50 THINGS BARACK OBAMA HAS DONE WRONG

John Hawkins


Why would anyone dislike Barack Obama?
Could it be because of what he’s done in the
White House? As you get a refresher on the
national nightmare that has been Barack
Obama’s presidency, keep in mind that the
biggest difficulty in compiling it was limiting it to just 50 examples of corruption,
dishonesty, and incompetence.

1) Because of Obama’s policies since he
became President, 11,472,000 Americans
have left the work force.
2) “Fewer Americans are at work today than in April 2000, even though the population since then has grown by 31 million.” — Mortimer Zuckerman
3) The number of Americans on welfare has
hit record highs.
4) A record 20% of Americans were on food
stamps in 2013.
5) The almost 11 million Americans getting
disability payments is now approaching the
population of Cuba.
6) Our nation lost its AAA credit rating
because Obama is spending so much money.
7) Not only was Cash for Clunkers a wasteful government program that “ cost $1.4 million for every job it created and did little to reduce carbon emissions ,” destroying the “clunkers” helped dramatically jack up the cost of used
cars for the rest of the country.
8) After BP had a huge oil spill in the Gulf,
Obama not only bungled the clean-up process, he slowed oil production from other companies that had done nothing wrong which led to higher oil prices.
9) Obama has helped drive up the cost of gas by blocking the Keystone Pipeline.
10) When he was running for office in 2008,
Obama claimed that, “Under my plan, no
family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.” He lied.
11) Through 2013, the Obama Administration had imposed new regulations on businesses that cost 46 billion dollars a year .
12) Taxpayers lost 25 billion dollars on
Obama’s bailout of General Motors and
Chrysler. Chrysler isn’t even an American
company any more. It’s now owned by an
Italian company, Fiat.
13) When he was running for office, Obama
called Bush “unpatriotic” for adding so much to the debt and promised to cut the deficit in half by the end of his first term. Yet, the national debt is up 7 trillion dollars since Obama became President. That’s more debt than all U.S. Presidents from George
Washington through Bill Clinton combined.
14) Obama’s administration gave guns to
Mexican cartels that were used to murder
hundreds of Mexicans and border agent
Brian Terry. The Obama Administration has
refused to cooperate with the investigation or hold anyone accountable for that illegal
behavior.
15) The NSA has spied on Americans under
Obama.
16) Under Obama, the CIA spied on the
Senate.
17) Obama’s campaign contributors at
Solyndra were handed 535 million dollars of taxpayer money that the Obama
Administration knew they would never be
able to pay back before they gave it to them.
18) The IRS targeted Obama’s political
enemies including Christian groups, pro-
Israel groups, and most prominently, Tea
Party groups. The Obama Administration has refused to cooperate with the investigation or hold anyone accountable for the illegal behavior.
19) Numerous donors to Mitt Romney were
audited by the IRS after giving him large
contributions.
20) When the EPA and IRS were asked to
provide emails requested by Congress as part of an investigation into their illegal activities, they’ve claimed over and over again to have lost the information because of “hard drive crashes.” Given that it’s quite easy to back up a hard drive and that they’re required by law to retain that information, it seems likely that they’re habitually destroying evidence to hide
their illegal activities.
21) Veterans received poor health care and
even died because of the incompetence and
cover-ups of Obama’s VA.
22) Even Barney Frank admits Barack Obama shamelessly lied to the American people to get Obamacare passed – and lie, he did. He promised that Americans could keep their insurance plans, that they could keep their doctors, and that Obamacare would save the average family $2500 per year. Not only were all of those lies, Obama knew they were lies when he made those promises.
23) Barack Obama has broken the law
repeatedly by making at least 23 unilateral
changes to Obamacare.
24) Obama has been illegally trying to force
Christians to pay for abortifacients via
Obamacare.
25) Obamacare has been a disaster that cost
millions their insurance and sent health care costs spiraling into the stratosphere.
26) Obama is taking 700 billion dollars out of Medicare to put into Obamacare.
27) The website portion of Obamacare,
healthcare.gov, was a non-functional disaster for months when it rolled out and Obama claimed he was completely unaware that there was anything wrong with it.
28) Instead of calming people down, Obama
helped to turn Americans against each other racially be inserting himself into the Trayvon Martin case.
29) Obama created so much racial animosity by attacking the police when they had done nothing wrong in the Henry Louis Gates case that he had to have a ridiculous “beer summit” to try to undo the damage.
30) The Department of Justice failed to pursue a voter intimidation case against members of the New Black Panthers because they were black and liberal. Former DOJ official J. Christian Adams quit over the case and “accused his former employer of instructing attorneys in the civil rights division to ignore cases that involve black defendants and white
victims.”
31) George W. Bush quit playing golf in 2003 because he didn’t want the mother of some fallen soldier to see the Commander-in-Chief out playing golf. He also said he thought playing golf during a war sent the wrong signal to the American people. Through June of 2014, Obama was up to 177 rounds and is on pace to play twice as much in his second term as his first term.
32) Obama chose tax cheat Tim Geithner to be his Secretary of the Treasury and then has had the audacity to spend his whole
presidency pushing for higher taxes.
33) After promising to unite America when he was running for office in 2008, Obama has been the most hyper-partisan President in decades.
34) Despite the fact that Barack Obama
claimed to believe that marriage should be
between one man and one woman when he
was running for President in 2008, his
Department of Justice asked states attorney
general to refuse to defend their states’ bans on gay marriage in court.
35) The Department of Justice has worked
overtime to help increase voter fraud by
fighting against voter ID. This is despite the
fact that you need ID to buy alcohol, drive a
car, fly on a plane or even to use Obamacare.
36) He’s the reason why countless Americans have been groped, molested and harassed by the TSA, even though agents never caught a terrorist sticking their hand down anyone’s pants.
37) He’s responsible for the dumbing down of our education system with Common Core.
38) We first landed on the moon in 1969, but because of Obama, we’re no longer even capable of going into space.
39) His servile bowing to other world leaders is embarrassing and un-American.
40) Barack Obama engaged in an illegal war
in Libya without the permission of Congress
that helped turn that country into an unstable basket case run by radical Islamists. How bad is it? America, Libyans and the rest of the world were better off with Muammar Gaddafi in charge. That’s how bad it is.
41) Radical Islamist Maj. Nidal Malik Hasan
“described himself as mujahedeen” and
yelled “Allahu Akbar” as he murdered 13 of
his fellow soldiers at Fort Hood. The Obama
Administration labeled that as "workplace
violence" rather than admitting there was a
terrorist attack on his watch.
42) He released 5 Taliban terrorists In
exchange for deserter Bowe Bergdahl.
43) Americans died at Benghazi because
Obama’s administration didn’t take their
repeated requests for additional security
seriously.
44) Russia annexed Crimea while Obama did nothing of consequence to discourage it from invading. That’s not a surprise for a
President who is fond of throwing out “red
lines” that don’t mean anything.
45) Obama’s premature pull-out in Iraq and
foolish refusal to get a status of forces
agreement in Iraq left the country vulnerable and led to the terrorists in ISIS taking over a large portion of that country.
46) Barack Obama unilaterally implemented the DREAM Act that Congress didn’t pass and illegally handed out work permits to illegal aliens.
47) Obama is threatening to bypass Congress and simply “legalize” millions more of illegal immigrants even though it’s illegal and unconstitutional and it hurts the American people and will further encourage even more illegal aliens to surge across the border.
48) The fence on our southern border was
supposed to be completed by 2009. The
Obama Administration has made it clear that it doesn’t intend to finish it during his
presidency.
49) Barack Obama is deliberately creating a
crisis on the southern border by refusing to
deport illegal aliens crossing into our
country.
50) For all practical purposes, Barack Obama has already unilaterally implemented amnesty in America because “ at least 99.92% of illegal immigrants and visa overstays without known crimes on their records” aren’t being deported.

THE B.R.I.C.S DEVELOPMENT BANK: A GAME-CHANGER?

Sonia Hukil


At the 2014 BRICS summit held in Brazil from 14-16 July, the five member countries agreed to the creation of a New Development Bank (NDB) and Contingent
Reserve Arrangement (CRA). Will this move enhance the BRICS’ economic clout by countering the hegemony of Western-run financial systems? Will it be a game-
changer?
Significance of the BRICS Bank
The NDB will have an initial subscribed capital of $50 billion, which premises on an equity principle wherein the five signatories will contribute $10 billion each
towards the $100 billion bank corpus. The capital base will fund infrastructure and sustainable development projects in the BRICS countries and eventually in the
rest of the developing countries. The CRA is a fund pool to aide countries in hedging against short-term liquidity pressures. In contrast to the NDB, the CRA will be
unequally funded by the BRICS – with China, contributing 41 per cent, at the helm. These arrangements are expected to have massive economic and political impacts.
The formation of the NDB is proclaimed to be just, inclusive and forward-looking. It provides an equal voting status to the founding members and offers loans
for assistance without attached conditions. This is envisioned in order to deepen present and long-term cooperation amongst the BRICS nations and further strengthen South-South economic cooperation.
Clearly, the BRICS’ main motive behind these initiatives is to press for a larger role in the international economic order that is otherwise centered on the International
Monetary Fund (IMF) and the World Bank (WB). The NDB intends to supplement, and, perhaps later, supplant these multilateral institutions for a new financial
architecture. The BRICS nations are craving for more control over their own resources as well as for greater representation in order to democratise the framework of
multilateral funding systems.
A Game-Changer?
Will the BRICS bank succeed in challenging the Western hold on global finance? Or will it have a mere symbolic and rhetorical impact?
In proposition at least, the BRICS hold the financial capacity to counter the hegemony of the WB and IMF given how four of the BRICS founding members – China, India, Brazil and Russia – are the among the world’s top 10 economies. Yet, the reality is riddled with complexities. The NDB’s subscribed capital base and authorised lending is miniscule in comparison to the WB – which is estimated to lend approximately $60 billion this year. Clearly, lending by the NDB will not be sufficient to make a substantial impact on the
development process of emerging nations. It will be difficult for the NDB to challenge the reach and expanse of existing development institutions.
Meanwhile, through the NDB, the BRICS will continue to conduct their business using the dollar, thereby making their economies function in accordance with policies and procedures designed by the US. There is no other alternative to the dollar as it is the primary choice for financial transactions, globally. Thus, instead of
controlling the global economic order, the BRICS nations likely to remain stuck in it for the near future.
Furthermore, structural disparities are likely to be a tipping point for differences amongst the BRICS. This remains the core issue for de-stabilisation of the BRICS
institutions. China is not only the second largest economy in the world but also substantially larger than all the BRICS nations’ economies combined. China’s
contributions to the CRA will be significantly more than the rest of the member-nations’. Analysts state that
China will bring countries from its own sphere of influence for membership. Thus, with greater political and economic clout, Beijing will overwhelm the institution. Fears linger that more than being a jointly-
held banking system, the NDB will demonstrate China’s individual supremacy.
Moreover, the economies of the BRICS member-nations are projected to a downturn in the foreseeable future.
Their future growth will be less remarkable as compared to the past due to consistent economic troubles like inflation. Some even speculate that the next financial meltdown will come from the BRICS. Failure to sustain
high growth rates will thwart the lending capacity of the BRICS and in turn augment their dependency on the WB and the IMF.
The BRICS’ divergent interests, priorities, and governance systems further raise doubts on its ability to challenge the Western-dominated financial systems.
Intra-BRICS dynamics too seem delicate. India-China ties have deteriorated over territorial disputes; Russia seems worried about China’s growing economic influence, and South Africa’s ties with China have been staggering in light of rising Chinese demands for its vital resources. The BRICS bloc therefore appears to be a fragile partnership of convenience that may possibly encounter demise in the future given China’s hold on power. The initiative taken during the summit is ground-
breaking. However it is doubtful to envision the BRICS bank’s success in replacing the existing development banks and re-balancing the global economic order.
India has high expectations from the BRICS bank.
However, policymakers in New Delhi should not be complacent with its standing within the bank. India must tread cautiously and decisively along the BRICS
road, and, if needed, must not shy away from taking a different turn altogether.

