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Monthly Archives
1:06AM

Again, why "resource war" advocates will be disappointed

CORPORATE NEWS: "China Oil Finds Tie-Ups Ease Deals: Partnerships Link State Funding With Westerners' Skills; Avoiding a Backlash," by Shai Oster, Wall Street Journal, 23 March 2010.

Short answer? The Chinese aren't dumb enough to isolate their extractive companies in these environments, instead preferring to bring the Western companies along for both technology and political cover.

Very smart indeed.

1:06AM

PA&E: LockMart's shortcut to Africa

pae.jpg

ARTICLE: "Defense Industry Pursues Gold in 'Smart Power' Deals," by August Cole, Wall Street Journal21 March 2010.

Another piece on LockMart's move into the SysAdmin Industrial Complex (here referred to by one expert as the rising "soft power industrial complex"--with alarm!), emphasizing the work of the recently acquired PA&E unit (a story I tell in Great Powers because of my thought leadership role in the purchase).

This is CEO (and former Marine) Bob Stevens' vision, and it's a good one. I mean, just look at how acquiring PA&E suddenly places LockMart all over Africa.

Steve DeAngelis and I know the top PA&E people (LM transplants) who've overseen this shift, and have worked with them. They are an impressive, ambitious and visionary bunch.

Cole is also a great writer on this stuff.

[Thanks to Russell Samuels]

1:05AM

The bankers stay in the picture

M&A: "Deluge of Asia deals as groups seek out growth: The burgeoning interest in cross-border transactions," by Helen Thomas and Lina Saigol, Financial Times, 31 March 2010.

FRONT PAGE: "Western banks pay out for Asia talent: Big salaries for top bankers in the region; Competition leads to pre-crisis wage levels," by Sundeep Tucker and Francesco Guerrera, Financial Times< 29 March 2010.

Old Core companies obviously seek to offset sluggish growth opportunities in the West by buying into more exciting times in Asia, resulting in a whopping $90B in dealmaking activity in Asia in the first quarter of 2010.

The rationale is simple, according to one expert:

M&A offers one of the few ways corporates can gain immediate exposure to these markets.

As such, individuals who can tap this opportunity are receiving some spectacular salary offerings.

Best part, in my mind: cross-regional transactions in emerging markets dominated the first quarter, meaning the transmission of globalization from Old Core to New Core is basically complete. Now the New Core is dynamic enough to power globalization's further advance on its own.

In the larger sense, this signals that globalization is no longer ours to call off.

Frankenstein has left the building!

11:33PM

Easterly & Co. plot the Gap's rapid shrinkage--by cellphone

POST: "Who ya gonna call? Entrepreneurs!", by William Easterly and Laura Freschi, AIDWATCH, 30 March 2010.

I'm a huge fan of Bill Easterly, as readers know. I had the pleasure of spending a day with him once discussing aid at an intimate workshop.

Here he shows how cellphone coverage (with serious density being described as 40 cell-phone subscriptions per 100 population) is connecting the Gap at a speed unknown in previous technology extensions across humanity (very much dovetailing with my recent WPR special feature).

Here are two of the time-maps reposted.

mobile-20014.png

In 2001, the mobile tele-density basically defines my Old Core.

mobile-2008.png

But by 2008 (just seven years later), it's spread throughout my New Core and deep inside the Gap.

I use an animation sequence in my opening Core-Gap slide that shows the Gap shrinking rapidly over time, and the ever-tightening shapes correspond almost exactly to this dynamic. I will naturally exploit this information to shape up the slide further.

Very cool!

[thanks to Abram Conrad]

11:31PM

After the four rough-patch months, the Chinese are making nice in a decidedly public fashion

ARTICLE: "China Appears Set to Make Currency Policy More Flexible," by Keith Bradsher, New York Times, 8 April 2010.

The good word:

The Chinese government is preparing to announce in coming days that it will allow its currency to strengthen slightly and vary more from day to day, a move being taken for domestic policy reasons in China but likely to please the Obama administration, people with knowledge of the emerging consensus in Beijing said on Thursday.

The domestic reasons cited are a compendium of my recent economic posts on China, but the general theme is inflation.

The larger good news: the self-correcting reality of globalization connectivity isn't all that much slower than the political dynamics--a good sign.

Obama and Geithner will benefit--and should.

[thanks to Robert Frommer]

11:30PM

Average Russians, increasingly ticked off

russia-violence_1250612c.jpg



ANALYSIS: "Strife on the edge: Russia; Amid demonstrations that trace an arc of dissatisfaction across the country's remotest regions, the Kremlin has cause to reconsider the wisdom of exercising control from the centre," by Charles Clover, Financial Times, 25 March 2010.

