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7/31/2019 IPD Volume I Issue XIII
1/22
by N athan W il li am M eyer
by Richard Falk
by Kour osh Z iabari and I qbal A hmed
by Binoy Kampmark
Volume I Issue XIII
7/31/2019 IPD Volume I Issue XIII
2/22
Copyright 2012 by In ternational Policy D igest.
The content f ound wi thin is a reproduction o f articles writt en for th e International Policy D igest website.
The views and opinions contri buted to I PD and in this publication are the authors alone. International Policy D igest, or simply the D igest or IPD, suppor ts legitimate use of and reproduction o f
material found on its pages in a manner that is professional and fo r non commercial purpo ses.
Ar ticles and material found o n IPD , not originally writ ten by one of our many contr ibutors or editor ial staff have been made available to us either through a Creative Common s license or through
the express wishes of managing editors or staff.
N o part of this D igest may be reproduced, scanned, or distributed, in any printed or electronic f orm witho ut the author's permission.
7/31/2019 IPD Volume I Issue XIII
3/22
by N aili N abil
by M arshall Au erback
by Joshua Wallace and Richard H artley
by Ramzy Baroud
by D r. Sudhanshu Tripathi
by George Grevett
by Professor Johan Galtung
by Richard Falk
7
by Binoy Kampmark
16
by Kour osh Z iabari and I qbal A hmed
12
by N athan W illiam M eyer
3
7/31/2019 IPD Volume I Issue XIII
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7/31/2019 IPD Volume I Issue XIII
5/22
Twenty-four trillion dollars. It is a number that beggars theimagination, almost 40% of the global economy, and it is buried in
one of the worlds poorest and most violent countries: The
Democratic Republic of Congo. Failed state, rape capital of the
world, humanitarian catastropheCongo personifies all these but
beneath the surface its dark earth holds $24 trillion of copper, cobalt,
coltan, the bones and blood of information age manufacturing. For
this reason, if for no other, the world cannot ignore Congo. It cant
afford to.
Called Congos deal of the century, in 2007 China recognized
the beleaguered nations importance to the global economy with an
unprecedented $9 billion resources-for-infrastructure agreement
which holds the potential to unlock Congos vast mineral wealth and
improve the material lives of its seventy-one million people with new
roads, rails, hospitals, and universities.
Now, five years later, Congos eastern frontier remains a lawless
battleground with conflict minerals undermining regional stability
and the $9 billion question remains: Will Chinese investment be the
cornerstone for Congos development or a grave marker for dead
dreams in the g reen hills of Africa?
With incredible resource wealth and the land mass of Western
Europe, Congo is a country whose staggering economic potential is
matched only by its poverty and corrupt mismanagement. Congo
ranks last on the UNs Human Development Index and
Transparency Internationals 2011 Corruption Perception Index
ranks Congo at 168, tied with Libya which was at the time engulfed
by civil war.
In human terms the development reports shuffled around
New York and Geneva read like damning tarot cards to the
Congolese people. Life expectancy is less than 48 years. One of five
children will die before age five. Sixty percent of the countrys 71
million people live on less than $1.25 per day. More than 400,000
women a year are victims of sexual violence, a fact prompting UN
special Representative Margot Wallstrom to call Congo the rape
capital of the world.
On the grounds of these statistics it is difficult to see why
China would invest $9 billion in this country-cum-humanitarian
3
By Nathan William Meyer
7/31/2019 IPD Volume I Issue XIII
6/22
crisis, but looking beneath the surface Chinas interests immediately
become clear: immense deposits of copper, cobalt, tin and coltan
the life blood of Chinese manufacturing.
It is a profound irony that Congo, rated by the IMF as the
worlds poorest country, is widely regarded as the worlds richest in
natural resources with wealth estimated at $24 trillion. Much of this
wealth is buried in mineral deposits whose size is a catalog of the
hyperbolic: Congo is the 5th leading producer of tungsten and 6th
of tin, holds 5% of the worlds copper and 50% of cobalt. MoreoverCongo possesses an estimated 80% of all known coltan which,
refined as tantalum, is a vital component of computers, personal
electronics, and the worlds 5.6 billion mobile phones. This cached
wealth, vital to the worlds present and future economy, is why
Congo cannot be overlooked and why China has taken particular
notice.
China views Africa as a major commodities source and Congos
$9 billion deal of the century is a natural extension of their
ongoing resources-for-infrastructure policy.
In 2004 China approved a $2 billion public investment package
for Angola and two years later struck a $3 billion deal with Gabon
who would receive dams, railroads, and ports in return for Chinese
access to iron ore reserves. This was followed in 2009 with similar
deals in Guinea and Zimbabwe amounting to $7 and $8 billion
respectively whereby resource wealth would underwrite Chinese
infrastructure investments. Under Beijings strategy of mutual benefit
China stokes its economic fire with African resources while resource-
rich but credit-poor countries further develop their economies with
Chinese infrastructure projects.
With Congos vast mineral deposits and critical development
needs a Chinese resources-for-infrastructure deal would seem an
inevitable and mutually beneficial arrangement.
Chinas initial $9 billion investment was later revised under IMF
objections to $6 billion with half going to mine development and
half to infrastructure projects and represents an investment
significant enough to radically transform Congos economy.
Many aspects of the deal are not public, but according to NGO
Global Witness China would be granted 10 million tons of copper
and 600,000 tons of cobalt. In exchange China would build 2,400
miles of roads and 2,000 of rail, 145 health clinics, 32 hospitals, two
universities, and two hydroelectric dams. Other infrastructure
projects include widespread transportation renovation and an
electricity distribution network. The other $3 billion of Chinese
investment would go to develop Congos copper and cobalt mines
which are expected to turn a profit in 2013, repaying Chinese invest-
ment in five years.
Despite the high cost China believes their mutual benefit in-
vestment will prove worthwhile as mines are expected to produce
$40 billion to $120 billion in revenues.
With significant Chinese investment at stake and profitability on
the horizon, Congos fragile government hopes that its buried wealth
will set the groundwork for successful economic development and
has begun courting other countries, notably South Korea, for
significant investment deals. However, the arc of history has seldom
bent in Congos favor and unresolved crises of the recent past
threaten both Chinas ambitions and Congos future.
In 1994 the world watched Africa in horror as some 800,000
people were killed without regard for sex or age over the course of
some hundred days it was the Rwandan Genocide and commanded
global guilt if not global action. In March, 1998, President Bill
Clinton stood on the tarmac of Rwandas Kigali airport and
expressed to on looking crowds his failure to stop the genocide was
the biggest regret of his presidency. Only six months later residualHutu-Tutsi hostilities ignited the Second Congo War which lasted
five years, directly involved eight African nations and twenty-five
armed groups, claimed 5.4 million lives, and garnered little global
attention.
While the deadliest conflict since WW2 may have been initiated
by deep ethnic and political tensions, the violence and bloody
aftermath which perpetuates today was driven in large part by
something deeper still: Congos mineral wealth.
