13 June 2013

A smarter way to deal with China***

By Joseph S. Nye Jr. 
June 12, 2013


The right U.S. strategy includes 'power with,' not just 'power over.'

President Barack Obama and Chinese President Xi Jinping, left, walk at the Annenberg Retreat of the Sunnylands estate in Rancho Mirage. While saying it is critical that the U.S. and China reach a "firm understanding" on cyber issues, Obama told reporters his meetings with Xi have been "terrific." (Evan Vucci / Associated Press / June 8, 2013) 

China will almost certainly pass the United States in the total size of its economy within a decade or so. But if one looks also at military and "soft power" resources, the U.S. is likely to remain more powerful than China for at least the next few decades. Does it matter? 

When nations worry too much about power transitions, their leaders may overreact or follow strategies that are dangerous. As Thucydides described it, the Peloponnesian War — in which the Greek city-state system tore itself apart — was caused by the rise in the power of Athens and the fear that created in Sparta. Similarly, World War I, which destroyed the centrality of the European state system in the world, is often said to have been caused by the rise in power of Germany and the fear that created in Britain. (Though the causes of both wars were also much more complex.) 

Some analysts predict that a similar scenario will be the story of power in the 21st century: The rise of China will create fear in the U.S., which will lead to a great conflict. But that is bad history. By 1900, Germany had already passed Britain in industrial strength. In other words, the United States has more time to deal with China's growing power than Britain had to deal with Germany's, and the U.S. does not have to be as fearful. If it were to be too fearful, both sides might overreact. The Chinese, thinking America was in decline, would push too hard, and Americans, worrying about the rise of China, would go too far. 

The best way to avoid that is by having a very clear-eyed view of all dimensions of power and how they are changing. The recent Sunnylands summit between President Obama and Chinese President Xi Jinping was a step in this direction. 

Another reason it is important not to be too fearful is the diffusion of power. China and the United States — as well as Europe, Japan and other nations — will be facing new transnational challenges on issues such as climate change, terrorism, cyber security and pandemics. These issues, which will only become more urgent, will require cooperation, including help in many cases from nongovernmental agencies. 

Obama's 2010 National Security Strategy referred to the fact that the U.S. has to think of power as positive-sum, not just zero-sum. In other words, there may be times when it is good for the United States (and the world) if Chinese power increases. 

The miracle of India’s negative growth

Jun 13 2013

RBI and CAG have each caused a loss of Rs 1.75 lakh crore to the economy over the last two years 

The economy has slowed down beyond most people's imagination, let alone expectation. The rupee has depreciated the most among emerging market currencies — close to 7 per cent this year and 10 per cent since the end of April. This has caused angst, and a healthy debate, in both the economic and policy community. Just two years ago, India was celebrating the miracle of 8.4 per cent average growth for eight years (2003-2010), including the three years of the Great Global Recession. And then a negative miracle — GDP growth collapsed to 5 per cent (factor cost) in 2012-13, or 3.2 per cent according to the universally preferred measure of growth at market prices. What happened, and who is responsible for this negative miracle? 

Obviously, this miraculous decline is man-made and the result of several factors/policies. Two prominent determinants of the negative miracle are the operation of policies by two esteemed institutions — the monetary authority, RBI, and the governance authority, the CAG. By my calculations, each of them has contributed an equal (presumptive?) loss to the Indian economy — at least 1 per cent of GDP for each of the two years, or around Rs 1.75 lakh crore each. 

How can such an assessment be made? By examining the determinants of investments and growth for the last 35 years and especially the last 20 (since 1993). For some suggestive answers, take a good look at the chart — I believe it contains a lot of answers to several questions of policy. The chart plots GDP growth versus the (real) SBI benchmark prime lending rate lagged one year. That is it — no statistical pyrotechnics, nothing. The chart reveals as close a fit as one can imagine between two variables that according to Indian myths are not even supposed to be related to each other. How many times have you heard learned economists, including those at the RBI, and even more learned "market" economists, opine that in a country like India, real lending rates don't really matter for investment, production and growth. Then what does? 

The reply comes back in double quick time. It is oil prices, projects being cleared and not cleared by the government, animal spirits, complementary infrastructure investments, etc. It is nobody's case that such things do not matter. Equally, it should be nobody's case, especially from the hallowed policy-making circle at the RBI and PMO, that interest rates do not matter. Especially when you consider the incontrovertible evidence — simple and convincing — relating interest rates to growth. One variable alone explaining 60 per cent of the variation in growth for the last 20 years — you have a better one? 


If India is to fulfil its promise of becoming a thriving nation soon, it must improve the quality of its science education, writes Bikash Sinha 


National Institute of Technology, Patna 

India is expected to emerge as an economically prosperous country with the majority of our citizens in the age group below 40 by 2020. We dream of an inclusive society where the bulk of the population would have access to education and healthcare and a prosperous life with hope and confidence. It is crucial to comprehend that science and technology are at the heart of that possibility. Thus it is important that India becomes a knowledge power house, a globally important centre for technological innovation and scientific creativity. 

To achieve even partially the goals we have set for ourselves, we need vast resources of manpower trained in science and technology. 

