An Ode to Brad W. Setser

Brad W. Setser has become my favorite USA economist. Richard Posner's prose is turgid; Mohamed El-Erian tends to be vague in order to be safe; Joseph Stiglitz is an academic's dream and a practical person's nightmare; Robert J. Shiller is excellent but not inspirational; Paul Krugman mistakes his intelligence in one specific area for intelligence in all areas; Richard Thaler's Nobel Prize speech was so boring, I couldn't finish it; Jeffrey D. Sach's scholarship is deficient; and Michael Lewis is more journalist than economist. Which leaves us with Dr. Setser. 

Setser's tweets are by far the most educational of any account, not just economics. More importantly, his prose is crisp and clear, something one just doesn't see after the letters "P," "h" and "D" are added to an economist's résumé. In his May 12, 2020 newsletter, Setser manages to summarize 25 years of economics in a single paragraph. See below. 

Any other economist would have included double Irish with a Dutch sandwich; inflation; positive demand shock; services vs. goods; and inequality. In doing so, they would have destroyed any real understanding or become clichéd. Meanwhile, everyone understands "positive shock," "exports," and "low tax jurisdictions," but you don't see such clarity in economics unless a true genius is at work. As Charles Baudelaire once said, "Always be a poet, even in prose." Dr. Setser is the economics world's poet. May he enjoy a long, fulfilling career. 

© Matthew Mehdi Rafat (2020) 

Bonus: I'm also a fan of N. Gregory Mankiw. 

Bonus: Like most economists who've worked for the federal government, Setser has blind spots relating to USA foreign policy. He's not perfect. 

Book Review: The Tommy Koh Reader (2013)

I wanted to share my favorite excerpts from The Tommy Koh Reader (2013). Tommy Koh, a former Singaporean diplomat, is a lawyer who spent 20 years in the United States. In addition to supporting various Singaporean artists--some of whom were jailed over his protestations--he has expertise in international sea rights (unclo), diplomacy, and of course international law. 

On interracial marriage: I was disappointed with [LKY's] views on race. He revealed that if his daughter had wished to marry a black African, he would have had no qualms telling her, "You're mad." [A common British expression for "crazy" or "unrealistic."] He also expressed reservations about inter-racial marriages. We should not judge a person on the basis of colour, race or religion. (2011) 

[In this excerpt, which is hyperlinked, Koh criticizes some of Lee Kuan Yew's more controversial comments, including what he calls LKY's reservations about interracial marriages.]

My own thoughts: I can see how Singaporean founder Lee Kuan Yew's über-practicality makes him suspicious of interracial marriages--including white and Chinese--especially when differences between two people's upbringings are vast. Practical-minded men see probabilities as more poignant than possibilities. LKY would argue the separation of Barack Obama's parents supports his views; Koh would point to Barack Obama's life as a counter-argument. 

Unlike LKY, Koh does not transfer his professional adherence to practicality to personal relationships, despite politics being a form of relationship-building. In truth, Koh's success in resolving post-1991 issues between the former Soviet Union and the Baltic states required him to be equal measures idealistic and practical--a practical idealist, if you will--whereas LKY was practical in a most lopsided manner. No one disputes LKY's open-hearted, transparent style meant some of his comments could be taken out of context. For example, LKY once said Muslims were more difficult to integrate than other religions, a comment he later retracted. What he meant was that he believed the average Muslim holds onto his or her religious beliefs more firmly than the average Christian or Buddhist. As a result, anyone marrying a Muslim would most likely have to convert, and one can see greater obstacles to marriages between Muslims and other religions that would not exist in relationships between, say, Buddhists and Christians. In context, everything LKY said made sense, but one sometimes had to give him an extremely sympathetic ear to avoid misunderstandings. Ultimately, it seems clear Singapore benefitted from a well-balanced team of founding diplomats and politicians. 

On Singapore's foreign policy: "Singapore's leaders... use a vocabulary which suggests that Singapore adheres to the Realist school, which takes a cold-eyed, unsentimental view of the world. The Realist worships power and is usually dismissive of other considerations. How can a Realist State attach so much importance to international law? Singapore's ideology is actually not Realism, but Pragmatism. Our adherence to international law is based upon utility and not morality. Small States are better off in a world ruled by law than in a lawless world." (2013) 

On Singaporean values: "The Singaporean cultural DNA includes a gene that respects all faiths." 

A reminder Trump's Presidency is a feature, not a bug, of USA culture: "I observe that American politics has been afflicted by three unwholesome influences. These are Hollywood, Madison Avenue and television. Hollywood exerts a powerful and pervasive influence on every aspect of American life and culture... in judging the presidential debates, 'the public responds overwhelmingly to the sweat on the brow [a Nixon vs. Kennedy reference], style, manner and personality' rather than to the substance of the debate... speeches by American politicians are often characterized by bombast, hyperbole and exaggerations." (written in 1983) 

On USA's political structure: If you are interested in understanding USA politics, you must read Tommy Koh's "De Tocqueville Revisited" speech at JFK School of Government, Harvard University, September 5, 1986. It is the best summary I have ever read regarding USA's political structure. Sample sentence: "The US system of government, characterized by the separation of powers among the three branches of government and by many checks and balances, is designed to protect the liberty of the individual." 

On cities: "[C]ities succeed in the global economy if they can achieve excellence in one or more of the following three areas: thinking, manufacturing and trading." 

