Developing Countries Return the Favor to Advanced Economies at IMF

On the heels of the warning shot from US creditors, emerging economies now emphasize that the US mortgage turmoil has put global prosperity at risk. The statements of these once-poor countries bear out a long-festering resentment.

There is a lesson here.

Countries do not ever forget an aggressor's humiliating attitude, whether arrogantly projected or misconstrued. Just as the once faltering and newly independent economies are discovering economic stability, autocratic countries will one day become vibrant democracies.

They will democratize on their own bowing to their people's aspirations. IMF and World Bank excesses did not spur economic growth. Similarly, the democratization will not happen because of or under the humiliating duress of American military adventures. When it does, one can be sure those countries will unload years of resentment; especially if the United States goes through a democratic turmoil such as an Abu Ghraib, a Katrina or a sloppy and hung presidential election.

Bloomberg.com: Latin America

``Allow me to point out the irony,'' Brazilian Finance Minister Guido Mantega told the annual meeting of the IMF and World Bank in Washington. ``Countries that were references for good governance, of standards and codes for the financial systems, these are the very countries facing serious problems of financial fragility, putting at risk the prosperity of the world economy.''

At the gathering today, finance ministers and central bankers from the Middle East to Asia expressed resentment at past conditions the U.S. and IMF demanded in return for loans.

``The world is decoupling from the United States,'' said Adam Posen, a senior fellow at the Peterson Institute for International Economics in Washington.

Developing countries are now lecturing the IMF. The G-24 urged the organization to increase ``surveillance of advanced economies, putting as much focus in evaluating their vulnerabilities as it does in emerging-market economies.''

Members of the group include Syria, Ivory Coast, Egypt, Ethiopia, South Africa, India, Iran, Lebanon, Pakistan, the Philippines and Sri Lanka.

This unloading of resentment is not without consequences. Its present form is forceful enough that advanced economies are yielding to restructure the IMF. Increased democratization around the world will also force another round of restructuring of the world order at the UN and in the form of powerful regional alliances that exclude some of the formerly advanced economies.

For sure, there is plenty of economic and democratic reforming to do at home. If not, America will come under increasing pressure from the global opinion. That presents a risk that a future US demagogue will be spurred on an isolationist path rather than playing ball.

America's Global Creditors Fire First Shot Across Its Bow

This was bound to happen sooner or later. Creditors of the debt-addict have begun to flex their muscles. They certainly have twin leverages of trillions in US securities and similar-sized government-run private equity funds. In the meanwhile, the patient is about to go in a recession and the dollar shows no signs of stabilizing anytime soon.

Calls Grow for Foreigners to Have a Say on U.S. Market Rules - New York Times

Their argument is simple: The United States is exporting financial products, but losses to investors in other countries suggest that American regulators are not properly monitoring the products or alerting investors to the risks.

“We need an international approach, and the United States needs to be part of it,” said Peter Bofinger, a member of the German government’s economics advisory board and a professor at the University of Würzburg. While regulators in the United States have not been receptive to the idea in the past, analysts said that Europe and Asia had more leverage now. Washington might have to yield if it wants to succeed in imposing bilateral regulations on government-owned investment funds from emerging economies. “America depends on the rest of the world to finance its debt,” Mr. Bofinger said. “If our institutions stopped buying their financial products, it would hurt.”

Their timing is impeccable!

In the run up to the 2008 US President election, politicians aren't
expected to espouse tough measures to restore fiscal order. If anything, Republicans will continue socialism for the rich and hide economic inadequacy with a shriller war machine running on borrowed money. Not to be left behind, Democrats will prepare to dole out health and supplemental income to baby boomers retiring in droves.

Come Inauguration 2009, the winner, regardless of political hue, may just be too late in administering the bitter medicine of higher taxes, higher interest rates and swallow its pride by giving up on the strong dollar policy.

Long live US Capitalism!

Angst At The Picnic

It is nice to see another author echo earlier blogged sentiments on this page. For a good measure, this article also delivers a dose of realpolitik to India's superpower ambitions:

Angst At The Picnic : outlookindia.com

The Bush administration's notorious CIA secret prisons and its detention without trial of over 400 alleged terrorists at Guantanamo have deprived the US of much of its moral authority in the court of global opinion. But India maintains scattered Guantanamos. And unlike in the US, where the media is scrambling to atone for the dismal cheerleading it offered Bush in the build-up to the invasion of Iraq, India's most influential news outlets rarely conduct sustained investigative reporting into human rights abuses at home.

Judicial "Independence" Indian Style

Here is an order from a High Court judge in India, Justice Uma Nath Singh of Punjab and Haryana High Court, the types who can only be removed by impeachment proceedings in both houses of the parliament.