The present situation in the country, however, is not altogether encouraging. We still do not have educational institutions that are in the top 50 or even 100 in the world. Our universities have deteriorated and in a state of perpetual decay owing to years of neglect and political interference. Even our best institutions are not up to the mark any more; there is a serious leadership crisis. We do not find sufficient numbers of young leaders in science. 

At the same time, there is increasing competition from other countries, especially our Asian neighbours. Some of them, such as South Korea and China, have made enormous investments in science in the last few years, not only in terms of funding but also in creating a large manpower base. The main concern for us should be not merely to improve the quantity of our scientific contribution, but, more important, to improve the quality of science significantly. Let us not forget that India contributes only around 3 per cent to world science and around 1 per cent or so to the top 1 per cent of scientific research. In the next 10 to 15 years, we should try to reach a level where at least 10 per cent of the top 1 per cent of scientific research comes from India. 

We must ensure that we have a large number of schools and colleges of high quality and that our universities become storehouses of high quality knowledge and are able to generate future leaders in science. These young leaders should lead our programmes, not government bureaucrats entangling us with rules and regulations. The national mission should have deep passion and conviction, strong enough to overcome bureaucratic pressure for tediousness and ‘more of the same’ which have precedence. Teachers and teaching should become a national mission for the next decade. Our leading institutions should take active part in improving the quality of schools and colleges. It is imperative that we rescue our schools from the prevailing appalling conditions that are well below the standards expected. 

Over the years there has been a deplorable diffusion of our manpower from the mainstream of science and technology to management and information technology. The motivations for such a trend are all too obvious. 

Almost a Miracle: Encouraging Inclusive Growth in India

The free public elementary school is closer to ten-year-old Rita’s home than the factory where she works ten-hour days instead of getting an education. Rita lives in Bawana, a slum on the northern edge of New Delhi that is home to more than one hundred thousand impoverished residents. In an effort to showcase a prosperous country to a global audience during the 2010 Commonwealth Games, the Indian government displaced thousands of poor people from their makeshift homes in the capital city’s center to Bawana. In exchange, they were all promised access to good paying manufacturing jobs in the nearby factories through which they could lift themselves out of poverty and create a better life for their children. 

According to mothers in a women’s group organized by STOP Trafficking and Oppression of Children and Women, a Delhi-based NGO that fights this pervasive crime, nearby factory operators engage local dalaals or brokers to provide child laborers to fulfill work orders in factories that produce jeans, soaps, sandals, and plastic-ware headed for domestic and export markets. These dalaals, who are actually traffickers and not always in disguise, go into Bawana and dupe, drug, steal, and buy children to provide labor to the factories. The children work long hours and the traffickers take one-third of their wages, leaving them with less than an average of $40 in monthly income to give to their families. Mothers have complained and filed many cases with the authorities, but to no avail: the local police are also on the dalaals’ payroll, denying the children and their families access to justice.Reality, however, differs considerably from the image of India that its government tries to portray to the world: Bawana’s thirteen city blocks are a maze of unpaved muddy lanes lined with open sewers, overflowing public toilets, and rotting garbage. Bawana is also a place where criminals traffic vulnerable children like Rita. 
The US and India are natural allies, but Obama has let China and Pakistan get in the way of New Delhi’s importance. 

In March 2012, another local NGO, Bachpan Bachao Andolan (Save the Childhood Movement), rescued nineteen such children from factories near Bawana, some as young as six years old. These children were trafficked and forced to work in hazardous conditions to assemble components for electronic equipment. 

Life in Bawana contradicts India’s self-portrayal as an “economic miracle.” While observers of globalization typically express concern about poorer nations left behind by successful rising powers like India, concern is also due for those left behind in India. India is squandering potential for greater growth by its lack of access to justice and opportunity for all its citizens. Indeed, after two decades of sustained economic growth, India’s “miracle” has exempted many of its young: forty-seven percent of all children under five are underweight and sixty-one million are stunted in growth, the highest percentage in the world. Despite a decade of near-double-digit GDP growth, one out of every three malnourished children in the world is found in India. 

Flawed vision

At the root of the UPA government’s continued failure to defeat left-wing extremism is the absence of a clear assessment of the ground reality and a larger political vision. By VENKITESH RAMAKRISHNAN in New Delhi

THE strategies adopted by the Congress-led United Progressive Alliance (UPA) government throughout its nine years in power to combat the guerilla tactics and growing political influence of the Communist Party of India (Maoist) have been characterised by ad hoc and ill-planned security initiatives. These initiatives have time and again fallen flat, underscoring the absence of a larger political vision to take on left-wing extremism (LWE). The gruesome attack by Maoist insurgents on a convoy of Congress leaders and workers at Darbha Ghati in Sukma district of Chhattisgarh’s Bastar division on May 25 and the developments before and after the attack have once again highlighted the confusion in the ruling dispensation on the question of combating insurgency. In fact, the situation in the context of the May 25 incident is far more complicated than before on account of a combination of political, administrative and security matters. 

