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April 28, 2009

Peace in the Public Square: the 100 Days and Re-emergence of Civitas (Updates)

Welcome to the "Brave New World", or as we like to call the land of reset. If you listened to the 100-day press conference we think the President did a decent job but not a great one, unlike his economic situation and policy review. Nonetheless, excepting the die-hard ideologues, this is a remarkable performance. And, in our judgment, an effort to find centrist, pragmatic and workable policies domestically, economically and internationally. In each of these areas thoughtful, informed, bold and potentially revolutionary policies have been put forth. An assessment put forth by a wide range of pundits (some of whom you'll find in the readings). We're going to try and take that apart a bit and look at what went on (though there's too much to review in ANY detail), what some of the assessments are and, our typical schtick, what the context and consequences are and how things will play out structurally. Setting aside partisan posturings the three major critiscisms that have been voiced (many by David Brooks initially and then picked up by others) are: 1) too much, to quick, 2) workability and execution (not in so many words but it is THE issue now that we're moving beyond ideological posturings) and 3) a radical shift in the line between the public and private spheres. All of them are legitimate, raise serious concerns and need to be addressed. But the bottomline here is that we're seen a remarkable 100 Days where critical markers have been laid down that set the tone, direction and strategies for most of the rest of the term and beyond. We are in fact engaged in an audacious reset at the most fundamental levels that will frame our outlook for decades. Perhaps most importantly we "Coach Carter" treating the voters like responsible adults and a slow shift in how they respond: from poll-driven policy-faking to principle-based decisions that try to balance what's best with with what's feasible and saleable. Now it's time to execute, execute, execute.

A 100-Day Assessment: Brooks, et.al.

In the readings you'll find selected excerpts and URL links to some of the more thoughtful pundits but so far the doyen and dean of reasonably balanced commentary is Mr. Brooks. Who, despite being a moderate conservative and a Burckian who worries about disrupting complex socionomic systems and unintended consequences, has applauded many of the decisions. For example calling the new Afghanistan policy bold but the war winnable or describing the economics speech as stunningly good or being dazzled and amazed at the sheer managerial competence of the Administration and how much they've managed to get done on so many fronts. We strongly suggest you invest the 30 min. required in watching the interview and taking notes because he covers an immense amount of ground quickly but insightfully. Some of the those major points deserve long essays in response. On the workability question we'll pursue some critical aspects later in policy focused posts but what Brooks and the others are missing is the repeated application of a systematic and systemic decision-solving methodology that seems to permeate each issue:gather the best people and ideas, pull them together, put a framework down, work out the details, start working the legislative process and selling to the voters. Review, revise,verify and extend as circumstances evolve.

Policy, Politics, Lizard-brains and the Disruptive Opposition

Let's get a little more analytical about some of the things swirling around. The accompanying graphic is a little busy but instead of building it up we compress several key ideas to that you can see how they all work together. Policy and politics have at least three key dimensions that must be addressed to be effective: what's the right policy, what constituencies does it impact and how do they react (the Political Spectrum) and how do you persuade sufficient support (the Mental Spectrum). Political interest combines the moderate and centrist leanings of the polity with the tendencies of party activists to retreat to the extremes while selling a policy has to balance the depth and density of information with the appeals to the hindbrain where decisions are really made. Clinton sold to the polls and told us what we wanted to hear - he got away with it because the times were good. Bush II told us what he thought we ought to hear based on his own ideologies. Obama is telling us what we must hear and not sugar-coating it. We'll see if the polity evolves itself enough to continue to respond constructively - so far there's more faith in the President than in his policies. We first used this chart during the elections and have modified to show how a centrist candidate (Barry) sold his intent while a wannabe centrist (McCain) retreated to the right and more and more appealed to the hindbrain. Now President Obama has gotten even more information-rich and is doing a fabulous job explaining things. It's not clear he's selling them - which is in fact one of the two major weaknesses he's got so far. That's not a problem that goes away until more pudding is eaten for proof however. On the other hand the Rips are retreating faster and faster into pure hindbrain appeals and bad policies. It's all very well and good to be "sincere" but right counts first and foremost and they're pushing shibboleths that were appropriate in Reagan's day, had a positive impact for a while but are badly outdated and deeply flawed. But instead of re-thinking themselves the True Believers are getting increasingly self-destructive. Too bad for them and ultimately for the country - a set of observations that roughly Brooks agrees with btw ! Ironically (cf. the readings, especially the assessment by Matt Miller) Obama's major initiatives in Healthcare, Education and Energy are closer to a combination of a) what Bush tabled in several State of the Union speeches (on Energy for example what's emerging is pretty close to his 2001 National Energy Strategy) and b) what other moderate Republicans have proposed over the last 20+ years. The Republicans, as opposed to the Rips, should be getting behind these instead of pursuing power and advantage at the cost of what's best for the country.

The Public Square: What Makes the Agora Work

Any society consists of a private sphere where people conduct their lives and make a living, a public sphere where the society makes decisions for everyone and a civic sphere where culture, religion and values define the ecology of the private and public sphere. If you go to almost any city in the world you'll find a public square which typically has shoppers strolling around, shops and commerce, public buildings and civic institutions (libraries, schools and churches for example). In Ancient Greece the called it the Agora - where all the myriad facets of the life of the city-state came together into one organic whole. Have you ever stopped to wonder what makes the public square work ? Like our mutual agreement that we have to have rules of the road so that we can operate our highways safely and efficiently we have to have rules that govern the Agora. Key among which is the agreement to abide by the rules, a recognition that they are necessary, tolerance for anybody who follows the rules to have the right to come to the square and be heard and a willingness to cooperate in it's creation, maintenance and safety. The public square has defined Civilization for millenia and, in it's modern, complex and gigantic form, it still does.

We've spent the last two or more decades abusing the rules necessary for the long-term health of the public square and damaged both the private and civic spheres as a result. Largely thru the opportunistic pursuit of various interest groups of their own advantages and interests at the expense of the general health and well-being. Now the question is will we all be citizens together and act in our collective self-interest to return the square to health or not ?

 Changes in Attitude: Paco vs the Consumer

This might be an odd sort of source to look at but Paco Underhill, who is one of the best consultatns and strategists in the world when it comes to retail and consumer behavior, was interviewed on the Newshour last week. He had a lot to say that was "ostensibly" about change in consumer behavior. But his critical observations and insights were really about whether or not we can continue to sustain our old behaviors. This economic crisis is forcing major and radical changes in shopping but Paco think the changes in attitudes are going to be permanent. We happen to agree. As points out - we can no longer afford to consume beyond our means. More importantly, fundamentally and even philosphically, we don't need to. Perhaps his most startling observation is that people need to learn, and are learning, that the next car or house or vacation is not only unnecessary. IT's NOT SATISFYING ! Now that's a SEE-change in our books. And when it comes from a guy who makes his living getting you to buy more and he's calling for changes in basic attitudes somethings up.

UPDATES: the Difference Between Pundits and Executive Responsibility

Here's the link for the CSpan: Obama 100 Day Press Conference and the post-conference Rose panel that discussed it. We were struck in the first case by how closely our assessment of things mirrored the President's directional intent while at the same time was reinforced by the pundits. BUT that's NOT the most important thing - THE important things are that the pundits don't talk at all about 1) whether the policies are right (which we've argued at length that they are), 2) what it takes to implement them (the question never came up among them) and 3) what it takes to explain and sell them to motivate the country in support of them. Yet as a matter of fact those are the central questions that must concern the Administration. The difference is between outside observers who've never stepped in front of the gun, even in a small way and the people who see dealing with all the elbow jostlers as just another part of their job but who's primary concern is getting it done, and getting it done right, workably and sustainably.

 The 100 Days and Outlook

AP Poll: After Obama's 100 days, US on right track Millions of people jobless. Billions of dollars in bailouts. Trillions of dollars in U.S. debt. And yet, for the first time in years, more Americans than not say the country is on the right track. In a sign that Barack Obama has inspired hopes for a brighter future in the first 100 days of his presidency, an Associated Press-GfK poll shows that 48 percent of Americans believe the United States is headed in the right direction — compared with 44 percent who disagree. The "right direction" number is up 8 points since February and a remarkable 31 points since October, the month before Obama's election. Intensely worried about their personal finances and medical expenses, Americans nonetheless appear realistic about the time Obama might need to turn things around, according to the AP-GfK poll. It shows, as Obama approaches his 100th day in office next Wednesday, most people consider their new president to be a strong, ethical and empathetic leader who is working to change Washington. "He presents a very positive outlook," said Cheryl Wetherington, 35, an independent voter who runs a chocolate shop in Gardner, Kan. "He's very well-spoken and very vocal about what direction should be taken." Nobody knows how long the honeymoon will last, but Obama has clearly transformed the yes-we-can spirit of his candidacy into a tool of governance. His ability to inspire confidence — Obama's second book is titled "The Audacity of Hope" — has thus far buffered the president against the harsh realities of two wars, a global economic meltdown and countless domestic challenges. Even if they don't always like what he's doing, Americans seem content for now that the president is taking action to correct the nation's course. He's doing something, anything, and that's better than nothing. Other AP-GfK findings could signal trouble for Obama: _While there is evidence that people feel more optimistic about the economy, 65 percent said it's difficult for them and their families to get ahead. More than one-third know of a family member who recently lost a job. _More than 90 percent of Americans consider the economy an important issue, the highest ever in AP polling. _Nearly 80 percent believe that the rising federal debt will hurt future generations, and Obama is getting mixed reviews at best for his handling of the issue.And yet, this is the first time since January 2004 than an AP survey found more "right direction" than "wrong direction" respondents. That fleeting 2004 burst of optimism came shortly after the capture of former Iraqi dictator Saddam Hussein. In recent years, the U.S. public has tended to be more pessimistic than optimistic about the nation's future. The exceptions lasted just a few months: the start of the Iraq war, the Sept. 11 attacks and late in the Clinton administration. Obama is not the first president who has sought to shape the nation's psychology, tapping the deep well of American optimism to effect policy and politics. For some people, including a minority of Republicans, the message has struck a chord. Others say their newfound optimism has nothing to do with Obama, but rather with an era of personal responsibility they believe has come with the economic meltdown.

Obama's Overture  As we approach the 100-day mark for the Obama administration, you will hear and see a wide variety of grades for the new president's performance. Remember this: What has happened so far is no more than the overture to the first act of this opera. The big stuff is still to come. The soprano has not opened her mouth for her signature aria. That will be health-care reform. The devilish baritone is still offstage. Wait for the first international crisis. Barack Obama has launched a lot of initiatives but has fulfilled few of them. What he has shown -- and it is an important accomplishment in itself -- is a mastery of the art of managing the presidency. It is important because it is the first and most basic test of his ultimate ability to be a successful president. And it is surprising, because there was no reason to assume that he had the skills to direct such a large enterprise. Never before in Obama's 47 years had the lawyer-writer-politician had to recruit, assign and motivate a professional staff of this size and skill and organize it to meet his needs and carry out his purposes. His staffs in the Illinois legislature and the U.S. Senate were minuscule. The campaign itself was by far his largest organizational challenge, and he passed with flying colors. But the presidency poses far tougher tests than a need to amass 270 electoral votes. Obama had a few stumbles in assembling his Cabinet and, as a result, lost the services of one potential major asset, Tom Daschle, his original choice to manage his health-care initiative. Many of the Cabinet members are still learning their jobs, but the White House staff has supported what so far has been a bravura performance on Obama's part. Particularly striking has been the staff's ability to move at a rapid pace to tackle inherited challenges and launch ambitious efforts without creating a sense of confusion about the priorities of the president. Hardly a day has gone by in the first three months that Americans have not seen Obama on their TV screens in a variety of roles -- chiefly as economic salvage director for seriously shattered housing, credit and employment systems. But they've also seen him as commander in chief of armed forces fighting two wars, diplomatic traveler engaged with world leaders, and agenda-setter for Congress -- to say nothing of first father, first fan, first consort of Michelle and first master of Bo. Making this kaleidoscope look coherent -- and not confusing -- requires enormous discipline, and nowhere more than in the management of the White House schedule. The task and the tools were sketched for me last week by chief of staff Rahm Emanuel, who had a close-up look at the near-fatal costs of losing control as a White House staff member in the chaotic first two years of the Clinton administration.

Sizing Up Obama's First 100 Days The combination of candor and vision and the patient explanation of complex issues was Obama at his best — and more than any other moment of his first 100 days in office, it summed up the purpose of his presidency: a radical change of course not just from his predecessor, not just from the 30-year Reagan era but also from the quick-fix, sugar-rush, attention-deficit society of the postmodern age. The speech received ho-hum coverage on the evening news and in print — because, I suspect, it was more of a summation than the announcement of new initiatives. Quickly, public attention turned to new "tempests of the moment" — an obscene amount of attention was paid to the new Obama family dog and then, more appropriately, to the Bush Administration's torture policy and the probably futile attempt to prosecute those who authorized the practices. The most important thing we now know about Barack Obama, after nearly 100 days in office, is that he means to confront that way of life directly and profoundly, to exchange sand for rock if he can. Whether you agree with him or not — whether you think he is too ambitious or just plain wrong — his is as serious and challenging a presidency as we have had in quite some time. There are those who mistake his quiet, deliberative style for softness. There is the fear that he won't have the strength to stand up to the Israelis (or the Iranians) or to the left wing of his party on health care or to the porkers on the defense budget. On the other hand, there are three dead Somali pirates who attest to this President's ability to make tough decisions in a timely fashion. Obama won't stand up to everyone, always; he is, after all, a politician. But the quality of fights he does choose will determine whether he builds his legacy on rock or sand. He has had a brilliant time announcing his intentions, but the real game of governing is about to begin. 

Ironies of 'a Devout Non-Ideologue'  How many ironies can a single presidency engender? Barack Obama is a detached man who has inspired fierce loyalties, and a cool man who has aroused both warm feelings of affection and a fiery opposition. He loves to engage conservatives, yet few of them have chosen to engage him. He is seen as too moderate by parts of the left, but the right thinks he has a radical, statist agenda. Wall Street's critics believe Obama's approach to rescuing the financial system amounts to coddling the bankers and financial scammers who got us into this mess. But many on the Street say Obama doesn't understand them and fear he is a secret populist who would displace finance as the dominant force in the U.S. economy. On torture, Obama sought a middle ground: He ended the practice, disclosed what happened and proposed that we move on. Yet the right opposed disclosure, parts of the left wanted more accountability and their fight brought forth all of the bitterness Obama wants to put behind us. The man does more than defy labels. He hates them. At a briefing for columnists last week to influence the coming 100-day assessments, a senior Obama adviser, struggling to offer a philosophical definition of the 44th president, finally settled on calling him "a devout non-ideologue." But the mysteries and paradoxes of these 100 days cannot be unraveled without an understanding that the president is more than a "whatever works" guy. Obama would not inspire such loyalty if his supporters did not see (correctly) that he has an agenda to move the country to a very different place. He would not inspire such resistance if his opponents did not sense exactly the same thing.

Politics: Inside the Sausage Factory

Let's Get Ready To Reconcile!  Sex, drugs and rock and roll. Sounds fun, except that this column is about reconciliation, obfuscation and cap-and-trade. A pity, I know, but bear with me. If we want to "put away childish things," as President Obama urged in his Inaugural Address (quoting Saint Paul), we're going to have to talk about some awfully wonky procedural and substantive things that grown-ups in Washington like to obsess about. And we're going to have to get used to the idea that transformational change in health, education and energy policy is more important than whether Republicans cry foul over being railroaded. Reconciliation on Capitol Hill, as you have probably heard, has nothing to do with avoiding divorce. It's the process by which the House and Senate "reconcile" their differing versions of the federal budget and deal with the devilish details. To keep things moving, passing budgets requires only 51 votes in the Senate, a simple majority. Now it may strike you that majority rule is what democracy is supposed to be about, but that just means you haven't been paying attention. A half century ago, the Senate averaged only one filibuster every two years. Senators would speak for 20 or 30 hours straight (or even read the phone book aloud) in order not to yield the floor until the bill—often a civil-rights measure—was killed. It took a vote of two thirds of the Senate to end debate and proceed to passage, a move known as cloture. Today's filibusters no longer feature the "Mr. Smith Goes to Washington" theatrics and cloture now requires three fifths. But what was once rare has become routine. For the last several years, senators in the minority have somehow convinced themselves that democracy demands that nothing serious passes their chamber without 60 votes. Because the Democrats have only 58 (59 when Al Franken shows up) and might face some Democratic defectors, they're examining their options. Republicans are shocked (shocked!) at the idea that a tool they used when they were in control to pass huge tax cuts for the rich in 2001 and 2003 might now be used for Obama's agenda. Republican Sen. Judd Gregg, only recently Obama's Commerce secretary designee, now says that using reconciliation is "an act of violence" and that the majority is "running over the minority, putting them in cement and throwing them in the Chicago River." In a strong bid for the hypocrisy gold, Gregg favored using reconciliation not just for President Bush's tax cuts but for Bush's plans to drill in the Arctic National Wildlife Refuge as well. Now he favors using reconciliation for obfuscation—to convince the public that the Democrats are somehow corrupting the process. I hate to break it to Republicans, but this isn't going to work any better than anything else they've been trying lately. Sure, the Democrats are hypocrites now, too. They blasted Bush's use of reconciliation when the GOP controlled Congress. But the supposed damage to "comity" (a fancy word for politicians getting along) is exaggerated, especially considering that not a single Republican in either chamber voted for Obama's budget. Not one. If the GOP is so mad about improper use of reconciliation that it deploys what Washington calls the "nuclear option," and shuts down the Senate with procedural gambits, only the C-Span part of its base will rally to the cause. Rahm Emanuel scoffs at the notion that the public is going to tune in to an archaic debate. "Hell,"—except he didn't say "hell"—"half the press corps doesn't understand what reconciliation is." Obama and the Democrats would prefer not to have to use reconciliation; it rubs wounds raw and makes it harder for the president to maintain a Reaganesque pose above the fray. But they'll do what it takes. When Congress reconvenes next week, the House and Senate Democratic leadership will include in their conference report on the budget resolution instructions that reconciliation can be used as a kind of fallback mechanism if the Senate isn't on track to pass a health-care bill and an education bill with 60 votes by this fall.

Obama's Bipartisan Triumphs Just about everyone agrees that one of the sad casualties of President Obama’s first 100 days is the bipartisanship he championed so appealingly on the campaign trail. But everyone is wrong—at least when it comes to the ideas Obama is advancing. Yes, it’s true that Republicans haven’t been supporting his initiatives, but that’s hardly Obama’s fault. Any fair-minded assessment of the president’s policy priorities reveals them to be to be an innovative blend of liberal and conservative thinking. As a result, Obama’s early tenure has posed nothing so much as an instructive political riddle, which runs as follows. When can you have a bipartisan agenda without Republican votes? Answer: when Republicans find that endorsing their own ideas gets in the way of pursuing their thirst for power. Don’t believe me? Look at what Obama is actually trying to do in his three big reform arenas: health care, energy, and education. Health care. The centerpiece of Obama’s approach to overhauling health care, now being fleshed out by Congress, is to create a new insurance exchange or marketplace so that people who don’t receive employer-sponsored plans have access to group coverage outside the job setting. In the exchange, folks would choose among competing health plans, with lower earners enjoying subsidies that taper off as income rises. Energy. Complicated details aside, Obama’s overarching approach to energy is simple: He wants America finally to put a proper, higher price on dirty energy that reflects its true environmental costs, and thus create market incentives that allow clean alternative energies to flourish. Obama’s related plan is to cushion the impact of higher dirty energy prices on middle- and lower-income Americans by rebating to them 80 percent of the revenue collected by his cap and trade plan. It’s basically a tax swap, with the other 20 percent of the revenue used by Uncle Sam to jumpstart investment in new energy sources. Education. In Republicans' eyes, Obama sinned by not fighting to renew the Washington, D.C., voucher program that provided a lifeline to a few thousand desperate families. But the rest of his school agenda hits every Republican erogenous zone. The president is pushing charter schools, higher standards, differential teacher pay, alternative teacher certification, and even tenure reform in ways far beyond anything any president has attempted before. What’s more, with Education Secretary Arne Duncan’s savvy management of the administration’s union ties, Obama has a chance to make more Nixon-to-China progress on ideas conservatives have long urged than has ever been possible. But when a Democratic president elected by a wide margin is working overtime to foist on America the Romney health plan, the McCain environmental fix, and the conservative establishment’s dream agenda for the schools, the question of “who lost bipartisanship” in his first 100 days has a pretty clear answer. 

