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The IMF: Crisis Fighter

| April 16, 2014

In the run-up to the 2014 Spring Meetings of the IMF and World Bank in Washington, DC, debt-relief campaigner Jubilee Germany (‘Erlassjahr’ in German) posed the following questions to a few veterans of efforts to improve the way the world handles countries’ financial troubles:

Can the Fund play a positive role in a reformed process of sovereign debt restructuring or is that ruled out because it is a creditor? And if so, what could or should be its role in both the reform process and any new mechanism to handle sovereign debt crises?

The International Monetary Fund (IMF) unequivocally can and does play a positive role in the process of continual reform of the global financial system and our methods of dealing with sovereign financial distress. As the pre-eminent global centre of crisis-fighting expertise and macroeconomic policymaking, the IMF must continue to occupy a central position in our collective efforts to achieve and maintain global financial stability and growth, and in the means by which we resolve crises when they arise. More …

For decades, the IMF has been a key player in improving the way the world handles sovereign debt workouts. From the Bretton Woods-era onward, the raison-d’être of the IMF has been the provision of financing and counsel to ease the process of closing balance of payments gaps. Indeed, the adjustment process for most countries would have been substantially more difficult in its absence.

Since the end of the Bretton Woods system, the gaps the IMF has been called on to fill—gaps in both policies and financing—have grown larger while the IMF’s firepower has expanded slowly. If the IMF hasn’t always been up to the tasks set for it, then it is to some extent a reflection of a variable commitment to multilateralism on the part of its major shareholders.

And yet, the IMF still represents an essential public good: it highlights vulnerabilities, works to provide early warning of incipient crises, provides mutual insurance against financial trouble, collects an institutional repository of best practice in several policy realms, and conducts meaningful and practical research. When a country falls into crisis, the IMF’s well-developed approach to debt sustainability analysis allows it to assess a reasonable balance between adjustment and debt relief, and convene stakeholders to implement the required policies and financing to restore a country to market access. No other institution or collection of experts is better placed to support our efforts to build what Christine Lagarde recently called “A New Multilateralism for the 21st Century.”

It was lamentable that the U.S. Congress didn’t ratify the G20’s agreed reforms of the IMF’s quota system back in January. But let’s put this miss in perspective: under any quota formula that has been institutionalized in the past or proposed for the future, the American quota is smaller than the United States’ role in the global economy implies it should be. Yes, the Fund’s governance must be re-weighted and improved, but even unreconstructed, the IMF still represents a subordination of national self-interest for multilateral good.

The IMF’s engagement in reform of the international system is hardly compromised by the fact that it provides debtor-in-possession financing. In fact, the extent and meaning of the IMF’s role as a creditor is vastly overblown. IMF lending represents only a small portion of the financing in most IMF-supported programmes and IMF arrangements are not intended to fill a country’s external financing gap. Instead, IMF funds are meant to catalyze co-financing from other official multilateral and bilateral sources, as well as from the private sector—and that is what they do.

This dependence on other creditors doesn’t make the IMF captive to their interests. Private creditors consistently view IMF programmes as tipped toward debtor interests. They see a presumption toward debt restructuring over adjustment in the IMF’s responses to its members’ financing challenges. Meanwhile, private creditors see Paris Club terms agreed without their participation and imposed upon them by bilateral public creditors under expectations of comparable treatment despite the fact that they don’t have a seat at the Paris Club’s table.

The IMF’s April 2013 Board paper, which reopened the Fund’s discussion on sovereign debt workouts, posited a series of changes that would limit creditor interests further. Amongst other things, the paper raised the possibility that delayed payments to bilateral creditors could be tolerated under the IMF’s “lending into arrears” policy. It also raised the possibility of making IMF financing contingent on automatic debt restructuring under defined circumstances. And finally, it discussed the need to make collective action clauses in bond contracts more effective in binding creditors to the terms of debt restructurings. These are not the proposals that would be floated by an IMF captured by either private or bilateral creditor interests.

To summarize, the IMF is not only expressly designed to play a role in continually improving the world’s efforts to maintain financial stability and growth, but it also can point to a good set of precedents in which it has made major contributions to this process. In this context, the IMF should clearly continue to be involved in global reform efforts.

Nevertheless, it’s premature for anyone—not least the IMF—to discuss renewed proposals for a mechanism to deal with sovereign debt. Since the rejection of the IMF’s Sovereign Debt Restructuring Mechanism (SDRM) in 2003, there has been no sign of renewed global appetite for a statutory sovereign bankruptcy court or a binding arbitration process, based either at the IMF or elsewhere. Given that it has proved impossible to secure even minimal IMF quota reform, it is, frankly, a folly to push now for renewed consideration of a statutory mechanism to restructure sovereign debt. In this context, the IMF shouldn’t be involved in either drafting such a proposal or in its putative operations. The IMF should, instead, be focused on the art of the possible—on articulating reforms that could have a meaningful impact and that could actually be implemented.