This is so because the Darbha Ghati incident has not only brought up questions about the efficacy of the anti-LWE security machinery and its evaluation at the administrative level but raised pointed queries about the collusion of segments of mainstream political leaders with the Maoists in perpetrating such acts of violence. Consequently, the topmost leadership of the Congress, the principal constituent of the UPA, has been compelled to launch its unpublicised internal probe into the incident, focussing primarily on the collusion angle. Given the track record of the Congress in the past nine years, this initiative may not result in altering the leadership’s vague perceptions about combating LWE. 

The assessment

The biggest question, according to a senior security specialist who was part of the highly successful counterterrorism operations in Tripura, which shares its border with Bangladesh, during the late 1990s, is whether the security machinery, the administration and the political leadership can make realistic, fact-oriented and level-headed assessments about the situation on the ground and advance commensurate action on the basis of this assessment. 

“The fact of the matter is all three levels had failed miserably in the assessment of the overall ground situation vis-a-vis LWE in the run-up to the Darbha Ghati incident,” the former security official told Frontline. “In the months preceding this gruesome attack, all these levels combined to generate and propagate a premise that the CPI (Maoist) had suffered telling blows and was so much on the back foot that it cannot bounce back. Warnings by several experts and observers against propagating this premise were not taken seriously,” he pointed out. 

Ajai Sahni, executive director of the Delhi-based Institute for Conflict Management, describes the reports about crippling blows to Maoists as “sustained falsification”, which “has its sources in both the State and Central security establishments”. In his view, these were dishonest and politically opportunistic efforts to claim “successes” without having worked for them. 

The war in Bastar

The conflict in Chhattisgarh, of which the ambush of the Congress convoy is the latest manifestation, is over whether the natural resources of Bastar belong to its people or to the state-supported corporations. A result of uneven development, it will never be resolved if the state keeps resorting to military adventurism instead of formulating policies that help the tribal people take their own decisions.By AJOY ASHIRWAD MAHAPRASHASTA in Darbha and Jagdalpur

A THREE-METRE-WIDE meandering road, with uneven rocky hills on one side and deep, dense forests on the other along a 25-kilometre stretch, constitutes Jeeram Ghati, a part of the wider Kanger valley in south Bastar, known for its rich natural resources and 90 per cent Adivasi population. This highway in southern Chhattisgarh connects Bastar with Andhra Pradesh, through areas like Sukma and Konta, theatres of a war between the state’s security forces and the banned Communist Party of India (Maoist). Despite being at the centre of a war zone, this highway has remained by and large immune to conflicts as it is also one of the busiest trade routes in the region. Heavy vehicles and other carriers constantly transport forest produce and other goods through this highway. 

It is because of such factors that the CPI (Maoist)’s attack on the Congress convoy on May 25, which killed 27 people, including Salwa Judum founder Mahendra Karma and State Congress president Nand Kumar Patel, took the Indian security forces by surprise. In its biggest operation since the 2010 ambush on a Central Reserve Police Force (CRPF) platoon which left 78 soldiers dead, the People’s Liberation Guerilla Army (PLGA) of the banned CPI (Maoist) planned the attack on the highway during the Congress’ Parivartan Yatra (rally for change). The Maoists used their familiarity with the rough terrain of the Kanger valley to their advantage and forced the Congress convoy and the security forces into a disadvantageous position by trapping them from both the sides on the narrow, S-shaped road. 

The PLGA team had around two hours to complete their operation as the carefully chosen site of attack was at least 10 kilometres away from the two nearest police stations—Darbha and Tongpal—which are on two different sides of the valley. The Congress’ convoy comprised around 25 cars and the attack on it started around 4:30 p.m. The security forces reached the spot by 6:30 p.m. only to find dead bodies, injured people and blasted cars strewn around. 

According to survivors Frontline spoke to, the Maoists had blocked the road with a truck in such a way that only one car could pass at a time. The driver of the truck was later found killed. The first car of the convoy, in which State Congress leader Avadesh Gautam was seated, passed through the blocked road without getting hurt. The second car, which carried local Congress workers, was blown off by a strong improvised explosive device (IED). That is when the convoy came to a halt and the Maoists started attacking it. “Most of the Maoists were young and carried wireless sets. Nand Kumar Patel, his son and Sukma’s MLA Kawashi Lakma were in the third car. They were caught when they were trying to escape into the jungle. As the crossfire continued, the Maoists kept looking for Mahendra Karma, who seemed to be their first target. Karma identified himself to the Maoists. But the Maoists took him away only after they verified his identity from other Congress leaders. Once they took Karma into the bushes, the firing stopped. Some rebels gave us water and medicines and asked us to go,” said one survivor who refused to be named. Kawashi Lakma told the media that he and some other Congress workers were let off by the Maoists while Nand Kumar Patel and his son were taken into the jungle. 

US and Iranian Strategic Competition: Afghanistan, Pakistan, India, and Central Asia

By Anthony H. Cordesman, Robert M. Shelala II, Nori Kasting, Sam Khazai, Sean Mann 
Jun 11, 2013 

US and Iranian competition in Afghanistan, Central Asia, and Pakistan has taken on renewed significance amid recent elections in Pakistan, and the upcoming Transition in Afghanistan. Rising anxiety over the withdrawal of US forces, ongoing regional instability, and continued tension over Iran’s nuclear program contribute to escalating competition between the US-Iranian competition in Afghanistan, Central Asia, and Pakistan. 

