Submerging Markets™ - Recent Posts

WEEKLY PUZZLER: "WHAT MADE GERALD R. FORD SO TRULY GREAT, ANYWAY?"James S. Henry

Some cynical pundits may have been surprised at the outpouring of grief associated with the passing of Gerald R. Ford, the 38th President of the US, who died of natural causes at the age of 93.

Ford had been an ex-President longer than than any one except Herbert Hoover, and had survived two assassination attempts. So some people may have just assumed that he was one of the handful of Yale Law graduates who are truly immortal, and were shocked to discover the truth. 

However, the pundits would be correct to point out that Ford was not high on the standard roster of reknowned US Presidents. 

To begin with, of course, he was never actually elected President. His Presidency was the product of our felicitous criminal justice system. He ascended to the Vice Presidency in 1973 by replacing one felon, and then to the Presidency in 1974 by agreeing to pardon another one.

There were also,  to be sure, relatively few truly memorable positive acts by President Gerald Ford -- and many of those are best forgotten, as we'll see below.

Despite these concerns, we believe that a very strong case can be made for the proposition that Gerald R. Ford was one of our finest -- if not the finest - recent Presidents. This is not so much because of what he did, as what he did not do -- especially in comparison with other, much better-known post-war US Presidents.

Saddam's Midnight LynchingOutsmarting Ourselves Again?James S. Henry

I'm certainly no palpitating, hand-wringing absolutist opponent of capital punishment in the abstract. If there were any evidence whatsoever that the death penalty's  deterrent effects outweighed its high costs, brutalizing impacts,  and other perverse side-effects, and that it was not just someone's idea of "I-4-I"/ Old Testament/Koranic personal justice, then by all means -- bring on the scaffolds and start selling ring-side seats! 

However, especially in the wake of last week's extra-legal fiasco of Saddam Hussein's midnight lynching by a Klan-like band of hooded henchman for Iraq's increasingly partisan Shiite-dominated government, it is worthwhile reminding ourselves that: 

(1) The vast majority of countries that are "civilized" and "developed" have long since abolished the death penalty.

These include all First World/ OECD countries except the US (38 out of 50 states), Japan, and South Korea -- Austria, Australia, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland,  Israel, Italy, Mexico, Netherlands, New Zealand, Norway, Poland,  Slovak Republic, Sweden, Switzerland, Turkey and the UK (plus Vatican City, San Marino, Monaco, and Andorra). 

(2) Most enlightened/ mid-level developing countries have also abolished the death penalty. 

These include Albania, Azerbaijan, Bolivia, Bosnia, Brazil, Bhutan, Bulgaria, Cambodia, Chile, Colombia, Costa Rica, Croatia, the Dominican Republic, Ecuador, El Salvador, Estonia, Georgia, Haiti, Latvia, Liberia, Lithuania, Mauritius, Mozambique, Namibia, Nepal, Nicaragua, Panama, Peru, the Philippines, Serbia, South Africa, Timor-Leste, Turkmenistan,  Ukraine, Uruguay, and Venezuela.

Indeed, the anti-death penalty ranks now include every South American country except Guyana and Suriname, all Central American countries except Guatemala and Belize, most FSU/Eastern European countries, several key African countries like Cote d'Ivoire, Liberia, Namibia, South Africa and Mozambique, and even a few Central Asian countries.

All told, as of 2007, 88 countries have completely abolished the death penalty for all crimes, while 40 more have effectively abolished it in practice.  Furthermore, despite the "global war on terrorism," the global abolition movement appears to have gained momentum, with 40 countries abolishing the death penalty since 1990.

(3) On the other hand, the countries that still employ the death penalty -- especially by way of primitive methods like hanging, beheading, and stoning -- are dominated by such stellar examples of enlightened democratic development as Afghanistan, Bahrain, Bangladesh, Burma, China, Equatorial Guinea, Egypt, Indonesia, India, Iran, Kazahkstan, Kuwait, Libya, Malaysia, Morocco, Nigeria, North Korea, Pakistan, Qatar, Saudi Arabia, the UAE, Uzbekistan, Yemen, and Zimbabwe.    

Most of these countries also are at the head of the class among the world's most nefarious one-person, one-family, one-party, and one-general dictatorships.

(4) Many countries that still retain the death penalty, like the US,  Japan, and Singapore,  have long since decided to use alternatives to the barbaric practices of hanging, stoning, or beheading.

In China, for example,  which now accounts for at least 83% to 95% of the world's 2138 to 8400  legal executions per year, most executions are now handled by lethal injections.  

Only such leading "negative role models" as Iran and Saudi Arabia -- the world's second and third largest legal execution markets respectively, just ahead of the US-- still employ hanging, let alone beheading and stoning. 

There is a demand among some "Christian Taliban" sects in the US for a return to these anachronistic punishments, perhaps because they would be such crowd-pleasers among their followers. But so, I'd bet, would witch dunking, cross burning, and the occasional fitted-sheet night ride.

BLIND JUSTICE

Of course, during his 35-year reign, Saddam Hussein also made Iraq a world leader in "legal" hangings and beheadings -- in addition to mass gassing, shooting, and torture. From this angle, many would argue that he only reaped what he'd sown.  

However, precisely in this situation, we might have hoped that Iraq's new democracy and its Washington patrons would have been smart enough to recognize the virtue of breaking sharply with Saddam's own wretched past practices,  seizing the opportunity to set an example for the whole region.

 What an example it would been  for him to have been condemned to live out the rest of his miserable life in a dark, dank cell at an undisclosed location, with no publicity whatsoever.

In such a situation,  reeking vengeance against Prisoner Saddam Hussein was a needless indulgence.

