Parts to Wholes: the Socionomic Systems Nexus

Europe

The Protests in France Get Personal As millions of French protesters took to the streets Thursday for a repeat of the nationwide strikes that slowed the country to a crawl on Jan. 29, there was the feeling that the mass social movement had become distinctly personal. More than ever before, marchers said they were not just denouncing the government's minimalist response to the worsening recession, but were singling out President Nicolas Sarkozy as the defiant embodiment of attention to ideological orthodoxy rather than the peoples' pain. As a result, public and political challenges to Sarkozy's leadership are growing - including from members of his own conservative majority. Over 200 demonstrations were organized across France on March 19, with early turnout suggesting participation would easily surpass the 2.5 million people who answered the Jan. 29 strike call. Beautiful weather helped swell the ranks of corteges marching throughout the day to protest the modesty of Sarkozy's stimulus package - especially compared to the mighty bail-out effort accorded to the banks and financial groups who detonated the country's crisis. The marches began in Marseille, where people carried banners reading THEY ARE THE PROBLEM; WE ARE THE SOLUTION and hoisted posters ridiculing Sarkozy's refusal to pledge money to boost spending that said: YESTERDAY I WAS PRESIDENT, TODAY I AM KING. The biggest assembly was planned in Paris, where as many as a million people were expected to join afternoon protests. But the swelling movement appeared to cause fewer logistical problems than did the near lock-down in January, when rail traffic and municipal transport was almost crippled, scores of flights were canceled, and countless schools and public administration offices remained shuttered.

• The crisis brings back dirigisme  IN ONE respect, at least, the global downturn is welcome in France: it has legitimised economic interventionism in the land where Louis XIV’s finance minister, Jean-Baptise Colbert, invented it under the term dirigisme. “The main feature of this crisis”, declared President Nicolas Sarkozy recently, with more than a hint of satisfaction, “is the return of the state, the end of the ideology of public powerlessness.”

Restarting the Engine: State Intervention in the German economy  Sorting out Opel’s fate has become the most pressing question in German politics. The company is part of the German arm of America’s nearly-bankrupt General Motors, which says it needs €3.3 billion ($4.2 billion) to survive. Mr Steinmeier’s Social Democratic Party (SPD), and members of the conservative Christian Democratic Union (CDU) whose constituents include most of Opel’s 29,000 workers, want to rescue the company at almost any cost. On the other side are economic liberals who fear that the state is already taking over too much of the economy. Some worry that Germany risks becoming something of a socialist state—“East Germany lite”, in the words of Guido Westerwelle, head of the opposition Free Democratic Party (FDP). Germany’s post-war prosperity (first in West Germany, then haltingly across the country after reunification) was founded partly on the notion of Ordnungspolitik, whereby the state referees the market without seeking to control it. It would intervene in some areas, for instance to prevent monopolies, but stay out of other domains, such as setting wage levels. This arrangement largely succeeded in making a success of Germany’s “social market economy”. To the dismay of economic liberals, however, the “grand coalition” government, in which Ms Merkel’s CDU is yoked to the SPD, had been chipping away at Ordnungspolitik even before the crisis, for example by introducing minimum wages in some sectors. Now it is going further. The government plans to spend €80 billion to stimulate demand and has made €500 billion available to rescue banks. It has created a €100 billion “Germany Economy Fund” to provide credit and loan guarantees to non-financial companies, perhaps including Opel. And it is proposing a law that would let the government expropriate failing banks as a last resort. Few doubt that the banking system needed rescuing. But the risks of bailing out industrial firms are “much more severe”, says Justus Haucap, head of the Monopolies Commission, which advises the government. These include distorting competition, weakening healthier companies and preserving outmoded methods of production. The costs could mire the government in large debts; the worry may be not that the state will become too powerful, but that it will become severely weakened. “The growing fear that the bail-out state will be overburdened could decide the election,” commented a recent editorial in Frankfurter Allgemeine, a conservative newspaper. That said, there are fewer purists in politics these days. Even Mr Westerwelle’s FDP concedes that aid to industrial firms may sometimes be warranted. The fights are over nuances: what sort of aid, to which firms and under what conditions? The government’s policy, officially at least, is that only firms that are in trouble through no fault of their own and have credible plans for recovery will qualify for aid, and then only in the form of loans or guarantees.

