The Dream Of A Modern Saudi Arabia

WASHINGTON Bloomberg Businessweek placed Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman on its cover (April 25 – May 1) underneath a caption that says he is “preparing Saudi Arabia for the end of oil”. The lengthy cover story is all about this energetic young Prince who –all alone– is determined to spearhead a series of bold initiatives and reforms aimed at re-engineering a country whose vast richness come from gigantic oil revenues, and not the skills of its citizens. Of course, being the son of the King helps a bit in what is still a top-down, absolute monarchy.

Plan to diversify the economy

The long article explains how the Deputy Crown Prince plans to diversify the economy. He wants to start selling shares of Saudi Aramco, probably the single largest oil company in the world. He would then invest the proceeds in a number of global companies. After this diversification, in the future Saudi Arabia’s economic fortunes will be less tied to the ups and downs of oil prices.

No more subsidies

At a different level, the Prince wants to cut back the vast web of subsidies provided by the Royal Family to almost every Saudi citizens. But this may be a bit tricky. It is an open secret that direct or indirect payments to millions of people are the means through which the Saudi government keeps a lid on Saudi society. In a region marred by unrest and civil wars, not much anti-government unrest in Saudi Arabia, since almost every citizen gets a regular check from the government.

Problem: no real middle class 

Well, so far so good. Except for one thing. Even assuming that all these reforms will work, at best Saudi Arabia can become more efficient. But it simply cannot become a modern society the way we understand it. For the very simply reason that Saudi Arabia does not have basic political freedoms and a modern middle class that can act as the engine of self-sustaining growth.

Here is the simple truth. Except for vast amounts of easy to extract and therefore highly profitable oil, Saudi Arabia does not have a real economy. Saudi Arabia does not have a sizable educated middle class with a fair number of entrepreneurs engaged in profitable, innovative businesses.

Monarchy controls oil 

Saudi Arabia is an oil Kingdom (second largest crude reserves in the world) essentially “owned” by a mostly parasitical elite. This elite, (the extended Royal Family), controls all the oil wealth. The same leadership distributes some of the oil revenue proceeds to the rest of the country, in many cases via bogus government jobs that produce no value. It is fair to say that most Saudis do not do any real work. In the Kingdom real labor is provided by foreign workers.

No modern middle class 

Now, given this picture, I submit that unless these fundamentals are drastically transformed it is essentially impossible to re-engineer the Saudi society. Capitalistic economies succeed mostly because of the existence of basic political freedoms and because of a solid, entrepreneurial middle class. By that I mean large numbers of reasonably well-educated, driven individuals who engage in money-making enterprises. Their activities are supported by bankers, lawyers, accountants, marketers, public relations professionals and what not.

In other words, modern competitive economies do not exist without a vibrant middle class that can produce at least some capable entrepreneurs. These entrepreneurs understand the value of innovation. They understand competition within a rules based system fairly managed by an independent judiciary that can act as a reliable referee in case of disputes.

Oil is the only productive sector 

Well, guess what, none of this exists in Saudi Arabia. And I sincerely doubt that any of this can be created –essentially out of nothing– by an energetic Crown Prince eager to modernize a rent based economy in which, with the exceptions of the few skilled people who are in charge of the highly profitable energy sector, nobody has done anything even remotely approaching real, productive work for decades.

Rules based democracy 

You want modernity? Well, then you need a rules based democracy in which people really understand and agree upon the proper balance between private and public, in which all players agree that the private sector is the driver of economic growth, while all economic actors appreciate the need to have and follow clear rules. You also need a government that is efficient, open, transparent, and fully accountable. Finally, you need basic freedoms, including laws that guarantee freedom of expression, and therefore truly free media.

Tinkering is possible; but no transformation 

I see none of this in Saudi Arabia. Despite formidable constraints, I can see that some tinkering is definitely possible within the existing environment. If his reforms work, Prince Mohammed may be able to make the existing system less wasteful, less corrupt, and less dependent on the price of oil. And this is a good thing.

But he cannot create a brand new country and a new Saudi society. And without these two prerequisites in place, there will be no modern country.

 




Afghanistan Among The Most Corrupt Countries In The World

WASHINGTON – Remember Afghanistan? Yes, that sorry nation in Asia, sandwiched between Iran and Pakistan. Presidential candidate Barack Obama, back in 2008, described it as the country where America should have concentrated all its military efforts, instead of starting a new “bad war” in Iraq.

War of necessity? 

Well, now Afghanistan enjoys the dubious distinction of being one of the most corrupt countries in the world, according to Transparency International. Billions of foreign aid money, (most of it from the US), combined with poorly targeted military and security assistance funds, (sometimes untraceable), certainly contributed to this.

