editorials/op eds
Monday, January 26, 2004
nyt 24jan04
caramba... lulinha tah bem...
January 24, 2004
Brazil's Moment
A year after assuming Brazil's presidency, Luiz Inácio Lula da Silva, a longtime labor activist, has displaced Vicente Fox of Mexico as the most influential Latin American leader, and he is an increasingly powerful presence on the global stage. The repercussions of Brazil's ascendancy for the Bush administration are clear: better ties with the rest of Latin America now hinge on a closer relationship with Brasília.
Brazil's retaliatory fingerprinting of visitors from the United States in response to new American security measures is an indication of longstanding frictions in the relationship. Despite being the largest country in Latin America, Brazil has usually stood apart from its Spanish-speaking neighbors. And Mr. da Silva's leftist world view is often at odds with that of the Bush administration.
His growing clout reflects a broader shift in the continent's center of political gravity in the last three years. In the absence of robust economic growth, Latin American governments eager to follow Washington's lead on trade and economic policy have been replaced by more populist ones, which are wary of American intentions. From Hugo Chávez of Venezuela to Néstor Kirchner of Argentina, Latin leaders are looking less to Mexico and more to Brazil to provide regional leadership.
Our relations with Brazil, a country little understood by Americans but which sees itself as the United States of South America, have always been complicated. A medium-size industrial power and an agricultural superpower, Brazil does not rely on trade with the United States to the same degree as most Latin American countries. Brasília is more interested in cementing a close-knit South American bloc than in buying into a Washington-dominated hemispheric arrangement.
Brazil led the entire developing world last year in opposing the further liberalization of global trade until and unless the United States and Europe stop giving their farmers subsidies that provide them an unfair advantage on world markets.
Still, Brazil's president is hardly a reckless firebrand. Wall Street applauds his prudent fiscal policies, which helped stave off a potential debt and currency crisis that could have affected all emerging markets. Moreover, President da Silva has acknowledged that it is important for Colombia to defeat its drug-trafficking guerrilla movements.
So long as Washington moves beyond outdated notions that Latin America must march behind us in lock-step unity on every issue, there is reason to believe that a more constructive relationship can be cultivated with Brazil. It's important to try.
Friday, October 10, 2003
GOVERNATOR
ft 09oct03
Terminator 4
Published: October 9 2003 5:00 | Last Updated: October 9 2003 5:00
Arnold Schwarzenegger's victory in the California recall election is testimony to the power of celebrity politics in the US. Aside from his name, his oversized muscles and his long-suffering Kennedy dynasty spouse, Mr Schwarzenegger is not the most obvious candidate to take over as governor of what Gray Davis, the hapless Democratic incumbent, liked to describe as the fifth largest economy in the world.
Unlike Ronald Reagan, a fellow Hollywood actor who served as governor of the Golden State and went on to greater political heights, Mr Schwarzenegger is a political ingénu. He is a social liberal and a fiscal conservative with a soft spot for environmentalists. He does not fit any obvious political label. He is most emphatically not one of the rock-ribbed Republicans who once dominated California politics. Yet these unconventional qualities are precisely those that helped him to victory over Mr Davis and assorted publicity-seekers and oddballs.
Many, including this newspaper, have deplored the crude mechanism of the recall. The process offers a chance for millionaires, such as Mr Schwarzenegger, to manipulate the political agenda. More seriously, the recall undermined the legitimacy of a governor who had secured a popular mandate just 11 months before. However weak his recent record of vacillation and pandering to vested interests, Mr Davis deserved more time.
However, Governor-elect Schwarzenegger's victory - with more votes than Mr Davis got last year - gives him a popular mandate to tackle what is arguably the biggest crisis the state has faced in more than a century. The state budget deficit is at least $8bn (£4.9bn). Millions of jobs have been lost since the dotcom bust. Education standards are a disgrace. Skilled people are moving to other states.
Moreover, by clearly rejecting Cruz Bustamante, the Democratic establishment's alternative to Mr Davis, voters sent a strong signal to the do-nothing Democrat-dominated legislature. They want co-operation not confrontation.
Mr Schwarzenegger refused during his brief campaign to discuss how he would bridge the deficit or remedy the state's long-term malaise. These problems cannot simply be terminated. Nor is it obvious how his opposition to higher property taxes helps him in this respect. He might want to have another word with Warren Buffett, his economic adviser, on this point.
The wider lessons of the California recall are less clear. Some Democrats see the popular revolt against a fiscally irresponsible administration as bad news for President George W. Bush. Republican strategists herald the Schwarzenegger victory as a signal that Mr Bush will take the huge electoral prize of California in next year's presidential race. In practice, neither claim may hold up. The recall verdict may be no more than the triumph of a populist over an incumbent, a trend in western democracies from the US to France and the Netherlands.
Thursday, October 09, 2003
GOVERNATOR
wsj editorial
October 9, 2003
REVIEW & OUTLOOK
Earthquake Arnold
So much for the recall "circus." Arnold Schwarzenegger's landslide victory Tuesday amounts to a loud and deliberate repudiation of the political class that has done so much harm to California. Winning so easily, the new Governor can now claim a mandate, if he's willing to seize it.
Special congratulations belong to California's voters, who proved all of the national mockery wrong. They were perfectly capable of separating the Ariannas from the serious candidates as well as the serious issues from last-minute political hits. The people who should be embarrassed are members of the press corps, both state and national, who were too busy sneering to see the real story: a brewing popular revolt unlike any since Proposition 13 a generation ago.
In an election marked by a heavy turnout, 55% voted "yes" on the recall, including a quarter of liberals and some 30% of moderate Democrats. Mr. Schwarzenegger and his closest Republican rival, state Senator Tom McClintock, combined for more than 60% of the vote in a Democrat-leaning state. Gropergate notwithstanding, Arnold won even among women. The Governor-elect by himself collected more votes (48%) than those who voted "no" on the recall (45%).
No doubt some of Mr. Schwarzenegger's appeal was personal, since as an actor and first-time candidate he was by definition not part of the political class. Other indicators suggest that voters wanted to punish not just Governor Gray Davis but Democratic leadership generally. The actor routed the most prominent Democrat in the race, Lieutenant Governor Cruz Bustamante. Exit polls indicate that 57% of voters held an unfavorable view of the state's No. 2 official. Despite blunt class-warfare and ethnic appeals throughout the campaign, he ended up with less than two-thirds of the Latino vote and less than a third of the independent vote.
The recall was undeniably a personal defeat for Mr. Davis, and his fate should instruct other politicians that failing to lead can be fatal. At every stage of the energy and budget crises, the Governor sought to point the finger at everyone but himself -- the utilities, Enron, Republicans in Sacramento, President Bush, the tides. Fed up, voters finally pinned the blame on him and the Democratic interest groups he pandered to in an effort to save his own skin. The lesson here is that it's sometimes safer to take political risks and do the right thing, even if the initial polls tell you it's unpopular. Mr. Davis never did, and now he's out of a job.
It's now up to Governor Schwarzenegger to do something about the "progressive" train wreck he's inherited. That won't be easy with hostile Democratic majorities in the legislature. But Arnold brings considerable assets to the fight, not least of which is his star power. The state legislature in Sacramento has been operating under a rock for 20 years with almost no news coverage. Mr. Schwarzenegger can turn over that rock, shine a light and threaten to take issues to the voters if the legislature resists.
The Democrats will no doubt try to break him by making a tax increase the price of any reform or spending cuts. Mr. Schwarzenegger said he wouldn't raise taxes but never took the no-tax pledge. What he needs to appreciate is that if he gives in he will alienate his most loyal supporters and cripple his chance of success. Tax increases would be especially hurtful in a recovering economy, sapping the growth the state needs to close its budget gap.
The new Governor should also work to fulfill his campaign promises, such as addressing California's workers' compensation system, enacting tort reform and repealing the Democrats' recent 300% hike in the car tax. Improving the state's business climate and restraining government growth are essential. A useful step would be the reinstitution of spending limits to prevent outlays from growing faster than a combination of state GDP and population.
Tax reform of the kind recently proposed on these pages by economist Art Laffer would be a harder political challenge, but structural changes are needed to restore the state's long-term economic health. Mr. McClintock should have quit the race a week ago, but Mr. Schwarzenegger would still be wise to make him an ally and steal his ideas on this front.
As for the Democrats, the smarter ones will understand the rebuke they just received and try to work with the new Governor. Court challenges and continued personal attacks could backfire. If they're not careful, Democrats could wake up 13 months from now and find that their legislative majorities have also been terminated.
URL for this article:
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Updated October 9, 2003
GOVERNATOR
wsp editorial
Recalled to Reality
Thursday, October 9, 2003; Page A36
AS WRETCHED AN IDEA as the California recall was, as insultingly substance-free a campaign as the winner ran, there are some positive things to say in its aftermath. The worst recall scenario -- that a candidate in the crowded field could be elected with just a sliver of popular support, undermining his or her political legitimacy -- didn't happen: More Californians voted to make Arnold Schwarzenegger governor than to retain Gray Davis. Indeed, Mr. Schwarzenegger captured a greater percentage of the vote and attracted more total votes this year than Mr. Davis did when he was reelected last year. Turnout was strong (about 60 percent) -- far above the anemic, dispirited showing (51 percent) of the last election.
Mr. Schwarzenegger's campaign was an irresponsible blend of bluster and evasion, perhaps best illustrated at a rally just before the election when he had a wrecking ball dropped on an old car "to show you exactly what we are going to do to the car tax." Yet the recall also gave Californians the chance to vote for the kind of Republican who is in tune with a majority of the state on social issues -- abortion, gay rights, gun control -- but unlikely to survive an ordinary GOP primary. Meanwhile, voters defeated a ballot measure that would have imposed yet another straitjacket on state spending, this time to devote a set percentage of funds to improving the deteriorating infrastructure. Could this be an indication that Californians finally are figuring out that they can't order the government to spend on various worthy causes, hamstring its ability to raise revenue and still expect a balanced budget?
Indeed, Mr. Schwarzenegger is about to discover this himself. The state faces a shortfall of at least $8 billion, and "step one" on his 100-day agenda is to repeal the tripling of the car tax, a move that may be popular but that will put the state $4 billion further in the red. Next come spending cuts, but Mr. Schwarzenegger has already put education spending, which accounts for more than half the state's budget, off limits. "Details, details, details. Sacramento is filled with warehouses of details," Mr. Schwarzenegger said dismissively during the campaign, as he was being pressed about where, exactly, he would trim. Now that he's got the keys to the warehouse, Mr. Schwarzenegger is going to have to delve into some of those annoying details. A budget needs to be submitted to the state legislature by Jan. 10. During the campaign, Mr. Schwarzenegger wisely left himself a bit of wiggle room on taxes. "You can't ever say never," he said, citing the possibility of an earthquake or a terrorist attack. Mr. Schwarzenegger was more categorical yesterday in ruling out new taxes, and he may yet regret those words. The more likely disaster to befall California is not a natural one but a shaky credit rating that could force the new governor to reconsider his no-new-taxes stance.
Having unleashed one misguided recall, the worst thing that Californians could do would be to continue the cycle. Democrats ought to make clear that they will not support another recall effort that could only disrupt matters further. As for the larger lessons of Tuesday's vote, incumbents of all stripes have some reason to be nervous. Angry voters, once roused, aren't easy to placate.
GOVERNATOR
nyt editorial
October 9, 2003
California's Day After: Governor Schwarzenegger
he results of the California recall are giving us pause, beyond the difficulty of adjusting to the phrase "Gov. Arnold Schwarzenegger." New York, after all, also has a governor who concealed the bad news about the state's impending deficit until he was safely re-elected, along with a State Legislature that gives a whole new resonance to the word dysfunction. But no one seems to be trying to replace George Pataki with Robert DeNiro.
New York, like most states, makes it difficult for voters to indulge in fits of pique at politics as usual by installing an action hero in the governor's office. Alienated citizens can't rush in and register to vote on Election Day, as they did in Minnesota when Jesse Ventura was elected. They don't have the option of a recall, as Californians do. The political tradition in New York might best be described as antipopulist. On Tuesday night at least, that didn't seem entirely bad.
California's system is actually the worst of all evils. The voters micromanage the state budget through one referendum after another. But they are generally deprived of real choice in picking state officials. Right-wing Republicans have been able to control their party's nominating process, forcing a moderate-to-liberal populace to accept whatever slate the Democrats deign to offer. Mr. Schwarzenegger, a moderate-to-liberal Republican, would have had a much tougher time in a primary than he did in this race, where he was able to insert himself onto the ballot without the party's screening.
The final days of the race were dominated by charges from a growing crowd of female accusers that Mr. Schwarzenegger was, at best, a boor when it came to dealing with vulnerable women. The voters seemed in the main to ignore the issue, demonstrating once again that a politician's private sins bother the citizenry only if they clash violently with his public image. There isn't much in Mr. Schwarzenegger's film career that would have caused people to be shocked by the news that he has behaved like a sexist and a bully off camera.
The exit polls did not shed much light on the California voters' feelings, except their profound sense of irritation. A sizeable chunk of the Schwarzenegger voters said they had voted on the issues, but agreed that he had not really addressed them.
Now everyone wants to see what happens next. California is famously difficult to govern, and Mr. Schwarzenegger will not have any more options than Gray Davis did when it comes to balancing the state's budget. Perhaps the voters understand that, and simply want to stagger through their current economic woes with a chief executive who is more diverting than the dour Mr. Davis. During the campaign, Mr. Schwarzenegger had a huge advantage in the low expectations that everyone had about him. In politics, it is better to be lucky than to be good. But Mr. Schwarzenegger already knew that from his movie days.
wsj 09oct03
on gse: privatize or nationalize
October 9, 2003
REVIEW & OUTLOOK
Fannie Takes the Hill
Sober analysts have been saying for years that Fannie Mae and Freddie Mac are dangerous. And so they have always seemed to us -- on paper. But this week, when it became clear that the House of Representatives couldn't get even a modest regulatory bill out of committee, the dangers became clear in reality.
Congress, which has ultimate oversight over these two government-sponsored hedge funds, was moved to act after a year in which Fan and Fred experienced some financial and corporate governance blowups. Earnings surprises and accounting scandals have demonstrated that Fan and Fred's current regulator, the Office of Federal Housing Enterprise Oversight, was utterly clueless. Obviously stronger regulatory oversight was needed. The Bush Administration and House Financial Services Committee Member Richard Baker (R., Louisiana) proposed that Fan and Fred be brought under Treasury's authority.
And then the fun began. At first, Fannie Mae took her usual magisterial tone and welcomed stronger regulation. Franklin Raines, Fan's boss, testified that he supported the move to Treasury and intoned that he "looked forward to working with Congress and the Administration to adopt the proposal into law this year."
Behind the scenes, however, Fan has been lobbying her head off against the bill. Fan's chief objection is to a provision moving the power to approve new products from the Department of Housing and Urban Development to Treasury. But in a three-page paper, widely circulated on Capitol Hill, Fan has also raised major objections to other parts of the legislation. Fannie is nothing if not a bossy and effective lobbyist, and various Congress people started caving in, right and left.
No surprise then that the bill was gutted, leaving Treasury with a limp carcass. But Treasury refused to take delivery, arguing that the gutted bill would cripple its ability to provide significant oversight. Quite sensibly, Treasury does not want the responsibility for Fan and Fred without the authority to police them.
The House Financial Services Committee has now postponed a vote indefinitely. And Representative Baker, who had been working in good faith with Fan and Fred to achieve reform, has pretty much thrown in the towel. After the effort fell apart, he put out a statement blaming them for "obstructionism and mendacity."
Of course it's all very good theater. Fan and Fred need to find a credible regulator soon, so they can assure investors that the political risk that has been weighing on their stock prices is at an end. This goal, however, is complicated by a Catch-22. They need a credible regulator to convince the markets that they aren't risky propositions, but a credible regulator might wring some risk out of their operations and make their returns less attractive to the market. Their too-clever-by-half solution has been to welcome Treasury as a strong regulator but to make sure that Treasury didn't have any real authority.
Fan and Fred have grown fat on the public purse. Their implicit backing from the federal government has subsidized their speedy growth into two of the largest financial institutions in the country. They are now so big and powerful that they can, apparently, dictate the terms of their existence to Congress.
Lack of accountability in any government-connected enterprise is dangerous. And we are now witnessing that danger firsthand in the fight over regulatory authority. What makes this particularly dangerous is that Fan and Fred's current regulatory setup has allowed them to indulge in all sorts of risky practices. And the taxpayers are on the hook for risks that go sour.
Simply put, Fan and Fred enjoy private profits at great public risk. There are two ultimate remedies for this problem. Either privatize or nationalize. We have always favored privatization. But if the pair can defeat any serious public financial accountability, privatization is even less likely to make it through Congress. So perhaps the Members ought to consider calling these fundamentally public entities what they truly are, government protectorates that taxpayers are guaranteeing even if they don't realize it. At least nationalizing Fan and Fred would be more honest about who is really on the hook.
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Updated October 9, 2003
Monday, October 06, 2003
barrons 06oct03
wants lower spending!!
Monday, October 6, 2003
EDITORIAL COMMENTARY
Happy New (Fiscal) Year
The federal government once again backs into the future
By THOMAS G. DONLAN
HARDLY A MURMUR of apprehension was heard last week when the federal government lumbered into a new fiscal year with only three of 13 appropriations bills enacted. There's no worrying about a government shutdown: The feds are running this month on a continuing resolution, just as they do nearly every year at this time, come Democrats or come Republicans to power.
The continuing resolution permits the government to stay open for business as if it were still fiscal 2003. All laws on spending simply carry forward another month, or until they are replaced by new laws for fiscal 2004.
In such circumstances, it should not be surprising that Congress plans to go home for a Columbus Day recess, or that it already is working on a supplemental appropriation -- the hotly debated extra appropriation for the cost of the Iraq war and postwar reconstruction. Price tag: $87 billion, and the administration says it will be the only emergency supplemental this year, assuming no other military, economic or financial crises arrive without fair warning. Even an optimist might say just wait until next year -- and a pessimist will say no, wait until later this year.
Poor timing, however, may be the least of the government's deficit woes. The sheer size of the deficit -- more than half a trillion dollars -- and the neck-snapping speed with which surpluses converted themselves to deficits have astonished and frightened...practically nobody except the Concord Coalition and eight or nine people running for the Democratic nomination for president.
Their Democratic colleagues in Congress are working as hard as Republicans to get those spending bills laden with as much spending for guns as possible, even as Republicans are working as hard as Democrats to enact the spending bills that call for as much spending on butter as possible.
Does this remind anyone of the fiscal policy of the late 1960s?
Keynesians and Hooverians
As President Nixon famously observed in 1972, after following several years of Democratic guns and butter policies with more of the same, "We are all Keynesians now," by which he meant that it was orthodox economic policy for Republicans to run deficits in recessions. He might as well have said, "We are all Hooverians now," since such "counter-cyclical" policies date to the Republican administration of Herbert Hoover.
With Keynesian economic theory for a foundation, President Bush has given his tax cuts credit for the mildness and brevity of the recession. They put money in consumers' pockets at just the right time to keep the economy moving.
