How goes the International Criminal Court?

Economist editorial and article.

As usual, the mag argues that the court, despite low expectations for effectiveness and high expectations for useless meddling in the superpower affairs of America, "has not done too badly."

The ICC has laid bare important facts about forgotten wars (all Gap).  It has issued 13 indictments (all Gap). No, it hasn't nabbed Sudan's Omar al-Bashir, but it has put him on notice, and yeah, that counts when you're trying to build up new rules.  111 countries have signed up, and most have signed some sort of immunity agreement with the U.S., in effect acknowledging our sheriff role and the credibility of US military justice.

America signed the treaty but did not ratify--a rare achievement.  Most non-members, like India, Indonesia and China, simply never signed.

The Economist laments an upcoming review of the ICC being held in Uganda, because on the agenda sits some promised exploration of the notion of punishing state-on-state aggression (the old League of Nations dream) instead of just remaining focused on the crimes against humanity.  If the notion should be explicitly expanded in any direction, it should be about terrorism, which is on the rise, instead of state-on-state wars, which are going the way of the dinosaur.

Pinning down a definition of all war as crime was denounced most elegantly, says the editorial, by Sir Austen Chamberlain in 1928 (Brit Foreign Secretary) when he said that such an effort would end up creating a "trap for the innocent and a signpost for the guilty."

In other words, by circumscribing the limits of criminal aggression, the world would seem to be permitting all that lay outside those limits.

In other words, the ICC would effectively undo everything it's done, which is highlight government crimes against their own peoples.

We live in a world of transnational terrorism and civil strife; the ICC should focus on both and not the past.

Learning a thing--but not two--from Kazakhstan on banking

FT column.

Call-out text states it plainly enough:

Until recently it was generally assumed that when a bank ran into problems it would either be bailed out or go spectacularly bust.

Well, unlikely Kazakhstan provides a better example:  getting the creditors to suffer the pain. They absorb all or most of the losses, keeping the bank a going concern.

Says Tett, “In America, there is every chance that the future financial reform bill will contain some features that would impose creditor losses in the future.”

The big question?  Is this discipline imposed by a central 3^rd party or the courts.

Investment groups hate the notion, but Tett calls it the least bad option.

How democratic.

Meanwhile, she laments the alternative that Europe seems to be pursuing:  “a system based on ever tighter bank rules and implicit taxpayer bail-outs.”

Big Oil to BP: No, you're the problem!

Artwork here

FT piece.

BP, naturally, keeps selling the Deepwater Horizon disaster as indicative of industry-wide problems, while the rest of Big Oil says otherwise—also to no surprise.

Other firms want deep-water drilling to continue, stating that their practices are better.

What I found interesting about the chart showing where everybody is drilling in the Gulf:  Deepwater’s water depth is listed as 5200 feet, but of the 18 other rigs listed, 8 are equally deep or a lot deeper (in the 7-8,000 ft range).  Companies drilling at that deeper depth include Shell, Chevron, Anadarko and Noble.

Of the 33 rigs left idle by Obama’s ban, we’re talking costs of about $12m a day.

The industry plans to invest about $170B in deep-water drilling tech and gear between now and 2014, or something on the order of $30-35B a year.

Naturally, BP’s massive screw-up (less the original accident, I would wager, than the incredibly incompetent response since) will perturb the entire industry, because America’s new rules on the subject will have global impact.

A familiar rule-set gap: the tech races ahead, but worker safety does not

NYT story, coming to a court near you.  Pic is David Michaels, director OSHA, which everybody despises until it's your ass on the production line.

Naturally, the leading edge is a risky place to work, starts the piece.

You work with dangerous stuff, and maybe it costs you--literally--an arm and both legs when the meningococcal bacteria infects you, as happened to a New Zealand lab worker.  

The small quiet suits by workers have already arrived, like a $1.4M win for a former Pfizer worker.  The bigger class-action types will inevitably follow.

