Focal Points Blog

Criminally High Interest Rates Foul the Wellsprings of Microcredit in India

Just as a new round of existential self-flagellation seemed primed to capture the time and attention of the foreign aid Twitterverse, news broke that reoriented the discussion from retrospective hand-wringing to forward looking action. Margaret Wente’s weekend essay—”Is Humanitarian Aid Bad for Africa?”—provoked a flurry of debate (though none of it so far as I could tell took issue with the Palin-esque categorization of “Africa”as a homogenous giganta-country) and attracted the attention of aid luminaries Dambisa Moyo and William Easterly. Then everything changed.

On Tuesday, the Bill and Melinda Gates Foundation announced a major strategic sea-change in its approach to combating poverty around the world. Melinda Gates, speaking at a media roundtable event in Seattle, made known her foundation’s commitment to

spend $500 million over the next five years to spur savings among the world’s poorest workers who live on less than $2 a day. As part of the pledge…Gates announced $40 million in new grants to six recipients that will start or expand savings programs, test new approaches such as mobile banking and research how such programs improve the lives of the poor.

The move marks an important move away from support for microcredit ventures. The Puget Sound Business Journal inquired whether

microlenders—which have an established network of locations to serve borrowers, unlike microsavings institutions—would play an important role in the foundation’s new strategy. The answer is no.

And good thing, too! The New York Times reports that microcredit is in huge trouble in the very place where it has been hailed the greatest success: India. The Times notes also that:

The crisis has been building for weeks, but has now reached a critical stage. Indian banks, which put up about 80 percent of the money that the companies lent to poor consumers, are increasingly worried that after surviving the global financial crisis mostly unscathed, they could now face serious losses. Indian banks have about $4 billion tied up in the industry, banking officials say.

Why the sudden problems? The roots may be found in some of the early criticisms of leveled against the microfinance industry. Chief among them, skeptics of microlending argue that the exorbitant interest rates that often attend loans reduce the practice to little more than formalized loan sharking. As the Times itself reported this past spring,

the phenomenon has grown so popular that some of its biggest proponents are now wringing their hands over the direction it has taken. Drawn by the prospect of hefty profits from even the smallest of loans, a raft of banks and financial institutions now dominate the field, with some charging interest rates of 100 percent or more.

The phenomenon is especially acute in countries like India, Mexico, and Nigeria, where the demand for small-market loans has completely outstripped local supply, opening the door for institutions to begin charging usurious interest rates to vulnerable borrowers.

In the case of India, officials

fear that microfinance could become India’s version of the United States’ subprime mortgage debacle, in which the seemingly noble idea of extending home ownership to low-income households threatened to collapse the global banking system because of a reckless, grow-at-any-cost strategy.

Responding to public anger over abuses in the microcredit industry — and growing reports of suicides among people unable to pay mounting debts — legislators in the state of Andhra Pradesh last month passed a stringent new law restricting how the companies can lend and collect money.

Even as the new legislation was being passed, local leaders urged people to renege on their loans, and repayments on nearly $2 billion in loans in the state have virtually ceased. Lenders say that less than 10 percent of borrowers have made payments in the past couple of weeks.

The lion’s share of public resentment surrounding microcredit institutions in India seems directed at the country’s largest provider of microloans to the poor, SKS Microfinance. The firm recently took its venture public, with its CEO Vikram Akula personally pocketing a crisp $13 million from the sale of his shares.

For his part, Akula defended his group, pinning blame on “rogue”actors who undermined the integrity of the microcredit structure though “errant practices.” The Wall Street Journal notes that

Mr. Akula said SKS’s lending rates had dropped consistently, to 24 percent, from 31 percent as the lender was able to take advantage of economies of scale. Within that, the company’s cost of funds was 9 percent and the cost of delivering a loan was 9 percent, he said. In addition, there was a 3 percent corporate tax, and another 1.5 percent was set aside for loan-loss provisions. “From a microfinance perspective, we have some of the lowest cost structures in the world,”he said.

This may be, but Alula’s suggested remedy for the crisis—”enlightened regulation”by the Indian state—would do nothing for micro borrowers such as K. Shivamma, a 38-year-old farmer profiled by the Times, who

took her first loan hoping to reverse several years of crop failure brought on by drought. “When you take the loan they say, ‘Don’t worry, it is easy to pay back,’ “Ms. Shivamma said. The man from Share, the company that made her first loan, did not ask about her income, Ms. Shivamma said. She soon ran into trouble paying back the $400 loan, and took out another loan, and then another. Now she owes nearly $2,000 and has no idea how she will repay it. The television, the mobile phone and the two buffaloes she bought with one loan were sold long ago. “I know it is a vicious circle,” she said. “But there is no choice but to go on.”

