Despite pressure from Trump, Iran's world role will continue to be important

Introduction

Ever since taking over as President, Donald Trump’s approach towards Iran has been excessively rash and lacking in nuance. The US withdrawal from JCPOA (Joint Comprehension for Plan of Action), the imposition of sanctions, and brash statements by Trump have heightened tensions between both countries. Allies of the US, including EU member states (especially Germany and France), have expressed their disapproval of Trump’s Iran policy on numerous occasions.

In August 2019, during the G7 Summit at Biarritz (France), it seemed that Trump might have changed his approach towards Iran. The US President expressed his openness to engaging with Iran and dubbed it as a country of immense potential. After the attack on Saudi Oil facilities, there has been a visible shift in the approach of Germany, France, and the UK towards Iran. All three countries blamed Iran for the attacks. In a meeting on the sidelines of the United Nations General Assembly (UNGA) these three countries issued a statement condemning the attack. They also held Iran squarely responsible for the attack. Said the joint statement:

It is clear to us that Iran bears responsibility for this attack

Why China is giving importance to Iran Continue reading

A short note on Ethiopia and the African continent

Introduction

Ethiopian Prime Minister Abiy Ahmed was awarded the 2019 Nobel Peace Prize. He is the 12th winner from Africa. The Nobel Committee stated that Abiy had been awarded the Nobel for his efforts towards resolving the border conflict with Eritrea (in September 2018, Abiy and Eritrean President Isaias Afwerki signed a peace deal in Jeddah).

A border war in the years between 1998 and 2000 had resulted in the deaths of 100,000 people, and was responsible for the displacement of over one million people and the splintering of many families. The agreement has helped in reducing tensions between both countries and has led to a number of other important steps; it has paved the way for air connectivity (Ethiopian Airlines resumed its flight from Addis Abbaba to Asmara, the capital of Eritrea after two decades), resumption of communications between both countries (telephone lines had been disconnected in 1998), reduction of military hostilities, and most importantly reuniting of families.

Abiy’s reaction

While reacting to the Nobel Committee’s decision, the Ethiopian Prime Minister said that this reward was not merely for Ethiopia, but the whole of Africa, and hoped that leaders in the region would work towards peace-building.

Said the Ethiopian PM:

…It is a prize given to Africa, given to Ethiopia, and I can imagine how the rest of Africa’s leaders will take it positively to work on the peace-building process in our continent.

It would be pertinent to point out that, in recent years, the outside world has begun to take note of Ethiopia for its economic progress – in spite of numerous political challenges.

In recent years — almost a decade — the country’s economic growth has been a whopping 10% according to International Monetary Fund (IMF) estimates. In 2018, Ethiopia’s growth was estimated at well over 8% (8.5), and was the fastest growing economy in Africa. One of the key factors for Ethiopia’s impressive economic performance has been the shift from the agricultural sector to the industry & service sector and favourable demographics.

Reforms introduced by Abiy Ahmed: Political Sphere

Abiy’s election has generated immense hope, as he has seemed genuine in his commitment to political and economic reforms. During his tenure, a number of political prisoners have been released. There is also a reasonable amount of press freedom. There have been no arrests of journalists ever since he has taken over (2018 was the first year since 2004 when not a single journalist was arrested).

Abiy’s reforms – both political and economic – are significant because in many countries which have made economic progress, leaders have exhibited authoritarian tendencies. In many countries with economic promise, leaders have also failed to bite the bullet, as far as big bang economic reforms are concerned. Abiy, on the other hand, has reiterated his commitment to reforms.

Reforms introduced by Abiy Ahmed: Economic Sphere

In September 2019, Abiy unveiled his vision for economic reform titled ‘Home-Grown Economic Reform,’ which focuses on drawing greater public sector participation, reducing debts, and enhancing foreign exchange reserves. While speaking on the occasion of the launch of the roll out of his government’s agenda, Abiy emphasized on the fact that this approach is holistic: pro-job, pro-growth, and pro-inclusivity.

Privatization of a number of state run enterprises, such as Ethiopian Airlines, Ethiopian Electric Power Corporation, and the sole telecom provider, EthioTelecom, has also been high on the agenda of Abiy ever since he has taken over.

