Wednesday, 12 February 2014

On homecoming, optimism and the reality of despair..

Linear thinking does have its purpose. It allows a human mind to compartmentalise complex scenarios in a soothing manner and creates an illusion of step-by-step progress. But, when applied on complex and difficult matters, liner thinking is not only the worst tool to use but could be quite dangerous. Why do I say that? The process of liner thinking fails miserably when one attempts to analyse and understand chaotic matters because it does not have the vigor or the capacity to truly grasp the complex debate, matter or structure or whatever else one is using this overused tool to analyze complicated issues. It is within this spirit, one must read the homecoming account of Dr. Ahmed in the most recent edition of the Pakistan's Friday Times; here, here, and here. Even after going over the terrible social, economic and political situation which is Pakistan today, somehow the author is optimist and left Pakistan with renewed hope which I am not sure is a reflection of the reality on the ground in Pakistan. 

He argues about the tussle between center and periphery and how it has shaped the current crisis in Pakistan. His thesis goes like this:  

The relationship between the center and the periphery has reached a breaking point across the Muslim world, due to the failure of the modern state to accommodate the diversity of minority groups and give them their due, especially on its borders.
the relationship between the center and the periphery has reached a breaking point across the Muslim world, due to the failure of the modern state to accommodate the diversity of minority groups and give them their due, especially on its borders. The delicate balance between center and periphery is now in jeopardy, from Morocco to the Caucasus Mountains. In most cases, the center has prevailed with brute force. Egypt, Syria, Saudi Arabia, and Bahrain are some examples. However, the periphery has also succeeded in some cases in not only challenging but overwhelming the center, as in Libya. - See more at: http://www.thefridaytimes.com/tft/homecoming-to-jinnahs-pakistan/#sthash.nP56AJV0.dpuf
the relationship between the center and the periphery has reached a breaking point across the Muslim world, due to the failure of the modern state to accommodate the diversity of minority groups and give them their due, especially on its borders. The delicate balance between center and periphery is now in jeopardy, from Morocco to the Caucasus Mountains. In most cases, the center has prevailed with brute force. Egypt, Syria, Saudi Arabia, and Bahrain are some examples. However, the periphery has also succeeded in some cases in not only challenging but overwhelming the center, as in Libya. - See more at: http://www.thefridaytimes.com/tft/homecoming-to-jinnahs-pakistan/#sthash.nP56AJV0.dpuf
the relationship between the center and the periphery has reached a breaking point across the Muslim world, due to the failure of the modern state to accommodate the diversity of minority groups and give them their due, especially on its borders. The delicate balance between center and periphery is now in jeopardy, from Morocco to the Caucasus Mountains. In most cases, the center has prevailed with brute force. Egypt, Syria, Saudi Arabia, and Bahrain are some examples. However, the periphery has also succeeded in some cases in not only challenging but overwhelming the center, as in Libya. - See more at: http://www.thefridaytimes.com/tft/homecoming-to-jinnahs-pakistan/#sthash.nP56AJV0.dpuf
the relationship between the center and the periphery has reached a breaking point across the Muslim world, due to the failure of the modern state to accommodate the diversity of minority groups and give them their due, especially on its borders. The delicate balance between center and periphery is now in jeopardy, from Morocco to the Caucasus Mountains. In most cases, the center has prevailed with brute force. Egypt, Syria, Saudi Arabia, and Bahrain are some examples. However, the periphery has also succeeded in some cases in not only challenging but overwhelming the center, as in Libya. - See more at: http://www.thefridaytimes.com/tft/homecoming-to-jinnahs-pakistan/#sthash.nP56AJV0.dpuf

Yet, he should know and I am sure he does that the state as a concept and idea has little or no value in the Islamic thought. Apart from Egypt and Iran, no Islamic country has a well-established, well-functioning and accountable state as an institution and the examples of Iran and Egypt have more to do with their historical evolution as entities than the religion these societies practice. So, by analyzing the crisis based on the breakdown of an entity which does not have any roots in these societies to begin with, leaves reader with an impression that the author fails to really establish the link between the ongoing crisis ( in this case in Pakistan) and its causes. There is  no legitimate state apparatus (center), how could it impose it's will and authority on its periphery ( Peshawar or Karachi or Quetta). You could see the hazards of linear thinking right there. 

