Thursday, 25 June 2009

Is western supremacy but a blip as China rises to the global summit?

The country's trajectory and the change in its people's values and aspirations are cause for heated debate. Two experts go head to head
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Martin Jacques and Will Hutton
The Guardian, Tuesday 23 June 2009
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Dear Will
It is now widely recognised that the balance of economic power is shifting from the rich world to the developing world. Indeed, the role accorded to the G20 rather than the G8 in seeking to tackle the financial crisis is a vivid illustration of this. But what is not recognised – and has been barely discussed – are the political and cultural ramifications of the rise of the developing countries. That, I suspect, is because there is a deeply held western view that they will – and should – end up as clones of western modernity: in other words, there is only one modernity and it is western. This is a fallacy. Modernity is a product of culture and history as much as markets and technology. The central question here is China: will it end up like us or will it be something very different and, as a result, change the world in very fundamental ways?
In my view, there is not a chance that China will become "western". Of course, it will be influenced by the west, as it already is, but it will remain profoundly different. To think otherwise is to believe that western norms are a universal pre-condition for successful modernisation. This is a highly provincial, and hubristic, mindset.
Let me give a number of examples of how China is and will remain different. Although for the last century it has described itself as a nation-state, in fact at its core China is a civilisation-state. The Chinese think of themselves primarily not as a nation but as a civilisation; all those things that constitute a sense of Chinese identity long predate China's short life as a nation-state. And the logic of a civilisation-state is very different: a necessary toleration of diversity because of the country's sheer size (as illustrated by the "one country, two systems" formula for Hong Kong); and a state which has for centuries been seen as the guardian of civilisation and therefore organic to society in a way quite different from the west.
Or take the example of race. Unlike any of the other most populous nations, 92% of Chinese regard themselves as of one race: that is a direct product of China's extraordinarily long history and civilisational consciousness. It also means that the Chinese do not recognise difference in the way that many societies do; and nor is that likely to change anytime soon. Consider also the fact that the Chinese state, for over a millennium, has, unlike Europe, never had to compete for power with other groups such as the church or merchants, with the consequence that there are no boundaries to its power. The Chinese state is, and will remain, very different from the western state, whatever happens to its present government.
None of these characteristics imply that China will not become a formidable power; but they will certainly make it a very different one. Why we should be surprised? The world is constituted of many different histories and cultures. It so happens that for a brief period of two centuries or so Europe (and its major derivative, the US) has dominated the world. That era is now coming to an end. Far from western universalism we are entering the age of contested modernity.
Dear Martin
More than 300 Chinese intellectuals and human rights activists put their name to Charter 08 last December on the anniversary of the UN Declaration of Human Rights – many have been subsequently arrested. What they want for China is an independent and impartial judiciary; freedom of speech and expression; free trade unions; a free media; the capacity to hold government to account by citizens – all institutions you dismiss as "western" and now to be contested by your forecast of China's imminent rule of the world. Pan Yue, Deputy head of China's Environmental Protection Agency, has warned that there is no chance of reversing China's disastrous growth of carbon and sulphur emissions – now larger than those of the US – unless civil society has the capacity to hold the mainly state owned polluting industries to account. Until China develops the institutions advocated by Charter 08 everybody in China knows there is not a chance – just as the hundreds of thousands mourning their dead children after the earthquake in Sichuan know they have no chance of holding the corrupt officials to account who commissioned the jerry built schools in which their kids died. The party's buildings stayed intact.
These are brave men and women, all of whom will be in silent despair about the innocent way another prominent western intellectual has bought the party's line. There is no more enthusiastic exponent of the thesis that China is a civilisation state than the party's propaganda department. The party thus takes refuge in some conception of "Chineseness" to excuse it from the consequences of authoritarianism, and shore up its own crisis of legitimacy. Its proposition is that the communism that aims to build a socialist market economy and which represents all of China's traditions – the three represents – is linked by a golden thread to China's great Confucian past. It is spearheading an economic revolution that will soon lead to Chinese world leadership. The Charter 08 signatories are thus wrong.
I find the notion that countries are condemned by their past to a future cast in the same mould empirically and philosophically wrong. The "civilisation state" is an empty construct: all states reflect their civilisations which in turn contain traditions that are in tension – individualism and collectivism, freedom and authority. If you mean that China is racially homogenous, what are your readers to make of that explosive claim? It is akin to claiming that everyone in the west is white, and therefore we think the same. But we don't. In any case there are vast cultural differences between the great agricultural provinces of Shandong and Henan and the bustling commerciality of the Pearl River delta and Shanghai. Do you not believe that there is a universal appetite for due desert for effort, for dignity and for the capacity to express self – and which Chinese culture amply expresses itself outside China in Taiwan, and in its own history? China's history is pockmarked with epic revolts against tyrannical dynasties excusing their tyranny as fealty to "Chineseness".
You will object that the middle class is hardly in revolt against the party. You are right – so far. It has been bought off with ample largesse, which is more a hard headed political and economic calculation easily recognisable in the west than anything to do with culture. So much depends upon continuing economic growth, but which I believe is unsustainable – at least until there is political change. You can side with the Propaganda Department and its dismissal of Charter 08's demands as western. I will stand with Charter 08.
Dear Will
