The Great Debate UK

from Ian Bremmer:

G-zero and the end of the 9/11 era top 2012 risks

In a video for Reuters, Ian Bremmer discusses the biggest risks facing the markets in 2012 and says the next phase in the Middle East and the post-9/11 environment pose the greatest uncertainty:

As we begin 2012, political risks dominate global headlines in a way we’ve not experienced in decades. Everywhere you look in today’s global economy, concerns over insular, gridlocked, or fractured politics affecting markets stare back at you. Continuation of the politically driven crisis in the eurozone appears virtually guaranteed. There is profound instability across the Middle East. Grassroots opposition to entrenched governments is spreading to countries such as Russia and Kazakhstan that were thought more insulated. Nuclear powers North Korea and Pakistan (and soon Iran?) face unprecedented internal political pressure... Read the full top risks report here.

from FaithWorld:

Will the Arab Spring bring U.S.-style “culture wars” to the Middle East?

(From left: Olivier Roy, Cardinal Angelo Scola and Martino Diez of the Oasis Foundation at the conference on San Servolo island, Venice, June 20, 2011/Giorgia Dalle Ore/Oasis)

Where is the Arab Spring leading the Middle East? What will be the longer-term outcome of the popular protests that have shaken the region since the beginning of this year? Of course, it’s still too early to say with any certainty, even in countries such as Tunisia and Egypt that succeeded in toppling their authoritarian regimes. Some trends have emerged, however, and they’re on the agenda at a conference in Venice I’m attending entitled “Medio Oriente verso dove?” (Where is the Middle East heading?). The host is the Oasis Foundation, a group chaired by Cardinal Angelo Scola, the Roman Catholic patriarch of this historic city, and guests include Christian and Muslim religious leaders and academics from the Middle East and Europe.

In one of the most interesting -- and hotly debated -- presentations, the French Islam specialist Olivier Roy described the Arab Spring as “a break with the culture and ideologies that dominated the Arab world from the 1950s until recently.” It marks a clear change in the demographic, political and religious paradigms operating there, he said. The old dichotomy of the authoritarian regime or the Islamist state has broken down, he argued, and Islam is taking on a new role in the political process. In the end, the region -- or at least the states where the Arab Spring brings real change -- could see democratic politics marked not by major efforts to establish an Islamic state but by Muslim “culture war” controversies not unlike the way hot-button issues such as abortion and gay marriage emerge in U.S. political debates.

(Newly wed Egyptian anti-government protesters in Tahrir Square in Cairo February 10, 2011/Dylan Martinez)

The first trend Roy cited to back up this thesis is the sharp drop in fertility levels in the Arab world since the late 1980s and the 1990s. Several Arab countries, especially those in North Africa, now have birthrates of around two children per woman, close but still above the European average. Tunisia’s birthrate is actually lower than France's.  “The generation that is now on the job market is the last generation of big families,” said Roy, who is now director of the Mediterranean Programme at the European University Institute in Florence. “It’s a generation that has many fewer children and marries much later.”

from Breakingviews:

G8 can help transform Middle East economies

By Una Galani The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

DUBAI -- The G8 could help transform the Middle East economies. The World Bank has pledged $6 billion of aid to Egypt and Tunisia, but the summit of industrialised nations' leaders this week could go further and come up with a model to prevent the Arab spring turning into an Arab winter. A significant package backed by multi-lateral institutions would be crucial to win back investor confidence.

Financial efforts to support the region so far have been piecemeal. On top of the substantial commitment from the World Bank, there's $2 billion-plus from America, another $4 billion pledge by Saudi to Egypt, and some small enterprise funds here and there. That's a mix of lending to both governments and the private sector over different periods of time. There are also ongoing talks with the International Monetary Fund.

It's tough to assess the total needs of an entire region while it is still in motion. But a big headline figure in excess of at least, say, $15 billion to Egypt and Tunisia would help bring back foreign direct investment, even if it is just an addition of various commitments. Egypt alone says it faces a $12 billion funding gap until mid-2012. Tunisia is in slightly better fiscal shape with a fiscal deficit forecast to reach 4.3 percent in 2011.