In regards to the issue of Tribal areas, the author highlights the situation in these areas as somehow getting out of control since the arrival of the War on Terror in 2001. Unfortunately, That is half the story. The issue of tribal areas was never fully analyzed and understood since the creation of Pakistan. Yes, they had their own code; their customs and the way of life and they were kept at distance from Islamabad. But, Pakistan and its governing elites have never really dealt with the issue of the tribal areas in a long term manner. That is the most visible failure of the Pakistani governing elites; both civilians and military - apart from the creation of Bangladesh. His take on creating a legitimate state goes like this:

The situation warrants a long-term and radical strategy to re-establish the writ of the state. It needs to be holistic and long-term. The path ahead will be difficult and will require courage, wisdom and compassion from the leaders of Pakistan. 

Fair enough. Yet, one must always distinguish between rhetoric and reality and the above passage fails to pass this crucial test.

His point of freedom of speech and the media hides the true crisis in Pakistan and almost trivializes the crippling economic and social conditions in Pakistan.

I also noted the energy and vitality in the genuinely free media, in the arts and in literature. There was so much impressive talent in Pakistan. And most important there was a freedom in the air which offset the real challenges of electricity shortages, the high prices and collapsing law and order.

When people cannot afford food and basic necessities of life; are worried sick about the safety of their life on daily basis and suffer from heat in summer and cold in winter because the electricity infrastructure is close to non-existent - they would still enjoy a good political talk show on TV; if they are lucky enough to have an electricity or can afford a generator.

The piece also lack a concrete analysis on the role of the army in Pakistan, Pakistan's relationship with its neighbors notably India and Afghanistan but I will also say, Iran; Pakistani economy and the relationship between the military and civilian leadership. Vague ideas and fancy vocabulary cannot be a substitute to a sober and serious analysis. 

A celebration of a homecoming is a personal matter and no one should question what one must feel when returning home after a long time. But, homecoming as a personal experience is different from offering a clear and concise analysis on complex matters of nationhood, state formation and economic collapse. That attempt serves no purpose but trivializes the sad and desperate reality on the ground.

Wednesday, 22 January 2014

The Anatomy of the Catalyst Leader

Asked what he thought of the French Revolution and its impact, Chairman Mao replied: It is too early to say. It seems, a Historical judgement is a faulty faculty for two reasons. First, it comes way too late to have any impact on the present and second, when the great volumes about a personality or an event are written, many of the characters are long gone to have an opportunity to explain or defend their position. The analysis of the past events and personalities is an established discipline but once you cross the line between analysis and judgement, there is a risk of colouring your assessment with a subjective paint and that could be a tricky path to provide an objective assessment of an event or a personality.

The Office of the President of the United States is a favourite entity to assess and analyze by those who are in the business of politics, academia and commerce. Most recently, the unwritten rule was that there must be a gap of at least two Presidents before one could attempt to analyze the occupier of the White House. But, in a world of constant communication and social media, it is no surprise that the indictments on President Obama and his Presidency started way back in 2011 and it continues until today

When it comes to Obama Presidency, the sense is that there will always be two camps . First camp believes that Obama was left with such a mess (militarily and economically) that even the two terms would not be enough to undo the damage from the Bush Administration. The second camp believes that the continuous blame of Bush administration is a side show to avoid Obama's own faults such as lack of leadership and a strategic vision regarding the US - both economically and militarily. My sense is that these two camps will be a central point for Obama's legacy - for better or worse.

But, is this the whole story or are we missing a larger point regarding what Obama Presidency has or has not done? Before anything else, what one must really acknowledge that the real issue lies with the unreal expectations the US populace and the World had for Obama when he took office in 2008. After eight years of controversial Bush presidency, the US and the global community were in awe of this man who campaigned in poetry but was about to find out that the you govern in pros with a very polarised political environment and structure around you. What Obama quickly learned that in fact, there are blue states and there are red states and depending on the color of the state, your chances to pass an agenda through Congress can be a easy ride or a nightmare journey. Off course by the time he realized that, the 2010 came knocking and he lost the majority in the House. The GOP has a firm control on the US House of Representative and the Senate democratic majority continue to swim on the thin ice. The upcoming 2014 Congressional elections do not point to a good news for President Obama. 

Perhaps, an individual, no matter how powerful and influential, is not fully capable of transforming the entire social and political order - let alone the global order. Perhaps, a judgement on an individual, is not a just attempt, since the power and decision making structure is way more complex.