The Burke Chair at CSIS is issuing a series of new analyses of this competition, and the new report entitled US and Iranian Strategic Competition: The Impact of Afghanistan, Central Asia, and Pakistan is now available on the CSIS web site at https://csis.org/files/publication/130602_AfPak_Cent_Asia.pdf

This new report provides a detailed analysis of Iran’s political and economic links to Afghanistan, as well as to Pakistan, India, and each of the Central Asian states. It identifies how each such relationship is both effected by -- and can shape -- US-Iranian competition. 

It explains Tehran’s links to western Afghanistan, its unique relationship with the Taliban, and the importance of Iran for facilitating key exports from the region. It highlights how the US-Iranian competition impacts Iran-Pakistan relations, and the threats that closer Iran-Pakistan ties could pose to US security interests. 

It also focuses on Iran’s relations with India and each Central Asian state. As the US and its NATO allies prepare to withdraw most of their forces from Afghanistan in 2014, the competition with Iran, tensions with Pakistan, India’s strategic ties to Iran, and the decline in US aid and military ties to Central Asia could all change the nature of US and Iranian strategic competition in this region. 

Much will depend, however, on the intensity of US and Iranian competition in the Gulf and Levant, and whether the tensions between the US and Iran in other areas lead to any form of clash or conflict. Iran has little incentive to confront the US in this region unless it feels it has to find every fault line it can to pressure or attack the US – conditions which do not now exist. 

If the intensity of US and Iranian com petition continues at something close to its current level, Iran will seek to both advance its own interest in the region and find ways to ease the pressure of US, EU, and UN sanctions, but an analysis of trade patterns and Iranian opportunities to expand its energy exports indicate Iran can only have limited near to mid-term success. It is more likely concentrate on the security of its eastern borders, make marginal gains in trade with Central Asia, and seek to expand its role in Afghanistan largely to ensure that it does not face another Taliban-like threat after most US and ISAF forces leave. 

Turmoil in tribal areas

12 Jun 2013

OUR armed forces are engaged in fierce battles in the Khyber and Kurram agencies and on a somewhat smaller scale in the other tribal agencies to re-establish the writ of the state.

It is an uphill task. The Khyber Agency operation was launched several weeks ago and it is only now that the Inter-Services Public Relations can claim that a substantial area has been cleared of militants. In their operations the armed forces have used artillery and air attacks with F-16s and helicopter gunships. One can assume that no matter how carefully these weapons have been used and no matter how many civilians have fled the conflict area, there has been substantial collateral damage. In the meanwhile, havoc continues to be wreaked in the settled districts of Khyber Pakhtunkhwa.

It is natural for the new government to believe that this seemingly unending conflict will only add to the over 40,000 persons who have already been killed, increase the number of internally displaced persons and jeopardise plans for an economy recovery.

A desire to seek a negotiated settlement is therefore understandable. But is it possible? Would a better course be to abandon the ambivalence of the past, recognise that no elusive external gain outweighs the costs that the support of extremist groups brings to our internal security situation and set about assuring the multitude of anti-Taliban forces in the region that they can safely join the government in fighting and eliminating the Tehreek-i-Taliban Pakistan (TTP) and its allies?

The armed forces, possibly with the collaboration of the civil administration, are seeking the assistance of local anti-TTP forces to break the hold the insurgents have established in Khyber, Kurram and other tribal areas. How successful and durable the results of these efforts will be will depend on the degree of credibility the locals attach to the determination of the new government to pursue this present course. They may take heart from President Zardari’s address to parliament in which he said, presumably with the approval of the new government, “Militancy, extremism and terrorism pose the greatest threat to our national security … We are ready to make peace with those willing to give up violence, but should be ready to use force against those who challenge the writ of the state.” The other statements that are being made by responsible officials about the willingness of the new government to find ways and means to woo the TTP into entering into talks will, however, give them pause.

A front of various groups including the Afghan Taliban and anti-TTP forces in Afghanistan’s Kunar province — the source of an enormous lumber and narcotics smuggling network — are massing to confront the TTP. Ehsanullah Ehsan, the TTP spokesman, confirmed with this newspaper’s correspondent that such an attack was anticipated and attributed it to an old enmity with the Ansar-ul Islam and other militant groups.

The Filthy Rich Election

By Tariq Ali 
page 31 | 2035 words 

Not long before last month’s elections, dozens of workers (the youngest was 12) were burned to death in factory fires in Karachi and Lahore. Pakistan’s rulers were unmoved: there were token expressions of regret but no talk of tough new laws being passed after the election. There is barely any safety regulation in Pakistan, and if any legislation does impede business a modest bribe usually solves the problem. Factory inspections were discontinued during the Musharraf regime in order, it was claimed, to protect industry from harassment by state inspectors. Ali Enterprises, the factory that burned down in Karachi, somehow passed an inspection by a New York-based body called Social Accountability International.

