Tag Archives: Capitalism

Uncomfortable Successes

11 Aug

As America is increasingly brought low on the world stage, with endless insurgencies in Iraq and Afghanistan, and a continually sputtering economy, it is worthwhile to observe two recent successes by other countries. The means required to provide such success should give us pause, as we reconsider our own country’s proper role and goals, and honestly assess our capabilities.

The first success is the new Sri Lankan Model for quelling an insurgency. The Sri Lankans have been fighting the Tamil Tigers, a terrorist organization fighting in defense of the ethnically separate Tamil group also inhabiting the island of Sri Lanka. This war had lasted for over 30 years, but recently Sri Lanka prevailed in their conflict. The Tigers were a substantial foe, with several successful assassinations of high ranking officials (Sri Lankan President in 1993 and the Indian Prime Minister in 1991), and despite their entirely secular nature, made extensive use of suicide bombers.

The struggle in Sri Lanka looked endless. So how did the Sri Lankan government win? An entirely military solution. The Economist relates the Model:

Louise Arbour, head of the International Crisis Group (ICG), says the Sri Lanka model consists of three parts: what she dubs “scorched-earth tactics” (full operational freedom for the army, no negotiations with terrorists, no ceasefires to let them regroup); next, ignoring differences between combatants and non-combatants (the new ICG report documents many such examples); lastly, the dismissal of international and media concerns.

Shut out the media, round up everyone, and kill them. The discomfort with the tactics is matched only by the disgust that it worked, and ended 33 years of war. The Economist continues:

A senior official in President Mahinda Rajapaksa’s office, quoted anonymously in a journal, Indian Defence Review, says “we had to ensure that we regulated the media. We didn’t want the international community to force peace negotiations on us.” The author of that article, V.K. Shashikumar, concludes that “in the final analysis the Rajapaksa model is based on a military precept…Terrorism has to be wiped out militarily and cannot be tackled politically.” This is the opposite of the strategy America is pursuing in Afghanistan. It is winning a widespread hearing.

The widespread hearing in this case consists of other countries with internal insurgencies and fewer qualms than Americans: Pakistan, Myanmar, Indonesia, etc. Is this what it takes to actually “win” an insurgency? Are we willing to take the same actions? And if not, what does that say about our fundamental long term goals (in Afghanistan, particularly)?

A second uncomfortable model comes from China. The Economist (yes, I enjoy the global outside perspective) relates another story from a financial crisis seminar held last year. A young Chinese businessman, in nearly flawless English, opened the seminar with this question:

“Now that the free market has failed, what do you think is the proper role for the state in the economy?”

The dramatic early 1990’s success of capitalism over communism is growing smaller in the rear view mirror. Since then, Russia’s flirtation with capitalism has yielded a few gas giant oligarchs, but mixed results in the general economy. Eastern Europe is struggling to integrate with its western EU neighbors, and the current financial crisis has hit North America worst of all, forcing the US government to invest directly in industry (GM, et al).

Contrast that with the booming developing world, which has used a different model. “State Capitalism” takes the best (read: most controlling) aspects of government and business and combines them in a centrally planned economy. Not to be confused with Communism, State Capitalism focuses the effort of the state to succeed in, and take advantage of, the rules of the international capitalist world by having the state act as the player directly.

Some examples: the massive hedge funds owned by Dubai, Abu Dhabi, Qatar, and other Gulf states have skewed international finance and investing. When we buy foreign oil, we are not so much sending our dollars to the Middle East as loaning the money back to ourselves, with the profits on the loans and investments kept in Kuwait City. To put it another way, they win twice: once when the state sells us the oil, and again when they loan the profits back to American corporations. It could be worse – those states could loan the money to faster growing economies, like Brazil and China, instead. China’s foreign reserves now top $2.3 trillion, and its sovereign wealth fund includes in its portfolio the world’s largest bank and largest mobile phone operator. In fact, three quarters of all oil reserves, and three of the four largest banks in the world, are state controlled.

Will this trend last? That depends on whether ingenuity, creativity and innovation – the hallmarks of small private companies, not large state bureaucracies – are truly what will drive the 21st Century (as preached by America’s Silicon Valley), as opposed to old fashioned money and power.