China and Japan’s Simmering Rivalry

THE GREAT ILLUSION

China and Japan, the giants of Asia, account for nearly three-quarters of the region’s economic activity and more than half of the region’s military spending. Despite their deep economic ties and a doubling of their bilateral trade in the past five years, their relationship is increasingly strained, with dangerous implications for the United States and the world at large.

Historically, relations between Japan and China were clearly structured. One country was always more prosperous or powerful than the other. Before the nineteenth century, China was usually dominant; since the Meiji Restoration, in 1868, Japan has generally been preeminent. The prospect that China and Japan could both be powerful and affluent at the same time has only recently emerged, largely because while China’s economy and influence have grown rapidly, Japan’s have remained stagnant. China has nuclear weapons and intercontinental ballistic missiles, and its military budget has grown by double-digit rates for 17 consecutive years. Although Japan has a relatively low military profile, with its “no-war” constitution and strong alliance with the United States, its defense-relevant technology is sophisticated and it has recently become more proactive. The stage is now set for a struggle between a mature power and a rising one.

Some liken current Sino-Japanese relations to the Anglo-German rivalry prior to World War I. As with the United Kingdom and Germany a century ago, the contest for regional leadership between China and Japan today is creating new security dilemmas, prompting concerns over Chinese ambitions in Japan and fears of renewed Japanese militarism in China. Both states are adopting confrontational stances, partly because of rising popular involvement in politics and resurgent nationalism exacerbated by revived memories of World War II; mutually beneficial economic dealings alone are not effectively soothing these tensions. Fluid perceptions of power and fear, Thucydides observed, are the classic causes of war. And they are increasingly present in Northeast Asia today.

PAIR OF RIVALS

Many contentious issues confront China and Japan. Among the most pressing is their thirst for energy. Japan depends on imports for 99 percent of its oil and natural gas; coastal China is similarly bereft of resources. Thus, the offshore oil and gas fields under the East China Sea are attractive “domestic” sources of energy for both Beijing and Tokyo — and both have laid claim to them. China argues that the entire East China Sea continental shelf, extending eastward nearly all the way to Okinawa, is a “natural prolongation” of the Chinese mainland. Japan has declared its boundary to be a median line between its undisputed territory and China — a line that runs roughly 100 miles west of the Okinawa Trough, which lies undersea just west of Okinawa and is where the richest petroleum deposits in the area are believed to be concentrated.

The conflict began escalating in May 2004 when China started serious exploratory operations in the Chunxiao gas fields, only four kilometers from the median line. Actions by both parties have since raised tensions. In November 2004, a Chinese nuclear-powered attack submarine intruded into Japanese waters near Okinawa for more than two hours, ostensibly by accident. Since the spring of 2005, the number of flights into disputed airspace by Chinese military surveillance aircraft has risen to record levels. In May 2005, Japan’s Ministry of Economy, Trade, and Industry (METI) authorized Japanese companies to explore contested areas for natural gas. On the eve of the Japanese elections in September 2005, Chinese warships patrolled near the now-active Chunxiao fields. In response, both Japan’s ruling coalition, led by the Liberal Democratic Party (LDP), and the opposition Democratic Party of Japan (DPJ) have prepared bills proposing to protect the operations of Japanese drillers and fishermen in disputed waters — by force, if necessary.

The Korean Peninsula and the Taiwan Strait also present challenges for the Sino-Japanese relationship and for regional stability. Since the Pyongyang summit in June 2000, trade between South Korea and North Korea has grown by 150 percent, cross-border tourism has boomed, railway lines across the demilitarized zone have been reconnected, and a special economic zone in the peninsula’s ancient capital of Kaesong, now in North Korea, has begun to flourish with South Korea’s backing. As the likelihood of inter-Korean conflict declines, the long-term rivalry between China and Japan for influence on the peninsula may be rekindled — a rivalry that helped spark the first Sino-Japanese War, of 1894-95. Unification or reconciliation could also deepen the sense Japan has that its position in Northeast Asia is under siege. Were the military forces of North Korea and South Korea to be combined, they would number close to ten times those in Japan’s Self-Defense Forces (SDF).

Like the Koreas, Taiwan and China have grown more intertwined economically. According to most estimates, investment across the Taiwan Strait now totals over $100 billion. More than 70 percent of Taiwan’s foreign investment went to the mainland in 2004, 10 percent of Taiwan’s labor force works in China, and four Taiwanese-owned firms are among the mainland’s top ten exporters. (Taiwan now trades substantially more with China than it does with the United States.) There have also been signs of an emerging political dtente between Beijing and Taiwan’s opposition parties: Lien Chan, chair of the Kuomintang Party (KMT) that Chiang Kai-shek led to Taiwan at the end of 1949, went to the mainland in April 2005, where he visited his ancestors’ graves and the former KMT capital of Nanjing and met with China’s president, Hu Jintao. Meanwhile, both countries’ military capabilities have increased. China has deployed dozens of submarines and frigates, 800 short-range missiles, over 1,200 fighter aircraft, and tens of thousands of troops along the Taiwan Strait. Taiwan has countered by deploying its own missiles and nearly 300 top-of-the-line fighter planes, mainly U.S.-built F-16s.

Beijing’s military buildup has implications for Tokyo: the missiles China has aimed at Taiwan could easily reach Japan’s main islands as well as Okinawa, where 70 percent of U.S. defense facilities in Japan, including the indispensable Kadena Air Force Base, are located. Both U.S. and Japanese defense specialists thus view neutralizing this potential threat as a vital goal. The United States and Japan will conduct missile tests in Hawaii during the spring of 2006 to establish the efficacy of ballistic missile defenses. If a missile defense system were deployed, the U.S.-Japanese alliance’s capabilities would be enhanced — and Beijing would be alarmed by the weakening of its relative position. The issue is therefore emerging as yet another area of controversy in Sino-Japanese relations.

As Sino-Japanese tensions increase, it is becoming more and more likely that Japan will revise its constitution in ways that will allow the SDF greater freedom of action, even as other nonmilitary reforms are achieved as well. (The constitution, written in 1947, limits the SDF to a narrowly defensive role.) Beyond the regional tensions themselves, important long-term structural changes in Japanese politics are at work: the combined socialist and communist representation in the Diet has fallen from 14 to 3 percent over the past decade, leaving the conservative LDP and its coalition partner with the two-thirds majority needed to begin amendment of the constitution and leaving the left with only 16 of 480 seats in the Diet’s dominant lower house. The recent ascendancy of defense hawks in the DPJ has also amplified the left’s collapse.

The current LDP draft amendment, published in October 2005, would retain the historic Article 9, which states that “the Japanese people forever renounce war as a sovereign right of the nation.” But the proposal would also clearly legitimate the SDF (an institution whose role has been constitutionally ambiguous); clarify Japan’s prerogative to participate in collective self-defense, the linchpin of the security cooperation between Japan and the United States; and simplify procedures for amending the constitution in the future. This procedural change could further exacerbate Sino-Japanese tensions by increasing uncertainty regarding Japan’s future rearmament.

THE NIGHTMARE OF POLITICIZED HISTORY

The prospect, however distant, of Japanese remilitarization has a disturbing historical resonance in the region. Although World War II is more than a half century in the past and Japanese expansionism in Asia dates back another half century still, this history continues to haunt relations between Japan and China. The War of Resistance Against Japan, as the Chinese call their version of World War II, lasted more than twice as long as Japan’s conflict with the United States; it had already been raging for more than four years when Japan attacked Pearl Harbor. By the time the war ended, it had caused far more casualties and atrocities than had the bitter struggle between Japan and the United States.

The debate over the war’s legacy remains volatile, hindering efforts at cooperation. There have been occasional signs of progress: Japan’s emperor, Akihito, whose father reigned during the conflict, visited Beijing in 1992, for example. Sadly, however, the situation has worsened lately, although generational change might have been expected to bring greater prospects for reconciliation. In China, the legitimacy of the Chinese Communist Party (CCP) is bound up with its perceived role as the stalwart defender of national interests during the war with Japan. The deference the party derives from that legacy grows ever more important to sustaining its rule as social inequities resulting from economic growth increase. Government policy, reflecting CCP concerns, promotes nationalist curricula in schools and intensive broadcasting of accounts of the war. The Internet has facilitated the expression of nationalist sentiments. In the spring of 2005, 44 million Chinese signed an electronic petition opposing Japan’s quest for a permanent seat on the UN Security Council.

Positive sentiments toward China among the Japanese have also declined dramatically. According to polls conducted by the secretariat of Japan’s cabinet, in October 2005, only 32 percent of respondents felt warmly toward China, down from 38 percent in 2004 and 48 percent in October 2001 (just after Japanese Prime Minister Junichiro Koizumi’s only visit to China so far while in office). During the 1980s, before the massacre in Tiananmen Square, similar polls reported that more than 75 percent of respondents had positive feelings about China. The dramatic hardening of sentiment toward China is clearly a reaction to anti-Japanese demonstrations in China, as well as to China’s military actions, including the nuclear submarine intrusion into Japanese waters in November 2004.

Five times in four years, Koizumi has visited the Yasukuni Shrine in Tokyo, a memorial where the names of the fallen of Japan’s wars are enshrined — including 14 convicted Class A war criminals from World War II. Only two other sitting prime ministers in the past twenty years visited the shrine at all, and each only went once. In Japan, opinion over Koizumi’s visits to Yasukuni is almost evenly split, with six former prime ministers and five of Japan’s six largest newspapers opposing them. But the dominant Mori faction of the LDP, to which both Koizumi and the influential chief cabinet secretary, Shinzo Abe, belong, has strong connections to Japan’s political leadership of the 1930s and 1940s. (Abe, for instance, is the grandson of Nobusuke Kishi, a member of Prime Minister Hideki Tojo’s wartime cabinet; Kishi’s legacy remains controversial even though later, as prime minister, Kishi began Japan’s policy of providing large-scale reparations to Southeast Asia.) Such ties make the Koizumi government prone to holding conservative conceptions of national interests and render it more suspect than its predecessors in the eyes of many Asians, including the Chinese.

Koizumi has consistently stressed the personal and unofficial nature of his visits to the Yasukuni Shrine. Beijing has nevertheless criticized them sharply. Seasoned U.S. diplomats suggest privately that the Yasukuni issue is more damaging to Japanese regional influence now than it was even two or three years ago, because China is emerging as a skilled diplomatic player that can use the history card more effectively to marginalize Japan than previously due to its growing political and economic clout. Two months after the February 2005 U.S.-Japan Security Consultative Committee meetings, at which Washington and Tokyo decided to make a priority of peacefully resolving Taiwan Strait issues, major demonstrations broke out in Beijing and Shanghai against Koizumi’s Yasukuni visits and the standard depiction of the war in Japanese textbooks (which the Chinese see as downplaying Japan’s culpability for the conflict). Many observers note that Beijing has particularly strong incentives to prevent any strengthening of the U.S.-Japanese alliance on Taiwan-related matters. And China, claiming that Japan has not sincerely atoned for its wartime aggression, has also used the issue to hinder Japan’s bid for the permanent UN Security Council seat that many feel it richly deserves (Tokyo, after all, funds 20 percent of the UN budget, compared to China’s 3 percent).

Whatever the personal or political rationale for Koizumi’s visits, Yasukuni is a flashpoint for widespread, if often ill-informed, international misgivings about Japan’s foreign policies, misgivings that erode the regional and global effectiveness of Japanese diplomacy. The visits make it difficult for leaders in both Japan and China to manage bilateral economic and security relations; hurt Japan’s ability to take proactive diplomatic steps (for instance, by preventing Tokyo from taking a leadership role, amply justified by its capabilities, in regional energy and environmental cooperation); reduce Japan’s leverage with third countries, such as Russia, that may care little about the visits themselves but care about tensions between Japan and China, with which they do business; and divert Japanese public attention from the serious security issues looming over Northeast Asia. There is a danger that, down the road, Japan could find itself increasingly isolated diplomatically from other countries in the region. Coupled with the security challenges that Tokyo faces, such a situation could drive Japan toward counterproductive unilateralism or an overly militarized variant of the U.S.-Japanese alliance. Either outcome would greatly intensify regional tensions.

CONFIDENCE BUILDING

The United States has a crucial role to play in easing the tensions between Japan and China. Rather than prescribing specific solutions for every problem, the U.S. approach should continue to be what it has been since the mid-1980s: reaffirming the importance of the U.S.-Japanese alliance while encouraging Japan and China to develop a dialogue of their own.

The United States’ long-standing alliance with Japan has been the pillar of U.S. policy in the Pacific for over half a century. Much has been achieved over the past decade on the military side of the relationship, including operational planning since the late 1990s for emergencies in “areas surrounding Japan,” as opposed to Japan itself. Since the attacks of September 11, 2001, the SDF has extended its area of operational responsibility to the Arabian Sea, and in January 2004 Japan sent troops to Iraq. In December 2005, Chief Cabinet Secretary Abe announced Japan’s decision to begin developing a next-generation missile interceptor with the United States.

Increasingly close bilateral defense relations have not, however, generated equally strong grass-roots support. Many Japanese appear uneasy with U.S. policies on Iraq, military transformation, host-nation support, and the environment, even as they are frustrated by seemingly lukewarm U.S. support for Japan’s aspirations to become a permanent member of the Security Council. These undercurrents showed up in a revealing December 2005 Yomiuri-Gallup poll: although 76 percent of U.S. respondents said they trusted Japan, 53 percent of Japanese said they did not trust the United States, 43 percent said they felt that the U.S. military presence in Japan should be reduced, and 27 percent characterized U.S.-Japanese relations as bad.

Clearly, more should be done to deepen the bilateral U.S.-Japanese partnership, with special sensitivity to the complex economic and security issues raised by the rise of China. A bipartisan U.S.-Japanese task force consisting of both countries’ best specialists on trilateral relations is needed. The model could be the Japan-United States Economic Relations Group (which brought together prominent businesspeople and academics of both nations to consider long-term economic and security issues) of the late 1970s. Such a step would help consolidate support for the alliance by making it more responsive to broad national sentiments and less tied to parochial interests.

Once the alliance between Tokyo and Washington is consolidated, the best way to defuse the rivalry between China and Japan would be to increase multilateral contacts, both through official mechanisms and through unofficial relations among nongovernmental actors (“Track II”). Enhancing trilateral cooperation among China, Japan, and the United States, especially regarding energy policy, should be a priority. Together, the three countries account for over 40 percent of the world’s energy consumption, and they are the three largest oil importers, making their cooperation especially vital. Japan could take a useful step by creating an “energy and environment exception” to its contemplated 2008 termination of development assistance to China, possibly including a provision for U.S.-Japanese-Chinese energy cooperation. The United States, Japan, and China should also form the core of a new North Pacific Regional Energy Consortium, to focus on improving energy efficiency, particularly in China (which currently operates at 40 percent of the United States’ efficiency levels and 11 percent of Japan’s). Measures such as these could be a balm for the greatest sore in the region, the spiraling rivalry across the East China Sea. Given rising strategic dangers and political uncertainties, a broad Northeast Asia Strategic Dialogue involving China, Japan, the United States, and others is also needed. Such a body could be a spin-off of the existing six-party talks over North Korea’s nuclear program (which include China, Japan, North Korea, Russia, South Korea, and the United States), omitting North Korea if necessary. The group’s creation should be supplemented by confidence-building measures such as a Sino-Japanese military-to-military dialogue and multilateral contingency planning for disaster-relief activities. Multilateralism keeps nationalism in check, as has been demonstrated by Europe’s experience with the Organization for Security and Cooperation in Europe, which provides the continent with a regional security framework.

To improve Sino-Japanese relations, the two countries will also have to stabilize their bilateral policies and cultural networks. During the period between the normalization of relations between Beijing and Tokyo in 1972 and the advent of the Koizumi government in 2001, Sino-Japanese networks were relatively vigorous, particularly those involving the political heirs of former Japanese Prime Minister Kakuei Tanaka (who presided over the normalization). But they have atrophied over the past five years. There have been no full-scale Sino-Japanese summits since mid-2001, and the crucial networks of midlevel bureaucratic coordination have badly frayed. The quiet yet devastating process of generational change has also been a corrosive factor. Veteran statesmen from both China and Japan who really knew the other country and its importance, such as Zhou Enlai, Deng Xiaoping, former Japanese Prime Minister Noboru Takeshita, and former Chief Cabinet Secretary Hiromu Nonaka, are now gone. From a Japanese perspective, it would be sensible to resume ministerial-level dialogues on finance, trade, and energy as well as to reinvigorate networks with China by appointing as ambassador to Beijing a heavyweight political or business figure with strong personal ties to both the United States and China. China has already made a gesture of this sort by naming the well-regarded (and Japanese-speaking) former vice minister of foreign affairs, Wang Yi, ambassador to Tokyo.

