The Power and the Money

The fall of the Soviet empire

   Kevin Drum repeats a claim that I’ve heard elsewhere:

“By 1989, the Soviet Union was so far in hock to western banks that they basically had Gorbachev by the balls.  He couldn't afford a repeat of 1956 or 1968, and when that became clear the jig was up.  Hungary went first, Berlin followed, and within a few months the Iron Curtain was on the ash heap of history.  In the end, it was hard currency, not ICBMs, that brought down the empire.”

 
I don’t understand this claim.  There are two premises behind it which do not make sense to me.  The first is that Western creditors would care if the Soviet Union cracked down in eastern Europe.  Why would they?  The only reason that I can think of would be if they believed that a crackdown made it more likely that Warsaw Pact regimes would default on their debts.  But why would a Soviet crackdown make default more likely? 

In fact, there seems to be some circular reasoning involved regarding Soviet debt.  The USSR had a reasonable debt burden until April 1989, when perestroika allowed Soviet enterprises to borrow in hard currency.  As a result, debt exploded.  But Moscow stopped taking Budapest’s calls in March!  The timing is off.

In 1990, the collapse of Comecon led to a collapse of Soviet trade with eastern Europe, worsening the problem.  Except ... if the tanks had rolled, then Comecon would not have collapsed.  See here and here for contemporary discussions of the debt problem. 

Nor do I buy the possibility that creditors would have moral qualms.  They didn’t care about Georgia last year; would they really have cared about Hungary in 1989? 

But let us grant that creditors might have been upset at a crackdown.  Violence in Eastern Europe might have been unsettling, I can imagine that.  Only that brings us to the second premise of the “bankers killed Communism” argument, which is that western creditors held some sort of special leverage over the Soviet Union. 

Considering the frequency of sovereign default, and the willingness to restart lending afterwards, I have trouble understanding what exactly that leverage would be.  Say the Warsaw Pact countries defaulted in 1990.  Why would regimes capable of using tanks against their own people have found the consequences so unpalatable?  Perhaps they would fear economic sanctions ... but that gets us to a version of an argument in which Western governments killed Communism by their implied economic threats, not one in which bankers did it.

Truth be told, I tend to think that neither creditors nor Western governments had all that much to do with the fall of the Wall.  (I did not always believe the latter, as some readers of this blog can attest.)  But I could easily be wrong.  I have, after all, heard the “bankers did it” story elsewhere. Is there a more sophisticated version that addresses my concerns?

The limits of empire

 The world really needs a good game-theoretic model of informal empire.  I suppose Bruce Bueno de Mesquita already has one, but I’d like to see something more specific. 

What’s informal empire?  Well, if “empire” happens whenever one sovereign state exerts its authority over an area previously under a different sovereignty (or none at all) then that empire is “formal” when the imperial state exerts its authority through a bureaucratic chain-of-command that runs from the imperial executive through the local government and down to the person in the street in the new territory.   (Similarly, an empire has formal characteristics if judicial decisions can be appealed upwards to courts in the center, or if the imperial legislature can pass laws for the subordinate territory.) 

Since 1898, the United States has generally eschewed formal empire.  The exceptions are Haiti in 1915-34, the Dominican in 1916-24, Japan in 1945-52, Germany in 1945-55, Okinawa in 1945-72, and Iraq in 2003-04.  (The European Union exercises formal authority over parts of the governments of Bosnia and Kosovo.)  The U.S. has relied on a combination of treaty arrangements, sanction mechanisms, and moral suasion to get its satraps to do what the government of day wants them to do.  The famous SOFAs kinda sorta sometimes formalize quasi-imperial arrangements by giving U.S. troops special privileges inside host countries, including sometimes the right to shoot people, but that is not the same thing as giving the American government the right to give local bureaucrats direct orders under the threat of unemployment or imprisonment.

Sometime informality works and sometimes it doesn’t.  Right now, informal empire has hit its limits in Afghanistan and Honduras.  The U.S. can’t make President Karzai crack down on corruption, form a coalition with Abdullah, or negotiate with the Taliban.  Considering both the number of troops we’ve got running around the country and the number of dollars we pour into its government budget, the lack of influence (let along control) is pretty depressing.  What kind of an empire is that?

In Honduras, the recent agreement between Micheletti and Zelaya appears to have collapsed.  The Honduran legislature has not voted to reinstate Zelaya, and Micheletti is continuing his modus operandi of “what the hell?” by picking a fight over who will lead the interim cabinet until Congress votes.  Washington may be able to pick something up out of this mess, but U.S. leverage is limited.  Aid is suspended and visas were as well until recently; stronger sanctions, meanwhile, will just sock it to a lot of very poor people.  We could give up and run out the clock, which would be the best option if the rest of the hemisphere agreed.  They don’t, so something had to be done, and a few days ago it looked as though the Secretary of State had done it, by brokering a solution.

Only now Micheletti keeps going off the reservation, and there seems to be no quiet easy way to keep him on it.  There is still something a little ridiculous about the lack of American leverage.  What kind of an empire is this?

Not much of one, actually.  To be honest, I suspect that the U.S. will be able to knock some sense into Micheletti.  If pushed, I’d bet on the agreement coming back to life.  But still, the limits of informality are clear.  Even in Afghanistan, let alone Honduras, local political actors are autonomous, and the threats that the U.S. could use to sanction them are not credible. 

Running an informal empire is complicated, and running a formal one is often impossible.  The implications are left as an exercise for the reader. 

¿Sufragio efectivo?

  Democracy and central banks.  Can they be reconciled?  I argued yes, but it is possible that the Banco de México has a different opinion.

It seems as though somebody at the central bank somehow screwed up quite possibly the most famous saying in Mexican history.  “Sufragio efectivo, no reelección” somehow became “Sufragio electivo y no reelección.”

I am very curious as to what non-elective suffrage would in fact be.

Of course, Porfirio Díaz, who used the slogan in his 1876 campaign, went on to be “re-elected” in 1884, 1888, 1892, 1896, 1900, 1904, and 1910.  Apparently he misplaced the comma the first time around.

Anyway, central banks aren't the only perplexing institution puzzling modern democracies:  the same can be said for investor-state arbitration.  NAFTA has an entire chapter devoted to investor protection, with ultimate enforcement relying on trade sanctions.   Pretty tough stuff!  “Sufragio electivo y no expropriación,” you might say.

Problem is, of course, in defining expropriation.  Mexican tax law currently allows different companies with the same owner to consolidate results.  In other words, losses at one subsidiary can be used to offset profits at a second.  Congress plans to change that, as part of a broader tax hike.  (Yes, Mexico needs to raise taxes.  No, it doesn't need to do so in the middle of a recession.  Don't get me started about Hooverism south of the border.) 

The catch?  Well, the tax hike might be called expropriation under NAFTA.  Now, generally for a case to be made under NAFTA or ICSID rules, creeping expropriation requires both evidence of discrimination and more than one action.  So I doubt that there would be much of a case here. 

Yet ... arbitration law is bizarre.  I must say that the judicialization of investor-state disputes has been a great thing for world peace.  Consider the risks that the Brazilian government has taken in defending its investors abroad!  But it remains confusing and (unlike independent central banks) not-entirely-legitimate in the eyes of the relevant electorates.  At some point, the world will need to find a better way, or the system will collapse under its own weight.

In this case, however, I don't think that a straw will be added to weight bringing down the world's current imperially non-imperial means of dealing with investor-state disputes.  But we shall see.  Any lawyers in the house?

Brazil annexes Venezuela

 OK, not quite.  But our friend Chávez just did something that will put meat on the bones of his somewhat jokey promise not to expropriate Brazilian investments in his country.  What did he do?  He agreed to plonk around $4 billion into a refinery located in the Brazilian state of Pernambuco. 

Refineries are notoriously hard to liquidate.  The market is thin; prices for similar installations in the United States have jumped around by a factor of ten.  This is part of the reason why the big international oil companies continue to operate them, despite low margins and big liabilities.  It's also why PDVSA has been unable to unload Citgo for a reasonable price, despite the fact that President Chávez would clearly like to do so.  Add in the fact that PDVSA will be a minority shareholder with Petrobras, and there's no way it's going to get out of this investment easily.

Which means that the Bolivarian Republic just gave the Brazilians a big fat $4 billion hostage.  More so since (1) the only other reasonable outlet for Venezuelan crude is in the United States; (2) civil law, unlike common law, allows Brazilian companies to sign contracts that spell out a predesignated list of damages to be paid should the government take certain actions; and (3) Brazil is basically independent of foreign oil, and therefore well-positioned to exercise a threat to embargo Venezuela.  Viva the not-empire!

It is quite brilliant.  I stand in awe.  How did he sucker Hugo in that one?  Is the prize of Mercosur really enough?  Then again, our Bolivarian friend seems to have just signed a contract paying a Spanish company a ridiculous amount of money to build a CCGT plant, so who knows?

Russia explained!

  So, there seems to be some evidence of disagreements between the President and the Prime Minister of the Russian Federation.  It shows up in trade policy, with Prime Minister Putin wanting to first cement the customs union with Belarus and Kazakhstan, and President Medvedev wanting to get the R.F. into the WTO ASAP.  It is hard to tell who's winning.  Other subtler signs of division have also emerged.  Who is in control? 

Well, Gancho tells us the answer.  It is all in this photograph. 

Hey Vladimir, what say we cut rugs at the discotheque tonight? Eh? A little dancing and some girls for the former president?

Shut up, pawn, or I bury you with fish in this water. Go away, you block my sun.

I say the Prime Minister is still in charge.  What say you?

I am opposed to an air raid on Iran, but ...

