Israel's gamble

The recent operations in Gaza have all the hallmarks of the 2006 war against Hezballah in Lebanon. However, this time the stakes are much higher because an inconclusive outcome would be devastating for Israel.

In this article, Ethan Bronner highlights the sense that Israel's foes are simply not as afraid of it as they once were. Hezballah's 33 days of staunch resistance were seen as the model to emulate when confronting Israel's military superiority. Bronner talks about Israel's need to 'show its teeth' once again. Herb Keinon echoes Bronner's analysis by writing in the Jerusalem Post about Israel's desire to "crush the will to fire rockets". Hence, Israel is looking to reshape the regional security structure by reestablishing the perception of traditional power balances.

This is a huge gamble for Israel. If Hamas keeps fighting and if the Palestinians rally around them in Gaza, the Israelis will have no choice but to intensify the conflict. This might only strengthen Palestinian resolve. Every day of prolongued fighting will also intensify the pressure on Israel's backers, most of all on the Egyptian government of Hossni Moubarak (the most populated Arab country) - which at the moment holds Hamas responsible for the conflict. A failure by the Israelis in Gaza would likely mean the end of political cover provided by Egypt. Finally, this operation may only solidify the Syrian-Iranian alliance which the Israelis were trying to break through indirect peace talks with Damascus.

Samuel Huntington dies

One of the brightest, if most controversial, figures in the field of political science died on Wednesday. Samuel Huntington's work was taught in university departments across the globe. His most famous book "The Clash of Civilizations" is - whether you support his arguments or not - one of the most important works of the 20th century.

More on Huntington here.

Politician's should definitely be smarter than that!

I had to post this up. This editorial from one of Turkey's leading newspapers absolutely trashes the Turkish Prime Minister's assertion that the present economic woes are more psychological than real.

Prime Minister Erdogan walked right into this one.

Happy Holidays or Merry Christmas (if fitting)!

I would like to take a moment to wish anyone who reads this a wonderful Christmas or Holidays!

Why market bubbles will never leave us

Got this off Prof. Mark Perry's CARPE DIEM blog who got it off Henry Blodget's piece in the December issue of The Atlantic.

Most bubbles are the product of more than just bad faith, or incompetence, or rank stupidity; the interaction of human psychology with a market economy practically ensures that they will form. In this sense, bubbles are perfectly rational—or at least they’re a rational and unavoidable by-product of capitalism (which, as Winston Churchill might have said, is the worst economic system on the planet except for all the others). Technology and circumstances change, but the human animal doesn’t. And markets are ultimately about people.

Here are three thoughts about bubbles that I hope we all can keep in mind.

1. Bubbles are to free-market capitalism as hurricanes are to weather: regular, natural, and unavoidable. They have happened since the dawn of economic history, and they’ll keep happening for as long as humans walk the Earth, no matter how we try to stop them. We can’t legislate away the business cycle, just as we can’t eliminate the self-interest that makes the whole capitalist system work. We would do ourselves a favor if we stopped pretending we can.

2. Bubbles and their aftermaths aren’t all bad: the tech and Internet bubble, for example, helped fund the development of a global medium that will eventually be as central to society as electricity. Likewise, the latest bust will almost certainly lead to a smaller, poorer financial industry, meaning that many talented workers will go instead into other careers—that’s probably a healthy rebalancing for the economy as a whole. The current bust will also lead to at least some regulatory improvements that endure; the carnage of 1933, for example, gave rise to many of our securities laws and to the SEC, without which this bust would have been worse.

3. We who have had the misfortune of learning firsthand from this experience—and in a bust this big, that group includes just about everyone—can take pains to make sure that we, personally, never make similar mistakes again. Specifically, we can save more, spend less, diversify our investments, and avoid buying things we can’t afford. Most of all, a few decades down the road, we can raise an eyebrow when our children explain that we really should get in on the new new new thing because, yes, it’s different this time.

At what cost?

Listening to president Bush and vice-president Cheney's farewell interviews, an expression kept creeping to the front of my cerebral cortex. Pyrrhic Victory. Pyrrhic Victory. Pyrrhic Victory.

To sum it up in a nutshell, the core of Bush and Cheney's arguments in these interviews was; "we did what we had to do to keep America safe, and to the best of our knowledge it has worked. The proof? No terrorist attacks on American soil in 7.5 years."