Michaels says, in effect, that "his agency's 20-century rules have not yet caught up with the 21st-cnetury biotech industry."

No kidding.  Same is true for US foreign policy on biowarfare, as our leaders instead prefer to obsess over the oh-so-20th-century "N" in the NBC (nuke, bio, chem) trilogy, which, in historical terms is really CNB (chemistry in the 19th C, nuclear in the 20th C--both producing weapons that debut in two world wars, and then biology in the 21st).  

Have no fear, the tragedies are coming.  Every good law on the American books had some nasty real-world tragedy as precursor. This will be no different.

Rule-set gaps, it's "what's for dinner?" in political terms.

Long-term unemployment in America: the new nasty twist

Scary piece by Clive Crook in the FT noting how the long-term unemployed share of total unemployment is unusually high by historical standards--almost 5m out for 6 months or longer.  They account for something like half the unemployed right now, also something not seen in decades.

Americans have always lost their jobs more frequently than their European counterparts, but we've also tended to find new ones faster while the Euro govs tend to offer better retraining and cushier benefits.

It would seem we enter a new period, hence the need for some new rules on how to handle it.

Face recognition: the global ID card

Pic here.  FT article.

Google, like Facebook and just about everybody else on the web right now, is suffering privacy issues, hence it has "put the launch of controversial facial recognition technology under review."

But no one expects, argues the article, that Google will back off from the technology, as all sorts of powerful face recognition techs are just hitting the market.

Hell, my new--and tiny--handheld Canon HD digital camcorder/camera does a fascinating job of spotting and tracking faces live as I film or shoot, so if that low-level capacity has reached everybody's personal cameras, you just know that far more profound technologies are being massed by major players.

Most of us have bumped into this technology in travel or across our work days, and there's long been the simple stuff for identifying faces of friends in programs like Apple's iPhoto.  The iPhone's got that bit where you record a snippet of a song and then search the web for its title, so no surprise that companies are rolling out similar technology that allows you to do the same with faces off your phone.

One telecom exec: 

There isn't a single mobile company that isn't interested in this. There are some 800m camera-equipped phones sold each year, but most people don't really use the cameras.  Mobile phone companies are looking for ways to enhance the camera experience.

The fear is easy to imagine:  the ability to snap a photo of somebody, find out who they are, and then be able to pull info up on them instantly, increasing the capacity of stalkers everywhere. Naturally, an Israeli start-up firm, Face.com, is at the forefront of the technology, having already scanned 9bn photos, yielding 52m identities.  Face.com admits it is still defining the safeguards on such a system.

But some smart words from an exec of a Swedish tech firm:

Now people are scared when they see [facial recognition products], but three or our years from now it won't be like that. At the moment, it is hard to control privacy on social networks, but it won't always be that way.  We will see a lot of legal cases over this, and a lot more control given to the user.

I believe he's right, and that this is the normal catch-up phenomenon on rules.

Larger point:  this will be a powerful security tool in a world where violence has largely migrated down to the level of individuals.

The importance of language--and its abuse: when "swaps" really mean "insurance"

Wikipedia graphic

A simple but compelling observation by Floyd Norris in the NYT:  "swaps" used to mean swaps, but then they were expanded to include protections that were tantamount to insurance:

As it happened, however, clever people on Wall Street followed the prescription laid down by Humpty Dumpty in Lewis Carroll’s “Through the Looking Glass:”

“When I use a word,” Humpty Dumpty said, in rather a scornful tone, “it means just what I choose it to mean — neither more nor less.”

When Alice protested, Humpty Dumpty replied that the issue was “which is to be master — that’s all.”

The word here is “swap.” It used to mean, well, a swap. In a currency swap, one party will win if one currency rises against another and lose if the opposite happens.

Credit-default swaps are, in reality, insurance. The buyer of the insurance gets paid if the subject of the swap cannot meet its obligations. The seller of the swap gets a continuing payment from the buyer until the insurance expires. Sort of like an insurance premium, you might say.

