Aetna pullout highlights pro-corporate, anti-working class character of Obamacare

Kate Randall

Health insurer Aetna, Inc. announced Monday that it will stop selling individual plans on the exchanges set up under the Affordable Care Act (ACA) in 69 percent of US counties and 11 of the 15 states where it has been participating. The move will affect nearly 1 million people across the US, who will have to look for new coverage for 2017.

The Hartford, Connecticut-based company cites mounting losses on the marketplaces of the program commonly known as Obamacare as the reason for the exit, saying it lost $430 million on the Obamacare plans in the first half of 2016.

Aetna, the number three US insurer, is the third major company to drastically reduce its involvement in the ACA exchanges. Earlier this year, insurers UnitedHealth Group Inc. and Humana announced they were leaving many of the state exchanges after posting what they claimed were hundreds of millions of dollars in losses.

The near-exit of these insurers from the ACA is further confirmation of the predatory, pro-corporate character of the entire Obamacare scheme. Even as they are pulling out of the exchanges, they are asking for and receiving gargantuan premium hikes on those policies that remain.

The situation, which potentially spells the collapse of the entire edifice of private, for-profit health insurance policies underwritten by Obamacare, underscores the fact that the program was conceived and implemented not for the purpose of ending the social obscenity of tens of millions going without health coverage in the United States—millions remain without any coverage under Obama’s program—but as a means of slashing costs and boosting profits for health insurers and providers by reducing benefits and rationing care for working people.

The entire program was drawn up by and for the insurers and corporate America as a whole. It places no serious obligations or controls on the profit-bloated insurance giants. There are no federal controls on the profits they make, the premiums they charge or the out-of-pocket costs they impose on policyholders. Whether or not they participate at all is entirely up to them, determined, like all other business decisions, on profit considerations.

On the other hand, ordinary people who are not in government programs such as Medicare or covered by employer-sponsored insurance plans are required to buy plans offered by private companies on Obamacare exchanges. If they fail to do so, they must pay a hefty fine.

The pullback by major companies means that the plans people are required to buy will be even more expensive, with even fewer benefits and even more restrictions on access to doctors, hospitals, tests and drugs. In practice, workers will be forced to buy barebones plans and then self-ration care for themselves and their families.

The Aetna announcement follows decisions by the Justice Department opposing two proposed insurance mergers—between Aetna and Humana, and between Anthem and Cigna. Anthem has indicated that if its merger deal with Cigna is allowed to proceed, it will increase its exchange offerings to nine additional states.

The blocked merger with Humana may very well be a factor in Aetna’s announcement of a large-scale pullout from Obamacare. The insurance giant may view the threat of such a move as a way to exert pressure on the Justice Department in regard to its planned merger.

According to a company statement released Monday, the markets Aetna will vacate include Florida, North Carolina and Pennsylvania. It will continue to sell plans on exchanges only in Delaware, Iowa, Nebraska and Virginia. The move will affect about 70 percent of Aetna customers in individual ACA plans when the open enrollment period begins November 1 for 2017, the fourth full year of the law’s operation.

Aetna said it will sell individual ACA insurance policies in only 242 counties in the four states, compared to 778 counties in 15 states where the company sold Obamacare plans this year. Aetna currently covers some 900,000 people through the ACA exchanges.

Aetna Chairman and CEO Mark Bertolini said there were not enough healthy people purchasing policies on the exchanges to financially offset those with major health problems who require high-cost care.

Under the ACA, insurers are not allowed to discriminate against people with previously existing conditions by charging them more or denying them coverage. But there is no provision that requires insurance companies to participate in the ACA.

While Aetna and other insurance companies claim unacceptable losses on Obamacare, they are posting huge profits overall. For all of 2015, Aetna reported net income of $2.9 billion, up 17.1 percent from 2014. Revenue for the year jumped 4 percent to more than $60 billion.

Aetna reported $726.6 million in net income for the first quarter of 2016 and $790.8 million for the second quarter. The company insured about 23 million people across all insurance sectors in 2015.

Aetna CEO Bertolini received $27.9 million in compensation in 2015, comprised of $24.8 million from stock that vested last year, $1,034,483 in salary, $1.84 million in cash bonuses, and $271,908 in perks, including the use of corporate aircraft.

The news that major players in the US insurance industry are exiting ACA marketplaces comes as insurers are requesting double-digit hikes in their premiums for Obamacare plans. Last Friday, New York authorities finalized a 16.6 percent average premium increase for the individual insurance market in the state. The insurance companies had requested a 19.3 percent hike.

While 16.6 percent was the average, premium increases granted for some New York insurers were far higher: 29.2 percent for Metro Plus and North Shore, 29 percent for UnitedHealthcare of New York, and 89 percent for Crystal Run.

Geisinger Health System in Pennsylvania is requesting a 40 percent rate increase in its insurance sector. In California, the state is reporting a final average rate increase of 13.2 percent, compared to a 4.2 percent hike in 2015 and 4 percent in 2016.

In Arizona, the two largest insurers in the state, Blue Cross Blue Shield (BCBS) of Arizona and Phoenix Health Plans, are requesting premium hikes of 64.9 percent and 60 percent respectively. BCBS of Tennessee, which enrolled nearly three-quarters of the state’s ACA members in 2016, is requesting a 62 percent premium increase for 2017.

Those shopping for ACA coverage in states where there is little competition on the exchanges will be even worse off, a situation that will undoubtedly be exacerbated by the pullout of Aetna, United Health and Humana from the exchanges. The Kaiser Family Foundation estimates that as many as 664 of 3,007 US counties may be served by only a single insurer in 2017, up from 225 in 2016. Many of these counties are in rural areas.

The sticker shock is going to impose increased financial hardship on the approximately 11 million current Obamacare enrollees and those who may look to enroll for 2017. Many of the least expensive “bronze” plans already come with deductibles in excess of $5,000, which must be paid before any coverage, aside from that deemed “essential” services, kicks in.

In an effort to further cut costs, the private insurers have already been narrowing the networks of doctors, hospitals and other providers across all levels of Obamacare plans. They are also increasingly restricting the prescription drugs offered, randomly cutting off access to life-saving drugs for cancer and other serious health conditions.