After he got elected, Obama called Afghanistan a “war of necessity”, as opposed to a “war of choice” like Iraq. We “had” to fight there, because, according to him, that was a just cause. Al Qaeda had its bases there. That’s where they plotted the 9/11 attacks.

Anyway, fast forward to today and Afghanistan, “just war” or nor, is essentially a disaster area. Sure, the US and its tired NATO allies have cut back their military forces deployed there. But only after having created strong and self-sustaining institutions, we are told.

Leaving the country in good hands?

The idea is that the well-trained Afghan soldiers, (yes there is irony here), will soon be able to take care of Afghanistan’s security entirely on their own. Indeed, after billions and billions of dollars spent in Afghanistan, America can leave the country (although not entirely) with a high degree of confidence that there is a democratically elected government in Kabul that can rely on (US and NATO trained) loyal and efficient armed forces in its continuing fight against the ever resilient Taliban.

One of the most corrupt countries in the world  

Yes, if it only were so. Afghanistan is an unmitigated disaster. No real economy, except for opium production. The Afghan forces fight, sometimes well, sometimes not so well. But the Taliban threat has not receded. And, guess what, there are astronomic levels of corruption that, for sure, involve the NATO trained military and the police, among others.

At least some Afghans are aghast. According to Tolo, an Afghan news site,”A new annual study of Transparency International illustrates Afghanistan, Somalia and North Korea as the most corrupt countries among 176 in the world”. 

“Afghanistan is the second most corrupt country in the list of 176 countries ranked in the report” Tolo continues. “Meanwhile, Executive Director for Integrity Watch Afghanistan (IWA) Mohammad Ikram Afzali is concerned over the Afghan government’s anti-corruption campaign and recommended a number of changes to this drive”. 

“The fight against corruption should be the top priority of the National Unity Government [NUG]. There should be a political will for this purpose,” he said.

“The NUG has not implemented its promises it has made for overcoming the endemic corruption in the country,” said Nasir Temori, a researcher at the IWA.

The Chief Executive of the NUG, Abdullah Abdullah, in a session with UN and other humanitarian organizations said they are committed to fighting endemic corruption.

“There is no doubt in the NUG’s mind it is serious about the fight against corruption in public offices,” he said.

The NUG leaders in the first day in their office vowed to overcome corruption in government offices and bring transparency in government contracts and other processes that pave the way for this problem. [Bold added]

“Not only government but the people, the civil society and the private sector are responsible to join hands and fight corruption in the country,” said the president’s deputy spokesman Sayed Zafar Hashemi.”

It did not happen 

Well, whatever the National Unity Government pledged about fighting corruption, it simply did not happen. Trying to help, the US and other countries poured literally billions and billions of dollars into Afghanistan in an effort to modernize its institutions and its economy, and there are only negligible results. And this is in part because a massive amount of foreign aid money was stolen through corruption, embezzlement, and other illegal means.

Bad aid policies 

To make things worse, corruption aside, US official aid was often spent on stupid or insane projects. Recently the news came up of a compressed natural gas (CNG) refueling station, funded by the Pentagon, that ended up costing in excess of $ 40 million. Yes that $ 40 million for a refueling station, when comparable projects in neighboring Pakistan would cost no more than $ 500,000.

Did this 140 times cost overrun happen just because of an extravagant level of stupidity and incompetence? May be we shall never know. The US run Task Force in charge of this insanely wasteful project cannot provide proper documentation.

And this an American project. This was not run by the Afghans. While this example is truly egregious, if this level of mismanagement is even remotely indicative of how things were planned and organized under the “just war” umbrella, you can understand why Afghanistan is an utter US foreign and security policies failure.

Interestingly enough, nobody says anything about any of this in Washington. It is true that President Obama inherited the Afghan conflict from George W. Bush who started it in 2001. However, after almost 8 years in the White House, he owns it. And yet it seems that he is not held accountable.

A disaster  

Sadly, the Afghan “just war” turned into a chronically ill patient completely unable to get better and take care of himself. In the meantime, everybody, from the ruling elites to the policemen in the villages, is busy stealing and extorting.

Is there a “Plan B” for Afghanistan? I doubt it.

 

 




Where Is The New African Middle Class?

WASHINGTON – In a recent article focusing on why the African middle class is still rather small, The Economist points out that rosy expectations about more broad-based prosperity failed to materialize. Indeed, while sub-Saharan African economies have experienced significant economic growth in recent years, this is simply not enough to expand the ranks of a new middle class.

Scaling back 

The news is not entirely negative. There has been some expansion. But far less than what many had predicted. For example, the article points out that Shoprite Holdings, a major South African retailer, just a few years ago announced that it planned to open anywhere between 600 and 800 stores in Nigeria, Africa’s most populous country, (173 million).