The credit may be deserved, although the perfect timing surely was accidental. Bush campaigned for tax cuts on many grounds, most notably and reasonably that nobody should have to pay the federal government more than one-third of his income. But he never mentioned that another big reason for cutting taxes was that if he took office he would usher in a recession.
Other administration officials also maintain that the tax cuts and spending increases since January 20, 2001 were all for the best.
"Find a voice, a rational human being, who suggests the federal government should have run a surplus for the last three years," demands Peter Fisher, undersecretary of the Treasury for domestic finance.
Fisher may not know any rational human beings who think that the federal government should have run a surplus, but there are many rational people who would have preferred that the government lower spending instead of taxes, or -- our preference -- lower both taxes and spending. Some of them supported the long-lost Constitutional amendment to require a balanced budget, which was an element of the Republican Contract With America.
Imagine the fiscal follies we would be living through if that amendment had passed in Congress and been ratified by the requisite number of states. Washington would be in as much of a mess as Sacramento, and the nation would be looking for a national version of Arnold Schwarzenegger. Since the amendment resolution failed in the U.S. Senate by a single vote in 1995, Bush's would-be opponents, and many representatives and senators of both parties, can offer a more perfectly Hooverian policy of higher taxes and higher spending.
By the way, if Undersecretary Fisher's political touchstone is rationality, then he should hasten to reverse one of his major contributions to irrational finance before he leaves office later this week.
Peter Fisher is the guy who announced, on Oct. 31, 2001, that the Treasury would no longer issue 30-year bonds. By putting long money into other instruments, this may have done wonders for individual debtors, many of whom have refinanced their mortgages twice since then. But it's certainly not rational for the federal government to borrow short-term during a period of low interest rates. Bringing back the long bond would reduce the Treasury's vulnerability to higher interest costs.
Short-Sighted
Having seen surpluses appear as if by magic where there were deficits as far as the eye could see, and vice-versa, we don't put much faith in long-term forecasts of federal finances at the best of times. And this is not the best of times. Within 10 years, the leading edge of the baby boom will be claiming Social Security and Medicare benefits, which may well create deficits much larger than those contained in the most pessimistic forecasts. Over the next 10 years, heavy borrowing, a declining dollar and rapidly rising interest rates could push inflation to levels not seen since the 1970s.
Or not. The fiscal eye can't see very far. There are reasons for optimism also.
Despite the strongest efforts of the leaders of both parties in Congress, truly enormous spending increases such as a prescription-drug benefit in Medicare seem farther off than they did at the beginning of the year. The mandarins of Capitol Hill couldn't even agree on a gigantic new six-year highway bill because responsible lawmakers refused to let it go through unless it's paid for with a gas-tax increase.
The war and the reconstruction of Iraq, though costly, look a good deal cheaper than they did at the beginning of the year, when we did not know whether the Iraqi army would fight or what weapons it might use.
The short recession and the long stagnation have blown down some of the hollow trees in the corporate forest, and it's now clearer that the stronger trees are still standing tall. Productivity gains more than match losses in manufacturing employment, leaving capital and labor available to go to work on the next Big Thing, whatever it turns out to be.
There is a fair chance, in other words, that lots of people will get rich in the next 10 years, maybe even more than got rich in the 1990s. Which presents an interesting political problem: The politicians who want higher taxes on those rich folks ought to realize that they can't live without those rich folks. That fair chance is the only thing that really stands between the baby boom generation and the renunciation of all the federal promises it's counting on in retirement.
Gloomy Scorecard
After several decades of tax cuts and outright tax subsidies for low-income Americans, the rich are the main support of government for the rest of us. The top 10% of families paid about 65% of individual income taxes in 2001, while the bottom 50% paid only 4% of the tax bill. The progressive income tax was more progressive than most people imagined.
Unfortunately for the federal fisc, the rich weren't doing quite as well in 2001 as they were in 2000. The top 1% of taxpayers reported $1.09 trillion of income in 2001, down from $1.34 in 2000. The fed's total bite on the top 1% of taxpayers was $300 billion, down 18% from $367 billion in 2000. Taxes paid by the other 99% fell $26 billion. The overall result was that federal income tax revenues fell 9.4% even though individual income fell only 2.8%.
As is so often the case with the most important government statistics, the income report is nearly two years out of date. We can only guess how much more national wealth and federal revenue have been lost in the upper income strata in 2002 and 2003. But what does it matter? The national government keeps on spending just the same, with or without appropriations, with or without revenues.
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Editorial Page Editor Thomas G. Donlan received e-mail at tg.donlan@barrons.com1.
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Monday, September 22, 2003
ft editorial 22sep03
To: Everybody
Published: September 20 2003 5:00 | Last Updated: September 20 2003 5:00
Oh, for the days before e-mail: before the first half-hour of the day spent deleting invitations to enlarge various body parts and take custody of $100m from Nigeria; before sifting through copies of memos sent to 30 others; before constant forwarding of internet flotsam and jetsam; before the world of electronic logorrhea.
There can be few office workers whose hearts did not lift a little at the news that Phones 4u, the UK's second-biggest mobile phone retailer, has banned its 2,500 staff from communicating internally via e-mail. Henceforth they can exchange messages with customers and suppliers, but if they want to impart something to each other, they will have to say it.
Phones 4u estimates that it will save £1m a year in staff time and, if anything, this seems conservative. Few inventions have been as abused as e-mail - the ease and frictionless quality of being able to pop off a missive to 100 or 1,000 colleagues has filled offices with silent babble. Never mind the Viagra merchants; the worst spammers are inside the building.
Nor can it have escaped John Caudwell, chief executive of Phones 4u, that eliminating internal e-mail reduces the risk of an electronic paper trail coming back to bite you. The Wall Street firms that allowed analysts to tell colleagues in lurid detail how little they thought of the stocks they were recommending to investors have paid a hefty price.
Michael Eisner, chairman of Walt Disney, showed uncanny prescience in a memorable FT article about the perils of the all-pervasive email in May 2000: "I have come to believe that, if anything will bring about the downfall of a company or maybe a country, it is blind copies of e-mails that should never have been sent."
As Mr Eisner also pointed out, e-mail has particular pitfalls as a means of communicating with colleagues. It is so easily dispatched that it feels like the spoken word, yet it is as indelible as the written one. An incriminating e-mail will turn up at an inquiry or in a court case and an angry or unpleasant one will cause long-lasting bitterness among the recipients.
So three cheers for Mr Caudwell. Back to the pre-Lapsarian days of the water cooler, when we walked around to talk to each other and exchange a bit of gossip rather than wasting time polishing an e-mail. No more of those pompous announcements from above, or insidious ones from one's peers, intended to place on permanent record a minor victory.
It will not happen, of course. The hegemony of e-mail is too strong to be resisted; we now live in an electronic world, for good or ill. But it is not too late for companies to ponder how internal e-mail could be used more sparingly. Here are some suggestions. E-mails should convey essential information when conversation is impossible; use of the cc: and bcc: boxes should be minimised; showing-off and telling-off must be done face-to-face. And people, talk to each other.
Wednesday, September 03, 2003
nyt 03sep03
--------------------------------------------------------------------------------
September 3, 2003
Blaming Beijing
nemployment in America is high, and elections are on the horizon. It must be time to look east again for scapegoats. Japan is only starting to recover from its protracted recession, so China will be handed the role of economic villain in the coming election cycle. Expect to hear a chorus of presidential candidates blame unfair Chinese competition for the nation's manufacturing woes.
China's trading partners do have legitimate grievances, but it would be irresponsible and inaccurate for American politicians to pin our economic sluggishness on scheming culprits in Beijing.
Exhibit A of what is alleged to be the perfidy of Beijing's communist rulers is China's $100 billion trade surplus with the United States. Exhibit B in the evolving politicized debate, if not the smoking gun proving Beijing's unfairness, is China's undervalued currency, the yuan, because an undervalued currency makes a nation's exports more competitive. The yuan has been pegged at about 8.3 to the dollar for some time. But most economists say China's currency would appreciate by as much as a third if allowed to float freely.
Traveling in Asia yesterday, Treasury Secretary John Snow heeded political pressures back home in exhorting Chinese leaders to let the market price their currency. This is a desirable outcome in the long run, but a raft of immediate caveats come to mind.
China's financial system remains fragile, and sudden currency volatility could lead to a banking crisis that could spell disaster for the world economy. Washington would do better to urge China's leaders to focus on their lack of preparation to assume their proper role in the world's financial order, rather than to demand any supposedly quick fix. Moreover, China's refusal to devalue its currency in the aftermath of the late 1990's crises in East Asia (much appreciated by its neighbors and Washington at a time when the yuan seemed overvalued) adds credence to its leadership's insistence that it prizes stability when it comes to exchange rates, not short-term advantage. With most economists concerned that China's robust growth could fuel inflation and a speculative bubble, there are valid reasons for Beijing to fear a surging currency.
It would also be silly to argue that exchange rates, as opposed to cheap labor and other factors, are the primary reason Americans buy three-quarters of their toys from China. Nor does a prospering China, by definition, cost America jobs, as the experience of the late 1990's proved. American politicians should resist dusting off old complaints about Japan and redirecting them at China. This is hardly a case of an exporting nation that is unfairly protecting its own market. China's imports are growing at a faster clip than its exports, and the bulk of the exports registering in those eye-popping trade figures are goods built in China by the likes of Intel and America's automakers.
wsj 03sep03
September 3, 2003
REVIEW & OUTLOOK
Snowed in Beijing
Treasury Secretary John Snow is in Beijing this week urging China to revalue its currency -- counsel that we're happy to say the Chinese seem more than prepared to ignore. It's a shame Mr. Snow didn't focus on China's bigger economic challenge: liberalizing the flow of capital.
We sympathize with Mr. Snow in the sense that it's hard for any political actor to resist the flavor of the month, and China's strong yuan is now it. Everyone from the Democratic Presidential candidates to the usual suspects at the National Association of Manufacturers insist that China's swelling foreign exchange reserves are proof that the country is holding down the value of its currency to boost exports and steal American jobs. They say the market should set the value of the yuan. Allowing market forces to work sounds good to us, but first let's look at how China is failing to do so before jumping for the quick and dirty fix of currency manipulation.
It's true that the People's Bank of China is holding the value of the yuan stable against the U.S. dollar. But take the glib pronouncements that the yuan is 40% undervalued with a grain, or rather a block, of salt. The yuan might be under pressure to appreciate now, but that's only because capital is largely free to enter China but not free to leave. If the market were truly allowed to determine the yuan's value, it would quickly come under selling pressure.
That's because if capital controls were lifted, some of the trillions of yuan in Chinese household savings would migrate abroad in search of higher returns. China so far has been unable to channel this domestic capital into efficient enterprises because its state-run banks are mismanaged and its stock and bond markets are dysfunctional. Much of the country's own savings have been wasted on loss-making state-owned enterprises. That leaves China overly dependent on foreign investment, which has created its most efficient companies and accounts for more than half of its exports.
That's the real story behind China's rising forex reserves. Trade flows aren't the problem; China's trade surplus has actually been falling of late. Rather there is a surge of foreign investment into the country, partly due to its entry into the World Trade Organization. But this has also been exacerbated by the international pressure on Beijing to revalue the yuan, which only encourages individuals and companies to buy and hold the currency in anticipation of windfall profits.
Some serious problems are emerging as a result. The capital inflow seems to be creating a curious form of overheating: Even though prices in the real economy remain stable, real estate prices in some areas are soaring. Bank loans in the first seven months of 2003 exceeded the total figure for all of 2002. In short, there's a lot of froth in China's economy at the moment, and some of the capital inflows look like "hot money" making exchange-range bets.
The central bank has prudently responded by lifting the reserve ratio for banks to 7% from 6%, effectively pulling $150 billion from the pool of money available for loans. The fact that this in turn caused a cash crunch that forced the People's Bank to put some emergency liquidity back into the system shows that many Chinese banks were indeed lending very aggressively.
Reforming the banks and creating efficient capital markets is not something China is going to do overnight. But neither would allowing the yuan to float freely be of much benefit to China or the U.S. Revaluing the yuan even by 20% won't eliminate the cost savings that are driving factories exporting to the U.S. to move to China from other countries, and would just complicate business decisions.
It would also create the expectation of even further revaluation, which could produce a deflation spiral in one of the few economies in the world that is actually growing. Japan shows that a steadily appreciating currency doesn't eliminate trade surpluses. It merely postpones the reforms needed to create a true market economy.
Beijing is now most likely to take a series of smaller measures, like the minor easing of capital controls announced yesterday, evidently as a gesture to Mr. Snow. Rebates on value-added tax for exporters will likely be reduced, and Chinese are being allowed to travel abroad more freely and take more foreign exchange when they do. Implementing WTO commitments to lower barriers to imports can also be hurried along. All of these will take some of the pressure off the yuan while the ground is prepared for more fundamental reforms.
If all else fails, it may be necessary to widen the trading band of the yuan to allow some appreciation. But Mr. Snow would have been better to focus whatever influence the U.S. has in Beijing on domestic market reforms that would help keep China's economy moving in the direction of greater freedom and prosperity.
URL for this article:
http://online.wsj.com/article/0,,SB106254204734756900,00.html
Updated September 3, 2003
Sunday, August 31, 2003
wsp 30aug03
Let Venezuela Vote
Sunday, August 31, 2003; Page B06
FOR YEARS Venezuelans have debated whether President Hugo Chavez is prepared to impose his quasi-socialist "Bolivarian revolution" on the country by force or will respect the country's increasingly fragile democratic rules. Now they will likely learn the answer. Unless Mr. Chavez directly violates or obstructs the constitution promulgated under his own government, he probably will have to face a recall referendum in the coming few months. Such a vote, nominally agreed on by the president and opposition in June, would give Venezuela a peaceful way out of a civil conflict that threatens to tear the country apart. But polls show that if the vote were held, Mr. Chavez would probably lose -- and so the president has made it clear he will do everything he can to prevent it. The challenge for Venezuelans, and for their neighbors, will be to ensure that democracy in this important oil-producing country is not disrupted.
The chances that Venezuelans will be able to vote their way out of crisis grew considerably last week when the country's Supreme Court, ending months of impasse, named the last member of an electoral council that must oversee the process. Days earlier, opposition organizers had turned in recall petitions bearing 3.2 million signatures, more than enough to meet the constitutional requirement. The council has 30 days to judge whether the petitions are valid and, if it rules they are, 60 days to schedule an election. The referendum requirements in Mr. Chavez's constitution are quirky: Some experts believe the signatures may be ruled invalid for having been collected before this month, a problem the opposition believes it could overcome by quickly collecting new petitions. If a vote takes place, it won't be enough for Mr. Chavez to lose (polls show him failing by a margin of 2-to-1); the constitution says more people must vote "no" than the 3.8 million who voted for Mr. Chavez when he was reelected three years ago. That, too, is a threshold the opposition believes it can cross -- and if it does not, Mr. Chavez will have earned a mandate to remain in power for three more years.
The real danger is that the president, who once attempted a military coup, will block the vote by fraud or force. Already he claims, without evidence, that the petition signatures are falsified. His supporters in Venezuela's Congress have been trying to pass measures changing the composition of the Supreme Court and imposing new restrictions on the media. Violence against opposition supporters, including shootings and bombings, has happened before and could return. Opposition leaders themselves backed an unsuccessful coup and later led a disastrous general strike; now they must avoid being provoked by Mr. Chavez and must build a platform that bridges the gap between Venezuela's rich and middle classes and the poor -- most of whom also want to see the president go. The Bush administration, the Organization of American States and key neighbors such as Brazil have all supported the electoral solution. In the coming weeks they must make clear to Mr. Chavez that any attempt to stop a referendum by violent or illegal means will be regarded as an interruption of Venezuela's democracy.
Thursday, August 28, 2003
wsj 28aug03
Hillary Confesses
We're not making this one up, folks. In a video snippet you can play for yourself on the NY1 News Web site (www.ny1.com), Hillary Rodham Clinton accuses the Bush White House of "a cover-up at the highest level."
"What transpired in the White House?" an angry Mrs. Clinton asked this week from the steps of New York's City Hall. "I know a little bit about how White Houses work. I know somebody picked up a phone, somebody got on a computer, somebody sent an e-mail, somebody called for a meeting, somebody, probably under instructions from somebody further up the chain, told the EPA, 'Don't tell the people of New York the truth,' and I want to know who that is."
Mrs. Clinton's cover-up accusation was prompted by a report from the Environmental Protection Agency's inspector general, which says the Bush Administration prodded the EPA to issue reassuring reports about the air quality in Lower Manhattan after September 11. She's not buying the argument that, in the chaotic aftermath of that day, no one really knew what was going on with air quality.
Maybe the first couple of days, Mrs. Clinton allows. "But a week later, two weeks later, two months later, six months later? Give me a break. They knew, and they didn't tell us the truth," she says.
This, of course, comes from the same woman who as First Lady thought it understandable that her long-subpoenaed records could suddenly materialize in a room right next to her White House study. "I think people need to understand that there are millions of pieces of paper in the White House," she told Barbara Walters at the time, "and for more than two years now people have been diligently searching."
Recall that she also dismisses the collection of hundreds of FBI files of Bush and Reagan appointees as a "bureaucratic snafu" by innocent newcomers "who did not recognize the mistake." And who can forget her classic disavowal of any responsibility for the sacking of staffers in the White House Travel Office?
We suppose Mrs. Clinton's explanations have to be taken on faith. So if the honorable junior Senator from New York now wants to argue that she knows a cover-up when she sees it, because she knows all about how these things work, who are we to argue?
Updated August 28, 2003
Wednesday, August 06, 2003
wsj 06aug03
this is the main wsj editorial, doom and gloom. talks of impact of widening ust: on securities portfolios, on housing->reverse wealth effect, on mortgage and business defaults! ends calling on administration to cut spending...
August 6, 2003
REVIEW & OUTLOOK
Surviving the Recovery
Yesterday's blowout report by the Institute for Supply Management would normally be cause for popping champagne corks, but stocks fell sharply again instead and bond prices took another hit. Investors seem to have settled at one of those places where everyone wonders if we are going to survive the recovery.
On most of the evidence, the economy is finally poised to accelerate after months of bouncing around below potential growth. Second quarter GDP growth rolled in the other day at 2.4%, much higher than expected for a period that included the main Iraq fighting. Jobless claims are down and corporate profits have been beating most expectations.
If more optimism is needed, the ISM survey of the huge U.S. service sector provides it. The bellwether measure of non-manufacturing activity surged in July to 65.1, well above June's 60.6 and the fourth monthly increase in a row. A measure of 50 signifies flat growth for the industry that includes tourism, finance, retail sales and restaurants, among other services, and July's measure is the highest since the survey began in 1997.
There are even -- hard to believe -- signs of growth overseas. Japan's economy may be getting off the tatami mat, with its manufacturing index cracking 50% in July. Meanwhile, the U.S. dollar has recovered from its long fall, suggesting that capital is again flowing here in anticipation of new opportunities.
So why all the long Wall Street faces? The answer is the bond market, which has taken its sharpest tumble in more than a decade. From their historic lows just 40 or so days ago, interest rates (the flip side of bond prices) have shot up at a rate that has given the markets the heebie-jeebies. The 10-year Treasury note, which hit a low of 3.11% in early June, closed yesterday at 4.40%.