As for outright crimes, it’s best to use the cloak of religion to justify them. This effectively paralyses the lower and middle echelons of the judiciary, the police and the politicians. In March, Joseph Colony, a Christian settlement in Lahore, was attacked by a Muslim group calling itself Lovers of the Prophet. The Lovers had heard that one of the Christians had defiled the name of Muhammad. The accusation was false, but the person accused was arrested even so, and, even so, the Lovers and other zealots attacked the settlement, burning down 171 dwellings as the police and other worthy citizens watched. As news of the disaster spread and the chief minister of the Punjab, Shahbaz Sharif, pretended nothing was going on, the chief justice of the Supreme Court criticised the police and the Punjab government for failing to protect the public and noted that it hadn’t learned the lesson of the even worse atrocity in the predominantly Christian town of Gojra in 2009, when eight Christians were burned alive, dozens were injured, houses were torched and a church destroyed. The chief justice asked why the report submitted by the judicial inquiry into that incident had not been published. There was no reply from the provincial government. One reason for politicians’ complacency is that they know they have the support of the silent majority. A Pew Institute survey carried out in April reveals that 84 per cent of Pakistanis favour the sharia as the only law of the land, slightly fewer than in Iraq (91 per cent), more than Egypt (74 per cent) and seven times as high as in Turkey (12 per cent).

The elected representatives of the people didn’t pay much attention to the factory fires or to the anti-Christian riots. They were busy elsewhere. Take just one example: the shenanigans of the provincial assembly in Sindh where the Pakistan People’s Party, led by Benazir Bhutto’s widower, Asif Zardari, is the single largest bloc. The day before the assembly was due to be dissolved in advance of the general election, the provincial government ordered all the banks to stay open (it was a Saturday) so that money could be withdrawn. Long-forgotten schemes were revived and a number of dodgy deals hurriedly voted through the chamber. And as if to reward themselves for all this hard work, the assembly voted its members a 60 per cent salary rise backdated to July 2011, adding measures to make sure that anyone who wasn’t re-elected kept his or her perks: free government accommodation with servants laid on, VIP treatment at airports, official passports and so on. It’s a mystery why they don’t just make the privileges hereditary. Needless to say, very few members of parliament pay taxes and several outgoing cabinet ministers, including the prime minister, are refusing to pay the electricity and telephone bills in their government residences. It’s easy to see why so many Pakistanis want to become members of one of the five parliamentary assemblies.

Intellectual ferment in China

Author: Mark Leonard
Publisher: Fourth Estate, HarperCollins
Pages: 164
Price: 8.99 pounds 

On the development of a new Chinese worldview and seeing China as a powerhouse of ideas that could influence the world. By A.G. NOORANI

FOR the last few decades, to go no further, China has been a powerhouse of ideas. There is an intellectual awakening of which little is known in India, the one country which ought to know of it, for two good reasons. The common place one is that India’s friendly relations with China are not unmixed with occasional sparring over the boundary dispute. The other, which escapes most, is that the two countries are in the same boat and can learn a lot from each other, especially on America’s drive for global hegemony. 

Disagreements on some points notwithstanding, neither country accepts, or should accept, America’s leadership. “Chinese thinkers want to create a world where national governments can be masters of their own destiny rather than be subject to the whims of global capital and American foreign policy. They want investment, technology and market access from the rest of the world, but they do not want to absorb Western values. Their goal is not to cut China off but rather to allow China to engage with the world on its own terms,” Mark Leonard writes. 

Is that not what every patriotic Indian would wish for India? But, for a sordid reason, the Bharatiya Janata Party’s (BJP) External Affairs Minister, Jaswant Singh, instantly and abjectly volunteered facilities on India’s soil to the United States after 9/11. Two years later, some card-carrying hawks urged the BJP-led National Democratic Alliance (NDA) regime to accede to America’s requests to send Indian jawans to Iraq in the wake of the U.S. aggression against that country. Prime Minister Atal Bihari Vajpayee instinctively rejected the idea. Had India agreed, the nation’s name would have been mud in Iraq and throughout West Asia. In both cases, the motivation was obvious—rise to great power status on the shoulders of the U.S. and, in the bargain, get the better of Pakistan. India must rise to that status on its own strength—as China aspires to do. 

Mark Leonard, executive director of the European Council on Foreign Relations, interacted extensively with a wide range of Chinese scholars and intellectuals, cutting across the ideological divide, to produce a slim volume packed with rich insights into the intellectual ferment in China. “Although dozens of books have been published about China’s rise, most authors treat it as an economic, political or military bloc rather than seeing it as a powerhouse of ideas that could influence our world. They have little to say about China’s intellectual debates, or the ideological competition they might pose to the European and American worldviews. My work tries to make sense of these ideas which European policymakers will need to understand if they want to successfully promote their own worldview…. This book is about the development of a new Chinese worldview.” 

Despite many curbs, “intellectuals in China do count”. But, the author asks, “How many of us can name more than a handful of contemporary Chinese writers or thinkers?” Indians are no better informed, either. But it is of vital importance to study the debate in China in order to better understand world politics. 