At present, such reforms include improved model language for bond contracts that provide for better collective action clauses, more effective aggregation, and sovereign commitments to engagement and transparency with creditors. The IMF should also work on refining decades-old proposals for model forms of state-contingent sovereign bonds that would allow for debt service suspensions and/or automatic maturity extensions during times of macroeconomic distress. Finally, the IMF could play a critical role in helping sovereigns and their creditors come together more proactively to address incipient signs of distress through venues such as the proposed Sovereign Debt Forum (SDF).

The IMF has an important role to play in refining and promoting these three sets of reforms, but that role does not yet—and may never—involve the creation of a statutory debt restructuring mechanism.

This article also appears in German in the Jubilee Germany (Erlassjahr) Debt Report (Schuldenreport) 2014. Brett House will be speaking about the global implications of public debt and what can be done to offset a major crisis at a CIC Montreal event on April 16.

Erdogan’s Next Move

| April 15, 2014

Turkish Prime Minister Tayeb Erdogan will claim he won the recent municipal elections that took place on April 4th, but his name was not on the ballot. The big question is, will Erdogan put his name forward to serve as President in the expected presidential elections in August? Has he been emboldened by his party’s win at the municipal elections or will he shy away from the ballot box in light of the corruption scandals plaguing both him and his inner circle? More …

The controversial Erdogan is celebrating the successes of his Justice and Development (AK) Party in municipal elections. The AK Party won the crucial seat of Istanbul and most cities in the interior of the country—albeit there remains controversy with regard to the AK Party’s success in the political capital of Ankara—and most importantly it has surpassed its results from the last municipal elections in 2009.

For many Turks, the 2014 municipal elections were interpreted as a referendum on Erdogan himself rather than those running for the seats, themselves. For Erdogan’s critics, the 2014 municipal elections represented the first time Turks went to the polls since the outbreak of protests while opposition parties rallied around the slogan “down with the thief, Erdogan.” This message was supposed to send the Prime Minister a message of the people’s displeasure with his wheeling and dealing. But with the party’s overwhelming win in key municipal elections, Erdogan likely feels more emboldened more now than ever.

Which begs the question, what might Erdogan do next? Well this Erdogan’s—and by extension Turkey’s—political drama is complicated by two issues.

First, the AK Party’s own bylaws has put limits on party leaders from holding the Prime Minister role beyond three terms. Erdogan is in his final, third term and undoubtedly enjoys his powerful position in recent years. Indeed, he may opt to run as Prime Minister again next summer by effectively changing his political party’s own rules. That might be an easy fix, but makes his party look like hypocrites for criticizing the previous ruling Republican People’s Party (CHP) party for one-man rule. That said, Erdogan seems less interested in consistency than in meeting the desires of his base of support among the working class and government workers that his government has added to the payroll that continue to come to his fiery public speeches in large droves. 

The second complicating factor is that the role of President remains a largely ceremonial role in Turkey. If Erdogan were to run for President this summer, he would be effectively taking a demotion from the all-powerful position as Prime Minister. And while Erdogan had tried to propose constitutional amendments to increase the legislative and executive powers of the Presidency, he has thus far been unable to endow the role with the power for him to play a musical chairs with the current President Gul in August in a repeat of the Russian game played by PM Putin and President Medvedev. These constitutional amendments were dead in the water with the Gezi Park uprisings last summer and the government will have a difficult time getting them re-tabled in time for the August election.

This leaves two options come August, an election with Erdogan on the ballot in a reduced role of the presidency or Erdogan being on the ballot next year following high stakes infighting between those in the AK Party between those that want a seat at the table. If Erdogan’s actions is any indication, I think he will chose the latter rather than the former. Following these election results, he has lots of fight in him and clearly doesn’t want any of his powers trimmed… and so the Turkish political drama continues.

Seeing Syria’s Horrors: A Message for Finance Ministers

| April 11, 2014

At the IMF-World Bank Spring Meetings, there are often many fascinating debates and discussions that draw you in. This week I was drawn into a most unusual panel about the art of resilience into the horrors of war in Syria. In the main atrium of the World Bank were a dozen or so artistic works and photographs that provided powerful visual imagery of the enormous human toll and suffering of the Syrian people.

A Syrian artist and founder of the Art Residence in Aley, Raghad Mardini, recalls how as a recent refugee of Lebanon she craved to find a workspace for displaced Syrian artists in Lebanon. Her program assembles young Syrian artists from all ethno-religious communities to create “a family,” in her words, who can resume apprenticeships pursuing their artistic passions. Unable to divorce their pain and suffering from their art is not surprising, Mardini noted; and the result are haunting creations. More …

While many of the art forms displayed in the World Bank atrium are conjured from the imagination of the Syrian artists in the Art Residence Aley, the most daunting and real—so to speak—is the large iconic photograph taken by Chris Gunness of thousands of Palestinians awaiting food aid in the besieged Yarmouk refugee camp on the outskirts of Damascus. The now infamous picture taken by the UNRWA spokesperson was re-tweeted more than 20 million times and republished thousands of times in international papers and news channels. Indeed, the image haunts us because it shows the inhumanity of war upon innocent civilians who are queued up in desperation for rations of food aid.


