A victory for moral clarity

It’s hard for the West to understand the full scope of the disaster that’s befallen Libya. It’s happened, in part, because no one in or outside Libya bothered to figure out what the country might really look like after the dictator was gone.

BusinessWeek, August 7, 2014

Early this year, the Libyan Investment Authority filed suit against Goldman Sachs. LIA claims that, “Goldman Sachs abused the relationship of trust and confidence with the then newly-formed LIA…The fund suffered significant losses.”

How significant? In 2008, the LIA made a $1.3 billion investment with Goldman. The money evaporated. For their formidable investment advice, Goldman also received $350 million in fees.

Just Goldman doing what Goldman does, perhaps.

The LIA was formed in 2006. After the Qaddafi regime made a clean breast of its chemical and nuclear weapons programs, and paid reparations to the families of Lockerbie victims, Libya was removed from the State Department’s list of states sponsoring terrorism. Moammar Qaddafi’s son Seif drove the establishment of the largest sovereign wealth fund in Africa, seeing it as a way to diversify the Libyan economy away from its dependence on oil. (Although under the table payments from western investment banks may have helped him see the light.)

The Libyans, now able to engage western financial institutions, but not terribly sophisticated, seem to have become the targets of every sharp operator from Société Générale to Goldman Sachs. Which I suppose is just investment banks doing what investment banks do – that is, exploit every asymmetry available to them.

The story might have ended there, with only a slow bleed into the shark pool while Libya learned to swim. But then came Libya’s version of the Arab Spring, only this time with an opposition armed and supported by NATO.

When protesters clashed with Libyan security, western powers decided to take the moral high ground. Libyan government forces had fired on civilians. The Libyan government was therefore evil. The opposition was therefore good. Q.E.D.

With NATO money, weapons, and 26,000 airstrikes, the opposition was, not too surprisingly, victorious. Although you have to stick to a pretty narrow definition of “victory” to appreciate it.

Thousands of heavily armed gangsters daily roaming the streets, kicking down doors and breaking into government ministries, extorting millions on a whim, torturing or killing anyone who crosses them or maybe just looks funny – the victors make Latin American drug cartels look like buttoned-down businessmen doing lunch at the rotary club. You’d rather work for the cartels.

Three years after Qaddafi was killed and nearly everyone involved in running the government either sent packing or summarily executed, virtually nothing in Libya works, except the oil terminals. The one thing the gangsters seem to agree on is to keep the cash coming.

As BusinessWeek put it, “…Libyans who opposed Qaddafi and fought for a more equal and democratic future, have been murdered. Their deaths have passed without any demonstrations…a measure of how irrelevant the causes for which Libyans fought three years ago have become. Libya’s economic future, once touted as the brightest in Africa, looks equally bleak.”

This morass of anarchy is a direct result of “moral clarity” in the west – truly a form of negligence. Focus on one particular ‘evil’, trumpet it long enough and loudly enough, and we can all forget the messy, inconvenient details.

And that is exactly what we have done.

 

 

 

The quagmire deepens

The quagmire of Iraq is merging into the larger morass of the Middle East, the morass growing deeper weekly with the military successes and sensationalized brutality of the Islamic State.

President Obama has taken to describing IS as a ‘cancer’, ordering airstrikes whose objectives are morphing from the humanitarian, i.e. facilitating the escape of persecuted  minorities, to the ostensibly moral, i.e. defeating the ‘cancer’ itself.

Editorials, blogs, and bloviating ‘experts’ made up and mic’ed for TV are ominously warning of the threat to the West. Apparently, jihadists recruited from Europe may go home again and cause trouble there.

The President is wading in deeper, not because he has a plan to fix Iraq, or Syria, or Gaza, or anything else, but because he’s being driven by politics into doing something. Airstrikes are ‘something’; we know how to do it; so we’ll do that. Maybe we’ll be able to kill enough IS fighters that the thing will disintegrate, and we can resume our withdrawal from the region.

Maybe. But the Middle East will not change, because the cancer that eats at that part of the world is not the Islamic State, or even jihadism. It is a cancer that was first planted and cultivated nearly 100 years ago by France and Britain after the First World War, when they carved up the old Ottoman Empire to suit themselves and their thirst for oil.

The cancer is political weakness.

Like many parts of the world, the Middle East is a stew of ethnicities and religions. There is nothing wrong with that. Even disparate peoples who must live together usually learn to get along. They develop commercial and social relationships. They intermarry. But they are also tinder for ambitious political adventurers who are good at striking sparks and fanning flames. (See The Politics of Tinder.) Political power is what keeps the adventurers down and the flames dowsed. Sarajevo, for instance, was once a cosmopolitan European city where Serbs, Croats, and Muslims lived in peace and raised families together. It even hosted the Winter Olympics.