Many of Africas resource-rich countries emerge from years of
civil war with residual conflict zones, but in this case Congo is in a
tragic class of its own. The enduring legacy of the Second Congo
War is the continuing conflict in Congos eastern provinces which
abut Rwanda and threaten to derail Chinas plans. Known as the Kivu
Conflict, in 2004 this armed struggle between government forces and
rebel militias picked up the Second Congo Wars bloody baton and
continues today due to innumerable artisanal mines funding a
perpetual conflict whose brutality includes mass rape, mutilation, and
cannibalism.
The UN believes over 50% of the regions 200 mines are
controlled by armed forces which employ illegal taxation, extortion,
forced labor, and violence to ensure the flow of mineral wealth.
According to one CNN report eastern Congos armed groups
generate some $180 million through the illicit trade of tin, coltan,
tungsten, and gold which are easily traded across the porous eastern
frontier and funneled into the international market.
It is this border pitted with mines and studded with militias
that undermines Chinese investments and jeopardizes Congos hopes
of development.
Congos eastern border is an established smuggling corridor
and its neighbors benefit from the re-export of conflict minerals.
According to a recent UN report Rwanda has covertly supported the
M23 rebel militia whose leader, General Ntaganda, has amassed a
huge fortune smuggling Congos coltan and tin to sell internationally
as Rwandan minerals.
This volatile mixture of extraordinary mineral wealth, ethnic
tension, and proxy armies can drag the region into another brutal
war. Since fighting began last April some 200,000 people have been
forced from their homes further destabilizing the region and sending
refugees into Rwanda and Uganda. Local government spokesman
Erneste Kyaviro described the latest conflict as an invasion and
M23s insurgency as a proxy army executing Rwandan military
offensives. This allegation was backed by Congos minister of
communications Lambert Mende stating we have evidence now that
Rwandese soldiers and officers are directly implicated in combat
4
7/31/2019 IPD Volume I Issue XIII
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operations in DRC. And there appears to be evidence to these
allegations.
The militias are well supplied and increasing in numbers.
According to a UN report, rebel deserters claim they are Rwandans
pressed by their own army into militia service across the border in
Congo. With tensions high and 1994s genocide still casting its
shadow over the region another devastating war remains a looming
and distinct possibility.
Congos estimated $24 trillion of raw mineral ores representamazing potential to transform one of the worlds least developed
nations and supply the global economys increasing demand for the
building blocks of modern manufacturing.
Chinas resources-for-infrastructure policy holds real potential to
turn Congos mineral wealth into tangible benefits for the Congolese
people. Their contribution to the countrys transportation
infrastructure alone will open new market potential for stymied
economic sectors like agriculture and provide the transfer of goods
and services vital for long term economic growth.
However, Congos eastern frontier remains a lawless battleground
for proxy wars fueled by the ground they fight on, claiming 540,000
lives per year and internally displacing some 1.7 million people. With
Rwandas support for rebel militias an open secret the possibility of a
Third Congo War is more likely than ever and could leave Congo
deep in Chinas debt for all current infrastructure investments.
While ongoing national and international efforts attempt to
restore peace to Congos eastern border little progress has been
achieved. Cross border tensions increase daily and only time will tell
if Chinas gambit marks a new day for Congo or just another false
dawn.
shattered, divided, destitute, and at the complete mercy of the
Wests corporate-financier interests.
Asia Times correspondent, Pepe Escobar, writes Certain
countries are behaving like arsonists, especially Turkey, in continuing
to offer a logistical base for mercenaries from liberated Libya. Saudi
Arabia providing the money to buy them weapons. As for
Washington, London and Paris, they will continue to calibrate their
tactics in the protracted anticipation of a NATO attack against
Damascus.Saudi Arabia, Qatar and other reactionary Gulf states are
actively taking part in the covert operations and efforts to force
regime change in Syria are serving American geopolitical objectives
with the goal to neutralize American global competitors, namely,
Russia and China.
Aligning itself with the United States, the Arab League has
announced plans to open talks with the Syrian opposition and cut all
diplomatic ties with the Syrian government, without offering
condemnation of the Bahraini, Saudi and Sudanese protest
crackdowns.
Turkey is an active participant in the Syrian civil war. Not only
did Turkey introduce a de facto buffer zone, 4 miles along the
Syrian-Turkish border now enforced by F-16s taking off from
NATOs Incirlik base, it also dispatched tanks, missile batteries and
heavy artillery to the 500 mile border, following Erdogans
declaration that Syria is a hostile state.
5
The West is Playing with Fire in Syria
By Naili Nabil
Lets be clear: Washington is pursuing regime change by civil war
in Syria. The United States, Europe, and the Gulf states want regime
change, so they are starving the regime in Damascus and feeding the
opposition.
- Joshua Landis, director of the Center for Middle East Studies.
While the UN remains paralyzed on whether to extend its ob-server mission, or impose sanctions, Syria is drifting quickly towards
what the International Committee of the Red Cross calls a state of
civil war, a declaration, with cataclysmic consequences, and which
might radically change the rules of the game.
Finian Cunningham, Global Researchs Middle East and East
Africa Correspondent, notes to the extent to which the Syrian
uprising has been exploited, the irony is that leading NATO
members, the United States, Britain and France, as well as their
Turkish and Arab allies, are the very parties that have deliberately
created the precipice for all-out war in the Middle East.
Its no longer a secret that Saudi Arabia, Qatar and Turkey have
been steadily, and from the early stages of the Syrian crisis, increasing
the violence inside Syria, turning a blind eye to the dire, grim and
ominous consequences which might leave Syria, like Libya, a mess,
While Syria is sinking deeper and deeper into anuncertain future, drifting more and more into a bloody
civil war, the 16 month-old uprising against the Syrianregime seems to be reaching a tipping point
No one could doubt that the Syrian regime is corrupt, bloody
and brutal, and vital reforms are necessary. But reforms,
unfortunately, are no longer on the agenda of the rebels.
The Syrian civil war has already moved beyond the control of
the Assad regime and the opposition. From the moment the Syrian
uprising was hijacked, the whole Syrian affair has become part of a
different foreign agenda having nothing to with a better future for
the Syrian people. What is at stake is creating the necessary
mayhem, to manufacture and engineer an international crisis, which
will serve as a final push to get rid of the Syrian regime.
Until now, the objective seemed more and more to be confined
only to deposing the Syrian regime, but no one, save the victims
themselves, dares to evoke the possibility of an ominous civil war
which may quickly follow, as armed groups contest the succession,
and outside countries, with their different interests, rally to different
sides.
While Syria is sinking deeper and deeper into an uncertain future,
drifting more and more into a bloody civil war, the 16 month-old
uprising against the Syrian regime seems to be reaching a tipping
point. Kofi Anans peace plan was doomed and sabotaged from the
beginning. Arab countries and the international community must
assume their responsibilities. The crisis should not be allowed to
precipitate into a regional catastrophe.
7/31/2019 IPD Volume I Issue XIII
8/22
Once the civil war reaches a tipping point it will escalate, and it
will be hard to contain within Syria. The Iraqi scenario, for those
who practice amnesia, is still a source for lessons learned. Turning a
blind eye, to a volatile and explosive situation, is nothing but playing
foolishly with fire on a powder keg.
