Pentagon, purple hearts, and PTSD

Mental health is not something that seems to crop up on the political radar too often. Health care reform gets a lot of attention (and rightfully so) but mental wellness seems to be the neglected black sheep of the policy family. People either don't understand it, are uncomfortable with it in public, or, most amazingly, simply still cease to believe it is a matter of serious concern.

Apparently, the defense community falls into the latter. The Pentagon announced last week that they will not bestow the Purple Heart to any soldier on the basis of mental health disorders caused by events during service. The rationale? Mental disorders are notoriously hard to quantify and diagnose, and with 1 in 4 Americans annually suffering from some type of affliction, it may seem too ubiquitous too deserve such a high honor. Additionally, the opportunity exists for misuse by those seeking greater benefits. 

But with the prevalence of Post-Traumatic Stress Disorder (PTSD) and the skyrocketing suicide rate among returning soldiers, it should be obvious that these are very real problems affecting our country's soldiers that deserve some type of recognition. This decision seems to mark a step backwards in the quest to establish PTSD and other mental problems as serious conditions and more importantly improve the availability and efficacy of treatment.

Outreach and rehabilitation services to veterans are notoriously poor and marginalizing those with serious mental disorders will only exacerbate any problems veterans have in re-adjusting to life at home. The Pentagon doesn't have to give them a medal, but the least they deserve is a chance at a normal life. 

Bhagwati on Obama on trade

*This post on trade represents my personal opinions.

Sometimes, it feels like Mr. Obama’s honeymoon period is ending before he even takes office. In an op-ed published earlier this week, Jagdish Bhagwati absolutely savages Barack Obama on trade issues. I am a huge fan of Dr. Bhagwati. He is one of the greatest trade economists and one of the most unrepentant defenders of free, multilateral trade. His work has shaped my own views on trade more than any other single thinker.

Dr. Bhagwati chides Mr. Obama for his “eloquent silence on trade issues” and his tepid support of the Doha Round. He also criticizes the auto industry bailout (no disagreement here), which he believes will be WTO-incompatible, and dismisses Obama’s trade team as a pack of under-qualified, semi-protectionists.

His most interesting argument is against America’s bilateral/regional trade strategy. In Dr. Bhagwati’s eyes, powerful union lobbies and other political forces have produced a trade agenda in which the US negotiates standard-laden agreements with small, poor and comparatively weak countries. The standards, in areas such as environment and labor issues, effectively undermine the smaller partner’s areas of comparative advantage. He characterizes this “free but fair trade” and “an exercise in insidious protectionism that few recognise as such.” Ouch.

As an aside, I wonder how Dr. Bhagwati reconciles this novel argument with the fact that every single one of these bilateral agreements was negotiated by a Republican administration and narrowly passed in Congress by Republican legislators, over the vigorous opposition of Democrats and organized labor?

In any case, the economic logic of Dr. Bhagwati’s arguments cannot be ignored. The US, and the world, would best be served by the successful conclusion of the Doha Round. In terms of regional agreements, negotiating bilateral deals with small trade partners is an exercise in economic futility: any positive gain is a drop in the vast ocean that is the US GDP.

Trade, however, is as much a political issue as it is an economic one. This is unfortunate, but it isn’t very useful to assess trade issues without considering the political ramifications. Dr. Bhagwati acknowledges this: “history shows that the freeing of trade is nearly impossible to achieve in times of macroeconomic crisis.” In assessing where Mr. Obama will fall on trade, we need to examine the political/economic climate he inherits: an American public that is increasingly sceptical of the benefits of trade, an outdated suite of government programs to assist displaced workers, and one of the most vicious recessions in the postwar era. Paradoxically, if Mr. Obama pushes too hard on trade without recognizing these other challenges, he may risk further damaging the 70-year political consensus in the US that freer trade is a good thing. I was thinking out loud about this very issue earlier this week.

As is such, Dr. Bhagwati’s argument is strongest when he calls for more vocal leadership on the issue of trade. I do think that President Obama will need to work hard to resell trade to the American people, so I am bothered by his “eloquent silence.” I wish we had seen a stronger push for Doha last month from the Obama camp. Still, given the current political realities that affect trade, we need to give Mr. Obama more time before sounding the warning on his trade agenda.