Responses and Backlashes

In GOP base, a 'rebellion brewing' A quick tour through the week’s headlines suggests the Republican Party is beginning to come to terms with the last election and that consensus is emerging among GOP elites that the party needs to move away from discordant social issues. There was Sen. John McCain's daughter and his campaign manager who last week demanded that their fellow Republicans embrace same-sex marriage. Utah Gov. Jon Huntsman – the most devoted modernizer among the party's 2012 hopefuls – won approving words from New York Times columnist Frank Rich for his call to downplay divisive values issues. The party’s top elected leaders in Congress, meanwhile, spooked by being attacked as the “party of no,” were recasting themselves as a constructive, respectful opposition to a popular president. But outside Washington, the reality is very different. Rank-and-file Republicans remain, by all indications, staunchly conservative, and they appear to have no desire to moderate their views. GOP activists and operatives say they hear intense anger at the White House and at the party’s own leaders on familiar issues – taxes, homosexuality, and immigration. Within the party, conservative groups have grown stronger absent the emergence of any organized moderate faction. There is little appetite for compromise on what many see as core issues, and the road to the presidential nomination lies – as always – through a series of states where the conservative base holds sway, and where the anger appears to be, if anything, particularly intense. "There is a sense of rebellion brewing," said Katon Dawson, the outgoing South Carolina Republican Party chairman, who cited unexpectedly high attendance at anti-tax “tea parties” last week. In one sense, Republican leaders face the same challenge their Democratic counterparts did during the Bush years: how to effectively channel the deep emotion of the base while tamping down its excesses. But the party’s battered infrastructure, still recovering from its drubbings in 2006 and 2008, is also listing to the right. Liberal Republican groups like the Main Street Republican Partnership and the Republican Majority for Choice remain essentially irrelevant, and even the main gay GOP group, the Log Cabin Republicans, is fending off a challenge from a more conservative gay splinter faction. The grass-roots fervor is pushing the party to the right in another concrete way: Two of the most prominent GOP Senate moderates face serious primary challenges in 2010. In Pennsylvania, former Congressman Pat Toomey, a down-the-line economic and social conservative, is running against Sen. Arlen Specter, attacking his “liberal agenda on social, labor, immigration and national security policies.”

Specter's Move Signals a Decisive Shift  In announcing his switch to the Democratic Party on Tuesday, the maverick Pennsylvanian was doing more than trying to save a political career jeopardized by the increasing conservatism of the Republican Party. He was also ratifying a decisive shift in American politics. The GOP in his home state had once been a bastion of moderates and liberals including William Scranton, Hugh Scott and Richard Schweiker. In the age of Barack Obama, Republicans of that stripe are flooding into the Democratic Party. Specter is not a leading indicator. His conversion is the culmination of an inexorable trend. In a sense, Specter's departure is a victory for conservatives who, since the days of Barry Goldwater, have been intent on purging liberals from the GOP. The raw political fact is that Specter was in grave danger of losing a Republican primary to former Rep. Pat Toomey, an anti-tax activist. One Democratic strategist reported seeing polling that showed Specter less popular among Pennsylvania Republicans than President Obama. Conservatives had once hoped that creating an ideologically pure party would put them on the path to a majority. But they must now worry that the Republicans' continued rightward drift is putting the party at odds with a moderate to liberal mood that pervades the country almost everywhere outside the Deep South. And Specter's switch would give the Democrats a filibuster-proof majority in the Senate, assuming that Minnesota's Al Franken eventually takes the seat for which he now leads after an extended recount. At the instant of his conversion, Specter transformed himself from a political underdog into a favorite for re-election in 2010.

The Culture War of Words Advice to would-be culture warriors in the 21st century: walk softly and carry a big thesaurus. According to the conventional wisdom, the culture wars are over in Washington—or, at the very least, reduced to sideline skirmishes. Buoyed by the support of centrist, socially conservative Christians, the Obama administration has ushered in a new era of conciliation. Ideological opponents—especially those on either side of the abortion issue—are now trying to establish common ground. This is one of the priorities of the president's Office of Faith-Based and Neighborhood Partnerships. (I wrote a story about this a month ago.) A first order of business is "abortion reduction," a seemingly noncontroversial and laudable goal. By agreeing that abortion is a complex moral issue and that it should be less frequent, former enemies can work together to find ways to reduce abortions. Beneath all the optimism though, tensions continue to simmer, and it can seem that differences between the old culture wars and the new ones are merely differences in tone and tactics, not in ideology. In previous eras, warriors fought with rhetorical bludgeons; now they use newfangled semantic weapons so sharp they could split a hair. On both sides, people say they want abortion reduction. But listen carefully to how they say it. Outside the Beltway, who really cares? According to an ABC News/Washington Post poll from August 2008, 54 percent of Americans support legal abortion in all or most cases—exactly the same percentage as a decade ago. It's hard to imagine anyone arguing with the basic premise: in an ideal world, fewer American women would seek abortions. How our government achieves that end matters a great deal; how activists talk about achieving it—in terms of need or numbers—matters not at all. In the words of David Kuo, a veteran of George W. Bush's faith-based office: "This stuff doesn't permeate the heartland—nobody gives a s––t."

Values, Responses and Adaptations

Generation Me Perhaps, one day, we will say that the recession saved us from a parenting ethos that churns out ego-addled spoiled brats. And though it is too soon to tell if our economic free fall will cure America of its sense of economic privilege, it has made it much harder to get the money together to give our kids six-figure sweet-16 parties and plastic surgery for graduation presents, all in the name of "self esteem." And that's a good thing, because as Jean Twenge and W. Keith Campbell point out in their excellent book "The Narcissism Epidemic," released last week, we've built up the confidence of our kids, but in that process, we've created a generation of hot-house flowers puffed with a disproportionate sense of self-worth (the definition of narcissism) and without the resiliency skills they need when Mommy and Daddy can't fix something. But as Twenge goes on to illustrate, all that narcissism is a problem that can range from the discourteous—residential advisers at Southern lament students disregarding curfews, playing dance music until 3 a.m., demanding new room assignments at a moment's notice and failing to understand why professors won't let them make up an exam they were too hung over to take—to the disastrous—failed marriages, abusive working environments and billion-dollar Ponzi schemes. Seems that the flip side of all that confidence isn't prodigious success but antisocial behavior. Armed with a steady influx of trophies just for showing up, "I Am Special" coloring books and princess parties, it is hard for kids to understand why an abundance of ego might be bad for them. Hot off their own rebellions in the late '60s, my parents struggled to give me the freedom to be me while also teaching me generosity, compassion and humility. But no matter how you were raised, the handiest cure for narcissism used to be life. Whether through fate, circumstances or moral imperative, our culture kept hubris in check. Now, we encourage it. Treating the whole world as if it works for you doesn't suggest you're special, it means you're an ass. As an antidote to a skyrocketing self-worth, Twenge recommends humility, evaluating yourself more accurately, mindfulness and putting others first. Such values may seem quaint, maybe even self-defeating, to those of us who think we're special, but trust me: it gets easier with practice.

In Slumping Economy, a Shift in Shopping Habits PACO UNDERHILL, author, "Why We Buy": We cannot sustain the juggernaut of consumption that we have had here in the United States over the past decade. PAUL SOLMAN: But you want us to be spending as much, don't you? PACO UNDERHILL: I want you to be spending what you can afford. We have Americans out there whose credit card debt exceeds their annual income. We have an entire generation of Americans with little or no fiscal discipline or financial knowledge. Our houses are too big. Our cars are too big. Our debts are too big. Our bellies are too big. Now it's time to go on a diet. PAUL SOLMAN: Do you think that because many of us can't afford to shop as much now, we feel more isolated? PACO UNDERHILL: I think so, yes. And many Americans are deeply frightened. They are frightened because they are facing things that most of them have never thought of in the context of their lifetime. We also know that there is something in our culture called shopping sickness. One of the fundamental issues I think we're trying to discover as consumers is that there are no acquisitions that are transformational. Acquiring that iPod or that tube of lipstick or that Maserati doesn't change us into anyone other than what we were to start out with and that, therefore, our relationship to consumption here has to be more real. 

Yanks in Crisis We’re in the middle of the biggest crisis of capitalism in 70 years. We’ve got a new administration in Washington active on every front. What’s all this done to the public mind? A poll to be released today by The National Journal and Allstate gives a pretty good view. As you’d expect, there’s a lot of economic anxiety in the country, spanning every income category. Sixty-four percent of Americans believe there are more risks that endanger their standards of living today than in their parents’ time. On the other hand, there’s still some sense of opportunity. Forty-two percent believe there are more opportunities to move up than a generation ago, compared with 29 percent who think there are fewer. In short, there’s a feeling of greater volatility, both up and down. People don’t seem to feel as if they are sliding into a hole, but neither do they feel secure. So whom do they turn to in times like these? Themselves. Americans have always felt that they are masters of their own fate. Decade after decade, Americans stand out from others in their belief that their own individual actions determine how they fare. That conviction has been utterly unshaken by the global crisis. In question after question, large majorities say their own actions will determine how much they will make, how well they will endure the recession, how healthy they will be and so on. The crisis has not sent Americans running to government for relief. Nor has it led to a populist surge in anti-business sentiment. My friend Ron Brownstein of The National Journal looks at the data and concludes that while Americans are still skeptical of government, they are open to rethinking what the social safety net should look like in the 21st century. I look at the data and conclude that the tumult has not significantly changed the way Americans look at government, corporations or the social contract. Americans are open to good ideas from government, as always, but they are still skeptical and fiercely self-sufficient. The economic crisis has produced a desire for change but not a philosophical shift. The big lesson for the Obama administration is that the American people will continue to support its agenda as long as they think it is competent. It was not automatic that an administration led by a 47-year-old man with little Washington experience would run a professional, smoothly functioning operation. Yet he has. The administration has unveiled a dazzling array of proposals with a high degree of efficiency and managerial skill. This has inspired confidence in his team, if not in the government as a whole.

April 22, 2009

Re-building On A Rock: Policy, Economy & Values

It's time to speak of many things, of kings, and cabbages, said the walrus. And speaking of things unless you've been hiding in the wilderness you've heard about Susan Boyle's stunning performance on the British Idol. Truly wonderful and a revelation. But beyond the singer and her voice one fascinating thing was watching the reactions of the audience and the judges - which we've tried to capture a bit here. But you need to watch the whole carefully as they move from snickers to shock to transformation to sheer joy. Amazing what's out there if only the opportunities are available, ain't it ? What she sang was "I Dreamed a Dream" from Les Mis, about the sundering of hope, ambitions and the cruelties of the world. Personally ironic but in light of the times we're living in more so for all of us. The question becomes what opportunities will we all have, what might be taken away and what do we do about it.

Economic Opportunities: Potential vs Actual GDP

One way to sneak up on those questions is to compare potential GDP - what the economy could produce at full employment, and actual GDP - what it produces when it's working at less than full capacity. The chart shows potential and actual real GDP per capita and they look pretty close from 1950-2008. Until you look at the differences between them ! Which is what the faint red line does while the heavy red line shows the trend. Notice that up until the late '90s things moved in a nice gentle cycle and then blipped up a bit. But the recent collapse is already more severe than anything we've seen in almost sixty years. And given that this downturn is going to go on for a while you can imagine where it will end up !

Dreams Indeed: Long-term Job Creation

One way to bring home the consequences a bit more is to look at the creation of new jobs which the next chart does. The light blue line shows new jobs quarterly from 1980 while the dark blue shows net new jobs. For the economy to grow, met growth in population and make folks better off we need to create a minimum of 450K jobs per quarter just to breakeven. Otherwise net new jobs falls behind population and productivity growth - and it is increased productivity that creates prosperity. When you take the running total over time you get the red line, which tells us more than we'd like to know about the health of the economy. For one thing it was poor with little real job growth thruout the '80s until the mid-'90s with only a little blip in the Tech Boom followed a very weak, jobless recovery that gained NO ground. And now - well judge for yourself - but it looks like a lot of folks will be singing "had a dream", emphasis past-tense, unless we do something. And that something is NOT just arresting the economic collapse or even beginning a recovery. It's putting the economy a path to new, sustainable growth based on new technology, new industries and new jobs. Which, as it happens, is exactly what the Administration has set out to do.

The Best Economic Policy Speech Ever

As it happens that President gave the single best economic and economic policy speech last week we've ever heard. He covered all the bases, talked about what got us into this mess, where we need to go, each major element of the recent spurts of activity and where they fit and how they all work together in a coherent and cohesive pattern that makes a whole greater than the sum of the parts. In particular he focused on why we need to act intelligently now with an eye on positioning ourselves for the future. If you click on thru the picture it takes you to the CSpan vidclip and we highly recommend you do just that. A while back, in fact several times, we listed out, discussed and analyzed the state of the economy and all the steps we saw, both on our own analysis and as a synthesis of the best thinking of a very wide variety of analysts and economists what needed to be done. Now there's a few green shoots (Green Shoots vs Self-Arrest: Back to Economic Realities (UPDATED)) that have shown up but we've got a long...long way to go. Some of the details are listed out in earlier posts (First Things: Financial Crisis, Economy and Barry, To Boldly Go Where We Must: Speech, Budget and Dr. Noes).

The shopping list of necessary economic policies is:

1. Find immediate and emergency fiscal stimulus through things like tax cuts, extended unemployment benefits and direct spending while

2. Keeping the wheels on the credit markets by injecting loanable funds directly but then we need

3. Substantive direct spending programs that should also not be simple consumption in disguise but improve the long-term performance of the Economy. Investment in Infrastructure perfectly fits that intermediate term bill. But then...

4. Invest in the creation of new industries that lower costs in the economy, create new technologies and new jobs. Strategic investment in Energy and Healthcare happen to fit that bill perfectly. And then...

5. Make sure enough people have the right qualifications - in other words we need to re-think how we deliver Education for the 21rst Century. Finally...

6. Quite wasting money on pork barrel projects driven by special interests and political manipulations and

7. Re-regulate the Financial Markets without destroying their creativity.

Now almost all of the markers are down and it's time to play the game - which means patience, persistence, skill and hard work. Fortunately all the right things are in place, unfortunately it won't be a quick or easy set of fixes because we've neglected things for too long and worse yet there are still major execution challenges. As the Zen Master Huitang said in Lessons on Leadership:

"What has been long neglected cannot be restored immediately. Ills that have been accumulating for a long time cannot be cleared away immediately. One cannot enjoy oneself forever. Human emotions cannot be just right. Calamity cannot be avoided by trying to run away from it. Anyone working as a teacher who has realized these five things can be in the world without misery". (Welcome to Coach Carter's Gym: Renewal of Duty, Honor and Country).

Sadly that was written well over 1200 years ago but then we're clearly a species that learns slowly when we learn.


Re-building on a Rock

News Analysis: Obama Stands Firm on a Sweeping Agenda AS he spoke about the economy on Tuesday, President Obama invoked the parable in the Sermon on the Mount about two houses, one built on sand only to be blown away in a storm and another built on rock impervious to the swirling winds. Mr. Obama was trying to explain why he wants not only to revive the sagging economy but to virtually reinvent it with sweeping changes in health care, energy and education. Without deeper reform, he argued, the economy would only topple again later. But as he confronted critics in a wide-ranging hourlong speech to students and faculty members at Georgetown University, he also sought to shift his expansive economic program off the political sands onto a firmer foundation. As Mr. Obama acknowledged, many Americans think he is taking on too much at once, or, conversely, not doing enough at all, or just wondering how all the pieces of his agenda fit together. A flurry of government action has yet to reverse the nation’s economic calamity, and while Mr. Obama said again that he detects “glimmers of hope,” he pleaded for patience from an instant-gratification society that usually responds to crisis with “a lurch from shock to trance.” “It’s more than most Congresses and most presidents have to deal with in a lifetime,” Mr. Obama said. “But we have been called to govern in extraordinary times. And that requires an extraordinary sense of responsibility to ourselves, to the men and women who sent us here, to the many generations whose lives will be affected for good or for ill because of what we do here.” Mr. Obama used the address to link those disparate issues and present an integrated vision for the future of American capitalism when the recession eventually ends. He defended himself against those who accuse him of bankrupting the nation and those who argue that he should be more aggressive about taking over banks and spending even more money. “I know there’s a criticism out there that my administration has been spending with reckless abandon, pushing a liberal social agenda while mortgaging our children’s future,” Mr. Obama said. But he rejected that characterization and said it was time to make difficult decisions. “There’s been a tendency to spend a lot of time scoring political points instead of rolling up sleeves to solve real problems.”

5 reasons Obama sounds optimistic President Barack Obama and his economic team are changing their tone on the economy. Gone are Obama’s bleak descriptions of crisis and catastrophe. In their place are “glimmers of hope” of a turnaround. The question is: why now? It’s a tricky balance. The White House doesn’t want to hang a premature “Mission Accomplished” banner on the economy ala President Bush’s speech about Iraq. Obama’s recovery talk Tuesday was couched with warnings of “more job loss, more foreclosures, and more pain before it ends.”  But through all that, Obama is highlighting an economy on the mend. Here are five reasons for Obama to make that rhetorical pivot now: 1. Real “glimmers of hope” There are a few in the economic data, as the president has noted twice in the past week. 3. They’ve done it all. There’s also a practical reality facing the Obama Administration, which is that they have largely done everything they set out to do to fix the economy. Obama ticked through a list of items in his speech -- the $787 billion stimulus bill, the Wall Street and auto bailout programs, a housing recovery plan, a boost to non-bank credit markets and even his efforts to get the G-20 nations to do more. All, he said, have “been necessary pieces of the recovery puzzle.”

Obama's 'House Upon a Rock' Speeches pop up in Washington like dandelions in the spring, and often are no more useful. But occasionally there comes a speech that is revealing, and worth pausing to absorb. Such a speech came this week when the White House created an audience at Georgetown University so President Barack Obama could deliver a long address (exactly 45 minutes) designed to explain the thinking behind the many economic policies he has poured out over the last 87 days. Tuesday's speech actually broke no news; not a single new policy decision was revealed. Yet talks with White House officials about the speech and its origins suggest it's the best look yet into how the president thinks he's both fixing and reshaping the American economy. It wasn't long in the making. The plan for the speech arose only in the last week or two, White House aides say, principally out of conversations between the president, strategist David Axelrod and chief speechwriter Jon Favreau. They saw a need to explain, in simple terms and metaphors, how the seemingly disjointed pieces of the administration's economic rescue package -- the bank bailout, the economic stimulus package, the attempt to get more cooperation from other countries at the Group of 20 summit in Europe, the new budget with big chunks of money for health, environment and education -- are supposed to fit together. Like other presidents, Mr. Obama decided he needed to do that by telling a story: This is where we were, this is where we are, this is where we're going. Mr. Obama's instruction to his staff, one senior aide says, was: "Think fireside chat." What the White House needed, then, was to present a unified theory of economics. Enter the speech. In it, Mr. Obama describes a nation that has developed in the last decade or so what he called a "bubble and bust economy," in which 40% of corporate profits have come from the financial sector, while the sectors that actually make things are increasingly held back by spiraling health-care costs that weigh down existing companies and their workers. So the speech portrays the economy as a house in trouble. Mr. Obama is, in essence, using bank bailouts and stimulus spending (which now is called "the recovery plan") as a kind of fire extinguisher to douse financial flames on the top floor of the house, while simultaneously dispatching work crews to put new education, health and energy stones in place to rebuild the foundation down below. The idea is that once the flames are out, the country will discover that the house's foundation has been made stronger by using federal dollars to create a whole raft of new jobs in an alternative energy industry, while saving old jobs by lightening the burden of health costs on existing industries. The metaphor President Obama used in the speech is, in fact, that of a house -- a Biblical house. He refers to the story from the Sermon on the Mount about how houses built on sand fall, while those built on rock remain standing. As for deficits that accumulate during the work -- well, they are the construction debris that will have to be cleared out, with the help of stronger economic growth, after the project is finished. That's the theory, at least. "Axis of evil" was just a line in a speech, but it came to define the last president's foreign policy. Time will tell whether "our house upon a rock" will, as the White House hopes, define this president's economic strategy. Pres. Obama on Goals for Recovery Speaking at Georgetown Univ., Pres. Obama outlined plans to turn around the financial crisis, which included enacting new financial regulations. He said that much more work needs to be done.

Policies and Changes

A Smarter Way to Set CEO Pay The opening sentence of Alexis de Tocqueville's Democracy in America, the social philosopher's magisterial epic investigation into early 19th century America, highlights how central the idea of equality has been in society: "No novelty in the United States struck me more vividly during my stay there than the equality of conditions." But a visit to 21st century America might give de Tocqueville pause. The era that the French author chronicled and the periods that followed were indeed a time of unparalleled opportunity. Immigrants swarmed to the U.S. to make a better life for themselves and their families. Americans looked at themselves as middle class, neither aristocrats nor working class, just common folk trying to get ahead, making a better life for their children. Nevertheless, the American economy was more egalitarian and open to talent than anywhere else. Horatio Alger's working boy heroes and Charles Foster Kane are fictional characters, but for Daniel Boone and Andrew Carnegie the climb from rags to riches was very real. Indeed, it's striking that Americans have long tolerated greater income inequality than other major industrialized nations. One reason is the powerful belief in equality of opportunity, that society rewards merit, pluck, risk-taking, and luck. Another factor is that for long periods of time the economic gains of rising productivity and increased innovation were widely shared. A less savory influence on the acceptance of greater inequality is a cottage industry of consultants, lobbyists, and think-tank entrepreneurs that justified the extraordinary gains at the top of the income spectrum as the just rewards for brains and merit. Problem is, none of these arguments hold anymore. Corporate America's productivity gains of the past three decades or so have largely gone to a relatively small number of executives. The ominous combination of recession and credit crunch makes it hard to argue that the gains have been the returns to "talent" in the 2000s. Perhaps most disturbing, Corporate America is becoming a pay-for-failure economy for its top executives and a Darwinian existence for everyone else. "Too often, executive compensation in the U.S. is ridiculously out of line with performance," says Warren Buffett, the legendary investor. "The upshot is that a mediocre-or-worse CEO -- aided by his handpicked VP of human relations and a consultant from the ever-accommodating firm of Ratchet, Ratchet, and Bingo -- all too often receives gobs of money from an ill-designed compensation arrangement." Peter Drucker, the late management philosopher, couldn't stand exorbitant executive salaries. The average CEO of the Standard & Poor's 500 companies gets about 400 times the average pay of an American worker. Drucker believed a gap like that damaged corporate productivity, reduced employee innovation, and tore at society's fabric. He argued for a ratio around 20 or 25 to 1. It's a safe forecast that it won't happen. It's also safe to say that there will be angry calls for reform, demands that the board of directors be transparent with CEO compensation and that consultants design improved benchmarks for judging pay for performance. This has been the mantra since the earlier debacles of Enron and Worldcom. We all know that not much has changed. Here's the rub: If corporate directors don't bring the CEO risk-to-reward ratio in line with other employees and the American entrepreneur, the danger is that Congress will do it for them. That would be a huge mistake. But at that point the big brains that inhabit America's boardrooms will have no one to blame but themselves.