  ... Matt Yglesias writes, catchingly, that “Give Up Your Nuclear Weapons Program Or Else We’ll Damage Your Nuclear Weapons Program!” sounds pretty ridiculous.  Which it does.  But he then goes on to argue:

Suppose I wanted Herf to give me $10. I figured maybe I could offer him various incentives in exchange for the $10. But it turns out that Herf is irrational or whatever and hell-bent on holding on to his $10. Reaching into his pocket and stealing $7 might have some merit as a response. But threatening to steal $7 in hopes of persuading him to give me $10 would be ridiculous.

The problem is that Herf doesn't have $10.  What Herf has is an uncertain plan to make $10 in the future.  Depending on how far in the future and the risk of failure, threatening to take $7 from him right now could be a powerful deterrent indeed. 

Me, I think that this particular Herf is unlikely to be deterred by taking away his $7.  Besides which, we don't know whether we'll get $7 from him, or just fifty cents.  So I'm not in favor of this particular pre-emptive pickpocketing.  But sadly for us doves, the general principle seems sound.

Back to Angola

  The Portuguese empire collapsed in Africa under the worst possible conditions.  After 15 years of bloody conflict, a military coup in Lisbon replaced the existing government with one that wanted to get the hell out of Africa yesterday.  The result was a chaotic flight of a half-million Portuguese settlers back to the metropole.  Over the subsequent decades, Portugal attracted some immigration from its former colonies, but other the Cape Verde (a country that almost certainly would have preferred to remain united with the metropole) it was never great.  As of 2007, only 33,000 Angolans lived in Portugal.  The reasons were simple.  First, it cost a whole lot of money to get to Portugal from Angola, and most Angolans were poor and getting poorer.  Second, Portugal shut the door to the citizens of its former colonies.  Third, Portugal itself wasn’t exactly a glowing destination for immigrants. 

But now it looks like the Portuguese are headed to Angola.  And not in small numbers, either.  Something like 17,000 people moved to Angola in 2006, followed by 24,000 in both 2007 and 2008.  So far this year they’re moving at an annual rate of 31,000.  Of course, 31,000 people is only 0.3% of Portugal’s population and 0.2½% of Angola’s, but still.   

The question is whether they’ll stay.  I tend to doubt it.  First, while Angola’s economy is exploding, it is pretty much all due to oil.  Most of the growth pulling in Portuguese expats (and Portuguese capital) is construction-driven and paid for out of government revenues.  To be frank, I would bet that the boom will last for a while, but the challenge for Angola is making the growth permanent.  Not that Gabon is a terrible outcome, but turning into Gabon is something that happens once, after which the foreigners who came in to help build stuff turn around and go home. 

Second, some of the movement is driven by a crappy economy in Portugal.  That could also turn around.

Finally, it isn’t all clear that Angola will be that welcoming.  Expats from the developed world go to all sorts of places.  Relatively few of them settle down and raise families outside their home, and even then mostly in other developed countries.  (Right, Doug?)  The French in Gabon, for example, are clearly an expat community and not part of the local fabric.  In Côte d’Ivoire they’ve mostly gone home.

So while this is a neat story, I’ll bet that it won't have much lasting effect on Angola.  I would like to be wrong.  Thoughts?

21st century something

  Now this is pretty cool.  It starts off as just a bunch of hardware rolling by.  Tanks, trucks, missile launchers ... although the blue digital camoflague on the missile launchers is a little odd.  What will they be defending, exactly?  Mongo?   Anyway, whatever.

And then comes minute 1:20. 

After which nothing is the same.  Watch it yourself.  But you want to put on your own soundtrack.  Rhythm-wise, “Tha Shiznit” is spot-on. 

China's 60th Anniversary national day - timelapse and slow motion - 7D and 5DmkII from Dan Chung on Vimeo.

I am speechless.  And highly entertained.  And sort of embarrassed for some of the participants.  What the hell was that with the hardhats and mirrors at minute 2:51? 

You can tell I had some trouble with the category tags here. 

Failure modes of the United States, part 2

  Today a conservative commentator for Newsmax called for a coup: 

There is a remote, although gaining, possibility America’s military will intervene as a last resort to resolve the “Obama problem.” ... Imagine a bloodless coup to restore and defend the Constitution through an interim administration that would do the serious business of governing and defending the nation. Skilled, military-trained, nation-builders would replace accountability-challenged, radical-left commissars ... Military intervention is what Obama’s exponentially accelerating agenda for “fundamental change” toward a Marxist state is inviting upon America. A coup is not an ideal option, but Obama’s radical ideal is not acceptable or reversible. Unthinkable? Then think up an alternative, non-violent solution to the Obama problem. 

The failure of the military to accept civilian authority was the second of Carlos’s proposed failure modes.  So let’s ask: could it happen here?  We won’t be the first.  Back in 1993, then-Lieutenant Colonel Charles Dunlap published an essay titled “The Origins of the American Military Coup of 2012.” 

In the scenario, the U.S. increasingly turns to the military, first to aid with domestic law enforcement and then, increasingly, to provide other services when the civilians deadlock.  (It’s too bad that the author missed the possibility that a collapsing private health insurance system might cause the government to mobilize domestic Medcaps.)  The military gains the experience to cheaply carry out governmental functions by becoming “the de facto government in many” places abroad where regimes had collapsed or been removed.  Finally, Dunlap postulates that a combination of the end of conscription, the exclusion of ROTC from liberal campuses, long overseas deployments, and attempts to improve on-post service life cause the military to continue to become ever more distinct from American society.  In 2007, Congress unifies the armed forces.  In 2010, the U.S. is soundly defeated in the “Second Gulf War.”  Dunlap doesn’t list the events that finally provoke the coup (a dolchstoßlegende is hinted at) but that wasn’t of course his purpose. 

Another deliberately vague treatment of an American military coup is in Starfarers, by Poul Anderson.  The book implies that the postulated coup occurs long after the elected parts of the United States government have become hollow shells, with a presidential “Advisory Council” calling most of the shots.  Anderson’s coup leader uses the military to oust the current crop of advisors and take their place, leaving intact the titular offices of President and Congress.  (Which is quite similar to what our conservative friend fantasized about today:  “Having bonded with his twin teleprompters, the president would be detailed for ceremonial speech-making.”)

Needless to say, there is no sign of any of this happening in the United States.  Discussion below the fold.

This blog’s intellectual foundations

  A friend in the Philippines, looking over the blog, concluded that it seemed all over the map.  And that’s true!  I put up plenty of personal stuff and random musings.  But there is a core set of interests that parallels the evolution of my academic work over the past few years.  The geographic focus is on Latin America, of course, but it goes beyond that.

(1)  Instability.  This is what I started out studying.  I was intrigued that Mexico had a pretty well-developed banking system by the 1930s, despite having gone from a dictatorship to bodies-bloating-in-the-sun chaos and back to dictatorship.  It also had steel mills and copper mines and produced a boatload of oil.  How did that happen?  You might say that most historians who get interested in Latin America start by asking the following:  “This place is much poorer than the United States!  Let’s look for the malfunctioning institutions and ask why they’re malfunctioning.”  I took the opposite approach.  “Man, stuff doesn’t work well here at all.  Property rights are all messed up. Why then is it so much richer than the DRC?”  In other words, how did businesses work around the lack of functioning political institutions?

(2)  Empire.  Now that’s a loaded word!  Let’s just define as the violation of one state’s Westphalian sovereignty by another.  In extremis, the violating state can end the sovereignty of the other. If it doesn’t then proceed to make the conquered population full citizens and create a legitimate shared political community, then you’ve got an empire.  In the other extremis, one government can tell key political actors in another, “Do this thing here and we’ll bribe you, otherwise we’ll sanction you.”  My interest in empire, thus defined, grew right out of the aforementioned interest in political instability.  The U.S. mucked around in Mexico for some time.  In some industries, U.S. mucking was key to compensating for the negative effects of domestic instability and political violence.  The general questions, then, became impossible to avoid.  Can foreign governments (or other supranational authorities) substitute for poorly-functioning domestic institutions?  When and why will they try?  What effects will they have?   Others have developed interest in empires and imperialism from a very different direction, of course.  The serious ones write good books about the rise and decline and collapse of empires.  The unserious ones wind up writing strange novels about worlds where meteor showers wiped out civilization in the 1870s, or some such.   Me, I come at the same interest from another direction:  curiousity about the economic causes and economic effects of the widespread phenomenon of strong states violating the sovereignty of weaker states. 

(3)  Energy.  Whaa? you may ask.  Well, what industries are most affected by political instability?  Oil and gas:  the resources are where they are.  When institutions fall apart, they remain viable.  (This applies to other hard-rock mineral resources as well, of course, but they tend to be less profitable.)  What industry has prompted (over the last century, at least) the most violations of sovereignty?  Once again, oil and gas.  (No, I am not suggesting that most such violations are over resources.  They are clearly not.  But if you limit yourself to economic motivations, you wind up again and again looking at the energy business.)  In the course of writing about issues (1) and (2), I got more and more interested in (3) ... and not just how it related to questions of instability or empire.  It is a fascinating business!  The economics of energy are just so weird, the politics are weirder, and it affects everyone’s life.  Moreover, the future of the planet is tied up in the future of the energy business.  Can we move away from fossil fuels?  What will we need to do?  Can it be done politically?   In short, my growing interest in the energy business came naturally, ever since that article on Mexico in the 1920s. 

Thus the progression:  Latin America --> Instability --> Empire --> Energy.  And thus the big theme tying together much, if not all, of this blog.  Even much of the random travelblogging falls into those categories.  Not all, of course.  I enjoy posting random political blather, talking about New York or Miami or elsewhere, and putting up pictures of my wonderful wife.  But here, at least, you have the three big themes of the blog, and why I believe that they fit together.

Brazilian magnaminity explained

  A while back, we discussed Brazil's decision to grant Paraguay a greater share in the rents from their joint hydroelectric project.  There were a number of excellent hard-headed reasons for the Brazilian government to do this, but we've just discovered another:  persuading the Peruvian government that it is worth getting into bed with Brasilia. 