South Korean trade politics: NOT for the faint of heart

Thought the West had a monopoly on contentious trade politics? Think again:

Opposition lawmakers ended their violent, 12-day siege of South Korea’s parliament Tuesday after successfully delaying a vote on a major U.S. free-trade deal. Democratic Party legislators had occupied the National Assembly since Dec. 26, fending off security guards who tried to drag them out by force last week. The sit-in ended after the ruling Grand National Party abandoned its bid to ram through the legislation before President-elect Barack Obama takes office Jan. 20. South Korea and the U.S. agreed to the landmark accord in 2007 to slash tariffs and other barriers to trade, but the deal sparked an outcry from farmers and labor, and Obama has hinted he will seek to renegotiate it. The deal would be the largest for the U.S. since the North American Free Trade Agreement more than a decade ago.

Of course, all this comes after the opposition tried to force their way into a barricaded room where the free trade agreement was being discussed using sledgehammers back in December. Yes, sledgehammers. Grand National Party members responded in kind, spraying fire extinguishers at the opposition party members. Yes, (sigh)... fire extinguishers. At least one person left the scene with blood streaming down their face.

Ridiculous as this all sounds, politics devolving into fisticuffs is not so unusual in South Korea. Still, it shows how contentious the domestic politics of trade can be on both sides of a proposed agreement. South Koreans are uncomfortable importing American beef, among other things. Americans are frustrated at South Korean quotas on imported autos, among other things.

It's all very unfortunate, because the KORUS FTA is the most economically-meaningful trade deal that the Bush administration managed to negotiate during its tenure. As it stands, you’re more likely to see another bench-clearing brawl in the South Korean National Assembly than this agreement get ratified in either country...

If you haven't seen Emily's excellent post yesterday about the riots in Greece, have a look for another dose of political violence.

(The picture above is from a 2004 brawl in the South Korea National Assembly, via Delaware Online. For the truly unbelievable pictures from the December battle, check out this New York Times article.)

Gaza Strip Maul

The Israeli Army's recent attacks in Gaza are a fresh reminder that, um, conflict in the Middle East is not new, and is still going on. Many International Relations theorists tell us that when danger is recognized the stronger party will probably act to defend itself.

Here it is in practice:

The Daily Show With Jon StewartM - Th 11p / 10c

Strip Maul

Barack Obama Interview
John McCain Interview

Sarah Palin Video
Funny Election Video

Other than Jon Stewart, who can we turn to these days? I don't always find myself agreeing with Jimmy Carter, but he might be on to something; indeed, these recent hostilities don't seem very productive. (Side Note: Carter can be really wrong sometimes: check out the last paragraph of an op-ed on cotton.) The BBC gives a pretty good breakdown of the situation here and sums up with:

Diplomats hope there can be a new ceasefire agreement. This would have to be based on three principles. Two of these are demanded by Israel - a commitment by Hamas not to fire
rockets into Israel, and a method (perhaps some kind of physical barrier) to stop the smuggling of arms. One is demanded by Hamas - the relaxation of the blockade on Gaza.

If there is no agreement, Israel will try to impose its conditions by force. Hamas will contest it.

What I find interesting is that some commentators believe that Israel's actions in the Gaza strip are a function of their concern about U.S. reactions, which may or may not change following the Obama inauguration on January 20th. But most commentators also issue their thoughts on Israel, Palestine, Syria and Iran in quite simplistic terminology, speaking as if these countries, filled with millions of individuals, are unitary actors. Sure, it might be easier to talk about the dynamics of international relations as if each country is a temperamental child on a playground with a propensity to get fussy- but I for one tire of this unimaginative vocabulary. Complex situations demand more than silly analogies. Basic audiences may need their CNN or FOX News commentators to frame the situation in historical terms easier to understand, but we should demand better of our policy makers. I personally favor Organizational Process Model or Bureaucratic Politics Model when analyzing how states behave during a crisis. Treating states like black boxes can be dangerous; looking at their internal situations can prove more revealing, although it's certainly more difficult.

THIS. IS. SPARTA! ... no wait, it's Athens.