But the people who dreamed up credit-default swaps did not like the word insurance. It smacked of regulation and of reserves that insurance companies must set aside in case there were claims. So they called the new thing a swap.

In the antiregulatory atmosphere of the times, they got away with it. As Humpty would have understood, Wall Street was master. Because swaps were unregulated, calling insurance a swap meant those who traded in them could make whatever decisions they wished.

That decision, perhaps more than anything else, enabled the American International Group to go broke — or, more precisely, to fail into the hands of the American government. Had it been forced to set aside reserves, A.I.G. would have stopped selling swaps a lot sooner than it did.

The decision that swaps were not insurance meant that anyone could buy or sell them — or at least anyone who could find a counterparty.

Had credit-default swaps been classified as insurance, the concept of “insurable interest” might have been applied. That concept says that you cannot buy insurance on my life, or on my house, unless you have an insurable interest.

Meaning, you have to have skin in the game to ensure your reasonably non-self-destructive behavior.

Pretty sensible and a nice explanation that I've missed up to now.  Simple works.

I will admit that I knew the swaps in question functioned like insurance; that's how I usually explained them--in rudimentary fashion.  What I was missing was the knowledge that expanded function purposefully leveraged a rule-set gap.  It makes the achieved abuse a lot easier to understand.

Chart of the day: Mismatch on importance of deepwater rigs & lack of disaster plans for same

Classic but sad tale:  Look at the incredible rise in deepwater oil production in the Gulf since the early-mid-1990s.  Just taking 1995 as a base year still gets you a 9-fold increase, meaning deepwater Gulf oil pumping has rapidly become a critical asset of our overall oil production.

And yet the piece declares:

A huge jolt convulsed an oil rig in the Gulf of Mexico. The pipe down to the well on the ocean floor, more than a mile below, snapped in two. Workers battled a toxic spill.

That was 2003—seven years before last month's Deepwater Horizon disaster, which killed 11 people and sent crude spewing into the sea. And in 2004, managers of BP PLC, the oil giant involved in both incidents, warned in a trade journal that the company wasn't prepared for the long-term, round-the-clock task of dealing with a deep-sea spill.

It still isn't, as Deepwater Horizon demonstrates and as BP's chief executive, Tony Hayward said recently. It's "probably true" that BP didn't do enough planning in advance of the disaster, Mr. Hayward said. There are some capabilities, he said, "that we could have available to deploy instantly, rather than creating as we go." 

It's a problem that spans the industry ...

The connectivity extended, the regulators apparently didn't bother keeping pace with new rules, not mandating preparation for disaster recovery at these depths.

And so, like so often happens in history, the new rules wait on the right disaster to trigger their emergence.

Get ready for US-Russian joint military production

Center of Economic Planning site story via Charles Ganske of Russia Blog.

Unbelievably to many, inevitable to me.

The United States is considering a Russian proposal on the joint production of An-124 Condor heavy-lift transport aircraft, a Russian deputy prime minister said.

The An-124 was designed by the Antonov Design Bureau in 1982, and was produced in Ukraine's Kiev and Russia's Ulyanovsk plants until 1995. Although there are no An-124s being built at present, Russia and Ukraine have reportedly agreed to resume production in the future.

"We have discussed a full-scale project, which includes the joint production of the plane, setting up a joint venture, shared rights, sales to Russian and American customers - both civilian and military - and the creation of a scheme for post-production servicing," Sergei Ivanov told reporters in Washington.

The An-124 is similar to the American Lockheed C-5 Galaxy, but has a 25% larger payload.

The aircraft has a maximum payload of 150 metric tons with a flight range of around 3,000 kilometers (1,864 miles).

An-124s have been used extensively by several U.S. companies. Russian cargo company Volga-Dnepr has contracts with Boeing to ship outsize aircraft components to its Everett plant.

Why inevitable?