Discarding any Arab, or at least a regional plan will make it
easier for the war-mongers to impose a NATO military intervention
to oust the Syrian despot and replace him with another puppet
regime. Focusing only on the Anans initiative without taking theadequate measures to make the conditions ripe, as far as security, a
cease-fire and dialogue are concerned, is by no means sufficient.
Former national security advisor, Zbigniew Brzezinski, cautioned
against acting simply on the basis of emotion, making it clear that
Were dealing here with a region in which all of these issues are
interconnected.
Brzezinski warned about producing a region-wide outbreak in
which the issues within Syria will become linked with a conflict
between the Saudis and the Shiites, Iraq will become destabilized,
Iran will be involved.
Secretary of State Hillary Clinton, though operating and doing
absolutely the opposite, is right when she declared, the sooner there
can be an end to the violence and a beginning of a political transition
6
process, not only will fewer people die, but theres a chance to save
the Syrian state from a catastrophic assault that would be very
dangerous not only to Syria but to the region.
Those who are sending hordes of excited radicals, recruited,
funded, trained and unleashed whenever proxy wars are waged, will
soon be convinced that their dangerous game is a double-edged
sword.
The monster, they have created, has already mutated and will
soon be untamed. Who dares betting on chaos?
7/31/2019 IPD Volume I Issue XIII
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There has been serious confusion associated with the wide-spread embrace of soft power as a preferred form of diplomacy for
the 21st century. Joseph Nye introduced and popularized the
concept, and later it was adopted and applied in a myriad of settings
that are often contradictory from the perspective of international law
and morality.
I write in the belief that soft power as a force multiplier for
imperial geopolitics is to be viewed with the greatest suspicion, but as
an alternative to militarism and violence is to be valued and adopted
as a potential political project that could turn out to be the first
feasible utopia of the 21st century.
Significantly, Nye first introduced the concept of soft power in
Bound to Lead, published in 1990, reaffirming confidence in the
United States as the self-anointed leader of the world for the
foreseeable future based on its military and economic prowess, as
well as due to its claimed status as an exemplary democracy and the
global outreach of its popular culture from jeans to Michael Jackson.
Nye has been a consistent advocate of what Michael Ignatieff
christened as empire lite a decade or so ago, and Nyes invocation
of soft power is essentially calling our attention to a cluster of
instruments useful in projecting American influence throughout the
world, and in his view under utilized, although less so, perhaps, since
the advent of drones.
It should be appreciated that Nyes influential career as a pro-
minent Harvard specialist in international relations was climaxed in
the 1990s by serving the government in Washington both as Chair of
the National Intelligence Council, making policy recommendations
on foreign policy issues to the American president, and as Assistant
Secretary of Defense for International Security Affairs during the
Clinton presidency.
He is an unabashed charter member of and valuable apologist
for the American foreign policy establishment in its current
embodiment, although the policies of the Bush presidency often
displeased him.
The idea of soft power was unveiled for the benefit of the
American establishment in Nyes 1996 Foreign Affairs article,
Americas Information Edge, appropriately written in collaboration
with Admiral William Owens, a leading navy planner who rose to be
Vice Chairman of the Joint Chiefs of Staff. The main argument of
the article was the need to realize the revolutionary relevance of
mastering the technologies of information if the American global
7
By Richard Falk
7/31/2019 IPD Volume I Issue XIII
10/22
domination project was to be successful in the years ahead. This
emphasis on the role of information and networking was also certain
to lead to a revolution in military technology. Soft power was not, as
the words seem to suggest, a turn away from imperial geopolitics in
the aftermath of the Cold War, but rather the opposite. It was more
in the spirit of a geopolitical cookbook on how to remain in control
globally despite a rapidly changing political and technological
environment.
The recommended soft power breakthrough can be summarizedas the recognition of the role to be played by non-military forms of
global influence and capabilities in reinforcing and complementing
the mandate of hard power.
states is an imperial undertaking at its core, and completely disregards
the post-colonial ethos of self-determination widely affirmed as the
inalienable right of all peoples. This right of self-determination is
given pride of place in common Article 1 of the two major
international human rights covenants.
The Nye/Owens assumption that democracy means made in
the USA is an ideological claim that seems increasingly questionable
given the reality of political life in America. This is the case even if
the country somehow miraculously heeds the Nye/Owens call torestore national health to its democracy. Is it open to doubt as to
whether an elective plutocracy, which America has surely become,
can qualify as the sort of democracy that merits being exported
abroad. And since the 9/11 attacks the corporatizing of democratic
space has been complemented by a series of governmental
encroachments on traditional liberties in the name of homeland
security.
While it might have seemed unproblematic in 1996 for Nye/
Owens to write about planting the seeds of American democracy
throughout the world, by 2012 such a project has become nothingless than diabolical. The best the world can hope for at this point is
not a somewhat less aggressive version of soft power geopolitics but
an American turn toward passivity, what used to be called
isolationism, and was perhaps briefly abortively reborn by the
Obama posture during the 2011 Libyan intervention of leading from
behind, as if that is leading at all.
Of course, such a realistic retreat begets the fury of the Repub-
licans who seem to have not lost any of their appetite for the red
meat of military adventures despite a string of defeats and their
constant wailing about the fiscal deficit. When it comes to militarism
their firepower is directed at the alleged defeatism and softness of
American foreign policy in the hands of a Democratic president.
8
The idea of using power of any kind to democratize othersovereign states is an imperial undertaking at its core, and
completely disregards the post-colonial ethos of self-determination widely affirmed as the inalienable right of
all peoples
The final section of the Nye/Owens article is aptly title The
Coming American Century, insisting that the famous claim made a
generation earlier by Time publisher, Henry Luce, that the 20th
century was the American century, would turn out to be a gross
understatement when it came to describing the 21st century. Their
expectation is that America will be more dominant internationally in
the emerging future, thanks mainly to this superiority in information
technology, anticipating that if their views are adopted by robust
military applications of soft power it will have a huge foreign policy
payoff for the country: The beauty of information as a power
resource is that, while it can enhance the effectiveness of raw military
power, it ineluctably democratizes societies. This unabashed avowal
of imperial goals is actually the main thesis of the article, perhaps
most graphically expressed in the following wordsThe United
States can increase the effectiveness of its military forces and make
the world safe for soft power, Americas inherent comparative
advantage.
As the glove fits the hand, soft power complements hard power
within the wider enterprise of transforming the world in Americas
image, as well as embodying the ideal version of Americas sense of
self.
Nye/Owens acknowledge a major caveat rather parenthetically
by admitting that their strategy will not work if America continues
much longer to be perceived unfavorably abroad as a national abode
of drugs, crime, violence, fiscal irresponsibility, family breakdown,
political gridlock. They make a rather empty and apolitical plea to
restore a healthy democracy at home as a prelude to the heavy
lifting of democratizing the world, but they do not pretend medical
knowledge of how national health might be restored, offering no
prescriptions. And now sixteen years after their article appeared, it
would seem that the Burmese adage applies: disease unknown, cure
unknown.