On South China Sea: "First, it is the highway for trade, shipping and telecommunications. 80% of world trade is seaborne. 1/3 of world trade and 1/2 the world's traffic in oil and gas pass through the South China Sea. Freedom of navigation in the South China Sea is, therefore, of critical importance to China, Japan, South Korea, ASEAN and other trading nations and maritime powers. 

Second, it is rich in fish and other living resources. Fish is a principal source of protein and fishing is a source of employment for millions of Asians who live in coastal communities. 

Third, it is presumed that there are significant deposits of oil and gas in the continental shelves underneath the South China Sea...

[A]rtificial islands are not entitled to any maritime zones except for a 500m safety zone... A rock is entitled to a 12-nautical mile (22 km) territorial sea... An island is entitled to a territorial sea, a 200-nautical mile exclusive economic zone and a continental shelf. Under Article 121 of the convention [UN Convention on the Law of the Sea], the difference between a rock and an island is that an island is capable of sustaining human habitation or economic life."" ("Mapping Out Rival Claims to the South China Sea," The Straits Times, 13 September 2011) 

On environmental preservation: "47% of Singapore's total land area is covered by greenery." (2012) [My own note: don't let the shiny skyscrapers fool you--most of SE Asia is and was mostly tropical jungle.] 

On recycling waste: "We should also consider... by requiring industrial and commercial establishments, as well as hotels and food courts, to separate food waste from other kinds of waste at source. The food waste, when treated by anaerobic digestion, will produce biogas which can, in turn, be used to generate renewable electricity." 

On air conditioning: the joke among foreign diplomats is that Singapore, because of air conditioning over-use, actually has two seasons: "summer outdoors and winter indoors." 

On water: "Water is more precious than gold. Without water, there would be no life on earth. The irony is that we take water for granted. In some countries, water is treated as a public good and given away for free. This invariably leads to over-consumption and wastage... By 2050, as many as 3/4 of the world's population could be affected by water scarcity... [Today] The fact that 700 million Asians do not have access to safe drinking water... is unacceptable." (2012) 

© Matthew Rafat (2020)

SE Asian History: a Chronological Primer

If "Europe in the first half of the 20th century was the killing fields of the world," Asia suffered the same ignominious status from 1949 to 1979. WWII may have ended in 1945, but the last two powers left standing jockeyed for influence while Europe's occupation forces lingered to maintain access to natural resources and strategic ports.

Below is a chronological overview of SE Asian history and related events in the second half of the 20th century. In just 30 minutes of reading, you will learn the basics of 30 years of Asian history, though astute readers will notice my limited knowledge of Thailand and the Philippines. Note that North American time is approximately 14 hours behind SE Asia, so some dates may differ by one day from USA-issued textbooks. 

1945: Terauchi Hisaichi, commander of the Japanese expeditionary forces in Southeast Asia, summons Sukarno and Mohammad Hatta to notify them of Japan's imminent surrender/departure and to tell them to prepare for Indonesia's immediate independence. 

1945: President Sukarno, previously imprisoned by Dutch colonial forces, delivers "The Birth of Pancasila," declaring five founding principles of a Free Indonesia: 1. Indonesian nationalism [the principle of one National state, i.e.,  the will to unite throughout the islands]; 2. Internationalism -- or humanism; 3. Consent, or democracy; 4. Social prosperity [eradication of poverty]; 5. Belief in God [and freedom to worship each Indonesian's particular God]. 

When Sukarno [more popularly written as Soekarno] was faced with the question whether Indonesia should be an Islamic country or a secular one, he denied both. As a compromise, he set forth the principle of belief in the "One and Only God" (Ketuhanan Yang Maha Esa). -- Shigeo Nishimura, "The Development of Pancasilia Moral Education in Indonesia." (1995) 

1946: Sarawak state within present-day Malaysia resists being ceded to Britain. Oil-rich Sarawak has functioned independently for almost a century under a deal made between a Bruneian sultan and the British Brooke family.

1947: USA President Truman declares the "Truman Doctrine," in which he pledges USA financial and economic aid to countries that resist Communist influence. 

At the present moment in world history nearly every nation must choose between alternative ways of life. The choice is too often not a free one... I believe that it must be the policy of the United States to support free peoples who are resisting attempted subjugation by armed minorities or by outside pressures. I believe that we must assist free peoples to work out their own destinies in their own way. I believe that our help should be primarily through economic and financial aid which is essential to economic stability and orderly political processes. The world is not static, and the status quo is not sacred. But we cannot allow changes in the status quo in violation of the Charter of the United Nations by such methods as coercion, or by such subterfuges as political infiltration. In helping free and independent nations to maintain their freedom, the United States will be giving effect to the principles of the Charter of the United Nations... The free peoples of the world look to us for support in maintaining their freedoms. If we falter in our leadership, we may endanger the peace of the world -- and we shall surely endanger the welfare of our own nation. -- President Harry Truman, March 12, 1947

1947: a two-state solution is borne. After almost two decades of nonviolent protests and negotiations (e.g., the Lahore Resolution) led by Mohandas Gandhi and Muhammad Ali Jinnah, a British Parliamentary act partitions British India into Hindu-majority India and Muslim-majority Pakistan. 

1948: a Hindu extremist assassinates Mohandas Gandhi on January 30, 1948. 

1948: the Malayan Communist Party, through the Malayan National Liberation Army, supports an armed insurgency against British occupiers. The British colonial government declares a state of emergency in Malaya, keeping large swaths of the population under lockdown. A state of emergency lasts from 1948 to 1960. 

