Will American Capitalism Survive?

As the modern system of capitalism faces the most serious challenge of its existence since Adam Smith, the name of John Maynard Keynes (1883-1946) is being regularly invoked by economists, politicians, bankers, and the media. And with good reason. Born in Cambridge, England, in 1883, the year Karl Marx died, Keynes probably saved capitalism from itself and kept Communists at bay. Keynesian Economics advocates the use of government monetary and fiscal policy to maintain full employment with low inflation.

Keynes described Capitalism in the following words: "Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone."

A well-known anti-Semite, Keynes once said, "It is not agreeable to see civilization so under the ugly thumbs of its impure Jews who have all the money and the power and brains." As in the past financial crises, powerful Jews on Wall Street and in Washington are being held responsible by many as the culprits of the current economic collapse.

In response to a severe recession or possible depression, Keynes suggested: "The government should pay people to dig holes in the ground and then fill them up." He advocated massive spending by government to stimulate demand when all else fails.

Who was Keynes? Here is how UC Berkeley's Robert Reich described him a few years ago: "A Cambridge University don with a flair for making money, a graduate of England's exclusive Eton prep school, a collector of modern art, the darling of Virginia Woolf and her intellectually avant-garde Bloomsbury Group, the chairman of a life-insurance company, later a director of the Bank of England, married to a ballerina, John Maynard Keynes--tall, charming and self-confident--nonetheless transformed the dismal science into a revolutionary engine of social progress."

Keynes was clearly a very smart man. His ideas of modern Capitalism have created unprecedented wealth and lifted hundreds of millions of people out of poverty. And his ideas may still help save capitalism yet again. At least, that is the hope of the Obama administration and the backers of the massive stimulus package of about $800 billion recently passed by the US Congress. However, what Keynes couldn't have imagined are the new heights of avarice and wickedness of the modern political-industrial elite in America that has threatened the very foundations of the system that brought them wealth and power. During the last decade, the behavior of American capitalists and politicians has been unbelievably self-destructive.

Even Alan Greenspan, the icon of modern US capitalism, was forced to show contrition in October, 2008. The former Federal Reserve Chairman told a House committee that the banking and housing crisis is a "once-in-a-century credit tsunami." When asked if his ideology pushed him to make bad decisions, Greenspan said he found a "flaw" in his governing ideology that has led him to re-examine his thinking. There has, however, been no acceptance of any responsibility for the current crisis by the members of US Congress and powerful finance, banking and appropriations committees responsible for overseeing the US finance and economy.

The American economy continues to deteriorate rapidly with the devastating credit crunch and major loss of confidence by consumers, businesses and investors. At this point, tax cuts or just handing out cash to banks or big infrastructure projects or re-regulation are not likely to help hasten economic recovery. The Obama administration will need to take more drastic measures, including nationalization and recapitalization of major banks to ensure that the much needed credit to businesses and consumers starts flowing again. Ideological aversion to nationalization will only delay recovery and take a much heavier toll on ordinary Americans in terms of job losses, home foreclosures and loss of other basic necessities of life.

The problem that some of the the critics of the Obama economic team and their Congressional overseers, derived mainly from the Clinton administration and the hold-overs from Bush-era, point out is articulated well by Nassim Taleb, the author of Black Swan. “We have the same people in charge, those who did not see the crisis coming,” he said recently on CNBC.

The roots of the current crisis can be traced to the Reagan revolution. Beginning in the early 1980s, Reaganomics transformed the United States in fundamental ways. Since the world saw the fall of the Soviet Union and collapse of Communism, the Conservative Republican ideas of less government and more deregulation have continued to change the economic landscape in America and the rest of the world. This revolution has now lasted almost three decades under various US administrations including Bush 41, Clinton and Bush 43. The Reagan ideas have also been adopted and preached by international financial institutions like the World Bank and the International Monetary Fund.

The continued wave of deregulation engineered and supported by America's predominantly Jewish political-industrial elite has led to the creation and trading of what Warren Buffet describes as "financial weapons of mass destruction". Such newfangled, unregulated financial derivative products as some mortgage-backed securities, credit default swaps and other wildly speculative futures and commodities contracts have produced hundreds of billions of dollars worth of personal gains for the financial industry executives and hundreds of millions of dollars in political contributions for American politicians who are now grand-standing as saviors of the American and the world economy.

The fate of many new-comers from the emerging economies of the world is closely tied to the success or failure of capitalism in America. It appears that some of the countries such as Brazil, Russia, China and India, who embraced the conservative American ideas of "economic reform" and "deregulation", may already be too late for the party. However, the European and Asian nations with substantial population of savers and entrepreneurs will recover rapidly and thrive again, as long as they keep their banks and financial institutions on a tight leash. In particular, the world's top creditor nations such as China , Japan and Germany with high savings rates, massive trade surpluses and large central bank cash reserves are likely to come out ahead at the end of the current crisis. Others may not be so lucky. But all the follower nations that have essentially been copying the US model will have to develop their own original ideas with financial systems and economic models to move forward in uncharted waters. Clearly, any new models will require a deep understanding and introspection of what has worked and where has the American capitalism gone wrong.