The party is definitely over DUBLIN is full of shiny new office buildings and retail outlets. But many are unoccupied, monuments to a construction boom that went bust. At one site, the football ground at Landsdowne Road, the cranes are not idle. The stadium is being renovated and will reopen in 2010. “At least someone is drawing a decent wage,” says one watching Dubliner. This year’s St Patrick Day’s parties were glum, even in Washington, where Brian Cowen, the Irish taoiseach, gave Barack Obama the usual bunch of shamrock (see above). Ireland is having a deeper recession than any other euro area country. The economy probably shrank by 2.5% in 2008 and may contract by another 6.5% this year. Unemployment has jumped from 5% to 10.4%, a faster rise even than in America. Irish banks may be free of the toxic securities that have poisoned rivals’ balance sheets, but they are blighted by souring property loans. And a crisis in public finances has forced the government to bring in an emergency budget on April 7th. To envious observers, Ireland’s fall from grace is an overdue payback for its previous swift rise. Between 1990 and 2007 the economy grew by an annual average of 6.5% (see chart 1). It is easy now to dismiss the rise in living standards in the “Celtic Tiger” years as illusory, particularly as Ireland enjoyed house-price and credit booms that were big even by British standards. But to focus on the bursting of the housing bubble would be to miss the lasting gains that were made. Ireland’s expansion went through two phases. The first, led by exports and powered by foreign direct investment, ended roughly in 2002. Foreign companies, mainly American, provided bags of capital and know-how. Ireland offered in return a young, educated, English-speaking, low-cost workforce. State grants, a low corporate-tax rate and access to the EU’s single market made things sweeter. That gave way to a period of growth on weaker foundations. Low interest rates, a consequence of euro membership, lit a fire under property prices and spurred a building and retailing boom. The boom got a fillip in 2004 as migrants from the EU’s new members flooded in. Continued growth gave the impression that all was well. But as one Irish economist notes, the Celtic Tiger had already vanished.

New leader, old problems WHEN Italy’s main opposition group, the Democratic Party (PD), chose Dario Franceschini as its leader, many assumed that he would be a stopgap. The party was in shock. Its first leader, Walter Veltroni, had quit after a disastrous election result in Sardinia. The role of the lean, bespectacled Mr Franceschini was to hold the fort until a cool-headed choice could be made in the autumn. It was Italy’s prime minister, Silvio Berlusconi, who first hinted that things might turn out differently. He warned his lieutenants not to underestimate the new man. “I have the impression”, says Mr Franceschini, “that he thinks that, since the crisis is global, the only responses are global.” The PD’s leader is not alone in pressing for more. On March 18th the head of the employers’ federation, Emma Marcegaglia, was summoned by Mr Berlusconi after complaining that business needs “real money”, not old commitments dressed up as a stimulus. The outcome was a €1.3 billion loan-guarantee fund for small firms. On the defensive for the first time since returning to office in May 2008, Mr Berlusconi has tried to discredit his opponent as a “Catholic communist”. Even his most purblind supporters knows this is nonsense. Mr Franceschini’s family is a near-perfect expression of the “two Italys” that emerged from the second world war. His father was a partisan, but not a communist; his grandfather on his mother’s side was a fascist. The young Dario threw himself into politics in reaction to the troubles of 1968. As Italy slid into the nightmare of terrorist violence, he became a Christian Democrat. He is under no illusion about the size of the challenge, or how long he may have to persevere. “My mission and that of my generation of politicians [on the centre-left] is to build the Democratic Party and, at the same time, demonstrate that Berlusconi can be bested. But in 2013. With the majority he has, his government can last another four years. It’s going to be a long journey.”

