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Friday, December 18, 2015

A Missed Opportunity of Ultra-Cheap Money - #ZIRP @NYTimes

From 2009 through September of this year, United States companies issuing such bonds spent a mere 2 percent of the proceeds of those bonds on capital expenditures, or "capex"

Public investment spending as a share of overall economic activity has fallen to lows not seen since the 1940s

A Missed Opportunity of Ultra-Cheap Money

The Portal Bridge over the Hackensack River in New Jersey, built in 1910, is overdue for replacement. Fred R. Conrad for The New York Times
Years of ultralow interest rates engineered by the Federal Reserve may have breathed life back into the economy and buoyed Wall Street. But they have not managed to solve problems like the aging Portal Bridge.
The 105-year-old railway bridge in northern New Jersey has for decades caused delays for commuters in and out of New York. "We have long desired the bridge's replacement," said Stephen Gardner, an executive vice president for Amtrak, whose trains use the bridge. "It's time for it to retire."
A replacement bridge would cost an estimated $1 billion, the sort of sum that financial markets can raise for a private corporation in the blink of an eye. Yet even though the federal government and the state of New Jersey can borrow at rock-bottom rates, the overhaul remains unfunded.
There are many such infrastructure projects needed around the country, providing a stark reminder of the deeper problems in the economy that the Fed's easy-money policies have not been able to fix.
"We are not where we should be when it comes to investment, public or private," said William A. Galston, a former adviser to President Bill Clinton and now a senior fellow at the Brookings Institution.


Why the Fed Raised Interest Rates

Officials said the economy was strong enough to keep growing with a little less help from the central bank. They said rates would rise slowly, but borrowing costs already have started to climb.
OPEN Graphic

Mr. Galston in particular lamented the failure to set up a government-backed infrastructure bank in recent years. "This will go down as one of the great missed opportunities," he said.
Public investment spending as a share of overall economic activity has fallen to lows not seen since the 1940s, according to an analysis by James W. Paulsen of Wells Capital Management.
Political impasses have, of course, restricted the flow of money into government projects aimed at improving aging roads, bridges and mass transit. But even in the private sector, many of the hoped-for benefits of low-cost borrowing have not occurred.
Corporations have tapped the markets for trillions of dollars in recent years, yet they plowed relatively little of the money into new operations. Such investments might have bolstered hiring and made American business more efficient and globally competitive.
In some ways, these are the wasted opportunities of the cheap-money years — and they may well remain squandered now that the cost of borrowing appears to be heading higher, even if the initial increases after the Fed's decision Wednesday to move its benchmark up from close to zero will remain modest.
The Fed's stimulus policies worked in many ways. They prompted banks and investors to lend, lifted stock prices and bolstered the confidence of consumers and chief executives. The economy eventually regained strength, causing unemployment to fall, auto sales to take off and house prices to rise somewhat.
But important indicators suggest that the money did not flow where some economists and analysts say it is needed to improve the long-term potential of the economy.
Corporations may not have made the most of the Fed's largess. In theory, low interest rates should spur companies to borrow money that they then invest in new machines and technology that will make their operations more efficient. These investments can improve profitability and make firms more competitive in global markets.
But business investment as a percentage of gross domestic product has remained below historical levels since the Great Recession. A surprising lack of investment also shows up in the recent borrowing habits of companies that issue junk bonds, a market that ballooned after the Fed cut interest rates.
From 2009 through September of this year, United States companies issuing such bonds spent a mere 2 percent of the proceeds of those bonds on capital expenditures, or "capex," according to an analysis of data provided by Bank of America Merrill Lynch. The capital expenditures figures may not capture all investment, the bank's analysts noted. Even so, the data shows that the lion's share of bond proceeds went to pay off other debt owed by the companies and to finance acquisitions and leveraged buyouts.
"Very little of it has been used for capex," said Michael Contopoulos, head of United States high-yield and leveraged loan strategy at Bank of America Merrill Lynch. "We think that's a big problem."
The lack of corporate investment may hold back the United States' growth rate in the future. Higher capital expenditures might have bolstered productivity, a crucial economic yardstick that measures how much an economy produces with resources like labor and capital. Growth in productivity has slowed in recent years, disturbing economists.

A History of Fed Leaders and Interest Rates

The chairwoman of the Federal Reserve is about to begin the process of raising interest rates, a move that her predecessors have taken in recent decades as they put their own distinctive stamp on the economy.