Louisiana, a Test Case in Federal Aid Years before Washington spent $787 billion on a national stimulus bill, it staged an unintended trial run in Louisiana, a huge injection of some $51 billion for which historians find few, if any, precedents in a single state. The experiment is still playing out, but some indicators suggest that what occurred in Louisiana — dumping a large amount of reconstruction money into a confined space in the three and a half years since Hurricane Katrina — has had a positive outcome. The state’s unemployment rate of 5.7 percent in February was considerably below the national average of 8.1 percent, and it was the only state to see a drop in unemployment from December to January. It was also the only state with an increase in non-farm employment in February. State economists specifically mention what one called “the ongoing building boom” from federal dollars as a main reason for the numbers. Largely a result of the damage caused by Hurricane Katrina, construction projects have not dried up as they have elsewhere, and a few can even be seen in downtown New Orleans. However, the state’s Republican governor, Bobby Jindal, has positioned himself as a leading voice against the new stimulus bill, objecting to federal intervention in a state’s economy. He has threatened to reject $98 million in stimulus money intended to help Louisiana’s unemployed, echoing other Southern and Western governors who have turned such rejections into a conservative rallying cry. But even as Mr. Jindal has criticized the stimulus bill, his own subordinates have continued to request money from Washington, notably in replacing Charity Hospital, which for generations served the poor in downtown New Orleans. In Louisiana, however, the consequences have hardly been dire — just the opposite, in fact. One of the governor’s leading aides, the state’s recovery director, Paul Rainwater, praised the federal relief effort in Louisiana in recent remarks to Congress, the day after his boss scorned federal help on national television in the Republican Party’s response to President Obama’s first address to Congress. “No other state in the nation has been blessed with such generosity from Congress and the American people,” Mr. Rainwater said. Referring to the Federal Emergency Management Agency, a principal conduit for the aid that has flowed here, he said that “Louisiana is FEMA’s biggest ‘customer,’ so to speak, and the state’s Office of Facility Planning and Control is the largest single public-assistance applicant in American history.”

Reverse Vicious Economic Circles The Obama administration's top economic voice said Wednesday the U.S. needs to respond aggressively to put an end self-perpetuating economic difficulties in order to begin the recovery process. "These vicious cycles are the central threat and why a strong policy response is so essential," Lawrence Summers, director of the National Economic Council, said in a speech to the American Bankers Association in Washington. Summers, who served as Treasury Secretary during the Clinton administration, said the U.S. cannot rely on the financial markets to stabilize themselves. This is in part because the banking system and capital markets became too interconnected, preventing one from taking up the slack when the other falters. "Those two pillars have become increasingly intertwined, and the consequences of that intertwining is that in the current downturn we have seen very substantial problems in both," Summers said. He said the same vicious cycles that have helped create greater instability in the U.S. economy provide an opportunity to policy makers; reversing the cycle can quickly build growth. Increasing the flow of credit can increase the level of demand, Summers said, which will in turn lead to higher levels of employment and even more demand. "They hold out the prospect that if we can reverse these vicious cycles we can engage the same engines for growth," Summers said. One key to moving toward recovery will be repairing the financial system. Overhauling the regulation of the financial services industry, stabilizing financial institutions and restoring confidence are all necessary. "It is our responsibility to create a healthier financial system that is less a source of instability in the lives of others over the next generation," Summers said.

Restore Order and Win a Financial War In the bubble era, even sophisticated people deluded themselves into believing that home prices would soar indefinitely and that lending risks were minimal. On those weak foundations, a huge house of cards was built. Wall Streeters designed a hideously complex financial system to enrich themselves. Financial institutions took on far too much debt. People signed mortgages they could ill afford and did not understand. Regulators, the Bush administration and Congress looked the other way. The bubble grew until it burst. Much of this shouldn’t have happened. But we are where we are, and the urgent priority is to extricate ourselves from this mess as quickly as possible, with minimal damage. Here’s how I conceptualize the master plan. American policy makers are fighting a two-front war. On the eastern front, they are battling a shortage of demand, as traumatized households and businesses pull in their horns. Less spending by some people means fewer jobs for others who, in turn, curtail their own spending. Keynes diagnosed this vicious recessionary spiral in the 1930s, and we are now in the midst of the worst one since then.Fortunately, we know how to fight a demand shortage — with more government spending, tax cuts and lower interest rates. That is why Congress enacted a huge fiscal stimulus in February and why the Federal Reserve has cut interest rates to virtually zero. But the cure takes time, and we are still sliding downhill. Depending on how long and deep the recession gets, we may need more firepower. But at least policy makers know what to do — and are doing it. The western front is vastly more complex. All economies run on credit, and ours developed an extreme dependency. Largely through their own failings, banks have been seriously damaged. Bankers are paralyzed by fear of further loan losses and shrinking capital that might subject them to regulatory penalties — or worse. One way or another, the banks must be restored to health and emboldened to lend.

The Big Fix In the aftermath of the stock market crash of 1987, reformers moved to remake America’s regulatory structure. Some experts proposed tinkering with the oversight agencies, merging the Securities and Exchange Commission with the Commodity Futures Trading Commission, for instance. Others recommended regulating derivatives, which were in their infancy. George Soros, not yet the bête noire of right-wingers, took to the editorial page of the Wall Street Journal to warn that nobody was thinking big enough: “The longer markets function without supervision explicitly aimed at maintaining stability, the greater the danger of an accident like October 19, 1987.” Anyone remember the landmark 1987 Securities Act? It never materialized. And did anything happen in 1998, after Long-Term Capital Management nearly went under and a similar dance took place? Many of the same players strutted on the same stage, and Soros again predicted that without sweeping international regulatory reform, we risked “the breakdown of the gigantic circulatory system which goes under the name of global capitalism.” Again, no ’98 Securities Act—perhaps not surprising, given that what followed was a market recovery that we now know was a massive equity bubble. This time, the calamity in the markets is more devastating than any of the previous crises since the Great Depression. Luckily, it’s looking like history won’t repeat itself. One of the enduring legacies of this economic collapse will be that the government finally had to embark on a wholesale financial rethinking. Right now, finding a way to end the crisis and reinvigorate the economy is the most pressing issue. But in a few months, after the Obama administration settles in—assuming we aren’t all eating cat food under a bridge—we are going to have the debate we need about how to rebuild the regulatory system.  The pressure to put off this debate will be enormous. The financial industry is bound to resist. But Wall Street is at its weakest point in decades; the new administration has to strike while the public temper is at its hottest. But surprisingly enough, given the dubious way it began, a Paulson-like framework is a good place to start. It was influenced by what is known in regulatory circles as the Twin Peaks approach, used in Australia and the Netherlands. The idea is to create two financial regulators that are given separate responsibilities not based on financial firms’ lines of business. The second peak will be more familiar. It would focus on business conduct and investor protection, otherwise known as lying, cheating, inadequate disclosure, and manipulation. This would encompass much of what the S.E.C. is currently supposed to be doing. It would go after big targets and not monkey around with dinky companies and small-time ­insider-trading issues. The Twin Peaks model has good-cop, bad-cop appeal. The safety-and-soundness regulator can work with firms to make sure they are solid or else the enforcer will come in. And we should consider a third peak as well: one with responsibility for surveying systemic risk. It would monitor the safety and soundness of the entire financial system, rather than assess it on a company-by-company basis. 

Pearlstein: Reinventing Regulation  That said, it is probably useful to begin thinking about what the new architecture for financial regulation should look like. Step one is to consolidate day-to-day "safety and soundness" regulation of all financial firms -- banks, investment banks, bank holding companies, insurance companies, hedge funds, housing finance agencies-- in a single entity. In the past, each type of institution was regulated by a different agency. But over time, firms became adept at getting around regulation by finding the cracks between the agencies and playing one regulator off another. But which of the existing bank regulators should get the assignment as prudential regulator? My vote is to build it around the Federal Deposit Insurance Corp. As an independent agency, the FDIC is a bit more insulated from the political influence wielded by banks and Wall Street firms. In addition to the prudential regulator, there will be a need for a separate agency to protect investors and supervise the markets in which stocks, bonds and futures are traded. There is absolutely no credible rationale for dividing the investor-protection responsibility, as we do now, between the Securities and Exchange Commission and the Commodity Futures Trading Commission. Nor, as we've learned from the AIG debacle, is there any reason to continue to exempt credit-default swaps and other derivative instruments from all regulation. The recent troubles also suggest the need for yet a third regulator, whose sole mission is to prevent breakdowns of the entire financial system. This uber-regulator would have broad powers to gather whatever information it needs -- from other regulators or directly from any financial institution. It would need the power to order those other regulators to take steps to reduce those risks. And if all else fails, it would need the ability to provide liquidity to financial markets and take over major financial institutions that are about to fail. This sounds like a natural role for the Federal Reserve. Getting all this right would be useful in preventing future financial crises, but don't confuse it with a panacea. Much of the current crisis could have been prevented if the existing patchwork of agencies, using their existing powers, had simply done their jobs. Congress can create a better regulatory structure and can expand regulatory powers, but in the end, the one thing it can't legislate is the good judgment of the regulators.

Gates Takes Aim at Military Pork Gates has been saying for months that the time has come for a "strategic reshaping" of the way the U.S. military is spending $600 billion a year — a tab that doesn't even include the cost of the wars in Afghanistan and Iraq. Now he's going public with the 2010 budget proposal he drafted in secret before formally sending it to the White House and the Office of Management and Budget. It's a ploy designed to build momentum for Gates' plan before it can be sabotaged by defense contractors and lawmakers (who often come from districts that benefit from building particular big-ticket items), with behind-the-scenes help from the military. "If even a few of the Gates cuts are serious, a pork-crazed Congress will go nuts," says Winslow Wheeler, who spent 30 years working on defense issues for members of both parties on Capitol Hill. "The big challenge will then become making any serious decisions stick."  Gates' aides say his budget is being presented as a single holistic proposal — rather than being leaked in dribs and drabs, which could build resistance to specific changes — and therefore it stands a better chance of winning approval from Congress. Resistance will be fierce on the Hill, where some view any retooling of the military budget as a recipe for a weaker America and others simply want to keep defense-contractor jobs in their districts — a combination that could yet trump a highly-regarded Defense Secretary and President.

Obama: Wants suggestions to cut spending waste Families are making tough decisions about their money and so too will their government, President Barack Obama said Saturday, promising that spending cuts are coming -- and soon. At a Cabinet meeting Monday, the president will ask department and agency heads for specific proposals for trimming their budgets. "If we're going to rebuild our economy on a solid foundation, we need to change the way we do business in Washington. We need to restore the American people's confidence in their government -- that it is on their side, spending their money wisely, to meet their families' needs," Obama said in his weekly radio and Internet address, released while he attended the Summit of the Americans in Trinidad. To help achieve his goal of an efficient government, Obama announced the appointment of Jeffrey Zients, a founder and managing partner of the investment firm Portfolio Logic, as chief performance officer. Zients, who also will serve as deputy director for management of the Office of Management and Budget, will work to streamline processes and cut costs. On that front, Obama gave notice he wants to act quickly."In the coming weeks, I will be announcing the elimination of dozens of government programs shown to be wasteful or ineffective," he said. "In this effort, there will be no sacred cows and no pet projects. All across America, families are making hard choices, and it's time their government did the same." Obama said he's determined to try to cut costs. "That is why I have assembled a team of management, technology and budget experts to guide us in this work," he said, "leaders who will help us revamp government operations from top to bottom and ensure that the federal government is truly working for the American people."

10 ideas that are changing the world right now 1. Jobs Are The New Assets 2. Recycling the Suburbs 3. The New Calvinism 4. Reinstating the Interstate 6. Africa, Business Destination 7. The Rent-A-Country 9. Survival Stores 10. Ecological Intelligence It's a question that most of us are ill equipped to answer, even as the debate over what is and isn't green becomes all-important in a hot and crowded world. That's because as the global economy has grown, our ability to make complex products with complex supply chains has outpaced our ability to comprehend the consequences — for ourselves and the planet. We evolved to respond to threats that were clear and present. That's why, when we eat spoiled food, we get nauseated and when we see a bright light, we shut our eyes. But nothing in evolution has prepared us to understand the cumulative impact that imperceptible amounts of industrial chemicals may have on our children's health or the slow-moving, long-term danger of climate change. But ecological intelligence is ultimately about more than what we buy. It's also about our ability to accept that we live in an infinitely connected world with finite resources. Goleman highlights the Tibetan community of Sher, where for millenniums, villagers have survived harsh conditions by carefully conserving every resource available to them. The Tibetans think ecologically because they have no other choice. Neither do we. "We once had the luxury to ignore our impacts," says Goleman. "Not anymore."

Back to the Future: Rocks and Values

When Two Boys Made the Midwest Proud  I put in a DVD the other day and watched that 1979 NCAA championship game -- Michigan State vs. Indiana State, Magic Johnson vs. Larry Bird, still one of the most-watched games ever, college or pro. I knew how it would turn out. Michigan State, stronger and deeper than the Sycamores, would go ahead early, then hold off a second-half challenge to win by 11. But at the opening jump I could still feel the charge so many people felt that day. There they were, those two sublime athletes, long-haired boys again on the screen, slender in the old short trunks, yet commanding. They were why so many watched. They were still beautiful. But as a Midwesterner, I turned off the set feeling a little sad. Somehow the meeting of those two boys struck me as the high point of a certain stretch of time that we took for granted until we realized -- just now, really -- that it was over. In the Midwest, history happened in tiny increments, each one a family's decision to pack and try for a new life. It happened in two broad waves. The first started when Revolutionary War veterans crossed the Appalachians to plant farms that made the states of Ohio, Indiana, Illinois, Michigan and Wisconsin. The second began around World War I, when black sharecroppers left the South for city jobs in Cincinnati, Cleveland, Detroit, Chicago, Gary and Milwaukee. By World War II, the journalist John Gunther wrote, the upper Midwest had become the region "where industry and agriculture both reach their highest American development and coalesce." In the decades after the war, the Midwest was two realms, two ways of life -- farm and factory, small town and city, white and black. But in both, lots of kids grew up crazy about basketball. By 1979, in that final game in Salt Lake City, the two boys, both famous by then, made a matched set, each of them straining for the ball, twisting, running, staring downcourt for the open man. Both were smart and unselfish on the court. Both had the good luck to grow to 6-foot-9. Otherwise, by their own admission, they were not the players most blessed with physical gifts. Their blessings were the parents, the towns, the schools, the neighborhoods that put up the rims and painted the lines on the pavement, the coaches who came in early. History and human infrastructures lifted and held those boys up. Now, if you stand on the corner where Magic Johnson sang on summer nights, you look down the street to Lansing's biggest vacant lot. The Cutlass plant is gone, the site paved over. Near Sexton High, the big, beat-up sign at UAW Local 602 says only: "Pension and Insurance. Substance Abuse. Community Services." On the business strips you see all the franchise places, but about the only homegrown businesses are barbershops and hair salons. It looks like the only thing growing in Michigan is hair. French Lick has had a little more luck -- not much. The Kimball piano plant is long gone. They fixed up the big French Lick Springs Hotel and put in a new casino, and up on the steep hill there are still fine, frowning bungalows with tidy lawns and Easter decorations. But down in the town, the signs on stores say "We Have Moved" and "This Location For Sale," one store after another. Even "Gotta Have It Sports" is for rent.

The American mood: Is the angst bottoming out? Friday night in northern New Jersey, circa April 2009, offers clues to prove any theory about the American economic meltdown, depending on what you want to believe. Just like so many places these days. Craving optimism? Watch the tour bus emptying into the La Quinta lobby off Route 3, its occupants abuzz about their weekend sightseeing jaunt into Manhattan. Or see the hungry diners spilling out the door of Carino's Italian Grill in the Clifton Commons shopping center -- a line of customers waiting to put their money into the consumer economy. Want some economic angst? That's easy, too. Drive straight up Bloomfield Avenue into Glen Ridge, Montclair and Verona. Gaze at the empty Volvo and Jaguar dealerships and the deserted bank. Contemplate the thinned-out blocks of storefronts, defunct restaurants, abandoned shops and "For Lease" signs in one of the region's more affluent areas. More doom on the horizon? Or will happy days soon be here again? Take your pick. The confusion is enough to play havoc on a person's mood -- or an entire nation's. "Everybody is looking at it through their own personal lens," says Liza Dawson, a self-employed literary agent from Glen Ridge. In hard economic times, Americans turn to numbers to see whether things are getting better. Gauging the mood of the republic is not as quantifiable. It is not measured but sampled. Yet the human factor can be crucial. An improving outlook can increase confidence and nudge prosperity along.

The Great Recession: America Becomes Thrift Nation Now we're stripping down and starting over. A platoon of TIME reporters and pollsters fanned out to every corner of the country to measure — anecdotally and empirically — what's changed in the way we set our priorities and spend our money since the Great Recession began. Most people think the pain will be lasting and the effects permanent: only 12% expect economic recovery to begin within six months, half believe it will be another year or two, and 14% believe we are at the start of a long-term decline.  Our institutions watch for economic vital signs. But maybe, for individuals, the sickness is what came before — the hallucination that debt would never need to be repaid, that values only rise, that bubbles never burst. When the markets collapsed, that fever broke. In our assumptions and attitudes and expectations, the recovery is already well under way. Talk to people not just about how they feel but about how they're living now, and you hear more resolve than regret. Nearly half say their economic status declined this year, and 57% now think the American Dream is harder to achieve. And yet pain and promise are a package deal; even after all this, fully 56% believe that America's best days are ahead. It would be nice if it took something short of a heart attack to get us to work out, eat better and spend more time with our kids. But in the end, where we wind up matters more than how we got there. Unlike any other downturn since the 1930s, this one has affected everyone, either the fact of it or the fear of it. Even when prosperity returns, 61% predict, they'll continue to spend less than they did before. Among people earning less than $50,000 a year — roughly half of U.S. households — 34% have not gone to the doctor because of the cost, 31% have been out of work at some point, and 13% have been hungry. At the same time, 4 in 10 people earning more than $100,000 say they are buying more store brands, 36% are using coupons more, and 39% have postponed or canceled a vacation to save money.

Obama vs. the culture of greed Conventional wisdom says a new president has a political honeymoon of about 100 days to define his presidency. So far, it looks as though Michelle Obama has been having a better time of it in the White House than Barack. By contrast, President Obama was immersed in the problems of the economy: a frozen banking system, soaring unemployment, a sagging housing market, and a struggling stock market. But what broadsided the president unexpectedly was the fury of public anger over executive compensation, specifically the $165 million in taxpayers' money as bonuses to executives of the American International Group (AIG). The real target of all this anger should be the culture of greed that has corrupted elements of our society, particularly in financial and banking circles. But in recent years, newly minted MBAs have been drawn to Wall Street, where they work 80-hour weeks and weekends, make millions for themselves and others by manipulating investments and currencies, yet produce nothing that can be perceived as of tangible value; utility; or even artistic, humanitarian, or spiritual inspiration to the community. It is this kind of nihilistic blindness, the rejection of customary beliefs in morality and religion, that leads the Bernard Madoffs of this world to plunder many millions of dollars from trusting investors for more luxurious homes, expensive cars, boats, and collections of bejeweled wristwatches, with no concern for the victims of their fraud. As we deplore the culture of greed in high places, we should ask whether the would-be-rich among us also are tainted. Do we commit to grander homes than our salaries justify, glamorous automobiles we do not need, exotic vacations we cannot afford? Then there are the mortgage brokers who encourage new homeowners to assume more debt than they can pay, the credit-card exploiters who press new cards upon a teenage clientele, and the payday loan merchants who offer cash at impossible rates to the unsophisticated. There is nothing evil in striving for the American dream that President Obama has so often lauded. It is best achieved by honest labor, careful saving, and prudent spending.