The World Bank has set the right tone by linking its support to the pace of political reform, and focusing on reviving the private sector. But elsewhere measures are less impressive. Debt relief, as offered by America, isn't a big shot in the arm to a government like Egypt's which has low external debt and needs to diversify its creditor base, reducing its current reliance on local banks. Another challenge will be to ensure that democratic fervor doesn't end up reversing the economic reforms achieved under autocratic regimes.

Crucially, the cornerstone of any support package needs to focus on financing labour-intensive infrastructure projects that would help lower unemployment. The region needs to create 70 million jobs over the next decade. If implemented properly, publicly-financed works would have a positive multiplier effect and could quickly attract private investment. By taking up a lead role in the effort, the G8 would show its decisions can have an impact, partly addressing rising questions about its own relevance.

from The Great Debate:

Why democracy will win

Philip N. Howard, an associate professor at the University of Washington, is the author of "The Digital Origins of Dictatorship and Democracy:  Information Technology and Political Islam". The opinions expressed are his own.

The Day of Rage in Saudi Arabia was a tepid affair, and Libyan rebels have suffered strategic losses. Only two months ago, popular uprisings in Tunisia inspired Egyptians and others to take to the streets to demand political reform. Will the tough responses from Gadaffi and the Saudi government now discourage Arab conversations about democratic possibilities? It may seem like the dictators are ahead, but it’s only a temporary lead.

Ben Ali ruled Tunisia for 20 years, Mubarak reigned in Egypt for 30 years, and Gadaffi has held Libya in a tight grip for 40 years. Yet their bravest challengers are 20- and 30-year-olds without ideological baggage, violent intentions or clear leaders. The groups that initiated and sustained protests have few meaningful experiences with public deliberation or voting, and little experience with successful protesting. These young activists are politically disciplined, pragmatic and collaborative. Where do young people who grow up in entrenched authoritarian regimes get political aspirations? How do they learn about political life in countries where faith and freedom coexist?

The answer, for the most part, is online. And it is not just that digital media provided new tools for organizing protest and inspiring stories of success from Tunisia and Egypt. The important structural change in Middle East political life is not so much about digital ties between the West and the Arab street, but about connections between Arab streets.

Research has demonstrated three clear democratizing effects of the Internet, especially among young people in the region: more individuals are using the Internet to openly discuss the interpretation of Islamic texts, more people are forming individuated political identities online and creating their own media, and more citizens are actively debating gender politics and pan-Islamic identity. Satellite television has fed a transnational Middle East identity for several decades. But it is only in the last decade that people have started transnational conversations about politics and shared grievances.

Some experts thought the Internet was going to be a boon for radical voices and fundamentalist Islam. But it turns out that digital media more often push such extremists to the side, and bolster the networks of civil society groups over terrorist groups. Individuals learn that they can become sources of information, and that Dropbox accounts, Twitter, YouTube, Facebook, Google and a host of other tools provide ways for people to spread information beyond the reach of their despot.

Don’t blame politicians for pragmatic foreign ties

By Laurence Copeland

There are times when even a cynic like me has to feel some sympathy for politicians. Take the case of Libya, for example. Over the forty years of Muammar Gaddafi’s regime, relations between Britain (and our Western allies) and Libya have varied from lukewarm to cold and back to lukewarm again.

Now that this particular dictator appears to have reached the end of the road, some people are asking why the previous Government ever allowed our relations to rise above freezing point, which sounds rather as though they are trying to resurrect our long-dead (and possibly mythical) Ethical Foreign Policy. Is that feasible?

Starting with the commercial issues, how much of the world’s oil is buried under the soil (or sand) of countries that could reasonably be regarded as democracies? A glance at the statistics suggests no more than 20%, which leaves precious little scope for picking and choosing among suppliers. In exchange for oil, we sell the supplying countries a range of goods and services, notably armaments, which unsurprisingly gets the boycott lobby even more incensed.

