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Friday, June 1, 2012

European Central Bank to E.U. Leaders: Vision Is Needed


Mario Draghi, president of the European Central Bank, warned a committee of the E.U.'s parliament at the end of May 2012 that the structure undergirding the euro in the E.U. had become "unsustainable." He criticized political officials for having kicked the can down the road by enacting half-measures or else delaying decisions, thus making the debt crisis even worse than it otherwise would have been. "The next step is for our leaders to clarify what is the vision for a certain number of years from now." Similarly, Olli Rehm, vice president of the E.U. Commission (the E.U.'s executive branch), said that ways must be found to avoid a disintegration of the common currency.

Such advice may be easier said than done. Even though vision and policy proposals are staples of leadership, the lack of the single executive at the E.U. level means that the competing ideological visions of state leaders who are active at the federal level via the European Council can result in no single vision being adopted. For example, David Cameron told his state's main legislative chamber that the E.U. is just one of the networks to which Britain belongs. That view of the E.U. is different from those of leaders from other states who view the E.U. as a federal union of semi-sovereign states. It is difficult to hold a vote on whether the E.U. is to be a network. It is much easier to vote on specific policy proposals. Fortunately, Draghi included some of those in his remarks at the parliament.

Besides pointing to the need for an agreed-upon vision for the E.U. that is consistent with a viable common currency being used even in debt-distressed states, Draghi urged the E.U. to establish a deposit insurance fund, presumably like the FDIC in the U.S., as well as to regulate big banks at the federal rather than state level. "Greater centralization of supervision is essential," he said. It may be essential, but Draghi was ignoring the conflict of interest facing state leaders in enacting such policy at the E.U. level. Essentially, the central banker was urging state leaders to give up power. The European Council, which represents the state governments via their executives or heads, had at the time more power than the "lower chamber," the E.U.'s Parliament, which represents E.U. citizens. This bicameral legislative structure, by the way, is what distinguishes modern federalism from "confederalism," only the latter retaining sovereignty in the states (e.g., The Articles of Confederation of the U.S., 1781-1789).

Therefore, combining Draghi's call for a long-term vision and more centralized regulation on banks, we can extrapolate a need for a more expansive vision that situates the European Council amid the other E.U. institutions as well as the role of the veto held by each government represented in the Council. That is, the vision must be constitutionalist in substance even if not in name. Otherwise, the E.U. will continue to be held back by the conflict of interest that is in the union's very design. Draghi did not go far enough in what he was suggesting, and thus his message can be reckoned as self-defeating at least in that it would doubtlessly face a strong headwind.

Ideologically-based visions being what they are (i.e., pretty enduring, or stubborn), the fact that very different visions of the E.U. have been voiced by state leaders serving on the European Council suggests that either a compromise will have to be reached (such a middle way may not be sufficient to support the euro, however) or two main visions can both be acted on in a "multi-track" approach. Of the latter approach, the "ever closer union" track must not be held back by state leaders favoring the "network" vision. Even as the state leaders insisting on the E.U. as a network meet to perfect that system for themselves, the leaders of other states who are willing to cede more state sovereignty to integrate more fully at the E.U. level would be advised to meet together (without the "network" state leaders) on a design that goes beyond transferring particular regulations incrementally to the federal level.

For instance, the state veto may not be sustainable as a devise, and the balance of power between the European Council and the Parliament might need to shift away from the states (while not depriving them of a veto as a council). Furthermore, something less than unanimity would be advisable for ratifying amendments. In this context, which would not apply to the states in the E.U. network only, it makes sense to talk about an FDIC-like fund and federal banking regulation. Otherwise, I suspect that the E.U. will continue to be "made" incrementally, policy by policy. I take Draghi's main point to be that such an approach was no longer enough for the euro to be sustained.

Source:

Jack Ewing, "Central Banker Sees Structure of Euro Zone as 'Unsustainable'," The New York Times, May 31, 2012.


