| 23 March 2004 | Tuesday | 01 Safar 1425 |
Iraq: one year later
Lies, half-lies and wishful thinking
Two recent visits to my Washington office by the senior management of foreign firms gave me great hope about Pakistan's economic future. The conversations I had with these people - and, with one exception, the six people I met were not expatriate Pakistanis - seemed to suggest that foreign capital and foreign entrepreneurship had begun to realize that Pakistan had considerable economic potential.
The managers who visited me would be classified as those who believe in "first mover's advantage." These are people who make great amount of money for themselves and for their companies by leading rather than following the pack.
There are, of course, risks in being at the head of the pack. Assumptions made about an economic opportunity may not prove to be correct. Or unexpected things may happen that were not fully anticipated at the time the investment was made.
The first set of visitors had an impressive track record in pioneering what has come to be called "outsourcing" in the West. They concentrated their efforts on India at a time when that country was considered to be even more risky than Pakistan is today. They were the first movers. They recognized that a combination of three things had made India an extremely attractive place for foreign investment.
The first, of course, was the availability of a large number of engineers and scientists - the graduates of the now famous Indian Institutes of Technology, or IITs - who were prepared to work at a fraction of a cost being charged by their counterparts in America.
Some of them had migrated to the US and proven that the skills they possessed were not inferior to those acquired by the graduates of American schools and colleges.
The question was how to make use of the skilled workforce that was still in India for the benefit of foreign investors? Or, in the words of finance, how to do "wage arbitrage" - make profit from the enormous wage differential between skilled workers in America and India?
These questions would have remained unanswered for long had the second development not occurred - an enormous amount of investment by foreign companies in improving the capacity of telecommunications cables to carry data.
The need for this capacity was seriously over-estimated and some of the companies that made those bets ultimately went bankrupt. One such company is Global Crossing whose bankruptcy ranks with those of Enron and WorldCom in the annals of American corporate history.
These investments were made at a time when the technology for increasing the capacity of the existing network of fibre-optic cables was increasing. The ultimate consequence of all this was to lower the cost of transmitting data over long distances to the point where it did not figure prominently in doing work overseas.
The scene was set for outsourcing work to India and my visitors, sensing the opportunity, made investment in a series of start-up companies that set up back-offices for several large corporations in and around Bangalore. For a decade and a half they built successfully businesses and then made their exit after selling their enterprises to large transitional corporations.
The third was the development of the IT sector outside the sphere of influence of the Indian government. This sector grew unhindered by all manner of regulations under which other parts of the Indian economy had to operate.
Even after the dismantling of the licence raj, the state continued to keep its hold over entrepreneurship. The grip has now been lightened but the economy is still not entirely released. There are no such controls on the IT sector. It flourished and matured without the Indian state paying any attention to it.
It was the confluence of these major developments that made India such an attractive place to do back-office work for large American corporations. The Indian success has now begun to raise the question whether other, similarly endowed countries, could jump on the bandwagon. That could happen if the same conditions that helped India were around in other places.
My visitors told me that they were now looking at some new frontiers in this outsourcing activity. They had identified two of them - South Africa and Pakistan. Why wouldn't these entrepreneurs who had scored such successes not continue to expand in India? There are still hundreds of thousands of well trained workers waiting to be employed doing back-office work.
Foreign corporations have come to know India and have developed a high level of comfort locating their back-office activities there. India has also begun to improve its physical infrastructure - in particular roads and energy supply - that had begun to constrain its development. Why, with all these and many more advantages, would venture capitalists seek new lands of opportunity?
The answer is that the Indian "back-office" industry has matured and the wages of the workers employed in it have begun to rise. In other words, the "wage arbitrage" on which the old business models were based was now less attractive.
It was much more advantageous in Pakistan where technically skilled people did not demand the kinds of compensation that had become commonplace in India. Once again, these entrepreneurs were looking to the rewards available to the first movers. They wanted to be at the head of the herd that they sensed was on the move towards Pakistan.
I asked my visitors if they were thinking of establishing call centres in Pakistan, an activity that had begun to draw some foreign investment. A company headed by a group of Pakistani investors had already raised capital in the Karachi Stock Market and begun to buy some call centres in the US and locate them in Pakistan.
From all accounts, that business model was succeeding and Pakistan was becoming a destination for those who wished to expand outsourcing in activities such as call centres.
My visitors were looking for considerably higher value-added work, I was told, not just answering telephone calls or even doing medical and legal transcription.
They wished to exploit a reasonably large pool of Pakistani engineers, doctors, pharmacists, accountants and lawyers to do higher paying tasks for American corporations.