However, their rage is likely to have little impact, given that the arms industry employs many thousands in poorer parts of the UK. Of course, if we had a properly functioning labour market undistorted by generous welfare benefits and restrictions on employers’ freedom to hire and fire – something the boycott lobby is probably in no hurry to see – we could have some confidence that cutting out arms exports would divert resources of capital and labour into other, perhaps even into new industries. But since reform is ruled out in a country as wedded to welfare as Britain, the process of reallocating resources away from the arms industry could take decades, with even more unemployment in the interim in places like Preston, where current levels are already quite high.

Moreover, as Libya explodes in rebellion, we should remember that when Colonel Gaddafi replaced King Idris, his revolution appeared to be extremely popular, and indeed lubricated by oil wealth, he seemed to enjoy considerable support until relatively recently. At which point ought we – Britain, the West -  to have decided that the popular demagogue had turned into a tyrant?

from FaithWorld:

Can Arabs learn from Turkish model of Islam and democracy?

(Turkey's Prime Minister Tayyip Erdogan in Ankara, December 2, 2008/Umit Bektas)

If President Hosni Mubarak bows to the clamor of the street and goes, Egyptians and other Arabs seeking to turn a page on autocratic government may look at Turkey for some clues on marrying Islam and democracy.

Relatively stable, with a vibrant economy and ruled by a conservative and pragmatic government led by former Islamists, Turkey has often been cited as a model Muslim democracy and a linchpin of Western influence in the region.

With a wave of unrest spreading from Tunisia to Jordan to Yemen and as calls intensify for Mubarak to start a transition soon, Middle East analysts are turning their attention to Turkey, a rising diplomatic force in the region.

"The only effective, working model in the Middle East is the Turkish model. There is nothing else," said Fatwa Gerges, professor of Middle Eastern politics and international relations at the London School of Economics. "Turkey's model serves as a foundation for similar societies so I think then in the wake of the protests Arabs will be taking a second look at the Turkish model that marries Islamic values and democracy as a universal form of government," Gerges said.

But analysts cautioned that deep differences between Turkey, a NATO partner and European Union candidate with a moderate brand of Islam, and an Arab Middle East lacking a culture of political freedom, means the model cannot be readily copied. "There is no question Turkey's example can be an inspiration in Tunisia or in Egypt, but if any Arab country would take Turkey as a model it would take it decades to emulate Turkey's political and economic development," said Fadi Hakura, associate professor at London's Chatham House think tank.

Could the Middle Eastern unrest start to unsettle financial markets?

-”Kathleen Brooks is research director at forex.com. The opinions expressed are her own.”-

The peoples of the Middle East are rising up and letting their political views be known. In Tunisia, Egypt and Yemen protestors have taken to the streets to demand political change, and in the case of Tunisia they have succeeded. These tensions between the people and their governments have caught the global media’s attention. It has also set off something of a domino effect with other autocratic regimes in the region worrying that the same could happen to them.

The protests were sparked initially by rising food prices. They are a sensitive issue in the Middle East; in Egypt, for example, they have been rising at a 17 percent annual rate. With approximately 15 percent of Egypt’s population living in poverty, the rising price of food erodes living standards and fuels resentment at governments perceived as turning a blind eye to the plight of the poor.

However, as the protests gather momentum criticism of food policies has spread to criticisms of the ruling elite and charges of corruption and economic mis-management threaten to topple more than just Tunisia’s Zine El Abidine Ben Ali. Adding fuel to the protests are high youth unemployment rates – it’s running at 35 percent in Egypt. When more than half the population is under 25, the lack of opportunities for ambitious, energetic young people is a deeply de-stabilising force.

Interestingly, the latest global economic update from the International Monetary Fund (IMF) in October 2010 sounded a note of warning on the social issues facing the Middle East. Although it noted that growth prospects had improved markedly for 2010 and 2011, it also pointed out that governments should concentrate on raising growth and creating jobs for expanding populations. Although rising oil prices will boost revenues for oil producing nations, this will come with its own challenges. The report added that rising revenue streams could fuel inflation, which would require tighter fiscal conditions. It recommended that government spending should be focused on long-term goals including social and development needs.