All of which seems to suggest that the microcredit crisis threatening the Indian economy offers initial support to William Easterly’s quick takeaway from Wente’s article, namely that “the viable arguments are that (1) aid’s record is sufficiently disappointing that it is unlikely to ever be the main driver of successful development, [and] (2) if aid were more accountable it would do less ill and more good.”But if the fears of some observers are realized in this particular case, “more good”will be completely off the table moving forward, and “ill”a mild understatement of the consequences.

Michael Busch, a Foreign Policy In Focus contributor, teaches international relations at the City College of New York and serves as research associate at the Ralph Bunche Institute for International Studies. He is currently working on a doctorate in political science at the Graduate Center, City University of New York.

Could Gandhi Have Halted Night Raids?

Afghanistan night raid victimU.S. Special Operations forces night raids may be scaring the wits out of Afghans, but they’re not the only ones freaked out. General David Petraeus professed to experience “astonishment and disappointment” when Afghan President Hamid Karzai recently called for an end to them because, aside from imperiling their lives, the raids drive Afghans into the arms of the Taliban.

In a Huffington Post article, Robert Naiman of Just Foreign Policy writes that the tactic of night raids “has been the subject of almost no public debate in the United States. Newspaper columnists aren’t inveighing against the night raids. Members of Congress aren’t demanding that the night raids stop.” What if, he asks, “Afghans adopted a strategy of nonviolent resistance against the night raids? Could they be stopped?” Naiman explains.

Let’s suppose . . . that there were a well-organized popular movement in Afghanistan against the night raids. Let’s suppose that this movement went around to respected Islamic scholars and got legal judgments that the night raids are an offense against Islam. Let’s suppose that this movement prepared to defend villages where U.S. night raids are being carried out, and organized committees of unarmed women to implement this defense. And let’s suppose that when a U.S. night raid began, a call would go out from the mosque, and a group of unarmed women would surround the house and say to the US soldiers: you’re not coming in, and if you try, we will not move. And let’s suppose that some Western NGO issued these women video cameras, as the Israeli human rights group B’tselem has issued Palestinians video cameras. And let’s suppose that a group of people in the United States and Western Europe agreed that they would try to support this movement, by vigorously raising their voices in protest whenever US special forces tried to break the line of protesters.

Nonviolent resistance is employed by thousands of Palestinians, along with sympathetic Israelis. Naiman cites the citizens of Budrus, who in 2004, used nonviolent resistance to force Israel to re-route the West Bank Barrier around its village. Do Focal Points readers think that this tactic has failed to achieve wide success in Palestine because it’s an impotent act — or because it hasn’t been fully implemented? Can Gandhi’s satyagraha work in Afghanistan as outlined by Naiman? Let us know in the comments section.

Note to Washington: China’s Monetary Moves Are Not a Conspiracy Against U.S.

China moneyOutgoing Director of the White House National Economic Council Larry Summers sure knows how to make the obvious seem newsworthy to the Wall Street Journal. Speaking with an elite group of American investors keen to capitalize on rapidly emerging market opportunities in Southeast Asia, Summers revealed to his audience what is by now conventional wisdom to anyone who bothers reading the newspaper once every year or so. According to the Journal, Summers told his audience that “The history of the early 21st century ‘will be about how the world adjusted to the movement of the theater of history toward China.’”

No kidding.

Still, the Journal contextualizes the current situation with some sobering, if widely known stats:

Underscoring the tension between the countries, Min Zhu, special advisor for the International Monetary Fund in Washington and former deputy governor of the People’s Bank of China, told the same forum that the weight of global GDP is shifting toward China and other fast-growing emerging economies while richer nations still face high debt and weak growth.

Given current trends, emerging markets and developing countries will account for 60% of global gross domestic product in six years, he said. “It is a different world,”Mr. Zhu said.

Robert Diamond, head of Barclays PLC, said U.S. businesses could pick up the mantle but lack the confidence to start hiring because of concerns the country isn’t on the right path with spending, deficits and taxes.

Meanwhile, China is moving up the value chain into high-tech capital goods and is poised to account for about a third of global manufacturing of advanced machinery and equipment within a decade, from about 8% today, Mr. Zhu said. “China will probably lead a global manufacturing restructuring. That will be a big impact for advanced economies, particularly for economies that want to export tech goods.”