Simply the rising costs associated with big platforms.  There ain't enough Leviathan work to go around that justifies great powers each producing their own major platforms--the old Norm Augustine bit.  Russia itself is only producing 20 through 2020 for its own military, and the platform has a long and good history with US customers, including our own Pentagon on a leased basis (currently through 2016).  

This proposal simply ups the cooperation to joint production.

Taxing soda like alcohol?

Via David Leonhardt column in NYT, say it isn't so!

And yet I would welcome it.  Too much soda comes into my household, the excuse being it's just so damn cheap.

Here's why:

The price has been kept unusually low.  Meat and cheese, fine enough, but soda?  Especially when water is finally getting some realistic pricing?

A good target for cash-strapped states.

Innovating faster than your customers can accept, otherwise known as . . .

Facebook consistently pushes the privacy envelope, and Chuck Schumer is gearing up.  The whole, letting companies know your brand loyalties strikes me more as reverse advertising that a huge loss in privacy, especially in a culture where everybody now wears their labels on the outside of their clothes (big damn change from my youth), but I get the angst too.

Zuckerman's quote disturbs a bit though:

There's always a challenge of innovating faster than your users understand or accept.

And there's a reason why, Mark.  When companies "innovate" at that stealthy speed, rule-breaking tends to follow--and fraud, and stealing, and . . ..

The fluctuating rule-sets that define emerging markets

FT piece that leads with recent acquisitions highlighted here previously (Geely buys Volvo, Bharti Airtel buys Zain's Africa telecom biz).  New Core corps are described, predictably enough, as "climbing up the value chain," meaning offering higher-end product and services or moving off the low-cost end of the spectrum.

We saw Germany do this after WWII, then Japan, then Korea, then the tigers, and now India and China and Brazil.  The big difference now is the speed of the climb.  These new corp giants are described as moving with far less caution than their Japanese predecessors did, for example--especially when it comes to aggressively acquiring Western companies and joint ventures with Western firms.  And when state-owned companies are involved, the political pushback from the West will only grow--as it should.

The quote that caught my eye: 

Securing global standards throughout an emerging markets-based organization is a difficult task.

Gist:  when you're rising, you make up a lot of new rules as you go, typically transgressing more than a few established ones--hence the sense among your competitors that you're shaking things up.

The May 6 market plunge: a web of rules with serious gaps

SEC chief Mary Schapiro spoke at a congressional hearing on the 11th concerning the 6 May 1,000-point drop in the Dow Jones Industrial Average that spooked America's other big markets.  Regulators, we are told, can't locate a single cause to explain it away, "but the lack of unified rules among stock exchanges played a role," Schapiro said (paraphrase).  

Classic problem, replicated today on a global basis.  Everybody is running on the assumption of harmonious rule sets, and plenty of players seem to be arbitraging that non-reality--some more dangerously than others.

The connectivity has outraced the rules--the essence of globalization today.

Chart of the day: China's internal immigration rule-set clash

Great piece in The Economist about the hukou registration system that classifies all Chinese are either rural and urban--and only stealthily shall the two meet.

Current purpose is simple:  keep rural folk from migrating to cities too fast.  China is urbanizing at a rate never before seen in history.  In fact, it's the single biggest migration in human history--by sheer size.

What the chart shows:  Officially in Chongqing, roughly 24m people live in the countryside and maybe 9m live in the cities.  But in truth, the cities hold more like 19m, meaning 10m rural folk have migrated there "illegally."

The system is sort of China's internal immigration process: the richer city folk holding off the poorer rural migrants who move in and take all the 3D jobs (dirty, dangerous, difficult). Like the US and its immigration issues, this system is failing to work as intended, hence the many calls for reform.

Classic rule-set clash:  government wants to control the people flow, but the economic development says otherwise.

The requirement to "fight through" a cyberattack = reasonable planning

Keith Alexander is confirmed as the first head of U.S. Cyber Command, a sub-unified command under Strategic Command.