The real value of hard times: retrieving our ideals We hear of a "new age of responsibility," and that "we're all in this together." We sense a new willingness to address problems that have lingered for decades. We are compelled to take a sober look at past wastefulness. We detect a newfound respect for cooperation, accountability, education, hard work, compassion, honesty, rectitude: a mix of traditional "liberal" and "conservative" values. This comes as our national wealth tumbles. What is it about that perilous uncertainty that moves us back in the direction of material and moral basics? As we daily learn about the faulty foundation upon which our economy towered, we learn how far we strayed from those basics. Let's remember that economy is first about physical survival – to ensure we are fed and sheltered. Our means may be more elaborate and clever, but in that need alone, there is little to distinguish us from other creatures on earth. Once that need is met we face a choice, whether to seek purpose beyond material achievements or to simply continue solving the problem of physical survival in its higher octaves of pleasure, luxury, or status. In the latter case, we are often tempted beyond our means for the sake of "keeping up." But do we ever consider that even in tough times, we are surrounded with goods and products that in earlier periods or for other societies would represent the unimaginable height of marvel and affluence? Are we ever fully satisfied in this regard? But maybe that hierarchy also needs to be turned on its head. Maybe one of the very purposes for our daily economic exchanges is to practice perfecting our ideals. And when we drop those inner concerns as inexpedient to the goal of extra profits, it's like dropping a gem for a trinket, ironically the first step toward collective poverty. Even the words we use to categorize our ideals can suffer this inversion. Liberal and conservative both represent something real – they are foundational principles. But each has its counterfeits. It gets confusing. Does liberal mean freedom unconcerned with the distinction between the licentious and the lofty, or the development of critical faculties intended to liberate us from such entanglements? Does conservative mean unbridled consumerism, or does it include responsible environmental conservation? The litmus test is this: While the counterfeits reinforce partisan divides, the genuine parts of these perspectives complement and synergize, much like protective strength and nurturing compassion. The seriousness of the situation – and the measure of our wisdom – can be gauged by how willing we are to jettison the counterfeits. If our difficulties force us to realize we can ill afford to be petty or extravagant and if they force us to identify and value the essential over the extraneous, then maybe there is value in hard times.

GE Exec Says Economic Crisis Resetting Capitalism The top executive of General Electric Co. said Wednesday he couldn't predict when the recession would end or how bad it will be, but said the global economic crisis has "fundamentally reset" the way companies do business and capitalism itself. Speaking at GE's annual shareholder meeting in Orlando, Florida, following what has been a punishing year for the conglomerate, CEO Jeff Immelt said the downturn was the worst since the Great Depression, and that it would ultimately lead to changes such as greater government involvement in business and a restructuring of the financial services sector that was a root of the crisis. "We are living through history, and I don't mean that in a positive sense," said Immelt, who heads one of the world's largest companies that makes products like jet engines and refrigerators but also has a big financial unit. Immelt told investors "2008 was tough and 2009 is also going to be tough." He added that it was hard to predict "how bad this will be and how long" the recession will last. 

April 18, 2009

Brave New World: the Emerging Balance, Pluralities, & Non-zero Sums

While international affairs are full of sudden crisis even they emerge from clear trends and always based on deeper structural characteristics. Like understanding how the great currents of the ocean move around the world and inter-act with the global environment grasping the future must be, and can be, based on understanding the structure, trends and dynamics of the world socionomic system. Which is under-going a radical shift in response to pressures that have accumulated over the last three decades and will take another three to work out; and which will be subject to enormous soci-demographic, ecological and economic strains in that period. To survive and prosper the global system requires an evolved institutional framework, which necessarily rests on the support of force but also requires a balance of smart-power instruments, and appropriate participation and contribution relative to benefits by each major stakeholder. But that evolution holds out the promise of the greatest increase in human welfare and well-being in human history if we keep the wheels on the wagon. The central debate will be between foreign and economic policies of mercantilism, "beggar-thy-neighbor" which views the world as a zero-sum gain where your losses are my gains. Or a world of free exchange, cooperation and collaboration which is decidedly non-zero sum where statesmen, not politicians, realize that the pie of world wealth can be grown enormously even if they end up with a smaller share. In all of this the US will remain the indispensable nation thru at least the rest of this century because of it's geography, resources, human capital and resilient institutions. Indispensable doesn't mean dominance though, it means major stakeholder, direction-setter and major player. We have to be prepared to see other powers take their rightful places at the table based on their interests. In both cases though the future is dependent on whether our collective leadership understands that those interests include the stability, peace, progress and prosperity of the system as a whole. As late as post-WW2 European nations were still pursuing traditional maneuvers of the old school which threatened to collapse Europe into chaos and were saved by the intervention of the US thru the Marshall Plan. The US acted partly out of altruism with many domestic political challenges and barriers and partly out of deep-seated self-interest. Now our bright new future can result from the balanced pursuit of balanced strategic self-interest by the emerging and existing stakeholders. Such a future will require major domestic shifts as well by all parties as well as the emergence of a new pluralistic world order. Those are the lessons we draw in this, the last in a series of posts, on the state of the world. Call it the "New Realism" or the pragmatics of knowledgeable self-interest and check out Leslie Gelb's CSpan interview to get a flavor.

Re-thinking US Policy, Power and Instruments

There are a lot of mis-conceptions running around about the relative position of the US in the current and future world from social to political to economic to military. By way of disabusing some of those, it not all - which we've been addressing piecemeal in the previous posts on this subject, we borrow from StrategyPage.com to show the relative position of the USN vs the rest of the world's naval powers. A similar graphic on world military power in toto is here. As the Somali pirates just learned the USN has a long-arm. In fact the world's sea lanes are more under the control of the USN than ever the Mare Nostrum was of the Roman Navy in it's heyday. But in both cases the result was and is safety, security and predictability for world trade...with all the resulting benefits for everybody. Those relative positions are not just unlikely but nearly impossible to change in five decades...and as long as the US continues to act as the guarantor of the trade lanes no one has the incentive, let alone the resources. Navies are beyond expensive but they can make for a peaceful world. But the nature and structure of all instruments of national power, hard and soft, will need to be adapted, radically, to this new world. In in less than a 100 days the new Administration has put down more markers in the right directions than at any time in the last 30, perhaps 60+, years ! Presuming balanced good judgment manages to triumph over partisan self-interest here's our summary of the state of things:

  1. We're ten years into a multi-decade adjustment and adaptation process that represents a historical re-balancing (more akin to the world of 1300 or 1800 than anything seen in a long-time).
  2. Historic because the dynamic, thrusting and resilient institutions of a pluralistic and aggressive Western Europe created a set of societies that were competitive, aggressive and innovative. In the last 2-3 decades the rest of the world has begun adopting and adapting those to it's own circumstances
  3. This adaptation will go on for next 30 with timetable driven by population growth and it's already locked in leveling off combined with numbers of resource barriers (water, air, oil, etc.).
  4. THE key is a new world system architecture that adapts the existing one - the best in history but aging - to new major players and new challenges.
  5. Early signs are somewhat encouraging: Davos09 + stakeholder responsibility by China, India, et.al. Russia not a major player over this horizon because of institutional failures, demographics and likely implosion. Europe will remain a player but needs to get it's act together while Latin America and Africa are beginning the transitions.
  6. Critical factor is resilience of domestic institutions in each major stakeholder which are badly strained by current crisis and were in many cases reaching thresholds of disruption in any case; as a trigger for change this crisis may in fact be all to the good before the "REAL" problems hit !
  7. US has best combination of geo-political position, innate resources and capabilities (pop, ed., size, resource base) and adaptive and inclusive institutions that are pro-growth.
  8. Bottomline therefore is stability and evolution of domestic institutions in world's players, particular the major potential stakeholders
  9. ...which therefore becomes a vital national interest of the US
  10. ...and makes it a vital interest that the US continue to support the evolution of a new world institutional framework while continuing to play a role in the development of each country, region and geography as constructively as we can manage.

 Re-balancing the World: Zheng He's Treasure Fleets

Between 1405 and 1433 the Ming Emperor Yongle (a reign name) sponsored a series of seven huge exploratory and political voyages by the eunuch and fleet admiral Zheng He with fleets of hundreds of ships and thousands of men. While the exact dimensions of the major Treasure Ships are in some debate there's no question that the West didn't build their like until the late 19thC. This wasn't all a matter of a show of face - these voyages not only over-awed the local potentates with the power and capabilities of China but created secure and stable trade lanes that saw a huge upsurge in trade and prosperity in the Indian Ocean and China Sea. A soft infrastructure that the later Europeans (primarily the Portuguese and then the Dutch) inherited and exploited. The European "Age of Discovery" was in fact heavily dependent on the Chinese fleet's history. Semi-fortunately the eunuch's clique lost power and influence at court while the traditional Mandarinate was restored and re-emphasized more internal concerns. Given the major projects from re-building Peking/Beijing to expeditions into nomad lands to restoring the Great Wall and the Great Canal they may in fact have made rational decisions about resource allocation trade-offs; after all nobody mounts five Apollo Programs at the same time ! When Columbus went to the New World his flagship could have been a tender for one of the Treasure Ships; no wonder the locals were impressed. Those ships were the end state of almost 400 years of Chinese development in marine engineering and naval operations that really got started under the Song. (When China Ruled the Seas: The Treasure Fleet of the Dragon Throne, 1405-1433 by Louise Levathes ) China, India and the rest have acquired or are acquiring the knowledge and skills they need to return to positions of prominence. Now we'll see if they're up to it.

R X P X H X C X I = Power: Exchange and Welfare

When tiny little Holland held off the world's mightiest empire in the 16th and 17thC for 80 years it did so because of it's institutional advantages, manufacturing and trade. Power is NOT simply counting heads or rocks though Population and Resources are critical elements. Equally important are Human Capital (the education and attitudes of that population), financial resources (which in turn are created by Capital markets) and Institutions. The difference between the decline of Spain and France and the rise of Holland and England lay, ultimately, the differences between their institutions. One was centralized, rigid and subject to political gamesmanship while the other was open-ended, competitive and pluralistic while providing secure foundations of the rule of law, security of property, non-arbitrary justice and some (relatively speaking) opportunity for any person to better themselves. [For a graphic comparing the modern powers of Europe] When you enlist the interests of the populace in getting ahead AND they understand and believe that the State is the best guarantor of those opportunities you have cracked the code for sustainable progress. That progress depends on and is driven by the gains from free exchange, in the proper institutional framework. [Structure and Change in Economic History by Douglass C. North, The Rise of the Western World: A New Economic History]

Consider two villages who grow corn (C) using Hoes (H). Their total output is limited by land, water and heads. But supposed one village is closer to the river with rich lands while the other is closer to the mountains with ready access to the flint for Hoe heads and wood for handles. BOTH can raise their individual outputs by focusing on what they do best. Seem fanciful and simplistic ? Well consider why Chicago specialized in meat-packing and grain trading while NYC focused on trade and finance and LA on making movies and planes. Each could have done each but they were all better off collectively and individually by letting the other do what they were best at. Nor does it stop there - supposed the Mountain Village finds a source of clay for Pottery (P) which allows corn to be stored better and more water to be carried for growing it. Re-investing some of the surplus in new capabilities means that innovation grows both economies yet again. And it doesn't end there - we face another cusp point in the world situation where protectionism reduces the benefits for all, where we keep trading but have limited innovation or where we really hit the jackpot and not only grow the world's economies thru open-exchange but increase the rate of growth thru innovation. To do that of course means investing in Education, Healthcare, new technologies (Green anyone) to adapt our Human Capital to the challenges. The shape of the world to come is being defined around us as we sit here and it can go many different directions.

Rising to the Challenges

So far it appears to be moving in the right ones. Now it's up to us to keep it so.

This post is the capstone of our survey of the state-of-the-world and the fourth major one we've done. Those prior posts are listed in the readings sections along with selections on the radical changes back to realistic pragmatism by the US, representative cases (Mexico & Drugs, the Pakitani near-death implosion, & African futures) along with some readings on the challenges to the world system. The various titles along are revealing IOHO but if you check back for compare and constrast we've moved from a world of challenges and no response to one of bigger challenges and greater responses. Actually that's encouraging in our book, even if we wished the motivation had been cheaper !

The Emerging US Foreign Policy Grand Strategy

Let him who desires peace prepare for war

Flavius Renatus The third contains a series of military maxims, which were (rightly enough, considering the similarity in the military conditions of the two ages) the foundation of military learning for every European commander from William the Silent to Frederick the Great.

US National Security Policy Videos

A conversation with Adm. Mike Mullen, JCS Chairman (an hour-long interview which covers US National Security strategy and doctrine in general, focuses on Pakistan and Afghanistan in particular, touches on other topics, e.g. Mexico and outlines the key commitments to integrated national power that balances hard and soft-components. If you want to understand where the US is going with regard to the rest of the world here it is in a nutshell)

President Obama Dedicates Lincoln Hall at NDU (this is a short 20 min. but it lays out the core of the evolving US strategic doctrine, which is in turn the Gates Doctrine. As important as the substance is the w arm reception and relationship with the military that is shown here. This is NOT the disdain given to Clinton nor the distrust the Bush ended up with).

Secretary of Defense Robert Gates on the 2008 National Defense Strategy Secretary of Defense Robert Gates speaks to students at the National Defense University, as part of the university’s Distinguished Lecture Program. During his remarks, Sec. Gates discusses the 2008 National Defense Strategy. This is the more detailed foundations of the Strategy that underpins Mullen’s and Obama’s remarks.

A Bushian Foreign Policy President Obama's foreign policy team has been working hard to present its policies to the world as constituting a radical break from the Bush years. In the broadest sense, this has been absurdly easy: Obama had the world at hello. When it comes to actual policies, however, selling the pretense of radical change has required some sleight of hand -- and a helpful press corps. Thus the New York Times reports a dramatic "shift" in China policy to "rigorous and persistent engagement," as if the previous two administrations had been doing something else for the past decade and a half. Another Times headline trumpeted a new "softer tone on North Korea," based on Secretary of State Hillary Clinton's suggestion that the United States would have a "great openness to working with" Pyongyang -- as soon as it agrees to "verifiable and complete dismantling and denuclearization." Startling. So, too, the administration's insistence on linking proposed missile defense installations in Europe to the "threat" posed by Iran, or its offer to negotiate Russia's acquiescence to this plan and even to share missile defense technology. All this is widely celebrated as new. But Defense Secretary Robert Gates began these negotiations with Moscow more than a year ago. On Iran, the emphasis on carrots, in the form of a global political and economic embrace if Tehran stops pursuing nuclear weapons, and sticks, in the form of international sanctions and isolation if it doesn't, is not exactly novel. Add to this the administration's justifiable hesitancy, campaign rhetoric notwithstanding, to jump into direct, high-level negotiations but to focus instead on mid-level contacts or multilateral meetings on other subjects such as Afghanistan and Iraq, and it's no surprise if Iranian officials wonder what's the big deal. This is all to the good. So far, President Obama has made generally sound decisions on Afghanistan, Iraq, missile defense and Iran. Along with the language of unclenched fists and reset buttons, the basic goals and premises of U.S. policy have not shifted. If the world views this as a revolution, so much the better. Whatever works.

The Return of Statecraft  Vast multinational conferences, like the G20 summit in London, are useful mainly for the "bilaterals"—the one-on-one side-room conversations—and, in these forums, President Barack Obama is living up to high expectations. Which is to say, the United States seems to be returning to diplomatic basics—a development that in the wake of the last eight years is practically revolutionary. Take Obama's meeting on April 1 with Russian President Dmitry Medvedev, which produced an unusually substantive 19-paragraph joint statement laying out a broad but specific agenda—all stemming from a cleareyed, even somewhat steely grasp of what international relations are all about. "What I believe we began today," Obama said at a joint press conference afterward, "is a very constructive dialogue that will allow us to work on issues of mutual interest." The italics are mine, but a "senior administration official" also drew attention to the phrase in a background press briefing and contrasted the approach with George W. Bush's first meeting with a Russian president, after which he proclaimed that he'd looked into Vladimir Putin's eyes and seen his soul. The Medvedev meeting, then, marked the occasion when Obama officially pushed that "reset button." The move was recognized as such by Russian Foreign Minister Sergei Lavrov, who noted a "new atmosphere of trust," stemming not just from personal camaraderie—which, he said, creates only "the illusion of good relations"—but from recognition of "mutual interests" and a "readiness to listen to each other." Lavrov added, "We missed this much in the past years."

Gates readies big cuts in weapons As the Bush administration was drawing to a close, Robert M. Gates, whose two years as defense secretary had been devoted to wars in Iraq and Afghanistan, felt compelled to warn his successor of a crisis closer to home. The United States "cannot expect to eliminate national security risks through higher defense budgets, to do everything and buy everything," Gates said. The next defense secretary, he warned, would have to eliminate some costly hardware and invest in new tools for fighting insurgents. What Gates didn't know was that he would be that successor. Now, as the only Bush Cabinet member to remain under President Obama, Gates is preparing the most far-reaching changes in the Pentagon's weapons portfolio since the end of the Cold War, according to aides. Two defense officials who were not authorized to speak publicly said Gates will announce up to a half-dozen major weapons cancellations later this month. Candidates include a new Navy destroyer, the Air Force's F-22 fighter jet, and Army ground-combat vehicles, the offi cials said. More cuts are planned for later this year after a review that could lead to reductions in programs such as aircraft carriers and nuclear arms, the officials said. As a former CIA director with strong Republican credentials, Gates is prepared to use his credibility to help Obama overcome the expected outcry from conservatives. And after a lifetime in the national security arena, working in eight administrations, the 65-year-old Gates is also ready to counter the defense companies and throngs of retired generals and other lobbyists who are gearing up to protect their pet projects. One aide who has traveled with Gates more than a dozen times said the secretary "is particularly keen and aware of the urgent operational needs on the ground." That likely means greater investments in intelligence-gathering systems such as pilotless drone aircraft, special-operations forces and equipment, and advanced cultural training for military personnel, aides said. Girding for a showdown with Congress, Gates took the unusual step of making the Joint Chiefs of Staff and other participants in budget deliberations sign nondisclosure agreements to prevent leaks. But already lawmakers and defense contractors are preparing to fight back. Lockheed, maker of the F-22 jet, recently launched an ad campaign to protect its fighter. Northrop Grumman, which could face cutbacks to its ship-building programs, has hired consultants to write op-eds. Unions are raising alarms about job losses. Even his closest friends acknowledge Gates is in the bureacratic fight of his life.

INTELLIGENCE: Spies From The Heartland Carry The Weight The CIA has found that it has a lot of potential recruits across American, especially away from the northeast and the west coast urban areas. That was discovered after September 11, 2001, as the CIA has undertook a massive recruiting program (of analysts and field operators), and the introduced lots of new technology (especially for the analysts) and techniques. All this was largely the result of the CIA being put into a sort of semi-hibernation in the late 1970s. This was an aftereffect of the Church Committee, an investigative operation sponsored by Congress, that sought to reform, and punish, the CIA. But after September 11, 2001, the CIA was tossed a huge pile of money and told to staff up and get going and save us all from the Islamic terrorists. The Church Committee restrictions were largely, if not completely, discarded. Recruiting efforts were greatly expanded, and since September 11, 2001, several hundred thousand applications were received. The agency has had a hard time keeping up with that. This created some interesting personnel problems, especially in the operations division (the people who go to foreign countries and, well, sometimes do James Bond stuff.) There were few people left in the agency that remembered how to do field ops the old school way. By late 2001, many of recently retired field ops guys were being lured back to active duty. You now had a situation where the field ops population is like a cross between a college fraternity and retirement community. There are few people in the middle, age and experience wise. It was almost as bad in the analysis division (where the data is studied and reports prepared.) The area of the CIA that has flourished in the last three decades has been the geek side of things. These folks were always flush, thanks to a Congress that felt safer with spy satellites, than with spies on the ground. But those days were over. But now Congress is resuming the cycle all over again. The CIA is being investigated for doing what was desperately demanded of it after September 11, 2001. Proposed new restrictions would outlaw things like the use of contractors for interrogations (even if there were no other source of manpower to do the job in time), the use of "vigorous interrogation", the detention of foreigners without giving them access to the U.S. criminal justice system, and many more items that most CIA officials know, from their own experience, will only get Americans killed. They know that because they paid attention to what the Church Committee restrictions did to degrade U.S. intelligence gathering capabilities. Thus the thousands of new people hired into the CIA since September 11, 2001, will be, for the foreseeable future, the only ones with practical experience in effective espionage. Congress wants new hires to stay away from anything that is unpleasant or potentially embarrassing.

Cases and Situations

Drugs, Guns and a Reality Check It's an indictment of our fact-averse political culture that a statement of the blindingly obvious could sound so revolutionary. "Our insatiable demand for illegal drugs fuels the drug trade," Secretary of State Hillary Clinton told reporters on her plane Wednesday as she flew to Mexico for an official visit. "Our inability to prevent weapons from being illegally smuggled across the border . . . causes the deaths of police, of soldiers and civilians." Amazingly, U.S. officials have avoided facing these facts for decades. This is not just an intellectual blind spot but a moral failure, one that has had horrific consequences for Mexico, Colombia, Peru, Bolivia and other Latin American and Caribbean nations. Clinton deserves high praise for acknowledging that the United States bears "shared responsibility" for the drug-fueled violence sweeping Mexico, which has claimed more than 7,000 lives since the beginning of 2008. But that means we will also share responsibility for the next 7,000 killings as well. Our long-running "war on drugs," focusing on the supply side of the equation, has been an utter disaster. Domestically, we've locked up hundreds of thousands of street-level dealers, some of whom genuinely deserve to be in prison and some of whom don't. It made no difference. According to a 2007 University of Michigan study, 84 percent of high school seniors nationwide said they could obtain marijuana "fairly easily" or "very easily." The figure for amphetamines was 50 percent; for cocaine, 47 percent; for heroin, 30 percent. At the same time, we've persisted in a Sisyphean attempt to cut off the drug supply at or near the source.

