1. FINANCIAL TIMES TUESDAY AUGUST 5 2003 17"
COMMENT
RICHARD JOSEPH
Moderate
Ba’athists
deserve a
role in the
new Iraq
I
t would be a mistake for the occu≤
pying powers to exclude moderate
Ba’athists from the new political
order in Iraq. The Ba’ath is the
most influential political party in the
region, not because Saddam Hussein
eliminated its rivals but because of its
broad ideological appeal. The longer
occupation continues, the greater this
appeal is likely to grow.
The partners in the US-led coalition
must distinguish between Mr Hussein’s
brutal practices and the ideology of the
Ba’ath party. The former reflect the
malign will of a military dictator. The
latter embodies an idealistic vision of a
new political order, antithetical to the
reality of a weak, fragmented and
underdeveloped Arab world.
The Ba’ath stands for secularism,
socialism, anti-imperialism and Arab
unity. Fiercely nationalistic, it seeks to
obliterate the vestiges of sectarianism,
communalism and tribalism that his≤
torically have impeded the creation of
a modern state. Its diagnosis of the
central problem in Iraqi political devel≤
opment is revealing: without the level≤
ling of primordial differences, without
the secularisation of society, without
individual deference to institutional
structures, democracy in Iraq will be
dysfunctional, if not unworkable.
Certain aspects of Ba’ath ideology
are problematic. The Ba’ath charter
advocates struggle “by all means neces≤
sary” to liberate the Arab nation from
“imperialism, occupation and foreign
influence”. It calls for the abrogation of
international agreements that “detract
from Arab sovereignty”. It speaks
boldly of socialist revolution and mes≤
sianically of the Arabs’ eternal mission
to the rest of humanity.
In other respects, Ba’athism is con≤
sistent with the western vision of a
secular, democratic state. The Ba’ath
charter extols freedom of speech,
assembly, belief and expression. It
demands equality of all before the law,
equal rights for women and sover≤
eignty of the people. It envisages a par≤
liamentary form of government, free
and fair elections, separation of powers
and a constitution that guarantees the
rights and liberties of all citizens.
These elements of Ba’ath dogma sug≤
gest that the Coalition Provisional
Authority can find common ground
with moderate Ba’athists, particularly
those who did not serve in the Hussein
government. The CPA should strive to
begin a dialogue with these party mem≤
bers. It is likely to discover that many
Ba’athists share with it a common
vision of parliamentary government ∞
though not necessarily the most appro≤
priate means for achieving it. The sup≤
posed “ideological divide” between
them is more about nationalism than
about freedom, democracy and rights.
Ba’athists should not be allowed to
serve in Iraq’s government without
preconditions. Those with the most
complicity in the crimes of the old
regime should be excluded. All others
should be required to disavow armed
struggle and commit to parliamentary
practice and gradual reform.
To exclude Ba’athists from Iraq’s
government could undermine coalition
efforts to build a secular, democratic
republic. They played a pivotal role in
Iraq’s economic, cultural and institu≤
tional development in the past and are
likely to do so in the future. Their
pre-eminent social position enables
them to discredit any foreign-sponsored
attempt to steer change in Iraq.
Armed with a potent psychological
weapon ∞ Arab nationalism ∞ they can,
and will, transform popular discontent
over mundane issues into a revolution≤
ary struggle for national liberation.
In the long run, the political alterna≤
tive to the Ba’ath could be more desta≤
bilising. The social basis of the Iraqi
state that the CPA is building consists
mainly of Shia clerics, Kurdish party
leaders, Sunni fundamentalists and
Iraqi expatriates. These groups have
little in common ideologically; indeed,
they can hardly agree on the nature of
the state and its relationship to the
occupying powers. The CPA has omit≤
ted some of the most influential ele≤
ments of Iraqi society: secular intellec≤
tuals, journalists, lawyers and other
professionals who are either affiliated
with the Ba’ath or sympathetic to its
ideology. Without these people, any
putative government, however broad
its ethnic base, will struggle.
In the end, the CPA must come to
terms with the Ba’ath. It must realise
that Ba’athism is ingrained in the
minds of many Iraqis, that militant
Ba’athists are likely to regroup after
the withdrawal of coalition forces and
that engaging moderate Ba’athists in
Iraq’s future is better than pushing
them down the path of resistance and
subversion.
The writer is a senior lecturer at the
University of Texas in Austin
To exclude Ba’athists, who
have played a pivotal role in
their country’s development,
from Iraq’s government
could undermine coalition
efforts to build a secular,
democratic republic
..............................................................