AFGHANISTAN: THE FRAGILE FUTURE OF DEMOCRACY

Matthew Porges


Afghanistan’s ongoing presidential election, if successful, will mark the first transfer of power via an election in that country's history. Election does not necessarily imply democracy. Afghanistan's previous two presidential elections, both won by incumbent Hamid Karzai, saw ubiquitous election fraud and there are legitimate questions about how representative one
leader or political party can be in a country so fraught with sectarian and tribal divisions. Nowhere are these divisions more apparent than in the central challenge of selling the whole process of democracy to the Afghan people.
Afghanistan's divisions are manifested partly in the readiness of many Afghans to pursue other avenues when the State looks less than functional, which is its usual condition. Presidential candidate Abdullah
Abdullah who withdrew from the 2009 election to protest Karzai's election fraud has threatened to create a “parallel state,” by force if necessary, if the currently
disputed outcome cannot be resolved. This willingness on Abdullah's part is suggestive of many things, most important of which may be a lack of confidence that the
central government can effectively represent more than one of Afghanistan's many groups at a time. Abdullah
nominally represents Tajik interests—the northern part of the country—despite his own mixed ancestry.
Ashraf Ghani, the other candidate, has more widespread support among Pashtuns. The challenge all parties face is in trying to make this election more than a contest to
see which ethnic group has more voters.
There are a lot of ways to slice Afghanistan: along tribal lines, religious lines, political allegiances, ethnicity, or even language. Western powers, however, have chosen
none of these divisions. Afghanistan is to be ruled as a single state, headquartered in Kabul, and is to be a democracy. The 2004 constitution under which Karzai has vaguely been operating grants considerable powers of centralisation: for instance, the president appoints not only regional governors, but also the police chiefs.
In a country like Afghanistan, where adjacent regions may be radically different, this is understandably concerning to anyone not belonging to the current
president's particular ethnic group. In part, this will be mitigated by various power-sharing measures, such as reinstating the position of a Prime Minister, as well as
proposed elections for regional governors. While this is a step in the right direction, it is not without its own dangers. Democracy can take many different forms, and
centralised government is not the only way to rule Afghanistan. Working with instead of against Afghanistan's existing tribal structures remains an open challenge for both the West and any future government
in Kabul.
The larger question, perhaps even bigger than identifying the least dysfunctional sort of governance, is whether or not Afghanistan has improved since the US-led
invasion. Certainly the problems facing Afghanistan today are not the same problems that faced the country in 2001; they are, perhaps, new twists in old problems.
The Taliban government is gone, but the Taliban itself is not, and it remains a political force by virtue of its long reach and extraordinary brutality. Different ethnic groups can now sit around negotiating tables and debate
representation—but ethnic divisions remain the primary backdrop against which all political manoeuvring is
conducted. Afghanistan is certainly better in some ways, but it is unclear whether that change is durable, or whether a post-NATO Afghanistan can protect the improvements that have been made.
In that context, is Western involvement in the form a Bilateral Security Agreement (BSA) in the interest of most Afghans? Karzai, who has said he will not sign the
agreement—citing heavy civilian casualties and the US’ meddling in the allegedly democratic process it created —disagrees. The arguments in favour of continued
Western involvement are well-known—ongoing insurgency, fragile central governance, weak institutions, al-Qaeda—but good counterinsurgency has to be more
than the temporary solutions of concentrated firepower, strung together until they become permanent. If
Afghanistan is to be a democracy, it must be permitted to make its own choices, right or wrong. Both Ghani and Abdullah have stated that they intend to sign the BSA if
elected.
Tactical operations are easy to evaluate but strategic goals are often opaque for long periods of time. Expecting Afghanistan to be a functioning democracy right now is probably unrealistic. The things that are
realistic are all short-term, and fairly precise: hold a (reasonably) legitimate election, transfer power peacefully, draw-down Western troops from the country,
and sign a BSA.
The real danger here is alienation – a sense that Afghanistan is somehow impervious to improvement or positive change. That is untrue, but that perception among external actors will only be reinforced by a lengthy and fraudulent election process. What is at
stake is not so much Afghanistan's present as its future. At some point, there needs to be some tangible progress, something to demonstrate that Afghanistan can, in fact, exist as a single country under democratic
leadership. Perfection is not required, but if there aren't glimpses of something better than perpetual civil war, entrenched corruption, and a total lack of trust in the
process, the notion of Afghanistan itself is going to be a hard sell—both internationally, and to the Afghan people.

PEOPLE OF THE WORD

Peter Lopatin


Simon Schama’s choice of “Story” in place of “History” in the title of this impressive new work is fitting, for the history he recounts is not history conceived of as a chronicle of important events, but rather as a compendium of thematically linked stories told throughout the ages by, and about, the lived experience of real people—and of a people. Schama tells these stories in terms of a number of characteristically

Jewish oscillations: between exclusivity and
inclusivity, differentiation and syncretism,
assimilation and rejection, fidelity to law and tradition and the Jewish proclivity for
scrutinizing and interrogating both. The
myriad ways in which Jews mediated and
resolved (or didn’t resolve) these oppositions over the better part of two millennia constitute the warp and weft, the theme and variation, of Schama’s narrative.
To tell a story is, necessarily, to adopt a
stance, an agenda that informs the story-
teller’s choices of what tales to tell and what
themes to educe, and Schama lays his agenda on the table at the outset:
What the Jews have lived through, and
somehow survived to tell the tale, has been
the most intense version known to human
history of adversities endured by other
peoples as well; of a culture perennially
resisting its annihilation, of remaking homes and habitats, writing the prose and the poetry of life, through a succession of
uprootings and assaults. It is what makes this story at once particular and universal, the shared inheritance of Jews and non-Jews alike, an account of our common humanity.
It turns out to be an agenda that serves
Schama well. Some of the stories he relates
are of well-known figures of Jewish history,
biblical and otherwise: Ezra and Nehemiah,
inveighing against the corruption of Jewish
society by “foreign” influences; the important (if ever problematical and dubious) Flavius Josephus, a Jew turned faithful Roman general and chronicler of Jerusalem’s destruction at the hands of his Roman masters; rabbi and philosopher Maimon ben Joseph (known to us today as Maimonides) striving to reconcile faith with reason. And the list goes on, including rabbis and scholars, to be sure, but also mapmakers, courageous wives and daughters, poets, and physicians.
The book’s subtitle is a bit misleading.
Although there are references to the very
earliest days of Jewish history, Schama’s story really begins with the fifth-century-b.c. Jewish community at Elephantine, in Upper Egypt, which provides the thematic backdrop for the stories that follow. As revealed in troves of papyri uncovered at the end of the 19th century, a Jewish garrison town flourished in Elephantine, populated by “tough guys, anxious mothers, slave-girl wives, kibitzers and quibblers, hagglers over property lines, drafters of prenups, scribes, temple officials, jailbait indignant that they were set up for a fall, big shots and small fry.” This was a community of Jews aware of its distinct identity, yet one which remained open to the wider non-Jewish world. Their
Jewishness was “worldly, cosmopolitan,
vernacular (Aramaic) not Hebrew, obsessed
with law and property, money-minded,
fashion-conscious [and] much concerned
with .  .  . the niceties of the social pecking
order and both the delights and burdens of
the Jewish ritual calendar.” These were Jews who mingled freely with their non-Jewish neighbors, sometimes to the point of taking non-Jewish wives, a practice repugnant to the priestly grandees of contemporaneous Jerusalem, where, at roughly the same time, the books of Ezra and Nehemiah were being composed, “with the express aim of purging Jewish society of ‘foreign’ elements: a winnowing out of foreign women, foreign cults, foreign habits.”
Elephantine and Jerusalem serve as the
thematic poles about which Schama’s “story
of the Jews” will turn, as he guides his reader deftly, if at times feverishly, over a great swath of Jewish history. The tension between the sacred demands of text and tradition—the never-ending “laying on of words” that is intrinsic both to the practice of Judaism and the lived experience that is Jewishness—and the pervasiveness of “alien” influences upon a people who saw themselves in some important sense as “distinct” is a recurrent theme in Jewish history. That theme runs like a river through Schama’s account as well,
perhaps nowhere more strikingly than in his chapter on “Classical Jews,” in which he
explores the tense yet fructifying interplay
between Hellenism and Judaism.
On the one hand, the Greeks abhorred the
obduracy of the stiff-necked Jews and “their
exasperating refusal to be like everyone else,” insisting—as against all (Greek) reason and spiritual sensibility—on restricting their diets (rather than indulging their appetites), violating the beauty of the human form through the practice of circumcision, and the exclusivity of their faceless God. Schama asks the key question: “What was it to be: the nude or the word? God as beauty or God as writing? Divinity invisible or an eyeful of perfect body?” The division seems stark and unbridgeable. Yet the lived reality of Hellenic Judaism tells us otherwise. From Libya to Alexandria to Judea and the Galilee, Jews and pagans lived among and influenced one
another:
For those multitudes, Hellenism and Judaism were not mutually incompatible at all. Their manner of living exemplified something like the opposite: unforced convergence; a spontaneous (if not untroubled) coexistence.
It is important to note that neither here, nor
in his compelling account of Jewish life in
Moorish Spain—nor anywhere else, for that
matter—does Schama spin a feel-good yarn of this or that golden age of Jewish life under the rule of non-Jews. He is keenly aware that the story of the Jews is, in part, a lachrymose tale of persecution and destruction. He notes that the earliest appearance of “Israel” on any historical artifact is a late-13th-century- b.c. Egyptian inscription that proclaims:
“Israel is laid waste, its seed is no more.” For all the cosmopolitanism of the Jews of
Elephantine, they were “stigmatized as
colonists, tools of the Persian occupiers .  .  .
their religion a desecrating intrusion.”
Schama knows those stories and tells them
vividly. But he also wishes to tell “a second
story .  .  . in which the line between the alien and the pure is much less hard and fast; in which being Jewish did not carry with it the requirement of shutting out neighboring cultures but, to some degree at least, living in their company.” The coexistence of these two stories is, in Schama’s telling, the real “Story”
of the Jews.
This book was conceived as a companion to
the eponymous BBC television documentary
series authored by Schama (now on PBS as
well), and, not surprisingly, Schama has
chosen a richly visual writing style that is
admirably evocative but occasionally
stumbles over itself. (Can it really be the case that “it takes no imagination at all to wander the streets of Elephantine, hear the gossip and smell the cooking pots”? Surely a little imagination would help!) And although, for the most part, Schama’s informal, conversational style works well, the overly generous sprinkling of Yiddishisms (Maimonides was a “king of the kvetch”) feels like a bit too much schmaltz in the kishka.
And it would have been helpful if the author had provided translations of some of the Hebrew words: nagid, nefesh, and sandek come to mind.
These are quibbles, however. The Story of the Jews is a deft, engaging, and humane work that, like all well-told tales, carries the reader along and leaves him better for the journey.