At the very least, his execution should have been designed to avoid granting Saddam the very status that,  next to being set free, he desired most of all,  and that he never would have  been able to achieve without the cupidity of his captors -- the status as a martyr,  a victim, and a myth. 

As Pontecorvo remarked long ago -- "Better silence than songs," for you cannot kill a myth.
 

(c) SubmergingMarkets, 2007    

For This We've Been Waiting?The Iraq Study Group's Underwhelming ReportJames S. Henry

So the November 2006 US elections  delivered a clear message to our elected leaders that we want the troops home from Iraq ASAP, right?

And the overwhelming majority of Iraqis also favor a rapid withdrawal of US troops, right?

And most of our loyal allies, including Britain, Italy, Japan, South Korea, and Spain, have either already withdrawn all their own troops from Iraq,  or have announced plans to do so by the middle of next year, right? 

And after having complained loudly about being "misled" into voting for the War back in Fall 2002, and having just won nearly 58 percent of the nationwide popular vote, Democrats have newfound courage, and are finally going to stand up and be counted on this issue, right?

So we ought to start seeing the 140,000 US troops in Iraq coming home real soon now, right?

Well, not so fast, my friends....

You see, this is Democracy in America we're talking about, not some tin-horn dictatorship.....

These are complex issues, which can't just be  delegated to any Tom, Dick, or Sheila on the street.

No - these issues requre careful study over many months by an enormous Bipartisan Iraq Study Group.

JUST WHAT WE NEEDED?   

Such a group must be staffed by the best and the brightest people that we can possibly find......People like Alan Simpson, Ed Meese, Sandra Day O'Conor, Leon J. Panetta, and Vernon Jordan.....

They'd be aided, of course,  by four other 12-person subpanels of US experts on "the economy and reconstruction," "political development," "the military and security," and the "strategic environment!" 

The resultng "goat rodeo" of all these Iraqi experts has resembled nothing so much as Hillary Clinton's  expert-laden Health Care reform effort back in the early 1990s. That effort also produced a grand scheme and a cornucopia of interesting ideas, few of which were ever adopted.

By the time the  Iraqi Study Group returned to the surface after taking six months to analyze the (constantly-changing) situation, it boldly declared that "the situation in Iraq is grave and deteriorating," and that President Bush's strategy is "not working." 

To that, the rest of us have been obliged to say, echoing the immortal Johnny Carson:

""Thank YOU!  WE DID NOT KNOW that! " 

The STUDY GROUP also produced a tightly-coupled 79-STEP PROGRAM that would merely REQUIRE...

1. A sharply-expanded  US training mission -- in the face of evidence that such training may take years, and that the first tough task  will be to "train the trainers"...
   
2. The insertion of small groups of (relatively defenseless) US trainers inside large units of (relatively clueless and unreliable) Iraqi forces -- a measure that is not only dangerous, but has also been rejected as "patronizing" by Iraqi officials
   
3. "Hail Mary"  negotiations with Syria and Iran -- not exactly our strongest allies in the region, and a step that the Iraqi Government may want to reserve for itself;
   
4. Quick progress on the (until-now intractable) Israeli Palestinian issue -- with few details about how the existing Hamas/Israeli deadlock can be overcome; 
5. Decisive action from the (heretofore nothing-if-not-indecisive) Iraqi Prime Minister -- who is finding it risky to side too closely with the Americans;
6. Amnesty for the (at least the non-al Qaeda/ more likeable) insurgents...(amnesty for Saddam was fortunately not proposed)...
7. Etc. Etc.....(79)

Well then. Perhaps the poor public,  the "customers" for this elaborate consulting study,  may be forgiven for being a bit skeptical about how iall this could ever be implemented.

On the other hand, most of us have also long since concluded that "Bush's policy is not working." So the implication is that if the ISG's elaborate, impractical plan really is necessary for a solution, it is time to head for the exits.  

WHITHER NOW?

As we might have expected, in the wake of these recommendations,  the PRO-WAR RIGHT -- including the indispensable one-person-party, Senator Joe Lieberman -- has sensed blood in the water, and is attacking aggressively..

Given its own miserable track record and diminished credibility, this may not matter very much. By now the pro-war right is taken seriously mainly by each other. This is not to say that it can no longer make trouble -- especially on matters involving Iran, Lebanon, Syria, and Palestine, where "Fifth Columnists" are working overtime to explain away the messes they've created.

But the most interesting questions now are for Democrats -- especially those who hoped that the Iraq Study Group would save them the trouble of having to find their own solution to this nightmare.

This is also an interesting time for the still-all-too-timid anti-war movement, which clearly has a majority of the country on its side. 

 In principle, this movement should be in a position to demand that the new Democratic Congress keeps its promises and starts to compel US troop withdrawals early next year.

To this extent, the Study Group report is helpful, because it demonstrates that there are no free lunches here, no  clever "technical fixes" or "soft landings."

The only real choice appears to be between two rather stark alternatives: 

• (1) MAKING A PROLONGED commitment to keeping US troops in Iraq -- indeed,  even increasing their numbers in the short run;  or

• (2) WITHDRAWING with all deliberate speed, along the lines suggested months ago by Congressman John Murtha.

One might have thought that the American people had just spoken clearly on this matter in the November 2006 election, favoring the second alternative.

But of course these are complex issues, which can't just be delegated to any Tom, Dick, or Sheila on the street....!!!   

                                               *****

(c)SubmergingMarkets, 2006

 

 

CUBA'S HEALTH CARE REVOLUTION, LATIN AMERICA'S HIDDEN HOLOCAUSTSomething for Fidel to Be Proud OfJames S. Henry

While US media conglomerates like Time and Fox have been obsessing for months about whether or not 80-year old Fidel Castro is finally about to meet El Fabricante,  Cuba has been busy setting health records -- helping its 11.4 million citizens achieve lower mortality and longer lives than almost anywhere else in the developing world.