According to the Department of Health and Human Services, about 45 percent of eligible people who purchase Obamacare plans have incomes between 151 and 200 percent of the absurdly low official poverty line. Only about half of people under age 65 who do not have employer-sponsored coverage qualify for a subsidy.

While government subsidies are available to low-income people, these subsidies are cut off at 400 percent of the poverty level, or about $47,520 for an individual and $97,200 for a family of four, hardly a measure of wealth under conditions of soaring costs for food, housing, energy and other basic essentials.

These working class and middle-income households are either not purchasing plans or purchasing the cheapest plans, which are less lucrative for the insurers. Many young people gamble on not purchasing coverage in the hope that they will not suffer a medical catastrophe in the coming year and their health costs will not outpace the hundreds of dollars in fines they are obliged to pay for not buying insurance. Others who receive a hardship exemption due to poverty dodge the penalty, only to have the “privilege” of remaining uninsured.

The inability of large numbers of people to pay the exorbitant premiums demanded by the insurers is a barometer of the social crisis in America and the growing chasm between the rich and poor. It is an exposure of the Obama administration’s assault on all of the basic social rights of the working class—to decent-paying jobs, housing, education, health care. While the Democrats and Republicans squander trillions on the US military and its criminal exploits abroad, they wage social war against the working class at home.

The Affordable Care Act has nothing in common with near-universal, quality health care, as Barack Obama promised at the law’s inception. The fraud of Obamacare shows the need to put an end to privately owned insurers, hospital and health care chains and pharmaceutical companies and establish socialized medicine under a workers government.

World Bank Group Fellowship Programme for African PhD Holders 2016

Brief description: The Africa Region of the World Bank Group (WBG) is relaunching its fellowship program for Ph.D. students who are Sub-Saharan nationals. The program will increase the diverse workforce that is a priority for the Bank and its clients.

Application Deadline: 30th September, 2016

Offered annually? Yes

Eligible Countries: Sub-Saharan African countries

To be taken at (country): World Bank offices in Washington, D.C. or in a Sub-Saharan country

Eligible Field of Study:  Sub-Saharan nationals who are recent Ph.D. graduates, or current doctoral students within one or two years of completing or graduating from a Ph.D. program in the following fields: Economics, Demography, Applied Statistics and Econometrics, Impact Evaluation, Education, Health, Energy, Agriculture, and Infrastructure.

About the Award: Started in 2013 by World Bank Africa Vice President Makhtar Diop, the World Bank Group Africa Fellowship Program aims to build a pipeline of Sub-Saharan African researchers and professionals, particularly women, who are interested in working in the development field at home or abroad, and in starting careers with the WBG. From the first class of fellows, several have joined the World Bank Group, and others have gone on to pursue promising development careers.

Fellows will get hands-on experience in development work. This includes knowledge generation and dissemination, design of global and country policies and the building of institutions to achieve inclusive growth in developing countries. While benefitting from research and innovation in multiple sectors, fellows will also work on economic policy, technical assistance, and lending for eliminating poverty and increasing shared prosperity. Special attention will be given to work with Fragile and Conflict-Affected States.

Type: PhD Fellowship

Eligibility: Candidates must:

• Be a recent graduate or be enrolled in an academic institution and returning to university after the fellowship
• Be 32 years of age or below
• Have an excellent command of English, both written and verbal
• Possess strong quantitative and analytical skills

Selection Criteria: After submitting an application online, the most promising candidates will be identified, and their application packages forwarded to World Bank Africa Region managers and participating departments for consideration. Departments and managers will then indicate their preferences, as well as the project to be undertaken.

Selected candidates will then be notified and, upon acceptance, will be hired as short-term consultants for a minimum of six months.

Number of Awardees: Not specified

Value of Fellowship: Fellows will receive consultant fees, round-trip economy class air travel to Washington, D.C. or a WBG country office from their university, and worker’s compensation insurance.

Duration of Fellowship: Fellows will spend a minimum of six months.

How to Apply: Application Form

Visit Fellowship Webpage for details

Award Provider: World Bank Group

HEC Paris-Forté Foundation for International Women Scholars 2016

Application Deadline: Rolling.

Offered annually? Yes

Eligible Countries: International

To be taken at (country): France

Brief description: HEC and Forté Foundation are offering scholarship opportunities to exceptional women candidates who understand the added value of an MBA from the University.

Eligible Field of Study: Courses offered for  MBA

About the Award: As part of the school’s partnership with the Forté Foundation, the HEC Paris MBA Program will offer exceptional women significant scholarships per graduating class. By opening educational pathways, the HEC Forté scholarships will help improve leadership opportunities for women in business.

Recipients of the Forté Scholarship are high-quality candidates who meet the school’s standard selection criteria and have demonstrated exemplary leadership skills in:

• Academics
• Team building
• Community work
• Creative activity

Offered Since: Not stated

Type: MBA

Eligibility: Only admitted candidates can apply for this scholarship. Candidates should have demonstrated a commitment to women via personal mentorship or community involvement. Candidates should please note that unfortunately, they cannot apply for this scholarship if admitted after June 15th for the September intake, and after November 26th for the January intake.

Selection Criteria: Essay – “Please explain in 1,500 words why you should be the Forté Scholar at the HEC MBA Program”.

Amount of Award: Variable, up to €15,000

Number of Awardees: A minimum of 3 scholarships for the September intake, a minimum of 1 for the January intake

Duration of Scholarship: Duration of programme

How to Apply: Once admitted into the HEC Paris MBA Program, candidates will have the opportunity to apply for HEC MBA Scholarships. Candidates will receive guidance in applying for a scholarship from the Admissions Officer

Visit Scholarship Webpage for details

Award Provider: HEC MBA School

Foreign Backers Flood Syria

Patrick Cockburn

The Syrian army and its militia allies from the Shia world are preparing a counter-offensive to cut the recently-opened corridor connecting East Aleppo to rebel territory. Syrian and Russian aircraft pound the ruins of this corner of Aleppo through which also runs the main supply road to the government-held west side of the city.

