World economic map in 2050

ECONOMISTS tend to divide the world in terms of economic development or growth potential. We have a group of G-7 countries, which are the most industrialised and the richest. Also, there is a group of OECD countries as well as a cluster of emerging economies.

There is, however, another set of countries which have been further differentiated from the emerging economies and called BRICs. Goldman Sachs, an international consulting group, in its 2003 paper coined this acronym. BRICs stands for Brazil, Russia, India and China.

Because of their development potential, recent growth trajectories and equally, if not more importantly, geographic and demographic size, these are the countries which, it is suggested, have the capacity to make a global impact and be a major force in the world economy. If everything goes smoothly, and there is no economic miracle either, then the authors project China could become the largest economy in the world by 2041, India the third largest by 2035, and the combined BRICs GDP could exceed that of G-6 (G-7 minus Canada) by 2041.In its December 2005 paper, the same consulting group extended this concept even further and discussed the probability of the ‘Next Eleven’ economies catching up with and becoming like BRICs. Pakistan is also included in this group of the famous Next Eleven, bracketed with countries like Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, the Philippines, South Korea, Turkey and Vietnam.

Before examining Pakistan’s potential to be a tour de force in the global economy, it would be appropriate to look at the factors that have been taken into account to declare a country a potential BRICs. The first and foremost, to our surprise, is demographic profile. According to the authors, without a sizable population, even economic miracles like Hong Kong and Singapore cannot have a global impact in spite of their high levels of income and living standards.

The authors also developed a Growth Environment Score (GES) to rank each of 170 countries for their performance under closely inter-linked performance categories. Stable macroeconomic policies ensure low inflation, tight monetary policy and reduction in fiscal deficit.Openness to trade and foreign investment is a prerequisite for rapid economic development, and one of the many important signs of healthy macroeconomic conditions. This provides greater access to better investment rates, modern technology, larger markets and greater employment opportunities. There is also a positive correlation between openness and profits, productivity and output at the micro level.

Another factor that constitutes part of GES is technological capabilities. These relate to penetration of PCs, phones and the Internet. These signify the presence of an educated workforce as well as their linkage with the global world.

Quality of human capital is also a core determinant of the GES. There is hardly any doubt now regarding a close and statistically strong association between education and economic growth. According to one estimate, one additional year of schooling leads to 0.3 per cent faster annual growth over a 30-year period.

Political stability and rule of law depend on institutions which include legal systems, functioning markets, health and education systems, financial institutions and government bureaucracy. Their quality is crucial to the promotion of trade and investment in the country. Institutional capacity is needed to introduce efficiency in the system and execute stable macroeconomic policies in the country.

Though all the BRICs countries (Brazil, Russia, India and China) score differently on these criteria, as a whole they come in the top half of the rankings for developing countries and above the developing country mean. China ranks most high (16th), followed by Russia (44th), while Brazil and India are further behind at 58th and 60th respectively. Had this been the only criteria, some other countries such as South Korea would have been part of BRICs, but it is their bigger size that lends them greater weight.

The GES individual scores highlight where there is room for improvement. Brazil scores relatively well on measures of political stability, life expectancy and technology adoption, but quite poorly on investment, education levels, openness to trade and government deficit. Historically, the performance of Brazil on the macroeconomic front has been pretty poor and it seems to carry this baggage along.Russia also scores well in terms of education, fiscal position, external debt position, openness to trade, technology adoption and life expectancy, but is placed at less than an ideal position in terms of political measures (political stability, corruption), investment rates and inflation.

India scores relatively well in terms of rule of law, external debt and inflation, but quite poorly in terms of levels of secondary education, technology adoption and fiscal position. It, along with Brazil, also lags behind in terms of the openness of its economy.China ranks well above the mean on macroeconomic stability, investment, openness to trade and human capital. Its rankings on technology adoption are more mixed (PC usage is still quite low) and corruption measures are also a little worse than the mean.

The GES scores are likely to be based on data provided by individual countries (for example World Bank Indicators) and surveys which are based on individual perceptions of businessmen working in those countries. The latter are likely to be subjective and biased. However, there is still some general truth in the analysis which merits our attention.

The writer is a Visiting Fulbright Scholar from Islamabad, currently based in the University of Florida.

iramkhan@fulbrightweb.org

A war like no other

ACCORDING to the Government Accountability Office (GAO) of the US Congress, the threat of a large, ‘visually dramatic’ attack on American soil is still very much there, even after seven years of furious assaults by the US military on suspected terrorist targets. The GAO also says that the attack may be accompanied by large-scale economic aftershocks and fear in the population.