Challenges

This is not to say that all is well in Ethiopia. In June 2019, Ethiopia faced two attacks, one in the Amhara regional capital of Bahir Dar and the other in the federal capital of Addis Ababa. While Abiy has made efforts towards reducing acrimony in the country’s polity, there are still numerous ethnic divisions, and a large number of political players are seeking to cash in on these schisms.

Expectations from Abiy are sky high, and the country faces numerous debts. While his agenda for reforms is well-intentioned, and does represent a significant break from the past, it is rather ambitious and it remains to be seen whether stakeholders involved in the implementation will be in sync with the PM.

Africa no longer the Dark Continent

For very long, many Western commentators have consistently adopted a patronizing approach towards Africa. The Nobel Award to the Ethiopian PM comes at an interesting time. At a time when the whole world is becoming insular, 54 African countries have signed the AfCTA (African Continental Free Trade Area) agreement. AfCTA. This is the world’s largest free trade agreement since the World Trade Organisation).

AfCTA is a crucial step towards strengthening intra-regional trade linkages and overall connectivity. AfCTA has the potential of connecting over 1 billion people, creating a bloc worth over an estimated $3 billion and pushing intra-Africa trade by up to 15-25% by 2040 (as of 2018, intra-regional trade was less than 20%).

It would be pertinent to point out that the Ethiopian PM has on repeated occasions reiterated his commitment to Pan-Africanism, and has been one of the most fervent backers of AfCTA.

Africa is also being viewed as the world’s next manufacturing hub (China has already moved in a big way, though of course many countries are looking to other alternatives). Political stability and investor-friendly policies of course are imperative.

Conclusion

One hopes that other leaders in Africa follow Abiy’s footsteps in focusing on economic and political changes which could pave the way for sustainable growth and prosperity.

For long the world’s attention has been driven by a Western narrative, but in recent years Africa along with Asia has begun to draw attention due to high economic growth rates. If Africa can get its act together, and growth in countries like Bangladesh and Vietnam is sustained, we could witness the rise of new Non-Western groupings (consisting of developing countries from different regions). Such groupings will not be driven by geopolitical compulsions, geographic proximity, or sheer size, but by economic consideration and could play a pivotal role in shaping a new narrative, while promoting globalization, connectivity and free trade.

Mexican Productivity and Poverty: a Superficial, Street-Level View

I just spent three and a half weeks in Puerto Vallarta, Mexico (summer 2019). Below are some impressions. First things first; I have to give you the severe limits of my field of vision while I was there.

My wife and I stayed in an old-fashioned, 1950s low-rise hotel on the ocean with a pleasant faded kind of glory. (My wife Krishna does not let me go to Mexico by myself, for obvious reasons!) It was very hot throughout so, we did not go out much except that we had to shop for food every day at the mall across a broad avenue. We took taxis to and from the dentist about fifteen times. I always chat with taxi drivers; they gave us the foundation of sociology, I am sure! We spent a little time in the old touristy market district (where we have friendly acquaintances from past visits). We also walked some on Puerto Vallarta’s beautiful and interesting seafront (the “malecon”). I speak Spanish well, I understand everything in the language; I read it with ease. I read the paper a few times; I watched the Spanish language news on television a few times. I read free brochures on this and that.

There is much to like in Mexico, and especially Mexicans. They are low-key, unexcitable, stoical cordial, affable, and eager to help, and not only vis-à-vis this pleasant, well-disposed gringo, myself. Living for a short time in pleasant, clean Puerto Vallarta, it’s difficult to remember that Mexico’s homicide rate is three times the US rate. It takes the occasional sighting of a truckful of the new, nattily dressed National Guard with automatic weapons to jog your memory. (See notes from a previous visit: “Mexicans in Mexico,” 2017, )

Low productivity

My main observation is a repeat from what I recounted the last time I was there (See my “Mexican Underdevelopment: Pop-Sociology.”) It’s about productivity. For most of our stay, there was work going on on a brick path right beneath my windows. It was mind boggling. At one point, there were seven people working on the same two steps, including a master craftsman. They continued by restoring and cleaning a flat brick path. The thought stuck me that,in California, two, or two-and-a-half of the same Mexican workers (the very same guys) would have done the same work in the same time easily. And, yes, I know something about brick laying, both personally (I used to be very poor; now I am moderately poor), and as a customer. I am talking about a more than fifty per cent rise in productivity obtained by simply moving workers into a different environment. Bosses and economic leaders would easily kill for a change of such magnitude!