Related Links:

China's Nuclear Option

Senator Schumer: The Champion of Wall Street on the Hill

Pay to Play is the Name of the Game in Washington

Are Jews Culprits of Collapse on Wall Street?

Keynes on Jews

Democrats and Republicans Share Blame for Financial Collapse

Jewish Network in US Congress

Jewish Power Dominates at Vanity Fair

20th Anniversary of Soviet Defeat in Afghanistan

"They should get out as soon as possible. Or they'll be picked off like clay pigeons in target practice."

The above words of warning to America are attributed by the NPR radio to former Soviet Afghan war veteran, Lt. Sergei Maximov, on the 20th anniversary of the humiliating defeat of the Soviet empire twenty years ago today.

On February 15, 1989, the last Soviet troops pulled out of Afghanistan, nine years after they swept into the country. The Soviet action involved more than 600,000 Soviet soldiers and resulted in large numbers of killed and wounded both among them and among the Afghan population.

Remembering the fateful war that brought down the Soviet Union, another war veteran, former sergeant Boris Raisky, chimes in, "I realized we were fighting a counterinsurgency against local partisans. By definition, that's an unwinnable war."


As the 44th president of the United States, one of the greatest challenges Barack Obama has inherited from former President George W. Bush is the growing strength of the Taliban insurgency in Afghanistan. The ferocity of the Taliban fighters has already stretched the Afghan war into its eighth year, making it the second longest war in the American history. With the US decision to send another 30,000 soldiers to Afghanistan, it seems more and more likely that the Obama presidency will be defined by the Afghan war in the same way that the LBJ presidency was defined by America's deepening involvement in the Vietnam war engulfing the entire Indochina region. In some ways, the Obama challenge is much more difficult because of the dire economic situation that America is facing today. Can Obama win the war he says America needs to win?

According to the Wall Street Journal, this year has been the deadliest for U.S. forces in Afghanistan since the 2001 invasion to oust the Taliban for hosting al Qaeda leader Osama bin Laden. Suicide attacks and roadside bombs have become more dangerous, and Taliban fighters have infiltrated wide swaths of countryside and now roam in provinces on Kabul's doorstep. Deep dissatisfaction with the Karzai government, increasing Afghan civilian casualties and money from expanding poppy cultivation and trade are helping the Taliban in their quest to oust foreign forces.

The Soviet Afghan war veterans are not alone in their pessimism. "Of all the lands of the earth, Afghanistan has been among the least hospitable to foreigners who come to rule, or to teach them how they should rule themselves", writes Patrick Buchanan in his opinion on Creators.com.

The conservative American columnist further adds,"America and NATO have never been nearer to strategic defeat". In this latest assessment, Buchanan joins Brig Mark Carleton-Smith, the UK's commander in Afghanistan's Helmand province in Afghanistan who declared in October that the Afghan war can not be won. "We're not going to win this war", he told London's Sunday Times in October.

"It's about reducing it to a manageable level of insurgency that's not a strategic threat and can be managed by the Afghan army." he added. Later, US Defense Secretary Robert Gates, who has retained his job in the Obama administration, basically agreed with the British brigadier's assessment without admitting that "the war can not be won". Instead, Gates said, "despite challenges, there was no reason to think success could not be achieved in the long run".

Before arriving in Kandahar last month, Gates spoke grimly of a "sustained commitment for some protracted period of time. How many years that is, and how many troops that is ... nobody knows."

Some Soviet veterans believe U.S. and NATO forces can learn from the Soviet failure. But Gen. Ruslan Aushev, one of the heroes of the Soviet war, says crucial lessons are being ignored — including the importance of building the infrastructure and government institutions the Afghans desperately need.

"What goals did the Americans set when they went into Afghanistan?" he asks. "To make life better for the Afghan people. Are they living better there today? No."

Can Obama change the course of the current Afghan war and set a new precedent in Afghanistan as a successful foreign power in a a historically defiant land? Will Obama reach a political settlement with the Taliban, wind down the Afghan war reasonably successfully and bring the troops home? The people in the Islamic world do not appear to be particularly hopeful on this point. Pre-election polling found tepid enthusiasm for Obama. A July-August 2008 BBC/GlobeScan/PIPA poll of 22 countries around the world found the Middle East region to have the lowest level of enthusiasm for Obama. While results indicated more favored Obama than McCain in each of the four Middle Eastern countries polled, the total percentage expressing support for Obama was very low in the larger countries (26 percent in both Egypt and Turkey) and fell short of a majority in the smaller countries (39 percent in Lebanon and 46 percent in the United Arab Emirates [UAE]).

Related Links:

Russians Mark Twentieth Anniversary of Afghan War's End

WorldFocus on Afghanistan

Pakistan's Prospects

Counterinsurgency in Afghanistan and Pakistan

Obama's South Asia Policy

Military Occupation of Kashmir

Bruce Riedel Interview

Clues to Obama's South Asia Policy

Pakistan's Textile Industry Woes

Pakistan has a diverse economy that includes textiles, chemicals, leather products, food processing, financial services, telecommunications, retail, automobile manufacturing, light and heavy armaments, agriculture and other industries. It is the 45th largest economy in the world in terms of official exchange rates ($144b) and 25th largest based on purchasing power parity ($410b PPP). Its service sector accounts for more than half of its GDP.