What caught my eye was his previous sensible testimony (see the other WAPO story) on the subject of war during conditions of cyber attack:

In his written responses, Alexander said that clandestine, offensive actions in cyberspace -- such as dismantling a Web site used by jihadists overseas -- are "traditional military activities" and should not be considered covert operations.

In the event of a cyber attack, the military must still be able to carry out conventional operations.

"Even with the clear understanding that we could experience damage to our infrastructure, we must be prepared to 'fight through' in the worst case scenario," he said.

I know, I know.  The right virus and everything goes back to the Dark Ages and we're all completely helpless.

But indulging in nightmare scenarios isn't planning, it's escapism. As always, the military has to plan on functioning even as comms are degraded.  There's nothing new in that.

Roubini: the crash was a "white swan"

Roubini has become quite the brand name, thanks to his great 2006 prediction of a global recession.  His web site goes way beyond the usual blog and book-hawking to providing "a uniquely tailored look at the logic of the global economy, applying the methodology of its renowned founder, NYU economist Nouriel Roubini"--replete with all sorts of analytical pieces by his employees.

What drew me to this interview:

What have we learned from these crises of capitalism?

The first lesson is that crises are not "black swan" events, using the terminology of my friend Nassim Taleb. They're not just random outcomes. They are the result of a buildup of financial and policy vulnerability and mistakes—excessive risk-taking, leverage, debt, and so on. The first chapter of my book is called "The White Swan" because these events are predictable. But generation after generation, we seem to forget the past. When there's a bubble, there's euphoria. There's irrational exuberance. Consumers can use their homes like ATM machines. Governments and policymakers are happy because they get reelected. Wall Street makes billions of dollars of profits. Everybody's delusional.

It was an old staple of mine in the NewRuleSets.Project brief to talk about rule-set resets happening every 7-10 years on Wall Street, primarily because it was a young man's game and once you got some distance from the last crash, all the new people, being somewhat ignorant of the causes, began to imagine they had invented some new way of perfecting their gaming of the market.  Over time, in their mounting hubris, they unwittingly or wittingly broke old taboos, saying it was different this time.  As those abuses accumulated and the self-delusion grew, the crash was inevitably triggered, and many--but not all--of the "new" rules were found not to have surpassed the old ones, even as the old ones now needed to be updated to account for the new behaviors engendered in the latest round of going just a bit too far.

I got this entire logic from my people at Cantor Fitzgerald.  They said it was as regular as a clock.

So, 2008, about 7-8 past the last financial meltdown known as the dot.com crash, was a pretty decent bet or prediction to make.  Don't be surprised when another one happens sometime in the middle of this decade.

Then again, it's different now, because now we have more than just the NYC-London financial axis in play. Now we've a number of significant markets, all of whom are going through their own learning-curve cycles with predictable crashes and reboots--or rule-set rests, as I call them.

So yeah, more white swan than black.

The BP disaster in perspective

NASA image by way of ABC News.  Nansen Saleir op-ed in WSJ.  Saleri is president and CEO of Quantum Reservoir Impact in Houston, so an oil man.

Why didn't the oil industry anticipate such a big disaster, asks Saleri.  

The answer may partially lie in the extraordinary safety record of offshore U.S. drilling over the last four decades. The last significant mishap in U.S. waters dates back to 1969, the year of the first lunar landing. A blowout on Union Oil's Platform A, six miles offshore from Santa Barbara, Calif., spilled an estimated 80,000 to 100,000 barrels of crude oil over a period of 10 days. This resulted in considerable environmental damage and loss of wildlife, including 10,000 birds. The ensuing chain of technical and procedural improvements in safety practices worked pretty well. The end result was an infinitesimal spill rate over several decades which in turn led many, including BP, to consider a blowout an inconceivable event.