QE measures risk repeat Asian crisis

By Shyam Saran 

NEW DELHI - The global economy is awash with successive waves of liquidity generated over the past few years by the four most advanced economies - the United States, the European Union, (EU), Japan and the United Kingdom, known as the G4. This liquidity has taken the form of "quantitative easing" (QE). 

When zero rates of interest have failed to stimulate their economies, these countries have resorted to large-scale asset purchases by their central banks, such as corporate bonds or mortgage backed securities, to pump more money into the banking system. 

The aim is to extend credit to business and industry and encourage consumption. 

In the immediate aftermath of the global financial and economic crisis in 2008, when there was a danger of financial collapse, both advanced and emerging economies adopted stimulus packages, to revive demand, maintain trade flows and avoid large-scale unemployment. During the crisis phase of 2008/09, QE played an important role in crisis management, helping advanced and emerging economies alike. 

However, while emerging economies have weathered the crisis and seen a revival of growth, the G4 continue to experience economic stagnation, depressed markets and large-scale unemployment. 

Their response has been to persist with even larger doses of QE as a means of propping up demand, encouraging banks to expand and boosting stock valuations. 

Before the crisis, the US held US$700 to $800 billion of Treasury notes. The current level is $2.05 trillion. In the latest round, QE-3, the US Federal Reserve is committed to the purchase of $40 billion of mortgage-backed securities per month as long as unemployment remains above 6.5%. 

The European Central Bank (ECB) has pumped 489 billion euros (US$640 billion) of liquidity into the eurozone since the crisis, while in the United Kingdom QE has reached the level of 375 billion pounds (US$577 billion). 

Most recently, the Bank of Japan has decided to pump $1.4 trillion in the next two years into its economy, aiming at a 2% inflation rate by doubling the money supply. 

The assets of the G4 central banks have expanded from a figure of 11-12% of their gross domestic product (GDP) to the current unprecedented level of 23%. These assets were $3.5 trillion in 2007 before the crisis. They are now $9 trillion and rising. This is the scale of liquidity expansion we are dealing with. 

Since interest rates in the G4 remain at zero and their economies remain stagnant, it is inevitable that there will be significant capital outflows to emerging and other developing economies, in quest of higher risk-adjusted returns. 

From G8 to G20 to G-Zero: Why no one wants to take charge in the new global order

11 June 2013

There are three big unfolding geopolitical stories: China’s rise, Middle East turmoil and the redesign of Europe. The three countries with most to lose from these trends are Britain, Japan and Israel. This is not a G7, G8 or a G20 world. This is the era of G-Zero. 

The sleeping giant of tomorrow? Brazil is rapidly expanding its global clout and soft power. Photograph: Getty Images 

As G8 leaders prepare to gather in Northern Ireland on 17 and 18 June, we are reminded of days when American, western European and Japanese officials could credibly claim to set an international agenda. Then came the financial-market meltdown of 2008, a catastrophe that made unavoidably obvious that most “problems without borders” can no longer be addressed without substantive support from China, India, Brazil, Saudi Arabia and other emerging powers. Members of the G20 gathered in Washington in November 2008 and London in April 2009 to claim their seats at the world’s most important bargaining table. 

Yet, despite positive early results –the product of a crisis that appeared to threaten all the major powers at the same moment – the G20 has not produced much of value. We shouldn’t be surprised. Without the urgency that only a crisis can create, it soon becomes obvious that it’s much more difficult to build agreements that impose costs and risks on 20 negotiators than those that demand compromise from seven or eight. 

This is especially true for a group that does not share a common set of assumptions about the proper role of the state in an economy, or about the value of the rule of law, transparency and freedoms of speech, press and assembly. Competing values create competing interests. 

Further undermining these institutions is the problem that voters in developed countries such as the United States, Britain, Germany, France and Japan expect their elected leaders to focus on domestic challenges rather than problems abroad. The United States will remain the world’s most powerful and influential country for the foreseeable future, but Washington is now fully occupied with battles over budgets, debt, immigration reform and how best to create jobs. European leaders are locked in a multi-year struggle to bolster the eurozone. Japan’s government, under its new prime minister, Shinzo Abe, has launched a grand experiment to reawaken the animal spirits trapped inside its once-dynamic economy. Meanwhile, next-generation powers such as China, India and Brazil are too busy managing the fallout from recent economic slowdowns and edging towards the next stage of their respective domestic development plans to welcome the burdens that come with new international responsibilities. 

The result is a lack of global leadership, one that has developed just as growing numbers of transnational problems –Middle East turmoil, intensified territorial disputes in Asia, climate change, conflicts in cyberspace and poorly regulated cross-border financial flows – are gathering momentum. The world needs leaders, those with the wealth and power to keep the peace, to persuade other governments to take actions they wouldn’t otherwise take, to pay for projects that others can’t afford and to provide services no one else will pay for. There are many countries now strong enough to block international action, but none is both willing and able to bring about lasting positive change. 

A Tentative Peace in Myanmar’s Kachin Conflict

Asia Briefing N°140, 12 June 2013

The deal that has now been struck between the Myanmar government and the Kachin armed group is a major step forward, but securing a sustainable peace will require much more work. 

