobilization for the Iraq war) in which we had only implicit involvement. Catharsis will be painful and involve redirecting blame to political leaders (read President Bush and GOP members unable to scatter in time), under whose leadership the nation has been exploited. It should also involve the government contractors (Halliburton, Blackwater, AEGIS) who made billions in profits while U.S. soldiers had to choose between placing their one bullet proof plate on their chest or back and crucial infrastructure projects went under-funded. Probes into government contracts awarded without competition to private military contractors – along with greater oversight in the future – are in order.

There are clear signs that this is beginning to happen, after the Democratic takeover of Congress, rock-bottom poll numbers for the President and the welcome return of vociferous debate in Congress (and fiery defense of Democrats’ patriotism by Tim Ryan, D-OH), sorely absent in recent years. New members of the legislature (Democrat and Republican) were not on the record supporting the Iraq war in ’03 and can more easily denigrate it as the mistakes of the previous Congress. And we should not feel bad about this: the manipulation of social bonds by political leaders is perhaps the most heinous tactic of all.

The Final Battle
This is truly the “final battle” of the Iraq war. America’s last battle will not occur in Iraq, but the United States. It’s the battle of the national psyche to come to terms with the events of the past four years and the dreadful consequences of the Iraq war. For better or worse, the United States will not withdraw from Iraq unless the country comes to terms with this issue.

February 16, 2007 Posted by | Author: DML, Congress, Democrats, International Relations, Iraq, Middle East, Politics, The GOP, The War on Terror, United States | 4 Comments

The (ill) State of Iraq

Iraq at Home (Part 1): There’s nothing brave in writing about Iraq in February ’07. We’ll do it anyway.

In President Bush’s January State of the Union Address, he asserted – not for the first time – that the war in Iraq is indelibly linked (no pun intended) to the “war on terror.” He was right. Stop: that statement was not true before America deposed Saddam Hussein. The unfortunate reality is that this is a classic example of saying something enough that it becomes true. Hussein was a secular dictator and, according to available intelligence, had minimal contacts with al-Qaeda before the war in Iraq. Now, as the April 2006 National Intelligence Estimate declares, the U.S. invasion of Iraq:

“has become a primary recruitment vehicle for violent Islamic extremists, motivating a new generation of potential terrorists around the world whose numbers may be increasing faster than the United States and its allies can reduce the threat… The U.S. invasion of Iraq, and the insurgency that has followed, [is] the leading inspiration for new Islamic extremist networks and cells that are united by little more than an anti-Western agenda…Rather than contributing to eventual victory in the global counterterrorism struggle, the situation in Iraq has worsened the U.S. position.”


In Agreement?

Presenting this evidence in February 2007 is no bold statement. The administration botched the rebuilding of Iraq, Bush’s approval ratings are at all time lows, a majority of Americans think the war was a mistake (55% in February 2006, Gallup poll “February Wave 1”); the rest is familiar by now. What needs further examination is not a tired summary of the last few years but the motives and arguments behind the raging in Congress at present about how to proceed.

Iraq in U.S. Politics
Congressional debate is back today; since this morning House Republicans and Democrats have been firing blows at each other over House Concurrent Resolution 63, the proposed non-binding” Iraq resolution, which registers disapproval but does not block funds for the President’s “surge” proposal. For those of you without time for C-Span in your busy lives, the substance of the fiery debate has been predictably familiar. It was illuminating nonetheless.

While the Democrats’ opposition was initially characterized as opposing war for the sake of peace, there is now a tinge of realism to their arguments: the war is further radicalizing large swathes of the world and billions of dollars are being spent while many domestic issues need serious attention. They appeal to the historical democratic tradition of debate and the need for open discussion of policy, especially when it’s flawed. Crucially for the Democratic shift was their minority status during the Iraq war, (despite having largely supported it in ‘03) which makes them less politically tied to its future than the GOP. The Democratic takeover of Congress also brought fresh faces into politics with the luxury of not having gone on record in support of the war in ’03. The party is better able to make a pragmatic about-face (or stand by an initial decision against it) in light of unfavorable developments.

The GOP meanwhile is torn. Some members have rebelled against President Bush and opposed the surge. Conversely, those supporting the surge (and opposing H Con Res 63) wax eloquently but their statements are threaded by several clearly identifiable arguments. One centers on the resolution being non-binding. Opponents call it “political posturing” and “empty talk” that accomplishes nothing. This is insincere. Of course the resolution is politically motivated; everything in Washington is. More importantly, both sides know that symbols matter. Sending the signal that Congress opposes the increase is designed to isolate President Bush for posterity and influence the battle for public opinion and thus policy. Counter to their public declarations, Republicans tacitly acknowledge that symbols matter when they say, correctly, that terrorists will take note of domestic discord and be emboldened. And in case you have any further doubts, when was the last time that almost 400 representatives felt compelled (and were allowed) to make speeches on the House floor?