Well, Shoprite ended opening up only 12 stores. You see the difference. 600 stores assume a large, reasonably affluent middle class that can afford supermarket shopping, as opposed to low income buyers who do their shopping with street vendors who barely get by with a tiny volume of sales. A total of 12 stores in a country of 173 million indicates that this scenario of more widespread prosperity failed to materialize. Most Nigerians are still poor.

The commodities boom is over

In truth, many African economies are growing. But in recent years this growth was the result of the global commodity prices boom triggered in large measure by Chinese unprecedented demand. This commodities explosion proved to be a short-lived, exceptional phenomenon. Now that China’s artificial boom is over, demand for Africa’s raw materials has declined. And this means lower revenues and stagnant standards of living.

Beyond this, you have to add Africa’s chronic malaise, a mixture of inefficiency, cronyism, lack of accountability, and corruption. This malaise in many cases translates into large income inequalities. Those in power and the well connected benefit in a disproportionate way from whatever growth is produced. Most of the others get little. Hence a small middle class.

Fine. We get all this. However, while good governance matters, the real reason why the middle class is not expanding in Africa is that the economic base is still very narrow.

Lack of electricity is the number one problem 

And by far the main reason for this is lack of electricity. Yes, lack of electricity. We can talk all we want about democracy, transparency, the need to fight corruption while creating systems that improve accountability. However, the fact is that without electricity you cannot have broad-based economic growth.

For many readers in developed countries this may sound really odd. We take electricity for granted. But imagine a situation in which, if you live in a city, power is cut off for several hours, every day. And if you live in a rural area there is no electricity whatsoever, period. Imagine doing routine things, (reading, ironing, riding an elevator, running a washing machine, watch TV, use your computer), without any power.

No power, no growth 

Of course, if you are a rich city-dweller in Africa, you can buy a generator. But making your own power is expensive. Imagine running a small manufacturing company relying on your generator for several hours, every day. This is possible, of course. But it adds to costs, in a major way. And this means non competitive products and smaller markets. If you live in a city and you are poor, forget about expensive generators. Lack of electricity means no lights, no refrigeration, no chance to watch TV.

If you live in an African village with no power, you are essentially cut off from the larger economy. Sure enough, these days you probably have a cell phone, and you may have access to a solar-powered phone charger.

The rural poor stay poor 

But you have no electricity. This means using wood or charcoal for cooking. Alternatively, you have to spend a large percentage of your truly small income, (we are talking about people surviving on a couple of dollars a day), to buy fuel for a stove.

And forget about basic developed world amenities such as refrigerators. Forget about switching on the (non existing) lights at night. In such circumstances of basic deprivation it is very difficult, in fact nearly impossible, to advance to the middle class. Lacking electricity, most African are condemned to a life of perpetual poverty in which at best people survive thanks to subsistence agriculture.

Other factors also matter 

Of course, there are additional factors that prevent economic growth, and therefore the expansion of a fledgling middle class. Health and education are key issues. Difficult to have economic progress with too many semi-illiterate and sick people.

Right next to these constraints, you have infrastructure, or lack thereof. While electricity is fundamental to any kind of economic development, good road, ports and modern customs systems that allow the easy movement of goods are also critical.

Yes, while this may sound odd, moving goods by truck on old roads is quite complicated in Africa. Likewise, clearing goods through antiquated (and often predatory) customs systems may take several days, or even weeks. All these obstacles hurt commerce and all companies that want to be engaged in international activities.

Economic growth will lead to the expansion of the middle class 

So, what about the future of the African middle class? Very simple. Hard to picture any significant expansion without basic modernization that will make more economic growth possible. Africa has come a long way. There are hundreds of millions of cell phone users, there are plenty of ATM machines, and internet penetration is improving. But African societies must fill huge gaps. While many issues are relevant and should be addressed, the number one problem is still power generation and distribution.

In Africa this is literally the difference between day and (hopelessly dark) night.

 




Can We Find Decent People To Fix Our Democracies?

WASHINGTON – Democracy and free markets anyone? By this I mean opting for a real republican government with fair rules, transparency, honesty, and constructive debates. And office holders who really believe that their job is to further the public good, while allowing private citizens who play by clear and fair rules to engage in whatever activity they may be interested in.

What happened to liberal democracies? 

Does any of this still exist? The answer is a qualified yes. However, the real article is almost extinct. There are only approximations. Unfortunately, most self-described liberal democracies are only distant relatives of the original model.