Track II conferences about history (especially World War II), involving academics from neutral countries such as Canada as well as Asian specialists from within the region, could improve relations by fostering less-politicized discussions of the war. Germany and Poland, as well as Japan and South Korea, already have joint textbook commissions that could serve as models for China and Japan. An initiative such as this could be particularly effective at de-escalating tensions in the wake of progress in the strategic dialogues outlined above. To help those dialogues along, moreover, U.S. officials should refrain from making casual pronouncements on the delicate matter of wartime commemoration in Japan. As Koizumi has noted, many personal issues are involved in such events. The Japanese people themselves, however, deserve the broadest possible range of options about how to remember the war. For several years, there has been spirited discussion about building a national secular war memorial to supplement Yasukuni, and this deserves serious consideration. Such a model has worked well in both Hiroshima and Okinawa. Apart from providing a way to commemorate the sacrifice of civilians and other heroes of past conflicts not enshrined at Yasukuni, a secular memorial would clearly help improve Japan’s relations with other countries in the region and provide foreign leaders with a way to gracefully honor the past sacrifices of the Japanese people.

The United States should encourage regional cultural communication as well. In many areas, such an approach will be far more effective than official action, given the importance of personal networks in Asia. Using mechanisms such as the State Department’s International Visitors Program to bring to the United States Japanese and Chinese experts who specialize in the other country’s affairs could help create new intellectual networks and generate specific ideas for improving trilateral relations. Informal groups and more formal deliberative forums, such as congressional hearings, should address the deteriorating Sino-Japanese relationship, which is the storm center of the political and military crisis in Northeast Asia. Such discussions could also usefully consider the diplomatic implications of the Yasukuni issue in addition to pressing security concerns such as China’s military buildup.

Change in Japan’s policy toward China ultimately must come from within. It is unlikely that any significant shift in foreign policy can be made while Koizumi remains in office. He is locked into his positions, such as his promise to go to Yasukuni annually, and it would be difficult for him to escape such pledges, particularly in the context of continuing geopolitical challenges in Northeast Asia. A window of opportunity could well open this September, when Koizumi is scheduled to leave office. Japan’s new leader will have opportunities to innovate pragmatically in relations with Beijing without being seen to knuckle under to Chinese influence — by resuming summit meetings between Japan and China, reinvigorating energy and environmental dialogues, exploring the concept of a secular war memorial, and tacitly refraining from visits to Yasukuni, even as he or she comprehensively strengthens relations with India, Australia, and the Association of Southeast Asian Nations (ASEAN) and takes a hardheaded approach to deepening security concerns. Such actions would enable Japan to take the diplomatic high ground and allow both Japan and China to focus on the very real challenges of stabilizing their relationship, less distracted by the peripheral yet politically contentious issues of history.

Stabilizing the Sino-Japanese relationship is crucial for both the region and the world. Doing so is a matter primarily for China and Japan, but there is an important role for the United States as well. The United States must honor its vital alliance with Japan. Yet it will also have to transcend its “hub and spoke” diplomacy and recognize that many issues need multilateral treatment. If it can do so, the United States will indeed be the “essential power” in Asia, as its diplomatic rhetoric has so often claimed.

Kent E. Calder. Foreign Affairs. New York: Mar/Apr 2006.Vol.85, Iss. 2;  pg. 129

Iraq: Learning the Lessons of Vietnam

SETTING THE RECORD STRAIGHT

Richard Nixon was elected in 1968 on the assumption that he had a plan to end the Vietnam War. He didn’t have any such plan, and my job as his first secretary of defense was to remedy that — quickly. The only stated plan was wording I had suggested for the 1968 Republican platform, saying it was time to de-Americanize the war. Today, nearly 37 years after Nixon took office as president and I left Congress to join his cabinet, getting out of a war is still dicier than getting into one, as President George W. Bush can attest.

There were two things in my office that first day that gave my mission clarity. The first was a multivolume set of binders in my closet safe that contained a top-secret history of the creeping U.S. entry into the war that had occurred on the watch of my predecessor, Robert McNamara. The report didn’t remain a secret for long: it was soon leaked to The New York Times, which nicknamed it “the Pentagon Papers.” I always referred to the study as “the McNamara Papers,” to give credit where credit belonged. I didn’t read the full report when I moved into the office. I had already spent seven years on the Defense Subcommittee of the House Appropriations Committee listening to McNamara justify the escalation of the war. How we got into Vietnam was no longer my concern. (Although, in retrospect, those papers offered a textbook example of how not to commit American military might.)

The second item was another secret document, this one shorter and infinitely more troubling. It was a one-year-old request from General William Westmoreland to raise the U.S. troop commitment in Vietnam from 500,000 to 700,000. At the time he had made the request, Westmoreland was the commander of U.S. forces there. As soon as the idea had reached the ears of President Lyndon Johnson, Westmoreland’s days in Saigon were numbered. Johnson bumped him upstairs to be army chief of staff, so that the Pentagon bureaucracy could dilute his more-is-better philosophy during the coming presidential campaign.

The memo had remained in limbo in the defense secretary’s desk, neither approved nor rejected. As my symbolic first act in office, it gave me great satisfaction to turn down that request formally. It was the beginning of a four-year withdrawal from Vietnam that, in retrospect, became the textbook description of how the U.S. military should decamp.

Others who were not there may differ with this description. But they have been misinformed by more than 30 years of spin about the Vietnam War. The resulting legacy of that misinformation has left the United States timorous about war, deeply averse to intervening in even a just cause, and dubious of its ability to get out of a war once it is in one. All one need whisper is “another Vietnam,” and palms begin to sweat. I have kept silent for those 30 years because I never believed that the old guard should meddle in the business of new administrations, especially during a time of war. But the renewed vilification of our role in Vietnam in light of the war in Iraq has prompted me to speak out.

Some who should know better have made our current intervention in Iraq the most recent in a string of bogeymen peeking out from under the bed, spawned by the nightmares of Vietnam that still haunt us. The ranks of the misinformed include seasoned politicians, reporters, and even veterans who earned their stripes in Vietnam but who have since used that war as their bully pulpit to mold an isolationist American foreign policy. This camp of doomsayers includes Senator Edward Kennedy, who has called Iraq “George Bush’s Vietnam.” Those who wallow in such Vietnam angst would have us be not only reticent to help the rest of the world, but ashamed of our ability to do so and doubtful of the value of spreading democracy and of the superiority of freedom itself. They join their voices with those who claim that the current war is “all about oil,” as though the loss of that oil were not enough of a global security threat to merit any U.S. military intervention and especially not “another Vietnam.”

The Vietnam War that I saw, first from my seat in Congress and then as secretary of defense, cannot be wrapped in a tidy package and tagged “bad idea.” It was far more complex than that: a mixture of good and evil from which there are many valuable lessons to be learned. Yet the only lesson that seems to have endured is the one that begins and ends with “Don’t go there.” The war in Iraq is not “another Vietnam.” But it could become one if we continue to use Vietnam as a sound bite while ignoring its true lessons.

I acknowledge and respect the raw emotions of those who fought in Vietnam, those who lost loved ones, and those who protested, and I also respect the sacrifice of those who died following orders of people such as myself, half a world away. Those raw emotions are once again being felt as our young men and women die in Iraq and Afghanistan. I cannot speak for the dead or the angry. My voice is that of a policymaker, one who once decided which causes were worth fighting for, how long the fight should last, and when it was time to go home. The president, as our commander-in-chief, has the overall responsibility for making these life-or-death decisions, in consultation with Congress. The secretary of defense must be supportive of those decisions, or else he must leave.

It is time for a reasonable look at both Vietnam and Iraq — and at what the former can teach us about the latter. My perspective comes from military service in the Pacific in World War II (I still carry shrapnel in my body from a kamikaze attack on my destroyer, the U.S.S. Maddox), nine terms in the U.S. House of Representatives, and four years as secretary of defense to Nixon.

Today, we deserve a view of history that is based on facts rather than emotional distortions and the party line of tired politicians who play on emotions. Mine is not a rosy view of the Vietnam War. I didn’t miss the fact that it was an ugly, mismanaged, tragic episode in U.S. history, with devastating loss of life for all sides. But there are those in our nation who would prefer to pick at that scab rather than let it heal. They wait for opportunities to trot out the Vietnam demons whenever another armed intervention is threatened. For them, Vietnam is an insurance policy that pretends to guarantee peace at home as long as we never again venture abroad. Certain misconceptions about that conflict, therefore, need to be exposed and abandoned in order to restore confidence in the United States’ nation-building ability.

STAYING THE COURSE

The truth about Vietnam that revisionist historians conveniently forget is that the United States had not lost when we withdrew in 1973. In fact, we grabbed defeat from the jaws of victory two years later when Congress cut off the funding for South Vietnam that had allowed it to continue to fight on its own. Over the four years of Nixon’s first term, I had cautiously engineered the withdrawal of the majority of our forces while building up South Vietnam’s ability to defend itself. My colleague and friend Henry Kissinger, meanwhile, had negotiated a viable agreement between North and South Vietnam, which was signed in January 1973. It allowed for the United States to withdraw completely its few remaining troops and for the United States and the Soviet Union to continue funding their respective allies in the war at a specified level. Each superpower was permitted to pay for replacement arms and equipment. Documents released from North Vietnamese historical files in recent years have proved that the Soviets violated the treaty from the moment the ink was dry, continuing to send more than $1 billion a year to Hanoi. The United States barely stuck to the allowed amount of military aid for two years, and that was a mere fraction of the Soviet contribution.

Yet during those two years, South Vietnam held its own courageously and respectably against a better-bankrolled enemy. Peace talks continued between the North and the South until the day in 1975 when Congress cut off U.S. funding. The Communists walked out of the talks and never returned. Without U.S. funding, South Vietnam was quickly overrun. We saved a mere $297 million a year and in the process doomed South Vietnam, which had been ably fighting the war without our troops since 1973.

I believed then and still believe today that given enough outside resources, South Vietnam was capable of defending itself, just as I believe Iraq can do the same now. From the Tet offensive in 1968 up to the fall of Saigon in 1975, South Vietnam never lost a major battle. The Tet offensive itself was a victory for South Vietnam and devastated the North Vietnamese army, which lost 289,000 men in 1968 alone. Yet the overriding media portrayal of the Tet offensive and the war thereafter was that of defeat for the United States and the Saigon government. Just so, the overriding media portrayal of the Iraq war is one of failure and futility.

Vietnam gave the United States the reputation for not supporting its allies. The shame of Vietnam is not that we were there in the first place, but that we betrayed our ally in the end. It was Congress that turned its back on the promises of the Paris accord. The president, the secretary of state, and the secretary of defense must share the blame. In the end, they did not stand up for the commitments our nation had made to South Vietnam. Any president or cabinet officer who is turned down by Congress when he asks for funding for a matter of national security or defense simply has not tried hard enough. There is no excuse for that failure. In my four years at the Pentagon, when public support for the Vietnam War was at its nadir, Congress never turned down any requests for the war effort or Defense Department programs. These were tense moments, but I got the votes and the appropriations. A defense secretary’s relationship with Congress is second only to his relationship with the men and women in uniform. Both must be able to trust him, and both must know that he respects them. If not, Congress will not fund, and the soldiers, sailors, and air personnel will not follow.

Donald Rumsfeld has been my friend for more than 40 years. Gerald Ford and I went to Evanston to support him in his first congressional race, and I urged President Bush to appoint him secretary of defense. But his overconfident and self-assured style on every issue, while initially endearing him to the media, did not play well with Congress during his first term. My friends in Congress tell me Rumsfeld has modified his style of late, wisely becoming more collegial. Several secretaries during my service on the Appropriations Committee, running all the way from the tenure of Charlie Wilson to that of Clark Clifford, made the mistake of thinking they must appear much smarter than the elected officials to whom they reported. It doesn’t always work.

If Rumsfeld wants something from those who are elected to make decisions for the American people, then he must continue to show more deference to Congress. To do otherwise will endanger public support and the funding stream for the Iraq war and its future requirements. A sour relationship on Capitol Hill could doom the whole effort. The importance of this solidarity between Congress and the administration did not escape Saddam Hussein, nor has it escaped the insurgents. In the days leading up to the U.S. invasion of Iraq, television stations there showed 1975 footage of U.S. embassy support personnel escaping to helicopters from the roof of the U.S. embassy in Saigon. It was Saddam’s message to his people that the United States does not keep its commitments and that we are only as good as the word of our current president. We failed to deliver the logistical support to our allies in South Vietnam during the post-Watergate period because of a breakdown of leadership in Washington. The failure of one administration to keep the promises of another had a devastating effect on the North-South negotiations.

There are no guarantees of continuity in a partisan democracy. We are making commitments as to the future of Iraq on an almost daily basis. These commitments must be understood now so they can be honored later. Every skirmish on the home front that betrays a lack of solidarity on Iraq gives the insurgents more hope and ultimately endangers the men and women we have sent to Iraq to fight in this war for us. We are now committed to a favorable outcome in Iraq, but it must be understood that this will require long-term assistance or our efforts will be in vain.

VIETNAMIZATION AS THE MODEL

Along with our abandonment of our allies, another great tragedy of Vietnam was the Americanization of the war. This threatens to be the tragedy of Iraq also. John F. Kennedy committed a few hundred military advisers to Saigon. Johnson saw Southeast Asia as the place to stop the spread of communism, and he spared no expense or personnel. By the time Nixon and I inherited the war in 1969, there were more than half a million U.S. troops in South Vietnam and 1.2 million more U.S. soldiers, sailors, and air personnel supporting the war from aircraft carriers and military bases in surrounding nations and at sea. The war needed to be turned back to the people who cared about it, the Vietnamese. They needed U.S. money and training but not more American blood. I called our program “Vietnamization,” and in spite of the naysayers, I have not ceased to believe that it worked.

Nixon was reelected in 1972 based in large part on our progress toward ending U.S. direct involvement in the war, ending the draft, and establishing the all-volunteer military service. His opponent that year, George McGovern, made the war the primary issue of the campaign, claiming that Democrats — the party in power that had escalated the war to an intolerable level — would be the best folks to get us out. McGovern lost because the American people didn’t agree with him.

We need to put our resources and unwavering public support behind a program of “Iraqization” so that we can get out of Iraq and leave the Iraqis in a position to protect themselves. The Iraq war should have been focused on Iraqization even before the first shot was fired. The focus is there now, and Americans should not lose heart.

We came belatedly to Vietnamization; nonetheless, there are certain principles we followed in Vietnam that would be helpful in Iraq. The most important is that the administration must adhere to a standard of competence for the Iraqi security forces, and when that standard is met, U.S. troops should be withdrawn in corresponding numbers. That is the way it worked in Vietnam, from the first withdrawal of 50,000 troops in 1969 to the last prisoner of war off the plane in January of 1973. Likewise, in Iraq, the United States should not let too many more weeks pass before it shows its confidence in the training of the Iraqi armed forces by withdrawing a few thousand U.S. troops from the country. We owe it to the restive people back home to let them know there is an exit strategy, and, more important, we owe it to the Iraqi people. The readiness of the Iraqi forces need not be 100 percent, nor must the new democracy be perfect before we begin our withdrawal. The immediate need is to show our confidence that Iraqis can take care of Iraq on their own terms. Our presence is what feeds the insurgency, and our gradual withdrawal would feed the confidence and the ability of average Iraqis to stand up to the insurgency.

I gave President Nixon the same advice about Vietnam from our first day in office. As secretary of defense, I took the initiative in the spring of 1969 to change our mission statement for Vietnam from one of applying maximum pressure against the enemy to one of giving maximum assistance to South Vietnam to fight its own battles. Then, the opponents of our withdrawal were the South Vietnamese government, which we had turned into a dependent, and some in our own military who harbored delusions of total victory in Southeast Asia using American might. Even if such a victory had been possible, it was wrong to Americanize the war from the beginning, and by that point the patience of the American people had run out.

Even with the tide of public opinion running against the war, withdrawal was not an easy sell inside the Nixon administration. Our first round of withdrawals was announced after a conference between Nixon and South Vietnamese President Nguyen Van Thieu on Midway Island in June 1969. I had already softened the blow for Thieu by visiting him in Saigon in March, at which point I told him the spigot was being turned off. He wanted more U.S. soldiers, as did almost everyone in the U.S. chain of command, from the chair of the Joint Chiefs of Staff on down. For each round of troop withdrawals from Vietnam, the Joint Chiefs suggested a miserly number based on what they thought they still needed to win the war. I bumped those numbers up, always in counsel with General Creighton Abrams, then the commander of U.S. forces in Vietnam. Even Nixon, who had promised to end the war, accepted each troop-withdrawal request from me grudgingly. It took four years to bring home half a million troops. At times, it seemed my only ally was General Abrams. He understood what the others did not: that the American people’s patience for the war had worn thin.