There seems to be some distance between us. So let me try and establish some common ground. Do I sympathise with the signatories of Charter 08? Of course. Do I believe that China needs a more transparent and accountable system of governance? Of course. And – a question you didn't ask but might – do I deplore the shootings in Tiananmen Square and its environs? Certainly. Your seeming desire to paint me into a corner where you are the democrat and I am the anti-democrat really won't wash. We give similar answers to these questions. Where we differ is on whether China is fundamentally different from the west in key respects or whether it is destined – in time – to be a western-style society, more or less a clone of us. Alas, you reduce this issue to the complexion of the present government: in other words, difference is simply a matter of politics. I beg to differ.
You dismiss the idea of a civilisation-state – mainly because it appears to have been used by the Propaganda Department. Can I direct you to Lucian Pye, one of the foremost American scholars of China, who died recently? He wrote: "China is not just another nation-state in the family of nations. China is a civilisation pretending to be a nation-state." Far from being "an empty construct", as you suggest, it is fundamental to understanding the nature of China – the state, the idea of unity, the notion of race, the sense of identity and much else. The fact that it is an entirely unfamiliar concept to us and that it is rooted in Chinese history and reality rather than our own, is not a reason to brand it as an 'empty construct'.
Which brings me to the question of race. If 92% of Chinese believe that they are of one race does not mean, as you suggest, that I do. It is patently obvious that a population as large as China's is a product of many different races. But most Chinese do not think this. How do we explain this; and why are Chinese attitudes so different from those of other populous countries, namely India, the United States, Indonesia and Brazil? I hope you are not going to tell me that the present government is responsible for this too. On the contrary, this is a function of China's civilisational history which has led to a long drawn-out process of assimilation, conquest and melding. The consequence is of great importance: the Chinese do not recognise difference. This is clear in the attitude of the Han Chinese towards the Tibetans and the Uighurs. So how will China as a global power relate to a world which is defined by difference: one cannot be too hopeful.
Let me conclude with what seems to me an absolutely fundamental difference between us. Your underlying view appears to be that there is only one form of modernity and that is western. Sooner or later all non-western countries must adopt western-style institutions, practices and values or else fail. In other words, we are the only ones with anything to offer. This, of course, makes political and cultural analysis of non-western societies much easier. We don't really need to understand them in their specificity, we just need to know how westernised they are. It seems to me to be the height of western hubris to believe that all wisdom resides in the west; on the contrary, all societies embody originality and insights from which we can all learn, the west included. As we move into an increasingly non-western world, this will become blindingly obvious.
Dear Martin
I agree that China's attitudes towards the Tibetans and Uighurs are oppressive, and that if they were reproduced when China rules the world – a prediction I think will not happen - nobody would like it much. You tell me this is the product of China being a civilisation state, to abandon western hubris and to learn wisdom from others. I presume the "insights and originality" hubristic westerners should admire are to do with China's economy; you would not want us to adopt China's attitude to foreigners, racial diversity or its assumptions of superiority.
However you have evaded my argument. Voting is the coping stone of democracy – but it is flanked and buttressed by much more. Democracy is about justice, accountability, plurality, checks and balances and all the processes that go with them. It is as much about effective company auditing, reliable official statistics, independent trade unions and strong corporate governance as it is about arrest and detention without trial or freedom of expression. However these are all interdependent "Enlightenment" institutions that stand or fall together, and bit by bit most of Asia is acquiring and deepening them whether India, South Korea or Japan. In these terms there is the beginning of an Asian Enlightenment reflecting fundamental human desires which when obstructed produce economic and social dysfunctions.
For unlike you I think China's economic and social model is dysfunctional. It is not just corrupt and environmentally dangerous. It is wildly unbalanced and lacking in innovation. The wastefulness of the system has been disguised by monumental saving which is so very high precisely because so many Chinese do not believe that the regime and model have much of a future. It desperately needs the institutional apparatus that houses great businesses and the innovation process, and the confidence in the future that allows consumers to consume.
Is China culturally predetermined not to move in the same direction as the rest of Asia? Most studies of the relationship between culture, economics and politics underline their malleability and lack of rigid predetermination: Lucian Pye's views were at one end of the spectrum. Even for those few hard-line cultural determinists like yourself the Ingelhart-Welzel cultural map of the world shows how close Chinese and European culture is – secular, rational, non-traditional and emphasising subjective well-being and the quality of life – suggesting the gap is much more narrow than you argue.
Of course we must learn from China. Tu Weiming, the world's premier Confucius scholar, shows the profound complimentarity of Confucian and Enlightenment values. He would find your concentration on the racial dimension and appetite for authoritarian government in China's culture as eccentric – even downright offensive. Charter 08 signatories much more relevantly represent the complexity of China's aspirations. This is not western hubris: I am extremely critical of the west's inability to live by Enlightenment standards. But China needs to develop its own variant of what is happening in the rest of Asia. I am confident that one day it will – and your fear of the yellow peril and rejoice in the decline of the west will both be confounded.
Best Will
Dear Will
I wouldn't exaggerate the extent to which east Asian and western societies have converged, as you seem to suggest. East Asia, of course, is a huge region, home to a third of the world's population and many very different cultures. But let us take the one that might appear most westernised, namely Japan. In fact, it remains profoundly different: social relations are shame-based rather than guilt-based and very hierarchical; the legal system plays a much smaller role than in western societies; and the labour force is far more gendered. Not least, its political system differs greatly. It is often classified as western. Certainly there is universal suffrage and a multi-party system but, as you know, the Liberal Democrats have been in power more or less permanently since the mid-50s and, as Karel van Wolferen argues, power really lies in the bureaucracy. So while Japan has the trappings of a western-style democracy in practice power resides in a Japanese-style Confucian state. It is not like China nor is it like the west. Japan enjoys a very different kind of modernity of its own. Get it?