Friday, 10 January 2014

The Relationship between Capitalism and Inequality - an elusive balance to achieve or a natural outcome to accept?


Where there is no bread, there is no Law; where there is no Law, there is no bread.
Rabbi Elezar ben Azariah
Chapters of the fathers

 

The disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect persons of poor and mean condition is the great and most universal cause of the corruption of our moral sentiments.

Adam Smith (1723-1790)
The Theory of Moral Sentiments

Saint-Augustine considered inequality to be the most serious threat to God’s world. Jean-Jacque Rousseau wrote extensively about the evils of inequality and how it could threaten the social contract. Most recently, Amartya Sen, a Harvard economist, in his most recent book on the Indian political and economic landscape, details India’s rising inequality and how it could danger India’s economic, political and social fabric. It seems, inequality has made a comeback. But why now? Why inequality has become subject du jour?

Before the beginning of the economic crisis in 2008, the focus on income inequality in the US and elsewhere within the modern capitalist economies, was subdued and under the political and economic radar. This is because as long as your income is growing – even if not nearly as quickly as financiers on Wall Street – it’s not hard to foolishly convince yourself that you have a same shot at those riches as the millionaire next door. But when the music stops, the story changes. Inequality is a problem, politically and economically, precisely because of a secular stagnation. In that sense, the intensity and longevity of this great economic recession has brought the issue of income inequality within the public forum with the renewed interest and analysis from all ideological corners. 

Obviously, much of the analysis and commentary on inequality, circles around the dogma of the left and right-less or more government intervention type of discussion that seriously undermines this serious social and economic issue.  This ideologically obsessed analysis on inequality, within the print and electronic media, does not really offer any thought provoking discussion on this crucial matter of public and economic policy. What is really needed is an open and strategic discourse that discusses this serious economic and social matter without any ideological bend which is capable of analyzing inequality from all possible venues. In a world of hyper partisanship, I understand it is a tall order but the attempt must be made for the sake of stable political and economic order across all modern capitalist economies.

As an economic system, the rise, success, and challenges of capitalism are one of the most sought sought after subjects in the History of Economic thought and history. According to universally acknowledged definition, capitalism is a system of economic and social relations marked by private property, the exchange of goods and services by free individuals, and the use of market mechanisms to control the production and distribution of those goods and services. Some of its elements have existed in human societies for ages, but it was only in the seventeenth and eighteenth centuries, in parts of Europe and its offshoots in North America, that they all came together in force. The triumph of the Capitalist economic order unleashed a burst of innovation, technology and new ideas in many societies – regardless of their geographical destiny. Yet, there is another side to this economic triumph. Capitalism’s intrinsic dynamism, also, produces insecurity among societies so its advance has always met with suspicion and resistance. 

Much of the political and economic history of capitalist societies revolved around the record attempts to ease or cushion those insecurities mostly through state interventions. In that manner, it was only the creation of the modern welfare state in the middle of the twentieth century that finally enabled capitalism and democracy to reconcile in relative harmony. But that harmony between capitalism and democracy, as we have seen, has been under serious strain as the costs of the welfare state have risen dramatically. The ongoing recession has compounded the tension between capitalism and democracy in modern economies as the growth rates have remained low and the rate of unemployment remains stubbornly high. 

The rapid rise in technology, finance and international trade have caused the new waves and forms of insecurity for many modern capitalist economies where the life has become increasingly unequal not only the lower and working classes but also for the middle class as well. It should not surprise anyone that the percentage share of worker's wages as a proportion of total national income is sinking throughout the developed world.

In the developing world,specially in China and India, the situation regarding inequality is similar. Latin America is also on the same boat. The current African situation regarding inequality is well documented- even though the growth rates in many African nations have been amazing.

The political response to inequality goes like this: the right, in many modern capitalist societies, believe that less, not more regulation and let-the-market-decide-approach is the suitable way to tame inequality; while the left has sought to minimize it through government action, regardless of the costs. Neither approach is viable in the long run. The modern capitalist societies need to accept that inequality and insecurity will continue to be the inevitable result of market operations and find ways to shield citizens from their consequences-while somehow still  preserving the dynamism that produces capitalism's vast economic and social benefits in the first place. 