Now consider the definition of Pyrrhic victory:

1) A victory that is won by incurring terrible losses - wordnet.princeton.edu/perl/webwn

and,

2) A Pyrrhic victory is a victory with devastating cost to the victor. The phrase is an allusion to King Pyrrhus of Epirus, whose army suffered irreplaceable casualties in defeating the Romans at Heraclea in 280 BC and Asculum in 279 BC during the Pyrrhic War - en.wikipedia.org/wiki/Pyrrhic_victory

and again,

3) A very costly victory, wherein the considerable losses outweigh the gain, so as to render the battle unfavourable - en.wiktionary.org/wiki/Pyrrhic_victory

Now returning to Bush and Cheney's arguments. At what cost to American principles and global reputation were 7.5 attack free years achieved? Is America safer in the long-run as a result of Bush and Cheney's policies? A Guantanamo Bay, Patriot Act, Maher Arar (and others), and Abu Ghreib later, how will history judge these two men? What lessons must responsible political leaders and governments around the world draw from the Bush-Cheney years if the same mistakes are not to be repeated?

Either way you twist and turn it, the notion of 'success' in the War on Terror seems to be Pyrrhic at best, and an illusion at worst.

Is Medvedev a true reformer?

Russia's leaders have taken heat in the Western press of late. A worrying Soviet-era authoritarianism creep is said to be underway. The Kremlin is admonished for reneging on its post-Cold War commitments to change course and integrate into the league of 'responsible nations.'

As it stands, it is accused of practicing 'perestroika' (economic restructuring) at the expense of 'glasnost' (political openness).

While there has been an undeniable centralization of power accompanying former president and current prime minister Vladimir Putin's rise to power, people would be wise to think twice before dismissing Dimitri Medvedev's democratic tendencies.

The new Russian president seems to understand the importance of strengthening democracy and political freedom in his country. In his state of the union address, Medvedev uttered words that are hard to ignore. He acknowledged and openly criticized the excessive degree of state interference in the media. He also admitted that the only way for government to become less obstrusive in social life is to develop the technological infrastructure and openness to make government interference much more difficult. You can muzzle a few large newspapers, but you cannot muzzle thousands of small ones in the form of blogs and informal discussion groups such as this one.

This article does a wonderful job highlighting these points.

China dozzes off, the world will feel it

Remember Napoleon's famous line - "As China wakes she will wake the world"? Well, she woke up in 1978, got to work, and now she's about to get some sleep. The following article highlights China's coming slumber on the heels of the economic crisis.

China's exports have taken a hard hit and the government is frantically trying to implement policies to mitigate a further drop. Beijing's response, which is not going to sit well in Washington, is the devaluation of the Renminbi to keep Chinese exports competitive. Another, is the massive fiscal stimulus that has already been enacted by the government, with further spending almost surely on the way. Not that China doesn't have the headway at the moment. It's foreign reserves are the largest in the world.

Nevertheless, the Dragon is looking increasingly tired these days, and a nice rest is likely to cause serious problems for it's political masters in Beijing. The most important will be 'maintaining social stability' (a favoured utterance of the Chinese Communist Party) in the face of increasing domestic disturbances.

Read the article and ponder.

The Bear's creeping influence

Bear paws are increasingly spotted on the Middle Eastern map these days. Today's announced decision by Russia to supply the Lebanese army with 10 Mig-29 fighters jets is a gesture of little military importance, but large geopolitical significance.

Why?

For one, this points to a further deterioration of relations between Israel and Russia. Both countries have - directly or indirectly - been supplying one another's enemy in recent years (Hezballah by Russia, the pro-American Georgian government by Israel).

Secondly, the move is yet another sign of the decline of American influence in the broader region. If we go back to the domestic turmoil that was witnessed it Lebanon following the Syrian withdrawal in 2005, the story becomes clearer. The Americans effectively lost the battle for Lebanon when the Hezballah-led March 9th coalition was granted veto power in the legislature as part of the broader reconciliation efforts brokered in Qatar last May. The Lebanese government, now with a strong anti-American presence in its fold, is in the process of realigning its strategic relationships.