Bush is not laboring under similar handicaps in his military. His commanders share his goal of letting Iraq take care of itself as soon as its fledgling democracy is ready. And for the moment, there is still patience at home for a commonsensical, phased drawdown. In fact, the voices expressing the most patience about a sensible withdrawal and the most support for the progress of Iraqi soldiers are coming from within the U.S. military. These people are also the most eager to see the mission succeed and the most willing to see it through to the end. It is they who are at high risk and who are the ones being asked to serve not one but multiple combat tours. They are dedicated and committed to a mission that ranges from the toughest combat to the most elementary chores of nation building. We should listen to them, and trust them.

In those four years of Vietnamization, I never once publicly promised a troop number for withdrawal that I couldn’t deliver. President Bush should move ahead with the same certainty. I also did not announce what our quantitative standards for readiness among the South Vietnamese troops were, just as Bush should not make public his specific standards for determining when Iraqi troops are ready to go it alone. In a report to Congress in July 2005, the Pentagon hinted that those measurable standards are in place. However, it would be a mistake for the president to rely solely on the numbers. Instead, his top commander in the field should have the final say on how many U.S. troops can come home, commensurate with the readiness of Iraqi forces. If Bush does not trust his commander’s judgment, as I trusted General Abrams, Bush should replace him with someone he does trust. That trust must be conveyed to the American people, too, if they are to be patient with an orderly withdrawal of our troops.

THE PRETEXT FOR WAR

In this business of trust, President Bush got off to a bad start. Nixon had the same problem. Both the Vietnam War and the Iraq war were launched based on intelligence failures and possibly outright deception. The issue was much more egregious in the case of Vietnam, where the intelligence lapses were born of our failure to understand what motivated Ho Chi Minh in the 1950s. Had we understood the depth of his nationalism, we might have been able to derail his communism early on.

The infamous pretext for leaping headlong into the Vietnam War was the Gulf of Tonkin incident. My old destroyer, the U.S.S. Maddox, was patrolling the Gulf of Tonkin 25 miles off the coast of North Vietnam on August 2, 1964, when it was attacked by three North Vietnamese torpedo boats. That solitary attack would have been written off as an aberration, but two days later the U.S.S. Maddox, joined then by the U.S.S. Turner Joy, reported that it was under attack again. From all I was able to determine when I read the dispatches five years later as secretary of defense, there was no second attack. There was confusion, hysteria, and miscommunication on a dark night. President Johnson and Defense Secretary McNamara either dissembled or misinterpreted the faulty intelligence, and McNamara hotfooted it over to Capitol Hill with a declaration that was short of war but that resulted in a war anyway. I, along with 501 colleagues in the House and Senate, voted for the Tonkin Gulf resolution, which was Johnson’s ticket to escalate our role in Vietnam. Until then, the United States had been part bystander, part covert combatant, and part adviser.

In Iraq, the intelligence blunder concerned Saddam’s nonexistent weapons of mass destruction, which in the end may or may not have been Bush’s real motivation for going to war. My view is that it was better to find that Saddam had not progressed as far as we thought in his WMD development than to discover belatedly that he had. Whatever the truth about WMD in Iraq, it cannot be said that the United States slipped gradually, covertly, or carelessly into Iraq, as we did into Vietnam.

MARKETING THE MISSION

The mistake on the question of WMD in Iraq has led many to complain that the United States was drawn into the war under false pretenses, that what began as self-defense has morphed into nation building. Welcome to the reality of war. It is neither predictable nor tidy. This generation of Americans was spoiled by the quick-and-clean Operation Desert Storm, in 1991, when the first President Bush adhered to the mission, freed Kuwait, and brought home the troops. How would Iraq look today if George H.W. Bush had changed that mission on the fly and ordered a march to Baghdad and the overthrow of Saddam? The truth is, wars are fluid things and missions change. This is more the rule than the exception. It was true in Vietnam, and it is true in Iraq today.

The early U.S. objective in Southeast Asia was to stop the spread of communism. With changes in the relationship between the Soviet Union and China and the 1965 suppression of the communist movement in Indonesia, the threat of a communist empire diminished. Unwilling to abandon South Vietnam, the United States changed its mission to self-determination for Vietnam.

The current President Bush was persuaded that we would find WMD in Iraq and did what he felt he had to do with the information he was given. When we did not find the smoking gun, it would have been unconscionable to pack up our tanks and go home. Thus, there is now a new mission, to transform Iraq, and it is not a bad plan. Bush sees Iraq as the frontline in the war on terror — not because terrorists dominate there, but because of the opportunity to displace militant extremists’ Islamist rule throughout the region. Bush’s greatest strength is that terrorists believe he is in this fight to the end. I have no patience for those who can’t see that big picture and who continue to view Iraq as a failed attempt to find WMD. Now, because Iraq has been set on a new course, Bush has an opportunity to reshape the region. “Nation building” is not an epithet or a slogan. After the attacks of September 11, 2001, it is our duty.

Unfortunately, Bush has done an uneven job of selling his message, particularly since he was relieved of the pressure of reelection. Nixon lost his leadership leverage because of Watergate and thus lost ground in the battle for public support. By contrast, I believe the American people would still want to follow Bush if they had a clear understanding of what was at stake. Recent polls showing a waning of support for the war are a sign to the president that he needs to level with the American people. When troops are dying, the commander-in-chief cannot be coy, vague, or secretive. We learned that in Vietnam, too.

Bush is losing the public relations war by making the same strategic mistakes we made in Vietnam. General Abrams frequently spoke to me about his frustration with the war that the U.S. media portrayed at home and how it contrasted with the war he was seeing up close. His sense of defeat in his own public relations war, with its 500-plus reporters based in Saigon, comes through in the hundreds of meetings held in his office in Saigon — meetings that were taped for the record. (Transcripts of those tapes are ably assembled and analyzed by Lewis Sorley in his recent book, Vietnam Chronicles: The Abrams Tapes, 1968-1972.)

In Vietnam, correspondents roamed the country almost at will, and their work brought home to the United States the first televised war. Until that war, families back home worried about the welfare of their soldiers but could not see the danger. Had the mothers and fathers of U.S. soldiers serving in World War II seen a real-time CNN report of D-day in the style of Saving Private Ryan, they might not have thought Europe was worth saving. Operation Desert Storm married 24-hour cable news and war for the first time. The embedding of journalists with combat units in Iraq 12 years later was a solid idea, but it has meant that casualties are captured on tape and then replayed on newscasts thousands of times. The deaths of ten civilians in a suicide bombing are replayed and analyzed and thus become the psychological equivalent of 10,000 deaths. The danger to one U.S. soldier captured on tape becomes a threat to everyone’s son or father or daughter or mother.

I have made too many phone calls to grieving families to ever downplay the loss of even one life. But I have also been in combat, and it looks different from the inside, from the viewpoint of those who volunteered and trained to fight for just causes. For a soldier, ducking a sniper’s bullet in downtown Baghdad is all in a day’s work, no matter how alarming it looks on television. The soldier will shrug it off and walk the same streets the next day if he believes in his mission. The key for Bush is to communicate that same sense of mission to the people back home. His west Texas cowboy approach — shoot first and answer questions later, or do the job first and let the results speak for themselves — is not working. With his propensity to wrap up a package and present it as a fait accompli, Bush declared, “Mission accomplished!” at the end of the major combat phase of the Iraq war. That was a well-earned high-five for the military, but it soon became obvious that the mission had only just begun.

The president must articulate a simple message and mission. Just as the spread of communism was very real in the 1960s, so the spread of radical fundamentalist Islam is very real today. It was a creeping fear until September 11, 2001, when it showed itself capable of threatening us. Iraq was a logical place to fight back, with its secular government and modern infrastructure and a populace that was ready to overthrow its dictator. Our troops are not fighting there only to preserve the right of Iraqis to vote. They are fighting to preserve modern culture, Western democracy, the global economy, and all else that is threatened by the spread of barbarism in the name of religion. That is the message and the mission. It is not politically correct, nor is it comforting. But it is the truth, and sometimes the truth needs good marketing.

Condoleezza Rice is one person in the administration who understands and has consistently and clearly stated this message. When she was national security adviser, the media seemed determined to sideline her repeated theme, perhaps because she was perceived as a mere water bearer for the president. As secretary of state, she is in a better position to speak independently. The administration should do its best to keep the microphone in her hands.

BUILDING A LEGITIMATE GOVERNMENT

As was the case in Vietnam, the task in Iraq involves building a new society from the ground up. Two Vietnam experts, Jeffrey Record and W. Andrew Terrill, recently produced an exhaustive comparison of the Vietnam and Iraq wars for the Army War College. They note that in both wars, the United States sought to establish a legitimate indigenous government. In Iraq, the goal is a democratic government, whereas in Vietnam the United States would have settled for any regime that advanced our Cold War agenda.

Those who call the new Iraqi government Washington’s “puppet” don’t know what a real puppet government is. The Iraqis are as eager to be on their own as we are to have them succeed. In Vietnam, an American, Ambassador Philip Habib, wrote the constitution in 1967. Elections were choreographed by the United States to empower corrupt, selfish men who were no more than dictators in the garb of statesmen.

Little wonder that the passionate nationalists in the North came off as the group with something to offer. I do not personally believe the Saigon government was fated to fall apart someday through lack of integrity, and apparently the Soviet Union didn’t think so either or it would not have pursued the war. But it is true that the U.S. administrations at the time severely underestimated the need for a legitimate government in South Vietnam and instead assumed that a shadow government and military force could win the day. In Iraq, a legitimate government, not window-dressing, must be the primary goal. The factious process of writing the Iraqi constitution has been painful to watch, and the varying factions must be kept on track. But the process is healthy and, more important, homegrown.

In hindsight, we can look at the Vietnam War as a success story — albeit a costly one — in nation building, even though the democracy we sought halfheartedly to build failed. Three decades ago, Asia really was threatened by the spread of communism. The Korean War was a fresh memory. In Malaysia, Singapore, Indonesia, the Philippines, and even India, communist movements were gaining a foothold. They failed in large part because the United States drew a line at Vietnam that distracted and sucked resources away from its Cold War nemesis, the Soviet Union. Similarly, the effect of our stand in Iraq is already being felt around the Middle East. Opposition parties are demanding to be heard. Veiled women are insisting on a voice. Syrian troops have left Lebanon. Egypt has held an election. Iran is being pressured by the United States and Europe alike on its development of nuclear weapons. The voices for change are building in Saudi Arabia. The movement even has a name: Kifaya — “Enough!” The parasites who have made themselves fat by promoting ignorance, fear, and repression in the region are squirming. These are baby steps, but that is where running begins.

INSURGENTS AS ENEMIES

Insurgents were and are the enemy in both wars, and insurgencies fail without outside funding. In Vietnam, the insurgents were heavily funded and well equipped by the Soviet Union. They followed a powerful and charismatic leader, Ho Chi Minh, who nurtured their passionate nationalist goals. In Iraq, the insurgency is fragmented, with no identifiable central leadership and no unifying theology, strategy, or vision other than to get the United States out of the region. If that goal were accomplished now, they would turn on each other, as they already have done in numerous skirmishes. Although they do rely on outside funding, their benefactors are fickle and without deep pockets.

There is no way of counting the precise number of insurgents in the Iraq war, but it appears to be in the thousands, which in comparative terms is paltry. Communist forces in Vietnam numbered well over 1 million in 1973. North Vietnam, over the course of the war, lost 1.1 million soldiers and 2 million civilians, and yet they were willing to fight on and we were not. Why? Record and Terrill say the key to understanding any war in which a weaker side prevails over a stronger one is the concept of the “asymmetry of stakes.” Victory meant everything to North Vietnam and nothing to the average American. We had few economic interests in Vietnam. Our national security interest — preventing the domino scenario, in which the entire world would fall under the sway of communism if we lost Southeast Asia — didn’t have enough currency to carry the day.

It is a very different story in Iraq, where the Bush administration hopes to implant democracy side by side with Islam. The stakes could not be higher for the continued existence of our own democracy and, yes, for the significant matter of oil. We are not the only nation dependent on Persian Gulf oil. We share that dependency with every industrialized nation on the planet. Picture those oil reserves in the hands of religious extremists whose idea of utopia is to knock the world economy and culture back more than a millennium to the dawn of Islam.

Bush’s belief that he can replace repression with democracy is not some neoconservative fantasy. Our support of democracy dates from the founding of our nation. Democracies are simply better for the planet. Witness the courage of the Iraqi people who shocked the world and defied all the pessimists by showing up to vote in January 2005, even with guns pointed at their heads. The enemies of freedom in Iraq know what a powerful message that was to the rest of the Arab world, otherwise they would not have responded by escalating the violence.

Although Vietnam may have been a success story when it came to defeating an insurgency, the domestic insurgency — conducted by the Vietcong — was unfortunately only one front in the war, the larger front being the conventional military forces of North Vietnam. The Vietcong were largely suppressed by a combination of persuasion and force. A similar combination of deadly force against the Iraqi insurgency’s leaders and incentives to co-opt their followers may work in Iraq, where the insurgency is the only enemy.

Vietnam, however, should be a cautionary tale when fighting guerrilla style, whether it be in the streets or in the jungle. Back then, frightened and untrained U.S. troops were ill equipped to govern their baser instincts and fears. Countless innocent civilians were killed in the indiscriminate hunt for Vietcong among the South Vietnamese peasantry. Some of the worst historical memories of the Vietnam War stem from those atrocities. Our volunteer troops in Iraq are better trained and supervised, yet the potential remains for a slaughter of innocents. Reports have already surfaced of skittish American soldiers shooting Iraqi civilians in acts that can only be attributed to poor training and discipline.

To stop abuses and mistakes by the rank and file, whether in the prisons or on the streets, heads must roll at much higher levels than they have thus far. I well remember the unexpected public support for Lieutenant William Calley, accused in the massacre of civilians in the village of My Lai. The massacre did not occur on my watch, but Calley’s trial did, and Americans flooded the White House with letters of protest when it appeared that Calley would be the scapegoat while his superiors walked free. The best way to keep foot soldiers honest is to make sure their commanders know that they themselves will be held responsible for any breach of honor.

For me, the alleged prison scandals reported to have occurred in Iraq, in Afghanistan, and at Guantnamo Bay have been a disturbing reminder of the mistreatment of our own POWs by North Vietnam. The conditions in our current prison camps are nowhere near as horrific as they were at the “Hanoi Hilton,” but that is no reason to pat ourselves on the back. The minute we begin to deport prisoners to other nations where they can legally be tortured, when we hold people without charges or trial, when we move prisoners around to avoid the prying inspections of the Red Cross, when prisoners die inexplicably on our watch, we are on a slippery slope toward the inhumanity that we deplore. In Vietnam, I made sure we always took the high ground with regard to the treatment of enemy prisoners. I opened our prison camps wide to international inspectors, so that we could demand the same from Hanoi. In Iraq, there are no American POWs being held in camps by the insurgents. There are only murder victims whose decapitated bodies are left for us to find. But that does not give us license to be brutal in return.

LIMITED WARFARE

Our commanders in Iraq have another advantage over those in Vietnam: President Bush seems unlikely to be whipsawed by public opinion, but will take the war to wherever the enemy rears its head. In Vietnam, we waged a ground war in the South and did not permit our troops to cross into North Vietnam. The air war over the North and in Laos and Cambodia was waged in fits and starts, in secret and in the open, covered by lies and subterfuge, manipulated more by opinion polls than by military exigencies. In the early years, the services squabbled with one another. Even the State Department was allowed to veto air strikes. President Johnson stayed up late calling the plays while generals were sidelined.

In all, 2.8 million Americans served in and around Vietnam during the war, yet less than ten percent of them were in-line infantry units, the men we think of as our Vietnam veterans. Men were drafted and given a few weeks of training before being attached to a unit of strangers. With few exceptions, our all-volunteer military in Iraq is motivated, well trained, well equipped, and in cohesive units. This is not to say that any of these troops want to be there. They don’t. Yet they are far more motivated to fight this war than were the average conscripts in Vietnam.

