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February 28, 2004

Iraq: The Painful intervention of holier than thou ideology

Unsurprising:

Iraqi Experts Tossed With The Water
Workers Ineligible To Fix Polluted Systems
By Ariana Eunjung Cha
Washington Post Staff Writer
Friday, February 27, 2004; Page A01
http://www.washingtonpost.com/ac2/wp-dyn/A10640-2004Feb26?language=printer

Compare with:
Rules May Be Eased for Iraqi Firms
U.S. Wants to Award More Reconstruction Contracts to Nation's Companies
By Jackie Spinner
Washington Post Staff Writer
Thursday, February 19, 2004; Page E04
http://www.washingtonpost.com/wp-dyn/articles/A53172-2004Feb18.html

Posted by The Lounsbury at 02:58 PM | Comments (0) | TrackBack
Filed Under: Jan-Jul 2004

Israel: Palestine Bank Incursion

I thought I should make a comment on this. I know the Arab Bank people involved, have mixed feelings on the justification. On one hand have heard the rumours about the terror financing angle, but also know Arab Bank to be one of the best run and most professional in the region. As well as rather conservative.

Cairo Amman Bank is another story. My call, pending more informatin, Israel either jumped the gun or is taking a rather typical guilty until proven innocent position.

Posted by The Lounsbury at 02:50 PM | Comments (0) | TrackBack
Filed Under: Jan-Jul 2004

From Istanbul: on the meaninglessness of "leading" n bizspeak

Briefly as I run off to another meeting:

New idea to work on while the fund reboot languishes, vulture fund for the region.

Not interesting for you all - but having spent too much of my precious time tooling about doing some background on this, I am reminded of how vacuous the term "leading" has become in bizspeak. Every damned firm is a "leading" one. Come now!

It is always more amusing when one reads the profile of firms you know are deeply troubled, to find them "leading."

I was most amused to find a "leading" - no in fact "the leading" PE-VC firm in the region invested in a venture which I personally rejected not six months ago after I became convinced (and have subsequently confirmed) is a scam - a shell game.

Well, some due diligence boyos; I guess that is how a "leading" firm operates.

Pity I can not rant on more about that, but has connections with the ongoing unpleasantness around me old boss.

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Filed Under: Jan-Jul 2004

February 25, 2004

The Oddness that is Sex in the Arab world.... [edited formatting - corrected]

[edited 26 Feb for formatting]
Many comments to write up - including some chilling convos re Americans from some old and previously pro American contacts of mine, however, in the short term:

Taken from the The Jordan Times website,

Gyrating singers belie stereotype of cloaked Arab women
By Donna Abu-Nasr
The Associated Press
BEIRUT — There's the video clip showing Haifa, the sultry Lebanese shimmying in the rain in a clingy red dress.

And it is, I must say with admiration, clingy.

Quite yummy for those who have this idea the entire region is Saudiyah.

And the clip featuring Roubi, the Egyptian singer belly-dancing in a public square. And scantily dressed dancers aplenty without whom no male singing act seems complete.

How terribly unsurprising, if one knows the region, how surprising if one gets ones views from the overheated commentary in the Western Press (in grosso modo) on the region and its values.

But let us be fair, note the following:

The blitz of dewy looks, pouting lips and suggestive dance on Arab satellite TV stations is outraging some critics.

Noting new in a way, but who are the critics? Let's see, and even better their incoherent comments:

One has dubbed the new crop of performers “weapons of singing destruction”. Another says some women are so offended that they are praying to Allah to smite the seductresses.

Well the fat ugly ones are.

However, the oddity is that one can very well understand from the historical and indeed modern media representations (since the 1950s) that sensuality has a long and deep place in the Islamic Arab world - which once upon a time had sex manuals. Yes, sex manuals. Not good ones, but hey.... this was when Europe thought maggots were demons and sex was a sin.

In the largely conservative Arab world, where many women go veiled and cloaked in public and government censors determine the length of an on-screen kiss, the video clips seem out of place. So why are they permitted to air? Competition, answers Abdo Wazen, a Lebanese art critic at the newspaper Al Hayat.

Well enough, and Abdo is right.

But the conspiracy world is alive here, from the reasonable:"“It's an attempt to divert the attention of youths away from the political and financial frustrations at home,” offers Ali Abu-Shadi, an Egyptian who was a government censor.

Ali is not, probably wrong.

...

To the stupid: “It's part of an American policy to strip Arab cultures of their values,” says Hussein Abdel-Qader of the Egyptian newspaper Akhbar Al Yom.

What does he think of the singers? “They're driving men crazy!” he exclaimed.

Okay Hussein, you're frustrated, and as an Cairene Egyptian your wife is probably a fat ugly cow.

However, as a less than enthusiastic viewer of Egypto-pop videos, and a moderate if not enthusiastic fan of Libano-pop (Rai is far better but not seen on the Arab Sats), the bloody styles and imagery have nothing to do with American values or imagery - except in a wide sense, and very much play to Arab values and imagery (even when Western in setting). No, they're just not pretending in the quasi faux puritan manner of the modern Wahhabi.

Abdel-Qader said women in Egypt go to the shrine of Zeinab, the Prophet Mohammad's granddaughter, “to pray that Allah take Haifa, Roubi and Nancy”. Nadira Omran, a prominent Jordanian actress, said the clips are “very cheap and vulgar”.

Yeah right. Zeinib's shrine prayers have a lot more to do with the price of a tamihay than Nancy (who is fairly hot I should say).

Although it is hard to argue that the Eastern Arab pop video scene is not vulgar and cheap, but that's across the board, not just in sex. Hey, market taste.

“They have turned a woman's body and its superior qualities into a commodity,” said Omran, who bans her children from watching them.

Sure. Sounds familiar. And not credible.

Finally:
Dalal Al Bizri, a Lebanese sociologist living in Cairo, blames male-dominated societies for making women cover up.

“When the condition of women on the street is unnatural, the demand for vulgarity and nudity increases,” she said.

“That's what viewers want and television stations have to cater for that demand.” Nancy — full name Nancy Ajram — is best-known for a clip that shows her swaying her hips and shaking her shoulders while serving customers at an all-male cafe. In an interview with the Associated Press, she denied it contains any sexual innuendoes.

Well, since I had to watch this, and still do every day in the Gym (even during women dominated hours, she's popular [Ousebek leh? for example] and stylish), I have to say the sexual innuedoes are there, although what can we say? She's not an alien, but what is she going to say, yeah I am fucking with your peeps?

The remainder of the article as it is not avail online:
“My clip is bold, but it doesn't go beyond feminine appeal. I don't sing with my body,” she said.

The clips air on several satellite stations, mostly based in Beirut or Cairo, where society tends to take a more liberal view of these things. But they reach all over the Arabic-speaking world.

One broadcaster is Rotana Television, a music channel inaugurated last month in Beirut. It belongs to a production company owned by Saudi billionaire Prince Alwaleed Ben Talal, famous in the United States for having his $10 million donation to the victims of the Sept. 11 attacks rebuffed by Rudolph Giuliani, then New York's mayor.

Michel Murr, who heads the Beirut operation, was not available to talk about the impact the videos are having on viewers. But at another network, Cairo-based Dream TV, general manager Osama Al Sheikh told AP: “We don't broadcast any video clip unless we are sure it is morally acceptable.” He said the station has an in-house “censorship department” of station employees that has banned some foreign and Arab videos, and the Roubi and Haifa clips almost didn't make it onto the air.

“We were not very enthusiastic in broadcasting them. We do broadcast them, but less frequently compared to the rest of the songs,” he said.

Some Arab government TV channels refuse to air the videos, but governments can't shut out satellite signals, and bans on dish ownership are widely ignored. Besides, some of the clips can be viewed on the stars' Web sites.

Several mosques and TV programmes in Saudi Arabia are urging youths to avert their eyes, said Abdullah Al Rufeidy, a 34-year-old Saudi government worker. But the clips remain highly popular.

Many Yemenis also are ignoring clerics' anti-clips edicts.

Some Yemeni hotels with satellite TV rent out rooms for the evening just for people wanting to watch the videos.

In the island state of Bahrain, a few hundred protesters trying to stop people from going to a Nancy concert Wednesday night threw rocks, set fires and smashed car windows. Police reported several arrests and the concert went ahead uninterrupted.

Muslim conservative lawmakers had earlier proposed banning the concert but were rebuffed by the liberal majority in parliament.

