Category Archives: politics

The diplomatic skills of John McCain

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The Guardian reports today that

A mysterious night-time telephone call brought India and Pakistan, two nuclear armed countries, to the brink of war at the height of the crisis over the Mumbai terror attacks, it was revealed yesterday.

According to the Pakistani authorities, a “threatening” call was made by the Indian government, ostensibly from the foreign minister, Pranab Mukherjee, to Pakistan’s president, Asif Zardari, on Friday November 28, two days after the drama in Mumbai began. India had by then declared that all the militants who had stormed its commercial capital were from Pakistan.

The heated conversation left Zardari believing that India was about to attack his country, reportedly pushing Pakistan’s armed forces to high alert. Given Pakistan’s inferiority in conventional forces, analysts believe it could respond with nuclear weapons to an Indian attack.

Zardari quickly mobilised western leaders in an attempt to avert war, telephoning the US secretary of state, Condoleezza Rice, and Britain’s foreign secretary, David Miliband, among others, who in turn frantically called New Delhi. Rice reportedly telephoned Mukherjee in the middle of the night and demanded: “Why have you threatened war?”

For some reason, John McCain went to the region during the 3 days of the attacks and visited first New Delhi, then Lahore.

John McCain, the US senator, arrived in Pakistan at the weekend from New Delhi, where he met the Indian prime minister, Manmohan Singh, and told Pakistani journalists that India was ready to order air strikes. At a lunch with senior reporters in Lahore, McCain said Indian officials had told him they had evidence of the involvement of former ISI officers in the planning and execution of the Mumbai assault.

Aren’t we glad he is not in charge of our foreign policy? Not only did he inflame already nervous leaders who might use nuclear weapons, but he did it in public, so that volatile mobs might take up the call for war.

In a short search of English-language Pakistani newspapers the only mention I found was in a very judicious editorial in the Daily Times (Lahore), counseling restraint on the part of the Pakistani government. It says, in part,

Talking informally to a group of Pakistanis in Lahore, the visiting US Senator John McCain said that “there is enough evidence of the involvement of former Inter-Services Intelligence officers in the planning and execution of the Mumbai attack, and if Pakistan does not act, and act fast, to arrest the involved people, India will be left with no option but to conduct aerial operations against select targets in Pakistan”. Since the senator had just arrived from New Delhi, this can be taken as a message from India.

From the tone of the statement one can say that the Senator, possibly along with the rest of the US delegation, wanted Pakistan to respond positively, “after receiving evidence from India”, to the Indian demand that the culprits named by them be arrested. The Senator talked in the future tense about his willingness to persuade India not to embark on military action against Pakistan. He thought America would not be able “do much” if India attacked Pakistan. He was more mindful of the assertion that India’s Mumbai attack was an Indian 9/11 like America’s in 2001, after which the US took the option of attacking Afghanistan.

No one in Pakistan should take this as empty bravado or a dare to the Pakistan government to respond equally truculently. The two countries stand at a critical juncture — much more serious than the standoff of 2001 — and the Pakistani side should refuse to be provoked into reminding the Indians that war will inevitably result from military strikes and that this war might escalate quickly into nuclear war. The scenario is qualitatively different this time. The world is less interested in forcing India to stand down than it was in 2001, and is inclined to put its trust in what the Indians are saying about the nature of the Mumbai attack. But it will definitely try and get Pakistan to respond positively without reaching the point of going to war.

However, before we consider how the world will approach Pakistan, we must take a look at what kind of evidence the Indians will present to Pakistan. Unfortunately, the truth is that India is throwing out hints of aggressive action before concluding the process of putting together all the evidence. The latest finding that domestic Indian terrorists could be involved in the Mumbai attack should change the Indian approach to the matter. Pakistan’s stance has been that if the spoor leads to Pakistan it could only be to the “non-state actors”, and that India should not rule out its own “non state actors”. The latest news from India tends to point to a cooperative approach rather than confrontation.

Country roads, country people

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I was driving home the other night, down our rural road, in the lull between those who go right home after work in town, and those who stop at the tavern; it was moonless, very dark, and there was no traffic. Nonetheless, there are still deer who suddenly appear in the road, so I keep my speed down. Tonight I was to be reminded that there are dumber mammals on the road than deer.