Pakistan’s textile industry is a major contributor to the national economy in terms of exports and employment. Pakistan holds the distinction of being the world’s 4th largest producer of cotton as well as being the 3rd largest consumer of the same. In the period July 2007 - June 2008, textile exports were US$ 10.62 Billion and accounted for 55% of the total exports.

As the economies in the US and Europe slow down, Pakistan's key exports of textiles and leather products are experiencing a slowdown in growth as well. According to APTMA, textile exports have declined by about 20 percent in 2008. The industry is bracing for more trouble ahead with continuing crises of electricity and gas, international market access, global economic slow-down,and adverse travel advisories.

According to Pakistan textile industry association, 90 percent of Pakistan's textile industry is losing money losses and facing closure. More than two months of production has been lost due to power cuts and gas shortages.

APTMA, Pakistan's textile industry Association established for the promotion and protection of the textile industry, says that the high cost of finance because of the nation's tight monetary policy has added to their continuing woes.

In order to pave the way for the IMF bailout, Pakistan's central bank raised its bank lending rate in early November by 2 percentage points to 15 percent. Since 2004 interest rates have risen dramatically. Kibor (Karachi Inter-Bank Offered Rate) has surged 261 percent. Likewise, the bank spread, on a weighted average basis, rose from 2 percent to an excessive 7.75 percent. This size of bank spread is among the highest in the world. These high rates were allowed as a policy to restrict money supply to satisfy the IMF conditions.

Federal Textile Adviser Dr Mirza Ikhtiar Baig told the News that Pakistan has a very low share of the international textile market. China tops the US market with a share of 36 per cent followed by Bangladesh 21 per cent, India 18 per cent, Morocco 19 per cent and Pakistan 13 per cent. South Korea has lost 20 per cent of the US market.

In the European market, China tops again with a share of 29 per cent, Vietnam 28 per cent, India 19 per cent and Pakistan only 1.5 per cent while the Philippines had lost 11 per cent of the market.

European buyers have told Baig that Pakistani garment manufacturers could cut their cost up to 45 per cent in sewing by improving efficiency.

“Labor productivity is very low,” said Baig. “Our regional competitors take 75 minutes to complete and produce one piece of cloth whereas we take 133 minutes for the same work. We also waste 30 per cent in finishing and 12 per cent in washing.”

According to a study of Pakistani textile and apparel sector conducted by Werner International, management consultants to the world textile, apparel & fashion industry, some of the garment units were over-staffed by 57 per cent. That was an internal negative factor whereas external factors included no duty-free market access to the EU and negative image and perception of Pakistan abroad.

Baig has asked Werner to submit a proposal for presenting a better image of the textile industry to global brands for achieving collaboration with them. In response, Werner is working on a three-year plan to help Pakistan garment manufacturers.

While Pakistan clearly needs to diversify and increase higher-value-added exports such as sophisticated machinery and high technology products and services, it is essential for it to maintain and enhance the current export levels of textiles, leather and other products for which there is an established export market. The export-oriented industries should get preferential treatment in getting access to necessary inputs of raw materials, financing and energy by government policies. Energy and communications infrastructure, in particular, need much greater focus to enable Pakistani exporters to continue to earn the much-needed hard currency.

Related Links:

Haq's Musings

Pakistan Textile Industry Report

Coffee, Tea or Pee?

In late 1970s when I was in graduate school in New Jersey, the late prime minister of India, Mr. Morarji Desai, was the focus of a CBS 60-minutes interview extolling the virtues of drinking urine. It provided Pakistani students an opportunity to embarrass our fellow students and friends from India. When our Indian friends showed up for a visit, my roommate politely asked them whether they would like to have "coffee, tea or pee". It was all in good fun and we all laughed it off.

Fast forward thirty years. The joke appears to be turning into reality with the expected launch of a drink "Gau Jal" in India. It is being touted as the "Hindu Nationalists' answer to Coke" by the RSS.

"Don't worry, it won't smell like urine and will be tasty too," Om Prakash of the RSS told The Times from his headquarters in Hardwar, one of four holy cities on the River Ganges. "Its USP (unique selling proposition) will be that it's going to be very healthy. It won't be like carbonated drinks and would be devoid of any toxins."

Many Hindus consider cow urine to have medicinal properties and it is often drunk in religious festivals.

Since 2001, the RSS and its offshoots – which include the opposition Bharatiya Janata Party – have been promoting cow urine as a cure for ailments ranging from liver disease to obesity and even cancer.

The Hindu organization, which aims to transform India's secular society and establish the supremacy of a Hindu majority (often referred to as Hindutva), said it had not yet decided on a name or a price for the drink.

My marketing suggestion to the RSS is to brand this new desi concoction as "Desai Cola" in honor of the late Indian prime minister who was the first to promote the benefits of urine to the world on a major TV show. The ads for this new invention should boldly ask the prospects, "Does your Pepsi lack pep? Is your Coke not the real thing?" And then offer "Desai Cola" as the answer. In spite of its "medicinal properties" the RSS should price it competitively with other cola drinks such as Coca Cola and Pepsi Cola to rapidly gain a large market share. The RSS should also consider hiring some of the smart middle-class Indian graduates from Harvard, Stanford and Wharton Business schools, specially the kids with certifiable RSS sympathies, to give their product international recognition.