Thirdly, Russia is a resurgent power looking to reestablish its lost prestige in the region. It has been on increasingly close terms with the Assad government in Damascus, and is looking to capitalize on improving relations between Lebanon and Syria to make inroads into Beirut.

Thy home makes thou free!

Here's a particularly interesting piece by economic historian Niall Ferguson guiding us through the historical lead up to our current financial crisis. It's a long article, but highly informative for anyone who cares to read it.

The following segment of his analysis is especially interesting. To own your own home has become a symbol of modern citizenship. One that is part-and-parcel with the concept of the free democratic society, and that may have indirectly led to the rise and fall of home prices. Here's how he puts it:

So why were we oblivious to the likely bursting of the real-estate bubble? The answer is that for generations we have been brainwashed into thinking that borrowing to buy a house is the only rational financial strategy to pursue. Think of Frank Capra’s classic 1946 movie, It’s a Wonderful Life, which tells the story of the family-owned Bailey Building & Loan, a small-town mortgage firm that George Bailey (played by James Stewart) struggles to keep afloat in the teeth of the Depression. “You know, George,” his father tells him, “I feel that in a small way we are doing something important. It’s satisfying a fundamental urge. It’s deep in the race for a man to want his own roof and walls and fireplace, and we’re helping him get those things in our shabby little office.” George gets the message, as he passionately explains to the villainous slumlord Potter after Bailey Sr.’s death: “[My father] never once thought of himself.… But he did help a few people get out of your slums, Mr. Potter. And what’s wrong with that? … Doesn’t it make them better citizens? Doesn’t it make them better customers?”

There, in a nutshell, is one of the key concepts of the 20th century: the notion that property ownership enhances citizenship, and that therefore a property-owning democracy is more socially and politically stable than a democracy divided into an elite of landlords and a majority of property-less tenants. So deeply rooted is this idea in our political culture that it comes as a surprise to learn that it was invented just 70 years ago.

Krugman's Nobel Lecture

Paul Krugman's lecture explains his Nobel prize winning research on international trade geography.

Interesting points that come out of his research:

1) Contrary to intuitive thinking, trade has become more sensitive to distance, not less. This doesn't mean that far-away countries are doing less trade, but that regional countries are doing more trade.

2) Intra-industry trade among largely similar countries accounts for a large percentage of regional trade.

3) Thinking in terms of the geographic clustering of manufacturing (ex. the manufacturing belt in the northeastern U.S.) is no longer an adequate description of the present geography of production in advanced countries. The results have been a decrease in high-wage manufacturing jobs for citizens in advanced countries due to increased competition by foreign owned manufacturing plants who pay lower wages in advanced countries.

You can watch the lecture here.

This guy is an outrage!

I don't often lash out against prominent political figures so easily, but Robert Mugabe is a politically bankrupt, narcissistic and egomaniac dictator that is erasing every patriotic and good thing he may have once done for his country.

His circus-show explanation for the cholera epidemic in Zimbabwe is a case in point. After originally denying the presence of an outbreak, he now characterizes it as a Western imperialist ploy to invade his country.

Yes, invade his strategically critical country...hmmm...

As if their lingering conflicts in Afghanistan and Iraq, coupled with their economic woes, weren't enough of a headache for Britain and America at the moment!

Smaller is better...in times of crisis at least

So the big guys get the girls. I guess that's true...somewhat. But in times of economic crisis, they certainly don't get profits - not when they are unhealthy-big instead of bulging-muscle-big. Large corporations have all the advantages when times are good. They have the capital to invest in R&D. They spend more on advertising and marketing then a Saudi prince on crack, and they are able to consolidate their market shares by simply bullying smaller firms out of competition (mostly by legal means). Problem is, that's WHEN things are rosy.

The opposite side of this equation is the paradox of largess. The bigger you get, the slower you get, the less flexible you are in the face of crisis - be it a revolution in market demand, exogenous economic shocks, or a widespread collapse of the financial system. When times get bad, the massive capital investments and organizational inertia that comes with being BIG become a serious detriment to survival. In the words of Ross Perot who sat on the board of GM in the 1980's:

"At GM if we saw a snake crawling around, we would call in a snake consultant. Then we'd organize a Snake Committee. We'd sit on the issue for a few years and think it through. And when we'd realize that nobody's been bit so far, we'd decide that it doesn't pose a serious problem and let it roam freely."