Alas, you have virtually nothing positive to say about China. Is that because you have become a China-denier, always predicting ultimate failure, even though for 30 years it has been astoundingly successful? You are right of course that its present model is unsustainable. But no serious economist in China thinks it is. Indeed, a double-digit growth rate since 1978 could only have been achieved by a constant and radical process of change and reform. You give no credit to the Chinese government in presiding over what is an extraordinary achievement. Sure, fundamental changes must be made to the growth model in due course; and that is probably exactly what will happen, just as it did with the earlier Asian tigers.
Dear Martin
If I didn't know you better I'd think you were an old Marxist swapping culture for class conflict in an attempt to create another determinist account of history. Of course Japan's democratic institutions are Japan specific; so are Britain's, France's, Brazil's and South Korea's. The argument is less interesting than paint drying. The point is that country specific democratic institutions evolve, change and mutate – and sit in creative tension with particular economies and societies as they develop. In Japan opposition candidate Toshihito Kumagai has just been voted overwhelmingly mayor of Chiba once a LDP citadel, portending the end of the LDP's fraying hegemony. Japan's seventeen year stagnation is forcing change in its economic model and society; at the same time it is readier to question, less deferential and more willing to use the courts than in van Wolferen's time. Its democratic institutions – as imperfect as Britain's – are moving it on.
I am not your straw man – the hubristic westerner predicting all societies converge on the western model. Of course societies have particularities. But the human appetite for self-expression, dignity and fairness is universal. Country-specific democratic institutions permit their expression and unleash great dynamism.
Your characterisation of Confucianism, with its simultaneous apocalyptic and grandiose predictions for China, is barely more than a cartoon. In The Writing on the Wall I acknowledge China's achievement over the last 30 years. 400 million being released from poverty is quite something. But I observe the flaws, and believe they are set to intensify. Economic models and institutions have to change as economic development proceeds. You have yet seriously to confront my two core questions. Does China need democratic institutions to support the next phase of its growth? Is there any reason why it should not have them except for the communist party's opposition?
Dear Will
It is time to call a halt to our discussion, so let me conclude with two points.
I believe that the rise of the developing countries, above all China and India, marks, in a rough and ready way, a huge democratic advance for the human race. For 200 years, the western world (and later Japan) – together constituting a small minority of the global population – has dominated the world and to all intents and purposes run it. The rest of the world – the overwhelming majority – until now has found itself marginalised and without a serious voice. When we talk about democracy in the west we almost invariably mean the democracy of individual nations, not the democracy of the world, with the enfranchisement of different societies, cultures and traditions. The rise of China and India, which account for 38% of the global population, will represent a huge democratisation of global governance, whether or not China becomes more democratic (and in time I certainly think it will).
At root you seem to believe that western dominance is eternal. I beg to differ. In fact, it will prove relatively short-lived. It started around the late eighteenth century and will fade during the course of this. But this is the story of humanity: the rise and fall of different civilisations. Your argument is that this time it will be different: that unless countries are essentially like the west then they will fail. I accept, with you, that some values are universal. But the rise of China, and India indeed, will be accompanied by the ascendancy of new values which are not reducible to western values and will certainly conflict with some of them. You endorse Confucianism in so far as it converges with our own values, but fall silent on where it is different (and might even have something to teach us). In your view, our values are always superior. I have a more nuanced position: some of our values are precious and to be treasured, others are not. Which do I think fall into the latter category: above all the one which you never seem to mention, the presumption of western superiority which has made us such an aggressive, expansionist and colonising force for most of that two hundred years. I have the same nuanced attitude towards Chinese culture (and others): some of the values are to be honoured, others are not.
Dear Martin
Trying to assume the mantle of being nuanced about China when you have just written a book called When China Rules the World is a bit rich, as is trying continually to paint me as an unsubtle champion of western values. I am not. As a matter of fact, as Amartya Sen always claims, it was the Indian Emperor Ashoka in the third century BC who first insisted on the value of pluralism, respect for argument and dissent, along with tolerance for minorities.
Some economic history is illuminating. Between 1750 and 2000 global GDP per person has exploded some 37 times after millennia of stagnation. The explosion has been driven by market capitalism interacting with all that we call democracy – a fundamentally new form of economic and political organisation which first grew to fruition in the west. Before 1750 China could claim to be the centre of the world. After 1750 it could not. You now think its recent growth portends a reversal to the historical norm.
But this change over the last 250 years is going to continue and it will be led by those societies best able to manage this combination of capitalist dynamism with democratic institutions. China, as Deng Xiaoping understood, has to share in this dynamism or be left behind – hence his market reform programme, and for many Dengists an eventual programme of political reform. However China is now stuck; and the weaknesses increasingly obvious.
The good news is that western societies are no longer the only ones trying to build this complex matrix of institutions, even if they are still best placed because of the legacy of being first movers. The bad news is that capitalism creates vicious inequalities and instabilities – none less than in China's incomplete revolution, but also in the system as a whole. The task ahead is to promote much better understanding of the links between capitalism and democratic governance, and above all of the need for equity and mutual accountability. It is a permanent job of criticism and renewal. My fear is that innocents like yourself, proclaiming China's comeback in pre 1750 terms and decrying universal values as "western", take us in the wrong direction. A tragedy for the world – and a tragedy for China.
Jacques book is When China Rules etc published this week; Will Hutton is authior of endnote authior of endnote authior of endnote authior of endnote authior of endnote