Now that a leading Madrid surgeon has made it clear -- contrary to USG agitprop -- that Fidel is not suffering from terminal cancer, and, indeed, is recovering well from last summer's stomach operation,   perhaps this other Cuban health story will finally receive the attention that it deserves. 

Just this month Cuba announced that its infant mortality rate has reached the First World average of just 5.3 per thousand -- on a par with the latest rates for the UK, Canada and New Zealand, even lower than the 6.7 US average,  and less than half the 14.1 average rate for all African-Americans in the US.

LATIN AMERICA'S HIDDEN HOLOCAUST

Even more to the point, Cuba's infant mortality rate is also the lowest in Latin America and the Caribbean, and indeed, the lowest for any developing country in the world.

The corollary is another important story. This is the fact that while Fidel's tiny, isolated, centrally-planned, highly-inefficient, antediluvian island economy has managed to set record after record on public health, education, poverty reduction, and gender equality since the 1970s,  the "non-revolutionary" rest of Latin America has lagged far behind. Over time, the cumulative impact has been huge.

For example, as we'll see below, if other Latin American and Caribbean countries had simply kept pace with Cuba's percentage improvements in infant mortality from the 1960s to 2005, an additional 6.4 million infants -- an average of 184,000 per year for the region as a whole -- would have survived the first year of childbirth.

In effect, all these "missing children" amount to nothing less than a continuing hidden holocaust -- attributable at least in part to the pro-elite development paths that most of these countries have pursued.

Many of those critics on the Right who like to rail against the deficiencies of Castro's regime -- its admitted lack of US-style national elections and market freedoms, its shortage of big fancy cars and other consumer goods -- also profess to be profoundly concerned about human rights,  the welfare of Elian Gonzalez, "the rights of the unborn," and so forth.

Perhaps they will now bring themselves to admit that at least in one respect, Fidel's Revolution is actually a role model -- and that naked capitalist development also has very high costs. 

This goes a long way to explain why, far from being the pariah that USG has tried to make him, Fidel is today treated with greater respect and admiration throughout Latin America than ever before -- certainly in comparison with former US-backed right-wing thugs like Pinochet, Rios Montt, Banzer, Fujimori, and the Argentine and Brazilian juntas.

Consistent with this, on October 28, 2006, the UN General Assembly voted for the 13th year in a row to condemn the US embargo on Cuba. Every Latin American and Caribbean country voted to support the resolution, joining 179 countries that did so. Only four countries voted against it -- the US, Israel, the Marshall Islands, and Palau.

In any case, whatever the quality of life in Cuba for adults today, the fact is that if you are an unborn infant of average means who somehow gets to decide where in the entire developing world to be born, there's no contest.

(For all the gory statistical details, read on below):

 

REMEMBERING THE GENERALPart I: OverviewJames S. Henry

---

I was born a Chilean,  I am a Chilean,
I will die a Chilean.
They, the fascists, were born traitors,
live as traitors, and will be remembered forever as fascist traitors.

-- Orlando Letelier, 1932-76

---

Both Chile's General Augusto Pinochet and Saddam Hussein, two formerly US-backed dictators, have at last had to confront Higher Authorities that they were unable to intimidate, compromise, or evade.

However, unlike Saddam, who was hanged in the middle of a night on December 30, 2006, by a nervous Iraqi Government tribunal,  Pinochet managed to escape human justice for his crimes, and died of natural causes at the age of 91. 

How does the General deserve to be remembered? Did he not richly deserve the same fate as Saddam? And how did he manage to avoid it? 

Was he simply a ruthless, corrupt right-wing tyrant, the puppet of foreign interests and their handmaidens, like ITT,  Nixon, Kissinger, the CIA, George H.W. Bush, Margaret Thatcher, and Reagan?   

Or was he, as many of his defenders still maintain,  an essential bulwark against the Leftist Horde in Latin America?

If perhaps not exactly the world's staunchest defender of political liberalism, was he at least -- as Thatcher, some neoliberal  economists, The Wall Street Journal, and even supposedly "liberal" newspapers like The Washington Post now maintain --  a staunch defender of  "free markets" who deserves much of the credit for Chile's economic performance since the 1970s?

As we'll see,  most conventional portraits of General Pinochet are flat-out wrong, not only with respect to his alleged role in combating Soviet expansionism, but also with respect to his regime's alleged beneficial influence on Chile's economy.

First,  Pinochet was at best only a non-essential bit player in the anti-Soviet struggle. Allende's broad-based social democratic "revolution" was never taken seriously by Moscow or Havana. Nor was it strong enough to mount a Cuban-style revolution, or even to precipitate a civil war. Left to its own devices, Allende's "leftish" alliance would probably have burned itself out by the next election or plebiscite in 1974.

Furthermore, even if Chile's leftists had somehow managed to create a "Soviet Republic of Patagonia," tiny Chile was already completely surrounded by other countries that had much greater strategic importance to the West.

By 1973, they either already had their own right-wing dictatorships (Brazil, Paraguay, and Bolivia), or were well on the way (Argentina and Uruguay).

In short,  killing off Chile's long-standing democracy was gratuitous -- the political equivalent of exaggeratinging Iraq's "slam dunk" WMD threat.

All the repression was for nothing.

On the economic front, Pinochet's interregnum was also a costly, needless detour. 

Indeed, one key reason why Chile's so-called "economic miracle" has proved to be so successful in the long run -- with great help from human capital finally brought back home by many well-educated returning "Leftists" who were  driven out of country in 1973-90 -- was precisely because Pinochet's first decade of experiments with "Los Chicago economics" proved to be so disastrous. Giving Pinochet credit for the subsequent corrective reforms is like crediting Leonid Brezhnev with last decade's revival of economic growth in Eastern Europe.