I came around a long curve with a short straightaway ahead before a narrow bridge and another curve. All was darkness. Suddenly I thought I saw a tiny flash of white light––not headlights by any means, just a small quick chip of light like a shard of glass well above ground level. I began to brake and then, as my headlights lit up the straightaway, I saw people in the left lane, and something big and white completely occupying my lane and very close. More pressure on the brakes, thankful for the anti-lock brakes on our new used car, huge white wall ahead closer with people to the left of it, nowhere to go, brake harder, harder. Stop. Two feet max between me and a big old RV parked in my lane.

Three men are in the left lane with flashlights on now, though not all of them could have been on and none pointed up the road when I came around the curve. Even now they are milling about, talking, not pointing the flashlights so as to warn oncoming traffic in either direction.

One walks over to me. I put the hazard lights on, open the car door, and say angrily “You got flares?” I assumed this event, whatever it was, had just happened, no flares out yet, and I carry flares.

“Oh,” says the guy, “uh, I just picked them up, we’ve got it fixed.” Right, I believe you had flares out.

“Then why isn’t it running and showing some lights?”

“The battery was dead, we had to jump it.”

“Why isn’t it running then?”

He turns to a middle-aged woman standing passively near the motor home and tells her to start it up. She doesn’t move, so he tells her again. The other men with flashlights still are not warning traffic. A car rounds the bend behind me, sees my hazard lights, slows down quickly. It occurs to me that I may be the only functioning adult present, though all these people are over 30, and rather than driving on, I get in and back up a few feet so as not to be smashed into the RV if a chain reaction rear-end collision occurs.

The RV starts up. It has only one brake light working and the tail lights are dim. I get out and inform them of this. Throughout the entire time I am there, none of these people seems at all concerned about the danger of this situation. My car could have fishtailed in a panic stop, flailed into the other lane and taken out all three of the guys there. Two cars or trucks could have arrived at once, one around each bend, and been unable to stop safely. These people aren’t just unconcerned, they are unengaged. If they were deer they’d be long dead.

Eventually the RV sputters off, and one of the helper vehicles actually follows it, perhaps to compensate for its inadequate tail lights. I drive off too, keeping my distance, until I turn off and they continue on, perhaps to one of the two very low-end trailer parks a few miles up the road.

I’ve grown to realize, in the 12 years we’ve lived out here, that there are many folks in this area who are not only marginal economically, but mentally and empathetically as well. For them such events as this are the stuff of stories to be told over beer or while fueling the chainsaw or leaning on the fence, along with stories about arrests, fights, narrow scrapes with the law, somebody who totaled their car missing a curve. Even when injury is involved there’s no awareness of consequences or responsibility. A neighbor’s son wrecked three trucks within 2 years; two were single-car accidents but in one he rear-ended someone in town and crippled a woman. No sweat, just something that happened. Alcohol and meth were involved, but to accept that as an explanation is a cop-out. The question to be asked has to do with why, with boredom, and lack of education, and lack of parenting skills. The young man in question now has two children with a young woman from whom he is now separated (both were meth users) and our neighbor’s wife, who finally left her husband because of his irresponsibility and “anger problems” is now raising the children. She has been gathered unto Jesus, acquiring an instant pattern for life, support group, and promise that the next life will be better than this one. But it would have been much better if she had been able to leave earlier before her two sons followed their father’s pattern.

In a positive development relative to this, a representative from the women’s shelter in town (21 miles away) came to the local Food Pantry the last two weeks, doing something new: rural outreach. She’s spreading the word about their shelter and other services including a 24-hour hotline which handles not just domestic abuse calls but suicide and all other forms of distress where someone needs immediate response. The shelter folks will arrange to pick up domestic abuse victims fleeing home, as long as a safe public place can be arranged to meet. This, the hotline, and the publicity, are all very valuable for rural areas where some people are very isolated and transportation is a big issue.

Rural areas don’t exactly have different social problems from those in urban or suburban areas but the setting can really intensify them. The isolation can reduce social contact, remove options, and conceal problems from neighbors, relatives, and law enforcement. It’s legal to fire guns out here, any time. There are fewer options for kids: no neighborhood kids, no places for organized activities within walking or biking distance, schools that struggle to maintain their very existence due to enrollment that is small to begin with and fluctuates. Our area is experiencing a boom in births but a decline in kids 5-8 years old; there may not be a K-8 school closer than 20 miles by the time this year’s babies get to school.

When gas prices go up and town is 20 miles away, the impact is severe on families, school budgets (long bus runs), and the few small local stores and businesses. A couple who run a business installing gutters showed up at the food pantry during the summer; the costs of their materials had gone up so much, while construction and remodelling plummeted, that for the first time in their lives they could not feed their kids without help. We’re seeing a lot of new faces at the food pantry; they’re new to us, and new to the idea of having to ask for help.

