Thursday, January 29, 2009

Settling in Istanbul

My apologies for not having posted for a while. I'v been extremely busy getting settled in Turkey.

Blogs should resume more frequently starting next week.

However, here are some first impressions of the city and its inhabitants:

  • The panorama from elevated vantage points is absolutely breathtaking. The Bosphorus strait dividing the European and Asian sides of the city is a site to see.
  • The harmonious mix between modern and historical architecture can be experienced all over the city. Istanbul is certainly a city of contrasts.
  • People are incredibly welcoming and nice, they will often go out of their way to give a helping hand.
  • The food is delicious. A popular delicacy here is mehdya, which consists of mussels stuffed with rice and spices. They are sold everywhere by street vendors.
  • The country's security situation is obviously tense as you will find metal detectors at the entrances of almost every mall, hotel, university, metro and ferry station and government building.
  • The political divisions between secular modernists and conservative Islamists is glarring and obvious. People don't shy from discussing the situation with foreigners.

Cheers from Istanbul!

Thursday, January 15, 2009

Just when you thought it couldn't get worse for Dubia

Just when you thought that David Milliband, the U.K. Foreign Secretary's rebuke of Dubia's War on Terror would be the final nail in the coffin for his failed presidency, another tragically comical development takes place; Islamists have taken over bases vacated by Ethiopian troops in the Somalian capital.

So what was the point of the operations against Somalia in the first place? The Islamists are back in power. Aren't we back to square one?

Actually, negative square one. Now you have uncontrolled piracy off the Somalian coast, and more hatred from Somalian civilians for the death and destruction suffered at the hands of the Ethiopian and American militaries.

Once again, tragically comical...tragically comical.

Monday, January 12, 2009

Stiglitz on the crisis

Joseph Stiglitz is one of my favourite economists out there. I find his analyses on most pressing issues much inline with my thinking.

In this essay, written in Vanity Fair Magazine, he talks about the coming V-shaped recession and he chops down the puritanical neoliberal doctrine that calls for little, to no, government regulation in the economy. But it's not like neoliberal economists don't believe in government intervention when market failures strike. They do argue for macroeconomic policy responses to mitigate the negative effects of macro shocks to the economy. So what's the problem?

Stiglitz argues that the mainstream thinking on market failures is incomplete because it applies a theoretically static paradigm (macro exogenous shocks = big fiscal & monetary readjustements) to a very dynamic and complicated problem.

Here's what he has to say regarding the current failures we are witnessing in financial, housing and manufacturing sectors:
Isn’t it more reasonable to assume that these failures are just the tip of the iceberg? That beneath the surface lie a myriad of smaller but harder-to-assess inefficiencies? Let me venture an analogy from biology: A patient arrives at a hospital in serious condition. Now, it may be that the patient has simply fallen victim to one of those debilitating ailments that go around from time to time and can be cured by a massive dose of antibiotics. In this case we have a macro problem with a macro solution. But it could instead be that the patient is suffering from a decade of serious abuse—smoking, drinking, overeating, lack of exercise, a fondness for crystal meth—and that it has not only taken a catastrophic toll but also left him open to opportunistic infections of every kind. In other words, a buildup of micro problems has led to a macro problem, and no cure is possible without addressing the underlying issues. The American economy today is a patient of the second kind.

Saturday, January 10, 2009

Ranking the 'idea factories'

Foreign Policy Magazine gives us an interesting piece ranking Think Tanks across the globe. This piece is important because:
Until now, there has been no guide to this rapidly growing global industry. The Think Tank Index is the first comprehensive ranking of the world’s top think tanks, based on a worldwide survey of hundreds of scholars and experts. Think of it as an insider’s guide to the competitive marketplace for ideas that matter.

Thursday, January 8, 2009

2009 already a year to forget for Western Europe

This is a sad story but one all too common in the high-paced, super-mobile and border-neutral global economy of today. Dell, one of Ireland's largest employers, is packing its bags and moving to Poland after 18 years in the land of St-Patrick. Over 2000 jobs will be lost directly, and thousands in 'dependent' sectors surely to follow as a result. Limerick City, the centre of Dell's Irish manufacturing operations, will remember this for a long time to be sure.

The move, according to Dell's website, is part of "a series of simplify operations, improve productivity, reduce costs and deliver even higher levels of customer satisfaction." It is part of the company's 3 billion dollar restructuring strategy. As it stands, Poland provides lower labour-costs and a more business friendly environment (i.e. less regulations and lower corporate tax rates.)

In these hard economic times, I have a feeling many other European multinational corporations will be doing much of the same in an effort to remain competitive. With the housing market downturn in Spain and England, the shedding of jobs intensifying, and the German economy (the engine of European economic growth) on the brink of recession, 2009 is already looking like a year to forget for Western Europe.

Wednesday, January 7, 2009

Is their a sliver of hope for peace?

Here's an interview with Rami Khouri, editor of the Lebanese newspaper The Daily Star. His take on the recent conflict in Gaza is simple and to the point. The disproportionate use of force on civilian populations has historically only strengthened insurgencies and resistance movements. Israel has used grossly disproportionate force against civilians in Gaza, with over 700 dead and over 3000 injured, many of them women and children.

So if Khouri's prediction is true, will a politically stronger Hamas alter the equation and force national reconciliation with Fatah, bring about a thaw in Arab relations, and accelerate regional and international efforts towards a sustainable peace with Israel? Or will it have the opposite effect and effectively kill the peace process for the foreseeable future?