They are also part of a much smarter military, thanks in large part to the lessons of Vietnam. In 1986, the Goldwater-Nichols Department of Defense Reorganization Act, with input from some veterans of my team at the Pentagon, cleaned up many of the command problems that hindered us in Vietnam and for a decade thereafter. The old system encouraged the Joint Chiefs of Staff to be anything but joint. They protected their fiefdoms and withheld cooperation from one another. The Goldwater-Nichols act centralized authority in the chair of the Joint Chiefs as the primary adviser to the president and the secretary of defense. The separate services are now responsible for training their people for war, but the area commanders who run the wars control all the assets. Today’s soldiers, sailors, and air personnel can also be more secure knowing that the people who make life-or-death decisions represent a better balance between military expertise and the will of the people as expressed through their elected officials.

Such confidence is critical to sustaining an all-volunteer military. As the secretary of defense who ended the draft in 1972, I see no need to return to conscription, even now that the prospect of combat has somewhat dampened the enthusiasm for military service. As long as servicepeople — current and future — know where their president is leading them, the enlistments will follow.

As it did in Vietnam, in Iraq the enemy has sought to weaken the United States’ will by dragging out the hostilities. In Vietnam, that strategy was reflected in a bottomless well of men, sophisticated arms, and energy the enemy threw into the fight. Similarly in Iraq, the insurgents have pinpointed the weakness of the American public’s will and hope to exploit it on a much smaller scale, with the weapon of choice being the improvised explosive device, strapped to one person, loaded into a car or hidden at a curb, and with the resulting carnage then played over and over again on the satellite feed. But one lesson learned from Vietnam that is not widely recognized is that fear of casualties is not the prime motivator of the American people during a war. American soldiers will step up to the plate, and the American public will tolerate loss of life, if the conflict has worthy, achievable goals that are clearly espoused by the administration and if their leadership deals honestly with them.

Such was not the case in Vietnam. When President Nixon ordered the secret bombing of Cambodia, I protested vigorously. I did not oppose the bombing itself, as I believed the United States should fight the war as it needed to be fought — wherever the enemy was hiding — or not fight it at all. What I opposed was the deception. Behind closed doors, my opinion was so well known that when the secret was exposed, as I knew it would be, I was immediately and wrongly pinpointed as being the leak. The president approved Kissinger’s order to the FBI to tap my military assistant’s home phone, hoping to catch the two of us in a plot to leak secrets. Americans will not be lied to, and they will not tolerate secrets nor be sidelined in a war debate. As with the Vietnam War, if necessary they will take to the streets to be heard.

AT WHAT COST?

The greatest cost of war is human suffering. But every war has its monetary price tag, too, even if it is rarely felt in real time. As with Vietnam, the Iraq war is revealing chinks in our fiscal armor. Only after the Vietnam War ended did its drain on the U.S. economy become apparent. During the war, our military readiness to fight other conflicts was precarious. Billions of dollars were drained away from other missions to support the war. It became a juggling act to support our forces around the world. I reduced our contingent in Korea by 29,000 men, and I persuaded Japan to begin paying the bills for its post-World War II defense by our troops. In retrospect, those two steps were positive results from the financial drain that the Vietnam War caused. But there were plenty of other places where the belt-tightening suffocated good programs. The Army Reserve and National Guard units fell into disrepair. President Johnson chose to draft the unwilling, rather than use trained reservists and National Guard soldiers and air personnel. As unpopular as the draft was, it was still an easier sell for Johnson than deploying whole National Guard and Reserve units out of the communities in middle America. So the second-string troops stayed home and saw their budgets cannibalized. Their training was third-rate and their equipment secondhand. Now, in our post-Vietnam wisdom, we have embraced the “total force” concept. After two decades of retooling, most National Guard units and reservists were better prepared to respond when called up for Operation Desert Storm.

Yet, because of pandering to the butter-not-guns crowd, we still do not spend enough of our total budget on national defense. The annual U.S. GDP is in excess of $11.5 trillion. The percentage of GDP going to the Defense Department amounts to 3.74 percent. In 1953, during the Korean War, it was 14 percent. In 1968, during the Vietnam War, it was nearly 10 percent — an amount that sapped domestic programs and ended up demoralizing President Johnson because he could not maintain his Great Society social programs. Now our spending priorities have shifted to social programs, with 6.8 percent of GDP, for example, going to Social Security and Medicare. That is more than twice what it was during the Vietnam War.

It will not be easy or popular to reverse the downward trend in defense spending. But the realities of the global threat of terrorism and the outside possibility of conventional warfare with an enemy such as China or North Korea demand that we take off the blinders. To increase defense spending to 4 percent of GDP would be adequate, but it is especially important to increase the share of the pie spent on the U.S. Army. It now gets 24 percent of the total Defense Department budget, but given the new realities of modern warfare, it should receive at least 28 percent. The army is currently strung along through the budget year with special appropriations, and that is no way to run a military service.

Reserve and National Guard units are understaffed and have been abused by deployments that have taken individuals out of their units to serve as de facto army regulars, many in specialties for which they have not been trained, a practice that eats at the morale of reservists. Nearly 80 percent of the airlift capacity for this war and about 48 percent of the troops have come from Reserve and National Guard units. The high percentages are due, in part, to the specialized missions of those troops: transporting cargo, policing, rebuilding infrastructure, translating, conducting government affairs — in short, the stuff of building a new nation. We have realized too late that our regular army forces have not been as well trained as they should have been for the new reality of an urban insurgent enemy. Nor was the military hierarchy paying serious attention to the hints that their mission in the twenty-first century would be nation building.

Secretary Rumsfeld is trying to reshape the army to be more mobile with fewer soldiers, in “units of action” built on the Special Forces model. But he is not being honest with himself or with Congress and the American people about how much money will be needed to make the transformation. Those specialized units will be more suited for urban guerrilla warfare, but light and lean is not the only way to maintain our military. Although guerrilla warfare looks like the wave of the future, we still face the specter of conventional divisional and corps warfare against other enemies. Both capabilities are expensive, but the downward trend of defense budgets does not recognize that. Except for bumps up in the Ronald Reagan years and during the Gulf War, the defense budget has been on a downward slide when viewed in constant dollars. We are coasting on the investments in research, development, and equipment made during earlier years.

SHORING UP OUR ALLIES

Our pattern of fighting our battles alone or with a marginal “coalition of the willing” contributes to the downward spiral in resources and money. Ironically, Nixon had the answer back in 1969. At the heart of the Nixon Doctrine, announced that first year of his presidency, was the belief that the United States could not go it alone. As he said in his foreign policy report to Congress on February 18, 1970, the United States will participate in the defense and development of allies and friends, but “America cannot — and will not — conceive all the plans, design all the programs, execute all the decisions and undertake all the defense of the free nations of the world. We will help where it makes a real difference and is considered in our interest” (emphasis in the original).

Three decades later, we have fallen into a pattern of neglecting our treaty alliances, such as NATO, and endangering the aid we can give our allies by throwing our resources into fights that our allies refuse to join. Vietnam was just such a fight, and Iraq is, too. If our treaty alliances were adequately tended to and shored up — and here I include the UN — we would not have so much trouble persuading others to join us when our cause is just. Still, as the only superpower, there will be times when we must go it alone.

President Bush does not have the luxury of waiting for the international community to validate his policies in Iraq. But we do have the lessons of Vietnam. In Vietnam, the voices of the “cut-and-run” crowd ultimately prevailed, and our allies were betrayed after all of our work to set them on their feet. Those same voices would now have us cut and run from Iraq, assuring the failure of the fledgling democracy there and damning the rest of the Islamic world to chaos fomented by extremists. Those who look only at the rosy side of what defeat did to help South Vietnam get to where it is today see a growing economy there and a warming of relations with the West. They forget the immediate costs of the United States’ betrayal. Two million refugees were driven out of the country, 65,000 more were executed, and 250,000 were sent to “reeducation camps.” Given the nature of the insurgents in Iraq and the catastrophic goals of militant Islam, we can expect no better there.

As one who orchestrated the end of our military role in Vietnam and then saw what had been a workable plan fall apart, I agree that we cannot allow “another Vietnam.” For if we fail now, a new standard will have been set. The lessons of Vietnam will be forgotten, and our next global mission will be saddled with the fear of its becoming “another Iraq.”

Melvin R. Laird. Foreign Affairs. New York: Nov/Dec 2005.Vol.84, Iss. 6;  pg. 22

The New Middle East

THE END OF AN ERA

Just over two centuries since Napoleon’s arrival in Egypt heralded the advent of the modern Middle East — some 80 years after the demise of the Ottoman Empire, 50 years after the end of colonialism, and less than 20 years after the end of the Cold War — the American era in the Middle East, the fourth in the region’s modern history, has ended. Visions of a new, Europe-like region — peaceful, prosperous, democratic — will not be realized. Much more likely is the emergence of a new Middle East that will cause great harm to itself, the United States, and the world.

All the eras have been defined by the interplay of contending forces, both internal and external to the region. What has varied is the balance between these influences. The Middle East’s next era promises to be one in which outside actors have a relatively modest impact and local forces enjoy the upper hand — and in which the local actors gaining power are radicals committed to changing the status quo. Shaping the new Middle East from the outside will be exceedingly difficult, but it — along with managing a dynamic Asia — will be the primary challenge of U.S. foreign policy for decades to come.

The modern Middle East was born in the late eighteenth century. For some historians, the signal event was the 1774 signing of the treaty that ended the war between the Ottoman Empire and Russia; a stronger case can be made for the importance of Napoleon’s relatively easy entry into Egypt in 1798, which showed Europeans that the region was ripe for conquest and prompted Arab and Muslim intellectuals to ask — as many continue to do today — why their civilization had fallen so far behind that of Christian Europe. Ottoman decline combined with European penetration into the region gave rise to the “Eastern Question,” regarding how to deal with the effects of the decline of the Ottoman Empire, which various parties have tried to answer to their own advantage ever since.

The first era ended with World War I, the demise of the Ottoman Empire, the rise of the Turkish republic, and the division of the spoils of war among the European victors. What ensued was an age of colonial rule, dominated by France and the United Kingdom. This second era ended some four decades later, after another world war had drained the Europeans of much of their strength, Arab nationalism had risen, and the two superpowers had begun to lock horns. “[He] who rules the Near East rules the world; and he who has interests in the world is bound to concern himself with the Near East,” wrote the historian Albert Hourani, who correctly saw the 1956 Suez crisis as marking the end of the colonial era and the beginning of the Cold War era in the region.

During the Cold War, as had been the case previously, outside forces played a dominant role in the Middle East. But the very nature of U.S.-Soviet competition gave local states considerable room to maneuver. The high-water mark of the era was the October 1973 war, which the United States and the Soviet Union essentially stopped at a stalemate, paving the way for ambitious diplomacy, including the Egyptian-Israeli peace accord.

Yet it would be a mistake to see this third era simply as a time of well-managed great-power competition. The June 1967 war forever changed the balance of power in the Middle East. The use of oil as an economic and political weapon in 1973 highlighted U.S. and international vulnerability to supply shortages and price hikes. And the Cold War’s balancing act created a context in which local forces in the Middle East had significant autonomy to pursue their own agendas. The 1979 revolution in Iran, which brought down one of the pillars of U.S. policy in the region, showed that outsiders could not control local events. Arab states resisted U.S. attempts to persuade them to join anti-Soviet projects. Israel’s 1982 occupation of Lebanon spawned Hezbollah. And the Iran-Iraq War consumed those two countries for a decade.

AMERICAN PASTORAL

The end of the Cold War and the demise of the Soviet Union brought about a fourth era in the region’s history, during which the United States enjoyed unprecedented influence and freedom to act. Dominant features of this American era were the U.S.-led liberation of Kuwait, the long-term stationing of U.S. ground and air forces on the Arabian Peninsula, and an active diplomatic interest in trying to solve the Arab-Israeli conflict once and for all (which culminated in the Clinton administration’s intense but ultimately unsuccessful effort at Camp David). More than any other, this period exemplified what is now thought of as the “old Middle East.” The region was defined by an aggressive but frustrated Iraq, a radical but divided and relatively weak Iran, Israel as the region’s most powerful state and sole nuclear power, fluctuating oil prices, top-heavy Arab regimes that repressed their peoples, uneasy coexistence between Israel and both the Palestinians and the Arabs, and, more generally, American primacy.

What has brought this era to an end after less than two decades is a number of factors, some structural, some self-created. The most significant has been the Bush administration’s decision to attack Iraq in 2003 and its conduct of the operation and resulting occupation. One casualty of the war has been a Sunni-dominated Iraq, which was strong enough and motivated enough to balance Shiite Iran. Sunni-Shiite tensions, dormant for a while, have come to the surface in Iraq and throughout the region. Terrorists have gained a base in Iraq and developed there a new set of techniques to export. Throughout much of the region, democracy has become associated with the loss of public order and the end of Sunni primacy. Anti-American sentiment, already considerable, has been reinforced. And by tying down a huge portion of the U.S. military, the war has reduced U.S. leverage worldwide. It is one of history’s ironies that the first war in Iraq, a war of necessity, marked the beginning of the American era in the Middle East and the second Iraq war, a war of choice, has precipitated its end.

Other factors have also been relevant. One is the demise of the Middle East peace process. The United States had traditionally enjoyed a unique capacity to work with both the Arabs and the Israelis. But the limits of that capacity were exposed at Camp David in 2000. Since then, the weakness of Yasir Arafat’s successors, the rise of Hamas, and the Israeli embrace of unilateralism have all helped sideline the United States, a shift reinforced by the disinclination of the current Bush administration to undertake active diplomacy.

Another factor that has helped bring about the end of the American era has been the failure of traditional Arab regimes to counter the appeal of radical Islamism. Faced with a choice between what they perceived as distant and corrupt political leaders and vibrant religious ones, many in the region have opted for the latter. It took 9/11 for U.S. leaders to draw the connection between closed societies and the incubation of radicals. But their response — often a hasty push for elections regardless of the local political context — has provided terrorists and their supporters with more opportunities for advancement than they had before.

Finally, globalization has changed the region. It is now less difficult for radicals to acquire funding, arms, ideas, and recruits. The rise of new media, and above all of satellite television, has turned the Arab world into a “regional village” and politicized it. Much of the content shown — scenes of violence and destruction in Iraq; images of mistreated Iraqi and Muslim prisoners; suffering in Gaza, the West Bank, and now Lebanon — has further alienated many people in the Middle East from the United States. As a result, governments in the Middle East now have a more difficult time working openly with the United States, and U.S. influence in the region has waned.

WHAT LIES AHEAD

The outlines of the Middle East’s fifth era are still taking shape, but they follow naturally from the end of the American era. A dozen features will form the context for daily events.

First, the United States will continue to enjoy more influence in the region than any other outside power, but its influence will be reduced from what it once was. This reflects the growing impact of an array of internal and external forces, the inherent limits of U.S. power, and the results of U.S. policy choices.

Second, the United States will increasingly be challenged by the foreign policies of other outsiders. The European Union will offer little help in Iraq and is likely to push for a different approach to the Palestinian problem. China will resist pressuring Iran and will seek to guarantee the availability of energy supplies. Russia, too, will resist calls to sanction Iran and will look for opportunities to demonstrate its independence from the United States. Both China and Russia (as well as many European states) will distance themselves from U.S. efforts to promote political reform in nondemocratic states in the Middle East.

Third, Iran will be one of the two most powerful states in the region. Those who have seen Iran as being on the cusp of dramatic internal change have been wrong. Iran enjoys great wealth, is the most powerful external influence in Iraq, and holds considerable sway over both Hamas and Hezbollah. It is a classic imperial power, with ambitions to remake the region in its image and the potential to translate its objectives into reality.

Fourth, Israel will be the other powerful state in the region and the one country with a modern economy able to compete globally. The only state in the Middle East with a nuclear arsenal, it also possesses the region’s most capable conventional military force. But it still has to bear the costs of its occupation of the West Bank and deal with a multifront, multidimensional security challenge. Strategically speaking, Israel is in a weaker position today than it was before this summer’s crisis in Lebanon. And its situation will further deteriorate — as will that of the United States — if Iran develops nuclear weapons.

Fifth, anything resembling a viable peace process is unlikely for the foreseeable future. In the aftermath of Israel’s controversial operation in Lebanon, the Kadima-led government will almost certainly be too weak to command domestic support for any policy perceived as risky or as rewarding aggression. Unilateral disengagement has been discredited now that attacks have followed Israel’s withdrawal from Lebanon and Gaza. There is no obvious partner on the Palestinian side who is both able and willing to compromise, further hindering the chances of a negotiated approach. The United States has lost much of its standing as a credible and honest broker, at least for the time being. Meanwhile, Israel’s settlement expansion and road building will continue apace, further complicating diplomacy.