Our brothers and sisters in Asia, who were colonized by the Europeans, our brothers and sisters in Africa, who were colonized by the Europeans, and in Latin America, the peasants, who were colonized by the Europeans, have been involved in a struggle since 1945 to get the colonialists, or the colonizing powers, the Europeans, off their land, out of their country. This is a real revolution. Revolution is always based on land. -- Malcolm X, "The Black Revolution," April 8, 1964

1949: after four years of civil war, in which millions die, the Communist Revolution in China succeeds. The People's Republic of China (PRC) is established after MAO Zedong of the Communist Party of China defeats Jiang Jieshi aka Chiang Kai-shek, who exiles himself to present-day Taiwan aka Chinese Taipei and receives protection from USA's Navy. MAO prevails in China by supporting peasants and farmers against landowners. 

The Chinese Revolution: they wanted land. They threw the British out, along with the Uncle Tom Chinese... I read an article in Life magazine showing a little Chinese girl, nine years old; her father was on his hands and knees and she was pulling the trigger because he was an Uncle Tom Chinaman. When they had the revolution over there, they took a whole generation of Uncle Toms and just wiped them out. And within ten years that little girl became a full-grown woman. No more Toms in China. And today it's one of the toughest, roughest, most feared countries on this earth by the white man. Because there are no Uncle Toms over there. -- Malcolm X, "Message to the Grassroots," November 10, 1963

1949: despite the Japanese surrender in 1945, the British and Dutch refuse to recognize Indonesian independence. On December 27, 1949, the Dutch finally leave Indonesia and recognize Indonesia's right to self-determination, but continue to control much of Indonesia's private sector, including its banking and oil industries. Indonesia does not gain control of a single Dutch-controlled bank (Javasche Bank) until 1953. 

At the time [1930s], there were two kinds of teacher's colleges: the so-called Native Teachers College to train native Indonesians to become teachers for native children; and the European Teacher's College to train teachers for Dutch children. I was enrolled after a very selective exam, but they barred me because a brown man standing as a teacher before a class of white Dutch children could create respect in the minds of Dutch children for the brown man. That was the reality of colonial society: it was full of discrimination and humiliation for us. -- Dr. H. Roeslan Abdulgani, one-time Indonesian ambassador to the United Nations 

1950: on February 9, 1950, USA Senator Joseph McCarthy gives a speech in which he claims the State Department, USA's agency of international relations and foreign policy, is harboring traitors and Communists. McCarthy, a devout Catholic, frames the conflict as between a "western Christian world and the atheistic Communist world." 

This is a time of "the cold war." This is a time when all the world is split into two vast, increasingly hostile armed camps--a time of a great armament race. -- Joseph McCarthy (1950) 

1950: beginning of Korean War from 1950 to 1953. 

1953: beginning of Cuban Revolution. 

1953: Operation Ajax aka TPAJAX. The United States overthrows democratically elected Prime Minister Mohammad Mossadegh in Iran. Mossadegh, a nationalist, had planned to transfer ownership of foreign oil companies operating in Iran to the Iranian people or at least negotiate more equitable terms. 

The struggle against capitalism had to be nationalist, too, because capital in Indonesia [and other SE Asian countries] was predominantly foreign. The goal was unity between nationalism, Islam and socialism but it was the nationalist content of Islam and socialism that made unity possible. -- from Indonesia, the first 50 years, 1945-1995 (Archipelago Press)

1953: in October 1953, USA agrees to send France 385 million USD in military aid to continue disrupting Communist influence in Indochina (present-day Vietnam, Laos, and Cambodia). 

Now let us assume that we lose Indochina. If Indochina goes, several things happen right away. The Malayan peninsula, the last little bit of the end hanging on down there, would be scarcely defensible--and tin and tungsten that we so greatly value from that area would cease coming... So, when the United States votes $400 million to help that war, we are not voting for a giveaway program. We are voting for the cheapest way that we can to prevent the occurrence of something that would be of the most terrible significance for the United States of America--our security, our power and ability to get certain things we need from the riches of the Indonesian territory, and from southeast Asia. -- USA President Eisenhower, August 4, 1953 

1954: led by the United States, the Manila Pact is signed, creating SEATO, a NATO for SE Asia. SEATO is unsuccessful and is eventually dissolved in 1977. 

1954: the United States, with the active support and lobbying of the Catholic Church, installs Catholic Ngô Dinh Diem in South Vietnam. Diem and his Roman Catholic Archbishop brother, Ngô Đình Thục, call upon Catholics in the north to move south and openly discriminate against local majority Buddhists. 

1954: from April to June 1954, USA Senator Joseph McCarthy holds anti-Communist hearings in Congress, where he accuses the U.S. Army of Communist infiltration. 

I will tell you about the situation in Saigon. When you did not appease certain groups, they called you a Communist. Who was it in the United States that practiced that tactic? Joe McCarthy? We had the same people in Vietnam. Anyone you disagree with, just call him a Communist. -- General Nguyen Khanh, interview, June 2009 

1954: in November 1954, the USA government gives Ngô over 28 million USD in foreign aid and begins taking over security responsibilities from France. 

1955: Jawaharlal Nehru-led Bandung Conference takes place in Indonesia, focusing on anti-colonialism. Internal Chinese communications indicate Taiwanese plot to assassinate Chinese delegate to conference. Indonesian President Sukarno delivers historic speech capturing optimism and pessimism of the times and correctly predicting war. 

