Renegades!

101 Things To Do In A Market Sell-Off

2008-10-11T15:06:00.000-07:00

Oh just take it or leave it
And take it or leave it
Oh take it

Oh that's right, he's gonna let you down
He's gonna let you down
He's gonna let you down.
And gonna break your back, for a chance
And gonna steal your friends, if he can
He's gonna win someday
Oh he will
--The Strokes

Here are a few thoughts on the current financial and economic crisis, that you can take or leave, and add to your own analysis of the situation:

Don't Sell Your Stocks At This Point

If you are invested in blue chip stocks and haven't sold out by now, there really is no point of selling. Look at the historical trends during a downturn - If you had locked in your losses during the last downturn in 2001, there were huge gains that were lost in the aftermath if you had a stake in the main players. Unless you are going to retire in the next five years, just hold your head, dig deep and keep buying over the downturn in small measures to reduce risk and come away with larger returns in the upturn. It sounds like a bad bet, but Canadian blue chip stocks are in reasonably good shape and have adequate capital reserves.

Currently, the key Canadian stocks of national and international importance are our bank stocks, which are priced at 10:1 P/E, which is low by any measure, especially since historical prices of the US market trend towards 15:1. It's true that the future earnings of our banks will may be reduced because of the downturn, but so far, we appear to be in good shape, economically, and by comparison with other western jurisdictions (ie: Europe, the US) we are a great buy. Yes, things will get worse, but is anyone worried that the big Canadian Banks will go under? Not a good bet (knock on wood).

The Depression Matters - But Its Not That Bad. Yet....
There are historical parrellels that matter - a bursting bubble, liquidity issues, and a lack of confidence in the financial system. The mistakes of the Depression are legendary, and well-known to anyone with intro-Econ classes behind them, and not likely to be repeated...mainly.

Ben Bernanke, for all his detractors' legitimate issues with him, is amongst the top experts on the depression, and his appointment now seems like clairvoyence. The main regulatory mistakes were:

Tight monetary policy - the governments of the day were keen on strengthening their currencies to stop capital flight. Today, capital flight is occuring in the US, but the Fed is keeping its head and telegraphing its need to reduce interest rates to keep liquidity high. In a stroke of enlightened internationalism yesterday, the world's central banks all decided to drop interest rates by a half percent. Good work, policy wonks!

Tariff barriers were raised - In the Depression, tariffs went up to protect domestic industries in the US, and Europe answered in kind, throwing many wrenches, big and small, into the cogs of capitalism. Yes, the Doha round of talks at the WTO is on its deathbed, but tariffs have been on a historical downturn for better part of a century, and with the free markets of the Euro-area, ASEAN, APEC, NAFTA, and other FTA's, the open borders will keep commerce moving and prevent unilateral tariffs being raised.

Delayed Action - The Depression wasn't just famous for its poor decision making by governments, it was also known for its initial lack of decision making. In the US and in Canada, laissez-faire ideologues in executive roles meant that the market downturn and bank failures would be left to market forces. In the US, Bernanke seems to have gotten the message...but in Canada...?

...But There Are Mistakes Being Made
For all the good things that the US federal reserve is able to do, there are some problems outside the US that are going to be issues in the short to mid term:

Europe Lacks Unity - While we can be glad that the EU has a common economic and interest rate policy in this disaster, the lack of common policy on securing bank deposits or coming up with a common bank bailout fund mean trouble. The problem is that the EU may be already burdened with long term Euroskepticism from some quarters, already at odds with massive centralized spending from Brussels. Who in Northern England will want to see more money spent in bailing out banks failing in Poland? Merkel came out against Ireland guaranteeing Irish bank deposits, and promptly took the same action the next day.

Let's hope Europe gets its act together and realizes that, yes, bank failures in one corner of the EU could have a disastrous local effect (see Iceland's bank meltdown that had ramifications for depositors in Norway).

Running Balanced Budgets In A Recession Is Not A Virtue
I am a fiscal conservative, partly because of my disgust over waste during the Chretien years, when one Liberal minister famously said in discussing a budget "Y'know, a hundred million here, a hundred million there...pretty soon your dealing with a lot of money."

Also, there is a real moral issue when we consider the waste of government on an individual basis. How can we turn a blind eye to government waste of even a million dollars, when for many of us, that may be the culmination of a lifetime of paying tax? If an official can blindly throw the life's work of a Canadian down the drain with couple expense accounts of senior Ottawa officials, there is a moral necessity to keep a tight leash on government.

I've worked in government before, and I have a good idea of some of the issues surrounding government waste at a provincial and federal level. I know why there is a push for tight budgets from the public as a whole, and why in Canada it has become a moral obligation for governments to keep spending under control. I remember the end of the Mulroney years, and years under NDP governments out west where NDP leadership had no idea of how to form a budget, and the Bush years in the US. These are not lost lessons on myself.

I realize the perils of deficit financing (ie: interest payments, lowered credit ratings) and we do not need to the bad old days of ramping up spending in to the stratosphere.

However.

Canada and other G7 nations should not be held hostage by balanced budgets in a time of crisis.

If keeping our financial system in tact and liquidity high means that we raise our national debt by 1%, let's keep our potential deficits in perspective of the total national debt and the total GDP. Canada has a debt of approximately $400B, which is big but manageable in terms of our GDP of approximately $1.2 trillion. We have come a long way from a time when our national debt was almost 100% of our GDP and that is something we can thank Paul Martin (I hated writing that) for.

But what were we preparing for during the Liberal years when they created a contingency fund? Why did we care if we had high credit ratings during the years Canada was flush with cash if we couldn't utilize our relatively low debt levels to take on marginally more debt during a downturn?

The rainy day is here. We need to loosen the purse strings to keep things going, and yes, possibly run the risk of going into the red. I don't like it, but that is the reality of the current situation. That doesn't mean wasting money, and it doesn't mean opening the flood gates, but prudent government spending in a downturn will stave off some of the worst of the affects of a crisis, but the time to spend is now.

If a government waits too long, the possible positive affects of spending may not be felt until the downturn is over, meaning a wild whipsaw of an overheated economy during the upturn. The current government's inaction and lack of foresight may force poor and delayed decision making on this issue, and I hope it's not too late.

And finally, the silver lining....

Music Is Going To Get Better
Every economic downturn of the last 40 years or so has meant better music.

The first bad downturn during this period, was in the late seventies, which meant an end to glam rock, and bloated, private airplane touring, coke-binging supergroups, like Eagles and Led Zeppelin, which were way past their time, and gave way to leaner, meaner, DIY artists, intent on creative destruction. The Clash, Sex Pistols and Ramones effectively demolished the professional, executive run and polished sound of established and uninteresting studio artists.

The garage-punk bands may not have had the technical excellence (Joe Strummer and Co. could never pull off the live, dual guitar solo of "Hotel California") or audio precision (see: Steely Dan's "Aja", vs. The Clash's self titled debut), but what they lacked in corporate polish, they made up for in energy and creativity.

They took a science and made it an art again. They took an architectural blueprint of precision and made it a Jackson Pollock ink splattered mess.

The second instance of this phenomenon was the 90-91 downturn, which really started during the end of the eighties, post-87's Black Monday. The late eighties music consisted again, of the monolithic glam rock bands like Poison, G'n'R (yes, they didn't get out of this unscarred), Def Leppard, Van Halen, Bon Jovi, Skid Row, and others. While the Stooges and MC5 were the undercurrents of garage music that was under the radar before the emergence of the Ramones, the Pixies and Jane's Addiction defined the undercurrents of Alternative and Grunge before Nirvana.

As soon as Nirvana arrived, the idea of a Van Halen album and accompanying tour with oversized mullets, neon tights and synth riffs became ridiculous.

Fast forward to the late nineties/early millenium, and superselling boy bands, the modern day Bay City Rollers feasted on high disposable incomes and again highly polished music industry that focused mass attention on a few chosen pop groups. Almost as soon as the era of starlets and boy bands had begun, 9/11 and the long downturn of the US stocks and economy catapulted garage bands back to the forefront. The Strokes were the dark horses, coming out a previously stagnant NY rock scene, only to lead the charge of the Hives, the Vines, the Libertines, the White Stripes and the Yeah Yeah Yeahs.

Today, the oversized, over commercialized superstars that are due for a hard fall are obvious. Turn on commericial radio, and they consist of two categories of douchebags - the high flying R&B/Rap artists and the Nickelback, Default, Theory of A Deadman axis of rock evil.

While rap was, and is on certain levels, the greatest of subversive music to emerge from the late seventies, it is almost certainly due for downfall, similar to the early nineties, where the street artists took over from their overly commercial and wealthy brethren. This revolution was typified by one event, when LL Cool J, turned up for an charity event in the late 80's, with Mr. T type bling on, and was roundly booed by all who attended. It was the age of NWA, and the size of your gold chain(s) was being inversely proportionate to how "real" you were.
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To summarize, Canada is going to whether the downturn, but we and the Europeans are making mistakes that need to be corrected, and so far the best jurisdiction dealing with this crisis from their Central Bank is, suprisingly, the US. And music is going to get marginally better as the Age Of Bling dies a horrid death. Again.

I hereby kill my last post about the East Vs. the West

2005-10-10T20:24:00.000-07:00

UPDATE:

I really didn't like the post about Rural Revolt. When I read it I'm reminded of Orientalism by Edward Said I think that it is based on some very poorly constructed stereotypes about the east and the west.

I really think the ideas we have as Westerners about the East and vice versa should be critiqued and reviewed, but that was not the way to do it...I hereby disavow any opinions cited in my last post:
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Koizumi: Latent Renegade Reformer

2005-09-01T23:12:00.000-07:00

In my own personal conversations with many Japanese people over the last year, I asked a few questions over and over again: How many famous Canadians do you know? Answer: um...just Avril Lavigne. Where have you travelled? Answer(s): Australia,Bali, or Los Angeles. What do you think of Junichiro Koizumi? Answer: (Awkward grin and a shake of the head.)

Digging deeper, I found disappointment with Koizumi, a man that rose to prominance on the world stage in 2001 promising reform of the cozy power system that had failed Japan badly after the Nikkei crash of 1989. But the power brokers of industry, government owned business and finance did not relinquish power over the Liberal Democratic Party. With the rise of the long haired rebel, the people of Japan saw a glimpse of renegade who promised to destroy the old order and bring Japan's government into the same century as its futuristic technology sector.

Of course, part of consumer/voter satisfaction with any good or leader is partly based on expectations. Those in customer service are told to "under" promise and "over" deliver to set low customer expectations and then blow those expectations out of the water with (theoretically) outstanding service. Koizumi, for his part, believed at some point he could take on the huge ship of state that is Japan and muscle it to a brighter future. And like any idealist who achieves power, things began to look very different from the top looking down. Simple solutions to simple problems become simply unworkable, or in some cases not immediately available.

Koizumi decided to start small with reform and began setting low maximum bad debt allowances for the banks in an effort to rid their balance sheets of the "Zombie" companies that have plagued Japan since time began. These poorly run construction and public works entities subsist on a neverending supply of loans from the huge Japanese banks (who were usually coerced by the government into issuing the financing). The zombies could get away with getting more cash with the ever shrewd Enron tactic that goes like this "If you cut off our cash, you won't see a dime of your other loans again". Under the new administration the banks were pressure to start calling in the loans or writing them off-But this is hardly the stuff of revolutions.

No politician gets a great headline out of "New Bank Regulations Put Thousands Out of Work". And even worse, the tangible results of his efforts were hidden because one lender was still (and continues) propping up the zombie companies. One lender was still financing the massive infrastructure programs in Nara Prefecture that saw millions wasted on expensive and redundant public rail lines soaring 20 Meters above the rural towns. The world's largest lender was still crowding out investment in package delivery, finance, banking, and insurance.

The Post Office.

With wide public support, Koizumi has found an issue to shake out the old guard of his party into open insubordination and rebellion: The privatization of Japan's Post Office. And with the old guard vowing to hold a last stand to protect the institution, those rebels have found themselves politically isolated from their party and the Japanese electorate.

Freed of the internal party albatross, Koizumi will be able to finally shake off the inertia that has kept Japan's financial reform in park for 15 years. From the outset it was a gamble by both sides: Koizumi and the old guard. The entrenched conservative leadership believed they would survive by promoting the appearance of reform by hoisting Koizumi on their shoulders, while Koizumi believed he could turn the tables on those who brought him to power. Koizumi, having come out on top, will now have an opportunity to overhaul the stagnant economy and a powerful mandate for reform and rejuvination of the Japanese islands.
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Crossposted @ Shamrocks!

Call And Response: Softwood Retaliation

2005-08-26T00:08:00.000-07:00

Above the 49th parallel, the rhetoric from (surprisingly) both sides of the political aisle has become heated in response to the American intransigence over softwood imports. The US, having told a meeting of first ministers (via their ambassador) that Canada should quiet down and negotiate, has been relaxed and unconcerned about possible trade ramifications. While Canadians fret over the end of North American treaties and a deterioration of trust in joint declarations with the US, the US has carried on with a business-as-usual attitude.

The problem facing Canada is: What next?

What is the appropriate response to the actions of a larger opponent who neither sees you as a threat, nor seems to notice your existence?

One suggested response to the softwood dispute sees Canada tacking huge tariffs on California wines headed for the northern border. This idea seems plausible, given the mulitude of wines stocking Canadian shelves and the wide range of substitutes and replacements for the Cali wine. The problem is that the US government is not under pressure from California saw mills to apply softwood tariffs, and it is not sensitive to the demands of Californians, regardless. California, on a federal level, is Democrat country, and the administration knows it. President Bush has never even visited San Francisco in either of his presidential terms, and has no plans to do so. Striking at the heart of the Napa Valley with tariffs might put a dent in the bottom line of the extras from "Of Mice And Men", but that mosquito bite will not register in the Red States that Republicans are banking on to re-elect them next year in the senate.