Sixth, Iraq, traditionally a center of Arab power, will remain messy for years to come, with a weak central government, a divided society, and regular sectarian violence. At worst, it will become a failed state wracked by an all-out civil war that will draw in its neighbors.

Seventh, the price of oil will stay high, the result of strong demand from China and India, limited success at curbing consumption in the United States, and the continued possibility of supply shortages. The price of a barrel of oil is far more likely to exceed $100 than it is to fall below $40. Iran, Saudi Arabia, and other large producers will benefit disproportionately.

Eighth, “militiazation” will continue apace. Private armies in Iraq, Lebanon, and Palestinian areas are already growing more powerful. Militias, both a product and a cause of weak states, will emerge wherever there is a perceived or an actual deficit of state authority and capacity. The recent fighting in Lebanon will exacerbate this trend, since Hezbollah has gained by not suffering a total defeat, while Israel has lost by not realizing a total victory — a result that will embolden Hezbollah and those who emulate it.

Ninth, terrorism, defined as the intentional use of force against civilians in the pursuit of political aims, will remain a feature of the region. It will occur in divided societies, such as Iraq, and in societies where radical groups seek to weaken and discredit the government, such as Saudi Arabia and Egypt. Terrorism will grow in sophistication and remain a tool used against Israel and the presence of the United States and other nonindigenous powers.

Tenth, Islam will increasingly fill the political and intellectual vacuum in the Arab world and provide a foundation for the politics of a majority of the region’s inhabitants. Arab nationalism and Arab socialism are things of the past, and democracy belongs in the distant future, at best. Arab unity is a slogan, not a reality. The influence of Iran and groups associated with it has been reinforced, and efforts to improve ties between Arab governments and Israel and the United States have been complicated. Meanwhile, tensions between Sunnis and Shiites will grow throughout the Middle East, causing problems in countries with divided societies, such as Bahrain, Lebanon, and Saudi Arabia.

Eleventh, Arab regimes are likely to remain authoritarian and become more religiously intolerant and anti-American. Two bellwethers will be Egypt and Saudi Arabia. Egypt, which accounts for roughly one-third of the Arab world’s population, has introduced some constructive economic reforms. But its politics have failed to keep up. On the contrary, the regime seems intent on repressing what few liberals the country has and presenting the Egyptian people with a choice between traditional authoritarians and the Muslim Brotherhood. The risk is that Egyptians will one day opt for the latter, less because they support it outright than because they have grown weary of the former. Alternatively, the regime might take on the colors of its Islamist opponents in an effort to co-opt their appeal, in the process distancing itself from the United States. In Saudi Arabia, the government and the royal elite rely on using large energy proceeds to placate domestic appeals for change. The problem is that most of the pressure they have responded to has come from the religious right rather than the liberal left, which has led them to embrace the agenda of religious authorities.

Finally, regional institutions will remain weak, lagging far behind those elsewhere. The Middle East’s best-known organization, the Arab League, excludes the region’s two most powerful states, Israel and Iran. The enduring Arab-Israeli rift will continue to preclude the participation of Israel in any sustained regional relationship. The tension between Iran and most Arab states will also frustrate the emergence of regionalism. Trade within the Middle East will remain modest because few countries offer goods and services that others want to buy on a large scale, and advanced manufactured goods will have to continue to come from elsewhere. Few of the advantages of global economic integration will come to this part of the world, despite the pressing need for them.

MISTAKES AND OPPORTUNITIES

Although the basic features of this fifth era of the modern Middle East are largely unattractive, this should not be a cause for fatalism. Much is a matter of degree. There is a fundamental difference between a Middle East lacking formal peace agreements and one defined by terrorism, interstate conflict, and civil war; between one housing a powerful Iran and one dominated by Iran; or between one that has an uneasy relationship with the United States and one filled with hatred of the country. Time also makes a difference. Eras in the Middle East can last for as long as a century or as little as a decade and a half. It is clearly in the interest of the United States and Europe that the emerging era be as brief as possible — and that it be followed by a more benign one.

To ensure this, U.S. policymakers need to avoid two mistakes, while seizing two opportunities. The first mistake would be an overreliance on military force. As the United States has learned to its great cost in Iraq — and Israel has in Lebanon — military force is no panacea. It is not terribly useful against loosely organized militias and terrorists who are well armed, accepted by the local population, and prepared to die for their cause. Nor would carrying out a preventive strike on Iranian nuclear installations accomplish much good. Not only might an attack fail to destroy all facilities, but it might also lead Tehran to reconstitute its program even more covertly, cause Iranians to rally around the regime, and persuade Iran to retaliate (most likely through proxies) against U.S. interests in Afghanistan and Iraq and maybe even directly against the United States. It would further radicalize the Arab and Muslim worlds and generate more terrorism and anti-American activity. Military action against Iran would also drive the price of oil to new heights, increasing the chances of an international economic crisis and a global recession. For all these reasons, military force should be considered only as a last resort.

The second mistake would be to count on the emergence of democracy to pacify the region. It is true that mature democracies tend not to wage war on one another. Unfortunately, creating mature democracies is no easy task, and even if the effort ultimately succeeds, it takes decades. In the interim, the U.S. government must continue to work with many nondemocratic governments. Democracy is not the answer to terrorism, either. It is plausible that young men and women coming of age would be less likely to become terrorists if they belonged to societies that offered them political and economic opportunities. But recent events suggest that even those who grow up in mature democracies, such as the United Kingdom, are not immune to the pull of radicalism. The fact that both Hamas and Hezbollah fared well in elections and then carried out violent attacks reinforces the point that democratic reform does not guarantee quiet. And democratization is of little use when dealing with radicals whose platforms have no hope of receiving majority support. More useful initiatives would be actions designed to reform educational systems, promote economic liberalization and open markets, encourage Arab and Muslim authorities to speak out in ways that delegitimize terrorism and shame its supporters, and address the grievances that motivate young men and women to take it up.

As for the opportunities to be seized, the first is to intervene more in the Middle East’s affairs with nonmilitary tools. Regarding Iraq, in addition to any redeployment of U.S. troops and training of local military and police, the United States should establish a regional forum for Iraq’s neighbors (Turkey and Saudi Arabia in particular) and other interested parties akin to that used to help manage events in Afghanistan following the intervention there in 2001. Doing so would necessarily require bringing in both Iran and Syria. Syria, which can affect the movement of fighters into Iraq and arms into Lebanon, should be persuaded to close its borders in exchange for economic benefits (from Arab governments, Europe, and the United States) and a commitment to restart talks on the status of the Golan Heights. In the new Middle East, there is a danger that Syria might be more interested in working with Tehran than with Washington. But it did join the U.S.-led coalition during the Persian Gulf War and attend the Madrid peace conference in 1991, two gestures that suggest it might be open to a deal with the United States in the future.

Iran is a more difficult case. But since regime change in Tehran is not a near-term prospect, military strikes against nuclear sites in Iran would be dangerous, and deterrence is uncertain, diplomacy is the best option available to Washington. The U.S. government should open, without preconditions, comprehensive talks that address Iran’s nuclear program and its support of terrorism and foreign militias. Iran should be offered an array of economic, political, and security incentives. It could be allowed a highly limited uranium-enrichment pilot program so long as it accepted highly intrusive inspections. Such an offer would win broad international support, a prerequisite if the United States wants backing for imposing sanctions or escalating to other options should diplomacy fail. Making the terms of such an offer public would increase diplomacy’s chances of success. The Iranian people should know the price they stand to pay for their government’s radical foreign policy. With the government in Tehran concerned about an adverse public reaction, it would be more likely to accept the U.S. offer.

Diplomacy also needs to be revived in the Israeli-Palestinian conflict, which is still the issue that most shapes (and radicalizes) public opinion in the region. The goal at this point would be not to bring the parties to Camp David or anywhere else but to begin to create the conditions under which diplomacy could usefully be restarted. The United States should articulate those principles it believes ought to constitute the elements of a final settlement, including the creation of a Palestinian state based on the 1967 lines. (The lines would have to be adjusted to safeguard Israel’s security and reflect demographic changes, and the Palestinians would have to be compensated for any losses resulting from the adjustments.) The more generous and detailed the plan, the harder it would be for Hamas to reject negotiation and favor confrontation. Consistent with this approach, U.S. officials ought to sit down with Hamas officials, much as they have with the leaders of Sinn Fin, some of whom also led the Irish Republican Army. Such exchanges should be viewed not as rewarding terrorist tactics but as instruments with the potential to bring behavior in line with U.S. policy.

The second opportunity involves the United States’ insulating itself as much as possible from the region’s instability. This would mean curbing U.S. oil consumption and U.S. dependence on the Middle East’s energy resources, goals that could best be achieved by reducing demand (by, say, increasing taxes at the pump — offset by tax reductions elsewhere — and promoting policies that would accelerate the introduction of alternative sources of energy). Washington should also take additional steps to reduce its exposure to terrorism. Like vulnerability to disease, vulnerability to terrorism cannot be entirely eliminated. But more can and should be done to better protect the U.S. homeland and to better prepare for those inevitable occasions when terrorists will succeed.

Avoiding these mistakes and seizing these opportunities would help, but it is important to recognize that there are no quick or easy solutions to the problems the new era poses. The Middle East will remain a troubled and troubling part of the world for decades to come. It is all enough to make one nostalgic for the old Middle East.

Richard N. Haass. Foreign Affairs. New York: Nov/Dec 2006.Vol.85, Iss. 6;  pg. 2

The New Global Slave Trade

BACK WITH A VENGEANCE

When most people think about slavery — if they think about it at all — they probably assume that it was eliminated during the nineteenth century. Unfortunately, this is far from the truth. Slavery and the global slave trade continue to thrive to this day; in fact, it is likely that more people are being trafficked across borders against their will now than at any point in the past.

This human stain is not just a minor blot on the rich tapestry of international commerce. It is a product of the same political, technological, and economic forces that have fueled globalization. Just as the brutal facts of the Atlantic slave trade ultimately led to a reexamination of U.S. history — U.S. historiography until the 1960s had been largely celebratory — so must growing awareness of the modern slave trade spark a recognition of the flaws in our contemporary economic and governmental arrangements. The current system offers too many incentives to criminals and outlaw states to market humans and promises too little in the way of sanctions.

Contemporary slavery typically involves women and children being forced into servitude through violence and deprivation. Disturbingly, the advanced industrial states have failed to to take much action to address the issue. The problem is one of political will, not capability, for the rich countries of the world have at their disposal numerous instruments that, if their leaders had the courage to use them, could greatly curtail the global slave trade. Just as the British government (after much prodding by its subjects) once used the Royal Navy to stamp out the problem, today’s great powers must bring their economic and military might to bear on this most crucial of undertakings.

After all, ending slavery is not simply a moral crusade, as compelling as the moral case may be. There are also important self-interested reasons why the West should lead a charge to eliminate this practice. The fact of the matter is that the same people who engage in human trafficking also contribute to the deepening criminalization of the world economy overall, often operating in close association with corrupt officials around the world. By allowing slavery to go unpunished, states unwittingly erode the foundations of the international economic system, which requires that governments be capable of enforcing bilateral and multilateral agreements and the rule of law.

Tragically, although the strongest states have the greatest capacity to suppress the slave trade, they have not done so, and key opportunities for action have been lost. The European Union (EU), for example, should have used accession talks with potential new members to pressure them into limiting the trafficking of their female citizens to the West. Meanwhile, President George W. Bush and Secretary of State Condoleezza Rice may have made some bold pronouncements about eliminating slavery, but the U.S. administration is so focused on the war on terror that Bush and Rice rarely press matters such as slavery at meetings with relevant governments.

Such a shortsighted approach is dangerous not just for the people who end up as slaves around the world but for anyone with a stake in the future of globalization. The costs of inaction are rising; already, they are too high to bear.

TRAFFIC

The modern global slave trade generally involves the use of deception and coercion to induce victims to cross national borders in search of new jobs; once the target has arrived in a foreign country, he or she (and it is usually a she) is then forced into some form of labor bondage. Although hard figures are difficult to come by, in June 2006, the U.S. government estimated that some 600,000-800,000 people were subjected to such treatment each year. This number does not include the many millions of people who are held as forced laborers within their home countries, such as in India and Myanmar. When those individuals are taken into account, the total number of people estimated to be living in some form of forced servitude around the world (according to the International Labor Organization) grows to 12 million. Whatever the exact number is, it seems almost certain that the modern global slave trade is larger in absolute terms than the Atlantic slave trade in the eighteenth and nineteenth centuries was.

Approximately 80 percent of today’s slaves on the global market are female, and up to 50 percent are under the age of 18. According to the United Nations (UN), these victims span the globe, being trafficked “from 127 countries to be exploited in 137 countries.” Most of the slaves come from countries such as Albania, Belarus, China, Romania, Russia, and Thailand, while the most frequent destinations for traffickers are in Asia, followed by the advanced industrial states of western Europe and North America and a number of states in the Middle East (including Israel). The slave trade is also a major problem in Africa — where children are often forced to serve as soldiers — but relatively little is known about the traffic in this region.

Once slaves arrive at their destinations, they typically are forced to serve one of several functions. Approximately 43 percent of those in the global market are used for sex, while another 32 percent are forced into other forms of unpaid labor, working as domestic servants, construction workers, or, occasionally (in the case of very young boys), as camel jockeys in the Persian Gulf states. The rest are pressed into both sexual and economic services. Governments and international agencies differ about these precise figures, since it is somewhat easier to calculate the numbers of persons forced into sexual servitude than it is to figure out how many are forced into bonded labor. Indeed, the number of men who are trapped as indentured laborers is likely underreported.

What all slaves have in common is that they are forced to work. Slavers typically recruit poor people in poor countries by promising them good jobs in distant places. A recruiter will then offer a victim a generous loan — at an exorbitant interest rate — to help with travel arrangements, papers, and locating a job in the new community. On arrival, the promised job never materializes, and thus the large debt — up to several thousand dollars — can never be repaid. The victim is then stripped of all travel documents, given a false identity, and forced into a job. He or she — and his or her family — are threatened with disfigurement or death should the slave try to alert the authorities or escape. If they are paid at all, slaves get the bare minimum required for survival.

As the persistence of the slave trade suggests, it is a profitable activity. The UN estimates that human traffickers earn around $10 billion per year and that the average sale price for a slave is around $12,500. Since operating costs (for transportation and false documents) are estimated to be approximately $3,000 for each slave, slavers can earn nearly $10,000 per victim. It is worth noting that the cost of a slave today is far less than what African slaves once fetched in the antebellum United States — a difference owing in part to cheap modern transportation.

As a result of the low entry costs of the modern slave trade, the business is dominated by numerous criminal gangs instead of one large mafia. These gangs are mainly from Asia, eastern Europe, and Latin America; the authorities do not know whether they are part of larger syndicates or are specialists in human trafficking. Besides easy profits, the slave trade offers another advantage to criminals: the risks of arrest are low and the penalties are relatively light. In the United States, for example, drug traffickers generally face much stiffer sentences than do those who traffic in humans.

In order to thrive, the slave trade requires the direct or indirect involvement of national governments, at both the source and the destination. Since profits are high, slavers have plenty of money to pay off government officials and local police. In certain countries, these criminal links go to the very top. For example, in a September 2005 memorandum to Secretary of State Rice, titled “Presidential Determination With Respect to Foreign Governments’ Efforts Regarding Trafficking in Persons,” President Bush stated that the Cambodian government had “failed to address the trafficking complicity of senior law enforcement officials” in that country and that the Myanmar military was “directly involved in forced labor.” Bush also singled out a number of other governments — including those of Ecuador, Kuwait, Saudi Arabia, and Venezuela — for failing to “show a serious commitment” or to devote “sufficient attention” to stopping human trafficking in their countries. If ordinary criminals are rarely punished for dealing in slaves, high-level officials in such places enjoy even more impunity.

A CONVENTIONAL APPROACH

Ever since the abolition of the Atlantic slave trade, slavery has been recognized as the most abhorrent violation of a person’s liberty. The practice runs counter to the entire modern history of human rights. Indeed, one of the UN’s first acts after its establishment was to pass the Convention for the Suppression of the Traffic in Persons and of the Exploitation of the Prostitution of Others, which the General Assembly approved in 1949. That convention updated international agreements from 1904 and 1910 on the “suppression of the white slave traffic.” Although it dealt largely with prostitution, the 1949 treaty was far more ambitious in certain respects than anything that has been proposed in more recent times. In fact, the convention’s blanket condemnation of all forms of prostitution and brothels looks almost quaint by today’s standards, given the number of governments (such as, most famously, that of the Netherlands) that have since legalized the sex trade.