(For more details, see Parts II and III...)

 

   

Blood DiamondsPart 1: The Empire Strikes Back!by James S. Henry

"...(O)ne of the great dramas of Africa: extremely rich areas are reduced to theaters of misery...."

-- Rafael Marques, Angolan journalist (July 2006)

"For each $9 of rough diamonds sold abroad, our customers, after cutting them, collect something like $56..." 

-- Sandra Vasconcelos, Endiama (2005)

"We found the Kalahari clean. For years and years the Bushman have lived off the land....thousands of years...We did not buy the Kalahari. God gave it to us. He did not loan it to us. He gave it to us. Forever. I do not speak in anger, because I am not angry. But I want the freedom that we once had."

-- Bushman, Last Voice of an Ancient Tongue, Ulwazi Radio, 1997 

 

---

The global diamond industry, led by giants like De Beers, RTZ,  BHP Bililton, and Alrosa  Co Ltd., Russia's state-owned diamond company,  a handful of aggressive independents like Israel's Lev Leviev,  Beny Steinmetz's BSG Group, and Daniel Gertier's DGI, a hundred other key "diamantaires" in New York,  Ramat-Gan, Antwerp,  Dubai, Mumbai, and Hong Kong,  and leading "diamond industry banks" like ABN-AMRO, is not exactly renowned for its abiding concern about the welfare of the millions of diamond miners, cutters,  polishers, and their families who live in developing countries.

But the industry -- whose top five corporate members still control more than 80 percent of the 160 million carets that are produced and sold each year into the $70 billlion  world-wide retail diamond jewelry market -- certainly does have an undeniable long-standing concern for its own product's image.

PERENNIAL FEARS

Indeed, for decades, observers of the diamond industry have warned that it was teetering on the brink of a price collapse, because the industry's prosperity has been based on a combination of artificial demand and equally-artificial -- but often more unstable -- control over supply.

Most of the doomsayers have always predicted that the inevitable downfall, when it came, would arrive from the supply side, in the form of some major new diamond find that produced a flood of raw diamonds onto the global market.

The precise culprits, in turn, were expected to be artificial diamonds (in the 1960s and 1970s), "an avalanche of Australian diamonds" (in the 1980s,) and Russian diamonds (in the 1990s.)

This supply-side pessimism has lately been muted, given the failure of the earlier predictions and the fact that raw diamond prices -- though not, buyers beware,  retail diamond resale prices!! --  have recently increased at a hefty 10-12 percent per year.  There is also some evidence that really big "kimberlite mines" are becoming harder and harder to find.

However, there are still an awful lot of raw diamonds out there waiting to found, and one does still hear warnings about the long-overpredicted Malthusian glut, now from new sources like deep mines in Angola, Namibia's offshore fields, Gabon, Zambia, and the Canadian Northwest.

THE REAL THREAT?

Meanwhile, the other key threat to the industry's artificial price structure -- where retail prices are at least 7 to 10 times the cost of raw diamonds -- comes from the demand side. This is the concern that diamonds may lose the patina of glamour, rarity and respectability that the industry has carefully cultivated since the 1940s.

It is therefore not surprising that the industry has been deeply disturbed by the December 8, 2006, release of Blood Diamond, a block-buster Hollywood film that stars Leonard DiCaprio, Jennifer Connelly, and Djinmon Hounsou.

While extraordinarily violent and a bit too long, the film is entertaining, mildly informative, and far from "foolish" -- the sniff that it received from one snide NYT reviewer -- who clearly knew nothing about the subject matter, other than, perhaps, the fact that the Times' own Fortunoff- and Tiffany-laden ad department didn't care for  the film. 

Indeed,  this film does provide the most critical big-screen view to date of the diamond industry's sordid global track record, not only in Africa, but also in Brazil, India, Russia, and, indeed, Canada and Australia, where diamonds have often been used to finance civil wars, corruption, and environmental degradation, and  indigenous peoples often been pushed aside to make room for the industry's priorities.

Surely the film is a small offset to decades of the diamond cartel's shameless exploitation of Hollywood films, leading ladies like Marilyn Monroe, Elisabeth Taylor, and Lauren Bacall, and scores of supermodels, rock stars, and impresarios.

INDUSTRY WHITE WASH
 

Dismayed at the potential negative impact of the film ever since the industry first learned about Blood Diamond in late 2005, it is reportedly spending at least an extra $15 million on a  PR campaign that responds to the film  -- in addition to the $200 million per year that the World Diamond Council already spends on regular marketing.

For example, if you Google "blood diamonds," for example, you'll see that the industry has purchased top billing for its own version of the "facts" regarding this film. Always eager for a new marketing angle, some diamond merchants have also seized the opportunity to pitch their own product lines as "conflict diamond - free."

DEF JAM'S  BLACK WASH

This shameless PR campaign has also included a "black wash" effort by the multimillionaire hip hop impresario Russell Simmons, who launched his own diamond jewelry line by way of the Simmons Jewelry Co. in 2004,  in partnershp with long-time New York diamond dealer M. Fabrikant & Sons.

Simmons, who admits to "making a lot of money by selling diamonds," rushed back to New York on December 6 from a whirlwind nine-day private jet tour of diamond mines in South Africa and Botswana -- but, admittedly,  not in conflict-ridden Sierre Leone, Angola, the Congo, the Ivory Coast or Chad.

Simmons was originally scheduled to travel with one of his latest flames, the  27-year old Czech supermodel and Fortunoff promoter, Petra Nemcova. But Petra reportedly preferred to stay home and accept a huge diamond engagement ring of her own from British singer/soldier James Blunt, whose 2005 pop hit "You're Beautiful" was recently nominated the "fourth most annoying thing in Britain," next to cold-callers, queue-jumpers, and caravans.