Spain's morning after  THE past few months have been bittersweet for Spain. In a general election in March the Socialist Party won a clear but not overwhelming victory, giving José Luis Rodríguez Zapatero a second term as prime minister. That seemed to drain some of the partisan poison that had accumulated in the political system over the previous four years. In June Spain shook off its long-standing reputation as the permanent under-achiever of world football, winning the European championship with swift and skilful attacking play. Not only did the performance of its young team (featuring Catalans as well as the usual Madrileños in prominent positions) seem to echo Spain’s flowering of creativity in everything from architecture to gastronomy; many commentators saw the footballers’ triumph and the public’s rapturous response to it as a welcome expression of national unity in a country that seemed to be turning increasingly fissiparous. In July Rafael Nadal, a tennis genius from Mallorca, won the Wimbledon championship. At the moment of victory he scampered across the press-box roof, clutching the national flag, to salute Spain’s crown prince and his wife. But every month since the election the news at home has become gloomier. Investment is slumping. Unemployment in August was 11.3%, a third higher than a year earlier, the biggest jump for 30 years. The economy grew by just 0.1% between the first and the second quarters of this year, the slowest pace since 1993. It is now almost certainly contracting. So sharp was the deterioration that Mr Zapatero , who had earlier refused to acknowledge that there was any economic crisis, interrupted his August break to hold an emergency cabinet meeting. “Spaniards went on holiday in party mood and came back to find there was no champagne left, nor even any decent wine,” sums up Fernando Fernández, a former IMF official who is now rector of Nebrija University near Madrid. The fiesta had indeed been splendid. Spain has undergone an extraordinary transformation since Francisco Franco died in 1975 and his long dictatorship came to an end. Democracy was swiftly consolidated. A deeply conservative Catholic society has metamorphosed into an almost self-consciously tolerant one. In the 1960s two-fifths of Spaniards still toiled on the land, many of them living in poverty. Now only 5% work in agriculture. Spain has become a vibrant, middle-class urban society. Social and political change went hand in hand with economic progress. Between 1994 and 2007 the economy grew at an average annual rate of 3.6%. During that period unemployment fell from 24% to 8%, even though many women joined the labour force and some 5m immigrants arrived—and were absorbed with scarcely any sign of tension. For most of the past decade Spain has been responsible for creating about one in every three new jobs in the euro zone. By 2007 total employment had risen to 20m, from only 12m in 1993. When Spain joined the forerunner of the European Union in 1986 its income per person was only 68% of the club’s average; in 2007 its income per person was 90% of that of the 15 EU members before its latest expansion. Living standards are now higher than Italy’s. The improvement in Spaniards’ lives is instantly visible. Many elderly people are short, stunted by the hunger they suffered as children in the hard years of fascist autarky after Franco won the civil war of 1936-39. Young Spaniards are strikingly taller than their grandparents, exemplified by Pau Gasol, who measures seven feet (2.13 metres) and was voted the most valuable player when Spain won the latest world basketball championship. Spain is not just a desirable place to live—though it is that, attracting northern Europeans who have bought second homes in order to enjoy the Spanish combination of sun, good public services and a relaxed way of life. In 2006 it was the world’s ninth-largest economy measured at market exchange rates and the twelfth-largest at purchasing-power parity. It is the sixth-biggest net investor abroad.

Latin America

Preparing for tougher times IT WAS great while it lasted. In the five years from 2004 Latin America’s economies grew at an annual average rate of over 5%, inflation remained generally low, credit expanded and exports boomed. All this meant that the proportion of people living in poverty fell from 44% in 2002 to 33% this year, according to an estimate this week by the United Nations Economic Commission for Latin America and the Caribbean. Now the task facing the region’s policymakers is to limit the damage as the world economy deflates. Until September Latin Americans could still hope that they would escape the worst of the downturn. Brazil’s economy, for example, grew by 6.8% in the third quarter compared with the same period last year, while Peru’s GDP expanded by 10% in the year to September. But in the past two months, Latin America has seen its stockmarkets crash, currencies wobble and credit start to dry up. That comes on top of falling exports and the plunge in the prices of the commodities it sells to the world. Twisting the knife, less money is being sent home by Latin Americans working abroad (see article). This has sent economists scurrying to cut their forecasts time and again. As recently as October, the IMF expected growth in the region next year of 3.2%. This week the World Bank forecast 2.1%. The same day Morgan Stanley, an investment bank whose Latin American research team is among the more pessimistic about the region, cut its forecast for the seven largest economies in 2009 from growth of 1.5% to a contraction of 0.4%. The average conceals wide variations. Brazil’s government still expects growth of 4% next year, though that looks optimistic. Mexico, hit by its close ties to the American economy, will be worse affected, but may manage growth of 0.4%, according to a poll of private forecasters by its central bank.