Poverty is a human rights issue

Conor Foley may not agree, but by bringing human rights into the poverty debate Amnesty can hold governments to account
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Kate Allen, Friday 19 June 2009 14.00 BST
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Contrary to recent articles by Conor Foley and William Easterly, Amnesty International does believe that poverty is a human rights issue. To be clear – the basic human rights of the millions of people around the world who are living in poverty are being violated. Thousands of families forced to live in slum conditions in Kenya and Cambodia and facing the constant threat of imminent eviction by authorities who won't consult them; Palestinian children who are prevented from going to school because of Israeli curfews and road closures; women who die in childbirth because they live in societies that condone early marriage and where a basic standard of maternal care is not provided – these people are all having their human rights violated. Just because a single individual neat violator can't always be sited does not mean that injustice is not being done.
The main problem however with Foley's critique of Amnesty's work is that he refers in the main to aid and aid policy, and he seems to think Amnesty is simply moving into this area too, as if that's all poverty was really about. Far from it. For us at Amnesty living in poverty is more than suffering material deprivation – it is being marginalised, being without power or influence over decisions that affect your life. Amnesty is currently campaigning to stop the forced eviction of more than 7,000 people from their homes in Nairobi, Kenya, where the local authority wants to sell the land to developers. "Deep Sea" residents have been forced from their homes in the middle of the night, which were then destroyed by bulldozers. The police stood by while it happened. This ongoing campaign is much more complex than "straightforward poverty" or the rights and wrongs of aid relationships. But it is without doubt a struggle for human rights.
Foley also seems to equivocate over whether the international community is obliged to provide protection for people affected by conflict or disasters, and development assistance in general. He rightly says that economic and social rights are supposed to be implemented progressively, but then balks at what follows — that all states must ensure these rights are realised, including, when they are in a position to do so, by providing international assistance. There may be a debate about how exactly this is to be done, but international law is clear that everyone is entitled to an adequate standard of living, to be free from hunger, to basic healthcare and to at least a free primary education. And in case there is any doubt about this these rights have been tested in law – they are written into the constitutions of India and South Africa and have for example been used to require governments and companies to make anti-retroviral drugs for people living with HIV/Aids available to them.
What is most disappointing about Foley's piece is that we know he's one of the good guys. Governments, companies and international institutions rely on the very complexity of economic, social and cultural rights violations to make would-be advocates throw their hands up and not know where or whether to start. But that sense of the enormity of the task ahead was there after the second world war when the original human rights treaties were drawn up, and now decades later we have changed the discourse about rights and what governments know they can and cannot do.
In the real world many aid agencies, UN agencies and donor governments have already adopted a rights-based approach to development. Amnesty believes strongly that bringing human rights into the debate on poverty is one of the most powerful ways to make poverty alleviation accountable to those it is supposed to help. And exactly because we are not an aid agency, trying to work with a given government's acquiescence, we can be very bold in challenging governments to be accountable to all their citizens.

will the cat above the precipice fall down?