Quick! What channel is C-Span?

Secondly, they warn that if America withdraws from Iraq the country will ignite, Iran will capitalize, and the region will be engulfed by violence. While fears of a war erupting throughout the Middle East are easily overblown, it’s true that Iraq would likely devolve further into full-scale ethnic cleansing and massive displacement and forced migration. Iran would be further emboldened with first the removal of its neighborly nemesis Saddam Hussein and the failure of the United States to create a self-sufficient Iraqi state. As in past wars (i.e. Korea 1950 – 1953), the stronger power doesn’t have to be defeated in battle to lose the war. Stalemate works just as well if you’re able to outlast the other and wining a direct military confrontation was never a requirement for victory anyway.

President Bush offers a third justification for the war that is less often asserted by GOP members of Congress. On February 15th at the American Enterprise Institute, Bush restated that fighting terrorists in Iraq means that the United States won’t have to fight them at home. This is an attractive argument: a would-be suicide bomber from Saudi Arabia or Yemen finds it far easier to detonate him or herself in Baghdad than Boston.

Yet it’s common sense that the longer that the “war on terror” goes on – and it could be infinite – the more likely it is to happen. In the long run, terrorist attacks will occur regardless of whether or not America is fighting terrorists in Iraq. Both sides use this in support: Democrats ponder the question, “If we’re going to be attacked either way, why spend the blood and treasure in Iraq?” Republicans say that since the terrorists won’t let up if we withdraw, we need to take the battle to them.

An Accusation, Not an Argument
The GOP then asks, disingenuously, what the Democrats strategy is for Iraq. “If you oppose President Bush’s plan, why not propose your own? What is your plan?” they ask while asserting that the Democrats have none. These Republican critiques are accurate; the Democrats have no miracle strategy.

Before rushing to herald the Republican strategists, however, we should recognize that they’re simply making the best of a politically tenuous position, one that is likely to become increasingly unstable with time. And Republicans who are politically unable to distance themselves from their support for the war will – if the Democrats eventually withdraw the United States from Iraq – forever claim that it didn’t have to fail. They’ll be relieved of forging a solution and insist to the last that it could have been won, crowing that the Democrats “lost Iraq.”

The immensely depressing reality, not only for the Democratic Party but for the whole country, is that America is so deep into the war in Iraq that no good option now exists. In the following article I make the case that the country is beginning to come to terms with this and that there is one last political issue, the resolution of which will determine the course of American policy in Iraq.

February 16, 2007 Posted by | Author: DML, Democrats, Dissent, International Relations, Iraq, Middle East, Politics, The GOP, The War on Terror, United States | Leave a comment

Slippery As an Eel

Momentum Undercut in the World’s Most Intractable Dispute

It was but a mere blip on the radar screen. For just several hours a fortnight ago, an article ran on the major news sites stating that Hamas and Fatah – the two primary groups representing Palestinians – had reached an agreement that could lead to talks with Israel. News watchers will be forgiven if they missed it; as quickly as the story appeared it was buried in the second half of lengthy articles about the latest development: a stout Israeli military offensive into Gaza.

True, Palestinian militants were launching rockets into southern Israel from Gaza for the past month, sporadically costing civilian lives. Spoilers have captured a severely unfortunate young soldier, Corporal Gilad Shalit, and held him hostage somewhere in Gaza for ten days while making overblown demands for Israel to empty their jails of Palestinians – albeit more legitimately for women and children – in return for his release. And despite the Palestinian compromise, Hamas hadn’t accepted legitimate international demands that it recognize Israel.


No Messing Around

Israel’s response was swift and effective, and was accomplished as much through the media as on the battlefield. Israeli officials lamented Hamas’ pigheaded refusal to recognize the state of Israel’s right to exist and twisted the screws tighter than at any time since the two-year-old ceasefire began. Israel reoccupied central Gaza, a first since unilaterally withdrawing from the territory last year. Israel arrested some 60-odd officials from Hamas and eight elected government ministers, and purposefully flew bombers over Bashir Assad, the unfriendly president of neighboring Syria (where some of the Hamas leadership resides).

Yet despite Hamas’ intransigence, the Israeli campaign is grossly disproportionate to the offences committed by the group holding the young soldier hostage. Analysts also differ fundamentally as to how much control the political wing of Hamas has over the three factions – one of which is nominally tied to Hamas – that played a role in the capturing raid. Israel’s operation will likely prove counterproductive as well: far from securing the release of Cpl. Shalit, the effective decapitation of Hamas’ leadership in Gaza may only serve to solidify Palestinian support for their embattled leaders.