KEVIN WATKINS
The rich wreckers of the world trade round
T
he Luddites are at it again. As
ministers prepare to descend
next month on Cancu´ n to
launch the Doha “develop≤
ment round” of trade negotiations, the
World Trade Organisation is under
concerted attack. Small groups of dedi≤
cated, well organised and ruthless
activists are plotting to sink the round,
striking at the heart of the rules-based
trading system.
The wreckers in question are not
balaclava-clad representatives of the
anti-globalisation movement but men
in suits representing the governments
of the world’s richest countries.
Thanks to their efforts, almost all the
deadlines set for reaching agreement
on issues of concern to developing
countries have been missed. There is
now a real danger of collapse.
Such an outcome would be a tragedy
on two counts. First, the new WTO
round is an opportunity to reform the
unfair trade rules that systematically
disadvantage the world’s poorest coun≤
tries. Second, failure at Cancu´ n would
accelerate the trend towards regional≤
ism, bilateralism and unilateral power
politics, triggering a protectionist back≤
lash in the process.
When they signed up for a new trade
round in Doha in 2001, northern gov≤
ernments promised concrete action to
open their markets, cut agricultural
subsidies and deal with the concerns of
developing countries over the public
health implications of WTO rules on
intellectual property rights (Trips). No
progress has been achieved in any of
these areas. Instead, rich countries
appear bent on using the round to
advance aggressive liberalisation in
areas primarily of interest to corporate
constituencies at home.
No development agreement will be
worth the paper it is written on unless
it lowers northern trade barriers
against exports from developing coun≤
tries. The problem is that rich coun≤
tries like to preach free trade overseas,
while practising protectionism at
home.
When developing countries export to
industrialised countries they face tar≤
iffs four times higher on average than
those applied in trade between indus≤
trialised countries. Rich countries
impose higher taxes on processed
goods than on raw materials, hamper≤
ing efforts by developing countries to
diversify out of poverty. It is uncon≤
scionable for the world’s richest coun≤
tries to reserve their highest trade
taxes for the world’s poorest people. At
Cancu´ n they should agree to duty-free
and quota-free access for all low-
income countries, zero tariffs on
labour-intensive exports from all devel≤
oping countries and the elimination of
tariff escalation.
It is the same story in agriculture.
Northern governments spend $1bn
(£620m) a day on farm subsidies ∞ six
times the amount they allocate to aid.
These subsidies generate large export
surpluses which are dumped overseas.
Farmers in poor countries are being
forced out of global and local markets.
At Doha, the European Union and
the US promised a WTO ban on export
dumping. Both farm subsidy superpow≤
ers have reneged on this commitment.
The 2002 US Farm Act will increase
subsidies by $8bn a year for the next
decade, guaranteeing continued over≤
production. The EU’s singular contri≤
bution to the agricultural trade negoti≤
ations has been a farm “reform” that
maintains current spending, leaves
export subsidies intact, and sectors
such as sugar and dairy farming in
chronic surplus.
When it comes to intellectual prop≤
erty, the US is the problem. Under
intense pressure from the pharmaceuti≤
cals industry, the Bush administration
has refused to accept WTO rules that
would limit the patent rights of drugs
companies in order to make affordable
medicines available in developing
countries.
Notwithstanding the near-unanimous
opposition of southern governments,
the EU is demanding a WTO invest≤
ment agreement that will force devel≤
oping countries to open up sectors such
as banking and insurance. And the US
is using negotiations on financial ser≤
vices to achieve similar goals.
The refusal of industrialised coun≤
tries to listen to developing countries’
opinion threatens to damage the credi≤
bility and legitimacy of the WTO. This,
after all, is supposed to be a consensus-
based group, not a rich men’s club.
Northern governments have a month
to prepare the ground for a successful
outcome at Cancu´ n. They could use≤
fully revisit the promises they made in
Doha and then assess their proposals
against two criteria: will they make
trade work for the poor; and do they
enjoy the support of developing coun≤
tries?
The writer is head of research at Oxfam
The refusal of industrialised
countries to listen to
developing countries’
opinion threatens to damage
the credibility of the WTO
..............................................................
America will not free Liberia from chaos
Let us be honest. If it were not the
height of summer, when news stories
are always in short supply, the horrible
civil war in Liberia would not be
getting so much attention in the
international media.
Thank goodness it is, because it
means that there is just a chance,
although only a very slim chance, that
the world community in general, and
the US administration in particular,
will be embarrassed into doing
something serious about it.
That is practically the only positive
thing to be said about one of the
nastiest and most pointless little wars
to have plagued Africa in recent
decades. Casual violence committed by
youths high on crack cocaine is bad
enough. When it is carried out by
seven-year-old child soldiers who do
not need drugs to pull the trigger, it is
even more awful.
Four out of five of the country’s 2.8m
population have been forced to
abandon their land and homes in a
civil war that has raged for a decade.
There is no economy left to speak of.