But this is only part of the story. What the Journal fails to point out is that the gradual transition of hegemony between the United States and China is currently being threatened by Washington’s insistence that Beijing dispense with its clever practice of currency manipulation, tinkering that has artificially driven down the price of Chinese money, and therefore also the price of Chinese commodities. The effect has been dramatic, as US manufacturing sectors have struggled to compete with attractive Chinese exports being sold well below cost.

Trouble is, as President Barack Obama rudely discovered this past week in his failed trip to the Far East, China refuses to be hectored on the issue of currency manipulation by an administration guilty of precisely the same thing (but for an entirely different purpose).

But even if the Fed were to abandon its newly minted policy of Quantitative Easing (if this makes no sense to you, and it shouldn’t, click here for an entertaining primer), it’s far from clear that China would be persuaded to follow suit. Thomas P.M. Barnett, in an unusually smart essay in yesterday’s World Politics Review worth quoting at length, explains why:

China’s demographic clock is ticking like no other nation’s in human history. Already losing its cheap-labor advantage right now, China is set to stockpile elders from here on out at a pace never before witnessed. By 2050, it will have more non-working old people (400 million plus) than America’s total projected population (400 million). At that point, the U.S. median age will still be just below 40, while China’s will be closer to 50. It took Europe a century for its elder population to gradually rise from 10 percent of total population to the 20-percent level. America’s still-unfolding journey along the same path will run about six decades. But China will have 20 years, if it’s lucky.

That should explain what’s driving China’s seemingly selfish economic strategy.

The world is now rolling the dice on one massive demographic bet: that the seemingly inexhaustible engine of Asia’s savings will be able to sustain both an aged West and a rapidly aging East until a new regional source of accumulated savings emerges to drive the global economy. That begs the question of whether or not China will have enough time to nurture its replacement in the role of global financier in either the Islamic belt, sub-Saharan Africa, Latin America or some combination thereof.

Understand, too, that young growing countries tend to deficit-spend, just like older ones. It’s the middle-aged ones — like both China and America today — that are supposed to rack up the savings. But the U.S. continues to blow its wad as the Boomers start marching into retirement, while China’s middle-aged window will slam shut more rapidly than that of any civilization in human history.

It’s about time someone other than Fareed Zakaria attempts to short-circuit the fear-mongering, lunatic predictions emanating from the far right concerning the rise of China. As Barnett rightly points out,

Our sense of scale is completely out of whack. The U.S. freaks out politically because a million or so Latinos show up inside America each year. But to approximate China’s domestic challenges, we’d need to invite roughly twice the population of Latin America (a billion-plus souls) into the country to achieve the same demographic density, with three-quarters of them impoverished to achieve the same poverty density. Clearly, our political and economic system might operate more rigidly under such circumstances.

As things now stand, we interpret China’s efforts to advance its economic “rise” as necessarily coming at our expense. By that logic, however, China cannot succeed without destroying the U.S. economy. Meanwhile, given our penchant for decrying China’s lack of democracy, the Chinese interpret our efforts at “rebalancing” the global economy to be nothing less than an attempt to destroy the ruling Communist Party’s primary source of political legitimacy — namely, China’s ongoing per capita income expansion. …

The truly ironic part is that we need Chinese savings to revitalize America’s economy — right now. But instead of welcoming that investment instinct, we spot bogeyman intentions behind every Chinese move to enter the U.S. market.

Coming into office last year, Barack Obama gave every indication of being above that sort of fear-mongering. But after his recent electoral “shellacking,” the president apparently senses that his political back is up against the wall. He’ll now be doing whatever’s necessary to avoid what he perceives to be the real ideological Armageddon on the horizon: a Tea Party president in the White House come 2013.

Which, I suppose, drives at the heart of all matters of political economy: namely, the degree to which smart economics is all too frequently sacrificed at the altar of political expediency, no matter how sympathetic its ends. The United States has successfully avoided crashing into the shoals of poor economic stewardship during the Cold War and immediate neoliberal period following the collapse of the Soviet Union. But as the 2008 financial and economic crisis seems to suggest, time may be running out on American faith in hypercapitalist free markets.

Given these gathering clouds, and caught between the twin threats of Tea Party potency and perceived threats of China’s rise to international prominence, one worries that President Obama may fall victim to the time-worn tendency to make the good the enemy of the best. Or, perhaps in the current situation, it’s a case of rendering the bad the enemy of the worst.

Michael Busch, a Foreign Policy In Focus contributor, teaches international relations at the City College of New York and serves as research associate at the Ralph Bunche Institute for International Studies. He is currently working on a doctorate in political science at the Graduate Center, City University of New York.

