Milton Osborne, Before Kampuchea

At the airport in Phnom Penh they have a set of shelves just full of awful histories of Cambodia in the bad times (I mean good books about awful history). I've read quite a few of them and, having visited the country in late 1979 when it was all too recently over with, I have little desire to explore the theme further. There was one, however, that looked more promising and so it turned out. Milton Osborne was a junior diplomat in the Australian embassy in Phnom Penh during 1959-61 and he returned as a Cornell PhD student in 1966. The book, Before Kampuchea, is basically a memoir, drawing on his journal of that year, which also dips back and forth to what the place was like during his earlier stay and how it was on a subsequent visit in 1971, during the Lon Nol years. He argues that 1966 was a turning point that led inexorably to the catastrophes of 1970-79, though I would say it's more a case that he could see, in 1966, that things were not going to turn out as he'd earlier expected. (I don't really believe in turning points). Still, a lot happened in 1966 that was a significant part of the downward spiral to disaster.

I found it fascinating reading. There is so much about the city that has changed and also not changed. The elite back then was no less venal than it is now, the corruption was no less rampant, the gambling no less prominent, the culture of impunity no less deeply entrenched. There were some interesting details on the dealings of Sihanouk's second wife, Monique, and her family that I didn't know about. There were also four interesting portraits of Cambodians he knew - an army officer, a Catholic priest, a Communist and a prince (from the Sisowath family) - all dead or disappeared by 1979 (the book was last updated in 1984, so there is little chance that the disappeared would not have reappeared by then if still alive). His conversations with all of them throw interesting light on the deep problems facing the country. Of course, the one segment of society to which Osborne had no access was the peasantry and, as he admits, he can throw no light on what made so many of them follow the French-educated intellectual Communists in the end. The sheer incompetence of successive elite regimes (Sihanouk, Lon Nol) and the genocidal US bombing of 1973 must have something to do with it.

My main disagreement with Osborne's line of thought is that he persists in seeing Sihanouk as a nationalist rather than a dynast. I think that Sihanouk's consistent goal was to preserve the Cambodian state in the form of the monarchy and he just took it for granted that his subjects would see things the same way. He assumed, rather than worked to gain, loyalty from the masses. It isn't that he was unpopular, he just had no idea and didn't much care what was going on down at the grass roots. He played statehood in the same way his ancestors had - as a series of deals with more powerful states that, while forcing him to pay tribute, also allowed him a degree of autonomy. He also clung to the French who, in the 19th century had preserved the state (ruled by his grandfather Norodom) from being gobbled up by Thailand and Vietnam. Sihanouk had a good grasp of the past, but he just had no real concept of the nation-state.

Reprinted by Orchid Books, Bangkok in 2004.

Bigger than Ben Hur

Naomi Klein, The Shock Doctrine, Penguin 2007

This book is a real tour de force (466 pages of text) and at the same time highly problematical. I found myself deeply absorbed in the detail of Klein's narratives and having to pull myself back and say 'hey, wait a minute!' all the time. In one way it tells nothing new - the theme is that free markets are incompatible with democracy (one passing reference to Polanyi on p. 23) and that crises and disasters represent opportunities for capital and indeed are necessary to keep the system going (no references at all to Marx's economic theory, frequent use of the term "creative destruction" but not one reference to Schumpeter). In another way it leaves out some important parts of the story - the Asian crisis of the late '90s was apparently based on nothing more than a rumour. No, actually there was a material disaster - an unsustainable economy that was going to crash anyway. China is made to fit the story, though I don't really think it does. The lacunae or misinterpretations of some of the cases made me wonder how strong her case was for places I know little about (Bolivia and Argentina, for example). Mind you, this is likely to be a problem for any work as ambitious as this one is - going from the Pinochet coup in Chile to the Asian tsunami, Katrina and Iraq.

Bits I liked or just found interesting:

"Disaster capitalists share this same inability to distinguish between destruction and creation, between hurting and healing." (p. 47)

Friedman as the architect of 'shock therapy', his enthusiasm for Nixon's election (and disappointment with his domestic economic policy though - cf Krugman). "Democracy had been inhospitable to the Chicago Boys in Chile; dictatorship would prove an easier fit." (p. 63)

The Chicago Boys... believed in a form of capitalism that is purist by its very nature. Theirs is a system based entirely on a belief in 'balance' and 'order' and the need to be free of interferences and 'distortions' in order to succeed. Because of these traits, a regime committed to the faithful appplication of this ideal cannot accept the presence of competing or tempering worldviews. In order for the ideal to be achieved, it requires a monopoly on ideology; otherwise, according to the central theory, the economic signals become distorted and the entire system is thrown out of balance. (pp. 102-03)

Torture as 'curing' (pp. 111-14). Idea of society as having gangrene or cancer which must be excised.

The decoupling of 'human rights' from the systematic reasons for these abuses which was the need to 'cure' the cancer of democratic ideals in order to serve the interests of capital better.

Simone de Beauvoir quoted: "There are no 'abuses' or 'excesses' here, simply an all pervasive system." Klein says: "there is no humane way to rule people against their will" (p. 126)

Thatcher showed that it could be done in a 'democracy' by creating a crisis. Crisis as opportunity.
Friedman 1982: "Only a crisis - actual or perceived - produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable." Or Allan Meltzer: "Ideas are alternatives waiting on a crisis to serve as the catalyst of change. Friedman's model of influence was to legitimize ideas, to make them bearable, and worth trying when the opportunity comes." Klein adds: "Crises are, in a way, democracy-free zones - gaps in politics as usual when the need for consent and consensus do not seem to apply." (p. 140)

The hollowing out of the state through sub-contracting and privatization of the state itself. Klein argues that this was the real Rumsfeld-Cheney program from the start and they chose Iraq for their most thoroughgoing experiment because it was in an already-weakened condition through sanctions.

"Political cleansing" (p. 330) and "disaster apartheid" - the discarding of 25 to 60 per cent of the population, the creation of Green Zones all over the world - gated communities that leave the masses to survive as best they can in the Red Zones. The Israeli Apartheid Wall as just the latest and most sophisticated of these, creating a whole "gated country."

New reasons for the breakdown of Oslo. While most sources attribute the sheer viciousness of Israeli policy in recent years to a continuation of aggression that began in 1948 together with unremitting US support, Klein argues that the destruction of Oslo was made possible by the application of the 'shock doctine' to the FSU, leading to a mass emigration of Jews and, indeed, many with the most tenuous of claims to Jewishness trying to escape from the sudden, sharp increase in poverty. Former Soviet Jews now account for 14% of the Israeli population and many of them have not only fuelled the settlement movement in the West Bank, but also replaced Palestinian cheap labour within Israel - thus facilitating the "closure". The dramatic rise of "security exports" as the mainstay of the Israeli economy - they trebled between 1992 and 2006 (p. 436).

In general, the depressing idea that 'security' has replaced 'peace' as the desirable state of affairs.

The dramatic widening of inequality (together with increasing poverty) in Argentina, Israel and the US in the past 20 years (p. 444). Overseas parallels with Krugman's data on the US. Same in the new ex-Soviet kleptocracy of Boris Yeltsin (where some people went from zero to billionaire in the space of a decade and average life expectancy fell by 10 years). Speaking of which, she produces the stunning (to me) statistic that 46 per cent of the population of New Mexico is functionally illiterate.

Book review

Antonia Finnane, Changing Clothes in China. Sydney, UNSW Press, 2007

One of the more interesting and fun history books I've ever read, it covers Chinese fashion from the late Qing dynasty to the present. There are really fascinating sections on queues, foot-binding, hemlines that (not surprisingly) go up and down, women's underwear, Sun Yatsen (or Mao or cadre) suits, hats and hairdos. Most, if not all, of these are linked to politics in some way - whether it is nationalism, gender, modernization, militarization, etc. A good deal of Finnane's argument is concerned with debunking the common western notion of stagnant China before the late 20th century (when people began to say "fashion arrives in China").

