Cleaning up Ukraine

Will what worked in Georgia work in Ukraine? It will if it is up to Davit Sakvarelidze, deputy prosecutor general of Ukraine and the chief prosecutor of the Black Sea city of Odessa.

L. Todd Wood writes:   Ukrainian President Petro Poroshenko has brought in veterans of the country of Georgia’s reform process to help Ukraine remove the legacy of decades of Soviet and oligarchic corruption. Sakvarelidze, appointed to the national post in February 2015, and to the Odessa post several weeks ago, is attempting to bring change to the one state organization that has most resisted the political reforms sweeping the country, the General Prosecutor’s Office, which enjoys very low trust among the Ukrainian people – indeed, for good reason. I sat with Sakvarelidze last week, during a visit to the Academy of Prosecutors in Kyiv, to discuss the challenges ahead of him. The place was teeming with young, energetic applicants making their way through the new selection process. There seemed to be a pervasive, youthful motivation, albeit possibly naive, with the people I met while engaged at the facility.

Along with former Georgian Prime Minister Mikhail Saakashvili and others, Sakvarelidze is working to bring trust in government to the Ukrainian people.

Sakvarelidze is attempting to overhaul the General Prosecutor’s Office and remold it into a professional force that can deal with the sickness destroying Ukrainian society. The number of prosecutorial positions have been reduced significantly and all candidates, even current hires, must undergo rigorous testing and training to be accepted into the new reality. More than 700 positions must be filled.

The entire effort is behind schedule. In fact, the newly created National Anti-Corruption Bureau cannot begin its work until the prosecutor’s office is up and running. Yet Sakvarelidze is optimistic and seems determined.

“Political changes have reshaped the political structure, but the Prosecutor General’s Office has not changed; the system has remained the same. Now we are trying to correct it,” he recently said at the 12th Yalta European Strategy Annual Meeting in Kyiv.

Regulatory reform should also be a big part of the anti-corruption effort, according to Sakvarelidze; the ability for bureaucrats to siphon cash from the public needs to be reduced. In Georgia, the time needed to get a new passport was reduced to 60 minutes.

The stakes for Ukraine are huge. There have been many half-baked anti-corruption campaigns in the past that lacked the political will for real reform. This time Sakvarelidze hopes it’s different. “It is not just Ukraine who will feel the pain if we fail. Ukraine is the gateway to Europe, a wall against the tide of Soviet-style corruption. I’d hate to think of the consequences to Europe and the world if we fail.”

Cleaning up Ukraine

Is Statebuilding the Answer in the Middle East

Judy Demsey writes:  Russia’s recently launched bombing of opposition targets in Syria is a brutal reminder of the decline of Western influence in the Middle East and North Africa.

In Afghanistan, the growing military might of Taliban fighters, who are now in open warfare with Afghan security forces, has exposed the weaknesses of the NATO-led mission in that country. Since the alliance’s withdrawal from Afghanistan in December 2014 after an eleven-year stint there, the country is lurching into another war.

Meanwhile, the United States’ decision to leave Iraq in December 2011, when the government in Baghdad was paralyzed by sectarian interests and the security forces were unprepared for later taking on the so-called Islamic State, has plunged the country into a new war.

And don’t forget Libya, where in March 2011 a NATO-led mission used its United Nations mandate, anchored in the responsibility to protect, to get rid of Libyan strongman leader Muammar Qaddafi. But NATO didn’t bother to consider the day after. The vacuum was filled by a plethora of competing tribes, Islamist forces, and a handful of genuine democrats. State building is not their priority, nor was it NATO’s.

The European Union’s 28 member states are now collectively faced with three unpalatable truths that expose Europe’s appalling lack of strategy, foresight, and understanding of crisis management.

The first is Europe’s – but also the United States’ – inability to do state building. The second is the questionable impact of hard power. The third is the fallout of wars: millions of refugees on the move, fleeing the areas of conflict.

The EU provided over €3 billion ($3.3 billion) in development aid and humanitarian assistance to Afghanistan between 2002 and 2013. In that time, the Afghans could boast how many girls were attending school for the first time and how many women were now able to work.

But neither the EU nor the United States was able to build strong state institutions that could preserve some of those gains. That would have required decades of commitment that the West was unwilling to invest.