The activities they had in mind included things such as computer-assisted design work, reading x-rays and other diagnostic materials that could be sent over the internet, testing drugs, doing tax returns and so forth.
These people had studied the Pakistani market for skills and had come to the conclusion that while the numbers may be considerably small compared to those in India, the quality of some of the graduates was as good.
They could form the back-bone of the new knowledge-based industry in the country. They were also of the view that Pakistan's telecommunications network was, in some ways, better than that of India. And, they had come to the conclusion that the financial sector in the country had developed and matured to the extent that foreign capital could easily be augmented by domestic resources flowing in from the banks or raised in the capital market.
Pakistan, in other words, was ready for the kind of development that had revolutionized the Indian economy and put that country on the world map. They wanted to profit from the change in the perception about Pakistan.
The other group of visitors to my office had an entirely different set of ideas in their mind. They were not working on wage-arbitrage but on adding value to Pakistan's largest industry, both in terms of its contribution to the gross domestic product as well as exports.
The reference here, of course, is to textiles. This group is hoping to get a Pakistani textile group to acquire a business in Europe that would help it integrate with the global market.
The industry they are working with in Pakistan is already vertically integrated in the sense that it produces yarn, fabrics as well as finished garments. Some 80 per cent of the targeted venture's product is exported.
The idea is to acquire a business that has extensive retail outlets in Europe with a well established brand name and design capacity. In that way the question of staying in step with a rapidly changing market place would get addressed.
The most attractive part of this particular initiative is that it would create the first multinational corporation based in Pakistan but with a reasonable presence in the developed world. This would then be Pakistan's entry into the field of transnational corporations, or TNCs, that have begun to dramatically restructure the international production system.
India has already gone on this route and several large firms from that country have made acquisitions abroad in order to become TNCs. The Tata Group, for instance, acquired Tetley, a British tea brand, which has given it a sizeable presence in the world's beverage market.
These then are two very different examples of some initiatives that are being taken by international financiers to connect Pakistan's economy with the global market place. As already discussed, the two approaches are very different. The first builds on the shake-up of global services through outsourcing to the countries that have the skills needed for this kind of work.
The other seeks to build on top of an already mature industry an organizational structure that Pakistan currently lacks. The choice to turn a local and successful domestic textile company into a transnational corporation producing, exporting and marketing a globally recognized brand name would bring a new dimension to the Pakistani industry.
Will these two initiatives help to modernize Pakistan's modern service sector and its large scale manufacturing? The answer to this question must take into account what might happen in the policy and political areas in Pakistan as well as in the developed world.
Pakistan is seeking to get connected with the global economy, after remaining on the fringes for a long time. But it is doing this at a time when the global system itself has come under enormous domestic political pressures on account of two developments that have begun to excite people. These are called "outsourcing" and "jobless economic recovery."
Iraq: one year later
The famous words of King Pyrrhus of Epirus after the bloody battle of Heraclea in 280 BC are as appropriate for America's conquest of Iraq: 'One more such victory and we are ruined.'
The March, 2003 invasion of Iraq pitted the world's greatest military power against the largely inoperative army of a small, dilapidated nation of only 17 million (deducting rebellious Kurds), crushed by 12 years of sanctions and bombing.
Thanks to total air superiority, the invading US forces achieved a brilliant feat of logistics, racing from Kuwait to northern Iraq in less than three weeks. The 15 per cent of Iraq's army that stood and fought was pulverized by massive, well-coordinated US air strikes and artillery. Bitter urban resistance failed to materialize.
The rout of Iraq's forces recalled another colonial war, the Dervish Campaign of 1898. General Kitchner led an imperial British army far up the Nile into Sudan where it met and massacred a primitive Islamic host at Omdurman.
Britain's quick-fire guns and artillery mowed down Dervish cavalry and sword-waving Fuzzy-Wuzzy tribesmen as murderously as US precision munitions vapourized Iraqi units.
The US air and ground forces in Iraq displayed superb technical, electronic, logistic, and combat prowess confirming they are two full military generations ahead of nearly all other nations. But, as the great modern military thinker, Maj Gen J.F.C.Fuller observed 40 years ago, the proper objective of war is not military victory, but rather a politically advantageous peace. While the US won an inevitable military victory against near helpless Iraq, political victory so far remains elusive.
Two primary objectives drove the US invasion of Iraq: oil and Israel. White House claims about weapons of mass destruction and terrorism were propaganda smokescreens hiding the real reasons.
President Bush's claims that impotent Iraq posed 'a grave and gathering danger' to the US, Condoleeza Rice's hysterical warnings about 'mushroom clouds over the US,' and Vice-President Dick Cheney's bizarre Jeremiads about 'Iraq's reconstituted nuclear weapons' were as devoid of truth as Dr Goebbel's claim in 1939 that Poland was about to invade Germany.