The timing of Simmons' trip, which he filmed for UUtube, just happened to coincide with the December 8 release of the Warner Brothers feature.

Upon his return, Simmons held a press conference, accompanied by his estranged wife Kimora Lee Simmons and Dr. Benjamin  F. Chavis Mohammed, a former civil rights activitist and fellow investor in the jewelry company who is perhaps best remembered for being fired as NAACP Director in 1994  after settling a costly sexual harassment suit, and for joining the Rev. Louis Farrakhan's Nation of islam. Simmons' astounding conclusion from his wonder-tour: "Bling isn't so bad."

Whatever the credibility of Simmons and his fellow instant experts, it was  evidently not enough to save M. Fabricant & Sons,  which filed for Chapter 11 in November.

THE GODS MUST (STILL) BE CRAZY

Simmons managed to tour a few major diamond mines on his African safari, but apparently he lacked time to examine the contentious land dispute between the Kalahari  San Bushmen, the members of one of Africa's oldest indigenous groups,  and the Botswana Government -- with the diamond industry's influence lurking right offstage.

In the 1990s, after diamond deposits were reportedly discovered on the Bushmen's traditional lands, the Botwana Government -- which owns 15 percent of De Beers, is a 50-50 partner with De Beers in the Debswana diamond venture, the largest diamond producer in Africa, and derives half its revenue from diamond mining -- has pressured the Bushmen to leave their tribal lands.

The methods used were not subtle. To force the Bushmen into resettlement camps outside the Reserve, the Botswana Government closed schools and clinics, cut off water supplies, and subjected members of the group to threats, beatings, and other forms of intimidation for hunting on their own land -- all of it ordained by F.G. Mogae, Botswana's President,  who declared in February 2005 that he 'could not allow the Bushmen to return to the Kalahari." Those who have been resettled have been living in destitution, without jobs and little to do except drink. (See a recent BBC video on the subject.) 

Thankfully, on December 13, 2006, Botswana's High Court ruled that in 2002, more than 1000 Bushmen had been illegally evicted by the Botswana Government from the Central Kalahari Game Reserve, where they'd lived for 30,000 years.

The Botswana Attorney General has already attempted to attached strict conditions to the ruling, so this struggle is far from over. But at least the first prolonged legal battle has been won -- thanks to the determination of the Bushmen, public-spirited lawyers like Gordon Bennett, their legal counsel, courageous crusaders like Professor Kenneth Good, and  NGOs like Survival International, which has supported the legal battle.

In the wake of this decision, as usual,  the global diamond industry, led by De Beers, has denied that any responsibility whatsoever for the displacement of the Bushmen.

However, the fact is that De Beers and other companies has been prospecting actively in the Kalahari Reserve, especially around the Bushman community of Gope (see this video), where De Beers has falsely claimed that no Bushmen were living when it started mining. It has actively opposed recognizing the rights of indigeneous peoples in Africa. In 2002, at the time of the eviction, Debswana's Managing Director -- appointed by De Beers -- commented that "The government was justified in removing the Basarwa (Bushmen)….’.

De Beers' behavior in Botswana has so outraged activists that they have joined together with prominent actors like Julie Christie and several Nemcova-like supermodels who used to appear in De Beers ads, in an appeal for people to boycott the now-UK-based giant -- which has lately been trying to move downstream into retail diamonds.

However, De Beers is far from alone in this effort.  Indeed, as has often been the case with  "conflict diamonds," less well-known foreign companies have been permitted to do much of the nastier pioneering. 

In Botswana's case, these have included Vancouver-based Motapa Diamonds and Isle of Jersey-based Petra Diamonds Ltd. both of which have have obtained licenses to explore and develop milliions of acres, including CKGR lands. Petra is not unfamiliar with "conflict diamonds;" it is perhaps best known for a failed 2000 attempt to invest in a $1 billion diamond project in the war-torn DR Congo, in which Zimbabwe's corrupt dicator, Robert Mugabe, reportedly held a 40 percent interest.

In the case of Botswana, in September 2005 Petra acquired the country's largest single prospecting license -- covering 30,000 square miles, nearly the size of Austria -- by purchasing Kalahari Diamonds Ltd, a company that was 20 percent owned by BHP Billiton and 10 percent by the World Bank/IFC -- which apparently saw the sponsorship of CKGR mining as somehow consistent with its own financial imperatives, if not its developmental mission. (!!!). Petra has also licensed proprietary explorations technology from BHP Billiton, and offered it development rights, a front-runner for the Australian giant.

Meanwhile, at least 29 of the 239 Bushmen who filed the lawsuit have perished while living in settlement camps, waiting for the case to be decided, and many others are impoverished. 

Perhaps the diamond industry's $15 million might be better spent simply helping these Bushmen return to their homes -- and also settling up with  the Nama people in South Africa, the Intuit and Kree peoples in Canada, and the aborigines in Australia.

FAR CRY

Meanwhile, as we'll examine in Part II, despite the "Kimberly Process" that was adopted by many -- but not all -- key diamond producers in 2003, the fact is that diamonds continue to pour out of conflict zones like the Congo, Ghana, and the Ivory Coast, providing the revenues that finance continuing bloodshed.

The industry's vaunted estimate that they account for just "1 percent" of total production is based on thin air -- there are so many loopholes in the current transnational supply chain that there is just no way of knowing. Of course, given the scale of the global industry, and the poverty of the countries involved, even a tiny percent of the global market can make a huge difference on the ground.

Furthermore, in cases like Angola, the Kimberly Process has provided an excuse for corrupt governments to team up with private security firms and diamond traders to crack down on independent alluvial miners.