Today, the plight of Palestinian refugees inside the Yarmouk camp remains desperate and their dependence on food aid—because of the  siege placed upon them by government forces—mean that horror and uncertainty continue to plague their lives to this day. The dependence on food aid means people in Yarmouk eat only when the international community open their wallets and have empathy for these forgotten refugees.

So why are these powerful and political images of war in the corridors of the World Bank? Well, as the MENA Vice President of the World Bank noted, these images are at the World Bank when 188 finance ministers are in the building. She appealed to them to see the art and images of Syria and accordingly open their cheque books and give generously to the people of Syria.

Syrians don’t need friends or allies, they need food, and the UN has estimated it needs at least USD$6.5 billion to feed, house, and take care of the more than 10 million refugees—approximately half of Syria’s population. Already falling short of UN’s needs, 23 countries of the international community have pledged USD$2.4 billion this year and yet little of that has actually made its way to the UN’s World Food Programme.

In the coming weeks, we can hope that Finance Ministers from some of the world’s most developed countries take heed and remember the real victims of Syria’s war: its people. As they attend the IMF-World Bank to talk about their budgets, they must not forget their financial commitments to Syria and the faces of people depending on them for basic needs. Political leaders, too, must look at their collective influence and ability to address a conflict that has limped from one tragedy to the next.

A Vote Against Xenophobia?

| April 8, 2014

I usually write on Canada’s international relations, but as a former resident of Quebec and as a scholar who has written on xenophobia, I have a few thoughts on the outcome of Quebec’s latest election. The first is that xenophobia didn’t work this time. The second is that where we go from here is not so clear. The most certain outcome of PQ’s failed campaign is that Quebecois sovereignty is not dead but in a deeper coma than previously believed. More …

The take home message by many is that appealing to people’s worst nature, fear of those who are different, did not work during this campaign. The Charter of Values, or the Charter of Xenophobia, was quite popular before the election and was a deliberate effort by the PQ to split the CAQ and to put the Liberals into a difficult position. Pauline Marois called the election precisely because this cynical appeal to fear seemed to be working. Yet her party only got 25 percent of the vote, an awful showing compared to the expectations a month ago and relative to previous outcomes in Quebec’s history. So, it could be viewed that the the election’s results are a condemnation of fear-mongering.

Yet, it is hard to tell if it was really the Charter of Values that doomed the PQ, since there was other elements at play. Indeed, the PQ stepping all over its message marked each week of the thankfully short campaign. Having Quebecor’s Pierre Karl Peladeau join the party seemed like a good idea but turned the focus to referenda and sovereignty. Given that Quebeckers are even more tired of sovereignty politics than the rest of Canada, this was not a good move. Plus his anti-union past did not mesh well with the PQ’s key partner—big unions. Other events, such as the outbreak of concern that McGill students were going to steal the election distracted the media and the politicians from talking about the Charter. So, it might not be so much that the Charter of Values caused people to swing away from the PQ and more that the party failed to focus on fear and xenophobia as its core, ahem, values during the campaign.

So, the election does not really tell us whether xenophobia was condemned. Indeed, the Liberals eventually provided a counter-proposal to the Charter of Values that was fairly Islamo-phobic, so we really do not know where they will go with those “values” now. But we do know one thing: independence is not a priority for Quebecers. While 40 percent of the voters selected the Liberals that had taken the most open and clear stance in favour of Canada and federalism, another 23 percent or so chose the CAQ, a party built on the desire to move past the sovereignty debates. Thus, nearly two-thirds of Quebec voters are opposed to sovereignty. This matches the polls taken before the election far better than the surveys focusing on support for the Charter of Values.

To be clear, support for or against separatism swings depending on events. The PQ bounced back from the 1989 election, for instance. However, the PQ has not gained more than 35 percent of the vote since 1998. The problem for the PQ is that the rest of Canada has learned not to stoke the fire of Quebecois nationalism. Few are interested in re-opening constitutional questions. Indeed, Senate reform is likely to flounder as serious discussions would require revising the constitution.

The separatist movement is not dead, but it is likely to be put aside for the next several years. Given the stronger support in the pre-election polls for the Charter of Values and the pandering to the xenophobes by all three of the major parties over the past year, xenophobia is unfortunately more likely to be a relevant issue in Quebec politics than referenda. In sum, the news from yesterday’s election is largely good, but xenophobia may still be a tactic that parties in Quebec (and elsewhere) may find tempting to deploy.

The IMF: The World’s Most Essential Septuagenarian

| April 8, 2014

The third in the Canadian International Council’s series focusing on the global economic order in the run-up to Larry Summers’s visit to Toronto, Brett House celebrates the often maligned IMF.

As it nears the 70th anniversary of its conception at the Bretton Woods Conference in 1944, the International Monetary Fund (IMF)—whose biannual meeting starts today—is arguably the public institution most essential to the future of the global economy. Yet plenty of people are still convinced it is either evil or useless. More …

Perhaps more than any other body, the IMF has acted on the dictum that you should never let a good crisis go to waste; and since the failure of Lehman Brothers in 2008 and the onset of the Great Recession, the IMF has had a very good crisis indeed. From resolving Greece’s existential threat to the euro zone, to a recently mooted $18 billion loan to support Ukraine, the Fund has re-established itself as the world’s key financial firefighter. 

