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Today Iraq and Afghanistan,tomorrow the world? Somehow I have trouble believing the "nonviolently" part.


http://www.salon.com/news/feature/2005/03/15/democracy_act/


March 15, 2005 | President Bush's "axis of evil," in targeting only Iraq, Iran and North Korea, was apparently an understatement. Saddam Hussein, the ayatollahs and "Dear Leader" Kim Jong Il were just the tip of the iceberg. The backers of new legislation before Congress have a much bolder vision: to "achieve universal democracy" by 2025 by removing -- nonviolently -- approximately two dictatorships a year. President Bush's call, in his February State of the Union address, for support of "democratic movements in the Middle East and beyond, with the ultimate goal of ending tyranny in our world," must have been just what they wanted to hear.

If enacted, the new bill -- the ADVANCE (which stands for Advance Democratic Values, Address Nondemocratic Countries, and Enhance) Democracy Act of 2005, introduced into both houses on March 3 -- would bring about a fundamental change in U.S. foreign policy. To maintain a regional balance of power, ensure access to vital resources, and pursue larger national security goals such as the "war on terror," the United States has traditionally worked with dictators big and small, from the tyrants of the past (such as Anastasio Somoza in Nicaragua) to current autocratic allies (such as Pervez Musharraf in Pakistan and Crown Prince Abdullah in Saudi Arabia). The ADVANCE Democracy Act, the foreign policy version of "Just Say No," on the other hand, would attempt to steer the United States away from engaging with tyrants under any circumstances.


Those who are skeptical of the bill, including both liberals and conservatives, say its goal of achieving democracy worldwide is hypocritical, because while the United States encourages some democracy movements in the Middle East, it continues its economic and military support of strong-arm leaders like Egypt's Hosni Mubarak. What's more, some critics say, the bill ignores the tensions between democracy promotion and America's economic and security goals.



Specifically, the act would put democracy promotion at the top of the State Department's agenda. It would establish a new Office of Democratic Movements and Transitions, require the State Department to issue an annual democracy report, and set up an advisory board of nongovernmental VIPs to evaluate all democracy-promotion activities and spending.

Initially funded at $250 million for two years, the act would direct resources to pro-democracy movements worldwide. The bill proposes to turn U.S. embassies into "islands of freedom" and align U.S. diplomats with pro-democracy movements in nondemocratic countries -- linking performance pay and promotions of Foreign Service officers to their efforts to spread democracy. The bill would also authorize the president to block financial flows to states that resisted democratization.

This plan to upend the world's remaining dictatorships (there are more than 40, according to the nongovernmental organization Freedom House) began with former U.S. ambassador to Hungary Mark Palmer and his 2003 book, "Breaking the Real Axis of Evil." "Some people think a world without tyrants is utopian," Palmer says. "And they think it's more utopian to have a deadline." But, Palmer says, "we're down to a limited number of dictators, and it's entirely feasible to get the rest of them out. Most are pretty creaky and won't even live until 2025!"

Palmer's book didn't generate much of a stir in the press, but it did capture the attention of influential politicians like Frank Wolf, R-Va., and Tom Lantos, D-Calif., in the House and John McCain, R-Ariz., and Joe Lieberman, D-Conn., in the Senate, the four cosponsors of the ADVANCE Democracy Act. The primary catalyst for the democracy legislation, however, was strategist Michael Horowitz of the neoconservative Hudson Institute. Fresh from his success in pushing passage of the North Korea Human Rights Act, Horowitz, along with the National Coalition for Religious Freedom and Human Rights (a below-the-radar group of evangelicals and others that came together to promote the International Religious Freedom Act of 1998), was ready to kick things up a notch.

Their efforts were aided by Bush's remarks in his State of the Union address. Palmer says that he almost wept with joy when he heard those words. Adds Horowitz: "There were heated efforts within the State Department to say that this speech was just rhetoric, but no, it was an extraordinary speech, and it changes everything."

Horowitz expects easy passage for the act. "Obviously Republicans can support it because it's so in sync" with the president's address, he says. And he thinks Democrats, including some who opposed the war in Iraq, will support the bill because it promotes "peaceful means of supporting democracy."