Top companies want to disclose data requests

By  Charles Arthur Dominic Rushe

This undated photo made available by Google shows backup tapes stored at a data centre in Berkeley County, South Carolina. Microsoft and Twitter have joined calls by Google and Facebook to be able to publish more detail about how many secret requests they receive to hand over user data. 

Government request under FISA cannot be made public 

Microsoft and Twitter have joined calls by Google and Facebook to be able to publish more detail about how many secret requests they receive to hand over user data under the controversial Foreign Intelligence Surveillance Act (FISA). 

“Permitting greater transparency on the aggregate volume and scope of national security requests, including FISA orders, would help the community understand and debate these important issues,” Microsoft said in an e-mailed statement to the Reuters news agency. 

At Twitter the chief lawyer, Alex Macgillivray, tweeted: “We’d like more NSL [national security letter] transparency and Twitter supports efforts to make that happen.” A national security letter is used by U.S. government agencies such as the FBI and NSA to demand access to data from companies — who are forbidden from revealing that they have been served such a request. 

Google, Microsoft and Twitter publish “transparency reports” detailing how many government requests they receive for user data in various countries, but those for the U.S. do not include FISA requests or other NSL demands. Facebook has not so far published a transparency report. 

Microsoft and Twitter joined in as the PR fallout of the revelations by the Guardian over the past week about the extent of National Security Agency (NSA) access to user data continued to grow. Google’s chief legal officer, David Drummond, reiterated the company’s protests that it had not allowed the NSA “direct or indirect” access to its servers and had not allowed the NSA to install equipment on its premises. 

In a letter from Google to the U.S. Attorney-General, Eric Holder, also published on its corporate blog, the company once again said allegations that the U.S. government had “unfettered access to our users’ data are simply untrue”. But, the letter added, the fact that Google was not allowed to disclose requests made for information under FISA “fuel[s] that speculation”. 

Mr. Drummond wrote in the letter to Mr. Holder: “We therefore ask you to help make it possible for Google to publish in our transparency report aggregate numbers of national security requests, including FISA disclosures — in terms of both the number we receive and their scope. 

Privacy is not American

Jun 13 2013

Obama's defence of US surveillance implies that rules of civilisation don't apply abroad 

The latest Prism and Verizon revelations about the United States' surveillance and data mining programmes are a reminder of the profound crisis facing liberal democracies. There are complex legal and technical issues. But the moral framework that President Obama has set up to justify these programmes will dent the reputation of the US. Obama blithely justified these programmes by saying that "with respect to internet and emails, this does not apply to US citizens and it does not apply to people living in the United States". But the moral hierarchies this insinuates are scandalous. It is a brazen acknowledgment that the rights of non-US citizens or residents count for nothing; American policy can trample on these rights with impunity. For a nation that prided itself on its universalism, this brazen disregard for the rights of others is odd. Presumably, the point of a Universal Declaration of Human Rights is that no state shall violate these rights, not just that your own state shall not. To claim privacy to be American! So much for universality. 

To be sure, members of a state have a special political standing in relation to that state that outsiders do not. But this dualism in respect of rights is unjustifiable. It is now part of a permanent pattern of American foreign policy. It is at the heart of a problematic use of drones. It is at the heart of America's practice of what Edmund Burke had resonantly called "geographical morality", where the rules of civilisation do not apply abroad. So torture and rendition can be outsourced to those others, outside the moral pale. This dualism is made even more unjustifiable when allied with another proposition: "foreigners" are deemed guilty until proven innocent. In any action taken against "outsiders", there needs to be at least some presumptive cause, some justification. Someone has to be designated an enemy. But the open-ended nature of this surveillance dispenses with that pretence: everyone is a potential enemy without rights. War is a permanent condition that can be waged anywhere and everywhere. This may sound melodramatic, but that is exactly the moral relationship this surveillance enshrines with the rest of the world. Perhaps this is an exaggeration. After all, the American government admits that data about Americans was acquired, even if only "incidentally" — one of those curious words in the new Orwellian moral lexicon that reminds one of the easy use of "collateral". 

Surveillance can be more insidious than censorship. Censorship is at least in the open. It names itself. It can be contested. Surveillance hides behind a veil. It induces a subtler but more insidious form of discipline. The fear of being watched is psychologically more debilitating than being shut up. At least in being shut up, you have a contest on your hand. Surveillance produces a constant anxiety in the subjects. By data mining you make every action of the subject complicit in making them the object of suspicion. It is not entirely reassuring to say that those who have done nothing wrong have nothing to fear. To say that is to entirely miss the point of what it means to treat someone with some dignity. The slow contortions in the psyche that the power of indiscriminate surveillance produces can be extraordinary. Secrecy is a power that feeds on itself. Even in this case, it has produced a kind of neurosis that even Joseph Heller could not have dreamed of in Catch-22. The New Yorker quoted the Electronic Frontier Foundation as saying something to the effect that even where national security letters are used to request surveillance, you cannot say you have received them, "they are nasty, because you cannot talk about having received one". This might be prudence from an intelligence point of view, but it makes secrecy a hermetically sealed circle. 