Now, a mixture of deeply entrenched corruption, traditions, ethnic rivalries, and Taliban forces that never disappeared from the scene is coming back with a vengeance to undo the West’s intervention. Indeed, once it became clear that NATO’s military operation in Afghanistan was to be replaced by a small training mission, many competing groups quickly exploited the ensuing security vacuum.

The same could be said of Iraq. The 2003 U.S.-led military invasion, which actually destroyed the country’s preexisting state institutions, was not followed up by a sustained effort to build new ones. Libya is also another case in point.

The second issue is the efficacy of hard power. Military means can only be successful if they are followed up by a very long-term state-building strategy aimed at supporting and institutionalizing democracy.

This is what happened in Germany and Japan after 1945. That U.S. commitment was unqualified. Certainly, the Cold War played a crucial role in persuading the United States of the strategic need to bring stability to Western Europe and build democracy in Germany and Japan.

Had the United States neglected state building, America’s hard power would have been squandered. It would have done untold damage to postwar Europe’s stability, prosperity, and ability to defend itself against the Soviet Union. In short, without the duality of hard power and a long-term policy of soft power, countries have little or no chance of being stable.

In this context, Russia’s bombing of forces opposed to Syrian President Bashar al-Assad’s regime has little to do with the day after the conflict in terms of rebuilding state institutions. Indeed, Russian President Vladimir Putin’s decision to intervene militarily in Syria could repeat the same mistakes of 1979, when the Soviet Union invaded Afghanistan to protect Moscow’s ally in Kabul.

Finally, Europe (after Jordan, Lebanon, and Turkey) is now picking up the pieces of these military ventures. Precisely because there are no stable, functioning state institutions – let alone the faintest hope of peace and freedom in several Middle Eastern countries – refugees are on the move.

And if any European government believes or hopes that Russia’s bombing campaign will end the flow of refugees, they are deceiving themselves. This is the new reality that European governments will have to accept.

It is questionable, however, whether Europe’s helplessness in the Middle East and its struggle to cope with refugees will make EU governments consider the miserable weaknesses of their foreign, security, and development aid policies.

State Building in the Middle East

TPP On the Way

On the rocky road to globalization

Twelve Pacific Rim nations, including the United States and Japan, have agreed to lower tariffs and take other steps to increase trade, an official told CNN.

The Trans-Pacific Partnership, long sought by President Barack Obama, will be announced at a news conference later this morning.

TPP

 

Progressive Alternatives to Whining

Andres Velasco writes:  Latin America has a new export: populist backlash. It first landed on the warm and receptive shores of the Mediterranean, nurturing support for Greece’s Syriza and Spain’s Podemos. Now it has reached the United Kingdom.

Corbynismo, the ideology of the long-marginalized British MP Jeremy Corbyn – who admired Venezuela’s late president, Hugo Chávez, thinks Vladimir Putin was justified in invading Ukraine, and now heads Britain’s venerable Labour Party – sounds familiar to anyone acquainted with Latin America.

Of course, this new populism (Hillary Clinton’s Democratic rival Bernie Sanders is also a card-carrying member) has much fodder. But being mad is not the same as being right. The new European populists are parlaying legitimate frustration into a misguided set of policies that can only produce more of the same. Latin Americans learned this the hard way in decades past. Europeans (and perhaps Americans) may be about to as well.

Three conceptual confusions cause Corbynismo to get crucial matters completely wrong.

The market for potatoes is not like the market for loans. Yes, bankers are greedy. And, yes, financial markets require close supervision and regulation. But what is true of financial markets need not be true of other markets.

Financial markets are not disciplined by the threat of bankruptcy. When banks get into trouble, governments always save them or wish they had (think Lehman Brothers). Regulation needs to provide the discipline that markets cannot.

But followers of Corbynismo are wrong to infer that the ills of financial markets infect all other markets, all the time. Countries, whether rich or poor, do not need a Potato Supervisory Board with new and enhanced regulatory powers.

It is great to be Keynesian – but during both halves of the cycle. Yes, orthodox economists of (mostly) Teutonic origin peddle a lethal fiscal-policy prescription. When the economy is booming, they claim, expenditure must be cut.. When the economy is tanking, expenditure also has to be cut in order to restore confidence and revive investment. For some European economies, this prescription has caused a needlessly long recession.

The way to render an aggressively counter-cyclical fiscal policy feasible is by relying on modern budget rules.