This is unfortunately what we are witnessing today with the Big-3 automakers in the United States. Due to their gargantuan capital investments in current business models, leading to hierarchical organizations meant to manage empires and billions in invested capital, they have become sitting-ducks in the face of deteriorating global economic prospects.

Either way you cut it, bailout or not, the Big-3 will have to undergo tremendous changes to survive, and that will require shedding the surplus fat. The diet? Most likely, some combination of lower wages for employees, plant closures, and most importantly, a new organizational structure that would allow for more flexible responses to uncertain times.

Our globalized era is for the strong and fit, not the slow and wobbly.

Arab leaders must lead...

Here's for speaking truth to power...

http://english.daralhayat.com/opinion/commentators/12-2008/Article-20081205-07ba8b14-c0a8-10ed-0088-d0c18a9d9574/story.html

Is there hope for the Middle East?

The jury is still out on how fast and intensely U.S. global influence will wane, but the near unanimous consensus is that it is has already started. The question for Arab leaders is the following: will they seize the transient opportunity that will come with U.S. decline to build a more inclusive long-term regional formula? The answer to this question is important not only for the region, but for the rest of us as well.

The sandstorms of the Middle East will not settle - disorienting the rest of the world with them - as long as Arab leaders keep ignoring the collective benefits of cooperation. No serious long-term strategic framework has seriously been pursued by the region's power brokers since Nasser's push for pan-Arab unity in the 1950's and 60's. No one is advocating the return of pan-Arabism. The concept (at least for the moment) is a chimera. Nonetheless, it IS possible to think outside the box of narrow interests, and inside the box of collective benefits - which would invariably raise the national interests of individual Arab countries in the long-run. One must travel across the region to realize how interconnected it really is. Culturally, linguistically, religiously, historically, economically and most importantly...politically. Every passing year that the region's festering problems are ignored, new and more elusive ones are created, and the effects are felt by all. This has been the unfortunate story of the Middle East for as long as we can remember.

At the heart of the problem is the psychology that permeates the highest offices of the Arab world. Fear is the dominant sub-conscious element in the Arab leader's psyche. Fear of his regional counterparts, fear of his own entourage, fear of rebellion, fear of foreign powers, etc... Robert Fisk once asked Saddam Hussein how he knew if he truly had the support of his people? Saddam looked around, stared in Fisk's eyes and exclaimed "why don't you go ask around and see what they say? they all love me!", only to burst into laughter along with his sycophants. The implication of Saddam's response are clear, no Iraqi would dare say how he truly felt about his president if asked. The moral is almost Newtonian in its logic - every action has an equal an opposite reaction. Saddam's fear of his own people would only be subdued by installing equal and opposite fear into them. Is this a sustainable framework for building healthy societies that can compete in today's globalized world? Machiavellians might think so, unfortunately, 21st century Arabia is not 15th century Italy - at least it shouldn't be.

If Arab leaders begin to think in terms of shared interests, as opposed to zero-sum gains, they may be able to manage a relatively peaceful transition to a post-American era. They could become more independent to implement the policies to improve the lives of their peoples in the process. Employment creation, inter-regional trade, education for a globalized era, civic participation in politics and a unified voice and stance for peace in the region. This would not only be in the interests of their people, but in the interests of their crowns. The rapidly changing demographics of the region should be extremely worrying for anyone who cares to look. The average age of the populations is decreasing. The birthrate is still high. It is getting harder and harder to create enough jobs every year to keep young people of the streets and away from the brainwashing of extremists.

The question is how to overcome the numerous obstacles standing in the way of regional cooperation? There are several: the American influence may be waning but is far from gone; Arab governments face a legitimacy crisis vis-a-vis their own people; the Russians are trying to reassert their role in the region; Iran continues (ironically helped by the U.S.'s elimination of Saddam) to spread its tentacles; Syria and Saudi-Arabia are at loggerheads over Lebanon; Palestinians are divided; and, extremists continue to sow more hatred and confusion along the way.

What exactly are Arab leaders hoping to achieve for their countries and the region? Do they wish to be seen as more legitimate and responsible in the eyes of their people and the world? Are they looking to solve the conflict with Israel and the Palestinians? Are they trying to improve the region's 'brand' for global business by plugging their countries into the switchboard of global finance, trade and ideas? Do they wish to keep extremists and militant Islam under control? All and any of these policies will require a new regional political and economic framework.