His solution-process going forward strikes me as solid:

So what now? What is needed is a scientific, thorough and apolitical investigation headed possibly by the National Academy of Sciences and drawing in experts from the oil and gas industry as well as the government agencies involved. The investigation must also evaluate the entire post-accident response effort led by BP in cooperation with local, state and federal agencies.

Some questions that must be diligently probed by investigators are:

1) Why did the blowout preventers—the massive valve assemblies designed to stop an uncontrolled flow—fail? And what are their reliability statistics?

2) Were the redundant safety systems truly redundant? It seems obvious they weren't, but this has to be verified.

3) How well trained was the crew?

4) Were the safety systems and contingency plans in place commensurate with the immense values of the total assets at risk—human, material and environmental?

5) Did operational and cost-cutting practices compromise safety?

What escalated the April 20 incident from a tragic accident to a catastrophe was not the blowout itself but the ensuing inferno that sunk the $650 million BP platform. Without the fire, the oil well leak could have probably been brought under control within a week. Thus it is critical to determine what future designs could best enhance survivability of giant offshore structures even under blowout conditions. Are there lessons to be learned from the airline industry, which has engineered significant reductions in post-crash fires during the last decade?

So treat it like the Challenger disaster, which Saleri notes didn't end the US space program.

The Gulf provides about 1/3rd of US domestic production.

Chart of the day: How much shale gas is there (over here)?

WSJ has a big spread on natural gas recently.

The chart that caught my eye (besides the nice graphic on "tapping the gas--click to enlarge) is the comparison of known global reserves of conventional natural gas and the estimates of shales in North America alone.

Historically, we've not really looked for gas, instead contenting ourselves with whatever we found when looking for oil.  This "associated" gas (as in, associated with oil) is the lighter stuff that typically sits on top of the oil deposit.  When you see that image of gas being burned 24-7 at an oil field, that's just the oil company saying, I'm not interested in the gas, just the oil, so I burn off the former.

Point being, when you only view the world of natural gas in terms of associated gas, then you're left--unsurprisingly--believing that all the gas you can access is already controlled by the same states that control the remaining, easily-access oil--meaning the Middle East and Eurasia, which dominate the know gas reserves to the tune of something like 4,500 trillion cubic feet.

For comparison's sake, the world currently burns about 115-120 tcf now, but that volume is naturally expected to rise quite a bit in the future.  We use almost 25 tcf a year.

Well, when you say shale gas is accessible at a reasonable cost (to include enviro impact), then all of sudden North America has an additional reserve (710 tcf)  thats' more than twice its known conventional reserves (309 tcf).  

What level of technology and cost is required to tap more of that vast total resource endownment?  To be determined, as usual, by the market.

Jaffe's bold analysis sums up the potential for new rules:

I have been studying the energy markets for 30 years, and I am convinced that shale gas will revolutionize the industry—and change the world—in the coming decades. It will prevent the rise of any new cartels. It will alter geopolitics. And it will slow the transition to renewable energy.

To understand why, you have to consider that even before the shale discoveries, natural gas was destined to play a big role in our future. As environmental concerns have grown, nations have leaned more heavily on the fuel, which gives off just half the carbon dioxide of coal. But the rise of gas power seemed likely to doom the world's consumers to a repeat of OPEC, with gas producers like Russia, Iran and Venezuela coming together in a cartel and dictating terms to the rest of the world.

The advent of abundant, low-cost gas will throw all that out the window—so long as the recent drilling catastrophe doesn't curtail offshore oil and gas activity and push up the price of oil and eventually other forms of energy. Not only will the shale discoveries prevent a cartel from forming, but the petro-states will lose lots of the muscle they now have in world affairs, as customers over time cut them loose and turn to cheap fuel produced closer to home.

The shale boom also is likely to upend the economics of renewable energy. It may be a lot harder to persuade people to adopt green power that needs heavy subsidies when there's a cheap, plentiful fuel out there that's a lot cleaner than coal, even if gas isn't as politically popular as wind or solar.

