Tuesday, 26 May 2009

A Dead-Man's Revolution

For all intents and purposes, Guatemala is a failed state and this is of no surprise given its chequered past. Until 1996 there was an ongoing war between left-wing guerillas and governing military dictators in which 200,000 died. As a result there was an influx of guns into the country. When peace arrived, drug-trafficking syndicates were being set-up across Central America and many of the former fighters turned to crime. Nowadays both crime and corruption pervade Guatemalan politics.

With a murder rate of nearly 50 per 100,000 Rodrigo Rosenberg should have simply have been another victim of the state but what the president Álvaro Colom did not expect was a posthumous indictment which was then given to the press. At first the president tried to fob the video off as a fake but when the video was verified, Colom turned to accusations of a right-wing plot.

Unsurprisingly there was a backlash against this with a protest outside the presidential palace in Guatemala City on 17th May. Protesters were also angry about suspected money laundering first suggested by Jean Anleu Fernández (@Jeanfer) on our very own Twitter. Thus, although a rival protest organised with public funds also took place, it was no match for those calling for Colom to step down.

Now the UN and FBI have got involved and will hopefully provide some justice for Mr Rosenberg's family. More importantly though his death must not be in vain. The fact those in political office cannot be prosecuted and that the army has now been given a greater role in quelling unrest must not deter those campaigning for what Colom once offered himself; good government and justice in Guatemala.

Saturday, 23 May 2009

Falling on Deaf Ears

But a yes to China may also be a yes to Taiwan

The Taiwanese are no stranger to taking to the streets as seen in 2006 when they campaigned against the corruption of then president Chen Shui-bian. In 2008 the KMT returned to power with 81 out of the 112 seats available in the Legislative Yuan compared with the 27 seats of Chen's party. Part of the reason for the demise of the Democratic Progressive Party (DPP) was their hostile relations with mainland China as they sought to become more economically independent.

This policy has now been reversed by current president Ma Ying-jeou and to good effect. A slight dip in the polls may be expected due to the global financial crisis but the pro-China policies seem to have kept this to a minimum. In general the stock market has been doing well and very recently the Taiwanese Health Minister was invited to the World Health Assembly as an observer for the first time in 38 years.

However recent suggestions from Ma about the possibility of a free trade agreement with China have sparked opposition from the DPP. They took to the streets on 17th May calling Ma a traitor and attempting to organise a referendum on the issue.

In fact such an agreement may be essential to the economic survival of Taiwan in the future. Similar agreements have already been signed with other South-East Asian countries and will take effect next year. In order to weather this storm a free-trade agreement between Taipei and Beijing must be signed. The protestors may be rightly concerned about some political concessions made in the course of dealings but it will be worth biting the bullet.

The DPP suggest that 600,000 took part in their protest but this figure is exaggerated and police estimate the figure as being nearer 76,000. Nevertheless the government should be worried that opposition may become more radical and there are already signs of this happening. Let's hope this dog stops barking and doesn't develop a bite.

Thursday, 21 May 2009

Braving the Storm

Canada defys the world

Unlike their American neighbours, Canada's banking system has held up superbly during the global banking crisis. In fact, they even made a profit during the last quarter when most would agree market conditions were at their worst. This has unsurprisingly led to many world leaders looking towards the Canadian model; not least Barack Obama.

What makes Canada so unique then? Well it seems that in Canada there are five major banks that dominate independent brokers. Compared to America, where 70% of mortgages were given by independents, Canada's smaller banks and lenders only originate 30% of the total. The result is that Canada's 'big five' are almost too big to fail although this in turn stifles competition.