Paradoxically, it is possible that the low interest rates have held back forces that would have made companies more efficient. In an influential speech in 2014, Lawrence H. Summers, a former Treasury Secretary and now a professor at Harvard, cited the experience of Japan, where interest rates have been low for a long time.
"In a period of zero interest rates or very low interest rates, it is very easy to roll over loans," he said. "And therefore there is very little pressure to restructure inefficient or even zombie enterprises."
The Fed's higher interest rates may now usher in a period of upheaval in corporate America. Recent turmoil in the junk bond market suggests that investors expect bankruptcies, particularly in the energy sector. And the pain today may create the sort of longer-term changes that would make the economy stronger. Conversely, if banks and bond investors cut back too much on lending, the economy could suffer.
But even as interest rates appear to be heading higher, some economists say there is an optimistic, alternative possibility.
Under this theory, productivity was weak in the years after the crisis because high unemployment kept labor costs depressed, giving companies an easy way to maintain margins. "Employers can be pretty sloppy in terms of efficiency," said Jared Bernstein, a former member of President Obama's economic team and now a senior fellow at the Center on Budget and Policy Priorities. "It's not hard to squeeze the heck out of labor costs."
Now, as unemployment has fallen, companies may compete more for workers, potentially pushing up wages. Confronted with higher labor costs, companies will have no choice but to invest to become more efficient, the theory goes. "You want an economy and labor market where firms can't afford to be inefficient," Mr. Bernstein said.
Question marks, however, will most likely continue to hang over the country's roads and railways as interest rates rise.
If the economy continues to grow and fiscal pressures ease, the federal government, state and cities may find more to spend on infrastructure even if they face higher borrowing costs.
But the substantial investment that some Democrats are hoping for seems improbable. Many Republicans assert that the infrastructure needs are overstated and that the private sector, rather than the taxpayer, needs to play a much greater role.
Congress overcame ideological differences this month to pass a roughly $300 billion transportation bill that provides funding for roads and bridges.
The bill happens to contain measures that could make it easier to secure funding for replacing the Portal Bridge, as well as building new tunnels under the Hudson. The existing tunnels, damaged by Hurricane Sandy, were the cause of long delays in July that caused an outcry among commuters.
Any rebuilding will take longer and cost much more than earlier plans. But advocates for public works, while saying the transportation bill falls short of the overall needs, nonetheless see reason to be encouraged.
"I'm optimistic; there's been big strides made," Mr. Gardner, the Amtrak official, said. "Infrastructure is starting to creep back into people's minds as an issue."

Tuesday, November 3, 2015

#LatinAmerica: after a decade of budgets and politics buoyed by high commodity prices, the raw realities of geopolitics are back with a vengeance.

An excellent analysis from Stratfor on the future political landscape shape in Latin America. 

The New Latin America

By Reggie Thompson

Several years into a Chinese economic slowdown, the Latin American economies that relied on China to buy up their key exports are feeling the pain. With less hard currency coming in, governments across the region are rapidly readjusting their spending plans and preparing to govern in an environment in which they will have fewer resources to secure their key constituents' political loyalties.

The Role of Geography

Ever since commodity prices began dropping several years ago, much has been written about how slow economic growth and potential political instability will plague Latin America in coming years. But what will Latin America as a whole look like in a decade as a result of the Chinese economic downturn? What ideologies will dominate in a continent that over the past decade veered toward leftist populism? And what issues will define its relationship with the United States, the hemisphere's undisputed hegemon?

The region's geopolitics hold the beginning of an answer. The first step is to view Latin America's geographic regions and countries as a series of divided islands rather than a united entity. Unlike Western Europe, where the relative absence of natural obstacles eventually gave rise to interconnected political entities, South America is bisected by the dense Amazon rainforest and divided lengthwise by the nearly insurmountable Andean mountain range. Latin American colonies were divided even before the collapse of the Spanish Empire in the Americas more than two centuries ago. After independence, this disconnected geographic landscape created dozens of economies of wildly varying sizes often more linked by trade with partners outside the region than with each other. With few unbroken expanses of arable land and high transport costs across the forests and mountains, Latin America was simply not in a position to create capital on the scale of the United States or Western Europe. Consequently, even major Latin American states such as Brazil or Mexico remain highly reliant on inflows of cash from abroad to keep their economies afloat and rely on exports to China or the United States for a significant part of their foreign trade.