Republican Go-to Guy on Nukes Keeps Obama Administration Twisting in the Wind on New START

Kyl, McConnellAlong with Richard Lugar (R-IN), Jon Kyl, the Republican Senate whip from Arizona, is Senate Minority Leader Mitch McConnell’s (KY) go-to guy on nuclear issues. We wrote yesterday:

“After Republicans picked up six seats in the Senate earlier this month, prospects for the passage of the new START began to diminish (not that this author minds). Barron YoungSmith at the New Republic writes that last week ‘chief of staff to Senator Bob Corker — a key vote on the treaty — said that it should not be considered during the lame-duck Congress, and the Republican Policy Committee released a memo urging a similar delay.’”

Kyl is known as a staunch supporter of nuclear weapons who made his mark as a freshman senator in 1999 when he blew up passage of the Comprehensive (nuclear) Test Ban Treaty. But, writes YoungSmith in the article I cited yesterday, “bizarrely enough, he seems to want [new START] to go through.” I continued:

Turns out, not so bizarrely. Desmond Butler for the Associated Press writes:

In a bid to win approval of [new START] before newly energized Republicans increase their clout in the Senate, the Obama administration is offering to add billions of dollars in funding for the U.S. nuclear arsenal. [To wit] a boost of $4.1 billion . . . between 2012-2016 . . . that will go to maintaining and modernizing the arsenal and the laboratories that oversee that effort. The additional money comes on top of an additional $10 billion the administration had already agreed to over 10 years.

And that additional $10 billion, YoungSmith explains, is “on top of” . . .

. . . an initial massive $80 billion appropriation in Obama’s 2011 budget proposal [that Kyl demanded be] guaranteed over ten years. [In the end] Kyl’s proposal would pair New START with a huge cash bonanza for programs that would make it easier to maintain and upgrade our nuclear weapons in the future.

In other words, according to YoungSmith, Kyl “seems to think that securing long-term funding for nuclear modernization outweighs whatever qualms he might have about reducing our present arsenal.”

Writing for Time, Massimo Calabresi is wary of Kyl, though. Of his perceived openness to New START, Calabresi writes:

Maybe. But if Kyl’s primary characteristic as a Senator is subterfuge, his secondary characteristic is a tough devotion to his ideological positions. . . . And convincing Kyl to accept a large cut to the cap on U.S. strategic warheads runs counter to positions he has taken over 16 years in the Senate. That said, the administration has accurately identified something Kyl wants in exchange for accepting a “relatively benign treaty.”

Nuclear modernization and missile defense, that is. Those issues aside, writes Kelsey Hartigan at Democracy Arsenal, New START will be “the first test of whether the GOP can be trusted to lead. [Sen. Lugar] recently wrote that ‘the Republicans can’t just be the Party of No.’ [And as] Robert Kagan recently explained to his fellow conservatives, ratifying New START is a ‘good first step toward governing.’” Besides, writes Hartigan, “Screw up New START and you can kiss your nuclear pork goodbye.”

To what extent, should New START be shot down, remains to be seen. But we might find out. Yesterday at Politico, Laura Rozen reports that Kyl may be getting cold feet.

Seemingly shutting the door on one of the Obama administration’s key goals for this lame-duck session of Congress, Sen. Jon Kyl (R-Ariz.) said Tuesday that he does not think the Senate should vote to ratify the START treaty before the end of the year. . . .

“If the Republicans’ lead negotiator says we shouldn’t consider START during a lame duck, I think we have to take him at face value,” a leadership aide told POLITICO Tuesday. “Having said that, we are going to continue to try and get it ratified in the lame duck.”

Also, Kyl is due to speak with either — reports vary — Vice President Biden or Secretary Gates tomorrow. Remember: however pro-nuclear those opposed to New START may appear to be, they’re voting against a measure that Secretary Gates and the Pentagon support. A no vote would also keep U.S. access to Russia’s nuclear program via inspections closed as it has been for a year. More to the point, as Ms. Rozen reports, “The move could be a blow to the Obama’s administration’s ‘reset’ of relations with Russia, and for U.S.-Russian cooperation on countering Iran’s nuclear program, among other areas.”

In regards to Kyl’s statement that the Senate should wait until after the lame-duck session to address New START, she writes:

“Issuing a press statement while sensitive private talks are ongoing strikes me as an act of bad faith,” the nonproliferation hand said. “It only reinforces those who believe that Kyl is playing the administration for a fool, stringing out a series of concessions before abruptly calling the whole thing off.”

The Obama administration: played by the Republicans again?