The strengths and weaknesses of all sides in the Syrian war are on show in the present battle. First there was a victory by President Bashar al-Assad’s forces, which cut the enemy’s supply line to East Aleppo on 28 July. But this was balanced within a few days by a rebel success in another part of the city, which shows how equally the two sides are balanced. Claims of decisive victories in local offensives dribble away because neither side can keep up the momentum after initial advances. Each side has a limited number of effective combat soldiers of which they cannot afford to lose too many. The rebels are reported to have lost 500 individuals in their recent offensive.

Each side responds to any setback on the battlefield by asking and getting greater support from foreign backers. In this case, the Syrian government is looking to Russia, Iran and Shia militias from Lebanon and Iraq for reinforcements and air strikes. As they have shown repeatedly since 2011, none of these allies can afford to see Assad defeated and have a great deal riding on his staying in power. They were caught by surprise on 1 August when the rebel umbrella group Jaish al-Fatah, of which the main fighting component is the salafi-jihadi al-Nusra Front, broke through government lines in south west Aleppo. Rebel fighters, numbering between 5,000 and 10,000 men, are supported by Saudi Arabia, Qatar and Turkey. The Syrian army, battered by suicide bombers, retreated and their commander has been sacked.

We have seen this before. The Syrian army has enough combat troops to launch successful offensives backed by airstrikes. But it does not have the manpower to hold fixed position, often manned by soldiers who do little aside from manning checkpoints, harassing civilians and keeping out of danger. This has been a feature of the war since 2012: it is striking how few military units one sees on the roads or even in the front line. This makes each side vulnerable to surprise attack.

Pro-Assad forces are reported to have been reinforced by 2,000 fighters from Lebanese Hezbollah and the Iraqi Shia militias – their military experience, training and morale often making them superior to the regular army. If these units backed by heavy airstrikes cannot regain the small but crucial piece of territory lost earlier this month, it will show that the Assad government is weaker than was thought, but it does not mean that it is anywhere near defeat.

The stalemate in the war is demonstrated by the fact that both East Aleppo and government-held West Aleppo are now under siege. Water supplies are scant and little food can get in from the outside. UNICEF said on 11th August that “two million people in Aleppo are left with no access to running water as fighting intensifies.” Nobody quite knows how many people remain in Aleppo, but there are probably around 250,000 in the rebel half of the city and the rest on the government side.

It is striking how little real change there has been on the ground in western Syria since the end of 2012. This contrasts with the vast but under-populated spaces of eastern Syria where Isis and later the Syrian Kurds have made sweeping advances.

A further factor reinforcing the stalemate in the war is that much of the fighting in Iraq and Syria is conducted on all aides by criminalised warlords with no interest in the well-being or even survival of the civilian population. But such cynicism, while usually realistic, can also be deceptive because it fosters a belief that nobody has a core of firm believers who will fight to the end.

Every fight in Syria takes place in political, sectarian, ethnic and social landscapes so distinct that they falsify generalisations about the course of the conflict. Fabrice Balanche of the Washington Institute for Near East Policy makes the point that “in Aleppo, the major divide between rebels and pro-government factions is not based on sectarian opposition – except for the pro-government Christian minority – but mainly on social class divisions and the historic urban-rural cleavage. Therefore, the chances for an anti-Assad uprising in western Aleppo are non-existent. If the rebels want to conquer the government-held portion of Aleppo, it will be with a hard fight.”

But Balanche remarks that any siege of East Aleppo by the government will be more difficult and prolonged than the eighteen month-long siege of the Old City of Homs. This was held by about one thousand rebel fighters occupying half a square mile of shattered buildings, while in East Aleppo there are an estimated 10,000 rebel fighters holding eight square miles. Moreover, “Aleppo is located in an Arab Sunni area very hostile to the Assad regime” while in Homs the surrounding rural areas were mostly loyal to the regime because they were Christian, Alawite or Shiah and because Hezbollah was able to close the border with Lebanon.

Indigenous factions in Syria are not going to bring an end to the war except by victory on the battlefield and this is a long way off. But the conflict has become progressively internationalised with the US starting its air campaign against Islamic State in September 2014 and Russia doing the same in defence of Assad a year later. Could the geopolitical environment be turning against the rebels after a rapprochement between Russia and Turkey? Turkish support or tolerance has always been crucial for the rebel cause. The meetingbetween Turkish President Recep Tayyip Erdogan and Vladimir Putin on 9 August sparked speculation that Turkey might do a U-turn in Syria, reconcile itself to Assad staying in power and abandon its anti-Assad rebel protégés.

It is not very likely. It is true that Turkey’s policy in Syria since 2011 has been a disaster. It has failed to displace Assad and establish a Sunni regime, but it has opened the door to a Syrian Kurdish de facto state ruled by the local branch of the Kurdistan Workers Party (PKK) against whom Ankara has been fighting a guerrilla war since 1984. Worse, the Syrian Kurds are the main military ally of the US in Syria.

Turkey is likely to be absorbed by its domestic affairs in the aftermath of the failed coup of 15 July. But switching sides in Syria, even if politically feasible, would not necessarily win Erdogan many friends while alienating Saudi Arabia and Qatar. It may be, however, that Turkish capacity and willingness to help the anti-Assad rebels will be more limited in future. The rebels will hope this does not happen and wait to see if they will be rescued by a Hillary Clinton Presidency. More hawkish towards Assad than President Obama, she might shift from giving priority to destroying Islamic State, but more likely she will stick with his policies.

The Solar Transition

Andrew Curry


Although futurists aren’t supposed to make predictions, the notion that our energy system is switching much more quickly than expected from fossil fuels to renewables, and that solar energy will be at the front of that change, suddenly doesn’t seem so controversial. Of course, the speed of the change still matters, certainly in terms of global warming outcomes.

And yet until recently the notion that solar energy would be the leading energy source was a possible future that was, broadly, regarded as impossible.

As Jeremy Williams notes in a recent review of Chris Goodall’s new book, The Switch, at his blog Make Wealth History:

The International Energy Agency didn’t think that solar power would ever be affordable at any great scale, and didn’t include it in its projections. In 2013, George Monbiot wrote that “solar power is unlikely to make a large contribution to electricity supply in the UK.” Goodall himself admits that he didn’t think it had much to offer until very recently.

Or, as Bloomberg put it:

The best minds in energy keep underestimating what solar and wind can do. Since 2000, the International Energy Agency has raised its long-term solar forecast 14 times and its wind forecast five times.