The most authoritative modern international agreement aimed at the slave trade is the Protocol to Prevent, Suppress, and Punish Trafficking in Persons, Especially Women and Children, which was approved by the UN General Assembly in 2000 after the G-8 (the group of leading industrial countries) declared its support for such an undertaking earlier that year. This agreement, which supplemented the UN’s Convention Against Transnational Organized Crime, reflected a growing awareness among world leaders of the role of organized crime in global commerce. Unlike earlier slavery treaties, the protocol does not mention prostitution; instead, it aims to serve as the “universal instrument that addresses all aspects of trafficking in persons.”

The most difficult issue faced by the diplomats who negotiated the treaty was how to define “human trafficking” in the first place. The confusion stemmed from the fact that it is often difficult to distinguish workers — even sex workers — who voluntarily take large loans at high interest rates in order to work abroad from those who are coerced into doing so and end up in bonded servitude. Separating the two groups requires establishing a clear definition of “deception” and “coercion” — no mean feat.

Reflecting the work of a committee, Article 3 of the protocol defines “human trafficking” awkwardly as “the recruitment, transportation, transfer, harboring or receipt of persons, by means of the threat or use of force or other forms of coercion, of abduction, of fraud, of deception, of the abuse of power or of a position of vulnerability or of the giving or receiving of payments or benefits to achieve the consent of a person having control over another person, for the purpose of exploitation.”

It is not hard to see why governments that have signed the protocol have found it hard to incorporate this definition into their criminal codes. In 2000, the United States took the lead by passing the Trafficking Victims Protection Act (TVPA), which was signed into law by President Bill Clinton and reauthorized and strengthened by Bush in 2003. The TVPA, which is widely regarded as a model for other countries, establishes a more precise definition of what constitutes human trafficking, imposes stronger penalties than had previously existed, and allocates funds for compensation to the victims of human trafficking and for cooperation efforts with foreign countries.

The TVPA also requires the State Department to issue an annual Trafficking in Persons Report that, among other things, classifies countries according to their efforts to halt the slave trade. There are now 32 countries on the State Department’s “Tier 2 watch list,” a list of those governments that are making efforts to comply with antislavery treaties but in whose countries compliance is still weak, [see footnote 1] and another 12 on the “Tier 3″ list, a list of those governments that are making little effort to halt the slave trade.[see footnote 2]

Since the passage of the TVPA, the United States has charged 189 individuals with sex trafficking, up from only 34 during the five years before the law went into effect. Federal prosecutors have won 109 convictions in these cases, up from 20 in the preceding period. Sentences have ranged from 16 months to 23 years. The U.S. government has also charged 59 defendants with labor trafficking (two major cases involved 24 of these individuals). These cases led to, among other things, the first-ever extradition of Mexican citizens to the United States to face labor-trafficking charges.

As a result of the TVPA, the United States has been much more successful in cracking down on slave traders than have most other countries. For example, according to the UN, in 2003 Lithuania prosecuted 24 traffickers but convicted only 8 of them, and Ukraine prosecuted 59 but convicted only 11. Among those countries that provide figures, only the Netherlands has a better record than the United States of prosecuting those involved with the slave trade.

Despite these accomplishments, the TVPA is far from perfect. For one thing, law enforcement officers have complained that it is difficult to implement. One California police officer who was interviewed about the legislation reported that in one of his cases “half the 30 men arrested … were deported instead of prosecuted” for their crimes. Another major problem that prosecutors face is how to get victims of human trafficking, who fear the repercussions for themselves and their families, to testify against their oppressors.

The TVPA has also failed to help the U.S. government make much of a dent in the global slave trade, for several reasons. To begin with, the available data suggest that only a relatively few slaves enter the United States each year. The Justice Department reported in 2006 that about 17,500 persons are trafficked into the country annually; in the late 1990s, the CIA put the figure at about 50,000. Even if one accepts the higher figure, this still means that the vast majority of slaves are traded outside the United States.

Yet most other governments have not made combating the slave trade as high a priority as Washington has. This includes many western European governments, which (with a few notable exceptions, such as in Sweden and the Netherlands) have done little to stop the flow of slaves from the East. As a result, ever-increasing numbers of young women and girls are being forced to work the streets of France, Germany, and Italy. This is despite the fact that Europe has numerous nongovernmental organizations and media outlets concerned with the issue. Outside Europe, where such forces play a much smaller role, the situation is even worse. In Thailand, for example, traders who bring in Myanmar women for prostitution are rarely prosecuted. In Russia, government officials show little concern over the plight of young women trafficked into or out of their country. And in the Persian Gulf, the use of slaves for prostitution, domestic service, and camel jockeying remains widespread even though it has been illegal since the 1960s.

Although the United States has sought to cooperate with foreign governments in combating the slave trade, it has rarely punished a country for failing to act against human trafficking. It is probably no coincidence that the lists of noncompliant states include important oil producers (such as Kuwait and Saudi Arabia), key allies in Washington’s war on terror (such as Uzbekistan), and great powers (such as China, India, and Russia). Under U.S. law, the president has the authority to impose economic sanctions on states that fail to combat the slave trade by blocking foreign aid and military assistance. Unfortunately, this is rarely a useful tool, since most of the countries in question either do not receive U.S. aid or are of such compelling importance to national security that the president is unwilling to crack down on them. The Bush administration, like its European counterparts, seems to feel that a few slaves should not be allowed to get in the way of high politics.

Instead, Washington and its allies in the industrial world have taken the position that rather than target governments, they should focus their efforts on the demand and supply sides of the slavery problem. But Western countries disagree about what those steps should be. And even if they could reach some sort of consensus, such measures would be insufficient. The slave trade will only come to an end when a few key states muster the will to use force to liberate the victims.

AT THE SOURCE

Such a claim may sound needlessly provocative. It certainly flies in the face of statements made by many European officials who argue that it would suffice to tackle the demand side of slavery by legalizing prostitution in the industrial world, which would supposedly reduce human trafficking by curbing the demand for slaves, or who argue that the supply side should be addressed by promoting economic development and growth in poor countries. It also runs counter to statements by UN officials, who generally focus on the need to strengthen the 2000 protocol — for example, by educating police officers and prosecutors about its content.

The problem is that none of these measures will work. The demand-side approach has already been tried — most famously by the Netherlands, which legalized prostitution in October 2000. The Dutch government has explicitly stated that its legalization of sex work was meant to facilitate “action against sexual violence and abuse and human trafficking.” The idea was that once brothels were permitted and regulated, the police would be better able “to pick up signs of human trafficking” and prevent it.

But the Dutch strategy has not achieved much. Sex slaves have continued to enter the black market, providing their services at lower prices than those charged by prostitutes in the officially sanctioned red-light district. The slaves work in areas such as railroad stations and on those streets that are off-limits to legal prostitutes, and they attract clients who are too poor to pay official prices. The police, meanwhile, have proved no more able than in the past to stop such practices.

Interestingly, Sweden — a country usually known for its relaxed attitudes toward sexuality — has taken the opposite tack, criminalizing the buying of sex. Since 1999, when this new law was introduced, some 750 men in Sweden have been charged with seeking to purchase the services of a prostitute, a crime punishable by up to six months in jail. The Swedish government claims that this policy has greatly reduced the number of prostitutes working the country’s streets — although it is possible that the law has merely driven Sweden’s prostitutes and their clients deeper underground.

Other countries have followed Sweden’s lead to varying degrees, especially penalizing those who prey on underage sex workers. Some states have even extended their laws to acts committed by their citizens while abroad. France, for example, has played a leading role in prosecuting “sex tourists,” who seek pleasure in countries such as Thailand. The effects of such policies have yet to be measured sufficiently, but even if laws criminalizing the buying of sex could make a dent in the trafficking of humans into the industrial world — changing the demand side of the equation — they would remain half measures given the number of people traded into slavery each year. For example, all the prosecutions in the United States to date have only led to the release of a few hundred victims of slavery. More action is therefore also needed on the supply side.

Many policymakers have suggested that promoting economic growth in developing countries should be the next step, since this would supposedly eliminate slavery by providing potential victims with an alternative. But economic growth alone will not stop this plague, at least not anytime soon. It will take a huge amount of progress before citizens of the developing world stop being tempted by the prospect of a good job in a rich country. And it is far from clear how such progress should be achieved; it would certainly be unrealistic to expect the industrial world to provide enough aid to make up the difference itself.

It is also important to remember that slavery today seems to thrive in some parts of the world because of economic growth, not despite it. In the Middle East, for example, the demand for young camel jockeys has increased as more people have gained the means to bet on races and as the stakes have increased. In fact, the history of slavery provides little evidence to suggest that economic growth could help end it anywhere.

Rather than seek complicated and distant solutions, governments should focus on a few concrete actions that could have a real impact on human trafficking in the short run. An excellent way to start would be with the naming and shaming of traders and the governments that support them. The United States has already gone further than any other country in this direction with its annual Trafficking in Persons Report. But few people seem aware of the document, and the Bush administration — and the mass media — should do much more to publicize its findings. Reputation matters in today’s global economy, and a reputation for harboring criminals is something no state wants.

Naming and shaming can also work in other parts of the globe. For example, the Association of Southeast Asian Nations has recently started putting pressure on Myanmar both through quiet diplomacy and through drawing greater public attention to the Myanmar government’s dismal human rights record. This policy seems to be working; even military juntas want respect, and Myanmar’s leaders seem to recognize that since they rely heavily on tourism for their supply of foreign currency, bad press in foreign papers could inflict real material damage on their country.

Next, wealthy states need to do a better job of confronting countries on the State Department’s Tier 2 and Tier 3 lists, imposing economic sanctions on them if they do not act to ban human trafficking. The EU should put pressure on accession candidates, such as Bulgaria and Romania, and on member states, such as Latvia and Portugal, that allow slavery to continue or take inadequate measures to stop it. After all, the EU sometimes exacts penalties on member states that fail to meet their commitments in many other areas, such as industrial policy; surely, there is an even stronger case to be made where slavery is involved. For its part, the United States must not allow its focus on the war on terrorism to distract it from acting on this issue. Washington has allowed too many states — especially oil producers, such as Kuwait and Saudi Arabia — to get away with too much for too long. Under the TVPA, the United States already has the authority to impose economic sanctions on states that fail to act against the slave trade. The Bush administration should also remember that governments that allow this scourge to thrive are unlikely to be reliable allies when it comes to other problems that concern the United States.

To complement sanctions, Western states should also empower their police, intelligence, and military forces to act much more aggressively against those who traffic in humans. Just as force was ultimately needed to halt the slave trade in the nineteenth century, so will force be necessary in some cases today. Current international treaties on slavery do not authorize the use of force against slavers, but bilateral agreements should be strengthened to allow such measures. The TVPA already provides funds to support international cooperation against slavery. When it is next reauthorized by Congress, in 2007, lawmakers should add provisions explicitly stating that such cooperation should extend to military and intelligence forces.

It is worth remembering that in the nineteenth century many people argued that slavery would end “naturally” once the practice was no longer economically profitable. But historians now agree that since slavery remained extremely profitable until the day it was abolished, such an end was unlikely ever to come. If this was true in the past, it is even more true today, since the costs associated with the slave trade have shrunk so dramatically. As long as slavers continue to face only mild penalties from a handful of countries — and none from the rest — they can be expected to continue their work, undermining in the process the legal and ethical foundations of the global economy. If the United States and some of its European partners wish to halt modern slavery, they will have to use their power to do so, just as the Royal Navy halted the Atlantic slave trade on the high seas in the nineteenth century. There is no “natural” end to slavery in sight, and any productive policy must start by recognizing that fact.

The time has come to tackle the slave trade once and for all, in the interest of not only the people most directly affected but the broader public as well. As usual when it comes to politics, Abraham Lincoln said it best: “In giving freedom to the slave, we assure freedom to the free.” Halt the global slave trade today, and all citizens of the world will benefit. Allow the practice to continue, and all will ultimately suffer.

[Footnote 1] The list comprises Algeria, Argentina, Armenia, Bahrain, Bolivia, Brazil, Cambodia, the Central African Republic, China, Cyprus, Djibouti, Egypt, Equatorial Guinea, India, Indonesia, Israel, Jamaica, Kenya, Kuwait, Libya, Macau, Malaysia, Mauritania, Mexico, Oman, Peru, Qatar, Russia, South Africa, Taiwan, Togo, and the United Arab Emirates.

[Footnote 2] The list comprises Belize, Burma, Cuba, Iran, Laos, North Korea, Saudi Arabia, Sudan, Syria, Uzbekistan, Venezuela, and Zimbabwe.

Ethan B. Kapstein. Foreign Affairs. New York: Nov/Dec 2006.Vol.85, Iss. 6;  pg. 103

China’s Leadership Gap

RECRUITING THE NEXT GENERATION OF REFORMERSAfter 28 years of reform, China faces challenges of an unprecedented scale, complexity, and importance. China has already liberalized its markets, opened up to foreign trade and investment, and become a global economic powerhouse. Now its leaders and people must deal with popular dissatisfaction with local government, environmental degradation, scarce natural resources, an underdeveloped financial system, an inadequate health-care system, a restless rural population, urbanization on a massive scale, and increasing social inequality. Most of these problems, of course, have existed throughout the period of reform. What is different now is that the pace of change is accelerating while the ability of the state to manage that change is not keeping pace.

Solving any one of these problems by itself would be a formidable task. But Beijing must deal with all of them at once. Because China’s government is a one-party system with minimal popular participation, success depends on the energy and ideas of its leaders. Yet the Chinese government today finds it harder than ever to attract, develop, and retain talent. Graduates from the country’s top universities, who once would have filled government posts, are instead choosing to take jobs in the private sector. Ironically, by creating new opportunities for talented people, China’s three decades of reform have made undertaking new reforms more difficult. Moreover, the structure of the country’s bureaucracy stifles initiative and promotes mediocrity. Worse, many officials, from the village to the central government, are corrupt, eroding the government’s effectiveness and feeding popular discontent with the system.

Of all of China’s challenges, none is more critical — or more daunting — than that of nurturing a new generation of leaders who are skilled, honest, committed to public service, and accountable to the Chinese people as a whole. Unless China manages to produce such leaders, Beijing will fail to meet the country’s challenges, and its public promises of a more prosperous and democratic future will remain unfulfilled.

MANDARINS AND MULTINATIONALS

For much of China’s history, the central bureaucracy attracted the country’s best and brightest. The famous imperial testing system for identifying future mandarins provided what was, at least in part, a merit-based route to social advancement: government service, especially when combined with personal connections and keen political skills, was the fastest path to power and wealth. Although the powerful state that emerged after the ascendancy of the Chinese Communist Party (CCP) in 1949 changed much in Chinese society, it only reinforced the bureaucracy’s near monopoly on talent. Today, however, many ambitious Chinese no longer regard a government job as the best route to success. And those who try to pursue careers in government after spending time in the private sector often find that their way is blocked.

China’s educational system continues to identify the best minds (or at least the best test takers) and send them to top universities. Once there, however, most students now study what they find most interesting or what they think will be most lucrative instead of taking courses designed to prepare them for government work. Top graduates of Tsinghua University, the alma mater of many CCP leaders (including four of the nine members of the Standing Committee of the Politburo) and the school where I now teach, tend to prefer graduate school, overseas study, jobs in multinational firms, and even jobs with local firms to government posts. And some who want official positions find it difficult to get them. One student I know, who had been among the best in his class at Tsinghua, wanted to pursue a career in the central government. But when he graduated, his only public-sector choice was to return to his low-level provincial post because no one in Beijing could find a place for him in the national bureaucracy. Rather than shuffle papers in the provinces, he decided to avoid government service altogether.

Many of those who do manage to enter public service do not stay there for long. Some central government ministries — notably the Commerce and Foreign Ministries — still attract top graduates, but those agencies’ employees are also the most vulnerable to poaching by multinational firms, which prize those employees’ language abilities, worldliness, and contacts. For their part, young officials can expect to quintuple their salaries in the private sector. Thus, even as the problems of reform grow harder, the leadership talent pool is becoming shallower.

Students at universities such as Tsinghua are strongly patriotic and often justify working abroad or for multinational firms as a way to prepare themselves for a future in public service. This assumes, of course, that they will be able to enter the government later in their lives. But power in China is still firmly in the hands of careerists. There remains a virtually impermeable wall between those who are what the Chinese call tizhinei (inside the system) and those who are tizhiwai (outside the system).