Unsurprisingly, the goal of forming institutions that can provide lasting political and economic unity has eluded Latin American statesmen. Numerous attempts have been made to unite the fractious region: Simon Bolivar's ill-fated 19th-century bid to unite South America, a similar attempt at uniting the Central American states into a federation and the more recent creation of separate economic blocs in Latin America. Yet the isolation created by geographic barriers has foiled leaders' attempts to unite the region's countries into a real economic or political union on the scale of the European Union or even the North American Free Trade Agreement. In recent history, the closest that Latin American states came to some sort of unity — besides regional trading blocs such as the Common Market of the South and the Pacific Alliance — was the wave of leftist populist governments that swept the continent beginning in the early 2000s. But after a decade of budgets and politics buoyed by high commodity prices, the raw realities of geopolitics are back with a vengeance.

The Shape of Governments to Come

We cannot define the exact nature of the national governments that will emerge during the next decade; short-term actions are less predictable than long-term trends, and attempting to forecast which people or parties will lead countries such as Brazil after its 2018 elections or Venezuela after its presidential election in 2019 is very risky. However, we have a rough idea of the shape these governments will take. With less revenue available to pacify restive populations, the new governments will likely be more economically pragmatic than their predecessors. This is not to say that populism as a means of governance in Latin America will subside; rather, rulers are likely to take more care in how they relate to their voters and the outside world.

Because the region is so dependent on foreign capital for continued economic growth, and because states' export revenues are so depleted (in Bolivia, for example, export revenue is down by nearly a third compared with last year), leaders are more likely to refrain from mass nationalizations or hostility to foreign companies. During the past decade, leftist governments seized numerous private assets in disputes with private firms. Except for extreme cases such as Venezuela  — which, because of its default risk, economic problems and past expropriations, is already de facto cut off from most foreign lending and many investments — most states will likely now try to encourage investments rather than scare them off. Consequently, Latin America is likely entering an era in which the grand populist gestures of the past decade will no longer yield the same results as before and can, in fact, be counterproductive for leaders trying to restart their faltering economies.

The weakening of the Latin American left is another factor that will shape the coming decade. In the next 10 years, the governments that came to power during the boom times will reach the end of their tenures. The list of states that will evolve from leftist administrations into some other type of government is lengthy. Venezuela will reach the painful point of reckoning in which its ruling United Socialist Party will split apart. And as the party splits, Venezuela will undergo a painful economic restructuring and a political shift away from extreme populism. In Ecuador, leftist President Rafael Correa may not secure even another four-year term. In Bolivia, low export prices for natural gas will put President Evo Morales' ability to secure another decade in office to the test.

Perhaps the only exception will be Colombia, where a possible peace deal with rebel groups could bring the left into the national fold, which could lead other parties to co-opt more leftist ideas. But even Cuba, long the bastion of Latin America's left and its ideological center, will eventually move into the United States' political orbit, likely in exchange for the lifting of the five-decade trade embargo.

The left's decline will give the United States an exceptionally benign climate for managing its relationships and priorities to the south. To be sure, longstanding concerns — such as trade, drug trafficking and illegal migration — guiding the United States' actions in much of Latin America will remain. But the bumper crop of leftist states that were often minor hindrances to U.S. political moves in the region will become less of a factor in the next decade. Washington's new priorities in the region, such as cushioning Venezuela's economic collapse and bringing Cuba into some sort of improved trade relationship, will occupy the United States' time.

Of the states currently undergoing deep economic downturns, several seem poised to make a resurgence. Mexico is an outlier, given than it is so linked to the United States through trade. But those links will ensure that despite problematic public finances, Mexico will remain a major force in Latin American economic growth. For Peru and Colombia, international trade will drop over the next several years, but their stable public finances will likely ensure some degree of social stability. And even Brazil, in the midst of a massive corruption scandal at Petrobras, will ride out the crisis due to its strong (albeit currently strained) domestic manufacturing base and sheer economic size.

Re-Emerging Differences

The rampant populism of the past 15 years — bolstered by rapidly increasing exports to hungry markets abroad — imposed a false appearance of unity among the Latin American leftist states. Superficially, Nestor Kirchner's Argentina appeared to have much in common with Hugo Chavez's Venezuela, even though both countries' individual geographic and political characteristics ultimately dictated the governments' decisions. With the rise of another leftist bloc unlikely in the next decade, the divided nature of Latin America will again become evident.