The US now controls Iraq, a strategic nation with the Mideast's second largest oil reserves. CIA estimates China's and India's surging, oil-hungry economies will cause world oil shortages by 2030 - or sooner.
Accordingly, the Bush administration moved to assure America's global hegemony by seizing Mideast and Central Asian oil before the impending oil crisis. Doing so required occupying Iraq and Afghanistan.
The US imports little oil from the Mideast or Central Asia. However, these regions are primary oil sources for Europe and Japan - and, increasingly, India and China. By dominating these oil sources, the US controls the economies of its main commercial and potential military rivals. Control of the Muslim world's oil is the principal pillar of America's world power.
The Pentagon plans three permanent major military bases in Iraq from which powerful garrisons of US air and ground forces, backed by mercenary native troops, will police Iraq, the entire Mideast, and guard the new 'imperial lifeline' of pipelines exporting oil from Central Asia and the Arab World.
Other US bases in Afghanistan, Uzbekistan, Tajikistan and Pakistan, linked to bases in Bulgaria and Romania, will guard the new imperial route. The second objective was to aid Israel.
Influential American supporters of Israel's rightist prime minister Ariel Sharon played a decisive role in engineering a war against Iraq. From positions in the vice president's office, Pentagon, National Security Council, media, and taxpayer supported Washington think tanks, these neo-conservatives orchestrated the disinformation campaign about Iraq's non-existent weapons of mass destruction and ceaselessly trumpeted alleged threats from Iraq.
The neocons achieve their objective: Iraq, once the Arab world's most developed, industrialized nation, a bitter foe of Israel, was destroyed, and will likely end up split into three weak mini-states. Israel is the primary beneficiary of the Iraq war: a potential nuclear rival was eliminated by the US, and it received a $1 billion bonus in extra aid from Washington.
The neocons believed crushing Iraq would cement Israel's grip on the occupied West Bank and Golan, thwart a Palestinian state, and force the Arab nations to accept Israel's regional hegemony.
But for the United States, Iraq was at best Pyrrhic victory. Invading and occupying Iraq has proven a financial disaster. The invasion cost US $105 billion in direct expenses - the price of five complete carrier battle groups, or one million low-cost apartments.
Occupying Iraq costs the United States $9 billion monthly. Pre-war neocon plans to finance the occupation by plundering Iraq's oil have been frustrated by sabotage. Congress estimates the overall cost of 'pacifying' and 'rebuilding' Iraq for fiscal 2003 and 2004 a staggering $200 billion.
This money will have to be borrowed by the empty treasury, which, thanks to Bush's reckless 'war' spending, is running huge deficits heading towards $400 billion, risking an explosion of inflation that threatens to undermine the long-term bond market and further weaken the dollar.
The human cost of the war continues to rise. As of this writing, US losses amount to 555 dead, and 9,000 casualties from combat, accidents and serious illnesses.
Ten thousand Iraqi civilians were estimated killed by US forces - in a war now described as waged under 'mistaken intelligence assumptions.' Iraq lies in ruins. 'Rebuilding Iraq' means paying for all the damage caused by massive US bombing and years of sanctions.
In spite of White House rosy claims about handing sovereignty to Iraqis, US troops will garrison Iraq for years to come to guard the oilfields and maintain a 'democratic' puppet regime in power in Baghdad that obeys Washington's orders.
US forces will continue to face a simmering, low grade guerilla war that will kill or wound more American troops, and increasingly brutalize and corrupt US occupation forces - the inevitable result of all colonial wars. In short, America now has its own West Bank, or Lebanon.
The brazen arrogance and profound ignorance shown by the Bush administration in its crusade against Iraq has turned the world against the United States. Occupied Iraq is acting as a terrorism generator.
For the next generation of young Muslims, Iraq is becoming what Afghanistan was in the 1980s, a rallying point to fight foreign occupation, battle imperialism, and defend the tattered honour of the Muslim world. President Bush and his men have created millions of new enemies.
Half of all US ground combat forces are tied down in and around Iraq. Reserves are being mobilized for long tours. Wear and tear on over-stretched US forces and their heavy equipment is a grave, though little discussed, problem.
Neocon promises of 'liberation' of Iraq, joyous, flower-tossing crowds and rapid 'democratization' turned to dust. Iraq remains a dangerous, volatile mess seething with violence and implacable Shia political demands. Twenty resistance groups now battle US and allied occupation troops.
Militant Islamic jihadis are heading for Iraq to fight 'Great Satan,' America. Yet Bush still claims invading Iraq made America safer. Yet because of Iraq, the world now regards America as a menacing, unstable threat.