Here's a brief video clip about RSS's cow urine drink:



Related Links:

Hindus plan cow urine drink to rival Western sodas

Sonal Shah to Help Divide Obama's Victory Spoils

India to Launch Cow Urine Drink as Coke Alternative

Hindu Nationalists' Government in Exile?

India's Guantanamos and Abu Ghraibs

Why is America Losing in Afghanistan?

American counterinsurgency strategy in Afghanistan has come under a lot of criticism recently as the resurgent Taliban have made significant gains. Not only are the Taliban controlling over 70% of the territory in Afghanistan, but they have also recently demonstrated their ability to strike at will in the heart of Kabul, the heavily fortified capital of the nation comparable to the Green Zone in Baghdad.

The latest reports indicate that there is a lot to worry about not just the failing strategy, but how badly the war is being executed on the ground. A lot of civilian casualties and lack of security have turned the population against the US forces. And now, according to the Batimore Sun, the Pentagon has reportedly lost track of some 87,000 weapons handed out without proper accounting to Afghan army and police units.

The weapons included rifles, pistols, machine guns, grenade launchers, shotguns, mortars and other weapons, the Government Accountability Office said. The GAO is the investigations arm of Congress.

The weapons are among about 240,000 small arms and other sensitive items, including 2,410 highly prized night vision devices that were given to Afghan security forces being trained by the U.S. military. The shipments included about 79,000 AK-47 assault rifles, the standard weapon used by the Taliban and other insurgents.

The U.S. command also failed to keep serial numbers or other records on about 135,000 weapons donated by allies and handed over to Afghan security forces, the GAO said.

Some of the lost or stolen US military equipment is starting to turn up for sale in the Pakistani city of Peshawar, according to Shahan Mufti of GlobalPost. Mufti describes Peshawar as a Silk Road town near the Afghan border where the black market has thrived and the military spoils of empires hawked openly throughout history.

Mufti recently purchased a U.S. military laptop for $650 from a small shop, which is known as the “Sitara Market,” on the western edge of the sprawling open-air markets on the edge of Peshawar.

The laptop, which Mufti says has clear U.S. military markings and serial numbers, contained restricted U.S. military information, as well as software for military platforms, the identities of numerous military personnel and information about weaknesses and flaws in American military vehicles being employed in the war in Afghanistan.

The leaks of the U.S. military’s electronic information on hard disks has occurred in the past. In April, 2006, the Los Angeles Times uncovered the story of confidential military information being smuggled off Bagram air base in Afghanistan on miniature hard drives and sold in markets no more than two hundred yards away.

Instead of accepting responsibility for bad US strategy and continual bungling, the response by the American military in Afghanistan is to shift the entire blame for their failures on Afghan leaders or Pakistani military. President Obama has spoken with over a dozen world leaders since taking office, and he finally called and spoke with Pakistan's President Zardari yesterday. While he continues to say Afghanistan is his top priority, the new president has yet to speak directly with Afghan President Hamid Karzai. He has delegated that job to Richard Holbrooke, who is not even a member of his cabinet.

It is clear from the developments over the last several months that the US needs a complete overhaul of both its overall strategy and tactics. Just the planned troops surge alone will not suffice. There has to be a comprehensive new strategy for political dialog, reconstruction and smart counterinsurgency tactics in both Afghanistan and Pakistan.

Related Links:

WorldFocus on Afghanistan

Pakistan's Prospects

Counterinsurgency in Afghanistan and Pakistan

Obama's South Asia Policy

Military Occupation of Kashmir

Bruce Riedel Interview

Clues to Obama's South Asia Policy

Pakistan Accepts India's Charges?

New York Times' Robert McKay has pointed out how the Indian media's news coverage has played fast and loose with the facts as it reported headline news blaring "Pakistan Accepts India's Charges" regarding Mumbai attacks.

Here's what McKay wrote on his blog:

The statement, made at a televised news conference by Rehman Malik, the senior security official in Pakistan’s Interior Ministry, was quickly reported by the Indian media. This report from the Indian news agency ANI, contains some of Mr. Malik’s remarks at the news conference on the Mumbai attacks (which started on Nov. 26, and are now called “26/11″ in the Indian press):



Mr. Malik was careful to mention that his government believes that the attacks were mainly planned in India, but the Indian media was far more interested in the acknowledged links to Pakistan.

After a graphic blaring “MUMBAI 26/11: MADE IN PAKISTAN,” a report by the Indian Broadcasting Network on Thursday began by framing the news this way: “Pakistan finally accepting India’s charges on the Mumbai attacks.” The full report can be read on the IBN Live Web site, or viewed in the (somewhat slow to load) video embedded below:




The coverage in the western media was distinctly different in words and tone from that of the Indian media. Here are some of the excerpts (Note the words "acknowledged" and "partly planned on its soil") :

Wall Street Journal:

Pakistan publicly acknowledged for the first time Thursday that last year's terrorist attack on Mumbai was partly planned on its soil and said it had arrested most of the key plotters, the clearest sign yet that Pakistan intends to cooperate with international efforts to prosecute those behind the attacks.