It would be foolhardy to rush to the support of a group that refuses to renounce terrorism and recognize Israel’s right to exist. Yet as all practitioners of diplomacy know, however depraved, these are sticking points used as bargaining chips in negotiations, and aren’t given up lightly; especially when they’ve been bedrock principles for decades. In just a few short months, however, momentum had been building for change. Since Hamas’ election in January, the Palestinian Authority’s leader, the secular Mahmoud Abbas, had been trying to force Hamas’ into embracing these notions. He called for a referendum in which it looked possible that wearied voters would give Hamas the cover needed to reverse policy and avoiding the appearance of caving under foreign pressure. The reconciliation between Hamas and Fatah was an additionally auspicious development.

Post-reoccupation, these events have no chance of being carried forward. Any opportunity for a referendum, much less recognition of Israel, has evaporated. Under siege, Hamas will maintain support by appearing as the martyred defender against a harsh foreign invader. Hamas won’t be allowed to either achieve change or turbidly stagnate and prove its own deficiencies. Moreover, the timing of Israel’s military incursion was suspiciously close to the announcement of the Hamas-Fatah accord, and peace is as far away as ever.

Of course, it’s beginning to be accepted wisdom that this is actually what Israel desires, as Ismail Haniyeh, Hamas Prime Minister, argues in today’s Washington Post. Suicide-bombings in Israel have slowed to a trickle in the last year and the country occupies all territory vital to its security. In May, President Bush sanctioned Israel’s land claims. States that possess everything they desire and face no pressure to give any of it up have never made for good faith negotiating partners. Squared off against a bitter enemy that does itself no favors in the public debate, don’t look for Israel to prove itself an exception to the rule.

– DML

 2006. All rights reserved.

July 12, 2006 Posted by | Hamas, Israel, Middle East, Palestine, Politics | Leave a comment

Pocahontas, Marlin Brando, and Me

Shakey Chimes In

 

In 1979, Neil Young and Crazyhorse released “Rust Never Sleeps”, an album held in high regards by both critics and fans alike. From the narrative “Powderfinger”, to the transcendant “Pocahontas”, Young, using rust as a metaphor for inevitable deterioration –see 1981's Re-ac-tor– proves that he possesses the tools to ward off rust, namely his creativity and ability to reinvent himself. Young’s newest album, Living With War, is a powerful indictment of the Bush Administration, addressing the current state of American politics, all the while placing his grievances in an emotional and historic context that is a breath of fresh air, especially considering the mostly sad state of dissent among the newest generation of popular musicians. The resulting album, although lacking lyrical depth at times, is a powerful effort that should remain relevant long after the current administration leaves office, in the same way that his 1971 classic "Ohio", written about the massacre at Kent State, remains relevant today.


Hey Hey, My My, Rock and Roll Will Never Die

While some songs on Living With War, namely “Lets Impeach the President” read like a moveon.org pamphlet or a University of Vermont sociology major’s away message, others such as “Families” and “Roger and Out” leave much more to the imagination, effectively conveying the justifiable discontent that many Americans are feeling right now. Powerful protest songs, which usually convey emotion without being terribly forward, seem to be rare these days, especially among the younger generation. Many of the newer anti-Bush efforts coming from Generation Y, examples being Bright Eyes "When the President Talks to God" and NOFX's "Idiots are Taking Over", are lacking in both lyrical content and accuracy. They also seem to lack the "Folky" appeal that historically has transcended age and class. For generally better efforts, see Steve Earle's The Revolution Starts Now, and selected tracks from Bruce Springsteen's excellent Devils and Dust.

Conclusions

Neil Young's newest album, while not flawless, serves as an effective protest album that is also an artistic success. Living With War's lyrical imagery, combined with Young's vocals, provides the listener with an original, experienced voice. It is apparent that it is this experience, gained through both songwriting and a lifetime of careful observation, is what seperates Neil Young from his younger counterparts.

June 24, 2006 Posted by | Author: JPL, Bright Eyes, Dissent, Music, Neil Young, NOFX, Politics, The GOP, The Media, The War on Terror, Uncategorized, United States | 1 Comment

In Shallah

What to Make of Somalia

Until recently, Somalia had been relegated to the depressingly long list of squalid, penurious places so depraved that no one much hoped for any sunny result. The international community largely disregarded Somalia, because hadn’t they tried to help the country before? That forlorn hope ended gruesomely with Black Hawk Down and the messy withdrawal of United Nations peacekeepers in 1993, which additionally helped dissuade foreign intervention elsewhere in Rwanda a year later at the cost of 1 million lives. Spurned and with no supreme interests at stake, the world gave up on Somalia.