Mohammed Khaled Ibrahim, a lawmaker who supported the ban, noted that the Holy Month of Ramadan was about to begin. “We should spend our time repenting and engaging in religious activities rather than engaging in activities that are un-Islamic,” he told AP.

The Bahrain Tribune quoted the singer as saying that she was in Bahrain to “put a smile on the faces of my fans”. “I sing to take people away from politics that separates people and causes chaos in society,” she said.

The videos have spawned a huge demand for salacious celebrity gossip. Newspapers and magazines are filled with bizarre rumours of orgies in which jaws are broken and silicone implants rupture.

Abdullah Al Qobei, who came up with the term “weapons of singing destruction,” sarcastically suggested in the newspaper Asharq Al Awsat that the singers do “veiled videos” for Ramadan.

Wazen, the art critic, had another explanation for the clips' popularity: The stars are Arabs, doing the things that in most Arab countries are seen only on Western TV shows.

“In such suppressed societies, people enjoy watching Arab nudity,” said Wazen. “It's a kind of voyeurism.” Not everybody, however, is happy about that.

Watching a music video channel at home in Cairo one night, Hisham Khalil, 30, and his friends muttered insults when Roubi, the belly dancer, appeared on the screen, a glittering star in her navel.

Such singers are “trying to Westernise their approach to art and entertainment”, Khalil complained. “It means that the Eastern culture has no more to give.” But sexy videos by Western stars draw no such disapproval.

“Westerners have their culture; we have our own culture and we're supposed to preserve it, respect it,” said Khalil, who works in finance. “When people go out of line in terms of their own culture, especially in the Muslim world, others start viewing them disrespectfully.”

Thursday, February 19, 2004

Khalil is full of shit, I may add.

Posted by The Lounsbury at 12:35 AM | Comments (0) | TrackBack
Filed Under: Jan-Jul 2004

February 21, 2004

An interesting Pat Buchanen article

Now, I believe Mr. Buchanen is as close to evil as one can get. However, I found this article intriguing.

No End to War
The Frum-Perle prescription would ensnare America in endless conflict.
By Patrick J. Buchanan
March 1, 2004 issue
http://www.amconmag.com/3_1_04/print/coverprint.html

Now, there is a clear line of Israel and maybe Jewish phobia here in Buchanen's artfully crafted prose, the prose of the elegant bigot.

However, the fact he is likely an anti-Semite does not entirely invalidate his analysis here, that a certain set of the people self-identified as "neo-Con" confound Israeli- more properly Sharonista- interests with US interests is not, I think, off-base. His analysis of the historical foreign policy of the states strikes me as perhaps 50percent correct, but his attacking the mythologies of the neco-cons in re 'democracy' and US foreign policy strike me as useful.

Interesting, problematic.

Posted by The Lounsbury at 10:33 PM | Comments (0) | TrackBack
Filed Under: Jan-Jul 2004

February 19, 2004

Iraq: Privatization down

18 Feb 2004 21:21
U.S. drops Iraq privatization, focuses on investors
By Sue Pleming
http://www.reuters.com/locales/newsArticle.jsp;:40342b7e:7e819bfe3a1b5cd9?type=businessNews&locale=en_IN&storyID=4387602

A few comments:
(a) There were plans to sell to international investors. Foley is not being honest there.
(b) The playing down of security problems in Iraq is bloody wishful thinking.

More later when I think further on this.

Posted by The Lounsbury at 05:20 PM | Comments (0) | TrackBack
Filed Under: Jan-Jul 2004

A Chalabi Story

[Edited slightly]
Start-up Company With Connections
U.S. gives $400M in work to contractor with ties to Pentagon favorite on Iraqi Governing Council
By Knut Royce
http://www.newsday.com/news/nationworld/nation/ny-uschal083671397feb15,0,735950.story

Interesting. I know the Jordanian connexions. No extended comment at this time. One of my partners is related to most of the names in there. Let's just say he's got nothing good to say about them, although he is related to them.

Posted by The Lounsbury at 04:51 PM | Comments (0) | TrackBack
Filed Under: Jan-Jul 2004

Another development, another misstep: Iraq - OPIC

I hate to pick on my friends at OPIC, but this strikes me as fully idiotic.

Iraqi Imports Get Citigroup Backing
Bank, U.S. Agency Propose
Financing, With Revenue
Guaranteed by Oil Sales
By MICHAEL M. PHILLIPS
Staff Reporter of THE WALL STREET JOURNAL

http://online.wsj.com/article_email/0,,SB107697670208530936-IVjfYNplaB3nZyra4GHaKyCm4,00.html

First, it strikes me as a possible violation of international covenents.

Second, it strikes me as a political misstep.

Third, it strikes me as far too late in the game, with mere months to go .... in theory.

Full Text in case of no access:

WASHINGTON -- The Bush administration and Citigroup Inc. are proposing a joint $200 million arrangement to finance Iraq's imports, with the bank's revenue from the project guaranteed by Iraq's oil sales.

The plan, led by the federal Overseas Private Investment Corp., has raised some eyebrows inside the administration because it comes just a few months before the U.S.-led Coalition Provisional Authority is to turn over sovereignty to a still-undetermined Iraqi government. It is far from clear whether the trade-finance project would get much done before the scheduled June 30 handover or whether the new Iraqi government would abandon it.

THE FIGHT FOR IRAQ

• U.S. Military Seeks More Funds for Iraqi Police, Security Forces

• FBI Collects Data on Way Money Is Moved in Iraq

See continuing coverage at the Fight for Iraq.



But OPIC officials believe their plan to facilitate letters of credit for Iraqi importers will help the economy recover and modernize. OPIC officials stress the assistance the project would provide to Iraqi private companies and private banks. It is an attempt to "put in the foundations that will achieve economic freedom for the Iraqis," said OPIC President Peter Watson.

The project would work through a series of guarantees for letters of credit, a standard tool used to smooth the flow of trade. Letters of credit guarantee payment to the seller -- say, a German drug company or an American tractor maker -- at the time it delivers the goods. Without such a letter, Iraqi importers -- who are by virtue of the country's situation considered huge credit risks -- would have to put up the cash beforehand and trust that the goods would eventually arrive.

In the case of the OPIC/Citigroup project, a Baghdad bank might issue a letter of credit for a local company's imports. An international bank would confirm the letter, assuming the risk of nonpayment. A separate institution, set up by Citigroup, would then guarantee that the international bank gets paid. Citigroup and OPIC would guarantee that the separate institution -- still nameless -- gets paid. Finally, the coalition would pledge to use Iraqi oil revenue to cover any Citigroup and OPIC losses.

All the banks along the way would collect fees for their participation, and as long as the coalition runs Iraq, there is essentially no risk for any of them.

The same sort of arrangement could work for providing letters of credit for Iraqi government ministries through the existing Trade Bank of Iraq. While OPIC argues that it is trying mainly to assist the private sector in Iraq, officials acknowledge that the bulk of the financing would inevitably go to the Iraqi government. Ten Iraqi banks already issue letters of credit on their own, according to the Treasury Department.

At one point, OPIC and Citigroup even proposed demanding that a fixed percentage of Iraqi government procurement go through the new financing mechanism. U.S. officials later decided it would be unwise -- both politically and economically -- to guarantee Citigroup and OPIC a lucrative slice of that business.

Citigroup has pledged $50 million for the project, with OPIC putting up the remaining $150 million in financing. Duncan King, a Citigroup spokesman, declined to comment on the OPIC deal, as did Tom Foley, the coalition's director of private-sector development in Baghdad.

The looming question is what happens after the coalition cedes power. OPIC still has to get the nod from Congress to launch the project, and so, at best, OPIC officials predict it will be operational at the end of March.

Amid the transitional uncertainty, OPIC and Citigroup insist that starting April 1, the coalition put cash from Iraq's oil revenue in offshore accounts to cover any outstanding letters of credit.

OPIC officials acknowledge that when they began developing the idea, they thought the coalition would be running Iraq for at least a couple more years. Now, OPIC and Citigroup appear to be pressing the current, U.S.-appointed Iraqi authorities to do their best to commit the future government to honoring the financing plan.

Confidential draft documents include a section in which the coalition and Trade Bank of Iraq would agree to "use reasonable efforts" to convince the current Finance Ministry and Central Bank to acknowledge "the intention of the Republic of Iraq to continue operating" under the arrangement after the transition.