As Athens, the “birthplace of democracy”, has been reduced to ash, broken glass and plenty of confusion, many people have been wondering what the hell is going on. Now that the dust is starting to settle...pun intended...it's worth examining what sparked the chaos in Athens. Was it:

a) the death of a 15 year old boy
b) the deteriorating economic situation
c) the lack of sustainable employment for the “700€ generation”
d) an attempt by an organized group to destabilize the government
e) all of the above

As any self-respecting test-taker knows, e) all of the above, is pretty much always the correct answer. The situation in Greece is incredibly complex, and cannot be explained away, much to the media’s dismay, by A, B, C, or D. The bottom line is that the shooting of 15-year old Alexis Grigoropoulos was the spark that lit the flame. The shooting united various groups of people, and became a launching point for protesting every ill of Greek society.

First and foremost, an important distinction needs to be made between the protesting groups of the past month. Peaceful demonstrators, made up of mostly students and young professionals known as the “700€ generation” marched in the streets demanding everything from justice for the death of young Alexis, to an increase in jobs in the public sector. This group has a whole host of wide-ranging complaints and demands, which are far too complex to address in anything short of a lengthy essay, so I’ll spare you. It is the second group, mainly made up of anarchists, who are responsible for the destruction and chaos in Athens. Quite frankly, I don’t even think they really know what they want… other than excuses to destroy property, wear Che Guevara t-shirts, and spout outdated cliché one-liners from left-wing literature that they probably haven’t even read.

With an impotent police force, universities that breed rage and frustration instead of knowledge, and a decrepit healthcare system, Greece is flirting with institutional failure. Anger about poverty and a stagnant political system are intersecting with a long tradition of extreme-left political activism and disdain for authority - in a very dangerous way.

The resurgence of “Epanastatikos Agonas” (or “Revolutionary Struggle”) in recent years has not occurred in a vacuum. Two violent attacks on police units in the past few weeks have been traced back to Revolutionary Struggle - the group responsible for the 2007 U.S. Embassy attack. Revolutionary Struggle surfaced in 2003 after the dissolution of the group “November 17th” but, unlike “November 17th”, Revolutionary Struggle is thought to be more diverse, both ideologically and ethnically, and better armed. What is needed now, more than ever, is a show of force from the Greek authorities. Although, if history is any indicator, any hint of law and order is probably a long-shot. Nikos Konstandaras, the managing editor of Kathimerini (one of Greece’s most respected newspapers) summed up the madness and impending danger quite succinctly:

[Alexis’ death] will be used to bind together every disparate protest and
complaint into a platform of righteous rage against all the ills of our society.
It will quickly become a flag of convenience for anyone who has a grudge against
the state, the government, the economic system, foreign powers, capitalism, and
so on. If Greece has already appeared difficult to govern, it will now be
out of control.

(Photo by Nikolas Giakoumidis)

Ya I know, poor taste

Hey Angola, 1995 called. They want their virus back.

Wishful thinking

Nancy Birdsall at the Center for Global Development, one of the few decent think tanks in DC, has produced her "policy wish list" for 2009. It's pretty predictable stuff and some of her wishes are stuff we here at zzzeitgeist have been advocating for some time, though her methods are not prescriptions we see too often. 

Everyone seems to support freer trade and increased development, but is it a good idea to avoid protectionism by offering "permanent duty-free, quota-free market access for the poorest countries" and embrace innovations such as cash on delivery aid? Foreign aid certainly needs to be modernized but Blattman does a better job of explaining why. It's hard to only give aid based on quotas when a country lacks the infrastructure necessary to reach said quotas. 

Too bad in this economic climate these wishes will remain just that.

BTW what's up with number 5?

Strange bedfellows?

I've been somewhat confused by the skepticism regarding the news that Obama's stimulus plan is largely composed of tax cuts - about 40%. Krugman Lefties think he's succumbing to Republican pressure, others fret that the tax cuts will essentially amount to welfare payments because only people making less than $200,000 a year will qualify.

I've noted before my shock that prominent academics are divided over this issue. But to be frank, I'm following this with cautious optimism (let's keep in mind that the bill has to pass!). Here is a politician actually fulfilling a campaign promise and proposing an idea that both sides of the aisle can get behind.

Until the bill passes speculation remains just that, but what really counts is how the cut is implemented. I agree with Cowen that the tax cuts probably won't drive recovery:

but less money will be wasted and...it shows that the Obama team is willing to flinch and be realistic.