New York Times:

Pakistan acknowledged for the first time in public on Thursday that parts of the murderous Mumbai terror attacks were planned on its soil and said six new suspects were being held, including “the main operator.”

BBC:

"Some part of the conspiracy has taken place in Pakistan," he told a news conference in the Pakistani capital Islamabad.

Regardless of the Indian media spin, or the accusations that Pakistanis caved under "pressure from Holbrooke, the Bulldozer", it is absolutely essential for Pakistan to pursue this investigation with sincerity and determination and ensure that any and all Pakistani perpetrators of this heinous crime in Mumbai are brought to justice. This is necessary to send a clear signal to the international community and any would-be terrorists that Pakistan will not allow its soil to be used for any attacks within or outside its territory. Pakistani government has to prove its seriousness in dealing with both domestic and international terror.

Related Links:

Pakistan Probe Finds Bangla Link

India's Choices After Pakistan's Response

Dawood Provided Logistics to Mumbai Attackers

Dawood Ibrahim Behind Mumbai Attacks

Solving Mumbai Puzzle

No One Knows Mumbai Better

Rampant Corruption in Construction Industry

On September 1, 2007, the newly constructed Sher Shah Bridge in Karachi, Pakistan, collapsed killing 14 people, and injuring many, including three police constables. The bridge was inaugurated by former President Pervez Musharraf less than a month before it fell down. Shoddy construction and corruption are suspected but the investigation has produced no results yet. Official cover-up appears to have succeeded.

In 2003, S.K. Dubey, Deputy General Manager of National Highways Authority of India (NHAI), was assassinated by unidentified gunmen after he wrote to the Prime Minister of India highlighting several instances of "loot of public money" and "poor implementation". He requested anonymity but, tragically, the confidentiality of Dubey’s letter and the identity of the ‘whistle blower’ were both violated as Dubey’s letter was passed down from file to file through the bureaucratic maze.

Earthquakes that hit China and Pakistan in the last few years have caused massive destruction. The fact that the damage was significantly disproportionate to government schools and other government buildings has raised questions about shoddy construction by government contractors supervised by corrupt officials. Majority of the victims in both nations were children.

As the need for infrastructure projects grows in both the developing and the developed nations and they commit massive funds to such projects, there is a huge concern about the waste from rampant corruption in the global construction industry. Transparency International, a nongovernmental organization that tracks corruption, reports that the construction industry is the most corrupt in the world.

A wave of government bailouts around the world and a sharp deterioration in existing infrastructure could lead to as much as $35 trillion in public works spending over the next 20 years, according to a new study by CIBC World Markets.

According to the CIBC forecasts:

* North America will spend $180 billion on infrastructure each year.
* Europe will spend $205 billion.
* Asia will spend $400 billion.
* And $10 billion will be invested in Africa annually.

Stimulus plans will figure heavily into the global infrastructure boom.

Indian Planning Commission's deputy chairman, Montek Singh Ahluwalia, recently told Reuters that his nation should be able to maintain economic growth of around 6.5-7 percent in the 2009/10 fiscal year but needs to ramp up infrastructure spending to boost growth.

While the recent US prosecution of Halliburton on corruption charges in Nigeria that resulted in a $559m settlement is welcome news, it also raises a lot of questions about how widespread and deeply rooted the corruption is in the construction industry. As a response to the deep concerns, the industry set up a Partnering Against Corruption Initiative (PACI) a few years ago. But Fluor CEO Alan Boeckmann recently told Fortune Magazine, "PACI was a cooperative effort to share best practices. But it had no teeth. We wanted to give it substance." Plenty of companies had signed on, but few had adequate programs to teach and enforce anticorruption principles.

Much of that changed four years ago, when he appointed a company lawyer, Wendy Hallgren, as the head of compliance, according to Fortune. Hallgren wanted to observe firsthand what Fluor's employees were experiencing. So she spent much of a year and a half crisscrossing the globe, talking to project managers and engineers in countries including the Philippines, Russia, and Chile.

In a Southeast Asian country (not named), Hallgren learned that local officials were demanding that Fluor hire their security details; when the company refused, the government converted the dirt road leading to Fluor's mining project into a one-way path and arrested workers as they drove home. Rather than pay up, Fluor appealed to the regional government - and then later used the story to train employees to react in the same way.

According to TI, corruption on construction projects (which includes bribery, extortion and fraud) is damaging:

* It damages the developed and developing world, resulting in projects which are unnecessary, unreliable, dangerous, and over-priced. This can lead to loss of life, poverty, economic damage and underdevelopment.
* It damages companies, resulting in tendering uncertainty, wasted tender expenses, increased project costs, economic damage, reduced project opportunities, extortion and blackmail, criminal prosecutions, fines, blacklisting, and reputational risk.
* It damages individuals, resulting in reduced morale, criminal prosecution, fines and imprisonment.