We did this in Chile during the copper price boom of 2006-2008, running budget surpluses of up to eight percentage points of GDP. When Wall Street melted down, we had the fiscal room to apply one of the most aggressive anti-crisis plans anywhere.

There is nothing inevitable or God-given about suffering, injustice, and inequality. That is why modern social democrats and progressive liberals are eager to right social wrongs. But effectiveness requires agnosticism about the policies required to achieve lofty ends.

Consider health care. Different things work differently in different places. Britain has a single payer and a single service provider: the National Health Service. Canada has a single public payer but mostly private providers. Obamacare establishes a public mandate to buy private insurance (with public subsidies for the poor) to finance services provided by (mostly) private hospitals and clinics.

Alternatives

Mining CEO on Trial for 29 Deaths in US

Rarely is a US CEO held accountable for the activities of the company he leads. Donald Leon Blankenship, former CEO of the now defunct Massy Energy Company is on trial for the death of 29 miners in the explosion at the company’s Upper Big Branch deep mine in Montcoal, West Virginia on April 5, 2010. Three invstigators have concluded that his methods contributed to the  explosion . This is the first time in 150 years of Appalachian mining that a top boss of a coal firm has ever had to answer for how he ran his company.

Mining Deaths

Entrepreneur Alert: Space Internet

The race for Internet service from space is on, again.

After a series of failed satellite Internet projects over the past two decades, fresh investment is coming into the sector, and at least three high-profile projects are moving forward.

OneWeb, a London-based consortium backed by tycoon Richard Branson, announced in June it had raised $500 million from investors including Airbus, Qualcomm and Intelsat to advance its plan for satellite broadband to underserved parts of the world.

Also this year, U.S.-based space exploration firm SpaceX secured a $1 billion investment that could help founder Elon Musk’s plan to build a satellite Internet network, with backing from Google and the financial firm Fidelity.

U.S.-based LeoSat, backed by Europe’s Thales Alenia Space, is also working on a satellite broadband project aimed at business. And Samsung outlined plans in a research report this year “to make affordable Internet services available to everyone in the world via low-cost micro-satellites.”

The projects seek to launch hundreds of low-orbit satellites to beam the Internet from space. The initial costs could be high, but would avoid the expense of building ground-based systems for wired or wireless broadband.

If the plans sounds familiar, we’ve seen this before.

Teledesic, a 1990s project backed by Microsoft’s Bill Gates and Saudi royal family investors, died before it went into service, as did another venture called SkyBridge, whose assets were eventually acquired by OneWeb.

Greg Wyler, chief executive of OneWeb, said much has changed since Teledesic abandoned its “Internet in the sky” plan more than a decade ago: the cost of satellite technology has come down, and most people now realize that connectivity is needed to spur economic development.

“If your goal is to end extreme poverty, boost the things that contribute to economic growth like health care and education, all of those things sit on a foundation of connectivity,” Wyler said.

OneWeb plans to begin launching its 648 low-orbit satellites in 2017, and begin connecting customers by 2019, Wyler said.

The company has “contractual arrangements” to operate in more than 50 markets and is looking at a broad global footprint.

“More than half the world is not connected,” he said.

In some developed markets like the United States, individuals who live in remote areas could subscribe to Internet broadband. In developing countries, it may be schools, health care centers and other government entities.

“Our technology fundamentally reduces the cost of connectivity,” he said.

An equally ambitious plan is being developed by Musk and SpaceX, which could launch as many as 4,000 satellites.

Musk said on Twitter that he sees “advanced micro-satellites operating in large formations” that would provide “unfettered (Internet access) certainly and at very low cost.”

Details of the SpaceX plan are still sketchy, but the company filed plans with the U.S. Federal Communications Commission to begin testing. Eventually, FCC approval could allow the SpaceX project to offer broadband services globally.

LeoSat’s plan calls for between 78 and 108 satellites for a broadband network aimed at high-volume business customers such as major corporations, governments, maritime operators and the oil and gas industry, said Chief Executive Mark Rigolle.

While LeoSat, a startup created in 2013, is aiming at only a few thousand customers, it can also serve as a “backbone” for other operators, which would mean millions could use its connections.

“We want to become ‘fiber from the sky’ from anywhere to anywhere,” Rigolle said.

“It’s not a product that is available in today’s market.”

The company was created by former oil and gas industry executives who understood the need for better connections in remote parts of the world, Rigolle said.