Some of our supply-side friends have been discounting this as the normal market response to a burst of faster economic growth. Credit demand is suddenly rising or soon will, so the price of credit naturally rises along with it. That's capitalism, and no doubt this explains part of the bond move. Others blame Fed Chairman Alan Greenspan's recent dance with "deflation" rhetoric, which has hurt his credibility.
But whatever the cause, markets that move this rapidly can also do some damage. Someone was long in bonds, and whoever it was has quickly lost a lot of money. If a hedge fund or bank got caught on the wrong side of such a market rout, the results might be ugly. Financial players are all now looking at one another and inspecting their appendages to see if anyone caught a bullet.
The larger worry of the bond bath is its impact on growth, especially in housing. We wrote in these columns last March that, after years of historically low rates, the U.S. economy is more vulnerable than usual to an increase in rates. To moderate the downturn after the stock-bubble burst, Chairman Greenspan brought rates low to finance the housing boom. But housing prices can't rise forever, especially if rates are rising.
Higher interest rates now mean an end to the home refinancing boom, which has helped to sustain consumer spending through the long, post-bubble drought in corporate investment. One result may be a reverse "wealth effect," backed by a similar negative effect among bond-holders, that could slow the pace of recovery or undermine its sustainability.
Financial institutions have also become inured to low rates and may be vulnerable to mortgage or business defaults. Some of this interest-rate risk has been securitized and passed along to the likes of Fannie Mae and Freddie Mac, but that means those two home-mortgage giants must also be watched.
We don't want to overplay the gloom. The economy still looks to us as if it's ready to break out of its three-and-a-half-year funk. Monetary policy has been accommodating, to say the least, and the Bush tax cuts are just starting to kick in. The latter have already induced 171 companies to raise or initiate dividend payments, easily surpassing the 112 for all of last year, according to Standard & Poor's Corp.
One way President Bush can help nurture the recovery now is by showing a new willingness to control spending, especially in entitlements (Medicare drugs). The more future federal liabilities Mr. Bush agrees to, the more investors will assume future tax increases to pay for them. His Treasury might also beef up its financial team to cope with, and minimize, any banking or hedge-fund failures. Left to its own devices the economy seems ready to resume its natural growth path, but it can't hurt to be prepared.
URL for this article:
http://online.wsj.com/article/0,,SB106012762214820800,00.html
Thursday, July 03, 2003
nyt 03jul03
impressively partisan nyt editorial...talkserious heartless republicans bastards against children! lets raise taxes! just read on reuters: "S&P may cut university of california's ratings, affects $5.5bn of debt"
July 3, 2003
No Budging in California
n California, where Republicans hold no statewide offices and are minorities in both houses of the Legislature, the G.O.P. has found an arena to exercise some political muscle: the state budget debacle. Republicans are stalwartly committed to blocking the passage of tax increases, while Democrats insist that raising taxes is better than continuing to hack away at already drained public services. The result of this standoff is that California has entered a new fiscal year with no budget.
State governments with budget woes are as common as mosquitoes this summer. But California's problems are so huge — the current deficit is $38 billion — and the barriers blocking any solution are so daunting that it stands in a category all by itself.
If California were like most other states, requiring a simple, rather than two-thirds, majority to pass the budget, it would have met its July 1 deadline. But it's not, and as a result, the government is legislatively paralyzed and running entirely on borrowed money.
Gov. Gray Davis needs to muster up support from a handful of Republicans to get the votes needed to pass a budget, but Mr. Davis is short on bargaining tools. He is unpopular within his party, and the public is so tired of him that a recall campaign is gaining support with lightning speed. By the end of the year, it is conceivable that Mr. Davis will be gone and the new governor will be someone who got a tiny fraction of the vote on a huge recall ballot listing people who have volunteered to run for his job.
California's system of government, heavy on voters' rights to set the rules through referendums and laced with restrictions that tie the hands of elected officials, is high on democracy but very low on efficiency. Right now the two parties are busy blaming each other for causing the state's once-robust reserves to disappear and trying to ignore the serious damage that budget delays will cause.
Officials say California has enough money to keep functioning on short-term borrowing until mid-August. But its credit rating is low, and without a budget, it will not be able to continue living on loans as the fall approaches. It will soon have to begin withholding hundreds of millions in funds from public schools and vendors who sell products to the state.
Local governments, with limited ability to raise taxes, are already reeling from the uncertainty of state aid. If the budget remains in limbo long enough, state employees may have their paychecks dropped to the minimum wage, an average pay cut for individuals of about 70 percent.
The Republicans hope to win voters' approval with their no-tax-increases stance, but their plan means increasing cuts for already strapped elementary schools and universities by $1 billion. A good example of the inflexibility with which the Republicans are operating is their plan to save on education expenses by raising the age at which children are eligible to attend kindergarten.
The divided, posturing Democrats obviously deserve their share of the blame for this debacle. But Republicans cannot be absolutists about opposing taxation at this level of financial meltdown. Whatever rancor they have built up against the governor and the Democrats' liberal spending policies, they should not take it out on the public during an emergency. Californians will inevitably be hurt by the budget crisis; they don't deserve additional suffering caused by the fecklessness of their elected officials.
Thursday, June 26, 2003
wsj 26jun03
Greenspan's Animal Spirits
We've been watching with amazement, and sometimes amusement, the not-so-epic debate over whether the Federal Reserve would reduce interest rates by a quarter point, or a half, at its June meeting yesterday. The Fed chose a quarter, getting its target rate down to the ripe round number of 1%, but in the end it really doesn't matter.
Chairman Alan Greenspan has for some time had the money supply opened up like the Colorado in spring. The drama is whether all of that liquidity in the system will help spur the economy back to more vigorous growth. So far Mr. Greenspan's bet seems to be paying off, as lower rates have kept housing prices up and consumers going back for one more round of mortgage refinancing.
A revival in capital spending is less certain, though there are signs of that too. The Fed's statement yesterday noted "a firming in spending, markedly improved financial conditions, and labor and product markets that are stabilizing." The recent tax cut is adding another dose of incentives to work and invest, so the Fed doesn't have to lift everyone's boat by itself.
What we'd like to hear from the Fed for a while is nothing. What the economy needs now is a burst of capitalist animal spirits, rather than everyone sitting on their cash for one more month, or two, to see if rates have a chance to go still lower. Mr. Greenspan has made his bet; now let's see how well the horses run.
Friday, June 13, 2003
wsj 13jun03
The Trouble With Freddie
The problems keep coming for Freddie Mac, the mortgage-finance giant. In addition to investigations by its regulator, the SEC, and Congress, the U.S. Attorney's Office in Northern Virginia has opened a criminal probe. Right now, the betting is that any wrongdoing involves accounting irregularities and won't be fatal. But even if Fred finesses this one, the past week demonstrates how vulnerable the economy remains to potential havoc coming from Fred and its larger sister, Fannie Mae.
The main purpose of Fred and Fan is to provide liquidity to the housing market. A worthy mission and they do a good job. But a decade of indifferent regulatory oversight and shrewd political lobbying have allowed Fan and Fred to transform themselves into companies that run with lots of leverage, use arcane hedging strategies and occupy a central and ever-larger place in the U.S. financial system.
Fan and Fred have been able to carve out their position because investors assume their ties to the federal government translate into an implicit guarantee for their debt. Thus, they can borrow at rates close to Treasuries. They then use these cheap funds to buy the same mortgage backed securities (MBSs) that they have bundled and plop them into their portfolios. If things go according to plan, those MBSs pay higher returns than Fan and Fred have to pay on their debt. This very profitable arrangement has propelled them to the tope of the financial world.
But consider where all of their debt ends up. Simply put, everywhere. U.S. and foreign banks, pension funds and individuals. According to Federal Financial Analytics, more than 60% of U.S. banks with less than $100 million in assets hold Fan and Fred debt in excess of 50% of capital. For banks with more than $1 billion in assets, 20% hold Fan and Fred debt in excess of 50%.
And here's where systemic risk comes in. Say that investors become anxious about the probes into Fred's accounting and start selling its debt. If its market value fell sharply, the enormous scale of Fred's liabilities could create serious problems in the credit markets. If sellers overwhelm buyers, trading could come to a screeching halt. Banks might refuse to buy Fred's debt.
Moreover, uncertainty might extend to Fred's MBSs and, not unlikely, to Fannie's as well. The resulting credit crunch and drop in market value of Fan and Fred's debt and MBSs would cause liquidity problems at some banks and thrifts. The result might be a contagion of illiquidity throughout the banking system and the financial sector -- possibly causing bankruptcies, a huge disturbance in the housing market and ultimately a big hit to the economy. And, probably, a taxpayer bailout of unthinkable size.
If you think we're being fanciful (and we wish we were), then consider that Fan and Fred satisfy many of the conditions that make it ripe for a systemic crisis. According to the Office of Federal Housing Enterprise Oversight, these conditions are: High levels of interdependence with other financial institutions, high leverage, lax safety and soundness regulations, and poor public disclosure.
So what to do? Better regulation and disclosure are the bare minimum needed to protect investors and taxpayers, Treasury Secretary John Snow noted yesterday. Another essential fix would require Fan and Fred to increase the amount of capital they hold. Capital provides insurance against mistakes and unexpected trouble, yet the two companies are required to hold less than half the amount of capital (as a share of assets) that banks must maintain for mortgages.
Capital is so important that almost any firm that maintains an adequate capital cushion can get a loan to cover a liquidity problem. William Poole, the president of the St. Louis Fed, points out that capital is especially important for Fan and Fred since they have a large amount of short-term obligations, with billions of dollars rolling over every week. Mr. Poole estimates that 45% of their debt liabilities are debt obligations due within one year.
We assume that a now-mobilized Congress will consider all of these solutions, as well as privatization and even breaking the duo up into smaller firms so that no single mortgage company carries so much risk. It is, after all, the government that created these behemoths that thrive on private profit but socialized risk. This is the right moment for government to lasso them and head off disaster.
Updated June 13, 2003
Monday, June 02, 2003
ft 02jun03
u don't hear this every day...calling for a 1 time REVAL of the renminbi....
Revaluing the renminbi
Published: June 2 2003 5:00 | Last Updated: June 2 2003 5:00
The dollar's slide is turning into a test of China's willingness to assume its share of global economic responsibility. Since its last peak in February 2002 the US currency has declined 9 per cent on the Federal Reserve's trade-weighted index but dropped 27 per cent against the euro. The dollar's fall against the yen, meanwhile, has been only 12 per cent, while the Chinese renminbi has remained firmly pegged to the greenback.
As a result, a large part of the pressure of this painful - though desirable - adjustment is falling on the already enfeebled eurozone. This is where Asia's help is called for. Japan urgently needs to expand domestic demand. And Asia's smaller economies should allow their currencies to appreciate rather than continuing to accumulate vast foreign exchange reserves. But the biggest change ought to come from China, which must be persuaded either to generate significant inflation in its domestic economy or, preferably, to appreciate its currency.
Chinese policymakers have so far ignored such calls. They fear not only a loss of export competitiveness but also a domestic price shock that could push an economy already going through painful restructuring into significant deflation. But such concerns are overblown. Nominal interest rates are indeed at a record low of just under 2 per cent; but it is desirable for real interest rates to remain solidly positive given the country's robust growth. Too-low real interest rates could encourage yet more overinvestment in China's capital stock.
Meanwhile, as Goldman Sachs notes, domestic credit grew 17 per cent in 2002 and the M2 measure of money expanded by 19 per cent. This does not exactly look like an economy stuck in a Japanese-style liquidity trap or heading for a deflationary spiral. Indeed, some rate of falling prices may even prove a boon, in the sense that it prevents the economy from overheating.
To the extent that China does have a problem with falling prices, this stems from the woeful state of the country's banking sector. Deflation would make that mess worse by increasing the burden of non-performing loans. But it would also increase the pressure on the authorities to overhaul the financial system - a huge challenge but one to which they will, sooner or later, have to rise.
As for the mechanics of currency appreciation, a free float of the renminbi would be the ideal solution, giving China the flexibility to cope with the growing pressures stemming from trade liberalisation. However, a free float will work properly only if the country's capital and exchange controls are lifted. That, in turn, is too risky until the financial sector is sorted out, otherwise China risks huge capital flight and the implosion of its banking system. That leaves a one-off revaluation of the renminbi, after which it is re-pegged at its new and stronger level. This may be a second-best solution but it is still far better than doing nothing.
Wednesday, May 28, 2003
fsp 28may03
BOLSA-ESCÂNDALO
É escandaloso o desperdício de bolsas-escola verificado em todo o país. Como mostrou reportagem da Folha publicada no domingo, a burocracia está impedindo que 645 mil bolsas cheguem aos destinatários. A verba existe, a família de baixa renda que poderia ser beneficiada existe, mas, por conta de "falhas cadastrais", o dinheiro não é recebido por quem dele tem necessidade.
O fenômeno é especialmente perverso porque as verbas não utilizadas nos programas sociais passam a ser contabilizadas como superávit primário. O já diminuto quinhão do Orçamento que deveria ser utilizado na distribuição de renda transforma-se em ajuste fiscal, tendo sua destinação desvirtuada.
Compreende-se que não seja uma tarefa simples distribuir mais de 5,7 milhões de bolsas num país com as dimensões do Brasil. As dificuldades, porém, não parecem autorizar uma "taxa de desperdício" da ordem de 11%. Em valores absolutos, o montante não utilizado varia de R$ 9,67 milhões a R$ 29 milhões mensais, considerando-se que o benefício pago a cada família oscila entre R$ 15 e R$ 45, dependendo do número de filhos matriculados em escolas.
Registre-se que é perfeitamente possível aproveitar todas as bolsas disponíveis. É o que ocorre, por exemplo, no Distrito Federal, onde surgiu esse programa, que tem a grande virtude de, a um só tempo, melhorar a renda e o nível de instrução das famílias por ele atendidas.
Outra crueldade do sistema reside no fato de que são justamente as áreas mais carentes as que mais deixam de captar bolsas. Na região Norte, por exemplo, o não aproveitamento chega perto de 20%, enquanto no Sul essa taxa é de menos de 6%.
O absurdo que é tal "sobra" de bolsas num país tão necessitado como o Brasil revela serem bem maiores do que alguns imaginavam os desafios para um governo com pretensões de promover mais justiça social.
fsp 28may03
CLÓVIS ROSSI
Fala sério, PT
SÃO PAULO - Primeiro foi Tarso Genro, um dos (melhores) ideólogos do PT, confessando de público que não há nem no PT nem em parte alguma experiência prática ou teórica de transição de "um modelo de modernização conservadora vinculado ao capital financeiro para um modelo produtivista de crescimento acelerado e inclusão social".
É verdade que, dias depois, Tarso resolveu "esclarecer" o que dissera, em carta ao "Painel do Leitor". Só enrolou. Como sou paciente, fiquei quieto, mas, se fosse o Elio Gaspari, tascaria nele um curso Madame Natasha de português para que, da próxima vez, não fingisse que texto nebuloso é esclarecimento.
Agora, vem frei Betto e diz que é preciso paciência porque o PT chegou ao governo, mas não chegou ainda ao poder.
Como? O que é chegar ao poder? Betto cita o FMI como "poder", em vez de governo. Então, o PT só vai começar a governar quando o Brasil puder comprar todas as cotas do Fundo e, assim, chegar ao "poder"?
Ou só haverá governo do PT quando as tropas expedicionárias comandadas pelo notório revolucionário Henrique Meirelles tomarem o baita prédio em que funciona o FMI em Washington?
Frei Betto lembra também que vivemos numa mísera democracia burguesa. Faltou contar a ele que é a única que existe, feliz ou infelizmente. Claro que sempre se pode contar Cuba como exemplo de "ditadura do proletariado" ou "popular", mas nem o PT nem Lula acreditam agora que Cuba seja uma democracia, burguesa ou não.
Quanto tempo será necessário para que o Brasil deixe de ser uma democracia burguesa e vire sabe-se lá o que para que, enfim, o PT chegue ao poder, em vez do governo, e comece a governar?
Pode ser que leve uma eternidade, não? Então, vamos combinar o seguinte: os ideólogos do PT param com a masturbação sociopolítica e o partido começa, de fato, a governar.
Tuesday, May 27, 2003
fsp 27may03
?! calote dja?!!?!?!?!?!?!?!?
CLÓVIS ROSSI
Calote com outro nome
SÃO PAULO - Devagarinho, com muito pudor, vai voltando à agenda latino-americana um clássico dos anos 70: pagar ou não a dívida (interna ou externa).
Sinais mais recentes: o presidente do Peru, Alejandro Toledo, sugere que 20% do que os países latino-americanos pagam sirva para formar um fundo destinado a financiar obras de infra-estrutura.
Traduzindo: não dá para pagar a dívida e, ao mesmo tempo, cuidar da infra-estrutura.
Sinal 2: o discurso em que o presidente da Argentina, Néstor Kirchner, volta à retórica que usaria Tancredo Neves no discurso da posse que não houve. Algo na linha de não dá para pagar a dívida à custa da fome do povo. É uma frase clássica, que ficou esquecida nos longos anos de messianismo neoliberal.
Volta agora que o messianismo mostrou-se insuficiente ou fracassado, ao gosto de cada qual.
No Brasil, na semana passada, o Ministério da Justiça lançou o balão de ensaio da taxação sobre empresas privadas de segurança, para financiar uma força-tarefa de combate ao crime organizado.
Aí também está a confissão quase explícita de que, com o que sobra do superávit fiscal a que se comprometeu o governo Lula, não dá para combater o crime organizado. Logo, ou se reduz o superávit, de forma a liberar dinheiro para uma necessidade absolutamente inadiável, ou o crime organizado continuará lampeiro por aí. Esse é o recado subliminar.
O que tem isso a ver com a dívida? Tudo. O superávit é feito para que os credores durmam tranquilos, na certeza de que o governo vai pagar tudinho, religiosamente.
Cedo ou tarde, vai-se verificar que não dá para pagar a dívida nos termos vigentes e ainda combater o crime organizado, sem falar todos os outros combates pendentes, no Brasil como na América Latina.
Não é uma questão ideológica, mas de aritmética pura: as necessidades superam os meios.