During the crisis, the IMF has approved 154 new loans, paid out $182 billion to countries in need, and provided technical assistance to 90% of its 188 member countries. It’s helped countries avoid the spread of beggar-thy-neighbor trade restrictions. It also pushed the G20 to agree in 2009 to commit $1 trillion to fight the recession followed up by an additional $2 trillion in January this year.

It’s also worth remembering that a few years ago, things were looking a lot less rosy. 

The IMF came from behind

A spate of financial upheavals in the late-1990s and early-2000s rocked Asian and Latin American countries that had been touted as stars in implementing IMF-sanctioned policies, and knocked the IMF’s credibility. Only a few years later, after the burst dot-com bubble had been mopped up, the Fund’s large emerging-market borrowers began falling over themselves to pay back their IMF loans early. It was irrational: IMF money was cheaper than the private capital that replaced it. But the message was clear: emerging markets would rather cut off their nose to spite their face than remain under the IMF’s watch. 

That put the Fund’s entire raison d’être as an insurer against crises into question. Lending revenues fell; the Fund’s budget was squeezed. At the time, mainstream economics was dominated by talk of a “great moderation” in business cycles and the end of crises. As Robert Lucas put it, the “central problem of depression prevention has been solved, for all practical purposes.” The IMF’s major shareholders militated for an early-2008 downsizing of the Fund’s staff. After all, it’s hard to justify maintaining a fire department when we don’t expect any fires. 

And so when Lehman Brothers collapsed in September 2008, the IMF was at a nadir in its relationship with emerging markets, hamstrung by staff cuts, and had too little lending capacity to fight all the fires the crisis started. Then-managing director Dominique Strauss-Kahn’s public apology for “an error of judgment” in pursuing an affair with a subordinate further embarrassed the Fund. 

All this makes the fact that the IMF pulled off the coups of the ensuing years that much more remarkable. 

Answering the critics

Nevertheless, the Fund’s critics continue to level their well-worn barbs. They contend that the IMF’s activities remain too opaque, its forecasts are too rosy, its surveillance overlooks major vulnerabilities and, as a result, it fails to anticipate too many crises. Some fault the Fund’s operational model as inherently flawed: its mere existence encourages countries to over-borrow and creditors to over-lend, since both know the IMF will bail them out if it all goes wrong. Others take the IMF to task for policy prescriptions they deem too focused on austerity, riddled with onerous conditions on governments while being too easy on private-sector creditors. 

In short, their beef is that the IMF is too timid. Yet this is just another way of saying that we—the shareholders of the IMF through our governments—are overly cautious. The IMF management and staff will do only as much as our representatives on the Fund’s executive board empower them to do. 

There are more direct answers to the criticisms too. If austerity remains at the heart of some IMF aid, it’s because a crisis-stricken government is unable or unwilling to adjust in other ways, or because other countries won’t help it get back on its feet. “Bailing in” private-sector creditors—making them take bigger losses when a government defaults on its debts—remains difficult because we still lack a bankruptcy-like mechanism or forum to facilitate restructurings of debt that can’t be paid. 

Standard criticisms of the Fund also ignore some of the changes it’s undergone in recent years. The IMF has become very transparent: it publishes nearly everything it writes. If something doesn’t get published, it’s usually because a country mentioned in a paper refused to authorize its release. 

Finally, critics of the IMF tend to dwell on individual failures while glossing over a much broader track record of success: The last seven decades have been marked by unprecedented economic and financial stability. Global GDP grew by an astounding 900% over the course of the 20th century. The IMF helped Europe rebuild after World War II, mid-wifed the nascent economies of newly independent Africa and Asia during the 1960s, and helped the former eastern bloc countries become market economies during the 1990s.

The world now needs the Fund as much as ever

Over the last few decades, countries worldwide have moved in varying ways to replicate the IMF’s model of open markets, prudent fiscal policy, price stability, and investment in the key pillars of growth. Since 1995, this agenda has produced the highest average growth rates in sub-Saharan Africa since independence. 

Still, as a conference on the IMF today will detail, there’s room for additional improvement. The archaic European lock on the IMF’s managing directorship must be replaced with a fully open nomination process. The US Congress needs to ratify increased capitalization and redistribution of IMF voting rights to emerging countries. Republicans are opposing this move, which president Barack Obama first championed in 2010, but it’s clearly in America’s interest: The change costs the US nothing and would shore up the IMF’s capacity to do things like aid Ukraine. 

Finally, as IMF head Christine Lagarde recently argued, the Fund needs to incorporate gender, inequality, and climate change into all of its work. The days should be over when a finance minister can quip, as one recently did in Davos, that these things “aren’t in his job description.” 

Six years after the onset of the 2008 financial crisis, the world economy is still caught between a rock and a hard place: governments built up a mountain of debt to fight the Great Recession, but as Larry Summers observes, growth is still too weak to make this debt sustainable. More financial crises lie ahead, and we will need a strong IMF to play its critical role in resolving them. 