The State Department might be expected to put up some resistance to legislative meddling in its mission. "That was [its] initial reaction toward the anti-trafficking legislation that was passed in both houses. That was also the initial reaction of the international religious freedom legislation," says Lorne Craner, head of the International Republican Institute and former assistant secretary for democracy, human rights and labor in the Bush administration. The State Department eventually successfully adapted to the institutional changes mandated by both pieces of legislation, he notes. "And given the president's words and his actions, I think at this point [the act] will get a more sympathetic hearing from the ... leadership than the trafficking or religious freedom legislation did."

Although a bill promoting democracy with bipartisan support might seem to be noncontroversial, conservatives have traditionally expressed skepticism toward the strain of messianic unilateralism that runs through neoconservative thought. As Jeane Kirkpatrick wrote 15 years ago in "The National Interest," "It is not the American purpose to establish 'universal dominance' in the provocative formulation of Charles Krauthammer -- not even the universal dominance of democracy."


It's not only conservatives who find fault with the strategy of putting democracy above all other considerations. "The inevitable fact is that in some places it is necessary to weigh competing American interests against one another," argues Thomas Carothers, director of the Democracy and Rule of Law project at the Carnegie Endowment for International Peace. "And this bill seems to assume an 'all democracy all the time' approach to foreign policy without even seeming to acknowledge deeper tensions between a democracy goal and other economic and security goals."


It also fails to take into account pressing short-term issues such as North Korea's nuclear weapons and China's growing influence in the international arena, Carothers says. "This bill doesn't seem to acknowledge that conceiving of our relationship with China as a democracy mission is probably not going to happen and will not help integrate China into the international political and economic system in the next two to 10 years."

Phyllis Bennis, a fellow at the progressive Institute for Policy Studies, sees the bill as an effort to give what are seen as negative U.S. policies, particularly in the Middle East, a more positive spin. (Bush's nomination of longtime advisor Karen Hughes as undersecretary of state for public diplomacy is clearly another part of that effort.) The bill uses "the power of the U.S. military occupation and military presence in the region since 9/11 to declare that a new historical moment has arrived," she says. "The problem is that all the things the Bush administration wanted to fight against turned out to be lies -- Iraq's nukes, potential weapons of mass destruction, links with al-Qaida. You can always say that you're fighting for democracy because it is such an elusive concept."

Bennis adds that the Bush administration's "claiming credit for the move to democratization is very insulting to the peoples of these countries -- the Palestinians, the Egyptians, the Syrians, the Lebanese. These democratization attempts have been in place for the last 25 years at least, and have failed because of the efforts of the U.S. government."

The issue of U.S. hypocrisy also troubles former ambassador Palmer, a supporter of the bill. "Young Arabs see us as inconsistent, as promoting democracy but propping up the Saudi dictators. They feel that we're not credible." He believes that the ADVANCE Democracy Act will eliminate the double standards by which the U.S. government supports democracy some of the time, in some places.

Carnegie's Carothers, however, argues, "You cannot legislate the elimination of double standards in America's approach to democracy in the world, because those double standards are based on the fact that our interests don't always go together despite all the nice rhetoric in presidential speeches."

To overcome the bill's critics, Horowitz will again rely on the support of the evangelical community, which he considers to have been "the most powerful force in human rights in the last 20 years." That force was evident when the North Korea Human Rights Act seemed to be on the verge of failure last year. "I can tell you that senior officials of the Korean and Chinese embassies told me that the bill had zero chance of passing the gantlet in the Senate," Horowitz recalls. But then his coalition went into overdrive, putting pressure on Democratic leaders such as Tom Daschle, on whom the coalition threatened to unleash 300 Korean-American pastors if he didn't help remove obstacles to the bill's passage. Daschle capitulated, then lost in a close reelection race in November anyway.