• Falling remittances to Mexico

Latin American Democrats Need U.S. Support  Latin America is an integral part of the community of nations that share the values of liberal democracy and market economy. Its combined GDP is larger than China's GDP. History shows that whenever Latin America has been neglected the cause of freedom and prosperity has been undermined. Therefore, it is essential that nations that embrace the principles of freedom and democracy band together to face today's security threats. We live in a dangerous world. The demise of communism was a step forward in the cause of liberty. But history has returned. The old enemies of free and open societies pose new challenges to the world. Terrorism, whatever its nature, continues to pose a threat to civilization and peace. Islamism is both a model and a yoke for millions. Regressive utopianism is spreading in many Latin American countries through a wave of populism. Nationalism and religious fanaticism continue to feed conflict and instability. The enemies of freedom that share anti-Western views are now forming new alliances. Liberties and freedoms are progressively being diminished inside some Latin American countries while hard-power foreign policies are being implemented as a means to increase influence and weaken the common enemy: the West. Latin Americans must continue to work with their American partners and friends to ensure the protection of democracy and other civil institutions. We must promote a transition to democracy in Cuba and direct our efforts to avoid the resurgence of authoritarian regimes. Poverty is a painful reality in many countries. Millions of people do not have access to health care or education. This is unacceptable. We strongly believe that the benefits of globalization should be available to everybody. We have found in our own countries that strengthening democratic institutions, providing good governance, and opening up our borders to trade is the best way to improve social conditions and economic welfare. Latin America has much to gain from free trade. Successfully negotiating free-trade agreements will help bring progress and prosperity to Latin American countries, as well as around the globe. Today, there are over 40 million people with strong links to Latin America who live in the U.S. and, through their dynamism, contribute to its greatness. The tradition of freedom embraced by the U.S. is in accord with Hispanic traditions and culture. The peaceful coexistence of the American and Hispanic traditions reinforces the idea of Latin America being part of the Western world. Latin America needs support against the threats it currently faces. It is essential that Latin America be able to count on the support of the U.S. if it is to succeed at promoting and consolidating common values and principles.

A big opportunity for Obama and Lula From the 1950s to the 1970s, the US government supported Latin American militaries as they ousted democratic governments and tortured opponents to silence dissent. In the 1980s, as Latin Americans reconstructed fragile democracies, US leaders encouraged the new governments to subscribe to the logic of unregulated markets. The result was that people across the hemisphere were abandoned economically by their governments just as they became citizens. Today, as Obama works to undo the damage of the Bush era, he should also promote socioeconomic reform in Latin America that brings material well-being and cultural inclusion to poor majorities. What Obama has said to Americans in the past two months will resonate with Latin Americans: What we want for our country is not dazzling prosperity for some, but a sustainable economy that fosters cohesive communities for all. Latin Americans want floors in their houses, refrigerators, quality education for their children, and secular governments. The biggest need in the region is for decent jobs and effective policymaking, not fundamentalism, terrorism, or genocide. Right now, Latin America stands as the developing world's greatest hope for democratic politics and market economies to provide a basic standard of living for the majority of people. In perilous times, words and alliances matter. The US needs pragmatic policymaking and strong alliances that won't undercut our antiterrorism commitments, but will strengthen our credibility by providing a model for sustainable development through democratic means. Brazil is a good place to start. With the world's 11th-largest economy and third-highest level of inequality, Brazil puts to the test the claims of those who champion democracy: that democracy can improve people's lives, that citizenship within democratic political institutions fosters inclusion and well-being, and that democratic nations can be significant forces for self-government and social justice in the globalized world. In the past 25 years, as Latin America's democracies have grown and deepened, creative individuals and groups have crafted out-of-the box solutions to poverty and exclusion. In the process, grass-roots activists have moved from the streets to the institutions, participating in elections, running local governments, and designing new civil society initiatives. Simultaneously, businesspeople in Latin America have become increasingly concerned about poverty and inequality. Crime and violence threaten their physical safety, and they cannot find enough workers with the skills and education demanded by global competition. For the first time in the trajectory of development since World War II, elites in Latin America realize that they might have to change the way they do business in order to fight the hunger and misery just up the street.