Thursday, May 31, 2012

Former Liberian President Gets 50 Years for War Crimes


In the 50 year sentence handed to  former Liberian president Charles Taylor by the Special Court for Sierra Leone meeting at the Hague on May 30, 2012, the world came one step closer to being able to hold dictators accountable for war crime atrocities that go even beyond the violation of basic human rights. In particular, the prosecutor described, "The purposely cruel and savage crimes committed included public executions and amputations of civilians, the display of decapitated heads at checkpoints, the killing and public disembowelment of a civilian whose intestines were then stretched across the road to make a check point, public rapes of women and girls, and people burned alive in their homes.” Insisting that he never knowingly assisted in the crimes, Taylor claimed that what he did “was done with honor.” He maintained that he had been “convinced that unless there was peace in Sierra Leone, Liberia would not be able to move forward.” Nevertheless, that he paid thugs in blood diamonds for the crimes means that he could be held accountable for the misdeeds themselves.


Of particular note, the conviction was the first of a former head of state since WWII. The judge stressed that the “special status of Mr. Taylor as a head of state puts him in a different category of offenders for the purpose of sentencing.” The judge added that the crimes were of the “utmost gravity in terms of scale and brutality. The lives of many more innocent civilians in Sierra Leone were lost or destroyed as a direct result of his actions.” That Taylor did not carry out the atrocities himself, as in raping a daughter while the father is forced to watch, or disemboweling a man so his intestines can be used at a border crossing, does not detract from his culpability. Yet the distance from the crimes themselves enabled Taylor to show (and presumably feel) no remorse as the sentence was being handed down. To be sure, he cannot be forced to recognize the sordidness of his role or feel contrition. Cognitive dissidence and sociopathic blockage of conscience can permanently forestall such a reckoning.

Even if the defendant never “gets the message” on account of his sociopathy, the world came one step closer to telling sitting heads of government around the world that they had better be careful not to violate others’ human rights lest they too find themselves spending decades in a cell. Yet more is needed to make this deterrent a reality. 

Because the court that convicted Taylor is not international, the International Criminal Court (ICC) could not be expected to benefit directly. Governments such as those in the United States that are not members of the International Criminal Court marginalize the court's legitimacy and effectiveness because the court's lack of jurisdiction suggests or implies that public officials can get away with violating human rights. Governments not subject to the ICC should be pressured to join (perhaps even as a condition for continued membership in the UN). Additionally, the ICC needs more power in being able to arrest indicted officials, whether in or out of office, in countries subject to the court.  The United Nations could draw from members' military forces to form a special force that could have access to the territory of any member for the specific purpose to arrest and transfer any former or sitting official indicted by the ICC. Economic and political sanctions would automatically kick in for any member refusing the special force such access. This would not apply to any UN members who are not also members of the ICC, though ideally every member of the UN would also be subject to the ICC. While such a system may seem unrealistic as of 2012, the proposal is at least possible. With the world heading in the right direction with respect to holding violators of human rights accountable, it is advisable that such proposals are explored and discussed lest the momentum be squandered in line with the self-interest of people like Charles Taylor. 



Source:

Marlise Simons and David Goodman, “Judge Gives Taylor 50 Years for ‘Heinous’ Crimes in War,” The New York Times, May 30, 2012. http://www.nytimes.com/2012/05/31/world/africa/charles-taylor-sentenced-to-50-years-for-war-crimes.html?hp








Wednesday, May 30, 2012

India’s Business Environment: Beyond Corruption

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In spite of expected growth of 6 or 7 percent for 2012, the economy of India was facing a pessimistic outlook at the time. The underlying cause seems to have been mismanagement by the federal government—in particular, by the ruling Congress Party. In actuality, the problem lies in the Indian business culture, and the society itself. As such, the problem is not so easily fixed as a change of government or policy.

For example, in March 2012, “facing pressures to raise revenues and stem the rising fiscal deficit, Pranab Mukherjee, the finance minister, released a budget that proposed new taxes on foreign entities in India, including levies on past deals that the Indian Supreme Court had ruled were not taxable in the country. Foreign investors were stunned, and analysts say the outflow of capital is one reason the rupee has tumbled 13 percent since the end of February [2012].” An official from an American bank in Mumbai said in reaction, “We are fed up and our investors are not keen to even talk about India. . . . They are sick and tired.”