In the meantime, Somalia’s capital Mogadishu continued to be one of the most violent and dangerous cities in the world. A prime example of a “failed state,” murderous warlords ruled the country and governmental institutions were non-existent; there was no central bank, foreign aid groups ran makeshift hospitals, and Islamists operated private schools. The international community’s half-hearted efforts to help out centered on propping up an interim government, led by Abdullah Yusuf, that is only nominally in charge of the country. When trying to return to Mogadishu last year he was shot at, and forced to flee in opprobrium. Moreover, as a former warlord many Somalis think Yusuf an Ethiopian stooge, which is hardly a favorable association in a country that’s long been at odds with its northern neighbor.


Looking for a New Career?

Frustrated by rapacious warlords, anomie, and political impotence, Somalis turned to the Islamic Courts Union. The Union began as a collection of local courts settling routine grievances and grew as militias turned out to enforce decisions, eventually coalescing to challenge and defeat the warlords.

So far the judgment is mixed. The ICU’s militias are imposing order and making the streets safe for the first time in memory. Optimistic stories abound of shops reopening and citizens venturing outside without bodyguard or arms. Yet others fear the introduction of Taliban-style theocracy and extreme rectitude. Indeed, there are already rumors of movie theater closings and beatings dealt out to young lovers for frolicking in public. Ultimately, there are more questions than answers at the moment.

Outsiders’ main concern is, unsurprisingly, with terrorism. Yusuf for one is claiming that the ICU is filled with foreign jihadists, although doing so also favors his own agenda; ICU gains are wresting control of territory from his grip. Long before recent interest in the country it was rumored that the CIA was channeling aid to the warlords so long as they kept al-Qaeda out. The ICU does appear to have a varied makeup, ranging from moderate to opportunistic and extreme.

The next concern centers on intervention. Such thoughts are premature, however, because despite recent media interest in the country there remains no legitimate party capable of effective governance that is therefore worthy of support. Unfortunately for Somalis, intervention may come from Ethiopia, which reports indicate has been moving contingents towards the town of Baidoa where Yusuf is holed up.

More promisingly, the ICU and the interim government recognized each other today and signed a cease-fire mediated by the Arab League. Surprisingly perhaps, Somalia’s kismet may not be entirely gloomy: breakaway regions of the country – Puntland and Somaliland – are already safe by comparison. Reassuringly, the concession with Yusuf wouldn’t have occured were al-Qaeda running the ICU. If moderation prevails Somalis may at last be able to affect how their country is governed.

Other peoples are itching for the day when this opportunity is afforded them. In Egypt, Palestine, Saudi Arabia, Pakistan, the oil monarchies and beyond, volatility and years of conflict are likely to pass before extremism’s inability to build a healthy society is exposed. No matter others’ prior experience with this, oppressed peoples throughout the Islamic crescent can’t be told that currently oppressive regimes are better than an alternative they’ve never tried, especially when it claims to have all the answers and promises eternal salvation. Once given the chance extremism will be shown for the failure that it is, people will tire of listlessness, and they’ll search for a sensible alternative. Let’s hope Somalia has already reached that point.

– DML

 2006. All rights reserved.

June 23, 2006 Posted by | Africa, Country Profiles, Intervention, Politics, Somalia, The War on Terror | 2 Comments

Jenga!

How Instability in Pakistan could Create a Perilous Proxy War

With the death of Abu Musab al-Zarqawi yesterday in Iraq, we’re reminded that it takes just one accurately targeted missile or bomb to make life fleeting. While Zarqawi’s demise is celebrated in America and elsewhere, there are other areas of the world in which such precise targeting would cause not rejoicing but a major headache. Foremost among such places? Pakistan, and not just because of terrorists; the interests of the South Asia’s three largest powers are increasingly converging in what the Washington Post calls “the world’s most politically fragile nuclear power.”

Musharraf the Quisling

Al Qaeda and friends have tried and barely failed to knock off Pakistani President Pervez Musharraf several times. With Musharraf facilitating and aiding U.S. counter-insurgency efforts in the mountainous region along the Pakistan-Afghan border – and thus severely restricting al-Qaeda’s maneuverability – he’s mujahideen target number one. Leaflets distributed in tribal areas of Waziristan in May called for the “lions of Islam to kill the slave of Bush in Pakistan.”


Dude Needs a Chill Pill, and a sh*@l$!d of weapons

Were this to happen, the nature of a successor government looks far from set. As Musharraf himself came to power by coup d’ etat while circling Karachi in an airplane, and the general has gone on to consolidate personal control at the expense of democratic institutions, weak processes to name a successor could be easily subverted. Indeed, in a country in which only one in ten resident is favorably disposed towards America, popular sentiment might result in a noisy extremist assuming the reins of a nuclear-armed nation (thus the location of WMD must be an A-list priority for the CIA here; there have been reports of this). Nonetheless, a state of flux would emerge with foreign spy agencies forcefully vying for influence.