Then the Soviet Union disintegrated, the adventurers came out of the woodwork, and Sarajevo became synonymous with “ethnic cleansing”.

So it is in the Middle East. Autocracies like Saudi Arabia and Egypt understand this all too well, and do whatever it takes to keep the adventurers down, whether it means buying off radical religious leaders or jailing and killing political opponents.

But the fragmentation and weakness of the Middle East go hand in hand with the machinations of Western politicians and security services, who dispense with humanitarian and democratic niceties in pursuit of short term ‘realpolitik’. Like selling anti-air and anti-armor weapons to the revolutionary Islamic Republic of Iran in the 1980s. Like cultivating Saddam Hussein as a covert client when the Islamic Republic used its weapons to invade Iraq as far as Basra. Like acquiescing to Saddam’s plan to cross the border into Kuwait, because he was such a good covert friend (see April Glaspie).

The only way to grow a civil society is for a government to become strong enough to defeat the anarchists, and to become reliant on tax revenue for its continued existence – not oil or Western aid. This is how the virtuous circle is started and maintained, where a government thrives because its people do, and its people thrive because their government ensures civil order. This was appreciated as long ago as William the Conqueror.

Apparently not so today. It is inconceivable that Western democracies are capable of either helping to bring this about in the Middle East, or even refraining from undermining it, were it to begin on its own. Ultimately the cancer of political weakness persists because we in the West want it to – for many reasons, open and covert, not the least of which is competition for oil.

The US military may well defeat the Islamic State, but the morass of humanitarian, political, and economic issues and conflicts will only deepen, principally because the web of Western interests is a Gordian Knot that no one is willing to cut.

We will instead moralize. Throw political darts. Attend conferences. Announce cooperation and reconstruction. Throw money at our ‘friends’. Kill a few people. Moralize some more.

As we have done for a hundred years.

 

The inevitable bombing

U.S. airstrikes are beginning in Iraq. The initial objectives are necessarily limited. But it is hard to see how they can stay that way. President Obama told reporters, “I don’t think we’re going to solve this problem in weeks…This is going to be a long-term project.”

Project? Exactly what project is this?

The project to remake the Middle East as an American sphere of influence was a hopeless delusion of the previous administration –  delusion, because they apparently believed the peoples of the region would throw themselves at our feet in gratitude; hopeless, because they had no interest in learning the truth.

Is the project to save Iraq? I have harped before on the fact that Iraqi institutions don’t function. They will not begin functioning because we save Baghdad from being overrun. The Shiite powers-that-be will feel even more secure in their autocracy and corrupt political practice.

Is the project to save lives? The Islamic State may be brutal toward its enemies, but the absence of a functioning state that includes the Sunni majority may become a humanitarian disaster in its own right, albeit one we may easily ignore as Western media will not brave the dangers to cover the suffering of daily life, and Western news consumers will quickly tire of it.

In other words, kill enough fighters to stop the fighting, and then we can go home again.

So the project seems to be to manage our own domestic politicians, who are using scenes of fleeing Christians and the bogeyman of ISIS to club the administration, after remaining silent for years while Iraqi PM Maliki gutted the Iraqi army of the officers we trained and tightened his grip on power.

Anything else is probably beyond the capabilities of the world’s largest democracy.

Meanwhile, the Islamic State

After days of diplomacy, Secretary of State John Kerry has apparently brokered a 72-hour temporary ceasefire in Gaza. This is considered a hard-won victory.

Meanwhile, the Islamic State captured a major Syrian gas field, despite Syrian reinforcements (their announcement here; beware graphic pictures); overran a Syrian Army base near the city of Raqqa, which they now control; and collected recruits defecting from other anti-Assad rebel groups.

Baghdad is almost under siege, even with US advisors and armed drones operating. The Islamic State is consolidating its hold over Mosul, a city of two million.

Kurdistan is pressing the US for arms to help it hold the Islamic State at bay. Washington is loathe to arm the region directly, not only because it would further undercut Baghdad’s already minimal authority, but because it might empower Kurdistan to declare its independence.

Washington is crippled by domestic politics and its inability to deal rationally with militants. Everybody’s a terrorist, and we don’t deal with terrorists. In the meantime, the entire region has devolved into post-Soviet Afghanistan writ large. There, we were able to wash our hands and forget it, until 9/11 brought it back. Not here.

What’s left is covert war, maybe along the lines of the CIA war in Pakistan, but on a much larger scale and with special forces involved, in support of an incompetent sham of a government.

Sounds a little too much like Vietnam, doesn’t it?

 

 

War

On Friday the European Commission put a draconian round of what it euphemistically calls “restrictive measures” against Russia up for approval by EU member nations. The measures are intended to inflict damage. They will be interpreted by the Kremlin as belligerent, and they are likely to be approved.