Of all the guys on the bricklaying and brick cleaning site, only one had a proper power tool, and it was only operational part of the time. The others labored by hand, mostly on their knees. No one had thought of giving them knee-guards. They had not themselves.

Moderate Poverty

The workers told me they were making about US$23 a day, or $115 for a forty-hour week. That’s not bad given that beginning professional positions – that require a university education – in thriving, manufacturing Monterrey are advertised for US$600 a month. Yet, and although most food, housing, gasoline, and health care are all cheaper in Mexico than in the US, this is still not much money on which to rear a family. But, this is also not dire poverty of the kind we used to see, and sometimes still find in India or in Africa. In that part of Mexico, everyone looks healthy, especially the children. Many adults are obese, more or less like in the US. Everyone is well dressed, by the admittedly low standards of central California where I live.

Over-staffing

Here is striking fact: Wherever you go, you find overstaffed shops, restaurants, etc, often very overstaffed. I mean like three shop attendants doing nothing in the middle of the afternoon. There must be a reasonable number of exceptions because my dentist’s office makes good use of its human resources. The same young women who serve as assistants, also act as receptionists. (I know, know, comparative advantage; don’t get me started, this is not the time or place.)

Productivity and Income

Over-staffing and the failure to provide workers with the best tools matter a great deal if you think, as I do, that incomes roughly follow productivity though often with big time lags, and often not in a linear fashion. Although employers sometimes fail to share the product of productivity gains with workers, the fact is that they cannot share gains that have not occurred. Low productivity pretty much guarantees low wages.

Note what I am not saying. The Mexican work ethic is not the problem. The guys who worked in the hot sun of tropical Mexico for eight hours a day don’t need lessons from anyone on that count. Also, those of us who live in California remember well the recession years when the vegetable picking lines remained nearly all-Mexican (with a handful of Filipinos) while poor Anglos lamented the absence of jobs. Now that wages in the field have increased substantially because of a chronic farm labor shortage, still few college students are flooding in, California sky-high rents or not.

Going back to fairly prosperous Puerto Vallarta, where construction is thriving (because of Canadian refugees from the cold, I am told), there is also the mysterious fact of the invisible zealot pounding stakes close to my hotel at 5:30 AM. I am not complaining. I respect this instance of unreasonable industriousness!

Social Structure and Productivity

Mexicans remain poor, the Mexican economy keeps growing but only slowly. This is, at least in part, I think, because Mexicans have normative standards that do not feed high productivity. These standard maintain a permanent social structure that makes increasing productivity difficult. A vicious/virtuous circle is at work. Labor is cheap because of its low productivity. It’s so cheap that, why not hire an additional worker for the same job? The incentive to hire nonchalantly is probably high because of Mexicans’ high connectivity. Mexicans, even in a fairly new city like Puerto Vallarta appear much more interconnected than Californians. (I don’t know much about the East Coast of the US.) There are many more individuals in one’s life there to please by giving their relatives and liege a job than is the case where I live.

Take the lifelong relationship of “compadre” and “comadre” between adults who are usually not kin to each other. The titles denote the link between a man and a woman who are respectively godfather and godmother to the same child. It easily multiplies by two or three beyond actual relatives the circle of individuals to whom one is to some extent obligated. And, it does not end there. Why, there is even a word in Mexican Spanish to denote the relationship of two people who have the same first name! I forgot the word but I was charmed to discover that I was ##### to any number of “Diegos.” I can even imagine situations where someone would succeed in using that tenuous link to extract a small favor from me (with a probable intention to reciprocate).