In the late 1990s, Premier Zhu Rongji regularly approached the best Chinese talent in particular disciplines around the world and invited them to join the government. The experiences of these returnees have been difficult. They work surrounded by resentful “lifers,” who see them as a threat. None of them has been a conspicuous success, and Zhu’s experiment has for the most part been abandoned. Although it is conceivable that returnees might receive a warmer welcome in the future, in the short term, the brain drain has led to a noticeable decline in the quality of lower-level officials, on whom the success of reform policies depends. It is telling that most foreigners doing business in China are loath to deal with government officials under the rank of director general, three levels below a minister.

The difficulty returnees face is only one aspect of the structural problems of China’s bureaucracy. Another is that senior officials are often asked to take on roles for which they are unprepared. The party secretary of one of China’s large cities once told me that he had been directed by Beijing to privatize several hundred state-owned firms within two years, even though he had never privatized a single business and had almost no idea about how to proceed. Nor were the managers of the state-owned businesses he was supposed to sell much help; in search of buyers for their firms, they were reduced to putting up “For Sale” pages on the Internet and waiting to see who responded. As the pace of change accelerates, it is increasingly common for officials to be asked to undertake such tasks without any sort of guidance.

Compounding the difficulty, many high-level officials are moved from post to post too quickly. The CEO of a state-owned bank may suddenly find himself assigned to a provincial leadership position. To some degree, such movement represents the government’s hunger for talent and its willingness to put leaders wherever they are needed. Such job-hopping, however, limits the effectiveness of leaders, since they have little time to learn about their positions or see their initiatives through, and they face resistance from subordinates who know they will soon be gone. Midlevel officials manipulate the senior officials who come through the revolving door to their advantage. Many Chinese bureaucrats sarcastically refer to this situation as “the system of ministerial responsibility under the leadership of the division chief.”

Lower-level officials have the opposite problem. Most must work patiently inside a single area of government until they reach a relatively senior level before they even have a chance to experience working in another ministry or bureau. Even at the national level, it is common for directors general to have spent their entire careers rising through the ranks of the bureaus they now lead. This further discourages risk taking and innovation and thus creates yet another obstacle to good governance. Worse, the system encourages careerism at all levels: one Chinese study published in 2000 found that government officials were more worried about pleasing their superiors than serving the people.

CONFUCIAN IDEAL, CORRUPT REALITY

Despite such systemic flaws, by some objective standards China’s current leaders are far more qualified than those who ran the country a generation ago. As the Hamilton College scholar Cheng Li observes, in 1982 less than 20 percent of provincial CCP chiefs had more than a high school education. Today, over 97 percent of such officials hold advanced degrees. The country’s highest political body, the Standing Committee of the Politburo, today comprises nine engineers educated at China’s elite universities and technical institutes, compared with the Long Marchers who held these offices a generation ago. Even at the local level, it is not uncommon for party secretaries, governors, and mayors to hold Ph.D.’s.

At its best, the marriage of talent and power realizes the ancient Confucian ideal of the scholar-official. But although China’s current leaders are better educated than were their predecessors, they are not necessarily more upright. Many talented and honest officials stay in government out of a deep sense of responsibility, but others are motivated by a desire for status and power. As a result, corruption is rife. Growing local anger at official venality belies the old CCP maxim that China’s leaders “suffered first and ate last.”

One of the most corrosive — and pervasive — forms of malfeasance is the selling of official posts. It is commonly said that becoming a municipal bureau chief costs about 800,000 yuan (roughly $100,000). In one infamous case that implicated more than 260 officials, Ma De, the party secretary of Suihua City, in Heilongjiang Province, was given a commuted death sentence in 2005 for pocketing the equivalent of more than $700,000 by selling government jobs. A national minister of land and resources was removed from office for involvement in the corruption. Such practices fuel a vicious cycle in which officials who have purchased their jobs feel the need to realize a return on their “investment.” One of the simplest ways to do so is to sell the jobs they control because of their own bought positions, an action that weakens leadership throughout the system.

Both the government and the party have made attempts to stem corruption in recent years. According to Ye Feng, a senior official at the Supreme People’s Procuratorate (roughly China’s equivalent of the U.S. Department of Justice), in 2005 state prosecutors investigated more than 41,000 corruption cases and filed charges in 75 percent of them. Between November 2004 and December 2005, according to a senior party official, the CCP conducted 147,539 investigations of its members, including 15,177 cases involving criminal conduct. But there is scant evidence that these efforts have had much effect. Despite high-profile examples of local authorities being tried, convicted, and sometimes even executed for corruption, many officials simply calculate that the payoff from malfeasance is worth the risk of being caught. According to Ye, for instance, four consecutive party secretaries in one county in the region of Guangxi have been arrested for corruption.

There are clear indications that public dissatisfaction with government incompetence and dishonesty is growing. According to the Chinese government’s own figures, last year there were more than 80,000 “mass incidents” throughout the country. It is commonly believed that a great number of these were protests of local government policy or performance. A survey released earlier this year by China’s largest private polling organization, Horizon Research, found that 43 percent of residents of small towns were dissatisfied with their local governments. More worrisome, over 60 percent of respondents from cities and towns believed that “the government could not solve problems even if [members of the public] complained.”

CAREERS OPEN TO TALENT

President Hu Jintao and Premier Wen Jiabao understand the importance of bridging the chasm between what China needs from its leaders and what the country is receiving. Both have publicly taken steps to do so. In 2004, for instance, Wen added a new section on “government self-improvement” to his annual report to the National People’s Congress, telling delegates that “it is imperative to build a contingent of public servants who are politically reliable, professionally competent and clean and honest and have a good work style.” During an inspection tour of Fujian Province in January 2006, Hu warned cadres against covering up problems or trying to pass the buck by sending dissatisfied citizens to file their complaints with the national government. Hu mentioned a December 2005 incident in the province of Guangdong, in which police opened fire on peasants protesting the confiscation of their land, as proof of the need to improve local government. The recurring educational campaigns for cadres, which exhort party members to “live plainly, struggle hard” and warn them not to “wallow in luxuries and pleasures,” stem less from nostalgia for the reeducation campaigns of earlier generations than from a realization that the quality of leadership needs to be raised.

Having a capable corps of public-sector leaders is critical for Hu to achieve his goals, including his stated ambition of broadening public participation in China’s governance. During his April 2006 visit to the United States, Hu said that China “will continue to reform its political structure, develop socialist democracy, expand citizens’ orderly participation in political affairs, and ensure that people exercise democratic elections, democratic decision-making, democratic management, and democratic supervision in accordance with the law.”

What precisely Hu has in mind is still not clear, perhaps even to him. It is probably safe to say, however, that he does not envision China becoming a Western-style liberal democracy. It is more likely that the CCP will seek ways to build greater responsiveness and accountability to citizens into the system while stopping well short of introducing direct elections for national leaders. Such reforms would likely include a more robust and independent judiciary, increasing degrees of democracy within the CCP itself, and more reliable sources of information about how people feel about local leaders and policies — and presumably some ability for people to affect one or both.

Among the measures that are being considered are changing how party congresses operate and how deputies are selected and disciplined and introducing intraparty democracy in order to promote greater accountability. It is no longer unusual for multiple candidates to stand for local party offices, for instance. Some even speculate privately that the entire CCP membership of more than 70 million people may in the not too distant future choose the party’s leader — who is, of course, the leader of China. More significant changes are unlikely, both because the current arrangement supports the interests of those in power and because there is unease among the elite, which is shared by many ordinary Chinese, about the risks posed by instability and disorder.

Encouraging popular participation and strengthening official accountability are essential elements of the transformation that China must undergo if its modernization is to succeed. It cannot continue to rely solely on its current top-heavy political structure. If it does, the country will experience increasing outbursts of popular anger against decisions made by local officials, which citizens do not feel they help to shape.

Because the size of the current pool of government leaders and managers in China is not sufficient to carry out the next wave of reform, the party will have to tear down the wall between the government and the private sector that currently keeps many talented professionals out of public service. By opening up the leadership to new members, China could unlock the potential of those existing leaders who are often frustrated by the competing demands of politics and effectiveness. Only by freeing its managers and leaders from the shackles of organizational politics and old-line thinking will China be able to find a dynamic but stable path toward the democratic future endorsed by Hu and aspired to by ever-larger numbers of his fellow Chinese.

John L. Thornton. Foreign Affairs. New York: Nov/Dec 2006.Vol.85, Iss. 6;  pg. 133

Mexico: new president could open the door to foreign investment

After winning the presidential election by the narrowest margin in Mexican history and enduring two months of public protests and legal challenges, conservative candidate Felipe Calderon has officially been declared the successor to Mexico’s leader, Vicente Fox, Anne Feltus reports.

That is good news for energy companies that have experience operating in deep waters around the globe. Like Fox, Calderon recognises that the country’s energy future depends on its ability to exploit its deep-water oil and gas potential and that the national oil company is not up to the task.

Oil income accounts for more than 40% of federal revenues and for years that income has come primarily from the giant Cantarell complex in the Gulf of Mexico. Total reserves of the five fields that comprise Cantarell rank as the second-largest in the world, smaller only than Saudi Arabia’s Ghawar oilfield.

Discovered in 1976, and producing since 1979, Cantarell reached peak production of 2.13m barrels a day (b/d) in 1994 then began to decline. In an effort to prolong its life, state-owned Pemex began pumping nitrogen into the field to increase its pressure and employed production-boosting techniques such as horizontal drilling. Cantarell is expected to yield about 1.9m b/d of oil this year, but production is projected to drop rapidly to between 1.43m and 0.52m b/d by 2008.

To meet future domestic demand and continue participation in the international market, Mexico must find significant new oil reserves and the industry consensus is that those deposits are most likely to be in deep water. Pemex made its first deep-water oil discovery in Campeche Sound in 2004.

Two more discoveries followed before the Noxal 1 well, drilled in 3,000 feet of water off the coast of Veracruz, struck paydirt in March 2006. Initially, it was hailed as a major oil discovery that would yield as much as 10bn barrels and would reinvigorate the Mexican industry by helping offset Cantarell’s decline. However, further drilling has revealed only 245bn cubic feet (cf) of gas and no significant oil reserves.

Pemex will continue its exploitation of the Mexican Gulf’s deep water, but deep-water development is expensive and Pemex is heavily in debt. More importantly, it lacks experience of deep-water drilling, which is technologically challenging. Compounding the problem, Mexico prohibits foreign companies from investing in oil exploration. Mexican law limits participation by private and foreign oil companies to provision of oilfield services on a contractual basis.

The Fox administration’s efforts to ease these restrictions were blocked by the opposition-dominated Congress. If the election had swung in favour of Calderon’s opponent, Andres Manuel Lopez Obrador, the impasse would probably have continued. However, now that the election results have been confirmed, Calderon is expected to begin opening the doors to foreign investment. Already, one deep-water veteran, Brazil’s Petrobras, has indicated that it is ready and eager to enter.

Petroleum Economist. London: Oct 2006. pg. 1

Petroleos Mexicanos

Mexico: Pemex under pressure to reform as Canterell declines

The country’s new government should relax the financing constraints on state-owned Pemex, the International Monetary Fund (IMF) says in a new country report. Under the existing financing arrangements, in which raising oil-sector investment requires either fiscal-policy tightening or the issuance of public debt, too much strain is being put on the public-sector balance sheet, the report says.

At the same time, Pemex is denied access to technologies and advantages that other oil companies obtain through joint ventures, because foreign ownership of hydrocarbons resources is prohibited in Mexico. In addition, argues the IMF, unlike international oil companies, Pemex is unable to adjust its annual capital budget at short notice to reflect changes in international crude and products prices.

Proposals to reform Pemex’s governance and to allow risk-sharing with the private sector deserve new consideration, says the report. Risk-sharing with private-sector investors would ease the pressure on the public-sector balance sheet, help reduce national debt and would mean that the state would have a lower share of its assets invested in the oil sector.

Mexico could emulate other countries that have put national oil companies (NOCs) on a more commercial footing. The IMF points to the example of Brazil’s NOC, Petrobras, as an illustration of how an NOC can use private-equity finance to underpin rising capital expenditure.

The urgency of reform is underscored by growing doubts about Pemex’s capacity to orchestrate a sustained increase in oil output, as its main fields continue their irreversible decline. The IMF says Pemex will find it difficult to develop sufficient oil to compensate for losses from the Cantarell field. Cantarell is the world’s second-largest producing field and accounted for 60% of Mexico’s oil production last year.

Pemex expects Cantarell’s output to fall by 50% by 2010 from the present level of 1.86m barrels a day (b/d). However, the problem is not restricted to Cantarell: 23 of Mexico’s 32 most important fields are in decline. Mexico’s oil production is expected to average 3.25m b/d in 2006 – down from 3.31m b/d in 2005. Proved oil reserves declined to 14bn barrels in 2005 from about 17bn barrels in 2002.

Enhanced oil-recovery (EOR) programmes should boost output at mature fields. For example, Pemex says EOR at the Jugo-Tecominoacan field in southern Mexico will boost production from 22,000 b/d to a peak of 88,000 b/d by 2008. However, gains on this scale will not deliver production increases on the scale of Cantarell.

Significant investment and new technology will, therefore, be required to exploit complex geological structures and deep-water resources, the IMF says. Some estimates suggest the deep waters of Mexico’s segment of the Gulf of Mexico could hold as much as 53bn barrels of oil. Yet Pemex has little experience in deep-water exploration and production, and lacks the necessary technology and funds. From 2000, Pemex boosted annual investment to over $10bn, from less than $1bn a year during the 1990s. But the extra spending has failed to staunch sliding output, adding weight to calls for reform.

Petroleum Economist. London: Nov 2006. pg. 1

Dynamic Capitalism

There are two economic systems in the West. Several nations — including the U.S., Canada and the U.K. — have a private-ownership system marked by great openness to the implementation of new commercial ideas coming from entrepreneurs, and by a pluralism of views among the financiers who select the ideas to nurture by providing the capital and incentives necessary for their development. Although much innovation comes from established companies, as in pharmaceuticals, much comes from start-ups, particularly the most novel innovations. This is free enterprise, a k a capitalism.

The other system — in Western Continental Europe — though also based on private ownership, has been modified by the introduction of institutions aimed at protecting the interests of “stakeholders” and “social partners.” The system’s institutions include big employer confederations, big unions and monopolistic banks. Since World War II, a great deal of liberalization has taken place. But new corporatist institutions have sprung up: Co-determination (cogestion, or Mitbestimmung) has brought “worker councils” (Betriebsrat); and in Germany, a union representative sits on the investment committee of corporations. The system operates to discourage changes such as relocations and the entry of new firms, and its performance depends on established companies in cooperation with local and national banks. What it lacks in flexibility it tries to compensate for with technological sophistication. So different is this system that it has its own name: the “social market economy” in Germany, “social democracy” in France and “concertazione” in Italy.

Dynamism and Fertility

The American and Continental systems are not operationally equivalent, contrary to some neoclassical views. Let me use the word “dynamism” to mean the fertility of the economy in coming up with innovative ideas believed to be technologically feasible and profitable — in short, the economy’s talent at commercially successful innovating. In this terminology, the free enterprise system is structured in such a way that it facilitates and stimulates dynamism while the Continental system impedes and discourages it.

Wasn’t the Continental system designed to stifle dynamism? When building the massive structures of corporatism in interwar Italy, theoreticians explained that their new system would be more dynamic than capitalism — maybe not more fertile in little ideas, such as might come to petit-bourgeois entrepreneurs, but certainly in big ideas. Not having to fear fluid market conditions, an entrenched company could afford to develop radical innovation. And with industrial confederations and state mediation available, such companies could arrange to avoid costly duplication of their investments. The state and its instruments, the big banks, could intervene to settle conflicts about the economy’s direction. Thus the corporatist economy was expected to usher in a new futurismo that was famously symbolized by Severini’s paintings of fast trains. (What was important was that the train was rushing forward, not that it ran on time.)

Friedrich Hayek, in the late 1930s and early ’40s, began the modern theory of how a capitalist system, if pure enough, would possess the greatest dynamism — not socialism and not corporatism. First, virtually everyone right down to the humblest employees has “know- how,” some of what Michael Polanyi called “personal knowledge” and some merely private knowledge, and out of that an idea may come that few others would have. In its openness to the ideas of all or most participants, the capitalist economy tends to generate a plethora of new ideas.