HILLARY CLINTON'S REPUTATION

Jay Cost


The rollout of Hillary Clinton’s new memoirs, Hard Choices, was not a resounding success for the former secretary of state. She stuck her foot in her mouth regarding her family’s vast fortune. She had trouble answering questions about her evolution on gay marriage. Critics, on the whole, found the book tired and shopworn.
Yet her poll numbers remain surprisingly
solid. Surveys conducted by Quinnipiac
University, Fox News, and Rasmussen Reports —all taken since the book’s release—show her with comfortable leads nationally over Rand Paul, Chris Christie, and Jeb Bush. A mid-July CNN poll shows her with generally strong favorable ratings, although not as positive as they were when she wrapped up her tenure at State. Even so, respondents said they thought her to be a “strong and decisive leader” who “generally agrees” with them on
the issues, can “manage the government
effectively,” and “cares about people” like
them.
What lessons are there to draw from these
numbers? The first, and probably most
obvious, is the disconnect between the
political class and the greater public.
Clinton’s book rollout was a disaster among
politicos and cable news obsessives, but
people who do not dedicate inordinate time
to politics and policy hardly seemed to notice.
While this might be disappointing for
conservatives, who would like to see Clinton’s numbers brought back to Earth, it is nevertheless a good reminder that what
matters in the Beltway does not necessarily
play in Peoria.
The second lesson becomes apparent when we think of Clinton’s numbers in terms of
Weekly Standard online editor Daniel
Halper’s new book, Clinton, Inc. As Halper
shows quite clearly, the Clintons are obsessed with brand management and have become exceedingly skilled at maintaining the improved reputation they have developed since the dark days of the Lewinsky scandal.
This reputation is not going to fall apart
simply because of a bad book rollout. The
collapse of the Barack Obama foreign policy— of which Clinton was an integral part—
apparently has done little to diminish it. Even Benghazi has hardly made a dent.
While the 2014 midterm election is still three months away, it looks as though the
Republicans are set to do quite well. Still,
Clinton’s continued polling strength cannot
but cast a pall over GOP prospects for 2016.
Republicans hope that a faltering Barack
Obama will damage Hillary Clinton’s
presidential chances. It’s true that unpopular presidents generally drag down their successor nominees. John McCain was hurt by George W. Bush, Hubert Humphrey by Lyndon Johnson, Adlai Stevenson by Harry Truman, James M. Cox by Woodrow Wilson.
But Clinton has something that McCain,
Humphrey, Stevenson, and Cox all lacked: a
national reputation built over a quarter-
century of assiduous brand management.
The early signs of the 2016 Clinton campaign suggest a subtle break with Obama that will reinforce her unique identity. Writing for the New Republic, Anne Applebaum took a careful read of Hard Choices as a piece of early campaign literature and concluded that Hillary Clinton is planning to run a campaign
akin to Richard Nixon’s 1968 “man in the
arena” strategy. She is battle-tested,
experienced, ready to make the hard
sacrifices for the country, and above all
somebody who can be counted upon:
Clinton hopes to be .  .  . deeply non-
ideological, a centrist. She intends to run as a hard-working, fact-oriented pragmatist—
someone who finds ways to work with
difficult opponents, and not only faces up to
difficult problems but also makes the
compromises needed to solve them. Again
and again she portrays herself sitting across
the table from Dai Bingguo or President
Putin, working hard, searching for a way
forward. Similar methods, presumably, can
be applied to the Republican leadership.
The problem for Republicans here is stark:
They have run a campaign like this for the
last half-century. It has met with little success in the last 20 years, and it has never worked against the Clintons; Hillary Clinton’s numbers suggest she would be able to “sell” the public on this problem-solving image better than the GOP nominee could. Given a choice between a Republican and a Clinton offering basically the same thing, there is little reason to believe that the country will select the Republican. Nor, for that matter, can Republicans rest on their oars and assume that Obama’s sinking reputation will pull Hillary Clinton down as well. After all, it hasn’t yet.
What, then, is the best response for the GOP?
It is simply this: The party must wrap itself
unabashedly in the garb of reform. If Hillary Clinton offers herself as the wise and learned hand who will rely upon her decades of experience to guide the ship of state, Republicans have to argue that her
experience is exactly what the country
doesn’t need at this moment. They need to
convince the public that, by being in
Washington for the last quarter-century, she is too committed to a broken status quo that is in desperate need of change. The party then needs to lay out a credible and salable agenda for that change.
This should sound familiar, for it is how
Barack Obama defeated Hillary Clinton in
2008. A message of reform resonated six
years ago, and it could very well resonate
again (so long as it is carried by somebody
other than Obama!). Now as then, the country is tired and frustrated with the status quo.
The people appear to want a change in
course. Granted, this is unfamiliar territory for the Republican party. From Dwight Eisenhower to Nixon to Gerald Ford to George H. W. Bush to Bob Dole to George W. Bush to McCain to Mitt Romney, “fresh and new” are not its calling cards! Only Barry Goldwater and Ronald Reagan broke with tradition, and only Reagan was a political success. The party is more comfortable offering a “Return to Normalcy,” even if the country doesn’t want normalcy.
If Hillary Clinton offers a Return to Normalcy in 2016, it is a fair bet that the GOP will not be able to beat her by competing on the same terrain. Instead, Republicans should focus assiduously on maximizing their gains in this midterm election, take a few weeks to enjoy
(hopefully) their victory, and then have a
serious conversation about exactly what kind of change they want to offer the country in 2016. For that appears to be the best— perhaps the only—way to beat Hillary Clinton.

IS THINKING OBSOLETE?

Thomas Sowell


Some have said that we are living in a post-
industrial era, while others have said that we are living in a post-racial era. But growing evidence suggests that we are living in a post- thinking era.
Many people in Europe and the Western
Hemisphere are staging angry protests
against Israel's military action in Gaza. One
of the talking points against Israel is that far
more Palestinian civilians have been killed
by Israeli military attacks than the number of Israeli civilians killed by the Hamas rocket attacks on Israel that started this latest military conflict.
Are these protesters aware that vastly more
German civilians were killed by American
bombers attacking Nazi Germany during
World War II than American civilians killed
in the United States by Hitler's forces?
Talk show host Geraldo Rivera says that there is no way Israel is winning the battle for world opinion. But Israel is trying to win the battle for survival, while surrounded by enemies. Might that not be more important?
Has any other country, in any other war,
been expected to keep the enemy's civilian
casualties no higher than its own civilian
casualties? The idea that Israel should do so
did not originate among the masses but
among the educated intelligentsia.
In an age when scientists are creating
artificial intelligence, too many of our
educational institutions seem to be creating
artificial stupidity.
It is much the same story in our domestic
controversies. We have gotten so intimidated by political correctness that our major media outlets dare not call people who immigrate to this country illegally "illegal immigrants."
Geraldo Rivera has denounced the Drudge
Report for carrying news stories that show
some of the negative consequences and
dangers from allowing vast numbers of
youngsters to enter the country illegally and be spread across the country by the Obama administration.
Some of these youngsters are already known to be carrying lice and suffering from disease. Since there have been no thorough medical examinations of most of them, we have no way of knowing whether, or how many, are carrying deadly diseases that will spread to American children when these unexamined young immigrants enter schools across the country.
The attack against Matt Drudge has been in
the classic tradition of demagogues. It turns
questions of fact into questions of motive.
Geraldo accuses Drudge of trying to start a
"civil war."
Back when masses of immigrants from
Europe were entering this country, those with dangerous diseases were turned back from Ellis Island. Nobody thought they had a legal or a moral "right" to be in America or that it was mean or racist not to want our children to catch their diseases.
Even on the less contentious issue of
minimum wage laws, there are the same
unthinking reactions.
Although liberals are usually gung ho for
increasing the minimum wage, there was a
sympathetic front page story in the July 29th San Francisco Chronicle about the plight of a local non-profit organization that will not be able to serve as many low-income minority youths if it has to pay a higher minimum wage. They are seeking some kind of exemption.
Does it not occur to these people that the very same thing happens when a minimum wage increase applies to profit-based employers?
They too tend to hire fewer inexperienced
young people when there is a minimum wage law. This is not breaking news. This is what has been happening for generations in the United States and in other countries around the world.
One of the few countries without a minimum wage law is Switzerland, where the unemployment rate has been consistently less than 4 percent for years. Back in 2003, The Economist magazine reported that "Switzerland's unemployment neared a five- year high of 3.9% in February." The most recent issue shows the Swiss unemployment rate back to a more normal 3.2 percent.
Does anyone think that having minimum
wage laws and high youth unemployment is
better? In fact, does anyone think at all these days?