Thursday, May 22, 2003
22may03
OTAVIO FRIAS FILHO
Chegou a hora
Parece cada vez mais comum que governos se elejam com uma plataforma e governem com outra. Sempre foi assim, mas, se a cisão aumentou, é porque ela reflete as tensões entre democracia e mercado, dois entes que deveriam reforçar-se, ao menos em tese, um ao outro. Na prática, nunca foram tão antagônicos. Como tantos governos pelo mundo, o de Lula tenta se equilibrar entre ambos. O mercado exige regras claras, condições estáveis e a menor restrição possível para os agentes realizarem lucros. Quase todo governo está atualmente empenhado em atender tais reivindicações, dado o peso que a atividade financeira desempenha na economia; todos competem para atrair recursos e essa competição mesma explica a queda de tantos limites (legais, corporativos, tarifários) outrora impostos à liberdade do capital. A cada quatro anos, porém, a grande maioria que não tem acesso ao admirável mundo dos mercados dispõe do poder fulminante de derrubar governos que a tenham decepcionado. As políticas que favorecem os mercados tendem a punir os setores mais tradicionais da economia, relegar a produção a segundo plano e impor sacrifícios ainda maiores a uma população já historicamente sacrificada. Cria-se um ciclo, assim, em que candidatos mais convincentes ao prometer "mudança de modelo" galvanizam o entusiasmo, sempre disponível, das maiorias flutuantes. Para governar sem levar os respectivos países à insolvência, porém, esses governantes são tentados a dançar conforme a música financeira. Trocam de lugar com a oposição não apenas no sentido físico mas também mental. É difícil distinguir, na ideologia dos mercados, que aspectos traduzem um avanço nas concepções de administração pública e que outros significam apenas colocar o Estado a serviço dos interesses da especulação financeira, externa e doméstica. Controle da inflação, equilíbrio fiscal e respeito aos orçamentos estão com certeza entre os primeiros. Até por sua natureza técnica, porém, deveriam ser conciliáveis com políticas diferentes. Aquela ideologia considera que esquerda e direita são posições ultrapassadas, que emergiu da ciência econômica um saber objetivo, indiscutível. Sem dúvida o debate se tornou mais técnico e menos ideológico. Sem dúvida as teses da esquerda foram desmoralizadas na prática. Isso não quer dizer que os interesses em conflito tenham desaparecido nem que deixaram de se fantasiar de ciência exata. Talvez a principal tarefa de um governo como o do PT fosse distinguir, nessa ideologia, o que é irrecusável do que é propriamente ideológico. Em tese, é o que ele está fazendo; na prática, limita-se até agora a repetir o governo anterior na economia e a repetir seus próprios chavões nas áreas de contrapartida social. Em algum momento vai-se constatar que o rei está nu.
Já se está se tornando hábito. Um candidato a prefeito (ou governador) se elege e herda o descalabro deixado pela gastança do antecessor. Tem de conter suas ambições, obedecendo a um gestor austero, que reequilibre as finanças devastadas. Então chega a hora de o novo governante empreender a própria gastança, para se reeleger a todo custo. Chegou a hora, portanto, de o secretário João Sayad deixar a equipe da prefeita Marta Suplicy.
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Otavio Frias Filho escreve às quintas-feiras nesta coluna.
Wednesday, May 21, 2003
ft 21may03
hello ecb: ease rates NOW, hello asia: let your currency appreciate, hello snow: shut up.
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The dollar's downward dance
Published: May 21 2003 5:00 | Last Updated: May 21 2003 5:00
At the weekend, John Snow, the US treasury secretary, said that recent currency realignments had been "really fairly modest". Objectively, you cannot fault his assessment. For all the comment about the plunging dollar, it has fallen less than 14 per cent over the past year on a trade-weighted basis and has spent the vast majority of the past 16 years at significantly lower levels against the currencies that constitute the euro. But Mr Snow's remarks have created the false impression that the dollar's recent falls are not particularly important.
For one thing, currency markets are extremely sensitive to nuanced changes in public rhetoric. Finance ministers feign bafflement at such attention to their words but it is hardly surprising that investors take notice, given the US need to attract more than $500bn (£310bn) net capital inflows annually to finance its current account deficit. Second, though currency markets are impossible to predict day to day, it is now becoming difficult to argue against the view that a significant dollar decline is under way. With US investment yields extremely low for foreigners, the greenback's fall from grace after a period of overvaluation has much in common with its last big drop between 1985 and 1987. Then, the dollar dropped by 40 per cent against the currencies of its main trading partners and lost half its value compared with the D-Mark.
If recent trends continue, the economic fallout should not be under- estimated. US goods would become more competitive than their eurozone counterparts in all markets, reducing profit margins of European companies and demand in eurozone economies.
These are just the circumstances the International Monetary Fund warned could spark a deflationary cycle in Germany. Its paper on deflation, also published at the weekend, highlighted the economic costs of allowing deflation to become entrenched; the importance of pre-emptive policy action to prevent it; and the high risk of a deflation in Germany. But it is not just these countries which have something to fear from dollar depreciation. The IMF study cogently concluded that "if the dollar decline were severe enough, foreign balance sheets could come under significant pressure, aggravating deflationary pressures there with effects that can rebound on the US".
The authorities' benign neglect of the dollar's fall therefore borders on reckless behaviour. Attempts to prevent its fall would probably be futile, given the huge US current account deficit, so offsetting measures are vital. The European Central Bank must loosen monetary policy now; and Asian economies with strong demand growth should allow their currencies to appreciate against the dollar. The latter would at least mean that Europe is not bearing the whole burden of adustment. Those in positions of power still express strong resistance to either move. The dollar's downward dance gets ever more dangerous.
Tuesday, May 20, 2003
ft 20may03
daunting at first, em rallies induced by global liquidity cycles eventually go bust. as this one was caused by a worsening of the global economy l-t effects are bad: lower oil prices and lower consumption of exports of em countries by developed ones. brz does not hurt with high oil nor is it a large player in global trade...
The false optimists of the emerging markets
By Desmond Lachman
Published: May 19 2003 20:11 | Last Updated: May 19 2003 20:11
Upon joining Salomon Brothers as their chief emerging market economic strategist in 1996, I was given a useful piece of advice from one of Salomon's seasoned, if cynical, emerging market bond traders. He told me that when the winds were strong, even turkeys would fly. I found that advice to be invaluable as I witnessed at close quarters a number of occasions when the winds were strong for emerging market debt, only to see those liquidity-induced rallies end badly as global liquidity conditions changed.
The current remarkably strong rally in emerging market debt appears to be no exception. However, the precise timing of the inevitable bust in emerging market debt prices is a matter of debate, as it is so intimately related to the global liquidity cycle.
Over the past six months, emerging market debt prices have rallied dramatically, making it among the best-performing asset classes over this period. From a low of 7.3 percentage points over US Treasuries immediately before the Brazilian presidential election last October, emerging market debt spreads as measured by the Salomon Emerging Market Bond Index have tightened to about 4.3 percentage points over US Treasuries at present. This is a level that was last seen in early 1998, a few months before the Russian debacle. As a result, Morning-star, the investment research firm, reports that over the past 12 months the average emerging market debt fund has provided investors with a 21 per cent rate of return.
The remarkable tightening in emerging market debt spreads has occurred despite the fact that the fundamentals in the main emerging markets appear as shaky as ever. Brazil remains saddled with an unsustainably heavy domestic and external debt burden, while its economy has yet to show any real signs of growth; Venezuela and much of the Andean region remain plagued with political instability; the central European economies are all too dependent on the fortunes of the hapless German economy; Turkey's reform effort appears to be stalled while its relations with its chief benefactor appear strained; and the once high-riding Asian economies are now threatened by the spread of the epidemic of severe acute respiratory syndrome in China.
Paradoxically, what is fuelling the rally in emerging market debt prices, at least in the near term, is the worsening of the global economic environment. That worsening allows global interest rates to decline and causes money to flee equity funds in general in favour of the safer haven of fixed income funds. In such an environment, fixed income money managers look hard for yield and begin to allocate increased sums to high-yielding asset classes such as emerging market debt. That sets in train a self-reinforcing cycle of higher emerging market debt prices that eventually sucks in even those who might be sceptical about the long-run credit fundamentals.
From a long-run point of view, the worsening of the global economic environment is unambiguously bad for the emerging markets. Perhaps the most important reason for this is the fact that slower global growth is associated with lower commodity prices in general and with lower international oil prices in particular. This is especially bad for the economic performance of those countries still highly dependent on oil revenues, such as Ecuador, Mexico, Russia and Venezuela.
Lower global growth is also associated with reduced opportunities for emerging markets to export to the more highly developed economies. This is particularly devastating for countries such as the Czech Republic, Hungary and Poland, which all export about 11 percentage points of their gross domestic product to Germany. It is also bad news for a country such as Mexico, which exports about a quarter of its GDP to the US. Another dire consequence is that foreign direct investment flows dry up. This is regrettable because FDI offers emerging markets a more stable flow of funds than the more ephemeral and shorter-term bond financing.
Ascertaining the precise timing of the inevitable large correction in emerging market debt prices is tricky. It involves either determining when the global liquidity cycle will move into a tightening mode or else judging when the longer-run damage to emerging market fundamentals caused by the global slowdown outweighs the short-run benefits from increased global liquidity. But whatever the immediate cause of the bursting of the emerging market debt bubble, burst it most certainly will. The wind is sure to abate soon - and then the turkeys will come plummeting to earth.
The writer is resident fellow of the American Enterprise Institute
Monday, May 19, 2003
fsp 18may03
ficaram bravos...saiu na capa...
SEM MEDO DE CRESCER
Há motivos para suspeitar de que a rendição do governo de Luiz Inácio Lula da Silva aos interesses financeiros que predominam na economia brasileira há mais de uma década não seja apenas uma concessão tática. Mais de quatro meses se passaram desde a posse, e a política econômica só fez apertar o torniquete sobre empresas e trabalhadores. A produção está estagnada, a renda per capita retrocede.
Na campanha, o presidente Lula, seguindo o mote de todos os candidatos, comprometeu-se com a mudança da política econômica. Prometeu colocar o país no rumo do crescimento, do aumento do emprego e da distribuição da renda. Compreende-se que o momento da posse não era propício à menor alteração de rumo. O primeiro presidente de esquerda da história assumia cercado de intensa desconfiança.
Os indicadores financeiros beiravam o descalabro. Se adotar inicialmente a cartilha do conservadorismo era inevitável, é hora de questionar não apenas a persistência da ortodoxia como seu exacerbamento. Sem que o FMI o tenha exigido, o ministro Antonio Palocci, interessado em gerar um "choque de credibilidade", ofereceu ao mercado financeiro mais superávit fiscal. Ou seja, abriu espaço no Orçamento para pagar uma conta de mais de R$ 100 bilhões em juros. Ignorando o custo já extorsivo do crédito, o Banco Central manteve a trajetória ascendente da taxa de juros. Desprezando a asfixia que os tributos exercem sobre a atividade econômica, o Executivo enviou ao Congresso propostas de reformas que, se aprovadas, aumentarão ainda mais a carga tributária.
O governo tarda em implementar a promessa de desenvolvimento que o elegeu. Se a manutenção da política anterior era imperativa no começo, está evidente que ela se esgotou. Persistir nesse caminho é intolerável. Onde está o prometido projeto alternativo, tão falado na campanha?
Manter a economia nos trilhos atuais significa estagnação, desemprego e deterioração da renda, embora agrade àquela fatia francamente minoritária de brasileiros que faz fortunas emprestando dinheiro ao Estado ou intermediando essa operação. De que lado está o governo Lula? Dos bancos ou da produção? Da mudança ou da permanência de um modelo que não consegue responder à exigência do crescimento?
Não se propõe uma mudança brusca, uma aventura populista, mas que se dêem os primeiros passos no rumo do desenvolvimento do país.
Friday, May 16, 2003
ft 16may03
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Argentina's choice
Published: May 16 2003 5:00 | Last Updated: May 16 2003 5:00
Sunday's election was supposed to draw a line under Argentina's catastrophic financial collapse and the uncertain aftermath. But with Carlos Menem's decision to back out, the contest will not take place and his rival Néstor Kirchner, a little-known centre-left provincial governor, will become president. This is bad news. By denying the new president the authority given by a resounding electoral success, Mr Menem has made it more difficult for Mr Kirchner to consolidate the nascent economic recovery.
In one sense, it is good for Argentine democracy that Mr Menem - a politician associated with corruption and mismanagement - has failed in his attempt to return to the presidency for the third time. Mr Kirchner is pledged to pursue the cautious economic policies that have begun to pull Argentina out of its long recession.
Even so, Mr Menem's withdrawal is damaging. Opinion poll results do not confer the legitimacy of real electoral success. With a 22 per cent share of the vote in last month's first round, Mr Kirchner has the weakest mandate of any president in Argentine history. His already fractious Peronist party is even more divided between supporters of Mr Menem, Mr Kirchner and other leaders. Mr Kirchner has neither a majority in congress nor firm support among the country's powerful provincial governors. Adding to the uncertainty, Argentina faces a further string of legislative and local elections.
In office Mr Kirchner will be confronted by a number of difficult tests, particularly on the economy. Argentina has been helped by its currency devaluation and firmer fiscal management but its success will not be sustainable unless the country can regain access to international financial markets.
That requires the country to come to terms with its creditors. Reducing a debt burden of 120 per cent of gross domestic product is vital. Bondholders must be persuaded to accept significant reductions in the value of their assets. Difficult decisions stemming from the unsatisfactory handling of last year's devaluation have still to be made.
Unless privatised utility companies can set realistic tariffs, they will be unable to maintain their networks or make fresh investments. Unless private banks can properly capitalise their operations, assess their liabilities and be confident that property rights will be respected, they will not make fresh loans. Mr Kirchner's supporters may harbour hopes that government intervention can set things right but the state lacks the resources to make the investments that would be necessary.
All this will make it more difficult to achieve and sustain faster growth. But without increased output it is unclear how Argentina can reverse recent very sharp falls in the value of real wages or how Mr Kirchner can meet expectations for wider social change. In short, Argentina faces daunting challenges. It would be unwise for anyone - least of all the new president and his team - to underestimate their scale.
Tuesday, May 13, 2003
ft 13may03
for changes in basel II, for lowering capital requirements on lending to developing countries on grounds that it overestimates the risk which is lower due to low correlation and diversification
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Pact that will hurt poorer countries
By Stephany Griffith-Jones
Published: May 12 2003 20:02 | Last Updated: May 12 2003 20:02
The Basel committee of banking regulators has proposed a new capital accord with the aim of more accurately aligning regulatory capital with the risks that international banks face. But the agreement could have precisely the opposite effect when it comes to developing countries.
The current Basel II proposal would significantly overestimate the risk of international bank lending to developing economies. This would excessively increase capital requirements on such lending, sharply raising the cost of bank borrowing by developing countries and reducing the supply of loans to them.
Bank lending to the developing world has already fallen sharply in the past five years, stifling growth - most recently and spectacularly in Latin America. To reinforce that trend would plainly contradict one of the aims of the Group of 10 richest countries, which wants to encourage private financial flows to developing countries and use them as an engine for stimulating and funding growth.
One of the main benefits of lending to - and investing in - developing countries is their relatively low correlation with mature markets. Spreads on syndicated loans - which reflect probability of default - tend to rise and fall together within developed regions more than between developed and developing countries; similar results are obtained for the correlation of bank profitability. Furthermore, broader macroeconomic variables - such as growth of gross domestic product, interest rates, evolution of bond prices and stock market indexes - show far more correlation within developed economies than between developed and developing ones.
A bank's loan portfolio that is diversified between developed and developing countries has a lower level of risk than one focused exclusively on lending to developed economies. Since the new Basel II rules are intended precisely to help banks cope with un- expected losses, it is surprising and unfortunate that the current proposals do not explicitly incorporate the benefits of international diversification. Unless the proposal is amended, capital requirements will not clearly reflect risk and will unfairly penalise lending to developing countries.
It is therefore imperative that the Basel committee, in its next (and almost final) revision of the proposed accord, incorporates the benefits of international diversification, for example by explicitly reducing capital requirements.
There is a clear precedent. The Basel committee has already made such a change with respect to lending to small and medium sized enterprises. Following the publication of its consultative document in January 2001, there was widespread concern - especially in Germany - that the increase in capital requirements would sharply reduce bank lending to smaller companies, with potentially devastating effects on growth and employment. Critics argued that the probability of a large number of SMEs defaulting simultaneously was lower than for a smaller group of large borrowers. After intensive lobbying by the German authorities, the Basel committee agreed to lower average capital requirements by about 10 per cent for smaller firms.
Our recent research implies that at least as large a modification is justified with respect to international diversification, in regard to lending to developing countries.* There are no practical, empirical or theoretical obstacles to a change that could greatly benefit the developing world and ensure more precise measurement of risk and capital adequacy requirements.
The Basel committee has always emphasised the technical nature of its proposals and the technical case for including the benefits of diversification is extremely strong. Furthermore, G10 governments are committed to encouraging private financial flows and therefore should avoid measures that might have the opposite effect.
Developing economies and transition countries are not represented at all in the Basel committee and so have limited leverage to make their case. However, given the committee's technical expertise and fair-mindedness, there is still a chance that it will amend the current proposal to take account of the benefits of international diversification. It would be technically wrong, economically unwise and politically insensitive not to do so.
* www.ids.ac.uk/intfinance
The writer is a professor at the Institute of Development Studies, Sussex University
Wednesday, May 07, 2003
ft editorial 06may03
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Lula's progress
Published: May 6 2003 16:16 | Last Updated: May 6 2003 16:16
After last year's financial crisis, not even the most foolhardy optimist could have expected Brazil to return to international capital markets so soon and so successfully. But euphoria should not blind Brazil's political establishment to the need for far-reaching reforms of the pension and tax system.
Last Tuesday investors were prepared to buy Brazil's $1bn (£620m) international bond six times over, even though the issue will include an innovative clause that allows for changes in its terms with less than 100 per cent approval from bondholders. Standard & Poor's, the credit rating agency, upgraded its outlook on Brazil. On May 2 the yield spread over US Treasuries (the most widely accepted measure of political risk) fell below 8 percentage points.
Caution is required for two reasons. First, investor enthusiasm is partly inspired by the depressed outlook for mainstream markets. In relative terms, Brazilian yields - still in excess of 11 per cent - are attractive and offer a premium of roughly 2 percentage points over comparable emerging market assets. Second, the appreciation of Brazil's currency that has accompanied the rally in prices could depress export growth, halting the steady current account improvement that has reduced external vulnerability. The Real has gained more than 20 per cent against the US dollar so far this year and this week fell below R$3 to the dollar for the first time since August.
Equally, however, the rally in the markets is creating the real possibility of a virtuous economic cycle. Currency strength and lower international rates will help to reduce the country's debt burden. Inflationary pressures - triggered by last year's sharp depreciation of the Real - have been damped, creating the potential for an eventual reduction in domestic interest rates from the current level of 26.5 per cent. That in turn should help increase economic growth beyond current expectations of about 2 per cent for 2003.
In this situation, it is encouraging that President Luiz Inácio Lula da Silva is pressing ahead with pension and tax reforms. Proposals submitted to congress last week envisage an increase in Brazil's retirement age to levels considered normal in richer countries. The tax plan means that Brazil is taking the first step towards changing a system that penalises productive activity and job creation. Although neither of the proposals submitted to congress last week is ideal, they are important moves in the right direction.
The biggest risk now is that the reforms could become bogged down in congress because trade unions and other groups will undoubtedly seek to dilute the package. It is important that Mr Lula da Silva and his government stick to their path and that legislators act responsibly. If Brazil is to grow faster on a sustainable basis and generate the resources it needs to tackle social problems, change in these areas is vital.
Sunday, April 06, 2003
estado 06apr03
otimista caiu o dolar. comprar dolar via diminuicao passivo cambial ao inves de aumento de reservas
Domingo, 6 de abril de 2003
Sinais auspiciosos
Dólar em queda e inflação em baixa são sinais auspiciosos para os brasileiros, neste momento. São prenúncios de maior segurança em todas as frentes da economia nacional. Ao mesmo tempo, o risco Brasil tem continuado a cair, abrindo a perspectiva de financiamento externo mais farto e mais barato, nos próximos meses. Estão-se formando as condições para um círculo virtuoso de crescimento com segurança. Essa tendência dependerá, naturalmente, da manutenção da seriedade fiscal e da continuação da política de reformas. A insegurança global causada pela guerra tem sido menos danosa à economia brasileira do que muitos temiam, apesar da instabilidade do preço do petróleo.