In most Western countries, citizens mistakenly believe that it is perfectly alright to bend the political process and the state institutions so that they will provide for them, or at least subsidize them. This entitlement mind frame is a perversion of any honest notion of the state as guardian of the public good. And yet, the “welfare state” model is now the standard, with plenty of intellectuals willing to affirm its legitimacy and high moral standing.

Welfare and statism 

To make things worse, the welfare state goes hand in hand with a statist economic model. Many people do not believe that public institutions should limit themselves to the role of impartial arbiters and enforcers when economic rules are broken. No, the state should run things, (banks, utilities, airlines, railways, factories), or at a very least dictate via minute regulations how they should be run.

All this amounts to a state that got bigger, more expensive and more powerful, and in most cases more wasteful. As a consequence, some people in charge of powerful institutions that control huge assets or resources have enormous power. And this often unchecked power is an open invitation to corruption.

Corruption 

Corruption in turn has the effect of a chronic, debilitating disease. It is nasty parasite that eats up resources, while engendering cynicism and sometimes despair. Who will have the enthusiasm to think about starting a new business when they know that at each step of the way there will an intrusive bureaucracy run by voracious corrupt officials demanding bribes?

Well, this is the picture. In some instances, it gets to be too much. And people protest, loudly. (Witness what is going on right now in Brazil, with daily street protests and demands for the impeachment of President Dilma Rousseff).

Ironically, even semi-dictators complain about corruption. Vladimir Putin commented that there is way too much corruption in the recently annexed Crimea. Think of that. According to Putin, the once oppressed ethnic Russians of Crimea, instead of showing gratitude towards their Russian liberators, engage in all sorts of shady practices. The level of corruption in Crimea is now so bad that even Putin thinks it is way too much.

Here is the picture 

Well, without being too gloomy, here is the picture. Europe is slowly sinking under the weight of unsustainable public debt. Indeed, lacking enough revenue, this is the only way to finance all the benefits. Too much debt weighs on the economy. Too many regulations impede innovation, business formation, and therefore the creation of new employment. A bloated public sector fosters waste and corruption.

These days, confronted with economic stagnation, lack of opportunity and high unemployment, people are restless and unhappy. This being the case, they could opt for better political leaders.

But no, they do not do this. With few and limited exceptions, no way that any political force proposing to go back to the original free market, liberal democratic model could get vast popular support and succeed. “Yes, reforms may be nice, but don’t even think of touching my benefits”.

Looking for a “Big Man” 

As real world solutions are excluded, the only alternative seems to be escapism. Yes, let’s elect someone —A Big Man— who will make all this go away. Let’s elect someone who will tell us that we are the innocent victims of a vicious cabal made out of corrupt politicians in bed with exploitative financiers. And then we have all the illegal immigrants who steal our jobs, not to mention unfair trading partners who cheat. Therefore, let’s elect someone who will clean house, throw all the rascals in jail, and start fresh. (Of course, the magic broom will steer clear of all my benefits and subsidies. And don’t you dare raise my taxes).

Hence the appeal of Beppe Grillo and his 5 Stelle movement in Italy, the National Front in France, Podemos in Spain, and Syriza in Greece. And, most recently, the British Labor Party choose as new leader Jeremy Corbyn, an old (age 66), unreconstructed Socialist whose ridiculous ideas have the fresh fragrance of the 1950s.

Bad news from America 

But what about America, the reliable bastion of democratic capitalism? Bad news from that front. Right now, in what is supposed to be a serious exercise aimed at selecting candidates for President, the leading contenders on the left and on the right are people who in ordinary circumstances would be dismissed as laughable populists.

Bernie Sanders and Donald Trump 

But no, they are not dismissed. They are in fact adored. On the left, Vermont Senator Bernie Sanders is an eccentric museum piece, a socialist who talks with passion about income redistribution. On the right, businessman Donald Trump argues passionately that he is really smart, while everybody else is stupid; and this is his main qualification for becoming President.

All this is disheartening. Confronted with this detachment from reality and consequent lowering of the level of policy debates, many commentators argue that this is a “healthy rebellion” against an ossified political system dominated by worn-out elites made out of professional politicians.

“You see, the people got fed up with the establishment, and so now they vent their frustrations by supporting populists who make outlandish claims. Perfectly understandable, no?”

Venting frustration is not smart 

No, not at all! While we can understand that frustrated people may engage in foolish behavior, this does not make foolish behavior smart. It is in fact stupid and destructive. If we accepted this logic, then we should accept as “normal” the fact that some unemployed workers become thieves, while others become alcoholics or drug addicts.

Indeed, lets agree that “the system is inefficient and corrupt”. Let’s assume that this is true. Well, then let’s try to find more honest and more competent people to run it.

Electing Jeremy Corbyn in the UK, or Bernie Sanders or Donald Trump here in the US will solve nothing.