Until then, all we can do is ask ourselves, is there hope for the Middle East?

Absolutely brilliant!

Got this from friend of mine.

"The Plan"

In the beginning was the Plan.
And then came the Assumptions.
And the Assumptions were without form.
And the Plan was without substance.
And darkness was upon the faces of the Workers.

And they spoke among themselves saying". It is a crock of s**t - and it stinketh."

And the Workers went unto their Supervisors and
said "It is a pail of dung - and none may abide the odor thereof."

And the Supervisors went unto their Managers
saying "It is a container of excrement - and it is very
strong - such that none may abide by it."

And the Managers went unto their Directors
saying "It is a vessel of fertilizer - and none may abide its strength."

And the Directors spoke amongst themselves
saying one to another "It contains that which aids plant growth
and it is very strong."

And the Directors then went unto the Vice
Presidents saying unto them "It promotes growth and it is very powerful."

And the Vice Presidents went unto the President
saying unto her "This new Plan will actively promote the growth
and vigor of the company with powerful effects."

And the President looked upon the Plan and saw
that it was good.

And the Plan became Policy.

In true Keynesian fashion

John K. Galbraith agrees a stimulus in the U.S. is needed, but only to grease things up - the effects of fiscal stimuli end when the 'sugar shock wears off'. Here's his broad prescription to get out of this mess:

First, we must fix housing. We need, as in the 1930s, a Home Owners' Loan Corporation to restructure failed mortgages on sustainable terms. The basic objective should be to keep people in their homes by all necessary means, except where borrowers committed willful fraud, so as to stop the spread of blight and decay. Government can use its power over banks to make this happen, as it has with IndyMac, the California bank that is now, as a federally owned company, revising unsustainable mortgages. But this is no small endeavor: The fdr-era holc operated for almost two decades and at its peak employed 20,000 people.

Second, we must backstop state and local governments with federal funds. Otherwise falling property (and other) tax revenues will implode their budgets, forcing destructive cuts in public services and layoffs for teachers, firefighters, and police. And when these public servants are laid off, guess what? They have trouble paying their mortgages. General revenue sharing—unrestricted federal grants to states and towns, a program invented by Richard Nixon and killed by Ronald Reagan—is required. Luckily it can be reintroduced quickly on a large scale.

Third, we should support the incomes of the elderly, whose nest eggs have been hit hard by the stock market collapse. We can't erase those losses case by case (nor should we), but we can sustain the purchasing power of the group. The best way is to increase Social Security benefits. Useful steps would include boosting the formula for widowed spouses, ensuring a minimum benefit for retirees who worked their whole lives in low-wage jobs, and allowing college students to receive survivors' benefits up until the age of 22. But let's go further and raise benefits across the board, which has not been done for a generation. I'd say raise them 30 percent, and let the federal government make the contributions for five years. This would be good for the elderly, who could retire; good for working-age people, who would replace the retiring; and good for the economy, since people who need money spend it when they get it.

Fourth, we should cut taxes on working Americans. Obama proposes to effectively offset the first $500 of Social Security taxes with a refundable credit. It's a good idea, but can be expanded. If the economy continues to spiral downward and a really large fiscal boost is needed, let's declare a payroll tax holiday, funding Social Security and Medicare directly from the treasury, until the economy gets back on track. Workers would get an immediate 8.3 percent raise to help meet their mortgages; employers would have the same amount to spend on wages, job creation, or investment. (Not all efforts to jump-start the economy deliver so much bang for the buck. See chart below.)

Is this the standard "liberal line"—borrow and spend? No. It is the situation, not the philosophy, that demands this action both grand and sustained. Economic recovery in an existential crisis like this means actually building a new economy. For that, we need investment—to restore our roads, rails, transit, broadband, and water systems, to build parks and museums and libraries, to protect the environment. Right now, states and localities can't borrow for these things. Creating a National Infrastructure Fund, using Uncle Sam's borrowing power to put money where it's needed, is one way forward. Federal capital spending should be bond financed and exempt from budget rules, especially pay-as-you-go. It makes no sense to finance projects whose benefits will last for 50 years solely from tax revenues of today.