Slavoj Zizek

When an authoritarian regime approaches its final crisis, its dissolution as a rule follows two steps. Before its actual collapse, a mysterious rupture takes place: all of a sudden people know that the game is over, they are simply no longer afraid. It is not only that the regime loses its legitimacy, its exercise of power itself is perceived as an impotent panic reaction. We all know the classic scene from cartoons: the cat reaches a precipice, but it goes on walking, ignoring the fact that there is no ground under its feet; it starts to fall only when it looks down and notices the abyss. When it loses its authority, the regime is like a cat above the precipice: in order to fall, it only has to be reminded to look down…In Shah of Shahs, a classic account of the Khomeini revolution, Ryszard Kapuscinski located the precise moment of this rupture: at a Tehran crossroad, a single demonstrator refused to budge when a policeman shouted at him to move, and the embarrassed policeman simply withdrew; in a couple of hours, all Tehran knew about this incident, and although there were street fights going on for weeks, everyone somehow knew the game is over. Is something similar going on now? There are many versions of the events in Tehran. Some see in the protests the culmination of the pro-Western “reform movement” along the lines of the “orange” revolutions in Ukraine, Georgia, etc. – a secular reaction to the Khomeini revolution. They support the protests as the first step towards a new liberal-democratic secular Iran freed of Muslim fundamentalism. They are counteracted by skeptics who think that Ahmadinejad really won: he is the voice of the majority, while the support of Mousavi comes from the middle classes and their gilded youth. In short: let’s drop the illusions and face the fact that, in Ahmadinejad, Iran has a president it deserves. Then there are those who dismiss Mousavi as a member of the cleric establishment with merely cosmetic differences from Ahmadinejad: Mousavi also wants to continue the atomic energy program, he is against recognizing Israel, plus he enjoyed the full support of Khomeini as a prime minister in the years of the war with Iraq.Finally, the saddest of them all are the Leftist supporters of Ahmadinejad: what is really at stake for them is Iranian independence. Ahmadinejad won because he stood up for the country’s independence, exposed elite corruption and used oil wealth to boost the incomes of the poor majority – this is, so we are told, the true Ahmadinejad beneath the Western-media image of a holocaust-denying fanatic. According to this view, what is effectively going on now in Iran is a repetition of the 1953 overthrow of Mossadegh – a West-financed coup against the legitimate president. This view not only ignores facts: the high electoral participation – up from the usual 55% to 85% - can only be explained as a protest vote. It also displays its blindness for a genuine demonstration of popular will, patronizingly assuming that, for the backward Iranians, Ahmadinejad is good enough - they are not yet sufficiently mature to be ruled by a secular Left.Opposed as they are, all these versions read the Iranian protests along the axis of Islamic hardliners versus pro-Western liberal reformists, which is why they find it so difficult to locate Mousavi: is he a Western-backed reformer who wants more personal freedom and market economy, or a member of the cleric establishment whose eventual victory would not affect in any serious way the nature of the regime? Such extreme oscillations demonstrate that they all miss the true nature of the protests. The green color adopted by the Mousavi supporters, the cries of “Allah akbar!” that resonate from the roofs of Tehran in the evening darkness, clearly indicate that they see their activity as the repetition of the 1979 Khomeini revolution, as the return to its roots, the undoing of the revolution’s later corruption. This return to the roots is not only programmatic; it concerns even more the mode of activity of the crowds: the emphatic unity of the people, their all-encompassing solidarity, creative self-organization, improvising of the ways to articulate protest, the unique mixture of spontaneity and discipline, like the ominous march of thousands in complete silence. We are dealing with a genuine popular uprising of the deceived partisans of the Khomeini revolution.There are a couple of crucial consequences to be drawn from this insight. First, Ahmadinejad is not the hero of the Islamist poor, but a genuine corrupted Islamo-Fascist populist, a kind of Iranian Berlusconi whose mixture of clownish posturing and ruthless power politics is causing unease even among the majority of ayatollahs. His demagogic distributing of crumbs to the poor should not deceive us: behind him are not only organs of police repression and a very Westernized PR apparatus, but also a strong new rich class, the result of the regime’s corruption (Iran’s Revolutionary Guard is not a working class militia, but a mega-corporation, the strongest center of wealth in the country).Second, one should draw a clear difference between the two main candidates opposed to Ahmadinejad, Mehdi Karroubi and Mousavi. Karroubi effectively is a reformist, basically proposing the Iranian version of identity politics, promising favors to all particular groups. Mousavi is something entirely different: his name stands for the genuine resuscitation of the popular dream which sustained the Khomeini revolution. Even if this dream was a utopia, one should recognize in it the genuine utopia of the revolution itself. What this means is that the 1979 Khomeini revolution cannot be reduced to a hard line Islamist takeover – it was much more. Now is the time to remember the incredible effervescence of the first year after the revolution, with the breath-taking explosion of political and social creativity, organizational experiments and debates among students and ordinary people. The very fact that this explosion had to be stifled demonstrates that the Khomeini revolution was an authentic political event, a momentary opening that unleashed unheard-of forces of social transformation, a moment in which “everything seemed possible.” What followed was a gradual closing through the take-over of political control by the Islam establishment. To put it in Freudian terms, today’s protest movement is the “return of the repressed” of the Khomeini revolution.And, last but not least, what this means is that there is a genuine liberating potential in Islam – to find a “good” Islam, one doesn’t have to go back to the 10th century, we have it right here, in front of our eyes.The future is uncertain – in all probability, those in power will contain the popular explosion, and the cat will not fall into the precipice, but regain ground. However, it will no longer be the same regime, but just one corrupted authoritarian rule among others. Whatever the outcome, it is vitally important to keep in mind that we are witnessing a great emancipatory event which doesn’t fit the frame of the struggle between pro-Western liberals and anti-Western fundamentalists. If our cynical pragmatism will make us lose the capacity to recognize this emancipatory dimension, then we in the West are effectively entering a post-democratic era, getting ready for our own Ahmadinejads. Italians already know his name: Berlusconi. Others are waiting in line.
// posted by it @ 2:06 PM //
23 June 2009
open letter of support to the demonstrators in iran Friday 19 June 2009This morning Ayatollah Ali Khamenei demanded an end to the massive and forceful demonstrations protesting the controversial result of last week's election. He argued that to make concessions to popular demands and 'illegal' pressure would amount to a form of 'dictatorship', and he warned the protestors that they, rather than the police, would be held responsible for any further violence. Khamenei's argument sounds familiar to anyone interested in the politics of collective action, since it appears to draw on the logic used by state authorities to oppose most of the great popular mobilisations of modern times, from 1789 in France to 1979 in Iran itself. These mobilisations took shape through a struggle to assert the principle that sovereignty rests with the people themselves, rather than with the state or its representatives. 'No government can justly claim authority', as South Africa's ANC militants put it in their Freedom Charter of 1955, 'unless it is based on the will of all the people.'Needless to say it is up to the people of Iran to determine their own political course. Foreign observers inspired by the courage of those demonstrating in Iran this past week are nevertheless entitled to point out that a government which claims to represent the will of its people can only do so if it respects the most basic preconditions for the determination of such a will: the freedom of the people to assemble, unhindered, as an inclusive collective force; the capacity of the people, without restrictions on debate or access to information, to deliberate, decide and implement a shared course of action.Years of foreign-sponsored 'democracy promotion' in various parts of the world have helped to spread a well-founded scepticism about civic movements which claim some sort of direct democratic legitimacy. But the principle itself remains as clear as ever: only the people themselves can determine the value of such claims. We the undersigned call on the government of Iran to take no action that might discourage such determination.