The Wolves Circle

And who would the meddlers be? Pakistan and Musharraf are centerpieces of America’s anti-terror strategy, and the CIA would obviously be supremely concerned with the outcome. Indeed, America has been ramping up efforts to keep Musharraf alive. India will be on the edge of its seat too. Since Britain abandoned its colonies after WWII, India and Pakistan – and Muslim separatists in Indian-controlled Kashmir – have been fighting over contested territory. India enjoys territorial advantage in the status quo, but spoilers and fanatics have prevented a formal peace and violence has spilled over, with sporadic attacks by armed-gunmen and suicide bombings in Delhi. Relations have thawed to an unprecedented degree since Indian Prime Minister Monmohan Singh took over, yet in the absence of a resolution the potential for disruption is ever-present. Moreover, both non-signatories to the Nuclear Non-Proliferation Treaty aim nuclear weapons at each other.

The third power in the region, China, is hardly a newcomer in Pakistan. Throughout the Cold War, China sought to offset hostility with India – witnessed by their 1962 border war – through friendship with Pakistan. During the 1990’s China exported weapons to the country and was vital to its acquisition of WMD. Of late, however, China has been further consolidating ties. In May, Pakistan placed an order for 150 Xiaolong fighter planes, a move that will replace the F-16 as the air force’s primary jet.


I Hear the Schools in the Neighborhood are Fantastic!

Before that, a February visit by Musharraf to Beijing saw the rapid-fire signing of 13 bilateral agreements on trade, security, and investment, which crucially included the announcement of Chinese aid in building an energy corridor through Pakistan that would supply China with imports of raw materials. China will finance the expansion of a port on the Pakistani coast at Gwadar, adding nine more berths, an approach terminal, and storage facilities. An oil and gas pipeline would then be built to ship materials from the Middle East directly to China’s western provinces, bypassing the (U.S. controlled) Malacca Straits. Never mind what this says about the domestic implications for minority and outlying areas through which the pipeline would cut – Xinjiang in China and Baluchistan in Pakistan – the external implications are clear: China-Pakistan ties are surging.

But They Sometimes Hunt in Packs

That Musharraf will go –in the near future due to assassination, bringing the return of insecurity, or later on because of time and age – is not in question. Neither is the reality that when he does, China, India, and the United States (with Iran potentially in the mix) will see their interests put to the test. Whether this engenders hostility and confrontation or cooperation is unclear; the signals, however, are not entirely inauspicious. China and India signed a border accord in April and have also just announced a $2b joint bid to develop a Kazakh oil field in an effort by the “world’s two fastest-growing major economies to avoid competing with each other,” according to the China Daily.  America and India agreed to a major nuclear deal in July last year. China and America have reached a consensus – although likely short-lived – on Iran, another rocky concern. Additionally, all three countries will be lothe to see WMD fall into terrorist hands or their economic interests threatened.

Against this backdrop, the most likely scenario is the emergence of another clique from the armed forces, commanding no popular support but receiving logistical sustenance from America, China’s tacit approval, and India’s watchful eye. This would be a stop-gap measure that leaves corrections between the people’s volition and political control for another day, yet is far better than allowing extremists assume control. Unfortunately, such has been the argument for supporting dictators everywhere for the past fifty years, always leaving the patriarch on the wrong side of history and fostering yet more grievances to be paid for in future.

– DML

 2006. All rights reserved.

June 10, 2006 Posted by | Asia, Author: DML, China, India, International Relations, Iran, Middle East, Nuclear Weapons, Oil, Pakistan, Politics, United States, WMD | 3 Comments

Chicken the China, the Chinese Chicken

A Changing Tide, the Spigot is Tightened

Since hitting an all time high on May 8, the MSCI Emerging Markets Index has fallen over 20%, as inflation fears and global monetary tightening begin to mop up the loose liquidity that has helped emerging market exchanges, along with other riskier assets, achieve strong annualized gains over the past few years.

With China experiencing staggering economic growth, one would think that the Chinese Stock Markets would have been on the winning end of a several year long emerging markets run. In fact, on June 6, 2005, while many Asian markets were continuously breaking multi-year highs, the Shenzen Compositie hit a six year low, puzzling amateur investors across the globe. Possible answers to China’s equity market conundrum can be found by taking a closer look.

The Times, they are a Shenzen

The Late Bird Gets the Sub Par Market Returns

China, a late bloomer in the Capital Markets game, did not have a stock market until 1990, and not a single Chinese company was listed abroad until 1993. As of 2003 -the latest information thescreamingpen.com could muster- over 66 million Chinese citizens participate in the domestic equity markets, with only 35 companies listed as private. It is estimated that at least two thirds of the shares listed on the Shanghai and the Shenzen, China’s two largest stock markets, are owned by the government. It is apparent that investors, especially those abroad, are hesitant to invest in companies whose balance sheets, among other things, could be compromised because of government involvement.