One chapter covers the emerging fashion industry in Shanghai in the 1910s-30s, from spinning and weaving to tailoring, retailing, advertising, fashion shows and design. Most of the fashions were reflected in the cloth rather than the garment. Finnane covers only one major change in women's garments - from a short jacket-blouse and skirt or trousers, to the qipao (better known in the West by the Cantonese cheongsam), the latter gaining true dominance from the mid-1920s. The qipao seems to have been based on the Manchu gown worn by both men and women under the Qing. It was gradually modified from a rather simple A-line to the body-hugging form associated with Suzie Wong, while the hem went up and down, collars became higher, sleeves longer and shorter, and the side splits became higher or were covered or disappeared altogether. The complications of women's fashions (exposure or not of arms, bust, legs, feet; hair cut long, short, permed or not) caused the poet Lu Xun to comment in 1927 that "A woman has so many parts to her body that life is very hard indeed." (p. 157)

The book has masses of wonderful pictures. To me, one of the most striking features exhibited in these pictures is the flat-chestedness of the women. In the late '20s there was a Short Hair, Natural Breast and Natural Feet Movement, but flat chests obviously remained popular for a long time after that. Boobs are not really evident in the illustrations, except for the advertisements (this one from Wikipedia),

until the 1950s, though Finnane argues that a distinguishing feature of a Chinese 'flapper' was that her bust was visible. That's odd because my mother was telling me just the other day about my aunt who was an Australian flapper and how breast-binding was a feature of that style. Global influences are evident in both countries (especially in the bobbed hair), but the bra didn't reach China until 1927 (I need to find out when it reached Australia!), so it seems unlikely that a 'modern' woman (active, outdoors, etc) would have given up breast-binding earlier than that. For others, the expense of the bra was likely a consideration, while there are hints that the flat-chested look was naughtier!

The other striking feature is the androgynous nature of clothing - as Finnane points out you couldn't really describe people as 'cross-dressing' because there wasn't much of an established distinction between male and female clothing styles. When girls started going to school, they donned the school uniforms worn by the boys (the western suit) - seen to be not so much boys' clothing as school clothing. When women joined the army, they wore military uniform. But androgyny was controversial and seems to be associated with women's desire to be emancipated and 'modern'. There is a whole chapter on women wearing their "brothers' clothes."

The period of the Republic was a period of turmoil, to which Finnane attributes the lack of certainty about what people should wear.

The fact remained that when a national crisis erupted, women were sure to be wearing the wrong clothes. So it happened that when Japan invaded China in 1937, women's dress was immediately at issue. "For the rise and fall of the country, [one newspaper proclaimed] women's adornment bears responsibility."' (p. 174)

Men did, however, share some responsibility for the country's reputation, if not its actual rise and fall. They had basically a choice between the Manchu gown (changpao) from which the qipao had been adapted, the Sun Yatsen suit or the western suit. Should a western suit be chosen, it was important that it was neat and clean, and the trousers properly creased, otherwise the lice would surely be lurking underneath and China would lose face. But the Sun Yatsen suit was the true nationalist statement to the outside world (even though Sun himself might have adapted it from Japanese school uniforms). What women wore when meeting foreigners didn't matter since they did not represent the national identity.

In the domestic sphere, however, what women wore was much more important and therefore controversial. After the 1949 revolution a lot of attention was devoted to what women should wear in a happy, socialist society. As Finnane says, emancipation was no longer a right it was a duty! From the outsider's standpoint, the revolutionary period in China probably represents the height of androgyny in dress (most obviously in the Cultural Revolution when young people went for military uniform - the genuine article conveying so much more kudos than the imitation version run up by mum - in much the same way that western youth of the same era were adopting blue jeans). But there was also a movement to establish a distinct feminine identity in clothing in the 1950s - a sort of Dior-ized version of the qipao and the earlier jacket-blouse and skirt. Interestingly, quite different styles were prescribed for urban professional and rural (peasant) women - a reflection of class distinctions in 'socialist' fashions. One of the factors that killed this movement off is that a Dior skirt required more cloth than was available in China, but the Cultural Revolution was clearly another one: when Mao launched it, he wore military gear.

After Mao's death and the advent of economic reforms fashion in China underwent another series of changes. As in the 1920s and '30s, capitalism and consumerism played a role, but Chinese history has a far less prominent one. While Chinese fashion designers have concepts like 'Chineseness', 'national culture' and 'cultural heritage' hanging over their heads, consumers are living in and for the present. In the marketplace some kind of decoupling has taken place in which there is no Chinese history of fashion. Nobody wants to wear a qipao anymore (unless as formalwear) and only foreigners are keen on designs that are Chinese retro. Finnane cites a Chinese designer who complains that his qipao-based designs were ignored, while a couple of years later French designers with similar designs 'made fashion headlines around the world.' (p. 283). This story is about the politics of the global fashion industry. For the Chinese themselves, retro means some earlier Western fashion, not an earlier Chinese one. I'm not familiar with the literature on the politics of western fashion so I don't know if there's a similar nihilism towards the past in other countries. But this decoupling also reminds me of the current Chinese attitude towards the built environment - crudely summarized as new = good, old = bad - that contrasts with western attitudes towards adapting and restoring antiquity to meet modern needs.

Nonetheless, Chinese are very conscious of their place as the Middle Kingdom in the world and what the world thinks of them. Early post-Mao fashion influence came from Japan and Taiwan - both seen as affirming a lack of dependence on Westerners. In the 2000s Korean fashion has had a big influence. Finnane argues that the Japanese and Koreans are actually mediating influences from the West anyway. If this is so, it is an interesting parallel with the garment manufacturing chain in which East Asian intermediaries have also played a crucial role. It is disappointing too because Japan and South Korea have very inequitable societies. Older Chinese women who refuse to adopt new fashions (still wearing the cadre suit) have explicity linked their dress to the emancipation of women, although the actual correlation between dress and emancipation isn't well established. There's a photo in the book (p. 199) of a military woman, a soldier for two decades who had 'frankly stated that she was "not much interested in women's problems," [yet] was put to work in the Children's Welfare Department of the Women's Federation' (p. 202) after 1949. Her husband, needless to say, remained a soldier. There is no sign that this reassignment of gender roles which, even in the 1950s, reflected global influences, is about to disappear.

Poverty

Poverty is disempowerment. I heard this, or something very close, a couple of months ago on the radio and thought it was a good, very succinct, definition.* It is reminiscent of Amartya Sen, Robert Chambers and others and, most importantly, gets away from the notion that poverty is simply a lack of money.

For the development economist, however, a problem is that power is difficult to measure, while money income is at least in principle easy to measure. The United Nations Development Program has come up with a lot of alternative measures, such as the Human Development Index, the Gender Development Index, the Gender Empowerment Index (how many women are in parliament, etc), the Human Poverty Index and so on. Each of these tackles poverty from a different angle without being able to provide a composite picture. Even the Gender Empowerment Index cannot tell much because it only gives the ratio of the average female to the average male. What if the average male is seriously powerless?

In classical political economy poverty was considered in relation to a minimum physical subsistence level. Both Malthus and Ricardo agreed that the standard of living of wage earners would be constantly driven down to the physical minimum by the combined pressures of population growth and scarce resources. Marx, on the other hand, had a more optimistic view that productivity could grow fast enough to enable working class living standards to rise over time - provided that workers could bargain an improvement through class struggle. Marx's version of the classical theory therefore leaves us with a view of poverty as at or below a 'socially acceptable minimum.' In a rich society, a poor person could be much more alive and kicking than a person in a similar situation in a much poorer society. If, for example, we take the poorest 10% of the population in Indonesia and Australia - on whichever measure (income, expenditure, educational attainment, health outcomes) - it is doubtful that the Indonesian group would agree that their Australian counterparts deserved the term 'poor'. Yet, in relation to other Australians they would surely be poor.

On the other hand, many people have observed the phenomenon of the 'smiling poor'. People can, it seems, be poor but happy. They might define poverty in relation to something other than their material circumstances. If they feel accepted and empowered by their community they are less likely to feel impoverished than if they feel rejected, neglected or otherwise unvalued.

If we were to define poverty as disempowerment rather than as an absence of material goods or money, or even of less tangible benefits such as education and health, I think we would be able to resolve some of these difficulties. A disempowerment definition would say, for example, that a person is poor if she is unable to exercise control over her access to a certain bundle of resources. The character of the bundle might vary from one society to another, but the key element of a definition of poverty is not so much the size or quality of the bundle itself (such bundles have different meanings and economic values for different people), but the power of individuals to access and to use it. Access that is contingent upon the agreement of another confers less control than independent access.