U.S. Wins the Merchant of Death Sweepstakes

Viktor Bout extraditedThe diplomatic tug of war between the United States and Russia over the fate of suspected international arms dealer Viktor Bout was won Tuesday by officials in Washington. For the past two years since his arrest in a US sting operation, Bout has languished in a Thai prison as Moscow and Washington sparred to control his fate. The United States has publicly pushed for his extradition to American soil where he will very likely be put on trial for conspiracy to kill Americans. Bout purportedly enjoys close ties to the upper echelons of power in Moscow which some believe has driven Russia to fight for his release in fear of what beans might be spilled about state secrets in an American courtroom.

Bout—known popularly as the “Lord of War”—was extradited Tuesday morning by Thai officials in a security operation worthy of the Secret Service. The New York Times gives a sense of the scope and scale of security measures taken to keep Bout alive for quick trip between the prison where the alleged “Merchant of Death” and the Bangkok’s international airport.

Two motorcades — one apparently a decoy — made the trip to the airport and shortly afterward an airport official confirmed that Mr. Bout had left on a chartered American aircraft. The Bangkok Post reported that about 50 police, including snipers, were at Don Muang airport to protect Mr. Bout. The 20-seat aircraft also carried two pilots and six officials from the United States Drug Enforcement Administration.

Bout will arrive in the United States, likely in New York, sometime Tuesday night.

Thailand’s last minute decision to ship Bout off to the States came as a huge relief to American officials. Thailand’s criminal court, which had opened the door for extradition in a ruling last month conditioned their decision by announcing that Bout had to be moved before November 20, or else set free. In the month since, Washington and Moscow have heavily lobbied the Thai government, with Russia being unusually visible in its proactive attempts to have Bout released. But authorities in Bangkok signed off on the suspected arms trafficker’s extradition early this morning, and state police wasted no time in putting Bout on a plane to the United States.

Russia was predictably upset. Russian Foreign Minister Sergei Lavrov denounced the move as “an example of extreme injustice. We as a country,” Lavrov said, “will support him by all means.” The foreign minister also cast doubt on the independence of the Thai legal system, noting that Bangkok’s decision resulted from “unprecedented political pressure from the USA on the government and judicial authorities of Thailand.” For its part, American officials had no immediate comment, but a press conference to discuss the issue has been scheduled for tomorrow morning in New York.

The big question in the immediate term is what effect, if any, Bout’s extradition will have on recent efforts by both Washington and Moscow to “reset” US-Russian relations. Despite the angry posturing by the Russian foreign ministry, the Bout case is unlikely to single-handedly disrupt attempts by President Barack Obama and Russian President Dmitry Medvedev to draw their countries closer on issues of common interest even as they push points of possible dispute to the sidelines. Renewed relations have successfully navigated some turbulence in recent months, not least of which, as the Telegraph points out, “a major spy scandal this summer that saw the FBI catch ten Russian agents did not spoil the party.” It’s hoped that the Bout situation will also not present a major speed bump to improved relations between the two powers.

For some, Bout’s extradition is not nearly so threatening to a US-Russia reset as the recently recalibrated US Congress. The Telegraph goes on to argue that “After Mr Obama’s Democrats fared badly in recent midterm elections, the fate of the new US-Russia nuclear pact or START, which needs to be ratified by the Senate, seems uncertain. If that falls, then the “reset” really will be in trouble.” Perhaps, but it isn’t just American lawmakers that could throw a wrench into the works.

Russia has recently exhibited an emerging block of reactionary legislators no less suspicious of the Obama White House than the US Congress is of their Cold War antagonists. Medvedev’s concessions to the Obama administration on anti-proliferation matters particularly have come under heavy fire from Russian lawmakers who argue that it represents of victory of American power over that of Russia. An irate Leonid Slutsky, deputy chairman of the international affairs committee in the Duma’s lower house, decried what he sees as clear US bullying. “The United States is now trying to dictate its position on the entire system of global politics and international relations. It is trying to somehow reintroduce a unipolar world.”

In this sense, the Bout case will likely bolster fears throughout various quarters in Moscow that Washington is intent on getting its way irrespective of Russian interests. It remains to be seen how well the Obama and Medvedev regimes handle this latest flashpoint in US-Russia relations. What is clear, however, is that in the face of a conservative resurgence in both countries, what otherwise could have been a minor nuisance in the management of foreign affairs suddenly may now take on greater dimensions, and further frustrate the maintenance of international security.

Michael Busch, a Foreign Policy In Focus contributor, teaches international relations at the City College of New York and serves as research associate at the Ralph Bunche Institute for International Studies. He is currently working on a doctorate in political science at the Graduate Center, City University of New York.