Mexico's Instability Is a Real Problem Mexico is now in the midst of a vicious drug war. Police officers are being bribed and, especially near the United States border, gunned down. Kidnappings and extortion are common place. And, most alarming of all, a new Pentagon study concludes that Mexico is at risk of becoming a failed state. Defense planners liken the situation to that of Pakistan, where wholesale collapse of civil government is possible. One center of the violence is Tijuana, where last year more than 600 people were killed in drug violence. Many were shot with assault rifles in the streets and left there to die. Some were killed in dance clubs in front of witnesses too scared to talk. It may only be a matter of time before the drug war spills across the border and into the U.S. To meet that threat, Michael Chertoff, the outgoing secretary for Homeland Security, recently announced that the U.S. has a plan to "surge" civilian and possibly military law-enforcement personnel to the border should that be necessary. The problem is that in Mexico's latest eruption of violence, it's difficult to tell the good guys from the bad. Mexico's antidrug czar, Noe Ramirez Mandujano was recently charged with accepting $450,000 from drug lords he was supposed to be hunting down. This was the second time in recent years that one of Mexico's antidrug chiefs was arrested for taking possible payoffs from drug kingpins. Suspicions that police chiefs, mayors and members of the military are also on the take are rampant. In the past, the way Mexico dealt with corruption was with eyes wide shut. Everyone knew a large number of government officials were taking bribes, but no one did anything about it. Transparency commissioners were set up, but given no teeth.

• MEXICO: Iraq Is Safer, MEXICO: You Can't Make This Stuff Up
• A public address by Felipe Calderon
• Democracy, Good Government and Development: MEXICO, an Experience in Latin America

In Mexico, Faltering, Not Failed Mexico is not a failing state, as it has become fashionable to say. What has failed is our "war on drugs." That failure and the drug-related violence wracking Mexico suggest it is time to open a national discussion on legalizing drugs. About 6,600 Mexicans were killed in fighting involving drug gangs last year, and alarms are going off in this country. The U.S. Joint Forces Command, former drug czar Barry R. McCaffrey, former CIA director Michael V. Hayden, former House speaker Newt Gingrich and any number of analysts have speculated that Mexico is crumbling under pressure from drug gangs. But "failed state" is the sort of shorthand that Washington has a way of turning into its own reality, the facts be damned. The Mexican government isn't on the verge of losing physical control of its territory, stopping public services or collapsing. But it is under tremendous pressure and has only nominal control in some places, including border cities such as Tijuana, near San Diego, and Juarez, which sits cheek-by-jowl with El Paso. Army troops patrol the streets, but the police, courts, journalists and citizenry are cowed by the less-visible but more-ruthless drug cartels. As Luis Rubio wrote in a recent report for the University of Miami's Center for Hemispheric Policy, "There are regions of the country where all vestiges of a functioning government have simply vanished," while in the rest, "the climate of impunity, extortion, protection money, kidnapping and, in general, crime has become pervasive."  The government of President Felipe Calderón bristles at Mexico's being called a "failed state" and notes that much of the violence is occurring between drug cartels, provoked by the government's own campaign against them. Tourists can still frolic safely on the beaches. But it is also true that the government has no hope of defeating the heavily armed and extraordinarily rich cartels, which earn between $15 billion and $25 billion a year in profits. Mexico's strategy, at a cost of all that blood, is merely to readjust the balance of power with the cartels. What that means for us is sobering. The flow of drugs won't stop. And, as a report by the Joint Forces Command says, "Any descent by Mexico into chaos would demand an American response based on the serious implications for homeland security alone."