Great chasms yawn between nations and groups of nations. Our unhappy world is torn and tortured, and the peoples of all countries walk in fear lest, through no fault of theirs, the dogs of war are unchained once again... The political skill of man has been far outstripped by technical skill, and what he has made he cannot be sure of controlling. The result of this is fear. And man gasps for safety and morality. -- first Indonesian President Sukarno, Bandung opening address at the Bandung Conference, April 18, 1955  

1956 to 1962: over ten countries on the African continent declare independence from colonial Europe. [See Ebere Nwaubani's The United States and Decolonization in West Africa, 1950-1960 (2001); and "The United States and the Liquidation of European Colonial Rule in Tropical Africa, 1941-1963" (2003)] 

1957: on August 31, 1957, Tunku Abdul Rahman issues the Malayan Declaration of Independence proclaiming independence from Britain. 

However, the proclamation is mostly ceremonial due to two factors: 1) British troops are still enforcing a state of emergency against Communist insurgents within Malaysia; and 2) Britain appears to be using Rahman to deflect accusations of colonialism by the Communists, who are now technically fighting against an independent country led by a Malay leader. 

The 14 stripes on Malaysia's flag represent its 13 different states, plus one Federal Territory, Kuala Lumpur.

1957: in December, Indonesia's President Sukarno begins nationalizing Dutch-owned businesses and expels between 40,000 and 50,000 Dutch nationals. 

In many countries, anti-colonial fighters and heroes would win independence and assume power, but then fail at nation-building, because the challenges of bringing a society together, growing an economy, [and] patiently improving people's lives are very different from fighting for independence. -- Singaporean PM LEE Hsien Loong (2015)

1959: beginning of the Laotian Civil War from 1959 to 1975.

1959: in May 1959, USA-backed President Ngô of the Republic of Vietnam passes Law 10/59, authorizing courts to issue death sentences on the spot against any political opponents "endangering national security." 

1959: Britain grants Singapore autonomy except in matters of defense and foreign policy, pushing Singapore towards self-determination. By 1964, Britain's budget was straining under obligations of empire and post-WWII debts, leading the Labour government to announce a phased withdrawal of British troops in Singapore by 1971. 

1962: on November 1, 1962, a referendum is held in Singapore to determine whether Singaporeans desire a merger with the Federated States of Malaya (present-day Malaysia). An overwhelming majority of Singaporeans vote to join Malaysia, but Barisan Sosialis, Singapore's anti-colonial party formed by left-wing members of the PAP, questions the referendum's legitimacy because blank votes are counted as pro-merger when in fact they represent opposition. 

1963: in April 1963, Indonesia's President Sukarno attacks still-British Borneo in present-day Malaysia, refusing to allow a de facto British-formed state on Indonesia's doorstep ("Konfrontasi"). By pressuring British influence in Malaysia, Indonesia paves the way for eventual Singaporean as well as Malaysian independence. Britain in the 1960s has no stomach for war. It is mired in domestic economic problems due to record unemployment as well as civil unrest in Hong Kong, Aden (Yemen), and Southern Rhodesia. Even so, despite an 800 million pounds deficit in 1964, Britain believes it has a stabilizing role to play "East of Suez." 

1963: on May 8, 1963, South Vietnamese security forces fire into a crowd of Buddhist religious marchers celebrating the Buddha's 2,527th birthday. From NSA Archive: "The rationale for the breakup of this march was no more serious than that the Buddhists had ignored a government edict against flying flags other than the South Vietnamese state flag. Another of [Ngô] Diem's brothers, the Roman Catholic archbishop for this same area of South Vietnam[,] had flown flags with impunity just weeks before when celebrating his own promotion within the Church." 

USA troops kneeling before Catholic priest
(Photo taken in War Remnants Museum in Vietnam)

1963: on June 11, 1963, a bonze--an ordained Buddhist monk--publicly sets himself on fire to protest Ngô's discriminatory actions. 

1963: on July 9, 1963, Britain negotiates terms creating a common financial market between Singapore and Malaysia that allows substantial British banking and insurance influence in SE Asia (as well as Hong Kong). The agreement is signed in London. 

1963: on August 28, 1963, North Borneo (aka Sabah), Sarawak, and Singapore sign an agreement to create a new, British-backed Malaysia effective August 31, 1963 (Merdeka Day aka Freedom Day). 

1963: on November 1 and 2, 1963, USA-sponsored Ngô and one of his brothers are captured and killed. French-trained General Duong Van Minh takes over leadership in South Vietnam. 

1963: on November 22, 1963, USA President JFK is assassinated. 

1964: on January 30, 1964, General Minh is unable to form a viable government in South Vietnam and is overthrown in a bloodless coup led by French-trained General Nguyen Khanh. Subsequent coups and counter-coups occur in Saigon. 

1964: Singapore experiences racial riots between majority-Chinese and minority-Malay residents. A teenaged Kishore Mahbubani, whose father arrived in Singapore orphaned and alone at the age of 13, sees his neighbors beaten and killed. (Mahbubani later becomes Singapore’s Ambassador to the United Nations.) The following year, Malaysia's PM Rahman will cite these riots and the 1,000+ residents arrested as one reason Malaysia separated from Singapore. 

1964: USA President Johnson signs Gulf of Tonkin resolution on August 10, 1964, escalating USA aggression in SE Asia on the basis of two reported attacks: the first one involving zero USA casualties, and the second one falsified.

