Friday, June 26, 2009

Electing Mousavi Would Not Have Been Enough

There has been quite an uproar about the recent disputed presidential election in Iran. Millions of protesters have taken the streets in Iran protesting the results, as there were accusations of irregularities in the election process. The election, which took place on June 12 of this year, saw incumbent Mahmoud Ahmadenijad defeat Mir-Hossein Mousavi with an astonishing 63% of the vote.

The election of Mousavi in the disputed Iranian presidential election, however, would not have produced the change that Iran needs. Mousavi would have represented a step in the direction of reform and would have changed the face and tone of Iranian politics. Mousavi, however, would not have changed the content of Iranian politics. Furthermore, the structure of the Iranian political system would not have allowed him the leeway to make changes. It’s the system that’s broken.

The election of Mousavi would have ushered in many changes in the Iranian political landscape. Mousavi is a supporter of personal freedom, women’s rights and was open to more diplomatic relations with the United States. However, Mousavi, like Ahmadenijad, is a staunch supporter of Iran’s uranium enrichment program. Mousavi would have differed in his approach to enrichment; he would have asked for an international consortium for oversight.

Even with all of the aforementioned changes, Mousavi would not have significantly changed the politics of Iran, as the Iranian president does not hold a significant amount of power in the Iranian political system. The Supreme Leader of Iran (Ali Khamenei) is the most powerful office in Iranian politics. The Supreme Leader is responsible for the direction of Iranian policy and the country as a whole. The president of Iran is responsible for the execution of policy and law rather than the formulation of policy and law.

Mousavi would have remained second fiddle to Khamenei were he elected, as he would have had to play the game that Khamenei wanted. He would need much more freedom to make policy than the office of the presidency of Iran would have afforded him.

This is all an afterthought, however. It is exceedingly likely that Ahmadenijad will remain in power, meaning the world will continue to see the same type of abrasive politics that it is used to from Iran. There will be no change after all.

Thursday, June 25, 2009

Iran's Possible Outcomes

With the recent turmoil in Iran, we’ve begun to wonder what the possible endgames for the situation look like. By my count, there are four possible outcomes from the Iranian election situation, which I’ve ordered here from least likely to most likely.

  1. Current Islamic Republic overthrown – Yes, the number of protesters for some events has been estimated to be over 3 million. However, it is highly unlikely that what is transpiring in Iran will lead to an overthrow of the entire government. The protesters are largely protesting an election result, not the existence of the current government (much as people here protested the 2000 election result). However, if the mood of the movement were altered such that the people wanted to overthrow the government, their ability to do so is doubtful. Without the support of any military/security forces, overthrowing the government is essentially impossible. The likelihood that significant security forces go to the protesters’ side looks minimal. Furthermore, unless the protesters get support from the Revolutionary Guard (which I’m nearly willing to guarantee won’t happen) or some other significant body (slightly more likely than getting support from the Revolutionary Guard), the current government will remain in place. No, there won’t be a V for Vendetta type revolution where government forces refuse to open fire on the people. The Iranian government has already shown a willingness to use brute force to keep itself in power.
  2. Government ‘recounts’ votes that leads to a run-off – While the Guardian Council hinted at a ‘partial recount’ (I highly doubt they actually counted any votes whatsoever, but that’s neither here nor there), the government now holds the position that the amount of votes they’re willing to recount wouldn’t impact the outcome of the election. If the government had ‘recounts’ in such a way that leads to a run off, it would have to admit that over 12% of the vote was somehow fraudulent and admit they were wrong and tried to fix the election. Like the complete overthrow, this won’t happen.
  3. Government ‘ recounts’ votes that keep the result – As discussed above, the government of Iran has already dismissed recounting as the votes they’re willing to recount aren’t large enough to actually impact the election one way or another.
  4. Government violently puts down protests – This seems to be the most likely outcome, especially in the light of recent events. Unless the protesters seek out external help, it seems unlikely they can fight back in a more-than-symbolic way.

The US is absolutely not going to invade Iran over this issue, not that a sustained invasion of Iran is even possible for the US to execute at this time. The US also won’t covertly assist the protesters with military equipment unless they show a willingness to go into full scale revolt. If the US does offer this type of support, it will damage relations with the Chinese (who trade and cooperate with Iran), and cause further tension with Russia. Also, if outside help is given to a revolutionary segment of the protesters, this could cause less determined protesters and supporters of the existing government to find unity, fighting back against ‘American Imperialism.’ Consequently, the US will probably not overtly or covertly assist a revolutionary movement unless they can somehow guarantee its success. Obama, seeing that outcome #4 seems to be playing out thus far, is not condemning the government in any significant way, as he believes that it will have to negotiate with this current power structure in the future.

Tuesday, June 16, 2009

Why We Want to Be in the REDD

Reducing Emissions from Deforestation and forest Degradation (REDD) is a UN program that uses market incentives to reduce the release of greenhouse gases from rainforest destruction. Companies work with international conservation groups and tropical countries to create investment funds to conserve large tracts of land. REDD has become recently popular as companies, nations and intergovernmental organizations seek to reduce or offset their own emissions. For example, Merrill Lynch ($432 million), Norway (more than $2.5 billion), and the World Bank ($165 billion) have created programs in Indonesia to save large expanses of rainforest. REDD programs are not limited to Indonesia; programs are being created throughout the tropics.

REDD is an important conservation and economic strategy. A recent study performed in Indonesia by Australian scientists found that REDD programs, if priced properly, make tropical rainforests more profitable standing than cut down. Carbon credits, which represent the cost of carbon stored in the environment, must be priced at or above half the expected profits to be had from cutting down the forest and converting into a plantation.