High Connectivity not a Specific Feature of Mexico, and Over-Staffing

I don’t think this high connectivity is an idiosyncratic feature of Mexican society. I believe rather that something similar prevails in India (that I know a little). It seems to me that high connectivity was visible also, in rural Brittany when I was a child in the forties and fifties. It was largely absent in Paris by contrast where I lived most of the time (Order my book of socio-historical memoirs of that period: I Used to Be French: An Immature Autobiography; avoid the middle person, go through me.). Having obligations to few rather than to many is a salient feature of modernity (that includes also urbanization, small nuclear families, and a search for formal education).

I speculate that Mexicans, even in comparatively modern places like Puerto Vallarta, have a high tolerance for over-staffing because of the large social networks within which they exist. Over-staffing is thus a primary contributor to low productivity. Low productivity keeps many people poor. Poor people need a supportive network more than do the more prosperous. Long and short of it: to break the cycle would require a degree of de-humanization of Mexican society. It’s not inexorable. Mexicans may collectively choose a bearable level of poverty (see life expectancy below) over the destruction of the emotional comfort larger social networks promote.

Not Following in the Footsteps….

It seems to me that a high degree of familiarity with the negative example of American society next door with its low connectivity – in places – may guide them toward such a choice. In point of fact, I have met a strikingly large number of Mexican men who had worked in the US for several years and who had returned home under their own power, by choice, according to their narratives. (I also note with satisfaction that ten years ago, S. Nikiforov and I had evoked precisely that sort of preference in a big article on Mexican immigration: “If Mexicans and Americans could cross the border freely,” in The Independent Review, 14-1: 101-133 [Summer] 2009.)

There is no law of nature that requires the people of less developed countries to retrace all the steps of their predecessors in development. The cellphone shows us that often, they don’t have to: Several African countries have phone landlines only in the center of their major city but 80% of their population has access to a cellphone. Trying to skip stages is the rational thing to do, of course. I would guess it’s most successful when it depends largely on a myriad of individual decisions, as with cellphones. Nevertheless, it seems to work pretty well – for some reason – even with collective decisions regarding health care, specifically.

Perhaps, societies can pick and choose what features of modernity they actually want thanks to a density of available information and a richness in inter-communications that was unimaginable forty years ago. (That was when I was studying underdevelopment with rigorous methods.) I can picture a partial national consensus forming that says, “We don’t need everything the big guys have; a little bit more of this and of that, and we are OK.” If this scenario is realistic, food, schooling, and health care will probably be its dominant themes. The Mexican food situation appears fine (I will consider contradiction on this.). In my subjective judgment, based on its products, on the average, Mexican K-12 is superior to its American public counterpart.

Illness and Health care

One component of socio-economic underdevelopment and also an obstacle to development in its own right used to be widespread illness. The morbidity figures I saw in the seventies about the situation in the fifties were horrifying. Illness also obstructed development indirectly because it destroyed family units through the death of parents or older siblings, even of aunts and uncles who might have provided. This is largely in the past. The present in poor countries is very different, greatly improved from the narrow standpoint of health. And, it turns out, the Mexican health picture, in particular appears fairly bright.

Single Payer Health Care

Something to think about for my conservative friends: Mexico has single payer healthcare for those who want it. It has a pretty poor reputation, it’s true. A private health network subsists side-by-side with it for the prosperous. (I like that.) Yet, yet, the life expectancy of Mexicans is only 2.6 years lower than that of Americans, same as the difference between the US and the Netherlands (WHO 2015, in Wikipedia). Americans live longer than Mexicans in the same proportion as the Dutch live longer than Americans. So, either, it’s possible to get fairly similar results health-wise at much lower cost than do Americans, or health care does not matter all that much, as far as not dying is concerned. (Hate to twist the knife in the conservative wound but the Dutch also spend much less money than Americans on their health care.)

Incidentally, I am well aware that there are non-economic arguments against entrusting what is now 17% of the US GDP to the government, to any government. But, perhaps, conservatives should restrict themselves to combating govt. health care on political and principle grounds alone. (End of digression.)

Where To?

So, where am I going with this, you may fairly ask? I am expressing my doubts that Mexican society – and other less developed societies – will be forced to undergo the dislocating social change that would be required to improve much its (their) productivity, according to the old schemes. I have to stop here, more or less, but it seems to me that Mexico is more likely to improve first its societal-level productivity by having more women join the work force. The preservation of a high existing level of connectivity – with its baked-in child care and food services – would ease, and facilitate such mass social change, of course.