Sem exceção, os indicadores divulgados a partir de 15 de março vêm mostrando o arrefecimento das pressões inflacionárias. Com o dólar em queda, primeiro lentamente, depois com maior velocidade, vem desaparecendo um dos principais fatores de elevação dos preços por atacado. Além disso, as famílias continuam gastando com muita cautela, forçadas à moderação pelo aperto do orçamento doméstico.
Os últimos índices de preços ao consumidor (IPCs) mostram inequívoca tendência de acomodação nos mercados. Em São Paulo, o IPC medido pela Fipe subiu 0,67% em março, confirmando a trajetória de baixa iniciada em dezembro e só interrompida em janeiro, quando se concentraram pressões excepcionais sobre alguns preços importantes. O núcleo da inflação, que exclui variações sazonais e as tarifas e preços administrados, também continuou em queda, com variação de 0,79%. O número de itens com preços em alta diminuiu de 404 em fevereiro para 357 no mês passado. O de produtos que ficaram mais baratos aumentou de 107 para 141.
Ainda haverá pressões, no meio do ano, quando as tarifas de serviços de utilidade pública forem reajustadas. O governo está procurando renegociar os critérios de correção dessas tarifas, mas, de toda forma, a acomodação do conjunto de preços prosseguirá, se não ocorrer um acidente político ou econômico importante. Acidentes políticos podem ser causados, por exemplo, pelo comportamento irracional e imaturo da chamada ala radical do PT, que o governo terá de continuar controlando para poder cumprir seu programa.
Com o dólar na faixa de R$ 3,20 a R$ 3,30, acentuou-se a discussão sobre o câmbio necessário à manutenção de um robusto superávit comercial. As opiniões têm-se dividido. Alguns afirmam que a balança comercial será prejudicada, seriamente, se a moeda americana custar menos que R$ 3,20.
Outros admitem que não haverá problemas importantes, se a cotação se estabilizar na altura de R$ 3,00. Essa discussão conduz à pergunta: em que momento o Banco Central (BC) deverá intervir para impedir uma valorização excessiva do real?
Tanto o presidente da República quanto o ministro da Fazenda, Antônio Palocci, e o presidente do Banco Central, Henrique Meirelles, negam que haja um plano de intervenção. O BC, disse Meirelles, não tem meta para o câmbio, que deve flutuar livremente, segundo as condições do mercado. De fato, o que se pode afirmar com alguma segurança é que a autoridade monetária acabará intervindo, em algum momento, se houver alguma variação muito ampla em prazo muito curto. O objetivo principal de intervenções desse tipo é limitar a instabilidade do mercado, que atrapalha o funcionamento da economia.
Um maior ingresso de capitais, que poderá ocorrer com a redução do risco Brasil, tenderá a acentuar a valorização do real. Quando isso ocorrer, e se ocorrer, o Banco Central terá de avaliar se os objetivos comerciais do País poderão justificar uma intervenção mais séria. Mas é possível que, antes de se chegar a esse ponto, o mercado se encarregue de corrigir a cotação.
Sangue-frio continua a ser um atributo importante para a autoridade monetária.
Muito mais prudente que intervir no mercado, por enquanto, será aproveitar o dólar mais barato para liquidar parte dos títulos públicos vinculados ao câmbio. Isso facilitará a gestão das contas públicas e tornará o País menos vulnerável a pressões cambiais.
Monday, March 31, 2003
wsj 31mar03
March 31, 2003
My Country Is Your Faithful Ally and Friend
By RECEP TAYYIP ERDOGAN
ANKARA -- Turkey enjoys historical, cultural and traditional ties with the Middle East, and promotes cordial relations with all countries and peoples of the region. A source of instability and concern in the region is the situation in our neighbor Iraq. After more than a decade since the liberation of Kuwait, the Iraqi problem remains unresolved.
***
For the last six months in particular, Turkey has been compelled to pay close attention to the Iraqi crisis. The 58th Turkish government, established after the elections last November, dedicated most of its work to the Iraq issue. The 59th government, of which I have just been appointed prime minister, has also engaged itself with Iraq, literally on a day-and-night basis. My Justice and Development Party government has exerted every effort so that the Iraqi problem would not lead to war, and so that new sufferings could be prevented.
The U.N. inspectors, while acknowledging in their reports that Iraq's cooperation was gradually increasing, also stressed that Iraq was elusive in providing conclusive information on the chemical and biological elements it is known to possess. As a result, it has been concluded that Iraq's cooperation, as far as substance was concerned, fell short of the requirements as set forth in U.N. Security Council Resolution 1441.
In our suggestions to Iraq at the highest level, we emphasized time and again the need for openness with regard to the chemical and biological material they may posses. We also stressed that small and occasional steps forward would not prevent war. Our worries have, unfortunately, proven justified.
In regard to Iraq, the Turkish government has, on three occasions, sought authority to act from our National Assembly. On Feb. 6, the motion regarding site preparation was approved. As the U.S.-led military operation loomed, a second motion on March 1 -- to authorize sending Turkish troops abroad as well as the deployment of foreign troops in Turkey -- failed to receive the constitutionally required majority. This result and its reasons were widely and publicly discussed in a democratic environment. It seems that the shared concern among Turkish parliamentarians was the need to take account of Turkish public opinion, as well as of the losses we were bound to incur in a war.
The developments that ensued clearly demonstrated that a war was imminent. In this respect, Turkey's choice was not one of war or peace; instead, the country had to choose ways in which to minimize the effects of such a war in our immediate vicinity -- while supporting our strategic ally, the United States.
The relations between Turkey and the U.S. are based on a long-standing friendship. From the outset of the Iraqi crisis we have been in close consultation with Washington, which is not only our ally but also our strategic partner. Indeed, the U.S made numerous requests to us seeking support in the operation. Turkey did not ignore them, but appraised them very seriously, in a manner compatible with the fabric of close relations between our two countries.
Contrary to some reports in the U.S. media, and to an extent in the Turkish press, our discussions at no point entailed a bargaining for dollars. To the contrary, we have maintained the understanding that in bad days the two allies need to act shoulder-to-shoulder. Turkey has indeed been alongside the United States in nearly every major military conflict, from Korea to the Gulf War, from Bosnia to Somalia, Kosovo and Afghanistan.
Based on an urgent U.S. request on March 19, we reapplied to the National Assembly to get authorization for the opening of Turkish air space to the coalition forces led by the U.S. The Assembly approved this request on March 20, the day the war began in Iraq. Turkish airspace was made available to the coalition forces on the very next day.
The Assembly has further authorized my government to deploy the Turkish Armed Forces in northern Iraq. In this regard we are witnessing certain doubts, an unease in some circles in northern Iraq, as well as in the U.S. and some European countries. This is unnecessary. Turkey has no intention to fight a war in northern Iraq, let alone fire a single bullet. We have no desires on our neighbor's natural resources either. Yet we vividly remember the influx of 500,000 refugees escaping from the atrocities of Saddam Hussein in the last Gulf War. We do not wish to go through the same experience again.
The aim of a limited deployment on the Iraqi side along our border is to control such an influx of refugees while providing them with humanitarian aid in an effective manner. Furthermore we need to take precautionary measures for possible intrusions by PKK/Kadek terrorists, who are concentrated in the region. In sum, Turkey's military presence in northern Iraq is envisaged with full cooperation and coordination with the U.S., as well as with the Kurdish groups in the region.
***
Turkish policy regarding Iraq rests on openness and sincerity, and Turkey's policy is clear. The territorial integrity and national unity of Iraq must be preserved. Iraq's political system should be determined by the democratic participation and consent of the Iraqi population. Furthermore, the natural resources of Iraq are the wealth and property of the Iraqi nation as a whole. These resources should in no way be apportioned among population groups.
The Arab, Kurdish, Turkmen and other peoples that constitute Iraq are linked to Turkey by kinship. We wish them freedom, democracy, human rights and a prosperous future. Turkey will strive for peace and durable stability in the region alongside the U.S., her strategic partner and ally for more than half a century. We are determined to maintain our close cooperation with the U.S. We further hope and pray that the brave young men and women return home with the lowest possible casualties, and that the suffering in Iraq ends as soon as possible.
Mr. Erdogan is the prime minister of Turkey.
URL for this article:
http://online.wsj.com/article/0,,SB104907941058746300,00.html
Updated March 31, 2003
ft 31mar03
Lula's 100 days
Published: March 31 2003 5:00 | Last Updated: March 31 2003 5:00
Amid the gloom on international financial markets, Brazil is providing an unexpectedly bright light. President Luiz Inácio Lula da Silva - approaching his 100th day in office - has shown a sure touch so far, with his government adhering firmly to the austerity package agreed with the International Monetary Fund. Investors brave enough to have stuck with the country last year, when many on Wall Street were predicting default, have been amply rewarded. In the last three months bond prices have risen about 20 per cent and yield spreads over US Treasuries - the most widely accepted measure of political risk - are close to their lowest levels for nearly a year. But although Brazil is on the right track, Mr Lula da Silva must press ahead quickly to consolidate progress.
Tough fiscal and monetary policies have underpinned success to date. The target for the primary fiscal surplus has been increased to 4.25 per cent of output, providing more room to meet a heavy burden of debt service. Interest rates have been increased twice in the last three months, reflecting the determination of the central bank to head off inflationary pressures following last year's devaluation of the Real. The medicine appears to be working - month on month inflation is declining.
However, this stability is fragile. The combination of low growth and high interest rates means Brazil's ability to service debt could again become a source for concern, especially if international uncertainty makes investors even more wary of emerging markets. For that reason, Mr Lula da Silva now needs to push through promised social security and tax reforms.
Public sector pensions provision is unfair and expensive, generating an annual deficit equivalent to about 5.4 per cent of national output. Yet most of the benefits are enjoyed by relatively well-off civil servants who retire earlier and on better terms than counterparts in richer countries. As for the tax system, it generates healthy revenues but the system penalises productive businesses and is far too complex.
Reforms to tax and social security will help Brazil to increase growth potential and should also reassure investors. But neither does much to improve Brazil's chronic fiscal deficit in the short term. It is thus essential that the government also improve the quality of its public spending. In particular the president needs to demonstrate that his flagship social reform plan - Zero Hunger - can deliver real improvement in the lives of Brazil's poorest. Raising issues of social exclusion and mobilising support from society to tackle them are laudable aims. But the Zero Hunger plan, dogged by inefficiency and confusion, needs clearer focus and stronger leadership.
After weeks of painstaking negotiations, the government is within sight of achieving the three-fifths congressional majority it needs to implement the reforms. Judging by recent declarations, Mr Lula da Silva and fellow Workers' party leaders are aware of what needs to be done. They must now begin to deliver.
Friday, March 28, 2003
ft 28mar03
GLOBAL INVESTING: Take the money and run - out of Brazil
By John Izard
Financial Times; Mar 28, 2003
In early September last year, when much of the financial world seemed to think the election of Luiz Inácio Lula da Silva as president of Brazil would lead to a Bolshevik revolution and the confiscation of all private capital, Brazil "C" dollar bonds were yielding 17.5 per cent over US Treasuries.
The Brazil C bond, with an 8 per cent coupon and a maturity of April 2014, is a favoured speculative vehicle because of its liquidity. Professional traders in emerging markets use it to establish short positions quickly when they are bearish, because they can easily cover (buy and give back borrowed bonds) those short positions when they turn bullish.
It was back then that I suggested Brazilian paper was far undervalued. Brazilians I knew who had spent time with Lula and his advisers thought he would run a responsible administration.
Lula had been a socialist firebrand metalworker and union leader but, over 30 years in the political world, he had learnt a lot about coalition building and market economics. Furthermore, the Brazilian elite had accepted that, in the words of Giuseppe de Lampedusa, everything had to change so everything could stay the same.
I had not quite bottom-ticked Brazilian paper, since the spread over on the C bond had climbed more than 22 per cent during the summer, but a 17.5 per cent yield over Treasuries is pretty cheap paper, assuming you get paid back.
Well, it was cheap. These days, the C bond's yield is down to 10 per cent over US Treasuries. Lula is accepted not only by the Brazilian elite but by a conservative US administration. He has appointed his own politically diverse team, and his budget and monetary policies have kept close to market orthodoxy. He is making progress in putting together votes in Congress to establish a fully independent central bank. The Brazilian real has been rising against the dollar and foreign direct investment is flowing in against the global tide of risk aversion, with more than $800m coming in during February. Also, Lula's suits are really nice now.
So now is the time to sell. Take those C bonds and shove them out the door. You will find quite a few takers, because most responsible bond managers have a hard time finding better paper that yields anything close to 1,000 basis points off the curve.
As they say, nobody ever went broke taking a profit. This is the time to take the profit on the C bond, because the spread could widen again. I agree with the Brazil bulls that Lula and his administration have done a good job so far but that job is going to get harder.
Here is one salient point to remember: the flows of capital into Brazil since the election have come principally from foreigners. Expatriate Brazilian money has tended to stay under the palm trees on those little offshore islands where it has been parked for a while, sipping drinks with little umbrellas in them.
Now, it is possible that the Brazilian money is being stupid, but I think the foreign money is more likely to fall into that camp. You are usually better off putting your money into a country at about the same time the locals are returning, or even a little later.
Also, while Lula is The Man With the Plan right now, he has to keep convincing his public. George W. Bush has far more control over the Republican party, and Tony Blair over the Labour party, than Lula does over the Workers party (PT). Lula does not enjoy a majority in the Congress. Emerging market investors up north are currently very impressed that he has managed to put together a voting bloc for an independent central bank.
But, while central bank independence makes bond analysts' hearts go pitty pat, pitty pat, there are much more serious issues on the horizon.
First, the PT is not much of a workers' party any more. Not that it has been taken over by oligarchs - that is years away, I think - but it is in the hands of the entitled middle class. These are the people with low-bandwidth civil service jobs or government pensions, neither of which they want to give up. Brazil's problem is not foreign debt, it is deadweight bureaucratic payrolls and the world class pensions that flow from them.
This is the money that has to be freed for healthcare, education and necessary public works. Giving the financial industry and foreign investors an independent central bank is easy, particularly as no one knows if that really means anything. Prising middle-class hands off the entitlement to an idle existence, on the other hand, is a life-threatening challenge.
Furthermore, the election of a social democrat at federal level has not eliminated feudal elements in the Brazilian system, such as the state governors' control over their patronage machines.
Before Brazil's politics and public finances come to resemble, say, Denmark's, these barons are going to have to give up some power.
Good luck on that one, Lula. Better you than me.
johndizard@hotmail.com
Sunday, March 23, 2003
wsp 23mar03
wow lets "reject this damaging tax package, before it is too late"
washingtonpost.com
Soft Backbones
Sunday, March 23, 2003; Page B06
THERE ARE PEOPLE who compromise and people who capitulate -- and then there are moderate senators who sometimes manage to do both at once. That is the conclusion one is tempted to draw from a series of Senate votes Friday on the fiscal 2004 budget, and from predictions regarding the vote next week on the final budget resolution. The central issue is the president's proposal to cut $726 billion worth of taxes over the next 10 years -- a plan that would, when combined with other tax cuts he has put forward, plunge the federal government deep into deficit, lead to unacceptable spending cuts in core programs or, most likely, both. Nearly all congressional Democrats and a solid group of congressional Republicans claim to oppose this tax cut. Indeed, senators valiantly voted early Friday to reduce the tax cut by $100 billion to pay for the war in Iraq. To general surprise, and to the administration's consternation, that small rebellion in the name of fiscal sanity won the day.
Yet when the same senators were asked a few minutes later to support an even saner measure -- an attempt to cap the tax cut at $350 billion, over 10 years -- the results were different. Sen. Ernest F. Hollings (D-S.C.), taking what his aides called a "principled stance," failed to back the measure, claiming he opposed all tax cuts, in any form that they might take. Sen. John McCain (R-Ariz.) and Sen Lincoln D. Chafee (R-R.I.) made the same decision. Seeing the amendment would fail without their support, others who opposed the cuts switched sides again, and the amendment was soundly defeated.
So, will all of these opponents of tax cuts rally around to defeat the budget resolution itself, and the entire tax package, next week? Alas, it seems not. A handful of senators, including Mr. McCain and Mr. Hollings, have sworn to stick to their guns, maintain their principled opposition to tax cuts and (in the case of Mr. McCain) defy their party's leadership and vote against the budget resolution. But others have made known their intention to vote in favor, regardless of what damage it will do to the country. They will do so, they say, to make sure the budget "process" isn't thrown off course -- though budget resolutions have been turned down before, without causing lasting damage to the country. They will also do so, they say, in the hopes of overturning the tax cut at a later stage -- even though all concerned know that will be difficult if not impossible. All eyes are on Sen. Olympia J. Snowe (R-Maine) and Sen. George V. Voinovich (R-Ohio) in particular, the Republicans who were brave enough to cosponsor the amendment to cap the tax cut. Will they have the nerve now to reject this damaging tax package, before it is too late?
Tuesday, March 18, 2003
nyt 18mar03
pentelho reclamando, eh a favor da guerra mas contra ir sozinho
War in the Ruins of Diplomacy
merica is on its way to war. President Bush has told Saddam Hussein to depart or face attack. For Mr. Hussein, getting rid of weapons of mass destruction is no longer an option. Diplomacy has been dismissed. Arms inspectors, journalists and other civilians have been advised to leave Iraq.
The country now stands at a decisive turning point, not just in regard to the Iraq crisis, but in how it means to define its role in the post-cold-war world. President Bush's father and then Bill Clinton worked hard to infuse that role with America's traditions of idealism, internationalism and multilateralism. Under George W. Bush, however, Washington has charted a very different course. Allies have been devalued and military force overvalued.
Now that logic is playing out in a war waged without the compulsion of necessity, the endorsement of the United Nations or the company of traditional allies. This page has never wavered in the belief that Mr. Hussein must be disarmed. Our problem is with the wrongheaded way this administration has gone about it.
Once the fighting begins, every American will be thinking primarily of the safety of our troops, the success of their mission and the minimization of Iraqi civilian casualties. It will not feel like the right time for complaints about how America got to this point.
Today is the right time. This war crowns a period of terrible diplomatic failure, Washington's worst in at least a generation. The Bush administration now presides over unprecedented American military might. What it risks squandering is not America's power, but an essential part of its glory.
When this administration took office just over two years ago, expectations were different. President Bush was a novice in international affairs, while his father had been a master practitioner. But the new president looked to have assembled an experienced national security team. It included Colin Powell and Dick Cheney, who had helped build the multinational coalition that fought the first Persian Gulf war. Condoleezza Rice had helped manage a peaceful end for Europe's cold war divisions. Donald Rumsfeld brought government and international experience stretching back to the Ford administration. This seasoned team was led by a man who had spoken forcefully as a presidential candidate about the need for the United States to wear its power with humility, to reach out to its allies and not be perceived as a bully.