NEPAL, INDIA AND THE ELECTRITY TRADE: ADVANTAGED KATHMANDU

Subin Nepal


Sitting on a theoretical possibility of producing 84,000 megawatts of hydro-electricity, Nepal currently produces
about 700 megawatts of hydro-electricity. The demand for electricity has risen upwards of 20% each year over the last decade; yet Nepal’s production has not seen
any significant rise. As a result, the population, during extreme situations, faces over 18-hour power-cuts each day.
Holding on to the historical paranoia of Indian expansionist policy, no Nepali government after 1990 has been able to create a situation to multiply
hydroelectricity production. After a long stalemate over the power trade issue, Indian Prime Minister Narendra Modi’s foreign policy to focus more on the
neighborhood seems to have given renewed impetus on both the sides for a revitalised power trade deal. India plans to propose a new Power Trade Accord (PTA) when Modi visits Nepal in August. Though some details
of the agreement are yet to be made public,
speculations are on the rise and as usual there is public outcry in Nepal as to how this agreement might not benefit Nepal.
Several Nepali scholars have pointed out that the 2014 PTA undercuts Nepali sovereignty by fueling Indian interests of power while making the Nepali private
power sector weak and selling energy that Nepal would require in the future for its own development projects. The PTA – that is in fact beneficial for Nepal in at
present as well as in the future – doesn’t appear to undermine Nepali sovereignty at all. In fact, for the present it is one way to create more jobs for newer power projects and increase electricity distribution, as
this accord doesn’t plan on selling electricity to India before fulfilling demands within Nepal.
Even for the distribution, majority of the infrastructure will be built by Indian corporations. Increased distribution within Nepal would give the country an
opportunity to focus on other development projects. The dissenting side of this argument seems to be holding on
to the idea of the effects of selling electricity to India at a lower rate than Nepal would want. However, the ground reality is that at the moment, Nepal neither has the infrastructure nor the capacity to mobilise its own domestic industry to create mega hydro-power projects that could sell output to India at a rate it would want.
The best compromise would be what has been proposed from the Indian side: consume as much electricity as you need at home and sell the rest of it at a rate that
has been agreed upon by both sides.
In the long run, these mega power projects that have been envisioned by India are sure to provide a consistent supply of power to the country to make a move towards clean energy and cut back on the consumption of gasoline – thereby decreasing Nepal’s
international trade deficit as well as dependency on fossil fuel. Nepal already does a great job of leaving very little carbon footprint internationally and this move
would only help strengthen Nepal’s environmental record. While Indian power companies build power projects, Nepal has a unique opportunity to study and implement ways to make hydro-electricity the main source of power for the country.
There is a fear that any Indian proposal to Nepal is to turn it into Bhutan – that is still considered an Indian “protectorate.” However, Nepali leaders seem to be
either unaware or deliberately ignoring that Bhutan’s case is different as India influences its foreign policy.
Kathmandu has full control over what it decides to sign off on, and the PTA, at the moment, is highly suitable for various reasons such as: India’s successful
experiment with such a project(s) in Bhutan; the India- Nepal, geographical and cultural proximities; the Indian power sector’s familiarity with regional geography; the Indian interest to invest in Nepal and India’s energy needs. One faction of Nepali leaders has been discussing the possibility of selling electricity to either
Pakistan or Bangladesh via India. They seem to be unaware of the historical baggage India carries in its relations with these countries. Hence, the voices
dissenting this power proposal seem to be stemming out of the paranoia towards anything tagged as Indian.
Nepal’s biggest challenge in moving forward with the PTA with India would be the ability to balance the growing Chinese interest in the country. Recently, Chinese companies were awarded contracts to build a few mega hydro-power projects, and this trend might continue. If balanced diplomatically, Nepal might in fact
be able to utilise this race between its two neighbours for increased infrastructure in the country; or turn into a playground if not balanced carefully. The Nepali leadership alone has the ability to decide where they
would like to head towards.

INDIA-SRI LANKA: STRENGTHENING REGIONAL COOPERATION

Asanga Abeyagoonasekera


August marks the death anniversary of the late Lakshman Kadirgamar, a remarkable Foreign Minister brutally assassinated by the LTTE. He once said, “India and Sri Lanka relationship is lost in the mist of time,” which signifies the deep bond that the two nations share. The gift of Buddhism is perhaps the most enduring of all ties and lays the foundation for this long-rooted friendship. The most sacred symbols of
Buddhism - the Sacred Tooth, a relic of Lord Buddha gifted by King Guhaseeva, and the sapling of Sri Maha Bo tree in Anuradhapura, which is believed to be from the same tree under which the Buddha attained Nirvana - were gifted from India. South Indian kings ruled the island nation from time to time. The last few kings who ruled the Island were Nayakkar kings. Yet, they protected the Sacred Tooth relic and respected Buddhist values and Sinhalese culture.
Despite the shared history, culture and religion, India-Sri Lanka relations in the present context is discussed with regard to three key areas: the India’s position on the
13th Amendment to the Constitution of Sri Lanka, its stand with regard to the UNHRC resolution against Sri Lanka, and the fishermen issue in Tamil Nadu. One of
the main topics of discussion between President Rajapaksa and the newly appointed Prime Minister of India Mr Narendra Modi was the 13th Amendment. Sri Lanka was advised to fully implement the 13th Amendment.
Among the many challenges that the Sri Lanka-India relationship faces at present, the Tamil Nadu fishermen issue has gained widespread attention. When Indian
fishermen illegally violate the maritime boundary of Sri Lanka, the Sri Lankan Navy arrests and detains them. A few days ago, 50 such fishermen were arrested.
According to news reports, 93 fishermen are currently under arrest and detention in Sri Lanka. In a context in which territorial boundaries are located in close proximity, these types of issues can happen. Failure to
agree on a suitable solution by both countries will only result in continuation of this problem.
In finding a solution to the fishermen issue neither Sri Lanka nor the Government of India can ignore South India. During his recent visit to Colombo, Dr
Subramaniam Swamy, one of the most influential policy advisors to the BJP Government said, “One weakness in
India’s policy towards Sri Lanka is the veto power Tamil Nadu has.” Explaining further, he suggested that this situation will not remain the same under the current
government. Even though this is a positive remark for Sri Lanka, one cannot ignore the fact that South India is Sri Lanka’s closest neighbour. As the tension between South India and Sri Lanka heightened after the war, strong remarks were made by both sides. This affected the Sri Lanka-India
relationship. In order to avoid such a situation in the future, it is important to count the concerns of Tamil Nadu in finding a solution to the fishermen issue. One technical way of mitigating and minimising this issue could be by introducing strict regulations on fisheries’ practices such as having a vessel monitoring system (VMS) with transponders on board all the
vessels. That gives the ability for the coast guards from both nations to monitor the path of the vessels. Geo fencing to determine the boundary between the two
nations can also be used. This would help in preventing any illegal vessel from entering each other’s territorial water. This in turn will help to identify and minimise
bottom trolling to protect the marine environment. Declaring the maximum amount of fish to catch would control excessive over fishing (Quota Management
System). There are many technical measures that could ease tensions between the two countries. India should have strong and close relations with all its
neighbours to achieve its goal as a regional economic power. The SAARC meeting due in November would be a good opportunity for the newly appointed Indian
Government to strengthen its bond and take some important decisions beneficial to both India and to the South Asian region as a whole.
In terms of the future goals of SAARC, it has been discussed that its future progress depends heavily on bordering countries such as Pakistan and India overcoming deep-rooted ethnic conflict. SAARC does
have the potential to be a platform for increased communication and engagement over these issues. Prime Minister Modi’s proposal of having a common satellite for the SAARC region would be one initial step.
As a Nepalese newspaper recently reported, the reduction in the soap industry ingredient import tariff in India would flood the Nepalese market with Indian soap,
which could destroy the Nepalese soap manufacturers.
While trade is one of the areas in which SAARC can strengthen its ties, it should be done in a way that is mutually beneficial and helpful to all the SAARC countries.
The behaviour of South Asian countries clearly indicate that they are derived more from a nationalistic agenda. RWhile looking inward is important for a country, it should
also note that improving and strengthening regional cooperation among the South Asian Nations is equally important in this globalised world.