The institutions of a nation that
modelled itself on America have been
destroyed. All that is left is random
violence, corruption and utter
insecurity. There is no source of law or
order, for the forces of the state are the
forces of disorder. And the rebels lined
against them are no better. Liberia is
the ultimate failed state.
It is ironic that this tragedy is
happening in the one country in Africa
that can claim direct ties to the US as
its colonial motherland. The
connection is not entirely fortuitous.
For the country that was founded by
liberated American slaves in the 19th
century has become the symbol of a
longer-term failure of US policy in
Africa over recent decades.
First, US administrations of both
political persuasions turned a blind eye
to rampant corruption in Liberia’s old
ruling elite of Americo-Liberians ∞ the
descendants of those freed slaves. But
when their century-long neo-colonial
rule was overthrown in 1980 in a
bloody coup by a junior soldiers led by
Staff Sgt Samuel Doe, Washington
actually stepped up its aid. Liberia was
a useful communications centre in the
cold war rivalry for Africa, so the new
mixture of violence and corruption in
the Doe regime was overlooked.
With the end of the cold war, Liberia
has ceased to be strategically
significant in any way. When a new
bunch of warlords launched a civil war
against Doe in 1990, the US decided to
look the other way. Charles Taylor, the
present ruler, was first ignored and
then ostracised. It was beneath US
dignity actively to intervene.
The ongoing disaster in Liberia is not
just a local tragedy. It is a cancer that
has affected the entire west African
region. Mr Taylor has stirred up
insurrection in neighbouring states,
starting with Sierra Leone, where he
has now been charged by a United
Nations-backed tribunal as a war
criminal. His latest intervention has
been in Ivory Coast, where he seems to
have encouraged his own supporters to
reward themselves by raping and
pillaging across the Ivorian border.
In that context, Mr Taylor has been
as evil and destabilising as Saddam
Hussein has been in the Gulf. But it is
scarcely surprising that that does not
figure with this US administration.
There is no national interest at stake.
Even Colin Powell, secretary of state,
who has argued for US intervention,
admits he cannot see a vital strategic
interest. “But we do have an interest in
making sure that west Africa does not
come apart,” he says.
Just as it is on most foreign policy
issues, Washington has been hopelessly
split on intervention in Liberia. With
casualties rising in Iraq, the Pentagon
has been strongly opposed. The result
has been “endless dithering”, according
to John Prendergast, Washington
director of the International Crisis
Group, so that Mr Bush could tour
Africa last month without having to
make up his mind.
“The delay in the decision, and
continuously providing a glimmer of
hope, obstructed everyone else from
acting,” he says. Only now are the first
Nigerian peacekeepers arriving in
Monrovia and they still do not know if
there will be US marines to back them
up. Three US warships are heading for
Liberian waters. They may be used to
encourage Mr Taylor to leave the
country voluntarily, but no more.
The US hesitancy about intervention
is extraordinary, considering the
relative success of both Britain and
France in restoring stability in
neighbouring Sierra Leone and Ivory
Coast. Both have done so with small
forces of disciplined troops. But it
seems that US fear of “another
Somalia”, where 18 US soldiers died
attempting to make the peace on the
other side of the continent, has left an
abiding fear of African interventions.
Indeed, US policy seems to be
focused on little more than “regime
change” in Liberia, just as it was in
Iraq. Far too little thought has gone
into the subsequent reconstruction and
stabilisation. But that is what Liberia
needs. The rebel forces will not provide
a nice alternative government; they are
guilty of many of the same atrocities.
Building democracy will take years. A
prolonged period of institution-building
is needed, guaranteed by a strong
external power. For the benighted
Liberian people, that means the US
rather than anyone else.
But Mr Bush does not seem to want
to know. His trip to the continent
played well back in the US, which is no
doubt what was intended. But unless
he makes a long-term commitment to
Liberia, he will not have many friends
in Africa to visit next time.
....................................................................................................
QUENTIN PEEL
quentin.peel@ft.com
The country that was
founded by liberated US
slaves has become the
symbol of a longer-term
failure of US policy in Africa
..............................................................
BILL O’RAHILLY
Goodbye, yellow brick road
S
eldom can we draw upon fic≤
tion and witchcraft to direct us
through economic history. But
in 1964, Henry Littlefield, a
school teacher, published a study enti≤
tled “The Wizard of Oz: A Parable on
Populism”. In this essay he presented
L. Frank Baum’s, The Wizard of Oz, as
an allegory for late 19th century Amer≤
ica. His description of this popular
novel has echoes in today’s US econ≤
omy.