We no longer understand what this is all about 

But then, why are socialists, populists and demagogues so in fashion, these days? Why the appeal of politicians who loudly promise easy fixes? Very simple: because many members of our societies have lost the meaning of the fundamental values that make republican government possible.

A republican government is supposed to manage the sectors that individuals cannot take care of on their own, while allowing people to freely live theirs lives. Government should take care of the truly needy; but it is not a philanthropy tasked with delivering plenty of goods at no cost. Government has costs that need to financed through fair taxation; but it is not a mechanism for redistributing wealth.

Government should be about the protection of individual rights, within clear and transparent rules. Government should allow all law-abiding private citizens to engage in wealth-producing activities. In other words, I can do my own thing, but this pursuit positively excludes taking advantage of others.

We got ourselves in this mess

Sadly, we forgot all this. And so we are caught between our deep dissatisfaction with our sorry-looking, stagnating democracies and our inability to see that we got here precisely because we lost our understanding of what the state is, and what it should do. 

 

 




Kenya Held Back By Lack Of Accountability, Corruption

WASHINGTON – According to a BBC story, only 26% of money spent and collected by the Kenyan government has been fully approved in an audit for 2013-2014. Kenya’s auditor-general, whose report covered an annual budget of about $16 billion said there were “disturbing problems” in government’s accounting.

Spending with no justification 

The recently released report indicated that there are “still persistent and disturbing problems in collection and accounting for revenue”. According to the auditor-general, about 16% of all government accounts data is “misleading”, a polite way to say that several government agencies release to the public a great deal of false information aimed at hiding graft, embezzlement and worse.

False payrolls 

The BBC indicates that “Among the numerous items being questioned [by the report] are empty office spaces paid by the police and 32 faulty armored vehicles for the military. The health department’s accounts were particularly worrying as they failed to account for 22 billion Kenyan shillings ($216 million) worth of spending, the report said. The auditor-general also noted that $2 billion had been transferred to an offshore account, against regulations”….”When the authorities started biometrically registering all civil servants in 2014 they found more than 12,000 false names in the government’s payroll.”

Only 1.2% of total spending properly documented 

A WSJ story on the same topic notes that, according to same auditor-general’s report, only 1.2% of all Kenyan government spending is properly accounted for. About half is murky, while a quarter lacks any documentation.

There you go. 25% of the entire state spending cannot be justified.

Notwithstanding all this, Kenya is held up by the IMF and other multilateral institutions as one of Africa’s important success stories. An example to be followed by others. Many point out its IT companies and its successful M-Pesa mobile phone based payment system, used by millions.

Too much corruption 

And yet Kenya is ranked among the world’s most corrupt countries. It came 145 out of 174 nations on the Transparency International’s Global Corruption Perception Index.

President Uhuru Kenyatta tried to get rid of or punish corrupt officials. In March 2015 four cabinet ministers and other high-ranking officials have been suspended.

Obviously this is not enough.

 




Ukraine On The Verge Of Collapse

WASHINGTON – Ukrainian President Petro Poroshenko recently authored an upbeat op-ed piece for the WSJ in which he painted a very positive picture of his country. Notwithstanding Putin’s aggression, the loss of Crimea and the costly conflict in the East, we learn that Poroshenko’s new, fully democratic government is filled with smart young reformers.

Are things getting better?

They are winning a serious fight against corruption and inefficiency. Lots of good people are lending a hand in this nation wide effort aimed at modernizing Ukraine. Soon enough investors from all over the world will see all this and Ukraine will offer them wonderful opportunities and more.

This positive depiction of Ukraine is both farcical and sad, because it is patently one sided. I am not questioning Poroshenko’s desire to modernize his sorry country. I assume his  sincerity. I also assume that there are indeed many western educated and highly qualified Ukrainians who are doing their very best to turn this former Soviet Republic around.

Leaving the bad stuff out

That said, if you tell a story about a country in serious turmoil, you cannot just omit the bad stuff. Indeed, as Poroshenko tells us what great progress Ukraine has made, all international economic and business publications write that the country is totally broke and on the verge of financial collapse.

The ongoing quasi-war with Russia is costing a lot, while Ukraine is at a stand still. According to the FT: “The economy is in a state of collapse, having contracted by nearly 18%, year on year, in the first quarter of 2015”. We also learn from various media reports that financial assistance provided by the IMF and other bilateral aid packages is too modest, and therefore it does not even begin to help. To start with, there are US $ 40 billion dollars to be paid back to foreign bond holders. And there is no money.

Help Ukraine?