Turning off foreign investors harkens back to the decades of India’s import-substitution policy wherein foreign direct investment was prohibited for decades until the 1980s. Behind that policy is the assumption that developing domestic industries is the most effective way to develop the Indian economy, without reliance on foreign business. With most of India having been subject to the British, the notion of swadeshi, or Indian self-reliance, was a salient feature of the movement that led to India’s political independence. Whereas Gandhi favored the development of village craft-work, industrialists such as J.N. Tata and G.D. Birla argued that developing big business domestically was the way to economic as well as political independence.  Tata went from textiles in Bombay (Mumbai) to build the first steel plant in India—in the midst of jungle! Visiting the steel mills in Pittsburgh around the time of the Homestead strike, Tata was shocked at the horrid living conditions for the workers. Tata observed crowded dwellings with bedroom windows broken even during the winter months. He cabled his son Dorab, who was designing the town that would house the steel mill in Jashempur, to see to it that the housing would be of sufficient livable space, even with lawns and trees. Moreover, the schools and the hospital would be accessible without cost to any resident of the town. In fact, when Tata donated money to found a college in India, it was the government that insisted that the courses include subjects relevant to business (rather than just the liberal arts). Essentially, Tata was told that his gift must be useful to his company and others! In the twenty-first century, India could do with more of the sort of ethic that J.N. Tata evinced.

Whether through industrialization or small business, the emphasis of decades since independence was on developing domestic-owned and managed business, with the government even kicking out IBM in the 1970s. With the trade liberalization movement being trumpeted by world leaders such as Ronald Reagan in the 1980s, India turned from its long-standing (and unsuccessful) import-substitution policy to allow for foreign direct investment. Yet the underlying cultural value of swadeshi did not vanish, however. So it is no surprise that Indian officials in a pickle in 2012 would look to squeeze more out of “foreign entities.” Even so, proposing taxes already declared to be unconstitutional, along with the corruption surrounding excessive permissions required in industries that have significant government involvement (e.g., manufacturing) go beyond swadeshi. In general terms, a culture of corruption is antithetical to a thriving economy because the additional roadblocks thwart entrepreneurism and innovation by staving off flexibility. Moreover, from the proposal of an unconstitutional tax and the continuing corruption (i.e., bribes) it can easily be seen how frustrating it must be for Western managers attempt to represent their respective company interests in India.

Beyond the obvious need for infrastructure such as steady utilities, roads and airports as well as a communications infrastructure, a developing country should not forget the intagibles if foreign direct investment is the objective. Specifically, efforts must be made to build trust. This can be accomplished by resisting the temptation to take immediate advantage, looking instead to the long-term financial benefits that can accrue only from sustained business relationships. This does not mean "giving away the store" to foreign companies. Rather, it involves making a concerted effort to provide a level playing field and this involves reducing corruption, especially as it touches foreign companies and their employees. This has implications for public policy in India as well as what the government can do to reduce fraud and corruption that touches on foreign firms.

In terms of public policy, I suspect that even more than being gouged, foreign managers representing their company interests are particularly offended by unfairness, especially when an Indian court makes it transparent. Ex post facto charges, for example, evince a lack of good faith and indeed basic honesty. Accordingly, Indian lawmakers would be prudent in making sure that proposed legislation does not include a "gotcha" turn-about regarding fees or tax policy that is at the expense of foreign managers or the companies. This does not mean that the latter should be able to evade taxes that even an Indian company must pay, by artifically moving revenue "off shore." It is certainly fair to have foreign companies pay their share share in taxes, but not more and particularly in a way that is unfair or discriminatory.

Regarding pressures to participate in fraud or corruption put on foreign managers, the Indian federal government, or goverments of the states, could establish an office to which foreign managers could report fraud and corruption. The office would have investigators, who would work in teams (to reduce the risk of corruption!) on any given case. The office and its staff would be renumerated based on the number of fraud/corruption cases solved to the foreign manager's satisfaction as well as the overall amount of foreign direct investment in the territory. The investigators' financial incentive should match, in other words, the office's goal of minimizing fraud and corruption as it relates to foreign companies. If successful, domestic managers of Indian companies may press for such an office for themselves!

Sources:

Jim Yardley and Vikas Bajaj, “India’s Economy Slows, With Global Implications,” The New York Times, May 30, 2012.