At best, this is a judge gone wild that assumes the role of an accusation amplifier, investigator, jury and judge in a span of a few hours. At worst, an illiterate man who inhabits a blissful world untouched by carefully weighed-in legal language. Notice the underlined text (underlining added) reminiscent of the language used by banana republic dictators.

IndianExpress.com :: HC judge gets CBI to drag lawyer to Agra mental asylum

“It is also learnt from the Bar that the accused [note by your blogger: a high court lawyer Tahar Singh who was leading a campaign to discuss conduct of judges] creates nuisance and commotion wherever he goes with the help of some anti-social elements on the strength of some vested interests who finance him in doing so. In this background, to ensure the safety of life of the complainant [the lawyer's wife] and her children, I deem it expedient to direct the Superintendent of Police, Central Bureau of Investigation, Chandigarh to immediately take the accused in custody, and take him away from Chandigarh to admit him in the Mental Hospital, Agra, for proper treatment,” the order said.

Directing the CBI to take charge of the investigation, Justice Singh said: “The CBI shall use modern devices during investigation to find out the connections of Tahar with anti social elements and the vested interests who are misusing him during this spell of insanity.”

When contacted by The Indian Express, Tahar Singh’s wife, Sujata Sharma said: “I just made a complaint, I am shocked to learn that he has been arrested by the CBI. I never wrote any letter to any court. He is not at all insane.”

Technorati Tags: Judicial Independence, Indian Judiciary

Sanctimonious Indian Govt Gets Well-deserved Earful from Press

The Australian authorities are following due process in the investigation of suspect Mohammed Haneef, an Indian citizen, in connection with the London and Glasgow bombings. While there is Maoist terrorism, aka Naxalism, in large swathes of central India, there are unmistakable signs Islamic terrorism within India is now by and large home grown and now evidently exported, and that there is evidence terrorists of all denominations, including Tamil Tigers in Sri Lanka, exchange logistical support in the ungoverned parts of India, the only reactions to the London/Glasgow bomb plot we get from the Indian government are the sanctimonious lectures to the Australian high commissioner and to the new British Prime Minister.

India has a terrible criminal justice system, to say the least. There has been no satisfactory investigation progress in any of the seven acts of jihadi terrorism in India since the present government came to power in 2004.

IndianExpress.com :: Haneef & his country

The [Australian] immigration minister has suggested there is information on [individuals’ reckless association with terrorist organisations under a .section of Australia’s anti-terror law]. Therefore, New Delhi could perhaps have waited to see what Canberra finally produced before registering a concern over due process. ...

Plus, let’s not be sanctimonious. What is due process when it comes to India? What is the record of our police and security agencies in terms of always respecting basic constitutional principles and guilty-until-proven-innocent rules? What is our record in quickly processing terror cases? Fourteen years after the Mumbai blasts, the convicted are still being sentenced. ...

India under its present government seems to have made not netting terror suspects a policy. Whether Australia is proved to have been right or wrong in detaining Haneef, there is no mistaking the purposefulness in its efforts to go after a terror network. Pervez Musharraf, as these columns observed, had shown more purpose and guts over the Lal Masjid issue than many ruling party ministers had shown when dealing with another law and order menace in India: Naxalism.

Battlefield Pakistan: Musharraf in the middle of US, China proxy war

Some may dismiss this as fiction, an interesting take on Pakistan's deepening crisis from a blunt-talking but highly analytical Indian columnist: Battlefield Pakistan : outlookindia.com

Kissinger's influence did not wane with Nixon's exit. It continued to grow with expanding Sino-American trade. Till recently, Kissinger was an important influence on the Neo-Conservatives who invaded Iraq. Bob Woodward in his book, State of Denial, has reported how Vice-President Dick Cheney told him in 2005: "I probably talk to Henry Kissinger more than I talk to anybody else. He just comes by and I guess at least once a month, Scooter (Libby Lewis, Cheney's closest aide, recently convicted) and I sit down with him."

US Shows World's Despots a Way to Legalize Torture

The story says it all. David Hicks gagged before vote | The Daily Telegraph

As part of his agreement which was signed before he appeared in the US military commission on Tuesday he has agreed that he was never illegally treated by any person while in US custody. It means Hicks can no longer claim he was mistreated by the US after he was captured in December 2001 in Afghanistan and taken to Guantanamo Bay.

Just as the US democracy was showing revival signs with the Democratic congress reinstating constitutional checks and balances to hold the Executive accountable for its muzzling of federal prosecutors and widespread espionage on US citizen bypassing the FISA, we now have this. While American taxpayers' money continues to be used to kill tens of thousands of innocent people in a war that has cost more American lives than in 9/11, we have the military courts preside over this way out as Gitmo's closure and consequent release of hundreds held without a trial or charges becomes imminent.