Contingencies, Not Domination, Behind Build-up of Chinese Navy

China's navyIn the last several years, the security community has become fixated on the rise of China. In particular, Chinese naval expansion has been the cause of growing alarm among its neighbors, international observers, and military strategists. Concerns have been intensified by the increasingly assertive attitude Beijing has adopted toward foreign policy, typified in its recent territorial spat with Japan. However, a closer inspection of Chinese naval policy, operations, and importantly, vessel procurement indicates that the Chinese are likely preparing for strategic contingencies and not for hegemonic domination of the high seas.

National Defense University professor, Bernard Cole, describes the Chinese naval buildup as “moderate,” and instead focuses on China’s improvements in the education and training of sailors (including the development of a professional non-commissioned officer corps, similar to the ROTC) to improve operational mobility, organization, and logistics management. Improvements in training and personnel are perhaps the most crucial aspect in developing a modern navy, and the Chinese are gaining invaluable experience through engaging in overseas operations as far away as the Gulf of Aden.

Chinese vessel procurement is a telling indicator of the strategic interests of Beijing. Indeed, it appears that China is much more concerned with its own littorals than it is at extending its reach. For example, China currently lacks the ability to sustainably project power over long distances. China only has five replenishment ships, of which only two are new. Furthermore, while it has continued to pursue joint operability with other branches, China’s navy remains years away from fielding aircraft carriers, and lacks integral naval aviation logistical units, such as AWACS and air-to-air refueling capabilities.

Instead, China has focused on developing capabilities to control and respond to contingencies in its own backyard. The 1996 Taiwan Strait Crisis influences much of the Chinese program of modernization. This episode (coupled with lessons learned from the history of the Cold War) convinced Chinese naval planners that they should not attempt to match U.S. strength, but rather modernize with specific strategic goals in mind. Chinese modernization appears to be geared toward assuring continued access to sea-lanes of communication, vital to sustaining economic growth, and future contingencies surrounding Taiwan.

Relations between China and Taiwan have lately improved, and Chinese naval modernization does not appear to be directed toward the forceful repossession of Taiwan. Importantly, China currently lacks large-scale amphibious capabilities that would be necessary in an invasion. Rather, Chinese modernization seems to follow the established doctrine of “minimal deterrence,” in the event there is a replay of the 1996 Crisis. In particular, the growth of China’s conventional submarine force appears to be directed primarily at preventing potential U.S. military intervention by increasing the costs to unacceptable levels. This stance is further supported by China’s development of anti-ship ballistic missiles. In line with the aforementioned doctrine, China is attempting to counter U.S. strength through developing limited capabilities aimed at exploiting U.S. weaknesses, thereby somewhat insulating Chinese policy from the effects of U.S. pressure.

Contingencies over Taiwan were indeed vital in influencing Chinese naval modernization. Today, however, access to sea-lanes of communication (SLOC) has become the major driving force behind Chinese naval expansion. Continued access to the SLOCs is vital to sustained economic growth, on which the Communist Party has staked its legitimacy. It is hardly surprising, then, that China has engaged in efforts to secure its littorals, home to several critical lanes of commerce. However, these efforts have been viewed with suspicion by neighbors and exacerbated by China’s increasingly assertive attitude, exemplified in its territorial claim to the South China Sea.

Chinese proximity to important SLOCs has given rise to the fear that China does not need to develop far-reaching capabilities to dramatically influence the international community. This fear is particularly strong among import-reliant neighbors, such as Japan. Indeed, many neighbors view China’s improved anti-access/area of denial capabilities, despite claims that they are defensive in nature, as threatening to their economic interests and security.

Concerns over Chinese expansion, combined with the improved naval capabilities of Japan and South Korea, have ignited the potential for a regional arms race despite the increasing integration of East Asian economies. Although China is indeed expanding its influence, the naval modernization need not lead to heightened conflict. Given U.S. alliance commitments and the importance of the region to world economic stability, heightening tension or the outbreak of conflict would prove disastrous. It is therefore imperative that the U.S. and its allies engage in more open dialogue with China over the future security structure of East Asia.

Greg Chaffin is an Intern/Research Assistant with Foreign Policy in Focus.

Fireground Rules, Part 1: When in Doubt, Cease and Desist

Wild FireIn the fire service, we had a simple rule that saved a lot of lives – when things go totally to shit, STOP WHAT YOU’RE DOING!

Don’t do it harder. Don’t do it longer. Don’t throw more resources at it.

It’s not working, so STOP!

This rule applies to US foreign policy as well. In a nutshell . . .

STOP fighting stupid wars. The US has launched some five dozen invasions, ‘interventions, ‘police actions’ and ‘regime changes’ in the last 60 years. None has made the nation or the world safer. All have made the nation and the world poorer. All have cost lives, damaged the environment, and skewed local and national economies. And all have cost the US cash, credibility, status and relationships.