And the continent's divided nature means that the shortcomings of international bodies there, such as the Common Market of the South (Mercosur) and the Union of South American Nations (Unasur), will become even more self-evident. For example, Brasilia will use Mercosur to do what is in its own immediate benefit: increase trade links with Latin American states outside its immediate neighborhood, such as Mexico. But truly lucrative deals, such as a Mercosur-European Union trade agreement, will remain just out of reach because they require full approval of all the group's members. Mercosur's other key member, Argentina, opposes any such deals lest they harm its domestic industry. Consequently, Brazil will continue looking for small bilateral deals, but it will continue to be hamstrung by Mercosur. Unasur, on the other hand, which was originally conceived of as a sort of South American United Nations, is highly unlikely to progress beyond a regional body that meets a couple of times a year. It is not that there is no political will in Latin America to push toward greater unity, but unlike the European Union, such bodies cannot be superimposed onto a region whose trade ties and key political relationships are focused toward other continents rather than each other.

The next decade will bring with it some political and economic continuity. The region will maintain its fundamental relationship with the rest of the globe, in which its foreign trade is overwhelmingly skewed toward the export of raw materials and its economies are heavily reliant on foreign capital markets. But deeper internal changes are already in motion, and the states of the region will change accordingly. The parties at the helm of these states will be different, and the way these parties relate with the outside world on a political and economic level will be undeniably different. Over the next 10 years, the shortcomings of extreme reliance on the Chinese economy will spur cost-cutting and domestic economic diversification. The trappings of the Cold War will fade in Latin America as leaders are replaced and political institutions evolve, but the new Latin America will continue to be more defined by its divisions than by any idea of unity.

"<a href="">The New Latin America</a> is republished with permission of Stratfor."
The New Latin America | Stratfor

Tuesday, October 27, 2015

The Anatomy of Anti #Corruption @Stratfor

The Anatomy of Anti-Corruption | Stratfor
An excellent analysis from Stratfor on the resurgence of anti-corruption probes throughout the world. 

"A question that has received far less attention is what fuels the anti-corruption engine. What is giving new anti-corruption bodies around the world the space and courage to act now? There is of course no single answer, but a closer examination traces these actions back to declining growth rates, internal political competition and encouragement from larger outside powers seeking their own geopolitical gains."

The Anatomy of Anti-Corruption

By Reva Bhalla
The tradition of abusing political power for personal gain goes back to antiquity, as does the debate over whether corruption is a necessary cultural vice in a country's development or a cancer that must be obliterated for a society to progress. A topic less covered, however, is what is behind the counter-corruption current.
In the past year or so, a striking number of scandals have been exposed, anti-corruption campaigns launched, probes deepened and leaders toppled over corruption charges. Brazil's state-run oil giant Petrobras, now the most indebted company in the world, is at the center of the biggest corruption scandal in the country's history; dozens of business executives and politicians, including the heads of the upper and lower houses of Brazil's legislature and Brazilian President Dilma Rousseff, are under investigation. In Mexico, President Enrique Pena Nieto has been heavily scrutinized for granting big contracts to companies that also sold him houses on favorable terms and for abruptly canceling a contract with a Chinese-led consortium for a high-speed rail contract over corruption allegations, as well as after the brazen escape of Joaquin "El Chapo" Guzman from federal prison. In Guatemala, a U.S.-backed anti-corruption investigative committee forced the resignation of President Otto Perez Molina, while in Honduras, another U.S.-led anti-corruption investigation has taken down one of the country's wealthiest and most politically connected families.
In Zurich, a U.S. and Swiss investigation has brought down on bribery charges the once untouchable Sepp Blatter, who headed FIFA, the global governing body for soccer. Elsewhere in Europe, Romanian Prime Minister Victor Ponta is barely holding onto his seat while standing trial for tax evasion and money laundering. And an already fragile government in neighboring Moldova could fall any day now as mass protests persist over more than $1 billion that suspiciously vanished from the country's three largest banks.
Further east, Turkish President Recep Tayyip Erdogan is working every institutional lever he can to neutralize corruption charges against himself, his son and a group of former ministers before he faces off against a vengeful opposition in a second round of elections. Chinese President Xi Jinping's sweeping anti-corruption probe is surging ahead after rounding up the biggest tiger yet, former security czar and former Politburo Standing Committee member Zhou Yongkang and his network of powerful allies. Malaysian Prime Minister Najib Razak is facing a series of no-confidence votes following allegations that the state development fund had deposited $700 million in his personal bank account.
Meanwhile, foreign investors and Nigerians alike are waiting for action after Nigerian President Muhammadu Buhari came to power with the promise of pursuing an aggressive anti-corruption campaign. In a desperate attempt to defuse mass street protests, Iraqi Prime Minister Haider al-Abadi launched a sweeping anti-corruption campaign that does away with sectarian-allotted government posts.
The list could go on, but the trend is discernable: Around the globe, and under a variety of circumstances, the momentum to expose and crush corruption appears to be building. Even the most presumably immune members of the political elite in many countries have to watch their backs much more carefully than before.
The question then becomes why. We could assume that the world is collectively cleaning up its act and that international bodies promoting good governance and investigative reporters, aided by social media distribution channels, are having more success in mobilizing the public to demand more from their leaders. But nothing is that simple. Even in the list of cases cited above, there are great differences in each country's stage of economic growth, internal political climate and geopolitical circumstances.