The FT makes the case for helping Ukraine, via debt forgiveness (the bond holders would have to take a major hair cut) and other forms of aid –for political reasons. Indeed, Ukraine is a large, strategic country, right at the eastern edge of Europe. It is in the interest of the West to save it. May be so.

However, in order to have a serious conversation about any rescue packages or bail out strategies, (whatever the chances of success), it would be good for President Poroshenko to tell the world how things really are. The fact that Ukraine is on the verge of collapse is not just a detail.

Sugar coating an economic and financial disaster does not help Poroshenko’s credibility.

And it certainly does not help Ukraine.

 

 




Is Hillary Clinton An Ethical Politician?

WASHINGTON – So, there you are working hard as the globe-trotting US Secretary of State, talking to heads of state and promoting US economic interests, including deals involving major US corporations.

Husband asking for money

At the same, your husband, who happens to be a still very popular former President of the United States, is busy working the same international circuits, drumming up major contributions on behalf of his foundation from some of the governments you are working with, along with major corporations or wealthy individuals within them. In fact, while you are Secretary of State, he also gets fabulous fees for speaking engagements abroad, (we are talking $ 500,000 or more per event).

Then, upon leaving public office –with a mile long contacts list that includes every head of state you met with– you also join the foundation. But then you decide that you want to get back into politics and so you announce that you will seek the presidency.

No evidence of any wrongdoing

In extreme brevity, this is Hillary Clinton for you. Look, whatever the recent allegations and innuendos about impropriety, so far nobody has come out with any evidence of any criminal wrongdoing. Nobody can claim that, while US Secretary of State, Hillary Clinton made policy decisions with the goal of benefiting the Clinton Foundation or Bill Clinton personally.

A convenient setup

But critics cannot be blamed when they question the ethics of this rather convenient set up of a wife in high office while the husband travels in the same circles, soliciting and getting huge amounts of money for his foundation in the process.

If you hate the Clinton family, you can conclude that they abused public office in order to enrich and/or benefit themselves.

The Clinton defenders reply to this assertion is that there is not even a shred of evidence to prove any of this. And this may very well true. Therefore: no evidence, no crime, case closed.

There is no evidence

Yes, except that here we are talking about the public image of a person running for the highest office in the land. And here the bar is not what may or may not stick in a court of law. Here we are not talking about being innocent until proven guilty. Here the bar, fairly or unfairly, is much higher. Here we are talking about not doing anything while in office that may create even a slight appearance of impropriety.

To say to America that “I am OK because you have no hard evidence against me” is not the right message coming from someone who wants to be the next President of the United States.

I am ethical

The message should be: “I am an honorable person who is totally above reproach. While in public office, I adhered to the highest ethical standards. No, I did not work with my husband to set a clever system that would prove to be advantageous to us, personally or politically. I did not work with him so that we could cover our tracks and make it impossible for anybody to accuse us of any wrong doing. I am an ethical person. I went into public office and I am now seeking the presidency because I want to serve the American people.” 

Yes, in America every citizen is innocent until proven guilty. In this particular case of the Clinton couple there is not even the beginning of any criminal case against either of them. Most likely there will never be one.

Appearance of impropriety

But they have created the appearance of impropriety. And, fairly or unfairly, the American voters will decide on Hillary Clinton’s viability as President in part on the basis of what they assume (even without any evidence whatsoever) she did while Secretary of State. Of course, the American voters may assume a lot of fictitious wrongdoing that never happened.

But when voters see a somewhat questionable setup –Hillary Clinton in high government office while the Clinton Foundation goes around asking and getting  hundreds of millions of dollars, often from the same people she engages with– and then a careful clean up process, (remember all those e-mails that have been destroyed without any third party review?), they may conclude that there is something fishy in all this.

Untrustworthy

So far, the immediate impact of all these allegations has been that a majority of US voters now believes that Hillary Clinton is not trustworthy. Of course, all of this can and will change. The presidential elections are still very far, (November 2016). And people change their mind.

In the meantime, there are plenty of opportunities to dig up stuff that may make any Republican would-be President look bad.

And we know that in politics anything goes. If any Republican did anything wrong or can be portrayed as having done anything wrong, you can rest assured that the Clinton people and their proxies will let us know.

We should be able to assume that all who seek high office are moral persons

Of course, in an ideal world it would be nice if we could limit any political debate on the merit of policy positions.

The very fact that we spend an inordinate amount of time trying to determine whether candidates for high office are or are not moral persons is an indication of a deep problem.




In Rome Municipal Guards Do Not Show Up For Work

WASHINGTON – From tragedy to farce Italy has it all. Sadly, there is the daily tragedy of the hapless refugees coming from North Africa, or Syria who put their lives in the hands of thugs who steal their money and then abandon ship and leave them stranded in the middle of the crossing.