Italy and the Belt and Road Initiative

There has been a growing scepticism with regard to the Belt and Road Initiative (BRI) project in many quarters, due to the lack of transparency with regards to terms and conditions as well as the economic implications for countries which are part of the project. A report published in April 2018 by the Center for Global Development (CGD) in Washington flagged 8 countries (including Pakistan, Maldives, Laos, and Djibouti) where the level of debts are unsustainable.

Apart from the red flag raised by a number of researchers, the removal of Pro-China leadership in countries like Malaysia, Maldives, and Sri Lanka has also resulted in problems with the BRI project, and China’s economic dealings (which are clearly skewed in favour of Beijing) with other countries is drawing more attention.

The most vocal critic of China’s economic links has been Malaysian Prime Minister Mahathir Mohamad. During a visit to China in August 2018, Mahathir, alluded to China’s trade relations with poorer countries as ‘a new version of colonialism’. Mahathir later on denied that his statement was targeted at China or the BRI. The fact is that the Malaysian Prime Minister did scrap projects estimated at well over $20 billion (which includes a rail project, East Coast Link, as well as two gas pipelines).

Top officials in the Trump Administration, including US Vice President Mike Pence, have also been critical of the BRI project for a variety of reasons. The major criticism from US policy makers has been the economic ‘unsustainability’ of the project as well as the point that the project is skewed in favour of China.

Italy to join BRI Continue reading

Sri Lankan strongmen and Chinese initiatives: India’s neighborhood is as bustling as ever

On October 25, 2018 Sri Lankan President Maithripala Sirisena suspended Parliament (till November 16, 2018) and sacked his Prime Minister, Ranil Wickremesinghe, replacing him with Mahindra Rajapaksa (who served as President of Sri Lanka for a decade, from 2005 till 2015). Sirisena had wrested power from Rajapaksa in 2015. Wickremesinghe decided to battle it out, saying that Sirisena’s decision was illegal since none of the conditions under which a Prime Minister can be removed, under provisions 46(2) and 48 of parliament were applicable to the current situation. Rajapaksa announced that the President will reconvene Parliament on November 5, 2018.

Rajapaksa has been gaining ground in recent months

First, Rajapaksa, who had been written off totally, set up a new political outfit, SLPP (Sri Lanka Podujana Peramuna), which performed well in the local elections of February 2018.

More recently, Sirisena, who was initially considered Pro-China, accused Indian intelligence agency RAW (Research and Analysis Wing) of meddling in Sri Lanka’s affairs and plotting his assassination. He supposed to have denied this in a conversation with Indian Prime Minister Narendra Modi.

As President, Rajapaksa had a close relationship with China (there were allegations of a Chinese company even providing financial assistance for his campaign) and New Delhi was relieved to see his back.

The strategically important Hambantota Port Project was awarded to the Chinese during Rajapaksa’s presidency. China provided assistance to the tune of $190 million, and Sri Lanka had to lease out the project for a period of 99 years to Beijing in 2017, since debts to Beijing are mounting (total Sri Lankan debts to China are estimated at $13 billion). The Hambantota Project is now presented as a symbol of what has been referred to on more than one occasion as China’s debt trap diplomacy.

It would be pertinent to point out that the project had first been offered to New Delhi in 2010, but India declined stating that the project was not economically sustainable.

It would also be pertinent to point out here that, after his removal, Rajapaksa has made some statements in favor of close ties with both Beijing and New Delhi. Indian PM Narendra Modi has met him on both his visits to Sri Lanka. In September 2018 Rajapaksa was himself in New Delhi.

How to approach the China factor

While there is no clarity as to how long this new arrangement will last in Sri Lanka, there are some broader issues which need to be dealt with.