Brazil is contemplating five hydroelectric projects in Peru that would cost about $15 billion and generate 6 gigawatts of power, 80 percent of which would go to Brazil.  That represents about 4½ percent of the country's current installed capacity.  The expansion will involve Electrobras purchasing Peruvian energy companies, something the Peruvian government won't accept lightly unless it trusts that it can negotiate with Brasilia.   After all, as things stand now, Brazil approaches its neighbors much as Teddy Roosevelt did:  it speaks softly, but it carries a big stick.  That makes people nervous.

By showing grace towards Paraguay, the Brazilian government showed Peruvians that it would be a reliable partner and take their interests into account, rather than using its power to take up all of the surplus.  We'll see if that attitude lasts (power corrupts and all that) but for now Brazil is managing the sudden and surprising emergence of its informal empire in South America with grace, aplomb, and plausible deniability. 

Was conquering the Philippines worth it?

  When you're a recreational blogger (procrastinational is more accurate) every so often an issue that you know a lot about is raised among the Big Dogs of the blogosphere, and for a moment you're annoyed that they didn't bother to check you out.

That's universal, I'm sure.  In my case, though, it's immediately followed by relief.  I don't want this place to be well known.  I mostly use it to establish a public record of my ideas, most of which will go into the book(s) I'm working on.  I've had a few bad experiences with tossing out such ideas sans public record.  Truth is, most of them are between silly and wrong, but every so often there's something good buried in there.

This applies to links to other people's ideas.  The linking makes me think about them, and how they apply to the stuff I work on.  It's why I don't see the point in link dumps, as opposed to specific links.

Which is why I'll link here to Matt Yglesias's question:  “Was conquering the Philippines worth it?”  In it, he suggests the following:

I mean, suppose the Philippines had obtained independence from the United States in the 1890s rather than the 1940s. How would my life be worse? How would any American’s life be worse? What “long-term benefits” actually accrued to us as a result of the counterinsurgency effort?  It seems to me that unless you look at victory and conquest as being their own reward, it’s hard to see any. Anti-American rebels lost, but we didn’t really win anything of note. We spent a lot of money, suffered some casualties, killed a lot of people and in exchange got some military bases that were overrun by the Japanese as soon as it looked like they might be strategically useful.

I have my own opinion, of course.  I might even give it later, although some of my thinking can be found here and here.  And I do think that one should take into account a counterfactual view of the Philippines before issuing judgment.  “Fifty years of Hollywood” might have improved the lot of the Filipinos, and it seems reasonable for a retrospective to seriously examine that possibility rather than reject it out of hand.   

So, before I give my own opinion (which is, as so often, changeable), what are your thoughts?

Magnanimidade para Paraguai

  Brazil just renegotiated its energy relationship with Paraguay, to the tune of $240 million per year.  The Paraguayans will now be able to sell the excess capacity from the Itaipú dam at something “close” to the Brazilian market rates.  (The concept of a “market rate” for electricity isn't as simple as it sounds.)  The deal also cuts out the Brazilian middleman.  In concrete terms, the price they receive will triple.  Moreover, the Paraguayans will get a new $400 million transmission line, financed by Itaipú revenues.  In other words, the Paraguayans will pay for only half the cost.  Symbolically, Itaipú’s financial offices will now be opened to Paraguayan nationals, at least in theory, and the Paraguayan government will get to look at the books.  The agreement punts on Paraguay’s right to sell electricity to consumers in third countries.

$240 million is a substantial number for Paraguay.  It’s about 2% of the country's total GDP in 2007, 4% of its exports, and 11% of its government revenue.  That ain’t nothing.  On the other hand, it is pretty close to nothing for the Brazilian government. 

And what does Brazil get in return?  Well, Paraguay is has long been to Brazil what northern Mexico has recently become for the United States:  a source of lawlessness and smuggling.  

Given the new administration is friendly to Brazil, and about as trustworthy as any Paraguayan government in decades (heck, since Francia) more resources for it means more to be spent on, say, customs enforcement or law and order ... and yes, Brazil has and will continue to pressure Paraguay regarding law enforcement.  At some point in the future, the Brazilian government may want and need to turn Mercopol into a serious organization capable of operating inside Paraguay, and it will be extremely useful if Brazil is viewed as a helpful neighbor and not an imperialist aggrandizer. 

Plus, it gives Brazil an ally in its continuing attempts to turn Mercosur into a de facto Brazilian empire.  After all, Brazil wants to give the Parlasur more power, and Brazil plus Paraguay would have an incontestable majority in that body.

And it sends a signal to Bolivia:  last time, we warned you that we had a very big stick, and would peel away half your country if you got too obstreperous.  Now, we say there are benefits for cooperation.  Play nice, Evo.  In the inestimable words of Porfirio Díaz, “pan y palo.”

Canada, I tell you, if American governments were half as smart, y’all could kiss your sovereignty goodbye. Finland, aren’t you glad the Russians ain’t nowhere as slick?

Chinese oil expansion

  What are Chinese state firms doing in Africa?  Among other deals, last year the CNPC agreed to get the right to the Agadem oil field in Niger in return for the construction of a 20,000 bbd oil refinery in the country.  It will also build a pipeline to export whatever it finds, although the route is still unclear.  And now the Chinese government has announced that it might start to subsidize the acquisition of natural resources even more.  Well, there are economic reasons to think that such subsidies don't make all that much sense.  So what is China doing?

I think there is an answer.  In reverse order:

(1)  Price hedging.  China wants to hedge against another oil spike.  Inasmuch as the Chinese will be able to push around African states, and keep them from expropriating the surplus, this would work.  And China might be able to do it.  States aren't unitary actors.  Bribing individuals within them brings value; recently the Chinese were involved in a bribery scandal in Namibia.  That one wasn't energy-related, but leaders can be bought, and so can influential actors within weak states.

(2)  Mad Max insurance.  What if the global trading system collapses?  Well, if the Chinese government has control of the marketing tools,and can plausibly threaten to destroy or interdict them, then it may have the ability to insure that its consumers have access to oil.  Moreover, it may be assuming that foreign states won't have the ability to find alternate markets in the event of such a collapse.  The rub?  I'm trying to picture such a collapse, short of a third world war.  It isn't coming to me.  Maybe a war that China isn't involved in?  I don't know.    

(3)  Production.  Maybe Chinese officials believe that oil investment won't increase as much as they need it to.  Oil companies sell project management skills more than anything else, but are subject to political risk.  Perhaps (1) is wrong, and the Chinese assume that African governments will hose them in the event of oil price spikes ... and perhaps they don't care, because the more oil that Chinese state firms can bring on line, the less likely such spikes will be.  If rational private actors won't make the investments, then the Chinese government will.

I'm leaning towards (3), but I don't know.  Thoughts?

Ain’t gonna study war no more?

  John Mueller repeats in this month’s Political Science Quarterly an argument that he’s made before:  war is becoming rare.  Developed countries no longer fight.  Underdeveloped countries rarely fight.  Imperial wars have disappeared with empires.  And civil wars are becoming rarer. 

Even if you want to quibble with Mueller’s typology (maybe Gulf War 2 and Chechnya are imperial wars, the Rwanda-Congo interventions could be called interstate wars instead of civil ones, perhaps you want to call the Caucasian countries developed), the data are pretty incontrovertible. 

The world has become steadily more peaceful since 1989, probably since the mid-1960s.  Mueller has some ideas about the causes of this decline in bellicosity.  I hope Mueller is right.  For while honesty compels me to admit that I would like to add a third (and fourth and fifth) picture to the sequence shown above, I must also admit that I do not want any of those additions to see anything even resembling combat. 

Therefore I ask you:  in the case of war, does the performance of the past two decades predict future results?

Demography matters, and a music video

  There is an interesting (if rarely updated) blog called “Demography Matters.” It's hit a few interesting topics lately.  Randy McDonald is the driving force behind it.  For those of you who don't know him, he wrote the defining takedown of the whole “Eurabia” nonsense, aka the idea that immigration and differential birthrates will eventually give Europe a Muslim majority.  But the blog is a lot more than that.

Here is a discussion of Greenland.  Short version:  considering the country's dependence on Danish expats for skilled labor, even a non-independence independence of the sort negotiated by other microstates could lead to disaster.  The population is shrinking despite high birthrates.  Maybe they'll get lucky and find oil.  More likely they will remain a dependency of Denmark forever, most likely de jure but definitely de facto.

The blog also recently discussed Iran.  Short version:  looks like Europe!  Crashing birthrates could fuel an economic boom if only the place could get the policies right.  In comments there is an interesting discussion of the fact that American birthrates have stayed above replacement ... and that much of that difference is because urban birthrates in the U.S. aren't appreciably different from their suburban or rural equivalents.  The really weird fact?  Canadian birthrates are crazy lower than U.S. ones, even in such similar places as Washington and British Columbia. 

Finally, it presents a scary version of Cuba's future, in which the country enters a demographic death spiral.  All it lacks is a projection of the worst case scenario: what would Cuba's population and age pyramid look like in 2050 if it goes the way of Ukraine and stays there?

Below the fold is a music video.  It is for Randy, for reasons he understands.  Essentially, while not my cup of tea, it shows what can be accomplished in his preferred genre in both aural and visual terms when attempted by two rather accomplished artists.  Enjoy.

Empire versus hegemony

  Here's a working definition of the difference between empire and hegemony, abstracting from the veil of Westphalian sovereignty.  An imperial power tells its satraps, “Run your societies the way we want you to, or we will run it for you.”  An hegemonic power tells its subordinates, “Run your societies the way we want you to, or we will f--k you up.”

Working hypothesis:  for reasons of domestic politics, the destruction of the sovereign bond market in the Great Depression turned America’s foreign regime in the Circum-Caribbean from an empire into a hegemony. 

Explanation forthcoming.  The book is in progress.  In the meantime, I recommend the collected works of Suresh Naidu, a great Canadian.