NUCLEAR USE: NEED FOR THINK ON POLITICAL-LEVEL CONSIDERATION

Ali Ahmed


In a recent op-ed, 'Counter Pak Nuke Tactics ', nuclear strategy expert Manpreet Sethi rightly states in the conclusion that “The purpose of the Indian nuclear weapon is narrow and limited to safeguarding the
country against nuclear coercion, blackmail or its possible use.”
Sethi, a long time Pakistan military watcher, is spot-on in her understanding that Pakistan’s military is using the Nasr nuclear missile system to deter India from
exercising its conventional advantage in case push comes to shove in the form of a mass terror attack, a’la Mumbai II. It would like to use this to catalyse foreign
intervention into moderating India’s nuclear response.
Many analysts advocate that, faced with this challenge, India needs to reinforce its existing nuclear doctrine. The existing nuclear doctrine calls for inflicting
unacceptable damage in retribution for Pakistani nuclear first use, even if this in the form of a lower order tactical nuclear strike. While many want to strengthen its
credibility, a few, such as professors Basrur and Rajaraman , want a shift in thinking on what deters.
There is a consensus among the competing schools that nuclear retaliation must greet nuclear first use. The difference is in the nature of the nuclear retaliation. If Pakistan resorts to ‘asymmetric escalation’, to use Vipin Narang’s phrase for escalation across the nuclear firebreak between conventional and nuclear levels of war, the former school argues for holding out the threat of escalation. The argument goes that India can withstand the loss of a couple of cities; Pakistan having just a few, cannot. This will stay Pakistan’s nuclear finger, the objective of deterrence. All India needs to do is to ensure that it unmistakably conveys to Pakistan its implacable intention, even if it is at the risk of a few Indian cities.
However, with nuclear warheads in the lower three digits, Pakistan may venture bold to get even. Taking this seriously, the ‘flexible’ response school does not rule out consideration of proportionate response. They believe that the credibility of disproportionate response is questionable. But a proportionate response can be assured and serves to deter equally.
As can be seen, both sides base their arguments on strategic level considerations focused on deterrence. Strategists dealing with deterrence are at a level lower than the political, at which the political decision-maker functions. For a political decision-maker, theirs’ is an important input to inform the nuclear decision but not to determine it. At the political level there are also other considerations over and beyond deterrence. These must override input from the strategic level on the nature of nuclear response.
First are political consequences. The Indian way of life and India as we know it cannot be endangered inordinately. Losing a few cities can perhaps be absorbed, but the communities that have lost cities lose
out on life chances. This is particularly so in relation to relatively unscathed neighbours. Perceiving that India has let them down, sub-nationalisms may come to fore. Next are social consequences. These will be long-term from the perspective of environmental effects. The number of nuclear mushrooms that need to sprout across Pakistan to deprive it of a retaliatory capability, stashed away at locations numbering in two digits, will be at least 30. Since Pakistan has second strike capability, the ability to fire back even after receiving a debilitating nuclear strike, it would be able to lob back
at least 20. Fifty bombs going off is half the total of the 100 that formed the basis for 2013 estimate by environmental scientists of two billion casualties from nuclear winter induced famine. The price will be paid at the cost of inter-generational equity.
Finally are strategic consequences. Winning the war is seldom as important as winning the peace. Though Pakistan will not be on the map, it will remain as a piece of land with severely disadvantaged people. India
will have to bear the additional burden of its recuperation for its own stability. It will consequently have to abandon its dream of parity with China for at least half a century.
Given these political level considerations, the political decision-maker will have to outthink his strategic advisers. Strategists have a role to play. Their discharging this role is good for deterrence. They keep nuclear dangers at the fore, lest the adversary take these as bluff. However, political level considerations trump strategic level input.
Nuclear doctrine is primarily meant for deterrence. The ‘massive’ retaliation school emphasising the dreadful possibilities helps deter, since inexorable escalation can
well occur. However, for an NFU abiding power such as India, nuclear employment will be when deterrence has failed. Therefore, a deterrence doctrine can at best
inform, but not determine, nuclear weapons employment decisions.
Eschewing Cold War thinking helps in sealing off a particular direction, but does not tell which direction to go. While deterrence relevant considerations have found reflection in the discourse, missing is thinking on what the content and checklist political level considerations needs to be for India.

AND THEN THERE IS THE MIDDLE-EAST: THE LACK OF AN END-GAME

Amit Gupta


US’ policy towards the turmoil in the Middle East, or the lack of it, is shaped by three factors: traditional ties and alliances that continue in the post-Cold War era; the complex regional environment that has emerged after the so-called “Arab Spring;” and the events of 9/11 and Iraq that have forged American opinion on the subject.
Yet none of these factors are any help in resolving the current political turmoil in the Middle East.
The US’ traditional ties in the Middle East have been with conservative Arab regimes, particularly in the Gulf, and with the state of Israel. Neither set of ties has changed much in the 21st century and if anything the ties with Israel have become even stronger since 9/11. International observers now, in fact, complain of an American media bias towards Israel in the current Gaza conflict that is much more marked than in past Arab- Israeli conflicts. The US is unlikely to change this relationship given the impact of the other two factors
mentioned above. The Arab Spring was a bombshell that policymakers, academics, and the American media were not expecting and a coherent American policy took some time to develop. What eventually emerged was a policy that supported a democratic transition with a preference for
moderate political forces having their hands on the wheel. In none of the Arab countries did events play out the way policymakers expected. In Egypt, the military dismissed the legally elected president and was able to get its own candidate elected in a new election. In
Tunisia, the nation which has seen the best potential transition to democracy, a conservative Islamic party came to power and has subsequently called for
parliamentary and presidential elections in October/ November 2014. In Libya, Colonel Gadhafi was removed from power but the country is now headed into a civil war and Western embassies, aid workers, and journalists are leaving the country en masse. In Bahrain, the fledgling movement for democracy was crushed by the authorities while in Yemen cosmetic changes were made to the regime. Iraq and Syria are engulfed in civil war and have seen the rise of ISIS - a group so brutal that
even al Qaeda has had to disown them.
As for the Palestinians, the rise of Hamas was viewed with disquiet by Israel, the Palestinian Liberation Organisation on the West Bank, and by the conservative Arab states and even the new government in Egypt. The Arab countries’ governments have remained by and large silent over the events in Gaza because of the turn the Arab Spring took. The elites and the middle class
were stunned by the rise of extremist elements and voted instead for stability which in actual terms meant withdrawing support from the Muslim Brotherhood and
Hamas. Paradoxically, it is the non-Arab states - Turkey and Iran - that have been the most vocal supporters of Palestinian nationhood. Add to these concerns the fact that in the post-9/11 world the West is worried by the rise of radical groups in the Middle East, all these events only works to strengthen the relationship with Israel which is seen as a loyal ally. What then is the likely endgame for the US, if any, in the
region?
Given the US’ economic concerns, the bill for the Afghan and Iraq wars, and war fatigue in the general population, long-term military intervention will be difficult to
achieve. At the same time, the chaos in the Middle East makes it likely that the global powers are going to have to adopt a wait-and-see approach on what type of
political formations emerge from this volatile situation.
The one threat which might prompt US-led intervention is if oil supplies from the Gulf were threatened especially from Saudi Arabia and the smaller Gulf states - although these states are as of now peaceful and in the case of the UAE and Qatar booming economically. Even in Iraq, despite the success of ISIS, oil exports continue since the insurgents are not targeting what could eventually be their cash cow - although this may lead to hard choices if ISIS continues to take over oil fields and thus impact on the international petroleum market.
So wait-and-see becomes the narrative.
Israel-Palestine is more problematic since given Israeli domestic politics and security concerns, Palestinian political cleavages, and the fact that the US can do little
to really pressure either side, it is likely that there will simply be more of the same. At some point of time both the Palestinians and the Israelis will agree to a ceasefire
and it will be back to business as usual. Having said that, there are no realistic expectations of a political breakthrough in the near to medium-term. John Kerry,
who has racked up more frequent flyer miles than Hillary Clinton, is seeing his carefully crafted peace solution crumble in the dust of Israeli air strikes and Palestinian
missiles.
In conclusion, one should raise the point that in the digital age it is hard for the general public to focus on anything and, therefore, a consistent well-thought out
American foreign policy becomes difficult. In this year American attention has wandered from the crisis in Crimea to Boko Haram kidnapping 300 schoolgirls to
ISIS in Iraq to the Gaza strip. And there are still five months left in this year. Given this public attention deficit, expecting a long-term focus on any region is just not possible.

NORTH KOREA: SEEKING NEW FRIENDS?

Sandip Mishra


North Korea appears to have become increasingly desperate in its behaviour. It executed its number two leader Jang Song-thaek in December 2013, called South
Korean President Park Geun-hye a ‘prostitute’ and the US President a ‘pimp’ in April 2014, characterised China as ‘spineless’ in July 2014, and fired around one hundred short-range missiles in the East Sea in June- July 2014. North Korea’s desperate behaviour has not been able to bring any change in the US and South
Korean postures but it has definitely alienated China.
South Korea’s tough posture, the US policy of ‘strategic patience’ and the growing economic and political hardships and isolation of North Korea have been
problematic for the North Korean leader Kim Jong-un. North Korea had tried to come out of the crisis by being tough and uncompromising as it did in the past.
Through nuclear and missile tests in early 2013 and escalation of military tensions in mid-2013, it tried to show that pressure and sanctions would not work and South Korea and the US must go back to placating
North Korea. However, North Korea miscalculated not only South Korean or American responses but also Chinese in the latest round of hostilities. It is important to underline that China provided North
Korea the strategic space in which it could
independently deal with the US and South Korea, and China did not either intervene in it or find it discomforting. However, it seems that North Korea went beyond this strategic space. Military tension escalated
in the region when North Korea loudly opposed - both in words and actions – the South Korea-US joint military exercise in April 2014. The North Korean justification
was that the US had brought its more advanced weaponry in the region as well as installed a missile defence system in Guam. North Korea-China relations became estranged and China started cooperating more substantially with the international community in putting sanctions on North Korea. The execution of Jang Song- thaek was symbolic of the growing distance between North Korea and China as he was supposed to be close to China. Rather than amending its ways, North Korea in a way challenged or warned China not to expect any compromise from it. This growing distance can be understood from the fact that the new Chinese and South Korean Presidents have been able to have two summit meets in both countries but there has been no visit by China’s top leaders to North Korea.
North Korea probably wants to convey to both its rivals and friends that it would not succumb to any pressure and the only way to deal with it is engagement. It wants to send this message by resorting to the
escalation of military tension and rhetoric. But it seems that the new Chinese leadership is not in agreement with this North Korean strategy. China has also been
looking at the broad regional equations in which it has to deal with an assertive Japan, ambivalent US and a possible partner in South Korea. North Korea has also been looking to inculcate new partnerships and entertained a Japanese official delegation in Pyongyang for talks on the issue of
Japanese abductees in April 2013. Japan and North Korea have been meeting to discuss this issue since May 2014. North Korea has been exploring in Japan a
potential partner, which might be able to lessen the international isolation and pressure. North Korea thus appears to be utilising the Japanese isolation in the region in its own favour. Since 2013, North Korea has also been trying to reach out to Russia as its relations with China have not been smooth. In May 2014, Russia wrote off US$10 billion in loans to North Korea and
there have also been a few important bilateral visits from both sides.
In an unprecedented move in July 2014, the North Korean media called for the strengthening relations with Russia on the 11th anniversary of a summit between
Kim Jong-il and Vladimir Putin. In the same context, there was no official statement on China-North Korea relations in on the 33rd anniversary of its Friendship Treaty with China. It has also been reported that North
Korea’s trade with Russia reached up to US $104 million in 2013 with a rise of 37.3 per cent. To further the exploration of new relations, the North Korean foreign minister is to visit Vietnam, Laos, Singapore, Indonesia and Myanmar before he attends the ASEAN Regional Forum (ARF) meeting in Myanmar.
However, this search for new partners would not be able to compensate for its growing distance from China. There are still expectations that not everything is lost in
China-North Korea relations and it is also not easy for China to fully abandon North Korea. However, Pyongyang’s overture towards Japan is going to be the key and would be most keenly watched in Beijing. If
North Korea crosses the Rubicon, China will have to seriously re-think its North Korea policy.