Corruption everywhere

And then there is the deeper tragedy of the entrenched connections between corrupt politicians of every stripe and organized crime that seem to dominate every bit of any public procurement, national and local, every contract, every bid. Yes, in case you missed it, it seems that almost every political party represented in Rome’s City Council –majority and opposition– has ties with organized crime. And this is just the latest scandal.

Nobody likes to work

And then there is farce. Big farce. A large number of Rome’s Vigili Urbani, (or Polizia Municipale, a quasi-police force that serve the citizens of the municipality), decided that they were not in the mood to work on December 31, New Year’s Eve. And so many of them faked illnesses, took a leave of absence or produced other bizarre excuses. Well, how many among those who were supposed to report for duty did not show up? 20% ? 30% ? No, the exact percentage is 83.5%.

Yes, you got it right: 83.5% of those Vigili Urbani who were supposed to be on duty on December 31 made up excuses and it not show up for work. Among those who were supposed to work on the night shift the same day there seems to be a much higher devotion to duty. Only 38% did not show up. Compared to 83.5%, this is an almost heroic performance.

Roma Caput Mundi

And so, here it is. Roma Caput Mundi, “Rome Capital of the World”. To this day, the plaques that indicate the names of streets and squares in Rome still carry the ancient, illustrious inscription: S.P.Q.R., for Senatus Populusque Romanarum, “The Senate and The People of Rome”. In antiquity this acronym that appeared almost everywhere, on coins and on the military banners of the feared Roman legions, signified Roman power that extended throughout most of the ancient world.

The highest honor

And even in the latter days of the Empire Roman citizenship was the highest honor that any subject, from Britannia to Lydia, could receive. Indeed the Romans were an exceptional people: Dignitas, Maiestas, Auctoritas, Libertas Populi Romani, “Dignity, Majesty, Authority, Freedom of the Roman People”.

And today the revered inscription S.P.Q.R. is still on the coat of arms of the municipality of Rome, selflessly defended by the Vigili Urbani who do not show up for work.

As I said, in Italy there is tragedy, and then there is farce. Would you like to receive the honor of Roman citizenship, today?

 




No Independent Judiciary In China

WASHINGTON – Western media are covering rather extensively the broad anti-corruption campaign now under way in China. Most recently, The New york Times had a front page article that provides vivid details about the prosecution of corrupt local officials and business people in the Luliang coal-producing region. 

Plenty of corruption

Corruption dominated almost everything there. Public positions were routinely sold. Friends and relatives of the powerful went quickly from obscurity to prominent positions. A coal baron had made so much money through illicit practices that he could afford to pay US $ 11 million for his daughter’s wedding. (US $ 11 million for a wedding? This looks a bit outlandish, but let’s accept it).

No surprise

All in all, there is no reason to be surprised by this level of corruption. When power is totally concentrated within a small, unelected and unaccountable elite of career functionaries, promoted only on the basis of loyalty, it is quite obvious that those who have great power will use it to enrich themselves by selling favors and by gaining control over money-making enterprises.

No fair trial

However, the fact that Xi Jinping, China’s new President and General Secretary of the Communist Party, is now very publicly pursuing corrupt public officials and their business friends provides only mild comfort.

There may be a genuine interest in “cleaning” the party by getting rid of the most egregious bad apples. Still, this process is carried out by the same unelected and unaccountable officials who participate in the spoils system. Are all corrupt officials pursued? Or only those who are not political friends?

May be some prosecutors are truly impartial. Still they all follow secretive investigative procedures. Indeed, sometimes the accused are held with no trial. Others simply vanish.

And, in case you wonder, there is no such thing as an “independent judiciary” in China. Trials are usually pro forma. All the accused are routinely found guilty.

“Modernize” the system?

Interestingly enough, the Chinese magazine Caixin Online recently published an editorial dealing with the need to “modernize” China’s judiciary, (Why China Must Build a Modern Judicial System, December 25, 2014).

The editorial does not focus on impartial trials for those now accused of corruption. It begins with a couple of known cases in which people accused of murder were convicted and sentenced, while it turned out later on that they were innocent.

Still, the general overview of China’s judicial system provided by the editorial, from which we glean that law enforcement authorities determine in advance who is guilty way before any trial is held, is quite revealing.

“Trials are a formality”

Here is an excerpt from the Caixin piece:

“[In China] all aspects of criminal cases, including investigation, prosecution and defense, should be carried out in a professional and modern way. This would be a change from the country’s current approach, which sees the judicial system function more like a factory’s production line.

The constitution and criminal procedure law say that courts, prosecutor’s offices and the police have their own separate jurisdictions, which in theory requires them to cooperate with each other and ensure the public a certain amount [Bold added] of checks and balances are in place.