Finally, the diamond industry still has much work to do on other fronts --  pollution, deforestation, and, most important, the task of creating a fairer division of the spoils, in an industry where the overwhelming share of value-added is still captured by just a handful of First World countries. 

The objective here is not to kill the golden goose. In principal, the diamond industry should be able to reduce world inequality and poverty, since almost all retail buyers are relatively-affluent people in rich countries, while more than 80 percent of all retail diamonds come from poor countries.

But beyond eliminating traffic in "blood diamonds," however,  we should also demand that this industry starts to redress its even more fundamental misbehaviors.

                                                           ***

(c) SubmergingMarkets,2007

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BEYOND DEBT RELIEFThe Next Stage In the Fight for Global Social JusticeJames S. Henry

“Third World debt relief”  has become a little like Boston’s “Big Dig,” the Middle East “peace process,” and the “ultimate cure for cancer” -- long anticipated, endlessly discussed, and perpetually, it seems, just around the corner.

At the end of the day, after decades of effort, the fact is that very little Third World debt relief has actually been achieved.

There is also mounting evidence that even the paltry amount of debt relief that has been achieved has not done very much good. 

This is partly  because debt relief tends to reinforce questionable policies and bad habits that get developing countries into hock in the first place.  It is also because debt relief has reinforced the prerogatives of IMF/World Bank econo-crats, whose policies have often been incredibly detrimental. 

Finally, debt relief is also often a very poor substitute for other forms of aid and development finance. 

Furthermore, most of the costs of debt relief have been born by ordinary First and Third World taxpayers, while the global banks and Third World elites that have profited enormously from all the lousy projects, capital flight, and corruption that were financed by the debt have escaped scot-free.

This is not to suggest that the debt relief campaign has been utterly pointless.

It has provided a bully pulpit for scores of entertainers, politicians, economists, religious leaders, and NGOs. It  has occasionally reminded us of the persistent problems of global poverty and inequality.

It has also provided an excuse for some pretty good free concerts.

From the standpoint of actually providing enough increased aid to improve living conditions in debt-ridden countries, however, debt relief has been a disappointment. In the immortal words of Bono himself, "We still haven't found what we're looking for."

Fortunately, there is an alternative strategy that would have much greater impact. But this strategy would require a more combative stance on the part of anti-debt activists, and it would almost certainly not generate nearly as many convivial press conferences or photo opportunities.

ISRAEL'S STRATEGIC BLUNDERS, ROUND TWOLessons (Re)-Learned?James S. Henry

LESSONS (RE)-LEARNED?

In hindsight, Israel and the US  should have just re-learned some very costly lessons about the risks of taking on a highly-motivated, well-trained and adequately-armed guerilla army on its own turf. They also have an opportunity to remember some important lessons about the limitations of purely-military solutions to such conflicts.    

> As in the case of  the US strategic bombing campaign in Vietnam, Nato's air war in Kosovo (1999), and, indeed, the Allied air war against the Nazis during World War II, Israel's month-long air war against Hezbollah has largely failed to accomplish its strategic objectives. In particular, Hezbollah's ability launch dozens of missiles into northern Israel went utterly unscathed, with the largest single number of missles launched on August 12, the day before the ceasefire.

>Given the elaborate ground defenses, arsenal, and trained force that Hezbollah was able to pre-position in South Lebanon, its ground forces also avoided the knock-out blow that Israel and Washington had hoped for.

>By far the most effective "weapons" on the ground were not Iranian-supplied long-range missiles, cruise missles, or even Katushyas, but a combination of hard-core tactical training, heavy investments in combat engineering, and anti-tank missiles, many of which appear to have been supplied by Russia, by way of Iran and Syria.

>At the same time, the widespread bombing campaign exacted a horrific price from Lebanon's civilian population, uniting most political factions within Lebanon against Israel rather than against Hezbollah, at least temporarily.

>It has also greatly boosted political support for Hezbollah on the "Arab street" throughout the Middle East, converting the initial anti-Hezbollah reactions by the Saudis, Egypt, and other conservative regimes into official expressions of support.

>Syria, which had been under strong political pressure to continue its detachment from Lebanon, has been "reaccredited" by Israel's excesses during the conflict -- able to assume the self-righteous role of Lebanon's protector against foreign aggression. On the other hand, the Baathist regime may also now be in a stronger negotiating position with respect to the West.

>Iran's hardcore anti-reformers have so far only been strengthened by Hezbollah's performance to date in this conflict, and by Israel's costly tactics. Nor were they discouraged from pursuing their nuclear development program.

>Most important, Hezbollah's ability to define victory as "not losing" against one of the world's most powerful armies has certainly not encouraged other radical groups around the planet to lay down their arms and pursue peaceful alternatives.

>For every Hezbollah fighter that was killed by the Israelis in the last month, the heavy bombing campaign probably generated several new recruits -- not only in Lebanon, but also in Afghanistan, Iraq, Kashmir, and the West Bank.

• In short, as a result of this strategic setback, Condi Rice's Panglossian "birth pangs of democracy" are likely to prove more prolonged and painful than ever.   

WAS THERE ANY ALTERNATIVE?

• At a tactical level, clearly Israel and the US both need to do much work to do regarding the failures of their intelligence operations with respect to Hezbollah's arsenal and military preparations. We can add this to the lengthy list of their  other intelligence failures in the last decade alone.
  

• The preference for high-altitude offensive bombing,  naval shelling, and open-field tank/ heavy vehicle warfare over hard-slog ground offensives also needs to be reexamined. To the extent that this reflects a preference for arms-length "hi-tech warfare," and a reluctance to sacrifice infantry for the sake of defeating dedicated militants like Hezbollah, this may indeed rise to the level of the same "morale/ will to die"  handicap that has crippled other many colonial armies,  in places like Vietnam, Algeria, China, and (long ago) the US itself.      