INDIA AND THE CONFLICT IN GAZA

Ranjit Gupta


The creation of Israel in Palestine was a Western venture to expiate their guilt for their historical ill treatment of the Jews, and, at the time it was finally done, also to implant a permanent base for safeguarding
their own interests for the future in the vital West Asian region. The Western ‘divide and rule’ policies and the arbitrary drawing of boundaries were at the heart of
imperial control of colonised peoples and territories. The legacy thereof continues. Unfortunately, history and international relations are not about fairness but about
the exercise of power in one’s own interest.
Meanwhile, Israel has become fully integrated economically and politically into the international comity of nations. Many non-Western countries, including China
and India, have developed a strong relationship with Israel. The leading Arab country, Egypt, and Jordan have had diplomatic and stronger than merely normal relations with Israel for decades; Turkey had exceptionally close relations with Israel until a few years ago; so did Iran under the Shah; Oman and Qatar have
had quasi-diplomatic relations with Israel; Tunisia and Morocco have had interactions with Israel; several GCC countries, and Saudi Arabia in particular, have
encouraged an increasingly close working relationship between their intelligence services and that of Israel’s, especially over the past three-four years.
The current hostilities in Gaza are essentially a war between Hamas and Israel and not a war between Israel and Palestine; that is how governments of many Arab
countries as well as the Palestinian National Authority are viewing the conflict; and they, not excluding Fatah, are also treating it as an intrinsic element of the current strong confrontation between the Muslim Brotherhood, of which Hamas is an offshoot, and its Arab opponents.
Egypt and Saudi Arabia consider Hamas a terrorist organisation. In strong contrast to each of the earlier such confrontations, except for Qatar’s support, Hamas is politically isolated in the Arab world this time. Another stumbling block is that Hamas does not officially recognise the existence of Israel. The uncomfortable truth is that each of these parties, without exception, is cynically pursuing its own broader geopolitical agenda.
The minimum fundamental requirement for meaningful forward movement on the Palestinian issue, including the lifting of the Israeli economic blockade of Gaza, is
substantive unity amongst the Arabs. The Arab world has enormous financial clout which has never been concertedly used for the Palestinian cause. In the absence of this, the rest of the non-Western world cannot meaningfully pressurise Israel. It is all these factors that have made possible Israel
getting away with the extreme brutality of its current onslaught on Gaza.
This broad brush backdrop must be kept in mind in evaluating India’s policy in relation to ongoing events in Gaza. What is the objective of a foreign policy? It should
primarily be to promote and protect the country’s national interests, national security and national welfare. An important guiding principle must be to avoid taking
stances that will have zero impact on realities on the ground but which could adversely affect important bilateral relationships. Though difficult, emotion and
ideological biases must be eschewed.
The establishment of diplomatic relations with Israel in 1992 was a right decision courageously taken by the Narasimha Rao Government as part of a sorely needed
revamp of India’s economic and foreign policies. Since then, Israel has emerged as a particularly important defence equipment supplier and a multi-sectoral hi-tech
partner of vital strategic significance. However, this has not come in the way of India maintaining excellent relationships with Arab countries in general; and with
the GCC countries, in particular, the latter developed mainly in the past decade and a half. This relationship is in fact India’s most spectacular foreign policy success. Meanwhile, India continues its strong
traditional support for the Palestinian cause consciously, deliberately and rightly. There is no contradiction in simultaneously pursuing these approaches that are
politico-strategic imperatives for India.
In the context of the current crisis in Gaza, India has maintained complete continuity with past stances in relevant international fora and in statements made by the Ministry of External Affairs (MEA). Nevertheless, India’s reactions and policies have come in for strong domestic criticism focused on two counts: first, regarding mention of the use of rockets by Hamas in the MEA spokesperson’ statement of July 10. In 2008, when Israeli retaliatory actions killed 1417 Palestinians in a much shorter conflict, it was mentioned in the MEA
spokesperson’s statement on 27 December, 2008. Both times, these statements accorded factually with observable ground realities.
Another reason for criticism is rejection of a demand for a Parliamentary Resolution; there was neither a demand nor any initiative for a resolution when the UPA
government was in power. It is wrong to politicise issues of national interest. Adopting resolutions on foreign policy issues should be avoided as it does not
promote solutions but only constrains governmental flexibility and options. However, discussions in the parliament should not be prevented. There have been demands to stop buying military equipment from Israel. This would hurt Israel only
marginally but will be an utterly devastating self- inflicted wound on ourselves; and no Indian government has or should consider such an utterly absurd and irresponsible proposal.
India’s stance is highly unlikely to adversely affect relations with important Arab countries as these are based on symbiotic mutually beneficial pragmatism, not
emotion.

THE ISLAMIC CALIPHATE AND SECTARIAN VIOLENCE: RAMIFICATIONS FOR PAKISTAN

Rajeshwari Krishnamurthy


Following the unilateral declaration of an Islamic ‘Caliphate’ in Iraq and Syria, the self-declared ‘Caliph’ Abu Bakr al-Baghdadi, reviling the Shia Muslims as Rafada (rejectionists), announced their campaign
against the Shias of the region. While a lot of it has to do with al-Baghdadi’s imprisonment in an Iraqi prison after his serving time at Camp Bucca, and is more
about political ambition than ideological differences, this has fuelled the already simmering issue of sectarian strife in the delicate societal structures in West Asia.
Repercussions are felt in South Asia, where Pakistan has witnessed similar but more worrisome crises over the past few years. What is the nature of the connection
between the rising Islamist militancy in the region and sectarian violence? Do Islamist jihadists residing in the country fuel sectarian differences and as a result,
violence, or do they merely exploit the existing differences for their benefit? What is the role of the State institutions in this issue? What implications does
this phenomenon hold for Pakistan?
Pakistan’s Sectarian Schism
The anti-Shia nature of Sunni Islamist militants in Pakistan and their regional counterparts stems from the hard-line Sunni Wahabbi interpretations of the Quran and the Sharia law several of these militants learn in the Madrasas along the Durand line – funded by fundamentalists from Saudi Arabia to strengthen the
Sunni wall around a Shia Iran. In addition to the Saudi Arabia-Pakistan nexus, Islamabad’s own paranoia that
Iran might influence its Shia population has led to it not eliminating the hard-line Deobandi militant groups entirely. Furthermore, the sectarian nature of these
jihadist militants does not stop at Shia killings. Other groups, especially the Ahmadiyyas and the Sufis, and some minority Sunni sub-groups, are heavily targeted.
Pakistan: The Role of Sectarianism in the IslamistJihadist Agenda
Although numerous Islamist jihadist groups in Pakistan have varying endgames and work in silos, their agendas converge on various levels – especially as a result of
the origins of their funding sources. Sectarian violence by Sunni Islamist jihadists intensified in 2007, alongside
the rise of the Tehrik-i-Taliban Pakistan (TTP), after a comparatively peaceful period from 2002-2006. The jihadists in an attempt to escape US military strikes started taking shelter in the Federally Administered
Tribal Areas (FATA) in North-western Pakistan. The timeline of the pattern can be traced alongside the leadership of the TTP under Baitullah Mehsud, and later, under Hakimullah Mehsud – whose relationship with the Ahle Sunnat Wal Jamaat helped establish a strong Wahabbi Islamist jihadist network across the country.
There are considerable Shia settlements along the country’s north, western and south-western borders, in Khyber Pakhtunkhwa, FATA, and Balochistan. These areas share international borders with Afghanistan and Iran, where too there are significant Shia settlements.
While there is a back-and-forth movement of Afghan Shias, especially Hazaras from Afghanistan into Pakistan in the north, Pakistan’s Balochistan province borders Iran’s Sunni majority Sistan Baluchestan
province.
The jihadist groups, while generally anti-Shia in character, have a more practical reason to exploit the sectarian schism. Their access routes into Afghanistan,
especially ones via Khurram Agency, pass through Shia- controlled areas, where Shia extremist groups have banded together to fight the Taliban’s anti-Shia campaigns. Sunni Islamist Jihadists from Sistan
Baluchestan often interact with similar groups based in Balochistan.
Sustenance of Sectarian Violence
The escalation of sectarian violence in the Af-Pak border region, and in the rest of Pakistan, finds greater fuel in the Pakistani governance and justice systems than
terrorists alone. The Pakistani State’s Sunni Islamic leanings have muddled the functioning of state structures. Often, investigations carried out following
incidents of sectarian violence are either never thoroughly followed up or are laced with a sectarian bias. The conviction rate of perpetrators and/or aides in such acts is extremely low and as a result, external
actors fund groups within Pakistan to provide solidarity. This results in a vicious cycle of funding for opposing militant groups by entities with vested interests. The
problem intensifies when sectarian organisations findvtheir way into the politics of the country. The increasing
political clout of these actors, coupled with the government’s treatment of terrorist groups as equals during negotiations, has further entrenched the problem.
Sectarian violence in Pakistan is therefore primarily a product of misinformed political manoeuvres than purely
ideology. The Islamist jihadists simply exploit the phenomenon to their benefit.
Bleak Prospects
Unless the Pakistani State takes comprehensive measures to undo the political clout enjoyed by sectarian actors and regulates the funding of the tens of
thousands of Madrasas, sectarian violence will only escalate in the country. Additionally, those battle- hardened Pakistani-origin jihadist returnees of the
Syrian war will try to force their writ in the region, regardless of sectarian definitions, and will bring heavy losses not limited to just religious minorities. The vicious cycle with continue, and the militants’ attempts
to turn Pakistan into a Salafist Wahabbi nation will not only destabilise Pakistan internally, but also fuel ablarger regional instability involving Afghanistan, Iran and
Saudi Arabia. Therefore, given the developments in West Asia, Pakistan, if it seeks stability, must clamp down on
terrorists of “all hue and colour,” especially the ambitious TTP chief Mullah Fazlullah, and the relatively unknown Jaish-e-Khurasan group, to crush Pakistan’s
own Khurasan movement – and in alliance with Afghanistan, weed out those militants hiding in Afghanistan’s Khost, Kunar and Nuristan provinces to escape Operation Zarb-e-Azb.