Pakistan Dodges A Bullet A month ago, Pakistan came close to a political breakdown that could have triggered a military coup. How that crisis developed -- and how it was ultimately defused -- illuminates the larger story of a country whose frontier region President Obama recently described as "the most dangerous place in the world." A detailed account of the March political confrontation emerged last week during a visit to Islamabad by Ambassador Richard Holbrooke and Adm. Mike Mullen. As described by U.S. and Pakistani officials, it's a story of political brinkmanship and, ultimately, of a settlement brokered by the Obama administration. At stake was the survival of Pakistani democracy. Allies of President Asif Ali Zardari attempted to cripple his political rival, former prime minister Nawaz Sharif. The opposition leader took to the streets in response, joining a "long march" to Islamabad to demand the reinstatement of Pakistan's deposed chief justice, Iftikhar Chaudhry. The march threatened a violent street battle that could have forced Gen. Ashfaq Kiyani, the army chief of staff, to intervene. The confrontation demonstrated the fragility of Pakistani politics. But it also showed that after some initial mistakes, the three key players -- Zardari, Sharif and Kiyani -- were able to defuse the crisis. The lesson for nervous Pakistan-watchers is that however enfeebled the country's elite may be, it isn't suicidal. Pressure for compromise came from Clinton and Holbrooke, in phone calls to Zardari and Sharif. According to Pakistani sources, the American officials signaled to Sharif that they wouldn't object to his becoming president or prime minister some day. Another key intermediary was David Miliband, the British foreign secretary, who urged dialogue with Sharif. Last week's visit by Holbrooke and Mullen reinforced the deal. They saw the key players and came away hoping that the three could form a united front against the Taliban insurgency in the western frontier areas, rather than continuing their political squabbling. Husain Haqqani, Pakistan's ambassador to Washington, praised Holbrooke's diplomacy. "He brings hope that complex problems will be resolved." On the political scorecard, Zardari came out a loser and Sharif and Gillani as winners. But the decisive actor was Kiyani, who managed to defuse the crisis without bringing the army into the streets.

Africa: Open for Business Africa is becoming a business destination. In 2006, according to the Organization for Economic Cooperation and Development, foreign investment in Africa reached $48 billion, overtaking foreign aid for the first time. That gap has only widened, reflecting a quadrupling of foreign investment since 2000. As the senior adviser in Africa for the International Monetary Fund (IMF), David Nellor, noted in a report last September, sub-Saharan Africa today resembles Asia in the 1980s. "The private sector is the key driver," wrote Nellor, "and financial markets are opening up." War is down. Democracy is up. Inflation and interest rates are in single digits. Terms of trade have improved. Crucially, said Nellor, "growth is taking off." The IMF puts Africa's average annual growth for 2004 to '08 at more than 6% — better than any developed economy — and predicts the continent will buck the global recessionary trend to grow nearly 3.3% this year. Yes, Africa is still a continent of commodities — with its forests, oil fields and mines — and demand for commodities has plummeted. Yes, Africa still has its Darfurs, Somalias, Congos and Zimbabwes. But commodity prices are higher than they were in the 1990s. Most Africans are not middle class, but most also no longer live in extreme poverty. The World Bank says the percentage of Africans living on $1.25 a day or less dropped from 59% to 51% from 1996 to 2005 and has decreased further since. Perhaps the most compelling evidence that Africa is now a business destination is China's new love for it. While the old superpowers still agonize over Africa's poverty, the new one is captivated by its riches. Trade between Africa and China has grown an average of 30% in the past decade, topping $106 billion last year. Chinese engineers are at work across the continent, mining copper in Zambia and cobalt in the Democratic Republic of Congo and tapping oil in Angola. Nor is this merely exploitative. China bought its access by agreeing to create a new infrastructure for Africa, building roads, railways, hospitals and schools across the continent. The current crisis is not expected to affect China's march in Africa: on the contrary, with the West's plans in Africa on hold at best, Beijing views it as an opportunity to extend China's lead.

Zero- vs None-Zero Sum: Challenges for the World

America's Way on Trial The Ugly American is no longer an uncaring bureaucrat or soldier posted to Southeast Asia, but a greedy financier on Wall Street selling unsecured securities to gullible foreigners and Americans alike. The G-20 gathering is the first important international test of Obama's considerable leadership and communication skills. He will need all those talents to prevent the summit from becoming a mock trial of America's recent alleged financial crimes and selfishness, and of "Anglo-American capitalism" itself. It is important to understand the case for the prosecution, even -- perhaps especially -- for those who do not accept it. Americans are much less sensitive than are foreigners to the preeminent role of the dollar in global power politics as well as commerce. As Charles de Gaulle argued in the 1960s (to the outrage of Lyndon Johnson), the original Bretton Woods system enabled Washington to ignore the international monetary discipline it enforced on the currencies of others. The United States could finance budget deficits at home -- and its wars abroad -- on the backs of foreign nations. The French have never abandoned that analysis, even if it waxed and waned as global fortunes shifted. President Nicolas Sarkozy renewed that approach last year by calling for greater international supervision of financial markets and the global exchange-rate system. This month, the European Union endorsed the Sarkozy line by agreeing to emphasize regulation at the summit -- even though Obama wanted the G-20 to focus on new stimulus spending by others to match the United States and Britain. The two camps have in fact patched together an agreement for the summit to highlight the need for more stimulus by some and more financial regulation by all, French Prime Minister François Fillon indicated during a visit to Washington's Carnegie Endowment last week. But the "global New Deal" compromise will actually rise or fall on details still to be settled. The United States is fine with more national regulation -- see the latest Wall Street oversight plan offered by the administration's Inspector Gadget, Treasury Secretary Tim Geithner. But Washington balks at surrendering real power over its economic life to international bodies it does not control. So do other nations. France and Britain talk eloquently about the need to make the IMF and other international financial bodies more democratic. Yet they don't offer to give up their vetoes in the U.N. Security Council to jump-start global institutional reform. Russia champions self-determination until it comes to countries that do not submit to the Kremlin's plans for a Euro-Asian pipeline and energy monopoly. Egypt, Libya and other Arab chauvinist regimes mouth off about double standards and then flock to praise and protect Omar Hassan al-Bashir, Sudan's president and indicted war criminal, and cover his back in Darfur. The G-20 leaders must avoid turning the London summit into a high-level hunt for scapegoats. This crisis is a collective failure of the world's established and rising powers. The United States should acknowledge any responsibility that its excesses and its beloved greenback bear for this mess. But other nations that demand new power must also show they are ready to exercise it responsibly before a meaningful reform of international institutions can begin.

No Givens as Obama Takes World Stage After 69 days in which international issues have taken a back seat to attempts to rescue the economy at home, President Obama takes the world stage this week as a wildly popular figure among the people of Europe, but one who faces a difficult task in selling his plans to the continent's leaders. The president plans to push for a new approach to the war in Afghanistan, aggressive action to stop the proliferation of weapons and a more united European effort to combat the global recession. But if the U.S. president thought his popularity would cause foreign governments to fall quickly into line behind a new American leadership, experts warn, he could be in for a rude awakening. The German government has resisted calls to deploy more combat troops to Afghanistan. Russia is pushing back against a NATO missile defense system in Poland. And the Czech prime minister last week described the U.S. plans for global economic recovery as the "road to hell."  On Saturday, the White House made clear that it is not trying to dictate spending in European capitals to revive the economy, after facing strong resistance from France, Germany and other nations. "The notion that Europe is going to rally around this administration is being exploded," said Nile Gardiner, director of the Margaret Thatcher Center for Freedom at the Heritage Foundation. Gardiner predicted "a rapturous welcome" for Obama from the European public but said that "when it gets down to the discussions . . . there are going to be very tense discussions."

Anglo-American Capitalism on Trial Sitting in a gilded upper room at 10 Downing Street last week listening to Prime Minister Gordon Brown outline his ambitions for reforming the world economy had something of an out-of-this-world feeling. With Mr. Brown seated beneath a 16th-century oil painting of Queen Elizabeth I, it was tempting to imagine for a moment that Britain was again rising grandly to the challenges of the age, in the way of Good Queen Bess. The occasion was a briefing for reporters on the Group of 20 summit meeting to be held Thursday at a conference center in the London docklands, close to the historic City of London, Britain’s financial hub. Mr. Brown was intense, and prolific with facts. He was also visibly exhausted, hours before leaving on a five-day, 20,000-mile trip to Europe, the United States and Latin America before the conference. The event for which he was preparing is as weighty as any London has hosted in decades. It will be attended by President Obama and the leaders of 21 other nations, including Europe’s wealthiest countries and Russia, China, and India. Organizers say that those attending generate 80 percent of the world’s wealth, making the gathering a potential powerhouse for global reform. The meeting is too short — a single day — to make more than a start on fixing the weaknesses in the international financial system that contributed to the current crisis. But it will help determine the extent to which the economic model shaped largely by Britain and America after World War II — call it Anglo-American capitalism — survives as the touchstone for economic growth worldwide. Now, the conviction that the system must be rebuilt to curb future excesses forms a starting point for the reforms that will come under discussion in London. Like Mr. Brown’s, President Obama’s message to his own compatriots has focused on ways of revitalizing the system, often to the exasperation of those among their supporters who would favor more radical measures. Even as both men have embarked on enormous increases in public-sector spending, they have maintained that solutions to the crisis lie in reawakening the markets and recapitalizing the banks, rather than having the government take them over, and in placing financial institutions under closer supervision rather than tearing at the system’s foundations. And both, when they respond to public anger at the private sector, have seemed more geared to managing that anger than stoking it. Now, a wave of voices around the world would like a new Big Bang to sweep away the Bretton Woods template and the era of Anglo-American dominance it ushered in. Prime Minister Vladimir Putin of Russia has suggested as much, to nobody’s great surprise, and even France’s otherwise pro-American president, Nicolas Sarkozy, has said the “Anglo-Saxon” presumption of dominance should be abandoned. Against this background, what the British and American leaders will be attempting at the G-20 conference, along with their partners from around the world, will be to begin building a new global financial system that curbs the rampant and often conscienceless free-marketeering of the past 20 years with a new sense of accountability and restraint, but without extinguishing the spirit of enterprise that arrived in America with the Pilgrims who landed at Plymouth Rock. It is a task some have likened to rebuilding an aircraft in midflight, and on its success may depend the future well-being of much of the world’s population of 6.5 billion, not to mention the fragile political prospects of Mr. Brown.

News Analysis - Hints of Obama’s Strategy in a Telling 8 Days ... In eight days in Europe, President Obama has started down the road to remaking the global financial system, reinvigorating the NATO commitment to Afghanistan and Pakistan, rewriting nuclear policy, and repairing relations with the Muslim world. So, 77 days into his presidency, is there an emerging Obama grand strategy? Not yet, but that may have been the point. Pragmatic, conciliatory, legalistic and incremental, he pushed what might be called, with a notable exception or two, an anti-Bush doctrine. There was no talk of pre-emption, or of the American mission to eradicate tyranny. From the Thames to the Bosporus, and at several landmarks in between, Mr. Obama barely mentioned his predecessor. But he emphasized one of their main differences: that the United States planned not only to give greater authority to international institutions that President George W. Bush often shunned, but also to embrace the creation of some new ones. Not surprisingly, these were the applause lines of his journey across the Continent. When he described his strategy for grappling with nuclear disarmament and countering proliferation, where some of the biggest shifts since the cold war’s end appeared to be under way, Mr. Obama emphasized that treaties and legal norms could help accomplish what sanctions and military pressure had failed to achieve. In doing so, he veered toward a pre-Sept. 11 world order. “This trip was more about reattaching all the cars on the train and convincing the other leaders that we’re no longer headed for derailment,” one of Mr. Obama’s senior advisers said in London. But of course, his pragmatic tone was born of necessity: unable to persuade important allies to follow his lead on economic stimulus or Afghanistan, he decided to settle for relationship building over immediate results. Looking for a grand strategy, a coordinated plan to use American power for broad goals in the world, is always risky.

Democracy in difficult places IN THE poor world, elections often seem to be accompanied by violence, civil war or worse. Over the past two years, in Africa alone, Nigeria, Zimbabwe and Kenya have all experienced widespread unrest during and immediately after general elections. These ballots not only precipitated killing and maiming; the violence also seemed to discredit democracy itself. It allowed critics, such as China, to lecture the West on the inherent divisiveness of democracy; best not to bother, is the verdict from the East. And if your family has been incinerated in a church in Kenya in a bout of ethnic cleansing triggered by an election, who is to say that the Chinese are so wrong? That is an uncomfortable question for Americans and Europeans. So Paul Collier’s new book on democracy and conflict in poor countries is timely. Most important, he shows unambiguously what observers of elections in poor countries have long suspected: that on their own, unless they are held in the context of a functioning democracy, elections can retard rather than advance a country’s progress. “If democracy means little more than elections, it is damaging to the reform process,” he writes. Nigeria is a case in point. Its immense oil wealth, which should be used to help the country develop, makes politicians particularly anxious to hold onto office. They employ ever fouler means to do so, and elections thus become little more than organised gangsterism. The violent methods the politicians use become the modus operandi of their period in office, and the whole political system is corrupted. Mr Collier observes that elections begin to pay dividends to society only when they occur in a system of checks and balances, with a functioning rule of law: “As with elections and reform, democracy is a force for good as long as it is more than a façade.” That thought alone should make all Western donors and United Nations officials pause long and hard before doling out more millions of dollars to support so-called democratic elections in Congo, Nigeria or, maybe this year, Sudan. Mr Collier also analyses the other factors that militate against the successful functioning of democracy and which cause violence in poor countries. Ethnic identity is one; the presence of a large pool of underemployed, testosterone-charged youths is another. Economic development is “a key remedy to violence”, he argues; you may not be able to take the testosterone out of young thugs, but creating jobs gives them something to do other than take up machetes. Rapid development, his research shows, is probably the most important determinant for maintaining peace. Aid alone does not achieve this; encouraging a flourishing private sector does.

Financial Fate, in Each Country’s Hands HERE’S a scary thought in the midst of the financial crisis. Although there was a time when Argentina and the United States were serious economic rivals, that changed with the Great Depression. America recovered and became the world’s richest nation. Argentina ended up a mess. How did such a reversal of fortune happen? In “False Economy: A Surprising Economic History of the World” (Riverhead, 321 pages), Alan Beattie writes that the answer had a lot to do with the two nations’ radically different responses to the panic that followed the stock market crash of 1929. The United States swiftly enacted the New Deal of Franklin D. Roosevelt. Argentina ended up electing Juan Domingo Perón, who tried to seal off Argentina from the rest of the world economically. Over the years, the country would endure huge deficits, runaway inflation and a host of other maladies that contributed to economic collapse. To this day Argentina has not recovered. Mr. Beattie, world trade editor at The Financial Times, provocatively suggests that it could have been the other way around.  What if wealthy Americans had blocked the New Deal? What if the country had fallen under the sway of demagogues like Father Charles Coughlin, the radio show host who admired Hitler and Mussolini? What if we had never removed the trade barriers we erected to shelter our industries from the world economy? We might have ended up like Argentina, too. In short, Mr. Beattie writes, countries choose their own economic destinies. That is worth considering as we try to extricate ourselves from the wreckage of the subprime mortgage debacle. “We created this mess and we can get ourselves out of it,” the author says. “To do so involves confronting a false economy of thought — namely that our economic future is predestined and we are helplessly borne along by huge, uncontrollable, impersonal forces.”  “False Economy” isn’t really a history book; instead, each chapter is an attempt by the author to debunk what he considers to be “fatalistic myths” about the economies of different counties and societies.  He devotes a chapter titled “Religion: Why Don’t Islamic Countries Get Rich?” to skewering some people’s post-9/11 view that Islam is the reason that so many Arab countries have high rates of unemployment. If that were true, Mr. Beattie argues, why is a Muslim country like Malaysia outperforming the Christian Philippines and the largely Buddhist Thailand? Good question. In another chapter, “Natural Resources: Why Are Oil and Diamonds More Trouble Than They Are Worth?,” Mr. Beattie challenges the notion that countries with large deposits of these items beneath their soil are doomed to poverty. “The corrupting power of mineral wealth has been shown graphically in movies like ‘Blood Diamond,’ set in the civil war that raged in Sierra Leone in the 1990s and turned it into one of the most deprived nations on earth,” he writes. “When the Saddam Hussein regime fell in Baghdad, one of the first lines of public questioning was how the newly liberated Iraq could avoid the mismanagement of its oil that had characterized so many other Middle Eastern counties.”

'Power Rules' The author wishes to reclaim the middle ground in the debates over American foreign policy between the two parties, toward both of which he feels “a bit surly.” At the start of his extended analysis of world power, he complains that “the core meaning of power has been lost, or even worse, hijacked by various liberals and conservatives,” who “repeatedly corner our leaders into making commitments they cannot fulfill,” as well as groups like “America’s premature grave diggers” and “the world-is-flat globalization crowd,” presumably led by Gelb’s successor on the Times Op-Ed page, Thomas L. Friedman. Gelb insists that power “is what it always was — essentially the capacity to get people to do what they don’t want to do, by pressure and coercion, using one’s resources and position. . . . The world is not flat. . . . The shape of global power is decidedly pyramidal — with the United States alone at the top, a second tier of major countries (China, Japan, India, Russia, the United Kingdom, France, Germany and Brazil), and several tiers descending below. . . . Among all nations, only the United States is a true global power with global reach.” None of this detracts from the general importance of Gelb’s book. His plea for greater strategic thinking is absolutely right and necessary. The campaign of 2008 was but the latest instance of a presidential contest (like 1952 and 1964, to name only two) when the debate over foreign affairs was underdeveloped and the election mandate for the new president in foreign policy was strong but underdefined. That campaign and the months that followed have demonstrated that Barack Obama’s inclination is to approach problems with a calm and steady concentration on long-term strategy. Thus, as he copes with domestic and world problems whose magnitude and range exceed those facing most American commanders in chief, he would no doubt benefit if someone should slip “Power Rules” into his evening reading. President Obama won’t, by any means, concur with all of Gelb’s meditations or policy recommendations, but he will surely agree that — especially in world affairs and especially at this moment — a president or secretary of state should consider strategy to be anything but baloney.

Previous Posts

 

Previous Posts: Series 3

Current Series

Black Swans & Unintended Consequences: the Food Crisis

WRFest 20Apr08(World Politics): More "Black Swans", UiC, and Self-Inflicted Wounds

Knowing China (Readings): Issues, Trends, Futures, Culture

Brave New World: Non-Flatness, History and Challenges

SoW I (the Good): Britain, Brazil, Mexico and India

SoW II(the Maybe So): Africa and Asia (China, Burma)

SoW III (the Bad): Challenged Russia...another Potemkin Village

The Iran Dilemma: They Like Us, Not; We Like Them, Not...usw.

 

Oil and Other System Shocks: Beyond Iraq & Georgia

Foreign Policy for a Dangerous Old World: Adoption, Adaptation & Resilience

3of4 BRICs: Governance, Stability & Outlook in China, Russia and India

The Next Decade's Crisis: ME, Bubbling Cauldrons & Fracture Lines

Witches Brew Recipes: ME Details (Iraq to Iran) {Updates}

From Complacent Stablities to Disruptive Challenges: Europe, Latin America, Africa

Sounds of Angry Men, Whimpering Politicians & the Global Crisis

G-20 Persepctives: How Well Do Bears Dance ? (Updated)

ME Update: Exemplar, Laboratory and Conundrums (Updates)

 


Previous Posts: Series 1

Previous Posts: Series 2

WRFest 15Feb08(Nat'l Security):

WRFest 23Feb08(Int'l Affairs): What Makes for Progress

WRFest 1Mar08(World Affairs): Seismic Changes a'Comin

WRFest 2Mar08(Europe): the Failure of Reform and Adaptation

WRFest 9Mar08(China/India): the Rise of the Dragon and Elephant

WRFest 9Mar08(Int'l): Russia, Iran, Iraq and the New Caudillos

 WRFest 16Mar08(Int'l I): Japan, India, China

WRFest 16Mar08(ROW): Latin Beat to Flamenco to Nigerian drums

WRFest 30Mar08(Europe): France and Russia - What's that Tune ?