In practice, defense lawyers have little power and prosecutors are seen doing little more than colluding with police. [Bold added]. This means the whole process gives far too much weight to law enforcement.

That has led some academics to liken China’s judicial system to a cozy restaurant, where the police are the chefs, the prosecutor’s office is the waiter and the court is the diner. In this metaphor, defense lawyers can only sit outside and beg for scraps.

As a result, the system is often troubled by convictions gained through torture, extra-judicial detentions and grave disregard of defense lawyers. The courts have thus become a hotbed of miscarriages of justice and trials are a formality. [Bold and emphasis added]

The party would like to change this so that trials are based on evidence and a suspect’s defense plays a central role. It has also clearly said that court officials should be held accountable and the judicial system must be allowed to be more independent. It also stressed that both plaintiffs and defendants have the rights to information in a case.

The party has also set out guidelines that allow for illegally collected evidence to be thrown out and for the principle of presumption of innocence to play a central role in trials. It has also proposed a way to hold to officials who interfere in a trial accountable because this is another reason for the country’s many miscarriages of justice”.

Reform will accomplish little

I appreciate the magazine’s deference to the party and its new guidelines. However, either there is a truly independent judiciary or there isn’t one. Is the Chinese Communist Party going to create and protect an independent judiciary? I doubt it.

In a country in which all power is concentrated within a small elite of co-opted senior leaders, some judicial system reform may be possible. But an independent judiciary –the only way to provide a guarantee of a fair trial– is only a dream.

The accused are always guilty

For sure, since right now the Communist Party needs to create a better image for itself, we are going to see more senior officials charged with corruption and sentenced, as the NYT story explained. And may be most of them are indeed guilty.

However, China’s judicial system being what it is, forget about anybody getting a fair trial.




A Genuine Anti-Corruption Drive In China?

WASHINGTON – The arrest in China of Zhou Yongkang, former head of domestic security and (even in retirement) still a powerful member of the political elites, made news.

No longer untouchable

China’s top Communist Party leaders used to enjoy special status and protection, even after they left office. They used to be untouchable. But now it is different. Under the guise of an all out war against corruption –a war that will target “tigers and flies”, big and small fish– President Xi Jinping has openly incriminated Zhou, one of the most illustrious untouchables.

Recreate trust in the party?

And what is the real end-game here? We are told by commentators that this Beijing-mandated and led anti-graft, anti-corruption drive is aimed at re-establishing trust in the party, although this may be a difficult task.

Difficult indeed. In fact, probably impossible. Anybody can see that there is a credibility problem when a secretive autocracy openly declares war against bad apples within; but uses a secretive process to identify and charge them.

Non transparent methods

The Communist Party is non transparent in most of what it does, beginning with the way in which it recruits, promotes and sometimes demotes its high-ranking officials. Therefore, in the eyes of the average Chinese citizen, it may appear that the Chinese leaders now are pursuing a new agenda that is simply called “fight against corruption”. Still, whatever the label, this campaign may have little to do with creating a new regime of real accountability, transparency and honest practices.

A credible campaign would have to be transparent

I do not have any trouble believing that President Xi may be serious about fighting corruption; simply because a totally corrupt political system eventually becomes both weak and unruly.

However, a real anti-corruption campaign that the common people could believe in would have to be based on clear laws. It would have to be managed in an open and transparent way by independent prosecutors and an independent judiciary, while truly free media would have unfettered access to all records and proceedings.

A way to get rid of enemies?

But we know that none of this exists in China. Right now, we see that many powerful people, both in the government and in the private sector, have been arrested and charged. Some have simply disappeared. Are all these people really engaged in corruption? Probably. But most likely many others are too. So, who gets to pick the targets?

More accurately, is this anti-corruption crusade a convenient way to eliminate potential rivals and/or other power centers that might in any way challenge the authority of President Xi and his allies? Who knows really.

Autocracies cannot be reformed

All this aside, a word of caution. Autocracies cannot be easily reformed or “improved”. As the experience of the old Soviet Union demonstrates, those who try to improve an autocracy –remember Soviet leader Mikhail Gorbachev?– may end up triggering a process that leads to the destruction of the old regime.

China is different, of course. The Chinese Communist Party is not ruling a quasi-failed state. Still, China is entering the uncharted territory of slower economic growth and increasing social tensions.

Unintended consequences

I can understand the public relations goal of trying to make the ruling Communist Party more popular. But I am not so sure that a few high visibility staged trials and a few purges will do the trick.

Meanwhile, a very complex and vast system of patronage, supported by bribes, kickbacks and all sorts of shady relationships may react in unpredictable ways under the new stress created by the zealous Beijing cops.