IRAN-P+5 NUCLEAR NEGOTIATIONS: WHAT'S HOLDING IT UP?

Ruhee  Neog


The six-month interim Joint Plan of Action (JPOA) between the P5+1 and Iran expired on 20 July with the negotiating parties failing to reach an understanding on
a longer-term comprehensive agreement. This was not a shock ending – there was a growing sense, towards the conclusion of the stipulated time frame of the interim deal, that overarching consensus would not be reached by the deadline. The talks have now been extended by four months, and are due to expire by 20 November 2014 – a year since the negotiations first began.
Sticking Points for the Negotiating Parties
One of the primary concerns that have delayed the conclusion of a comprehensive deal is the question of Iran’s enrichment capacity, on which the negotiators have thus far been unable to reach any kind of
consensus. Iran wants to hold on to the 19,000 centrifuges in its possession. It has also repeatedly stressed its need for an enrichment capacity that meets, among others, the requirements for the fuelling of the nuclear power reactor at Bushehr, built by Russia under an Iran-Russia contract. Russia currently supplies the low enrichment uranium (LEU) to fuel the reactor, a job that Iran sees itself taking over once the contract expires in 2021. Significantly, this would require Iran to
increase its uranium enrichment capacity, which could be at cross-purposes with the eventual aim of a comprehensive agreement: to curb the possible
weaponisation element of the Iranian nuclear programme in perpetuity. The P5+1, on the other hand, seek a reduction where Iran desires an expansion.
As it currently stands, Iran has voiced its opposition to reduce the number of centrifuges in existence, a position
that is seen as unacceptable to the P5+1. Continued Iranian maintenance of the Arak heavy water reactor and the uranium enrichment facilities at Fordow and
Natanz as components of the Iranian civilian nuclear programme have also been challenged, and Fordow’s location inside a mountain and therefore fortification
against a potential conventional strike has hardened this position. Although there have been some vocal demands for a complete end to Iranian uranium enrichment as an
end-goal of the comprehensive agreement, it has also been recognised that this would not be politically realistic.
Iran's stand is that it will not forego its right to enrich uranium for peaceful means as promised to it by the NPT (Nuclear Non-proliferation Treaty). This right, used
often and publicly by Iranian statesmen to define their expectations from the P5+1, informs the Iranian approach to the talks and is therefore non-negotiable.
In this light, therefore, a lower capacity for enrichment is being sought. It has been argued that this would be a win-win for Iran and the P5+1. First, it would still allow
Iran to meet the “practical needs” as recognised in the JPOA of its civilian nuclear programme, such as fuel for
the Tehran Research Reactor (TRR), Bushehr, and the four light-water research reactors that Iran has expressed an interest in building. Second, this is expected to extend Iran's “break-out” in the event that
it decides to bow out of the agreement, and enrich uranium to weapons-grade levels for a nuclear bomb.
Additionally, Russia may apparently be willing and able to extend its contract to supply fuel to Bushehr post 2021. Also, as Mark Hibbs of the Carnegie Endowment
for International Peace argues, “Iran has no agreement with Russia licensing the Atomic Energy Agency of Iran (AEOI) to make Bushehr fuel, giving Iran access to the
intellectual property for the design of the reactor core internals, for the design of the fuel assemblies, and for the chemical and physical specifications of the fuel.” If
Russia, given its commercial interests in retaining the contract, is unwilling to hand over fuel supply to Iran, then Iran’s argument for greater enrichment capacity on this basis can be considered invalid.
Since the negotiations began, technical issues were expected to throw a spanner in the works – a misgiving that has since been justified. Recent frustration notwithstanding, this extension provides the necessary space for a stock-taking of where the negotiations stand, what the sticking points are, and how best to
move forward in the right diplomatic direction. Also, this extension should not read as failed diplomacy, and take
away from the good work done so far and the noteworthy achievements made under the JPOA. Most importantly, Iran and the West have met at the negotiating table for the first time since Iranian President Hassan Rouhani led the last (failed) talks in
his former avatar as Iran’s top nuclear negotiator. As starting points go, therefore, the deal itself is a diplomatic breakthrough, and in this give and take, it is hoped that the negotiating parties build on past mileage
by focusing not so much on what is ideal, but what is achievable.

IN CHINA, AN IRRATIONAL INDICTMENT

Ellen Bork


On July 30, Chinese communist authorities
indicted Ilham Tohti, a Uighur intellectual, on charges of separatism, a charge that could carry the death penalty. Tohti was detained in mid-January, and the timing of the indictment seems related to an attack the Chinese authorities claim was carried out by knife-wielding militants in the Uighur homeland, which China calls Xinjiang, near Kashgar. An overseas Uighur group says the violence took place around a protest against Chinese restrictions on the observance of Ramadan.
It is impossible to know what really
happened. China allows no independent
monitoring and little access to Xinjiang, a
large but remote area that is home to China’s Turkic Muslim Uighurs.
Tohti, however, is an open book. He is an
academic economist who focuses on China’s
policies toward its minorities. He is known
for rejecting violence and seeking improved
conditions for Uighurs under Chinese rule,
including by telling the Party how their
policies backfire. Tohti’s daughter Jewher,
now a student in the U.S., testified before a
congressional commission about her father in April.
He is, she said, exactly the sort of person a rational Chinese political structure would seek to engage with in order to address the conditions of the Uyghur people. Instead, by arresting my father and threatening him with charges that carry the severest of penalties it has driven many Uighurs to a point at which they can’t even imagine that their wholly justified grievances can get any sort of a hearing under Chinese rule.
Tragically, for Tohti and other citizens of
China, the Party is not rational when it comes to those who question their rule.
Worse, Beijing’s propaganda about the
Uighurs frequently goes unchallenged. It
would be a full time job to bat down each
and every pernicious Chinese Communist
Party statement about the Uighurs. But not to do so puts the U.S. in the position of
appearing to accept Beijing’s policies. On July 16, the Obama administration hosted Chinese officials in Washington for a
“Counterterrorism Dialogue.” According to a terse official announcement from the State Department, “the two sides noted their
opposition to terrorism in all forms.” In light of China’s depiction of Uighurs’ cause as “terrorist,” the Obama administration should clarify the U.S. definition of terrorism publicly—explicitly excluding non-violent, peaceful speech and association—and refuse cooperation with China so long as it peddles nonsense, and arrests and tries people like Tohti.
Tohti should be released. His treatment will
be a test of how far the Chinese Communist
Party will go to conflate non-violent,
intellectual opposition with crimes that carry long prison terms and even the death
penalty. It is also a test of how far the U.S.
Congress and the Obama administration will go to speak up for Tohti who is, in his
daughter’s words, “an honest, outspoken
dissident.”

DID IRAN SCUTTLE THE CEASEFIRE IN GAZA?