A more interesting retaliation tactic has Canada "embarrassing" the administration through a New York Times advertising assault: A propaganda campaign designed to humiliate the administration into submission. The logic is that Americans are simply unaware of their governments' actions, and that a full fledged expose' would start a media avalanche that ends in the dropping of Softwood tariffs. The problem is that a media campaign with a target market of people already disillusioned with the Bush administration will have minimal impact. If these same readers failed to stop their own country from going to war, would they think their efforts on behalf of Canada would succeed? Probably not. They would check their schedules and see that lounge singer they love is playing at that quaint cafe in the Village the same night as the "Save Canadian Lubmer" protest.

Then there is the nuclear option: Oil. Canada has it. The US wants it. For our federal government, oil has never been off the table in terms of trade leverage and in public communications and in trade negotiations, it never should be. Oil, whether special interest groups like it or not, is a threat that has the power to unhinge the US from its negotiating positions. In today's markets, we may not have the ability (politically or logistically) to direct all of our imports away from the US or impose massive tariffs, but we can take actions that will compromise the US' energy supply from Canada while keeping our oil exports expanding. The answers to our problem? The subcontinent and China. The CIA has only recently recognized that Alberta has the second biggest oil reserves behind only Saudi Arabia and the huge oil fields of the coast of British Columbia are money in the bank.

The prospect of interrupting oil supplies also rears its head in the far north, where the US is planning the drilling of Alaskan oil to alleviate American dependence on foreign oil. The problem for the Americans is that all of the proposed pipelines go through Canadian soil and that means leverage at the bargaining table. While the government has struck deals with the Natives of the Mackenzie River Delta, it could simply hold up building the pipeline until softwood tariffs are dropped. This could be a hot button issue in the House this fall as there is scheduled to be a vote on the proposed drilling. Canada might use this opportunity to draw attention to softwood while Republicans face a potential huge political loss going into an election year.

One viable option is: Canada should begin to trim future participation of the US in investment deals on the oil patch where all else being equal, India and/or China present a competitive bid.

The expansion of Canada's 44B oil and gas industry and an expanding market in the east present an interesting prospect for the Canadian economy. If Canada can expand its oil and gas exports to the east, it could begin to build profitable trade relationships building on that one industry. Valuable trade relationships could be forged, preferable with India, a country with a shared history and a similar value system to Canada. And with human capital in British Columbia providing a valuable link to both nations, Canada has only to push open the door to expanded trade with both nations.

In the long run, Canada should see that the problem lies not only in the US' lack of honour in trade agreements, but also our dependence on the US. While Canada manages to keep a low but positive profile on the world stage, it has failed to turn that into a commercial advantage and suffers from a lack of diverse trading partners. While most countries would cringe at a 85% single source export market, Canada has sat on its trade laurels since NAFTA's inception, signing few trade deals of significance. As a result, Canada has been vulnerable to change in US government policy-policy from a country that has strong protectionist impulses at the best of times.

The solution is mult-faceted and complex, but we need to become part of other trading blocs. One key bloc that is maturing and growing in the most dynamic region of the world is ASEAN. Canada's own Westcoast has numerous ties with the Far East, and would make a natural fit a Pacific trade partner to this expanding group. Opening southeast Asia to Canadian trade would mean vast resources of markets and people for Canada, and a reciprocal market for those in Asia. The next trading bloc that Canada needs to make inroads with is the European Union. Again, Canada has numerous ties to Europe (and is frequently lumped in with Western Europe on all kinds of issues) but has failed to turn those ties into trading relationships. While it would be unrealistic to think in terms of acceptance into the EU, a strong trade treaty would see Canada as trading partner with access to both North American and European markets.

In the short term however, Canada has to be ready and able to anihilate American resistance to abiding to international law with concentrated action in direct retaliation with a shot across the bow to set the tone for future Northwest Passage talks (which incidently would be the loophole in a Canadian decision to block a oil pipeline from Northern Alaska). In the long run, Canada has to start diversifying its trade away from the US, and into growth markets with oil and gas markets initially, and later with comprehensive trade agreements.

African Debt Relief: Moral Hazard and Internal Politics

2005-07-04T05:00:00.000-07:00

The G8 is considering massive debt relief for African nations that are breaking under disease, interest payments, AIDS, periodic mass slaughters and other calamities that unfortunately and predictably plague the dark continent. A reasonable person might be forced to ask "Well, if debt relief was all it took to help these nations, why haven't the West dropped the debt before now?". A quick review of the state of the G8 might reveal that the inertia on this issue is not simply a case of neglecting a poor neighbour. On the contrary, aide to Africa has been one of President George W. Bush's pet projects, upping per year aide to the continent to the tune of $15B. In fact, there are two key stumbling blocks that keep the G8 and other countries from eliminating African debt: moral hazard and the internal politics of the G8 nations.

The fact is that several of the G8 nations are stumbling with their own debt, making massive relief of African debt, or "foreign" debt, a non-starter. Both France and Germany are running huge deficits, breaking the European Union's stability pact. This is a big political worry for Schroeder, as he approaches an almost certain loss in the elections later this year, and for Chirac, who has already suffered a loss on the EU constitution. For its part, the US is grappling with a rapidly expanding debt due to the double deficits, and a 5% budget deficit. Italy's Berlusconi will also have a tough time selling foreign debt relief when Italy is struggling with a debt load of over 100% of the GDP. Japan, while being extremely generous with cash for poorer nations, is in a similar bind with a debt load approaching 150% of GDP. As much as the G8 nations would like to drop the debt, their own political situations complicate this.

The next problem is known as the moral hazard of forgiving the debt of dictatorships and military juntas, whose borrowed cash ended up in the pockets of the ruled rather than the hands of the needy. To forgive the debt would be a de facto forgiveness of the actions of those horrible leaders. Uganda, for example, is now a shining beacon of light for sub-Saharan Africa. After years of slaughter, the country seems back on track for the most part. But even under the careful guidance of Museveni (does that rhyme with "Mousolini"?), over $100M/year of the budget is diverted from general revenue to kickback schemes and mismanagement. While in Canada, this might be sniffed at as the yearly shenanigans of a Liberal government, in Uganda this a proportionately huge number. And the donors that contribute one half of the budget revenues are getting nervous. Just as problematic has been the revelation that for Africa as a whole, over $148B/year goes down the drain in corruption related activity.

What's the solution to this corruption and the problem of selling debt relief on countries with their own debt problems?

Corruption, of course, is not an easily solved puzzle. But a culture and history of corruption aren't the death knell of reform. Most corruption centres around monetary payoffs, so the cynic might conclude that the only way to combat a monetary incentive of graft, is to outbid it by a monetary incentive of reform. What can achieve this? Set stringent targets for the creation of democratic and healthy nations (free press, civil rights, multiparty elections, etc) and working capital markets (foreign investment targets, strong central banks). If targets are met, then more debt relief will be given. Start off with low benchmarks and make them progressively harder to reach. A smarter approach would not be to limit these benchmarks to one issue or another, but eventually have graduated debt relief (or aid) for a variety of problem areas for Africa. In a nutshell, the idea is to make the eradication of every awful vice that plagues an African nation a potential windfall for their people.

For donor nations, the small, initial amount of debt relief will be an easy sell, while larger, more substantial debt relief will be down the road. The idea is that by the time the continent has cleaned up its act, the West's electorates will be used to the idea of graduated debt relief, while their leaders will have their own books in order.

A more constructive idea, is to get money past the NGO's, the unproductive UN, the ghastly governments and the do-gooder Christian missionaries (more intent on conversion than relief), is to drop the trade barriers to African agricultural products. Currently, the West spends over $300B subsidizing the Common Agricultural Policy of the EU and the Midwestern US farmers who recieve on average almost $160,000/year. Japan, for its part, stops imports cold with massive tariffs on outside food making its way to Japan's shores. In conjunction with graduated debt relief, the West could make tariff relief a prerequisite.

If there were a common, comprehensive initiative amongst the G8 to push for the relief of debt (over the long haul) and tariffs, Africans might see a real improvement in their standard of living. For the time being, Africans will need to wait for a healthier economic west, more willing and able to help than its present form, more intent on pleasing a home electorate.

Top Ten Things I Learned In Japan

2005-06-02T00:04:00.000-07:00

My days in the Land of the Rising Sun are coming to an end, so I'm running down some simple lessons I have taken in:

10. In Japan, a customer at any pub/restaurant is required to first declare "Itadakimasu!" as word of thanks before eating and then eat every last grain of rice left in any given bowl. To accomplish this task given only chopsticks, hold the bowl sideways while pressing the chopsticks flat against the inner surface of the bowl and scrape the rice out.

I don't speak Japanese, but I can sure eat Japanese.

9. Liberally apply social grease in any social interaction. Being polite and deferrential goes a long way towards harmony. There's your moment of zen.

8. Bowing is cooler than shaking hands. A cool combination of the two methods is even better. If you can work in a smile and "pounds out", then you're the man.

7. Green space is important. You never really appreciate it until you don't have it anymore...They paved paradise, to put up a Paschinko parlour.

6. Be patient... except if you are wearing a different country's logos and gear.. Then by all means go to town..."Damn those Norwegians. So impatient!"

5. If you ever think minorities are overly sensitive about their status or tribulations, just try living as one for a while.

Know what I'm sayin', J-Roc?

4. Never try to 'wing it' from Kansai Airport to your 'hood. If it should only take 90 minutes, it could damn near take 8 hours and a sore back if you don't know what you are doing.

3. Acoustic guitars are more awe-inducing than any other instrument....just don't bother trying to take one through the Osaka subway system during rush hour.

2. Get out of your comfort zone and stay outside it--that's my submission for a "No Fear" t-shirt slogan, anyway.

1. Gambatte! Attempting to do your best will determine success more than natural ability, or aptitude. "Gambatte" translated into Canadian is roughly:

"Go hard 'r go home, eh?"

Non Comment

2005-05-01T08:45:00.000-07:00

On May 29, 2005 the French will vote 'Non' in a referendum, killing the ratification of the European Constitution and will imperil the existence of the EU.

That's the way things look as of today. The Non side has gained a sizable advantage against an enfeebled graduate of ENA and leader of the political class, Jacques Chirac. While it would be easy to say it is simply a test of his leadership, but the truth is that France is beginning to feel as Euro-Skeptical as its uneasy northern neighbour, Britain. Mais..Pourquoi? France is unquestionably the most influential member of the EU, and had the most say over the constitution's writing. If it were not stated explicitly that Brusselles was the capital, one would surely assume that Paris was running the show, and only from Paris because Versailles ("Toutes Les Gloires De La France") is such a great tourist trap. France has reason to throw the baby and the bathwater on the heads of the political class that has dragged country into what has been a great economic and political success for France, but has thrown the people of France into a serious existential fable with only a Camus-like ending: Frustration, violence, inner turmoil, ethnic strife and a rejection of the world.

The growing skepticism that the EU inspires in France is not confined to one issue or another- it is a mosaic of problems that will be the heard in the voice of the French voters. While the administration of France has surged into post-Catholic, post-modern, post-communism and post-pill world with policies that fill the unskilled workforce with ghettos of disenchanted Muslims from former hellhole colonies, the French people have had to learn to deal with their compromised existence. In many Western nations, immigration has been a blessing that has constantly reinvigorated nations. In France however, there has been no effort to bring Muslim immigrants into the identity of France. They are a forever excluded group, dwelling in massive unpoliced and violent hoods, devoid of French language, culture or schooling. Instead of assimilation and acceptance, the French have dealt with new immigration with a pc solution (replace aging workers with young muslism immigrants), with decidedly un pc coping mechanisms (banning head scarves). The result is a burgeoning underclass of angry voters and parallel powers (an emerging Islamist movement) that threatens the values of the French Revolution.

The inability to assimilate and accept immigrants is only one of many problems. Another key problem for France is that it is has emerged from the most influential of the original six members to being one of the many twenty-five nations begging for recognition at the European dinner table. While France was one of only two nuclear powers, a larger population nation, and a significant economic power in the old union, the new union is becoming a haven for the eastern pro-US republics seeking shelter from their abusive Ex, the USSRussia. In essence, the EU's ship of state is far too large for any one nation to steer by itself, and the former Captain can no longer determine its course.

The enlargement of the EU doesn't just mean that Frances' relative size and power will be diluted, or that hostile immigration will inflame social tension, it also means that these that these two poison pills of accepting the constitution will be realized by one event:

Turkey's acceptance into the group.

Turkey, long a bridge from Europe into the wider continent and a symbol of hope to Middle Eastern democrats, represents the culmination of France's decimated power and increased social strife. If accepted, France may well fear that the gates of holding back the swarm will be lowered, and the nation will be overwhelmed by the massive eastern counterweight of 70 M Turks. The EU has already started its talks with Turkey, but to many EU voters it is a sure sign that their worst fears may be confirmed and that the rapid changes that have changed the face of Europe will continue.

This is say nothing of the growing trade disputes and stability pacts that have threatened France's heavily subsidized pastoral farms, the very mythic setting of France's past held close to the heart of every red wine swilling Frenchman.

France's Oui side may yet pull something out of its hat to save the referendum, but for the time being, the French Government and the Eurocrats will be dusting of plans B through Z to deal with a Non vote and those alternatives do not look pretty. While France can go back to the voters time and again until a Yes vote is secured (a la Ireland), Britain and the Netherlands will be voting in the meantime and will be heavily influenced by the outcome of this French vote.
It is possible that there will be a retrenching of power, where the original six maintain their relationships, while limiting the power of the newcomers and immigration from the East.

Whatever the outcome of the vote, the French will need to find solutions to its internal problems that cannot be swept under carpet of a decent economy and an ability to punch above its weight on the world stage.

Land of the Rising Tension

2005-04-14T05:17:00.000-07:00

The images of Japan in the west have been shaped by half-baked movies that Japan has rightly assumed to be the only images that the west understands of an ancient culture. To the western mind geishas, an undefinable wisdom, Godzilla, high tech electronics and compact cars are the staples of Japan's image. Perceptions of Japan, an inwardly focusing society, have alternately changed how the Japanese view themselves and their outward policies. One perceptions that Japan has held onto is that Japan was a freedom fighter in World War II for Asia, and that it's own suffering was comparable to any other war 'victim'. Memorials for the war dead at Yasukina and citizens from Hiroshima, Tokyo and Osaka concentrate on the Japanese experience and carefully avoid the awkward admissions of guilt from WW2.