But this did not turn out to be a team of steady veterans. The hubris and mistakes that contributed to America's current isolation began long before the attacks of Sept. 11, 2001. From the administration's first days, it turned away from internationalism and the concerns of its European allies by abandoning the Kyoto Protocol on global warming and withdrawing America's signature from the treaty establishing the International Criminal Court. Russia was bluntly told to accept America's withdrawal from the Antiballistic Missile Treaty and the expansion of the North Atlantic Treaty Organization into the territory of the former Soviet Union. In the Middle East, Washington shortsightedly stepped backed from the worsening spiral of violence between Israel and the Palestinians, ignoring the pleas of Arab, Muslim and European countries. If other nations resist American leadership today, part of the reason lies in this unhappy history.
The Atlantic alliance is now more deeply riven than at any time since its creation more than a half-century ago. A promising new era of cooperation with a democratizing Russia has been put at risk. China, whose constructive incorporation into global affairs is crucial to the peace of this century, has been needlessly estranged. Governments across the Muslim world, whose cooperation is so vital to the war against terrorism, are now warily navigating between popular anger and American power.
The American-sponsored Security Council resolution that was withdrawn yesterday had firm support from only four of the council's 15 members and was opposed by major European powers like France, Germany and Russia. Even the few leaders who have stuck with the Bush administration, like Tony Blair of Britain and José María Aznar of Spain, have done so in the face of broad domestic opposition, which has left them and their parties politically damaged.
There is no ignoring the role of Baghdad's game of cooperation without content in this diplomatic debacle. And France, in its zest for standing up to Washington, succeeded mainly in sending all the wrong signals to Baghdad. But Washington's own destructive contributions were enormous: its shifting goals and rationales, its increasingly arbitrary timetables, its distaste for diplomatic give and take, its public arm-twisting and its failure to convince most of the world of any imminent danger.
The result is a war for a legitimate international goal against an execrable tyranny, but one fought almost alone. At a time when America most needs the world to see its actions in the best possible light, they will probably be seen in the worst. This result was neither foreordained nor inevitable
Sunday, March 16, 2003
http://www.nytimes.com/2003/03/16/international/16SHELL-CHENEY.html?pagewanted=print&position=top
The Sunday Times of London said that its findings showed 60 percent of the public against war without United Nations sanction and 32 percent for such action. The same poll in January found 73 opposed and 20 percent in favor.
Seven out of 10 people said France was wrong to promise to veto any resolution sanctioning war, and 76 percent said Britain should go to war if a new United Nations resolution was obtained. The figure explains why Mr. Blair has pressed so vigorously for United Nations approval.
http://www.washingtonpost.com/ac2/wp-dyn/A32413-2003Mar16?language=printer
Cheney, on CBS's "Face the Nation," showed the administration's contempt for the tactics of France, calling it "difficult to take the French serious."
Asked how Hussein could avert war, Powell told CNN's "Late Edition," "I think the curtain is coming down."
Bush ate dinner with the other leaders, then boarded Air Force One. He was to return to the White House tonight.
Bush was accompanied on the flight by Michael J. Gerson, his chief speechwriter and by his confidant Karen Hughes, both of whom have been working on a major war speech.
For the first time in Bush's presidency, the White House did not announce his schedule for the week. "There are events on the schedule," White House press secretary Ari Fleischer told reporters on Air Force One. "But there's a lot of flexibility in the schedule this week."
nyt 16mar03
still against. slightly though
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March 16, 2003
The Summit of Isolation
hree men meeting on an Atlantic island seems an apt symbol for the failure of the Bush administration to draw the world around its Iraq policy. That's not the intended message of President Bush's meeting today in the Azores with Prime Ministers Tony Blair of Britain and José María Aznar of Spain, but it's hard to avoid that impression. In what appears to be the final days before an American invasion of Iraq, Mr. Bush is taking time to consult with two loyal allies and, ostensibly, to decide if any realistic chance remains for a new United Nations Security Council resolution on Iraq. But the underlying diplomatic reality is bleak. Only a little more than four months since a unanimous Security Council backed American demands for disarming Saddam Hussein, Washington's only sure council supporters are Britain, Spain and Bulgaria.
President Bush was dealt a bad hand by others. Baghdad refused to provide the active cooperation that alone could have brought inspections to a swift and successful conclusion. France has created enormous problems through its unwillingness to back up inspections with tight deadlines and a credible threat of force.
But the Bush administration's erratic and often inept diplomacy has made matters immeasurably worse. By repeatedly switching its goals from disarmament to regime change to broadly transforming the Middle East, and its arguments from weapons to Al Qaeda to human rights, the White House made many countries more worried about America's motives than Iraq's weapons. Public arm-twisting of allies like Turkey and Mexico backfired, as did repeated sniping at Hans Blix, one of the U.N.'s two chief arms inspectors.
Just this past week, Defense Secretary Donald Rumsfeld damagingly suggested that Washington didn't really need British military help, administration diplomats unhelpfully hedged their support for a British compromise proposal and Secretary of State Colin Powell further undercut London's efforts to win over undecided Security Council members by suggesting that Washington might soon withdraw the pending resolution without a vote.
Even now, diplomacy might be resuscitated if the administration made an all-out effort to seek broad consensus around the British concept of disarmament benchmarks and specific, achievable deadlines. Such an effort would require much greater American willingness to negotiate realistic deadlines and credible mechanisms for measuring Iraqi compliance than has yet been evident.
Instead, the Bush administration now gives every appearance of going through the motions of diplomacy as a favor to Mr. Blair without really believing in it. By allowing that perception to grow, Mr. Bush finds himself about to embark on an uncertain course of war and nation-building in one of the world's most dangerous and complex regions, with an alliance far too narrow for comfort.
Friday, March 14, 2003
nyt 14mar03
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March 14, 2003
Iran's Nuclear Ambitions
raq, mercifully, still has a few hurdles to overcome in its nuclear weapons program. Iran, its larger neighbor to the east, is almost there. It has natural uranium. It has a plant capable of enriching natural uranium into bomb fuel. And it has declined to give the International Atomic Energy Agency the access it needs to sites and information to certify that a country is not building nuclear bombs. That poses an acute challenge to the peaceful system the world relies on to restrain the spread of nuclear weapons, as well as another potential threat in the oil-rich Persian Gulf region.
This is a problem that needs urgent international attention. Under the Nuclear Nonproliferation Treaty, which Tehran has signed, it would be a violation of international law for Iran to build nuclear weapons. All countries, especially members of the United Nations Security Council, should insist that Tehran immediately agree to the I.A.E.A.'s strengthened safeguards system, which was created in the late 1990's for just this kind of situation.
Under the treaty's basic safeguards, inspectors can check only acknowledged nuclear installations. That leaves a dangerously large loophole, permitting construction of illegal, unmonitored facilities. Iran exploited this to build a plant that can turn natural uranium into the highly enriched form used in bombs. Fortunately, the I.A.E.A. learned of the installation before it became operational. That plant, at Natanz, will now be monitored to make sure that no highly enriched uranium is used to make bombs. But Iran may have other secret plants.
Iran's deception is similar to those previously carried out by North Korea, and by Iraq before the Persian Gulf war. The Iraq experience led directly to the strengthened safeguards. More than 65 countries have signed up for these, which let international inspectors visit sites where they have reason to believe that work related to nuclear weapons might be going on. But Iran has not. Tehran insists that its nuclear programs are transparent to international inspections. So long as it declines to sign up for strengthened safeguards, this is unverifiable.
Iran's secret enrichment plant is in some ways more troubling than the other Iranian nuclear problem Washington has long complained about: the civilian power reactor Russia is building at Bushehr. The worry there is that plutonium from the reactor's spent fuel could be secretly reprocessed into bomb-grade plutonium. That is a legitimate concern. But Iran has no known plutonium reprocessing plant, while its newly discovered uranium enrichment plant is almost ready for operation.
Iran claims that it has no nuclear weapons ambitions and that its nuclear programs are for civilian energy needs. Given the country's oil and gas riches and its resistance to strengthened safeguards, there are good reasons to think otherwise.
Sunday, March 09, 2003
barrons 09mar03
The Root of Evil
Oil money, not oil, is the cause of war in Iraq
By THOMAS G. DONLAN
Practical Charity0
IF YOU SPONSOR a political demonstration, one of your main objectives should be to make your opponents boiling mad, for they may do foolish things in reply. This is how we understand the tactic that war protestors here and abroad have adopted on their signs and banners, accusing the United States of planning to attack Iraq in order to control its oil. "No blood for oil!" is their despicable slogan, which must be dismissed as an attempt to incite a riot. There is no truth in it.
If the U.S. merely wanted lower oil prices, it would have accepted the end of United Nations sanctions years ago and allowed Iraqi oil on the market. That market operates by supply and demand. Neither Arabs nor Texans can eat the stuff; they must sell it to live. The better they wish to live, the more they must sell and the lower the price.
In the last 30 years we should have learned we need not care where our oil comes from. Indeed, if we care too much and seek chimerical "energy independence," we will push up our domestic price above the world price and hurt ourselves. There are more economically successful nations with no oil of their own than there are nations with abundant energy using it to make more than a few of their citizens wealthy.
The important question about Middle Eastern oil is not who controls it. If Iraq had conquered Arabia along with Kuwait in 1990, or if one side or the other had been victorious in the Iran-Iraq war, the victors might have had more oil to sell and thus obtained more money, but they would not have had any more control over the price of oil.
Kings and cartels can push up prices in the short term, but in the longer run they are self-defeating or ineffectual if they do more than maintain the supplies and prices that demand dictates. High prices stimulate new exploration, new technology and new managers more disposed to cheat on the cartel's quotas.
Sanctions, unfortunately, do something similar. Though they allow us to deplore bad conduct by bad governments, they are more likely to hurt us than those governments. They are also likely to hurt the citizens oppressed by those governments, as Iraqis have been injured and killed by a government strapped for cash because it devotes billions of dollars of permitted oil profits to arms, soldiers' pay and offshore bank deposits, rather than to food and medicine as the U.N. intended.
The important question about oil, in the Middle East or anywhere else, is what the producing governments do with the money. If they use it to oppress their people and enrich corrupt officials, that is a shame. If they use it to purchase weapons and pay soldiers to intimidate their neighbors, that is an international danger. If they use it to acquire nuclear, chemical or biological weapons, that is an even bigger international danger. If they attempt to conquer other nations, that is a cause for war.
Blood for oil is not the issue; it's oil money used to spill blood that has prompted the U.S. and other responsible nations to move against Iraq.
Other national governments, ruling cliques, tribes and conspiracies are as vicious, as well-armed, as threatening to their neighbors. But no others are as rich and at the same time as eager to put their threats into action. Iran may be rich enough, but its society is deeply divided and most of its leaders do not wish to threaten its neighbors. North Korea is probably better-armed and it threatens its neighbors, but it is so desperately poor that it is more likely to collapse suddenly into chaos than organize a surprise attack. India and Pakistan are serious threats only to each other, at least for now.
Thus Iraq is at the top of President Bush's list. Although he has been resolute, he has not been articulate or inspiring. Let's turn to a president who was articulate and inspiring in explaining an attack on Iraq, but not resolute:
"Instead of the inspectors disarming Saddam, Saddam has disarmed the inspectors.... [We] gave Saddam a chance, not a license. If we turn our backs on his defiance, the credibility of U.S. power as a check against Saddam will be destroyed. We will not only have allowed Saddam to shatter the inspection system that controls his weapons of mass destruction program, we also will have fatally undercut the fear of force that stops Saddam from acting to gain domination in the region."
Though his words were clear, four days after this 1998 statement President Clinton ended air attacks on Iraq and declared that the mission was accomplished.
The case for finishing the mission of ousting Saddam Hussein is at least as good as the case for using arms to bring about "regime change" in Serbia (as all of NATO agreed to do), at least as good as the case for defending a dictatorial regime against barbarous insurgents in Sierra Leone (as the French are doing) and better than the case for stamping out separatists in Chechnya (as the Russians are doing).
President Bush recently told our Washington Editor Jim McTague that he listened to a European leader -- although not one of those getting headlines.
"The Estonian prime minister came to see me and I said, 'I'd like to share with you my sense of Saddam Hussein.' He said, 'You don't have to. My country watched democracies go soft in the face of totalitarianism and we lived in slavery for 50 years.'"
This is the cause of war, not "blood for oil."
wsp 09mar03
steadfast. confrontational regarding france/russia.
washingtonpost.com
Moment of Decision
Sunday, March 9, 2003; Page B06
THE DEBATE on Iraq at the United Nations Security Council no longer concerns whether Iraq has agreed to disarm; in fact, it hardly concerns Iraq at all. At Friday's meeting, once again, neither chief U.N. inspector Hans Blix nor any member of the council contended that Saddam Hussein has complied with the terms of Resolution 1441, which offered him a "final opportunity" to give up weapons of mass destruction. But most members chose not to discuss the "serious consequences" the council unanimously agreed to in the event of such non-compliance. Some, such as Mexico and Chile, essentially argued that Iraqi disarmament was less important than avoiding a split of the Security Council. Others, such as Russia and France, sought to change the subject from Iraq to the United States' global role. They argued for using Iraq to establish that international crises should be managed solely by the Security Council -- and not through military action that necessarily must be led by the United States.
It's painful to imagine Saddam Hussein's satisfaction in observing the council once again descend into internal quarrels rather than hold him accountable for his defiance of its resolutions. But it's not hard to understand much of the diversionary argument. Few countries outside of the Middle East feel directly threatened by Iraq, other than the United States. Many have an understandable aversion to war when their own citizens' lives don't appear to be at risk. Some, notably Russia and France, have been unsuccessfully seeking for a decade to check American influence and create a "multipolar world"; the Iraq crisis offers a fresh platform for an agenda more important to them than the menace of a Middle Eastern dictator. The Security Council's action on Iraq "implies the international community's ability to resolve current or future crises . . . a vision of the world, a concept of the role of the United Nations," said French Foreign Minister Dominique de Villepin. "There may be some who believe that these problems can be resolved by force, thereby creating a new order. But this is not what France believes." To oppose the use of force in Iraq, in other words, is to oppose the exercise of the United States' unrivaled power in the world.
We share the concern of those on the council who spoke of the damage of an enduring rift over Iraq -- damage for which the Bush administration's clumsy and often high-handed diplomacy will be partly responsible. Yet we would argue that the only way to preserve international cohesion is for the council to face up to the tough question that it has been avoiding for weeks -- not world order or U.S. power but Saddam Hussein's defiance of an unambiguous Security Council disarmament order. In their bid for global opinion, the French and Russians now invoke principles they would never agree to if they were applied to Chechnya or Francophone Africa. As President Bush pointed out in his news conference Thursday, Iraq's continued stockpiling of banned weapons is a direct threat to the United States, and the country has a right under the U.N. Charter to defend itself against that threat.
By taking its case to the United Nations, the Bush administration tested whether the Security Council -- which only rarely in the past 50 years has been able to respond to the world's crises -- could serve as a place where such threats could be addressed. Yet after six months of intensive effort, France, Russia, Germany and others refuse to accept the consequences of the process they claim to favor. They would rather the Security Council abandon its own resolutions, or split apart, than endorse a U.S. use of force against an outlaw tyrant. If their goal is really to preserve the U.N. security system, they should join in supporting the enforcement of U.N. resolutions; if it is merely to contain the United States, they should not be allowed to succeed. The United States, for its part, must remain open to reasonable compromise. If a few more weeks of diplomacy will serve to assuage the legitimate concerns of undecided council members, the effort -- even at this late date -- would be worth making.
nyt 09mar03
ok. now the nyt is against war...
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March 9, 2003
Saying No to War
ithin days, barring a diplomatic breakthrough, President Bush will decide whether to send American troops into Iraq in the face of United Nations opposition. We believe there is a better option involving long-running, stepped-up weapons inspections. But like everyone else in America, we feel the window closing. If it comes down to a question of yes or no to invasion without broad international support, our answer is no.
Even though Hans Blix, the chief weapons inspector, said that Saddam Hussein was not in complete compliance with United Nations orders to disarm, the report of the inspectors on Friday was generally devastating to the American position. They not only argued that progress was being made, they also discounted the idea that Iraq was actively attempting to manufacture nuclear weapons. History shows that inspectors can be misled, and that Mr. Hussein can never be trusted to disarm and stay disarmed on his own accord. But a far larger and more aggressive inspection program, backed by a firm and united Security Council, could keep a permanent lid on Iraq's weapons program.
By adding hundreds of additional inspectors, using the threat of force to give them a free hand and maintaining the option of attacking Iraq if it tries to shake free of a smothering inspection program, the United States could obtain much of what it was originally hoping to achieve. Mr. Hussein would now be likely to accept such an intrusive U.N. operation. Had Mr. Bush managed the showdown with Iraq in a more measured manner, he would now be in a position to rally the U.N. behind that bigger, tougher inspection program, declare victory and take most of the troops home.
Unfortunately, by demanding regime change, Mr. Bush has made it much harder for Washington to embrace this kind of long-term strategy. He has talked himself into a corner where war or an unthinkable American retreat seem to be the only alternatives visible to the administration. Every signal from the White House is that the diplomatic negotiations will be over in days, not weeks. Every signal from the United Nations is that when that day arrives, the United States will not have Security Council sanction to attack.
There are circumstances under which the president would have to act militarily no matter what the Security Council said. If America was attacked, we would have to respond swiftly and fiercely. But despite endless efforts by the Bush administration to connect Iraq to Sept. 11, the evidence simply isn't there. The administration has demonstrated that Iraq had members of Al Qaeda living within its borders, but that same accusation could be lodged against any number of American allies in the region. It is natural to suspect that one of America's enemies might be actively aiding another, but nations are not supposed to launch military invasions based on hunches and fragmentary intelligence.
The second argument the Bush administration cites for invading Iraq is its refusal to obey U.N. orders that it disarm. That's a good reason, but not when the U.N. itself believes disarmament is occurring and the weapons inspections can be made to work. If the United States ignores the Security Council and attacks on its own, the first victim in the conflict will be the United Nations itself. The whole scenario calls to mind that Vietnam-era catch phrase about how we had to destroy a village in order to save it.
President Bush has switched his own rationale for the invasion several times. Right now, the underlying theory seems to be that the United States can transform the Middle East by toppling Saddam Hussein, turning Iraq into a showplace democracy and inspiring the rest of the region to follow suit. That's another fine goal that seems impossible to accomplish outside the context of broad international agreement. The idea that the resolution to all the longstanding, complicated problems of that area begins with a quick military action is both seductive and extremely dangerous. The Bush administration has not been willing to risk any political capital in attempting to resolve the conflict between Israel and the Palestinians, but now the president is theorizing that invading Iraq will do the trick.
Given the corner Mr. Bush has painted himself in, withdrawing troops — even if a considerable slice remains behind — would be an admission of failure. He obviously intends to go ahead, and bet on the very good chance that the Iraqi army will fall quickly. The fact that the United Nations might be irreparably weakened would not much bother his conservative political base at home, nor would the outcry abroad. But in the long run, this country needs a strong international body to keep the peace and defuse tension in a dozen different potential crisis points around the world. It needs the support of its allies, particularly embattled states like Pakistan, to fight the war on terror. And it needs to demonstrate by example that there are certain rules that everybody has to follow, one of the most important of which is that you do not invade another country for any but the most compelling of reasons. When the purpose is fuzzy, or based on questionable propositions, it's time to stop and look for other, less extreme means to achieve your goals.
nyt 09mar03
unilateral war is easy. aftermath without allies is not.