The CIA traces this threat largely to the Federally Administered Tribal Areas in Pakistan, which have seen an intensification of violence during the last year. All of this doom and gloom stands in sharp contrast to the euphoria that broke out when the US deposed the Taliban in December 2001 and followed up by deposing Saddam Hussein in April 2003. For one brief moment, it looked like the scourge of terror had been put out of business.

The neoconservatives were imagining that the world was going to become a safer place under a Pax Americana. It is now May 2008 and the war on terror continues unabated, its early and dramatic victories but a distant memory. According to many western experts, the US and its allies may be on the verge of losing the war. How did this happen? Can anything be done about it?

Examining the first question, it is apparent that the war was poorly conceived and even more poorly executed, since it was based on false assumptions. First, that there was a finite pool of ‘bad guys’ who could be hammered into extinction. The enemy was largely invisible, melded in among the people and carried out its attacks in the shadows.

Second, that once the top leaders of Al Qaeda would be taken out, the rest of the organisation would shrivel up. Al Qaeda Central is on the run, most of its leaders are dead, its armies are outgunned and its loyal followers scattered to the four winds. But through a Darwinian process, it has given birth to a more sinister, hardened Al Qaeda Informal.

Its members are younger and westernised and therefore harder to detect. They have adapted their tactics to the new environment. They are in this fight for the long haul and have figured out that the way to win is by outlasting the foreign occupying forces. They live or die by Mao’s dictum, “The guerilla wins by not losing.”

And third, that this ‘war’ required conventional military intervention. The failure of this strategy is manifest in Fata. The US paid little attention to the educational and economic development of Fata, which only received four per cent of the US aid that came to Pakistan, with 96 per cent going to the military.

It is unfortunate that Washington chose to ignore the sage counsel that was given by Sir Michael Howard soon after the 9/11 attacks. The renowned military historian had written that the rhetoric and expectations of ‘war’ were counterproductive when dealing with terrorism since much military experience was irrelevant. Howard said the problem required skillful political management and patient police work, backed up where necessary by military force in aid of the civil power.

Just before the Iraq war, I argued in Security Dialogue, a European journal, that Washington needed to rethink the premises of its policy against terrorism. Like other criminal problems, terrorism had a supply side and a demand side. The Bush administration focused exclusively on the supply side, deploying military force to eliminate existing terrorist networks. This was an incomplete cure at best.

As Israel had discovered to its regret, killing terrorists will not eliminate terrorism. For every terrorist that is killed, several more are created. Without condoning terrorists or forgiving their heinous crimes, the plan should be to prevent future terrorists from being created.

Washington needs to rethink its policies in the region, since they are alienating large numbers of young people throughout the Muslim world and some are becoming terrorists. Both the strategy and tactics of the war have to be reinvented. Most importantly, a way has to be found to communicate with the terrorists. It may be impossible to speak in rational terms with the uberterrorists, but it is fairly probable that large numbers of their existing and future followers can be reached.

Political solutions have to be pioneered that would draw people away from a path where they are willing to sacrifice their own lives in order to take the lives of others. Only then will the demand for terrorist acts diminish. Up to now, such views were widely regarded as heretical in the US by those who are managing the war on terror. However, they have just received a strong theoretical and empirical foundation in a new book by forensic psychiatrist Marc Sageman Leaderless Jihad.

A former CIA employee, he has analysed the background of several hundred terrorists. Based on this empirical work, he argues that terrorists are not sociopaths but intelligent, goal-oriented people who are infused with a moral outrage stemming from either the Israeli occupation of Palestinian land or, more recently, the US occupation of Iraq and Afghanistan.

Poverty and lack of opportunity are not necessarily the factors that drive young men to commit violence. Instead, it is the opportunity to sacrifice themselves for the sake of building a better world that ignites the fire inside their heart. They become convinced that blowing up people is the only way of drawing attention to the underlying injustices.

Thus, to answer the second question about how to fix the problem, the best way is to bring about genuine peace in the Palestinian territories and begin withdrawing immediately US forces from Iraq and Afghanistan, depriving jihadis of their ability to wage a moral war. Sageman contends that the presence of even one American soldier trumps any goodwill policy the United States attempts to carry out in the Middle East.

He also recommends an end to the offering of rewards, to the publication of most-wanted lists and to the staging of press conferences that proclaim the capture of top terrorists. Jihadis regard all these as badges of honor. It would be better to treat terrorists like common criminals and give them minimal publicity.