A lack of leverage

  The U.S. really doesn't give a whole lot of aid to Honduras.  Look at the figures, including military aid, from the USAID Greenbook:

That isn't a whole lot of leverage.  Of course, small amounts of aid may make it more likely that they'll be yanked, since such yanking won't wreck the national economy.  But that is the problem with using aid as an instrument of empire.  Contingent bribes — e.g., do good and we will give you more money — are fairly easy to administer.  Contingent threats — do what we want or the cookie jar will be taken away — are a lot harder.  You need to be giving enough money for the recipient to care, but not so much that withdrawing it would cause drastic adjustments that would reverberate back upon the donor. 

To put the above figures in perspective, remittances from the U.S. averaged 16% of GDP over the same period, peaking at 21% in 2006. 

In short, the U.S. didn't have a whole lot of leverage to keep the military-Court combo from ousting President Zelaya, even if the Obama Administration had wanted to.

(Say, should I add a “Honduras” tag to the blog?) 

A dog not barking in Honduras

  The fact that none of my posts about the Honduran coup carry the “Empire” tag is remarkable, considering the history of U.S. involvement in Latin American politics.  Even more remarkable is the idea that should events evolve in such a way as to warrant such a tag (which I consider unlikely), it will probably be either due to either direct meddling by the Alba countries or pressure from Unasur/Río Group/Brazil, not the interference of the United States.  That is quite a shift. 

Of course, the U.S. is still quite hip-joined to Honduras.  There is Soto Cano Air Base.  There is CAFTA.  There is the Millenium Challenge Account.  There are remittances.  Honduras isn’t dollarized, but it is a great case for dollarization, what with remittances above 14% of GDP, a fixed exchange rate and about 24% of all loans denominated in U.S. currency.  And we train its military. 

But Washington isn't leading events.  Sure, maybe it could, but it’s resisting temptation.  (Thank God!)  And that is a very big change. 

A real anti-imperial triumph

  It seems as though the Argentine ambassador in France will no longer need to pay embassy expenses out of his own pocket.  A French judge lifted the freeze imposed on April 3rd.  More importantly, a German judge released the funds that German companies owed Argentine tax authorities.  Interestingly, Judge Wölber did not base his decision on sovereign immunity.  Rather, he ruled that since the tax payments were owed by the companies’ Argentine operations, German courts had no authority.  It remains to be seen if this precedent will be followed by other European courts, but the Argentine government is optimistic.

Interestingly, U.S. courts have taken the same position.  In 1999, the New York-based Leucadia National Corporation sued Nicaragua over $26 million in defaulted debt that it had purchased for $1.14 million.  A New York court granted the company $87 million.  (No, I don’t know why.)  It tried to collect by attaching Nicaragua’s share of the ticket and landing fees paid by U.S.-based airlines that flew to that country.  U.S. courts, however, refused to uphold the judgment.  But don’t cry for Leucadia.  Eventually the World Bank paid off the debt at 4.5¢ on the dollar, including accrued interest.  By my calculations, Leucadia received about $7.8 million, for a nice return of 584%. 

I am increasingly unsympathetic to Argentina.  But I am also relatively unsympathetic to the vulture funds that try to use the judicial system to impose sanctions on defaulting governments.  I may change that position if we start seeing more ploys like President Correa’s brilliant gamble, but that’s still a hypothetical fear, not a real one. 

P.S.  It seems like I was wrong about Ecuador.  I’ll discuss why, but only if there’s interest.  No reason to admit error if nobody cares ...

Guest post #6: War and Remembrance

  These images show the medal that the Russian army minted to commemorate the 1831 conquest of Warsaw. You can occasionally still find these in Finnish antique shops; this one was provided courtesy of Jani Tiainen’s Finnmedals in Helsinki. 

Before we leave behind the Finnish soldiers who fought on behalf of Russia in Poland back in 1831, there are a few questions left to be answered.  What were the consequences of the war for Finland? What were its effects on Poland?  In the short term, the Polish campaign of 1831 undoubtedly strengthened the Grand-Duchy of Finland. In the context of the politically incendiary situation in 1830-1831, the Finnish Guard’s participation in the Polish campaign played an important role in securing Imperial favor for the Grand-Duchy’s autonomous status. At a  time of crisis, Finland demonstrated to the Russian Empire that (unlike Poland) she could be trusted.

For the Finnish officers who had distinguished themselves on the front, the campaign marked the beginning of some splendid careers. Adolf Aminoff, the young lieutenant from the painting in the fourth part of the story, rose to the rank of General of Infantry and ended his career as an adjutant of Alexander III. Henrik Lyra, whom the Poles captured at Długosiodło, became a General Major. The young Casimir von Kothen became the adjutant for Governor-General Aleksandr Sergeyevich Menshikov, and later the governor of the province of Viipuri. And finally, Colonel Ramsay, the commander of the Guard, became General of Infantry and a member of the Russian Imperial War Council.  In short, over the decades preceding the Crimean War, the government of the Grand-Duchy of Finland was in the hands of officers who had earned their ranks on the battlefields of Poland.

For the common people of the Grand-Duchy, the Guard’s campaign of the became the first concrete example of a developing Finnish patriotism that put love for the Finnish fatherland and loyalty towards the Russian Emperor into one and the same breath with no sense of contradiction. A belief in the virtues of the Finnish soldier instilled a special sense of devotion and enthusiasm, celebrated in popular broadside ballads that proclaimed the willingness of the younger generations to follow the example of their predecessors and take up arms under the banner of the Finnish Guard in defense of Finland and the Empire:

Not-so-secret prisons at Bagram

  This, if accurate, is un-American and must be stopped.  I was not aware that the U.S. held prisoners at Bagram who were captured outside Afghanistan.  That is wrong.

While I think the decision to keep the torture photos under wraps is a mistake, I am not so sure of my position as to become upset about it.  No laws are being violated, and the administration's propaganda rationale is quite valid.  In addition, I also think that it would be a bad idea to extend habeus corpus to prisoners taken in Afghanistan as long as there is an active rebellion under way.  Denying those rights during a rebellion does not violate American law nor American tradition nor a decent respect of the opinions of mankind.  Finally, I have no problem with American forces swooping down and arresting somebody outside the United States, even in violation of the jurisdiction in which the swooping occurs.  After all, even now, two decades later, and despite all the gray, it still seems to me that Bush the Elder's decision to invade Panama and arrest Manuel Noriega was the right thing to do. 

But I have a serious problem when the swoopee is not transferred to an American federal court but rather transported to an extraterritorial outpost and held with no judicial protections whatsoever.

I understand why the President wants to punt on the Bagram issue.  I am supremely cynical, and unlike many of his early supporters I found the man an attractive candidate early on because I beleived that he was even more supremely cynical in the sort impersonal way that makes for successful presidencies.  But cynicism has its limits.  He does not have my support on the fate of the Bagram detainees captured outside the Af-Pak theater, and they should be tried in American courts or released.   

The great socialist scramble for Africa

  So, China is trying to get into the Nigerien uranium business, for reasons known only to the China National Uranium Corporation.  (Although I will guess later in this post.)  Here's the story to date.  On June 5, 2007, the Nigerien government formed the Société des Mines d'Azelik (Somina) a mining enterprise intended to exploit the Azelik uranium deposit way up in the north.  Niger got a 33% stake in the enterprise, with China getting 67%.   On July 6, Toureg rebels kidnapped a Chinese national for four days.  On November 9, Somina got an official license to work at Azelik.  On November 11, the Toureg rebels declared that China's contracts were "invalid."  At which point the Nigeriens accused Areva (the French state-owned nuclear company) once again of funding the rebels.  The same rebels, that is, who attacked Areva in April.

So the Chinese suspended work.  And the Nigerien government started to hem and haw and stall and delay.  So much for all those Chinese plants to build 50 MW of (conventional) power plants in the country and a €27.3 million bridge over the Niger river.  On the other hand, the Chinese didn't want to lose their options, so on April 30, 2009, they agreed to lend the Nigerien government $95.22 million at 2% over ten years, with the loan explicitly (but vaguely) tied to the stalled Azelik project.  China, meanwhile, sold 5 percentage points of its interest in the mine to a state-owned Korean company, which promised the Nigerien government that it would buy 400 tons per year once (if) the 700 tons-per-year mine gets up and running.  The president of Niger has just visited the site, in order to show his seriousness about getting the project back on track. 

The hitch is that as the Chinese project in Azelik stalled, France was on the move. In January 2009, Areva signed a deal to open the largest uranium mine on the continent, and President Sarkozy visited Niger in March to give it his full-throated support.  That's a problem for the Chinese.

Now, the Chinese still have a good project if they can get it running.  After all, they have gotten the Korean government to implicitly promise to buy the uranium at whatever price the Chinese charge, which will be quite a coup if the mine opens.  Not a terribly bad plan.  That said, the overall impression is that the Chinese really don't yet know how to play this game.  

So what exactly is the game?  Suggestion below the fold.

On the edge of the French energy empire

  In 1965, the French discovered uranium in Niger.  Here is what the New York Times had to say about it in 1969, right before production began.  It makes for fascinating reading.  

The paved road comes to an end in this isolated, dust-colored market town on the southern shore of the sand sea known as the Sahara.  About 300 miles farther north, along an ill-defined track, lies the town of Agadez.  About 150 miles beyond that, near the jumbled boulders of the Air Mountains, the village of Arlit is rising.  Where nothing more than tumbledown mud huts stood two years ago, French and African workmen are building cement-block houses, shops, an electrical generating plant big enough for a city of 40,000 — and two uranium processing plants. 

The uranium will be produced by a company in which the government of Niger holds 20 percent, German groups 10 percent, and the French Atomic Energy Commission and two French mining companies 70 percent ...

In a country where the per capita income runs about $75 a year ($351 in 2008 dollars), peanuts and bony steers constitute the only significant exports, where fuel is so scarce that technicians once tried and failed to make a power plant run on peanut husks, the discovery of uranium was an extraordinary event.