On Saturday, 20 March, around 50 major Russian cities saw substantial anti-government demonstrations in streets. No "orange revolution" on the horizon, but clearly the average Russian no longer feels the Putin package is working, and now with seemingly random terrorism back on the agenda, even that aspect of the Putin legend comes under question.

The political undercurrent here: the desire to bring back local elections for governors, something that Putin ended by making the position appointed.

Why this would be smart? If the locals cannot throw the bums out, then they start looking to Moscow for the same.

Analysts say a new mood is starting to develop that barely existed before the onset of the economic crisis in the autumn of 2008. Prior to that, protests were confined mostly to within the Moscow ring road an coterie of democratic activists, or the elderly demanding higher pension. Saturday's protests included all age groups and covered the full ideological spectrum, from democrats to hardline nationalists.

Yet another reason why the Western egghead hysteria over Russia's dust-up with Georgia was best ignored: the internal correction builds nicely enough inside Russia, and the notion of the rising petrocracies is shown to be suitably faddish (meaning it gained great intellectual currency just as the seeds of its destruction appeared).

Meanwhile, the all-powerful Russian military, which performed so unimpressively in that five-day conflict, is reduced to trying to buy its force modernization from France.

Ah, but our freak-out was glorious while it lasted, nyet?

Now it's back to arms treaties . . ..

11:30PM

Iran: silently disapproving the Iraq election, but working hard on the resulting outcome

ARTICLE: "Iran in silent fury over Iraq election result," by Michael Theodoulou and Maryam Sinaiee, The National, 7 April 2010.

ARTICLE: "Iran Plays Host to Delegations After Iraq Elections," by Rod Nordland, New York Times, 2 April 2010.

Ah, but I thought most of the regional experts had it that Iran owned this election from day one.

Iran has yet to respond officially to the surprisingly strong display of political muscle by a secular, nationalist coalition in neighbouring Iraq's general elections.

Tehran's seemingly sullen silence reinforces the impression that it is fuming.

This is why I was generally happy with Allawi barely winning.

Yes, the compromises and coalitions will come (and yes, Sadr will have his king-making moments), but hard to describe Iran as running the show, contrary to a lot of pessimism previously expressed.

Yes, as the second article points out, Iran will do its best to discipline and direct the Shiite parties. But the larger point remains: assuming Iraq will become Iran's Syria is a fear that's far from being proven--to date--by events.

[thanks to WPR Media Roundup]

11:29PM

The "stark alternative" on Iran arrived on/about 2006: we're just getting our minds around it now


OPINION: "Iran Sanctions Are Failing. What's Next?" by Danielle Pletka, Wall Street Journal, 31 March 2010.

THE WORLD: "The 'What If' of an Israeli Strike," by David E. Sanger, New York Times, 28 March 2010.

FRONT PAGE: "Agencies Suspect Iran Is Planning New Atomic Sites: U.N. Demands Ignored; International Inspectors Seek Evidence After Official's Speech," by David E. Sanger and William J. Broad, New York Times, 28 March 2010.

When even the hardliners raise the obvious possibility that we'll end up managing the risk because the strike either will not happen or won't achieve its ends, then we move into the serious phase of thinking on this subject.

Of course, Pletka must pretend that all blame lies with Obama. So her piece isn't really any such exploration, but a pre-blaming of Obama for any Israeli strikes.

As for such strikes, a recent, rather intelligently-run wargame on the subject, covered by NYT's David Sanger (a very sensible fellow) and run by the Saban Center for Middle East Policy at Brookings, lays out the following reasonable sketch:


  1. Israel attacks, leveraging an impromptu refueling base in Saudi Arabia where it's not clear if the Saudis okayed or not



  1. We step in, just rhetorically



  1. We end up sending weapons to all our friends (e.g., antimissile batteries)



  1. Iran hits back at Israel via proxies and direct missile shots at similar nuclear facilities there



  1. Iran makes some symbolic attacks on Saudi oil facilities (believable even if step #1 doesn't involve the kingdom) and pursues some general mischief in Europe to scare them off



  1. Iran avoids US targets



  1. strife breaks out in Israel from the combo of proxy attacks, missile attacks, and the economy coming to a standstill



  1. Israel launches a mini-war on Hezbollah



  1. Iran really goes after Saudi oil facilities



  1. America bulks up with local naval assets (classic show of force)



  1. game ends at day 8 with participants arguing over how much the world freaks out and how much damage Israel really did.


Sanger's judgment:

No one won, and the United States and Israel measured success differently.