A growing recognition  of increasing inequality within the modern industrial societies has naturally led to discussion of what can be done about rising inequality. What must be acknowledged right from the start that there is not one magic formula which can reduce inequality. If the society is serious about reducing rising inequality, all options must be a part of a grand solution. Yes, education must be reformed where the vocational training and trade school must be a part of an overall reform strategy. There is no harm to reassess the tax code. Fiscal instruments such as the transfer payments should not be out of question. Yes,economic growth must remain the priority but if that growth does not translate into creating jobs with decent salaries, the inequality issue will persist. But the economic growth alone is not sufficient, either. It is interesting that some relatively equal countries suffer from extremely high unemployment (Portugal) while some relatively unequal countries are seeing fast growth and low unemployment (Singapore). What I am trying to suggest is that all policy options must be a part of an overall strategy to tame this social and economic malaise. 

If the society is serious about reducing rising inequality, all options must be a part of a grand solution. Yes, education must be reformed where the vocational training and trade school must be a part of an overall reform strategy. There is no harm to reassess the tax code. Fiscal instruments such as the transfer payments should not be out of question. Yes, economic growth must remain the priority but if that growth does not translate into creating jobs with decent salaries, the inequality issue will persist. But the economic growth alone is not sufficient, either. It is interesting that some relatively equal countries suffer from extremely high unemployment (Portugal) while some relatively unequal countries are seeing fast growth and low unemployment (Singapore). What I am trying to suggest is that all policy options must be part of an overall strategy to tame this social and economic malaise.

I once wrote: Inequality is the biggest social shame. Unemployment is the other. A stable social order is only possible when the citizens are confident that they have an access to equal economic opportunities to thrive and prosper. Rising inequality and decreasing upward mobility are threats to stable social order. Within this context, the real challenge for government policy in the advanced capitalist world and, also in the emerging economies, can be summarized in the following fashion: how to maintain a rate of economic dynamism that will provide increasing benefits for all while still managing to pay for the social welfare programs required to make citizens' lives bearable under conditions of increasing inequality and insecurity. There is no doubt that different countries will approach this challenge in different ways, since their priorities, traditions, size, and demographic and economic characteristics vary. But a useful starting point might be the rejection of both the politics of privilege and the politics of resentment and the adoption of a clear-eyed view of what capitalism actually involves, as opposed to the idealization of its worshipers and the demonization of its critics.

Wednesday, 4 December 2013

The Virtue of a Diplomatic Tango (II) - Analyzing the Iranian Nuclear Diplomacy

 Any plan conceived in moderation must fail when the circumstances are set in extremes.
 Klemens von Metternich
May 15, 1773 - June 11, 1859

The treaties on conducting foreign relations, written in the classical age of diplomacy (13th & 14th Century), are an amazing source for grasping the contemporary global affairs. Those treaties remain timeless classics and through those writings, we can better understand the recent Iranian nuclear diplomatic tango with the West. The classical age of diplomacy rested upon the idea that one must always be cautious of true and hidden intention of the other in order to pursue a true diplomatic venture or an international agreement. It was within this context, the wars were waged to carry out the true intentions in a violent way. The diplomatic corps inside the imperial court was filled with people who understood the impact of the raw power and the politics of national interest at its core. Little has changed since then. In fact, the modern diplomacy has remained intact. What is changed are the tools of communication. The Emperor's messenger has been replaced by the op-ed pages of the New York Times and the Royal City announcer is replaced by the likes of Twitter. 

So, how should one assess and analyze the durability, credibility and effectiveness of the Iranian nuclear diplomacy in the context of the classical age of diplomacy? For starters, words matter. That is why what one should remember is that it is an "interim" deal. The key word here is "interim" which means that it is not final and it could be reversed anytime. However, each side will seek arrangements that are relatively easy for it to reverse but lock the other side in as much as possible. That is why the global media outburst which continues to focus on the benefits and costs of the deal has less to do with the thorough analysis of this very complex issue and more to do with their ideological and political leanings towards Iran and its nuclear program. That dichotomy is not strong and sufficient enough to completely grasp the anatomy of this deal. Plus, the ideological rhetoric regarding the Iranian nuclear issue obscures and trivialises the broader issue of nuclear proliferation especially in the Middle-East. 

It seems that there are at least four avenues through which this nuclear diplomacy must be analyzed and judged. These avenues cover the whole Iranian nuclear debate and I would like to go through each one of these avenues in detail.