So what’s happened? The answer, in headline form, is in the chart at the top of this post.

Exponential fall

The vertical axes, on both sides, showing costs and installation, are both logarithmic scales, which means that they’re telling us that there’s been an exponential fall in the cost of producing solar PV. It is now the cheapest way to produce electricity in many parts of the world. Even in cloudier and cooler parts such as the UK, the cost of solar is now approaching “grid parity”, at which the cost of solar is the same as the average cost of the overall basket of energy sources for the electricity grid as a whole.

(This is one of the reasons why the vast premium on offer to EDF if it ever builds and runs the Hinkley Point nuclear power station, more than a decade down the line, looks increasingly anachronistic. But that’s a post for another day.)

Now, “exponential” is one of those words that gets bandied about dangerously in futurist cicrles. There are people out there who make a good living as keynote speakers from telling their audiences that the world is speeding up, that change is beciming exponential, and that we poor old humans have only linear, arithmetric brains. At some point in the presentation the lily pond gets wheeled out, or the grains-of-rice-on-the-chessboard parable.

‘It will stop’

I’m sceptical of such broad sweeping claims. The exponential idea is built on the steady progression of Moore’s law over the last 30 years or so; except that this has now stopped progressing. As a futurist, I’m more a fan of Stein’s law (“if something can’t go on forever, it will stop”).

But at risk of seeming paradoxical, I think the world’s experts missed the possibility that solar power might see dramatic falls in cost was because their mental models of technological innovation were wrong. As a result, they didn’t expect any exponential change in cost at any time. They assumed–at best–arithmetic or geometric rates of change.

It’s worth unpacking this, not least because these policy assumptions on the future of solar are expensive mistakes. They mean, with the benefit of hindsight, that investment capital has been misdirected. And even if strategy is about the best assumptions you could have made at the time, there are good reasons to believe that strategy would have been better if the mental models of the analysts had also been better.

S-curves

I think the reason why people get confused about this is partly down to Silicon Valley exceptionalism (“Hey, Moore’s Law!”), and partly from taking a long enough view.

The price/performance ratio of every successful technology follows an S-curve, or logistic curve, and it always looks like exponential growth in the middle.

Source: http://www.gummy-stuff.org/logistic-growth.htm

Engineers tend to understand this better than others. It was Bill Sharpe and Ian Welsh, both ex-HP, who observed to me in 2010 or so that the cost of solar was following a logistic curve that meant it would hit grid parity, even in the UK, around the middle of the decade.

Researchers from the Santa Fe Institute and MIT observed in a paper a couple of years ago that Wright’s Law was the best predictor of this exponential phase. It relates cost to production volumes (whereas Moore’s Law connects price/performance improvements to time). Wright’s Law was formulated in 1936 on the basis of cost curves in aviation development.

The IEEE summary of the research summarised the research this way: The paper

compares the performance of six technology-forecasting models with constant-dollar historical cost data for 62 different technologies—what the authors call the largest database of such information ever compiled. The dataset includes stats on hardware like transistors and DRAMs, of course, but extends to products in energy, chemicals, and a catch-all “other” category (beer, electric ranges) during the periods when they were undergoing technological evolution. The datasets cover spans of from 10 to 39 years; the earliest dates to 1930, the most recent to 2009. It turns out that high technology has more in common with low-tech than we thought. The same rules seem to describe price evolution in all 62 areas.

One other point is worth picking up from the researchers’ abstract (opens pdf):

We discover a previously unobserved regularity that production tends to increase exponentially.

Experience curves

In his book, which I haven’t yet read, Goodall calls this the “experience curve”: as we produce more, costs fall. The Bloomberg article put figures on this:

Every time global wind power doubles, there’s a 19 percent drop in cost, according to BNEF, and every time solar power doubles, costs fall 24 percent.

Solar has doubled seven times in 15 years; wind has doubled four times over the same period.

This looks quite a lot like Wright’s law in action, and like the familiar economics idea of “economies of scale”. There’s a second half as well, which one can call “economies of scope”, in which changes in the price to performance ratio also promotes collective learning as the community around the technology expands and makes connections with related technologies.

This second half of the story is an important part of what’s happening with solar. Battery technology is also making significant improvements as car companies turn their attention to an electric vehicle future, along with the development of other innovative storage solutions for solar-generated electricity.

Cycles of disruption

There’s a further consequence. One of the observations that Bill Sharpe has made to me is that when the price-performance ratio of a technology changes by an order of magnitude (i.e., a factor of 10) then the structure of the industry also goes through a structural disruption. In the case of solar, the first effects of this disruption is being seen in the fossil fuels sector.

Suddently, the majority of new energy investment is going into renewables rather than the fossil fuel sector, the balance sheets of coal companies are weak, and those of smaller oil businesses are starting to look shaky, and the divestment case from coal and oil is not just a moral case, driven by global warming, but a financial case, especially for long-term investors such as pension funds.

Motivating Pakistan to Prevent Cross–Border Terrorism: With a Little Help from Friends

Manpreet Sethi

Not War, Not Peace is a recent publication from the prolific authors George Perkovich and Toby Dalton at the Carnegie Endowment for International Peace. The book seeks to help India find ways of ‘motivating’ Pakistan to give up its cross-border terrorism. As they have correctly inferred, and as Indians have long fretted, “good and ready options for retaliation” are difficult to come by. Undoubtedly, India faces a unique security dilemma in the existence of a nuclear-armed, terrorism-supporting, dissatisfied-with-self nation as its western neighbour. In fact, the predicament is exacerbated by the fact that this challenge encompasses four levels of threats: from the state of Pakistan, from non-state actors backed by the state (Pakistan’ Army and ISI), from non-state actors not under state control, and from the state backed politically and strategically by another state (China).

It is heartening to finally hear some Western scholars join the search with India for the right answers to deal with these issues. In fact, the first happy aspect of the book is the admittance of the fact that Pakistan uses cross-border terrorism as an instrument of state policy. This was never a secret. But, the West had been chary of publicly accepting the reality. So, the good news for India is that what was essentially considered only an Indian problem for decades is now being accepted as a security challenge at a wider international level.