Israel sees any delay as worth the hassle, while the Americans think it was all a "pipe dream."

I found this rendition highly plausible, and as such, don't really worry much about the likelihood.

I believe everybody will get jacked over it, but that the long-term impact will be negligible. "Surprise attacks" this long in the making are simply anticipated by the target, and preparations made.

11:29PM

Send in the chili-throwers!

chili.jpg

AP - FILE - In this July 4, 2007 file photo, farmer Digonta Saikia shows a 'Bhut jolokia' or 'ghost chili' ...

WIRE STORY: "Indian military to weaponize world's hottest chili," by Associated Press, Yahoo News, 23 March 2010.

This is one pin you won't be pulling with your teeth!

11:29PM

The Crucible continues

POST: "NGO launches witches camp integration project," BusinessGhana, 22 March 2010.

Consider how far back in U.S. history you have to go on this one to find the comparable listing.

But yeah, it's there.

[Thanks to Thomas Frazel]

11:28PM

Force generation v. force operation

ARTICLE: "U.S. Must Strengthen Civilian Expeditionary Capacity," by Dane F. Smith, World Politics Review, 24 March 2010.

The logic is fine, but the assumptions regarding the future are not.

America always says it won't do anything big again in the future, but then, soon enough again, it does.

And when it does next time, it will once again regret low-balling the institutional response. Ask anybody who's worked this reality in the field: State, no matter how many offices you give it, will never be up to the task.

But locating Bowen's proposed office under the NSC? That would be a serious step forward, and would constitute no bigger a structural response than creating the Stability and Reconstruction office (it is literally an office) in State.

Here's what this guy's piece is lacking: the State entity is a force provider, not a force operator (as I have noted based on direct conversations with that crew and Herbst himself). What Bowen is talking about it a force operator.

Do not confuse the two, because they are vastly different things.

[Thanks to Our Man in Kabul]

11:28PM

SWFs becoming a bit more transparent

about_adia.jpg

WORLD NEWS: "Sovereign wealth funds start to open up their books: Managers say their investing decisions are not political," by Robin Wigglesworth, Financial Times, 18 March 2010.

FRONT PAGE: "Oil industry urges India to set up fund to compete with China: Sovereign wealth plan in race for energy assets," by James Fontanella-Khan, Financial Times, 18 March 2010.

Adia (Abu Dhabi Investment Authority) publishes its first annual review. Not a whole lot of details, but it sure beats the past disclosure practices.

SWFs are overwhelming energy-related, as in, either looking for (India's proposal) or based on existing oil wealth, so yeah, it's all highly political--thus the even greater need for transparency to dispel fears. This is especially true when oil-rich funds place large investments in the very same Western economies from which the money was first obtained.

So a good sign, but still in the baby-steps phase.

11:27PM

That cow has left the barn

GLOBAL INSIGHTS: "China's Military Buildup Stokes Regional Arms Race" by Richard Weitz, World Politics Review, 16 March 2010.

The tragic irony here: everybody is spending AFTER the period when serious wars were possible and are spending now primarily because they can (most got a lot wealthier while America played Leviathan in the region and obviated the need for such futile races). The region as a whole has already migrated into serious economic interdependency in a supply-chain sense, meaning their shared security interests vastly outweigh the perceived bilateral rivalries.

But this only underscores the badly managed spending currently being pursued by the PLA. The vast majority of it has little to do with addressing their true global national interests. Mostly it's just good for triggering responding efforts by neighbors that largely negate the sought-for perceived advantage, meaning it's doubly a waste of time and money.

Pathetic really, but when I spent time a while back with PLA long-range planners, they complained that China's military budget was just a combining of wish-lists from various wings of the force with almost no rationalization or strategic filtering. They were embarrassed by it all.

12:44AM

I'll be attending & speaking at the Fortune/Time/CNN Global Forum 2010

global forum.gif

Got the invite from Andy Serwer, Managing Editor of Fortune about a month ago. Just confirmed now. Where exactly I fit in remains TBD (and you won't find me among the listed participants until that's settled), but the organizers said I could/should promote here now.

This will be the 15th edition of the Fortune/Time/CNN Global Forum.

It'll be in Cape Town, South Africa, at the same international convention center where I spoke at in February for Mining Indaba 2010. The event runs 26-28 June.

Lotsa of CEOs and world leaders, plus as many of the Time 100 honorees as they can lure (will.i.am, for example, is listed). For me, it'll be great to see C.K. Prahalad again.

12:44AM

World trade rebound is just as stunning as last year's drop

wto.jpg


WORLD NEWS: "WTO forecasts big increase in global trade this year," by Alan Beattie, Financial Times, 27-28 March 2010.