The first question which arises is: should New Delhi view China’s involvement with suspicion or work jointly? While there is absolutely no doubt that, in recent years, India too has tried to come up with its own responses to the China’s Belt and Road Initiative (BRI) in South Asia. This includes promoting greater connectivity within South Asian countries through the BBIN (Bangladesh, Bhutan, India, Nepal) framework on the one hand, while also exploring synergies with Japan in order to check Beijing’s growing clout on the other. This includes not just cooperation under the umbrella of Japan’s PQI (Partnership for Quality Infrastructure) initiative, but also in areas like infrastructure and energy (two key instances being the metro project in Dhaka, where India’s Larsen & Toubro and Japanese companies are working jointly for developing Line 6, as well as an LNG terminal in Sri Lanka where Petronet and Japanese companies are making a joint investment to the tune of $300 million).

During Wuhan Summit one of the important issues discussed was that India and China will work together in Afghanistan (only recently both countries set up a joint training program for Afghan Diplomats). Pakistan has been trying to obstruct any big ticket cooperation between both countries, and that is cited as one of the main reasons why Beijing is shying away from any big ticket investments into a joint project in Afghanistan.

If Japan and China can work together in connectivity projects (Japan has even expressed its willingness to join the BRI), as was discussed during Abe’s recent China visit, New Delhi and Beijing too can explore certain instances where they work together. It would be pertinent to point out that the Global Times made an interesting argument in favor of New Delhi and Beijing working in tandem for Sri Lanka’s infrastructural development. While this may appear to be a pipedream currently, in the long run it can not be ruled out given the changing geopolitical equations.

Apart from this, there are clear lessons for New Delhi: that it should not put all eggs in one basket, and realize that certain leaders will have good relations with China. A former Diplomat, Ashok Kantha, who was India’s envoy to Sri Lanka, made the point that India needed to stop looking at domestic politics from a lens of ‘Pro-India and Pro-China’, as this is too simplistic.

While India was apprehensive about the election of K.P. Oli as Nepalese Prime Minister, he has been speaking about close ties with both Beijing and New Delhi. During his visit to China in June 2018, Oli spoke about the possibility of Nepal emerging as a bridge between China and India.

In conclusion, New Delhi has to watch out for it’s own interests in South Asia, and should certainly ensure that no country has a stranglehold, but paranoia will be of no use. India needs to come up with viable alternatives to the BRI, while also being open to cooperation, as and when feasible. Apart from this, New Delhi needs to realize that countries in the neighborhood will give precedence to their own interests and even if they do maintain close economic linkages with China, it is not always targeted at India.

American protectionism and Asian responses

On October 10, 2018, a senior Chinese diplomat in India underscored the need for New Delhi and Beijing to work jointly in order to counter the policy of trade protectionism being promoted by US President Donald Trump.

It would be pertinent to point out that US had imposed tariffs estimated at $200 billion in September 2018, Beijing imposed tariffs on $60 billion of US imports as a retaliatory measure, and US threatened to impose further tariffs. Interestingly, US trade deficit vis-à-vis China reached $34.1 billion for the month of September (in August 2018, it was $31 billion). Critics of Trump point to this increasing trade deficit vis-à-vis China as a reiteration of the fact that Trump’s economic policies are not working.

Ji Rong, spokesperson of the Chinese Embassy in India, said that tariffs will be detrimental for both India and China and, given the fact that both are engines of economic growth, it is important for both to work together.

The Chinese diplomat’s statement came at an interesting time. Continue reading

The EU’s laudable Asia Connectivity Strategy

The European Union (EU) has put forward a plan for enhancing connectivity within Asia, and has been dubbed as the Asia Connectivity Strategy.

The EU does not want to give an impression that the Asia Connectivity Strategy (ACS) is a counter to the Belt and Road Initiative (BRI). Yet, senior officials of the EU, while commenting on the broad aims and objectives of the project, have categorically stated that the primary goal of the Asia Connectivity Strategy is enhancing connectivity (physical and digital) while also ensuring that local communities benefit from such a project, and that environmental and social norms are not flouted (this is a clear allusion to the shortcomings of the BRI). There are no clear details with regard to the budget, and other modalities of the project (EU member countries are likely to give a go ahead for this project, before the Asia-Europe Meeting in October 2018). The EU has categorically stated that it would like to ensure that the ACS is economically sustainable.

Other alternatives to BRI: the US

It is not just the EU, but also the US, along with Japan and Australia, which are trying to create an alternative vision to the BRI.

Continue reading