Brazil's New Way In past crises, Brazil was usually the nation in need of the largest life preserver. If it wasn't drowning under fiscal recklessness, it was being held under by draconian austerity plans. Brazil, the old joke goes, is the country of the future - and always will be. Now, in the middle of the worst global downturn for decades, Brazil could finally be the country of the moment. According to a recent study by the Paris-based Organization for Economic Cooperation & Development (OECD), Brazil may be the only one of 34 major economies that avoids recession in 2009. While the U.S. debates whether to nationalize its crippled banks, Brazil's remain comparatively sound. Oil companies worldwide are slashing investment, but Brazil's state-run Petrobras is going ahead with a four-year, $174 billion expansion plan. "Brazil," Lula boasted to TIME, "is riding the current crisis better than many developed countries."  To be sure, the boom - years of 5% growth and soaring exports - is over. There may be another miracle in the making. Because unfettered capitalism is widely blamed for the global meltdown, economists and laborers alike say Brazil has become an example of what Lula likes to call "the financial strategy of the future." By that he means a postideological approach that is equal parts wealth creation for corporations such as Embraer and wealth redistribution for underdogs like Da Silva. All this under the kind of prudent financial regulation that seems to have gone missing in the developed world of late. Brazil still faces huge challenges; its education system is dysfunctional, its political system squalid, corruption endemic. But consider: 53% of Brazil's 190 million people now occupy the middle class, up from 42% in 2002. This increased social mobility happened at the same time the country's main stock index soared some 480% before last fall's downturn. Lula seems to have cracked Latin America's chronic conundrum: how to expand underachieving economies while reducing epic inequality. In so doing, he's created a model that's "an insurance ticket, not a lottery ticket," says Marcelo Neri, head of the Center for Social Policies in Rio de Janeiro.

Reaping the rewards of indolence ANY list of the things that hold back Brazil’s economy would until recently have included overbearing state influence in the financial sector. The government controls Banco do Brasil, a huge retail bank, and Caixa Econômica, the largest mortgage lender, plus the BNDES, a big development bank that feeds cheap credit to favoured companies. Hugely expensive bank loans are a handicap, too. And yet under changed circumstances such lamentable policies suddenly look far-sighted, and have given the global downturn an unusual tinge in Brazil. Other countries are trying to work out how to run banks and direct credit to where politicians think it is needed. This is something Brazil did even when it was unfashionable. It is a sign of the times that a recent research note on Brazil from Goldman Sachs listed state involvement in banking as a plus. As for the private banks, the huge reserve requirements and taxes on funding that push up the price of their loans discouraged them from the wild risks that have brought down some peers in Europe and America. So far, credit in Brazil has been lightly chewed, not crunched. Although the country has been spared the worst of the financial crisis, the economy is weakening. Redundancies have shot up, reversing the job growth of recent years in the formal economy (see chart). Embraer, a maker of jets, laid off 20% of its workers on February 19th. Vale, a mining giant, has cut 1,300 jobs and put more than 5,000 other workers on forced leave. Industrial production in December dropped 12%, the biggest fall in 17 years of record-keeping by the federal statistics agency. This sharp slowdown will make for a grim year. Marcelo Carvalho, an economist at Morgan Stanley, has been forecasting no growth in 2009 and his view is fast becoming mainstream. Brazil is likely to be as late out of the downturn as it was late in. If the past is a guide, its industrial production has followed China’s exports up and down, with a lag of one quarter. Yet by comparison with Brazil’s recent past, and also with what other countries are experiencing, the economy is in fair shape. The IMF forecasts that only the developing countries in Asia (which are poorer than Brazil), Africa (ditto) and the Middle East will do better in 2009. Given Brazil’s previous tendency to go into cardiac arrest whenever economies elsewhere became stressed, this is impressive. Argentina’s crisis in 2001 and the Asian and Russian crises of 1997-98 were painful and disruptive for Brazil. The country’s hypersensitivity to the vagaries of the world economy stretches back to at least the 1930s, when Brazil suffered a military coup during the Depression.