Finally, we must change how we produce energy, how we consume it, and above all how much greenhouse gas we emit. That's a long-term proposition that will require research and reconstruction on a grand scale: support for universities, for national labs, for federal and state planning agencies, a new Department of Energy and Climate. It's the project around which the economy of the next generation must be designed. It's the key to future employment and future growth—and to our physical survival.

Energy transformation is key for another reason. Even during this crisis, the world has supported the dollar. Why? Because no alternative safe haven exists. Despite our faults, we have a well-designed economic system, the enduring fruit of the New Deal and Great Society. Thus Uncle Sam can borrow, at very low cost, whatever he needs—a terrific advantage over the competition. But in the long run, the world will support us only if we give something back. Ushering in new technologies that the rest of the world can adopt in order to save the planet is the right sort of gift. By helping to save the physical world, we may be able to save our currency, our credit, and our economy as well.

Spend Wisely - What a dollar will get you when spent on...

Israel's powerplays

An interesting article by George Friedman dissecting Israel's power relations.

http://www.stratfor.com/weekly/israeli_strategy_after_russo_georgian_war

Important points the author makes:

1) Israel's security is safer than it would have us believe.
2) Israel, like the U.S., views Russia as the only major power that can destabilize the regional balance of power. As a result, Israel's courting of Georgia (including arming and training its military) prior to the recent Russio-Georgian conflict was an attempt to prevent Russia's reemergence as a major regional power.
3) Israel's loyalty to the U.S. is not as pristine as its leaders proclaim.

Read and ponder...

Guess who's on your side?

Ford, GM and Chrysler aren't the only ones worried about going out of business. Apparently, so are their top foreign competitors.

Japanese and Korean car makers are afraid that allowing the Big-3 to go belly up would further reduce aggregate demand in the U.S. economy. Sure the likes of Honda, Toyota and Hyundai would increase their U.S. market shares, but it is feared that the reduced consumer spending accompanying the Big-3's collapse would cancel out the gains from increased market capitalization.

Weird, considering competition is supposed to be the foundation of business! It's odd how things work sometimes...

Abou el Fadl, M, Khaled. ‘The Great Theft: Wrestling Islam From the Extremists’. 2005

Professor Khaled Abou el-Fadl’s book presents a piercing critic of authoritarian Islam. The book presents a binary account of diametrically opposed versions of the faith; the Islam of the moderates, and the Islam of the puritans. The author argues that the battle for Islam’s soul is currently being waged and won by the puritan creed. The influence of moderate Muslims the world over has been trumped by voices and actions of zealous puritans. In the process, Islam has erroneously become associated with this distorted puritan ideology. Abou el-Fadl’s book is a rallying cry for concerned Muslims to resist the epic challenge facing them and work together to reconnect Islam with its peaceful, rational, and sagacious past. Furthermore, the author speaks to non-Muslims who may be confused and shocked by what they see emanating out of some Muslim societies today.

The author begins with a caveat: Islam is a complex and amorphous entity that defies over-simplified and generalized analysis. However, a cross-spatial commonality today has been the negative conceptualization of Islam, especially in the West. Complexity coupled with generalization gives rise to a sensationalist, albeit misunderstood Islam. The author is distraught by the vile reputation modern Muslims must carry with them. In his view, “the legacy of modern Muslims seems to be a long sequence of morally repugnant acts”. He sets out on a twin-track effort to demystify the Islam that should be from the one non-Muslims hear about today, and at the same time qualifies moderate Muslim thinking to be fundamentally opposed and incompatible with the authoritarian ideology that dominates the news media.