The academic paper that predicted the NSA scandal

June 11, 2013 


If you've been following the fallout from last week's NSA surveillance revelations, you may have seen repeated reference to a certain "recent MIT study." "Unique in the Crowd: The Privacy Bounds of Human Mobility," published in Nature's Scientific Reports last year, has been cited by multiple media sources, including this one, as evidence for why -- contra Dianne Feinstein -- your metadata matters. Indeed, re-examined in light of the current headlines, the concerns raised by the study seem quite prescient. 

The paper's authors, Yves-Alexandre de Montjoye, César A. Hidalgo, Michel Verleysen, and Vincent D. Blondel of MIT and the Universite Catholique de Louvain, examined a dataset of 15 months of anonymous cell-phone data from 1.5 million people in a "small European country." (They're a bit coy about how they obtained the data.) 

There were no names, addresses, or phone numbers in the data, yet they argue that "if individual's patterns are unique enough, outside information can be used to link the data back to an individual." In fact, just four points of observation -- time of the call and the nearest cell-phone tower -- were enough to identify 95 percent of individuals in the database. 

In other words, if I make four calls from four different places over the course of a 15-month period, my pattern of movement could be identified out of a population two and a half times the size of Washington, D.C. If you were able to cross-reference that with my Twitter feed, say, you'd be able to build a pretty good picture of who I am. The pattern still worked when the researchers "coarsened" their sample by using less specific time observations and lumping multiple cell-phone towers into one. The way we move through the world -- and share data while we're doing it -- is pretty distinctive, even at high altitude. 

How America Lost Its Nerve Abroad

Jun 11 2013


Policymakers used to believe in a forceful projection of American authority. But after debacles in Afghanistan, Iraq, and Libya, they are turning inward. 
An armoured U.S. Marine vehicle is enveloped in smoke after it was hit by an IED roadside bomb attack during a patrol of Now Zad district in Helmand province, southwestern Afghanistan. (Erik De Castro/Reuters)

KABUL, Afghanistan -- Much as Baghdad once did, this city feels like an outpost of American imperialism. There's the familiar "green zone," the checkpoints you have to zigzag through, the armored convoys roaring by in clouds of dust, their IED jammers poking up like peacock tails. 

But all of this vast presence is focused on one task: getting out. 

Across Kabul -- and out in the provinces of Afghanistan -- U.S. military advisers are developing the Afghan securities forces as carefully and tenderly as a mother lion nurtures her cubs into killers. Afghanistan is one of the poorest and most corrupt nations in the world, but the newborn Afghan National Army isn't getting second-rate surplus equipment, the usual fare for Third World client states. The Pentagon ordered up from Textron new armored troop carriers, worth $1 million apiece, that are so state of the art Canada bought 500 of them for its own army. "They provide the same protection as we have for our vehicles," says John Simpson, Textron's team leader. Washington is also building Kabul a huge $92 million defense headquarters, one of the world's largest ("Pentagon No. 1; this No. 2," an Afghan officer, Col. Mohammed Shah, proudly explained in halting English), and a $54 million Interior Ministry to oversee the Afghan police. 

In Afghanistan, there is a direct tension between a president, and a people, who want to go home, and the very real demands on America's attention that remain. 

The object of this largesse is not to expand America's reach. Quite the contrary: It is to expedite Afghan readiness so we can hand things over as quickly as possible -- and ensure we never have to come back in force. Afghan President Hamid Karzai is himself in no apparent hurry for the U.S. to leave -- he's still getting bags of CIA money, and he has publicly offered us no fewer than nine post-2014 bases. But President Obama is clearly eager to get our forces out (as almost all the polls agree he should), and he's hesitating over making any further commitments of troops, either here or anywhere else. It's not only that Americans in overwhelming numbers want to withdraw from Afghanistan; they don't want the president sending troops anywhere else, either -- in particular, Syria -- despite a humanitarian catastrophe that already dwarfs that of Kosovo in the late '90s. 

According to a new Gallup Poll, 68 percent of Americans say the United States should not use military force in Syria, even if diplomatic efforts to end the civil war fail. Sensitive to the war-weary mood, the president has sought to explain in a series of speeches and actions --defying almost his entire national security team, for example, in refusing to supply arms to Syria -- that he's paying close attention to what the public wants. But in doing so, critics say, Obama may be relinquishing American leadership in critical regions of the globe, and leaving a vacuum that more-aggressive powers such as Russia and China are trying to fill. 

Like Ike

What all this adds up to is an attitude that hasn't been seen in decades, perhaps as far back as the Eisenhower era of the mid-1950s. That was a time when the fresh memories of World War II and Korea, and fear of exacerbating the Cold War, drove Ike to avoid open conflict abroad (although, like Obama, he was fond of covert action). Today, too, there is an inward lean to American foreign policy, a listing homeward that appears to be a kind of neo-isolationism. Compared with the neoconservative strain of a decade ago -- a belief in the aggressive projection of American power voiced most recently by Mitt Romney early in the 2012 presidential campaign -- it is virtually a reversal of direction. The reasons are obvious. According to surveys, we think we've been out too much in the world in recent years, and we're feeling badly burned and spent, financially and emotionally. We want to come home. Rightly or not, Obama is merely channeling these sentiments.