This inward focus on the Japanese experience has meant that Japan has been able to pull away from its international responsibilities. While Japan has been under military protection and occupation, it has been able to be once more in a protective coccoon that combined with harsh immigration laws and a its northern island status allows Japan to watch the 'fire across the ocean' from afar. In the first Persian Gulf War, Japan pledged over $12 B. to defeat Saddam, and contributed a heavily protected SDF unit of a few hundred for the sequel.

The inward focus has had a disasterous affect on the nation's foreign policy towards its greatest asset and potentially its greatest threat-China. While Japan indifferently sees the rise of China, only pausing for an instant to consider that its new largest trading partner is now China, the mainland is viewing Japan a potential rival for influence and power. China, now feeling its own strength after a humiliating 200 years of foreign submission from abroad, is feeling a renewed nationalism bordering on jingoism. Recent trangressions ranging from the completely irrelevant and meaningless (A Japanese orgy at a Shanghai hotel, approval of rightwing history textbooks) to something more important (Japan competing in offshore oil reserves along international borders) have brought the Chinese into the streets to protest. While many protests have the Communist Party seal of approval stamped all over them, there is a widening allure of protests as the uprising against the Japanese lets off some steam for the disenfranchised Chinese, numbering in the tens of millions, while giving the Chinese leadership a free hand to take a hardening line in Japanese negotiations.

While using historical grievances and minor irritations with an unpopular neighbour (or people) takes the pressure off a government, the Chinese seem to be taking the aggitation a bit far. It may be possible that the Chinese are aware of the Japanese indifference to China's feelings on a range of issues, and are simply using Japan as a lightening rod for widening disparity on the mainland that has causes signficant social tension. Japan, plays the indifferent hegemon role to a 't', similar to most powerful countries such as the US,that pay little attention to self-conscious neighbours (Canada).

This will change in the near future.

While China pursues its 'string of pearls' strategy along its western and borders, shoring up monitoring posts and military ports in Pakistan, Thailand, Malaysia and India, it keeps the US at arm's length, using Kim Jong-Il as the freak on a leash to keep the US bases away from its borders. India, for its part, has buried the hatchet with China, opening trade deals and an a gentleman's agreement on competition in far away oil fields where the Chinese and India struggle to keep supply open. While China seeks a 'Molotov-Ribbentrop' pact with India to keep it all quiet on the western front, it can focus on Japan, Taiwan and the US.

While China is looking to take on the West's local allies, Japan has been its diplomatic and domestic best to (unintentionally) prod the Chinese. Japan, looking westward for the goodwill of the US upped the tensions recently by signing military accords that amount to a diplomatic coup by the US, as Japan has openly sided with the US against China in the event of a war in Taiwan. This came hot on the heels of the approval of a history textbook that whitewashes the heinous crimes of the Japanese during colonial rule and throughout WW2. In the West, such an uproar over a book seems to be an overreaction, but if it was an isolated event it would be nothing. Japan's youth however, and much of Japanese society treat the pre-WW2 era as some aberration in their history that is shamefully put in the attic never to be talked about, like a crazy old aunt. This contrasts harshly with the Germans who faced up to their crimes quickly and started to heal, while the Japanese never hear about the Rape of Nanjin, the 'comfort women' from Asia, or the massive civilian massacres in the Phillipines. The war criminals from these atrocities are buried at the Yasukina Shrine, a shrine Prime Minister Koizumi visits yearly. If, for example, Gerhard Shroeder decided to visit Nuremberg to honour the German war dead from the World Wars, the uproar over Europe would be deafening. Koizumi, and recently Taiwan's Premier, Lee have visited the much publicized Shrine, only to hear scathing criticism all over Asia.

Taiwan, having secured a military backing from Japan, and a visa free visit for their leader, now enjoys tighter relations with its colonial master. Taiwan, from its own mildly positive experience under Japanese rule, still speaks Japanese in some quarters, and does a fair amount of trade with its northern neighbour to the ire of China. Japan has done nothing diplomatically to soften these blows to China, even hosting the Dalai Lama recently to put the icing on the cake.

The picture painted here is of a strong but inward looking nation (Japan) handing every opportunity to China to paint the Japanese as irresponsible for the ultimate prize that Germany, India and Japan are all vying for: permanent membership on the UN Security Council. While Japan can point to its economic power and population as reason enough for its 'peerage', China is taking steps (with Japan's ample help) to paint Japan as irresponsible in its Asian leadership, while bolstering India's membership. This is where it gets interesting: What is China trying to do? Why is it pumping up the public relations blunders of Japan, and amping up its own anti-Japanese sentiment to deprive Japan of a seat? Why would it wasted its own political capital on history textbooks?

There are several reasons, but two become more and more evident: Taiwan and North Korea. China rightly sees that Japan has sided against China in both of these contentious issues and therefore is firmly in the US' corner. Another seat on the UNSC would divide the voices claiming to speak for the Far East on these issues and dilute China's power to persuade the UN on these issues of strategic importance (North Korea and Taiwan) and manifest destiny (Taiwan). With the US' views being fronted by Japan, a proxy battle could erupt over influence in the Far East being played out in the UN's halls. If China can successfully thwart Japan at the UNSC while landing India a seat (Singh is already in debt to Wen for a variety of reasons), India will be obliged to tow China's line on matters of no importance to the subcontinent:

North Korea and Taiwan.

Strangelove: Libertarianism + Society

2005-03-20T22:32:00.000-08:00

No one ever accused Libertarians of being boring.

They can be dyed in the wool entrepreneurs who happen to hate paying taxes, highly paid individuals who resent all forms of collectivist thinking, or even free spirited good timers who don`t appreciate the government intrusions into their lives. The actual character of the Libertarians themselves is relatively unimportant, although they appear to be intelligent and well versed in Ayn Rand`s writing and philosophy. Despite their background or opinions, they agree on one thing: government must be stopped or dismantled completely. This is the essence of Libertarianism: a certain contempt for the organization of a nation and its rule of law.

Libertarianism, as an ideology, may never explicitly state this, but it is certainly implied. Libertarianism itself asks that no laws be imposed in a criminal court, but that all disputes be rectified in a civil court. Individuals would theoretically motivated by a `personal interest` (aka: potential monetary loss) not to act against others in a criminal way. All actions would technically be `legal`, but would be subject to civil trial. This presupposes that all individuals have a in-depth knowledge of the law, and that lawyers would be readily available for late night domestic disputes where they could convene a court on the front steps of the trailor park for an instantaneous monetary rectification. Instantly serving muggers and car theives for their court dates would prove more challenging.

But what Libertarianism lacks in practicality, it makes up for in idealism; That is part of the allure of Libertarianism: it is served by its own utopian mythology that has served similar ideologies like anarchism or pre revolution bolshevism. It is hard to argue against libertarianism when the imperfect but functional reality that is the welfare state is compared to the perfectly operating nirvana of the libertarian state. `Of course this government program doesn`t work-it`s operated by a government...if only there was a Libertarian state to rectify this`.

Of course, in reality, there are countries where the central government has been displaced and what is feared even in the deepest recesses of Libertarian thought has become a reality in these states-mob rule. While most reasonable Libertarians deplore what might happen, and state that `This would never happen in a real Libertarian state` the practical application of the idea (the ultimate test of theory) has become a nightmare. Ethiopia, arguably the most chaotic of any state on earth, has descended into a nightmare where the absence of government has formed a power vacuum where the monopoly of violence once owned by the government is now farmed out to unaccountable henchmen and warlords. The same situation is being played out in West Belfast where terrorists effectively rule through coercion and propaganda as the state has backed off and left Catholic areas in the hands of the IRA.

While the term monopoly of violence is quite an ominous term, and implies a somewhat negative connotation (monopoly, a la Microsoft or Standard Oil) it is quite a benefit to the individual. With a monopoly of violence, the democratic government is the only one held accountable for the violence and its uneven application. A parallel power that amasses the strength outside of the law to impose its way on the masses is not accountable at all, and acts as alternative fascist state waiting to take over in the event of a toppled or depleted government.

If Libertarianism has been a failure in application, what should we make of its greatest champions? One can almost imagine Ayn Rand bristling under the Soviet behemoth as the complete anihilation of individual rights was completed for the subservience of the state. It is no surprise that her conclusion was that the complete opposite of the personal hell of communism was the utopia of libertarianism, where the state held no hold over the individual at all. Her personal experience validated her philosophy, and for that she cannot be judged too harshly. She brought an interesting and informed viewpoint forward and staked out a political space she felt was valid and brought many people to her position.

Milton Friedmann on the other hand, has much to answer for. While he may not be considered a Libertarian in the political sense, he is one of the greater apologists for anti-government animosity in the US, and could be considered the most high profile apologist of the anti-government crowd at the moment. Friedmann has been an award winning economist for some time and there is no doubting his intellectual power. His opinion is rightly respected and he is a giant of the times we live in. If we see farther in the future, it will be because we have stood in his shoulders. In light of this, we should at least examine the actions of Friedmann over his career.

In the height of the post-Allende coup, a group of youngish alumni from the University of Chicago economics students brought in Friedmann to help plan the Chilean economy. At this point it should be carefully considered: if Friedmann really thought that government had no place in the lives of individuals, why was he serving the interests of a violent dictator? If he didn`t think that the policies of the government would make no impact, was he simply there for a holiday and a pay package from Pinochet? The answer is obvious: Friedmann knew that the rule of law, combined with the establishment of capital institutions by the government would provide the make up of a balanced and successful capitalist economy that would eventually lead to a democratic and prosperous state. He was right, of course, and Chile has emerged as a shining light in the sometimes dark continent of South America.

Allan Greenspan, for his part, was an early convert to Rand's ideology, penning an anti-regulation essay in 'Capitalism: The Unknown Ideal'. Greenspan has come to see the light that government controlled central banks and a healthy regulatory environment promote stability and prosperity. Greenspan has come full circle: From anti-regulatory renegade, to becoming (arguably) the world's most powerful regulator.

Apart from Libertarianism`s problems with application and its sometimes inconsistent proponents, it suffers from another more serious affliction-it basically rules out any of the debt we owe to each other as humans. Libertarianism might say it is immaterial what is owed, and that this `debt` is in the area of buddhist raver theory. Any single individual who succeeds and does well in this life, does not only owe his or her success to their own `great work and determination`. Anyone who had done well has had others who were more than willing to do more than `what the market required` to see that any successful individual did well.

Who set the conditions for the successful types who want to break their ties of responsibility to others? One thousand years ago, there would be no choice for 99% of Libertarians to do anything other than tend to a farm (not that there is anything wrong with that). Was it only the self-interest of others that created favourable conditions for today`s individuals to thrive? Of course not. Millions have died for our freedom. Millions have suffered for their progeny. We are born into the debt of others who have created the favourable conditions for us to succeed.

Of course the debt to each other in a society is often paid back in terms of the tax we pay. Libertarianism, in its quest to break free of government ties, has advocated the idea that `tax is theft`, and that breaking tax laws is in fact acceptable since the government has commited the crime of robbing citizens of their income. While a libertarian would find no argument from this writer about the fiscal irresponsibility or governments in general and the waste they generate, simply opting out of tax laws has its own ethical issues. Tax evaders might be heros in Libertarian writing, but the opting out of tax paying means that the tax burden is left to a smaller law-abiding majority. While some Libertarians may enjoy the social benefits of society while avoiding the legal duties to pay tax, a smaller chunk of the working world picks up the slack with relatively higher taxes (all else being equal).

Forgetting all other criticism for a moment, the basic purpose of a government or state is to protect its people, defend the collective interests, and improve the standard of living. It might be flawed in many of its attempts, but is it worth dismantling just to marginally increase the freedom of the individual? Even if you agree, the rational outcome will be a chaotic mess of competing free mercenary interests looking to impose order for monetary gain. Without a government, we are unable to act to defend ourselves (how many people can personally afford a tank), unable to pursue foreign interests, and unable to care for those around us effectively.

For all the problems associated with Libertarianism, it is not evil or malignant. Its basic premise is promoting personal freedom and individuality. Libertarianism provides a the unique perspective of an ideology that is both pro peace and anti government spending. Libertarians are naturally the friends of fiscal conservatives and should not be disaccociated from their natural allies. It is not likely (it is hoped) that a Libertarian revolution will overcome the west, although it will not be without the help and strength of Libertarians that government will become increasingly accountable. Libertarians are critical of the governmental waste of the west, and despise the imposition of the government`s will when it burdens the individual. These are healthy attitudes that serve to remind others when our governments have overstepped their bounds.

While fiscal conservatives and Libertarians will never agree on their end goals, there is no reason to believe that there will ever be a reasonable choice between these two visions of the role of government. Just as there are forces that disagree on the fine details of the left, but unite for strength and numbers, the Libertarians and fiscal conservatives should stick together for influence and power.

Japan: Population And Policy

2005-03-06T17:52:00.000-08:00

For the last 500 years, the population growth of many countries was seen as a given. In Japan, the massive population explosion of its islands was especially pointed. In the 1702, Tokyo (Edo) registered 1 million inhabitants, and 300 years later the population has grown over to over 30 million. Today though, there is a general panic in some quarters about the state of the nation. While a new emphasis on the appearance of youth masks the true state of the younger population, it's clear from census material that Japan is headed for a clear meltdown, with a huge elderly population weighing down the rest of the population: By 2050 the UN estimates over 42% of Japan's population will be over 60.

In Europe, the short term solution has been to import foreign youth from former colonies to take up positions in low skilled work. Europe, having only a mixed record on assimilating their immigrants, is facing significant challenges in meeting their population needs. Europe, for better or worse, has always been a part of the larger Euro-asian landmass, meaning that immigration flows from the east to west has been a factor. Ancient arab races once moved far west in great numbers, bringing flutes and strange garb that later became the bagpipes and kilts of Scotland.

