Afghanistan

After the American Century

Imagine you are in Obama's inner circle. You have inherited Bush's foreign policy, including the two wars in Iraq and Afghanistan. What do you do? Pulling out immediately would invite the Taliban and Al Qaeda back into the country, and it would also expose the new president to fierce criticism from the Republicans. No president wants to lose a war in the first year of his administation, and no American politician can survive very long if he seems be doing favors for Osama Bin Ladin. But if the Americans are going to continue to lead an army in Afghanistan, what are the realistic possibilities for success? This was such a difficult issue that the Administration took a year to decide.

The answer has now been made public, and in essence it is to escalate the war for almost two years and then begin to pull the troops out. This resembles in some respects the "solution" to the Iraq situation, which conceivably still could work. The idea seems to be that a nation torn apart by centuries of religious, ethnic, and tribal differences can and will pull itself together if given a timetable for withdrawel, support in developing new democratic institutions, and the promise of control of its own destiny. But will the Iraqi or the Afghan people will take responsibility for their own fate if they know that soon all the foreign troops will leave? The answer is still unclear in Iraq. On the positive side it was long a secular state (albeit a dictatorship) and the presence of vast oil reserves gives it an economic foundation and a good reason not to let civil war paralyze exports. On the negative side, the Kurds want indepdence, the religious factions tend to kill each other, and Iran is not a model neighbor.

Unhappily, things are less promising in Afghanistan, which is a far less developed country than Iraq. Under the Taliban it had one of the world's most repressive, fundamentalist regimes. And it does not have oil. Rather, the proverbial undiscussed elephant in the room, and a rather sweaty demanding elephant at that, is the drug traffic that has been a central part of the Afghan economy for a long time. Afghanistan produces about 90% of the world's opium. Worse, the size of the poppy crop has been growing not shrinking. (For more about that click here)

This is not a new or casual illegal business, nor one that be eradicated easily. Profits from opium sales are a central source of funds for the Taliban and also for semi-autonomous local leaders. Farmers can make more money growing poppies than anything else, and if they do so they also gain protection from powerful neighbors.

However, the Obama speech about Afghanistan did not discuss this aspect of the problem very much. In one passage declared, "To advance security, opportunity, and justice - not just in Kabul , but from the bottom up in the provinces - we need agricultural specialists and educators; engineers and lawyers. That is how we can help the Afghan government serve its people, and develop an economy that isn't dominated by illicit drugs."

This is surely correct. At least in theory something like a special Peace Corps for Afghanistan ought to have been part of the Afghan strategy from the beginning. George Bush failed at the arts of peace in both Iraq and Afghanistan, however, leaving Obama with two very large problems to solve without much capital to do it after saving a collapsing banking system.

But where are these agricultural specialists and educators and engineers going to come from? How can they work effectively in an environment permeated by the opium trade? Who will protect them day to day? Who is going to pay their salaries and guarantee them medical treatment for the rest of their lives if they are maimed or wounded? Unemployment may be high, but it will be hard to recruit people for such dangerous work. Yet it is essential work. If Afghanistan remains focused on producing opium, it will have a large renegade economy that pays no taxes, works against the state, and funds war lords and insurgents.

Iran Dishonors Itself, Again

After the American Century

No other nation has ever sunk so low since the Nobel Peace Prize was first given a century ago. In 2003 the recipient was Shirin Ebadi, an Iranian lawyer who has championed democracy and freedom of speech. She put the prize itself in a safe deposit box for safekeeping. Now the prize has been taken, not by bank robbers, but by the Iranian government itself. The government has also stopped paying her pension and blocked access to her own bank accounts. Last year it forcibly closed her law offices. The rule of law is not the strong point of this regime.

The world already knew that they lied about their capacity to produce plutonium. The world already knew that its June elections were irregular, to say the least. The world already knew that the Iranian government brutally suppressed the demonstrations against the flawed election. And it already knew that many of these same peaceful demonstrators have now been condemned to death or life imprisonment. And the world also knows that Iran's falsely elected president, whom I refuse to name here, has repeatedly said that the Holocaust never happened, while denouncing Israel's right to exist.

Now the regime in Iran has signaled its contempt for the Nobel Peace Prize, by stealing it from Shirin Ebadi. No government has ever done such a thing. This is not really a government, however, but a fundamentalist dictatorship that will stop at nothing to suppress its people.

This outrage apparently is connected - in the minds of the Iranian regime - with its current defiance of the UN on the production of plutonium. It seems signal that they do not care what anyone else thinks about them, that indeed they are spoiling for a fight and would like to drag the Peace Prize into it. Perhaps they imagine that they have dishonored the Prize. All they have done, again and again, is to dishonor themselves.

It appears that the Iranian regime is trying to provoke someone to take action against them.

My sympathies go out to Shirin Ebadi and to the Iranian people.

The Weakening Dollar

After the American Century

For much of the twentieth century the American dollar was the benchmark currency. Whenever a crisis arose, world investors moved money into the dollar. For decades, the dollar was a good investment for anyone living in an inflation-prone economy, like those in Latin America or Africa. Likewise, because the dollar was stable, it was the preferred currency in the oil market.