There is much that I would object to about this l ine of advocacy
that waves the banner of soft power so triumphantly. First of all, the
idea of using power of any kind to democratize other sovereign
If we decide to respect the politics of self-determinationthen we need to be prepared to accept the prospect of some
tragic struggles for control of national space
There is a second sense of soft power that I advocate, which is
in its most maximal form, represents the extension of Gandhian
principles to the practice of diplomacy. A weaker form of Gandhian
geopolitics may seem more consistent with the world as it is,
restricting the role of hard power to self-defense as strictly limited in
the UN Charter and to UN humanitarian interventions in
exceptional circumstances of genocidal behavior or the repeated
commission of crimes against humanity. In such instances uses of
hard power would remain under the operational control of the UN
Security Council, and enacted by a UN Peace Force especially trained
in conflict resolution to minimize recourse to violence.
If we decide to respect the politics of self-determination (as
the preferred alternative to military intervention) then we need to be
prepared to accept the prospect of some tragic struggles for control
of national space. Geopolitical passivity, as validated by international
law, needs to be recognized as an essential political virtue in this
century. Such an imperative also mandates reliance on the greater
wisdom of collective procedures subject to constitutional constraints
7/31/2019 IPD Volume I Issue XIII
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as a necessary adjustment to the realities of a globalizing world, and
offers an alternative to unilateralist and oligarchic claims (coalitions
of the willing) to act in defiance of law and world public opinion.
Such an empowerment of the global community may go awry
on some occasions but it seems a far preferable risk than continuing
to entrust world peace and security to the untender mercies of global
and regional hegemonic sovereign states even should their domestic
democratic credentials are in good order, which happens not to be
the case.There is no doubt that I would like to live in a borderless soft
power world that was consistently attentive to human suffering,
protective of the global commons, and subject to the discipline of
global constitutional democracy. As global conditions now confirm,
such a benign fantasy lacks political traction at present, and is thus an
irresponsible worldview from the perspective of humane problem
solving.
The most we can currently hope for is a more moderate regime
of global governance presided over by sovereign states that exhibits a
greater sense of responsibility toward the wellbeing of the peoplesof the world, identifies and works to correct dysfunction and
corruption, and is thus less swayed by the reigning plutocracy that
now sets global policy. Such moderate global governance, while far
from the desired Gandhian model would at least become more
respectful of international law and responsive to transnational
movements dedicated to human rights and the preservation of the
global commons.
Nyes soft power geopolitics provides a roadmap for those com-
fortable with currents hierarchies of dominance and privilege, while
even the minimal version of a nonviolent and non-imperial
alternative could help humanity greatly in the deepening struggle to
find a world order path that leads to peace, justice, and development.
appears that Berlin has now moved into a position where they cannot
or will not prevent that disasterous scenario, either for economic or
legal reasons. The decision by Germanys constitutional court to
delay its approval of the German Parliaments ratification of the
ESM and fiscal compact may be a warning.
The court could have moved to approve quickly. Instead, it will
not rule on emergency appeals for an interim injunction against the
parliamentary approvals until the end of this month. If the court
rules in favor of an interim injunction, the final decision on the ESMand fiscal compact may not be made for several months.
This decision to delay by the constitutional court suggests that it
cannot be counted on to approve bailout measures for other
European nations even if a failure of Germany to participate in such
bailouts may lead to a quick and perhaps decisive European financial
crisis. Also its decision to delay may also reflect a growing opposition
to such bailouts in Germany that will lead to more and more
constitutional challenges. If so, the odds of an adequate ECB and
EU policy response are surely dimmer.
In short, there is virtually no appetite for the kind of FDICstyle eurozone-wide deposit insurance needed to halt the bank run
which is still afflicting the EMU.
Geithners Kinsleyian gaffe might therefore represent a very,
very revealing slip on his part.
So why is there so little reaction in the markets? Is it simply a
case of the summer doldrums? Are people just plain and simple sick
of the whole crisis and just want to enjoy a few weeks respite on the
beaches? That might be part of it, but an equally salient factor is that
the ECB now appears to be engaged in a massive cover-up to
disguise the extent of the bank run and the corresponding problems
afflicting Europe.
Consider this: about 18 months ago, Wilhem Buiter wrote for
Citibank on the legality of the ELAs use in Ireland. He suggested the
following:
Above we noted that, at least in the interpretation of the ECB,
the monetary financing prohibition in the Treaty would be violated if
ELA were granted to an institution that was not just illiquid, but
insolvent. Of course, the distinction between the two concepts is
notoriously difficult, and especially so during periods of high market
stress and very volatile asset prices. Nevertheless, in the Irish case, it
appears that the main beneficiaries of ELA were institutions whose
9
Geithner
Europe Cant be Left Hanging on the Edge of
Abyss
By Marshall Auerback
Michael Kinsley once defined a gaffe as when a politiciantells the truth some obvious truth he isnt supposed to say.
On that basis, the recent headline that just popped up might well
represent a major gaffe of the Kinsley variety by Treasury Secretary
Tim Geithner.
Speaking on CNBCs Delivering Alpha conference, the
Treasury Secretary argued:
What is very important is that [Eurozone officials] not leave the
Continent hanging on the edge of the abyss as a device for getting
more leverage for reform, because that leaves the rest of the world
much more exposed to financial pressure and slower growth from
Europe.
In essence, Geithner is letting the cat out of the bag. He is
implying that Europe is hanging on the edge of the abyss. Only
Germany can prevent it from falling in, and at the same time it
7/31/2019 IPD Volume I Issue XIII
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solvency must at the very least have been in question even at the time
ELA was provided
The implication was that the use of the ELA for Ireland was
probably illegal as Irelands banks were probably insolvent. If
Irelands banks were insolvent, then those of Greece today can only
be described as insolvency squared.
How are they surviving?
They are almost certainly being kept alive solely by the ELA. But
nobody talks about it. The odds are that, once the deposit rununexpectedly got out of hand, the ECB and the EU authorities have
been afraid to make any mention of it because, in drawing attention
to it, they would probably exacerbate the run.
In fact, you cant even find the ELA on the ECBs balance sheet
as a specific line item.
Two months ago the prevailing estimate for ELA financing from the
central bank of Greece was 50 billion euros as of the end of 2011.
As of February of this year, according to the central bank of Greece,
its ELA rose to 109 billion euros. However, that same central bank
of Greece reports now show that their ELA exposures are almostnonexistent. Has such emergency lender of last resort financing
suddenly been repaid? Of course not. It has been reclassified.
And as Buiters report indicated, the manner in which the ELA
has been used might well be illegal.
The cover-up will be hard to sustain going forward, given that
there has been a precipitous plunge in Eurozone interbank lending in
the nine months through April and a very sharp decline in the net
foreign assets of the ECB since the beginning of May.
And, in the final twist to this saga, Buiters report on Ireland,
entitled Ireland Emergency Liquidity Assistance (ELA) 21/01/11 .