There is the potential for corrupt practices at every phase in construction projects. Research by Sohail and Cavill on corruption in construction in Pakistan describes the forms of corruption as:

* Land acquisition: land-titling arrangements land mafia or acquiring the land in illegal ways. corrupt officials within the various departments to maintain haphazard records of land and no serious effort in maintaining computerized records has been made
* Excavation e.g. bribes to police to allow heavy machinery to execute the job
* Dumping of material – bribes to dump the excavated soil
* Illegal water connection: Water is the foremost requirements for the construction. bribe paid for water tankers or by water connections e.g. to lineman of Water and Sewerage Board
* Illegal electricity connection: In the local language the illegal electricity
connection is called “Kunda”. This is pretty obvious and could be detected easily. In order for the area inspector of electricity department to turn a blind eye a bribe is paid through a middleman or agent.
* Storage of material at site: The storing of materials on site or by the roadside causes an obstruction to traffic so it is often necessary to bribe the traffic police or city government inspector.

In India, the assassinated engineer S.K. Dubey’s key complaints included:

* Tenders are called for on the basis of Detail Project Reports (DPR) by design consultants which are are badly prepared and are unreliable.
* Process of procurement ‘‘completely manipulated and hijacked’’ by the big contractors ; forged documents are submitted to justify technical and financial capabilities.
* NHAI officials are in league with big contractors and internal NHAI decisions are leaked.
*Nearly 10% of contract value is paid as ‘Mobilization Advance’ to selected contractors within a few weeks of award of work, for which the NHAI officials receive illegal gratification or “commissions”. No follow-up to ensure the actual utilization of such advances.
*Practice of subletting of contracts or sub-contracting to small petty unqualified contractors fails to ensure the requisite quality of construction.

Transparency International (TI) believes that corruption on construction projects can only be eliminated if all participants in construction projects co-operate in the development and implementation of effective anti-corruption actions which address both the supply and demand sides of corruption. These participants include governments, funders, project owners, contractors, consultants, and suppliers, and the business and professional associations which represent these parties.

TI offers a number of ideas on fighting corruption in the construction industry on its website.

Related Links:

Bhutto Convicted in Switzerland

Corruption in Pakistan

Infrastructure Corruption in India

Infrastructure Corruption in Pakistan

Transparency International Survey 2007

Is Siemens Guilty?

Fluor's Anti-Corruption Initiative

Zardari Corruption Probe

Construction, Corruption and Developing Countries

Pakistan's Growing Insurgency

In recent years, militant groups in the beautiful Swat valley, led by radical cleric Maulana Fazlullah, have been attacking and killing civilians as well as security forces in scenic Swat. In some 60 villages, the militants have set up a de facto "parallel government" with Islamic courts imposing sharia law. The region is effectively under militant control despite the presence of 20,000 Pakistani troops. Local opponents of the militants have been harshly critical of Pakistani civil society for its lack of concern for their plight as well as critical of the military and provincial government for their ineffective measures for controlling the tide of militancy. It should be noted that in May, 2008, the NWFP government led by Pashtoon Nationalists attempted to appease the Swat militants by agreeing to allow their version of Shariah to be imposed in Swat valley.

Media reports indicate that the Taliban are enforcing a complete ban on female education in the Swat district. Some 400 private schools enrolling 40,000 girls have been shut down. At least 10 girls' schools that tried to open after the January 15, 2009 deadline by the Taliban were blown up by the militants in the town of Mingora, the headquarters of the Swat district. "More than 170 schools have been bombed or burned, along with other government-owned buildings."

There is widespread sorrow and outrage in Pakistan over the ongoing situation in Swat and other parts of Pakistan which are being threatened by a growing insurgency. Let us put these troubling events in perspective.

Throughout human history, there have been bloody insurgencies. The Ridda wars in the early days of Islam during the first Caliph Aboobakr's rule were fought to defeat an insurgency that threatened the existence of Islamic state soon after Prophet Muhammad's death.

For those of us living in US or UK, let’s not ignore the history of prolonged and extremely violent civil wars fought by these two nations in earlier times.

The situation today is no different in South Asia. Just look in Pakistan’s neighborhood for comparison. The beautiful island nation of Sri Lanka has had a long and bloody insurgency by a Tamil separatist group LTTE, initially created, trained and funded by Indian Intelligence agency RAW. Still very active, the Sri Lanka war marked the beginning of the suicide bombing as a tactic to rattle the government and population and it has claimed tens thousands of lives.

In India, a Maoist group calling themselves the “Naxalites” have exploited growing economic disparities in India to carve out a “red corridor” of activity that runs from the Nepalese border to the jungles of central India. Fighting in thirteen of India’s twenty-eight provinces and boasting between 10,000 and 20,000 dedicated followers, the Naxalites pose India’s biggest internal security threat. In contrast to the scattered actions of Kashmiris, the Naxalites are in every way a traditional communist insurgency. UC Berkeley Professor Chhibber has described the total absence of any legitimate civil authority in large parts of India that remind of the parts of Pakistan's FATA region. The Indian government relies on private militias to enter such Maoist-controlled areas for limited purpose and duration, when absolutely needed.

Since 1989 more than 80,000 have died in insurgencies in Kashmir and the northeastern states. Manmohan Singh himself has called the Maoist insurgency centered on the state of Chhattisgarh the biggest internal security threat to India since independence. The Maoists, however, are confined to rural areas; their bold tactics haven't rattled Indian middle-class confidence in recent years as much as the bomb attacks in major cities have, according to Indian writer Pankaj Mishra.