When we're used to hearing figures in the hundreds of billions, saving a little money probably isn't the worst thing in the world. People may not spend the money, but if it helps people avoid defaulting on personal loans or expands credit to enterprise where it wasn't before then that's one less loan the government has to guarantee under TARP.

There's also a bit of pscyhology wrapped into this proposal. Unlike the Bush tax cuts where citizens received one large check in the mail, Obama's plan has a smaller portion taken out of each paycheck. Does this signal a move away from encouraging consumer spending and instead focusing on personal fiscal responsibility? Probably not, but it's an interesting tactic.

Martin Sheen is an economics badass... with a heart of gold

Via Trade Diversion, we have this unintentionally hilarious snippet of dialogue from the West Wing. In my head, I read it in the Dirty Harry voice:

When I was 26, I wrote a paper supporting the deregulation of Far East trade
barriers. Nearly got thrown out of the London School of Economics. I was young
and stupid, and trying to make some noise.

This is one of President Jed Bartlet's line. On the show, the character, played by Martin Sheen, earned his Master's and PhD at the London School of Economics. As a brand-new alum of the LSE, I can confidently second Jonathan Dingel in saying that A.) this sentence makes no sense and B.) who would ever get thrown out of any academic department, let alone one at the London School of Economics, for arguing (I think) in favor of trade liberalization?

I never really got into the West Wing, although I've heard it's pretty good. Still, I can't help but feel like this is one of those instances where a TV character is only as smart as the people who write for him...

Trade counterfactuals

*This post on trade represents only my own opinions.

For the sake of argument, I want to present an alternate viewpoint about President-elect Obama and trade. I’ve been thinking about it a lot about, and specifically whether or not he’s ‘bad’ for trade. He distances himself from protectionist rhetoric all the time, and he likes to reiterate that he both understands the fundamentals of trade and considers himself a free trader. And yet, the conventional wisdom among many trade watchers seems to be that he won’t pursue new agreements and that he won’t try to bring a successful conclusion to the DDA. How do you reconcile these two points of view? Is one of them wrong?

For what it’s worth, I don’t think the two positions are incompatible. I agree that is unlikely that Mr. Obama will do much on trade for the first year or two of his presidency. But this only in part because of the financial/economic crisis over which he will preside – part of it is purposeful as well. Free traders tend to look at the big picture: the aggregate benefits of freer trade outweigh the concentrated losses, and society as a whole gains. Mr. Obama recognizes this, but he is also much more in tune with the distribution of these gains. In other words, his departure point is different.

I think that in Mr. Obama’s mind, the postwar consensus on trade has unraveled. And the public has grown much more skeptical about the benefits of globalization and much more wary of the downsides. In this climate, it is possible that simply continuing the current trade policy is no longer sustainable. To make people more accepting of future trade deals, it might mean that you need better unemployment assistance, better infrastructure investment, better retraining schemes and better health care that is less tied to employment. And Mr. Obama is very eager to do all of these things.

So while trade watchers may be wary of Mr. Obama’s short term stance toward trade, his intended investments in an enhanced social safety net may actually make it more feasible to conduct ambitious trade deals in the future. The remaining question (aside from whether or not this is accurate!) is whether or not the US can afford to take a trade pause while other nations are racing forward.

Any thoughts? This is just a hypothetical counterfactual. Feel free to tear it apart in the comments section.

Can I even re-post this?

Best comment I've read on the fighting in Gaza. Megan McArdle:

I don't see any untainted victims. I see a bunch of people who have been stomped on by history beating up each other in revenge for past wrongs that can't be righted, lashing out whenever they think they can get away with it without losing the foreign funding that allows them to continue the fun. And I don't ever blog about it because one is not allowed to have an opinion on the matter - no matter what I say, I'll be excusing terrorism or, irrelevantly, the holocaust, or shilling for western imperialism.

On this delightful note, Happy New Year. Best wishes for peace, health, and prosperity. 

Mistaken for mujahideen

Finally in Afghanistan we are starting to see a bit of cohesion: an actual plan, not imposed by NATO or the US, but brought in conjunction with Karzai's Afghan development and support. The New York Times reports that

American and Afghan officials intend to set up local militias of 100 to 200 fighters in each provincial district...militiamen will be given a brief period of training, along with weapons like assault rifles and grenade launchers...