Monday, 22 June 2009

The recession tracks the Great Depression

By Martin Wolf

Published: June 16 2009 19:41 | Last updated: June 16 2009 19:41

Bromley illustration

Green shoots are bursting out. Or so we are told. But before concluding that the recession will soon be over, we must ask what history tells us. It is one of the guides we have to our present predicament. Fortunately, we do have the data. Unfortunately, the story they tell is an unhappy one.

Two economic historians, Barry Eichengreen of the University of California at Berkeley and Kevin O’Rourke of Trinity College, Dublin, have provided pictures worth more than a thousand words (see charts).* In their paper, Profs Eichengreen and O’Rourke date the beginning of the current global recession to April 2008 and that of the Great Depression to June 1929. So what are their conclusions on where we are a little over a year into the recession? The bad news is that this recession fully matches the early part of the Great Depression. The good news is that the worst can still be averted.

First, global industrial output tracks the decline in industrial output during the Great Depression horrifyingly closely. Within Europe, the decline in the industrial output of France and Italy has been worse than at this point in the 1930s, while that of the UK and Germany is much the same. The declines in the US and Canada are also close to those in the 1930s. But Japan’s industrial collapse has been far worse than in the 1930s, despite a very recent recovery.

Second, the collapse in the volume of world trade has been far worse than during the first year of the Great Depression. Indeed, the decline in world trade in the first year is equal to that in the first two years of the Great Depression. This is not because of protection, but because of collapsing demand for manufactures.

Third, despite the recent bounce, the decline in world stock markets is far bigger than in the corresponding period of the Great Depression.

The two authors sum up starkly: “Globally we are tracking or doing even worse than the Great Depression ... This is a Depression-sized event.”

Yet what gave the Great Depression its name was a brutal decline over three years. This time the world is applying the lessons taken from that event by John Maynard Keynes and Milton Friedman, the two most influential economists of the 20th century. The policy response suggests that the disaster will not be repeated.

Profs Eichengreen and O’Rourke describe this contrast. During the Great Depression, the weighted average discount rate of the seven leading economies never fell below 3 per cent. Today it is close to zero. Even the European Central Bank, most hawkish of the big central banks, has lowered its rate to 1 per cent. Again, during the Great Depression, money supply collapsed. But this time it has continued to rise. Indeed, the combination of strong monetary growth with deep recession raises doubts about the monetarist explanation for the Great Depression. Finally, fiscal policy has been far more aggressive this time. In the early 1930s the weighted average deficit for 24 significant countries remained smaller than 4 per cent of gross domestic product. Today, fiscal deficits will be far higher. In the US, the general government deficit is expected to be almost 14 per cent of GDP.

All this is consistent with the conclusions of an already classic paper by Carmen Reinhart of the university of Maryland and Kenneth Rogoff of Harvard.** Financial crises cause deep economic crises. The impact of a global financial crisis should be particularly severe. Moreover, “the real value of government debt tends to explode, rising an average of 86 per cent in the major post–World War II episodes”. The chief reason is not the “bail-outs” of banks but the recessions. After the fact, runaway private lending turns into public spending and mountains of debt. Creditworthy governments will not accept the alternative of a big slump.

The question is whether today’s unprecedented stimulus will offset the effect of financial collapse and unprecedented accumulations of private sector debt in the US and elsewhere. If the former wins, we will soon see a positive deviation from the path of the Great Depression. If the latter wins, we will not. What everybody hopes is clear. But what should we expect?

We are seeing a race between the repair of private balance sheets and global rebalancing of demand, on the one hand, and the sustainability of stimulus, on the other.

Global economy

Robust private sector demand will return only once the balance sheets of over-indebted households, overborrowed businesses and undercapitalised financial sectors are repaired or when countries with high savings rates consume or invest more. None of this is likely to be quick. Indeed, it is far more likely to take years, given the extraordinary debt accumulations of the past decade. Over the past two quarters, for example, US households repaid just 3.1 per cent of their debt. Deleveraging is a lengthy process. Meanwhile, the federal government has become the only significant borrower. Similarly, the Chinese government can swiftly expand investment. But it is harder for policy to raise levels of consumption.

The great likelihood is that the world economy will need aggressive monetary and fiscal policies far longer than many believe. That is going to be make policymakers – and investors – nervous.