• At a strategic level, the notion that the "enemy" simply consists of a finite stock of "fanatical terrorists," motivated primarily by "Islamo-fascist" dogma, or -- as Benjamin Netanyahu put it last week -- "12th century religious doctrines," is simple-minded and unhelpful. Unless military planners come to appreciate the political implications of what they do, they may lose the war off the battlefield.

• True, it is now very late in the day, and the long-term failure of Israel and its enemies in the region to make any progress at the bargaining table may indeed mean that this overall story is headed for a terrible climax.

• From this angle, however, perhaps the one good thing about this strategic disaster is that it may remind Israel and the US that, whatever the final outcome of any attempt to solve the problems of the Middle East by military means,  it will not be cheap, easy, or devoid of surprises.

• (c) JSH, SubmergingMarkets, 2006     

"PORT WHINE, DUBAI-OUS LOGIC"The Impressive Power of Sheer DemagogyJames S. Henry

We must realize that it is very hard to save a civilization when its hour has come to fall beneath the power of demagogues. For the demagogue has been the great strangler of civilization....(One) is not a demagogue simply because he stands up and shouts at a crowd...The real demagogy..is rooted in...irresponsibility toward... ideas...Demagogy is a form of intellectual degeneration.

-- Jose Ortega y Gasset, History as a System

World oil markets may be tight, but evidently the world has an inexhaustible supply of ethnic and religious enmity -- and not only in the Middle East. If we are looking for a sustainable alternative energy source, perhaps we should start here.

Just this week,  at least five more Palestinian "terrorists" --  or "freedom fighters" and "martyrs,"  as many Palestinians regard them -- were shot dead by Israeli paramilitaries in the West Bank. Seven US soldiers were blown to bits in Iraq, more than 165 Iraqis perished in fighting between Sunnis and Shiites, and at least 100 Nigerians died in conflicts that were aggravated by Denmark's gratuitous Muslim-baiting cartoons. 

Meanwhile, back on the center stage of Western democracy,  many of our best-known  Congressional Democrats and Republicans -- including Senators Hillary Clinton (D), Charles Schumer (D), Bill Frist (R), Richard Shelby (R), and George Allen (R), as well as many media pundits -- were focusing on the Bush Administration's decision to approve the acquisition of a P&O Ports, a leading British ports services company,  by DP World, a Dubai government-owned ports services company that already operates 22 container terminals in 15 countries.

On closer inspection, that opposition amounted to little more than a combination of knee-jerk prejudice, dubious economics, even more gratuitous Muslim-baiting, and the worst form of political pandering.

If recent experiences with similar port licensing conflicts in the US are any guide, it is likely that the Dubai company will eventually get its way.

Unfortunately, given President Bush's weak political position and the paucity of principled statemanship and wisdom in both of our two leading "cartel-like" parties,  we are likely to see much more of this kind of demagogy in the next few years.

  (c) SubmergingMarkets, 2006.

EVO'S HISTORIC VICTORYBolivia's Democratic RevolutionJames S. Henry LaPaz, Bolivia

The mood at Tuto Quiroga's well-appointed campaign headquarters at the Hotel Radisson in downtown LaPaz was funereal, while across town at MAS Party headquarters in the former Brazilian Embassy, and later on in the impoverished township of El Alto,  people were chanting and singing in the streets late into the night. Not long after the polls in Bolivia closed late this Sunday afternoonn,  it was already clear that the country's impoverished majority had finally elected one of their own as the country´s next President -- and by a much larger margin than any foreign policy expert, journalist, or Latin America political pundit had expected.

This is easily one of the most surprising and important elections in the history of Latin American democracy. For fans of the "neoliberal," free-market approach to development, as well as coca eradication, it is also a time for soul-searching.

Evo Morales, the 46-year old working-class meztizo, cocalero organizer, and leader of the neo-left "Movement Toward Socialism" party, has soundly defeated the seven other Presidential candidates in the race, capturing close to 50 percent of the nationwide vote.

While the final vote tally still has to be certifed by Bolivia's Electoral Court,  this clearly puts Evo within reach of becoming the first Bolivian President ever to have won a first-round victory outright -- without having the choice default to Bolivia`s fractious, "rent-seeking" Congress.

From an historical perspective, Evo's performance is an all-time record for a Bolivian Presidential candidate, far surpassing the 31 percent received by the second-place candidate, the free-market oriented-former President, Tuto Quiroga. It also surpasses the previous all-time high registered by Hernan Solis in 1982, as well as the 34 percent captured by neoliberal businessman "Goni" Sanchez de Lozada in 1993.

For that matter, relative to other recent elections in the Western Hemisphere, Evo has also outperformed the victory margins achieved by the US´President Bush, Brazil´s Lula, and Argentina's Kirchner. Whatever one thinks of Evo's economic platform -- and it certainly contains more than a little wishful thinking-- there is no doubt that, at least for the moment, he has far more credibility with the Bolivian people than his opponents.

A DEMOCRATIC REVOLUTION?

Even more important than the historical records,  Bolivians have clearly voted en masse in favor of at least three fundamental changes in Bolivia`s social and political landscape -- all of them supported by MAS.

 

• Reasserting public control over Bolivia`s natural resources, especially its huge natural gas reserves -- already, in official terms, the second largest in Latin America, and quite possibly much more.

  Evo's vague, rhetorical shorthand for this is "nationalization," but there is a whole range of policy options that MAS is considering to increase the public`s share of the income generated by its natural resources, and add more value, and generate more jobs by using these resources at home. Whether or not any of these will make practical economic sense is far from clear. But it is hard to argue that this program will  necessarily be any more disappointing for ordinary people than the last two decades of neoliberal policies.