As the insurgencies intensify, the domestic and international critics of Pakistani military are growing louder. A large part of the criticism stems from the military's role in national affairs that has not always been in the best interest of the people. Many Pakistanis have significant grievances against the past actions of the military. But this harsh criticism is clearly not helpful in dealing with the current challenges. Among the various institutions in Pakistan, we must recognize that the military, backed by a comprehensive political strategy, is the only strong institution capable of dealing with both internal and external threats at this time in the nation's history. That is not to say that seek a purely military solution. The primary purpose of counterinsurgency operations should be to protect the ordinary citizens and neutralize the hard-core terrorists with the help of the population. It requires a strategy to win the support of the people rather than just to kill or capture the terrorists.

The best thing for Pakistanis is to have courage and patience and not give up hope in the face of extreme difficulty. Counterinsurgency is something very difficult for the conventional army of any nation, designed, equipped and trained mainly to fight conventional wars. But Pakistani military and civilian leadership are learning from their experience and they can and will eventually defeat the insurgents, if the people of Pakistan support their efforts by words and deeds. It is much easier to criticize and express dismay at these events than to actually deal with such events effectively. Despondency is our worst enemy. Let us ignore the prophets of doom and gloom and not allow ourselves to be demoralized.

Related Links:

Appeasement by Nationalists in Swat

Maoist Insurgency in India

Ridda Wars

Sri Lanka's Civil War

Obama's Kashmir Focus

Masters of Suicide Bombing

Counterinsurgency in Afghanistan and Pakistan

India's Research and Analysis Wing

Bollywood and Hollywood Create Combos

Bollywood and Hollywood are joining forces to produce a whole slew of hybrid movies with money, stars and scripts flowing in both directions. The motivation is clear: Both purveyors of entertainment are looking to expand their audiences. "It's the right time for these two giants to shake hands," Mr. Vidhu Vinod Chopra, Indian writer and director, told the Wall Street Journal, adding that Hollywood stands to benefit from India's large movie audiences. "We have stars like Aamir Khan, who has more eyeballs than Tom Cruise, Brad Pitt, anybody."

Though it is dwarfed by Hollywood's $10b in sales last year, India's domestic film industry is growing much faster at 15% annually and is projected to hit $4 billion by 2012, up from $1.9 billion in 2007, according to PricewaterhouseCoopers.

Wall Street Journal is reporting a number of joint projects currently in development: Screenwriter Paul Schrader, famous for such films as "Taxi Driver" and "Raging Bull," is working on a thriller with an Indian producer. Sylvester Stallone will appear in "Kambakkht Ishq," or "Incredible Love," an action-filled comedy shot in Los Angeles and starring Akshay Kumar. Indian film mega star Shahrukh Khan is producing and starring in a superhero film that will be co-written by American and Indian screenwriters and digitally souped up by American special-effects technicians.

The critical or commercial success of such projects, however, remains a big question mark based on the reception of the recent releases of Slumdog Millionaire and Chandni Chowk. While Slumdog Millionaire grossed about $70m in America and received nominations for many of the most prestigious Hollywood awards, it was greeted by howls of protests in India. Bollywood's biggest superstar of all time, Amitabh Bachchan, scolded Slumdog producers on his blog for showing India as "a third world dirty under belly developing nation (sic)" when poverty can be found in rich countries as well. Contrast that with Chandni Chowk's miserable performance, with less than a million dollars gross in spite of being released on 125 screens, the biggest ever Bollywood release in America. Chandni Chowk was considered an average draw at the Indian box office, with Rs. 400 million in ticket sales.

American audiences may not warm to Indian-style kitschy, song-and-dance sequences and melodramatic staples. In 2007, Columbia Tri-Star funded and produced "Saawariya," which failed to capture a wide audience in India and flopped in its limited U.S. release, earning $885,574 in American theaters. Executives at Sony Pictures, which owns Columbia, declined to say how much the film made in India but noted that they more than recovered their investment.

In spite the huge gap in taste between the South Asian and American audiences, it would be hard to dismiss the new Indo-American hybrid film genre, given the amount of talent, money and serious interest by the big studios and investors in Los Angeles and Mumbai going in to make it a success. It will be very interesting to see how such a wide gap is bridged by the undeniable talent on both sides.

Here's the title track for Chandni Chowk to China:




Related Links:

India's Bid to Extend Cultural Dominance

Mumbai's Slumdog

Harry Potter Versus Hari Puttar

Amitabh Bachan Slams Slumdog

Highest Grossing Bollywood Films

Highest Grossing Hollywood Films

Preview of Holbrooke 's Mission in Pakistan

As Richard C. Holbrooke arrives as US Special Envoy in Pakistan tomorrow, there are a lot of questions and speculations as to the man, his agenda, strategy and tactics in developing and implementing a new policy toward Afghanistan and Pakistan. Having been a career diplomat and Clinton adviser, Holbrooke is not an unknown entity. Given Holbrooke's tough-as-nails reputation, Indians were very concerned about having him explicitly address Kashmir as part of his portfolio. India, therefore, lobbied and managed to "prune the portfolio of the Obama administration's top envoy to Pakistan and Afghanistan, Richard C. Holbrooke -- basically eliminating the contested region of Kashmir from his job description", according to Washington Post.