Washington had gone tone deaf when Sir Michael said virtually the same thing in 2001. Perhaps the British accent got in the way. One hopes Sageman’s American voice will resonate better.

The writer is an associate with the Pakistan Security Research Unit at the University of Bradford.

faruqui@pacbell.net

Hillary’s fight, Republicans’ delight

REPUBLICAN Party presidential candidate John McCain must be delighted that his campaign strategy is being outlined by his Democratic opponents. The increasingly restive Democratic hierarchy now needs a hero, rather than an official nominee, who could gracefully end the campaign that is becoming self-damaging.

On the Republican side, Mitt Romney heroically retired after spending more than $30m out of his pocket. He showed political maturity and statesmanship when he announced he was quitting the race following his Super Tuesday poor showing in February.

No Romney-like hero is in sight in the Democratic race. Barack Obama has a widening lead in pledged delegates, superdelegates and popular vote over Hillary Rodham Clinton. But the relatively competitive primaries’ results are giving Hillary enough reasons to stay on.

Despite a big win in West Virginia, Hillary has failed to seriously dent Obama’s gains in delegates and popular vote. Hillary was expected to retire in recent days but she stayed defiant. Her message was clear following the West Virginia victory: “I am more determined than ever to carry on this campaign...” Hillary’s reasons to stay in the race, despite the odds in her way, are too many. Even if she extends her high margin winning streak to Kentucky on May 20 and the remaining contests in other states among them South Dakota and Montana, it would probably be too late to change the dynamics of the contest in her favour.

Hillary has been trying to impress upon the party’s superdelegates that she remains a strong choice. One of her arguments is based on the premise that her victories in swing states like West Virginia make her a champion who can beat McCain. No Democrat has won the White House without winning West Virginia since 1916.

Hillary is hoping for validation of the Florida and Michigan primaries. The two states are being denied delegates to the Democratic National Convention (DNC) because they broke from the party’s primaries schedule. But she faces a dilemma. Obama, whose name was not on the Michigan ballot, is not going along with new primaries for the two states, and the DNC has no money or will for the expensive exercise. Her campaign, already under a debt of $20m, obviously has no funds to spare. Repolling in the two states thus remains a distant possibility.

With Hillary refusing to bow out and Obama yet to score an unbeatable lead, the Democratic primaries are in peril. The cliffhanger is not only dividing the party, but also weakening the nominees against McCain. The fiercer and nastier the race gets, the more it adds to the unintended political fortunes of the veteran senator from Arizona. McCain is gaining more acceptance among conservative American voters despite his relatively weak campaign agenda. The New York Times describes McCain as ‘Bush the Sequel’. But recent public opinion polls have seen a dramatic increase in support for McCain. According to the May 8-10 Gallup poll, Obama enjoys just a three percentage point lead over John McCain.

Many American analysts believe that the Democratic standoff is affecting the party’s unity more than many believe. “… it [the Democratic Party] finds itself stuck inside some time machine that is dragging it back toward the divisions of the 1960s,” says Washington Post columnist Harold Meyerson. To him Hillary’s attacks on Obama — chiefly that he’s not going to be strong on national defence — echo the accusations that (Henry Martin) ‘Scoop’ Jackson (a former senator and congressman who was a candidate for the Democratic presidential nomination in 1972 and 1976) and his followers levelled against the anti-war candidates of the sixties and seventies.

Hillary Clinton and the Republicans are campaigning to position Obama on the side of the elitist insurgents of the sixties. Obama is also being cornered on race issues. Race was never an issue at the beginning of the Democratic primaries but has emerged as a major one following questions about Obama’s relations with Reverend Jeremiah A. Wright Jr. The controversial pastor has been criticised for stoking the flames of racism that haunts America to this date. Obama parted ways with Wright following his most recent statements accusing Obama of being hypocritical.

The Republicans’ ‘stop-Obama’ strategy is based on simple logic and may be effective too: keep the Democrats polarised in the hope that the white working and middle-class voters will feel estranged with Obama on the grounds of culture and race, and therefore vote for McCain.

Race played a key role in deciding the West Virginia primaries where 96 per cent of the population is white. It may leave its imprint on the Kentucky primaries too. Some Republican strategists are also encouraging Hillary to stay in the race and project her as a better candidate than Obama. Understandably, a prolonged Democratic race is a dream coming true for the Republicans. They see a huge window of opportunity being created by a weaker Democratic candidate.