The Reforms of 2005

Realizing that capital inflows are essential to sustainable growth, the powers that be in China undertook some important reforms in 2005, including:

  • Public listing of the “Big Four” Chinese banks on overseas exchanges
  • Selling large stakes of domestic banks to international investors, which will result in increased capital inflows and much needed international banking expertise.
  • Reform of China’s A share market, which has resulted in 1/3 of China’s A shares being tradable.
  • The removal of capital gains taxes on securities held by foreign investors
  • The issuance of sovereign “Panda Bonds”, issued in Chinese currency.

Outlook and Conclusions

With the initiation of a global tightening cycle, it is possible that China may have missed out on the latest emerging markets rally. The good news is that China’s Eleventh Five Year Plan, which began on January 1, 2006, contains many provisions that aim to reform China’s financial sector even further. Hopefully these provisions are enacted.  This would allow China to efficiently handle foreign inflows of Capital, as well as wealth created at home.  If China continues down the road of financial sector reform, it will be a much needed step on the path to possible market maturity.

*Look for an overview of the Indian Financial sector reform in the coming days.

-JPL

Links of Interest

http://www.washingtonpost.com/wp-dyn/content/article/2006/06/08/AR2006060801493.html

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June 9, 2006 Posted by | Asia, Author: JPL, China, Chinese Stocks, Corruption, Emerging Markets, Globalisation, Investing, Politics, World Markets | 1 Comment

An Awkward Two-Step

A Beginner’s Guide to the World’s Most Important Relationship

“Which is best chemistry graduate school in England? Who is your favorite NBA player? How many centimeter are you?” Launched rapid fire by the throngs of residents that swallow any native speaker brave enough to wander into one of China’s many “English corners” – plazas and parks where Chinese meet to practice speaking the language on Saturday nights – the questions begin to take on the air of a personal press conference. Any lone Westerner at one of these can expect a similarly exhilarating evening, replete with overly eager late-20’s gentlemen popping into view randomly, making googly-faces from behind the rows of questioners for effect. Indeed, the curiosity and friendliness greeted foreigners here is hard to imagine for outsiders who rarely think of China without the menacing C-word directly preceding.

As the world’s largest and most visible Communist country this is perhaps inevitable. Much U.S. press coverage of China relates to textile quotas, exchange rate policy, and corporate takeovers; complicated issues more easily made exoteric by portraying the country as hostile, red, and monolithic. Avian bird flu, tense relations with Taiwan and Japan, human rights, and an intense military build-up are no less frightening.


Remembering her Conjunctions, and with Plenty of Questions for You

This misunderstanding by no means runs only one way. The xenophobic atmosphere that festered in China during the 1960’s and 70’s persists still, marooned by intellectual debates firmly quashed in public, on-line, and in the classroom. Problems with the U.S. media there may be, but American news organizations provide reporting less fettered by direct state control and censorship. Indeed, Chinese perceptions of America are influenced more heavily by the professional basketball player Dwayne Wade and the television sitcom Friends – wildly popular in Shanghai and Beijing– than through the cycle of accurate reporting, solid analysis, and measured reflection.

A fundamental misconception underlying common foreign discussion of China, but lacking in reality however, is that a massive reservoir of pent-up ill will exists towards America. In fact, many Chinese still proffer the old saying that they “dislike the government, but like the people” of America; a statement now obsolete in many parts of the world that abhor both. Widespread membership in the Communist Party primarily serves cadre’s bureaucratic and individual career objectives rather than zealous anti-capitalist indoctrination. And soldiers’ marching drills in Tiananmen Square are today largely equitable to those at Arlington National Cemetery. Scare-mongering photos of such are better left to tabloid articles covering North Korea.

Policy-makers on both sides have to move past these stereotypes if they are to successfully manage China’s emergence on the regional and national stage. Washington’s principals must also recognize that while Joseph Nye’s “soft power” is ubiquitous throughout the mainland and its peasants and laborers have plenty of bread and butter grievances, they’re hardly clamoring for a democratic revolution. President Hu and company rightly take serious America’s tough talk – a real-politic tendency regulated by its superpower status in a rocky unipolar world – but need to understand that an adversarial relationship is not the intended result, but the concern.

The necessity of maintaining peace is consequently pressed upon by Beijing’s legitimately unnerving actions: an exponential increase in military spending with no obvious military threat; bellicosity towards Taiwan and Japan; and political cover and economic assistance for unsavory regimes from Central Asia to Africa to Latin America. How leaders are able to deal with these issues will likely determine the answer to another question frequently posed at China’s English Corners: “Will there be peace between America and China?”