This view of poverty is very different from what you get in mainstream economics where the solution to poverty is usually seen in terms of increasing the size of the bundle available to a given individual and then encouraging that individual to make 'development-oriented choices'. If, for example, we increase a poor person's cash holdings, we'd hope they would invest in further income-generating activities rather than on buying an iPod. The person who chooses the iPod is supposed to have a high rate of discounting the future. Ultimately, then, development (or poverty) boils down to a series of individual choices based on given individual discount rates.

What if, instead, the increase in cash holding gave the person a choice between eating or starving. If she 'chose' to eat, would we then say she had a high rate of discounting the future? Actually a sensible person would say that there was simply no choice. Suppose now that the iPod purchaser was faced with a similar lack of choice, simply because she knew that no amount of investment would enable her to escape the poverty of her existence. There are plenty of real world reasons why this might happen - more powerful individuals could prevent her from conducting a business, for example. In some social contexts, the investment "choice" desired by the development economist could leave an individual worse off than before and the consumption "choice" would leave her better off. Choice them becomes a rather meaningless concept - apples versus oranges rather than poverty versus affluence.

There's a lot more to say about this problem, but this post is already long enough.

* Possibly it was in an interview with Jared Diamond who was otherwise talking twaddle.

Burma v China - the case of disaster response

It is quite interesting to consider the differences between these two countries (or rather their regimes) as highlighted by the recent catastrophes. In the normal course of events, minus cyclones and earthquakes, they tend to get lumped together as regimes that abuse human rights. One could argue, however, that when disaster happens Burma has more in common with the United States than it does with China. I'm thinking, of course, about Katrina and the response that was so delayed - not to mention the failure to invest in the maintenance of levees that could have averted most of the worst effects - as well as the bland refusal of either government to really recognize the extent of human loss at the time. By contrast, the Chinese had at least 50,000 troops in the disaster area by the next day and the scale of the rescue effort increased from there.

The criminality of the Burmese regime is accentuated by the fact that the cyclone wasn't even a Category 5. It was a 4 when it initially hit the Irrawaddy delta coast and it was a 2 by the time it reached Rangoon. Yet it killed about 100,000 people. I was in Vietnam a couple of years ago when they had the worst typhoon in a decade. It was a 4 or 5. The Army rushed to the affected areas to build defences and evacuate people before it hit. A handful of people died. Nobody was left to fend for themselves in the aftermath.

Even if you think the Vietnamese Communists have a bad record on human rights, you can hardly fault them for valuing the lives of ordinary people when disaster strikes. The Vietnamese armed forces do not exist primarily for regime maintenance, as in Burma, but for national defence. I think the situation in China is similar to that in Vietnam. Although the latter has never had anything resembling the Tien An Men violence of 1989, there is a similarity in that the armed forces do not threaten ordinary people, while they do step in to provide support in times of real danger. Moreover, despite its brutal repression in 1989, the Chinese regime did respond. In the aftermath of the protests a number of policy changes were put into place that effectively tackled the causes of discontent.

Let them eat cake!
In Burma, by contrast, the armed forces are a constant threat and they show no sign of recognizing any problem. While various aid agencies estimate that a million people have so far received no aid at all, the regime insists that the emergency is over and reconstruction has begun. In a statement reminiscent of Marie Antoinette, a Burmese leader was quoted today saying that people in the Irrawaddy delta did not need supplies because they could eat frogs.

Dua Khalil - teenage girl stoned to death

Here you can find links to this story - complete with chilling eye-witness video of a teenage girl being stoned to death. The girl, it seems, was suspected of abandoning her family's religion by being seen with, possibly marrying or otherwise consorting with a Sunni muslim (or, I should say, the son of a Sunni muslim since we know nothing about the young man apart the fact that he possibly exists and has a Sunni family background). For a woman, abandoning your family's religious ideals, is a crime punishable by public execution (while the cops do nothing, despite witnessing a murder - there is also a Kurdish law against the oxymoronic "honour killing" since 2001 - and being openly filmed witnessing a murder).

Apart from the sheer barbarity of what happened (fortunately the film quality is not good), I was struck by the unanimity of reportage:
CNN website: "Dua Khalil, a 17-year-old Kurdish girl whose religion is Yazidi"
CNN broadcast: "Dua Khalil, a 17 year-old member of the Yazidi sect"
Katha Pollitt: "Dua Khalil, a 17-year-old Kurdish girl whose religion is Yazidi" (she was plagiarized by CNN!)
Joss Whedon: "Dua Khalil, who was of the Yazidi faith"

Granted, Joss Whedon might be right, in the sense that she was born of people of the Yazidi faith, but what do we actually know about Ms Khalil's religious beliefs. Nothing at all based on these reports. All we know is that she was suspected of not subscribing to the Yazidi faith.

We are never going to know what Ms Khalil thought about anything at all. We may end up knowing what her brothers and other relatives thought she should think and what the wider community of Kurdish men thinks of what her male relatives thought she should think, and what our media thinks about what the wider community of Kurdish men thinks of what her male relatives thought about what she should think.

The good, the bad and the powerful

Dani Rodrik recently opened a blog entry with the following:

Increasingly, economists are moving away from the Washington-Consensus, rules-of-thumb approach to country-specific strategies based on diagnosing locally-binding constraints. The difficulty is that designing such strategies is more of a craft than a science.

The latest contribution to the literature comes from Wendy Carlin and Paul Seabright.

My initial take was 'what's new here'? But there's an interesting footnote on the first page of the paper that made me giggle:

Gregory Clark (2007 forthcoming) challenges institutionalist explanations of the industrial revolution, on the grounds that a number of medieval economies (such as England from the thirteenth century onwards) had institutions (such as systems of secure property rights in land) that, he claims, would have earned them high marks in any World Bank policy review. Of course, not all researchers who claim that good institutions are important for development would claim that they were either necessary or sufficient. (emphasis added)

This really begs the question of what is a 'good' institution if it is neither necessary nor sufficient. Most economists would, for example, argue that China's massive expansion of the past 3 decades was based on 'bad' institutions. 'Good' institutions clearly were not necessary in this case. Milton Friedman, on the other hand, was famed for pooh-poohing the idea that theory is important - if it works then it must be right. Friedman, of course, was wrong. His understanding of the relationship between money supply and inflation was based on a simple correlation and, without understanding the transmission mechanism, his prescription of reducing the money supply would (and did) wreak havoc on any economy to which it was applied. For the authors of the above paper on the other hand, 'good' institutions clearly come from somewhere in the realm of World Bank thinking which, for half a century now, hasn't worked (at least in terms of its stated - as distinct from possible non-overt - intentions). Where is the difference from the Washington consensus here?

Vietnam's booming economy

BBC's business program the other day had a discussion of Vietnam. Three capital fund managers were interviewed and all three were very up-beat. Two, I would guess, were recent arrivals (even though they were both Vietnamese or Vietnamese-Americans) as they had their history pretty wrong. The third was a British fund manager who has been in the country since 1994 and, according to me anyway, seemed to know what he was talking about. Inter alia, he forecast that Vietnam will be the dominant economic power in ASEAN before long. I agree with him, not because he ranted about how the country is only recently opening up to foreign investment (which is what the others did - they clearly weren't there in the mid-'90s), but because he talked about the growth prospects, the education levels and the brilliant organizing ability of local firms. None of them mentioned the role of the government, which has been crucial (as also in China), but doesn't fit with their glorification of the private sector and the market. Maybe this is because businessmen don't like to talk about how dependent they are on government assistance.

None of it, of course, augurs well for socialism (by which I mean democracy and equity).

The inevitable result of the Surge

Let's suppose that the original invasion of Iraq plus Israel's disastrous adventure in Lebanon last year have brought about a fundamental change in the balance of power in the Middle East. The losers in this shift are Israel and the Saud family. The gainers are Iran and Syria. From that standpoint Bush's escalation is very rational. The US cannot afford to pull out and leave the field to the 'axis of evil'. It has to attempt to defend the gains made - and putting it bluntly, they are gains because the objective was never democracy and blah blah in Iraq, the objective was always to gain a strategic foothold for Big Oil & associates as well as a possible new base in case the Saudi regime went belly up.