It is also an implicit assumption of the authors that Pakistan is unlikely to give up its support for terrorism, and hence India will face such incidents in the future. Indeed, this is inevitable if Pakistan continues to maintain a strategy that seeks to decimate one kind of terrorist – those that threaten its own interests - while holding onto another that have been cultivated to trouble India. This is an unsustainable strategy. Terrorist organisations have exhibited deep and complex cross-institutional and cross-sectoral linkages and it is not feasible to annihilate some and allow others to proliferate. In fact, today Pakistan is infested with highly motivated terrorist organisations that are as anti-West and anti-India, as they are anti-Pakistan. The country has seen attacks on sensitive high security zones/installations despite all assurances of security.

In such a situation, it is not surprising that Perkovich and Dalton caution India against more attacks and offer assistance by undertaking a cost-benefit analysis of the four possible options before India. These include an Indian response through the use of a proactive strategy led by the Army, response through use of punitive air power, use of covert operations, and use of non-violent compellence through economic and diplomatic means. Their recommendation is for the use of the last approach since it is seen as least escalatory.

To be fair, the Indian response, traditionally, has been largely defensive – better border fencing and better intelligence gathering to foil infiltration, picking up pieces after an attack, and banking on the resilience of the Indian economy and society to carry on. As a nation and a civilisation, India tends to lean towards strategic restraint and does not believe in easy or quick use of force. Since Operation Parakram, military responses were further seen as offering lesser dividends and the focus was clearly on economic growth and development. So it was that even the Mumbai attack in 2011 did not elicit a forceful military response that would have overtly appeared to punish Pakistan. However, one can sense a loss of patience and tolerance with Pakistan’s duplicity, as well as the international community’s loss of patience and tolerance to be taken in by Pakistan’s duplicity.

It is in this context that the book is a welcome change. However, its recommendation that India should follow a calibrated, synergistic diplomatic and economic response to motivate Pakistan’s change of behaviour can only be useful if simultaneously supported by the international community. If influential powers opt to turn a blind eye, continue to pander to Pakistan’s tantrums, or seek to offer it status of ‘normal’ from outside, it would only tempt Pakistan to further exploit the virtues of terrorism shielded by nuclear brinkmanship.

The following set of multi-pronged and multi-directional international responses could serve as a corollary to the option that the book recommends for India. It is imperative that the US and other friends who understand the security challenge posed by Pakistan contribute their bit through the following steps:

a. Reassuring Pakistan that India has no designs on its sovereignty or territorial integrity. Its threat perceptions from India are of its own making. Unfortunately, they serve the purpose of propping up the Army in the domestic power structure. If the Army were to reduce the sense of ‘existential threat’ from India, it would also lose some of its relevance and power. This will not be easy. But if the influential major powers were to question Pakistan’s threat perceptions, it might have some impact by and by

b. Using all leverages to subtly influence the Army mindset into becoming a regular Army servicing a state rather than treating the state as its appendage

c. Reducing military and financial support for Pakistan’s armed forces

d. Reassuring Pakistan that neither India nor the US have the intention nor the capability to disarm Pakistan of its nuclear weapons

e. Communicating to Pakistan that the state will have to take responsibility for acts of terrorism emanating from its soil. Therefore, dealing with all terrorists uniformly is in its own interest. In any case, under UNSCR 1373, the international community is legally bound to respond to acts of terrorism through united action. Sending this message may help to prevent a future act of terrorism

f. Greater sharing of intelligence and coordination of crackdown on terrorist financing, communications etc

g. Assisting constituencies in Pakistan that cherish a different future for the country

h. Refusing to buy into Pakistan’s low projection of its nuclear threshold. Rather, using every opportunity to highlight the lack of military utility of nuclear weapons, and the long lasting impact of a nuclear exchange could motivate Pakistan to adopt a more responsible nuclear strategy.

Pakistan is too complex a case for any one set of responses to work. It is a happy development that two serious Carnegie scholars have discussed Indian responses in a constructive manner. While there would be some differences of opinion on how Indians undertake their own capability appreciation and adversary’s intention analysis, there is no doubt that it is only through a collective churning of thoughts that a problem as vexed as Pakistan can be managed.

GST: Facilitating India’s Domestic, Regional and Global Integration

Amita Batra


After being first suggested by the Kelkar Task Force on indirect taxes over a decade ago, the Goods and Services Tax (GST) is now ready to see the light of day, thus marking a major step forward in indirect tax reform in India; and thereby facilitating India’s business environment and trade efficiency. 

The GST is a single tax, essentially on value addition at each stage of manufacturing, allowing credit of input tax at the previous stage. The single GST will subsume major central and state indirect taxes - including the central excise duty, additional excise duty, service tax, countervailing duty, special additional duty of customs, state VAT, entertainment tax, octroi and entry tax - so that, as multiple taxes and taxation points are replaced, tax payment and compliance will be simplified and transparent. It is expected, therefore, that the GST will not only be revenue enhancing but also capable of eliminating cascading effect. Both producers and consumers are potential beneficiaries of the GST. The former, through ease of movement of goods across states, will benefit from improved logistics performance and scope for consolidating supply chains, and reduced transaction costs; and the latter, through reduced burden of tax translated eventually into reduced prices. Investors and manufacturing enterprises will find doing business to be tax neutral irrespective of its location anywhere in the country. Effectively, the GST will facilitate the creation of unhindered and predictable domestic commodity supply chains in India as also a unified market.

In the international context, the GST induced enhanced ease of doing business and logistics performance is better understood when viewed against the performance of a comparator country set. Of the 189 countries surveyed for the 2016 World Bank for Ease of Doing Business report, India ranked 130th. While this was an improvement of four ranks from India’s ranking from the previous year, there was no change in the rank for the constituent element of ‘trading across borders’ (that includes documentary compliance and domestic transport). It also shows a negative change or a fall from its 2015 ranking vis-a-vis the constituent element of ‘paying taxes’ (indicative of the overall tax environment of an economy that includes, among other aspects, the administrative burden in complying with the processes).

In the South Asian region, India has an overall rank of five among the region’s eight economies, and rank six and four respectively for the two constituent elements of  ‘trading across borders’ and ‘paying taxes’. India has gained by 9.94 per cent with respect to its distance from frontier (measure of best practice), for procedures to start a business. And, the distance of 71.59 per cent in 2016 as against 61.65 per cent in 2015, is higher relative to the regional South Asian average. 