President Bush has stuck his head into a hornet's nest. The United States will bleed men, money and reputation for a long time before it figures out how to get out of the first colonial misadventure of the 21st Century. -Copyright Eric S. Margolis 2004
Lies, half-lies and wishful thinking
Is a bull-fight an apt metaphor for the war on terror? But it is hard to know who is the matador and who the enraged bull. Perhaps, a cock-fight may be more appropriate.
Is the war on terror being won? Saddam Hussein has been captured and Iraq has been occupied. But Iraq had nothing to with terrorism. A link between Iraq and Al Qaeda was an afterthought, more grist to the mills of propaganda. But Osama bin Laden is still at large. There are of course the cynics and the incorrigible conspiracy-theorists who are convinced that he will be found this year, at a time, most beneficial for Bush's election campaign.
Is the world a safer place since 9/11? Condoleezza Rice says it is, and so does Donald Rumsfeld. Is this optimism shared by the people of Madrid? Has Iraq been both liberated and pacified? The Iraqi governing council says that Iraq is well on its way to becoming a model democracy reading from the script written by the Pentagon. Why then does the anxiety persist and doubts haunt us that events have gone horribly wrong?
That Al Qaeda which was supposed to have been crushed has gone global and continues to be omnipresent rather like the communist threat during the height of the cold war? Are we, in fact, saying that the war on terror is being won but the number of terrorists has actually increased? I remember an Alec Guinnes film in which he is told to keep smiling and keep a stiff upper lift. "How can I do both? " asks the character played by him.
There is a Chinese saying that an angry man turns mad. It was this kind of madness that created Guantanamo Bay, a blind rage that sought revenge, that wanted to tear the perceived enemy from limb to limb, gouge out its eyes and then carry out a hanging.
One did not expect a democratic government to wear the white cloaks and hoods of the Klu Klux Klan, burn crosses as a calling-card and carry out a lynching. One might, in a perverse way, might have forgiven the Americans but the British?
Tony Blair might have misled the British public about the weapons of mass destruction. He took refuge in his assertion that intelligence agencies of all countries including France and Germany had it wrong.
But he never told the British public or the world that Britain was a complice in the horrors of Guantanamo. The MI6 has been involved from the outset. It is very much a part of the team or gang who are interrogating the 'illegal combatants' and those who have been released from this hell-hole have described this third-degree interrogation as psychological torture.
Jamal Al Harith was the first of the British detainees who were set free as a part of a deal. This is what he told The Daily Mirror: "In Camp X-Ray, my cage was right next to a kennel housing an Alsatian dog. He had a wooden house with air conditioning and green grass to exercise on. I said to the guards, 'I want his rights' and they replied, 'That dog is a member of the US army' "
Harith was held in captivity for two years and said that he was assaulted with fists, feet, knees and batons after refusing a mystery injection. "One of them attacked me really hard and left me with a deep red mark from my backbone down to my knee. I thought I was bleeding, but it was really bad bruising."
He sums it up philosophically but with a simmering rage:" The whole point of Guantanamo was to get you psychologically. The beatings were not nearly as bad as the psychological torture - bruises heal after a week - but the other stuff stays with you."
There will be other disclosures, other revelations but there will be no apologies and, perish the thought, no asking of God's forgiveness. These 'illegal combatants' were picked up at random and if we overlook the emotional hysteria, they were kidnapped. Included in this messianic round-up were minors, even children.
How indeed unsparing is total war? Will Tony Blair claim he did not know what was happening at Guantanamo? Or will he justify it and simply refuse to discuss "intelligence" in the larger interest of national security" as he did with weapons of mass destruction and the embarrassing matter of the bugging of Kofi Annan's telephone?
But can the war on terror be won if national politics keep intruding. The bombs that went off in Madrid were set off by ETA. This was the certainty of the Spanish government. Then an Al Qaeda element was introduced. The dispassionate investigation which was the need of the hour had to take backstage to the general elections.
To the discomfort of the coalition partners, one of the green bottles hanging on the wall was knocked down, one prime minister who was an ardent votary of the war in Iraq has been replaced by a prime minister who says that war in Iraq is a "disaster."
We have every reason to be worried about terrorism. Was it good luck or vigilance that prevented a mega bombing of the US consulate in Karachi last week? Let no one be in any doubt that the terrorists have us on their hit-list. We need to engage the terrorists robustly but with a cool head and not in the glare of the media.
As I have written before security must be done but not seen to be done. But the government must not be seen to be alone in fighting terrorism. The government needs the unflinching support of the people.
Even those who can't help scoring political points must come out and condemn terrorism for the terrorists kill indiscriminately and do not respect political affiliations.