So the foothold of aspiration has become a toehold in reality. Escalation was thus inevitable, given that Bush's political constituency has always been so closely linked to BO & Associates and, since the warmongering began, Big Defence & Associates. In 2001 the US was in the middle of a serious recession. I seem to recall saying back when the wars began that this would be good for the economy and it has been. However, the crash is also inevitable sooner or later - the articles about excessive liquidity in the global financial system have already begun to appear. The following is from the WSJ a couple of weeks ago:

The world's financial system is overflowing with stocks, bonds and other financial assets -- $140 trillion worth, to be precise.

The figure was released in a study by McKinsey & Co. that maps financial assets around the globe and seeks to track the flows of these assets as they move from one region to another, putting hard numbers on the oceans of capital washing up around the globe.

At $140 trillion in 2005, the value of the world's financial assets hit a new peak and was more than three times as large as the total output of goods and services produced across the planet that year.

The study, released today, paints a picture of a world in which investors and the banks that manage their money are spreading their bets more broadly. Flows of investment across borders hit $6 trillion in 2005, McKinsey said, above levels reached at the height of the 1990s stock-market bubble and more than double the figure in 2002.

At the epicenter of these financial flows is the U.S., which takes in about 85% of the flows from countries that are net exporters of capital -- places like Japan, China and the Middle East. "It's a pretty striking thing," says Diana Farrell, director of the McKinsey Global Institute, an in-house think tank that produced the report. "Of all the savings that citizens world-wide are willing to put outside their countries, the U.S. gets 85% of it."

Global financial flows are likely to accelerate in the coming years. "The growth in trade in financial assets is proceeding about 50% faster than the growth in trade" in goods and services, says Kenneth Rogoff, an economist at Harvard....

Ninety percent of global capital flows run between three regions: the U.S., the United Kingdom and the European countries that use the euro, the report found. Capital flows in and out of Japan in recent years, according to McKinsey's data, were smaller than China's.

When the financial bubble bursts, Europeans and Americans will have squillions wiped off the value of their assets. China is in a much better position since it has no ideological problems with the Iranian regime and will be only too glad to step in when the US loses its toehold. But before that happens, the war seems very likely to spread - to Iran in the first instance. Do they seriously think they can win that one? Can your average American jackboot tell the difference between an Iraqi militiaman and an Iranian one (there are already, according to a professor at Tehran University, thousands of Iranians in Iraq lending a hand to the Shia side - or a civilian and a militiaman for that matter? Will they care? I don't think so as the stakes are too high to worry about a few mere humans.

The result is predictable. There will be a Shi'ite arc across the Middle East (let's face it, there already is since the election in Iraq.) Not so predictable: a new regime in Arabia? Israel pushed into the sea? Depends how far the escalation goes.

The Suffolk Strangler: same old

This article by Julie Bindel, written during the earlier part of the investigation, is worth a read. She compares the police investigation with that of the so-called Yorkshire Ripper (Peter Sutcliffe). So little has changed.

Five years after the Ripper's first murder, the only solution the police had come up with was to impose a curfew on women. We were urged to "stay indoors" and told, "Do not go out at night unless absolutely necessary, and only if accompanied by a man you know." (Sutcliffe himself gave the same advice to his sister.)

The women's movement responded by posting the following notice all over town:
"Attention all men in West Yorkshire, there is a serial killer on the loose in the area. Out of consideration for the safety of women, please ensure you are indoors by 8pm each evening, so that women can go about their business without the fear you may provoke." The cops tore the notices down and, in Ipswich last month, they adopted the same policy of a curfew on women. As Julie Bindel observes:

Police have not thought to advise men not to go out to buy sex in Ipswich, but they should have done, just as the police during the Yorkshire Ripper inquiry should have. Men need to be told that their presence can mask and protect men who go out in order to harm and kill.

The sex industry is in the news again

The mayor of Amsterdam has once again proposed the closure of the city's windows district on account of the rise of organized crime linked to prostitution. This news surprised me, because I thought legalised prostitution was supposed to reduce the involvement of criminals and improve the conditions of working women. Certainly that was always the intention of legalisation. Then there is the case of the 5 murdered women in Suffolk. What surprised me in that case was the public outpouring of sympathy for the women - plus the fact that people immediately assumed that vulnerability extended to all women in the area, not only prostitutes.

Most Australian states have legalized or at least decriminalized prostitution at some stage in the 1980s and '90s and, as in the Netherlands, the results are quite remote from the intentions. It is true that public attitudes have changed a lot. In Holland, for example, a large majority of the population regard prostitution a legal economic sector and approve of efforts to improve the position of prostitutes, though prostitution is not accepted as a worthwhile profession. The sex industry (broadly defined - e.g. including escort services, lap dancers, strippers etc.) reportedly accounts for 5% of Dutch GDP! In Victoria, Australia, it's much the same. The Age (Melbourne) reported in 1996, two years after more or less full legalization: 'sexually explicit entertainment and prostitution are becoming just another service industry'. 'Like it or not, sex work is entering the mainstream'. 'In January's edition of the tourist guide This Week in Melbourne ... there were ... three pages of advertisements for prostitution services. Bank managers can claim visits to a table-top dancing club as a business expense.' (3 Feb 1996: 1)

On the other hand, a paper by Arnot (2002) said that most sex workers in Melbourne couldn't be open about their work on account of the stigma - attitudes to the industry have changed, but not to the people who work in it. Bindel and Kelly (2003) note that "in the few surveys which ask the opinion of those currently involved in prostitution, few support legalisation. The extent to which they also view violence as an 'occupational hazard', raises serious questions, on this ground alone, whether prostitution can ever be considered as 'just another form of employment'." The research in this report isn't is a bit too anecdotal for my liking and insufficiently informed by comparisons with other forms of female-dominated employment, but it raises very interesting questions that demand something better. Moreover, it belongs to a preciously small body of work on the subject. Some of its findings:

1. On choice of profession
In Victoria in 1996, 64% of women in brothel and street prostitution wanted to leave the sex industry, and 57% were actively looking for other work. All the women in street prostitution surveyed wanted to leave, but faced great barriers: homelessness, drug addiction, and a cycle of being fined for prostitution, doing prostitution to pay for the fines, and imprisonment (Noske & Deacon 1996). In the Netherlands one study found that "79 percent of women in prostitution gave an indication that they were in prostitution due to some degree of force". Further: "Bullens and Van Horn (2002) analysed police records of 16 young prostitutes. Results show that the girls were recruited by so-called 'lover boys' who applied various seduction techniques to make the girls fall in love with the pimps. In general, the girls were procured into prostitution by means of physical violence. To protect and secure their income and organisation, the pimps used a wide range of techniques of which the use of physical violence can be considered the most effective."

70% of prostitutes in Holland are of non-EU origin, which means that they need a work permit to work legally in Holland and sex work is the only area in which you absolutely cannot get a work permit.

Most don't want to get onto any government-related record (which might afford them better protection) because they don't want to be tagged forever as having been a sex worker.

2. On the 'harm minimization' goals of the legislation.
According to the Prostitutes Co-operative of Victoria (PCV), while women in the sex industry consistently asserted to customers that condoms were essential, one in five customers still requested unsafe sex. Not all legal brothels insisted on condom use (TA 28 Feb 1999: 19). The PCV research found that youth, inexperience and drug use made it more difficult for women to enforce condom use, even in legal brothels (Pyett & Warr 1999: 183). In 2000, WorkCover [Australian federal government agency] and police began raiding brothels because of complaints about women being forced to have unprotected sex. It was discovered that women were being pressured to have full sex without condoms in unhygienic and often unsafe conditions (TA 13 Aug 2000: 3). Though research on the health of women in the sex industry has tended to focus on STDs and condom use, none of the research in this period assessed actual rates of STDs among women in the sex industry (Pyett & Warr 1999: 189).

Research in 1996 with 23 street workers found that all had been raped, bashed or robbed by a customer and all had been forced to have sex without a condom (TA 4 Sep 1996: 5). Women tended to blame themselves for violence and did not report it to police (Pyett & Warr 1999: 188).

Street workers are more vulnerable, but a fragment of a paper available here reports the following in relation to all prostitutes:

Perkins (1991) reported that 20 per cent (26 of 128) of respondents to a survey of New South Wales prostitutes had been raped in the course of their work, half of these more than once. However, the same study reported a much higher incidence of rape outside of work: almost half of the 128 women had been raped while not working, with 95 per cent of these assaults perpetrated by a husband, lover or acquaintance.