But what about the effects on the market?  The domestic stock markets have been hit the hardest as most currencies in the Middle East are still pegged to the dollar. Egypt’s market had to be closed after a plunge of more than 10 percent in a matter of minutes last week. The Bloomberg GCC 200 stock index has also come off its highs. Added to this, Egypt’s sovereign credit outlook was revised to negative from stable by a leading credit ratings agency. But so far the problems haven’t spread to global financial assets and outside of the Middle East risky assets have continued to perform well.

In the short-term, as protests continue, hot money flows will abandon the markets of the most troubled nations, or those that look like they could be next, which will hurt domestic asset prices. There could be more credit rating downgrades and depending on the duration of the protests they might hit first quarter growth. But, in the long-term a change of government for some of these nations may be no bad thing. Getting rid of corrupt (Tunisia) or tired governments such as the 30-year regime of Egypt’s Hosni Mubarak may be no bad thing. These old autocracies are falling behind the pace of change that is transforming the daily lives of their citizens who have information at their finger tips and use social media sites and mobile phones like their counterparts in the west. But a concomitant rise in living standards hasn’t materialised with the introduction of new technology and the people want this to change.

What WikiLeaks reveals about the changing map of global power

-Andrew Hammond is a Director at ReputationInc. The opinions expressed are his own-

The WikiLeaks release last month of around a quarter of a million classified U.S. State Department documents has, by critics, been variously characterised as the “September 11 of world diplomacy” (Italian Foreign Minister Franco Frattini); an “attack on the international community” (U.S. Secretary of State Hilary Clinton); and a threat to “democratic sovereignty and authority” (French Government Spokesman Francois Baroin).

Debate will long continue, across the world, about the rights and wrongs of WikiLeaks’ actions. Nevertheless, there can be no doubt that the episode has, highly regrettably, caused not inconsiderable damage to the United States.

Underlying many of these issues is the fundamental question of what the Wikileaks affair reveals about the changing map of influence and power in a world that continues to be transformed by the information revolution and economic globalisation. To date, these forces have generally reinforced U.S. pre-eminence for several reasons, including the country’s relative technological edge over much of the rest of the world (which will decrease over time); the fact that its dominant culture and ideas are very close to prevailing global norms; and its multiple channels of communication which help to frame global issues.

However, as the WikiLeaks’s releases underline, this emerging environment has simultaneously raised new challenges not just for the United States, but for all countries. For instance, with technological advances leading to vast increases in information, international publics have generally become more sensitive to “spin” and propaganda. Here, governments must not just compete for credibility vis a vis their foreign counterparts, but also with new actors such as Al-Jazeera and indeed WikiLeaks.

Information that appears to be spin or propaganda, or indeed sensitive leaks that are damaging, can undermine the credibility of a country and/or its government. For instance, pre-war intelligence controversies about Iraq damaged the reputation both of the United States and United Kingdom, and also of the Blair and Bush administrations.

In this current context, key dangers from the WikiLeaks episode for Washington (and certain of its allies) is potential backlash from some international publics, and also foreign elites proving more cautious in sharing information and cooperation going forwards. As Representative Peter Hoekstra, the ranking Republican on the House of Representatives Intelligence Committee has asserted, a “catastrophic issue here is a breakdown in trust”.

from Global News Journal:

Perilous predictions for 2011

It’s the season to be merry - and to make forecasts about next year. Across the finance industry fine minds spend December crafting outlooks and extrapolations about how the world will fare, in the hope of a decent return over the next 12 months and avoiding the bear traps that will swallow an investment. The banks, strategic advisories and political risk consultants trumpet their analytical prowess, of course, but are also meeting a natural human need to peer into the future. We all want guidance to take the sting out of living in an uncertain world.