Two opposing dangers arise. One is that the stimulus is withdrawn too soon, as happened in the 1930s and in Japan in the late 1990s. There will then be a relapse into recession, because the private sector is still unable, or unwilling, to spend. The other danger is that stimulus is withdrawn too late. That would lead to a loss of confidence in monetary stability worsened by concerns over the sustainability of public debt, particularly in the US, the provider of the world’s key currency. At the limit, soaring dollar prices of commodities and rising long-term interest rates on government bonds might put the US – and world economies – into a malign stagflation. Contrary to some alarmists, I see no signs of such a panic today. But it might happen.

Last year the world economy tipped over into a slump. The policy response has been massive. But those sure we are at the beginning of a robust private sector-led recovery are almost certainly deluded. The race to full recovery is likely to be long, hard and uncertain.

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UK legal industry faces loss of 10,000 lawyers

As many as 10,000 lawyers could be out of work in the UK in the next two years as the legal business faces its worst slump in decades.

More than one in ten of the country’s 83,000 privately employed solicitors could lose their jobs, recruiters, consultants and senior law firm partners told The Times, and will struggle to find new jobs even as the economy emerges from the recession.

The total number of jobs in the legal sector, including non-solicitors, fell by 16,700 in 2008, from 296,500 to 279,800, according to the Office for National Statistics, and the scale of losses is set to worsen this year.

The shake-up has thrown the traditionally conservative sector into turmoil, with leading firms shedding thousands of jobs, freezing salaries and telling trainees who expected to be offered permanent employment that they will not be kept on. Even partners, once regarded as secure for life, have not been spared. Industry observers said that further job losses were inevitable.

Lawyers who fall out of work have little hope of finding new jobs, with vacancies for associate solicitors down by 95 per cent this year, recruiters said. “It’s the worst year ever, by some margin,” Nick Root, founding partner of Taylor Root, a leading recruitment agency, said. “Those people who are being let go will not get another job.”

Meanwhile, thousands of new law graduates this year will intensify the recruitment squeeze.

Britain’s commercial legal sector, which contributes more than £15 billion a year to the economy, grew at a dizzying rate in recent years, driven by mergers and acquisitions, commercial property, private equity and leveraged finance.

In 2007-08, the 100 biggest firms enjoyed record profits of more than £4 billion and hundreds of partners earned in excess of £1 million.

But the market shuddered to an abrupt halt in September after the collapse of Lehman Brothers. Profits are plummeting: in recent weeks, leading firms, such as Eversheds, Hebert Smith, Lovells and Norton Rose, reported a decline in partners’ earnings of up to a third for the 2008-09 financial year, which ended on April 30. As those results were boosted by a healthy first-half, next year’s results are likely to be bleaker still.

Not only are partners experiencing a sharp reverse in earnings, but, unlike in previous recessions, many are losing their jobs. Scores have been pushed out from the City’s biggest firms — including 47 at Allen & Overy, part of the “magic circle” — while others have been stripped of equity and forced to take a pay cut.

Discarded partners accustomed to earning more than £700,000-a-year have been shocked to find that they can command as little as £200,000 from the few firms that are hiring.

Firms are placing a greater emphasis on productivity, recruiters said, insisting that prospective hires bring with them a dependable client following. In some cases, partners have been offered commission-only deals — pay historically has been based on tenure rather than performance.

Unemployed junior lawyers are finding it even tougher, with one recruitment agency receiving about 700 applications for three entry-level vacancies. Those associates who have kept their jobs have had their salaries frozen.

UK commercial law firms remain internationally competitive and will recover, Scott Gibson, a consultant at Hughes-Castell, a recruitment agency, said.

However, they are likely to emerge from the recession leaner, with a smaller ratio of associates to partners and more aggressively managed. The notion of job security at big law firms is unlikely to endure. “No lawyer is ever going to think they’ve got a safe job again,” Mr Gibson said.

Complicity with cruelty

The advice to MI6 officers reveals deeply troubling equivocation about Britain's responsibility not to abet abuse of detainees

Very little is known about Britain's policy on the overseas treatment of detainees by British intelligence personnel after September 11. What is known is deeply troubling. In early 2005 a report by the intelligence and security committee on the handling of detainees by UK intelligence personnel included extracts of instructions sent to British intelligence ­personnel in Afghanistan.

These require British personnel not to engage in abuse, but they do not require them to intervene to prevent abusive behaviour if they see detainees being treated by others in a manner that does not meet "appropriate standards". In such circumstances, if possible, they need to do no more than consider drawing concerns "to the attention of a suitably senior US official locally".

These instructions are striking for what they do not require: where abuse or torture has occurred or may occur, there is no requirement to prevent it or to disengage from the interview process. This opens the door to complicity in torture: provided that coercion is not "in conjunction with an SIS [MI6] interview", British involvement may continue. Knowledge of prior abuse, or knowledge as to the risk or likelihood of later abuse, would not be a bar to continued British involvement.

One should be cautious about reading too much into an incomplete extract and where there is no information as to the underlying legal advice. But the tenor of this text raises serious concerns. Did the instructions allow crimes to be committed? It seems they may have done so.