In both work and non-work environments, these are much higher percentages than for the female population as a whole, especially the employed population. Further: sexual violence against sex industry workers is more likely to be accompanied by physical injury, more frequently necessitating hospitalization, than in other cases. This makes it a particularly hazardous industry to work in. Again, however, it fits with historical patterns of treating female victims as 'asking for it'. Sex workers, in particular, don't 'ask for it'. They are engaged in the sale of a specified service for which there is an agreed price as for any other service. There is no ambiguity. Because it is a commercial transaction there are none of the ambivalences about the meaning of 'no'. Sexual assault of sex workers by their partners reminds me of the incredulous attitude with which many men back in the 1970s greeted the South Australian legislation against rape within marriage - as if signing a marriage contract meant that you handed your husband a permanent 24/7 entitlement to do whatever he wanted with you.


3. Criminal organizations and trafficking
Since you can only get a brothel licence in Victoria if you have no criminal record, the industry is riddled with front men and women acting on behalf of criminal gangs who use the legal (licensed) part of the industry to launder funds. Trafficking has increased as legalization has increased demand. Project Respect estimates that there are up to 200 women under `contract' in Victoria at any one time, and that at least seven licensed brothels in Victoria used trafficked women in 2002. Trafficked women commonly pay off debts between $30,000 and $50,000, experience significant physical and sexual violence, and are frequently deported. In July 2003, four people in Victoria were charged with sexual slavery. I haven't found the results, but prior to that there had been no successful prosecutions. The sexual slavery act came 5 years after the full legalization in Victoria - note that Victoria did not have such an act - and was a response to the rapid rise in trafficking after legalization. In 2000 the police estimated that 500 trafficked women were working in Sydney.

Trafficking is far worse in Holland where the illegality of non-EU workers is a the dominant feature of the industry. While most Dutch people support equal rights for these women with locals, the reality is something different.

4. Supply
In Victoria, on 1 July 1983 there were 149 brothels known to the police. All of them were illegal. In June 2003 there were 95 legal brothels and 400 illegal ones known to police and 1688 brothels exempt from the licensing requirement because they operated with not more than 2 prostitutes. In addition, there were 37 escort agencies in 1985 when they were still unregulated, 39 in 2003 plus a further 91 that operated as both brothels and escort agencies.

In 1985 there were 3-4000 prostitutes working in Victoria and 6000 in 1991. Since then there appear to be no data. However, the number of women working in escort agencies rose from 300-500 in 1985 to 5000 in 1994. The number of street workers has risen from 200 in 1985 to 400 in 2003.

There are some complaints that it is an industry controlled by big business. In the brothels, there are 'menus' and women cannot chose which items they will suppy or not. They get told how to dress, etc - which of course is no different from any other industry that employs either men or women.

5. Demand
In 1985, the Neave Report (which prepared the way for legalization) estimated that there were 45,000 visits to prostitutes each week in Victoria. By February 1999, the estimate had risen to 61,000 visits a week. That is about a 2.2% annual growth rate. Since the average annual population growth rate of Victoria is 1.2%, this implies either an increase in the proportion of men using prostitutes or an increase in their frequency of use.

A study published in the British Medical Journal in 2005 found that the proportion of British men who reported paying for heterosexual sex had increased from 5.6 per cent in 1990 to 9 per cent in 2000. An article in The Times begins to suggest an answer: while in the west free sex is more easily obtained than ever, western women demand something in return. The prostitute, on the other hand, offers an obligation free transaction. Basically, a man has an itch that has to be relieved and if he is in danger of acquiring an obligation - or even just a vague feeling of guilt that he might be skipping some unspecified obligation - he might as well pay for it.

But wait a minute! An itch can be relieved by masturbation (no guilt, not even any money). So what's with the need to pay women for the service?

Sweden
Sweden became the first country in the world to make the purchase of sexual services a criminal offence on 1 January 1999. This was one element in a comprehensive Violence Against Women Bill (Swedish Government Offices, 1998) in which prostitution was defined as a form of male violence against women. Sweden is thus one of the few signatories to fulfil Article 9.5 of the UN Optional Protocol to Prevent, Suppress and Punish Trafficking in Persons, especially Women and Children (2001) supplementing the UN Convention Against Transnational Organized Crime. This article states that signatories must put into place measures to discourage demand.

In Sweden prostitution... is officially acknowledged as a form of exploitation of women and children... which is harmful not only to the individual prostituted person but also to society at large… This objective is central to Sweden’s goal of achieving equality between women and men at the national level as well as the international. However, gender equality will remain unattainable so long as men buy, sell and exploit women and children by prostituting them... Prostituted persons are considered as the weaker party, exploited by both the procurers and the buyers. It is important to motivate persons in prostitution to attempt to exit without risk of punishment. By adopting the legislation Sweden has given notice to the world that it regards prostitution as a serious form of oppression of women and children and that efforts must be made to combat it. (Ministry of Industry, Employment and Communications, 2003, p. 1)

When I originally read the Bindel and Kelly paper, I wondered why they used the term 'prostituted women' instead of 'sex workers'. The meaning of the language is pretty clear. It denies the 'agency' of the women. Well, no actually. The Swedish law says that prostitution is an expression of the unequal power between men and women. Any 'agency' that the women have is confined to a realm defined by the power relation in which they find themselves. The Swedish government, alone in the world, has decided that this relation must be equalized. It has therefore completely decriminalized the provision of sexual services and criminalized the purchase of them. The Swedish approach locates the cause of prostitution in the arena of demand – whatever women’s social circumstances they would not and could not sell sex if there were no one willing to pay for it. The underlying reason for the existence of prostitution is the continued inequality between women and men, and men’s sense of (obligation-free) entitlement to sex. Prostitution is regarded as a form of sexual violence. In terms of the wider social effects prostitution contributes to the inferior status of all women and girls - and this links back very neatly to the fear induced in all young women by the murders in Suffolk.

I like the Swedish argument. While legalization of prostitution has brought about (or resulted from) a significant change in social attitudes, in the sense that prostitutes are no longer blamed for their condition, we need to go a step further. The reason prostitutes remain at the bottom of the social ladder is that men can simply commodify something that would otherwise have to be negotiated as part of a human-to-human relationship (however fleeting). Legality reinforces the commodification and presents the delusion of an equal exchange.

Do we still live in a federation? Should we care?

The High Court handed down an important judgement today on the legality of the federal government's industrial relations legislation. As expected, they found that it was legal. It doesn't really take a lawyer to see that the Constitution fairly explicitly gave power to the federal government in the relevant area. There is only one section (51xxxv) that refers to state powers in relation to industrial relations and that refers only to the settlement of disputes that don't extend outside state boundaries, not to the establishment of the framework in which such disputes might take place. My guess is that the only point of discussion is over what constitutes a 'corporation'.

Commonwealth Of Australia Constitution Act
Chapter I. The Parliament.
Part V - Powers of the Parliament

51.The Parliament shall, subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to: -
....(xx.) Foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth...
...(xxxv.) Conciliation and arbitration for the prevention and settlement of industrial disputes extending beyond the limits of any one State...

Chapter V. The States.
109. When a law of a State is inconsistent with a law of the Commonwealth, the latter shall prevail, and the former shall, to the extent of the inconsistency, be invalid....

From Wikipedia:
In the first two decades of its existence, the High Court adopted a doctrine of reserved State powers combined with "implied inter-governmental immunities". The essence of the first part of the doctrine was that grants of power to the Commonwealth in the Constitution should be read in a restrictive way so as to preserve as much autonomy as possible for the States. The essence of the second part of the doctrine was that the Commonwealth and States were immune to each other's laws, and could not mutually regulate each other's governmental apparatus: for instance, they could not tax the wages of each other's employees or force each other's employees to submit to compulsory industrial arbitration.

There was little basis in the text of the Constitution for this doctrine although the judges who developed it had all been active members of the Constitutional Conventions and believed that it was implied in the nature of federalism itself.

