G-20's Summit of fear

By S.V. Vaidyanathan IAS (Retd.)

The $ 1.1 trillion shock therapy is not going to cure the disease with which the world economy is infected, thanks to the American profligacy. Printing the green buck, to satiate the ever greedy American consumers, financial institutions and war mongering has ruined the world economy and the financial sin of the world's largest economy has to be shared by the rich and the poor in equal measures. This is what is being called global economic meltdown. Both developed and developing countries grouped in G-20 are engaged in fire fighting to salvage the economy for future generation to live peacefully.

But there was the problem with the summit in London on April 2: It was all show. What the show masked was a very deep worry and fear among the global elite that it really didn't know the direction in which the world economy was heading and the measures needed to stabilize it.

The latest statistics are exceeding even the gloomiest projections made earlier. Establishment analysts are beginning to mention the dreaded "D" word and there is a spreading sense that a tidal wave just now gathering momentum will simply overwhelm the trillions of dollars allocated for stimulus spending. In this environment, the G-20 conveys the impression that it is more

commanded by than in command of developments (In addition to the seven wealthy industrial nations (the US, Japan, Germany, the UK, France, Italy and Canada) that belong to the Group of Seven, the G-20 includes China, India, Indonesia, Mexico, Brazil, Argentina, Russia, Saudi Arabia, Australia, South Korea, Turkey, Italy, and South Africa.).

The current capitalist crew manning the global economy doesn't know whether Keynesian methods can re-inflate the global economy. Meanwhile, an increasing number of people are asking whether using a clutch of Social Democratic-like reforms is enough to repair the global economy, or whether the crisis will lead to a new international economic order.

The most problematic component of the G-20 solution is its proposals for the IMF. The US and the European Union are seeking a doubling of the capital of the IMF from $ 250 billion to $500 billion. The plan is for the IMF to lend these funds to developing countries to use to stimulate their economies, with US Treasury Secretary Tim Geithner proposing that the fund supervise this global exercise. If ever there was a non-starter, this is it.

First of all, the representation question continues to exercise much of the global south. So far, only marginal changes have been made in the allocation of voting rights at the IMF. Despite the clamour for greater voting power for members from the south, the rich countries are still overrepresented on the fund's decision-making executive board. Developing countries, especially those in Asia and Africa, are vastly underrepresented. Europe holds a third of the chairs in the executive board and claims the feudal right to have a European always occupy the role of managing director. The US, for its part, has nearly 17 per cent of voting power, giving it veto power.

Second, the IMF's performance during the Asian financial crisis of 1997, more than anything, torpedoed its credibility. The IMF helped bring about the crisis by pushing the Asian countries to eliminate capital controls and liberalize their financial sectors, promoting both the massive entry of speculative capital as well as its destabilizing exit at the slightest sign of crisis.

The fund then pushed governments to cut expenditures, on the theory that inflation was the problem, when it should have been pushing for greater government spending to counteract the collapse of the private sector. This pro-cyclical measure ended up accelerating the regional collapse into recession. Finally, the billions of dollars of IMF rescue funds went not to rescuing the collapsing economies but to compensating foreign financial institutions for their losses - a development that has become a textbook example of "moral hazard" or the encouragement of irresponsible lending behaviour.

Finally, there is the question of whether the fund knows what it's doing. One of the key factors discrediting the IMF has been its almost total inability to anticipate the present financial crisis. In concluding the 2007 Article IV consultation with the US, the IMF board stated that "the financial system has shown impressive resilience, including to recent difficulties in the sub-prime mortgage market." In short, the fund hasn't only failed miserably in its policy prescriptions, and despite its supposedly top-flight stable of economists, it has drastically fallen short in its surveillance responsibilities.

However large the resources the G-20 provide the IMF, there will be little international buy-in to a global stimulus program managed by the Fund.

The north's response to the current crisis, which is to revive fossilized institutions, is reminiscent of Keynes's famous saying: "The difficulty lies not so much in developing new ideas as in escaping from old ones." So, in Keynes's spirit, let's try to identify ways of abandoning old ways of thinking.

First, since legitimacy is a very scarce commodity at this point, the UN secretary general and the UN General Assembly - rather than the G-20 - should convene a special session to design the new global multilateral order. A Commission of Experts on Reforms to the International Monetary and Financial System, set up by the president of the General Assembly and headed by Nobel Prize laureate Joseph Stiglitz, has already done the preparatory policy work for such a meeting. The meeting, like the Bretton Woods Conference, would be an inclusive process, and like Bretton Woods it should be a working session lasting several weeks. One of the key outcomes might be the setting up of a representative forum such as the "Global Coordination Council" suggested by the Stiglitz Commission that would broadly coordinate global economic and financial reform.

Second, to immediately assist countries to deal with the crisis, the debts of developing countries to northern institutions should be cancelled.

Third, regional structures to deal with financial issues, including development finance, should be the centrepiece of the new architecture of new global governance, not another financial system where the countries of the north dominate centralized institutions like the IMF and monopolize resources and power.