However, of the 14 procedures that are required to start a business in India, as against an average of 7.9 in South Asia and 4.7 in OECD countries, the procedure for registering for VAT online, even though simultaneous with other procedures, takes ten days. As VAT (centre and state) gets subsumed in the GST and as tax implementation calls for a prior IT infrastructure to be in place, not only will the procedures get reduced in number, there will be a decline in time consumption as well.

Multiple taxes and procedures, differentiation across states and taxes makes compliance a complex task for domestic as well as external trade. With the introduction of the GST, almost all these procedural delays and encumbrances are likely to be eliminated, making India’s tax environment more conducive to business and India, a more attractive destination for investment with increased productive efficiency. Overall, the implementation of the GST will contribute to greater supply chain reliability, which is a critical input in a country’s global integration.

Reduced business costs and more efficient manufacturing supply chains can boost Indian exports that have over the past year experienced a downward growth trend. More importantly, the GST facilitated domestic market integration and supply chain predictability can be a major positive development for the ‘Make in India’ initiative. As international trade has slowed post the global financial crisis, logistics performance in the domestic context has acquired greater relevance than border issues in trade. The GST could thus be the innovative step forward for India in evolving its domestic supply chain in these critical times.

India’s domestic economic integration through the GST may also augur well for regional trade integration in South Asia. A more reliable domestic supply chain creates possibilities of India becoming the production and trade hub for South Asia. As South Asian economies struggle with the global growth slowdown and hence subdued demand for their exports, India could provide some succour by facilitating movement of goods within and across the South Asian region. The GST created unified Indian market could be a first step towards visualising the creation of a regional trade corridor.

Of course, the GST Bill creates only an enabling environment for the implementation of tax reform; and there remain political, administrative and infrastructure gaps that have to be appropriately filled for the transition to be complete. However, once this is accomplished, which, given the government’s announcement of a time schedule, is in all probability, likely to be in the next financial year, India will have a better chance of being integrated not just domestically but also in the regional and global economic context.

Rewarding Thugs

Vijay Shankar

On 12 July 2016, a long delinquent inspiration struck key members of the US Congress concerned with terrorism, non-proliferation, and trade. In concluding the hearing of the Joint Sub-Committee of the Committee on Foreign Affairs on “Pakistan, Friend or Foe in the Fight against Terrorism,” the Chairman, Mr Matt Salmon drew an unequivocal inference: “For the record, I personally believe that we should completely cut off all funding to Pakistan. I think that would be the right first step. And then, a State Sponsor of Terrorism declaration.…Right now we have the worst policy that we could possibly have; all we are doing is rewarding thugs.”

 

The experts panel was led by Zalmay Khalilzad, former US ambassador to Afghanistan. His testimony was woven around what the Pakistani strategic calculus was and how its aims were the anti-thesis of the global war on terror; the exposition was substantiated by facts. Pakistan, he said, in the immediate aftermath of 9/11, was coerced into providing support to overthrow the Taliban; this was, at best, backhanded support roused more by survival instincts rather than conviction. Fifteen years and ÚS$14 billion of funding later, Pakistan has shed all pretensions of being an ally in the war on terror and its blatant duplicity stands exposed. Khalilzad surmised “One may conclude now that Pakistan is a State Sponsor of Terror.”

 

Within the Indian security establishment, there has been little doubt that the Pakistani military and intelligence agencies provide the substructure for terrorist operations both in Afghanistan and India. It is also well known that the Lashkar-e-Taiba (LeT) and a host of other jihadists are virtual arms of the Pakistan military and their deployment a cardinal feature of strategy. Former President Musharraf more recently has boasted that Pakistan trains and equips the Taliban and Haqqani Network for operations in Afghanistan; while his military, through the devices of the LeT, Harkat-ul-Mujahidin (HuM) and Jaish-e-Mohammed (JeM), were actively training, bankrolling and stoking the insurgency in Kashmir and terrorism elsewhere. The fact is that the leadership of the Taliban form the Quetta and Peshawar Shura and are located there; while the LeT, HuM and the JeM operate freely between Karachi, Lahore and Muzzaffarabad from where they control terror activities in India. Both are denotive of the extent to which jihadists hold sway within the state of Pakistan.

 

It is apparent that global policy to tacitly accept Pakistan’s deceit and characterise terror groups as ‘good’ and ‘bad’ and then neutralise the ‘bad’ while venturing to reform 'well-disposed' groups (well-disposed to whom, one wonders) has failed. And failure, to a large extent, has been machinated by Pakistan towards preserving what they consider instruments that served them well during the Soviet occupation, current Afghan campaign and insurgency in Kashmir. With Pakistan’s stratagem now laid-bare, the time has come to impose penalties for its perfidy. The irony is that the state continues to believe that they can dupe the world at large, get aid in billions of dollars, while selectively nurturing Islamic terror outfits. The reality, however, is that these very terror organisations have infiltrated every limb of the establishment. Global peril raised by a nuclear state in this form has now become their central bargaining chip for relief, despite the obvious fact that derangement of Pakistan has already occurred! 

 

The recent drone attack on Mullah Mansour in Pakistan, capture of LeT terrorist Bahadur Ali in Kashmir, flagrant inflammatory activities of wanted terrorists Hafiz Sayeed (LeT), Massod Azhar (JeM) and Sayeed Salahudeen (HuM) and Prime Minister Modi’s strategic shift to expose atrocities in Pakistan-oOccupied Kashmir (PoK), Gilgit, and for bludgeoning the Balochistan independence movement provide a pivotal moment to work a change in the UN policy towards Pakistan. India must now direct its diplomatic efforts to bring the US on board (to some extent this is already happening) and then orient its strategic exertions along three prongs:

 

• Politically, orchestrate through the aegis of the UN, isolation of Pakistan from international collaboration and impose sanctions on the military and the ISI in their ability to move freely out of the country through the instrument of a UN resolution specific to that country (on the lines of UNSCR 2255 concerning terrorist threats to international peace and security). 

• On the economic and financial fronts, embargo trade with Pakistan except for humanitarian assistance. Terror financing must be traced and cut (UNSCR 1373). 