1965: after Indonesia's attack against British Borneo (now Sabah) and related pressure, the British focus on developing Singapore, especially its port, and forgo a united Federation of Malaya-Sarawak-Brunei-North Borneo-Singapore under British influence. Consequently, on August 7, 1965, Singapore and Malaysia agree to separate, giving Singapore its independence, though some say the predominantly Chinese Singaporeans were "kicked out of Malaysia" as part of a two-state solution giving Muslim Malays political power in Malaysia and non-Muslim Chinese the same statistical dominance in Singapore. In a televised interview, Singaporean founder Lee Kuan Yew (of Peranakan descent) begins crying when discussing separation, saying, "The whole of my adult life, I have believed in merger and the unity of these two territories." 

We are going to have a multi-racial nation in Singapore. We will set the example. This is not a Malay nation. This is not a Chinese nation. This is not an Indian nation. Everybody will have his place. Equal. Language, culture, religion. -- Lee Kuan Yew, 1965

1965: Indonesia withdraws from the United Nations in protest of Malaysia's admittance. As a result of Indonesia's withdrawal from the U.N., it loses access to foreign aid/loans from the World Bank and IMF. 

1965: USA President Johnson opens major ground war in Vietnam, escalating conflict. 

1965: on October 1, 1965, several high-ranking members of the Indonesian military are murdered in an alleged coup d'état but President Sukarno is safe, and the coup fails. By evening, General Soeharto--who now has fewer opponents within the military hierarchy--takes control of Jakarta and places all media under strict military control. The Indonesian military publicly blames the Communist Party of Indonesia (PKI) for the alleged coup and does nothing to stop indiscriminate anti-Communist violence. Hundreds of thousands and perhaps millions of Indonesians are murdered. The PKI, which at one point had been the second largest Communist political party in the world, is no more.

The rate of increase of consumer prices [inflation] rose from 27% in 1961 to over 1000% in 1966 [in Indonesia]. -- Mary Sutton, Indonesia 1966-70: Economic Management and the Role of the IMF, Overseas Development Institute (April 1982)

1966: on March 12, Sukarno transfers power to Soeharto, Sultan Hamengkubuwono IX (the Sultan of Yogyakarta), and Adam Malik. Western powers tell Soeharto that abandoning Konfrontasi would stabilize Indonesia's economy, meaning the IMF and the United States Agency for International Development would provide substantial foreign aid/loans for Indonesian development and also re-schedule existing debt. Soeharto, eager to make Indonesia the example to emulate in the East, accepts foreign aid and investment that assume, among other projections, annual electrical load growth of 15 to 20%. Over the next two decades, armed with tens of billions of dollars of loans and oil, Soeharto begins modernizing Indonesia's infrastructure, leading a building spree that creates state-of-the-art international airports, railway stations, mosques, art centers, hotels, shopping malls, and other projects, mostly in Jakarta/Djakarta.

I also realized that my college professors had not understood the true nature of macroeconomics: that in many cases helping an economy grow only makes those few people who sit atop the pyramid even richer, while it does nothing for those at the bottom except to push them even lower. -- John Perkins, Confessions of an Economic Hitman (2004)

1966: facing increasing living costs and an uncertain economic future, Hong Kong residents riot in 1966 and 1967 against British policies. Britain devalues the pound sterling in 1967. 

1966: on June 1, 1966, Indonesia and Malaysia begin negotiations in Bangkok. Konfrontasi officially ends August 12, 1966. 

1967: beginning of Cambodian Civil War and genocide from 1967 to 1975. 

1967: ASEAN is created. 

1967: on September 7, 1967, Indonesia and Singapore establish formal diplomatic relations. 

1968: My Lai massacre in Vietnam. 

1968: the Soviet Union publishes the "Brezhnev Doctrine," in which the Soviet Union, in order to protect workers' rights worldwide, reserves the right to interfere in countries considering capitalism or non-approved foreign influence.

There is no doubt that the peoples of the socialist countries and the Communist parties have and must have freedom to determine their country’s path of development. However, any decision of theirs must damage neither socialism in their own country, nor the fundamental interests of the other socialist countries, nor the worldwide workers’ movement, which is waging a struggle for socialism. This means that every Communist party is responsible not only to its own people but also to all the socialist countries and to the entire Communist movement. -- Sergei Kovalev, "The International Obligations of Socialist Countries," September 25, 1968 

1969: on May 13, 1969, tensions surrounding Malaysia's general election result in racial riots in Kuala Lumpur, which later spill over into Singapore. Between 100 to 900 people, mostly ethnic Chinese Malays, are killed. Chinese Malays, dissatisfied with the government's plans to promote opportunities for ethnic Malays ("Bumiputera"), shift votes to extremist political parties to send a message to the Malay political establishment. Around this time, eleven Chinese men are found guilty of treason against the Malaysian government. 

From A Doctor in the House, The Memoirs of Tun Dr Mahathir Mohamad

1969: USA President Nixon expounds the "Nixon Doctrine," whereby the United States pledges financial aid and weapons rather than ground troops for allies facing military threats, thus reversing President Johnson's ground war in Vietnam. 

American expansion was primarily the outgrowth of financial and economic imperialism. In principle, the United States did not annex, it made an economic conquest. -- from Indonesia, the first 50 years, 1945-1995 (Archipelago Press) 

1973: OPEC initiates an oil embargo against Western nations in protest of Western interference in the Middle East. 

1974: oil and gas fields are discovered in East Timor.

1974: "If the decade must be summarized, it could be said that the youth of America, who had so recently studied it in civics classes, tested the system--and it flunked." -- USA journalist Warren Hinckle, author of If You Have a Lemon, Make Lemonade (1974) 

1975: on April 30, 1975, Communist-backed northern Vietnamese forces re-capture occupied south Vietnam, ending Vietnam War.