Looking, for example, at the relatively short period of 1997-2008, RBS made 10 times as much as the Royal Bank of Canada. Furthermore, having such an oligopoly means the government has to supervise the banking system more than in other countries. Interest paid on home loans is tax-deductible in America but this is not the case in Canada plus most mortgages have to be insured by the 'Canada Mortgage and Housing Corporation'. Nevertheless, the scrutinisation that applies to new mortgages keeps the banks honest and has not got unnoticed in the American media. Some even suggest that the bigger housing-finance companies such as Fannie Mae and Freddie Mac should guarantee mortgages rather than buying them.

Overall though it seems unlikely that America will ever adopt such a conservative model. As one banker put it "the United States has an inherently higher risk appetite".

Wednesday, 20 May 2009

A Tough Nut to Crack

It has been a long time since Israel has faced any real pressure from America over their position in the Middle-East but this is potentially set to change during the Obama era. Recently vice-president Joe Biden told AIPAC: "You’re not going to like me saying this, but [do] not build those settlements. Dismantle existing outposts, and allow the Palestinians freedom of movement,". Israel itself is in a good position to fight it's corner though and arguably couldn't have a better man to lead the charge. Binyamin Netanyahu disrupted the peace process as Prime Minsiter from 1996-99 leading Bill Clinton to splutter "that son of a bitch doesn't want a deal". Although Obama himself is a novice in this sticky mire he will be aware that Netanyahu will back down under pressure. Furthermore, it is my opinion that George Mitchell will prove himself to be an effective peace envoy to the region.

Netanyahu doesn't come to the table empty-handed though and refuses to prevent the growth of Jewish settlements and will not surrender the Golan Heights amongst publicly refusing to accept the notion of two states. In this respect, Obama cannot afford to give to much away and must play a tough game. The Democrat administration may even be helping Israel in the long-term by doing so as it will force them to take actions which will appease the Arab states. Another thing which must be sorted out is the government of the Palestinian state which must provide a stable base. Again, Israel must co-operate strongly here even if this means not interfering.

One thing is for sure though. Obama must get stuck in to this problem now in order to deal with the conflict and cannot stick with the rhetoric seen on Monday. Obama gives a keynote speech in Cairo next month and it is certainly no understatement to say the world waits.

Sunday, 17 May 2009

The Fallout from the Expenses Scandal

I haven't written about this yet and to be quite honest have generally taken little interest in it. Hopefully I can use this slightly detached position to take a more intelligent view of the issue than some bloggers and tabloid newspapers.

I should probably state my position in relation to MPs generally and in this current climate it is especially important to do so as it seems my own view is now quite radical. MPs generally do an excellent job and it should be remembered that often their work isn't easy. To go through all of this now would be impossible but it is enough to say that their hard work often goes unrecognised by constituents and unnoticed in the press (both national and local). A more expansive article on this is available here. Unfortunately such points are lost in the swathe of uproar and it is unsurprising that now 85% of people think MPs are "self-serving and out of touch".

Although the scandal is now subsiding it will have a damaging effect in the future. Take the elections set to happen on the 4th June. With such a dim view of representatives now taken by the British electorate I predict turnout will be lower than usual and many ballots will be spoilt. Although I have long been an advocate of the availability of the vote blanc, an especially low turnout will take a proverbial piss on the democratic system.

Furthermore, in this time of economic hardship it is clear that cuts will have to be made to public services. This will be hard to justify in a climate when MPs are seen to be feathering their own nests. Meanwhile any campaign to crack down on benefit cheats will come across as, at best, ironic.

Although I have now rested the case for the defence, clearly this mess needs to be sorted out. Immediately we have to deal with those MPs who have seriously abused the system. Although the system is admittedly faulty, not all MPs have exploited the system with major disregard so those who have done must suffer the consequences. On Question Time last Thursday, comparisons were made with such an abuse in the commercial world and though this is not the same thing; people are rightly angry. Heads have and will roll and despite debate as to what constitutes a major abuse of expenses it is important for the public's sake that action is seen to be being taken. I believe the culmination of this will be a successful vote of no-confidence against the speaker next week.