Lee Smith


Ninety minutes into the 72-hour
unconditional ceasefire announced this
morning, Hamas launched a suicide attack in which two IDF soldiers were killed and
another was kidnapped. Word on the ground in Israel is that Palestinian Islamic Jihad, rather than Hamas, may be responsible for the operation. If those rumors prove accurate, some analysts speculate, it would mean that Iran, PIJ’s longtime patron, is behind the operation and is responsible for scuttling the ceasefire.
The reality is that regardless of PIJ’s
involvement, it is virtually certain that Iran
played a large role in this morning’s
operation. Mounting evidence points to the
fact that Hamas’s nearly month-long
campaign, now bracketed by the kidnapping and murder of three Israeli civilians and the killing and the kidnapping of IDF soldiers, was an Iranian project from the beginning.
As Iran analyst Ali Alfoneh noted yesterday,
“Arm Hamas . . . was the main message of
Supreme Leader Ali Khamenei’s speech on
the occasion of Eid al-Fitr, the feast marking
the end of the month of Ramadan.” Support
for Hamas marked a shift in Khamenei’s
rhetoric, as Alfoneh explains. Relations
between Hamas and Tehran have been chilly ever since the two parties came down on different sides of the Syrian conflict, with Iran fully backing its client Bashar al-Assad and Hamas wary of supporting a brutal suppression of their Sunni co-religionists.
But both sides have been trying to mend
relations for some time. Hamas needs Iranian money and arms, and with Hezbollah spread increasingly thin fighting in Syria as well as Iraq, the clerical regime needs to shore up its deterrence against Israel. Hamas’s campaign over the last month was effectively a tryout to
rejoin Team Iran.
As Tony Badran, a research fellow at
Foundation for Defense of Democracies,
explains in an important column for NOW
Lebanon today, Iran and Hamas have been
clearly signaling each other during the
conflict. “After the war broke out,” Badran writes, “senior Iranian officials, including Quds Force commander Qassem Soleimani,
expressed strong support for the leaders of
Hamas and Islamic Jihad. Hezbollah
Secretary General Hassan Nasrallah also
phoned the head of Hamas’s politburo,
Khaled Meshaal, and Islamic Jihad chief
Ramadan Shallah. Iran's relationship with
Hamas has been strained for the past couple of years, so these statements mark a
reinvigoration of the ‘Resistance Alliance.’
The rebirth of the Iranian-led axis provides
the essential ingredient for a new
explanation of Hamas's decision to go to war with Israel.”
The Gaza conflict should come as a sharp
reminder that what we’re watching unfold in the Middle East at present is less a region- wide Sunni-Shiite war but rather a regional cold war where sectarian conflict and the rise of sub-state actors is a byproduct of a larger struggle between real nation states, often fighting through proxies. On one side are traditional American allies or partners like Egypt, Saudi Arabia, United Arab Emirates,
Jordan, the Palestinian Authority and Israel.
This is the status quo camp that wants to
preserve the U.S.-backed order of the Middle East, a task increasingly difficult with the Obama administration all but absent from the region.
Iran and the resistance axis, including Assad, Hezbollah, Iraqi Shiite militias and even Iraqi prime minister Nuri al-Maliki are on the other side. Turkey and Qatar are somewhere in the middle, looking to make themselves relevant, like by backing the Muslim Brotherhood. In the Gaza conflict, Doha and Ankara are acting as Hamas’s lawyers, for instance presenting John Kerry with the pro- Hamas terms for a ceasefire agreement last week. However, their attempts at mediation notwithstanding, Qatar and Turkey are secondary players. Yes, Khaled Meshaal lives in Doha, but Hamas’s political officials aren’t directing the war on the ground. Rather, it’s
in the hands of Hamas’s military
commanders, like Mohamed Deif and
Marwan Issa.
As Jerusalem Center for Public Affairs
research associate (Ret.) Brigadier General
Shimon Shapira told me recently, Iran has
gone over the heads of the politburo officials and reached out directly to the military commanders. If Meshaal can afford the luxury of tending to his garden in his lovely Doha home, it’s different for the
organization’s military commanders that
have to pay and feed men to maintain their
own power on the ground. There’s war in
Gaza because the interests of Hamas’s men in uniform are aligned with those of the clerical regime in Tehran. As Badran writes, the war “was a necessary gateway for Hamas to resume its place in the resistance axis.” The current conflict, Badran concludes, “has served to clarify Hamas’s mission and place on the regional map.” In short, it has returned to the Iranian fold.
The key question then is why did Tehran plot an operation—the abduction of an IDF officer —that was certain not only to scuttle the ceasefire but also further steel Israel’s will, while making it nearly impossible for the Obama administration to restrain the
Netanyahu government? After Israel’s 2006
war with Hezbollah, Operation Cast Lead in
Gaza in 2009, and most recently 2012’s
Operation Pillar of Defense in Gaza, Iran’s
proxies didn’t throw gas on the fire as Hamas did this morning. What’s different this time around?
Insofar as it is a regional cold war, the reality is that Iran’s proxy in Gaza has few real triumphs. Yes, Hamas kidnapped and killed three Israeli teenagers in June. With the assistance of the FAA, it virtually closed down Ben Gurion airport for 48 hours. It also fired hundreds of missiles on Israel and its attack tunnels will feed the nightmares of Israeli officials and parents for many years to come.
To date, some 60 IDF troops have lost their
lives. Now consider the other side of the ledger: The Iron Dome succeeded in deflecting the vast majority of missiles. As of yesterday, the IDF
claimed that 90 percent of Hamas’s attack
tunnel network was destroyed, as was half of its missile arsenal. Further, the IDF assesses that Operation Protective Edge has killed some 1,000 Hamas fighters . Even the
ceasefire presented terms unfavorable to
Hamas, since, among other things, it allowed Israel to continue destroying tunnels. In short, Hamas comes out of the conflict a clear loser. However, the operation this morning represents a tangible victory, a kidnapping that Hamas and its Iranian backers understand from experience will eat at the Israeli public.
The dominant issue however is the strategic
picture. The P5+1 has extended the interim
agreement with Iran until November when it hopes to reach a permanent deal over the
nuclear weapons program. From this
perspective, the war in Gaza is, first, a
delaying tactic meant to get the nuclear issue off the front page. Second, and most
important, it’s a threat: Iran can turn up the
heat around the region, from Iraq to Gaza, at will. The problem for America’s traditional allies is that those hot spots are on their borders—Israel, for instance, now has Iran on three of its frontiers: Lebanon, Syria, and Gaza. An even graver concern for our allies is that the White House still seems incapable of understanding the nature of the regime in Tehran.

DAZED AND CONFUSED

Irwin Stelzer


At last, some good news about the U.S.
economy. Sort of. The government’s Bureau
of Economic Analysis (BEA) reckons the
economy grew at an annual rate of 4 percent in the second quarter of the year (data subject to revision). If that rate continues, five years of a lackadaisical recovery would be replaced
by a growth rate more consistent with past
recoveries. The government also revised its
estimate of a 2.9 percent decline in the
economy in the first quarter to a less-
disastrous drop of 2.1 percent. But hold the
bubbly. Put the quarters together and the
-2.1 percent first quarter combined with the
+4 percent second quarter means that the
tepid growth rate that has characterized the
economy for too long was essentially
unchanged in the first half of the year.
The real question is whether the 4 percent
reported growth rate is a new normal, the
first step on the long road to a rapidly
growing economy, or a one-off fluke. As
always, the evidence is mixed. The bad news is that 1.7 percentage points of the second quarter spurt were accounted for by a build- up of inventories: real final sales of the stuff the economy produced were up only 2.3 percent. In the past, growth based on churning out goods that piled up on retailers’ shelves or in wholesalers’ warehouses has slowed as production was cut back to allow a draw-down of the inventory overhang.
 As one Texas oilman told me in a year in which drilling activity slowed, “You don’t plant ‘taters when you have a cellar full of
‘taters.”
Then there is the role of catch-up. Goldman
Sachs is telling its clients that estimates
suggest that “Catch-up from the effect of
adverse weather in Q1 … added about one
percentage point to Q2 growth.” So the pile-
up of inventories and a one-time offset to
weather-related sluggishness combined to
account for 2.7 percent of the 4 percent
second quarter growth.
Finally, there are several factors creating the oft-cited headwinds that are retarding
growth. Corporate profits are running below expectations. Continued fiscal tightening by the federal government will have a dampening effect on future growth, probably offsetting any increase in spending by state and local governments. And the wave of regulations that the president has unleashed by asserting an expanded version of his prerogatives – using his pen, as he puts it – is driving up energy costs and adding to the uncertainty created by the upcoming mid- term elections, now only 94 days away. That’s a short time for corporate decision makers to hold off investing until they find out whether Republicans will seize control of the Senate and constrain the president’s ability to increase regulatory and cost burdens on private-sector actors.
Add these factors to the uncertainties facing
corporate boards, and it is a surprise that
they don’t rein in spending even more:
· Hamas rockets and terrorist tunnels
aimed at the destruction of Israel,
· Putin’s support of separatists in Ukraine,
and his vision of an expanded New Russia,
· The uncertain effect on European
economies of new sanctions on Russia,
· Still another default by Argentina, and
· The complete collapse of politicians’
interest in reforming our tax structure to
make our companies more competitive with overseas rivals, and our entrepreneurs more willing to risk their capital.
Before returning the champagne to the wine cellar, consider this somewhat cheerier set of facts:
· The BEA revised its estimates of growth in
the third and fourth quarters of 2013 from
4.1 percent to 4.5 percent, and from 2.6
percent to 3.5 percent, respectively.
· Business investment in the second quarter
of this year rose by 5.5 percent after rising a
meagre 1.6 percent in the first quarter.
Policy makers have been hoping that
corporations would replace cash-hoarding
with spending, and they might be getting
their wish despite all the uncertainties listed above.
· Investment in housing rose by 7.5 percent
after two quarters of decline, suggesting that the housing market might be heating up after cooling earlier in the summer.
· Consumers remain cheerful enough to
continue snapping up new vehicles. A
prominent Los Angeles dealer told me his
only problem is that he can’t get enough of
GM’s giant Suburbans to satisfy his
customers’ demand.
· The manufacturing sector expanded in
July for the 14 consecutive month.
Add to this plethora of data what we learned about the job market at week’s end. Some 209,000 new jobs were created in July,
extending the streak of above-200,000 new
jobs to six months, the longest such run since 1997. The unemployment and labor-force participation rates, and the number of long- term unemployed were little changed from levels at the beginning of the summer. Most observers characterized the news on the jobs front as not so hot as to force the Federal Reserve Board to bring forward its plan to raise interest rates in mid-to-late 2015, and not so cold as to compel it to end the gradual reduction of its bond-buying stimulus. A Goldilocks report in the jargon of Wall Street.
The central bank’s monetary policy
committee is now concentrating on selecting from among the many tools in its kit which ones will push interest rates up without aborting the recovery. Investors know an increase is inevitable, but are hoping that with nineteen million Americans either un- or underemployed, the labor force participation rate at historically low levels and wages more or less stuck, Fed chairwoman Janet Yellen, who is extremely sensitive to the social consequences of joblessness, will not bring forward the inevitable tightening. My guess is that the Fed will stick with its mid- or late-2015 date rather than heed the calls of those Fed governors who are arguing that the economy has already achieved lift-off and that the bank should push rates up earlier, perhaps very early in 2015. These dissidents believe Yellen is wrong to believe that faster growth will bring millions back into the labor force, reducing upward pressure on wages and therefore inflation. Instead, the inflation hawks fear that by waiting too long to raise interest rates, the Fed is repeating past errors, and storing up inflationary pressures.
So here is where matters stand after a
confusing, mind-boggling, data-rich week.
The economy is neither as strong as the
headline 4 percent growth rate suggests, nor as weak as the first-quarter 2.1 percent
shrinkage of the economy indicated. The jobs market continues to recover, but at a rate not so rapid as to force the Fed to raise interest rates sooner than it has planned. Some day Yellen will enter a policy meeting humming, “The party’s over, now you must wake up, all dreams must end.” But not for another year.