1975: in December 1975, after meeting with USA President Ford and Henry Kissinger, General Soeharto invades East Timor (aka Timor-Leste), driving out Portuguese colonizers. Soeharto is covertly backed by the United States, which is keen to prevent Chinese political influence in East Timor. The U.N., seeing East Timor torn between competing interests of several stronger powers, demands Soeharto leave East Timor. Defying world opinion, Indonesia--convinced of its stature as a superpower in the making--maintains troops in East Timor during Soeharto's entire tenure, and East Timor does not gain right to self-determination until 1999-2002. 

The UN estimates nearly half the population [of East Timor] lives below the extreme poverty line of US$1.90 a day and half of the children under 5 suffer moderate to severe physical and mental stunting as a result of malnutrition. -- from UNDP, 2018 article

1978: the Communist Vietnamese military invades Cambodia to remove the genocidal Khmer Rouge. The world is split between condemning the unilateral violation of another nation's sovereignty and applauding the removal of the destructive Khmer Rouge.

1978: the Saur Revolution. Soviet-backed forces murder sitting Afghan President Khan. Taraki, a member of the revolution/coup, is named president in 1978. Taraki is murdered in 1979 by Hafizullah Amin, who in turn is allegedly murdered on orders from the Soviet Union because of his role in Taraki's death. 

1979: Iranian Islamic Revolution. After a year of protests and martial law, the Shah is exiled from Iran and student protestors overrun the U.S. embassy in Tehran, taking 52 American hostages. 

1979: Nicaraguan Revolution. "The United States supported the brutal Somoza dictatorship in Nicaragua for over 40 years. The Nicaraguan people, led by the Sandinistas, overthrew this regime in 1979, a breathtaking popular revolution." (Harold Pinter, 2005)

1979: beginning of Soviet-Afghan War from 1979 to 1989, in which 500,000 to 2,000,000 civilians are murdered, causing millions of Afghans to flee to Pakistan and Iran, where they become refugees. The United States actively supports Afghan rebels aka mujahideen, the Taliban's precursor, against the Soviet Union. 

1990-1991: the Soviet Union collapses. 

1997: in 1997 and 1998, East Asia suffered a serious financial crisis that wiped out decades of progress. Unemployment and poverty increased substantially in countries such as Indonesia and the Philippines. The political leaders of Indonesia [including Soeharto], South Korea, and Thailand lost their mandates and were replaced. (From The Tommy Koh Reader, reproduced from February 23, 2009)  

A rapid outflow of foreign capital contributed to the sharp contraction in investment during the Asian crisis. Between 1997 and 1999, net foreign direct investment in Indonesia shifted from an inflow of 2.2% of GDP to an outflow of 1.3%, while the volume of investment fell by 45%. -- Stephen Elias and Clare Noone, The Growth and Development of the Indonesian Economy (December 2011)

In December 1997, ASEAN--originally intended to help smaller and developing Asian countries negotiate better terms with more developed countries--becomes ASEAN Plus Three (APT: ASEAN + China, Japan, South Korea), deepening Asian economic, political, and social cooperation. 

2001: on December 11, 2001, China joins the World Trade Organization. 

© Matthew Mehdi Rafat (April 2020) 

Dedicated to Ms. Dunham, my blue-eyed, straight-haired Social Studies teacher at Castro Middle School (San Jose, CA), who told me "You're not that important." Now that I'm older, I am pleased to say I never let my schooling interfere with my education. 

Capitalists of the World, Unite!

It should surprise more people that idealists are attracted to socialism rather than capitalism. Part of the problem is the economists don't know history, the historians don't know law, and the lawyers don't know economics. Put simply, capitalism seeks to synchronize ever-changing supply and demand for labor and resources, whereas socialism focuses on the inevitability of owners exploiting dispersed workers. When condensed in such a way, one immediately sees the need for regulation; and yet, since people have never agreed on the perfect type and amounts of regulation, it may be useful to analyze the topic differently. 

Globalization needs regulation, but everyone is reluctant to demand it for fear that it may discriminate against them. --  Misha Glenny, McMafia (2008) 

1. Economic Systems Should Not Be Discussed without Historical Context

Countries with strong militaries tend to use their navies to steal not just resources, but human labor from weaker countries. The United States, a slave-owning, capitalist country from inception, used slaves to maximize output from cotton, sugar, and tobacco fields in the 1700s and 1800s. 

America was founded on the double standard. That's our history. We were founded on a very basic double standard: slaveowners who wanted to be free. -- George Carlin

Even aside from anecdotal evidence, we know slavery in the West was handled differently than slavery and indentured servitude elsewhere in the world because few African or Muslim-majority countries have anyone who resembles Shaquille O'Neal or wrestler Mijaín López--indicating some slaveowners selected or bred people for certain traits while others didn't. Given that the Arabs had armies in the Middle East and Africa, were savvy traders, and the Prophet Muhammad's first wife was an affluent businesswoman, was capitalism or religion the difference in the way workers were treated? 