But that's not the end of the story: I also believe this offers a tremendous new longer-term opportunity for alternative fuels. Since there's no longer an urgent need to make them competitive immediately through subsidies, since we can use natural gas now, we can pour that money into R&D—so renewables will be ready to compete without lots of help when shale supplies run low, decades from now.

To be sure, plenty of people (including Russian Prime Minister Vladimir Putin and many Wall Street energy analysts) aren't convinced that shale gas has the potential to be such a game changer. Their arguments revolve around two main points: that shale-gas exploration is too expensive and that it carries environmental risks.

I'd argue they are wrong on both counts.

Definitely a story to clip. 

(click to enlarge)

The G20 can play global executive, but it needs to delegate rule-setting

Good piece by Daniel McDowell at World Politics Review that highlights the natural limits of G20 leadership

When the finance ministers of the G-20 nations met on the sidelines of the annual IMF-World Bank meetings in Washington last weekend, it marked the sixth time they had convened since the fall of 2008. When the G-20 leaders meet this summer in Toronto, the total number of summits held since the global financial crisis erupted will hit double digits. 

And yet, despite early cooperation that addressed the global liquidity shortfall, little substantial progress has been made in the area of international financial regulation. Given the trauma that the entire world economy has suffered, in part due to a lack of such regulation, one would think more headway would have been made by now. A closer look, however, reveals a litany of factors that has created conditions making coordination points incredibly difficult to locate and even trickier to maintain. 

Much like my A-to-Z-Rule-Set-On-Processing-Politically-Bankrupt-States, there's a place for executive level decision-making and another for determining the implementing the new rules.  So, to me, it's logical for the IMF to step up and assist in this manner.  Not a loss or gain of power, but a logical separation.

That's essentially McDowell's excellent advice:

What's needed is an institution with a clear mandate for monitoring and enforcing any agreements reached by the G-20. But creating such an institution from scratch is unlikely given the current distribution of power. The last time major economic institutions were created, the United States had emerged from World War II as a global leader with unparalleled power. Washington led the world in building the Bretton Woods system and was largely able to impose its preferences on weaker powers when there were disagreements. Simply put, coordination is easier when the balance of power so dramatically favors one state. 

Today, conditions are obviously less favorable. While the U.S. remains the pre-eminent economic power, its relative dominance has diminished. And when it comes to the issue of financial regulation, America is sorely lacking in leadership credentials given its starring role in the current crisis. 

Yet, if the prospects for building a new regulatory architecture appear weak, the G-20 could consider widening the mandate of the IMF to include monitoring and enforcement of any regulatory agreements.

The fund has already rebounded over the past two years from near-irrelevance to play a central role in responding to the crisis, including as an important voice on the issue of regulation. Its monitoring capabilities are unparalleled. Lastly, it's available -- and would likely accept the job. 

Agree.

Corruption as a business affair

Schumpeter column in The Economist on business corruption in the world, which is naturally worse in New Core countries like China and worst in Gap countries.

Recent World Bank study says that those who succumb typically end up spending more times negotiating with partners and bureaucrats, so the "efficient grease" theory doesn't hold.

Worse, it is corrupting for all involved.  Many businesspeople compare it to an illicit affair or cheating on their spouses:  once you start the lying, it takes over, especially since once you get the rep, they bribe-demanders just keep on coming.  Pretty soon you are "trapped in a world of secrecy and guilt."

But if you avoid such stuff:

Texaco, an oil giant now subsumed by Chevron, has such an incorruptible reputation that African border guards were said to wave its jeeps through without engaging the ritual shakedown.

So if you don't want to suffer corruption, present yourself as incorruptible.

America used to feel like the Lone Ranger on this one, with its Foreign Corrupt Practices Act.  Legend had it that our businesspeople were disadvantaged.  But 38 countries have now signed the OECD's 1997 anti-corruption convention.

A long-term evolution, no doubt, but moving in the right direction.