The Roots of Corruption

A lot of scholarly thinking has been devoted to what drives corruption, what mitigates its corrosive effects and what role (for better or for worse) corruption plays in a country's economic development. A developmental economic approach would lament the "resource curse" afflicting countries that are overly dependent on extractive industries when large amounts of money taken in by state-owned firms is easily funneled into the pockets of a small political elite. A sociological approach would emphasize the differences between cultures and how they perceive corruption. For example, the West looks down on the tribal tradition of handing out positions to one's brother or cousin, but there are parts of the world where entrusting one's business to a stranger would be considered outright reckless.
Geopolitics will tell you that countries that are physically difficult to govern will be more prone to bribery. If a country is internally fragmented by its geographic features, allowing for the development of distinct cultures and sects that need to be brought under some form of central rule, then patronage-building will likely be an ingrained practice of the government and will be difficult, if not impossible, to root out.
Samuel Huntington, a revered political scientist who died in 2008, would stress that the taming of corruption and the rise of political order all comes down to institutions. If institutions are too beholden to the political ego of the day, then a wide gap between the political elite and the civil society will result, leaving ample room for a culture of impunity to develop at the top. From Huntington's point of view, the style of government (for example, a liberal democracy) is not a prerequisite for effective governance; rather, the degree of government — and thus the strength of its institutions — will chart a country's path toward growth or decay. Huntington even postulated that corruption could actually compensate for weak rule of law and provide an alternative path to growth when a country becomes bloated with bureaucracy. In other words, corruption will at least get things done in countries where the formal channels of government simply do not work.
A question that has received far less attention is what fuels the anti-corruption engine. What is giving new anti-corruption bodies around the world the space and courage to act now? There is of course no single answer, but a closer examination traces these actions back to declining growth rates, internal political competition and encouragement from larger outside powers seeking their own geopolitical gains.

Anti-Corruption in Action

This part of the discussion focuses on a selection of countries: Turkey, Brazil, China, Mexico, India and Indonesia. Each has experienced dramatic economic growth since the early 2000s, and each of those growth stories has been heavily tainted by corruption.
The World Bank's Worldwide Governance Indicators include "Control of Corruption" as one of the core variables to measure governance in countries. Drawn from a compilation of sources that measure everything from perception of corruption through surveys to anti-corruption policy and prosecution, the index ranks countries annually from 0 to 100, with a higher number showing stronger control of corruption and a lower number showing weak control of corruption. Overlaying the Control of Corruption measure against gross domestic product and foreign direct investment rates from 1996 to 2014 has yielded some notable observations.

In boom times, when credit is abundant and foreign direct investment is shooting up in developing countries, corruption on the grandest scale becomes possible. After all, when a government is the chief party awarding major infrastructure projects with multimillion- and sometimes multibillion-dollar price tags attached, there is ample opportunity to pad the budget with political favors. Each step — from the environmental and technical feasibility studies to ongoing maintenance — is an opportunity for government bureaucrats and businessmen to cut ribbons in public and make furtive financial deals in private to move the process along.
When economic times are good and there is more money to go around, there is little variance in the Control of Corruption variable. However, when global economic conditions began stagnating following the 2008-2009 financial crisis and growth flattened out in 2011-2012, Turkey, Brazil and Mexico all showed a noticeable decline in Control of Corruption as major scandals were exposed and the perception of high-level corruption rose. Under more stressful economic conditions, political competition will naturally escalate, and civil society will be hyperaware of abuses of political power.