Political Risk Today
With the onset of globalization, Political Risk is an increasingly
pertinent concern for multinational companies and investors as they
attempt to tap into, and harness, the velocity of the global
marketplace. New challenges and opportunities are sprouting up,
driven by increasingly social and politically aware young populations
across the globe who are armed with innovative & enabling forms of
technology.
The conventional top down approach to risk, supplemented byon the ground contacts is by no means becoming redundant, but in
need of refreshment if Political Risk firms are to continue providing
worthwhile assessments on whether countries provide a suitable, safe
or attractive investment destination.
Top Down Problems
A top down approach understanding the macro political and
economic developments is, of course, a necessary pre-requisite to
inform any accurate position on risk.
Nonetheless top down approaches often lean heavily on quan-
titative variables, which suffer from their inability to capturedynamics at a social level.
Ultimately how are these structural changes/events being inter-
preted and what are the implications?
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Social Blindspot
Why Risk Models Need to Change
By Joshua Wallace and Richard Hartley
The risk landscape is undoubtedly shifting. PwC (Pricewater-houseCoopers), invoking Nassim Nicholas Talebs recent book, posit
that Black Swans are increasingly turning grey. By this, they mean
that previously catalytic and unforeseen events are becoming more
regular betraying an increased level of uncertainty faced by the
global community in the face of growing connectivity and
dependency.
Their approach is to expand existing ERM (Enterprise Risk
Management) frameworks by innovating around them, adding tools
and techniques such as scenario modelling, predictive indicators and
reverse stress-testing.
PwC is right to identify a changing terrain, in which political
developments play an increasingly important role, however traditional
approaches to Political Risk themselves must adjust to remain
relevant in the 21st century.
So while organisations will benefit from integrating Political
developments as a component into their ERM systems, more
fundamentally, Political Risk as a discipline needs to be re-calibrated.
Risk models pre-occupation with regime level politicscoupled with often-rigid country specific focuses has
obscured the potential of technologically empowered butpolitically marginalized populations to be decisive
drivers
While risk firms often utilise local contacts, who are able to
provide an in-country insight into the personalities, the dynamics and
the temperament of the situation the inside scoop, they do not
necessarily capture the diversity of opinions that now must be
accommodated. The problem with these contacts is that they their
focus is skewed towards the corridors of power to determine who
and what is shaping the contours of the issues at hand. Demographic
and technological changes have now empowered a whole raft of
actors who cannot be ignored, meaning that risk analysis must strive
to better integrate a bottom up approach to navigate uncertainty.
Technology Enabling Social Revolution
The Arab Spring dramatically bought to the fore the realisation
that an increasingly educated, and technical savvy young
demographic has the capacity to not only engage with, but to also
drastically disrupt the political elite.
In a world of big data, which continues to proliferate along-
side increased access to a plethora of new technologies- the ways in
which the public, across the world, engage with the political elite is
being revolutionized. These new forms of technology are facilitating
collaboration, discussion, review and mobilisation in a way
unparalleled in history.
It means the space between the political class and the public
is being continually shrunk, as the public has the ability to scrutinize
developments and provide feedback, often influential, by clustering
around certain issues.
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Importance of Social Dynamics
The failure of Political Risk advisories to predict the Arab Spring
has shown current risk methodologies to be adequate. Most risk
methodologies focus heavily on political infrastructures and tend to
understate the importance of social dynamics.
This has led to blind spots specifically, a failure to predict
political shifts born through mass interaction and accelerated
through virtual networks. Modern Revolutions most recently, the
colour revolutions in Eastern Europe, and the Arab spring aresocially instigated. Whether they are successful depends, to a large
extent, on the density and cohesiveness of internal and external
social networks.
Yet, risk models pre-occupation with regime level politics
coupled with often-rigid country specific focuses has obscured the
potential of technologically empowered but politically marginalized
populations to be decisive drivers. Increasingly, quick fire social
dynamics determine risk probabilities not elite infighting or
factional separation. Populations, once mobilized, can destabilize a
regime without arms or money.Analysts were outflanked by the Arab Spring because they were
looking in the wrong place, and operating at too slow a speed.
Punctuated reports emphasising political change characteristics
ignored the explosive nexus of social technologies, youthful
populations and political disquiet. Risk therefore has migrated into
the virtual social space Political Risk, as it stands, remains concerned
with political developments.
Changes to Traditional Risk Methodologies
The preoccupation with the behaviour of governments must, in
our view, be augmented with a focus on the potential of populations
to mobilize. Necessarily, this involves the identification of
mechanisms that enable contagion and an understanding of how to
monitor and manage them effectively.
To be sure, existing risk methodologies are stil l relevant but must
be diversified to assess the range of options open to regimes in the
face of social contestation.
Contingencies, whilst improbable must be explored and built into
standard risk mitigation procedures. Is regime liberalisation
through limited, incremental democratisation possible? Can a
regime, under duress, successfully transition from full
authoritarianism to competitive authoritarianism?
Harnessing New Technologies
Yet these ideas, while necessary, remain under the (limited) remit
of traditional approaches. If risk is to start delivering value and
consistency, it needs to develop real time tools that can monitor,
map, and ultimately manage social dynamics as they occur. Here,
social network analysis namely, sentiment analysis- is the frontier.
Yet, technology at this moment is a long way away. Difficulties
transforming micro opinions into an overall risk picture, and
incorporating regional dialectics, vernaculars, sarcasm and misspelling
mean such technologies are nascent.
Nonetheless new forms and platforms of technology provide an
unparalleled opportunity to understand social interaction and
dynamics, critical now to any informed position on risk.
For example, Ushahidi, established in the wake of the violence
from the 2008 Kenyan election violence provided a real-time
platform for information to be updated and shared for the mapping
of developments- and is increasingly being used to map other events.
As crowd sourcing continues to gain momentum, there is growing
potential to be able to outsource the role of providing up to date
risk analysis away from expensive and often out of touch analysts to
those social actors who are the drivers of social movements.
Predicting the future is a chimera and we should not be pre-occupied by it. As various authors (most popularly Nassim Nicholas
Taleb, but also a growing body of political scientists concerned with
institutional change) have argued, social trajectories of humans,
movements and countries are highly contingent they are often
accidental and involve too many variables to yield to longitudinal
regression models.
Linear causation, linking a discreet cause to an effect, is often
empirically unsubstantiated. Instead, reflexivity circular casual loops
engendering rapid shifts in behaviour appears instrumental in
various risk dynamics that catalyse in the social sphere. Risk thereforeshould focus on the early identification, and the potential strength
and breadth of seismic social shifts. Such an approach emphasises
agility rather than predictability, and tracks risk at an embryonic stage.
Conclusion
To us, Political Risk is static in a world of high-speed interaction
and linkage. We foresee a movement away from content heavy
deliverables to products that operate surveillance of regional social
dynamics. We believe social dynamics shape political developments
and will do so more and more as populations intertwine with
governments and businesses. Concomitant will be a fusion of
business strategy and risk management.