Mr. Watson said the administration isn't trying to present the incoming government with a fait accompli. "We're not going to force it on them," he said. "I don't prejudge whether they'll like this or not."

"We need to accept that this is possibly a short-duration program," said another senior U.S. official.

Posted by The Lounsbury at 12:05 AM | Comments (0) | TrackBack
Filed Under: Jan-Jul 2004

February 18, 2004

An Entreprise Fund

Informed sources tell me that influential staff in the MEPI are going to opt for an entreprise fund, over a regional private equity fund model. This is a stupid decision. A large pot of USG money, admined from Washington to do 'entreprise grants' in a region they are not well-connected with, do not have on the ground business intelligence, and for which the bureaucrats in charge really do not have a direct risk involved. Risk is discipline.

This is a perfect way to piss away a rather large number of millions. Morons.

Posted by The Lounsbury at 09:10 PM | Comments (0) | TrackBack
Filed Under: Biz - Private in MENA , Business , Economics , Jan-Jul 2004 , MENA Region General , Politics - US FP

February 17, 2004

Speaking of rent-seeking

Iraq bedouins see Japan troops as business opportunity
http://www.jordantimes.com/Tue/news/news6.htm

My response in one phrase: "Lying greedy scum."

They're likely, however, to dupe the Japanese into paying. I bloody well hope it is not $4m a year, a idiotic sum, highway robbery. But it is fleece the foreigner time.

Posted by The Lounsbury at 01:09 PM | Comments (0) | TrackBack
Filed Under: Jan-Jul 2004

FT: back article on Iraq and Banking

I missed this while travelling, however it is interesting:

Banking struggles back to its feet in postwar Iraq
By James Drummond in Baghdad
The Financial Times Jan 29, 2004

In the chaos of postwar Iraq last year banks were a target for looters. Now these financial institutions, essential to restoring the country's economy to a semblance of normality, are slowly feeling their way amid violence and a confusing legal and regulatory environment.

Banking in Iraq has a chequered history: foreign institutions were forced out in the 1960s and ordinary Iraqis saw arbitrary regulations slapped on their deposits through the years of war and sanctions. But at least many banks are now open - even if they are protected by barbed wire and armed guards.

"Now you can buy and sell dollars in the central bank. Before we used to buy [hard currency] from people in the streets," says Saad al-Bunnia, chairman of the Iraqi bankers association and of the private sector al-Warka Investment Bank.

"[But] the Iraqi does not have confidence in banking . . . because one day you would wake up in the morning and there was a new law which says that you are not allowed to withdraw more than 500,000 Iraqi dinars from your account. How could you run a business like that?" he asks.

From the 1960s, most of the Iraqi banking system was dominated by the state-owned Rafidain and al-Rashid banks. Then after the first Gulf war, the Ba'athist regime gradually licensed 17 private sector institutions, including al-Warka.

When the invasion was launched last year, Mr Bunnia says that the private sector banks held about 8 per cent of deposits.

A number of non-Iraqi banks are also due to hear soon whether they have succeeded in getting through to the second stage of a tendering process which may see foreign institutions returning to Iraq for the first time for 40 years.

The "strong assumption" is that those who reach the second stage will be offered licences, according to an official with the US-led Coalition Provisional Authority. Those that choose to open full subsidiaries have to commit to a $25m (19.8m, £13.6m) capital requirement.

As with much else in Iraq today it is uncertain when exactly the announcement about the foreign banks is due to be made. HSBC confirms its interest. Citibank says "not for the moment".

Currently domestic private sector banks are forbidden by the central bank to export funds. They are confined to foreign exchange activities - mainly trading in dollars and, as of yesterday, euros. They can also act as correspondents for letters of credit. In the absence of fixed telephone lines their main means of communication with the outside world are the internet and satellite phone.

Mr Bunnia welcomes the prospect of foreigners returning to Iraq, but questions whether managers will commit to doing so in the current environment.

"There is room for everyone - look at Lebanon," he says. A far smaller country than Iraq with fewer natural resources, Lebanon has more than 50 private sector domestic and international banks active in the country.

Iraq's difficulties are complicated by legal questions. The problem surrounding the tendering of mobile phone licences last year was in part one of jurisdiction - a turf war between the CPA and the nascent ministry of communications.

A similar situation appears to prevail in the financial sector. Mr Bunnia says he has to contend with three different authorities.

"I would welcome [the foreign banks] because then they will put pressure on the CPA and on the central bank," he says.

"You have the CPA law, you have the [central bank] committee law and you have the ministry [of finance] law. Who is the legal representative of Iraq? Nobody knows what is going on."

Well, as usual, chaos, but interesting. I have yet to hear very confident things in regards to the Iraqi private banks, except from the specialists in wishful thinking as policy, the US Administration in Iraq.

Posted by The Lounsbury at 01:24 AM | Comments (0) | TrackBack
Filed Under: Jan-Jul 2004

Reproducing a comment, developing economies

I wrote this for: http://www.calpundit.com/mt/mt-comments.cgi?entry_id=3284 but wanted to share.

Follow ons:

(a) in re Government.
Let me clarify, I am not one of those idealistic fools who thinks government will wither away, that someone one can operate without government.

My original background was in pharma, actually a specific niche therein (Let's say Monsanto was long an archenemy), I very well value the positive externalities that appropriate, market oriented regulation can achieve, and reject categorically the idea that markets can do all. I have seen market failure straight up in emerging markets, very ugly they are.

No, my attack on government is in the context of the reality of how governments generally operate in the part of the world I deal in, i.e. the Arab states, and to a much lesser extent (in terms of my exposure / operations / connexioins) Africa.

Inappropriate government, inappropriate regulation, inappropriate structures are every bit as evil as the ideologues on the Libertarian fringe would have all regulation be. A socio-economic context is necessary for any given range of institutions, try to create an institution without a good social-economic base, you create a rent-seeking vampire. That's what much very well-meaning and well-intended governmental intervention has meant in the developing world. Inappropriate, misconcieved regulation and government has meant rent seeking and leaching.

(b) Monetary Policy:
Devaluation is not inflation of the currency, and in fact the commentator gets the effects 100% backwards. Over-valuation of a currency, above market demand strangles domestic activity, it is in effect a subsidy to the rest of the world, paid for by the (poor) taxpayers. Certainly in the case of brutal devaluations, when things have become so out of whack that the devaluation arrives all at once, in a crash (Argentina, Asia in 98), people suffer.

However the long term real value of savings is in their ability to be mobilized in investments for the savers - an overvalued currency reduces the attractiveness of investment in the home country (artificially depressed competitiveness of home production, artificially increased consumptive buying power - meaning several things (holding things constant, ceteris paribus) (i) less investment at home [capital flight] due to less ops (ii) depressed wealth creation at home (iii) depressed job creation.). Over the life span of the policy, that creates more economic damage (thus damage to the wealth) hidden behind the facade of nominal growth than the actual crisis - or put it better, the currency crises and devaluations are simply the fever of a suppressed disease breaking. It is rather typical, however, to see people mistake symptoms the disease.

Of course, in emerging markets, over-valued currencies (in the name of 'stability') are often popular because they subsidize consumption by the "apparatchiks" - the officials in government and the like- of imported goods. I point to the devaluation of the Franc CFA in Africa in 1994, which produced much howling on the part of "intellectuals" (aka state bureacrats) who spouted nice little leftist lines about capital this and that, in fact it reduced their buying power which was being subsidized by who? By the mass of impoverished citizens who had few opportunities to consume imported goods, and whose agricultural production was priced out of the market, artificially, for the benefit of an elite few dressed up in 'progressive' clothes. Hypocrisy, and pure blindness to be sure.

Sometimes it also is a subsidy to expensive capital goods, which may seem rational, but nota bene, it is a subsidy to using capital intensive methods of production when in fact labor intensive methods of production are more desirable. However, one also notes the perverse incentives in politically directed investment, above all governmental in weak states, of over-investing in prestige projects, inevitably capital intensive.

In the end, simple minded Leftists and "progressives" who maintain an understanding of economics on the level of anectdote have ended up promoting policies that in fact subsidize capital (if often state capital versus private capital) at the expense of the little guy.)