Remember the scary 9-10% drop in global trade last year? It was so much larger than the other three drop years since 1971 (Nixon takes us off the gold standard), which all were 2-3 percent.

Well, we're now on track to see a 9.5% rise in global trade in 2010, meaning we earn it all back in just 12 months.

According to the WTO's chief economist:

The story is of a recovery in global demand. Those countries which suffered from a fall in demand, particularly the Asians, are now recovering.

Clever Americans to create an international liberal trade order of sufficient global inclusiveness so that, when the day finally came when the American consumer could no longer drive globalization's advance, somebody else was all prepped to step up.

Larger immediate point: the credit crunch is now viewed as less decisive in last year's trade collapse than the sudden drop in global demand, meaning people freaked out at the financial collapse but it was not the direct constraint on trade. An ultra-fine point, in my mind, but there it is.

I guess another way to say it is that a sort of global business cycle hit.

The emerging markets, to no surprise, lead the way at 11 percent, with Old Core exports rising about 7-8%.

Another key point from Mr. Patrick Low, the WTO chief economist:

Mr. Low said that there was no clear evidence yet whether the sharp fall had inflicted any lasting damage to trade by making producers less willing to extend supply chains around the globe.

"There were some reports of concern before the crisis that people had extended supply chains too far and that long-distance transport was vulnerable to pressure from environmentalists, but it is not obvious that the crisis as such has made any difference," he said.

As so the faddish myth of de-globalization receives another fact-filled hit.

12:43AM

A century later, old Ford sells off a unit to the rising Asian version

COMMENT: "China's can-do carmaker: The poetic Geely chief is poised to take the wheel at Volvo,""China's can-do carmaker: The poetic Geely chief is poised to take the wheel at Volvo," by Patti Waldmeir and John Reed, Financial Times, 27-28 March 2010.

Li Shufu, head of Geely, speaks of his plans for the venerable/vulnerable Volvo.

Geely is China's largest private carmaker, and it's paying Ford $1.8B for Volvo:

The deal will be a bellweather for China's ambitions to add supremacy in global automaking to its newly won title as the world's largest car market.

Bill Russo, former head of Chrysler in China:

He says "Why not" while the rest of the world is asking "Why?" He is the kind of story that exists in China today, that existed in the west 100 years ago.

How apropos that Li buys Volvo from Ford, then.

Geely's now producing just under half a million units, which gives them single-digit status in China's roughly 15m unit market that is growing by leaps by bounds every year.

12:39AM

The EU post-Greece bailout deal

WORLD NEWS: "Bailout Agreement Betrays EU Divisions: Germany's Terms Win Out, Underlining How the Bloc's Biggest Member Views the Workings of Euro-Zone Unity," by Marcus Walker, Wall Street Journal, 26 March 2010.

Germany's tough conditions won out. The verdict?

Germany's tough conditions for any aid for Greece, which other euro-zone countries were forced to swallow at a summit of European Union leaders Thursday [25 March], signal a broader division that threatens to hamper Europe's ambitions as a global power: Germany has cooled to unity, except on its terms.

Germany-the-unilateralist damages Europe in the economic realm as America-the-Bush-era-unilateralist did the same to the West in the pol-mil realm.

And we can expect Germany to remain as intransigent as the Chinese on any desired intra-European "rebalancing."

I'm Punkt Nein! Nein! Nein! Nein! Nein! percent sure on this.

12:39AM

"You ate yours, these are mine."

ARTICLE: "Asia's Food Crisis Driving Broader Trade Shifts," by Saurav Jha, World Politics Review, 18 March 2010.

Sharp piece by Jha on Asia's rising food needs driving a lot of trade protectionism and the belief that food self-sufficiency is needed.

The last bit, of course, is darn near crazy talk, given the expected impact of global warming on much on Asia (more droughts) below the 35th parallel, but countries will try.

To me, as I highlight in the current brief, the future of food is to become the most important global transpo net in the world, replacing energy. Nobody will be self-sufficient in food, any more than they are on energy.

[Slap on the back for the movie reference.]

12:38AM

What China can learn from authoritarian states in LATAM

ARTICLE: "China: What the CCP Could Learn from Latin America," by Mariano Turzi, World Politics Review, 19 March 2010.

Funky piece by Turzi that is definitely worth a read.

The Chinese Communist Party declares it wants more "democratic centralism," old Bolshevik code redefined to mean more intra-party democratization to curb corruption in the ranks--as in, baddies are more easily weeded out.

This, Turzi argues, is crucial in a post-stimulus China.