The IMF is never going to be loved for its work. If central banks are charged with withdrawing the metaphorical punchbowl just as an economy’s party gets going, the IMF is the annoying, slightly too-prim-and-perfect relative who visits every year to scold you to shape up while offering tough love if you can’t. 

It’s a role that’s as thankless as it is essential. And the IMF does it well.

A version of this article originally appeared on Quartz. Brett House will be speaking about the global implications of public debt and what can be done to offset a major crisis at a CIC Montreal event on April 16.

Heeding the Lessons of the Rwandan Genocide

| April 7, 2014

Two decades ago, in a remote corner of Africa, far from the eyes of the western media, a massacre was unleashed like no other in modern times.

Within 100 days of violence, an estimated 800,000 people were killed in Rwanda.

Roméo Dallaire, now a senator, led the UN peacekeeping force when the genocide began. While he did everything in his power to protect Rwandans, many countries disregarded their legal responsibility to take action as signatories of the Genocide Convention. More …

Those responsible for the Rwandan genocide are of course the Rwandans who planned and implemented a nearly successful extermination of the ethnic Tutsi minority. The 20th anniversary offers an opportunity to dispel the myth that knowledge of the genocide did not penetrate the executive branch of government in national capitals across the globe.

Many historians and human rights activists have been critical of how western governments stood on the sidelines in 1994. Much of the blame is directed at the U.S. for not supporting the UN peacekeeping force.

Former U.S. president Bill Clinton has always remained tight-lipped about Rwanda. At a public speaking engagement in Toronto in 2009, Clinton was caught off guard when asked by Frank McKenna why he didn’t do more to help Rwanda. “It’s one of the two or three things I regret most about my presidency. By the time we thought of doing something about it, it was over… I don’t think we could have saved 800,000 lives [in Rwanda] but I think I might have saved 250,000 to 400,000. And that’s something I have to live with for the rest of my life.” Clinton responded emotionally.

While the U.S. bears the brunt of much criticism because it held a seat on the UN Security Council and had the military capacity to respond, attention needs to be directed at other countries who abdicated their responsibility. Canada is no exception.

In 2009 the Montreal Institute for Genocide and Human Rights Studies released a policy report that demonstrated the official narrative that Ottawa “did not know” what was taking place in Rwanda was more fiction than fact.

Former leader of the NDP, Ed Broadbent, as president of the International Centre for Human Rights and Democratic Development, travelled to Rwanda two years before the genocide took place. He was troubled by the hate speech being broadcast by local radio stations in Kigali against the Tutsi minority and upon his return met with officials at External Affairs to press the Canadian government to do something. No evidence was found that Ottawa acted on these early warning signs of genocide.

Canadian aid continued to flow into Rwanda and the country never received a diplomatic scolding. Another year passed before Canada offered up Dallaire to the UN in 1993. External Affairs did not share Broadbent’s warnings with the Department of National Defence.

Once the genocide began in April 1994 Canada moved one aircraft that was serving the UN operations in the Balkans to help ferry supplies between Nairobi and Kigali. Robert Fowler, deputy minister of Defence at the time, followed the situation closely and was the only high level Western official to travel to Rwanda in the midst of the crisis, visiting in mid-May. Upon returning to Ottawa he wrote a memo urging for a change in government policy and warned Canada’s inaction would be “irrelevant to the historians who chronicle the near-elimination of a tribe while the white world’s accountants count and foreign policy specialists machinate.”

The document eventually made its way to the Lester B. Pearson building where a deputy minister wrote across the first page of the memo in red ink “not in Canada’s national interest.” This terminated any possibility of Canadian leadership.

While Rwanda looms large in our national psyche because of Dallaire and his personal story of not giving up in the face of great odds, the simple fact is that Canada, like many other countries, abandoned Rwanda in its greatest hour of need.

The international community failed in protecting Rwandans because of the actions of national governments. While real progress has been made since with the creation of the International Criminal Court and the advancement of the Responsibility to Protect doctrine, largely in part due to Canadian leadership, much more needs to be done. Last week, foreign affairs minister John Baird spoke at the International Conference on the Prevention of Genocide in Brussels and reminded everyone in attendance that “states have a solemn duty to defend the vulnerable, challenge aggressors, protect human rights and promote human dignity, both at home and abroad.”

If Canada is serious about heeding the lessons of the Rwandan genocide and becoming an international leader in making “never again” a reality, then it must communicate to Canadians the importance of strengthening national and internationals mechanisms that improve global governance and protect human rights. It is the least we can do to honour genocide and mass atrocity survivors everywhere.

A version of this post was published by the Ottawa Citizen.