(c) Liberal thought
Rob gets this perfectly wrong.
Liberalism at its roots began as the combination of both political and economic liberalism. Economic liberalism is much more than simple "market fundamentalism" -which I find rather more often among my friends on the right who are rather innocent of proper economics and understand things at a econ 101 level, i.e. largely simple platitudes. There are no proper economists who are not economic liberals, however there is a wide range within solid economic theory for admitting market correcting interventions when one takes into account total cost of events, etc. - what we might call negative externalities, or costs to society that a market, for whatever reason, does not capture (external to the market, externalities, positive externalities are obv. the pluses).

(d) Policies in the developing world
It is indeed true that moving from general theoretical frameworks to trying to find ways to move developing markets to more efficient levels is easier said than done and there is little consensus.

Among the problems is not so much the lessons of what needs to be done, but rather the assumptions about how it can get done in poor institutional environments, and were incentives and responses to incentives are not what classical, neo-classical or other flavors of economic theory would suppose (although people are people in the end, and I think one can, to use an ugly term, 'incentize' once one understands the parameters of their world view).

Thus the emerging works in behaviour economics and related fields to grapple with that. In my journal during the summer I railed on about how the CPA-Iraq in its privatization program was making all kinds of enormously idiotic assumptions, above all about Iraqi capacity to respond to privatization. I note from Juan Cole's blog that Stiglitz (nice to share such company) makes similar points in a recent article.

A question of institutional habits, of ingrained responses, of a variety of cultural and social mores that will take time to grapple with the very necessary move to privatize the economy. I am 100 percent for privatizing every chunk of Iraq, get it out of the hands of the rent-seeking, citizen abusing bureaucrat (mind you, I am not one who dislikes bureaucrats ipso facto, I have immense respect for those who serve well, however my experience in the Arab world teaches that the worst vision is the normal vision here) and into the hands of Iraqis.

However, one can not do that magically, the habits of Western economies, which took a long time to emerge [and for good reason] will not just spring up. The economic habits in the region have deep seated reasons, some good, some bad, some outdated, etc. They will not disappear, and to make a brutal shift to a fully private economy now, in Iraq, to use the example, will only discredit the move, and that is what I fear.

Posted by The Lounsbury at 01:10 AM | Comments (0) | TrackBack
Filed Under: Jan-Jul 2004

February 16, 2004

Interesting WP Article on Iraq democracy

In Iraqi Towns, Electoral Experiment Finds Some Success
By Anthony Shadid
Washington Post Foreign Service
Monday, February 16, 2004; Page A01
http://www.washingtonpost.com/ac2/wp-dyn/A44553-2004Feb15?language=printer

Of note the surprise by the FSO officer re lack of civic mindedness. Hardly just an Iraqi issue, not just a product of Sadaam.

Posted by The Lounsbury at 11:16 PM | Comments (0) | TrackBack
Filed Under: Jan-Jul 2004

Iraq: business views

Came from an interesting dinner this evening with an Indian origin businessman who's been doing work in Iraq for six years.

First, let me say that I found it odd that after roughly six years in Baghdad he doesn't speak a lick of Arabic (or pretends...).

Second, it was an interesting exchange of views. I will spare you the talk re my own projects, rather his views on the general environment. Primo, there is a general sense that things are getting out of control on one level, no one believes that the American plan has any street cred, a self-reinforcing view that tends to undermine influence. There is a widespread sense that CPA is corrupt - something I argued against actually as I think they are not in fact corrupt, but rather that they came in without people like myself and thusly, by lack of lang. and lack of experience in developing countries, are easily sold a line of shit. Easily manipulated.

It strikes me as a strategic error of the first order that the Bush Admin, seeking a rather illusory domestic electoral advantage, has entirely ceded its street cred in Iraq. They have zero initiative at present, and are prey to the changing political landscape. It's sad and deeply dangerous.

On a practical level, my interlocutor noted that Baghad has a strange rhythm. During daylight hours things are near normal, you might not guess there is a war going on (ex-of course the issue of car jackings, and the like), in the evening the armed gangs slowly take over (with the same guard with an AK who protected you earlier on perhaps freelancing on 'the other side'), until by midnight no one sane is out. And so it goes, day after day.

Very clearly no one can think rationally of investing, and we all found it laughable that the CPA still maintains its strange happy talk, which we have all heard, ad nauseum since May, that Iraq is open for business, etc. etc. It reflects... I am not sure what. A surreal sense of the possible? Divorce from the reality? Denial? A sort of stick the fingers in the ears and wah wah wah...?

It's deeply frustating insofar as there is a desperate need to get realistic. Tone down the talk to the possible, set the acheivable aims that can make things appear moving.

The disconnect is palpable.

However, I am no happier with Kery's talk oof pullling out. Perhaps it is necesary to win, but I think it is a mistake to speak in those terms. Without an international presence (but probably not a US led one) Iraq goes to hell. Civil war.

Well, in any case, we all agreed there was money to be made, although perhaps we were a bit ashamed at the mark ups, but then if yo're looking at a serious risk of half a 100 k ton shipment going missing, you need compensation.

Good for some, bad for the end results.

Posted by The Lounsbury at 10:49 PM | Comments (0) | TrackBack
Filed Under: Jan-Jul 2004

Stiglitz on Iraq: pessimism

If Bush has his way, Iraq's next shock will be shock therapy
A quick shift to a market economy failed in former Soviet-bloc countries; in Iraq it could fail even more badly
By Joseph Stiglitz
http://www.taipeitimes.com/News/edit/archives/2004/02/16/2003098999

Interesting, found this via http://www.juancole.com/2004_02_01_juancole_archive.html#107691296757544385
(I do disagree with the professor's implication that privatization is a bad thing per se)

More interesting, Stiglitz arrived at the same analysis that I did several months ago, notably:

" Now, everyone agrees, the most important task -- beyond creating a democratic state and restoring security -- is reconstructing the economy. Blinded by ideology, however, the Bush administration seems determined to continue its record of dismal failures by ignoring past experience.

When the Berlin Wall fell, the countries of Eastern Europe and the former Soviet Union began transitions to a market economy, with heated debates over how this should be accomplished. One choice was shock therapy -- quick privatization of state-owned assets and abrupt liberalization of trade, prices, and capital flows -- while the other was gradual market liberalization to allow for the rule of law to be established at the same time.

Today, there is a broad consensus that shock therapy, at least at the level of microeconomic reforms, failed, and that countries (Hungary, Poland, and Slovenia) that took the gradualist approach to privatization and the reconstruction of institutional infrastructure managed their transitions far better than those that tried to leapfrog into a laissez-faire economy. Shock-therapy countries saw incomes plunge and poverty soar. Social indicators, such as life expectancy, mirrored the dismal GDP numbers.?

More than a decade after the beginning of the transition, many post-communist countries have not even returned to pre-transition income levels.

Worse, the prognosis for establishing a stable democracy and the rule of law in most shock-therapy countries looks bleak.

This record suggests that one should think twice before trying shock therapy again. But the Bush administration, backed by a few handpicked Iraqis, is pushing Iraq towards an even more radical form of shock therapy than was pursued in the former Soviet world. Indeed, shock therapy's advocates argue that its failures were due not to excessive speed -- too much shock and not enough therapy -- but to insufficient shock. So Iraqis better prepare for a brutal dose.

...

These factors, together with the ongoing occupation, make quick privatization particularly problematic. The low prices that the privatized assets are likely to fetch will create the sense of an illegitimate sell-off foisted on the country by the occupiers and their collaborators.

Without legitimacy, any purchaser will worry about the security of his property rights, which will contribute to even lower prices.

Furthermore, those buying privatized assets may then be reluctant to invest in them; instead, as happened elsewhere, their efforts may be directed more at asset stripping than at wealth creation. ..."

Emphasis added.

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Filed Under: Jan-Jul 2004

Iraq: rats and ships

I had an evening meeting today with a local parnter, with decent Iraq connexions.

Highlights (a) he sees the door closing. The American game is over. (he's pro American) (b) suggested we try to extract as much $$ from CPA (the Accountants as we call them) as possible before the honey pot runs out. Not a good long term bet.

Well, there is the informed talk on the street. It ain't happy.

Posted by The Lounsbury at 12:14 AM | Comments (0) | TrackBack
Filed Under: Jan-Jul 2004

February 15, 2004

On Iraq

It's been a while since I reflected on my sense of Iraq, partially because we seem to be in a mode of stumbling forward.