Real time social monitoring enables effective engagement, and
through engagement, business can better understand social
behaviour and its ramifications. Building a new approach to risk that
places social dynamics at its core opens the door for a host of new
opportunities and breakthroughs. Risk management takes on a new
dimension in its capacity to identify, gauge and subsequently manage
the information that rises to prominence with the swell of public
opinion.
In turn, creating strategic opportunities to better understand
preference shifts, allowing for more relevant, tailored and sensitive
responses by both governments and corporations as they attempt to
manage risk in the 21st century.
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For Muslims around the world, Ramadan is a month of peace
and calmness. That is hardly the case for the Rohingya Muslims in
Myanmar. The ethnic rift between them and the ethnic Buddhists
since June has spiraled out of control, leaving scores of Rohingya
Muslims dead and homeless. Many have crossed the border into
Bangladesh. Amnesty Internationals Benjamin Zawacki said the
latest violence has been primarily one-sided, with Muslims generally
and Rohingya specifically the targets and victims.
Branded by the United Nations as one of the most persecuted
minorities of the world, Rohingyas live in the Rakhine State, located
in west of Myanmar. With a population of 3 million, the Rakhine
state borders Bay of Bengal to the west and the majority of its
residents are Theravada Buddhists and Hindus.
The suppression of the Rohingya Muslims dates back to the
Second World War. On March 28, 1942, Rakhine nationalists brutally
massacred 5,000 Rohingya Muslims in the Minba and Mrohaung
Townships. Since then, the Burmese government has refused to
grant the Rohingya Muslims citizenship.
According to the UN High Commissioner for Refugees, the
lack of full citizenship rights means that the Rohingyas face
restrictions on their movement and limitations on access to
education, arbitrary confiscation of property, and even marriage.
Because of the discriminatory treatment by the government,
some 300,000 Rohingyas have so far emigrated to Bangladesh and
24,000 of them also escaped to Malaysia in search of a better life.
Many of them have also fled to Thailand.
Bangladesh is negotiating with the Burmese government to return
the Rohingyas and Thailand has sporadically rejected receiving them.
There have been instances where boats of Rohingyas reaching
Thailand have been towed out to sea and allowed to sink, sparking
outrage from the international community.
Human Rights Watch says that the government authorities
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By Kourosh Ziabari and Iqbal Ahmed
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continue to require Rohingya Muslims perform forced labor.
According to HRW, those who refuse or complain receives severe
physical punishment. Further, children as young as seven years old
have been forced into child labor.
Writing for The Egyptian Gazette, University of Waterloo pro-
fessor, Dr. Mohamed Elmasry, has enumerated that the hardships
that the Rohingya Muslims face have historically gone unnoticed.
He writes that they are subjected to various forms of extortion
and arbitrary taxation, land confiscation and forced evictions.Rohingyas continue to be used as forced laborers to build roads and
at military camps.
been murdered thus far in the region.
Along with the mainstream media, the Western governments
have also turned a blind eye to the anguish and suffering of the
Rohingya Muslims. Even the renowned Burmese political activist and
Nobel Peace Prize laureate Aung San Suu Kyi has spoken very little
about the crisis. This could be attributed to the fact that Ms. Kyi was
just freed and has to pick her battles carefully.
The international community needs to engage with the Bur-
mese government to stop the ethnic violence between the RohingyaMuslims and the ethnic Buddhists. The failure of political
intervention could lead to more bloodshed and unrest. An ongoing
civil conflict is not an option for Burma.
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Amnesty International called the recent attacks againstminority Rohingyas and other Muslims in Myanmar astep back in the countrys recent progress on human
rights
They are also subjected to various forms of extortion and
arbitrary taxation land confiscation forced eviction and house
destruction and financial restrictions on marriage. Rohingyas
continue to be used as forced labourers on roads and at military
camps, although the amount of forced labour in northern Rakhine
State has decreased over the last decade, Elmasry writes.
The Myanmar governments mistreatment of the Rohingyas,
however, has long been contested and protested by international
organizations. For several years, human rights activists have decried
the arbitrary measures levied against the Rohingya Muslims in
Myanmar by the government.
In May 2009, Elaine Pearson, the Human Rights Watchs
Deputy Asia Director issued a statement in protest at the
deteriorating conditions of the Rohingya Muslims, calling on the
Association of Southeast Asian Nations (ASEAN) to press the
Burmese government to end its brutal practices.
She said, the treatment of the Rohingya in Burma is deplorable
the Burmese government doesnt just deny Rohingya their basic
rights, it denies they are even Burmese citizens.
Now, the conflict has escalated in the Rakhine State and the
Muslims are once again experiencing difficult times. According to a
report, 10 Rohingya Muslims were killed by a mob of 300 Rakhines
while on their way back from the countrys for mer capital Rangoon.
According to several UK-based NGOs, 650 Rohingyas were
massacred from June 10 to 28.
The United Nations estimates that between 50,000 and 90,000
Rohingyas were displaced since the eruption of violence in Malaysia.
However, due to the absence of independent reporters and
monitors in Myanmar, it is impossible to verify the exact number of
those who have been displaced. It has been reported that some 9,000
Muslim homes in the western state of Rakhine were destroyed.
On July 20, Amnesty International called the recent attacks
against minority Rohingyas and other Muslims in Myanmar a step
back in the countrys recent progress on human rights.
The Organization of Islamic Cooperation (OIC) has voiced its
concern over the recent violence in the state of Rakhine. The Time
Turk News Agency reported that over 1,000 Rohingya Muslims have
Democracy and Slaughter in Burma
Gold Rush Overrides Human Rights
By Ramzy Baroud
The widespread killings of Rohingya Muslims in Burma orMyanmar have received only passing and dispassionate coverage in
most media. What they actually warrant is widespread outrage and
decisive efforts to bring further human rights abuses to an immediate
halt.
Burmese helicopter set fire to three boats carrying nearly 50
Muslim Rohingyas fleeing sectarian violence in western Burma in an
attack that is believed to have killed everyone on board, reported
Radio Free Europe on July 12.
Why would anyone take such fatal risks? Refugees are attempt-
ing to escape imminent death, torture or arrest at the hands of the
Ethnic Buddhist Rakhine majority, which has the full support of the
Burmese government.
The relatively little media interest in Burmas ethnic clashes is
by no means an indication of the significance of the story. The
recent flaring of violence followed the raping and killing of a
Rhakine woman on May 28, allegedly by three Rohingya men.
The incident ushered a rare movement of unity between many
sectors of Burmese society, including the government, security forces
and so-called pro-democracy activists and groups. The first order of
business was the beating to death of ten innocent Muslims. The
victims, who were dragged out of a bus and attacked by a mob of
300 strong Buddhist Rhakine, were not even Rohingyas, according to
the Bangkok Post (June 22). Not all Muslims in Burma are from the
Rohingya ethnic group. Some are descendants of Indian immigrants,
some have Chinese ancestry, and some even have early Arab and
Persian origins. Burma is a country with a population of an estimated
60 million, only 4 percent of whom are Muslim.