WRFest 30Mar08(Asia): Trouble in Big China

WRFest 13Apr08(China): More Troubles in Big China

April 12, 2009

ME Update: Exemplar, Laboratory and Conundrums (Updates)

If we learned anything from 911 a critical insight is that we can no longer safely ignore what goes on in the rest of the world - our oceanic barrier walls are that no longer. Which means, geo-political and economic issues and threats aside - it's important to us on a personal level. A derivative lesson is that we can no longer treat the rest of the world with semi-benign neglect but must be willing to be involved, all tradeoffs considered, appropriately in each area of concern. But as we've learned in Iraq appropriate is based on local conditions, details and idiosyncrasies. That, taken all together, makes the current multiple series of crisis of in the ME important and a laboratory for US foreign policy in general. Here we want to provide another update of the status of each country involved and suggest that we need to treat them 1) for their own sakes, 2) as part of a great ME whole (a systematic, systemic and holistic approach is called for) and 3) take what we've learned and are learning there as lessons for elsehwere. Suitably adapted and customized of course.

The Multi-Factor ME

One of those key learnings, which we've discussed before (The Next Decade's Crisis: ME, Bubbling Cauldrons & Fracture Lines) so we'll just briefly review, is that it's one damm thing after the other. Put differently each country and sub-region must be evaluated on it's own terms but also with regard to it's linkages to other countries and players. Here's out previous attempt at mapping out some of these complexities with some, certainly not all, of the linkages involved being shown. Now experts in the area have usually always had this sort of perspective, at least in their heads if not explicitly mapped out. But the really good news is that the current administration seems to be shaping a holistic policy of balancing a focus on local problems with integration into the broader context. For example we now have senior level special envoys of the highest caliber dedicated to the Israeli/Palestinian and Afghanistan/Pakistan problem. And they clearly understand that things are linked. They also clearly understand that US policy must be built on a deep local understanding of the cultural, political and institutional characteristics of the different players. Something that is new to the US at this level and with this sort of focus. Judging by recent Presidential speeches this inclusive and balanced approach where tactics and strategy are balanced and attempt to integrate local with broader concerns is now central to our approach to foreign policy. That's the really good news - we're making as concerted a good effort as we've ever made. The bad news is that the challenges may still exceed the capabilities and resources - in which case there's not much of an available fallback except to bend over and kiss it goodbye.

The Devil's Details: a Checklist for the ME

In another previous post (Witches Brew Recipes: ME Details (Iraq to Iran) {Updates}) we suggested a series of steps that the US should undertake in dealing with the Israeli/Palestinian dilemmas and alluded to the possibility that it was a more general checklist of actions and strategies for shaping a constructive foreign policy. Historically we and others have simply attempted to contain the dysfunctions of the various ME countries within their own boundaries, interpreted local events within our own context (seeing everything for forty years for example strictly within the framework of the Cold War; which led us to abandon Afghanistan, encourage Pakistan's ISI to support the Taliban and alienated most of the Arab countries by ignoring their concerns and interfered in legitimate Iranian local politics strictly in our own interests). We'll see if we've move on at all but the penalty for not trying is pretty severe. We've made no pretense of populating the checklist for each of the local situations, instead leaving that to the experts for now. BUT...we will suggest that the historical assessment would be that we've simply focused on the first few steps and now we MUST evolve policies that lead to effectiveness on all of them. In the readings below you'll find current selected news on each of the key countries:

1. In Iraq where we've learned that force must be coupled with civil development which has resulted in enormous strides. Iraq became an independent country 87 years after it's founding. The same timeframe in US history was the day after Gettysburg. Judged by appropriate standards a lot of progress has been made in a very short time with a long road ahead. A road that there are increased indications that the Iraqis are willing and able to walk.

2. The Administration has announced a bold "new" strategy for Afghanistan that builds on these lessons and has garnered widespread applause from knowledgeable pundits of widespread political persuasions. This will be, again, a long, hard road in very different and more difficult circumstances that nonetheless holds great promise.

3. The key to Afghanistan lies in Pakistan, which is a sovereign country in which "kinetic intervention" is not an option. Yet the lessons still apply suitably morphed. Our primary national interest is in preventing an unstable and fragile country that is nuclear-armed from breaking down into chaos. Whatever it takes.

4. If we segue over to the Mediterranean coast we now have very clear evidence that the Syrian site bombed last year was in fact a nuclear weapons development center with heavy North Korean and Iranian involvement. Can you imagine the world with Hezbollah having access to nuclear weapons ? The lessons for being locally informed, constructively involved and controlling adversarial interference from outside powers seem pretty clear; and ones that pass all possible cost/benefit tests.

5. The Israeli/Palestinian conundrum continues to be just that yet it's one of the great running sores in the ME that we cannot NOT afford to be constructively engaged in. (Gaza and the ME: Flames for the Fuses) Unfortunately local attitudes appear to have both hardened up and deteriorated. A great irony is that both Israelis and Pallestian populations would prefer peaceful solutions yet don't know that about each other. A critical key will be to move on from past hatreds, not forgetting or even forgiving but at least tolerating in mutual self-interest.

6. So far the spoiler in the ME appears to continue to be Iran which in the name of it's own Revolution continues to support violence and develop WMD at the expense of the health of it's own society and economy. President Obama is beginning to reach out so we'll have to see. What people are missing in their commentaries is that this is a brilliant strategy AND tactical maneuver - if the Iranians fail to respond constructively and sincerely they will simply isolate themselves more and strengthen the case for more restrictive sanctions and concerted worldwide efforts to contain. And cooperation would be in their self-interest. The real dilemma is is it in the interest of the power-holders who control the fruits of the country for their own benefit ? Aye, there's the rub.

7. During his visit to Turkey the President not only reached out to the Turks in ways that were extremely well received but also to the rest of the Muslim world. As the example of Indonesia shows not all Muslims are dedicated to reglious extremes. They are choosing instead to pursue an increased religiosity balanced with more open and secular governments. The lesson and hope would be that similar stances could be evoked and evolved from other players. Possible ? Yes. Likely ? Perhaps. Easy ? NO. Quick ? Definitely NOT. Alternatives ? None good. Either disciplined, constructive and patient engagement or worldwide economic disruption that will make the current crisis look like a walk in the park. We have little to loose in spite of the armchair quarterbacking.

The Confluence of Self-interest: Lessons Learned ?

Looking back at the lessons of 911, the Cold War or farther some other key lessons come to mind.

1. It is in the clear self-interest of the US to promote stable, progressive regimes thruout the ME.

2. We must be constructively engaged.

3. It is in the interests of each of the individual countries as well.

4. The primary opponents of moving forward seem to be self-serving power holders in various countries who put their immediate advantage over the long-term welfare of their populations.

5. Those populations have been so inculcated with emotional shibboleths that it will take time and effort to de-tox them. And ask of them some hard, hard, hard choices to give up their hatreds which are counter-productive but immediately emotionally satisfying for possible long-term benefits. Surrendaring immediate emotional gratification for long-term abstract benefits is not something humans do well. Just ask yourself how your last diet or anti-smoking efforts went.

6. A critical challenge to all the parties is to give up the "bloody shirt" of revenge for a civil society. Or more importantly we must figure out how to engage and sell the long-term benefits to the street...not just he power-holders.

911 Lessons: Pointing Fingers vs Potential Futures

And before we point to many fingers at supposed local irrationalities let's ask how well public spirited policy has faired in this country as opposed to partisan posturing and the pursuit of self-interest. (Back in the US: Economic Realities vs Partisan Posturings) Flawed, narrow and destructive self-interest as opposed to the enlightened variety ? The basic tradefoffs are between creating and supporting a virtuous vs a vicious cycle of self-destruction vs one of mutual gain, between a zero-sum and a non-zero sum set of public policies.

UPDATES: 

We've added three stories related to Iran that sketch the complications and convolutions of dealing with that theocratic kleptocracy in the context of the ME maelstrom. Egypt's arrest of Hizbollah operatives apparantly plotting an attack against Syrian tourists, the supression of press freedom thru intimiation of foreign journalists and a sudden peace overture by Pres. Ahmadinejad. Taken all together it's hard to reach a summary conclusion but we take it as continued evidence of the multiple influences straining that country as power protection by the clerics bumps against the realities of needing to rejoin the world. Will they or won't they ? On that MUCH hinges.

ME as Exemplar

Fmr. Ambassador to Iraq Ryan Crocker Assessment on Iraq, Afghanistan, Pakistan & ME (CSpan) Former Ambassador to Iraq Ryan Crocker spoke at the George H.W. Bush Presidential Library about the politics, history, and current issues in the Middle East. Mr. Crocker was introduced by Fmr. President George H.W. Bush. 

PEACEKEEPING: The Secrets Of Iraq The major obstacle to peace in Iraq is still corruption, and the lack of things we take for granted in the West. The main problem is the absence of what is called "civil society." In short, this means that a majority of the people support clean and efficient government, and energetically back honest politicians, and denigrate dishonest ones. In Iraq, the three major groups (Kurds, Shia Arabs and Sunni Arabs) never got along. Moreover, there are also hundred of tribes and clans which wield considerable power. The long time lack of honest courts, meant that many judicial matters (contract, marital, criminal and land disputes) were settled by clan or tribal elders. This is still the case. There is also the tradition of "winner take all." Anyone who achieves a position of power in the government is expected to take care of his clan or tribe, usually to the exclusion of anyone else. While many Iraqis understand the need for a civil society, the majority of officials still play by the traditional rules. As a result, back in the United States, many politicians either don't bother, or don't want to believe, what is actually happening, and has happened, in Iraq. In a way, that makes sense. Now, this is the critical thing that many Americans don't understand, or even know. When Saddam was deposed in 2003, most (well, many) Sunni Arabs believed they would only be out of power temporarily. This sort of thing you can pick up on the Internet (OK, mostly on Arab language message boards, but it's out there). Saddam's followers (the Baath Party) and al Qaeda believed a few years of terror would subdue the Shia, scare away the Americans, and the Sunni Arabs would return to their natural state as the rulers of Iraq. U.S. troops quickly picked up on this Sunni mindset. Because Sunni Arabs were the best educated group, most of the local translators the troops used were Sunni Arabs, and even these guys took it for granted that, eventually, the Sunni Arabs would have to be in charge if the country were to function. The Sunni Arabs believed the Shia were a bunch of ignorant, excitable, inept (and so on) scum who could never run a government. Four years later, the Shia sort-of proved the Sunni Arabs wrong. By 2007, most Sunni Arabs had decided to make peace, not suicide bombs. The basic problem is that the United States is divided into two groups; those who have worked (or fought) in Iraq, or otherwise paid close attention to what's happening on the ground, and those who create their own picture of what's happening, one that fits other needs (personal, political, religious). No amount of wishing will change what is going on over there. The majority of the population hates the Sunni Arabs, who now have four years of terrorist attacks added to their list of sins. The Kurds, although beset by corruption and factionalism, have shown that you can still have peace, security and prosperity if everyone works together. The Arabs to the south see that, but have not been able to work together well enough to make it happen. Will the Arabs be able to overcome their factionalism and hatreds? THAT is the big question. What is lost in all the rhetoric about Iraq is that Iraq is the only real Arab democracy in the Middle East. Egypt is a one party state, a dictatorship masquerading as a dictatorship. Every other Arab state is either a dictatorship or a monarchy. Iraqis know they are in a position to show the way, to an era of better government, and the freedoms and prosperity that flows from that. Iraqis know they have problems with religion, tribalism and corruption. Iraqis know what they are up against. Do you? 

The Promise, and Peril, Ahead for Iraq During his visit to Iraq this week, President Barack Obama commended U.S. forces for their invaluable work there: "From getting rid of Saddam, to reducing violence, to stabilizing the country, to facilitating elections -- you have given Iraq the opportunity to stand on its own as a democratic country. That is an extraordinary achievement." But the president also cautioned that "now is not the time to lose focus" for the next 18 months will be a "critical period." He's absolutely right. Iraq has undergone a quiet transformation since Mr. Obama's first visit to the country as a senator in July 2008. We can no longer speak of Iraqi politics at a standstill, or a lack of political accommodation, or an unwillingness of the Iraqi government to take responsibility. The issues facing the president in Iraq, and his military commanders, are fundamentally different from those of 2007 and 2008. On a visit to Iraq last month, we had the opportunity to see the transformation firsthand. Iraq is now a fully sovereign country. Mr. Obama has stated his objectives in Iraq clearly: The U.S. must "make sure that Iraq is stable, that it is not a safe haven for terrorists, that it is a good neighbor and a good ally." This is an attainable goal. Iraq has undergone a profound transformation -- it is no longer a predatory, dictatorial state or a maelstrom of sectarian violence. It no longer threatens its neighbors or stability in the region. Indeed, Iraq has become an attractive political and economic partner for states throughout the Middle East. But Iraqis remain most interested in establishing a strategic partnership with the U.S. and the West. In the long run, this partnership will not be defined by the numbers of U.S. troops in Iraq but by the depth of our economic and political cooperation, diplomatic support, and strategic alliance. As Mr. Obama said in Baghdad, America must be "a stalwart partner" and Iraqis must "know that they have a steady partner with us."

Combat and Community Before the Soviet invasion in 1979, Afghan towns had three parallel authority structures: the tribal elders, the religious clerics and the government representatives. The Soviets decimated the tribes and the indigenous government. That left only the mullahs, and their sudden unchecked prominence helped explain the rise of the Taliban. The terror and the fall of the Taliban reduced clerical authority, too. By 2002, when the coalition forces arrived, village society was fractured, social capital decimated. The resulting disorder has been a perfect nesting ground for the insurgents. The insurgents are not popular in Afghanistan, the way they sometimes were in Iraq. But they have money, and young men in the villages talk about “taking a Taliban day” — that is, accepting a few hundred bucks to plant an I.E.D. Between 2002 and 2005, the coalition and the Afghans were slow to recognize the perils of social fragmentation. The general view was that warlordism and civil war were the biggest threats. Therefore, power should be centralized with the national government. The country should be restored through a strong national government spreading outward. That approach has had some success. The Afghan National Army is the country’s most trusted institution. But it’s also had many shortcomings. The national police force is ineffective. The central government has rarely been able to reweave the social fabric at the village level. Nobody’s been able to establish rule of law or end rampant corruption. So the Afghans and the coalition are adapting. There’s been a shift to supplement central authorities with village authority structures.

Diplomatic Surge: Can Obama's Team Tame the Taliban?  Admiral Mike Mullen is an odd one. He eschews the crisp, classic aura of command; he comes across as a no-drama, common-sense-dispensing country doctor from downstate Illinois (actually, he's the son of prominent show-biz publicists from Los Angeles). But as Chairman of the Joint Chiefs of Staff, Mullen is still the highest-ranking U.S. military officer, and so it was a bit disconcerting to see him taking flak from a group of Afghan farmers and international agricultural experts in Kabul the first week in April. "The military is giving away free wheat seed to Afghan farmers, and that's undermining our efforts," said an expert whose USAID-supported program gave farmers vouchers to buy seeds, which was helping build a secondary market of seed- and farm-supply businesses. Instead of taking umbrage, Mullen took notes. In fact, he seemed close to excited as ideas flew around the table. It was not the normal fare for an admiral, but agriculture - specifically, how to get Afghan farmers to plant something other than opium poppies - is a central issue in this very complicated war. Welcome to the U.S. military in the Age of Obama. Indeed, Mullen's tour of Afghanistan, Pakistan and India was quietly significant in a number of ways. The trip was organized and led by the State Department's indefatigable special representative, Richard Holbrooke, with Mullen happily playing second fiddle (except in the closed-door meetings with Afghan and Pakistani military leaders) - a striking reversal of fortune after the Pentagon dominance of the Bush years. It was a demonstration of the Obama emphasis on diplomacy and economic development, a strategy that tracks with the military's new counterinsurgency tactics - "We've developed the best counterinsurgency capability in the world," Mullen said several times - that focus on protecting the public and building civil order. And so, in addition to the usual round of private meetings with government officials, Holbrooke convened a breathtaking parade of farmers, Afghan tribal leaders, women legislators, rule-of-law advocates, journalists, the local diplomatic corps, religious leaders; and then a similar roundelay in Pakistan. Mullen seemed amazed and somewhat nonplussed by Holbrooke, who is the David Petraeus of diplomats, a constant source of energy and creativity - and occasionally controversy, since he is not, shall we say, a country-doctor sort of guy. Zardari's helplessness reflected one reality - the Pakistani army holds the real power in the country - but it also fed the parallel reality of an infantile political class, constantly squabbling, incapable of acting effectively even in a dire crisis. Holbrooke and Mullen saw it firsthand when a shouting match broke out before dinner at the U.S. embassy between a prominent Zardari aide and a leading member of the lawyers' group that had successfully forced the reinstatement of Pakistan's Chief Justice. "They're both moderate, secular leaders," one of those present commented later. "They should be focused on the desperate threat facing their nation instead of fighting each other."

Holbrooke of South Asia  His face tense and unsmiling, a young man from a village in Pakistan's western tribal areas tells his story, mixing English, Pashto and Urdu. He is the only male in his clan to get an education, but can't find a job, and blames a corrupt national government. Americans are bombing his neighbors, he says, tempting him to join the Islamist militants in his area. Across the room, another Pakistani turns toward his hosts at the U.S. Embassy and says, "You are hated." The comments are addressed to the Chairman of the Joint Chiefs of Staff Adm. Michael Mullen and the new American special representative for the region, Richard Holbrooke. Seated alongside the highest-ranking U.S. military officer, Mr. Holbrooke asks a dozen or so men in the room about the presence of the Taliban in their villages. "We are all Taliban," comes a response. The others nod in accord. All are or were "religious students," or Taliban in Pashto. But the expression of solidarity with the various Pakistani and Afghan insurgents who go by the name is lost on no one. Mr. Holbrooke, who leads the diplomatic charge, acknowledges the hardest work will be here. His airplane reading is Dennis Kux's history of the U.S.-Pakistani relationship titled, "The United States and Pakistan, 1947-2000: Disenchanted Allies." "Pakistan is at the center of our strategic concerns," he tells me Tuesday night, flying from Islamabad to India's capital, Delhi. "If Afghanistan had the best government on earth, a drug-free culture and no corruption it would still be unstable if the situation in Pakistan remained as today. That is an undisputable fact, and that is the core of the dilemma that the Western nations, the NATO alliance, face today." Take the dilemma a logical step further, I suggest. The terrorists who threaten America are in Pakistan, but the U.S. fights the Afghan Taliban, who don't. "That's a fair point," says Mr. Holbrooke, "but the reason for fighting the Taliban in Afghanistan is clear: The Taliban are the frontrunners for al Qaeda. If they succeed in Afghanistan, without any shadow of a doubt, al Qaeda would move back into Afghanistan, set up a larger presence, recruit more people and pursue its objectives against the United States even more aggressively." Public support for the expanded U.S. Afghan mission hinges on making this case stick. 

INTELLIGENCE: The Enemies Within For several years now, the United States, Afghanistan, India and many Pakistanis, have been pressuring the Pakistani government to reform the ISI (Inter Service Intelligence agency). This organization has long been a power unto itself, with its own agenda and many members who support Islamic radicalism. Last year, the government sought to disband the political wing of the ISI. This section was believed be largely responsible for Pakistani support of Islamic, or simply Pakistani, terrorist operations in Afghanistan and India, as well as support for Taliban and al Qaeda in Pakistan itself. The political wing has also served as a domestic spying operation whenever the military was running the country (which is more than half the time.) Pakistan is currently run by a civilian government that came into power last Summer. ISI has long supported Islamic terrorists, and now Pakistan appears determined to root out "Taliban spies" in the ISI. The problem is that these Islamic radicals have been operating openly in the ISI for three decades, and were put there by the government in the late 1970s, when it was decided that Islamic conservatism was the solution for Pakistan's problems (corruption and religious/ethnic conflicts.) These guys are not just "Taliban spies," but Pakistani intelligence professionals that believe in Islamic radicalism.

In Pakistan, A Government Official-Turned-Protester(NPR) Many thousands of people took part in the campaign to restore Pakistan's chief justice after he was ousted by the country's military ruler, Gen. Pervez Musharraf, more than two years ago.But one man in particular stood out amid that noisy throng of black-suited lawyers, civil activists and party cadres, who are now celebrating the judge's return to the bench. Roedad Khan does not fit the stereotype of the fiery-eyed frontline protester, who took to Pakistan's streets for week after week, braving tear gas and baton-wielding police at the risk of arrest and injury. He is a courtly, urbane and soft-spoken man who lives in an airy villa in the capital, Islamabad, surrounded by elegant furniture, oriental rugs and the biographies of history's leaders. He is also 85 years old. Khan used to be one of Pakistan's most senior government officials, serving in high office under civil leaders and military dictators. For most of his career, he was a civil servant, although he came out of retirement for a stint as a federal minister. He has, over the years, been on personal terms with six of Pakistan's presidents.

