Latest Developments, August 5

In the latest news and analysis…

Standard &Poor’s has downgraded the US credit rating from AAA to AA-plus for the first time ever. Although a lower credit rating tends to mean higher interest rates, Planet Money’s Jacob Goldstein is not convinced this particular adjustment will have much practical impact, arguing most financial institutions don’t distinguish between the two ratings. Princeton economist Paul Krugman, for his part, is totally dismissive based largely on the agency’s recent track record: “In short, S&P is just making stuff up — and after the mortgage debacle, they really don’t have that right.” But even if there is little domestic impact, a continuation of negligible growth and extremely low interest rates in the US could mean “emerging market economies—Brazil, other strong performers in Latin America, much of Southeast Asia, and even the better performers in sub-Saharan Africa—will continue to experience a flood of capital seeking higher returns, hot money with all the attendant risks of a bubble,” according to the Center for Global Development’s Liliana Rojas-Suarez. And the Guardian reports that bubble may already be about to burst.

Only a month after replacing the disgraced Dominique Strauss-Kahn, International Monetary Fund head Christine Lagarde has learned she will face a criminal inquiry over her roll in a questionable $600 million payment to a political ally. According to the IMF’s website, the “Fund’s approach to combating corruption emphasizes prevention, concentrating on measures to strengthen governance, and limiting the scope for corruption. The IMF also has strong measures in place to ensure the integrity of its own organization.” Nevertheless, the allegations Lagarde faces had been widely reported well before her appointment as the organization’s managing director despite resistance from a number of non-European countries who felt it was time to end that continent’s six-decade hold on the IMF’s top job.

Canadian Prime Minister Stephen Harper sets off this weekend for a four-country Latin American tour that will focus on trade, rights and security, according to Postmedia News. In a recent statement, Amnesty International said many of the hemisphere’s governments are not doing a satisfactory job of balancing these considerations at home: “Countries across the region – including Argentina, Brazil, Canada, Colombia, Ecuador, Guatemala, Mexico, Panama and Peru – have failed to consult Indigenous Peoples before passing laws that would threaten their livelihoods. They also carried out development projects in Indigenous Peoples’ ancestral lands without respecting their right to give free, prior and informed consent.”  And in terms of international relations, the Canadian parliament approved a free trade agreement with Peru  in June 2009, a few days after dozens died in protests over new Peruvian laws facilitating oil and gas exploration in the Amazon.

A couple of telecommunications companies have run up against the US Foreign Corrupt Practices Act. Magyar Telekom, a Hungarian corporation controlled by German Deutsche Telekom, is currently in talks with the Securities and Exchange Commission over possible bribes paid in Macedonia and Montenegro. And a federal jury has convicted two former executives of Florida-based Terra Telecommunications Corp. for authorizing bribes paid in Haiti over a period of several years. Meanwhile, a pair of US lawmakers has proposed legislation absolving non-Americans living outside the US of having to report their bank deposits within the country to revenue authorities, according to a Task Force on Financial Integrity and Economic Development blog posting by Ann Hollingshead. In her view, such a law would encourage people to hide dirty money in US bank accounts. She sums up: “[Gregory] Meeks and [Bill] Posey, two officials elected to represent the interests of U.S. citizens, have introduced a bill that represents the interests of foreign money launderers, tax evaders, terrorist financers, and, perhaps, big banks.” Writing on the same blog, Global Financial Integrity’s Ryan Isakow writes about a PR/framing coup for the global anti-corruption movement: “It’s interesting to note that connecting corruption to something which directly interests those in power—economic growth— has elicited a bigger response from government leaders than the abundance of stories written everyday on the impoverishing effects corruption has on their own countrymen.  After all, if exploiting the poor bothered them, they would have more reservations about robbing their country’s resources in the first place.”

The US Navy has held a celebration to mark the launch of the 2,000th Tomahawk missile. “It was a great feeling to have taken part in the 2,000th missile launch,” according to a sailor quoted in a Navy press release. “There were a lot of us that had never shot before, so to be able to fire off the 2,000th one was a great experience; it means a lot to us.” The US Navy has launched over 200 Tomahawks in the Libyan conflict so far at a cost of $607,000 each, according to Defense Tech.

In other technology matters, Tactical Technology Collective’s Tanya Notley says mobile phones and the Internet are among the tools that can help people impose a certain level of accountability on governments and development agencies but “there are many “invisible” layers that track what we do online.” And given that such bodies do not always like questioning and exposure, there are real (and sometimes fatal) risks attached to engaging in such behaviour. Consequently, “we should all be thinking about what kind of digital future we want and what risks we might be taking or asking others to take when we promote digital technologies as tools for transparent, fair and just development.”

Former US assistant defense secretary Joseph Nye regrets that Bush Administration “policy failures” led to the view among many that democracy promotion smacked of imperialism and hypocrisy: “Democracy is not an American imposition, and it can take many forms,” he writes. But he stresses the need to “stimulate emulation” by maximizing domestic democracy, rather than trying to impose values on others. But Foreign Policy’s Josh Rogin sees little in the way of positive examples as he presents “the top eight foreign-policy items currently held up by the do-nothing 112th Congress.” Der Spiegel columnist Jakob Augstein is harsher still in writing of America’s “apparent political insanity” and arguing the “divided country has more in common with a failed state than a democracy.”