The apparent rock-like stability of the dollar began to weaken already in the 1970s, when President Richard Nixon took the dollar off the gold standard. Until then, at least for very large investors, one could redeem dollars in gold. After then, the dollar was a little less rock-like, but on the whole was the preferred currency in any crisis. One could see this again in the wake of the financial collapse during the fall of 2008. Even though American banks were largely responsible for the sudden downturn, many people around the world instinctively moved money into the dollar.

Those days are over, and probably over forever. Rationally speaking, the dollar is not a smart investment at the moment. It has been declining in value for months, and has reached its lowest point in 14 years against the Japanese yen. The current interest rate on dollar savings accounts is also very low, so that even assuming the dollar's decline ends soon, nevertheless, the rate of return is better in the Euro zone.

The Chinese, meanwhile, are keeping their currency artificially weak, as a way to stimulate exports and continue building up already massive foreign reserves. In effect, the United States is letting its currency fall in value for the same reason, to stimulate exports and dampen the desire for imports. But China is way ahead in this race to the bottom, while Japan and Europe are both being hurt. Because China and to a lesser extent the United States have weak currencies, both Japanese and European goods cost more - forcing some factories to close or to move overseas where labor costs are lower. Japan and Europe have higher unemployment and fewer exports because their currency is too strong.

This is a dangerous game for all concerned. As President Obama pointedly told the Chinese leadership on his state visit, Asian economies need to play by the same rules as the rest of the world. Asian consumers, particularly in China, need to buy more, and their currencies should be worth more, to bring the world's economic system into balance.

For the United States, the danger is that it will soon be forced to increase interest rates in order to fund its growing national debt. This will increase the dollar's value, but it will also slow or halt economic recovery. This in turn will reduce American demand for foreign goods, as the economy stagnates.

Unfortunately, precisely this scenario (in which the US weakens) might be what China wants. For if it comes to pass, then China's massive holdings in American dollars will increase in value, while the US itself will grow slowly or not at all. The Chinese economy might then outpace US growth by 5% or more per year, until, in perhaps a decade, perhaps less, the US currency would enter a more definitive decline.

I hope this scenario is wrong. Should it prove at all accurate, then the dollar's reign as the world's reserve currency might not last longer than about 2020. Clearly this is not a happy thought for anyone with a pension or investments in the United States. Just as importantly, the relative decline of the US economy vis-a-vis the rest of the world will soon necessitate a major realignment that takes account of new players: Brazil, India, Indonesia, and most of all, China.

Obama and the Copenhagen Climate Summit

After the American Century

President Obama has announced that he will briefly attend the Copenhagen Climate Summit. This is welcome news. But the timing of the visit (early) and its length (brief) suggest that the White House does not expect a major breakthrough to occur. After all, in the American system of government the President can only carry out what the independent Congress has mandated, and no laws are yet on the books that endorse even the modest 17% cutbacks that Obama has proposed.

One weakness of the preparations for the Copenhagen Summit is that there seem to be no clear guidelines on the methods of calculation that all nations share in advance. So when Obama says the US will cut CO2 emissions by 30% in 2025, this sounds much like what the EU is offering to achieve by 2020. It is not. The EU calculates from 1990 while the US is using a 2005 baseline. What the US is actually promising is to make reductions back to about where it was in 1990, while the EU is promising to go 20% lower than the 1990 level.

A second problem is that the focus really ought to be on per capita energy use and CO2 emissions. The United States uses about twice as much energy per person as Japan, so the US would need to reduce its total energy use by one half just to get to get even. Nations such as China and India, which each have more than four times as many people as the United States, look at per capita energy use, and relatively speaking do not see themselves as the problem. India uses less energy that the United States, and millions of its people still do not have regular electrical service. China is now the world's largest polluter, but the United States is by far the largest per capita.

A third problem is that the summit seems to be focused primarily on ends - CO2 reductions - without a corresponding showcase for the technological means to achieve it. Some nations, notably the UK, are adopting atomic energy as the way forward, since nuclear plants produce almost no CO2 compared to coal-fired ones. The problem is that atomic energy does produce serious amounts of toxic waste, and it must be stored for hundreds, or in some cases for thousands of years. Look around for examples of hermetically sealed buildings that have been constantly guarded for even 100 years. There are none. When all the long-term costs and dangers of atomic power are included, is it not likely that wind, tide, thermal, and solar power are more desirable?

In short, in addition to having a big political circus with heads of state coming that negotiate on the ends, the world needs an equally big demonstration of what is already possible. We already have the means available to build houses that are close to self-sufficient. We already can make automobiles that are twice as efficient as the average vehicle on the road today. There are hundreds of new technologies and best practices that just need to become better known and put to use.

The Kyoto agreement focused on noble ends, but they have not been achieved. In practice, not even one of the major industrial nations that signed the Kyoto agreement has in fact managed to do what they promised. In every case, energy use has continued to rise. (See my October 1, 2009 blog on this.) It is time to focus more on the technological means. The leaders can promise whatever they like, but will they know how to achieve those noble ends?