What I've been saying about Afghanistan all this time included a call for greater tribal engagement. This doesn't mean we arm the people! Despite Petraeus being the genius of Iraq, or something similar depending what weeklies you read, a universal re-application of his Sunni Awakening media campaign tactic probably won't work in Afghanistan. Council members who we continue to pay in Iraq as local militia police forces are mostly in urban areas - Baghdad was where we needed the most help in Iraq. In Afghanistan, the border region is vast, sparsely populated, and without central organization. The tribes cannot and won't act in unison. They speak different languages and have wildly different social and religious customs, even within those who follow Islam and not animist religions. Militias will be forced to cover vast regions beyond their traditional tribal lands - not their small, local neighborhood.

For tribal engagement to work as a defense tactic against the Taliban we need to build roads, schools, and civic centers. Tribal groups obviously need to feel safe to help US forces in the fight against the Taliban, but this doesn't mean they should have to do it themselves. Embedded forces combined with greater development efforts is the way to stop the Taliban's second coming. Let's hope this is something the US and Afghans can figure out together.

(Photo by erwinlux)

Predict(able)

Obama may be on vacation, but his proposed stimulus plan has garnered alot of economic debate, which is certainly not of the post-partisan variety. In case you haven't been following it, the huge surprise is a back and forth between Mankiw and Krugman. Shockingly they're duking it out over whether tax cuts or government spending is more efficient to spur economic growth. 

These are both very, very intelligent men, but lest we find ourselves trending to whatever side our political inclinations may lead, let us keep in mind that forecasting is hard. And if it's hard to predict oil or food prices, how can we seriously hope to predict what this stimulus will produce; especially when economic historians still debate the exact causes and escape mechanisms of the Great Depression. 

What we must admit and accept is that the experimentation and bold action our current situation requires could easily be hampered if we require historical precedent. This is not to say that healthy and vigorous debate is not needed; it most certainly is. But let us not forget that debate should eventually produce some action. For now, we can only hope that today's recession fears go the way of the Y2K bug, but until history proves that view, let's have something more than words in place. 

El Gordo

The holidays are officially upon us. For most in the US that means quiet nights with family and friends, perhaps a drunk uncle or two, and hopefully some good memories. Across the pond it's a bit different, and no I'm not talking about Boxing Day. El Gordo is a Spanish lottery that's played every year right before Christmas. It's the world's largest lottery and is always advertised in the pages of Parade (I think I'm the only person besides my grandmother who actually reads this) and late night infomercials sandwiched between old men selling commemorative, limited edition coins.

The competition is huge - up to 32 million people play annually - but in a global recession will we see more people sitting out to save their dwindling cash or more than ever hoping to catch the "fat one"? No one really knows whether lotteries are a counter-cyclical industry. Sales are up in many parts of the world and it would seem that people will indeed pay to play when they're down and out. But gaming as a whole suffers during a recession (largely because it's often paired with travel), so why does lottery do well? For one thing, it's cheap. Second, it's sold in the same places as gas, cigarettes, and booze. Vices usually go together. So, in a climate of rising unemployment and 401(k) losses, here's hoping that the fat one can make somebody's Three King's Day a bit brighter. Let's just hope they don't invest it coins.

Sorry for the light posting of late: between starting a new job and finishing up the term, time was stretched far too thin...back to normal this week.

(Photo by alvy)

Facebook sparks controversy in the Balkans

In the last few weeks, two interesting stories made the press involving the social networking website Facebook and the Balkans. On December 1, the International Herald Tribune reported that police detained 22 year old Niksa Klecak – creator of the Facebook group "I bet I can find 5,000 people who dislike [Croatian Prime Minister Ivo] Sanader." Police questioned Klecak for three hours and searched his home and computer. Several defended the detention, claiming that the group included a photo montage of Sanader in a Nazi uniform - Nazi symbols are banned under Croatian law.

Others, including political analyst Jelena Lovric and Social Democrats leader Zoran Milanovic, claim it is a veiled attempt to quash growing dissent that pervades the internet. An earlier Facebook group in protest of Sanader already had 80,000 members. Klecak’s group has attracted more than 5,000, and in the wake of his detention, almost 3,000 joined a new group called "Search my flat, you Gestapo gang, Croatia is not a police state." Sanader might be disappointed to hear that "I bet I can find 7,000 people who LIKE Sanader" only brought together 19 Facebookers. Ouch.