The book is divided into two parts. The first is a historical briefing documenting the rise of modern puritan ideology. According to the author, a conglomeration of factors has contributed to the emergence of puritans today. Chief among them is what he describes as the disintegration of ‘the authoritative’ in the house of Islam (anywhere where Islam is practiced and preached). The effacing of a legitimate and traditional authoritative class of ‘ulama (learned men) has permitted unqualified, vengeful, and disillusioned individuals to speak on behalf of God by propagating religious doctrines fundamentally inconsistent with the morals and ethics underpinning the faith. The waning influence of browbeaten jurists and vanguards of moderate Islam has given way to architects of contemporary Puritanism such as Mohamed ‘Abd-el-Wahab, Abu al-A`la al-Mawdudi, and Sayyed Qutb. Funded and supported by the Saudi state, these individuals have provided spiritual guidance to their followers who in turn have exploited the vacuum of authority to become the illegitimate mouthpieces of contemporary Islam. In addition, the authoritarian political systems under which the majority of Muslims live today have fueled extremist tendencies. Perceived historical injustices committed by foreign powers, accentuated by unrepresentative and despotic governments have radicalized some Muslims and pushed them to fight evil with evil. The author argues that although many of their grievances are legitimate, these Muslims have chosen to deviate from the path of true Islam. The political and socio-economic difficulties in which many Muslims find themselves today leads a minority to recoil further into the shadows, tempted by the reactionary and confrontational nature of extremism as an avenue for expressing subdued anger and despair.

The second segment of the book contains the substantive weight of the author’s arguments. Here, the author highlights the visceral conundrum presented when attempting to marry the spiritual and the temporal; namely, how best to apply God’s Will on earth? Asking this question gets us to the core of the divide between moderates and puritans, and it is through a multifaceted inter-temporal analysis of these diametrically opposed viewpoints that the author structures his book. Both sides have mutually exclusive answers to this question that cannot be reconciled. Abou El Fadl argues that the way in which both camps understand one’s relation to the Creator is critical in determining issues such as Islam and human rights, warfare/terrorism and gender equality. Contrary to moderates, puritans view this relationship in the context of a master/slave nexus leaving little room for the faculty of human reasoning to operate beyond strictly defined parameters. Moderates require a delicate interpretative and applied balance between the primary religious sources, the role of the state, and the legal applicability of God’s Law (Shari’a). Puritans do not tire themselves trying to reach such equilibrium, when in their opinion all that is required is the willingness to obey God’s commands without questioning. Muslims should not attempt to engineer the relationship between the state, religion and the law beyond the narrow confines of a literal interpretation of God’s revelations. God’s commands are candidly elucidated to us through the Koran and Hadith, and interpretation is to remain as exoteric and literal as possible. Humanism, compassion and mercy are irrelevant to the puritanical credo. We do not have the right to question God’s Will. If He is Perfect and All-knowing than His laws are as well.

The book provides the reader with an informative introduction to the schism between humanist Islam and puritan demagoguery. Abou El Fadl succeeds in making his voice heard on behalf of all moderates, transcending religious, ethnic and national boundaries. He skillfully demonstrates the compatibility of Islam with modernity, and rebuffs both puritans and Islamophobes who argue otherwise. However, while the author’s descriptive and analytical talents as a modern Muslim jurist and American lawyer are unquestionable, his prescriptive solution to the puritan problem is slightly discoloured.

Abou El Fadl calls for a consolidated effort on the part of moderate Muslims and non-Muslims to confront the perversion of Islam from extremists. His book concludes by calling for a counter-jihad to liberate Islam. He does not call for violence however, and instead encourages all stakeholders to work collaboratively in restoring authoritative legitimacy to Islam by supporting its moderate legal jurists and ‘ulama.

It must be asked; Does Abou El Fadl exaggerate the degree to which puritans can redefine the collective Muslim conscience? While Abou el Fadl may view Puritanism as the sword of Democles hanging over Islam, others may not agree. Extremists have historically risen as fickle byproducts of difficult geopolitical and socio-economic times and do not usually succeed in deepening their roots in society. This does not imply that puritans must not be resisted, but simply means that giving puritans too much direct attention only serves to strengthen their position; after all, their modernist ideology feeds off simplistic resistant discourse of us vs. them, here vs. there, Islam vs. West etc… Furthermore, the solution is highly problematic for the lack of a political angle it embodies.

While the past has been for learning and guidance; the future about dreams, goals and visions; the present has traditional been about compromise, diligence, and activation of human faculties towards development of self and society. Muslims and non-Muslims must beware of sensationalist cries with essentialist undertones of existence and survival. Abou El Fadl is certainly meaning to serve Islam and Muslims well with his book and on the most part he does, but to a certain degree he falls into the trap of the puritan worldview by engaging in essentialist notions of survival. Instead, Muslims must remember who they once were without forgetting who they are now, and must visualize where they wish to be without forgetting where they stand at present. Nevertheless, the book remains a worthy stepping stone to those wishing to have a clearer picture of internal divisions within Islam.