Second, the pluralism of experience that the financiers bring to bear in their decisions gives a wide range of entrepreneurial ideas a chance of insightful evaluation. And, importantly, the financier and the entrepreneur do not need the approval of the state or of social partners. Nor are they accountable later on to such social bodies if the project goes badly, not even to the financier’s investors. So projects can be undertaken that would be too opaque and uncertain for the state or social partners to endorse. Lastly, the pluralism of knowledge and experience that managers and consumers bring to bear in deciding which innovations to try, and which to adopt, is crucial in giving a good chance to the most promising innovations launched. Where the Continental system convenes experts to set a product standard before any version is launched, capitalism gives market access to all versions.

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The issues swirling around capitalism today concern the consequences of its dynamism. The main benefit of an innovative economy is commonly said to be a higher level of productivity — and thus higher hourly wages and a higher quality of life. There is a huge element of truth in this belief, no matter how many tens of qualifications might be in order. Much of the huge rise of productivity since the 1920s can be traced to new commercial products and business methods developed and launched in the U.S. and kindred economies. (These include household appliances, sound movies, frozen food, pasteurized orange juice, television, semiconductor chips, the Internet browser, the redesign of cinemas and recent retailing methods.) There were often engineering tasks along the way, yet business entrepreneurs were the drivers.

There is one conceivable qualification that ought to be addressed. Is productivity not finally at the point, after 150 years of growth, that having yet another year’s growth would be of negligible value? D.H. Lawrence spoke of America’s “everlasting slog.” Whatever the answer, it is important to note that advances in productivity, in generally pulling up wage rates, make it affordable for low-wage people to avoid work that is tedious or grueling or dangerous in favor of work that is more interesting and formative.

Of course, productivity levels in the smaller countries will always owe more to innovations developed abroad than to those they develop themselves. Some might suspect that the domestic market is so tiny in a country such as Iceland, for instance, that even in per capita terms only a very small number of homemade innovations would bring a satisfactory productivity gain — and thus an adequate rate of return. In fact, most of the Continental economies, including the large ones, have been content to sail in the slipstream of a handful of economies that do the preponderance of the world’s innovating. The late Harvard economist Zvi Griliches commented approvingly that in such a policy, the Europeans “are so smart.”

I take a different view. For one thing, it is good business to be an innovative force in the “global economy.” Globalization has diminished the importance of scale as well as distance. Tiny Denmark sets its sights on markets in the U.S., the EU and elsewhere. Iceland has entered into European banking and biogenetics. France has long done this — and can do more of it. But it could do so more successfully if it did not insulate its innovational decisions so much from evaluations by financial markets — including the stock market — as Airbus does. The U.S. is already demonstrably in the global innovation business. To date, there is an adequate rate of return to be expected from “investing” in the conception, development and marketing of innovations for the global economy — a return on a par with the return from investing in plant and equipment, software and other business capital. That is a better option for Americans than suffering diminished returns from investing solely in the classical avenue of fixed capital.

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I would, however, stress a benefit of dynamism that I believe to be far more important. Instituting a high level of dynamism, so that the economy is fired by the new ideas of entrepreneurs, serves to transform the workplace — in the firms developing an innovation and also in the firms dealing with the innovations. The challenges that arise in developing a new idea and in gaining its acceptance in the marketplace provide the workforce with high levels of mental stimulation, problem-solving, employee-engagement and, thus, personal growth. Note that an individual working alone cannot easily create the continual arrival of new challenges. It “takes a village,” preferably the whole society.

The concept that people need problem-solving and intellectual development originates in Europe: There is the classical Aristotle, who writes of the “development of talents”; later the Renaissance figure Cellini, who jubilates in achievement; and Cervantes, who evokes vitality and challenge. In the 20th century, Alfred Marshall observed that the job is in the worker’s thoughts for most of the day. And Gunnar Myrdal wrote in 1933 that the time will soon come when more satisfaction derives from the job than from consuming. The American application of this Aristotelian perspective is the thesis that most, if not all, of such self-realization in modern societies can come only from a career. Today we cannot go tilting at windmills, but we can take on the challenges of a career. If a challenging career is not the main hope for self-realization, what else could be? Even to be a good mother, it helps to have the experience of work outside the home.

I must mention a “derived” benefit from dynamism that flows from its effects on productivity and self-realization. A more innovative economy tends to devote more resources to investing of all kinds — in new employees and customers as well as new office and factory space. And although this may come about through a shift of resources from the consumer-goods sector, it also comes through the recruitment of new participants to the labor force. Also, the resulting increase of employee-engagement serves to lower quit rates and, hence, to make possible a reduction of the “natural” unemployment rate. Thus, high dynamism tends to bring a pervasive prosperity to the economy on top of the productivity advances and all the self-realization going on. True, that may not be pronounced every month or year. Just as the creative artist does not create all the time, but rather in episodes and breaks, so the dynamic economy has heightened high-frequency volatility and may go through wide swings. Perhaps this volatility is not only normal but also productive from the point of view of creativity and, ultimately, achievement.

Ideals and Reality

I know I have drawn an idealized portrait of capitalism: The reality in the U.S. and elsewhere is much less impressive. But we can, nevertheless, ask whether there is any evidence in favor of these claims on behalf of dynamism. Do we find evidence of greater benefits of dynamism.in the relatively capitalist economies than in the Continental economies as currently structured? In the Continent’s Big Three, hourly labor productivity is lower than in the U.S. Labor-force participation is also generally lower. And here is new evidence: The World Values Survey indicates that the Continent’s workers find less job satisfaction and derive less pride from the work they do in their job.

Dynamism does have its downside. The same capitalist dynamism that adds to the desirability of jobs also adds to their precariousness. The strong possibility of a general slump can cause anxiety. But we need some perspective. Even a market socialist economy might be unpredictable: In truth, the Continental economies are also susceptible to wide swings. In fact, it is the corporatist economies that have suffered the widest swings in recent decades. In the U.S. and the U.K., unemployment rates have been remarkably steady for 20 years. It may be that when the Continental economies are down, the paucity of their dynamism makes it harder for them to find something new on which to base a comeback.

The U.S. economy might be said to suffer from incomplete inclusion of the disadvantaged. But that is less a fault of capitalism than of electoral politics. The U.S. economy is not unambiguously worse than the Continental ones in this regard: Low-wage workers at least have access to jobs, which is of huge value to them in their efforts to be role models in their family and community. In any case, we can fix the problem.

Why, then, if the “downside” is so exaggerated, is capitalism so reviled in Western Continental Europe? It may be that elements of capitalism are seen by some in Europe as morally wrong in the same way that birth control or nuclear power or sweatshops are seen by some as simply wrong in spite of the consequences of barring them. And it appears that the recent street protesters associate business with established wealth; in their minds, giving greater latitude to businesses would increase the privileges of old wealth. By an “entrepreneur” they appear to mean a rich owner of a bank or factory, while for Schumpeter and Knight it meant a newcomer, a parvenu who is an outsider. A tremendous confusion is created by associating “capitalism” with entrenched wealth and power. The textbook capitalism of Schumpeter and Hayek means opening up the economy to new industries, opening industries to start-up companies, and opening existing companies to new owners and new managers. It is inseparable from an adequate degree of competition. Monopolies like Microsoft are a deviation from the model.

It would be unhistorical to say that capitalism in my textbook sense of the term does not and cannot exist. Tocqueville marveled at the relatively pure capitalism he found in America. The greater involvement of Americans in governing themselves, their broader education and their wider equality of opportunity, all encourage the emergence of the “man of action” with the “skill” to “grasp the chance of the moment.”

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I want to conclude by arguing that generating more dynamism through the injection of more capitalism does serve economic justice.

We all feel good to see people freed to pursue their dreams. Yet Hayek and Ayn Rand went too far in taking such freedom to be an absolute, the consequences be damned. In judging whether a nation’s economic system is acceptable, its consequences for the prospects of the realization of people’s dreams matter, too. Since the economy is a system in which people interact, the endeavors of some may damage the prospects of others. So a persuasive justification of well-functioning capitalism must be grounded on its all its consequences, not just those called freedoms.

To argue that the consequences of capitalism are just requires some conception of economic justice. I broadly subscribe to the conception of economic justice in the work by John Rawls. In any organization of the economy, the participants will score unequally in how far they manage to go in their personal growth. An organization that leaves the bottom score lower than it would be under another feasible organization is unjust. So a new organization that raised the scores of some, though at the expense of reducing scores at the bottom, would not be justified. Yet a high score is just if it does not hurt others. “Envy is the vice of mankind,” said Kant, whom Rawls greatly admired.

The ‘Least Advantaged’

What would be the consequence, from this Rawlsian point of view, of releasing entrepreneurs onto the economy? In the classic case to which Rawls devoted his attention, the lowest score is always that of workers with the lowest wage, whom he called the “least advantaged”: Their self-realization lies mostly in marrying, raising children and participating in the community, and it will be greater the higher their wage. So if the increased dynamism created by liberating private entrepreneurs and financiers tends to raise productivity, as I argue — and if that in turn pulls up those bottom wages, or at any rate does not lower them — it is not unjust. Does anyone doubt that the past two centuries of commercial innovations have pulled up wage rates at the low end and everywhere else in the distribution?

Yet the tone here is wrong. As Kant also said, persons are not to be made instruments for the gain of others. Suppose the wage of the lowest- paid workers was foreseen to be reduced over the entire future by innovations conceived by entrepreneurs. Are those whose dream is to find personal development through a career as an entrepreneur not to be permitted to pursue their dream? To respond, we have to go outside Rawls’s classical model, in which work is all about money. In an economy in which entrepreneurs are forbidden to pursue their self- realization, they have the bottom scores in self-realization — no matter if they take paying jobs instead — and that counts whether or not they were born the “least advantaged.” So even if their activities did come at the expense of the lowest-paid workers, Rawlsian justice in this extended sense requires that entrepreneurs be accorded enough opportunity to raise their self-realization score up to the level of the lowest-paid workers — and higher, of course, if workers are not damaged by support for entrepreneurship. In this case, too, then, the introduction of entrepreneurial dynamism serves to raise Rawls’s bottom scores.

Actual capitalism departs from well-functioning capitalism — monopolies too big to break up, undetected cartels, regulatory failures and political corruption. Capitalism in its innovations plants the seeds of its own encrustation with entrenched power. These departures weigh heavily on the rewards earned, particularly the wages of the least advantaged, and give a bad name to capitalism. But I must insist: It would be a non sequitur to give up on private entrepreneurs and financiers as the wellspring of dynamism merely because the fruits of their dynamism would likely be less than they could be in a less imperfect system. I conclude that capitalism is justified — normally by the expectable benefits to the lowest-paid workers but, failing that, by the injustice of depriving entrepreneurial types (as well as other creative people) of opportunities for their self-expression.

Edmund S. Phelps”);”>Edmund S. Phelps. Wall Street Journal. (Eastern edition). New York, N.Y.: Oct 10, 2006. pg. A.14

Approval for Vietnam

The emerging economy is poised, finally, to become the WTO’s 150th member

Vietnam shortly is set to join the World Trade Organisation (WTO), after the WTO’s General Council on November 7th approved the country’s accession. Membership of the WTO should ultimately benefit Vietnam’s economy by increasing its access to foreign markets, strengthening the country’s ability to defend its interests in trade disputes, and promoting domestic reforms. However, this does not mean that in the short term the country’s export boom will continue unabated. Indeed, it is far from certain whether the net impact of accession will be positive in the first few years.

Vietnam now only needs to complete the final formalities before it officially joins the WTO, as its 150th member. The National Assembly must ratify the terms of accession, which the WTO expects it to do by December 5th. Vietnam will then notify the WTO that ratification has been completed, and the country will be formally admitted to the WTO 30 days thereafter. It therefore seems likely that Vietnam’s accession will be complete by early January 2007.

Upsides

Among the benefits of WTO entry will be fewer restrictions on Vietnam’s exports to other member countries, including lower tariffs and the lifting of US and EU quotas on shipments of textiles and garments (which account for about 15% of the country’s exports). This is important not only because garments are Vietnam’s second-largest export, after crude oil. It also matters because it will put Vietnam on an equal footing with other WTO member countries, which have enjoyed quota-free treatment since the start of 2005, when the 30-year-old global system of quotas for textile and garment trade was dismantled.<block class=”relateditems

Another key benefit of WTO entry will be a boost in confidence. Foreign investors like Intel of the US have shown increasing interest in Vietnam in anticipation of its accession. Foreign firms committed almost US$6.5bn in new investment in the country in the year to October, a year-on-year increase of 41.4%, according to the Ministry of Planning and Investment. This trend should continue, with foreign companies now likely to regard the country as a safer place in which to invest.

Vietnam’s market-opening commitments, which are a condition of its entry, will be a further enticement to investors looking to tap into the country’s booming domestic economy. But an equally important development is the regulatory reform Vietnam has already effected in preparation for WTO entry. A new Unified Enterprise Law and a Common Investment Law took effect in July this year, providing a single set of rules for domestic and foreign enterprises and setting the basis for the encouragement and protection of all forms of investment. According to the WTO, Vietnam has also moved to harmonise its rules on trading rights, so that the registration procedure is the same for foreign and domestic traders.

Vietnam’s preparations for joining the WTO and its commitments following entry will also play an important role in promoting wider economic reforms. Because Vietnam will be obliged to open its own markets further (both for goods and services), this will increase local companies’ exposure to foreign competition and, in theory at least, promote restructuring at less efficient firms. The authorities are certainly trying to achieve this: they are in the midst of a campaign to reform the many state-owned enterprises (SOEs) that are a legacy of Vietnam’s Communist system, although this arduous process has fallen behind schedule.

The downsides

WTO entry is no panacea for Vietnam’s economy, however. Indeed, in some significant respects it may add to the challenges the country faces. Vietnam is believed to have offered substantial concessions in order to secure WTO entry, and fulfilling these obligations will make life harder for some domestic industries by removing subsidies and lowering import tariffs on foreign goods.

The details of Vietnam’s terms of accession and market-opening commitments are complex, running to 880 pages of documentation. However, the WTO says key commitments include: eliminating agricultural export subsidies; lowering bound duties on goods imports to 0-35%, though with some scope to phase in reductions; and raising foreign-ownership ceilings in services sectors (for example to 100% for accountancy with immediate effect, and to 100% for express courier delivery services after five years).

Of course, Vietnam’s domestic goods and services industries will not be entirely exposed to foreign competition. In some cases Vietnam will retain the right to limit foreign ownership in services. And it will continue to enjoy some leeway in protecting sensitive sectors in merchandise trade. For instance, it will be able to help farmers to cope with the elimination of agricultural export subsidies by maintaining what the WTO calls “trade-distorting supports”. Moreover, the extent of permitted support will be above and beyond the standard WTO-mandated allowance for developing countries. Also some products–eggs, tobacco, sugar and salt–will be partially protected through tariff quotas, whereby higher tariffs will apply to imports above certain quotas.

Nonetheless, WTO entry will introduce new challenges for Vietnamese manufacturers and service providers. In particular, better access to overseas markets will not guarantee the continuation of the export bonanza of recent years. One area to watch is trade with the US. The entry into force in late 2001 of a bilateral trade agreement prompted a surge in shipments to the US that distorted Vietnam’s overall export growth. Although exports have risen rapidly since 2001, those to the US have grown much faster. According to US Census Bureau data, the US imported US$6.6bn worth of goods from Vietnam last year, six times the amount in 2001. These increases are probably not sustainable, and as growth in exports to the US naturally cools this will have a knock-on effect on Vietnam’s overall trade performance (although increased access to other markets will partly compensate for this and overall export growth, though slower than in recent years, will remain robust). In the short term, the prospect of a sharp slowdown in the US economy next year could also take the shine off Vietnam’s immediate post-WTO-accession trade performance.

Non-market status

A further potential problem for Vietnam is that it will be designated as a “non-market economy” for up to 12 years after accession. Although membership of the WTO will give Vietnam some leverage in trade disputes, enabling it to invoke WTO rules against other member countries in cases where it feels its rights have been infringed, the playing field will not be entirely level. Because of its non-market-economy status, countries will find it easier to bring anti-dumping cases against Vietnam, as price benchmarks from “proxy” countries that do not necessarily have similar economic conditions will be used to determine if Vietnam is dumping goods at below the cost of production.

Vietnam’s own political willingness to comply with its WTO obligations will also remain an area of potential concern. Although the Communist Party leadership has been supportive of the economic reforms needed to secure WTO accession–and notably has been far more open to these than to political reforms–there is bound to be some slippage. Indeed, in recent months there have been some examples of back-tracking, with restrictive measures imposed on imports of scrap and used computers. Important reforms to SOEs have also been allowed to drift, a point of particular concern given the greater competition that will follow WTO membership.

Economist.com / Global Agenda. London: Nov 8, 2006. pg. 1