Japan, by contrast, has been insulated by the "God's Wind" of typhoons that cast the Mongolians and Chinese back to the mainland. There is no history of massive migration to Japan, and no positive history of interaction with Japan's neighbours besides Taiwan. Refugees face a long process of internment and certification before they can stay in Japan, while most foreigners face significant challenges in attempting to stay in Japan. The government encourages snooping and informal reporting on foreigner activity; There are significant and legal glass ceilings on the hiring of foreigners for higher level jobs; There are no foreign communities to support new immigrants. Japan regards its social solidarity and homogeneous nature as a positive aspect to their national character.

In fact, the only time Japan has imported a foreign population was during World War 2 when Japan imported slave labour from Korea to work in Japan's war machine. While most Koreans returned to the peninsula after the war, small communities reside outside Osaka and Japan. These communities are completely insulated from the larger Japanese nation: They refuse in many cases to learn Japanese, have their own schools, and are not hired to work outside "Little Korea".

There is hope for Japan in this regard, however. Japan has long integrated the best of foreign ideas into their own national character because of the flexibility of the Shinto creed, which emphasizes taking the integrating of superior ideas of other nations into the Japanese culture. Shintoism encouraged the integration of Buddhism and Confucianism, and lead the Japanese to start integrating the industrialization that brought prosperity to the west. If immigration and the integration of foreigners becomes a must, Japan might be able to draw on this flexibility to incorporate pluralism into its national character.

In regards to the fertility rates, Japan is very unique in terms of its causes. While in the west, feminism and individualism are seen as two movements that encourage a lower rate, in Japan these movements are very weak in comparison. Japan's movement towards lower rates might because of higher education rates for women (when a woman might be her most fertile), and a far less religious population. In Japan, there is no bible belt of rural communities that usually have larger families to boost the overall population. Most Japanese live in close quarters in small apartments, with a child seen as a huge expense in terms of money, space and standard of living. While poorer societies see children as insurance in old age, Japan's rates of savings and wages see older Japanese being rich and pensioned without need for many children to look after them.

In addition, the Japanese have a system of Ie, that sees the oldest male of the family being the patriarch of the family. Generally speaking, the eldest males are seen as the ones most highly regarded and are given the lions share of respect and resources of a household. Ie also stipulates that the nuclear family, so prevalent in the west, is not the norm in Japan. Older family members, having gained the respect and resources of the youth, will be a burden in terms of needing support of the pensions but also in terms of space in already crowded homes.

The Japanese might not be able to fix their population problems in a generation, and there is no general feeling of crisis amongst the people: they are relatively rich and content despite the low growth in the economy. The government is being proactive in some respects, but using silly schemes to boost the domestic population by boosting romantic walks for couples in areas like Nara and Kyoto.

A key factor that has to be addressed is the lack of viable living space in most communities. The Japanese could start pushing its population into more rural areas like the northern island of Hokkaido with tax incentives and the development of cheaper energy resources allowing central heating for the northern communities, making these areas infinitely more hospitable. Japan also has to start looking to immigration as a viable alternative, and start preparing the people of the island to accept outside cultures. If Japan's policy makers are unable to address this problem of population decline, there will be a social crisis and possibly a face off in the legislatures as the monied and populated elderly vote for proposals that will be unpopular to the under 60 set. And as any student of Japan will tell you, while the Japanese surface emotions are usually stoic in nature, the bubbling undercurrent of passion that spills over in times of crisis is usually an eruption of repressed feelings that reveal themselves with explosive results.

Let's hope it doesn't come to that.

Great Expectations

2005-02-21T05:30:00.000-08:00

Over the last week there has been much newsprint devoted to the mending of the Trans Atlantic relationship between the US and Europe. Hurt feelings over 'Old Europe' comments and the hyperpuisse unilateralism have made cooperation on certain issues next to impossible. Terrorism, of course, suffers from a massive difference of expectations. Like many issues seperating the continents, terrorism is interpreted differently on a variety of levels.

Of course, terrorism is not the first issue to seperate the two. Sex, religion, and violence has also divided the two. While the US bristles at Janet Jackson's ridiculous nipplegate 'scandal', Europe loves the topless Page 3 girls, nude beaches, porn TV and revealing apparel. Similarly, while the US enjoys extreme violence on TV and in movies, Europe's censors work overtime to edit American TV's graphic beatdowns. These are superficial examples, but they point to a dichotomy of morals and expectations. Expectations guide policy and actions in regard to terrorism, especially.

Europe's expectations towards terrorism have been adjusted over centuries of dealing with guerilla warfare and domestic insurgencies. Prior to dealing with far off colonies on different colonies uprising against the European masters, the Europeans attempted to colonize each other. Sicily, formerly a French holding, started its own underground resistance that used harsh violence to finally kick the French off the island for good. This group of violent Sicilians spawned a criminal subculture that later morphed into the Mafia. Meanwhile, the Irish rebelled against the British in various forms and methods for over 700 years, which lead to the rise of the IRA. More recently, Moscow's bouts with Chechen terrorists are the latest incarnation of long running terrorist violence in the Russian capital. Bukanin anarchists and Bolshevik communists tore Moscow apart with ruthless suicide bombings of ministers and leaders. Similarly, Germany (Red Army Brigades) and Italy have gone through brutal communist terror campaigns. Spain, for its part, has been dealing with Basque terrorists for millenia, and the more recent 3/11 attacks. Yugoslavia, famously, suffered from the assasination of Archduke Ferdinand by a terrorist. These are only a few examples, but it is obvious to the casual observer that Europe's long experience has made it a veteran partner in the long running war on terror. Its response to the 9/11 was the sympathy of the knowledgeable older brother who had gone through the same harsh experience.

The US, by comparison, has little in the way of experience of terrorism, domestic or otherwise. Long guarded by a culture of assmilation and two large oceans, the US was shielded for centuries from the terrorist violence that plagued Europe. While the SLA, the Unibomber and Timothy McVeigh were serious local menaces, they never approached the widespread and organized attacks suffered by Europe over the last two centuries.

Europe, long a player in the anti-terrorist game, has developed its own longstanding methods to dealing with the terrorists. Realpolitik, deals with the devil, a developed sense realism, plus some measures pushing the scale of liberty and security towards security have kept the existence of the European states a reality. Mostly, these measures were made after having realized that terrorism (in their mind) was a nuisance to be dealt with, rather than a problem that could be eradicated. The US, by comparison, being the newbie to the game, comes equipped with the enthusiasm and power it displays in many endeavours. The US hasn't been fatigued by attrition and continuous failure like the Europeans in respect to terrorism, while the US keep the hope alive that they can free other nations from this menace to keep their own nation secure. In a way, it is not unlike the approach and idealism of Kennedy in the fight against communism. Where the Europeans had bunkered down in the hopes of the problem would pass it by taking remedial action and hoping they would survive, the US was relied on to do the heavy lifting.

In a sense, the US is like the new CEO at a Fortune 500 company. The company is stuck in a rut with a set culture, rigid rules, and a long history. The CEO has to steer a new course for the War On Terror, INC and that means hiring, firing, and setting a new strategy and vision for the company. Of course, CEO's often fail in their new roles. They might come into a new job with fresh enthusiasm and ideas that comes with being at a new post, but expectations will be adjusted with experience at the healm.

In one sense, the US can relate to the European experience. While the US may be new to the terrorist violence, it is no stranger to the most threatening aspect of US society: gun violence. While unorganized and sometimes completely random, the US has been dealing with high murder rates and violent crimes, and a culture that glorifies that best villians of the underworld like Capone, Dillinger, Bonnie and Clyde and Gotti. Americans can expect that if they are involved in crime, or visit certain parts of town, they expect violence to occur. They have adjusted their expectations of their own society and have dealt with the fact that they live in a gun culture, with high murder rates. This is an accepted part of modern life in the US, and there is an awarenesss, but also an attitude that it is an expected nuisance that is to be handled rather than eradicated.

The Europeans, and especially the British are quite new to the phenomena of the gun culture and gang violence. Organized political violence in the form of IRA bombings is what a Briton might expect, but armed thugs in the East End of London or Birmingham are a brand new threat. Predictably, the British believed they could attack the problem with harsh action, and started banning guns altogether in some areas only to see the black market for illegal guns explode. Also predictably, the Americans laughed at this effort to rid the gangs of guns as the naive action of a novice. Funny they should think that......

The relationship between the US and Europe does not necessarily have to be antagonistic even as the two differ on their methods. The Americans could begin to at least respect the length of the struggle that Europe has endured in respect to terror, and perhaps learn from some of the European experiences. The Europeans for their part could at least appreciate that their whille their paradigm on the War on Terror is refined and ancient, it might be premised on some arguments that are simply antiquated. While at one point it may have been taken for certain that the Middle East was not ready for democracy, it now seems to be a imminent reality. At one point it might have been ridiculous to think that long term international stability would be dependent on universal freedom, it is now apparent. While at one point it would be safe to assume that simply leaving nations alone to pursue their own sovereign right to govern as they see fit (in the post-colonial era) would be acceptable, if these independent countries pursue totalitarian dictatorships, it will mean a brutalized population of discontents, motivated to commit mass destruction.

It is hoped that with the new detente in the post-election Bush-EU relationship, the two sides can start to appreciate the others' experience and expectations in this shared struggle against this old (new) foe.

Bygones Be Bygones: The EU and Japan

2005-02-05T16:28:00.000-08:00

A new report from the European Policy Centre concentrates on the relationship and joint cooperation of Japan and its new big brother: Europe. While the EU sees Japan as a natural buyer in the larger first world markets that haven't appreciated their currency against the Euro, as the US Dollar has, Japan's new appreciation of Europe is something of a mystery. While a casual observer might pass over this detail as insignficant given the apparently close relationship between the US and Japan, there are obvious signs that Japan is looking for new trading partners and a renewed independence as a leader in Asia, while the EU seeks to further its own influence. To do this, Japan needs to break off some of the ties to the US and seek its own path to some extent, with the help of an old nemesis.

Long before the US showed up on Japan's shores to demand trade treaties with gunboat diplomacy, the Dutch had set up shop off the shore of Japan to trade. Japan feared the foreign barbarians, but enjoyed the brisk trade and huge trade surplus that European markets supplied. While Japan later broke off most trade with the outside world to go into what you might call 'seclusion' for 200 years, Japan maintained links with the Dutch traders in what might have been called Japan's most positive foreign relationship until the post World War II era. Even today, fruits of the EU-Japanese relationship are evident on the streets of Osaka: While American cars on unheard of, Volkswagon and Mercedes are commonly seen alongside Toyotas and Nissans.

Mining this relationship for ideas on the future, the report makes an interesting policy recommendation calling for a Japanese version of the International Monetary Fund to fund Asia's struggling smaller economies (a recommendation Renegades! has previously made). Currently, there is an aversion to US aid in some quarters as the IMF has enforced some very tough measures on struggling economies: Restricting deficit financing to 3%, etc. Japan has taken it upon itself to rectify this funding issue by quietly 'encouraging' its own private and semi-private banks to take on riskier loans to these economies to protect Japan's trading interest, but also the regional economy as a whole. With the largest banks on earth and highest savings rates in the free world, there is no shortage of capital, either in the Federal Reserves or in private banks to keep Asia liquid if the need came.

The report implies that the 1997 currency crisis and the IMF's poor handling and outdated recommendations worsened the problem. There is a sense that report implies that possibly a less dogmatic (Read: US free-market) approach to resolving the crisis would have been preferable. The unspoken reasoning is that a pragmatic Japanese resolution could have saved the turmoil that rocked Indonesia and Malaysia.

Cynics can look at Japan's history and wonder if Japanese leadership in Asia would be positive given the enormous baggage of WW II and the Interwar Period. While perceptions of Japan in Asia have not always been positive, there has and continues to be reverance reserved for Asia's natural leader. It's economy is still larger than China's, and has been a first world country for a long time with some of the highest living standards on earth. The respect of Asia has been regained, and with the US' brand in a public relations disaster, Japan sees an opportunity to put an Asian face on market capitalism in the Far East. With massive contributions to tsunami relief (over $500 mill, Japan again raised its regional profile.)

With weakness in North Korea, and the possibility of either a collapse of the regime or an opening in dialogue with the six party talks, Japan might see further opportunity to raise its regional profile. If it can take a leadership position in the talks, a UNSC seat might be in the cards. Further complicating the issue, China is hinting they might trade a disarmed North Korea for US and Japanese leeway on the issue of Taiwan. If Japan position itself as a peacemaker and bring a resolution to the North Korea (with some US cooperation) they can consolidate their recent foreign policy gains.

In the Asian theatre, the EU is active on all kinds of fronts. While these talks concentrated on the EU-Japanese relationship, there were sections that read like a passage from Gulliver's Travels, as the Lilliputians attempted to tied down the 'monster', Gulliver (Read: The US). The EU sees Japan as a counterforce to be unleashed to diminish the relative unipolarity of world power. This line of thinking would never have gained much in previous post WW 2 years, but the younger generations of Japan no longer look towards the US as their guardian and cultural icon. The Japanese, while extremely pacifist in nature and constitution, want a real independence from the US and want to become a normal nation: Sovereign, free and independent. The EU sees this desire as an opportunity to push for a rising Japanese state as a counter to US dominance in the economies of the far east. With massive US-Japan trade, and a foreign reserve of well over $1 trillion of USD, Japan has a special hold over the US' power in the area. The EU's calculation is that if the EU can wield its influence over Japan, it might hold more sway with the US as well.

Of course, apart from Japan, the EU is focusing its might on building up China as well. The proposed abolition of the ban on weapon sales to China could lead to a rising arms race across the Straits, and if war broke out (which the EU is thinking won't happen)the US could have dead soldiers on its hands...killed with EU weapons. The EU of course is thinking with its wallet, and the possibility of again countering the US' dominance in the area. Japan, for its part, would be wise to see that Europe is playing both sides of the aisle.