S. Worden, “The Role of Religious and Nationalist Ethics in Strategic Leadership: The Case of J. N. Tata,” Journal of Business Ethics 47 (2003) No. 2, 147-164. http://www.springerlink.com/content/n3m3k33w43604227/

No State Left Behind: Education Eclipsing Federalism


Facing a federal requirement that every student be proficient in math and English by 2014, the republics in the U.S. rushed to apply for waivers in 2011 and 2012. In 2010, 38 percent of the schools had failed to meet their goals for annual progress toward the 2014 goal. The U.S. Secretary of Education thought that figure could soar to 80 percent. When a school fails to meet such goals, the No Child Left Behind law requires “a series of interventions by the district and the state that can culminate in a state takeover. With so many schools failing, “that threatened to create an impossible burden on states and districts,” according to Chester Finn, director of an institute that studies education. The waivers did not come without strings, however. The Obama administration pushed the governments to measure teacher performance, and put increased emphasis on low-performing groups as well as on the lowest-performing schools.

While the waivers can easily be seen as an effort to put the Obama administration’s own priorities on legislation from a prior administration, the Secretary of Education, Arne Duncan, claimed that his aim was to get out of a bad law that could overwhelm states that don’t measure up. “Our goal with this waiver process, frankly, has always been to get out of the way of states and districts,” he said. If this were so, however, he would not insist on negotiating for better terms in granting the waivers. Beyond this extent of intervention, that of the No Child Left Behind law requiring “interventions by the district and the state” with failing schools interlards the U.S. Government in a domain that is constitutionally reserved to the states. Absent the enumerated (i.e., listed) powers of the federal government, the fifty republics are sovereign states. While the Congress can spend in the general welfare of the political and monetary union, strings beyond the general purpose trigger a breach of the constitutional design, which should give the republics enough power to act as a check on the other system of government—that of the union itself. That is, specifying down to district intervention meddles inordinately in a state’s system of government to implement federal law.

In terms of education, the role of the U.S. Government should be oriented to regulating the interstate aspects, such as making sure that students are not deprived of equal protection (e.g., not discriminated against) and that out-of-state students are not gauged at the university level. Any spending should come attached to a general purpose (which I believe must be within an enumerated power, especially if there are any strings attached), rather than with requirements for implementation (or penalty). Should a republic not spend the money in line with the purpose (especially if that purpose lies within one of the sovereign domains of the member states), the federal government could sue to get the money back. If this seems to restrict Congressional power unduly, it may be that the federal power had gone so far beyond what is consistent with a federal system that what seems drastic is merely what is necessary to get back in line with it. In terms of failing schools, the underlying problem may be that Americans (i.e., including parents of school children) do not value self-discipline (i.e., at the expense of instant gratification) or education itself enough. Imposing federal requirements and penalties are doomed to fail against such societal disvalues. In other words, we are trashing federalism for nothing.

Source:

Richard Perez-Pena, “Waivers for 8 More States from ‘No Child Left Behind,” The New York Times, May 30, 2012.

Tuesday, May 29, 2012

Christianity by State: The Religious Dimension of Federalism


According to the  2010 U.S. Religious Census of Religious Congregations & Memberships Study by the Association of Statisticians of American Religious Bodies, less than 50 percent of the people living in the United States identified themselves as Christian adherents in 2010. There were more than 150.6 million out of 310 million. Even so, candidates for the U.S. presidency still felt the need to vocalize the fact that they are Christian (while the opponent doesn't quite measure up in that respect). President Obama made a point during his first two years in office to stress his Christianity as if it were the membership card to the Oval Office. It would seem that the litmus test was already antiquated and thus needlessly constrictive on potential candidates.

The study also discerned differences between the states, once again giving evidence of the heterogeneous nature of the empire of fifty republics. States where more than 55% of the residents identified themselves as Christian were either in the South or in the Midwest. Mississippi (59%), Utah (57%), Alabama (56%), and Lousiana (54%) top the list. Interestingly, the two clusters of dark red on the map point to two distinct Christian cores in the United States. It would be interesting to study whether or how the two cores differ. One indication is that there were differences is that all of the states in the southern core had the death penalty at the time, whereas two of the three states in the northern core did not. I suspect that the southern core was more ideologically conservative in nature (i.e., social issues)--the Northern core's conservatism being moderated perhaps by the tradition of Hubert Humphrey.

                      The darker the red, the higher the percentage of residents claiming a Christian affiliation. 