It is difficult to see how the Kremlin can back down. And if the EU launches sufficiently crippling measures, it is difficult to see what the Kremlin loses by taking the next step and openly occupying a non-NATO country on its border.

Perhaps a number of western governments will actually welcome this as an opportunity to make the “restrictive measures” permanent. So much for the reset.

While we were patting ourselves on the back for our forays into Eastern Europe in the mid-2000s, in the name of democracy, many Russians were probably remembering the 600,000 Red Army soldiers lost defending Kiev from Hitler’s invasion, and sourly noting that Ukraine only came into existence as a state with the fall of the Soviet Union. Others were undoubtedly chafing over obstructionism against the ambitious South Stream pipeline project on the part of influential members of the EU.

Which is not to defend Vladimir Putin. It is only to point out that the momentum building toward disaster in Eastern Europe is not the consequence of a single man. We might have hoped for a Russian leader who would have found a way to stifle Russian ambitions and muffle grievances, a kind of Slavic Mahmoud Abbas, but we can hardly complain that they picked one who speaks their own cultural language.

Maybe this is all inevitable. If so, if this is the best that can be done, then one shudders at the eventual collision between the West and China.

But what to do about it?

In a previous post I tried to point out that there are areas in any modern economy where markets don’t operate reliably, or don’t operate at all. Market meaning something that works through supply and demand to optimize society’s allocation of resources.

Sometimes this is because what constitutes supply (let’s say savings) and what constitutes demand (say business investment) don’t actually meet directly in a marketplace,  but go through an intermediary (institutions like banks, etc.) with its own motivations. Sometimes it’s because one side (say skilled labor) can not change rapidly in response to the other (say factories relocating overseas).

Why should we care? Because in a market for coffee sweeteners, for example, all sides can adjust fluidly to the best balance of prices that makes consumers happy and is profitable for business. Which is presumably a good thing for society. Where markets can not accomplish this, the consequences may be very much to the detriment of society. (See the Great Depression.) Waiting for a generation of people to die off is not an acceptable way to optimize the use of resources.

I still don’t like the term income inequality, for reasons I’ve already explained, but fortunately there are people seriously studying the effects of income imbalance. I just discovered this short paper, published earlier this year. From the paper:

[T]here is a strong negative relation between the level of net inequality and growth in income per capita…and there is a weak (if anything, positive) relationship between redistribution and subsequent growth

[T]he things that governments have typically done to redistribute do not seem to have led to bad growth outcomes, unless they were extreme. And the resulting narrowing of inequality helped support faster and more durable growth

It’s a growing consensus. Beyond a certain point, income imbalance hurts the economy. And many economies are beyond that point. The question is, what can we do?

Can democracy survive? – 2

Beginning in the early 1920s, Vladimir Lenin and Joseph Stalin propelled the Soviet Union into a centrally-planned industrial economy, ordering the construction of dozens of power plants and the electrification of industry. After the Wehrmacht invaded in 1941, the planned economy was ready to be re-purposed for war production, without essentially changing its character. After the German surrender, the Soviet Union rose to become the world’s second superpower, but the planners were losing their grip. By the time Ronald Reagan entered office, the planned economy, choking with its own unmanageable complexity, stifling all individual initiative, and falling behind, was crumbling badly.

In a world of increasingly complex technology and increasingly complex interrelationships, where effective private action was becoming increasingly important, the Soviets were committed to a trajectory of failure.

The genius of the capitalist system, such as it is, is to permit thousand of economic actors to ferret out and exploit areas of need, want, and desire, through profit-making business ventures organized to supply products and services as the opportunities arise.

Of course, even capitalists are can be reined in or called to account. Avenues of profitable exploitation, from drugs and prostitution to the convenient disposal of industrial waste in rivers and streams, are cut off by central authorities. And only a few think we would be better off were this not so.

Democracy might be thought of as a system where thousands of political actors are permitted to ferret out and exploit areas of grievance, greed, and zealotry, through office-seeking careers that promise to deliver a voice and recognition, as opportunities arise.

Unlike capitalists, activists and politicians are hardly restrained at all. From the founders of the Ku Klux Klan, to the Students for Democratic Action and the Weathermen, to Richard Mellon Scaife and Karl Rove, political actors very often bring more heat than light, as the saying goes.

But the genius of democracy is in no small part its ability to give every faction, no matter how wrong it is, a voice of some kind, so long as it is a large enough faction to be an electoral factor. And any faction that does not meet that threshold is in any case too small to endanger national stability if ignored.

Absent an existential crisis, democracy as we understand it is a battle of private agendas flying flags of public ideals, the institutions of government the battleground. But multifarious private agendas do not necessarily lead to effective public action.

In a world of competing nation-states, volatile finance, and environmental danger, where effective public action is increasingly important and increasingly difficult, it is right and prudent to think hard about what trajectory the world’s established democracies are on, and whether democracy as we now understand it can, and should, survive.