In the long term we have to consider an alternative system to the one which the MPs themselves have designed. It's not an awful system necessarily but clearly it has lost all public confidence and there is cross-party support for a new system which could come from either an independent commission or at least the Committee on Standards in Public Life.

In my opinion the best way forward is to completely ditch the second home allowance. This would mean that MPs salaries would have to be raised by around £30-40,000 which, it has to be conceded, seems unfeasible in the current climate. However, this would not be a bad option for the Conservatives to take up once they attain power. Recent polls suggest that the Tories hold a huge lead over Labour and such a policy may be controversial but would get passed if it is presented as ending the possibility for abuse of the system once and for all. Another criticism is that not all MPs would use the extra money for the purpose intended and may simply keep the money and live with friends/family in the capital. This, in my opinion, is fine! People are never told how to spend their salaries so why start now with MPs? GPs and headteachers are now paid more than MPs and whilst their work is important; these guys are running the country.

Thursday, 14 May 2009

Terry Leahy for PM?

As an advocate for laissez-faire it is somewhat upsetting to see people in these troubled economic times looking towards more regulation in finance. However there is one country that seems to have bucked the trend and in an unlikely corner of the world too.

South America is famed for it's tendency towards the left-wing and this stereotype has only been confirmed in recent years after Latin America's left has enjoyed success at the polls. However, in a recent election, Ricardo Martinelli (<-Enjoy the tune btw) became the new 'el presidente' of Panama with 60% of the popular vote, beating Balbina Herrera of the governing centre-left party.

What makes Martinelli an unusual candidate is that he is the owner of Super 99 the country's largest supermarket chain. In fact, including all his interests, Martinelli's wealth covers 2% of the Panamanian GDP. It is therefore unsurprising to hear that he wants to cut corporate tax. Such a conflict of interest would be ripped apart in British politics but clearly the Panamanian people want Martinelli to run the country as efficiently as his supermarket.

The election comes at a crucial time in Panamanian development. After rapid economic development of around 8% per year for the past 5 years, Panama has hit a slowdown and with a property bust and rising food prices (sound familiar?) it will be interesting to see how a businessman handles the situation.

Tuesday, 12 May 2009

Obama's Big Decision

America waits in suspense as David Souter announced his retirement from the Supreme Court. The importance of this cannot be emphasised enough. The Supreme Court has the power to interpret the constitution and as the final court of appeal; it's decision remains final.

Despite this power, the system of checks and balances which operates in the US means that it is up to the president to nominate members to the Supreme Court when there is a death or retirement etc. Thus the decision lies in the hands of new president Barack Obama to replace Souter. This is a sensitive decision, not least because judges are appointed for life, but also because of the scrutiny placed on the decision. Take the proposal put forward in 1987 to have Robert Bork appointed which was resoundingly rejected by the Senate. Meanwhile the appointment of Clarence Thomas was only passed with a small majority in 1991 following allegations of sexual harassment at work. This problem has even been parodied in 'Supreme Courtship' by Christopher Buckley.

In theory Obama shouldn't have the same problem, or at least to not the same extent. The strong Democrat majority in both houses and general popular support for the government means Obama's choice should get in. Nevertheless, the media will have a field day scrutinising the new judge. It is therefore perhaps of no surprise that it will most likely be October before he (or she) takes their seat.

It is my opinion that Obama needs to see this as more of an opportunity than a threat. With gay marriage being such a prevalent issue in American news at the moment, this could be the chance to enforce the liberal wing of the Supreme Court. In the past this has been headed by Ruth Bader Ginsburg but has often lost out to the more conservative wing.

The liberal wing has gained some minor victories in recent years and surprisingly it was Souter who took the lead part in some of these cases as in Lee v. Weisman hyperlinked above. This was a surprise to many as it was expected that Souter was a staunch conservative when nominated by George Bush Snr. Obama has the chance to strengthen the liberal wing but must make sure he doesn't get the opposite of Souter, i.e. a conservative with a liberal façade.