However recent events, the continued fundamental incoherence of Bush Administration approach and engagement (as usual, driven more by wishful thinking re what would be good or nice for them to happen than reasoned analysis of the possible and the potential), the regain in violence and the brazen attacks (a lesson I may add, pauses may be just that, pauses, not manifestations of collapse), make me ever more pessimistic.

Pantom in comments asked me if I thought conflict could be avoided. In fact I have a growing sense, as many do here, that a civil war is in the offing, whatever is done. It may be that it can still be avoided, but sadly the misteps to date have made it ever harder.

Certainly, as I used to say on the SDMB (sadly prophetically, although anyone with a modicum of knowledge on the region and the country would have said the same [ex-Friedman the self-deluded fool]), Iraq was Pandora's box. And now it is open. Sadly, as Pandora, the Bush Administration was only thinking about the good things, the wishful thinking that is their vision for the Middle East. It is nice, I may add, to have a vision. Very nice. The ultimate goals enunciated by this Administration, however much the border on platitudes and easy posturing like the "road map" that lasted just about as long as the PR utility did, are fine.

However, getting there from here requires something more than wishful thinking. It involves a realistic appriasal of the possible and a realistic weighing of the costs and benefits of long and short terms interests. Rather typical of this adminstration, there isn ot that going on, rather there is hand waving. It reminds me of their economic policy in re debt and proper financing of whatever spending is going on. Magically all conditions lead to their pre-conceved and not terribly economically grounded policies. A terrible danger, the inattention to the problem of getting there from here.

In regards to the Middle EAst and the specific politics of democratization - even including Iraq - there is nothing but a very magical set of thinking going on. In essence somehow they believe that democratization will produce pro-American results. It will not. Else, they do not believe that, but like th eroad map for peasce, are psturing for public consumption, while pursing a sad mixture of cheaply understsood 'realpolitik' mixed with a bizarre naivete about what can be achieved in using force. Now as I have mentioned before, I recall vividly a long ago, and chance convo with Wolfowitz wherein, as I recall (to be fair to us both, ther was much beer involved) he made an argument (in re Algeria) that rested on the concept that applied force just need to be done right to achieve change. This in regards as the convo went to the Algerian war, and perhaps Vietnam. It is not hard to see this thinking behind present policies.

What to do in its place? Certainly one has to sit down and think long and hard about how to purseu democratization, in the context of democratic results that are certain to be anti-American. Faux democratization, (you only get democracy when you agree with us) like Egypt is worse than no democratization. Like th faux secularism of the Arab world from the 1950-present, faux democratization will do nothing but slowly and surely discredit (even further) the concept, at the very least the concept of the West helping the Arab world democratize. That is a bad thing, every bit as much as faux secularism (often aping to please the aid donor) is a bad thing.

In my view, it is better to get those forces that are anti-secular and anti-American involved in a process than to shut them out. In the long run. certainly in the short term one is exposed to cheap domestic political attacks of "supporting" the "bad guys" and the various lobbies, eg, the gender/women's lobby will raise hell. However, better real gains supported by the population than gains that make some NGO staffers and their gullibale donors in comfortable suburbias happy.

Posted by The Lounsbury at 05:09 PM | Comments (0) | TrackBack
Filed Under: Jan-Jul 2004

Interesting Article: Israeli Rap, Arab and Hebrew.

Straight Outta Tel Aviv
For Disenchanted Israelis, Rap Takes Politics to the 'Edge'
By Molly Moore
Washington Post Foreign Service
Sunday, February 15, 2004; Page A18
http://www.washingtonpost.com/ac2/wp-dyn/A42614-2004Feb14?language=printer

An interesting article. I have not heard either of these sets - Arabic radio also tends to be "mainstream" and conservative. Interesting. North Africans do rap, although interestingly when using rap/hip hop style they tend to use French, and then fall into Rai style in Arabic - sometimes in the same song.

I note one interesting usage, characterizing a divide as Arab vs Israeli in the context of Arab and Jewish Israeli citizens.

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Filed Under: Jan-Jul 2004

February 14, 2004

The Neo Colonial Power

The following article was brought to my attention by pantom in a comment, I thought I should highlight it:

THE ROVING EYE
SISTANI'S WAY
Part 2: The marja and the proconsul
By Pepe Escobar
http://www.atimes.com/atimes/Middle_East/FA30Ak02.html

Even with all its military might, the US has never looked so fragile and discredited in Iraq. An occupying power which refuses democratic elections using all manners of excuses is being judged by the Islamic world - and the international community - for what it is: a neo-colonial power. It has now been proved there were never any weapons of mass destruction in Iraq - much less the means to deliver them. It is now being proved the invasion of Iraq had nothing to do with introducing democracy to the Middle East.

Now, the article in content and tone is discussable as to its factual assertions and perhaps conclusions. I find it most important for the sentiment, the perception that it conveys. Abstracting away from whether the author is right in his judgement, I will not comment on that as it is in many ways besides the point, the reality is that the manner in which this Iraq fiasco has been carried off has very much given a boost to the worst possible judgements on American intentions.

The mendacity and incompetence of the current American administration is deeply harmful to US interests, it seems to me, above all in achieving security goals that can only really be arrived at - for long term results - cooperatively.

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Filed Under: Jan-Jul 2004

February 13, 2004

Terrorism: Reflections on why the Arab Middle East and the West

Terrorism: Reflections on why the Arab Middle East and the West

Eva Luna asked me this recently, and I saw it raised on an American conservative’s website as well recently. It’s not a question I particularly wanted to handle as in many respects it requires a vast answer, and extensive research. These are certainly not things I shy away from, as those who know me from the SDMB know from several years of interaction. At the same time, time is at a premium at present and I lack the time to tackle items the way I used to in say the race debates. I might add that I have covered this ground in the past on the SDMB, but let me remind you, I can't give you directions to SDMB threads, etc. because I no longer have access to the SDMB, I blocked the SDMB well over six months ago on the IP level.

Nevertheless, I am prompted to comment based on a taxi ride today. One of those moments where I say, ‘very good, besides the fact my cost-benefit analysis says taxis are more effective than a leased car, given current uncertainty, I get intelligence.’ A strange conversation, but one that revolved around the Arabs as failures, Johnny come Latelies. In fact the expression used in Arab was just about the same as that.

I will not bother with a research-data based comment, for which I lack the time, but rather a sort of commentary based off of my experience and background expertise. I am led to understand some of you find this interesting.

First, Eva posed the question in terms of Islam or Muslims, as I recall. I think that is in error. I think the question has to be honed down to Arabs and perhaps Pakistan/Afghanistan. I shall not even say the Indian sub-Continent as the Bangladeshis and eastern Indian Muslims are rarely (although occasionally) implicated in what we shall call the violence of extremist political Islam. There are some other examples, for example Indonesia recently, but I regard that as largely an aberration and believe that in large part there is not the fundamental problem that exists in the Arab world, and Pakistan by its peculiar history.

Now then, on the widest possible level, ‘why Islam’ and the “why aren’t X, Y, Z’ blowing themselves up in the US, etc., I say, this is a question by someone who is utterly without a sense of history – for behind the question presumes that there is an inherent answer without regard to the historical moment. These are largely the conflict of civilization people.

It seems to me that in the context of the present historical moment the Middle East has a number of particularities that drive the extremist fringe towards violence towards the West, particularities that do not exist, say in Gautemala.