...The doctrine was swept away in the 1920 decision in the Engineer’s case (after changes in the composition of the Court).[NB: another industrial relations case] The Court now insisted on adhering only to the language of the constitutional text read as a whole in its natural sense and in light of the circumstances in which it was made: there was to be no reading in of implications by reference to the presumed intentions of the framers. In particular, since there is no mention of "reserved State powers," only one express inter-governmental immunity (regarding property taxes: section 114), and, an express provision asserting the superiority of valid Commonwealth laws over inconsistent State laws (section 109), there was no longer any room for the doctrine previously asserted in favour of the States.

While the new IR legislation certainly demolishes a lot of rights that workers have gained over the past century, it isn't at all clear to me that the latest ruling on the Constitution is disadvantageous. At the moment we have Labor governments in all states and a Liberal federal government. It could just as easily go the other way. The states do not have a good historical record in protecting human rights - particularly those of Aborigines. What we need to do now is change the government at the federal level to get rid of this rotten legislation.

At a deeper level, it isn't clear that trade unions have much of a future in their present form. One consequence of the IR system we've had for the past century is that the unions have become part of a tripartite club revolving around the Industrial Relations Commission. Since wages and conditions were largely settled in a legal environment, membership and activism became secondary to the raison d'etre of the unions. Basically unions only survive in the diminishing proportion of large-scale units (especially the public service). Now that casualisation of the workforce has taken hold in a big way, it is difficult for them to recruit members - there has been a massive swing in bargaining power towards the employers and the destruction of the old arbitration system is merely a reflection of this, not its cause.

One could also make a point about the Prime Minister's interpretation of 'Australian values', which for most people includes the notion of fairness. The way Howard interprets this is extremely narrow - the Act in question is called the 'Workplace Choices' Act. This effectively means that employers get more choice over hiring and firing, while workers get more choice about whether to accept low pay or starve. The PM is clearly against the idea of workers being 'coerced' by unions into accepting high wages and protected working conditions. One of the biggest changes that the legislation brought about was the abolition, for businesses employing fewer than 100 workers, of the 'unfair dismissal laws' which, according to the government, were unfair to employers because they couldn't just get rid of anybody without having a good reason. In PM-speak, employers were being 'harrassed' by court cases over unfair dismissal. Under the new law, they won't be harrassed anymore and they can probably harrass their workers as much as they like. All's fair in love and class war.

Sustainable poverty

I actually wrote this some time ago, but I'm still seeing congratulatory notices about the award of the Nobel Peace Prize to a banker, Mohammad Yunus and his Grameen Bank. What most of these notices are suggesting is that, while criticisms can be made, the development of Grameen-type microfinance schemes has really achieved something towards poverty reduction.

Much of the criticism of the Grameen Bank and its numerous clones has been of the high interest rates charged. I don't actually have a problem with these rates. Sure, the rates are above those available from the rest of the banking system. But the trouble is that lower rates are simply not available to the poor. While the poor have a very high demand for credit, they normally have to resort to even higher interest rates from informal sector money lenders. From the banks' point of view, the poor are not creditworthy since they have no collateral to offer, their loans are too small and require too much administration (no economies of scale), etc. The risks of default are high. From the money lenders' point of view, they are creditworthy in so far as they can be induced to accept permanent indebtedness. For example, as long as they keep paying interest, they may not be required to repay the principal - the equivalent of endlessly renewing the loan. If they cannot pay the interest in money, there are ways to extract it in kind - a common example being the provision of labour. In some countries you can find people repaying the debts of their grandparents.

What Yunus has achieved is to demonstrate to the bankers that people without physical collateral can be rendered more creditworthy through the mechanism of 'social capital'. To be eligible for microfinance you have to be part of a group that guarantees your loan repayments. If one person defaults, the group has to cover the debt - so the majority of microfinance programs also try to encourage the groups to save. However, the savings schemes are less than successful, for the simple reason that poor people generally aren't able to save money. What happens is that many borrowers, in order to meet their repayments to the Grameen and other banks, have to borrow from the informal sector - either from moneylenders, in which case the payments required are regular and probably higher than those from the bank, or from family and friends, where they are likely to be less regular and can often be delayed.

Thus Yunus' great discovery was to find a way to transfer some of the income stream from money lenders to the formal banking sector and, to a lesser extent, to the poor.

Whether this actually has any impact on poverty reduction is another question altogether. For those who have to resort to moneylenders and others to meet their debt service requirements to the Bank, the answer is clearly no. For others, the answer is still moot. Loans available through microfinance schemes are very tiny (typically in the range $50-$200). This might be enough to establish a micro-enterprise, but it is scarcely going to enable somebody to accumulate sufficient capital to climb out of poverty. Successful micro-entrepreneurs might enter the realm of sustainable poverty, meaning the kind of poverty that is not going to kill them as early as it would otherwise have done. The risks remain very high: if your chickens die, or you suffer a bout of illness, you can still lose everything. Generally speaking, you're probably better off if you can find a factory job since regular wage income is generally higher than incomes from micro-enterprises. Regular wage jobs are in short supply, however, so Yunus' scheme of providing financial intermediation at lower rates than the money lenders is probably better than nothing. What it is not, is economic development.

Moreover, microfinance schemes are not themselves independently sustainable. The low default rates are a reflection of the continued dependence of the customers on the informal sector. The much vaunted 'social capital' of the borrowers is in fact simply a method of imposing discipline on them - forcing them to repay even when they cannot. Otherwise, microfinance has to be sustained by the subsidies from the commercial banking system - which is only possible when the banks are directed by the government. In Vietnam, for example, the Social Policy Bank (formerly known as the Bank for the Poor) is able to charge low rates of interest because its capital is supplied directly by the Agriculture Bank and others. The same applies to the large microfinance scheme operated by the Vietnam Women's Union which also obtains its capital from the Agriculture Bank. This system generates problems of sustainability for the banking system as a whole.

The problem of sustainability of microfinance has often been referred to in the literature, not only in the Vietnamese case. There have been many attempts to clone the Grameen Bank, but many, if not most, of them are unsustainable because they rely on subsidies to survive, basically because they do not generate savings deposits and, despite the high interest rates, their lending margins are insufficient to generate increases in loanable funds.

Intel in Vietnam

The Wall St Journal reports today that Intel has received permission to increase its initial investment in Vietnam to up to $1 billion. The original license, granted in February, was for $605 million - it is using this to build a chip manufacture and testing plant in Ho Chi Minh City, scheduled to open next year.

In 2005, computer and electronic equipment exports from Vietnam rose 34% to $1.44 billion, while imports of computers and electronics rose 26% to $1.7 billion.

China's role in the third world

Had an interesting discussion at work yesterday about China's role in Africa and other underdeveloped regions. It was prompted by an article in The Economist on Chinese investment in Africa. It discusses the new Chinese presence in Africa in typical Economist terms:

China already buys a tenth of sub-Saharan Africa's exports and owns almost $1.2 billion of direct investments in the region.... A Chinese diaspora in Africa now numbers perhaps 80,000, including labourers and businessmen, who bring entrepreneurial wit and wisdom to places usually visited only by Land Cruisers from international aid agencies.

I mean wow! How big is the European 'diaspora' in Africa by comparison? Who bought the Landcruisers? "In the cold war Maoists dotted Africa with hospitals, football stadiums and disastrous ideas." And, if I remember correctly, infrastructure projects (the TanZam railway). Now China only wants access to raw materials. The West, of course, never tried any such thing. 'We' never undermined African efforts with our protectionism and our support for apartheid, Ian Smith, Mobutu, the Nigerian junta or Tubman "our aircraft carrier in Africa".

Sadly, China's success is an obstacle, as well as an inspiration. Its rise has bid up the price of Africa's traditional raw commodities, and depressed the price of manufactured goods. Thus Africa's factories and assembly lines, such as they are, are losing out to its mines, quarries and oilfields in the competition for investment....

China is doing its bit to improve infrastructure, building roads and railways. But it could do more to open up its own markets. China is quite open to yarn, but not jerseys; diamonds, but not jewellery. If it has as much “solidarity” with Africa as it claims, it could offer to lower tariffs on processed goods...

Competition from whom? Here we get to the nub of the question, which is: how dare those Chinese upstarts encroach upon our territory? How dare they not lower their trade barriers while demanding that we lower ours? The hypocrisy astounds me.