While it would be easy to assume that both the EU and Japan are eager to see the US fall from grace, both economies are extremely interlocked to the US'. It hasn't escaped either the EU or Japan that in this intergrated world economy that if one player falls, the repercussions for the rest would be disasterous. For now, the EU needs the US market, while Japan's defender and the main buyer of manufactured Japanese goods is still the US. Any currency shenanigans perpetrated by the Japanese (ie: dumping USD) would result in the collapse of the Japanese and EU markets. In terms of their relationships with the US, the EU and Japanese aren't running for the door, but there are sideways glances and slow moving feet.

Unlikely Bed Buddies: China and the EU

2005-01-06T21:23:00.000-08:00

Collectivist thinking is making a comeback.

In the recent talks between China and the EU, an epiphane of monumental proportions occurred-An academic proclaimed "The idea of sovereignty is dead". He was referring to the new world that the EU had been envisioning since its inception, where no country would act unilaterally of its own interests without consulting the rest of the world, namely at the UN. As the continent that has undoubtedly seen its own share of unfortunate unilateralism, there can be some sympathy with this sentiment. For years, the textbooks of the western world have gone over and over the events leading up to the world wars: the tough stances, gunboat diplomacy, the imperialist overtones, the eventual outbreak of war.

China, the other partner in the recent talks, has also seen its own share of unilateral actions on the part of the Japanese. Although weak and defensive but under the protection of the US, the Japanese still instill a fear in China, as institutional memory of the last conquests of the mainland are somehow fresh. And, as the rising empire of the east, China naturally sees the US as its future competitor in trade, strength and power. The past emperors (Europe), see an opportunity in the future empire (China) back down to earth, and possibly remove what they both see as a threat to their own supremecy.

Of course, both sides are delusional about their own unilateralism. While China unbraids the US for its unilateralism, Tibet still smoulders, the Nepalese are overrun with Maoist rebels and Taiwan is in a constant state of war readiness. Hong Kong, by diplomacy or otherwise, has also begun to feel the wrath of its new owner. India, another rising country, hot on the heels of China, has been infiltrated by Maoists seeking to destabilize the countries eastern half, leaving the west to Jihadis from Pakistan. The EU for its part, has a number of Unilateralists on its membership, including France. While Germany, Italy and Britain (for the most part) have given up foreign ventures, France has clung to invading lesser nations at will. The Congo and the Ivory Coast are its most recent victims of France's African Adventures.

So what can the terrible twosome of China and the EU do to their nemesis of the United States? Plenty.

The most obvious consequence of the pairing of the EU and China will be economic. Their combined forces in the near future may begin to overtake the output of the US' 11 trillion USD in GDP. With this force, the US backed financial institutions will no longer be able to control the means to emergency financial backing ie: World Bank, IMF. These two institutions , for all their problems are idealistic backers of democratic reform and capital institutions. This of course, is the result of being the face of the US' own policy of exporting freedom and capitalism. If these financial institutions are marginalized, the Chinese and the EU could institute their own set of realpolitik in developing nations which may or may not have benevolent intentions. While the EU has certainly backed positive reform in Turkey (a neighbour and EU enthusiast) it may not think similarly about,say.. Central American countries. Countries that are, if need be, able to destabilize the US if there was a economic or financial disaster. The possibilities are endless.

There may be talk of a currency manipulation, where the Chinese will begin to dump massive amounts of USD onto the market to sink their economy, but this is unlikely for two reasons. The US still does a tonne of trade with China, and the Euro, the only other world currency, is already far too high in relative value. A continued upswing in the Euro would destroy EU exports and cause far too much internal strife. The Chinese currency reserve switch from the USD to the Euro is unlikely to occur in the short run.

Militarily, the combined pair are nothing to sniff at, but they lack cohesive strategic aims. The EU might have some military strength, but is essentially demilitarized and is not looking to militarily annexe close neighbours. China, for its part has a invasion force of 2 M soldiers, but lacks an airforce and is chiefly in a defensive stance. While China does want to secure 'historic China' ie: Taiwan, it is essentially an 'inwardly focused' country, as it has been for centuries. Invading Taiwan is a possibility....but not Japan. Although there is talk of the annexation of Siberia to meet a growing population of Chinese...

The issue of arms sales is another matter. With the US backing Taiwan, there has been a massive push within Europe to start sales to an angry China. The French, having lost a buyer in Iraq, is pushing the most on this front. They have capable arms ready for sale, and with nominal trade with Taiwan, lose nothing in diplomacy with the island. This would be diplomatic coup for the French, who have long neglected their relationship with the US, and would like to strengthen their relationship with the rising power. This plan will work perfectly until the US loses their first man to French arms that were sold to China.

The key consequence will be political. China and the EU frequently find themselves in the same boat at the UN, condemning the US and Israel for their actions. Continued political cooperation on the multitude of resolutions will continue, and a continued marginalization of the US diplomatically will occur. Politically and economically (in the future) outnumbered by the rising bloc of anti-Americanism, there will be a tough battle for the US in the years ahead if the enemies of the US begin to coalesce into one giant, collective behemoth.

Iraq, 2005

2004-12-30T19:16:00.000-08:00

An interesting exercise in journalism has always been the prediction of the future type columns that attempt to see into the next year or years with equal amounts of speculation and insight. This exercise has been largely absent when attempting to see what Iraq might look like after the next election, probably the most significant world development of the coming year.

Let's start with the easy stuff: the Shias are going to come out ahead in the elections, with their parties more or less under the influence or control of Ayatollah Sistani. Sistani, a leader with credibility as the most senior cleric of the Shias, and because of his work negotiating peace in Najaf. He helped nullify the Shia insurgency and has become the most influential Iraqi, outside of Allawi. Some in the press are worried that this will be a disaster because they believe Sistani is under the control of Iran. While sharing a common religion, the Shias have shown that they are Iraqis first on numerous occasions: They were on the front lines of the war on Iran and are seperated by race and physical geography. Of course, the realities of democratic politics also means that Sistani will have to placate his electorate if he wants to be re-elected and that means serving Iraqis, not the Mullahs.

The Kurds, for their part, will be pleased as they finally reach a viable place within the ranks of the ruling elite of the country. With smoothe diplomacy, they will see more autonomy transferred their way as they seek more power for their already semi-independent states. The federal government may seek to strengthen their hold over the areas by slowly incorporating Kurd security forces into the federal forces, and gradually moving more federal institutions into the area to make their presence felt. They might even pull a 'Karzai' by incorporating many of the independence leaders into the fold until they are confident they no longer need their help and simply be rid of them and appoint federal politicians from the Kurd areas when possible.

The Sunnis will be the hardest nut to crack, of course. How do you placate or incorporate them into a government when they are opting out of the elections? One possibility is that while some of the Sunni areas are left out (Fallujah, parts of Mosul), these areas are simply left behind while other areas compete for the largesse of the government. Politicians being politicians, the areas that have effective leadership will roll in cash while areas with little or no economic importance or political representation will be left with nothing at the federal government. For the Sunnis, their former mental association with wealth was supporting the violent autocracy, but under the new regime they will suffer without representation at the federal level. After some time, I predict they will see a correlation between democracy and wealth: areas that play ball at the federal level will get the cash, while those still holding out for some possibility that the Baathists will return and reward their loyalty will suffer. This depends on the ability of the federal government to spend at least some of the cash the US has offered. There needs to be a concerted effort to start spending more and more of the reconstruction funds made available by congress.

Predicting the when and how of the insurgency's end is a fool's game. The minds of the insurgents has to change before anything and former predictions of the end have been unfortunately pie-eyed false horizons. The election will not stop the insurgency, but for the US administration, their will be more deadlines created in the future (the date the new Iraqi administration takes office, etc) that will offer a public relations opportunity to give a definite end date.

International cooperation on Iraq will become key. The UN under Koffi Annan will be involved in the elections, as will some other western nations, opening a door to furthered cooperation. In a preverse form of blackmail, Koffi Annan will be under more pressure to cooperate with the US on Iraq with the implicite understanding that the US will not push the food-for-oil investigation that would see Annan and several other UN insiders who were intensely anti-American be forced in front of an international court. Ironically, it is possible they would have to go before the ICC, the very forum the US has abandoned. If the food-for-oil investigation is not going to force Annan to submit, the US might try to push several other failures of the UN under Annan's watch, such as the massacres in the Congo and Rwanda.

In attempting to save face and in an opportunity to mend relations with the US, the EU may step into the void as they have with Ukraine to offer a seperate and independent version of western democratization. The US and EU can play a form of good cop/bad cop in Iraq, where the EU can be the friendly western power, playing off the poor image of the US to further democratization. The PR message would be something like this "Democracy doesn't have to be Americanization; You can be like us in Europe....Psst: We don't really like the US either".

Whatever happens in 2005 in Iraq, it will begin and end with the elections. The overall success of democracy in Iraq may depend on the ability to secure funds from the US, along with the proper functioning of pork barrell politics. International cooperation by the UN and the EU would also go a long way to smoothing the transition from autocracy to democracy.

The US Dollar: Currency Revolution

2004-12-23T16:38:00.000-08:00

Sounding the alarm over the decrease in value over the US dollar has become de rigeur in many publications, including the Economist, which may still install a red alarm for its articles on the currency's deficiencies. But what is at the roots of this sensationalist bell ringing? But are the opportunities and threats to Canada, and other countries?

The first problem that has caught unprepared exporters off-guard has been the rapid decrease in the USD (US Dollar) value. If exporters had not been hedging their sales to the US, they would find that the sale they made last year while the Canadian dollar was in the 70 cent range has lost significant value. Without hedging, many exporters would be exposed to extreme currency risk. While this probably did not affect larger, sophisticated operations, many smaller operators were probably blindsided by the currency shift. In the long term, however, even large exporters will have to face up to the fact that Canadian goods are proportionately more expensive, and will probably only increase in value relative to the USD. According to the 'Big Mac' index, the CDN Dollar is still undervalued, and has room to run.

This means that in the near term, as Canadian exporters and manufacturers attempt to improve their products or productivity to offset the currency gains, the trade balance with the US will probably approach parity. Currently, there is still a monthly trade gap of $9 B. in Canada's favour.

It is not all bad news for Canadians of course. Previously, goods across the border that were too expensive, are now becoming more affordable. Canadians will have greater choice and a more competitive consumer market for their dollars, and that can only mean greater relative wealth for the consumer as they immediately get more bang for their buck. Apart from the obvious benefits for consumers, manufacturers, particularly those interested in the Canadian domestic market, will reap a whirlwind of opportunity as improved buying power means that they can finally buy high tech machinery from the US that can improve their own productivity on the cheap. While our trade surplus with the US may decrease somewhat, the Canadian productivity should go up, leading to higher relative wages for workers.

For the larger world, there is a bigger game going on with a very intersting dynamic between trading blocs. Obviously, Canada is the largest trading partner with the US, but other markets are emerging and are about to surpass Canada's top spot. The EU for instance, a massive economic bloc on its own, has had its own currency skyrocket in comparison to the USD. At 1.30, the EU is at a serious competitive disadvantage, and may see a flood of manufacturing jobs for export products be curtailed. With the current situation of massive unemployment in certain areas and demographics, the integrity of the EU itself is threatened as some members (ie: Ireland) see the central bank and Brussels as becoming an albatross around the neck of their economy. The EU may be forced to lower interest rates, and in turn add more pressure to a global housing bubble.

Britain also faces relative pressure to keep Sterling competitive,and will keep its rates low. For Britain, the country is between a rock and a hard place. London faces one of the worst housing bubbles on earth, as even London's suburb ghettos like Brixton and Sutton face prices in the stratosphere. If the interest rates stay low to keep competitive with the USD, the bubble will continue to expand and will become unstable and possibly dangerous. The policy choice between popping the bubble and destroying the competitiveness of the sterling is stark, and Blair cannot afford to walk a tightrope forever, as the longer the situation continues, the worse the fallout will become afterwards.

China for its part, is playing up its status as the world's workshop, as manufacturing jobs from the US float across the pacific and into the provinces of the mainland Chinese. With China's currency, the yuan, pegged to the USD, the US cannot improve its massive tade deficit with the emerging economy. Worse, as China buys up consumer goods and consumer product manufacturers stationed in the US (ie: IBM's PC division), the Chinese will be able to move more and more of the manufacturing off the continent. As the US attempts to keep the USD low against the EU to protect manufacturing jobs, the same jobs are being slipped out the backdoor to China. Ultimately, this is a zero sum game for the US: they cannot win against a competitor who keeps them at bay with a straight arm known as the 'pegged currency'.

This stiatuion is not necessarily going to stay the same forever. China's own currency is coming under ferocious pressure to either be revalued, or have its own interest rates increased to decrease the inflationary pressure against the pegged currency. Recently, China upped its own interest rates, and has continued to buy up USD to relieve pressure against the yuan. This phenomenon of an Asian country buying up USD to relieve pressure on their own currency is nothing new, and is widespread.

This brings us to the dynamic between Asia and the US: The trading relationship that has ultimately supported the US' bad habits. During the Asian crisis in 1997-8, the USD was the only currency worth obtaining. Countries began getting rid of their own currencies to buy up USD to maintain their worth. This death spiral of currencies spread across Indonesia and most of Asia, causing havoc with their economies.

These countries made it policy to continue the purchase of massive amounts of USD after the crisis to ensure they had a safeguard in case of a currency meltdown. In the case of Japan and China, these countries used the USD as a safeguard to ensure pressure on their domestic currencies would be decreased. The idea behind the purchase of USD, is that that the US' credibility and the strength of the dollar would keep the relative value of the US currency would remain high. This faith in the USD now means that for every business day, the US requires 2.6 B in USD be bought to keep the US government solvent. For the time being, there is still a market for the US debt, meaning that the US can keep its up high spending without having to account for its higher risk with higher interest rates.

The result has been a disaster for American fiscal conservatives. The government is able to spend vast sums of money well beyond its means on the premise that 'deficits don't matter', while the currency markets still temporarily back up this delusion by continuing to buy the USD. As terrible consequence of this unfortunate problem, the American consumer is afforded lower interest rates which they use to buy foreign goods at Walmart (a huge importer of foreign goods) exasperating the trade deficit problem, but also ramping up the enourmous consumer debt of the nation as well.