If significant legislative resistance to the ADVANCE Democracy bill emerges, expect another wave of pressure from an alliance of evangelicals and neoconservatives. Having successfully shifted the debate on North Korea from security issues to human rights concerns, it is now attempting to sell a more ambitious program: the destabilization of more than 40 dictatorial regimes around the world. Whether the result is 20 years of increasing democracy (think Poland) or 20 years of devastating decline (think Russia) will depend not only on passage of the democracy act but also on the way that events affecting America's economy and national security -- which aren't always in our control -- play out on the world stage.

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Haven't said it in a while but been thinking it - go MaTT!!!!

http://www.morganstanley.com/GEFdata/digests/20050318-fri.html#anchor0



Mar 18, 2005





Global: America Smells the Coffee

Stephen Roach (from Beijing)




Tipping points are a great concept, but virtually impossible to identify ahead of time -- let alone when they are occurring. It is only with the great luxury of hindsight that we can look back and know that the proverbial bell has rung. In my view, March 16, 2005 could end up in the running as a possible tipping point for America. Suddenly, the US has taken on a very different aura in an increasingly unbalanced world: The confluence of a record current account deficit, a disaster from General Motors, and yet another new high for oil prices all speak of an increasingly precarious role for the global hegemon. World financial markets have barely begun to sniff that out.

The current account deficit probably says it all. As I have noted ad nauseum, it is an outgrowth of America’s biggest problem -- an unprecedented shortfall of national saving. The US net national saving rate -- the combined saving of individuals, businesses and the government sector (all adjusted for depreciation) -- has fallen to a record low of 1.5% since early 2002. Lacking in domestic saving, America must import foreign saving from abroad in order to keep growing at what the body politic judges to be acceptable growth rates. And so the US must then run massive and ever-widening current account deficits to attract that foreign capital. And ever-widening it is: America’s broadest measure of its external shortfall was just reported to have hit an all-time record of 6.3% of GDP in 4Q04 -- an astonishing 1.8 percentage point deterioration from the 4.5% deficit a year-earlier in 4Q03. Not only is this a record current-account deficit for the US, but it is also a record financing burden for the rest of the world. Based on the annualized current account deficit of slightly more than $750 billion in the final period of 2004, America now requires an average of $2.9 billion of capital inflows each and every business day to keep the magic going.

“What’s good for General Motors is good for America.” I realize that dates me, but I’m old enough to remember when that was the battle cry of a once mighty Smokestack America. So when GM throws in the towel on earnings (again) and its bonds trade at near-junk status, maybe there’s more to this story than a quick flicker on the screen. The ever-cynical comments on chatrooms were quick to minimize the significance of this event: “What do you want from a healthcare provider dressed up as an auto company?” Yes, Detroit is now a shadow of its former self -- US automakers currently employ only 0.8% of all workers in the US. In many respects, that’s emblematic of the fate of the factory sector as a whole, where the job share has plunged from 33% of private nonfarm payrolls in 1960 to around 13% today. The demise of US manufacturing is now taken as a given and most simply dismiss GM’s latest travails as a non-event.

I think there is a deeper meaning to all this -- especially coming on a day when the current-account deficit was reported to have taken yet another ominous leap into uncharted territory. Not surprisingly, the US trade deficit on goods accounted for fully 98% of America’s total current account deficit in 4Q04. That’s right, a once proud Smokestack America has borne the brunt of the unprecedented US saving shortfall. And just as GM led the charge in the heyday of America’s manufacturing prowess, it is now on the “bleeding edge” of its darker days. Coincidence? I doubt it. It may well be that the accelerated erosion of America’s manufacturing base in recent years is the most painful outgrowth of a record US saving shortfall. Washington, of course, wants to pin the blame on unfair foreign competition. Instead, it ought to take a look in the mirror: It is the budget deficit, of course, that has been crucial in pushing national saving to record lows in recent years. And it is the capital inflows -- and the trade deficits behind those flows -- that are required to compensate for these budget deficits and give a saving-short America the foreign aid it needs to keep on growing.