• On the military front, action must be stepped up on the targeting of terror leadership and infrastructure. In this context, for Pakistan to be designated as a “major non-NATO ally in the war on terror” is strange; rather, Pakistan must be placed internationally on the list of sponsors of terrorism.

 

Pakistan’s strategic calculus has to be debunked on all counts; particularly the conviction that Afghanistan, with the pull out of NATO troops along with the drawdown of US combat forces, once again provides the space for a return to the “happy-days”. It must not be allowed to thrive under the belief that it can be both the legatee of international largesse and cavort with jihadists. The international community and India have taken some measures to challenge Pakistan; it began with UNSC resolution 1373 in the wake of the 9/11 terror attack which proscribed terrorist organisations, to the more recent UNSC resolution 2255 that identifies threats to international security by terrorism. Blockage of military sales, cutting financial aid, calling to attention atrocities in Balochistan, Gilgit and PoK, increased attacks on terror leadership, are all representative of these measures. In this context, how does one see Pakistan’s all-weather friend China respond? The question ought to be: can China really afford to run with the hare and hunt with the hounds (it appears to be distancing itself from North Korea)?

 

As Indian and US perceptions on terrorism converge and the growing disquiet over Washington’s bottomless and ineffectual aid to Pakistan attains critical mass, India must work vigorously with the USa and the UN to ensure that “thugs,” in fact, are not “rewarded.”

Post Coup Turkey: Implications for Judicial Independence

Samanvya Hooda

The events of the 15 July coup d'etat attempt in Turkey have huge ramifications for the country’s political structure. Nearly 16,000 people have been detained so far, including journalists, prosecutors, judges, school teachers, university heads, and those military members who allegedly orchestrated the coup attempt. It is important to study the incarceration of members of Turkey’s judiciary and its consequences for the country’s political landscape.

Past Friction The judiciary has always played an important role in checking the power balances in the country. When Necmettin Erbakan, a mentor of incumbent President Recep Tayyip Erdoğan showed Islamist tendencies during his prime ministerial term in the 1990s, the military stepped in and deposed him in a bloodless coup. However, it was the Constitutional Court's banning of his Welfare Party, and later sentencing of several party members in the ‘Lost Trillion Case’ that lent this coup a semblance of legitimacy. Erbakan was banned from politics because the Court felt that his policies were in direct contravention to the constitution’s secular underpinnings.

 

Erdogan’s government is also Islamist, and in many ways more than that of Erbakan's, because of the lack of significant opposition to his policies in the country. Experiencing his mentor getting banned from politics using judicial channels has no doubt created in him a certain distrust of the judiciary, and suspicions regarding where their true loyalties lie. This was exacerbated during a December 2013 investigation into corruption, which implicated several individuals in and close to his family along with other senior ministers. This led to the reassignment of 3,750 judges and prosecutors in the country, all of whom showed inclinations towards questioning Erdogan’s authoritarian tendencies. Reasons for this are clear. Erbakan’s dismissal created a certain fear of the judiciary in Erdogan, and an investigation into members of his family was the proverbial last straw.

Post Coup Crackdown and ImplicationsA total of 2,745 judges and prosecutors have been detained/ suspended following the coup attempt.  Attention needs to be paid to the speed with which the government has proceeded with these arrests, as gathering intelligence and evidence on the vast number of people detained or suspended (estimates put the number at 60,000) is not feasible in such a brief period of time. Apart from the tag of ‘Gulenist sympathies’, no evidence against has been forthcoming from the government against most of those accused. This indicates the existence of a pre-prepared list of individuals who oppose Erdogan, and the coup being a perfect opportunity for the government to get rid of them. Senior military officers notwithstanding, it is inconceivable to imagine the large number of schoolteachers, university staff, lawyers and journalists who have been detained based on allegation of having played a role in the coup attempt.

It is evident that apart from the military, Erdogan is also attempting to replace the existing deep state apparatus with one that is more suited to his policies. While a large part of the current rhetoric should be considered an excuse to remove any opposition to Erdogan, the fact remains that Fethullah Gülen still holds a great deal of influence in the country. The old deep state refers to individuals at senior positions in various institutions in the country who are sympathetic towards Gülen and his softer approach to Islamism than Erdogan. They are possibly the points of opposition to Erdogan, as they disagree with the latter's many conservative and authoritarian leanings. Erdogan made use of this to garner support for himself while the two were still allies, and now views it as a hindrance.

By replacing this perceived deep state, which includes actual Gulen supporters as well as individuals who disagree with his policies, Erdogan has removed certain obstacles to his pursuit of more executive power. Seeing as he has absolute power over the ruling Justice and Development Party (AKP), he does not have any opposition to his policies from within the executive. The AKP currently holds 317 seats out a total of 550 in the country's unicameral legislature, with the sole sizeable opposition controlling only 133 seats. By purging the judiciary of his opponents and creating his own deep state, he has ensured very little separation of power in the country leaving him with near-absolute power in all three branches of government. Because of the fear and wide-scale crackdown on various public sector employees, it is unlikely that he will face opposition from other sectors as well.

Erdogan has made no secret of his desire to shift the Turkish form of governance from parliamentary to presidential. A part of the executive powers involved include control of the legislature, and the power to appoint half the members of the higher courts. The new deep state in Turkey is now equipped to push the country towards this goal.

However, one must not forget a crucial aspect – Erdogan enjoys huge popular support, especially in the rural areas. For all his authoritarian leanings, he and the AKP have been voted into power consistently, always with sizeable majorities. It is important to take this into consideration while studying Turkey’s political landscape because it involves an individual with vast popular support, who, by  promising to purge the country of the ‘virus’ behind the coup, is slowly moving the country towards a quasi-dictatorial form of governance. He can now do this with no significant opposition, and with a new deep state that is loyal to him alone.

Russia: The New and Unexpected Power Broker in West Asia

Ranjit Gupta

In sharp contrast to the Soviet Union, post-Cold War Russia, completely preoccupied with rebuilding domestically both in the economic and political domains, was determined to establish a good relationship with the US and disinclined to challenge US policies and presence even in Europe, let alone in West Asia or other parts of the world, until well into the Putin era. In fact, in its first decade as the new Russian Federation, its role and relevance in West Asia reached a post-World War II low. But as a proud nation and one of two erstwhile global superpowers, Russia had no intentions of remaining a nonentity in global geopolitics. Its veto power in the UN Security Council ensured that it could not be entirely disregarded while it bided time patiently.