Hillary Clinton is being blamed for this unnecessarily prolonged, increasingly bruising and counterproductive contest. Continuous delay in her exit would adversely affect her reputation. If the Democrats lose the presidential elections, she wouldn’t escape the blame. But despite increasing voices of discomfort, the former first lady is in no mood to quit, at least for now.

She knows she has bleak chances of winning the nomination. Her strategists believe that her retiring after a few impressive victories in the upcoming contests, while not winning her the nomination, will certainly add to her stature as the most powerful Democratic candidate in recent history. In doing so, Hillary would prove that she is not a Mitt Romney — a statesman.

The November presidential election is expected to be a watershed in America’s political history and will be historic in many ways. If Hillary gets the nomination and wins as well, she will be the first woman president of the US. If Obama becomes the nominee and makes it to the White House, he will become the first African-American president in US history. In case of John McCain’s victory, it will be for the third time in US history that a sitting senator will be elected president. The other two were John Kennedy and Warren G. Harding.

The colourful tapestry of these three presidential nominees is a wonderful reflection of America’s human patchwork quilt. But the million-dollar question remains unanswered: is America ready for a woman president, an African-American commander-in-chief or the continuation of the Bush presidency? None will know before Tuesday, Nov 4.

The writer is a US-based journalist.

mjehangir@aol.com

Climate adaptation loans

BITAIN’S GBP800m international project to help the poorest countries in the world adapt to climate change was under fire on Friday after it emerged that almost all the money offered by the UK prime minister, Gordon Brown, will have to be repaid with interest.

The UK environmental transformation fund was announced by Brown to international acclaim in November 2007, and was widely expected to be made in direct grants to countries experiencing extreme droughts, storms and sea level rise associated with climate change.

But this newspaper has learned that the money is not additional British aid and will be administered by the World Bank mainly in the form of concessionary loans which poor countries will have to pay back to Britain with interest.

A letter signed by two government ministers shows that Britain has been pressing other G8 countries to also give money to the new fund, which will be launched in July in Japan at the G-8’s annual meeting. “UK contributions from the environmental transformation fund ... will need to be primarily concessional loans. We will also talk to other donor countries about the possibility of grants,” the letter, signed by British environment minister Phil Woolas and his international aid counterpart Gareth Thomas, said .

The letter shows that the US has resisted the idea of loans, preferring to give developing countries grants. “We understand that grants would be the US preferred approach,” the British ministers say. Both their departments are understood to have argued strongly that the money should be in direct grant form on principle, but were overruled by the UK Treasury.

Last night several countries joined environment and development groups to condemn the loans. “We need urgently to prepare for climate change, but we are not in a position to pay back loans,” said a spokesman for the Bangladesh high commission in London. “The climate situation has not been created by us. The money should come spontaneously from rich countries and not be a loan.” Bangladesh expects up to 80 million people to be displaced by climate change within 50 years.

A senior Brazilian diplomat was “indignant” that poor countries should have to borrow the money to prepare their populations for climate change.

Development groups said they were dismayed that climate adaptation funds would be funded by any sort of loan.

“It should be grants and not loans, otherwise developing countries will have to pay twice, once for the emissions that caused the problems and then again to clean up the mess,” said Tom Sharman, a policy adviser with ActionAid in London. “This is not money that is additional to Britain’s aid budget. It seems strange to be cancelling debt and then inviting poor countries to take on new debt.”

The fund will be promoted as the G-8’s showpiece contribution to developing countries at the next meeting of the organisation, in Japan in July. The US and Japan are understood to have agreed to contribute but figures have not yet been decided. Britain hopes that the fund will attract more than GBP1.5bn.

Concerns were also expressed that the World Bank, to which Britain is now the largest contributor, is now becoming the main disburser of international money for climate change as well as a major funder of climate change emissions.

“Between 2005 and 2007 the Bank financed greenhouse gas-emitting fossil fuel projects from coal, oil and gas to the tune of $1.5bn. At the same time the Bank acts as trustee to ten greenhouse gas-reducing funds, pocketing an average 13 per cent ‘overhead’ in the process”, said Janet Redman, an analyst with Washington thinktank Foreign Policy in Focus.

According to the UK government, the GBP800m will be spent over the next three years, focusing on projects that support development through environmental protection and which help poor countries to tackle climate change. Of the money, GBP50m has been earmarked for helping ten countries in central Africa to tackle deforestation in the Congo basin.

In a statement placed on the Department for International Development (Dfid) website, a government spokeswoman said: “A number of details are still under discussion, including the structure of the funds, how they are governed, which countries are prioritised for funding, and how much money different donors will commit.

––The Guardian, London