The natural state of human beings according to the Quran is freedom, and all believers are equal in the eyes of God. The Quran repeatedly urges believers to treat their slaves [indentured servants] humanely; to feed, clothe, and educate them; and to free them... Children of a free man are born free, and... the mother of a free man's child becomes an um walid, who cannot be sold. -- Martin Klein, Historical Dictionary of Slavery and Abolition (2014), pp. 307

If we say the former, the Europeans--who invented the first international debt trading markets in Venice and Belgium and the first publicly traded corporation (The Dutch East India Company) in the Netherlands--were as capitalistic as the Americans. So why has Europe become more "socialist" than the United States? Any reasonable answer must include the French Revolution (led by military commander Napoleon) and/or post-WWII agreements, whereby the United States drove global economic growth through military alliances and investment, allowing other countries to spend higher percentages of their budgets on social programs. Was Europe's acceptance of higher social spending the outcome of a non-European country's military victory or a specific economic structure? Whatever your answer, you must admit history, both distant and near, deserves a role in the discussion. 

2. History Shows Military Strength Trumped All Other Considerations, including Economics

At the same time, since many voyages capturing slaves and other resources were funded by companies issuing shares in joint stock companies in exchange for profits (minus royalty's cut), one could argue widespread inequality--both racial and economic--caused by European and American slavery would not have been possible without capitalism. After all, the more people who profit from immorality, the easier it becomes to mistreat labor. Indeed, at one point, the British East India Company had a larger military than the Queen of England's, which is consistent with the Exchequer's funding through imports of (stolen) gold and silver, plus fees on other items, rendering homeland defense subservient to military adventurism. (Defense is a cost most countries try to minimize unless they are empires, in which case they maximize it in hopes of being the first empire in history to avoid certain collapse.) 

If we continue pursuing the "capitalism equals inequality" argument or "more government equals more equality," we may agree America's pernicious treatment of slaves stemmed from a desire to maximize the profit motive; however, we must also admit the country's lack of morality would have allowed its military to go to Africa and coerce or mislead local leaders into selling their human capital under any economic system. Such conversations, with or without government approval, must have involved false promises of work and wealth or threats of genocide, followed by shiny gifts to helpless leaders to give the appearance of congeniality, then a transfer of resources. Remember: there were no videocameras or journalists to document human rights abuses, and almost all English-speaking philosophers and academics of the day believed in the inherent inferiority of non-whites. 

Why should they ask me to put on a uniform and go 10,000 miles from home and drop bombs and bullets on brown people in Vietnam while so-called Negro people in Louisville [Kentucky] are treated like dogs and denied simple human rights? No, I am not going 10,000 miles from home to help murder and burn another poor nation simply to continue the domination of white slavemasters of the darker people the world over. -- USA boxer and conscientious objector Muhammad Ali 

So was it capitalism, racism, Christianity, immorality, and/or military power that most contributed to the lack of fair wages for Africans in the United States? A clue to the best answer involves answering another question: had an arms-length transaction and voluntary departures occurred between white naval officers, African tribal leaders, and individual Africans, would we consider such transactions acceptable even if workers were exploited? Persons convinced they would answer a certain way may want to examine the skin color or guess the immigration status of the next worker they see in the back of a restaurant or agricultural field. 

3. Why Trade at All When You Can Steal? 

By now, Machiavellian types must be wondering why anyone bothers signing trade agreements. If you have the stronger military, why not steal what you need? In fact, this is exactly what has happened for most of human history, which explains our current cultural malaise--and misplaced economic priorities. 

The reason Canada is called Canada is because the Quebecois beat back American invaders. Cuba is socialist and not capitalist because a Spaniard from noble lineage succeeded in repelling American-sponsored troops. The reason the Ottoman Empire is now called Turkey is because it fought on the wrong side of WWI. You think socialist Sweden was really neutral in WWII? The so-called "neutral" Swedes allowed the Nazis to use their rail systems to transport troops and materiel. Too often, economic experts fail to realize a country's success hinges on which side of the most recent war they chose and geographic accident rather than particular economic preferences. It's as if experts think WWI ended one thousand years ago instead of approximately one hundred years ago. 

In fact, by 1932, borrowing by military allies had left the United States with over 40% of the world's gold reserves plus billions of dollars in outstanding European loans. Please read the last sentence again. The allies--the side that won, which also happened to be called the Allies--ended up owing billions of dollars, giving them incentives to maximize the losers' reparations/debt. 

Look closely, and everywhere you look, military and political leaders have erred on the side of expansion or compromise at any cost. Under such historical precedent, economic systems, whether socialist-leaning or capitalist-leaning, have logically prioritized military spending and R&D. 

The Malaysians are observing the agreements they have signed without trying to retaliate in other directions, such as water... which will lead to war. -- Singaporean founder LEE Kuan Yew (July 26, 2013) 

4. Diplomacy Has Failed, but We're Talking about Capitalism

Quick, name three genocides or civilian massacres the United Nations averted. You can probably cite a conflict the U.N. shortened. You might even be able to name peace agreements the U.N. negotiated post-war or post-bombings. Overall, however, diplomatic efforts have been oddly ineffective in reducing weapons sales and military spending.

We find it repulsive that the Western countries that more loudly make rhetorical speeches about human rights are the ones that manufacture most weapons that have killed more than 20 million people in the developing world since WWII. -- Nobel Peace Prize laureate José Ramos-Horta (1996) 

Today, no one talks seriously about nuclear disarmament because the only weapon preventing a larger power from invading a smaller power is a nuclear one. Such is the result of a world where economic futures are subordinate to threats of foreign invasion, coups d'état, sanctions, and/or onerous tariffs. And still, when people argue capitalism is the problem, they don't seem to realize diplomacy has failed. 