The first is the Iranian nuclear know-how. That is there and we should not pretend otherwise. Second, how this interim deal will play out in the region specially for those who despise the idea of having a Persian nuclear arsenal. Third, the West and especially the US must be absolutely clear as to what is the ultimate goal here? Is it the capacity or dismantling of the nuclear program the goal? And, how does this deal, either in six months or long-term, manages the issue of Iranian adventure in places like Lebanon, Syria, Bahrain and Iraq? These four avenues will provide the genuine nuclear litmus test for the credibility of this deal. The positive or negative rhetoric regarding this deal in the media does not really contribute anything serious to this very serious and complex issue.

One must acknowledge that the Iranian nuclear know-how is the reality and the world needs to accept it - either willingly or reluctantly.  The acceptance of the fact that Iran has the nuclear know-how will be the most realistic step the international community would take in managing the issue of a nuclear Iran. This is truly surprising or perhaps not, that all the talk of attacking or intimidating Iran, halting its nuclear program or whatever else, ignores  the simple fact that no amount of firepower will destroy that nuclear know-how knowledge which exists inside Iran regarding the making of the bomb. There is no way that the clock can be turned back on the nuclear know-how. No attack, no air strike and no military adventure will reverse that course. There are certain undeniable realities in the world of international diplomacy which must be acknowledged. The Iranian nuclear know-how is one of them. One must be cognitive of this reality.

This interim deal has not received a positive feedback from Iran's neighbours specially from the UAE and Saudi Arabia. The Gulf monarchies harbor deep rooted suspicions regarding the Iranian nuclear adventure. Their foreign policy assessment makes it clear to them that the Iran's nuclear intentions are not peaceful and the real goal is to dominate the region and dictate the regional politics based on Tehran's wishes. Saudi Arabia and the other Gulf monarchies cite Iran's already deep involvement in Iraq, Bahrain, Lebanon and Syria. This interim deal had many of Iran's neighbours very concerned. The real chasm is between Iran and Saudi Arabia and the world has already seen how these two giants of the Middle-East are fighting each other in Syria. That is why the Saudi discontent is now out in public and for the first time in their diplomatic history, Saudi Arabia and the US are on the opposite end of this issue. One must not have any doubts that the thought of a Persian nuclear capability strikes a real fear in places like Riyadh, Abu Dhabi, Tel Aviv, Doha and Manama. The US, along with its partners, continue to ensure the likes of Saudi Arabia that this is not a final deal and if nothing concrete happens in next six months, all bets are off. Moreover, this six month interim deal will allow the creation of a confidence building measures with Tehran. Off course, no one in Riyadh and other gulf states is buying this argument and assurance from Washington specially the fumbling of the Syrian red line metaphor and the air strike fiasco where at the last minute, the US backed down of bombing Damascus which Saudi Arabia publicly supported. There is a major issue of the US credibility in the region at this moment and this will continue for the foreseeable future or at least until the next six months. 


A third avenue concerns the issue of defining the ultimate goals and objectives in regards to the Iranian nuclear issue. A serious and mature foreign policy must always be based on the strategic assessment of its goals and objectives and how to achieve those goals and objectives in an uncertain world. Regardless of what one thinks of this interim deal, the larger question remains unanswered: Is the goal to have Iran completely eliminate its nuclear program or dismantle some parts of it so it does not get the bomb? These are two completely different goals and any confusion regarding these goals will not only complicate the further dealings with Iran but might terminate any goodwill the US and the P+5 have developed with Iran. Just look at the statements and interviews coming from both sides. Iran vehemently argues that it has the right under international agreements to enrich uranium for nuclear power production (There is a big question mark to this Iranian claim within the US administration). The US and its allies have a different perspective. They want a limited peaceful nuclear program for Iran. The language of the interim agreement called for the issue to be settled in a final deal. In other words, the difficulty in agreeing on the goals is very visible between negotiating parties. Within this context, the Israeli opposition to this deal must be understood. Yes, there are steps which will be taken to keep up the monitoring of the Iranian nuclear program but there is a huge suspicion which lingers as to how far those verifications will go in order to really calm the nerves of those who are very suspicious of the Iranian nuclear issue. The Israelis, Saudis and the gulf monarchies argue that the Iranian regime has been untrustworthy for decades, and the desire for a nuclear bomb is a source of national pride and a security interest. Perhaps the objective is to ting-fence the acquired capability so its use can only be peaceful. If that is the case, it will be a long road to have some concrete measures put in place to achieve that objective.As of now, the clarity regarding the objectives is fuzzy at best.