March 16 was also a day of record oil prices. No, this is not just America’s problem. But in a falling-dollar climate, other nations enjoy a cushion from this blow as their currencies rise. Not so in the US as the current account deficit keeps the greenback under pressure. The press, of course, is filled with commentary about how oil no longer matters. All I can say is -- been there, done that. My experience tells me that this is precisely the rhetoric we always hear in the midst of an oil shock. And shock it is: In real terms, $56 oil represents more than a quadrupling from the lows of late 1998 -- putting this price spike very much on a par with those devastating blows of the 1970s. The apologists will tell you not to worry -- that the real price of oil is still below record levels hit in the late 1970s. That is poor macro, to say the least. Impacts to economic growth are not about levels -- but about changes. The sharp run-up of oil prices in these past few years is the functional equivalent of a tax on household purchasing power that only puts further pressure on an already over-extended American consumer. The fact that consumers haven’t caved yet doesn’t mean the Holy Grail of a new immunity to rising oil prices has been discovered. It could mean that something else has temporarily deferred the endgame.

That “something else,” in my view, goes right back to America’s biggest hole -- the current account deficit and the capital inflows from abroad that keep funding it. Recent US Treasury data suggest this is not a problem -- net portfolio investment of $91.5 billion in January 2005 that was more than enough to cover the $58 billion trade deficit that month. The Washington spin is that foreigners can’t get enough of dollar-denominated assets and the returns they offer in an otherwise return-starved world. Don’t kid yourself. This rush of foreign capital is not about private investors plunging back into US assets. It is a conscious policy move on the part of foreign central banks. The US Treasury data do not accurately reflect the obvious -- an extraordinary build-up of dollar-denominated official foreign exchange reserves held by the world’s monetary authorities. By our estimates (based on IMF data), total reserves increased by about $700 billion from year-end 2003 to year-end 2004. Assuming that the dollar share of such holdings held steady at around 70% (an official BIS estimate as of late 2003), that implies an increase of nearly $500 billion in dollar-denominated holdings of the world’s central banks -- confirming that foreign central banks financed about 75% of America’s current account deficit last year. That policy-driven financing is a bold effort on the part of foreign central banks to keep their currencies from rising and defer what could be an otherwise painfully classic US current account adjustment -- complete with a further decline in the dollar and sharply higher US interest rates. The resulting subsidy to US interest rates -- and the asset-driven consumption that engenders -- goes a long way in cushioning the blows of stagnant real wages and surging oil prices that might have otherwise clobbered the American consumer.

But the message from overseas is that this game is just about over. One by one, Asian central banks -- America’s financiers at the margin -- have dropped the not-so-subtle hint that they are saturated with dollar-denominated assets. From Korea and Japan to China and India -- not to dismiss Malaysia, Hong Kong, and Singapore -- there is a growing protest to massive dollar overweights in official reserve portfolios. The standard American response borders on arrogance: “What choice do they have?” The presumption is that the US has externally driven Asian economies over a barrel -- unwilling to accept a deterioration in export competitiveness that currency appreciation might bring. This misses a key cost-benefit tradeoff -- weighing the hit to exports against the fiscal cost of a portfolio loss on holdings of dollar-denominated assets. The bigger the build-up of dollar reserves, the more this tradeoff is likely to tip toward dollar diversification -- spelling the end of America’s cut-rate foreign financing.

In the end, of course, there’s far more to this story than economics. As I noted recently, history is replete with examples of leadership tests that pit a nation’s military prowess against its economic base (see my 28 February dispatch, “The Pendulum of Global Leadership”). Yale historian Paul Kennedy has long argued that great powers typically fail when military reach outstrips a nation’s economic strength. In that vein, there’s little doubt that America is extending its reach in this post-9/11 world. Wars in Afghanistan and Iraq were the opening salvos. The Bush Administration’s recent nomination of two leading neocons to key global positions -- John Bolton as America’s ambassador to the UN and Paul Wolfowitz to head the World Bank (also announced on March 16) -- are more recent examples of a White House that is upping the ante on its “transformational” projection of global power. In Paul Kennedy’s historical framework, America is extending its reach at precisely the moment when its economic power base is weakening -- a classic warning sign of the fall of a Great Power.

Was March 16, 2005 America’s tipping point? Only time will tell. The optimist can hope that it was a wake-up call for a saving-short US economy to put its house back in order. For once, call me an optimist. It’s time for America to smell the coffee.

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