And, when somebody parks a disabled vehicle in the road without lights or flares, they can do so in confidence that no sheriff’s deputy will happen on it and no one will see it and report it in time for the understaffed sheriff’s department to respond (no cell phone coverage for miles). It’s just there, and you deal with it. Not long ago my husband came around a sharp turn in the road (this was on the highway) to find two cars facing opposite directions stopped to chat out the driver’s side windows, completely blocking a road that is heavily used by log trucks and delivery trucks as well as by regular traffic. He was quick-witted and lucky, able to squeeze past on the shoulder. A car coming the other way could have hit him or one of the other cars and a four-car pileup would have resulted.

The stupid and careless, like the poor, are believed to be always with us. In fact some of them are “created,” when babies are malnourished, toddlers are neglected, children are uncared for and discouraged from learning and from being responsible. We can have a society with fewer poor people and fewer stupid or ignorant people, if we work at it.

Rural problems are out of sight and therefore out of mind, for most people. These areas may need extra support to keep the institutions critical to their well-being; they may need not just outreach but more decentralization of services: part-time clinics, places that offer parenting classes, bus service to job training, and so on. Some services others take for granted don’t exist here, like cell phone service, cable tv, broadband Internet access, meals on wheels. I know people who’ve had to move to town for the broadband, in order to telecommute or perform high-tech work.

With our economy nationwide staggering from the parasitism of the very rich, it is not likely that rural areas will see much of this sort of investment; indeed, most rural counties today consider themselves lucky to be maintaining minimum levels of law enforcement, road and bridge work, and health services. But what the rural parts of this country need is a national initiative, a new Tennessee Valley Project which would, for example, upgrade schools, provide clinics, and add wireless net access to benefit schools, businesses, and families. Otherwise the current population tendencies will become more pronounced: rural residents are more and more composed of these groups: retirees; those raised here who would leave if they had the education and the gumption; a smattering of “cultural creatives” from elsewhere; and those who move/stay here because they can live under the radar of law enforcement. It doesn’t have to be this way.

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Like Candide, go and tend your garden (but share the produce)

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The popular press is seizing upon greed and stupidity as causes of the ongoing economic ripoff, and that’s true as far as it goes, but there’s a larger context. Here’s part of a European take on it:

The malady of infinite aspiration
In the first of two issues of Esprit devoted to the economic crisis, editor Olivier Mongin argues that market crashes are less the fault of ignorant or irrational traders and more the result of a broader historical trend in politics, philosophy, and aesthetics. Since the nineteenth century, value is no longer a property of each object or idea, but determined by the price it will fetch on the market.

Enter the herd mentality: traders who expect the market to move in a certain direction buy and sell accordingly, and so cause the change they have predicted. Politics and the media are plagued by the same self-destructive introspection. Without stable values, politicians and journalists try to anticipate what the public wants, and attempt to buy into a rising trend. As public discussion converges on these predicted beliefs, it propagates them through society – prophecies that self-fulfil.

One current consensus, notes André Orléan, is that the financial sector needs more regulation. Look deeper, though, and ideological differences remain. The dominant perspective sees markets as sound in principle, merely distorted by concealed risks. Regulate to increase transparency, and markets will get back on track. This view is opposed by those who note that bubbles and crashes appear in the most transparent markets. Markets are too volatile, this group holds, and would best be helped by keeping them connected to the economy of the real world. These fundamentally different approaches deserve to be publicly considered, argues Orléan, and not relegated to technical discussions between economists.

This is from the Eurozine Review, which presents summaries in English from European publications.

The analysis in the third paragraph echoes that of Nassim Nicholas Taleb in a book I’m reading, Fooled by Randomness: the hidden role of chance in the markets and in life. Taleb is a mathematically trained and philosophically inclined trader in the US markets; it seems as though his early life, as a Lebanese Christian whose family lost everything suddenly during the decades-long civil war there, helped him realize the power of chance events and the fragility of human fortunes. He emphasizes not only the role of chance but also the need to consider not just the odds of an investment, but its potential downside. Such consideration precludes participation in bubbles such as the sale of mortgages and credit debt, packaged and presented as safe investments.

Our American attitude has always been one of denying chance; we exalt the individual’s ability to prevail and the concepts of unlimited positive progress. We now find ourselves in a situation where many negative trends/possibilities are beginning to affect us–ones which we have denied, ignored, deferred action and study upon, for more decades than the Lebanese civil war lasted.