Latin America's Quiet Revolution It is no mystery why so many people think that Latin America is plunging headlong into chaos. There is, of course, a group of troubled countries that includes Venezuela, Bolivia, Argentina, Ecuador and Nicaragua. The governments in these countries are hostile to the U.S., and act arbitrarily against their own citizens. What is taking place in these countries is not, however, a departure from a gloried past of rule of law, strong property rights and economic success. Rather, it is a continuation of a long history of mismanagement, overlaid with a thin patina of anti-imperialist rhetoric. Most of Latin America is, however, undergoing a period of unprecedented political and economic transformation. In Chile, Brazil, Peru, Uruguay, Costa Rica, El Salvador, Panama, the Dominican Republic and, yes, Mexico -- which is most decidedly not a failing state -- there has been a quiet but substantial movement toward the creation of societies that are characterized by increased economic opportunity, social mobility and political democracy. This is not to say that Brazilians have achieved the same standard of living as the Dutch, or that the rule of law operates in Mexico as it does in Canada. It is to say, however, that these countries have undertaken a series of economic and political reforms that make them vastly different places than they were two decades ago. The most obvious manifestations of this change are sound macroeconomic policies that have held down inflation, opened markets and encouraged investment, but these policies are often undergirded by changes in much deeper institutions, such as electoral rules that give rise to governments with centrist agendas or constitutional amendments that provide for independent central banks. Chile provides perhaps the most obvious example of a country that has been undergoing dramatic changes -- and its success has served as a model for the rest of the region. Beginning in the 1970s, a series of reforms reshaped the economic playing field. Analysts often point to Chile's sound macroeconomic policies -- and rightly so. But these policies are the result of parliamentary rules that create incentives for legislators to converge on balanced budgets and of electoral rules that favor the two largest parties -- one of which is center-right and the other center-left, thereby minimizing the probability of a return to populist economic policies.

Africa

The Bad News From Africa U.S. intelligence analysis of the situation in Africa are grim. The basic problems are corruption, tribalism and raw materials (from oil to diamonds and minerals) that enable warlords to sustain themselves, and their gun toting followers, for years. Somalia and Congo are the worst examples of this sort of thing. Then there's Sudan, where the government actually supports much of the mayhem. Many countries are seemingly peaceful, but are actually ready to slip into anarchy. The problems in Africa are pretty basic, but most Western leaders are unwilling to deal with them head on. For example, it's not considered politically correct to talk about tribes anymore. Instead these distinct cultural organizations are referred to as "ethnic groups" (which they often are) or "clans" (which are subsections of tribes). But much of the world's population still owes their primary allegiance to tribal organizations. Africa, South America and parts of Asia are largely tribal areas. Europe still has a few. But the Scots clans are largely just social organizations, although in Eastern Europe you can still find functioning clans. Over the past few thousand years, tribes evolved (by more powerful tribes conquering weaker ones) into kingdoms, and then, with the addition of robust economies and a lot of bureaucrats, nations. So you tend to find tribes in less affluent parts of the world. The majority of our planet's population is poor. But a third of the world's population is in China and India, two places where the strong tribes long ago conquered all the weaker ones. Africa, Southeast Asia and the Pacific Islands still have a lot of unconquered tribes. Tribes tend to fight a lot. Most tribes are agrarian, and there always are disputes over land and crime. Tribes don't have the strong legal systems of kingdoms and nations, so justice is seen as a personal chore. Within tribes, there usually is a system of tribal elders who arbitrate these disputes. But when the disputes are between tribes, arbitration is difficult, usually impossible. Violence and endless blood feuds result. Money alone won't solve the problem of tribal violence, Honest government will. But you can't easily buy that. The locals have to put aside centuries of custom to make government work. That won't happen fast, and when it does, it will take a long time to eliminate the tribal loyalties. Meanwhile, Africa is a grim example of survival of the fittest. Resourceful and ruthless men, abetted by cheap guns and natural resources to plunder, thrive, while proponents of civil society and honest government cower in the shadows.