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March 9, 2003
Fire, Ready, Aim
By THOMAS L. FRIEDMAN
went to President Bush's White House news conference on Thursday to see how he was wrestling with the momentous issue of Iraq. One line he uttered captured all the things that are troubling me about his approach. It was when he said: "When it comes to our security, we really don't need anybody's permission."
The first thing that bothered me was the phrase, "When it comes to our security . . ." Fact: The invasion of Iraq today is not vital to American security. Saddam Hussein has neither the intention nor the capability to threaten America, and is easily deterrable if he did.
This is not a war of necessity. That was Afghanistan. Iraq is a war of choice — a legitimate choice to preserve the credibility of the U.N., which Saddam has defied for 12 years, and to destroy his tyranny and replace it with a decent regime that could drive reform in the Arab/Muslim world. That's the real case.
The problem that Mr. Bush is having with the legitimate critics of this war stems from his consistent exaggeration on this point. When Mr. Bush takes a war of choice and turns it into a war of necessity, people naturally ask, "Hey, what's going on here? We're being hustled. The real reason must be his father, or oil, or some right-wing ideology."
And that brings us to the second phrase: "We really don't need anybody's permission." Again, for a war of no choice against the 9/11 terrorists in Kabul, we didn't need anyone's permission. But for a war of choice in Iraq, we need the world's permission — because of what it would take to rebuild Iraq.
Mr. Bush talks only about why it's right to dismantle the bad Iraq, not what it will take to rebuild a decent Iraq — a distant land, the size of California, divided like Yugoslavia. I believe we can help build a decent Iraq, but not alone. If we're alone, it will turn into a U.S. occupation and make us the target for everyone's frustration. And alone, Americans will not have the patience, manpower and energy for nation-building, which is not a sprint but a marathon.
Mr. Bush growls that the world is demanding that America play "Captain, May I" when it comes to Iraq — and he's not going to ask anybody's permission. But with Iraq, the relevant question is not "Captain, May I?" It's "Captain, Can I?" — can I do it right without allies? No.
So here's where we are. Regime change in Iraq is the right choice for Iraq, for the Middle East and for the world. Mr. Bush is right about that. But for now, this choice may be just too hard to sell. If the president can't make his war of choice the world's war of choice right now, we need to reconsider our options and our tactics. Because if Mr. Bush acts unilaterally, I fear America will not only lose the chance of building a decent Iraq, but something more important — America's efficacy as the strategic and moral leader of the free world.
A story. In 1945 King Abdul Aziz Ibn Saud of Saudi Arabia met President Franklin D. Roosevelt on a ship in the Suez Canal. Before agreeing to meet with Roosevelt, King Abdul Aziz, a Bedouin at heart, asked his advisers two questions about the U.S. president: "Tell me, does he believe in God and do they [the Americans] have any colonies?"
The real question the Saudi king was asking was: how do these Americans use their vast power? Like the Europeans, in pursuit of colonies, self-interest and imperium, or on behalf of higher values?
That's still the most important question for U.S. national security. The world does not want to be led by transparent cynics like the French foreign minister and his boss. But it also does not want to be led by an America whose Congress is so traumatized by 9/11 that it can't think straight and by a president ideologically committed to war in Iraq no matter what the costs, the support, or the prospects for a decent aftermath. But, France aside, the world is still ready to be led by an America that's a little more humble, a little better listener and a little more ready to say to its allies: how can we work this out? How much time do we need to give you to see if inspections can work for you to endorse the use of force if they don't?
Think about F.D.R. He had just won World War II. America was at the apex of its power. It didn't need anyone's permission for anything. Yet, on his way home from Yalta, confined to a wheelchair, F.D.R. traveled to the Mideast to meet and show respect for the leaders of Ethiopia, Egypt and Saudi Arabia. Why? Because he knew he needed them not to win the war, but to win the peace.
nyt 09mar03
carter against war
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March 9, 2003
Just War — or a Just War?
By JIMMY CARTER
TLANTA — Profound changes have been taking place in American foreign policy, reversing consistent bipartisan commitments that for more than two centuries have earned our nation greatness. These commitments have been predicated on basic religious principles, respect for international law, and alliances that resulted in wise decisions and mutual restraint. Our apparent determination to launch a war against Iraq, without international support, is a violation of these premises.
As a Christian and as a president who was severely provoked by international crises, I became thoroughly familiar with the principles of a just war, and it is clear that a substantially unilateral attack on Iraq does not meet these standards. This is an almost universal conviction of religious leaders, with the most notable exception of a few spokesmen of the Southern Baptist Convention who are greatly influenced by their commitment to Israel based on eschatological, or final days, theology.
For a war to be just, it must meet several clearly defined criteria.
The war can be waged only as a last resort, with all nonviolent options exhausted. In the case of Iraq, it is obvious that clear alternatives to war exist. These options — previously proposed by our own leaders and approved by the United Nations — were outlined again by the Security Council on Friday. But now, with our own national security not directly threatened and despite the overwhelming opposition of most people and governments in the world, the United States seems determined to carry out military and diplomatic action that is almost unprecedented in the history of civilized nations. The first stage of our widely publicized war plan is to launch 3,000 bombs and missiles on a relatively defenseless Iraqi population within the first few hours of an invasion, with the purpose of so damaging and demoralizing the people that they will change their obnoxious leader, who will most likely be hidden and safe during the bombardment.
The war's weapons must discriminate between combatants and noncombatants. Extensive aerial bombardment, even with precise accuracy, inevitably results in "collateral damage." Gen. Tommy R. Franks, commander of American forces in the Persian Gulf, has expressed concern about many of the military targets being near hospitals, schools, mosques and private homes.
Its violence must be proportional to the injury we have suffered. Despite Saddam Hussein's other serious crimes, American efforts to tie Iraq to the 9/11 terrorist attacks have been unconvincing.
The attackers must have legitimate authority sanctioned by the society they profess to represent. The unanimous vote of approval in the Security Council to eliminate Iraq's weapons of mass destruction can still be honored, but our announced goals are now to achieve regime change and to establish a Pax Americana in the region, perhaps occupying the ethnically divided country for as long as a decade. For these objectives, we do not have international authority. Other members of the Security Council have so far resisted the enormous economic and political influence that is being exerted from Washington, and we are faced with the possibility of either a failure to get the necessary votes or else a veto from Russia, France and China. Although Turkey may still be enticed into helping us by enormous financial rewards and partial future control of the Kurds and oil in northern Iraq, its democratic Parliament has at least added its voice to the worldwide expressions of concern.
The peace it establishes must be a clear improvement over what exists. Although there are visions of peace and democracy in Iraq, it is quite possible that the aftermath of a military invasion will destabilize the region and prompt terrorists to further jeopardize our security at home. Also, by defying overwhelming world opposition, the United States will undermine the United Nations as a viable institution for world peace.
What about America's world standing if we don't go to war after such a great deployment of military forces in the region? The heartfelt sympathy and friendship offered to America after the 9/11 attacks, even from formerly antagonistic regimes, has been largely dissipated; increasingly unilateral and domineering policies have brought international trust in our country to its lowest level in memory. American stature will surely decline further if we launch a war in clear defiance of the United Nations. But to use the presence and threat of our military power to force Iraq's compliance with all United Nations resolutions — with war as a final option — will enhance our status as a champion of peace and justice.
Jimmy Carter, the 39th president of the United States, is chairman of the Carter Center in Atlanta and winner of the 2002 Nobel Peace Prize.
Friday, February 28, 2003
wsp 28feb03
trashing france
A Costly Charade At the U.N.
By Charles Krauthammer
Friday, February 28, 2003; Page A23
America goes courting Guinea, Cameroon and Angola in search of the nine Security Council votes necessary to pass our new resolution on Iraq.
The absurdity of the exercise mirrors the absurdity of the United Nations itself. Guinea is a perfectly nice place and Guineans perfectly nice people. But from the dawn of history to the invention of the United Nations, it made not an ounce of difference what a small, powerless, peripheral country thought about a conflict thousands of miles away. It still doesn't, except at the Alice-in-Wonderland United Nations, where Guinea and Cameroon and Angola count.
For a day. As soon as their votes are cast, they will sink again into obscurity. In the meantime, however, we'll have to pay them off. Their price will be lower than Turkey's, but, then again, Turkey is offering something tangible -- territory from which to launch a second front. Guinea will be offering a raised hand at a table in New York.
The entire exercise is ridiculous, but for unfathomable reasons it matters to many, both at home and around the world, that the United States should have the permission of Guinea to risk the lives of American soldiers to rid the world -- and the long-suffering Iraqi people -- of a particularly vicious and dangerous tyrant.
It is only slightly less absurd that we should require the assent of France. France pretends to great-power status but hasn't had it in 50 years. It was given its permanent seat on the Security Council to preserve the fiction that heroic France was part of the great anti-Nazi alliance rather than a country that surrendered and collaborated.
A half-century later, that charade has proved costly. In order to appease the French, we negotiated Security Council Resolution 1441, which France has thoroughly trashed and yet which has delayed American action for months.
Months for the opposition to mobilize itself, particularly in Britain, where Tony Blair is now hanging by a thread. Months for Hussein to augment his defenses and plan the sabotage and other surprises he has in store when the war starts. Months, most importantly, that threaten to push the fighting into a season of heat and sandstorms that may cost the lives of brave Americans. We will have France to thank for that.
France is not doing this to contain Iraq -- France spent the entire 1990s weakening sanctions and eviscerating the inspections regime as a way to end the containment of Iraq. France is doing this to contain the United States. As I wrote last week, France sees the opportunity to position itself as the leader of a bloc of former great powers challenging American supremacy.
That is a serious challenge. It requires a serious response. We need to demonstrate that there is a price to be paid for undermining the United States on a matter of supreme national interest.
First, as soon as the dust settles in Iraq, we should push for an expansion of the Security Council -- with India and Japan as new permanent members -- to dilute France's disproportionate and anachronistic influence.
Second, there should be no role for France in Iraq, either during the war, should France change its mind, or after it. No peacekeeping. No oil contracts. And France should be last in line for loan repayment, after Russia. Russia, after all, simply has opposed our policy. It did not try to mobilize the world against us.
Third, we should begin laying the foundation for a new alliance to replace the now obsolete Cold War alliances. Its nucleus should be the "coalition of the willing" now forming around us. No need to abolish NATO. The grotesque performance of France, Germany and Belgium in blocking aid to Turkey marks the end of NATO's useful life. Like the United Nations, it will simply wither of its own irrelevance.
We should be thinking now about building the new alliance structure around the United States, Britain, Australia, Turkey, such willing and supportive Old Europe countries as Spain and Italy, and the New Europe of deeply pro-American ex-communist states. Add perhaps India and Japan and you have the makings of a new post-9/11 structure involving like-minded states that see the world of the 21st century as we do: threatened above all by the conjunction of terrorism, rogue states and weapons of mass destruction. As part of that rethinking, we should redeploy our bases in Germany to Eastern Europe, which is not just friendlier but closer to the theaters of the new war.
This is all for tomorrow. The imperative today is to win the war in Iraq. However, winning the peace will mean not just the reconstruction of Iraq. It will mean replacing an alliance system that died some years ago, but whose obituary was written only this year. In French, with German footnotes.
Monday, February 24, 2003
wsj 24feb03
February 24, 2003
REVIEW & OUTLOOK
Hurray for the Trade Deficit
The Commerce Department released its estimate of the 2002 balance of trade late last week, by chance just ahead of the weekend's G-7 economic meetings in Paris, giving officials a chance to fret that the U.S. trade deficit is too large. But the real problem is that the U.S. trade imbalance is the only thing standing in the way of global recession.
The U.S. current-account deficit hit a new record high in 2002, topping $435 billion for the full year. Meanwhile, the U.S. budget deficit is projected to reach $300 billion this year (still below the EU's designated limit of 3% of gross domestic product).
This provoked new talk in Paris of the much-feared "twin deficits" -- fiscal and trade -- which last reared their ugly heads together in the 1980s. Europe's chief central banker, the normally sensible Dutchman Wim Duisenberg, called the twin deficits "cause for concern" for Europe and the U.S. alike. Greece's finance minister said the deficits raised "sustainability risks."
On the contrary, we'd say the real alarm here is what the figures show about the pace of non-U.S. economic growth. With the exception of China, and a few other bright spots, the U.S. remains the world's only economic growth engine. The big players of Europe, Germany and France, are especially weak, and of course Japan is entering its second decade in the doldrums.
The problem is apparent when you inspect the Commerce statistics in any kind of detail. By happy coincidence, the European Union also released its trade statistics for 2002 on Thursday, so we can look at the two side by side.
The EU's current-account surplus, which includes goods and services plus profits on investments, doubled last year to $110 billion from about $53 billion in 2001. This so-called improvement in the balance of trade came about because EU imports dropped 4% while exports rose about 1%. In the U.S., the reverse was true; exports fell 2.5% while imports increased by just under 2%. In other words, Americans bought more from overseas, and sold less, while Europeans sold more and bought less.
You might call this "favorable" for Europe, if it translated into anything like better economic growth or higher living standards, but it plainly hasn't. Through the third quarter of last year, the latest period for which EU-wide statistics are available, the region managed economic growth of only 1.1%. A similarly poor performance is expected for 2003. The U.S. economy over the same period grew 3.3% -- not great, but clearly the main prop holding the world economy up.
What's more, owing to the way these things are calculated, imports subtract from GDP growth while exports add to it. So without Americans buying Philips plasma TVs and BMWs, American growth would be higher and European growth nonexistent or negative. In other words, America's "unsustainable" demand for foreign products is the only thing sustaining Europe's lackluster economy. The same thing can be said about the Japanese economy.
Pundits claim that "financing" the U.S. current account deficit requires that foreigners purchase some $1.5 billion in U.S. assets a day, and warn darkly of the time when that need cannot be met. But the current account deficit is by definition the inverse of net capital inflow. So it can very easily be argued that U.S. assets are in such demand, even with Treasury yields at historic lows and after three down years in the U.S. stock market, that Americans have to find $1.5 billion a day worth of foreign goods just to spend all the money that's coming in.
U.S. Treasury Secretary John Snow, who made his G-7 debut in Paris this weekend, put the case plainly. The American economy is growing, and the Bush Administration, through its tax-cut proposal, is doing what it can to encourage even faster growth. If Europe is truly concerned about American "sustainability," it could do the same, cutting taxes and reforming labor markets to spur its own anemic growth.
It's encouraging, in a way, that Europe is so concerned about the U.S. economy; messages of sympathy haven't been much in evidence recently. But the best thing that Europe's ministers can do about it is to get their own economic houses in order. In the meantime, they can keep loading those BMers on ships and sending them over; whatever Americans think of Germany's foreign policy these days, they still like Bavarian cars.
URL for this article:
http://online.wsj.com/article/0,,SB1046039408672780103,00.html
Updated February 24, 2003
Sunday, February 23, 2003
nyt 23feb03
February 23, 2003
Power and Leadership: The Real Meaning of Iraq
he debate over Iraq has exhausted everybody. Many people now think an American invasion is inevitable; many more are desperate just to get whatever happens over. There's nothing less satisfying than calling for still more discussion.
But that's right where this page is. More discussion is the only road that will get the world to the right outcome — concerted effort by a wide coalition of nations to force Saddam Hussein to give up his weapons of mass destruction. We need another debate. Another struggle to make this the United Nations' leadership moment.
Right now, things don't look promising for those of us who believe this is a war worth waging, but only with broad international support. The United States has an invasion force in place, and the military's schedule seems to demand that it attack within a few weeks before spring brings on withering desert heat. Washington has some support among other nations, but many of them are newcomers to the world of high-stakes diplomacy and few have much to offer in the way of troops or financial support. Prime Minister Tony Blair of Britain, America's only strong and consistent ally among the world's other major military powers, is facing fierce opposition at home and ridicule abroad for his allegiance to the Bush administration. Turkey, another important ally, held out for more money as it considered whether to allow American invasion forces on its soil. The size of the Turkish demands made the anti-Iraq forces look less like a serious coalition than a diplomatic version of "Let's Make a Deal."
Saddam Hussein, meanwhile, has been skillful at providing the pretense of progress to international inspectors without seriously cooperating. Iraq has drawn the United Nations into a game of find the handkerchief, in which the burden is on the inspectors to track down mobile laboratories or sniff out hidden weapons. All this puts an enormous weight on what Iraqi behavior Hans Blix, the chief U.N. inspector, chooses to stress — whether he dwells on Iraqi resistance or points to areas of cooperation. In the United Nations, the equivalent of a C-minus for effort on a Blix report can be taken as an argument for peace, while a D-plus can be seen as a call to war. The inspectors should never be put in the position of deciding international foreign policy.
A Case for Action
While the possibility of Mr. Hussein experiencing a last-minute conversion seems minuscule, there is one quick way to test whether it's possible. Iraq has Al Samoud 2 missiles, weapons it built at great expense and effort. Mr. Blix has already stated that they are too powerful, able to travel too far to fit under the limits the United Nations placed on Iraq after the Persian Gulf war. On Friday, Mr. Blix told the Iraqis to destroy them.
This week the United Nations should tell Mr. Hussein he must let the inspectors watch him get rid of his missiles immediately, or outside forces will do it for him, with the support of the international community. That clear message would resolve the most frustrating problem for those who want the United Nations to nail down its position as the arbiter of world crises — how to get France and its supporters to define their own bottom line rather than simply criticizing Washington's.
Saddam Hussein is nobody's hero in this story. Although many Americans are puzzled about why the Bush administration chose to pick this fight now, it's not surprising that in the wake of Sept. 11, the president would want to make the world safer, and that one of his top priorities would be eliminating Iraq's ability to create biological, chemical and nuclear weapons. Of all the military powers in the world, Iraq is the one that has twice invaded its neighbors without provocation and that has used chemical weapons both on its military foes and some of its own restive people. North Korea may be a greater danger, but North Korea has not been told by the United Nations to disarm and stay disarmed. And, although the administration is careful to steer clear of this argument, the very fact that North Korea has the international community in a bind is a cautionary tale for making sure that no other despotic governments run by irrational adventurers get hold of nuclear arms.
A Game of Chance
Many foreigners, and large numbers of Americans, wonder whether this administration is capable of dispassionate judgment as it relentlessly pushes for war. All too often, American officials have undermined their own case by demonstrating reckless enthusiasm for a brawl, denigrating allies who fail to fall in line or overstating their case against Iraq, particularly when it comes to a link between Saddam Hussein and Al Qaeda. But to his credit, President Bush worked hard to achieve the unanimous support of the Security Council for Resolution 1441, and more broadly to make his case before the United Nations and the world. This may be an administration intent on making war, but so far it has also shown itself willing to give the United Nations both time and space to make up its mind.
It seems clear to us that the United Nations should enforce its own orders and make Iraq disarm, even if that requires force. But in the end, sometime in March, the United States may have to decide whether it should do the job on its own.