The problem for the US government, currently flying high on hubris and intellectual arrogance, is that this situation is not static. There might be short term inertia towards changing the world's standard currency, but in the long term the situation is intensely dynamic. Just as gold, the pound, the dinar, and other currencies owned the world's respect for a time, their time came came and passed. And just as these currencies encountered a perfect storm of problems that heralded the end of their monetary supremecy, the USD may well be entering its own hurricane of challenges.

One of the key challenges will be the emergence of China. By itself, China's ascendence onto the world's stage does not mean the end of the USD, but some of the factors that are accompanying its rise will certainly be detrimental. For instance, the EU has decided to drop much of its arms embargo against China, heralding a new era of trade between the two trading behemoths. China's increased trade with the EU will mean that the EU's relative importance will rise, and China's choice of holding 400 B in USD will change. Even now, China is increasing its holdings of the Euro. As an investment, the Euro is smarter, as its value is only increasing relative to the USD. If trade with the US is a priority, holding Euros until the date of payment will result in huge exchange gains if current trends continue.

There are also a multitude of coming problems that could end the reign of the USD in a hearbeat. A military showdown in the Pacific over North Korea or Taiwan could precipitate a flood of USD on to the market as investors instantly find the Euro more safe as the US trade with the Pac Rim would drop immediately. China could attack simply by dropping its reserves immediately into the lap of the US government and run. Since 9/11, the USD has appeared more and more vulnerable to speculation and one more attack might mean a run on the bank by foreign investors.

Or the end could come by attrition, as the US government simply decides in ignorance that the deficits (which will continue until at least 2009) will simply become a fact of life. As Republicans have consolidated their hold on the Senate, House and Executive office, the chances of spending bills being vetoed becomes relatively less and less. The interest rates will have to increase eventually, and the markets will simply start dumping the currency, slowly and surely.

The fallout for the American consumer and government will be horrendous. As interest rates permanently rise, the borrowing costs will rise exponentially meaning that the US will have to spend more money for their risky prospects, and meaning more money will be spent on financial institutions rather than on the purchase of goods that might increase productivity, decrease costs or save labour expenses. As much as any economic downturn, the rise of the interest rates coupled with hardcore inflationary pressures on the dollar as they flood the markets might mean a return to the seventies style staglation.

There is a very real possibility that the US government's policies will bring some dark days economically.

A Warm Embrace: Intellectual Incest

2004-12-17T23:45:00.000-08:00

In the process of categorizing one thinker, any critic or observer has to use almost a shorthand approach to label anyone else. Where do does this intellectual stand on any one issue? Where do they stand in an overall sense? Inevitably, the process gets messy when the observer attempts to compare themselves to their subject: How can I objectively observe someone else's work when I profoundly disagree with them? The problem will stick with the reader of observer of another's work. There has to be a rationalization of the observer's point of view as they observe a reasonable argument from an opponent. In short, they are challenged by an opposing viewpoint.

The observer of an opponent's position will feel as though they are threatened, inferior for having their illusions shattered, or cornered and defensive. The reaction is natural: although not explicitly stated, the difference of opinion means that someone believes your thinking to be flawed. It becomes almost personally offensive for some observers to read, think about, or consider the opposition's position on any one question. Take the issue of abortion, easily one of the most divisive topics in modern politics. If you are pro-choice, you may be instantly branded a child killer and an amoral psychotic by opponents. Conversely, pro-life boosters are almost instantly labeled intolerant fundamentalists by pro-choice forces. There are a list of hot button issues that cannot be dispassionately debated in such an atmosphere because of the instant vilification of both sides. An attempt to reach out to the other side's point of view is almost inimicable to the make up of the opposing forces. Each side may organize into lobby groups, pressuring a government to side with one side, or undermine the other. Heated exchanges in the public sphere, on the news, on panels or (less and less likely) the university result in few constructive dialogues.

The organization of like minded individuals is nothing new. Of course there is strength in numbers. Of course there is reassurance from knowing that your individual viewpoint is not the only one. But this reassurance of being 'one of many' is also a cause of concern. What if you only hear your own viewpoint reverberrated back to you? If the only viewpoint you might hear is your own, but just repeated by another person?

The response to this is instant comfort. Any one thinker can feel at ease knowing that their viewpoint is shared, and reinforced by others. There may be even a sense of invincibility to the thinker: Of course my viewpoint is correct. Others share my views, and they are intelligent and reasonable. In fact, it is possible that I am simply repeating what a majority of individuals believe. If so many agree with myself, it is a sample size worthy of a majority of individuals. Challenging viewpoints of an opponent will seem to glance off the solid armour or reinforcement and reassurance. Opposition may become unnecessary. Therein lies a problem of the thinker: the tool that kept them sharp, is no longer used. Ideas, once battle-hardened and shaped by an opponent's attacks and volleys are not utilized.

What possible thinker could embody such reasoning? Beyond challenges? The answer: all of us. Take a look in the mirror.

A sample of the modern thinker's reading material will show a stunning tunnel vision. The left reads Chomsky, Begala, and Moore. It eats up dissenters from the Bush Cabinet. It revels in the self righteousness of Hollywood. Its writers track the daily rants of the Daily Kos and Moore with zeal and secretly indulge in Z-Net and Indymedia. The right, for its part, has turned a blind eye to the obvious problems with the Bush administration, valuing its ideology over competence, the problems with its foreign policy, and the willingness to forgive dictators who will tow the party line (Musharaff).

Sample the reading lists of both the left and right, and you will find only like minded individuals as their favourites. There is no perceived value in their opponents, and with only your echo chamber, the writing and views of some have traveled well beyond the mainstream, and into fanaticism. Without the safety net of the opponents to keep viewpoints sharp and concrete, ideas and views have made an unfettered journey to the outer reaches. Where 'mixed company' might once held us together as a cohesive unit that simply 'agreed to disagree' and would 'fight for your right to disagree with me', now there is an instant, repulsive reaction to differences of the other.

Moderating Elected Radicalism

2004-12-08T17:46:00.000-08:00

A question hangs over news reports from the middle east, typically posed by anonymous 'critics' and repeated ad nauseum in the columns of North American papers:

'Does the US and the West as a whole really want democracy in countries that might elect Islamists?'

This 'hypothetical' question insinuates that radical Islamists will carry out their agenda once they gain the reigns of power. Often, it is cited in the case of Saudi Arabia, a politically repressed and violent kingdom. A kingdom, it is often noted, that is rich in princes and oil, but low on opportunity, political freedom, and equality. The kingdom is also the exception to one 'rule' of terrorism: "Terrorism is a product of poverty". Northern Ireland, Saudi Arabia, and Spain were and are fairly wealthy in one form or another, and the terrorists from these regions have all been relatively well off individuals. If this law were in fact true, sub-Saharan africa would be the hotbed of international terrorism, and Tanzanians would be under considerably more scrutiny at the airport.

What political scientists are slowly coming around to see, is that terrorism is not simply a matter of economic conditions, but a matter of 'political freedom'. Typically, a political leader in a politically free society will be able to talk openly about ideas or movements that they have come to believe in. If a leader has proposed these ideas, they have probably been tested on a focus group of the leaders' constituents or party, and have garnered some support on their merits. This same leader might put these ideas to the general population to see if they will fly. After a hearing, columnists, writers, community leaders and politicians will debate the issue or idea. Whether the criticism is politically motivated or not, the idea will receive a hearing in Parliament and the court of public opinion will issue a ruling. Perhaps the issue or idea will be put down, discarded, modified or taken into consideration. The issue of 'tax cuts' in the late 1990's is a prime example. In a push from western provinces and from some quarters in Ontario, the Alliance (with support from the National Post) made a real push for tax cuts for a tax weary public. The public, in general, was behind the idea and the Liberals subsequently implemented many of the cuts in their pre-election goody bag.

While the idea was not able to win an 'election' for the Alliance, mainly because the Liberals actually implemented the tax cuts, the Alliance felt that the fact that because they had successfully argued for the cuts, they had served their constituents. They took pride in the fact that their ideas had been included in a public debate and had shown to have merit.

In countries like Saudi Arabia or Iran, these debates are not possible. Instead of discussing 'tax cuts', however, there is a push amongst many quarters for radical change to a more conservative state, but these are thwarted amibitions. So, instead of having a public debate, the public is told time after time, that the status quo is the only option. The unopposed ideas of opposition forces are not debated, and so ideas take on a mythical status: Utopia can be achieved if only the government was toppled or a caliphate imposed. If we were in power, we would change everything, and a more perfect state would exist. Without a discussion or public hearing, imams and militants have a free pass on debating the merits of their ideas.

So what would a democratic election in Saudi Arabia look like? A shock to Militant Islam. Instead of finding their ideas are intellectually superior, they might find that reason and logic deem their political persuasion inferior. Liberal moderates might not win, but they would offer change and possibly convince Islamist leaders that what they believe might need moderation. This is typical of any discussion of ideas: two sides honestly exchange views, and attempt to persuade the other side of their merits. If both sides are being honest, they might admit that they are closer to their opponent's position after such a debate.

Supposing that Islamists do gain power, like they have in Turkey: are they going to stick to their radical agenda? Iran, for its part, has given up on reform for now, having lost faith in the power of their democratic reformers. Their country, despite evidence suggesting opposition, is on a massive suicide bombing mission of Israel. Its leaders have stated every few months or so, that a nuclear attack on Israel resulting in the total anihilation of Iran would be worth the cost because Iran is statistically such a small proportion of the overall world muslim population. Would such actions be possible under a democratic regime? Well, unless the entire electorate is willing to go on a massive suicide mission, the answer is no. Of course, even in Palestine, the home of such barbarians, the Palestinian territories would not want to kill themselves whole hog to see Israel go under. Most of the diehard suicide bombers themselves pull out of such missions because of basic human decency and a will to live.

The moderating force in democracy is not an internal mechanism that keeps leaders 'honest', or 'doing the right thing'. Democracy moderates the actions of leaders because they realize that a majority of the population must feel they are being served by their government. If not, the government will not be sticking around very long. Saudi Arabia, it is thought, would be a disaster if a democratic Islamist group were to take over the helm because they would 'cut the oil supplies off'. Is the west to believe that the Islamists would not be politicians? How would they get slush funds to coax the representatives from Jeddah into a coalition to keep burkas in the classroom? How would they fund the construction of glorious fountains in the presidents' riding in Mecca?

The truth in Turkey, will be the truth in other nations: the outrageous amibitions of the leaders will be tempered by the need to bring home the bacon to the people. Democratic nations demand competency, results and improved living conditions for the electorate. They re-elect leaders on these criteria.

Other than the electorate, and free debate that moderate parties, there is one massive force that democratic nations face: other democracies. Voters are free to live in other nations, with the best and brightest being the most mobile. If they feel that other nations are doing a better job, they will move. It is a competition amongst the free that keeps a nation on the straight and narrow. Under a free Saudi Arabia, its people might feel that their neighbour Iraq is doing a better job with their health care system (okay, we're talking way down the line here) or that the are keeping income tax to a minimum, etc. This competition increases pressure on nations to provide opportunity for their citizens.

Similarly, in this competition and in the name of self interest, other nations place enourmous pressure on other democracies to cooperate. Turkey has come under pressure to conform to certain economic, social and international laws with the promise of becoming a full EU member. Recently, controversial conservative muslim legislators had their own laws undermined by EU nations, stating that their new laws would delay entry into the EU. Islamists, of course, might hate Christianity, the EU, the west and the freedoms in those nations. But they would hate even more to be kicked out of office.

Ultimately, the open dialogue and political freedom coupled with the interests of the people, other nations and the invisible hand of the market all play a part in keeping radical agendas sidelined in an honest and democratic political system. There is nothing to fear from a democratic muslim state, but much to fear from a country of one official voice, where smouldering hatred and unopposed ideas of revolution fester.

The Militant Imam of Northern Ireland

2004-12-05T11:01:00.000-08:00

In the late 1950's, the labour movement amongst the poor of Northern Ireland was spreading. Like many trends from America, 'organized labour' had taken a while to reach the shores of the Eire's Rock. Hot on the heels of this godless phenom, were the ideals of equality and civil rights. If the influence of democratic socialism reached Northern Ireland, workers would focus on organizing in greater numbers against their employers, and for religious leaders on both sides of the North's great divide, that meant Protestants and Catholics joining together to put aside ancient grievances and start working productively. They may even turn away from that all encompassing and domineering mother that had a vice grip on their lives-the church. It was a pivotal crossroads for the Northern Irish: they could put down their weapons and realize their common enemies that kept them divided, or they could trod down the beaten path of armalites, direct rule, sedition, sectarian violence and barbed wire.

Sensing an opportunity to counteract the sea change, Reverand Ian Paisley stepped into the void and struck a new course for the Protestants of Northern Ireland. As the Guardian recently reported:

Dr Paisley began in politics in 1959 by forming the Ulster protestant association to prevent Belfast's dockworkers from being seduced by Gerry Fitt's Marxism.

Countering the socialist cause with appeals to loyalty to the country, God and King, Paisley started his march against the social changes that had overwhelmed the west. The church, while bringing in tourists and their dollars to France and all over Europe, had taken a beating by Camus, Satre and the war in general: How could God exist if he allowed World War 2? Paisley and the North, were insulated from this sentiment in some ways. The Irish had in fact been shamefully sympathetic to the Germans because of their shared animosity for the English, and had stayed neutral during the war. Other than bringing some conscripts to the action, the Irish had blissfully missed most of the action and fallout. As a result, they also missed out on the soul searching and introspection that most of Europe went through. For the Northern religious leaders, they could breathe a sigh of relief: If they could stem the tide of secularization from the continent, they could surely repel the civil rights movement and social change from the United States.