Regardless of numbers, the abuses are widespread and rioters
are facing little or no repercussions for their actions. The
Rohingyasface some of the worst discrimination in the world,
reported Reuters on July 4, citing rights groups. UK-based Equal
Rights Trust indicated that the recent violence is not merely due to
ethnic clashes, but actually involves active government participation.
From June 16 onwards, the military became more actively involved
in committing acts of violence and other human rights abuses
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It has begun. Oscar-winning Danny Boyle is one of the artistic
gatekeepers who was commissioned to deal with the opening
ceremony of the London Olympics, and was given 27m to do it.
There was Mary Poppins, the Red Arrows, there was the Tour de
France winner Bradley Wiggins, decked in yellow jersey in front of
the Olympic bell.
There was historical context thrown in, idiosyncratic twists and
turns. If people find hope and happiness in such saccharine
nonsense, well and good. There was certainly some bafflement to be
had.
The occasion provides a stupefacient, annulling the senses. If thefireworks show is good, then everything else will go swimmingly.
What the Olympics have, in their formal, cyclical way, wrote a
clearly moved James Lawton, is renewal, a wiping-away of the past
and a huge investment not so much in the future but the moment.
Criticism is muted, even neutered one had to be a brave and
resilient polemicist last night to ignore being caught up in that
moment.
Then come the almost moronic comparisons the pissing
contest is all de rigueur when it comes to Olympic openings. Did, for
instance, Beijing do it better? Watching these open ceremonies,
tweeted Slates Matt Yglesias, fairly confident that China will bury
the west. Police states must have all the fun at sporting ceremonies.
Marina Warner of The Guardian was thrilled by the brilliantly
irrational night and its indigestibility for foreign palettes. A true
muddle of a scene.
Then there was Mitt Romneys London visit, one that wenthopelessly wrong for the US presidential contender. His own
summations of Londons Olympic effort were negative, something
that immediately placed his own record regarding the 2002 Winter
Games in Utah in the spotlight. Lets ignore, shall we, the corruption
endemic to that event, and the papering over received from federal
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By Binoy Kampmark
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funding.
Or rather, lets not. Former rival Rick Santorum in February
remaindered us that, One of the things he talks about most is how
he heroically showed up on the scene and bailed out and resolved the
problems of the Salt Lake City Olympic Games.
He did so by heroically [bailing] out the Salt Lake City Olympic
Games by heroically going to Congress and asking them for tens of
millions of dollars to bail out the Salt Lake Games in an earmark.
An unimpressed Prime Minister David Cameron took his rapierout: Of course its easier if you hold an Olympics Games in the
middle of nowhere. Rupert MurdochsUK Sun also jointed the
criticism this was Mitt the Twit talking.
So, matters are already proving entertaining for London 2012.
Where there is rhetoric on fairness in sport, an actuality of
corruption is bound to take precedence.
The peoples games is all too often a short hand expression for
orgy of the elite, playground for the terminally cashed. Be it the
sportsmen and women who fight it out on the pitches or the
Olympic Committee members who move about their anointed citieslike an intergalactic parasite consuming all before them, we know
each Olympics when we see it. London has seen the unfortunate
construction and allocation of road lanes dubbed Zil lanes (or
Game Lanes) if Stalins vehicles could have special access in the
proletarian paradise, so can Olympic officials and their various
impedimenta.
The introduction of those lanes has been particularly disrupting
for motorists. One can be fined 130 for making unauthorised use
of them, and a mass revolt by drivers should be encouraged. (So far,
one item of resistance has been documented a taxi driver taking
the plunge off the Tower Bridge in protest against the exclusivity of
those lanes.) In any case, given that space is at a premium in
Londons transport infrastructure, such a move is something the city
can ill afford. On Wednesday, this became all too apparent with the
eight-mile clog-up on the M4 motorway.
Transport for London, that Orwellian overseer of a system they
scant understand, have been pleased by the compliance of
Londoners.
Riots are not imminent yet. Compliance among drivers have
been high (Independent, Jul 25). There was less compliance on the
part of those providing the new cable car system, valued at 45m.
More than 30 cars, equipped with 60 passengers, were suspended
300 ft above Thames on Wednesday. Emirates Air Line the
geniuses behind it had some explaining to do.
If not on the roads, then on the Tube the London transport
system will be moving into a well-earned paralysis. For the duration
of this month, there will be regular announcements of delays on
every single line of the network. Globally, the Circle, Metropolitan,
Hammersmith, and City Lines, shall be made more famous than they
already are. Yes, the games have well and truly begun.
Just one month after the so called make or break election,the state coffers in Greece are running low as tax revenues continue
to miss targets as the economy slows further. The election outcome,
dubbed by European political leaders as a victory for the euro, was
supposed to ensure that the bailout programme be implemented in
order to move Greece back onto a sustainable economic path.Since then the emphasis in Greece has shifted towards a re-
negotiation of the bailout conditions as the austerity measures hit
living standards. A recent statistic published by Eurostat claimed that
27.7 percent of Greeks are now living on or below the poverty line.
Such rhetoric is falling on deaf ears elsewhere in Europe as leaders in
countries such as Germany, Finland and the Netherlands struggle to
sell each of the bailouts to their respective electorates further
highlighting the North-South divide in the Eurozone.
Recent figures released suggest that Greece is making progress
towards reducing its deficit as the figure for the first six months of
2012 came in at 12.3 billion euros well ahead of the Troika target of
14.9 billion euros and down from 13.1 billion euros from the same
period in 2011.
However, a closer inspection reveals that, whilst spending cuts
are being met, the required taxation income was 1 billion euros
behind the plan during the first half of 2012.
One consequence of this is that Greece will struggle to survive
financially until September when the next bailout tranche is due to be
made payable.
The main impasse is two bonds that mature on August 20 when
Greece is due to repay 3.2 billion euros of debt owed to the
European Central Bank (ECB).
With the ECB insisting on repayment in full, and with 4 weeks to
go, Greece simply does not have the cash to meet this commitment.
Aside from a potential bridging loan, which has little support across
Europe, Greece would be forced to issue short dated debt at a highly
expensive rate of interest to cover this liability and to avoid a default.
Clearly this is not a sustainable solution, as any positive deficit
reduction effort would quickly be offset by the high financing costs
of avoiding a messy default.
As if this wasnt enough, a decision on Friday by the ECB to
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Greece on the BrinkAgain
By George Grevett
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refuse Greek Government bonds as collateral for direct funding will
place further strain on Greek banks ability to fund them and to
maintain solvency.
The effect of this decision is that struggling banks in Greece
(which is nearly all of them) will be forced to borrow via the Bank of
Greece at about 2 percent above the rate that could have been
obtained directly from the ECB.
Again this outcome is not sustainable for any amount of time as
any further banking collapses in Greece would trigger further chaosin financial markets as Eurozone leaders would have to weigh the
merits of yet another Greek rescue package. Any sign of doubt or
hesitation would no doubt trigger turmoil and contagion across to
Europes other troubled regions and could act as the stimulus for an
immediate break-up of the Eurozone.