I suspect the latter for three reasons. First, Hamas must be seen as an extension of the geopolitical alliance of Syria, Iran and Hezballah on one hand, and Western backed Egypt, Saudi Arabia and Jordan on the other. A stronger Hamas will probably further divide both camps.

Secondly, it is simply too risky for Arab leaders to consider full-fledged peace negotiations with Israel at the moment for fears of the backlash from raging Arab masses. This includes the Syrians who had completed several rounds of indirect talks with Israel via Turkey and were proposing a move to direct negotiations soon.

Finally, the only hope for comprehensive peace - ironically enough - comes through Washington. Considering Barack Obama's economic problems at home, he is unlikely to give the Middle East the attention it deserves, without which peace will remain elusive.

Consider these reasons and is there a sliver of hope for peace? My heart remains hopeful, but my brain just wont buy it. Call me a pessimist if you wish.

Saturday, January 3, 2009

Tax the culprits?

The shadow financial system has come to symbolize all that is wrong with gun-ho profit-seeking at the expense of society. Its implosion has affected the real economy after credit markets dried up, investors flocked to safer grounds such as U.S. Treasury bills, companies began hoarding cash and consumers clinched their wallets ever tighter. With the world economy being interconnected as it is, the problems are compounding in the form of a global recession.

However, there is nothing like crisis to stimulate creative thinking. Mark Foley proposes a tax on credit default swaps to generate revenue for the government in bad economic times.

As he puts it:

There would be several advantages to taxing the financial derivatives market in general and the credit default swaps market in particular:

  1. The U.S. government would have a new source of revenue which would not come from the “real” economy. This is capital that is tied up in speculative instruments, so taxing it would be unlikely to affect the “real” economy, except positively.
  2. The people who bought (or buy) credit default swaps to insure their actual risks would not be taxed, as they would exchange one asset for another at the same value. This would preserve the product for a legitimate purpose. This would also take some pressure off obligors because the number of players who would be willing to bet against a company (buy credit insurance against default) for only a small gain would be reduced, allowing the companies' creditworthiness to be determined by more normal market forces, such as suppliers and banks rather than financial speculators. Corporate bond yields might narrow as people try to purchase the outstanding paper for less than the cost of the tax if they really believe a default is in the offing.
  3. If a seller of credit default insurance was “too big to fail” or, as in the case of Bear Stearns, too interconnected to fail because of its credit default swap obligations, the government would obtain a vast amount of the resources for the rescue from the tax on the winners – rescues based on such payments would be a lot cheaper for the taxpayer.
  4. If the losing institution was not “too big to fail,” the taxes would be simply net revenue for the government to use for stimulus or to reduce its own deficit.
  5. It would essentially cut back the unknown taxpayer exposure to the rest of AIG's credit default swap book as well as those in the as yet un-rescued companies and some of the banks.

Thursday, January 1, 2009

Is the West losing Turkey?

Turkey is an enigmatic country to be sure. However, its foreign policy in the past five years is becoming clearer by the day. The Turks seem to have 'refound the Middle East'. In the midst of 80 years of modernization, Turkification, secularization and democratization, the Turks have realized that closing their eyes and 'wishing' for the Middle East to go away will not bear fruit.

Some of their most important geopolitical interests are tied to the Middle East, and Ankara has awakened to the fact that following the carnage, confusion and dislocations that have haunted the region, it may now be forced to play a leading role in piecing it back together.

It is no surprise that the Turks are agitated about the crudeness and shortsightedness of the U.S. and Israel's contemporary policies in the region. In 2003, Turkey expressed its disapproval of Washington's grandiose plans to 'redraw the Middle Eastern map' by denying the U.S. permission to use Turkish airspace for launching air strikes into Iraq. Turkey made it clear that it opposed the war due to the aftereffects that would ripple across the region. It worried about the blowback of the Iraq war in two ways. One, in the form of Kurdish separatism; the other, in the form of militant Islam. The same logic underpins Turkey's unequivocal and sharp criticism of Israel's raids on the Gaza strip. The Turks seem to have figured out, like the rest of sensible observers, that Islamic extremism cannot adequately be tackled without a fair and peaceful settlement to the Israeli-Palestinian conflict.

Turkey is also looking to reassert its role in a region that it has purposely kept at arms-reach for too long. A surging domestic political Islam, in addition to Washington's failed policies in the region, and to Europe's heal-dragging on the Turkish accession issue, have forced Turkish authorities, including the army, to recalibrate assumptions and perceptions of their country's foreign policy strategy.

What we are witnessing today, with Prime Minister Erdogan's tour of the region, and with the resignation of nearly half of the Turkish representatives of the Turkish-Israeli Caucus, symbolize a neo-Middle Eastern foreign policy, and a rejection of Israel's tactics towards the Palestinian issue. The Turks feel "disrespected" by Israel. One gets the impression that the Turks feel used by Israel as well. The ease with which Israel jettisoned the Turkish mediated peace talks with Syria to strike Hamas begs the question; was Israel even serious about peace, or was the tactic only meant to test the Syrian-Iranian alliance and deceive Hamas with regards to its true intentions, all by using Turkey as a smokescreen?

As Hanifi Alır of the ruling AK party said, "The Israeli offensive slapped the hand we had put forward in friendship." The Turks are fuming, and one can easily understand why, but from this anger we may see a more engaged and assertive Turkish effort towards the Arab-Israeli conflict. Turkey is a member of NATO, and knows that it can play a much larger and constructive role as a gateway between the West and the Middle East.