If the popular reports from neuroscience and behavioral studies are to be believed, humans have built-in tendencies that make us unfit for facing the complexities we now live with. We embrace short-term gains and ignore long-term risks, we do not judge the magnitude of risks accurately (e.g. we worry about dying on an airliner but drive with blithe blindness to the odds of injury or death on the road), we have short attention spans, and when something conflicts with our established ideas we ignore it or make up reasons why it doesn’t apply (cognitive dissonance behavior). And so on, the list is long.

At this point the rhythm of writing demands that I suggest some positive courses of action in mitigation of what I’ve described, but if you’ve read this far you probably know as well as I do the sort of changes, individual and systemic, that need to be made. When things get bad enough, perhaps some of them will happen in sufficient frequency to help. Until then, we must be frugal, provident, and compassionate in our own lives, and work at extending those principles more widely whenever there’s an opportunity.

What should happen at the International meeting on the economic crisis?

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On Nov. 14 and 15, leaders from around the world (the “Group of 20”) will meet in Washington DC to negotiate a response to the continuing economic crisis. An article from the Washington Post on Nov. 2nd gave some good background to this meeting, for those of us who are not versed in international finance. An article yesterday at bloomberg.com gives more detail.

Discord on Economies In a World Of Trouble––
Conflicts Emerge as Nations Seek Solutions

By Steven Mufson, Mary Jordan and Edward Cody

Washington Post Staff Writers

Presidents and prime ministers from major countries around the world will gather in Washington in two weeks to begin heated negotiations over the shape of global financial regulation as they scramble to avoid a deep worldwide recession and restore confidence in markets.

Key European allies are pushing for broad new roles for international organizations, empowering them to monitor everything from the global derivatives trade to the way major banks are regulated across borders. But the Bush administration has signaled reluctance to go that far. In the past, it has resisted similar proposals as potentially co-opting the independence of the U.S. financial system or compromising free markets.

Some economists and policymakers say the summit could launch important reforms. But others predict it could turn into an economic tower of Babel, with weak political leaders promoting solutions fundamentally at odds with one another. And if leaders cannot bridge their differences, they could risk another bout of financial disarray.

There are also differences of opinion on the issue of timing. French President Nicolas Sarkozy, who pressed for the 20-nation summit, says it must produce concrete and immediate results. But the host, President Bush, is a lame duck who says the meeting will be “the first in a series” and should focus on principles even though “the specific solutions pursued by every country may not be the same.” Emerging proposals to sharpen existing regulatory tools appear to conflict with plans to create entirely new ones.

What is clear is that expectations for the summit among many observers are high.

“At the moment, I don’t think it would be acceptable for the major leaders to come back from this conference and to go to their respective parliaments or whatever and say, ‘Yes, we rearranged the deck chairs a little bit.’ Because this is genuinely a Titanic crash,” said Howard Davies, director of the London School of Economics and former head of Britain’s financial regulator, the Financial Services Authority.

But no matter what parliaments and people may think about the need for prompt and effective action, it seems to me unlikely that the meeting will succeed in doing much more than talking; the establishment of a new global economic monitoring agency with “teeth” faces too many obstacles: lack of preparation, lack of a precedent or foundation for such a global regulatory institution, too many parties who must agree, Chinese insistence on unfettered national sovereignty.

The summit does have a precedent, one reaching back more than six decades. At the 1944 Bretton Woods conference, world leaders gathered to design the current international financial architecture, laying the groundwork for the International Monetary Fund and the World Bank. The Nov. 15 summit has been popularly referred to as Bretton Woods II.

But this time is different. Two years of preparation went into the 1944 summit. And whereas the United States and Britain largely shaped the postwar financial system, financial regulation and coordination will now require the participation of a broader and more unwieldy group, including emerging economies, many of them loaded with foreign exchange reserves, foreign debts and influence over global financial markets.

Those emerging economies, far from being “decoupled” from traditional industrial powers as many analysts believed just a few months ago, have found that they and more developed nations need one another.…

Bush, meanwhile, has been reserved. “We need to proceed with caution and care but also with all due speed,” White House press secretary Dana Perino said recently. “The president is concerned about moving too far too fast and wanting to avoid unintended consequences.”

Locking In Allies

World leaders are already maneuvering for position. Sarkozy, in particular, has methodically sought allies.

He won a key, although carefully worded, endorsement for action from China on Oct. 25 in Beijing, where a Europe-Asia economic cooperation summit called for more regulation of global financial markets.

“Each of us perfectly understood that it was not possible to meet [Nov. 15] just to talk,” Sarkozy told reporters at a closing news conference.