The manner of US' dismantling of the Taliban regime and later that of Saddam Hussein following the unilateral US invasion and occupation of these countries, exacerbated the radicalisation of increasing proportions of the populations of Islamic countries on the one hand and contributed to significantly exacerbating sectarian tensions within Islamic societies on the other. Ultimately, the consequences of these particular US policies, and those of Turkey and Saudi Arabia too,finally opened the door for the now hyper-nationalist Putin-governed Russia to make a dramatic re-entry and emerge as the new and unexpected power broker in West Asia. History is more often than not an account of unexpected and unintended consequences of events and policies, the significance of which emerges only in hindsight.

The Saudi-Iran standoff in West Asia has never been as bitter and hostile as today. The wars in Syria and Yemen are essentially proxy wars between Saudi Arabia and Iran for regional supremacy. Syria has been Iran’s foremost ally ever since the Islamic Revolution in 1979. An internal NATO draft report entitled ‘Regional and Global Implications of the Syrian Civil War: What Role for NATO? (August 2014) had characterised the war thus: “The struggle for the future of the Middle East is being played out in Syria. The Syrian conflict has transformed over the last four years from a local to a regional to a global conflict.”

Russia’s longest-standing relationship in West Asia is with Syria, having begun in the mid-1950s with arms supplies. President Hafez Assad elevated it to a strategic alliance by granting the Soviet Union a naval base at Tartous. His son and successor, President Bashar al-Assad, consciously maintained this alliance even as Russian power and standing was in precipitous decline. As the war in Syria got fully under way, Russia adopted a dual track approach: to help Assad meet the military challenge of a particularly formidable coalition, apart from continuing to supply modern weaponry in ever increasing quantities, Russia (along with China) vetoed punitive Resolutions on Syria in the UN Security Council four times; given what Western countries did in Libya these Russian actions provided an essential lifeline for the survival of the Assad regime. But from the beginning, Russia also consistently supported efforts of the UN Special Envoy for Syria and talks under the auspices of the UN. After the use of chemical weapons in Syria in August 2013 and Obama resiling from his previously publicly announced commitment to take punitive action against the regime in Syria if such an event occurred, a Russian diplomatic initiative resulted in the peaceful dismantling of Syria’s chemical weapons programme, sending out a clear message that supposedly intractable problems can be resolved peacefully.

Obama had voted against Bush's war in Iraq; despite increasing domestic criticism and from longstanding allies in West Asia, as President, Obama steadfastly refused to permit significant US involvement in new wars and conflicts in Arab and Muslim countries. Obama also abandoned long-standing US demonisation and marginalisation of Iran, reaching a historic nuclear deal with it in a negotiating process in which Russia was proactively involved. Iran is now poised to play a leading and significant role in West Asia and Russia’s strong relationship with Iran becomes another strengthening factor in enhancing Russia's future role in West Asia. Long-standing US regional Sunni allies regard Obama's policies as treacherous betrayal. However, rather perversely, the net effect of Obama’s well-intentioned policies has been that US ability to influence ground realities and its prestige and standing in West Asia are today at a historic low.
Taking the fullest advantage of these new ground realities in end September 2015, Russia took the world by surprise by robust military involvement in Syria, its first ever direct combat involvement in West Asia, to prevent any possibility of the Assad regime being defeated. The existing naval base at Tartous was strengthened and a new state-of-the-art airbase was established at Hmeymim near Latakia and the Turkish border. Russian military involvement has transformed the war decisively in favour of Assad and he cannot now be defeated militarily; at the same time, Assad cannot remain in power without continuing Russian (and Iranian) support. Meanwhile, given the many high profile, high casualty Islamic State (IS) terrorist attacks in Western countries, defeating the IS has acquired far higher priority for the West than Assad’s removal. Russia is now also conducting increasing and particularly effective airstrikes against the IS too. Earlier this month, Syria and Russia agreed to make the Hmeymim facility a permanent fully-operational, full-fledged military base equipped with vast advanced weaponry, clearly indicating Russia's intentions to remain substantively involved in West Asia in a major way for the long-term.
Russia will now be playing the pivotal role in how the future evolves in Syria; indeed in how the strategic landscape of West Asia will be determined.
Russia is being courted by the region’s most powerful and prominent countries: Egypt, Israel, and Turkey. President Sisi has has paid three visits to Russia since he became president. The two countries have signed a US$3.5 bn arms deal. Russia will construct Egypt’s first nuclear power plant; Sisi publicly expressed full support for Russian intervention in Syria when it began. Prime Minister Benjamin Netanyahu has also commended Moscow's efforts in Syria while making his third visit to Russia since Russia began its military intervention in Syria. Despite being a NATO member and an aspirant for EU membership, Turkey's relationship with the US and the EU is in tatters, at least for the immediate future. It was no surprise that Erdogan’s first post-coup visit abroad was to Russia and a re-establishment of the past very robust economic relationship has been agreed upon. In a significant policy U-turn, Turkey is likely to also abandon its ‘regime change’ project and leave Assad’s fate to future internationally monitored elections and a new commitment to be a fully proactive participant in the war against the IS. However, none of these three countries intends to abandon their traditionally strong bilateral security relationships with the US while fully accepting strong Russian involvement in West Asia. US Secretary of State John Kerry has visited Moscow four times in the past year and met his counterpart Sergey Lavrov a dozen times at various multilateral fora to coordinate their common war against the IS and al Qaeda affiliated Jabhat al-Nusra. Russia’s role is now widely regarded as being constructive and helpful rather than destabilising. Despite serious differences particularly in relation to Syria, even Saudi dignitaries have been visiting Moscow: the powerful Deputy Crown Prince and Saudi Defence Minister Mohammed bin Salman in June 2015 and Foreign Minister in August 2015 while King Salman and President Putin met on the margins of the G20 Summit in Antalya in February 2016. They are in a continuing dialogue over oil production levels and pricing issues. Russia has never enjoyed such standing and leverage in West Asia in the past.