Paisley, sensing a momentum, found a guiding light and a pride in taking on this menace. Concentrating on proselytizing the most vulnerable group, at risk of falling to socialism: the working poor. In Northern Ireland today, the most militant areas on both sides of the religious divide are from the most dilapidated neighbourhoods. Like fundamentalist leaders in other countries fighting a similar battle, Paisley immunized the poor from the spreading liberalization by appealing to their mortality, their ignorance, their baser instincts, their god and their pride. If nothing else, they could be proud of their Protestantism. Why would they join up with Catholic workers? They worship a devil, and show reverance for the Pope. Or, as Paiseley put it, "I denounce you, Anti-Christ!" he screamed at the Pope during a session of the European Parliament during the Pope's address.

Paisley not only gave religious justification for violence against Catholics, he incited it. During the height of the civil war movement in Northern Ireland, an event (a precursor to the Bloody Sunday Massacre) involving Paisley came to pass. In 1968, in a Sharpton-esque speech that incited clear and present danger, Paisley convinced 500 Protestants to attack and loot Catholic homes. He justified his actions, explaining that:

"Catholic homes caught fire because they were loaded with petrol bombs; Catholic churches were attacked and burned because they were arsenals and priests handed out sub-machine guns to parishioners; and the massive discrimination in employment and shortage of houses for Catholics were simply because they breed like "rabbits" and multiply like "vermin".

Not coincidentally, memberships in the Catholic Irish Republican Army spiked during this period. Similarly, the loyalist Ulster Defense Association began its own operations, cashing in on the fear of Catholic equality and the fire and brimstone speeches from the pulpit by Paisley. In five year period in the early seventies, the UDA murdered 600 Catholics in cold blood. Freddie Parkinson, a leader of the UDA in later years, stated that Paisley was:

"a tarantula who spreads the venom of further conflict and has been a major contributor to our prolonged tragedy."

The inference here is that Catholics were only one of many victims of his hatred. The Protestant community itself was a major victim of this 'venom', to be sure. Reverand Paisley was a respected religious and secular leader who had taken advantage of a people's god fearing vulnerability and abused their trust to no end. Like any abusive relationship, the abuser suffers just as the abused does. Already at odds with a violent past and colonial misdeeds, the Protestant community already carries considerable baggage. They are ridden with guilt, debased by their actions, have suffered by Catholic retaliation, and driven by self-loathing.

Like religious leaders in all areas of the globe, Paisley has abused the fear of the afterlife to conquer his mortal enemies. The poor of Northern Ireland were divided and conquered on his watch and with his blessing. Like Cardinal Law, like priests and bishops of the residential schools, like Richelieu, like the Spanish Inquisition, like the Salem Witch trials, and not unlike several other historically tragic movements, Paisley is the latest incarnation of the charismatic leader who identifies an enemy to attack and to divert attention away from real problems. He offered bread and circuses, misdirection, and a cure-all for the Protestant Northern Ireland: Kill the Catholic leaders, invade their country and convert them. There is an earthly salvation for your present torment, and an outlet for your rage: use your frustration to acheive a noble religious goal. God will forgive your actions if they are in his service.

His message is eerily similar to the one found in the dark recesses of the Muslim world. A religious leader whispering into the ear of the poor and vulnerable: if they will only do his dirty work, they can be saved.

Certainly, Reverant Paisley is not the only responsible figure in Northern Ireland. As a wise man once said "Throw a rock in the air, you'll hit someone guilty." But certainly, his continued presence and influence is disturbing. This is the man that holds the talks for peace in his hands, with his large voting bloc of the loyalist DUP party in his grasp.

The silver lining has been that there has been an uneasy peace in the North for years, and with this peace Paisley's ability to incite violence grows weak. A generation may go by that never knew sectarian violence in the North, never knew an uncle that was killed by the British Government or an IRA henchman, and never knew the mob violence that destroyed their homes. The memories of these deeds will fade as long as the violence stays dorment. History, sectarian violence and lynch mobs may disappear from living memory, and a fresh chance to throw down the cross that all the Irish bare will present itself. It is at that moment of opportunity, they may have a sober look at the true cause of their painful shared experience.

For now, amongst the crumbling tenements and walls of West Belfast's poor, a brand new structure rises, soaring ten stories above the ghetto, boasting a glorious steeple that dominates the blood red sky. The houses below, are small and trembling before an ever present and watchful alter: their crutch, their father, their justification, their love, their guide, their hope, their lifeline, their drug and their curse.

Quick Note

2004-11-30T21:40:00.000-08:00

I'm going on Hiatus, as is Shamrocks!, so blogging will be light until I am chillin' in Osaka, Japan on Dec 22nd or so. But when I return, don't call it a comeback. I've been here for years.

Trade Fluency and Influence

2004-11-30T20:18:00.000-08:00

In recent days, the Canadian news has focused on a visit to Canada by the most powerful man on the planet earth: George Bush. The trip promises big changes, as the leaders focus on the issues that have divided the two nations in previous years. While most commentators focus on the influence of the pro war/pro peace divisions in the two countries, they neglect to mention that some of the irritants in the relationship are due not so much to 'country-to-country' differences, but the geographic and demographic nature of Bushs' key constituencies. These same constituencies that are driving much of the foreign policy, are also driving the trade policy.
In examining this phenomena, the most obvious place to start is the cattle industry. The US, from a Public Relations standpoint has had a free pass on this one, since they can blame the ban on Japanese policy. Years ago, Canada banned (legally) a type of fish that was being imported from Japan. The reason? The fish was highly toxic if not prepared correctly, and after numerous deaths in Japan, Canada shut down the sales of the fish in Canada, triggering a shutdown in NAFTA sales of the product. This meant a massive hit to Japan in terms of sales, similar to the hit Brazil took after Canada banned its beef.

Japan retaliated to the banning of its fish by banning Canadian beef the instant that BSE was found. The Americans, also sensing opportunity, followed suit. While Canada has attempted to reopen the border, the US has cited the fact that Japan will not allow the imports of US beef into Japan if the border is reopened to Canadian beef. Japan, on the surface, has become leery all of a sudden of Canadian beef. In reality, Japan-US trade is dwarfed by Canadian-US trade, and despite the fact that our beef has been deemed safe, the relationship between Canada and the US has suffered immensely due to BSE.

So the question remains, why would the US use such a flimsy excuse to cause problems with their best and biggest trading partner? The answer lies in following the money in the beef trade in the US. For years, US cattle ranchers have been lining up at the border to protest the imports of Canadian Beef. Under Clinton, gridlock in the US Congress and Senate meant that very little could be done to stem the tide of the beef south of the border. Bush, sensing an opportunity to shore up heartland votes along the norther border, moved in to secure their industry. The voters in the northern Cattle-producing states rewarded Bush with more votes than ever in the recent election. He has also bolstered the vote in these same states with massive farm subsidies, unparalled in any country save France and Japan.

The policy of shoring up the interior states' vote at the expense of allied nations is nothing new, however. The most obvious example has to be the illegal tariffs launched against European steel producers. While Britain stood by the US' side at the UN, the US was implementing tariffs to shore up the Pennsylvanian vote. The policy of steel tariffs was specifically aimed at Ohio and Pennsylvania, which were losing thousands and thousands of manufacturing jobs. These loss of these jobs in Ohio was particularly distressing, since Cleveland was becoming the post industrial ghost town that it is today, and this was the battleground state of battleground states.

Similarly, in the West Virginian hills, steel workers were losing hope in an already depressed state, despite the national focus on 'clean burning coal' that had propped up the state for some time. Still, with the eastern half of the state becoming DC commuters, there were liberals and ex-steel workers who might swing the vote on election day if action was not taken. Steel tariffs were introduced to the dismay of Britain, in particular. A trade partner, that stood with the US at the UN, against the wishes of their close neighbours in France and Germany.

Similarly, the Softwood trade was a dealt a similar blow. Underneath the nose of the Toronto-centric national news, and with Vancouver news outlets barely able to keep up with local news, northern British Columbia was attacked by the tariffs that ravaged the softwood industry. With the Canadian news otherwise occupied, and the constituency unable to influence national policy, the problem crippled what could be a national powerhouse of economic growth. With aluminum manufacturing, the possibility of massive offshore oil reserves, one of the top three deep sea harbours in North America (Prince Rupert), a potentially explosive tourism industry, the huge expanse of forests, a mining industry (currently tied up in red tape) and northern LNG plants, Northern BC sits calm as a bomb waiting for the layers of government to economically set it off. But with the tariffs, and an inactive government at the federal level, and a decentralized (Provincial and Federal) approach to resolving the issue, the problem persists.

In the US, the pain in the softwood industry was acute: Competitively, Georgia and other southern producers of poor quality wood were at a severe competitive disadvantage. The cheap Canadian dollar, highly efficient Canadian production techniques and superior materials made our product unstoppable, and with home building ramping up with the introduction of low interests rates, southern American producers realized they were missing out. With their only competitive advantage they had (lobbyists), the US softwood producers pressed their case on Capitol Hill and won a very unimaginative victory: Pulling out the same complaint they had the previous two times. They again complained that our softwood industry was 'unfairly subsidized'. Despite numerous rulings at NAFTA and the WTO, Bush sensed that he again needed to go to bat for a constituency he needed to solidify. Bush could not have known who he would oppose in the Presidential election, but with the onus on the Democrats to try to recapture Florida and possibly other parts of the formerly 'solid south', he probably sensed there would be a challenger on the ticket from the southern states. In this case, the ticket choice was John Edwards, who turned out to be an incredibly weak southern candidate: he could not even secure his own state.

Of course, trade is not a zero sum game, but there are definitely losers from these trade games that Bush plays. The heartland of America, with a focus on the production of food and goods was the key demographic that Bush has needed for his re election. But who suffered from these trade antics inside the US? Who would pay the price for his intransigence? Which states would feel the pinch of higher consumer goods, but none of the benefits of protected industry? The states that had moved past a reliance on industrial manufacturing and instead focus on service industries. States that do not name their universities after Agriculture and Manufacturing (A&M). States that rely on foreign trade rather than production. In short:

The Blue States.

The calculation of mandatory electoral votes, and the discounting of New York, New England, and the Pacific states/California, meant that trade with foreign countries was an expendable item. Trade, of course, is only one area where Bush has played up the divide in key demographics and regions (remember the words 'The Senator from Massachusetts'?) . While regionalism has long been kept under wraps in the US because of their senate which nullifies some of the weight of populated states, it is now guiding the very visible hand of international trade policy to the overall detriment of the US.

The good news is that re-election is no longer a priority for this president. The Democrats are going to use their considerable braintrust to figure out a way to attack the president in the next election, and with no obvious figure ready to take on the Republican candidacy, there is an open door. The situation will be extremely liquid and an obvious strategy for playing to the heartland may not present itself. The strategy, while barely able to eek out two tight elections, will not hold for a thrird. To widen their appeal, the president might want to tear down the trade barriers and let the Republicans stem the bleeding in the currently Blue states. Canada, for its part, can allow some give on issues like NMD and show some more vocal, if not military support, for the Middle East adventures of the US. Showing up to vote on some US backed issues in the UN would also go a long way.

With nothing to lose, and four years until the next election to get the economic reforms underway, the president has an opportunity for his party and his weary allies to step back from the darkside of trade policy. For the sake of his country and his party, he needs to stop playing politics with trade policy, and start encouraging freemarket economics.

The West's Eastern Edge

2004-11-29T17:19:00.000-08:00

In Kiev, the frontline of the battle against tyranny has opened up. The opposing sides are engaged in a straight ahead fight, the geographic basis of the fight being east vs. west, as the map clearly shows. Previously, the same battle divided a major European power in two: Germany. Berlin, having fallen to the west opened the eastern states to rapid liberalization.

In the last 15 years, the forces of autocracy seemed to be in permanent regression. In fact, at the beginnning it seemed destined to overwhelm the largest country by population: China. Tyranny and despotism fought back and regained their toehold however: a headlong rush into liberalization brought opportunity for mobs, sychophants and former tough men of the old regime. The epic fight between Burke, the slow reformer vs. Paine, the instant revolutionary seemed to be going Burke's for once.

Ukraine has been down the road of slow reform, as patient democrats watched their neighbours join the EU and prosper under liberalization. Meanwhile, the linguistic, geographic, ethnic, religious and cultural ties of Ukraine's eastern shore pull the nation to the east. But to what east exactly? Russia's hold on its neighbours is weak as it barely maintains the integrity of its own borders in Chechnya, attempting to maintain its hold on a muslim nationalist movement within its borders and watching several other nationalist movements disrupt the neighbourhood. Armenian Christians, Kurds, Georgians, Azerbaijanis and Chechens are chomping at the bit to free themselves.

Complicating matters immensely are several interests, oil and religion being the most obvious. Ukraine has long been an important strategic breadbasket, but its value is also maintained by its location. It holds sway over important oil pipeline routes that Russia, drunk on oil money, is keen on exploiting. With regional capacity maxed out in most of the middle east, and OPEC loathing to expand production to decrease their oil prices, the industrious Russians are drilling themselves out of bankruptcy-and with Yukos, have nationalized themselves into being a key player once more.

An overlooked factor in the conflict has been religion and history. As Huntington has pointed out, the 1999 conflict in Serbia and Kosovo involved three major religious blocs: Muslims, Western Catholics/Protestants and Slavic/Eastern Orthodox. Just as in the 1914, where the Serbs erupted a firestorm drawing on the Slavic connection to Russia, the Motherland still sees its old western provinces as its own prodigal slavic sons. The eastern half of the Roman empire developed its own traditions, own orthodoxy and beliefs. Their development took on a life of its own, and the ethnic differences with the western half of europe intensified these differences. Stalin, being wise to these nationalist movements (and being from Georgia) recognized that they posed a danger to Soviet superstate, and undermined them with 'Russianization': moving masses of Russians into 'ethnic' states and patriating some of those ethnic groups across Russia. The other tie that bound them was an ideology of 'equality' as 'workers', all equal across the board: no offical minorities, just soviets, all.