When that happens, the arguments on both sides are sure to be couched in the highest moral principles. But the real calculations will be entirely about the odds of succeeding. If military victory over Iraq is swift, and if it can be accomplished without extensive casualties to American soldiers or Iraqi civilians or damage to neighboring countries or the area's oil fields, Mr. Bush's popularity will soar. If occupation forces unearth proof of a large nuclear program, stockpiles of terrifying biological weapons and real evidence of serious collusion between Saddam Hussein and international terrorists, many of the international leaders who are riding the crest of anti-Americanism now will start looking very foolish.
But things could go terribly wrong, very quickly. The war could be brutal and protracted, especially if Mr. Hussein unleashes biological or chemical weapons against Israel or American troops. He may also succeed in setting fire to his oil wells, or disabling those in neighboring countries, crippling the world economy. And if he is destroyed, there is every possibility of a vicious struggle for the lucrative spoils among the disparate clans and ethnic groups in Iraq, drawing in Turkey, Iran and others. In the chaos, the weapons of mass destruction Americans went to war to eliminate could wind up being ferried out of Iraq and sold to the highest terrorist bidder. And just as the American military's presence in Saudi Arabia during the gulf war precipitated the growth of Al Qaeda and Sept. 11, the long-term occupation of Iraq will create resentment in the Muslim world that could lead to more, not less, terrorism.
The Long Haul
All those risks, we repeat, are worth taking in the context of a broad international coalition, and some might even be diminished if the world acts together. The country is still traumatized by the discovery on Sept. 11, 2001, that we live in a world of unimaginable danger. Some of our traditional allies knew that already, from long and terrible experience. Some are still trying to face up to it. But the rational response is to work together to make the world safer, not to ignore obvious dangers in hope that the likely will not become inevitable.
Our own guess, when we calculate the odds in Iraq, is that the war is likely to go well in the short run, but that the long run will be messy, difficult and dangerous. If America acts virtually on its own, it is hard to imagine either the Bush administration or the American people having the staying power to make things right. Washington may be counting on Iraq's oil revenue to pay for rebuilding the country after the war, but the oil wells could be damaged in the fighting. It seems certain that an administration that will not give up tax cuts to pay for the war itself is not going to inflict economic pain at home to pay for the cleanup. And while Americans have always shown themselves willing to risk anything, even their own children, for a critical cause of high purpose, their support for this particular fight is thin as a wafer and based on misapprehension that Iraq is clearly linked to terrorism.
Our Bottom Line
When all the odds are calculated, people will have their own particular critical concerns that add weight to one side of the scale or the other. For some, it is the belief that rogue nations can be deterred — a certainty that if they use their worst weapons, the United States and its allies will pay them back, double. While the evidence that Saddam Hussein has used chemical weapons in battle with Iran, and against his own Kurdish population, is strong, the fact that he has not used similar weapons in other situations, including the gulf war, suggests that deterrence should not be dismissed.
For others, the bottom line will come down to saving face. The United States has assembled its forces for invasion, and to back down now, many argue, will be to show a weakness that will encourage our enemies. We don't think the world's only surviving superpower should be making war to avoid embarrassment.
Our own overriding concern runs in the other direction. The United States is, and seems likely to remain, a nation whose military might and economic power so outstrip any other country that much of the world has begun comparing it to ancient Rome. The test now is whether we will find a new way to exercise our power in which leadership, self-discipline and concern for the common good will outweigh our smaller impulses. An invasion of Iraq that is not supported by many traditional allies, or those powers that we need to be allied with in the best possible future, will send a message that we can do whatever we want. But it is not going to make the rest of the world want to root for us to succeed. The real test of American leadership is only incidentally about Iraq. It is whether we will further split the world into squabbling camps, united only by their jealousy of our power, or use our influence to unite it around a shared vision of progress, human rights and mutual responsibility.
Thursday, February 20, 2003
ft 20feb03
Complacency about Iraq after Saddam
Published: February 20 2003 4:00 | Last Updated: February 20 2003 4:00
Faced with popular and governmental opposition worldwide to an invasion of Iraq, it is becoming customary forUS and British officials to say thatthe tune will change once the war is won and the rush to share in the spoils is on. This could prove to be over-confident. It already is complacent.
No one doubts that US military might can bring down Saddam Hussein's regime - much reduced by more than a decade of sanctions and attrition - and probably in fairly short order. That will be the easy part. But getting a grip on post-Saddam Iraq, an ethnic, religious, tribal and political patchwork that makes the Balkans look relatively straightforward, is another matter entirely. Iraq, arbitrarily constructed as a nation-state by the British from bits of the Ottoman empire more than 80 years ago, is fragile, and seething with accumulated bitterness. Much of this hatred is directed against the Ba'ath regime, a vehicle for three decades of tribal rule by clans from the minority Sunni Muslims. The Kurds in the north, and the majority Shia Muslims in the south and centre, have scores to settle.
But outside powers could easily get sucked into this maelstrom - and not just the US as an occupying power.
As the FT reported yesterday, Shi'ite opposition forces backed by neighbouring Iran have started moving into northern Iraq. Iran - bracketed with Iraq and North Korea as part of the "axis of evil" by President George W. Bush - appears to be staking a pre-emptive claim in Iraq's future. The Shi'ite Islamic Republic, beyond a natural sympathy for its Iraqi co-religionists, felt it got little in return for its tacit support for the US campaign in Afghanistan, and does not want to be short-changed again. After the brutal experience of the 1980-88 war with Iraq, moreover, Tehran has every reason to see its neighbour as a potential threat.
Turkey too has forces in northern Iraq, and wants to send tens of thousands more. Ankara has postponed deciding on whether to allow US troops to use its soil to open a northern front in Iraq. But it is not just haggling with the Americans over a multi-billion-dollar aid package. Its main fear is that Iraq's Kurds, after a decade of de facto self-government protected by allied aircraft policing the northern no-fly zone, will cement their autonomy within a loosely federal Iraq, and reignite the now-quiescent insurgency of Turkey's 12m Kurds. Ankara says its troops are needed to avoid any repeat of the post-Gulf war flood of Kurdish refugees into Turkey. But Turkish officials also talk of protecting their Turcoman cousins in northern Iraq, even though the majority of this minority lives in Arab, not Kurdish areas.
The US has rightly stated its intention to preserve the integrity of Iraq, but that is about as far as it goes. If Mr Hussein's dictatorship is going to be toppled, there needs to be some realistic thinking about what comes next - starting with the realisation that Iraq is a cauldron, not a laboratory that lends itself to improvisation.
Saturday, February 15, 2003
ft 15feb03
tough place for blair...
In public opinion we trust
Published: February 15 2003 4:00 | Last Updated: February 15 2003 4:00
Relationships between the world's leading democracies are under enormous strain as they struggle to find unity in dealing with the threats posed by terrorism and weapons of mass destruction. But there are also tensions within each of those countries between the inclinations of their political leaders and the desires of those who elect them. How the internal strains are resolved is likely to be pivotal in determining the outcome of the present crisis over Iraq.
These issues are presented most sharply in the European countries whose leaders have supported President George W. Bush in his determination to disarm - and if necessary overthrow - Saddam Hussein. As demonstrations against a war in Iraq are staged across Europe today, two of the largest are expected to be in Britain and Spain, whose prime ministers have been Mr Bush's staunchest allies. Yet in neither country is there majority support for a war - with or without a fresh United Nations resolution.
For Spain's José María Aznar, the problem is easier. He has a quiescent majority in parliament and has already announced his intention to step down as prime minister in 2004. He is therefore less constrained by the opposition of almost half the electorate to action even if there is a new UN mandate.
For Tony Blair, the stakes are much higher. Not only is British public opinion unconvinced of the need for action against Iraq: his own party is seething with opposition to the idea. The misgivings of the rank-and-file are likely to be heard at Labour's spring conference in Glasgow this weekend. They have already been voiced by parliamentarians and Labour supporters in the trade unions.
Even in the cabinet, there is dissent that at present emerges only occasionally. But a large turn-out at today's demonstration in London could lead to louder protests from within Labour's leadership.
The precedent here is the great 1990 demonstration in London against Margaret Thatcher's poll tax. The day ended in violence that shocked and upset many of those who joined the march. But the turn-out of about 100,000 shook many Conservatives - not least because it was not dominated by the usual cast of demonstrators. Many of those who marched were exactly the sort of people who had been traditional Tory voters, and within a year Mrs Thatcher had been toppled.
Mr Blair's resolve will not be shaken by today's demonstration. Britain's place at the side of the US is a fundamental principle for the prime minister. He is also right to believe that leadership is about more than responding to opinion polls. Public opinion can be wrong on matters of war and peace, and can also change fast in the light of events. A successful and short war in Iraq could reverse the misgivings of the majority of the electorate.
But increasingly vocal public opposition could encourage cabinet dissenters, especially if it looks likely that war would be without the backing of a second Security Council resolution. Perhaps as important, a continuing erosion in support for war in the Gulf would leave senior officers in the armed forces uncomfortable. Under such circumstances, Britain's participation in a US-led coalition might be impossible. And even if Mr Blair won the day on joining Mr Bush, a messy or prolonged war could prove fatal for his premiership.
For now, the task is easier for those leaders who are moving in step with European public opinion. President Jacques Chirac has perhaps even strengthened his hand in domestic French politics by showing his determination not to be rushed into action. Chancellor Gerhard Schröder and Joschka Fischer, his foreign minister, have little choice given German public opinion but to continue to oppose war.
Yet there could come a time when they find that realpolitik forces them to confront deep-seated public opinion in their countries. If there is a war in Iraq, both France and Germany are likely to be involved to some degree - even if that falls short of fighting as members of the coalition. Offering help, finance or even passive support might be hard to explain to voters convinced by their leaders of the case against military intervention.
On both sides of the argument, the outcome may - in the end - hinge on trust. This week's BBC poll that showed continuing opposition to British involvement in a war in Iraq also found that more than half trusted Mr Blair to to do what he believed was right for Britain in a crisis. The prime minister can retain room for manoeuvre so long as he retains that public trust. But if that is shaken, the opposition to war could leave Mr Blair unable to do as his instincts urge him.
wsp 15feb03
ironic reply from a french asshole
washingtonpost.com
Merci For the French Correction
By Justin Vaisse
Saturday, February 15, 2003; Page A33
As a Frenchman, I have certainly learned a lot about my country in recent weeks.
"How dare the French forget," read a headline in the New York Post on Monday, on a page with a photograph of a military cemetery in Normandy.
I apologize for being so ungrateful. It's just that I learned in school that France and Britain declared war on Nazi Germany in September 1939, while the United States was enacting isolationist laws, and that America entered the war two years later, only after Japan attacked Pearl Harbor. But now I see that was just Gallic propaganda. How could I have believed it?
I now know what really happened: Franklin D. Roosevelt felt that a country with more than 300 kinds of cheese was worth liberating, and for the love of France he came to our rescue. Joseph Stalin came to the same conclusion, but -- fortunately for us -- he was slower and had to stop in Berlin.
Meanwhile, Lafayette and Rochambeau were a different story altogether: They apparently came here not to help Americans gain their independence but merely to execute the crass realpolitik maneuvers of Louis XVI.
I have also been interested to learn that my hesitation in endorsing war in Iraq is mainly a product of my nostalgia for France's past glory. As Thomas Friedman writes in the New York Times, being weak after being powerful is a terrible thing. Perhaps he is right. I had been deluded into thinking that my doubts about military intervention in Iraq had something to do with fears of civilian casualties, the use of weapons of mass destruction, increasing terrorism or Middle East instability. But apparently we French are really just longing for the time of Napoleon or Louis XIV.
In those good old days, we could unilaterally invade a Muslim Arab country, say Egypt or Algeria, and create a regional mess just because we felt like it. Now, because we can't do that anymore, we try to bother the United States. The fact that war is opposed by large majorities in most other countries around the world, which have no such nostalgia complexes, must be pure coincidence.
Another thing I had failed to appreciate was how isolated we French are. It's painful to admit, but only 73 percent of the French people oppose a war without a second U.N. resolution. We definitely cannot pretend we speak for the rest of the world, as war is opposed by 82 percent of the European Union (84 percent of Brits), and in other parts of the world, let's say South America, it's more in the range of 90 percent. So we should shut up. And we should also admit that our isolation makes us insignificant, though I still can't understand why publications such as the Weekly Standard keep talking about us so much. Maybe it has something to do with our food.
Now that I have admitted everything, I should own up to the true motivation of our foreign policy: We are protecting commercial interests, especially oil. For the harsh truth, just check out the International Monetary Fund's Web site:
From 2000 to 2001, our exports to Iraq jumped from 0.12 percent to 0.2 percent of our total exports! Never mind that we'll never realize our oil contracts with Iraq or get our debt repaid so long as Saddam Hussein stays in power, and don't believe anyone who tells you that a truly mercantilist France would help America attack Iraq and share the spoils afterward. Some even make the bizarre claim that if America wanted to enhance its oil interests, it would join France and oppose the war in the United Nations so as to keep oil flowing from Iraq at current levels (America is the first buyer of Iraqi oil). But not too much oil, as this would lower the price to a point where it would be bad for Texas producers and Alaska drilling. But I take that as typically far-fetched Gallic perfidy.
My situation is now very difficult: When I talk to my former French friends on the phone, they claim they oppose the war for the same reasons about 40 percent of Americans do. They claim that they find their own arguments expounded in American newspapers by American statesmen; namely, that war would help Osama bin Laden recruit new followers, that war would trigger more terrorist attacks at home and abroad, that containment can work, and that it would be hard to impose stability -- let alone democracy -- on Iraq, especially when you look at Afghanistan.
But I don't listen to them anymore. After all, they're French. I know better. I have become an American.
Justin Vaisse is a visiting fellow at the Center on the U.S. and France at the Brookings Institution.
nyt 15feb03
wow. strong words from the other side, the nyt!
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February 15, 2003
Disarming Iraq
s much as the feuding members of the United Nations Security Council might like Hans Blix and Mohamed ElBaradei to settle the question of war or peace with Iraq, these two mild-mannered civil servants can't make that fateful judgment. All they can do, which they did again yesterday, is to tell the Council how their inspection efforts are faring. So-so was the answer. It's up to the Council members — especially the veto-wielding quintet of the United States, Britain, France, Russia and China — to decide whether Iraq is disarming.
In our judgment, Iraq is not. The only way short of war to get Saddam Hussein to reverse course at this late hour is to make clear that the Security Council is united in its determination to disarm him and is now ready to call in the cavalry to get the job done. America and Britain are prepared to take that step. The time has come for the others to quit pretending that inspections alone are the solution.
The Security Council, as we said the other day, needs to pass a new resolution that sets a deadline for unconditional Iraqi compliance and authorizes military action if Baghdad falls short. Without that, the French proposal that Mr. Blix and Dr. ElBaradei report again in mid-March is the diplomatic equivalent of treading water. It practically invites President Bush to take the undesirable step of going to war without the support of the Security Council.
Just as they did last month, the inspectors offered a mixed picture that allowed all sides to draw sustenance for their arguments. What should not be missed is that the positive aspects of the reports dealt largely with secondary matters like process and access. On the essential issue of active Iraqi cooperation in the disclosure and destruction of prohibited unconventional weapons, the inspectors could find little encouraging to say.
That leaves the fundamental picture about where it was last weekend, except that another week has passed without Iraq doing what it urgently needs to do. It's easy to see where France's wishful thinking leads. Baghdad could continue dribbling out meaningless concessions such as yesterday's laughable decree that the development of weapons of mass destruction is now prohibited in Iraq.
Mr. Blix and Dr. ElBaradei cannot be left to play games of hide-and-seek. This is not like Washington's unproved assertions about an alliance between Saddam Hussein and Osama bin Laden. There is ample evidence that Iraq has produced highly toxic VX nerve gas and anthrax and has the capacity to produce a lot more. It has concealed these materials, lied about them, and more recently failed to account for them to the current inspectors. The Security Council doesn't need to sit through more months of inconclusive reports. It needs full and immediate Iraqi disarmament. It needs to say so, backed by the threat of military force.
Copyright 2003 The New York Times Company | Privacy Policy
wsp 15feb03
last sentence most clarifying: "Even if others lose their nerve, the United States must ensure that this time the dictator suffers the "serious consequences" that are due."
washingtonpost.com
Sound and Fury
Saturday, February 15, 2003; Page A32
THE LATEST MEETING of the United Nations Security Council on Iraq generated much emotional rhetoric but little change in the situation. Inspectors Hans Blix and Mohamed ElBaradei reported again that Saddam Hussein has not accounted for his weapons of mass destruction or cooperated fully with the inspectors, as required by Resolution 1441. They suggested no alteration of Iraq's practice of offering partial collaboration on procedure but no collaboration on the actual substance of disarmament. Britain and the United States tried again to call attention to the path laid out by the council in a unanimous vote three months ago: Failure by Iraq "at any time" to comply was defined as a "material breach" mandating the council's consideration of "serious consequences" -- which all understood to mean military intervention. Finally, France, Germany and Russia argued -- to the applause of the gallery -- that the terms of Resolution 1441 simply be disregarded and that inspections continue despite Iraq's refusal to cooperate. French Foreign Minister Dominique de Villepin, ignoring Mr. Blix's statement that "it is not the task of the inspectors" to locate Iraq's stockpiles, proposed that they be charged with doing just that -- and that force not be considered unless the inspectors reported that they were "unable to work."
Most of the speeches, like that of Mr. de Villepin, were directed at global opinion. The French minister devoted far more of his speech to proclaiming France's love of peace than to explaining how the dispatch of more inspectors would get results when even the chief inspector doesn't think so. But it's worth considering how one particular spectator -- Saddam Hussein -- must have reacted to this show. Surely he noticed the deep divide in the council and the focus by France and its followers on blocking action by the United States. He listened as meaningless or even ludicrous gestures on his part, such as yesterday's announcement of a decree outlawing the production of chemical and biological weapons, were described as gratifying steps forward by veto-wielding members of the Security Council. And he heard the French government say that as long as he stops short of forcing inspectors out of his country, there will be no war. Saddam Hussein's conclusion is easy: He can safely continue his strategy of dickering over procedure with the inspectors while continuing to hide his weapons.
Yesterday's session diminished hope that the council will face up to the responsibility of implementing its resolutions on Iraq. Mr. Blix did report that Iraq has produced dozens of illegal missiles that should be destroyed; if Iraq refuses orders to do so in the coming weeks, the council could feel compelled to respond. Both the inspectors and the French also contended that inspector-managed disarmament could be completed quickly. If that's the case, then they should be prepared to set a deadline for full Iraqi compliance. The Bush administration still intends to seek another council resolution, and it should do whatever it can to prevent the Iraq debate from damaging the United Nations and the NATO alliance -- including curbing the intemperate rhetoric it has directed at Paris and Berlin. But the United States cannot again join the Security Council in backing down from a confrontation with the Iraqi dictator, as it did repeatedly during the 1990s, also under pressure from France and Russia. Saddam Hussein was offered a "final opportunity"; no member of the council contends that he accepted it. Even if others lose their nerve, the United States must ensure that this time the dictator suffers the "serious consequences" that are due.