These are, of course, immediate steps to be made in the context of a longer-term, more fundamental and strategic reconfiguration of a global capitalist system now on the verge of collapsing.

The current crisis is a grand opportunity to craft a new system that ends not just the failed system of neo-liberal global governance but the Euro-American domination of the capitalist global economy, and put in its place a more decentralised, deglobalised, democratic post-capitalist order. Unless this more fundamental restructuring takes place, the global economy might not be worth bringing back to the surface. And G-20 like jamboree is not going to resolve the world economic crisis. INAV

SCO in search of itself

By K.Raghunath

India was represented at the Shanghai Cooperation Organisation (SCO) conference on Afghanistan in Moscow by Prime Minister's special envoy, Satinder Lambah. During the conference, Lambah expressed resentment against treating any section of the Taliban as "good". The Indian Government has been worried that the Obama administration wants to reach out to the so-called "good Taliban", the moderate section of the terrorists in Afghanistan-Pakistan in a bid to control the war situation there. But in Indian perception there is nothing like "good or bad Taliban, and they are all terrorists." United Nations Secretary-General Ban Ki-moon and senior officials from the US the European Union, North Atlantic Treaty Organization (NATO) and other international organizations participated in the conference.

Indian policy is aimed at stabilizations in Afghanistan, by way of giving emphasis to developmental initiatives and military and security components in creating a zone of peace.

India currently has observer status in the SCO. Members of the SCO have encouraged India to join the organisation as a full-time member. With the world's second largest standing army, fourth largest (PPP) and second fastest growing major economy, and an increasing political and economic clout, India is seen by SCO members as a crucial future strategic partner. Additional factors working in favour of India joining the SCO are its major military presence in Central Asia, its close military ties with several Central Asian countries (especially Tajikistan and Russia) and also its deep interest in the region's energy resources. Factors working against India's joining the SCO as a member include India's persistent military rivalry with fellow SCO-observer Pakistan, its nascent strategic tilt towards the United States and its general reluctance to make binding ties to groups that could compromise its strategic independence.

The SCO has acquired some heft since its birth in 2001. But how it picks its way across the minefield of different, at times conflicting interests -- in the shadow of giants China and Russia - remains its biggest challenge in the coming years.

The environment in which the SCO finds itself reflects many of the issues that have come to the fore in the decades after the Cold War -- the challenge of terrorism, how to address domestic issues, how to cooperate in the area of economics and freer trade, but also how to deal with touchy matters like hosting U.S. military presence, and which countries to have as future members.

As the European Union's special representative to Central Asia Pierre Morel put it, the SCO - whose members are the Central Asian states of Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan, and China and Russia - is a "mirror of the new trends of an unstable world and a barometre of new relationships in the making in the Eurasian arena".

Indeed, debate continues about the shape and direction of the organisation that was formed in Shanghai seven years ago.

Some see it as a venue where China and Russia flex their muscles in Central Asia. Others have called it a "NATO (North Atlantic Treaty Organisation) of the east", as Richard Weixing Hu of the Brookings Institution and the University of Hong Kong noted at a seminar here on 'Shanghai Cooperation Organisation: A New Regional Kid on the Block?' Some see it as a challenge to the west, but others see its potential for strengthening cooperation in a region that is coming into its own after the Central Asian states' independence from the Soviet Union nearly two decades ago.

Russia tends to see the SCO as more of a discussion forum, while China favours its becoming a formally structured organisation. The SCO's formation, after all, was China's first initiative in forming regional organisations like this.

In 2005, the SCO issued a statement calling for a timetable for the withdrawal of U.S. bases from the Central Asian republics, one that had many observers branding it an anti-US one. It also held small-scale joint military exercises from 2003 to 2007.

Today, SCO members continue to have different positions on hosting foreign military presence. At last year's summit in Bishkek, Kyrgyzstan, the summit statement did not even mention the matter of foreign troops because the government did not want the issue of US air bases it hosts in Manas - close to the Chinese border of Xinjiang discussed.

There was no "grand design" to the SCO, and that outsiders tended to attribute too much to theories of it being a foil to Western geopolitical blocs. What has been happening has actually been quite pragmatic. Confidence-building measures" in the SCO that are similar to the European Union's earlier support to Central and Eastern European countries.

For the European Union, its approach to SCO will be "operational", seeking concrete cooperation in areas such as narco-trafficking that it considers a priority issue. The EU has always had a fairly relaxed approach to the SCO. Another challenge is membership in the SCO, because criteria for membership are far from established. Pakistan, Afghanistan, Iran, Turkmenistan and India have been identified as potential members, but how SCO expands - whether towards the Caspian Sea or toward South or South-west Asia, or towards a 'Greater Central Asia' - remains to be seen.

For now, what is clear the SCO is still searching for its centre of gravity and even the leaders of the organisation recognise that? There has been a lot of talking but we still don't see substantive action (in many areas). The key challenge is what kind of regional architecture can we envision in the region?" INAV

War within Pakistan

By Sushil Vakil

The old adage that only the wearer knows where the shoe pinches has been proved right by the politicians as well as media of Pakistan. Till some time back, these very leaders and the media-both print and electronic-had been always on the forefront to criticise India for blaming ISI and Pak based terrorist groups after every strike. Frankly, people on the other side of the fence never felt so upset as they seem to be now. Particularly after every terror strike on its people by the operatives of Al-Qaeda, Taliban, LeT, JeM and other dreaded Islamic groups.