In some of these situations, the UN is almost absent, for instance in the South China Sea dispute, because China doesn’t want to internationalize the tension by allowing the UN special envoys to be present there... The UN can be present and can act only if the parties involved seek help, otherwise it cannot force itself into those situations. Another issue, Kashmir, is on the UN agenda since Day One but the UN has mostly a residual and symbolic presence, hence it is tolerated by India. There is not much more that the UN can do, at least at this stage. India is far too powerful, and they reject UN involvement to avoid internationalizing the issue and India is not keen to allow the UN to take part in any discussion regarding the status of Kashmir. -- José Ramos-Horta, Nobel Peace Prize Laureate, 2019 interview 

Conclusion

As Western voters divide themselves politically over increasingly meaningless economic terms, the really interesting developments are technological. In some countries, governments have maintained relevance by providing education, healthcare, social services, and public transportation, only to be challenged by less costly private actors, including religious entities responsible for large voter turnout. These governments are in disarray because they have privatized technological development or delegated to allies exempt from domestic regulation to such an extent, private corporations now host military and other confidential data, a similar situation as Britain's outsourcing of important affairs to the British East India Company--which it had to eventually dissolve and bail out. Meanwhile, governments elsewhere have maintained power by controlling or approving technological advances, especially in security, but have not invested adequately in creative enterprises or social services, thereby neglecting social cohesion.

Allow me a prediction: the future will not be about capitalism or socialism, but who controls the technology and under what terms. That's the discussion we ought to be having, and sadly, it's a discussion most voters are totally unqualified to have--which explains why people prefer to discuss the "isms" du jour. 


© Matthew Rafat (April 2020)


Bonus I: I didn't properly explain the link between slavery, immigration, and capitalism, so let me try again. If USA was not trying to maximize profit and output from its cotton and tobacco fields in the 1800s, it would not have needed to import labor. The importation of slaves is immigration in a sense, and in this case, immoral not because of capitalism--i.e., the desire to maximize profits--but because of the way the labor was treated and paid. 

Note that capitalist USA in the 1900s was able to attract immigrants voluntarily, even though labor conditions were similarly exploitative, because immigrants believed their first and second generations would be better off. Such progression was a function of automatic citizenship rather than a specific kind of economic system, but the demand for immigrants would not have been as high had companies not been able to maximize output under a globalized system of trade. In short, suboptimal diversity is often a function of the lack of investment and need for excess labor (immigration), which is the result of the absence of conditions favorable to the maximization and expectation of profit. 

Bonus II: After I wrote this article, I began to wonder: why didn't USA manufacturing and plantation owners in the 1700s and 1800s hire more laborers from Mexico rather than enslaving Africans? I suspect the French, who had set up shop in Mexico, would have stopped them; and conditions in Mexico must have been pleasant enough not to drive residents to uproot themselves. If my guesses are correct, I would be interested in knowing the relative value of Mexican currency (Spanish dollar and Mexican centavo/peso) to the US dollar in the 1700s and 1800s, though such an analysis might be impossible because the US dollar only came into existence as an agreed-upon monetary unit between 1785-1792.

Bonus III: Why bother with cross-continent trade? Well,  Indonesian cinnamon tastes better than cinnamon grown elsewhere; Iranian dates are juicier than Tunisian dates; and apparently cocaine from the Colombian jungle is the most potent. Why? Growing conditions in some places are more favorable to certain crops than others. Without investors and globalized trade, either fewer people would be exposed to the same variety of items and experiences, or such exposure would be limited based on the whims of not-always competent governments. 

Similarly, talent, like growing conditions, is not equally distributed. For example, MIT is considered to have the world's best technical minds (Harvey Mudd College and Caltech may disagree, but I digress). According to MIT in 2011, "over 40% of our graduate students, over 70% of our postdocs, and about 40% of our faculty were born outside the U.S." How can the United States steal so many talented people? Why aren't these great minds working at universities back home? Part of the answer is the inequality of the US dollar, which has been stronger than other currencies, making it easier to buy products and immigrants from overseas. Economists use the term "attract" rather than "buy" when discussing immigrant labor, but if you want to be hard-nosed, there's really no difference. In other words, the same currency that allows a country to exploit others in trade negotiations also allows it to steal their talent voluntarily--increasing opportunities, innovation, and quality of life for immigrants as well as everyone else. Equality may be a laudable goal, but most people go where they are treated or exposed to better--i.e., unequal--circumstances. Thus, if you are pro-diversity and pro-immigration, you want more inequality, not less--in your favor. 

Finally, trade begets trade. A container ship returning only gold and silver will not be able to utilize space--or afford shipping fees--as well as another ship also transporting spices, clothing, handmade jewelry, and other products. If there is a complaint, the complaint once again involves inequitable treatment of workers, not globalized trade.

Bonus IV: I originally wanted to end this article with the following exchange from a Hollywood movie, but I ran out of patience. Perhaps the dialogue below will stand on its own. From Sabrina (1954): 

Linus Larrabee: What’s money got to do with it? If making money were all there were to business, it'd hardly be worthwhile going to the office. Money is a by-product. 

David: What’s the main objective? Power? [Capitalism?] 

Linus: Agh! That’s become a dirty word. 

Davis: Well then, what’s the urge? You’re going into plastics now. What will that prove?

Linus: Prove? Nothing much. A new product has been found, something of use to the world. So, a new industry moves into an undeveloped area. Factories go up, machines are brought in, a harbor is dug and you’re in business. It’s purely coincidental of course that people who've never seen a dime before suddenly have a dollar. And barefooted kids wear shoes and have their teeth fixed and their faces washed. What’s wrong with a kind of an urge that gives people libraries, hospitals, baseball diamonds and movies on a Saturday night?