These low-earth orbit systems require more satellites but can cover areas not served by the higher-orbit systems, with better connectivity because of faster transmission speeds.

Rigolle said LeoSat will be able to transmit around the globe “from satellite to satellite without ever touching the ground,” create a system which is “effectively faster than fiber” and more secure.

Scott Pace, director of the Space Policy Institute at George Washington University, said now may be an opportune time to launch a space broadband service because of advances in technology and growing needs for connectivity.

“Space has a lot of natural advantages” over terrestrial systems, he said.

“Space systems provide a way to cover massive amounts of territory very quickly, and the new satellites are increasingly sophisticated.”

Because growing numbers of people around the world rely on wireless broadband, Pace said that “demand is more intense than in the 1990s and satellite systems have a chance of meeting that demand and being a player.”

Still, he said it is not clear if satellite systems can compete effectively with ground-based systems. And he said that any new entrant will still have to compete for airwave spectrum and deal with regulators in various countries.

With a number of satellite firms competing, it is not clear if all will survive.

Space Internet

Japan Has No Room at the Inn for Refugees

Responding to the Syrian refugee crisis worldwide.  Abe of Japan writes a check.

Nancy Snow writes: Last year, 5,000 people applied for refugee status in Japan. 11 were accepted.

Japan is a strong target for refugee criticism because of its modest engagement in social media and global communications. Typically, it doesn’t proactively make its case to the world, largely allowing the international press and the Twitterverse to frame its issues for it.

The Washington Post article, comparing the refugee response of Europe with Japan’s closed doors, quotes heavily from Twitter messages that argue for opening the doors to refugees in Japan.

Accepting refugees to Japan is not unprecedented, just very limited. Between 1978 and 2005, Japan accepted over 11,000 Indo-Chinese refugees fleeing the Vietnam conflict. Japan was the first Asian country in 2010 to participate in the United Nations High Commissioner for Refugees’ resettlement program, a pilot program to bring 90 Myanmar refugees from Thailand over the course of three years.

Where Japan shines is in providing assistance as a leading humanitarian nation. It is a top official development assistance (ODA) country, just below the United States, United Kingdom and Germany. International aid ostensibly greatly improves the lives of refugees. But because Japan is not a top host nation for refugees, it is vulnerable to critical global media stories singling it out as a rich country that takes in the least refugees. In contrast, Germany is celebrated for opening arms wide to take in up to half a million refugees. Germany may be facing incredible burdens from this population infusion, but its liberal refugee policy blowback may take years.

Germany was the Cinderella of the refugee crisis and Japan the Evil Stepmother before Abe’s address to the United Nations on Sept. 29. Abe announced a tripling of the budget from last year to $810 million in assistance to refugees and internally displaced people in Syria and Iraq.

The refugee criticism of Japan risked threatening an image that Japanese leaders have attempted to cultivate in developing nation brand Japan as a compassionate leader in the world. One of Japan’s most honored citizens, Madame Sadako Ogata, high commissioner of the U.N.’s refugee agency for a decade (1991-2000), remains one of the country’s most honored citizens. At age 88, she remains president of the Japan International Cooperation Agency, a Tokyo-based developmental organization that works to alleviate poverty, as one mission.

The focus on Syria may also carry with it a bitter memory for many Japanese. This past January, Abe announced a $100 million donation to help the countries of the Middle East fighting Islamic State inside their borders. Within a few days, Muslim militants with IS beheaded Kenji Goto, a journalist, and Haruna Yukawa, the Japanese hostage that Goto had gone to Syria to attempt to rescue.

Abe’s tripling of humanitarian assistance for refugees and internally displaced people in the Middle East is notable.

Abe Writes Check

Is the Beetle Over?

Can VW survive emissions manipulation scandal?

Volkswagen AG’s designated Chairman Hans Dieter Poetsch warned managers that the diesel-emissions scandal could pose “an existence-threatening crisis for the company.”

The German carmaker faces a Wednesday deadline to present a plan to fix some 2.8 million vehicles in its home market.

Volkswagen and German industry have been rocked by charges, first made by U.S. regulators on Sept. 18, that the carmaker had used software to hoodwink regulators about the true emissions of its diesel cars for years. As owners of 11 million affected cars across the globe, regulators and investors await answers, the crisis has wiped out almost 30 billion euros ($34 billion) of the company’s value.