Discussion of the Economist article segued into a discussion of Burma, one of our pet topics. China (also India and Thailand) are playing an increasing role in that country, to the detriment of Western efforts to boycott the regime. Asia Times has this to say:

Foreign investment into Myanmar surged to a record high US$6 billion in the fiscal 2005-06 year that ended in March, up from the paltry $158.3 million recorded the previous year...

That's five times the amount of Chinese investment in the whole of Africa!

Myanmar has significantly managed to bypass the Western-controlled multilateral lending agencies, including the World Bank, which has in the main observed the US and EU sanctions, and accessed capital investment directly from private-sector Asian sources. While various US and European companies closed down their Myanmar-based investments because of the sanctions, Chinese and Indian - mainly energy - companies have rapidly filled the gap.

Western sanctions' failure to achieve economic collapse and political change in Myanmar significantly underscores both the United States' and Europe's waning and China's and India's growing economic influence in the region. As Asia's economies become more integrated, particularly through greater Chinese- and Indian-inspired trade and investment links, Western-led economic threats clearly no longer strike fear into the region's roguish regimes.

Myanmar's ruling junta last year abruptly moved the national capital from the coastal city of Yangon to the inland, mountainous redoubt of Naypyidaw. Ironically, perhaps, the junta is now pumping profits earned from China and India into building up a new military-industrial complex, where the ruling generals are living comfortably and hunkering down against a possible US military rather than economic threat.

All this raises interesting questions. Burma has become the new locus of competition between local powerhouses - China, India and Thailand. The West seems to have an outdated notion of its own importance, but its sanctions no longer work - if they ever did. What is the right way to go in a situation like this? From the realpolitik point of view, the only possibilty is to compete. In this argument, Aung San Suu Kyi might ask us to boycott, but she has no power and the boycott has no effect. An alternative scenario is that we invest in Burma with as much vigour as China and India do. Not in extractive industries, but in manufacturing and services that require education - it would encourage them to reopen schools and universities. I don't believe in the mantra that markets create democracy, but if you look at Korea, Taiwan and Brazil, economic development does bring about changes. The mechanism here is not markets => democracy. On the contrary, the mechanism is more likely to be economic development leads to shortages of educated labour and this gives the educated part of the population the power to demand a share of political power.

The Burmese generals are bent on enriching themselves, but in the long-run they cannot succeed without the co-operation of the people. To date their opposition has mainly come from the university-educated class - so they closed the universities. But I think their ability to control the mass of the population stems from the fact that there is no shortage of unskilled labour. From the point of view of the regime, it's easy to replace people you have killed or locked up. Once you start to depend economically on an educated class of people, you can't just get rid of them and you have to make compromises with their demands for more democracy. I think that greater economic security is the fundamental reason that democracy has made progress in South Korea and Taiwan (not to mention earlier in the West itself). You can stave off the inevitable by importing skilled workers, creating a more competitive labour market and making life for the indigenous workers more insecure (as in Singapore, for example). So there's no necessary and inevitable causation between increasing wealth and democratization, but it does seem to help. It will be interesting to see how long the Burmese generals will want to see the top jobs going to immigrant Chinese and Indians rather than provide the necessary middle class education and jobs to their own people.

There are, however, other ways to view the road to democracy in Burma. After all, there are serious moral considerations in dealing with a regime like that and a boycott seems the right thing to do. As noted above, moreover, there is more to democratization than just growing wealth and an expanding middle class. A more appropriate comparison might be, not Taiwan or South Korea, but Saudi Arabia - a regime that managed for half a century or more to grow extremely wealthy without generating any resemblance of trickle down to the masses (Indonesia under Suharto presents a similar, if less stark, case). Most of the Burmese generals' wealth today does seem to come from resources (oil and gas) rather than the labour-intensive manufacturing that stimulated growth in East Asia. In such a case, the only possible route to democracy is overthrow of the regime. Period.

Not just cheap labour

From the Financial Times:

Intel, the world's largest microchip maker, is seeking to set up a $605m (€500m, £355m) plant in Vietnam to design, assemble and test chips, a project that would be a huge boost to the Communist-ruled country's fledgling high-tech industry....

In addition to the assembly and testing plant, Intel is also said to be interested in tapping Vietnamese engineers for the design and development of specialised embedded systems chips.

With a population of more than 80m and an economy that grew 8.4 per cent last year, Vietnam is south-east Asia's fastest-growing personal computer market, with ownership climbing to more than 1.5m this year from a mere 288,000 five years ago.

Domestic sales of computers and related products rose by about 30 per cent last year from 2004.

Who should be in the G8?

The discussion has come up again due to some people wanting to exclude Russia over the Ukrainian gas business, gaoling of Khordukovsky, press suppression, etc. The advocates of this point of view argue that the G8 members are the largest economies that are also liberal democracies. The Russian counter-argument is that it is a grouping of the world's most influential economies. Both are right in a way, but in order to preserve the safety of all of us, I'd rather lean towards the Russian view.

The G8 was once the G7, originally set up to manage the consequences of the 1970s oil shocks in the capitalist part of the world economy. Since neither Russia nor China were then capitalist economies they could, by definition, not participate. The extent to which the group operated as an instrument of US economic power is illustrated by the fact that Bill Clinton could, virtually unilaterally, invite Russia to join during the latter's early post-Communist phase. In this earlier format, while the G7 was always about attempting to generate economic co-ordination, it was at the same time an exclusive club of basically like-minded politicians - a method by which they could negotiate with each other over the solutions to their inevitable economic tensions. Thus the 'largest industrial democracies' argument is right up to a point.

However, the situation has changed somewhat since the early 1990s. China has emerged as an economic superpower and, if its current growth rates continue, is likely to overtake France, the UK and even Germany within the space of a decade or two. Moreover, it is by now the world's 4th largest trading power. These facts would suggest that, from an economic co-ordination point of view, China should be included in the G8 (or whatever number is chosen). But then China is scarcely a lickspittle of the US - the like-mindedness of the old G7 would be out the window. Life would get more uncomfortable, as it already is with Russia about to take up the presidency of the group. Arguably a new kind of Cold War is already beginning - between the dominant western economies (the 'old' imperial economies) and the newcomers like China.

Russia is in the group, probably because the Clinton administration assumed that shifting from an authoritarian, centrally planned economy to a market democracy would be a simple thing and therefore underestimated the extent of the Russian economy's post-Soviet collapse. While Russia has begun to recover and Putin is obviously anxious to flex economic muscle - the only muscle they have left to flex is the natural resources one - it hardly qualifies as one of the world's largest industrialized economies, let alone democracies. I searched 16 countries in the World Bank's database and Russia came in last on the size of its Gross National Income (same on GDP). Other non-G8 countries ahead of it in economic size are Spain, India, Korea, Australia and the Netherlands. Anyway, it's economy is only half the size of Canada's (the next smallest in the G8). Moreover, while it exported 35% of its GDP in 2002, it ranked 11th in terms of the total volume and the share of exports in its GDP has declined since then. Russia does, perhaps, have a disproportionate influence on European energy supplies - which means the Europeans will be keen to keep them in, at least while the current energy scares continue. But as in 1914, it seems the weakest of the current group by a long way.

Canada has recently been overtaken by Spain on GDP, but not yet on GNI. The reason is that GNI includes external resources (e.g. foreign capital inflows and outflows) which increase the size of the US and Chinese economies relative to GDP, but reduce those of all the others. GNI is a better measure to use for G8 purposes because it reflects the external clout of the economy, rather than just its domestic production. Spain is, as yet, a slightly less influential international economic player than Canada. In 2002, for example, exports of goods and services amounted to 28% of GDP compared with 42% for Canada. Then, if you look at the growth rates of these economies, there is much more growth in the bottom half of the list than in the top half (excepting China). Canada might be overtaken, not just by Spain, but by Mexico, India and Korea in the next decade (assuming continuation of current growth - which is always problematical).

My prediction is that the G8 will expand its numbers in the coming years. China may push to get in, but then it may also decide that the East Asian Summit is a better way to promote its global influence against the 'old' imperial powers. That would not, on the whole be a helpful development, especially if the like-minded ones (the US' political allies) decided to start up smaller, more exclusive, club too. Imperial blocs are generally not conducive to world peace.