STOP supporting stupid governments. The long history of the US picking and backing losers and criminals continues unabated. The Karzais are no more noble nor capable – and will ultimately prove no more durable – than Diem, Marcos, Pahlavi or Pinochet. America’s support for Israel, Pakistan and Egypt, to name only a few of the current crop of losers and lame-os shored up and funded by the US, is equally stupid and counterproductive.

STOP supporting stupid organizations. From the IMF and the World Bank to multi-national predators, private military contractors and Halliburton, US support of corrupt and incompetent institutions digs an ever deeper hole of environmental destruction, inequity, unrest and insecurity. These organizations have amply demonstrated over the past several decades that they have neither the intention nor the ability to create a better future, so why waste time and money on them?

STOP buying stupid weapons. (Especially the ‘smart’ ones.) Not only is the cost of Cold War legacy weapons a major factor in the impending bankruptcy of the US, their profusion and use further separate both warfighters and the general population from the ugly reality that what the US does best is kill people and destroy nations. Anything that allows that process to be more sterile and remote – more like a video game than the vicious murder it is – allows us to ask only the question of whether something can be done, rather than whether it should be done.

And, finally, to the voters who ultimately choose the policymakers . . .

STOP electing the fools, criminals, liars and corporate whores that currently populate the administration and congress. These are the people who brought you to this dangerous and potentially disastrous point. Unless you want more of the same, stop electing more of the same.

Republican Whip Kyl Sold (Literally) on New START

After Republicans picked up six seats in the Senate earlier this month, prospects for the passage of the new START began to diminish (not that this author minds). Barron YoungSmith at the New Republic writes that last week “chief of staff to Senator Bob Corker — a key vote on the treaty — said that it should not be considered during the lame-duck Congress, and the Republican Policy Committee released a memo urging a similar delay.”

Of powerful Arizona Senator Jon Kyl, YoungSmith writes: “Kyl’s position as Republican whip enables him to command enough Senate votes that he can determine whether New START is ratified or not.” Nor has Kyl demonstrated a fondness for treaties in the past. “I submit that we have to be very careful to avoid relying on treaties to safeguard our security, since the reality is they are rarely enforced,” he said in 2000 of the Comprehensive Test Ban Treaty. But, writes YoungSmith, “bizarrely enough, he seems to want [new START] to go through.”

Turns out, not so bizarrely. Desmond Butler for the Associated Press writes:

In a bid to win approval of [new START] before newly energized Republicans increase their clout in the Senate, the Obama administration is offering to add billions of dollars in funding for the U.S. nuclear arsenal. [To wit] a boost of $4.1 billion . . . between 2012-2016 . . . that will go to maintaining and modernizing the arsenal and the laboratories that oversee that effort. The additional money comes on top of an additional $10 billion the administration had already agreed to over 10 years.

And that additional $10 billion, YoungSmith explains, is “on top of” . . .

. . . an initial massive $80 billion appropriation in Obama’s 2011 budget proposal [that Kyl demanded be] guaranteed over ten years. [In the end] Kyl’s proposal would pair New START with a huge cash bonanza for programs that would make it easier to maintain and upgrade our nuclear weapons in the future.

In other words, according to YoungSmith, Kyl “seems to think that securing long-term funding for nuclear modernization outweighs whatever qualms he might have about reducing our present arsenal.”

Then, a couple of odd statements by YoungSmith. First: “Given Kyl’s apparent passion for securing this funding, it’s no surprise that the White House seems to have decided to threaten the senator.” Most likely, the author and editor failed to notice the absence of the word “not” preceding “threaten.”

Next: “One senior administration official told the Financial Times that ‘not moving ahead … could shatter the fragile consensus on modernizing the nuclear complex.’ Presumably that would put at risk not just the extra $10 billion Kyl has been requesting, but possibly the entire $80 billion proposed appropriation.

Doesn’t the official mean “shatter the fragile consensus on ratifying START”? Because, as the statement stands, it sounds as if he’s more concerned with securing funding for the nuclear-weapons industry than ratifying new START. Maybe he is.

Tax Cuts and Trade: Is Obama Triangulating?

Cross-posted from the Dissent Magazine blog Arguing the World.

It was about this far into his first term—back in late 1994 and early 1995—when President Bill Clinton truly fell under the spell of malevolent strategist Dick Morris. Stung by the heavy losses brought on by the “Republican Revolution” in the 1994 midterms, Clinton began to believe that his only route to reelection was to tack to the right and steal some of the conservatives’ thunder on issues like welfare reform and federal deficits.