Loosening the ANC’s Stranglehold on South African Politics

| April 3, 2014

Recent revelations surrounding the misspending associated with South African President Jacob Zuma’s traditional residence—Nklanda—feed into a narrative that the ruling African National Congress (ANC) is drunk on its own power and slipping into a pattern of corruption and cronyism. In recent years, it has become increasingly hard to explain away the various allegations of corruption and incompetence consistently leveled against members of the ANC-led government in both the South African and international media.  More …

The moral standing of Africa’s oldest freedom fighting organization has been consistently called to question for some time now—and particularly since Jacob Zuma came to power in 2009 amid allegations of rape and inappropriate behaviour in an arms deal. Subsequently, when South Africa’s Public Protector (equivalent of an Ombudsmen) revealed that the President unduly benefited from the ZAR246m ($25m) security upgrades to Nklandla and should pay back some of these costs, it came as little surprise that Zuma deflected blame by saying: “They did this without telling me… so why should I have to pay for something I didn’t ask for?”  The President stands by this excuse even in light of documentary evidence that suggests he knew and approved of the non-security related upgrades that included a swimming pool, amphitheatre, a cattle enclosure, a chicken run, and paving.

Such a response smacks of a President, political party, and government that, despite being in the midst of an election, has little to worry about.  Regardless of the Public Protector’s bombshell of a report, the ANC appears certain to win the national elections taking place on May 7. This is because the ANC and its coalition partners—the South African Communist Party (SACP) and the Congress of South African Trade Unions (COSATU)—still command a huge amount of loyalty and mass support, which is held over from the anti-apartheid struggle days. So, it seems inevitable that they will form another majority government, albeit with a reduced share of the vote.

To an outsider, such a fact might be shocking and somewhat confounding, but within the South African context, the legacies and memories of apartheid are still fresh.  Many still rely on the ANC’s massive social policies that extend important (and necessary) benefits to many in the country—including health care, education, electricity, housing, and even water.  Despite the obvious existence of clientelism between the government and the governed, South African political observers are rather focusing on the share of votes that the ANC will get and whether it will hold in provincial and municipal leadership positions as an indicator of potential public dissatisfaction and discontent. Indeed, some are predicting that the Northwest Province and the province of Gauteng—South Africa’s economic and financial engine—could go the largest opposition party—the Democratic Alliance—that maintains its seat of power in the Western Cape (the location of the legislative capital, Cape Town).  While this wouldn’t change much at the national level, it would mean that South Africa’s two largest and most economically prosperous provinces would no longer be governed by the ANC. 

And that is significant in terms of thinking about policies pertaining to infrastructure, public housing, education, water and sanitation, and other key government services that have typically been controlled by the ANC.  In effect, it would dilute the ANC’s ability to align key policy areas and budgets between the national and provincial governments. This is because the provinces, in a manner reminiscent of Canada, maintain constitutionally enshrined concurrent and exclusive powers and could easily deviate from the approach of the national government. This development would constrain the ANC’s ability to extend their electorally popular social programs unabated, or at least to claim sole credit for them.

Such a shift at the provincial and municipal level could have important knock on effects that will influence future elections. While it would be premature to speculate on the prospect of an ANC defeat at the national level, it not unreasonable to think that the ANC government in its current incarnation might undergo a significant transformation in the not too distant future. As mentioned earlier, the ANC is the major player in a coalition with the SACP and COSATU. However, fractures in this so called Tripartite Alliance have begun to emerge in recent years signaling that the solid bond once thought to exist between these parties might no longer be as compelling as previously thought. Already a split has occurred within COSATU when its largest constituent union – National Union of Metalworkers South Africa – breaking off and taking a non-aligned position for the upcoming election. Indeed, if the underlying coalition of political actors that form the current government falls away completely, a true multiparty contestation of elections could actually take place. This only has benefits for the democratic development of South Africa and, in my view, is an inevitability.

So, despite the disturbing trends that appear to be emerging from South Africa and the potentially corrupt ANC government—South Africans are still very much in control of their own future and can temper the influence of corruption or cronyism that seem to be becoming more and more common place. The method might be somewhat more nuanced than those of us in Canada are used too… but the effect just might be the same.

Always Open for Business

NATO, Afghanistan, and Ukraine
| April 3, 2014

In the aftermath of Russia’s decision to annex Crimea, the media has turned to the North Atlantic Treaty Organization (NATO), suggesting that it gives NATO new purpose or that it brings NATO back into the spotlight.  This, of course, reflects how limited our attention span apparently must be. After all, when the United States was attacked on 9/11, article V of the NATO treaty was invoked—an attack on one is equal to an attack on all—for the first time, ultimately leading to NATO taking ownership of the International Security Assistance Force
(ISAF) in Afghanistan. This effort came at great cost to NATO’s members and partners with much blood spilled and billions of dollars spent on a country that hitherto few had appeared to really cared about.  More …

Since 2003, ISAF has been a NATO mission, one that took place in the shadow of Iraq. While the United States was focused elsewhere, Canadian and European troops provided more than half of the troops engaged in the effort until the American surge in 2009. Certainly, the allies sparred with each other over burden sharing, especially over the restrictions that kept some countries confined to the less dangerous parts of the country.  Still, even these countries, such as Germany and Italy, paid a significant price. 