– DML

 2006. All rights reserved.

June 6, 2006 Posted by | Asia, China, Country Profiles, International Relations, Politics, The Media, United States | Leave a comment

This is Chess not Checkers That’s a Warning Shot

The Deadly Paradox of the Big Six’s Iranian Accord

It’s hard to suppress feelings of glee upon reading the headline “Six World Powers Agree on Iran.” This is the exact foundation that any diplomatic solution to the Iranian quandary must be based upon: a united international alliance providing Iran with a choice between carrots if it agrees to halt uranium enrichment and sticks if it doesn’t. A common diplomatic front brings the world one step closer to the chance for a peaceful solution; however, if the chance proves illusory it will also bring the world one step closer to war.

In the run up to Iraq in 2003, there were many arguments against the U.S. invasion, many of which could be reasonably discounted at the time. War is an extreme last resort, but the argument that it should never be used is flawed: when squared off against a murderous dictator conflict can become justifiable. Nor was U.S. belligerence a stand alone sound argument. Despite bellicose rhetoric from George Bush, Saddam Hussein had violated 18 U.N. resolutions and was sidestepping weapons inspectors. The most valid pre-war argument against going to war: that the Bush administration hadn’t exhausted all diplomatic options.


It’s your Turn, Khameini. Whatcha Gonna Tell ’em ya Big Bearded Fella?

The Diplomacy this Time

The Bush administration seems to have painfully learned how to go about building its case without alienating virtually every non-holder of an American passport. It first relied on negotiations led by the “European 3” – Britain, France, and Germany – during which Iran acquiesced to halting enrichment for a time. But Iran knew that the European trio’s silent partner held the key to the only concession vital to its survival: security. So Iran once again began work on its centrifuges.

Steadily advancing its nuclear know-how, Iran’s fiery president Mahmoud Ahmadinejad recently sent an 18-page letter to George Bush, which was touted as being the first direct communication between the two nations since the 1979 hostage crisis. Accustomed to years of frosty, static relations, Secretary Rice made a knee-jerk announcement that the letter suggested nothing new, and perhaps it didn’t. Then just this week Iran called for direct talks with America, which in the absence of a U.S. response gave Iran the impression of being patient and reasonable. So until the United States replied to these overtures – no matter the political or public relations intentions behind them – Iran would appear to be holding out the olive branch. America had to respond.

With the six-party agreement on Iran it did, and with perfect timing to boot. Iran will be presented with a package of incentives in return for a “verifiable” halt to its enrichment activities. If it continues to pursue nuclear weapons further Security Council action could follow. Clearly, Iran has to make the next move, and crucially, America will appear to have dutifully followed a diplomatic approach supported by the Security Council nations.

This appears to be good news for advocates of multilateralism and supporters of a peaceful, diplomatic solution. It’s good news for those who wanted Europe to face up to legitimate security threats, which due to pride and matters of the heart it could not with Iraq. And it’s good news for those who want to see more than obstructionism and the unbridled pursuit of resources from Russia and China.

The Ball’s in Their Court

Thus, the question now becomes, “What will Iran do?” The preferred choice is for it to accept the incentives offered and abandon its desire for nuclear weapons (merely nuclear energy, it says). This is possible but would likely only come in the form of a comprehensive strategic agreement leaving Iran assured of its own security. Observers should also note that the Iranian issue is not confined to uranium enrichment: Iran plays a powerful role in neighboring Iraq, has long supported insurgents in Lebanon, Palestine, and elsewhere; and exercises more power than many realize. It recently won backing for its nuclear program from Indonesia, and China and Russia usually provide solid political cover. These will have to be addressed.

The true test of the “Big Six’s” solidarity will come if Iran decides to balk: will the world support increasingly tough sanctions, or will views diverge? Governments around the world – now realizing that true threats must be confronted – may be more likely to follow, because they too have played an active diplomatic role this time round. Despite this, these countries’ citizens will have seen Iraq and the gruesomeness of war and are likely to feel much the same as they did before Iraq.

Will Iran stall, varying negotiations with concealment? Probably. This much is true, however: until now, with a dire situation in Iraq and virulent anti-Americanism everywhere, talk of military action against Iran seemed distant. Yet now, if diplomacy is given a fair chance and fails nonetheless, Iranian rejectionism will leave us on the precipice of Iraq redux. And this time – no matter the political logic beforehand– military action would be no more likely to create a stable or friendly or democratic country out of Iran than Iraq.

– DML

 2006. All rights reserved.

Note: The Iranian situation is highly fluid at present, with half a dozen diplomatic developments and announcements (see links below) being made in the past few days alone. Contrast this with the lack of bilateral contact that existed for the past 27 years between the two countries. As stated above, this will either lead to a breakthrough or a serious deepening of the standoff. Keep watching.