And the last avenue is the issue of Iranian involvement in the regional affairs. Before the Iranian Revolution, it was Tehran and not Riyadh, which played a key role in that part of the world. Shah of Iran was Washington's point man until he was not. After the Iranian Revolution of 1979, Saudi Arabia became the official nation to be contacted when one dealt with the Middle-Eastern affairs. The Soviet invasion of Afghanistan provided further influence to Riyadh in the region and beyond. While Tehran remained isolated, Riyadh made sure that the Middle-Eastern affairs had a Saudi stamp before going public. But Iran remained active in promoting its vision of the region through its proxies in Lebanon and Bahrain. That continues today. The ongoing Syrian civil war is publicly supported by Iran. The Iranian involvement in the internal affairs of the Iraqi regime also makes regional actors nervous. The Saudis and others in the region are asking this crucial question regarding this interim deal and how it impacts the Tehran's involvement in the region: Is the US willing to look the other way to sign a deal, if Iran ramps up its support for Assad, Hezbollah, and the increasingly sectarian and authoritarian Shiite government of Iraq? How far and how much each side is willing to let go to really hammer down the nuclear deal is an open question and contain many risks.

There is a possibility - as many have mentioned – that Iran views its negotiations with the West as a way to gain time ( no one knows for how long) to continue to advance its nuclear program whose purpose are still unknown. There is also a possibility that Iran may well manoeuvre for a position from which there is only a short final step to a nuclear weapons program, in the meantime encouraging as many incentives of long-term usefulness to the Iranian economy and nuclear program as it can induce the Western negotiators to offer. This is where the Western purpose should be clear regarding the Iranian nuclear program. Therefore, a clarity on the following issues is tantamount: How much time is available before Iran has a nuclear weapons capability, and what strategy can best stop an Iranian nuclear weapons program? How do we prevent the diplomatic process from turning into a means to legitimise proliferation rather than avert it?

One can imagine how the possession of these deadly weapons in the Mid-East will create an unimaginable chaos and destruction, if used. But let's be honest here. Who, in their right mind, will have the will and the resolve to use these weapons specially if they know full well that the consequence will be total destruction of all parties involved in the nuclear conflict?. Israel's fears regarding the Iranian nuclear program are legitimate since the regime especially in the past had not mince words when it came to discussing the State of Israel. But an actual use of a nuclear weapon on Israel is a different ball game. The Iranian political class might have a fiery rhetoric during each and every Friday prayers towards the big Satan and little Satan but when it comes to the actual use of nuclear weapons on Israel, Iranian political leadership knows the consequences will be devastating for their nation. That is why the most reasonable explanation for having a nuclear program, peaceful or otherwise, is to protect the regime. Put in another way. What Iran really seeks is a shield to discourage intervention by outsiders in its internal affairs and its ideologically based foreign policy which I have already mentioned, makes Iran's neighbors very nervous. If Iran is ensured that there will be no intervention or the regime change policy, there is a possibility that we might see some dismantling of the program but that will be a huge step since the mistrust runs deep between Iran and the US.

Diplomacy is way better option than war. Hence, the diplomacy is the right strategy. But diplomacy without clear goals and objectives runs the risk of becoming a game of musical chairs and one must avoid playing a musical game of chairs when one is dealing with the most dangerous weapons the mankind has ever known. The six month grace period is an opportunity for all the parties to hash out the goals and objectives moving forward. The last time when the red line alert was issued and then crossed, nothing happened. Let's hope that after this six month red line, something meaningful will emerge - for everyone in that already tormented and bruised region and for the entire world.


This post was also published with the World Politics Journal.

Sunday, 24 November 2013

Legitimacy and Governing - The turmoil of Confused Narrative and the Pursuit of a Greater Good

Men who give up the common goal of all things that exist, thereby cease to exist themselves. Some may perhaps think it strange that we say that wicked men, who form the majority of men, do not exist; but that is how it is. I am not trying to deny the wickedness of the wicked; what I do deny is that their existence is absolute and complete existence. Just as you might call a corpse a dead man, but couldn't simply call it a man, so I would agree that the wicked are wicked, but could not agree that they have unqualified existence.
 The Consolation of Philosophy
Boethius 480-524

The core philosophical search for Socrates and subsequent political philosophers focused on finding out the answers to two crucial questions: What is the purpose of our existence and how should we govern ourselves? While the religious history revolved around finding out the answer to the first question, the governing question was the beginning of the political philosophy and politics. In so many ways, one can attest that the governing question continues to haunt the global political community - not always in a most tranquil and civil manner and many times in a bloody way. Divers cultures, social norms, economic relations and institutions shaped the questions of governing in different forms in different societies. However, the central point was and continues to be, to assess and analyse the relationship between those who govern and those who are governed. That in a nutshell is the story of politics and political discourse since the time of immemorial. 