Holbrooke is nicknamed "the Bulldozer" for arm-twisting warring leaders to the negotiating table as he hammered out the 1995 Dayton peace accords that ended the war in Bosnia, a peace that has stuck. The Indians are quite happy to see this "Bulldozer" riding roughshod over Pakistan.

According to Jewish News, Richard Holbrooke is proud of his Jewish heritage. He only spent a year as the U.S. ambassador to Germany, but he tried to make sure that his hosts would not forget he is a son of German Jews. Visitors to Holbrooke's official residence were greeted by an ambassador who proudly displayed a photo of his grandfather, a Jewish businessman, in his World War I Germany army uniform. "I show it to German visitors as a symbol of what they lost," Holbrooke told The New York Times in a 1994 interview.

To help readers get insights into Holbrooke's thinking as a diplomat, here is an Op Ed piece he wrote for the Washington Post last March:

PESHAWAR, Pakistan -- Pakistan has had a such run of bad news in recent years that it may seem delusional to describe the current mood here as hopeful. Yet that is the impression this country -- often called by the American media the most dangerous on Earth -- is offering a visitor.

The main reason for the new mood is the return of a vibrant democratic process and what is widely believed to be the end of a decade of military rule. Less than two months after Benazir Bhutto's murder, her Pakistan People's Party and the party of her chief rival, former prime minister Nawaz Sharif, swept parliamentary elections that were widely accepted as honest. They have formed a Pakistani version of a grand coalition, with Bhutto's PPP on top.

The victory of these parties -- broadly based political organizations with widespread popular appeal -- is only half the story. The other half is equally important: The military seems to have pulled out of the political arena, at least temporarily, after President Pervez Musharraf's party won less than 20 percent of the seats in the newly elected National Assembly. Since Musharraf's real power base was as military commander, when he "took off his uniform" last year, it turned out that his residual power as president was largely ceremonial -- "like the queen of England," as one enthusiastic new parliamentarian put it. The new military chief, Gen. Ashfaq Kiyani, has said emphatically that the military should stay out of politics. In a country where the military has stepped into the political process with unfortunate regularity since the birth of the nation in 1947, this could be the biggest news of all -- if Kiyani and his colleagues mean it. The military has a central role to play in Pakistan's security, but not in the political arena.

Another positive straw in the wind is the poor showing of the overtly religious parties in February's elections -- they got only 4 percent of the total vote. In the volatile tribal areas near the Afghan border, where the Taliban and al-Qaeda have had a sanctuary from NATO operations in Afghanistan, the Muslim parties were shut out.

This does not mean, of course, that the border region is free of terrorists; sheltered deep in the valleys and villages of western Pakistan, they pose a serious threat to American and NATO troops fighting in Afghanistan. Dealing with them will require a massive program of security and development that goes far beyond the current plan, which is about $150 million in U.S. assistance per year. After visiting the border areas this week, I believe that the place to start is with a vastly improved, better-equipped, better-trained and better-paid Frontier Corps. This ancient force, created by the British in the 19th century, has only 50,000 troops; incredibly, it faces a better-armed Taliban and local rebel groups. Put another way, the eastern front of the American war in Afghanistan is surely worth more than $150 million a year -- money that, I should note, has not yet arrived in any significant amount.

Huge mistakes were made by the Musharraf regime in the tribal areas. Even Musharraf admits that his government's 2006 peace deal with the Taliban was a disaster that gave the Taliban a huge advantage in the Pakistani tribal areas and greatly weakened the NATO effort in Afghanistan. (Inexplicably, the United States publicly endorsed the deal, perhaps as part of its generally pro-Musharraf policies.)

But it seems a large overstatement to see the militants in the tribal areas as a threat to the rest of Pakistan. Pakistan's problems -- including terrorism -- are monumental, and its future is uncertain. (A bright spot in recent years has been a quietly improving relationship with India.) But Pakistan, the world's second-largest Muslim nation, is too big and its civil society -- with its deeply established political parties, its free press, its vibrant and very visible lawyers, its thousands of nongovernmental organizations, its huge business community, and its own moderate Muslim leaders -- too extensive to in fact become "the world's most dangerous nation."

For their part, educated Pakistanis are following the American presidential campaign carefully. Whoever is elected, they will continue to pay close attention to Washington. (An example: Asif Ali Zardari, Bhutto's widower and co-chairman of the PPP, told me that in choosing a woman to be speaker of the National Assembly, he was deeply influenced by his wife's friendship with Nancy Pelosi.)

Over decades, Washington has usually sent mixed signals to Pakistan. This time the message should be clear and consistent: democracy, reconciliation, the military out of politics, a new policy for the tribal areas -- and more democracy.

Here is a video clip about Holbrooke's appointment:



Related Links:

Pakistan's Prospects

Counterinsurgency in Afghanistan and Pakistan

Obama's South Asia Policy

Military Occupation of Kashmir

Bruce Riedel Interview

Clues to Obama's South Asia Policy