Of course, democracy and liberty have never been concepts that have been applied strictly to western countries, but in many parts of the world, these concepts, derived from ancient Greek ideals are now seen as 'Americanization'. Even in Canada, the Senate has withstood withering criticism because of its lack of democratic mandate and usefulness, because reforming it to be a 'Triple E Senate' is seen as too 'American'. So the spectre of anti-americanism has played a big part of this conflict, as even the pro-Russian forces admit that this is a battle against the US. Undoubtedly, there are western Ukrainians who are non too keen on the US, but see freedom as being something desirable, despite the PR problem it might have.

How can the western Ukrainians overcome their eastern counterparts? They have to appeal to Ukrainian nationalism, and paint the obstructionist and tyrannical forces of the east into a corner: Are you loyal to Russia, or are you a patriot? They can also focus on being apart of the EU, which might offset the accusation of being 'pro american'. Also, appealing to the media is key. There has to be a concerted effort on the part of the opposition to get their message to the eastern shores. A seperatist movement in the east would leave the westerners landlocked, with little chance of an 'insta-deal' to open up trade with Europe. Strategically, it is key that Ukraine controls the eastern ports and when the reformers are in power, they seize the opportunity to establish their presence in the eastern side.

Ultimately, a hearts and minds campaign must be waged. The eastern half will not instantly become pro western, but if the US, Canada and the EU can support Ukraine the way they supported Berlin, there is a good chance that freedom's chances will improve.

Risk of Loss: Business Strategy and Foreign Policy

2004-11-27T10:09:00.000-08:00

There was a revelation in a recent article about Porsche: Porsche had renounced quaterly reporting, and was instead continuing its policy of yearly reports. In North America, Porsche would never be able to report to the SEC on the NYSE or the TSX because of this policy. Similarly, in Germany it appears that Porsche may be delisted. What is going on at Porsche? Why has Porsche rejected the short term misery of quarterly reporting?

You may recall a few years ago when Enron was in trouble: The company was tanking, the markets were reeling and the regulators were getting a head full of steam. Analysis of the inner workings of Enron revealed that a big part of the company culture revolved around the obsession with stock prices and, naturally, the earnings reports that would drive up the share price. In fact, rather than focus on quality earnings, ingenious accounting and financial schemes (costing real money) were devised that made it appear every quarter as if the cash was rolling in and that the company was on the up and up. The ability to manufacture earnings and hit the expectations of the analysts eventually became the chief duty of the senior executives.

In focusing on the markets, businesses realize that driving down the associated 'risk' with their stock, will lead to a perception of stability and consistency. In fact, if there is a positive earnings shock when a company reports its earnings, a company will pay in the long run for appearing to be 'unpredictable'. The result of this attitude is considerable stress on management to manipulate figures-and so they do. In a sense, Enron's metamorphisis from 'company' to 'accounting fraud clearinghouse' was the natural outcome of such attitudes. But the Enron debacle is not the only outcome of this attitude. In many ways, companies themselves are becoming more and more 'risk averse' because they know that taking chances can be punished if these 'chances' result in a missed earnings result. Porsche, the wiser, older European brother of the relatively "'roided up" American companies, realizes the havoc that playing with these market games can result in.

Further encouraging this trend has been the focus on unreported stock options, which radically skew the alignment of management and company goals. In business, where the hired gun at the top may only stay on for a few years (or months, in some cases), the motivation for a CEO is to ramp up the 'appearance' of success at the company to drive up the share price. Unfortunately, options are an amplification of share returns, which amplifies the CEO's motivation to manipulate. Futher exasperating this situation, is the insane bonus structure of the so much of the executive compensation. Paying a CEO a decent wage has been replaced by a system of compensation where 'performance rewards', where in theory, the reward is the fruit of the CEO's hard work. And the report card of the CEO? You guessed it-the quarterly earnings report. That report must have the earnings hit the analyst consensus to drive down the risk associated with the company. It must say 'earnings are gradually increasing'. It's the report that whispers sweet reassurances to investors and creditors. The report that, if 'successful' drives down the credit risk and the cost of borrowing for a company.

To downplay risk, however, the companies that slave away to meet their quarterly estimates also engage in what you might call a 'policy of stability'. That is, using principles that are sometimes short term oriented and extremely short sighted. Take the American election: the markets had factored in a surge if Bush won because there would be 'stability' because a change in the government meant short term inconsistency. Or take for instance, take the Venezuelan election. The business community, in its drive for consistency, was backing Chavez. Chavez, obstensibly a socialist dictator who (in hindsight) very obviously stole the election, was backed because he represented the choice of stability.

If, for example, the opposition forces were to win, there would be blood in the streets. In fact, when Chavez won, there were gunmen in the street killing protesters anyway, but if there was an opposition victory, the blood would flow. In the short term, the price of oil would skyrocket since Venezuela is such a key player in OPEC. There would be a regime change that would mean new contacts would need to be made, new lobbyists would need to be hired, an examination of new government policies would have to be reviewed and in short-political anarchy and the dreaded 'uncertainty'. Earnings might be missed, heads could roll and the market would react violently.

This is a very limited example, but you can apply these principles to just about any state. Russia, for instance, is becoming a hotbed of business under Putin because his government represents a 'stability' of sorts. Stable autocracy, it seems, is becoming a hot item in some circles, because it represents short term certainty. If your business has a problem in the factories of China with labour unrest you can be certain of who to talk to in the local Chinese government to have that fixed. If you want that new distribution centre on the Venezuelan coast, you can find the right man in Chavez' government to make it happen.

The problem with the short term stability favoured by companies, and by extension, the markets is that this focus leads to long term instability. Long term profits and certainty are being sacrificed to the quarterly earnings gods.

To put it in more succint terms: if business wants to lie down with dogs, it will wake up with fleas. Chavez, Putin and all the dictators who are sucked up to by businesses are not men who breed long term success for capitalism. They destroy political opponents through repression, leading (according to new reports) to violent underground and sometimes overt reactions by the opposition.

They are also unpredictable in the long run. Look at Yukos: the founder was jailed because of his views and political affiliations. The business community has deluded itself into thinking that this was 'just a warning to other businesses to stay out of Putin's way', because what exactly counts as "Putin's way"? What exactly will set him off? He is an autocrat taking actions without repercussions. What will prevent his nationalization of a foreign firm that does too much business with a political rival? And by extension, if those same political rivals are stifled through the legitimate political organs, how far will they go to make sure their voices are heard in the street?

Autocratic states are not known for their peaceful regime changes, so when the hammer drops in places like Venezuela or Russia, what will be the price the business community will pay in the markets? How will the new and violent regime react to the businesses that supported the old regime? How would this regime change be handled if it were take place, but in the context of a democratic election? How would this change the associated risk of doing business in any one country?

There is no easy solution to these problems. Business has to continue in these countries in a political sense as free markets eventually will lead to democracy. There has to be a change at the top in terms of the focus in short term profits. While regulators in Germany agonize over Porsche's insistence that the company stay away from quarterly reports, Porsche carries on business as it has for many, many years: focusing on cranking out a superior product and letting its yearly report speak for itself. My own impression is that management is spending time on the sales and development of their product rather than spending untold man hours with a team of specialized accountants thinking up ways to stay within Generally Accepted Accounting Principles but still meet the earnings consensus figures.

A happy medium might be to approach the situation as a Burkean conservative: support democracy, but not a revolution. If businesses are operating in some of these countries, they have to realize that they take a risk from a public relations and logistical standpoint: autocrats can and will turn on you. Someday, Chavez and his cronies will be thrown out of office, and those affiliated with him will suffer. To counter this, supporting democratic and capital institutions or parties in an anonymous fashion or under the guise of promoting business will go a long way.

There has to be a realization that in the short term, democracy is a messy process and if not properly implemented can result in disaster. The long term benefits of supporting democracy will result in long term certainty in regime change, the rule of law, and the enforcement of legal contracts. These are the basics of modern capitalism: if you do not have these founding principles, the result might be short term gain (assuming you are in the 'good books' of the regime) but only at the expense of long term anarchy.

Northern Intransigence

2004-11-25T17:54:00.000-08:00

North Korea, as you may already be aware, is on a one way path to confrontation with the west. Not much is known about the motives for the actions of the hertmit state, but one article in Policy Review, attempts to uncover the method behind the madness. In a nutshell, North Korea has inverted the rationale behind the military spending of western countries. While the west sees its military spending, in general, as a burden that must be carried by the rest of the economy, North Korea views its military very differently.

Rather than portraying its military as a 'burden', the leadership of the North sees the military as its chief financial resource, despite the massive resources thrown into the military spending. Basically, without many exports leaving its physical borders, the North Koreans have managed to export the one commodity that transcends physical time and space. It exports the one thing that has become a hot item for many parts of the global village, the one thing thing that will bring the west to its knees-terror. The North Koreans have managed, in light of their lack of material goods and a market to sell them too to keep their little home grown business up and operating. Sabrerattling, formerly the realm of nations readying for war, has become the primary state of a country intent on blackmailing the rest of the world.

Philosophically, the North Koreans have also inverted their idea of 'success' in the global economy. In one sense, they have reached a very real conclusion about opening their borders to trade: they believe that the free movement of people and goods will result in the 'infiltration' of democracy and capitalism. If they are too integrated in the world economy, the see the end of the North Korean state as it is.

So their strategy is working to an extent. The view their philosophy of 'Juche', or 'self reliance' as the reliance in their military to keep the country apart yet financially afloat through extortion of other nations. It is a fascinating strategy, but one that relies on one dangerous premise:

The rest of the world will not call their bluff at some point.

Civility, Lost

2004-11-24T19:05:00.000-08:00

If I have seen farther
It is because I have stood on the shoulders of others
--Newton

I make no claim to have seen ‘further’, but what I would like to convey in this opening quote is the modesty and respect that it conveys. When Newton was being confronted about his findings, and put under duress he modestly deferred to the achievements of the intellectual giants who came before him, namely Copernicus and Galileo. At the time, both of these ,uh, renegades drew the ire of the establishment of the time. Their thinking might have shown (in the long run) to be flawed, or simply wrong in many respects, but their accomplishments compelled others to further their work. Newton disagreed fundamentally with many of their findings, but respected them nonetheless and was rewarded for his open mindedness.

In science, and some other exacting fields, a peer review system (thanks to Bacon, et al) combining theory and practical application has laid a foundation for building a body of knowledge: hypothesis, experiment and peer review all develop conclusions that are based on theory, tested in practice and handily debated in review. Advocacy and politics are, in theory, supposed to play no part in the results. Of course, David Suzuki and a host of other ‘advocates’ posing as ‘scientists’ who represent every special interest under the sun are able to come out with their own ‘findings’ . Theoretically, however, the findings in the scientific world of academia are supposed to be apolitical: Science, in theory, does not have a ‘slant’ or bias. When a scientist presents a new idea in defending a Ph.D, he or she does no longer has to respond to questions like ‘Are you an imbecile? You think there is another inhabitable planet outside our solar system? What an idiot!’

Unfortunately, this kind of approach has made itself an established art in the world of criticism. Maybe it is confining space with which pundits are forced to work with, having only 800 words to convey complex arguments. In short works of criticism, how can you express to a reader that the person you criticize is wrong? The tempting shorthanded approach is an ad hominem attack: A form of criticism that concentrates on the human behind the argument.

In the last three years, we have seen an all out assault on the usual rules surrounding criticism. The reasons are all over the map. Heated discussions, and lines in the sand have culminated in an atmosphere where in the US and Canada, and apparently in the EU as well, political affiliation and opinions have become the only judge of character. Can I have a cordial discussion of political views with someone I vehemently disagree with? Not likely. Can they express to the reasons they disagree with me? It will probably end in fists flying, rather than a well thought out discussion and conclusion to ‘agree to disagree’.

For instance, last year I was making (I thought so anyways) a well reasoned argument against my friend’s position that the US should stay out of Iraq. Whatever you may think of the current situation, or the debate before the war, you might agree that this is a fairly removed situation from my friend and I, and also that either side had a fairly decent argument. At the time, both us were sitting in office towers in (relatively) safe western cities without any chance of being drafted to fight. We were in no immediate danger, and men with guns were not threatening us.

Problems with our back and forth emails emerged when he insisted that I was ‘brainwashed’ and unable to see past the ‘media’s thirst for war’. His insults were a little hard to take and despite numerous attempts to asking him politely to desist, he continued. We simply stopped trading emails referring to the war.

In the US, the situation is worse. Check any nightly newscast, or even Jon Stewarts’ show (I like it anyways) and you will notice that the competing viewpoints are not respected and challenged, but pilloried with ridiculous personal attacks. Recently, a ‘liberal’ newscaster took to calling Condi Rice ‘Aunt Jemima’ and refused to apologize. On right wing websites, like ‘Little Green Footballs’ or left wing sites like ‘Daily Kos’, opposing viewpoints are grounds for cowardly and anonymous attacks by other readers.

Similarly, I was watching Dennis Miller the other night, while Miller launched a screaming attack on what he called a close personal friend, because said ‘friend’ believed that some of the fighters in Falluja might be ‘protecting their homes’. You might disagree or agree with this viewpoint, but does it warrant a rabid-mouthed and furious response? Does it warrant accusations of treason if you disagree? Miller is not an idiot either: we are talking about a history buff, with a master’s in English literature. He is someone who should know better, and his apparent slide into intellectual intolerance sets a dangerous precedence for his viewers.

I started out quoting Newton on this page to remind us that even those we overwhelmingly disagree with might have something valuable to teach us. Newton, Galileo and Copernicus were denounced as heretics by the church, and only later were recognized by the wider world as scientific prophets. This is the standard we might adhere to: How much respect would I respect him or her, if I looked back at this moment several years from now and realized they were correct? How sheepish would I feel if they were proven to have called the situation correctly? How would I correct my own behaviour towards my foe? Nietzsche once said (I paraphrase): “We should encourage the young to respect those they disagree more than those they side with”.

We’re all guilty of not doing exactly the opposite-even Nietzsche.

First Past The Post

2004-11-24T09:22:00.000-08:00

This is the sister site to Shamrocks! and will serve as a 'long-post' type blog, and and as a compliment to my other site. My hope is that this blog will carry more longer, more detailed posts while Shamrocks! will focus on shorter observations.