Management of the crisis (sudden or perpetual) and the creation of a national confidence through a clear vision and road map to achieve that vision is the hallmark of the awesome leadership and spectacular governing legitimacy. Within this context, we can comfortably say that the ruling political class in the majority of the nations today is facing the chronic and perpetual governing and the legitimacy crisis. From Brazil to Brunei; Morocco to Mauritius and from India to Ireland, the political class is fumbling through the issues and concerns of their citizen's. It seems that both the political class and the institutional structure in many contemporary societies are stuck in a perpetual failing and are unable to find the way out.

The response by the government class in major nations is nothing short of a Greek tragedy. In many parts of the world, the governments of all kind are scrambling for short-term solutions to help them through to the next business cycle, the next election, the next political transition. The result is a global crisis of legitimacy in the majority of the nations.

In the US, the ongoing budget drama is the example of this approach where the pursuit of narrow political and economic interests has created an intense and poisonous governing environment. The lack of serious and sober analysis has compounded this toxic atmosphere in Washington. The haphazard and on the go policy making has made a mockery of institutions such as the Federal Reserve and the Congress along with the Office of the President of the United States. Let us not forget the managing of the international affairs file by the US where rhetoric continues to trump the serious assessment of the American role in the 21st Century.

The European inability to get handle on its ongoing economic malaise, which has destroyed millions of jobs and has fractured the celebrated European social contract, is in fact a symptom of a confused governing model where a uniform policy is not so uniform. The current EU governing model is unable to create new opportunities for its upcoming generation and the implication of this model will have a lasting impact on the European social model. The failure of the political class in Europe to identify and pursuit a common European greater good is in serious jeopardy and will remain that way for a long time.

In emerging-market democracies such as Brazil, India, South Africa, and Turkey, leaders are unable to strike a balance between a rising income inequality and sluggish economic growth. The political institutions in these economies promised a brighter future for their citizens some twenty years ago through economic liberalisation and international trade and the majority of the people bought into this narrative. As of now, the economies of these societies are stagnate; private loan defaults are all time high and the promise of job security have vanished. But, these economies are still being told to continue to borrow; carry on the structural reforms (whatever that means) and spend their way out of this temporary economic nightmare.The current economic and political situation in many emerging nations is a perfect example of confused narrative and broken governing structure.

The governing situation in the Middle-East requires no explanation to say the least. The ballooning unemployment specially among young, along with the stifling political environment, has created a close to an impossible situation to govern. The tribal loyalties are still engraved in collective psyche, making the transformation to legitimacy and governing a monumental task in the region. The plight of many who are caught between the international intrigue of the West in the region and the corrupt rulers at home, the citizenry has no trust in the political class. The intensity of the political and economic mess in the Middle-East is very brutal and very real for the millions of people in that part of the world. 

Yes, Africa is growing but the majority of the growth has resulted from the rise in the commodity prices and other natural resources and not from solid and strong economic institutions such as taxation, private property and the financial regulations. There are stories of success such as Gabon and Angola but the truth of the matter is that Africa is still myriad in very real corruption and the broken governance structure. Meanwhile, the soaring income inequality in nations like Nigeria and Angola has further complicated the craft of governing. Off course, the major consulting and advisory outlets have made you believe otherwise regarding the reality on the ground in Africa but then again, serious and sober analysis is rare commodity these days - even inside the prestigious consulting houses.

All of the above plus the rise of the social and electronic media has created quite a complex situation for the governing class in many parts of the world. The intense connectivity among masses has created its own norms and principles which might or might not be compatible with the existing governing models. Moreover, for the first time ever in the history of the world, the most challenging issues are global in nature. Issues such as climate change, financial market vulnerabilities, and cyber-risks to global terrorism, weapons proliferation, and traditional competition for power are truly testing the limits of the state power - the most visible and powerful actor in any governing model regardless of the political climate in any given society.