Niger will receive about 40 percent of the company’s profits ... Niger is counting on only $4 million a year in revenues by 1975 — about a tenth of the current national budget.  “Even with this strike,” said a local economist this week, “this is never going to be a rich country—unless they find a market for sand.” 

Imperialism can pay ... the imperialized

  The French empire in Africa never really ended.  In 1960, the autonomous territories of the “French Community” got seats in the United Nations, but for most the change was less than dramatic.  Only Mali dropped the use of the old colonial currency.  The new African governments increased trade restrictions, bit by bit, and the French market closed to their exports, bit by bit, but Paris fought hard to keep the European market open for a very long time.  The Yaoundé and Lomé conventions granted the “associated” states preferential access to what later became the E.U. 

Empire didn’t go away in another more visible manner:   French troops remained on the continent, French nationals staffed the governments and newly-created armies, French companies (often state-owned) dominated the export industries, and France knocked over more than a few recalcitrant governments while propping up others. 

Niger, where the French found uranium, made for a particularly egregious example.  In 1963, French troops rescued the government of President Hamani Diori from a coup.  In 1969, the French discovered uranium, and two French companies got exclusive rights.  In March 1974, French, Nigerien, and Gabonese representatives meant in Niger’s capital to discuss Diori’s insistance that the country’s uranium contracts be renegotiated.  Coincidentally, Diori fell to a coup the next month.  It seems that all of Diori’s French military advisors had gone on vacation and no one picked up the phone in Paris when news of the violence arrived.  The New York Times went so far as to accuse France of abetting the coup because Diori wanted to give uranium concessions to Exxon.  The next guy kicked French troops out of the country, but the French remained in control of the mines ... and their troops came back in 1981 anyway.

So what did the combination of continuing French intervention and French uranium mining mean for Niger?  An unexpected answer below the fold. 

Venezuela cede

  The Bolivarian Republic just settled with the Argentine owners of Ternium over Sidor, its Venezuelan steel unit.  The Venezuelan government nationalized Sidor in 2008.  Chávez offered $800 million.  Ternium scoffed and asked for $4 billion.  They just decided upon $1.97 billion.  Is that a fair price?

Ternium bought Sidor for $1.79 billion in 1997 and subsequently invested a lot of money, but that doesn't really tell you anything.  On the other hand, Sidor enjoyed revenues of $2.4 billion in 2007.  At a discount rate of 10 percent, the agreed-upon price implies a Sidor profit margin of 8 percent, which is consistent with the steel industry's average margin during the 2001 recession.  Conversely, at a profit margin of 16 percent, about what the industry earns in a boom, the implied discount rate is 19 percent ... which seems reasonable for a high-risk area like Venezuela.  (Bernard?) 

Upon announcement of the deal, the price of Ternium shares jumped 49 percent, to $15.67.  That said, the stock peaked at $45.18 on July 2, 2008, before sliding to $34.01 on August 8, and then collapsing to $4.65 by November 20.  The problem with interpreting that price collapse as evidence that the offered price isn't fair?  President Chávez announced the nationalization in April. 

In other words, the price appears to be fair.  Another demonstration of the power of ICSID?  Perhaps. We don't know if the Venezuelan government offered more money out of fear of an adverse arbitration result, or if it offered more money at the urging of the “semi-dictator” of Argentina, or it offered more money because the President of the Bolivarian Republic decided that it was simply the right thing to do. 

But we do know that the foreign oil companies can go to ICSID, and that Caracas seems to be a bit worried about the prospect.  We also know that Cemex is pursuing the ICSID route.  So we will see if the empire strikes back at the Revolution.

P.S.  FWIW, Argentine embassy accounts in France remain frozen.

Are there lessons in what didn’t happen in Mexico?

 From the outside, the Mexican federal government, and several local administrations, seem to have handled the flu outbreak fairly well.  Not perfectly:  there is some evidence that the country’s inefficient health system may have contributed to the outbreak in the first place, or at least the relatively high initial death toll.  But fairly well. 

The necessary condition for a solid Mexican response, of course, is that Mexico is not a failed state.  It’s not even a failing state.

My question:  do failed states pose a epidemiological threat?  On the one hand, there won’t be any authority to coordinate a response to an outbreak.  On the other, contacts between failed states and the rest of the world are almost inescapably limited, presumably making any outbreaks less likely to spread.  And if they are an epidemiological threat (a big if) what (if anything, because not all threats are worth countering) should be the international response? 

Canadian policy on captured pirates: let ‘em go. ¿¿De veras??

  As our few readers know, we've been covering piracy for some time on this blog.  Our first post on the topic, in fact, took on the myth that European navies refused to enforce the law against pirates.  Only now Robert Farley tells us that the Canadian and Dutch navies went ahead, captured pirates, and released them.  Er?

Well, NATO is not the problem.  It is true that NATO, which is not a sovereign state, does not have arrest powers.  But the national navies operating under NATO command do have such powers.  Now, I'd be happy with giving an international organization arrest powers, but I can see why some politicians might be reluctant to take that step.  That said, the truth is that not only do national militaries have the power to arrest pirates on the high seas, since December they've had the ability to do the same thing anywhere in Somali territory, sea or land.

So if this and this story are correct, something isn't working.  In the Dutch case, it seems to have been a low-level screw-up.  Ships under European command have standing orders to turn captured pirates over to Kenya for prosecution and punishment; ships under NATO do not.  There was a deputy from the justice ministry on board the Dutch ship (for precisely this reason), but whoever it was decided to let the pirates go.  Parliament appears to be annoyed.  At some point, I suppose, we'll find out who made the decision and why.  We might even find that circumstances made it a wise choice.  But it isn't Dutch policy, and it seems to be causing the government some headaches at home.

Canada seems to have a deeper problem.  The Globe and Mail has deeply misinformed its readers by reporting, contrary to fact, that “Canadian sailors, like their NATO allies, lack the authority to make arrests in international waters.”  Of course, the Globe and Mail is parroting what seems to be Ottawa's official line.  After all, the Prime Minister said in Port-of-Spain that the Winnipeg did the right thing by releasing the pirates.  “Those were the appropriate measures under the circumstances.”  Elsewhere, a Canadian admiral alluded to mysterious legal difficulties.  “There's the rule of law that needs to be applied, so we're not currently regularly detaining them, no. There are all kinds of challenges with that.” 

Now, I can understand why a country would fear becoming a dumping ground for pirates ... but it isn't as though hundreds or thousands of them are being captured every year.  Nor is organizing a piracy trial under normal criminal rules all that difficult.  (And they have, by definition, been caught red-handed.) 

So, Canadian readers, I ask you, what the hell?

The other Castro

  Cipriano Castro managed to make a bit of a hash of Venezuela during his brief regime.  He gained power in 1899, at the head of a revolutionary army.  His army mobilized resources by confiscating property; sometimes of opponents, sometimes not.  Eventually he provoked a bunch of European navies into blockading him.  The resulting diplomatic mess eventually dragged in the United States, who was worried that Germany intended to, say, scarfle off some Venezuelan islands and establish a naval base.  Or something.

So it isn't really clear to me why Hugo Chávez would want to replace a bust of Rómulo Gallegos with one of Cipriano Castro in the presidential palace. 

And then Leticia Arroyo sent me this speech by Castro made on December 9th, 1902, just as the European navies started sinking Venezuelan ships in the harbor of La Guaira:

Venezuelans!

The insolent foot of the foreigner has profaned the sacred soil of the Fatherland!  An extraordinary act in the history of the civilized nations, without precedent, without possible justification, a barbarous act because it is an attack on the most rudimentary principles of international law, an ignoble act because it is the fruit of an immoral and cowardly collusion of force and betrayal, it is something that the English and German squadrons have just done in the harbor of La Guaira just a few moments ago:  in a simultaneous and coordinated action they surprised and captured three undefended ships of our navy that had entered dock for repairs. 

The battle is unequal because two of the most powerful nations of Europe have conducted an attack against our country, which has barely made it out of a  long and painful convalescence ... But justice is on our side, as is the God of the Nations who inspired Bolívar and the constellation of heroes who accompanied him in the great work of bringing us, at the cost of great sacrifice, our Fatherland free and independent ... For my part I am prepared to sacrifice everything on the altar of the Fatherland, everything, including what one might call my anguish over our internal differences.  I have no memory of what disagreements may have occurred in the past.  Erased in my thoughts are the politics and fighting of all who were opposed to my aims, of all who have been able to leave a trace of pain in my heart.  In front of me lies no less than the luminous vision of the Fatherland, of which Bolívar dreamed, of which I dream.

... I open the doors of the Republic’s jails for the political prisoners who still remain in them; I also open the doors of the Fatherland for those Venezuelans who remain abroad for similar reasons and return to them under the constitution the properties of all the revolutionaries who lost them for reasons of public order.  Further still, if I survive these events ... I am prepared to return to private life, leaving behind my sword, of course, at the service of the Republic, and you can be sure that I will retire sans nostalgia for power, because my greatest aspiration is to see my great Fatherland prosperous and happy.

Now I see exactly what Hugo sees in this guy.  I can imagine him giving this speech on Aló Presidente, word for word.  Some things never change indeed.

Guest post #5: The Home Front on the edge of Empire

  In Finland, as we saw yesterday, the participation of local soldiers in the campaign against Poland ignited patriotic sentiments, at least among those who had served in combat:  “May our banner call the sons of Finland to perform the highest civic virtues still in the future, to fulfill their obligations and loyalty towards their sovereign.” 

Elsewhere in Europe, the bloody suppression of the November Insurrection aroused, well, different feelings. The Polish independence struggle became an immediate cause célèbre for European liberals. Casimir Delavigne, for example, celebrated the old Napoleonic brotherhood in arms between France and Poland in his exhilarating song La Varsovienne.  In the German-speaking countries, August von Platen’s 1831 sonet collection Polenlieder topped what later generations would call the charts.  