“This is about no less and no more than the creation of a new financial constitution,” German Chancellor Angela Merkel said.

Sarkozy has also called a Nov. 7 summit of the European Union’s 27 heads of state and government in hopes of winning a Europe-wide mandate to demand swift action in Washington. Recognizing Britain’s special contacts with the United States, Sarkozy invited Prime Minister Gordon Brown to a strategy session Tuesday at a presidential retreat in Versailles.

Still, despite all the posturing, there are different views on what concrete action would mean.

Sarkozy and Brown have voiced support for a new international regulatory body to supervise large transnational banks. Brown has called for strengthening the Financial Stability Forum, created after the Asian financial crisis of the late 1990s. The group of central bankers, finance ministry officials and international financial institution representatives produces important recommendations, Brown said in a speech this week, but, he added, “It never had enough teeth.”

Merkel, who has been more conservative in dealing with the crisis than the hard-charging Sarkozy, favors a stronger International Monetary Fund, giving it a supervisory role in international finance and making it a “guard” of financial stability. Brown, too, has proposed making the IMF “an early-warning system” for financial problems, singling out low bank capital ratios or wildly mispriced securities.

IMF officials have embraced the idea that the fund could take on a larger role, perhaps as part of a secretariat involving other multilateral institutions.

Sarkozy has also sought support for proposals to curtail tax havens with new international investigative powers; require increased transparency on high-risk hedge fund investments; and regulate financial traders’ compensation packages in a way that would reduce the incentive to make risky investments. But a French analyst said Sarkozy may scale back some of those ambitions given U.S. opposition. “He may have overreached a bit,” said the analyst, who spoke on condition of anonymity so that he could speak candidly.

Japanese Prime Minister Taro Aso, in power just five weeks, spelled out in a nationally televised speech Thursday night what he wants from the summit: international regulation of financial institutions and of credit rating agencies as well as standardized accounting for international business and markets.…

China may prove more cautious than any other nation. Wu Xiaoqiu, director of the Institute of Finance and Securities, said he thinks Chinese officials, while joining their European counterparts in calling for an overhaul of current regulatory systems, would stop short of supporting a proposal for a worldwide organization with significant power.

“It is important to have an agency which can coordinate the global market and policies of different countries,” Wu said. “But China doesn’t like the idea of having a global SEC since no organization should affect the sovereignty of countries.”

Prospects for Politicians

For some leaders, the financial crisis offers a political opportunity at a time when electorates are deeply concerned about the future. Brown, Merkel and Sarkozy are all facing low approval ratings.

“I think all of the governments are uncomfortably aware that they have got very, very nervous electorates. Point one is just to show that somehow there is an agenda which can allow people to feel that something’s under control,” said Davies, the director of the London School of Economics. “People like Sarkozy, in particularly, and Brown know that their future depends on it appearing that they are responding adequately to this crisis.”

There are dangers, though. The pressure to be seen as taking vigorous action could lead to overregulation, say many business leaders, especially in London, where the financial services sector plays a key role in the economy.

Willem Buiter, a professor at the London School of Economics and a former Bank of England policymaker, said he feared “we will . . . end up regulating so tightly that a lot of financial institutions will be untenable and unprofitable and we will spend the next decade slowly chipping away at over-regulation.”

Disunity is another risk. If world leaders fail to coordinate, the consequences could be severe. Their staggered responses to the financial crisis in September contributed to bank runs and currency fluctuations, as money fled to whatever country was promising the most generous guarantees.

“If we forbid alcohol in two pubs only, everyone would just go to the other pubs,” said Dimitrios Tsomocos, professor of financial economics at Oxford University and a consultant to the Bank of England, who added that one nation’s regulatory scheme must not be more attractive to business than another’s.…

Robert Hormats, a vice chairman at Goldman Sachs and former National Security Council staffer, said that the November summit would be valuable if it became the first in a series of G-20 meetings, widening economic coordination.

“We’re at a point of time where the role of emerging economies has become very apparent and where the G-7 does not have the capacity in the eyes of many people in the world to solve this problem alone,” Hormats said.

“We’ve learned from this crisis that you can’t conceivably in the future try to pretend that the global financial system can be run by the occasional phone call between the Fed, the Bank of England, the SEC and the FSA,” Davies agreed. “That’s not going to work anymore.”

Brown, in a speech to business leaders in London this week, said, “We have got to . . . involve China, India and all the emerging market economies because the world economy is changing before our eyes, and the system that is just built on Europe and America will not survive the test of time.”
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