Why? Because of their commitment to the Atlantic alliance. The history of the post-Cold War period provided a series of existential crises—wither NATO—followed by situations where the only institutionalized multilateral military organization has been seen as indispensable.  Indeed, the European Union and the United Nations proved to be incapable of dealing with war in Bosnia. So President Bill Clinton faced a choice of using 25,000 American soldiers to rescue the failing UN mission (especially its French and British allies) or doing something to end the war.  He chose to involve NATO to compel the sides to agree to a peace agreement and then to enforce that agreement—the Dayton Accords.  A few years later, NATO leaders issued a series of threats to Serbia, led by Slobodan Milosevic, to deal with the ethnic conflict in Kosovo.  This led to a NATO air campaign that was largely sustained by the shared concern that failure here would doom the alliance. 

As its mission in Afghanistan was coming to an end—not for Afghans—once again there was concern about its future. But, even before the exit from the last war is complete, NATO is immediately seen as relevant—this time for dealing with the traditional focus of the alliance, the big threat to the east. Again, other organizations have not been viewed as particularly impactful, whether that is the European Union, the UN, or the Organization for Security and Cooperation in Europe.

What sets NATO apart?  First, unlike the other organizations, NATO is an alliance: membership is limited but provides security guarantees to its members via Article V.  NATO does not have to appear to be even-handed, and Russia does not have a vote.  Second, it is a practiced security institution.  Its members have been working together in simulations, exercises, peacekeeping missions, and various conflicts.  So, the level of cooperation is far higher and far more capable than any alternative.  As I have documented elsewhere with David Auerswald, there are some real challenges that arise in multilateral warfare even when NATO is the alliance involved. With that said, it remains more capable than ad hoc efforts such as the international side of the Iraq war or before NATO took over the Libya mission. Finally, because the members value the alliance, they are willing to do much to protect it. When NATO’s credibility is threatened, the allies tend to stick together—as we have seen in Bosnia, Kosovo and Afghanistan. 

This is especially important now as Russia’s behaviour challenges NATO’s commitment to the Baltics and to other states in Eastern Europe.  So, NATO is not back or finding a new purpose, but is simply there doing what it has been doing for more than 60 years, being the most powerful, most institutionalized, most practiced form of military cooperation on the planet.  Sure, there will be wrangling and politics within the alliance, but its commitments to existing members are quite significant and credible.  Which means, ultimately, that Russia’s assertiveness will be limited.  Just as we are deterred from interfering too much in Crimea, Russia will be deterred from going too far. 

The funny thing is we even see a sudden switch in the Harper government’s attitude towards NATO. After pulling out of various NATO programs during the course of his leadership, in the last couple of weeks Harper and Foreign Minister Baird have become among the foremost advocates of NATO playing a role during the current crisis. This may be due to the desire to appeal to the Ukrainian-Canadians at home, but is still telling.  Even those burned by uneven burden sharing in the past find NATO to be the best international organization in times like these. 

Re-imagining the West

| April 2, 2014

The 24-hour news cycle casts the Ukraine crisis in dichotomous terms—a renewed Cold War confrontation between the East and West. On one side is Russia, with tacit support from a few ex-Soviet satellite states. And on the other, the United States joined by its “western” allies in the European Union. In an effort to simplify the annexation of Crimea, media commentators lump the rest of the world into one of each of these two camps. In the process, they unintentionally reinforce the always dangerous “with us or against us” oratory of the post-9/11 era. But what exactly is “the West”? There is a risk that the expression is so worn-out as to have lost any analytical utility. 

As simmering tensions risk plunging the region into war, it is worth reflecting on what precisely is meant by “the West.” The West is not, and perhaps has never been, a purely geographical construct. On the one hand, its historical origins can be traced to Hellenic communities efforts to differentiate themselves from the Persians some 2,500 years ago. The construct assumed a geo-political connotation in the twentieth century. After two consecutive world wars the idea of the “West” implied a common political commitment shared by a few countries to democracy and the free market. From 1948 onward, it was shorthand for the United States and those who shared political and economic ties with Washington. It was designed to distinguish the Americans and their allies from the Communist “East” and later, Eurasia. More …

Paraphrasing Benedict Anderson, the West consists of an imagined community of shared ideas and ideologies. More recently it has been described as a kind of mentality and set of behaviours, not least a commitment to innovation, self-criticism and gender equality. Political philosophers affiliated with universities across North America and Western Europe regularly describe the West as a particular constellation of liberal values shared by a selection of nation states and societies. This thesis was developed most prominently by Samuel Huntington who predicted a clash of civilizations between the liberal West against “the rest.” Other like-minded thinkers have also anticipated the triumph of the (exceptional) West owing to its superior political and economic institutions. 

So where is the West as a unifying idea in the twenty first century? Philippe Nemo argues that it is still fundamentally premised on Greek science and philosophy, Roman law, Christian thought, and democratic revolution. Certainly these ideas are still routinely leveraged to justify membership in Western institutions. Yet the West cannot be reduced to a white Christian polity as is often implied by a vocal minority of right-wingers in North America and Western Europe. For over 60 years the West has had virtually nothing to do with geography or ethnicity. Notwithstanding their so-called “Asian values,” Japan, Korea, Singapore, and Taiwan are often included in the Western club while China is not. Ultimately, the West continues to be dynamic, and its affiliates have waxed and waned over centuries.