A conversation with U.S. diplomat Scott Bellard

We had a very interesting and astute American diplomat join us in class today - Mr. Scott Bellard, Minister-Counselor for Political Affairs at the American embassy in Ottawa. I was impressed with Mr. Bellard's ability to express complex ideas in simple yet informative ways.

Three salient points from our conversation with Mr. Bellard stand out.

1) He talked about continuity in U.S. foreign policy. He pointed out that when it comes to foreign policy, fundamental national interests do not allow incoming administrations to deviate much from the paths set about by their predecessors.

2) He mentioned that U.S. foreign policy decisions are much more reactive than we'd like to
think. For example, Bush did not go looking for 9/11 but had to adjust and respond once it did
happen.

3) The U.S. and its allies rarely differ on the goals, but more often on the means by which to
attain those goals. An example is the U.S. and Canada's positions on Cuba policy. Both share
the view that Cuba should liberalize its political and economic system but the U.S. insists on
continuing with sanctions while Canada chooses the path of engagement. To be fair, he did
mention the old adage that 'all politics are local' and alluded to the strong influence of the
Cuban community in Florida on the U.S.'s policy stance against Cuba.

While generally agreeing with much of what Mr. Bellard's had to say, I could not help but question his second point about the degree of U.S. reactionism in international affairs. It is true that 'black swan' events such as 9/11 require unforeseen responses and adjustements to policy priorities. Nonetheless, major controversial positions of the U.S. today - i.e. the Middle East, missile defence and global warming, to name a few - result less from reactivist policymaking than from its polar opposite: the almost rhythmic daily politicking, backdoor deals and mutual back-scratching emanating from Washington.

NATO meets, Russia watches...

NATO foreign ministers will be meeting in Brussels this week. The agenda will be dominated by the recent Georgia-Russia crisis and the issue of extending Membership Action Plans (MAP) to Georgia and Ukraine. A MAP commits an aspiring applicant country to certain reforms in order to meet NATO specific standards before being admitted into the alliance.

Three important things to keep in mind this week. The first is that Ukraine and Georgia will be undertaking a tremendous backdoor diplomatic initiative to try to persuade NATO members to grant them the MAP. The second is the reaction of Russia to any potential NATO decision. The third is the way in which the U.S. will play this time around. Will it soften its push for NATO enlargement so as not to further deteriorate its relations with Moscow, or will it try to play the realpolitik card and press for expansion to Russia's borders?

* Here is an opinion peace published by the Ukrainian President in the International Herald Tribune this week outlining his opinions on the matter.

What kind of Aggregate Demand?

Most of the commentary I have read so far seems to support a Keynesian 'go big or go home' fiscal stimulus to prevent the recession from getting worst. I have read suggestions ranging anywhere from $US 300 billion to one trillion needed to push that Aggregate Demand (AD) curve enough to the right to escape a liquidity trap. The only problem with that prescription is that well...nobody really knows if it will work.

Now don't get me wrong, I am an admirer of Keynes and I believe he is (arguably) the brightest economic mind of the past century. The only problem is that Keynes's prescriptions came at a time when the most powerful country in the world (the U.S.) basked in a current account surplus making it the world's #1 creditor. Americans produced, produced and produced some more, and consumed less than...well...they produced. The Great Depression hit, the Second World War came and the U.S. well, produced even more!


Things are much different this time around. Number one, the U.S.'s manufacturing and industrial capacity has greatly diminished relative to the world. The ability for the U.S. to pull itself from the bootstraps by producing its way out of the crisis is simply no longer there - manufacturing and production has gradually shifted overseas. The only thing that has maintained U.S. GDP going strong in recent years is the consumption power of its population - made possible by the abundance of cheap credit to a degree never before seen in history.

Which brings me back to my original worry. So we push that AD curve by providing a massive fiscal stimulus. Then what? The only part of GDP growth that can sustain the economy operating at its pre-crisis equilibrium is...well...you guessed it, consumption spending! The credit freeze might thaw, banks might start lending again, businesses and consumers might start borrowing and consuming again, but the question remains; if the problem began because of excessive borrowing and spending, what would we have solved?