INTELLIGENCE: A Grain Of Sand Reveals All There are recent revelations about the Syrian site, which was bombed by Israel in September, 2007, and why the Israelis knew it was a nuclear research facility under construction. It all began when an Iranian general, and former deputy defense minister (Ali Reza Asghari) defected in February of 2007. He said that Iran was financing a North Korean effort to help Syria develop nuclear weapons. The site had already been noted by American intelligence, but they were unsure of what it was. It seems that the Syrians had taken extraordinary security measures. No cell phones were allowed on the site, and all messages to and from the workers there were delivered in written form, by courier. In August, 2007, the Israelis sent in a twelve man commando team, by helicopter, to the site. Photographs, and soil samples, were taken. This confirmed that nuclear research was taking place at the site. The bombing mission followed the next month. American and Israeli intelligence concluded that Iran had spent over a billion dollars (much of it to North Korea) to finance the operation. Some intelligence officials doubt this, but Syria hasn't got much cash, and North Korea does not do freebies. Iran has the money and the motivation. After the bombing, the Syrians promptly removed the structures, both the ones that were bombed and those left intact. Syria has since rebuilt the area with what appears to be a missile control and launching center. After the bombing, and accusations of nuclear weapons research, UN inspectors found that there were traces of uranium and graphite, indicating that there was indeed a nuclear research activity, at the very least, going on. The Syrians apparently did not realize that it was difficult, nearly impossible, to clear away the microscopic evidence that nuclear research was going on there. North Korean technicians were involved with whatever was going on there, although Syria denied any nuclear work was taking place. Denying that North Koreans were around was more difficult, as North Koreans have been seen entering and leaving this area for months. North Korea is believed to be still selling weapons, and possibly nuclear technology, to Syrian mentor Iran. Moreover, the minute nuclear and graphite material can be traced back to where it came from, which in this case was North Korea.

An Arab-Made Misery International donors pledged almost $4.5 billion in aid for Gaza earlier this month. It has been very painful for me to witness over the past few years the deteriorating humanitarian situation in that narrow strip where I lived as a child in the 1950s. The media tend to attribute Gaza's decline solely to Israeli military and economic actions against Hamas. But such a myopic analysis ignores the problem's root cause: 60 years of Arab policy aimed at cementing the Palestinian people's status as stateless refugees in order to use their suffering as a weapon against Israel. It was in those years that the Arab League started its Palestinian refugee policy. Arab countries implemented special laws designed to make it impossible to integrate the Palestinian refugees from the 1948 Arab war against Israel. Even descendants of Palestinian refugees who are born in another Arab country and live there their entire lives can never gain that country's passport. Even if they marry a citizen of an Arab country, they cannot become citizens of their spouse's country. They must remain "Palestinian" even though they may have never set foot in the West Bank or Gaza. This policy of forcing a Palestinian identity on these people for eternity and condemning them to a miserable life in a refugee camp was designed to perpetuate and exacerbate the Palestinian refugee crisis. So was the Arab policy of overpopulating Gaza. The United Nations Relief and Works Agency for Palestine Refugees in the Near East, whose main political support comes from Arab countries, encourages high birth rates by rewarding families with many children. Yasser Arafat said the Palestinian woman's womb was his best weapon. Now it is Hamas, an Islamist terror organization supported by Iran, which is using and abusing Palestinians for this purpose. While Hamas leaders hid in the well-stocked bunkers and tunnels they prepared before they provoked Israel into attacking them, Palestinian civilians were exposed and caught in the deadly crossfire between Hamas and Israeli soldiers. As a result of 60 years of this Arab policy, Gaza has become a prison camp for 1.5 million Palestinians. Both Israel and Egypt are fearful of terrorist infiltration from Gaza -- all the more so since Hamas took over -- and have always maintained tight controls over their borders with Gaza. The Palestinians continue to endure hardships because Gaza continues to serve as the launching pad for terror attacks against Israeli citizens. Those attacks come in the form of Hamas missiles that indiscriminately target Israeli kindergartens, homes and businesses.

LEADERSHIP: Arabs Who Hate Israel Less Saudi Arabia, and most Arab nations, are coming around to viewing Israel as an ally and tolerable neighbor. The Saudi royal family has always been very practical, and willing to take risks. One of their current risky behaviors is pointing out, to their fellow Arabs, how destructive internal conflicts are for the Arab world. Then there is the admission that the obsession with Israel has brought the Arabs more harm than good. Increasingly, Arabs are advocating an old practice in the region, "if you can't beat them, join them." What's driving this move towards Israel's welcoming arms (pun intended), is growing fear of Iran, and disgust at the self-destructive and incompetent politics of the Palestinians. For sixty years, the Arab world had been united in their support of the Palestinian (a nationality created in the 1960s) efforts to destroy Israel, and replace it with a Palestinian state. Most Arab leaders no longer believe that the Palestinians are capable of negotiating a deal with the Israelis, or even running their own state, should they get one. The big obstacle is the sixty years of anti-Israeli and anti-Semitic propaganda Arab states have been spewing. This stuff is still coming, although several Arab states have quietly reduced the volume and vehemence. Arab states have been more vigorously leaning on the Palestinians to make peace, knowing that this would quickly lower the toxicity level of Middle Eastern anti-Semitism. But Hamas has stopped progress in peace negotiations, and made that worse by using Iranian help to do it. The more reasonable Palestinian faction, Fatah, is hopelessly corrupt, and politically inept as well. The Arab states are as frustrated as the Israelis are with the "Palestinian situation." In fact, many Arabs are coming to see the "Israeli problem" as actually the "Palestinian problem." The Israelis are willing to deal, but the Palestinians either aren't, or can't, or won't.

The tantalising prospect of reconciliation AFTER nigh on three decades of abuse-filled estrangement, two spouses mull a reconciliation. Bitter memories of insults and humiliation linger. Mutual acquaintances, fearing more broken crockery, offer to mediate. The initial exchanges have been held at high volume. But at least the sulky silence has been broken. These are likely to be modest steps, to begin with. The administration’s review of America’s Iran policy, almost complete, has impressed on those involved how far America’s rivalry with Iran has permeated policymaking across the region. For instance, America’s hostility to groups such as Hamas in the Palestinian territories and Hizbullah in Lebanon is coloured by a perception that they are Iran’s proxies. It is notable, too, that Mr Obama’s desire to improve relations with Russia is fuelled partly by his hope that the Russians will press Iran harder to give up its nuclear ambitions. American experts on Iran also have a big say in policy towards Iraq and Afghanistan, whose occupation has furnished Iran’s leaders with unanticipated chances to advance their claims to be a regional power. Indeed, it is on Iran’s borders that efforts at detente may start. Signals count for much. According to an Iraqi government official, Iran’s Revolutionary Guard has reduced its meddling in Iraq since Mr Obama’s inauguration. Now Afghanistan, the subject of much presidential attention, offers an opportunity for more overt co-operation.

America Seeks Bonds to Islam, Obama Insists President Obama formally began his outreach to the Muslim world on Monday when he spoke before Turkey’s Parliament, telling legislators that the United States “is not and will never be at war with Islam.”  “America’s relationship with the Muslim community, the Muslim world, cannot and will not just be based upon opposition to terrorism,” he said. “We seek broader engagement based upon mutual interest and mutual respect.” Showing more self-confidence each day on his maiden overseas trip as president, Mr. Obama, in addressing a majority Muslim country for the first time, appeared to have prepared carefully for one particular line in his wide-ranging speech. “The United States has been enriched by Muslim-Americans,” he said. “Many other Americans have Muslims in their family, or have lived in a Muslim-majority country. “I know,” he said, “because I am one of them.” And then he paused. Throughout his speech, he had moved swiftly from passage to passage, but this time, he waited for the interpreter to catch up. After about five seconds, the applause came. The line was a bold one for Mr. Obama, who has been falsely described as a Muslim. The claim persists on some right-wing Web sites, which may try to interpret his remarks as proof of that view. But Mr. Obama, who spent part of his childhood in Indonesia, is calculating that the benefits of demonstrating to the Muslim world that Americans are not antagonistic toward it outweigh the potential political fallout back home. His calculus may also reflect an increased belief that he has enough political capital that he can spend some of it in pursuit of strengthening ties between Muslim nations and the West.

The Winnable War I came to Afghanistan skeptical of American efforts to transform this country. Afghanistan is one of the poorest, least-educated and most-corrupt nations on earth. It is an infinitely complex and fractured society. Every element of my skepticism was reinforced during a six-day tour of the country. Yet the people who work here make an overwhelming case that Afghanistan can become a functional, terror-fighting society and that it is worth sending our sons and daughters into danger to achieve this. In the first place, the Afghan people want what we want. They are, as Lord Byron put it, one of the few people in the region without an inferiority complex. They think they did us a big favor by destroying the Soviet Union and we repaid them with abandonment. They think we owe them all this. That makes relations between Afghans and foreigners relatively straightforward. Most military leaders here prefer working with the Afghans to the Iraqis. Second, we’re already well through the screwing-up phase of our operation. At first, the Western nations underestimated the insurgency. They tried to centralize power in Kabul. They tried to fight a hodgepodge, multilateral war.Third, we’ve got our priorities right. Armies love killing bad guys. Aid agencies love building schools. But the most important part of any aid effort is governance and law and order. It’s reforming the police, improving the courts, training local civil servants and building prisons. Fourth, the quality of Afghan leadership is improving. This is a relative thing. President Hamid Karzai is detested by much of the U.S. military. Some provincial governors are drug dealers on the side. But as the U.N.’s Kai Eide told the Security Council, “The Afghan government is today better and more competent than ever before.” Reformers now lead the most important ministries and competent governors run key provinces.  Fifth, the U.S. is finally taking this war seriously. Up until now, insurgents have had free rein in vast areas of southern Afghanistan. The infusion of 17,000 more U.S. troops will change that. The Obama administration also promises a civilian surge to balance the military push. Sixth, Pakistan is finally on the agenda. For the past few years, the U.S. has let Pakistan get away with murder. The insurgents train, organize and get support from there. “It’s very hard to deal with a cross-border insurgency on only one side of the border,” says Mr. Alexander of the U.N. The Obama strategic review recognizes this. Finally, it is simply wrong to say that Afghanistan is a hopeless 14th-century basket case. This country had decent institutions before the Communist takeover. It hasn’t fallen into chaos, the way Iraq did, because it has a culture of communal discussion and a respect for village elders. The Afghans have embraced the democratic process with enthusiasm. I finish this trip still skeptical but also infected by the optimism of the truly impressive people who are working here. And one other thing: After the trauma in Iraq, it would have been easy for the U.S. to withdraw into exhaustion and realism. Instead, President Obama is doubling down on the very principles that some dismiss as neocon fantasy: the idea that this nation has the capacity to use military and civilian power to promote democracy, nurture civil society and rebuild failed states.

Turkey in Full AS a Turkish journalist who for years covered the United States, I’ve spent the last few days repeatedly answering the inevitable question from my fellow Turks: “Does Washington see Turkey as a moderate Islamic republic?” That description may sound like a compliment to American ears. But in Turkey, it is an outright insult. Even if the “moderate Islam” conspiracy theorists were off base, it is true that ever since Prime Minister Tayyip Erdogan came to power in 2003, Washington has viewed Turkey as a simplistic duality: pious masses led by the Justice and Development Party against the small secular elite and the military. As Americans banked on the government’s electoral majority, they lost touch with the rest of the population. No doubt President Obama was briefed, just as Secretary of State Hillary Clinton was before she came here last month, to never speak of “moderate Islam.” And he hasn’t so far. In fact, he has done the opposite. The new American president — whose dark skin and Muslim middle name of Hussein have made him a folk hero here — went out of his way on Monday to acknowledge Turkey’s plurality in all its colors, and telling Europe that in welcoming Turkey it would gain “by diversity of ethnicity, tradition and faith.” Mr. Obama’s visit to Ankara was a carefully calibrated series of messages and symbolic gestures that spoke to Turkey’s different segments. He met with the government leadership as well as opposition leaders from secular, nationalist and Kurdish parties. He pledged to support “Ataturk’s vision of Turkey as a modern and prosperous democracy," as he wrote in the guestbook at the mausoleum of the founder of secular Turkey. In our eternal identity crisis, we Turks have lately been thinking only in opposites — that you are either secular or religious, Kurd or Turk, European or Middle Eastern. It took a young foreign leader on his first visit here to remind us that we are all of those things, and much more. And Mr. Obama’s brief mention in Parliament that Turkey should undertake further democratic reforms seemed insufficient. Since 2007, Prime Minister Erdogan has become more authoritarian, lashing out at his critics, suing journalists and alienating liberal Turks who once supported him. Last Sunday, voters in municipal elections delivered a serious warning: the party’s overall support fell to 39 percent, from 47 percent two years ago. The elections revealed a divided map, four different Turkeys: the liberal coastline, the conservative inland, the ultra-nationalist middle and the Kurdish nationalist southeast. The Justice and Development Party will grow when it embraces all Turkey’s colors and shrink as it denies them. It is wonderful that the president reminded Europeans that Turkey’s place is in Europe. But let’s hope he also reminds Turks that getting there requires more tolerance and reform. This trip will undoubtedly improve America’s popularity in the Muslim world — with Mr. Obama’s scheduled visit to the Blue Mosque here on Tuesday likely resonating far beyond Turkey’s borders. But so far, it has been all about us — our own democracy struggling between Europe and Islam.

Tony Blair on How to Restart the Mideast Peace Process TIME: How much longer do you expect to keep shuttling to the Middle East? Blair: [Laughing] As long as it takes. People keep saying this to me as if I were going to bunk off at any point. I knew this would be extremely difficult. But I don't give up on these things. I also think the Israeli-Palestinian conflict is of fundamental importance to the whole struggle going on in the Islamic world. That isn't to say that its cause is the [Israeli-Palestinian] conflict, but its resolution would be a major part to solving it. If this thing could be put on a better and different path, it would change the whole dynamic within Islam. How so? It will empower the moderates. This is the issue far more than Iraq or Afghanistan - it's what allows the extremists to reach across into moderate opinion. Once again, peace talks seem to have stalled. Why? For last six months you've had a hiatus - paralysis in the Israeli government, problems on the Palestinian side, and a transition going on in America. All these things are now clearing. The next couple of months will determine if we can breathe new life back into this process. No doubt we need to. The question is: Can we? What's the answer? The hiatus is over. Now we have to return to basic principles and put this back together again. You've got a new U.S. Administration determined to take this forward, and you've got an Israeli government that at least is going to be empowered to make decisions [because of its majority in Knesset]. For all these reasons we're back in with a shout. But Palestinian President Mahmoud Abbas says that all these talks with Israel have yielded nothing. I think it's very simple. If the moderates on the Palestinian side show they can make progress by engagement [with Israel] they'll be strong. If they engage and can't make progress they'll be weak. It's an absolutely simple equation.

  • The Road to Peace After Gaza (KSG) The most balanced discussion between two distinguished ME scholars moderated by Nicholas Burns, retired Dep. Sec. of State and current KSG professor. If you’d like to understand the rat’s nest that is ME Peace with perspectives from both sides this is as good a starting point as there is.

Indonesians Hold Fast to Secular Politics Ismi Safeya is a student at an Islamic school who veils her hair for modesty, prays five times a day and is inspired by the idea of a society based on Muslim principles. But when the 18-year-old casts her vote for the first time in parliamentary elections Thursday, she won't vote for an Islamist party. "The wisest choice is a government not dependent on Islamic law," she said, acknowledging the religious diversity of Indonesia and arguing that rules must be fair for everyone. "Islam actually guides our lives, but it doesn't seem to be shown in the way we vote." Like Safeya, most voters here in the world's largest majority-Muslim country are expected to cast their ballots for secular parties. As political Islam gains strength globally, it has achieved little electoral success in Indonesia. Though polls show Indonesians becoming more religiously observant in their private lives, surveys also suggest this shift will not translate into significant support for Islamist politics in parliamentary elections Thursday or in presidential elections scheduled for July. "More and more young Muslims are interested in basic bread-and-butter issues," said Defense Minister Juwono Sudarsono in an interview in his office in Jakarta, the capital. "Parties that advocate for sharia, or Islamic law, do not get much play." One of the reasons is that Islamist parties have won local elections in the past. But instead of building strength for the parties' ideals, experiments with Islamic law have produced a backlash. Meanwhile, mainstream parties have co-opted some positions of their Islamist opponents. Religious positions have seeped into the national consensus, neutralizing them as campaign platforms for the Islamist parties. "The categories are blurred right now," said Andi Mallarangeng, a spokesman for President Susilo Bambang Yudhoyono, a member of the secular Democratic Party. "To win, you have to move to the center." The center, he said, fuses moderate Islamic ideals with programs to deliver such economic basics as jobs and food. "Islamic political parties exist and will always have a niche in this electorate," Mallarangeng said. "But they're not going to dominate."

UPDATES:

1)Iran denies Hizbullah operating in Egypt After an Egyptian official said Hizbullah would pay "a heavy price" for what Cairo alleges were attempts to carry out terror attacks inside the country, Iran dismissed the accusations as an "old trick" aimed at influencing the Lebanese parliamentary elections, and accused Israel of involvement.

2) INFORMATION WARFARE: Press Freedom In Iran Iran, like any other police state, has to be creative in finding ways to control troublesome foreign media. Iran has achieved a great deal of control over foreign news organizations by arresting and imprisoning female reporters. The most recent one arrested, Roxana Saberi had been working in the country for six years, reporting stories for NPR and BBC. These two news organizations have been more accommodating to the clerical dictatorship, than most. But there is so much wrong in Iran these days, that even NPR and the BBC will come up with stories that will offend some of the clerics, particularly the more radical ones. Since the radical faction control the secret police and many judges, it's not difficult to arrest and keep in prison, and even convict (usually for being a spy), foreign female journalists. For every foreign journalists you do this to, dozens are suitably terrified. Thus stories the clerics don't like will not be written, or will be toned down.

3)Iran willing to build new relationship with US Iran's president on Wednesday sent the clearest signal yet that the Islamic Republic wants warmer ties with the U.S., just one day after Washington spoke of new strategies to address the country's disputed nuclear program. Taken together, the developments indicate that the longtime adversaries are seeking ways to return to the negotiating table and ease a nearly 30-year-old diplomatic standoff.President Barack Obama's administration has sought to start a dialogue with Iran — a departure from the Bush administration's tough talk.Iran had mostly dismissed the overtures, continuing to take hard-line steps like putting an American journalist on trial on espionage allegations.But in his speech Wednesday, President Mahmoud Ahmadinejad changed his tone, saying that Iran was preparing new proposals aimed at breaking an impasse with the West over its nuclear program."The Iranian nation is a generous nation. It may forget the past and start a new era, but any country speaking on the basis of selfishness will get the same response the Iranian nation gave to Mr. Bush," Ahmadinejad told thousands in the southeastern city of Kerman.

April 08, 2009

G-20 Persepctives: How Well Do Bears Dance ? (Updated)

With the conclusion of a jam-packed foreign policy week+ from the G-20 to NATO to trips to Turkey, Iraq, etc. it might be time to gain a little perspective. Unfortunately that's very hard to do from the headlines and stories as they've drifted by, for many reasons. Let's start by setting reasonable expectations. The interesting thing about a dancing bear is not so much how graceful and skilled they are but that they're dancing at all. Something everybody forgets, along with the fact that there is no magic fairy dust where with a few words, the wave of a wand and shazam...everything's all of a sudden mended. As it happens, while the words reported were fairly accurate, they were moved far enough out of context and then interpreted by folks who appear to have totally lacked the historical, analytical and technical background to analyze, interpret and explain exactly what went on at these meetings. So we're going to take our best shot at it but there's no substitute for actually listening to some of the press conferences. If you have any interest whatsoever in foreign affairs and are willing to invest a little time there are two that are very...very worthwhile. The first is the joint press conference between Brown and Obama that kicked off the G-20 and the second is the townhall meeting in Strasbourg where the President spoke to the locals.

The press tried to magnify the differences of opinion and policy among the attendees by emphasizing the "vast" differences between them on many issues, e.g. stimulus. In fact we're here to tell you there were NO major differences and there were debates mostly on the margin. Now the press is biased by it's business model - if it bleeds they'll read and we'll get paid. Which unfortunately is not a reliable indicator of value and interest. Of the many major policies considered the level of substance, agreement and commitment was literally stunning. We are in fact laying the groundwork for an evolutionary re-architecting of the world system by including more key players and involved parties and working out collaborative agreements on how to proceed on all these major challenges that have been deferred or ignored for so long. The bear danced very well indeed.

Meetings of the Minds: the Other's Perspectives

Both WW1 and WW2 were triggered by, among several key factors, by a fundamental view that the world was/is a zero-sum affair where my wins are your loses. An alternative view that's supposed to prevail inside society is that by living in an agreed upon political, legal and civil framework we can agree to get along and work in fair exchange. This is a non-zero sum world and is the source of ALL the world's progress. In an international situation it's not often clear where different countries will choose to tradeoff their immediate narrow interests against the good of the whole system, even when their own long-term interests benefit from a stable, secure and predictable system. And since no one country has a monopoly of force any international framework must be agreed by the participants. After WW2 when Europe was collapsing in chaos (literally) and it looked like the Soviet Union was going to be able to cheaply conquer all of Western Europe the US committed to the Marshall Plan which saved Europe and laid the foundations for it's future stable evolution. One of the most interesting things the US administrators found early on was that the various European powers were pursuing the same self-aggrandizing policies that "beggared their neighbors" as they'd pursued at Versailles. And pretty much the same ways for the same reasons. There was a 3-5 years period there were Europe as we know it today was going extinct. (The Most Noble Adventure: The Marshall Plan and How America Helped Rebuild Europe). It was literally the US who forced collaboration and cooperation and set up the necessary institutional frameworks.