The ramifications of this study are immense. REDD will become (and this may have started already) particularly attractive to both those looking to balance their emissions and those looking for economic growth.

The study, however, did not include an important factor in their calculations: ecosystem services. Ecosystem services are the benefits that people derive from environmental processes such as pollination of crops, production of oxygen and the detoxification of water. These services are essential. As such, they are can be considered as environmental infrastructure. Without environmental services, the world would be in terrible trouble.

Ecosystem services make REDD programs vital. REDD programs prevent the destruction of rainforests and the important services they provide. Not only can they reduce emissions and create economic growth, but also they are an important investment in environmental infrastructure.

Sunday, June 7, 2009

Foreign Direct Investment: The Most Important Phrase You Don’t Know

Foreign Direct Investment (FDI) is the reason you can (or use to) be able to buy a shirt at Steve and Barry’s for $4.99. FDI makes electronics (iPods, TVs, computers, ect.) affordable for more people. FDI is responsible for half of modern globalization (the other half is the vast improvements seen in communications technology). FDI started the Chinese economy in the 1970’s, oil exportation from Venezuela (as well as the Middle East early on), and Subaru factories in America.

FDI is the fancy abbreviation describing how corporations build production facilities outside their home countries. Exxon building an oil pump in Saudi Arabia, Nike building a shoe factory in China, and Old Navy building a shirt factory overseas so people can dress like this here in America. Local people work at the facility which generates revenue for both the workers (through wages), the government (through taxing said revenue) and local stores (workers spending their money at local places of business). Meanwhile the company who invested in said facility reaps the profit produced, taking it back to their home country.

Unfortunately the results of FDI are not always so rosy.

We all know the story. Ford shuts down a factory in the US to build a new factory in Mexico. Ford is called greedy for abandoning the American worker, and leftists complain the Mexican workforce is being mistreated and underpaid. FDI of this variety is referred to as “outsourcing,” or sending jobs overseas. Outsourcing is by far the most controversial type of FDI for the home country. There has been a loud outcry over outsourcing in the US, especially in the current state of the economy.

The second type of FDI is much less controversial for the image of a corporation. It occurs when a company builds a production facility overseas that cannot be built in its home country. For example, most Americans don’t cry foul when Exxon builds a new oil pump in Saudi Arabia. The pump belongs to Exxon; the oil pumped from the ground belongs to Exxon, Exxon pays the workers (mostly locals), and gives the Saudi government an agreed figure.

Of course there are ‘problems’ with the second type of FDI as well. One issue is that it infuriates locals who feel like their government sold out to a foreign company. The second potential problem is nationalization, which is the fancy word for government taking control of an industry (with or without fair compensation). The final potential problem with this type of FDI is investing in areas with poor political stability. Investor companies tend not to invest heavily in such areas as the local government has a tough time guaranteeing the security of the asset.

Ok. Hopefully you found this bit as helpful as this sign, and as easy to understand as this situation. So, best of luck to you going forward in you quest to understand the current state of world economic affairs.

Wednesday, June 3, 2009

The Price of Espionage

For those who are not aware, an Israeli spy was convicted in the United States this week. The spy had passed between 50-100 classified documents containing information about nuclear weapons, a modified version of an F-15 fighter jet and the U.S. Patriot missile air defense system. This spy was charged with four counts of conspiracy, including giving classified documents to Israel. The spy plead guilty. He was sentenced to pay a fine of $50,000.

A man found guilty of spying was ordered to pay a fine of $50,000.

Sure, former spy Ben-ami Kadish is now 85 years old. True, the act of espionage occurred some 20 years ago. But a fine of $50,000 is next to nothing when looking at the magnitude of the crime.

I wondered if perhaps the US government was giving an Israeli spy a break. After all, Russian spy Robert Hanssen was sentenced to a life of solitary confinement for 23 hours a day. Upon further research, I stumbled upon John Pollard . Pollard was a spy who divulged tons of information to Israel, the nature of which has yet to be released by the US government. The Pollard case concluded in 1987, and Pollard received a life sentence, not dissimilar to Hanssen’s. We see, therefore, that being an Israeli spy isn’t the reason for the break.

A key difference I haven’t touched upon (aside from the age issue) is that while Pollard and Hassen got paid rather handsomely, Kadish accepted no cash in return, only small gifts and occasional dinners for him and his family. However, as thousands of impoverished convicts that reside in our prisons will tell you, money is not a requirement to go to jail. And, as former Enron execs could tell you, money can even help you get out of jail.

Sadly, a common theme between the two cases seems to be a sense of arrogance on the part of Israeli supporters. Kadish said he thought he was helping Israel without hurting the US. Surely if the US thought that the information Kadish passed wouldn’t harm the US in some way, Israel would have been given that information by the US, not a military engineer. Meanwhile, Pollard’s supporters say that what Pollard did was not treason, as Israel and the US are allies. However, from 1942-1945, the US and Soviet Union were allies, and had Soviet spies been caught in that era, I’m sure they would’ve been treated just as if not more ‘harshly’ than Pollard.

No, I’m not saying that 1940’s USSR and 1980’s Israel are completely similar, but there is something amiss. Even if the US and Israel were best of friends, a government employee does not have the authority to decide what information goes to Israel and what information does not. Espionage is espionage, and while I don’t think the death penalty is warranted in many cases, I’m going to go ahead a guarantee that both Hanssen and Pollard will still be in prison when they’re 85, assuming they live that long. Whether you commit the act for money, ideology, or a dinner and satisfaction you helped country X, the crime is the same: betraying the US. And maybe Kadish didn’t deserve a life sentence (as short as that would be), but at $50,000, even I can afford to commit espionage.