Morris, who was only forced out of the White House after a sex scandal and who has since exposed his true political stripes as a FoxNews commentator, thought triangulation both a brilliant political strategy and a generator of fine public policy. The remaining liberals in the Clinton administration disagreed. As the Economist notes, George Stephanopoulos incisively labeled it “a fancy word for betrayal.”

Not yet two weeks after the 2010 midterms, and just two years after Obama’s campaign of “hope” and “change,” there are troubling signs that the current president might be tempted to follow the same path as Clinton.

Obama’s first move after the midterms, already much criticized by progressives, was to express his willingness to cave on Bush tax cuts for the rich. This one felt to me more like a gutless compromise than a calculated shift to the right. And, on the hopeful side, the White House is now backpedaling, indicating that the story was overblown and Obama’s pre-midterms position hasn’t changed.

There’s no detectable silver lining, however, to the president’s drive to push forward the Bush-negotiated, NAFTA-style trade agreement with Korea. While it appears the deal has stalled for the time being, the denunciations of the neoliberal “free trade” program that Obama once used to attack rival candidate Hillary Clinton in the Democratic primaries are now long gone.

Given the composition of the administration’s economics team, this flip-flop is not surprising. There were signs of it already back in 2008, when Obama quickly tried to moderate his earlier stances during the general election campaign.

Nevertheless the maneuver is a sad one. While triangulation arguably worked for Clinton (he was reelected at any rate), rightward moves promise few benefits for Obama. A too-small stimulus meant that unemployment remained higher and anger about the economy greater than might otherwise have been the case going into the midterms. It also produced an uninspired Democratic base, resulting in a low-turnout election that favored Republicans.

Likewise, the trade deals on deck with Korea, Colombia, and Panama are bad not only because they seek to expand a flawed economic model, but also because “free trade” is a political loser. The Democratic base is firmly in the “fair trade” camp, disenchanted with neoliberal policies, and an anti-NAFTA message also resonates with the wider electorate. As Public Citizen has documented, “House Democrats that ran on fair trade platforms in competitive and open-seat races were three times as likely to survive the GOP tidal wave than Democrats who ran against fair trade.”

Global Trade Watch Research Director Todd Tucker has gone so far as to call compromising with the Republicans on pending trade deals a “political death wish” for a president who will soon be seeking reelection.

After Obama’s first year in office, I gave the administration a “B“ on trade policy, on the grounds that no news is good news. As long as unfinished “free trade” deals remained bogged down in negotiations and are not an administration priority, I am willing to judge the situation as no harm, no foul. But it’s a different story if the White House starts investing any real political capital in advancing these deals.

Even worse would be if Obama keeps his backbone as well hidden from public view as it has been since the midterms and turns to triangulation, imagining that moving right on trade would be politically beneficial.

Mark Engler can be reached via his website, Democracy Uprising.

Aung San Suu Kyi’s Plate Is Already Full

The New York Times reports that the release of Aung San Suu Kyi “just five days after an election that recast the structure of military rule in Myanmar” — poured more cement into the foundation, that is — “suggested that the generals who rule the country were confident of their position and ready to face down the devotion she still commands both among her countrymen and among Western nations.”

By “face down the devotion,” doesn’t the Times staff means “yield to the devotion”? One of Burma’s ruling generals’ incentives for freeing Suu Kyi was to provide a key human rights indicator that the West could point to when making the case that the time has come to lift the embargo and sanctions on Burma before China corners the market all its resources.

Meanwhile, of Suu Kyi’s stated intention to return to the human-rights fray, the Times reports that she “will be re-entering a battleground more complicated and difficult than the one she had faced in the past.” For example, partly at Suu Kyi’s behest, her party, the National League for Democracy “declined to take part in the election, calling it unfair and undemocratic, and was required to formally disband. But Mrs. Aung San Suu Kyi was assailed for that decision by party members who saw the vote, however flawed, as an opening. . . . ‘She’ll be facing a mountain of expectation and challenges,’ said Aung Zaw, editor of The Irrawaddy, a Thailand-based exile magazine.”

Besides the internal divisions in her party, Suu Kyi is also being asked to address the results of the election and the fate of other political prisoners who remain behind bars. Meanwhile, Burma’s festering wound, the junta’s oppression of the country’s ethnic minorities, has become inflamed “over the junta’s border guard force . . . plan aimed at assimilating all armed ethnic groups under its command.”

Suu Kyi’s freedom, the Times concludes “may be a burden as much as it is a liberation.” Let’s not make her feel like being sequestered in her house was so bad after all.

Page 153 of 177« First...102030...151152153154155...160170...Last »