Bloody history, unhappy future  NO ONE doubts the scale of the war in Congo. Ten African countries dispatched troops there in 1998. Two, Uganda and Rwanda, were trying to overthrow their former puppet, President Laurent Kabila, the others ostensibly seeking to prop him up. Although Madeleine Albright, then America’s secretary of state, called it Africa’s “first world war”, the armies did little fighting. The horrific death toll—as many as 5m—was caused, as so often in Africa, by people fleeing their homes and dying of hunger and disease. And what of the reaction of the rest of the world? The Kosovo war, which occurred at the same time, affected 3m people of whom 10,000 died. Outside powers appealed for $471m to help the victims and NATO eventually sent 30,000 troops to hold the ring. In Congo 86m people were affected. The United Nations asked for $314m. No troops were sent (though the UN now has over 18,000 personnel there). Kosovo is at peace, but the war in eastern Congo, which began in 1993, has never ended. Most of central Africa was colonised by the French or the Belgians, and René Lemarchand and Gérard Prunier are France’s two leading experts. Both have written their latest contributions in English, perhaps because, as Mr Lemarchand puts it at the start of “The Dynamics of Violence in Central Africa”, this region “matters”. It matters because it is the great core of Africa, its breadth nearly the distance between London and Moscow. It matters because its nine neighbours are all affected by its upheavals and because parts of it are stuffed with valuable minerals. And it matters because the war that engulfs it is brutal, unending and often overlooked. Both these books are written to disprove fashionable hypotheses about the war and its causes. Mr Prunier, elaborate, anecdotal and discursive, enjoys demolishing the idea that the war is a conspiracy of English-speaking countries to prise Congo away from the French sphere of influence.

How a profiteer works one of the world’s worst economies Like many of the nouveau riche in Zimbabwe, Mphele (whose name, like everyone’s in this piece, has been changed for security reasons) is a man of contradictions. He goes to church every Sunday, but he has a team of eight thugs who enforce his deals. He delivers firewood to needy homes, and an hour later bribes a local police official. He takes his daughter to France to visit Disneyland, but he admits to having shot a man, though not fatally. He’s a one-man NGO, a mafia king, a doting father, a shrewd businessman, and, potentially, the future president of Zimbabwe (or so he claims). In reality, Mphele, 33, is a middleman in one of the worst economies in the world. He is part of an underground network of black marketeers, foreign-exchange dealers, import-export merchants, and just plain street-savvy capitalists who dabble in anything that turns a profit. They are opportunists and entrepreneurs who, in their own perverse way, help a destitute country function.

South Africa Bars Dalai Lama from Peace Conference South Africa has barred the Dalai Lama, Tibet’s spiritual leader and a Nobel Peace Prize winner, from attending a peace conference here this week that is supposed to promote the 2010 World Cup and the potential of sport to unite people across races and nations. The government said Monday that the Dalai Lama’s presence at the conference would have distracted the world’s attention from its hosting of the World Cup and drawn it instead into the fraught relations between the Dalai Lama and China, one of South Africa’s most important trading partners. Thabo Masebe, a government spokesman, said the Tibetan leader’s presence “would not be in South Africa’s best interests.” Three of South Africa’s own Nobel laureates had invited the Dalai Lama to attend, and the government’s move to deny him entry drew sharp condemnations on Monday both here and abroad. Critics of the decision, including Desmond Tutu, the retired Anglican archbishop of Cape Town, who won the peace prize in 1984, said South Africa had caved in to China, which has aggressively sought to extend its influence across the continent in recent years. Prime Minister Wen Jiabao said at a news conference earlier this month that foreign countries should stay away from any involvement in the Tibet issue. “We are shamelessly succumbing to Chinese pressure,” Mr. Tutu told South Africa’s Sunday Tribune, a statement his office confirmed on Monday. “I feel deeply distressed and ashamed.” South Africa’s decision comes at a particularly charged moment in China’s relations with ethnic Tibetans. China has dispatched thousands of troops to the Tibetan region to quell any repeat of the anti-Chinese riots that broke out a year ago in Lhasa, the Tibetan capital.