The story covers the 1890s, during
which the US endured grinding defla≤
tion. Farming communities in the west,
represented by the Scarecrow, saw
their incomes and asset values collapse
and the real cost of debts rise. This
benefited the bankers in the east ∞ in
the guise of the Wicked Witch of the
East. Throughout the period the gold
standard was in operation, represented
by the Yellow Brick Road. The supply
of money was confined by the fixed
availability of gold. According to Little≤
field, Baum supported the Democratic
pro-silver candidacy of the time and
wove this theme into his tale. Dorothy
was the US, Oz gold, the Tin Man
industry and the Emerald City Wash≤
ington. Perhaps the allegory was lost
on Messrs Metro Goldwyn and Mayer ∞
or maybe they employed artistic
licence for visual effect. But in Baum’s
original story, Dorothy did not have
ruby shoes but silver ones, represent≤
ing the silver campaign.
In a National Democratic Convention
debate on monetary policy at the time,
William Jennings Bryan, a little-known
Democrat, called for a move towards a
silver standard. Silver would, he said,
provide a more abundant reserve
against which banks could produce
money and ultimately reflate the econ≤
omy. Drastic times called for dramatic
rhetoric. Bryan’s manifesto earned him
the Democratic presidential nomina≤
tion that year as he electioneered:
“You shall not press down upon the
brow of labour this crown of thorns,
you shall not crucify mankind upon a
cross of gold”.
Victory eluded Bryan in the 1897
election and the gold standard
remained. Not long after, discoveries of
gold in the Klondike and the Yukon led
to an increase in gold reserves, which
had the same net effect on liquidity as
moving to a silver standard ∞ the US
economy eventually reflated.
The big mistake of policymakers in
the 1890s was slavish adherence to the
gold standard. Bryan’s call for a break
from the prevailing economic conven≤
tion was too revolutionary to counte≤
nance. Indeed, the gold standard
remained for a further 40 years. It
again acted as a policy restraint after
the 1927 crash, with more disastrous
consequences. This time there were no
serendipitous discoveries of gold. The
consequence of policy inflexibility was
the Depression of the 1930s.
Learning from the past, the Federal
Reserve has already gone some way to
embracing Bryan’s school of thought
by breaking with policy norms and
deploying “pre-emptive and forceful”
measures. The Fed maintains that it is
easier to prevent deflation than cure it.
If we consider International Monetary
Fund studies of Japan in the early
1990s, it is clear that the onset of defla≤
tion can be insidious and can lead to
unsuitable policies that at the time
appear appropriate. This is why,
despite signs of recovery, the Fed has
continuously cut interest rates.
Although current policies may stoke
inflation in the future, the Fed would
rather face inflation than deflation
down the track.
In the deflationary arena, traditional
relationships and systems become dis≤
torted. We can no longer rely on con≤
ventional policy responses to buoy eco≤
nomic growth. Hence interest rates
have been reduced to their lowest lev≤
els in 50 years, the dollar has declined
by 30 per cent against the euro and
federal taxes have been cut by $350bn.
Though such measures are not
unusual per se, the combination,
speed and degree to which they
have been invoked recently marks
them as dramatic and unforeseen.
Exchange rate policy alone can be
highly potent. Consider the effect that
Franklin Roosevelt’s 40 per cent reduc≤
tion of the dollar against gold had in
1933-34. This depreciation led to a surge
in money supply that precipitated an
end to deflation by 1934 and sparked
one of the most vigorous stock-market
rallies in a century.
Some recent economic data indicate
that the threat of deflation is beginning
to wane. But the Fed will probably
maintain an accommodative stance
until it is certain of that. During this
transition period, we could see an out≤
come that echoes 1999, when the Fed
told markets it would provide liquidity
to protect financial systems against a
possible slowdown induced by the “mil≤
lennium bug” (Y2K). Ultimately, when
it became evident that the advent of
Y2K would pass without a ripple, this
excess liquidity was sucked into mar≤
kets and fuelled a bull run in equities.
If observers today view the Fed as over≤
compensating against deflation, we
could see a shift in liquidity from
bonds and property to equities, prompt≤
ing another Y2K-style bull run.
For the time being, the Fed’s goal is
to ward off deflation; if that means
straying from the Yellow Brick Road of
policy orthodoxy, so be it. Any unwel≤
come rise in the longer end of the yield
curve will more than likely be count≤
ered by rhetoric to that effect from Fed
members.
Much has changed since Baum wrote
his tale. The Scarecrow’s fields are full
of genetically modified soya and the
Tin Man has silicon components. Yet
as before, the Good Witch in the Fed
will endeavour to bring Dorothy safely
back home to Aunt Em.
The writer is a Dublin-based investment
banker
The big mistake of 1890s
policymakers was slavish
adherence to the gold
standard. Today, the Fed has
gone some way to learning
from the past by breaking
with policy norms
..............................................................