(a) Galloping population growth with large majorities of the populations under 25, and large numbers of frustrated young men.
(b) The sense of threat to their civilization as civilization. That is, for both Arab Xian and Arab Muslim, although clearly more so for the Arab Muslim, a sense of their values and specificity being threatened by the West. In terms of the Muslims, the sense of civilization and values being under attack is probably clearest, although do not forget the Palestinian Xian angle in terror activities.
(c) The sense of intrusion, as represented by massive funding to Israel by the US, and the understanding (however discussable) that their body politics are being deliberately manipulated to (i) guarantee access to oil (ii) benefit Israel; both with plausible real facts supporting radical (and to an extent highly mythical) conclusions.
(d) The economic blockages in the Arab world, versus a relatively well-educated, relatively well-developed social infrastructure. Job creation in the MENA region is at lows rivaled by sub-Saharan Africa – but the social infrastructure, including media, is generally far more advanced and as recently as 20 or 30 years ago, the MENA region seemed to be on a path to growth. That is, unlike Asia, much of the sub-continent, Latin America, not only is there unemployment, but opportunities seem to be receding collectively. This may be contrasted with sub-Saharan Africa where educational levels and by extension, consciousness of opportunities and alternatives (modernity in a Western sense) are rather lower.
(e) Related to point (c ), further, for a variety of reasons the Arab Middle East suffers from a number of social rigidities (which in part are behind the economic rigidities and work together to close off opportunities) that appear to be frustrating modernization of society, and in my view push youth towards radical critiques. Tribalism, or even where ‘tribe’ per say does not exist, a radically reduced social vision that only really cares for the family (in operative sense, not in terms of grand but inapplicable rhetoric) are severe barriers to both social and economic advancement. All the while, a radical, seducing critique of this exists in terms of pan-Islamic political action. Mind you, I do not believe it can or will solve the social issue – see Iran – but in the pseudo-secular regimes supported by the West (or even not, see Syria) the critique is seductive.
(f) A recent colonial history combined with several terror or guerilla based models of anti-colonial resistance – Algeria, Morocco to a limited extent, for example. The Palestinian example of course looms large, both in the Territories, and its various groups in the Diaspora in the region – e.g. Lebanon.
(g) On the theoretical level, the emergence (in chance in part, in part arising from political and historical circumstances) of a radical, messianic political movement willing to see violence as its key tool, i.e. the radical end of political Islam.
(h) On a practical level, few safety valves – emigration is less and less a realistic option; Europe has largely closed its doors, America is both difficult to get too and far away (more expensive). Latin American, for example, has better safety valves in terms of immigration and:
(i) Fundamental opportunities, the MENA region is one of expanding desertification, increasing pressure on water and relatively limited ‘subsistence’ opportunities. Back to the land is not an option, those that are on the land have few other options….

I note that reducing the question to Islam itself is a fundamental error: one has not seen terror in Islamic Africa, for example, ex the imported event in Kenya, for example, and again it is rare in Asia. The key locus is the Middle East proper and Pakistan-Afghanistan (where is was doubtless doped in the 1980s by the Soviet war there).

The rest of the developing word, whether Muslim, Xian or other, in my opinion, lacks the volatile mixture that exists in the Arab Middle East. In the Arab Middle East I always have a sense of massive frustration, of having almost been there and having squandered the opportunity. This goes two ways, or perhaps three ways. Self-hatred, hatred of the outside world (partial scapegoat), apathy and withdrawal.

In many ways, I think the appeal of Islamic extremism and violence is analogous to the appeal of extreme right and left thinking in Europe during the intra-war period, when economic collapse, disorder, and general sense of social and economic malaise fed a rejection of democratic orders set up post-1918 and led to the emergence of extremist movements, be they Communist or Fascistic. Poverty or near poverty drives this, fear of yet worse. I note, e.g. that on conservative American sites there is frequent note that the 11 Sep 01 hijackers did not come from ‘impoverished’ backgrounds – citing to their Saudi background etc. To the best of my understanding, they all came from what I would call petty bourgeois or appartchik type backgrounds, exactly that social class in the Arab world that is inexorably losing ground, falling away from (relative) prosperity and impregnated with a sense of ever reduced opportunities. Not comfortable by any means, they can not look forward, as things stand now, to anything but reduced social and economic mobility. In many ways this seems quite analogous to the situation in Europe in the intra-war period. The fact that Bin Laden, for example, comes from a wealthy background is rather meaningless, with little indicative value for the overall drivers than the fact some Bolsheviks came from wealthy backgrounds… The aggregate is what counts.

The aggregate is the frustrated, semi or fully educated young Arab (or Arabized) young graduate who looks to a job market and a society that is not producing any future at all for him – now of course arguably that is not the fault of the West per se, indeed many of the fundamental issues which at present are presenting blockages are almost entirely internally generated – e.g. socio economic structures focused on rent-seeking and patronage-clientelistic governmental and private sector hiring, promotion etc. At the same time, Western, especially American, support for bankrupt pseudo-secular regimes is at once helping discredit the secular model (and in the manner it has been applied in the Arab world, one can not help but say that it is inevitable there will be a reaction to its essentially corrupt and venal form) and Western rhetoric on democracy and the like.

In the end, as in the case of intra-war Europe, I think the key answer in drawing the poison of those who would have recourse to political violence lies in the sensation there are socio-economic opportunities, and a sense of confidence in the future. Desperation, a sense of doom, a sense of failure leads to extreme solutions.

However, there is a tension between what is needed in the short term (security to be sure) and what is needed to achieve longer term solutions. How to arrive at a compromise. For example, I noted my conversation with a senior American diplomatic official who indicated that his economic agenda was being driven by security concerns. One has to be careful that security concerns do not choke off the developments most necessary to get to the roots of the issue, for security measures, in terms of direct and indirect (economic) costs reach points of diminishing and I argue even negative returns (i.e. more security measures after a certain point can produce insecurity) as anything else.

Posted by The Lounsbury at 04:02 PM | Comments (0) | TrackBack
Filed Under: Jan-Jul 2004

FT: Balkanization in Iraq

Secret report warns of Iraq 'Balkanisation'
By Nicolas Pelham in Baghdad
Published: February 12 2004 21:21 | Last Updated: February 12 2004 21:21
http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1075982503425&p=1012571727088

"A confidential report prepared by the US-led administration in Iraq says that the attacks by insurgents in the country have escalated sharply, prompting fears of what it terms Iraq's "Balkanisation"."

Further, "January has the highest rate of violence since September 2003," the report said. "The violence continues despite the expansion of the Iraqi security services and increased arrests by coalition forces in December and January."

The report, which is based on military data and circulated to foreign organisations by the US aid agency USAid, diverges with public statements by US officials who claim that security in the country is improving.

"The security risks are not as bad as they appear on TV," Tom Foley, the coalition official overseeing Iraq's private-sector development, said at the US Commerce Department headquarters in Washington on Wednesday. "Western civilians are not the targets themselves. These are acceptable risks." [interjection: this is bullshit, they are indeed targets in themselves.]

"According to the report, "January national review of Iraq", strikes against international and non-governmental organisations increased from 19 to 26 in January. It said that high-intensity attacks involving mortars and explosives grew by 103 per cent from 316 in December to 642 in January; non-life threatening attacks, including drive-by shootings and rock-throwing, soared by 186 per cent from 182 in December. It also recorded an average of eight attacks a day in Baghdad alone, up from four a day in September, and a total of 11 attacks on coalition aircraft."

I should mention that this matches the comments I heard from several sources leavng Iraq, including one high ranking CPA official I know (knew) on a passing basis who had just ended his tour of duty.

I also mentioned earlier (perhaps a few weeks back) the Iraqi-American program officer who I met on her leaving Iraq, again same story of increasing insecurity, inability of US officials to get connected with Iraqis (ex-Chalabi's sycophants) and generally very poor linguistic infrastructure such that US forces rely on completely inadequate translators.

Mentioned that drives many misunderstandings, and with troops under stress, the young men lash out and alienate Iraqis.

I have a hard time seeing, as noted in my prior comment, a means of making this work. The window of opportunity is closed, the money is still not flowing and I don't see a durable pro-American result from this. Afraid Egypt on the Euphrates is looking like almost an upside.

The specter of Balkanisation has always been there, and given the failure of DoD to properly run a reconstruction program, I think will take superhuman efforts to avoid. The bureaucratic wheels on this are simply not moving. I was, for example, asked by a US agency to look into putting together a consortium on capital leading. I dutifully, and mind you for free, did so. Silence so far from their end. No Money for this? I have no idea how Iraq is supposed to work if foot dragging and form filling is the order of the day. I am less and les inclinded on a personal basis to see Iraq as an area where risk and return will be interesting in the near future.

Posted by The Lounsbury at 12:53 AM | Comments (0) | TrackBack
Filed Under: Jan-Jul 2004

February 12, 2004

A Book Recommendation

Let me recommend this combined commentary / review (not bothering with the accents):

abdou filali ansary reformer l'islam: une introduction aux debats contemporians editions la decouverte Paris 2003.

Very nice review.

Posted by The Lounsbury at 11:14 PM | Comments (0) | TrackBack
Filed Under: Jan-Jul 2004

Some items of interest: Iraq, Hijab and France, KSA and Oil

First, I wish to recall the tender hypocrisy of the "write off the Iraqi debt" among the American idelogues:
Debt relief for poor countries held up by discord"
By Alan Beattie in Washington
Published: February 12 2004 0:34 | Last Updated: February 12 2004 0:34
http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1075982473860&p=1012571727172

Contrast the eagerness on Iraq, and the "right thing", with otherwise.