So far, Pakistani leaders and the media never condemned the role of any agency or a militant group as pointed out by India. Even the major terror strikes like attack on Parliament House, Mumbai hotels, Mumbai trains, Akshardam Temple Ahmeda- bad, Delhi, Varanasi etc which claimed hundreds of lives had not moved the Pak politicians or Journos to the extent as they are moved now. There was neither any show of sympathy with the victims nor any suggestion to Pakistan establishment to act against the Jihadis or to dismantle terror structure from its soil. Instead, there had been big news items from Jihadi leaders and terror masterminds glorifying the fidayeens behind these attacks. Apart from that, newspapers carried huge advertisements placed by fundamentalist organisations appealing for funds to run the training camps in the guise of Madrasas. Moreover, the media accorded a sizable space to print the venomous speeches made by Jihadi leaders against India and its forces.

There is no doubt that Pak is now facing more deadly attacks than India. It is now being admitted by all and sundry that the perpetrators of attacks are none other than terrorist groups trained and supported by Pakistan. Monday's attack on a police training school in Manawan is the clearest reminder yet that Pakistan is slowly but surely losing the battle against extremist elements on its soil. Suicide bombings and gun battles are occurring with frightening regularity and neither the Government nor the military seems to have a cohesive strategy to tackle the menace. Apparently, Pakistan's obsession with gaining a strategic depth in Afghanistan and its policy of bleeding India with a thousand cuts have led to its losing control over the Hydra-headed monster it created.

Undoubtedly, with the manifold increase in frequency and magnitude of terror strikes within its geographical territory in recent times the media has realised that the extremists groups are none but those once nurtured by Pakistan to act against the Soviets in Afghanistan, and carry out the holy war 'Jihad' against India to set Kashmir free, have now also turned against Pakistan. The Lashkar-e-Taiba (LeT), which has been charged with carrying out the November 2008 terror attack on Mumbai, is considered to have a strong hold in Lahore.

As Monday's attack on the police training academy has proved that outlawed terror groups have established firm grip of the country, there have been condemnations from all sides. President Asif Ali Zardari and Prime Minister Syed Yousuf Geelani strongly condemned the attack that killed several people. They said terrorism and extremism would be rooted out with full force from the country and vowed that the perpetrators of such heinous crime would be brought to justice. Ameer Jamaat-e-Islami Qazi Hussain Ahmed and newly elected JI Ameer Syed Munawar Hassan too condemned the terrorist attack. Chairman Pakistan Awami League and former federal minister Sheikh Rasheed Ahmed condemned the terrorist attack saying that it was a matter of great concern for the present regime. Naib Ameer Jamaat-e-Islami Liaqat Baloch said that terrorist attack in Lahore was the consequence of continuing Musharraf's polices. Chairman Tehreek Minhaj-ul-Quran Dr Tahir-ul-Qadri urged the government to take effective measures to combat terrorism. He said that the terrorists had no religion and stringent action should be taken against them.

Condemning the attack, Chairman Jamiat Ulema-e-Islam Senator Maulana Samiul Haq said the terrorist attack was a conspiracy of intelligence agencies of enemy states. Chairman Markazi Jamiat Ulema-e-Pakistan MNA Haji Fazal Karim said that the US, Israel and India were involved in the terrorist attack in Lahore. Acting Ameer of banned Jama'at-ud-Dawa Hafiz Abdul Salam has said that anti-Islam and anti-Pakistan elements were hatching conspiracies to destablise Pakistan. Condem ning the terrorist attack, he urged the government to take serious notice of increasing wave of terror and take effective measures to provide exemplary punishment to anti-state elements. President Pakistan Democratic Party Nawabzada Mansoor Ahmed Khan and Quaid Khaksar Tehreek Hameed-ud-Din Mashraqui termed the terror attack as conspiracy against the country.

What is clearly lacking here is the will to fight. Those who bear the brunt of terrorism are willing to fight back, as proved by the brave police action that defeated Baitullah Mehsud's plan to take hostages and extract concessions at Manawan. But the will is divided at the level of thinking at various levels in the country. Commentators on TV and in newspapers still prefer to cling to the line that "it's not our war", even after Baitullah Mehsud's declared challenge. Given this state of affairs, the readiness Pakistan needs to confront the challenge is being adversely affected."

Baitullah Mehsud knows that his war will ultimately be with the police. In 2005 he killed 113 of them; in 2007 he killed 1,820. It was a slaughter of the lambs that should not be allowed to go on. At Manawan, the police proved that it is capable of taking on the terrorists and protect the citizens despite its bad state of preparedness. Let us increase its competence. That will also strengthen our will to fight back."

The duplicity maintained by Pakistani leaders and the media in viewing and condemning the terror attacks in India and Lahore differently clearly indicates that they want the people of their own country safe and not of the other countries.