U.S. Offers to Join European Three in Talks with Iran
Iran Welcomes Talks, Rejects U.S. Conditions
Iran Considers Offer from Big Six
Washington Post Analysis

June 2, 2006 Posted by | Asia, Author: DML, China, Europe, France, Germany, International Relations, Iran, Iraq, Middle East, Nuclear Weapons, Oil, Palestine, Politics, Russia, United States, WMD | Leave a comment

Dude, Where’s My W-2?

Let me tell you how it will be;
There’s one for you, nineteen for me.
‘Cause I’m the taxman,
Yeah, I’m the taxman.

-The Beatles

 

A Possible Impetus For Change

Last fall, the international media focused much of its attention on European elections that promised to shake up the old European order. For those seeking real economic change in the form of market liberalization, those elections were partial letdowns. For instance, many analysts believe that a clear-cut Merkel victory in Germany could have provided the impetus necessary for much needed economic reform and market liberalization in other Western European countries. Following the formation of a grand coalition in Germany, it appears that constant compromise may prevent Angela Merkel, the new Chancellor of Germany, from carrying out her intended reforms. It is also uncertain what direction Poland’s newly elected center right coalition government will take the country. Before coming to the conclusion that all hope is lost regarding Western European change, one must consider an economic force that has been slowly moving westward, originating in the tiny nation of Estonia. The flat tax, which applies a constant rate of taxation, is exerting economic pressure in the form of tax competition on the high tax economies of Western Europe, slowly forcing economic change in those countries.

Reactionary Yet Opportunistic

From a historical perspective, it is interesting that many of the countries who have enacted constant rates are ex-communist nations who have voluntarily moved in the opposite direction of Soviet central planning, the failed communist system that attempted to control every aspect of economic activity. Much like the iron curtain before it, the flat tax movement and free market values are slowly moving westward, with Greece facing a crucial decision this year regarding the adoption of a 25% flat tax. In the recent Polish election, the pro flat tax Civic Platform Party came in a close second, and will now share power with the victorious Law and Justice party. In Germany, the early election campaign of Angela Merkel featured a proposed finance minister who was an outspoken supporter of a flat tax. Unlike the spread of communism, however, the flat tax movement is being voluntarily implemented.

Mail Order Brides are no Longer Estonia’s Chief Export

 

The flat tax system, which uses a single tax rate that is applied to wage earners and corporations that begins taxing after a certain income threshold is reached, has been successful in several nations beginning in 1994, when Estonia introduced a 24% tax rate. By attracting business from abroad, Estonia’s economy grew at double digits in 1997, and has averaged about 6% GDP growth per year since. Russia, a nation whose complicated tax code caused widespread evasion, instituted a flat tax in 2001. It is estimated that in the years leading up to the 2001 flat tax, Russia’s biggest corporations ignored 29% of their tax obligations, while 63% substituted goods or services instead of hard currency. This made Russia susceptible to debt defaults as their coffers reached record lows. In 1998 Russian government revenues were 12.4% of GDP. By implementing a simplified tax code, Russia eliminated loopholes and increased its revenues in real terms by 28% in 2001, 21% in 2002, and 31% in 2004.

Opponents of a flat tax, who believe that a flat tax is meant to line the pockets of the rich and will result in lower government revenues, fail to realize that flat tax systems do not tax earners below a certain threshold, allowing the poorest workers to be exempt from taxes. The revenue question is answered by looking at Russia, a nation who learned that the best way to get higher revenues is to give people more incentive to report their taxes by keeping tax rates low. Ideally, a low tax rate would result in more wealth creation, which could generate even greater revenue. Remember, the examples cited in this article are from countries that had an insanely restrictive, command style tax code. The flat tax is also making Western Europe increasingly uncompetitive, as businesses and investment dollars flow into Eastern Europe.

Implications

In response to widespread eastern European acceptance of a flat tax, Western Europe is beginning to consider tax reform. According to the Economist, Germany has already made plans to cut its corporate tax rate from 25% to 19%, and the in Britain, the Opposition Conservatives announced on September 7, that they would set up a panel to study a flat tax proposal. As investment dollars and businesses continue to flock to Eastern Europe from Western Europe, it will be increasingly apparent to Western Europe that in order to maintain its standard of living, it will need to make radical changes in its tax policy.

Conclusions

It will be interesting to see how the Western European nations deal with tax competition from the east. It is apparent that the increasingly uncompetitive Western European nations will need to modernize their economies in order to compete. It will also be interesting to see how the continued success of an Eastern European flat tax effects the current tax situation in America, where our own tax code has broken the nine million word mark.

-JPL

Links of Interest

http://www.washingtonpost.com/wp-dyn/content/article/2006/05/31/AR2006053102043.html

 

May 31, 2006 Posted by | Author: JPL, Emerging Markets, Europe, Flat Tax, Germany, Globalisation, Politics, Russia, Unemployment, World Markets | 16 Comments