Regime Thought War Unlikely, Iraqis Tell U.S.
By THOM SHANKER
Published: February 12, 2004
http://www.nytimes.com/2004/02/12/politics/12SADD.html?hp=&pagewanted=all&position=

Sadly unsurprising. When one knows the habits of Arab governments, not only th "Stalinist" or quasi-Stalinist ones, the mendacity and lack of realism - as well as lack of of information sharing is of no surprise. Indeed, unfortunatley in the quasi-trbal environment of the Middle East, information sharing is the key challenge in private and public sectors. I recall with no little 'fondness' the former Director of my former Fund refusing to share where he had gotten some information from, even though it harmed our due diligence efforts.

So, my qualification to this article, the sad problem is that it can not solely be laid at the feet of a Sadaam, but rather to deep rooted habits. The rule of the individual and the family to the exclusion of the society, whatever the theoretical calls for cooperation of the Ummah.

Then this amused me:

Data From Iraqi Exiles Under Scrutiny
By JAMES RISEN
Published: February 12, 2004
http://www.nytimes.com/2004/02/12/politics/12EXIL.html

No comment. Should only surprise the pre-fooled.

Saudis 'hoping to become central bankers of oil'
By Carola Hoyos, Energy Correspondent, in London
Published: February 11 2004 20:52 | Last Updated: February 11 2004 20:52

Interesting, re Saudii positioning on oil market. Best card they can play, if they can play it right.

Now, because I just had a lively, perhaps a bit too lively argument with a taxi driver about this, I bring you a series of articles about the new anti-Hijab law in France. Frankly, I don't like the hijab, but I rather think the law is misconcieved. Nevertheless, the reaction among certain quarters in the Muslim community does indeed reflect a lack of acceptance of Laicisme. I am not a fan of "love it or leave it" thinking, for those in the franco-Muslim community who have advanced arguments about "holy law" being above the State, well, you're in the wrong country. There is always the hijra. I should say that (posing as A Frenchman as I do sometimes) I got into a lively argument with the taxi driver on this very point.

The articles then:
LAÏCITÉ 494 voix pour, 36 contre et 31 abstentions
La loi sur le voile adoptée à une très large majorité
http://www.figaro.fr/politique/20040211.FIG0101.html

Le ventre de "une"
Le voile fait aussi désordre à l'extrême gauche
LE MONDE | 06.02.04
http://www.lemonde.fr/web/recherche_articleweb/1,13-0,36-351930,0.html

POINT DE VUE
La loi, vite ! Et passons à l'intégration
par Fawzia Zouari
LE MONDE | 09.02.04
http://www.lemonde.fr/web/recherche_articleweb/1,13-0,36-352267,0.html

Pour nombre d'élèves voilées et exclues, l'école s'arrête définitivement
LE MONDE | 10.02.04 | 13h27
http://www.lemonde.fr/web/article/0,1-0@2-3224,36-352400,0.html
As background for a wider issue.

Posted by The Lounsbury at 03:40 PM | Comments (0) | TrackBack
Filed Under: Jan-Jul 2004

February 10, 2004

Several articles of interest

All surround US FP and the recent unpleasantness:

The Allies' Mindless Bickering
By David Ignatius
Tuesday, February 10, 2004; Page A23
http://www.washingtonpost.com/wp-dyn/articles/A27181-2004Feb9.html

I rather think that Europe has a firmer ground to stand on in re their present position that the US, in re its public comments, which are gratiutious and ill-mannered - as well as wrong headed.

. . . To 'War President'
By E. J. Dionne Jr.
Tuesday, February 10, 2004; Page A23
http://www.washingtonpost.com/wp-dyn/articles/A27179-2004Feb9.html

No comment.

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Filed Under: Jan-Jul 2004

FT: Wolf on American Admin vision for Middle East

Catching up with my FT reading I have another Wolf article to pimp, although I do differ with some key points.

The article, which I again quote in extenso is:
Martin Wolf: Bush is all big stick and no soft speech
By Martin Wolf
Published: December 23 2003 20:12
| Last Updated: December 23 2003 20:12
http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&cid=1071251752381&p=1016652197036

Wolf's discourse, as I note supra is, as usual, well-thought through, although in this case I find myself in disagreement on some specific observations:

He opens with Bush's "vision" for democracy, stating "this statement, made by President George W. Bush last month, is astonishing. The man who once rejected mere nation-building has committed his country to civilisation- rebuilding. The enterprise is true to the best in US history. But it also extremely risky.

Indeed risky, I recall for example Friedman's article before the war about the Iraq war being a long ball strategy, risky, very risky - and did the Admin have the wherewithal to execute properly. Of course Friedman fooled and fools himself into thinking so.

Wolf notes: The administration has returned to Woodrow Wilson. His belief that peace is founded not in foreign relations but in domestic transformation became a cornerstone of US policy in western Europe and Japan after the second world war.

The democratic transformation of erstwhile enemies, combined with peace and free markets, was then the basis for western success in the cold war."

Ironic considering American conservatives have long reviled Wilson. Indeed:

"Mr Bush initially rejected this Wilsonian vision. Yet now he argues that "60 years of western nations excusing and accommodating the lack of freedom in the Middle East did nothing to make us safe . . . And with the spread of weapons that can bring catastrophic harm to our country and to our friends, it would be reckless to accept the status quo."

This is the vision of the neo- conservatives, who are Wilsonian in their ends but anti-Wilsonian in their means. Unlike Wilson, they believe that the needed transformations can be achieved by US power unbound by international constraint. On the latter point, they are in agreement with traditional nationalists, such as Richard Cheney, vice-president, and Donald Rumsfeld, secretary of defence."

I think a very able summary. However, on the results:

"[T]hey disagreed on the goals of policy after victory. Traditional nationalists would accept a modicum of stability in Iraq; neo-conservatives want democracy. Now, it appears, the president has adopted the neo-conservative vision. He is intent on remaking an ancient civilisation that has proved most resistant to western ideas. Is this policy wisdom or inexcusable folly?"

While I do not fully agree with "most resistant to western ideas", indeed it seems a bit ahistorical in context, in the context of democratization it's a supportable generalization.

"On one point even the fiercest critics should agree: the aim is desirable."

Sure, of course, but then so is universal wealth and edcuation. The problem is getting there.

"If Middle Eastern regimes were democratic and their economies prosperous, the world would be a safer and happier place. But desirable objectives are not necessarily achievable."

Indeed, indeed, indeed. Achievable - of course let us stipulate, in the context of other goals, in the context of short term versus long term incentives, in the context of the risk versus reward in the framework of actual political calculation.

It would have been desirable, for example, for the US to have engaged Hitler earlier - but possible, no. Not economically, not politically.

On his list here:
"The Middle East offers five potent obstacles to democratisation: the lack of a democratic tradition; the strength of belief that the will of God is superior to the decisions of a democratically elected legislature; the role of oil in so many of the economies; the absence of a prosperous market economy; and the consequent absence of a strong, independent middle class."

The second item is, in my opinion, something of a bugaboo - there are indeed even in the US, for example, people who hold the 'will of God' superior to the parliament. That is not the key obstacle. The key obstacle really lies in socio-economic structures. Oil is less of an obstacle also as it's really a Gulf and Iraqi problem, the remainder, indeed the demographic majority of the Arab world is not faced with oil as an issue.

Now here is where I fully agree:
"This is bad enough; but the modus operandi of the Bush administration has added further obstacles. President Theodore Roosevelt once recommended speaking softly and carrying a big stick. A century later, this Republican administration also believes in the big stick. Unfortunately, it believes in a loud voice. It has humiliated allies, undermined international institutions and projected a narrow vision of US interests."

Emphasis added.

I rather believe this has been my argument, and one of my chief sources of disdain for this Bush administration, the load voice of the self-indulgent and perhaps not entirely self-confident but blustering bully.