Because of the global nature of the issues, the policy options available to nations, to manage these issues, are very limited and in many cases counterproductive in nature (QE for example). Within this context, the traditional responsibility of the state, which is to govern locally, is increasingly under pressure. As pressure on the state apparatus continues to grow to provide a local greater good for its people in a very global climate, the options to provide the local greater good (political and economic security at the minimum) continue to shrink along with the financial capacity of the state. The ability to govern is facing some serious challenges and not all of those challenges are emerging at home. More and more, international events are defining the local debate- whether we realise it or not.

We are truly experiencing an age of global anxiety and it is having an immense impact on the issue and the art of governing for the majority of the nations in the world. As economic, political and social chaos in one corner of the world causes waves in another corner of the world, the current form of governing structure is unable to mitigate the impact of a global crisis locally. Even though, all politics is local; not all crises are local and that is becoming a larger theme in the global discourse. Unless we find ways to expand and enhance the rules and institutions of global cooperation--around economics, energy, climate change, disease, drugs, migration and a host of other issues--the world will experience more crises and government responses will be hasty and ad hoc: too little, too late. We have 18th century structures responsible for delivering 21st century solutions. As long as this approach of governing from the past continues in the present and future, you can be sure that the crisis of legitimacy and governing will continue. There is no other way to explain this dilemma.

Wednesday, 13 November 2013

The Confession and Redemption - Too late you might say....

When is it too late to admit your mistakes? It seems that the answer varies from where you are in life. However, that approach does not amend the impact of your mistakes in the long-run. Yet, you might get the redemption if you are lucky enough. The safest approach, it seems, that the best time to admit your mistake is right after you feel that you have done an error and offer your apology - unless off course your "realization" kicks in few years which seems to be the case with Mr. Huszar.

His confession comes too late for the majority of the people who do not follow the world of economic and politics but does not surprise those who have been suggesting the similar argument without knowing the inside details of the Fed's QE approach as in the case with Mr. Huszar. In a nutshell, as argued on these pages many times before, the QE has not benefited the main street and has only strengthened the balance sheets of the large financial institutions in the US. The exact can be said for the ECB in Europe. It is a policy which relies on hope and rests on some miraculous recovery without taking into account the long term damage to economic fundamentals and not to mention the unmatched credibility of the Fed. But all that easing did the exact. 

In its almost 100-year history, the Fed had never bought one mortgage bond. Now my program was buying so many each day through active, unscripted trading that we constantly risked driving bond prices too high and crashing global confidence in key financial markets. We were working feverishly to preserve the impression that the Fed knew what it was doing.

The bond buying binge, as confessed by Mr. Huszar, as an economic policy, has not achieved its desired objectives but instead, has only benefited the major Wall Street firms - unless off course that was and remain the sole objective of the bond buying binge. But here, I am not appealing to Mr. Huszar's new found faith in redemption. What I am really interested in his insight that even the Fed is not sure if this policy will work or not - in the long run. That part and that part alone should scare many in the world of economics and finance because my experience suggests that no policy is still better than a bad policy but that logic does not apply to the QE. Many in the past have suggested to me personally that without the QE, it could have been worse. Worse for whom? unemployed? debt buried consumers with low paying jobs? working poor? I could never understand the logic of that argument that it could have been worse. Even our ability to compare and analyze has run its course, it seems.

And the impact? Even by the Fed's sunniest calculations, aggressive QE over five years has generated only a few percentage points of U.S. growth. By contrast, experts outside the Fed, such as Mohammed El Erian at the Pimco investment firm, suggest that the Fed may have created and spent over $4 trillion for a total return of as little as 0.25% of GDP (i.e., a mere $40 billion bump in U.S. economic output). Both of those estimates indicate that QE isn't really working.

No amount of QE will tackle the fundamentals problems facing the US and major western economies. The persistence anaemic growth, stubborn structural unemployment and rising income inequality are daunting challenges which must require a comprehensive (overhaul of the tax code, fiscal policy, pension and yes, education) approach. Mr. Huszar's attempt to redeem himself from the evils of the QE shows that the implementation of the policy, especially an economic policy, has less to do with the idea of achieving the public good and more to do about who has the power and how it is exercised.

Mr. Huszar, like others, has written an account of his "conscious" after leaving the high professional crown. If nothing else, his account, proves the limits of the monetary policy in managing the contemporary economic crisis. Now, that will be a true path to achieve an economic redemption. Will you agree?