The Angst about "Sleeping Indian Media"

A respected retired Indian journalist forwards an email expressing deep angst about the quality of Indian print and television media. It is dismayed that what used to be respectable "mainstream" print media is now slipping into tabloid journalism. The latest example cited is the failure to report the killing by terrorist outfits in Kashmir of an Army major just as acquittal of a popular Bollywood star on charges of stashing weaponry at his home during the 1992-93 bomb blasts and riots in Mumbai was all over the news:

Star versus 'Star'

The body of Major Manish Pitambare, who was shot dead at Anantnag [in Indian Kashmir], was cremated with full military honours at Thane [near Mumbai] on Wednesday [Feb 7, 2007].

On Tuesday a news swept across all the news channels 'Sanjay Datt relieved by the court'. [....] experts like Salman Khan saying 'He is a good person. We knew he will come out clean', Mr. Big B [Superstar Amitabh Bacchan saying] 'Datt family and our family have relations for years. He's a good kid. He is like elder brother to [my son] Abhishek'. [...] sister Priya Datt 'we can sleep well tonight. It's a great relief'.

In other news, Parliament was mad at Indian team for performing bad; Shah Rukh Khan replaces Big B in KBC [Indian version of Who Wants to be a Millionaire] and Sonia [Gandhi] asked the PM to consider reducing petroleum prices (I wonder who's the PM. [...] but most of the emphasis was given on Sanjay Datt's "phoenix like" comeback from the ashes of terrorist charges.

In my humble opinion, Indian media's slumber is much more than missing a soldier's sacrifice or pandering to what sells. It is also about propagating the "India Superpowering" belief with the "life imitates media" arrogance displayed in the Indian-brand festooned Times Square.

Patriotism sells. Everywhere. Sometimes for years before enough people start asking the obvious questions. Anything that detracts the "feel-good" patriotism is at best an annoying inconvenience and at worst "anti-national". The distractions include human rights abuses, terrorists killing soldiers, farmer suicides or forced acquisition of farmers' lands in the name of Special Economic Zones.

Of course, convenient slumber isn't the exclusive domain of the Indian media. The US media wishfully denied inconvenient truths about the Iraq war as long as it could. Under the pretext of protecting sources, it unwittingly shielded, as long as possible, Libby and other White House operatives from the worst crimes of abuse of power.

The sobering and reassuring truth is that the US media was shocked out of its slumber by real-life players like whistle blowing diplomats and the political leadership.

The same is required in India. One can blame, and thus flatter, the media only so much.

Euphoria in India Over a Foreign Acquisition

Am glad a respected India-based historian has accurately psychoanalyzed the euphoria in India:

India Is Reveling in Being the Buyer - New York Times

“There’s a deep inferiority complex,” said Ramachandra Guha, a prominent historian and social critic. “Sometimes it manifests itself in excessive deference. At the same time, we exalt in cases of success over the white man.”

Ever since the Tata bid for Corus was announced, I've wondered why the largest single industrial investment in emergent India is not in or for the fast-growing Indian market -- not even the steel sector when a huge infrastructure backlog is threatening to knock a point or two off India's projected GDP growth of 9% -- but is a windfall for the European shareholders of Corus.

Is today's Indian industry and its growth potential too shallow to give better returns on $11 billion? To be sure, this acquisition is not about increasing Tata Steel's competitiveness in the Indian market by acquiring technology, management or more efficient suppliers from Corus.

On a purely jingoistic metric, if anything, Ratan Tata's move is opposite of Jamshedji Tata's when he set up India's first cotton mill in Nagpur in 1874 to process central India's raw cotton instead of finding its way to Manchester mills only to be exported back as cloth (as an aside, it helped the Tatas mitigate export losses after cotton production resumed in the South post the US civil war). Granted that was in a different era and in a vastly different global economic environment. Nonetheless, value-add and moving up the value chain from raw materials to finished goods are a constant.

The projected $300 million annual synergies in the Corus deal are from Tata shipping semi-finished products from existing Indian capacity for Corus' automobile customers. One hopes that is the real reason and that this isn't a ruse to ship Orissa's large iron ores, as is preferred by the Indian central government that gets export duties on ores but gains much less, unlike the state government, from a steel plant in Orissa. All of this makes the jingoistic euphoria in India harder to swallow.

There appear good business reasons for the shareholders of Tata Steel, Tata Sons and Corus to get to 100 million tonnes faster and cheaper than setting up greenfield steel mills. In capitalism, for good reasons, that is all that matters and not jingoism.

One wonders if the Tata Sons shareholders, more than any Indian shareholder, have their ears to the ground and know something to diversify holdings away from the booming Indian stock market and emergent Indian economy.