"So what, one might ask. Has the US not put Saddam Hussein in prison and forced Colonel Muammer Gadaffi to abandon his programme for making weapons of mass destruction? Indeed, it has. Force works. But it will not, on its own, achieve the democratic transformation the US now seeks. As Ivo Daalder and James M. Lindsay argue in an important study of the administration's foreign policy: "The Iraq experience underscored that how America led mattered as much as whether it led."*

Legitimacy, without force, will founder; but force, without legitimacy, is barren. The US transformed Europe, because the defeated came to accept American values as superior to their own. Now it asks the Middle East to do the same. But it suffers from a huge handicap: remarkably few people in the region trust its good intentions, partly because of the history of its support for authoritarian regimes, partly because of its role in the conflict between Israelis and Palestinians and partly, as Jeffrey Sachs wrote in yesterday's FT, because of its objective of securing cheap oil at all costs."

Emphasis added.

Again, it strikes me that the argument is spot on, but the following I think is even more relevant, and I think key to understanding the underlying failure of the Bush administration, and indeed why I think any other given candidate is superior to the present fool:
"I would add that there exists a deeper contradiction. The core democratic values are reason above force, procedures above power and consent above coercion. It is hard for the democrat to argue that these have no applicability to the behaviour of states. Yet that is precisely what neo-conservatives do. They argue that democracy and freedom are the best way for people to live. Yet they also believe that paying "a decent respect to the opinions of mankind" is a policy for wimps.

An unbound superpower dedicated to pursuing its own interests will fail to export its values. In international relations it appears to think, might, not right, makes right. The Bush administration now accepts, correctly in my view, that US foreign policy must be grounded in values. But it will fail to achieve its goals if it continues to proclaim that those values are irrelevant to guiding America's own relations with other states."

A cogent statement, and I think one that gets right to the heart of the essential emptiness of present American foreign policy, as well as its deep internal contradictions.

[his reference referred to: * America Unbound: The Bush Revolution in Foreign Policy (Brookings Institutions Press, 2003)]

For all this, I do not see Cold War and immediate post-Cold War model that evidently lurks behind present policy tinkering as a fundamentally useful jumping off point.

Posted by The Lounsbury at 04:20 PM | Comments (0) | TrackBack
Filed Under: Jan-Jul 2004

February 09, 2004

FT: Martin Wolf on the new rebound in the market

As anyone who reads my commentaries knows, I am a great fan of FT's Martin Wolf. Sharing another article by him which I believe merits attention. Quoted in extenso.

[Edited to correct coding 10 Feb]

Martin Wolf: End of the bear market?
By Martin Wolf
Published: February 3 2004 20:53 |
Last Updated: February 4 2004 13:30

First, I want to note that I very much like Wolf's sense of humour:

Is the US bear market now over? The durability and strength of the US - and so, global - economic recovery depend, at least in part, on a positive answer. Unfortunately such an answer can be given only by someone who believes, if not six, at least four impossible things before breakfast.

I hope you all get the reference.

He continues:
If we cast our minds back four years, we shall recall the era of belief in the "new economy" and surging equity prices. These, we now believe, were the bad old days. Welcome, instead, to the bad new days. By the standards of the late 1990s, today is an era of moderation. But it is moderate only by those standards. Since 1881, US stock market valuations have been as high as they are today only twice: in 1929/1930 and then around the recent peak (see chart). The question we confront is whether such valuations should now be deemed the norm. My answer is "no".

Nothing like historicity I say.

Skpping ahead, Wolf notes: "Today's ratio of stock market prices to earnings - the p/e ratio - is roughly double its long-run average. The cyclically adjusted p/e ratio (the ratio of the value of the stock market index to the moving average of real earnings), which is the method proposed by Robert Shiller of Yale, is more than 70 per cent above its mean. The valuation ratio (known as Tobin's Q, after the late James Tobin), which is the ratio of the stock market to the replacement cost of corporate assets, gives a similar picture (see chart). As Prof Shiller and Andrew Smithers of London-based Smithers & Co argue, stock market valuations are mean-reverting in the long run. Since markets are mean-reverting, exceptionally high valuations mean that markets are subsequently more likely to fall than rise. .... As today's valuations are high, by historical standards, markets are, argue the bears, also far more likely to fall than to rise in the years ahead."

A bit of background, then this. Hwever what I rather enjoyed was the following:

How do bulls counter the argument that stock prices are now overvalued? The first impossible thing they argue is that profitability is exploding and will thereby validate current prices.

It is true that the share of profit in gross domestic product has soared (see chart). Indeed, it is close to levels last seen in 1997. Yet this is a bearish, not a bullish point. Profit margins oscillate sharply in the short run, but profits tend to rise in line with GDP in the long run. Since 1970, the share of profits in GDP has averaged 8.4 per cent. In the third quarter of 2003, it was already 10.1 per cent. This suggests that profit shares are now more likely to fall than to rise as a share of GDP.

Skipping further argumentation to this point:
"A second impossible argument is that the equity risk premium has fallen far below historic levels, thereby justifying today's high stock market valuations and prospective low returns.

This argument, widely used before the bubble burst, is, in essence, that people enjoy high returns today because they desire lower returns in future. Markets then enjoy a once-only revaluation, as the risk premium falls, and subsequently deliver low returns by historical standards. The shift envisaged is large. In the long term, real returns have averaged around 6.5 per cent. But today's cyclically adjusted p/e ratio implies a long-run real return of less than 4 per cent. ...... So what we are asked to believe is that those now buying the market are doing so in the belief that their return will be only 4 per cent, before they pay any of the costs. This is a stockbroker's fairy story.

Positively lyrical. As well as sharp.

Further:
A third impossible argument relates directly to the second. It is that the risk premium can collapse without affecting the risk-free cost of capital.

Grant, for the moment, that the equity risk premium has fallen. Yet nobody is suggesting that the marginal product of capital has collapsed. On the contrary, many believe it has risen, along with the improvements in productivity. It follows that, if the risk premium had fallen sharply, the risk-free rate should have risen, to clear the market for investable funds. Yet the risk-free rate has not risen. On the expected inflation rates for next year, the risk-free real interest rate on US government bonds is only about 2.5 per cent.

Not sure if I entirely am with this observation.

This brings us to a fourth and last impossible argument, that the return on capital is independent of its cost.

A high equity market implies a low cost of equity capital. But the confident expectations about high prospective economic growth imply a high return on corporate capital. Yet the two have to converge. They can converge in one of two ways: by an investment boom that lowers the returns on corporate equity or by a fall in the stock market. The former route was tried in the last years of the bubble. As returns fell, so did investment. The adjustment will, instead, occur through the second route: a fall in the market.

Most importantly, and rather dangerously, Wolf argues:
Where does this leave us? Worried is the answer. The Federal Reserve has helped create a mini-bubble, to alleviate the impact of the implosion of the maxi-bubble. This makes no secure basis for a sustained recovery. US stock valuations are not grotesquely high this time. But they are still very high. The bear market is not yet over. Until it is, we cannot be confident about the recovery.

I highly recommend the full article: http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1073281525056&p=1012571727088

Posted by The Lounsbury at 08:14 PM | Comments (0) | TrackBack
Filed Under: Jan-Jul 2004

On my caustic comments on democratization and Bush admin policy

I see that this Washington Post piece has materials to reflect on:

washingtonpost.com

Bush Aims For 'Greater Mideast' Plan
Democracy Initiative To Be Aired at G-8 Talks
By Robin Wright and Glenn Kessler
Washington Post Staff Writers
Monday, February 9, 2004; Page A01
http://www.washingtonpost.com/ac2/wp-dyn/A24025-2004Feb8?language=printer

I don't believe the Eastern European model is applicable at all in the region, the issues and core problems, ex perhaps Yugoslavia (and Russia in the context of its fringes) are too different.

Posted by The Lounsbury at 07:49 PM | Comments (0) | TrackBack
Filed Under: Jan-Jul 2004

On MENA and Economic Opps

Yesterday I was in a truly foul mood and was rather pessimistic.

Today I am in the same, but feeling a bit more fair minded.

First, I do think there is potential in the region. However it is bounded, even abstracting away from socio-economic barriers, by the environmental bounds.Certainly an area with severe water shortages or at least shortfalls presents bounded growth opportunities, above all in regards to transitioning from quasi-subsistence agriculture under heavy demographic pressure to something else.

However, as I noted in a reply, I believe, however limited opportunities in a region, the skillful, the clever and, yes, the lucky can make money. Unilever, for example, makes its best profits in sub-Saharan Africa - a region I also know (at least its Western portion, not really Central, East or South) and like, having perhaps an affinity for trouble. Hard markets often