The trick: "The political forces and interest groups that benefit from the central government's patronage will not give up their privileges easily, even if that means undermining stability and the power of the state. "

The guts of the piece is the perceived pool of lessons learned in Latin America's past:

In this sense, Latin America's experience offers useful insights into the impact of this kind of rent-seeking behavior on the state. Historically, Latin American states have been parceled out, to varying degrees, between competing clienteles. Most of these states lacked established, clearly understood rules and regulations -- whether formal or informal -- regarding the interaction of actors as well as discretionary behavior on the part of state officials. As a result, alliances arose between private interests and public officials to carve up pieces of the state administration for their own benefit.

The result was chronic institutional weakness that undercut state capacity. In the typical scenario, policy was defined in narrow terms and formulated to accommodate interest groups, perpetuating patterns of social exclusion and economic inequality. When rent-seeking became pervasive, policy uncertainty raised socioeconomic tensions and, with it, the likelihood of conflict. Moreover, markets became nervous, negatively impacting the country's economic organization, investment decisions, and the productive process as a whole -- ultimately hampering overall economic performance.

When policies and norms became terribly unpopular, they disenfranchised sectors of the population from the political process, generating the initial conditions for populist leaderships to denounce the whole system as inherently exploitative and illegitimate. The institutional structure and policy environment then became unstable and eventually collapsed under the pressures of social demands that the system could not adequately process.

Thus, Turzi argues that the inner-party democratization push better succeed.

12:38AM

But wait, at least the Chinese can't do it without fear of nuclear retaliation!

ARTICLE: "Academic Paper in China Sets Off Alarms in U.S.," by John Markoff and David Barboza, New York Times, 20 March 2010

Some classic stuff with an overzealous U.S. security expert in the middle, fostering undue fear.

Larry Wortzel, a China military specialist speaking on the Hill, makes much hay of a Chinese academic report on the vulnerability of the U.S. electric grid to attack. The Chinese academics in question are stunned to learn they are aggressive cyberwarriors:

When reached by telephone, Mr. Wang said he and his professor had indeed published "Cascade-Based Attack Vulnerability on the U.S. Power Grid" in an international journal called Safety Science last spring. But Mr. Wang said he had simply been trying to find ways to enhance the stability of power grids by exploring potential vulnerabilities.

"We usually say 'attack' so you can see what would happen," he said. "My emphasis is on how you can protect this. My goal is to find a solution to make the network safer and better protected." And independent American scientists who read his paper said it was true: Mr. Wang's work was a conventional technical exercise that in no way could be used to take down a power grid.

The NYT article then argues that the resulting anger in Congress says more about U.S. fears than Chinese intentions. It also speaks to Wortzel's modus operandi, of course.

The underlying reality:

"Already people are interpreting this as demonstrating some kind of interest that China would have in disrupting the U.S. power grid," said Nart Villeneuve, a researcher with the SecDev Group, an Ottawa-based cybersecurity research and consulting group. "Once you start interpreting every move that a country makes as hostile, it builds paranoia into the system."

Wortzel's defense is gloriously open-ended in its accusation:

In an interview last week about the Wang paper and his testimony, Mr. Wortzel said that the intention of these particular researchers almost did not matter.

"My point is that now that vulnerability is out there all over China for anybody to take advantage of," he said.

My, that certainly is a broad brush.

But serious experts on nets say otherwise:

"Neither the authors of this article, nor any other prior article, has had information on the identity of the power grid components represented as nodes of the network," Reka Albert, a University of Pennsylvania physicist who has conducted similar studies, said in an e-mail interview. "Thus no practical scenarios of an attack on the real power grid can be derived from such work."

The issue of Mr. Wang's paper aside, experts in computer security say there are genuine reasons for American officials to be wary of China, and they generally tend to dismiss disclaimers by China that it has neither the expertise nor the intention to carry out the kind of attacks that bombard American government and computer systems by the thousands every week.

Then Arquilla, who sometimes strikes me as a bit too excited by these prospects, weighs in with an eminently sensible analogy:

The trouble is that it is so easy to mask the true source of a computer network attack that any retaliation is fraught with uncertainty. This is why a war of words, like the high-pitched one going on these past months between the United States and China, holds special peril, said John Arquilla, director of the Information Operations Center at the Naval Postgraduate School in Monterey, Calif.

"What we know from network science is that dense communications across many different links and many different kinds of links can have effects that are highly unpredictable," Mr. Arquilla said. Cyberwarfare is in some ways "analogous to the way people think about biological weapons -- that once you set loose such a weapon it may be very hard to control where it goes," he added.

Wiser words never spoken.