 

• Rejecting (US-backed) coca eradication programs. This supply-side approach to cocaine trade has been pursued by Bolivia since at least the mid-1980s, especially under the Banzer-Quiroga administration from 1997 to 2002.

  Unfortunately, as most observers outside the "drug enforcement complex" now agree -- including good solid conservatives like Milton Friedman and Steve Forbes --  the impact on ultimate cocaine supplies have been limited at best.

  At the same time,  the social, political, and economic impacts on countries like Bolivia, Columbia, and Peru have been disastrous.

  Oddly enough, with respect to drug enforcement, Evo is the true "neoliberal."  He believes that a poor country like Bolivia has a right to grow crops like coca if it makes economic sense, that punishing them for doing so is like punishing Dupont because some of its chemicals end up in illicit drugs, and that Bolivian farms should not be made to pay for the fact that  Americans and Brazilians can't control their bad habits.

  From this angle, his election is just one in a growing series of "corrective interviews" that Andean countries are giving to Washington on the huge costs of the failed supply-side drug control strategy. To summarize the matter quickly -- wouldn't the American people really have preferred to be buying several million cubit feet per day of LNG from Bolivia this winter, rather than pursue coca eradication policies in Bolivia that have had little impact on drug supplies while fostering a hostile political movement?

• Much greater effective representation for Bolivia´s impoverished, excluded, indigenous and meztizo majority. In this case the cliche happens to be true -- for centuries, the Bolivian people have stood by and watched the country´s incredible raw materials -- silver, tin, iron ore, guano, rubber, and now natural gas -- being expropriated by private interests or elite-controlled state companies, while the vast majority have remained dirt poor.

  Futhermore, since the 1990s, Bolivia has been a virtual laboratory for neoliberal economics, as well as coca eradication. The country ended up with its most valuable assets in private hands, while more than half the population remained poor and inequality increased dramatically. Evo´s election sends a message, loud and clear, that Bolivians have had enough. Indeed, from this standpoint, their voting behavior is not particularly radical -- in capitalist terms, they are  simply a group of shareholders who have finally decided to show incompetent managers the door.

This  is a message that will reverbrate throughout the region -- in next year's elections in Peru, Colombia, and even Mexico, for example. This is a message that the US, in particular -- so obsessed with implanting "democracy" in the Middle East, and recently so careless about paying attention to Latin America's troubled democracies closer to home -- ignores at its peril.    

EVO'S ALLIES?

There is an old Russian proverb that says, "Keep an eye on your friends -- your enemies will take care of themselves."

Of course it is to be expected that hard-line America haters like Venezuela's Hugo Chavez and Cuba's Fidel Castro, as well as leading Latin leftlists like Lula and Kirchner,  will take pleasure in Evo's victory, just as many simple-minded American neoconservatives will regard it as an unmitigated setback. 

But Evo's erstwhile left-wing allies should be careful not to celebrate too soon.

In Fidel's case, the key question is, how soon is he prepared to give Cubans the same democratic rights that Bolivians have just exercized?   

In Hugo's case, the question is, is he prepared to make up all for the economic aid, debt relief, and lost exports that Bolivia will lose if it alienates the US and the international community by adopting policies like coca legalization and gas nationalization?  Isn't it just possible that he may well prefer for Bolivia's gas to stay in the ground, where it can't compete with Venezuela's proposed pipeline to Brazil and its proposed LNG exports to the US? 

In the case of Lula's Brazil and Kirchner's Argentina, the question is, are they really willing to renegotiate the lucrative gas export contracts they now have with Bolivia, helping Evo by sharply increasing the prices that they pay, while increasing their Bolivian investments? Assuming that Bolivia is going to export at least part of its gas, shouldn't it consider competitors to Brazil and Argentina, rather than continue to be a captive supplier to these monopsonists?

Overall, therefore, it is easy for Latin America's kneejerk Left to celebrate Evo's rise as yet another defeat for Yankee imperialism -- and, indeed, there is just enough truth in that story to keep the brew bubbling. 

But every day that  Evo wakes up, he needs to remind himself that it was not the Yankees who are responsible for the fact that his country is one-half the size that it was 150 years ago;  that it is not Yankees who consumed most of his country's silver and other resources; that it is not Yankees that are consuming up to 30 million cubic feet per day of Bolivian gas at prices less than a fifth of US market levels (but Brazil and Argentina -- and Chile, by way of Argentina);  that it not Yankees who are content to keep Bolivia landlocked. On the other hand, it IS Yankees who have provided Bolivia with more foreign aid per capita than almost any other Third World country since 1948 -- much of which was admittedly wasted, but much of which undoubtedly did some good. 

In short, now that Evo is President, and not just an angry outside critic of the system, he will have to take responsibility for governing, and admit that Venezuelan, Brazilian, Argentine, and Chilean imperialism -- or, indeed, Chinese imperialism --  are no better than gringo imperialism.

As I`ll argue in Part II, none of these changes will be easy for Evo to implement within the bounds of Bolivia's existing political system, with its increasing regional polarities.   

Indeed, he faces an extraordinary list of challenges -- the least of which will be to become an effective head of government.  He will need a great deal of help. The US could usefully start by lifting its ban on holding discussions with him, and by granting him a visa. 

Despite all the obstacles, it is not too early to pronounce the strong, unified outpouring in favor of this program a ¨democratic revolution.¨

And what is perhaps most striking about this particular one is that Bolivia's people have made it on their own -- without the costly outside intervention that has been required to construct Lego-democracy in other well-known energy-rich developing countries.

(c)SubmergingMarkets, 2005