The tale of the tape here is that progress towards overall crisis
resolution has not been made, as a solution for Greece still needs to
be found.
A decision must be made whether to provide an astonishing third
bail out to Greece or to let the sovereign bust out of the commoncurrency area. Any more political deadlock could likely spark
financial Armageddon in the Eurozone in the very near future.
See it as bad finance, economics and banking practice at
workand the structural violence hitting the old, the poor, the
underprivileged is without parallel since the Great Depression. See it
as politics, as intended acts of commissionand it becomes direct
violence hitting people whose only wrongdoing was to trust the
system.
One hypothesis does not exclude the other. The question
becomes: How much was banking gone mad, how much was
politics as usual?
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The Politics of the Economic Crisis
By Professor Johan Galtung
Perhaps the most surprising aspect of the Libor scandal ishow familiar it seems. Sure, for some of the worlds leading banks to
try to manipulate one of the most important interest rates in
contemporary finance is clearly egregious. But is that worse than
packaging billions of dollars worth of dubious mortgages into a
bond and having it stamped with a Triple-A rating to sell to some
dupe down the road while betting against it? Or how about forging
documents on an industrial scale to foreclose fraudulently on
countless homeowners?, writes Eduardo Porter on The New York
Times.
A useful summary of the situation as of today. But of what?
What is this? We have been through many answers starting with
credit squeeze, then a real estate bubble that burst, toxic assets, credit
swaps, hedge funds, derivativesbets with the money of other
people, yours and mineall finance and banking. A psychologism
was added at an early stage, that of greed. Small savings banks
wanted to be in it, the pattern was contagious and spread from Wall
Street to the Euro zone. Bailout vs. Stimulus, Wall Street vs. Main
Street. But as big banks are too big to fail there was bailout for the
former and austerity for the latter, resulting in misery.
Jobless growth in the United States, 17 percent unemployment
in the European Union stocks slump worldwide and euro sinks as
bond rates soar to record (IHT, July 24, 2012). So on and so forth.
Whatever it is, the effect is an enormity. It stands to reason that
the causes should be commensurate. True, the system could have
reached a tipping edge and tumbled down after one small step, but
then that tipping edge is a huge cause. Why didnt we know about it?
Was it ignorance or sloppy theory? There could be other causes.
That was the tipping edge: the transition to the financeeconomy through deregulation, on credit offered with nocapital, on insider trading betting against customers, on
buying legislators by financing their campaigns, onSupreme Court judges appointed by bought legislators
One guide in the morass is useful if not perfect: Who are the
winners, who are the losers? US class warfare, said Warren Buffet,
and the rich are winning. Banks that had taken risks with other
peoples money and lost billions were bailed out the victims were
foreclosed. Speculation is all over. And on basic necessitiesfood,
water, housing, education (tuition fees), health services (ever rising
costs), the demand is inelastic. People have to buy them at whatever
price, hence safe bets.
There is speculation on the stock exchange on privatized
prisons. When common people do wrong by signing a mortgage that
they cannot service, the court system criminalizes them and the
police throw them out of the property. But when it comes to fixing,
manipulating and betting against their own customers, and rigging
the London Interbank Offered Rate (LIBOR), there are no arrests
(to prevent destroying evidence and coordinating testimony), but
gentle hearings in prestigious places, mild rebukes and milder fines.
One may argue that there are no laws clearly defining their
actions as criminal. Precisely. But why not? Why not right now?
The transfer of capital from investment in the real economy to
speculation in the finance economy, done digitally, in microseconds is
transfer to a labor-free economy.
Workers, the plague of industrial capitalists, quarrelsome, on
strike, always demanding more, are out. The longer the buying and
selling chains in the finance economy, there will be more
commissions. And hence, economic growth, and fewer jobs. A
handful can do it. Lehman Brothers took huge risks that are
compensated by huge Goldman Sachs bonuses.
That was the tipping edge: the transition to the finance
economy through deregulation, on credit offered with no capital, on
insider trading betting against customers, on buying legislators by
financing their campaigns, on Supreme Court judges appointed by
bought legislators. Goodbye democracy, welcome finance mogul
plutocracy.
The crisis was an opportunity that the rich used to cut what-
ever smelt of welfare state, privatizing basic needs including health
and education (coming). Under no democratic checks and balances.
Using the crisis as a cover for brutal class politics.
If the cause is not yet big enough, an international dimension
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comes to the rescue.
The US empire is threatened militarily by being beaten in one
arena after the other politically by elites they thought they could
trust, but that are withdrawing into regional groupings like Latin
America and the Shanghai Cooperation Organization (SCO)
culturally by the US exceptionalism running out of its magic touch.
And economically? By the threats to the Bretton-
Woods/International Monetary Fund system with the dollar as the
world reserve currency. Deals are increasingly made in othercurrencies. Saddam Hussein and Muammar Gaddafi were punished,
but to punish China and Russia is more problematic.
The economic goal is to control the global flow of capital via
such privatized central banks as the Federal Reserve. Seven not-US-
friendly countries had state central banks: Iraq, Iran, Lebanon, Libya,
Syria, Sudan, Somalia. They were targeted after 9/11, according to
Wesley Clark, the US general who commanded NATOs attack on
Serbia (1997-2000).
How to manage the Euro zone? By having Goldman Sachs fix-
ing the Greek accounts, and by having Goldman Sachs insiders
appointed as interim prime ministers of Greece and Italy and as head
of the European Central Bank (who makes money available to the
banks at very cheap rates, below inflation). The name of the game is
finance, not real economy, with bailouts, not stimulus and then the
new European Stability Mechanism (ESM) treaty of debt, with
Article 27: The ESM, its property, funding and assetsshall enjoy
immunity from every form of judicial process.One day the US bubble starts bursting the real economy leav-
ing too much behind the finance economy and behind the massive
printing of money and serving people too much behind serving
debts. Sacrificing their own people for a world hegemony long since
lost. Who will be the winners? The non-West, already taking shape.
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Title Page & Page 3 The United Nations became heavily involved in the DRC to insure that elections went off as planned. Martine
Perret/UN Photo
Page 6 - Syria independence flag flies over a large pathering of protesters in Idlib. Image source: Freedom House
Page 7 - President Barack Obama talks with President Dmitry Medvedev. Official White House Photo by Pete Souza
Page 9 - Secretary Timothy F. Geithner and John Podesta. Photo source: Center for American Progress
Page 12 - Rohingya refugees in the Nayapara camp. Photo by Ruben Flamarique/Austcare
Page 14 - U.S. Secretary of State Hillary Rodham Clinton met with Daw Aung San Suu Kyi in Rangoon, Burma, on December 1,
2011.
Page 16 - Tower Bridge with Olympic Rings. Photo by Katharine Hunter
Page 17 - A European Union (EU) flag, left, and Greek national flag fly near the Parthenon temple on Acropolis hill in Athens,
Greece. Simon Dawson/Bloomberg
Page 19 - Bank of England in the background. Photo by Mark Hillary