Sunday, 10 May 2009

The problem with charity

Arguably this latest blog takes laissez-faire capitalism to an extreme level not even particularly explored by the likes of Hayek or Rand. It concerns activities at a personal level which can affect the fine balance of the global economic system. A few years ago now, people from my school went on a World Challenge trip to Tanzania to help in a village which assumedly was suffering relatively worse conditions to here in the UK. I do not question their good deed per se but doubt their competency in relation to the wider political issues in Tanzania and Africa as a whole.

Compared to neighbouring Kenya, Tanzania is generally more economically successful. There is commercial development in provincial towns as well as new road and water projects. Furthermore, Tanzania can lay claim to a common national identity which is rare in many African countries. One only has to look at the debacle in Kenya last year for evidence. Even at elections the ruling party tend to dominate through its popularity and propaganda rather than guns and terror.

So why did this bunch of do-gooders go to Tanzania rather than say Kenya? Well it’s obvious really from the previous paragraph. In the words of the ‘Dogs Die in Hot Cars’ song they are “Godhopping for good times, when everything starts to go wrong”. In other words they are prepared to help out poor people in a politically stable country but not those who suffer from both political and economic strife.

The effect of this is potentially disastrous. Africa will become divided as a continent between those stable countries that receive aid and help from the developed world (Tanzania gets 40% of its government budget in aid) and those that are caught up by the ravages of war. I believe that when looking at issues of charity such as this it is important to look at things from a wider perspective and take into account the political situation.

Thus my argument states that the answer to Africa’s problem does not lie in the form of billions of dollars of aid but rather in the stability of a region; which must be achieved as a primary goal. It is no use sending more money to a country where the money will be spent profitably as opposed to where the money will be spent on arms because this only highlights the problem further.

What is the answer then? In order to create stability it is clear that corrupt governments need to be removed and proper democratic systems set up and established. This takes time and cannot be done by throwing money at the problem. It is possible for the Western world to do this directly by means of invasion and this was considered by Britain in relation to Zimbabwe. This could potentially work for countries that are in as dire a situation as Zimbabwe where the people are desperate but in most cases this would merely be seen as a return to colonial times and wouldn’t be appreciated either locally or globally.

I believe the answer lies in Africa itself. Through self-regulation and internal pressure the African community can really force their neighbours to be more open democratically. The possibility of economic embargoes imposed by such unions would also create much-needed pressure. If organisations such as the EAC were more closely knit and functioned as more than just a trading bloc then it would be possible for Tanzania to pressurise the Kenyan government into fairer elections. The effect would be mutually beneficial as the Kenyan people would be relieved of their political strife and would be able to begin developing as a proper economy whilst Tanzania would gain a reliable trading partner.

Friday, 8 May 2009

The Death of Capitalism

This evening's comedy on BBC 1, 'Reggie Perrin', once again failed to make me laugh but did make one interesting point. Clunes' character suggested that society is resigned to capitalism because the other economic systems of Communism and thieving don't work. This makes an all too clear distinction between what is a grey area.

However the G20 protests suggested that some are becoming disenfranchised with capitalism and the economic downturn has unsurprisingly got some people questioning, at the very least, the Anglo-Saxon, laissez-faire approach to capitalism. Of course it would be absurd to suggest a Communist revolution or the destruction of the criminal justice system but many are beginning to look at the continental approach for guidance in these tough times. Countries like Germany and France seemed to have held up well despite the current climate and although there have been shortfalls in relation to industry and employment this is nothing compared to the situation in Britain and America.

Is the French model the one to pursue in the future then? The answer is probably not and I think the reason for this will become evident in the near future when the global economy begins to recover. Whilst it is predicted that Britain and the USA will make a swift recovery and may even be stronger on the other side of the recession, other countries such as France will make a slower recovery as they pay the price for their welfare system which for the time being has protected employment.