West European sympathy towards Poland, however, hardened Russian attitudes; even the Russian intelligentsia abandoned its criticism of the Tsarist régime and supported Imperial policy in Poland. The anti-European backlash culminated in Aleksandr Pushkin’s legendary (if somewhat unsubtlely-titled) poem, “To the Slanderers of Russia.”  Pushkin’s diatribe, in particular, should be familiar to a modern reader. 

(Uh, Jussi, you give us too much credit.  I’ve never heard of any of the works of music or literature that you’ve cited in here.  Then again, I hope nobody criticizes people in 2145 for their ignorance of, say, “Eve of Destruction” or “Bad Moon Rising.” Right?  Or am I excusing my ignornance?  —ed.) 

Russian officials still reference “To the Slanderers of Russia” in times of conflict.  During the 1999 Kosovo War, for example, the Russian foreign minister, Igor Ivanov, cited the poem in order to give a stern warning to the NATO countries.  Eight years later, in 2007, the Russians once again used the poem for propaganda purposes during the Bronze Warrior crisis between Estonia and Russia. 

Guest post #4: Heroes of the Empire

  The work of art that you see below is a painting by Robert Wilhelm Ekman, a pioneer of early national romantic art in Finland. Ekman is perhaps best remembered for his early attempts at the illustration of Kalevala, but this work, finished in 1848, invokes the memory of the Finnish soldiers who had fought and died in Poland seventeen years before. You won’t find this work on display in any museum; it is part of a private collection, and the owner prefers to keep it that way.

The painting depicts the young lieutenant Adolf Aminoff wounded on the ramparts of Tykocin on May 21st 1831. As you can see, the painting captures two ideals.  First, an officer who leads his men from the front, even at the risk of his own personal safety.  Second, his soldiers, equally ready to risk their lives by rushing to the aid of their wounded comrade. During the following decades, national romanticism claimed these universal ideals as quintessentially Finnish military virtues.  Emphasizing the importance of solidarity and camaraderie is always a natural choice.  After all, it doesn’t really matter what you’re theoretically fighting for, because putting your life on the line for your comrade is always a virtue.  

Raisuli my ass

  Who's the biggest pirate-fighter in the last century of American presidents?

From Big Crush, via  Mojo.

Word.

Observatorio Argentino 10: French lawyers declare war!

  It seems as though some French lawyers have decided to do a Rogers on the Argentine Republic. 

A few years ago, in 2005, Argentina repudiated a big chunk of its foreign debts.  Since then, the jilted bondholders have been trying to get it back.  On April 7th, the famous NML-Elliott announced that their lawyers managed to get a French bailiff to put a stay on all Argentine accounts in the country.   “The frozen assets in France are not diplomatic, and therefore are not protected by sovereign immunity,” said an Elliott spokesperson. 

Well, Buenos Aires wasn't going to take this lying down.  Elliott had already tied up funds held in France by the Banco Hipotécario and Banco Central.  The Argentine embassador to France, Luis Ureta, complained to the French foreign ministry.  The French diplomats were not happy to hear the news.  “On Monday night, a bucket of cold water landed on the heads of the diplomats at the Latin American Desk of the French foreign ministry,” was how La Nación described it.  The Argentines asked France to unfreeze the accounts “by any means necessary.”  (Argentines are not Filipinos:  I don't think the phrasing was deliberate.)

The French response?  Well ... it was rather American, actually.  A spokesman expressed support for the Argentine position, and then told the Argentine government that if they didn't like it, it was up to them to appeal.  In the interim, the Argentine embassador is paying for burnt-out light bulbs and the like out of his own pocket.  I suppose the embassy employees are getting paid back in Argentina and withdrawing their salaries out of ATMs, or some such.  The account itself is only a million euros or so, but man is it a pain to have to run a big office without any access to, you know, modern finance. (Although many Argentines have some recent experience of doing exactly that.)

Anyway, it's a bit of mess.  Argentina has already lost access to several hundred million dollars worth of bank accounts and all of the nationalized pension funds held abroad.  About the only bright light in the legal firmament is that a New York judge just declared that the recently-nationalized Aerolineas Argentinas is “not an alter ego or agent of the Republic, and the recognition of Aerolíneas’s independent status won't serve as a fraud or injustice against the Republic’s creditors.”  So that's one bright spot.  

In other news, I've added an “empire” tag to this blog.  I'm still not sure what I mean by it, but once I figure that out, I'll try to reclassify past posts appropriately.  Suggestions?

Oh, and go listen to Will.  I need help with this stuff!

When lawyers declare war!

  You know, the more I learn, the more I think that President Correa of Ecuador is really playing with fire in defaulting on his debts.  Brazil is mad at him, and you don't want to get the new imperial rulers of South America mad at you.  But more importantly, he's got his American creditors mad at you ... and it seems as though those creditors may have a rather powerful legal recourse.  It'll all depend on the definition of a “central bank.”

But let's start at the beginning.  What happens when lawyers declare war on a country?  Well, remember this post, on the U.S. sanctions against Manuel “La Piña” Noriega ?  Turns out that the sanctions weren't really Elliot Abrams' idea.  Rather, the credit goes to a lawyer, William Rogers, acting on behalf of his client, former President Eric Delvalle of Panama. 

La Piña, you see, had an anger-management problem.  He decapitated Hugo Spadafora, one of his political opponents.  When the President of Panama, Nicolás Barletta, made the mistake of thinking that he, you know, ran the country, and decided to investigate the head-chopping, Noriega locked him in his office and threatened his family.  At 3am, President Barletta appeared on national television and offered his resignation, which the National Assemby accepted in a late-night emergency session.  Eric Delvalle, the education minister, then became President.  A little while later, Delvalle decided to pass on to La Piña an American offer to let him peacefully resign with all his ill-gotten gains.  In response, Pineapple-face ejected Delvalle from the presidency.  Delvalle got word that he was going to be arrested the next day, and managed to make it to an American military base.  His ambassador-at-large hired Rogers, and then ...

Guest post #3: Battle for the Empire

  The soldiers of the Finnish Guard joined the other units of the Russian Imperial Life-Guard in Białystok on April 11th, 1831. By this time, the Polish-Russian war had been raging for two months, and the insurrection was spreading, with violence and mayhem escalating on daily basis. On the same day as the Finnish soldiers listened Colonel Ramsay’s lecture on the Russian War Articles and the letters of protection issued to the Polish civilian population, one Russian cossack regiment massacred civilians in the small Lithuanian village of Oszmiana. The event was subsequently commemorated in Adam Mickiewicz’s epic poems.  

The Polish-Russian war was fought on two fronts.  In the south, on the eastern side of the Vistula, the main 100,000-man Russian army (under a Baltic German field-marshal, Hans Karl Friedrich Anton von Diebitsch) advanced directly towards Warsaw.  Meanwhile, in the north, Grand-Duke Mikhail Pavlovich’s units of the Russian Imperial Life-Guard (the Finnish Battalion included) approached the Polish capital from the northeast, through the dismal woodlands between the Narew and Bug rivers in Mazovia. You can get a rough view of the surroundings from the map.   (Click on it for a larger image in a new window.)

Diebitsch’s army crossed the frontier on February 5th, fully prepared to crush the Polish rebellion. Resistance, however, proved to be a good deal tougher than anticipated; as mentioned before, the Congress Kingdom had a large, professional standing army, which now proved its mettle. On February 25th, the Poles halted the Russian advance in the bloody battle of Grochów.  The Poles then began a counteroffensive. Lieutenant-General Ignacy Prądzyński, the Polish chief of staff, defeated the Russians at Dębe Wielkie on March 31st, and again at Iganie on April 10th. 

But wars, like baseball games, aren’t over until they’re over. 

Guest post #2: The Guardsmen of the Empire

   We continue the story from December 14th, 1830, when the Finnish Guard received its mobilization orders and started to prepare for a long and arduous journey to the Polish battlefields, on behalf of the Emperor and the Fatherland. [The “Fatherland” would be Finland, not the Russian Empire, right? In our hemisphere, we’re not used to those distinctions, except maybe the Canadians.  And the West Indians. And the Puerto Ricans.  And the Colombians.  And … oh, never mind.   —ed.]  However, before we describe the Finnish participation in the suppression of the Polish independence struggle in any further detail, it’s perhaps best to describe those men who ended up serving as tools of the Imperial Russian war machine in the said campaign. What kind of a unit was the Finnish Guard, and what do we know of its officers and soldiers?   

Guest post #1: Empires and nationalities

  Hello, everyone. For those who don’t know me, and for those who are wondering why I’m posting here, it’s perhaps best to start with some details.  [No pix of you with a dangling cigarette and sunglasses? —ed.]

Who am I? My full name is Jussi Olavi Jalonen. I’m a single man on my thirties, and after a long residence in the city of Tampere, I now live on the Western Seaboard of Finland. Why am I posting here? Well, because Noel suggested it. I’ve done all sorts of things for living, but these days I’m basically a free-lance researcher and writer. Guest posts on a high-quality weblog are just as good a way to kill time as anything else.  [We’re high quality! —ed.] 

I write about history. As said, I’m single, but Clio is a very demanding mistress. [My wife is very understanding of that, and it's one of the many reasons I love her. —ed.]  As for my field of study, you could probably say that I’m more interested in Power than Money.  [One often begats the other. —ed.]  I specialize in military history, in a very broad sense. Two months ago, an article that I wrote on the interned Polish soldiers in Finland in 1940-41 appeared in a publication of the Finnish National Archives, and just recently, Studia Historica Septentrionalia published another article that I wrote on the theme of comradeship-in-arms. In particular, however, I’m interested in soldiers who have, for one reason or another, ended up serving in the military establishments of foreign powers — usually, in the service of their Imperial master, occasionally in the service of its enemy, or sometimes even in conflicts where there appears to be no vested national or ideological interest whatsoever. I’ve written articles on the Finnish volunteers in the Boer War, Finnish volunteers in the Waffen-SS, and also a biography of jäger colonel Eino Polón, Knight of the Mannerheim Cross. For those who don’t know, the term “jäger” refers to the Finnish independence activists and volunteers who served in the Imperial German Army against Tsarist Russia in 1915-17.