The West today is more diverse, and divergent, than often assumed. While routinely presented as a unified front, it is anything but. There are some 35 countries that form the bulwark of the West, all of them associated with aid and military entities such as the North Atlantic Treaty Organization (NATO) and the Organization for Economic Cooperation and Development (OECD). Alongside them are another 15-odd countries—many of them erstwhile Eastern bloc members—that stepped in from the cold after a century-long hiatus. There are still others, spread out across the Americas, Africa, and Asia, that while falling into the Western orbit, also diverge in many respects from its historical, geographical, political, ideological, and cultural moorings.

Now, the time has come to re-imagine the West. This is not so much to abandon the idea as to align its immense potential with contemporary geopolitical and economic realities. Where can such a debate begin? Countries such as Brazil, India, and South Africa are well suited to initiate and lead a critical discussion on the West and its discontents. Brazil, in particular, is unencumbered by a colonial past, even if serving as the seat of Portuguese empire for a decade. What is more, Brazil resides at the axis of an array of political binaries—East versus West, North versus South, First World versus Third World, and membership in the club of Non-Aligned states. And while Brasilia shares many cultural attributes of the West, it also shares a host of affinities with decidedly non-Western societies.

Having resisted initiating a war for over 150 years and recently pulled some 40 million people out of poverty, Brazil brings great credibility and legitimacy to the table. A proponent for noninterference in Afghanistan, Iraq, Libya, and Syria that frustrated its Western partners, its lack of support for interventions speaks to the country’s fundamental desire for a stable global order mediated by effective and efficient multilateral institutions. After all, it is not by chest beating and intervention that the West will prevail in the world’s hot spots. Indeed, lasting peace will not be achieved by imposing one’s worldview, but rather by genuinely seeking to understand and engage the differences of “the other”—however they might be defined. Once we do, we might then start to mend our disordered world and rediscover our common humanity.

Obstacles to Independence in Quebec

If the PQ wins the Quebec provincial election, the party will face serious international challenges in holding a referendum.
| April 1, 2014
Quebec Premier Pauline Marois

The Quebec provincial election has re-awoken deep-seated fears across Canada that another referendum might soon be on our doorstep.

The possibility that Pauline Marois and the Parti Quebecois (PQ) will be elected to a majority government on 7 April is far from a given; recent polls indicate that the Liberal Party of Quebec, led by Philippe Couillard, is currently pulling ahead by a wide margin.

Nevertheless, in the case of a PQ majority, Canadians both inside and outside of Quebec would do well to consider several international challenges that will profoundly impact, if not contain or restrict, the PQ’s ultimate quest to make Quebec a sovereign country. More …

The most obvious challenge is the upcoming referendum on independence in Scotland scheduled to take place on 18 September of this year. Unlike the two past Quebec referendums (in 1980 and 1995) where the PQ posed obfuscating questions to the citizens of the province, the Scots will be posing a remarkably clear question: ‘Should Scotland be an independent country?’ 

During this election, Philippe Couillard challenged Pauline Marois to promise Quebeckers that she would pose a straightforward question like the one agreed to between the Scottish Parliament and London if a third referendum on Quebec independence were ever to come to pass. She refused to comment. 

The Scottish referendum question (saying nothing of Canada’s Clarity Act) will impose limitations on the liberty of obfuscation employed by the PQ in the past.

Another key challenge being exposed by Scotland’s planned referendum is that very few national governments or supranational bodies such as the European Union appear to be excited about separatism as an international norm.  The PQ will find many states in the European Union—where the impulse in the post-WWII era has been to build and foster political and economic unions, not break them—to be less than enthusiastic about its secessionist project.

The other international elephant in the room is how Washington would react to Quebec’s third referendum in less than fifty years. Recently, former U.S. President Bill Clinton released documents from his personal library that highlighted in 1995 that Washington had some reservations about immediately recognizing Quebec in the wake of referendum victory or of guaranteeing it would automatically be included in the North America Free Trade Agreement. “The ties between our two countries have been carefully cultivated and we should not take for granted that a new entity would have exactly the same kind of ties” was the message imparted as official speaking notes. It would be naïve to believe Washington’s future policy regarding another Quebec referendum campaign would be any different. Now that it has been made public, it is much more difficult to ignore.

But looking to the future, potentially the most freighting international challenge to Quebec’s independence movement could be France. Rumours have been swirling for some time that former President Nicholas Sarkozy will attempt to unseat the deeply unpopular François Hollande in the next presidential election in 2017.

The PQ has always operated under the assumption that Paris would automatically and without reservation be the first member of the UN Security Council to recognize Quebec as an independent country, even if the referendum was won by a simple majority of one vote. 

However, Sarkozy is no De Gaulle and no friend of the PQ’s brand of identity politics. In 2009 he angered Quebec sovereigntists when he stated, “those who do not understand that, I don’t think they have understood the message of the Francophonie, the universal values we hold in Quebec as in France—the rejection of bigotry, the rejection of division, the rejection of self-confinement, the refusal to define one’s identity through fierce opposition to another.”

The PQ will need a lot of luck in the next week to win the Quebec election. Even should the party win, however, it will face many international challenges that will restrict its ability to achieve its ultimate goal of independence for Quebec.

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