Latest Developments, August 2

In the latest news and analysis…

American senators Carl Levin and Chuck Grassley have brought forth legislation that aims to greatly reduce international financial secrecy and wrongdoing by requiring anyone setting up a company in the US to divulge the name of the beneficial owner. “Until this law is passed, foreign corrupt politicians, terrorists and drug traffickers can continue legally to hide their identities and their dubious assets behind the secrecy provided by American companies,” according to Global Witness’s Stefanie Ostfeld who hailed the bill’s introduction. As did Global Financial Integrity’s Heather Lowe who said, as things stand, it is “far too easy to gain access to financial services in the U.S. through anonymous U.S. corporations, while it is far too difficult for law enforcement groups to figure out who is really behind those corporations.

Plaintiffs in Papua New Guinea have obtained a temporary injunction “preventing a mine from dumping millions of tonnes of waste into the sea.” The news came less than a week after a national court judge had ruled the Chinese-Australian copper project’s proposed method of waste disposal “amounts to an abuse and depletion of Papua New Guinea’s natural resources and environment” but refused to impose a permanent ban. PNG’s Supreme Court will examine the case later this month.

A new Food and Agriculture Organization report suggests that, contrary to popular belief, growing demand for grain in China and India has little to do with increasing food prices.  In fact, the FAO says cereal imports to the two Asian giants actually declined between 2000 and 2007 and points to the rise of biofuels as the main driver of growth in demand. And a new report by the New Economics Foundation suggests EU fisherman have discarded more than 2 million tonnes of cod over the last half-century.

Somalia’s Islamist Al Shabab “has destroyed whatever legitimacy it had, by obstructing humanitarian organizations from entering the country to provide relief from the severe famine,” according to a Globe and Mail editorial. Meanwhile, the US has decided to ease up on some obstruction of its own by loosening restrictions on aid to Somalia that threatened to prosecute any organization deemed to have provided any financial or material support to Al Shabab. Food aid aside, the rebel group which controls much of Somalia, including the famine-stricken south, has reportedly gotten its hands on a large number of American-made weapons.

Arguing “we live in an era when political boundaries, not the lives of nomadic pastoralists, are sacrosanct,” Columbia University economist Jeffrey Sachs takes on the role of arbitrary colonial-era borders in the Horn of Africa’s food crisis. He points to the fact that many Somali people live in Kenya and Ethiopia as a prime reason for the ongoing instability of the border regions. Sachs also discusses “the overlap of dryland climates and conflict zones” and argues “the region urgently requires a development strategy, not a military approach.” Moreover, he says the “US and Europe are not only failing to respond to the African drought; they have probably contributed to it through their greenhouse-gas emissions.”

Former NATO secretary general Javier Solana and the University of the Basque Country’s Daniel Innerarity declare an end to foreign affairs, saying that globalized threats and opportunities give today’s world an “epidemic character” that renders national policies inadequate: “Truly effective global governance is the strategic horizon that humanity must pursue today with all its energy.” Failure, they claim will mean “the “end of history” – not as the placid apotheosis of liberal democracy’s global victory, but as the worst collective failure we can imagine.”

A Bloomberg editorial argues Brazil, India and South Africa “don’t seem to demonstrate the awareness that international leadership comes with responsibilities as well as privileges.” Exhibit A, according to the authors, is the three countries’ disappointing troop contribution to UN peacekeeping: only India is a “major contributor,” they say, and even it ranks behind its much smaller neighbours, Pakistan and Bangladesh. But according to June statistics on military and police contributions to UN peacekeeping, India  ranks third overall, behind only Pakistan and Bangladesh. Brazil and South Africa rank 13th and 14th, respectively. The UK is 46th and the US is 64th, with approximately a twentieth of Brazil’s or South Africa’s contributions. As for the editorialists’ notion that a greater contribution from India, Brazil and South Africa could “possibly free European troops for more difficult missions, such as Afghanistan,” there are currently only three European countries (Italy, France and Spain) ranked among the top 35 contributors with over 500 troops or police serving as blue helmets.

A Voice of America editorial celebrates the UN refugee convention’s 60th anniversary, saying the agreement remains essential today given the millions “who have been uprooted from their homes and forced to live in difficult and in many cases unacceptable conditions.” The US leads the way both in terms of permanently resettling refugees (71,400 in 2010) and creating them in the first place (4.7 million from Afghanistan and Iraq).

Reuters’s Rachelle Younglai and Ana da Costa point out the “overwhelming irony” that credit agencies, such as Standard & Poors and Moody’s, “are the same firms that many blame as prime instigators of the 2007-2008 credit crisis for freely giving out top ratings to ultimately worthless structured mortgage products” and yet, they now “sit in judgment of the countries that had to ruin their public balance sheets to prevent financial collapse by saving the banks shattered by those bad instruments once blessed by the agencies.”