Nowhere is prediction more fraught with peril than in politics and world affairs. The success rate is in inverse proportion to the costs that unexpected acts in the real world can impose on the investor. So despite the difficulty of providing a reliable guide to the future there are huge incentives to try to chart the way ahead. Here's  Control Risks, a risk consultancy firm, on its view of 2011, while competitor Eurasia reveals in early January, as does the World Economic Forum. Nomura has a list of 10 political challenges to prosperity that range from the prospect of gridlock in US domestic politics to brinksmanship on the Korean peninsula.

So which voices warning of political perils should one heed? There’s a crowded field of commentators, perhaps because political outcomes are not as reducible to numbers as economic indicators, where the industry of forecasting has statistical validity. If you work for a well-known investment bank or strategic studies institute your thoughts carry  institutional gravitas. However, and this is somewhat a statement of the obvious, only a track record of smart forecasting earns you an audience. That, and saying something worthwhile. Worse than getting a prediction wrong is being so blandly vacuous and broad in scope that your forecasts are both right and uninformative.

Respected voices suggest that beyond pointing to areas of dispute and potential tension, political forecasters are attempting the impossible. “The science of prediction is a contradiction in terms,” says Nigel Inkster, a former British intelligence officer who analyses international political risk at the International Institute for Strategic Studies in London. “There are so  many potential variables that could come together in so many potential configurations that it is really difficult to identify anything about which you can be really confident,” says Inkster.

“You can look at the line up of forces and make some broad predictions, for example on the likelihood of trouble around the referendum in Sudan. But so much there depends on decisions not yet taken,” he says, referring to January’s plebiscite where south Sudan may vote to secede. “And when you get into assigning probabilities (to outcomes), that’s not very helpful.”

Reuters tries to gauge political risks with appropriate cautions in mind. We reckon it is possible to use our expertise to diminish surprise and anticipate both dangers and opportunities. How well do we do? Our 2010 outlook focused on sovereign debt default, a hung parliament in Britain and tension between China and the United States. Those were borne out, unlike our prediction that Kevin Rudd would easily be re-elected in Australia. (He was ousted in a party coup in June and his successor Julia Gillard scraped into power). For comparison's sake look at the 2010 predictions from Eurasia.

from The Great Debate:

America, Iran and a terrorist label

Bernd Debusmann is a Reuters columnist. The opinions expressed are his own.

Who says that the United States and Iran can't agree on anything? The Great Satan, as Iran's theocratic rulers call the United States, and the Islamic Republic see eye-to-eye on at least one thing, that the Iranian opposition group Mujahedin-e-Khalq (MEK) are terrorists.

America and Iran arrived at the terrorist designation for the MEK at different times and from different angles but the convergence is bizarre, even by the complicated standards of Middle Eastern politics. The United States designated the MEK a Foreign Terrorist Organization in 1997, when the Clinton administration hoped the move would help open a dialogue with Iran. Thirteen years later, there is still no dialogue.

But the group is still on the list, despite years of legal wrangling over the designation through the U.S. legal system. Britain and the European Union took the group off their terrorist lists in 2008 and 2009 respectively after court rulings that found no evidence of terrorist actions after the MEK renounced violence in 2001.

On July 16, a federal appeals court in Washington instructed the Department of State to review the terrorist designation, in language that suggested that it should be revoked. But Hillary Clinton’s review mills appear to be grinding very slowly.

A group of lawmakers from both parties reminded Clinton of the court ruling this week and drew attention to a House resolution in June -- it has more than 100 co-sponsors and the list is growing -- that called for the MEK to be taken off the terrorist list. Doing so would not only be the right thing, the six leading sponsors said in a letter, it would also send the right message to Tehran. Translation: using the terrorist label as a carrot does not work, so it's time to be tough.

Come January, when a new, Republican-dominated House of Representatives begins its term, Clinton and President Barack Obama are likely to come under pressure from hawkish members of congress to act tough towards Iran, further tighten economic sanctions and ensure that those already existing don't erode.