States where less than 36% of the residents identified as Christian were in the West and New England. Vermont (23%), New Hampshire (23%), Maine (25%), and Massachusetts (28%) have the fewest Christians on a percentage basis (the map incorrectly shows MA as bright red). In these states, it would be particularly untenable were public services and offices to close on Good Friday and the following day. Unlike Christmas, Easter does not have the secular holiday component (which is recognized as a national holiday in the U.S.).  In fact, the sheer extent of difference between states like Mississippi (high 50s) and those like Vermont (low 20's) suggests that holidays should be declared on the state rather than the federal level. The question of whether the U.S. Constitution's establishment of religion clause applies at the state level is also relevant.

In short, the multi-colored map of the U.S. in terms of Christianity suggests that a "one size fits all" approach through Congress has the significant downside of ignoring significant cultural and religious differences. In other words, to take Vermont and Mississippi and "split the difference" is not likely to fit with the condition in many states. The fact that those two states are in the same union testifies to the fact that the union itself is on the empire-level, meaning that its member states are themselves commensurate with countries around the world that are not themselves on the empire-level. It should be no surprise, then, that federalism, which originated at the empire level in alliances, is a system of governance particularly well-suited to accommodate the sort of diversity that exists in the U.S. (and E.U.). The key to enabling federalism to accommodate the different religious makeups of the states is to keep the imperial-level government from stifling the state governments. In other words, they need to have enough space to produce legislative action that is tailored to their respective religious cultures. In states that are dark red, it makes sense that Good Friday would be a recognized holiday, whereas such a practice in Vermont or Oregon would impose too much on too many people. 

Source:

The Huffington Post, "Most and Least Christian States in America," May 29, 2012. 



Sunday, May 27, 2012

U.S. “Foreign Aid” Enabling Pakistani Betrayal


Officials speaking on behalf of Pakistan’s government claimed that Pakistani officials did not know that Osama bin Laden had been living in Pakistan, and yet a Pakistani court sentenced a Pakistani to a 33-year prison sentence for treason in having conspired “to wage war against Pakistan” by aided the CIA in its hunt for bin Laden. If trying to find him constitutes treason, it follows that the Pakistani government was opposed to the Americans finding him. Meanwhile, that government accepted hundreds of billions of dollars in foreign aid from the U.S. Government.  The reaction of an appropriations committee of the U.S. Senate in 2012 was merely to cut $33 million from $800 million in foreign aid to Pakistan. It would seem that the U.S. Government wanted it both ways—to castigate Pakistan for essentially hiding bin Laden while seeking to retain some influence with the Pakistani government by bribing it with foreign aid.

That the Pakistani government linked the 33-year prison sentence to that government’s demand for an apology form the U.S. for an airstrike that accidently killed 24 Pakistanis is, according to Sen. John McCain, “beyond ludicrous.” At the very least, the linkage violates the defendant’s human right to freedom, as he had nothing to do with the U.S. airstrike. Senators McCain and Levin claimed to be outraged, yet it is strange that the result is a paltry $33 million cut (out of $800 million of foreign aid to Pakistan).  If helping the U.S. Government find the man behind 9/11 constitutes waging war against Pakistan, then the U.S. itself can be faulted for continuing to give Pakistan anything. Demanding that it earn back the privilege of being trusted (a privilege given the aid) is not too much to ask, especially for $800 million (even less the $33 million).

Even if the U.S. Senate was not principled enough to act on principle, the interest if the United States can be distinguished from financially enabling a government that prosecutes citizens for “waging war” against Pakistan for having helped the U.S. in a mission that the Pakistani government itself had indicated it accepted (and would help, rather than hinder). It is not in one’s interest to consider the friend of one’s enemy as one’s friend. That is to say, the U.S. Government could have done better even in terms of its own interest, if it is defined as something broader than short-term manipulation of other governments by essentially bribing them. Such influence assumes that governments do not accept the “foreign aid” only to act against the “donor.”  Therefore, even from the standpoint of political realism, the U.S. Senate committee did not go nearly far enough in its fiscal policy of foreign relations. As a result, other governments must have gotten the message that it is possible to take the money and tacitly act against the United States.

Source:

Jonathan Weisman, “Senate Panel Holds Up Aid to Pakistan,” The New York Times, May 24, 2012.  http://thecaucus.blogs.nytimes.com/2012/05/24/senate-panel-holds-up-aid-to-pakistan/