Meanwhile in Serbia, Radio Free Europe/Radio Liberty reports that a Facebook group proclaiming that the massacre at the Bosnian town of Srebrenica is a model for "fighting Islam" has popped up and drawn some 1,000 members. An estimated 7,000 Muslim men and boys were killed at Srebrenica in an act of genocide. A group in Bosnia-Herzegovina is asking Serbian officials to shut down the page and to prevent the Internet from being used as a forum to promote hate speech. No action thus far has been taken. 

These cases bring to mind the usual questions. What is freedom of speech? Should there be limitations to freedom of speech? etc., etc. However, what must not be overlooked is that while both cases are controversial in nature, they are both being openly discussed in and out of country. While it is disheartening to see a man be detained for starting an opposition Facebook group, and it’s just plain disgusting to see so many people support what most consider genocide, we should be reassured that the citizens of these countries as well as international observers are informed. In stark contrast, over the weekend 90 people were detained in Russia for participating in an opposition rally organized by Garry Kasparov. You may have read about it; the Russian press (for some reason) has overlooked this story.

(photo by ManilaRyce)

CHAAAAANNNNGGEEE!!! YOU KNOW IT!!!

Nick’s post from the other day got me thinking about what an upcoming Obama Administration will look like and how Mr. Obama will govern. Some disjointed thoughts:

Like most functioning democracies, in the United States, it's better to work for incremental, meaningful, and calculated reform than any sort of systemic change. The US Executive has considerable power, but that power is constrained by the institutional quirks of and large number of veto players in the American political system. It is also important to remember that the President represents the American people. There is a strong appetite for a larger government role in the economy and society given our current woes, but Mr. Obama would do well to remember that the US is essentially a center or center-right nation. I’m not saying that there aren’t policy areas where significant reform would be welcome (climate, energy, and education all spring to mind), but Mr. Obama risks squandering valuable political capital by proposing changes that offend popular sentiment (HilaryCare springs to mind.)

Fortunately, I think he understands this. His advisers are the cream of the Democratic Party establishment, but most of them have been around for years and cut their teeth during the Clinton Administration. To me, this sends a strong signal about prioritizing competence and experience over ideology or grandiose but unworkable plans. I should add that I appreciate the calculus behind the Clinton pick at State and am reasonably optimistic that it will work out fine.

Barack Obama strikes me as a highly intelligent, capable, and confident man poised to govern from the country’s political center. Like Nick,

I voted for the man based on my belief that his Presidency would represent a
return to a thoughtful administration, open to debate among passionate and
intelligent academics with equal weight given to voices, despite their
ideological leanings.

I’m still optimistic that this will largely be the case, save a few issue areas that I will refrain from discussing here.

(I'm in London for business and the LSE graduation ceremony this week, so posting from me will be light.)

Fool me once?

I must admit to being a somewhat lukewarm Obama supporter. I voted for the man based on my belief that his Presidency would represent a return to a thoughtful administration, open to debate among passionate and intelligent academics with equal weight given to voices, despite their ideological leanings.

When assembled, the formidable economic team validated my hopes for open and honest debate in a time when it's most certainly required. Hillary tempered my support just a little. And now this.

President-elect Barack Obama is expected to create what is sometimes called an “energy czar” to coordinate energy and environmental policy among the myriad federal agencies and lead a new National Energy Council...Browner, who’s heading the transition team’s environmental division, has likely landed the job.

I'm starting to fear that instead of real policy decisions, we will have a tepid and limp administration hampered by so many different new agencies, councils and czars that the executive branch will take longer to act than our current Congress. Maybe such a fear is irrational; granted, the man can't really do anything until January 20th, but if this is what he meant by job creation than America just got hoodwinked.

Rule of who?

No one seems to know what to make of the Blackwater case. Charges against the contractors, who turned themselves in, have been filed in Utah based on their role in the deaths of 17 Iraqi civilians in Baghdad back in September 2007. The 6 men are the first to be charged under the Military Extraterritorial Jurisdiction Act; 5 of the 6 have pled not guilty.

Thankfully under this law they can be tried for their crimes here in the US, because Lord knows they will never be extradited to Iraq. But would they be able to at least get a fair trial there? The answer to that question depends on whether Iraq functions under the rule of law. If the rule of law is defined by a functioning judiciary, then the country passes, but just barely. The US has sunk a LOT of money into rebuilding the courts (as it has in Afghanistan as well), but the problem is that the staff are underpaid, and sad to say, often corrupt.