One particular thing that I find fascinating is the historical contrast between Finland and Poland in their relations towards Russia; as the most recent example, you may remember that during the South Ossetian war last August, Poland sided openly with Georgia, while Finland, as the head of the OSCE, attempted to mediate the conflict and maintain communications with Russia. These contrasts between Finland and Poland have very deep roots. Consider the Finnish Guard’s participation in the 1831 Polish campaign. (Last year, I wrote an article on this topic for the Polish weekly Tygodnik Powszechny.) 

But what was this so-called “Finnish Guard?”  What exactly happened in Poland in 1831?  And how did it create such long-standing differences between the two border countries?

Getting serious about the cartel wars

  Much of Mexico's organized crime problem derives from the United States.  First, obviously but intractably, the U.S. provides most of the demand for illegal narcotics.  Second, and more tractably, the U.S. provides most of the weapons.  This is not to deny that the weakness of Mexican law enforcement and local government is a necessary condition for the current violence.

There are several ways around the problems of Mexican law enforcement.  The simplest one is to use foreign agents.  In fact, that's happened.  In Operación Limpieza, the Mexican government recently busted open a corruption ring inside SIEDO, the agency charged with fighting organized crime.  Except ... the info originally came from an FBI agent operating in Mexico.  (Hat tip:  Patrick Corcoran.)  This will be a diplomatic problem, especially considering how long it took the Americans to pass the information along.

Except it shouldn't be a problem.  In fact, embedding Americans inside the chain-of-command of Mexican law enforcement might be one of the most effective ways of improving its efficacy.  So would spending much more U.S. money on training, or subsidizing Mexican salaries.  This is not to say that Americans are uncorruptible; it is to say that it's much harder to suborn an American agent without discovery.  The incentives are just too different.  The same applies (albeit to a lesser extent) to a better-paid Mexican agent.

A serious American reaction would involve reinstating the assault rifle ban and giving Mexico much more money.  A serious Mexican reaction would involve allowing Americans to bring their investigatory knowledge to Mexico, and use Americans to police Mexican law enforcement. 

Which isn't to say that organized crime is intractable without American help.  It isn't.  It's merely to say that entirely-understandable nationalism on both sides of the border ― “Why should we spend money to help Mexico do things it should be able to do for itself?”  “Why should we allow gringos hipócritas malintencionados to give orders to our own people on our own soil?” ― keeps some of the best tools out of the kit.  And that seems like a shame. 

International institutions 101

  What do international institutions do?  I'm not referring to the European Union, but the more garden-variety alphabet soup stuff, the arbitration panels and dispute-resolution mechanisms and the like?  After all, they usually don't alter domestic law, and when they do, the domestic law in question is usually pretty easy to un-alter.  There usually isn't a whole lot stopping countries from just breaking their agreement, and when there is, it tends to rely on sanctions from other individual states. 

Frex, the WTO.  Nobody has to write WTO rules into their constitution.  And the WTO doesn't sanction anyone.  All the WTO does is tell the aggrevied member state whether and how much it can sanction the offending party without breaking WTO rules.  In that case, what do you need the WTO for?

An answer below the fold.

Data I'd like to have

  Where can I find time series on:

1. Gazprom's revenue, by market;
2. Russia's transit fee revenue, by originating market;
3. The average wholesale price per standardized unit for Russian gas and other gas, by market.

Get me that data, and I might be able to make some sense out of Russian policy.  I will say that current events make me think that Russia doesn't want to snarfle off bits of Ukraine.  You can extract a lot more surplus out of a neighboring vassal than you can out of your own citizens.

The resource curse doesn't exist, and please stop talking about it

  My friend Will hopes that oil prices stay low, in order to insure that the Russian Federation remains behaved.

My response:  Please get the stupid, and I mean truly monumentally stupid, idea of the resource curse out of your heads?  It's a well-accepted idea, but it's just plain wrong.  No matter what Tom Friedman writes about it.

Stephen Haber and Victor Menaldo have a paper coming out that shows that there is no, squat, zero, ningún relationship between democracy and oil resources.  Haber and ... uh ... me ... will eventually have a paper showing the same thing for civil war. 

But hell, maybe Russia is different.  So my question for you all is simple.  Why would an authoritarian government, no, why would a dictatorship give up power because its export revenues went down?  That makes no bloody sense.  It could default on foreign debtors.  It could blame foreigners for any crisis.  It could shoot dissidents, you know, the way Panama did under Noriega. 

Is there any reason to believe that a fat Russia would be more democratic and less expansionist than a lean Russia?  No.  F@&k no.  There isn't any reason to believe the opposite either, of course ... but by God do I wish that people would stop fooling themselves.  Resource money has fueled democratic transitions and dictatorial takeovers, foreign expansion and foreign engagement.  Those who know Russia better will be able to predict that country's idiosyncratic political reaction to declining export revenues ... but why any of the information in this story, about governments trying to crack down on the bearers of bad news, would make an observer hope for sustained bad news is beyond me. 

Ah, here comes my first AFOE cross-post.  But your reactions first.  At least until I can find the damned keys to that blog.

Taking the C-levels

  Peter asks, was a sea-level canal possible in Panama?  The answer is yes. 

The French initially planned a sea-level canal.  Of course, they failed.  But the American government also considered a sea-level plan.  They rejected it only when a group of consultants presented a report that killed the idea on something other than cost.

First, they calculated the rate at which dirt could be moved away from the excavation, and figured that a sea-level canal would take at least 15 years to build.  (The actual canal took 11 until the first transit and 17 until full commercial operation, but it was planned to take only 8½.)  Second, because a sea-level canal would be pretty narrow for most of its length, transit times would be longer.  (Narrow is a relative term:  the above and below pictures show one of the narrowest parts of the Canal.)    Third, it would be shallow for long stretches.  (41 feet, in fact.)  Finally, it would require locks anyway:  the Pacific tides are twenty feet higher than the Atlantic tides.  Without locks, there would be a 4.5 knot current ... on average.  In fact, it would vary quite a lot, making navigation much tougher. 

In addition, it would be just as vulnerable to sabotage (lots of talk of dynamite-laden vessels in the 1906 report) and require a 180-foot masonry dam on the Chagres, rather than the 135-foot earthen dam actually constructed.  Which would look cool, but be vulnerable.

Later plans were much more grandiose. 

By the power of ICSID

  How vulnerable are Latin American nations to international arbitration? 

Venezuela makes the answer easy to find.  The Bolivarian Republic owns $14.5 billion in direct investments abroad, mostly Citgo refineries and gas stations.  It also enjoys $22.9 billion in accounts receivable, mostly for oil delivered by not paid for.  Some of that are debts incurred by the Petrocaribe countries, but most of it is with the United States, and it is all potentially attachable in a settlement.  (The liquid assets are probably owned by the central bank, which has $39 billion in reserves, and are considered immune.)  Blocking those accounts receivable is the 21st-century equivalent of parking a gunboat in the harbor.  Hugo needs to tread very carefully, and considering that Cemex is still being run from Monterrey, it looks like he has been.

How about Argentina?  Mecon gives the answer for 2007 right here, on page 15.  The Argentine government owns $8.2 billion in foreign assets.  Sounds vulnerable!  It's not, however.  $6.0 billion consists of “créditos por financiación de entes binacionales.”  The big one is the  Yacyretá dam on the Paraguayan border, an $11 billion project.  I suppose one can imagine a world in which ... uh ... no, I can't really imagine a world in which foreign investors in Argentina could go after Yacyretá.  And given that it loses money, I'm not sure that they'd want to.  Another $1.5 billion represents Argentina's paid-in capital to multilateral lending organizations like the IMF and World Bank.  In theory, I suppose, that money is very vulnerable to an adverse ICSID (aka CIADI in Spanish) ruling, considering that ICSID is part of the World Bank group.  In practice, I don't know of any cases where the a multilateral institution has reassigned capital from a national entity to a private interest.  I don't even know how that would work, accounting-wise:  the multilateral entity would need to find cash to pay the private investors for its shares, since only governments can hold capital stakes in multilaterals.  That would get beyond messy right quick.  In short, Argentina isn't all that vulnerable to the postmodern imperialism of the 21st century.  So why not nationalize the airlines?

What about Ecuador?  Sadly, its central bank does not make the figure easy to find.  It does not track Ecuadorean foreign direct investment at all.  And what it does track is not broken out into public v. private, save for central bank reserves.  (Which is an odd concept in a dollarized economy, but the number is there.)  I'm still stumped. 

Great Debate Attempt #3: The League of Democracies

  Expanding NATO to Ukraine and Georgia strikes me as a bad idea.  Expanding it to include Japan, Brazil, India, Chile, and Israel strikes me as a stunningly bad idea.  I'm a bit surprised to see one of the McCain campaign's poorer ideas — the League of Democracies — recycled by the Progressive Policy Institute.  

Why does Will Marshall think it's a good idea? 

“It would extend NATO's military reach and resources.”  That is just wrong.  NATO's ability to operate out-of-area is already too dependent on American resources.  Brazil and India don't bring anything to the table.  Brazil and India already provide U.N. peacekeeping troops; neither could operate with advanced NATO militaries that train together and share operational commands.   Japan could, but it has constitutional problems with using the organization formerly known as the Japanese Army outside of its own territory.  NATO is also a tightly-integrated military alliance, not quite as integrated as the stillborn EDC, but much more than any historical equivalent of which I am aware. (Jussi?)  You can't plug new militaries into it without spending a lot of money.