Unsurprisingly, spikes in the Control of Corruption variable correlate closely with political transitions in many of these cases. For example, when Erdogan came to power in 2003, many Turks — both secular and conservative — saw him as the fresh face that would clean up Turkey, root out the Mafioso networks and make the economy work again. For a while, that perception held, and Turkey's corruption ranking steadily rose. Meanwhile, Erdogan used Turkey's growth spurt to rapidly build out his patronage network and hand out contracts to political loyalists while sidelining his political adversaries. Once news started trickling out on the scale of corruption that had emerged during his tenure, Erdogan did not bother trying to redeem himself with a fresh anti-corruption drive. Instead, he dug his heels in further, promising more privileges to those who remained loyal to him.

Volatility in Indonesia's Control of Corruption variable seems to mirror significant political shifts in the late 1990s and early 2000s. The Suharto New Order dictatorship came to an end in 1998, and new efforts were made to undo his tightly knit and centralized patronage network extending from the armed forces to a sizable class of capitalist cronies. Indonesia has hit several major bumps along the way as successive governments have attempted to adopt anti-corruption platforms, only to see more entrenched interest groups derail these efforts from within. In fact, as post-Suharto Indonesia has become more politically decentralized, corruption has simply taken on a new form as additional layers of regulation at the local level create more space for bribery.

India's corruption ranking, on the other hand, appears to be largely insensitive to political shifts. The Indian National Congress party was hit by a slew of major corruption scandals involving the coal sector, telecom, railways, aerospace and defense, and construction. India's Control of Corruption rating declined steadily during that time. When it was in the opposition, the Bharatiya Janata Party used these scandals to smear the Congress party, but now the Bharatiya Janata Party is caught up in "Lalitgate" — a scandal involving India's professional cricket association — and the Vyapam scandal, which exposed payoffs to place students in the best schools and government jobs. The fledgling anti-corruption Aam Aadmi Party, which unseated the Bharatiya Janata Party in state elections in Delhi, is already faltering in popularity. Perhaps India's politics are too deeply mired in corruption to build a credible anti-corruption platform at this stage of development.

China is a much more complex story. China's current leaders seemed aware early on that the country's rapid growth could endanger the Party's credibility and viability should corruption go unchecked. Xi is well aware of his country's long history of dynastic cycles, beginning with centralized power and consolidation, the erosion of the imperial court by bureaucratic corruption, the gradual empowerment of local landlords at the expense of the center, a call too late to reform and inevitable dynastic decline. Now stuck in the throes of an economic slowdown and still far behind in a number of crucial reforms to rebalance the economy, Xi is focused on the need to consolidate control under himself while he works to redeem the Party's credibility through the most aggressive anti-corruption drive since Maoist China. The spike in China's Control of Corruption ranking seems to correspond closely with the launch of Xi's anti-corruption drive, but it also appears to be leveling out. Although Xi's anti-corruption drive is earnest, his ability to enforce reforms is still questionable. When officials are too intimidated to make decisions, they avoid them altogether, and reforms are left in limbo. It remains to be seen whether Xi can avoid the historical paradox of anti-corruption reform precipitating political decline in China.