 

After mostly remaining silent on the cheating scandal, ChancellorAngela Merkel on Sunday called the disclosure by Germany’s largest carmaker “a dramatic event” and said Volkswagen must clarify the affair swiftly. She ruled out a longer-term impact on the country’s industry.

An internal investigation has already yielded several engineers who admitted to installing the fraudulent software in 2008 for EA 189 diesel-motor models. The result was a so-called defeat device that disengaged emissions controls when an auto wasn’t being tested, breaching emissions rules and prompting a raft of government investigations and lawsuits since the U.S. Environmental Protection Agency cited the violations last month.

Volkswagen has also found more executives are involved in the scandal than previously acknowledged.

The manipulated software may have been put into parts supplied by Hanover, Germany-based Continental AG for 1.6-liter engines.  Upgrading models with Continental parts would entail replacement parts, not just a software upgrade, Bild said.

Another engine-parts supplier, Robert Bosch GmbH, warned VW in 2007 that its planned use of the software was illegal.

In contrast with Merkel, European Parliament President Martin Schulz, a German Social Democrat, said the scandal is a “grave blow for the German economy as a whole.”

VW Emissions Deceit

Fiorina: Lucent, HP and the Presidency

First, we have to remember that women often get the top job when a company is in trouble.  Note HP and GM in the US>

Megam McArdle writes:  Justin Fox notes that HP was in a hard place, Jeffrey Sonnenfeld argues Fiorina seems indisposed to admit to and learn from her failures. Fiorina wasn’t the best CEO in history, she certainly wasn’t the worst, either.

Critiques of Fiorina’s tenure seem excessively focused on the outcome. People are far too prone to confuse outcomes with good decision-making. Too many of Fiorina’s critics pointed out that the company lost shareholder value, then settled back with a satisfied QED.

The merger Fiorina spearheaded with Compaq was costly and did not noticeably improve the company’s competitive position. The company stock price certainly did fall a lot from the time she started there to the time she finished (something that unsurprisingly happens to a lot of CEOs before they’re forced out). A lot of employees were laid off in the process of making a larger, less profitable company.

This does not mean that Fiorina did a bad job. Fox makes this point: The strategy she started paid off much better after she left, but she gets no credit for it. I’d like to make a different, if related point: Sometimes, CEOs don’t really have any good options.

At the time Fiorina took over, HP made a fine server and a nice workstation and a very good printer.  But it had become clear that the hardware business wasn’t such a great place to be. In fact, that had been true for a while, but until the late 1990s, there was some hope that things would shake down to a few players, prices would stabilize, and things would get better, as had happened in the automobile market. 

Did Fiorina manage to fix this problem? Not really. But it’s far from clear to me that anyone else could have fixed it, given that she presided over a difficult business model during the Great Tech Meltdown and the recession that followed. Her idea to merge with Compaq, in order to give the company enough scale to take on IBM in the corporate market, didn’t work out as she’d hoped, but while that’s obvious in hindsight, it was undoubtedly a mite harder to see at the time.

Failure doesn’t always mean that you made the wrong decision. It might just have meant that there were no good options, or that you got unlucky. 

Fiorina could be the best CEO in the world, or the worst, and that wouldn’t give us much insight into how she’d do as president.

We’re in the midst of a great outsider boom, from Bernie Sanders to Donald Trump, to populist parties in Europe and the election of a far-left Labour backbencher as leader of the party in the U.K. Much of the appeal seems to be that we need someone to shake things up who’s not beholden to the same tired, focus-grouped, compromised, corrupt political culture. On the left, this appetite seeks out radical firebrands who promise they won’t sell out to the neoliberal consensus; on the right, it looks to business leaders (or maybe surgeons), who have proved they are competent in a competitive domain utterly unlike the political system.

This is another way of committing the fundamental attribution error. Politicians are the way they are because they operate under serious constraints. 

The closest job is either head of another government (most of whom are not legally eligible to run for U.S. president) or governor (few of whom have any foreign policy experience).

The problem, in other words, is not the people or the “culture” they live in; it is the system. And at least politicians know how to get results out of that system, however puny those results may seem next to our grand dreams of wholesale change. They do this largely by means of the very things we hate about them: staying within fairly narrowly plausible lines, compromising, trading favors, catering to single-issue interest groups, focus-grouping and poll-testing everything to death. An outsider may not do any of those things. But if not, they won’t do much else, either.

Who is Fiorina?