At the G-20 there were more players with more interests but nonetheless we're seeing massive global stimulus programs, concerted efforts at monetary easing and collaboration, rigorous new policies fore worldwide financial regulatory reform, some joint efforts on climate change, major new commitments and investments on trade and aid and on down a long list. Consider the number of powerful players this is probably the most effective and substantive major international meeting in several decades. Possibly rivaled only by Bretton Woods but this time more open, inclusive and forward-looking. This is not to say all was sweetness and light or that it will be but what you say was responsible stakeholders finding common ground based on enforceable and workable agreements that serve their individual and collective interests. Any time you want to get a group of power players together around a policy you need to recognize the 4P's of Negotiation: Issues/Policy, Players, Position, and Power. And understand that serious resources commitment come about if and only if an agreement provides workable satisfaction to all relative to their gains and costs. Try looking at the above graphic and ask yourself what each of the major players position and influence was on each of those issues. We saw more coming together this time than we've seen in at least three decades. BtW for a graphic depiction of the full range of major policy risks click the highlight to see a graphic summary from Davos.

Re-Stabilizing the World: the Emerging Plurality

Let's re-visit another old graphic we put together to try and look at what leads to a stable international order. The vertical axis represents different US strategic policy positions while the horizontal represents a collective summary of the other major stakeholders policies. (Foreign Policy for a Dangerous Old World: Adoption, Adaptation & Resilience) A key to getting widespread buyin is understanding, reflecting and incorporating the interests, positions and biases of all the players. In the readings section you'll find a representative sample of some decent information looking at the positions of China, Russia, Europe, Mexico and Brazil to serve as a representative sample. You'll also find some key other readings excerpts on just what the stakes were and are in terms of getting this right. The stakes literally couldn't be higher. We're really playing for all the marbles here.

But not all we're going to be playing for. As a final note and a point we've made before...the next thirty years will see the continued development of the rest of the world. Which will require a new global architecture to hold things together. As the incomes rise and resource demands increase the pressures on the world for resources, economic competition, etc. etc. will escalate exponentially until we reach a new steady state of stable population and no major new surges in income growth. That's in an ideal world. In the world we know from history, recent history, the international system fails to adopt and adapt, countries pursue pure aggrandizement and the result....KABOOM.

What we need then, and now, is a pluralistic system where stakeholders rights and responsiblities are in balance as are their contributions; the latter relative to their gains. That's what we saw the groundwork being laid for in London this last week. Judged by realistic expectations and historical standards it literally couldn't have gone better. Which doesn't mean the next several years will be easy. But looking at the preceeding graphic where would you rather be - the green line or the red one ? Judging from the talking heads and the pontificating pundits we were headed to red perdition or at least the yellow road to devolution. In fact our judgment is that we're started down the blue road  to plural stability, however shaky and fragile that path might be. Something else you'll find in the readings is a set of vidclips from Hans Rosling, Paul Collier, et.al. on the challenges and opportunities which we urge you to take a gander at. Hopefully they'll convince you of the magnitude and urgency of the situation while also persuading you that serious improvements are in fact happening RIGHT NOW and that it's to all our benefits.

UPDATES: We've just added a new reading on the growth of Indian and Chinese naval power in the Indian ocean and the need for evovling a new multi-party arrangement. Which exemplifies and amplifies many of our main points.

State of the World

Hans Rosling on the Real State of Progress

Other Key Commentators

200 Years That Changed the World For the first time, Gapminder can now visualize change in life expectancy and income per person over the last two centuries. In this Gapminder video, Hans Rosling shows you how all the countries of the world have developed since 1809 - 200 years ago.

 

Yes they can! says Hans Rosling about low and middle income countries that, with economic and health progress, are catching up with high income countries - countries we used to call the western world.

Paul Collier: 4 ways to improve the lives of the "bottom billion"(TED) ,  Collier Extended Talk for Gelbar Prize (Cspan)

 

Peter Singer on Development, Foreign Aid & Urgency (Rose)

 

Dambisa Moyo on Dependency & Dysfunction (Rose)

 

Jacqueline Novogratz on Patient Capitalism and Development (Rose), Jacqueline Novogratz(TED)

The new world order: How China sees the world IT IS an ill wind that blows no one any good. For many in China even the buffeting by the gale that has hit the global economy has a bracing message. The rise of China over the past three decades has been astonishing. But it has lacked the one feature it needed fully to satisfy the ultranationalist fringe: an accompanying decline of the West. Now capitalism is in a funk in its heartlands. Europe and Japan, embroiled in the deepest post-war recession, are barely worth consideration as rivals. America, the superpower, has passed its peak. Although in public China’s leaders eschew triumphalism, there is a sense in Beijing that the reassertion of the Middle Kingdom’s global ascendancy is at hand. Before panic spreads, it is worth noting that China’s new assertiveness reflects weakness as well as strength. This remains a poor country facing, in Mr Wen’s words, its most difficult year of the new century. The latest wild guess at how many jobs have already been lost—20m—hints at the scale of the problem.  Far from oozing self-confidence, China is witnessing a fierce debate both about its economic system and the sort of great power it wants to be—and it is a debate the government does not like. This year the regime curtailed even the perfunctory annual meeting of its parliament, the National People’s Congress (NPC), preferring to confine discussion to back-rooms and obscure internet forums. Liberals calling for greater openness are being dealt with in the time-honoured repressive fashion. But China’s leaders also face rumblings of discontent from leftist nationalists, who see the downturn as a chance to halt market-oriented reforms at home, and for China to assert itself more stridently abroad. An angry China can veer into xenophobia, but not all the nationalist left’s causes are so dangerous: one is for the better public services and social-safety net the country sorely needs.

Diplomatic Virtual Reality And while America may want to make the past vanish -- as a nation, we've never been all that keen on foreigners' histories -- alas, the past cannot be changed. The profound differences in psychology, philosophy and policy that have been the central source of friction between the American and Russian governments for the past decade remain very much in place. Sooner or later, the Obama administration will have to grapple with them. Anyone who doubts the truth of this need only look at remarks Lavrov himself made last weekend in Brussels, where he presented a vision of the world utterly unchanged by the events of Jan. 20. Speaking to past and present policymakers -- several of whom had helped dismember the Warsaw Pact and expand NATO in the 1990s -- he offered his own version of those developments, as well as of some more current. Among other things, he said, or implied, that the West lied to Russia; that NATO remains a threat to Russia; that the Organization for Security and Cooperation in Europe should replace NATO as the primary Western security organization; and that, by the way, Russia has plenty of potential clients for its gas in the Far East should its Western clients ever become problematic. As for Russia helping to prevent Iran from developing nuclear weapons -- an Obama administration suggestion -- Lavrov's only comment was that "there is no proof that Iran even has decided to make a nuclear bomb." The transcript of his remarks, and those of other Russians attending the same conference, do not capture their snide tone, or the scorn with which they dismissed suggestions that Russia's neighbors might have wanted to join NATO because they were afraid of Russia. To return to the metaphor: If that is how the Russian government sounds after pressing the reset button, I'm not sure that the technical complications that caused the screen to freeze have gone away.
  • Russia Recalibrates After Commodities Downturn
  • Simon Sebag Montefiore (Rose: Russia) Highly recommended introduction to current socio-political culture, attitudes and intents and the linkages to the past thru and with a novel written by a foreign/war correspondent.
  • Nixon, Khrushchev And A Story Of Cold War Love(NPR) Still, Beyrle says the exhibitions also showed the limits of personal connections. He believes they can't overcome profound misunderstandings between the two cultures. Today, most observers say the level of hostility and distrust toward America and Americans among ordinary Russians is much stronger than it was when Nixon debated Khrushchev 50 years ago.

The Mexican Evolution AMERICA’S distorted views can have costly consequences, especially for us in Latin America. Secretary of State Hillary Clinton’s trip to Mexico this week is a good time to examine the misconception that Mexico is, or is on the point of becoming, a “failed state.” This notion appears to be increasingly widespread. It most assuredly will not. First, let’s take a quick inventory of the problems that we don’t have. Mexico is a tolerant and secular state, without the religious tensions of Pakistan or Iraq. It is an inclusive society, without the racial hatreds of the Balkans. It has no serious prospects of regional secession or disputed territories, unlike the Middle East. Guerrilla movements have never been a real threat to the state, in stark contrast to Colombia. Most important, Mexico is a young democracy that eliminated an essentially one-party political system, controlled by the Institutional Revolutionary Party, that lasted more than 70 years. And with all its defects, the domination of the party, known as the P.R.I., never even approached the same level of virtually absolute dictatorship as that of Robert Mugabe in Zimbabwe, or even of Venezuela’s Hugo Chávez. Mexico has demonstrated an institutional continuity unique in Latin America. Our national institutions function. The army is (and long has been) subject to the civilian control of the president; the church continues to be a cohesive force; a powerful business class shows no desire to move to Miami. We have strong labor unions, good universities, important public enterprises and social programs that provide reasonable results. Thanks to all this, Mexico has demonstrated an impressive capacity to overcome crises, of which we’ve had our fair share. They include the government’s repression of the student movement of 1968; a currency devaluation in 1976; an economic crisis in 1982; the threefold disaster of 1994 with the Zapatista rebel uprising, the murder of the P.R.I. candidate for president and a devastating collapse of the peso; and the serious post-election conflicts of 2006. We have overcome these challenges and drawn meaningful lessons from them. We learned to diversify the economy and reduce the state’s financial monopolies, paving the way for the eventual Nafta agreements. Election controversies and the threat of political violence have led to a national acceptance of a peaceful and orderly transition to democracy. Now once again, we face enormous problems. The worldwide financial crisis is intensifying our ancient dramas of poverty and inequality. But the most acute problems are the increased power and viciousness of organized crime — drug trafficking, kidnappings and extortion — and an upsurge in ordinary street crime. This may be the most serious crisis we have faced since the 1910 Mexican Revolution and its immediate aftermath. Washington should support Mexico’s war against the drug lords — first and foremost by recognizing its complexity. The Obama administration should recognize the considerable American responsibility for Mexico’s problems. Then, in keeping with equality and symmetry, the United States must reduce its drug consumption and its weapons trade to Mexico. It will be no easy task, but the United States has at least one advantage: No one thinks of it as a failed state. Nor, for that matter, did anyone ever see Al Capone and the criminal gangs of Chicago as representative of the entire country. For Mexico as well, let’s leave caricatures where they belong, in the hands of cartoonists.

Brazil’s leader blames white people for crisis Brazil’s President Luiz Inácio Lula da Silva on Thursday blamed the global economic crisis on “white people with blue eyes” and said it was wrong that black and indigenous people should pay for white people’s mistakes.Speaking in Brasília at a joint press conference with Gordon Brown, the UK prime minister, Mr Lula da Silva told reporters: “This crisis was caused by the irrational behaviour of white people with blue eyes, who before the crisis appeared to know everything and now demonstrate that they know nothing.” He added: “I do not know any black or indigenous bankers so I can only say [it is wrong] that this part of mankind which is victimised more than any other should pay for the crisis.” Mr Brown appeared to distance himself from Mr Lula da Silva’s remarks. “I’m not going to attribute blame to any individuals,” he said. Mr Brown was visiting Brazil as part of a five-day tour of Europe, the US and South America in preparation for the G20 summit to take place in London next Thursday. He made a joint appeal with Mr Lula da Silva for the world’s biggest economies to provide $100bn to boost global trade. “I’m going to ask the G20 summit next week to support a global expansion of trade finance to reverse a slide in world trade,” Mr Brown said. Mr Lula da Silva also spoke out strongly against raising trade barriers in response to the global crisis. “I compare protectionism to a drug,” he said. “Why do people use drugs? Because they are in crisis and they think the drug will help them. But its effects pass quickly.” The two leaders’ remarks demonstrate the desire each will have to secure the other’s support during the G20 meeting. Brazil – which has long campaigned unsuccessfully to be given a permanent seat on the United Nations Security Council – will argue for a bigger voice for Brazil and other emerging nations in multilateral organisations such as the International Monetary Fund and the Financial Stability Forum, a group of central banks and national supervisory authorities established in 1999. Brazil is one of many nations calling for increased regulation of global financial markets and greater powers for multilateral regulators. It will also call for a resumption and conclusion of the Doha round of talks at the World Trade Organisation. In return for supporting such initiatives, Mr Brown will expect Brazil to endorse calls for fiscal stimulus in a bid to mitigate the impact of the global crisis, such as the proposed $100bn in trade finance

In Europe, Rage Over Crisis Hits Executives Vandals attacked the Edinburgh home of Sir Fred Goodwin, former chief executive of the now state-controlled Royal Bank of Scotland Group PLC, in a sign that public outrage over the financial crisis could be taking a dangerous turn. The vandals broke windows at the front of Sir Fred's villa early Wednesday morning, and wrecked a side and back window of his black Mercedes, which was parked in the driveway, according to Edinburgh police. A group claiming responsibility sent emails to at least one newspaper, the Edinburgh Evening News. "We are angry that rich people, like him, are paying themselves a huge amount of money, and living in luxury, while ordinary people are made unemployed, destitute and homeless," the email, reviewed by The Wall Street Journal, read. "This is a crime. Bank bosses should be jailed. This is just the beginning." The attack reflects a virulent strain of social unrest that is appearing across Europe. Workers at a factory operated by the U.S. industrial conglomerate 3M Co. held their boss, Luc Rousselet, captive for more than 24 hours to protest planned layoffs. He was released on Thursday after a deal was reached, according to Reuters. Mr. Rousselet left his office early on Thursday morning to boos from about 20 workers. Sir Fred has faced sharp criticism for refusing to give up a pension package that pays him £693,000 ($1 million) a year, after overseeing a period of rapid expansion at RBS that culminated in the bank's near collapse last year and the largest annual loss in U.K. corporate history. The bank has since been all but nationalized as part of a broader bailout to which the U.K. government has committed hundreds of billions of pounds in taxpayer money.

The Death of De Gaulle The mother of all Gallic temper tantrums is over -- and a mere 43 years to the month after Charles de Gaulle booted the American GIs who liberated France, and the NATO alliance that kept it free, out of the country. Next week, President Nicolas Sarkozy formally brings France back into the alliance's integrated military command and co-hosts the North Atlantic Treaty Organization's 60th anniversary summit. In so doing Mr. Sarkozy will start to bury de Gaulle's spirit and the legacy of "French exceptionalism." In practice, the reversal of de Gaulle's March 7, 1966 order merely puts French officers back inside NATO military headquarters. But as one of the few European countries with a military able to project force, France has taken an active part in NATO missions in Afghanistan and the Balkans. The symbolic import of Mr. Sarkozy's decision is lost on neither the French left nor some in his own Gaullist camp, who loudly opposed it. From the moment de Gaulle gave allied troops and NATO headquarters few weeks' notice, forcing the quick relocation to an abandoned hospital in Brussels, France's raison d'être has been to trip up American power while standing under its security umbrella. Jacques Chirac, born before the war, practiced what the General preached, most memorably in 2003 in the trans-Atlantic spat over Iraq.

Will China and America Save Us? The first G20 meeting, last fall, appropriately took place in Washington. But holding this second conclave in Beijing would have signalled a clear recognition that the Washington-Beijing axis is the most important relationship in the world today; it is the X factor in the quest to rescue the global economy. If the two powerhouses work together, the world may yet emerge prosperous and stable. If they work at cross purposes, the world's future will be as grim as the gloomiest doomsayers forecast. Can they do it? Some look at the relationship and see only complications, worrying that if China sells off or stops buying U.S. bonds, the American economy could sink even deeper, leaving us like England at the end of War World II, a broke and broken hegemon, dependent on an upstart power. The parallel overlooks one critical difference: Today, China needs the United States as much as the United States needs China. This isn't codependence; it's interdependence, especially since the rest of the world needs both of them equally. For Beijing and Washington to pull the world out of this Great Recession, they must overcome both mutual suspicion and self-perceptions that are quickly losing validity. China is no longer as poor as it claims; the United States is no longer as rich as it acts. This transition will be tough for both. China is a bit like a newly muscular adolescent; it is gaining power but doesn't yet know how to wield it or to what purpose. As for Washington, it must learn to use muscles it hasn't stretched for many years, muscles that are adept at collaboration rather than dictation, that are flexible rather than simply big.

A World in Need of a New Order Future historians might look at the collapse of the Soviet Union as the end of the 20th century, and at the current financial crisis as the beginning of the 21st. Remarkably, these two macro events have a common root, which is also the root of globalization: the revolution of Information Technologies. In the 1970s, the IT revolution accelerated the arms race; the Soviet Union proved unable to follow the United States. Ultimately, the Marxist-Leninist system and ideology vanished. The financial and more generally the managerial revolution occurred in the 1980s. The world economy embarked on a strong and stable upswing. In the 1990s, many could believe that democracy and market economy had won an irreversible victory and would quickly spread everywhere. The “international community,” led by the United States, seemed to be on the way to universal peace and prosperity. It was a dream. History came back under the presidency of George W. Bush, starting with 9/11 and ending with the burst of an unprecedented asset bubble. The institutional framework of world governance erected since World War II proved a failure. What the international community can and must demonstrate now is a willingness to undertake a full reconstruction The G-20 summit would be a great success if it could achieve just that, in addition to agreeing on credible immediate economic and financial measures. Any attempt to rebuild governance must recognize that the new international system must be multipolar, heterogeneous and global. Multipolarity means that although the United States will remain the only superpower for the foreseeable future, it can no longer pretend to lead the world alone. This is why we need a relevant group of permanent members for the U.N. Security Council, which would potentially include at least the following five natural “poles” — the United States, Japan, China, Russia and European Union. The members of this group should recognize they collectively share responsibilities for a politically sustainable globalization process, including such issues as climate change.

In the Indian Ocean: Beyond Pirates, an India-China Rivalry  ... a drama with more far-reaching geopolitical consequences may be brewing in the Indian Ocean, involving two of the nations that have sent warships to fight the Somali buccaneers: longtime rivals India and China. New Delhi has had at least one ship in the Gulf of Aden since October, and late last year, with great fanfare, China deployed two warships to the same area. The ships have been active in interdicting pirates and coming to the aid of commercial ships in apparent distress - though they are not part of the U.S.-led Combined Task Force 151 (usually comprised of 14 to 15 vessels from several nations), which coordinates its activity with the dominant naval force in the Ocean, the U.S. 5th Fleet based in Bahrain. But the presence of the Chinese and Indian warships underlines Beijing's and New Delhi's intense economic and strategic interests in the world's third largest ocean.The potential for confrontation is fueled by China's historical nostalgia. In the 15th century, the Chinese sent seven massive naval and commercial expeditions into the Indian Ocean to extend the prestige and power of the relatively new Ming dynasty. There had not been anything quite like it in history, and the Chinese were recognized as the masters of the ocean. But a change in emperors and national policy curtailed the expensive naval forays after 1433 and China turned inward. As if to declare that centuries-old era over, Beijing staged elaborate celebrations in 2005 to mark the half-millenium anniversary of the first expedition. The Ming voyages are now an inextricable part of Chinese nationalist lore - and its populist claim on the Indian Ocean. Overheated daydreams about history can be dangerous. Nevertheless, at least one analyst believes that, while there is potential for conflict, there is also the possibility of a new order for the Indian Ocean - with a central role for the U.S. In the March/April edition of Foreign Affairs, Robert Kaplan envisions the United States managing the rival ambitions of India and China into a workable security continuum, even as Washington's ability to project naval power recedes.

Prioritizing World Growth at the G-20 Tomorrow, for the second time in only five months, the leaders of the world's top 20 economies will meet to seek a joint response to the unprecedented global economic crisis. Since this crisis began, I have argued that when we are faced by a challenge of this magnitude, cooperation is a necessity, not an option. In September, I called upon the world to rally together with a response based on coordination and cooperation. Brought forward in concert by the European nations, that initiative led to November's Group of 20 meeting in Washington, where we laid the foundations for far-reaching reform of the international financial system. Tomorrow's summit must enable us to put into practice the principles we established. The world expects that we will speed up the reform of the international financial system and rebuild, together, a better-regulated form of capitalism with a greater sense of morality and solidarity. This is a precondition for mobilizing the global economy and achieving sustainable growth. This crisis is not a crisis of capitalism but the breakdown of a system that drifted away from capitalism's most fundamental values. In November, we agreed on four principles that would guide our response: enhanced coordination and cooperation; the rejection of protectionist measures; the strengthening of regulatory systems in financial markets; and a new global governance. On the first two points, we have made a good deal of progress. We have managed to hold off the specter of protectionism, and many nations have injected massive support for their economies, undertaking ambitious stimulus programs. Countries that offer their citizens a high level of social protection, such as France, have also significantly increased their levels of crisis-related welfare spending. Overall, the world's leading economies have made comparably gigantic efforts to combat the crisis. This week we must attach the same sense of urgency to the regulation of financial markets. World growth will be all the stronger for being sustained by a stable, efficient financial system and by the kind of renewed confidence in the markets that would enable resources to be better allocated, encourage lending to pick up again and foster the return of private investment capital to developing countries. I remain convinced that the world can emerge from these troubled times stronger, more united and with a greater sense of solidarity, provided we have the will to do so. We cannot achieve radical change overnight, and much remains to be done. We may need future meetings to implement the reforms undertaken in London. I am certain of two additional things: We must achieve practical results beginning with tomorrow's summit. And failure is not an option.