Rebuilding a judicial system from the ground up is no small feat, but it is vital to any successful nation building operation. Just as important as the police force, the legal system must be able to handle not only the large number of cases, but do so in a fair manner. It may not be a realistic way of testing the system, but it would tell us more about the capabilities of the Iraqi judicial system more than any of the High Court's reviews of oil contracts or parliamentary actions.

China: cooperation or competition?

It seems clear that combating a global recession will require a good deal of international cooperation. There are a number of policy arenas where coordinated government action makes sense, such as monetary, fiscal and trade policy. So far, world leaders have said the right things in regards to working together, and they’ve explicitly acknowledged the dangers of protectionism. So what do you do when a rising economic power decides that it will do whatever it takes to avoid recession, even if it means harming other economies?

From the Asia Times:

As for the beggar thy neighbor, it has become clear over the past week that
Chinese government officials intend to export their way out of the global
economic crisis. This is all too readily apparent in the recent downward
movements of the Chinese yuan relative to the dollar. Stripped of any rhetoric,
this movement represents a "competitive devaluation" designed to boost Chinese
exports to the US at the expense of both domestic US manufacturers and competing
countries such as South Korea and Japan.

Such a move, if deliberate and sustained, is potentially disturbing for three reasons. One, as Martin Wolf has argued, in order for the root causes of this recession to be addressed, the world’s massive surplus countries (ahem… China) must expand domestic demand to mitigate imbalances. China is neglecting its systemic responsibilities to satisfy domestic concerns, which brings me to my second point. I tend to think that when a government’s legitimacy and mandate to rule are predicated on delivering sustained rapid economic growth, such a government will be more tempted by “beggar-thy-neighbor” strategies.

Finally, in this particular economic climate, we really do need to be wary of the ghosts of Smoot-Hawley. I’m not fear-mongering, nor am I suggesting that we’re entering a new period of trade-destroying protectionism; in fact, I’ve argued the opposite. But there is a lot of damage to trade that could be done legally, without violating existing WTO commitments, mainly due to the gap between applied and bound tariff rates. This sort of posturing by China merely provides fodder for the Lou Dobbs crowd and makes international cooperation all the more difficult to sustain politically.

The Great Resource Guessing Game

Petroleum Intelligence Weekly has published its influential annual ranking of the world's top oil companies. The most notable and widely reported aspect of the report is the global power shift from the traditional private oil majors to national oil companies. 27 of the top 50 oil companies are now majority state-owned. China's CNPC leads the surge, having surpassed both BP and Shell according to the report's metrics. Exxon Mobile is the only majority privately owned company remaining in the top 5.

The impact of a global oil market dominated by state-owned firms on both international growth and security is immense. The recent Global Trends 2025 report published by the US National Intelligence Council, and Patrick's farming piece below, highlight the high probability of future inter-state conflicts over increasingly scarce resources like oil. Energy security has risen to the top of both national and international agendas, and the threat of countries using the "energy weapon" for geopolitical leverage has lead many Western states to move in the direction of resource nationalism.

Beyond military and economic conflict, market uncertainty is the biggest effect of greater state control of natural resources. Reserve and refining capacity statistics are classified as state secrets in many countries with nationalized energy sectors. As Western majors are kicked out, and given the press restrictions in countries such as Russia and Iran, it will be increasingly difficult to obtain an accurate measurement of global supply and capacity (you can find my take on Russia's energy industry here). The hysteria surrounding "peak oil" (due in part to the realization of "known unknowns") last year probably contributed to the record run up in oil prices. The inability of traders to estimate and match long term supply and demand will drive up the speculative risk premium in oil prices, particularly if over-the-counter markets remain unregulated (an issue that has dropped off the political radar since the commodity bubble burst). This will only exacerbate inflationary pressures, political instability, and resource competition similar to what we witnessed over the past few years.

Information, transparency, property rights, and security are all central elements of an efficiently functioning oil market. Greater resource nationalization compromises all of these, and increases the probability of resource-driven political and economic conflict. As long as the trends outlined by Petroleum Intelligence Weekly continue, energy security will remain one of the defining issues of the 21st century.

(Photo: ifijay)