Article 4 of the 1984 UN convention against torture, to which the UK is a party, criminalises "an act by any person which constitutes complicity or participation in torture". Parliament's joint committee on human rights has taken evidence on the meaning of "complicity". The English courts have not interpreted Article 4 and any case will turn on its particular facts. But before 2002, when the "instructions" were circulated, international law provided guidance on the standard needed to avoid charges of complicity.

The 1998 Rome statute of the international criminal court extends criminal responsibility where military commanders and civilian superiors "should have known" that international crimes were being committed but "failed to take all necessary and reasonable measures within his or her power to prevent or repress their commission".

The 1984 convention's committee against torture has ruled that there is acquiescence where the police have been informed of an "immediate risk" of abuse and, if present at the scene, did not take steps to protect the victims. In this way, turning a blind eye or failing to take steps to prevent abuse is not enough to avoid liability.

This is consistent with a 1998 judgment by the international criminal tribunal for the former Yugoslavia. Its appeal chamber treated "complicity" as being akin to "aiding and abetting" or "assistance" that could be "physical or in the form of moral support". A crime could be committed even if the abettor did not take any tangible action, provided the actions "directly and substantially" assisted and where there was "knowledge … that torture is being practised". The Appeals Chamber did not mince words:

"if an official interrogates a detainee while another person is inflicting severe pain or suffering, the interrogator is as guilty of torture as the person causing the severe pain or suffering, even if he does not in any way physically participate in such infliction."

In a 2005 House of Lords judgment, Lord Bingham said that "the prohibition of torture requires member states to do more than eschew the practice of torture".

This is consistent with the view recently expressed by Martin Scheinin, the UN special rapporteur on human rights, that "active participation through the sending of interrogators or questions, or even the mere presence of intelligence personnel at an interview with a person who is being held in places where his rights are violated, can be reasonably understood as implicitly condoning such practices".

On these principles it is difficult to avoid the conclusion that the 2002 "instructions" were incompatible with Britain's international obligations. They may have caused British personnel to cross a line into complicity, with responsibility ensnaring ministers who approved a policy which basically said: so long as you don't directly participate in physical abuse you can press on with interviews, passing on questions.

That, presumably, is why the policy changed in 2004, after the Abu Ghraib abuses came to light. And that is why we need a full inquiry on the evolution of the policy: who decided what and when.

Alex Bailin is a criminal barrister at Matrix Chambers

Obama and Darling too soft on bankers

There has never been a better time to cut finance down to size, but Washington and London have ducked the chance to do so

Two years ago, Gordon Brown used his last Mansion House speech to praise the City for its enterprise and verve. Labour's light-touch regulatory regime had, he boasted, created the right environment for London to become the world leader in financial services.

There will be a bit less of that sort of talk when Alistair Darling addresses the Square Mile's great and good tonight. We must learn the lessons of the past, the chancellor will insist. There must be no repetition of the behaviour that led to the most serious financial meltdown in living memory. Anyone who thinks we can carry on as before should think again.

In reality, though, the government is planning no more than a slap on the wrist for the discredited bankers. The message from London – and from the Obama administration in Washington today – is that the chance for radical overhaul has been ducked. The chancellor has made it clear he retains faith in the tripartite system of regulation that failed so badly in the run-up to the crisis and believes the first line of defence should be tougher scrutiny of banks by their own directors.

But, as Vince Cable noted today, it was self-regulation that got us into this mess and it would be madness to return to business as usual.

Obama has fallen into the same trap. The president has announced that the Federal Reserve, America's central bank, is to have a bigger role in supervision. That sounds tough but in fact creates the conditions for a classic conflict of interest. The running of the Federal Reserve in Washington reflects the views of the 12 regional reserve banks, each of which have nine-person boards, two-thirds of whom are elected by local banks. To be fair, bits of the Obama blueprint are welcome. He wants greater constraints on leverage and restrictions on securitised products; both are good ideas, but they do nothing to change the status quo.

So what's wrong with the softly-softly approach? First, this has been a financial crisis of extreme severity, with global economic ramifications. Second, it was not a one-off event, but instead the culmination of a period of speculative excess that spawned smaller, but still serious, financial upsets around the world in the preceeding years. Finally, the systemic weaknesses of de-regulated finance suggest that a failure to act decisively now to put financial capital back in its cage will lead to the problems of the past two years re-surfacing before long.

The past two years have seen a belated interest in the work of the US economist Hyman Minsky, who warned in the 1970s that left to its own devices the financial sector would move from stability to fragility, making the economy vulnerable to painful debt deflations. Unfortunately, Minsky's ideas do not seem to have penetrated the Treasury, either in the UK or the US.

Darling is right to say that lessons must be learned. The big lesson, though, is that we permit banks that are "too big to fail" at our peril. One of Roosevelt's first decisions in 1933 was to pass the Glass-Steagall act, which legally separated retail from investment banking. That could be achieved today either by taking the banks into public ownership, breaking them up and then returning them to the private sector. Or it could be done through a draconian use of capital requirements, which would make it prohibitively expensive for what are primarily retail banks to dabble in the more exotic financial instruments. But the chances of either happening look remote. Two years into the crisis, the carnage caused by the follies of finance is strewn around the global economy; taxpayers have bailed out the City and Wall Street; and the banks are even bigger than they were before. Never has there been a better moment to cut finance down to size.

Sadly, unforgivably, governments have bottled it.