“The inclusion of such non-European powers as Japan, India, and Brazil also would ... enhance its legitimacy in the eyes of people who traditionally have been suspicious of the West.”  That's utterly unclear.  Will including India make NATO more legitimate to Pakistanis?  Will including Brazil reduce Bolivian anti-Americanism?  The answer, it would seem, is no. 

“It would continue to provide a hedge against turmoil and conflict in Eastern and Southern Europe and, if Georgia is admitted, in the Caucasus.”  It would also put Americans on the line if anything blows up in the Caucasus ... and Latin America ... and the Pacific ... and South Asia.  NATO is a mutual defense pact.  Marshall seems to elide over that.  The U.S. could wind up at war with Pakistan, and wouldn't that help the Afghan effort? 

“It would create an incentive for rising democracies like Brazil and South Africa to stay on the path of liberal reform.”  Let's ignore the strange aspertion cast upon Brazilian democracy.  Why would Brazil or South Africa want to join NATO?  The eastern European countries got extensive military aid and protection from Russia.  The idea that NATO promotes democracy presupposes that there is some cost to getting kicked out.  Poland faces such a cost.  Why would Chile? 

The League of Democracies was a bad idea.  A global NATO seems an even worse one.  Thoughts?

Correa lo hizo

  “Hay gente que rectifica lo que dice, hay mucha gente que se contradice.”  —René Pérez

Well, it appears that Ecuador just went and defaulted on its foreign debt.  I think that this is a bad idea.   The problem, of course, is that I am on record as supporting the U.S. decision to allow its financial protectorates in Latin America to default in 1931.  The only reason that I think Britain’s subsequent decision to default was bad is that is prevented the union of Trinidad and the United States.  I have also argued that Argentina’s much later default was a good idea. In fact, I have even implied that I think there might be good arguments in favor of an Argentine default right now.  (Really.  Read the linked post closely.  I more than imply that.) 

So why do I think that this move is stupid?  After all, Ecuador is suffering from a collapse in oil prices.  What’s the problem? 

First, Ecuador does not have to default.  Debt is around 21% of GDP, and debt service is only around 1%.  A balance-of-payments crisis this is not, even with the crash in oil prices.

Second, Ecuador is vulnerable.  I don’t know how vulnerable.  Why don’t I know?  Well, I haven’t been able to find Petroecuador’s balance sheets, so I don’t know how many American assets it holds.  Nor do I know how many commercial assets the Ecuadorean government may hold.  And I certainly don’t know how many payments to the Ecuadorean government pass through vulnerable payments centers.  But the fact that I don’t know these things make me think that the country is very vulnerable.  Call it a hunch, but a lack of transparency often means that there is something to hide.

I should point out that I have met the fellows from Greylock and Elliott who will be going after the country.  They are very very good at what they do, and they are very motivated. 

Third, Ecuador could use access to the World Bank.  It will probably lose that.  It has already lost access to Brazilian development funds. 

It could still be a bluff.  This is just a default; many stand to profit from such a thing.  The Ecuadorean government may just be engaging in a complicated political redistribution, and it will restart payments once the relevant parties have taken their profits.  Alternatively, should a second Great Depression really emerge, then early default will seem like a brilliant move. 

But short of those two possibilities — a short-term move or a prediction of disaster — it just seems unwise to me.

Pirates and convoys

  I clearly need a new tag.  What should it be?  “Pirates” is too specific for my taste.  “Failed states” is a possibility, but seems a bit, well, anodyne given the rather horrible reality of just what happens when a state fails in the modern world.  “Empire” is another, but might be too ... whatever the opposite of anodyne is.  I'm looking for a short pithy one or two-word phrase that covers places and situations in which the writ of the local state does not apply (or at the very least is not the sole source of authority) and in which other states or institutions might have to substitute for the local government.  Ideas?  Reasons to pick either “failed states” or “empire”?  C'mon, help me out. 

Returning to the topic of the day, in theory there is a way to make policing the sea lanes leading to the Suez Canal much easier.  For reasons which I do not yet fully understand (help?) the Suez Canal authority organizes transits in three daily convoys.  The implication is that, in theory, such convoys could be organized not at the Canal entrance, but at some point in the Indian Ocean.  Naval vessels could then shadow the three daily convoys.  This would require far fewer ships than the impossible 180-vessel armada. 

The organizational details, however, seem rather daunting.  Still, it might be possible for an enterprising contractor to organize convoys around their protective vessels.  It would be more expensive than simply hiring out a security vessel, because the convoys would need to be managed, but it would allow the security firm to enjoy economies of scale from the point of view of the companies that hired its services:  the more clients, the less cost-per-client. 

Thoughts?

More thoughts about pirates

  Pirates attacked 11 vessels in the Gulf of Aden in November.  They attacked an additional 6 in the Indian Ocean off the Somali coast.  Of the 11 incidents in the Gulf, all occurred right outside Yemenese territorial waters, which passing ships have taken to hugging as they head to and from Suez.  Of the 11 attacks in the Gulf, the pirates took their targets six times.  NATO warships stopped three and a tanker crew managed to avoid the tenth.  Of the attacks in the Indian ocean, the Indian navystopped one (sinking the pirate vessel involved), the crews involved evaded three (two by outrunning the pirates and one by turning firehoses on them as they tried to board, knocking their shoulder-held RPGs into the water), and two took their targets. 

I can't link to the source; it's what I was told by intel officers in the U.S. Coast Guard.  Don't worry, it's unclassified.  Another good data source is here, and a third here.

So what is the scale of the problem?  Well, in 2006 roughly 51 vessels passed through the Suez Canal each day.  Given the length of the Gulf of Aden, the fact that the pirates seem to be able to range about 450 miles beyond that, and an average ship speed of 22 knots, that would mean approximately 90 ships within pirate range every day.  (This assumes that vessels headed around Cape Horn could fairly easily re-route to remain out of pirate range.) 

The implication is that a rotating flotilla of 180 armed vessels could probably deal with the problem.  Djibouti may no longer be a French territory, but it hosts several thousand French troops and at least 450 American ones at Camp Lemonier, and it has a (relatively) modern port.  In other words, it isn't right to think that stabilizing Somalia is the only solution.  Of course, the pirates use swarming tactics, where they attack with multiple boats, which poses a very serious tactical problem for the escort vessels.  (Under the current rules of engagement, there is maybe a 15-minute window to attack a pirate ship.)  Alternate strategies are possible; the real point is that the problem is manageable even without any attempt to stabilize Somalia or, alternatively, a smash-up of the pirates' coastal havens.  (The human cost of the latter would not be low.)  One could imagine alternative operations involving continuous aerial patrols of the effected areas, although speaking as someone with some experience, managing such a thing would not be easy and the chance of a major cock-up would be high. 

The big problem?  See below.

The empire's demise has been prematurely reported

  The United States just announced that the the Millenium Challenge Corporation will suspend $60 million in grants to the government of Nicaragua.  The reason?  Rigged local elections.  Now, I don't expect the aid suspension to accomplish much.  It's important to bear in mind that the U.S. still provides more aid than the Bolivarian Republic to most putative members of the Bolivarian alliance. 

In other Revolutionary news, the Bolivarian summit in Caracas announced that the alliance would consider establishing a common currency.  That is rather weak brew, and I will be very (albeit pleasantly) surprised if it happens.  Why pleasantly?  Well, a common currency spanning Venezuela, Nicaragua, Cuba, Honduras, Bolivia, Dominica and possibly Ecuador would be a fascinating monetary experiment to watch.  Sadly, I feel pretty confident that it isn't going to happen. 

A ditch not dug

In 1911, U.S.-Latin American relations almost took a dramatic turn for the different.

In October of that year, the head of the Panama Canal Zone's civil administration, Maurice Thatcher, told a U.S. Senate committee, “We must have courts ...  I would like to see an American civil population here ... These Americans would come here to live, make their homes here, and they would prefer to live under the dominion of the American government, under American laws.” 

George Goethals, the rather un-Brooklyn-like Brooklynite in charge of construction thought differently.  “Introduce the franchise, and we’d go to pieces.”  The Taft administration agreed with Goethals.  The Canal Zone was not to receive elected government, civil courts, or even private property.  The Zonians remained a population of transients.  (Vocal, obnoxious, and slightly-crazy transients, but transients.)

But what if Thatcher had won the argument?  The Zonians would have owned farms and businesses.  They would set their own tax rates.  They would elect their governor.  The strange monopoly that the federal government held over ancilliary businesses would not last.  The Zonians would not all work for the federal government.  They would be a settled population, certainly larger than the actual Canal Zone population, which bounced around 50,000 in the 1950s and '60s.  And it is hard to imagine them lacking a non-voting representative in Congress.

Under such circumstances, could Congress have agreed to give the Canal Zone back to Panama?   

Imperialism can really pay

So there's Panama.  Well, what about Suez?

The Suez Canal started under very different political conditions, inasmuch as the Egyptian government was on-board with the project.  So on board, in fact, that it not only put in 45 percent of the initial capital (£1.5 million), it promised the Compagnie de Suez the free use of forced labor to build the thing. 

That wasn't nada.  In 2007 pound sterling, the Egyptians put in £149 million.  But as I've mentioned elsewhere, the world was poorer then:  relative to the growth of the British economy since then, that would be equivalent of plonking in £4.3 billion today.  That would be a lot of scratch for the current Egyptian government; it was an amazing amount of scratch for 1854's. 

So far, so non-imperialistic.  Awful for the poor people who had to live under Cairo's despotism, but that'd be like blaming Russia for the shortcomings of the Kazakh government.  (Wait ... no, I'll leave that to those who know more.)

The story gets better, though.  It's an amazing bit of imperial skullduggery ... and perhaps the coolest thing about it is that it could easily happen today.  I mean, it's not like world powers scarf off strategic parts of nearby states for strategic gain these days.

So, with the caveat that what I'm about to tell you is pieced together from primary sources and could well be wrong, the story is below.