The Role of Outside Players

In other cases, the agendas of larger outside powers influencing smaller states in their periphery could drive anti-corruption efforts more than economic cycles. In Ukraine, the protesters who withstood the cold in Maidan Square for weeks in hopes of toppling former President Viktor Yanukovich were incensed by his flagrant spending habits, but would they have succeeded in overthrowing their president without support from certain Western intelligence agencies interested in pushing back against Russia in one of the most sensitive points in its periphery? In Moldova, a highly fragile coalition of pro-European parties is facing the ire of protesters (many of whom are Russian-backed) over a major corruption scandal that could topple the government once again and give Moscow an opening in another proxy battleground with the West.
Backing foreign anti-corruption bodies is developing into a handy foreign policy tool for Washington. The United States did not have to build institutions from scratch; it inherited them from the British and then figured out a more equitable system in the end to check and balance political power. This makes it all the easier for Washington to export the argument that institution building is the path to effective governance and economic growth. And if the United States is a leading provider of capital in a time of great economic stress, then U.S. officials towing large delegations of investors have a bit more leverage in trying to shape institutional development in countries of interest.
In Romania, a critical Western ally in the former Soviet periphery known for entrenched corruption, the United States has worked very closely with the country's intelligence service strengthening the National Anti-Corruption Directorate. Against all odds, this investigative body has succeeded in removing a number of high-level officials and stripping politicians of immunity and is currently trying to unseat a sitting prime minister. From the Western perspective, if Romania is more politically stable and more conducive to foreign investment, it will be more immune to Russian influence and sit more comfortably in the Western camp.
In Central America, the United States has the ability to withhold crucial aid to pressure drug-ridden and corrupt countries to enable anti-corruption investigative bodies. One such entity, the International Commission Against Impunity in Guatemala, actually brought down President Otto Perez Molina. The bitter former president is now blaming U.S. Vice President Joe Biden and the "geostrategic" agenda of the U.S. government for pressuring him to extend the mandate of the committee that ultimately brought about his downfall. The U.S. Drug Enforcement Administration has played a particularly significant role in building cases and pursuing corrupt politicians in Latin America, from Honduras to Venezuela. In the name of building more credible institutions and stable governments to limit drug-trafficking and illegal immigration, Washington can increasingly be expected to use anti-corruption measures to shape political evolutions in many of these states.
No simple or single explanations will come from examining the drivers of corruption and the forces that counter the abuse of political power for personal gain. In some cases, anti-corruption initiatives will amount to little more than a political campaign, only to fizzle out within a couple of years. In other cases, corruption is so endemic that political and economic changes will have little impact on a country's ranking. For several countries, the recent explosion of bribery scandals is the natural product of more than a decade of unprecedented economic growth. And for a country like China, an anti-corruption campaign is both the saving grace of the Party and the potential harbinger of decline. A less familiar but growing trend reveals how countries sitting in the shadow of bigger powers can be pushed and pulled through anti-corruption protests and investigations toward broader geopolitical ends.
"">The Anatomy of Anti-Corruption </a> is republished with permission of Stratfor."

Friday, October 23, 2015

UN "very regrettably" admits #UNRWA employees suspended after @UNWatch report exposing incitement to anti-Semitic violence

They can't even own up their "mistakes"...

UN “very regrettably” admits employees suspended after UN Watch report exposing incitement to anti-Semitic violence

Thursday, October 22, 2015 5:15 pm  


GENEVA, October 22, 2015 -The spokesman for United Nations Secretary-General Ban Ki-moon quietly announced on the UN website that UNRWA employees have “in a number of cases” beeen subjected to disciplinary action, including suspension and loss of pay, following an investigation that verified evidence published by UN Watch — in one report last week, and another in September — of incitement to anti-Semitic violence committed by at least 22 UNRWA employees. UNRWA added that it “condemns and will not tolerate anti-Semitism or racism in any form.”

Curiously, UNRWA’s admission was made public only as a bracketed addition buried deep in a UN transcript, and not posted as a stand-alone statement by the UN, or indeed anywhere at all on the UNRWA website.

UN Watch welcomed the announcement, yet noted that “the UN statement hides more than it reveals,” said Hillel Neuer, executive director of the Geneva-based non-governmental monitoring group.

“We need to know, first, which of the UNRWA teachers identified in our reports were suspended, what were the findings, and whether the UN investigations found any additional incitement to anti-Semitic violence.”

“Second,” said Neuer, “In light of the above, UN Watch is demanding a full apology from UNRWA spokseman Chris Gunness for his McCarthyite tirade against what he called UN Watch’s ‘baseless allegations about antisemitism’.”

Gunness famously launched into a frenzied attack on UN Watch, issuing an “appeal to journalists” to ignore what he insisted was a “non-story”:

  • “Appeal to journalists: please don’t turn UN Watch baseless allegations about anti-semitism into a ‘he said she said’ story. It is a non-story.”
  • “UN Watch makes a fool of itself … Credibility dead in water. Will anyone believe them again”?
  • “Interested to find out more about UN Watch’s political and financial affiliations since it establishment. Can anyone advise?”
Screen Shot 2015-09-03 at 3.33.04 AMGunness on UNW finacial affil

spedding reply crop gunness

UN Watch fool Gunnessannual reports

wsj quote

UN 'very regrettably' admits employees suspended after UN Watch report exposing incitement to anti-Semitic violence - UN Watch

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