Gross National Income (Atlas method) 2004 (trillion USD)*

1. United States 12150.93
2. Japan 4749.91
3. Germany 2488.97
4. United Kingdom 2016.39
5. France 1858.73
6. China 1676.85
7. Italy 1503.56
8. Canada 905.63
9. Spain 875.82
10. Mexico 703.1
11. India 674.58
12. Korea, Rep. 673.04
13. Brazil 552.1
14. Australia 541.1
15. Netherlands 515.1
16. Russian Federation 487.34
* The Atlas method gets rid of changes that are just due to exchange rate fluctuations.

Exports of goods and services, 2002 (trillion USD)
1. United States 1042.9
2. Germany 715.0
3. Japan 436.9
4. United Kingdom 406.4
5. France 388.0
6. China 368.6
7. Italy 320.2
8. Canada 304.5
9. Korea 191.5
10. Spain 183.4
11. Russia 120.8

Multiculturalism and gender

I enjoyed this article from Asia Times. The author is a Japanese person, Tawada Yoko, living in Germany. Inter alia, the following passage reminded me of the French riots.

Even right-wing radicals don't need [the term 'German']. They refer to the "whites", an inappropriate term because they often attack ethnic German immigrants from Russia, although they never talk badly of African-American pop stars. They woul love to be racists, but in reality they violently attack those they accuse of being poor.

This reminded me of the French riots because of an article, also written by a person (Alice Schwarzer) living in Germany. It brought to mind not only the question of poverty and powerlessness, but the similarities currently existing between left and right wing politics in advanced industrialized economies (after reading Tawada's article, I am can't bring myself to use the term 'Western'). Multiculturalism which, in a variety of manifestations, is an ideology used to enable minority groups to preserve their own cultures within the society to which they have migrated, seems now to be an out-dated and conservative ideology in a world in which we are faced with the phenomenon of Islamic fundamentalism. What multiculturalism now achieves is to permit powerful patriarchs to present us with a 'tradtion' to which, under the rules of multiculturalism, we must genuflect. In this particular case, the so-called 'tradition' is one of patriarchy. It's not that patriarchy hasn't been an important element of all such 'traditions', including our own, just that we haven't been confronted by it on such a scale in recent decades. Since the feminist wave of the 1970s, patriarchy has been something that women have had to fight in private. Yes, we have a lot more social support systems than we used to have, but the general climate is that equality has been achieved already - even overachieved and could do with some rolling back. Meanwhile multiculturalism allows patriarchs in communities that haven't been through the 70s feminist wave, or any other for that matter, to assert their own version of 'tradition' with impunity.

As Tawada points out, traditions are fictive. They are created in retrospect, by selecting material from a diverse past to suit the needs of the present. This is a point also made in various writings on the development of nationalism by Ernest Gellner, Eric Hobsbawm and Ben Anderson, among others. It is who controls these 'traditions' that is important and how successfully they can be made to appeal to people who are attracted to the 'imagined community' they create.

In the case of the French riots, the constituents of this imagined community were young, mainly French-born, males of North African descent. Multiculturalism attributes their protest to high levels of unemployment. But as Schwarzer pointed out, the unemployment rates, though high by French standards, are twice as high among women of this 'community' compared to men (25% for males and 50% for females). So if it's a question of unemployment, why were the women not present at the riots in large numbers (as they were in the 1968 events in Paris). The answer that Schwarzer gave was that if the women go out of the house dressed, as the men were, in 'French' gear as opposed to 'traditional' gear, they are liable to be viciously attacked by members of their own 'community'. Jeans and T-shirts are, of course, part of 'traditional' Islamic dress for men, while French women have died for daring to suggest the same applies to their own sex.

If you look at it this way, then Sarkozy's response to the riots and other French responses to multiculturalism, such as the recent ban on hijab in public schools, cannot in any way be seen as worse than the response of the left. Multiculturalism has become just another way of putting women back in their place. The fact that many women cooperate with this revival of patriarchy doesn't make it any better. Women in hijab are making a statement of the fact that, by adhering to religion, they are accepting the 'natural order' of patriarchy. I don't want to digress onto my favourite punching bag of religion here, so let me just say that hijab is not prescribed in the Koran. Hijab is a 'tradition' created by modern proponents of Islam to oppress women - specifically, to encourage them to deny their sexuality.

If the 'imagined community' of Saint-Denis is poor and powerless relative to mainstream French society, the women of Saint-Denis are doubly so. Where, in all the chatter of the multiculturalist left do we find any discussion of the brutality of these 'poor and oppressed' men towards the women they live with?

PS: You have to read Tawada's article to get the reference to Montana.

Poverty in Vietnam and China

According to today's Financial Times, the 'eradication' of poverty in China has actually been going in the other direction since China joined WTO in 2001. Three quarters of rural households are expected to suffer a cut in real incomes between 2001 and 2007.

ICFTU says that membership of the WTO has boosted the incomes of those already benefiting from China's economic reforms: private enterprise capitalist and white collar workers. The losers have been blue collar workers, farmers and unskilled office workers, "whose income has remained stagnant for the last 10 years".

About 250m people still earn less than $1 a day, the official measure of poverty, and 700m, 47 per cent of the population, live on less than $2 a day. As a result, "the people who provide everything from T-shirts to DVD players to the world's consumers often have 60-70 hour working weeks, live in dormitories with eight to 16 people in each room, earn less than the minimum wages that go as low as $44 per month, and have unemployment as the only prospect if they should get injured in the
factories", says the ICFTU.

It warns that China will need to create 300m new jobs over the next decade to compensate for job losses in agriculture and at former state-owned enterprises - which is "much higher than China's current job creation capacity".

Unemployment and inequality therefore would continue to rise "if the Chinese government's strategy for further growth, employment creation and poverty eradication is based only on securing a larger share of global trade".

Since 1995, the number of companies under state control has halved, shedding 59m jobs, while emerging private enterprises have created only 16m jobs, according to the International Labour Organisation.

Guy Ryder, ICFTU general-secretary, said: "Most people seem to have been too blinded by China's economic results to see the dark side. Domestic concerns, such as their own trade deficits and the jobs they might lose from cheap Chinese imports, have overshadowed any doubts the international community may have about exactly how Chinese companies are able to produce DVD players that sell for less than $50."

All of this is reflected in growing discontent. The number of so-called 'mass incidents' (sit-ins, riots, strikes and demonstrations) each year has grown 7-fold since 1994 and the number of participants by 5-fold. In 2004 there were 74,000 such incidents with about 3.7m people. The number of petitions to the central government has also reached a record high.

Luckily for Beijing, brewing social unrest has not precipitated a nationwide crisis, and participants in these incidents, localised and poorly organised, have yet to form an anti-government movement with mass appeal. Most incidents are triggered by specific grievances (unpaid wages, high taxes and arbitrary land seizures). The government occasionally appeases protesters by punishing local officials or redressing these grievances. If that fails, the authorities can always call on well-equipped anti-riot police. (FT 6/11/05)

This sounded somewhat like Vietnam to me, although in that case the number of incidents does not seem to be rising, the main reason for them has always been land rather than unpaid wages or taxes, and while the armed forces have been used to restore order, the more frequent response is to send in the Prime Minister or Party Secretary to solve the problem. Maybe the difference lies in the paragraph below from the same article.

At a more fundamental level, China’s investment-driven growth strategy, which powers economic growth with excessive physical capital but short-changes practically everything else, is generating crushing social strains: environmental degradation, a collapsing public health system and neglect of the poor. The resulting social discontent is further amplified by an unresponsive authoritarian political system with few pressure valves. Ordinary Chinese citizens have little recourse for redressing grievances. The official petition system, which ostensibly enables aggrieved individuals to seek intervention by higher officials, has broken down. Only two in 1,000 petitions actually lead to some kind of resolution. Chinese courts offer little judicial relief. They accept only about 90,000 lawsuits against local authorities each year and rule against the government in less than 25 per cent of the cases. On rare occasions, Chinese media may publicise a particularly egregious case of official abuse of power, and subsequent public outrage forces the central government to act.

The first sentence seems to correspond closely to the Vietnamese case, but I think the responsiveness of the Vietnamese authorities is greater (except in the case of certain ethnic minorities who continue to suffer from government paranoia deriving from earlier associations with US-supported separatist movements). Nevertheless, given the similar underlying causes of continued poverty and unrest, it will be interesting to watch whether and how far the two states diverge in their management of the problem in future.

Must do something about this!

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